ASSET PURCHASE AGREEMENT

 

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

 

 

	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

 

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.

“ 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 .”

“ 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.

“ 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.

“ 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).

“ 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.

“ 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.

“ 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.

“ 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.

“ 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;

(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.

(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);

(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:

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

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.

(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.

(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 ex