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EXHIBIT 4.5

WARRANT AGREEMENT

     Agreement made as of                      ___, 2006 between Santa Monica Media Corporation, a Delaware
corporation, with offices at 9229 Sunset Boulevard, Suite 505, Los Angeles, CA 90069 (“Company”),
and Continental Stock Transfer & Trust Company, a New York corporation, with offices at 17 Battery
Place, New York, New York 10004 (“Warrant Agent”).

     WHEREAS, in July 2005, the Company issued to Santa Monica Capital Partners, LLC (“Partners”)
4,687,500 Warrants (the “Founder Warrants”), each of such Founder Warrants evidencing the right of
the holder thereof to purchase one share of common stock, par value $.001 per share, of the
Company’s Common Stock (“Common Stock”) for $6.00, subject to adjustment as provided herein;

     WHEREAS, the Company has determined to issue and deliver to Partners in a private placement
375,000 Warrants (the “Placement Warrants”), each of such Placement Warrants evidencing the right
of the holder thereof to purchase one share of Common Stock for $6.00, subject to adjustment as
provided herein;

     WHEREAS, the Company is engaged in a public offering (“Public Offering”) of Units (“Units”)
and, in connection therewith, has determined to issue and deliver up to (i) 21,562,500 Warrants
(“Public Warrants”) to the public investors, and (ii) 937,500 Warrants collectively to Citigroup
Global Markets Inc. (“Citigroup”), Deutsche Bank Securities, Inc. (“DBSI”) and Landenburg Thalman &
Co. Inc. (“Landenburg” and, together with Citigroup and DBSI, the “Underwriters”) or its designees
(“Underwriters’ Warrants” and, together with the Public Warrants, the Founder Warrants and the
Placement Warrants, the “Warrants”), each of such Public Warrants evidencing the right of the
holder thereof to purchase one share of Common Stock, for $6.00, subject to adjustment as described
herein; and

     WHEREAS, the Company has filed with the Securities and Exchange Commission a Registration
Statement, No. 333-128384 on Form S-1 (“Registration Statement”) for the registration, under the
Securities Act of 1933, as amended (“Act”) of, among other securities, the Public Warrants and the
Underwriters’ Warrants and the Common Stock issuable upon exercise of the Underwriters’ Warrants
and Public Warrants; and

     WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the
Warrant Agent is willing to so act, in connection with the issuance, registration, transfer,
exchange, redemption and exercise of the Warrants; and

     WHEREAS, the Company desires to provide for the form and provisions of the Warrants, the terms
upon which they shall be issued and exercised, and the respective rights, limitation of rights, and
immunities of the Company, the Warrant Agent, and the holders of the Warrants; and

     WHEREAS, all acts and things have been done and performed which are necessary to make the
Warrants, when executed on behalf of the Company and countersigned by or on behalf

 

 

of the Warrant Agent, as provided herein, the valid, binding and legal obligations of the
Company, and to authorize the execution and delivery of this Agreement.

     NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto
agree as follows:

1. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints the Warrant Agent
to act as agent for the Company for the Warrants, and the Warrant Agent hereby accepts such
appointment and agrees to perform the same in accordance with the terms and conditions set forth in
this Agreement.

2. WARRANTS.

     2.1 FORM OF WARRANT. Each Warrant shall be issued in registered form
only; except as set forth herein, shall be in substantially the form of Exhibit A hereto, the
provisions of which are incorporated herein; and shall be signed by, or bear the facsimile
signature of, the Chairman of the Board or President and Treasurer, Secretary or Assistant
Secretary of the Company and shall bear a facsimile of the Company’s seal. In the event the person
whose facsimile signature has been placed upon any Warrant shall have ceased to serve in the
capacity in which such person signed the Warrant before such Warrant is issued, it may be issued
with the same effect as if he or she had not ceased to be such at the date of issuance. All of the
Warrants shall initially be represented by one or more book-entry certificates.

     2.2 EFFECT OF COUNTERSIGNATURE. Unless and until countersigned by the
Warrant Agent pursuant to this Agreement, a Warrant shall be invalid and of no effect and may not
be exercised by the holder thereof.

     2.3 REGISTRATION.

          2.3.1 WARRANT REGISTER. The Warrant Agent shall maintain books (“Warrant
Register”), for the registration of original issuance and the registration of transfer of the
Warrants. Upon the initial issuance of the Warrants, or, in the case of the Founder Warrants, the
delivery of definitive warrant certificates in physical form to the Warrant Agent, the Warrant
Agent shall issue and register the Warrants in the names of the respective holders thereof in such
denominations and otherwise in accordance with instructions delivered to the Warrant Agent by the
Company. All of the Warrants shall initially be represented by one or more Book-Entry Warrant
Certificates deposited with the Depository Trust Company (the “Depository”) and registered in the
name of Cede & Co., a nominee of the Depository. Ownership of beneficial interests in the Warrants
shall be shown on, and the transfer of such ownership shall be effected through, records maintained
by (i) the Depository or its nominee for each Book-Entry Warrant Certificate, or (ii) institutions
that have accounts with the Depository (such institution, with respect to a Warrant in its account,
a “Participant”).

          If the Depository subsequently ceases to make its book-entry settlement system available for
the Warrants, the Company may instruct the Warrant Agent regarding making other arrangements for
book-entry settlement. In the event that the Warrants are not eligible for, or it is no longer
necessary to have the Warrants available in, book-entry form, the Warrant Agent shall provide
written instructions to the Depository to deliver to the Warrant Agent for cancellation

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each Book-Entry Warrant Certificate, and the Company shall instruct the Warrant Agent to
deliver to the Depository definitive Warrant Certificates in physical form evidencing such
Warrants. Such definitive Warrant Certificates shall be in the form annexed hereto as Exhibit A
with appropriate insertions, modifications and omissions, as provided above.

          2.3.2 BENEFICIAL OWNER; REGISTERED HOLDER. The term “beneficial owner”
shall mean, on or after the Detachment Date (as defined in Section 2.4), any person in whose name
ownership of a beneficial interest in the Warrants evidenced by a Book-Entry Warrant Certificate is
recorded in the records maintained by the Depository or its nominee, and prior to the Detachment
Date, the person in whose name the Unit to which such Warrant Certificate was initially attached as
registered upon the register relating to such Units. Prior to due presentment for registration of
transfer of any Warrant, the Company and the Warrant Agent may deem and treat the person in whose
name such Warrant shall be registered upon the Warrant Register (“registered holder”), as the
absolute owner of such Warrant and of each Warrant represented thereby (notwithstanding any
notation of ownership or other writing on the Warrant Certificate made by anyone other than the
Company or the Warrant Agent), for the purpose of any exercise thereof, and for all other purposes,
and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.

     2.4 DETACHABILITY OF WARRANTS. The securities comprising the Units will
not be separately transferable until five business days following the earlier to occur of (1)
expiration or termination of the Underwriters’ over-allotment option or (2) its exercise in full
(the “Detachment Date”), but in no event will separate trading of the securities comprising the
Units be allowed until the Company (A) files a Current Report on Form 8-K which includes an audited
balance sheet reflecting the receipt by the Company of the gross proceeds of the Public Offering
including the proceeds received by the Company from the exercise of the Underwriter’s
over-allotment option, if the over-allotment option is exercised prior to the filing of the Form
8-K, and (B) issues a press release announcing when such separate trading will begin.

     2.5 FOUNDER WARRANTS, PLACEMENT WARRANTS AND UNDERWRITERS’ WARRANTS. The
Underwriters’ Warrants shall have the same terms and be in the same form as the Public Warrants
except with respect to the Warrant Price as set forth below in Section 3.1. The Founder Warrants
shall have the same terms and be in the same form as the Public Warrants except with respect to the
duration of the Warrants as set forth in Section 3.2 and the redemption of the Warrants as set
forth in Section 6.6. The Placement Warrants shall have the same terms and be in the same form as
the Public Warrants.

3. TERMS AND EXERCISE OF WARRANTS.

     3.1 WARRANT PRICE. Each Public Warrant, Founder Warrant and Placement
Warrant shall, when countersigned by the Warrant Agent, entitle the registered holder thereof,
subject to the provisions of such Public Warrant and of this Warrant Agreement, to purchase from
the Company the number of shares of Common Stock stated therein, at the price of $6.00 per whole
share, subject to the adjustments provided in Section 4 hereof and in the last sentence of this
Section 3.1. Each Underwriters’ Warrant shall, when countersigned by the Warrant Agent, entitle
the registered holder thereof, subject to the provisions of such Underwriters’ Warrant and of this
Warrant Agreement, to purchase from the Company the number of shares of

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Common Stock stated therein, at the price of $7.50 per whole share, subject to the adjustments
provided in Section 4 hereof. The term “Warrant Price” as used in this Warrant Agreement refers to
the price per share at which Common Stock may be purchased at the time a Warrant is exercised. The
Company in its sole discretion may lower the Warrant Price at any time prior to the Expiration
Date.

     3.2 DURATION OF WARRANTS. Except as set forth in this Section 3.2, a
Warrant may be exercised only during the period (“Exercise Period”) commencing on the later of (i)
the consummation by the Company of a merger, capital stock exchange, asset or stock acquisition or
other similar business combination (“Business Combination”) (as described more fully in the
Company’s Registration Statement) and (ii)                      ___, 2007, and terminating at 5:00 p.m., Los
Angeles time on the earlier to occur of (i)                      ___, 2010 or (ii) the date fixed for
redemption of the Warrants as provided in Section 6 of this Agreement (“Expiration Date”).
Notwithstanding the foregoing, (1) the Founder Warrants may not be exercised until the closing
price of a share of Common Stock included in the Unit is at least $11.50 per share for five
consecutive trading days, and (2) the Expiration Date for the Founder Warrants shall be                     
2010. Except with respect to the right to receive the Redemption Price (as set forth in Section 6
hereunder), each Warrant not exercised on or before the Expiration Date shall become void, and all
rights thereunder and all rights in respect thereof under this Agreement shall cease at the close
of business on the Expiration Date. The Company in its sole discretion may extend the duration of
the Warrants by delaying the Expiration Date.

     3.3 EXERCISE OF WARRANTS.

          A Registered Holder may exercise a Warrant by delivering, not later than 5:00 P.M., New York
time, on any Business Day during the applicable Exercise Period (the “Exercise Date”) to the
Warrant Agent at its corporate trust department (i) the Warrant Certificate evidencing the Warrants
to be exercised, or, in the case of a Book-Entry Warrant Certificate, the Warrants to be exercised
(the “Book-Entry Warrants”) free on the records of the Depository to an account of the Warrant
Agent at the Depository designated for such purpose in writing by the Warrant Agent to the
Depository from time to time, (ii) an election to purchase the Shares underlying the Warrants to be
exercised (“Election to Purchase”), properly completed and executed by the Registered Holder on the
reverse of the Warrant Certificate or, in the case of a Book-Entry Warrant Certificate, properly
delivered by the Participant in accordance with the Depository’s procedures, and (iii) the Warrant
Price for each Warrant to be exercised in lawful money of the United States of America by certified
or official bank check or by bank wire transfer in immediately available funds.

          As soon as practicable after the exercise of any Warrant and the clearance of the funds in payment
of the Warrant Price, the Company shall issue to the registered holder of such Warrant a
certificate or certificates for the number of full shares of Common Stock to which he is entitled,
registered in such name or names as may be directed by him, her or it, and if such Warrant shall
not have been exercised in full, a new countersigned Warrant for the number of shares as to which
such Warrant shall not have been exercised. Notwithstanding the foregoing, the Company shall not be
obligated to deliver any securities pursuant to the exercise of a
Public Warrant or an Underwriters’
Warrant and shall have no obligation to settle the Warrant exercise unless a registration statement
under the Act with respect to the Common Stock is effective, subject to the Company’s satisfying
its obligations under Section 7.4 to use its best efforts. In the event that a registration
statement with respect to the Common Stock underlying a Public
Warrant or an Underwriters’ Warrant
is not effective under the Act, the holder of such Public Warrant or Underwriters’ Warrant shall
not be entitled to exercise such Warrant and such Warrant may have no value and expire worthless.
In no event will the Company be required to net cash settle the warrant exercise. Public Warrants
and Underwriters’ Warrants may not be exercised by, or securities issued to, any registered holder
in any state in which such exercise would be unlawful. The shares of common stock issuable upon
exercise of Founder Warrants and Placement Warrants shall be unregistered shares. In the event that
a registration statement is not effective for the exercised Public Warrants and Underwriters’
Warrants, the purchaser of a unit containing such Warrant, will have paid the full purchase price
for the unit solely for the shares included in such unit.

          If any of (A) the Warrant Certificate or the Book-Entry Warrants, (B) the Election to
Purchase, or (C) the Warrant Price therefor, is received by the Warrant Agent after 5:00 P.M., New
York time, on the specified Exercise Date, the Warrants will be deemed to be received and exercised
on the Business Day next succeeding the Exercise Date. If the date specified as the Exercise Date
is not a Business Day, the Warrants will be deemed to be received and exercised on the next
succeeding day that is a Business Day. If the Warrants are received or deemed to be received after
the Expiration Date, the exercise thereof will be null and void and any funds delivered to the
Warrant Agent will be returned to the Holder or Participant, as the case may be, as soon as
practicable. In no event will interest accrue on funds deposited with the Warrant

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Agent in respect of an exercise or attempted exercise of Warrants. The validity of any
exercise of Warrants will be determined by the Company in its sole discretion and such
determination will be final and binding upon the Holder and the Warrant Agent. Neither the Company
nor the Warrant Agent shall have any obligation to inform a Holder of the invalidity of any
exercise of Warrants.

          The Warrant Agent shall deposit all funds received by it in payment of the Warrant Price in
the account of the Company maintained with the Warrant Agent for such purpose and shall advise the
Company at the end of each day on which funds for the exercise of the Warrants are received of the
amount so deposited to its account. The Warrant Agent shall promptly confirm such telephonic advice
to the Company in writing.

               (i) The Warrant Agent shall, by 11:00 A.M. on the Business Day following the Exercise Date of
any Warrant, advise the Company and the transfer agent and registrar in respect of (a) the shares
of Common Stock (the “Shares”) issuable upon such exercise as to the number of Warrants exercised
in accordance with the terms and conditions of this Agreement, (b) the instructions of each
Registered Holder or Participant, as the case may be, with respect to delivery of the Shares
issuable upon such exercise, and the delivery of definitive Warrant Certificates, as appropriate,
evidencing the balance, if any, of the Warrants remaining after such exercise, (c) in case of a
Book-Entry Warrant Certificate, the notation that shall be made to the records maintained by the
Depository, its nominee for each Book-Entry Warrant Certificate, or a Participant, as appropriate,
evidencing the balance, if any, of the Warrants remaining after such exercise and (d) such other
information as the Company or such transfer agent and registrar shall reasonably require.

               (ii) The Company shall, by 5:00 P.M., New York time, on the third Business Day next succeeding
the Exercise Date of any Warrant and the clearance of the funds in payment of the Warrant Price,
execute, issue and deliver to the Warrant Agent, the Shares to which such Registered Holder or
Participant, as the case may be, is entitled, in fully registered form, registered in such name or
names as may be directed by such Registered Holder or the Participant, as the case may be. Upon
receipt of such Shares, the Warrant Agent shall, by 5:00 P.M., New York time, on the fifth Business
Day next succeeding such Exercise Date, transmit such Shares to or upon the order of the Registered
Holder or Participant, as the case may be.

          In lieu of delivering physical certificates representing the Shares issuable upon exercise,
provided the Company’s transfer agent is participating in the Depository Fast Automated Securities
Transfer program, the Company shall use its reasonable best efforts to cause its transfer agent to
electronically transmit the Shares issuable upon exercise to the Registered Holder or Participant
by crediting the account of Registered Holder’s prime broker with Depository or of the Participant
through its Deposit Withdrawal Agent Commission system. The time periods for delivery described in
the immediately preceding paragraph shall apply to the electronic transmittals described herein.
Notwithstanding the foregoing, except with respect to Placement Warrants, the Company shall not be
obligated to deliver any securities pursuant to the exercise of a Warrant unless a registration
statement under the Act with respect to the Common Stock is effective. Warrants may not be
exercised by, or securities issued to, any Registered Holder in any state in which such exercise
would be unlawful.

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               (iii) The accrual of dividends, if any, on the Shares issued upon the valid exercise of any
Warrant will be governed by the terms generally applicable to the Shares. From and after the
issuance of such Shares, the former Holder of the Warrants exercised will be entitled to the
benefits generally available to other holders of Shares and such former Holder’s right to receive
payments of dividends and any other amounts payable in respect of the Shares shall be governed by,
and shall be subject to, the terms and provisions generally applicable to such Shares.

               (iv) Warrants may be exercised only in whole numbers of Shares. No fractional shares of Common
Stock are to be issued upon the exercise of the Warrant, but rather the number of shares of Common
Stock to be issued shall be rounded up to the nearest whole number. If fewer than all of the
Warrants evidenced by a Warrant Certificate are exercised, a new Warrant Certificate for the number
of unexercised Warrants remaining shall be executed by the Company and countersigned by the Warrant
Agent as provided in Section 2 hereof, and delivered to the holder of this Warrant Certificate at
the address specified on the books of the Warrant Agent or as otherwise specified by such
Registered Holder. If fewer than all the Warrants evidenced by a Book-Entry Warrant Certificate are
exercised, a notation shall be made to the records maintained by the Depository, its nominee for
each Book-Entry Warrant Certificate, or a Participant, as appropriate, evidencing the balance of
the Warrants remaining after such exercise.

               (v) The Company shall not be required to pay any stamp or other tax or governmental charge
required to be paid in connection with any transfer involved in the issue of the Shares upon the
exercise of Warrants; and in the event that any such transfer is involved, the Company shall not be
required to issue or deliver any Shares until such tax or other charge shall have been paid or it
has been established to the Company’s satisfaction that no such tax or other charge is due.

     3.4 VALID ISSUANCE. All shares of Common Stock issued upon the proper
exercise of a Warrant in conformity with this Agreement shall be validly issued, fully paid and
nonassessable.

     3.5 DATE OF ISSUANCE. Each person in whose name any such certificate for
shares of Common Stock is issued shall for all purposes be deemed to have become the holder of
record of such shares on the date on which the Warrant was surrendered and payment of the Warrant
Price was made, irrespective of the date of delivery of such certificate, except that, if the date
of such surrender and payment is a date when the stock transfer books of the Company are closed,
such person shall be deemed to have become the holder of such shares at the close of business on
the next succeeding date on which the stock transfer books are open.

4. ADJUSTMENTS.

     4.1.1 STOCK DIVIDENDS — SPLIT-UPS. If after the date hereof, and subject to
the provisions of Section 4.6 below, the number of outstanding shares of Common Stock is increased
by a stock dividend payable in shares of Common Stock, or by a split-up of shares of Common Stock,
or other similar event, then, on the effective date of such stock dividend, split-up or

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similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall
be increased in proportion to such increase in outstanding shares of Common Stock.

     4.1.2 Extraordinary Dividend. If the Company, at any time while the Warrants are
outstanding and unexpired, shall pay a dividend in cash or securities to the holders of the Common
Stock (or shares of the Company’s capital stock into which the Warrants are convertible), then upon
the exercise of the Warrants, the registered holder shall be entitled to a proportionate share of
any such dividend as if the shares of Common Stock purchased upon exercise hereof by such
registered holder had been purchased and outstanding on the record date fixed for the determination
of the holders of the Common Stock entitled to receive such dividend.

     4.2 AGGREGATION OF SHARES. If after the date hereof, and subject to the
provisions of Section 4.6, the number of outstanding shares of Common Stock is decreased by a
consolidation, combination, reverse stock split or reclassification of shares of Common Stock or
other similar event, then, on the effective date of such consolidation, combination, reverse stock
split, reclassification or similar event, the number of shares of Common Stock issuable on exercise
of each Warrant shall be decreased in proportion to such decrease in outstanding shares of Common
Stock.

     4.3 ADJUSTMENTS IN EXERCISE PRICE. Whenever the number of shares of
Common Stock purchasable upon the exercise of the Warrants is adjusted, as provided in Section 4.1
and 4.2 above, the Warrant Price shall be adjusted (to the nearest cent) by multiplying such
Warrant Price immediately prior to such adjustment by a fraction (x) the numerator of which shall
be the number of shares of Common Stock purchasable upon the exercise of the Warrants immediately
prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common
Stock so purchasable immediately thereafter.

     4.4 REPLACEMENT OF SECURITIES UPON REORGANIZATION, ETC. In case of any
reclassification or reorganization of the outstanding shares of Common Stock (other than a change
covered by Section 4.1 or 4.2 hereof or that solely affects the par value of such shares of Common
Stock), or in the case of any merger or consolidation of the Company with or into another
corporation (other than a consolidation or merger in which the Company is the continuing
corporation and that does not result in any reclassification or reorganization of the outstanding
shares of Common Stock), or in the case of any sale or conveyance to another corporation or entity
of the assets or other property of the Company as an entirety or substantially as an entirety in
connection with which the Company is dissolved, the Warrant holders shall thereafter have the right
to purchase and receive, upon the basis and upon the terms and conditions specified in the Warrants
and in lieu of the shares of Common Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented thereby, the kind and amount of shares of
stock or other securities or property (including cash) receivable upon such reclassification,
reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer,
that the Warrant holder would have received if such Warrant holder had exercised his, her or its
Warrant(s) immediately prior to such event; and if any reclassification also results in a change in
shares of Common Stock covered by Section 4.1 or 4.2, then such adjustment shall be made pursuant
to Sections 4.1, 4.2, 4.3 and this Section 4.4. The provisions of this Section 4.4 shall similarly
apply to successive reclassifications, reorganizations, mergers or consolidations, sales or other
transfers.

     4.5 NOTICES OF CHANGES IN WARRANT. Upon every adjustment of the Warrant
Price or the number of shares issuable upon exercise of a Warrant, the Company shall give written
notice thereof to the Warrant Agent, which notice shall state the Warrant Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares purchasable at such price
upon the exercise of a Warrant, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Upon the occurrence of any event specified in
Sections 4.1, 4.2, 4.3 or 4.4, then, in any such event, the Company shall

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give written notice to the Warrant holder, at the last address set forth for such holder in
the warrant register, of the record date or the effective date of the event. Failure to give such
notice, or any defect therein, shall not affect the legality or validity of such event.

     4.6 NO FRACTIONAL SHARES. Notwithstanding any provision contained in this
Warrant Agreement to the contrary, the Company shall not issue fractional shares upon exercise of
Warrants. If, by reason of any adjustment made pursuant to this Section 4, the holder of any
Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a
share, the Company shall, upon such exercise, round up to the nearest whole number the number of
the shares of Common Stock to be issued to the Warrant holder.

     4.7 FORM OF WARRANT. The form of Warrant need not be changed because of
any adjustment pursuant to this Section 4, and Warrants issued after such adjustment may state the
same Warrant Price and the same number of shares as is stated in the Warrants initially issued
pursuant to this Agreement. However, the Company may at any time in its sole discretion make any
change in the form of Warrant that the Company may deem appropriate and that does not affect the
substance thereof, and any Warrant thereafter issued or countersigned, whether in exchange or
substitution for an outstanding Warrant or otherwise, may be in the form as so changed.

5. TRANSFER AND EXCHANGE OF WARRANTS.

     5.1 REGISTRATION OF TRANSFER. The Warrant Agent shall register the
transfer, from time to time, of any outstanding Warrant upon the Warrant Register, upon surrender
of such Warrant for transfer, properly endorsed with signatures properly guaranteed and accompanied
by appropriate instructions for transfer. Upon any such transfer, a new Warrant representing an
equal aggregate number of Warrants shall be issued and the old Warrant shall be cancelled by the
Warrant Agent. The Warrants so cancelled shall be delivered by the Warrant Agent to the Company
from time to time upon request.

     5.2 PROCEDURE FOR SURRENDER OF WARRANTS. Warrants may be surrendered to
the Warrant Agent, together with a written request for exchange or transfer, and thereupon the
Warrant Agent shall issue in exchange therefor one or more new Warrants as requested by the
registered holder of the Warrants so surrendered, representing an equal aggregate number of
Warrants; provided, however, that except as otherwise provided herein or in any Book-Entry Warrant
Certificate, each Book-Entry Warrant Certificate may be transferred only in whole and only to the
Depository, to another nominee of the Depository, to a successor depository, or to a nominee of a
successor depository; provided further, however, that in the event that a Warrant surrendered for
transfer bears a restrictive legend, the Warrant Agent shall not cancel such Warrant and issue new
Warrants in exchange therefore until the Warrant Agent has received an opinion of counsel for the
Company stating that such transfer may be made and indicating whether the new Warrants must also
bear a restrictive legend.

     5.3 FRACTIONAL WARRANTS. The Warrant Agent shall not be required to
effect any registration of transfer or exchange which will result in the issuance of a warrant
certificate for a fraction of a warrant.

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     5.4 SERVICE CHARGES. No service charge shall be made for any exchange or
registration of transfer of Warrants.

     5.5 WARRANT EXECUTION AND COUNTERSIGNATURE. The Warrant Agent is hereby
authorized to countersign and to deliver, in accordance with the terms of this Agreement, the
Warrants required to be issued pursuant to the provisions of this Section 5, and the Company,
whenever required by the Warrant Agent, will supply the Warrant Agent with Warrants duly executed
on behalf of the Company for such purpose.

6. REDEMPTION.

     6.1 REDEMPTION. Subject to Sections 6.4 and 6.6 hereof, not less than all
of the outstanding Warrants may be redeemed, at the option of the Company, at any time after they
become exercisable and prior to their expiration, at the office of the Warrant Agent, upon the
notice referred to in Section 6.2., at the price of $.01 per Warrant (“Redemption Price”), provided
that the last sales price of the Common Stock has been at least $11.50 per share, on any twenty
(20) trading days within a thirty (30) trading day period ending on the third business day prior to
the date on which notice of redemption is given.

     6.2 DATE FIXED FOR, AND NOTICE OF, REDEMPTION. In the event the Company
shall elect to redeem all of the Warrants, the Company shall fix a date for the redemption. Notice
of redemption shall be mailed by first class mail, postage prepaid, by the Company not less than 30
days prior to the date fixed for redemption to the registered holders of the Warrants to be
redeemed at their last addresses as they shall appear on the registration books. Any notice mailed
in the manner herein provided shall be conclusively presumed to have been duly given whether or not
the registered holder received such notice.

     6.3 EXERCISE AFTER NOTICE OF REDEMPTION. The Warrants may be exercised in
accordance with Section 3 of this Agreement at any time after notice of redemption shall have been
given by the Company pursuant to Section 6.2. hereof and prior to the time and date fixed for
redemption. On and after the redemption date, the record holder of the Warrants shall have no
further rights except to receive, upon surrender of the Warrants, the Redemption Price.

     6.4 OUTSTANDING WARRANTS ONLY. The Company understands that the
redemption rights provided for by this Section 6 apply only to outstanding Warrants. To the extent
a person holds rights to purchase Warrants, such purchase rights shall not be extinguished by
redemption. However, once such purchase rights are exercised, the Company may redeem the Warrants
issued upon such exercise provided that the criteria for redemption is met.

     6.5 REDEMPTION OF PURCHASE OPTION. Notwithstanding anything to the
contrary contained herein or in that certain Unit Purchase Option, dated as of                     ,
2006 (the “Unit Purchase Option”), if the Company shall elect to redeem all of the Warrants, (i)
the Underwriters’ option to purchase up to 937,500 Units (as described in more detail in the Unit
Purchase Option), if not earlier exercised in full, shall be automatically exercised, on a cashless
basis as described in Section 2.3 thereof immediately prior to the Redemption Date, and (ii) each
Warrant that is part of a Unit issued thereunder upon such

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automatic conversion shall be redeemed by the Company as part of such redemption for the
Redemption Price.

     6.6 EXCLUSION OF FOUNDER WARRANTS. The Founder Warrants shall not be
subject to redemption.

7. OTHER PROVISIONS RELATING TO RIGHTS OF HOLDERS OF WARRANTS.

     7.1 NO RIGHTS AS STOCKHOLDER. A Warrant does not entitle the registered
holder thereof to any of the rights of a stockholder of the Company, including, without limitation,
the right to receive dividends, or other distributions, exercise any preemptive rights to vote or
to consent or to receive notice as stockholders in respect of the meetings of stockholders or the
election of directors of the Company or any other matter.

     7.2 LOST, STOLEN, MUTILATED, OR DESTROYED WARRANTS. If any Warrant is
lost, stolen, mutilated, or destroyed, the Company and the Warrant Agent may on such terms as to
indemnity or otherwise as they may in their discretion impose (which shall, in the case of a
mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination, tenor,
and date as the Warrant so lost, stolen, mutilated, or destroyed. Any such new Warrant shall
constitute a substitute contractual obligation of the Company, whether or not the allegedly lost,
stolen, mutilated, or destroyed Warrant shall be at any time enforceable by anyone.

     7.3 RESERVATION OF COMMON STOCK. The Company shall at all times reserve
and keep available a number of its authorized but unissued shares of Common Stock that will be
sufficient to permit the exercise in full of all outstanding Warrants issued pursuant to this
Agreement.

     7.4 REGISTRATION OF COMMON STOCK. The Company agrees that prior to the
commencement of the Exercise Period, it shall file with the Securities and Exchange Commission a
post-effective amendment to the Registration Statement, or a new registration statement, for the
registration, under the Act, of, and it shall use its best efforts to take such action as is necessary to qualify for sale,
in those states in which the Warrants were initially offered by the Company, the Common Stock
issuable upon exercise of the Warrants. In either case, the Company will use its best efforts to
cause the same to become effective and to maintain the effectiveness of such registration statement
until the expiration or redemption of the Public Warrants in accordance with the provisions of this
Agreement.

8. CONCERNING THE WARRANT AGENT AND OTHER MATTERS.

     8.1 PAYMENT OF TAXES. The Company will from time to time promptly pay all
taxes and charges that may be imposed upon the Company or the Warrant Agent in respect of the
issuance or delivery of shares of Common Stock upon the exercise of Warrants, but the Company shall
not be obligated to pay any transfer taxes in respect of the Warrants or such shares.

10

 

     8.2 RESIGNATION, CONSOLIDATION, OR MERGER OF WARRANT AGENT.

          8.2.1 APPOINTMENT OF SUCCESSOR WARRANT AGENT. The Warrant Agent, or any
successor to it hereafter appointed, may resign its duties and be discharged from all further
duties and liabilities hereunder after giving sixty (60) days’ notice in writing to the Company.
If the office of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise,
the Company shall appoint in writing a successor Warrant Agent in place of the Warrant Agent. If
the Company shall fail to make such appointment within a period of 30 days after it has been
notified in writing of such resignation or incapacity by the Warrant Agent or by the holder of the
Warrant (who shall, with such notice, submit his Warrant for inspection by the Company), then the
holder of any Warrant may apply to the Supreme Court of the State of New York for the County of New
York for the appointment of a successor Warrant Agent at the Company’s cost. Any successor Warrant
Agent, whether appointed by the Company or by such court, shall be a corporation organized and
existing under the laws of the State of New York, in good standing and having its principal office
in the Borough of Manhattan, City and State of New York, and authorized under such laws to exercise
corporate trust powers and subject to supervision or examination by federal or state authority.
After appointment, any successor Warrant Agent shall be vested with all the authority, powers,
rights, immunities, duties, and obligations of its predecessor Warrant Agent with like effect as if
originally named as Warrant Agent hereunder, without any further act or deed; but if for any reason
it becomes necessary or appropriate, the predecessor Warrant Agent shall execute and deliver, at
the expense of the Company, an instrument transferring to such successor Warrant Agent all the
authority, powers, and rights of such predecessor Warrant Agent hereunder; and upon request of any
successor Warrant Agent the Company shall make, execute, acknowledge, and deliver any and all
instruments in writing for more fully and effectually vesting in and confirming to such successor
Warrant Agent all such authority, powers, rights, immunities, duties, and obligations.

          8.2.2 NOTICE OF SUCCESSOR WARRANT AGENT. In the event a successor Warrant
Agent shall be appointed, the Company shall give notice thereof to the predecessor Warrant Agent
and the transfer agent for the Common Stock not later than the effective date of any such
appointment.

          8.2.3 MERGER OR CONSOLIDATION OF WARRANT AGENT. Any corporation into
which the Warrant Agent may be merged or with which it may be consolidated or any corporation
resulting from any merger or consolidation to which the Warrant Agent shall be a party shall be the
successor Warrant Agent under this Agreement without any further act.

     8.3 FEES AND EXPENSES OF WARRANT AGENT.

          8.3.1 REMUNERATION. The Company agrees to pay the Warrant Agent
reasonable remuneration for its services as such Warrant Agent hereunder and will reimburse the
Warrant Agent upon demand for all expenditures that the Warrant Agent may reasonably incur in the
execution of its duties hereunder.

          8.3.2 FURTHER ASSURANCES. The Company agrees to perform, execute,
acknowledge, and deliver or cause to be performed, executed, acknowledged, and delivered all

11

 

such further and other acts, instruments, and assurances as may reasonably be required by the
Warrant Agent for the carrying out or performing of the provisions of this Agreement.

     8.4 LIABILITY OF WARRANT AGENT.

          8.4.1 RELIANCE ON COMPANY STATEMENT. Whenever in the performance of its
duties under this Warrant Agreement, the Warrant Agent shall deem it necessary or desirable that
any fact or matter be proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a statement signed by the
President or Chairman of the Board of the Company and delivered to the Warrant Agent. The Warrant
Agent may rely upon such statement for any action taken or suffered in good faith by it pursuant to
the provisions of this Agreement.

          8.4.2 INDEMNITY. The Warrant Agent shall be liable hereunder only for its
own negligence, willful misconduct or bad faith. The Company agrees to indemnify the Warrant Agent
and save it harmless against any and all liabilities, including judgments, costs and reasonable
counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Agreement
except as a result of the Warrant Agent’s negligence, willful misconduct, or bad faith.

          8.4.3 EXCLUSIONS. The Warrant Agent shall have no responsibility with
respect to the validity of this Agreement or with respect to the validity or execution of any
Warrant (except its countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any Warrant; nor shall it be
responsible to make any adjustments required under the provisions of Section 4 hereof or
responsible for the manner, method, or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment; nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or reservation of any shares
of Common Stock to be issued pursuant to this Agreement or any Warrant or as to whether any shares
of Common Stock will when issued be valid and fully paid and nonassessable.

     8.5 ACCEPTANCE OF AGENCY. The Warrant Agent hereby accepts the agency
established by this Agreement and agrees to perform the same upon the terms and conditions herein
set forth and among other things, shall account promptly to the Company with respect to Warrants
exercised and concurrently account for, and pay to the Company, all moneys received by the Warrant
Agent for the purchase of shares of the Company’s Common Stock through the exercise of Warrants.

     8.6 Waiver. The Warrant Agent hereby waives any and all right, title,
interest or claim of any kind (“Claim”) in or to any distribution of the Trust Account (as defined
in that certain Investment Management Trust Agreement, dated as of the date hereof, by and between
the Company and the Warrant Agent as trustee thereunder), and hereby agrees not to seek recourse,
reimbursement, payment or satisfaction for any Claim against the Trust Fund for any reason
whatsoever.

12

 

9. MISCELLANEOUS PROVISIONS.

     9.1 SUCCESSORS. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their
respective successors and assigns.

     9.2 NOTICES. Any notice, statement or demand authorized by this Warrant
Agreement to be given or made by the Warrant Agent or by the holder of any Warrant to or on the
Company shall be sufficiently given when so delivered if by hand or overnight delivery or if sent
by certified mail or private courier service within five days after deposit of such notice, postage
prepaid, addressed (until another address is filed in writing by the Company with the Warrant
Agent), as follows:

Santa Monica Media Corporation

9229 Sunset Boulevard, Suite 505

Los Angeles, CA 90069

Attn: Chairman

Any notice, statement or demand authorized by this Agreement to be given or made by the holder of
any Warrant or by the Company to or on the Warrant Agent shall be sufficiently given when so
delivered if by hand or overnight delivery or if sent by certified mail or private courier service
within five days after deposit of such notice, postage prepaid, addressed (until another address is
filed in writing by the Warrant Agent with the Company), as follows:

Continental Stock Transfer & Trust Company

17 Battery Place

New York, New York 10004

Attn: Compliance Department

with a copy in each case to:

Citigroup Global Markets, Inc.

388 Greenwich Street

New York, New York 10013

Attn: General Counsel

And

Deutsche Bank Securities, Inc.

60 Wall Street, 4th Floor

New York, New York 10005

Attn: General Counsel

13

 

And

Troy & Gould, PC

1801 Century Park East, 16th Floor

Los Angeles, CA 90067

Attn: David L Ficksman.

     9.3 APPLICABLE LAW. The validity, interpretation, and performance of this
Agreement and of the Warrants shall be governed in all respects by the laws of the State of New
York, without giving effect to conflict of laws. The Company hereby agrees that any action,
proceeding or claim against it arising out of or relating in any way to this Agreement shall be
brought and enforced in the courts of the State of New York or the United States District Court for
the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction
shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and
that such courts represent an inconvenience forum. Any such process or summons to be served upon
the Company may be served by transmitting a copy thereof by registered or certified mail, return
receipt requested, postage prepaid, addressed to it at the address set forth in Section 9.2 hereof.
Such mailing shall be deemed personal service and shall be legal and binding upon the Company in
any action, proceeding or claim.

     9.4 PERSONS HAVING RIGHTS UNDER THIS AGREEMENT. Nothing in this Agreement
expressed and nothing that may be implied from any of the provisions hereof is intended, or shall
be construed, to confer upon, or give to, any person or corporation other than the parties hereto
and the registered holders of the Warrants and, for the purposes of Sections 2.5, 6.1, 6.4, 7.4 and
9.2 hereof, the Underwriters, any right, remedy, or claim under or by reason of this Warrant
Agreement or of any covenant, condition, stipulation, promise, or agreement hereof. The
Underwriters shall be deemed to be a third-party beneficiary of this Agreement with respect to
Sections 2.5, 6.1, 6.4, 7.4 and 9.2 hereof. All covenants, conditions, stipulations, promises, and
agreements contained in this Warrant Agreement shall be for the sole and exclusive benefit of the
parties hereto (and the Underwriters with respect to the Sections 2.5, 6.1, 6.4, 7.4 and 9.2
hereof) and their successors and assigns and of the registered holders of the Warrants.

     9.5 EXAMINATION OF THE WARRANT AGREEMENT. A copy of this Agreement shall
be available at all reasonable times at the office of the Warrant Agent in the Borough of
Manhattan, City and State of New York, for inspection by the registered holder of any Warrant. The
Warrant Agent may require any such holder to submit his Warrant for inspection by it.

     9.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to be an original, and
all such counterparts shall together constitute but one and the same instrument.

     9.7 EFFECT OF HEADINGS. The Section headings herein are for convenience
only and are not part of this Warrant Agreement and shall not affect the interpretation thereof.

14

 

     IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the day
and year first above written.

	 	 	 	 	 	 	 	 	 
	Attest:	 	 	 	SANTA MONICA MEDIA CORPORATION
	 
	 	 	 	 	 	 	 	 
	 

 
	 	 	 	By:	 	 

	 	 
	 	 	 	 	Name: David Marshall
	 	 	 	 	Title:   Chairman
	 
	 	 	 	 	 	 	 	 
	Attest:	 	 	 	CONTINENTAL STOCK TRANSFER & TRUST COMPANY
	 
	 	 	 	 	 	 	 	 
	 

 
	 	 	 	By:	 	 

	 	 
	 	 	 	 	Name: Steven Nelson
	 	 	 	 	Title:   Chairman

15exv10w1

 

Exhibit 10.1

HEI, INC.

EMPLOYMENT AGREEMENT

This Employment Agreement is made and entered into as of July 10, 2006, and effective as of July 7,
2006 (the “Effective Date”), by and among HEI, Inc., a Minnesota corporation (the “Corporation”),
and Nina M. Anderson (“Employee”).

RECITALS

A. Employee is currently employed by the Corporation as its Vice President of Human Resources, and
Employee is a party to a Non-Disclosure, Non-Compete and Inventions Assignment Agreement between
Employee and the Corporation dated February 11, 2003 (the “Non-Compete Agreement”) and that certain
Employment Agreement by and between the Corporation and the Employee dated July 1, 2004 (the “Prior
Employment Agreement.”)

B. Corporation desires to continue to employ Employee in accordance with the terms of this
Agreement and this Agreement shall incorporate, amend and replace the terms of the Non-Compete
Agreement and the Prior Employment Agreement.

C. Employee recognizes that the Corporation operates in a highly competitive environment and the
importance to the Corporation of ensuring Employee’s loyalty and protecting the Corporation’s
customers, employees, business information and inventions, and goodwill. Accordingly, Employee has
entered into and agrees to be bound by this Agreement in consideration of Employee’s employment
with the Corporation and being given access to the Corporation’s confidential information.

D. The Employee acknowledges she is receiving good and valuable consideration for entering into
this Employment Agreement (the “Agreement”), including the Non-Competition/Non-Solicitation
provisions contained in Section 6 of this Agreement, and Employee acknowledges that this Agreement
was negotiated between the parties hereto, that Employee was not previously entitled to the
benefits conferred to Employee under this Agreement as part of her Employment with the Corporation
and that Employee received bargained for consideration including, without limitation, the increased
severance provisions contained in this Agreement in relation to the Previous Employment Agreement
and the increase in base salary contained in this Agreement in relation to the Previous Employment
Agreement, in exchange for agreeing to the Non-Competition/Non-Solicitation provisions of this
Agreement set forth in Section 6 of this Agreement; and

E. The Corporation and Employee desire to enter into this Agreement.

AGREEMENT

In consideration of the above recitals and the mutual promises set forth in this Agreement the
parties agree as follows:

1

 

       1. Nature and Capacity of Employment. The Corporation hereby agrees to employ
Employee as its Vice President of Human Resources, subject to the direction of the President/Chief
Executive Officer and the Board of Directors of the Corporation and pursuant to the terms and
conditions set forth in this Agreement. Employee hereby accepts employment under the terms and
conditions set forth in this Agreement.

Employee agrees to perform or be available to perform, on a full-time basis, the functions of this
position, pursuant to the terms of this Agreement. In addition, Employee will not, during the
course of employment by the Corporation, without prior written approval of the Board of Directors
of the Corporation, become an employee, director, officer, agent, partner of or consultant to, or a
stockholder of (except a stockholder of a public company in which Employee owns less than five
percent (5%) of the issued and outstanding capital stock of such company) any company or other
business entity which is, as determined by the Board of Directors in its discretion, a significant
competitor, supplier, or customer of the Corporation.

       2. Term of Employment. Employee’s employment hereunder shall commence as of the
Effective Date and shall continue for period of one year thereafter until July 6, 2007 (the “Term”)
unless Employee’s employment is earlier terminated pursuant to the terms of Paragraph 5 of this
Agreement.

Unless Employee’s employment has earlier terminated pursuant to the terms of Paragraph 5 of this
Agreement, this Agreement shall automatically renew following the Term for successive terms of one
year each (each called a “Renewal Term”) unless the Corporation provides Employee thirty (30) days
advance written notice prior to the expiration of the Term or Renewal Term that this Agreement
shall not be renewed. During any Renewal Term, this Agreement may be terminated pursuant to the
terms of Paragraph 5 of this Agreement.

       3. Compensation.

     3.1 Base Salary. As of the Effective Date, the Corporation agrees to pay
Employee an annual base salary of $80,000 (the “Base Salary”), which amount shall be earned
by Employee on a pro rata basis as Employee performs services and which shall be paid
according to the Corporation’s normal payroll practices. The Corporation may, in its
discretion, adjust Employee’s Base Salary from time to time based on Employee’s performance
and the Corporation’s business and financial situation.

     3.2 Incentive or Bonus Compensation. In addition to the Base Salary, the
Corporation may, in its sole discretion, pay bonuses or other incentive compensation to
Employee in accordance with the terms and conditions set forth annually in writing by the
Corporation (the “Incentive Compensation.”)

       4. Employee Benefits. During Employee’s employment with Corporation, Employee shall
be entitled to participate in the retirement plans, health plans, and all other employee benefits
made available by the Corporation, and as they may be changed from time to time. Employee
acknowledges and agrees that the Corporation is under no obligation to Employee to establish and
maintain any employee benefit plan in which Employee may participate, and that the terms and
provisions of any employee benefit plan of the Corporation are

2

 

matters within the exclusive province of the Corporation’s Board of Directors, subject to
applicable law. Upon the termination of Employee’s employment, Employee shall be entitled to
continue those benefits as may be required by state or federal law.

       5. Termination
of Employment Prior to the End of the Term or Renewal Term. Employee’s employment may be terminated prior to the expiration of the Term or a Renewal Term
as follows:

     5.1. For Cause Termination, Without Severance. Notwithstanding anything
contained herein to the contrary, the Corporation may discharge Employee and terminate this
Agreement immediately upon written notice to Employee. For the purposes of this Agreement,
“Cause” shall mean the occurrence of any of the following:

     (i) mismanagement or neglect of Employee’s duties which the Corporation’s Board
of Directors determines is (or will be if continued) materially and adversely
affecting the business or affairs of the Corporation; or

     (ii) conduct by Employee which the Corporation’s Board of Directors determines
is (or will be if continued) demonstrably and materially injurious to the
Corporation, monetarily or otherwise; or

     (iii) fraud, misappropriation or embezzlement by the Employee; or

     (iv) conviction of a felony crime or a crime of moral turpitude; or

     (v) conduct in the course of employment that the Corporation’s Board of
Directors determines is unethical; or

     (vi) the material breach of this Agreement by Employee.

If the Corporation terminates Employee’s employment for Cause pursuant to this Paragraph
5.1, Employee shall not be entitled to severance pay under Paragraph 5.6 or to any bonus or
incentive compensation of any kind.

     5.2. Without Cause, With Severance. The Corporation may terminate Employee’s
employment immediately at any time and for any reason without Cause upon providing notice to
Employee. However, in such event the Corporation shall pay Employee any earned and unpaid
bonus or incentive compensation, if any, on a pro rata basis for the period through the
Employee’s termination date. In addition, provided that Employee meets all of the Severance
Pay Conditions (as hereinafter set forth in this Paragraph 5.2), the Corporation shall pay
Employee severance pay in bi-weekly installments equal to the total of 1/26th of
Employee’s Base Salary at the time of termination, less applicable withholdings, for three
(3) months from the date of Employee’s date of termination (the “Severance Period”)
(collectively, the “Severance Base Pay”), plus the pro rata amount of the Employee’s
Incentive Compensation which could have been earned during the Severance Period, which
amount shall be calculated by annualizing the amount of Incentive Compensation paid to
Employee from January 1st of each year through the date of termination of
employment and then multiplying said

3

 

amount by the ratio of the number of days in the Severance Period to 365, less
applicable withholdings (the “Severance Incentive Compensation”) (for purposes of this
Agreement, the Severance Base Pay and the Severance Incentive Compensation shall hereinafter
be referred to as the “Severance Pay”). For example, without limitation, assume the
Employee was terminated on June 30, the Incentive Compensation earned by the Employee from
January 1 through June 30 was $30,000 and that the Severance Period was 90 days. The
Employee would receive Severance Incentive Compensation of $14,794 [($30,000 x 2) x 90/365.]

Employee shall only be entitled to receive the Severance Pay described herein if Employee
signs a Separation Agreement at the time of termination in a form prepared by the
Corporation that includes adequate provisions for the following: (i) Employee’s general
release of any and all legal claims; (ii) Employee’s return of all of the Corporation’s
property in Employee’s possession; (iii) nondisparagement of the Corporation and its
representatives; (iv) confidentiality of terms; and (v) acknowledgement of Employee’s
continuing contractual obligations to the Corporation, including Employee’s continuing
noncompetition, confidentiality, return of property, and invention obligations under
Paragraphs 6, 7, 8, and 9 of this Agreement (collectively, all of the conditions set forth
in this paragraph shall hereinafter be referred to as the “Severance Pay Conditions.”)

     5.3. Resignation by Employee Due to Change of Control, With Severance. For
purposes of this Agreement, “Change of Control” means either (A) a change in ownership or
control of the Corporation effected through any of the following transactions: (i) a
merger, consolidation or reorganization approved by the Corporation’s stockholders,
unless securities representing more than fifty percent (50%) of the total combined
voting power of the voting securities of the successor corporation are immediately
thereafter beneficially owned, directly or indirectly and in substantially the same
proportion, by the persons who beneficially owned the Corporation’s outstanding voting
securities immediately prior to such transaction; (ii) any stockholder-approved transfer or
other disposition of all or substantially all of the Corporation’s assets; (iii) the
acquisition, directly or indirectly by any person or related group of persons (other than
the Corporation or a person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation), of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation’s outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation’s stockholders which the Board recommends
such stockholders accept; or (iv) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the Board members ceases,
by reason of one or more contested elections for Board membership, to be comprised of
individuals who either (a) have been Board members continuously since the beginning of such
period or (b) have been elected or nominated for election as Board members during such
period by at least a majority of the Board members described in clause (a) who were still in
office at the time the Board approved such election or nomination or (B) a sale of all or
substantially all of the assets of Advanced Medical Operations, a division of the
Corporation, for which the Employee performs her duties in accordance with the terms of this
Agreement.

4

 

Employee shall have the right to terminate Employee’s employment for any reason within six
(6) months following a Change of Control in the Corporation upon providing thirty (30) days
advance written notice to the Corporation. The Corporation may then elect either (a) to
have Employee continue performing work for the Corporation throughout the 30 day notice
period; or (b) to accept Employee’s resignation effective immediately.

In the event of Employee’s termination of employment with the Corporation within six (6)
months following a Change of Control under this Paragraph 5.3, Corporation shall pay
Employee any earned and unpaid bonus or incentive compensation, if any, on a pro rata basis
for the period through the Employee’s termination date. In addition, provided that Employee
meets all of the Severance Pay Conditions, the Corporation shall pay Employee severance pay
in bi-weekly installments equal to 1/26th of Employee’s Base Salary at the time
of termination, less applicable withholdings, for twelve (12) months from the date of
Employee’s date of termination, plus the Severance Incentive Compensation.

     5.4 Other Resignation by Employee, Without Severance. The Employee may resign
Employee’s position upon providing 30 days advance, written notice to the Corporation. The
Corporation may then elect either (a) to have Employee continue performing work for the
Corporation throughout the 30 day notice period; or (b) to accept Employee’s resignation
effective immediately. In the event of Employee’s termination of employment with the
Corporation under this Paragraph 5.4, Employee shall receive payment for Base Pay, Incentive
Compensation and benefits as provided in Paragraph 5.6.

     5.5 Because of Death, Disability or Incapacity of Employee, Without Severance.
In the event of Employee’s death, or if the Employee is unable to perform Employee’s duties
and responsibilities for more than 90 days in any consecutive 12-month period, by reason of
physical or mental disability or incapacity, the Corporation may terminate Employee’s
employment upon thirty (30) days advance written notice to Employee, during which 30-day
period the Employee shall receive her pro rata portion of Employee’s Base Pay. This
paragraph does not relieve the Corporation of any duty to reasonably accommodate a
qualifying disability under the Americans with Disabilities Act, any legal duty under the
Family Medical Leave Act, or any of its other duties pursuant to applicable law. If
Employee’s employment is terminated pursuant to this Paragraph 5.5, Employee shall receive
payment for Base Pay, Incentive Compensation and benefits as provided in Paragraph 5.6, plus
Employee’s Severance Incentive Compensation.

     5.6 No Other Payments. Unless otherwise provided in this Agreement, Employee
shall only be entitled to the following in the event of Employee’s termination of
employment: (i) Base Salary and Incentive Compensation earned and unpaid through the date
of termination; (ii) benefits under any employee benefit plan or program to the extent
provided therein; and (iii) continued coverage under Corporation’s health and

5

 

group term life insurance programs to the extent required under state or federal
continuation coverage laws.

       6. Noncompetition/Non-Solicitation.

     6.1. Acknowledgement by Employee. Employee acknowledges that (a) Employee’s
services to be performed for Corporation are of a special and unique nature; (b) Corporation
operates in a highly competitive environment and would be substantially harmed if Employee
were to compete with Corporation or divulge its confidential information; (c) Employee has
received valuable and sufficient consideration for entering into this Agreement, including
but not limited to the increased benefits provided under Section 5 of this Agreement, the
increase in Base Salary provided for in this Agreement and the receipt of Confidential
Information, and (d) the provisions of this Section 6, including all of its subparts, are
reasonable and necessary to protect Corporation’s business.

     6.2. “Corporate Product” Defined. For purposes of this Agreement, “Corporate
Product” means any product or service (including any component thereof and any research to
develop information useful in connection with a product or service) that has been or is
being designed, developed, manufactured, marketed or sold by the Corporation or with respect
to which Employee has acquired Confidential Information.

Employee understands and acknowledges that, at the present time, Corporate Products include
microelectronics, subsystems, systems, connectivity and software solutions (including, but
not limited to, hardware, software, technology, patents, concepts, ideas, inventions,
discoveries, MMIC chip carriers and packages, high linearity power amplifiers, front end RF
modules, micro-circuit design, production and value-added assembly services, ultra-miniature
multi-chip packaging including chip on flex, ceramic and PWB substrates, and high end flex
and rigid flex fabrication). Employee understands and acknowledges that the foregoing
description of Corporate Products may change, and the provisions of this Section 6 and all
of its subparts shall apply to the Corporate Products of the Corporation in effect upon the
termination of Employee’ s employment with the Corporation.

     6.3 “Competitive Product” Defined. For purposes hereof, “Competitive Product”
means any product or service (including any components thereof and any research to develop
information useful in connection with the product or service) that is being designed,
developed, manufactured, marketed or sold by any person or entity other than the Corporation
that is of the same general type, performs similar functions, or is used for the same
purpose as a Corporate Product on which Employee worked or assisted the Corporation during
Employee’s employment with the Corporation or about which Employee has acquired Confidential
Information.

     6.4 Noncompete Obligations. Employee agrees that, during Employee’s employment
with the Corporation and for a period of eighteen (18) months following Employee’s
termination of employment with the Corporation, regardless of the reason for termination,
Employee will not, directly or indirectly, render services to any person or

6

 

entity that designs, develops, manufactures, markets or sells a Competitive Product in
any geographic area where the Corporation designs, develops, manufactures, markets or sells
a Corporate Product.

Employee understands and acknowledges that, at the present time, the geographic market of
the Corporation includes the entire United States. Employee understands and acknowledges
that the foregoing description of the Corporation’s geographic market may change, and the
provisions of this section 6 and all of its subparts shall apply to the geographic market of
the Corporation in effect upon the termination of Employee’s employment with the
Corporation.

     6.5 No Solicitation of Customers. During Employee’s employment with
Corporation and for a period of eighteen (18) months after Employee’s termination of
employment with Corporation, regardless of the reason for such termination, Employee agrees
that Employee shall not, directly or indirectly, solicit business from, work for, or
otherwise interfere with or attempt to interfere with Corporation’s relationship with any
customer or prospective customer of Corporation.

     6.6 No Solicitation of Employees or Business Contacts. During Employee’s
employment with Corporation and for a period of eighteen (18) months after Employee’s
termination of employment with Corporation, regardless of the reason for such termination,
Employee agrees that Employee shall not, directly or indirectly, take any action to
encourage, solicit or recruit any current or former employee, consultant, independent
contractor, subcontractor, supplier, vendor, or other business relation of Corporation to
terminate their relationship with Corporation.

     6.7 Disclosure of Obligations. Employee agrees that, during Employee’s
employment with Corporation and for a period of eighteen (18) months after Employee’s
termination of employment with Corporation, regardless of the reason for such termination,
Employee shall, prior to accepting employment or any other business relationship with any
other person or entity, inform that person or entity of Employee’s obligations under this
Section 6, including all of its subparts.

       7. Protection of Confidential Information.

     7.1 Definition of Confidential Information. As used in this Agreement, the
term “Confidential Information” shall mean any information which Employee learns or develops
during Employee’s employment with Corporation that derives independent economic value from
being not generally known or readily ascertainable by other persons who could obtain
economic value from its disclosure or use, and includes, but is not limited to, trade
secrets, Inventions as defined in Paragraph 9 below, financial information, personnel
information, and information relating to such matters as existing or contemplated products,
services, profit margins, fee schedules, pricing, design, processes, formulae, business
plans, sales techniques, marketing techniques, training manuals and materials, policies or
practices related to Corporation’s business, personnel or other matters, computer databases,
computer programs, software and other technology,

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customer lists and requirements, vendor lists, or supply information. Confidential
Information includes such information of Corporation, its customers, vendors, and other
third parties or entities with whom Corporation does business. Any information disclosed to
Employee or to which Employee has access during the time of Employee’s employment that
Employee reasonably considers to be Confidential Information, or which the Corporation
treats as Confidential Information, will be presumed Confidential Information.

     7.2 Restrictions on Use or Disclosure of Confidential Information. Employee
shall keep the Confidential Information in absolute confidence both during Employee’s
employment with Corporation and after the termination of Employee’s employment, regardless
of the reason for such termination. Employee agrees that Employee will not, at any time,
disclose to others, use for the benefit of any entity or person other than Corporation, or
otherwise take or copy any such Confidential Information, whether or not developed by
Employee, except as required in Employee’s duties to Corporation.

       8. Return of Confidential Information and Corporation’s Property. When Employee’s
employment terminates with Corporation, regardless of the reason for such termination, Employee
will promptly turn over to Corporation in good condition all Corporation property in Employee’s
possession or control, including but not limited to all originals, copies of, or electronically
stored documents or other materials containing Confidential Information, regardless of who prepared
them. In the case of electronically stored information retained by Employee outside of
Corporation’s electronic systems, Employee will promptly make a hard copy of such information in
paper, audio recording, disc format, or other format as appropriate, turn that hard copy over to
Corporation, and then destroy Employee’s electronically stored information. Further, Employee
agrees to execute written confirmation that all Confidential Information in the Employee’s
possession, or to which the Employee has access, has been turned over to Corporation or destroyed.

       9. Inventions.

     9.1 Definition of Inventions. As used in this Agreement, “Inventions” means
any inventions, improvements, trade names or trademarks, trade secrets, discoveries,
designs, formulae, ideas or original works of authorship (whether or not reduced to writing,
other media or practice and whether or not patentable or copyrightable), or work product
originated, conceived, developed, discovered or made in whole or in part solely by Employee
or jointly with others that relate, directly or indirectly, (a) to Corporation’s business;
(b) to Corporation’s actual or demonstrably anticipated research or development; (c) that
are made through the use of any of Corporation’s equipment, facilities, supplies, trade
secrets; (d) that result from any work Employee performs for Corporation; or (e) that are
developed on Corporation time.

     9.2 Ownership of Inventions. With respect to Inventions originated, conceived,
developed, discovered or made in whole or in part solely or jointly by Employee at any time
during Employee’s employment with Corporation, Employee understands and agrees that
Corporation will own all right, title, and interest, including

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patent rights, copyrights, trade secret rights and all other intellectual property
rights of any sort, throughout the world related to all Inventions without further payment
beyond Employee’s agreed-upon salary or wage. To the maximum extent permitted by law, all
Inventions are deemed “works made for hire” under the United States Copyright Act and
Corporation is deemed the sole author of any Inventions. To the extent any Inventions are
determined not to constitute “works made for hire,” Employee hereby assigns and transfers to
Corporation all right, title and interest in the Inventions.

Employee further agrees to (a) promptly and fully disclose all such Inventions to
Corporation; (b) keep accurate, complete, and timely records of all Inventions, which
records shall be Corporation’s property and shall be maintained on Corporation’s premises;
(c) at Corporation’s expense, assist Corporation to perfect, protect, and use its rights to
Inventions, including without limitation, transferring Employee’s entire right, title and
interest in Inventions and enabling Corporation to obtain patent, copyright or trademark
protection for Inventions anywhere in the world; and (c) give affidavits and testimony as to
facts within Employee’s knowledge in connection with any Inventions in any administrative
proceedings, arbitration, litigation or controversy relating thereto. In addition, the
Employee agrees to promptly disclose: (i) any patents, pending patents, inventions, trade
secrets or copyrighted works (“Employee Intellectual Property”) that Employee creates or
acquires prior to Employee’s employment with Corporation that Employee believes should not
be subject to this Agreement; and (ii) any Employee Intellectual Property that Employee
creates or acquires during Employee’s employment with the Corporation that Employee believes
should not be subject to this Agreement. If Employee does not promptly disclose any
Employee Intellectual Property that Employee believes should not be subject to this
Agreement, Employee acknowledges that such non-disclosure will be considered a material
representation under this Agreement that, prior to and during the course of Employee’s
employment with the Corporation, Employee has no claim of ownership or other rights to any
Employee Intellectual Property.

     9.3 Notice Regarding Exception to Inventions Assignment. Employee understands
that the assignment of Inventions set forth herein does not apply to any Invention for which
no equipment, supplies, facility, or trade secret information of Corporation was used and
which was developed entirely on Employee’s own time, and which does not relate directly to
the business of the Corporation or to its actual or demonstrably anticipated research or
development, or which does not result from any work performed by Employee for the
Corporation.

       10. Compliance and Remedies. Employee recognizes that if Employee violates this
Agreement, including but not limited to Paragraphs 6, 7, 8, or 9 of this Agreement, irreparable
damage will result to Corporation that could not adequately be remedied by monetary damages. As a
result, Employee hereby agrees that notwithstanding any other dispute resolution provisions of this
Agreement, in the event of any breach by Employee of this Agreement, including but not limited to
Paragraphs 6, 7, 8, or 9 of this Agreement or in the event of apparent danger of such breach,
Corporation shall be entitled, in addition to any other legal or equitable remedies available to
it, to an injunction to restrain Employee’s violation of any portion of this Agreement, as well as
Corporation’s attorney’s fees and costs incurred in enforcing this Agreement.

9

 

     11. Informal Dispute Resolution. Employee and the Corporation agree to make good
faith efforts to resolve internally and without resort to formal dispute resolution any dispute,
which may arise out of or relate to Employee’s recruitment, employment or the termination of
Employee’s employment with the Corporation, or any dispute regarding any of the provisions of this
Agreement.

     12. Arbitration Clause. In the event that informal efforts to resolve disputes
pursuant to Paragraph 11 are unsuccessful, any dispute between Employee and the Corporation arising
out of or related to Employee’s recruitment, employment or the termination of Employee’s employment
with the Corporation, and any dispute between Employee and the Corporation regarding any of the
provisions of this Agreement (other than an action for injunctive relief to enforce Employee’s
obligations under Paragraphs 6, 7, 8, or 9 of this Agreement), shall be determined not in a court
of law, but instead by arbitration in the United States, in the State of Minnesota and the County
of Hennepin. Such disputes shall be referred in writing to the American Arbitration Association
for selection of an arbitrator. Selection of the arbitrator shall be made in accordance with the
Rules of the American Arbitration Association, and the arbitrator’s decision shall be final and
binding in all respects.

Except as otherwise provided in this section, arbitration proceedings initiated pursuant to this
Agreement shall be conducted in accordance with the Rules of the American Arbitration Association.
Prior to the arbitration hearing, the parties may use the following discovery methods:
interrogatories in a form consistent with Rule 33 of the Federal Rules of Civil Procedure; requests
for production of documents in a form consistent with Rule 34 of the Federal Rules of Civil
Procedure; admissions; depositions of witnesses in accordance with Rule 30 of the Federal Rules of
Civil Procedure. The arbitrator shall have the right to determine the extent of discovery
permitted. The arbitrator shall consider the matter in controversy and may hold hearings regarding
the same. The arbitrator may grant any remedy or relief that he or she deems just and equitable,
including, but not limited to, any remedy or relief that would have been available to the parties
under any applicable statutes or common law. The arbitrator also has the authority to issue an
award or partial award on the grounds that there is no claim stated on which relief can be granted
or that there is no genuine issue as to any material fact and one party is entitled to judgment as
a matter of law consistent with Federal Rules of Civil Procedure 12 or 56. The arbitrator shall
enter an award in writing detailing Employee’s consideration of the relevant facts, the basis and
reason for the decision, and Employee’s adherence to the applicable law. This written decision
shall be entered within thirty days after the matter is finally submitted to the arbitrator, and a
copy thereof shall be delivered to each party by certified mail. Judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction thereof.

The Corporation shall pay the expense of the arbitrator; each party will bear its own attorneys’
fees and expenses. All proceedings under this paragraph are private and confidential.

Notwithstanding the foregoing, the Corporation may bring a court action for injunctive relief to
enforce this Agreement. The parties agree that the Corporation may elect to venue such action in
the federal or state courts of the State of Minnesota, whether or not such venue is then

10

 

convenient to Employee, and that such courts shall have personal jurisdiction over Corporation and
Employee and Employee shall not object to the venue or personal jurisdiction of such courts.

Employee understands that by signing this Agreement, Employee is forever giving up Employee’s right
to litigate in a court of law any controversy arising out of Employee’s employment relationship
with the Corporation, and any controversy regarding any of the provisions of this Agreement, and
that he is agreeing instead to arbitrate any claims he may choose to pursue against the
Corporation. Nothing in this Agreement, however, prohibits either party from going to a court of
law to enforce an award of an arbitrator.

     13. Miscellaneous.

     13.1. Integration. This Agreement embodies the entire agreement and
understanding among the parties relative to subject matter hereof and supersedes and
replaces all prior agreements and understandings relating to such subject matter, including
but not limited to the Non-Compete Agreement and/or the Prior Employment Agreement.

     13.2. Applicable Law. This Agreement and the rights of the parties shall be
governed by and construed and enforced in accordance with the laws of the state of
Minnesota.

     13.3. Payments. All amounts paid under this Agreement shall be subject to
normal withholdings or such other treatment as required by law.

     13.4. Counterparts. This Agreement may be executed in several counterparts and
as so executed shall constitute one agreement binding on the parties hereto.

     13.5. Binding Effect. Except as herein or otherwise provided to the contrary,
this Agreement shall be binding upon and inure to the benefit of the Corporation and its
successors, assigns and personal representatives without any requirement of the consent of
the employee for assignment of its rights or obligations hereunder.

     13.6. Notices. All notices, requests and other communications hereunder shall
be given in writing and deemed to have been duly given or served if personally delivered, or
sent by first class, certified mail, return receipt requested, postage prepaid, to the party
at the address as provided below, or, to such other address as such party may hereafter
designate by written notice to the other party:

     (a) If to the Corporation, to the address of its then principal office.

     (b) If to Employee, to the address last shown in the records of the
Corporation.

     13.7. Modification. This Agreement shall not be modified or amended except by
a written instrument signed by the parties.

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     13.8. Severability. The invalidity or partial invalidity of any portion of
this Agreement shall not invalidate the remainder thereof, and said remainder shall remain
in fully force and effect.

     13.9. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.

     13.10. Survival. Employee acknowledges and agrees that Employee’s
noncompetition, confidentiality, return of property, and invention obligations under
Paragraphs 6, 7, 8, and 9 of this Agreement shall survive the Term or any Renewal Term, the
non-renewal of this Agreement, and the termination of Employee’s employment with the
Corporation, regardless of the reason for termination.

     13.11. Opportunity to Obtain Advice of Counsel. Employee acknowledges that
Employee has been advised by the Corporation to obtain legal advice prior to executing this
Agreement, and that Employee had sufficient opportunity to do so prior to signing this
Agreement.

THIS AGREEMENT was voluntarily and knowingly executed by the parties as of date and year first set
forth above.

	 	 	 	 	 
	 	HEI, INC.

 	 
	 	By:  	/s/ Mack Traynor
 	 
	 	 	Mack Traynor, President/CEO 	 
	 	 	 	 
	 
	 	EMPLOYEE:

 	 
	 	  	/s/ Nina M. Anderson
 	 
	 	 	Nina M. Anderson 	 
	 	 	 	 
	 

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