Exhibit 10.1

PARTNERSHIP INTEREST PURCHASE AGREEMENT

dated as of January 10, 2005

among

FUNimation Productions Management, LLC,

FUNimation General Partnership,

FUNimation Management Company, LLC,

FUNimation Productions, Ltd.,

The FUNimation Store, Ltd.,

The individuals signatory hereto, and

Daniel Cocanougher as the Seller Representative

and

Navarre CP, LLC,

Navarre CS, LLC,

Navarre CLP, LLC, and

Navarre Corporation

 

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TABLE OF CONTENTS

                      Page
Article 1
  PURCHASE AND SALE OF PARTNERSHIP INTERESTS     2                
1.1
  Purchase and Sale     2  
1.2
  Closing     3  
1.3
  Deliveries at the Closing     3  
1.4
  Post-Closing Adjustments     4  
1.5
  Performance Payments     6                
Article 2
  REPRESENTATIONS AND WARRANTIES REGARDING THE SELLERS     10                
2.1
  Organization and Good Standing of Certain Sellers     10  
2.2
  Authority     10  
2.3
  Ownership of Partnership Interests     10  
2.4
  No Conflict     11  
2.5
  Consents and Approvals     11  
2.6
  Brokers     11  
2.7
  Experience; Acquisition of Closing Shares for Investment     11  
2.8
  Litigation     12  
2.9
  Disclosure     12                
Article 3
  REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES     12                
3.1
  Organization and Good Standing of the Companies; Authority of the Companies  
  12  
3.2
  Subsidiaries     13  
3.3
  Capitalization of the Companies     13  
3.4
  No Conflict; Consents and Approvals     13  
3.5
  Financial Statements; Undisclosed Liabilities; Information Provided     14  
3.6
  Business Since September 30, 2004     15  
3.7
  Compliance with Law     16  
3.8
  Litigation     16  
3.9
  Contracts and Agreements; Defaults     16  
3.10
  Employee Benefit Plans     18  
3.11
  Employment-Related Matters     20  
3.12
  Taxes     21  
3.13
  Permits     23  
3.14
  Real Property     23  
3.15
  Title; Condition of Assets     24  
3.16
  Intellectual Property     24  
3.17
  Insurance     26  
3.18
  Environmental Laws     26  
3.19
  Brokers     27  
3.20
  Bank Accounts     27  
3.21
  Affiliate Transactions     27  
3.22
  Outstanding Borrowings     27  
3.23
  Operation of the Business     27  

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TABLE OF CONTENTS
(continued)

                      Page
3.24
  Absence of Certain Business Practices     27  
3.25
  Books and Records     28  
3.26
  Disclosure     28                
Article 4
  REPRESENTATIONS AND WARRANTIES OF BUYERS AND NAVARRE     28                
4.1
  Organization     28  
4.2
  Authority     28  
4.3
  No Conflict     29  
4.4
  Governmental Consents and Approvals     29  
4.5
  Experience; Acquisition of Partnership Interests for Investment     29  
4.6
  Brokers     29  
4.7
  Closing Shares     30  
4.8
  Buyers SEC Documents     30  
4.9
  Disclosure     30                
Article 5
  COVENANTS     31                
5.1
  Notice of Changes     31  
5.2
  Access; Confidentiality     31  
5.3
  Notice of Proceedings     31  
5.4
  Consummation of Agreement     32  
5.5
  Filings and Authorizations     32  
5.6
  Announcements     33  
5.7
  Conduct of Business of the Companies Prior to the Closing     33  
5.8
  Satisfaction of Conditions Precedent     34  
5.9
  Consents     35  
5.10
  No Other Negotiations     35  
5.11
  Insurance     35  
5.12
  Confidential Information     35  
5.13
  Accounts Receivable     36  
5.14
  Related Party Debt; Affiliate Transactions     37  
5.15
  Financial Statements     37  
5.16
  Restriction on Transfer of Shares     37  
5.17
  Cooperation in Financing     38                
Article 6
  CONDITIONS TO THE OBLIGATIONS OF SELLERS     38                
6.1
  Sellers’ Closing Conditions     38                
Article 7
  CONDITIONS TO THE OBLIGATIONS OF BUYERS AND NAVARRE     40                
7.1
  Buyers’ and Navarre’s Closing Conditions     40                
Article 8
  SURVIVAL; INDEMNIFICATION     43                
8.1
  Survival     43  

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TABLE OF CONTENTS
(continued)

                      Page
8.2
  Indemnification     43  
8.3
  Set-Off     48  
8.4
  Exclusive Remedy     49                
Article 9
  TERMINATION     49                
9.1
  Termination of Agreement     49                
Article 10
  CERTAIN TAX MATTERS     50                
10.1
  Certain Tax Matters     50  
10.2
  Tax Sharing Agreements     52  
10.3
  Coordination of Provisions     52                
Article 11
  MISCELLANEOUS     53                
11.1
  Expenses     53  
11.2
  Further Assurances     53  
11.3
  Notices     53  
11.4
  Assignment     54  
11.5
  Construction     54  
11.6
  Law Governing     55  
11.7
  Waiver of Provisions     55  
11.8
  Counterparts     55  
11.9
  Entire Agreement     55  
11.10
  Submission to Jurisdiction; Waivers     56  
11.11
  No Third Party Beneficiary     56  
11.12
  No Presumption     56  
11.13
  Severability     57  
11.14
  Seller Representative     57  
11.15
  Guaranty     59  

 
Exhibits:

     
Exhibit A
  Definitions
Exhibit B
  Form of Assignment and Assumption
Exhibit C
  Form of Employment Agreement
Exhibit D
  Form of Escrow Agreement
Exhibit E
  Form of Non-Competition Agreement
Exhibit F
  Form of Registration Rights Agreement
Exhibit G
  Form of Release

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PARTNERSHIP INTEREST PURCHASE AGREEMENT

     PARTNERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement”), dated as of
January 10, 2005, among FUNimation Productions Management, LLC, a limited
liability company organized and existing under the laws of Texas (“FUN Seller”),
FUNimation General Partnership, a Texas general partnership organized and
existing under the laws of Texas (“GP Seller”), FUNimation Management Company,
LLC, a limited liability company organized and existing under the laws of Texas
(“Management Seller”), each individual (“Individual”) signatory hereto, (each of
FUN Seller, GP Seller, Management Seller, and each Individual a “Seller” and
collectively, the “Sellers”), FUNimation Productions, Ltd., a limited
partnership organized and existing under the laws of Texas, The FUNimation
Store, Ltd., a limited partnership organized and existing under the laws of
Texas (respectively, “Productions Company” and “Store Company” each a “Company”
and collectively, the “Companies”), and Daniel Cocanougher as the representative
of all Sellers (the “Seller Representative”), and Navarre CP, LLC, a limited
liability company organized and existing under the laws of Minnesota (“Navarre
CP”), Navarre CS, LLC, a limited liability company organized and existing under
the laws of Minnesota (“Navarre CS”), and Navarre CLP, LLC, a limited liability
company organized and existing under the laws of Minnesota (“Navarre CLP” and
collectively with Navarre CP and Navarre CS, the “Buyers”), and Navarre
Corporation, a corporation organized and existing under the laws of Minnesota
(“Navarre”), in its own capacity as provided herein and its capacity as
guarantor of Buyers’ obligations hereunder pursuant to Section 11.15 herein.

     WHEREAS, FUN Seller owns all of the general partnership interests in
Productions Company;

     WHEREAS, GP Seller owns all of the limited partnership interests in
Productions Company;

     WHEREAS, Management Seller owns all of the general partnership interests in
Store Company;

     WHEREAS, the Individuals collectively own all of the limited partnership
interests in Store Company;

     WHEREAS, Buyers desire to purchase all of the outstanding limited
partnership interests and general partnership interests of each Company
(collectively, the “Partnership Interests”), and Sellers severally desire to
cause the sale of the Partnership Interests to Buyers on the terms and
conditions hereinafter set forth;

     WHEREAS, Navarre wishes to undertake certain obligations hereunder and to
guaranty the obligations, duties and undertakings of Buyers under this
Agreement; and

     WHEREAS, the definitions of certain defined terms used herein are set forth
in Exhibit A hereto.

     NOW, THEREFORE, in consideration of the premises and of the respective
covenants and agreements contained herein, the parties hereto hereby agree as
follows:

 

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ARTICLE 1

PURCHASE AND SALE OF PARTNERSHIP INTERESTS

     1.1       Purchase and Sale.

          (a)      Partnership Interests. Upon the terms and subject to the
conditions set forth in this Agreement, (i) FUN Seller shall sell to Navarre CP,
and Navarre CP shall purchase from FUN Seller, all of the general partnership
interests of Productions Company held by FUN Seller (“FUN Seller General
Partnership Interests”), free and clear of all Liens, (ii) GP Seller shall sell
to Navarre CLP, and Navarre CLP shall purchase from GP Seller, all of the
limited partnership interests of Productions Company held by GP Seller (“GP
Seller Limited Partnership Interests”), free and clear of all Liens,
(iii) Management Seller shall sell to Navarre CS, and Navarre CS shall purchase
from Management Seller, all of the general partnership interests of Store
Company held by Management Seller (“Management Seller General Partnership
Interests”), free and clear of all Liens, and (iv) each Individual shall sell to
Navarre CLP, and Navarre CLP shall purchase from such Individual, all of the
limited partnership interests of Store Company held by such Individual
(collectively, “Individual Limited Partnership Interests”), free and clear of
all Liens, for the consideration set forth below.

          (b)      Purchase Price. The purchase price (the “Purchase Price”)
payable to Sellers in consideration of the transfer to Buyers of the Partnership
Interests shall be:

(i)      $100,400,000, as adjusted pursuant to Section 1.4;

(ii)      the number of unregistered shares (the “Closing Shares”) of Navarre
Common Stock as is obtained by dividing $25,000,000 by the Closing Share Price;
provided that in no event shall the number of Closing Shares payable to Sellers
be less than 1,495,216 or greater than 1,827,486; and

(iii)      contingent payments in an amount up to a maximum of $17,000,000, in
the aggregate, subject to the attainment of certain performance criteria set
forth in Section 1.5 (each, a “Performance Payment” and collectively, the
“Performance Payments”).

          (c)      Payments and Deliveries at Closing. On the Closing Date,
Buyers and/or Navarre, as the case may be, shall:

(i)      (x) pay the Closing Cash Amount minus the sum of the A/R Amount, the
Indemnification Cash and an amount equal to fifty percent (50%) of any and all
filing fees under the HSR Act required to be paid by any of the parties hereto
in order to consummate the transactions contemplated by this Agreement to the
order of Sellers as provided in Section 1.1(c)(i) of the Disclosure Letter,
(y) deliver an amount equal to the A/R Amount to the Escrow Agent, and
(z) deliver an amount equal to the Indemnification Cash to the Escrow Agent to
be held pursuant to the Escrow Agreement as Indemnification Cash; and

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(ii)      direct its transfer agent to issue to each Seller such number of
Closing Shares as is equal to (A) the aggregate number of Closing Shares payable
pursuant to Section 1.1(b)(ii) multiplied by (B) such Seller’s Pro Rata Share.

          (d)      Allocation of Purchase Price. The allocation of the Purchase
Price among the partnership assets of each of Productions Company and Store
Company (the “Allocation of Purchase Price”) shall be negotiated in good faith
between Buyers and Sellers prior to the Closing Date and shall be set forth in
Schedule 1.1(d) of the Disclosure Letter. The Allocation of Purchase Price shall
be used by Buyers and Sellers for all Tax purposes, including the preparation
and filing by Buyers and Sellers of all relevant Tax Returns, reports, and
filings, including, if applicable, IRS Form 8594. Buyers and Sellers will
cooperate with each other regarding the preparation and filing of Tax Returns,
reports, and filings, including a party’s filing, or joining in the filing, of a
Tax form or filing that is required with respect to the other party’s Tax
reporting position, provided that the information that is being reported on the
Tax form or filing is consistent with the parties’ general understanding of the
transaction for, as applicable, federal income Tax purposes or any other Tax
purpose. The parties agree that the cash portion of the Purchase Price shall be
allocated first to underlying property of each Company that is described in
Section 751(a) of the Code, to the extent of the amount of Purchase Price
allocated thereto pursuant to this Section 1.1(d).

     1.2 Closing. Unless the parties hereto shall agree in writing upon a
different location, time or date, the closing of the sale and purchase of the
Partnership Interests (the “Closing”) shall take place at the offices of Bear
Stearns, 383 Madison Avenue, New York, New York 10179 at 10:00 a.m. (New York
City time) on the 10th Business Day following the satisfaction or waiver (by the
applicable party) of the conditions required to be satisfied or waived pursuant
to Articles 6 and 7 hereof (other than those requiring the delivery of a
certificate or other document, or the taking of other action, at the Closing),
but in no event later than the Outside Date. The term “Closing Date” means the
date and time at which the Closing occurs.

     1.3 Deliveries at the Closing. Subject to the conditions set forth in this
Agreement, at the Closing:

          (a)      FUN Seller shall deliver or cause to be delivered to Navarre
CP (i) an Assignment and Assumption Agreement with respect to all of the FUN
Seller General Partnership Interests duly executed by FUN Seller, (ii) the
applicable Closing Certificate described in Section 7.1(a)(iii), (iii) the
applicable secretary’s certificate described in Section 7.1(d), (iv) a Release
Agreement duly executed by FUN Seller, and (v) all certificates and other
instruments, agreements and documents which are expressly required or reasonably
requested by Navarre CP pursuant to this Agreement to be delivered by FUN Seller
to Navarre CP at the Closing.

          (b)      GP Seller shall deliver or cause to be delivered to Navarre
CLP (i) an Assignment and Assumption Agreement with respect to all of the GP
Seller Limited Partnership Interests duly executed by GP Seller, (ii) the
applicable Closing Certificate described in Section 7.1(a)(iii), (iii) the
applicable secretary’s certificate described in Section 7.1(d), (iv) a Release
Agreement duly executed by GP Seller, and (v) all certificates and other
instruments, agreements and documents which are expressly required or reasonably
requested by Navarre CLP pursuant to this Agreement to be delivered by GP Seller
to Navarre CLP at the Closing.

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          (c)      Management Seller shall deliver or cause to be delivered to
Navarre CS (i) an Assignment and Assumption Agreement with respect to all of the
Management Seller General Partnership Interests duly executed by Management
Seller, (ii) the applicable Closing Certificate described in Section
7.1(a)(iii), (iii) the applicable secretary’s certificate described in
Section 7.1(d), (iv) a Release Agreement duly executed by Management Seller, and
(v) all certificates and other instruments, agreements and documents which are
expressly required or reasonably requested by Buyers pursuant to this Agreement
to be delivered by Management Seller to Navarre CS at the Closing.

          (d)      Each Individual shall deliver or cause to be delivered to
Navarre CLP (i) an Assignment and Assumption Agreement with respect to all of
the Individual Limited Partnership Interests duly executed by such Individual,
(ii) the applicable Closing Certificate described in Section 7.1(a)(iii),
(iii) a Release Agreement duly executed by such Individual, and (iv) all
certificates and other instruments, agreements and documents which are expressly
required or reasonably requested by Buyers pursuant to this Agreement to be
delivered by such Individual to Navarre CLP at the Closing.

          (e)      Each Company shall deliver or cause to be delivered to Buyers
(i) the applicable Closing Certificate described in Section 7.1(a)(iii),
(ii) the applicable good standing certificate described in Section 7.1(e),
(iii) the releases and satisfactions described in Section 7.1(h), and (iv) all
certificates and other instruments, agreements and documents which are expressly
required or reasonably requested by Buyers pursuant to this Agreement to be
delivered by such Company to Buyers at the Closing.

          (f)      The Seller Representative shall deliver or cause to be
delivered to Buyers all Ancillary Agreements to which any Seller or the Seller
Representative is contemplated by this Agreement to be a party or signatory,
duly executed by such Person, to the extent not otherwise delivered as provided
in this Section 1.3.

          (g)      Buyers and/or Navarre, as the case may be, shall (i) accept
and purchase the Partnership Interests from the Sellers, (ii) pay and deliver
the Closing Cash Amount as provided in Section 1.1(c)(i), (iii) deliver the
Closing Shares as provided in Section 1.1(c)(ii), (iv) deliver the Assignment
and Assumption Agreements duly executed by Buyers, and (v) deliver to the Seller
Representative all certificates and other instruments, agreements and documents
which are expressly required or reasonably requested by the Seller
Representative pursuant to this Agreement to be delivered by Buyers to such
Seller Representative at the Closing.

     1.4 Post-Closing Adjustments.

          (a)      As promptly as practicable, but in no event later than
30 days after the Closing Date, Buyers shall prepare and deliver to the Seller
Representative a schedule (“Buyers’ Closing Schedule”) setting forth in
reasonable detail Buyers’ calculation of Adjusted Net Worth. Buyers will give
the Seller Representative (or its representatives) reasonable access to any
computations and workpapers used in connection with the preparation of Buyers’
Closing Schedule. Buyers’ calculation of Adjusted Net Worth shall be prepared in
accordance with GAAP, this Section 1.4 and the definition of Adjusted Net Worth.
If Buyers employ a firm of independent accountants in connection with the
preparation of Buyers’ Closing Schedule, Buyers shall cause such independent

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accountants to give reasonable access to the Seller Representative (or its
representatives) to any computations and workpapers used in the preparation of
Buyers’ Closing Schedule subject, in the case of accountants’ workpapers, to
execution of a customary access agreement by the Seller Representative (or its
representatives) if required by such independent accountants. On not less than
5 days prior written notice, Buyer will also give the Seller Representative (and
its representatives) access, during the normal business hours of Buyers and the
Companies, to all personnel, books and records of the Companies as reasonably
requested by the Seller Representative to assist it, if applicable, in the
preparation of Sellers’ Dispute Notice (as defined below). The Seller
Representative and its representatives shall be permitted to ask questions of
and receive answers from Buyers and the Companies and request such other books
and records of the Companies as is reasonably requested by them to assist them
in the review of Buyers’ Closing Schedule. The Seller Representative will
deliver to Buyers a notice (“Sellers’ Dispute Notice”) within 30 days after
receiving Buyers’ Closing Schedule if the Seller Representative believes that
Buyers’ calculation of Adjusted Net Worth as set forth in Buyers’ Closing
Schedule (i) has not been prepared in accordance with GAAP, this Section 1.4 and
the definition of Adjusted Net Worth or (ii) is not mathematically correct,
which notice shall set forth in reasonable detail all disputed items, the basis
for such disagreement, the dollar amounts involved (the “Disputed Items”) and
the Seller Representative’s calculation of Adjusted Net Worth. The Seller
Representative will give Buyers (or their representatives) reasonable access to
any computations and workpapers used by the Seller Representative or its
representatives in connection with the review of Buyers’ Closing Schedule or the
preparation of Sellers’ Dispute Notice, subject, in the case of accountants’
workpapers, to execution of a customary access agreement by Buyers (or their
representatives) if required by such accountants. Buyers and their
representatives shall be permitted to ask questions of and receive answers from
any Person necessary including, without limitation, the Seller Representative
and request such other books as are reasonably requested by Buyers to assist it
in the review of Sellers’ Dispute Notice. The Seller Representative shall be
deemed to have agreed with all other items other than the Disputed Items
contained in Buyers’ Closing Schedule, and if no Sellers’ Dispute Notice is
received by Buyers within such 30-day period, Buyers’ calculation of Adjusted
Net Worth as set forth in Buyers’ Closing Schedule shall be final and binding
upon the parties hereto.

          (b)      Upon receipt by Buyers of Sellers’ Dispute Notice, if any,
the Seller Representative and Buyers shall negotiate in good faith to resolve
any disagreement with respect to Adjusted Net Worth set forth in Sellers’
Dispute Notice. To the extent Buyers and the Seller Representative are unable to
agree with respect to Adjusted Net Worth within 30 days after receipt by Buyers
of Sellers’ Dispute Notice, Buyers and the Seller Representative shall jointly
engage a mutually acceptable nationally recognized public accounting firm (the
“Accounting Firm”) and promptly submit any unresolved Disputed Items (and their
respective proposed calculations) to the Accounting Firm for a binding
resolution (it being understood the Accounting Firm shall be functioning as an
expert and not an arbitrator). The reasonable fees and expenses of the
Accounting Firm shall be borne by the party whose calculation of the aggregate
dollar amount of all Disputed Items is the furthest from the aggregate dollar
amount of such Disputed Items as finally determined by the Accounting Firm.

          (c)      The Seller Representative and Buyers shall instruct the
Accounting Firm to render its decision resolving the Disputed Items within
30 days after its engagement. Buyers, Sellers and the Seller Representative
agree that the determination of the Accounting Firm shall be final and binding
upon the parties absent manifest error and that judgment may be entered upon the

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determination of the Accounting Firm in any court having jurisdiction over the
party or parties against which such determination is to be enforced. The
Accounting Firm shall determine, based solely on presentations by Buyers and the
Seller Representative and their respective representatives, and not by
independent review, only those Disputed Items and shall prepare a written report
as to the dispute and the resulting calculation of Adjusted Net Worth which
shall be conclusive and binding upon the parties absent manifest error. In
resolving any Disputed Item, the Accounting Firm: (x) shall be bound by the
principles set forth in this Section 1.4 and the definition of Adjusted Net
Worth, (y) shall limit its review to matters specifically set forth in Buyers’
Closing Schedule and Sellers’ Dispute Notice, and (z) shall further limit its
review solely to whether the Buyers’ Closing Schedule is mathematically accurate
and has been prepared in accordance with GAAP and this Section 1.4. The
determination of the Accounting Firm for any Disputed Item cannot, however, be
in excess of, nor less than, the greatest or lowest value, respectively, claimed
for that particular item in the proposed calculations submitted to the
Accounting Firm.

          (d)      Within 15 days after the final determination of Adjusted Net
Worth Buyers or the Sellers, as the case may be, shall make the following
payments:

(i)      In the event that Adjusted Net Worth is equal to or greater than Target
Net Worth and the Cash of the Companies on the Closing Date is greater than
$2,500,000, Buyers shall make a cash payment to Sellers in an amount equal to
$1.00 for every $1.00 that the Cash of the Companies on the Closing Date exceeds
$2,500,000, together with simple interest thereon at the Prime Rate as of the
opening of business on the Closing Date computed from the Closing Date until the
date of payment;

(ii)      In the event that Adjusted Net Worth is equal to or greater than
Target Net Worth, Buyers shall make a cash payment to Sellers in an amount equal
to $0.50 for every $1.00 that Adjusted Net Worth is greater than Target Net
Worth, together with simple interest thereon at the Prime Rate as of the opening
of business on the Closing Date computed from the Closing Date until the date of
payment; provided, that for purposes of this paragraph, the maximum Adjusted Net
Worth to be taken into account shall be $42,000,000; and

(iii)      In the event that Adjusted Net Worth is less than Target Net Worth,
Sellers shall make a cash payment to Buyers, within 15 days after the final
determination of Adjusted Net Worth, in an amount equal to such deficiency,
together with simple interest thereon at the Prime Rate as of the opening of
business on the Closing Date computed from the Closing Date until the date of
payment.

          (e)      For the purposes of this Section 1.4, “Target Net Worth”
shall be defined as an amount equal to $32,000,000 plus $2.00 for every $1.00
that the Cash of the Companies on the Closing Date is less than $2,500,000, but
in no event shall “Target Net Worth” be in excess of $37,000,000.

     1.5 Performance Payments.

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          (a)      The Sellers shall be entitled to receive Performance Payments
in an amount up to a maximum of $17,000,000, in the aggregate, contingent upon
attainment of certain performance targets as follows:

(i)      if EBIT for the fiscal year ending March 31, 2006 (the “First Pay-Out
Period”), is equal to or greater than:

(1)      $15,000,000, the Sellers shall be entitled to receive a Performance
Payment of $400,000, payable to the order of Sellers as provided in Section
1.1(c)(i) of the Disclosure Letter; and

(2)      $25,000,000, the Sellers shall be entitled to receive an additional
Performance Payment of $5,000,000, payable to the order of Sellers as provided
in Section 1.1(c)(i) of the Disclosure Letter.

(ii)      if EBIT for the fiscal year ending March 31, 2007 (the “Second Pay-Out
Period”), is equal to or greater than:

(1)      $15,000,000, the Sellers shall be entitled to receive a Performance
Payment of $400,000, payable to the order of Sellers as provided in Section
1.1(c)(i) of the Disclosure Letter; and

(2)      $25,000,000, the Sellers shall be entitled to receive an additional
Performance Payment of $5,000,000, payable to the order of Sellers as provided
in Section 1.1(c)(i) of the Disclosure Letter.

(iii)      if EBIT for the fiscal year ending March 31, 2008 (the “Third Pay-Out
Period”) is equal to or greater than:

(1)      $15,000,000, the Sellers shall be entitled to receive a Performance
Payment of $400,000, payable to the order of Sellers as provided in Section
1.1(c)(i) of the Disclosure Letter; and

(2)      $25,000,000, the Sellers shall be entitled to receive a Performance
Payment of $5,000,000, payable to the order of Sellers as provided in
Section 1.1(c)(i) of the Disclosure Letter.

(iv)      if EBIT for the fiscal year ending March 31, 2009 (the “Fourth Pay-Out
Period”) is equal to or greater than:

(1)      $15,000,000, the Sellers shall be entitled to receive a Performance
Payment of $400,000, payable to the order of Sellers as provided in Section
1.1(c)(i) of the Disclosure Letter.

(v)      if EBIT for the fiscal year ending March 31, 2010 (the “Fifth Pay-Out
Period”) is equal to or greater than:

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(1)      $15,000,000, the Sellers shall be entitled to receive a Performance
Payment of $400,000, payable to the order of Sellers as provided in Section
1.1(c)(i) of the Disclosure Letter.

          (b)      Notwithstanding the foregoing, in the event that Sellers fail
to earn the Performance Payments described in subsections 1.5(a)(i)(2) or
1.5(a)(ii)(2) above, Sellers may carry back any EBIT amounts in excess of the
performance targets described in subsections 1.5(a)(ii)2 and 1.5(a)(iii)2 above
and allocate such excess amounts to the EBIT at the close of the First Pay-Out
Period and/or Second Pay-Out Period in order to earn the Performance Payments
described in subsections 1.5(a)(i)2 or 1.5(a)(ii)2 that were not earned by
Sellers at the close of the First Pay-Out Period and/or Second Pay-Out Period.

          (c)      Notwithstanding anything to the contrary contained in
Section 1.5(a), the Performance Payments described in subsections 1.5(a)(i)(1),
1.5(a)(ii)(1), 1.5(a)(iii)(1), 1.5(a)(iv)(1) and 1.5(a)(v)(1) above shall only
be payable for those years in which Gen Fukunaga has acted as President of
Productions Company.

          (d)      The following items shall be disregarded in the calculation
of EBIT for purposes of determining Performance Payments for any Pay-Out Period:
(i) all Transaction Expenses incurred by the Companies; (ii) acquisitions of
more than 50% of the equity interests or all or substantially all of the assets
of an entity by either Company following the Closing Date and any and all costs
and expenses associated therewith; and (iii) borrowings of either Company
following the Closing Date outside the ordinary course of business and any and
all principal amortization, costs and expenses associated therewith.

          (e)      As promptly as practicable, but in any event within 30 days
after receipt by Buyers of audited financial statements for the Pay-Out Period
in question (but not later than 120 days after the end of such Pay-Out Period),
Buyers shall prepare and deliver to the Seller Representative a statement
setting forth in reasonable detail Buyers calculation of EBIT for such Pay-Out
Period (a “Calculation Statement”). Buyers will give the Seller Representative
(or its representatives) reasonable access to any computations and workpapers
used in connection with the preparation of the Calculation Statement. Buyers’
calculation of EBIT shall be prepared in accordance with GAAP, subject to
Section 1.5(d). If Buyers employ a firm of independent accountants in connection
with the preparation of EBIT, Buyers shall cause such independent accountants to
give reasonable access to the Seller Representative (or its representatives) to
any computations and workpapers used in the preparation of EBIT subject, in the
case of accountants’ workpapers, to execution of a customary access agreement by
the Seller Representative (or its representatives) if required by such
independent accountants. On not less than 5 days prior written notice, Buyers
will also give the Seller Representative (and its representatives) access,
during the normal business hours of Buyers and the Companies, to all personnel,
books and records of the Companies as reasonably requested by the Seller
Representative to assist it, if applicable, in the preparation of a Performance
Payment Dispute Notice (as defined below). The Seller Representative and its
representatives shall be permitted to ask questions of and receive answers from
Buyers and the Companies and request such other books and records of the
Companies as is reasonably requested by them to assist them in the review of the
Calculation Statement. The Seller Representative will deliver to Buyers a notice
(“Performance Payment Dispute Notice”) within 30 days after receiving a
Calculation Statement if the Seller Representative believes that Buyers’

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calculation of EBIT as set forth in the Calculation Statement (i) has not been
prepared in accordance with GAAP, subject to Section 1.5(d) or (ii) is not
mathematically correct, which notice shall set forth in reasonable detail all
disputed items, the basis for such disagreement, the dollar amounts involved
(the “Performance Payment Disputed Items”) and the Seller Representative’s
calculation of EBIT. The Seller Representative will give Buyers (or their
representatives) reasonable access to any computations and workpapers used by
the Seller Representative or its representative in connection with the review of
the Calculation Statement or the preparation of the Performance Payment Dispute
Notice, subject, in the case of accountants’ workpapers, to execution of a
customary access agreement by Buyers (or their representatives) if required by
such accountants. Buyers and their representatives shall be permitted to ask
questions of and receive answers from any Person including, without limitation,
the Seller Representative and request such other books and records as are
reasonably requested by Buyers to assist it in the review of a Performance
Payment Dispute Notice. The Seller Representative shall be deemed to have agreed
with all other items other than the Performance Payment Disputed Items contained
in the Calculation Statement, and if no Performance Payment Dispute Notice is
received by Buyers within such 30-day period, Buyers’ calculation of EBIT as set
forth in the Calculation Statement shall be final and binding upon the parties
hereto.

          (f)      Upon receipt by Buyers of a Performance Payment Dispute
Notice, if any, the Seller Representative and Buyers shall negotiate in good
faith to resolve any disagreement with respect to the Performance Payment
Disputed Items set forth in the Performance Payment Dispute Notice. To the
extent Buyers and the Seller Representative are unable to agree within 30 days
after receipt by Buyers of a Performance Payment Dispute Notice, Buyers and the
Seller Representative shall jointly engage the Accounting Firm and promptly
submit any unresolved Performance Payment Disputed Items (and their respective
proposed calculations) to the Accounting Firm for a binding resolution (it being
understood the Accounting Firm shall be functioning as an expert and not an
arbitrator). The reasonable fees and expenses of the Accounting Firm shall be
borne by the party whose calculation of the aggregate dollar amount of all
Performance Payment Disputed Items is the furthest from the aggregate dollar
amount of such Performance Payment Disputed Items as finally determined by the
Accounting Firm.

          (g)      The Seller Representative and Buyers shall instruct the
Accounting Firm to render its decision resolving the Performance Payment
Disputed Items within 30 days after its engagement. Buyers, Sellers and the
Seller Representative agree that the determination of the Accounting Firm shall
be final and binding upon the parties absent manifest error and that judgment
may be entered upon the determination of the Accounting Firm in any court having
jurisdiction over the party or parties against which such determination is to be
enforced. The Accounting Firm shall determine, based solely on presentations by
Buyers and the Seller Representative and their respective representatives, and
not by independent review, only those Performance Payment Disputed Items and
shall prepare a written report as to the dispute and the resulting calculation
of EBIT which shall be conclusive and binding upon the parties absent manifest
error. In resolving any Performance Payment Disputed Item, the Accounting Firm:
(x) shall be bound by the principles set forth in this Section 1.5 and the
definition of EBIT, (y) shall limit its review to matters specifically set forth
in the Calculation Statement and the Performance Payment Dispute Notice, and
(z) shall further limit its review solely to whether the Calculation Statement
is mathematically accurate and has been prepared in accordance with GAAP and
Section 1.5(d). The determination of the Accounting Firm for any Performance
Payment Disputed Item cannot, however, be in excess of, nor

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less than, the greatest or lowest value, respectively, claimed for that
particular item in the proposed calculations submitted to the Accounting Firm.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES REGARDING THE SELLERS

     The Sellers each, jointly and severally, represents and warrants, to Buyers
and Navarre as follows:

     2.1 Organization and Good Standing of Certain Sellers. Each Seller (other
than any Individual) is a partnership or a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Texas. Each Seller has previously made available to Buyers and/or Navarre
complete and correct copies of the partnership agreements or limited liability
company agreements and certificates of limited partnership or articles of
organization, as the case may be, of each Seller, as presently in effect.

     2.2 Authority. Each Seller (other than any Individual) has the requisite
partnership or limited liability company power and authority to execute and
deliver this Agreement and the Ancillary Agreements to which it is or at the
Closing will be a party, to perform its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery by each Seller (other than any Individual) of this Agreement and
the Ancillary Agreements to which it is or at the Closing will be a party, the
performance by each Seller of its obligations hereunder and thereunder and the
consummation by each Seller of the transactions contemplated hereby and thereby
have been duly and validly authorized by all requisite partnership or limited
liability company action (including, if necessary, partner or member approval)
on the part of each Seller. This Agreement has been duly executed and delivered
by each Seller (including any Individual) and, at the Closing, the Ancillary
Agreements to which each Seller is a party will be duly executed and delivered
by each Seller. This Agreement constitutes and, when executed and delivered at
the Closing, the Ancillary Agreements to which each Seller (including any
Individual) is a party will constitute, the valid and binding obligations of
each Seller, enforceable against each Seller in accordance with their respective
terms except that such enforcement may be limited by any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other Laws (whether
statutory, regulatory or decisional), now or hereafter in effect, relating to or
affecting the rights of creditors generally or by equitable principles
(regardless of whether considered in a proceeding at law or in equity).

     2.3 Ownership of Partnership Interests.

          (a)      FUN Seller is the sole record and beneficial owner of the FUN
Seller General Partnership Interests, free and clear of all Liens.

          (b)      GP Seller is the sole record and beneficial owner of the GP
Seller Limited Partnership Interests, free and clear of all Liens.

          (c)      Management Seller is the sole record and beneficial owner of
the Management Seller General Partnership Interests, free and clear of all
Liens.

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          (d)      Each Individual is the sole record and beneficial owner of
that number of Individual Limited Partnership Interests as is set forth opposite
such Individual’s name in Section 2.3(d) of the Disclosure Letter, free and
clear of all Liens.

     2.4 No Conflict. Except as set forth in Section 2.4 of the Disclosure
Letter, the execution and delivery by each Seller of this Agreement and the
Ancillary Agreements to which it is or at the Closing will be a party do not,
and the performance by each Seller of this Agreement and the Ancillary
Agreements to which it is or at the Closing will be a party and the transactions
contemplated hereby and thereby will not, (i) violate any provision of the
certificate of incorporation or by-laws or certificate of formation or limited
liability company agreement (or any similar organizational instrument) of each
Seller (other than any Seller who is an Individual), (ii) violate any Law,
Permit or Order applicable to each Seller, or any of its assets, properties or
businesses (including the Partnership Interests owned by each Seller), except
for such violations, if any, that when taken together with all other such
violations would not be reasonably likely to have, in the aggregate, a Material
Adverse Effect on the ability of each Seller to perform its obligations under,
and to consummate the transactions contemplated by, this Agreement and the
Ancillary Agreements to which it will be a party at the Closing, (iii) result in
a breach of, constitute a default (or an event which, with or without the giving
of notice or lapse of time or both, would become a default) under, require any
consent or notice under, or give to others any right of termination, amendment,
acceleration, suspension, revocation or cancellation of, any oral or written
contract, agreement, commitment or understanding, to which each Seller is a
party or is bound, except for such breaches, defaults or failures to obtain
consent or give notice, if any, that when taken together with all other such
breaches, defaults or failures would not be reasonably likely to have, in the
aggregate, a Material Adverse Effect on the ability of each Seller to perform
its obligations under, and to consummate the transactions contemplated by, this
Agreement and the Ancillary Agreements to which it will be a party at the
Closing, or (iv) result in the creation of any Lien on the Partnership
Interests.

     2.5 Consents and Approvals. The execution and delivery by each Seller of
this Agreement and the Ancillary Agreements to which it is or at the Closing
will be a party, do not, and the performance by each Seller of this Agreement
and the Ancillary Agreements to which it is or at the Closing will be a party
and the consummation by each Seller of the transactions contemplated hereby and
thereby, do not and will not, require any Governmental Authorization or order
of, action by, filing with or notification of, any Governmental Authority,
except (x) for the requirements of the Antitrust Laws or (y) for the
Governmental Authorizations set forth in Section 2.5 of the Disclosure Letter.

     2.6 Brokers. Except for A.G. Edward & Sons, Inc., whose fees will be paid
for by the Sellers prior to or at the Closing, neither Seller nor any of its
directors, officers, employees or Affiliates has employed any broker, investment
bank or finder or has incurred or will incur any broker’s, investment banking,
finder’s or similar fees, commissions or expenses, in each case in connection
with the transactions contemplated by this Agreement.

     2.7 Experience; Acquisition of Closing Shares for Investment.

          (a)      Each Seller is an “accredited investor” within the meaning of
Regulation D promulgated under the Securities Act and has been afforded the
opportunity to ask questions and

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receive answers regarding Buyers and/or Navarre and has reviewed the data and
information it requested from the Buyers and/or Navarre in connection with this
Agreement.

          (b)      Each Seller is acquiring its Closing Shares for investment
and not with a view toward, or for sale in connection with, any distribution
thereof. Each Seller agrees that its Closing Shares may not be sold,
transferred, offered for sale, pledged, hypothecated or otherwise disposed of
without registration under the Securities Act except (i) pursuant to an
exemption from such registration available under the Securities Act and (ii) in
accordance with any applicable provisions of state securities laws.

     2.8 Litigation. Except as set forth in Section 2.8 of the Disclosure
Letter, there is no suit, action, arbitration, demand, claim, dispute,
investigation or proceeding pending or, to the Knowledge of the Sellers,
threatened, against the Sellers; nor is there any judgment, decree, injunction,
rule or order of any Governmental Authority or arbitrator outstanding against
the Sellers. No injunction, writ, temporary restraining order, decree or order
of any nature has been issued by any court or other Governmental Authority
against the Sellers purporting to enjoin or restrain the execution, delivery or
performance of this Agreement or any of the Ancillary Agreements or any
documents contemplated thereby.

     2.9 Disclosure. To the Knowledge of Sellers, no representation or warranty
by a Seller in this Agreement and no statement contained in this Agreement or in
any document delivered or to be delivered pursuant hereto contains or will
contain an untrue statement of material fact or omits or will omit to state any
material fact necessary to make the statements herein or therein contained, in
light of the circumstances under which made, not misleading.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES

     The Sellers each, joint and severally, represents and warrants to Buyers
and Navarre as follows:

     3.1 Organization and Good Standing of the Companies; Authority of the
Companies.

          (a)      Each Company is duly registered and validly existing as a
limited partnership in good standing under the laws of the State of Texas. Each
Company has the requisite partnership power and authority to own, operate and
lease the properties and assets now owned, operated or leased by it and to carry
on its business as now being conducted and as contemplated to be conducted. Each
Company is duly qualified to do business and is in good standing under the Laws
of each jurisdiction where such qualification is required, except for such
failures to be qualified and in good standing, if any, that when taken together
with all other such failures would not be reasonably likely to have, in the
aggregate, a Material Adverse Effect. Sellers have previously made available to
Buyers and/or Navarre complete and correct copies of the partnership agreements
and certificates of limited partnership of each Company, as presently in effect.

          (b)      Each Company has the requisite partnership power and
authority to execute and deliver this Agreement and the Ancillary Agreements to
which it is or at the Closing will be a party, to perform its obligations
hereunder and thereunder and to consummate the transactions

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contemplated hereby and thereby. The execution and delivery by each Company of
this Agreement and the Ancillary Agreements to which it is or at the Closing
will be a party, the performance by each Company of its obligations hereunder
and thereunder and the consummation by each Company of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
requisite partnership action (including, if necessary, partner approval) on the
part of each Company. This Agreement has been duly executed and delivered by
each Company and, at the Closing, the Ancillary Agreements to which each Company
is a party will be duly executed and delivered by such Company. This Agreement
constitutes and, when executed and delivered at the Closing, the Ancillary
Agreements to which each Company is a party will constitute, the valid and
binding obligations of each such Company, respectively, enforceable against such
Company, respectively, in accordance with their respective terms except that
such enforcement may be limited by any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other Laws (whether statutory, regulatory or
decisional), now or hereafter in effect, relating to or affecting the rights of
creditors generally or by equitable principles (regardless of whether considered
in a proceeding at law or in equity).

     3.2 Subsidiaries. Set forth in Section 3.2 of the Disclosure Letter is a
true and complete list of all of the Subsidiaries of each Company stating, with
respect to each such Subsidiary, its jurisdiction of incorporation or
organization, type of entity and ownership percentage. Except for the
Subsidiaries listed in Section 3.2 of the Disclosure Letter, neither Company
owns, directly or indirectly, beneficially or of record, or has any operational
control over, any capital stock or other equity securities of, or any investment
or other interest in any corporation, partnership, limited liability company,
joint venture or other entity. Neither Company has any obligation to acquire any
capital stock or other equity securities of, or any obligation to invest in or
loan funds to, any corporation, partnership, limited liability company or other
Person.

     3.3 Capitalization of the Companies. The Partnership Interests constitute
all of the issued and outstanding equity interests in the Companies. Other than
as contemplated hereby, there is no security, option, warrant, right, call,
subscription, agreement, commitment or understanding of any nature whatsoever,
fixed or contingent, that directly or indirectly (i) calls for the issuance,
sale, pledge, transfer or other disposition of any partnership interest or other
equity interest of either Company or any securities convertible into, or other
rights to acquire, any partnership interest or other equity interest of either
Company, (ii) relates to the dividend or voting rights with respect to or
control of such partnership interest or other equity interest, (iii) obligates
any Seller or either Company to grant, offer or enter into any of the foregoing
or (iv) except as disclosed in Section 3.3 of the Disclosure Letter, provides
for “phantom” equity, profit participation or similar rights with respect to
either Company. All Partnership Interests are validly issued and freely
transferable.

     3.4 No Conflict; Consents and Approvals.

          (a)      The execution, delivery and performance by each Company of
this Agreement and the consummation by such Company of the transactions
contemplated hereby do not (i) violate any provision of such Company’s
partnership agreement or certificate of formation, (ii) violate any Law, Permit
or Order applicable to either Company, or any of their respective assets,
properties or businesses which violation would reasonably be expected to have a
Material Adverse Effect, on the Partnership Interests, (iii) result in a breach
of, constitute a default (or an event which, with or without the giving of
notice or lapse of time or both, would become a default) under, require any

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consent or notice under (except as disclosed in Section 3.4(a) of the Disclosure
Letter), or give to others any right of termination, amendment, acceleration,
suspension, revocation or cancellation of, any Material Contract or any material
Permit held or used by either Company or (iv) result in the creation of any Lien
on any of the assets of either Company or the Partnership Interests.

          (b)      The execution and delivery by each Company of this Agreement
and the Ancillary Agreements to which it is or at the Closing will be a party do
not, and the performance by each Company of this Agreement and the Ancillary
Agreements to which it is or at the Closing will be a party and the consummation
by each Company of the transactions contemplated hereby and thereby will not,
require any Governmental Authorization or order of, action by, filing with or
notification of, any Governmental Authority, except (x) for the requirements of
the Antitrust Laws and (y) for the Governmental Authorizations set forth in
Section 3.4(b) of the Disclosure Letter.

     3.5 Financial Statements; Undisclosed Liabilities; Information Provided.

          (a)      Each Company has delivered or made available to Buyers and/or
Navarre true and complete copies of the audited financial statements of such
Company as of December 31, 2001, December 31, 2002 and December 31, 2003
(collectively, the “Audited Financial Statements”), the unaudited statement of
operations for each of the Companies for the 12 month period ending
September 30, 2004 and the 6 month period ending June 30, 2004 (collectively,
the “2004 Statements of Operations”). The Audited Financial Statements, the 2004
Statements of Operations and any audited or unaudited quarterly or annual
financial statements to be made available to Buyers and/or Navarre by the
Companies following the date of this Agreement shall collectively be referred to
herein as the “Financial Statements”). The Financial Statements are or will be,
as the case may be, true and correct and fairly and accurately represent the
financial matters stated therein. All financial statements included as part of
the Financial Statements fairly present or will fairly present, as the case may
be, in all material respects, the financial condition of each Company, as the
case may be, as of the dates specified therein and the results of each Company’s
operations for the periods specified therein.

          (b)      Neither Company has any Liabilities required to be disclosed
under GAAP except (i) as set forth on Section 3.5(b) of the Disclosure Letter,
(ii) Liabilities expressly disclosed or reserved against in the Financial
Statements and (ii) Liabilities which arose after September 30, 2004, in the
ordinary course of business consistent with past practice. Neither Company has
any Liabilities under any sale-leaseback arrangement, synthetic lease or other
off-balance sheet financing devices. None of the employees of the Companies are
now or will by the passage of time hereinafter become entitled to receive any
vacation time, vacation pay or severance pay attributable to services rendered
prior to such date except as disclosed on the Financial Statements.

          (c)      Except as set forth in Section 3.5(c) of the Disclosure
Letter or included in the Financial Statements, none of the Company Subsidiaries
have any Liabilities.

          (d)      The information supplied, or to be supplied, by or on behalf
of the Companies for inclusion in the Prospectus, such as the information
incorporated in the Description of FUNimation business in the summary section,
Management’s Discussion and Analysis of Financial Condition and Results of
Operations of FUNimation, FUNimation information included within the Business
Section, FUNimation Production, Ltd. and The FUNimation Store, Ltd. Financial

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Statements, shall not on the date that the Prospectus is first mailed to
potential investors contain any statement which, at such time and in light of
the circumstances under which it shall be made, is false or misleading with
respect to any material fact, or omit to state any material fact, necessary in
order to make the statements made in the Prospectus not false or misleading.

     3.6 Business Since September 30, 2004. Since September 30, 2004, (i) each
Company has operated its business in the ordinary course consistent with past
practice, and (ii) except in the ordinary course of business there has not been
any:

          (a)      change in the condition (financial or otherwise), properties,
assets, liabilities, business operations or results of operations that could
reasonably be expected to constitute a Material Adverse Effect;

          (b)      redemption, repurchase or other acquisition of the
Partnership Interests other than for cash or any declaration, setting aside or
payment of any non-cash dividend or other non-cash distribution with respect to
the Partnership Interests;

          (c)      increase in or modification of the compensation or benefits
payable or to become payable by either Company to any of its directors,
officers, employees or consultants other than as would be permitted under
Section 5.7(g);

          (d)      modification of any term of benefits payable under, any
Employee Benefit Plan;

          (e)      acquisition or sale of a material amount of property or
assets of either Company, or by either Company of any property or assets of the
Sellers;

          (f)      (i) incurrence, assumption or guarantee by either Company of
any debt for borrowed money; or (ii) issuance by either Company of any
securities;

          (g)      creation or assumption by either Company of any mortgage,
pledge, material security interest or lien or other encumbrance on any asset;

          (h)      making of any loan, advance or capital contribution to or
investment in any Person;

          (i)      entering into, amendment of, relinquishment, termination or
non-renewal by either Company of any contract, lease transaction, commitment or
other right or obligation;

          (j)      transfer or grant of a right under either Company’s
Intellectual Property or any disclosure of any material proprietary information
with respect to either Company’s business to any Person which has had or may
have a Material Adverse Effect on such Company;

          (k)      labor dispute or charge of unfair or discriminatory
employment or labor practice, any activity or proceeding by a labor union or
representative thereof to organize any employees of either Company or any
campaign being conducted to solicit authorization from employees to be
represented by such labor union;

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          (l)      agreement or arrangement made by either Company to take any
action which, if taken prior to the date hereof, would have made any
representation or warranty set forth in this Agreement untrue or incorrect as of
the date when made unless otherwise disclosed;

          (m)      change in accounting methods or practices, except as
disclosed in the Financial Statements;

          (n)      waiver or release of any right or claim;

          (o)      prepayment by either Company of any material liabilities or
obligations;

          (p)      acceleration, termination, suspension, abrogation, renewal,
modification or cancellation of any Permit;

          (q)      termination, renewal, modification or cancellation of any
Material Contract other than in the ordinary course of business consistent with
past practice, or any acceleration, suspension, or abrogation of any Material
Contract;

          (r)      acquisition of all or substantially all of the assets or
properties or of the securities or business of any other Person by either
Company or any merger, consolidation or amalgamation involving either Company;

          (s)      making, changing or revoking of any election concerning Taxes
or Tax Returns, change any annual accounting period, change any accounting
method, file any amended Tax Returns, enter into any closing agreement with
respect to Taxes, settle any Tax claim or assessment or surrender any right to
claim a refund of Taxes or obtain or apply for any Tax ruling; or

          (t)      agreement by either Company to do any of the foregoing.

     3.7 Compliance with Law. The Companies and the Company Subsidiaries are in
compliance in all material respects with all applicable Laws, Permits or Orders.
To the Sellers’ Knowledge, there is currently no investigation or review by a
Governmental Authority with respect to the Companies or any of the Company
Subsidiaries pending or threatened, nor has any Governmental Authority notified
the Companies, the Company Subsidiaries or any Seller of its intention to
conduct the same.

     3.8 Litigation. Except as disclosed in Section 3.8 of the Disclosure
Letter, there is no suit, action, arbitration, demand, claim, dispute,
investigation or proceeding pending or, to the Knowledge of the Sellers,
threatened, against either of the Companies or any of the Company Subsidiaries;
nor is there any judgment, decree, injunction, rule or order of any Governmental
Authority or arbitrator outstanding against either of the Companies or any of
the Company Subsidiaries. No injunction, writ, temporary restraining order,
decree or order of any nature has been issued by any court or other Governmental
Authority against either of the Companies or any of the Company Subsidiaries
purporting to enjoin or restrain the execution, delivery or performance of this
Agreement or any of the Ancillary Agreements or any documents contemplated
thereby.

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     3.9 Contracts and Agreements; Defaults.

          (a)      Section 3.9(a) of the Disclosure Letter sets forth a list of
any of the following written or (except as otherwise specified below) oral
contracts, agreements and other instruments (the “Material Contracts”) entered
into by either Company or any of the Company Subsidiaries or by which either
Company or any of the Company Subsidiaries are bound, true and correct copies of
each of which (or written summaries, in the case of oral contracts) have been
delivered to Buyers, Navarre, and/or their counsel:

(i)      collective bargaining or similar labor agreements;

(ii)      joint venture contract or agreement which has involved or is
reasonably expected to involve a sharing of profits or losses in excess of
$25,000 per annum with any other party;

(iii)      (x) written contract relating to the employment or engagement of any
Person (whether as an employee, consultant or independent contractor) or any
bonus, deferred compensation, pension, profit sharing, stock option, employee
stock purchase, retirement or other similar Employee Benefit Plan, other than
written contracts relating to the engagement of any person as an actor, writer
or translator copies of which have been previously provided to Navarre and/or
Buyers, and (y) oral contract relating to the employment or engagement of any
Person (whether as an employee, consultant or independent contractor) or any
bonus, deferred compensation, pension, profit sharing, stock option, employee
stock purchase, retirement or other similar Employee Benefit Plan which is not
cancelable without penalty within 30 days;

(iv)      indenture, mortgage, promissory note, loan agreement, guarantee or
other agreement or commitment for the borrowing of money, for a line of credit
or for a leasing transaction or imposing a Lien on any asset;

(v)      lease, conditional sales or other agreement pursuant to which either
Company or any of the Company Subsidiaries leases, has purchased or sold or
holds possession of, but not title to, any real or personal property, whether as
lessor, lessee, purchaser, seller, bailee, pledgee or the like;

(vi)      management, service, consulting or any other similar arrangement, or
any non-competition agreement;

(vii)      power of attorney granted by or to either Company or any Company
Subsidiary;

(viii)      contract not entered into in the ordinary course of business
consistent with past practice which is not cancelable without penalty within
30 days;

(ix)      sales representative agreements to which either Company or any Company
Subsidiary is a party, regardless of amounts involved;

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(x)      any Contract relating to an acquisition (closed or otherwise) by either
Company or any Company Subsidiary of a business or the capital stock of any
Person;

(xi)      Contracts containing covenants of either Company or any Company
Subsidiary not to compete in any line of business or with any Person in any
geographical area or covenants of any other Person not to compete with either
Company or any Company Subsidiary in any line of business or in any geographical
area;

(xii)      any Contract that provides for any party to have first refusal, first
offer, “tag-along” or “drag-along” rights or obligations with respect to any
partnership interest, capital stock or other security of either Company or any
Company Subsidiary;

(xiii)      any Contract to which either Company or any Company Subsidiary, on
the one hand, and any Related Party of either Company or any Company Subsidiary,
on the other hand, are parties;

(xiv)      any Contract relating to rights, licenses, permissions or privileges
with respect to the use, distribution, performance or other exploitation of
Intellectual Property to which either Company or any Company Subsidiary is a
party (a “License Agreement”). Section 3.9(a) of the Disclosure Letter sets
forth a true and correct list of all License Agreements; or

(xv)      any agreement which by its terms involves the payment after the
Closing Date by or to either Company or any Company Subsidiary of an amount of
$100,000 or more which has not been included within clauses (i) through
(xiv) above and any agreement which otherwise involves a commitment by either
Company or any Company Subsidiary which is material to the business of either
Company or any Company Subsidiary.

          (b)      Except as disclosed separately to Buyers and Navarre in
correspondence dated January 7, 2005, or as set forth in Section 3.9(b) of the
Disclosure Letter or for such breaches, defaults, events or failures to be in
full force and effect or validly binding and enforceable as have not had and are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect, (i) neither Company nor, to Sellers’ Knowledge, any other party
to any Material Contract is in breach of or default under any such Material
Contract, (ii) no event has occurred which (after notice or lapse of time or
both) would become a breach or default by either Company under any Material
Contract, (iii) to Sellers’ Knowledge, each Material Contract is in full force
and effect and is valid, binding and enforceable against a Company and each
other party thereto, in accordance with its terms, except that such enforcement
may be limited by any bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other Laws (whether statutory, regulatory or decisional),
now or hereafter in effect, relating to or affecting the rights of creditors
generally or by equitable principles (regardless of whether considered in a
proceeding at law or in equity), and (iv) neither Company has received or given
any written notification asserting a breach or default under any Contract.
Sellers have heretofore furnished Buyers with the consent of Toei Animation Co.,
Ltd. to the transactions contemplated hereby.

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     3.10 Employee Benefit Plans.

          (a)      Section 3.10(a) of the Disclosure Letter contains a complete
list of all Employee Benefit Plans. The Sellers have delivered to Buyers,
Navarre and/or their counsel prior to the date hereof true and complete copies
of (i) any employment agreements and any procedures and policies relating to the
employment of employees of either Company or any of the Company Subsidiaries and
the use of temporary employees and independent contractors by either Company or
any Company Subsidiary (including summaries of any procedures and policies that
are unwritten), (ii) all Employee Benefit Plans and related trust agreements,
insurance and other contracts, summary plan descriptions and summaries of
material modifications and communications distributed to the participants of
each Employee Benefit Plan, (iii) the reports which have been filed (or are in
fully completed form for filing) for the last 3 years with the IRS and the
Department of Labor with respect to each Employee Benefit Plan which is required
to make such filing, (iv) the latest determination letter issued for each
Employee Benefit Plan and related trust that are intended to satisfy the
qualification requirements of Sections 401(a) and 501(a) of the Code, and
(v) the latest IRS Form 5300 or 5307 (whichever is applicable) filed with the
IRS for each Employee Benefit Plan and related trust that are intended to
satisfy the qualification requirements of Sections 401(a) and 501(a) of the
Code.

          (b)      Neither Company nor any Company Subsidiary maintains nor has
ever maintained an Employee Benefit Plan subject to Title IV of ERISA. With
respect to each Employee Benefit Plan, no party in interest or disqualified
person (as defined in Section 3(14) of ERISA and Section 4975 of the Code,
respectively) has at any time engaged in a transaction which could subject
either Company, any Company Subsidiary, any Buyer or Navarre, directly or
indirectly, to a material tax, penalty or liability for prohibited transactions
imposed by ERISA or the Code. No fiduciary (as defined in Section 3(21) of
ERISA) with respect to any Employee Benefit Plan has breached any of the
responsibilities or obligations imposed upon fiduciaries under Title I of ERISA.

          (c)      Each Employee Benefit Plan is and has been operated in
material compliance with its terms and all applicable laws including, without
limitation, the Code and ERISA, and by its terms can be amended and/or
terminated at any time. As of the Closing Date, each Company and all Company
Subsidiaries shall have made all required contributions under each Employee
Benefit Plan for all periods through and including the Closing Date or adequate
accruals therefor shall have been provided for and reflected on the Financial
Statements. Except as disclosed on Section 3.10(c) of the Disclosure Letter,
neither Company nor any Company Subsidiary has made a commitment to allocate or
make a profit sharing contribution under any Employee Benefit Plan with respect
to any plan year commencing or ending in 2004 or 2005.

          (d)      Neither the Sellers nor either Company or any Company
Subsidiary has received or is aware of any actions, claims (other than routine
claims for benefits), lawsuits or arbitrations pending or, to the Knowledge of
the Sellers, threatened with respect to any Employee Benefit Plan or against any
fiduciary of any Employee Benefit Plan, and the Sellers do not have Knowledge of
any facts that could give rise to any such actions, claims, lawsuits or
arbitrations. There has not occurred any circumstances by reason of which either
Company or any Company Subsidiary may be liable for an act, or a failure to act,
by a fiduciary with respect to any Employee Benefit Plan.

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          (e)      No Employee Benefit Plan provides or provided for continuing
benefits or coverage for any participant or any dependent or beneficiary of any
participant after such participant’s retirement or other termination of
employment (except as may be required by Part 6 of Subtitle B of Title I of
ERISA and Section 4980B of the Code (collectively, “COBRA”)).

          (f)      Neither Company nor any Company Subsidiary has ever
contributed to, or withdrawn in a partial or complete withdrawal from, any
multiemployer plan (as defined in Section 3(37) of ERISA) or incurred contingent
liability under Section 4204 of ERISA.

          (g)      Neither Company nor any Company Subsidiary or any Seller
proposed nor agreed to any increase in benefits under any Employee Benefit Plan
(or the creation of new benefits) or change in employee coverage which would
increase the expense of maintaining any such Employee Benefit Plan.

          (h)      The consummation of the transactions contemplated by this
Agreement will not result in (i) any payment (including, without limitation,
severance, unemployment compensation, golden parachute or bonus payments)
becoming due to any director, officer, employee or consultant of either Company
or any Company Subsidiary, (ii) any increase in the amount of compensation or
benefits payable in respect of any director, officer, employee or consultant of
any Company or any Company Subsidiary, or (iii) accelerate the vesting or timing
of payment of any benefits or compensation payable in respect of any director,
officer, employee or consultant of either Company or any Company Subsidiary. No
Employee Benefit Plan provides benefits or payments contingent upon, triggered
by or increased as a result of, a change in the ownership or effective control
of either Company or any Company Subsidiary.

     3.11 Employment-Related Matters.

          (a)      No employees of either Company are covered by a collective
bargaining agreement or similar labor agreement and neither Company is currently
negotiating such an agreement. There is no labor strike, organized work
stoppage, lockout or other labor controversy presently pending or, to the
Knowledge of the Sellers, threatened against either Company and neither Company
has experienced any labor strike, lockout or organized work stoppage during the
last three years. To the Knowledge of the Sellers, there is no union
organization campaign relating to any employees of either Company. There is no
unfair labor practice charge or complaint or any other similar action, suit,
arbitration, proceeding or investigation pending against either Company or, to
the Knowledge of the Sellers, threatened before the National Labor Relations
Board or any other Governmental Authority. No charges with respect to or
relating to the employees of either Company are pending or, to the Knowledge of
the Sellers, threatened before the Equal Employment Opportunity Commission or
any other Governmental Authority responsible for the prevention of unlawful
employment practices.

          (b)      Section 3.11(b) of the Disclosure Letter lists all employees
of the Companies and the Company Subsidiaries as of the date of this Agreement.
Except as provided in Section 3.11(b) of the Disclosure Letter, (i) no person or
entity has a written employment, severance or independent contractor agreement
with either Company or any of the Company Subsidiaries, (ii) no person or entity
has an oral employment, severance or independent contractor agreement with
either Company or any of the Company Subsidiaries which is not cancelable
without penalty within 30

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days, and (iii) no “leased employee” (within the meaning of Section 414(n) or
(o) of the Code) performs any material services for either Company or any of the
Company Subsidiaries. Sellers have heretofore furnished Buyers with a true,
correct and complete list of the salaries of all employees of the Companies as
of the date of this Agreement.

          (c)      The Companies and Company Subsidiaries are in compliance with
all applicable laws, agreements and contracts relating to employment, employment
practices, wages, hours, and terms and conditions of employment, including, but
not limited to, employee compensation matters.

          (d)      The Companies and Company Subsidiaries have good relations
with its employees and, to the Knowledge of the Sellers, there are no facts
indicating that the consummation of the transactions contemplated hereby will
have an adverse effect on such relations, and the Sellers have no Knowledge that
any of key employees of the Companies or any Company Subsidiaries intends to
leave their employ.

          (e)      Neither Company nor any Company Subsidiary is engaged in any
unfair labor practice. There is (i) no grievance or arbitration proceeding
arising out of or under collective bargaining agreements pending or threatened
against either Company or any Company Subsidiary; (ii) no strike, labor dispute,
slowdown or stoppage pending or threatened against either Company or any Company
Subsidiary; (iii) neither Company nor any Company Subsidiary is a party to any
collective bargaining agreement or contract; (iv) no union representation
question existing with respect to the employees of either Company or any Company
Subsidiary; and (v) no union organizing activities are taking place.

     3.12 Taxes.

          (a)      Each Company and Company Subsidiary has timely filed all Tax
Returns which are required to be filed by them, which returns and reports are,
to the Knowledge of the Sellers, true, correct and complete in all material
respects, and has paid timely all Taxes whether or not shown as due on such Tax
Returns that they are required to have paid.

          (b)      There are no actions, suits, proceedings, audits,
investigations or claims now pending, nor, to the Knowledge of Sellers, proposed
against either Company or any Company Subsidiary (including without limitation,
any partnership level administrative or judicial proceedings under Section 6231
et seq. of the Code or any similar provision of state or local law) relating to
any Taxes.

          (c)      Sellers have delivered, or made available, to Buyers and/or
Navarre complete and correct copies of all Tax Returns, examination reports, and
statements of deficiency that have been filed by, assessed against, or agreed to
by any of Sellers, the Companies, or Company Subsidiaries with respect to the
activities of any of the Companies or Company Subsidiaries. To the Knowledge of
the Sellers, no claim has ever been made or proposed by an authority in a
jurisdiction where either Company or any of Company Subsidiaries does not file
Tax Returns that it is or may be required to file Tax Returns in that
jurisdiction.

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          (d)      There are no Liens on any of the assets of either Company or
any Company Subsidiary, except for any Liens for current Taxes that are not yet
due and payable and Permitted Liens.

          (e)      Neither Company nor any Company Subsidiary (i) has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency which Taxes have not since been
paid, (ii) except as set forth in Section 3.12(e) of the Disclosure Letter, has
requested or been granted an extension of the time for filing any Tax Return to
a date later than the Closing Date, which Tax Return has since not been filed
and any Taxes relating to such Tax Return (whether or not shown on as due on
such Tax Return) has not been paid, (iii) has granted to any Person any power of
attorney that is currently in force with respect to any Tax matter relating to
any of the Companies or the Company Subsidiaries, or (iv) has been a member of
an affiliated group (as defined in Section 1504 of the Code) or filed or been
included in a combined, consolidated or unitary income or similar Tax Return.

          (f)      Section 3.12(f) of the Disclosure Letter sets forth (i) all
types of Taxes paid, and all types of Tax Returns filed, by or on behalf of each
of the Companies and the Company Subsidiaries and (ii) all of the jurisdictions
that impose such Taxes or the duty to file such Tax Returns.

          (g)      Neither Company nor any Company Subsidiary has any liability
for Taxes of any other Person by reason of contract, agreement (including as a
party to a Tax allocation, sharing, or similar agreement), assumption,
transferee liability, operation of law, or otherwise.

          (h)      Neither Company nor any Company Subsidiary or any other
person on behalf of any of them: (i) has executed or entered into a closing
agreement pursuant to Section 7121 of the Code or any predecessor provision
thereof or any similar provision of state, local, foreign, or other law; or
(ii) has agreed to, or is required to make, any adjustments pursuant to
Section 481 or Section 263A of the Code or any similar provision of state,
local, foreign, or other law, nor has any Governmental Authority proposed any
such adjustments or change in accounting method.

          (i)      Neither Company nor any Company Subsidiary has made any
payment or payments, is obligated to make any payment or payments, or is a party
to (or a participating employer in) any agreement or Employee Benefit Plan that
could obligate one of the Companies or Company Subsidiaries to make any payment
or payments that would constitute an “excess parachute payment,” as defined in
Section 280G of the Code (or any similar provision of state, local, foreign, or
other law) or that would otherwise not be fully deductible under Section 162 or
Section 404 of the Code (or any similar provision of state, local, foreign, or
other law).

          (j)      Neither Company nor any Company Subsidiary has been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.

          (k)      Neither Company nor any Company Subsidiary has distributed
stock of another Person, or had its stock distributed by another Person, in a
transaction that was purported or intended to be governed in whole or in part by
Section 355 or Section 361 of the Code.

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          (l)      All Taxes attributable to periods ending on or prior to the
Closing Date, to the extent not required to have been paid previously, will be
fully and adequately reserved for or accrued as of the Closing Date as a current
liability on the respective balance sheets of the Companies, the Company
Subsidiaries, or both.

          (m)      Since December 31, 2003, neither Company nor any Subsidiary
has incurred any liability for any Tax other than in the ordinary course of its
business. Neither Company nor any Company Subsidiary has entered into a
transaction that currently is being accounted for under the installment method
of Section 453 of the Code or a similar provision of state, local, foreign, or
other law, and neither Company nor any Company Subsidiary has any taxable income
that will be reportable in a taxable period beginning after the Closing Date
that is attributable to a transaction or event that occurred prior to the
Closing.

     3.13 Permits. Section 3.13 of the Disclosure Letter lists all material
Permits that are presently required for the operation of each Company, as
currently conducted and as proposed to be conducted, which Permits have been
duly obtained by each Company and are in full force and effect, except where the
failure to acquire such Permits or to keep such Permits in full force and
effect, if any, that when taken together with all other such failures would not
be reasonably likely to have Material Adverse Effect. Each Company is in
compliance with all Permits that are presently required for the operation of
each Company, except where failing to comply would not reasonably be expected to
have a Material Adverse Effect. There is no action pending or, to the Knowledge
of the Sellers, threatened against either Company to modify, suspend, terminate,
limit, condition or declare invalid the rights of either Company under any of
such Permits, and to the Knowledge of the Sellers, there are no facts or
circumstances which could form the basis for any such action. No written notice
has been received by either Company or by any Seller or Individual with respect
to any failure by either Company to have any Permit.

     3.14 Real Property.

          (a)      Section 3.14(a) of the Disclosure Letter contains a complete
and correct list of all Owned Real Property setting forth the address and owner
of each parcel of Owned Real Property. Each Company has, or on the Closing Date
will have, good, valid and marketable fee simple title to the Owned Real
Property indicated on Section 3.14(a) of the Disclosure Letter as being owned by
it, free and clear of all Liens other than Permitted Liens. There are no
outstanding options or rights of first refusal to purchase the Owned Real
Property, or any portion thereof or interest therein.

          (b)      Section 3.14(b) of the Disclosure Letter contains a complete
and correct list of all Real Property Leases. The Companies have delivered to
Buyers and/or Navarre correct and complete copies of the Real Property Leases.
Each Real Property Lease is legal, valid, binding, enforceable, and in full
force and effect, except as may be limited by bankruptcy, insolvency,
reorganization or other applicable laws affecting creditors generally and by the
availability of equitable remedies. Neither Company nor any other party is in
default, violation or breach in any respect under any Real Property Lease, and
no event has occurred and is continuing that constitutes or, with notice or the
passage of time or both, would constitute a default, violation or breach in any
respect under any Real Property Lease. Each Real Property Lease grants the
tenant under the Real Property Lease the exclusive right to use and occupy the
demised premises thereunder. Each Company has good and valid title to the
leasehold estate under each Real Property Lease free and

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clear of all Liens other than Permitted Liens. Each Company enjoys peaceful and
undisturbed possession under its respective Real Property Leases for the Leased
Real Property.

          (c)      The Real Property constitutes all the fee and leasehold
interests in real property held for use in connection with, necessary for the
conduct of, or otherwise material to, the Business.

          (d)      There are no eminent domain or other similar proceedings
pending or threatened affecting any portion of the Real Property. There is no
writ, injunction, decree, order or judgment outstanding, nor any action, claim,
suit or proceeding, pending or threatened, relating to the ownership, lease,
use, occupancy or operation by any Person of any Real Property.

          (e)      The use and operation of the Real Property in the conduct of
the Business does not violate in any material respect any instrument of record
or agreement affecting the Real Property. There is no violation in any material
respect of any covenant, condition, restriction, easement or order of any
Governmental Authority having jurisdiction over such property of any other
Person entitled to enforce the same affecting the Real Property or the use or
occupancy thereof.

          (f)      The Real Property is in compliance in all material respects
with all applicable building, zoning, subdivision and other land use and similar
Laws affecting the Real Property (collectively, the “Real Property Laws”), and
no Company or any Seller has received any notice of violation or claimed
violation of any Real Property Law. To the Knowledge of Sellers, there is no
pending or anticipated change in any Real Property Law that will have a material
adverse effect upon the ownership, alternation, use, occupancy, or operation of
the Real Property or any portion thereof.

          (g)      Each parcel included in the Real Property is assessed for
real property tax purposes as a wholly independent tax lot, separate from
adjoining land or improvements not constituting a part of that parcel.

     3.15 Title; Condition of Assets. Each Company has title to or valid
leasehold interests in all of the assets that it purports to own or lease (or
are reflected as owned on the Financial Statements) free and clear of any and
all Liens other than Permitted Liens, and such assets and properties constitute
all of the assets and properties which are owned, used or held, and necessary,
for use in the conduct by such Company of its business as it is currently
conducted.

     3.16 Intellectual Property.

          (a)      Each Company possesses by ownership or by license all
Intellectual Property sufficient for it to conduct its business as currently
conducted and as currently contemplated to be conducted in the future. Such
ownership or license rights will not be lost, terminated, limited, restricted,
modified or impaired in any respect by reason of the consummation of any
transaction contemplated by this Agreement.

          (b)      Section 3.16(b) of the Disclosure Letter sets forth a true
and complete list of (i) all Patent Rights owned by each Company, (ii) all
Trademarks owned by each Company which have been registered in the United States
Patent and Trademark Office (“PTO”), the states of the United States or the
corresponding offices of other jurisdictions, (iii) all Copyrights owned by
either

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Company which have been registered in the United States Copyright Office
(“Copyright Office”) or the corresponding offices of other jurisdictions,
(iv) all applications for the registrations of Copyrights that have been filed
by either Company on its own behalf and are pending in the Copyright Office or
the corresponding offices of other jurisdictions, and (v) all domain name
registrations owned by either Company.

          (c)      Each Company is the sole owner, beneficially and of record,
of each of the Copyright registrations and applications set forth in
Section 3.16(b) of the Disclosure Letter and each of the Copyrights covered
thereby. All renewals, payments of fees and other acts required to keep such
registrations and Copyright applications set forth in Section 3.16(b) of the
Disclosure Letter in force through the Closing Date, have been, or will be,
taken by that date.

          (d)      Each Company is the sole owner, beneficially and of record,
of each of the Trademark registrations and applications set forth in
Section 3.16(b) of the Disclosure Letter and each of the Trademarks covered
thereby. All renewals, payments of maintenance fees and other acts required to
keep such registrations and Trademark applications set forth in Section 3.16(b)
of the Disclosure Letter in force through the Closing Date, have been, or will
be, taken by that date.

          (e)      Each Company is the sole owner, beneficially and of record,
of each of the Patent Rights set forth in Section 3.16(b) of the Disclosure
Letter. All renewals, payments of maintenance fees and other acts required to
keep any registrations and applications relating to the Patent Rights set forth
in Section 3.16(b) of the Disclosure Letter in force through the Closing Date,
have been, or will be, taken by that date.

          (f)      Except with respect to licenses for commercially available
off-the-shelf Software and pursuant to the License Agreements listed in
Section 3.9(a) of the Disclosure Letter, neither Company is required, obligated,
or under any liability whatsoever, to make any payments by way of royalties,
fees or otherwise to any owner, licensor of, or other claimant to any
Intellectual Property, or other third party, with respect to the use thereof or
in connection with the conduct of the businesses of the Companies as currently
conducted or as currently contemplated to be conducted in the future.

          (g)      All of the Intellectual Property owned, used, sold, licensed
or exploited by each Company is free and clear of all Liens other than Permitted
Liens, and is not the subject of any cancellation or reexamination proceeding,
declaratory judgment action, or any other proceeding, pending or threatened,
challenging their extent, validity or enforceability.

          (h)      Section 3.16(h) of the Disclosure Letter sets forth a
complete and accurate list of (i) all Software that is owned exclusively by a
Company and is material to the operation of its respective business, and
(ii) all Software that is used by each Company in its respective business that
is not exclusively owned by a Company, excluding Software available on
reasonable terms through commercial distributors or in consumer retail stores
for a license fee of no more than $1,000 per workstation.

          (i)      To the Knowledge of the Sellers, none of the employees of
either Company is obligated under any Contract, license or commitment of any
nature, or subject to any Order of any Governmental Authority, that would
prevent such employee from promoting the interests of such

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Company, or that would materially conflict with the conduct of its respective
business as currently conducted. To the Knowledge of the Sellers, none of the
consultants who perform services for or on behalf of either Company is obligated
under any contract, license or commitment of any nature, or subject to any Order
that would prevent such consultant from performing its contractual obligations
to such Company. To the Knowledge of the Sellers, it is not and will not be
necessary for the continued conduct of the business of either Company as
currently conducted to use any inventions conceived or reduced to practice by
any of such Company’s respective employees or consultants prior to such
employee’s employment or consultant’s engagement by such Company.

          (j)      All domain names used by each Company are currently
registered and in good standing, and one of the Companies is shown on the
records of the registrar thereof as the sole owner of such domain names and has
physical or contractual control over the servers that respond thereto (and any
contract with respect thereto has been disclosed on Section 3.9(a) of the
Disclosure Letter). Neither Company has received any notice or communication
stating that any Person is challenging its right to use any such domain name.

          (k)      Except as set forth on Section 3.16(k) of the Disclosure
Letter, to the Knowledge of the Sellers, the business of the each of Companies
does not infringe any Intellectual Property of any other party, and there is no
pending or, to the Knowledge of the Sellers, threatened claim or litigation
contesting the validity, ownership or right to use, sell, license or dispose of
any Intellectual Property owned, used, sold, licensed or exploited by either
Company nor, to the Knowledge of the Sellers, is there any basis for any such
claim, nor has either Company or any Seller received any notice asserting that
any such Intellectual Property or the proposed use, sale, license or disposition
thereof conflicts or will conflict with the rights of any other party, nor, to
the Knowledge of the Sellers, is there any basis for any such assertion.

     3.17 Insurance. Set forth on Section 3.17 of the Disclosure Letter is a
list of all policies of liability, casualty, indemnity and other forms of
insurance relating to the Companies and their assets (the “Insurance Policies”),
whether currently in force or otherwise applicable to any current or future
liabilities, setting forth the type and amount of coverage, policy number,
policy periods and the status of premiums paid thereon. There exists no dispute
between either Company and any underwriters of the Insurance Policies, and all
premiums due and payable with respect thereto have been paid. To Knowledge of
the Sellers, there are no pending or threatened terminations or premium
increases for the current policy period of any of the Insurance Policies that
are materially in excess of those implemented in the past. To the Knowledge of
the Sellers, no condition or circumstances exist which could result in such
termination or increase. The Companies, the activities of the Companies as
currently conducted, and the tangible and personal property owned or leased by
the Companies are in compliance in all material respects with all conditions of
the Insurance Policies.

     3.18 Environmental Laws. To the Knowledge of the Sellers, except as set
forth on Section 3.18 of the Disclosure Letter:

          (a)      The operations of each Company and Company Subsidiary are and
have been in compliance with all applicable Environmental Laws, which compliance
includes obtaining, maintaining in good standing and complying with all
Environmental Permits, and no action or proceeding is pending or, threatened to
revoke, modify or terminate any such Environmental Permit, and, no facts,
circumstances or conditions currently exist that could adversely affect such
continued

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compliance with Environmental Laws and Environmental Permits or require
currently unbudgeted capital expenditures to achieve or maintain such continued
compliance with Environmental Laws and Environmental Permits.

          (b)      Neither Company nor any Company Subsidiary is the subject of
any outstanding written Order or Contract with any Governmental Authority or
Person respecting (i) Environmental Laws, (ii) Remedial Action or (iii) any
Release or threatened Release of a Hazardous Material.

          (c)      No claim has been made or is pending, threatened against
either Company or any Company Subsidiary alleging either or both that either
Company or any Company Subsidiary may be in violation of any Environmental Law
or Environmental Permit, or may have any Liability under any Environmental Law.

          (d)      The transactions contemplated hereunder do not require the
consent of or filings with any Governmental Authority with jurisdiction over
either Company or any Company Subsidiary and environmental matters, and none of
the Real Property is located in New Jersey, Indiana or Connecticut.

     3.19 Brokers. Except for A.G. Edwards, Inc., whose fees will be paid for by
Sellers prior to or at the Closing, neither Company nor any of their directors,
officers, employees or Affiliates or any Company Subsidiary has employed any
broker, investment bank, finder or other Person or has incurred or will incur
any broker’s, investment banking, finder’s or similar fees, commissions or
expenses, in each case in connection with the transactions contemplated by this
Agreement.

     3.20 Bank Accounts. Section 3.20 of the Disclosure Letter sets forth the
name of each bank in which either Company or any Company Subsidiary has an
account or safe deposit box or standby letter of credit, the identifying numbers
or symbols thereof and the names of all persons authorized to draw thereon or to
have access thereto.

     3.21 Affiliate Transactions. Section 3.21 of the Disclosure Letter sets
forth a complete and accurate (i) list of all Contracts to which any Seller or
any of its Affiliates (other than either Company), on the one hand, and either
Company, on the other hand, is a party (each transaction relating thereto, an
“Affiliate Transaction”).

     3.22 Outstanding Borrowings. Section 3.22 of the Disclosure Letter sets
forth (a) the amount of all outstanding borrowings of each of the Companies and
the Company Subsidiaries as of the date hereof, (b) any Liens that relate to
such outstanding borrowings and that encumber the assets of either Company and
any Company Subsidiaries and (c) the name of each lender thereof.

     3.23 Operation of the Business. Except as set forth on Section 3.23 of the
Disclosure Letter, (a) each Company has conducted the Business only through such
Company and the Company Subsidiaries and not through any other divisions or any
direct or indirect Subsidiary or Affiliate and (b) no part of the Business is
operated by a Company through any entity other than such Company and the Company
Subsidiaries.

     3.24 Absence of Certain Business Practices. Except as set forth on
Section 3.24 of the Disclosure Letter, none of the Companies, any officer,
employee or agent of any Company, or any

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other Person acting on their behalf, has, directly, or indirectly, within the
past 5 years given or agreed to give any gift or similar benefit to any
customer, supplier, governmental employee or other person who is or may be in a
position to help or hinder the Business (or assist either Company in connection
with any actual proposed transaction relating to the Business) (a) which
subjected or might have subjected either Company or any Company Subsidiary to
any damage or penalty in any civil, criminal or governmental litigation
proceeding, (b) which if not given in the past, might have a Material Adverse
Effect on either Company or any Company Subsidiary, (c) which if not continued
in the future, might have a Material Adverse Effect on either Company or any
Company Subsidiary or subject either Company or any Company Subsidiary to suit
or penalty in any private or governmental litigation or proceeding, (d) for any
of the purposes described in Section 162(c) of the Code or (e) for the purpose
of establishing or maintaining any concealed fund or concealed bank account.

     3.25 Books and Records. The books of account and other financial records of
each Company and Company Subsidiary have been made available to Buyer, are
complete and correct in all material respects and represent actual, bona fide
transactions and have been maintained in accordance with sound business
practices. The minute books of each Company and Company Subsidiary have been
made available to Buyers and are substantially complete and correct in all
material respects. The books of account of each Company are sufficient to
prepare the Financial Statements in accordance with GAAP.

     3.26 Disclosure. To the Knowledge of Sellers, no representation or warranty
by the Sellers in this Agreement and no statement contained in this Agreement or
in any document delivered or to be delivered pursuant hereto contains or will
contain an untrue statement of material fact or omits or will omit to state any
material fact necessary to make the statements herein or therein contained, in
light of the circumstances under which made, not misleading.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF BUYERS AND NAVARRE

     Buyers and Navarre, jointly and severally, represent and warrant to Sellers
as follows:

     4.1 Organization. Each of Navarre CP, Navarre CS and Navarre CLP is a
limited liability company validly existing and in good standing under the laws
of Minnesota. Navarre is a corporation validly existing and in good standing
under the laws of Minnesota.

     4.2 Authority. Buyers and Navarre have the requisite power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which they
are or at the Closing will be a party, to perform their obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by Buyers and Navarre of this Agreement and
the Ancillary Agreements to which they are or at the Closing will be a party,
the performance by Buyers and Navarre of their obligations hereunder and
thereunder and the consummation by Buyers and Navarre of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
company or corporate action, as the case may be, on the part of Buyers and
Navarre. This Agreement has been duly executed and delivered by Buyers and
Navarre and, at the Closing, the Ancillary Agreements to which Buyers and/or
Navarre are a party will be

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duly executed and delivered by Buyers and Navarre, as the case may be. This
Agreement constitutes and, when executed and delivered at the Closing, the
Ancillary Agreements to which Buyers and/or Navarre are a party will constitute,
the valid and binding obligations of Buyers and Navarre, as the case may be,
enforceable against Buyers and Navarre, as the case may be, in accordance with
their respective terms except that such enforcement may be limited by any
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other
Laws (whether statutory, regulatory or decisional), now or hereafter in effect,
relating to or affecting the rights of creditors generally or by equitable
principles (regardless of whether considered in a proceeding at law or in
equity).

     4.3 No Conflict. Except as would not have or be reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the ability of
Buyers and/or Navarre to perform their obligations under, and to consummate the
transactions contemplated by, this Agreement and the Ancillary Agreements to
which they are or at the Closing will be a party, the execution and delivery by
Buyers and Navarre of this Agreement and the Ancillary Agreements to which they
are or at the Closing will be a party, do not, and the performance by Buyers and
Navarre of this Agreement and the Ancillary Agreements to which they are or at
the Closing will be a party and the transactions contemplated hereby and thereby
by Buyers do not and will not, (i) violate any provision of the articles of
organization or operating agreement of any Buyer, (ii) violate any provision of
the articles of incorporation or by-laws of Navarre, (iii) violate any Law,
Permit or Order applicable to Buyers and/or Navarre, or any of their assets,
properties or businesses, or (iv) result in a breach of, constitute a default
(or an event which, with or without the giving of notice or lapse of time or
both, would become a default) under, require any consent or notice under, or
give to others any right of termination, amendment, acceleration, suspension,
revocation or cancellation of, any oral or written contract, agreement,
commitment or understanding, to which Buyers and/or Navarre are a party or are
bound.

     4.4 Governmental Consents and Approvals. The execution and delivery by
Buyers and Navarre of this Agreement and the Ancillary Agreements to which they
are or at the Closing will be a party, do not, and the performance by Buyers and
Navarre of this Agreement and the Ancillary Agreements to which they are or at
the Closing will be a party and the consummation by Buyers and Navarre of the
transactions contemplated hereby and thereby, do not and will not, require any
Governmental Authorization or order of, action by, filing with or notification
of any Governmental Authority, except for the requirements of the Antitrust
Laws.

     4.5 Experience; Acquisition of Partnership Interests for Investment. Buyers
are acquiring the Partnership Interests for investment and not with a view
toward, or for sale in connection with, any distribution thereof, nor with any
present intention of distributing or selling the Partnership Interests. Buyers
agree that the Partnership Interests may not be sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of without registration under
the Securities Act except (i) pursuant to an exemption from such registration
available under the Securities Act and (ii) in accordance with any applicable
provisions of state securities laws. Buyers are able to bear the economic risk
of holding the Partnership Interests for an indefinite period, and have
knowledge and experience in financial and business matters such that it is
capable of evaluating the risks of the investment in the Partnership Interests.

     4.6 Brokers. Except for Bear Stearns, whose fees will be paid by Buyers
and/or Navarre prior to or at the Closing, neither Buyers, Navarre nor any of
their directors, governors, officers,

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managers, employees or Affiliates have employed any broker, investment bank or
finder or has incurred or will incur any broker’s, investment banking, finder’s
or similar fees, commissions or expenses, in each case in connection with the
transactions contemplated by this Agreement.

     4.7 Closing Shares. The Closing Shares issuable pursuant to this Agreement
have been duly authorized, and when issued in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable and free of pre-emptive
rights.

     4.8 Buyers SEC Documents.

          (a)      Buyers and/or Navarre have furnished or made available to the
Sellers a correct and complete copy of Navarre’s Annual Report on Form 10-K
filed with the SEC with respect to the fiscal year ended March 31, 2004, and
Navarre’s Quarterly Report on Form 10-Q filed with the SEC with respect to the
fiscal quarter ended September 30, 2004, (the “Form 10-Q”), and each report,
schedule, registration statement and definitive proxy statement filed by Buyers
and/or Navarre with the SEC on or after the date of filing of the Form 10-Q,
which are all the documents (other than preliminary material) that Buyers and/or
Navarre were required to file (or otherwise did file) with the SEC in accordance
with Sections 13, 14 and 15(d) of the Securities Exchange Act on or after the
date of filing with the SEC of the Form 10-Q (as amended, the “Buyers SEC
Documents”). As of their respective filing dates, or in the case of registration
statements, their respective effective times, none of the Buyers SEC Documents
(including all exhibits and schedules thereto and documents incorporated by
reference therein) contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and the Buyers SEC Documents complied when filed, or in
the case of registration statements, as of their respective effective times, in
all material respects with the then applicable requirements of the Securities
Act or the Securities Exchange Act, as the case may be, and the rules and
regulations promulgated by the SEC thereunder.

          (b)      The financial statements (including the notes thereto) of
Navarre included in the Form 10-Q for the fiscal quarter then ended, complied as
to form in all material respects with the then applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with GAAP during the periods involved
(except as may have been indicated in the notes thereto) and fairly present the
financial position of Navarre as at the dates thereof and the results of its
operations, shareholders’ equity and cash flows for the period then ended. Since
the date of the financial statements included in Navarre’s most recent Form 10-Q
filed with the SEC, there has been no material adverse change in the financial
position of Navarre, and no event has occurred which could reasonably be
expected to have a Material Adverse Effect on Navarre.

     4.9 Disclosure. No representation or warranty by Buyers and/or Navarre in
this Agreement and no statement contained in this Agreement or in any document
delivered or to be delivered pursuant hereto contains or will contain an untrue
statement of material fact or omits or will omit to state any material fact
necessary to make the statements herein or therein contained, in light of the
circumstances under which made, not misleading; it being understood that as used
in this Section 4.9 “material” means material to any individual statement or
omission and in the aggregate as to all statements and omissions.

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ARTICLE 5

COVENANTS

     5.1 Notice of Changes.

          (a)      During the period from the date of this Agreement until the
earlier of the Closing Date or the termination of this Agreement in accordance
with its terms, the Sellers will promptly advise Buyers in writing (i) of any
event occurring subsequent to the date of this Agreement that would render any
representation or warranty of the Sellers contained in this Agreement, if made
on or as of the date of such event or the Closing Date, untrue or inaccurate in
any material respect, (ii) of any Material Adverse Effect on either Company, any
Company Subsidiary or the Sellers and (iii) of any breach by the Sellers or any
Company of any covenant or agreement contained in this Agreement. The
disclosure, in the updated Disclosure Letter delivered by the Sellers pursuant
to Section 7.1(t), of any events, conditions or circumstances arising in the
ordinary course of business of the Companies shall be effective to amend any
representation or warranty of the Sellers contained in Sections 3.9(a)(iii),
3.9(a)(ix), 3.9(a)(xiv), 3.11(b), 3.16(b), 3.20 and 3.21 of this Agreement as if
disclosed in the original Disclosure Letter delivered by the Sellers on the date
of this Agreement

          (b)      During the period from the date of this Agreement until the
earlier of the Closing Date or the termination of this Agreement in accordance
with its terms, Buyers and/or Navarre will promptly advise the Seller
Representative in writing (i) of any event occurring subsequent to the date of
this Agreement that would render any representation or warranty of Buyers and/or
Navarre contained in this Agreement, if made on or as of the date of such event
or the Closing Date, untrue or inaccurate in any material respect, (ii) of any
Material Adverse Effect on Buyers and/or Navarre, and (iii) of any breach by
Buyers and/or Navarre of any covenant or agreement contained in this Agreement.

     5.2 Access; Confidentiality. At the reasonable request of Buyers, Sellers
and the Companies shall from time to time prior to the Closing give or cause to
be given to the managers, officers, employees, accountants, counsel, investors,
financing sources and other authorized representatives of Buyers full access
during normal business hours to (i) any and all premises, properties, files,
books, records, documents and other information of the Companies and to those
officers, employees, accountants, counsel and other authorized representatives
of the Companies who have relevant knowledge, and (ii) all such other
information in Sellers’ or either Company’s possession otherwise to the extent
concerning the Companies as Buyers may reasonably request. Buyers will treat all
such information as confidential in accordance with the Mutual Non-Disclosure
Agreement dated as of August 4, 2004, between Navarre and Productions Company
(the “Non-Disclosure Letter”).

     5.3 Notice of Proceedings. Each party to this Agreement will notify the
other promptly in writing upon (i) such party’s becoming aware of any Order or
judgment restraining or enjoining the consummation of this Agreement or the
transactions contemplated hereby or any complaint or threatened complaint
seeking such an Order or judgment or (ii) such party’s receiving any notice from
any Governmental Authority of its intention (A) to institute an investigation
into, or institute a suit or proceeding to restrain or enjoin, the consummation
of this Agreement or the transactions

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contemplated hereby or (B) to nullify or render ineffective this Agreement or
such transactions if consummated.

     5.4 Consummation of Agreement. Subject to the terms and conditions of this
Agreement, each party hereto shall use its commercially reasonable efforts to
perform all obligations on its part to be performed under this Agreement, to
cause the satisfaction of each of the conditions to Closing set forth in
Article 6 and Article 7 to the extent that satisfaction thereof is within such
party’s control and generally to cause the transactions contemplated hereby to
be fully carried out in accordance with the terms hereof.

     5.5 Filings and Authorizations.

          (a)      In furtherance and not in limitation of Section 5.4:

(i)      each party agrees to use its commercially reasonable efforts (x) to
file or cause to be filed a Notification and Report Form pursuant to the HSR Act
no later than 10 Business Days after the date of this Agreement and any other
required regulatory filings with any other Governmental Authority as promptly as
practicable following the execution of this Agreement, and (y) to supply as
promptly as practicable any additional information and documentary material that
may be requested pursuant to the HSR Act or by any Governmental Authority and to
take such other commercially reasonable actions as may be necessary to cause the
expiration or termination of the applicable waiting periods under the HSR Act as
soon as practicable; and

(ii)      within 10 Business Days following the execution of this Agreement,
Buyers and/or Navarre shall use commercially reasonable efforts to file with the
SEC such documents or amendments that they deem reasonably necessary to register
for sale             shares of its common stock to pay a portion of the Purchase
Price and Buyers and/or Navarre shall use commercially reasonable efforts to
supply as promptly as practicable any additional information requested by the
SEC and respond to any comments from the SEC.

          (b)      Each of the parties hereto shall, in connection with the
efforts referenced in Section 5.5(a) to obtain all requisite approvals and
authorizations for the transactions contemplated hereby under the HSR Act, any
Antitrust Laws, the Securities Act or any other applicable Law, use its
commercially reasonable efforts to (i) cooperate in all respects with each other
in connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a private
party; and (ii) keep the other parties informed in all material respects of any
material communication received by such party from, or given by such party to,
the Federal Trade Commission, the Antitrust Division of the Department of
Justice, the SEC or any other Governmental Authority and of any material
communication received or given in connection with any proceeding by a private
party, in each case regarding the transactions contemplated hereby.

          (c)      In furtherance and not in limitation of the covenants of the
parties contained in Sections 5.5(a) and (b), each of the parties hereto shall
use its commercially reasonable efforts to resolve such objections, if any, as
may be asserted with respect to the transactions contemplated

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hereby under any Antitrust Law; provided, however, that the foregoing shall not
require any party to agree to any asset divestiture or restriction on its or its
Subsidiaries’ or Affiliates’ or either Company’s business operations or any
other conditions to the issuance of any consent or approval under any Antitrust
Law.

     5.6 Announcements. Prior to the Closing, no party hereto will (and each
such party will cause its Affiliates not to) issue any press release or
otherwise make any public statement or report with respect to this Agreement
except (i) as and to the extent that such party or any of its Affiliates
determines in good faith that it is so obligated by Law, in which case such
party shall give notice, which if practicable under the circumstances, will be
in writing, to the other parties in advance of such party’s or its Affiliate’s
intent to make such announcement or issue such press release and the parties
hereto shall use reasonable efforts to cause a mutually agreeable release or
announcement to be issued, or (ii) as may be mutually agreed by Buyers and the
Companies.

     5.7 Conduct of Business of the Companies Prior to the Closing. During the
period from the date of this Agreement until the earlier of the Closing Date or
the termination of this Agreement in accordance with its terms, the Sellers
will, and they shall cause both Companies to, continue to conduct the business
of the Companies and maintain their business relationships in the ordinary and
usual course and will not, without the prior written consent of Buyers, cause
either Company to take any of the following actions:

          (a)      borrow any money;

          (b)      enter into any material transaction other than the redemption
of one or more holders of Partnership Interests for cash;

          (c)      encumber or permit to be encumbered any of its assets, except
for Permitted Liens;

          (d)      dispose of any of its assets, other than in the ordinary
course of business, other than interests in or assets of the Company
Subsidiaries;

          (e)      enter into any material lease or contract for the purchase or
sale or license of any property, real or personal except in the ordinary course
of its business;

          (f)      fail to maintain its equipment and other assets in good
working condition and repair in all material respects according to the standards
it has maintained to the date of this Agreement, subject only to ordinary wear
and tear in the ordinary course of business;

          (g)      except as may be required to cause the condition set forth in
Section 7.1(u) to be satisfied or except in the ordinary course of its business,
pay (or make any oral or written commitments or representations to pay) any
bonus, increased salary or special remuneration to any director, officer,
employee or consultant (except for normal salary increases or bonuses consistent
with past practices or pursuant to existing arrangements previously disclosed to
Buyers and/or Navarre) or enter into or vary the terms of any employment,
consulting or severance agreement with any such person, pay any severance or
termination pay (other than payments made in accordance with plans or agreements
existing on the date hereof), grant any stock option or issue any restricted
stock, or enter into or modify any agreement or Employee Benefit Plan;

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          (h)      change accounting methods;

          (i)      except as may be required to cause the conditions set forth
in Articles 6 and 7 hereof to be satisfied or except in the ordinary course of
business, amend or terminate any contract, agreement or license to which it is a
party so long as any such amendment or termination would not be reasonably
likely to have a Material Adverse Effect on either of the Companies;

          (j)      make any loan, advance or capital contribution to or
investment in any Person;

          (k)      except as may be required to cause the conditions set forth
in Articles 6 and 7 hereof to be satisfied, waive or release any right or claim
except in the ordinary course of its business;

          (l)      issue or sell any shares of its capital stock of any class or
any other of its securities, or issue or create any warrants, obligations,
subscriptions, options, convertible securities or other commitments to issue
shares of capital stock, or accelerate the vesting of any outstanding security;

          (m)      split or combine the outstanding shares of its capital stock
of any class or enter into any recapitalization or agreement affecting the
number or rights of outstanding shares of its capital stock of any class
affecting any other of its securities;

          (n)      merge, consolidate or reorganize with, or acquire any entity;

          (o)      license any Intellectual Property except in the ordinary
course of its business consistent with past practice;

          (p)      amend its certificate of limited partnership or partnership
agreements;

          (q)      agree to any audit assessment by any Tax authority;

          (r)      change any insurance coverage or issue any certificates of
insurance; or

          (s)      agree to do, or enter into negotiations with respect to, any
of the things described in the preceding clauses in this Section 5.7.

     5.8 Satisfaction of Conditions Precedent.

          (a)      During the term of this Agreement, the Sellers and the
Companies will use their commercially reasonable best efforts to satisfy or
cause to be satisfied all the conditions precedent that are set forth in
Article 7, and the Sellers and the Companies will use their commercially
reasonable best efforts to cause the transactions contemplated by this Agreement
to be consummated.

          (b)      During the term of this Agreement, Buyers and Navarre will
use their commercially reasonable best efforts to satisfy or cause to be
satisfied all the conditions precedent that are set forth in Article 6, and
Buyers and Navarre will use their commercially reasonable best efforts to cause
the transactions contemplated by this Agreement to be consummated.

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     5.9 Consents. The Companies shall promptly as is reasonably practicable
give such notices to third parties and use its commercially reasonable efforts
to obtain the third party consents listed, or required to have been listed, in
Section 3.4(a) of the Disclosure Letter (the “Consents”). Buyers and Navarre
shall cooperate and use all commercially reasonable efforts to assist the
Companies in giving such notices and obtaining such consents; provided, however,
that neither Buyers, Navarre, the Sellers nor the Companies shall be required to
make any payments of money or provide any other inducement to the other party or
parties to the applicable Contracts.

     5.10 No Other Negotiations. From and after the date of this Agreement until
the earlier of the Closing Date or the termination of this Agreement in
accordance with its terms, the Sellers shall not, and will not allow either
Company to, directly or indirectly, (a) solicit, initiate discussions or engage
in negotiations with any Person (whether such negotiations are initiated by
either Company or the Sellers or otherwise) or take any other action intended or
designed to facilitate the efforts of any Person, other than Buyers and/or
Navarre, relating to the possible acquisition of either Company (whether by way
of merger, purchase of capital stock, purchase of assets or otherwise) or any
material portion of its capital stock or assets (with any such efforts by any
such person, including a firm proposal to make such an acquisition, to be
referred to as “Acquisition Proposal”), (b) provide non-public information with
respect to either Company to any Person, other than Buyers and/or Navarre in
connection with any such transaction, or (c) enter into an agreement with any
Person, other than Buyers and/or Navarre, providing for a possible Acquisition
Proposal. If either Company or any Seller receives any unsolicited offer or
proposal to enter negotiations relating to an Acquisition Proposal, the Company
or Seller, as the case may be, shall immediately notify Buyers thereof,
including information as to the identity of the party making any such offer or
proposal and the specific terms of such offer or proposal.

     5.11 Insurance. Between the date of this Agreement and the Closing, the
Companies shall use commercially reasonable efforts to maintain in full force
and effect the Insurance Policies. The Companies shall promptly advise Buyers in
writing of any change of insurer or type of coverage in respect of the Insurance
Policies.

     5.12 Confidential Information.

          (a)      For a period of three (3) years following the Closing Date,
each Seller shall, and shall cause its Affiliates and representatives to, keep
confidential and not disclose to any other Person or use for the benefit of any
other Person any confidential proprietary information, trade secrets (including,
without limitation, the terms of all Contracts and all results of research and
development) or other intellectual property in its possession or control
regarding the Business (collectively, “Confidential Information”); provided that
each Seller may disclose Confidential Information as required in connection with
the enforcement of such Seller’s rights under this Agreement or any Ancillary
Agreement to which it is a party, or as required to its financial advisors,
legal counsel and other professional advisors who are advised of the
confidential nature of such information and agree (or are bound under applicable
cannons of ethics or similar constraints) to keep such information confidential.
The obligations of each Seller under this Section 5.12 shall not apply to
information which (i) is or becomes generally available to the public without
breach of the commitment provided for in this Section 5.12 or (ii) is required
to be disclosed by Law, Order or regulation of a court or tribunal or
Governmental Authority; provided, however, that, in any such case, to the extent
practicable and not prohibited by Law, any Seller subject to such requirement

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shall notify the Companies as early as reasonably practicable prior to
disclosure to allow the Companies to take appropriate measures to preserve the
confidentiality of such information.

          (b)      Each Seller acknowledges and agrees that the remedy at law
for any breach, or threatened breach, of any of the provisions of this
Section 5.12 would be inadequate and, accordingly, each Seller covenants and
agrees that Buyers and/or Navarre shall, in addition to any other rights and
remedies which Buyers and/or Navarre shall have, have the right to seek
equitable relief, including injunctive relief, and to seek the remedy of
specific performance with respect to any breach or threatened breach of such
covenant, as may be available from any court of competent jurisdiction. Such
right to obtain equitable relief may be exercised, at the option of Buyers
and/or Navarre, concurrently with, prior to, after, or in lieu of, the exercise
of any other rights or remedies that Buyers and/or Navarre may have as a result
of any such breach or threatened breach.

     5.13 Accounts Receivable.

          (a)      On or before the Closing Date, the Seller Representative
shall deliver to Buyers a list of all Closing Accounts Receivable showing, in
each case, the name of the customer or other third party owing each Closing
Account Receivable, the date and number of each outstanding invoice and the
amount owed by such customer or other third party on each such invoice.

          (b)      During the 120-day period immediately following the Closing
Date (the “Collection Period”), Buyers and the Companies shall use their best
efforts to collect the Closing Accounts Receivable on a basis consistent with
the Companies’ collection processes prior to the Closing Date. Without the
agreement of the Seller Representative, neither Buyers nor the Companies shall
settle any Closing Account Receivable for less than its face value. During the
Collection Period, the Seller Representative shall also have the right to seek
to have the account debtors satisfy such Closing Accounts Receivable.

          (c)      On the 125th day after the Closing Date, Buyers shall prepare
and deliver to the Seller Representative a list showing the total amount of each
Closing Account Receivable which was collected by Buyers and the Companies
(including, in the case of any item returned to a Company in respect of a
Closing Account Receivable, the value of such item as determined in accordance
with GAAP) as of the close of business on the 120th day following the Closing
Date including any returns and the value ascribed thereto (the “Collected
Accounts Receivable”), and an amount equal to the excess of Closing Accounts
Receivable over the amount of Collected Accounts Receivable (but not greater
than the A/R Amount) shall be released from the Escrow Account to the Buyers,
and the balance, if any, of the A/R Amount shall be released to the Sellers.

          (d)      All amounts received by Buyers and the Companies during the
Collection Period from any account debtor with respect to one or more Closing
Accounts Receivable and one or more Post-Closing Accounts Receivable shall be
applied first to the oldest outstanding Closing Accounts Receivable for such
account debtor; provided that if the account debtor has asserted a colorable
defense against payment of a Closing Account Receivable as to which payment
would otherwise be applied hereunder, Buyers and the Seller Representative may
jointly agree to apply such payment to a different Closing Accounts Receivable
of such account debtor.

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          (e)      At the end of the Collection Period, with respect to all
Closing Accounts Receivable that have not been collected in their entirety,
Buyers and the Companies shall immediately reassign to the Seller
Representative, for the account of the Sellers, the entire right, title and
interest of each Company in such remaining Closing Accounts Receivable. The
Seller Representative shall thereupon be entitled to collect such Closing
Accounts Receivable (or to settle or negotiate the amounts and terms of such
Closing Accounts Receivable as he deems appropriate) and neither Buyers nor the
Companies shall have any further responsibility with respect thereto or be
entitled to receive any portion of any amounts collected by the Seller
Representative thereon, it being understood that Buyers and the Companies shall
promptly remit to the Seller Representative any amounts thereafter received from
an account debtor in respect of any such reassigned Closing Account Receivable.
Any returned inventory received from account debtors in respect of Closing
Accounts Receivable after the end of the Collection Period shall first be
credited towards all Post Closing Accounts Receivable for such account debtor
(determined on a SKU-by-SKU basis), and thereafter towards Closing Accounts
Receivable for such account debtor.

     5.14 Related Party Debt; Affiliate Transactions. The Sellers and the
Companies shall cause all Indebtedness and payment obligations of any kind
(whether for money borrowed, guarantees, intercompany Indebtedness or otherwise)
of each Company owing to or for the benefit of any Related Party of such Company
other than a Company including, without limitation, that certain Promissory Note
dated June 30, 2004, in the principal amount of $4,000,000 made by Productions
Company in favor of Robert Cocanougher, as Agent for Wise Resources, Ltd., DCJC
Ltd., Wise Capital, Ltd., and Coventry Asset Management, Ltd. (“Related Party
Debt”) to be cancelled at or prior to Closing, and shall cause all other
Affiliate Transactions to be terminated at or prior to Closing without any
Liability to either Company or any of their Subsidiaries, except for those
transaction listed in Section 5.14 to the Disclosure Letter.

     5.15 Financial Statements. If reasonably required by Buyers and/or Navarre
to meet SEC reporting requirements on or before the Closing Date, the Sellers
shall, at their sole cost and expense, deliver, or cause each Company to
deliver, to Buyers, at the earliest possible date, audited financial statements
for each Company for the fiscal year ended December 31, 2004 (the “Year End
Financials”), which shall be in form suitable for filing with the SEC and for
which the auditors for each Company shall have consented to the inclusion of the
SEC filings of Buyers and/or Navarre.

     5.16 Restriction on Transfer of Shares.

          (a)      Any Shares issued pursuant to this Agreement and any shares
of capital stock or other securities received with respect thereto that have not
been registered pursuant to an effective registration statement under the
Securities Act pursuant to the terms of the Registration Rights Agreement
(collectively, the “Restricted Securities”) shall not be sold, transferred,
assigned, pledged, encumbered or otherwise disposed of (each, a “Transfer”)
except in compliance with the provisions of this Section 5.16, which provisions
are intended to insure compliance with the provisions of the Securities Act.
Each Seller agrees to observe and comply with the Securities Act in connection
with any Transfer of Restricted Securities owned by such Seller.

          (b)      Each certificate representing Restricted Securities and each
certificate issued to any transferee of any holder of any such certificate shall
be stamped or otherwise imprinted with a legend in substantially the following
form:

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES OR “BLUE-SKY” LAWS. THESE SECURITIES MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.

     5.17 Cooperation in Financing.

          (a)      Prior to the Closing, the Sellers shall, and shall cause the
Companies and the Company Subsidiaries to, reasonably cooperate, and request the
auditors of the Companies and the Company Subsidiaries to reasonably cooperate,
with Navarre, Buyers and their auditors in connection with the financing of the
transactions contemplated by this Agreement. The cooperation requested of the
auditors of the Companies and the Company Subsidiaries shall include providing
consent to Navarre and/or Buyers to prepare and use their audit reports relating
to the Companies and the Company Subsidiaries and, at the cost of Navarre and/or
Buyers, to provide any necessary “comfort letters”.

          (b)      Without limiting Section 5.17(a), prior to the Closing, the
Sellers shall cause appropriate management and other employees of the Companies
and the Company Subsidiaries, and Navarre and/or Buyers shall cause their
appropriate management and other employees, and each of Navarre, Buyers and
Sellers shall request their respective accountants, advisors, counsel and other
representatives, to reasonably cooperate and participate in good faith in
meetings, conference calls, drafting sessions, due diligence sessions,
management presentation sessions, roadshow rehearsals, sales force presentations
and sessions with rating agencies as reasonably requested by Navarre, Buyers
and/or their advisors in order to obtain the financing for the transactions
contemplated by this Agreement. Such cooperation shall also include arranging
for senior officers of the Companies and the Company Subsidiaries to provide
reasonable assistance with the preparation of offering memoranda, private
placement memoranda, prospectuses and similar documents.

ARTICLE 6

CONDITIONS TO THE OBLIGATIONS OF SELLERS

     6.1 Sellers’ Closing Conditions. The obligations of Sellers under this
Agreement to effect the Closing are subject to the fulfillment of the following
conditions prior to or at the Closing, each of which may be waived (as
conditions to their obligations) by Sellers in their absolute discretion:

          (a)      Representations, Warranties, Covenants.

(i)      The representations and warranties of Buyers and Navarre contained in
Article 4 of this Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing Date with the same effect
as though such representations and warranties had been made at and as of the
Closing Date, except for representations and warranties that speak as of a
specific date or time other

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than the Closing Date (which need only be true and correct in all material
respects as of such date or time).

(ii)      Buyers and Navarre shall have performed and complied in all material
respects with each and every covenant and agreement required by this Agreement
to be performed or complied with by it at or prior to the Closing.

(iii)      Buyers and Navarre shall have furnished Sellers with a certificate,
dated as of the Closing Date and duly executed on behalf of Buyers and Navarre
by an officer of each Buyer and Navarre, as the case may be, to the effect that
the conditions set forth in clauses (i) and (ii) of this Section 6.1(a) have
been satisfied as of the Closing Date.

          (b)      Injunction; Litigation; Legislation. (i) None of the parties
hereto shall be subject to any order or injunction restraining or prohibiting
the consummation of the transactions contemplated hereby, (ii) no action or
proceeding shall have been instituted before any court or Governmental Authority
to restrain or prohibit, or to obtain damages in respect of, the consummation of
the transactions contemplated hereby, (iii) none of the parties hereto shall
have received written notice from any Governmental Authority of (x) its
intention to institute any action or proceeding to restrain, enjoin or nullify
this Agreement or the transactions contemplated hereby, or to commence any
investigation (other than a routine letter of inquiry, including a routine civil
investigative demand) into the transactions contemplated hereby or (y) the
actual commencement of such investigation, and (iv) no statute, rule or
regulation shall have been promulgated or enacted by any Governmental Authority,
which would prevent or make illegal the consummation of the transactions
contemplated hereby.

          (c)      HSR Act. The waiting period (and any extension thereof) under
the HSR Act shall have expired or been terminated.

          (d)      Secretary’s Certificate. Each Buyer and Navarre shall have
furnished Sellers with a certificate, dated as of the Closing Date and duly
executed on behalf of each Buyer by the Secretary of each Buyer and on behalf of
Navarre by the Secretary of Navarre, certifying as to an attached copy of the
resolutions of the Board of Governors of each Buyer and the Board of Directors
of Navarre, as the case may be, authorizing and approving the execution,
delivery and performance of, and the consummation of the transactions
contemplated by, this Agreement and the Ancillary Agreements to which they are a
party, and stating that the resolutions thereby certified have not been amended,
modified, revoked or rescinded.

          (e)      Good Standing Certificates. Each Buyer shall have furnished
Sellers with a certificate certifying as to its organization, valid existence
and good standing as a limited liability company in the State of Minnesota as of
a date no more than 5 days prior to the Closing Date. Navarre shall have
furnished Sellers with a certificate certifying as to its incorporation, valid
existence and good standing as a corporation in the State of Minnesota as of a
date no more than 5 days prior to the Closing Date.

          (f)      Assignment and Assumption. Each Assignment and Assumption
Agreement executed and delivered by a Seller shall be executed and delivered by
the appropriate Buyer.

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          (g)      Escrow Agreement. Each Buyer and the Escrow Agent shall have
executed and delivered the Escrow Agreement.

          (h)      Employment Agreement. Productions Company shall have executed
and delivered the Employment Agreement pursuant to Buyers’ authorization.

          (i)      Non-Competition Agreements. Each Buyer shall have executed
and delivered the Non-Competition Agreements.

          (j)      Registration Rights Agreement. Navarre, the Seller
Representative and each Seller shall have executed and delivered the
Registration Rights Agreement.

          (k)      Consents and Approvals. Buyers and/or Navarre shall have
obtained, each in form and substance reasonably satisfactory to the Sellers in
their sole and absolute discretion, and delivered to the Sellers, all
Governmental Authorizations that are required to be obtained by Buyers and/or
Navarre in order to consummate the transactions contemplated hereby.

          (l)      Legal Opinion. Buyers shall have delivered the legal opinion
of Winthrop & Weinstine, P.A., counsel to Buyers and Navarre, in form and
substance reasonably satisfactory to the Sellers.

          (m)      Allocation of Purchase Price. Buyers and the Sellers shall
have agreed to the Allocation of Purchase Price pursuant to Section 1.1(d).

ARTICLE 7

CONDITIONS TO THE OBLIGATIONS OF BUYERS AND NAVARRE

     7.1 Buyers’ and Navarre’s Closing Conditions. The obligations of Buyers and
Navarre under this Agreement to effect the Closing are subject to the
fulfillment of the following conditions prior to or at the Closing, each of
which may be waived (as conditions to their obligations) by Buyers and Navarre
in their absolute discretion:

          (a)      Representations, Warranties, Covenants.

(i)      The representations and warranties contained in Articles 2 and 3 of
this Agreement shall be true and correct in all material respects as though such
representations and warranties were made as of the date of this Agreement and as
of the Closing Date with the same effect as though such representations and
warranties had been made at and as of the Closing Date, except for
representations and warranties that speak as of a specific date or time other
than the Closing Date (which need only be true and correct in all material
respects as of such date or time).

(ii)      Each Seller and each Company shall have performed and complied in all
material respects with each and every covenant and agreement required by this
Agreement to be performed or complied with by such Seller, or such Company, as
applicable, at or prior to the Closing.

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(iii)      Each Seller and each Company shall have furnished Buyers with a
certificate (each, a “Closing Certificate”), dated as of the Closing Date and
duly executed by such Seller (if an Individual) or on behalf of such Seller by
an officer of such Seller, to the effect that the conditions applicable to such
Seller or such Company set forth in clauses (i) and (ii) of this Section 7.1(a)
have been satisfied as of the Closing Date.

          (b)      Injunction; Litigation; Legislation. (i) None of the parties
hereto shall be subject to any order or injunction restraining or prohibiting
the consummation of the transactions contemplated hereby, (ii) no action or
proceeding shall have been instituted before any court or Governmental Authority
to restrain or prohibit, or to obtain damages in respect of, the consummation of
the transactions contemplated hereby, (iii) none of the parties hereto shall
have received written notice from any Governmental Authority of (x) its
intention to institute any action or proceeding to restrain, enjoin or nullify
this Agreement or the transactions contemplated hereby, or to commence any
investigation (other than a routine letter of inquiry, including a routine civil
investigative demand) into the transactions contemplated hereby or (y) the
actual commencement of such investigation, and (iv) no statute, rule or
regulation shall have been promulgated or enacted by any Governmental Authority,
which would prevent or make illegal the consummation of the transactions
contemplated hereby.

          (c)      HSR Act. The waiting period (and any extension thereof) under
the HSR Act shall have expired or been terminated.

          (d)      Secretary’s Certificates. Each Seller (other than the
Individuals) and each Company shall have furnished Buyers with a certificate,
dated as of the Closing Date and duly executed on behalf of such Seller and such
Company, respectively, by the Secretary of such Seller and such Company,
respectively, certifying as to (i) an attached copy of the resolutions of the
Board of Directors (or such other governing body) of such Seller and all holders
of interests in such Seller or of such Company, respectively, authorizing and
approving the execution, delivery and performance of, and the consummation of
the transactions contemplated by, this Agreement and the Ancillary Agreements to
which such Seller and such Company, respectively, is a party, and stating that
the resolutions thereby certified have not been amended, modified, revoked or
rescinded and (ii) a true and complete copy of the certificate of formation and
operating agreement (or similar governing instruments) of such Company.

          (e)      Good Standing Certificates. Each Company shall have furnished
Buyers with a certificate certifying as to such Company’s organization, valid
existence and good standing as a domestic limited partnership in the State of
Texas as of a date no more than 5 days prior to the Closing Date.

          (f)      Release Agreements. Each Seller shall have executed and
delivered a Release Agreement.

          (g)      Minimum Cash. Either (i) the Companies shall have at least
$2,500,000 in Cash on the Closing Date, or (ii) Sellers shall provide evidence,
in form and content reasonably acceptable to Buyers, that the amount by which
Cash is less than $2,500,000 was used by the Companies to acquire content,
Intellectual Property rights, or other income producing assets relating to the
Business. Notwithstanding the foregoing, in the event that the Companies have
less than

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$2,500,000 in Cash on the Closing Date (after giving effect to the provisions of
clause (ii) above), Sellers may, within 2 Business Days of notice of such
deficiency from Buyers, provide Cash to the Companies in the amount of such
deficiency, and such amount shall be deemed to be Cash held by the Companies as
of the Closing Date.

     (h)      Cancellation of Indebtedness; Affiliate Transactions. All Related
Party Debt shall have been cancelled and each Company shall have delivered to
Buyers a release and satisfaction executed by each such Related Party in form
and substance reasonably satisfactory to Buyers. All other Affiliate
Transactions except those transactions set forth in Section 5.14 of the
Disclosure Letter shall have been terminated without continuing Liability to
either Company or any of the Company Subsidiaries and each Company shall have
delivered to Buyers a release and satisfaction executed by each such Affiliate
in form and substance reasonably satisfactory to Buyers.

     (i)      Escrow Agreement. Each of the Seller Representative and the Escrow
Agent shall have executed and delivered the Escrow Agreement.

     (j)      Registration Rights Agreement. Navarre, the Seller Representative
and each Seller shall have executed and delivered the Registration Rights
Agreement.

     (k)      Consents and Approvals. The Companies shall have obtained, each in
form and substance reasonably satisfactory to Buyers, and delivered to Buyers,
all Governmental Authorizations that are required in order to consummate the
transactions contemplated hereby and to permit Buyers to conduct the business of
the Companies as currently conducted and as contemplated to be conducted.

     (l)      Legal Opinion. The Seller Representative shall have delivered the
legal opinion of Shannon, Gracey, Ratliff & Miller, LLP, counsel to the Sellers,
the Seller Representative and the Companies, in form and substance reasonably
satisfactory to Buyers.

     (m)      Assignment and Assumption Agreements. Each Seller shall have
executed and delivered an Assignment and Assumption Agreement.

     (n)      Gen Fukunaga. Gen Fukunaga shall have entered into the Employment
Agreement.

     (o)      Non-Competition Agreements. Each Individual party to a
Non-Competition Agreement shall have executed and delivered his respective
Non-Competition Agreement.

     (p)      Indebtedness. Except as set forth in Section 7.1(p) of the
Disclosure Letter, the Company and Company Subsidiaries shall have no
Indebtedness.

     (q)      Financing. Buyers and/or Navarre shall have obtained funds
sufficient to enable Buyers and/or Navarre to consummate the transactions
contemplated by this Agreement on such terms as are satisfactory to Buyers
and/or Navarre in their sole and absolute discretion.

     (r)      Financial Statements. The Sellers shall have delivered to Buyers
the Year End Financials if required by Buyers and/or Navarre pursuant to the
terms of Section 5.15, as well as the

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Statement of Operations indicating that the Companies have generated not less
than $23,000,000 of EBIT during the period covered by the Statement of
Operations.

          (s)      Allocation of Purchase Price. The Sellers and Buyers shall
have agreed to the Allocation of Purchase Price pursuant to Section 1.1(d).

          (t)      Disclosure Letter. The Sellers shall have delivered to Buyers
an updated Disclosure Letter updating the disclosures required by
Sections 3.9(a)(iii), 3.9(a)(ix), 3.9(a)(xiv), 3.11(b), 3.16(b), 3.20 and 3.21
of this Agreement.

          (u)      Barry Watson. Barry Watson shall have entered into a
termination and release agreement in form and substance reasonably satisfactory
to Buyers.

ARTICLE 8

SURVIVAL; INDEMNIFICATION

     8.1 Survival. Subject to this Section 8.1 and to Section 8.2, all
representations, warranties, covenants and agreements contained in this
Agreement or the Disclosure Letter or the Ancillary Instruments shall survive
(and not be affected in any respect by) the Closing and any investigation
conducted by any party hereto. Notwithstanding the foregoing, the
representations and warranties contained in or made pursuant to this Agreement
and the related indemnity obligations set forth in Section 8.2 shall terminate
on, and no claim or action with respect thereto may be brought after the third
(3rd) anniversary date of the Closing Date, except that (i) the representations
and warranties contained in Sections 2.2, 2.3, 2.6, 3.1(b), 3.3, clause (i) of
Section 3.4(a), Section 3.19, Section 4.2, clause (i) of Section 4.3 and
Section 4.6 and the related indemnity obligations contained in Section 8.2 shall
survive indefinitely, (ii) the representations and warranties contained in
Section 3.18 and the related indemnity obligations contained in Section 8.2
shall survive until the sixth anniversary of the Closing Date, and (iii) the
representations and warranties contained in Sections 3.10 and 3.12 and the
related indemnity obligations contained in Sections 8.2 and 10.1 shall survive
until 60 days following the running of the applicable statute of limitations
(giving effect to any waiver or extension thereof). The representations,
warranties, covenants and indemnity obligations which terminate pursuant to this
Section 8.1, and the Liability of any party hereto with respect thereto pursuant
to this Article 8, shall not terminate with respect to any claim, whether or not
fixed as to Liability or liquidated as to amount, with respect to which the
Indemnifying Party has been given written notice from the Indemnified Party
setting forth the facts upon which the claim for indemnification is based in
reasonable detail prior to the expiration of the applicable survival period.

     8.2 Indemnification. The parties hereto shall indemnify each other as set
forth below:

          (a)      Subject to Section 8.1 and the other provisions of this
Section 8.2 including, without limitation, Section 8.2(c), each Majority Seller
and each Minority Seller hereby severally (but jointly as among Minority Sellers
and Majority Sellers as provided in Paragraph (c) below), agrees to indemnify
and hold harmless (i) each Company (from and after the Closing), (ii) each
Buyer, (iii) Navarre and (iv) their respective managers, officers, employees,
governors, directors, agents and Affiliates (collectively as to (i), (ii),
(iii) and (iv), the “Buyers’ Indemnitees”) from, and to reimburse Buyers’
Indemnitees for, on a Net After Tax Basis, any Losses (including, without

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limitation, any reasonable Legal Expenses) based upon, in connection with,
arising out of, resulting from, or otherwise in respect of:

(i)      the breach of or inaccuracy as of the Closing Date of any
representation or warranty of any such Seller set forth in Article 2 of this
Agreement (the “Relevant Representations”); and

(ii)      the breach by any such Seller (or Seller Representative) of or failure
by any such Seller (or Seller Representative) to perform any of its covenants or
agreements contained in this Agreement.

          (b)      Subject to Section 8.1 and the other provisions of this
Section 8.2 including, without limitation, Section 8.2(c), each Majority Seller
and each Minority Seller (and, prior to the Closing only, each Company) hereby
severally (but jointly as among Minority Sellers and Majority Sellers as
provided in Paragraph (c) below), agrees to indemnify and hold harmless Buyers’
Indemnitees from, and to reimburse Buyers’ Indemnitees for, on a Net After Tax
Basis, any Losses (including, without limitation, any reasonable Legal Expenses)
based upon, in connection with, arising out of, resulting from or otherwise in
respect of:

(i)      the breach of or inaccuracy as of the Closing Date of any
representation or warranty of the Sellers set forth in Article 3 of this
Agreement (the “Company Representations”);

(ii)      the breach by the Sellers (or Seller Representative) of or failure by
Sellers (or Seller Representative) to perform any of their covenants or
agreements contained in this Agreement; and

(iii)      the breach by either Company of or failure by either Company to
perform prior to the Closing any of its covenants or agreements contained in
this Agreement.

     provided, however, that:

  (1)   Sellers (and, prior to Closing only, the Companies) shall not be
responsible for any Losses with respect to Section 8.2(b)(i), until the amount
of all Losses of the Buyers’ Indemnitees under Section 8.2 exceeds $1,000,000
(the “Basket Amount”), in which case Sellers (and, prior to Closing only, the
Companies) shall be liable only to the extent such Losses exceed the Basket
Amount; and     (2)   The cumulative aggregate indemnity obligation of Sellers
(and, prior to the Closing only, the Companies) under Section 8.2(a)(i) and
(b)(i) shall be calculated as follows:

  (A)   For Indemnification Claims received by Sellers (and prior to Closing
only, the Companies) during the period commencing on the date of this Agreement
and continuing until the 460th day following the Closing Date (the “First Cap
Period”), the cumulative aggregate indemnity obligation of Sellers and the

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      Companies, as the case may be, shall in no event exceed $20,000,000.
Within 10 days following the close of the First Cap Period, an amount equal to
$10,000,000 less the amount of any Indemnification Claims received by Sellers
and/or the Companies, as the case may be, during the First Cap Period in excess
of $10,000,000 shall be released from the Escrow Account to Sellers (the “First
Escrow Release Amount”).     (B)   For Indemnification Claims received by
Sellers during the period commencing on the 461st day following the Closing Date
and continuing for a period of 270 days thereafter (the “Second Cap Period”),
the cumulative aggregate indemnity obligation of Sellers shall be reduced to an
amount not to exceed the positive difference, if any, of $10,000,000 less the
amount of any Indemnification Claims received by Sellers and/or the Companies,
as the case may be, during the First Cap Period where it is determined by a
Final Order that Buyers and/or Navarre are entitled to the amount of such
Indemnification Claims and such amount has been paid and received by Buyers
and/or Navarre, as the case may be. Within 10 days following the close of the
Second Cap Period, an amount equal to $10,000,000 less the amount of any
Indemnification Claims received by Sellers and/or the Companies, as the case may
be, during the Second Cap Period in excess of $10,000,000 shall be released from
the Escrow Account to Sellers (the “Second Escrow Release Amount”).     (C)  
For Indemnification Claims received by Sellers during the period commencing on
the 732nd day following the Closing Date and continuing for a period of 360 days
thereafter (the “Third Cap Period”), the cumulative aggregate indemnity
obligation of Sellers shall be reduced to an amount not to exceed the positive
difference, if any, of $10,000,000 less the amount of any Indemnification Claims
received by Sellers and/or the Companies, as the case may be, during the First
Cap Period and Second Cap Period where it is determined by a Final Order that
Buyers and/or Navarre are entitled to the amount of such Indemnification Claims
and such amount has been paid and received by Buyers and/or Navarre, as the case
may be.

          (c)      Notwithstanding anything in Articles 2 and 3 and
Sections 8.2(a) and 8.2(b) to the contrary, the indemnity obligations of each
Majority Seller shall only be joint and several with respect to the other
Majority Sellers and the indemnity obligations of each Minority Seller shall
only be joint and several with respect to the other Minority Sellers. In
addition, with respect to indemnification claims arising out of Sections 8.2(a)
and 8.2(b), the Majority Sellers shall only be

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jointly and severally liable for the Majority Share of any Losses (on a Net
After Tax Basis) and the Minority Sellers shall only be jointly and severally
liable for the Minority Share of any Losses (on a Net After Tax Basis).

          (d)      Subject to Section 8.1 and to the other provisions of this
Section 8.2, Buyers and Navarre hereby, jointly and severally, agree to
indemnify and hold harmless Sellers and their respective officers, directors,
agents, employees and Affiliates (collectively, the “Seller Indemnitees”) from,
and to reimburse Seller Indemnitees for, on a Net After Tax Basis, any Losses
(including, without limitation, any reasonable Legal Expenses), based upon, in
connection with, arising out of, resulting from or otherwise in respect of:

(i)      the breach of or inaccuracy as of the Closing Date of any
representation or warranty of Buyer and/or Navarre set forth in Article 4 of
this Agreement;

(ii)      the breach by Buyer and/or Navarre of or failure by Buyer and/or
Navarre to perform any of its covenants or agreements contained in this
Agreement; and

(iii)      except to the extent that any such claims, damages or liabilities
occurs in reliance upon and in conformity with written information regarding
Sellers furnished by Sellers expressly for use and used in connection with the
Registration Statement or Prospectus, claims, damages or liabilities (joint or
several) to which Seller Indemnitees may become subject under the Securities
Act, the Securities Exchange Act or any state securities laws, insofar as such
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon (a) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus or any
amendments or supplements thereto, (b) the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make the
statements therein not misleading, or (c) any violation or alleged violation by
the Buyers and/or Navarre of the Securities Act, the Securities Exchange Act,
any state securities laws or any rule or regulation promulgated under the
Securities Act, the Securities Exchange Act or any state securities laws.

          (e)      As promptly as practicable, and in any event within 60 days,
after Buyers, Navarre or Sellers shall receive any notice of, or otherwise
become aware of, the commencement of any action, suit or proceeding or the
assertion of any claim, for which indemnification is provided for by
Section 8.2(a), (b) or (d) (an “Indemnification Event”), the party entitled to
such indemnification (an “Indemnified Party”) shall give written notice (an
“Indemnification Claim”) to the party (or in the case of any Seller who is an
Indemnified Party, to the Seller Representative) from which such indemnification
is (or, under such assumption, could be) sought (an “Indemnifying Party”)
describing in reasonable detail the Indemnification Event and the basis on which
indemnification is (or, under such assumption, could be) sought; but the failure
of the Indemnified Party to give the Indemnification Claim within such time
period shall not relieve the Indemnifying Party of any Liability hereunder in
respect of such Indemnification Event (or the facts or circumstances giving rise
thereto) except to the extent that such Indemnifying Party is prejudiced or
harmed as a consequence of such failure.

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          (f)      If any Indemnification Event involves the claim of any third
party (a “Third-Party Claim”), the Indemnifying Party shall (whether or not the
Indemnified Party is entitled to claim indemnification under Section 8.2(a),
(b) or (d), as the case may be) be entitled to, and the Indemnified Party shall
provide the Indemnifying Party with the right to, participate in, and assume
sole control over, the defense and settlement of such Third-Party Claim (with
counsel reasonably satisfactory to the Indemnified Party); provided, however,
that (i) the Indemnifying Party or Indemnifying Parties shall provide written
notice to the Indemnified Party of its or their election to assume control of
the defense of such Third-Party Claim (and in the case of Sellers as the
Indemnifying Party in accordance with their joint and several obligations under
Section 8.2, shall be provided to Buyers and/or Navarre by a single written
notice duly executed by the Seller Representative), (ii) the Indemnified Party
shall be entitled to participate in the defense of such Third-Party Claim and to
employ counsel at its own expense to assist in the handling of such Third-Party
Claim, provided that if there is an actual conflict of interest between the
Indemnifying Party and the Indemnified Party, which in the reasonable opinion of
counsel to the Indemnified Party would prevent one counsel from representing
both the Indemnifying Party and the Indemnified Party in any matter, the
Indemnifying Party shall be responsible for all such reasonable counsel expenses
of the Indemnified Party to the extent the Indemnifying Party is found to be
liable to indemnify the Indemnified Party, and (iii) the Indemnifying Party
shall obtain the prior written approval of the Indemnified Party, which approval
shall not be unreasonably withheld, conditioned or delayed (and in the case of
an approval required by Sellers as the Indemnified Party, shall be communicated
to Buyers and/or Navarre as the Indemnifying Party by a single notice duly
executed by the Seller Representative), before entering into any settlement of
such Third-Party Claim or ceasing to defend against such Third-Party Claim if
(x) as a result of such settlement or ceasing to defend, injunctive or other
equitable relief would be imposed against the Indemnified Party or (y) in the
case of a settlement, the Indemnified Party would not thereby receive from the
claimant an unconditional release from all further Liability in respect of such
Third-Party Claim. After written notice by the Indemnifying Party or
Indemnifying Parties to the Indemnified Party of its or their election to assume
control of the defense of any such Third-Party Claim, subject to the provisions
of the following exceptions, the Indemnifying Party or Indemnifying Parties
shall not be liable hereunder to indemnify any Person for any Legal Expenses
subsequently incurred in connection therewith. If the Indemnifying Party or
Indemnifying Parties do not assume sole control over the defense or settlement
of such Third-Party Claim as provided in this Section 8.2(f) within a reasonable
period of time, or, after assuming such control, fails to diligently defend
against such Third-Party Claim in good-faith (it being agreed that settlement of
such Third-Party Claim does not constitute such a failure to defend) the
Indemnified Party shall have the right (as to itself) to defend and, upon
obtaining the written consent of the Indemnifying Party, which consent shall not
be unreasonably withheld, conditioned or delayed, if such Indemnifying Party is
liable for the Losses with respect to such Third Party Claim, settle the claim
in such manner as it may deem appropriate, and the Indemnifying Party shall
promptly reimburse the Indemnified Party therefor in accordance with in
Section 8.2(a), (b) or (d), as appropriate. Notwithstanding the foregoing
provisions of this Section 8.2(f), the Indemnified Party shall have the right at
all times to take over and assume the control (as to itself) of the defense or
settlement of any Third-Party Claim; provided, however, that in such event and
if the Indemnified Party has not taken over control of such Third Party Claim
under the previous sentence the Indemnifying Party or Indemnifying Parties shall
cease to have any obligation under Section 8.2(a), (b) or (d), as the case may
be, in respect of such Third-Party Claim. The

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Indemnifying Party shall not be liable under this Section 8.2(f) for any
settlement or compromise affected without its consent.

          (g)      The Indemnified Party and the Indemnifying Party shall each
cooperate fully (and shall each cause its Affiliates to cooperate fully) with
the other in the defense of any Third-Party Claim pursuant to Section 8.2(f).
Without limiting the generality of the foregoing, each such Person shall furnish
the other such Person (at the expense of the Indemnifying Party) with such
documentary or other evidence as is then in its or any of its Affiliates’
possession as may reasonably be requested by the other Person for the purpose of
defending against any such Third-Party Claim.

          (h)      If at any time subsequent to the receipt by an Indemnified
Party of an indemnity payment hereunder, such Indemnified Party (or any
Affiliate thereof) actually receives any recovery, settlement or other similar
payment with respect to the Loss for which it received such indemnity payment
(the “Recovery”), such Indemnified Party shall promptly pay to the Indemnifying
Party an amount equal to the amount of such Recovery, less any expense incurred
by such Indemnified Party (or its Affiliates) in connection with such Recovery,
but in no event shall any such payment exceed the amount of such indemnity
payment.

          (i)      Unless otherwise required by applicable Law, any payment made
by Buyers, Navarre or Sellers pursuant to this Section 8.2 shall be deemed an
adjustment to the Purchase Price.

          (j)      Notwithstanding anything herein to the contrary (i) this
Section 8.2 shall have no application to claims for indemnification with respect
to Section 3.12, which claims are governed exclusively by Section 10.1, (ii) the
time limitations set forth in Section 8.1, and the Basket Amount and the
aggregate indemnification obligations set forth in Section 8.2(b), shall not
apply to Losses arising from representations made with the knowledge that such
representations were false at the time they were made or fraudulent acts or
failures to act, and (iii) the limitations set forth in Sections 8.2(b)(A),
(B) and (C) shall not apply to Losses arising in respect of claims for any
breach of any representation and warranty contained in Sections 2.2, 2.3, 2.6,
3.1(b), 3.3, clause (i) of Section 3.4(a), Section 3.19, Section 4.2, clause
(i) of Section 4.3, or Section 4.6.

          (k)      For purposes of this Article 8, any breach of or inaccuracy
in any representation or warranty shall be determined without regard to any
materiality or knowledge qualifiers set forth in such representation or
warranty, and all references to materiality and knowledge qualifiers shall be
ignored for purposes of determining whether such representation or warranty was
true and correct when made.

     8.3 Set-Off. Without limiting any of the other rights Buyers and/or Navarre
may have at law or in equity to recover from the Sellers in respect of claims
made pursuant to this Article 8, Buyers and/or Navarre may set-off an amount
equal to Buyers’ or Navarre’s reasonable estimate of such claim(s) against any
payment or payments coming due to the Sellers pursuant to this Agreement
including without, limitation, the Performance Payments, said set-off to be made
against such payments in the order in which they come due; provided, however, to
the extent that Buyers and/or Navarre exercises their right of set-off, it shall
promptly notify the Sellers of the basis for such set-off and, within 15 days
thereafter, Buyers and/or Navarre, as the case may be, shall negotiate in good
faith with the Sellers to attempt to resolve any dispute. If it is ultimately
determined that Buyers

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and/or Navarre wrongfully set-off any amount (or portion thereof) against any
payment due the Sellers, such amount shall be promptly paid to the Sellers.

     8.4 Exclusive Remedy. Each party’s rights of indemnification contained in
this Article 8 shall, from and after the Closing Date, be its sole and exclusive
remedy for any Losses in connection with this Agreement and the transactions
contemplated hereby (including Losses in connection with Third Party Claims),
except as provided in Section 10.1 and except for Losses arising from
representations made with the knowledge that such representations were false at
the time they were made or fraudulent acts or failures to act.

ARTICLE 9

TERMINATION

     9.1 Termination of Agreement. This Agreement may be terminated at any time
on or prior to the Closing:

          (a)      by the mutual consent of the Seller Representative and
Buyers;

          (b)      by Buyers or the Seller Representative, if the Closing has
not taken place on or prior to the Outside Date, provided that the right to
terminate this Agreement under this Section 9.1(b) shall not be available to any
party whose failure to perform any covenant or obligation under this Agreement
or breach of a representation or warranty contained in or made pursuant to this
Agreement has been the cause of or resulted in the failure of the Closing to
occur on or before such date;

          (c)      by Buyers or the Seller Representative, if any court or
Governmental Authority of competent jurisdiction in the United States or any
other material foreign jurisdiction shall have issued an Order, or taken any
other action, permanently prohibiting the transactions contemplated by this
Agreement, and such Order, or other action, shall have become final and
non-appealable; or

          (d)      by either Buyers or the Seller Representative if there has
been a material breach by (i) any of Sellers, the Seller Representative or the
Companies, in the case of termination by Buyers, or (ii) Buyers or Navarre, in
the case of termination by the Seller Representative, of any of the
representations, warranties, covenants or agreements made by such person in this
Agreement, which would permit such other person or persons not to consummate the
transactions contemplated by this Agreement, following written notice from the
terminating party and the failure to cure any such material breach by the
breaching party within 30 days of receipt of such notice.

          (e)      In the event that Buyers and/or Navarre fail to consummate
the transactions contemplated hereby by the Outside Date due to Buyers’ and/or
Navarre’s failure to secure financing necessary to consummate the transactions
contemplated hereby, Buyers or Navarre shall pay to Sellers, as Sellers’ sole
and exclusive remedy for the Buyers’ or Navarre’s failure to consummate the
transactions contemplated hereby, a termination fee in the aggregate amount of
$2,500,000.

          (f)      In the event that Sellers fail to consummate the transactions
contemplated hereby by the Outside Date in order to pursue a competing offer for
the sale of the Partnership

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Interests of all or substantially all of the assets of the Companies, Sellers
shall pay to Buyers and/or Navarre, as Buyers’ and Navarre’s sole and exclusive
remedy for the Sellers failure to consummate the transactions contemplated
hereby, a termination fee in the aggregate amount of $2,500,000.

          (g)      In the event of termination of the Agreement pursuant to this
Section 9.1, written notice thereof shall forthwith be given by the terminating
party to the other parties hereto, and this Agreement shall thereupon terminate
and become void and have no effect, and the transactions contemplated hereby
shall be abandoned without further action by the parties hereto, except that the
provisions of this Section 9.1 and of Section 11.1 shall survive the termination
of this Agreement.

ARTICLE 10

CERTAIN TAX MATTERS

     10.1 Certain Tax Matters.

          (a)      Buyers and Sellers acknowledge that for U.S. Federal income
tax purposes the Companies shall be deemed to have terminated as of the Closing
Date and both Companies’ taxable years shall close on the Closing Date (the
“Final Year”). Sellers shall prepare and file or cause to be filed by the
Companies and the Company Subsidiaries (to the extent of the Companies’
aggregate direct and indirect ownership of a Company Subsidiary) any Income Tax
Returns required to be filed by the Companies for any taxable period ending on
or prior to the Closing Date (a “Pre-Closing Tax Period”), including, without
limitation, any partnership Tax Return for the Final Year and all Tax Returns
required to be filed by the Company Subsidiaries for all Pre-Closing Tax
Periods. If requested by Buyers, the partnership Tax Returns for the Final Year
shall include an election under Section 754 of the Code. Buyers shall prepare
and file or cause to be prepared and filed all other Tax Returns of the
Companies and the Company Subsidiaries for any Pre-Closing Tax Periods that are
due after the Closing; provided, however, that (i) drafts of any such Tax
Returns shall be provided to Seller Representative for his review prior to
filing, and (ii) such Tax Returns shall be prepared in a manner consistent with
past practice and in accordance with the then applicable Tax law.

          (b)      Each Seller shall jointly and severally indemnify Buyers
Indemnitees and hold them harmless from and against, on a Net After Tax Basis,
(i) any and all Taxes imposed on either of the Companies or any of the Company
Subsidiaries for any Pre-Closing Tax Period; (ii) any and all Taxes imposed on
either of the Companies or any of the Company Subsidiaries for any Pre-Closing
Straddle Period (as defined in Section 10.1(d) below); (iii) any and all Taxes
of any Person (other than either Company or any of the Company Subsidiaries)
imposed on any of the Companies or any of the Company Subsidiaries as a
transferee or successor, by contract or pursuant to any law, rule or regulation,
which Taxes relate to an event or transaction occurring before, or as a result
of, the Closing, or as a result of being a member of an affiliated group, or
being included in a combined, consolidated, or unitary income or similar Tax
Return, prior to the Closing, including pursuant to Treasury Regulations §
1.1502-6; (iv) any and all Taxes imposed or other Losses (including, without
limitation, any reasonable Legal Expenses) as a result of the breach of any
representation or warranty contained in Section 3.12 or this Article 10 and
(v) any and all Taxes imposed upon any Seller for any period.

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          (c)      Buyers shall prepare and file all Tax Returns required to be
filed by the Companies or the Company Subsidiaries for any period that includes
(but does not end on) the Closing Date (a “Straddle Period” ) and will notify
Seller Representative of Buyers’ calculation of the Taxes attributable to any
Pre-Closing Straddle Period (determined in accordance with Section 10.1(d));
provided, however, that drafts of any such Tax Returns and calculations shall be
provided to Seller Representative at least 60 days prior to filing. Buyers and
Seller Representative shall attempt to resolve in good faith any disagreement
arising out of any Straddle Period Tax Return and/or any calculation of Sellers’
share of the related Tax liability; if any such dispute is not resolved within
30 days prior to the deadline for filing the Tax Return in question, the matter
shall be submitted for binding resolution to a mutually acceptable nationally
recognized accounting firm in the relevant jurisdiction with no material
relationship to Buyers or Sellers. The accounting firm will have 10 days within
which to resolve the disagreement. Buyers and Sellers will share the fees and
expenses of the accounting firm jointly.

          (d)      In the case of any Straddle Period, the amount of any Taxes
of any Company or Company Subsidiary attributable to the portion of such
Straddle Period ending on the Closing Date (such portion, a “Pre-Closing
Straddle Period” ) with respect to (x) real, personal and intangible property
Taxes and any other Taxes levied on a per diem basis (“Per Diem Taxes”), shall
be equal to the amount of such Per Diem Taxes for the entire Straddle Period
multiplied by a fraction, the numerator of which is the number of days during
the Straddle Period prior to and including the Closing Date, and the denominator
of which is the total number of days in the Straddle Period, and (y) the Taxes
of any Company or Company Subsidiary (other than Per Diem Taxes) for any
Pre-Closing Straddle Period shall be computed as if such taxable period ended as
of the close of business on the Closing Date. Any allocation of income or
deductions required to determine any Taxes attributable to any Straddle Period
shall be made by means of a closing of the books and records of the applicable
Company or Company Subsidiary as of the close of business on the Closing Date;
provided, that exemptions, allowances or deductions that are calculated on an
annual or periodic basis (including, but not limited to, depreciation and
amortization deductions) shall be allocated between the period ending on the
Closing Date and the period after the Closing Date in proportion to the number
of days in each such period.

          (e)      After the Closing Date, each of Buyers and Sellers shall
furnish or cause to be furnished to each other (subject to reimbursement by the
requesting party for any out-of-pocket expenses), upon request, as promptly as
practicable, such information (including access to books, records and personnel)
and assistance as is reasonably requested for the preparation and filing of any
Tax Return or related document, for the preparation for any Tax audit or for the
prosecution or defense of any claim, suit or proceeding relating to Liability
for Taxes of Sellers, Buyers, the Companies or any Company Subsidiary. Buyers
further agree to retain and provide Sellers with access to all books and records
relevant to the Liability of Sellers for Taxes for any periods prior to Closing
for at least five years after the Closing and to give Sellers notice and an
opportunity to receive such books or records prior to destroying or discarding
any such books or records.

          (f)      Buyers shall, in the event that Buyers or, following the
Closing Date, the Companies or the Company Subsidiaries receive notice (in
writing) of any audit, examination or claim by any taxing authority with respect
to Taxes for any Pre-Closing Tax Period for which Buyers’ Indemnitees may be
indemnified hereunder (a “Tax Claim”), promptly notify Seller Representative
thereof. Buyers shall have the sole right to contest any Tax Claim through

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appropriate administrative and judicial procedures, and shall be entitled to
control any such contest. Buyers (i) shall keep Seller Representative reasonably
informed of the status of any such Tax Claim and (ii) shall not pay or
compromise any Tax liability asserted in such Tax Claim for which the Sellers
have an indemnification obligation hereunder without the Seller Representative’s
prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed.

          (g)      Sellers will be entitled to retain, or to receive prompt
payment from Buyers or the Companies of, any refund or credit for overpayment of
Taxes for which Sellers are responsible pursuant to this Section 10.1, plus any
interest received or credited with respect thereto, from the relevant taxing
authorities, except to the extent any such refund or credit is taken into
account in determining the Adjusted Net Worth. Buyers will be entitled to
retain, or to receive prompt payment from Sellers of, any refund or credit for
overpayment of Taxes of the Companies that Sellers are not entitled to retain or
receive pursuant to the immediately preceding sentence, plus any interest
received or credited with respect thereto, from the relevant taxing authorities.
Buyers and Sellers shall cooperate with respect to claiming any refund or credit
with respect to Taxes referred to in this Section 10.1(g). For purposes of this
Section 10.1(g), a party will be deemed to have made prompt payment of a refund
or credit if such payment is made within 10 Business Days of the receipt by such
party of such refund or of the use by such party of such credit.

          (h)      All transfer, documentary, sales, use, stamp, registration
and similar Taxes, and all conveyance fees, recording charges, real property
gains, and similar fees and charges (including any penalties and interest)
incurred in connection with the sale of the Partnership Interests (or any deemed
sale of assets as the result of the sale of the Partnership Interests or as a
result of the deemed sale of any ownership interests in the Company
Subsidiaries) shall be paid timely by the Sellers. Buyers will be responsible
for preparing and timely filing (and Sellers shall timely cooperate with Buyers
in preparing and filing) any forms required with respect to any such Taxes.
Buyers will provide to Sellers a true copy of each such return as filed and
evidence of the timely filing thereof, and Sellers will provide to Buyers
evidence of timely payment thereof.

          (i)      Any indemnification payment for Taxes required by this
Section 10.1 shall be treated by all parties as an adjustment to the Purchase
Price unless otherwise required by applicable law, and shall be paid within 15
Business Days after written notice of payment of, or the obligation to pay, such
Taxes by the party, or any of such party’s Affiliates, who must be indemnified
hereunder.

     10.2 Tax Sharing Agreements. All Tax sharing agreements or similar
agreements with respect to or involving any of the Companies or the Company
Subsidiaries and a Person (other than another Company) shall be terminated as of
the Closing Date and, after the Closing Date, no Company shall be bound thereby
or have any liability thereunder.

     10.3 Coordination of Provisions. The indemnification provided for in
Section 10.1 shall be the sole remedy for any claim in respect of Taxes,
including any claim arising out of or relating to a breach of the
representations and warranties contained in Section 3.12. In the event of a
conflict between the provisions of this Article 10, on the one hand, and the
provisions of Article 8, on the other, the provisions of this Article 10 shall
control with respect to any claim relating to Taxes. For avoidance of doubt, any
indemnification claim with respect to Taxes shall not be subject to the Basket
Amount or the Cap.

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ARTICLE 11

MISCELLANEOUS

     11.1 Expenses. Except as expressly set forth in Section 8.2, regardless of
whether the Closing occurs, each party hereto shall bear all of its expenses
incurred in connection with the transactions contemplated by this Agreement
(“Transaction Expenses”), including, without limitation, accounting and legal
fees incurred in connection herewith; provided, however, that (i) Buyers shall
pay all fees, commissions and expenses of Bear Stearns incurred in connection
with the transactions contemplated by this Agreement, (ii) the Sellers shall pay
all fees, commissions and expenses of A.G. Edwards, Inc. incurred in connection
with the transactions contemplated by this Agreement, (iii) Buyers shall
reimburse Sellers for all reasonable audit and legal costs up to a maximum of
$100,000, associated with the audit for the fiscal year ended December 31, 2001,
and (iv) if the Closing is consummated, except as otherwise expressly provided
herein, all Transaction Expenses of the Companies attributable to the period
prior to and ending at the Closing, other than those out-of-pocket expenses
actually paid prior to the Closing, shall be deemed liabilities of the Companies
as of the Closing and shall be taken into account for purposes of calculating
Adjusted Net Worth.

     11.2 Further Assurances. Subject to Section 9.1 hereof, from time to time
prior to, at and after the Closing Date, without the payment of any additional
consideration and at Buyers’ expense, each party hereto will execute all such
instruments and take all such actions as the other parties shall reasonably
request in connection with carrying out and effectuating the intent and purpose
hereof and all transactions and things contemplated by this Agreement.

     11.3 Notices. Notices and other communications provided for herein shall be
in writing (which shall include notice by facsimile transmission) and shall be
delivered or mailed (or if by graphic scanning or other facsimile communications
equipment of the sending party hereto, delivered by such equipment), addressed
as follows:

     If to any Seller, the Seller Representative or (prior to the Closing only)
either Company:

     

  Daniel Cocanougher

  6851 NE Loop 820, Suite 247

  North Richland Hills, TX 76181

  Fax No. (817) 788-0628
 
   
with a copy to:
  Moses & Singer LLP

  1301 Avenue of the Americas

  New York, NY 10019

  Attention: Howard Herman, Esq.

  Fax No. (212) 554-7700
 
   
and (prior to closing
   
only) a further copy to:
  Stephanie Giotes, Esq.

  6851 N.E. Loop 820; Suite 247

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  North Richland Hills, TX 76181

  Fax No. (817) 788-0628
 
   
If to Buyers or Navarre:
  Navarre Corporation

  7400 49th Avenue North

  New Hope, MN 55428

  Attention: Eric Paulson, CEO

  Ryan Urness, General Counsel

  Fax No.: (763) 504-1107
 
   

  and
 
   

  Winthrop & Weinstine, P.A.

  225 South Sixth Street, Suite 3500

  Minneapolis, MN 55402

  Attention: Scott J. Dongoske, Esq.

  Fax No: (612) 604-6800

or to such other address as a party may from time to time designate in writing
in accordance with this section. All notices and other communications given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given, when delivered if delivered by hand, when
transmission confirmation is received if telecopied, 3 Business Days after
mailing if mailed, and 1 Business Day after deposit with an overnight courier
service if delivered by overnight courier. Notwithstanding the foregoing, if a
notice or other communication is actually received after 5:00 p.m. at the
recipient’s designated address, such notice or other communication shall be
deemed to have been given the later of (i) the next Business Day or (ii) the
Business Day on which such notice or other communication is deemed to have been
given pursuant to the immediately preceding sentence.

     11.4 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, however, that neither this Agreement
nor any of the rights, interests, or obligations hereunder may be assigned by
any Seller or the Seller Representative, on the one hand, or Buyers or Navarre,
on the other hand, without the prior written consent of the other.
Notwithstanding the foregoing, Buyers may assign any of their rights and
obligations hereunder in whole or in part to any Affiliate of Buyers and may
collaterally assign their rights hereunder to any lender or financing source to
Buyers, in each case, without the consent of Sellers; provided, however, that no
such assignment by Buyers shall relieve the Buyers from any of their obligations
hereunder. Any assignment in violation of this Agreement shall be null and void
ab initio.

     11.5 Construction.

          (a)      Unless otherwise expressly specified herein, (i) defined
terms in the singular shall also include the plural and vice versa, (ii) the
words “hereof,” “herein,” “hereunder” and other similar words refer to this
Agreement as a whole, (iii) Article, Section, Schedule and Exhibit references in
this Agreement are to Articles of, Sections of, Schedules to and Exhibits to
this

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Agreement, and (iv) words of any gender (masculine, feminine, neuter) mean and
include correlative words of the other genders.

          (b)      The captions in this Agreement are for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.

          (c)      All references to “days” shall be to calendar days unless
Business Days are specified.

          (d)      Unless the context otherwise requires, (i) “or” is not
exclusive and (ii) “including” means “including but not limited to” and
“including without limitation”.

          (e)      The phrases “date of this Agreement” and “date hereof” and
any other phrases of similar import shall mean January 10, 2005 (it being
understood that, with respect to representations and warranties made as of the
“date of this Agreement” or as of the “date hereof”, the date or time which such
representations and warranties are made or deemed to have been made or as of
which the accuracy or inaccuracy thereof is measured or determined shall not
alter the January 10, 2005 date as of which any such representations or
warranties speak).

          (f)      The terms “it,” “its” and “itself” shall, as the context
requires, be deemed to include “he,” “him,” “his,” “himself,” “she,” “her,”
“hers” and “herself.”

     11.6 Law Governing. THIS AGREEMENT IS INTENDED AS A CONTRACT UNDER AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LOCAL LAW OF THE STATE
OF MINNESOTA (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS TO THE EXTENT
SUCH PRINCIPLES WOULD PERMIT OR REQUIRE THE APPLICATION OF LAW OF ANY OTHER
JURISDICTION), INCLUDING WITHOUT LIMITATION AS TO ALL MATTERS OF CONSTRUCTION,
VALIDITY, ENFORCEABILITY AND PERFORMANCE.

     11.7 Waiver of Provisions. The provisions, terms, covenants,
representations, warranties and conditions of this Agreement may be waived only
by a written instrument executed by the party hereto waiving compliance. The
failure of any party hereto at any time or times to require performance of any
provision of this Agreement shall in no manner affect the right of such party at
a later date to enforce the same. No waiver by any party hereto of any condition
or the breach of any provision, term, covenant, representation or warranty
contained in this Agreement, whether by conduct or otherwise, in any one or more
instances shall be deemed to be or construed as a further or continuing waiver
of any such condition or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.

     11.8 Counterparts. This Agreement may be executed in several counterparts,
and all counterparts so executed shall constitute one agreement, binding on the
parties hereto, notwithstanding that such parties are not signatory to the same
counterpart.

     11.9 Entire Agreement. This Agreement (including the Disclosure Letter and
Exhibits hereto), the Ancillary Agreements and the Non-Disclosure Letter
constitute the entire agreement among the parties relating to the subject matter
hereof and thereof, and supersede and cancel any and all prior agreements among
them, relating to the subject matter hereof and thereof (including without

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limitation that certain letter agreement among certain of the parties dated
October 27, 2004) and may not be amended or modified except by a written
agreement signed by each party hereto.

     11.10 Submission to Jurisdiction; Waivers.

          (a)      Each party to this Agreement hereby irrevocably and
unconditionally:

(i)      (x) agrees that any suit, action or proceeding instituted against it by
any other party with respect to this Agreement or any Ancillary Agreement may be
instituted, and that any suit, action, or proceeding by it against any other
party with respect to this Agreement or any Ancillary Agreement shall be
instituted, exclusively in the United States District Court, District of
Minnesota, Fourth Division (and appellate courts therefrom) as the party
instituting such suit, action or proceeding may in its sole discretion elect,
(y) consents and submits, for itself and its property, to the jurisdiction of
such courts for the purpose of any such suit, action or proceeding instituted
against it by the other and (z) agrees that a final judgment in any such suit,
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law;

(ii)      agrees that service of all writs, process and summonses in any suit,
action or proceeding may be effected by the mailing of copies thereof by
registered or certified mail, postage prepaid, to the Companies, Buyers,
Navarre, Sellers or the Seller Representative, as the case may be, at the
addresses for notices pursuant to Section 11.3 hereof (with copies to such other
Persons as specified therein), such service to become effective 15 days after
such mailing; provided, that nothing contained in this Section 11.10(a)(ii)
shall affect the right of the Companies, Buyers, Navarre, Sellers or the Seller
Representative, as the case may be, to serve process in any other manner
permitted by law;

(iii)      (x) waives any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Agreement or any Ancillary Agreement brought in the court specified in
Section 11.10(a)(1), (y) waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum
and (z) agrees not to plead or claim either of the foregoing; and

(iv)      WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING
OUT OF OR RELATING TO THIS AGREEMENT AND AGREES THAT ANY SUCH DISPUTE SHALL BE
TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.

     11.11 No Third Party Beneficiary. This Agreement is for the sole benefit of
the parties hereto and their respective successors and permitted assigns and
nothing herein, express or implied, is intended to or shall confer upon any
other Person (other than Indemnified Parties) any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.

     11.12 No Presumption. With regard to each and every term and condition of
this Agreement and any and all agreements and instruments subject to the terms
hereof or referred to

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herein, the parties hereto understand and agree that the same have or has been
mutually negotiated, prepared and drafted, and if at any time the parties hereto
desire or are required to interpret or construe any such term or condition or
any agreement or instrument subject hereto, no consideration shall be given to
the issue of which party hereto actually prepared, drafted or requested any term
or condition of this Agreement or any agreement or instrument subject hereto.

     11.13 Severability. To the fullest extent that they may effectively do so
under applicable law, the parties hereto hereby waive any provision of law which
renders any provision of this Agreement invalid, illegal or unenforceable in any
respect. Such parties further agree that any provision of this Agreement which,
notwithstanding the preceding sentence, is rendered or held invalid, illegal or
unenforceable in any respect in any jurisdiction shall be ineffective, but such
ineffectiveness shall be limited as follows: (i) if such provision is rendered
or held invalid, illegal or unenforceable in such jurisdiction only as to a
particular Person or Persons or under any particular circumstance or
circumstances, such provision shall be ineffective, but only in such
jurisdiction and only with respect to such particular Person or Persons or under
such particular circumstance or circumstances, as the case may be; (ii) without
limitation of clause (i), such provision shall in any event be ineffective only
as to such jurisdiction and only to the extent of such invalidity, illegality or
unenforceability, and such invalidity, illegality or unenforceability in such
jurisdiction shall not render invalid, illegal or unenforceable such provision
in any other jurisdiction; and (iii) without limitation of clause (i) or (ii),
such ineffectiveness shall not render invalid, illegal or unenforceable this
Agreement or any of the remaining provisions hereof. Without limitation of the
preceding sentence, (A) it is the intent of the parties hereto that, in the
event that in any court proceeding, such court determines that any provision of
this Agreement is illegal, invalid or unenforceable in any jurisdiction to any
extent, such court shall have the power to, and shall, (1) modify such provision
(including by limiting the Persons against whom, or the circumstances under
which, such provision shall be effective in such jurisdiction) for purposes of
such proceeding to the minimum extent necessary so that such provision, as so
modified, may then be enforced in such proceeding and (2) enforce such
provision, as so modified pursuant to clause (1), in such proceeding and
(B) upon any determination that any provision of this Agreement is invalid,
illegal or unenforceable, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of such parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible. Nothing in this Section 11.13 is intended to, or
shall, (x) limit the ability of any party hereto to appeal any court ruling or
the effect of any favorable ruling on appeal or (y) limit the intended effect of
Section 11.6 or 11.10.

     11.14 Seller Representative.

          (a)      Sellers hereby authorize and direct the Seller Representative
to take such action, and to exercise such rights, power and authority, as are
authorized, delegated and granted to the Seller Representative hereunder in
connection with the transactions contemplated hereby and to exercise such
rights, power and authority as are incidental thereto. Execution of this
Agreement by Sellers shall constitute ratification by Sellers of the appointment
of the Seller Representative in accordance herewith and agreement to be bound by
the actions of the Seller Representative taken hereunder.

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          (b)      Subject to the provisions of this Section 11.14(b), the
Seller Representative shall serve as such from the date hereof until the earlier
of his removal or the completion of his obligations hereunder. The parties
hereto acknowledge and agree that, as to all matters arising under this
Agreement, the Seller Representative shall act for and on behalf of Sellers.
When this Agreement provides that a determination or any other action or event
is conclusive and binding upon Sellers, such determination, action or event of
the Seller Representative shall be conclusive and binding upon Sellers. In
addition, the Seller Representative shall have all such incidental powers as may
be necessary or desirable to carry into effect the provisions of this
Section 11.14, including, at the expense of Sellers, to retain attorneys,
accountants and other advisors to assist him in the performance of his duties
hereunder. In the event that the Person who is acting as the Seller
Representative is terminated by Sellers, his successor shall be appointed by
Seller in accordance with this Section 11.14. Upon the resignation of any Seller
Representative, a successor Seller Representative (and, if necessary, further
successor Seller Representatives), shall be appointed by the Seller
Representative or in the event of his death, or his failure to so appoint a
successor by the other Sellers. Any successor to a Seller Representative shall
for purposes of this Agreement be deemed to be, for the time of the appointment
thereof, a Seller Representative and from and after such time, the term “Seller
Representative” as used herein shall be deemed to refer to any successor. No
appointment of a successor shall be effective unless such successor agrees in
writing to be bound by the terms of this Agreement.

          (c)      Sellers agree that the provisions set forth in this
Section 11.14 shall in no way impose any obligations on Buyers and/or Navarre
other than those explicitly set forth in this Agreement. In particular,
notwithstanding in any case any notice received by Buyers and/or Navarre to the
contrary, Buyers and Navarre shall be fully protected in relying upon and shall
be entitled (i) to rely upon actions, decisions and determinations of the Seller
Representative and (ii) to assume that all actions, decisions and determinations
of the Seller Representative are fully authorized and binding upon the Seller
Representative and Sellers.

          (d)      Each Seller further agrees that Seller Representative
(A) shall not incur any personal liability for acting in such capacity if in
doing so he acts upon advice of counsel or otherwise acts in good faith,
(B) shall not incur any personal liability for acting in such capacity in the
absence of his gross negligence or willful misconduct, (C) may act upon any
instrument or signature believed by him to be genuine and may assume that any
Person purporting to give any notice or instruction under this Agreement or any
Ancillary Agreement or document believed by him to be authorized has been
authorized to do so. The Seller Representative shall not be liable for any act
done or omitted hereunder as Seller Representative while acting in good faith
and in the exercise of reasonable judgment, and any act done or omitted by
pursuant to the advice of counsel shall be conclusive evidence of such good
faith. The Sellers shall severally indemnify the Seller Representative and hold
him harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of such Seller Representative and arising
out of or in connection with the acceptance or administration of his duties
hereunder.

          (e)      The Seller Representative shall act without any compensation.
Notwithstanding the foregoing, the Seller Representative shall be promptly
reimbursed by the Sellers for all out-of-pocket expenses incurred by him in his
capacity of Seller Representatives.

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          (f)      Any amounts received by the Seller Representative in respect
of Closing Accounts Receivable after the Collection Period will be paid to the
Sellers in accordance with their Pro Rata Share.

     11.15 Guaranty. Navarre hereby unconditionally guarantees unto the Sellers,
their successors and assigns, the full performance and observance of all of the
obligations, duties and undertakings of Buyers under this Agreement. This
guaranty is a guaranty of payment and not of collection, is a primary obligation
of Navarre, and no act or omission which would at law or equity constitute a
discharge or defense to this guaranty shall have such effect.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

            Productions Management, LLC
      By:           Name:           Title:      

            FUNimation General Partnership
      By:           Name:           Title:      

            FUNimation Management Company, LLC
      By:           Name:           Title:      

            FUNimation Productions, Ltd.
      By:   FUNimation General Partnership, its general partner    

                  By:         Name:         Title:      

            The FUNimation Store, Ltd.
      By:   FUNimation Management Company, LLC, its general partner    

                  By:         Name:         Title:      

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            Daniel Cocanougher, as the Seller Representative
      By:           DANIEL COCANOUGHER   

                              GEN FUKUNAGA  

                              DANIEL COCANOUGHER  

                              ROBERT COCANOUGHER  

                              ALLEN COCANOUGHER  

                              JENNIFER B. COCANOUGHER  

                              DANIEL COCANOUGHER, Custodian for ROBERT A..
COCANOUGHER JR., Minor  

                              ROBERT COCANOUGHER SR., Custodian for DANIELLE M.
COCANOUGHER, Minor  

                              ROBERT COCANOUGHER SR., Custodian for ELLEN J.
COCANOUGHER, Minor  

                              CINDY FUKUNAGA  

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                              ROBERT BRENNAN  

                              BARRY WATSON  

            Navarre CP, LLC
      By:           Name:           Title:      

            Navarre CS, LLC
      By:           Name:           Title:      

            Navarre CLP, LLC
      By:           Name:           Title:      

            Navarre Corporation
      By:           Name:           Title:      

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EXHIBIT A

     1. For purposes of the Agreement to which this Exhibit A is attached, the
following terms shall have the following meanings:

     “2004 Statement of Operations” shall be defined as set forth in
Section 3.5(a).

     “Accounting Firm” shall be defined as set forth in Section 1.4(b).

     “Acquisition Proposal” shall be defined as set forth in Section 5.10.

     “Adjusted Net Worth” shall mean the total equity value of the Companies
determined as of the Closing Date in accordance with GAAP.

     “Affiliate” means, as to any specified Person, any other Person which,
directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such specified Person. For the
purposes of this definition, “control” means the possession of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise. No
Seller shall be deemed to be an Affiliate of each other solely by virtue of its
ownership interest in a Company.

     “Affiliate Transaction” shall be defined as set forth in Section 3.21.

     “Agreement” shall be defined as set forth in the Recitals.

     “Allocation of Purchase Price shall be defined as set forth in
Section 1.1(d).

     “Ancillary Agreements” means the Release Agreements, the Assignment and
Assumption Agreements, the Escrow Agreement, the Registration Rights Agreement,
the Non-Competition Agreements and the Ancillary Instruments executed and
delivered as contemplated hereby.

     “Ancillary Instruments” means all schedules or certificates delivered
pursuant to this Agreement.

     “Antitrust Laws” means the Sherman Act, as amended, the Clayton Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, applicable
DOT regulations, and all other federal, state and foreign statutes, rules,
regulations, Orders, administrative and judicial doctrines and other Laws that
are designed or intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade or lessening of
competition through merger or acquisition.

     “A/R Amount” means $1,800,000.

     “Assignment and Assumption Agreement” means an Assignment and Assumption
Agreement in substantially the form attached hereto as Exhibit B.

     “Audited Financial Statements” shall be defined as set forth in
Section 3.5(a).

 

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     “Basket Amount” shall be defined as set forth in Section 8.2(b)(iii)(A).

     “Business” shall mean the business of the Companies as currently conducted
and as conducted on the Closing Date including, without limitation, home video
distribution of anime and related products and the acquisition of Japanese
properties in connection therewith.

     “Business Day” means any day except Saturday, Sunday or any other day on
which commercial banks in Minneapolis, Minnesota, or Fort Worth, Texas, are
authorized or required by Law to remain closed.

     “Buyers” shall be defined as set forth in the Recitals.

     “Buyers’ Indemnitees” shall be defined as set forth in Section 8.2(a).

     “Buyers’ Closing Schedule” shall be defined as set forth in Section 1.4(a).

     “Buyers’ SEC Documents” shall be defined as set forth in Section 4.8(a).

     “Calculation Statement” shall be defined as set forth in Section 1.5(e).

     “Cash” means cash and cash equivalents of each Company net of the aggregate
amount of any checks outstanding as of the opening of business on the Closing
Date; provided, that Cash shall not include any customer deposits or cash or
cash equivalents subject to other similar restrictions.

     “Closing” shall be defined as set forth in Section 1.2.

     “Closing Accounts Receivable” means the accounts receivable and other
receivables of Productions Company as of the Closing (after allowances for
returns and bad debt consistent with Productions Company’s historical accounting
practices).

     “Closing Cash Amount” means $100,400,000, as adjusted pursuant to
Section 1.4.

     “Closing Certificate” shall be defined as set forth in Section 7.1(a)(iii).

     “Closing Date” shall be defined as set forth in Section 1.2.

     “Closing Shares” shall be defined as set forth in Section 1.1(b)(ii).

     “Closing Share Price” shall mean the price per share of Navarre Common
Stock determined based on the 20-day Volume Weighted Average Price, or “VWAP”,
of shares of Navarre Common Stock on the NASDAQ National Market System during
the twenty (20) trading days immediately preceding the Closing Date.

     “COBRA” shall be defined as set forth in Section 3.10(e).

     “Collected Accounts Receivable” shall be defined as set forth in
Section 5.13(c).

     “Code” means the Internal Revenue Code of 1986, as amended.

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     “Collection Period” shall be defined as set forth in Section 5.13(b).

     “Companies” shall be defined as set forth in the Recitals.

     “Company” shall be defined as set forth in the Recitals.

     “Company Representations” shall be defined as set forth in
Section 8.2(b)(i).

     “Company Subsidiaries” means the Subsidiaries set forth in Section 3.2 of
the Disclosure Letter.

     “Confidential Information” shall be defined as set forth in
Section 5.12(a).

     “Consents” shall be defined as set forth in Section 5.9.

     “Contracts” means all written and oral contracts and all other legally
binding agreements, commitments, understandings and undertakings to which either
Company is a party or by which either Company or any of their assets are bound.

     “Copyrights” means all original works of authorship or any part thereof
which are within the scope of the copyright Laws of the United States or
treaties to which the United States is a party, including all copyrights,
copyrightable works and mask works, including all rights of authorship, use,
publication, merchandising, reproduction, distribution, performance,
transformation, moral rights and rights of ownership of copyrightable works and
mask works, and all rights to register and obtain renewals and extensions of
Copyrights, together with all other interests accruing by reason of
international copyright and mask work conventions.

     “Copyright Office” shall be defined as set forth in Section 3.16(b).

     “Disclosure Letter” means the Disclosure Letter, dated the date of the
Agreement, delivered to Buyer.

     “Disputed Items” shall be defined as set forth in Section 1.4(a).

     “Dollar” or “$” means a dollar or other equivalent unit in such coin or
currency of the United States of America as at the time shall be legal tender
for the payment of public and private debts.

     “EBIT” shall mean the Companies’ combined net income plus interest expense
and Taxes, determined in accordance with GAAP.

     “Employee Benefit Plan” means any “employee benefit plan” as defined in
Section 3(3) of ERISA and any other plan, policy, program, practice, agreement,
understanding or arrangement (whether written or oral) providing compensation or
other benefits to any current or former officer, employee or consultant (or to
any dependent or beneficiary thereof) of either Company or any Company
Subsidiary, which are now or have been maintained by either Company or any
Company Subsidiary, or under which either Company or any Company Subsidiary has
any obligation or liability, whether actual or contingent, including, without
limitation, all incentive, bonus, deferred compensation, vacation, holiday,
medical, disability, share purchase or other similar plans, policies,

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programs, practices or arrangements.

     “Employment Agreement” shall mean an Employment Agreement by and between
Gen Fukunaga and Productions Company, dated as of the Closing Date, in
substantially the form attached hereto as Exhibit C.

     “Environmental Costs and Liabilities” means, with respect to any Person,
all Liabilities, obligations, responsibilities, Remedial Actions, losses,
damages, punitive damages, consequential damages, treble damages, costs and
expenses (including all reasonable fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any claim or
demand by any other Person or in response to any violation of Environmental Law,
whether known or unknown, accrued or contingent, whether based in Contract,
tort, implied or express warranty, strict liability, criminal or civil statute,
to the extent based upon, related to, or arising under or pursuant to any
Environmental Law, Environmental Permit, order or agreement with any
Governmental Body or other Person, which relates to any environmental, health or
safety condition, violation of Environmental Law or a Release or threatened
Release of Hazardous Materials.

     “Environmental Law” means any and all applicable federal, state or local
directive, statute, law, rule, regulation, ordinance, or rule of common law in
effect and any judicial or administrative decisions, including any judicial or
administrative order, consent decree or judgment, relating to the control of any
pollutant or hazardous material, the protection of the environment or the effect
of the environment on human health, including, but not limited to, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Sections 9601 et seq.; the Resource Conservation and
Recovery Act, as amended, U.S.C. Sections 6901 et seq.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Sections 1252 et seq.; the Toxic
Substances Control Act, as amended, 15 U.S.C. Sections 2601 et seq.; the Clean
Air Act, as amended, 42 U.S.C. 7401 et seq.; the Safe Drinking Water Act, as
amended, 42 U.S.C. Sections 300f et seq.; the Hazardous Materials Transportation
Act, as amended 49 U.S.C. Sections 1801 et seq.; the Atomic Energy Act, as
amended, 42 U.S.C. Sections 2011 et seq.; the Federal Insecticide, Fungicide and
Rodenticide Act, as amended, 7 U.S.C. Sections 136 et seq.; the Occupational
Safety and Health Act, as amended, 20 U.S.C. Section 651 et seq.; the Emergency
Planning and Community Right to Know Act, as amended, 42 U.S.C. Sections 11001
et seq.

     “Environmental Permits” means any license, permit, order, consent,
approval, registration, authorization, qualification or filing required under
any Environmental Law.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.

     “Escrow Account” means the escrow account established and maintained in
accordance with the Escrow Agreement.

     “Escrow Agent” means Wells Fargo Bank Minnesota, National Association, as
escrow agent under the Escrow Agreement, or any successor in such capacity.

     “Escrow Agreement” means an Escrow Agreement by and among Sellers, the
Seller Representative, Buyers and the Escrow Agent in substantially the form
attached hereto as Exhibit D.

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     “Fifth Pay-Out Period” shall be defined as set forth in Section 1.5(a)(v).

     “Final Order” shall mean (i) a written agreement between Sellers and/or the
Companies, as the case may be, and Buyers and/or Navarre, as the case may be;
(ii) by a final judgment or decree of any court of competent jurisdiction; or
(iii) by any other means to which Sellers and/or the Companies, as the case may
be, and Buyers shall agree in writing. The judgment or decree of a court shall
be deemed final only when the time for appeal and reconsideration of any kind,
if any, shall have expired and no appeal or motion for reconsideration shall
have been taken or when all appeals and motions taken shall have been finally
determined.

     “Final Year” shall be defined as set forth in Section 10.1(a).

     “Financial Statements” shall be defined as set forth in Section 3.5(a).

     “First Cap Period” shall be defined as set forth in
Section 8.2(b)(iii)(B)(a).

     “First Escrow Release Amount” shall be defined as set forth in Section
8.2(b)(iii)(B)(a).

     “First Pay-Out Period” shall be defined as set forth in Section 1.5(a)(i).

     “Form 10Q” shall be defined as set forth in Section 4.8(a).

     “Fourth Pay-Out Period” shall be defined as set forth in
Section 1.5(a)(iv).

     “FUN Seller” shall be defined as set forth in the Recitals.

     “FUN Seller General Partnership Interests” shall be defined as set forth in
Section 1.1(a).

     “GAAP” shall mean United States generally accepted accounting principles,
applied on a basis consistent with the basis used by the Companies in connection
with the preparation of the Financial Statements.

     “Governmental Authority” means any government, any governmental,
administrative or regulatory entity, authority, commission, board, agency,
instrumentality, bureau or political subdivision and any court, tribunal or
judicial or arbitral body.

     “Governmental Authorization” means any approval, consent, license, permit,
Order, waiver, or other authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Authority or pursuant to
any applicable Law, including the lapse of any waiting period thereunder.

     “GP Seller” shall be defined as set forth in the Recitals.

     “GP Seller Limited Partnership Interests” shall be defined as set forth in
Section 1.1(a).

     “Hazardous Material” means any substance, material or waste that is
regulated, classified, or otherwise characterized under or pursuant to any
Environmental Law as “hazardous,” “toxic,” “pollutant,” “contaminant,”
“radioactive,” or words of similar meaning or effect, including without
limitation, petroleum and its by-products, asbestos, polychlorinated biphenyls,
radon, mold, urea

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formaldehyde insulation.

     “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.

     “Income Tax Return” shall mean any Tax Return relating to Income Taxes.

     “Income Taxes” shall mean any Taxes in the nature of income or franchise
taxes.

     “Indebtedness” of any Person means, without duplication, (i) the principal
of and premium (if any) in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable; (ii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person and
all obligations of such Person under any title retention agreement (but
excluding trade accounts payable, amounts payable under license agreements and
other accrued current liabilities arising in the ordinary course of business);
(iii) all obligations of such Person under leases required to be capitalized in
accordance with GAAP; (iv) all obligations of such Person for the reimbursement
of any obligor on any letter of credit, banker’s acceptance or similar credit
transaction; (v) the liquidation value of all redeemable preferred stock of such
Person; (vi) all factoring or similar arrangements; (vii) all obligations of the
type referred to in clauses (i) through (vi) of any Persons for the payment of
which such Person is responsible or liable, directly or indirectly, as obligor,
guarantor, surety or otherwise, including guarantees of such obligations; and
(viii) all obligations of the type referred to in clauses (i) through (vii) of
other Persons secured by any Lien on any property or asset of such Person
(whether or not such obligation is assumed by such Person).

     “Indemnification Cash” shall mean $20,000,000.

     “Indemnification Claim” shall be defined as set forth in Section 8.2(e).

     “Indemnification Event” shall be defined as set forth in Section 8.2(e).

     “Indemnified Party” shall be defined as set forth in Section 8.2(e).

     “Indemnifying Party” shall be defined as set forth in Section 8.2(e).

     “Individual” shall be defined as set forth in the Recitals.

     “Individual General Partnership Interests” shall be defined as set forth in
Section 1.1(a).

     “Insurance Policies” shall be defined as set forth in Section 3.17.

     “Intellectual Property” means all intellectual property rights and related
priority rights arising from or in respect of the following, whether protected,
created or arising under the laws of the United States or any other jurisdiction
or under any international convention: (i) Trademarks; (ii) Copyrights;
(iii) discoveries, concepts, ideas, research and development, know-how,
formulae, inventions (whether or not patentable and whether or not reduced to
practice), compositions, manufacturing and production processes and techniques,
technical data, procedures, designs, drawings, specifications, databases, and
other proprietary and confidential information, including

6

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customer lists, supplier lists, pricing and cost information, and business and
marketing plans and proposals of the Company and its Subsidiaries, in each case
excluding any rights in respect of any of the foregoing that comprise or are
protected by Copyrights, and (iv) all Software.

     “IRS” means the Internal Revenue Service.

     “Knowledge of Sellers” or “Sellers’ Knowledge” (or words of similar import)
means the actual conscious awareness of any fact by any Seller; provided,
however, in the case of Gen Fukunaga and Daniel Cocanougher, “Knowledge of
Sellers” or “Sellers’ Knowledge” (or words of similar import) means the actual
conscious awareness of any fact after inquiry by Gen Fukunaga and Daniel
Cocanougher, as the case may be, of the responsible officers of the applicable
Company, assuming such inquiry was conducted in a manner consistent with that of
a reasonably prudent person holding a position or positions similar to the
positions held by Gen Fukunaga and Daniel Cocanougher with the Companies.

     “Laws” means all laws, constitutions, statutes (including without
limitation the Securities Act and Securities Exchange Act), directives, codes,
ordinances, decrees, rules, regulations, municipal by-laws, judicial or arbitral
or administrative or ministerial or departmental or regulatory judgments,
Orders, decisions, ruling or awards, consent orders, consent decrees and
policies of any Governmental Authority, including general principles of common
and civil law and equity, binding on or affecting the Person referred to in the
context in which such word is used.

     “Leased Real Property” means all interests leased pursuant to the Real
Property Leases.

     “Legal Expenses” means the fees, costs and expenses of any kind incurred by
any Person indemnified under Articles 8 and 10 and its counsel in investigating,
preparing for, defending against or providing evidence, producing documents or
taking other action with respect to any threatened or asserted claim.

     “Liability” means any debt, loss, damage, adverse claim, liability or
obligation (whether direct or indirect, known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, or due or to become due, and whether in contract, tort, strict
liability or otherwise), and including all costs and expenses relating thereto.

     “License Agreement” shall be defined as set forth in Section 3.9(a)(xiv).

     “Lien” means any lien (including any Tax lien), pledge, mortgage, security
interest, restriction, encroachment, charge, conditional sales or other title or
interest retention agreement, easement, license, option, right of first refusal,
claim, defect in title or encumbrance of any kind whatsoever.

     “Losses” means all losses, damages, liabilities and claims, and fees, costs
and expenses of any kind related thereto (whether or not resulting from a
Third-Party Claim) (including, without limitation, Legal Expenses).

     “Majority Sellers” shall mean Daniel Cocanougher, Robert Cocanougher, Allen
Cocanougher, Jennifer B. Cocanougher, Robert Allen Cocanougher, Jr., Danielle M.
Cocanougher, and Ellen J. Cocanougher and Barry Watson.

7

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     “Majority Share” shall mean an amount equal to 72.449%.

     “Management Seller” shall be defined as set forth in the Recitals.

     “Management Seller General Partnership Interests” shall be defined as set
forth in Section 1.1(a).

     “Material Adverse Effect” means any circumstances, state of facts or
matters, change, event, occurrence, action or omission that have or result, or
may reasonably be expected to have or result, in a material adverse effect on
the: (a) business, properties, assets, liabilities, affairs, prospects,
condition (financial or otherwise) or results of operations of a Person; or (b)
ability of a Person to perform its obligations under this Agreement or any
Ancillary Agreement.

     “Material Contracts” shall be defined as set forth in Section 3.9(a).

     “Memorandum” shall mean the Form S-3 Shelf Registration Statement (SEC
No. 333-119348) of Buyers and/or Navarre or any related prospectus or amendment
regarding the Companies or Sellers.

     “Minority Sellers” shall mean Gen Fukunaga, Cindy Fukunaga and Robert
Brennan.

     “Minority Share” shall mean an amount equal to 27.551%.

     “Navarre” shall be defined as set forth in the Recitals.

     “Navarre CLP” shall be defined as set forth in the Recitals.

     “Navarre CP” shall be defined as set forth in the Recitals.

     “Navarre CS” shall be defined as set forth in the Recitals.

     “Navarre Common Stock” shall mean shares of common stock, no par value per
share, of Buyer.

     “Net After Tax Basis” means, with respect to any calculation of any
indemnification payment owed to any party pursuant to this Agreement,
calculation thereof taking into account any Taxes actually owing by the
indemnified party or its Affiliates as a result of receipt or accrual of the
indemnity payment and any savings in Taxes actually realized by the indemnified
party or its Affiliates as a result of the indemnified liability. In the event
that a Tax liability is actually incurred or a savings in Taxes is actually
realized by an indemnified party subsequent to the time that an indemnification
payment is required to be paid, such liability or savings shall be taken into
account (and payment with respect thereto shall be made by the appropriate
party) only as and when such liability is incurred or savings are realized.

     “Non-Competition Agreement” shall mean a non-competition agreement dated as
of the Closing Date between Buyers and each of Gen Fukunaga, Daniel Cocanougher,
Robert Cocanougher and Allen Cocanougher, substantially in the form attached
hereto as Exhibit E.

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     “Non-Disclosure Letter” shall be defined as set forth in Section 5.2.

     “Order” means any preliminary or permanent injunction, judgment or other
order or decree of a Governmental Authority of competent jurisdiction.

     “Outside Date” shall mean May 15, 2005.

     “Owned Real Property” means the real property owned by either Company,
together with all structures, facilities, improvements, fixtures, systems,
equipment and items of property presently or hereafter located thereon attached
or appurtenant thereto or owned by either Company and located on Leased Real
Property and all easements, licenses, rights and appurtenances relating to the
foregoing.

     “Partnership Interests” shall be defined as set forth in the Recitals.

     “Patent Rights” means United States and foreign patents, patent
applications, continuations, continuations-in-part, divisions, reissues, patent
disclosures, inventions (whether or not patentable or reduced to practice) and
improvements thereto.

     “Pay-Out Period” means any of the First Pay-Out Period, the Second Pay-Out
Period, the Third Pay-Out Period, the Fourth Pay-Out Period, or the Fifth
Pay-Out Period, as applicable.

     “Performance Payment” and “Performance Payments” shall be defined as set
forth in Section 1.1(b)(iii).

     “Performance Payment Dispute Notice” shall be defined as set forth in
Section 1.5(e).

     “Performance Payment Disputed Items” shall be defined as set forth in
Section 1.5(e).

     “Permits” means all licenses, permits, orders, consents, approvals,
registrations, authorizations, qualifications and filings which are required to
be made with all applicable Governmental Authorities or required under all
applicable Laws of the U.S. (federal, state or local) or any other jurisdiction.

     “Permitted Liens” means (i) Liens for Taxes not yet due and payable, that
are payable without penalty or that are being contested in good faith by
appropriate proceedings and as to which reserves have been established on the
Financial Statements reflecting the full amount of such contested Taxes,
(ii) Liens arising or resulting from any action taken by Buyers or any of their
Affiliates, (iii) Liens to the extent created by this Agreement, and (iv) Liens
under lines of credit and borrowings disclosed in the Disclosure Letter;
provided that Liens described in this clause (iv) are terminated on or prior to
the Closing Date.

     “Person” means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust (including any
beneficiary thereof), unincorporated organization, Governmental Authority or any
agency or political subdivision thereof or other entity.

     “Per Diem Taxes” shall be defined as set forth in Section 10.1(d).

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     “Post Closing Account Receivable” means any account receivable of a Company
arising from a transaction occurring after the Closing.

     “Pre-Closing Straddle Period” shall be defined as set forth in
Section 10.1(d).

     “Pre-Closing Tax Period” shall be defined as set forth in Section 10.1(a).

     “Prime Rate” means the rate of interest per annum publicly announced from
time to time by JPMorgan Chase Bank as its prime rate in effect at its principal
office in New York City.

     “Productions Company” shall be defined as set forth in the Recitals.

     “Pro-Rata Share” means with respect to each Seller, the percentage set
forth for such Seller in Section 1.1(c)(ii) of the Disclosure Letter.

     “Prospectus” means the prospectus to be included within the Registration
Statement and any amendments or supplements thereto to be filed by Navarre after
the date of this Agreement relating to the financing of the transactions
contemplated by this Agreement.

     “PTO” shall be defined as set forth in Section 3.16(b).

     “Purchase Price” shall be defined as set forth in Section 1.1(b).

     “Real Property” means the Owned Real Property and the Leased Real Property.

     “Real Property Laws” shall be defined as set forth in Section 3.14(f).

     “Real Property Leases” means all leases, subleases, licenses and other
occupancy agreements, and all amendments, modifications or supplements thereto
or renewals thereof, relating to any real property and to which either Company
is a party or pursuant to which either Company uses or occupies any real
property.

     “Recovery” shall be defined as set forth in Section 8.2(h).

     “Registration Rights Agreement” means the Registration Rights Agreement
substantially in the form attached hereto as Exhibit F.

     “Registration Statement” means the Registration Statement on Form S-3 filed
by Buyers and/or Navarre with the SEC in connection with the equity financing
contemplated by Buyers and/or Navarre in order to consummate the transactions
contemplated by this Agreement.

     “Related Party” means, with respect to each Company, any Seller, any
Affiliate of such Seller, any officer or director of such Seller, the other
Company, each Subsidiary of the other Company and any of their respective
Affiliates and any relative of any of the foregoing.

     “Related Party Debt” shall be defined as set forth in Section 5.14.

     “Release” means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, or leaching into the indoor or outdoor
environment, or into or out of any property.

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     “Release Agreement” means a Release Agreement in substantially the form
attached hereto as Exhibit G.

     “Relevant Representations” shall be defined as set forth in
Section 8.2(a)(i).

     “Remedial Action” means all actions to (i) clean up, remove, treat or in
any other way address any Hazardous Material; (ii) prevent the Release of any
Hazardous Material so it does not endanger or threaten to endanger public health
or welfare or the indoor or outdoor environment; (iii) perform pre-remedial
studies and investigations or post-remedial monitoring and care; or (iv) correct
a condition of noncompliance with Environmental Laws.

     “Restricted Securities” shall be defined as set forth in Section 5.16(a).

     “SEC” means the U.S. Securities and Exchange Commission.

     “Second Cap Period” shall be defined as set forth in
Section 8.2(b)(iii)(B)(b).

     “Second Escrow Release Amount” shall be defined as set forth in Section
8.2(b)(iii)(B)(b).

     “Second Pay-Out Period” shall be defined as set forth in
Section 1.5(a)(ii).

     “Securities Act” means the U.S. Securities Act of 1933, as amended from
time to time and in effect, and the rules, regulations and interpretations
thereunder.

     “Securities Exchange Act” means the U.S. Securities Exchange Act of 1934,
as amended from time to time and in effect, and the rules, regulations and
interpretations thereunder.

     “Seller” shall be defined as set forth in the Recitals.

     “Seller Indemnitees” shall be defined as set forth in Section 8.2(d).

     “Seller Representative” shall be defined as set forth in the Recitals.

     “Sellers” shall be defined as set forth in the Recitals.

     “Sellers’ Dispute Notice” shall be defined as set forth in Section 1.4(a).

     “Software” means any and all (i) computer programs, including any and all
software implementations of algorithms, models and methodologies, whether in
source code or object code, (ii) databases and compilations, including any and
all data and collections of data, whether machine readable or otherwise,
(iii) descriptions, flow-charts and other work product used to design, plan,
organize and develop any of the foregoing, screens, user interfaces, report
formats, firmware, development tools, templates, menus, buttons and icons, and
(iv) all documentation including user manuals and other training documentation
related to any of the foregoing.

     “Store Company” shall be defined as set forth in the Recitals.

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     “Straddle Period” shall be defined as set forth in Section 10.1(c).

     “Subsidiary” means, with respect to any specified Person, any other
corporation, partnership, joint venture, association or other entity in respect
of which such specified Person directly, or indirectly through one or more other
Subsidiaries, either (i) owns not less than 50% of the overall economic equity
or (ii) has the power to elect at least 50% of the board of directors (or
individuals serving a function similar to that of a board of directors of a
corporation). “Subsidiary” includes, with respect to each Company, such
corporations, partnerships, joint ventures, associations or other entities with
respect to which (i) the combined equity interests held by Productions Company
and Store Company equals no less than 50% of the overall economic equity or
(ii) the combined voting power of Productions Company and Store Company is
sufficient to elect at least 50% of the board of directors (or individuals
serving a function similar to that of a board of directors of a corporation).

     “Target Net Worth” shall be defined as set forth in Section 1.4(e).

     “Tax Claim” shall be defined as set forth in Section 10.1(f).

     “Tax Return” means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

     “Taxes” means all (i) taxes, assessments, duties, levies, fees and other
governmental charges of any kind whatsoever (including taxes on or with respect
to net or gross income, alternative minimum, employment, social security (or
similar), value added, rent, excise, occupancy, licensing, sales, use, transfer,
ad valorem, intangibles, gross receipts, personal property, real property,
environmental (including taxes under Code section 59A), franchise, doing
business, withholding, payroll, stamp and capital), of the United States
(federal, state or local) or other applicable jurisdiction, whether or not
disputed, (ii) interest thereon, penalties, fines, additions to tax or
additional amounts with respect to items described in clause (i), and any
interest in respect of any such penalties, fines, additions or additional
amounts and (iii) liability in respect of any items described in clauses (i) or
(ii) payable as a successor, by reason of contract, assumption, transferee
liability, operation of law, Treasury Regulation section 1.1502-6(a) (or any
predecessor or successor thereof or any analogous or similar provision under
law) or otherwise.

     “Third Cap Period” shall be defined as set forth in
Section 8.2(b)(iii)(B)(c).

     “Third Escrow Release Amount” shall be defined as set forth in Section
8.2(b)(iii)(B)(c).

     “Third-Party Claim” shall be defined as set forth in Section 8.2(f).

     “Third Pay-Out Period” shall be as defined in Section 1.5(a)(iii).

     “Trademarks” means any marks, names, symbols or devices used by a Person to
identify itself or its products or services, whether or not registered,
including trademarks (including trade dress and product configurations),
registered trademarks (including trade dress and product configurations),
applications for registration of trademarks (including trade dress and product
configurations), service marks, registered service marks, applications for
registration of service marks, business names, trade names, registered trade
names and applications for registration of

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service marks, business names, trade names, registered trade names and
applications for registration of trade names, domain names, registered domain
names and applications for registration of domain names and any and all goodwill
associated with the foregoing.

     “Transaction Expenses” shall be defined as set forth in Section 11.1.

     “Transfer” shall be defined as set forth in Section 5.16(a).

     “Year End Financials” shall be defined as set forth in Section 5.15.

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Exhibit B

to

Partnership Interest Purchase Agreement

Form of

Assignment and Assumption Agreement

 

--------------------------------------------------------------------------------

 

Exhibit C

to

Partnership Interest Purchase Agreement

Form of

Employment Agreement

 

--------------------------------------------------------------------------------

 

Exhibit D

to

Partnership Interest Purchase Agreement

Form of

Escrow Agreement

 

--------------------------------------------------------------------------------

 

Exhibit E

to

Partnership Interest Purchase Agreement

Form of

Non-Competition Agreement

 

--------------------------------------------------------------------------------

 

Exhibit F

to

Partnership Interest Purchase Agreement

Form of

Registration Rights Agreement

 

--------------------------------------------------------------------------------

 

Exhibit G

to

Partnership Interest Purchase Agreement

Form of

Release