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    EXHIBIT
      10.1

    

    

    

    

    

    

    

    

    

    

    

    

    

    
      

      

    

    
      ASSET
        PURCHASE AGREEMENT

      

      DATED
        AS OF JANUARY 30, 2007

      

      BY
        AND BETWEEN

      

      MUSICIAN’S
        FRIEND, INC.

      

      AND

      

      DENNIS
        BAMBER, INC., D/B/A THE WOODWIND & THE BRASSWIND,

      

      AND

      

      ITS
        CHAPTER 11 ESTATE

    

    
      

      
        

        

      

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    
      	
              Article
                1 Definitions

            	
              1

            
	 	 
	
              Article
                2 Purchase and Sale of Transferred Assets; Closing

            	
              10

            
	 	 
	 	
              2.1

            	
              Purchase
                of Transferred Assets

            	
              10

            
	 	
              2.2

            	
              Consideration

            	
              11

            
	 	
              2.3

            	
              Closing

            	
              13

            
	 	
              2.4

            	
              Purchase
                Price Adjustment

            	
              14

            
	 	
              2.5

            	
              Calculation
                of Closing Date Qualified Accounts Receivable and Assumed Accrued
                Liabilities

            	
              14

            
	 	
              2.6

            	
              Inventory.

            	
              15

            
	 	
              2.7

            	
              Allocation

            	
              16

            
	 	 
	
              Article
                3 Representations and Warranties of Seller

            	
              17

            
	 	 
	 	
              3.1

            	
              Organization
                and Good Standing; Shareholders

            	
              17

            
	 	
              3.2

            	
              Authorization

            	
              17

            
	 	
              3.3

            	
              Real
                Property

            	
              17

            
	 	
              3.4

            	
              Personal
                Property.

            	
              18

            
	 	
              3.5

            	
              Environmental
                Matters

            	
              19

            
	 	
              3.6

            	
              Contracts

            	
              19

            
	 	
              3.7

            	
              No
                Conflict or Violation; Consents

            	
              21

            
	 	
              3.8

            	
              Permits

            	
              21

            
	 	
              3.9

            	
              Financial
                Information; Books and Records

            	
              21

            
	 	
              3.10

            	
              Liabilities

            	
              22

            
	 	
              3.11

            	
              Litigation

            	
              22

            
	 	
              3.12

            	
              Labor
                Matters

            	
              22

            
	 	
              3.13

            	
              Purchase
                Commitments and Outstanding Bids

            	
              23

            
	 	
              3.14

            	
              Employee
                Benefit Plans

            	
              23

            
	 	
              3.15

            	
              Transactions
                with Related Parties

            	
              23

            
	 	
              3.16

            	
              Compliance
                with Legal Requirements

            	
              24

            
	 	
              3.17

            	
              Intellectual
                Property

            	
              24

            
	 	
              3.18

            	
              Assets
                Necessary to Continue to Conduct Business

            	
              25

            
	 	
              3.19

            	
              Brokers;
                Transactions Costs

            	
              25

            
	 	
              3.20

            	
              No
                Other Agreements to Sell the Transferred Assets

            	
              25

            
	 	
              3.21

            	
              Product
                Liability

            	
              25

            
	 	
              3.22

            	
              Approvals

            	
              26

            
	 	 
	
              Article
                4 Purchaser’s Representations and Warranties

            	
              26

            
	 	 
	 	
              4.1

            	
              Organization

            	
              26

            
	 	
              4.2

            	
              Authorization

            	
              26

            
	 	
              4.3

            	
              Brokers;
                Transactions Costs

            	
              26

            
	 	
              4.4

            	
              Transferred
                Assets “AS IS”; Purchaser’s Acknowledgment Regarding Same

            	
              26

            
	 	
              4.5

            	
              Availability
                of Funds

            	
              27

            

    

     

     

    
      
         

      

      
        i

        
          

        

      

      
         

      

    

     

    
      	 	 
	
              Article
                5 Covenants

            	
              27

            
	 	 
	 	
              5.1

            	
              Access
                and Availability

            	
              27

            
	 	
              5.2

            	
              Operation
                of the Business

            	
              27

            
	 	
              5.3

            	
              Notices
                and Consents

            	
              29

            
	 	
              5.4

            	
              Commercially
                Reasonable Efforts

            	
              29

            
	 	
              5.5

            	
              Notice
                of Developments

            	
              30

            
	 	
              5.6

            	
              Bankruptcy
                Proceedings

            	
              30

            
	 	
              5.7

            	
              Expense
                Reimbursement Amount

            	
              30

            
	 	
              5.8

            	
              Notice
                of Bids

            	
              31

            
	 	
              5.9

            	
              Reserved

            	
              31

            
	 	
              5.10

            	
              Employee
                Matters

            	
              31

            
	 	
              5.11

            	
              Confidentiality

            	
              31

            
	 	
              5.12

            	
              Change
                of Name

            	
              32

            
	 	
              5.13

            	
              Transfer
                of Assets

            	
              32

            
	 	
              5.14

            	
              Cure
                Costs

            	
              32

            
	 	 
	
              Article
                6 Conditions Precedent to the Parties’ Respective Obligation to
                Close

            	
              32

            
	 	 
	 	
              6.1

            	
              No
                Restraints

            	
              32

            
	 	
              6.2

            	
              Governmental
                Authorizations

            	
              33

            
	 	 
	
              Article
                7 Conditions Precedent to Purchaser’s Obligation to Close

            	
              33

            
	 	 
	 	
              7.1

            	
              Accuracy
                of Representations

            	
              33

            
	 	
              7.2

            	
              Performance
                of Obligations

            	
              33

            
	 	
              7.3

            	
              Deliveries

            	
              33

            
	 	
              7.4

            	
              No
                Material Adverse Effect

            	
              33

            
	 	
              7.5

            	
              Orders

            	
              33

            
	 	
              7.6

            	
              Executory
                Contracts

            	
              33

            
	 	
              7.7

            	
              Key
                Software Licenses

            	
              34

            
	 	
              7.8

            	
              No
                Proceedings

            	
              34

            
	 	
              7.9

            	
              Governmental
                Approvals

            	
              34

            
	 	 
	
              Article
                8 Conditions Precedent to Seller’s Obligation to Close

            	
              34

            
	 	 
	 	
              8.1

            	
              Accuracy
                of Representations

            	
              34

            
	 	
              8.2

            	
              Performance
                of Obligations

            	
              34

            
	 	
              8.3

            	
              Deliveries

            	
              34

            
	 	
              8.4

            	
              No
                Proceedings

            	
              35

            
	 	 
	
              Article
                9 Termination

            	
              35

            
	 	 
	 	
              9.1

            	
              Termination
                Events

            	
              35

            
	 	
              9.2

            	
              Termination
                Procedures

            	
              36

            
	 	
              9.3

            	
              Expenses;
                Termination Fees

            	
              36

            
	 	
              9.4

            	
              Effect
                of Termination

            	
              36

            

    

     

    
      
         

      

      
        ii

        
          

        

      

      
         

      

    

    
      	 	 
	
              Article
                10 Additional Covenants

            	
              36

            
	 	 
	 	
              10.1

            	
              General

            	
              36

            
	 	
              10.2

            	
              Leases
                and Other Agreements

            	
              37

            
	 	
              10.3

            	
              Certain
                Tax Matters.

            	
              37

            
	 	
              10.4

            	
              Access
                to Books, Records, Etc.; Further Action.

            	
              38

            
	 	 
	
              Article
                11 General Provisions

            	
              38

            
	 	 
	 	
              11.1

            	
              Applicable
                Law

            	
              38

            
	 	
              11.2

            	
              Jurisdiction;
                WAIVER OF JURY TRIAL

            	
              39

            
	 	
              11.3

            	
              Termination
                of Representations and Warranties

            	
              39

            
	 	
              11.4

            	
              Notices

            	
              39

            
	 	
              11.5

            	
              Confidentiality

            	
              39

            
	 	
              11.6

            	
              Public
                Announcements

            	
              39

            
	 	
              11.7

            	
              Binding
                Effect; Assignment

            	
              40

            
	 	
              11.8

            	
              Modification

            	
              40

            
	 	
              11.9

            	
              Counterparts

            	
              40

            
	 	
              11.10

            	
              Severability

            	
              40

            
	 	
              11.11

            	
              Entire
                Agreement

            	
              40

            
	 	
              11.12

            	
              Interpretation
                of Agreement

            	
              40

            

    

    

    

    
      	 	
              Exhibits

            	 	 
	 	 	 	 
	 	
              Exhibit
                A

            	
              -

            	
              Reserved

            
	 	
              Exhibit
                B

            	
              -

            	
              Reserved

            
	 	
              Exhibit
                C

            	
              -

            	
              Sale
                Order

            
	 	
              Exhibit
                D

            	
              -

            	
              Reserved

            
	 	
              Exhibit
                E

            	
              -

            	
              Form
                of Assignment Agreement

            
	 	
              Exhibit
                F

            	
              -

            	
              Form
                of Bill of Sale

            
	 	
              Exhibit
                G

            	
              -

            	
              Material
                Terms of Amendments to Real Estate Leases

            
	 	
              Exhibit
                H

            	
              -

            	
              Form
                of Noncompetition Agreement

            
	 	
              Exhibit
                I

            	 	
              Material
                Terms of Barrington/LA Sax
                Agreement

            

    

    

    
      
         

      

      
        iii

        
          

        

      

      
         

      

       

    

    ASSET
      PURCHASE AGREEMENT

     

    THIS
      ASSET PURCHASE AGREEMENT (this “Agreement”)
      is
      made as of January 30, 2007, by and between Musician’s Friend, Inc., a Delaware
      corporation (“Purchaser”),
      and
      Dennis Bamber, Inc., d/b/a The Woodwind & The Brasswind, an Indiana
      corporation, and its chapter 11 estate (“Seller”),
      pursuant to the following terms and conditions.

     

    Recitals:

     

    A. Seller has
      filed
      a voluntary petition (the “Petition”)
      for
      reorganization relief pursuant to Chapter 11 of Title 11 of the United States
      Code, 11 U.S.C. §§ 101-1330 (as amended, the “Bankruptcy
      Code”),
      in
      the United States Bankruptcy Court for the Northern District of Indiana (the
      “Bankruptcy
      Court”),
      which
      case shall be administered pursuant to order of the Bankruptcy Court (the
“Bankruptcy
      Case”).

     

    B. Purchaser
      desires to purchase substantially all of the assets, contracts and properties
      of
      Seller related to the Business and to assume certain specified liabilities
      from
      Seller (the “Acquisition”),
      and
      Seller desires to sell, convey, assign, and transfer to Purchaser, such assets,
      contracts and properties together with such specified liabilities.

     

    C. The
      Parties intend to effectuate the transactions contemplated by this Agreement
      through a sale of substantially all of Seller’s assets pursuant to Section 363
      of the Bankruptcy Code.

     

    D. The
      execution and delivery of this Agreement and Seller’s ability to consummate the
      transactions set forth in this Agreement are subject, among other things, to
      the
      entry of an order of the Bankruptcy Court under, inter alia,
      Sections 363 and 365 of the Bankruptcy Code.

     

    E. Seller
      and Purchaser have each approved the Acquisition.

     

    Agreement:

     

    NOW,
      THEREFORE, in consideration of the foregoing premises, the mutual covenants
      and
      agreements contained herein and other good and valuable consideration, the
      adequacy of which is hereby acknowledged, Purchaser and Seller hereby agree
      as
      follows:

     

    ARTICLE
      1

    DEFINITIONS

     

    “Accounts
      Receivable/Inventory Adjustment Amount”
shall
      have the meaning set forth in Section 2.4(a).

     

    “Acquisition”
shall
      have the meaning set forth in Recital B.

     

    “Action”
means
      any action, order, writ, injunction, judgment or decree outstanding or claim,
      suit, litigation, proceeding, investigation or dispute.

     

    “Adjustment
      Payment”
shall
      have the meaning set forth in Section 2.2(b)(iii).

     

    “Affiliate”
of
      a
      Person means a Person that directly or indirectly, through one or more
      intermediaries, controls, is controlled by, or is under common control with,
      the
      first-mentioned Person. For purposes of this definition, “control,” when used
      with respect to any specified Person, means the power to direct or cause the
      direction of the management and policies of such Person, directly or indirectly,
      whether through ownership of voting securities or by contract or otherwise,
      and
      the terms “controlling” and “controlled by” have meanings correlative to the
      foregoing.

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    “Allocation”
shall
      have the meaning set forth in Section 2.7.

     

    “Ancillary
      Agreements”
means
      the Assumption Agreement, the Bill of Sale, the Noncompetition Agreement and
      each other agreement entered into in connection herewith.

     

    “Assumed
      Accrued Liabilities”
shall
      have the meaning set forth in Section 2.2(c).

     

    “Assumed
      Liabilities”
shall
      have the meaning set forth in Section 2.2(c).

     

    “Assumption
      Agreement”
shall
      have the meaning set forth in Section 2.3(b).

     

    “Bankruptcy
      Case”
shall
      have the meaning ascribed to such term in Recital A.

     

    “Bankruptcy
      Code”
shall
      have the meaning ascribed to such term in Recital A.

     

    “Bankruptcy
      Court”
shall
      have the meaning ascribed to such term in Recital A.

     

    “Bankruptcy
      Rules”
shall
      mean the Federal Rules of Bankruptcy Procedure.

     

    “Barrington/LA
      Sax Agreement”
shall
      have the meaning set forth in Section 10.2(b).

     

    “Benefit
      Arrangement”
means
      any employment, consulting, severance or other similar contract, arrangement
      or
      policy (written or oral) and each plan, arrangement, program, agreement or
      commitment (written or oral) providing for insurance coverage (including any
      self-insured arrangements), workers’ compensation, disability benefits,
      supplemental unemployment benefits, vacation benefits, retirement benefits,
      life, health or accident benefits (including any “voluntary employees’
beneficiary association” as defined in Section 501(c)(9) of the Code providing
      for the same or other benefits) or for deferred compensation, profit-sharing,
      bonuses, stock options, stock appreciation rights, stock purchases or other
      forms of incentive compensation or post-retirement insurance, compensation
      or
      benefits which (a) is not a Welfare Plan, Pension Plan or Multiemployer Plan
      and
      (b) is entered into, maintained, contributed to or required to be contributed
      to
      or has been entered into, maintained, contributed to or required to be
      contributed to, by any Seller or any ERISA Affiliate or under which any Seller
      or any ERISA Affiliate has or may have any Liability.

     

    “Bill
      of Sale”
shall
      have the meaning set forth in Section 2.3(b).

     

    “Business”
means
      Seller’s businesses of marketing, selling, refurbishing or repairing or
      otherwise providing musical instruments, as well as all other products, parts,
      accessories, print materials, supplies and services related to such instruments
      to consumers, students, schools and other educational institutions, whether
      through the Store / Headquarters, the internet, catalog, mail order, direct
      response sales or otherwise.

     

    “Business
      Day”
means
      any day other than a Saturday or Sunday or a legal holiday on which banks in
      Los
      Angeles, California or New York, New York are closed.

     

    “Cash”
means
      cash and cash equivalents, including marketable securities and short-term
      investments.

     

    “CERCLA”
shall
      have the meaning set forth in the definition of “Environmental
      Laws.”

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    “Closing”
shall
      have the meaning set forth in Section 2.3(a).

     

    “Closing
      Date”
shall
      have the meaning set forth in Section 2.3(a).

     

    “Closing
      Date Payment”
shall
      have the meaning set forth in Section 2.2(b)(i).

     

    “Closing
      Date Qualified Accounts Receivable”
shall
      have the meaning set forth in Section 2.5(a).

     

    “Closing
      Inventory”
      shall have the meaning set forth in Section 2.6(a).

     

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

     

    “Contracts”
means
      all agreements, contracts, leases (whether for real or personal property),
      purchase orders, undertakings, covenants not to compete, employment agreements,
      confidentiality agreements, licenses, instruments, obligations and commitments
      relating to the Business or any of the Transferred Assets, whether written
      or
      oral.

     

    “Court
      Order”
means
      any judgment, decision, consent decree, injunction, ruling or order of any
      foreign, federal, state or local court or governmental agency, department or
      authority that is binding on any Person or its property under applicable
      law.

     

    “Cure
      Costs”
means
      all liabilities, obligations and commitments of Seller for all cure,
      compensation and reinstatement costs or expenses of or relating to the
      assumption and assignment of any Contracts to be assumed and assigned as part
      of
      the Transferred Assets that
      are
payable
      or necessary to cure any defaults pursuant to Section 365 of the Bankruptcy
      Code
      on account of any obligation or default arising on or before the Closing
      Date.

     

    “Default”
means
      (a) a breach of or default under any Contract, (b) the occurrence of an event
      that with or without the passage of time or the giving of notice or both would
      constitute a breach of or default under any Contract or (c) the occurrence
      of an
      event that with or without the passage of time or the giving of notice or both
      would give rise to a right of termination, renegotiation or acceleration, or
      the
      modification of the terms or conditions, under any Contract.

     

    “Defective
      Merchandise”
means
      any item of Inventory that is damaged or defective and not saleable as
“new.”

     

    “Designated
      Employees”
shall
      have the meaning set forth in Section 5.10(b).

     

    “Disclosure
      Schedule”
means
      the written disclosure schedule of Seller delivered to Purchaser prior to the
      date hereof, a copy of which is attached hereto.

     

    “Display,
      Return and Obsolete Merchandise”
means
      any item of Inventory that (a) has been removed from its packaging, or
      installed, affixed or modified for purposes of a sample, display or for
      demonstrating its function or design and is not salable as “new” under Seller’s
      historic sales practices, (b) has been returned by a customer and is not
      resalable as “new,” under Seller’s historic sales practices, or (c) has been
      discontinued by the applicable vendor.

     

    “Distribution
      Center”
means
      the distribution center of Seller located at 4955 Ameritech Drive, South Bend,
      Indiana 46628.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    “Employee
      Plans”
means
      all Benefit Arrangements, Multiemployer Plans, Pension Plans and Welfare
      Plans.

     

    “Employee
      Plan Liabilities”
means
      any Liability under, relating to or with respect to any Employee Plans,
      including any Liability of any Employee Plan, Seller or any ERISA
      Affiliate.

     

    “Employees”
means
      all officers and directors of Seller and all other Persons employed by Seller
      in
      connection with the Business on a full or part-time basis together with all
      persons retained as “independent contractors” in connection with the Business as
      of the relevant date.

     

    “Encumbrance”
means
      any claim, lien, pledge, option, charge, easement, Tax assessment, security
      interest, deed of trust, mortgage, right-of-way, encroachment, building or
      use
      restriction, conditional sales agreement, encumbrance or other right of third
      parties of any sort whatsoever, whether voluntarily incurred or arising by
      operation of law, and includes any agreement to give any of the foregoing in
      the
      future, and any contingent sale or other title retention agreement or lease
      in
      the nature thereof, other than Permitted Encumbrances.

     

    “Entity”
      means any corporation (including any non-profit corporation), general
      partnership, limited partnership, limited liability partnership, joint venture,
      estate, trust, cooperative, foundation, society, political party, union, company
      (including any limited liability company or joint stock company), firm or other
      enterprise, association, organization or entity.

     

    “Environmental
      Condition”
means
      the state of the environment, including natural resources (e.g., flora and
      fauna), soil, surface water, ground water, any present or potential drinking
      water supply, subsurface strata or ambient air, relating to or arising out
      of
      the use, handing, storage, treatment, recycling, generation, transportation,
      release, spilling, leaking, pumping, pouring, emptying, discharging, injecting,
      escaping, leaching, disposal, dumping or threatened release of Hazardous
      Substances by Seller or any of its predecessors or successors in interest,
      or by
      any of its agents, Representatives, employees or independent contractors when
      acting in such capacity on behalf of Seller.

     

    “Environmental
      Laws”
means
      all applicable federal, state, district and local laws, all rules or regulations
      promulgated thereunder, and all orders, consent orders, judgments, notices,
      permits or demand letters issued, promulgated or entered pursuant thereto,
      relating to pollution or protection of the environment (including ambient air,
      surface water, ground water, land surface or subsurface strata), including
      (a)
      laws relating to emissions, discharges, releases or threatened releases of
      pollutants, contaminants, chemicals, industrial materials, wastes or other
      substances into the environment and (b) laws relating to the identification,
      generation, manufacture, processing, distribution, use, treatment, storage,
      disposal, recovery, transport or other handling of pollutants, contaminants,
      chemicals, industrial materials, wastes or other substances. Environmental
      Laws
      shall include the Comprehensive Environmental Response, Compensation and
      Liability Act of 1980, as amended (“CERCLA”),
      the
      Toxic Substances Control Act, as amended, the Hazardous Materials Transportation
      Act, as amended, the Resource Conservation and Recovery Act, as amended, the
      Clean Water Act, as amended, the Safe Drinking Water Act, as amended, the Clean
      Air Act, as amended, the Occupational Safety and Health Act, as amended, and
      all
      analogous laws promulgated or issued by any Governmental Body.

     

    “Environmental,
      Health and Safety Liability”
means
      any cost, damage, Liability or other responsibility of Seller arising from
      or
      under Environmental Law or Occupational Safety and Health Law and consisting
      of
      or relating to: (a) any environmental, health, or safety matters or conditions
      (including on-site or off-site contamination, occupational safety and health,
      and regulation of chemical substances or products); (b) fines, penalties,
      judgments, awards, settlements, legal or administrative proceedings, damages,
      losses, claims, demands and response, investigative, remedial, or inspection
      costs and expenses arising under Environmental Law or Occupational Safety and
      Health Law; (c) financial responsibility under Environmental Law or Occupational
      Safety and Health Law for cleanup costs or corrective action, including any
      investigation, cleanup, removal, containment, or other remediation or response
      actions (“Cleanup”)
      required by applicable Environmental Law or Occupational Safety and Health
      Law
      (whether or not such Cleanup has been required or requested by any governmental
      body or any other Person) and for any natural resource damages; or (d) any
      other
      compliance, corrective, investigative, or remedial measures required under
      Environmental Law or Occupational Safety and Health Law. The terms “removal,”
“remedial,” and “response action,” include the types of activities covered by
      CERCLA.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

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

     

    “ERISA
      Affiliate”
means
      any Entity which is (or at any relevant time was) a member of a “controlled
      group of corporations” with, under “common control” with, or a member of an
“affiliated service group” with, or otherwise required to be aggregated with,
      Seller as set forth in Section 414(b), (c), (m) or (o) of the Code or Section
      4001 of ERISA.

     

    “Excluded
      Assets”
means
      Seller’s (a) rights under this Agreement, (b) Cash, (c) avoidance and other
      bankruptcy estate causes of action under the Bankruptcy Code to which Seller
      is,
      or becomes, a party, (d) all claims and causes of action of any kind or nature
      relating to (i) the Excluded Assets, or (ii) any shareholder, officer and/or
      director of Seller (as such) or any agreements between Seller and any or all
      of
      its shareholders (as such), excluding for purposes of this clause (ii) all
      claims and causes of action of any kind or nature against David Yoder, (e)
      retainers and prepayments for Professional Fees, (f) all
      claims for refunds (together with interest accrued thereon) of Seller related
      to
      Taxes in respect of periods ending on or prior to the Closing,
      (g)
all
      rights in connection with and the assets of any Employee Plans, (h) Seller’s
      minute books and stock records and other documents relating to the organization,
      maintenance and existence of Seller, (i) Seller’s prepaid business, group and
      other insurance policies (including without limitation the cash surrender value
      of any Seller-owned life insurance policies), Contracts of insurance, all
      coverage, proceeds and recoveries thereunder and all rights in connection
      therewith to the extent unrelated to the Transferred Assets, (j) the capital
      stock or other ownership interest held by Seller in any Subsidiary (it being
      understood, however, that any assets of a Subsidiary shall nonetheless
      constitute Transferred Assets hereunder unless any such asset shall be in the
      nature of an Excluded Asset), (k)
      rights under the Asset Purchase Agreement, dated as of December 15, 2006,
      between Seller, its Chapter 11 Estate and Steinway Musical Instruments, Inc.,
      (l) the Government A/R as of the Closing Date, and (m) the assets identified
      in
      Section 1.1(a) of the Disclosure Schedule.

     

    “Excluded
      Liabilities”
shall
      have the meaning set forth in Section 2.2(d).

     

    “Expense
      Reimbursement Amount”
means
      all reasonable out-of-pocket costs and expenses actually incurred by Purchaser
      (including expenses of counsel, accountants, experts and other outside
      consultants and legal expenses related to negotiating this Agreement and
      investigating Seller or the Transferred Assets), not to exceed $350,000, which
      shall, subject to Bankruptcy Court approval, constitute a priority
      administrative expense under Section 503(b)(1) of the Bankruptcy Code and shall
      be paid as set forth in Sections 5.7 and 9.3.

     

    “Facilities”
means
      all offices, stores, warehouses, administration buildings, plants, other
      facilities and all real property and related facilities owned or leased by
      Seller, including the Store / Headquarters and the Distribution
      Center.

     

    “Facilities
      Leases”
shall
      have the meaning set forth in Section 3.3(b).

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    “Final
      Order”
      means
      an order of the Bankruptcy Court or other court of competent jurisdiction as
      to
      which no appeal, notice of appeal or motion for rehearing or new trial has
      been
      timely filed or, if any of the foregoing has been timely filed, no stay shall
      have issued.

     

    “Fixtures
      and Equipment”
means
      all of the (a) furniture, office equipment, fixtures, and furnishings of Seller,
      (b) machinery, computer hardware, automobiles, trucks, trailers, vehicles,
      spare
      parts, supplies, equipment, racking, shelving, tools, supplies, molds, jigs,
      patterns, dies, Refurbishment Equipment and other tangible personal property
      owned or leased by Seller that is used in the Business, wherever located, and
      (c) all warranty rights associated with the foregoing.

     

    “Government
      A/R”
shall
      mean trade accounts receivable payable to the Seller from federal, state or
      local governments.

     

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

     

    “Governmental
      Body”
      means any: (a) nation, principality, state, commonwealth, province, territory,
      county, municipality, district or other jurisdiction of any nature; (b) federal,
      state, local, municipal, foreign or other government; (c) governmental or
      quasi-governmental authority of any nature (including any governmental division,
      subdivision, department, agency, bureau, branch, office, commission, council,
      board, instrumentality, officer, official, representative, organization, unit,
      body or Entity and any court or other tribunal); (d) multi-national organization
      or body; or (e) individual, Entity or body exercising, or entitled to exercise,
      any executive, legislative, judicial, administrative, regulatory, police,
      military or Taxing authority or power of any nature.

     

    “Hazardous
      Substances”
means
      all pollutants, contaminants, chemicals, wastes and any other carcinogenic,
      ignitable, corrosive, reactive, toxic or otherwise hazardous substances or
      materials (whether solids, liquids or gases) subject to regulation, control
      or
      remediation under Environmental Laws.

     

    “Holdback
      Amount”
means
      $1,500,000.

     

    “Indebtedness”
means
      (a) any obligation for borrowed money, including any obligation for accrued
      and
      unpaid interest thereon and any prepayment or other penalties or premiums,
      (b)
      any capitalized lease obligations, (c) any obligation evidenced by a note,
      deed,
      mortgage or secured by any property of Seller, (d) any reimbursement obligations
      in respect of letters of credit, (e) any and all obligations of Seller pursuant
      to the terms of the LaSalle Equipment Lease, including without limitation all
      amounts necessary to exercise the purchase option thereunder, and (f) all
      guarantees issued in respect of obligations of any other Person of the type
      described in clauses (a) through (e).

     

    “Intangible
      Assets”
means
      an asset, such as goodwill, Intellectual Property rights or similar assets,
      with
      no physical properties.

     

    “Intellectual
      Property”
means
      (a) all inventions (whether patentable or unpatentable and whether or not
      reduced to practice), all improvements thereto and all patents, patent
      applications and patent disclosures, together with all reissuances,
      continuations, continuations-in-part, revisions, extensions and reexaminations
      thereof, (b) all United States or foreign trademarks, service marks, trade
      dress, logos, trade names and corporate names, together with all translations,
      adaptations, derivations and combinations thereof and including all goodwill
      associated therewith and all applications, registrations and renewals in
      connection therewith, (c) all copyrightable works, all copyrights and all
      applications, registrations and renewals in connection therewith, (d) all mask
      works and all applications, registrations and renewals in connection therewith,
      (e) all trade secrets and confidential business information (including ideas,
      research and development, know-how, formulas, techniques, designs, drawings,
      specifications, customer and supplier lists and databases, sales literature,
      promotional literature, lists of distributors, artwork, purchasing records,
      pricing and cost information, business and marketing plans and proposals, and
      related documentation), (f) all computer software (excluding software commonly
      available through licenses on standard commercial terms, such as software
“shrink-wrap” licenses, it being understood that such licenses nonetheless
      constitute Transferred Assets), including data and related documentation and
      all
      software necessary to maintain the operation of the Business, URLs, web sites,
      web portals, and other forms of technology, (g) all other proprietary rights
      related to the Business or the Transferred Assets, (h) all copies and tangible
      embodiments thereof (in whatever form or medium) and (i) all rights to use
      telephone and facsimile numbers related to the Business or the Transferred
      Assets.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    “Inventory”
means
      all merchandise owned and intended for resale in connection with the Business
      (including all Prepaid Inventory), all manufactured and purchased parts, goods
      in process, raw materials, supply and packing materials and finished goods
      and
      other tangible personal property that is used in connection with the Business,
      including all instruments on hand at the Store / Headquarters, loan, consignment
      and approval instruments, all Defective Merchandise and all Display and Return
      Merchandise, in each case wherever located.

     

    “Inventory
      Value”
shall
      have the meaning set forth in Section 2.6(a).

     

    “Key
      Software Licenses”
shall
      have the meaning set forth in Section 3.17(d).

     

    “LaSalle
      Equipment Lease”
shall
      mean the Master Lease Agreement between Seller and LaSalle National Leasing
      Corporation dated June 27, 2005.

     

    “Leased
      Real Property”
shall
      have the meaning set forth in Section 3.3(b).

     

    “Legal
      Requirement”
      means any applicable federal, state, local, municipal, foreign or other law,
      statute, legislation, constitution, principle of common law, resolution,
      ordinance, code, edict, decree, proclamation, treaty, convention, rule,
      regulation, ruling, directive, pronouncement, requirement, notice requirement,
      guideline, Court Order, specification, determination, decision, opinion or
      interpretation issued, enacted, adopted, passed, approved, promulgated, made,
      implemented or otherwise put into effect by or under the authority of any
      Governmental Body.

     

    “Liabilities
      Adjustment Amount”
shall
      have the meaning set forth in Section 2.4(b).

     

    “Liability”
means
      any direct or indirect liability, Indebtedness, obligation, commitment, expense,
      claim, deficiency, guaranty or endorsement of any type whatsoever, whether
      accrued or unaccrued, absolute or contingent, matured or unmatured, liquidated
      or unliquidated, known or unknown, asserted or unasserted, due or to become
      due.

     

    “Material
      Adverse Effect”
means
      any material adverse effect on or change with respect to the business,
      operations, assets, Liabilities, financial condition, results of operations,
      properties or prospects of Seller or the Business taken as a whole that (a)
      results in the inability of Seller to convey to Purchaser all of the material
      elements necessary to conduct the Business, including the Intellectual Property
      used in the Business, accounts receivable, Facilities, Inventory and other
      assets as contemplated by this Agreement, or (b) results in the Facilities
      ceasing to materially operate in their current condition; provided,
      however,
      that
      any effect or change arising out of or resulting from any of the following
      shall
      not be deemed (either alone or in combination) a Material Adverse Effect: (i)
      the filing of the Bankruptcy Case or the announcement or pendency of the
      Acquisition or (ii) conditions affecting the industry or industry sector in
      which Seller participates or the United States economy as a whole.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    “Material
      Contracts”
shall
      have the meaning ascribed to such term in Section 3.6(a).

     

    “Multiemployer
      Plan”
means
      any “multiemployer plan,” as defined in Section 3(37) or 4001(a)(3) of ERISA,
      which any Seller or any ERISA Affiliate maintains, administers, contributes
      to
      or is required to contribute to, or maintained, administered, contributed to
      or
      was required to contribute to, or under which any Seller or any ERISA Affiliate
      has or may have any Liability.

     

    “Noncompetition
      Agreement”
shall
      have the meaning set forth in Section 2.3(b).

     

    “Nonqualifying
      Closing Inventory”
      shall have the meaning set forth in Section 2.6(a).

     

    “Occupational
      Safety and Health Law”
means
      any applicable Legal Requirement designed to provide safe and healthful working
      conditions and to reduce occupational safety and health hazards.

     

    “Owned
      Real Property”
means
      any real property owned in fee by Seller.

     

    “Party”
shall
      mean any Person who is a party to this Agreement.

     

    “PBGC”
shall
      mean the Pension Benefit Guaranty Corporation.

     

    “Pension
      Plan”
means
      any “employee pension benefit plan” as defined in Section 3(2) of ERISA (other
      than a Multiemployer Plan) which Seller or any ERISA Affiliate maintains,
      administers, contributes to or is required to contribute to, or maintained,
      administered, contributed to or was required to contribute to, or under which
      Seller or any ERISA Affiliate has or may have any Liability.

     

    “Permits”
means
      all licenses, permits, franchises, approvals, authorizations, consents or orders
      of, or filings with, any Governmental Body, necessary or customary for the
      present conduct or operation of the Business or ownership of the Transferred
      Assets.

     

    “Permitted
      Encumbrances”
means
      the Encumbrances identified in Section 1.1(b) of the Disclosure
      Schedule.

     

    “Person”
means
      an individual, Entity
      or Governmental Body.

     

    “Personal
      Property Transferred Assets”
shall
      have the meaning set forth in Section 3.4(a).

     

    “Petition”
shall
      have the meaning ascribed to such term in the recitals hereof.

     

    “Petition
      Date”
shall
      mean the date that Seller commence the Bankruptcy Case before the Bankruptcy
      Court.

     

    “Pre-Closing
      Period”
      means the period from the date of the Agreement through the Closing
      Date.

     

    “Preliminary
      Estimate”
      shall have the meaning set forth in Section 2.6(a).

     

    “Prepaid
      Inventory”
      means Inventory which the Seller has paid for in whole or in part, but which
      the
      Seller has not yet received from the vendor.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    “Proceeding”
      means any action, suit, litigation, arbitration, proceeding (including any
      civil, criminal, administrative, investigative or appellate proceeding and
      any
      informal proceeding), prosecution, contest, hearing, inquiry, inquest, audit,
      examination or investigation commenced, brought, conducted or heard by or
      before, or otherwise involving, any Governmental Body or any arbitrator or
      arbitration panel.

     

    “Professional
      Fees”
shall
      mean compensation for fees or reimbursement of expenses of any Person in the
      Bankruptcy Case under Sections 327, 328, 329, 330, 331, 364, 503 or 506 of
      the
      Bankruptcy Code or otherwise.

     

    “Purchaser”
shall
      have the meaning set forth in the preamble.

     

    “Purchase
      Price”
means
      (a) the Closing Date Payment, plus (b) the Adjustment Payment, plus (c) the
      Assumed Liabilities.

     

    “Refurbishment
      Equipment”
means
      any tools, supplies, inventory and spare parts used primarily in Seller’s repair
      or refurbishment of instruments.

     

    “Related
      Party”
means
      (a) any officer, director or shareholder of Seller, and any officer, director,
      partner, manager, or relative of such officers, directors and shareholders,
      and
      (b) any Person in which Seller or any Affiliate or relative of any such Person
      has any direct or indirect interest.

     

    “Representative”
means,
      with respect to any Person, any officer, director, principal, attorney,
      accountant, agent, employee, financing source or other representative of such
      Person.

     

    “Sale
      Hearing”
means
      the hearing conducted by the Bankruptcy Court to approve the transactions
      contemplated by this Agreement.

     

    “Sale
      Motion”
means
      the motion, in form and substance reasonably acceptable to Seller and Purchaser,
      filed by Seller pursuant to, inter alia,
      Sections 363 and 365 of the Bankruptcy Code to obtain the Sale Order and approve
      the transactions contemplated by this Agreement.

     

    “Sale
      Order”
means
      an order of the Bankruptcy Court, in form and substance substantially identical
      to the sale order attached hereto as Exhibit
      C,
      with
      such subsequent changes reasonably acceptable to Purchaser.

     

    “Seller”
shall
      have the meaning set forth in the preamble.

     

    “Seller’s
      Cost”
      shall have the meaning set forth in Section 2.6(b).

     

    “Store
      / Headquarters”
mean
      Seller’s retail store and headquarters located at 4004
      Technology Drive, South Bend, Indiana 46628.

     

    “Subsidiary”
means,
      with respect to any Person, (a) any corporation of which at least 50% of the
      securities or interests having, by their terms, ordinary voting power to elect
      members of the board of directors, or other persons performing similar functions
      with respect to such corporation, is held, directly or indirectly by such Person
      and (b) any partnership or limited liability company of which (i) such Person
      is
      a general partner or managing member or (ii) such Person possesses a 50% or
      greater interest in the total capitalization or total income of such partnership
      or limited liability company.

     

    “Tax”
means
      any federal, state, local or foreign income, gross receipts, license, payroll,
      employment, excise, severance, stamp, occupation, premium, windfall profits,
      environmental, customs duties, capital stock, franchise, profits, withholding,
      social security, unemployment, disability, real property, personal property,
      sales, use, transfer, registration, value added, alternative or add-on minimum,
      estimated, or other tax of any kind whatsoever, including any interest, penalty,
      or addition thereto, whether disputed or not.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

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

     

    “Transferred
      Assets”
shall
      have the meaning set forth in Section 2.1.

     

    “Transferred
      Employees”
means
      Persons who were Employees of Seller immediately prior to the Closing who become
      employees of Purchaser or one of its Affiliates at the Closing.

     

    “Welfare
      Plan”
means
      any “employee welfare benefit plan” as defined in Section 3(1) of ERISA, which
      Seller or any ERISA Affiliate maintains, administers, contributes to or is
      required to contribute to, or maintained, administered, contributed to or was
      required to contribute to, or under which Seller or any ERISA Affiliate has
      or
      may have any Liability.

     

    ARTICLE
      2

    PURCHASE
      AND SALE OF TRANSFERRED ASSETS; CLOSING

     

    2.1  Purchase
      of Transferred Assets.
      At the
      Closing, Seller shall cause to be sold, assigned, transferred, conveyed and
      delivered to Purchaser good and valid title to the Transferred Assets, free
      of
      any Encumbrances, on the terms and subject to the conditions set forth in this
      Agreement and in accordance with Sections 363 and 365 of the Bankruptcy Code.
      For purposes of this Agreement, “Transferred
      Assets”
means
      and includes substantially all of the properties, rights, interests and other
      tangible and intangible assets of Seller and its Subsidiaries relating to the
      Business (wherever located and whether or not required to be reflected on a
      balance sheet prepared in accordance with generally accepted accounting
      principles) and all Intellectual Property of Seller including any assets
      acquired by Seller during the Pre-Closing Period; provided,
      however,
      that the
      Transferred Assets shall not include any Excluded Assets. Without limiting
      the
      generality of the foregoing and except for the Excluded Assets, the Transferred
      Assets shall include:

     

    (a)  Receivables.
      All accounts receivable (including all Closing Date Qualified Accounts
      Receivable), notes receivable and other receivables of Seller relating to the
      Business, and all rights to collect from customers (and to retain) all fees
      and
      other amounts payable, or that may become payable, to Seller with respect to
      products sold or services performed by or on behalf of Seller in connection
      with
      the Business on or prior to the Closing Date, but excluding the Government
      A/R;

     

    (b)  Inventory.
      All Inventory (including without limitation all rights in respect of Prepaid
      Inventory and any pending but not received merchandise returns from
      customers);

     

    (c)  Contracts.
      All rights of Seller under (i) purchase orders or similar agreements (A) for
      branded product, and (B) for the proprietary products identified in Section
      2.1(c) of the Disclosure Schedule, and (ii) the other executory Contracts
      relating to the Business identified in Section 2.1(c) of the Disclosure
      Schedule, including all confidentiality, non-disclosure and non-solicitation
      agreements to which Seller is a party; provided,
      however,
      that Purchaser may add or remove Contracts from Section 2.1(c) of the Disclosure
      Schedule at any time or from time to time up to the close of business on the
      Business Day before the Sale Hearing;

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    (d)  Intellectual
      Property.
      All Intellectual Property of Seller used in the Business, including the items
      set forth in Sections 2.1(d) and 3.17(c) of the Disclosure Schedule and software
      commonly available through licenses on standard commercial terms, such as
      software “shrink-wrap” licenses;

     

    (e)  Books
      and Records.
      All books, papers, records, files, data (in paper or electronic format) of
      Seller, including all purchasing and sales records, customer lists, vendor
      lists
      and accounting and financial records;

     

    (f)  Permits.
      All Permits, to the extent transfer is permitted under applicable
      law;

     

    (g)  Prepaid
      Expenses and Deposits.
      All right, title and interest in and to all prepaid expenses and deposits
      relating to the Business, including all security or other deposits held by
      any
      third party with respect to the Store / Headquarters and Distribution
      Center;

     

    (h)  Causes
      of Actions.
      All claims, deposits, prepayments, refunds, causes of action, choses in action,
      rights of recovery, rights of setoff and rights of recoupment arising out of
      or
      relating to the Business or the Transferred Assets;

     

    (i)  Personal
      and Other Property.
      Any other assets, including Fixtures and Equipment, owned by Seller used in
      the
      operation of the Business as well as all property presently subject to the
      LaSalle Equipment Lease;

     

    (j)  Facilities
      Leases.
      All of Seller’s right, title and interest in, to and under Leases relating to
      the Store / Headquarters and the Distribution Center, subject to Section
      10.2;

     

    (k)  Insurance
      Proceeds.
      Proceeds under any insurance policy of Seller received or receivable with
      respect to any Transferred Asset;

     

    (l)  Warranty
      and Similar Rights.
      All rights and claims of Seller pursuant to warranties, representations,
      guarantees and indemnities made by suppliers in connection with the Transferred
      Assets or service furnished to Seller pertaining to or affecting the Transferred
      Assets; and

     

    (m)  Goodwill.
      Any and all goodwill related to the Business or any of the
      foregoing.

     

    2.2    Consideration.

     

    (a)  Reserved.
      

     

    (b)  Cash
      Consideration.
      As consideration for the sale of the Transferred Assets to
      Purchaser:

     

    (i) Purchaser
      shall pay to Seller $26,095,000 in cash (the “Closing
      Date Payment”)
      on the Closing Date in accordance with Section 2.3(b)(i);

     

    (ii) Purchaser
      shall assume the Assumed Liabilities on the Closing Date in accordance with
      Section 2.2(c); and

     

    (iii) Purchaser
      shall pay to Seller the Holdback Amount, minus the
      Accounts Receivable/Inventory Adjustment Amount, and plus
      or minus
      the Liabilities Adjustment Amount (collectively, the “Adjustment
      Payment”),
      no later than two (2) Business Days after the latest to occur of the final
      determination of each of (1) the Closing Date Qualified Accounts Receivable,
      (2)
      the Liabilities Adjustment Amount and (3) reconciliation and verification of
      the
      Inventory Value of the Closing Inventory.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    (c)  Assumed
      Liabilities.
      For purposes of this Agreement, “Assumed
      Liabilities”
      means only the following Liabilities of Seller: (i) Liabilities first arising
      after the Closing Date that relate solely to the operation of the Business
      by
      Purchaser; (ii) all obligations and liabilities of Seller first arising after
      the Closing Date under Contracts specifically described in Section 2.1(c) to
      the
      extent such obligations and liabilities do not arise from or relate to any
      act or omission by Seller under any of such Contracts; (iii) an amount equal
      to
      the accrued payroll and vacation liabilities (which Purchaser may fund or,
      in
      the case of vacation liabilities, elect to assume in the form of vacation time
      credit under its policies, at its sole election) for Transferred Employees
      as of
      Closing, such amount not to exceed $1,000,000 in the aggregate under any
      circumstances; (iv) employee benefits for Transferred Employees arising after
      the Closing Date, in form and amount consistent with those provided by Purchaser
      to its employees; (v) an
      amount equal to the value of accrued liabilities related to customer credits
      and
      other similar amounts due to customers of Seller; and (vi) the unpaid deferred
      purchase price due to David Carpenter pursuant to the secured Term Promissory
      Note dated April 28, 2005, between Seller and David Carpenter in the original
      principal amount of $736,851.21, up to $308,041. The accrued Liabilities
      described in Section 2.2(c)(iii), (v) and (vi) are herein referred to as the
      “Assumed
      Accrued Liabilities.”
      Notwithstanding anything to the contrary contained in this Agreement, payments
      of amounts due pursuant to Section 2.2(c)(iii) (up to the $1,000,000 cap) shall
      not constitute an assumption of the obligations and liabilities underlying
      or
      related to such amounts unless Purchaser expressly elects to assume vacation
      time credits in writing and then solely to the extent of the hours of credit
      it
      elects to assume whether or not sufficient to extinguish the liability of Seller
      to such employee. No Transferred Employee shall have any claim against Purchaser
      pursuant to this Section 2.2(c) or otherwise under this Agreement except
      pursuant to a written offer of employment delivered directly by Purchaser to
      such individual Transferred Employee.

     

    (d)  Excluded
      Liabilities.
      Notwithstanding anything to the contrary contained in this Agreement, Purchaser
      shall not be obligated to assume or to perform or discharge any Liability of
      Seller, any ERISA Affiliate or any Employee Plan (such other Liabilities being
      referred to as “Excluded
      Liabilities”)
      other than the Assumed Liabilities. Without limiting the foregoing, Seller
      shall
      retain and be responsible for, and Purchaser shall not be obligated to assume
      or
      to perform or discharge, and does not assume or perform or discharge, any
      Liability of Seller, any ERISA Affiliate or any Employee Plan at any time
      arising from or otherwise attributable to:

     

    (i) any
      Liability of Seller relating to the Business that arises on or before the
      Closing Date and is not specifically assumed by Purchaser;

     

    (ii) any
      Liability of Seller relating to real property leases or Facilities not
      specifically assumed by Purchaser pursuant to Section 10.2;

     

    (iii) any
      Liability relating to the Excluded Assets;

     

    (iv) any
      Liability of Seller relating to Seller’s execution, delivery or performance of
      this Agreement or any document contemplated by this Agreement;

     

    (v) all
      Liabilities of Seller for all Cure Costs;

     

    (vi) any
      outstanding bids, purchase orders, customer credits, customer deposits or lay
      away purchases to the extent not included in Section 2.1(c);

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    (vii) any
      transfer Taxes with respect to the transactions contemplated by this
      Agreement;

     

    (viii) any
      Environmental, Health and Safety Liability of Seller;

     

    (ix) any
      Employee Plan Liability; and

     

    (x) any
      Professional Fees or brokerage fees of Seller.

     

    2.3  Closing.

     

    (a)  The
      consummation of the purchase of the Transferred Assets by Purchaser provided
      for
      in this Agreement (the “Closing”)
      shall occur at the offices of Barnes & Thornburg LLP, 100 N. Michigan
      Street, South Bend, Indiana 46601, at 10:00 A.M. on the first Business Day
      after
      the day on which all conditions to Closing that must be satisfied prior to
      Closing have been satisfied or, to the extent permitted, waived (other than
      conditions that are intended to be satisfied or, to the extent permitted,
      waived, at the Closing), or at such other date, time or place as the parties
      may
      agree (the “Closing
      Date”).
      The Transferred Assets shall be transferred to Purchaser at the Closing on
      the
      Closing Date, and Seller shall do all things that are deemed necessary by
      Purchaser for the valid transfer of the Transferred Assets.

     

    (b)  At
      the Closing:

     

    (i) Purchaser
      shall pay to Seller, in cash by wire transfer of immediately available funds,
      an
      amount equal to the Closing Date Payment;

     

    (ii) Purchaser
      and Seller shall execute and deliver to one another, as applicable:

     

    (1) an
      assignment and assumption agreement in the form attached hereto as Exhibit
      E
      (the “Assumption
      Agreement”);

     

    (2) a
      bill of sale in the form attached hereto as Exhibit
      F
      (the “Bill
      of Sale”);
      and

     

    (3) amendments
      to the Facilities Leases in accordance with Exhibit
      G
      attached hereto and duly countersigned by the owner of such
      properties

     

    (4) the
      Barrington/LA Sax Agreement in accordance with Exhibit I attached hereto and
      duly countersigned by Barrington, Inc.;

     

    (iii) Seller
      shall deliver or cause to be delivered to Purchaser:

     

    (1) a
      certificate executed on behalf of Seller by its president or chief executive
      officer (the “Seller
      Closing Certificate”)
      confirming that, except as expressly set forth in the Seller Closing
      Certificate, each of the conditions set forth in Sections 7.1, 7.2, 7.4, 7.6
      and
      7.9 has been satisfied in all respects;

     

    (2) all
      necessary forms and certificates complying with applicable Legal Requirements,
      duly executed and acknowledged by Seller, certifying that the transactions
      contemplated hereby are exempt from withholding under Section 1445 of the
      Code;

     

    
      
         

      

      
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    (3) assignments
      (including Intellectual Property, personal property, lease and Contract transfer
      documents) and such other instruments of sale, transfer, conveyance and
      assignment as Purchaser and its counsel may reasonably request;

     

    (4) properly
      endorsed certificates of title for each vehicle that is an Transferred Asset
      (and each other Transferred Asset where ownership is established through a
      certificate of title);

     

    (5) a
      certificate of the secretary of Seller in customary form;

     

    (6) a
      Certificate of Existence, dated as of a date within five days of the Closing
      Date, of Seller issued by the Secretary of State of the state of organization
      of
      Seller;

     

    (7) a
      noncompetition agreement in the form attached hereto as Exhibit
      H
      (the “Noncompetition
      Agreement”),
      executed by Dennis Bamber; and

     

    (8) such
      other documents as Purchaser or its counsel may reasonably request in connection
      with the transactions contemplated by this Agreement.

     

    (iv) Purchaser
      shall deliver or cause to be delivered to Seller a certificate executed on
      behalf of Purchaser by its president or chief executive officer (the
“Purchaser
      Closing Certificate”)
      confirming that, except as expressly set forth in the Purchaser Closing
      Certificate, each of the conditions set forth in Sections 8.1 and 8.2 has been
      satisfied in all respects.

     

    2.4  Purchase
      Price Adjustment.
      The
      Purchase Price is premised on (x) the (i) Closing Date Qualified Accounts
      Receivable of Seller plus
      the
      Inventory Value of the Closing Inventory of Seller being not less than
      $33,600,000 on the Closing Date, and (y) the aggregate Assumed Accrued
      Liabilities being $1,940,000.

     

    (a)  In
      the event that the (i) Closing Date Qualified Accounts Receivable of Seller
      plus
      the Inventory Value of the Closing Inventory of Seller, as determined pursuant
      to Sections 2.5 and 2.6, is less than $33,600,000, the Purchase Price shall
      be
      decreased by one dollar for each dollar of such deficiency (collectively, the
      “Accounts
      Receivable/Inventory Adjustment Amount”).

     

    (b)  In
      the event that the aggregate Assumed Accrued Liabilities, as determined pursuant
      to Section 2.5, is more or less than $1,940,000 on the Closing Date, the
      Purchase Price shall be increased or decreased, as applicable, by one dollar
      for
      each dollar of such excess or deficiency (collectively, the “Liabilities
      Adjustment Amount”).

     

    (c)  To
      the extent that after final determination of the Closing Date Qualified Accounts
      Receivable, the Assumed Accrued Liabilities and the Inventory Value of the
      Closing Date Inventory of Seller, it is determined that the Closing Date Payment
      exceeded the amount that was due Seller under this Agreement, any overpayment
      shall be immediately refunded to Purchaser from Seller’s estate.

     

    2.5  Calculation
      of Closing Date Qualified Accounts Receivable and Assumed Accrued
      Liabilities.

     

    (a)  As
      soon as reasonably practicable following the Closing Date, and in any event
      within ten (10) days thereof, Seller shall cause to be prepared and delivered
      to
      Purchaser calculations of (i) the aggregate accounts receivable of Seller due
      from unrelated third parties (other than the Government A/R), net of a reserve
      consistent with past practice under valid orders that have been fully performed
      by Seller and that are not more than 365 days old at Closing (“Closing
      Date Qualified Accounts Receivable”)
      and (ii) the aggregate Assumed Accrued Liabilities. The Closing Date Qualified
      Accounts Receivable and the Assumed Accrued Liabilities amount shall be prepared
      in accordance with generally accepted accounting principles consistently
      applied. If reasonably requested by Seller, Purchaser will provide Seller with
      access to the records of the Business in order to determine the Closing Date
      Qualified Accounts Receivable and the Assumed Accrued Liabilities. The parties
      also acknowledge and agree that accounting staff previously employed by Seller
      shall assist Seller, at no cost to Seller, in determining the Closing Date
      Qualified Accounts Receivable and the Assumed Accrued Liabilities on behalf
      of
      Seller even though such employees may be employed by Purchaser after the
      Closing.

     

    
      
         

      

      
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    (b)  Upon
      delivery of the calculation of Closing Date Qualified Accounts Receivable and/or
      the Assumed Accrued Liabilities, Seller will provide Purchaser and its
      Representatives full access to Seller’s records to the extent reasonably related
      to Purchaser’s evaluation of the calculation of such amounts. If Purchaser shall
      disagree with the calculation of either the Closing Date Qualified Accounts
      Receivable or the Assumed Accrued Liabilities, it shall notify Seller of such
      disagreement in writing, setting forth in reasonable detail the particulars
      of
      such disagreement, within twenty (20) days after receipt of the respective
      calculation of Closing Date Qualified Accounts Receivable or Assumed Accrued
      Liabilities (subject to extension for any period of inadequate access to the
      underlying records). In the event that Purchaser does not provide such a notice
      of disagreement within such twenty (20) day period (as may be so extended),
      Purchaser shall be deemed to have accepted the calculation of Closing Date
      Qualified Accounts Receivable and Assumed Accrued Liabilities delivered by
      Seller, which shall be final, binding and conclusive on the Parties for the
      purposes of determining the Accounts Receivable Adjustment Amount and the
      Liabilities Adjustment Amount. In the event any such notice of disagreement
      is
      timely provided, Purchaser and Seller shall use commercially reasonable efforts
      for a period of twenty (20) days (or such longer period as they may mutually
      agree) to resolve any disagreements with respect to the calculation of Closing
      Date Qualified Accounts Receivable and/or the Assumed Accrued Liabilities.
      If,
      at the end of such period, they are unable to resolve such disagreements, then
      the Bankruptcy Court shall resolve any remaining matters in
      dispute.

     

    2.6    Inventory.

     

    (a)  Inventory
      Valuation.

     

    (i) In
      accordance with Section 2.6(b) of this Agreement, and prior to the Closing,
      Seller shall deliver to Purchaser a preliminary estimate (the “Preliminary
      Estimate”)
      of the aggregate value of the Inventory (“Inventory
      Value”)
      to be acquired by Purchaser hereunder (the “Closing
      Inventory”),
      which preliminary aggregate value estimate shall be based on the Seller’s Cost
      information supplied to Purchaser for each Inventory item.

     

    (ii) Purchaser
      and Seller shall jointly conduct an actual physical count and inspection of
      the
      Inventory in order to (A) verify the Seller’s Cost information provided by the
      Seller on the Closing Inventory and (B) examine the Closing Inventory to
      identify items of Closing Inventory, if any, that constitute Defective
      Merchandise or Display, Return or Obsolete Inventory (the “Nonqualifying
      Closing Inventory”).
      The physical inventory shall commence on the Closing Date and be completed
      within five (5) Business Days after the Closing Date (unless extended by mutual
      agreement of the parties). Purchaser shall prepare, and submit to Seller, for
      Seller’s review and approval, a proposed final valuation of the Closing
      Inventory within twenty (20) Business Days after the completion of the physical
      inventory. Purchaser will provide Seller with access to its records and the
      Facilities to the extent reasonably related to its review of Purchaser’s
      proposed final valuation of the Closing Inventory. All items of Closing
      Inventory that are not Nonqualifying Closing Inventory shall be valued at
      Seller’s Cost, as verified by Purchaser. All Nonqualifying Closing Inventory
      shall be reviewed for appropriate lower of cost or market valuation adjustment
      as mutually agreed upon by Purchaser and Seller, it being expressly understood
      that the calculation of market value shall be determined by using the expected
      selling price reduced by (X) normal selling costs and (Y) a reasonable selling
      margin representative of the historical selling margin of Seller in the product
      category.

     

    
      
         

      

      
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    (b)  Inventory
      Valuation Methodology.
      The following conventions shall apply to the identification and valuation of
      the
      Inventory, the Closing Inventory and the Nonqualifying Closing Inventory: (i)
      the Preliminary Estimate shall be based on Seller’s customary Inventory report
      prepared by Seller as of two business days or less of Closing and delivered
      to
      Purchaser prior to Closing, the value for which shall be based on Seller’s Cost
      as contained in such report; (ii) the Closing Inventory and Nonqualifying
      Closing Inventory shall be based on the joint physical count and inspection
      of
      the Inventory by Purchaser and Seller, (iii) Purchaser’s proposed final
      valuation shall include verified Seller’s Cost information for each item of
      Inventory and also shall include Inventory which has been prepaid by Seller
      and
      received after the Closing; (iv) the Closing Inventory shall not include “return
      to vendor” or repair items; (v) the value of any Inventory acquired by Purchaser
      following the Closing Date (including customer returns) shall not be included
      in
      the Inventory Value; and (vi) Inventory value, other than Nonqualifying Closing
      Inventory, shall be based on Seller’s historical costing method as verified by
      Purchaser (“Seller’s
      Cost”),
      unless Seller, in its sole discretion, agrees to a lesser value, in which event
      the lesser value shall become the “Seller’s Cost.” The parties shall bear their
      own expenses in the valuation of the Inventory, the Nonqualifying Closing
      Inventory and Closing Inventory.

     

    (c)  Inventory
      Valuation Disputes.
      If Seller shall disagree with the Purchaser’s final calculation of the value of
      the Closing Inventory that Seller received from Purchaser pursuant to Section
      2.6(a), it shall notify Purchaser of such disagreement in writing, setting
      forth
      in reasonable detail the particulars of such disagreement, within twenty (20)
      days after receipt of the calculation of the valuation of the Closing Inventory,
      accompanied by reasonable supporting documentation. In the event that Seller
      does not provide such a notice of disagreement within such twenty (20) day
      period, Seller shall be deemed to have accepted the calculation of Closing
      Inventory. In the event any such notice of disagreement is timely provided,
      Purchaser and Seller shall use commercially reasonable efforts for a period
      of
      twenty (20) days following receipt of the calculation of the valuation of the
      Closing Inventory (or such longer period as they may mutually agree) to resolve
      any disagreements with respect to the calculation of the Closing Inventory.
      If,
      at the end of such period, they are unable to resolve such disagreements, the
      Bankruptcy Court shall resolve any remaining matters in dispute.

     

    2.7  Allocation.
      Purchaser shall use its commercially reasonable efforts to deliver to Seller,
      within ninety (90) days following the Closing Date, the allocation of the
      Purchase Price, among the Transferred Assets (the “Allocation”).
      The
      Allocation will be made by Purchaser in good faith and in accordance with
      Section 1060 of the Code and the Treasury regulations promulgated thereunder
      (it
      being understood that an allocation provided by an independent third party
      shall
      be deemed to be in good faith). Seller and Purchaser agree to (a) be bound
      by the Allocation, (b) act in accordance with the Allocation in the
      preparation of financial statements and filing of all Tax Returns (including
      filing Form 8594 with their United States federal income Tax Return for the
      taxable year that includes the date of the Closing) and in the course of any
      Tax
      audit, Tax review or Tax litigation relating thereto and (c) take no
      position and cause their Affiliates to take no position inconsistent with the
      Allocation for income Tax purposes, including United States federal and state
      income Tax and foreign income Tax. Not later than thirty (30) days prior to
      the
      filing of their respective Forms 8594 (and analogous state law forms) relating
      to the Acquisition, each party shall deliver to the other party a copy of its
      Form 8594 (and any analogous state law forms).

     

    
      
         

      

      
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    ARTICLE
      3

    REPRESENTATIONS
      AND WARRANTIES OF SELLER

     

    As
      an
      inducement of Purchaser to enter into this Agreement, Seller hereby makes the
      following representations and warranties to Purchaser, except as otherwise
      set
      forth in the Disclosure Schedule. The sections of the Disclosure Schedule are
      numbered to correspond to the various subsections of this Article 3 setting
      forth certain exceptions to the representations and warranties contained in
      this
      Article 3 and certain other information called for by this Agreement. No
      disclosure made in any particular section of the Disclosure Schedule shall
      be
      deemed made in any other section of the Disclosure Schedule unless (a) expressly
      made therein (by cross-reference or otherwise) or (b) it is reasonably apparent
      on its face that such disclosure applies to such other section of the Disclosure
      Schedule. As used in this Agreement, references to the “knowledge” or
“awareness” means with respect to any matter in question, in the case of Seller,
      if the president or vice president of Seller has actual knowledge or
      knowledge that such person would reasonably be expected to have in the ordinary
      course of his employment duties.

     

    3.1     Organization
      and Good Standing; Shareholders.
      Seller
      is a corporation duly organized, validly existing and in good standing under
      the
      laws of the State of Indiana, with full corporate power and authority to conduct
      its business as presently conducted, to own or use the properties and assets
      that it purports to own or use and to perform all its obligation under this
      Agreement. Indiana is the only state or other jurisdiction in which either
      the
      ownership or use of the properties owned or used by it, or the nature of the
      activities conducted by it, requires Seller to be qualified to do business
      as a
      corporation (foreign or domestic). Section 3.1(a) of the Disclosure Schedule
      contains a complete and accurate list of all states or other jurisdictions
      in
      which Seller is qualified to do business as a foreign corporation. Except as
      set
      forth in Section 3.1(b) of the Disclosure Schedule, Seller currently has no,
      and
      has never had, any Subsidiaries.

     

    3.2     Authorization.
      Seller
      has all necessary corporate power and authority to enter into this Agreement
      and
      the Ancillary Agreements to which it is a party and has taken all corporate
      action necessary to consummate the transactions contemplated hereby and thereby
      and to perform its obligations hereunder and thereunder, subject to requisite
      Bankruptcy Court approval. This Agreement has been duly executed and delivered
      by Seller, and subject to requisite Bankruptcy Court approval, this Agreement
      is, and upon execution and delivery thereof each Ancillary Agreement will be,
      a
      valid and binding obligation of Seller, enforceable against Seller in accordance
      with its terms, except that enforceability may be limited by the effect of
      (a)
      bankruptcy, insolvency, reorganization, moratorium or other similar laws
      relating to or affecting the rights of creditors or (b) general principles
      of
      equity (regardless of whether enforceability is considered in a proceeding
      at
      law or in equity).

     

    3.3  Real
      Property.

     

    (a)  Each
      Facility is in such operating condition and repair, subject to normal wear
      and
      tear, as is necessary for the conduct of the Business in material compliance
      with applicable Legal Requirements.

     

    (b)  Seller
      has no Owned Real Property. The Store / Headquarters and the Distribution Center
      are the only Facilities of Seller, both of which are leased by Seller. Seller
      has delivered a true and correct copy of the leases for the Store / Headquarters
      and the Distribution Center (the “Facilities
      Leases”)
      to Purchaser. The Facilities Leases constitute all Leases, subleases or other
      occupancy agreements pursuant to which Seller occupies or uses the Facilities.
      Section 3.3 of the Disclosure Schedule sets forth a true, correct and complete
      list of each parcel of real property leased, subleased or occupied by Seller
      in
      the operation of the Business (the “Leased
      Real Property”).
      The Leased Real Property constitutes all of the real property leased, subleased
      or occupied by Seller as of the date hereof in the operation of the Store /
      Headquarters and the Distribution Center.

     

    
      
         

      

      
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    3.4     
      Personal
      Property.

     

    (a)  Seller
      owns or leases all Transferred Assets that constitute personal property
      (“Personal
      Property Transferred Assets”)
      necessary for the conduct of the Business as presently conducted, and the
      Personal Property Transferred Assets are in such operating condition and repair,
      subject to normal wear and tear, as is necessary for the conduct of the Business
      in material compliance with applicable Legal Requirements. There is no material
      deferred maintenance, nor any significant pending maintenance requirements,
      with
      respect to any Personal Property Transferred Assets. As of the Closing, each
      item of personal property that constitutes a Transferred Asset will be located
      solely at a Facility.

     

    (b)  Seller
      has good and marketable title to all such Personal Property Transferred Assets
      owned by it, free and clear of any and all Encumbrances. With respect to each
      such item of Personal Property Transferred Assets: (i) there are no Leases,
      subleases, licenses, options, rights, concessions or other agreements, written
      or oral, granting to any party or parties the right of use of any portion of
      such item of personal property, (ii) there are no outstanding options or rights
      of first refusal in favor of any other party to purchase any such item of
      personal property or any portion thereof or interest therein and (iii) there
      are
      no parties other than Seller who are in possession of or who are using any
      such
      item of personal property.

     

    (c)  Section
      3.4(c) of the Disclosure Schedule sets forth all leases for personal property
      that constitute Transferred Assets involving annual payments in excess of
      $25,000, true and correct copies of which have been delivered to Purchaser.
      Seller has good and valid leasehold title to all Fixtures and Equipment and
      other tangible Personal Property Transferred Assets leased by it from third
      parties, free and clear of any and all Encumbrances.

     

    (d)  With
      respect to each lease listed in Section 3.4(c) of the Disclosure Schedule and
      except as set forth in Section 3.4(d) of the Disclosure Schedule, (i) there
      has
      been no material Default under such lease by Seller, or, to Seller’s knowledge,
      by any other Person, (ii) to the knowledge of Seller, the execution, delivery
      and performance of this Agreement and the Ancillary Agreements and the
      consummation of the transactions contemplated hereby and thereby will not cause
      (with or without notice and with or without the passage of time) a material
      Default under any such lease, (iii) to Seller’s knowledge, such lease is a valid
      and binding obligation of the lessor, is in full force and effect and is
      enforceable by Seller in accordance with its terms, (iv) no action has been
      taken by Seller and, to Seller’s knowledge, no event has occurred which, with
      notice or lapse of time or both, would permit termination, modification or
      acceleration by a party thereto other than by Seller without Seller’s consent
      under any such lease, (v) to the knowledge of Seller, no Person has repudiated
      any term thereof or threatened to terminate, cancel or not renew any such lease
      and (vi) Seller has not assigned, transferred, conveyed, mortgaged or encumbered
      any interest therein or in any leased personal property subject thereto (or
      any
      portion thereof).

     

    3.5  Environmental
      Matters.
      Except
      as set forth in Section 3.5 of the Disclosure Schedule, Seller is, and at all
      times has been, in material compliance with, and has not been and is not in
      material violation of or liable under, any Environmental Law. Seller has no
      basis to expect, nor has any other Person for whose conduct Seller is or may
      be
      held to be responsible received, any actual or threatened order, notice, or
      other communication from (a) any Person or private citizen acting in the public
      interest or (b) the current or prior owner or operator of any Facility, of
      any
      actual or potential violation or failure to comply with any Environmental Law,
      or of any actual or threatened obligation to undertake or bear the cost of
      any
      Environmental, Health and Safety Liability with respect to such Facility or
      any
      other properties or assets (whether real, personal or mixed) in which Seller
      has
      had an interest. No underground tank or other underground storage receptacle
      for
      Hazardous Substances is currently located on any Facility, and there have been
      no releases of any Hazardous Substances from any such underground tank or
      related piping and there have been no releases of Hazardous Substances in
      quantities exceeding the reportable quantities as defined under federal or
      state
      law on, upon or into any Facility other than those authorized by Environmental
      Laws. In addition, to the knowledge of Seller, there have been no such releases
      by predecessors of Seller and no releases in quantities exceeding the reportable
      quantities as defined under federal or state law on, upon or into any real
      property in the immediate vicinity of any of the Facilities other than those
      authorized by Environmental Laws which, through soil or ground water
      contamination, may have come to be located on any Facility. Seller is not a
      party, whether as a direct signatory or as successor, assign or third-party
      beneficiary, or otherwise bound, to any lease or any Contract under which Seller
      is obligated by or entitled to the benefits of, directly or indirectly, any
      representation, warranty, indemnification, covenant, restriction or other
      undertaking concerning any Environmental Condition. Seller has not released
      any
      other Person from any claim under any Environmental Law or waived any rights
      concerning any Environmental Condition.

     

    
      
         

      

      
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    3.6  Contracts.

     

    (a)  Disclosure.
      Section 3.6(a) of the Disclosure Schedule sets forth a list of Material
      Contracts as of the date hereof. For purposes of this Agreement, “Material
      Contracts”
      refer to the following Contracts, which shall be included in the Transferred
      Assets:

     

    (i) Contracts
      not made in the ordinary course of business, other than any Contracts included
      in the Excluded Assets;

     

    (ii) license
      agreements or royalty agreements involving any form of Intellectual Property,
      whether Seller is the licensor or licensee thereunder (excluding licenses that
      are commonly available on standard commercial terms, such as software
“shrink-wrap” licenses);

     

    (iii) confidentiality
      and non-disclosure agreements (whether Seller is the beneficiary or the
      obligated party thereunder);

     

    (iv) Contracts
      or commitments involving future expenditures or Liabilities in excess of
      $50,000 after
      the date hereof;

     

    (v) Contracts
      or commitments relating to commission arrangements with others that are material
      to the Business or the Transferred Assets;

     

    (vi) written
      employment contracts, consulting contracts, severance agreements, “stay-bonus”
agreements and similar written arrangements relating to employees, including
      written Contracts (A) to employ or terminate executive officers or other
      personnel and other contracts with present or former officers or directors
      of
      Seller or (B) that will result in the payment by, or the creation of any
      Liability of Purchaser to pay any severance, termination, “golden parachute,” or
      other similar payments to any present or former personnel following termination
      of employment or otherwise as a result of the consummation of the transactions
      contemplated by this Agreement;

     

    (vii) indemnification
      agreements;

     

    (viii) promissory
      notes, loans, agreements, indentures, evidences of indebtedness, letters of
      credit, guarantees, or other instruments relating to an obligation to pay money,
      whether Seller shall be the borrower, lender or guarantor thereunder and related
      to any lien on any Transferred Assets (excluding credit provided by Seller
      in
      the ordinary course of business to buyers of its products and obligations to
      pay
      vendors in the ordinary course of business consistent with past
      practice);

     

    
      
         

      

      
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    (ix) Contracts
      containing covenants limiting the freedom of Seller or Affiliate of Seller
      to
      engage in any line of business or compete with any Person that relates directly
      or indirectly to the Business or the Transferred Assets;

     

    (x) any
      Contract with the federal, state or local government or any agency or department
      thereof;

     

    (xi) any
      Contract or other arrangement with a Related Party (excluding payments to
      shareholders as such);

     

    (xii) Leases
      of real or personal property involving annual payments of more than $25,000;
      and

     

    (xiii) any
      other Contract under which the consequences of a Default or termination would
      reasonably be expected to have a Material Adverse Effect, individually or in
      the
      aggregate.

     

    Complete
      and accurate copies of all of the Contracts listed in Section 3.6(a) of the
      Disclosure Schedule, including all amendments and supplements thereto, have
      been
      delivered to Purchaser, with the exception of Contracts the existence of which
      cannot be disclosed without a waiver of a confidentiality agreement, consisting
      of three contracts for goods or services that are generally commercially
      available without the payment of a significant advance license or set-up fee.
      Seller shall use it reasonable best efforts to obtain consent to disclose such
      contracts to Purchaser as soon as practicable after the execution of this
      Agreement.

     

    (b)  Absence
      of Defaults.
      Except as set forth in Section 3.6(b) of the Disclosure Schedule, all of the
      Material Contracts are valid and binding obligations of Seller and enforceable
      against Seller and, to Seller’s knowledge, the other parties thereto in
      accordance with their terms (except that enforceability may be limited by the
      effect of (i) bankruptcy, insolvency, reorganization, moratorium or other
      similar Legal Requirements relating to or affecting the rights of creditors
      or
      (ii) general principles of equity (regardless of whether enforceability is
      considered in a proceeding at law or in equity) with no existing or, to Seller’s
      knowledge, threatened Default or dispute by Seller or, to Seller’s knowledge,
      any other party thereto. Seller has fulfilled, or taken all action necessary
      to
      enable it to fulfill when due, all of its material obligations under each of
      such Material Contracts. To Seller’s knowledge, all parties to such Material
      Contracts have complied in all material respects with the provisions thereof,
      no
      party is in material Default thereunder and no notice of any claim of Default
      has been given to Seller.

     

    3.7  No
      Conflict or Violation; Consents.
      Except
      as set forth in Section 3.7 of the Disclosure Schedule, none of the execution,
      delivery or performance of this Agreement or any Ancillary Agreement, the
      consummation of the transactions contemplated hereby or thereby, nor compliance
      by Seller with any of the provisions hereof or thereof, will (a) violate or
      conflict with any provision of Seller’s articles of incorporation or bylaws, (b)
      violate, conflict with, or result in a breach of or constitute a Default (with
      or without notice or the passage of time) in any material respect under, or
      result in the termination of, or accelerate the performance required by, or
      result in a right to terminate, accelerate, modify or cancel under, or require
      a
      notice under, or result in the creation of any Encumbrance upon any of the
      Transferred Assets under, any Material Contract, franchise, permit, indenture
      or
      mortgage for borrowed money, instrument of indebtedness, security interest
      or
      other arrangement to which Seller is a party or by which Seller is bound or
      to
      which the Transferred Assets or any portion thereof are subject, (c) violate
      any
      applicable Legal Requirement in any material respect or Court Order or (d)
      impose any Encumbrance on any Transferred Assets or the Business. Except as
      set
      forth in section 3.7 of the Disclosure Schedule, no notices to, declaration,
      filing or registration with, approvals or consents of, or assignments by, any
      Persons (including any federal, state or local governmental or administrative
      authorities) are necessary to be made or obtained by Seller in connection with
      the execution, delivery or performance of this Agreement or any Ancillary
      Agreement or the consummation of the transactions contemplated hereby or
      thereby. Except as set forth in Section 3.7 of the Disclosure Schedule, as
      of
      the date hereof, the Assumed Liabilities do not, and as of the Closing will
      not,
      include any indebtedness for borrowed money (including any capital lease) or
      outstanding letter of credit or similar obligation.

     

    
      
         

      

      
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    3.8  Permits.
      Seller
      has all Permits required under any applicable Legal Requirement in the operation
      of the Business or its ownership of the Transferred Assets, and owns or
      possesses such Permits free and clear of all Encumbrances, except the failure
      to
      have a given Permit would not be material to the Business or the Transferred
      Assets. Seller is neither in Default, nor has Seller received any written notice
      of any claim of Default with respect to any such Permit.

     

    3.9  Financial
      Information; Books and Records.
      Seller
      has provided to Purchaser accurate and complete copies of the audited balance
      sheet and related statements of income or loss the twelve-month period ending
      on
      December 31, 2004 and the balance sheet, related statements of income or loss
      and the preliminary audit report for the twelve-month period ending on December
      31, 2005 (the “Audited
      Financial Statements”),
      and
      an unaudited balance sheet and related statement of income or loss for the
      nine-month period ending on September 30, 2006 (the “Interim
      Financial Statements,”
and
      together with the Audited Financial Statements, the “Financial
      Statements”).
      Except as set forth in Section 3.9 of the Disclosure Schedule or as noted in
      the
      Financial Statements, the Financial Statements have been prepared in accordance
      with Seller’s books and records and generally accepted accounting principles
      consistently applied (subject, in the case of the Interim Financial Statements,
      to normal year-end adjustments and the absence of notes) and fairly present,
      in
      all material respects, the results of operations and financial condition of
      Seller for the respective periods and as of the dates identified therein,
      respectively. The accounting books and records of Seller accurately and fairly
      reflect the activities of Seller in connection with the Business. Seller has
      not
      engaged in any transaction, maintained any bank account or used any corporate
      funds, except for transactions, bank accounts or funds which have been and
      are
      reflected in the normally maintained accounting books and records.

     

    3.10    Liabilities.
      Seller
      has no material Liabilities or obligations (absolute, accrued, contingent or
      otherwise) relating to the Business or the Transferred Assets except (a)
      Liabilities disclosed in the Financial Statements, (b) Liabilities incurred
      in
      the ordinary course of business consistent with past practice, (c) Liabilities
      arising under Contracts assumed by Purchaser under this Agreement and (d)
      Liabilities expressly identified in Section 3.10 of the Disclosure Schedule.
      Upon consummation of the transactions contemplated by this Agreement, Purchaser
      will have no liability with respect to any such Liabilities of Seller except
      to
      the extent they shall constitute Assumed Liabilities.

     

    3.11     Litigation.
      Except
      as set forth in Section 3.11 of the Disclosure Schedule, there is no Action
      pending or, to Seller’s knowledge, threatened, against, relating to or affecting
      Seller or any of the Transferred Assets which seeks to enjoin or obtain damages
      in respect of the transactions contemplated hereby, and with respect to which
      there is a reasonable likelihood of a determination which would prevent Seller
      from consummating the transactions contemplated hereby. Except as set forth
      in
      Section 3.11 of the Disclosure Schedule, there are presently no outstanding
      judgments, decrees or orders of any court or any Governmental Body against
      or
      affecting Seller, the Business or any of the Transferred Assets.

     

    3.12     Labor
      Matters.

     

    (a)  General.
      Seller is not a party to any labor agreement with respect to its Employees
      with
      any labor organization, group or association, and Seller has not experienced
      any
      attempt by organized labor or its representatives to make Seller conform to
      demands of organized labor relating to its Employees or to enter into a binding
      agreement with organized labor that would cover any of Seller’s Employees. There
      is no unfair labor practice charge or complaint against Seller pending before
      the National Labor Relations Board or any other governmental agency arising
      out
      of Seller’s activities, and Seller has no knowledge of any facts or information
      which would give rise thereto; there is no labor strike or labor disturbance
      pending or, to the knowledge of Seller, threatened against Seller nor is any
      grievance currently being asserted against Seller; and Seller has not
      experienced a work stoppage or other labor difficulty. There are no material
      controversies pending or, to Seller’s knowledge, threatened between Seller and
      any of its Employees, and Seller is not aware of any facts which could
      reasonably result in any such controversy.

     

    
      
         

      

      
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    (b)  Compliance.
      Seller is in compliance in all material respects with all applicable Legal
      Requirements respecting employment practices, terms and conditions of
      employment, wages and hours, equal employment opportunity, and the payment
      of
      social security and similar Taxes and, to the knowledge of Seller, is not
      engaged in any unfair labor practice. Seller is in compliance with the
      Immigration Reform and Control Act of 1986. Seller is not liable for any claims
      for past due wages or any penalties for failure to comply with any of the
      foregoing. Seller has not effectuated (i) a “plant closing” or partial “plant
      closing” (as defined in the WARN Act or any similar Legal Requirement) affecting
      any site of employment or one or more Facilities or (ii) a “mass layoff” (as
      defined in the WARN Act or any similar Legal Requirement) affecting any site
      of
      employment or Facility of Seller, except that Seller issued WARN Act notices
      on
      or about November 22, 2006 and January 15, 2007 in the forms provided to
      Purchaser.

     

    (c)  Severance
      Obligations.
      Seller has not entered into any severance, “stay-bonus” or similar arrangement
      in respect of any present or former Employee that will result in any obligation
      (absolute or contingent) of Purchaser to make any payment to any present or
      former Employee following termination of employment (voluntary or involuntary)
      or upon consummation of the transactions contemplated by this Agreement or
      any
      Ancillary Agreement (whether or not employment is continued for any specified
      period after the Closing Date). Neither the execution and delivery of this
      Agreement or any Ancillary Agreement nor the consummation of the transactions
      contemplated hereby or thereby will result in the acceleration or vesting of
      any
      other rights of any Person to benefits under any Employee Plan.

     

    (d)  Employees.
      Attached hereto as Section 3.12(d) of the Disclosure Schedule is a list of
      the
      names of all present employees. Seller has provided Purchaser with the amount
      of
      compensation currently payable to such employees by Seller.

     

    3.13    Purchase
      Commitments and Outstanding Bids.
      As of
      the date of this Agreement, Seller has not entered into any Contracts for the
      purchase of products or services by Seller in connection with the Business,
      other than in the ordinary course of business, except for (a) contracts relating
      to the retention of professional advisors for which Seller is solely responsible
      and (b) other contracts involving the expenditure of not more than $100,000
      in
      the aggregate. As
      of the
      date of this Agreement, Prepaid Inventory is, in all material respects, as
      indicated in Schedule 3.13 (which schedule specifies all material elements
      of
      Prepaid Inventory and the vendor to which the payment has been made). There
      are
      no obligations to sell Inventory to any third party outside the ordinary course
      of business. No outstanding purchase or outstanding lease commitment of Seller
      presently is in excess of the normal, ordinary and usual requirements of the
      Business. There are no outstanding or pending obligations of Seller in
      connection with the Business to lease real property other than the Facility
      Leases.

     

    3.14   Employee
      Benefit Plans

     

    
      
         

      

      
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    (a)  Attached
      hereto as Section 3.14 of the Disclosure Schedule is a true and complete list
      of
      all Employee Plans existing on the date hereof. Except as listed in Section
      3.14
      of the Disclosure Schedule, there are no Pension Plans that are subject to
      Section 412 of the Code or Section 302 or Title IV of ERISA, and there are
      no
      Multiemployer Plans.

     

    (b) A
      true and complete copy of each of the Employee Plans listed in Section 3.14
      of
      the Disclosure Schedule, together with any and all related trusts, any and
      all
      amendments thereto, the most recent summary plan description, any and all
      collective bargaining agreements relating to such Employee Plan, and the most
      recent annual reports filed for such Employee Plan, has been delivered to
      Purchaser. In the case of any Employee Plan listed on Section 3.14 of the
      Disclosure Schedule which is not in written form, an accurate description of
      such Employee Plan is included as part of Section 3.14 of the Disclosure
      Schedule.

     

    (c) Each
      Employee Plan listed on Section 3.14 of the Disclosure Schedule complies, and
      has complied, in all material respects in form and operation with all
      requirements of applicable United States federal, state, local and other law
      or
      regulation, whether domestic or foreign. Seller represents and warrants that
      all
      contributions and other payment obligations required to be made on or before
      the
      Closing Date under or in connection with the Employee Plans listed on Section
      3.14 of the Disclosure Schedule have been or will be paid in full on or as
      of
      the Closing Date.

     

    3.15     Transactions
      with
      Related Parties.
      Except
      for employment agreements and other arrangements or agreements disclosed in
      Section 3.15 of the Disclosure Schedule, no Related Party has, with respect
      to
      the Business or the Transferred Assets, (a) borrowed or loaned money or other
      property to Seller that has not been repaid or returned, (b) any contractual
      relationship or other claims, express or implied, of any kind whatsoever against
      Seller or (c) any interest in any of the Transferred Assets (including any
      Intellectual Property).

     

    3.16     Compliance
      with Legal Requirements.
      Seller
      and its predecessors have conducted the Business in material compliance with
      all
      applicable Legal Requirements and Court Orders. Seller has not received any
      notice to the effect that, or has otherwise been advised that Seller is not
      in
      compliance with any such Legal Requirements or Court Orders, and , to the
      knowledge of Seller, Seller has no reason to anticipate that any existing
      circumstances are likely to result in a violation of any of the
      foregoing.

     

    3.17     
      Intellectual
      Property.

     

    (a)  General.
      Section 3.17(a) of the Disclosure Schedule sets forth with respect to Seller’s
      Intellectual Property: (i) for each invention material to the Business of
      Seller, whether or not patented, the date of conception and reduction to
      practice, names of inventors, priority date of patent applications (if any),
      and
      issue dates of any issued patents, (ii) all material Intellectual Property
      in
      the form of licenses of Seller, and (iii) all material trademarks, tradenames,
      patents, copyright registrations and URLs owned or used by Seller or owned
      or
      used by any Person and used in the Business. True and correct copies of all
      Intellectual Property (including all pending applications, application related
      documents and materials) owned, controlled or used by or on behalf of Seller
      or
      in which Seller has any interest whatsoever have been provided or made available
      to Purchaser. Section 3.17(a) of the Disclosure Schedule sets forth a true
      and
      complete list of all trade names not owned by Seller, but that are used in
      the
      conduct of the Business.

     

    (b)  Adequacy.
      Seller’s Intellectual Property are all those necessary for the normal conduct of
      the Business as presently conducted including the procurement, distribution
      and
      sale of all products and services currently under development, planned for
      development or in practice.

     

    
      
         

      

      
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    (c)  Royalties
      and Licenses.
      Except as set forth in Section 3.17(c) of the Disclosure Schedule, Seller has
      no
      obligation to compensate any Person for the use of any of its Intellectual
      Property nor has Seller granted to any Person any license, option or other
      rights to use in any manner any of its Intellectual Property, including the
      trade names set forth in Section 3.17(a), whether requiring the payment of
      royalties or not.

     

    (d)  Ownership.
      Except as set forth in Section 3.17(d) of the Disclosure Schedule, Seller owns
      or has the valid right to use the Intellectual Property, including the trade
      names identified in Section 3.17(a) of the Disclosure Schedule, and such
      Intellectual Property will remain the valid rights of Seller (or Purchaser
      following the consummation of the Acquisition) following the execution, delivery
      and performance of this Agreement or any Ancillary Agreement or the consummation
      of the transactions contemplated hereby or thereby. Except as set forth in
      Section 3.17(d) of the Disclosure Schedule, all Intellectual Property will
      be
      fully transferable, alienable or licensable by Purchaser without restriction
      and
      without payment of any kind to any third party. Seller has no obligation to
      compensate or account to any person for the use of the Intellectual Property
      except as otherwise set forth in Section 3.17(d) of the Disclosure Schedule.
      The
      licenses identified in Section 3.17(d) of the Disclosure Schedule as the “Key
      Software Licenses” constitute the only inbound software licenses or similar
      services that are critical to the operation of the Business and are not
      otherwise generally commercially available without the payment of a significant
      advance license or set-up fee (such licenses, the “Key
      Software Licenses”).

     

    (e)  Absence
      of Claims.
      Except as set forth in Section 3.17(e) of the Disclosure Schedule, Seller has
      not received (i) any notice alleging, or otherwise has knowledge of facts that
      might give rise to, invalidity with respect to any of the Intellectual Property
      or (ii) any notice of alleged infringement of any rights of others due to any
      activity by Seller. Except as set forth in Section 3.17(e) of the Disclosure
      Schedule, Seller’s use of the Intellectual Property in the Business does not
      infringe upon or otherwise violate the Intellectual Property rights of any
      third
      party anywhere in the world. Except as set forth in Section 3.17(e) of the
      Disclosure Schedule, no other Person has notified Seller that it is claiming
      any
      ownership of or right to use any Intellectual Property of Seller, or, to
      Seller’s knowledge, is infringing upon any such Intellectual Property in any
      way.

     

    (f)  Protection
      of Intellectual Property.
      Seller has taken reasonable steps to safeguard and maintain its confidential
      information.

     

    (g)  Licenses.
      Seller has secured any export and import licenses that are necessary or
      appropriate for the conduct of the Business in accordance with all applicable
      laws and regulations.

     

    3.18    Assets
      Necessary to Continue to Conduct Business.
      The
      Transferred Assets (a) constitute all of the assets, properties and rights
      (i)
      used in the Business as presently conducted other than the Excluded Assets,
      and
      (ii) necessary to conduct the Business as presently conducted, and (b) upon
      consummation of the transactions contemplated by this Agreement, Purchaser
      will
      obtain the resources necessary to conduct the Business as currently conducted
      by
      Seller. Except as set forth in Section 3.18 of the Disclosure Schedule, no
      Affiliate of Seller (which for purposes of this Section 3.18 shall include
      any
      current or prior shareholder of Seller) has any direct or indirect interest
      in
      any asset, property or right used in, or necessary to conduct, the Business
      as
      currently conducted by Seller (including, without limitation, any URL’s, trade
      names or trademarks related to the trade names “The Woodwind & The
      Brasswind” and “Music 123,” or any derivation thereof, wherever
      located).

     

    3.19    Brokers;
      Transactions Costs.
      Except
      as set forth in Section 3.19 of the Disclosure Schedule (for which Seller is
      solely responsible), Seller has not entered into nor will enter into any
      contract, agreement, arrangement or understanding with any Person which has
      or
      will result in the obligation of Purchaser or Seller to pay any finder’s fee,
      brokerage commission, legal, accounting or similar payment in connection with
      the transactions contemplated hereby.

     

    
      
         

      

      
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    3.20    No
      Other Agreements to Sell the Transferred Assets.
      Seller
      has no legal obligation, absolute or contingent, to any other Person to sell
      the
      Transferred Assets or any portion thereof or to sell any capital stock of Seller
      or to effect any merger, consolidation or other reorganization of Seller or
      to
      enter into any agreement with respect thereto, except pursuant to this
      Agreement.

     

    3.21    Product
      Liability.
      To the
      knowledge of Seller, Seller has not committed any act, and there has been no
      omission by Seller, which is reasonably likely to result in, and there has
      been
      no occurrence relating to any product of Seller which is reasonably likely
      to
      result in, product liability (whether covered by insurance or not) on the part
      of Seller, with respect to products distributed, delivered or sold by Seller
      prior to the Closing.

     

    3.22    Approvals.
      Section
      3.22 of the Disclosure Schedule contains a list of all material approvals or
      consents relating to the Business which are required to be given to or obtained
      by Seller from any Person in connection with the consummation of the
      transactions contemplated by this Agreement, it being acknowledged that the
      consents related to the continued use of the Key Software Licenses shall be
      deemed material.

     

    ARTICLE
      4

    PURCHASER’S
      REPRESENTATIONS AND WARRANTIES

     

    As
      an
      inducement of Seller to enter into this Agreement, Purchaser hereby makes the
      following representations and warranties to Seller.

     

    4.1  Organization.
      Purchaser is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Delaware, with full corporate power and authority
      to conduct its business as presently being conducted.

     

    4.2  Authorization.
      Purchaser has all necessary corporate power and authority to enter into this
      Agreement and the Ancillary Agreements and has taken all corporate or similar
      action necessary to consummate the transactions contemplated hereby and thereby
      and to perform its obligations hereunder and thereunder. This Agreement has
      been
      duly executed and delivered by Purchaser, and this Agreement is, and upon
      execution and delivery thereof each Ancillary Agreement to which Purchaser
      is a
      party will be, a valid and binding obligation of Purchaser, as the case may
      be,
      enforceable against Purchaser in accordance with its terms, except that
      enforceability may be limited by the effect of (a) bankruptcy, insolvency,
      reorganization, moratorium or other similar laws relating to or affecting the
      rights of creditors or (b) general principles of equity (regardless of whether
      enforceability is considered in a proceeding at law or in equity).

     

    4.3  Brokers;
      Transactions Costs.
      Purchaser has neither entered into or will enter into any contract, agreement,
      arrangement or understanding with any Person which has or will result in the
      obligation of Seller to pay any finder’s fee, brokerage commission, legal,
      accounting or similar payment in connection with the transactions contemplated
      hereby.

     

    4.4  Transferred
      Assets “AS IS”; Purchaser’s Acknowledgment Regarding Same.
      Purchaser agrees, warrants, and represents that, except as set forth in this
      Agreement, (a) Purchaser is purchasing the Transferred Assets on an “AS IS”
basis based solely on Purchaser’s own investigation of the Transferred Assets
      and (b) neither Seller nor any real estate broker, agent, officer,
      employee, servant, attorney, or representative of Seller has made any
      warranties, representations or guarantees, express, implied or statutory,
      written or oral, respecting the Transferred Assets, or any part of the
      Transferred Assets, including the Leased Real Property, or any matters
      pertaining thereto, including respecting the compliance or non-compliance with
      or the applicability or non-applicability of, any other building, health,
      zoning, Environmental, Health and Safety Laws, or any other applicable city
      and
      county, state, or federal statute, ordinance, code, rule, regulation, or other
      law, relating to the Transferred Assets, or any part thereof, or relating to
      the
      financial performance or future prospects of the Transferred Assets or the
      Business, or otherwise with regard to or pertaining to the Transferred Assets,
      Purchaser’s intended use and operation thereof, or the physical condition of the
      Transferred Assets. Purchaser further acknowledges that the consideration for
      the Transferred Assets specified in this Agreement has been agreed upon by
      Seller and Purchaser after good-faith arms’-length negotiation in light of
      Purchaser’s agreement to purchase the Transferred Assets “AS IS,” except as set
      forth in this Agreement. Purchaser agrees, warrants, and represents that, except
      as set forth in this Agreement, Purchaser has relied, and shall rely, solely
      upon its own investigation of all such matters, and that Purchaser assumes
      all
      risks with respect thereto. EXCEPT AS SET FORTH IN THIS AGREEMENT, SELLER MAKES
      NO EXPRESS WARRANTY, NO WARRANTY OF MERCHANTABILITY, NO WARRANTY OF FITNESS
      FOR
      A PARTICULAR PURPOSE, NOR ANY IMPLIED OR STATUTORY WARRANTY WHATSOEVER WITH
      RESPECT TO ANY REAL OR PERSONAL PROPERTY OR ANY MERCHANDISE, INVENTORY OR
      FURNITURE, FIXTURES AND EQUIPMENT.

     

    
      
         

      

      
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    4.5  Availability
      of Funds.
      Purchaser has the financial capability to consummate the Acquisition.
      Purchaser’s consummation of the Acquisition is not in any way contingent upon or
      otherwise subject to (a) Purchaser’s consummation of any financing arrangements
      or Purchaser’s obtaining of any financing, or (b) the availability, grant,
      provision or extension of any financing to Purchaser.

     

    ARTICLE
      5

    COVENANTS

     

    5.1  Access
      and Availability.
      During
      the Pre-Closing Period, Seller shall (a) afford Purchaser and its
      Representatives reasonable access to, during normal business hours, and if
      reasonably requested by Purchaser, evenings and week-ends, in a manner so as
      not
      to interfere with the normal business operations and upon reasonable prior
      written notice, the properties, Contracts, books and records and other documents
      and data pertaining to Seller, the Business, the Assumed Liabilities and the
      operation of the Transferred Assets, and (b) furnish Purchaser and its
      Representatives with such additional financial, operating and other data and
      information as they may reasonably request.

     

    5.2  Operation
      of the Business.

     

    (a)  Except
      with the prior written consent of Purchaser (which consent shall not be
      unreasonably withheld, delayed or conditioned), as otherwise contemplated or
      permitted by this Agreement or as required by the Bankruptcy Code, during the
      Pre-Closing Period, Seller shall operate the Business in the ordinary course
      (taking into account Seller’s status as a debtor-in-possession), comply with all
      Legal Requirements applicable to the operation of its business and preserve
      its
      present business organization intact. During the Pre-Closing Period, Seller
      shall use commercially reasonable efforts to:

     

    (i) maintain
      in full force and effect the Permits in all material respects;

     

    (ii) maintain
      all of the Transferred Assets in a manner consistent with past practices,
      reasonable wear and tear excepted and maintain the types and levels of insurance
      currently in effect in respect of the Transferred Assets;

     

    
      
         

      

      
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    (iii) upon
      any damage, destruction or loss to any Transferred Asset, apply any insurance
      proceeds received with respect thereto to the prompt repair, replacement and
      restoration thereof to the condition of such Transferred Asset before such
      event
      or, if required, to such other (better) condition as may be required by
      applicable Legal Requirements;

     

    (iv) replenish
      the Inventory such that the mix, character and quality of the Inventory on
      the
      Closing Date is substantially similar as on the date hereof;

     

    (v) pay
      when due all undisputed amounts owed under the Facilities Leases;
      and

     

    (vi) consult
      with Purchaser on all material aspects of the Business as may be reasonably
      requested from time to time by Purchaser, including, but not limited to,
      personnel, accounting and financial functions.

     

    (b) Except
      as otherwise contemplated or permitted by this Agreement, during the Pre-Closing
      Period, Seller shall not, without the prior written consent of Purchaser (which
      consent shall not be unreasonably withheld, delayed or
      conditioned):

     

    (i) terminate
      or amend any of the Facilities Leases (or execute any amendments or
      modifications to any Facilities Leases), or cancel, modify or waive any claims
      held in respect of the Transferred Assets or waive any material rights of
      value;

     

    (ii) do
      any act or fail to do any act that will cause a material breach or default
      in
      any of the Facilities Leases;

     

    (iii) sell,
      transfer or otherwise dispose of any of the Transferred Assets except in the
      ordinary course of business, consistent with past practices;

     

    (iv) modify
      any of its sales practices or receivables collections practices from those
      in
      place on the date hereof, including offering any discounts, incentives or other
      accommodations for early payment;

     

    (v) conduct
      any “going out of business,” liquidation, bankruptcy, or similar sales or take
      any action to fashion its business as going out of business, liquidating or
      closing;

     

    (vi) grant
      to any Employee any increase in compensation, except increases to non-management
      Employees in the ordinary course of business;

     

    (vii) terminate
      any Employee related to the Business, except non-management Employees in the
      ordinary course of business;

     

    (viii) make
      or rescind any material Tax election or take any material Tax position (unless
      required by law) or file any Tax Return or change its fiscal year or financial
      or Tax accounting methods, policies or practice, or settle any Tax Liability,
      except in each case as would not reasonably be expected to materially affect
      Purchaser;

     

    (ix) modify,
      rescind or terminate a material Permit, allowance, or credit (or application
      therefor) relating to the Business or the Transferred Assets;

     

    
      
         

      

      
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    (x) dispose
      of or fail to keep in effect any material rights in, to, or for the use of
      any
      of the Intellectual Property, except for rights which expire or terminate in
      accordance with their terms;

     

    (xi) issue
      any shares of stock or stock equivalents;

     

    (xii) subject
      its assets to any material Encumbrances;

     

    (xiii) directly
      or indirectly make any dividend or other distribution to shareholders or
      repurchase or reacquire any equity interests;

     

    (xiv) close
      the Store / Headquarters;

     

    (xv) issue
      any purchase order for non-branded goods in excess of $100,000;

     

    (xvi) incur
      any Indebtedness other than under current credit arrangements provided to
      Purchaser; or

     

    (xvii) authorize
      any of the foregoing, or commit or agree to take actions, whether in writing
      or
      otherwise, to do any of the foregoing.

     

       
5.3  Notices
      and Consents.
      As promptly as practicable following the execution hereof, each of the Parties
      will deliver any notices to, make any filings with and use its commercially
      reasonable efforts to obtain any authorizations, consents and approvals of
      Governmental Bodies required in connection with the consummation of the
      transactions contemplated by this Agreement. During the Pre-Closing Period,
      Seller and Purchaser shall reasonably cooperate with one another: (a) in
      obtaining all consents identified in Section 3.22 of the Disclosure Schedule,
      (b) with respect to all filings that Purchaser is required by any Legal
      Requirement to make in connection with the transactions contemplated hereby,
      and
      (c) in delivering any notices deemed necessary or desirable by Purchaser or
      Seller in connection with the Bankruptcy Case. Seller shall promptly deliver
      to
      Purchaser copies of all filings, correspondence and orders to and from any
      Governmental Body in connection with the transactions contemplated
      hereby.

     

            5.4  Commercially
      Reasonable Efforts.
      Subject to the terms and conditions of this Agreement:

     

    (a)  During
      the Pre-Closing Period, each of Seller and Purchaser shall (i) use its
      commercially reasonable efforts (A) to cause the conditions in Article 7 and
      Article 8, respectively, to be satisfied, (B) to deliver or cause to be
      delivered at the Closing the items to be delivered by Seller and Purchaser
      pursuant to Section 2.3(b), (C) obtain the right to assume and assign, or
      otherwise obtain consent of the applicable licensors with respect to, the Key
      Software Licenses so as to assure the continued availability of such licensed
      software to Purchaser from and after the Closing, and (D) to take all other
      actions to consummate the transactions contemplated hereby, and (ii) not take
      any action that will have the effect of unreasonably delaying, impairing or
      impeding the receipt of any authorizations, consents, orders or approvals to
      be
      sought pursuant to this Agreement.

     

    (b)  From
      and after the Closing, Seller and Purchaser shall use commercially reasonable
      efforts to deliver or cause to be delivered such additional documents and other
      papers and to take or cause to be taken such further actions as may be
      necessary, proper or advisable to make effective the transactions contemplated
      hereby and to carry out the provisions hereof.

     

    
      
         

      

      
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    5.5  Notice
      of Developments.
      Seller
      shall promptly notify Purchaser in writing of any change or development that
      would cause any of the representations and warranties herein not to be true
      and
      correct in any material respect or any other material development in the
      Business, the Transferred Assets, or the Assumed Liabilities.

     

            5.6  Bankruptcy
      Proceedings.

     

    (a)  Purchaser
      and Seller acknowledge that this Agreement, the sale of the Transferred Assets,
      and the assumption and assignment of the Facilities Leases of Seller are subject
      to Bankruptcy Court approval.

     

    (b)  Seller
      has filed with the Bankruptcy Court a Petition for reorganization relief
      pursuant to Chapter 11 of the Bankruptcy Code and the Sale Motion, together
      with
      appropriate supporting papers and notices, seeking the entry, by no later than
      January 31, 2007, of the Sale Order.

     

    (c)  Seller
      shall use its commercially reasonable efforts to obtain entry of the Sale Order
      no later than January 31, 2007.

     

    (d)  In
      the event an appeal is taken or a stay pending appeal is requested, from the
      Sale Order, Seller shall immediately notify Purchaser of such appeal or stay
      request and shall provide to Purchaser promptly a copy of the related notice
      of
      appeal or order of stay. Seller shall also provide Purchaser with written notice
      of any motion or application filed in connection with any appeal from either
      of
      such orders.

     

    (e)  Seller
      shall not take any action that is intended, or fail to take any action the
      intent of which failure to act would result in the reversal, voiding,
      modification or staying of the Sale Order.

     

    (f)  During
      the Pre-Closing Period, Seller shall use its reasonable efforts to provide
      such
      prior notice as may be reasonable under the circumstances before filing any
      papers in the Bankruptcy Case that relate, in whole or in part, to this
      Agreement or Purchaser.

     

    5.7  Expense
      Reimbursement Amount.
      If this
      Agreement is terminated for any reason other than by Seller pursuant to Section
      9.1(d) or (e) Seller shall pay Purchaser the Expense Reimbursement Amount upon
      termination of this Agreement. The Expense Reimbursement Amount shall be payable
      as allowed administrative expenses under Sections 503(b) and 507(a) of the
      Bankruptcy Code. Purchaser’s receipt of the Expense Reimbursement Amount in
      accordance with the terms of this Section 5.7 shall be in full settlement and
      satisfaction of any damages of any kind that Purchaser may suffer as a result
      of
      the termination of this Agreement or a breach by Seller of its obligations
      hereunder prior to Closing and shall be Purchaser’s sole and exclusive remedy in
      damages for Seller’s breach of its obligations hereunder prior to
      Closing.

     

    5.8  Notice
      of Bids.
      If
      Seller shall receive any offer, proposal or inquiry regarding the acquisition
      of
      all or any portion of the Transferred Assets, Seller shall within two (2)
      Business Days thereafter: (a) notify Purchaser, in writing, of such proposal
      or
      offer, or any inquiry or contact with any Person with respect thereto, and
      shall, in any such notice to Purchaser indicate in reasonable detail the
      identity of the offeror and the terms and conditions of any proposal and
      (b) after entry of the Sale Order, notify any such offeror of the entry of
      the Sale Order and the fact that Seller is neither considering nor permitted
      to
      consider any such proposal or offer.

     

    5.9  Reserved. 

     

    
      
         

      

      
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    5.10    Employee
      Matters.

     

    (a)  Prior
      to the Closing, Purchaser shall offer to enter into a severance agreement with
      David G. Yoder to become effective upon the commencement of his employment
      with
      Purchaser, which agreement shall be on the same terms and conditions
      as offered by Purchaser to its executive officers of a similar
      level.

     

    (b)  Section
      5.10 of the Disclosure Schedule, which Purchaser shall deliver not later than
      the Business Day prior to the Closing Date, shall set forth the list of the
      employees of Seller that are expected to become employees of Purchaser or one
      of
      its Affiliates (the “Designated
      Employees”).
      Seller shall terminate the employment of all Designated Employees to whom
      Purchaser or one of its Affiliates offers employment immediately prior to the
      Closing, and Seller shall cooperate with and use commercially reasonable efforts
      to assist Purchaser and its Affiliates in their respective efforts to secure
      satisfactory employment arrangements with the Designated Employees, including
      providing Purchaser with access to the Designated Employees for purposes of
      negotiating terms of employment. Nothing contained in this Agreement shall
      confer upon any Designated Employee any right with respect to employment, or
      continuance thereof, with Purchaser or one of its Affiliates, nor shall anything
      herein interfere with the right of Purchaser and its Affiliates to terminate
      the
      employment of any of the Designated Employees at any time, with our without
      cause and with or without prior notice, or restrict Purchaser or its Affiliates
      in the exercise of their independent business judgment in modifying any of
      the
      terms and conditions of the employment of the Designated Employees. Purchaser
      shall have no obligation with respect to claims by any employee of Seller,
      including any Designated Employee, whether under any Employee Plan or for
      severance, unpaid wages, unpaid accrued time off, unpaid bonuses, credit for
      prior service, unpaid commissions or otherwise, except, from and after the
      Closing, with respect to (i) the Assumed Liabilities specified in Section
      2.2(c)(iii) and (ii) obligations under the Consolidated Omnibus Budget
      Reconciliation Act of 1985, as amended. Seller shall be responsible for any
      and
      all Liability under the WARN Act or other Legal Requirements that arises out
      of
      or results from any termination of employment by Seller. Seller confirms that
      it
      has provided to each of its employees on or about November 22, 2006 and January
      15, 2007 all notices required to be provided in order to comply with the WARN
      Act, including a valid and complete WARN Act notice.

     

    5.11    Confidentiality.
      Subject
      to the requirements of the Bankruptcy Code or as may be imposed by the
      Bankruptcy Court, from and after the Closing: (a) Seller shall, and shall cause
      its Affiliates to, hold in confidence all confidential information (including
      trade secrets, customer lists, marketing plans and pricing information) of
      Seller; (b) in the event that Seller or any of its Affiliates shall be legally
      compelled to disclose any such information, Seller shall provide Purchaser
      with
      prompt written notice of such requirement so that Purchaser may seek a
      protective order or other remedy; and (c) in the event that such protective
      order or other remedy is not obtained, Seller or its Affiliate shall furnish
      only such information as is legally required to be provided. Notwithstanding
      the
      forgoing, nothing in this Section 5.11 shall restrict Seller’s provision of
      confidential information to other potential bidders pursuant to a
      confidentiality agreement substantially in the form executed by Purchaser,
      whether or not such Person is ultimately determined to be a Qualified
      Bidder.

     

    5.12    Change
      of Name.
      After
      the Closing Date, neither Seller nor any of its Affiliates shall use the names
      or marks listed in Section 3.17(a) of the Disclosure Schedule or any derivatives
      thereof for commercial purposes. The Sale Order shall provide for the
      modification of the caption in the proceedings before the Bankruptcy Court
      to
      reflect the change in the names of Seller, except that during the pendency
      of
      such proceedings, Seller shall be permitted to use the name “Woodwind &
Brasswind” as its corporate alias in connection with matters relating such case,
      but for no other commercial purpose. After the Closing, Seller and its
      Affiliates shall promptly file with the applicable Governmental Bodies all
      documents necessary to delete from their names each of the tradenames, marks
      or
      any derivatives thereof and shall do or cause to be done all other acts,
      including the payment of any fees required in connection therewith, to cause
      such documents to become effective as promptly as practicable.

     

    
      
         

      

      
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    5.13    Transfer
      of Assets.
      Prior to
      the Closing, Seller shall cause all assets used by Seller in the conduct of
      the
      Business that are owned by an Affiliate of Seller to be transferred to
      Seller.

     

    5.14    Cure
      Costs.
      On or
      before Closing, Seller shall pay all Cure Costs. All Cure Costs will be agreed
      upon by Seller and each party entitled to receipt of a cure payment, or will
      be
      determined by the Bankruptcy Court.

     

    ARTICLE
      6

    CONDITIONS
      PRECEDENT TO THE PARTIES’ RESPECTIVE OBLIGATION TO
      CLOSE

     

    The
      respective obligations of Purchaser and Seller to consummate the Acquisition
      shall be subject to the satisfaction at or prior to the Closing of the following
      conditions, any or all of which may be waived only by agreement of Purchaser
      and
      Seller, in whole or in part, to the extent permitted by applicable Legal
      Requirements:

    

    6.1  No
      Restraints.  No
      temporary restraining order, preliminary or permanent injunction or other order
      preventing the consummation of the Acquisition shall have been issued by any
      court of competent jurisdiction and remain in effect, and there shall not be
      any
      Legal Requirement enacted or deemed applicable to the consummation of the
      transactions contemplated by this Agreement that makes consummation of the
      Acquisition illegal.

     

    6.2  Governmental
      Authorizations.
      All
      requisite Governmental Authorizations or waiting periods following governmental
      filings shall have been obtained or expired.

     

    ARTICLE
      7

    CONDITIONS
      PRECEDENT TO PURCHASER’S OBLIGATION TO CLOSE

     

    The
      obligation of Purchaser to consummate the Acquisition shall be subject to the
      satisfaction at or prior to the Closing of the following conditions, any or
      all
      of which may be waived only by Purchaser, in whole or in part, to the extent
      permitted by applicable Legal Requirements:

    

            
      7.1  Accuracy
      of Representations.
      (a) Each
      of the representations and warranties of Seller in this Agreement that is
      qualified as to materiality shall be true and correct in each case as of the
      date of this Agreement and as of the Closing Date as though made on and as
      of
      the Closing Date (unless made as of a specific date, in which event such date
      shall be applicable), and (b) each of the representations and warranties of
      Seller in this Agreement that is not qualified as to materiality shall be true
      and correct in all material respects, in each case as of the date of this
      Agreement and as of the Closing Date as though made on and as of the Closing
      Date (unless made as of a specific date, in which event such date shall be
      applicable), in case of each of clause (a) and clause (b), without giving effect
      to any update to the Disclosure Schedule.

     

    7.2  Performance
      of Obligations.
      Seller
      shall have complied in all material respects with each of the covenants
      contained in this Agreement to be performed by Seller prior to the Closing
      .

     

    7.3  Deliveries.
      Seller
      shall have executed and delivered or caused to be executed and delivered to
      Purchaser the agreements and documents identified in Section 2.3(b) to be
      delivered to Purchaser by or on behalf of Seller or the Affiliate of Seller
      identified therein, and each such agreement and document shall be in full force
      and effect.

     

    
      
         

      

      
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    7.4  No
      Material Adverse Effect.
      Since
      the date of this Agreement there shall have been no event, condition, change,
      development or other matter, or any worsening of any existing event, condition,
      change, development or other matter that, individually or in combination with
      any other event, condition, change, development or other matter or worsening
      thereof, has had or could reasonably be expected to have a Material Adverse
      Effect.

     

    7.5  Orders. The
      Bankruptcy Court shall have entered the Sale Order, and such order shall have
      become a Final Order.

     

    7.6  Executory
      Contracts. The
      Bankruptcy Court shall have approved and authorized the assumption and
      assignment of the Contracts to be identified on the Assignment
      Agreement.

     

    7.7  Key
      Software Licenses. Purchaser
      shall have obtained the right to assume and assign, or otherwise obtained
      consent of the applicable licensors with respect to, the Key Software Licenses
      so as to assure the continued availability of such licensed software to
      Purchaser from and after the Closing on terms and conditions reasonably
      acceptable to Purchaser.

     

    7.8  No
      Proceedings.
      Since
      the date of this Agreement, there shall not have been commenced against
      Purchaser, or against any Person affiliated with Purchaser, any Proceeding
      (a) involving any material challenge to, or seeking material damages or
      other material relief in connection with, the Acquisition, or (b) that may
      have the effect of preventing, materially delaying, making illegal or otherwise
      materially interfering with the Acquisition. 

     

    7.9  Governmental
      Approvals.
      All
      consents, approvals and authorizations of any Governmental Entity required
      in
      connection with the transactions contemplated by this Agreement shall have
      been
      obtained, in each case, without (a) the imposition of conditions, (b) the
      requirement of divesting Purchaser of any assets or property or (c) the
      requirement of expenditure of money by Purchaser to a third party in exchange
      for any such consent.

     

    ARTICLE
      8

    CONDITIONS
      PRECEDENT TO SELLER’S OBLIGATION TO CLOSE

     

    The
      obligation of Seller to consummate the Acquisition shall be subject to the
      satisfaction at or prior to the Closing of the following conditions, any or
      all
      of which may be waived only by Seller, in whole or in part, to the extent
      permitted by applicable Legal Requirements:

    

    8.1  Accuracy
      of Representations.
      (a) Each
      of the representations and warranties of Purchaser in this Agreement that is
      qualified as to materiality shall be true and correct in each case as of the
      date of this Agreement and as of the Closing Date as though made on and as
      of
      the Closing Date (unless made as of a specific date, in which event such date
      shall be applicable), and (b) each of the representations and warranties of
      Purchaser in this Agreement that is not qualified as to materiality shall be
      true and correct in all material respects, in each case as of the date of this
      Agreement and as of the Closing Date as though made on and as of the Closing
      Date (unless made as of a specific date, in which event such date shall be
      applicable).

     

    8.2  Performance
      of Obligations.
      Purchaser shall have complied in all material respects with each of the
      covenants contained in this Agreement to be performed by Purchaser prior to
      the
      Closing.

     

    8.3  Deliveries.
      Purchaser shall have executed and delivered or caused to be executed and
      delivered to Seller the agreements and documents identified in Section 2.3(b)
      to
      be delivered to Seller by or on behalf of Purchaser, and each such agreement
      and
      document shall be in full force and effect.

     

    
      
         

      

      
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    8.4  No
      Proceedings.
      Since
      the date of this Agreement, there shall not have been commenced against Seller,
      or against any Person affiliated with Seller, any Proceeding (a) involving
      any
      material challenge to, or seeking material damages or other material relief
      in
      connection with, the Acquisition, or (b) that may have the effect of preventing,
      materially delaying, making illegal or otherwise materially interfering with
      the
      Acquisition.

     

    ARTICLE
      9

    TERMINATION

     

    9.1  Termination
      Events.
      This
      Agreement may be terminated prior to the Closing by:

     

    (a)  mutual
      written consent of Purchaser and Seller;

     

    (b)  (i)
      Purchaser if the Closing has not taken place on or before February 15, 2007
      or
      (ii) Seller if the Closing has not taken place on or before March 15, 2007
      (in
      each case other than as a result of any failure on the part of the terminating
      party to comply with or perform any of their respective covenants or obligations
      set forth in this Agreement);

     

    (c)  Purchaser
      (i) if there is a material breach of any representation or warranty or any
      covenant or agreement to be complied with or performed by Seller pursuant to
      the
      terms of this Agreement or (ii) upon the failure of a condition to the
      obligations of Purchaser set forth in Article 7 to be satisfied (and such
      condition is not waived in writing by Purchaser) on or prior to the Closing
      Date, or the occurrence of any event that results or would result in the failure
      of a condition to the obligations of Purchaser set forth in Article 7 to be
      satisfied on or prior to the Closing Date; provided,
      however,
      that such breach or failure is through no fault of Purchaser; provided,
      further,
      however,
      that if such inaccuracy in Seller’s representations and warranties or a breach
      of a covenant by Seller is curable by Seller, then Purchaser may not terminate
      this Agreement under this Section 9.1(c) on account of such inaccuracy or
      breach until the earlier of (A) the expiration of a ten (10) Business Day period
      commencing upon delivery of written notice from Purchaser to Seller of such
      breach or inaccuracy and (B) Seller ceasing to exercise commercially reasonable
      efforts to cure such breach (it being understood that this Agreement shall
      not
      terminate pursuant to this Section 9.1(c) as a result of such particular breach
      or inaccuracy if such breach by Seller is cured prior to such termination
      becoming effective);

     

    (d)  Seller
      (i) if there is a material breach of any representation or warranty or any
      covenant or agreement to be complied with or performed by Purchaser pursuant
      to
      the terms of this Agreement or (ii) upon the failure of a condition to the
      obligations of Seller set forth in Article 8 to be satisfied (and such condition
      is not waived in writing by Seller) on or prior to the Closing Date, or the
      occurrence of any event that results or would result in the failure of a
      condition to the obligations of Seller set forth in Article 8 to be satisfied
      on
      or prior to the Closing Date; provided,
      however,
      that such breach or failure is through no fault of Seller; provided,
      further,
      however,
      that if such inaccuracy in Purchaser’s representations and warranties or a
      breach of a covenant by Purchaser is curable by Purchaser, then Seller may
      not
      terminate this Agreement under this Section 9.1(d) on account of such
      inaccuracy or breach until the earlier of (A) the expiration of a ten (10)
      Business Day period commencing upon delivery of written notice from Seller
      to
      Purchaser of such breach or inaccuracy and (B) Purchaser ceasing to exercise
      commercially reasonable efforts to cure such breach (it being understood that
      this Agreement shall not terminate pursuant to this Section 9.1(d) as a result
      of such particular breach or inaccuracy if such breach by Purchaser is cured
      prior to such termination becoming effective);

     

    (e)  Purchaser
      or Seller if a court of competent jurisdiction or other Governmental Body (other
      than the Bankruptcy Court) shall have issued a final and nonappealable order,
      decree or ruling, or shall have taken any other action, having the effect of
      permanently restraining, enjoining or otherwise prohibiting the Acquisition;
      or

     

    
      
         

      

      
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    (f)  Purchaser
      or Seller if the Bankruptcy Court shall not have entered the Sale Order on
      or
      before February 2, 2007, provided that such terminating party is not in material
      breach of this Agreement.

     

    9.2  Termination
      Procedures.
      Subject
      to Section 9.3, if Purchaser wishes to terminate this Agreement pursuant to
      Section 9.1(a), Section 9.1(b)(i), Section 9.1(c), Section 9.1(e) or
      Section 9.1(f), then Purchaser shall deliver to Seller a written notice stating
      that Purchaser is terminating this Agreement in accordance with the respective
      section. Subject to Section 9.3, if Seller wishes to terminate this Agreement
      pursuant to Section 9.1(a), Section 9.1(b)(ii), Section 9.1(d), Section
      9.1(e) or Section 9.1(f), then Seller shall deliver to Purchaser a written
      notice stating that Seller is terminating this Agreement in accordance with
      the
      respective section.

     

            
      9.3  Expenses;
      Termination Fees. Except
      as set forth in Section 5.7 (which obligations it is expressly agreed
      survive termination of this Agreement), all fees and expenses incurred in
      connection with this Agreement and the transactions contemplated by this
      Agreement shall be paid by the party incurring such expenses, whether or not
      the
      Acquisition is consummated.

     

    9.4  Effect
      of Termination. If
      this
      Agreement is terminated pursuant to Section 9.1, all further obligations of
      the parties under this Agreement shall terminate; provided,
      however,
      that
      the Parties shall, in all events, remain bound by and continue to be subject
      to
      the provisions set forth in Section 2.2(a), Section 5.7, Section 5.11,
      Section 9.3, Section 9.4, Section 11.1, Section 11.2, Section 11.5, Section
      11.6
      and Section 11.11.

     

    ARTICLE
      10

    ADDITIONAL
      COVENANTS

     

    The
      Parties further agree as follows:

    

    10.1    General.
      In case
      at any time after the Closing any further action is necessary to carry out
      the
      purposes of this Agreement, each of the Parties will take such further action
      (including the execution and delivery of such further instruments and documents)
      as any other Party reasonably may request. Seller shall use its commercially
      reasonable efforts from and after the Closing to cause any and all Encumbrances
      on the Transferred Assets that exist on the Closing Date to be released without
      cost to Purchaser.

     

    10.2    Leases
      and Other Agreements.

     

    (a)  Purchaser
      shall assume all of Seller’s right, title and interest in and to, and shall pay
      and perform all liabilities and obligations as and when due under, the
      Facilities Leases; provided,
      however,
      that such assumption shall be conditioned on Purchaser’s successful
      renegotiation of the Facilities Leases to (i) amend the terms of the Store
      /
      Headquarters lease in accordance with the material terms of lease amendment
      attached as Exhibit
      G-1,
      which shall become effective as of the Closing Date and (ii) amend the
      Distribution Center lease in accordance with the material terms of lease
      amendment attached as Exhibit
      G-2,
      which shall become effective as of the Closing Date; provided,
      further, that the terms in such Facilities Leases regarding rent and real
      property taxes payable by the tenant shall remain in their current form for
      the
      duration of the amended terms of the respective Facilities Leases. The
      assumption agreement relating to such Facilities Leases shall include
      representations and warranties that Seller has good and valid leasehold title
      to
      the Leased Real Property, that each Facility has received all required approvals
      of Governmental Bodies, and regarding the suitability of the Leased Real
      Property and customary estoppel provisions. The parties acknowledge that such
      terms have been agreed to pursuant to a letter agreement between Purchaser
      and
      Bamber, LLC, dated as of the date of this Agreement.

     

    
      
         

      

      
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    (b)  Purchaser
      and Seller and the Affiliates of Seller who control Barrington, Inc. shall
      arrive at an agreement with the material terms set forth in Exhibit
      I
      designed to provide Purchaser with continued access to such products consistent
      with past practice (the “Barrington/LA
      Sax Agreement”).

     

    (c)  At
      or prior to Closing, Seller shall pay and perform all liabilities and
      obligations as and when due under the LaSalle Equipment Lease, including payment
      of the purchase option, so as to cause the Seller to be the owner of all
      property subject to such lease and such assets to become Transferred Assets
      hereunder. Seller estimates the payoff amount as of January 31, 2007 to be
      $2,718,343.

     

    10.3    Certain
      Tax Matters.  
      The
      Parties agree that inasmuch as the Transferred Assets include substantially
      all
      the operating assets of Seller, the sale and purchase of the Transferred Assets
      may be exempt from sales and use Taxes in the jurisdictions in which the
      Transferred Assets are located pursuant to the bulk sale, occasional sale,
      or
      sale for resale provisions in the applicable Legal Requirements, and the Parties
      hereto shall treat the transfer of the Transferred Assets provided for herein
      as
      a bulk, occasional sale, or sale for resale for all purposes; provided,
      however,
      that to
      the extent it shall be determined after the date of the Agreement that the
      sale
      by Seller, and the purchase by Purchaser, of all or any portion of the
      Transferred Assets is subject to a sale, use or other transfer Tax, then such
      Tax (and any penalties and interest) shall be paid by Seller. The Parties shall
      cooperate with each other in the preparation, execution and filing of exemption
      certificates or any Tax Returns that may be required in connection with such
      Taxes and any related filing fees, notarial fees and other costs.

     

    10.4    Access
      to Books, Records, Etc.; Further Action.

     

    (a)  Each
      Party agrees that, after the Closing, it will cooperate with and make available
      to the other Parties, during normal business hours and upon reasonable notice,
      all books and records, and other information retained and remaining in existence
      after the Closing Date with respect to the Transferred Assets or the Assumed
      Liabilities that are necessary or useful in connection with any use of the
      Transferred Assets or the operation of the Business by Purchaser after the
      Closing. Seller agrees that it shall preserve and keep all such books and
      records of Seller retained by it for a period of at least three (3) years
      from the Closing Date. After such three (3) year period, Seller may dispose
      of such books and records, unless notified by Purchaser at least sixty (60)
      days
      prior to the expiration of such three (3) year period that Purchaser wishes
      to retain such books and records, in which case Purchaser shall be permitted,
      at
      its sole cost and expense, to remove all or any part of such books and records.
      Additionally, Seller shall have access to the books and records acquired by
      Purchaser for the period commencing on the Closing Date and ending three (3)
      years from the Closing Date for any proper purpose relating to the operation
      of
      its business prior to the Closing Date. Following the Closing, Seller shall
      promptly provide Purchaser with any notices or other documents received by
      Seller relating to the Business.

     

    (b)  From
      and after the Closing Date, Seller shall cooperate with Purchaser and its
      Affiliates and Representatives, and shall execute and deliver such documents
      and
      take such other actions as Purchaser may reasonably request, for the purpose
      of
      evidencing the Acquisition and putting Purchaser in possession and control
      of
      all of the Transferred Assets. Without limiting the generality of the foregoing,
      from and after the Closing Date, Seller shall promptly remit to Purchaser any
      funds that are received by Seller and that are included in, or that represent
      payment of receivables included in, the Transferred Assets. Purchaser shall
      promptly remit to Seller any funds that are received by Purchaser and that
      are
      included in the Excluded Assets. Seller: (i) hereby irrevocably authorizes
      Purchaser, at all times on and after the Closing Date, to endorse in the name
      of
      Seller any check or other instrument that is made payable to Seller and that
      represents funds included in, or that represents the payment of any receivable
      included in, the Transferred Assets; and (ii) hereby irrevocably nominates,
      constitutes and appoints Purchaser as the true and lawful attorney-in-fact
      of
      Seller (with full power of substitution) effective as of the Closing Date,
      and
      hereby authorizes Purchaser, in the name of and on behalf of Seller, to execute,
      deliver, acknowledge, certify, file and record any document, to institute and
      prosecute any Legal Proceeding and to take any other action (on or at any time
      after the Closing Date) that Purchaser may deem appropriate for the purpose
      of
      (A) collecting, asserting, enforcing or perfecting any claim, right or
      interest of any kind that is included in or relates to any of the Transferred
      Assets (including, without limitation, the delivery of documents of conveyance
      to the United States Patent and Trademark Office, foreign trademark registries
      and domestic and foreign URL registries) , (B) defending or compromising
      any claim or Legal Proceeding relating to any of the Transferred Assets, or
      (C) otherwise carrying out or facilitating the Acquisition. The power of
      attorney referred to in the preceding sentence is and shall be coupled with
      an
      interest and shall be irrevocable, and shall survive the dissolution or
      insolvency of Seller. Purchaser shall give prompt notice in reasonable detail
      to
      Seller of any action taken by Purchaser under the foregoing clause (ii) of
      this Section 10.4, including copies of any documents executed by Purchaser
      under
      such clause (ii).

     

    
      
         

      

      
        35

        
          

        

      

      
         

      

    

    ARTICLE
      11

    GENERAL
      PROVISIONS

     

    11.1    Applicable
      Law.
      The
      execution, performance and interpretation of this Agreement shall be governed
      by, and construed and enforced in accordance with, the internal laws of the
      State of Indiana.

     

    11.2    Jurisdiction;
      WAIVER OF JURY TRIAL. The
      parties agree that the Bankruptcy Court shall retain exclusive jurisdiction
      to
      resolve any controversy or claim arising out of or relating to this Agreement
      or
      the implementation or the breach hereof. EACH OF THE PARTIES HERETO HEREBY
      IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING
      OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
      HEREBY.

     

    11.3    Termination
      of Representations and Warranties.
      The
      representations and warranties of the Parties set forth in Articles III and
      IV
      of this Agreement shall terminate and be of no further force or effect after
      the
      Closing Date.

     

    11.4    Notices.
      All
      notices required or permitted to be given under this Agreement shall be in
      writing, and will be deemed given on the date of receipt if delivered in person,
      or on the date of mailing if mailed by overnight courier or registered or
      certified mail, postage prepaid, return receipt requested, to the applicable
      Party at its address indicated on the signatures pages to this Agreement. Any
      Party may change its address for purposes of this Agreement by giving fifteen
      (15) days’ prior written notice of such change of address to the other Party in
      the manner described in this Section 11.4.

     

    11.5    Confidentiality.
      The
      following is subject to any disclosure requirements under the Bankruptcy Code
      or
      imposed by the Bankruptcy Court: Purchaser and Seller each agree that it will
      treat in confidence all documents, materials and other information that it
      shall
      have obtained regarding the other party during the course of the negotiations
      leading to the consummation of the transactions contemplated hereby (whether
      obtained before or after the date of this Agreement), the investigation provided
      for herein and the preparation of this Agreement and other related documents,
      and, in the event the transactions contemplated hereby shall not be consummated,
      at the request of the disclosing party, will return to the other party all
      copies of nonpublic documents and materials which have been furnished in
      connection therewith. Such non-public documents, materials and information
      shall
      not be communicated to any third Person (other than to Purchaser’s and Seller’s
      respective counsel, accountants or financial advisors, in each case subject
      to
      the recipient’s agreement to keep the same confidential). No other party shall
      use any confidential information in any manner whatsoever except solely for
      the
      purpose of evaluating the proposed purchase and sale of the Transferred Assets;
      provided,
      however,
      that
      after the Closing, Purchaser may use or disclose any confidential information
      included in the Transferred Assets or otherwise reasonably related to the
      Transferred Assets and the business. The obligation of each party to treat
      such
      documents, materials and other information in confidence shall not apply to
      any
      information which (a) is or becomes available to such party from a source other
      than the disclosing party, (b) is or becomes available to the public other
      than
      as a result of disclosure by such party or its agents or (c) is required to
      be
      disclosed under applicable law, judicial process or rule of any national
      securities exchange or quotation service.

     

    
      
         

      

      
        36

        
          

        

      

      
         

      

    

    11.6    Public
      Announcements.
      All
      public announcements or statements with respect to this Agreement, the
      transactions contemplated hereby or the activities and operations of the other
      Party shall be jointly approved by Seller and Purchaser; provided,
      however,
      that if
      the Parties are unable to agree on a public statement or announcement and Seller
      or Purchaser determines, after consultation with counsel, that such statement
      or
      announcement is required by applicable Legal Requirement or by obligations
      of
      the Parties or their Affiliates pursuant to any listing agreement with or rules
      of any national securities exchange or quotation service, then Seller or
      Purchaser, as the case may be, may issue such statement or
      announcement.

     

    11.7    Binding
      Effect; Assignment.
      No Party
      shall assign any of its rights, or delegate any of its obligations under this
      Agreement to any third party without the prior written consent of the other
      Parties; provided,
      however,
      that
      Purchaser may assign this Agreement to one or more Affiliates of Purchaser
      without the consent of any Party so long as Purchaser remains fully and
      primarily liable under this Agreement. This Agreement is binding upon, and
      shall
      inure solely to the benefit of, the parties hereto and their respective heirs,
      personal representatives, successors and permitted assigns. This Agreement
      is
      not intended to benefit, and shall not be construed as benefiting, any third
      party, and no third party shall have standing to enforce any provision of this
      Agreement. Without limiting the generality of the foregoing, no Transferred
      Employee shall have any claim against Purchaser pursuant to this Agreement
      except pursuant to a separate written offer of employment delivered directly
      by
      Purchaser to such individual Transferred Employee.

     

    11.8    Modification.
      No
      purported modification, amendment or waiver of any term of this Agreement shall
      be effective unless it is in writing, subsequent to this Agreement and signed
      by
      all parties hereto.

     

    11.9    Counterparts.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed to be an original and all of which together shall constitute one and
      the
      same agreement. Facsimile copies shall also be deemed originals.

     

    11.10   Severability.
      Purchaser and Seller agree that the provisions of this Agreement are severable
      and separate and that the unenforceability of any specific provision or part
      of
      any provision shall not affect the validity of any other provision or term
      of
      this Agreement.

     

    11.11    Entire
      Agreement.
      This
      Agreement, together with the Ancillary Agreements and the instruments delivered
      hereunder and thereunder, constitutes the entire agreement of Purchaser and
      Seller with respect to the subject matter hereof and supersedes any and all
      prior and contemporaneous understandings or agreements, whether oral or written,
      concerning such subject matter, including that certain letter agreement between
      Purchaser and Seller dated November 3, 2006. Each Party acknowledges that it
      enters into this Agreement without relying on any statement by the other Party
      which is not specifically set forth in this Agreement.

     

    
      
         

      

      
        37

        
          

        

      

      
         

      

    

    11.12    Interpretation
      of Agreement.

     

    (a)  The
      words “hereof,” “herein” and “hereunder” and words of similar import when used
      in this Agreement refer to this Agreement as a whole and not to any particular
      provision of this Agreement, and article, section, schedule and exhibit
      references are to this Agreement unless otherwise specified. The meaning of
      defined terms shall be equally applicable to the singular and plural forms
      of
      the defined terms. The terms “include” and “including” are not limiting and mean
“including without limitation.” The masculine gender shall include the feminine
      and neuter genders; the feminine gender shall include the masculine and neuter
      genders; and the neuter gender shall include the masculine and feminine
      genders.

     

    (b)  References
      to agreements and other documents shall be deemed to include all subsequent
      amendments and other modifications thereto.

     

    (c)  References
      to statutes shall include all regulations promulgated thereunder and references
      to statutes or regulations shall be construed as including all statutory and
      regulatory provisions consolidating, amending or replacing the statute or
      regulation.

     

    (d)  The
      captions and headings of this Agreement are for convenience of reference only
      and shall not affect the construction of this Agreement.

     

    (e)  The
      Parties participated jointly in the negotiation and drafting of this Agreement
      and the language used in this Agreement shall be deemed to be the language
      chosen by the Parties to express their mutual intent. If an ambiguity or
      question of intent or interpretation arises, then this Agreement will
      accordingly be construed as drafted jointly by the Parties, and no presumption
      or burden of proof will arise favoring or disfavoring any Party by virtue of
      the
      authorship of any of the provisions of this Agreement.

     

    (f)  The
      annexes, schedules and exhibits to this Agreement are a material part hereof
      and
      shall be treated as if fully incorporated into the body of the Agreement. For
      purposes of this Agreement, whenever the context requires: the singular number
      shall include the plural, and vice versa.

     

    

     

    (Signature
      Page Follows)

     

    
      
         

      

      
        38

        
          

        

      

      
         

      

    

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

    

      
        	 	
                PURCHASER:

              
	 	 	 
	 	
                MUSICIAN’S
                  FRIEND, INC.

              
	 	 	 
	 	 	 
	 	
                By:
                  

              	 
	 	 	
                Leland
                  P. Smith

              
	 	 	
                Executive
                  Vice President

              
	 	 	 
	 	
                Address
                  for Notice:

              
	 	 	 
	 	 	
                c/o
                  Guitar Center, Inc.

              
	 	 	
                5795
                  Lindero Canyon Road

              
	 	 	
                Westlake
                  Village, California 91362

              
	 	 	
                Attention:
                  General Counsel

              
	 	 	
                Fax:
                  (818) 735-4923

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

              
	 	 	 
	 	 	
                Latham
                  & Watkins LLP

              
	 	 	
                140
                  Scott Drive

              
	 	 	
                Menlo
                  Park, California 94025

              
	 	 	
                Attention:
                  Anthony J. Richmond, Esq.

              
	 	 	
                Fax:
                  (650) 463-2600

              
	 	 	 
	 	 	 
	 	
                SELLER:

              
	 	 	 
	 	
                DENNIS
                  BAMBER, INC., D/B/A THE WOODWIND & THE
                  BRASSWIND

              
	 	 	 
	 	 	 
	 	
                By:

              	 
	 	 	
                Dennis
                  Bamber

              
	 	 	
                President

              
	 	 	 
	 	
                Address
                  for Notice:

              
	 	 	 
	 	 	
                4004
                  Technology Drive

              
	 	 	
                South
                  Bend, IN 46628

              
	 	 	
                Fax:
                  (574) 251-3549

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

              
	 	 	 
	 	 	
                c/o
                  ___________

              
	 	 	
                Attention:
                  ________

              
	 	 	
                Fax:
                  (___) ________

              

      

    

     

    

    
      
         

      

      
        S-1EXHIBIT
      10.28

     

    MEDSTRONG
      INTERNATIONAL CORPORATION

    

    January
      8, 2007

    

    Stephen
      J. Bartkiw

    3
      Ocean
      Harbour Circle

    Ocean
      Ridge, FL 33435

    

    Dear
      Stephen: 

    

    We
      are
      very pleased to offer you the position of President and Chief Executive Officer
      at Medstrong International Corporation (the “Company”). This assignment is based
      in South Florida.

    

    We
      expect
      that you will begin working in this new position no later than January 8, 2007.
      Your base salary will be $149,000 on an annual basis. You have agreed to defer
      receipt of your salary, and the Company agrees to accrue such salary, until
      such
      time that as determined by the Board:
      (a) the
      Company receives financing from any source and (b) the other senior executives
      of the Company (who are also deferring their salaries) are paid their accrued
      compensation. At such time(s) that the foregoing conditions are met, you will
      be
      repaid your accrued compensation to the same extent that such accrued
      compensation is repaid to the Company’s other senior executives; once the
      accrued compensation has been fully paid, you will then receive your pro-rata
      salary on a bi-weekly basis. The
      Company’s benefits plans, insurance, retirement and vacation benefits, are in
      the process of being developed and you will qualify as will all other employees
      at a similar compensation level of the Company with respect to any such benefits
      granted.

    

    If
      decided by the Company’s Board of Directors (or
      committee of the Board of Directors having responsibility for option grants)
      that
      any
      senior executive of the Company receives stock options of the Company according
      to a stock option plan, then you will be eligible to participate in such
      plan,
      subject
      to and in accordance with applicable law and regulation.
      Your
      participation level, vesting schedule, exercise price and all other conditions
      for the grant of any stock options will be commensurate with your position
      in
      the company relative to other participating senior executives as determined
      in
      the sole and absolute discretion of the Board of Directors. As a condition
      of
      your employment, you will be required to execute the Company’s Employee
      Inventions and Proprietary Rights Assignment, Non-Competition and
      Non-Disclosure Agreement.

     

     Stephen,
      we are all truly looking forward to your joining the Company. Provided the
      terms
      of this letter are acceptable to you, please sign and return the enclosed copy.
      

     

    
      	
               

              Sincerely
                yours,

               

            	 	 	 
	
              /s/
                Gary Schultheis

            	 	 	
            
	
              

              Gary
                J. Schultheis 
                Chairman
                  of the Board of Directors

              

            	 	 	
            
	
            	 	 	 
	
              Agreed:

            	 	 	 
	
               

              /s/ Stephen J. Bartkiw

              
                

              

              Stephen
                J. Bartkiw

            	 	 	
               

              Date: February 5,
                2007

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