ETOYS Direct 1, LLC, et al., filed a Chapter 11 Bankruptcy petition. The petition seeks an order approving the selection of a "stalking horse" The Motion seeks a break-up fee and expense reimbursement.
ETOYS Direct 1, LLC, et al., filed a Chapter 11 Bankruptcy petition. The petition seeks an order approving the selection of a "stalking horse" The Motion seeks a break-up fee and expense reimbursement.
ETOYS Direct 1, LLC, et al., filed a Chapter 11 Bankruptcy petition. The petition seeks an order approving the selection of a "stalking horse" The Motion seeks a break-up fee and expense reimbursement.
FOR THE DISTRICT OF DELAWARE ) Chapter 11 ) eTOYS DIRECT 1, LLC, et al., 1 ) Case No. 08-13412(BLS) ) (Jointly Administered) Debtors. ) ) Objection Deadline: January 29, 2009, at 12:00 noon (requested) Hearing Date: January 30, 2009 at 12:00 noon (requested) NOTICE OF DEBTORS' MOTION PURSUANT TO SECTIONS 105 AND 363 OF THE BANKRUPTCY CODE FOR ORDER APPROVING SELECTION OF STALKING HORSE, BREAK-UP FEE AND EXPENSE REIMBURSEMENT, AND RELATED RELIEF IN CONNECTION WITH SALE OF ASSETS OF DEBTOR POSHTOTS, INC. TO: (a) the Office ofthe United States Trustee; (b) counsel to the Debtors' prepetition and postpetition lenders; (c) counsel for the Official Committee of Unsecured Creditors; (d) those persons who have requested notice pursuant to Rule 2002 of the Federal Rules of Bankruptcy Procedure; (e) counsel for Posh Ventures, LLC. On January 23, 2009, the captioned debtors and debtors in possession (the "Debtors") filed the attached Debtors' Motion Pursuant to Sections 105 and 363 ofthe Bankruptcy Code for Order Approving Selection of Stalking Horse, Break-Up Fee and Expense Reimbursement, and Related Relief in Connection With Sale of Assets ofDebtor PoshTots, Inc. (the "Motion"), with the United States Bankruptcy Court for the District of Delaware, 824 Market Street, Wilmington, Delaware 19801 (the "Bankruptcy Court"). The Motion seeks an order approving the selection 1 The Debtors in these cases, along with the last four digits of each Debtor's federal tax identification number, if applicable, are: eToys Direct I, LLC (N/A); The Parent Company (7093); BabyUniverse, Inc. (7990); Dreamtime Baby, Inc. (8047); eToys Direct, Inc. (7296); PoshTots, Inc. (8660); eToys Direct 2, LLC (N/A); eToys Direct 3, LLC (N/A); Gift Acquisition, L.L.C. (0297); and My Twinn, Inc. (1842). The address for each ofthe Debtors is 717 17th Street, Suite 1300, Denver, CO 80202, with the exception ofPoshTots, Inc., the address for which is 5500 Cox Road, Suite M, Glenn Allen, VA 23060. 68781-001\DOCS_DE: 144100.2 of Posh Ventures, LLC, as the stalking horse bidder for assets of debtor PoshTots, Inc., for approval of a break-up fee and expense reimbursement, and for related relief. OBJECTIONS AND RESPONSES TO THE MOTION AS IT PERTAINS TO SALE PROCEDURES, IF ANY, MUST BE IN WRITING AND FILED WITH THE BANKRUPTCY COURT NO LATER THAN 12:00 NOON PREVAILING EASTERN TIME ON JANUARY 29, 2009 (REQUESTED). Objections or other responses to the Motion as it pertains to sale procedures, if any, must also be served so that they are received not later than January 29, 2009, at 12:00 noon, prevailing Eastern time (requested), by (i) proposed counsel to the Debtors, Pachulski Stang Ziehl & Jones LLP, 919 North Market Street, 1 ih Floor, P.O. Box 8705, Wilmington, Delaware 19899-8705 (Courier 19801), Attention: Laura Davis Jones, Esq.; and (ii) the Office of the United States Trustee, J. Caleb Boggs Federal Building, 844 N. King Street, Suite 2207, Lock Box 35, Wilmington, Delaware 19801, Attn: David Buchbinder, Esquire. IF OBJECTIONS OR RESPONSES ARE TIMELY FILED AND SERVED IN ACCORDANCE WITH THIS NOTICE, A HEARING ON THE MOTION WILL BE HELD BEFORE THE HONORABLE BRENDAN L. SHANNON, UNITED STATES BANKRUPTCY COURT JUDGE, AT THE UNITED STATES BANKRUPTCY COURT, 824 NORTH MARKET STREET, SIXTH FLOOR, COURTROOM 1, WILMINGTON, DELAWARE 19801 ON JANUARY 30, 2009, AT 12:00 NOON. PREVAILING EASTERN TIME (REQUESTED). 68781-001\DOCS_DE:l44100.2 2 IF YOU FAIL TO RESPOND IN ACCORDANCE WITH THIS NOTICE, THE COURT MAY GRANT THE RELIEF REQUESTED IN THE MOTION WITHOUT FURTHER NOTICE OR HEARING. Dated: January,2_..) , 2009 68781-001\DOCS_DE: 144100.2 PACHULSKI STANG ZIEHL & JONES LLP Laura Davis Jones (Bar No. 2436) Jeffrey W. Dulberg (CA Bar No. 181200) Michael R. Seidl (Bar No. 3889) 919 N. Market Street, 17th Floor Wilmington, DE 19801 Telephone: 302/652-4). 00 Facsimile: 302/652-4400 Email: ljones@pszjlaw.com jdulberg@pszjlaw.com mseidl@pszjlaw.com [Proposed] Counsel for eToys Direct 1, LLC, et al., Debtors and Debtors in Possession 3 In re: IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ) Chapter 11 ) eTOYS DIRECT 1, LLC, et al., 1 ) Case No. 08-13412-BS ) Debtors. ) (Jointly Administered) ) ) Objection Deadline: January 29,2009, at 12:00 noon (requested) Hearing Date: January 30, 2009 at 12:00 noon (requested) DEBTORS' MOTION PURSUANT TO SECTIONS 105 AND 363 OF THE BANKRUPTCY CODE FOR ORDER APPROVING SELECTION OF STALKING HORSE, BREAK-UP FEE AND EXPENSE REIMBURSEMENT, AND RELATED RELIEF IN CONNECTION WITH SALE OF ASSETS OF DEBTOR POSHTOTS, INC. The above-captioned debtors and debtors in possession (the "Debtors"), by and through their undersigned counsel, hereby move (the "Motion") this Court for entry of an order pursuant to sections 105 and 363 of Chapter 11 of Title 11, United States Code (the "Bankruptcy Code") authorizing and approving their selection of a stalking horse, a break-up fee and expense reimbursement in connection therewith, and certain related relief, as described more fully below, in connection with the Debtors' proposed sale of assets of debtor Posh Tots, Inc. ("Posh Tots"). In support of the Motion, the Debtors respectfully represent as follows: 1 The Debtors in these cases, along with the last four digits of each Debtors' federal tax identification number, if applicable, are: eToys Direct 1, LLC (N/A); The Parent Company (7093); BabyUniverse, Inc. (7990); Dreamtime Baby, Inc. (8047); eToys Direct, Inc. (7296); PoshTots, Inc. (8660); eToys Direct 2, LLC (N/A); eToys Direct 3, LLC (N/ A); Gift Acquisition, L.L.C. (0297); and My Twinn, Inc. (1842). The address for each of the Debtors is 717 17th Street, Suite 1300, Denver, CO 80202, with the exception of Posh Tots, Inc., the address for which is 5500 Cox Road, Suite M, Glenn Allen, VA 23060. 1 68781-001\DOCS_DE: 144100.2 Jurisdiction and Venue 1. The Court has jurisdiction over this Motion under 28 U.S.C. 1334, which is a core proceeding within the meaning of28 U.S.C. 157(b)(2). Venue of these proceedings is proper pursuant to 28 U.S.C. 1408 and 1409. 2. The statutory bases for the requested relief are sections 105 and 363 of the Bankruptcy Code. Background 3. On December 28, 2008 (the "Petition Date"), the Debtors commenced these cases (the "Chapter 11 Cases") by each filing a voluntary petition for relief under chapter 11 the Bankruptcy Code. 4. The factual background relating to the Debtors' commencement of these Chapter 11 Cases is set forth in detail in the Declaration of Michael J. Wagner in Support of First Day Motions (the "Wagner Declaration") filed on the Petition Date and incorporated herein by reference. 5. The Debtors have continued in possession of their property and have continued to operate and manage their businesses as debtors in possession pursuant to sections 1107(a) and 1108 ofthe Bankruptcy Code. 6. No request has been made for the appointment of a trustee or an examiner in the Chapter 11 Cases. An official committee of unsecured creditors was appointed by the Office of the United States Trustee on or about January 8, 2009. 2 68781-00 I \DOCS_ DE: 144100.2 7. On January 2, 2009, the Debtors filed the Debtors' Motion Pursuant to Sections 105, 363 and 365 ofthe Bankruptcy Code for Orders (A) Approving Sale Procedures and Bid Protections, Including Break-Up Fees, in Connection With Sale of Substantially All Assets; (B) Scheduling an Auction for and Hearing to Approve One or More Sales; (C) Approving Notice of Respective Date, Time and Place for Auction and for Hearing on Approval of Sale(s); (D) Authorizing the Debtors (X) to Sell Substantially All Assets, Free and Clear of Liens, Claims, and Encumbrances and to Conduct Sales at the Debtors' Headquarters and Warehouse Locations and (Y) to Assume and Assign Executory Contracts and Unexpired Leases ofNonresidential Real Property; (E) Establishing Procedures in Connection with the Rejection of Executory Contracts and Unexpired Leases ofNonresidential Real Property; and (F) Granting Other Related Relief (the "Sale and Sale Procedures Motion"). 8. On January 16, 2009, in connection with the relief requested by the Sale and Sale Procedures Motion, the Court entered the Order (A) Approving Sale Procedures and Bid Protections, Including Break-Up Fee(s), in Connection with Sale of Substantially All Assets; (B) Scheduling an Auction for and Hearing to Approve One or More Sales; (C) Approving Notice ofRespective Date, Time and Place for Auction and for Hearing on Approval ofSale(s) (the "Sale Procedures Order," Docket No. 143). The Sale Procedures Order approved certain bid procedures (the "Bid Procedures") and fixed certain deadlines, including a bid deadline of February 2, 2009, at 5:00p.m. (EST), an auction date ofFebruary 4, 2009, at 10:00 a.m. (EST), and a sale hearing date of February 6, 2009, at 9:00a.m. (EST). 3 68781-001 \DOCS_DE: 144100.2 9. In connection with the entry of the Sale Procedures Order, the Court declined to approve requested procedures that would have permitted the Debtors to identify a stalking horse bidder for some or all of the Debtors' assets and to approve a break-up fee without further order of the Court. However, the Court left open to the Debtors an opportunity to identify a stalking horse and seek approval of such a stalking horse and related break-up fee on an expedited basis. 10. Thereafter, the Debtors received a bid and formalized the proposed Asset Purchase Agreement, attached hereto as Exhibit A (the "PoshTots APA"), between the Debtors and Posh Ventures, LLC ("Posh Ventures"), for the purchase of substantially all of the assets of debtor PoshTots, Inc. (the "PoshTots Assets"). The principal ofPosh Ventures is Andrea Edmunds, currently one of the Debtors' vice presidents and one of the founders of the PoshTots business. The proposed purchase price under the Posh Tots AP A is $500,000. Furthermore, the Debtors understand and anticipate that, if Posh Ventures is the prevailing bidder, it will offer employment to all of the 20 PoshTots employees, thereby eliminating substantial severance benefit costs. 11. In connection with the PoshTots APA, the Debtors seek approval ofthe following break-up fee, expense reimbursement, and other bid protections: (a) break-up fee of $15,000, payable upon consummation of a sale to another bidder at a higher and better offer (the "Break-Up Fee"); (b) expense reimbursement not greater than $20,000, payable upon consummation of a sale to another bidder at a higher and better offer (the "Expense Reimbursement"), and (c) a required minimum initial overbid of $560,000 (the "Overbid"). 4 68781-001\DOCS_DE: 144100.2 Posh Ventures has expressed its unwillingness to commit to hold open its offer to purchase the PoshTots Assets unless the Debtors are authorized to provide the Break-Up Fee, the Expense Reimbursement, and the Overbid protections requested by this Motion. 12. Apart from the requested Break-Up Fee, the Expense Reimbursement, and the associated Overbid protection, the Posh Tots AP A and the relief requested by this Motion is consistent with the sale procedures implemented in connection with the Sale Procedures Order. 13. The Debtors, after consultation with their counsel, financial advisors, and investment bankers, have determined that the PoshTots APA and the associated Break-Up Fee, Expense Reimbursement, and Overbid protection provide the best opportunity to maximize the return on the sale of the PoshTots Assets. The Debtors' prepetition and postpetition lenders have consented to the relief requested herein. Prior to filing the Motion, the Debtors consulted at length with the Committee to explain their reasoning for supporting a stalking horse transaction with Ms. Edmunds. The Committee has indicated that while the Committee reserves all of its rights with respect to the Motion and continues to weigh the merits of the transaction, the Debtors should initiate the process of obtaining Court approval of the transaction. Relief Requested and Basis Therefor 14. Pursuant to this Motion, and to compensate Posh Ventures for serving as the stalking horse bidder whose bid will be subject to higher or better offers, the Debtors seek entry of an order approving (a) Posh Ventures as the stalking horse, (b) the Break-Up Fee, (c) the Expense Reimbursement, and (d) the Overbid. The Debtors request the foregoing relief on shortened notice so that they can commence the auction scheduled for February 4, 2009, with the 5 68781-001\DOCS_DE: 144100.2 certainty of a stalking horse bidder for the Posh Tots Assets. The Debtors and Posh Ventures believe that the Break-Up Fee, the Expense Reimbursement, and the Overbid are reasonable in light of the benefits to the Debtors' estates of having a "stalking horse" bidder by virtue of the definitive PoshTots APA and the risk to Posh Ventures that a third-party offer ultimately may be accepted. The Debtors further believe that approval of the Break-Up Fee, the Expense Reimbursement, and the Overbid as described herein and under the terms of the Posh Tots AP A are necessary to preserve and enhance the value of the PoshTots Assets. 15. Section 363(b) of the Bankruptcy Code provides, in relevant part, that "the trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate." 11 U.S.C. 363(b). A court can authorize a debtor to use property of the estate outside of the ordinary course pursuant to Section 363(b)(l) of the Bankruptcy Code when there is a "sound business purpose" that justifies such use. See In re Lionel Corp., 722 F.2d 1063, 1071 (2d Cir. 1983); In re Delaware & Hudson R.R. Co., 124 BR. 169, 176 (D. Del. 1991) (explaining that the Third Circuit has adopted the "sound business purpose" test to evaluate motions brought pursuant to Section 363(b)); In re Ames Dept. Stores, Inc., 136 BR 357,359 (Bankr. S.D.N.Y. 1992) (noting that "going-out-of-business" sales are governed by Section 363(b)). See also In re Abbott Dairies ofPa., Inc., 788 F.2d 143 (3rd Cir. 1986). 16. In general, bidding incentives encourage a potential purchaser to invest the requisite time, money, and effort to negotiate with a debtor and perform the necessary acts attendant to the acquisition of a debtor's assets, despite the inherent risks and uncertainties of the 6 68781-001 \DOCS_DE: 144100.2 chapter 11 process. Historically, bankruptcy courts have approved bidding incentives similar to the bidding protections proposed here under the "business judgment rule," which proscribes judicial second-guessing of the actions of a corporation's board of directors taken in good faith and in the exercise of honest judgment. See, e.g., In re 995 Fifth Ave. Assocs., L.P., 96 B.R. 24, 28 (Bankr. S.D.N.Y. 1989) (bidding incentives may "be legitimately necessary to convince a 'white knight' to enter the bidding by providing some form of compensation for the risks it is undertaking"); In re Marrose Corp., Nos. 89 B 12171 (CB) to 89 B 12179 (CB), 1992 WL 33848, at *5 (Bankr. S.D.N.Y. Feb. 15, 1992) (stating that "agreements to provide breakup fees or reimbursement of fees and expenses meant to compensate the potential acquirer who serves as a catalyst or 'stalking horse' which attracts more favorable offers."). See also In reIntegrated Resources, Inc., 147 B.R. 650, 657-58 (S.D.N.Y. 1992), appeal dismissed, 3 F.3d 49 (2d Cir. 1993) (establishing three basic factors for determining whether to permit breakup fees in bankruptcy: whether "the relationship of the parties who negotiated the break-up fee [is] tainted by self-dealing or manipulation," whether the "fee hamper[s], rather than encourage[s], bidding," and whether "the amount of the fee [is] unreasonable relative to purchase price"). 17. The Third Circuit has established standards for determining the appropriateness of bidding incentives in the bankruptcy context. In Calpine Corp. v. 0 'Brien Envtl. Energy, Inc., 181 F.3d 527 (3d Cir. 1999), the court held that even though hidding incentives are measured against a business judgment standard in non bankruptcy transactions, the administrative expense provisions of 11 U.S.C. 503(b) govern in the bankruptcy context. 7 68781-001\DOCS_DE: 144100.2 Accordingly, to be approved, bidding incentives must provide some benefit to the Debtors' estates. See id. at 533. 18. The 0 'Brien court identified at least two instances in which bidding incentives may provide benefit to the estate. First, benefit may be found if "assurance of a break-up fee promoted more competitive bidding, such as by inducing a bid that otherwise would not have been made and without which bidding would have been limited." !d. at 537. Second, where the availability of bidding incentives induces a bidder to research the value of the Debtors and submit a bid that serves as a minimum or floor bid on which other bidders can rely, "the bidder may have provided a benefit to the estate by increasing the likelihood that the price at which the debtor is sold will reflect its true worth." !d. 19. Also, courts have routinely held that when the sale of assets in bankruptcy is done on a competitive bidding basis, it is appropriate to require parties submitting competing bids to submit bids that exceed existing bids by a specified minimum amount. See, e.g., In re Financial News Network, Inc., 931 F.2d 217 (2d Cir. 1991) (requiring that overbids exceed the initial offer by 9.5 percent); In re Crown Corp., 679 F.2d 774 (9th Cir. 1982) (requiring that overbids exceed the initial offer by 4.9 percent). 20. Whether evaluated under the "business judgment rule" or the Third Circuit's "administrative expense" standard, the Break-Up Fee, Expense Reimbursement, and Overbid pass muster. The PoshTots APA and the Debtors' agreement to pay the Break-Up Fee and Expense Reimbursement and seek the Overbid pursuant to the terms thereunder are the product of good faith, arm's-length negotiations between the Debtors and Posh Ventures. The 8 68781-001 \DOCS_DE: 144100.2 Break-Up Fee, Expense Reimbursement, and Overbid are fair and reasonable in amount and are reasonably intended to compensate for the risk to the Posh Ventures of being used as a stalking horse bidder. Cause thus exists to approve the Break-Up Fee, the Expense Reimbursement, and the Overbid. Specifically, Posh Ventures has expended, and likely will continue to expend, considerable time, money, and energy pursuing the sale, has engaged in extended and lengthy, good faith negotiations, and has provided a floor bid for the Posh Tots Assets. 21. Further, the Break-Up Fee, the Expense Reimbursement, and the Overbid already have encouraged competitive bidding, in that Posh Ventures would not have entered into the PoshTots APA without these provisions. The Break-Up Fee, Expense Reimbursement, and Overbid thus have "indue[ ed] a bid that otherwise would not have been made and without which bidding would [be] limited." O'Brien, 181 F.3d at 537. Similarly, the Posh Ventures' offer provides a minimum bid on which other bidders can rely, thereby "increasing the likelihood that the price at which the [Assets will be] sold will reflect [their] true worth." Id. 22. The Debtors acknowledge that the principal of Posh Ventures, Andrea Edmunds, is potentially an "insider" as contemplated by 11 U.S.C. 101(31). Ms. Edmunds was the co-founder ofPoshTots and currently operates PoshTots as one of the Debtors' vice presidents. Sales to insiders under 11 U.S.C. 363(b) and other insider transactions are traditionally subject to a "stricter scrutiny" test. See, e.g., In re After Six, Inc., 154 B.R. 876, 881 (Bankr. E.D. Pa. 1993); see also In re Summit Global Logistics, Inc., 2008 WL 919934 (Bankr. D. N.J. Mar. 26, 2008) (referencing applicability of"heightened scrutiny" for insider transactions). 9 68781-00I\DOCS_DE:l44100.2 23. As an initial matter, Ms. Edmunds operates PoshTots from the Debtors' Richmond, Virginia, location, while the Debtors' other and general management operates from the Denver, Colorado, headquarters. Consequently, Ms. Edmunds does not have the day-to-day involvement with the Debtors' overall businesses that would ordinarily be associated with someone accorded "insider" status. More important, the Debtors have been aware of Ms. Edmunds' interest in the PoshTots Assets from the beginning of their marketing efforts, and, consequently, Ms. Edmunds has not been privy to the Debtors' discussions with other possible bidders, has been excluded from confidential sale-related discussions, and has not participated in other bankruptcy-related issues. Ms. Edmunds is represented by outside counsel. The Posh Tots APA, including the Break-Up Fee, the Expense Reimbursement, and the Overbid were the result of protracted, sometimes contentious, negotiations among the Debtors and their professionals on the one hand and Ms. Edmunds and her counsel on the other hand. Consequently, the Debtors believe that the PoshTots APA, the Break-Up Fee, the Expense Reimbursement, and the Overbid were the result of arms-length negotiations, entered into in good faith, and satisfy the heightened scrutiny applicable in the context of insider transactions. 24. In this instance, the Break-Up Fee, the Expense Reimbursement, and the Overbid will permit the Debtors to insist that competing bids for the Posh Tots Assets made in accordance with the Bid Procedures be materially higher or otherwise better than the PoshTots APA (or competing agreement), which is a clear benefit to the Debtors' estate. 25. Furthermore, the Break-Up Fee proposed herein is within the spectrum of termination fees approved by bankruptcy courts in chapter 11 cases. See e.g., In re Western 10 68781-00 I \DOCS_ DE: 144100.2 Nonwovens, Inc., Case No. 08-11435 (PJW) (Bankr. D. Del. July 29, 2008) (Court approved break-up fee of$125,000 and expense reimbursement in connection with sale for $4,000,000); In re Global Motorsport Group, Inc., et al., Case No. 08-10192 (KJC) (Bankr. D. Del. Feb. 14, 2008) (Court approved a break up fee of approximately 4%, or $ 500,000 in connection with sale); In re Global Home Products, Case No. 06-10340 (KG) (Bankr. D. Del. July 14, 2006) (Court approved a break-up fee of3.3%, or $700,000, in connection with sale); In re Ameriserve, Case No. 00-0358 (PJW) (Bankr. D. Del., September 27, 2000) (Court approved a break-up fee of3.64%, or $4,000,000, in connection with $110,000,000 sale); In re Montgomery Ward Holding Corp., et al., Case No. 97-1409 (PJW) (Bankr. D. Del., June 15, 1998) (Court approved termination fee of2.7%, or $3,000,000, in connection with $110,000,000 sale of real estate assets); In re Medlab, Inc., Case No, 97-1893 (PJW) (Bankr. D. Del. Apr. 28, 1998) (Court approved termination fee of 3.12%, or $250,000, in connection with $8,000,000 sale transaction); In re Anchor Container Corp. et, al., Case Nos. 96-1434 and 96-1516 (PJW) (Bankr. D. Del. Dec. 20, 1996) (Court approved termination fee of2.43%, or $8,000,000, in connection with $327,900,000 sale of substantially all of debtors' assets); In re FoxMeyer Corp. et al., Case No. 96-1329 (HSB) through 96-1334 (HSB) (Bankr. D. Del., Oct. 9, 1996) (Court approved termination fee of7.47%, or $6,500,000, in connection with $87,000,000 sale of suhstantially all ofDehtors' assets); In re Edison Bros. Stores. Inc. et al., Case No. 95-1354 (PJW) (Bankr. D. Del., Dec. 29, 1995) (Court approved termination fee of3.5%, or $600,000, in connection with $17,000,000 sale of debtors' entertainment division). 11 68781-00I\DOCS_DE:l44100.2 26. The Debtors thus request that the Court approve the Break-Up Fee, the Expense Reimbursement, and the Overbid protections. Request for Waiver of Rule 6004(h) Stay 27. In order to allow the immediate realization of value from the Posh Tots Assets consistent with their liquidation goals, the Debtors respectfully request that any order granting this Motion be effective immediately, notwithstanding the 10-day stay imposed by Bankruptcy Rule 6004(h). As the Debtors expressed above, their goal is to conduct an efficient administration of their financial and business affairs. An expedient sale process will inure to the benefit of all the Debtors' estates and creditors. Waiver of Bankruptcy Rule 6004(h) will insure that the bargained-for protections sought by this Motion, to the extent approved by the Court, are in place and effective at the time of the Auction. Notice 28. Notice of the Motion has been provided by overnight delivery, facsimile, or hand-delivery to the (a) Office of the United States Trustee; (b) counsel to the Lender; (c) counsel to the Official Committee; and (d) all parties who have timely filed requests for notice under Rule 2002 of the Federal Rules of Bankruptcy Procedure. The Debtors respectfully submit that such notice is sufficient and request that the Court find that no further notice of the relief requested herein is required. 12 68781-00 I \DOCS_ DE: 144100.2 WHEREFORE, the Debtors respectfully request that the Court approve the Break-Up Fee, the Expense Reimbursement, and the Overbid protections, enter an order substantially in the form annexed hereto, and grant other related reliefthat the Court finds just and proper. Dated: January V, 2009 68781-00I\DOCS_DE:I44100.2 PACHULSKI STANG ZIEHL & JONES LLP - ~ <///- Laura Davis Jones (Bar No. 2436) Jeffrey W. Dulberg (CA Bar No. 181200) Michael R. Seidl (Bar No. 3889) 919 N. Market Street, 17th Floor Wilmington, DE 19801 Telephone: 302/652-4100 Facsimile: 302/652-4400 Email: ljones@pszjlaw.com jdulberg@pszjlaw.com mseidl@pszj law.com [Proposed] Counsel for eToys Direct 1, LLC, et al., Debtors and Debtors in Possession 13 EXHIBIT A ASSET PURCHASE AGREEMENT BY AND AMONG THE PARENT COMPANY, ETOYS DIRECT, INC., ETOYS DIRECT 1, LLC, ETOYS DIRECT 2, LLC, ETOYS DIRECT 3, LLC, BABYUNIVERSE, INC., POSHTOTS, INC., DREAMTIME BABY, INC., MY TWINN, INC., AND GIFT ACQUISITION, L.L.C. AND POSH VENTURES, LLC Dated as of January 23,2009 TABLE OF CONTENTS ARTICLE I DEFINITIONS ............................................................................................................ 1 Section 1.1 Certain Definitions ...................................................................................... 1 Section 1.2 Other Definitional and Interpretive Matters ................................................ 7 ARTICLE II PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES ........... 8 Section 2.1 Purchase and Sale of Assets ........................................................................ 8 Section 2.2 Excluded Assets ........................................................................................... 9 Section 2.3 Assumption of Liabilities .......................................................................... 11 Section 2.4 Purchased Assets ....................................................................................... 12 Section 2.5 Further Conveyances and Assumptions .................................................... 12 Section 2.6 Pre- and Post-Closing and Transitional Matters ........................................ 12 ARTICLE III CONSIDERATION ................................................................................................ 12 Section 3.1 Purchase Price and Payment; Assumed Liabilities .................................... 12 ARTICLE IV CLOSING AND TERMINATION ........................................................................ 13 Section 4.1 Closing Date .............................................................................................. 13 Section 4.2 Deliveries by Sellers .................................................................................. 13 Section 4.3 Deliveries by Buyer ................................................................................... 13 Section 4.4 Termination of Agreement ........................................................................ 14 Section 4.5 Procedure Upon Termination .................................................................... 15 Section 4.6 Effect of Termination ................................................................................ 15 ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLERS ............................... 16 Section 5.1 Authorization of Agreement.. .................................................................... 16 Section 5.2 Title to Purchased Assets ........................................................................... 16 Section 5.3 Tangible Personal Property ....................................................................... 16 Section 5.4 Intellectual Property .................................................................................. 16 Section 5.5 Financial Advisors ..................................................................................... 17 Section 5.6 Litigation ................................................................................................... 17 Section 5. 7 Compliance with Laws .............................................................................. 17 Section 5.8 Permits ....................................................................................................... 17 Section 5.9 Sellers' Representations and Warranties Generally .................................. 17 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER ................................. 17 Section 6.1 Organization and Good Standing .............................................................. 17 Section 6.2 Authorization of Agreement.. .................................................................... 17 Section 6.3 Financial Advisors ..................................................................................... 18 Section 6.4 Financial Capability ................................................................................... 18 Section 6.5 Condition of the Business .......................................................................... 18 ARTICLE VII BANKRUPTCY COURT APPROVAL ............................................................... 18 Section 7.1 Approval of Break-Up Fee ........................................................................ 18 Section 7.2 Competing Transaction .............................................................................. 19 TABLE OF CONTENTS (Continued) Page Section 7.3 Bankruptcy Court Filings .......................................................................... 19 ARTICLE VIII COVENANTS ..................................................................................................... 19 Section 8.1 Section 8.2 Section 8.3 Section 8.4 Section 8.5 Section 8.6 Section 8.7 Section 8.8 Section 8.9 Access to Information ................................................................................ 19 Further Assurances .................................................................................... 20 Confidentiality ........................................................................................... 20 Preservation of Records ............................................................................. 21 Publicity ..................................................................................................... 21 Operation of Business ................................................................................ 21 Cure Amounts ............................................................................................ 22 Section 363(b)(1)(A) ................................................................................. 22 Adequate Assurances Regarding Purchased Contracts ............................. 23 ARTICLE IX POST-CLOSING COVENANTS .......................................................................... 23 Section 9.1 Storage ofEquipment ................................................................................ 23 Section 9.2 Access to Equipment ................................................................................. 24 Section 9.3 Transportation ofEquipm .......................................................................... 24 ARTICLE X EMPLOYEES AND EMPLOYEE BENEFITS ...................................................... 23 Section 1 0.1 Employment. .............................................................................................. 23 Section 10.2 Employee Benefits ..................................................................................... 24 ARTICLE X CONDITIONS TO CLOSING ................................................................................ 24 Section 11.1 Conditions Precedent to Obligations of Buyer .......................................... 24 Section 11.2 Conditions Precedent to Obligations of Sellers ......................................... 25 Section 11.3 Conditions Precedent to Obligations of Buyer and Sellers ....................... 25 Section 11.4 Frustration of Closing Conditions ............................................................. 26 ARTICLE XII NO SURVIVAL .................................................................................................... 26 Section 12.1 No Survival ofRepresentations and Warranties ........................................ 26 ARTICLE XIII TAX MATTERS .................................................................................................. 26 Section 13.1 TransferTaxes ........................................................................................... 26 Section 13.2 Prorations ................................................................................................... 26 Section 13.3 Purchase Price Allocation .......................................................................... 27 ARTICLE XIV MISCELLANEOUS ............................................................................................ 27 Section 14.1 Expenses .................................................................................................... 27 Section 14.2 Submission to Jurisdiction; Consent to Service ofProcess ....................... 27 Section 14.3 Waiver of Right to Trial by Jury ............................................................... 27 Section 14.4 Entire Agreement; Amendments and Waivers .......................................... 28 Section 14.5 Governing Law .......................................................................................... 28 Section 14.6 Notices ....................................................................................................... 28 Section 14.7 Severability ................................................................................................ 30 Section 14.8 Binding Effect; Assignment ...................................................................... 30 11 TABLE OF CONTENTS (Continued) Section 14.9 Counterparts ............................................................................................... 30 111 Exhibit A Schedule 1.1 (a) Schedule 1.1 (b) Schedule 1.1(c) Schedule 1.1 (d) Schedule 2.1 (e) Schedule 2.2 Schedule 2.3(a) Schedule 2.3(b) Schedule 5.2 Schedule 5.3(a) Schedule 5.3(b) Schedule 5.5 Schedule 5.6 Schedule 5. 7 Schedule 5.8 Schedule 8.6(i) Schedule 10.1(a) Schedule 10.2(a) EXHIBITS Bill of Sale and Assignment SCHEDULES Contracts Intellectual Property Purchased Contracts Purchased Intellectual Property Furniture and Equipment Excluded Assets Liabilities Cure Amounts Title to Purchased Assets Tangible Personal Property Defaults by Lessors on Tangible Personal Property Financial Advisors Litigation Compliance with Laws Permits Affiliate Transactions Employees Benefits IV ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT, dated as of January_, 2009 (this "Agreement"), is entered into by and among THE PARENT COMPANY, a Colorado corporation ("Parent"), ETOYS DIRECT, INC., a Colorado corporation ("eToys Direct"), ETOYS DIRECT 1, LLC, a Delaware limited liability company ("eToys 1 "), ETOYS DIRECT 2, LLC, a Delaware limited liability company ("eToys 2"), ETOYS DIRECT 3, LLC, a Delaware limited liability company ("eToys 3"), BABYUNIVERSE, INC., a Colorado corporation ("BabyUniverse"), POSHTOTS, INC., a Colorado corporation ("PoshTots"), DREAMTIME BABY, INC., a Colorado corporation ("Dreamtime"), MY TWINN, INC., a Colorado corporation ("My Twinn"), GIFT ACQUISITION, L.L.C., a Delaware limited liability company ("Gift", and collectively with Parent, eToys Direct, eToys 1, eToys 2, and eToys 3, BabyUniverse, PoshTots, Dreamtime, and My Twinn, "Sellers"), and POSH VENTURES, LLC, a Virginia limited liability company ("Buyer"). W I TN E S S E T H: WHEREAS, on December 28, 2008 (the "Petition Date"), Sellers filed voluntary petitions for reorganization relief (the "Bankruptcy Cases") pursuant to chapter 11 oftitle 11 of the United States Code, 11 U.S.C. 101 et seq. (the "Bankruptcy Code"), in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"); WHEREAS, Sellers presently conduct the Business; WHEREAS, Sellers desire to sell, transfer and assign to Buyer, and Buyer desires to acquire and assume from Sellers, pursuant to Sections 363 and 365 of the Bankruptcy Code, the Purchased Assets and Assumed Liabilities as more specifically provided herein; and WHEREAS, certain terms used in this Agreement are defined in Section 1.1. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter contained, the Parties hereby agree as follows: ARTICLE I DEFINITIONS Section 1.1 Certain Definitions. For purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.1 : "Affiliate" means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, and the term "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise. Notwithstanding the foregoing, neither D.E. Shaw & Co. nor its Affiliates (other than Sellers themselves) shall be deemed to be an "Affiliate" of Sellers for purposes of this Agreement. "Assumed Liabilities" shall have the meaning set forth in Section 2.3. "Bankruptcy Cases" shall have the meaning set forth in the Recitals. "Bankruptcy Code" shall have the meaning set forth in the Recitals. "Bankruptcy Court" shall have the meaning set forth in the Recitals. "Bidding Procedures Order" means that certain order of the Bankruptcy Court, entitled "Order (A) Approving Sale Procedures and Bid Protections, Including Break-Up Fee(s), In Connection With Sale Of Substantially All Assets; (B) Scheduling An Auction For And Hearing To Approve One Or More Sales; (C) Approving Notice Of Respective Date, Time And Place For Auction And For Hearing On Approval Of Sale(s)," entered on January 16, 2009. "Break-Up Fee" shall have the meaning set forth in Section 7.1. "Business" means the business of PoshTots, including the delivery of Products, content and new media resources to expectant parents and families. "Business Day" means any day of the year on which national banking institutions in New York are open to the public for conducting business and are not required or authorized to close. "Buyer" shall have the meaning set forth in the Recitals. "Buyer Documents" shall have the meaning set forth in Section 6.1. "Buyer Plans" shall have the meaning set forth in Section 9.2(a). "Cash Payment" shall have the meaning set forth in Section 3 .1. "Closing" shall have the meaning set forth in Section 4.1. "Closing Date" shall have the meaning set forth in Section 4.1. "Code" means the Internal Revenue Code of 1986, as amended. "Competing Bid" shall have the meaning set forth in Section 7.2(a). "Contract" means any oral or written contract, indenture, note, bond, lease, real property lease or other agreement (including, without limitation, employment and consulting agreements and the Personal Property Leases) to which any Seller is a party relating to the Business, as set forth on Schedule 1.1 (a). "Deposit" shall have the meaning set forth in Section 3 .1. "Documents" means all files, documents, instruments, papers, books, reports, records, tapes, microfilms, photographs, letters, budgets, forecasts, ledgers, journals, title policies, customer lists, regulatory filings, operating data and plans, technical documentation (design specifications, functional requirements, operating instructions, logic manuals, flow charts, etc.), 2 user documentation (installation guides, user manuals, training materials, release notes, working papers, etc.), marketing documentation (sales brochures, flyers, pamphlets, web pages, etc.), and other similar materials related primarily to the Business and the Purchased Assets in each case whether or not in electronic form. "Employee Claims" means any claim, demand, action, cause of action, damage, loss, cost, liability or expense, including legal costs, made or brought by any Employee, including any Employment Claim made pursuant to any applicable Laws relating to employment standards, occupational health and safety, labor relations, workers compensation, pay equity, employment equity, the Americans with Disabilities Act, the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the Family and Medical Leave Act or the Fair Labor Standards Act or any other federal, state or local, statutory or decisional Law regarding employment discrimination. "Employee Obligations" means all wages, bonuses, vacation pay, sick time, pension payments, overtime pay, change of control payments, severance pay and any other termination or severance obligations and any other compensation or obligation which may be due by statute, contract or Law relating to the employment of the Employees. "Employees" means all individuals, as of the date hereof, whether or not actively at work as of the date hereof, who are employed by Sellers in connection with the Business, together with individuals who are hired in respect of the Business after the date hereof and prior to the Closing. "Excluded Assets" shall have the meaning set forth in Section 2.2. "Excluded Contracts" means all Contracts other than the Purchased Contracts. "Excluded Liabilities" shall have the meaning set forth in Section 2.3. "Expense Reimbursement" shall have the meaning set forth in Section 7 .1. "Final Order" means an Order, judgment, or other decree ofthe Bankruptcy Court that has not been vacated, reversed, modified, amended, or stayed, and for which the time to further appeal or seek review or rehearing has expired; provided, however, that any such Order, judgment or other decree of the Bankruptcy Court shall be deemed to be a Final Order upon its entry (without reference to the expiration of the time for appeal or review) if no objection to such Order, judgment or other decree is received by the Bankruptcy Court prior to its entry by the Bankruptcy Court. "Furniture and Equipment" means all furniture, fixtures, furnishings, equipment, vehicles, leasehold improvements, and other tangible personal property owned or used by Sellers in the conduct of the Business, including all such artwork, desks, chairs, tables, computer and computer-related hardware (including, computers, file servers, facsimile servers, scanners, color printers, laser printers and networks), copiers, telephone lines and numbers, telecopy machines and other telecommunication equipment, cubicles and miscellaneous office furnishings and supplies. "GAAP" means generally accepted accounting principles in the United States. 3 "Governmental Body" means any government or governmental or regulatory body thereof, or political subdivision thereof, whether foreign, federal, state, or local, or any agency, instrumentality or authority thereof, or any court or arbitrator (public or private). "Indebtedness" of any Person means, without duplication, (i) the principal and interest of, and premium (if any) in respect of, (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (ii) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the Ordinary Course of Business); (iii) all obligations of such Person under leases required to be capitalized in accordance with GAAP; (iv) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction; (v) all obligations of the type referred to in clauses (i) through (iv) of other Persons for the payment of which such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including guarantees of such obligations; and (vi) all obligations of the type referred to in clauses (i) through (v) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person). "Initial Minimum Overbid" means Five Hundred Sixty Thousand Dollars ($560,000). "Intellectual Property" means all intellectual property rights used or useful in the conduct of the Business by Sellers, including (i) patents, patent applications and inventions, (ii) trademarks, service marks, trade names, trade dress and domain names, together with the goodwill associated therewith, (iii) copyrights, including copyrights in computer software, (iv) confidential and proprietary information, including trade secrets and know-how ("Trade Secrets"), (v) licenses relating to any of the foregoing and (vi) registrations and applications for registration of the foregoing, as set forth on Schedule 1.1 (b). "Law" means any federal, state, local or foreign law, statute, code, ordinance, rule or regulation. "Legal Proceeding" means any judicial, administrative or arbitral actions, suits, proceedings (public or private) or claims or any proceedings by or before a Governmental Body. "Liability" means any debt, liability or obligation (whether direct or indirect, known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due), and including all costs and expenses relating thereto. "Lien" means any lien, encumbrance, pledge, mortgage, deed of trust, security interest, claim, lease, option, right of first refusal, easement, servitude, proxy, voting trust or agreement, or transfer restriction under any shareholder or similar agreement or encumbrance. "Material Adverse Effect" means (i) a material adverse effect on the business, assets, results of operations or financial condition of Sellers or the Business (except for the Bankruptcy Cases), or (ii) a material adverse effect on the ability of Sellers to consummate the transactions contemplated by this Agreement or perform their respective obligations under this Agreement, 4 other than the effect of any change resulting from any action taken by Buyer or its Affiliates with respect to the transactions contemplated hereby or with respect to Sellers, or any effect resulting from the filing of the Bankruptcy Case (including the failure or delay of vendors to deliver goods without a reasonable assurance of payment therefor), or from Orders of the Bankruptcy Court or other courts of competent jurisdiction, and reasonably anticipated effects thereof. "Order" means any order, injunction, judgment, decree, ruling, writ, assessment or arbitration award of a Governmental Body. "Ordinary Course of Business" means the ordinary and usual course of normal day-to- day operations of the Business consistent with the past practice of the Business through the date hereof, subject to any duties and restrictions imposed on Sellers under the Bankruptcy Code. "Overbid Protection" shall have the meaning set forth in Section 7 .1. "Parties" means Sellers and Buyer. "Permits" means any approvals, authorizations, consents, licenses, permits or certifications of a Governmental Body. "Permitted Exceptions" means (i) all defects, exceptions, restrictions, easements, rights of way, encumbrances and Liens reflected in policies of title insurance which have been made available to or are obtained by Buyer; (ii) statutory Liens for current Taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings provided an appropriate reserve is established therefor; (iii) mechanics', carriers', workers', repairers' and similar Liens arising or incurred in the Ordinary Course of Business; (iv) zoning, entitlement and other land use and environmental regulations by any Governmental Body provided that such regulations have not been violated; (v) title of a lessor under a capital or operating lease, (vi) the Assumed Liabilities as pertain to particular Purchased Assets, and (vii) such other imperfections in title which would not materially interfere with the use of the Purchased Assets. "Person" means any individual, corporation, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Body or other entity. "Personal Property Leases" shall have the meaning set forth in Section 5.3. "Petition Date" shall have the meaning set forth in the Recitals. "Products" means any and all products developed, manufactured, procured, marketed or sold by Sellers, whether work in progress or in final form, in connection with the business conducted by PoshTots. "Purchase Price" shall have the meaning set forth in Section 3 .1. "Purchased Assets" shall have the meaning set forth in Section 2.1. 5 "Purchased Contracts" means the Contracts to which Sellers are a party relating to the Purchased Assets and the Business, which are set forth on Schedule l.l(c). "Purchased Intellectual Property" means (i) all Intellectual Property and (ii) all Software and Technology set forth on Schedule l.l(d). "Sale Motion" means the motion or motions of Sellers filed with the Bankruptcy Court seeking approval and entry of the Sale Order. "Sale Order" shall be an Order of the Bankruptcy Court in form and substance acceptable to Buyer and Sellers approving this Agreement and all of the terms and conditions hereof, approving the sale and assignment to Buyer of all of the Purchased Assets (assuming Buyer is the winning bidder at the auction contemplated hereby); approving the Break-Up Fee; approving the Expense Reimbursement; approving the Overbid Protection; and approving and authorizing Sellers to consummate the transactions contemplated hereby. Without limiting the generality of the foregoing, such order shall find and provide, among other things, that (i) the Purchased Assets sold to Buyer pursuant to this Agreement shall be transferred to Buyer free and clear of all Liens (other than Liens specifically assumed or created by Buyer and Permitted Exceptions), claims (other than Assumed Liabilities), encumbrances and interests (including Liens, claims, encumbrances and interests of any Governmental Body), such Liens, claims, encumbrances and interests to attach to the proceeds of sale of the Purchased Assets; (ii) Buyer has acted in "good faith" within the meaning of Section 363(m) ofthe Bankruptcy Code; (iii) this Agreement was negotiated, proposed and entered into by the Parties without collusion, in good faith and from arm's length bargaining positions; (iv) the Bankruptcy Court shall retain jurisdiction to resolve any controversy or claim arising out of or relating to this Agreement, or the breach hereof as provided in Section 13.2 hereof; and (v) this Agreement and the transactions contemplated hereby are not subject to rejection or avoidance by any chapter 7 or chapter 11 trustee of Sellers. "Sellers" shall have the meaning set forth in the Recitals. "Sellers Documents" shall have the meaning set forth in Section 5.1. "Software" means, except to the extent generally available for purchase from third Persons, any and all (i) computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, (ii) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (iii) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing, screens, user interfaces, report formats, firmware, development tools, templates, menus, buttons and icons and (iv) all documentation including user manuals and other training documentation related to any of the foregoing, in each case, relating to the Business. "Stalking Horse Motion" means the motion of Sellers filed with the Bankruptcy Court seeking approval and entry of the Stalking Horse Order. "Stalking Horse Order" means an Order of the Bankruptcy Court in form and substance acceptable to Buyer and Sellers approving the Break-Up Fee; approving the Expense Reimbursement; and approving the Initial Minimum Overbid. 6 "Tax Return" means all returns, declarations, reports, estimates, information returns and statements required to be filed in respect of any Taxes. "Taxes" means (i) all federal, state, local or foreign taxes, charges or other assessments, including, without limitation, all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, and (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any taxing authority in connection with any item described in clause (i). "Technology" means, collectively, all designs, formulae, algorithms, procedures, methods, techniques, ideas, know-how, research and development, technical data, programs, subroutines, tools, materials, specifications, processes, inventions (whether patentable or unpatentable and whether or not reduced to practice), apparatus, creations, improvements, works of authorship and other similar materials, and all recordings, graphs, drawings, reports, analyses, and other writings, and other tangible embodiments of the foregoing, in any form whether or not specifically listed herein, and all related technology, that are used in, incorporated in, embodied in, displayed by or relate to, or are used or useful in the Business or in the design, development, reproduction, maintenance or modification of, any of the Products. "Termination Date" shall have the meaning set forth in Section 4.4(a). "Trade Secrets" shall have the meaning set forth in Section 1.1 (in the definition of Intellectual Property). "Transfer Taxes" shall have the meaning set forth in Section 12.1. "Transferred Employees" shall have the meaning set forth in Section 10.1 (a). "WARN" means the Worker Adjustment and Retraining Notification Act of 1988, as amended. Section 1.2 Other Definitional and Interpretive Matters. (a) Unless otherwise expressly provided, for purposes of this Agreement, the following rules of interpretation shall apply: Calculation of Time Period. When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day. Dollars. Any reference in this Agreement to$ shall mean U.S. dollars. Exhibits/Schedules. The Exhibits and Schedules to this Agreement are hereby incorporated and made a part hereof and are an integral part of this Agreement. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this 7 Agreement as if set forth in full herein. Any matter or item disclosed on one Schedule shall not be deemed to have been disclosed on any other Schedule. Any capitalized terms used in any Schedule or Exhibit but not otherwise defined therein shall be defined as set forth in this Agreement. Gender and Number. Any reference in this Agreement to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa. Headings. The provision of a Table of Contents, the division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement. All references in this Agreement to any "Section" are to the corresponding Section of this Agreement unless otherwise specified. Herein. The words such as "herein," "hereinafter," "hereof," and "hereunder" refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires. Including. The word "including" or any variation thereof means "including, without limitation" and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it. (b) The Parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the Parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement. ARTICLE II PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES Section 2.1 Purchase and Sale of Assets. On the terms and subject to the conditions set forth in this Agreement, at the Closing Buyer shall purchase, acquire and accept from Sellers, and Sellers shall sell, transfer, assign, convey and deliver to Buyer, all of Sellers' right, title and interest in, to and under the Purchased Assets. "Purchased Assets" shall mean all of the assets of Sellers used or held for use in connection with the Business as of the Closing (but excluding Excluded Assets) including, without limitation, all of the following: (a) all inventory, related to or used in connection with the Business, located at 5500 Cox Road, Suite M, Glen Allen, Virginia 23060; (b) all deposits (including, with respect to Purchased Assets, customer deposits and security deposits for rent, electricity, telephone or otherwise) and other prepaid charges and expenses of Sellers as they relate to Purchased Assets; and excluding any deposits or prepaid charges and expenses paid exclusively in connection with or relating exclusively to any Excluded Assets; 8 (c) all rights to payment related to any customer order or purchase where the customer's credit card merchant has authorized current or future payment and the goods subject to such customer order or purchase are shipped on the Closing Date or thereafter; (d) the Furniture and Equipment (excluding any Furniture and Equipment held by any Seller pursuant to a lease, rental agreement, contract or similar arrangement where Buyer does not assume the underlying lease, rental agreement, contract or similar arrangement at Closing) used in connection with the Business and located at 5500 Cox Road, Suite M, Glen Allen, Virginia 23060, including but not limited to the Furniture and Equipment set forth on Schedule 2.l(e), and the servers and related hardware located in Denver, Colorado and set forth on Schedule 2.1(e); (e) all Purchased Intellectual Property; (f) all Purchased Contracts; (g) all Documents that are used in, held for use in or intended to be used in, or that arise out of, the Business, including Documents relating to Products, services, marketing, advertising, promotional materials, Purchased Intellectual Property, personnel files for Transferred Employees and all files, customer files and documents (including credit information), supplier lists, records, literature and correspondence, whether or not physically located on any of the premises referred to in clause (d) above, but excluding (i) personnel files for Employees of Sellers who are not Transferred Employees, (ii) such files as may be required under applicable Law regarding privacy, and (iii) any Documents exclusively related to any Excluded Assets; (h) all Permits granted to, held or used by Sellers in the conduct of the Business necessary to conduct the Business after Closing, to the extent transferable; (i) all supplies owned by Sellers and used in connection with the Business; G) all rights of Sellers under or pursuant to all warranties, representations, indemnities and guarantees made by suppliers, manufacturers and contractors to the extent relating to Products sold, or services provided, to Sellers affecting any of the Purchased Assets other than any warranties, representations and guarantees pertaining to any Excluded Assets; (k) subject to the provisions of Section 363(b)(l)(A) ofthe Bankruptcy Code, all goodwill and other intangible assets associated with the Business, including customer and supplier lists and the goodwill associated with the Purchased Intellectual Property owned by Sellers; and (1) all of Sellers' rights to rebates and discounts payable by manufacturers, vendors, suppliers or others in connection with the Purchased Assets. Section 2.2 Excluded Assets. Nothing herein contained shall be deemed to sell, transfer, assign or convey the Excluded Assets to Buyer, and Sellers shall retain all right, title and interest to, in and under the Excluded Assets. "Excluded Assets" shall mean all assets, 9 properties, interests and rights of Sellers other than the Purchased Assets, including without limitation each of the following assets: (a) all cash, cash equivalents, bank deposits or similar cash items of Sellers; (b) the Cash Payment; (c) all of Sellers' deposits or prepaid charges and expenses paid exclusively in connection with or relating exclusively to any Excluded Assets; (d) any owned or leased real property interest pertaining to the Business, including, but not limited to those leases, and the rights and obligations thereunder, listed on Schedule 2.2; (e) all Excluded Contracts; (f) any accounts receivable and proceeds arising exclusively out of or exclusively in connection with any Excluded Contract or Excluded Asset (for purposes of clarity and the avoidance of doubt, any right to payment related to any customer order or purchase where the customer's credit car merchant has authorized current or future payments is not an Excluded Asset); and all of Sellers' rights under this Agreement and/or other documents and agreements executed in connection with the transactions provided for herein; (g) all intercompany obligations, liabilities and Indebtedness, including any note Indebtedness, owed to or by Sellers to or by any Affiliates of Sellers; (h) any Intellectual Property rights of Sellers other than the Purchased Intellectual Property; (i) any (i) confidential personnel and medical records pertaining to any Employee who is not a Transferred Employee; (ii) other books and records that Sellers is required by Law to retain or that Sellers determine are necessary or advisable to retain including, without limitation, Tax Returns, financial statements, and corporate or other entity filings; provided, however, that Buyer shall have, to the extent allowed by applicable Law, the right to make copies of any portions of such retained books and records that relate to the Business or any of the Purchased Assets; (iii) minute books, stock or membership interest records and corporate seals; and (iv) documents relating to proposals to acquire the Business by Persons other than Buyer; G) any claim, right or interest of Sellers in or to any refund, rebate, abatement or other recovery for Taxes of Sellers, together with any interest due thereon or penalty rebate arising therefrom, and all Tax credits and other Tax attributes of Sellers; (k) any rights, claims or causes of action of Sellers against third parties relating to assets, properties, business or operations of Sellers arising out of events occurring on or prior to the Closing Date and causes of action under Chapter 5 of Title 11 of the United States Code, and proceeds deriving therefrom; 10 (1) any stock or other equity interests in Sellers or any subsidiaries of Sellers; and (m) all benefit plans; (n) the assets set forth on Schedule 2.2; ( o) all insurance policies or rights to proceeds thereof relating to the Purchased Assets; and (p) all rights of Sellers under non-disclosure or confidentiality, non-compete, or non-solicitation agreements with employees and agents of Sellers or with third parties to the extent relating to the Business or the Purchased Assets. Section 2.3 Assumption of Liabilities. On and subject to the terms and conditions of this Agreement, Buyer shall assume and become responsible for all of the Assumed Liabilities at the Closing. Buyer will not assume or have any responsibility, however, with respect to any other obligation or liability of Sellers not included within the definition of Assumed Liabilities, including but not limited to: (i) Taxes related to the Business or the Purchased Assets for all Tax periods (or portions thereof) ending on or prior to the Closing; (ii) any costs or expenses incurred in connection with, or related to, the administration of the Bankruptcy Case, including, without limitation, any accrued professional fees and expenses of attorneys, accountants, financial advisors and other professional advisors related to the Bankruptcy Case; (iii) liabilities to the extent relating to the Excluded Assets, including Liabilities relating to Excluded Contracts; (iv) liabilities and obligations of Sellers under this Agreement; (v) all liabilities and obligations arising under any Purchased Contract (and all liabilities for any breach, act or omission under any Purchased Contract) arising prior to the Closing; subject to Buyer's obligation to pay cure costs as provided in subsection (b) below; (vi) all intercompany obligations, liabilities and Indebtedness, including any note Indebtedness, owed by Sellers to any Affiliates of Sellers; (vii) any Employee Obligations to any Employee who is not a Transferred Employee; (viii) any Employee Claim of any Employee who is not a Transferred Employee or any Employee Claim of any Transferred Employee arising from the period prior to Closing, in each case other than Employee Claims based on WARN relating to the transactions contemplated by this Agreement; and (ix) all other liabilities and obligations for which Buyer does not expressly assume any liability (collectively, the "Excluded Liabilities"). Buyer's assumption of the Assumed Liabilities shall in no way expand the rights or remedies of third parties against Buyer as compared to the rights and remedies which such parties would have had against Sellers had this Agreement not been consummated. From and after the Closing Date, Buyer shall pay, perform and discharge, as and when due or as may otherwise be agreed between Buyer and the obligee, all of the Assumed Liabilities. The "Assumed Liabilities" are specifically limited to the following: (a) all Liabilities of Sellers set forth on Schedule 2.3(a); (b) all Liabilities under the Purchased Contracts arising after the Closing, together with the "cure amounts" associated therewith, estimates of which cure amounts are set forth on Schedule 2.3(b); 11 (c) all Liabilities arising from the sale of Products after the Closing pursuant to product warranties, product returns and rebates; (d) all Liabilities with respect to the Business, the Purchased Assets or the Transferred Employees arising after the Closing; (e) all Liabilities relating to amounts required to be paid by Buyer hereunder; Section 2.4 Purchased Assets. At Closing, and pursuant to Section 365 of the Bankruptcy Code, Sellers shall assume and assign to Buyer and Buyer shall assume from Sellers, the Purchased Assets and Assumed Liabilities. The cure amounts, as determined by the Bankruptcy Court, if any, necessary to cure all defaults, if any, and to pay all actual or pecuniary losses that have resulted from such defaults under the Purchased Contracts and/or Personal Property Leases assumed at Closing, shall be paid by Buyer on or before Closing, and Sellers shall have no liability therefor. Section 2.5 Further Conveyances and Assumptions. From time to time following the Closing, Sellers and Buyer shall, and shall cause their respective Affiliates to, execute, acknowledge and deliver all such further conveyances, notices, assumptions, releases and acquaintances and such other instruments, and shall take such further actions, as may be reasonably necessary or appropriate to assure fully to Buyer and its respective successors or assigns, all of the properties, rights, titles, interests, estates, remedies, powers and privileges intended to be conveyed to Buyer under this Agreement and the Sellers Documents and to assure fully to Sellers and their respective Affiliates and their respective successors and assigns, the assumption of the liabilities and obligations intended to be assumed by Buyer under this Agreement and the Sellers Documents, and to otherwise make effective the transactions contemplated hereby and thereby. Section 2.6 Pre- and Post-Closing and Transitional Matters. (a) From and after Closing, Sellers shall retain full right and authority to use, enforce, pursue remedies and take actions with respect to any of the Excluded Assets. (b) Buyer will retain and make available to Sellers, for a period of three (3) years following the Closing Date, the Documents delivered by Sellers to Buyer, if reasonably needed by Sellers for liquidation, winding up, tax reporting or other proper purposes; provided that Sellers will use reasonable efforts to retain copies of Documents and the Parties otherwise will reasonably cooperate to minimize inconvenience to Buyer. (c) From and after Closing, Buyer will be solely responsible for compliance with the requirements of COBRA (if and as applicable), with respect to Transferred Employees. ARTICLE III CONSIDERATION Section 3.1 Purchase Price and Payment; Assumed Liabilities. In consideration ofthe transfer of the Purchased Assets to Buyer and the other undertakings set forth herein, Buyer will 12 pay to Sellers Five Hundred Thousand Dollars ($500,000), (the "Cash Payment"). On the date hereof, Buyer shall wire Fifty Thousand Dollars ($50,000) (the "Deposit") into a client trust account maintained by Pachulski Stang Ziehl & Jones LLP. At Closing, Buyer will pay Sellers, by wire transfer of immediately available funds to an account designated by Sellers, an amount equal to the Cash Payment, less the Deposit. As additional consideration for the transfer of the Purchased Assets and the undertakings set forth herein, at Closing Buyer will assume the Assumed Liabilities. The Cash Payment plus all amounts owed in respect of the Assumed Liabilities is referred to in this Agreement as the "Purchase Price." The Purchase Price will be paid to Seller as provided hereunder, without offset or reduction. ARTICLE IV CLOSING AND TERMINATION Section 4.1 Closing Date. Subject to the satisfaction of the conditions set forth in Section 11.1, Section 11.2 and Section 11.3 hereof (or the waiver thereof by the Party entitled to waive that condition), the closing of the purchase and sale of the Purchased Assets and the assumption of the Assumed Liabilities provided for in Article II hereof (the "Closing") shall take place at the Wilmington, Delaware offices of Pachulski Stang Ziehl & Jones LLP (or at such other place as the Parties may designate in writing) as soon as practicable following the satisfaction or waiver of the conditions set forth in Article X (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions) and no later than a date that is two (2) Business Days after the Sale Order becomes a Final Order, unless another time or date, or both, are agreed to in writing by the Parties hereto. The date on which the Closing shall be held is referred to in this Agreement as the "Closing Date," and the Closing shall be deemed effective at the close of business on the Closing Date. Section 4.2 Deliveries by Sellers. At the Closing, Sellers shall deliver to Buyer: (a) a duly executed bill of sale and assignment in the form of Exhibit A hereto; (b) duly executed assignments ofthe U.S. trademark registrations and applications included in the Purchased Intellectual Property, in a form suitable for recording in the U.S. trademark office, and general assignments of all other Purchased Intellectual Property; (c) the officer's certificate required to be delivered pursuant to Section ll.l(a) and Section ll.l(b); (d) a certified copy of the Sale Order; and (e) all other instruments of conveyance and transfer, in form and substance reasonably acceptable to Buyer, as may be necessary to convey the Purchased Assets to Buyer. Section 4.3 Deliveries by Buyer. At the Closing, Buyer shall deliver to Sellers: (a) a duly executed bill of sale and assignment in the form of Exhibit A hereto; 13 (b) the Cash Payment, less the Deposit, in immediately available funds, as set forth in Section 3.1 hereof; (c) duly executed assignments of the U.S. trademark registrations and applications included in the Purchased Intellectual Property, in a form suitable for recording in the U.S. trademark office, and general assignments of all other Purchased Intellectual Property; (d) the officer's certificate required to be delivered pursuant to Section 11.2(a) and Section 11.2(b) hereof; (e) a copy of resolutions of the managers of Buyer, authorizing the execution, delivery and performance hereofby Buyer, certified by an authorized officer of Buyer and dated as of the Closing Date; (f) a copy of a certificate ofthe Secretary ofthe Commonwealth ofVirginia dated no earlier than ten (1 0) days before the Closing, certifying that Buyer is in good standing under the Laws of the Commonwealth of Virginia; and (g) all other instruments of conveyance and transfer, in form and substance reasonably acceptable to Sellers, as may be necessary to convey the Purchased Assets to Buyer. Section 4.4 Termination of Agreement. This Agreement may be terminated prior to the Closing as follows: (a) by mutual written consent of Sellers and Buyer or solely by the Buyer in the event the Bankruptcy Court has not entered the Stalking Horse Order on or before January 30, 2009; (b) by Sellers or Buyer if there shall be in effect a final nonappealable Order of a Governmental Body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby; it being agreed that the Parties hereto shall promptly appeal any adverse determination which is not nonappealable (and pursue such appeal with reasonable diligence); (c) with no further action by either Party, if the Bankruptcy Court shall enter an Order approving a Competing Bid and the transaction contemplated by such Competing Bid is thereafter consummated; (d) by Buyer, if the Closing shall not have occurred by the close of business on the date which is five (5) Business Days after the Sale Order becomes a Final Order (the "Termination Date"); provided, however, that if the Closing shall not have occurred on or before the Termination Date due to a material breach of any representations, warranties, covenants or agreements contained in this Agreement by Buyer, then Buyer may not terminate this Agreement pursuant to this Section 4.4(a); (e) by Buyer, if any of the conditions to the obligations of Buyer set forth in Section 11.1 and Section 11.3 shall have become incapable of fulfillment other than as a result of 14 a breach by Buyer of any covenant or agreement contained in this Agreement, and such condition is not waived by Buyer; (f) by Buyer, ifthere shall be a breach by Sellers of any representation or warranty, or any covenant or agreement contained in this Agreement which would result in a failure of a condition set forth in Section 11.1 or Section 11.3 and which breach cannot be cured or has not been cured by the earlier of (i) 10 (ten) Business Days after the giving of written notice by Buyer to Sellers of such breach and (ii) the Termination Date; (g) by Sellers, if any condition to the obligations of Sellers set forth in Section 11.2 or Section 11.3 shall have become incapable of fulfillment other than as a result of a breach by Sellers of any covenant or agreement contained in this Agreement, and such condition is not waived by Sellers; or (h) by Sellers, if there shall be a breach by Buyer of any representation or warranty, or any covenant or agreement contained in this Agreement which would result in a failure of a condition set forth in Section 11.2 or Section 11.3 and which breach cannot be cured or has not been cured by the earlier of (i) 10 (ten) Business Days after the giving of written notice by Sellers to Buyer of such breach and (ii) the Termination Date. Section 4.5 Procedure Upon Termination. In the event of termination and abandonment by Buyer or Sellers, or both such Parties, pursuant to Section 4.4 hereof, written notice thereof shall forthwith be given to the other Party or Parties, and this Agreement shall terminate, and the purchase of the Purchased Assets hereunder shall be abandoned, without further action by Buyer or Sellers. If this Agreement is terminated as provided herein each Party shall redeliver all documents, work papers and other material of any other Party relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the Party furnishing the same. If this Agreement is terminated pursuant to Sections 4.4(a), .{Q), {}, @, W or ffi, the Deposit shall be returned to Buyer, and the Parties shall have no further obligations to one another except for any obligations that, by their terms, survive the termination of this Agreement. If this Agreement is terminated pursuant to Sections 4.4(g), with respect to Section 11.2, but not Section 11.3, or Section 4.4.(hl, the Deposit shall be retained by Sellers, without prejudice to any other remedies that may be available to Sellers in law or in equity. If this Agreement is terminated pursuant to Section 4.4(c), Sellers shall also pay the Break-Up Fee and the Expense Reimbursement to Buyer promptly upon the effective date of termination of this Agreement in accordance with the provisions thereof, and the Parties shall have no further obligations to one another except for any obligations that, by their terms, survive the termination of this Agreement. Section 4.6 Effect of Termination. (a) In the event that this Agreement is validly terminated in accordance with Section 4.4, this Agreement shall terminate and each of the Parties shall be relieved of its respective duties and obligations arising under this Agreement after the date of such termination and such termination shall be without liability to Buyer or Sellers; provided, however, that the obligations of the Parties set forth in Section 4.5, Section 7.1 and Article XIII hereof shall survive any such termination and shall be enforceable hereunder. 15 (b) Except for fraud or willful misconduct by Sellers, Buyer acknowledges and agrees that the return ofthe Deposit, if applicable pursuant to the provisions of Section 4.5, and the payment of the Break-Up Fee and the Expense Reimbursement, if applicable pursuant to the provisions of Section 4.5 and Section 7.1, shall be the sole and exclusive remedy ofBuyer with respect to any failure by Sellers to consummate the transactions contemplated by this Agreement. ARTICLEV REPRESENTATIONS AND WARRANTIES OF SELLERS Sellers hereby jointly and severally represent and warrant to Buyer that: Section 5.1 Authorization of Agreement. Subject to the entry ofthe Sale Order: (a) Sellers each have all requisite power, authority and legal capacity to execute and deliver this Agreement and Sellers each have all requisite power, authority and legal capacity to execute and deliver each other agreement, document, or instrument or certificate contemplated by this Agreement or to be executed by Sellers in connection with the consummation of the transactions contemplated by this Agreement (the "Sellers Documents"), to perform their respective obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby; and (b) this Agreement has been, and each of the Sellers Documents will be at or prior to the Closing, duly and validly executed and delivered by Sellers and (assuming the due authorization, execution and delivery by the other Parties hereto and thereto and the entry of the Sale Order) this Agreement constitutes, and each of the Sellers Documents when so executed and delivered will constitute, legal, valid and binding obligations of Sellers, enforceable against Sellers in accordance with their respective terms. Section 5.2 Title to Purchased Assets. Except as set forth in Schedule 5.2, and other than the personal property subject to the Personal Property Leases, Sellers own each of the Purchased Assets, and Buyer will be vested with good title to such Purchased Assets, free and clear of all Liens, other than Permitted Exceptions, to the fullest extent permissible under Section 363(f) of the Bankruptcy Code. The Purchased Assets include all of the properties and assets required to operate, in all material respects, the Business in the Ordinary Course of Business. Section 5.3 Tangible Personal Property. Schedule 5.3(a) sets forth all leases of personal property ("Personal Property Leases") relating to personal property used by Sellers in the Business or to which Sellers are a party or by which the properties or assets of Sellers are bound. Each Seller has a valid and enforceable leasehold interest under each Personal Property Lease under which it is a lessee; subject to defaults by the lessors thereunder set forth on Schedule 5.3(b). Section 5.4 Intellectual Property. To Sellers' knowledge, Sellers own all right, title and interest to, or are licensees with respect to, the Purchased Intellectual Property, and can convey such property free and clear of Liens, other than Permitted Exceptions, pursuant to the Sale Order. To the knowledge of Sellers, (i) no Person is engaging in any activity that infringes any Purchased Intellectual Property and (ii) no claim has been asserted to any Seller that the use of any Purchased Intellectual Property or the operation of the Business infringes or violates the 16 Intellectual Property of any third party. The Purchased Intellectual Property and the rights under the Purchased Contracts include the rights to use all Intellectual Property required to operate the Business. Section 5.5 Financial Advisors. No Person has acted, directly or indirectly, as a broker, finder or financial advisor for Sellers in connection with the transactions contemplated by this Agreement, and no Person is entitled to any fee or commission or like payment from Buyer or Sellers in respect thereof, in each case other than as set forth on Schedule 5.5. Section 5.6 Litigation. Except for the Bankruptcy Cases and except as set forth on Schedule 5.6, there is no suit, action, litigation, arbitration proceeding or governmental proceeding, including appeals and applications for review, in progress, pending or, to the best of Sellers' knowledge, threatened against or relating to Sellers or any judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality or arbitrator which, in any case, might adversely affect the ability of Sellers to enter into this Agreement or to consummate the transactions contemplated hereby and Sellers are not aware of any existing ground on which any such action, suit or proceeding may be commenced with any reasonable likelihood of success. Section 5.7 Compliance with Laws. Except as set forth on Schedule 5.7 and to Sellers' knowledge, Sellers have conducted and are presently conducting the Business in material compliance with all applicable Laws. Section 5.8 Permits. Schedule 5.8 sets forth all Permits used by Sellers in the Business. Sellers are in compliance with the material terms of all such Permits, and all such Permits are valid and in full force and effect, and no proceeding is pending or, to the knowledge of Sellers, threatened, the object of which is to revoke, limit or otherwise affect any such Permit. Section 5.9 Sellers' Representations and Warranties Generally. Sellers' representations and warranties herein (including as made or qualified in the Schedules hereto) are made by the respective Sellers in a corporate or limited liability company capacity, without personal liability to Sellers' directors, officers, members or counsel, or Sellers' signatory, other than with respect to fraudulent or criminal activity with respect to the transactions contemplated hereby. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby represents and warrants to Sellers that: Section 6.1 Organization and Good Standing. Buyer is a limited liability company duly organized, validly existing and in good standing under the Laws of the Commonwealth of Virginia. Section 6.2 Authorization of Agreement. Buyer has full limited liability company power and authority to execute and deliver this Agreement and each other agreement, document, instrument or certificate contemplated by this Agreement or to be executed by Buyer in 17 connection with the consummation of the transactions contemplated hereby and thereby (the "Buyer Documents"), and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by Buyer of this Agreement and each Buyer Document have been duly authorized by all necessary limited liability company action on behalf of Buyer. This Agreement has been, and each Buyer Document will be at or prior to the Closing, duly executed and delivered by Buyer and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and each Buyer Document when so executed and delivered will constitute, legal, valid and binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). Section 6.3 Financial Advisors. No Person has acted, directly or indirectly, as a broker, finder or financial advisor for Buyer in connection with the transactions contemplated by this Agreement and no person is entitled to any fee or commission or like payment in respect thereof. Section 6.4 Financial Capability. Buyer (i) has, as of the date hereof, and will have as of the Closing, sufficient funds available to pay the Purchase Price and any expenses incurred by Buyer in connection with the transactions contemplated by this Agreement; (ii) has, as of the date hereof, and will have at Closing, the resources and capabilities (financial or otherwise) to perform its obligations hereunder and (iii) has not, as of the date hereof, and will not have as of the Closing, incurred any obligation, commitment, restriction or Liability of any kind which would impair or adversely affect such resources and capabilities. Section 6.5 Condition of the Business. Notwithstanding anything contained in this Agreement to the contrary, Buyer acknowledges and agrees that Sellers are not making any representations or warranties whatsoever, express or implied, beyond those expressly given by Sellers in Article V hereof (as modified by the Schedules hereto), and Buyer acknowledges and agrees that, except for the representations and warranties contained therein, the Purchased Assets and the Business are being transferred on a "WHERE IS" and, as to condition, "AS IS" basis and "WITH ALL FAULTS." Without in any way limiting the foregoing, Sellers hereby disclaim any warranty (express or implied) of merchantability or fitness for any particular purpose as to any portion of the Purchased Assets. ARTICLE VII BANKRUPTCY COURT APPROVAL Section 7.1 Approval ofBreak-Up Fee, Expense Reimbursement, Overbid Protection. In consideration for Buyer having expended considerable time and expense in connection with this Agreement and the negotiation thereof and the identification and quantification of assets of Sellers, Sellers shall pay to Buyer promptly upon the effective date of termination of this Agreement in accordance with the provisions of Section 4.4(c) (i) a break-up fee in the amount ofFifteen Thousand Dollars ($15,000) (the "Break-Up Fee") and (ii) the Buyer's reasonable 18 expenses incurred in connection with the transactions contemplated by this Agreement, provided the amount of such expense reimbursement does not exceed Twenty Thousand Dollars ($20,000) (the "Expense Reimbursement"). In addition, the Stalking Horse Motion shall provide for an overbid protection in the amount of Twenty-Five Thousand Dollars ($25,000) over and above the aggregate of the Purchase Price, the Break-Up Fee and the Expense Reimbursement (the "Overbid Protection"). Section 7.2 Competing Transaction. (a) This Agreement is subject to approval by the Bankruptcy Court and the consideration by Sellers of higher or better competing bids (each a "Competing Bid"). From the date hereof (and any prior time) and until the completion of the auction contemplated hereby or as otherwise directed by the Bankruptcy Court, Sellers are permitted to cause their respective representatives and Affiliates to initiate contact with, solicit or encourage submission of any inquiries, proposals or offers by, any Person (in addition to Buyer and its Affiliates, agents and representatives) in connection with any sale or other disposition of the Purchased Assets. Each Competing Bid submitted subsequent to the execution of this Agreement must include a bid price of at least $560,000 in accordance with the Overbid Protection. In addition, Sellers shall have the responsibility and obligation to respond to any inquiries or offers to purchase all or any part of the Purchased Assets and perform any and all other acts related thereto which are required under the Bankruptcy Code or other applicable law, including supplying information relating to the Business and the assets of Sellers to prospective buyers. (b) Following completion of the auction contemplated hereby, Sellers are not permitted to cause their respective representatives and Affiliates to initiate contact with, solicit or encourage submission of any inquiries, proposals or offers by, any Person (in addition to Buyer and its Affiliates, agents and representatives) in connection with any sale or other disposition of the Purchased Assets. In addition, unless otherwise directed by the Bankruptcy Court, Sellers shall not after completion of the auction contemplated herein respond to any inquiries or offers to purchase all or any part of the Purchased Assets or perform any other acts related thereto, including supplying information relating to the Business and the assets of Sellers to prospective buyers. Section 7.3 Bankruptcy Court Filings. Sellers shall file the Sale Order with the Bankruptcy Court and seek entry thereof. Buyer agrees that it will promptly take such actions as are reasonably requested by Sellers to assist in obtaining the Sale Order, including furnishing affidavits or other documents or information for filing with the Bankruptcy Court for the purposes, among others, of providing necessary assurances of performance by Buyer under this Agreement and demonstrating that Buyer is a "good faith" Buyer under Section 363(m) of the Bankruptcy Code. In the event the entry of the Sale Order shall be appealed, Sellers shall use its reasonable efforts to defend such appeal. 19 ARTICLE VIII COVENANTS Section 8.1 Access to Information. Sellers agree that, prior to the Closing Date, Buyer shall be entitled, through its officers, employees and representatives (including its legal advisors and accountants), to make such investigation of the properties, businesses and operations of the Business and such examination of the books, records and financial condition of the Business, the Purchased Assets and the Assumed Liabilities as it reasonably requests and to make extracts and copies of such books and records. Any such investigation and examination shall be conducted during regular business hours upon reasonable advance notice and under reasonable circumstances and shall be subject to restrictions under applicable Law. Sellers shall cause their respective officers, employees, consultants, agents, accountants, attorneys and other representatives to cooperate with Buyer and Buyer's representatives in connection with such investigation and examination, and Buyer and its representatives shall cooperate with Sellers and their respective representatives and shall use their reasonable efforts to minimize any disruption to the Business. Notwithstanding anything herein to the contrary, no such investigation or examination shall be permitted to the extent that it would require Sellers or any of their respective Affiliates to disclose information subject to attorney-client privilege or conflict with any confidentiality obligations to which Sellers or any of their respective Affiliates is bound. Section 8.2 Further Assurances. Each of Sellers and Buyer shall use reasonable efforts to (a) take all actions necessary or appropriate to consummate the transactions contemplated by this Agreement and (b) cause the fulfillment at the earliest practicable date of all of the conditions to their respective obligations to consummate the transactions contemplated by this Agreement. Section 8.3 Confidentiality. (a) Buyer acknowledges that the confidential information provided to it in connection with this Agreement, including under Section 8.1, and the consummation ofthe transactions contemplated hereby, is subject to the terms and conditions of that certain letter agreement, by and among Buyer and The Parent Company, dated as of January 22,2009. (b) Following the completion of the auction contemplated hereby, Sellers agree to maintain, and shall cause their respective Affiliates to maintain, unless disclosure is required by applicable Law, the confidentiality of any confidential information regarding the Business which is in Sellers' or any of their respective Affiliate's possession or which Sellers or any of their respective Affiliates are aware of. Sellers hereby further agree, unless disclosure is required by applicable Law, to take all appropriate steps, and to cause each of their respective Affiliates to take all appropriate steps, to safeguard such confidential information and to protect it against disclosure, misuse, espionage, loss and theft. In furtherance and not in limitation of the foregoing, Sellers shall not, and shall cause their respective Affiliates not to, unless required by applicable Law, disclose to any Person (a) any confidential information regarding the Business or (b) any of the discussions or negotiations conducted in connection with this Agreement. In the event Sellers or any of their respective Affiliates are obligated by a Law or an Order to disclose any confidential information regarding the Business or the Buyer, Sellers, on their own 20 behalf and on behalf of their respective Affiliates, as the case may be, shall promptly notify Buyer in writing, which notification shall include the nature of the applicable Law or Order and the extent of the required disclosure, so that the Buyer may seek an appropriate protective order at its own expense or waive compliance with the provisions of this Section 8.3. Notwithstanding anything in this Section 8.3 to the contrary, unless disclosure is required by applicable Law, the confidentiality of any Trade Secrets of the Business or Buyer shall be maintained for so long as such Trade Secrets continue to be entitled to protection as Trade Secrets of the Business and Buyer, respectively. Section 8.4 Preservation of Records. Sellers and Buyer agree that each ofthem shall preserve and keep the records held by it or their respective Affiliates relating to the Business for a period of three (3) years from the Closing Date and shall make such records and personnel available to the other as may be reasonably required by such party in connection with, among other things, any insurance claims by, Legal Proceedings or Tax audits against or governmental investigations of Sellers or Buyer or any of their Affiliates or in order to enable Sellers or Buyer to comply with their respective obligations under this Agreement and each other agreement, document or instrument contemplated hereby or thereby. In the event Sellers, on the one hand, or Buyer, on the other hand, wish to destroy such records after that time, such Party shall first give ninety (90) days' prior written notice to the other and such other Party shall have the right at its option and expense, upon prior written notice given to such Party within that ninety (90) day period, to take possession of the records within one hundred and eighty (180) days after the date of such notice. Section 8.5 Publicity. Neither Sellers, on the one hand, nor Buyer, on the other hand, shall issue any press release or public announcement concerning this Agreement or the transactions contemplated hereby without obtaining the prior written approval of the other Party hereto, which approval will not be unreasonably withheld or delayed, unless, in the sole judgment of Buyer or Sellers, disclosure is otherwise required by applicable Law or with respect to filings to be made with the Bankruptcy Court in connection with this Agreement. Notwithstanding the foregoing, the Parties may publicly disclose the existence of this Agreement. Section 8.6 Operation of Business. Until the Closing, Sellers shall use commercially reasonable efforts, except as otherwise required, authorized or restricted pursuant to an Order of the Bankruptcy Court, to operate the Business in the Ordinary Course of Business. Sellers shall use commercially reasonable efforts to (A) preserve intact their respective business organizations, (B) maintain the Business, (C) keep available the services of their respective officers and employees, (D) maintain satisfactory relationships with licensors, licensees, suppliers, contractors, distributors, consultants, customers and others having business relationships with Sellers in connection with the operation of the Business and (E) pay all of their post-petition obligations in the Ordinary Course of Business. Without limiting the generality of the foregoing, and except (i) as otherwise expressly provided in or contemplated by this Agreement, or (ii) required, authorized or restricted pursuant to an Order of the Bankruptcy Court, on or prior to the Closing Date, Sellers may not, without the prior written consent of Buyer: 21 (a) modify in any manner the compensation of any of the Employees, or accelerate the payment of any such compensation (other than in the Ordinary Course of Business or such that the liability associated with such modification is excluded from the Assumed Liabilities); (b) engage any new Employee other than in the Ordinary Course of Business; (c) remove or permit to be removed from any building, facility, or real property any Purchased Asset (other than in the Ordinary Course of Business); (d) sell, lease or otherwise dispose of, mortgage, hypothecate or otherwise encumber any Purchased Asset (other than in the Ordinary Course of Business); (e) amend, terminate or renew any Purchased Contract, once identified as such by Buyer in writing to Sellers; (f) fail to pay any required filing, processing or other fee, and use commercially reasonable efforts to maintain the validity of Sellers' rights in, to or under any Purchased Intellectual Property; (g) fail to use commercially reasonable efforts to maintain all Permits of Sellers, including those used in the operation of the Business; (h) make any unusual or extraordinary efforts to collect any outstanding accounts receivable or intercompany obligation, liability or Indebtedness, give any discounts or concessions for early payment of such accounts receivable or intercompany obligation, liability or Indebtedness, other than the usual discounts given by the Business in the Ordinary Course of Business and make any sales of, or convey any interest in, any accounts receivable or intercompany obligation, liability or Indebtedness to any third party; (i) other than transactions pursuant to agreements or arrangements in effect on the Petition Date as set forth on Schedule 8.6(i), engage in any transaction with any Affiliate, subsidiary, shareholder, officer or director of any Seller (other than in the Ordinary Course of Business), incur or assume any long term or short term debt with or on behalf of any such Person or guarantee, endorse or otherwise be liable or responsible (whether directly, indirectly, contingently or otherwise) for the obligations of any such Person; G) make any change in their method of accounting, except in accordance with GAAP; (k) enter into any Contract that would survive the Closing; (1) return inventory to any vendor; and (m) agree, whether in writing or otherwise, to do any of the foregoing. Section 8.7 Cure Amounts. On the second Business Day prior to the Closing Date, Sellers shall deliver to Buyer a copy of Schedule 2.3(b) updated as of such date. 22 Section 8.8 Section 363(b)(l)(A). Buyer shall honor and observe any and all policies of Sellers in effect on the Petition Date prohibiting the transfer of personally identifiable information about individuals and otherwise comply with the requirements of Section 363(b)(1)(A) ofthe Bankruptcy Code. Section 8.9 Adequate Assurances Regarding Purchased Contracts. With respect to each Purchased Contract set forth on Schedule 1.1(c), Buyer shall provide adequate assurance of the future performance of such Purchased Contract by Buyer as required by Sections 365(b)(1)(C) and/or 365(f)(2)(B) ofthe Bankruptcy Code, as applicable. ARTICLE IX POST -CLOSING COVENANTS Section 9.1 Storage of Equipment. The Sellers shall permit the Equipment and Inventory to be stored on its premises undisturbed by the Sellers or its Affiliates for a period of up to ten (1 0) days after the Closing Date. After the Closing, the Sellers shall have no obligation to maintain the Equipment or carry any insurance related to the Equipment and the Buyer acknowledges and agrees that all risk of loss related to the Equipment passes to the Buyer at the Effective Time, except in the case of the gross negligence or willful or intentional misconduct of the Sellers or any of its or its Affiliates' employees, contractors, agents or representatives. Section 9.2 Access to Equipment. Upon no less than five (5) Business Days' notice, the Sellers shall permit the Buyer or its contractors to have reasonable access to the Sellers' facilities for the purposes of selling or moving the Equipment and Inventory. The Buyer will exercise commercially reasonable efforts to conduct the selling process with respect to, and move, the Equipment in a safe manner. Section 9.3 Transportation of Equipment. The Buyer shall be responsible for all transportation costs and related expenses associated with moving the Equipment and Inventory from its location on the Sellers' premises other than those attributable to the personnel of the Sellers involved in such process, if any. The Sellers acknowledge that there may be certain support structures connected to or abutting the Equipment (such as electrical conduits or building infrastructure) that must necessarily be disturbed in order to move the Equipment. The Buyer shall use commercially reasonable efforts to cause as little disturbance as possible to the strUcture of the Sellers' facility and the Sellers' operations thereat in the Buyer's removal of the Equipment, and the Buyer shall be responsible for any damages caused thereby. ARTICLE X EMPLOYEES AND EMPLOYEE BENEFITS Section 10.1 Employment. (a) Employees. Buyer agrees that prior to the Closing Date it shall offer jobs to those employees listed on Schedule 10.1 (a). Such individuals who accept such offer by the Closing Date are hereinafter referred to as the "Transferred Employees." Sellers agree that 23 between the date hereof and the Closing Date it shall take no action so as to trigger any WARN Liabilities in respect of Sellers or Buyer. (b) Standard Procedure. Pursuant to the "Standard Procedure" provided in Section 4 of Revenue Procedure 2004-53, 2004-34 IRB 320, (i) Buyer and Sellers shall report on a predecessor/successor basis as set forth therein, (ii) Sellers will not be relieved from filing a Form W-2 with respect to any Transferred Employees, and (iii) Buyer will undertake to file (or cause to be filed) a Form W-2 for each such Transferred Employee with respect to the portion of the year during which such Employees are employed by Buyer that includes the Closing Date, excluding the portion of such year that such Employee was employed by Sellers. Section 10.2 Employee Benefits. (a) Benefits. Set forth on Schedule 10.2(a) is a correct and complete list for each Employee (including and denoting any Employee who is on a leave of absence or on layoff status): (i) the name and title of such Employee; (ii) the aggregate dollar amounts of the compensation (including wages, salary, commissions, director's fees, fringe benefits, bonuses, profit-sharing payments and other payments or benefits of any type) received by such Employee from Sellers with respect to services performed in 2007 and 2008; (iii) such Employee's annualized compensation as ofthe date ofthis Agreement; (iv) the number ofhours of sick-time which such Employee has accrued as of the date hereof and the aggregate dollar amount thereof; (v) the number of hours of vacation time which such Employee has accrued as of the date hereof and the aggregate dollar amount thereof; and (vi) any additional severance amounts that would be payable to such Employee if such Employee were terminated as of the Closing Date. ARTICLE XI CONDITIONS TO CLOSING Section 11.1 Conditions Precedent to Obligations of Buyer. The obligation of Buyer to consummate the transactions contemplated by this Agreement is subject to the fulfillment, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by Buyer in whole or in part to the extent permitted by applicable Law): (a) The representations and warranties of Sellers set forth in this Agreement qualified as to materiality shall be true and correct and those not so qualified shall be true and correct in all material respects, at and as of the Closing, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties qualified as to materiality shall be true and correct and those not so qualified shall be true and correct in all material respects, on and as of such earlier date); and Buyer shall have received a certificate signed by an authorized officer of each Seller, dated the Closing Date, to the forgoing effect in his or her corporate (not personal) capacity (it being acknowledged and agreed that the signatory to such certificate shall have no personal liability as a result of signing such certificate); (b) Sellers shall have performed and complied in all material respects with all obligations and agreements required in this Agreement to be performed or complied with by 24 them prior to the Closing Date, and Buyer shall have received a certificate signed by an authorized officer of each Seller, dated the Closing Date, to the forgoing effect in his or her corporate (not personal) capacity (it being acknowledged and agreed that the signatory to such certificate shall have no personal liability as a result of signing such certificate); (c) Sellers shall have delivered, or caused to be delivered, to Buyer all ofthe items set forth in Section 4.2; (d) Buyer shall have received all Permits necessary or useful for the conduct of the Business (which Buyer shall use commercially reasonable efforts to timely obtain); and (e) From the date hereof through the Closing Date, (i) there shall have been no Material Adverse Effect and (ii) Sellers shall have delivered to Buyer a certificate (executed in corporate or limited liability company capacity, without liability to Sellers' signatory), dated as of the Closing Date, to such effect. Section 11.2 Conditions Precedent to Obligations of Sellers. The obligations of Sellers to consummate the transactions contemplated by this Agreement are subject to the fulfillment, prior to or on the Closing Date, of each of the following conditions (any or all of which may be waived by Sellers in whole or in part to the extent permitted by applicable Law): (a) The representations and warranties of Buyer set forth in this Agreement qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, at and as of the Closing, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties qualified as to materially shall be true and correct, and those not so qualified shall be true and correct in all material respects, on and as of such earlier date); and Sellers shall have received a certificate signed by an authorized officer of Buyer, dated the Closing Date, to the foregoing effect in his or her corporate (not personal) capacity (it being acknowledged and agreed that the signatory to such certificate shall have no personal liability as a result of signing such certificate); (b) Buyer shall have performed and complied in all material respects with all obligations and agreements required by this Agreement to be performed or complied with by Buyer on or prior to the Closing Date, and Sellers shall have received a certificate signed by an authorized officer of Buyer, dated the Closing Date, to the foregoing effect in his or her corporate (not personal) capacity (it being acknowledged and agreed that the signatory to such certificate shall have no personal liability as a result of signing such certificate); (c) Sellers shall have received the Deposit; and (d) Buyer shall have delivered, or caused to be delivered, to Sellers the Cash Payment in accordance with Section 3 .1. Section 11.3 Conditions Precedent to Obligations of Buyer and Sellers. The respective obligations of Buyer and Sellers to consummate the transactions contemplated by this Agreement are subject to the fulfillment, on or prior to the Closing Date, of each of the following conditions 25 (any or all of which may be waived by Buyer and Sellers in whole or in part to the extent permitted by applicable Law): (a) there shall not be in effect any Order by a Governmental Body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby; (b) the Bankmptcy Court shall have entered the Sale Order, in form and substance acceptable to Sellers and Buyer, by no later than Febmary 6, 2009; and (c) the Sale Order shall have become a Final Order (unless this condition shall have been waived in writing by Buyer). Section 11.4 Fmstration of Closing Conditions. Neither Sellers nor Buyer may rely on the failure of any condition set forth in Section 11.1, Section 11.2 or Section 11.3, as the case may be, if such failure was caused by such Party's failure to comply with any provision of this Agreement. ARTICLE XII NO SURVIVAL Section 12.1 No Survival ofRepresentations and Warranties. The Parties hereto agree that the representations and warranties contained in this Agreement shall not survive the Closing hereunder, and none of the Parties shall have any liability to each other after the Closing for any breach thereof. The Parties hereto agree that the covenants contained in this Agreement to be performed at or after the Closing shall survive the Closing hereunder, and each Party hereto shall be liable to the other after the Closing for any breach thereof. ARTICLE XIII TAX MATTERS Section 13.1 Transfer Taxes. Buyer and Sellers shall seek to include in the Sale Order a provision that provides that the transfer of the Purchased Assets shall be free and clear of any sales, use, stamp, documentary stamp, filing, recording, transfer or similar fees or taxes or governmental charges (including any interest and penalty thereon) payable in connection with the transactions contemplated by this Agreement ("Transfer Taxes") under Bankruptcy Code Section 1146( c). If not included, Buyer and Sellers shall be responsible for all Transfer Taxes equally to the extent permitted by applicable Law. Section 13.2 Prorations. All real and personal property Taxes or similar ad valorem obligations levied with respect to the Purchased Assets for any taxable period that includes the Closing Date and ends after the Closing Date, whether imposed or assessed before or after the Closing Date, shall be prorated between Sellers and Buyer as of 12:01 a.m. (New York time) on the day following the Closing Date. Such Taxes that first become payable in calendar year 2009 shall be apportioned between Sellers and Buyer using the calendar-year method. Under the calendar-year method, any Tax bill that first becomes due and payable during a calendar year is 26 deemed to be related to that entire calendar year. Sellers' share of the Tax bills first becoming due and payable during 2009 shall be determined by multiplying the sum of the 2009 Tax bills by a fraction, the numerator of which shall be the number of days from and including January 1 to, and including, the Closing Date, and the denominator of which shall be 365. Buyer's share shall be the aggregate amount of all such bills less Sellers' share. If the exact amount of any real or personal property Taxes is not known on the Closing Date, the apportionment shall be based upon a reasonable amount, without subsequent adjustment. Section 13.3 Purchase Price Allocation. Within sixty (60) days after the Closing Date, Buyer and Sellers will agree to a certificate of allocation detailing the allocation of the Purchase Price among the Purchased Assets. Buyer and Sellers will each file an Internal Revenue Service Form 8594 "Asset Acquisition Statement under Section 1 060" at the times and in the manner as required by Treasury Regulation 1.1060-1 consistent with such certificate of allocation. The certificate of allocation will be conclusive and binding on the Parties for all purposes, including reporting and disclosure requirements under the Code and any foreign, state, or local Tax authority. ARTICLE XIV MISCELLANEOUS Section 14.1 Expenses. Except for the Expense Reimbursement owed by Sellers to Buyer, each of Sellers and Buyer shall bear their own expenses incurred in connection with the negotiation and execution of this Agreement and each other agreement, document and instrument contemplated by this Agreement and the consummation of the transactions contemplated hereby and thereby. Section 14.2 Submission to Jurisdiction; Consent to Service of Process. (a) Without limiting any Party's right to appeal any order of the Bankruptcy Court, (i) the Bankruptcy Court shall retain exclusive jurisdiction to enforce the terms of this Agreement and to decide any claims or disputes which may arise or result from, or be connected with, this Agreement, any breach or default hereunder, or the transactions contemplated hereby, and (ii) any and all proceedings related to the foregoing shall be filed and maintained only in the Bankruptcy Court, and the parties hereby consent to and submit to the jurisdiction and venue of the Bankruptcy Court and shall receive notices at such locations as indicated in Section 13.7 hereof; provided, however, that if the Bankruptcy Case has closed, the Parties agree to unconditionally and irrevocably submit to the exclusive jurisdiction of the United States District Court for the District of Delaware and any appellate court thereof, for the resolution of any such claim or dispute. The Parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hen:after have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the Parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. 27 (b) Each of the Parties hereto hereby consents to process being served by any Party to this Agreement in any suit, action or proceeding by delivery of a copy thereof in accordance with the provisions of Section 13.7. Section 14.3 Waiver of Right to Trial by Jury. Each Party to this Agreement waives any right to trial by jury in any action, matter or proceeding regarding this Agreement or any provision hereof. Section 14.4 Entire Agreement; Amendments and Waivers. This Agreement (including the Schedules and Exhibits hereto) represents the entire understanding and agreement between the Parties hereto with respect to the subject matter hereof. This Agreement can be amended, supplemented or changed, and any provision hereof can be waived, only by written instrument making specific reference to this Agreement signed by the Party against whom enforcement of any such amendment, supplement, modification or waiver is sought or, if such amendment, supplement, modification or waiver can be so construed, by both Parties. No action taken pursuant to this Agreement, including any investigation by or on behalf of any Party, shall be deemed to constitute a waiver by the Party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any Party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any Party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. Section 14.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and performed in Delaware, and, to the extent applicable, the Bankruptcy Code. Section 14.6 Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed given (i) when delivered personally by hand (with written confirmation of receipt), (ii) when sent by facsimile (with written confirmation oftransmission) or electronic mail (and no notice of failure of delivery was received within a reasonable time after such message was sent) or (iii) one Business Day following the day sent by overnight courier (with written confirmation of receipt), in each case at the following addresses, facsimile numbers and e-mail addresses (or to such other address, facsimile number or e-mail address as a Party may have specified by notice given to the other Party pursuant to this provision): If to Sellers, to: The Parent Company 717 17th Street, Suite 1300 Denver, CO 80202 Attention: Chief Restructuring Officer Telecopier: (303) 226-8650 E-mail: ______ _ 28 With a copy (which shall not constitute notice) to: Pachulski Stang Ziehl & Jones LLP 1 01 00 Santa Monica Boulevard, 11th Floor Loa Angeles, CA 90067-4100 Attention: Jeffrey W. Dulberg Telecopier: (31 0) 201-0760 E-mail: jdulberg@pszjlaw.com With a copy (which shall not constitute notice) to: D.E. Shaw Laminar Lending 3 (C), L.L.C. c/o D.E. Shaw & Co., L.P. 120 West 45th Street, 39th Floor New York, New York 10036 Attention: Sarah Johnson E-mail: Sarah.Johnson@deshaw.com Telecopier: (212)845-1833 Attention: Debbie Blank Telecopier: (713) 292-5454 E-mail: ______ _ With a copy (which shall not constitute notice) to: Ifto Buyer, to: Klee, Tuchin, Bogdanoff & Stern LLP 1999 Avenue of the Stars, 39th Floor Los Angeles, California 90067 Attn: Michael L. Tuchin Telecopier: (310) 407-9090 E-mail: MTuchin@ktbslaw.com Posh Ventures, LLC 9510 Osborne Turnpike Richmond, Virginia 23231 Attn: Andrea Edmunds Telecopier: ____ _ E-mail: _____ _ 29 With a copy (which shall not constitute notice) to: McGuire Woods LLP 90 1 E. Cary Street Richmond, Virginia 23219 Attn: Michael J. Schewel Telecopier: (804) 698-2120 E-mail: mschewel@mcguirewoods.com Each Party entitled to notice may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth. Section 14.7 Severability. If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any Law or public policy, all other terms or provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. Section 14.8 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any person or entity not a party to this Agreement except as provided below. No assignment of this Agreement or of any rights or obligations hereunder may be made by either Sellers, on the one hand, or Buyer, on the other hand, (by operation of law or otherwise) without the prior written consent of the other Parties hereto and any attempted assignment without the required consents shall be void; provided, however, that Buyer may assign any or all of its rights, interests, and obligations hereunder to one or more of its Affiliates, provided, further, however, no such assignment shall relieve Buyer of its obligations hereunder. No assignment of any obligations hereunder shall relieve the Parties hereto of any such obligations. Upon any such permitted assignment, the references in this Agreement to Buyer shall also apply to any such assignee unless the context otherwise requires. Section 14.9 Counterparts. This Agreement may be executed in one or more counterparts (including by facsimile or electronic mail), each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. [Signature Page Follows] 30 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first written above. SELLERS: eTOYS DIRECT 1, LLC By: eToys Direct, Inc., its Managing Member B y : ~ / ~ Name: /YI "''" /..._.,,_ L w ... J -- Title: __;,;;;G;....;=..;..c ________ _ THE PARENT COMPANY Name: Title: BABYUNIVERSE, INC. By: Name: Title: eTOYS DIRECT, INC. By: Nan1e: Title: POSHTOTS, INC. Name: Title: [SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT] PAGE I DREAMTIME BABY, INC. By: /Y1 7 Name: UfJc:J. """ L w'"0 ,Jo < r Title: MY TWINN, INC. Name: Title: eTOYS DIRECT 2, LLC By: eToys Direct, Inc., its Managing
Name: 02tvt. tdc.J /'J .... r Title: o eTOYS DIRECT 3, LLC By: eToys Direct, Inc., its Managing Member
Name: t11t"'h p_ c.- I wc..s ,....,.<-,... Title: G r- c; GIFT ACQUISITION, L.L.C. By: eToys Direct, Inc., its Managing Member By: I 7 Name: @u ... tv<- L {A).._ .;/'J ... .- Title: C-r-' o "' [SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT] PAGE2 BUYER: [SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT] PAGE3 PAGE 1/1 RCVD AT 1/23/2009 12:40:21 PM [Eastern Standard Time] SVR:RIGHTFAX/23 DNIS:2244 CSID:8049350844 DURATION (mm-ss):00-18 Exhibit A BILL OF SALE AND ASSIGNMENT THIS BILL OF SALE AND ASSIGNMENT (this "Bill of Sale and Assignment") is made and entered into as of , 2009 by and among THE PARENT COMPANY, a Colorado corporation ("Parent"), ETOYS DIRECT, INC., a Colorado corporation ("eToys Direct"), ETOYS DIRECT 1, LLC, a Delaware limited liability company ("eToys 1 "), ETOYS DIRECT 2, LLC, a Delaware limited liability company ("eToys 2"), ETOYS DIRECT 3, LLC, a Delaware limited liability company ("eToys 3"), BABYUNIVERSE, INC., a Colorado corporation ("BabyUniverse"), POSHTOTS, INC., a Colorado corporation ("PoshTots"), DREAMTIME BABY, INC., a Colorado corporation ("Dreamtime"), MY TWINN, INC., a Colorado corporation ("My Twinn"), GIFT ACQUISITION, L.L.C., a Delaware limited liability company ("Gift", and collectively with Parent, eToys Direct, eToys 1, eToys 2, and eToys 3, BabyUniverse, PoshTots, Dreamtime, and My Twinn, "Sellers"), and POSH VENTURES, LLC, a Virginia limited liability company ("Buyer"). WITNESSETH WHEREAS, Sellers and Buyer are parties to that certain Asset Purchase Agreement dated as of January_, 2009 (the "Purchase Agreement"), whereby Sellers have agreed to sell, transfer, convey, assign and deliver to Buyer the Purchased Assets (as defined in the Purchase Agreement), and Buyer has agreed to purchase and acquire from Sellers the Purchased Assets; WHEREAS, pursuant to the Purchase Agreement, Sellers have agreed to assign and transfer the Assumed Liabilities and Buyer has agreed to assume the Assumed Liabilities; and WHEREAS, all capitalized terms not otherwise defined herein shall have the same meaning as in the Purchase Agreement unless specifically defined in this Bill of Sale and Assignment. NOW, THEREFORE, pursuant to and in accordance with the terms and provisions of the Purchase Agreement, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: 1. Transfer of Purchased Assets. Upon and subject to the terms and conditions set forth in the Purchase Agreement, Sellers do hereby sell, assign, convey, transfer and deliver to Buyer, and Buyer does hereby purchase and acquire from Sellers the Purchased Assets, as the same shall exist on the Closing Date, free and clear of all Liens, other than Permitted Exceptions. 2. Assumption of Liabilities. Sellers do hereby assign and Buyer hereby accepts, assumes, and agrees to perform and discharge when due the Assumed Liabilities. 3. Purchase Agreement. This Bill of Sale and Assignment is subject to the terms and conditions set forth in the Purchase Agreement and nothing herein shall be deemed to modify, expand or diminish the representations, warranties, covenants, rights and obligations of the Parties under the Purchase Agreement. 4. Exclusivity. Nothing contained herein, express or implied, shall be construed, nor is intended, to confer upon any Person other than the Parties and their respective successors and permitted assigns, any remedy or claim under or by reason of this Bill of Sale and Assignment or any term, covenant and condition thereof, and such terms, covenants and conditions shall be for the exclusive benefit of Buyer, its respective successors and permitted assigns, and Sellers, their successors and assigns. 5. Governing Law. This Bill of Sale and Assignment and all matters arising from or relating to this Bill of Sale and Assignment will be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflict of laws principles thereof. 6. Counterparts. This Bill of Sale and Assignment may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument. Execution of this Bill of Sale and Assignment via facsimile will be effective, and signatures received via facsimile or email will be binding upon the Parties and effective as originals. [Signature Page to Follow] 2 IN WITNESS WHEREOF, this Bill of Sale and Assignment has been executed and delivered on the date first above written. SELLERS: ETOYS DIRECT 1, LLC By: eToys Direct, Inc., its Managing Member By: Name: Title: THE PARENT COMPANY By: Name: Title: BABYUNIVERSE, INC. By: Name: Title: ETOYS DIRECT, INC. By: Name: Title: POSHTOTS, INC. By: Name: Title: Signature Page to Bill of Sale and Assignment and Assumption Agreement DREAMTIME BABY, INC. By: Name: Title: MYTWINN, INC. By: Name: Title: ETOYS DIRECT 2, LLC By: eToys Direct, Inc., its Managing Member By: Name: Title: ETOYS DIRECT 3, LLC By: eToys Direct, Inc., its Managing Member By: Name: Title: Signature Page to Bill of Sale and Assignment and Assumption Agreement GIFT ACQUISITION, L.L.C. By: eToys Direct, Inc., its Managing Member By: Name: Title: BUYER: POSH VENTURES, LLC By: Name: Title: Signature Page to Bill of Sale and Assignment and Assumption Agreement SCHEDULE l.l(a) Contracts S-1 SCHEDULE 1.1 (b) Intellectual Property Software and Software Licenses: 1. The following software licenses related to the Servers located in Denver, Colorado and listed on Schedule 2.1(e): a. Microsoft Windows Server 2003 R2 (6 each) b. Microsoft SQL Server 2005 (2 each) c. Telligent Community Server (1 each) 2. All Software, Software licenses and Technology located and maintained at 5500 Cox Road, Suite M, Glen Allen, Virginia 23060. Internet Domains Domain Name poshadmin.com poshads.com poshadvertising.com poshcraving.com poshcraving. net poshcraving .org poshcravings.com poshcravings. net poshcravings. org poshliving.com posh newsletters. com poshshare.com poshtots.com poshtots. net posh tots. tv poshtween.com poshtweens.com babyparade.com Trademarks TRADEMARK COUNTRY CLASS(ES) POSHLIVING us 35 POSHLIVING us II, 16,20 POSHTOTS CAN POSHTOTS us 35 APPL.NO Registrar Domain monger Domain monger Domain monger Domain monger Domain monger Domain monger Domain monger Domain monger Domain monger Domain monger Domain monger Domain monger Domain monger Domain monger Domain monger Domainmonger Domain monger REGNO. FILING DATE ISSUE DATE 77/508211 06/25/2008 78/665819 3486252 07/07/2005 08/12/2008 1417572 11107/2008 77/486738 05/29/2008 S-2 Expiration 8/4/2010 6/5/2009 6/5/2009 2/19/2010 2/19/2010 2/19/2010 1/10/2018 2/19/2010 2/19/2010 1/11/2011 6/26/2009 10/31/2009 3/23/2015 10/4/2013 10/3/2011 8/21/2009 12/18/2009 STATUS AND REMARKS Pending (Published) Publication Date: 10/28/2008 Registered Next Due Date: Section 8 & 15 Open 08/12/2013 Pending Pending Publication Date: 11/18/2008 TTCREF. A TTY(S) HANDLING CLIENT REF. 027263-000 I 0 I US (DES) 027263-000 I OOUS (DES) 027263-000300CA (DES) 027263-000303US S4M(DES) TRADEMARK COUNTRY CLASS(ES) APPL.NO REGNO. STATUS AND REMARKS TTCREF. FILING DATE ISSUE DATE ATTY(S) HANDLING CLIENT REF. POSHTOTS us 25 77/486737 Pending (Published) 027263-000302US 05/29/2008 Publication Date: 11/18/2008 S4M(DES) POSHTOTS us 24 77/486735 Pending 027263-000301US 05/29/2008 S4M(DES) POSHTOTS us 20 77/486734 Pending (Published) 027263-000300US 05/29/2008 Publication Date: 11/18/2008 (DES) POSHTOTS& us 20,24,25 78/243917 3092160 Registered 027263-000200US Design 04/30/2003 05/16/2006 Next Due Date: Section 8 & 15 Open 05/16/2011 (DES) POSHCRA VING us 41 77/211749 3470601 Registered 027262-000300US s 06/2112007 07/22/2008 Next Due Date: Section 8 & 15 Open 07/22/2013 (DES) S-3 SCHEDULE l.l(c) Purchased Contracts FTot Descri[!tion Record Amt Creditor Address 1 Address 2 Address3 DEBTOR CASE I. 5371 $312.72 Bane of Lease PO Box 371992 Pittsburgh, PoshTots, 08-13417 America Administration PA 15250- Inc. Leasing Center 7992 2. Phone 6992 $2,204.51 Paetec fka US PO Box 601310 Charlotte, NC Posh Tots, 08-13417 System LECCorp 28260-1310 Inc. 3. Postage 6982 $0.00 Pitney Bowes Attn: Joey PO Box 856460 Louisville, Posh Tots, 08-13417 Meter Privitera KY 40285- Inc. 6460 4. Janitorial $793.88 PM Building PO Box 50008 Richmond, VA Posh Tots, 08-13417 Service Maintenance 23250 Inc. Corp 5. Copier 6988 $0.00 Stones Office POBox 7023 Troy, MI 48007- Posh Tots, 08-13417 Equipment 7023 Inc. S-4 SCHEDULE 1.1(d) Purchased Intellectual Property Software and Software Licenses: 1. The following software licenses related to the Servers located in Denver, Colorado and listed on Schedule 2.1 (e): a. Microsoft Windows Server 2003 R2 (6 each) b. Microsoft SQL Server 2005 (2 each) c. Telligent Community Server (1 each) 2. All Software, Software licenses and Technology located and maintained at 5500 Cox Road, Suite M, Glen Allen, Virginia 23060. Domain Names: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Trademarks: Domain Name poshadmin.com poshads.com poshadvertising.com poshcraving.com poshcraving.net poshcraving.org poshcravings.com poshcravings.net poshcravings.org poshliving.com poshnewsletters.com poshshare.com poshtots.com poshtots.net poshtots.tv poshtween.com poshtweens.com babyparade.com TRADEMARK COUNTRY CLASS(ES) APPL.NO FILING DATE POSHLIVING us 35 77/508211 06/25/2008 POSHLIVING us 11, 16,20 78/665819 07/07/2005 POSHTOTS Canada 1417572 11107/2008 Registrar Domainmonger Domainmonger Domainmonger Domainmonger Domainmonger Domainmonger Domainmonger Domainmonger Domainmonger Domainmonger Domainmonger Domainmonger Domainmonger Domainmonger Domainmonger Domainmonger Domainmonger Expiration 8/4/2010 6/5/2009 6/5/2009 2/19/2010 2/19/2010 2/19/2010 1/10/2018 2/19/2010 2/19/2010 1/11/2011 6/26/2009 10/31/2009 3/23/2015 10/4/2013 10/3/2011 8/21/2009 12/18/2009 REGNO. STATUS AND REMARKS ISSUE DATE Pending (Published) Publication Date: 10/28/2008 3486252 Registered 08/12/2008 Next Due Date: Section 8 & 15 Open 08/12/2013 Pending S-5 TTCREF. ATTY(S) HANDLING CLIENT REF. 027263-000101 us (DES) 027263-000 1 oous (DES) 027263-000300CA (DES) POSHTOTS us 35 77/486738 Pending 027263-000303US 05/29/2008 Publication Date: 11/18/2008 S4M(DES) POSHTOTS us 25 77/486737 Pending (Published) 027263-000302US 05/29/2008 Publication Date: 11118/2008 S4M(DES) POSHTOTS us 24 77/486735 Pending 027263-000301US 05/29/2008 S4M(DES) POSHTOTS us 20 77/486734 Pending (Published) 027263-000300US 05/29/2008 Publication Date: 11/18/2008 (DES) POSHTOTS& us 20,24,25 78/243917 3092160 Registered 027263-000200US Design 04/30/2003 05/16/2006 Next Due Date: Section 8 & 15 Open 05/16/2011 (DES) POSHCRA VlNGS us 41 77/211749 3470601 Registered 027262-000JOOUS 06/21/2007 07/22/2008 Next Due Date: Section 8 & 15 Open 07/22/2013 (DES) S-6 SCHEDULE 2.1(e) Furniture and Equipment 1. The following servers and associated hardware (e.g. all cables, hard drives, memory, CPUs, etc.) located in Denver, Colorado and related to the operation of the Business:
SVRBUNWEB03
COPTWEBPRD2
COPTDBPRDl
COPTDBPRD2
COPTCMSPRDl
COPTCMSPRD2 2. The following PC's located at 5500 Cox Road, Suite M, Glen Allen, VA 23060: Make Model Location Quantity Glen Dell Dell DXP051 Allen 1 Glen Dell Dimension 11 00 Allen 1 Glen Dell Dimension 3000 Allen 1 Glen Dell Dimension 4550 Allen 2 Glen Dell Dimension 9150 Allen 1 Glen Dell OptiPiex 170L Allen Glen Dell OptiPiex GX240 Allen 1 Glen Dell OptiPiex GX260 Allen 1 Glen Dell OptiPiex GX620 Allen 39 3. The following laptops located at 5500 Cox Road, Suite M, Glen Allen, VA 23060: Make Model Location Quantity Glen Dell XPS M1530 Allen 3 Glen Dell XPS M1710 Allen 1 Glen Toshiba M105-S3031 Allen 3 S-7 4. The following monitors located at 5500 Cox Road, Suite M, Glen Allen, VA 23060: Make Model Location Quantity Glen Acer 77e Allen 1 Glen Dell 1907FP Allen 38 Glen Dell P780 Allen 2 Glen Dell P991 Allen 1 Glen Envision EN-980e Allen 1 Norwood Glen Micro M19BBK Allen 1 Glen Viewsonic A72f Allen 1 Glen Viewsonic A91f+ Allen 1 Glen Viewsonic E171fp Allen 1 Glen Viewsonic E771p Allen 1 Glen Viewsonic E772p Allen 3 Glen Viewsonic E773c Allen 1 Glen Viewsonic E773s Allen 2 Glen Viewsonic G220fb Allen 1 Glen Viewsonic G90F Allen 9 Glen Viewsonic M992 Allen 1 Glen Viewsonic PS775 Allen 1 5. The following printers located at 5500 Cox Road, Suite M, Glen Allen, VA 23060: Make Model Location Quantity Dell OptiPiex 170L Glen Allen 1 Dell PowerEdge 1800 Glen Allen 1 Dell PowerEdge 2800 Glen Allen 1 Dell PowerEdge 2850 Glen Allen 5 PowerEdge Dell 600SC Glen Allen 2 S-8 6. The following network equipment located at 5500 Cox Road, Suite M, Glen Allen, VA 23060: Make Model Device Type Location Quantity Glen Adtran NetVanta 4305 Allen 1 Glen Belkin FSD 7230-4 Allen 1 Glen Cisco 2851 with 2 2MFT-T1 Allen 1 Glen Cisco 3600 with 3 1 FE-TX Allen 1 Glen Cisco Catalyst 3500 XL Allen 1 Catalyst 3560 PoE- Glen Cisco 48 Allen 1 Glen Cisco PIX 506E Allen 1 Glen Cisco PIX 515E Allen Glen Dell PowerConnect 2624 Allen 2 Glen SMC EZ Switch 1016DT Allen 1 7. The following storage equipment located at 5500 Cox Road, Suite M, Glen Allen, VA23060: Device Make Model Type Controllers Cache Drives Location PowerVault Tape Dell TL2000 Library n/a n/a 1 x LTO 4 Glen Allen 8. The following printers located at 5500 Cox Road, Suite M, Glen Allen, VA 23060: Make Model Location Quantity Brother MFC 9420CN Glen Allen 1 Dell 3100cn Glen Allen 2 Dell 5100cn Glen Allen 1 HP DeskJet 3650 Glen Allen 1 HP DeskJet 5150 Glen Allen 3 HP DeskJet 5440 Glen Allen 2 HP DeskJet 5650 Glen Allen 1 HP DeskJet 57 40 Glen Allen 1 HP DeskJet 6540 Glen Allen 2 HP Laser Jet 1020 Glen Allen 1 HP Laser Jet 2600N Glen Allen 1 HP Laser Jet 3015 Glen Allen 1 HP OfficeJet 7 41 0 Glen Allen 1 HP OfficeJet J5780 Glen Allen 1 S-9 HP HP OfficeJet K80 OfficeJet v40 Glen Allen Glen Allen 1 1 9. The following phone systems located at 5500 Cox Road, Suite M, Glen Allen, VA 23060: Make Model Device Type Location Quantity Digital Station Avaya DIGDCPx30 Interface GlenAllen Digital Station Avaya DIG DCPx30 V2 Interface GlenAllen Avaya IP 406DS with I PRI card and I Duai-PRI card PBX GlenAllen 10. The following phones located at 5500 Cox Road, Suite M, Glen Allen, VA 23060: Make Model Location Quantity Glen Avaya 5410 Allen 39 Glen Avaya 5420 Allen 4 Glen Avaya 44120+ Allen 22 11. The following other equipment located at 5500 Cox Road, Suite M, Glen Allen, VA23060: Description Make Model Location Quantity Glen UPS APC Back-UPS 1000 Allen 57 Glen UPS APC Back-UPS 650 Allen 1 Glen UPS APC Smart-UPS RT 3000 Allen 3 Glen UPS Co next 700AVR Allen 2 Glen Multi-Function Copier Sharp MX-3501N Allen 1 S-10 SCHEDULE 2.2 Excluded Assets Excluded Leases: 1. Real property lease between PoshTots and Liberty for the property located at 5500 Cox Road, Suite M, Glen Allen, Virginia 23060. S-11 None. SCHEDULE 2.3(a) Liabilities S-12 SCHEDULE 2.3(b) Cure Amounts Contract Cure Amount 1. Agreement between Bank of America Leasing and $312.72 PoshTots, Inc. (Record- 5371; Case 08-13417) 2. Agreement between Paetec fka US LEC Corp and $2,204.51 PoshTots, Inc. (Record- 6992; Case 08-13417) 3. Agreement between PM Building Maintenance Corp $793.88 and PoshTots, Inc. (Case 08-13417) S-13 SCHEDULE5.2 Title to Purchased Assets None. S-14 See Schedule l.l(c) SCHEDULE 5.3(a) Tangible Personal Property S-15 SCHEDULE 5.3(b) Defaults by Lessors on Tangible Personal Property See Schedule l.l(c) and 2.3(b) S-16 SCHEDULE5.5 Financial Advisors Oppenheimer & Co. LLC S-17 SCHEDULE 5.6 Litigation None. S-18 SCHEDULE 5.7 Compliance with Laws None. S-19 SCHEDULE 5.8 Permits [Parties to provide at closing] S-20 None. SCHEDULE 8.6(i) Affiliate Transactions S-21 SCHEDULE 10.1(a) Employees 1. Baker, Jessica L 2. Blankenship, Ronald 3. Cook, Jennie 4. Dengel, Sarah 5. Edmunds, Andrea H 6. Edwards, Susan E 7. Elko, Angie 8. Ellis, Alexander 9. Herring, Cathy S 10. Hetrick, Katherine H 11. Hinson, Jeffrey A 12. Iacone, Kristin 13. Johnson, Stephanie 14. Lippincott, Branin 15. Roberts, Lucy 16. Robertson, Katherine P. 17. Robinson, Troy 18. Taylor, Ashley 19. Welk, Nancy 20. Wiber, Ashley G S-22 [Redacted from filed copy.] SCHEDULE 10.2(a) Benefits S-23 In re: IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ) Chapter 11 ) eTOYS DIRECT 1, LLC, et al., 1 ) Case No. 08-13412-BS ) Debtors. ) (Jointly Administered) ) ) Re: Docket No. ORDER APPROVING SELECTION OF STALKING HORSE, BREAK-UP FEE AND EXPENSE REIMBURSEMENT, AND RELATED RELIEF IN CONNECTION WITH SALE OF ASSETS OF DEBTOR POSHTOTS, INC. Upon the motion, dated January 23,2009 (the "Motion"), ofeToys Direct 1, LLC, et al., the above-captioned debtors and debtors-in-possession (each, a "Debtor," and collectively, the "Debtors"), for entry of an order pursuant to sections 105 and 363 of the Bankruptcy Code 2 to, among other things, approve the selection of Posh Ventures, LLC, as stalking horse bidder for the PoshTots Assets pursuant to the terms ofthe PoshTots APA, approve the Break-Up Fee, approve the Expense Reimbursement, and approve the Overbid; and notice of the Motion being sufficient and no further notice needing to be given; and the Debtors having articulated good and sufficient reasons for granting the Motion; and after due deliberation, and sufficient cause appearing therefor, it is hereby ORDERED that the Motion is hereby granted to the extent set forth herein; and it is further 1 The Debtors in these cases, along with the last four digits of each Debtors' federal tax identification number, if applicable, are: eToys Direct I, LLC (N/A); The Parent Company (7093); BabyUniverse, Inc. (7990); Dreamtime Baby, Inc. (8047); eToys Direct, Inc. (7296); PoshTots, Inc. (8660); eToys Direct 2, LLC (N/A); eToys Direct 3, LLC (N/A); Gift Acquisition, L.L.C. (0297); and My Twinn, Inc. (1842). The address for each of the Debtors is 717 17th Street, Suite 1300, Denver, CO 80202, with the exception ofPoshTots, Inc., the address for which is 5500 Cox Road, Suite M, Glenn Allen, VA 23060. 2 Capitalized terms not otherwise defmed herein shall have the meaning given them in the Motion. 1 68781-00 I \DOCS_ DE: 144 HlO .2 ORDERED that Posh Ventures is approved as the stalking horse for the PoshTots Assets as upon the terms and conditions ofthe PoshTots APA; and it is further ORDERED that the Break-Up as requested in the Motion and upon the terms and conditions ofthe PoshTots APA is approved, and the Debtors are authorized to pay Posh Ventures the Break-Up fee from the proceeds of a sale to a competing bidder; and it is further ORDERED that the Expense Reimbursement requested in the Motion and upon the terms and conditions ofthe PoshTots APA is approved, and the Debtors are authorized to pay Posh Ventures the Expense Reimbursement fee from the proceeds of a sale to a competing bidder; and it is further ORDERED that the Overbid is approved, and any further initial bid for the Posh Tots Assets must be in an amount not less than $560,000; and it is further ORDERED that the Bid Procedures as previously approved by this Court are otherwise unaffected by this Order; and it is further ORDERED that notwithstanding Bankruptcy Rule 6004, this Order shall be effective and enforceable immediately upon entry and its provisions shall be self-executing; and it is further ORDERED that the Court shall retain jurisdiction over any matter or dispute arising from or relating to the implementation of this Order. Dated: _____ , 2009 68781-001\DOCS_DE: 144100.2 Honorable Brendan L. Shannon United States Bankruptcy Judge 2 In re: IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ) Chapter 11 ) eTOYS DlRECT 1, LLC, et al., 1 ) Case No. 08-13412(BLS) ) (Jointly Administered) Debtors. ) ) Related Docket No. ) MOTION TO FIX A HEARING DATE AND SHORTEN NOTICE REGARDING DEBTORS' MOTION PURSUANT TO SECTIONS 105 AND 363 OF THE BANKRUPTCY CODE FOR ORDER APPROVING SELECTION OF STALKING HORSE, BREAK-UP FEE AND EXPENSE REIMBURSEMENT, AND RELATED RELIEF IN CONNECTION WITH SALE OF ASSETS OF DEBTOR POSHTOTS, INC. The above-captioned debtors and debtors in possession (the "Debtors"), by and through their undersigned counsel, hereby move this Court for an Order pursuant to Del. Bankr. LR 9006-1 (e), substantially in the form of the proposed order attached hereto, fixing a hearing and shortening notice of the Debtors' Motion Pursuant to Sections 105 and 3 63 of the Bankruptcy Code for Order Approving Selection ofStalking Horse, Break-Up Fee and Expense Reimbursement, and Related Relief in Connection With Sale of Assets of Debtor PoshTots, Inc. (the "Motion"), such that (i) an expedited hearing with respect to the Motion may be held on January 30, 2009, at 12:00 noon (the "Hearing") and (ii) objections to the Motion, if any, be filed 1 The Debtors in these cases, along with the last four digits of each Debtor's federal tax identification number, if applicable, are: eToys Direct I, LLC (N/ A); The Parent Company (7093); BabyUniverse, Inc. (7990); Dreamtime Baby, Inc. (8047); eToys Direct, Inc. (7296); PoshTots, Inc. (8660); eToys Direct 2, LLC (N/A); eToys Direct 3, LLC (N/ A); Gift Acquisition, L.L.C. (0297); and My Twinn, Inc. (1842). The address for each of the Debtors is 717 17th Street, Suite 1300, Denver, CO 80202, with the exception ofPoshTots, Inc., the address for which is 5500 Cox Road, Suite M, Glenn Allen, VA 23060. 68781-001\DOCS_DE: 144100.2 on or before 12:00 noon on January 19, 2009. In support of this motion (the "Motion to Shorten"), the Debtors respectfully state as follows: Del.Bankr.LR 9006-1(c) provides that unless the Federal Rules of Bankruptcy Procedure or the Local Rules state otherwise, "all motion papers shall be filed and served in accordance with Local Rule 2002-1(b) at least fifteen (15) days (eighteen (18) days if service is by mail; (16) days if service is by overnight delivery) prior to the hearing date." Del. Bankr. LR 9006-1(e) provides in pertinent part that "no motion will be scheduled on less notice than required by these Rules or the Fed. R. Bankr. P. except by order of the court, on written motion specifying the exigencies justifying shortened notice." The Debtors seek to shorten the period in which they are required to give notice of the Motion, which seeks an order approving the selection of Posh Ventures, LLC, as the stalking horse bidder for assets of debtor Posh Tots, Inc., for approval of a break-up fee and expense reimbursement, and for related relief. Specifically, Debtors seek an order from this Court scheduling a hearing on relief requested in the Motion on January 30, 2009, at 12:00 noon (the next regularly scheduled omnibus hearing date). The Debtors further request that objections to the Motion, if any, be filed on or before 12:00 noon on January 29, 2009. In support of this Motion to Shorten, the Debtors represent that a prompt hearing on the Motion is in the best interest of Debtors' estates and will not prejudice parties in interest. As related at the hearing held on January 16, 2009, and detailed in the Motion, the Debtors have been actively seeking potential stalking horse bidders for their assets, which are presently scheduled for auction on February 4, 2009, and for a hearing to approve auction results and sale 2 68781-001 \DOCS _DE: 144100.2 on February 6, 2009. Expedited approval of relief requested in the Motion is necessary ratify the stalking horse selection, break-up fee, expense reimbursement, and related bid protections prior to the February 4, 2009, auction. The Debtors also submit that hearing the Motion on shortened notice will not prejudice parties in interest. The Debtors have previously shared the requested relief with counsel for the Official Committee of Unsecured Lenders and with counsel for their pre-and-post-petition lenders. In order to allow parties additional time to respond, this Motion to Shorten and the Motion are being served via hand delivery or overnight delivery on (a) Office of the United States Trustee; (b) counsel to the Lender; (c) counsel to the Official Committee of Unsecured Creditors; (d) all parties who have timely filed requests for notice under Rule 2002 of the Federal Rules of Bankruptcy Procedure; and (e) counsel to the proposed stalking horse bidder, Posh Ventures, LLC. The Debtors believe that such notice is fair and adequate in light of the nature of the relief requested in the Motion and the current auction and sale hearing schedule. Furthermore, if the Court approves shortening of notice, the Debtors will serve a copy of the Order shortening time on the same parties who were served with the Motion to Shorten and the Motion by hand delivery and overnight mail. 3 68781-00I\DOCS_DE:l44100.2 WHEREFORE, for the reasons set forth, Debtors respectfully request the entry of an Order approving the shortening of notice and expedited consideration of the Motion. Dated: January 23, 2009 68781-00I\DOCS_DE:l44100.2 PACHULSKI STANG ZIEHL & JONES LLP Laura Davis Jones (Bar No. 2436) Jeffrey W. Dulberg (CA Bar No. 181200) Michael R. Seidl (Bar No. 3889) 919 N. Market Street, 17th Floor Wilmington, DE 19801 Telephone: 302/652-4100 Facsimile: 302/652-4400 Email: ljones@pszjlaw.com jdulberg@pszjlaw.com mseidl@pszjlaw.com [Proposed] Counsel for eToys Direct 1, LLC, et al., Debtors and Debtors in Possession 4 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: eTOYS DIRECT 1, LLC, et al., 1 ) Chapter 11 ) ) Case No. 08-13412(BLS) ) (Jointly Administered) Debtors. ) ) Related Docket No. ) ORDER GRANTING MOTION TO FIX A HEARING DATE AND SHORTEN NOTICE REGARDING DEBTORS' MOTION PURSUANT TO SECTIONS 105 AND 363 OF THE BANKRUPTCY CODE FOR ORDER APPROVING SELECTION OF STALKING HORSE, BREAK-UP FEE AND EXPENSE REIMBURSEMENT, AND RELATED RELIEF IN CONNECTION WITH SALE OF ASSETS OF DEBTOR POSHTOTS, INC. Upon the motion (the "Motion to Shorten") of the above-captioned debtors and debtors in possession (the "Debtors") for an order fixing a hearing date and shortening the notice period regarding a hearing on Debtors' Motion Pursuant to Sections 105 and 3 63 of the Bankruptcy Code for Order Approving Selection of Stalking Horse, Break-Up Fee and Expense Reimbursement, and Related Relief in Connection With Sale of Assets of Debtor PoshTots, Inc. (the "Motion"); and it appearing that this Court has jurisdiction over this matter pursuant to 28 U.S.C. 1157 and 1334; and it appearing that this proceeding is a core proceeding pursuant to 28 U.S.C. 158(a); and it appearing that the relief requested by the Motion to Shorten is in the 1 The Debtors in these cases, along with the last four digits of each Debtor's federal tax identification number, if applicable, are: eToys Direct I, LLC (N/A); The Parent Company (7093); BabyUniverse, Inc. (7990); Dreamtime Baby, Inc. (8047); eToys Direct, Inc. (7296); PoshTots, Inc. (8660); eToys Direct 2, LLC (N/A); eToys Direct 3, LLC (N/ A); Gift Acquisition, L.L.C. (0297); and My Twinn, Inc. (1842). The address for each of the Debtors is 717 17th Street, Suite 1300, Denver, CO 80202, with the exception of Posh Tots, Inc., the address for which is 5500 Cox Road, Suite M, Glenn Allen, VA 23060. 1 68781-001\DOCS_DE: 144100.2 best interests of Debtors' estate, their creditors and other parties in interest; and after due deliberation and for good cause appearing for the Motion, it is hereby ORDERED that the Motion to Shorten is granted; and it is further ORDERED that the hearing on the Motion is hereby scheduled for _______ , 2009, at ______ prevailing Eastern Time; and it is further ORDERED the deadline to object or respond to the Motion is hereby set for ________ , 2009, at _______ prevailing Eastern time; and it is further ORDERED that counsel for Debtors shall, within twenty-four hours of entry of this Order, serve a copy of this Order on parties originally served with the Motion in the manner described in the Motion to Shorten. Dated: , 2009 ------- 68781-001 \DOCS_DE: 144100.2 The Honorable Brendan L. Shannon United States Bankruptcy Judge 2