Asset Purchase Agreement

Table of Contents

This Asset Purchase Agreement (this “ Agreement ”) is made as of June 21, 2009 (the “ Signing Date ”), by and among   Man Alive Acquisitions, LLC, a Delaware limited liability company  (“ Buyer ”), each of the other parties listed in Exhibit E (each a “ Buyer Related Party ” and collectively the “ Buyer Related Parties ”), The Finish Line Man Alive, Inc., an Indiana corporation (“ Seller ”) and The Finish Line, Inc., an Indiana corporation (“ Finish Line ”).  Buyer, Buyer Related Parties, Seller and Finish Line may hereinafter be referred to individually as a “ Party ” and collectively as the “ Parties .”

Seller desires to sell and transfer, and Buyer desires to purchase and acquire, substantially all the assets owned or held by Seller and used primarily in the operation of the Business (as defined in Exhibit A other than those specifically excluded as described in this Agreement).

The Parties, intending to be legally bound, agree as follows:

Article 1.   Definitions

For purposes of this Agreement, capitalized terms used herein but not otherwise defined herein shall have the meanings specified in Exhibit A .

Article 2.   Asset Purchase Transaction; Closing

Section 2.1   Assets to be Sold .  Subject to the terms and conditions of this Agreement, at the Closing, Seller shall sell, assign, transfer, convey and deliver to Buyer, or cause to be sold, assigned, transferred, conveyed and delivered to Buyer, and Buyer shall purchase and acquire from Seller, all the right, title and interest in and to all of the assets of Seller (the “ Purchased Assets ”), including, without limitation, the following (but excluding the Excluded Assets):

(a)   except as otherwise provided in Section 2.9, the interest of Seller in the real property leases described on Part 2.1(a) of the Disclosure Letter (the “ Assigned Leases ”) including any prepaid rents and security deposits in connection therewith;

(b)   the equipment, furniture, fixtures, cash registers, alarm systems, sensors, cameras, digital video recording systems, bags, hangers, racks and other personal property currently in all stores of the Assigned Leases and in Seller’s (or, to the extent owned by Seller, Finish Line’s) warehouse, including those described on Part 2.1(b) of the Disclosure Letter (the “ Equipment ”);

(c)   the merchandise and other inventory consisting of inventory in stores, inventory in distribution centers and inventory in transit between distribution centers and stores, as of July 4, 2009, (collectively, the “ Received Inventory ”) and inventory under non-cancellable purchase orders and in transit between vendors and distribution centers utilized by Seller as of July 4, 2009 (the “ Ordered Inventory ” and collectively with the

Received Inventory the “ Inventory ”) described on Part 2.1(c) of the Disclosure Letter, subject to adjustment for actual Inventory as of the Closing Time;

(d)   the Seller’s interest in the Contracts described on Part 2.1(d) of the Disclosure Letter (the “ Seller Contracts ”);

(e)   any and all rights of Seller, including goodwill, in and to all trade names, trademarks, service marks, brand names, recipes, packaging designs, packaging files, logo artwork, copyrights, customer lists, trade secrets, inventions, technology, nonproprietary information, know-how, licenses and processes and other intangible assets of every kind and description whatsoever (including registrations thereof and applications therefor) owned or used in connection with the Business as more specifically described in Part 2.1(e) of the Disclosure Letter (the “ Intellectual Property Assets ”);

(f)   all books, records and other information relating to the operation of the Business, including, without limitation, inventory information, Sales information, employee information, customer and supplier lists and records relating to customers and suppliers and if applicable, in an electronic form;

(g)   except for the Tax refunds described in Section 2.2(f), any and all rights, claims, credits, causes of action or rights of set-off against third Persons related to the Purchased Assets existing as of the Closing Time, including, without limitation, rights under manufacturers’ and vendors’ warranties, rights under insurance policies covering the Purchased Assets and rights under indemnification and contribution agreements;

(h)   to the extent transferable, any and all licenses and permits necessary or required to operate the Purchased Assets and held by Seller as of the Closing Time;

(i)   all rights of Seller in and to websites and domain names used or held for use in connection with the Business, as more specifically described on Part 2.1(i) of the Disclosure Letter;

(j)   any and all documentation, policies, data, literature, advertising materials and other books and records or portions thereof that relate to the foregoing assets; and

(k)   all other assets, properties and rights of Seller related to the Business except for the Excluded Assets.

Section 2.2   Excluded Assets .  For the avoidance of doubt, the Purchased Assets shall not include, and Buyer shall not purchase or acquire from Seller, the following assets, rights and interests (the “ Excluded Assets ”):

(a)   all cash (including all cash in all bank accounts, all cash in stores, deposits in transit, cash to be received from debit and credit card transactions, and all petty cash) and cash equivalents (including marketable securities and short term investments);

(b)   all accounts receivable (the “ Seller Receivables ”);

(c)   all prepaid expenses and other prepaid items, other than the prepaid rents and security deposits in connection with the Assigned Leases;

(d)   all minute books, stock record books, taxpayer and other identification numbers, tax returns and similar corporate records;

(e)   all personnel records and other records that Seller is required by Legal Requirements to retain in its possession;

(f)   all claims for refund of Taxes and other governmental charges of whatever nature related to time periods prior to the Closing Time;

(g)   any insurance policies or rights thereunder;

(h)   all rights of Seller under this Agreement or the Ancillary Documents;

(i)   assets which are not used primarily in the operation of the Business;

(j)   Seller’s leasehold interest in its corporate headquarters; and

(k)   the assets set forth on Part 2.2(k) of the Disclosure Letter.

Section 2.3   Nonassignable Seller Contracts .  To the extent that any Seller Contract is not capable of being assigned, transferred, subleased or sublicensed without the consent or waiver of the issuer thereof or the other party thereto or any third party, or if such assignment, transfer, sublease or sublicense (an “ Assignment ”) would constitute a breach thereof or a violation of any Legal Requirement, this Agreement shall not constitute an Assignment thereof or an attempted Assignment thereof and the Purchased Assets shall not include such Seller Contract, unless and until such consent or waiver of such issuer or other party or parties has been duly obtained or such Assignment has otherwise become lawful.  To the extent that the consents and waivers are not obtained by Seller before the Closing, then after the Closing and until the impracticalities of Assignment are resolved, (i) Seller shall use commercially reasonable efforts to provide or cause to be provided to Buyer the benefits of any such Seller Contract, and (ii) Buyer shall use commercially reasonable efforts to perform the obligations of Seller arising under such Seller Contract.

Section 2.4   Assumed Liabilities .  At the Closing, Buyer shall assume and agree to discharge the following obligations and Liabilities of Seller (the “ Assumed Liabilities ”) except in any such case to the extent that such Liability is caused by a breach of the representations and warranties of Seller set forth in  this Agreement: (a) all Liabilities and obligations of Seller under the Assigned Leases accruing after the Closing Time, provided same did not arise from events or circumstances prior to Closing Time; (b) all Liabilities and obligations of Seller under the Seller Contracts accruing after the Closing Time, provided same did not arise from events or circumstances prior to Closing Time; (c) all Liabilities and obligations of Seller under the Non-Assigned Leases accruing after the Closing Time, provided same did not arise from events or circumstances prior to Closing Time; and (d) any Liabilities of Seller or the Business under outstanding gift cards issued to customers, limited to the dollar amount of credit provided by Seller to Buyer herein.

Section 2.5   Excluded Liabilities .   Except for the Assumed Liabilities set forth in Section 2.4, Buyer shall not assume, whether by assignment, express or implied contract, by operation of law or otherwise, or be obligated to pay, perform, discharge or guarantee, any Liabilities of Seller or any Affiliate thereof, including any of their successors and assigns, whether arising or incurred before, on or after the Closing Time.  Notwithstanding anything contained herein to the contrary Seller, not Buyer shall be liable for any rent and additional rents due under the Assigned Leases prior to the Closing Time and shall make payment of same prior to Closing (the “ Excluded Liabilities ”). Seller and Finish Line jointly and severally agree that they shall be liable for and hold Buyer and Buyer Related Parties harmless from all Excluded Liabilities and

shall indemnify Buyer or Buyer Related Parties for any Damages arising from the Excluded Liabilities.

Section 2.6   Ordered Inventory .  Seller shall pay and be liable for all payments to vendors for Ordered Inventory.  To the extent Seller receives any Ordered Inventory after Closing, Seller shall, at its own expense, ship any such Ordered Inventory to Buyer’s distribution center(s) as directed by Buyer. The amounts deducted from the Purchase Price Rebate for Ordered Inventory under Section 2.7 shall be held by Seller in escrow and used to pay 40% of the amounts due the vendors of the Ordered Inventory, when such amounts become due and owing; provided Buyer has received said Ordered Inventory and has not objected to the same as defective pursuant to this Section 2.6.  If Buyer does not receive Ordered Inventory, or if the Ordered Inventory is defective, Buyer shall notify Seller of such facts within seven (7) business days after receipt of the Ordered Inventory and where practicable, Seller shall withhold payment to the vendors for such Ordered Inventory until the Parties can resolve the matter. Seller agrees that it shall not agree to postpone any initial required delivery dates or to request that any goods be shipped later than in the ordinary course of business.  No later than October 31, 2009, Seller shall provide Buyer with a reconciliation of Ordered Inventory to actual received Ordered Inventory (and defective inventory, if any) and the net adjustment, if any, shall be paid by Seller to Buyer based on a pro-rata allocation of 60% to Seller and 40% to Buyer (it being the intention that Buyer will, after adjustment, only be responsible for paying forty percent (40%) of the actual received Ordered Inventory amount).  In the event the Received Inventory is less than the amount required by Section 3.16 as of the Closing Time, Seller and Finish Line agree to pay any deficiency to Buyer within twenty (20) days of Closing.  As of the Signing Date, the Parties acknowledge that 40% of the Ordered Inventory value is no greater than $1,275,000.

Section 2.7   Purchase Price Rebate .  In consideration of Buyer’s agreement to assume the Assumed Liabilities, Seller shall (i) transfer and assign to Buyer the Purchased Assets as contemplated by this Agreement and (ii) pay the sum of Eight Million Two Hundred Fifty Thousand Dollars ($8,250,000), plus an amount equal to Seller’s gift card liability as reflected in the Seller’s books and records as of the Closing Time, minus an amount equal to forty percent (40%) of the sum of the value of (A) the Received Inventory in excess of Seven Million Five Hundred Thousand Dollars ($7,500,000) valued at the Seller’s cost value before markdowns or shrinkage as reflected in Seller’s books and records as of the Closing Time and consistent with the values reflected in the Disclosure Letter, plus the (B) the Ordered Inventory, valued at the Seller’s cost value before markdowns or shrinkage as reflected in Seller’s books and records as of the Closing Time and consistent with the values reflected in the Disclosure Letter (collectively, the “ Purchase Price Rebate ”).  The Purchase Price Rebate shall be payable as follows: (i) the Purchase Price Rebate less (A) the Escrow Amount (as defined in Section 2.12) but in no event less than zero dollars ($0), and (B) Two Million Dollars ($2,000,000) (the “ Installment Payment ”), shall be payable to Buyer in cash by wire transfer of same day funds as of July 6, 2009, as directed by Buyer (the “ Cash Purchase Price Rebate ”), (ii) the Escrow Amount shall be payable to U.S. Bank National Association to be held in Escrow subject to Section 2.12 as of July 6, 2009 and (iii) the Installment Payment shall be payable without setoff for any reason in equal monthly installments by check or wire transfer to Buyer on the first day of the first month following the Closing Time and continuing on the first day of the first month each month thereafter for a total of twelve (12) months (the “ Deferred Purchase Price Rebate ”).  Finish Line guaranties the full and prompt payment of the Cash Purchase Price Rebate, the Escrow Amount and the Deferred Purchase Price Rebate as and when due hereunder.

Section 2.8   Closing .  The purchase and sale (the “ Closing ”) provided for in this Agreement will take place at the offices of Seller’s counsel at Barnes & Thornburg LLP, 11 South Meridian Street, Indianapolis, Indiana 46204, at 10:00 a.m. (local time) or via correspondence and e-mail communications on July 3, 2009, to be effective and deemed to occur at 11:59 p.m. (local time) on July 4, 2009 (the “ Closing Time ”), or at such other time and place as the Parties may agree.  For the avoidance of doubt, it is the intent of the Parties that all payments to be made as of the Closing Time, will be made as of July 6, 2009. Subject to the provisions of Section 9.1, failure to consummate the purchase and sale provided for in this Agreement on the date and time and at the place determined pursuant to this Section 2.8 will not result in the termination of this Agreement and will not relieve any Party of any obligation under this Agreement.

Section 2.9   Allocation of Purchase Price .  Buyer and Seller shall prepare and file their respective Tax Returns, including, but not limited to, Internal Revenue Service Form 8594, reflecting the Contemplated Transactions in a manner consistent with the allocation of the Assumed Liabilities less the Purchase Price Rebate (the “ Purchase Price ”) provided in Exhibit C attached hereto and made a part hereof and reflecting the effective time of the consummation of the transactions as of the Closing Time, and shall take no position contrary thereto or inconsistent therewith (including, without limitation, in any audits or examinations by any Governmental Body or any other Proceedings) unless required by Legal Requirements.  Buyer and Seller shall make those portions of their returns, or amendments thereof, that relate to the reporting of the transactions contemplated hereby available for inspection by the other Party or its Representatives, and such other Party shall specify, within ten (10) days after its receipt of such return or amendment, in what respect, if any, such return or amendment would violate the obligations set forth in the preceding sentence.

Section 2.10   Nonassignable Leases .  To the extent that any Assigned Leases are not capable of being assigned without the consent or waiver of any other party thereto or any third party (the “ Assignment ”) and such party refuses to provide such consent or waiver, then after the Closing and until the impracticalities of Assignment are resolved, (i) Buyer shall sublease (the “ Sublease ”) such real property from Seller under the same terms and conditions as those terms and conditions in the original Lease for the applicable subleased premises (including any amendments prior to Closing, the “ Non-Assigned Lease ”) which Subleases shall also provide that Buyer and Buyer Related Parties shall defend, indemnify and hold harmless the Seller and Finish Line, from all Liability under the Non-Assigned Leases related thereto and the amount of any Damages arising proximately therefrom, (ii) Buyer and Seller shall use commercially reasonable efforts to provide or cause to be provided to Buyer the benefits of any such Non-Assigned Lease, (iii) Buyer shall perform the obligations of Seller arising under such Non-Assigned Lease accruing after the Closing Time, provided same did not arise from events or circumstances prior to Closing Time, except in any such case to the extent that such Liability is caused by a breach of the representations and warranties of Seller set forth in this Agreement and (iv) Seller shall remain liable and perform the obligations of Seller arising under such Non-Assigned Lease accruing prior to or arising from events or circumstances prior to the Closing Time and to the extent that such Liability is caused by a breach of the representations and warranties of Seller set forth in this Agreement.  With respect to any Non-Assigned Lease, this Agreement shall not constitute an Assignment thereof or an attempted Assignment thereof unless and until such consent or waiver of such issuer or other party or parties has been duly obtained.  Continuing promptly following the Closing Time, Buyer and Buyer Related Parties shall

continue to use their reasonable best efforts in attempting to secure the Assignment of any Non-Assigned Lease until the Assignment is obtained.  For the avoidance of doubt, any Liability arising from the failure of the Parties to obtain a Landlord’s consent to the Sublease shall be born solely by Buyer and Buyer Related Parties; provided, however that Seller and Finish Line will indemnify and reimburse Buyer and Buyer Related Parties $0.50 per dollar incurred, suffered or spent for such Liabilities, if any, up to a maximum of $1,500,000.  Seller and Finish Line will pay any amount due under this Section 2.10 within ten (10) days after Buyer provides Seller with reasonable documentation of such Liabilities.  The Parties acknowledge that as of the Signing Date the only two Non-Assigned Leases are the Leases with Aranov and O’Leary as the landlords.

Section 2.11   Proration of Leases .  For purposes of this Agreement the parties agree that all amounts accruing under the Assigned Leases and Non-Assigned Leases, including without limitation rent, additional rent, insurance, utilities, taxes, costs, credits and other Liabilities or payables, will be prorated as of the Closing Time, based on the periods for which such amounts are actually allocated or accrued.  Items for which it is indeterminate which period they relate to, will be considered accrued based on the date the Landlord’s billing statement for such items is received.  For the avoidance of doubt, property tax refunds for periods prior to the Closing Time shall remain the property of Seller.

Section 2.12   Escrow .  Effective as of the Closing Time, the Parties shall set up an escrow with U.S. Bank National Association pursuant to the terms of an escrow agreement in substantially the form attached as Exhibit F (the “ Escrow Agreement ”).  As of or prior to the Closing Time, the Seller shall deposit an amount equal to $2,250,000 (the “ Three Month Rent Amount Estimate ”), plus $2,263,142.87 representing the aggregate estimated amount of rent and additional rent payable for the period from the November 1, 2009 through the Kick Out Time for (i) the Non-Assigned Leases, (ii) any Assigned Leases with respect to which the Landlord Consent does not contain an unconditional release of Seller and Finish Line for Liabilities accruing after the Closing Time and (iii) any Assigned Leases which Finish Line has guaranteed and which guarantee has not been released, (the “ Lease Escrow ” and collectively with the Three Month Rent Amount Estimate, the “ Escrow Amount ”) which shall be held and distributed in accordance with the terms of the Escrow Agreement.  The amount of the Lease Escrow shall be adjusted to the extent that between the Signing Date and the Closing Date (i) the Non-Assigned Leases become Assigned Leases, (ii) the Landlord Consents are revised to contain an unconditional release of Seller and Finish Line for Liabilities accruing after the Closing Time or (iii) Finish Line is released from its guaranties.

Section 2.13   Deliveries by Seller .  At the Closing, Seller shall deliver or cause to be delivered to Buyer the following items:

(a)   a duly executed Bill of Sale;

(b)   a certificate of a duly authorized officer of Seller, dated effective as of the Closing Time, certifying that the resolutions attached thereto are true, correct and complete copies of the resolutions of Seller authorizing, adopting and approving the Transaction Documents and the transactions contemplated hereby and thereby, and that the bylaws attached thereto are true, correct and complete copies thereof as in effect as of the Closing Time;

(c)   a certified copy of the articles of incorporation of Seller as in effect as of the Closing Time, certified by the Secretary of State of the State of Indiana and dated within ten (10) Business Days prior to the Closing Time;

(d)   a certificate of existence of Seller issued by the Secretary of State of the State of Indiana and dated within ten (10) Business Days prior to the Closing Time;

(e)   an incumbency certificate of Seller, dated effective as of the Closing Time, in form and substance reasonably satisfactory to Buyer;

(f)   a certificate of the Treasurer of Seller, dated effective as of the Closing Time, certifying as to the payment in full of any and all Taxes;

(g)   a list of the current Received Inventory certified by Seller as true and correct as of the business day prior to Closing;

(h)   a list of the Ordered Inventory certified by Seller as true and correct as of the business day prior to Closing;

(i)   all sales figures between date of this Agreement and the business day prior to Closing, and for the last twelve months prior to the business day prior to Closing certified by Seller as true and correct;

(j)   a certificate executed by an officer of Seller certifying that the conditions set forth in Article 7 have been satisfied as of the Closing and that the respective representations and warranties are true and correct as of the respective dates set forth herein; and

(k)   such other instrument or instruments of transfer in such form as shall reasonably necessary or appropriate to vest in Buyer all of Seller’s right, title and interest to the Purchased Assets an in form and substance reasonably satisfactory to Buyer (all such instruments and agreements, collectively, the “ Transfer Documents ”).

Section 2.14   Three Month Rent Obligation .  The Escrow Agreement will provide that the Three Month Rent Amount Estimate will be held by the Escrow Agent without offset or setoff by Seller and distributed to Buyer on January 4, 2010.  In the event the Three Month Rent Amount Estimate is less than the actual rents and additional rents accruing for the period of August 1, 2009 through October 31, 2009, for the Assigned Leases and the Non-Assigned Leases (a “ Rent Deficiency ”), Seller and Finish Line, jointly and severally agree to reimburse Buyer for such amounts on January 4, 2010.  If Buyer desires to seek any such reimbursement, Buyer agrees to provide Seller a statement from Buyer that a Rent Deficiency for such period exists together with such reasonable documentation verifying the existence of a Rent Deficiency.  Payment by Seller of the Rent Deficiency amount shall be the later of 30 days after receipt of the request from Buyer or January 4, 2010.  For the avoidance of doubt, it is the intention of the Parties that Buyer and Buyer Related Parties agree to pay, when due, after applicable notice and grace periods and subject to Buyer’s right to dispute any claim by landlord all rent or additional rent for the accruing for the period of August 1, 2009 through October 31, 2009 and that Seller and Finish Line will be responsible to reimburse Seller on January 4, 2010 for all rent and additional rent under the Leases paid by Buyer or Buyer Related Parties for the periods prior to October 31, 2009 (less the Three Month Rent Amount Estimate being released from escrow), but will not be responsible for any other Liabilities under the Leases accruing after the Closing Time.

Article 3.   Representations and Warranties of Seller

Seller and Finish Line, jointly and severally represent and warrant to Buyer, as of the date hereof, as follows:

Section 3.1   Organization .  Seller is a corporation duly organized and validly existing under the laws of the State of Indiana, with the corporate power and authority to conduct its business as it is now being conducted, to own or use the properties and assets that it owns or uses and to perform all its obligations under the Seller Contracts to which it is a party.  Seller is qualified to do business and is in good standing in each jurisdiction in which the conduct of its business requires it to be so qualified, except where the failure to be so qualified or in good standing would not result in a Material Adverse Change.  Finish Line is a public company traded on NASDAQ under the symbol FINL.

Section 3.2   Authority; No Conflict; Consents .

(a)   Each of this Agreement and the Ancillary Documents to which the applicable Seller is a party is a legal, valid, and binding obligation of Seller, enforceable against Seller in accordance with its respective terms, except that such enforcement may be subject to or limited by (i) bankruptcy, insolvency or other similar laws, now or hereafter in effect, affecting creditors’ rights generally, and (ii) the effect of general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity).  Seller has all right, power and authority to execute and deliver this Agreement and the Ancillary Documents to which it is a party and to perform its obligations under this Agreement and the Ancillary Documents to which it is a party.  No further action on the part of Seller is necessary to authorize the execution, delivery and performance by Seller of the forgoing agreements and consummation by it of the transactions contemplated hereby and thereby.

(b)   The execution and delivery of this Agreement and the Ancillary Documents by Seller does not, and the consummation or performance by Seller of any of the Contemplated Transactions will not, (i) conflict with or result in a violation of any provision of the articles of incorporation or by laws of Seller, (ii) conflict with or result in a violation of any Order to which Seller or any of the Purchased Assets may be subject, (iii) conflict with or result in a violation of any of the terms or requirements of any Seller Approval, (iv) conflict with, result in a violation or breach of, constitute a default under, result in the acceleration of, create in any party the right to terminate, modify or cancel any provision of any Seller Contract or Leases, or (v) assuming the Landlord Consents (as hereafter defined) are obtained, conflict with, result in a violation or breach of, constitute a default under, result in the acceleration of, create in any party the right to terminate, modify or cancel any provision of any Assigned Leases, (vi) result in the imposition or creation of any Encumbrance upon or with respect to any of the Purchased Assets, or (vii) require any filing with, permit or consents of any Governmental Authority or other Persons, other than those which have been obtain or will be obtained at Closing.

(c)   Except as set forth on the Part 3.2(c) of the Disclosure Letter, and except for the Landlord Consents (as hereafter defined), Seller is not required to obtain any Consent from, or provide any notice to, any Person in connection with the execution and delivery of this Agreement or the Ancillary Documents or the consummation or performance of

any of the Contemplated Transactions, except for such failures to obtain Consents or to provide notices which, individually or in the aggregate, will result in a Material Adverse Change.

(d)   Seller has the requisite power and authority to execute and deliver this Agreement and each other Transaction Document to which it is a party and to consummate the transactions contemplated hereby and thereby.

Section 3.3   Financial Statements .  Seller has delivered to Buyer: (a) an unaudited balance sheet of Seller as of February 28, 2009 (the “ Balance Sheet ”), and the related statements of income and cash flow for the fiscal year then ended (“ Annual Income Statement ” and collectively, with the Balance Sheet, the “ Annual Financial Statements ”), and (b) an internally prepared balance sheet of Seller as of May 2, 2009 (the “ Interim Balance Sheet ”), and the related internally prepared statements of income as of May 2, 2009 (the “ Interim Income Statement ” and, collectively with the Interim Balance Sheet, the “ Interim Financial Statements ”).  The Annual Financial Statements fairly present in all material respects the financial condition and the results of operations of Seller as of the respective dates and for the respective periods referred to in such Annual Financial Statements, all in accordance with GAAP, consistently applied.

Section 3.4   Title to Assets .  All of the Purchased Assets are owned by Seller free and clear of all Encumbrances and at the Closing, the Bill of Sale, to be executed and delivered by Seller to Buyer, will effectively vest in Buyer good, valid and marketable title to all of the Assets free and clear of all Liens.  At Closing, Seller will have delivered or caused to be delivered to Buyer all of the properties, assets and rights of Seller used in or necessary to operate the Purchased Assets in the Ordinary Course of Business as of the Closing Time, except for the Excluded Assets.  At Closing, the Purchased Assets will be in such condition and repair as is necessary to operate the Purchased Assets in the Ordinary Course of Business.  To Seller’s Knowledge, there are no defects in the Purchased Assets or other conditions relating thereto which, in the aggregate, would have an adverse effect on Buyer’s ability to operate the Purchased Assets in the Ordinary Course of Business.

Section 3.5   Condition and Sufficiency of Assets .  To Seller’s Knowledge, (a) the Equipment is in good operating condition and repair, is free from material defects and is adequate for the uses to which the Equipment is being put, ordinary wear and tear excepted, and (b) none of the Equipment is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that would not result in a Material Adverse Change.

Section 3.6   Taxes .

(a)   Seller has filed or caused to be filed all Tax Returns that are or were required to be filed by them pursuant to applicable Legal Requirements.  To Seller’s Knowledge, all Tax Returns filed by Seller are true, correct, and complete.  Seller has paid, or made provision for the payment of, all Taxes that have become due pursuant to the Tax Returns or otherwise, or pursuant to any assessment received by Seller, except such Taxes, if any, as are being contested in good faith.  Except as set forth on Part 3.6(a) of the Disclosure Letter, to Seller’s Knowledge (i) Seller has not received any written claim by any taxing authority in any jurisdiction where Seller does not file Tax Returns that Seller is or may be subject to Taxes assessed by such jurisdiction (ii) there has been no issue raised or adjustment proposed (and none is pending) by any Tax authority with respect to Taxes,

(iii) there are no Liens for Taxes upon any of the Purchased Assets, and (iv) there is no pending Tax audit or examination, nor any action, suit, investigation, claim or deficiency asserted against Seller.

(b)   To Seller’s Knowledge, Seller has timely paid (or will timely pay prior to the Closing Time) and/or accrued all sales Taxes required to be paid by them or collected from customers in connection with the sale of goods or performance of services for customers which are owing for the periods prior to the Closing Time.  Seller has paid (or will timely pay prior to the Closing Time) and/or accrued all payrolls, employment, withholding and other Taxes required in connection with their employees which are owing for the periods prior to the Closing Time.

Section 3.7   Employee Benefits .  All pension, retirement, supplemental retirement, stock option, stock purchase, stock ownership, savings, stock appreciation right, profit sharing, deferred compensation, consulting, bonus, medical, disability, workers’ compensation, vacation, group insurance, severance, employee welfare benefit plans (as defined in ERISA), employee pension benefit plans (as defined in ERISA) and other material employee benefit, incentive and welfare policies, contracts, plans and arrangements, and all trust agreements related thereto, maintained by or contributed to by Seller or which Seller has any Liability or potential Liability in respect of any of the present or former directors, officers, other employees and/or consultants of Seller, or in which any of such directors, officers, employees or consultants participates (each an “ Employee Plan ”) have been maintained and operated substantially in accordance with both their terms and with the requirements of all applicable Legal Requirements, including, without limitation, ERISA, the Code and COBRA.  All contributions required to be made to Employee Plans have been or will be made.

Section 3.8   Compliance with Legal Requirements; Governmental Authorizations .

(a)   To Seller’s Knowledge, except as set forth in the Part 3.8(a) of the Disclosure Letter, (i) Seller is in compliance with each Legal Requirement that is applicable to it or the ownership or use of the Purchased Assets which it owns or uses; and (ii) Seller has not received, at any time since May 1, 2007, any written notice from any Governmental Body or any other Person regarding any violation of, or failure to comply with, any Legal Requirement.

(b)   Except as provided in Part 3.8(a) of the Disclosure Letter, since May 1, 2007, no notice, charge, claim, action or assertion has been received by Seller (with respect to the Purchased Assets) or, to Seller’s Knowledge, has been filed, commenced or threatened against Seller alleging any violation of any of the foregoing.  The conduct of the Business has not violated, and as presently conducted does not violate any Applicable Laws, Orders or any industry standards which would have a material adverse effect on the Business.  No investigations by any Governmental Authority asserting or alleging any violation of, or noncompliance with, any such Applicable Laws or Orders are pending or, to Seller’s Knowledge, threatened against Seller.

(c)   Part 3.8(c) of the Disclosure Letter identifies each Governmental Authorization which (i) is required for and material to the conduct of the Business by Seller, or (ii) is held by Seller.  To Seller’s Knowledge, Seller is not in violation of any such Governmental Authorization held by it.

Section 3.9   Legal Proceedings .  Except as set forth in Part 3.9 of the Disclosure Letter, there is no Proceeding pending or, to Seller’s Knowledge, threatened against Seller and affecting the Purchased Assets nor any Order to which Seller or the Purchased Assets is subject.

Section 3.10   Seller Contracts; Assigned Leases; No Defaults .

(a)   Except as set forth in the Part 3.10 of the Disclosure Letter, each Seller Contract and Lease (i) to Seller’s Knowledge is legal, valid, binding, in full force and effect and valid and enforceable against Seller and the other parties thereto, in accordance with its terms, and (ii) assuming the Landlord Consents (as defined hereafter) are obtained, the consummation of the Contemplated Transactions will not cause the failure of such Seller Contract or Lease to be legal, valid, binding, in full force and effect and enforceable on identical terms following the consummation of the Contemplated Transactions.

(b)   Except as set forth in Part 3.10 of the Disclosure Letter (i) Seller is in compliance in all material respects with each Seller Contract and Assigned Lease under which Seller has or had any obligation or Liability or by which Seller or any of the Purchased Assets owned by it is bound and (ii) to Seller’s Knowledge, each other Person that has any obligation or Liability under any Seller Contract or Assigned Lease under which Seller has any rights is in compliance in all material respects with such Seller Contract or Assigned Lease as the case may be.

(c)   Except as set forth in Part 3.10 of the Disclosure Letter, Part 2.1(d) of the Disclosure Letter contains an accurate and complete list of all contracts, agreements, licenses and instruments (including without limitation a summary of any oral contracts or agreements) to which Seller is a party or is bound and that are material to the Purchased Assets (other than the Assigned Leases).  True, complete and correct copies of all Seller Contracts and Assigned Leases have been provided or made available to the Buyer.

Section 3.11   Environmental Matters .  To Seller’s Knowledge: (a) the operations of Seller complies with all Environmental Laws; (b) Seller is not subject to any outstanding Order respecting (i) Environmental Laws, (ii) Remedial Action, or (iii) any Release or threatened Release of a Hazardous Material; (c) there has been no Release by Seller of any Hazardous Materials; (d) there are no pending or, threatened Proceedings, of any nature, resulting from any Environmental Law, with respect to or affecting the Seller; and (e) Seller has obtained and complied with, and is in compliance with in all material respects, all Governmental Authorizations that are required pursuant to Environmental Laws for the occupation of its facilities and the operation of the Business.  Notwithstanding the generality of any other representation or warranty in this Agreement, the representations and warranties contained in Section 3.11 shall be deemed to contain the only representations and warranties in this Agreement with respect to Environmental Laws and Hazardous Materials.

Section 3.12   Labor Matters .

(a)   Seller is not a party to any collective bargaining Contract.  Except as set forth in Part 3.12 of the Disclosure Letter, there is not presently pending or existing, and, to Seller’s Knowledge, there is not threatened, (i) any strike, slowdown, picketing, or work stoppage, (ii) any Proceeding against or affecting Seller relating to the alleged violation of any Legal Requirement pertaining to labor relations or employment matters, including

any charge or complaint filed by an employee or union with the National Labor Relations Board, the Equal Employment Opportunity Commission, or any comparable Governmental Body, organizational activity, or other labor or employment dispute against or affecting Seller or its respective premises, or (iii) any application for certification of a collective bargaining agent.  Except as set forth in Part 3.12 of the Disclosure Letter, Seller is in material compliance with all Legal Requirements relating to employment, equal employment opportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining, the payment of social security and similar taxes, occupational safety and health, plant closing and mass layoff of employees.

(b)   Seller has paid or will pay and perform all obligations with respect to its employees, independent sales representatives, consultants, agents, officers and directors, including, without limitation, all wages, salaries, commissions, bonuses, severance pay, vacation pay, benefits and other direct compensation for all services performed by such Persons to the date hereof and all amounts required to be reimbursed to such Persons.  Seller is in compliance in all material respects with all federal, state, local and foreign laws and regulations respecting employment and employment practices, terms and conditions of employment and wages and hours.  No employees of Seller are covered by any collective bargaining agreements and, to Seller’s Knowledge, no effort is being made by any union to organize any of Seller’s employees.  There is no workman compensation claim pending against Seller that is not adequately provided for by insurance.  Except as provided in Part 3.9 of the Disclosure Letter, there is no charge, complaint or suit pending or, to Seller’s Knowledge, threatened against Seller respecting employment, hiring for employment, terminating from employment, employment practices, employment discrimination, terms and conditions of employment, safety, wrongful termination, or wages and hours.

Section 3.13   Intellectual Property .

(a)   Part 3.13(a) of the Disclosure Letter contains a true, correct and complete list of all Intellectual Property, including without limitation all Patents, registered Marks and Copyrights that are owned or used (pursuant to license agreements or otherwise) by Seller and the jurisdiction, if any, in which it is registered or application therefore has been made.

(b)   Except as set forth in Part 3.13(b) of the Disclosure Letter, Seller (i) owns and possesses all right, title and interest, free and clear of all Encumbrances, the Patents, registered Marks and Copyrights owned by it and set forth in Part 3.13(a) of the Disclosure Letter, or (ii) has a valid and enforceable license to use all Patents, registered Marks and Copyrights licensed by it and set forth the Disclosure Letter (the “ Company Intellectual Property ”).  No current or former employee and no other Person owns or has any proprietary, financial or other interest, direct or indirect, in whole or in part, and including any right to royalties or other compensation, in any of the Intellectual Property, or in any application therefor.

(c)   To Seller’s Knowledge, the operation of the Business as currently conducted does not infringe, misappropriate or otherwise conflict with any Intellectual Property Assets of any third party.  To Seller’s Knowledge, no third party has infringed, misappropriated, or otherwise conflicted with any of the Company Intellectual Property.  

Notwithstanding the generality of any other representations or warranty in this Agreement, the representations and warranties contained in Section 3.13 shall be deemed to contain the only representations and warranties in this Agreement with respect to Intellectual Property Assets or Company Intellectual Property.

Section 3.14   No Undisclosed Liabilities .  To Seller’s Knowledge, Seller has no Liabilities or obligations of any nature that are required to be reflected on a balance sheet in accordance with GAAP except for (a) Liabilities or obligations reflected or reserved against on the Interim Balance Sheet, (b) current Liabilities incurred in the Ordinary Course of Business, (c) Liabilities set forth in Part 3.14 of the Disclosure Letter, (d) Liabilities under the Seller Contracts or Assigned Leases, (e) Liabilities or obligations which would not reasonably be expected to result in a Material Adverse Change, or (f) Excluded Liabilities.  This Section 3.14 shall not apply to any Liability or obligation which is of a type covered by another representation or warranty in this Agreement.

Section 3.15   Brokers .  Seller has not incurred or will incur any obligation for any finder’s or broker’s fee or commission in connection with the Contemplated Transactions.

Section 3.16   Received Inventory .  Received Inventories are valued at the lower of cost or market using a weighted-average cost method, which approximates the first-in, first-out method. Received Inventories are recorded net of markdowns and shrinkage. Part 2.1(c) contains a true and complete listing of Received Inventory and Ordered Inventory as of the date hereof.  Seller shall not place any further orders for Inventory after the date hereof.  The Received Inventory as of the Closing Time will have a value of at least Six Million Seven Hundred Thousand Dollars ($6,700,000).

Section 3.17   Employees .  Part 3.17 of the Disclosure Letter contains to Seller’s Knowledge a true, complete and accurate list of each employee of Seller, along with the current salaries for each employee, except for the President of Seller (the “ Seller Employees ”).  Seller agrees not to increase in any manner the number of Seller’s Employees after the date hereof.

Section 3.18   Gift Cards .  All gift cards issued by Seller were issued in the Ordinary Course of Business to third party retail customers and Part 3.18 of the Disclosure Letter contains the aggregate amount of gift card liabilities as of the business day prior to the date hereof.

Section 3.19   Full Disclosure .  No representation or warranty by Seller contained in this Agreement and no statement contained in any document (including, without limitation, the disclosure schedules), certificate, or other writing furnished or to be furnished by Seller to Buyer or any of its representatives pursuant to the provisions hereof or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of material fact or omits or will omit