ASSET PURCHASE AGREEMENT

Exhibit 10.42

EXECUTION VERSION

ASSET PURCHASE AGREEMENT

by and between

LIZ CLAIBORNE, INC.

and

PERRY ELLIS INTERNATIONAL, INC.

Dated as of January 7, 2008

TABLE OF CONTENTS

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ASSET PURCHASE AGREEMENT

THIS AGREEMENT, made this 7th day of January, 2008 (the “Execution Date”), by and between LIZ CLAIBORNE, INC., a Delaware corporation (“Seller”), and PERRY ELLIS INTERNATIONAL, INC., a Florida corporation (`Buyer”).

WITNESSETH :

WHEREAS, in connection with the disposition of several of its brands, businesses and related assets, Seller desires to sell, transfer and assign to Buyer, and Buyer desires to acquire and assume from Seller, substantially all of the assets owned, leased or licensed by Seller and used in connection with the Purchased Business (as hereinafter defined) and assume liabilities as more specifically described herein; and

WHEREAS, in connection with such acquisition and assumption, Buyer has undertaken its own due diligence review of the Purchased Business (as hereinafter defined), the past performance of the Purchased Business, the industries in which the Purchased Business is operated and the trends of such industries.

NOW, THEREFORE, in consideration of the premises and the mutual covenants, promises and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

SECTION 1

DEFINITIONS

1.1. Definitions . Whenever used in this Agreement, unless the context otherwise requires, the following words and phrases shall have the respective meanings ascribed to them as follows:

(a) “Affiliate” means, with respect to any Person, any other Person which directly or indirectly controls, is controlled by or is under common control with such Person. For purposes of this definition “control” means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through ownership of voting securities, by contract or otherwise.

(b) “Agreement” means this Asset Purchase Agreement, as it may be amended in accordance with the provisions hereof.

(c) “Applicable Employees” is defined in Section 8.1(o).

(d) “Assumed Liabilities” means only (i) all liabilities and obligations related to the Buyer Chargebacks and the Buyer Returns, (ii) those obligations and liabilities accruing on or after the Closing Date and in respect of the period following the Closing Date with respect to the Purchased Assets (other than the Excluded Liabilities) listed on Schedule 1.1(d) in accordance with their respective terms (which shall be updated on the Closing Date solely to reflect, and such updates shall be limited to, changes in the Order Book and purchase orders from suppliers pursuant to ordinary course transactions consistent with the past practices of the

Purchased Business which occur between the Execution Date and the Closing Date), (iii) 50% of all retention payments arising under the Hired Employee Talent Retention Agreements, and (iv) 100% of all severance payments arising under the Hired Employee Talent Retention Agreements.

(e} “Bill of Sale, Assignment and Assumption Agreement” is defined in Section 3.2(a).

(f) “Business Day” means a day other than (i) a Saturday, Sunday or (ii) any other day on which the principal national banks located at the City of New York are not open for business during normal banking hours.

(g) “Buyer” is defined in the preamble.

(h) “Buyer Confidential Information” is defined in Section 10.2.

(i) “Buyer Indemnified Parties” is defined in Section 13.1.

(j) “Buyer’s Indemnified Liabilities” is defined in Section 13.1.

(k) “Chinese Laundry Complaint” means the complaint filed on May 21, 2007 in the matter of Robert Goldman & Cels Enterprises, Inc. v. Liz Claiborne Inc.

(1) “Closing” means the completion of the sale to and purchase by Buyer as contemplated hereby.

(m) “Closing Date” means the day of the Closing, which shall be February 4, 2008, or such other date as mutually agreed by the parties (and which, unless otherwise agreed by the parties, shall be on a Monday).

(n) “Code” means the U.S. Internal Revenue Code of 1986, as amended.

(o) “Confidentiality Agreement” means the confidentiality agreement, dated August 3, 2007, by and between Seller and Buyer.

(p) “Dispute Resolution Period” is defined in Section 5.4(d).

(q) “Environmental Laws” means the applicable Laws relating to pollution or protection of the environment, including Laws relating to the emission of waste into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of hazardous materials or waste including, without limitation, the Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery Act, the Toxic Substances Control Act and CERCLA, as amended, and their state and local counterparts.

(r) “Disputed Matters” is defined in Section 5.4(d).

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(s) “Execution Date” is defined in the preamble,

(t) “Excluded Fixed Assets” means the machinery, vehicles, computer hardware, furniture, fixtures, equipment and other tangible property set forth in Schedule 1.1(t) .

(u) “Facility Leases” is defined in Section 8.1(g).

(v) “Finished Goods” means items of apparel using the Transferred Intellectual Property that are complete and packaged or ready to be packaged and ready to be shipped to the customer.

(w) “Financial Statements” means (i) the unaudited balance sheets and income statements of the Purchased Business for the fiscal year ended December 30, 2006, and (ii) the unaudited balance sheets and income statements of the Purchased Business as of and for the nine-month period ended September 29, 2007, in each case including the related notes and schedules thereto (as applicable).

(x) “Fixed Assets” means the machinery, vehicles, computer hardware, furniture, fixtures, equipment and other tangible property used primarily in the Purchased Business, other than the Excluded Fixed Assets.

(y) “Governmental Entity” means any court, administrative agency or commission or any federal, state or local governmental entity, municipality or subdivision thereof.

(z) “Intellectual Property” means all the following in any jurisdiction worldwide, registered and unregistered: (i) trademarks, service marks, trade names, logos, designs and symbols, corporate names, certification marks, collective marks, d/b/a’s, Internet domain names and websites, business symbols, brand names and other indicia of origin, all applications and registration for the foregoing and all goodwill associated therewith and symbolized thereby, including all renewals of same; (ii) confidential information, trade secrets and know-how, including processes, schematics, business methods, formulae, drawings, prototypes, models, designs, customer and supplier lists and other industry information; (iii) published and unpublished works of authorship, whether copyrightable or not (including without limitation data bases and other compilations of information), copyrights therein and thereto, and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof; and (iv) other intellectual property and proprietary rights.

(aa) “Inventory” means all inventory of Seller relating to the Purchased Business including all unfinished and finished goods, work-in-process, raw materials, fabrics, trim, supplies, and other inventories of every nature which contribute to the Finished Goods.

(bb) “knowledge” with respect to Seller means the actual knowledge of Mike Scarpa, Roberta Karp, Nicholas Rubino, Mark Walsh, Stephen Cox (only to the extent related to the C&C California business) and Susan Jones (only to the extent related to the Laundry business), after reasonable inquiry and investigation.

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(cc) “Liens” means, with respect to any asset of any Person, all liens, charges and encumbrances on such asset.

(dd) “Law” means any statute, law, rule, regulation, order, decree or ordinance.

(ee) “Material Adverse Change” means any event, change, violation, inaccuracy, circumstance, occurrence, state of facts, condition or effect that, individually or when taken together with all other such events, changes, violations, inaccuracies, circumstances, occurrences, state of facts, conditions or effects, has had (i) a material adverse effect on the business, assets, properties, results of operations, or condition (financial or otherwise) of the Purchased Business, taken as a whole, (ii) a material adverse diminution in the value of, or the rights associated with, the Purchased Assets or (iii) a material adverse effect on the ability of the Seller or its Affiliates to consummate the transactions contemplated by this Agreement or perform their obligations under this Agreement; provided, however, that in determining whether a Material Adverse Change has occurred or exists, there shall be excluded any adverse change or effect that is the result of (A) any war, riot, acts of terrorism, revolution, civil commotion, acts of public enemies or embargo involving the United States or the military forces of the Unites States, (B) general declines in the economy or financial markets of the United States, but only to the extent that the change or effect thereof on the Purchased Business is not disproportionately more adverse than the change or effect thereof on comparable companies or businesses in the industry in which the Purchased Business competes, (C) any conditions generally affecting the industry in which the Purchased Business competes, but only to the extent that the change or effect thereof on the Purchased Business is not disproportionately more adverse than the change or effect thereof on comparable companies or businesses in the industry in which the Purchased Business competes, (D) actions that the Seller takes with the express written consent of the Buyer between the Execution Date and the Closing Date, or (E) any public announcement of this Agreement or the transactions contemplated hereby.

(ff) “Non-Hired Employees” means all employees of Seller that are primarily involved in the Purchased Business (or individuals who are deemed to be current or former employees of Seller primarily involved in the Purchased Business) other than the Hired Employees.

(gg) “Non-Hired Employee Talent Retention Agreements” means all employment or retention agreements or arrangements set forth on Schedule 1.1(pp) relating to any Non-Hired Employees.

(hh) “Non-Purchased Inventory” means Inventory not included within the Purchased Assets.

(ii) “Order Book” means all bona fide orders for shipment of goods bearing the Transferred Intellectual Property set forth on Schedule 1.1(ii) (which shall be updated on the Closing Date solely to reflect, and such updates shall be limited to, ordinary course transactions consistent with the past practices of the Purchased Business which occur between the Execution Date and the Closing Date).

(jj) “Permits” is defined in Section 8.1(s).

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(kk) “Person” means any individual, corporation, partnership, limited liability company, trustee or trust or unincorporated association or other entity or such person’s heirs, executors, administrators or assigns, as the case may be.

(11) “Premises” means the premises leased under the Facility Leases set out in Schedule 8.1(g) .

(mm) “Purchase Price” is defined in Section 4.1.

(nn) “Purchased Assets” has the meaning set forth in Section 2.1.

(oo) “Purchased Business” means the business conducted by Seller or Affiliate thereof relating to the designing, manufacturing, importing, processing, marketing, promoting, selling, distributing, licensing and managing goods and services using exclusively the Transferred Intellectual Property.

(pp) “Purchased Contracts” means, collectively, (i) the contracts, leases, Facility Leases, together with all of Seller’s rights in the leasehold improvements relating thereto to the extent the same are transferable pursuant to the respective Facility Leases, licenses, customer contracts, purchase orders from customers, other instruments or other agreements relating to the Purchased Business set forth on Schedule 1.1(pp), but excluding all Non-Assigned Contracts, (ii) all employment or retention agreements or arrangements set forth on Schedule 1.1(pp) relating to any Hired Employees (the “Hired Employee Talent Retention Agreements”), and (iii) all other unfilled orders from customers and unfilled purchase orders to suppliers relating to the Purchased Business.

(qq) “Purchased Inventory” means all Inventory set forth on Schedule 1.1(qq) (which shall be updated on the Closing Date solely to reflect, and such updates shall be limited to, ordinary course transactions consistent with the past practices of the Purchased Business which occur between the Execution Date and the Closing Date), including, without limitation, Finished Goods in retail and outlet stores (if any), in warehouses, in transit and on purchase order as set forth in Schedule 1.1(qq) .

(rr) “Remza Matter” means any matter relating to (i) that certain letter, dated December 5, 2007, from Remza Investment Co. WLL (“Remza”) and (ii) the termination of the arrangements between Seller or its Affiliates and each of Remza and MAF Fashions LLC that relate to the Purchased Business (the “Remza/MAF Arrangements”).

(ss) “Required Consents” means all consents (if any) required under the Purchased Contracts for the assignment and transfer to Buyer of the Purchased Contracts and all consents (if any) of any other Person required for the assignment and transfer to Buyer of the Purchased Assets and the consummation of the transactions contemplated hereby.

(tt) “Schedules” means the schedules to this Agreement which are incorporated herein and made a part hereof.

(uu) “Seller” is defined in the preamble.

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(vv) “Seller Benefit Plans” means all “employee pension benefit plans” (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), maintained or contributed to by Seller or any of its Affiliates for the benefit of any Applicable Employee (“Seller Pension Plans”) and all “employee welfare benefit plans” (as defined in Section 3(1) of ERISA), bonus, stock option, stock purchase, deferred compensation plans, agreements or arrangements and other employee fringe benefit plans maintained, or contributed to, by Seller or any of its Affiliates for the benefit of any Applicable Employee.

(ww) “Seller’s Indemnified Liabilities” is defined in Section 13.2.

(xx) “Seller IP” is defined in Section 8.1(j)(iii).

(yy) “Tax” or “Taxes” means taxes, fees, levies, custom duties, tariffs, imposts and governmental impositions or charges of any kind in the nature of (or similar to) taxes, payable to any Federal, state, local or foreign taxing authority, including (a) income, franchise, profits, gross receipts, ad valorem, net worth, value added, sales, use, service, real or personal property, special assessments, capital stock, license, payroll, withholding, employment, social security, workers’ compensation, unemployment compensation, utility, severance, production, excise, stamp, occupation, premiums, windfall profits, transfer and gains taxes, and (b) interest, penalties, additional taxes and additions to tax imposed with respect thereto.

(zz) “Trademark Assignment” is defined in Section 3.2(b).

(aaa) “Transferred Intellectual Property” means all Intellectual Property owned by Seller, relating to, used in or held for use exclusively in connection with the Purchased Business including, but not limited to, items set forth on Schedule 1.1(aaa) .

(bbb) “Transition Services Agreement” is defined in Section 3.2(c).

(ccc) “Threshold” is defined in Section 13.6.

1.2. Additional Defined Terms . In addition to the terms defined above, the following terms are defined in the section of this Agreement so designated:

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SECTION 2

PURCHASE AND SALE

2.1. Assets to be Purchased and Sold . Subject to the terms and conditions hereof, at the Closing, Buyer shall purchase from Seller or its Affiliates and Seller shall, or shall cause its Affiliates to, sell, assign, transfer, and deliver to Buyer, free and clear of all Liens, all right, title and interest to and under all of the assets, properties and rights of Seller (and its Affiliates) of every kind and description whatsoever, wherever located, real, personal or mixed tangible or intangible, other than the Excluded Assets, whether owned, leased

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or licensed by Seller or its Affiliates and used by Seller or its Affiliate exclusively in connection with the operation of the Purchased Business, including, without limitation, as set forth below (the “Purchased Assets”):

(a) Purchased Inventory;

(b) Transferred Intellectual Property;

(c) Purchased Contracts and all rights and benefits thereunder, including all rights and benefits thereunder with respect to all cash and other property of third parties under Seller’s dominion or control to the extent such rights and benefits are transferable;

(d) Order Book;

(e) Fixed Assets;

(f) the full benefit of all representations, warranties, guarantees, indemnities, undertakings, certificates, covenants, agreements and the like to the extent assignable by Seller and relating to the Purchased Contracts or which apply to the Purchased Assets;

(g) all books, records and files relating to the Purchased Assets (the “Books and Records”) including, without limitation, current customer lists and databases, sales records, current price lists and catalogues, current sales literature, current advertising material, current marketing materials, current manufacturing data, production records, current employee manuals, current personnel records, current supply records, inventory records, and correspondence files related thereto (together with, in the case of any such information that is stored electronically, the media on which the same is stored) except that where Seller is required by Law to retain a particular book, record or file, it shall retain such book, record or file and deliver to Buyer a copy thereof unless prohibited from transferring such information by applicable Law;

(h) all the right, title, benefit and interest of Seller in respect to prepaid insurance, prepaid royalties and advertising/marketing fees and other prepaid expenses, deposits and all advances to suppliers and other deposits of cash and cash equivalents made by Seller with respect to the Purchased Assets;

(i) all current and past patterns, samples, prototypes archived files, artwork, development and design work, graphics and designs for products to the extent the same are owned and held by Seller exclusively for use in the operation of the Purchased Business;

(j) all UPC codes set forth on Schedule 2.1(j);

(k) all goodwill associated with the Purchased Assets and the Purchased Business; and

(1) all other material tangible and intangible assets of any kind and description, wherever located, that are owned and used by Seller exclusively in connection with the operation of the Purchased Business, other than the Excluded Assets and to the extent the same are transferable.

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2.2. Excluded Assets . Buyer is not acquiring, and Seller is not selling, any other assets of Seller, including the Non-Purchased Inventory, all accounts receivable due to Seller in connection with the Purchased Business, all of Seller’s cash and cash equivalents in respect of the Purchased Business, the Excluded Fixed Assets and the assets set forth on Schedule 2.2 (collectively, the “Excluded Assets”).

2.3. Assumed Liabilities . Effective upon the Closing, subject to the terms hereof and pursuant to the Bill of Sale, Assignment and Assumption Agreement, Buyer will assume all of the Assumed Liabilities.

2.4. Excluded Liabilities . Notwithstanding anything else contained herein to the contrary, Buyer shall not assume and shall have no obligation to pay, satisfy, perform, discharge or fulfill any liabilities or obligations of Seller or its Affiliates (whether known or unknown, liquidated or unliquidated, contingent or fixed) other than the Assumed Liabilities (collectively, the “Excluded Liabilities”). The Excluded Liabilities shall remain the liabilities and obligations of Seller or its Affiliates and shall not be assumed by Buyer pursuant hereto (regardless of whether any such liabilities or obligations are disclosed in this Agreement). Without limiting the generality of the foregoing, Excluded Liabilities shall include the following:

(a) all liabilities and obligations related to the Excluded Assets;

(b) all liabilities and obligations for any of Seller’s income or capital taxes owed by Seller, and any liability or obligation for any sales, use, excise, or other taxes (including, without limitation, income taxes, withholding taxes and employment and payroll taxes) arising prior to or in connection with the consummation of the transactions contemplated by this Agreement;

(c) except as otherwise expressly provided for herein, all liabilities and obligations of Seller for costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby;

(d) all liabilities and obligations related to the Seller Chargebacks and the Seller Returns (in each case subject in all respects to the provisions of Section 5.4);

(e) all payment obligations of Seller to any bank, insurance company, finance company, or other institutionalized lender of other person for money borrowed;

(f) all liabilities and obligations of Seller relating to the guaranty by Seller of any third party obligations;

(g) all inter-company liabilities payable to Seller or its Affiliates;

(h) all liabilities related to applicable bulk sales or fraudulent conveyance Laws;

(i) all liabilities, including claims made for defective material and failure to comply with specifications, in respect of any occurrence, defect, deterioration or incident related to any (A) Purchased Inventory or (B) products using the Transferred Intellectual Property sold by Seller or any of its Affiliates, in each case whether asserted before, on or after the Closing Date;

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(j) all liabilities and obligations in respect of any and all litigations, actions, suits, mediations, arbitrations, disputes, oppositions or other proceedings or governmental investigations with respect to or involving the Purchased Assets, the Purchased Business, the Applicable Employees or the Assumed Liabilities (including the Chinese Laundry Complaint and the Remza Matter), which are pending on, or threatened in writing on or before, the Closing Date;

(k) all liabilities relating to Non-Assigned Contracts;

(1) all liabilities in respect of the Purchased Assets or the Purchased Business relating to Environmental Laws that are attributable to the ownership of the Purchased Assets or the operation of the Purchased Business prior to the Closing Date;

(m) all liabilities and obligations relating to all union contracts and collective bargaining agreements of Seller or its Affiliates; and

(n) (i) all liabilities and obligations arising prior to the Closing Date (or relating to periods prior to the Closing Date) relating to or with respect to any current or former employees of Seller (including but not limited to Hired Employees) or individuals who are deemed to be current or former employees of Seller, including under all Seller Benefit Plans, (ii) all liabilities and obligations arising on or after the Closing Date relating to or with respect to any Non-Hired Employees (including those arising under all Non-Hired Employee Talent Retention Agreements and all Seller Benefit Plans), (iii) all liabilities and obligations arising under all written or oral contracts, agreements or arrangements (other than the Hired Employee Talent Agreements, which are subject to clauses (iv) and (v) hereof) between Seller and any Hired Employees, (iv) 50% of all retention payments arising under the Hired Employee Talent Retention Agreements, and (v) 100% of all liabilities and obligations arising under the Hired Employee Talent Retention Agreements other than retention payments (which are subject to clause (iv) hereof) and severance payments.

SECTION 3

CLOSING AND CLOSING DOCUMENTS

3.1. Time of Closing and Closing Date . The transactions contemplated by this Agreement shall be closed at 10:00 a.m. on the Closing Date at the offices of Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York, NY 10036, or such other place as may be agreed upon by the parties.

3.2. Items to be Delivered at the Closing by Seller . At the Closing, Seller shall deliver to Buyer:

(a) An executed Assignment, Bill of Sale, Assignment and Assumption Agreement in the form annexed hereto as Exhibit A (the “Bill of Sale, Assignment and Assumption Agreement”) and such other assignments, notices, documentation and other instruments of transfers and conveyance, in form and substance reasonably satisfactory to Buyer, necessary to sell, transfer and assign

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the Purchased Assets to Buyer; provided that the terms of such other assignments, notices, documents and instruments of transfer and conveyance are consistent with terms of this Agreement.

(b) An executed Trademark Assignment in the form annexed hereto as Exhibit B (the “Trademark Assignment”).

(c) An executed Transition Services Agreement substantially in the form previously provided by Seller to Buyer with such changes as mutually agreed by the parties (the “Transition Services Agreement”).

(d) A certificate of the corporate secretary of Seller attaching thereto a true, correct and complete copy of resolutions of the board of directors of Seller authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby.

(e) A certificate of an officer of Seller certifying as to the matters set forth in Section 12.1(a).

(f) A lease assignment agreement executed by Seller, substantially in the form of Exhibit D (the “Lease Assignment Agreement”), in respect of the Facility Lease set forth on Schedule 3.2(f) containing, or together with, any applicable Required Consent to the assignment, if obtained prior to the Closing Date.

(g) All Books and Records including financial records.

(h) The Financial Statements.

3.3. Items to be Delivered at the Closing by Buyer . At the Closing, Buyer shall deliver to Seller:

(a) The Purchase Price as set forth in Section 4.1.

(b) The executed Bill of Sale, Assignment and Assumption Agreement.

(c) The executed Transition Services Agreement.

(d) The executed Trademark Assignment.

(e) A certificate of the corporate secretary of Buyer attaching thereto a true, correct and complete copy of resolutions of the board of directors of Buyer authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby.

(f) A certificate of an officer of Buyer certifying as to the matters set forth in Section 12.2(a).

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(g) A schedule setting forth all employees of Seller that will be hired by Buyer or its Affiliates in connection with the consummation of the transactions contemplated hereby (the “Hired Employees”).

SECTION 4

PURCHASE PRICE

4.1. Purchase Price . In consideration of the sale, transfer and assignment of the Purchased Assets and Purchased Contracts, Buyer shall pay to Seller an amount, in cash, equal to $37,158,930 (the “Purchase Price”), subject to adjustment pursuant to Section 4.4. Payment of the Purchase Price shall be made in immediately available funds by wire transfer to an account or accounts specified by Seller at least two (2) Business Days prior to the Closing Date.

4.2. Absence of Consents . Notwithstanding any other provision of this Agreement to the contrary, if any Purchased Contract, other than those Purchased Contracts which are set forth on or referred to (including by reference to the Required Consents relating thereto) in Schedule 12.1(d) (with respect to which the provisions of this Section 4.2 shall not be applicable), is not assignable or transferable either by virtue of the provisions thereof or under applicable Law without obtaining a Required Consent, and any Required Consents with respect to any such Purchased Contracts are not obtained by Seller at or before the Closing, nothing in this Agreement and the related instruments of transfer shall be construed as an assignment or transfer of such Purchased Contracts (the “Non-Assigned Contracts”). Instead, Seller shall (i) at the request and under the direction of Buyer, and at Seller’s expense, continue to hold such Non-Assigned Contracts in trust for the benefit of Buyer and promptly pay over to Buyer all monies collected by or paid to Seller in respect of every such Non-Assigned Contracts; and (ii) use its commercially reasonable efforts to obtain all such Required Consents not previously obtained as soon as reasonably practicable after the Closing or otherwise obtain for Buyer the practical benefit of such Non-Assigned Contracts. There shall be no adjustment to the Purchase Price in the event that Seller is either unable to obtain any Required Consent or is unable to assign or transfer any Non-Assigned Contracts to, or obtain the practical benefit of any Non-Assigned Contracts for, Buyer. Notwithstanding anything in this Agreement to the contrary, nothing contained in this Section 4.2 shall in any way change, modify, limit or affect the condition set forth in Section 12.1(d) of this Agreement.

4.3. Allocation of Purchase Price . The Purchase Price shall be allocated among the Purchased Assets in the manner agreed upon by Buyer and Seller in good faith as promptly as practicable following the Closing. Buyer and Seller shall each file all tax returns (including amended returns and claims for refund) and information reports in a manner consistent with such allocation. Neither Buyer nor Seller shall take any position with respect to Taxes that is inconsistent with the agreed upon allocation, including in any audit or examination by any governmental body. Buyer and Seller shall prepare and timely file such reports and information returns as may be required under Section 1060 of the Code to report the allocation of the Purchase Price among the Purchased Assets as agreed pursuant to this Section 4.3.

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4.4. Purchase Price Adjustment .

(a) Definitions . For purposes hereof, the following terms shall have the following meanings:

(i) “Closing Inventory” shall mean the amount of Purchased Inventory according to the results of the Physical Inventory, valued in accordance with the Inventory Valuation.

(ii) “Inventory Valuation” shall mean the manner in which inventory is to be valued as set forth on Schedule 4.4(a) .

(iii) “Total Book Inventory” shall mean the amount of Purchased Inventory set forth on Schedule 4.4(a) , valued in accordance with the Inventory Valuation.

(iv) “Total Closing Inventory shall mean the total amount of all Purchased Inventory at all Inventory Locations according to the results of the Physical Inventory.

(b) Physical Inventory .

(i) Schedule 4.4(a) sets forth the Total Book Inventory (the “Book Inventory Schedule”). Over the two (2) calendar days prior to the Closing Date, Seller shall (or shall cause its Affiliates or its representatives to) conduct a physical count of all Purchased Inventory (the “Physical Inventory”) located (i) at any location (including the Premises) where the total value of Purchased Inventory exceeds $75,000 and (ii) at all locations (including the Premises) where the total aggregate value of Purchased Inventory at such locations exceeds $250,000, notwithstanding that on an individual location basis, the total value of Purchased Inventory at any such location does not exceed $75,000 (each such location described in clause (i) and clause (ii) above, an “Inventory Location”). At least seven (7) calendar days prior to the Physical Count, Seller shall notify Buyer of the address of each Inventory Location and the date(s) and time(s) when the Physical Inventory is scheduled at each such Inventory Location. Buyer and its Affiliates shall have the right to monitor (or to send its representatives to monitor) the Physical Inventory as well to have access at such reasonable times and to all such Inventory Locations as Buyer may reasonably request to conduct an inspection of all Purchased Inventory located at such Inventory Locations. Seller shall engage an audit firm that is mutually agreeable to the parties to audit the Physical Inventory, and each of Seller and Buyer shall pay half of the cost of such auditing firm. Any damaged or obsolete, as applicable, Purchased Inventory will be included in the count and identified as damaged or obsolete, as applicable. Seller shall identify all Purchased Inventory that is not of quality useable and saleable in the ordinary course of the Purchased Business (the “Excluded Inventory”) and such Excluded Inventory shall not be included in the Physical Inventory.

(ii) The Physical Count at all Inventory Locations shall be completed by 8:00 AM (New York City time) on the Closing Date. Upon the completion of the Physical Count at each Inventory Location, Seller (or its Affiliates or representatives, as the case may be) shall prepare a report setting forth the results of the Physical Count at such Inventory Location, which report shall be approved by the audit firm and shall be final, binding and conclusive, absent manifest error (each, an “Inventory Report”). A copy of each Inventory Report shall be delivered to Buyer (or its Affiliates or representatives, as the case may be).

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(c) Closing Date Adjustment . As early as practicable on the Closing Date (and in no event later than 9:30 a.m., New York City time, on such date), Seller shall deliver to Buyer a schedule (the “Closing Inventory Schedule”) setting forth: (i) the Total Book Inventory (which shall be identical to the Total Book Inventory set forth on the Book Inventory Schedule); (ii) the Closing Inventory at each Inventory Location (which shall be based on the Inventory Report for each such Inventory Location); (iii) the Total Closing Inventory (which shall be based on all of the Inventory Reports); and (iv) the amount by which the Total Closing Inventory exceeds the Total Book Inventory (the “Final Inventory Overage Amount”) or the amount by which the Total Book Inventory exceeds the Total Closing Inventory (the “Final Inventory Shortfall Amount”), as applicable. If the Closing Inventory Schedule indicates a Final Inventory Shortfall Amount, then the Purchase Price payable at the Closing shall be reduced, on a dollar-for-dollar basis, by the Final Inventory Shortfall Amount. If the Final Inventory Schedule indicates a Final Inventory Overage Amount, then the Purchase Price payable at the Closing shall be increased, on a dollar-for-dollar basis, by the Final Inventory Overage Amount.

SECTION 5

CERTAIN ASSETS AND LIABILITIES OF SELLER

5.1. Non-Assumption of Liabilities . Except for the Assumed Liabilities, which Buyer shall assume and discharge when properly due and payable, Buyer does not assume or take any responsibility for paying, performing or discharging when due any liability or obligation of any type of Seller or any of its Affiliates, whether secured or unsecured, known or unknown, accrued or contingent, and whether or not related to the Purchased Assets, the Purchased Business or the Hired Employees.

5.2. Bulk Sales . Seller will indemnify and hold harmless Buyer with respect to all costs, expenses, damages and losses which Buyer may incur or suffer as a result from Seller’s non-compliance with any applicable bulk sales or bulk transfers act.

5.3. Product Liability . Seller shall be responsible for and shall indemnify Buyer from any and all claims, actions, loss, liability, judgments, disbursements, expenses and costs (including costs of defense), including claims made for defective material and failure to comply with specifications, in respect of any occurrence, defect, deterioration, or incident to or related to any (i) Purchased Inventory or (ii) products using the Transferred Intellectual Property sold by Seller or any of its Affiliates, in each case whether asserted before, on or after the Closing Date.

5.4. Chargebacks and Returns .

(a) Chargebacks . Seller shall be responsible for and shall indemnify Buyer with respect to any and all (i) chargebacks in respect of Finished Goods identifiable to shipments by Seller or its Affiliates prior to the Closing Date, and (ii) chargebacks in respect of Finished Goods that are not identifiable or linkable to shipments by Seller or its Affiliates prior to the Closing Date to the extent they arise within 90 calendar days following the Closing Date (the chargebacks referenced in clause (ii), the “Unidentifiable Chargebacks” and the chargebacks referenced in clauses (i) and (ii) collectively, the “Seller Chargebacks”); provided , however , that

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Seller shall have the exclusive right to negotiate, authorize and approve each Seller Chargeback (consistent with its past practices). Buyer shall be responsible for and shall indemnify Seller with respect to any and all (i) chargebacks in respect of Finished Goods identifiable to shipments by Buyer or its Affiliates on or after the Closing Date, and (ii) chargebacks in respect of Finished Goods that are not identifiable or linkable to any shipments to the extent they arise on or after the 91 ^st calendar day following the Closing Date (collectively, the “Buyer Chargebacks”); provided , however , that Buyer shall have the exclusive right to negotiate, authorize and approve each Buyer Chargeback (consistent with its past practices).

(b) Returns . Seller shall be responsible for and shall indemnify Buyer with respect to any and all returns in respect of (i) Finished Goods sold by Seller or its Affiliates prior to the Closing Date and (ii) Finished Goods that are not identifiable as sold by, or that have not been authorized by, either Seller or Buyer or their respective Affiliates and that are physically returned within 90 calendar days following the Closing Date (the returns referenced in clause (ii), the “Unidentifiable Returns” and the returns referenced in clauses (i) and (ii) collectively, the “Seller Returns”); provided , however , that Seller shall have the exclusive right to negotiate, authorize and approve each Seller Return (consistent with its past practices). Buyer shall be responsible for and shall indemnify Seller with respect to any and all returns in respect of (i) Finished Goods sold by Buyer or its Affiliates on or after the Closing Date and (ii) Finished Goods not identifiable as sold by, or that have not been authorized by, either Seller or Buyer or their respective Affiliates and that are physically returned on or after the 91 ^st calendar day following the Closing Date (“Buyer Returns”); provided , however , that Buyer shall have the exclusive right to negotiate, authorize and approve each Buyer Return (consistent with its past practices). Following the Closing Date, Seller and its Affiliates shall have the right, at its option, to either (i) sell off any Finished Goods relating to Seller Returns (“Returned Goods”) to Buyer at a purchase price calculated in accordance with the Inventory Valuation or otherwise agreed upon between the parties, or (ii) negotiate with third parties to sell such Returned Goods at a negotiated price; provided that Buyer shall have a right of first refusal on any sale of Returned Goods as expressly described in the following four sentences (a “Right of First Refusal”). Prior to agreeing to sell any Returned Goods to any third party, Seller shall send a written notice to Buyer (a “Return Notice”) setting forth a description of the Returned Goods in question and the purchase price offered by the third party (the “Third Party Price”). Buyer shall have five (5) Business Days (the “ROFR Notice Period”) to notify Seller in writing pursuant to which it agrees to purchase such Returned Goods from Seller at the Third Party Price (an “Acceptance Notice”). If within ROFR Notice Period, Seller receives an Acceptance Notice from Buyer, Seller shall be obligated to sell such Returned Goods to Buyer at the Third Party Price. If Buyer does not exercise its Right of First Refusal (either by providing notice to Seller of its intention not to exercise its Right of First Refusal or by allowing the ROFR Notice Period to lapse), Seller shall have the right to sell such Returned Goods to a third party at the Third Party Price.

(c) Limitation on Unidentifiable ChargebackslReturns . Notwithstanding the foregoing, in no event shall Seller be responsible for Unidentifiable Chargebacks and Unidentifiable Returns in excess of $500,000 in the aggregate.

(d) Disputes . Seller and Buyer shall cooperate with each other to resolve any issues relating to or arising under this Section 5.4. If a party provides a dispute notice to the other party, the representatives of Seller and Buyer shall, within thirty (30) days following the date of receipt of the dispute notice (the “Dispute Resolution Period”), attempt in good faith to resolve their differences

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and any resolution by them that is agreed to in writing shall be final, binding and conclusive. If at the conclusion of the Dispute Resolution Period there is any matter still remaining in dispute (“Disputed Matters”), then all Disputed Matters shall be submitted for resolution to an independent registered public accounting firm or third-party factoring company that is mutually agreeable to the parties (the “Special Accountants”). The parties will cause the Special Accountants to use commercially reasonable efforts to resolve all Disputed Matters within 10 days of submission to the Special Accountants. In making such resolution, the Special Accountants will review only those items and amounts specifically set forth and objected to in writing and will resolve the dispute with respect to each such item and amount. The determination of the Special Accountants shall be conclusive, nonappealable and binding upon the parties for all purposes. Buyer and the Seller agree that (x) the procedures established by this Section 5.4(d) shall be the exclusive procedures for resolving disputes or disagreements arising under this Section 5.4, and (y) that all of the time periods provided for in this Section 5.4 may be extended by mutual written agreement by Buyer and Seller. The fees, expenses and disbursements of the Special Accountants shall be borne by Buyer, on the one hand, and Seller, on the other hand, based upon the percentage which the portion of the contested amount not awarded to each party bears to the amount actually contested.

5.5. Consents, etc . Seller shall use its reasonable best efforts to obtain prior to the Closing, the Required Consents. Except as otherwise provided herein, Seller shall be responsible for any consent fee, transfer fee, penalty or other cost relating to any such consent or approval, or arising by reason of the transactions contemplated hereby.

SECTION 6

PRORATION; CERTAIN OTHER MATTERS

6.1. Expenses . Seller shall be responsible for all expenses, liabilities and obligations arising out of or relating to the Purchased Assets or the use, possession, ownership or operation thereof accruing prior to the Closing Date and Buyer shall be responsible for all such expenses, liabilities and obligations on or after the Closing Date.

6.2. Attorneys Fees; Expenses; Taxes . Except as otherwise provided in this Section 6.2, each party shall be responsible for the payment of its own attorneys’ and other fees and expenses (including, without limitation, any investment advisor, finder or similar fees) in connection with the transactions contemplated hereby. Buyer and Seller shall each be liable for and shall pay one half of all applicable Taxes properly payable on and in connection with the conveyance and transfer of the Purchased Assets. Buyer shall be responsible for all fees and expenses in connection with the conveyance and transfer of the Transferred Intellectual Property.

6.3. Brokers . Buyer represents and warrants to Seller that it has not employed any investment adviser, agent, broker or finder in connection with the transaction contemplated by this Agreement. Buyer hereby indemnifies Seller against and agrees to hold Seller harmless from any and all claims, losses, demands, expenses, suits and liabilities arising from or in any way connected with any claim for a commission or similar fee brought or made by any Person who may have been hired in such capacity by Buyer. Seller represents and warrants to Buyer that it has not employed any investment adviser, agent, broker or finder in connection with the transactions

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contemplated by this Agreement, other than Centerview Partners LLC. Seller hereby indemnifies Buyer against and agrees to hold Buyer harmless from any and all claims, losses, demands, expenses, suits and liabilities arising from or in any way connected with any claim for a commission or similar fee brought or made by any Person who may have been hired in such capacity by Seller, including but not limited to Centerview Partners LLC.

6.4. Schedule Updates . Seller shall update Schedule 1.1(d) , (only to the extent related to changes in the Order Book or to purchase orders from suppliers), Schedule 1.1(ii) and Schedule 1.1(qq) , in each case solely to reflect (and such updates shall, for purposes of this Section 6.4 and each of Sections 1.1(d), 1.1(ii) and 1.1(qq), be limited to) ordinary course transactions consistent with the past practices of the Purchased Business which occur between the Execution Date and the Closing Date, and shall deliver such updated Schedules to Buyer on the Closing Date.

6.5. Further Assurances . All Excluded Assets that are received or deemed to be received by Buyer after the Closing will be received by Buyer as agent, in trust for and on behalf of Seller, and Buyer will pay or deliver promptly all of such Excluded Assets to Seller and will provide to Seller any written information received concerning such Excluded Assets, including any related invoice. All Purchased Assets that are received or deemed to be received by Seller after the Closing will be received by Seller as agent, in trust for and on behalf of Buyer, and Seller will pay or deliver promptly all of such Purchased Assets to Buyer and will provide to Buyer any written information received concerning such Purchased Assets, including any related invoice. From and after the Closing Date, as and when reasonably requested by any party, each party will execute and deliver, or cause to be executed and delivered, all such documents and instruments and will take, or cause to be taken, at the requesting party’s expense, all such further or other actions as such other party may reasonably deem necessary or desirable to consummate the transactions contemplated by this Agreement.

SECTION 7

TRANSFER OF INTELLECTUAL PROPERTY

7.1. Use after Closing . From and after the Closing Date, Seller and its Affiliates shall discontinue all use of the Transferred Intellectual Property purchased by Buyer under this Agreement and neither Seller nor its Affiliates shall use any trademark, tradename or other Intellectual Property which infringes the Transferred Intellectual Property; provided , however , that Seller shall have the limited and nonexclusive right and license to use such trademarks and tradenames, to the least extent reasonably necessary, for the purpose of selling any Non-Purchased Inventory or