Exhibit 10.1

ASSET PURCHASE AGREEMENT

BY AND AMONG

CRAVE ENTERTAINMENT GROUP, INC.,

CRAVE ENTERTAINMENT, INC. and SVG DISTRIBUTION, INC.

and

FILLPOINT LLC

Dated as of February 10, 2009

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LIST OF EXHIBITS AND SCHEDULES

 

Exhibits   

Exhibit-Premises-

   Real Property Lease

Exhibit 3.1(e)

   Assumption Agreement

Exhibit 3.1(g) -

   Certificate of Officer of Purchaser

Exhibit 3.2(d)(i)

   Certificate of Officer of Sellers

Exhibit 3.2(d)(iv)

   Trademark and Service Marks Agreement

 

Schedules    Referenced in:

License Schedule

   Section 1.1

Assumed Contracts Schedule

   Section 2.1(a)(xvi)

Excluded Assets Schedule

   Section 2.1(b)(ix)

Assumed Indebtedness Schedule

   Section 2.2(a)(i)(B)

Schedule 2.3(a)(iv)

   Section 2.3(a)(iv)

Schedule 2.3(b)(iii)

   Section 2.3(b)(iii)

Allocation Schedule

   Section 2.4

Corporate Organization Schedule

   Section 4.1

Restrictions Schedule

   Section 4.3

Contracts Schedule

   Section 4.6(a)

Litigation Schedule

   Section 4.7

Compliance Schedule

   Section 4.8

Taxes Schedule

   Section 4.9(b)

Proprietary Rights Schedule

   Section 4.10

Brokerage Schedule

   Section 4.11

Employee Benefit Schedule

   Section 4.15

Warranty Schedule

   Section 4.20

Purchaser Disclosure Schedule

   Section 5

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
February 10, 2009 by and among Crave Entertainment Group, Inc., Crave
Entertainment, Inc. and SVG Distribution, Inc., each a California corporation
(each a “Seller” and collectively the “Sellers”), and Fillpoint LLC, a Delaware
limited liability company (“Purchaser”). Capitalized terms used in this
Agreement without definition shall have the meaning given to such terms in
Article 1 hereof.

The parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

1.1 When used in this Agreement, the following terms shall have the meanings
assigned to them in this Section 1.1, or in the applicable Section of this
Agreement to which reference is made in this Section 1.1.

“Affiliate” means, with respect to any specified Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such specified Person.

“Authorization” means any authorization, approval, consent, certificate,
license, permit or franchise of or from any Governmental Entity or pursuant to
any Law.

“Best Efforts” means such commercially reasonable efforts that a prudent person
desiring to achieve a particular result would use in order to ensure that such
result is achieved as expeditiously as possible.

“Business” means the full-service distribution of video game software, hardware
and related accessories, and specialty video game publishing business of Sellers
as currently conducted.

“Capital Stock” means (a) in the case of a corporation, its shares of capital
stock, (b) in the case of a partnership or limited liability company, its
partnership or membership interests or units (whether general or limited), and
(c) any other interest that confers on a Person the right to receive a share of
the profits and losses, or distribution of assets, of the issuing entity.

“Charter Documents” means, with respect to any entity, the certificate of
incorporation, the articles of incorporation, by-laws, articles of organization,
limited liability company agreement, partnership agreement, formation agreement,
joint venture agreement or other similar organizational documents of such entity
(in each case, as amended).

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“Contract” means any agreement, contract, license, lease, commitment,
arrangement or understanding, written or oral, including any sales order or
purchase order.

“Environmental Laws” means all foreign, federal, state and local laws, statutes,
codes, regulations, rules, ordinances, orders, standards, permits, licenses,
actions, principles of common law and requirements (including consent decrees,
judicial decisions, administrative orders and self-implementing closure
requirements) relating to the protection, preservation or conservation of the
environment and to public or worker health and safety, all as amended, hereafter
amended or reauthorized, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. §
9601 et seq., the Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. §
6901 et seq., the Emergency Planning and Community Right to Know Act, 42 U.S.C.
§ 11001 et seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. § 1251 et seq., the Toxic Substances Control
Act, 15 U.S.C. § 2601 et seq., the Safe Drinking Water Act, 42 U.S.C. § 300f et
seq., and the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.

“GAAP” means generally accepted accounting principles, consistently applied, in
the United States as promulgated by all relevant accounting authorities as of
the date of this Agreement.

“Governmental Entity” means any entity or body exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to United States federal, state, local, or municipal government, including any
department, commission, board, agency, bureau, subdivision, instrumentality,
official or other regulatory, administrative or judicial authority thereof, and
any non-governmental regulatory body to the extent that the rules and
regulations or orders of such body have the force of Law.

“Government Licenses” means all permits, licenses, franchises, orders,
registrations, certificates, variances, approvals and other authorizations
obtained from federal, state or local governments or governmental agencies or
other similar rights, and all data and records pertaining thereto, including,
without limitation, those listed on the attached “License Schedule”, but
excluding any such permits or licenses which are specifically identified on the
License Schedule as not transferable.

“Hazardous Substances” means (a) “hazardous substances,” as defined by CERCLA.;
(b) “hazardous wastes,” as defined by RCRA; (c) petroleum or petroleum products,
natural gas, synthetic gas and any mixtures thereof; (d) radioactive material,
including, without limitation, any source, special nuclear, or by-product
material, as defined in 42 U.S.C. §2011 et seq.; (e) asbestos in any form or
condition; (f) polychlorinated biphenyls; (g) biomedical wastes, mold spores or
myotoxins; and (h) any other material, substance or waste regarding which
liabilities or standards of conduct may be imposed under any Environmental Law.

 

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“Indemnitee” means any Person that is seeking indemnification from an Indemnitor
pursuant to the provisions of this Agreement.

“Indemnitor” means any party hereto from which any Indemnitee is seeking
indemnification pursuant to the provisions of this Agreement.

“Knowledge” of Sellers or any similar phrase means, with respect to any fact or
matter, the actual Knowledge of any officer or director of any Seller or such
knowledge as would be reasonably known after reasonable inquiry.

“Law” means any statute, law (including common law), constitution, treaty,
ordinance, code, order, decree, judgment, rule, regulation and any other binding
requirement or determination of any Governmental Entity.

“Leased Real Property” means all of Sellers’ right, title and interest under all
leases, subleases, licenses, concessions and other agreements (written or oral)
(the “Leases”), pursuant to which any Seller holds a leasehold or sub-leasehold
estate in, or is granted the right to use or occupy, any land, buildings,
improvements, fixtures or other interest in real property which is used in the
operation of the Business.

“Leasehold Improvements” means all buildings, improvements and fixtures located
on any Leased Real Property which are owned by any Seller, regardless of whether
such buildings, improvements or fixtures are subject to reversion of the
landlord or other third parties upon the expiration or termination of the Lease
for such Leased Real Property. Leasehold Improvements shall include all
leasehold improvements located on the Premises.

“Lien” means, with respect to any property or asset, any mortgage, lien, pledge,
charge, security interest, adverse claim or other encumbrance in respect of such
property or asset.

“Operating Subsidiaries” means Crave Entertainment, Inc., (“Crave”) and SVG
Distribution, Inc., (“SVG”)

“Order” means any award, injunction, judgment, decree, order, ruling, subpoena
or verdict or other decision issued, promulgated or entered by or with any
Governmental Entity of competent jurisdiction.

“Permitted Liens” means (a) Liens for current real or personal property taxes
not yet due and payable and with respect to which Sellers maintain adequate
reserves, (b) workers’, carriers’ and mechanics’ or other like liens incurred in
the ordinary course of business with respect to which payment is not due and
that do not impair the conduct of the businesses of Sellers or the present or
proposed use of the

 

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affected property and (c) liens that are immaterial in character, amount, and
extent and which do not detract from the value or interfere with the present or
proposed use of the properties they affect.

“Person” means an individual, a corporation, a partnership, a limited liability
company, a trust, an unincorporated association, a Governmental Entity or any
agency, instrumentality or political subdivision of a Governmental Entity, or
any other entity or body.

“Premises” means that certain parcel of real property which is the subject of
the real property lease attached hereto as Exhibit-Premises.

“Proprietary Rights” means all of the following owned by, issued to, or licensed
to any Seller, or used in the Business, along with all associated income,
royalties, damages and payments due from or payable by any third party
(including, without limitation, damages and payments for past, present or future
infringements or misappropriations thereof), all other associated rights
(including, without limitation, the right to sue and recover for past, present
or future infringements or misappropriations thereof), and any and all
corresponding rights that, now or hereafter, may be secured throughout the
world: (i) patents, patent applications, patent disclosures and inventions
(whether or not patentable and whether or not reduced to practice) and any
reissues, continuations, continuations-in-part, divisions, extensions or
reexaminations thereof; (ii) trademarks, service marks, trade dress, internet
domain names or uniform resource locators, logos, slogans, trade names and
corporate names and all registrations and applications for registration thereof,
together with all goodwill associated therewith; (iii) copyrights and works of
authorship, and all registrations and applications for registration thereof;
(iv) mask works and all registrations and applications for registration thereof;
(v) computer software (including, without limitation, data, data bases, database
rights and documentation); (vi) trade secrets, confidential information and
proprietary data and information (including, without limitation, compilations of
data (whether or not copyrighted or copyrightable), ideas, formulae,
compositions, blends, processes, know-how, manufacturing and production
processes and techniques, financial and accounting data, business and marketing
plans, and customer and supplier lists and related information).

“Stockholder” means Handleman Company, a Michigan corporation.

“Subsidiary” or “Subsidiaries” means any Person of which (a) such party or any
other Subsidiary of such party is a general partner (excluding partnerships, the
general partnership interests of which held by such party or any Subsidiary of
such party do not have a majority of the voting interest in such partnership),
or (b) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the board of directors or
others performing similar functions with respect to such Person is directly or
indirectly owned or controlled by such party and/or by any one or more of its
Subsidiaries.

 

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“Tax” or “Taxes” means any and all federal, state, or local net or gross income,
gross receipts, net proceeds, sales, use, ad valorem, value added, franchise,
bank shares, withholding, payroll, employment, excise, property, deed, stamp,
alternative or add-on minimum, environmental, profits, windfall profits,
transaction, license, lease, service, service use, occupation, severance,
energy, unemployment, social security, workers’ compensation, capital, premium,
and other taxes, assessments, customs, duties, fees, levies or other
governmental charges of any nature whatever, whether disputed or not, together
with any interest, penalties, additions to tax, or additional amounts with
respect thereto.

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

“Taxing Authority” means any Governmental Entity having jurisdiction with
respect to any Tax.

“$” means United States dollars.

Certain other terms are defined throughout this Agreement and shall have the
meanings set forth by such definitions.

ARTICLE 2

PURCHASE AND SALE OF ASSETS

2.1 Purchase and Sale of Assets.

(a) On the terms and subject to the conditions contained in this Agreement, on
the Closing Date, Purchaser shall purchase from Sellers, and Sellers shall sell,
convey, assign, transfer and deliver to Purchaser, free and clear of all Liens
by appropriate warranty bills of sale, warranty deeds, assignments and other
instruments satisfactory to Purchaser and its counsel, all of the following
assets of Sellers (collectively, the “Purchased Assets”):

(i) all accounts receivable, including without limitation, all trade accounts
receivable, notes receivable from customers, vendor credits and accounts
receivable from employees and all other obligations from customers with respect
to sales of goods or services, whether or not evidenced by a note and whether
current or non-current (all of the foregoing are collectively referred to herein
as “Accounts Receivable”);

(ii) all prepayments and prepaid expenses that are transferable and related to
exclusive distribution or publishing contracts or to inventory;

 

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(iii) all inventory, including raw materials, finished goods, and contract
rights with regard to inventory in development or in process, including finished
goods returned by customers of Sellers post-Closing (“Inventory”);

(iv) all furniture, equipment, office supplies, production supplies, spare
parts, other miscellaneous supplies and other tangible property of any kind
wherever located (including all such property located in any building, office,
warehouse or other space leased, owned or occupied by any Seller and related to
the Business or in any warehouse where any of the properties and assets related
to the Business may be located);

(v) the data processing equipment and, to the extent assignable, related
software of the Business;

(vi) all lists, records and other information pertaining to customer accounts
(whether past or current), suppliers, personnel and agents and all reports,
studies, plans, books, ledgers, files and financial, business and accounting
records of every kind (including all financial, business and marketing plans),
in each case whether evidenced in writing, electronic data, computer software or
otherwise (provided that Sellers shall be entitled to keep a copy of any such
items);

(vii) all claims, deposits, prepayments, warranties, guarantees, refunds, causes
of action, rights of recovery, rights of setoff and rights of recoupment of
every kind and nature, other than those relating exclusively to Excluded Assets
or Excluded Liabilities;

(viii) the right to bill and receive payment for products shipped or delivered
and/or services performed but unbilled or unpaid as of the Closing;

(ix) all Proprietary Rights;

(x) all goodwill as a going concern and all other intangible property, including
trademarks, copyrights and corporate names of Sellers, and all goodwill
associated with any of them;

(xi) all Government Licenses (but excluding any such permits or licenses which
are specifically identified on the License Schedule as not transferable);

(xii) all insurance, warranty and condemnation proceeds received after the date
hereof with respect to damage to, nonconformance of or loss to the Purchased
Assets;

 

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(xiii) all rights to receive mail and other communications addressed to Sellers
including, without limitation, Accounts Receivable payments;

(xiv) all telephone numbers (e.g. “800” numbers) used by Sellers;

(xv) all signs and advertising, marketing and promotional materials;

(xvi) all web sites and e-mail accounts;

(xvii) all Contracts listed on the attached “Assumed Contracts Schedule”; and

(xviii) all choses in action, rights and benefits under any warranties, and
rights and benefits under any indemnity provision other than those arising under
this Agreement.

The purchase and sale of the Purchased Assets is referred to in this Agreement
as the “Acquisition.”

(b) Notwithstanding the foregoing, the following properties, assets, rights and
interests of Sellers are expressly excluded from the purchase and sale
contemplated hereby (the “Excluded Assets”) and, as such, are not included in
the Purchased Assets:

(i) Sellers’ rights under or pursuant to this Agreement;

(ii) Sellers’ general ledger, accounting records, minute books and corporate
seal; provided that Purchaser shall be given copies of the general ledger and
accounting records as such documents exist as of the Closing Date;

(iii) any right to receive mail and other communications addressed to Sellers
relating exclusively to the Excluded Assets or the Excluded Liabilities;

(iv) all contracts, agreements and arrangements which are not listed in the
Assumed Contracts Schedule;

(v) cash, cash equivalents and checks in Sellers’ bank accounts at the effective
time of the Closing, all of which shall be distributed to Sellers in the
ordinary course from the bank accounts;

(vi) except as provided by Section 2.1(a)(xi), rights and benefits under all
insurance policies;

(vii) all interests in real estate (including, without limitation, fixtures,
fittings and improvements thereon, and easements, licenses, rights of way,

 

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permits, and the other appurtenants thereto, including appurtenant rights in and
to public streets, whether or not vacated), whether, owned, leased, subleased or
otherwise;

(viii) the rights to that part of the Business which is the subject of the MLA
(as hereinafter defined); and

(ix) the properties, assets, rights and interests listed on the attached
“Excluded Assets Schedule.”

2.2 Limited Assumption of Liabilities.

(a) On the terms and subject to the conditions set forth in this Agreement, in
addition to the Purchase Price payable hereunder and as additional consideration
for the Purchased Assets, as of the Closing, Purchaser shall assume and agree to
pay, defend, discharge and perform as and when due only the following specific
liabilities and obligations of Sellers that relate exclusively to the Business
(the “Assumed Liabilities”):

(i) all obligations relating to any performance obligation due after the Closing
or to any fact or circumstance arising after the Closing Date under the
Contracts on the Assumed Contracts Schedule, it being understood that any and
all performance obligations due before the Closing Date with respect to the
Contracts on the Assumed Contracts Schedule shall remain the obligation of
Sellers;

(ii) such other liabilities as are specifically identified on the “Assumed
Indebtedness Schedule.”

(b) Notwithstanding anything to the contrary in this Agreement, Purchaser shall
not assume or in any way become liable for any of Sellers’ debts, liabilities or
obligations of any nature whatsoever other than the Assumed Liabilities, whether
accrued, absolute or contingent, whether known or unknown, whether due or to
become due and whether or not related to the Business or the Purchased Assets,
and regardless of when or by whom asserted and whether or not set forth on the
Schedules hereto (collectively, the “Excluded Liabilities”). Without limiting
the generality of the foregoing, Purchaser shall have no obligation to accept
the return of any inventory sold by any Seller prior to the Closing Date but, if
it does so, such inventory shall be credited and paid as provided by
Section 2.3.

2.3 Purchase Price.

(a) In addition to the assumption of the Assumed Liabilities set forth in
Section 2.2(a) above, the purchase price for the Purchased Assets (the “Purchase
Price”) shall be equal to the sum of:

(i) 95% of the Accounts Receivable aged 90 days or less from the date of the
invoice on the Closing Date (excluding such Accounts Receivable due from Kmart
or Sears (“Kmart/Sears Current Accounts Receivable”)) (“Current Accounts
Receivable”) collected by Purchaser after the Closing;

 

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(ii) Except as set forth in Section 2.3(b)(iii), 50% of the difference between
(x) Accounts Receivable aged over 90 days from the date of the invoice on the
Closing Date (“Non-Current Accounts Receivable”) collected by Purchaser after
the Closing and (y) reasonable fees, commissions and other collection costs paid
to third-parties, if Sellers consent to the retention of the third party, which
consent Sellers shall not unreasonably withhold;

(iii) 95% of the Kmart/Sears Current Accounts Receivable if and as collected by
Purchaser after closing;

(iv) 95% of the Non-Current Accounts Receivable listed on the attached Schedule
2.3(a)(iv) (“Special Non-Current Accounts Receivable”), if collected by
Purchaser within 14 days after the date the customer has committed for payment,
as set forth on such Schedule; provided that, if the customer does not pay
within such time frame but makes a firm commitment for payment by a new date
certain, the parties shall attempt to agree in good faith (considering, among
other factors, the reasons why the original commitment was not met and the
anticipated costs of collection) as to whether to keep such receivable as a
Special Non-Current Account Receivable, with the prior agreement that the
account shall cease to be a Special Non-Current Account Receivable and will be
re-classified as a Non-Current Account Receivable if it is not paid within 3
days after the new commitment date;

(v) (X) 75% of the net appraised value of the Inventory at Closing (the
“Inventory Value”) plus (Y) 75% of the net appraised value of re-salable
Inventory returned to Purchaser after the Closing, less a 5% restocking fee. On
the close of business on the third business day prior to Closing, Sellers shall,
at Sellers’ expense, conduct a physical count of the Inventory. Purchaser and/or
its representatives shall have the right to be present and observe the taking of
such count. The value of the Inventory shall be based on such physical count
(adjusted for transactions between the date of the count and the Closing Date)
and the appraisal by Tiger Valuation Services dated February 9, 2009 provided
that, if an item of returned Inventory was not on the appraisal because Sellers
did not have any at the time of the appraisal, then such item shall be valued at
42.675% of Sellers’ cost of such item; and

(vi) $100,000.

 

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(b) The Purchase Price shall be paid by Purchaser to Sellers as follows:

(i) At the Closing, by wire transfer of immediately available funds, the sum of
(X) $100,000, (Y) 50% of the Inventory Value, and (Z) 75% of the Current
Accounts Receivable, net of reserves and allowances, as set forth in an Account
Receivable Statement prepared by Sellers as of the Closing, which shall be
prepared in accordance with GAAP and reasonably acceptable to Purchaser; plus
the amount of pre-paid salary acquired by Purchaser, less a credit for the
amount of the accrued vacation assumed by Purchaser;

(ii) 12.50% of the Inventory Value at each of April 10, June 10, August 10, and
October 10, 2009;

(iii) Bi-weekly on the 10th and 24th day of each month commencing March 10,
2009, during the remainder of 2009, and quarterly, on the 10th day of each
calendar quarter thereafter commencing with January 10, 2010 and through
April 10, 2011, Sellers’ share of the amount by which the aggregate net amount
collected by Purchaser from the Closing Date through the end of the immediately
preceding calendar month with respect to Accounts Receivable (whether such
Accounts Receivable are Current Accounts Receivable, Non-Current Accounts
Receivable, Special Non-Current Accounts Receivable or Kmart/Sears Current
Accounts Receivable) exceeds the sum of (X) the amount paid by Purchaser to
Sellers pursuant to Section 2.3(b)(i)(Z) and (Y) Purchaser’s share of the
aggregate net amount of the Accounts Receivable collected (examples of the
application of this Section 2.3(b)(iii) are set forth on the attached “Schedule
2.3(b)(iii)”);

(iv) Bi-weekly, the payment due under Section 2.3(a)(v)(Y);

(v) By a credit equal to the full amount of the selling price of any returned
Inventory accepted by Purchaser, in its discretion, if such Inventory was sold
by any Seller prior to the Closing Date and the amount of the return exceeds the
reserve establish as of the Closing; provided that, if Purchaser has sold the
identical item after the Closing to the customer making the return, returns
shall first be applied against Purchaser’s sales and only to the extent of the
excess against Sellers. Such credit shall be applied by Purchaser to the next
payment(s) due pursuant to this Section 2.3(b); and

(vi) Any payment not made when due shall bear interest at a variable the rate of
interest equal to two percent (2%) in excess of the prime rate of interest as
set forth in the Wall Street Journal from time to time, from the due date to the
payment date.

(c) At the end of four months after the Closing, if the net amount collected
with respect to Accounts Receivable has not totaled 105.263% of the amount paid
to Sellers at the Closing for Current Accounts Receivable pursuant to
Section 2.3(b)(i)(Z)

 

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less a $250,000 de minimus basket (such deficit, as it may be reduced by future
collections of Current Accounts Receivable, the “Shortfall”), Purchaser may
withhold payments due thereafter (but not payments already due) from Purchaser
to Sellers relating to all Accounts Receivable, Inventory and Net Publishing and
Distribution Profit pursuant to Section 2.3(b)(ii), (iii) and (iv) and may, to
the extent of the then Shortfall, set off against the Shortfall the withheld
payments. Whenever the Shortfall has been eliminated (whether by collections or
by setoff), Purchaser shall resume making payments pursuant to
Section 2.3(b)(ii), (iii) and (iv), and the amount of the setoff shall be
included as a collection of Accounts Receivable in determining the amount
payable to Sellers pursuant to Section 2.3(b)(iii). If the Shortfall is not
recouped by Purchaser within two (2) years of the Closing Date then fifty
percent (50%) of the Shortfall shall be repaid by Sellers to Purchaser upon
demand together with interest from the Closing Date to the payment date at the
rate set forth in Section 2.3(b)(vi).

(d) For two years following the Closing, Purchaser agrees to use its Best
Efforts to collect the Accounts Receivable; provided that, (i) Purchaser is not
obligated to (X) engage any third party collection agency or engage any
attorneys or other third parties to collect the Accounts Receivable except for
the account of Sellers and Purchaser pro rata in proportion to the Purchase
Price of an Account Receivable and with Sellers’ express consent, (Y) do
business with any particular customer or (Z) have or attempt to have a given
sales volume with any customer and (ii) at any time, Purchaser and Sellers may
agree upon an amount to be paid by Purchaser to Sellers in full satisfaction of
Sellers’ rights with respect to the Accounts Receivable. On the 90th and 180th
days after the Closing Date Sellers and Purchaser shall meet to review the
status of Purchaser’s collection of the Accounts Receivable and, as a result of
those meetings or otherwise may agree to transfer any Accounts Receivable to
Sellers with an appropriate adjustment in the Purchase Price. At the end of two
years following the Closing, if there has not been an agreement pursuant to the
previous sentence, all remaining Accounts Receivable shall be transferred to
Sellers. In addition, at Sellers’ expense, there shall be a monitor at
Purchaser’s place of business for six months following the Closing who shall
advise Sellers whether Purchaser is adhering to its sales and collections
process in order to meet its obligations to Sellers and whose approval is
necessary before Purchaser may authorize the return of any inventory for the
account of Sellers, which approval will not be unreasonably withheld or delayed.

2.4 Allocation. The parties agree to allocate the aggregate of the Purchase
Price as adjusted herein (and all other capitalizable costs) among the Purchased
Assets for all purposes (including financial accounting and tax purposes) in the
manner required by Section 1060 of the Internal Revenue Code as shown on the
attached “Allocation Schedule”. Purchaser and Sellers agree that the form of the
transactions and the consideration provided for in this Agreement were arrived
at on the basis of arm’s length negotiation between Purchaser, on the one hand,
and Sellers, on the other hand, and shall be respected by each of them for
federal, state, local and other tax reporting purposes, including filings on
Internal Revenue Service Form 8594, and that none of them will assert or
maintain a position inconsistent with the foregoing.

 

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2.5 Closing and Closing Date. The closing of the Acquisition (the “Closing”)
shall take place at Sellers’ offices at 10:00 a.m. simultaneously with the
execution of this Agreement. The date upon which the Closing occurs is herein
referred to as the “Closing Date.” The Closing shall be effective as of 11:59
p.m., Pacific Standard Time, on the Closing Date.

2.6 Transactions to be Effected at the Closing.

(a) At the Closing Purchaser shall deliver to Sellers the payment due to Sellers
at the Closing pursuant to Section 2.3(b)(i) in immediately available funds by
wire transfer to an account of Sellers designated in writing by Sellers to
Purchaser.

(b) At the Closing, each Party shall deliver to the other Party all documents,
instruments or certificates required to be delivered by it at or prior to the
Closing pursuant to this Agreement.

ARTICLE 3

CONDITIONS TO CLOSING

3.1 Conditions to Sellers’ Obligations. The obligation of Sellers to consummate
the transactions contemplated by this Agreement is subject to the satisfaction
of the following conditions on or before the Closing Date:

(a) The representations and warranties set forth in Article 5 to the extent
qualified by materiality shall be true and correct in all respects, and all
representations and warranties set forth in Article 5 not so qualified shall be
true and correct in all material respects, at and as of the Closing as though
then made and as though the Closing Date were substituted for the date of this
Agreement throughout such representations and warranties.

(b) Purchaser shall have performed in all material respects all the covenants
and agreements required to be performed by it under this Agreement prior to the
Closing.

(c) All necessary filings with regulatory authorities shall have been made and
all waiting periods shall have expired or shall have been terminated, including
all notices and publications.

(d) No action or proceeding before any court or government body shall be pending
or threatened which, in the reasonable judgment of Sellers, makes it inadvisable
or undesirable to consummate the transactions contemplated by this Agreement by
reason of the probability that the action or proceeding will result in a
judgment, decree or order that would prevent the carrying out of this Agreement
or any of the transactions contemplated hereby, declare unlawful the
transactions contemplated hereby or cause such transactions to be rescinded.

 

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(e) Purchaser shall have delivered the portion of the Purchase Price payable at
Closing and shall have assumed the Assumed Liabilities by delivery of an
Assumption Agreement, in the form attached hereto as Exhibit 3.1(e) (the
“Assumption Agreement”).

(f) Purchaser shall have subleased from Sellers the property located at 5000
Birch Street, Suite 6500, Newport Beach, CA 92660, for three months with an
option to extend for up to an additional three months, if notice is given within
two months after the Closing, the terms of which shall be Purchaser’s agreement
to pay all of Sellers’ verified expenses with respect to such property. At the
end of such sublease, Purchaser shall vacate the subleased premises and shall
leave them in broom-clean condition. In addition, Purchaser shall cease using
the Canadian facility of Anderson Merchandisers-Canada, Inc. by March 2, 2009,
unless Purchaser and Anderson Merchandisers-Canada otherwise agree.

(g) On or prior to the Closing Date, Purchaser shall have delivered to Sellers
each of the following:

(i) a certificate from an officer of Purchaser in the form set forth as Exhibit
3.1(g) attached hereto, dated the Closing Date, stating that the applicable
preconditions have been satisfied;

(ii) certified copies of the resolutions duly adopted by Purchaser’s Manager and
members authorizing the execution, delivery and performance of this Agreement
and the other agreements contemplated hereby, and the consummation of all
transactions contemplated hereby and thereby;

(iii) such other documents or instruments as Sellers reasonably request to
effect the transactions contemplated hereby.

(h) Any condition specified in this Section 3.1 may be waived by Sellers;
provided that no such waiver will be effective against Sellers unless it is set
forth in a writing executed by Sellers.

3.2 Conditions to Purchaser’s Obligations. The obligation of Purchaser to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date:

(a) The representations and warranties set forth in Article 4 to the extent
qualified by materiality shall be true and correct in all respects, and all
representations and warranties set forth in Article 4 not so qualified shall be
true and correct in all material respects, at and as of the Closing as though
then made and as though the Closing Date were substituted for the date of this
Agreement throughout such representations and warranties.

 

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(b) Sellers shall have performed in all material respects all of the covenants
and agreements required to be performed by them under this Agreement prior to
the Closing.

(c) No action or proceeding before any court or government body shall be pending
or threatened which, in the reasonable judgment of Purchaser, makes it
inadvisable or undesirable to consummate the transactions contemplated by this
Agreement by reason of the probability that the action or proceeding will result
in a judgment decree or order that would prevent the carrying out of this
Agreement or any of the transactions contemplated hereby, declare unlawful the
transactions contemplated hereby or cause such transactions to be rescinded.

(d) On or prior to the Closing Date, Sellers shall have delivered to Purchaser
each of the following:

(i) a certificate from an officer of Sellers in the form set forth as Exhibit
3.2(d)(i) attached hereto, dated the Closing Date, stating that the applicable
preconditions have been satisfied;

(ii) certified copies of the resolutions duly adopted by Sellers’ boards of
directors and stockholders authorizing the execution, delivery and performance
of this Agreement and the other agreements contemplated hereby, and the
consummation of all transactions contemplated hereby and thereby;

(iii) copies of all necessary governmental and third party consents, approvals,
releases and filings required in order to effect the transactions contemplated
by this Agreement and the other agreements contemplated hereby;

(iv) such instruments of sale, transfer, assignment, conveyance and delivery, in
form and substance reasonably satisfactory to counsel for Purchaser, as are
required in order to transfer to Purchaser good and marketable title to the
Purchased Assets, free and clear of all Liens, including, without limitation a
Trademark and Service Marks Agreement in the form set forth as Exhibit
3.2(d)(iv), collectively, the “Transfer Documents”);

(v) such other documents or instruments as Purchaser reasonably requests to
effect the transactions contemplated hereby.

(e) Sellers shall pay the balance due the lessor pursuant to the Balboa Lease.

(f) All proceedings to be taken by Sellers in connection with the consummation
of the transactions contemplated hereby and all certificates, instruments and
other documents required to effect the transactions contemplated hereby
reasonably requested by Purchaser will be reasonably satisfactory in form and
substance to Purchaser and its counsel.

 

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(g) Any condition specified in this Section 3.2 may be waived by Purchaser;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by Purchaser.

3.3 Conditions to Obligations of Purchaser and Sellers. The obligations of
Purchaser and Sellers to consummate the Acquisition are subject to the
satisfaction on or prior to the Closing Date of the following conditions:

(a) Sellers and Purchaser shall have entered into a mutually acceptable
Transition Services Agreement (“TSA”) and a mutually acceptable Management and
License Agreement (“MLA”).

(b) No temporary restraining order, preliminary or permanent injunction or other
Order preventing the consummation of the Acquisition shall be in effect. No
Action shall be pending or threatened before any court or other Governmental
Entity or other Person wherein an unfavorable Order would (i) prevent
consummation of any of the transactions contemplated by this Agreement or
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF SELLERS

As an inducement to Purchaser to enter into this Agreement, Sellers and
Stockholder, jointly and severally, hereby represent and warrant to Purchaser
that unless otherwise specified, as of the Closing Date:

4.1 Organization and Power; Subsidiaries and Investments. Each Seller is a
California corporation duly organized, validly existing and in good standing
under the laws of the State of California. Each Seller is qualified to do
business as a foreign entity and is in good standing in each jurisdiction listed
on the attached “Corporate Organization Schedule,” which jurisdictions
constitute all of the jurisdictions in which the ownership of properties or the
conduct of business requires such Seller to be so qualified. Each Seller has all
requisite power and authority and all licenses, permits and authorizations
necessary to own and operate its assets and to carry on its business as now
conducted and as presently proposed to be conducted. Each Seller has all
requisite power and authority to execute and deliver this Agreement and the
other agreements contemplated hereby and to perform its obligations hereunder
and thereunder. Except as set forth on the Corporate Organization Schedule,
Seller does not own or control (directly or indirectly) any stock, partnership
interest, joint venture interest, equity participation or other security or
interest in any other Person. The articles of incorporation of each Seller that
have previously been furnished to Purchaser reflects all amendments thereto and
are correct and complete.

4.2 Authorization. The execution, delivery and performance by Sellers of this
Agreement, the other agreements contemplated hereby and each of the transactions

 

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contemplated hereby or thereby have been duly and validly authorized by Sellers
and no other act or proceeding on the part of Sellers, their respective board of
directors or the stockholders is necessary to authorize the execution, delivery
or performance by Sellers of this Agreement or any other agreement contemplated
hereby or the consummation of any of the transactions contemplated hereby or
thereby. No further approval of the shareholders of the Stockholder is necessary
to authorize the execution, delivery or performance by Sellers of this Agreement
or any other agreement contemplated hereby or the consummation of any of the
transactions contemplated hereby or thereby. This Agreement has been duly
executed and delivered by Sellers and this Agreement constitutes, and the other
agreements contemplated hereby upon execution and delivery by Sellers will each
constitute, a valid and binding obligation of Sellers, enforceable against each
Seller in accordance with its terms.

4.3 No Breach. Except as set forth on the attached “Restrictions Schedule”, the
execution, delivery and performance by Sellers of this Agreement and the other
agreements contemplated hereby and the consummation of each of the transactions
contemplated hereby or thereby do not and will not (a) violate, conflict with,
result in any breach of, constitute a default under, result in the termination
or acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice under any Sellers’ articles of
incorporation or bylaws or any contract, agreement, arrangement, indenture,
mortgage, loan agreement, lease, sublease, license, sublicense, franchise,
permit, obligation or instrument to which any Seller is a party or by which it
is bound or which affect any of the Purchased Assets; (b) result in the creation
or imposition of any Lien upon any Purchased Assets; (c) require any
authorization, consent, approval, exemption or other action by or notice to any
court, other governmental body or other Person or entity under, the provisions
of any law, statute, rule, regulation, judgment, order or decree or any
contract, agreement, arrangement, lease, sublease, license, sublicense,
franchise, permit, indenture, mortgage, obligation or instrument to which any
Seller is subject, or by which any Seller is bound or affected or to which any
Seller or any of the Purchased Assets are bound or affected; or (d) violate or
require any consent or notice under any law, statute, regulation, rule,
judgment, decree, order, stipulation, injunction, charge or other restriction of
any government, governmental agency or court to which any Seller or any of the
Purchased Assets are subject, or by which any Seller or any of the Purchased
Assets is bound or affected. Except as set forth on the Restrictions Schedule,
no permit, consent, approval or authorization of, declaration to or filing with,
or notice to, any governmental authority or any third party is required in
connection with the execution, delivery or performance by Sellers of this
Agreement or the other agreements contemplated hereby, or the consummation by
Sellers of any the transactions contemplated hereby or thereby.

4.4 Account Receivable Statement. The Account Receivable Statement delivered to
Purchaser at Closing has been prepared according to GAAP.

 

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4.5 Assumed Contracts. No party (including any Seller) has accelerated,
terminated, modified or canceled any contract, lease, sublease, license,
sublicense or other agreement set forth on the attached Assumed Contracts
Schedule.

4.6 Contracts and Commitments.

(a) No Seller is a party to, bound by or subject to any contract, agreement or
arrangement, whether written or oral, except for:

(i) this Agreement and the other agreements contemplated hereby;

(ii) those contracts, agreements and arrangements described on the attached
“Contracts Schedule” which require payments in excess of $25,000 annually or are
otherwise material to the Business; and

(iii) contracts, agreement and arrangements which do not require payments in
excess of $25,000 annually or are otherwise not material to the Business.

(b) Except as disclosed on the attached Contracts Schedule: (i) no contract,
agreement or arrangement listed in the Contracts Schedule has been breached in
any material respect or canceled by the other party that has not been duly cured
or reinstated; (ii) each Seller has performed all of its obligations required to
be performed by it under such contracts, agreements and arrangements and such
Seller is not in receipt of any written claim of default under any such
contract, agreement or arrangement; and (iii) no event has occurred which with
the passage of time or the giving of notice or both would result in a breach or
default under any such contract, agreement or arrangement. Each contract,
agreement and arrangement required to be listed on the Contracts Schedule is
valid, binding and enforceable. All contracts which are Assumed Contracts are
disclosed in the attached Contracts Schedule.

(c) The Contracts Schedule sets forth each contract, commitment or obligation of
any Seller which is secured by a letter of credit or guarantee (including
guarantees by any Seller) and the nature and amount of such security.

(d) Purchaser has been supplied with a true and correct copy of all written
contracts, or, where such contracts are oral, true and complete written
summaries of their terms, required to be disclosed on the attached Contracts
Schedule, together with all amendments, waivers or other changes thereto. There
are no modifications of or additions to any such contract (whether written or
oral) which are not fully described in the attached Contracts Schedule.

4.7 Litigation; Proceedings. Except as set forth in the attached “Litigation
Schedule,” there are no actions, suits, proceedings, hearings, orders,
investigations, charges, complaints or claims pending or, to Sellers’ Knowledge,
threatened against or affecting any Seller or any of its assets (or, to Sellers’
Knowledge, pending or threatened against or affecting any of the officers,
directors, employees or stockholders of any

 

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Seller, in their capacity as such), or to which any Seller or any of its assets
may be bound or affected, at law or in equity, or before or by any federal,
state, municipal, foreign or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, and there is no basis
for any of the foregoing; no Seller is subject to any judgment, order or decree
of any court or governmental agency; and since January 1, 2009, no Seller has
received any opinion or memorandum or legal advice from legal counsel to the
effect that it is exposed, from a legal standpoint, to any liability or
disadvantage which may be material to its business and no Seller has engaged in
any legal action to recover monies due it or for damages sustained by it.

4.8 Compliance with Laws. Except as set forth in the attached “Compliance
Schedule,” to Sellers’ Knowledge, each Seller has complied and is in compliance
with, and no Seller has violated any applicable law, ordinance, code, rule,
regulation or requirement of any federal, state, local or foreign government or
agency thereof. No notice, claim, charge, complaint, action, suit, proceeding,
investigation or hearing has been received by any Seller or filed, commenced or
threatened against any Seller alleging a violation of or liability or potential
responsibility under any such law, rule or regulation which has not heretofore
been duly cured and for which there is no remaining liability. Each Seller has
complied and is in compliance with all orders, decrees or judgments promulgated
or issued by any state, federal, local or foreign regulatory agency.

4.9 Tax Matters.

(a) Except as set forth in the attached “Taxes Schedule,” each Seller has timely
filed all Tax Returns required to be filed by it, each such Tax Return has been
prepared in compliance with all applicable laws and regulations, and all such
Tax Returns are true and accurate in all respects. All Taxes due and payable by
any Seller have been paid. Each Seller has delivered to Purchaser correct and
complete copies of all federal income Tax Returns filed with respect to such
Seller, and all examination reports, and statements of deficiencies assessed
against or agreed to by any Seller with respect to such taxable periods.

(b) Except as set forth in the attached Taxes Schedule:

(i) with respect to each taxable period of each Seller, either such taxable
period has been audited by the relevant Taxing Authority or the time for
assessing or collecting income Tax with respect to each such taxable period has
closed and such taxable period is not subject to review by any relevant Taxing
Authority;

(ii) no deficiency or proposed adjustment which has not been settled or
otherwise resolved for any amount of Tax has been proposed, asserted or assessed
by any Taxing Authority against any Seller;

 

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(iii) no Seller has consented to extend the time in which any Tax may be
assessed or collected by any Taxing Authority;

(iv) no Seller has requested or been granted an extension of the time for filing
any Tax Return to a date later than the Closing Date;

(v) there is no action, suit, Taxing Authority proceeding or audit now in
progress, pending or, to Sellers’ Knowledge, threatened against or with respect
to any Seller with respect to any Tax;

(vi) no Seller is a party to or bound by any Tax allocation or Tax sharing
agreement, and no Seller has any current or potential contractual obligation to
indemnify any other Person with respect to Taxes;

(vii) no Seller reasonably expects any Taxing Authority to claim or assess any
additional Taxes for any period;

(ix) no claim has ever been made by a Taxing Authority in a jurisdiction where a
Seller does not pay Tax or file Tax Returns that such Seller is or may be
subject to Taxes assessed by such jurisdiction; and

(x) each Seller has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, creditor,
independent contractor or other third party.

(c) The Taxes Schedule contains a list of states, territories and jurisdictions
(whether foreign or domestic) in which any Seller is required to file Tax
Returns relating to the Business.

4.10 Proprietary Rights. The attached “Proprietary Rights Schedule” sets forth a
correct and complete list of all material Proprietary Rights owned or licensed
by any Seller or for which any Seller has a valid right to use. Except as set
forth on said Schedule, (i) the applicable Seller owns, or has the right to use
pursuant to valid and effective agreements, all such Proprietary Rights;
(ii) the consummation of the transactions contemplated hereby will not alter or
impair any such rights; (iii) the applicable Seller has the right to use all
material Proprietary Rights owned by third parties which are used in the
Business; (iv) no claims are pending or, to the Knowledge of Sellers, threatened
against any Seller by any Person with respect to the use of any material
Proprietary Rights or challenging or questioning the validity or effectiveness
of any license or agreement relating to the same, nor is there any Basis
therefor; (v) the current use by any Seller of the material Proprietary Rights
does not infringe on the rights of any Person nor is there any basis therefore;
(vi) no person is infringing upon or otherwise violating the Proprietary Rights;
(vii) there are no pending claims or charges brought by any Seller against
any Person with respect to the use of any Proprietary Rights or the enforcement
of any of such Seller’s rights relating to the Proprietary Rights; and
(viii) the Sellers own or possess adequate rights in perpetuity to use all
Proprietary Rights necessary to conduct the Business as it is now conducted.

 

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4.11 Brokerage. Except as set forth on the attached “Brokerage Schedule,” there
are no claims for brokerage commissions, finders fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made or alleged to have been made by or on behalf of
Sellers or any stockholder of Sellers.

4.12 Names and Locations. During the three-year period prior to the execution
and delivery of this Agreement no Seller has used any name or names (other than
the use of any trade names set forth on the Proprietary Rights Schedule) under
which it has invoiced account debtors, maintained records concerning its assets
or otherwise conducted business other than the exact name under which it has
executed this Agreement, and all of the tangible Purchased Assets are located at
the Leased Real Property.

4.13 Government Licenses. Each Seller has all authorizations, approvals,
Government Licenses and orders of and from all Government Entities necessary to
carry on its portion of the Business as it is now being conducted, to own or
hold under lease the properties and assets it owns or holds under lease and to
perform all of its obligations under the agreements to which it is a party.
Complete and accurate copies of all Government Licenses are attached to the
Government Licenses Schedule.

4.14 Environmental Matters. Since January 1, 2006, the ownership, leasing, use,
occupancy and operation of any assets or premises by any Seller, including the
Leased Real Property and all other assets or premises currently or formerly
owned, leased, used, occupied or operated by any Seller (the “Company and
Subsidiary Properties”) and the conduct of the Business are and at all times
have been in compliance in all material respects with all applicable
Environmental Laws. There is no material liability pursuant to any Environmental
Laws attaching to any Seller or to the Company and Subsidiary Properties or the
ownership, leasing, use, occupancy and operation thereof by any Seller or
otherwise in connection with the conduct of the Business. No Hazardous
Substances are present at, on, in, or under, or have been discharged on or
released from any Company and Subsidiary Properties, or disposed of on-site or
off-site in a manner, quantity or condition that could result in a liability
under Environmental Laws. No Seller has received any communication alleging that
such Seller is not or in the past six (6) years was not, in compliance with any
applicable Environmental Laws.

4.15 Employment Agreements, ERISA, etc.. Except as set forth on the attached
“Employee Benefit Schedule” with respect to the Business, (i) no Seller has any
employment or other agreement with employees or agents of, or consultants to,
the Business; (ii) no Seller maintains or contributes to any “employee benefit
plan” (within the meaning of Section 3 of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations promulgated
thereunder (“ERISA”)), including, but

 

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not limited to, any bonus, percentage compensation, profit sharing, deferred
compensation, retirement, pension or union plan, or any other agreement, policy,
or practice providing pension or welfare benefits to current or former employees
of the Business; (iii) Each of the employee benefit plans, agreements, policies
and practices disclosed on said Schedule (the “Plans”) has been duly adopted and
operated in accordance with its provisions and is in material compliance with
all applicable requirements of ERISA and the Code; (iv) none of the Plans is a
“multiemployer plan” (within the meaning of Sections 3 or 4001 of ERISA);
(v) each of the Plans which is intended to be a qualified plan under
Section 401(a) of the Code is so qualified and has received a favorable
determination of the Internal Revenue Service to that effect; (vi) each Seller
has timely made all contributions required to be made to each of the Plans by
law or by the terms of the Plan, has timely complied with all reporting and
disclosure requirements applicable to each of the Plans under ERISA and the
Code, and has not breached any of the fiduciary responsibility provisions of
Title I of ERISA nor engaged in any transaction prohibited under Section 406 of
ERISA or Section 4975 of the Code; (vii) such Schedule sets forth the unfunded
current liability and unfunded accrued liability of each Plan that is subject to
Section 302 of ERISA or Section 412 of the Internal Revenue Code (the “Code”)
and no such Plan had an accumulated funding deficiency, whether or not waived,
as of the last day of the most recently ended fiscal year of such Plan. With
respect to each Plan subject to the provisions of Title IV of ERISA: except as
set forth on said Schedule, (i) no reportable event (within the meaning of
Section 4043(b) of ERISA) has occurred; (ii) there exists no condition or fact
which could result in the termination of any such Plan by the Pension Benefit
Guaranty Corporation (the “PBGC”) or the appointment of a trustee to administer
any such Plan; and (iii) except for premiums due in the ordinary course, no
Seller has incurred and does not expect to incur any liability to the PBGC. To
the Knowledge of Sellers, no event has occurred which would cause any Seller to
incur any liability under ERISA or the Code to any person in respect of any
employee benefit plan maintained, or to which contributions are or were made, by
any trade or business that is under common control with Sellers. There are no
material liabilities, contingent or otherwise, of any Seller under any of the
Plans which are not insured by fully paid and non-assessable insurance policies.
Other than usual claims for benefits arising under the Plans in the normal
course, there are no, and the transactions contemplated by this Agreement will
not give rise to, any claims, suits or proceedings which might cause any Seller
to incur any liability to any employee or former employee of the Business, or
beneficiary under any Plan, except for wages and benefits accrued through the
Closing and possible severance payments.

4.16 Labor Relations. Each Seller is in compliance in all material respects with
all applicable Laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, and is not engaged in any unfair
labor or unlawful employment practice. There is no: (a) unlawful employment
practice discrimination charge pending before the Equal Employment Opportunity
Commission (the “EEOC”) or any EEOC recognized state referral agency or, to the
Knowledge of Sellers, threatened, against or involving or affecting any Seller;
(b) unfair labor practice

 

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charge or complaint against any Seller pending before the National Labor
Relations Board (the “NLRB”) or to the Knowledge of Sellers threatened, against
or involving or affecting any Seller; (c) labor strike, dispute, slowdown or
stoppage actually pending or, to the Knowledge of Sellers, threatened against or
involving or affecting any Seller and no NLRB representation question exists
respecting any of its employees; (d) grievance or arbitration proceeding pending
and no written claim therefor exists; and (e) collective bargaining agreement
that is binding on any Seller. No organizational efforts involving any of
Sellers’ employees have been made for the past four (4) years, and to the
Knowledge of Sellers, no such organizational efforts are presently being made.
No union or other collective bargaining unit has been certified or recognized by
any Seller as representing any of such Seller’s employees during the past four
(4) years. During the past four (4) years, no union or collective bargaining
unit has sought such certification or recognition, and, to the Knowledge of
Sellers, no union or collective bargaining unit is seeking or currently
contemplating seeking any such certification or recognition. There has not been
any labor strike, slow down, work stoppage, concerted refusal to work overtime
or other similar labor action, and, to the Knowledge of Sellers, no such action
has been threatened, against or affecting any Seller.

4.17 Title to Assets. Each Seller has good and marketable title to, and are the
lawful owners of all of the Purchased Assets free and clear of all Liens except
for the Permitted Liens. No unreleased instrument encumbering any of the
Purchased Assets has been recorded, executed or delivered.

4.18 Condition of Properties. Except for the representations and warranties
otherwise set forth in this Article 4, the tangible Purchased Assets are being
sold “as-is, where-is.”

4.19 Inventory. All of the Inventory is (subject to reserves established by the
Sellers pursuant to GAAP for slow-moving, obsolete, outmoded or scrap inventory)
current, merchantable, usable and salable in the ordinary course of business,
using sales practices consistent with each Seller’s past practices. With the
exception of items of below standard quality which have been written down to
their estimated net realizable value, the Inventory is free from defects in
materials and workmanship. The Inventory is valued in accordance with GAAP at
the lower of cost or net realizable value, with cost determined using the first
in, first out accounting method. No Seller has any outstanding sales on
consignment, sales on approval, sales on return or guaranteed sales.

4.20 Warranties. No Seller has made any oral or written warranties with respect
to the quality or absence of defects of the products or services which it has
sold or performed which are in force as of the date hereof, except for those
warranties which are described in the attached “Warranty Schedule”. There are no
claims pending or, to Sellers’ Knowledge, anticipated or threatened against any
Seller with respect to the quality of or absence of defects in such products or
services, nor is there any basis therefor.

 

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4.21 Disclosure. Neither this Article 4, the Schedules and Exhibits hereto nor
any writing delivered by Sellers to Purchaser in connection with the
transactions contemplated hereby contain any untrue statement of a material fact
or omits a material fact by Sellers necessary to make the statements contained
herein or therein, in light of the circumstances in which they were made, not
misleading. There is no material fact which has not been disclosed to Purchaser
which materially adversely affects or could reasonably be anticipated to
materially adversely affect Sellers or their assets.

4.22 Closing Date. All of the representations and warranties of Sellers
contained in this Article 4 and elsewhere in this Agreement and all information
delivered in any schedule, attachment or exhibit hereto or in any certificate
delivered by Sellers to Purchaser are true and correct on date of this Agreement
and shall be true and correct on the Closing Date, except to the extent that
Sellers have advised Purchaser otherwise in writing prior to the Closing.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants to Sellers that each statement contained in
this Article 5 is true and correct in all material respects as of the date
hereof, except as set forth in the disclosure schedule dated and delivered as of
the date hereof by Purchaser to Seller (the “Purchaser Disclosure Schedule”),
which is attached to this Agreement and is designated therein as being the
Purchaser Disclosure Schedule.

5.1 Organization and Good Standing. Purchaser is a limited liability company
duly organized, validly existing and in good standing under the Laws of the
jurisdiction of its organization, has all requisite corporate power to own,
lease and operate its properties and to carry on its business as now being
conducted.

5.2 Authority and Enforceability. Purchaser has the requisite power and
authority to enter into this Agreement and to consummate the Acquisition. The
execution and delivery of this Agreement and the consummation of the Acquisition
have been duly authorized by all necessary corporate action on the part of
Purchaser. This Agreement has been duly executed and delivered by Purchaser and,
assuming due authorization, execution and delivery by Sellers, constitutes the
valid and binding obligation of Purchaser, enforceable against it in accordance
with its terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other similar Laws affecting or
relating to creditors’ rights generally, and (b) the availability of injunctive
relief and other equitable remedies.

5.3 No Conflicts; Authorizations.

(a) The execution and delivery of this Agreement by Purchaser do not, and the
consummation of the Acquisition by Purchaser will not, (i) violate the
provisions of any of the Charter Documents of Purchaser, (ii) violate any
Contract to which Purchaser

 

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is a party, (iii) to the Knowledge of Purchaser, violate any Law of any
Governmental Entity applicable to Purchaser on the date hereof, or (iv) to the
Knowledge of Purchaser, result in the creation of any Liens upon any of the
assets owned or used by Purchaser, except in each such case where such violation
or Lien would not reasonably be expected to impair materially the ability of
Purchaser to perform its obligations under this Agreement or consummate the
Acquisition.

(b) No Authorization or Order of, registration, declaration or filing with, or
notices to any Governmental Entity is required by Purchaser in connection with
the execution and delivery of this Agreement and the consummation of the
Acquisition, except for (i) such filings as may be required under the HSR Act,
or (ii) such Authorizations, Orders, registrations, declarations, filings and
notices the failure to obtain or make which would not reasonably be expected to
impair materially the ability of Purchaser to perform its obligations under this
Agreement or consummate the Acquisition.

5.4 Availability of Funds. Purchaser has cash available or has existing
borrowing facilities which together are sufficient to enable it to consummate
the Acquisition.

5.5 Brokers or Finders. Except as set forth on the Purchaser Disclosure
Schedule, no broker, finder or investment banker is entitled to any brokerage,
finder’s or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Purchaser or any Affiliate of Purchaser.

ARTICLE 6

COVENANTS OF SELLERS

6.1 Notification of Certain Matters. Sellers shall give prompt notice to
purchaser of (i) any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the Acquisition, (ii) any notice or other communication from any Governmental
Entity in connection with the Acquisition.

6.2 Restrictive Covenants.

(a) Each Seller covenants that, commencing on the Closing Date and ending on the
3 year anniversary of the Closing Date (the “Noncompetition Period”), such
Seller shall not, throughout North America, and it shall cause its Affiliates
not to, engage in, directly or indirectly, in any capacity, or have any direct
or indirect ownership interest in, or permit such Seller’s or any such
Affiliate’s name to be used in connection with, any business which is engaged,
either directly or indirectly, in the Business (the “Restricted Business”). It
is recognized that the Restricted Business is expected to be conducted
throughout North America and that more narrow geographical limitations of any
nature on this non-competition covenant are therefore not appropriate.
Notwithstanding the foregoing, Sellers may conduct the business set forth in the
MLA.

 

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(b) Each Seller covenants that, during the Noncompetition Period, such Seller
shall not, and it shall cause their Affiliates not to, directly or indirectly,
solicit or entice, or attempt to solicit or entice, any clients or customers of
Purchaser or potential clients or customers of Purchaser for purposes of
diverting the Restricted Business from Purchaser.

(c) Each Seller covenants that, for a period of 36 months after the Closing
Date, such Seller shall not, and it shall cause its Affiliates not to, solicit
the employment of any person who was employed as an employee by Purchaser on the
Closing Date.

(d) Each Seller acknowledges that the restrictions contained in this Section 6.2
are reasonable and necessary to protect the legitimate interests of Purchaser
and constitute a material inducement to Purchaser to enter into this Agreement
and consummate the Acquisition. Each Seller acknowledges that any violation of
this Section 6.2 will result in irreparable injury to Purchaser and agrees that
Purchaser shall be entitled to preliminary and permanent injunctive relief,
without the necessity of proving actual damages, as well as an equitable
accounting of all earnings, profits and other benefits arising from any
violation of this Section 6.2, which rights shall be cumulative and in addition
to any other rights or remedies to which Purchaser may be entitled.

(e) In the event that any covenant contained in this Section 6.2 should ever be
adjudicated to exceed the time, geographic, product or service, or other
limitations permitted by applicable Law in any jurisdiction, then any court is
expressly empowered to reform such covenant, and such covenant shall be deemed
reformed, in such jurisdiction to the maximum time, geographic, product or
service, or other limitations permitted by applicable Law. The covenants
contained in this Section 6.2 and each provision thereof are severable and
distinct covenants and provisions. The invalidity or unenforceability of any
such covenant or provision as written shall not invalidate or render
unenforceable the remaining covenants or provisions hereof, and any such
invalidity or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such covenant or provision in any other jurisdiction.

6.3 Employees. Purchaser shall have no obligation to offer to hire any of
Sellers’ employees. As set forth in the TSA, Sellers are willing to provide
transitional services of its employees, at Purchaser’s expense, through
April 30, 2009. If Purchaser desires to obtain transitional services from any of
Sellers’ employees after that date, Purchaser shall hire such employees, and
Sellers shall not be responsible for their severance claims.

Purchaser may offer employment to such of Sellers’ employees who are employed at
the Business as it deems appropriate on such terms and conditions it deems
appropriate. Sellers agree to encourage such employees to whom Purchaser offers
employment to accept employment with Purchaser.

 

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Purchaser shall, as promptly as possible following the Closing Date, notify
Sellers of those employees to whom it will offer employment. Those employees who
accept such offers are referred to as “Retained Employees”. Sellers may
terminate all other employees. Nothing in this Agreement shall be interpreted to
create a contractual right to continuing employment for any employee of any
Seller.

Except as provided in the TSA, each Seller shall retain the responsibility for
payment of all pay holdbacks, accrued vacation and sick pay, bonuses, medical,
dental, health and disability claims incurred by any Retained Employees prior to
the date of hire by Purchaser, and Purchaser shall not assume any liability with
respect to such claims; provided, however, that the TSA may provide for
Purchaser to take the prepaid employee advance asset (paying Sellers for such
item) and the vacation pay accrual (being paid by Sellers for such item) for the
Retained Employees.

Each Seller agrees that it shall retain, consistent with its normal employment
practices, all liability and obligation, if any, (including, without limitation,
the liability and obligation for all severance, wages, salary, vacation pay and
unemployment, medical, dental, health and disability benefits) for those former
employees of any Seller who retired or terminated employment prior to the
Closing Date or otherwise do not become employees of Purchaser.

6.4 Assignment of Contracts. Notwithstanding the foregoing, no Assumed Contract
shall be deemed to be assigned to Purchaser to the extent that such assignment
is prohibited by Law or by a valid and enforceable prohibition to such an
assignment contained in such Contract until the necessary waiver or consent
(whether express or by acquiescence) to such assignment has been obtained or
such provision has been rendered ineffective or unenforceable by Law, action of
the parties or otherwise, whether before or after the Closing Date. In any
event, however, Sellers shall at the request and under the direction of
Purchaser, at Purchaser’s expense, in the name of Sellers or otherwise, attempt
to obtain such waivers and consents as soon as possible and, in the meantime,
take such action as shall in the reasonable opinion of Purchaser be necessary or
proper (a) in order that the rights, benefits and obligations of Sellers under
the Assumed Contracts are preserved for the benefit of Purchaser and (b) to
facilitate the collection of monies due and payable and to become due and
payable to Sellers in respect of such Assumed Contracts, and Sellers shall hold
all such monies in trust for the benefit of and shall promptly pay such amounts
to Purchaser, less all charges properly allocable thereto incurred by Sellers
but which would have been incurred by Purchaser if consent to assignment of such
Assumed Contracts had been obtained on or prior to the Closing Date. If and when
any such consents or approvals shall be obtained, then the Sellers shall
promptly assign their right and obligations thereunder to the Purchaser without
the payment of any consideration therefor.

 

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ARTICLE 7

COVENANTS OF PURCHASER AND SELLERS

7.1 Public Announcements. Neither Purchaser nor Sellers shall issue any press
releases or otherwise make any public statements with respect to the
transactions contemplated by this Agreement, except:

(a) Purchaser or Sellers may, without such approval, make such press releases or
other public announcement as it believes are required pursuant to any listing
agreement with any national securities exchange or stock market or applicable
securities Laws, in which case the party required to make the release or
announcement shall allow the other party reasonable time to comment on such
release or announcement in advance of such issuance; provided, further, that
each of the parties may make internal announcements to their respective
employees that are consistent with the parties’ prior public disclosures
regarding the Acquisition;

(b) After the signing of this Agreement Purchaser may, subject to Sellers’
review and approval, issue a public statement regarding the execution of this
Agreement and a general description of the contemplated transactions. Sellers
shall not unreasonably withhold such approval.

7.2 Further Assurances. Subject to the terms of this Agreement, each of
Purchaser and Sellers shall execute such documents and other instruments and
take such further actions as may be reasonably required to carry out the
provisions hereof and consummate the Acquisition.

7.3 Name Changes by Sellers. From and after the Closing, Sellers will cease
using the names “Crave,” “Crave Entertainment,” “Star Video Games” or any
abbreviations thereof and thereafter will not use any substantially similar or
confusingly similar names or include them in any logo. In addition, promptly
after the Closing, each Seller will change its corporate name to a name that
does not contain the words “Crave”, “Star” or any substantially similar or
confusingly similar name, and will file that name change in all state
jurisdictions in which such Seller has presently registered the name for
purposes of maintaining its corporate business and doing business as a foreign
corporation.

ARTICLE 8

ADDITIONAL AGREEMENTS; COVENANTS AFTER CLOSING

8.1 Indemnification,

(a) Survival. Notwithstanding the right of Purchaser to fully investigate the
affairs of Sellers, and notwithstanding any Knowledge of facts determined or
determinable by Purchaser pursuant to such investigation or right of
investigation,

 

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Purchaser has the right to rely fully upon the representations, warranties,
covenants and agreements of Sellers set forth in this Agreement. All
representations, warranties, covenants and agreements set forth in this
Agreement or in any Schedule or Exhibit to this Agreement will survive the
Closing Date, and the consummation of the transactions contemplated hereby and
will not be affected by any examination made for or on behalf of any of the
parties hereto or the Knowledge of any of their officers, directors,
stockholders, employees, agents or stockholder or the acceptance of any
certificate. Purchaser represents and warrants to Sellers and Stockholder that
it and its shareholders, affiliates and agents do not have any Knowledge of a
breach by Sellers or Stockholder of any of its representations and warranties.

(b) Sellers’ and Stockholder’s Indemnification.

(i) Sellers and Stockholder shall, jointly and severally, indemnify Purchaser
and hold it harmless against any loss, liability, deficiency, diminution in
value, damage or expense (including reasonable legal expenses and costs and
including interest and penalties) (a “Purchaser Loss”) which Purchaser may
suffer, sustain or become subject to, as a result of or by virtue of (A) the
breach by Sellers of any representation or warranty made by Sellers contained in
this Agreement or any writing delivered in connection with this Agreement ;
(B) any breach by Sellers of any covenant or agreement (other than the
representations and warranties which are covered by the foregoing clause (A))
contained in this Agreement or any writing delivered in connection with this
Agreement; (C) any claims of any brokers or finders claiming by, through or
under any Seller; (D) any claims with respect to any Excluded Liability, or
(E) any claim or liability (other than an Assumed Liability) arising from the
operation of the Business or the ownership or use of the Purchased Assets prior
to the Closing Date. Purchaser may offset any Purchaser Losses against the
balance owed by Purchaser to Sellers pursuant to Section 2.3.

(ii) With respect to any claim or claims for breaches or alleged breaches of
representations and warranties contained in Article 4 hereof, Sellers and
Stockholder will not be liable with respect to any breach or alleged breach of
such Article 4 representations and warranties unless written notice of a
possible claim for indemnification with respect to such breach or alleged breach
is given by the Purchaser to Sellers on or before the Survival Date, it being
understood that so long as such written notice is given on or prior to the
Survival Date, such representations and warranties shall continue to survive
until such matter is resolved. For purposes of this Agreement, the term
“Survival Date” shall mean the second anniversary of the Closing Date.

 

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(iii) The indemnification provided for in Section 8.1(b)(i)(A) above is subject
to each of the following limitations: Sellers and Stockholder shall not be
liable to indemnify Purchaser pursuant to Section 8.1(b)(i)(A) unless and until
Purchaser has suffered Losses by breaches in excess of $100,000 in the aggregate
(the “Basket”) (at which point Sellers and Stockholder will be obligated to
indemnify Purchaser for all Purchaser Losses in excess of the Basket); provided
that Purchaser Losses below $10,000, individually, shall be considered de
minimus and not covered by this indemnity provision; and provided further that
Sellers’ and Stockholder’s aggregate liability for all Purchaser Losses
indemnifiable under Section 8.1(b)(i)(A) shall not exceed the Purchase Price.
Sellers and Stockholder shall be liable for any Purchaser Loss for which
Purchaser is entitled to indemnification, regardless of whether Purchaser is
entitled to receive reimbursement under any insurance policy.

(iv) It is expressly agreed that Sellers’ and Stockholder’s liability to
indemnify Purchaser pursuant to Sections 8.1(b)(i)(B), (C), (D) and (E) are not
subject to the limitations of Section 8.1(b)(ii) and (iii).

(c) Purchaser’s Indemnification.

(i) Purchaser agrees to indemnify Sellers and hold Sellers harmless against any
loss, liability, deficiency, diminution in value, damage or expense (including
reasonable legal expenses and costs and including interest and penalties) (a
“Seller Loss”) which Sellers may suffer, sustain or become subject to, as a
result of or by virtue of (A) the breach by Purchaser of any representation or
warranty or covenant made by Purchaser contained in this Agreement or any
writing delivered in connection with this Agreement; or (B) the conduct of
Purchaser’s operations of the Business or use of the Purchased Asset after the
Closing Date, but not to the extent the matter giving rise to such Seller Loss
constitutes an Excluded Liability, or constitutes, results from or arises out of
any breach of Sellers’ representations or warranties or covenants contained in
this Agreement or any writing delivered in connection with this Agreement or
Sellers’ actions or operations prior to the Closing Date.

(ii) With respect to any claim or claims for breaches or alleged breaches of
representations and warranties contained in Article 5 hereof, Purchaser will not
be liable with respect to any breach or alleged breach of such Article 5
representations and warranties unless written notice of a possible claim for
indemnification with respect to such breach or alleged breach is given by the
claiming Seller Indemnity to Purchaser, on or before the first anniversary of
the Closing Date, it being understood that so long as such written notice is
given on or prior to such anniversary date,

 

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such representations and warranties shall continue to survive until such matter
is resolved. Notwithstanding the foregoing, and subject to the following
sentence, in the case of Seller Losses resulting from a breach set forth in
Section 8(c)(i)(A), Purchaser shall not be liable for indemnification hereunder
unless and until the aggregate amount of such Seller Losses exceed $100,000 (the
“Purchaser Basket”) (at which point Purchaser shall be obligated to indemnify
Sellers for all Seller Losses in excess of the Purchaser Basket); provided that
Seller Losses below $10,000, individually, shall be considered de minimus and
not covered by this indemnity provision

(d) Indemnification Procedures.

(i) Notice of Claim. Any party making a claim for indemnification (an
“Indemnitee”) must give the party from whom indemnification is sought (an
“Indemnitor”) written notice of such claim describing such claim and the nature
and amount of such Loss, to the extent that the nature and amount thereof are
determinable at such time (a “Claim Notice”) promptly after the Indemnitee
receives any written notice of any action, lawsuit, proceeding, investigation or
other claim (a “Proceeding”) against or involving the Indemnitee by a third
party or otherwise discovers the liability, obligation or facts giving rise to
such claim for indemnification; provided that the failure to notify or delay in
notifying an Indemnitor will not relieve the Indemnitor of its obligations,
except to the extent that the Indemnitor is materially prejudiced as a result
thereof.

(ii) Control of Defense; Conditions. With respect to the defense of any
Proceeding against or involving an Indemnitee in which the claimant seeks only
the recovery of a sum of money for which indemnification is provided, at its
option the Indemnitor may appoint as lead counsel of such defense a legal
counsel selected by the Indemnitor, reasonably acceptable to the Indemnitee;
provided that before the Indemnitor assumes control of such defense it must
first:

(A) enter into an agreement with the Indemnitee (in form and substance
satisfactory to the Indemnitee) pursuant to which the Indemnitor agrees to be
fully responsible (with no reservation of any rights other than the right to be
subrogated to the rights of the Indemnitee) for all Losses relating to such
Proceeding and unconditionally guarantees the payment and performance of any
liability or obligation which may arise with respect to such Proceeding or the
facts giving rise to such claim for indemnification; and

 

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(B) furnish the Indemnitee with evidence that the Indemnitor, in the
Indemnitee’s sole judgment, is and will be able to satisfy any such liability or
obligation.

(iii) Control of Defense; Exceptions, etc. The Indemnitee will be entitled to
participate in the defense of such claim and to employ separate counsel of its
choice for such purpose at its own expense; provided that notwithstanding the
foregoing, the Indemnitor shall bear the fees and expenses of such separate
counsel incurred prior to the date upon which the Indemnitor effectively assumes
control of such defense. The Indemnitor shall not be entitled to assume control
of the defense of such claim, and shall pay the fees and expenses of legal
counsel retained by the Indemnitee, if:

(A) the Indemnitee reasonably believes that a conflict of interest exists or
could arise which, under applicable principles of legal ethics, could prohibit a
single legal counsel from representing both the Indemnitee and the Indemnitor in
such Proceeding; or

(B) a court of competent jurisdiction rules that the Indemnitor has failed or is
failing to prosecute or defend such claim.

(iv) Settlement of Claims. The Indemnitor must obtain the prior written consent
of the Indemnitee (which will not be unreasonably withheld) prior to entering
into any settlement of any claim or Proceeding or ceasing to defend any claim or
Proceeding.

(e) Payments. Any payment pursuant to a claim for indemnification shall be made
not later than thirty (30) days after receipt by the Indemnitor of written
notice from the Indemnitee stating the amount of the claim, unless the claim is
subject to defense as provided in Section 8.1, in which case payment shall be
made not later than thirty (30) days after the amount of the claim is finally
determined. Any payment required under this Section 8.1 which is not made when
due shall bear interest at a variable rate equal to two percent (2%) in excess
of the prime rate of interest as set forth in the Wall Street Journal from time
to time.

8.2 Mutual Assistance. Each of the parties hereto agrees that they will mutually
cooperate in the expeditious filing of all notices, reports and other filings
with any governmental authority required to be submitted jointly by any of the
parties hereto in connection with the execution and delivery of this Agreement,
the other agreements contemplated hereby and the consummation of the
transactions contemplated hereby or thereby. Subsequent to the Closing, each of
the parties hereto, at its own cost, will assist each other (including by the
retention of records and the provision of access to relevant records) in the
preparation of their respective Tax Returns and the filing and execution of

 

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Tax elections, if required, as well as in the defense of any audits or
litigation that may ensue as a result of the filing thereof, to the extent that
such assistance is reasonably requested.

8.3 Expenses. Except as otherwise set forth in this Agreement, each party hereto
shall be solely responsible for and shall bear all of its own costs and expenses
incident to its obligations under and in respect of this Agreement and the
transactions contemplated hereby, including, but not limited to, any such costs
and expenses incurred by any party in connection with the negotiation,
preparation and performance of and compliance with the terms of this Agreement
(including, without limitation, the fees and expenses of legal counsel,
accountants, and consultants), whether or not the transactions contemplated
hereby are consummated.

8.4 Specific Performance. Each of the parties hereto acknowledges and agrees
that the other would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
are otherwise breached. Accordingly, each of the parties hereto agrees that the
other shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any court in the
United States or in any state having jurisdiction over the parties and the
matter in addition to any other remedy to which it may be entitled pursuant
hereto.

8.5 Further Transfers. Each party hereto shall execute and deliver such further
instruments and take such additional action as any other party hereto may
reasonably request to effect or consummate the transactions contemplated hereby.
Each such party shall, on or prior to the Closing, use commercially reasonable
efforts to fulfill or obtain the fulfillment of the conditions precedent to the
consummation of the transactions contemplated hereby, including the execution
and delivery of any documents, certificates, instruments or other papers that
are reasonably required for the consummation of the transactions contemplated
hereby.

8.6 Communications. All mail and other communications received by Sellers at any
time after the Closing Date related to the Purchased Assets or Assumed
Liabilities shall be promptly turned over to Purchaser by the recipient;
provided that the recipient may keep a copy of such communication. All mail and
other communications relating exclusively to aspects of Sellers other than the
Purchased Assets or Assumed Liabilities received by Purchaser at any time after
the Closing shall be promptly turned over to Sellers by Purchaser.

8.7 Sales Taxes. Purchaser shall be responsible for the payment of all sales
taxes assessed on the sale of tangible personal property to the extent such
property is taxable, notwithstanding Purchaser’s resale certificate.

 

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8.8 Amendment and Waiver. This Agreement may not be amended, altered or modified
except by a written instrument executed by Purchaser and Sellers. No course of
dealing between or among any persons having any interest in this Agreement will
be deemed effective to modify, amend or discharge any part of this Agreement or
any rights or obligations of any Person under or by reason of this Agreement. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute, a waiver of any other provisions, whether or not similar, nor shall
any waiver constitute a continuing waiver.

8.9 Notices. All notices, demands and other communications to be given or
delivered to Purchaser or Sellers under or by reason of the provisions of this
Agreement will be in writing and will be deemed to have been given when
personally delivered, sent by reputable overnight courier or transmitted by
facsimile or telecopy (transmission confirmed), to the addresses indicated below
(unless another address is so specified in writing):

If to Sellers:

Crave Entertainment Group, Inc.

c/o Handleman Company

Attention: Rozanne Kokko

500 Kirts

Troy, MI 48084

Copy to

Pepper Hamilton LLP

100 Renaissance Center

Suite 3600

Detroit, MI 48243

Attention: Dennis S. Kayes

If to Purchaser:

Fillpoint LLC

200 Fillpoint Drive

Mechanicville, New York 12118

Attention: Glenn Rockwood

Copy to:

McNamee, Lochner, Titus & Williams, P.C.

677 Broadway

P.O. Box 459

Albany, New York 12201-0459

Attention: Richard A. Langer

 

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8.10 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of each of the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any
rights, benefits or obligations set forth herein may be assigned by any of the
parties hereto, except that (a) Purchaser may assign this Agreement and any of
the provisions hereof without the written consent of the other parties hereto
(i) to any of its Affiliates, (ii) in connection with a sale of the Business,
and (iii) for collateral security purposes to any lenders providing financing to
Purchaser; provided that Purchaser shall remain liable despite such assignment,
and (b) Sellers may assign this Agreement to Handleman Company.

8.11 Severability. Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.

8.12 No Strict Construction. The language used in this Agreement shall be deemed
to be the language chosen by the parties hereto to express their mutual intent,
and no rule of strict construction will be applied against any person. The use
of the word “including” in this Agreement or in any of the agreements
contemplated hereby shall be by way of example rather than by limitation.

8.13 Captions. The captions used in this Agreement are for convenience of
reference only and do not constitute a part of this Agreement and shall not be
deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement shall be enforced and construed
as if no caption had been used in this Agreement.

8.14 No Third Party Beneficiaries. Except as otherwise expressly set forth in
this Agreement, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any Person, other than the parties hereto
and their respective permitted successors and assigns and other than the
investors of Purchaser, any rights or remedies under or by reason of this
Agreement, such third parties specifically including, without limitation,
employees or creditors of Sellers.

8.15 Complete Agreement. This document and the documents referred to herein
contain the complete agreement between the parties and supersede any prior
understandings, agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in any way.

 

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8.16 Counterparts. This Agreement may be executed in one or more counterparts,
any one of which may be by facsimile, all of which taken together shall
constitute one and the same instrument.

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

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

 

SELLERS: CRAVE ENTERTAINMENT GROUP, INC. By:  

/s/ Rozanne Kokko

Name:   Rozanne Kokko Its:   Secretary and Chief Financial Officer CRAVE
ENTERTAINMENT, INC. By:  

/s/ Rozanne Kokko

Name:   Rozanne Kokko Its:   Secretary and Chief Financial Officer SVG
DISTRIBUTION, INC. By:  

/s/ Rozanne Kokko

Name:   Rozanne Kokko Its:   Secretary and Chief Financial Officer

 

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PURCHASER: FILLPOINT LLC By:  

/s/ Glenn Rockwood

Name:   Glenn Rockwood Its:   President

 

As to Articles 4 and 8, only STOCKHOLDER: HANDLEMAN COMPANY By:  

/s/ Rozanne Kokko

Name:   Rozanne Kokko Its:   Secretary and Chief Financial Officer

 

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