Document:

EXHIBIT 10.39

CROCS, INC.

Board of
Directors Compensation Plan

On September 20, 2006, the Board of Directors of
Crocs, Inc. (the “Company”) approved a new compensation arrangement for
non-employee directors effective as of September 1, 2006. The new compensation
arrangement provides the following for non-employee directors:

(a)          Annual cash compensation of $40,000 payable to each
non-employee director in quarterly payments of $10,000 each;

(b)          Additional annual cash compensation of $10,000 will be
payable to the chair of the Audit Committee and $5,000 will be payable to the
chairs of the Governance and Nominating Committee, and the Compensation
Committee;

(c)          Reimbursement of reasonable out-of-pocket expenses incurred
by each director in connection with attendance at meetings of the Board and
committees thereof;

(d)          Grant to each non-employee director options to purchase
40,000 shares of Common Stock of the Company upon election to the Board when
first elected, each such grant to be made at the fair market value of the
Company’s Common Stock on the date of grant and to vest in four equal annual
installments on the date of the annual meeting of stockholders each year;

(e)          Annual grant to each director options to purchase 10,000
shares of Common Stock of the Company for each year of service on the Board
after the initial appointment to the Board, each such grant to be made at the
fair market value of the Company’s Common Stock on the date of grant and to
vest in four equal annual installments on the date of the annual meeting of
stockholders each year;

(f)           Grant to the Chairman of the Board additional options to
purchase 10,000 shares of Common Stock of the Company when first elected as
Chairman, such grant to be made at the fair market value of the Company’s
Common Stock on the date of grant and to vest in four equal annual installments
on the date of the annual meeting of stockholders each year;

(g)          All stock option grants to the Board will have seven (7)
year terms; and

(h)          All stock option grants to members of the Board after the
initial grant will be made in connection with the annual meeting of
stockholders each year.Exhibit
10.40

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

among

CROCS, INC.

and

THE MEMBERS OF JIBBITZ, LLC

September
29, 2006

 

 

 

 

TABLE OF
CONTENTS

 

	
  

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
  1.

  	
   

  	
  Definitions

  	
   

  	
  1

  
	
  2.

  	
   

  	
  Purchase and
  Sale of Membership Interests

  	
   

  	
  7

  
	
   

  	
   

  	
  2.1

  	
   

  	
  Basic
  Transaction

  	
   

  	
  7

  
	
   

  	
   

  	
  2.2

  	
   

  	
  Deposit

  	
   

  	
  7

  
	
   

  	
   

  	
  2.3

  	
   

  	
  Preliminary
  Purchase Price

  	
   

  	
  7

  
	
   

  	
   

  	
  2.4

  	
   

  	
  Closing

  	
   

  	
  8

  
	
   

  	
   

  	
  2.5

  	
   

  	
  Deliveries at
  Closing

  	
   

  	
  8

  
	
   

  	
   

  	
  2.6

  	
   

  	
  Closing Merger
  Equity Adjustment

  	
   

  	
  8

  
	
   

  	
   

  	
  2.7

  	
   

  	
  Earn-Out
  Accounts

  	
   

  	
  10

  
	
   

  	
   

  	
  2.8

  	
   

  	
  Payments

  	
   

  	
  12

  
	
   

  	
   

  	
  2.9

  	
   

  	
  Appointment of
  Member Agent

  	
   

  	
  12

  
	
  3.

  	
   

  	
  Representations
  and Warranties Concerning Transaction

  	
   

  	
  12

  
	
   

  	
   

  	
  3.1

  	
   

  	
  Sellers’
  Representations and Warranties

  	
   

  	
  12

  
	
   

  	
   

  	
  3.2

  	
   

  	
  Buyer’s
  Representations and Warranties

  	
   

  	
  13

  
	
  4.

  	
   

  	
  Representations
  and Warranties Concerning Target

  	
   

  	
  14

  
	
   

  	
   

  	
  4.1

  	
   

  	
  Organization,
  Qualification, and Corporate Power

  	
   

  	
  14

  
	
   

  	
   

  	
  4.2

  	
   

  	
  Capitalization

  	
   

  	
  14

  
	
   

  	
   

  	
  4.3

  	
   

  	
  Non-Contravention

  	
   

  	
  15

  
	
   

  	
   

  	
  4.4

  	
   

  	
  Brokers’ Fees

  	
   

  	
  15

  
	
   

  	
   

  	
  4.5

  	
   

  	
  Title to Assets

  	
   

  	
  15

  
	
   

  	
   

  	
  4.6

  	
   

  	
  Subsidiaries

  	
   

  	
  15

  
	
   

  	
   

  	
  4.7

  	
   

  	
  Financial
  Statements

  	
   

  	
  15

  
	
   

  	
   

  	
  4.8

  	
   

  	
  Events
  Subsequent to Most Recent Fiscal Month End

  	
   

  	
  15

  
	
   

  	
   

  	
  4.9

  	
   

  	
  Undisclosed
  Liabilities

  	
   

  	
  17

  
	
   

  	
   

  	
  4.10

  	
   

  	
  Legal Compliance

  	
   

  	
  17

  
	
   

  	
   

  	
  4.11

  	
   

  	
  Tax Matters

  	
   

  	
  18

  
	
   

  	
   

  	
  4.12

  	
   

  	
  Real Property

  	
   

  	
  20

  
	
   

  	
   

  	
  4.13

  	
   

  	
  Intellectual
  Property

  	
   

  	
  22

  
	
   

  	
   

  	
  4.14

  	
   

  	
  Tangible Assets

  	
   

  	
  24

  
	
   

  	
   

  	
  4.15

  	
   

  	
  Inventory

  	
   

  	
  24

  
	
   

  	
   

  	
  4.16

  	
   

  	
  Contracts

  	
   

  	
  24

  
	
   

  	
   

  	
  4.17

  	
   

  	
  Notes and
  Accounts Receivable

  	
   

  	
  26

  
	
   

  	
   

  	
  4.18

  	
   

  	
  Powers of
  Attorney

  	
   

  	
  26

  
	
   

  	
   

  	
  4.19

  	
   

  	
  Insurance

  	
   

  	
  26

  
	
   

  	
   

  	
  4.20

  	
   

  	
  Litigation

  	
   

  	
  26

  
	
   

  	
   

  	
  4.21

  	
   

  	
  Product Warranty

  	
   

  	
  26

  
	
   

  	
   

  	
  4.22

  	
   

  	
  Product
  Liability

  	
   

  	
  27

  
	
   

  	
   

  	
  4.23

  	
   

  	
  Employees

  	
   

  	
  27

  
	
   

  	
   

  	
  4.24

  	
   

  	
  Employee Benefits

  	
   

  	
  27

  
	
   

  	
   

  	
  4.25

  	
   

  	
  Guaranties

  	
   

  	
  28

  
	
   

  	
   

  	
  4.26

  	
   

  	
  Environmental,
  Health, and Safety Matters

  	
   

  	
  28

  
	
   

  	
   

  	
  4.27

  	
   

  	
  Business
  Continuity

  	
   

  	
  29

  

 

 i
 

 

 

	
  

  	
   

  	
  4.28

  	
   

  	
  Certain Business
  Relationships with Target

  	
   

  	
  29

  
	
   

  	
   

  	
  4.29

  	
   

  	
  Customers and
  Suppliers

  	
   

  	
  29

  
	
  5.

  	
   

  	
  Pre-Closing
  Covenants

  	
   

  	
  29

  
	
   

  	
   

  	
  5.1

  	
   

  	
  General

  	
   

  	
  29

  
	
   

  	
   

  	
  5.2

  	
   

  	
  Notices and
  Consents

  	
   

  	
  30

  
	
   

  	
   

  	
  5.3

  	
   

  	
  Operation of
  Business

  	
   

  	
  30

  
	
   

  	
   

  	
  5.4

  	
   

  	
  Preservation of
  Business

  	
   

  	
  30

  
	
   

  	
   

  	
  5.5

  	
   

  	
  Access

  	
   

  	
  30

  
	
   

  	
   

  	
  5.6

  	
   

  	
  Notice of
  Developments

  	
   

  	
  30

  
	
   

  	
   

  	
  5.7

  	
   

  	
  Exclusivity

  	
   

  	
  31

  
	
   

  	
   

  	
  5.8

  	
   

  	
  Tax Matters

  	
   

  	
  31

  
	
   

  	
   

  	
  5.9

  	
   

  	
  Buyer Covenant
  Not to Compete

  	
   

  	
  32

  
	
   

  	
   

  	
  5.10

  	
   

  	
  Tax-Sharing
  Agreements

  	
   

  	
  32

  
	
  6.

  	
   

  	
  Post-Closing
  Covenants

  	
   

  	
  32

  
	
   

  	
   

  	
  6.1

  	
   

  	
  General

  	
   

  	
  32

  
	
   

  	
   

  	
  6.2

  	
   

  	
  Transition

  	
   

  	
  32

  
	
   

  	
   

  	
  6.3

  	
   

  	
  Confidentiality

  	
   

  	
  32

  
	
   

  	
   

  	
  6.4

  	
   

  	
  Covenant Not to
  Compete

  	
   

  	
  33

  
	
   

  	
   

  	
  6.5

  	
   

  	
  Consulting
  Payment. The Parties covenant and agree that, with respect to any Earn-Out
  Payments, prior to making any distributions in accordance with the Earn-Out
  Allocations, Buyer shall pay the first 2.5% of any such Earn-Out Payment to
  Zan Design & Associates in consideration for consulting services
  performed by Zan Design & Associates. Thereafter, the remainder will be
  distributed in accordance with the Earn-Out Allocations as specified in
  Section 2.7(b). 6.6 Responsibility for Filing Tax Returns and Payment of
  Taxes

  	
   

  	
  33

  
	
   

  	
   

  	
  6.6

  	
   

  	
  Cooperation on
  Tax Matters

  	
   

  	
  34

  
	
  7.

  	
   

  	
  Conditions to
  Obligation to Close

  	
   

  	
  35

  
	
   

  	
   

  	
  7.1

  	
   

  	
  Conditions to
  Buyer’s Obligation

  	
   

  	
  35

  
	
   

  	
   

  	
  7.2

  	
   

  	
  Conditions to
  Sellers’ Obligation

  	
   

  	
  36

  
	
  8.

  	
   

  	
  Remedies for
  Breaches of this Agreement

  	
   

  	
  37

  
	
   

  	
   

  	
  8.1

  	
   

  	
  Survival of
  Representations and Warranties

  	
   

  	
  37

  
	
   

  	
   

  	
  8.2

  	
   

  	
  Indemnification
  Provisions for Buyer’s Benefit

  	
   

  	
  37

  
	
   

  	
   

  	
  8.3

  	
   

  	
  Indemnification
  Provisions for Sellers’ Benefit

  	
   

  	
  38

  
	
   

  	
   

  	
  8.4

  	
   

  	
  Matters
  Involving Third Parties

  	
   

  	
  38

  
	
   

  	
   

  	
  8.5

  	
   

  	
  Determination of
  Adverse Consequences

  	
   

  	
  40

  
	
   

  	
   

  	
  8.6

  	
   

  	
  Release

  	
   

  	
  40

  
	
   

  	
   

  	
  8.7

  	
   

  	
  Purchase Price Adjustment

  	
   

  	
  40

  
	
  10.

  	
   

  	
  Termination

  	
   

  	
  40

  
	
   

  	
   

  	
  10.1

  	
   

  	
  Termination of
  Agreement

  	
   

  	
  40

  
	
   

  	
   

  	
  10.2

  	
   

  	
  Effect of
  Termination

  	
   

  	
  40

  
	
  11.

  	
   

  	
  Miscellaneous

  	
   

  	
  41

  
	
   

  	
   

  	
  11.1

  	
   

  	
  Nature of
  Sellers’ Obligations

  	
   

  	
  41

  
	
   

  	
   

  	
  11.2

  	
   

  	
  Press Releases
  and Public Announcements

  	
   

  	
  41

  
	
   

  	
   

  	
  11.3

  	
   

  	
  No Third-Party
  Beneficiaries

  	
   

  	
  41

  
	
   

  	
   

  	
  11.4

  	
   

  	
  Entire Agreement

  	
   

  	
  42

  
	
   

  	
   

  	
  11.5

  	
   

  	
  Succession and
  Assignment

  	
   

  	
  42

  
	
   

  	
   

  	
  11.6

  	
   

  	
  Counterparts

  	
   

  	
  42

  
	
   

  	
   

  	
  11.7

  	
   

  	
  Headings

  	
   

  	
  42

  
	
   

  	
   

  	
  11.8

  	
   

  	
  Notices

  	
   

  	
  42

  
	
   

  	
   

  	
  11.9

  	
   

  	
  Governing Law

  	
   

  	
  43

  
	
   

  	
   

  	
  11.10

  	
   

  	
  Amendments and
  Waivers

  	
   

  	
  43

  
	
   

  	
   

  	
  11.11

  	
   

  	
  Severability

  	
   

  	
  43

  
	
   

  	
   

  	
  11.12

  	
   

  	
  Expenses

  	
   

  	
  43

  
	
   

  	
   

  	
  11.13

  	
   

  	
  Relationship

  	
   

  	
  44

  
	
   

  	
   

  	
  11.14

  	
   

  	
  Construction

  	
   

  	
  44

  
	
   

  	
   

  	
  11.15

  	
   

  	
  Incorporation of
  Exhibits, Annexes, and Schedules

  	
   

  	
  44

  
	
   

  	
   

  	
  11.16

  	
   

  	
  Specific
  Performance

  	
   

  	
  44

  
	
   

  	
   

  	
  11.17

  	
   

  	
  Submission to
  Jurisdiction

  	
   

  	
  44

  

 

Exhibit A                        Form of Endorsement
Agreement

Exhibit B                        Form of Escrow Agreement

Exhibit C                        Financial Statements

Exhibit D-1                     Employment Agreement with
Rich Schmelzer

Exhibit D-2                     Employment Agreement with
Sheri Schmelzer

 

 ii

 

MEMBERSHIP
INTEREST PURCHASE AGREEMENT

This Membership Interest Purchase Agreement (this “Agreement”)
is entered into on September 29, 2006, by and among CROCS, Inc., a Delaware
corporation (“Buyer”), each of the parties listed as “Sellers” on the
signature pages hereto (each a “Seller” and collectively, “Sellers”),
and Rich Schmelzer, as Member Agent (as hereinafter defined).  Buyer, Sellers and Member Agent are referred
to collectively herein as the “Parties”.

Sellers in the aggregate own all of the outstanding
Membership Interests of Jibbitz, LLC, a Colorado limited liability company (“Target”).

This Agreement contemplates a transaction in which
Buyer will purchase from Sellers, and Sellers will sell to Buyer, all of the
outstanding membership interests of Target in return for cash and the other
consideration described herein.

For United States
federal income tax purposes, the parties intend to treat the purchase of Target
membership interests as a transaction covered under Revenue Ruling 99-6.

Concurrently with the execution of this Agreement,
Buyer and Target are entering into the Endorsement Agreement.

Now, therefore, in consideration of the premises and
the mutual promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as follows.

1.             Definitions.

“Accountant”
has the meaning set forth in Section 2.6 below.

“Acceleration
Event” has the meaning set forth in Section 2.7(d) below.

“Acquisition
Proposal” has the meaning set forth in Section 5.7 below.

“Act”
has the meaning set forth in Section 4.1 below.

“Affiliate”
has the meaning set forth in Rule 12b-2 of the regulations promulgated under
the Securities Exchange Act.

“Affiliated
Group” means any affiliated group within the meaning of Code §1504(a) or
any similar group defined under a similar provision of state, local or foreign
law.

“Basis”
means any past or present fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction that forms or could form the basis for any specified
consequence.

“Buyer”
has the meaning set forth in the preface above.

 

 

“Buyer
Material Adverse Effect” means any effect or change with respect to Buyer
or its business that would be (or could reasonably be expected to be)
materially adverse to the ability of Buyer to make the Earn-Out Payment or of
Sellers to earn the Earn-Out Payment, or to the ability of Buyer to consummate
timely the transactions contemplated hereby (regardless of whether any Seller
has knowledge of such effect or change on the date hereof); provided, however,
that none of the following shall be deemed, either alone or in combination, to
constitute a Buyer Material Adverse Effect: (i) any adverse effect
(including any loss of employees, any cancellation of or delay in customer
orders, any litigation or any disruption in supplier, partner or similar
relationships) proximately resulting from or arising out of the announcement or
pendency of this Agreement and the transactions contemplated hereby (except for
any adverse effect resulting from a breach by Buyer of a representation,
warranty or covenant hereunder);
(ii) any adverse effect resulting from or arising out of changes in
general economic conditions; (iii) any adverse effect resulting from or
arising out of changes generally affecting the industry in which Buyer operates
provided that such changes do not affect Buyer in a materially disproportionate
manner; (iv) any adverse effect resulting from or arising out of any
natural disaster or any acts of terrorism, sabotage, military action or war or
any escalation or worsening thereof; or (v) any
adverse effect resulting from or arising out of changes in GAAP or applicable
laws, rules or regulations.

“Cash
Payment Increase” has the meaning set forth in Section 2.6 below.

“Cash
Payment Decrease” has the meaning set forth in Section 2.6 below.

“Closing”
has the meaning set forth in Section 2.4 below.

“Closing
Date” has the meaning set forth in Section 2.4 below.

“Closing Date
Balance Sheet” has the meaning set forth in Section 2.6 below.

“Closing
Member Equity” has the meaning set forth in Section 2.6 below.

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

“Confidential
Information” means any information concerning the businesses and affairs of
Target that is not already generally available to the public.

“Conflict”
has the meaning set forth in Section 3.1(c) below.

“Controlled
Group” has the meaning set forth in Code §1563.

“Deposit”
has the meaning set forth in Section 2.2 below.

“Disclosure
Schedule” has the meaning set forth in Section 4 below.

“Draft
Closing Date Balance Sheet” has the meaning set forth in Section 2.6 below.

“Earn-Out
Payment” has the meaning set forth in Section 2.7 below.

 2
 

 

 

“EBIT”
means the earnings of Target before interest and taxes determined in accordance
with the accounting policies of Buyer consistently applied.

“Employee
Benefit Plan” mean any “employee benefit plan” (as such term is defined in
ERISA §3(3)) and any other employee benefit plan, program or arrangement of any
kind.

“Employee
Pension Benefit Plan” has the meaning set forth in ERISA §3(2).

“Employee
Welfare Benefit Plan” has the meaning set forth in ERISA §3(1).

“Employment
Agreements “ has the meaning set forth in Section 7.1 below.

“Endorsement
Agreement” means the agreement in the form attached hereto as Exhibit A.

“Environmental,
Health, and Safety Requirements” shall mean, as amended and as now and
hereafter in effect, all federal, state, local, and foreign statutes, regulations,
ordinances, and other provisions having the force or effect of law, all
judicial and administrative orders and determinations, all contractual
obligations, and all common law concerning public health and safety, worker
health and safety, pollution, or protection of the environment, including,
without limitation, all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances, or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise, or radiation.

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

“Escrow
Agreement” has the meaning set forth in Section 2.2 below.

“Financial
Statements” has the meaning set forth in Section 4.7 below.

 “FIRPTA Affidavit” has the meaning set
forth in Section 7.1 below.

“Force
Majeure Event” has the meaning set forth in Section 4.27 below.

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

“Hart-Scott-Rodino
Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

“Improvements”
has the meaning set forth in Section 4.12 below.

“Indemnified
Party” has the meaning set forth in Section 8.4 below.

“Indemnifying
Party” has the meaning set forth in Section 8.4 below.

 3
 

 

 

“Intellectual
Property” means all of the following in any jurisdiction throughout the
world: (a) all inventions (whether patentable or unpatentable and whether or
not reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, slogans, trade
names, corporate names, Internet domain names, and rights in telephone numbers,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including source code, executable code, data,
databases, and related documentation), (g) all advertising and promotional
materials, (h) all other proprietary rights, and (i) all copies and tangible
embodiments thereof (in whatever form or medium).

“Knowledge”
means actual knowledge.

“Lease
Consents” has the meaning set forth in Section 7.1 below.

“Leased
Real Property” means all leasehold or subleasehold estates and other rights
to use or occupy any land, buildings, structures, improvements, fixtures, or
other interest in real property held by Target.

“Leases”
means all leases, subleases, licenses, concessions and other agreements
(written or oral), including all amendments, extensions, renewals, guaranties,
and other agreements with respect thereto, pursuant to which Target holds any
Leased Real Property, including the right to all security deposits and other
amounts and instruments deposited by or on behalf of Target thereunder.

“Liability”
means any liability or obligation of whatever kind or nature (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due), including any liability for Taxes.

“License”
means any license, sublicense, agreement, or permission with respect to the
Intellectual Property of any Person.

“Lien”
means any mortgage, pledge, lien, encumbrance, charge, or other security
interest, other than (a) liens for Taxes not yet due and payable, (b) purchase
money liens and liens securing rental payments under capital lease
arrangements, and (c) other liens arising in the Ordinary Course of Business
and not incurred in connection with the borrowing of money .

“Loss”
or “Losses” means all claims, losses, Liabilities, damages, costs,
interest, awards, judgments, penalties, reasonable amounts paid in settlement,
and expenses, including 

 4
 

 

 

court costs and reasonable attorneys’ and consultants’ fees and
expenses, net of actual insurance recoveries.

“Material
Adverse Effect” or “Material Adverse Change” means any effect or
change with respect to Target or its business that would be (or could
reasonably be expected to be) materially adverse to the business, assets,
condition (financial or otherwise), operating results or operations of Target,
or to the ability of Sellers to consummate timely the transactions contemplated
hereby (regardless of whether Buyer has knowledge of such effect or change on
the date hereof); provided, however, that none of the following shall be
deemed, either alone or in combination, to constitute a Material Adverse
Effect: (i) any adverse effect (including any loss of employees,
any cancellation of or delay in customer orders, any litigation or any
disruption in supplier, partner or similar relationships) proximately resulting
from or arising out of the announcement or pendency of this Agreement and the
transactions contemplated hereby (except for any adverse effect resulting from
a breach by any Seller of a representation, warranty or covenant hereunder); (ii) any adverse effect resulting from
or arising out of changes in general economic conditions; (iii) any
adverse effect resulting from or arising out of changes generally affecting the
industry in which Target operates provided that such changes do not affect
Target in a materially disproportionate manner; (iv) any adverse effect
resulting from or arising out of any natural disaster or any acts of terrorism,
sabotage, military action or war or any escalation or worsening thereof;  or (v) 
any adverse effect resulting from or arising out of changes in GAAP or
applicable laws, rules or regulations.

“Member
Agent” means agent appointed by the Sellers pursuant to Section 2.9 below.

“Member
Equity” means (a) total assets minus (b) total liabilities (including
accrued compensation for paid time off and all fees and expenses of the Sellers
in connection with the transactions contemplated by the Agreement).

“Membership
Interests” means the membership interests of Target.

“Most
Recent Balance Sheet” has the meaning set forth in Section 4.7 below.

“Most
Recent Fiscal Month End” has the meaning set forth in Section 4.7
below.

“Objection
Report” has the meaning set forth in Section 2.6 below.

“Ordinary
Course of Business” means the ordinary course of business consistent with
past custom and practice (including with respect to quantity and frequency).

“Owned Real
Property” means all land, together with all buildings, structures,
improvements, and fixtures located thereon, including all electrical,
mechanical, plumbing and other building systems, fire protection, security and
surveillance systems, telecommunications, computer, wiring, and cable
installations, utility installations, water distribution systems, and
landscaping, together with all easements and other rights and interests
appurtenant thereto (including air, oil, gas, mineral, and water rights), owned
by Target.

“Party”
has the meaning set forth in the preface above.

 5
 

 

 

“Percentage
Ownership Amounts” has the meaning set forth in Section 2.3 below.

“Period 1”
has the meaning set forth in Section 2.7 below.

“Period 2”
has the meaning set forth in Section 2.7 below.

“Period 3”
has the meaning set forth in Section 2.7 below.

“Person”
means an individual, a partnership, a corporation, a limited liability company,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, any other business entity, or a governmental
entity (or any department, agency, or political subdivision thereof).

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

“Preliminary
Purchase Price” has the meaning set forth in Section 2.3 below.

“Purchase
Price” shall mean the aggregate of the Preliminary Purchase Price and any
Earn-Out Payment pursuant to Section 2.7 hereof.

“Real
Property” has the meaning set forth in Section 4.12 below.

“Real
Property Laws” has the meaning set forth in Section 4.12 below.

“Real
Property Permits” has the meaning set forth in Section 4.12 below.

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

“Securities
Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Seller”
has the meaning set forth in the preface above.

“Subsidiary”
means, with respect to any Person, any corporation, limited liability company,
partnership, association, or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election
of directors, managers, or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof or (ii) if a limited liability company,
partnership, association, or other business entity (other than a corporation),
a majority of the partnership or other similar ownership interests thereof is
at the time owned or controlled, directly or indirectly, by that Person or one
or more Subsidiaries of that Person or a combination thereof and for this
purpose, a Person or Persons own a majority ownership interest in such a
business entity (other than a corporation) if such Person or Persons shall be
allocated a majority of such business entity’s gains or losses or shall be or
control any managing director or general 

 6
 

 

 

partner of such business entity (other than a corporation).  The term “Subsidiary” shall include all
Subsidiaries of such Subsidiary.

“Systems”
has the meaning set forth in Section 4.27 below.

“Target”
has the meaning set forth in the preface above.

“Tax”
or “Taxes” means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code §59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not and including any
obligations to indemnify or otherwise assume or succeed to the Tax liability of
any other Person.

“Tax Return”
means any return, declaration, report, claim for refund, or information return
or statement relating to Taxes, including any schedule or attachment thereto,
and including any amendment thereof.

“Third-Party
Claim” has the meaning set forth in Section 8.4 below.

2.             Purchase
and Sale of Membership Interests.

2.1           Basic
Transaction.  On and subject to the
terms and conditions of this Agreement, Buyer agrees to purchase from each
Seller, and each Seller agrees to sell to Buyer, all of his or her or its
Membership Interests for the consideration specified below in this
Section 2.

2.2           Deposit.  Concurrently with the execution of this
Agreement, Buyer is delivering to Sellers a deposit of $2,000,000 (the “Deposit”)
by wire transfer or delivery of other immediately available funds.  The Deposit shall be held by U.S. Bank
National Association, as escrow agent, pursuant to the terms of the Escrow
Agreement of even date herewith (the “Escrow Agreement”), a copy of
which is attached hereto as Exhibit B. 
The Deposit and any interest or other income thereon shall either be
credited toward the cash payment to Sellers at Closing, forfeited to Sellers,
or refunded to Buyer upon the occurrence of certain events described in this
Agreement.  For income tax purposes, the
Deposit shall be treated as owned by Buyer during the escrow period, and all
interest or other income earned on the Deposit under the Escrow Agreement shall
be treated as taxable income of Buyer and shall be reported as such to the
Internal Revenue Service and other taxing authorities.  The parties agree to treat the Deposit and
the Escrow Agreement consistently with the foregoing for all tax reporting
purposes.

2.3           Preliminary
Purchase Price.  Buyer agrees to pay
to Sellers at the Closing $10,000,000 (the “Preliminary Purchase Price”)
by (1) delivery of cash equal to the difference of Preliminary Purchase Price
less the amount of the Deposit and any interest or other income earned on the
Deposit and (2) release of the Deposit and any interest or other income earned
on the Deposit.  The Preliminary Purchase
Price shall be allocated among Sellers in accordance with 

 7
 

 

 

the percentages set forth on Schedule 2.3 hereof (the “Percentage
Ownership Amounts”).  The Preliminary
Purchase Price shall be subject to post-Closing adjustment as set forth in
Section 2.6.

2.4           Closing.  The closing of the transactions contemplated
by this Agreement (the “Closing”) shall take place at the offices of
Faegre & Benson LLP, in Boulder, Colorado, commencing at 9:00 a.m. local
time on the second business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself) or such other date as Buyer
and Member Agent may mutually determine (the “Closing Date”); provided,
however, that the Closing Date shall be no earlier than December 1, 2006.

2.5           Deliveries
at Closing.  At the Closing, (i)
Sellers will deliver to Buyer the various certificates, instruments, and
documents referred to in Section 7.1 below, (ii) Buyer will deliver to Sellers
the various certificates, instruments, and documents referred to in Section 7.2
below, (iii) Buyer will deliver to each Seller the consideration specified in
Section 2.2 above and (iv) Buyer shall (x) repay all amounts outstanding under
Target’s line of credit with Waymire Trading Co. (in an amount not to exceed $1.5 million);
(y) repay all outstanding notes payable to the Sellers; and (z) pay to Sellers
all accrued distributions as of the Closing Date.

2.6           Closing
Merger Equity Adjustment.

(a)           On or before March
31, 2007, Buyer shall prepare and deliver to Member Agent a draft balance sheet
(the “Draft Closing Date Balance Sheet”) as of the close of business on
the Closing Date (determined on a pro forma basis as though the Parties had not
consummated the transactions contemplated by this Agreement).  The Draft Closing Date Balance Sheet shall be
prepared in accordance with GAAP applied on a basis consistent with the preparation
of the Financial Statements; provided, however, that assets, liabilities,
gains, losses, revenues, and expenses in interim periods or as of dates other
than year-end (which normally are determined through the application of
so-called interim accounting conventions or procedures) shall be determined,
for purposes of the Draft Closing Date Balance Sheet, through full application
of the procedures used in preparing the Most Recent Balance Sheet.  The Draft Closing Date Balance Sheet shall
provide sufficient detail as is reasonably necessary to confirm the
calculations therein.

(b)           If Member Agent
objects to the Draft Closing Date Balance Sheet, any such objections shall be
set forth in reasonable detail in a report (the “Objection Report”) that
shall be delivered to Buyer within 15 days after receipt of the Draft Closing
Date Balance Sheet that shall indicate the grounds upon which Member Agent
disputes that the Draft Closing Date Balance Sheet has been prepared in
accordance herewith.  Any such Objection
Report shall specify those items or amounts as to which Member Agent disagrees,
and Sellers shall be deemed to have agreed with all other items and amounts
contained in the Draft Closing Date Balance Sheet.

(c)           Within 15 calendar
days of the receipt by Buyer of the Objection Report, Buyer and Member Agent
shall endeavor to agree on any items or amounts in dispute.

 8
 

 

 

(d)           If Buyer and Member
Agent are unable to agree on any matters in dispute within 15 calendar days
after receipt by Buyer of the Objection Report, then, within 15 days of the
expiration of such 15-day period, the items or amounts in dispute will be
submitted for resolution to a nationally recognized independent accounting firm
mutually acceptable to Buyer and Member Agent (the “Accountant”).  If Buyer and Member Agent are unable to select
an independent accountant acceptable to each of them within such 15-day period,
then each of Buyer and Member Agent shall select a nationally recognized
independent accounting firm acceptable to such Party, and such accounting firms
shall mutually select a third national nationally recognized independent
accounting firm to serve as the Accountant. 
The Accountant shall, within 30 calendar days of such submission of the
items or amounts in dispute, make a final determination of the items or amounts
in dispute, and the Accountant’s determination shall be within the range of the
amounts shown on the Draft Closing Date Balance Sheet and the amounts of the
disputed items shown on the Objection Report. 
The Accountant shall issue a written report to Buyer and Member Agent
setting forth the Accountant’s determination(s), and such resolution and such
written decision shall be final and binding upon Buyer and Member Agent.  Buyer and Member Agent agree that the
procedure set forth in this Section 2.6 for resolving disputes with respect to
the Draft Closing Date Balance Sheet shall be the sole and exclusive method for
resolving any such disputes; provided that this provision shall not prohibit
Buyer or Member Agent from instituting litigation to enforce the ruling of the
Accountant.  Buyer and Member Agent shall
cooperate to enable the Accountant to render a written decision as promptly as
possible.  Buyer and Member Agent shall
share the fees and expenses of the Accountant in the same proportion as the
dollar amount of the disputed items or amounts that are not resolved in favor
of Buyer or Seller (as applicable) bears to the total dollar amount of the
items or amounts in dispute that are submitted to the Accountant.

(e)           “Closing Date
Balance Sheet” means (i) the Draft Closing Date Balance Sheet if no
Objection Report is provided by Member Agent within the period set forth in
Section 2.6(b); or (ii) if an Objection Report is provided by Member Agent
within the period set forth in Section 2.6(b), the Draft Closing Date Balance
Sheet with such changes as are agreed by Buyer and Member Agent pursuant to
Section 2.6(c) or with such changes as are determined by the Accountant
pursuant to Section 2.6(d).

(f)            If the Member
Equity of Target as of the close of business on the Closing Date as set forth
on the Closing Date Balance Sheet (the “Closing Member Equity”) is less
than $400,000, the Purchase Price shall be reduced by an amount equal to the
amount of such difference (the “Cash Payment Decrease”), and the Cash
Payment Decrease shall be paid to Buyer by Sellers in accordance with the
percentages set forth on Schedule 2.6 hereof within 10 business days after the
date of receipt by Buyer and Member Agent of the Draft Closing Date Balance
Sheet (or date of final determination in the case of a dispute).

(g)           If the Closing
Member Equity is greater than $400,000, the Purchase Price shall be increased
by an amount equal to such difference (the “Cash Payment Increase”), and
the Cash Payment Increase shall be paid by Buyer to Sellers in accordance with
the percentages set forth on Schedule 2.6 hereof within 10 business days 

 9
 

 

 

after the date
of receipt by Buyer and Member Agent of the Closing Date Balance Sheet (or date
of final determination in the case of a dispute).

2.7           Earn-Out
Accounts.

(a)           Subject to the other
paragraphs of this Section 2.7, the Purchase Price shall be subject to the
following adjustments (collectively, the “Earn-Out Payment”):

(i)            If EBIT for the
period commencing on Closing and ending on the earlier of: (x) the satisfaction
of the $12,500,000 Earn-Out Payment milestone described in paragraph
2.7(a)(i)(B) below and (y) the close of business on December 31, 2007 (“Period
1”):

(A)          is equal to or
greater than $10,000,000 but less than $12,500,000, the Purchase Price shall be
increased by an amount equal to 32% of EBIT for Period 1; or

(B)           is equal to or
greater than $12,500,000, the Purchase Price shall be increased by an amount
equal to $3,333,333.

(ii)           If EBIT for the
period commencing at the ending of Period 1 and ending on the earlier of: (x)
the satisfaction of the $15,625,000 Earn-Out Payment milestone described in
paragraph 2.7(a)(ii)(B) below and (y) the close of business on the date that is
one year following the end of Period 1 (“Period 2”):

(A)          is equal to or
greater than $12,500,000 but less than $15,625,000, the Purchase Price shall be
increased by an amount equal to 25.6% of EBIT for Period 2; or

(B)           is equal to or
greater than $15,625,000, the Purchase Price shall be increased by an amount
equal to $3,333,333.

(iii)          If EBIT for the
period commencing at the ending of Period 2 and ending on the earlier of: (x)
the satisfaction of the $15,625,000 Earn-Out Payment milestone described in
paragraph 2.7(a)(iii)(B) below and (y) the close of business on the date that
is one year following the end of Period 2 (“Period 3”):

(A)          is equal to or
greater than $15,625,000 but less than $19,531,000, the Purchase Price shall be
increased by an amount equal to 20.5% of EBIT for Period 3; or

(B)           is equal to or
greater than $19,531,000, the Purchase Price shall be increased by an amount
equal to $3,333,333.

(b)           Earn-Out
Allocations.  Subject to Section 6.5,
any portion of the Earn-Out Payment that is due with respect to Period 1,
Period 2 or Period 3 will be paid by Buyer to those Persons (the “Earn-Out
Recipients”) and in accordance with the

 

 10

 

 

percentages
set forth on Schedule 2.7 hereof (the “Earn-Out Allocations”) by wire
transfer or delivery of other immediately available funds within thirty (30)
days following the completion of the calendar quarter in which such Earn-Out
Payment milestone is achieved.  The
maximum amount of the Earn-Out Payment under this Section 2.7 is $10,000,000.

(c)           Operational
Covenants.

(i)            Target
Operational Covenants.  Until the
earlier of the end of Year 3 or the date on which the Earn-Out Payment that has
been made by Buyer is $10,000,000, Rich Schmelzer and Sheri Schmelzer shall
cause Target to operate its business in good faith and in a manner consistent
with reasonable business practices and with its operations prior to the date
hereof unless Target directs Rich Schmelzer and Sheri Schmelzer to change its
business operations or practices.

(ii)           Buyer
Operational Covenants.  Until the
earlier of the end of Period 3 or the date on which the Earn-Out Payment that
has been made by Buyer is $10,000,000, Buyer shall not, without consent of the
Member Agent, require that any current or future customers of Target carry
Buyer’s products as a condition to carrying and selling Target’s products (the “Customer
Covenant”).  If at any time prior to
the end of Period 3, neither Rich Schmelzer nor Sheri Schmelzer is employed by
Target, Buyer thereafter shall no longer be obligated to comply with this
Section 2.7(c)(ii).

(d)           Acceleration of
Earn-Out Payments.  Except as set
forth in Section 2.7(e), upon the occurrence of an Acceleration Event, Buyer
will pay to Earn-Out Recipients in accordance with the Earn-Out Allocations,
within thirty (30) days of such Acceleration Event, an amount equal to
$10,000,000 less the Earn-Out Payments made to date, whether or not the
milestones associated with the Earn-Out Payments have been achieved.  For purposes hereof, an “Acceleration
Event” shall mean (i) the termination of the employment of either Rich
Schmelzer or Sheri Schmelzer by Buyer (or any subsidiary or other affiliate of
Buyer) without “Cause” or the resignation of either Rich Schmelzer or Sheri
Schmelzer of employment with Buyer (or any subsidiary or other affiliate of
Buyer) with “Good Reason”, as such terms are defined in the respective
Employment Agreements or (ii) the occurrence of breach of the Customer
Covenant.

(e)           Breach of
Operational Covenants. 
Notwithstanding anything herein to the contrary,

(i)            in the event Rich
Schmelzer or Sheri Schmelzer cause Target to breach in any material respect the
covenant set forth in Section 2.7(c)(i) and fail to cure such breach within 10
days following Member Agent’s receipt of written notice thereof by Buyer, Buyer
shall have the right (but not the obligation) to take any and all action to
remedy the breach and mitigate the consequences of the breach;

(ii)           in the event Buyer
causes Buyer to breach in any material respect the covenant set forth in
Section 2.7(c)(ii) and fails to cure such breach 

 11
 

 

 

within 10 days
following Buyer’s receipt of written notice thereof by the Member Agent,
Sellers shall have the right (but not the obligation) to take any and all
action to remedy the breach and mitigate the consequences of the breach.

2.8           Payments.  Any payments required under this Section 2
shall be made by wire transfer or in other immediately available funds.

2.9           Appointment
of Member Agent.  Each Seller hereby
appoints Rich Schmelzer as its agent and attorney in fact to take any and all
actions on behalf of the Seller under this Agreement.  The Member Agent shall be entitled to rely on
such appointment, and each Seller hereby releases and agrees to indemnify and
hold harmless the Member Agent from any liability resulting from the Member
Agent’s reliance on such appointment in accordance with their respective
Percentage Ownership Amounts.

3.             Representations
and Warranties Concerning Transaction.

3.1           Sellers’
Representations and Warranties.  Each
Seller represents and warrants to Buyer as follows:

(a)           Organization
of Certain Sellers.  Seller
(if a corporation or other entity) is duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation or other
formation.

(b)           Authorization
of Transaction.  Seller has
full power and authority (including full power and authority) to execute and
deliver this Agreement and to perform his, her, or its obligations
hereunder.  This Agreement constitutes
the valid and legally binding obligation of Seller, enforceable in accordance
with its terms and conditions except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors rights generally and laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies.  Except as has
been obtained prior to the date hereof, Seller need not give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.  The
execution, delivery, and performance of this Agreement and all other agreements
contemplated hereby have been duly authorized by Seller.

(c)           Non-Contravention.  Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(A) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Seller is subject or, if Seller is an
entity, any provision of its charter, bylaws, or other governing documents, (B)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel (any such event, a “Conflict”), or require any notice
that has not been given as of the date of this Agreement under any agreement,
contract, lease, license, instrument, or other arrangement to which Seller is a
party or by which he, she, or it is 

 12
 

 

 

bound or to
which any of his, her, or its assets are subject, or (C) result in the
imposition or creation of a Lien upon or with respect to the Membership
Interests.

(d)           Brokers’
Fees.  Neither Seller nor any
of its Affiliates has any Liability to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this
Agreement.

(e)           Membership
Interests.  Seller holds of
record and owns beneficially the Membership Interests set forth next to his,
her, or its name in Section 4.2 of the Disclosure Schedule, free and clear
of any restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Liens, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands.  Seller is not a party to any option, warrant,
purchase right, or other contract or commitment (other than this Agreement)
that could require Seller to sell, transfer, or otherwise dispose of any
membership interests or equity interests, or any voting or economic right
therein, of Target.  Seller is not a
party to any voting trust, proxy, or other agreement or understanding with
respect to the voting of any membership interests or equity interests of
Target.

3.2           Buyer’s
Representations and Warranties. 
Buyer represents and warrants to Sellers as follows:

(a)           Organization
of Buyer.  Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware.

(b)           Authorization
of Transaction.  Buyer has
full corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder.  This
Agreement constitutes the valid and legally binding obligation of Buyer,
enforceable in accordance with its terms and conditions except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors rights
generally and laws relating to the availability of specific performance,
injunctive relief or other equitable remedies. 
Buyer need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order to consummate the transactions contemplated by this Agreement.  The execution, delivery, and performance of
this Agreement and all other agreements contemplated hereby have been duly
authorized by Buyer.

(c)           Non-Contravention.  Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(A) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Buyer is subject or any provision of its
charter, bylaws, or other governing documents or (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or 

 13
 

 

 

other
arrangement to which Buyer is a party or by which it is bound or to which any
of its assets are subject.

(d)           Brokers’
Fees.  Buyer has no Liability
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which any Seller could
become liable or obligated.

(e)           Cash
Resources.  Buyer has
sufficient cash resources to pay any amounts owed pursuant to Sections 2.6 and
2.7 hereunder.

4.             Representations and Warranties
Concerning Target.  Sellers jointly
and severally represent and warrant to Buyer, subject to such exceptions as are
disclosed in the disclosure schedule delivered by Sellers to Buyer on the date
hereof and initialed by the Parties (the “Disclosure Schedule”) (it
being understood that the Disclosure Schedule shall qualify (a) the
representations and warranties set forth in the corresponding sections and
subsections of this Section 4 and (b) any other representations and warranties
of this Section 4 if and solely to the extent that it is readily apparent on
the fact of such disclosure (without reference to the documents referenced
therein) that it applies to such other representations and warranties), as
follows:

4.1           Organization,
Qualification, and Corporate Power. 
Target is a limited liability company duly organized, validly existing
and in good standing under the laws of Colorado.  Target is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the failure to be so qualified or in
good standing would not reasonably be expected to have a Material Adverse
Effect.  Target has full power and
authority and all licenses, permits, and authorizations necessary to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it.  Section 4.1 of the
Disclosure Schedule lists the managers and officers of Target.  Sellers have delivered to Buyer correct and
complete copies of the Articles of Organization and Operating Agreement for
Target, each as amended to date.  Target
is governed by the Colorado Limited Liability Company Act, as amended (the “Act”).  The membership interest record books for
Target are correct and complete.  Target
is not in default under or in violation of any provision of its Articles of
Organization or Operating Agreement.

4.2           Capitalization.  The Membership Interests constitute the
entire outstanding membership interests of Target.  All of the issued and outstanding Membership
Interests have been duly authorized. 
Sellers collectively hold all of the issued Membership Interests, and
the Membership Interests are held of record by the respective Sellers as set
forth in Section 4.2 of the Disclosure Schedule.  There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require Target to
issue, sell, or otherwise cause to become outstanding any of its Membership
Interests, or any equity or voting right therein component thereof.  There are no outstanding or authorized equity
appreciation, phantom interest, profit participation, or similar rights with
respect to Target.   There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of the Membership Interests of Target.

 14
 

 

 

4.3           Non-Contravention.  Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Target is subject or any
provision of the Articles of Organization or Operating Agreement of Target,
each as amended to date, or (ii) result in any Conflict or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which Target is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Lien upon any of its
assets), except where such Conflict or failure to give notice would not
reasonably be expected to have a Material Adverse Effect.  Target need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement, except where the failure to give
notice, to file, or to obtain any authorization, consent or approval would
reasonably be expected to have a Material Adverse Effect.

4.4           Brokers’
Fees.  Neither Target nor its
Affiliates has any Liability to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement.

4.5           Title
to Assets.  Target has good and
marketable title to, or a valid leasehold interest in, the properties and
assets used by it, located on its premises, or shown on the Financial Statements
or acquired after the date thereof, free and clear of all Liens, except for
properties and assets disposed of in the Ordinary Course of Business since the
date of the Financial Statements.

4.6           Subsidiaries.  Target does not have any Subsidiaries and
does not own or have any right to acquire, directly or indirectly, any
outstanding capital stock of, or other equity interests in, any Person.

4.7           Financial
Statements.  Attached hereto as
Exhibit C are the following financial statements (collectively the “Financial
Statements”): (i) unaudited balance sheet and statement of income as of and
for the fiscal year ended on December 31, 2005 for Target; and (ii) unaudited
balance sheet (the “Most Recent Balance Sheet”)
and statement of income (the “Most Recent
Income Statement”) as of and for the six months ended June 30, 2006
(the “Most Recent Fiscal Month End”) for Target.  The Financial Statements present fairly in
all material respects the financial condition of Target as of such date and the
results of operations of Target for such period, are correct and complete, and
are consistent with the books and records of Target (which books and records
are correct and complete).

4.8           Events
Subsequent to Most Recent Fiscal Month End. 
Since the Most Recent Fiscal Month End, there has not been any Material
Adverse Change.  Without limiting the
generality of the foregoing, between the date of the Most Recent Fiscal Month
End and the date of this Agreement:

(a)           Target has not sold,
leased, transferred, or assigned any of its material assets, tangible or
intangible, other than for a fair consideration in the Ordinary Course of
Business;

 15
 

 

 

(b)           Target has not
entered into any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) outside the Ordinary Course of
Business or involving a future payment after the date of this Agreement in
excess of $50,000;

(c)           no party (including
Target) has accelerated, terminated, made a material modification to, or
cancelled any material agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses);

(d)           Target has not
imposed any Liens upon any of its assets, tangible or intangible;

(e)           Target has not made
any capital expenditure (or series of related capital expenditures) in excess
of $50,000 in the aggregate;

(f)            Target has not made
any capital investment in, any loan or advances of money to, or any acquisition
of the securities or assets of, any other Person (or series of related capital
investments, loans, and acquisitions) outside the Ordinary Course of Business;

(g)           Target has not
created, incurred, assumed, or guaranteed any indebtedness for borrowed money
or capitalized lease obligation involving more than $50,000 in the aggregate,
except for trade payables and advances to employees for travel and business
expenses in the Ordinary Course of Business;

(h)           Target has not
delayed or postponed the payment of accounts payable and other Liabilities
outside the Ordinary Course of Business;

(i)            Target has not
cancelled, compromised, waived, or released any material right or claim (or
series of material related rights and claims) either involving more than
$50,000 or outside the Ordinary Course of Business;

(j)            Target has not
transferred, assigned, or granted any License of any rights under or with
respect to any Intellectual Property;

(k)           there has been no
change made or authorized in the Articles of Organization or Operating
Agreement of Target;

(l)            Target has not
issued, sold, or otherwise disposed of any of its membership interests, or
granted any options, warrants, or other rights to purchase or obtain (including
upon conversion, exchange, or exercise) any of its Membership Interests, or any
voting or economic interests therein;

(m)          Target has not declared,
set aside, or paid any dividend or made any distribution or return of capital
with respect to its Membership Interests (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its membership interests;

 16
 

 

 

(n)           Target has not experienced
any damage, destruction, or loss (whether or not covered by insurance) to its
property;

(o)           Target has not made
any loan to, or entered into any other transaction with, any of its managers,
officers, and employees outside the Ordinary Course of Business;

(p)           Target has not
entered into any employment contract or collective bargaining agreement,
written or oral, or modified the terms of any existing such contract or
agreement;

(q)           Target has not
granted any increase in the base compensation of any of its managers, officers
or employees outside the Ordinary Course of Business;

(r)            Target has not
adopted, amended, modified, or terminated any bonus, profit sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of any of its
managers, officers or employees;

(s)           Target has not
changed any employment terms for any of its managers, officers or employees
outside the Ordinary Course of Business;

(t)            Target has not made
or pledged to make any charitable or other capital contribution outside the
Ordinary Course of Business;

(u)           there has not been
any other material occurrence, event, incident, action, failure to act, or
transaction outside the Ordinary Course of Business involving Target;

(v)           Target has not
discharged a material Liability or Lien outside the Ordinary Course of
Business; and

(y)           Target has not
committed to do any of the foregoing.

4.9           Undisclosed
Liabilities.  Target does not have
any material Liability of any nature required to be reflected on or reserved
against in financial statements that are prepared in accordance with GAAP
except for (i) Liabilities set forth on the face of the Most Recent Balance
Sheet; (ii) Liabilities that have arisen after the Most Recent Fiscal Month End
in the Ordinary Course of Business (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any material breach of
contract, material breach of warranty, tort, infringement, or material
violation of law) or (iii) legal and accounting fees and expenses incurred by
Target in connection with the execution of this Agreement.

4.10         Legal
Compliance.  Target has complied, to
the Knowledge of any Seller, with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder and including the Foreign Corrupt Practices Act, 15
U.S.C.  78dd-1 et seq.) of federal,
state, local, and foreign governments (and all agencies thereof), except to the
extent that such would not have a Material Adverse Effect; provided, that, the foregoing shall  not be deemed to cover any notices or
violations of laws that are explicitly 

 17
 

 

 

covered in another representation or warranty in this Section 4.  No action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or written notice has been
filed or, to the Knowledge of any Seller, commenced against Target alleging any
failure so to comply.

4.11         Tax
Matters.

(a)           Target has filed all
Tax Returns that it was required to file under applicable laws and
regulations.  All such Tax Returns were
correct and complete in all material respects and were prepared in substantial
compliance with all applicable laws and regulations.  All Taxes due and owing by Target shown on
any Tax Return have been paid.  Target currently
is not the beneficiary of any extension of time within which to file any Tax
Return.  No claim has ever been made by
an authority in a jurisdiction where Target does not file Tax Returns that
Target is or may be subject to taxation by that jurisdiction.  There are no Liens for Taxes (other than
Taxes not yet due and payable) upon any of the assets of Target.

(b)           Target, and to the
Knowledge of any Seller, any company from whom Target leases employees, has
withheld and paid all Taxes required to have been withheld and paid in
connection with any amounts paid or owing to any employee, independent
contractor, creditor, member, or other third party.

(c)           No Seller or manager
or officer (or employee responsible for Tax matters) of Target expects any authority
to assess any additional Taxes for any period for which Tax Returns have been
filed.  No foreign, federal, state, or
local tax audits or administrative or judicial Tax proceedings are pending or
being conducted with respect to Target. 
Target has not received from any foreign, federal, state, or local
taxing authority (including jurisdictions where Target has not filed Tax
Returns) any (i) notice indicating an intent to open an audit or other review,
(ii) request for information related to Tax matters, or (iii) notice of
deficiency or proposed adjustment for any amount of Tax proposed, asserted, or
assessed by any taxing authority against Target.  Section 4.11(c) of the Disclosure
Schedule lists all federal, state, local, and foreign income Tax Returns filed
with respect to Target for the shorter of the taxable periods ended on or after
June 30, 2003 or the period of Target’s existence, indicates those Tax Returns
that have been audited, and indicates those Tax Returns that currently are the
subject of audit.  Sellers have delivered
to Buyer correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by Target filed or received since the shorter of the taxable periods ended
on or after June 30, 2003 or the period of Target’s existence.

(d)           Target has not
waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.

(e)           Target is not a
party to any agreement, contract, arrangement or plan that has resulted or
could result, separately or in the aggregate, in the payment of (i) any “excess
parachute payment” within the meaning of Code §280G (or any corresponding
provision of 

 18
 

 

 

state, local
or foreign Tax law) and (ii) any amount that will not be fully deductible as a
result of Code §162(m) (or any corresponding provision of state, local or
foreign Tax law).  Target has not been a
United States real property holding corporation within the meaning of Code
§897(c)(2) during the applicable period specified in Code
§897(c)(1)(A)(ii).  Target has not
disclosed on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax within
the meaning of Code §6662.  Target is not
a party to or bound by any Tax allocation or sharing agreement.  Target (A) has not been a member of an
Affiliated Group filing a consolidated federal income Tax Return, or (B) does
not have any Liability for the Taxes of any Person (other than Target) under
Reg.  §1.1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or successor, by contract, or
otherwise.

(f)            The unpaid Taxes of
Target (A) did not, as of the Most Recent Fiscal Month End, exceed the reserve
for Tax Liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the face
of the Most Recent Balance Sheet (rather than in any notes thereto) and (B) do
not exceed that reserve as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of Target in filing its
Tax Returns.  Since the date of the Most
Recent Balance Sheet, Target has not incurred any liability for Taxes arising
from extraordinary gains or losses, as that term is used in GAAP, outside the
Ordinary Course of Business consistent with past custom and practice.

(g)           Target will not be
required to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof) ending after
the Closing Date as a result of any:

(i)            change in method of
accounting for a taxable period ending on or prior to the Closing Date;

(ii)           “closing agreement”
as described in Code §7121 (or any corresponding or similar provision of state,
local or foreign income Tax law) executed on or prior to the Closing Date;

(iii)          intercompany
transaction or excess loss account described in Treasury Regulations under Code
§1502 (or any corresponding or similar provision of state, local or foreign
income Tax law);

(iv)          installment sale or
open transaction disposition made on or prior to the Closing Date; or

(v)           prepaid amount
received on or prior to the Closing Date.

(h)           Target has not distributed
stock or equity of another Person, or has had its membership interests
distributed by another Person, in a transaction that was purported or intended
to be governed in whole or in part by Code §355 or Code §361.

 19
 

 

 

4.12         Real
Property.

(a)           Target does not
have, and has never had, any Owned Real Property.

(b)           Section 4.12(b)
of the Disclosure Schedule sets forth the address of each parcel of Leased Real
Property, and a true and complete list of all Leases for each such Leased Real
Property (including the date and name of the parties to such Lease
document).  Target has delivered to Buyer
a true and complete copy of each such Lease document.  Except as set forth in Section 4.12(b) of the
Disclosure Schedule, with respect to each of the Leases:

(i)            such Lease is
legal, valid, binding, enforceable and in full force and effect;

(ii)           the transactions
contemplated by this Agreement do not require the consent of any other party to
such Lease, will not result in a breach of or default under such Lease, and
will not otherwise cause such Lease to cease to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
Closing;

(iii)          Target’s possession
and quiet enjoyment of the Leased Real Property under such Lease has been disturbed
and, to the Knowledge of any Seller, there are no disputes with respect to such
Lease;

(iv)          neither Target nor,
to the Knowledge of any Seller, any other party to the Lease is in breach of,
or default under, such Lease and, to the Knowledge of any Seller, no event has
occurred or circumstance exists that, with the delivery of notice, the passage
of time or both, would constitute such a breach or default, or permit the
termination, modification or acceleration of rent under such Lease;

(v)           no security deposit
or portion thereof deposited with respect to such Lease has been applied in
respect of a breach of or default under such Lease that has not been
redeposited in full;

(vi)          Target does not owe,
and will not owe in the future, any brokerage commissions or finder’s fees with
respect to such Lease;

(vii)         the other party to
such Lease is not an Affiliate of, and otherwise does not have any economic
interest in, Target;

(viii)        Target has not
subleased, licensed or otherwise granted any Person the right to use or occupy
the Leased Real Property or any portion thereof;

(ix)           Target has not
collaterally assigned or granted any other Lien in such Lease or any interest
therein; and

(x)            there are no Liens
on the estate or interest created by such Lease.

 

 20

 

 

(c)           The Leased Real
Property identified in Section 4.12(b) of the Disclosure Schedule
(collectively, the “Real Property”) comprises all of the real property
used or intended to be used in, or otherwise related to, Target’s business; and
Target is not a party to any agreement or option to purchase any real property
or interest therein.

(d)           All buildings,
structures, fixtures, building systems and equipment, and all components
thereof, included in the Real Property (the “Improvements”) are in good
condition and repair and sufficient for the operation of Target’s
business.  There are no structural
deficiencies or latent defects affecting any of the Improvements and there are
no facts or conditions affecting any of the Improvements that would,
individually or in the aggregate, interfere in any respect with the use or
occupancy of the Improvements or any portion thereof in the operation of Target’s
business as currently conducted thereon.

(e)           There is no
condemnation, expropriation or other proceeding in eminent domain, pending or,
to the Knowledge of any Seller, threatened, affecting any parcel of Real
Property or any portion thereof or interest therein.  There is no injunction, decree, order, writ
or judgment outstanding, or any claim, litigation, administrative action or
similar proceeding, pending or, to the Knowledge of any Seller, threatened,
relating to the ownership, lease, use or occupancy of the Real Property or any
portion thereof, or the operation of Target’s business as currently conducted
thereon.

(f)            The Real Property
is in material compliance with all
applicable building, zoning, subdivision, health and safety and other land use
laws, including the Americans with Disabilities Act of 1990, as amended, and
all insurance requirements affecting the Real Property (collectively, the “Real
Property Laws”), and the current use and occupancy of the Real Property and
operation of Target’s business thereon do not violate in any material respect
any Real Property Laws.  Target has not
received any notice of violation of any Real Property Law and, to the Knowledge
of any Seller, there is no Basis for the issuance of any such notice or the
taking of any action for such violation.

(g)           All water, oil, gas,
electrical, steam, compressed air, telecommunications, sewer, storm and waste
water systems and other utility services or systems for the Real Property have
been installed and are operational and sufficient for the operation of Target’s
business as currently conducted thereon.

(h)           All certificates of
occupancy, permits, licenses, franchises, approvals and authorizations
(collectively, the “Real Property Permits”) of all governmental
authorities, boards of fire underwriters, associations or any other entity
having jurisdiction over the Real Property that are required or appropriate to
use or occupy the Real Property or operate Target’s business as currently
conducted thereon, have been issued and are in full force and effect.  The Real Property Permits are transferable to
Buyer without the consent or approval of the issuing governmental authority or
entity; no disclosure, filing or other action by Target is required in
connection with such transfer; and Buyer shall not be required to assume any
additional liabilities or obligations under the Real Property Permits as a result
of such transfer.

 21
 

 

 

(i)            Target’s use or
occupancy of the Real Property or any portion thereof or the operation of
Target’s business as currently conducted thereon is not dependent on a “permitted
non-conforming use” or “permitted non-conforming structure” or similar
variance, exemption or approval from any governmental authority.

(k)           The current use and
occupancy of the Real Property and the operation of Target’s business as
currently conducted thereon do not violate in any material respect any easement, covenant, condition,
restriction or similar provision in any instrument of record or other
unrecorded agreement affecting such Real Property.

4.13         Intellectual
Property.

(a)           Target owns or has
the right to use pursuant to a valid and enforceable written License all
Intellectual Property necessary for the operation of the business of Target as
presently conducted by Target.  Each item
of Intellectual Property owned or used by Target immediately prior to the
Closing will be owned or available for use by Target on identical terms and
conditions immediately subsequent to the Closing.  Target has taken all reasonable action to
maintain and protect each item of Intellectual Property that it owns.

(b)           Target has not
infringed upon or misappropriated any Intellectual Property rights of third
parties, and none of Sellers and the managers and officers (and employees with
responsibility for Intellectual Property matters) of Target has ever received
any written charge, complaint, claim, demand, or notice alleging any such
infringement or misappropriation (including any claim that Target must license
or refrain from using any Intellectual Property rights of any third
party).  To the Knowledge of any of
Sellers and the managers and officers (and employees with responsibility for
Intellectual Property matters) of Target, no third party has infringed upon or
misappropriated any Intellectual Property rights of Target.

(c)           Section 4.13(c)
of the Disclosure Schedule identifies each patent or registration that has been
issued to Target with respect to any of its Intellectual Property, identifies
each pending patent application or application for registration that Target has
made with respect to any of its Intellectual Property, and identifies each
License that Target has granted to any third party with respect to any of
Target’s Intellectual Property.  Sellers
have delivered to Buyer correct and complete copies of all such patents,
registrations, applications and Licenses (as amended to date) and have made
available to Buyer correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of each such
item.  Section 4.13(c) of the
Disclosure Schedule also identifies each unregistered trademark, service mark,
trade name, corporate name or Internet domain name and computer software item
(other than commercially available off-the-shelf software) owned or purported
to be owned by Target or licensed to Target in connection with its
business.  With respect to each item of
Intellectual Property owned by Target and required to be identified in
Section 4.13(c) of the Disclosure Schedule:

(i)            Target owns and
possesses all right, title, and interest in and to the item, free and clear of
any Lien or License;

 22
 

 

 

(ii)           Target’s use of the
item is not subject to any outstanding injunction, judgment, order, decree,
ruling, or charge;

(iii)          no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand is
pending or, to the Knowledge of any of Sellers, threatened that challenges the
legality, validity, enforceability, use, or ownership of the item, and there
are no grounds for the same;

(iv)          Target has never
agreed to indemnify any Person for or against any infringement or
misappropriation with respect to the item; and

(v)           no loss or
expiration of the item is threatened or pending, except for patents expiring at
the end of their statutory terms (and not as a result of any act or omission by
Sellers or Target, including without limitation, a failure by Sellers or Target
to pay any required maintenance fees).

(d)           Section 4.13(d)
of the Disclosure Schedule identifies each item of Intellectual Property that
any third party owns and that Target uses pursuant to License.  Sellers have delivered to Buyer correct and
complete copies of all such Licenses (as amended to date).  With respect to each item of Intellectual
Property required to be identified in Section 4.13(d) of the Disclosure
Schedule:

(i)            the License
covering the item is legal, valid, binding, enforceable, and in full force and
effect in all material respects;

(ii)           the License will
continue to be legal, valid, binding, enforceable, and in full force and effect
in accordance with items terms on identical terms following consummation of the
transactions contemplated hereby;

(iii)          to the Knowledge of
any Seller, no party to the License is in breach or default, and, to the
Knowledge of any Seller, no event has occurred that with notice or lapse of
time would constitute a breach or default or permit termination, modification,
or acceleration thereunder;

(iv)          no party to the
License has repudiated any provision thereof;

(v)           to the Knowledge of
any Seller, the underlying item of Intellectual Property is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge;

(vi)          no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand is
pending or, to the Knowledge of any Seller, threatened that challenges the
validity or enforceability of the underlying item of Intellectual Property; and

 23
 

 

 

(vii)         Target has not
granted any unauthorized sublicense or similar right with respect to the
License.

(e)           To the Knowledge of
any of Sellers: (A) Target has not in the past infringed upon or
misappropriated any Intellectual Property rights of third parties as a result
of the continued operation of its business as presently conducted; and (B) no
written notices regarding any of the foregoing (including, without limitation,
any demands or offers to license any Intellectual Property from any third
party) have been received.

(f)            Sellers have taken
reasonable actions to maintain and protect the Intellectual Property of
Target.  To the Knowledge of any of
Sellers, the owners of any of the Intellectual Property licensed to Target have
taken all reasonable actions to maintain and protect the Intellectual Property
covered by such License.

4.14         Tangible
Assets.  Target owns or leases all
material items of machinery, equipment, and other material tangible assets
necessary for the conduct of its business as presently conducted.  Each such tangible asset is free from
material defects (patent and latent), has been maintained in accordance with
normal industry practice, is in good operating condition and repair (subject to
normal wear and tear), and is suitable for the purposes for which it presently
is used.

4.15         Inventory.  The inventory of Target consists of raw
materials and supplies, manufactured and purchased parts, goods in process, and
finished goods, all of which is merchantable and fit for the purpose for which
it was procured or manufactured, and none of which is slow-moving, obsolete,
damaged, or defective, subject only to the reserve for inventory writedown set
forth on the face of the Most Recent Balance Sheet as adjusted for the passage
of time through the date of this Agreement in accordance with the past custom
and practice of Target.

4.16         Contracts.  Section 4.16 of the Disclosure Schedule
lists the following contracts and other agreements to which Target is a party
as of the date of this Agreement:

(a)           any agreement (or
group of related agreements) for the lease of personal property to or from any
Person providing for future lease payments after the date of this Agreement in
excess of $10,000 per annum;

(b)           any agreement (or
group of related agreements) for the purchase or sale of raw materials,
commodities, supplies, products, or other personal property, or for the
furnishing or receipt of services, the performance of which will extend over a
period of more than one (1) year, result in a material loss to Target, or
involve future consideration after the date of this Agreement in excess of
$50,000;

(c)           any agreement
concerning a partnership or joint venture;

(d)           any agreement (or
group of related agreements) under which it has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, or any 

 24
 

 

 

capitalized
lease obligation, in excess of $50,000 or under which it has imposed a Lien on
any of its assets, tangible or intangible;

(e)           any agreement
concerning non-competition;

(f)            any agreement with
any of Sellers and their Affiliates (other than Target);

(g)           any profit sharing,
option, equity purchase, equity 
appreciation, deferred compensation, severance, or other material plan
or arrangement for the benefit of its current or former managers, officers, and
employees;

(h)           any collective
bargaining agreement;

(i)            any agreement for
the employment of any individual on a full-time, part-time, consulting, or
other basis providing annual compensation in excess of $50,000 or providing
material severance benefits (other than standard offer letters that do not
contain terms regarding severance benefits);

(j)            any agreement under
which it has advanced or loaned any amount to any of its managers, officers,
and employees outside the Ordinary Course of Business;

(k)           any agreement under
which the consequences of a material default or termination could have a
Material Adverse Effect;

(l)            any agreement under
which it has granted any Person any registration rights (including, without
limitation, demand and piggyback registration rights);

(m)          any settlement,
conciliation or similar agreement, the performance of which will involve
payment after the Closing Date of consideration in excess of $10,000;

(n)           any agreement under
which Target has advanced or loaned any Person amounts in excess of  $10,000 in the aggregate; or

(o)           any other agreement
(or group of related agreements) the performance of which involves a future
payment after the date of this Agreement in excess of $50,000.

Sellers have delivered to Buyer a correct and complete
copy of each written agreement (as amended to date) listed in Section 4.16
of the Disclosure Schedule and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 4.16 of the
Disclosure Schedule.  With respect to
each such agreement required to be disclosed on Section 4.16: (A) the agreement
is legal, valid, binding, enforceable, and in full force and effect; (B)
neither Target nor, to the Knowledge of any Seller, any other party is in
material breach or default, and no event has occurred that with notice or lapse
of time would constitute a material breach or default, or permit termination,
modification, or acceleration, under the agreement; and 

 25
 

 

 

(C) neither Target nor, to the Knowledge of any Seller,
any other party has repudiated any material provision of the agreement; and (D)
to the Knowledge of any Seller, no party is in material breach or default.

4.17         Notes
and Accounts Receivable.  All notes
and accounts receivable of Target are reflected properly on its books and
records, are valid receivables which, to the Knowledge of any Seller, are
subject to no setoffs or counterclaims, and are current and collectible.  All accounts receivable of Target represent
valid obligations arising from sales actually made or services actually
performed.

4.18         Powers
of Attorney.  There are no
outstanding powers of attorney executed on behalf of Target.

4.19         Insurance.  Section 4.19 of the Disclosure Schedule
sets forth the following information with respect to each insurance policy
(including policies providing property, casualty, liability, and workers’
compensation coverage and bond and surety arrangements) to which Target has
been a party, a named insured, or otherwise the beneficiary of coverage at any
time:

(a)           the name, address,
and telephone number of the agent;

(b)           the name of the
insurer, the name of the policyholder, and the name of each covered insured;
and

(c)           the policy number
and the period of coverage.

With respect to each such insurance policy, to the
Knowledge of any Seller, (A) the policy is legal, valid, binding, enforceable,
and in full force and effect; (B) neither Target nor any other party to the
policy is in material breach or default (including with respect to the payment
of premiums or the giving of notices), and no event has occurred that, with
notice or the lapse of time, would constitute such a material breach or
default, or permit termination, modification, or acceleration, under the
policy; and (C) no party to the policy has repudiated any material provision
thereof.  Section 4.19 of the Disclosure
Schedule describes any self-insurance arrangements affecting Target.

4.20         Litigation.  Section 4.20 of the Disclosure Schedule
sets forth each instance in which Target (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge known to the Sellers or
(ii) is a party or is, to the Knowledge of any Seller, threatened to be made a
party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator.

4.21         Product
Warranty.  To the Knowledge of any
Seller, each product manufactured, sold, leased, or delivered by Target has
been in conformity with all applicable material contractual commitments and all
express and implied warranties.  Target
does not have material Liability for replacement or repair thereof or other
damages in connection therewith, subject only to the reserve for product
warranty claims set forth on the face of the Most Recent Balance Sheet or, with
respect to products manufactured, sold, leased or delivered by Target 

 26
 

 

 

after the date of the Most Recent Balance Sheet, except in accordance
with the past custom and practice of Target. 
Section 4.21 of the Disclosure Schedule includes copies of the
standard terms and conditions of sale for Target (containing applicable
guaranty, warranty, and indemnity provisions). 
No product manufactured, sold, leased, or delivered by Target is subject
to any guaranty, warranty, or other indemnity beyond the applicable standard
terms and conditions of sale set forth in Section 4.21 of the Disclosure
Schedule or except as implied by law.

4.22         Product
Liability.  Target does not have any
Liability arising out of any injury to individuals or property as a result of
the ownership or use of any product manufactured, sold, leased, or delivered by
Target.

4.23         Employees.  To the Knowledge of any Seller, no executive
or employee (a) has any present intention to terminate employment with Target
or (b) is a party to any confidentiality, non-competition, proprietary rights
or other such agreement between such employee and any Person other than Target
that would be material to the performance of such employee’s employment duties
or the ability of Target to conduct its business.  Target is not a party to or bound by any
collective bargaining agreement and has not experienced any strike or material
grievance, claim of unfair labor practices, or other collective bargaining
dispute within the past 3 years.  Target
has not committed any material unfair labor practice.  Neither any Seller nor any of the managers
and officers of Target has any Knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
employees of Target.  With respect to
this transaction, any notice required under any law or collective bargaining
agreement has been given, and all bargaining obligations with any employee representative
have been, or prior to the Closing Date will be, satisfied.  Within the past 3 years, Target has not
implemented any plant closing or layoff of employees that could implicate the
Worker Adjustment and Retraining Notification Act of 1988, as amended, or any
similar foreign, state, or local law, regulation, or ordinance.

4.24         Employee
Benefits.

(a)           Section 4.24 of the
Disclosure Schedule lists each Employee Benefit Plan that Target directly or
indirectly maintains, to which Target directly or indirectly contributes or has
any obligation to contribute, or with respect to which Target has any direct or
indirect Liability.

(i)            To the Knowledge of
any Seller, each such Employee Benefit Plan (and each related trust, insurance
contract, or fund) has been maintained, funded and administered in accordance
with the terms of such Employee Benefit Plan and the terms of any applicable
collective bargaining agreement and complies in form and in operation in all
respects with the applicable requirements of ERISA, the Code, and other
applicable laws, except where such noncompliance would not reasonably be
expected to have a Material Adverse Effect.

(ii)           All contributions
(including all employer contributions and employee salary reduction
contributions) that are due have been made to each such Employee Benefit Plan
that is an Employee Pension Benefit Plan. 
All 

 27
 

 

 

premiums or
other payments for all periods ending on or before the Closing Date have been
paid with respect to each such Employee Benefit Plan that is an Employee
Welfare Benefit Plan.

(iii)          Each such Employee
Benefit Plan that is intended to meet the requirements of a “qualified plan”
under Code §401(a) has received a determination from the Internal Revenue
Service that such Employee Benefit Plan is so qualified.

(b)           Target does not
contribute to, have any obligation to contribute to, or have any Liability
under or with respect to any Employee Pension Benefit Plan that is a “defined
benefit plan” (as defined in ERISA §3(35)). 
No asset of Target is subject to any Lien under ERISA or the Code.

4.25         Guaranties.  Target is not a guarantor or otherwise liable
for any Liability (including indebtedness) of any other Person.

4.26         Environmental,
Health, and Safety Matters.

(a)           Target has
materially complied and is in material compliance with all Environmental,
Health, and Safety Requirements.

(b)           Without limiting the
generality of the foregoing, Target has obtained and materially complied with,
and is in material compliance with, all permits, licenses and other authorizations
that are required pursuant to Environmental, Health, and Safety Requirements
for the occupation of their facilities and the operation of their business.

(c)           Target has not
received any written or oral notice, report or other information regarding any
actual or alleged violation of Environmental, Health, and Safety Requirements,
or any Liabilities, including any investigatory, remedial or corrective
obligations, relating to any of them or their facilities arising under
Environmental, Health, and Safety Requirements.

(d)           To the Knowledge of
any Seller, none of the following exists at any property or facility owned or
operated by Target: (1) underground storage tanks, (2) asbestos-containing
material in any form or condition, (3) materials or equipment containing
polychlorinated biphenyls, or (4) landfills, surface impoundments, or disposal
areas.

(e)           Target has not
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, manufactured, distributed, or released any substance,
including without limitation any hazardous substance, or owned or operated any
property or facility (and no such property or facility is contaminated by any
such substance) so as to give rise to any current or future Liabilities,
including any Liability for fines, penalties, response costs, corrective action
costs, personal injury, property damage, natural resources damages or attorney’s
fees, pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended 

 28
 

 

 

(“CERCLA”),
the Solid Waste Disposal Act, as amended (“SWDA”) or any other
Environmental, Health, and Safety Requirements.

(f)            Neither this
Agreement nor the consummation of the transactions that are the subject of this
Agreement will result in any obligations for site investigation or cleanup, or
notification to or consent of government agencies or third parties, pursuant to
any of the so-called “transaction-triggered” or “responsible property transfer”
Environmental, Health, and Safety Requirements.

(h)           Target has not
assumed, or otherwise become subject to, any 
Liability, including without limitation any obligation for corrective or
remedial action, of any other Person relating to Environmental, Health, and
Safety Requirements.

(i)            Sellers and Target have
furnished to Buyer all environmental audits, reports and other material
environmental documents relating to Target’s or its predecessors’ or Affiliates’
past or current properties, facilities, or operations that are in their
possession or under their reasonable control.

4.27         Business
Continuity.  None of the computer
software, computer hardware (whether general or special purpose),
telecommunications capabilities (including all voice, data and video networks)
and other similar or related items of automated, computerized, and/or software
systems and any other networks or systems and related services that are under
the control of Target and are used by or relied on by Target in the conduct of
its business (collectively, the “Systems”)
have experienced bugs, failures, breakdowns, or continued substandard
performance in the past twelve (12) months that has caused any substantial
disruption or interruption in or to the use of any such Systems by Target.  Target is covered by business interruption
insurance in scope and amount customary and reasonable to ensure their ongoing
business operations.

4.28         Certain
Business Relationships with Target. 
None of Sellers and none of Target’s managers, officers or employees
owns any material asset, tangible or intangible, that is used in the business
of Target.

4.29         Customers
and Suppliers.  Section 4.29 of the
Disclosure Schedule lists all suppliers of Target as of the date of this
Agreement.  Since the date of the Most
Recent Balance Sheet, (a) no supplier of Target has indicated that it shall
stop, or decrease the rate of, supplying materials, products or services to
Target, and (b) no current customer of Target has indicated that it shall stop,
or decrease the rate of, buying materials, products or services from Target, except
in the case of (a) and (b) above, as would not have a Material Adverse Effect.

5.             Pre-Closing Covenants.  The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing:

5.1           General.  Each of the Parties will use his, her, or its
commercially reasonable efforts to take all actions and to do all things
necessary, proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction of the conditions
set forth in Section 7 below).

 29
 

 

 

5.2           Notices
and Consents.  Sellers will cause
Target to give any notices to third parties, and will cause Target to use its
commercially reasonable efforts to obtain any third-party consents referred to
in Section 4.3 above, any authorizations, consents, and approvals of
governments and governmental agencies referred to in Section 4.3 above at
Target’s expense to be paid prior to Closing.

5.3           Operation
of Business.  Rich Schmelzer and
Sheri Schmelzer will cause Target to operate its business in accordance with
the provisions of Section 2.7(c)(i). 
Without limiting the generality of the foregoing, without Buyer’s
consent (which consent shall not be unreasonably withheld or delayed), Rich
Schmelzer and Sheri Schmelzer will not cause Target to declare, set aside, or
pay any dividend or make any distribution with or return of capital respect to
the Membership Interests or redeem, purchase, or otherwise acquire any of the
Membership Interests, provided that Target may make cash distributions prior to
Closing so long as such distributions do not cause the Member Equity of Target
to be below $400,000 at Closing.

5.4           Preservation
of Business.  Sellers will cause
Target to keep its material business and properties substantially intact.

5.5           Access.

(a)           Subject to the terms
of the Confidentiality Agreement dated May 31, 2006, each of Sellers will
permit, and Sellers will cause Target to permit, representatives of Buyer
(including legal counsel and accountants) to have reasonable access to all
premises, properties, personnel, books, records (including Tax records),
contracts, and documents of or pertaining to each of Target, and each of
Sellers will provide, and will cause Target to provide, such other information
regarding Target and its business as Buyer shall reasonably request.

(b)           Buyer will provide
Target and its managers and officers reasonable access to Buyer’s
representatives, suppliers and financial information as is reasonably necessary
for Target to: (i) appropriately assess Buyer’s ability to support the growth
required to satisfy the target amounts for the Earn-Out Payment, and (ii) the
application of Target’s accounting principles to the calculation of EBIT.

5.6           Notice
of Developments.

(a)           Sellers will give
prompt written notice to Buyer of any material adverse development or of any
Material Adverse Effect causing a breach of any of the representations and
warranties in Section 4 above.  Each
Party will give prompt written notice to the others of any material adverse development
causing a breach of any of his, her, or its own representations and warranties
in Sections 3.1 or 3.2 above.  No
disclosure by any Party pursuant to this Section 5.6, however, shall be deemed
to amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.

(b)           From the date of
this Agreement until the Closing Date, Target shall periodically (but not less
frequently than once every 30 days) notify Buyer in writing of any contracts
and other agreements that Target has entered into during such

 

 30

 

 

period which would be required to list on
Section 4.16 of the Disclosure Schedule had such agreements been entered into
prior to the date hereof.

5.7           Exclusivity.

(a)           Until the earlier of
December 31, 2006 or the date on which this Agreement is validly terminated
pursuant to the provisions of Section 10, none of Sellers will (and Sellers
will not cause or permit Target to)

(i)            enter into any
agreement, understanding or arrangement relating to any Acquisition Proposal
(as defined below);

(ii)           engage in any discussions
or negotiations relating to any Acquisition Proposal (except to communicate the
existence of these provisions);

(iii)          provide any
Confidential Information regarding Target or its business or operations to any
Person in connection with discussions or due diligence regarding an Acquisition
Proposal;

(iv)          solicit or knowingly
encourage the submission of any Acquisition Proposal;

(v)           permit any
representative of Target or Sellers to do any of the foregoing; or

(vi)          participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in any effort or attempt by any Person to do or seek any
of the foregoing (except to communicate the existence of these
provisions).  None of Sellers will vote
their Membership Interests in favor of any such acquisition.

(b)           Each Seller agrees
on behalf of itself and Target to notify Buyer in writing promptly upon the
receipt of an Acquisition Proposal.

(c)           The term “Acquisition
Proposal” refers to any proposal, plan, agreement, understanding or
arrangement contemplating (i) any merger, consolidation, reorganization,
recapitalization or similar transaction involving Target (other than the
transactions contemplated herein), (ii) any acquisition of securities of Target
(whether or not outstanding), (iii) any transfer of any material asset of
Target, or (iv) any transaction that would prohibit the consummation of the
transactions contemplated by this Agreement.

5.8           Tax
Matters.  Buyer and Sellers agree
that the Purchase Price will be allocated for income tax purposes among the
assets of Target in accordance with a schedule to be mutually determined by
Buyer and Member Agent in good faith within 30 days after the Closing Date
Balance Sheet is finalized.  The
allocation will be in accordance with Section 1060 of the Code and shall be
made pursuant to the following principles: 
(i) cash, inventory, accounts receivable and fixed assets will be
allocated an amount of Purchase Price equal to their 

 31
 

 

 

respective book values as reflected on the Closing Date Balance Sheet;
and (ii) the excess of the Purchase Price over the sum of Target’s cash,
inventory, accounts receivable and fixed assets will be allocated to Target’s
trademarks, goodwill and other intangible assets.  Buyer and Sellers hereby agree to report the
transactions contemplated herein for all income tax purposes in a manner
consistent with such allocation and shall not make any allocation of the
Purchase Price which is contrary to such allocation.

5.9           Buyer
Covenant Not to Compete.  Between the
date of this Agreement and the Closing Date, Buyer will not engage directly or
indirectly, in any geographic area, in any business that involves any product
designed to decorate shoes except for any decorations printed directly on the
shoe or on the shoe strap.

5.10         Tax-Sharing
Agreements.  Any tax-sharing
agreements or similar agreements with respect to or involving Target shall be
terminated as of the Closing Date and, after the Closing Date, Target shall not
be bound thereby or have any liability thereunder.

6.             Post-Closing Covenants.  The Parties agree as follows with respect to
the period following the Closing:

6.1           General.  In case at any time after the Closing any
further actions are necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will use commercially reasonable efforts to take
such further actions (including the execution and delivery of such further
instruments and documents) as any other Party may reasonably request, all at
the sole cost and expense of the requesting Party (unless the requesting Party
is entitled to indemnification therefor under Section 8 below).  Sellers acknowledge and agree that from and
after the Closing Buyer will be entitled to possession of all documents, books,
records (including Tax records), agreements, and financial data of any sort
relating to Target (provided, that, Sellers shall be entitled to retain copies
of all such documents as are necessary to file the Tax Returns of any of the
Sellers or Target or that provide support for Tax Returns that have been
previously filed).

6.2           Transition.  None of Sellers will knowingly take any
action that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier, or other business associate of Target
from maintaining the same business relationships with Target after the Closing
as it maintained with Target prior to the Closing.

6.3           Confidentiality.  Each Seller will treat and hold as such all
of the Confidential Information and refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
Buyer or destroy, at the request and option of Buyer, all tangible embodiments
(and all copies) of the Confidential Information that are in his, her, or its
possession, except for the documentation retained by Sellers pursuant to
Section 6.1.  In the event that any
Seller is requested or required pursuant to written or oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process to disclose any Confidential
Information, such Seller will notify Buyer promptly of the request or
requirement so that Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 6.3.  If, in the absence of a protective order or
the receipt of a waiver hereunder, any of 

 32
 

 

 

Sellers is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal, such Seller may disclose the
Confidential Information to the tribunal; provided, however, that the disclosing Seller shall use
his, her, or its commercially reasonable efforts to obtain, at the request and
expense of Buyer, an order or other assurance that confidential treatment will
be afforded to such portion of the Confidential Information required to be
disclosed as Buyer shall reasonably designate. 
The foregoing provisions shall not apply to any Confidential Information
that is generally available to the public immediately prior to the time of
disclosure unless such Confidential Information is so available due to the
actions of a Seller.

6.4           Covenant
Not to Compete.  For a period of
three years from and after the Closing Date, none of Sellers will engage
directly or indirectly in any business that involves any product designed to
decorate shoes in any geographic area in which Target conducts that business as
of the Closing Date; provided, however, that no owner of less than 1% of the
outstanding stock of any publicly traded corporation shall be deemed to engage
solely by reason thereof in its business. 
If the final judgment of a court of competent jurisdiction declares that
any term or provision of this Section 6.4 is invalid or unenforceable, the
Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.

6.5           Consulting
Payment.  The Parties covenant and
agree that, with respect to any Earn-Out Payments, prior to making any
distributions in accordance with the Earn-Out Allocations, Buyer shall pay the
first 2.5% of any such Earn-Out Payment to Zan Design & Associates in
consideration for consulting services performed by Zan Design &
Associates.  Thereafter, the remainder
will be distributed in accordance with the Earn-Out Allocations as specified in
Section 2.7(b).

6.6           Responsibility
for Filing Tax Returns and Payment of Taxes.

(a)           Sellers shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for Target that include any Pre-Closing Tax Period or portion thereof, whether
filed before or after the Closing Date. The costs of preparation for any Tax
Returns of Target that include any portion of the Pre-Closing Tax Period shall
be paid by Sellers.

(b)           Sellers should pay
all Taxes of Target which are or become due and owing for the Pre-Closing Tax
Period, except such Taxes as are reflected in the Closing Date Balance
Sheet.  In the case of any taxable period
that includes (but does not end on) the Closing Date (a “Straddle Period”),
the amount of any Taxes based on or measured by income or receipts of Target for
the Pre-Closing Tax Period shall be determined based on an interim closing of
the books as of the close of business  on
the Closing Date (and for such purpose, the taxable period of any partnership
or other pass-through entity in which Target holds a beneficial interest shall
be deemed to terminate at such time) and the amount of other Taxes of Target
for a Straddle Period that relates to 

 33
 

 

 

the
Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the
entire taxable period multiplied by a fraction the numerator of which is the
number of days in the taxable period ending on the Closing Date and the
denominator of which is the number of days in such Straddle Period.

(c)           All transfer,
documentary, use, stamp, registration and other such Taxes, and all conveyance
fees, recording charges and other fees and charges (including any penalties and
interest) incurred in connection with consummation of the transactions
contemplated by this Agreement shall be paid by Sellers when due, and Sellers
will, at their own expense, file all necessary Tax Returns and other
documentation with respect to all such Taxes, fees and charges.  Notwithstanding the foregoing, Seller shall
not be responsible for, and Buyer shall satisfy all obligations arising from,
any sales Taxes incurred in connection with the consummation of the
transactions contemplated by this Agreement.

(d)           The Parties agree to
report all payments made pursuant to this Agreement as consideration for the
Membership Interests and not as compensation for services or other form of
income.  No Party shall take a position
inconsistent with such treatment on any tax return, tax statement, information
report, financial statement or other document or filing.

6.6           Cooperation
on Tax Matters.

(a)           Buyer, Target, and
Sellers shall cooperate fully, as and to the extent reasonably requested by the
other Party, in connection with the filing of Tax Returns pursuant to this
Section 6.7 and any audit, litigation or other proceeding with respect to
Taxes.  Such cooperation shall include
the retention and (upon the other Party’s request) the provision of records and
information that are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.  Target and Sellers agree (A) to retain all
books and records with respect to Tax matters pertinent to Target relating to
any taxable period beginning before the Closing Date until the expiration of
the statute of limitations (and, to the extent notified by Buyer or Sellers,
any extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (B) to
give the other Party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other Party so
requests, Target or Sellers, as the case may be, shall allow the other Party to
take possession of such books and records prior thereto.

(b)           Buyer and Sellers
further agree, upon request, to use their commercially reasonable efforts to
obtain any certificate or other document from any governmental authority or any
other Person as may be necessary to mitigate, reduce or eliminate any Tax that
could be imposed (including, but not limited to, with respect to the
transactions contemplated hereby).

 34
 

 

 

(c)           Buyer and Sellers
further agree, upon request, to provide the other Party with all information
that either Party may be required to report pursuant to Code §6043 and all
Treasury Regulations promulgated thereunder.

7.             Conditions to Obligation to
Close.

7.1           Conditions
to Buyer’s Obligation.  Buyer’s
obligation to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:

(a)           The representations
and warranties of Sellers set forth in Section 3.1 and Section 4 above shall be
true and correct at and as of the Closing Date, as though such representations
and warranties were made on the Closing Date (except for such representations
and warranties as of a specified date, which shall be accurate as of such date)
except as has not had, individually or in the aggregate, a Material Adverse
Effect.

(b)           Sellers shall have
performed and complied with all of their covenants hereunder in all respects
through the Closing, except as not had, individually or in the aggregate, a
Material Adverse Effect;

(c)           no action, suit, or
proceeding shall be pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation, or (C)
adversely affect the right of Buyer to own the Membership Interests and operate
Target’s business;

(d)           Sellers shall have
delivered to Buyer a certificate to the effect that each of the conditions
specified above in Sections 7.1(a)-7.1(c) has been satisfied;

(e)           Buyer shall have
received the resignations, effective as of the Closing, of each manager of
Target other than those whom Buyer shall have specified in writing at least
five (5) business days prior to the Closing;

(f)            during the combined
months of October and November 2006, the aggregate revenue of Target,
determined through full application of the procedures used in preparing the
Most Recent Income Statement, shall have been at least $2,000,000;

(g)           there shall not have
occurred a Material Adverse Effect;

(h)           each Seller shall
deliver to Buyer a non-foreign affidavit dated as of the Closing Date, sworn
under penalty of perjury and in form and substance required under the Treasury
Regulations issued pursuant to Code §1445 stating that such Seller is not a “Foreign
Person” as defined in Code §1445 (the “FIRPTA Affidavit”);

 35
 

 

 

(i)            each of Rich
Schmelzer and Sheri Schmelzer shall have entered into employment agreements
with Buyer, attached hereto as Exhibits D-1 and D-2 (the “Employment
Agreements”);

(j)            Sellers shall have
delivered to Buyer a copy of the Articles of Organization of Target certified
on or soon before the Closing Date by the Secretary of State of Colorado;

(k)           Sellers shall have
delivered to Buyer a copy of the certificate of good standing of Target issued
on or soon before the Closing Date by the Secretary of State of Colorado; and

(l)            Sellers shall have
delivered to Buyer a certificate of the secretary of Target, dated as of the
Closing Date, in form and substance reasonably satisfactory to Buyer, stating
that there have been no amendments to the Articles of Organization or Operating
Agreement of Target since the date specified in clause (l) above.

Buyer may waive any condition specified in this
Section 7.1 if it executes a writing so stating at or prior to the
Closing.

7.2           Conditions
to Sellers’ Obligation.  The
obligation of Sellers to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:

(a)           The representations
and warranties of Buyer set forth in Section 3.2 above shall be true and
correct at and as of the Closing Date, as though such representations and
warranties were made on the Closing Date (except for such representations and
warranties as of a specified date, which shall be accurate as of such date)
except as has not had, individually or in the aggregate, a Buyer Material
Adverse Effect;

(b)           Buyer shall have
performed and complied with all of its covenants hereunder in all respects
through the Closing, except as not had, individually or in the aggregate, a
Buyer Material Adverse Effect;

(c)           no action, suit, or
proceeding shall be pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);

(d)           Buyer shall have
delivered to Sellers a certificate to the effect that each of the conditions
specified above in Sections 7.2(a)-7.2(c) has been satisfied;

(e)           there shall not have
occurred a Buyer Material Adverse Effect; and

 36
 

 

 

(f)            Rich Schmelzer
shall have been released as a guarantor on any lease of Target.

Member Agent
may waive any condition specified in this Section 7.2 on behalf of all
Sellers if they execute a writing so stating at or prior to the Closing.

8.             Remedies for Breaches of this
Agreement.

8.1           Survival
of Representations and Warranties. 
The representations and warranties contained in Sections 4.1
[Organization, Qualification, and Corporate Power], 4.2 [Capitalization], 4.3
[Non-Contravention], 4.4 [Brokers’ Fees], 4.6 [Subsidiaries], Section 4.11
[Tax Matters] and Section 4.26 [Environmental, Health and Safety Matters]
and in Section 3.1 (the “Specified Representations”) shall survive the
Closing indefinitely (even if Buyer knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing).  All of the other representations, warranties
and covenants of Sellers contained in this Agreement shall survive the Closing
hereunder (even if Buyer knew or had reason to know of any misrepresentation or
breach of warranty at the time of Closing) and continue in full force and
effect for a period of one (1) year following the Closing Date.

8.2           Indemnification
Provisions for Buyer’s Benefit.

(a)           In the event any Seller
breaches (or in the event of any third party claim that, if true, would mean
any Seller has breached) any of his, her, or its representations and warranties
contained in Section 4 or any of its covenants and, provided that Buyer makes a
written claim for indemnification against any Seller pursuant to
Section 11.8 below within the applicable survival period set forth in
Section 8.1 above, then each Seller shall jointly and severally indemnify Buyer
from and against the entirety of any Losses paid or incurred by Buyer resulting
from, arising out of or caused by the breach.

(b)           In the event any
Seller breaches (or in the event of any third party claim that, if true, would
mean any Seller breached) any of his, her, or its covenants in Section 3.1
above, and provided that Buyer makes a written claim for indemnification
against such a Seller pursuant to Section 11.8 below within the applicable
survival period set forth in Section 8.1 above, then such Seller shall
severally and not jointly indemnify Buyer from and against the entirety of any
Losses paid or incurred by Buyer resulting from, arising out of or caused by
the breach.

(c)           Buyer shall not be
entitled to indemnification for any Losses hereunder until the aggregate amount
of all Losses of Buyer under this Section 8.2 shall exceed $80,000 (at which
point Sellers will be obliged to indemnify Buyer from and against all such
Losses relating back to the first dollar).

(d)           Except as
specifically set forth in Section 8.2(e) below, the maximum aggregate amount
that Buyer may recover from Sellers pursuant to the indemnity set forth in
Sections 8.2(a) and (b) shall not exceed $800,000; provided,
that, in no event shall any Seller be liable for more than his
respective Percentage Ownership Amount of $800,000; provided, however, that, if, on
the Expiration Date, the Losses 

 37
 

 

 

suffered by
Buyer pursuant to the indemnity set forth in Sections 8.2(a) and (b) exceed
$800,000, then Buyer may recover such amounts in excess of $800,000 by
withholding up to a maximum of 10% of any Earn-Out Payment owed by Buyer to the
Earn-Out Recipients hereunder and offset such amounts against such Losses
(based on the Earn-out Allocations).

(e)           Notwithstanding the
foregoing, the maximum aggregate amount that Buyer may recover from any particular
Seller pursuant to the indemnity set forth in Sections 8.2(a) and (b) arising
from breaches of the Specified Representations shall not exceed the total
amounts actually paid by Buyer to such Seller under this Agreement.

(f)            Nothing in this
Section 8 shall prevent Buyer from bringing a common law action for fraud
against any Person whose own fraud has caused Buyer to suffer Losses or limit the Losses
recoverable by Buyer in such common law action; provided,
that, Buyer shall not be entitled to recover more than once for the
same Loss.

8.3           Indemnification
Provisions for Sellers’ Benefit.

(a)           In the event Buyer
breaches (or in the event of any third claim that, if true, would mean Buyer
has breached) any of its representations, warranties and covenants contained
herein and, provided that any Seller makes a written claim for indemnification
against Buyer pursuant to Section 11.8 below within such survival period
(if there is an applicable survival period pursuant to Section 8.1 above),
then Buyer shall indemnify each Seller from and against any Losses suffered
resulting from, arising out of or caused by the breach.

(b)           Sellers shall not be
entitled to indemnification for any Losses hereunder until the aggregate amount
of all Losses of Sellers under this Section 8.3 shall exceed $80,000 (at which
point Buyer will be obliged to indemnify Sellers from and against all such
Losses relating back to the first dollar); provided, however,
that the foregoing shall not apply to the breach by Buyer of any payment
obligation pursuant to Section 2.7(d).

(c)           The maximum
aggregate amount that may be recovered from Buyer pursuant to the provisions of
Section 8.3 shall not exceed an amount equal to $800,000 plus 10% of any
Earn-Out Payment; provided, however, that the foregoing shall not
apply to the breach by Buyer of any payment obligation pursuant to Section
2.7(d).

8.4           Matters
Involving Third Parties.

(a)           If any third party
notifies any Party with respect to any matter (a “Third-Party Claim”)
that may give rise to a claim for indemnification against Sellers or Buyer (the
“Indemnifying Party”) under this Section 8, then Buyer or Seller
(as applicable) (the “Indemnified Party”) shall promptly notify each
Indemnifying Party thereof in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any 

 38
 

 

 

obligation
hereunder unless (and then solely to the extent) the Indemnifying Party is
thereby prejudiced.

(b)           Any Indemnifying
Party will have the right to defend the Indemnified Party against the
Third-Party Claim with counsel of his, her, or its choice reasonably
satisfactory to the Indemnified Party so long as (A) the Indemnifying Party
notifies the Indemnified Party in writing within 15 days after the Indemnified
Party has given notice of the Third-Party Claim that the Indemnifying Party
will indemnify the Indemnified Party from and against the entirety of any
Adverse Consequences the Indemnified Party may suffer resulting from, arising out
of, relating to, in the nature of, or caused by the Third-Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third-Party Claim and fulfill its
indemnification obligations hereunder, (C) the Third-Party Claim involves only
money damages and does not seek an injunction or other equitable relief, (D)
settlement of, or an adverse judgment with respect to, the Third-Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedent or practice materially adverse to the continuing business interests
or the reputation of the Indemnified Party, and (E) the Indemnifying Party
conducts the defense of the Third-Party Claim actively and diligently.

(c)           So long as the
Indemnifying Party is conducting the defense of the Third-Party Claim in
accordance with Section 8.4(b) above, (A) the Indemnified Party may retain
separate co-counsel at his, her, or its sole cost and expense and participate
in the defense of the Third-Party Claim, (B) the Indemnified Party will not
consent to the entry of any judgment on or enter into any settlement with
respect to the Third-Party Claim without the prior written consent of the
Indemnifying Party (not to be unreasonably withheld), and (C) the Indemnifying
Party will not consent to the entry of any judgment on or enter into any
settlement with respect to the Third-Party Claim without the prior written
consent of the Indemnified Party (not to be unreasonably withheld).

(d)           In the event any of
the conditions in Section 8.4(b) above is or becomes unsatisfied, however,
(A) the Indemnified Party may defend against, and consent to the entry of any
judgment on or enter into any settlement with respect to, the Third-Party Claim
in any manner his, her, or it may reasonably deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (B) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third-Party Claim (including reasonable attorneys’ fees
and expenses), and (C) the Indemnifying Parties will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third-Party Claim to
the fullest extent provided in; provided, however, that, except with the consent of the
Member Agent, no settlement of any such Third-Party Claim with third-party
claimants shall be determinative of (i) the amount of Losses relating to such
matter or (ii) whether Buyer is entitled to indemnification pursuant to this
Section 8.

 39
 

 

 

8.5           Determination
of Adverse Consequences.  All
indemnification payments under this Section 8 shall be deemed adjustments
to the Purchase Price.

8.6           Release.  Each Seller hereby agrees that he, she, or it
will not make any claim for indemnification against Target arising out of facts
occurring prior to the Closing by reason of the fact that he, she, or it was a
manager, officer, employee, or agent of Target or was serving at the request of
Target as a partner, trustee, director, manager, officer, employee, or agent of
another entity (whether such claim is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses, or otherwise and whether
such claim is pursuant to any statute, charter document, bylaw, agreement, or
otherwise).

8.7           Purchase
Price Adjustment.  Notwithstanding
anything to the contrary herein, Sellers shall not be obligated to indemnify
Buyer against any Losses as a result of, or based upon or arising from, any
claim or Liability to the extent such claim or Liability is taken into account
through the application of Section 2.6.

10.           Termination.

10.1         Termination
of Agreement.  This Agreement may be
terminated as follows:

(a)           Buyer and Member
Agent may terminate this Agreement by mutual written consent at any time prior
to the Closing.

(b)           Buyer may terminate
this Agreement at any time prior to the Closing if there has been a Material
Adverse Effect that either (i) is incapable of being cured or (ii) is capable
of being cured but which Sellers fail to cure within 15 days after Member Agent
receives written notice thereof.

(c)           Member Agent may
terminate this Agreement at any time prior to the Closing if there has been a
Buyer Material Adverse Effect that either (i) is incapable of being cured or
(ii) is capable of being cured but which Buyer fails to cure within 15 days
after Buyer receives written notice thereof.

(d)           Either Buyer or
Sellers (acting through the Member Agent) may terminate this Agreement by
giving written notice thereof to the other Party if the Closing shall not have
occurred on or before December 31, 2006 (unless the failure results primarily
from the terminating Party breaching any of its representations, warranties or
covenants (including the covenant set forth in Section 2.4) contained in this
Agreement).

10.2         Effect
of Termination.

(a)           In the event of the
termination of this Agreement as provided in Section 10.1, this Agreement shall
be of no further force or effect; provided, however, that this Section 10.2 and Section
11 shall survive the termination of this Agreement and shall remain in full
force and effect.

 

 40

 

 

(b)           In the event that
this Agreement is validly terminated by Buyer pursuant to  Section 10.1(b) and Buyer shall not have
materially breached any provision of this Agreement, the Deposit and any
interest or other income earned on the Deposit shall be forfeited to Buyer and
Target shall pay to Buyer liquidated damages in the aggregate amount of
$1,000,000 within 10 days of such termination, by wire transfer or delivery of
other immediately available funds.

(c)           In the event that
this Agreement is validly terminated by the Member Agent pursuant to Section
10.1(c) and no Seller shall have materially breached any provision this
Agreement, in addition to any other remedies that may be available to Target
and Sellers, including breach of contract (which remedies shall not be subject
to any limitations set forth in Section 8, including Section 8.3), the Deposit
shall be forfeited to Sellers, and any interest or other income earned on the
Deposit shall be returned to Buyer.  Notwithstanding
anything herein to the contrary, the parties hereby confirm their understanding
that the Sellers’ sole remedy under this Agreement for any Acceleration Event
under Section 2.7(d) shall be the acceleration of the Earn-Out Payment and
Sellers shall not be entitled to any other remedy under this Agreement.

(d)           In the event that
this Agreement is validly terminated pursuant to Sections 10.1(a) or 10.1(d),
the Deposit and any interest or other income earned on the Deposit shall be
forfeited to Buyer.

11.           Miscellaneous.

11.1         Nature
of Sellers’ Obligations.  Other than
the representations and warranties contained in Section 3.1, the
representations, warranties, and covenants of Sellers in this Agreement are
joint and several obligations.  This
means that, subject to the limitations set forth in Sections 8.2(c) and (e),
each Seller shall be responsible to the extent provided in Sections 8.2(a) and
8.2(b) above for the entirety of any Losses suffered by Buyer as a result of
any breach thereof.

11.2         Press
Releases and Public Announcements. 
No Party shall issue any press release, give notice to any third party
(except as required pursuant to the terms of this Agreement) or make any public
announcement relating to the subject matter of this Agreement prior to the
Closing without the prior written approval of Buyer and Member Agent, which
approvals shall not be unreasonably withheld; any Party may disclose the
existence of this Agreement and the terms of the transaction contemplated
hereby to such of its officers, directors, manager or agents who such Party
reasonably believes have a need to know and who are bound by confidentiality
agreements; provided, further, that Buyer may issue any press release or make
any public disclosure that its general counsel or outside legal counsel
reasonably believes is required by applicable law or any listing or trading
agreement concerning its publicly traded securities.

11.3         No
Third-Party Beneficiaries.  This
Agreement shall not confer any rights or remedies upon any Person other than
the Parties and their respective successors and permitted assigns.

 41
 

 

 

11.4         Entire
Agreement.  This Agreement (including
the documents referred to herein) constitutes the entire agreement among the
Parties and supersedes any prior understandings, agreements, or representations
by or among the Parties, written or oral, to the extent they relate in any way
to the subject matter hereof.

11.5         Succession
and Assignment.  This Agreement shall
be binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. 
No Party may assign either this Agreement or any of his, her, or its
rights, interests, or obligations hereunder without the prior written approval
of Buyer and Member Agent; provided, however, that Buyer may (i) assign any or all
of its rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations hereunder
(in any or all of which cases Buyer nonetheless shall remain responsible for
the performance of all of its obligations hereunder).

11.6         Counterparts.  This Agreement may be executed in one or more
counterparts (including by means of facsimile), each of which shall be deemed
an original but all of which together shall constitute one and the same
instrument.

11.7         Headings.  The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.

11.8         Notices.  All notices, requests, demands, claims, and
other communications hereunder shall be in writing.  Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given (i) when delivered
personally to the recipient, (ii) 1 business day after being sent to the
recipient by reputable overnight courier service (charges prepaid), (iii) 1
business day after being sent to the recipient by facsimile transmission or
electronic mail, or (iv) 4 business days after being mailed to the recipient by
certified or registered mail, return receipt requested and postage prepaid, and
addressed to the intended recipient as set forth below:

If to Sellers:                                                                                 Jibbitz,
LLC

3052 Sterling Circle

Boulder Colorado 80301

Attn:  Richard Schmelzer

Fax:  (303) 484-6380

Copy to:                                                                                                  Cooley
Godward LLP

380 Interlocken Crescent, Suite 900

Broomfield, CO 80021-8023

Attn:  Michael Platt

Fax:  (720) 566-4099

and

 42
 

 

 

Daniel L. Swires

9830 Isabelle Rd.

Lafayette, CO  80026

Fax:  (303) 665-6448

If to Buyer:                                                                                    Crocs,
Inc.

6273 Monarch Park Place

Niwot, CO 80503

Attn:  Erik Rebich

Fax:  (303) 848-7010

Copy to:                                                                                                  Faegre
& Benson LLP

3200 Wells Fargo Center

1700 Lincoln Street

Denver, CO 802030

Attn:  Bill Campbell

Fax:  (303) 607-3600

Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.

11.9         Governing
Law.  This Agreement shall be
governed by and construed in accordance with the domestic laws of the State of
Delaware without giving effect to any choice or conflict of law provision or
rule (whether of the State of Delaware or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Delaware.

11.10       Amendments
and Waivers.  No amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by Buyer and Member Agent.  No
waiver by any Party of any provision of this Agreement or any default,
misrepresentation, or breach of warranty or covenant hereunder, whether intentional
or not, shall be valid unless the same shall be in writing and signed by the
Party making such waiver nor shall such waiver be deemed to extend to any prior
or subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such default, misrepresentation, or breach of warranty or covenant.

11.11       Severability.  Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.

11.12       Expenses.  Each Buyer, Seller, and Target shall bear
his, her, or its own costs and expenses (including legal fees, accounting and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby; provided, however, that Sellers shall also bear the
costs and expenses of Target (including all of its legal fees and expenses) in
connection with this Agreement and the transactions contemplated hereby in the
event that the transactions contemplated by this Agreement are consummated.

 43
 

 

 

11.13       Relationship.  It is not the intention of the Parties to
create a partnership, joint venture or association, and neither this Agreement
nor the transactions to be performed in connection with this Agreement will be
construed as creating such a relationship. Nothing contained in this Agreement
will be construed to constitute any Party to be the partner of any other Party
or to impose any fiduciary duties between or among the Parties.

11.14       Construction.  The Parties have participated jointly in the
negotiation and drafting of this Agreement. 
In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this
Agreement.  Any reference to any federal,
state, local, or foreign statute or law shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the context requires otherwise.  The word “including” shall mean including
without limitation.  The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance.  If any Party
has breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) that the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.

11.15       Incorporation
of Exhibits, Annexes, and Schedules. 
The Exhibits, Annexes, and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.

11.16       Specific
Performance.  Each Party acknowledges
and agrees that the other Parties would be damaged irreparably in the event any
provision of this Agreement is not performed in accordance with its specific
terms or otherwise is breached, so that a Party shall be entitled to injunctive
relief to prevent breaches of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in addition to any other remedy
to which such Party may be entitled, at law or in equity.  In particular, the Parties acknowledge that
the business of Target is unique and recognize and affirm that in the event
Sellers breach this Agreement, money damages would be inadequate and Buyer
would have no adequate remedy at law, so that Buyer shall have the right, in
addition to any other rights and remedies existing in its favor, to enforce its
rights and the other Parties’ obligations hereunder not only by action for
damages but also by action for specific performance, injunctive, and/or other
equitable relief.

11.17       Submission
to Jurisdiction.  Each of the Parties
submits to the jurisdiction of any state or federal court sitting in or for
Boulder, Colorado, in any action or proceeding arising out of or relating to
this Agreement and agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court.  Each Party also agrees not to bring any
action or proceeding arising out of or relating to this Agreement in any other
court. Each of the Parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other Party with respect
thereto.  Any Party may make service on
any other Party by sending or delivering a copy of the process to the Party to
be served at the address and in the manner provided for the giving of notices
in Section 11.8 above.  Nothing in
this Section 11.17, however, shall affect the right of any Party to serve legal
process in any other manner permitted 

 44
 

 

 

by law or at equity.  Each Party
agrees that a final judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.

* * * * *

 45
 

 

 

IN WITNESS WHEREOF, the Parties hereto have executed
this Agreement on the date first above written.

	
   

  	
  BUYER:

  
	
   

  	
   

  	
   

  
	
   

  	
  CROCS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Erik Rebich

  
	
   

  	
  Name:

  	
  Erik Rebich

  
	
   

  	
  Title:

  	
  General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SELLERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  JUNIPER HOLDING
  CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard A. Schmelzer

  
	
   

  	
  Name:

  	
  Richard A. Schmelzer

  
	
   

  	
  Title:

  	
  President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ALEXANDER A. SCHMELZER HERITAGE TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard A. Schmelzer

  
	
   

  	
  Name:

  	
  Richard A. Schmelzer

  
	
   

  	
  Title:

  	
  Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  RILEY A. SCHMELZER HERITAGE TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard A. Schmelzer

  
	
   

  	
  Name:

  	
  Richard A. Schmelzer

  
	
   

  	
  Title:

  	
  Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JULIAN T. SCHMELZER HERITAGE TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard A. Schmelzer

  
	
   

  	
  Name:

  	
  Richard A. Schmelzer

  
	
   

  	
  Title:

  	
  Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HD PEARL, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel Swires

  
	
   

  	
  Name:

  	
  Daniel Swires

  
	
   

  	
  Title:

  	
  President

  

 

 46
 

 

 

	
  

  	
  JUSTIN D. SWIRES HERITAGE TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel Swires

  
	
   

  	
  Name:

  	
  Daniel Swires

  
	
   

  	
  Title:

  	
  Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JESSICA E. SWIRES HERITAGE TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel Swires

  
	
   

  	
  Name:

  	
  Daniel Swires

  
	
   

  	
  Title:

  	
  Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  RANDALL J. WAYMIRE HERITAGE TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tom Waymire

  
	
   

  	
  Name:

  	
  Tom Waymire

  
	
   

  	
  Title:

  	
  Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SARAH E. WAYMIRE HERITAGE TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tom Waymire

  
	
   

  	
  Name:

  	
  Tom Waymire

  
	
   

  	
  Title:

  	
  Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THERESA L. WAYMIRE HERITAGE TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tom Waymire

  
	
   

  	
  Name:

  	
  Tom Waymire

  
	
   

  	
  Title:

  	
  Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MEMBER AGENT:

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Richard A. Schmelzer

  
	
   

  	
  Rich Schmelzer

  

 

 47

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