Exhibit 10.1

LOGO [g55100img001.jpg]

Digital Music Group, Inc.

2151 River Plaza Drive, Ste. 200 • Sacramento, CA 95833 • Tel 916.239.6010 • Fax
916.239.6015

July 10, 2007

DELIVERED VIA E-MAIL

Mr. Mitchell Koulouris

 

Re: Notice of Termination of Employment

Dear Mitch:

We are in receipt of your resignation letter dated July 9, 2007. The purpose of
this letter is to advise you that your termination of employment will be treated
by Digital Music Group, Inc. (“DMGI”) as a “Without Cause” termination under
your Employment Agreement dated September 13, 2005 as amended by Amendment
Number 1 dated September 10, 2006 (the “Employment Agreement”) and under your
Restricted Stock Purchase Agreement dated August 26, 2005, and that such
termination therefore shall be effective August 9, 2007.

On the effective date of your termination, you will be provided with:

 

  1. Your final paycheck(s) representing your earned wages through the effective
date of termination and any accrued and unused vacation;

 

  2. A Notice to Employee as to Change in Relationship pursuant to California
Unemployment Insurance Code section 1089;

 

  3. EDD Form DE 2320: California Unemployment Insurance Pamphlet; and

 

  4. HIPP Notice regarding state assistance with health insurance premiums for
certain individuals.

On the effective date of your termination, DMGI requires that you be in full
compliance with the termination provisions of the Employment Agreement, and that
you deliver to DMGI the signed Termination Certification as required under the
Employment Agreement (Exhibit C to the Employment Agreement). If, in DMGI’s
opinion, you are not complying with such termination provisions or you do not
deliver the required Termination Certificate, DMGI reserves the right to revoke
this letter and commence actions necessary to protect its interests.

http://www.dmgi.com

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Pursuant to Section 8.2 of the Employment Agreement, from the effective date of
your termination, DMGI will continue to pay your current base salary of $12,500
per month for a period of twelve (12) months (through August 2008), less
applicable withholding taxes, payable on DMGI’s normal payroll dates. However,
if, in DMGI’s opinion, you are in compliance as of December 31, 2007 with all
the covenants and provisions of all agreements with DMGI that survive your
termination, then DMGI will make a lump-sum payment of the remaining salary
continuation amount on December 31, 2007. Also, pursuant to Section 8.2 of the
Employment Agreement, DMGI will continue group health, dental and vision
insurance benefits for you and your family, or pay COBRA premiums necessary to
continue such coverage, for a period of twelve (12) months (through July 2008).
In addition, pursuant to Section 8.2(b) of the Employment Agreement, a cash
payment (less applicable withholding taxes) of $26,250 will be made to you on
December 31, 2007, in satisfaction of your right to receive a pro-rata bonus for
2007 under Section 5.3 of the Employment Agreement.

Pursuant to Sections 4.A. and 4.B. of your Restricted Stock Purchase Agreement
with DMGI dated August 26, 2005, the remaining unreleased Restricted Shares
under such agreement will be released from the Repurchase Option at the
effective date of your termination; upon your written request after such date,
DMGI will instruct its Transfer Agent to deliver such shares to you. Likewise,
pursuant to Section 4 of your Founder’s Restricted Stock Purchase Agreement with
Digital Musicworks International, Inc. dated March 21, 2004, the remaining
unreleased Restricted Shares under such agreement will be released from the
Repurchase Option at the effective date of your termination; upon your written
request after such date, DMGI will instruct its Transfer Agent to deliver such
shares to you.

If you have questions, please call Clayton Trier at 713-686-4997.

 

Sincerely, DIGITAL MUSIC GROUP, INC. By:   LOGO [g55100img002.jpg] Name:  
Clayton Trier Title:   Chairman of the Board of Directors

http://www.dmgi.com