ASSET PURCHASE AGREEMENT

Exhibit 10.1

Asset Purchase Agreement

(July 24, 2008)

AMONG

Handleman Company of Canada Limited,
(“Seller”),

Handleman Company
(“Seller Parent”)

and

Anderson Merchandisers-Canada, Inc.
(“Purchaser”)

and

Anderson Merchandisers, L.P.
(“Merchandisers”)

ASSET PURCHASE AGREEMENT

-1-

ASSET PURCHASE AGREEMENT

     This Asset Purchase Agreement (this “ Agreement ”) is made effective as of July        , 2008 (the “ Effective Date ”) by and between Handleman Company of Canada Limited (“ Seller ” or “ HDL-CND ”), an Ontario corporation, with offices at Unit #1 60 Leek Crescent, Richmond Hill, Ontario, Canada, L4B 1H1; Handleman Company, a Michigan corporation (“ HDL ” or “ Seller Parent ”), with offices at 500 Kirts Boulevard, Troy, MI 48084 which indirectly owns all of the issued and outstanding capital stock of Seller; Anderson Merchandisers—Canada, Inc., a Delaware corporation (“ Purchaser ”), with offices at 421 S.E. 34 ^th Avenue, Amarillo, TX 79103, and Anderson Merchandisers, L.P., a Texas limited partnership (“ Merchandisers ”), with offices at 421 S.E. 34 ^th Avenue, Amarillo, TX 79103, an affiliate of Purchaser.

RECITALS

     The following is a recital of facts underlying this Agreement:

          A. A portion of HDL’s business (the “ US WMS Business ”) consisted of distribution of certain music product to Wal-Mart stores in the United States. HDL sold certain assets related to the US WMS Business to Merchandisers pursuant to an Asset Purchase Agreement (WMS Related Assets) dated as of June 2, 2008.

          B. Seller’s business (the “ Business ”) is distribution of music products in Canada, including distribution of products to Wal-Mart Stores in Canada.

          C. Seller desires to sell, and Purchaser desires to purchase, substantially all of the assets of Seller used in the Business, on the terms and conditions set forth herein.

     NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

1. Agreement to Purchase and Sell.

     1.1. Purchase .

     At the Closing, Purchaser shall purchase and Seller shall sell and transfer all of Seller’s right, title and interest in and to substantially all of the assets of Seller used in the Business (the “ Purchased Assets ”) as follows (but excluding the Excluded Assets):

          (a) all merchandise inventory (the “ Inventory ”);

          (b) the real property leased pursuant to the lease for the premises located at Unit #1, 60 Leek Crescent, Richmond Hill, Ontario (the “ Lease ”), including rights to leasehold improvements (if any);

          (c) any and all office furniture, computers, and any and all other machinery and equipment, warehouse racking and other distribution equipment, including but not limited to forklifts, pallet jacks, conveyors, turntables and carts, spare parts and all other tangible properties, wherever located (collectively the “ Equipment ”) owned by Seller or leased pursuant

to the equipment leases (including the employee fleet vehicle leases) (“ Equipment Leases ”) listed in Exhibit 1.1(e), together with computer software licensed by Seller for use with the Equipment;

          (d) retail store display fixtures, whether located in stores or in storage;

          (e) customer contracts, supply contracts and other contracts relating to the Business listed in Exhibit 1.1(e) (the “ Contracts ”); and

          (f) all telephone numbers, post office boxes, customer records, vendor records, such warranties on the Equipment as exist as of the Closing Date, all licenses, permits and other governmental authorizations necessary or desirable for the conduct of the Business to the extent the same are transferable (the “ Intangibles ”).

     1.2. Excluded Assets .

     Notwithstanding Section 1.1, Seller’s right, title and interest in and to the following assets are specifically excluded from the Purchased Assets (collectively, the “ Excluded Assets ”):

          (a) all cash and cash equivalents;

          (b) customer accounts receivable, gross amounts arising from customer and supplier discounts and rebates, and other customer- or supplier-related receivables arising prior to the Closing;

          (c) deferred taxes and claims for tax refunds;

          (d) intercompany investments in and loans to and other receivables from Seller Parent and other entities owned or controlled directly or indirectly, in whole or in part, by Seller Parent;

          (e) assets relating to any Benefit Plans (defined in Section 4.20);

          (f) the field sales handheld equipment listed in Exhibit 1.2(F); and

          (g) any Contracts and other assets that would otherwise constitute Purchased Assets if and to the extent that Seller is unable after reasonable commercial effort to obtain a required consent or is otherwise prohibited from transferring its rights in such Purchased Assets.

     1.3. Assumed Obligations .

     As of the Closing, Purchaser shall assume Seller’s obligations and liabilities arising after the Closing with respect to the Lease, the Equipment Leases, and the Contracts, including but not limited to any obligations to ship products to Seller’s customers after the Closing Date and the obligation to accept returns of products from Seller’s customers following the Closing which obligation shall be represented by the amount reflected on Seller’s books and records as Future Return Reserve as of the Closing (the “ Assumed Obligations ”).

     1.4. Excluded Obligations.

     Except for the Assumed Obligations set forth in Section 1.3 above, Buyer shall not assume and shall in no event be liable for any liabilities, debt or obligations of Seller, whether accrued, absolute, matured, known or unknown, liquidated or unliquidated, contingent or otherwise (the “ Excluded Obligations ”), including without limitation:

     (a) Any liabilities of Seller for federal, provincial, local or foreign Taxes (as defined in Section 4.8 below);

     (b) Any indebtedness or other obligation to Seller Parent or its affiliates, including without limitation, loans, advances, tax sharing agreement obligations, and intercompany accounts;

     (c) Any severance liabilities in favor of the employees of Seller arising prior to the Closing;

     (d) Any liabilities resulting from, arising out of, relating to, in the nature of, or caused by any breach of contract, breach of warranty, tort, infringement, violation of law, or environmental matter;

     (e) Any liabilities resulting from, arising out of, or relating to any Benefit Plans or Statutory Plans (defined in Section 4.20 below); and

     (f) Any liabilities and obligations relating to the Excluded Assets.

2. Purchase Price and Payments.

     2.1. Purchase Price .

     In consideration for acquisition of the Purchased Assets (the “ Purchase Price ” ), Purchaser shall pay to Seller, subject to the adjustment thereto set out in Section 2.5, the following: (a) One Million Dollars US (US$1,000,000.00) plus (b) the Net Book Value of the Purchased Assets as set forth on Exhibit 2.1. In determining the Net Book Value, the Seller shall update the values set out on Exhibit 2.1 in accordance with Section 12(b). In determining the Net Book Value of Inventory as of the Closing at the Closing Date, the parties shall take a physical inventory, in accordance with the physical inventory procedures set out in Exhibit 3.3, immediately prior to Closing, and the amount set forth on the Exhibit at the Closing shall be the amount agreed to by the parties following such physical inventory, as adjusted for receipts and shipments after the taking of the inventory.

     2.2. Allocation of Purchase Price .

     The Purchase Price shall be allocated in the manner set forth on Exhibit 2.2. The parties agree to be bound by such allocation for all federal, provincial, and local income tax purposes.

     2.3. Payment and Hold Back .

          (a) Purchase Price Payment . On the Closing Date, Purchaser shall pay to Seller an amount equal to the Purchase Price minus (i) the book value as shown on the Seller’s accounting records as of the Closing Date of all Assumed Obligations which pursuant to generally accepted accounting principles are required to be reflected as liabilities on such accounting records, minus (ii) the amount required to make immediate payment of the Creditor Claims (as defined in Section 3.6(b)(i)) and minus (iii) the Hold Back (defined in Section 2.3(c) below), in immediately available funds (the “ Closing Payment ”). The balance of the Purchase Price, as adjusted, shall be paid from the Hold Back in accordance with Section 9.3.

          (b) Gross Closing Payment . Seller shall use its best efforts to ensure that, as of the Closing Date, the aggregate amount of the Creditor Claims (as defined in Section 3.6(b)(i)) to be paid by Purchaser (the “ Aggregate Creditor Claims Amount ”) shall not exceed the amount of the Closing Payment before deducting the Aggregate Creditor Claims Amount (the “ Gross Closing Payment ”). If the Aggregate Creditor Claims Amount does exceed the Gross Closing Payment, then the Seller shall, on Closing, pay to the Purchaser an amount equal to the Aggregate Creditor Claims Amount minus the Gross Closing Payment for the purpose of paying the Creditor Claims and Purchaser agrees that it shall use such amount solely to pay Creditor Claims in accordance with Section 3.6(b).

          (c) Hold Back A portion of the Purchase Price in the amount of Seven Hundred and Fifty Thousand Dollars (US$750,000) (the “ Hold Back ”) shall be retained by Purchaser pending the final settlement of all Claims and liabilities of the Business and shall be paid in accordance with Section 9.7.

     2.4. Adjustments .

     At the Closing, the following shall be adjusted and, to the extent practicable, all such adjustments shall be computed and paid at the Closing, and to the extent not practicable, as soon as practicable after the Closing:

          (a) Prepaid Amounts . Purchaser shall pay to the Seller all prepaid amounts paid by the Seller under the Lease (including, without limitation, rental (including prepaid rent and security deposits), common area maintenance charges, utilities charges and business taxes) relating to periods after the Closing Date. Purchaser shall pay to the Seller all other prepaid amounts which Purchaser elects to acquire or from which Purchaser will realize value following the Closing Date. All prepaid amounts to be paid to the Seller by Purchaser shall be determined based on the unamortized portion of the prepayment.

          (b) Transfer Fees; Sales Taxes . Purchaser and Seller shall each pay 50% of all transfer fees and applicable sales taxes (other than as provided in Section 3.7 and excluding any portion of such sales taxes that is recoverable or refundable), if any, arising under or on account of the purchase and sale of the Purchased Assets.

     2.5. Closing.

     The closing of the transaction herein contemplated (the “ Closing ”) shall be held at the offices of Seller Parent, on a date specified by Seller and Purchaser, which date shall be no later than the tenth business day following the satisfaction or waiver of the conditions set forth in Sections 6 and 7 (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction of such conditions), or at such other date and place as may be mutually agreed by the Parties (the “ Closing Date ”). At the Closing, the parties will execute and deliver the closing documents set forth in Sections 6 and 7. If the Closing Date occurs after September 2, 2008, provided that (i) any delay in Closing beyond September 2, 2008 is not the result of a default by Purchaser or Merchandisers hereunder, and (ii) all of the closing conditions are satisfied or waived at the Closing:

          (a) The Closing of the transactions herein contemplated shall be deemed to have occurred, solely with respect to the benefit of the net profit (loss) generated from the Purchased Assets, effective as of the opening of business of September 1, 2008 (the “ Effective Date ”), and the Purchase Price shall be reduced (increased) by the amount of after tax net profit (loss) realized by Seller in respect of the Business during the period from the Effective Date to the Closing Date, which net profit (loss) shall be retained by Seller, and the Closing Payment shall earn interest for the account of the Seller from the Effective Date to the Closing Date (the “ Interim Period ”) at the rate set forth in Section 9.7(c). The net profit (loss) shall be determined in accordance with GAAP and on a basis consistent with the Financial Statements by the Seller, with the reasonable input of the Purchaser, in a manner consistent with the Seller’s past practice. In calculating the after tax earnings of the Business for the Interim Period or, if applicable, the net loss of the Business for the Interim Period for the purposes of Section 2.5, “net profit or “net loss” shall mean gross profit from net shipping activity of the Business, less operating expenses of the Business on a fully absorbed basis (including customary allocations of home office expenses), but excluding any write downs, account reconciliation adjustments, and other balance sheet adjustments.

3. Additional Provisions.

     3.1. Employees.

          (a) Purchaser shall offer employment to all of Seller’s employees effective as of the Closing Date at the same hourly rate of pay or periodic salary; the same vacation, sick leave, holiday policies; prior service credit for all service with the Seller for purposes of determining eligibility and vesting for all benefits; a defined contribution retirement plan with the same employer contribution and employer matching provisions as the Seller’s existing defined contribution plan, and health, dental and life insurance benefits substantially similar to the Seller’s existing Benefit Plans.

          (b) Seller shall be responsible for all liabilities including notice of termination, termination pay, severance pay and other obligations to the employees who do not accept employment with the Purchaser, whether under contract, common law, statute or otherwise, and Seller and Seller Parent, jointly and severally, shall indemnify and save the Purchaser harmless in respect of all such obligations.

          (c) All employees who accept the Purchaser’s offer of employment (the “ Transferred Employees ”) shall cease to participate in and accrue benefits under the Seller’s Benefit Plans on the Closing Date.

          (d) The Purchaser shall have no liability for any Claim Incurred (as defined below) prior to the Closing Date by the employees in respect of the Benefit Plans, and the Seller shall remain responsible for all such Claims Incurred.

     3.2. Accounts Receivable .

     All accounts receivable for transactions occurring on or before the Closing Date shall remain the property of Seller irrespective of any payment for it to Purchaser. If Purchaser receives payment for any of Seller’s accounts receivable existing as of the Closing Date, Purchaser shall promptly forward payment directly to Seller. If Seller receives payment for any accounts receivable for Purchaser transactions after the Closing Date, Seller shall promptly forward payment directly to Purchaser.

     3.3. Transition Services .

     The parties have agreed to cooperate in transitioning the Business and consummating the sale as set forth in Exhibit 3.3 (the “ Transition Services ”), pursuant to which (a) Seller Parent will provide bookkeeping and IT related services to support Purchaser’s operation of the Business for a period (the “ Transition Period ”) ending on the earlier of (i) three (3) days after Purchaser gives notice of termination and (ii) sixty (60) days after the Closing, for a fee as set forth in such Exhibit, and (b) Purchaser, at the option of Seller or Seller Parent, will perform pick, pack, ship and return processing services for Crave Entertainment relating to its Canadian customers at a fee as set forth in Exhibit 3.3 (HDL-CND’s fully absorbed cost plus 10% (pick, pack and freight)), in each case, with 30 day payment terms for a period not to exceed six (6) months following the Closing. Notwithstanding anything in Exhibit 3.3 or this Agreement neither Seller nor Seller Parent shall be required to hire or otherwise retain any employees to the extent that personnel voluntarily leave their employment or are terminated for cause, but, during the period commencing on the Effective Date and terminating upon the expiration of the Transition Period, neither Seller nor Seller Parent will terminate any personnel employed in providing the Transition Services without Purchaser’s consent, except for cause.

     3.4. Third Party Consents .

     At no expense to the Purchaser, the Seller will:

          (a) use reasonable efforts to obtain the consent of the landlord under the Lease to the assignment of the Lease to the Purchaser, such consent to be in the form attached hereto as Exhibit 3.4.

          (b) obtain the consent of Silver Point Finance, LLC under the lending agreement between Seller and Silver Point Finance, LLC dated April 30, 2007; and

          (c) obtain the consent of General Electric Capital Corporation under the lending agreement between Seller and General Electric Capital Corporation dated April 30, 2007.

     3.5. Governmental Approvals.

          A. Investment Canada Act Approval

     (a) The following definitions apply to this Agreement:

          (i) “ Investment Canada Act ” means the Investment Canada Act , R.S.C. c.28 (1st Supp.); and

          (ii) “ Investment Canada Act Approval ” means the approval or deemed approval pursuant to the Investment Canada Act by the appropriate Minister.

          (b) The Purchaser shall use reasonable efforts to obtain Investment Canada Act Approval as soon as reasonably practicable, and will keep the Seller informed as to the status of its efforts to obtain such approval.

          (c) The Seller shall furnish to the Purchaser such information and assistance as the Purchaser may reasonably request in connection with its efforts to obtain Investment Canada Act Approval.

          B. PST and Other Clearance Certificates . The Seller shall provide on Closing a clearance certificate pursuant to Section 6 of the Retail Sales Tax Act (Ontario) and if applicable any similar or corresponding provision under any other tax legislation applicable to Seller.

     3.6. Bulk Sales Act

          (a) Each of the Seller and the Purchaser shall do, or cause to be done, all such things and take, or cause to be taken, all such actions as may be required to comply with the Bulk Sales Act (Ontario) R.S.O. 1990, c B.14 (the “ Bulk Sales Act ”) and shall provide all such reasonable assurances as the other Party may reasonably request with respect to the other party’s compliance. Without limiting the generality of the foregoing, the Seller and the Purchaser shall make such filings as may be required or provide such further documents or instruments as may be reasonably desirable to comply with the Bulk Sales Act and effect the purpose of this Agreement and carry out its provisions.

          (b) Procedures.

          (i) Subject to the Seller’s compliance with Section 2.3(b), if applicable, Purchaser shall immediately after Closing pay, from the Purchase Price, all claims (in the amounts due to the applicable Trade Creditor (as defined below) as of the Closing Date) (“ Creditor Claims ”) of Seller’s unsecured trade creditors and secured trade creditors (collectively, the “ Trade Creditors ”) who are listed on the statement of trade creditors provided to the Purchaser by the Seller pursuant to the Bulk Sales Act, the form of which statement is attached hereto as Exhibit 3.6(b)(i), other than such creditors who

have delivered a waiver of immediate payment in the form prescribed under the Bulk Sales Act . For greater certainty the Purchaser shall have no obligation hereunder to pay any amounts to any Trade Creditors that is in excess of the amount of the Creditor Claims listed on the statement of trade creditors.

          (ii) Purchaser shall make the payments contemplated in Section 3.6(b)(i) in accordance with the procedures set out in Exhibit 3.6(b)(ii).

          (iii) Within five (5) days after the Closing Date, the Purchaser shall file, pursuant to the Bulk Sales Act, an affidavit setting out the particulars of the sale, which shall, among other matters include as an exhibit thereto duplicate originals of the statement in Exhibit 3.6(b)(i) and any waivers of immediate payment provided by Trade Creditors.

     3.7. GST.

     The Purchaser and the Seller shall jointly elect, under subsection 167(l) of Part IX of the Excise Tax Act (Canada), and any equivalent or corresponding provision under any applicable provincial or territorial legislation imposing a similar value added or multi-staged tax, that no tax be payable with respect to the purchase and sale of the Purchased Assets under this Agreement. The Purchaser and the Seller shall make such election(s) in prescribed form containing prescribed information and the Purchaser shall file such election(s) in compliance with the requirements of the applicable legislation.

     3.8. Income Tax Election .

     In accordance with the requirements of the Income Tax Act (Canada), the regulations thereunder, the administrative practice and policy of the Canada Revenue Agency and any applicable equivalent or corresponding provincial or territorial legislative, regulatory and administrative requirements, the Purchaser and the Seller shall make and file, in a timely manner, a joint election to have the rules in subsection 20(24) of the Income Tax Act (Canada), and any equivalent or corresponding provision under applicable provisional or territorial tax legislation, apply to the obligations of the Seller in respect of undertakings which arise from the operation of the Business, and to which paragraph 12(l)(a) of the Income Tax Act (Canada) applies. The Purchaser and the Seller acknowledge that the Seller is transferring assets to the Purchaser which have a value equal to the elected amount as consideration for the assumption by the Purchaser of such obligations of the Seller.

     3.9. Delay in Closing.

     Provided that the Purchaser is not in default of its obligations hereunder, if the Closing has not occurred by September 2, 2008, Seller will not ship to its customers any holiday themed product during the month of September 2008 and Seller will provide Purchaser with reasonable access to the Seller’s customer orders, including by providing to the Purchaser item level detail stating the product title of all customer orders shipped during such month or any other reasonable information that Purchaser requests to ensure that Seller has not shipped, or is not shipping, any holiday themed products to the Seller’s customers during the month of September 2008. Notwithstanding the foregoing, Seller may ship the Faith Hill Christmas album to its customers

on the release date for such album, provided that Seller agrees to limit its shipments to no more than [1,000] units during the month of September 2008.

4. Representations and Warranties of Seller and Seller Parent.

Seller and Seller Parent, jointly and severally, represent and warrant the following:

     4.1. Status of Seller and Seller Parent .

     Seller is an Ontario corporation, duly organized, validly existing, and in good standing under the laws of the Province of Ontario and is duly qualified as a foreign corporation and in good standing in each jurisdiction in which the failure to be so qualified would have a material adverse effect on the Business. Exhibit 4.1 lists each foreign qualification of Seller. Seller Parent is a Michigan corporation, duly organized, validly existing and in good standing under the laws of Michigan. Seller Parent indirectly owns all of the issued and outstanding capital stock of Seller.

     4.2. Authority .

     Each of Seller and Seller Parent has the corporate power and authority, and is duly authorized, to enter into and carry out the transactions contemplated by this Agreement. When executed, this Agreement will be a legal, valid, and binding obligation of each of Seller and Seller Parent. The execution and delivery of this Agreement by Seller and Seller Parent and the consummation of the transactions described herein do not and will not (a) contravene the terms of Seller’s or Seller Parent’s respective articles of incorporation or bylaws; (b) conflict with or result in any breach or contravention of, or the creation of any lien under, or require any payment to be made under (i) any contract, mortgage, indenture or agreement to which Seller or Seller Parent is a party or affecting Seller or Seller Parent or their respective assets (subject to the receipt of necessary consents, approvals, procedures and releases described in Sections 3.4 (Third Party Consents), 3.5 (Governmental Approvals), 3.6 (Bulk Sales Act) and 7.2(a) (lender lien releases)) or (ii) any order, injunction, writ or decree of any governmental authority or any arbitral award to which Seller or Seller Parent or their respective property is subject; or (c) violate any law.

     4.3. Title to Purchased Assets .

     At Closing, Seller will transfer to Purchaser good title to the Purchased Assets, including the leasehold estates described in the Lease and the rights under the Equipment Leases, subject to no mortgage, pledge, lien, encumbrance, security interest, or charge, except liens that will be released upon payment of the Purchase Price as described in Section 7.2(a) and Creditor Claims that will be released pursuant to the procedures set forth in Section 3.6 (Bulk Sales Act) and for which the Purchaser will have no liability. The Purchased Assets constitute all the material assets and rights used in the conduct of the Business, except for the Excluded Assets and rights which will be provided to Buyer by Seller Parent pursuant to the Transition Services.

     4.4. Litigation .

     There are no actions, suits, or proceedings pending or, to Seller’s knowledge, threatened against Seller, before any court, administrative agency, or other body which will become a liability or obligation of Purchaser or Merchandisers; and no judgment, order, writ, injunction, decree, or other similar command of any court or governmental agency has been entered against or served upon Seller which will become a liability or obligation of Purchaser or Merchandisers.

     4.5. Insolvency Proceedings.

     Seller is not involved in any proceeding by or against Seller in any court under the Bankruptcy and Insolvency Act or any other insolvency or debtor’s relief act, whether provincial or federal, or for the appointment of a trustee, receiver, liquidator, assignee, or other similar official of Seller or Seller’s property. As of the execution of this agreement, to the knowledge of Seller, the realizable value of Seller’s assets exceeds its liabilities.

     4.6. No Violation or Breach .

     The performance of this Agreement will not be in violation of any laws, statutes, local ordinances, state or federal regulations, court or administrative order, or ruling, nor is the performance of this Agreement in violation of the conditions or restrictions in effect for financing pursuant to any loan documents, whether any such loan is secured or unsecured (subject to the receipt of necessary consents, approvals, procedures and releases, and the making of the payments described in Sections 3.4 (Third Party Consents), 3.5 (Governmental Approvals), 3.6 (Bulk Sales Act) and 7.2(a) (lender lien releases)), or any other agreement to which Seller is a party or to which either the Purchased Assets is subject.

     4.7. Broker’s or Finder’s Fees .

     No agent, broker, investment banker, person, or firm acting on behalf of Seller or Seller Parent is or will be entitled to any broker’s or finder’s fees or any other commission or similar fee directly or indirectly for which the Purchaser or Merchandisers will have any liability in connection with the sale of the Purchased Assets contemplated hereby.

     4.8. Taxes .

     Except as set out on Exhibit, neither Seller nor Seller Parent has liability for Taxes which is or could become a lien on any of the Purchased Assets or a liability of Purchaser or Merchandisers. Each of Seller and Seller Parent has timely filed all Tax Returns with respect to such Taxes that it was required to file. All such Tax Returns were correct and complete in all respects and were prepared in substantial compliance with all applicable laws and regulations. For purposes of this Agreement, “ Taxes ” means all taxes, surtaxes, duties, levies, imposts, fees, assessments, withholdings, dues and other charges of any nature, including interest additions to tax and penalties applicable thereto, imposed or collected by any governmental authority, whether disputed or not, including Canadian and US federal, provincial, territorial, municipal and local, foreign and other income, franchise, gross receipts, capital, capital gains, real property, personal property, withholding, payroll, health, employee health, transfer, goods and services and other value added, sales, use, consumption, land transfer, ad valorem, excise, customs, anti-

dumping, countervail, net worth, stamp, registration, franchise, payroll, employment, education, business, school, local improvement, development and occupation taxes, duties, levies, imposts, fees, assessments and withholdings and Canada and Quebec pension plan contributions, employment insurance premiums and all other taxes and similar governmental charges of any kind for which the Seller or Seller Parent may have any liability imposed by any governmental authority and including any obligation to indemnify or otherwise assume or succeed to the Tax liability of any other Person, and “ Tax Return ” includes returns, reports, declarations, elections, notices, filings, forms, statements and other documents (whether in tangible, electronic or other form) and including any amendments, schedules, attachments, supplements, appendices and exhibits thereto, made, prepared, filed or required to be made, prepared or filed by law in respect of Taxes.

          (a) No failure, if any, of the Seller to duly and timely pay all Taxes, including all installments on account of Taxes for the current year, that are due and payable by it will result in any lien or encumbrance on the Purchased Assets or become a liability or obligation of Purchaser or Merchandisers.

          (b) Except as set forth in Exhibit 4.8, there are no proceedings, investigations, audits or claims pending or threatened against the Seller in respect of any Taxes. There are no matters under discussion, audit or appeal with any governmental authority relating to Taxes, which will result in a lien or encumbrance on the Purchased Assets or become a liability or obligation of Purchaser or Merchandisers.

          (c) The Seller has duly and timely withheld all Taxes, and other amount required by law to be withheld by it (including taxes and other amounts required to be withheld by it in respect of any amount paid or credited or deemed to be paid or credited by it to or for the account of or for the benefit of any person, including any employees, officers, or directors and any non-resident person, including but not limited to Seller Parent) and has duly and timely remitted to the appropriate governmental authority such Taxes and other amounts required by law to be remitted by it.

          (d) The Seller has duly and timely collected all amounts on account of any sales or transfer Taxes, including goods and services, harmonized sales and provincial or territorial sales Taxes, required by law to be collected by it and has duly and timely remitted to the appropriate governmental authority any such amounts required by law to be remitted by it.

     4.9. Competition Act

     Seller, together with its affiliates, as such term is defined in the Competition Act, (i) do not have assets in Canada that exceed CDN$50 million in aggregate value, determined as of such time and in such manner as is required under the Competition Act and its regulations in connection with this transaction, and (ii) do not have gross revenues from sales in, from or into Canada, determined for such annual period and in such manner as is required under the Competition Act and its regulations in connection with this transaction, that exceed CDN$170 million.

     4.10. Canadian Seller

     Seller is not a non-resident of Canada for the purposes of the Income Tax Act (Canada).

     4.11. Financial Statements .

     Seller and Seller Parent have supplied to Buyer the unaudited balance sheet and income statement (a) as of and for the fiscal year ended April 30, 2008 (the “ Most Recent Fiscal Year End ”), and (b) as of and for each of the months ending May 31, 2008 and June 30, 2008 (which June statement shall be in draft form), which, in the case of both (a) and (b), include the financial results of the Business only (collectively (a) and (b), the “ Financial Statements ”). The Financial Statements (including the notes thereto) have been prepared in accordance with generally accepted US accounting principles applied on a consistent basis with prior periods, present fairly the assets and liabilities of Seller as of the Most Recent Fiscal Year End and the revenues and expenses for such period, and are consistent with the books and records of Seller.

     4.12. Subsequent Events .

     Since the Most Recent Fiscal Year End, there has not been any material adverse change in the business, financial condition, operations, or results of operations of Seller or the Business. Without limiting the generality of the foregoing, since that date:

          (a) Seller has not sold, leased, transferred, or assigned any assets, tangible or intangible, outside the ordinary course of business;

          (b) Other than the inventory purchases described in Exhibit 3.6(b)(ii), Seller has not entered into any agreement, contract, lease, or license outside the ordinary course of business;

          (c) Seller has not accelerated, terminated, made material modifications to, or canceled any agreement, contract, lease, or license involving more than $50,000 to which Seller is a party; `

          (d) Seller has not imposed any lien or encumbrance upon any of its assets, tangible or intangible;

          (e) Seller has not made any capital expenditures outside the ordinary course of business;

          (f) Seller has not granted any license or sublicense of any material rights under or with respect to any intellectual property;

          (g) Seller has not experienced any material damage, destruction, or loss (whether or not covered by insurance) to its properties;

          (h) Seller has not entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement;