ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT

(the "Agreement") is entered into on this 25th day of November, 2002, by and
between Moto Photo, Inc., a Delaware corporation with an address at 4444 Lake
Center Drive, Dayton, OH ("Seller") and MOTO Franchise Corp., an Ohio
corporation, c/o LG Management Corp., with an address at 210 New Road, Linwood,
NJ ("Buyer").

BACKGROUND

A. Seller is a franchisor of businesses offering on site photographic film and
digital processing, portrait studios and merchandise sales under the mark
"MotoPhoto" and a supplier of paper, chemistry and related products to
franchisees (the "Business").

B. Seller desires to sell and Buyer desires to purchase certain assets used by
Seller in connection with the Business in accordance with the terms and
conditions of this Agreement.

In consideration of the mutual promises and covenants contained in this
Agreement, and for other consideration, the receipt and sufficiency of which is
acknowledged, and intending to be legally bound, the parties agree as follows:

AGREEMENT

1. SALE AND PURCHASE OF ASSETS. Upon the terms and subject to the conditions of
this Agreement, at Closing, Seller shall sell, transfer, and assign to Buyer,
and Buyer shall purchase from Seller, free and clear of all claims, liabilities,
encumbrances, liens and security interests of any kind whatsoever, the Business
as a going concern, and all of Seller's rights, title, and interest in and to
the following assets (the "Assets"):

1.1 All franchise agreements and license agreements for open units, along with
any sublease, collateral assignment of lease, security interest or personal
guaranty granted in connection with the foregoing (the "Franchise Agreements")
and selected Area Developer Agreements along with any personal guaranty granted
in connection with the foregoing (the "Developer Agreements"), including but not
limited to those set forth on Schedule 1.1;

1.2 All non-compete agreements entered into between Seller, and including
without limitation, any franchisee, licensee, area developer, and certain
management employees or otherwise for the benefit of Seller, including those set
forth on Schedule 1.2;

1.3 All management agreements, or other contracts pursuant to which Seller
manages the business of any franchisee, licensee or area developer (the
"Management Agreements"), including those set forth on Schedule 1.3;

1.4 All accounts receivable, notes receivable, and any other amounts due to
Seller at Closing and amounts earned but not yet billed for goods sold and
delivered before Closing along with any security interest or personal guaranty
granted in connection with the foregoing;

1.5 All inventory wherever located, including but not limited to inventory
located in Seller's distribution warehouse and in company-owned stores;

1.6 All equipment, machinery, furniture, fixtures, leasehold improvements and
any other fixed assets including, but not limited to, all such assets owned or
used by Seller in the Business and identified on Schedule 1.6 and reflected on
Seller's Balance Sheet dated June 30, 2002, or which hereafter have been
acquired prior to Closing, including any such assets used in connection with
Seller's operation of the Dayton Mall store location, except the real estate
lease;

1.7 All intellectual property owned, licensed or used by Seller including, but
not limited to, all patents, patent applications, inventions, trade names,
trademarks, service marks, copyrights, logos, trade secrets (including all print
and electronic copies of training and operations manuals, system or franchise
recruitment advertising and similar items), marketing plans and any other
intangible or intellectual property related to or used in the Business,
including those items set forth on Schedule 1.7 (the "Intellectual Property");

1.8 Seller's web site and internet domain, name extranet, or intranet system and
current hosting agreements and/or maintenance agreements, including but not
limited to those set forth on Schedule 1.8;

1.9 Seller's telephone and facsimile numbers for the Business and any other form
of communication through which franchisees and customers reach Seller, including
those set forth on Schedule 1.9;

1.10 All customer contracts, agreements, purchase orders, warranties, files,
lists, invoices, sales journals and records of the customers of the Business,
including ClubMoto materials and lists, all customer or prospecting lists, lists
of franchisee lead inquiries, lists of potential franchisee prospects and lists
of suppliers, including those set forth on Schedule 1.10;

1.11 Seller's supply contract with (A) Kodak dated September 17, 2001 (the
"Kodak Supply Agreement"); (B) Agfa dated June 1, 2002 (the "Agfa Supply
Agreement"); and (C) verbal agreement with Trebla (the "Trebla Supply
Agreement"), copies of which are attached as Schedule 1.11, and all franchisee
executed supply agreements for Kodak, Agfa and Trebla products and all
agreements requiring any franchisee to purchase products or supplies from
Seller; and

1.12 All books and records in paper and electronic form, including accounts
receivable ledgers, employment records, and other property, files, agreements,
contracts, intellectual property, and other information or assets which could
reasonably be required for the continued operation of Seller's Business;

2. EXCLUDED ASSETS. Seller will not sell and Buyer will not purchase the
following assets of Seller ("Excluded Assets"):

2.1 Seller's corporate seal, minute books, stock certificates and other records
relating exclusively to Seller's corporate organization and capitalization;

2.2 Cash and cash equivalents;

2.3 All prepaid expenses;

2.4 Seller's leasehold interest in any company-owned stores and Quick Start
equipment, including any security deposits given in connection with the
foregoing; and

2.5 Those fixed assets used in connection with any company-owned stores subject
to the Seller's rights to sell such company-owned stores prior to Closing
pursuant to Section 15.3 in compliance with any existing right of first refusal.

3. ASSUMED CONTRACTS.

At Closing, Buyer will assume Seller's obligations under the contracts
identified on Schedule 3 (the "Assumed Contracts"). The Assumed Contracts will
include Seller's rights under any terminated or expired franchise agreement or
the developer agreement (or documents securing the foregoing) and any
contractual rights of Seller to assume any franchisee's or licensee's real
estate lease. At Closing, Seller shall assign all of its right, title and
interest under such Assumed Contracts to Buyer. Buyer shall faithfully perform
Seller's obligations on or after Closing under the Assumed Contracts and Seller
shall not be responsible for such obligations.

4. ASSUMED LIABILITIES.

4.1 Buyer shall not assume any liabilities of Seller, except for Seller's post
closing obligations with respect to the following (the "Assumed Liabilities"):

 1. Any Assumed Contract;

4.1.2 The Kodak Supply Agreement, Agfa Supply Agreement and Trebla Supply
Agreement, except that Kodak shall be required to forgive $250,000 as a
condition of assumption and assignment;

4.1.3 Any liability of Seller arising after Closing under any Franchise
Agreements, Developer Agreements and Management Agreements; and

4.1.4 Any un-expired real estate lease which Seller sublets to a franchisee, in
the event that Seller and franchisee are not, despite using commercially
reasonable efforts, able to obtain a direct Lease between the franchisee and the
particular landlord containing appropriate collateral assignment language
acceptable to Seller. Seller shall have no obligation to pay any fee or
increased costs to obtain any such approval.

4.2 Buyer shall not assume any liability arising out of or related to a breach,
which occurred prior to Closing with respect to any Assumed Liabilities.

5. PURCHASE PRICE; ALLOCATION; ADJUSTMENT.

5.1 Purchase Price. Buyer shall pay to Seller an aggregate purchase price of
$2,750,000 (the "Purchase Price"), as adjusted pursuant to Section 5.4 and an
earn out pursuant to Section 5.7.

5.2 Deposit. Upon execution of this Agreement, Buyer will pay a deposit in the
amount of $100,000 ("Deposit") into Seller's attorney's escrow account. The
Deposit is refundable, except for the non-performance of Buyer, as set forth in
Section 19.1.

5.3 Payment of Purchase Price. At Closing, Buyer will pay the Purchase Price in
cash by wire transfer to Seller in the amount of the Purchase Price less the
Deposit, and any other payment assumed or paid by Buyer in order for Seller to
assume and transfer the Kodak Supply Agreement, Afga Supply Agreement, Trebla
Supply Agreement or other Assets or Assumed Contracts. Buyer shall not receive
any credit for the $250,000 forgiven by Kodak.

5.4 Adjustments.

5.4.1 The Purchase Price shall be increased or decreased to the extent that the
combined level of Accounts Receivable, Notes Receivable and Inventory at Closing
exceeds or is less than their value, net of all reserves, as set forth on the
Balance Sheet dated June 30, 2002 attached as Schedule 5.4.1. Within 2 days of
Closing, Buyer and Seller shall mutually conduct a physical inventory of all
Inventory with a mutually acceptable third party (the cost of whom shall be paid
equally by Buyer and Seller), who shall determine any disputes related to the
calculation of Inventory. Within 30 days of Closing, Buyer may audit Seller's
calculation of Reserves for Inventory, Accounts Receivable and Notes Receivable.
If Buyer does not agree that Reserves were calculated in a manner consistent
with past practice using the methodology previously disclosed to Buyer and
consistent with GAAP (the "Reserve Calculation"), Buyer and Seller will mutually
select an independent accountant to review the Reserve Calculation to determine
whether Buyer is entitled to an additional credit, whose determination shall be
binding upon the parties. Payment shall be made by Buyer of any undisputed
amounts at Closing, and disputed payments shall be paid by Buyer within 5 days
of the earlier of the parties' mutual agreement, or the independent accountant's
determination of such disputed payments. If the total adjustments under Section
5.4 cause the Purchase Price to be increased by $100,000 or more, the adjustment
amounts shall be payable by the Buyer on or before 90 days following Closing.
Accounts Receivable, Notes Receivable, and Inventory are defined in Schedule
5.4.1.

5.4.2 If any item contained on Schedule 1.6 is not on hand on Closing, then
Buyer shall be entitled to a credit equal to the fair market value of such fixed
asset item(s).

5.4.3 To provide an incentive to Seller to market and sell its company-owned
stores, Seller shall be entitled to an increase in the Purchase Price of $15,000
for each company-owned store which Seller sells on or after June 30, 2002,
pursuant to Section 15.3.

5.4.4 Buyer shall be entitled to a credit at Closing equal to the amount of any
accrued and unpaid Area Developer fees due under any Area Developer Agreement at
Closing, which are assumed by Buyer that were accrued by Seller and earned by
the Area Developer within 90 days prior to Closing.

5.4.5 The Purchase Price shall be increased by the amount of prepaid
expenditures which Seller has made prior to Closing for maintenance contracts on
computer, telephone equipment and other equipment to the extent of the prorated
portion of such maintenance contracts that continue after Closing, and to the
extent that Buyer, at Buyer's option and in Buyer's sole discretion, determines
to assume such contracts.

5.5 Allocation of Purchase Price. Within 30 days of Closing, Buyer shall prepare
and furnish Seller with a completed draft of federal form 8594 ("Statement of
Allocation") allocating the Purchase Price among the Assets and other rights
transferred under this Agreement. The Statement of Allocation shall be prepared
in a manner consistent with the requirements of Section 1060 of the Internal
Revenue Code and the Treasury Regulations adopted thereunder. The Statement of
Allocation prepared by Buyer shall be final and binding upon both Buyer and
Seller.

5.6 Tax Reporting. The parties will file their respective tax returns and
reports (including any amended returns and reports) relating to the transactions
contemplated hereby on a basis consistent with the Statement of Allocation and
the Section 1060 Reports, and will not take any position inconsistent with the
Statement of Allocation or the Section 1060 Reports in any tax proceeding. Buyer
will provide Seller with all assistance reasonably necessary to prepare Seller's
tax returns, pursuant to the Transition Services Agreement referred to in
Section 30.3.

5.7 Earn Out. Buyer shall pay to Seller within 90 days of the last day of each
of the 2003 Earn Out Period, 2004 Earn Out Period, and 2005 Earn Out Period the
sum of $150,000 upon the following terms and conditions:

5.7.1 The 2003 Earn Out shall be payable to Seller if the gross revenue in 2003
for those U.S. franchised and company-owned Stores opened and operating for the
entire 2002 calendar year (the "Base Line Stores") and open and operating for
the entire 2003 calendar year exceeds their gross revenue in 2002 by 5% or more,
as calculated in a manner consistent with the method used in Seller's "Monthly
Franchise Sales Reports";

5.7.2 The 2004 Earn Out shall be payable to Seller if the gross revenue for
those Base Line Stores for the 13th thru 24th calendar months following the
Closing exceeds their gross revenue for the prior 12 calendar months by 5% or
more;

5.7.3 The 2005 Earn Out shall be payable to Seller if the gross revenue for the
Base Line Stores for the 25th thru 36th calendar months following the Closing
exceeds their gross revenue for the prior 12 calendar months by 5% or more; but

5.7.4 In no event shall the aggregate Earn Outs paid to Seller exceed the sum of
$300,000 (the "Maximum Earn Out").

6. BANKRUPTCY COURT APPROVALS, OVERBIDDING PROCEDURES AND BREAK-UP FEES.

6.1 Bankruptcy Covenants.

6.1.1 Immediately after the execution of this Agreement, Seller shall:

6.1.1.1 continue to operate its business from and after the commencement of the
Chapter 11 Case;

6.1.1.2 file a motion, pursuant to 11 U.S.C. Sections 105, 363, and 365 to
approve the sale of the Assets to Buyer pursuant to this Agreement, including
the overbidding procedures in Section 6.2 and break-up fee in Section 6.3 (the
"Approval Motion");

6.1.1.3 file a motion (the "Cash Collateral Motion") for emergency determination
for approval of and authorizing Seller, as borrower, to use cash collateral,
such motion in form and substance reasonably acceptable to Buyer. Seller shall
use commercially reasonable efforts to obtain an order (the "Cash Collateral
Order") within 10 days of the date of this Agreement and a final order within 30
days of the date of this Agreement, and approval of the Approval Motion (the
"Approval Order") within 45 days of the date of this Agreement, which orders
shall each be in form and substance reasonably acceptable to Buyer, provided
that the Approval Order shall be in a form substantially in conformity with the
form of order attached as Schedule 6.1.1.3 and the Cash Collateral Order shall,
among other customary terms and provisions, be in form and substance acceptable
to Buyer, with only such changes to such orders as shall be agreed to by all of
the parties in writing.

6.1.2 Seller shall promptly provide Buyer with drafts of all documents, motions,
orders, filings or pleadings that Seller proposes to file with the Bankruptcy
Court which relate to the consummation or approval of this Agreement, the Cash
Collateral Motion or any other provision of this Agreement, and will provide
Buyer with reasonable opportunity to review and approve such proposed filings as
reasonably practical. Seller shall also promptly (within 24 hours) provide Buyer
with facsimile copies of all pleadings received by or served by or upon Seller
in connection with its Bankruptcy Case, which have not otherwise been served on
Buyer.

6.1.3 Seller shall use commercially reasonable efforts to obtain, at its sole
cost and expense, the entry of a final order authorizing Seller to assign the
Franchise Agreements, Developer Agreements, Management Agreements, Kodak Supply
Agreement, Agfa Supply Agreement, Trebla Supply Agreement, Leases and Assumed
Contracts to Buyer (the "Assignment Order"). Except for Buyer's right to assume
payments due from Seller under the Franchise Agreements, Developer Agreements,
Kodak Supply Agreement, Agfa Supply Agreement, Trebla Supply Agreement and
Assumed Contracts in exchange for a credit toward the Purchase Price payment as
provided in Section 5.3 of this Agreement, Seller shall be responsible for the
payment, at or prior to Closing of any amounts necessary to cure any defaults
which exist at Closing under the Franchise Agreements, Developer Agreements,
Management Agreements, Kodak Supply Agreement, Agfa Supply Agreement, Trebla
Supply Agreement and Assumed Contracts. Notwithstanding the foregoing, if one or
more parties to any non-supply related executory contracts asserts a claim or
files an objection to Seller's assumption and assignment of their respective
contract(s) to Buyer based on a claim or claims which in the aggregate exceed
$50,000, which are determined to be valid after notice and hearing and which
Seller is unwilling to cure, then the parties shall proceed to Closing without
the affected agreement(s) with an abatement to the Purchase Price equal to the
percentage reduction in actual collections over the previous 12 months, as a
result of the loss of the affected agreements. For example, if the affected
agreements represent 2% of Seller's actual collections during the 12 months
immediately preceding Closing, then Buyer would be entitled to a 2% reduction in
the Purchase Price. If the claims exceed $200,000, the Seller may, at its sole
option, terminate this Agreement and refund the Deposit to Buyer, without
further liability to Buyer. Buyer shall receive a dollar for dollar credit to
the Purchase Price for the net book value of any Account Receivable or Note
Receivable associated with any affected agreement, which is not assigned to
Buyer and the affected Account Receivable and/or Note Receivable shall not be
assigned to Buyer. Buyer may require, at its sole option, that Seller reject any
affected contract pursuant to Section 6.1.4 of this Agreement. Buyer shall be
responsible for providing adequate assurance of its ability to perform the
obligations of Seller under these agreements following Closing. Seller's
reasonable commercial efforts shall not require Seller to bear any costs
associated with any time, expense or travel of Buyer, its employees, attorneys,
accountants or other professionals or agents, or any other costs of Buyer.

6.1.4 Seller shall use commercially reasonable efforts, at its sole cost and
expense, to file and obtain approval of the motion(s) to reject those executory
contracts identified on Schedule 6.1.4.

6.1.5 From and after the date of this Agreement, Seller shall not take any
action or fail to take any action, which action or failure to act would
reasonably be expected to (i) prevent or impede the consummation of the
transactions contemplated in this Agreement, or (ii) result in (A) the reversal,
avoidance, revocation, vacating or modification (in any manner which would
reasonably be expected to materially and adversely affect Buyer's rights
hereunder) or (B) the entry of a stay pending appeal, in the cases of each of
sub-clauses (A) or (B) of this Section, with respect to the Approval Order, the
Cash Collateral Order, the Assignment Order; provided, however, that nothing
contained herein will in any way limit Seller's ability to provide notice of the
Approval Motion and to comply with requests for information from potential
competing bidders for the Assets so long as it complies with the provisions of
Section 6.2 and 6.3.

6.2 Overbidding Procedures. Seller and Buyer agree that no competing bid will be
accepted or approved by Seller unless it is made pursuant to terms substantially
similar to those contained in this Agreement (a "Competing Bid") and provides
for aggregate consideration having a value equal to at least the sum of (i) the
Purchase Price, plus $40,000 and in the case of the first bid, the Break Up Fee
of $55,000. Any bidder making a Competing Bid (a "Competing Bidder") shall be
required to deliver to Seller and file with the Bankruptcy Court an executed
copy of a similar form of asset purchase agreement (the "Competing Bid
Agreement") at least 10 calendar days prior to the date scheduled by the
Bankruptcy Court for the Sale Hearing, together with evidence of the Competing
Bidder's financial ability to consummate the Competing Bid Agreement; and the
Competing Bidder shall be required to submit to Seller on or before the date
scheduled by the Bankruptcy Court for the Sale Hearing, a certified check drawn
to the order of Seller in an amount equal to 5% of the Purchase price of the
Competing Bid (the "Competing Bid Deposit"). If 1 or more Competing Bid
Agreements are submitted, and after an opportunity for Buyer and all parties who
have submitted conforming Competing Bid Agreements to submit additional higher
and better offers (each successive Competing Bid Agreement shall be in
increments of not less than $40,000 in each successive round of bidding), Seller
will request the Bankruptcy Court to determine the prevailing Competing Bidder;
if so determined, the prevailing Competing Bidder shall execute and deliver at
the Sale Hearing an instrument of irrevocable commitment with terms
substantially similar to those described in this Agreement. If closing is not
timely concluded with a successful Competing Bidder, Seller shall be authorized
without further bankruptcy court approval to close with the next highest bidder
who has satisfied all of the former requirements.

6.3 Break Up Fee. Subject to approval of the Bankruptcy Court and the closing of
the contemplated transactions by an accepted Competing Bid, if a Competing Bid
is approved by order of the Bankruptcy Court, Buyer shall be paid a break up fee
of $55,000 (the "Break Up Fee"). Buyer shall be entitled to the Break Up Fee if
Seller materially breaches its obligations to proceed with the contemplated
transactions for any reason and Buyer terminates this Agreement. Payment of the
Break Up Fee shall (i) be in consideration of Buyer's efforts and expenses in
connection with the time and expense (including professional fees, associated
bidding and due diligence process and (ii) constitute liquidated and agreed
damages in respect of the transactions contemplated in this Agreement. As part
of the Approval Motion, Seller shall obtain an order from the Bankruptcy Court
that provides that the Break Up Fee constitutes a first priority administrative
expense of Seller pursuant to Section 503(b) of the Bankruptcy Code and
approving its payment upon the earlier of (A) the closing on the Competing Bid,
or (B) further order of the Bankruptcy Court. In the event that the Break Up Fee
is not approved by the Bankruptcy Court, Seller shall use commercially
reasonable efforts to obtain approval for the highest allowable Break Up Fee,
provided however, that if the Bankruptcy Court does not approve any Break Up
Fee, it shall not be a default by Seller under this Agreement.

7. TAXES. All applicable sales, transfer, documentary use, filing and other
taxes and fees, other than the escrow fees, that are due or payable as a result
of the conveyance, assignment, transfer, or delivery of the Assets or the
Business, levied upon Seller, shall be paid by Seller.

8. CLOSING. Closing ("Closing") of this transaction shall be on or before
January 31, 2003, time being of the essence, or on such other date mutually
agreed to by the parties in writing, at which time title and possession of the
Assets shall be transferred, conveyed, and delivered to Buyer. Closing shall be
at Seller's offices, or such other location as the parties may mutually agree.
If Closing has not occurred on or before January 31, 2003, Buyer has the right
to terminate this Agreement and obtain a refund of the Deposit.

9. BUYER'S CONDITIONS OF CLOSING. Buyer's obligation to purchase the Assets
shall be subject to the satisfaction of the following conditions:

9.1 Buyer shall have received from a U.S. Bankruptcy court having jurisdiction
over Seller, a final order approving this sale under Section 363 of the U.S.
Bankruptcy Code, free and clear of all liens, claims or encumbrances, including
but not limited to any claims of franchisees, area developers, landlords and
contracting parties under any Assumed Contracts or Assumed Liabilities, any
claims for unpaid wages or any pension, profit sharing or retirement plan or
collective bargaining agreement, regarding or relating to "hazardous substances"
and/or "hazardous materials" as those terms are defined in any federal, state or
local law, rule, regulation or ordinance, or any claims relating to any
occupational safety or health or compliance with OSHA arising on or before
Closing, in form and substance satisfactory to Buyer. If Seller cannot obtain
the order required under this Section, Buyer may terminate this Agreement and
obtain a refund of the Deposit.

9.2 All proceedings to be taken in connection with the transactions contemplated
by this Agreement and all documents incident to this Agreement shall be
reasonably satisfactory in form and substance to Buyer and its counsel, and
Buyer shall have received copies of all of such documents and other evidence as
Buyer and its counsel may reasonably request in order to establish the
consummation of such transactions.

9.3 There shall have been no materially adverse change or damage to the Assets,
or the Business or to Seller's franchisee or customer relationships or material
supplier relationships, which has or have a materially negative impact on the
Business. By way of example, a "material change" in the Business would include
(i) a material adverse change in franchisee relationships (either in number of
franchised stores or in the volume of royalty and advertising fees that such
relationships represent); (ii) a reduction in collections by 15% or more as
against accrued royalty and advertising fees, calculated as follows: accruals
for September 2002 royalty and advertising fees due October 2002, divided by the
collections of such fees from October 1, 2002 through October 31, 2002, compared
to the accrual for November 2002 royalty and advertising fees due December 2002
divided by the collections of such fees from December 1, 2002 through December
31, 2002; or (iii) any material degradation in the services provided by Area
Developers. Upon a material change, Buyer is entitled to terminate this
Agreement and obtain a refund of the Deposit.

9.4 Seller shall have closed and/or de-identified any company-owned store, and
have ceased all use of the Intellectual Property to operate any de-identified
company-owned store after Closing.

9.5 Seller shall have delivered to Buyer all the documents that Seller is
required to deliver under this Agreement.

10. SELLER'S CONDITIONS FOR CLOSING. Seller's obligation to sell the Assets
shall be subject to the satisfaction of the following conditions:

10.1 Seller shall have received from a U.S. Bankruptcy court having jurisdiction
over Buyer, a final order approving this sale under Section 363 of the U.S.
Bankruptcy Code, pursuant to the terms of this Agreement.

10.2 All proceedings to be taken in connection with the transactions
contemplated by this Agreement and all documents incident to this Agreement
shall be reasonably satisfactory in form and substance to Seller and its
counsel, and Seller shall have received copies of all of such documents and
other evidence as Seller and its counsel may reasonably request in order to
establish the consummation of such transactions.

10.3 Buyer shall have delivered to Seller all the documents that Buyer is
required to deliver under this Agreement.

11. ADDITIONAL DOCUMENTS. From time to time after Closing, at the reasonable
request of Buyer, Seller shall execute and deliver such other instruments of
conveyance and transfer and take such other action as Buyer may reasonably
require to more effectively convey any of the Assets.

12. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller represents and warrants
that:

12.1 Seller is a corporation duly existing, qualified, and in good standing
under the laws of the State of Delaware, and is and shall be duly empowered to
execute this Agreement and to do any and all things required or desirable for
consummation of all transactions contemplated by this Agreement.

12.2 To the best of Seller's knowledge, after reasonable investigation by the
President/CEO (Larry Destro), CFO (Al Lefeld), Sr. Vice President, Franchise
Operations (Linda Kramer) and in house counsel (Joan Durham), the inventories
set forth on Seller's Balance Sheet dated June 30, 2002 are properly valued, in
accordance with GAAP. Except for obsolete or damaged items that have been
reserved for or written off, inventories consist of items of quality and
quantity currently usable and saleable in the ordinary course of business
without markdown or discount. Seller holds no materials on consignment and has
title to no materials in the possession of others, except for orders in transit
from suppliers.

12.3 To the best of Seller's knowledge, after reasonable investigation by the
President/CEO (Larry Destro), CFO (Al Lefeld), Sr. Vice President, Franchise
Operations (Linda Kramer) and in house counsel (Joan Durham), Reserves, Accounts
Receivable and Notes Receivable reflected on Seller's Balance Sheet dated June
30, 2002 are, and all accounts receivable and notes receivable subsequently
accruing to Closing will be: (i) valid, genuine and subsisting; (ii) subject to
no known defenses, setoffs, or counterclaims, except as separately disclosed to
Buyer; (iii) due and payable in full; and (iv) extended in the ordinary course
of Seller's Business.

12.4 To the best of Seller's knowledge, after reasonable investigation by the
President/CEO (Larry Destro), CFO (Al Lefeld), Sr. Vice President, Franchise
Operations (Linda Kramer) and in house counsel (Joan Durham), the Franchise
Agreements, Developer Agreements and Assumed Contracts are valid and binding
obligations of the parties in accordance with their terms and conditions. Except
as set forth on Schedule 12.4 or as already been disclosed to Buyer, Seller has
disclosed all material monetary or non-monetary defaults under any Franchise
Agreement, Developer Agreement or Assumed Contracts to Buyer. To the best of
Seller's knowledge, after reasonable investigation by the President/CEO (Larry
Destro), CFO (Al Lefeld), Sr. Vice President, Franchise Operations (Linda
Kramer) and in house counsel (Joan Durham), and except as set forth on Schedule
12.4 or as already been disclosed to Buyer, no party to any such contract is in
default with respect to any term or condition, nor has any event occurred which,
through the passage of time or the giving of notice, or both, would constitute a
default under such contract or would cause the acceleration of any obligation of
any party to the contract or the creation of a lien or encumbrance upon any
Asset.

12.5 To the best of Seller's knowledge, after reasonable investigation by the
President/CEO (Larry Destro), CFO (Al Lefeld), Sr. Vice President, Franchise
Operations (Linda Kramer) and in house counsel (Joan Durham), except as set
forth on Schedule 12.5, there is no suit, claim, action, investigation or
proceeding ("Action") now pending or threatened before any court, administrative
or regulatory body, or any governmental agency. To the best of Seller's
knowledge, after reasonable investigation by the President/CEO (Larry Destro),
CFO (Al Lefeld), Sr. Vice President, Franchise Operations (Linda Kramer), and in
house counsel (Joan Drake Durham),except as set forth on Schedule 12.5, no such
judgment, order or decree has been entered against Seller nor has any such
liability incurred that has, or could have, the effect of adversely affecting
the Assets to be acquired by Buyer. To the best of Seller's knowledge, after
reasonable investigation by the President/CEO (Larry Destro), CFO (Al Lefeld),
Sr. Vice President, Franchise Operations (Linda Kramer) and in house counsel
(Joan Durham), there is no Action now pending or threatened before any court,
administrative or regulatory body, or any governmental agency, that will, or
could, prevent or hamper the consummation of the transactions contemplated by
this Agreement.

12.6 To the best of Seller's knowledge, after reasonable investigation by the
President/CEO (Larry Destro), CFO (Al Lefeld), Sr. Vice President, Franchise
Operations (Linda Kramer) and in house counsel (Joan Durham), except as set
forth on Schedule 12.6, Seller knows of no condition which may materially and
adversely affect the Business, the Assets or any franchisee, customer or
supplier relationship.

12.7 To the best of Seller's knowledge, after reasonable investigation by the
President/CEO (Larry Destro), CFO (Al Lefeld), Sr. Vice President, Franchise
Operations (Linda Kramer) and in house counsel (Joan Durham), Seller has
complied with and has operated the Business in compliance with all applicable
laws, rules and regulations of which Seller is aware and any noncompliance with
applicable laws, rules and regulations will not have a material adverse effect
on the Business.

12.8 Seller has good title to the Intellectual Property as set forth on Schedule
1.7 and, upon receiving court approval, has the right to transfer the
Intellectual Property in accordance with the terms and conditions of this
Agreement, free of any liabilities, changes, liens, pledges, mortgages,
restrictions, adverse claims, security interests, rights of others, and
encumbrances of any kind. To the best of Seller's knowledge, after reasonable
investigation by the President/CEO (Larry Destro), CFO (Al Lefeld), Sr. Vice
President, Franchise Operations (Linda Kramer) and in house counsel (Joan
Durham), Seller has properly registered the Intellectual Property set forth on
Schedule 12.8. Seller is aware of no adverse claims to or senior users of the
Intellectual Property. To the best of Seller's knowledge, after reasonable
investigation by the President/CEO (Larry Destro), CFO (Al Lefeld), Sr. Vice
President, Franchise Operations (Linda Kramer) and in house counsel (Joan
Durham), there is no claim, action, proceeding or other litigation pending or to
Seller's knowledge, threatened with respect to Seller's ownership or use of the
Intellectual Property. Seller has granted limited licenses to use the
Intellectual Property in connection with those agreements as identified in
Schedule 1.1, and to others as set forth on Schedule 12.8, and is aware of no
infringing uses of the Intellectual Property in connection with such grants.

12.9 Seller will use commercially reasonable efforts to provide notice of the
bankruptcy filing to all present and former franchisees, landlords, suppliers
and contracting parties of Seller.

13. REPRESENTATIONS AND WARRANTIES TO SURVIVE CLOSING. All of the
representations and warranties contained in this Agreement (including all
statements contained in any Schedule or Certificate or other instrument
delivered by or on behalf of Seller or Buyer pursuant to this Agreement) are a
material part of the consideration for the sale of the Assets, the inducement
for Buyer to buy the Assets, and Seller to sell the Assets, and accordingly, all
the representations and warranties contained in this Agreement shall survive
Closing for a period of 6 months.

14. POST-CLOSING COVENANTS. As partial consideration for Buyer's obligations
under this Agreement, after the date of Closing of this Agreement, Seller shall
not:

14.1 Disclose to any third party any trade, technical or technological secrets,
or confidential information concerning Seller or Seller's Business;

14.2 Use itself in connection with any company-owned store or otherwise, or
license any third party to use any Intellectual Property sold to Buyer under
this Agreement for any purpose whatsoever;

14.3 Use information concerning Seller's past or present franchisees, licensees
or customers, or any other information concerning Seller's Business for any
competitive business purpose.

In the event that a Court of competent jurisdiction deems any provision of this
Section 14 unenforceable, Buyer and Seller agree that such provision shall be
amended so that it is valid and enforceable to the fullest extent permitted by
law. These provisions shall survive Closing.

15. OPERATION PENDING CLOSING. During the period from the date of this Agreement
to Closing:

15.1 Except as contemplated by this Agreement and to the extent not inconsistent
with the Bankruptcy Code, the Bankruptcy Rules, the operation and information
requirements of the Office of the United States Trustee (the "OIRR"), any orders
entered by the Bankruptcy Court in Seller's Chapter 11 Case, and subject to the
availability of Cash Collateral financing, during the period prior to Closing,
Seller shall conduct its operations in compliance with all other applicable laws
and regulations in all material respects, and to the extent consistent therewith
so as to preserve the current value and integrity of the Assets, pay all
post-petition taxes as they become due and payable, maintain insurance on the
Assets (in amounts and types consistent with past practice), use commercially
reasonable efforts to preserve its relationships with franchisees, customers,
suppliers and others having business dealings with it. Without limiting the
generality of the foregoing, prior to Closing, Seller shall, subject to the
requirements of the Bankruptcy Code, Bankruptcy Rules, the OIRR, any orders
entered by the Bankruptcy Court in Seller's Chapter 11 Case and subject to the
availability of cash collateral financing, conduct its operations in the
ordinary and usual course of business and use Seller's best efforts to maintain
and preserve the organization of the Assets, the Business and its employees.

15.2 Seller shall inform Buyer in writing from time to time of the development
of any material matters relating to the Business or Assets including, without
limitation, any adverse changes in the results of operations or financial
position of the Business or Assets or any litigation, proceeding, or government
investigation instituted or threatened against Seller relating to the Business
or Assets or the occurrence of any factor that might give rise to any such
litigation, proceeding, or investigation.

15.3 Seller shall use its commercially reasonable efforts to market and sell its
company-owned stores to franchisees who execute a valid franchise agreement and
supply agreement for Kodak products. Upon a sale of any company-owned store,
Seller shall receive an increase in the Purchase Price of $15,000 pursuant to
Section 5.4.3. In connection with the sale of any company-owned store, Seller
shall use its commercially reasonable efforts to cause the landlord to enter
into a direct Lease with the purchasing franchisee without recourse to Seller.

15.4 Seller shall not, without the prior written consent of Buyer:

15.4.1 Sell or otherwise transfer any of the Assets other than the sale of
inventory in the ordinary course, except pursuant to Section 15.3;

15.4.2 Take any action to waive or compromise any material claims (whether or
not asserted in any pending litigation), which are included in the Assets except
as provided in this Agreement, outside of the normal course of business;

15.4.3 Increase or agree to increase in any manner the compensation of any of
the employees of the Business or commit the Business to any pension, retirement,
or profit sharing plan or agreement or employment agreement with or for the
benefit of any employee or other person, outside of the normal course of
business.

15.5 Seller shall not enter into any new contracts relating to the Business,
except in the ordinary and usual course of business consistent with past
practices, and shall not in any event enter into any contracts relating to the
Business providing for total payment by Seller in excess of $10,000 without
Buyer's prior written consent.

15.6 Seller shall not, without Buyer's prior written consent, cancel, amend,
modify or breach any Assumed Contracts or Assumed Obligations.

15.7 Seller shall afford to Buyer and its counsel, accountants, and authorized
representatives full opportunity and access to inspect, investigate and audit
all properties, books, records, contracts and other documents of the Business
and shall furnish such financial and other information with respect to the
Business, its personnel, and property as Buyer may reasonably require either
offsite of the Business premises or onsite during normal business hours.

15.8 Except as otherwise provided in this Agreement, all revenues, profits,
losses, risk of loss and liabilities resulting from the ownership or operation
of Seller's Business and the Assets before Closing shall be Seller's
responsibility. All revenues, profit, losses, and liabilities resulting from the
ownership or operation of the Assets after Closing shall be Buyer's
responsibility. Seller shall keep the Assets adequately insured against fire and
casualty until Closing. If any part of the Assets are damaged or destroyed by
fire or casualty before Closing, the Seller shall assign all insurance proceeds
to Buyer. In the absence of adequate insurance proceeds for the full replacement
value of any Assets, Buyer shall receive a credit to the Purchase Price in the
amount of any shortfall.

15.9 Seller shall pay all amounts due under written or oral Area Developer
Agreements, as and when due, and shall pay all amounts due under the Area
Developer Agreements at Closing. If Seller fails to make all such payments,
Buyer may take a credit toward the Purchase Price in an amount equal to any such
deficiency pursuant to Section 5.4.4 and provided that Buyer remit same to the
Area Developers.

15.10 Seller will cause all property owned or leased by it to be insured against
all ordinary and insurable risks (except in respect of any leased property where
the terms of the lease do not impose on lessee the obligation to maintain
insurance) and will operate, maintain, and repair all its property in a careful,
prudent, and efficient manner.

15.11 Seller shall furnish all information to and make all filings required by
any state or governmental regulation including making the appropriate filing and
notices with the appropriate federal and state environmental protection agency
in any state where it operated a company-owned store.

16. TRANSFER. Simultaneously with the payment at Closing, and upon delivery of
an order approving the sale pursuant to Section 363 of the Bankruptcy Code in
the form required under Section 9.1, Seller shall convey by bill of sale
absolute, all Assets to Buyer or by assignment, free of all liens, encumbrances,
conditions, and limitations of any nature whatsoever.

17. EXPENSES. Each party shall pay its own expenses in connection with this
Agreement, including the fees and expenses of counsel, accountants, or other
professionals.

18. RECORDS. Seller shall provide Buyer with originals or legible copies of all
records related to the operation of the Business including all records regarding
the use, storage or disposal of hazardous materials or hazardous waste, and all
records related to the use or maintenance of the Assets. Buyer shall provide
Seller access to all vendor invoices at no cost to Buyer during Buyer's normal
business hours. Buyer shall retain all vendor invoices at no cost to Buyer for 3
years following Closing and may, at that time, discard such vendor invoices.
Buyer shall make all records it retains regarding Sellers operation of the
Business available to Seller if Seller needs these records in the event of a
future tax audit.

19. BREACH.

19.1 Breach by Buyer. In the event that Buyer fails to tender the Purchase Price
at Closing, and Seller has substantially performed all of its obligations under
this Agreement, as its sole and exclusive remedy, Seller shall be entitled to
terminate this Agreement and as its liquidated damages retain the Deposit and
Harry Loyle shall surrender any rights to (A) his Area Developer Agreement, and
(B) his personal holding of Seller's shares (approximately 717,016 shares at
October 1, 2002).

19.2 Breach by Seller. In the event Seller fails to close for any reason, and
Buyer has substantially performed all of its obligations under this Agreement,
as its sole and exclusive remedy, Buyer shall be entitled to terminate this
Agreement and obtain a full refund of the Deposit, along with the Break Up Fee.

20. WAIVER OF BREACH. No failure to declare or enforce a breach of this
Agreement shall constitute a waiver of any other or subsequent breach.

21. CUMULATIVE REMEDIES. The remedies afforded in this Agreement are cumulative
to each other and to all other remedies provided by law.

22. UNENFORCEABILITY OF ANY PROVISIONS. The unenforceability or invalidity of
any provision of this Agreement shall not affect the enforceability and validity
of the remainder of this Agreement, which shall continue in full force and
effect.

23. NOTICES. Any notice required or permitted under this Agreement shall be in
writing and shall be delivered by hand or shall be sent by United States mail,
return receipt requested, addressed to Seller, Attn: Corporate Counsel, at 4444
Lake Center Drive, Dayton, OH 45426, with a copy to Anne M. Frayne at 18 West
First Street, Suite 200, Dayton, Ohio 45402, and to Buyer at 210 New Road,
Linwood, NJ 08221, with a copy to Lane Fisher, Esquire at Fisher & Zucker LLC,
121 Avenue of the Arts, Suite 1200, Philadelphia, PA 19107.

24. ASSIGNMENT. Buyer may assign some or all of its rights under this Agreement
to a separate entity with identical shareholders, provided that no such
assignment shall release Buyer from any of its obligations under this Agreement.

25. BROKERS. Seller and Buyer represent that there is no broker or agent
involved in this transaction. Seller and Buyer agree to indemnify and hold each
other harmless for any liability or claim for the payment of any commission,
including interest and attorneys' fees, arising from the conduct of the other
party. These representations are made as part of the consideration of this
transaction. This Section shall survive Closing.

26. HEADINGS. All headings are for convenience and reference only and shall not
be deemed to have any substantive effect.

27. ENTIRE AGREEMENT. This Agreement and the Schedules and documents delivered
pursuant to this Agreement constitute the entire integrated agreement between
the parties pertaining to the subject matter set forth in this Agreement, and
supersede all prior and contemporaneous agreements, understandings,
negotiations, and discussions, whether written or oral, of the parties. There
are no representations, warranties, or other agreements between the parties in
connection with the subject matter contained in this Agreement, except as
specifically set forth in this Agreement. No supplement, modification, or waiver
of this Agreement shall be binding unless executed in writing by the parties.

28. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio. Any action arising out of or
relating to this Agreement shall be commenced, litigated and concluded only in
any state or federal court in Ohio.

29. SELLER'S CLOSING OBLIGATIONS. At Closing, Seller shall deliver to Buyer the
following documents:

29.1 Assignments, consents, bills of sale, and other documents or instruments of
transfer which shall contain full warranties of title as shall be effective to
vest in Buyer all of Seller's right, title, and interest in and to all of the
Assets, free and clear of all liens, charges, encumbrances, and restrictions;

29.2 All contracts, files, commitments, and rights pertaining to Seller's
Business and other data relating to its operations;

29.3 Certified copy of the bankruptcy court order approving the sale.

30. BUYER'S CLOSING OBLIGATIONS. At Closing, Buyer shall deliver to Seller:

30.1 Payment of the Purchase Price due under this Agreement; and

30.2 Resolution of Board of Directors of Buyer, authorizing the execution of
this Agreement and all documents required for Closing; and

30.3 Delivery of a Transition Services Agreement in form attached as Schedule
30.3.

31. SUCCESSORS AND ASSIGNS. This Agreement shall be for the benefit of and
binding upon the parties and their respective representatives, successors and
assigns. Buyer shall be permitted to assign any real estate leases, by and
through an affiliated real estate entity, without recourse to Buyer.

32. ATTORNEY'S FEES. If it becomes necessary for either party to retain the
services of legal counsel to enforce the breaching party's obligations under
this Agreement, the non-breaching party shall be entitled to recover its
reasonable costs and expenses, including reasonable attorney's fees, incurred in
enforcing the breaching party's obligations under this Agreement.

33. COUNTERPARTS. Each party may execute this Agreement in multiple counterparts
without affecting the validity or enforceability of this Agreement.

Intending to be legally bound, the parties have executed this Agreement as of
the date first written above.

Seller: MOTO PHOTO, INC.

 

By: /s/ Lawrence P. Destro

Lawrence P. Destro,

President and CEO

 

Buyer: MOTO FRANCHISE CORP.

 

By: /s/ Harry Loyle

Harry Loyle, President

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIST OF SCHEDULES TO

ASSET PURCHASE AGREEMENT

BETWEEN MOTO PHOTO, INC.

AND

MOTO FRANCHISE CORPORATION

 

 

 

 

Schedule No.

Description/Title

Schedule 1.1 Developer Agreements

Franchise Contracts

Schedule 1.2 Covenants Against Competition

Schedule 1.3 Management Agreements

Schedule 1.6 Summary Asset List

Schedule 1.7 Intellectual Property

Schedule 1.8 Domain Names

Internet-Related Agreements

Computer-Related Agreements

Schedule 1.9 Customer Access Information

Schedule 1.10 Miscellaneous business-related books and records

N/A Supply Agreement dated September 17, 2001,

between Moto Photo, Inc. and Eastman

Kodak Company

N/A Private Label Film Agreement dated as of June 1, 2002,

between Agfa Corporation and Moto Photo, Inc.

N/A Summary of Verbal Supply Contract between Moto Photo,

Inc. and Trebla Chemistry, Inc.

Schedule 3 Assumed Contracts

Schedule 5.4.1 Accounts Receivable, Notes Receivable, Inventory

N/A Form of Interim Order Authorizing Use of Cash Collateral

Schedule 6.1.4 Rejected Agreements

Schedule 12.4 Certain Disclosures

Schedule 12.5 Certain Disclosures and Pending Litigation

Schedule 12.6 Certain Disclosures

Schedule 12.8 Intellectual Property and Limited Licenses