ASSET PURCHASE AGREEMENT

Exhibit 10.22

ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (the “Agreement”) effective as of August 11, 2006, dated August 14, 2006, is by and among Elizabeth Arden, Inc., a Florida corporation (the “Buyer”), and Sovereign Sales, LLC, a Michigan limited liability company (the “Seller”).

RECITALS

The Seller desires to sell, transfer and assign to the Buyer and the Buyer desires to purchase certain of the assets of the Seller’s fragrance distribution business (the “Business”), in accordance with the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the promises and the mutual representations, warranties and covenants and subject to the conditions contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:

ARTICLE I

SALE OF ASSETS

Section 1.1 Subject Assets . The Seller hereby agrees to sell, assign and deliver to the Buyer at the Closing (as defined in Section 3.1), free and clear of all liens, mortgages, pledges, options, claims, security interests, conditional sales contracts, title defects, encumbrances, charges and other restrictions of every kind (collectively, the “Liens”) all right, title and interest in and to the assets, properties and rights, together with any replacements thereof and additions thereto made between the date hereof and the Closing (as defined in Section 3.1), as hereafter described in this Section 1.1 and as listed on composite Schedule 1.1 (collectively, the “Subject Assets”), including the following:

(a) All inventories of fragrance, skincare and color products, including, without limitation, finished goods and products, packaging, labeling, raw materials, components, work-in-process, materials, parts, accessories, supplies, tote, corrugate, shippers, displays, testers, samples, collateral material and gifts with purchase, wherever located (collectively, the “Inventory”);

(b) All finished goods and products relating to the Seller’s inventory which are returned by customers prior to or following the Closing Date (as defined in Section 3.1) and which relate to sales made by the Seller to such customers prior to the Closing Date and, if returned prior to the Closing Date, are not part of the Inventory, or resold or destroyed directly by the Seller (the “Returns”);

(c) All of the Seller’s rights, title and interest in and to the agreements, purchase orders and commitments (including, but not limited to, binding forecasts provided to vendors) related to sales of the Inventory that are listed on Schedule 1.1(c) and the Deposits (as defined in Section 2.1(iv), and subject to the Buyer’s payment to Seller in accordance with Section 2.1(iv), (collectively, the “Contracts”);

(d) All of the Seller’s rights, title and interest in and to the licenses, permits, approvals and other authorizations (other than Acquired Intellectual Property which is addressed in Section 1.1(h) below), issued to it by any governmental authority, including a court (each, a “Governmental Authority”) which are used in connection with the sale of the Inventory, including those listed on Schedule 1.1(d), to the extent transferable to the Buyer (the “Regulatory Licenses”);

(e) All proceeds, rights, claims, credits, causes of action or rights of set-off against third parties relating to the Subject Assets, including, without limitation, unliquidated rights under manufacturers’ and vendors’ warranties, but excluding Insurance Claims and claims for refunds or credits of any taxes that relate to any taxable period (or portion thereof) that ends on or before the Closing Date (the “Claims”);

(f) All rights and claims pursuant to any policy of property and casualty insurance underwritten by any person (as defined in Section 15.14(e)) arising from any casualty loss or damage to the Subject Assets occurring from the date hereof through the Closing, whether or not then reported, but only to the extent the Buyer pays the allocable portion of the Purchase Price with regard to such damaged Subject Assets as if such loss had not occurred (the “Insurance Claims”);

(g) Copies of all books and records pertaining to the Subject Assets, including, without limitation, books, records and files relating to customers, manufacturers and suppliers of the Seller, operating data, business and marketing plans, electronic data files, budgets, regulatory filings, warranties, guaranties, bills of sale, customer and supplier lists, copies of financial and accounting records, executed Contracts, credit records, correspondence and other similar documents and records used and/or useful in connection with the Subject Assets (collectively, the “Records”); and

(h) all copyrights, copyright registrations and applications, trade names (including, but not limited to, “Sovereign Sales”), UPC codes, trade dress, (whether or not registered or by whatever name or designation), owned, applied for or used by, or registered in the name of, the Seller in connection with the Inventory (collectively, the “Acquired Intellectual Property”), (ii) customer lists, supplier relationships, all proprietary data, processes, formulations, technical or manufacturing know-how or information (and materials embodying such information), owned by or used by, the Seller in connection with the Inventory and all goodwill relating to the Subject Assets (collectively with the Acquired Intellectual Property, the “Intangible Assets”).

Section 1.2 Assumed Liabilities . At the Closing, the Buyer shall assume and undertake to perform, pay, satisfy or discharge in accordance with their terms, the liabilities, obligations and commitments of the Seller arising or accruing during the period commencing after the Closing Date under the Contracts to be assigned to it as set forth on Schedule 1.1(c) (the “Assumed Liabilities”). The parties acknowledge and agree that no other liabilities or obligations, whether accrued, mature, absolute, contingent or otherwise, will be assumed by the Buyer, including, without limitation, any liability or obligation with respect to any of the following:

(a) Any product liability or similar claim for injury to persons or property, regardless of when made or asserted, which arises out of or is based upon any express or implied representation, warranty or agreement made by the Seller or its agents, or which is imposed by operation of law or otherwise, in connection with any service performed or product sold by the Seller on or prior to the Closing Date (acknowledging that the Buyer’s product liability and casualty insurance will cover such claims for sales of Inventory after the Closing Date);

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(b) any liability or obligations to any current or former employees, agents, independent contractors or creditors of the Seller (other than those set forth above under Assumed Liabilities) or under any plan or arrangement with respect thereto, including, without limitation, liabilities and obligations of the Seller (A) under any life, health, accident, disability or any other employee benefit plan, and (B) under any pension, profit sharing, stock bonus, deferred compensation, retirement, bonus or other employee pension benefit plan or post-retirement benefit plan to which the Seller is a party or under which the Seller has any obligation, or which is maintained, or to which contributions have been made, by the Seller or any predecessor or any corporation which is a controlled group or corporations of which the Seller are a member, or any trade or business (whether or not incorporated) under common control with the Seller, and (C) for wages, salaries, bonuses, commissions, severance, sick pay, vacation or holiday pay, overtime or other benefits not set forth above;

(c) the Seller’s legal, accounting, investment banking or other fees or expenses arising out of the transactions contemplated by this Agreement or otherwise incurred by the Seller;

(d) any liabilities for any tax, assessment or other governmental imposition of any type or description, including, without limitation, any federal income or excess profits taxes or state, provincial or local income, sales, use, excise, ad valorem or franchise taxes, together with any interest, assessments and penalties thereon arising out of or attributable to the conduct of the Seller’s operations and the Business prior to the Closing Date or the Seller’s or its members’ federal income or capital gain taxes or state, provincial or local income or franchise taxes arising by virtue of the transactions contemplated by this Agreement;

(e) any liability (i) the existence of which constitutes an inaccuracy or breach with respect to any representation, warranty, covenant or agreement of the Seller hereunder, (ii) which arises out of or in connection with any violation by the Seller of any requirement of law prior to the Closing Date, and (iii) which relates to the Subject Assets (including those arising under the Contracts) to the extent relating to periods prior to the Closing Date unless such liabilities are included in the Assumed Liabilities; and

(f) to the extent relating to any conduct occurring prior to the Closing Time, any liability arising out of or in connection with litigation or other legal proceedings, claims or investigations related to the Seller or the Business and operations, regardless of when made or asserted, including, without limitation, contract, tort, intellectual property, infringement or misappropriation, crime, fraudulent conveyance, workers’ compensation, product liability or similar claim for injury to persons or property which arises out of or is based upon any express or implied warranty, representation or agreement of the Seller or its employees or agents, or which is imposed by law or otherwise.

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ARTICLE II

PURCHASE PRICE

Section 2.1 Purchase Price and Inventory Requirements .

(a) Subject to the terms and conditions set forth in this Agreement, including, without limitation, the adjustments set forth in Section 2.2, and in reliance on the representations, warranties and covenants of the parties hereto, the Subject Assets shall be sold by the Seller and shall be purchased by the Buyer for an aggregate purchase price (the “Purchase Price”) consisting of the following:

(i) Twenty-three Million Dollars ($23,000,000.00) cash, of which $20,500,000 is to be paid at the Closing Date, by wire transfer of immediately available funds to an account designated by the Seller at least two business days before the Closing Date (the “Account”), and the remaining Two Million Five Hundred Thousand Dollars ($2,500,000.00), which will be paid as follows: (A) $500,000 on or before September 15, 2006; (B) $1,000,000 on or before October 15, 2006; (C) $500,000 on or before November 15, 2006; (D) $400,000 on or before December 15, 2006; and (E) $100,000 on or before January 15, 2007. The Buyer and the Seller agree that $800,000 of the Purchase Price represents a fair value for the operating services being provided in support of the Subject Assets through December 31, 2006;

(ii) The value of the Inventory (“Inventory Value”) defined as the book value at the Closing Date of the Inventory, as reflected at the lower of the Seller’s standard cost (as set forth in Schedule 2.2(a), “Standard Cost”) or market, which is good and saleable to U.S. and Canadian accounts, and excluding any obsolete or ineligible Inventory (obsolete and ineligible Inventory being mutually and reasonably agreed to by the Parties consistent with the same principles as in the Initial Inventory Listing Report set forth in Schedule 2.2(a)), and subject to adjustment as set forth in Section 2.2(c). The Inventory Value will be paid at the Closing Date by wire transfer of immediately available funds to the Account; and

(iii) At the Closing Date, the Buyer will issue to the Seller a non-interest bearing subordinated note in the amount of Eleven Million Dollars ($11,000,000) (the “Note”), in the form set forth in Exhibit A, which is attached hereto and made a part hereof; and

(iv) To the extent that the Seller’s balance sheet at the Closing Date reflects prepaid deposits (the “Deposits”) on Inventory that has yet to be delivered to the Seller by the Closing Date, and such Inventory is received by the Buyer after the Closing Date with an invoice price corresponding to the purchase price of the Inventory less the Deposit, the Buyer agrees to remit the Deposit to the Seller within 15 days of the receipt of the corresponding Inventory.

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Section 2.2 Inventory Reports; Adjustment to Purchase Price.

(a) Schedule 2.2(a) (the “Initial Inventory Listing Report”) sets forth the Inventory on the date of this Agreement based on the lower of the Seller’s Standard Cost or market, excluding any obsolete or ineligible Inventory and other credits (as determined by agreement of the parties).

(b) Intentionally omitted.

(c) Within ten (10) business days following the Closing Date, the Seller and the Buyer shall make a mutual physical count of the Inventory and shall review the market value of the items in the Initial Inventory Report that were not listed on the inventory schedule delivered by the Seller to the Buyer on August 2, 2006 (by way of email from Tony Khouri to Joel Ronkin), and the parties shall agree on such market values in good faith taking into account market conditions existing as of the Closing Date. On the basis of such Inventory count and review, the Buyer and the Seller shall determine if any adjustments to the Purchase Price paid to the Seller based on the Inventory Closing Update needs to be made. In the event that any adjustments are necessary, the Purchase Price shall be adjusted as follows: for each dollar below the Inventory Closing Update amount, the cash portion of the Purchase Price shall be reduced by one dollar and for each dollar above the Inventory Closing Update amount, the cash portion of the Purchase Price shall be increased by one dollar. The Seller or the Buyer shall remit to the other party the difference in immediately available funds within 3 business days of the Inventory reconciliation.

(d) Requests for Returns from retailers received after the Closing Date that relate to sales by the Seller will be submitted to the Seller for approval. The Seller will act reasonably with respect to such approval. The Seller will reimburse the Buyer for the sales price of the product to which the Returns relate. The Buyer shall purchase Returns that are good and saleable to U.S. mass-market retailers as normal goods at a price equal to 90% of Seller’s cost. If the Returns are not saleable as normal goods, Buyer and Seller shall reasonably agree on Buyer’s purchase price for the Returns. After the Closing Date, the Buyer shall pay for Returns received by the Buyer during a month within 15 days of the end of the month in which the Returns are received.

Section 2.3 Allocation of Purchase Price . Schedule 2.3 hereof sets forth allocations with respect to the Subject Assets, which shall be used by the parties for purposes of reporting to the Internal Revenue Service (the “IRS”) on Form 8594. The Buyer and the Seller agree to cooperate with each other in connection with the preparation and filing of any information required to be furnished to the IRS under Section 1060 of the Internal Revenue Code of 1986, as amended (the “Code”), and any applicable regulations thereunder, and shall not take any position in any income tax return, before any Governmental Authority charged with the collection of income tax, or in a judicial proceeding inconsistent with the terms of this subsection.

Section 2.4 Expenses . Any transfer tax or sales tax or recording or filing fees imposed upon the sale, assignment and delivery of the Subject Assets (other than the fees payable in

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connection with the Initial HSR Filing (as hereinafter defined) which are identified in Section 8.1 and which shall be paid in equal parts by the parties) shall be paid by the Seller, provided that freight and insurance charges on delivery of the Subject Assets shall be paid by the Buyer.

ARTICLE III

CLOSING

Section 3.1 Time and Place of the Closing . The closing (the “Closing” or “Closing Date”) of the transaction contemplated by this Agreement shall take place on August 14, 2006, effective August 11, 2006, provided that all of the conditions to Closing shall have been met. The Closing shall take place on the Closing Date at such time as the transactions are complete, but shall be deemed to have occurred effective as of 11:59 p.m. on the Closing Date (the “Closing Time”) for all purposes.

Section 3.2 Procedure at the Closing . At the Closing, the parties agree to take the following steps in the order listed below (provided, however, that upon their completion all of these steps shall be deemed to have occurred simultaneously):

(a) The Seller shall deliver to the Buyer evidence reasonably satisfactory to the Buyer that each of the conditions to the obligations of the Buyer set forth in Article IX of this Agreement has been satisfied and a certificate of an officer of the Seller to such effect;

(b) The Buyer shall deliver to the Seller evidence reasonably satisfactory to the Seller that each of the conditions to the obligations of the Seller set forth in Article X of this Agreement has been satisfied and a certificate of an officer of the Buyer to such effect;

(c) Each of the Seller and the Buyer shall deliver to the other a copy of the resolutions of its Board of Directors and, as to the Seller, also its members, authorizing the transactions contemplated by this Agreement, certified by a person authorized under the Seller’s Articles of Organization or Operating Agreement to so certify;

(d) Each of the Seller and the Buyer shall deliver to the other a good standing certificate of such party (which is dated not more than 15 days prior to the Closing) and the Seller shall deliver to the Buyer such bills of sale, endorsements and assignments in the forms attached hereto as Exhibit B, and other customary instruments and documents and certificates reasonably satisfactory to the Buyer as shall be sufficient to vest in the Buyer good, valid and marketable title to the Subject Assets, free and clear of all Liens, except as otherwise specifically permitted by this Agreement;

(e) The Seller shall deliver to the Buyer possession of all tangible personal property constituting the Subject Assets which, to the extent not delivered to the Buyer’s designated location, shall be held in trust for the Buyer and designated as being the property of the Buyer, the originals of the Books and Records, the Regulatory Licenses and the Contracts;

(f) The Buyer shall deliver the Purchase Price in accordance with Sections 2.1 and 2.2; and

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(g) Each of the Buyer and the Seller shall execute and deliver documents acknowledging receipt from the other, respectively, of the Subject Assets and the Purchase Price.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE SELLER

In order to induce the Buyer to enter into this Agreement and to consummate the transactions contemplated under this Agreement, the Seller makes the following representations, warranties and covenants, each of which is relied upon by the Buyer in consummating the transactions contemplated hereby regardless of any other investigation made or information obtained by the Buyer:

Section 4.1 Organization, Power and Authority . The Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Michigan, and is duly qualified in each other jurisdiction in which the conduct of its business or the ownership of its assets requires such qualification. The Seller has full legal power and authority (a) to own or lease its properties and to carry on the Business as it is now being conducted, (b) to enter into this Agreement and, subject to the Consents (as defined in Section 4.2) to assign, transfer and deliver the Subject Assets to the Buyer as provided in this Agreement, and (c) to perform the other transactions and agreements contemplated by this Agreement (the “Ancillary Agreements”).

Section 4.2 Authorization; Binding Obligation: Consents . The execution, delivery and performance of this Agreement and the Ancillary Agreements has been duly authorized by all necessary shareholders or members and other requisite action on the part of the Seller or its affiliates. This Agreement and the Ancillary Agreements have been duly executed and delivered by the Seller and are legal, valid and binding obligations of the Seller enforceable in accordance with its terms. The Seller represents and warrants that SDC Enterprises, Inc. and Sovereign Management, Inc. are the sole members of the Seller. The execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby by the Seller does not and will not, violate or result in the breach of any term or provision of (a) the charter documents or operating agreements of the Seller, (b) to the best knowledge of the Seller, any law, treaty, ordinance, rule, regulation, judgment, order, decree or injunction of a Governmental Authority applicable to any of the Seller or the Subject Assets, or (c) to the best knowledge of the Seller, any mortgage, indenture, lease, license, agreement, instrument, plan, document or understanding, oral or written, to which the Seller is a party, or to which the assets, properties or business of such organization are subject, or give any party with rights thereunder the right to terminate, accelerate, modify or change the existing rights or obligations of the Seller. To the best of the Seller’s knowledge, except for filings and consents required pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and the consents set forth in Schedule 4.2 (the “Consents”), no consent, action, permit, license, approval or authorization of, or material registration, declaration or filing with, any person is required or necessary to be obtained by the Seller in connection with the execution, delivery and performance by them of this Agreement and the Ancillary Agreements, including the consummation of the transactions contemplated hereby and thereby.

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Section 4.3 Financial Statements . Attached as part of Schedule 4.3 to this Agreement are the audited financial statements for the Seller for the fiscal years ended December 31, 2003, 2004 and 2005, and the unaudited financial statements for the six month period ending June 30, 2006, certified as to the six month period by the Chief Financial Officer of the Seller, together with the related notes and schedules attached to the audited financial statements (collectively the “Financial Statements”). The Financial Statements are true, correct and complete, are in accordance with the books and records of the Seller, were prepared in accordance with generally accepted accounting principles applied on a consistent basis (other than any unaudited Financial Statements) and fairly present the financial condition and results of operation and other information presented for the periods so indicated. Except as provided in the Financial Statements, or as fully disclosed in Schedule 4.3, the Seller has no liabilities or obligations (whether accrued, absolute, contingent, whether due or to become due or otherwise) which might be or become a charge or Lien against the Subject Assets or be asserted against the Buyer after the Closing, including any “loss contingencies” considered “probable” or “reasonably possible” within the meaning of the Financial Accounting Standard Board’s Statement of Financial Accounting Standards No. 5, except trade payables and similar liabilities and obligations incurred in the ordinary course of business since the date of the Financial Statements.

Section 4.4 Good Title to and Condition of the Subject Assets . The Seller has good and marketable title to the Subject Assets, free and clear of all Liens, except those set forth in Schedule 4.4(a) (which shall be satisfied and discharged in full on or prior to the Closing). There are no unpaid taxes or other matters that are or could become a Lien on the Subject Assets. Schedule 4.4(b) sets forth a list of all of the physical locations of the Subject Assets other than the Inventory, including a street address for each such location.

Section 4.5 Acquired Intellectual Property .

(a) Schedule 4.5(a) sets forth a list of all of the Acquired Intellectual Property specifying as to each, as applicable: (i) the nature of such Acquired Intellectual Property; (ii) the record owner of any such Acquired Intellectual Property which is registered, applied for or pending; (iii) the jurisdictions in which such registered Acquired Intellectual Property exists or in which an application for registration has been filed including the respective registration or application numbers; and (iv) any agreements to which the Seller is a party with respect to the Acquired Intellectual Property.

(b) Except as set forth in Schedule 4.5(b), during the two (2) years preceding the date of this Agreement, (i) no claim has been asserted or, to the knowledge of the Seller, threatened against the Seller to the effect that the operation of the Business or the use or registration of the Acquired Intellectual Property in connection therewith infringes upon or conflicts with the rights of any person in any country or is otherwise void and unenforceable, and (ii) no restrictions exist relating to the use of the Acquired Intellectual Property in connection with their use for the manufacture, marketing and distribution of fragrance products in the United States.

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Section 4.6 Compliance With Law . To the best of knowledge of the Seller, the Seller has complied with all applicable foreign, federal, state, and local laws, statutes, regulations, orders of any Governmental Authority and legal requirements of any kind in respect of the Subject Assets and the conduct of the Business, in each instance where the failure to comply would result in any material adverse effect on the Subject Assets, including, without limitation, those relating to the packaging, distribution, labeling, advertising and marketing of the products in the Inventory and those relating to foreign, federal, state and local environmental laws, regulations, orders and restrictions. To the best knowledge of the Seller, no event has occurred, and no condition or circumstance exists, that might (with or without notice or lapse of time, or both) reasonably constitute or result, directly or indirectly, in a violation by the Seller of, or a failure on the part of the Seller to comply with, any of the above legal requirements.

Section 4.7 Litigation . Except as set forth on Schedule 4.7, there is no (i) action, arbitration, mediation, suit, claim, proceeding or investigation pending and, to the best knowledge of the Seller, threatened against or affecting the Seller or the Subject Assets, or to the best knowledge of the Seller, there are no unasserted claims or assessments that are considered to be probable of assertion (within the meaning of Financial Accounting Standard Board’s Statement of Financial Accounting Standards No. 5); or (ii) action, suit, claim, proceeding or inquiry of a Governmental Authority inquiry pending or threatened relating to or involving the transactions contemplated by this Agreement. Except as described in Schedule 4.7, all the actions, suits, proceedings or investigations described in such schedule are being diligently prosecuted and are covered by insurance or adequate provisions have been made to cover the potential liabilities. There are no outstanding orders, decrees or stipulations issued by a Governmental Authority in any proceeding related to the Business or the Subject Assets.

Section 4.8 No Adverse Changes . To the best of knowledge of the Seller, other than as described on Schedule 4.8, since the date of the last fiscal year end audited balance sheet (the “Balance Sheet”), there has not been (except as otherwise contemplated or permitted by this Agreement):

(a) any sale or other disposition of any of the Subject Assets, other than in the ordinary course of business;

(b) any damage, destruction, loss or other change (whether or not insured) materially and adversely affecting the Subject Assets or operation of the Business;

(c) any loans or advances or charges that in any way create Liens on the Subject Assets;

(d) any change in the accounting methods relating to the Subject Assets followed by the Seller or in the methods of preparing Inventory reports;

(e) any material adverse change in the Subject Assets or the Business; or

(f) agreement or commitment, whether or not in writing, to do any of the foregoing by or on behalf of the Seller or its members.

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Section 4.9 Books and Records . The books and records of the Seller relating to the Subject Assets, all of which have been made available to the Buyer, are complete and correct and have been maintained in accordance with sound business practices and generally accepted accounting principles.

Section 4.10 Material Agreements .

(a) Set forth in the respective schedules described below is a list of all agreements, obligations and commitments of the Seller in relation to the Inventory to which the Seller is a party or by which it or the Subject Assets may be bound and that:

(i) provide for the sale, marketing or distribution of products or services relating to the Inventory which provides for payments in excess of $15,000 per annum, including, without limitation, advertising agreements, sales agreements and a description of agreements with retail accounts, fulfillment houses and other third parties relating to other advertising, merchandising and promotions entered in the ordinary course of business as set forth in Schedule 4.10(a)(i);

(ii) relate to the acquisition or manufacturing of the Inventory and, where accomplished by means of purchase order, a listing of such outstanding purchase orders as set forth in Schedule 4.10(a)(ii); or

(iii) are otherwise material to the Business or the Subject Assets as set forth in Schedule 4.10(a)(iii).

Section 4.11 Governmental Filings . Any and all filings required to be made pursuant to any local, state or federal law, regulation or ordinance due as of or before the Closing Date and which may be due as a result of the Closing or for periods ending prior to the Closing Time has or will be timely filed by the Seller.

Section 4.12 Labor Relations; Independent Contractors . Except as set forth in Schedule 4.12(a), and except as would not have a material adverse effect on the Subject Assets or the Business: (a) to the best knowledge of the Seller, the Seller is in compliance with all federal, state and local laws regarding employment and employment practices, conditions of employment, wages and hours with respect to the Business; (b) the Seller is not engaged in unfair labor practices, and there are no unfair labor practice complaints or grievances pending or, to the best knowledge of the Seller, threatened against the Seller before the National Labor Relations Board relating to employees of the Seller who are employed in connection with the Business, (c) there are no violations of employment or labor laws, or age, sex, racial or other employment discrimination claims charged, pending or, to the best knowledge of the Seller, threatened against the Seller relating to employees of the Business, and (d) there is no labor strike, dispute or work stoppage pending or, to the best knowledge of the Seller, threatened against or involving the Business or at the current customer locations which may affect the Business or which may interfere with its continued operation, and there has been no strike, walkout or work stoppage involving any of the employees of the Seller employed with respect to

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the Business or at the current customer locations during the twenty-four (24) months prior to the date of this Agreement. The Seller has no arrangements with independent contractors except as set forth on Schedule 4.12(b), all such arrangements with independent contractors are terminable at will by the Seller without penalty.

Section 4.13 Employee Benefits . The Seller does not maintain or contribute to: (a) any non-qualified deferred compensation or retirement plans or arrangements; (b) any qualified defined contribution retirement plans or arrangements; (c) any qualified defined benefit pension plan; (d) any other plan, program, agreement or arrangement under which former employees of the Seller or its beneficiaries are entitled, or current employees of the Seller will be entitled following termination of employment, to medical, health or life insurance or other benefits other than pursuant to benefit continuation rights granted by state or federal law; or (e) any other employee benefit, health, welfare, medical, disability, life insurance, stock, stock purchase or stock option plan, program, agreement, arrangement or policy, except as described in Schedule 4.13 attached to this Agreement, and as to which the Buyer is assuming no obligation or liability.

Section 4.14 Inventory . The Initial Inventory Listing Report is, and the Inventory Closing Update will be, true, complete and correct and prepared in a manner disclosed to the Buyer. All Inventory consists of a quality and quantity which are saleable and merchantable in the ordinary course of business to U.S. and Canadian accounts, except for obsolete items and items of below-standard quality all of which have been written off or written down to the lower of Standard Cost or market. Schedule 4.14(a) sets forth a list of all of the physical locations of the Inventory, including a street address for each such location. Schedule 4.14(b) sets forth a list of all of the Seller’s customers who have returned finished goods or products relating to the Inventory for 2005 and 2006, as well as customers who have indicated to the Seller that they anticipate returning finished goods or products, the current returns policies of the Seller with respect to its customers and their approximate rate of returns for 2005 and 2006, which schedule shall be updated as of the Closing Date. Except as disclosed in Schedule 4.14(b), all of the Returns received by the Sell