**Exhibit 10.1**

 

AGREEMENT AND PLAN OF MERGER

 

 

Dated as of July 22, 2005

 

 

by and among

 

 

CKX, Inc.,

MBST Acquisition Corp. and FocusAcquisition Corp.

 

and

 

Lawrence Brezner, David Steinberg and Stephen Tenenbaum,

 

The Lawrence Brezner Living Trust,

The Steinberg/Thayer Living Trust,

and The Tenenbaum Living Trust

 

and

 

Morra, Brezner,Steinberg & Tenenbaum Entertainment, Inc.,

Focus Enterprises,Inc. and StepTeco, Inc.

 

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**TABLE OF CONTENTS**

 
| 1.     | Mergers                                             |                                                           |
|--------|-----------------------------------------------------|----------------------------------------------------------------|
|   | 1.1.                                                | The Mergers                                                    |   |
|   | 1.2.                                                | Consummation of the  Mergers                                   |   |
|   | 1.3.                                                | Effects of the Mergers                                         |   |
|   | 1.4.                                                | Conversion of the  Shares of the Merger Subs and the Companies |   |
|   | 1.5.                                                | Merger Consideration                                           |   |
|   | 1.6.                                                | Adjustment of  Parent Common Stock Through the Closing Date    |   |
|   | 1.7.                                                | Escrow                                                         |   |
|   | 1.8.                                                | Certain  Post-Closing Accounting Matters                       |   |
|   | 1.9.                                                | Allocation of Payments                                         |   |
|   | 1.10.                                               | Closing                                                        |   |
| 2.     | Working Capital  Merger Consideration Adjustment    |                                                           |
|   | 2.1.                                                | Adjustment of  Merger Consideration                            |   |
|   | 2.2.                                                | Preliminary Working Capital  Estimate                          |   |
|   | 2.3.                                                | Determination of  Closing Working Capital                      |   |
|   | 2.4.                                                | Payment of Merger Consideration Adjustment                     |   |
| 3.     | Representations  and Warranties of the Seller Group |                                                           |
|   | 3.1.                                                | Authority and  Enforceability                                  |   |
|   | 3.2.                                                | Organization of the  Companies                                 |   |
|   | 3.3.                                                | Equity Interests;  Title                                       |   |
|   | 3.4.                                                | Ownership of Other  Equities                                   |   |
|   | 3.5.                                                | No Conflicts                                                   |   |
|   | 3.6.                                                | Governmental  Approvals and Filings                            |   |
|   | 3.7.                                                | Assets of the  Companies; Entities; Licenses                   |   |
|   | 3.8.                                                | Financial Statements                                           |   |
|   | 3.9.                                                | Absence of Changes                                             |   |
|   | 3.10.                                               | No Undisclosed  Liabilities; No Indebtedness                   |   |
|   | 3.11.                                               | Tax Matters                                                    |   |
|   | 3.12.                                               | Legal Proceedings                                              |   |
|   | 3.13.                                               | Compliance With  Laws and Orders                               |   |
|   | 3.14.                                               | Benefit Plans; ERISA                                           |   |
|   | 3.15.                                               | Real Property                                                  |   |
|   | 3.16.                                               | Environmental Matters                                          |   |
|   | 3.17.                                               | Intellectual Property                                          |   |
|   | 3.18.                                               | Contracts; Client  and Customer Relations                      |   |
|   | 3.19.                                               | Insurance                                                      |   |
|   | 3.20.                                               | Transactions with  Certain Persons                             |   |
|   | 3.21.                                               | Employees and Labor  Matters                                   |   |
|   | 3.22.                                               | Bank and Brokerage  Accounts                                   |   |
|   | 3.23.                                               | Insurability of  the Principals                                |   |
|   | 3.24.                                               | Brokers                                                        |   |

 

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|   | 3.25.                                                             | Investment  Representations                                          |   |
|--------|-------------------------------------------------------------------|----------------------------------------------------------------------|--------|
|   | 3.26.                                                             | Major Clients or  Customers                                          |   |
|   | 3.27.                                                             | Disclosure                                                           |   |
| 4.     | Representations  and Warranties of the Parent and the Merger Subs |                                                                 |
|   | 4.1.                                                              | Organization                                                         |   |
|   | 4.2.                                                              | SEC Reports and  Financial Statements of the Parent                  |   |
|   | 4.3.                                                              | Authority and  Enforceability                                        |   |
|   | 4.4.                                                              | No Conflicts                                                         |   |
|   | 4.5.                                                              | Governmental  Approvals and Filings                                  |   |
| 5.     | Additional  Covenants of the Parties                              |                                                                 |
|   | 5.1.                                                              | Further  Assurances and Cooperation                                  |   |
|   | 5.2.                                                              | Investigation by the  Parent                                         |   |
|   | 5.3.                                                              | No Shop                                                              |   |
|   | 5.4.                                                              | Conduct of Business                                                  |   |
|   | 5.5.                                                              | Certain  Reorganization Transactions                                 |   |
|   | 5.6.                                                              | Affiliate  Transactions                                              |   |
|   | 5.7.                                                              | Books and  Records                                                   |   |
|   | 5.8.                                                              | Employment  Agreements                                               |   |
|   | 5.9.                                                              | Preparation  of Tax Returns                                          |   |
|   | 5.10.                                                             | Non-Disclosure  of Confidential Information                          |   |
|   | 5.11.                                                             | No  Solicitation; No Hire                                            |   |
|   | 5.12.                                                             | Non-Competition                                                      |   |
|   | 5.13.                                                             | Seller  Group Representative                                         |   |
|   | 5.14.                                                             | Payment  of Certain Post Closing Collections to the Sellers          |   |
|   | 5.15.                                                             | Grant of  Proxies                                                    |   |
|   | 5.16.                                                             | Votes  with Respect to the Mergers; Waiver of Dissenters Rights, Etc |   |
|   | 5.17.                                                             | Purchase  for Investment; Legend on Certificate                      |   |
|   | 5.18.                                                             | No  Disqualifying Actions                                            |   |
|   | 5.19.                                                             | Notice  of Client Adverse Effects                                    |   |
|   | 5.20.                                                             | Sale  of Marketable Securities                                       |   |
| 6.     | Conditions  to the Mergers                                        |                                                                 |
|   | 6.1.                                                              | Conditions  to Closing Obligation of the Parent and the Merger Subs  |   |
|   | 6.2.                                                              | Conditions  to Closing Obligation of the Seller Group                |   |
| 7.     | Closing  Deliveries                                               |                                                                 |
|   | 7.1.                                                              | Closing  Deliveries of the Seller Group                              |   |
|   | 7.2.                                                              | Closing  Deliveries of the Parent                                    |   |
| 8.     | Indemnification                                                   |                                                                 |
|   | 8.1.                                                              | Survival  of Representations and Warranties                          |   |
|   | 8.2.                                                              | Indemnification  by the Seller Group                                 |   |
|   | 8.3.                                                              | Indemnification  by the Parent                                       |   |
|   | 8.4.                                                              | Limitations  on Indemnification                                      |   |
|   | 8.5.                                                              | Payment  by the Sellers of Indemnification Amounts                   |   |

 

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|   | 8.6.          | Method  of Asserting Claims                                              |   |
|--------|---------------|--------------------------------------------------------------------------|--------|
|   | 8.7.          | Other Remedies                                                           |   |
|   | 8.8.          | Limitation  on Indemnification After Disclosure of Client Adverse Effect |   |
| 9.     | Termination   |                                                                     |
|   | 9.1.          | Termination                                                              |   |
|   | 9.2.          | Effect of  Termination                                                   |   |
|   | 9.3.          | Break-Up Fee                                                             |   |
| 10.    | Miscellaneous |                                                                     |
|   | 10.1.         | Notices                                                                  |   |
|   | 10.2.         | Specific  Performance                                                    |   |
|   | 10.3.         | Entire  Agreement                                                        |   |
|   | 10.4.         | Expenses                                                                 |   |
|   | 10.5.         | Public  Announcements                                                    |   |
|   | 10.6.         | Waiver                                                                   |   |
|   | 10.7.         | Amendment                                                                |   |
|   | 10.8.         | No  Third Party Beneficiary                                              |   |
|   | 10.9.         | No  Assignment; Binding Effect                                           |   |
|   | 10.10.        | Headings;  Definitional Provisions; etc                                  |   |
|   | 10.11.        | Invalid  Provisions                                                      |   |
|   | 10.12.        | Drafting  History                                                        |   |
|   | 10.13.        | Governing Law                                                            |   |
|   | 10.14.        | Jurisdiction                                                             |   |
|   | 10.15.        | Counterparts                                                             |   |
|   | 10.16.        | GAAP                                                                     |   |

 

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**EXHIBITS**

 
| Exhibit  1.7(a)   |   | Form of Escrow  Agreement                                          |
|-------------------|--------|--------------------------------------------------------------------|
| Exhibit  5.8(i)   |   | Form of  Employment Agreement with Lawrence Brezner                |
| Exhibit  5.8(ii)  |   | Form of  Employment Agreement with David Steinberg                 |
| Exhibit  5.8(iii) |   | Form of  Employment Agreement with Stephen Tenenbaum               |
| Exhibit 5.15      |   | Form of  Proxy                                                     |
| Exhibit  7.1(iv)  |   | Form of  Seller Group Bringdown Certificate                        |
| Exhibit  7.2(v)   |   | Form of  Parent Bringdown Certificate                              |
|              |   |                                                               |
| **SCHEDULES**     |
|              |   |                                                               |
| Schedule l.4      |   | Allocation  of Merger Consideration to the Shares of the Companies |
| Schedule 3.3      |   | Equity  Interests; Title                                           |
| Schedule 3.4      |   | Ownership of  Other Equities                                       |
| Schedule 3.5      |   | Certain  Required Consents, Etc.                                   |
| Schedule 3.6      |   | Governmental  Approvals and Filings                                |
| Schedule  3.8(a)  |   | Financial  Statements                                              |
| Schedule  3.9(a)  |   | Absence of  Changes                                                |
| Schedule  3.9(b)  |   | Artists  Relationships                                             |
| Schedule  3.11(a) |   | Tax Matters                                                        |
| Schedule  3.12    |   | Legal  Proceedings                                                 |
| Schedule  3.14    |   | Benefit  Plans; ERISA                                              |
| Schedule  3.15    |   | Leased Real  Property                                              |
| Schedule  3.18(a) |   | Contracts                                                          |
| Schedule  3.18(c) |   | Income  Forecast and Audit Contracts                               |
| Schedule  3.19    |   | Insurance                                                          |
| Schedule  3.20    |   | Transactions  with Certain Persons                                 |
| Schedule  3.21(a) |   | Companies  Employees                                               |
| Schedule  3.21(b) |   | Companies  Employees Employment Agreements                         |
| Schedule  3.22    |   | Bank and  Brokerage Accounts                                       |
| Schedule  3.26    |   | Major  Clients or Customers                                        |

 

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This AGREEMENT AND PLANOF MERGER, dated as of July 22, 2005 (this “Agreement”), by and among CKX,Inc., a Delaware corporation (the “Parent”), MBSTAcquisition Corp., a California corporation (“M-Sub”), and FocusAcquisition Corp., a California corporation (“F-Sub” and, collectivelywith M-Sub, the “Merger Subs”), Lawrence Brezner, David Steinbergand Stephen Tenenbaum (collectively, the “Principals”), The LawrenceBrezner Living Trust (the “L Trust”), The Steinberg/Thayer Living Trust(the “S Trust”) and the Tenenbaum Living Trust (the “T Trust”and, collectively with the L Trust and the S Trust, the “Sellers”), andMorra, Brezner, Steinberg & Tenenbaum Entertainment, Inc., a Californiacorporation (“MBST”), Focus Enterprises, Inc., a California corporation(“Focus”), and StepTeco, Inc., a California corporation (“StepTeco”and, collectively with MBST, Focus, Uncle Dave’s (as defined in Section 5.5hereof) and Productions (as defined in Section 5.5 hereof), the “Companies”).  The Parent and the Merger Subs are sometimescollectively referred to hereinafter as the “Parent Group.”  The Principals, the Sellers and the Companiesare sometimes collectively referred to hereinafter as the “Seller Group.”

 

The Sellers own,collectively, all of the outstanding capital stock of MBST and Focus.  The Companies are engaged in the business ofartist management, television and feature film production and relatedbusinesses and other activities that are integral to the foregoing(collectively, the “Business”).

 

The Parent and theSellers desire that StepTeco, Uncle Dave’s and Productions be acquired by Focusor MBST (as contemplated in Section 5.5 hereof), and that M-Sub and F-Subthereafter merge with and into MBST and Focus, respectively, in order to effectuatethe acquisition of the Companies by the Parent. For that purpose the Parent has organized each of the Merger Subs as awholly-owned subsidiary of the Parent, and the parties have agreed, subject tothe terms and conditions set forth in this Agreement, (i) to merge M-Sub withand into MBST and to merge F-Sub with and into Focus, with MBST and Focus beingthe surviving corporations of their respective mergers and wholly-ownedsubsidiaries of the Parent (such mergers, collectively, the “Mergers”),and (ii) in exchange for the shares of capital stock of MBST and Focus whichare to be cancelled as a result of the Mergers, to cause the Sellers to be paidcertain consideration by the Parent, all as set forth in this Agreement.

 

The Boards of Directorsof the Parent, the Merger Subs and the Companies have determined that it is inthe best interests of their respective companies and their respectivestockholders for the Parent to acquire the Companies by means of the Mergerscontemplated in this Agreement and, accordingly, the Boards of Directors of theParent, the Merger Subs and the Companies have approved the Mergers and thisAgreement.

 

For federal income taxpurposes it is intended that the Mergers contemplated by this Agreement shallqualify as a reorganization within the meaning of Section 368(a)(1) of the Codeand that this Agreement constitutes a plan of reorganization for such purposes.

 

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Capitalized terms usedbut not otherwise defined in this Agreement have the meanings given them in theAppendix hereto (the “Appendix”), which is incorporated into, and made part of,this Agreement.

 

THEREFORE, inconsideration of the mutual covenants and agreements set forth in thisAgreement, and for other good and valuable consideration, the receipt andsufficiency of which are hereby acknowledged, the parties hereto agree asfollows:

 

# 1.         Mergers.

#  

## 1.1.      TheMergers.  Upon the terms and subject to the conditionsset forth in this Agreement, and inaccordance with Sections 1103 and 1107 of the California Corporation Code (the “CaliforniaCorporations Code”), at the respective Effective Time (as defined below):

##  

#### (i)  M-Sub shall be merged with and into MBST,with MBST being the surviving corporation and a wholly-owned subsidiary of theParent, and the separate corporate existence of M-Sub shall cease; and

####  

#### (ii)  F-Sub shall be merged with and into Focus,with Focus being the surviving corporation and a wholly-owned subsidiary of theParent, and the separate corporate existence of F-Sub shall cease.

####  

## 1.2.     Consummationof the Mergers.  At theClosing, the parties shall cause each of the Mergers to be consummated byfiling duly executed articles of merger with the Secretary of State of theState of California in accordance with the relevant provisions of theCalifornia Corporations Code.  The timeof the filing of such articles of merger with respect to each of the Mergers isreferred to herein as the “Effective Time” of such Merger.

##  

## 1.3.     Effectsof the Mergers.

##  

### (a)       At therespective Effective Time of each of the Mergers, the effect of the Mergersshall be as provided under the California Corporations Code, and as furtherprovided in this Section 1.3 and in Section 1.4 hereof.  Without limiting the generality of theforegoing, upon consummation of the Mergers, as applicable:

###  

#### (i)  all properties, assets, rights, privileges,policies and franchises of M-Sub and MBST shall vest in MBST as thesurviving corporation of their respective Merger, and all debts, liabilitiesand obligations of M-Sub and MBST shall become the debts, liabilities andobligations of MBST as the surviving corporation of such Merger; and

####  

#### (ii)  all properties, assets, rights, privileges,policies and franchises of F-Sub and Focus shall vest in Focus as the survivingcorporation of their respective Merger, and all debts, liabilities and

 

2

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#### obligations ofF-Sub and Focus shall become the debts, liabilities and obligations of Focus asthe surviving corporation of such Merger.

 

### (b)       TheArticles of Incorporation and By-laws of MBST and Focus, as in effectimmediately prior to the respective Effective Time of its Merger with therespective Merger Sub, shall remain the Articles of Incorporation and By-lawsof MBST and Focus, respectively, as the surviving corporations of theirrespective Mergers, unless and until amended in accordance with their terms andas provided by Law.

###  

## 1.4.     Conversion of the Sharesof the Merger Subs and the Companies. At the Effective Time of each of the Mergers, by virtue of each Mergerand without any action on the part of the Parent, the Merger Subs, any of theCompanies, any of the Sellers, any of the Principals or any other Person, (i) each outstanding share of thecommon stock of M-Sub and F-Sub, as applicable, shall be converted into oneshare of the common stock of MBST and Focus, respectively, and shall continueto be held by the Parent; and (ii) all of the outstanding shares of the capitalstock of MBST and Focus (collectively, the “Converted Companies Shares”),as applicable, shall cease to be outstanding and shall be converted into theright to receive the portions specified on Schedule 1.4 of theconsideration described in Section 1.5 (the “Merger Consideration,” asthe Merger Consideration may be adjusted pursuant to Section 2.4, Section5.9(b) and Section 5.14 hereof).

##  

## 1.5.     MergerConsideration.  The MergerConsideration to be paid at the Closing shall, in the aggregate, consist of thefollowing:

##  

#### (i)  $1,000,000 cash plus suchamount, if any, as may be required to be added thereto based on the preliminaryestimate of Working Capital in accordance with Section 2.2(b), which theParent shall pay to the Sellers at the Closing by wire transfer of immediatelyavailable funds to bank accounts designated in writing by the Sellers to theParent not less than three (3) days prior to the Closing;

####  

#### (ii)  700,000 newly issued shares of Parent CommonStock (subject to adjustment as provided in Section 1.6 hereof), which theParent shall deliver to the Sellers at the Closing; and

####  

#### (iii)  150,000 newly issued shares of Parent CommonStock (subject to adjustment as provided in Sections 1.6 and 1.7(b) hereof),which the Parent shall deliver to the Escrow Agent pursuant to the EscrowAgreement, and which shall be released only in accordance with the terms andprovisions of Section 1.7 hereof and the Escrow Agreement.

####  

## 1.6.     Adjustmentof Parent Common Stock Through the Closing Date. The number of shares of Parent Common Stock that shall be issued at theClosing, as provided in Section 1.5(ii) and Section 1.5(iii) hereof, shall beproportionately adjusted for and in respect of all Parent Equity RecapTransactions that are consummated, or that

 

3

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have a record date, after the date of thisAgreement and on or prior to the Closing Date, with the result that the numberand kind of securities so issued at the Closing as provided in Section 1.5(ii)and Section 1.5(iii) hereof shall be equal to thenumber and kind (including Parent Common Stock) of securities that the holderof 700,000 shares and 150,000 shares, respectively, of Parent Common Stockimmediately before the first of such Parent Equity Recap Transactions wouldhave held immediately after the last of such Parent Equity Recap Transactions.

##  

## 1.7.     Escrow.

##  

### (a)       At theClosing, the Parent and the Sellers shall enter into an Escrow Agreement in the form of Exhibit1.7(a) attached hereto (the “Escrow Agreement”) with an escrow agentreasonably acceptable to the parties hereto (the “Escrow Agent”).  As provided in Section 1.5(iii) hereof, theshares of Parent Common Stock or other securities to be issued at the Closingpursuant to Section 1.5(iii) hereof (such securities, as adjusted (ifapplicable) pursuant to Section 1.7(b) hereof, the “Escrowed Shares”)shall be delivered by the Parent to the Escrow Agent at the Closing to be heldin escrow and released in accordance with the terms of the Escrow Agreement.

###  

### (b)       Inthe event of a Parent Equity Recap Transaction that occurs, or that has arecord date, after the Closing Date and during the period any of the EscrowedShares are to be held in escrow pursuant to the Escrow Agreement, the Parent,and (as applicable) the Sellers, shall cause the number of Escrowed Shares tobe proportionately adjusted for and in respect of such Parent Equity RecapTransaction (without duplication for any adjustment that would occurautomatically as a result of such Parent Equity Recap Transaction), with theresult that the number and kind of securities then held in escrow pursuant to theEscrow Agreement shall be equal to the number and kind (including Parent CommonStock) of securities that the securities held in escrow immediately before suchParent Equity Recap Transaction would have become immediately after such ParentEquity Recap Transaction.

###  

### (c)        TheParent and the Sellers shall jointly direct the Escrow Agent to release theEscrowed Shares held in escrow as follows:

###  

#### (i)  50,000 of such Escrowed Shares (as suchnumber may have been adjusted prior to the closing pursuant to Section 1.6hereof and as such number may be adjusted after the Closing pursuant to Section1.7(b) hereof) to the Sellers if, and at such time, during the five (5) yearperiod ending June 30, 2010, the Business of the Companies, based on theregularly prepared financial statements of the Companiesand the Parent, achieves cumulative Section 1.7(c)(i) Revenues of atleast $40 million;

####  

#### (ii)  50,000 of such Escrowed Shares (as suchnumber may have been adjusted prior to the closing pursuant to Section 1.6hereof and as such number may be adjusted after the Closing pursuant to Section1.7(b) hereof) to the Sellers if and at such time, on or prior to the fifth(5th) anniversary of

 

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#### the Closing Date,the price of one share of Parent Common Stock closes at $50.00 or more (whichprice shall be determined based on the closing price on the principal U.S.securities exchange or securities market on which the Parent Common Stocktrades and proportionately adjusted to reflect any adjustments pursuant toSection 1.7(b) hereof) on ten (10) consecutive trading days on the principalU.S. securities exchange or securities market on which the Parent Common Stocktrades; and

####  

#### (iii)  50,000 of such Escrowed Shares (as suchnumber may have been adjusted prior to the closing pursuant to Section 1.6hereof and as such number may be adjusted after the Closing pursuant to Section1.7(b) hereof)  to the Sellers if and atsuch time the conditions in both of Section 1.7(c)(i) and Section 1.7(c)(ii)hereof have been satisfied or deemed satisfied hereunder;

####  

provided,however, the Parent may require that, in any directions to the EscrowAgent pursuant to this Section 1.7(c), the Parent and the Sellers shall reducethe number of Escrowed Shares to be released, with such reduction equal to anumber of Escrowed Shares having a value (determined in the manner specified inSection 1.7(d) hereof as of the date such Escrowed Shares would otherwise havebeen released to the Sellers pursuant to this Section 1.7(c)) equal to the sumof all indemnification claims by the Parent or a Parent Indemnitee that arepending and unresolved (pursuant to the resolution procedures applicable withrespect to the indemnification provisions of Section 8 of this Agreement), whichnumber of Escrowed Shares shall continue to be held by the Escrow Agent pendingfinal resolution of such claims, or that have been resolved (pursuant to suchresolution procedures) in favor of the Parent or a Parent Indemnitee but remainunpaid.

 

### (d)       TheParent and the Sellers shall jointly direct the Escrow Agent to release theEscrowed Shares not released to the Sellers in accordance with Section 1.7(c)hereof to the Parent for cancellation; provided, however, that:

###  

#### (i)  as to any Escrowed Shares that were notreleased to the Sellers because of an unresolved indemnification claim ascontemplated in the proviso at the end of Section 1.7(c), such jointnotice shall be given to the Escrow Agent from time to time upon resolution ofthe indemnification claim, and shall direct the Escrow Agent to release (A) tothe Parent or Parent Indemnitee a number of Escrowed Shares having a valueequal to the amount of the claim (in accordance with the resolution thereof),or (if applicable) such lesser amount, if any, remaining after payment (afterthe date the respective Escrowed Shares were not released pursuant to theproviso at the end of Section 1.7(c)) by the Sellers of any amount of suchclaim in cash; and (B) to the Sellers such number of Escrowed Shares, if any,as may be remaining from the number withheld in respect of such resolvedindemnification claim that were not released to the Parent or Parent

 

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####  

#### Indemnitee (lesssuch number of Escrowed Shares that may be necessary for the Escrow Agent tocontinue to hold so that sufficient Escrowed Shares are held in respect of allpending and unresolved or resolved and unpaid, indemnification claims); and

####  

#### (ii)  as to any Escrowed Shares that were notreleased to the Sellers because of an unpaid indemnification claim ascontemplated in the proviso at the end of Section 1.7(c), such jointnotice shall be given if such payment is not made within thirty (30) days afterthe date such Escrowed Shares would otherwise have been released from escrow,and shall direct the Escrow Agent to release (A) to the Parent or ParentIndemnitee a number of Escrowed Shares having a value equal to the amount ofthe claim or (if applicable) such lesser amount, if any, remaining afterpayment (after the date the respective Escrowed Shares were not releasedpursuant to the proviso at the end of Section 1.7(c)) by the Sellers of anyamount of such claim in cash; and (B) to the Sellers such number of EscrowedShares, if any, as may be remaining from the number withheld in respect of suchunpaid indemnification claim that were not released to the Parent or ParentIndemnitee (less such number of Escrowed Shares that may be necessary for theEscrow Agent to continue to hold so that sufficient Escrowed Shares are held inrespect of all pending and unresolved or resolved and unpaid, indemnificationclaims).

####  

In connection withany release of Escrowed Shares pursuant to items (i) or (ii) of this Section1.7(d) or any reduction of the amount of Escrowed Shares as contemplated by theproviso at the end of Section 1.7(c), any Escrowed Shares so released orwithheld from release shall be valued at the average of the closing prices onthe principal U.S. securities exchange or securities market on which the ParentCommon Stock trades on the ten (10) consecutive trading days ending on thethird (3rd) trading day prior to the date such Escrowed Shares would otherwisehave been released to the Sellers pursuant to Section 1.7(c).

 

### (e)        Ifa Change in Control Transaction is consummated at any time any Escrowed Sharesremain in escrow pursuant to the Escrow Agreement, the conditions set forth inSections 1.7(c)(i), (ii) and (iii) hereof for the release of such EscrowedShares to the Sellers shall be deemed to have been satisfied regardless ofwhether such conditions have actually been satisfied as of the time of theconsummation of the Change in Control Transaction.  Accordingly, the Parent and the Sellers shalljointly direct the Escrow Agent to release all of the Escrowed Shares then heldin escrow upon the consummation of a Change in Control Transaction.

###  

### (f)        Inthe event the Parent makes any material changes (or directs that any materialchanges be made) to the day-to-day historic operation and activities of theBusiness (unless such material changes are made solely with respect to the backoffice or administrative matters of the Business), and such material changes materiallyimpair the

 

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ability of the Sellers to cause theconditions for release of the Escrowed Shares to the Sellers set forth inSection 1.7(c)(i) to be satisfied, or if the employment of any Principal withthe Companies is terminated by the applicable Company or other employer withoutCause (as such term is defined in the applicable Employment Agreement) or bythe Principal for Constructive Termination Without Cause (as such term isdefined in the Employment Agreement) and if the Parent and theSeller have not prior thereto jointly directed the Escrow Agent to releaseEscrowed Shares as a result of the satisfaction of the condition set forth inSection 1.7(c)(i) hereof, then such condition set forth in Section 1.7(c)(i)hereof shall be deemed to have been satisfied and the Parent and the Sellersshall jointly direct the Escrow Agent to release Escrowed Shares then held inescrow to the Sellers as though such condition had been satisfied.

###  

### (g)        Notwithstandinganything to the contrary in this Agreement, including, without limitation,Section 1.7(c), no Escrowed Shares shall be released until after the ClosingWorking Capital has become final and binding on the parties hereto inaccordance with the terms and provisions of Section 2 hereof.

###  

### (h)       Inall matters pertaining to the escrow described in this Section 1.7, in theevent of any conflict between the terms and provisions of this Agreement andthe terms and provisions of the Escrow Agreement, the terms and provision ofthis Agreement shall prevail as between the Parent and the Sellers.

###  

## 1.8.     CertainPost-Closing Accounting Matters.  The Sellersacknowledge that, after the Closing, the Companies and the Business will beoperated as a division of the Parent or through one or more Subsidiaries of theParent, in all respects under the control and subject to the authority of theBoard of Directors of the Parent; provided, however, that theParent shall not take any action that will prevent the recognition of theSection 1.7(c)(i) Revenues.

##  

## 1.9.     Allocationof Payments.  All payments of MergerConsideration, whether directly to the Sellers at the Closing, from the escrowheld pursuant to the Escrow Agreement, or otherwise, shall be allocated amongand paid and delivered to the Sellers in the relative percentages set forth on Schedule1.4.

##  

## 1.10.   Closing. ** **The closingof the Mergers and the other transactions contemplated hereby (the “Closing”)shall take place at the offices of Troutman Sanders LLP, legal counsel to theParent and the Merger Subs, in New York, New York, at 10:00 a.m., local time,on a date that is not later than the tenth (10th) Business Day after the dateof this Agreement (provided that all of the conditions to closing setforth in Section 6.1 and Section 6.2 hereof have been satisfied or waived), orat such other date, time or place as may be agreed to in writing by the partieshereto (the “Closing Date”).  TheClosing shall be deemed to take place at 11:59 p.m. on the Closing Date.

 

7

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# 2.         WorkingCapital Merger Consideration Adjustment.

#  

## 2.1.     Adjustmentof Merger Consideration.  The MergerConsideration shall be (i) increased by the amount, if any, by which theClosing Working Capital (as it becomes final and binding on the parties inaccordance with Section 2.3 hereof) is greater than zero (such amount, if any,the “Positive Working Capital”), or (as applicable) or (ii) decreased bythe amount, if any, by which the Closing Working Capital (as it becomes finaland binding on the parties in accordance with Section 2.3 hereof) is less thanzero (such amount, if any, the “Negative Working Capital”).

##  

## 2.2.     Preliminary Working Capital Estimate.

##  

### (a)       Not less than two (2) BusinessDays and not more than five (5) Business Days before the Closing Date, theSellers shall deliver to the Parent (i) a written calculation in reasonabledetail of the amount of the Working Capital (whether positive, negative orzero) that the Seller Group expects the Companies (on a combined basis) to haveas of the Closing and (ii) a certificate signed by the Sellers stating theamount of the Working Capital (whether positive, negative or zero) ofthe Companies as of the Closing as so estimated and certifying that such amountis the Sellers’ best estimate and forecast of the Working Capital of theCompanies as of the Closing.

###  

### (b)       If the Sellers’certificate as delivered pursuant to Section 2.2(a) shows that Working Capitalis expected to be positive as of the Closing, then seventy-five percent (75%)of the amount by which Working Capital is expected to be positive, as set forthin the Sellers’ certificate, shall be added by the Parent to the cash componentof the Merger Consideration and shall be paid at the Closing pursuant toSection 1.5(i), subject to adjustment pending the final determination ofClosing Working Capital in accordance with Section 2.3 hereof and the paymentthereof in accordance with Section 2.4 hereof.

###  

## 2.3.     Determinationof Closing Working Capital.

##  

### (a)       As promptlyas practicable after the Closing Date (but in any event not more than ninety(90) days thereafter), the Parent shall deliver to the Sellers: (i) a combinedbalance sheet of the Companies as of the time of the Closing which shall beprepared in a manner consistent with the definition of Working Capital hereinand otherwise in accordance with GAAP consistently applied with respect to theAudited Financial Statements of the Companies referred to in Section 3.08hereof, but without giving effect to the Mergers, any matters occurringsimultaneously with the Closing pursuant to this Agreement (other than anyamount that may be paid at or prior to the Closing, as contemplated by Section5.5 hereof) or any matters occurring after the Closing; and (ii) a calculation(which shall be based on and consistent with the combined balance sheetdelivered pursuant to item (i) of this Section 2.3(a)) in reasonable detailsetting forth the Parent’s calculation of the Working Capital of the Companiesas of the Closing (the “Closing Working Capital”).

 

8

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### (b)       TheSellers shall have thirty (30) days after delivery to them of the Parent’sdeliveries pursuant to Section 2.2(a) (the “Review Period”) to reviewsuch Parent deliveries.  If the Sellersdo not agree with the amount of the Closing Working Capital as calculated bythe Parent pursuant to Section 2.2(a), the Seller Group Representative shall,within the Review Period, give the Parent a written notice (a “DisputeNotice”) setting forth (i) the amount the Sellers believe to be the ClosingWorking Capital and showing the differences, category-by-category, and (ii) areasonably detailed explanation of the basis of the Sellers’ calculation ofsuch amount.  If the Seller GroupRepresentative indicates in writing that the Sellers do not object to theClosing Working Capital as calculated by the Parent, or if the Seller GroupRepresentative fails to deliver a Dispute Notice to the Parent within theReview Period, the Closing Working Capital as calculated by the Parent shall bedeemed to have been accepted by the Sellers in the form in which it was deliveredby the Parent and shall be final, conclusive and binding upon the parties forall purposes and not subject to appeal on any ground, absent mathematical erroror fraud, and judgment on such amount of Closing Working Capital, and anyresulting obligation of either the Parent or the Sellers to pay the other partyany amount pursuant to Section 2.4 may be enforced in any court havingjurisdiction over the subject matter of the controversy.

###  

### (c)        Ifa Dispute Notice shall be timely delivered by the Seller Group Representativeto the Parent, the Seller Group Representative and the Parent shall, withinthirty (30) days after such delivery, promptly and in good faith attempt toresolve the matters set forth therein and agree in writing upon the final amountof the Closing Working Capital.  If theSeller Group Representative and the Parent are unable to resolve the matters indispute within that 30-day resolution period, then the Panel of Accountants (asdefined in Section 2.3(e) hereof) shall be employed to arbitrate and resolvesuch matters as soon as reasonably practicable. Any arbitration pursuant to this Section 2.3(c) and Section 2.3(d)hereof shall be conducted in New York City, or by telephonic conference call ifacceptable to the Panel of Accountants. The Sellers and the Parent shall each execute and deliver such retentionagreements as the Panel of Accountants may reasonably require in connectionwith its services pursuant to this Section 2.3(c).

###  

### (d)       ThePanel of Accountants shall be instructed to promptly review the applicableprovisions of this Agreement and shall only consider those items in the Parent’scalculation of Closing Working Capital that are expressly identified as itemsof dispute in the Dispute Notice.  ThePanel of Accountants shall, as promptly as practicable, deliver to the Parentand the Seller Group Representative a report setting forth any adjustments tosuch disputed items in the Parent delivery necessary to make such items conformto the requirements of this Section 2, and setting forth the amount of theClosing Working Capital.  Thedetermination of the Panel of Accountants with respect to such matters shall befinal, conclusive and binding upon the parties and not subject to appeal on anyground, absent mathematical error or fraud, and judgment on the determination,and any resulting obligation of either the Parent or the Sellers to pay theother party any amount under Section 2.4, may be enforced in any court havingjurisdiction over the subject matter of the controversy.

 

9

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### (e)        The“Panel of Accountants” shall consist of three individual CertifiedPublic Accountants each of whom shall be engaged in accounting practice in NewYork City and shall not, in the immediately preceding thirty-six (36) months,have provided services to or been employed by the Parent, the Companies, theSellers, the Principals, or any of their respective Affiliates or any of theirrespective executive officers, and shall not be a member of, or employed by, afirm which has provided services to any of such Persons, or otherwise have aconflict of interest with any such Person or taken an adversarial position withrespect to any such Persons.  Individualswho meet such qualifications shall be appointed as follows:  (i) one member shall be appointed by theParent by written notice to the Seller Group Representative; (ii) one membershall be appointed by the Seller Group Representative by written notice to theParent; and (iii) one member, who shall be the chairman of the Panel ofAccountants, shall be appointed by the mutual agreement of the two membersappointed pursuant to the foregoing items (i) and (ii) of this Section2.3(e).  If the two members appointedpursuant to items (i) and (ii) of this Section 2.3(e) fail to agree withinthirty (30) days after the second member has been appointed upon theappointment of the third member, the third member shall be appointed by theAmerican Arbitration Association (the “AAA”) in accordance with itsrules then in effect.  In the event thateither party shall fail to appoint a member within fifteen (15) days after theother party appoints its member, such member and the third member shall beappointed by AAA in accordance with its rules then in effect.  The Panel of Accountants shall be instructedto determine which of the parties has substantially prevailed in the disputeand the party who has not substantially prevailed shall pay all of the fees andexpenses of the Panel of Accountants in connection with the dispute.

###  

### (f)        Withrespect to any dispute and/or arbitration pursuant to this Section 2, theSellers and the Parent shall each pay and be responsible for their ownrespective costs and expenses, including, without limitation, the fees andexpenses of their respective legal, accounting and other advisors.

###  

## 2.4.     Payment of MergerConsideration Adjustment.

##  

### (a)       Except asprovided in Section 2.4(b), withinfive (5) Business Days after the amount of Closing Working Capital becomesfinal and binding upon the parties in accordance with Section 2.3, (i) theParent shall pay to the Sellers, in cash, the amount, if any, by which thePositive Working Capital exceeds the amount, if any, of cash that, pursuant toSection 2.2(b), was added to the $1,000,000 cash portion of Merger Considerationpaid at the Closing pursuant to Section 1.5(i) or, if applicable, (ii) theSellers shall pay to the Parent, in cash, either (A) the amount, if any, bywhich the Positive Working Capital is less than the amount of cash that, pursuant to Section 2.2(b), was added to the cashportion of Merger Consideration paid at the Closing pursuant to Section 1.5(i)or (B) the sum of Negative Working Capital, if any, plus the amount of cashthat, pursuant to Section2.2(b), was added to the cash portion of Merger Consideration paid atthe Closing pursuant to Section 1.5(i).  If the Sellers fail to pay any amountrequired to be paid pursuant to the immediately preceding sentence, the Parent

 

10

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may recoversuch amount not paid by canceling any of the shares of Parent Common Stockdelivered to the Sellers pursuant to this Agreement.

###  

### (b)       In the event that, asa result of either (i) the adjustments, pursuant to Section 2.2(b) and Section2.4(a), to the $1,000,000 cash portion of Merger Consideration paid at theClosing pursuant to Section 1.5(i), or (ii) any other adjustment to the MergerConsideration hereunder pursuant to any of Section 5.9 or Section 5.14 hereof,the portion of the total amount of cash paid by Parent to Sellers as MergerConsideration allocable to a Company undergoing one of the Mergers would exceedan amount equal to 25% of the fair market value on the date of Closing of theportion of the 700,000 shares of Parent Company Stock allocable to such Company,then any such excess amount shall not be paid in cash but rather shall be paidin newly issued shares of Parent Common Stock of equal value as determined inthe manner specified in Section 1.7(d); and if fractional shares would resultfrom such computation, such fractional shares shall not be issued.

###  

# 3.         Representations andWarranties of the Seller Group.  Each memberof the Seller Group, jointly and severally, hereby represents and warrants tothe Parent and the Merger Subs as set forth below:

#  

## 3.1.     Authorityand Enforceability.

##  

### (a)       Eachof the Sellers has the full capacity, power and authority to execute anddeliver this Agreement and the Escrow Agreement and perform such Seller’sobligations hereunder and thereunder. The respective trustees of each of the Sellers have the full capacity,power and authority to execute and deliver this Agreement and the EscrowAgreement on behalf of the respective Seller and to cause such respectiveseller to perform such Seller’s obligations hereunder and thereunder.  This Agreement and the Escrow Agreement havebeen duly and validly executed and delivered by the respective trustees of eachof the Sellers and constitute the legal, valid and binding obligations of suchSeller, enforceable against such Seller in accordance with the terms hereof andthereof.

###  

### (b)       Eachof the Companies that is a signatory to this Agreement has the power andauthority to execute this Agreement and each of the Operative Agreements towhich it is a party and perform its respective obligations hereunder andthereunder.  The execution and deliveryby each of such Companies of this Agreement and each of the OperativeAgreements to which it is a party and the performance by each of such Companiesof its obligations hereunder and thereunder have been duly and validlyauthorized by the board of directors and the stockholders of each of suchCompanies, and no other action on the part of any of the Companies or the boardof directors or stockholders thereof is necessary.  This Agreement and each of the OperativeAgreements to which it is a party have been duly and validly executed anddelivered by each of the Companies that is a signatory to this Agreement andconstitute the legal, valid and binding obligations of each of such Companies,enforceable against it in accordance with the terms hereof and thereof.

 

11

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### (c)        Eachof the Principals has the full capacity, power and authority to execute anddeliver this Agreement and each of the Operative Agreements to which suchPrincipal is a party and perform his obligations hereunder and thereunder.  This Agreement and each of the OperativeAgreements to which a Principal is a party have been duly and validly executedand delivered by such Principal and constitute the legal, valid and bindingobligations of such Principal, enforceable against him in accordance with theterms hereof and thereof.

###  

## 3.2.     Organizationof the Companies.  Each of theCompanies is a corporation (other than Productions which is a general partnership),duly organized, validly existing and in good standing under the Laws of thejurisdiction of its incorporation and has full corporate power and authority toconduct the Business as and to the extent now conducted and as presentlycontemplated to be conducted and to own, use and lease its Assets.  Each of the Companies is duly qualified,licensed or admitted to do business and is in good standing in eachjurisdiction in which the ownership, use or leasing of its Assets, or theconduct or nature of the Business, makes such qualification, licensing oradmission necessary except where the failure to be so qualified, licensed oradmitted would not result in a Material Adverse Effect on the Companies.  The Sellers have, prior to the execution ofthis Agreement, given the Parent access to true, correct and complete copies ofthe Organizational Documents of each of the Companies.

##  

## 3.3.     EquityInterests; Title.  Schedule3.3 sets forth a complete and correct list of the authorized and issuedcapital stock of each of the Companies that is a corporation and the ownershipof Productions.  The issued shares ofcapital stock as shown on Schedule 3.3 constitute all of the issued andoutstanding shares of capital stock of each of the Companies that is acorporation and the ownership of Productions, and such issued shares of capitalstock have been duly authorized and validly issued, are fully paid andnon-assessable and were not issued in violation of, and are not subject to, anypreemptive rights or other similar rights of any Person, any Laws or theArticles of Incorporation of the respective Company.  There is no Option or other Contractoutstanding that directly or indirectly: (a) calls for, requires orcontemplates the issuance, sale, grant or other disposition of any shares ofcapital stock of any of the Companies or securities that are convertible into,or have other rights to acquire, any shares of capital stock of any of theCompanies; or (b) relates to the voting or control of any of the shares ofcapital stock of any of the Companies. No Person has any right to require any of the Companies (or anyAffiliate thereof) to register any securities of such Company (or any Affiliatethereof) under the Securities Act.  TheSellers own, beneficially and of record, all of the Converted Companies Shares,free and clear of any and all Liens.

##  

## 3.4.     Ownershipof Other Equities.  Except as setforth on Schedule 3.4, none of the Companies owns, directly orindirectly or, since December 31, 2001, has owned, directly or indirectly, anyshares of capital stock or other equity interests (including any Option) in orwith respect to any business, corporation, general partnership, limitedpartnership, limited liability company, association, joint venture, trust, orother entity.  All of such outstandingshares of capital stock or other equity

 

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interests have been duly authorized andvalidly issued, and are fully paid and non-assessable.  There are no Options requiring any of the entitieslisted on Schedule 3.4 to issue or sell, or giving any Person a right tosubscribe for or acquire, or any way dispose of, any shares of capital stock orother equity interests of such entities. None of such outstanding shares of capital stock or other equityinterests is subject to any voting trust agreement, proxy or other agreement orarrangement.  There are no outstandingobligations or other commitments of any of the Companies or any of the issuerslisted on Schedule 3.4 to make any investment (in the form of a loan,capital contribution or other obligation to provide funds) in any otherPerson.  None of the Principals, none ofthe Sellers and none of the Companies owns any shares of the capital stock ofthe Parent.

##  

## 3.5.     NoConflicts.  Except as set forth on Schedule 3.5,the execution and delivery by the Sellers, the Principals and the Companies, asapplicable, of this Agreement and the Operative Agreements to which such Personis a party, the consummation by the Sellers, the Principals and the Companies,as applicable, of the Mergers and of the other transactions contemplated herebyor thereby, and the performance of their respective obligations hereunder andthereunder, do not and will not (as applicable):

##  

#### (i)  conflict with or result in a violation orbreach of any of the terms, conditions or provisions of any of theOrganizational Documents of any of the Companies;

####  

#### (ii)  conflict with or result in a violation orbreach of any term or provision of any Law or Order applicable to any of theSellers, any of the Principals or any of the Companies or any of theirrespective Assets or to which any of the Sellers, the Principals or theCompanies is a party; or

####  

#### (iii)  result in a breach of or default under,require notice or consent under (or give rise to any right of payment,termination, cancellation or acceleration under) any of the terms, conditionsor provisions of any Contract of any of the Companies or any of theirSubsidiaries or to which any of the Assets of any of the Sellers (or any of thetrustees thereof), any of the Companies or any of their Subsidiaries is bound,except for such breaches or defaults (or rights of termination, cancellation oracceleration) as to which requisite waivers or consents have been obtained.

####  

## 3.6.     GovernmentalApprovals and Filings.  Except as setforth on Schedule 3.6, no term or provision of any Law or Orderapplicable to any of the Sellers, any of the Principals or any of the Companiesor any of their respective Assets or to which any of the Sellers, the Principalsor the Companies is a party requires any consent, approval or action of, filingwith or notice to any Governmental Authority in connection with the executionor delivery of this Agreement or the Operative Agreements or the consummationby any of the Sellers, any of the Principals or any of the Companies of theMergers or any of the other transactions contemplated hereby or thereby or the

 

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performance by any of the Sellers, any of thePrincipals or any of the Companies of their respective obligations hereunderand thereunder.

##  

## 3.7.     Assetsof the Companies; Entities; Licenses.

##  

### (a)       The Assetsthat are owned by the Companies as of the date hereof, and that will be owned by the Companies immediatelyprior to the Closing and immediately after the Closing will include all Assetsnecessary to conduct the Business, in all respects, immediately following theClosing as such Business was conducted during the period reflected in theAudited Financial Statements, and all of the Assets that were owned by theCompanies and used, directly or indirectly, in the Business during such period,in each case, subject to immaterial changes in the ordinary course of businessconsistent with past practice.  TheSellers, the Principals and the Companies do not conduct and have not conductedthe Business through any entity other than the Companies or a wholly ownedSubsidiary or Affiliate thereof, each of which (i) is listed on Schedule 3.3attached hereto, (ii) has been continuously wholly owned by the Companies since1999 (except as may be otherwise expressly disclosed on Schedule 3.3hereto to the extent such entity was organized after that date) and (iii) willbe acquired by the Parent as a result of the Mergers.  There is not, and at the Closing there willnot be, any Lien (other than Permitted Liens) on or with respect to any of suchAssets of the Companies (including, without limitation, any shares of capitalstock or other equity interest of any Subsidiary of any of the Companies) thatis not fully disclosed in the Audited Financial Statements and described indetail in the notes thereto.

###  

### (b)       Eachof the Companies possesses every License reasonably necessary to conduct itsbusiness in the manner conducted during calendar year 2004 and each suchLicense is current and in force and effect and will not be terminated as aresult of the Mergers or any of the other transactions contemplated hereby.

###  

## 3.8.     Financial Statements.

##  

### (a)       Attached hereto as Schedule 3.8(a)are true, correct and complete copies of the audited combined balance sheets ofthe Companies (subject to the last sentence of this Section 3.8(a)) as ofDecember 31, 2004 (the “December 2004 Balance Sheet”) and December 31,2003 and the related audited combined statements of operations, stockholders’equity and cash flows of the Companies for each of the two fiscal years thenended (all of the foregoing financial statements, the “Financial Statements”).  The Financial Statements were prepared inaccordance with GAAP consistently applied (except as may be required by Section3.10(b) hereof) and fairly and accurately present in all material respects thecombined financial condition, results of operations, stockholders’ equity andcash flows of the Companies as of the dates and for the periods thereof.  The revenues and expenses set forth in theFinancial Statements constitute all revenues generated and expenses incurred bythe Companies or by any Subsidiary or Affiliate thereof or by any other Personin connection with the operation of the Business during the periods presented,subject to the last sentence of this Section 3.8(a).  The Financial Statements were audited by anindependent auditing firm that is

 

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registered to practice before the U.S. Securities and ExchangeCommission.  The right of the Parent andthe Merger Subs to rely fully on the representations and warranties set forthin this Section 3.8 shall not be impaired or affected in any way by virtue ofany assistance or involvement of the Parent or any of its internal or externalaccountants or other representatives in the preparation of the FinancialStatements.  The financialcondition, results of operations and cash flows for each of the entities theequity or assets of which are to be purchased or otherwise acquired prior tothe Closing pursuant to Section 5.5, other than Uncle Dave’s, are fullyreflected in the Financial Statements (subject to the last sentence of thisSection 3.8).  Anything to the contrarynotwithstanding, the Parent Group hereby acknowledges that the FinancialStatements do not include any results from operations, or footnotes relating toUncle Dave’s or Productions.

###  

### (b)       Uncle Dave’sis not a party to any Contract other than the Contract described at item 3 onSchedule 3.18(a).  The only revenues ofUncle Dave’s are attributable to such Contract. Pursuant to such Contract, Uncle Dave’s receives revenues of $18,750 percalendar quarter.  Other than suchContract, Uncle Dave’s has no Assets, and Uncle Dave’s has no liabilities orobligations other than its performance obligations under such Contract.  The expenses of Uncle Dave’s do not exceedits revenues.

###  

## 3.9.     Absenceof Changes.

##  

### (a)       Except forthe execution and delivery of this Agreement, since the date of the December2004 Balance Sheet there has not been any Material Adverse Effect with respectto the Business or any of the Companies or any event or development that,individually or together with any or all other such events and/or developments,could reasonably be expected to result in a Material Adverse Effect withrespect to the Business or the Companies except as set forth on Schedule 3.9(a)attached hereto.  Without limiting theforegoing, except as set forth on Schedule 3.9(a) attached hereto, therehas not occurred since December 31, 2004 any event, fact or circumstance that,if such event, fact or circumstance were to occur after the date hereof andprior to the Closing, would be a violation of any of Sections 5.4(i) through(xviii).

###  

### (b)       Except as set forth onSchedule 3.9(b) attached hereto, since December 31, 2004, (i) there hasbeen no termination, or substantial reduction or alteration, of anyrelationship between any Artist, on the one hand, and the Companies or theBusiness, on the other hand; and (ii) no member of the Seller Group hasreceived any notice, indication, expression of intent or other communication(whether written, oral or otherwise), by or on behalf of any Artist,  that the Artist will terminate orsubstantially reduce or alter his or her relationship with the Companies or theBusiness, whether as a result of the consummation of the transactionscontemplated hereby or otherwise.

(c)        SinceDecember 31, 2004, (i) there has been no termination, or substantial reductionor alteration, of any relationship between any client or customer (other thanan Artist, as to which Section 3.9(b) shall apply), on the one hand, and theCompanies or the Business, on the other hand; and (ii) no member of the SellerGroup

###  

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###  

hasreceived any notice, indication, expression of intent or other communication(whether written, oral or otherwise), by or on behalf of any client or customer(other than an Artist, as to which Section 3.9(b) shall apply), that the clientor customer will terminate or substantially reduce or alter its relationshipwith the Companies or the Business, whether as a result of the consummation ofthe transactions contemplated hereby or otherwise.

###  

### (d)       Notwithstandinganything in this Agreement (including, without limitation, Section 3.9(b)hereof and Section 3.9(c) hereof) to the contrary, the Seller Group makes norepresentation or warranty that any client of the Business or any of theCompanies (including, without limitation, any Artist) will not cease being aclient of the Business or reduce its patronage of the Business following thesigning of this Agreement or following the Closing;provided,that nothing in this Section 3.9(d)shall in any way limit or restrict the right of the Parent and the Merger Substo rely upon, or recover any and all Losses pursuant to the indemnificationprovisions hereof in respect of any breach of, any of the representations andwarranties of the Seller Group herein, including, without limitation, therepresentations and warranties of the Seller Group set forth in Section 3.9(b)hereof and Section 3.9(c) hereof or the failure of the Seller Group to notifythe Parent of a Client Adverse Effect of which any member of the Seller Grouphas knowledge prior to the Closing.

###  

## 3.10.   NoUndisclosed Liabilities; No Indebtedness.

##  

### (a)       Except for(i) liabilities expressly and specifically reflected or reserved against in therespective December 2004 Balance Sheet or in the notes thereto and (ii)accounts payable, accrued expenses and salaries and wages payable incurredsince December 31, 2004 in the ordinary course of the Business consistent inamount and nature with past practice of the Companies, there are no liabilitiesof, relating to or affecting any of the Companies or their respective Assets orthe Business.

###  

### (b)       Withoutlimiting the generality of Section 3.10(a), each and every liability to anyformer stockholder, employee or consultant of any of the Companies, or to anyPerson with whom any of the Companies at any time had or engaged in anypartnership, participation, joint venture or other collective undertaking, orany client (including, without limitation, any Artist) or customer of theBusiness, is fully recorded and disclosed as a current liability on the AuditedFinancial Statements, or if not yet fixed due to any pending or prospectiveaudit or review, is of a third party described in the express terms of thecertain of the applicable Contracts that are listed on Schedule 3.18,true, correct and complete copies of which have been provided to the Parent.

###  

### (c)        Noneof the Companies has any outstanding Indebtedness of any kind whatsoever.

###  

## 3.11.   TaxMatters.

##  

### (a)       SinceDecember 31, 2001

 

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#### (i)  each of the Companies has (A) duly and timelyfiled with each relevant Tax Authority each Tax Return that is required to befiled by such Company or that includes or relates to such Company, its income,sales, Assets or business, which Tax Return is correct and complete andreflects accurately and fully all revenues and expenses of such Company for therespective periods covered by such Tax Return, (B) duly and timely paid in fullall Taxes due and payable on or prior to the date hereof that appear on all TaxReturns (recognizing that any of the Companies that is an “S Corporation” orpartnership does not pay federal income Taxes), and (C) has properly accrued onits Books and Records in accordance with GAAP a provision for the payment ofall Taxes due or claimed to be due or for which such Company otherwise is ormay be liable;

####  

#### (ii)  except as described on Schedule 3.11(a),none of the Companies has requested an extension of time within which to fileany Tax Return in respect of any Tax period which has not since been filed;

####  

#### (iii)  none of the Companies is a “consentingcorporation” within the meaning of Code Section 341(f) or any similar provisionof applicable law and has not agreed to have Code Section 341(f)(2) apply toany disposition of a subsection (f) asset (as such term is defined in CodeSection 341(f)(4)) owned by such Company;

####  

#### (iv)  no election under Code Section 338 or anysimilar provision of applicable law has been made or is required to be made byor with respect to any of the Companies;

####  

#### (v)  none of the Companies (A) has adjusted orchanged or received any request, demand, or proposal from a Tax Authority toadjust or change any accounting method, (B) is required to include in incomeany adjustment pursuant to Code Section 481 (a) (or any similar provision ofapplicable law) by reason of a change in accounting method, and (C) has eitherdeferred any income to a period after the Closing that has economically accruedor is otherwise attributable to a period prior to the Closing nor acceleratedany deductions into a period ending on or before the Closing that will or mayeconomically accrue after the Closing; and

####  

#### (vi)  none of the Companies is, nor has it everbeen, a “United States real property holding corporation” within the meaning ofCode Section 897(c)(2) at any time during the applicable period referred to inCode Section 897(c)(1)(A)(ii).

####  

### (b)       TheSeller Group has furnished to the Parent, or provided the Parent with accessto, copies of all of the income Tax Returns filed or Tax elections made by eachand all of the Companies since December 31, 2000.

 

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### (c)        Focusand StepTeco are classified and taxed as a “C corporations” for federal andstate income Tax purposes, and MBST is classified and taxed as an “S”corporation for federal and state income Tax purposes.

###  

## 3.12.   LegalProceedings.  Except as set forth on Schedule3.12 attached hereto, there are no Actions (including, but not limited to,any Actions pertaining to Taxes, to Environmental matters or to hiring, unfairlabor practices, wages, hours, discrimination, wrongful termination, workerscompensation, immigration or employee benefits plans) pending or, to theKnowledge of each member of the Seller Group, threatened, against, relating toor affecting any of the Companies, their Assets or the Business.  To the Knowledge of each member of the SellerGroup, there are no facts or circumstances that could reasonably be expected togive rise to any other Action that (if in existence on the date hereof) wouldbe required to be disclosed pursuant to the preceding sentence.

##  

## 3.13.   ComplianceWith Laws and Orders.  There are noOrders outstanding against any of the Companies.  None of the Companies has since January 1,2001 been in violation of or in default under any Law applicable to it, itsAssets or the Business.  Since January 1,2001, neither any of the Sellers nor any of the Companies has received anynotice of any violation of any Law or Order relating to the Business or to anyof the personnel of any of the Companies.

##  

## 3.14.   BenefitPlans; ERISA.  Schedule3.14 sets forth a complete and correct list of each Benefit Plan pursuantto which the Companies incurred an aggregate liability or expense in excess of$25,000 during any of the past three calendar years.  Each Benefit Plan, other than the medicalplan of the Companies, will be terminated by the applicable Company prior tothe Closing without any liability to the Parent or any of the Companies.  None of the Companies nor any of theCompanies’ respective ERISA Affiliates have contributed to, nor do they haveany liability, contingent or otherwise, to or arising out of, any MultiemployerPlan.  The following documents have beenmade available to the Parent prior to the date hereof: (i) true, correct andcomplete copies of all Benefit Plans, including all amendments thereto, whichare employee welfare benefit plans (within the meaning of Section 3(1) ofERISA), or, in the case of any unwritten Benefit Plans, descriptions thereof;and (ii) all trust agreements or other funding agreements including insurancecontracts, and (iii) the most recently filed form 5500 and actuarial valuationor financial information relative thereto. Neither any of the Companies nor any ERISA Affiliates thereof hasmaintained, terminated or partially terminated any defined benefit plan withinthe meaning of ERISA.

##  

## 3.15.   RealProperty.

##  

### (a)       None of theCompanies owns any real property.  Allreal property leased for a period greater than one (1) month by any of theCompanies is listed on Schedule 3.15 (collectively, the “LeasedReal Property”).  Each of theCompanies (i) has a valid and enforceable leasehold interest with respect toeach item of Leased Real Property leased by it, subject to no Liens (other thanPermitted Liens), and (ii) is in

 

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possession of and has quiet enjoyment of eachitem of Leased Real Property leased by it. None of the Leased Real Property is subject to any sublease of all orany portion thereof and no Person other than the Companies has any right tooccupy any of the Leased Real Property. The Leased Real Property is adequate in all material respects for thecurrent needs of the Companies and the anticipated needs of the Companies forthe year ended December 31, 2005.

###  

### (b)       Eachlease with respect to any of the Leased Real Property is listed on Schedule3.18 hereto.  Each such lease was enteredinto on the basis of arms’-length negotiations, is in full force andeffect and constitutes a legal, valid and binding agreement of, enforceable inaccordance with its terms against, the particular Company a party thereto and,to the Knowledge of each member of the Seller Group, the other partythereto.  None of the Companies nor, tothe Knowledge of each member of the Seller Group, any other party to any suchlease, is in material violation or breach of or material default under any suchlease (or, with notice or lapse of time or both, would be in material violationor material breach of or default under any such lease).

###  

## 3.16.   EnvironmentalMatters.  Without limiting the generality of Section3.13 hereof, each of the Companies is in compliance with all EnvironmentalLaws, has all required Environmental Permits and is in compliance with theterms thereof.  There has been noEnvironmental Release of a Hazardous Substance at, from, in, to, on or underany Site and, to the Knowledge of each member of the Seller Group, no HazardousSubstances are present in, on, about or migrating to or from any Site for whichany of the Companies will be liable. There are no past, pending, or, to the Knowledge of each member of theSeller Group, threatened Environmental Claims against any of theCompanies.  Neither any of the Companiesnor any predecessor thereof has transported or arranged for the treatment ofany Hazardous Substance to any off-Site location.

##  

## 3.17.   IntellectualProperty.  The Companies own or have valid andenforceable rights to use all Intellectual Property used in the operation ofthe Business in the manner the Business was conducted during the fiscal yearended December 31, 2004, and none of such rights will terminate nor will anyparty have the power to terminate any such right as a result or by reason ofthe transaction contemplated by this Agreement.

##  

## 3.18.   Contracts; Client andCustomer Relations.

##  

### (a)       Schedule3.18(a) contains a true, correct and complete list of eachwritten or oral Contract or other arrangement (true, correct and completecopies, or, if none, reasonably complete and accurate written descriptions, ofwhich, together with all amendments and supplements thereto and all materialwaivers thereof, have been delivered to the Parent prior to the execution ofthis Agreement) to which any of the Companies is a party or by which any Assetof any of the Companies is bound, under which the Company may be obligated topay, or have the right to receive, at least $50,000, and that relate to orotherwise affect any of the Companies or the Business, including, but notlimited to, all Contracts with any client (including, but not limited to, anyArtist) or any customer of any of the Companies.

 

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### (b)       Each Contractdisclosed or required to be disclosed in Schedule 3.18(a) (a “Section3.18 Contract”) is in full force and effect and constitutes a legal, validand binding agreement of, enforceable in accordance with its terms against, theparticular Company a party thereto and, to the Knowledge of each member of theSeller Group, the other party thereto. None of the Companies nor, to the Knowledge of each member of the SellerGroup, any other party to any Section 3.18 Contract, is in material violationor material breach of, or default under, any such Contract (or, with notice orlapse of time or both, would be in material violation or material breach of, ordefault under, any such Contract).  Tothe Knowledge of each member of the Seller Group, no event or circumstanceexists that could reasonably cause a Material Adverse Effect to occur inconnection with any Contract disclosed on Schedule 3.18(a), whether nowor in the future, nor does any such Contract contain any term or provision thatis unreasonably burdensome to any of the Companies.

###  

### (c)        Schedule3.18(c) sets forth: in part (i) thereof, a true, correct and complete listof all Contracts or other arrangements with respect to which, in accordancewith the agreement of the parties hereto, an amount will be included in theClosing Working Capital based upon the Income Forecast Method; and, in part (ii)thereof, a true, correct and complete list of all audits, reviews, analyses orother inspections by an auditor of the books and records of any Person(including, without limitation, studios, distributors and production companies)as to which the auditor or other representative has or shall have commencedfield work prior to the Closing Date, and which are attributable to theBusiness.  No amounts anticipated to bereceived from the items listed in part (ii) of Schedule 3.18(c) will beincluded in Closing Working Capital.

###  

### (d)       Noreceivable amount to be included in Closing Working Capital will have orinvolve any liability, participation, sharing obligation or other obligation ofany kind except to the extent such obligation is included as a liability on thecalculation of Working Capital prepared by the Sellers pursuant to Section2.2(a) hereof.

###  

## 3.19.   Insurance.  Schedule 3.19 contains a true, correctand complete list of all liability, property, workers’ compensation, inlandmarine, automobile and other insurance policies currently in effect that insurethe Business or the Assets, operations or employees of any of the Companies, a list and description of allclaims made since December 31, 1999 against any insurance policy with respectto the Business or the Assets, operations or employees of any of the Companiesand a description of the disposition of each such claim.  The insurance coverage provided by thepolicies described in the preceding sentence will not terminate or lapse byreason of the consummation of the Mergers or any of the other transactionscontemplated by this Agreement or by any Operative Agreement.  Each policy listed on Schedule 3.19 isvalid and binding and in full force and effect, no premiums due thereunder havenot been paid and none of the Companies nor any other Person to whom suchpolicy has been issued has received any notice of cancellation or terminationin respect of any such policy or is in default thereunder.

 

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## 3.20.   Transactionswith Certain Persons.

##  

### (a)       Schedule3.20 sets forth a true, complete and correct descriptionof each and every relationship between any of the Companies, on the one hand,and any of the Principals, any of the Sellers or any trustee thereof or anyAffiliates or family member of any of the foregoing Persons since December 31,2001, including, without limitation, any employment or consultingrelationship, and the amounts paid by such Company in respect of suchrelationship (other than reimbursement for reasonable business expenses orpayment of dividends in the ordinary course consistent with past practice) foreach of the three calendar years ending December 31, 2004.

###  

### (b)       Exceptas disclosed on Schedule 3.20, since December 31, 2001, none of thePrincipals, none of the Sellers, no trustee of any of the Sellers, and noAffiliate or family member thereof:  (i)has had any direct or indirect financial interest in any Person with whom anyof the Companies has consummated or entered into any Contract; (ii) hasowned, directly or indirectly, in whole or in part, or has had any otherinterest in, any tangible or intangible property (including, withoutlimitation, any Contract) that is used in the conduct of the Business; or (iii)has had any contractual or financial relationship or arrangement with, orotherwise received or has had the right to receive any payments from, anyPerson with whom any of the Companies has consummated or entered into anyContract.

###  

## 3.21.   Employeesand Labor Matters.

##  

### (a)       Set forth on Schedule3.21(a) hereto is a copy of the December 31, 2004 payroll summary of theCompanies which lists all employees (other than the Principals) who as of thedate thereof were employed either full or part time by any of the Companies(the “Companies Employees”) and their respective wage information and a detail listing of anychanges in any of the employees or their wage information since December 31,2004.

###  

### (b)       Setforth on Schedule 3.21(b) hereto is a list of (i) each employmentContract (other than any unwritten Contract that is an employment-at-willrelationship) or severance protection Contract in effect with respect to any ofthe Companies Employees (collectively, the “Companies Employees EmploymentAgreements”), and (ii) the name of any of the Companies Employees with whomany of the Sellers or any of the Companies has entered into a Contract as ofthe date hereof providing for retention payments (collectively, the “RetentionAgreements”).  The Sellers havefurnished to the Parent true, correct and complete copies of all CompaniesEmployees Employment Agreements and Retention Agreements.

###  

### (c)        SinceNovember 1, 2002, (i) none of the Companies has effectuated a “plant closing”as defined in the Worker Adjustment and Retraining Notification Act of 1988(the “WARN Act”) affecting any site of employment or one or moreoperating units within any site of employment or facility of the Seller, (ii)none of the Companies has effectuated a “mass layoff” as defined in theWARN  Act affecting any site of

 

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employment or one or moreoperating units within any site of employment or facility of the Seller, and(iii) to the Knowledge of each member of the Seller Group, none of theCompanies has been affected by any transaction or engaged in layoffs oremployment terminations sufficient in number to trigger any similar state orlocal laws.

###  

### (d)       Tothe Knowledge of each member of the Seller Group, no union organizationalcampaign presently exists with respect to any Companies Employee and no requestor petition for union representation has been filed or made.  There are no collective bargaining Contractscovering Companies Employees.

###  

## 3.22.   Bankand Brokerage Accounts.  Schedule3.22 sets forth a true, correct and complete list of the names and locationsof all banks, trust companies, securities brokers and other financialinstitutions at which each Company has an account or safe deposit box or maintains abanking, custodial, trading or other similar relationship.  Except as expressly described on Schedule3.22, no Person has any authority to sign check or drafts or otherwisebind, or enter into any transaction on behalf of, any of the Companies withrespect to any bank, brokerage or other account with any financial institution.

##  

## 3.23.   Insurabilityof the Principals.  No member ofthe Seller Group knows of any reason (including, without limitation, any reasonrelating to any medical condition) that would prevent the Companies or theParent from obtaining insurance on the lives of each of the Principals, withthe Company or the Parent as the beneficiary thereof, at the best rates forindividuals of the same ages, respectively, as each of the Principals.

##  

## 3.24.   Brokers.  All negotiations relative to this Agreement,the Mergers and the other transactions contemplated hereby have been carriedout by the Principals, the Sellers and the Companies directly with the Parentwithout the intervention of any Person on behalf of the Principals, the Sellersand the Companies in such manner as to give rise to any valid claim by anyPerson against the Parent for a finder’s fee, brokerage commission or similarpayment.

##  

## 3.25.   Investment Representations.  Each of the Sellers:

##  

#### (i)  is an “accredited investor” as such term isdefined in Rule 501 (a) of Regulation D of the Securities Act;

####  

#### (ii)  has substantial experience in evaluating andinvesting in private placement transactions of securities so that such Selleris capable of evaluating the merits and risks of its, his or her investment inthe Parent Common Stock and has the capacity to protect its, his or her owninterests;

####  

#### (iii)  understands that the acquisition of theParent Common Stock is a speculative investment that involves a high degree ofrisk of loss of the Seller’s investment therein, is able to bear the economicrisk of its, his or 

 

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#### her investment inthe Parent Common Stock for an indefinite period of time, including the risk ofa complete loss of its, his or her investment in the Parent Common Stock, and acknowledgesthat the Parent Common Stock has not been registered under the Securities Act,and therefore cannot be sold, transferred, pledged, hypothecated or otherwisetransferred of disposed of unless subsequently registered under the SecuritiesAct or an exemption from such registration is available;

####  

#### (iv)  is acquiring the Parent Common Stock forinvestment for its, his or her own account, not as a nominee or agent, and notwith the view to, or for resale in connection with, any distribution thereof inviolation of, or that could cause the Parent to be in violation of, applicableLaws, understands that the Parent Common Stock has not been registered underthe Securities Act and is being offered hereby by reason of an exemption fromthe registration requirement of the Securities Act, the availability of whichdepends upon, among other things, the bona fide nature of the investment intentand the accuracy of the Seller’s representations as expressed herein, andacknowledges that the certificates evidencing such shares of Parent CommonStock will bear a legend with respect to certain of the matters set forth inthis Section 3.24;

####  

#### (v)  acknowledges that it, he or she has had afull opportunity to ask questions and receive answers concerning the terms andconditions of the offering of the Parent Common Stock and has had full accessto the Parent’s officers and such other information concerning the Parent asit, he or she has requested; and

####  

#### (vi)  acknowledges that: no securities authorityhas approved or otherwise passed upon the issuance of Parent Common pursuant tothis Agreement; it, he or she has relied solely upon its, his or her own taxadvisors and other advisors and not on any statements or representations of theParent or any of their representatives; and it, he or she (and not the Parent)shall be solely responsible for any of its, his or her Tax liability that mayarise as a result of the consummation of the Mergers and the other transactionscontemplated hereby or an investment in the Parent Common Stock.

####  

## 3.26.   MajorClients or Customers.  Schedule3.26 sets forth a true, correct and complete list of the ten (10) clientsor customers from whom the Companies derived the greatest amount ofrevenues in cash in connection with the operation of the Business during eachof the twelve months ended December 31, 2004 and December 31, 2003, and (to theextent not otherwise included in such list) the five (5) Artists from whom theCompanies derived the greatest amount of revenues in cash in connection withthe operation of the Business during such periods.

##  

## 3.27.   Disclosure.  No representation or warranty of or by anymember of the Seller Group contained in this Agreement, in any of the Scheduleshereto, in any

 

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Operative Agreement or in any certificate,list or other writing furnished to the Parentpursuant to any provision of this Agreement (including, without limitation, theAudited Financial Statements), contains any untrue statement of a material factor omits to state a material fact necessary in order to make the statementsherein or therein, in the light of the circumstances under which they weremade, not misleading.

##  

# 4.         Representations andWarranties of the Parent and the Merger Subs. Each member of the Parent Group hereby jointly and severally representsand warrants to the Sellers as follows:

#  

## 4.1.     Organization.

##  

### (a)       The Parent isa corporation, duly organized, validly existing and in good standing under thelaws of the State of Delaware and has full corporate power and authority toconduct its business as and to the extent now conducted and to own, use andlease its Assets.  The Parent is dulyqualified, licensed or admitted to do business and is in good standing in eachjurisdiction in which the ownership, use or leasing of its Assets, or theconduct or nature of its business, makes such qualification, licensing oradmission necessary.

###  

### (b)       Eachof the Merger Subs is a corporation, duly organized, validly existing and ingood standing under the laws of the State of California and has full corporatepower and authority to conduct its business as and to the extent now conductedand to own, use and lease its Assets. Each of the Merger Subs is duly qualified, licensed or admitted to dobusiness and is in good standing in each jurisdiction in which the ownership,use or leasing of its Assets, or the conduct or nature of its business, makessuch qualification, licensing or admission necessary.

###  

## 4.2.     SECReports and Financial Statements of the Parent.

##  

### (a)       The Parenthas delivered or made available to the Sellers a copy of the most recent Form10-K filed by the Parent with the Securities and Exchange Commission (the “SEC”)(as such item has been amended since the time of their filing, and includingany documents filed as exhibits thereto, collectively, the “SEC Reports”).  As of their respective dates, each SEC Report(including, without limitation, any financial statements or schedules includedor incorporated by reference therein) complied in all material respects withthe requirements of the Exchange Act applicable to such SEC Report, and none ofthe SEC Reports contained when filed any untrue statement of a material fact oromitted to state a material fact required to be stated therein or necessary tomake the statements made therein, in light of the circumstances under whichthey were made, not misleading.

###  

### (b)       Includedin the SEC Reports are the audited balance sheet of the Parent as of December31, 2004 and the related audited statements of income, changes in stockholders’equity and cash flows for the Parent for the fiscal year then ended (the “ParentFinancial Statements”). The Parent Financial Statements have been preparedby

 

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the Parent in accordance withGAAP, consistently applied, and fairly present in all material respects thefinancial condition and results of operations of the Parent as of December 31,2004 and for the fiscal year then ended.

###  

## 4.3.     Authorityand Enforceability.  Each of theParent and the Merger Subs has the power and authority to execute thisAgreement and perform its respective obligations hereunder.  The execution and delivery by each of theParent and the Merger Subs of this Agreement and the Operative Agreements andthe performance by each of the Parent and the Merger Subs of its obligationshereunder and thereunder have been duly and validly authorized by the Board ofDirectors and the stockholders, and under the Operative Agreements, asapplicable, of each of the Parent and the Merger Subs and no other corporateaction on the part of the Parent or the Merger Subs of the board of directorsor stockholders thereof is necessary. This Agreement has been duly and validly executed and delivered by eachof the Parent and the Merger Subs and constitutes the legal, valid and bindingobligation of each of the Parent and the Merger Subs, enforceable against it inaccordance with its terms.

##  

## 4.4.     NoConflicts.  The execution and delivery by the Parent andthe Merger Subs, as applicable, of this Agreement and the Operative Agreements,as applicable, the consummation by the Parent and the Merger Subs, asapplicable, of the Mergers and the other transactions contemplated hereby andthereby, and the performance of their respective obligations hereunder andthereunder, do not and will not (as applicable):

##  

#### (i)  conflict with or result in a violation orbreach of any of the terms, conditions or provisions of any of theOrganizational Documents of the Parent and the Merger Subs, as applicable;

####  

#### (ii)  conflict with or result in a violation orbreach of any term or provision of any Law or Order applicable to the Parent orthe Merger Subs or any of their respective Assets or to which either the Parentor the Merger Subs is a party; or

####  

#### (iii)  result in a breach of or default under,require notice or consent under (or give rise to any right of payment,termination, cancellation or acceleration under) any of the terms, conditionsor provisions of any material Contract of the Parent or the Merger Subs or towhich any of the material Assets of the Parent or the Merger Subs is bound,except for such breaches or defaults (or rights of termination, cancellation oracceleration) as to which requisite waivers or consents have been obtained.

####  

## 4.5.     GovernmentalApprovals and Filings.  No consent,approval or action of, filing with or notice to, any Governmental Authority onthe part of any of the Parent or the Merger Subs is required in connection withthe execution, delivery and performance of this Agreement or the OperativeAgreements or the consummation of the Mergers or any of the other transactionscontemplated hereby or thereby.

 

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# 5.         Additional Covenantsof the Parties.

#  

## 5.1.     FurtherAssurances and Cooperation.  Subject tothe terms and conditions hereof, the parties hereto shall, and shall causetheir Affiliates to, use their reasonable best efforts to take as promptly aspracticable all action and to do all things necessary, proper or advisable toconsummate and make effective the Mergers and any of the other transactionscontemplated hereby, including, without limitation, fulfilling the conditionsprecedent to the other party’s obligations hereunder, securing as promptly aspracticable all consents, approvals, waivers and authorizations, and making anyfilings, required under any Contract or applicable Law in connection with theMergers and any of the other transactions contemplated hereby; provided,however, that (a) the consent of the landlord of the Leased RealProperty to the consummation of the Mergers and the other transactionscontemplated herein shall not be required as a condition to the Closing; provided,however, that, following the execution and delivery of this Agreement,the parties shall use their best efforts to obtain such consent, and (b) noneof the parties or any of their respective Affiliates shall be required to makeany payment therefor, other than filing, recordation or similar fees payable toany Governmental Authority.

##  

## 5.2.     Investigationby the Parent.  From the datehereof until the Closing Date, the members of the Seller Group shall, and shalleach of them shall cause all of the officers, directors, employees, agents,accountants and counsel of each of the Companies to, (i) promptly afford theofficers, employees and authorized agents, accountants, counsel andrepresentatives of the Parent, during normal business hours, access to (A) theoffices, books, Contracts and records of each of the Companies and any recordsconcerning each of the Companies maintained and accumulated by itsrepresentatives, and (B) those officers, directors, employees, agents,accountants and counsel of each of the Companies who have any knowledgerelating to the Business, and (ii) promptly furnish to the officers, employeesand authorized agents, accountants, counsel and representatives of the Parentsuch additional financial and operating data and other information regardingeach of the Companies or the Business (including, without limitation, anyContracts in effect as of the date hereof and any Contracts being negotiated orentered into between the date hereof and the Closing Date), properties andgoodwill as the Parent may from time to time reasonably request.  All such investigations by the Parent shallbe performed at such times and locations as are reasonably mutually agreed toby the parties and shall be performed upon reasonable prior written notice tothe Sellers and in a manner that shall not be disruptive to the operations ofthe Business.

##  

## 5.3.     NoShop. From the date hereof until consummationof the Closing or termination of this Agreement in accordance with Section 9,no member of the Seller Group shall, and each member of the Seller Group shallnot authorize or permit the Companies or any of its respective family members(as applicable) or Affiliates to, nor will it authorize any investment bankeror other representative or agent to (and shall direct such bankers or similarrepresentatives or agents not to): (a) directly or indirectly, solicit, encourage,initiate, or participate in any way (including, without limitation, by way offurnishing information) in any discussions or negotiations with any Person or

 

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group (other than the Parent) concerning anymerger, consolidation, sale of the Business by asset sale, sale of shares ofcapital stock or similar transactions in respect of any of the Companies or theBusiness (each, an “Acquisition Proposal”), (b) knowingly disclose, directly orindirectly, to any Person preparing to make an Acquisition Proposal, anyconfidential information concerning the Companies or the Business, or (c) enterinto any understanding, agreement or commitment with any third party providingfor a business combination involving, equity investment in, or sale of any ofthe Companies or the Business (or any portion thereof) by asset sale orotherwise other than with the Parent and the transactions contemplatedhereby.  The Seller Group shall promptlyadvise the Parent of any Acquisition Proposal and deliver a copy thereof to theParent.

##  

## 5.4.     Conductof Business.  During the period from thedate hereof through the Closing Date, the Sellers shall cause each of theCompanies (i) to conduct the Business in the ordinary course thereof consistentwith past practice and (ii) not to engage in any material or extraordinarytransaction without the Parent’s prior written consent.  Without limiting the generality of and inaddition to, the foregoing, and without limiting anything set forth in Section5.6, prior to the Closing Date, except as the Parent may otherwise consent inwriting, the Sellers shall not permit any of the Companies to do or take any ofthe following actions (provided that in the case of Section 5.4(i)hereof, the Sellers’ obligation shall be to use their reasonable good faithefforts (without causing any impairment of economic terms) not to permit any ofthe Companies to allow any of the events contemplated by Section 5.4(i) tooccur):

##  

#### (i)  fail to take all commercially reasonableactions to preserve the relationships between the Business and all clients(including, but not limited to, Artists) and customers; provided, however,that, without limiting the right of the Parent and/or the Merger Subs toterminate this Agreement in accordance with Section 9.1 hereof or toindemnification for Losses under any other provision of this Agreement, theSeller Group shall not have any liability to the Parent for any Losses arisingsolely from a Client Adverse Effect (provided that such Client AdverseEffect shall have been disclosed as required in Section 5.19 hereof);

####  

#### (ii) enter into any new Contract, other than (A) new Contracts withArtists or new Contracts for production, (B) new Contracts that bind theCompanies for less than 24 months or (C) new Contracts that obligate theCompanies for less than $200,000, in each case only to the extent that such newContracts are in the ordinary course of Business consistent with pastpractices;

####  

#### (iii)  amend any of its Organizational Documents;

####  

#### (iv)  authorize for issuance, issue, sell, deliveror agree or commit to issue, sell or deliver (whether through the issuance orgranting of Options or otherwise) any shares of any class of capital stock orany other ownership interests of any of the Companies;

 

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#### (v)  split,combine or reclassify any shares of capital stock or other ownership interests,or redeem or otherwise acquire any of its securities or other ownershipinterests;

####  

#### (vi)  incur orassume any Indebtedness, other than trade payables or accrued expenses incurredin the ordinary course of the Business consistent with past practice, or anyliability or other obligation of the kind described in Section 3.10(b), or makeany loans, advances or capital contributions to, or investments in, any otherPerson (other than loans or advances to employees in the ordinary course of theBusiness consistent with past practices);

####  

#### (vii)  enterinto, adopt, terminate (in whole or part) or amend any Benefit Plan, orincrease in any manner the compensation or fringe benefits of any officer oremployee from the levels in effect as of December 31, 2004, other than (A) bonusesto the Principals and key employees (all of which bonuses shall be paid priorto the Closing and (without duplication for any reduction of the cash componentof Working Capital as a result of such payment) the effect of such paymentshall be included in the calculation of Closing Working Capital, including,without limitation, the calculation thereof as reflected in the calculation andcertificate delivered by the Sellers to the Parent pursuant to Section 2.2(a)hereof), (B) increases effective January 1, 2005 in compensation levels foremployees in the aggregate amount of $38,500, (C) increases incompensation as of the Closing to employees other than the Principals in anamount which shall be approximately equal to the profit sharing benefits eachsuch employee received in 2004, and (D) in addition to the foregoing, increasesafter January 1, 2005 in the annual compensation of certain key employees in amountsnot to exceed $50,000 in the aggregate;

####  

#### (viii)  changeany accounting principle or method or make any election for purposes offoreign, federal, state or local income Taxes;

####  

#### (ix)  take orsuffer any action that would result in (A) the creation, or consent to theimposition, of any Lien on any of the Assets of such Company or thecancellation, termination, lapse or non-renewal of any insurance policy (unlesssuch policy is replaced with comparable insurance);

####  

#### (x)  enter intoor engage in any transaction not fully described on Schedule 3.20 withany of the Principals, any of the Sellers, any trustee of any of the Sellers orany family member or Affiliate of any of the foregoing, or any transaction notfully described on Schedule 3.20 with any of the other Companies;

####  

#### (xi)  commit anyviolation, breach or default under, or fail to take any action that (with orwithout notice or lapse of time or both) would

 

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#### constitute a violation, breach or default under, anyContract to which any of the Companies is a party or by which any of its Assetsis bound;

####  

#### (xii)  write offor write down any Assets of any of the Companies not in the ordinary course ofthe Business and/or inconsistent with past practice;

####  

#### (xiii)  disposeof or permit to lapse any rights in, to or for the use of any IntellectualProperty Rights of the Business;

####  

#### (xiv)  settleany Action in a manner that would result in any of the Companies being enjoinedin any respect;

####  

#### (xv)  unlessrequired by GAAP or applicable Law: (A) make or rescind any material electionrelating to Taxes, (B) file any amended income Tax Returns that will result ina material increase in taxable income for any Company, or (C) make any materialchange in any method of accounting, keeping its books of account or accountingpractices or in any material method of Tax accounting of any of the Companies.

####  

#### (xvi)  dispose of any Assets otherthan obsolete Assets in the ordinary course of Business;

####  

#### (xvii)  cancelor compromise any material debt or claim or waive or dispose of any rights orassets of material value to the Business without the Business receiving arealizable benefit of similar or greater value, or voluntarily suffer anyextraordinary loss;

####  

#### (xviii)  authorizeor enter into any Contract to do any of the foregoing.

####  

5.5.      Certain ReorganizationTransactions.

 

### (a)          Prior to theClosing, the Seller Group shall cause Focus to acquire all of the equity ofStepTeco, either by purchase or through a merger of StepTeco into Focus, withFocus being the surviving entity.  Theconsideration to be paid by Focus for StepTeco shall be cash which shall befully paid to the sellers of StepTeco no later than immediately prior to theClosing, and the reduction in the Companies’ cash as a result of such paymentshall be reflected in the calculation of Closing Working Capital pursuant toSection 2 hereof and shall be included in the Sellers’ certificate deliveredpursuant to Section 2.2(a) hereof.

###  

### (b)         Priorto the Closing, the Seller Group shall cause MBST to acquire all of the equityof Uncle Dave’s Boondoggle, Inc., a California corporation (“Uncle Dave’s”),either by purchase or through a merger of Uncle Dave’s into MBST, with MBSTbeing the surviving entity.  Uncle Dave’sis an affiliate of the Companies through

 

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### which certain aspects ofthe Business have been conducted.  Theconsideration to be paid by MBST for Uncle Dave’s shall be cash which shall befully paid to the sellers of Uncle Dave’s no later than immediately prior tothe Closing, and the reduction in the Companies’ cash as a result of suchpayment shall be reflected in the calculation of Closing Working Capitalpursuant to Section 2 hereof and shall be included in the Sellers’ certificatedelivered pursuant to Section 2.2(a) hereof.

###  

### (c)          Priorto the Closing, the Seller Group shall cause MBST to purchase all of the assetsof MBST Productions, a California general partnership (“Productions”)that is an affiliate of the Companies through which certain aspects of theBusiness have been conducted.  The SellerGroup shall also cause MBST to assume none of the liabilities of Productions,except only for contingent liabilities pursuant to which Productions would berequired to share a certain portion of revenues received by Productions withrespect to rights in certain prior television productions (and none of whichcontingent liabilities is associated with an item that will be included inClosing Working Capital).  Theconsideration to be paid by MBST for the assets and liabilities of Productionsshall be cash which shall be fully paid to Productions no later than immediatelyprior to the Closing, and the reduction in the Companies’ cash as a result of suchpayment shall be reflected in the calculation of Closing Working Capitalpursuant to Section 2 hereof and shall be included in the Sellers’ certificatedelivered pursuant to Section 2.2(a) hereof.

###  

### (d)         Allagreements and other documentation that effectuates or evidences any of thetransactions contemplated in Section 5.16(a), (b) or (c) shall be furnished tothe Parent at least five (5) days prior to the execution and delivery thereof,shall be satisfactory to the Parent as to form, substance and scope in allrespects.

###  

## 5.6.        AffiliateTransactions.  Except forcompensation, rights or obligations under any Benefit Plans or reimbursement ofexpenses in the ordinary course of the Business consistent with the pastpractices of the Companies or as set forth on Schedule 5.6,simultaneously with the Closing, (i) the Seller Group shall cause to becancelled all amounts due from any of the Companies to any of the Principals,any of the Sellers (or any trustee thereof) or any of the family members orAffiliates thereof (other than the Companies) and (ii) theSeller Group shall cause all amounts then due to any of the Companies from anyof the Principals, any of the Sellers (or any trustee thereof) or any of thefamily members or Affiliates thereof (other than the Companies) to be paid.

##  

## 5.7.        Booksand Records.  On the Closing Date, theSellers shall deliver to the Parent the originals of all corporate Books andRecords of the Companies, including any minute books, and shall deliver to theParent copies of all other Books and Records pertaining to the Companies, andif at any time after the Closing any of the Sellers discovers in his or herpossession or under his or her control any other Books and Records, it shallforthwith deliver or make available such Books and Records to the Parent.

 

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## 5.8.        EmploymentAgreements.  At the Closing, the Seller Group shall causeLawrence Brezner, David Steinberg and StephenTenenbaum to enter into employment agreements with certain of the Companies inthe respective form attached hereto as Exhibit 5.8(a)(i), in the case ofMr. Brezner, Exhibit 5.8(a)(ii), in the case of Mr. Steinberg, and Exhibit5.8(iii), in the case of Mr. Tenenbaum (collectively, the “EmploymentAgreements”).

##  

## 5.9.        Preparationof Tax Returns.

##  

### (a)          To the extentpermitted under applicable Law, each of the Sellers, each of the Companies (other thanProductions) and the Parent shall close or terminate (or cause to close orterminate), as of the Closing, each Tax period relating to such Company or suchCompany’s income, sales or Assets or the Business or other activities.

###  

### (b)         Tothe extent not filed prior to Closing, the Sellers shall prepare (or cause tobe prepared) each Tax Return required for each of the Companies (other thanProductions) for each Pre-Closing Tax Period. At least twenty (20) days prior to the date on which such Tax Return isdue to be filed (including any extensions) with the appropriate Tax Authoritypursuant to applicable law, the Sellers shall deliver such Tax Return to theParent for the Parent’s review and approval (which approval shall not beunreasonably withheld or delayed).  Uponthe Parent’s review and approval of such Tax Return, the Sellers shall pay tothe Parent any Tax due thereon, and the Parent shall file (or cause each of theCompanies, other than Productions, to file) such Tax Return and pay (or causeeach of the Companies, other than Productions, to pay) to the appropriate TaxAuthority any Taxes due with respect to such Tax Return; provided, however,that the obligation of Sellers to pay to the Parent any Tax due shall bereduced to the extent such Tax was taken into account in the calculation ofClosing Working Capital.  Any Taxes sopaid shall be deemed a decrease in the Purchase Price.

###  

### (c)          Afterthe Closing, each of the Companies, each of the Sellers, each of the Principalsand the Parent shall each:

###  

#### (i)  assist theother parties in preparing any Tax Returns which such other parties areresponsible for preparing and filing in accordance with this Agreement;

####  

#### (ii)  cooperatefully in preparing for any audit of, or disputes with any Tax Authorityregarding, any Tax Return with respect to such Company, the Parent, the MergerSubs or any of the Parent’s other subsidiaries;

####  

#### (iii)  makeavailable to the other and to any Tax Authority as reasonably requested allinformation, records, and documents relating to any Tax of any of the Companiesor such Company’s subsidiaries;

####  

#### (iv)  providetimely notice to the other in writing of any pending or threatened (in writing)Tax audits or assessments with respect to any Tax

 

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#### periods of any of the Companies or any of theirrespective subsidiaries for which the other may have a liability under thisAgreement; and

####  

#### (v)  furnish theother with copies of all correspondence received from any Tax Authority inconnection with any Tax audit or any other information request from any TaxAuthority with respect to any taxable period for which the other may have aliability under this Agreement.

####  

### (d)         TheSellers shall cause any and all existing Tax sharing agreements or similararrangements, written or unwritten, binding on any of the Companies or any oftheir respective subsidiaries to be terminated on or before the Closing Dateand no payments pursuant to any such Tax sharing agreement or similararrangement shall be made on or after such termination.

###  

### (e)          After the Closing, for federal incometax purposes, the Parent, the Companies and the Sellers shall, pursuant toTreasury Regulations Section 1.368-3, (i) report consistently with the positionthat each of the Mergers is a reorganization under Section 368(a)(2)(E) of theCode, and (ii) shall not take any position inconsistent therewith.

 

## 5.10.      Non-Disclosureof Confidential Information.

##  

### (a)          Following theClosing, each of the Principals and each of the Sellers shall not, and each ofthe Principals and each of the Sellers shall cause its respective officers,directors, employees, agents, accountants, counsel and other representativesnot to, directly or indirectly, disclose or communicate to any Person, or useto the detriment of any of the Beneficiaries or for the benefit of any otherPerson, any Confidential Information; other than, (i) in the case of thePrincipals during any period of their employment by the Companies after theClosing, to any of the Beneficiaries or their authorized employees andotherwise to the extent necessary in the course of such Principal’s service tothe Companies; or (ii) as may be required by applicable law or pursuant to asubpoena or other judicial or regulatory process and, if during any suchPrincipal’s employment term, then only after consultation with the Parent’sGeneral Counsel or Chief Legal Officer or the Board of Directors of the Parent,to the fullest extent possible.

###  

### (b)         Forpurposes of this Agreement, “Confidential Information” shall include thefollowing:

###  

#### (i)  anyinformation pertaining to any of the Beneficiaries or their respectivebusinesses, operations or Assets, whether such information is in written,digital, electronic or other form or communicated orally, visually orotherwise, that is proprietary, non-public or relates to any trade secret ofany of them, including, without limitation, information that consists of orconcerns any of their Assets, clients (including, without limitation, Artists)or customers, suppliers, vendors, competitors, businesses and affairs, graphs,

 

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#### samples, inventions and ideas, past, current andplanned marketing methods, processes, business and marketing strategies andmaterials, price lists, pricing policies, market studies, business plans,computer software and databases, contracts with any person, names or otherinformation, strategies for business plans, plans, ideas, concepts, designs,drawings, specifications, techniques, models, data, documentation, diagrams,graphs, flow charts, research, discoveries, development, processes, proceduresand “know-how,” whether or not such information would be deemed a trade secretunder applicable state or federal law;

####  

#### (ii)  to theextent not included in item (i) above, information concerning the business,operations, affairs, condition (financial or otherwise), prospects, businessplans and strategies (whether or not pursued) of any of the Beneficiaries(which includes, without limitation, financial statements, financialprojections and budgets, historical and projected sales, promotion andmarketing budgets and plans, the names and backgrounds of key personnel,proposed personnel and personnel training techniques and materials), howsoeverdocumented; and

####  

#### (iii)  allnotes, analyses, compilations, studies, summaries and all other materialprepared by any party hereto or its representatives containing or based, inwhole or in part, on any information included in any of the foregoing items (i)and (ii); and

####  

#### (iv)  theexistence of this Agreement and the fact that the parties have considered ordiscussed, or engaged in any communications whatsoever, regarding thetransactions contemplated hereby.

####  

In addition to the restrictions set forth in Section5.10(a) hereof, each of the Principals and each of the Sellers acknowledges andagrees that all Confidential Information is also entitled to all of theprotections and benefits available to the Beneficiaries under applicable Law.

 

### (c)          Notwithstandinganything to the contrary contained in this Section 5.10, ConfidentialInformation shall not include any information that:

###  

#### (i)  is or wasin the public domain at the time of its receipt, or subsequently came into thepublic domain through no fault of the seller Group; or

####  

#### (ii)  isindependently acquired or developed by the Seller Group without violating anyobligation of the Seller Group under this Agreement.

####  

**(d)****      ****Notwithstandinganything to the contrary contained herein, promptly following the execution anddelivery of this Agreement, the members of the Seller Group shall disclose to alimited number of major clients (including, without limitation, the**

** **

**33**

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** **

Artists)the existence of this Agreement (but not the terms of this Agreement) and thatthe transactions contemplated hereby will result in the Companies (other thanProductions) becoming subsidiaries of the Parent; provided that if anyof the information to be so disclosed has not, at the time of such proposeddisclosure, been publicly announced by the Parent, the Seller Group shallobtain the oral agreement of each of such clients (i) to hold such informationin strict confidence and not further disclose such information to any Person orentity, and (ii) not to trade in any of the securities of the Parent at anytime while such client may be in possession of material non-public informationwith respect to the Parent.

 

## 5.11.      NoSolicitation; No Hire.

##  

### (a)          Each of thePrincipals and each of the Sellers shall not, during the Restriction Period,directly or indirectly, solicit, entice, persuade, induce or cause anyemployee, officer, manager, director, consultant, agent or independentcontractor of any of the Beneficiaries (in each case, other than AndrewTenenbaum) to terminate his, her or its employment, consultancy or otherengagement with such entity and become employed by or engaged with any otherPerson, or work with such Person or represent such Person, or approach any suchemployee, officer, manager, director, consultant, agent or independentcontractor for any of the foregoing purposes, or authorize or assist in thetaking of any of such actions by any Person or by himself or itself.

###  

### (b)         Excepton behalf of any Beneficiary, each of the Principals and each of the Sellersshall not, during the Restriction Period, directly or indirectly, solicit,entice, persuade, induce or cause:

###  

#### (i)  any Person(including, without limitation, any Artist) with whom any of the Beneficiarieshad a business relationship at any time during the 12-month period prior to thedate of this Agreement or at any time during the respective Restriction Period;

####  

#### (ii)  any Personwho is a client (including, without limitation, any Artist) or customer or wasa client or customer of any Beneficiary at any time during the 12-month periodprior to the date of this Agreement or at any time during the respectiveRestriction Period; or

####  

#### (the Persons referred to in items (i) and (ii) above,collectively, the “Section 5.11(b) Prohibited Persons”) to enter into abusiness relationship with any other Person for the same or similar services,activities or goods that any such Section 5.11(b) Prohibited Person purchasedfrom, was engaged in with or provided to, such Beneficiary, as applicable, orto reduce or terminate such Section 5.11(b) Prohibited Person’s businessrelationship with any Beneficiary; and each of the Principals and each of theSellers shall not, directly or indirectly, approach any such Section 5.11(b)Prohibited Person for any such purpose, or authorize or assist in the taking ofany of such

 

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#### actions for any such purpose or authorize or assist inthe taking of any such actions by any Person.

####  

### (c)          Asused in this Section 5.11 or in Section 5.12, the terms “employee,” “consultant,”“agent” and “independent contractor” shall include any Persons with such statusat any time during the six (6) months preceding any solicitation in question.

###  

5.12.    Non-Competition.

 

### (a)          Except withrespect to any Beneficiary, each of the Principals and each of the Sellersshall not, during the Non-Competition Restriction Period, alone or inassociation with any other Person, directly or indirectly, (i) engage, directlyor indirectly, in any Restricted Activity, (ii) acquire, or own in any manner,any interest in any Person that engages in any Restricted Activity, or thatengages in any business, activity or enterprise that competes with any aspectof any of Restricted Activity, or (iii) be interested in (whether as an owner,director, officer, partner, member, lender, shareholder, vendor, consultant,employee, advisor, agent, independent contractor or otherwise), or otherwiseparticipate in the management or operation of, any Person that engages in anyRestricted Activity or in any business, activity or enterprise that competeswith any Restricted Activity.

###  

### (b)         TheSeller Group and the Parent Group believe that the goodwill of the Companiesand of the Business is a valuable asset and an essential inducement to theParent and the Merger Subs to enter into this Agreement and to consummate theMergers and the other transactions to be consummated pursuant to the thisAgreement.  Each of the Principals andeach of the Sellers acknowledges that any of the Principals and any of theSellers could substantially dilute the value of such goodwill by violating anyof the provision of Section 5.12(a) hereof, or any of the provisions of Section5.10 or 5.11 hereof.  In order to inducethe Parent and the Merger Subs to enter into this Agreement and a conditionprecedent to the consummation of the Mergers and the other transactionscontemplated by this Agreement, each of the Principals and each of the Sellershas agreed, in his or its capacity as a selling equity holder (or a Person witha beneficial interest in such selling equity holder) and not as an employee ora consultant, to accept the restrictions as set forth in Sections 5.10, 5.11and 5.12 hereof.  In addition, each ofthe Principals and each of the Sellers acknowledges and agrees that theprovisions of Section 5.10, Section 5.11 and this Section 5.12 and the periodof time, geographic area and scope and type of restrictions on the RestrictedIndividuals’ activities set forth in such Sections, are reasonable andnecessary for the protection of the Parent, which is paying substantialconsideration (in the form of, among other things, the Merger Consideration)and other benefits to the Sellers and the Principals.  If any provision contained in any of Section5.10, Section 5.11 and this Section 5.12 shall be determined by any court orother tribunal of competent jurisdiction to be invalid or unenforceable byreason of its extending for too great a period of time or over too great ageographical area or by reason of its being too extensive in any other respect,(x) such provision shall be interpreted to extend over the maximum period oftime for which it may be enforceable and/or over the

 

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### maximum geographical areaas to which it may be enforceable and/or to the maximum extent in all otherrespects as to which it may be enforceable, all as determined by such court orother tribunal making such determination, and (y) in its reduced form, suchprovision shall then be enforceable, but such reduced form of provision shallonly apply with respect to the operation of such provision in the particularjurisdiction in or for which such adjudication is made.  It is the intention of the parties that theprovisions of Section 5.10, Section 5.11 and this Section 5.12 shall beenforceable to the maximum extent permitted by applicable law.

###  

### (c)          Eachof the Principals and each of the Sellers acknowledges and agrees that anybreach or threatened breach of the covenants or other provisions contained inSection 5.10, Section 5.11 and this Section 5.12 may cause the Parent materialand irreparable damage, the exact amount of which will be difficult toascertain, and that the remedies at law for any such breach will beinadequate.  Accordingly, the Parentshall, in addition to all other available rights and remedies (including, butnot limited to, seeking such damages as it can show it has sustained by reasonof such breach and recovery of costs and expenses including, but not limitedto, attorneys’ fees and expenses), be entitled to specific performance andinjunctive relief (including, without limitation, a temporary and/or permanentrestraining order and/or a permanent injunction) in respect of any breach orthreatened breach of any of such covenants or provisions, without beingrequired to post bond or other security and without having to prove theinadequacy of the available remedies at law.

###  

### (d)         Inany action to enforce any of the covenants contained in Sections 5.10, Section5.11 or this Section 5.12, no member of the Seller Group shall interpose orassert any defense or liability that is not directly related to the covenantfor which enforcement is sought.

###  

### (e)          Eachof the Principals and each of the Sellers acknowledges that the covenants ofsuch Person set forth in Section 5.10, Section 5.11 and this Section 5.12 arein addition to, and independent of, any non-solicitation, non-competition ornon-disclosure covenant to which any such Person may be bound as an employee onand after the date of this Agreement under any employment agreement with any ofthe Companies or any other subsidiary of the Parent.

###  

## 5.13.      SellerGroup Representative.

 

### (a)          Each of theSellers hereby irrevocably designates and appoints Stephen Tenenbaum (the “SellerGroup Representative”) as its, his or her agent and attorney-in-fact, forand on behalf of each such member of the Seller Group, with full power andauthority to represent such member of the Seller Group and his or hersuccessors and assigns with respect to all matters arising under thisAgreement.

###  

### (b)         Eachand every notice, delivery, statement, agreement or other action taken by theSeller Group Representative hereunder shall be binding upon each member of theSeller Group and its, his or her successors and assigns as if expresslyratified and

 

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### confirmed in writing bysuch member of the Seller Group.  TheParent shall be entitled to rely on, and each member of the Seller Group shallbe bound by, each and every notice, delivery, statement, agreement or otheraction made by the Seller Group Representative on behalf of the members of theSeller Group in accordance with this Agreement. Where any notice, delivery, statement, agreement or other action isrequired, permitted or contemplated in this Agreement to be made by the SellerGroup Representative, no such notice, delivery, statement, agreement or otheraction shall be effective unless made in writing and signed by the Seller GroupRepresentative.

###  

### (c)          Withoutlimiting the generality of the foregoing, the Seller Group Representative shallhave full power and authority, in the name of and on behalf of each member ofthe Seller Group and its, his or her successors and assigns, to (i) interpretall the terms and provisions of this Agreement, (ii) waive any condition onbehalf of any or all members of the Seller Group under Section 6.2 hereof,(iii) dispute or fail to dispute or expressly agree to any claims of Losses ordamages made by any Parent Indemnitee, (iv) assert claims of Losses or damagesagainst any indemnifying party, (v) negotiate, compromise and settle anydispute (including, but not limited to, any dispute relating to Losses ordamages) that may arise under this Agreement, (vi) sign any releases or otherdocuments with respect to any such dispute, and (vii) authorize payment ordelivery of any part of the Escrowed Shares pursuant to the Escrow Agreement orany other payments to be made with respect thereto.

###  

### (d)         Eachnotice required to be given to the Sellers or the Seller Group pursuant to thisAgreement shall be given to all of the Sellers or Seller Group, as applicable,and such notice shall not be valid if delivered or given only to the SellerGroup Representative.

###  

### (e)          TheSeller Group Representative, or any successors hereafter appointed, may resignand shall be discharged of his duties hereunder upon the appointment of anysuccessor Seller Group Representative(s) jointly as hereinafter provided.  In case of such resignation, or in the eventof the death or inability to act as a Seller Group Representative(s), asuccessor shall be named by all of the Sellers acting unanimously.  Each such successor Seller GroupRepresentative(s) shall have all the power, authority, rights and privilegeshereby conferred upon the initial Seller Group Representative(s), and the term “SellerGroup Representative” as used herein shall be deemed to include suchsuccessor Seller Group Representative(s).

###  

### (f)          Theforegoing notwithstanding, the Seller Group Representative shall not, and shallnot have any power to, incur any liability or obligation on the part of any ofthe Companies to the extent such liability or obligation would exist on orafter the Closing.

###  

## 5.14.      Paymentof Certain Post Closing Collections to the Sellers.

##  

### (a)          After theClosing, the Parent shall cause the Companies to remit to the Sellers, withinthirty (30) days after each Post-Closing Reporting Period, all amounts

 

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collected by the Companies during theapplicable Post-Closing Reporting Period, in respect of any account receivablepursuant to any Contract or other arrangement disclosed pursuant to Section3.18(c)(i) that is included in the Closing Working Capital on the IncomeForecast Method, to the extent (and only to the extent) such amount collectedwas in excess of the amount included in such Closing Working Capital in respectof such account receivable.

###  

### **(b)****        ****Within thirty(30) days after the Fifteen-Month Date, the Parent shall deliver to the Sellersa statement showing the amounts, if any, by which collections on any receivablethat was included in the Closing Working Capital on the Income Forecast Methodwas less than the amount included in respect of that receivable.  The Sellers shall promptly pay to the Parentthe amount of such deficiency.  TheParent shall attempt to give the Sellers timely notice if both the Parent andthe Sellers are to make payments pursuant to Section 5.14(a) and this Section5.14(b) hereof after the Fifteen-Month Date, and in the event of such noticethe parties shall coordinate such payments so the one party shall pay the otherparty the net balance of such amounts after offset of one against the other.**

###  

### **(c)****         ****Within thirty(30) days**after each Post-Closing Reporting Period**, the Parentshall cause the Companies to remit to the Sellers all amounts collected afterthe Closing Date by the Companies during such**Post-ClosingReporting Period**in respect of receivables with respect to Contracts or otherarrangements disclosed pursuant to Section 3.18(c)(ii), net of any and allcosts, fees and expenses to determine and collect such amounts paid or incurredby the Companies, including, without limitation, audit and legal fees andexpenses, with a statement as to the amounts received.  Such receivables shall not be included in theClosing Working Capital.**

###  

### (d)         Afterthe Closing, the Parent shall cause the Companies to remit to the Sellers, w**ithin thirty(30) days**after each Post-Closing Reporting Period,all amounts collected by the Companies during the applicable Post-ClosingReporting Period in respect of the Apple Receivable.

###  

## 5.15.      Grant of Proxies.  At the Closing, each of the Sellers shall grant, to one or moreindividuals designated by the Parent, a proxy, in the form of Exhibit 5.15attached hereto (the “Proxies”) to vote all of the Escrowed Shares, atany meeting of the stockholders of the Parent or on any written consent of thestockholders of the Parent; provided, that such Proxies shall requirethat any vote (as opposed to a written consent) cast at a meeting pursuant tosuch proxy shall be cast for, against or in abstention with respect to anymatter, proposal, candidate for director or other matter in the sameproportions of the for, against and abstention votes as are cast by all of theother stockholders of the Parent who are present (in person or by proxy) at themeeting.

##  

## 5.16.      Voteswith Respect to the Mergers; Waiver of Dissenters Rights, Etc.  Each of the Sellers shall vote or give itswritten consent, as applicable, in favor of the Mergers at each meeting or ineach written consent or other document relating to the Mergers.  Each of the Sellers hereby irrevocably waivesany and all dissenters’ rights or

 

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## appraisal rights or other similar rights under any applicableLaw in connection with the Mergers.

##  

## 5.17.      Purchase for Investment;Legend on Certificate.  All of theEscrowed Shares to be issued to the Sellers pursuant to this Agreement shallhave indorsed in writing, stamped or printed, upon the back thereof, thefollowing legend (or a legend of similar effect):

##  

THE SECURITIESREPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS (INCLUDINGPROVISIONS PERMITTING THE CANCELLATION OF THE SHARES UNDER CERTAINCIRCUMSTANCES AND RESTRICTIONS ON TRANSFER OF THE SHARES) OF AN AGREEMENT ANDPLAN OF MERGER DATED AS OF JULY 22, 2005 (THE “AGREEMENT”) BY AND AMONG CKX,INC., A DELAWARE CORPORATION (THE “COMPANY”), AND THE OTHER SIGNATORIESTHERETO.  A COPY OF THE AGREEMENT, AS ITMAY BE AMENDED FROM TIME TO TIME, IS MAINTAINED WITH THE CORPORATE RECORDS OFTHE COMPANY AND IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THECOMPANY.

 

5.18.    No Disqualifying Actions.  The Parent shall not, after the Closing,knowingly take any action that results in either of the Mergers failing toqualify as a reorganization under Section 368(a)(2)(E) of the Code.

 

## 5.19.      Notice of Client Adverse Effects.  The Sellers and the Principals shall promptlygive the Parent written notice of each and every Client Adverse Effect, if any,that may occur prior to the Closing, with such notice to be given in writingwithin one day of any of the Sellers, the Companies or the Principals learningof such Client Adverse Effect and in any event not less than one day before theClosing.

##  

## 5.20.      Sale of Marketable Securities.  Prior to the Closing, the Seller Group shallcause the Companies to sell all of their marketable securities.  No amount with respect to marketablesecurities shall be included in Closing Working Capital.

##  

# 6.           Conditionsto the Mergers.

#  

## 6.1.        Conditionsto Closing Obligation of the Parent and the Merger Subs.  The obligation of the Parent and the Merger Subs to consummate the Mergersand the other transactions contemplated hereby and to enter into the OperativeAgreements at the Closing are subject to the fulfillment, at or before theClosing, of each of the following conditions (all or any of which may be waivedin writing in whole or in part by the Parent and the Merger Subs in their solediscretion):

 

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### (a)          Representationsand Warranties. The representations and warranties of the Seller Group set forth in thisAgreement and in each of the Operative Agreements shall be true, correct andcomplete in all material respects as of the date of this Agreement and as ofthe Closing Date as though made on and as of the Closing Date, except thatthose representations and warranties that are modified as to materiality orcontain a qualification referring to a “Material Adverse Effect” or anysimilar modification or qualification shall be true, correct and complete inall respects as of said dates.

###  

### (b)         Performance.  The Seller Group shall have performed and compliedin all material respects with each agreement, covenant and obligation requiredby this Agreement to be so performed or complied with by the Seller Group (orany member(s) thereof) at or before the Closing (including, but not limited to,the obligation to execute and deliver the documents required to be executed anddelivered pursuant to Section 7.1).

###  

### (c)          Orders,Laws and Actions.  There shall not bein effect on the Closing Date any Order or Law restraining, enjoining orotherwise prohibiting or making illegal the consummation of the Mergers or anyof the other transactions contemplated hereby or any of the OperativeAgreements or that could reasonably be expected to otherwise result in amaterial diminution of the benefits of such transactions to the Parent, andthere shall not be pending or threatened on the Closing Date any Action in,before or by any Governmental Authority that could reasonably be expected toresult in the issuance of any such Order or the enactment, promulgation ordeemed applicability of any such Law to the Parent, any of the Companies orsuch transactions.  There shall not be inexistence any Action pending or threatened against the Parent that, in thejudgment of the Parent, could have a Material Adverse Effect with respect to theParent.

###  

### (d)         RegulatoryConsents and Approvals.  Allconsents, approvals and actions of, filings with and notices to anyGovernmental Authority necessary to permit the Sellers to perform theirobligations under this Agreement and to consummate the Mergers and the othertransactions contemplated hereby (i) shall have been duly obtained, made orgiven, (ii) shall be in form and substance reasonably satisfactory to theParent, (iii) shall not be subject to the satisfaction of any condition thathas not been satisfied or waived and (iv) shall be in full force and effect,and all terminations or expirations of waiting periods imposed by anyGovernmental Authority necessary for the consummation of the such transactionsshall have occurred.

###  

### (e)          ThirdParty Consents.  All consents (orwaivers in lieu thereof) to the performance by the Sellers of their obligationsunder this Agreement and the Operative Agreements and to the consummation ofthe Mergers and the other transactions contemplated hereby and thereby withoutviolating any Law or breaching (or giving rise to a right to terminate) anyContract listed on Schedule 3.18, (i) shall have been obtained, (ii)shall be in form and substance reasonably satisfactory to the Parent, (iii)shall not be subject to the satisfaction of any condition that has not beensatisfied or waived and (iv) shall be in full force and effect; provided,however, that the Parent and the Merger Subs

 

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### acknowledge that noconsent shall be required from any client (including any Artist) or customer ofthe Business or the landlord of the Leased Property as a condition to theobligation of the Parent and the Merger Subs hereunder.

###  

### (f)          Proceedings.  All proceedings to be taken on the part of theSellers in connection with the Mergers and any of the other transactionscontemplated hereby and all documents incident thereto shall be reasonablysatisfactory in form and substance to the Parent, and the Parent shall havereceived copies of all such documents and other evidence as the Parent mayreasonably request in order to establish the consummation of such transactionsand the taking of all proceedings in connection therewith.

###  

### (g)         NoMaterial Adverse Effect.  There shallnot have occurred any Material Adverse Effect (other than one or more ClientAdverse Effects, which are addressed in Section 6.1(h) hereof) with respect tothe Companies since December 31, 2004.

###  

### **(h)****        ****No ClientAdverse Effect****.  Without limiting the generalityof Section 6.1(g) hereof,**there**shall not have occurred any Client Adverse Effect which the Parentdetermines, in its sole but reasonable discretion, would be materiallydetrimental to the operations, business, condition (financial or otherwise) orprospects of the Companies.**

###  

### (i)           **RestructuringTransactions****.  The restructuring transactionscontemplated in Section 5.5 shall have taken place on terms satisfactory to theParent.**

###  

## 6.2.        Conditionsto Closing Obligation of the Seller Group. The obligation of the Sellers to consummate the of the Mergers and theother transactions contemplated hereby and the obligation of the Sellers toenter into the Operative Agreements at the Closing are subject to thefulfillment, at or before the Closing, of each of the following conditions (allor any of which may be waived in writing in whole or in part by the Sellers intheir sole discretion):

##  

### (a)          Representationsand Warranties.  The representationsand warranties of the Parent Group set forth in this Agreement and in each ofthe Operative Agreements shall be true, correct and complete in all materialrespects as of the date of this Agreement and as of the Closing Date as thoughmade on and as of the Closing Date, except that those representations andwarranties that are modified as to materiality or contain a qualificationreferring to a “Material Adverse Effect” or any similar modification orqualification shall be true, correct and complete in all respects as of saiddates.

###  

### (b)         Performance.  The Parent Group shall have performed andcomplied in all material respects with each agreement, covenant and obligationrequired by this Agreement to be so performed or complied with by the ParentGroup at or before the Closing (including, but not limited to, the obligationto execute and deliver the documents required to be executed and deliveredpursuant to Section 7.2).

 

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### (c)          Ordersand Laws.  There shall not be ineffect on the Closing Date any Order or Law restraining, enjoining or otherwiseprohibiting or making illegal the consummation of any of the Mergers or any ofthe other transactions contemplated hereby or by any of the OperativeAgreements or that could reasonably be expected to otherwise result in amaterial diminution of the benefits of such transactions to the Sellers, andthere shall not be pending or threatened on the Closing Date any Action in,before or by any Governmental Authority that could reasonably be expected toresult in the issuance of any such Order or the enactment, promulgation ordeemed applicability of any such Law to the any of the Sellers or suchtransactions.

###  

### (d)         RegulatoryConsents and Approvals.  Allconsents, approvals and actions of, filings with and notices to anyGovernmental Authority necessary to permit the Parent to perform itsobligations under this Agreement and to consummate the Mergers and the othertransactions contemplated hereby (i) shall have been duly obtained, made orgiven, (ii) shall be in form and substance reasonably satisfactory to theSellers, (iii) not be subject to the satisfaction of any condition that has notbeen satisfied or waived and (iv) shall be in full force and effect, and allterminations or expirations of waiting periods imposed by any GovernmentalAuthority necessary for the consummation of such transactions shall haveoccurred.

###  

### (e)          ThirdParty Consents.  All consents (orwaivers in lieu thereof) to the performance by the Parent Group of theirobligations under this Agreement and the Operative Agreements and to theconsummation of the Mergers and the other transactions contemplated hereby andthereby (i) shall have been obtained, (ii) shall be in form and substancereasonably satisfactory to the Sellers, (iii) shall not be subject to thesatisfaction of any condition that has not been satisfied or waived and (iv)shall be in full force and effect.

###  

### (f)          Proceedings.  All proceedings to be taken on the part ofthe Parent and the Merger Subs in connection with the Mergers and the othertransactions contemplated hereby and all documents incident thereto shall bereasonably satisfactory in form and substance to the Sellers, and the Sellersshall have received copies of all such documents and other evidence as theSellers may reasonably request in order to establish the consummation of suchtransactions and the taking of all proceedings in connection therewith.

###  

# 7.           ClosingDeliveries.

#  

## 7.1.        ClosingDeliveries of the Seller Group.  At or priorto the Closing, the Seller Group shall deliver or cause to be delivered to theParent each of the following agreements and other documents:

##  

#### (i)  the writtenresignations of each of the officers and directors of each of the Companies (otherthan Productions) from every position as an officer or director of each of suchCompanies;

 

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#### (ii)  theopinion of counsel to the Seller Group, addressed to the Parent and dated theClosing Date, in form and substance reasonably satisfactory to the Parent;

####  

#### (iii)  copies ofthe Organizational Documents, including all amendments thereto, of each of theCompanies (other than Productions) certified by the Secretary of State or otherappropriate official of the jurisdiction of organization, and (ii) certificatesfrom the Secretary of State or other appropriate official of the respectivejurisdictions of organization to the effect that each of such Companies is ingood standing or subsisting in such jurisdiction;

####  

#### (iv)  acertificate, dated the Closing Date and executed by each of the Sellers,substantially in the form and to the effect of Exhibit 7.1(iv);

####  

#### (v)  payoffletters, duly signed by the lender and in customary form reasonably acceptableto the Parent, with respect to each item of Indebtedness of any of theCompanies;

####  

#### (vi)  copies ofall consents referred to in Section 6.1(e) (or waivers in lieu thereof);

####  

#### (vii)  certificatesor other documents representing all of the Converted Companies Shares, in formand substance reasonably satisfactory to the Parent;

####  

#### (viii)  evidenceof the cancellation of the Affiliate amounts described in Section 5.6 hereof;

####  

#### (ix)  theEmployment Agreements, duly signed by each of the employees part thereto;

####  

#### (x)  the EscrowAgreement, duly executed by the Sellers;

####  

#### (xi)  theresignations of the officers and directors of each of the Companies;

####  

#### (xii)  theProxies, duly executed by each of the Sellers; and

####  

#### (xiii)  all ofthe Books and Records described in Section 5.7 relating to the Companies in theSellers’ possession at the Closing.

####  

## 7.2.        ClosingDeliveries of the Parent.  At or priorto the Closing, the Parent shall deliver or cause to be delivered to the SellerGroup each of the following agreements and other documents:

 

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#### (i)  the opinionof counsel to the Parent and the Merger Subs, addressed to the Sellers anddated the Closing Date, in form and substance reasonably satisfactory to theSellers;

####  

#### (ii)  copies ofOrganizational Documents of the Parent and the Merger Subs, including allamendments thereto, certified by the Secretary of State of California, and acertificate from the Secretary of State of such State to the effect that theParent or the Merger Subs (as applicable) is in good standing therein;

####  

#### (iii)  the cashpayment required by Section 1.5(i);

####  

#### (iv)  the sharesof Parent Common Stock pursuant to Section 1.5(ii) and (iii);

####  

#### (v)  acertificate, dated the Closing Date and executed by a duly authorized officerof the Parent substantially in the form and to the effect of Exhibit 7.2(v);

####  

#### (vi)  theEmployment Agreements, duly signed by one of the Companies or another affiliateof the Parent; and

####  

#### (vii)  theEscrow Agreement, duly executed by the Parent and the Escrow Agent.

####  

# 8.           Indemnification.

#  

## 8.1.        Survivalof Representationsand Warranties.

##  

### (a)          Notwithstandingany right of the Parent and the Merger Subs to fully investigate the affairs ofthe Companies and notwithstanding any Knowledge of facts determined ordeterminable by the Parent and the Merger Subs pursuant to such investigationor right of investigation, the Parent and the Merger Subs havethe right to rely fully upon the representations and warranties of the SellerGroup contained in this Agreement, the Schedules hereto and in any of theOperative Agreements.  Except as providedin the immediately following sentence, all such representations and warrantiesshall survive the execution and delivery of this Agreement and the Closinghereunder and shall thereafter continue in full force and effect until thesecond anniversary of the Closing Date, and (subject to Section 8.2(b)) theliability of the Seller Group in respect of any inaccuracy in any suchrepresentation or warranty shall terminate on the second anniversary of theClosing Date, except for liability with respect to which notice shall have beengiven on or prior to such date to the party against which such claim isasserted.  The foregoing notwithstanding,the obligation of the Seller Group to indemnify pursuant to this Agreement withrespect to representations and warranties contained in Section 3.3 (EquityInterests; Title), which shall survive indefinitely, and Sections 3.11 (Taxes),3.16 (Environment), 3.21 and 3.14 (Employment and Benefit Plans; ERISA), andwith respect

 

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### to matters arising from fraud, shall survive the Closing, and(subject to Section 8.2(b)) the Seller Group’s liability in respect of anyinaccuracy therein shall continue until all liability relating thereto isbarred by all applicable statutes of limitation (including any extensions orwaivers thereof).

###  

### (b)         Notwithstandingany right of the Sellers to fully investigate the affairs of the Parent and theMerger Subs and notwithstanding any Knowledge of facts determined ordeterminable by the Sellers pursuant to such investigation or right ofinvestigation, the Sellers have the right to rely fully upon therepresentations and warranties of the Parent and the Merger Subs contained inthis Agreement, the Schedules hereto and in any of the OperativeAgreements.  Except as provided in thenext sentence, all such representations and warranties shall survive theexecution and delivery of this Agreement and the Closing hereunder and shallthereafter continue in full force and effect until the second anniversary ofthe Closing Date, and the liability of the Parent and the Merger Subs inrespect of any inaccuracy in any such representation or warranty shallterminate on the second anniversary of the Closing Date.

###  

### (c)          Notwithstandinganything to the contrary in this Agreement, a claim for indemnification withrespect to Section 8.2(a)(ii) and Section 8.3(a)(ii) may be made at any timeafter the Closing within the applicable statute of limitations.

###  

## 8.2.        Indemnificationby the Seller Group.

##  

### (a)          Each memberof the Seller Group, jointly and severally (but in the case of the Companies, subject toSection 8.2(b)), shall indemnify and defend the Parent and each of itsofficers, directors, employees, shareholders, agents, advisors orrepresentatives (each, a “Parent Indemnitee”) from and against, and holdeach Parent Indemnitee harmless from and against, any and all Losses that anyParent Indemnitee may suffer or incur based upon, arising out of, relating toor in connection with any of the following (whether or not in connection withany third party claim):

###  

#### (i)  any breachof or inaccuracy in any representation or warranty made by any member of theSeller Group contained in this Agreement or in any of the Operative Agreementsor in respect of any claim made based upon alleged facts that if true couldconstitute any such breach or inaccuracy; and

####  

#### (ii)  the SellerGroup’s breach of or failure to perform or to comply with any covenant,obligation or other agreement required to be performed or complied with by theSeller Group contained in this Agreement or in any of the Operative Agreements.

####  

### (b)         Ifthe Closing occurs, none of the Companies shall have any obligation whatsoeverto indemnify any of the Parent Indemnitees under this Agreement (including thisSection 8) or any of the Operative Agreements, and shall have no obligationwhatsoever to the Sellers to make any contribution, cross-indemnify orotherwise participate in any indemnification obligation of the Sellershereunder.

 

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## 8.3.        Indemnificationby the Parent.

##  

### (a)          The Parentshall indemnify and defend the Sellers and each of their agents, advisors orrepresentatives (each, a “Seller Indemnitee”) from and against, and holdeach Seller Indemnitee harmless from and against, any and all Losses that suchSeller Indemnitee may suffer or incur arising from, related to or in connectionwith any of the following (whether or not in connection with any third partyclaim):

###  

#### (i)  any breachof or inaccuracy in any representation or warranty made by the Parent containedin this Agreement or in any Operative Agreement or in respect of any claim madebased upon alleged facts that if true could constitute any such breach orinaccuracy; and

####  

#### (ii)  the Parent’sbreach of or failure to perform or to comply with any covenant, obligation orother agreement required to be performed or complied with by the Parentcontained in this Agreement or in any Operative Agreement.

####  

## 8.4.        Limitationson Indemnification.

##  

### (a)          The SellerGroup shall not be obligated to indemnify or hold harmless the ParentIndemnitees in respect of any Losses suffered, incurred or sustained by any orall the Parent Indemnitees in excess of Merger Consideration.

###  

### (b)         TheParent Indemnitees shall not be entitled to seek any indemnification claims orother relief or remedy hereunder or otherwise with respect to the transactionscontemplated hereby, unless and until the aggregate amount of Losses by theParent Indemniteesexceeds $100,000.  If the ParentIndemnitees incur losses in excess of $100,000, they shall be entitled torecover (in accordance with the provisions of this Section 8) all of suchLosses, including the first Dollar thereof. The limitations set forth in this Section 8.4(b) shall not apply to anyLosses that may arise or that may be suffered in connection with or as a resultof, or that may be related to, any breach by the Sellers or the Principals ofthe provisions of Section 5.19 hereof.

###  

### (c)          TheSeller Indemnitees shall not be entitled to seek any indemnification claims orother relief or remedy hereunder or otherwise with respect to the transactionscontemplated hereby, unless and until the aggregate amount of Losses by theSeller Indemnitees exceeds $100,000.  Ifthe Seller Indemnitees incur losses in excess of $100,000, they shall beentitled to recover (in accordance with the provisions of this Section 8) allof such Losses, including the first Dollar thereof.

###  

## 8.5.        Paymentby the Sellers of Indemnification Amounts. Except as provided in Section 1.7(d), the indemnification obligations ofthe Seller Group under this Section 8 shall be satisfied by theSellers paying the Parent such amounts in cash in the form of a bank or cashier’scheck or in immediately available funds by wire transfer to such bank accountsor account as may be designated by the Parent. Any such payment

 

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## by the Sellers under this Section 8 shall be deemed anadjustment to the Merger Consideration.

##  

## 8.6.        Methodof Asserting Claims.  All claimsfor indemnification by any Indemnified Party shall beasserted and resolved as follows:

##  

### (a)          Inthe event any claim or demand is asserted against or sought to be collectedfrom such Indemnified Party by a Person other than a party hereto (a “ThirdParty Claim”), the Indemnified Party shall deliver a Claim Notice withreasonable promptness to the Indemnifying Party.  If the Indemnified Party fails to provide theClaim Notice with reasonable promptness after the Indemnified Party receivesnotice of such Third Party Claim, the Indemnifying Party shall not be obligatedto indemnify the Indemnified Party with respect to such Third Party Claim tothe extent that the Indemnifying Party’s ability to defend has been materiallyprejudiced by such failure of the Indemnified Party.  The Indemnifying Party shall notify theIndemnified Party as soon as practicable within the Dispute Period whether theIndemnifying Party disputes its liability to the Indemnified Party underSection 8.2 or Section 8.3, as the case may be, and whether the IndemnifyingParty desires, at its sole cost and expense, to defend the Indemnified Partyagainst such Third Party Claim.  Anythingto the contrary in this Section 8 notwithstanding (including this Section 8.6),the Sellers shall retain the right to control in all respects any Action,matter or other proceeding relating to Taxes for which the Sellers areobligated to indemnify the Parent with respect to such Action, matter or otherproceeding subject to the Parent’s consent to any settlement, which consentshall not be unreasonably withheld.

###  

### (b)         Ifthe Indemnifying Party notifies the Indemnified Party within the Dispute Periodthat the Indemnifying Party desires to defend the Indemnified Party withrespect to the Third Party Claim pursuant to this Section 8.6, then theIndemnifying Party shall have the right to defend, at the sole cost and expenseof the Indemnifying Party, such Third Party Claim by all appropriateproceedings, which proceedings shall be prosecuted in good faith, and withreasonable diligence, by the Indemnifying Party to a final conclusion or shallbe settled at the discretion of the Indemnifying Party (but only with theconsent of the Indemnified Party, which shall not be unreasonably withheld, inthe case of any settlement that provides for any relief other than the paymentof monetary damages or that provides for the payment of monetary damages as towhich the Indemnified Party shall not be indemnified in full pursuant toSection 8.2 or Section 8.3, as applicable). The Indemnifying Party shall have full control of such defense and proceedings,including any compromise or settlement thereof; provided, however,that the Indemnified Party may, at the sole cost and expense of the IndemnifiedParty, at any time prior to the Indemnifying Party’s delivery of the noticereferred to in the first sentence of this clause (b), file any motion, answeror other pleadings or take any other action that the Indemnified Partyreasonably believes to be necessary or appropriate to protect its interests;and providedfurther, that if requested by the IndemnifyingParty, the Indemnified Party shall, without being required to incur any cost orexpense, provide reasonable cooperation to the Indemnifying Party in contestingany Third Party Claim

 

47

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### that the IndemnifyingParty elects to contest.  The IndemnifiedParty may participate in, but not control, any defense or settlement of anyThird Party Claim controlled by the Indemnifying Party pursuant to this Section 8.6(b),and the Indemnified Party shall bear its own costs and expenses with respect tosuch participation.  Notwithstanding theforegoing, the Indemnified Party may take over the control of the defense orsettlement of a Third Party Claim at any time if it irrevocably waives itsright to indemnity under Section 8.2 or Section 8.3, as applicable,with respect to such Third Party Claim.

 

### (c)        Ifthe Indemnifying Party fails to notify the Indemnified Party within the DisputePeriod that the Indemnifying Party desires to defend the Third Party Claimpursuant to Section 8.6(b), or if the Indemnifying Party gives such noticebut fails to prosecute the Third Party Claim in good faith, and with reasonablediligence, or settle the Third Party Claim, or if the Indemnifying Party givesnotice that it elects not to defend the Third Party Claim, then the IndemnifiedParty shall have the right to defend, at the sole cost and expense of theIndemnifying Party, the Third Party Claim by all appropriate proceedings, whichproceedings shall be prosecuted by the Indemnified Party in a reasonable mannerand in good faith or shall be settled at the discretion of the IndemnifiedParty.  The Indemnified Party shall havefull control of such defense and proceedings, including any compromise orsettlement thereof; provided, however, that if requested by theIndemnified Party, the Indemnifying Party shall, at the sole cost and expenseof the Indemnifying Party, provide reasonable cooperation to the IndemnifiedParty and its counsel in contesting any Third Party Claim that the IndemnifiedParty is contesting.  The IndemnifyingParty may participate in, but not control, any defense or settlement controlledby the Indemnified Party pursuant to this Section 8.6(c), and theIndemnifying Party shall bear its own costs and expenses with respect to suchparticipation.

###  

### (d)       Inthe event any Indemnified Party should have a claim under Section 8.2 or Section 8.3,as applicable, against any Indemnifying Party that does not involve a ThirdParty Claim, the Indemnified Party shall deliver an Indemnity Notice withreasonable promptness to the Indemnifying Party.  The failure by any Indemnified Party to givethe Indemnity Notice shall not impair such party’s rights hereunder except tothe extent that an Indemnifying Party demonstrates that it has been irreparablyand materially prejudiced thereby.  Ifthe Indemnifying Party has timely disputed its liability with respect to suchclaim, the Indemnifying Party and the Indemnified Party shall proceed in goodfaith to attempt to negotiate a resolution of such dispute within 30 days.

###  

## 8.7.      OtherRemedies.  Anything in this Agreement to the contrarynotwithstanding, the provisions of this Section 8 shall not constitute thesole remedy available to the parties hereto in the event of a breach of any ofthe representations and warranties and covenants under this Agreement.  The limitation set forth in Section 8.5(c) shallapply regardless of whether any Parent Indemnitee brings an Action under this Section 8or pursuant to any other right with respect to this Agreement.

 

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## 8.8.      Limitationon Indemnification After Disclosure of Client Adverse Effect.  Anything to the contrarynotwithstanding, in the event that, prior to the Closing, the Seller Group hasmade written disclosure to the Parent of a Client Adverse Effect as required bySection 5.19 hereof, and the Parent Group elects to consummate the Closingnotwithstanding such Client Adverse Effect, the Parent Indemnitees shall not beentitled to recover any Losses which arise solely from, or which areattributable solely to, such Client Adverse Effect.

##  

# 9.         Termination.

#  

## 9.1.      Termination.  This Agreement may be terminated, and theMergers may be abandoned:

##  

#### (i)  By the mutualwritten consent of the Parent and the Sellers;

####  

#### (ii)  By either theParent or the Sellers, upon ten (10) days prior written notice to theother party, if the Closing shall not have occurred on or before September 6,2005 (the “Expiration Date”) other than as a result of the condition describedin Section 6.1(h) not having been satisfied or waived; provided,however, that this provision shall not be available to either party ifthe other party has the right (or, upon lapse of the 30-day period referred toin either clause (A) or clause (B) of item (iii) below, wouldhave the right) to terminate this Agreement under item (iii) of this Section 9.1;

####  

#### (iii)  By (x) theParent in the event of an inaccuracy in any representation or warranty of theSeller Group (provided, however, that if the only inaccuracy inany representation or warranty of the Seller Group is solely attributable to aClient Adverse Effect (provided that such Client Adverse Effect shallhave been disclosed as required by Section 5.19 hereof) asto which the Parent has the right to terminate this Agreement pursuant to Section 9.1(v) andas to which the Seller Group made written disclosure to the Parent and theMerger Subs prior to the Closing, then the Parent’s right to terminate thisAgreement with respect to such matter shall be pursuant to Section 9.1(v) hereof)or a non-performance of any covenant or other agreement of the Seller Groupcontained in this Agreement, or (y) the Seller Group in the event of aninaccuracy in any representation or warranty of the Parent or a non-performanceof any covenant or other agreement of the Parent contained in this Agreement,that (A) in the case of a termination by the Parent, would reasonably beexpected to result in a Material Adverse Effect with respect to the Companies,and in the case of a termination by the Seller Group, would reasonably beexpected to result in a Material Adverse Effect with respect to the Parent, ineach case where such inaccuracy or non-performance cannot be or has not beencured within thirty (30) days after the giving of written notice to thenon-terminating party of such inaccuracy or non-performance; or (B) wouldgive rise to the failure of a condition of the non-terminating party set forthin Section 6 of this Agreement, where such

 

49

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#### failure ofcondition cannot be or has not been cured within thirty (30) days after thegiving of written notice to the non-terminating party of such inaccuracy ornon-performance (a “Material Breach”); provided that theterminating party is not then in Material Breach of any of its, his or her (asthe case may be) representations, warranties, covenants or other agreementscontained in this Agreement;

####  

#### (iv)  By either theParent or the Seller Group if any court of competent jurisdiction or otherGovernmental Authority shall have issued an Order or taken any other actionpermanently enjoining, restraining or otherwise prohibiting the transactionscontemplated hereby and such order, decree, ruling or other action shall havebecome final and non-appealable;

####  

#### (v)  by the Parentupon five (5) Business Days prior written notice to the Seller GroupRepresentative if the condition described in Section 6.1(h) has notbeen satisfied or waived by the Parent prior to the Closing Date; or

####  

#### (vi)  by the SellerGroup upon five (5) Business Days prior written notice to the Parent ifthe Closing shall not have occurred on or before the Expiration Date as aresult of the condition described in Section 6.1(h) not having beensatisfied or waived and the Parent has not delivered the notice described in Section 9.1(v) onor before the Expiration Date.

####  

## 9.2.      Effectof Termination.  Upontermination of this Agreement pursuant to Section 9.1, all of theobligations of the parties shall terminate except those under Section 5.10,Section 9.3 and Section 10.4; provided, however, that (i) nosuch termination shall relieve any party of any liability to the other party byreason of any breach of or default under thisAgreement except as provided in Section 8.8, and (ii) the partiesshall not publicly disclose, and the parties shall cause their Affiliates notto publicly disclose, the proposed terms and conditions set forth herein or anynon-public information regarding the other party, except as may be required byLaw.

##  

## 9.3.      Break-UpFee.

##  

### (a)        Termination Based on a Client AdverseEffect.  If this Agreement is terminated by the Parentin accordance with Section 9.1(v) hereof, or by the Seller Group in accordancewith Section 9.1(vi) hereof, and the Parent or the Seller Group,as applicable, does not otherwise have the right to terminate this Agreementpursuant to Section 9.1(iii) hereof, then upon the date oftermination, the Parent shall pay to MBST the sum of the following: (i) $2,000,000;(ii) the fees, costs and expenses charged by Cornick, Garber &Sander, LLP, to the Companies; (iii) the fees, costs and expenses chargedby Deloitte and Touche, LLP to the Companies; and (iv) the fees, costs andexpenses (but in any event not more than $125,000) charged by Loeb &Loeb LLP to the Companies; the foregoing payments shall be the only amount to which the Seller Groupwill be entitled in such event.

 

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### (b)       Termination by the Parent Based on aBreach by the Seller Group.  If this Agreement is terminated bythe Parent in accordance with Section 9.1(iii) hereof, then upon thedate of termination, the Parent shall pay to MBST the amount of: (i) $2,000,000;less (ii) the fees, costs and expenses of the Parent Group and itsattorneys, accountants and other advisors in connection with this Agreement andthe transactions contemplated hereby; the foregoing payments shall be the onlyamount to which the Seller Group will be entitled in such event.

###  

### (c)        Termination by the Sellers Based on aFailure to Close by the Parent.  If (x) the SellerGroup is ready, willing and able to consummate the Closing, (y) this Agreementis terminated by the Sellers in accordance with Section 9.1(ii) andthe Parent is not ready, willing and able to consummate the Closing, and (z)the Parent does not have the right to terminate this Agreement pursuant to Section 9.1(iii) hereof,then upon the date of termination, the Parent shall pay to MBST the sum of thefollowing: (i) $2,000,000; (ii) the fees, costs and expenses chargedby Cornick, Garber & Sander, LLP, to the Companies; (iii) thefees, costs and expenses charged by Deloitte and Touche, LLP to the Companies;and (iv) the fees, costs and expenses (but in any event not more than $125,000)charged by Loeb & Loeb LLP to the Companies; the foregoing paymentshall be the only amount to which the Seller Group will be entitled in suchevent.

###  

### (d)       Termination by the Parent Based on a Failure to Close by the Sellers. If this Agreement is terminated by the Parent expresslyin writing in accordance with Section 9.1(ii), then upon the date oftermination, the Parent shall pay to MBST the sum of the following: (i) $2,000,000;(ii) the fees, costs and expenses charged by Cornick, Garber &Sander, LLP, to the Companies; (iii) the fees, costs and expenses chargedby Deloitte and Touche, LLP to the Companies; and (iv) the fees, costs andexpenses (but in any event not more than $125,000) charged by Loeb &Loeb LLP to the Companies; the foregoing payment shall be the only amount towhich the Seller Group will be entitled in such event.

###  

### (e)        Termination by the Sellers Based on a Breach by the Parent. If this Agreement is terminated by the Sellers inaccordance with Section 9.1(iii), notwithstanding that the Parent isready, willing and able to consummate the Closing (insofar as it is prepared todeliver the Merger Consideration contemplated hereby), and the Parent does nototherwise have the right to terminate this Agreement pursuant to Section 9.1(iii) hereofor Section 9.1(v) hereof, then upon the date of termination, theParent shall pay to MBST $2,000,000; the foregoing payment shall be the onlyamount to which the Seller Group will be entitled in such event.

###  

### (f)        Terminationas a Result of Governmental Order. If this Agreement is terminated by any party pursuant to Section 9.1(iv),then upon the date of termination, the Parent shall pay to MBST $2,000,000; theforegoing payment shall be the only amount to which the Seller Group will beentitled in such event.

 

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# 10.       Miscellaneous.

#  

## 10.1.    Notices.  All notices, requests and othercommunications hereunder must be in writing and shall be deemed to have beenduly given only if delivered personally or by facsimile transmissionor mailed (first class postage prepaid) to the parties at the followingaddresses or facsimile numbers:

##  

If to the Parent, to:

 

CKX, Inc.650 Madison Avenue16th FloorNew York, New York 10022Telephone:   (212) 838-3100Telefax:          (212) 319-6517Attn.: Howard Tytel, Esq.

 

and with a copy to:

 

Troutman Sanders LLPThe Chrysler Building405 Lexington AvenueNew York, New York 10174Facsimile No.:  (212) 704-6288Attn:  Richard G. Cushing, Esq. and

Timothy I. Kahler, Esq.

 

If to any member of the Seller Group, to such member:

 

c/oMBST Entertainment 345 N. Maple Drive, Suite 200 Beverly Hills, California 90210 Facsimile No.: (310) 385-1836

 

with a copy to:

 

Loeb & Loeb LLP10100 Santa Monica BoulevardSuite 2200Los Angeles, California 90067-4164Telephone: 310-282-2000 Facsimile: 310-282-2200 Attn:  Allan B. Duboff, Esq.

 

Allsuch notices, requests and other communications shall (i) if deliveredpersonally to the address as provided in this Section, be deemed given upondelivery, (ii) if delivered

 

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byfacsimile transmission to the facsimile number as provided in this Section, bedeemed given upon receipt, and (iii) if delivered by mail in the mannerdescribed above to the address as provided in this Section, be deemed givenupon receipt (in each case regardless of whether such notice, request or othercommunication is received by any other Person to whom a copy of such notice isto be delivered pursuant to this Section). Any party from time to time may change its address, facsimile number orother information for the purpose of notices to that party by giving noticespecifying such change to the other parties hereto.

 

## 10.2.    SpecificPerformance.  No provision of thisAgreement shall limit or restrict the availability of specific performance orinjunctive or other equitable relief to the extent that specific performance orsuch other relief would otherwise be available to a party hereunder.

##  

## 10.3.    EntireAgreement.  This Agreement and the Operative Agreementssupersede all prior discussions and agreements between the parties with respectto the subject matter hereof and thereof and contain the sole and entireagreement between the parties hereto with respect to the subject matter hereofand thereof.

##  

## 10.4.    Expenses.  Except as provided in Section 9.3,whether or not the transactions contemplated hereby and by the OperativeAgreements are consummated, the Parent shall pay its costs and expenses(including, without limitation, the fees and expenses of attorneys and accountants),and the Sellers shall pay their costs and expenses (including, withoutlimitation, the fees and expenses of attorneys and accountants), incurred withrespect to the Transactions.  Theforegoing notwithstanding, each of the parties hereto may recover itsreasonable costs and expenses in successfully enforcing the provisions hereofagainst any other party.

##  

## 10.5.    PublicAnnouncements.  Subject to Section 5.10(d) hereof,at all times at or before the Closing, neither the Parent or the Merger Subs,on the one hand, nor the Seller Group, on the other hand, shall issue or makeany reports, statements or releases to the public or generally to theemployees, suppliers or other Persons to whom any of the Companies providesservices or with whom any of the Companies otherwise has significant businessrelationships with respect to this Agreement or the transactions contemplatedhereby without the consent of the other party hereto, which consent shall notbe unreasonably withheld.  Withoutlimiting the generality of the foregoing, the Parent Group shall not make anypublic announcement concerning the transactions contemplated hereby for aperiod of three (3) Business Days after the execution and delivery of thisAgreement; provided, however, that nothing in this Section 10.5shall limit or prevent the Parent from making any disclosure required byapplicable Law or from discussing or making information relating to thisAgreement available to its lenders, financiers and other advisors orrepresentatives; and providedfurther, however, thatnothing in this Section 10.5 shall prohibit the Sellers from taking theactions described in Section 5.10(d).

 

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## 10.6.    Waiver.  Any term or condition of this Agreement maybe waived at any time by the party that is entitled to the benefit thereof, butno such waiver shall be effective unless set forth in a written instrument dulyexecuted by or on behalf of the party waiving such term or condition.  No waiver by any party of any term orcondition of this Agreement, in any one or more instances, shall be deemed tobe or construed as a waiver of the same or any other term or condition of thisAgreement on any future occasion.  Allremedies, either under this Agreement or by Law or otherwise afforded, shall becumulative and not alternative.

##  

## 10.7.    Amendment.  This Agreement may be amended, supplementedor modified only by a written instrument duly executed by or on behalf of eachparty hereto.

##  

## 10.8.    NoThird Party Beneficiary.  The terms andprovisions of this Agreement are intended solely for the benefit of each partyhereto and their respective successors or permitted assigns, and it is not theintention of the parties to confer third-party beneficiary rights upon anyother Person other than a Person entitled to indemnity under Section 8.

##  

## 10.9.    NoAssignment; Binding Effect.  Neither thisAgreement nor any right, interest or obligation hereunder may be assigned byany party hereto without the prior written consent of the other party hereto,and any attempt to do so shall be void, except that the Parent may assign anyor all of its rights, interests and obligations hereunder (including withoutlimitation its rights under Section 8) to (i) a wholly-ownedsubsidiary, provided that any such subsidiary agrees in writing to be bound byall of the terms, conditions and provisions contained herein, (ii) anypost-Closing purchaser of all of the issued and outstanding stock of the Parentor a substantial part of its Assets or (iii) any financial institutionproviding debt or equity financing to the Parent from time to time, but noassignment pursuant to any of items (i), (ii) or (iii) above shallrelieve the Parent of its obligations hereunder.  Subject to the preceding sentence, thisAgreement is binding upon, shall inure to the benefit of and is enforceable bythe parties hereto and their respective successors and assigns.

##  

## 10.10.  Headings;Definitional Provisions; etc.  The headingsused in this Agreement have been inserted for convenience of reference only anddo not define or limit the provisions hereof. Any reference to the masculine, feminine, or neuter gender shall be areference to such other gender as is appropriate. References to the singularshall include the plural and vice versa. The words “herein” and “hereunder” and words of similar import, whenused in this Agreement, shall refer to this Agreement as a whole and not to anyparticular provision of this Agreement. Whenever the words “include,” “including” or “includes” appear in this Agreement,they shall be read to be followed by the words “without limitation” or wordshaving similar import.  References inthis Agreement to the “Companies” shall, where appropriate in the context, bedeemed to include all Subsidiaries (if any) of the Companies.

##  

## 10.11.  InvalidProvisions.  If any provision of this Agreement is held tobe illegal, invalid or unenforceable under any present or future Law, and ifthe rights or

 

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## obligations of any party hereto underthis Agreement shall not be materially and adversely affected thereby, (a) suchprovision shall be fully severable, (b) this Agreement shall be construedand enforced as if such illegal, invalid or unenforceable provision had nevercomposed a part hereof, (c) the remaining provisions of this Agreementshall remain in full force and effect and shall not be affected by the illegal,invalid or unenforceable provision or by its severance and (d) in lieu ofsuch illegal, invalid or unenforceable provision, there shall be addedautomatically as a part of this Agreement a legal, valid and enforceableprovision as similar in terms to such illegal, invalid or unenforceableprovision as may be possible.

##  

## 10.12.  DraftingHistory.  In resolving any dispute or construing anyprovision in the Agreement, there shall be no presumption made or inferencedrawn (a) because the attorneys for one of the parties drafted suchprovision of the Agreement, (b) because of the drafting history of theAgreement, or (c) because of the inclusion of a provision not contained ina prior draft or the deletion of a provision contained in a prior draft.  The parties acknowledge and agree that thisAgreement was negotiated and drafted with each party being represented bycounsel of its choice and with each party having an equal opportunity toparticipate in the drafting of the provisions hereof and shall therefore beconstrued as if drafted jointly by the parties.

##  

## 10.13.  GoverningLaw.  This Agreement shall be governed by andconstrued in accordance with the Laws of the State of New York applicable to acontract executed and performed in such State without giving effect to theconflicts of laws principles thereof, which would result in the applicabilityof the Laws of another jurisdiction.

##  

## 10.14.  Jurisdiction.  Each of the parties hereto hereby irrevocablyconsents and submits to the jurisdiction of the United States District Courtfor the Southern District of New York and the courts of the State of New Yorklocated in New York County in connection with any Action arising out of orrelating to this Agreement or the transactions contemplated hereby, whichcannot be resolved by arbitration pursuant to Section 10.15 hereof, waivesany objection to venue in the United States District Court for the SouthernDistrict of New York and the courts of the State of New York, New York Countyfor such Action, and agrees that service of any summons, complaint, notice orother process relating to such Action may be effected in the manner provided bySection 10.1.  In any Action arisingout of or relating to this Agreement or the Operative Agreements, the ParentGroup and the Seller Group waive trial by jury.

##  

## 10.15.  Counterparts.  This Agreement may be executed in any numberof counterparts, each of which shall be deemed an original, but all of whichtogether shall constitute one and the same instrument.

##  

## 10.16.  GAAP.  All accounting and financial information tobe prepared under this Agreement shall be prepared in accordance with GAAP,unless this Agreement expressly requires otherwise, and for this purpose, ifGAAP would authorize more than one accounting method or principle, then GAAPshall mean the accounting method or principle used by the Companies in theordinary course during 2004.

 

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[The remainder of this page is left blankintentionally.]

 

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[Agreement and Plan of Merger]

[Signature Page One ofThree]

 

IN WITNESS WHEREOF, thisAgreement has been duly executed and delivered by or on behalf of each partyhereto as of the date first above written.

 
| The “Parent”      |   | CKX, INC.                       |
|-----------------------------|--------|---------------------------------|
|                        |   |                            |
|                        |   | By:                             | /s/ Thomas P. Benson |   |
|                        |   |                            | Name: Thomas P. Benson |
|                        |   |                            | Title: Executive Vice President and  Chief Financial Officer |
|                        |   |                            |
|                        |   |                            |
| The “Merger Subs” |   | MBST ACQUISITION CORP.          |
|                        |   |                            |
|                        |   | By:                             | /s/ Thomas P. Benson |   |
|                        |   |                            | Name: Thomas P. Benson |
|                        |   |                            | Title: Executive Vice President |
|                        |   |                            |
|                        |   |                            |
|                        |   | FOCUS ACQUISITION CORP.         |
|                        |   |                            |
|                        |   | By:                             | /s/ Thomas P. Benson |   |
|                        |   |                            | Name: Thomas P. Benson |
|                        |   |                            | Title: Executive Vice President |
|                        |   |                            |
|                        |   |                            |
| The “Principals”  |   | /s/  Lawrence Brezner |   |
|                        |   | Lawrence Brezner                |
|                        |   |                            |
|                        |   | /s/ David Steinberg             |   |
|                        |   | David Steinberg                 |
|                        |   |                            |
|                        |   | /s/ Stephen Tenenbaum           |   |
|                        |   | Stephen Tenenbaum               |

 

----

 

[Agreement and Plan of Merger]

[Signature Page Two ofThree]

 

IN WITNESS WHEREOF, thisAgreement has been duly executed and delivered by or on behalf of each partyhereto as of the date first above written.

 

 
| The “Sellers” |   | THE LAWRENCE BREZNER LIVING TRUST |
|-------------------------|--------|-----------------------------------|
|                    |   |                              |
|                    |   | By:                               | /s/    Lawrence Brezner |   |
|                    |   |                              | Name: Lawrence Brezner |
|                    |   |                              | Title: Trustee |
|                    |   |                              |
|                    |   |                              |
|                    |   | THE STEINBERG/THAYER LIVING TRUST |
|                    |   |                              |
|                    |   | By:                               | /s/ David Steinberg |   |
|                    |   |                              | Name: David Steinberg |
|                    |   |                              | Title: Trustee |
|                    |   |                              |
|                    |   | By:                               | /s/ Brynn Thayer Steinberg |   |
|                    |   |                              | Name: Brynn Thayer Steinberg |
|                    |   |                              | Title: Trustee |
|                    |   |                              |
|                    |   |                              |
|                    |   | THE TENENBAUM LIVING TRUST        |
|                    |   |                              |
|                    |   | By:                               |   /s/ Stephen Tenenbaum |   |
|                    |   |                              | Name: Stephen Tenenbaum |
|                    |   |                              | Title: Trustee |
|                    |   |                              |
|                    |   | By:                               |   /s/ Rosalie Tenenbaum |   |
|                    |   |                              | Name: Rosalie Tenenbaum |
|                    |   |                              | Title: Trustee |
|                         |        |                                   |  |  |  |  |

 

----

 

[Agreement and Plan of Merger]

[Signature Page Three ofThree]

 

IN WITNESS WHEREOF, thisAgreement has been duly executed and delivered by or on behalf of each partyhereto as of the date first above written.

 

 
| The “Companies” |   | MORRA, BREZNER, STEINBERG &  TENENBAUM ENTERTAINMENT, INC. |
|---------------------------|--------|---------------------------------------------------------------------|
|                      |   |                                                                |
|                      |   | By:                                                                 | /s/ Stephen Tenenbaum |   |
|                      |   |                                                                | Name: Stephen Tenenbaum |
|                      |   |                                                                | Title: Secretary and Chief Financial  Officer |
|                      |   |                                                                |
|                      |   |                                                                |
|                      |   | FOCUS ENTERPRISES, INC.                                             |
|                      |   |                                                                |
|                      |   | By:                                                                 | /s/ Stephen Tenenbaum |   |
|                      |   |                                                                | Name: Stephen Tenenbaum |
|                      |   |                                                                | Title: Secretary and Chief Financial  Officer |
|                      |   |                                                                |
|                      |   |                                                                |
|                      |   | STEPTECO, INC.                                                      |
|                      |   |                                                                |
|                      |   | By:                                                                 | /s/ Stephen Tenenbaum |   |
|                      |   |                                                                | Name: Stephen Tenenbaum |
|                      |   |                                                                | Title: Chief Financial Officer |

 

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**APPENDIXDEFINITIONS**

 

(a)        Capitalizedterms that are used and not otherwise defined in the Agreement and Plan ofMerger to which this Appendix is attached (the “Agreement”) shall havethe meanings set forth in this Appendix. Except as otherwise expressly provided, section references in thisAppendix are references to Sections of the Agreement.

 

“Accrual Basis”shall mean such accrual method or methods as may be provided by GAAP and asshall be determined to be appropriate in the circumstances in the reasonablegood-faith discretion of the Parent; provided, however, that,GAAP notwithstanding, for this purpose (a) revenue, and the relatedelements of working capital, shall be recognized consistent with the Parent’saccounting principles which generally record an item of revenue when (i) persuasiveevidence of the arrangement exists; (ii) the Parent or Subsidiary hasdelivered the services to the other party; (iii) the price or amount isfixed or determinable; and (iv) collection of the revenue item isreasonably assured; and (b) in the case of any commission, fee,percentage, royalty, override, participation or similar right or obligationthat will be owed to any of the Companies the amount of which is determinedfrom time to time by audit, review, analysis or any other inspection by anauditor or other representative of the books or records of any Person(including, without limitation, studios, distributors and production companies),such amount shall be recorded as an item of revenue (and as an asset) in theperiod during which the auditor or other representative completes its fieldwork with respect to such audit, review, analysis or other inspection of booksor records and the Parent or Subsidiary submits a claim for such item; provided,furtherhowever, that, notwithstanding item (b) above, anycommission, fee, percentage, royalty, override, participation or similar rightor obligation that will be owed to any of the Companies pursuant to anyContract or other arrangement disclosed pursuant to Section 3.18(i), shallbe recorded as an item of revenue (and as an asset) on the Income ForecastMethod of Accounting.

 

“Action” means anyaction, cause of action, claim, suit, proceeding, arbitration, mediation, causeof action or Governmental Authority investigation or audit (in any forum,including, but not limited to, any federal, state or local court or anyagency), but shall not include audits, reviews, analyses or other inspectionsfor the purpose of determining contractual rights or obligations of theCompanies with respect to commissions or fees of the Business.

 

“Affiliate” meansany Person that directly, or indirectly through one or more intermediaries,controls or is controlled by or is under common control with the Personspecified.  For purposes of thisdefinition, control of a Person means the power, direct or indirect, to director cause the direction of the management and policies of such Person whether byContract or otherwise and, in any event and without limitation of the previous

 

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sentence,any Person owning fifty percent (50%) or more of the voting securities of asecond Person shall be deemed to control that second Person.

 

“Agreement” meansthe Agreement and Plan of Merger to which this Appendix is attached and theExhibits and the Schedules thereto, as the same may be amended or otherwisemodified from time to time.

 

“Apple Receivable”means that certain receivable of the Companies from Apple Corps, Ltd. inconnection with certain consulting services rendered in 2004 and 2005 in theamount of $515,850, but shall not include any other receivable of the Companiesfrom Apple Corps, Ltd.

 

“Artist” means anydirector, producer, actor, comedian, singer, musician, musical group,performing group, author, screenwriter, playwright or other performer orcreative talent, including, without limitation, any corporation, limitedliability company, partnership or other entity that acts as a “loan-out”company to provide the services of any of the foregoing.

 

“Assets” of anyPerson means all assets of every kind, nature, character and description(whether real, personal or mixed, whether tangible or intangible, whetherabsolute, accrued, contingent, fixed or otherwise and wherever situated),including the goodwill related thereto, operated, owned or leased by suchPerson, including, without limitation, cash, cash equivalents, assets, accountsand notes receivable, chattel paper, documents, instruments, generalintangibles, real estate, equipment, inventory, goods and IntellectualProperty, and including, without limitation, any item that would be consideredan asset under GAAP.

 

“Audited FinancialStatements” have the meaning provided in Section 3.8(a).

 

“Beneficiaries”means, collectively, the Parent, the Companies and any of the Affiliates ordirect and indirect Subsidiaries of the Parent and/or the Companies that, atany time after the Closing, engage in the same business or a similar businessas the Business conducted by the Companies and their Affiliates immediatelyprior to the Closing.

 

“Benefit Plan”means any bonus, employee pension, executive compensation, deferredcompensation, profit sharing, savings, retirement, stock option, stockpurchase, severance pay, life, health, disability or accident insurance plan,or vacation, or other employee benefit plan, program, policy, arrangement,agreement or commitment, including any “employee benefit plan” within themeaning of Section 3(3) of ERISA.

 

“Books and Records”means all files, documents, instruments, papers, books and records relating tothe Business, including, without limitation, financial statements, Tax Returnsand related work papers and letters from accountants, budgets, pricingguidelines, ledgers, journals, deeds, title policies, minute books, stockcertificates and books, stock transfer ledgers, Contracts, Licenses, supplierlists, computer files and

 

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programs,retrieval programs, operating data and plans and environmental studies andplans.

 

“Business” has themeaning provided in the recitals at the head of the Agreement.

 

“Business Day”  means any day that is not a Saturday,Sunday or other day on which commercial banks in New York City are authorizedor required by law to remain closed.

 

“Calendar Quarter EndDate” means each of March 31, June 30, September 30 and December 31.

 

“CaliforniaCorporations Code” has the meaning provided in Section 1.1.

 

“Change in Control Transaction”means the occurrence of a single transaction or a series of relatedtransactions resulting in (i) the sale of all or substantially all of theassets of the Parent; (ii) the members of the Board of Directors of theParent immediately prior to such transaction(s) ceasing to be a majority of themembers of the Board of Directors of the Parent immediately after suchtransaction(s); (iii) both (A) the stockholders of the Parentimmediately prior to such transaction(s) ceasing to own or control, in theaggregate, a majority of the voting shares of the Parent immediately after suchtransaction(s) and (B) the President and Chief Executive Officer of theParent ceasing to hold such offices immediately after such transaction(s); (iv) thesale of all or substantially all of the assets of the Companies by the Parentand its consolidated group; or (v) the Parent or an Affiliate of theParent ceasing to own or control a majority of the voting shares of theCompanies or the right to appoint a majority of the members of the Boards ofDirectors of the Companies.

 

“Claim Notice”means written notification pursuant to Section 8.7(a) of a ThirdParty Claim as to which indemnity under Section 8.2 or Section 8.3,as applicable, is sought by an Indemnified Party, enclosing a copy of allpapers served, if any, and specifying the nature of and basis for such ThirdParty Claim and for the Indemnified Party’s claim against the IndemnifyingParty under Section 8.2 or Section 8.3, as applicable, together withthe amount or, if not then reasonably ascertainable, the estimated amount,determined in good faith, of such Third Party Claim.

 

“Client Adverse Effect” means the occurrence of either of thefollowing events or circumstances at any time after the date of this Agreement:(i) the termination, or substantial reduction or alteration, of anyrelationship between any Artist, on the one hand, and the Companies or theBusiness, on the other hand; or (ii) the receipt by any member of theSeller Group of any notice, indication, expression of intent or othercommunication (whether written, oral or otherwise), by or on behalf of anyArtist, that the Artist will terminate or substantially reduce or alter his orher relationship with the Companies or the Business.

 

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“Closing” has themeaning provided in Section 1.10.

 

“Closing Date” hasthe meaning provided in Section 1.10.

 

“Closing WorkingCapital” has the meaning provided in Section 2.3(a).

 

“Code” means theInternal Revenue Code of 1986, as amended, and the rules and regulationspromulgated thereunder or any successor statute.

 

“Companies” hasthe meaning provided at the head of the Agreement.

 

“Companies Employees”has the meaning provided in Section 3.24(a).

 

“Companies EmployeesEmployment Agreement” has the meaning provided in Section 3.22(b).

 

“ConfidentialInformation” has the meaning provided in Section 5.10(c).

 

“Contract” meansany contract, consultancy, employment agreement, guild agreement, talentagreement, joint venture, partnership, participation, override, royalty, feeentitlement, commission right, lease, evidence of Indebtedness, mortgage, loanagreement, indenture, security agreement, or other understanding, arrangement,instrument or agreement (whether written or oral) of any kind whatsoever,including any amendments, modifications, renewals and extensions thereof(including, without limitation, any of the foregoing with any client orcustomer of the Business)

 

“Converted CompaniesShares” has the meaning provided in Section 1.4.

 

“Dispute Notice”has the meaning provided in Section 2.2(b)

 

“Dispute Period”means the period ending thirty (30) calendar days following receipt by anIndemnifying Party of either a Claim Notice or an Indemnity Notice.

 

EmploymentAgreements” has the meaning provided in Section 5.8.

 

“Environmental”means all air, surface water, groundwater, or land, including land surface orsubsurface, including all fish, wildlife, biota and all other naturalresources.

 

“Environmental Claim”means any and all administrative or judicial Proceedings pursuant to orrelating to any applicable Environmental Law by any Person relating to anyactual or potential (x) violation of or liability under any Environmental Law,(y) violation of any Environmental Permit, or (z) liability for any costs ordamages related to the presence, Environmental Release, or threatenedEnvironmental Release into the Environment, of any Hazardous Substances at anylocation, including, but not limited to, any off-Site location to which HazardousSubstances or materials containing Hazardous Substances were sent for handling.

 

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“Environmental Law”means any and all Laws relating to the Environment.

 

“Environmental Permit”means any License, under or in connection with any Environmental Law.

 

“Environmental Release”means any spilling, leaking, pumping, pouring, emitting, emptying, discharging,injecting, escaping, leaching, dumping, or disposing of a Hazardous Substanceinto the Environment, except those permitted under Environmental Law.

 

“ERISA” means theEmployee Retirement Income Security Act of 1974, as amended, and the rules andregulations promulgated thereunder, or any successor statute.

 

“ERISA Affiliate”means any Person who is in the same controlled group of corporations or who isunder common control with any of the Corporations within the meaning of Section 414of the Code.

 

“Escrow Agent”shall have the meaning provided in Section 1.4.

 

“Escrow Agreement”has the meaning provided in Section 1.4.

 

“Escrowed Shares”has the meaning provided in Section 1.6(a).

 

“Expiration Date”has the meaning provided in Section 9.1(a)(ii).

 

“Fifteen-Month Date”means the last day of the fifteenth calendar month after the Closing Date;provided, that for this purpose the first calendar month after the Closing Dateshall be, as applicable, either (a) the calendar month in which theClosing Date occurs, if the Closing Date occurs prior to the sixteenth (16th)day of a calendar month, or (b) the calendar month immediately followingthe calendar month in which the Closing Date occurs, if the Closing Date occurson or after the sixteenth (16th) day of a calendar month.

 

“GAAP” meansUnited States generally accepted accounting principles, consistently appliedthroughout the specified period and in the immediately prior comparable period,subject in all cases to Section 10.16 of the Agreement.

 

“GovernmentalAuthority” means (i) the United States and any state, county, city orother political subdivision thereof, (ii) any foreign country or anystate, province, county, city or other political subdivision thereof, and (iii) anyexecutive or other official or individual acting with the power of or derivedfrom any entity referred to in item (i) or item (ii) above, and anycourt, tribunal, governmental arbitrator, authority, agency, commission,service or other instrumentality of any entity referred to in item (i) oritem (ii) above.

 

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“Income ForecastMethod” means a method of accounting for certain receivables fromparticipations or similar rights as to which an amount will be receivable bythe Companies as of the Closing hereunder but the amount of the receivable willnot be known until receipt of a statement from the obligor.  For purposes of determining Closing WorkingCapital hereunder, the amount will be estimated on the basis of the amount paidfor the prior annual period, pro rated on the basis of the percentage that theperiod of time through the Closing represents of the entire period for whichthe payment is due.

 

“Indebtedness” ofany Person means all obligations of such Person (i) for borrowed money, (ii) evidencedby notes, bonds, debentures or similar instruments, (iii) for the deferredpurchase price of goods or services (other than trade payables or accrualsincurred in the ordinary course of business), (iv) under capital leases or(v) in the nature of guarantees, assumptions or endorsements of theobligations described in clauses (i) through (iv) above of any otherPerson.

 

“Indemnified Party”means any Person claiming indemnification under any provision of Section 8.

 

“Indemnifying Party”means any Person against whom a claim for indemnification is being assertedunder any provision of Section 8.

 

“Indemnity Notice”means written notification pursuant to Section 8.7 of a claim forindemnity under Section 8.2 or Section 8.3, as applicable, by anIndemnified Party, specifying the nature of and basis for such claim, togetherwith the amount or, if not then reasonably ascertainable, the estimated amount,determined in good faith, of such claim.

 

“Intellectual Property”means (a) all trademarks, service marks, trade names, trade dress, productnames and slogans both registered and unregistered, and any common law rightsand good will appurtenant thereto, and all applications and registrationsthereof; (b) all copyrights in copyrightable works (including, but notlimited to, any jingles, songs, scores or other musical compositions,screenplays, movies, television shows, cartoons, comics, comic books, blogs,magazines, newspapers or other periodicals, plays, articles, scripts ormanuscripts and any concepts or ideas for any of the foregoing) and all otherownership rights in any works of authorship, any derivations thereof and allmoral rights appurtenant thereto and all applications and registrationsthereof; (c) all registered, reserved and unregistered domain names,uniform resource locators and keywords; (d) all computer and electronicdata, documentation and software, including both source and object code,computer and database applications and operating programs; (e) all rightsrelating to the use of any name, image or likeness of any Person or theportrayal of a Person, either individually or together with others; (f) alltrade secrets and confidential business, technical and proprietary information,including ideas, research notes, development notes, know-how, residuals,formulas, business methods and techniques, supplier lists, and marketing,financial and pricing data; (g) the right to sue both in equity and forpast, present and future damages of any or all of the foregoing; 

 

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(h) allexisting copies and tangible embodiments of any or all of the foregoing, in whateverform or medium; (i) all right, title and interest (free and clear) in andto each of the Corporations’ website(s), including without limitation, theframework and infrastructure of such web site(s), the layout design and the “lookand feel” thereof, all related software, source code and object code, all CGI,HTML, XML or other coding, all scripts and applets, all web graphics and data,all navigational buttons, all server configurations, and any and all attendantintellectual property rights therein; and (j) all other intellectual propertyrights relating to any or all of the foregoing including any renewals,continuations or extensions thereof.

 

“Knowledge” orlanguage of similar import means those matters of which the applicable Personis “aware” and all matters that should be known by such Person in the ordinarycourse.  In the case of any Person thatis an entity, the “Knowledge” of any trustee, director, officer, executive orperson holding a similar title or with similar responsibilities shall beattributed to that Person.  Knowledge ofthe Seller Group shall mean the knowledge of each of the Principals and each ofthe Sellers (including, but not limited to, each trustee of any of the Sellers)..

 

“Law” or “Laws”means all laws, statutes, rules, regulations, ordinances and otherpronouncements having the effect of law of the United States, any foreigncountry or any domestic or foreign state, county, city or other politicalsubdivision or of any Governmental Authority.

 

“Leased Real Property”has the meaning provided in Section 3.14.

 

“Licenses” meansall licenses, permits, certificates of authority, authorizations, approvals,registrations, franchises and similar consents granted or issued by anyGovernmental Authority.

 

“Lien” means anyclaim, mortgage, pledge, hypothecation, assessment, security interest, lease,lien (statutory or other), option, levy, charge, economic interest, right ofuse, conditional sale Contract, title retention Contract, or other encumbranceof any kind whatsoever, or other Contract to give any of the foregoing.

 

“Losses” means anyand all losses, debts, liabilities, Actions, causes of action, damages, fines,fees, penalties, deficiencies, obligations, claims, demands, payments,judgments or settlements of any nature or kind whatsoever, known or unknown,absolute or contingent, accrued or unaccrued, liquidated or unliquidated,whether arising from a third-party claim or otherwise, including all reasonablecosts and expenses (including, without limitation, court costs, fees ofattorneys, accountants and other experts or other expenses of litigation orother proceedings or of any claim, default or assessment or otherwise), inconnection with the investigation, defense, prosecution or enforcement of anyclaim.  A “Loss” is any one of theforegoing.

 

“Material AdverseEffect” means (a) with respect to the Companies, (i) a change in(or effect on) the condition (financial or otherwise), properties, assets

 

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(includingintangible assets), liabilities (including contingent liabilities), rights,obligations, operations, business or prospects, which change (or effect) ismaterially adverse to the financial condition, properties, assets, liabilities,rights, obligations, operations, business or prospects of the Companies andwithout limiting the generality of the foregoing, a Material Adverse Effectshall be deemed to have occurred if there shall have occurred any materialdefault, dispute, complaint or termination of or in respect of any relationshipwith any material client (including, without limitation, any Artist) orcustomer of the Business; provided, however, that “MaterialAdverse Effect” shall not include any change or effect due solely to generaleconomic conditions; or (ii) a material adverse effect on the ability ofany of the Sellers or any of the Companies to consummate any of thetransactions contemplated hereby, and (b) with respect to the Parent, amaterial adverse effect on its ability to consummate the Mergers and the othertransactions contemplated by the Agreement.

 

“Material Breach”has the meaning provided in Section 9.1(a)(iii).

 

“Merger Consideration”shall mean the cash and the shares of Parent Common Stock delivered by theParent pursuant to Section 1.5, as adjusted pursuant to Section 2.4, Section 5.9,Section 5.14 and Article 8, as applicable.  For purposes of this definition, indetermining the Dollar amount of the Merger Consideration the shares of CommonStock of the Parent delivered as part of the Merger Consideration shall bevalued as of the close of business on the trading day immediately prior to theClosing Date.

 

“Multiemployer Plan”means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

 

“Non-CompetitionRestriction Period” shall mean the period beginning on the Closing Date andending on the fifth anniversary of the Closing Date.

 

“Operative Agreements”means the Escrow Agreement and the Employment Agreements.

 

“Option” withrespect to any Person means any security, right (including, without limitation,any preemptive right, conversion right, stock appreciation right, redemptionright or repurchase right), subscription, warrant, option, “phantom” stockright or other Contract that gives the right to (i) purchase or otherwisereceive or be issued any shares of capital stock (or other equity securities orbeneficial or other interests) of such Person or any security of any kindconvertible into or exchangeable or exercisable for any shares of capital stock(or other equity securities or beneficial or other interests) of such Person or(ii) receive any benefits or rights similar to any rights enjoyed by oraccruing to the holder of shares of capital stock (or other equity securitiesor beneficial or other interests) of such Person, including any rights toparticipate in the equity, income or election of directors or officers (orpersons of a similar capacity) of such Person.

 

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“Order” means anywrit, judgment, decree, injunction or similar order or pronouncement of anyGovernmental Authority (in each such case whether preliminary or final).

 

“OrganizationalDocuments” means, with respect to any Person that is not a natural person,the organizational documents of such Person, as amended to the date inquestion.  The term OrganizationalDocuments includes articles or certificates of incorporation, by-laws,agreements or certificates of limited liability companies, joint venture orpartnership agreements, and other similar documents pertaining to the governanceand organization of the Person in question (including those pertaining to anytrust).

 

“Panel of Accountants”has the meaning provided in Section 2.3(e).

 

“Parent” has themeaning provided at the head of the Agreement.

 

“Parent Common Stock”shall mean the common stock, par value $0.01 per share, of the Parent, which isthe class of equity of the Parent that is publicly registered as of the date ofthis Agreement.

 

“Parent Equity RecapTransaction” means any stock split, stock dividend, consolidation,recapitalization and similar transaction that affects the Parent Common Stockgenerally; provided, however, that a Parent Equity RecapTransaction shall not include (a) the issuance of shares of Parent CommonStock or other securities pursuant to Section 1.5(ii) and Section 1.5(iii) or(b) any issuance (regardless of the consideration therefor) pursuant to atransaction that is not expressly described above.

 

“Parent Indemnitee”has the meaning provided in Section 8.2(a).

 

“Permitted Lien”means (i) any Lien for Taxes not yet due or delinquent or being contestedin good faith by appropriate proceedings for which adequate reserves on thebooks and records of the Person contesting same have been established inaccordance with GAAP, (ii) any statutory Lien arising in the ordinarycourse of business by operation of Law with respect to a liability that is notyet due or delinquent, (iii) any minor imperfection of title or similarLien which individually or in the aggregate with other such Liens does notmaterially impair the value of the property subject to such Lien or the use ofsuch property in the conduct of the Business, and (iv) Liens that consistof the rights of the lessor under any lease for equipment or vehicles leased byany of the Companies.

 

“Person” means anynatural person, corporation, general partnership, limited partnership, limitedliability company, limited liability partnership, proprietorship, jointventure, other business organization, trust, union, association or GovernmentalAuthority of any nature.

 

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“Post-ClosingReporting Period” means each of the following periods, as applicable: (i) theperiod from the Closing Date until the first Calendar Quarter End Dateoccurring after the Closing Date; (ii) each of the four successivecalendar quarters immediately following the period described in the foregoingitem (i), and (iii) the period, if any, beginning immediately after the endof the fourth calendar quarter described in the foregoing item (ii) andending on the Fifteen-Month Date.

 

“Post-Closing TaxPeriod” means any Tax period that ends after the Closing.

 

“Pre-Closing TaxPeriod” means any Tax period that ends on or before the Closing.

 

“Principals” hasthe meaning provided in the first paragraph of the Agreement.

 

“Productions” hasthe meaning provided in Section 5.5(c).

 

“Restricted Activity”means any aspect of the Business and any activity that from time to time in thefuture is pursued by the Companies or the subsidiaries, divisions or otherbusiness units of the Parent through which the Business is conducted, in eachcase, anywhere in North America and any country outside North America where theBusiness may be conducted from time to time.

 

“RestrictedIndividuals” has the meaning provided in Section 5.11(a).

 

“Restriction Period”means (i) as to any of the Sellers or the Companies, the period beginningon the Closing Date and ending on the fifth (5th) anniversary of the ClosingDate; and (ii) as to any of the Principals, the period beginning on theClosing Date and ending on the later of the fifth (5th) anniversary of theClosing Date and the first anniversary of the date the employment of suchPrincipal with any of the Companies is terminated.

 

“Retention Agreements”has the meaning provided in Section 3.24(b).

 

“Review Period”has the meaning provided in Section 2.2(b).

 

“Section 1.7(c)(i) Revenues”means, on a consolidated basis, revenues from commissions and fees, plus otherrevenues from operations of the Business, in each case of a character similarto revenues that are reflected in the Audited Financial Statements, and(whether or not of such a similar character) revenues from participations inBroadway plays or from sales of recorded music or video devices or as providedin any of the Contracts listed on Schedule 3.18; provided, however,that all such revenues shall be determined on an Accrual Basis net of any thirdparty commissions and fees due or payable in respect of such commission and feerevenues, other than amounts (all of which are usual and customary inaccordance with industry standards) payable to talent agents or outsideattorneys who have been entitled to receive a percentage of such revenues or to

 

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formershareholders of the Companies pursuant to existing deferred compensation andwithdrawal agreements that have been historically reflected in the financialstatements of the Companies.

 

“Section 3.18Contract” has the meaning provided in Section 3.18(b).

 

“Section 5.11(b) ProhibitedPersons” has the meaning provided in Section 5.11(b).

 

“Securities Act”means the Securities Act of 1933, as amended, the rules and regulationspromulgated thereunder and any successor Laws.

 

“Securities ExchangeAct” means the Securities Exchange Act of 1934, as amended, the rules andregulations promulgated thereunder and any successor Laws.

 

“Sellers” has themeaning provided at the head of this Agreement.

 

“Seller Group” hasthe meaning provided at the head of the Agreement.

 

“Seller Indemnitee”has the meaning provided in Section 8.3(a).

 

“Seller GroupRepresentative” has the meaning provided in Section 5.13.

 

“Site” means anyof the real properties currently or previously owned, leased, used or operatedby any of the Companies, including all soil, subsoil, surface waters andgroundwater thereat.

 

“Subsidiary” ofany Person means any corporation, general partnership, limited partnership,limited liability company or other entity of which the Person owns at least 50%of any class of the equity interests.

 

“Tax” means anytax, charge, fee, levy, deficiency or other assessment of whatever kind ornature including, without limitation, any net income, gross income, profits,gross receipts, real or personal property, sales, ad valorem, withholding,social security, retirement, excise, employment, unemployment, minimum,estimated, severance, stamp, occupation, environmental, windfall profits, use,service, net worth, payroll, franchise, license, gains, customs, transfer,recording and other tax, duty, fee, assessment or charge of any kindwhatsoever, imposed by any Tax Authority, including any liability therefore asa transferee (including without limitation under Code Section 6901 or anysimilar provision of applicable law), as a result of Treas. Reg. §1.1502-6 orany similar provision of applicable law, or as a result of any tax sharing orsimilar agreement, together with any interest, penalties or additions to taxrelating thereto.

 

“Tax Authority”means any branch, office, department, agency, instrumentality, court, tribunal,officer, employee, designee, representative, or other Person that is actingfor, on behalf, or as a part of any foreign or domestic government (or

 

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anystate, local or other political subdivision thereof) that is engaged in or hasany power, duty, responsibility or obligation relating to the legislation,promulgation, interpretation, enforcement, regulation, monitoring, supervisionor collection of or any other activity relating to any Tax or Tax Return.

 

“Tax Proceeding”means any audit, examination, review, assessment or reassessment, refund claim,litigation or other administrative judicial proceeding or other similar actionby a Tax Authority relating to any Tax for which any of the Companies is (or isasserted to be) or may be liable, the collection, payment, or withholding ofany Tax, or any Tax Return filed by or on behalf of any of the Companies.

 

“Tax Return” meansany return, election, declaration, report, schedule, information return,document, information, opinion, statement, or any amendment to any of theforegoing (including without limitation any consolidated, combined or unitaryreturn) submitted or required to be submitted to any Tax Authority.

 

“Third Party Claim”has the meaning ascribed to it in Section 8.7(a).

 

“Treas.  Reg.” means any temporary, proposed orfinal regulation promulgated under the Code.

 

“Uncle Dave’s” hasthe meaning provided in Section 5.5(b).

 

“WARN Act” has themeaning provided in Section 3.24(c).

 

“Working Capital” shall mean as of any date, on an AccrualBasis (and otherwise in accordance with GAAP), except as described herein, (x)the sum of (i) cash, cash equivalents and marketable securities, (ii) accountsreceivable (which shall include receivables with respect to Contracts or otherarrangements disclosed pursuant to Section 3.18(c)(i) hereof on theIncome Forecast Method but shall not include any receivables with respect toContracts or other arrangements disclosed pursuant to Section 3.18(c)(ii) hereofor the Apple Receivable), (iii) loan receivables, (iv) prepaidexpenses, (v) cash surrender value of life insurance policies, and (vi) leasedeposits, minus (y) the sum of (i) accrued expenses, (ii) accountspayable, (iii) both current (*i.e.,*due within one year) and long-term Indebtedness, including, without limitation,Indebtedness under lines of credit, revolving credit facilities or otherbanking arrangements used by the Companies to obtain working capital, and (iv) withoutduplication, all other liabilities (both current and long-term, but excludingcontingent liabilities that arise from (and are less than) revenues that may bereceived after the Closing hereunder, and future commitments under leases), allas determined in accordance with GAAP; provided, however, thereshall be excluded from this calculation (I) any amount owed between theCompanies and (II) any amounts due to or from Affiliates that are cancelled orforgiven pursuant to Section 5.6 of the Agreement.

 

(b)       TermsGenerally.  Unless the context ofthis Agreement otherwise requires, (i) words of any gender include eachother gender; (ii) words using the singular

 

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orplural number also include the plural or singular number, respectively; (iii) theterms “hereof,” “herein,” “hereby” and derivative or similar words refer tothis entire Agreement; (iv) the terms “Article,” “Section” or “Schedule”refer to the specified Article, Section or Schedule of thisAgreement; and (v) the words “include,” “includes,” and “including” aredeemed to be followed by the phrase: “without limitation.” All accounting termsused herein and not expressly defined herein shall have the meanings given tothem under GAAP.

 

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