Document:

ex10-1.htm

    
      

    

    Exhibit 10.1

    
      

       

      ASSET
PURCHASE AGREEMENT

       

      

       

      by and
among

       

      

       

      SONY DADC
US INC.,

       

      ENTERTAINMENT
DISTRIBUTION COMPANY (USA), LLC

       

      and

       

      ENTERTAINMENT
DISTRIBUTION COMPANY, LLC

       

      

       

      DATED
October 31, 2008

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      TABLE OF CONTENTS

       

      
        
          
            	 
      	 
      	
                    Page

                  	 
	
                    ARTICLE I
      DEFINITIONS

                  	 
      	 
	
                    Section 1.1

                  	
                    Certain
      Definitions

                  	
                    1

                  	 
	
                    Section 1.2

                  	
                    Other
      Definitions

                  	
                    9

                  	 
	
                    Section 1.3

                  	
                    Accounting
      Terms

                  	
                    10

                  	 
	
                    ARTICLE II PURCHASE AND
      SALE

                  	 
      	 
	
                    Section 2.1

                  	
                    Agreement to Purchase and
      Sell

                  	
                    10

                  	 
	
                    Section 2.2

                  	
                    Excluded
    Assets

                  	
                    11

                  	 
	
                    Section 2.3

                  	
                    Assumed
      Liabilities

                  	
                    12

                  	 
	
                    Section 2.4

                  	
                    Excluded
      Liabilities

                  	
                    13

                  	 
	
                    Section 2.5

                  	
                    Expenses of Relocating Transferred
      Assets

                  	
                    14

                  	 
	
                    ARTICLE III PURCHASE PRICE;
      ADJUSTMENTS; ALLOCATIONS

                  	 
      	 
	
                    Section 3.1

                  	
                    Purchase
    Price

                  	
                    14

                  	 
	
                    Section 3.2

                  	
                    Payment of Purchase
      Price

                  	
                    14

                  	 
	
                    Section 3.3

                  	
                    Additional Purchase
      Price

                  	
                    15

                  	 
	
                    Section 3.4

                  	
                    Adjustment of Purchase Price for
      Working Capital.

                  	
                    16

                  	 
	
                    Section 3.5

                  	
                    Allocation of Purchase
      Price

                  	
                    17

                  	 
	
                    ARTICLE IV REPRESENTATIONS AND
      WARRANTIES OF SELLERS

                  	 
      	 
	
                    Section 4.1

                  	
                    Organization;
      Ownership

                  	
                    17

                  	 
	
                    Section 4.2

                  	
                    Authority;
      Noncontravention

                  	
                    18

                  	 
	
                    Section 4.3

                  	
                    Financial
      Statements

                  	
                    19

                  	 
	
                    Section 4.4

                  	
                    Absence of Undisclosed
      Liabilities

                  	
                    19

                  	 
	
                    Section 4.5

                  	
                    Absence of Certain
      Changes

                  	
                    19

                  	 
	
                    Section 4.6

                  	
                    Personal Property; Title to
      Assets

                  	
                    20

                  	 
	
                    Section 4.7

                  	
                    Taxes

                  	
                    20

                  	 
	
                    Section 4.8

                  	
                    Inventory

                  	
                    21

                  	 
	
                    Section 4.9

                  	
                    Leased Real
      Property.

                  	
                    21

                  	 
	
                    Section
4.10

                  	
                    Contracts.

                  	
                    22

                  	 
	
                    Section
4.11

                  	
                    Insurance

                  	
                    23

                  	 
	
                    Section
4.12

                  	
                    Consents

                  	
                    24

                  	 
	
                    Section
4.13

                  	
                    Compliance with Laws;
      Licenses

                  	
                    24

                  	 
	
                    Section
4.14

                  	
                    Legal
      Proceedings

                  	
                    24

                  	 
	
                    Section
4.15

                  	
                    Products Liability and
      Warranty

                  	
                    24

                  	 
	
                    Section
4.16

                  	
                    Accounts
      Receivable

                  	
                    24

                  	 
	
                    Section
4.17

                  	
                    Employment Benefits and Labor
      Matters

                  	
                    25

                  	 
	
                    Section
4.18

                  	
                    Environmental
      Matters

                  	
                    25

                  	 
	
                    Section
4.19

                  	
                    Intellectual
      Property

                  	
                    26

                  	 
	
                    Section
4.20

                  	
                    Customers

                  	
                    27

                  	 
	
                    Section
4.21

                  	
                    Transactions with Related
      Parties

                  	
                    27

                  	 
	
                    Section
4.22

                  	
                    Fraudulent
      Conveyance

                  	
                    27

                  	 
	
                    Section
4.23

                  	
                    Brokers and Other
      Advisors

                  	
                    28

                  	 
	
                    Section
4.24

                  	
                    No Other Representations or
      Warranties

                  	
                    28

                  	 

          

        

      

    

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        
          
            	
                    ARTICLE V REPRESENTATIONS AND
      WARRANTIES OF PURCHASER

                  	 
      	 
	
                    Section 5.1

                  	
                    Organization, Standing and
      Power

                  	
                    28

                  	 
	
                    Section 5.2

                  	
                    Authority;
      Noncontravention

                  	
                    28

                  	 
	
                    Section 5.3

                  	
                    Capital
      Resources

                  	
                    29

                  	 
	
                    Section 5.4

                  	
                    Brokers and Other
      Advisors

                  	
                    29

                  	 
	
                    Section 5.5

                  	
                    No Other Representations or
      Warranties

                  	
                    29

                  	 
	
                    ARTICLE VI ADDITIONAL
      COVENANTS

                  	 
      	 
	
                    Section 6.1

                  	
                    Conduct of Business by
      Sellers

                  	
                    29

                  	 
	
                    Section 6.2

                  	
                    Inspection and Access to
      Information

                  	
                    31

                  	 
	
                    Section 6.3

                  	
                    Employee
      Matters.

                  	
                    32

                  	 
	
                    Section 6.4

                  	
                    Payment Due from
      UMG

                  	
                    36

                  	 
	
                    Section 6.5

                  	
                    Public
      Announcements

                  	
                    36

                  	 
	
                    Section 6.6

                  	
                    Insurance
      Policies

                  	
                    36

                  	 
	
                    Section 6.7

                  	
                    Consents; Further
      Assurances

                  	
                    36

                  	 
	
                    Section 6.8

                  	
                    Transfer
    Taxes

                  	
                    37

                  	 
	
                    Section 6.9

                  	
                    Proration

                  	
                    37

                  	 
	
                    Section
6.10

                  	
                    Cooperation Regarding Transfer of
      Relocated Assets

                  	
                    37

                  	 
	
                    Section
6.11

                  	
                    Cooperation Regarding the Lease of
      the Fishers Distribution Center

                  	
                    37

                  	 
	
                    Section
6.12

                  	
                    No Solicitation of Acquisition
      Proposals

                  	
                    37

                  	 
	
                    Section
6.13

                  	
                    Fishers Sub-Lease
      Payments

                  	
                    38

                  	 
	
                    Section
6.14

                  	
                    Sellers’ Collection of Accounts
      Receivable

                  	
                    38

                  	 
	
                    Section
6.15

                  	
                    Transition
      Services

                  	
                    38

                  	 
	
                    ARTICLE VII RESTRICTIVE
      COVENANTS

                  	 
      	 
	
                    Section 7.1

                  	
                    Confidential
      Information.

                  	
                    39

                  	 
	
                    Section 7.2

                  	
                    Agreement Not to
      Compete.

                  	
                    39

                  	 
	
                    Section 7.3

                  	
                    Non-Solicitation

                  	
                    40

                  	 
	
                    Section 7.4

                  	
                    Severability and Reformation of
      Covenants

                  	
                    41

                  	 
	
                    Section 7.5

                  	
                    Extension of
      Restrictions

                  	
                    41

                  	 
	
                    Section 7.6

                  	
                    Equitable Relief and
      Damages

                  	
                    41

                  	 
	
                    Section 7.7

                  	
                    Assignment of
      Restrictions

                  	
                    41

                  	 
	
                    ARTICLE VIII CLOSING
      CONDITIONS

                  	 
      	 
	
                    Section 8.1

                  	
                    General
      Conditions

                  	
                    41

                  	 
	
                    Section 8.2

                  	
                    Conditions to Obligations of the
      Sellers

                  	
                    42

                  	 
	
                    Section 8.3

                  	
                    Conditions to Obligations of the
      Purchaser

                  	
                    42

                  	 
	
                    ARTICLE IX
      CLOSING

                  	 
      	 
	
                    Section 9.1

                  	
                    Closing

                  	
                    43

                  	 
	
                    Section 9.2

                  	
                    Sellers Closing
      Deliveries

                  	
                    43

                  	 
	
                    Section 9.3

                  	
                    Purchaser Closing
      Deliveries

                  	
                    44

                  	 
	
                    ARTICLE X
      TERMINATION

                  	 
      	 
	
                    Section
10.1

                  	
                    Termination

                  	
                    44

                  	 
	
                    Section
10.2

                  	
                    Effect of
      Termination

                  	
                    45

                  	 
	
                    ARTICLE XI
      INDEMNIFICATION

                  	 
      	 
	
                    Section
11.1

                  	
                    Survival of Representations and
      Warranties

                  	
                    45

                  	 

          

        

      

       

      
        
          
          

        

        
          - ii -

          
            

          

        

        
          
          

        

      

       

      
        
          
            
              	
                      Section
11.2

                    	
                      Indemnification by the
      Sellers

                    	
                      46

                    	 
	
                      Section
11.3

                    	
                      Indemnification by the
      Purchaser

                    	
                      47

                    	 
	
                      Section
11.4

                    	
                      Environmental
      Indemnification

                    	
                      47

                    	 
	
                      Section
11.5

                    	
                      Procedures

                    	
                      48

                    	 
	
                      Section
11.6

                    	
                      Limits on
      Indemnification

                    	
                      50

                    	 
	
                      Section
11.7

                    	
                      Set Off

                    	
                      50

                    	 
	
                      Section
11.8

                    	
                      Consequential
      Damages

                    	
                      50

                    	 
	
                      Section
11.9

                    	
                      Security
      Documents

                    	
                      50

                    	 
	
                      Section
    11.10

                    	
                      Exclusivity

                    	
                      51

                    	 
	
                      ARTICLE XII
      MISCELLANEOUS

                    	 
      	 
	
                      Section
12.1

                    	
                      Notices

                    	
                      51

                    	 
	
                      Section
12.2

                    	
                      Schedules and
      Exhibits

                    	
                      52

                    	 
	
                      Section
12.3

                    	
                      Assignment; Successors in
      Interest

                    	
                      52

                    	 
	
                      Section
12.4

                    	
                      Captions

                    	
                      52

                    	 
	
                      Section
12.5

                    	
                      Controlling
    Law

                    	
                      52

                    	 
	
                      Section
12.6

                    	
                      Dispute
      Resolution

                    	
                      52

                    	 
	
                      Section
12.7

                    	
                      Severability

                    	
                      53

                    	 
	
                      Section
12.8

                    	
                      Counterparts

                    	
                      53

                    	 
	
                      Section
12.9

                    	
                      Enforcement of Certain
      Rights

                    	
                      53

                    	 
	
                      Section
    12.10

                    	
                      Waiver;
      Amendment

                    	
                      53

                    	 
	
                      Section
    12.11

                    	
                      Integration

                    	
                      54

                    	 
	
                      Section
    12.12

                    	
                      Compliance with Bulk Sales
      Laws

                    	
                      54

                    	 
	
                      Section
    12.13

                    	
                      Interpretation

                    	
                      54

                    	 
	
                      Section
    12.14

                    	
                      Cooperation Following the
      Closing

                    	
                      54

                    	 
	
                      Section
    12.15

                    	
                      No Third-Party
      Beneficiaries

                    	
                      54

                    	 
	
                      Section
    12.16

                    	
                      Transaction
      Costs

                    	
                      54

                    	 

            

          

           

          
            
              
              

            

            
              - iii
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      ASSET
PURCHASE AGREEMENT

       

      THIS
ASSET PURCHASE AGREEMENT, dated as of October 31, 2008, is made and entered
into by and among SONY DADC US INC., a corporation organized under the Laws of
the State of Delaware (the “Purchaser”) and
ENTERTAINMENT DISTRIBUTION COMPANY, LLC (“EDC”) and
ENTERTAINMENT DISTRIBUTION COMPANY (USA), LLC (“EDC USA”), each a limited
liability company organized under the Laws of the State of Delaware (EDC and EDC
USA, collectively, the “Sellers,” and each, a
“Seller”).

       

      RECITALS

       

      WHEREAS,
the Sellers are engaged in the business of replicating compact discs and digital
versatile discs, packaging and distribution services and related
services;

       

      WHEREAS,
upon and subject to the terms and conditions set forth herein, the Sellers
propose to sell to the Purchaser, and the Purchaser proposes to purchase from
the Sellers, certain of the assets used or held for use by the Sellers in the
conduct of the Business, and the Purchaser proposes to assume certain specified
liabilities and obligations of the Sellers set forth in this Agreement;
and

       

      WHEREAS,
as a condition to the Parties’ execution of this Agreement, EDC USA, the
Purchaser and UMG have entered into Amendment No. 3 to UMG CD Agreement;
Amendment No. 1 to  the U.S. DVD Manufacturing And Related Services
Agreement dated as of May 31, 2005 between UMG and EDC USA; and Amendment No. 2
to UMG Distribution Agreement, each of which is dated as of the date hereof, but
effective as of the Closing Date, authorizing the assignment of
such  agreements to Purchaser and modifying certain of the terms
thereof (collectively, the “UMG Assignment
Agreements”).

       

      NOW,
THEREFORE, in consideration of the foregoing and the respective representations,
warranties, covenants, agreements and conditions hereinafter set forth, and
intending to be legally bound hereby, each Party hereby agrees as
follows:

       

      ARTICLE I

      DEFINITIONS

       

      Section 1.1    Certain
Definitions

       

      .  For
purposes of this Agreement, the following terms when capitalized shall have the
meanings set forth below:

       

      “Affiliate” means,
with respect to any specified Person, any other Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such specified Person.  The term “control”
means (a) the possession, directly or indirectly, of the power to vote 50% or
more of the securities or other equity interests of a Person having ordinary
voting power, (b) the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, through the
ownership of voting securities, by contract or otherwise, or (c) being a
director, officer, executor, trustee or fiduciary (or their equivalents) of a
Person or a Person that controls such Person.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      “Agreement” means this
Asset Purchase Agreement, as amended from time to time.

       

      “Ancillary Agreements”
means the Bill of Sale, Assignment and Assumption Agreement, Assignment of
Fishers Sub-Lease Agreement, UMG Assignment Agreements, Union Agreement, and
each agreement, document, instrument or certificate (including, without
limitation the certificates referred to in Sections 9.2(a) and 9.3(b))
contemplated by this Agreement to be executed by the Purchaser or either of the
Sellers in connection with the consummation of the transactions contemplated by
this Agreement, in each case only as applicable to the relevant party or parties
to such Ancillary Agreement, as indicated by the context in which such term is
used.

       

      “Bankruptcy and Equity
Exception” means except that such enforceability (i) may be limited by
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar Laws affecting or relating to the enforcement of
creditors’ rights generally and (ii) is subject to general principles of equity,
whether considered in a proceeding at Law or in equity.

       

      “Business” means the
following services with respect to Products in North America: (i) pre-production
services (expressly excluding content mastering (other than glass mastering),
authoring and similar content preparation); (ii) selection of raw materials
suppliers; (iii) purchasing raw materials (including components) from various
suppliers such as pressing plants, duplicators and printers; (iv) replication
and manufacturing; (v) assembly and packaging; (vi) staging for shipment
components to various points; (vii) staging for shipment finished units from
point of manufacture to distributors and other shipment locations; (viii)
inventory control with respect to raw material component parts; (ix) physical
distribution; (x) processing of returns for scrap or return to inventory; (xi)
inventory control (but excluding the ordering and determination of such
inventory levels) and warehousing with respect to finished units; and (xii)
shipment of finished units.

       

      “Business Day” means
any day except Saturday, Sunday or any day on which banks are generally not open
for business in the City of New York, New York.

       

      “CBA” means the
Agreement effective April 3, 2007 by and among EDC USA and the
Union.

       

      “CERCLA” means the
United States Comprehensive Environmental Response, Compensation and Liability
Act of 1980.

       

      “COBRA Continuation
Coverage” means the continuation coverage requirements under Code Section
4980B and Part 6 of Title I of ERISA.

       

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

       

      “Contract” means any
contract, plan, undertaking, arrangement, concession, understanding, agreement,
agreement in principle, franchise, permit, instrument, license, lease, sublease,
note, bond, indenture, deed of trust, mortgage, loan agreement or other binding
commitment, whether written or oral, to which either Seller is a party or by
which either Seller is bound.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

         

      

      “Consequential
Damages” means, for purposes of Article XI of this Agreement, those
damages that (i) are remote, speculative or punitive or (ii) arise solely from
the special circumstances of the Indemnified Party that have not been
communicated to the Indemnifying Party prior to date of this Agreement, and
Consequential Damages do not, in any case, include those damages that are
direct, general or incidental (including, without limitation, lost profits and
diminution in value).

       

      “Effective Time” 12:01
a.m. EST on the Closing Date.

       

      “Employment Agreement”
means any contract respecting the terms and conditions of employment or payment
of compensation or benefits with respect to any employee.

       

      “Employee Benefit
Plan” means, with respect to any Person, each plan, fund, program,
agreement, arrangement or scheme, including each plan, fund, program, agreement,
arrangement or scheme maintained or required to be maintained under applicable
Laws, that is sponsored or maintained or required to be sponsored or maintained
by such Person or to which such Person makes or has an obligation to make,
contributions providing benefits to current and former employees or their
dependents, including (a) each deferred compensation, bonus, incentive
compensation, pension, retirement, stock purchase, stock option, profit sharing
or deferred profit sharing, stock appreciation, phantom stock plan and other
equity compensation plan, “welfare” plan (within the meaning of Section 3(1) of
ERISA, determined without regard to whether such plan is subject to ERISA), (b)
each “pension” plan (within the meaning of Section 3(2) of ERISA, determined
without regard to whether such plan is either subject to ERISA or is tax
qualified under the Code), (c) each severance plan or agreement, and each other
plan providing health, vacation, supplemental unemployment benefit,
hospitalization insurance, medical, dental, disability, life insurance, death or
survivor benefits or fringe benefits and (d) each other employee benefit plan,
fund, program, agreement or arrangement.

       

      “Environmental Laws”
means any federal, state or local Law, administrative or court order relating to
the environment, human health or safety from pollution, product content
restrictions, electronic waste disposal, or other environmental degradation or
Hazardous Materials, including, without limitation, CERCLA, the Resource
Conservation and Recovery Act, the Hazardous Materials Transportation Act, the
Clean Water Act, the Toxic Substances Control Act, the Clean Air Act, the Safe
Drinking Water Act, the Federal Insecticide, Fungicide and Rodenticide Act and
the Occupational Safety and Health Act, and any similar international, state and
local Laws or by-laws, the rules, regulations, ordinances, administrative or
courts orders and interpretations thereunder, all as the same shall be in effect
from time to time.

       

      “ERISA” means the
United States Employee Retirement Income Security Act of 1974.

       

      “ERISA Affiliate”
means any Person that together with the Sellers would be deemed a “single
employer” within the meaning of Section 414 of the Code.

       

      “ERISA Affiliate Plan”
means each Employee Benefit Plan sponsored or maintained or required to be
sponsored or maintained by any ERISA Affiliate, or to which such ERISA Affiliate
makes, or has an obligation to make, contributions.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      “Final Working Capital
Schedule” means the Working Capital Schedule as finally determined
pursuant to Section 3.4 hereof.

       

      “Financial Statements”
means collectively the Fishers Financial Statements and the Pro Forma Balance
Sheet.

       

      “Fishers Business
Employees” means all individuals who are employed by the Sellers
immediately prior to the Closing Date working at the Fishers Distribution Center
(including (a) those on military leave and family and medical leave, (b) those
on approved leaves of absence, but only to the extent they have reemployment
rights guaranteed under federal or state Law, under any applicable collective
bargaining agreement or under any leave of absence policy, and (c) those on
short-term disability under a short-term disability program).

       

      “Fishers Distribution
Center” means the real property located at 9999 East 121st Street,
Fishers, Indiana 46037-9727 leased by EDC USA as tenant pursuant to the Fishers
Sub-Lease, together with all buildings and other structures, facilities or
improvements currently located thereon, all fixtures, systems, equipment and
items of personal property of the Sellers attached or appurtenant thereto and
all easements, licenses, rights and appurtenances relating to the
foregoing.

       

      “Fishers Financial
Statements” means the unaudited balance sheets and income statements of
the Business operations at the Fishers Distribution Center as of and for the
twelve months ended December 31, 2007 and the nine months ended September 30,
2008 included in Schedule 4.3 of
the Disclosure Schedule.

       

      “Former Business
Employee” means those individuals listed on Schedule 1.1(b)  who
are not Transferred Employees or Retained Employees but who were, at any time
before the Effective Time, employed by the Sellers at or solely in connection
with the Business, including employees of the Business who will cease employment
upon or after the Effective Time as a result of the closure of the Business
facilities at Kings Mountain, North Carolina, Reno, Nevada, Wilkes-Barre,
Pennsylvania and employees located at the Business facility in New York, New
York.

       

      “GAAP” means United
States generally accepted accounting principles in effect from time to
time.

       

      “Governmental Entity”
means any federal, state, local, municipal or foreign (i) government, (ii)
governmental authority or (iii) governmental body exercising or entitled to
exercise any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority, including any court, tribunal, arbitral body,
commission, administrative agency or quasi-governmental or private body
exercising any regulatory or taxing authority thereunder.

       

      “Group Health Plan”
means, collectively, all of the Code Section 105 group health plans offered by
(as specified in the text) the Sellers’ Affiliates or the
Purchaser.

       

      “HIPAA” means the
Health Insurance Portability and Accountability Act of 1996.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

         

      

      “Hazardous Materials”
means any and all pollutants, contaminants, hazardous substances, hazardous
chemicals, toxic substances, hazardous wastes, infectious wastes, radioactive
materials or wastes, substances, materials, products, petroleum (including crude
oil or any fraction thereof), petroleum products or petroleum distillates,
fractions or wastes, pesticides, asbestos-containing materials, urea
formaldehyde foam, heavy metals and any other wastes, materials, chemicals or
substances regulated or restricted pursuant to any applicable Environmental
Law.

       

      “Kings Mountain
Facility” means the facility of the Business owned by EDC USA located at
700 Battleground Road, Grover, North Carolina 28073-0400 (together with all
fixtures and improvements thereon).

       

      “Knowledge” with
respect to the Sellers, means the actual knowledge of the Persons listed on
Schedule 1.1(c)
after reasonable inquiry by each such Person.

       

      “Law” means all laws,
statutes, common law, treaties, rules, codes, regulations, restrictions,
ordinances, orders, decrees, approvals, directives, judgments, rulings,
injunctions, writs, awards and decrees of, or issued or entered by, any
Governmental Entity.

       

      “Liabilities” means
any debt, liability, commitment or obligation, of any kind, character or nature
whatsoever, whether known or unknown, asserted or unasserted, choate or
inchoate, secured or unsecured, fixed, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated and whether due or to become
due.

       

      “Licenses” means all
licenses, permits (including environmental, construction and operation permits),
franchises, certificates, approvals, registrations, authorizations, variances
and similar rights issued by any Governmental Entity.

       

      “Liens” means all
mortgages, liens, statutory liens, pledges, security interests, charges, claims,
restrictions, rights of first refusal and encumbrances of any kind or nature
whatsoever.

       

      “Master Landlord”
means Fishers Indiana Warehouse Limited Partnership.

       

      “Master Lease” means
the Lease dated as of July 15, 1992, re-executed on August 30, 1993, and amended
by that certain First Amendment to Lease Agreement dated as of March 31, 2000 by
and between Master Landlord, as successor in interest to Project Indiana Inc.,
successor in interest to Industrial Developments International, Inc., and
Sublandlord, as successor in interest to Polygram Group Distribution,
Inc.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

         

      

      “Material Adverse
Effect” means any event, condition, change, fact, circumstance or effect,
which individually or in the aggregate, is, or would reasonably be expected to
be, materially adverse to the operation of the Business at the Fishers
Distribution Center or the customer relationship with UMG, including without
limitation, any material damage to the Fishers Distribution Center; any material
damage to or inoperability of the equipment comprising the Transferred Assets;
the loss of that number of employees at the Fishers Distribution Center which
exceeds by more than 20% the historical attrition rate during such time period;
the adoption of any Law that materially limits, or is reasonably likely to
materially limit, the operation of the Business at the Fishers Distribution
Center; the violation of any Law, or the taking of any action or the threat of
any action by a Governmental Entity, that would, or is reasonably likely to,
prevent or limit in any material respect the operation of the Business at the
Fishers Distribution Center; a material default under the Fishers Sub-Lease
which is not, or has not been, cured within any applicable cure period
thereunder and which gives rise to a right of termination of the Fishers
Sub-Lease; the delivery of a Key Failure Notice (as defined in Section 9.1 of
the UMG Supply Agreements) under any UMG Supply
Agreement which is not, or has not been,  cured within any applicable
cure period thereunder, provided that such cure period shall not extend beyond
the fifteenth day prior to the Termination Date; written notice by UMG to
terminate any of the UMG Supply Agreements; an amendment of the Fishers
Sub-Lease or any UMG Supply Agreement without the Purchaser’s consent; acts of
war or terrorism that materially and adversely impact the operation of the
Business at the Fishers Distribution Center; or a violation of
Sections 6.1(m), 6.1(n), 6.1(o), 6.1(p) or 6.1(q).

       

      “Net Working Capital”
means the accounts receivable (net of allowance for doubtful accounts),
inventory, and prepaid expenses included in the Transferred Assets less the
accounts payable, accrued expenses and ordinary course liabilities set forth in
Section 2.3(d) hereof included in the Assumed Liabilities, as reflected on the
Working Capital Schedule; provided, however, that
intercompany accounts receivable and intercompany accounts payable shall not be
taken into account in determining Net Working Capital.

       

      “Party” or “Parties” means,
individually, the Purchaser or the Sellers and, collectively, the Purchaser and
the Sellers.

       

      “Permitted Liens”
means (a) statutory Liens for current Taxes not yet due and payable or being
contested in good faith by appropriate proceedings (with no risk of forfeiture),
(b) pledges, deposits or other Liens securing the performance of surety or
appeal bonds, performance bonds or statutory obligations (including workers’
compensation, unemployment insurance or other social security legislation), and
(c) restrictions, easements, rights-of-way and other encumbrances of record
affecting title to the Fishers Distribution Center which do not interfere with
the present use or operation of the Fishers Distribution Center.

       

      “Person” means any
individual, corporation, partnership, joint venture, limited liability company,
trust, unincorporated organization, Governmental Entity or any other entity of
any kind or nature whatsoever.

       

      “Products” means any
and all types of optical discs now known or hereafter devised, including compact
discs in any form and Digital Versatile Discs in any forms and any other
high-density optical discs, including, in each case, any successor format or
replacement product.  For the purposes of this definition, a compact
disc includes audio CD, CD-ROM, Video CD, CD-I, CD-R, CD-RW, Photo CD, Enhanced
CD and CD+G as each such term is commonly used and understood. For the purposes
of this definition, a Digital Versatile Disc includes DVD-Audio, DVD-Video,
DVD-ROM, DVD-R, DV-RW and DVD-RAM, as each such term is commonly used and
understood.

       

      “Pro Forma Balance
Sheet” means the combined balance sheet of EDC and EDC USA as of
September 30, 2008, adjusted to eliminate EDC’s investment in its foreign
subsidiaries and to reflect the assumption that the Closing had occurred as of
such date and after giving effect to the required paydown of debt under the
Senior Credit Facility and other contemplated payments immediately following the
Closing, included in Schedule 4.3 of the
Disclosure Schedule.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

         

      

      “Reference
Calculations” means the methodology used to prepare the sample
calculation of “Net Working Capital” as set forth on Schedule 1.1(d).

       

      “Release” means any
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing into the environment, including
continuing migration, of Hazardous Materials into or through soil, surface water
or groundwater.

       

      “Retained Employees”
means those individuals who are Fishers Business Employees listed on Schedule 1.1(e)
who will remain employed by the Sellers after the Effective Time.

       

      “Sellers Affiliates”
means Entertainment Distribution Holding GMBH, Entertainment Distribution
Company GMBH, Entertainment Distribution Company Netherlands Holdings Company
B.V., Glenayre Electronics (UK) Ltd., EDC UK Holdings Limited, EDC Blackburn
Limited, EDCI Holdings, Inc. and GEI EDC Holding Company.

       

      “Sellers Employee Benefit
Plan” means (i) each Employee Benefit Plan with respect to the Sellers
and/or their Affiliates, and/or (ii) each ERISA Affiliate Plan.

       

      “Sellers European
Affiliates” means Entertainment Distribution Holding GMBH, Entertainment
Distribution Company GMBH, Glenayre Electronics (UK) Ltd., EDC UK Holdings
Limited, EDC Blackburn Limited, and Entertainment Distribution Company
Netherlands Holdings Company B.V.

       

      “Senior Credit
Facility” means that certain Credit Agreement dated as of May 31, 2005
among the Sellers, as obligors, Wachovia Bank, National Association, a national
banking association, in its capacity as Administrative Agent, and the other
lenders referred to therein, as such Credit Agreement is amended, restated,
refinanced or replaced, from time to time.

       

      “Software” means any
computer software program, together with any error corrections, updates,
modifications, or enhancements thereto, in both machine-readable form and
human-readable form, including all comments and any procedural
code.

       

      “Sublandlord” means
Universal Music & Video Distribution, Corp.

       

      “Target Working Capital
Range” means Net Working Capital between $(375,000) and
$0.0.

       

      “Tax” or “Taxes” means, with
respect to any Person, (i) all taxes (including any tax on or based upon net
income, or gross income, or income as specially defined, or earnings, or
profits, or selected items of income, earnings or profits) and all gross
receipts, sales, use, ad valorem, transfer, franchise, escheat, license,
withholding, payroll, employment, excise, severance, occupation, premium,
property or windfall profits taxes, real property tax, alternative or add-on
minimum taxes, customs duties or other taxes, fees (including accounting,
financial advisor and legal fees directly associated therewith), assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any Governmental Entity and
(ii) any liability for the payment of any amount of the type described in the
immediately preceding clause (i) as a result of (A) being a “transferee” (within
the meaning of Section 6901 of the Code or any other applicable Law) of another
Person or a member of an affiliated or combined group, (B) being a member of an
affiliated, consolidated, unitary or combined group or (C) a contractual
obligation or otherwise.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

         

      

      “Tax Return” means any
report, return, declaration, statement or other information, in whatever form or
medium, required to be supplied to a Governmental Entity in connection with
Taxes, including estimated returns and reports of every kind with respect to
Taxes.

       

      “UMG” means UMG
Recordings, Inc.

       

      “UMG CD Agreement”
means the U.S. CD Manufacturing and Related Services Agreement dated as of May
31, 2005 between UMG and EDC USA.

       

      “UMG Distribution
Agreement” means the U.S. Distribution and Related Services Agreement
dated as of May 31, 2005 between UMG and EDC USA.

       

      “UMG Supply
Agreements” means the U.S. HDFD Manufacturing and Related Services
Agreement dated as of May 31, 2005 between UMG and EDC USA, the UMG CD
Agreement, and the UMG Distribution Agreement, in each case as amended and
modified by the UMG Assignment Agreements.

       

      “Union” means,
collectively, International Union United Automobile, Aerospace &
Agricultural Implement Workers of America, UAW and Local Union No.
761.

       

      “WARN Act” means the
United States Worker Adjustment Retraining and Notification Act of 1988, and
similar state and local Laws.

       

      “Welfare Benefits”
means the types of benefits described in the definition of “Welfare Plan”
(whether or not covered by ERISA).

       

      “Welfare Plan” means
any employee welfare benefit plan within the meaning of Section 3(1) of
ERISA, any short-term disability program classified as a “payroll practice,” any
group health plan within the meaning of Code Section 105, any cafeteria plan
within the meaning of Code Section 125, any dependent care assistance
program within the meaning of Code Section 129, any adoption assistance
plan within the meaning of Code Section 137, and any tuition assistance
plan within the meaning of Code Section 127.

       

      “Working Capital
Deficit” means the amount by which the Net Working Capital is below the
lowest dollar amount of the Target Working Capital Range.

       

      “Working Capital
Schedule” means a statement of the Transferred Assets and Assumed
Liabilities included in the calculation of Net Working Capital computed as of
the close of business on the day prior to the Closing Date.

       

      “Working Capital
Surplus” means the amount by which the Net Working Capital exceeds the
highest dollar amount of the Target Working Capital Range.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

         

      

      Section 1.2    Other
Definitions.  Each
of the following terms is defined in the Section set forth opposite such
term:

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        	
                                                Term

                                              	
                                                Section

                                              
	
                                                2009
      Volumes

                                              	
                                                3.3(a)

                                              
	
                                                85%
      Target Volumes

                                              	
                                                3.3(a)

                                              
	
                                                Accounting
      Referee

                                              	
                                                3.4(c)

                                              
	
                                                Acquisition
      Proposal

                                              	
                                                6.12(a)

                                              
	
                                                Additional
      Purchase Price

                                              	
                                                3.3(a)

                                              
	
                                                Assumed
      Contracts

                                              	
                                                2.1(c)

                                              
	
                                                Assumed
      Liabilities

                                              	
                                                2.3

                                              
	
                                                Assignment
      and Assumption Agreement

                                              	
                                                9.2(c)

                                              
	
                                                Assignment
      of Fishers Sub-Lease Agreement

                                              	
                                                9.2(d)

                                              
	
                                                Bill
      of Sale

                                              	
                                                9.2(b)

                                              
	
                                                Claim
      Notice

                                              	
                                                11.5(a)

                                              
	
                                                Closing

                                              	
                                                9.1

                                              
	
                                                Closing
      Date

                                              	
                                                9.1

                                              
	
                                                Confidential
      Information

                                              	
                                                7.1(b)

                                              
	
                                                Consent

                                              	
                                                4.12

                                              
	
                                                Direct
      Claims Dispute Period

                                              	
                                                11.5(c)

                                              
	
                                                Disclosure
      Schedule

                                              	
                                                IV

                                              
	
                                                EDC

                                              	
                                                Preamble

                                              
	
                                                EDC
      USA

                                              	
                                                Preamble

                                              
	
                                                Excluded
      Assets

                                              	
                                                2.2

                                              
	
                                                Excluded
      Liabilities

                                              	
                                                2.4

                                              
	
                                                Fishers
      Sub-Lease

                                              	
                                                2.1(b)

                                              
	
                                                Fundamental
      Representations

                                              	
                                                11.1

                                              
	
                                                Indemnified
      Party

                                              	
                                                11.5(a)

                                              
	
                                                Indemnifying
      Party

                                              	
                                                11.5(a)

                                              
	
                                                International
      Customers

                                              	
                                                7.2(a)

                                              
	
                                                Inventory

                                              	
                                                2.1(i)

                                              
	
                                                IP
      Rights

                                              	
                                                4.19(a)

                                              
	
                                                Liability
      Claim

                                              	
                                                11.5(a)

                                              
	
                                                Litigation
      Conditions

                                              	
                                                11.5(b)

                                              
	
                                                Losses

                                              	
                                                11.2

                                              
	
                                                Material
      Contract

                                              	
                                                4.10(a)

                                              
	
                                                Personal
      Property

                                              	
                                                2.1(d)

                                              
	
                                                Purchase
      Price

                                              	
                                                3.1

                                              
	
                                                Purchaser

                                              	
                                                Preamble

                                              
	
                                                Purchaser
      Indemnified Parties

                                              	
                                                11.2

                                              
	
                                                Relocated
      Assets

                                              	
                                                2.5

                                              
	
                                                Remediation

                                              	
                                                11.4

                                              
	
                                                Representatives

                                              	
                                                6.2(a)

                                              
	
                                                Response
      Notice

                                              	
                                                11.5(c)

                                              
	
                                                Restricted
      Customer

                                              	
                                                7.3(a)

                                              
	
                                                Security
      Documents

                                              	
                                                11.9

                                              

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

             

            
              
                
                

              

              
                9

                
                  

                

              

              
                
                

              

            

             

            
              	
                      Sellers

                    	
                      Preamble

                    
	
                      Sellers
      Indemnified Parties

                    	
                      11.3

                    
	
                      Sellers
      IP Rights

                    	
                      4.19(b)

                    
	
                      Shortfall
      Customer

                    	
                      3.3(a)

                    
	
                      Sub-Lease
      Adjustment

                    	
                      6.13

                    
	
                      Termination
      Date

                    	
                      10.1(b)

                    
	
                      Third
      Party Claim

                    	
                      11.5(b)

                    
	
                      Third-Party
      IP Rights

                    	
                      4.19(b)

                    
	
                      Transferred
      Assets

                    	
                      2.1

                    
	
                      Transferred
      Employees

                    	
                      6.3(a)

                    
	
                      UMG
      Assignment Agreements

                    	
                      Preamble

                    
	
                      Union
      Agreement

                    	
                      6.3(d)

                    
	
                      Working
      Capital Dispute Period

                    	
                      3.4(b)

                    

            

          

        

      

       

      Section 1.3    Accounting
Terms.  All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.

       

      ARTICLE II

      PURCHASE
AND SALE

       

      Section 2.1    Agreement to Purchase and
Sell.  Subject
to the terms and conditions hereof, at the Closing, the Sellers shall sell,
assign, transfer and deliver to the Purchaser, and the Purchaser shall purchase
and acquire from the Sellers, all right, title and interest in and to all of the
following assets, properties and rights of the Business (such assets, properties
and rights, being referred to as the “Transferred Assets”),
free and clear of all Liens, other than Permitted Liens:

       

      (a)           all
rights of the Sellers under the UMG Supply Agreements;

       

      (b)           all
rights of the Sellers under the sublease related to the Fishers Distribution
Center between EDC USA and Sublandlord dated March 31, 2005, as amended
(the “Fishers
Sub-Lease”);

       

      (c)           all
rights of the Sellers under all Contracts listed on Schedule 2.1(c)
(each, an “Assumed
Contract,” and collectively, the “Assumed
Contracts”);

       

      (d)           all
assets, including all equipment, furniture, fixtures, leasehold improvements and
other personal property, located at, used in connection with or related to the
operation of the Business at the Fishers Distribution Center (the “Personal Property”),
including, but not limited to those assets which are listed on Schedule 2.1(d);

       

      (e)           a
non-exclusive, non-transferable (except as permitted by Section 12.3),
royalty-free, perpetual right and license of the Purchaser and its Affiliates to
use, copy, store, install and distribute internally the IP Rights used in
connection with the operation of the Fishers Distribution Center (but excluding
any IP Rights listed as an Excluded Asset on Schedule 2.2(e)),
which right and license includes the right to permit consultants and service
providers to access, use, store, install and operate the IP Rights so licensed
on behalf of the Purchaser and its Affiliates as reasonably necessary to support
the business operations of the Purchaser and its Affiliates, including for
production, back-up, testing, development, contingency and archival
purposes;

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      (f)           all
Software used in connection with the operation of the Fishers Distribution
Center (but excluding Software listed as an Excluded Asset on Schedule 2.2(e));

       

      (g)           all
accounts receivable, pre-paid expenses and deposits related to the operation of
the Business at the Fishers Distribution Center, other than any such account
receivable from UMG pursuant to any of the UMG Supply Agreements that is as of
the Closing Date past due by not more than seven days;

       

      (h)           the
equipment located at the Kings Mountain Facility listed on Schedule 2.1(h);

       

      (i)           all
non-customer-owned inventory, including finished goods, raw materials, work in
progress, supplies, packaging material and other inventory property located at
the Fishers Distribution Center (the “Inventory”);
and

       

      (j)           copies
of the following items of each Seller related to the Business conducted at the
Fishers Distribution Center:  sales records and materials; accounting
information to include invoice level detail of vendor payments for the previous
twelve (12) months and account reconciliations for any transferred account
included on the Working Capital Schedule with descriptions of any salient
issue(s) guiding Sellers’ management estimates; pricing information, customer
lists, vendor lists, customer and vendor files, correspondence with customers
and suppliers, technical materials, product specifications, service manuals,
warranties, property maintenance schedules, service contracts and other material
documents relating to the Fishers Distribution Center; correspondence with any
lessor or sublessor under the Fishers Sub-Lease; and personnel records of
Transferred Employees; provided that each Seller shall make commercially
reasonable efforts to provide support for and respond to inquiries with respect
to accounting related issues related to the Business conducted at the Fishers
Distribution Center.

       

      Section 2.2    Excluded
Assets.  Notwithstanding
anything to the contrary set forth herein, Sellers shall not sell, and Purchaser
shall not purchase or acquire, and the Transferred Assets shall not include, the
following assets, properties and rights of the Business (collectively, the
“Excluded
Assets”):

       

      (a)           all
of the Sellers’ cash and cash equivalents;

       

      (b)           the
Kings Mountain Facility;

       

      (c)           all
assets located at the Business facilities at Kings Mountain, North Carolina,
Wilkes-Barre, Pennsylvania and Reno, Nevada, other than those assets listed on
Schedule 2.1(h)
or transferred to the Purchaser pursuant to Section 2.1(j);

       

      (d)           rights
to refunds of Taxes paid by the Sellers, whether paid directly by the Sellers or
indirectly by a third party on the Sellers’ behalf, regardless of whether such
rights have arisen or hereafter arise;

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

         

      

      (e)           the
IP Rights and Software of the Business listed on Schedule 2.2(e);

       

      (f)           all
accounts receivable related to the operation of the Business at the Kings
Mountain Facility;

       

      (g)           assets
of the Fishers Distribution Center listed on Schedule 2.2(g);

       

      (h)           all
patents, trademarks, copyrights, tradenames, service marks, service names,
Internet domain names and similar user names of the Sellers;

       

      (i)           (x)
the Sellers’ limited liability company books and records of internal
proceedings, tax records, work papers and SOX narratives and workpapers, and (y)
the original records of Sellers, copies of which will be delivered to the
Purchaser pursuant to Section 2.1(j);

       

      (j)           all
rights of the Sellers under this Agreement and any Ancillary
Agreement;

       

      (k)           all
rights, claims and causes of action relating to any Excluded Asset or any
Excluded Liability; and

       

      (l)           any
contracts of insurance in respect of the Business, any reimbursement for, or
other benefit associated with, prepaid insurance, and any rights associated with
any prepaid expense for which Purchaser will not receive the benefit after the
Closing Date and which is not included in the Working Capital Schedule,
including, without limitation, any insurance proceeds with respect to events
occurring prior to the Closing Date.

       

      Section 2.3    Assumed
Liabilities.  In
connection with the purchase and sale of the Transferred Assets, and
simultaneously with the sale, transfer, conveyance and assignment to Purchaser
of the Transferred Assets at the Closing, Purchaser shall assume and pay,
discharge and perform, as and when due only the following Liabilities
(collectively, the “Assumed
Liabilities”):

       

      (a)           the
obligations of the Purchaser under the UMG Supply Agreements arising on or after
the Closing Date;

       

      (b)           the
obligations of EDC USA under the Fishers Sub-Lease arising on or after the
Closing Date;

       

      (c)           the
obligations of the applicable Seller under each Assumed Contract arising on or
after the Closing Date;

       

      (d)           the
following ordinary course liabilities as of the Closing Date of either Seller
related to the operation of the Business at the Fishers Distribution Center so
long as the amount of each such liability is set forth on the Final Working
Capital Schedule: (i) accounts payable not past due owed to the vendors listed
on Schedule
2.3(d), (ii) accrued liabilities for amounts that are not yet due or
payable under the Assumed Contracts or the Fishers Sub-Lease, (iii) accrued
salaries and wages with respect to Transferred Employees that are not yet due
and payable (including salaries, hourly wages, overtime, vacation pay and
related salary and wage liabilities), (iv) accrued employee taxes and benefits
with respect to Transferred Employees not yet due and payable related to the
accrued salaries and wages referred to in subsection (iii) (including employer
matching 401(k) contributions, profit sharing contributions, withholdings,
employer portion of payroll taxes including FICA, FUTA, SUTA and related taxes
and withholdings solely with respect thereto), (v) accrued
paid-time-off  with respect to Transferred Employees (including
non-union vacation carryovers and union time-off) and (vi) accrued other
(including building care, consulting fees, equipment leases, maintenance
contracts, outside services, utilities, refuse removal and related liabilities);
provided, however, that if any Liability referred to in this Section 2.3(d) is
not set forth on the Final Working Capital Schedule, then the Purchaser shall
have no responsibility for any such Liability; and

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

         

      

      (e)           all
Liabilities incurred, arising out of or relating to the operation by the
Purchaser of the Fishers Distribution Center or the ownership of the Transferred
Assets, from and after the Closing Date.

       

      Section 2.4    Excluded
Liabilities.  EXCEPT
FOR THE ASSUMED LIABILITIES,
PURCHASER SHALL NOT AND DOES NOT ASSUME ANY LIABILITIES OF SELLERS (OR ANY
PREDECESSOR OF SELLERS OR ANY PRIOR OWNER OF ALL OR ANY PART OF THE BUSINESS OR
TRANSFERRED ASSETS), THEIR AFFILIATES OR RELATING TO THE BUSINESS, WHETHER OR
NOT ARISING OUT OF OR RELATING TO THE TRANSFERRED ASSETS OR THE BUSINESS OR ANY
OTHER BUSINESS OF SELLERS OR THEIR AFFILIATES.  ALL SUCH LIABILITIES
SHALL AFTER THE CLOSING REMAIN THE EXCLUSIVE RESPONSIBILITY OF SELLERS OR THEIR
AFFILIATES (AS APPLICABLE) (“EXCLUDED
LIABILITIES”).  Such Excluded Liabilities shall include,
without limitation:

       

      (a)           Any
warranty claim, product liability or similar claim (including, without
limitation, for injury to person or property) regardless of when made or
asserted, which arises out of or is based upon any express or implied
representation, warranty, agreement or guarantee made by the Sellers, or alleged
by a third party to have been made by the Sellers, or which is imposed or
asserted by a third party to be imposed by operation of Law or contractually, in
connection with any service performed or Product manufactured or sold by either
Seller prior to the Closing Date, including without limitation any claim seeking
recovery for consequential damages, lost revenue or income;

       

      (b)           any
Liability with respect to the Excluded Assets or other assets of either Seller
which are not Transferred Assets;

       

      (c)           all
Liabilities (including under any Environmental Law) incurred, arising out of or
relating to the operation of the Fishers Distribution Center or the ownership of
the Transferred Assets, prior to the Closing Date;

       

      (d)           all
costs (including all WARN Act Liabilities) related to the closure of the
Sellers’ facilities located at Kings Mountain, North Carolina, Reno, Nevada and
Wilkes-Barre, Pennsylvania; or

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

         

      

      (e)           any
Liability of the Sellers, other than in respect of the operation of the Fishers
Distribution Center or the ownership of the Transferred Assets, whether before,
on or after the Closing Date, including, without limitation, any Liability
arising out of or relating to the Sellers’ facilities located at Kings Mountain,
North Carolina, Reno, Nevada and Wilkes-Barre, Pennsylvania.

       

      Section 2.5    Expenses of Relocating
Transferred Assets.  The
Purchaser shall reimburse the Sellers for all costs and expenses (including
without limitation, inventorying, labeling for shipment, palletizing, picking,
packing, corrugating, decommissioning and handling, each of which shall be
conducted in a commercially reasonable manner or shall be approved by the
Purchaser) of preparing all customer owned inventory, Inventory and other
Transferred Assets that are not located at the Fishers Distribution Center on
the Closing Date (“Relocated Assets”)
for shipment from the applicable Seller’s loading dock at the applicable
Business facility; provided that the amount of such costs and expenses shall be
mutually agreed by Sellers and Purchaser prior to the incurrence
thereof.  The Parties shall cooperate in good faith to persuade
Sellers’ customers with customer owned inventory not located at the Fishers
Distribution Center to agree to scrap, rather than ship to the Purchaser, an
appropriate portion of each such customer’s customer owned
inventory.  The Purchaser shall promptly reimburse the Sellers for
such costs and expenses upon its receipt of appropriate evidence
thereof.  Purchaser shall be solely responsible for all costs and
expenses (including the cost of shipping from Seller’s loading dock and
post-shipping relabeling) of shipping the Relocated Assets from the applicable
Seller’s loading dock to the Fishers Distribution Center or other location
designated by Purchaser.

       

      ARTICLE III

      PURCHASE
PRICE; ADJUSTMENTS; ALLOCATIONS

       

      Section 3.1    Purchase
Price.  Subject
to adjustment pursuant to Section 3.3 below, the aggregate amount to be
paid for the Transferred Assets (the “Purchase Price”)
shall be $26.0 million.  The Purchase Price shall be increased by any
Working Capital Surplus or reduced by any Working Capital Deficit.  In
addition to the foregoing payment, as consideration for the sale, assignment,
transfer and delivery of the Transferred Assets, the Purchaser shall assume and
discharge the Assumed Liabilities.

       

      Section 3.2    Payment of Purchase
Price.

       

      (a)           On
the Closing Date, the Purchaser shall pay or cause to be paid to EDC USA the
Purchase Price.

       

      (b)           Within
five (5) Business Days following the determination of the Final Working Capital
Schedule in accordance with Section 3.4 below, if there is a Working Capital
Deficit, the Sellers shall pay to the Purchaser an amount equal to the Working
Capital Deficit and if there is a Working Capital Surplus, the Purchaser shall
pay to the Sellers an amount equal to the Working Capital Surplus.

       

      (c)           In
addition, on the Closing Date, the Purchaser shall have the right to purchase,
free and clear of all Liens, from the Sellers certain equipment otherwise
constituting an Excluded Asset pursuant to Section 2.2(c).  Purchaser
shall identify the specific equipment to be purchased by it from the equipment
listed on Schedule
3.2(c), by giving written notice to EDC USA at least five (5) Business
Days prior to the Closing Date.  The purchase price to be paid by the
Purchaser for each such item of equipment shall be the price set forth on such
schedule under the heading “EDC Engr Estimate”; provided however, that the
aggregate purchase price for the equipment so identified by the Purchaser shall
not exceed $1.5 million.  Purchaser shall pay the aggregate purchase
price for such equipment in four equal monthly installments on the first,
second, third and fourth month anniversaries of the Closing
Date.  Notwithstanding anything to the contrary contained herein, all
equipment purchased pursuant to this Section 3.2(c) shall be deemed to be a
Transferred Asset for all purposes of this Agreement (including, without
limitation, Articles IV, VI and XI) beginning on the date that Purchaser so
identifies such equipment.  Such equipment shall be delivered to the
Purchaser following the Closing, as the Purchaser shall direct, and the cost of
preparing such equipment for shipment shall be reimbursed pursuant to Section
2.5 hereof.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

         

      

      (d)           All
payments required under this Section 3.2 or any other provision of this
Agreement shall be made in cash by wire transfer of immediately available funds
to such bank account as shall be designated in writing by the Sellers or the
Purchaser, as applicable.

       

      Section 3.3    Additional Purchase
Price

       

      (a)           EDC
USA shall be entitled to receive from the Purchaser the amount (the “Additional Purchase
Price”) (or a pro rata portion of such amount to the extent provided
below) set forth next to the name of the four current third party customers of
the Business conducted by the Sellers at the Fishers Distribution Center set
forth on Schedule 3.3
upon the occurrence of any of the following with respect to such
customer:  (i) the orders of Products by such customer to the
Purchaser from the Closing Date to the one year anniversary of the Closing Date
(“2009
Volumes”) are equal to or exceed 85% of the actual volumes of Products
ordered by such customer during 2008 (“85% Target Volumes”),
or if such purchases are less than 85% Target Volumes, EDC USA shall receive a
pro rata portion of the amount set forth for such customer on Schedule 3.3 based on
the percentage of 2009 Volumes compared to the 85% Target Volumes or (ii)
Purchaser shall terminate its customer relationship with such customer during
the one year period following the Closing Date, in which case EDC USA shall be
entitled to receive the full amount set forth for such customer on Schedule 3.3, unless
such termination occurs as a result of a default by the customer or such
customer is deemed in good faith by Purchaser to present an unacceptable credit
risk based on a standard credit application/investigative process, requiring
applicants to provide banking and trade references and utilizing Dun and
Bradstreet qualitative measures such as Financial Stress and Commercial Credit
Score Percentiles as well as the results from the credit
investigation.  In addition, to the extent orders of any customer set
forth on Schedule 3.3 are less than its 85% Target Volumes (a “Shortfall Customer”),
and orders of Products by any other former customer of EDC USA at the Fishers
Distribution Center to the Purchaser during calendar year 2009 that have an
average sales price (“ASP”) not more than
7.0% below the ASP of any applicable Shortfall Customer, such other customer’s
orders shall be added to the 2009 Volumes for any one or more (without
duplication) applicable Shortfall Customers (in each case, up to each Shortfall
Customer’s 85% Target Volumes) for purposes of calculating the Additional
Purchase Price.

       

      
        
          
          

        

        
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      (b)           Within
thirty (30) days following the Closing, EDC USA will provide Purchaser with a
report showing the actual volumes purchased during 2008 by the customers listed
on Schedule
3.3. Within thirty (30) days of the end of calendar year 2009, Purchaser
shall provide a report to EDC USA showing the 2009 Volumes of the customers set
forth on Schedule
3.3 and any other former EDC USA customers with an ASP not more than 7.0%
below any such listed customer’s ASP, and setting forth the Additional Purchase
Price payment to be made to EDC USA pursuant to this Section 3.3 based on such
orders.  Each Party shall have the right, exercisable within fifteen
(15) days of receipt of the report from the other Party, to review the records
of the other Party supporting the customer business described in such report,
including copies of purchase orders and invoices and shall notify the other
Party of any dispute regarding the 2008 volumes or the calculation of the
Additional Purchase Price owed, as applicable.  Inspection of such
records shall be conducted during normal business hours, under the supervision
of such Party’s personnel and in such manner that is to not unreasonably
interfere with the normal operations of such Party.  If Purchaser
terminates its relationship with any customer pursuant to
Section 3.3(a)(ii) above, it shall provide prompt written notice to EDC USA
of such termination, the reasons for such termination and a statement regarding
any payment owed as a result of such termination.  EDC USA shall keep
all information received in connection with this Section 3.3(b)
confidential.

       

      (c)           Purchaser
shall be entitled to hold any amounts payable to EDC USA pursuant to this
Section 3.3 until eighteen (18) months and thirty (30) days after the Closing
Date in order to satisfy any indemnification claims by the Purchaser pursuant to
Article XI.

       

      Section 3.4    Adjustment of Purchase Price
for Working Capital.

       

      (a)           Within
sixty (60) days following the Closing Date, the Purchaser shall prepare and
deliver to the Sellers the Working Capital Schedule and its calculation of the
Working Capital Deficit or Working Capital Surplus, if any, based
thereon.  The Working Capital Schedule shall be prepared in accordance
with GAAP and shall be calculated consistent with the Reference
Calculations.

       

      (b)           The
Sellers shall have thirty (30) days following receipt of the Working
Capital Schedule delivered pursuant to Section 3.4(a) during which to
notify the Purchaser of any dispute of any item contained therein (the “Working Capital Dispute
Period”), which notice shall set forth in detail the basis for such
dispute.  The Purchaser and the Sellers shall thereafter cooperate in
good faith to resolve any such dispute as promptly as possible, and upon such
resolution, the Working Capital Schedule shall be finalized in accordance with
the agreement of the Purchaser and the Sellers.  In the event the
Sellers do not notify the Purchaser of any such dispute within the Working
Capital Dispute Period or notify the Purchaser within the Working Capital
Dispute Period that they do not dispute any item contained therein, the Working
Capital Schedule delivered pursuant to Section 3.4(a) and the Purchaser’s
calculation of the Working Capital Deficit or Working Capital Surplus, if any,
shall be final and binding upon the Parties and shall become the Final Working
Capital Schedule.

       

      (c)           In
the event the Purchaser and the Sellers are unable to resolve any dispute
regarding the Working Capital Schedule, notice of which was delivered during the
Working Capital Dispute Period, within fifteen (15) days following the
Purchaser’s receipt of such notice, such dispute shall be submitted to a
nationally recognized accounting firm mutually agreed to by the Sellers and the
Purchaser (the “Accounting
Referee”).  In resolving any such dispute, the Accounting
Referee shall consider only those items or amounts in the Working Capital
Schedule with respect to which notice of dispute was delivered during the
Working Capital Dispute Period and as to which the Sellers continue to
disagree.  The Accounting Referee’s determination of the disputed
items of the Working Capital Schedule and the Working Capital Deficit or Working
Capital Surplus, if any, based thereon shall be final and binding on the Parties
and shall become the Final Working Capital Schedule.  The Accounting
Referee shall use commercially reasonable efforts to complete its work within
thirty (30) days following its engagement.  The expenses of the
Accounting Referee shall be shared equally by the Sellers on the one hand and
the Purchaser on the other hand.

       

      
        
          
          

        

        
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      Section 3.5    Allocation of Purchase
Price.   The Purchase Price and
any other consideration paid by the Purchasers (or deemed to be paid by the
Purchasers to the Sellers) shall be allocated as set forth on Schedule 3.5.  To
the extent the Purchase Price is adjusted pursuant to Sections 3.3 or 3.4,
the Parties shall amend Schedule 3.5
consistently to reflect such adjustments.  The Parties acknowledge
that such allocation represents the fair market value of the Transferred Assets
and shall be binding upon them for federal, state, foreign and local Tax
purposes.  The Purchaser and the Sellers shall file their Tax Returns
(and IRS Form 8594) in a manner consistent with such allocation and neither
Party shall thereafter voluntarily take a Tax Return position inconsistent with
such allocation in an audit or other inquiry or examination by the Internal
Revenue Service or other Governmental Entity relating to Taxes.  If
there is an increase or decrease in the consideration within the meaning of
Treasury Regulations Sections 1.1060-1(e)(ii)(B) after the Parties have filed
the initial IRS Form 8594, the Parties shall allocate such increase or decrease
among the Transferred Assets as required by and consistent with Section 1060 of
the Code and the applicable Treasury Regulations.

       

      ARTICLE IV

      REPRESENTATIONS
AND WARRANTIES OF SELLERS

       

      Except as
set forth in the Disclosure Schedule attached hereto (the “Disclosure
Schedule”), each of the Sellers, jointly and severally, represents and
warrants to Purchaser as follows:

       

      Section 4.1    Organization;
Ownership.

       

      (a)           Each
of the Sellers is a limited liability company duly organized, validly existing,
and in good standing under the Laws of the State of Delaware and has all
requisite power and authority to own, lease and operate its properties,
including the Transferred Assets, and to conduct the Business as now
conducted.  Except as would not reasonably be expected to have a
Material Adverse Effect, each of the Sellers is qualified to do business and is
in good standing in each of the jurisdictions listed on Schedule 4.1(a) of
the Disclosure Schedule for such Seller, which constitute each of the
jurisdictions in which it is transacting the Business or in which the operation,
ownership or leasing of its properties related to the Business make such
qualification necessary.

       

      
        
          
          

        

        
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      (b)           A
majority of the issued and outstanding equity interests of EDC are owned
beneficially and of record by GEI EDC Holding Company, a Delaware
corporation.  Schedule 4.1(b) of
the Disclosure Schedule sets forth all Persons owning any equity interests of
EDC and their respective equity interests therein.

       

      (c)           All
of the issued and outstanding equity interests of EDC USA are owned beneficially
and of record by EDC.  All of the issued and outstanding equity
interests of each of the Sellers European Affiliates are owned beneficially and
of record, directly or indirectly, by EDC.

       

      Section 4.2    Authority;
Noncontravention.

       

      (a)           Each
of the Sellers has all requisite power and authority to execute and deliver this
Agreement and the Ancillary Agreements and to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby.  The execution, delivery and performance by each of the
Sellers of this Agreement and the Ancillary Agreements, and the consummation by
the Sellers of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary actions (including any company action
and action by the members of each Seller), and no other action on the part of
either Seller,  its members or managers or any of the Sellers
Affiliates or their respective owners is necessary to authorize the execution,
delivery and performance by the Sellers of this Agreement and the Ancillary
Agreements and the consummation by them of the transactions contemplated hereby
and thereby.  This Agreement has been, and the Ancillary Agreements to
which each of the Sellers is a party will be as of the Closing, duly executed
and delivered by each of the Sellers and, assuming due authorization, execution
and delivery by the Purchaser of this Agreement and the Ancillary Agreements to
which the Purchaser is a party, this Agreement and the Ancillary Agreements
constitute, or will constitute as of the Closing, legal, valid and binding
obligations of each of the Sellers, as applicable, enforceable against each of
the Sellers in accordance with their respective terms, subject to the Bankruptcy
and Equity Exception.

       

      (b)           Neither
the execution and delivery of this Agreement or the Ancillary Agreements by any
Seller nor the consummation by any Seller of the transactions contemplated
hereby or thereby, nor compliance by any Seller with any of the terms or
provisions of this Agreement or the Ancillary Agreements, will (i) conflict with
or violate any provision of the operating agreement or other organizational
documents of either Seller, (ii) violate any Law, judgment, writ, order or
injunction of any Governmental Entity applicable to either Seller, (iii) except
as provided on Schedule 4.2(b)(iii)
of the Disclosure Schedule, violate or constitute a default under any of the
terms, conditions or provisions of any Contract to which either Seller is a
party or by which either Seller is bound, except as would not be reasonably
expected to have a Material Adverse Effect or have a material adverse effect on
the ability of either Seller to perform its obligations under this Agreement, or
(iv) except as provided on Schedule 4.2(b)(iv)
of the Disclosure Schedule, give rise to a right of termination, cancellation,
modification or acceleration or loss of any material benefit under any Assumed
Contract, the Fishers Sub-Lease or any UMG Supply Agreement or result in a Lien
on any Transferred Asset.

       

      (c)           No
declaration, filing or registration by any Seller with, or notice by the Seller
to, or authorization, consent or approval by any Seller of any Governmental
Entity is necessary for the execution, delivery and performance by the Sellers
of this Agreement or the Ancillary Agreements.

       

      
        
          
          

        

        
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      Section 4.3    Financial
Statements.  Schedule 4.3 of the
Disclosure Schedule contains the Financial Statements.  Except as
disclosed in Schedule
4.3 of the Disclosure Schedule or the Fishers Financial Statements, the
Fishers Financial Statements fairly present in all material respects the
financial condition and the results of operations of the Business conducted at
the Fishers Distribution Center as at the respective dates of and for the
periods referred to in such Fishers Financial Statements, subject, in the case
of interim financial statements, to normal recurring year-end adjustments (the
effect of which will not, individually or in the aggregate, be materially
adverse) and the absence of notes; provided, however, that the
Fishers Financial Statements present such information in accordance with the
Sellers’ historical accounting principles consistent with GAAP. Except as
disclosed in Schedule
4.3 of the Disclosure Schedule, the Pro Forma Balance Sheet fairly
presents in all material respects the financial statements of EDC and EDC USA as
of September 30, 2008 assuming the Closing had occurred as of such date,
eliminating EDC’s investment in its foreign subsidiaries, and after giving
effect to the required paydown of debt under the Senior Credit Facility and
other contemplated payments to be made immediately following the Closing and
based on reasonable assumptions made in good faith.  The Financial
Statements have been prepared from and are in accordance with the books and
records of the Sellers and the Business.  Without limiting in any
respect the provisions of this Section 4.3, the Fishers Financial Statements may
not be indicative of the financial position or results of operations that would
have existed if the Fishers Distribution  Center had been operated as
a stand alone company as a result of EDCI Holdings, Inc.’s provision of certain
corporate, management and other overhead services to  the
Sellers.

       

      Section 4.4    Absence of Undisclosed
Liabilities.  Except
as may be reflected in the Financial Statements or the Working Capital Schedule,
and except for liabilities incurred since the date of the Financial Statements
in the ordinary course of business, consistent with past practice, Sellers do
not have any material Liabilities relating to, or arising in connection with,
the Transferred Assets or the Business conducted at the Fishers Distribution
Center.

       

      Section 4.5    Absence of Certain
Changes.  Since
June 30, 2008, the Sellers have only conducted the Business at the Fishers
Distribution Facility in the ordinary course consistent with past practice and
have not with respect to the Transferred Assets or the Business conducted at the
Fishers Distribution Center:

       

      (a)           incurred
any Liabilities, other than Liabilities incurred in the ordinary course of
business consistent with past practice, or failed to pay or discharge when due
any Liabilities of which the incurring or the failure to pay or discharge would
cause any damage or risk of loss to the Transferred Assets or the Business
conducted at the Fishers Distribution Center;

       

      (b)           sold,
encumbered, assigned or transferred any assets or properties which would have
been included in the Transferred Assets if the Closing had been held on
June 30, 2008 or on any date since then, except for the sale of inventory
in the ordinary course of business consistent with past practice and sales of
obsolete equipment;

       

      
        
          
          

        

        
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      (c)           made
or suffered any amendment or termination of, or waived any rights of substantial
value under, any Assumed Contract, the Fishers Sub-Lease or any UMG Supply
Agreement;

       

      (d)           suffered
any damage, destruction or loss, whether or not covered by insurance, (i)
materially and adversely affecting the Transferred Assets or the Business
conducted at the Fishers Distribution Center, or (ii) suffered any recurring or
prolonged shortages, cessation or interruption of supplies or other services
required to conduct the Business at the Fishers Distribution
Center;

       

      (e)           suffered
any Material Adverse Effect; or

       

      (f)           entered
into any transaction other than in the ordinary course of business consistent
with past practice.

       

      Section 4.6    Personal Property; Title to
Assets.

       

      (a)           The
Sellers have good, valid and marketable title to, or in the case of the Fishers
Sub-Lease, a valid leasehold interest in, all of the Transferred Assets, free
and clear of all Liens, except Permitted Liens and except for those Liens set
forth on Schedule
4.6(a) of the Disclosure Schedule which shall be released before the
Closing.  The Transferred Assets constitute all of the assets, rights
and properties necessary for the conduct by the Purchaser of the Business at the
Fishers Distribution Center after the Closing Date in the same manner as
conducted by the Sellers at the Fishers Distribution Center since June 30,
2008.  All of the tangible Transferred Assets used or held for use in
the Business conducted at the Fishers Distribution Center are (a) free from
material defects or other material deficiency (whether in design or
manufacture); (b) usable in the regular and ordinary course of business
consistent with past practice; (c) in conformity in all material respects with
all applicable Laws and Licenses relating to their construction, use and
operation; and (d) except as set forth on Schedule 4.6(a) of
the Disclosure Schedule,  in good operating condition and repair,
subject to ordinary wear and tear.

       

      (b)           Except
as set forth on Schedule 4.6(b) of
the Disclosure Schedule, since June 30, 2008, all tangible personal
property used in connection with or related to the operation of the Business at
the Fishers Distribution Center has been located at the Fishers Distribution
Center and has not been moved or relocated, other than with respect to the sale
of inventory in the ordinary course of business.

       

      Section 4.7    Taxes.

       

      (a)           The
Sellers have duly and timely filed (and prior to the Closing Date will duly and
timely file) true, correct and complete real property, personal property,
employment, income and other Tax Returns required to be filed under federal,
state, local or other Law.  All Taxes of the Sellers have been paid,
and there is no liability for any Taxes due and payable in connection with any
such Tax Returns and unpaid Taxes not yet due and payable do not exceed the
reserve for Taxes in the Financial Statements.  There are no existing
Liens for Taxes upon any of the Transferred Assets, except for Liens for Taxes
which are not yet due and payable.  All Taxes which the Sellers are
required by Law to withhold and collect have been duly withheld and collected,
and have been timely paid over to the proper Governmental Entity to the extent
due and payable.

       

      
        
          
          

        

        
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      (b)           None
of the Transferred Assets is tax exempt use property under Code
Section 168(h).  None of the Transferred Assets is property that
a Seller is required to treat as being owned by any other Person pursuant to the
safe harbor lease provision of former Code
Section 168(f)(8).  None of the Sellers is a foreign person
within the meaning of Code Section 1445.  None of the Assumed
Liabilities is an obligation to make a payment that is not deductible under Code
Section 280G.  For purposes of Section 4.7(a) and (b), a Seller
shall be deemed to include any predecessor of the Seller or any Person from
which a Seller incurs a liability for Taxes as a result of transferee
liability.

       

      (c)           Each
of the Sellers is or has been treated as a partnership for federal, state and
local income Tax purposes at all times during its existence.

       

      Section 4.8    Inventory.  The
Inventory consists of new and unused items of a quality, quantity and condition
useable and saleable in the ordinary course of the Business, is not discontinued
or obsolete and is valued at the lower of cost or market value.  Each
of the categories of Inventory is at a level normal and adequate for the
continuation of the Business in the ordinary course consistent with Sellers’
past practice.

       

      Section 4.9    Leased Real
Property.  

       

      (a)           The
Fishers Sub-Lease is a legal, valid and binding obligation, enforceable in
accordance with its terms with respect to EDC USA and, to the Knowledge of the
Sellers, each other party to the Fishers Sub-Lease (subject, in each case, to
the Bankruptcy and Equity Exception), and there is no existing default or breach
by EDC USA under the Fishers Sub-Lease (or any event or condition
that, with notice or lapse of time or both, could constitute a default or breach
by EDC USA) and, to the Knowledge of the Sellers, there is no such default or
breach (or event or condition that, with notice or lapse of time or both, could
constitute a default or breach) with respect to any third party to the Fishers
Sub-Lease.  Sellers have not created any condition and there is no
Lien, easement, covenant or other restriction applicable to the Fishers
Distribution Center that would materially impair the current use or the
occupancy by the Sellers of the Fishers Distribution Center.  The term
of the Fishers Sub-Lease expires on October 30, 2012.  Prior to the
date hereof, the Sellers have delivered to the Purchaser a true, complete and
correct copy of the Fishers Sub-Lease and all side letters between EDC USA, the
Master Landlord and/or the Sublandlord relating thereto.

       

      (b)           Each
Seller’s operation of the Fishers Distribution Center is in compliance in all
material respects with all applicable Laws and orders of Governmental
Entities.  Neither Seller’s operation of the Fishers Distribution
Center, nor either Seller’s current uses and operations conducted at the Fishers
Distribution Center, are in violation of the current zoning (whether in the form
of ordinances, regulations, or rules).  The Sellers have not received
notice (i) of any special assessment relating to the Fishers Distribution Center
or any portion thereof or (ii) that  such a special assessment is
pending.  To the Knowledge of the Sellers, no such special assessment
is threatened.  There does not exist any pending condemnation or
eminent domain proceedings that affect the Fishers Distribution Center or, to
the Knowledge of the Sellers, any threatened condemnation or eminent domain
proceedings that affect the Fishers Distribution Center, and the Sellers have
not received any written notice of the intention of any Governmental Entity or
other Person to take or use any portion of the Fishers Distribution
Center.

       

      
        
          
          

        

        
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      (c)           All
improvements to the Fishers Distribution Center (including mechanical,
electrical and plumbing systems serving such improvements) are in good condition
and repair (normal wear and tear excepted), and such improvements are free from
material structural defects.  The Sellers have complied with all
maintenance or repair obligations under the Fishers Sub-Lease and have obtained
all required consents and approvals under the Master Lease and the Fishers
Sub-Lease for all actions or omissions of either Seller pursuant
thereto.  Except as set forth on Schedule 4.9(c) of
the Disclosure Schedule, there are no continuing material maintenance, repair or
capital improvement obligations with respect to the Fishers Distribution
Center.  The Sellers would have no obligations under the Fishers
Sub-Sublease had the same been expiring currently to perform (i) any repairs or
(ii) restoration, upon surrender and expiration of the Fishers
Sub-Lease.  The Fishers Distribution Center is supplied with utilities
and other services adequate for the operation of such facilities as currently
conducted, including adequate water, storm and sanitary sewer, gas, electric,
cable and telephone facilities.  The Sellers have obtained all
agreements, easements or other rights from any other Person necessary to permit
the lawful use and operation of the Fishers Distribution Center or any
driveways, roads and other means of egress and ingress to and from the Fishers
Distribution Center and each such agreement, easement or other right is in full
force and effect.  There is no pending or, to the Knowledge of the
Sellers, threatened proceeding which could result in the modification or
cancellation of such agreements, easements or rights except, in each case, for
deviations from the foregoing which could not reasonably be expected to
materially impair the continued use of the Fishers Distribution Center as it is
currently used.

       

      Section 4.10    Contracts.

       

      (a)           Schedule 4.10 of the
Disclosure Schedule sets forth a correct and complete list of the below
Contracts currently in force, or under which either Seller has continuing
Liabilities, related to the Business, the Transferred Assets or the Fishers
Distribution Center (other than the UMG Supply Agreements, the insurance
policies listed on Schedule 4.11 of the
Disclosure Schedule and the Employee Benefit Plans listed on Schedule 4.17(a) of
the Disclosure Schedule) (each, a “Material
Contract”).

       

      (i)           
Bonds, debentures, notes, credit or loan agreements or loan commitments,
mortgages, indentures, guarantees or other Contracts relating to the borrowing
of money or the deferred purchase price of property of either Seller, in each
case, related to the Transferred Assets or the Fishers Distribution
Center;

       

      (ii)           
Leases of any Personal Property located at the Fishers Distribution Center or
any Transferred Assets;

       

      (iii)           Contracts
for capital expenditures or the acquisition or construction of fixed assets at
the Fishers Distribution Center requiring the payment by either Seller of an
amount in excess of $20,000;

       

      
        
          
          

        

        
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      (iv)           Contracts
granting to any Person an option or a right of first refusal, first-offer or
similar preferential right to purchase or acquire any Transferred
Assets;

       

      (v)           
Contracts with either Seller and any sales agent or representative providing for
the payment of commissions for work related to the operations of the Fishers
Distribution Center that are not terminable without penalty on ninety (90) days’
or less notice;

       

      (vi)           Joint
venture or partnership Contracts and all other Contracts providing for the
sharing of any profits, in each case, to which either Seller is a party and
which relates to the operation of the Fishers Distribution Center;

       

      (vii)           Contracts
containing any covenant that purports to materially restrict the business
activity of either Seller at the Fishers Distribution Center or materially limit
the freedom of either Seller to engage in any line of business or to compete
with any Person that are binding with respect to the Fishers Distribution Center
or the Transferred Assets;

       

      (viii)         Contracts
with customers or suppliers of the Fishers Distribution Center;

       

      (ix)           Employment
Agreements with Fishers Business Employees or independent contractors who
perform services material to the operation of the Business at the Fishers
Distribution Center; and

       

      (x)           Contracts
(other than those described in subsections (i) through (ix) of this
Section 4.10) to which either Seller is a party and by which the
Transferred Assets are bound involving an annual commitment or annual payment to
or from either Seller of more than $25,000 individually.

       

      (b)           Each
of the Assumed Contracts and the UMG Supply Agreements is a legal, valid and
binding obligation enforceable in accordance with its respective terms with
respect to the Sellers and, to the Knowledge of the Sellers, each other party to
such Assumed Contract and UMG Supply Agreement (subject to the Bankruptcy and
Equity Exception), and there is no existing default or breach by either Seller
under any such Assumed Contract or UMG Supply Agreement (or event or condition
that, with notice or lapse of time or both, could constitute a default or
breach) and, to the Knowledge of the Sellers, there is no such default or breach
(or event or condition that, with notice or lapse of time or both, could
constitute a default or breach) with respect to any third party to any such
Assumed Contract or UMG Supply Agreement.  The Sellers have no
Knowledge of any notice or bona fide threat to terminate any Assumed Contract or
any UMG Supply Agreement.  True, correct and complete copies of each
Material Contract, each Assumed Contract and each UMG Supply Agreement have been
delivered to the Purchaser.

      
         

        Section 4.11    Insurance.

      

       

      
        
          
          

        

        
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      (a)           Schedule 4.11(a) of
the Disclosure Schedule sets forth a correct and complete list of all insurance
policies maintained as of the date of this Agreement by or on behalf of the
Sellers and relating to the Business operated at the Fishers Distribution
Center, indicating the type and amount of coverage maintained thereunder, the
name of the insurance carrier or underwriter, and all insurance claims
thereunder and worker’s compensation claims received for the past three (3)
policy years.  All
such insurance policies are valid and binding and in full force and effect. The
Sellers are not in breach or default (including any breach or default with
respect to the payment of premiums or the giving of notice) with respect to
their material obligations under any such insurance policies, and no event has
occurred which, with notice or the lapse of time or both, would constitute such
a breach or default or permit termination or modification under such
policy.

       

      (b)           Except
as set forth on Schedule 4.11(b) of
the Disclosure Schedule, there is no claim pending or, to the Knowledge of the
Sellers, any existing facts which are reasonably likely to result in a claim
under any such policy, and if any of the foregoing have been disclosed, no such
claim or existing facts was questioned, denied or disputed by the underwriter of
such policy.

       

      Section 4.12    Consents.  Schedule 4.12 of the
Disclosure Schedule sets forth each action, consent, approval, notification,
waiver, authorization, order or filing (each, a “Consent”) under any
Assumed Contract, the Fishers Sub-Lease, any UMG  Supply Agreement or
other Contract required in connection with the execution and delivery by the
Sellers of this Agreement or the Ancillary Agreements and the consummation by
the Sellers of the transactions contemplated hereby and thereby.

       

      Section 4.13    Compliance with Laws;
Licenses.  The
Sellers are in compliance in all material respects with all Laws applicable to
the Transferred Assets, the Assumed Liabilities and the Fishers Distribution
Center.  The Sellers hold all material Licenses from Governmental
Entities necessary for the lawful conduct of the Business.  The
Sellers are in compliance in all material respects with the terms of all
Licenses.

       

      Section 4.14    Legal
Proceedings.  Except
as set forth on Schedule 4.14 of the
Disclosure Schedule, there is no litigation, suit, action, arbitration,
administrative or other proceeding or investigation, governmental or otherwise,
pending or, to the Knowledge of the Sellers, threatened against, affecting or
involving the Sellers, the Fishers Distribution Center or the Transferred Assets
before any Governmental Entity.  There are no judgments, orders,
decrees or awards before any court, department, commission, board,
instrumentality or arbitrator which affect the Sellers, the Fishers Distribution
Center or the Transferred Assets.

       

      Section 4.15    Products
Liability and
Warranty.  With
respect to the Business conducted at the Fishers Distribution Center, each
Product sold or otherwise delivered by the Sellers has been in conformity with
all applicable contractual commitments and all express and implied warranties,
if any, and the Sellers have no material liability for replacement or repair of
any such Products or other damages or other costs in connection
therewith.  No warranty claim, product liability or similar claim has
been made against either Seller during the past year relating to any service
performed or Product sold or delivered by such Seller with respect to the
Business conducted at the Fishers Distribution Center.  There have
been no Product recalls by the Sellers.

       

      Section 4.16    Accounts
Receivable.  The
accounts receivable comprising a part of the Transferred Assets arose from bona
fide transactions in the ordinary course of business and are collectible in the
book amounts thereof, except to the extent of the Sellers’ reserves as
reflected, as of the date of this Agreement, on the Fishers Financial Statements
and, as of the date of Closing, on the Final Working Capital
Schedule.  None of such accounts receivable is subject to any claim of
offset or recoupment or counterclaim, and Sellers have no Knowledge of any
specific facts that would be likely to give rise to any such claim.

       

      
        
          
          

        

        
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      Section 4.17    Employment Benefits and
Labor Matters

       

      (a)           All
of the Sellers Employee Benefit Plans are set forth on Schedule 4.17(a) of
the Disclosure Schedule, and neither of the Sellers nor any ERISA Affiliate has
made any commitment to any of the Fishers Business Employees to provide any
additional employee benefit plans or other arrangements.

       

      (b)           No
liability under Title IV or Section 302 of ERISA has been incurred by the
Sellers or any ERISA Affiliate for which the Purchaser would be liable under
applicable Law as a result of the transactions contemplated by this Agreement;
and no Sellers Benefit Plan is a multiemployer plan within the meaning of
Section 3(37) of ERISA.

       

      (c)           Each
of the Sellers Employee Benefit Plans has been established, maintained, funded,
and administered in material compliance with its terms and with applicable
federal and state Laws and regulations to which it is subject, including ERISA
and the Code and the Treasury Regulations promulgated thereunder, and is, if
applicable, qualified under Code Section 401(a).  Each Employee
Benefit Plan qualified under Code Section 401(a) has a plan document in the
form of a prototype which has received a favorable opinion letter from the
Internal Revenue Service.

       

      (d)           Except
as set forth on Schedule 4.17(d) of
the Disclosure Schedule, there are no strikes, work slowdowns, work stoppages,
lockouts, arbitrations, material grievances, unfair labor practice charges or
complaints pending or, to the Knowledge of the Sellers, threatened, with respect
to any of the Fishers Business Employees.

       

      (e)           Neither
Seller nor any of the Sellers Affiliates is a party to any labor or collective
bargaining agreement with respect to any of the Fishers Business Employees,
other than the CBA.

       

      (f)           Each
of the Sellers is in material compliance with all federal and state Laws
respecting employment and employment practices, terms and conditions of
employment, and wages and hours, and there are no arrearages in the payment of
wages.

       

      (g)           The
number of employees employed, as of the date of this Agreement, at the Sellers’
facilities located at Reno, Nevada, Wilkes-Barre, Pennsylvania and New York, New
York is 12, 5 and 3, respectively.

       

      Section 4.18    Environmental
Matters.

       

      (a)           Since
November 1, 2007, the Sellers have been and continue to be in compliance with
all Environmental Laws related to the Transferred Assets or the Fishers
Distribution Center, except for those matters that would not have a Material
Adverse Effect.  There is no investigation, suit, claim, action or
proceeding by any Governmental Entity or other Person relating to or arising
under Environmental Laws that is pending or, to the Knowledge of the Sellers,
threatened, against the Sellers relating to the Transferred Assets or the
Fishers Distribution Center.  The Sellers have not received any notice
of or entered into any order, settlement, judgment, injunction or decree
involving uncompleted, outstanding or unresolved obligations, liabilities or
requirements relating to or arising under Environmental Laws related to the
Transferred Assets or the Fishers Distribution Center.

       

      
        
          
          

        

        
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      (b)           Without
in any way limiting the foregoing, neither Seller, nor, to the Knowledge of
Sellers, any other Person, has buried, Released, emitted, discharged, dumped or
disposed of any Hazardous Materials into the environment in violation of
Environmental Laws or in quantities that would give rise to liability on the
part of either Seller or require cleanup by either Seller under Environmental
Laws with respect to the Fishers Distribution Center or any Transferred
Assets.

       

      (c)           Neither
Seller has received any written request for information, or been notified in
writing that it is a potentially responsible party, under CERCLA, or any similar
state, local or foreign Law with respect to the Fishers Distribution Center or
any Transferred Assets or operations related to any Transferred
Assets.

       

      (d)           Neither
the Fishers Distribution Center nor any Transferred Assets is listed or is, to
the Knowledge of Sellers, proposed for listing on the “National Priorities List”
under CERCLA, or on the Comprehensive Environmental Response, Compensation and
Liability Information System maintained by the United States Environmental
Protection Agency, or any similar state list of sites requiring investigation or
cleanup.

       

      (e)           Except
as set forth on Schedule 4.18(e) of
the Disclosure Schedule, neither Seller is a party to any Contract pursuant to
which it is obligated to indemnify any other Person with respect to, or be
responsible for any Liability pursuant to, or violation of, any Environmental
Law related to the Fishers Distribution Center or any Transferred
Asset.

       

      (f)           The
Sellers have made available to, or provided the Purchaser with, true and correct
copies of all environmental permits, Licenses, or authorizations under any
Environmental Laws and environmental assessment reports (such as Phase I or
Phase II reports) and any other environmental studies in their possession
relating to the Fishers Distribution Center or any Transferred
Assets.

       

      Section 4.19    Intellectual
Property.

       

      (a)           The
Sellers own or have the right to use all (i) inventions and discoveries, whether
patentable or not, and all patents, registrations, and applications therefor,
including divisions, continuations, continuations-in-part and reissues; (ii)
published and unpublished works of authorship, whether copyrightable or not,
including computer software programs, applications, source code and object code,
and databases and other compilations of information, copyrights in and to the
foregoing, including extensions, renewals, and restorations, and registrations
and applications therefor; and (iii) confidential and/or proprietary
information, trade secrets and know-how, including processes, schematics,
business methods, formulae, drawings, prototypes, models, designs, customer
lists and supplier lists, in each case, that are used in and material to the
conduct of the Business at the Fishers Distribution Center as currently
conducted ((i) through (iii) collectively being referred to as “IP
Rights”).

       

      
        
          
          

        

        
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      (b)           The
Sellers have no Knowledge of any claims (i) asserting that the use by the
Business of any IP Right used in the Business as currently conducted infringes
the rights of any Person; (ii) challenging the ownership, validity or
enforceability of any of the IP Rights owned by the Sellers (collectively, the
“Sellers IP
Rights”) or any IP Rights owned or held by third parties (collectively,
the “Third-Party IP
Rights”) exclusively licensed to the Sellers; or (iii) challenging the
right to the use of any Third-Party IP Rights held by the
Sellers.  The conduct of the Business as currently conducted does not
infringe or otherwise violate any IP Rights of any Person.

       

      (c)           There
is no unauthorized use, infringement or other violation of any of the Sellers’
IP Rights, or any Third-Party IP Rights held exclusively by the
Sellers.

       

      (d)           All
of the Sellers’ IP Rights and Third-Party IP Rights held exclusively by the
Sellers and included in the Transferred Assets are valid and
enforceable.

       

      (e)           None of Sellers’ Software contains any “time bombs,” “Trojan horses,” “backdoors,” “trap doors,” “worms,” viruses, bugs, faults or other devices that are
designed or intended to, or have the effect of, (a) disrupting, disabling,
harming, or impeding the operation of the Software, or (b) providing
unauthorized access to a system or device on which the Software is
installed.  None of Sellers’ Software is subject to any
“copyleft” or other obligations under any
“open source” license such as GNU Public License,
Lesser GNU Public License, or Mozilla Public License, or other shareware or open
source code, that requires or conditions the use of such Software on the
disclosure or licensing of any source code of any portion of the
Software.

       

      Section 4.20    Customers.  Since
January 1, 2008, no material customer of the Business conducted at the Fishers
Distribution Center has terminated its relationship or materially reduced its
level of business with the Sellers, nor has either Seller received written
notice or, to the Knowledge of either Seller, any other notice, that any
material customer of the Business conducted at the Fishers Distribution Center
intends to do so.  Except as set forth on Schedule 4.20 of the
Disclosure Schedule, either Seller is involved in any material dispute or
controversy with any material customer of the Business conducted at the Fishers
Distribution Center.  Neither Seller is involved in any dispute or
controversy with any of its other customers that, individually or in the
aggregate, could reasonably be anticipated to have a Material Adverse Effect on
the Business conducted at the Fishers Distribution Center.

       

      Section 4.21    Transactions with Related
Parties.  No
member, manager, employee or officer of either Seller or any member of such
member’s, manager’s, employee’s or officer’s immediate family, or any Affiliate
thereof (a) owns any interest in any Transferred Asset or (b) is a party, or
owns more than 50% of the ownership interests of any Person who is a party, to
any Contract with either Seller with respect to the Business conducted at the
Fishers Distribution Center or any Transferred Asset.

       

      Section 4.22    Fraudulent
Conveyance.  The
sale of the Transferred Assets pursuant to this Agreement is made in exchange
for fair and equivalent consideration.  Neither Seller is now
insolvent and neither Seller will be rendered insolvent by the sale, transfer
and assignment of the Transferred Assets pursuant to this
Agreement.  Neither Seller is entering into this Agreement or any of
Ancillary Agreements with the intent to defraud, delay or hinder its creditors
and the consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements will not have any such effect.  The transactions
contemplated in this Agreement or any Ancillary Agreements will not constitute a
fraudulent conveyance, or otherwise give rise to any right of any creditor of
either Seller to any of the Transferred Assets after the Closing.

      
         

        
          
            
            

          

          
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      Section 4.23    Brokers and Other
Advisors.  Except
as set forth on Schedule 4.23 of the
Disclosure Schedule, no broker, investment banker, financial advisor or other
Person is entitled to any broker’s, finder’s, financial advisor’s or other
similar fee or commission, or the reimbursement of expenses, in connection with
the transactions contemplated hereby based upon arrangements made by or on
behalf of either Seller.

       

      Section 4.24    No Other Representations or
Warranties.  Except
for the representations and warranties made by the Sellers in this Agreement or
any of the Ancillary Agreements, neither Seller makes any representation or
warranty with respect to the Sellers or the Business.

       

      ARTICLE V

      REPRESENTATIONS
AND WARRANTIES OF PURCHASER

       

      Purchaser
hereby warrants and represents to the Sellers as follows:

       

      Section 5.1    Organization, Standing and
Power.  The
Purchaser is a corporation duly organized, validly existing and in good standing
under the Laws of the State of Delaware and has all requisite power and
authority necessary to own or lease all of its properties and to carry on its
business as it is now being conducted.

       

      Section 5.2    Authority;
Noncontravention.

       

      (a)           The
Purchaser has all requisite power and authority to execute and deliver this
Agreement and the Ancillary Agreements and to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby.  The execution, delivery and performance by the Purchaser of
this Agreement and the Ancillary Agreements, and the consummation by it of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate action and no other action on the part of
the Purchaser is necessary to authorize the execution, delivery and performance
by the Purchaser of this Agreement and the Ancillary Agreements and the
consummation by it of the transactions contemplated hereby and
thereby.  This Agreement has been, and the Ancillary Agreements to
which the Purchaser is a party will be as of the Closing, duly executed and
delivered by the Purchaser and, assuming due authorization, execution and
delivery by each of the Sellers of this Agreement and the Ancillary Agreements
to which each of the Sellers is a party, this Agreement and the Ancillary
Agreements constitute, or will constitute as of the Closing, legal, valid and
binding obligations of the Purchaser, enforceable against the Purchaser in
accordance with their respective terms, subject to the Bankruptcy and Equity
Exception.

       

      
        
          
          

        

        
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      (b)           Neither
the execution and delivery of this Agreement or the Ancillary Agreements by the
Purchaser nor the consummation by the Purchaser of the transactions contemplated
hereby or thereby, nor compliance by the Purchaser with any of the terms or
provisions of this Agreement or the Ancillary Agreements, will (i) conflict with
or violate any provision of the charter documents of the Purchaser or (ii)
violate any Law, judgment, writ, order or injunction of any Governmental Entity
applicable to the Purchaser or (iii) violate or constitute a default under any
of the terms, conditions or provisions of any Contract to which the Purchaser is
a party, except as would not be reasonably expected to have a material adverse
effect on (i) the financial condition or results of operations of the Purchaser
or (ii) the ability of the Purchaser to perform its obligations under this
Agreement.

       

      (c)           No
declaration, filing or registration by the Purchaser with, or notice by the
Purchaser to, or authorization, consent or approval by the Purchaser of any
Governmental Entity is necessary for the execution, delivery and performance by
the Purchaser of this Agreement or the Ancillary Agreements.

       

      Section 5.3    Capital
Resources.  The
Purchaser has, and will have on the Closing Date, sufficient cash and cash
equivalents available to pay the Purchase Price and to pay all related fees and
expenses of the Purchaser payable by it in connection with the transactions
contemplated hereby.

       

      Section 5.4    Brokers and Other
Advisors.  No
broker, investment banker, financial advisor or other Person is entitled to any
broker’s, finder’s, financial advisor’s or other similar fee or commission in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of Purchaser.

       

      Section 5.5    No Other Representations or
Warranties.  Except
for the representations and warranties made by the Purchaser in this Agreement
or any of the Ancillary Agreements, the Purchaser does not make any
representation or warranty with respect to the Purchaser.

       

      ARTICLE VI

      ADDITIONAL
COVENANTS

       

      Section 6.1    Conduct of Business by
Sellers.  Between
the date of this Agreement and the Closing Date, unless the Purchaser shall
otherwise agree in writing, the Business shall be conducted only in the ordinary
course of business consistent with past practice.  Between the date of
this Agreement and the Closing Date, except as otherwise required by this
Agreement, without the prior written consent of the Purchaser, which consent
shall not be unreasonably withheld (and all requests for the Purchaser’s consent
shall be directed to Dave Stevens at Dave.Stevens@sonydadc.com
and the Purchaser shall respond by email within four Business Days of Mr.
Stevens’ receipt of such request), neither Seller shall, in connection with the
Business conducted at the Fishers Distribution Center or relating to the
Transferred Assets (except as otherwise provided below):

       

      (a)           sell,
transfer, encumber or otherwise dispose of any Transferred Assets or any
interest therein, other than inventory sold or disposed of in the ordinary
course of business;

       

      
        
          
          

        

        
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      (b)           acquire
any corporation, partnership, limited liability company, or other business
organization or division thereof or purchase any material amount of
assets;

       

      (c)           enter
into any Contract that would be a Material Contract if entered into prior to the
date hereof, other than any such Contracts entered into in the ordinary course
of business (including Contracts with customers or vendors);

       

      (d)           take
any actions that would materially change Inventory amounts of corrugated
packaging materials and similar distribution related consumables and supplies in
a manner inconsistent with past practice;

       

      (e)           remove
or relocate any of the Transferred Assets from the Fishers Distribution Center,
other than the sale of Inventory in the ordinary course of business, except in
accordance with Section 6.10;

       

      (f)           change
its method of accounting;

       

      (g)           extend,
renew, modify, terminate, cancel or agree to cancel any Assumed Contract, any
UMG Supply Agreement or the Fishers Sub-Lease;

       

      (h)           authorize,
or make any commitment with respect to, any capital expenditures related to the
Fishers Distribution Center that, individually or in the aggregate, exceed
$25,000;

       

      (i)           enter
into any employment or consulting Contract or arrangement with any Fishers
Business Employee which is not terminable at will, without penalty or continuing
obligation;

       

      (j)           grant
or announce any increase in the salaries, bonuses or other benefits payable to
any Fishers Business Employees, other than as required by Law or any existing
Contract or Employee Benefit Plan;

       

      (k)           incur,
create, assume or suffer to exist any Lien (other than Permitted Liens),
tenancy, encroachment, covenant, condition, claim, charge or other matter
affecting title on any Transferred Asset or the Fishers Distribution
Center;

       

      (l)           take
any action or omit to take any action that will cause a breach of any Assumed
Contract, the Fishers Sub-Lease or any UMG Supply Agreement;

       

      (m)           increase
by more than ten percent (10%) the number of employees of the Sellers working at
the Fishers Distribution Center (excluding Retained Employees) as of the date of
this Agreement;

       

      (n)           permit
per unit materials costs at the Fishers Distribution Center to increase by more
than ten percent (10%) in any one month period compared to the same period in
the prior year;

       

      
        
          
          

        

        
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      (o)           permit
aggregate fixed costs (excluding rent under the Fishers Sub-Lease) at the
Fishers Distribution Center to increase by more than ten percent (10%) in any
one month period compared to the same period in the prior year;

       

      (p)           permit
the delivery performance (as defined in Section 6.5 of the UMG Distribution
Agreement) at the Fishers Distribution Center or at the manufacturing operations
of the Kings Mountain Facility to be less than ninety percent (90%) of the
respective monthly historical performance (computed as the average monthly
performance during the same calendar quarter in the year prior to the date of
this Agreement) during any one month period;

       

      (q)           permit
inventory accuracy (as defined in Section 7.5.2 of the UMG Distribution
Agreement) at the Fishers Distribution Center or at the manufacturing operations
of the Kings Mountain Facility to be less than ninety percent (90%) of the
respective monthly historical accuracy (computed as the average monthly accuracy
during the same calendar quarter in the year prior to the date of this
Agreement) during any one month period; or

       

      (r)           take
any other action that is reasonably likely to result in a Material Adverse
Effect.

       

      Section 6.2    Inspection and Access to
Information.

       

      (a)           From
the date of this Agreement until the Closing Date, upon reasonable notice, the
Sellers shall afford the Purchaser and its officers, directors, employees,
agents, accountants, advisors, bankers and other representatives (collectively,
“Representatives”)
access to the properties, offices, plants and other facilities, books and
records of the Sellers relating to the Transferred Assets, the Assumed
Liabilities and the Fishers Distribution Center, and shall furnish the Purchaser
with such financial, operating and other data, analysis and information to the
extent relating to the Transferred Assets, the Assumed Liabilities and the
Fishers Distribution Center as the Purchaser may reasonably request; provided, however, that any
such access or furnishing of information shall be conducted during normal
business hours, under the supervision of the Sellers’ personnel and in such a
manner as to not unreasonably interfere with the normal operations of the
Sellers and the Business.  Notwithstanding anything to the contrary in
this Section 6.2(a), the Sellers shall not be required to disclose any
information to the Purchaser or its Representatives if such disclosure would, in
the Sellers’ reasonable discretion, (i) jeopardize any attorney-client or other
legal privilege (provided, that the
Sellers shall use their reasonable best efforts to enter into a joint defense
agreement with the Purchaser or employ such other means as may be available for
purposes of preserving any such legal privilege and providing information to the
Purchaser in accordance with this Section 6.2(a)) or (ii) contravene any
applicable Laws or binding agreement entered into prior to the date hereof
(provided, that
the Sellers shall use their commercially reasonable efforts to have such binding
agreement amended or waived to allow the providing of such information to the
Purchaser).

       

      
        
          
          

        

        
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      (b)           From
and after the Closing Date, each Party will provide reasonable access to
information in its possession to the other Party necessary for such other Party
to prepare any tax or other governmental filings, prepare financial statements,
respond to inquiries of any Governmental Entity or facilitate the resolution of
any claims made against or incurred by such Party (other than pursuant to this
Agreement), upon the reasonable request of such other Party and upon
reimbursement of the Party providing access by the other Party of its actual,
reasonable, out-of-pocket costs of providing such information and each Party
shall maintain such information for a period of at least three years following
the Closing Date.  Notwithstanding anything to the contrary in this
Section 6.2(b), neither Party shall be required to disclose any information to
the other Party or its respective Representatives if such disclosure would, in
the reasonable discretion of such Party, (i) jeopardize any attorney-client or
other legal privilege (provided, that such
Party shall use its reasonable best efforts to enter into a joint defense
agreement with the requesting Party or employ such other means as may be
available for purposes of preserving any such legal privilege and providing
information to the requesting Party in accordance with this Section 6.2(b)) or
(ii) contravene any applicable Laws or binding agreement.

       

      Section 6.3    Employee
Matters.

       

      (a)           Hiring of Transferred
Employees.  The Purchaser has determined, in its discretion, to
offer employment to those Fishers Business Employees listed on Schedule 6.3(a)(i).  The
Purchaser, before the Closing Date, shall offer employment to those Fishers
Business Employees so listed on Schedule 6.3(a)(i).  Employment
of those individuals accepting employment shall be effective as of the Effective
Time.  The Fishers Business Employees who accept such offers shall be
referred to as the “Transferred
Employees.”  As of the Effective Time, the Sellers shall
terminate the employment of all Fishers Business Employees, other than the
Retained Employees.  The Purchaser shall pay the cost of any severance
owed to those employees listed on Schedule 6.3(a)(ii)
to the extent that the Sellers’ cost for severance of such employees is not
fully offset as a result of the Purchaser offering employment to Former Business
Employees.  All liabilities incurred on or prior to the Closing Date
relating to the Transferred Employees that are the responsibility of the
Purchaser shall be set forth on Schedule 6.3(a)(iii)
attached hereto and shall be included on the Working Capital Schedule as a
current Liability.  Any Liabilities incurred prior to the Closing Date
and relating to the Transferred Employees not set forth on Schedule 6.3(a)(iii)
shall remain with the Sellers.

       

      (b)           Terms and Conditions of
Employment, Salary and Benefits for Transferred Employees Not Covered By a
Collective Bargaining Agreement.  The Purchaser shall provide
wages and benefits to those Transferred Employees who are not covered by a
collective bargaining agreement in its discretion and in accordance with its
business judgment.

       

      (c)           Terms and Conditions of
Employment for Transferred Employees Covered by a Collective Bargaining
Agreement.  The Purchaser shall provide Transferred Employees
who are covered by a collective bargaining agreement the same terms and
conditions of employment as set forth in the CBA, except for the modifications
set forth in the balance of this Section 6.3(c).  The Purchaser,
however, shall provide health insurance benefits and retirement benefits
pursuant to the terms and conditions of the benefits and plans currently in
effect for hourly employees at its other locations and shall retain the right to
alter the benefits and plans as provided in the CBA.  Notwithstanding
any agreement or prior practice between EDC USA and the Union, the Purchaser
will implement its payroll practices, such as paying on a bi-weekly basis,
pursuant to its policies currently in effect for its hourly employees at other
locations.

       

      
        
          
          

        

        
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      (d)           Agreement of Union
Required.  Prior to the Closing Date, the Purchaser and EDC USA
will meet with the Union and discuss implementation of
Section 6.3(c).  The Purchaser shall negotiate with the Union an
agreement (the “Union
Agreement”)  among the Purchaser, the Union and EDC USA
pursuant to which (i) the Purchaser will agree to enter into a successor
collective bargaining agreement to the CBA, effective as of the Effective Time,
(ii) EDC USA will retain all obligations and liabilities for any act occurring
or accruing prior to the Effective Time, (iii) the Purchaser will have the right
to implement the health insurance benefits, retirement benefits and payroll
practices set forth in Section 6.3(c), (iv)  the Union will enter
into the Union Agreement with the benefits and payroll practices so modified but
identical in all other respects to the CBA between EDC USA and the Union, and
(v) the Union and the Purchaser will agree to maintain the successor collective
bargaining agreement in effect  through the current CBA’s expiration
date of April 3, 2010.  Each Seller agrees to provide reasonable
assistance to the Purchaser in order to facilitate negotiation of and execution
of the Union Agreement.

       

      (e)           Employment Tax
Reporting.  The Sellers and the Purchaser agree that, pursuant
to the “Alternative Procedures” provided in Section 5 of Revenue Procedure
2004-53, with respect to the filing and furnishing of Internal Revenue Service
Forms W-2, W-3 and 941 for the full calendar year in which the Effective Time
occurs, (i) the Sellers and the Purchaser shall report on a
“predecessor-successor” basis, to the extent provided therein, (ii) the Sellers
shall be relieved from furnishing Forms W-2 to any Transferred Employees, and
(iii) the Purchaser shall assume the obligations of the Sellers to furnish Forms
W-2 to such Transferred Employees and Forms W-2 and W-3 with respect to
Transferred Employees to the Social Security Administration; provided, the
Sellers Affiliates shall transfer to the Purchaser all Forms W-4 and W-5 with
respect to the Transferred Employees, and such other data relating to
Transferred Employees as shall be necessary  for the Purchaser to
assume and satisfy such obligations accurately and in accordance with the
Law.

       

      (f)           No Third Party
Beneficiaries. The provisions of this Section 6.3 pertaining to the
employment and employee benefits of the Transferred Employees are solely for the
benefit of the Parties, and no employee or former employee of the Sellers or the
Purchaser or any other individual associated therewith shall be regarded for any
purpose as a third-party beneficiary of this Agreement.

       

      (g)           Welfare Benefit
Plans.

       

      (i)           Benefits.  Except
as otherwise provided in this subsection (g) and without limiting the
generality of subsections (b) and (c) hereof, the participation by
Transferred Employees in Welfare Plans maintained and participated in by the
Sellers shall cease at the Effective Time.  The Purchaser shall permit
each Transferred Employee to enroll as of the Effective Time in Welfare Plans
that are offered by the Purchaser to its similarly-situated employees subject to
the terms and conditions, including eligibility requirements, of the Purchaser’s
Welfare Plans; provided no terms and conditions, including eligibility
requirements, inconsistent with the Union Agreement shall be applied to
employees covered by the Union Agreement during the term of the Union
Agreement.

       

      
        
          
          

        

        
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      (ii)           Responsibility for Group
Health Plan Claims.  Except as otherwise provided in
subsection (g)(v) hereof, commencing as of the Effective Time, (i) the
Sellers shall be solely responsible for any claims for Welfare Benefits that are
incurred by or with respect to any Transferred Employee and his or her covered
dependents before the Effective Time; and (ii) the Purchaser shall be solely
responsible for any claims for Welfare Benefits that are incurred under the
Purchaser’s Welfare Plans by or with respect to any Transferred Employee and his
or her covered dependents at or after the Effective Time, provided that such
claims are eligible for payment under the Purchaser’s Welfare Plans and in the
case of any such claims that are not so eligible for payment, neither Purchaser
nor Sellers shall have any responsibility.  For purposes of the
foregoing, a medical, dental or vision claim shall be considered incurred when
the services are rendered or the supplies or medications are provided, and not
when the condition arose.

       

      (iii)           Service
Credit.  With respect to the coverage of the Transferred
Employees under the Purchaser’s Welfare Plans, (i) each such employee’s credited
service with the Sellers shall be credited against any waiting period applicable
to eligibility for enrollment of new employees under the Purchaser’s Welfare
Plans; and (ii) limitations on benefits due to pre-existing conditions under any
type of Welfare Benefit shall be waived for any Transferred Employee enrolled in
a similar type of Welfare Benefit under the Sellers’ Welfare Plans immediately
before the Effective Time.

       

      (iv)           HIPAA
Certificate.  With respect to the Sellers’ Group Health Plan,
the Sellers shall cause their records as to the length and dates of each group
health plan participant’s (and covered dependents’) creditable coverage, within
the meaning of HIPAA, to be transferred to the Purchaser.  For this
purpose, participants shall mean Transferred Employees and their covered
dependents with respect to whom the Sellers have any current or potential HIPAA
responsibilities as of or after the Effective Time.  The Purchaser
shall be responsible for providing timely certificates of creditable coverage
(within the meaning of HIPAA) to all Transferred Employees and their covered
dependents, with such certificates to include and aggregate such employees’ (and
covered dependents’) periods of creditable coverage under both the Sellers’
Group Health Plan and the Purchaser’s Group Health Plan; provided, the
Purchaser’s obligation with respect to creditable coverage earned by individuals
while they were employed by the Sellers shall be limited to the data provided to
the Purchaser by the Sellers.

       

      (v)           COBRA
Responsibility.  Beginning as of the Effective Time, the
Purchaser shall be responsible for providing the notices and making available
the health care continuation coverage, all as required by the COBRA Continuation
Coverage requirements, for all of (i) the Transferred Employees and Former
Business Employees and their respective qualified beneficiaries, whose
qualifying events (as defined in Code Section 4980B) occur after the Effective
Time; and (ii) all Former Business Employees and their respective qualified
beneficiaries whose qualifying events occurred before the Effective Time, and
with respect to whom the Sellers have any current notice or COBRA Continuation
Coverage responsibilities as of or after the Effective Time; provided, in each
such case, the Sellers shall provide the Purchaser with the records necessary to
identify and administer such responsibilities.

       

      (vi)           Short-Term and Long-Term
Disability Benefits.  Notwithstanding anything herein to the
contrary, if any Transferred Employee has become disabled (within the meaning of
the applicable short-term or long-term disability plan of the Sellers) on or
prior to the Effective Time, any short-term disability salary continuation
income or long-term disability benefits relating to the disability of such
Transferred Employee shall be paid by the Sellers under the terms in effect
immediately before the Effective Time.  From and after the Effective
Time,  Transferred Employees shall be eligible to participate in any
short-term and long-term disability benefit plans offered to similarly situated
active employees of Purchaser.  The Purchaser shall have no obligation
to provide any short-term or long-term disability benefits to any employee or
former employee of either Seller who is not a Transferred Employee.

       

      
        
          
          

        

        
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      (vii)           Vacation
Pay.  From and after the Effective Time, (i) the Purchaser
shall assume and honor all vacation days, sick leave days, and paid time off
days of the Transferred Employees that accrued prior to the Effective Time and
shall not take any action that results in a forfeiture of any such time off in
violation of any applicable state law, and (ii) the Purchaser’s vacation pay
policy, sick leave policy and paid time off policy will apply to each
Transferred Employee and will take into account service with the Sellers as
provided in subsection (j) hereof.

       

      (viii)          Severance
Pay.  The Purchaser shall provide Transferred Employees whose
employment is involuntarily terminated without cause (as determined by the
Purchaser in its sole discretion) during the 12-month period ending on the first
anniversary of the Effective Time levels of severance pay and benefits at least
comparable to the levels of pay and benefits offered to similarly-situated
employees under the Sellers’ severance plan immediately before the Effective
Time; provided,
however, that
any such terminated Transferred Employee must execute and not revoke a valid and
binding release and waiver in such form as may be prescribed by the
Purchaser.

       

      (h)           Qualified Retirement
Plans.

       

      (i)           401(k)
Plans.  As of the Effective Time, the Transferred Employees who
are eligible to participate in the Purchaser’s 401(k) plan in accordance with
the Purchaser’s 401(k) plan rules shall be allowed to enroll in the Purchaser’s
401(k) plan as of the Effective Time.  Service credited to a
Transferred Employee under the Sellers’s 401(k) plan as of the Effective Time
shall be credited to such Transferred Employee under the Purchaser’s 401(k) plan
for purposes of eligibility and vesting.

       

      (ii)           Rollovers.  As
soon as practicable following the Effective Time, the Sellers shall cause the
vested account balances of all Transferred Employees in the Sellers’ 401(k) plan
to be distributed in accordance with terms of said plan (treating the
Transferred Employees as having severed from employment within the meaning of
said plan), and the Purchaser shall permit Transferred Employees who are
participants in said plan and who are employed by the Purchaser following the
Effective Time and are otherwise eligible to participate in the Purchaser’s
401(k) plan to rollover such distributions (including outstanding participant
loans balances) into the Purchaser’s 401(k) plan.

       

      (i)           Workers’
Compensation.  Beginning at the Effective Time, all Transferred
Employees shall be eligible for coverage under the Purchaser’s workers’
compensation insurance, and the Purchaser shall be liable for all workers’
compensation claims of the Transferred Employees, other than those for which the
Sellers retain responsibility in accordance with this Section
6.3.  The Sellers shall remain responsible and retain liability for
workers’ compensation claims and all other claims relating to occupational
illnesses and injuries that are both incurred before the Effective Time and
reported within one hundred eighty (180) days after the Effective
Time.

       

      
        
          
          

        

        
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      (j)           General Service
Crediting.  For all purposes under the employee benefit plans,
practices or arrangements of the Purchaser providing benefits to any Transferred
Employees after the Effective Time, each Transferred Employee shall be credited
with all years of service for which such Transferred Employee was credited as of
the Effective Time under any similar employee benefit plans, practices or
arrangements of the Sellers Affiliates.  Notwithstanding the
foregoing, no Transferred Employee shall be eligible to participate in the
Purchaser’s defined benefit pension plan.

       

      (k)           WARN
Act.  The Sellers agree to provide any required notice under
the WARN Act, and to provide copies of such notices to the Purchaser at the time
of issuance, and otherwise to comply with any such statute, including any
payment obligations for failure to provide timely notices or otherwise, with
respect to any “plant closing” or “mass layoff” (as defined in the WARN Act) or
group termination or similar event affecting employees of the Business and (i)
occurring at or before the Effective Time or (ii) occurring after the Effective
Time and related to any facility of the Business other than the Fishers
Distribution Center and involving employees of the Business other than Fishers
Business Employees, including any such notice required in connection with the
closing of the facilities located at Kings Mountain, North Carolina, Reno,
Nevada and Wilkes-Barre, Pennsylvania.

       

      (l)           Retiree
Benefits.  The Purchaser shall have no responsibility to
provide medical, life or other benefits to the Sellers’ retirees and/or their
dependents.

       

      Section 6.4    Payment Due from
UMG.  If
the Closing occurs on or before December 15, 2008, Purchaser shall ensure
that the $500,000 payment owed by UMG to Sellers pursuant to Section 10.11
of the UMG CD Agreement and the $300,000 payment owed by UMG to Sellers pursuant
to Section 10.10 of the UMG Distribution Agreement is paid by UMG directly
to Sellers or, if such payment is made to Purchaser including through any offset
against payments owed by Purchaser, Purchaser shall promptly remit such funds to
Sellers.

       

      Section 6.5    Public
Announcements.  Except
as otherwise required by Law or applicable requirements of stock exchanges,
neither Party shall make, or cause to be made, any press release or public
announcement regarding this Agreement or the transactions contemplated hereby
without the prior written consent of the other Party and the Parties shall use
reasonable efforts to agree upon the text of any such release or announcement
prior to its release.

       

      Section 6.6    Insurance
Policies.  Purchaser
acknowledges and agrees that the insurance policies referred to in
Section 4.11 hereof, which the Sellers agree to keep in effect through the
Closing Date, will cease to have effect with respect to the Transferred Assets
upon the Closing and accordingly that it is the responsibility of the Purchaser
to arrange new insurance for the benefit of the Transferred Assets effective on
the Closing Date.

       

      Section 6.7    Consents; Further
Assurances.

       

      (a)           Each
of the Purchaser and the Sellers shall (i) use its respective commercially
reasonable efforts to promptly obtain all authorizations, consents, orders and
approvals of all Governmental Entities or other Persons that may be or are
necessary for the performance of its obligations pursuant to this Agreement to
ensure satisfaction of the conditions precedent to each Party’s obligations
hereunder, (ii) cooperate with each other in seeking to obtain all such
authorizations, consents, orders and approvals as promptly as practicable
following the date hereof, and (iii) promptly make all necessary filings, and
thereafter make any other required submissions, with respect to this Agreement
required under any applicable Law.  Notwithstanding the foregoing, in
connection with obtaining the foregoing authorizations, consents, orders and
approvals, the Purchaser shall not be required to take, or agree to take, any
action that would materially and adversely affect the Purchaser.

       

      
        
          
          

        

        
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      (b)           From
time to time, as and when requested by any Party, the other Parties shall
execute and deliver, or cause to be executed and delivered, all such documents
and instruments and shall take, or cause to be taken, all such further or other
actions, as such other Party may reasonably deem necessary or desirable to
consummate the transactions contemplated hereby.

       

      Section 6.8    Transfer
Taxes.  Each
of the Purchaser and the Sellers shall be responsible for one-half of all sales,
use, value added, documentary, stamp, gross receipts, registration, transfer,
conveyance, excise, recording, license, and other similar taxes and fees arising
out of or in connection with or attributable to the transactions contemplated
hereby.

       

      Section 6.9    Proration.  Ad
valorem, property and similar taxes (but not including income Taxes)
attributable to the Transferred Assets shall be prorated, as of the Closing
Date, with the Sellers paying a fraction thereof based upon the number of days
elapsed in the fiscal year prior to and including the Closing Date and the
Purchaser paying a fraction thereof based upon the number of days remaining in
such fiscal year after the Closing Date.

       

      Section 6.10   Cooperation Regarding
Transfer of Relocated
Assets.  The
Parties shall cooperate to identify all inventory owned by customers of the
Business, including UMG, and its location at any of the Sellers’ Business
facilities, the possession of which the Sellers will deliver to the Purchaser at
or following the Closing.  The schedule for preparing all Relocated
Assets for shipment at or following the Closing shall be mutually agreed upon by
the Parties.  On and after the Closing Date, the Purchaser shall
arrange for the pick-up and shipment of such Relocated Assets from the
applicable loading dock to the Fishers Distribution Center or such other
location designated by the Purchaser.

       

      Section 6.11   Cooperation Regarding the
Lease of the Fishers Distribution Center.  The
Sellers shall cooperate with the Purchaser in seeking to restructure the
Purchaser’s lease of the Fishers Distribution Center so that the Purchaser
leases the Fishers Distribution Center directly from the Master Landlord and
subleases a portion of the Fishers Distribution Center to the
Sublandlord.

       

      Section 6.12   No Solicitation of
Acquisition Proposals.

       

      (a)           From
the date of this Agreement until the earlier of the Closing or the termination
of this Agreement, each of the Sellers shall not, and shall cause its Affiliates
and its respective employees, members, managers, agents and representatives,
including any investment banker, attorney or accountant retained by either
Seller or any of its Affiliates, not to, directly or indirectly through another
Person, (i) solicit, initiate, entertain, consider, encourage, accept or
otherwise facilitate any inquiries (including by way of furnishing any
non-public information or otherwise) or the making of any inquiry, proposal or
offer from any Person which constitutes an Acquisition Proposal  (or
would reasonably be expected to lead to an Acquisition Proposal) or (ii)
participate in any discussions or negotiations regarding an Acquisition
Proposal.  For purposes of this Agreement, “Acquisition Proposal”
means any direct or indirect inquiry, proposal or offer (or any improvement,
restatement, amendment, renewal or reiteration thereof) relating to any direct
or indirect (A) acquisition or purchase of a majority of the membership
interests of or other equity interest in either of the Sellers, (B) a merger,
consolidation or other business combination transaction involving the Sellers,
unless the surviving or resulting entity has agreed to assume all of the
obligations of each of the Sellers under this Agreement, or (C) sale of any
portion of the assets of the Fishers Distribution Center or the Transferred
Assets (other than sales of Products in the ordinary course of business) of the
Sellers, other than the transactions contemplated by this
Agreement.

       

      
        
          
          

        

        
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      (b)           Sellers
shall promptly (but in any event within one Business Day) notify the Purchaser
orally and in writing of any Acquisition Proposal or any inquiry regarding the
making of any Acquisition Proposal, indicating, in connection with such notice,
the name of the Person making such Acquisition Proposal or inquiry and the terms
and conditions of any such Acquisition Proposal or inquiry.

       

      Section 6.13   Fishers Sub-Lease
Payments.  Pursuant
to Sections 3.2 and 3.3 of the Fishers Sub-Lease, following each calendar
year end, EDC USA and the Sublandlord are obligated to reconcile certain amounts
owed between them based on the Sublandlord Year-End Statement and the Subtenant
Year-End Statement (as each such term is defined in the Fishers Sub-Lease),
respectively (the “Sub-Lease
Adjustment”).  Notwithstanding anything in this Agreement or
the Ancillary Agreements to the contrary, following the Closing, EDC USA shall
remain obligated to perform all acts necessary to complete the Sub-Lease
Adjustment for 2008, including, without limitation, the preparation of the
Subtenant Year-End Statement for such calendar year.  In the event
that the Sub-Lease Adjustment for 2008 results in EDC USA being obligated to pay
to the Sublandlord additional amounts pursuant to the Fishers Sub-Lease, EDC USA
shall pay such amounts directly to the Sublandlord.  In the event that
the Sub-Lease Adjustment for 2008 results in the Sublandlord owing to EDC USA
additional amounts pursuant to the Fishers Sub-Lease, the parties shall instruct
the Sublandlord to pay such amount directly to EDC USA.

       

      Section 6.14   Sellers’ Collection of
Accounts Receivable.  Each
of the Sellers shall collect its accounts receivable, including those referred
to in Section 2.2(f), in the ordinary course of business, consistent with past
practice.

       

      Section 6.15   Transition
Services.  Following the Closing, each Party shall perform the
transition services for the other Party, and the other Party shall pay for such
services at the costs, set forth on Schedule 6.15,
provided that each Party shall use commercially reasonable efforts to mutually
agree to refinements and additional detail regarding the services prior to the
Closing.

       

      
        
          
          

        

        
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      ARTICLE VII

      RESTRICTIVE
COVENANTS

       

      Section 7.1    Confidential
Information.

       

      (a)           Each
Seller recognizes and acknowledges that such Seller has had access to certain
Confidential Information.  Each Seller expressly acknowledges that the
Confidential Information is considered by the Purchaser to be a unique asset,
access to and knowledge of which are essential to preserve the goodwill and
going business value of the Transferred Assets for the benefit of the Purchaser
and the Purchaser’s existing and future Affiliates.  In recognition of
this fact, each Seller agrees that, from the Closing Date until the third (3rd)
anniversary  thereof, such Seller will keep confidential and not
disclose any Confidential Information in the possession of such Seller to any
Person, and that such Seller will not, except as provided in Section 7.1(b),
use, misappropriate, exploit or publish any of such Confidential Information
without the express written authorization of Purchaser.  Nothing
herein shall prohibit the Sellers European Affiliates from using the
Confidential Information solely in the conduct of their business outside of
North America or in the activities permitted by Section 7.2(a)(ii), so long
as the Sellers maintain the confidentiality of such Confidential
Information.

       

      (b)           For
purposes of this Agreement, “Confidential
Information” shall mean all confidential and proprietary technical,
business and financial information relating to the Transferred Assets, the
Assumed Liabilities or the Business conducted at the Fishers Distribution
Center, including, but not limited to, marketing and financial information,
personnel, sales and statistical data, plans for future development, computer
programs, information and knowledge pertaining to Products and services offered,
inventions, innovations, designs, ideas, trade secrets, technical data, computer
source codes, Software, proprietary information, construction, advertising,
sales methods and systems, sales and profit figures, customer and client lists,
and relationships with customers, clients, suppliers and others who have
business dealings with the Sellers and their Affiliates, and information with
respect to various techniques, procedures, processes and
methods.  Confidential Information also includes confidential or
proprietary information received by the Sellers from third parties subject to a
duty on the Sellers’ part to maintain the confidentiality of such
information.  Notwithstanding the foregoing, Confidential Information
shall not include information that is (i) in the public domain other than as a
result of a breach by either Seller of this Section 7.1, (ii) required to
be produced by a Seller under order of a court of competent jurisdiction or a
valid administrative or congressional subpoena; provided, however, that upon
issuance of any such order or subpoena, such Seller shall promptly notify
Purchaser and shall provide Purchaser with an opportunity (if then available) to
contest the propriety of such order or subpoena or restrict or condition the
disclosure of such Confidential Information (or to arrange for appropriate
safeguards against any further disclosure by the court or administrative or
other body seeking to compel disclosure of such Confidential Information), or
(iii) previously received in good faith by such Seller without secrecy
obligation from sources other than the Purchaser and that did not originate,
directly or indirectly, from the Sellers.

       

      Section 7.2    Agreement Not to
Compete.

       

      
        
          
          

        

        
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      (a)           From
the Closing Date until the third (3rd) anniversary thereof, each Seller
agrees that such Seller shall not, and shall cause its Affiliates not to,
directly or indirectly, engage in the Business anywhere in North
America.  For purposes of this Agreement, “engage in the Business”
means to be financially interested in, own, manage, operate, control or
participate in the ownership, management, operation or control of, or furnish
any capital to or be connected in any manner with, or provide any services as a
consultant or advisor for, or use or permit its name to be used in connection
with, all or any portion of the Business or any Person that is involved in all
or any portion of the Business; provided, however, nothing
contained in this Section 7.2 shall prevent (i) the Sellers from holding
for investment no more than five percent (5%) of any class of equity securities
of a company whose securities are publicly traded, or  conducting
manufacturing operations at the Kings Mountain Facility for the sale of Products
to the Purchaser for a period of four months following the Closing Date; or (ii)
the Sellers European Affiliates from delivering Products to International
Customers in North America so long as such Products are either (x) manufactured
outside of North America or (y) manufactured in North America by a Person other
than the Sellers European Affiliates or their Affiliates and the Purchaser is
provided a final right of first refusal to manufacture such Products which the
Purchaser does not exercise, in accordance with the procedures in
Section 7.2(b).  “International
Customers” means  customers of the Sellers European Affiliates
which request delivery of Products to a location in North America.

       

      (b)           If
Sellers European Affiliates intend to contract with a Person other than the
Sellers European Affiliates or their Affiliates  to manufacture
Products in North America for delivery to International Customers pursuant to
Section 7.2(a)(ii)(y), then Sellers European Affiliates shall secure bids for
such manufacture from third party manufacturers.  After such third
party manufacturers have provided bona fide bids to manufacture such Products,
the Sellers European Affiliates shall offer the Purchaser the
right  to manufacture such Products on the same terms and conditions
as the lowest bid so received from any such third party.  If the
Purchaser accepts such offer, which acceptance must occur within two (2)
Business Days of the Purchaser’s receipt of written notice of the terms of such
lowest bid, then Purchaser shall manufacture such Products for Sellers European
Affiliates.  If Purchaser does not accept such offer within such two
(2) Business Day period, then the Sellers European Affiliates shall be permitted
to use the third party manufacturer which provided such lowest bid to
manufacture such Products pursuant to the terms and conditions of such bona fide
bid.  If the terms and conditions at which such third party
manufacturer with the lowest bona fide bid manufactures such Products change or
are proposed to be changed or modified, then prior to the implementation of such
change or modification, the Sellers European Affiliates must first offer to
Purchaser the right to manufacture such Products, instead of such third party
manufacturer, on the same terms and conditions as such changed or modified terms
and conditions and subject to the same two (2) Business Day response requirement
set forth above.

       

      Section 7.3    Non-Solicitation.

       

      (a)           From
the Closing Date until the third (3rd) anniversary thereof, each Seller agrees
that it shall not, and shall cause its Affiliates not to, directly or
indirectly, solicit or accept business from or interfere with the Purchaser’s
relationship with any Restricted Customer with respect to the
Business.  “Restricted Customer”
means any Person that is located in North America which was a customer of either
Seller’s Business on the Closing Date or during the twelve month period prior
thereto.  Nothing contained in this Section 7.3(a) shall prevent
(i) either Seller from accepting Business from Restricted Customers at the King
Mountain Facility for the manufacture of Products that are sold to the Purchaser
during the four month period after the Closing Date or (ii) the Sellers European
Affiliates from delivering Products to International Customers in North America
in accordance with Section 7.2(a)(ii).

       

      
        
          
          

        

        
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      (b)           From
the Closing Date until the third (3rd) anniversary thereof, each Seller agrees
that it shall not, and shall cause its Affiliates not to, directly or
indirectly, (i) approach, cause, solicit, induce or attempt to induce, any
Transferred Employee to leave their employment or (ii) hire any Transferred
Employee.  From the Closing Date until the third (3rd) anniversary
thereof, unless EDC otherwise agrees, the Purchaser agrees that it shall not,
and shall cause its Affiliates not to, directly or indirectly, (i) approach,
cause, solicit, induce or attempt to induce, any Retained Employee to leave
their employment or (ii) hire any Retained Employee

       

      Section 7.4    Severability and Reformation
of Covenants.  If
any provision of Sections 7.1, 7.2 or 7.3 is adjudged to be void or
unenforceable, in whole or in part, such adjudication shall not affect the
validity of the remainder of Sections 7.l, 7.2 or 7.3.  In the
event that any portion of Sections 7.1, 7.2 or 7.3 should ever be
adjudicated to exceed the maximum time, geographic, service, product or other
limitations permitted by applicable Law, then such provisions shall be deemed
reformed to the maximum time, geographic, service, product or other limitations
permitted by applicable Law.

       

      Section 7.5    Extension of
Restrictions.  Each
Seller agrees that, in the event that a Seller violates Sections 7.1, 7.2
or 7.3, the period of the restriction violated by such Seller shall be extended
by the period of time of such Seller’s violation thereof.

       

      Section 7.6    Equitable Relief and
Damages.  Each
Seller acknowledges that the restrictions contained in Sections 7.1, 7.2,
and 7.3, are, in view of the acquisition of the Transferred Assets and the
nature of the Business, reasonable and necessary to protect the legitimate
interests of the Purchaser and that any violation of any provisions of those
paragraphs will result in irreparable injury to Purchaser.  Each
Seller also acknowledges that Purchaser shall be entitled to temporary and
permanent injunctive relief, without the necessity of proving actual
damages.  The Purchaser may also pursue any other rights or remedies
to which Purchaser may be entitled, including, without limitation, an equitable
accounting of all earnings, profits and other benefits arising from any such
violation, which rights shall be cumulative.

       

      Section 7.7    Assignment of
Restrictions.  Purchaser
shall have the right to assign its rights under this Article VII in
connection with a merger involving Purchaser or any of its Affiliates, or a sale
or transfer of the Business or all, or substantially all, of the business and
assets of Purchaser or any of its Affiliates, provided that such successor,
assign or surviving entity assumes the obligations of Purchaser under this
Agreement, and each Seller agrees to be obligated by the terms of this
Article VII to any successor, assign or surviving entity.

       

      ARTICLE VIII

      CLOSING
CONDITIONS

       

      Section 8.1    General
Conditions.  The
respective obligations of the Purchaser and the Sellers to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment,
at or prior to the Closing, of each of the following conditions, any of which
may, to the extent permitted by applicable Law, be waived in writing by either
Party in its sole discretion (provided that such waiver shall only be effective
as to the applicable condition of such Party):

       

      
        
          
          

        

        
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      (a)           No
Governmental Entity shall have enacted, issued, promulgated, enforced or entered
any Law (whether temporary, preliminary or permanent) that is then in effect and
that enjoins, restrains, makes illegal or otherwise prohibits the consummation
of the transactions contemplated by this Agreement.

       

      (b)           All
material consents of, or registrations, declarations or filings with, any
Governmental Entity legally required for the consummation of the transactions
contemplated by this Agreement shall have been obtained or filed.

       

      (c)           No
action by a Governmental Entity shall be pending against the Sellers or the
Purchaser seeking to restrain or prohibit, or to obtain substantial damages with
respect to, the consummation of the transactions contemplated by this Agreement
or any of the Ancillary Agreements.

       

      Section 8.2    Conditions to Obligations of
the Sellers.  The
obligations of the Sellers to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment, at or prior to the Closing, of
each of the following conditions, any of which may be waived in writing by the
Sellers in their sole discretion:

       

      (a)           The
representations and warranties of the Purchaser contained in this Agreement
shall be true on the Closing Date with the same effect as though such
representations and warranties were made as of such date, except where the
failure of such representations and warranties to be true on the Closing Date
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

       

      (b)           The
Purchaser shall have performed all obligations and agreements and complied with
all covenants and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing.

       

      (c)           The
Purchaser shall have delivered, or caused to be delivered, to the Sellers the
documents listed in Section 9.3 hereof.

       

      Section 8.3    Conditions to Obligations of
the Purchaser.  The
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment, at or prior to the Closing, of
each of the following conditions, any of which may be waived in writing by the
Purchaser in its sole discretion:

       

      (a)           The
representations and warranties of the Sellers contained in this Agreement shall
be true on the Closing Date with the same effect as though such representations
and warranties were made as of such date, except where the failure of such
representations and warranties to be true on the Closing Date would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

       

      
        
          
          

        

        
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      (b)           Each
of the Sellers shall have performed all obligations and agreements and complied
with all covenants and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing (other than the covenant set
forth in Section 6.11 which shall not be a condition to Closing).

       

      (c)           All
of the Consents set forth on Schedule 8.3(c)
shall have been obtained.

       

      (d)           The
Sellers shall have delivered, or caused to be delivered, to the Purchaser the
documents listed in Section 9.2 hereof.

       

      (e)           The
Sellers shall have delivered to the Purchaser the Union Agreement executed by
the Union and EDC USA.

       

      (f)           The
Sellers shall have delivered to the Purchaser a consent to assignment, in the
form of Exhibit 8.3(f), executed by each of Sublandlord and Master
Landlord.

       

      (g)           The
Sellers shall have executed and delivered to the Purchaser the Security
Documents, in form and substance satisfactory to the Purchaser, in accordance
with Section 11.9.

       

      (h)           No
Material Adverse Effect shall have occurred since the date of this
Agreement.

       

      ARTICLE IX

      CLOSING

       

      Section 9.1    Closing.  Subject
to the satisfaction or waiver of the conditions set forth in Article VIII, the
closing (the “Closing”) shall occur
on December 31, 2008 or such other date as the Parties may agree (the
“Closing
Date”); provided that the Purchaser shall be entitled to extend the
Closing Date for a reasonable period if a Material Adverse Effect has occurred
because of a material default under the Fishers Sub-Lease or any UMG Supply
Agreement and the time period for cure set forth in such agreement has not yet
expired.  The Closing shall take place at the offices of Paul,
Hastings, Janofsky & Walker LLP, Park Avenue Tower, 75 East 55th  Street,
First Floor, New York, New York  10022, or at such other place as the
Parties may agree.

       

      Section 9.2    Sellers Closing
Deliveries.  At
the Closing, the Sellers shall deliver to the Purchaser the
following:

       

      (a)           certificates
executed by duly authorized officers of the Sellers as to compliance with the
conditions set forth in Sections 8.3(a) and 8.3(b) hereof;

       

      (b)           the
bill of sale in the form of Exhibit 9.2(b) (the “Bill of Sale”)
executed by each of the Sellers;

       

      (c)           the
assignment and assumption agreement in the form of Exhibit 9.2(c) (the
“Assignment and
Assumption Agreement”) executed by each of the Sellers;

       

      
        
          
          

        

        
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      (d)           the
sublease assignment, assumption and acceptance agreement with respect to the
Fishers Sub-Lease Agreement in the form of Exhibit 9.2(d) (the “Assignment of Fishers
Sub-Lease Agreement”) executed by each of the Sellers;

       

      (e)           proof
of receipt of the Consents identified in Schedule 8.3(c);

       

      (f)           a
non-foreign person affidavit executed by each Seller and in form and substance
that reasonably complies with the requirements of Section 1445 of the Code
and the Treasury Regulations thereunder;

       

      (g)           proof
of release of all Liens other than Permitted Liens on the Transferred Assets;
and

       

      (h)           all
other documents required to be entered into or delivered by the Sellers at or
prior to the Closing pursuant hereto.

       

      Section 9.3    Purchaser Closing
Deliveries.  At
the Closing, the Purchaser shall have delivered, or caused to be delivered, to
the Sellers the following:

       

      (a)           the
Purchase Price to be paid at the Closing pursuant to Section 3.2(a), paid
and delivered in accordance with such Section;

       

      (b)           a
certificate of an authorized officer as to compliance with the conditions set
forth in Sections 8.2(a) and 8.2(b) hereof;

       

      (c)           the
Assignment and Assumption Agreement executed by the Purchaser;

       

      (d)           the
Assignment of Fishers Sub-Lease Agreement executed by the
Purchaser;

       

      (e)           a
subordination agreement relating to Purchaser’s security interest pursuant to
Section 11.9 hereof executed by Purchaser; and

       

      (f)           all
other documents required to be entered into or delivered by the Purchaser at or
prior to the Closing pursuant hereto.

       

      ARTICLE X

      TERMINATION

       

      Section 10.1    Termination.  This
Agreement may be terminated at any time prior to the Closing:

       

      (a)           by
mutual written consent of the Purchaser and the Sellers;

       

      (b)           by
either the Sellers or the Purchaser if the Closing shall not have occurred by
March 31, 2009 (the “Termination Date”);
provided, that the right to terminate this Agreement under this
Section 10.1(b) shall not be available if the failure of the Party so
requesting termination to fulfill any obligation under this Agreement shall have
been the cause of the failure of the Closing to occur on or prior to such
date;

       

      
        
          
          

        

        
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      (c)           by
either the Sellers or the Purchaser in the event that any Governmental Entity
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and nonappealable; provided, that the party so requesting termination
shall have complied with Section 6.7(a);

       

      (d)           by
the Sellers, if (i) the Sellers are not in material breach of their obligations
under this Agreement and there has been a breach of a representation, warranty,
covenant or agreement of the Purchaser contained in this Agreement such that the
conditions set forth in Section 8.2(a) hereof would not be satisfied, and such
breach has not been cured within twenty (20) calendar days after written notice
thereof to the Purchaser; provided, however, that no cure
period shall be required for a breach which by its nature cannot be cured; or
(ii)(A) any petition, arrangement, reorganization, or the like under any
insolvency or bankruptcy law is filed by or against the Purchaser (and if such
filing is involuntary, the Purchaser fails to have same dismissed within 30 days
from the date of filing), or (B) the Purchaser becomes the subject of an
assignment for the benefit of creditors or the appointment of a receiver for any
material part of the Purchaser’s properties or admits in writing its inability
to pay debts as they become due; or

       

      (e)           by
the Purchaser, if (i) the Purchaser is not in material breach of its obligations
under this Agreement and there has been a breach of a representation, warranty,
covenant or agreement of either Seller contained in this Agreement such that the
conditions set forth in Section 8.3(a) hereof would not be satisfied, and such
breach has not been cured within twenty (20) calendar days after written notice
thereof to the Sellers; provided, however, that no cure
period shall be required for a breach which by its nature cannot be cured; or
(ii)(A) any petition, arrangement, reorganization, or the like under any
insolvency or bankruptcy law is filed by or against either Seller (and if such
filing is involuntary, such Seller fails to have same dismissed within 30 days
from the date of filing), or (B) either Seller becomes the subject of an
assignment for the benefit of creditors or the appointment of a receiver for any
material part of such Seller’s properties or admits in writing its inability to
pay debts as they become due.

       

      The Party
seeking to terminate this Agreement pursuant to this Section 10.1 (other
than Section 10.1(a)) shall give prompt written notice of such termination
to the other Party.

       

      Section 10.2    Effect of
Termination.  In
the event of termination of this Agreement as provided in Section 10.1,
this Agreement, other than Sections 6.5 (Public Announcements), 12.1
(Notices), 12.5 (Controlling Law), 12.6 (Dispute Resolution), 12.7
(Severability), 12.16 (Transaction Costs) and this Section 10.2, shall forthwith
become void and there shall be no liability on the part of either Party hereto
except as set forth in Section 12.16.

       

      ARTICLE XI

      INDEMNIFICATION

       

      Section 11.1    Survival of Representations
and Warranties.  All
representations and warranties made by the Parties in this Agreement shall
survive the Closing for a period of eighteen (18) months, except that (a)
the representations and warranties contained in Sections 4.1, 4.2, 4.6, 5.1
and 5.2 shall survive forever (the Sections contained in this clause (a),
collectively, the “Fundamental
Representations”), (b) the representations and warranties contained in
Sections 4.7, 4.17 and 4.22 shall survive for the period of the applicable
statute of limitations, (c) the representations and warranties contained in
Section 4.18 shall survive until the fifth (5th)
anniversary of the Closing Date, (d) any representation or warranty as to which
a claim (including without limitation a contingent claim) shall have been
asserted prior to the expiration of such representation or warranty and of which
the Indemnifying Party shall have been notified pursuant to this Agreement
within thirty (30) days after the expiration of the applicable representation or
warranty shall continue in effect with respect to such claim until such claim
shall have been finally resolved or settled in accordance with the terms hereof,
and (e) any representation or warranty contained in this Agreement made by any
Party or any information furnished by any Party that was made by such Party
fraudulently or in bad faith, shall indefinitely survive the Closing. All covenants and
agreements of the Parties shall survive the Closing in accordance with their
terms.

       

      
        
          
          

        

        
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      Section 11.2    Indemnification by the
Sellers.  Each
of the Sellers shall, jointly and severally, defend, indemnify and hold harmless
the Purchaser, its Affiliates and their respective Representatives, successors
and assigns (collectively, the “Purchaser Indemnified
Parties”) from and against any and all losses, damages, liabilities,
deficiencies, audits, claims, interest, awards, judgments, settlements, fines,
penalties, fees, Taxes, costs and expenses (including reasonable attorneys’
fees, costs and other out-of-pocket expenses incurred in investigating,
preparing, defending or settling the foregoing) (hereinafter collectively,
“Losses”)
arising out of, resulting from or relating to:

       

      (a)           any
breach of any representation or warranty of either Seller contained in this
Agreement or any Ancillary Agreement (without giving effect to any qualification
as to “materiality” or “Material Adverse Effect”  contained
therein);

       

      (b)           any
breach of any covenant or agreement by either Seller contained in this Agreement
or any Ancillary Agreement;

       

      (c)           any
Excluded Liability;

       

      (d)           any
Liability for federal, state, local or foreign income or other Tax (i) of either
Seller or its Affiliates, (ii) payable with respect to or that may be asserted
against the Business or the Transferred Assets for any period (or partial
period) prior to the Closing, (iii) incident to or arising as a consequence of
the consummation by the Sellers of the transactions contemplated hereby
(including income Taxes arising as a result of the Sellers transferring the
Transferred Assets) or (iv) payable by either Seller pursuant to Treasury
Regulation Section 1.1502-6 (or similar provision of state, local or foreign
Law), as a transferee or successor, by Contract or otherwise;

       

      (e)           any
Liability arising as a result of or in connection with either Seller’s failure
to comply with “bulk sales,” “bulk transfers” or similar Laws;

       

      
        
          
          

        

        
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      (f)           any
Liability arising out of or in connection with (i) any termination of employment
or layoff of any Former Business Employee other than as specifically provided in
Section 6.3(g)(v) or (ii) either Seller’s failure to comply with the WARN
Act;

       

      (g)           any
Liability arising out of either Seller’s non-compliance with applicable Laws or
agreements, express or implied, respecting employment, employment practices,
wages and hours, any collective bargaining agreement or any other terms and
conditions of employment applicable to the Former Business Employees or Fishers
Business Employees, including but not limited to those Liabilities arising out
of EEOC Charge No. 470-2008-01745; or

       

      (h)           the
ownership, operation or use of the Transferred Assets and the operation of the
Fishers Distribution Center prior to the Closing Date;

       

      (i)           any
Liabilities arising out of  Koninklijke Philips Electronics N.V. and
U.S. Philips Corporation v. Entertainment Distribution Company (USA) LLC et
al.

       

      Section 11.3    Indemnification by the
Purchaser.  The
Purchaser shall defend, indemnify and hold harmless the Sellers, their
Affiliates and their respective Representatives, successors and assigns
(collectively, the “Sellers Indemnified
Parties”) from and against any and all Losses  arising out of,
resulting from or relating to:

       

      (a)           any
breach of any representation or warranty of the Purchaser contained in this
Agreement or any Ancillary Agreement;

       

      (b)           any
breach of any covenant or agreement by the Purchaser contained in this Agreement
or any Ancillary Agreement;

       

      (c)           any
Assumed Liability; or

       

      (d)           the
ownership, operation or use of the Transferred Assets and the operation of the
Business at the Fishers Distribution Center on or after the Closing
Date.

       

      Section 11.4    Environmental
Indemnification.  From
the Closing Date until the fifth (5th)
anniversary thereof, each of the Sellers shall indemnify, defend and hold the
Purchaser Indemnified Parties harmless from and against any and all Losses
directly or indirectly arising out of, resulting from or relating to (i) any
breach of Sellers’ representations in Section 4.18 or (ii) the cleanup or
Remediation (as defined below) of any unlawful Release of Hazardous Materials by
such Seller or caused by such Seller’s employees, agents or independent
contractors, on, under or about the Fishers Distribution Center which Release
shall have occurred at any time prior to the Closing regardless of the date of
discovery but within such five (5) year period.  If prior to the fifth
(5th) anniversary of the Closing Date, the Purchaser determines that (i) an
unlawful Release had occurred in, on, under or about the Fishers Distribution
Center prior to the Closing; (ii) the Release continues to exist in, on, under
or about the Fishers Distribution Center and (iii) such Release was not the
result of the acts or omissions of the owner or another operator of the Fishers
Distribution Center, an adjoining property owner or originating from an
adjoining property or properties, then in such event Purchaser shall give each
Seller prompt written notice which notice shall provide reasonable detail of the
nature of the Release and any supporting information or
documentation.  Within thirty (30) days of receipt of notice of an
unlawful Release, Sellers shall either (a) confirm liability in whole pursuant
to this Section 11.4, (b) deny liability in whole as to such Release or (c)
confirm liability in part and deny liability in part pursuant to this Section
11.4.  If Sellers shall confirm responsibility for such Release, in
whole or in part, Sellers shall at Sellers’ sole cost and expense abate, monitor
and/or remediate (“Remediation”) the
Release to the extent the Sellers have confirmed liability with respect thereto
in accordance with Environmental Laws and subject to Governmental Entities
having jurisdiction thereof. Sellers shall provide Purchaser with copies of
relevant reports and data regarding the Remediation.  If a response is
not received by Purchaser within such 30-day period, then Sellers shall be
conclusively deemed to have agreed that the Sellers are responsible for the
Release; provided that if the Sellers deny responsibility in whole or in part,
such denial is not conclusive on the Purchaser.  If the Parties are
not able to resolve any dispute over a claim brought under this Section 11.4
within thirty (30) days after the receipt of a response by Purchaser denying
liability in whole or in part, such dispute shall be subject to
Section 12.6.

       

      
        
          
          

        

        
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      Section 11.5    Procedures.

       

      (a)           Notice of Asserted
Liability.  In order for a Purchaser Indemnified Party or
Sellers Indemnified Party (the “Indemnified Party”)
to be entitled to any indemnification provided for under this Agreement in
respect of, arising out of or involving a Loss or a claim or demand that may
result in a Loss (a “Liability Claim”),
such Indemnified Party shall deliver notice thereof to the Party against whom
indemnity is sought (the “Indemnifying Party”)
promptly after receipt by such Indemnified Party of written notice of the
Liability Claim (the “Claim Notice”),
describing in reasonable detail the facts giving rise to any claim for
indemnification hereunder and the amount or method of computation of the amount
of such claim (estimated, if necessary and to the extent
feasible).  No delay in or failure to give a Claim Notice by the
Indemnified Party to the Indemnifying Party pursuant to this
Section 11.5(a) will adversely affect any  rights or remedies
that the Indemnified Party has under this Agreement or alter or relieve the
Indemnifying Party of its obligation to indemnify the Indemnified Party to the
extent that such delay or failure has not materially prejudiced the Indemnifying
Party.

       

      (b)           Third Party
Claims.  If any Claim Notice identifies a Liability Claim
brought by a third party (a “Third Party Claim”),
then the Indemnifying Party has the right, exercisable by written notice to the
Indemnified Party within 15 days after receipt of a Claim Notice from the
Indemnified Party relating to a Third Party Claim in respect of which indemnity
may be sought under this Article XI, to assume and conduct the defense of
such Third Party Claim in accordance with the limits set forth in this
Agreement, with counsel selected by the Indemnifying Party and reasonably
acceptable to the Indemnified Party; provided, however, that (i) the
Third Party Claim solely seeks (and continues to seek) monetary damages; or (ii)
the Indemnifying Party expressly agrees in writing to be fully responsible for
all Losses (subject to the limits in this Article XI) relating to such
Third Party Claim (the conditions set forth in clauses (i) and (ii) are,
collectively, the “Litigation
Conditions”).

       

      (i)           The
Indemnifying Party or the Indemnified Party, as the case may be, has the right
to participate in, at its own expense, the defense of any Third Party Claim that
the other is defending as provided in this Agreement.  Notwithstanding
anything to the contrary contained in this Agreement, such Indemnified Party
shall at all times have the right to fully participate in such defense at its
own expense directly or through counsel; provided, however, if the named
parties to the action or proceeding include both the Indemnifying Party and the
Indemnified Party and representation of both parties by the same counsel would
be inappropriate because of a conflict or potential conflict between the
Indemnified Party and the Indemnifying Party as defined by applicable standards
of professional conduct, the reasonable expense of separate counsel for such
Indemnified Party shall be paid by the Indemnifying Party provided that such
Indemnifying Party shall be obligated to pay for only one counsel for all
Indemnified Parties in any jurisdiction.

       

      
        
          
          

        

        
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      (ii)           If
the Indemnifying Party has assumed the defense of a Third Party Claim as
provided in this Section 11.5(b):

       

      (A)           the
Indemnifying Party will not be liable for any legal expenses subsequently
incurred by the Indemnified Party in connection with the defense of the Third
Party Claim; provided, however, that if (i)
any of the Litigation Conditions ceases to be met or (ii) the Indemnifying Party
is not actively and diligently defending such Third Party Claim, the Indemnified
Party may assume its own defense, and the Indemnifying Party will be liable for
all costs and expenses paid or incurred in connection with such defense, subject
to the limits in this Article XI;

       

      (B)           the
Indemnifying Party may not, without the prior written consent of the Indemnified
Party, consent to a settlement of, or the entry of any judgment arising from,
any such Third Party Claim that (i) does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the Indemnified Party of
a complete release from all liability in respect of such Third Party Claim, (ii)
grants any injunctive or equitable relief or (iii) may reasonably be expected to
have a material adverse effect on the affected business of the Indemnified
Party; and

       

      (C)           the
Indemnified Party shall cooperate with the Indemnifying Party in such defense
and make available to the Indemnifying Party all witnesses, pertinent records,
materials and information in the Indemnified Party’s possession or under the
Indemnified Party’s control relating thereto as is reasonably required by the
Indemnifying Party.

       

      (iii)           If
the Indemnifying Party does not assume the defense of a Third Party Claim in
accordance with this Section 11.5(b), the Indemnified Party may continue to
defend, and shall have the right to settle, such Third Party Claim.

       

      (c)           Direct
Claims.  In the event the Claim Notice does not involve a Third
Party Claim, within thirty (30) days after receipt of the Claim Notice (the
“Direct Claims Dispute
Period”), the Indemnifying Party shall by written notice (the “Response Notice”) to
the Indemnified Party either (a) concede liability in whole as to the Claimed
Amount, (b) deny liability in whole as to such Claimed Amount, or (c) concede
liability in part and deny liability in part of such Claimed
Amount.  If a Response Notice is not received by the Indemnified Party
prior to the expiration of the Direct Claims Dispute Period, then the
Indemnifying Party shall be conclusively deemed to have agreed that the full
Claimed Amount is owed to the Indemnified Party.  If the Parties are
not able to resolve any dispute over a claim brought under this subsection (c)
within thirty (30) days after the receipt of a Response Notice denying liability
in whole or in part, such dispute shall be subject to
Section 12.6.

       

      
        
          
          

        

        
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      Section 11.6    Limits on
Indemnification.

       

      (a)           The
right to indemnification, reimbursement or other remedy based upon the
representations, warranties, covenants and obligations contained in this
Agreement shall not be affected by any investigation conducted with respect to,
or any knowledge acquired at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date, or if the Closing occurs with
such knowledge, with respect to the accuracy or inaccuracy of or compliance with
any such representation, warranty, covenant or obligation; it being agreed that
such representations, warranties, covenants and obligations are intended to
reflect a negotiated allocation of risk between the parties.

       

      (b)           Notwithstanding
anything to the contrary contained in this Agreement:  (i) the Sellers
shall not be liable to any Purchaser Indemnified Party for any claim for
indemnification pursuant to Section 11.2(a) unless and until the aggregate
amount of indemnifiable Losses that may be recovered from the Sellers equals or
exceeds $200,000, in which case the Sellers shall be liable only for the Losses
in excess of such amount; and (ii) the maximum aggregate amount of indemnifiable
Losses which may be recovered by the Purchaser Indemnified Parties pursuant to
Section 11.2(a) shall be an amount equal to $4,250,000, provided, that the
limitations in (i) and (ii) shall not apply to any inaccuracy in or breach of
Section 4.18 or a Fundamental Representation.

       

      (c)           For
all purposes of this Article XI, “Losses” shall be net of any insurance or other
recoveries actually received by the Indemnified Party or its Affiliates in
connection with the event or fact giving rise to the right of indemnification;
provided that neither the Indemnified Party nor any of its Affiliates shall be
obligated to seek any insurance or other recoveries.

       

      Section 11.7    Set Off.  The
Purchaser may offset any rights to indemnification or other amounts payable to
it under this Agreement following the Closing against any amounts due or to
become due to the Sellers under this Agreement or any Ancillary
Agreement.

       

      Section 11.8    Consequential
Damages.  Notwithstanding
anything to the contrary contained in this Agreement, no Indemnifying Party
shall, in any event, be liable under Section 11.2, Section 11.3 or Section 11.4 to an
Indemnified Party for Consequential Damages except, in each case, to the extent
payable to a third party.

       

      Section 11.9    Security
Documents.  In
order to secure the payment of the indemnification obligations of each Seller
pursuant to this Article XI, the Sellers agree to enter into a security
agreement, pledge agreement, and such mortgages, financing statements and other
agreements as may be requested by Purchaser, (the “Security
Documents”)  in favor of the Purchaser granting the Purchaser a
perfected lien on and security interest in those assets of each Seller which the
Purchaser designates, second in priority only to the lien of the lenders under
the Senior Credit Facility, which Senior Credit Facility lien will secure as of
the Closing Date a loan in the principal amount not to exceed $9 million and
such SWAP agreement obligations as are then existing under the Senior Credit
Facility. The Security Documents shall prohibit each of the Sellers from paying
any dividends (subject to payment of dividends with provision for cash
collateralization once the Senior Credit Facility has been satisfied in full),
granting any liens or incurring any indebtedness for borrowed money other than
under the Senior Credit Facility (as it may be amended, replaced or restructured
over time) not to exceed the obligations outstanding under such facility at such
time (as it may be reduced over time), and shall contain such other covenants as
are customary in loan or security agreements.

       

      
        
          
          

        

        
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      Section 11.10    Exclusivity.  The
Purchaser and the Sellers acknowledge and agree that (a) following the Closing,
except for fraud or willful misconduct, the indemnification provisions of
Sections 11.2, 11.3 and 11.4, shall be the sole and exclusive remedies of
the Purchaser and the Sellers for any breach by the other Party of the
representations and warranties in this Agreement and for the failure by the
other Party to perform and comply with any covenants and agreements in this
Agreement, except that if any of the provisions of this Agreement are not
performed in accordance with their terms or are otherwise breached, the Parties
shall be entitled to specific performance of the terms thereof in addition to
any other remedy at Law or in equity.

       

      ARTICLE XII

      MISCELLANEOUS

       

      Section 12.1    Notices.  All
notices, communications and deliveries required or made hereunder must be made
in writing signed by or on behalf of the Party making the same, and shall be
delivered personally or by telecopy transmission or by a national overnight
courier service or by registered or certified mail (return receipt requested)
(with postage and other fees prepaid) as follows:

      

      To the
Purchaser:                                 Sony
DADC US Inc.

      550 Madison Avenue
(555/21)

      New York, NY 10022

      Attn:  Michael Frey,
President

      Facsimile No.: (212)
833-4293

      

      with a
copy
to:                                      Sony
Corporation of America

      550 Madison Avenue, 27th
Floor

      New York, NY 10022

      Attn:  SVP, Legal
Department

      Facsimile No.: (212)
833-6809

      

      Cozen O’Connor

      1900 Market Street

      Philadelphia, PA 19103

      Attn:  Larry P.
Laubach

      Facsimile No.: (215)
701-2346

      

      To the
Sellers:                                       Entertainment
Distribution Company, LLC

      825 8th Avenue

      29th Floor

      New York, NY 10019

      Attn:  Tom Costabile,
President

      Facsimile No.: (917)
591-8623

      

      
        
          
          

        

        
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      with a
copy
to:                                      Paul,
Hastings, Janofsky & Walker LLP

      600 Peachtree Street, NE, Suite
2400

      Atlanta,
Georgia  30308-2222

      Attn:  Elizabeth H.
Noe

      Facsimile No.: (404)
685-5287

       

      or to
such other representative or at such other address of a Party as such Party may
furnish to the other Parties in writing in accordance with this
Section.  Any such notice, communication or delivery shall be deemed
given or made (a) on the date of delivery, if delivered in person, (b) upon
transmission by facsimile if receipt is confirmed, (c) on the first (1st)
Business Day following delivery to a national overnight courier service or (d)
on the fifth (5th) Business Day following it being mailed by registered or
certified mail.

       

      Section 12.2    Schedules and
Exhibits.  The
Schedules and Exhibits are hereby incorporated into this Agreement and are
hereby made a part hereof as if set out in full herein.

       

      Section 12.3    Assignment; Successors in
Interest.  This
Agreement may not be assigned by operation of Law or otherwise without the
express written consent of the Sellers and the Purchaser (which consent may be
granted or withheld in the sole discretion of the Sellers or the Purchaser), as
the case may be; provided, however, that the
Purchaser may assign this Agreement and any or all rights or obligations
hereunder (including Purchaser’s rights to purchase the Transferred Assets and
to seek indemnification hereunder) to any Affiliate of Purchaser without the
consent of the Sellers, provided that no such assignment shall relieve the
Purchaser of any of its obligations hereunder; provided, further, however, that the
Sellers may collaterally assign their rights under this Agreement to Wachovia
Bank, National Association, in its capacity as Administrative Agent, to secure
their obligations under the Senior Credit Facility.  This Agreement
shall be binding upon and shall inure to the benefit of the Parties and their
respective successors and permitted assigns, and any reference to a Party shall
also be a reference to the successors and permitted assigns
thereof.

       

      Section 12.4    Captions.  The
titles, captions and table of contents contained herein are inserted herein only
as a matter of convenience and for reference and in no way define, limit, extend
or describe the scope of this Agreement or the intent of any provision
hereof.

       

      Section 12.5    Controlling
Law.  This
Agreement shall be governed by and construed and enforced in accordance with the
internal Laws of the State of New York without reference to its choice of law
rules.

       

      Section 12.6    Dispute
Resolution.

       

      (a)           Any
and all disputes, claims or controversies arising out of or relating to this
Agreement or the breach thereof shall be finally and exclusively resolved and
settled by arbitration administered by the JAMS Streamlined (for claims under
US$250,000) or the JAMS Comprehensive (for claims over US$250,000) Arbitration
Rules and Procedures, except as modified in this Section 12.6, in effect at the
time the request for arbitration is made.  Each Party hereby
irrevocably and unconditionally agrees that the location of any such arbitration
shall be New York City, New York.  Judgment upon any award rendered by
the arbitrators may be entered by a court having jurisdiction
thereof.

       

      
        
          
          

        

        
          52

          
            

          

        

        
          
          

        

         

      

      (b)           The
arbitral tribunal shall consist of three persons appointed in accordance with
the following provisions: (i) the Purchaser shall appoint one arbitrator and the
Sellers shall appoint one arbitrator within thirty (30) days of the first notice
invoking arbitration; and (ii) the two arbitrators thus appointed shall choose a
third arbitrator, who will act as the chairperson of the arbitral
tribunal.

       

      (c)           The
arbitrators shall render a written, reasoned award.

       

      (d)           All
fees and expenses of the arbitration shall be borne fifty percent (50%) by the
Sellers and fifty percent (50%) by the Purchaser.  At the arbitrators’
discretion, attorneys’ fees and expenses may be awarded to the prevailing
Party.

       

      (e)           Nothing
contained herein shall limit the right of a Party to seek from any court of
competent jurisdiction, pending appointment of an arbitral tribunal interim
relief in aid of arbitration or to protect or enforce its rights
hereunder.

       

      Section 12.7    Severability.  If
any term or other provision of this Agreement is invalid, illegal or incapable
of being enforced by any Law or public policy, all other terms and provisions of
this Agreement shall nevertheless remain in full force and effect for so long as
the economic or legal substance of the transactions contemplated by this
Agreement is not affected in any manner materially adverse to either Party
hereto.  Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the Parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner in order
that the transactions contemplated by this Agreement are consummated as
originally contemplated by this Agreement to the greatest extent
possible.  To the extent permitted by Law, each Party hereby waives
any provision of Law that renders any such provision prohibited or unenforceable
in any respect.

       

      Section 12.8    Counterparts.  This
Agreement may be executed and delivered (including by facsimile transmission) in
one or more counterparts, and by the different Parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original, but
all of which taken together shall constitute one and the same
agreement.

       

      Section 12.9    Enforcement of Certain
Rights.  Nothing
expressed or implied herein is intended, or shall be construed, to confer upon
or give any Person other than the Parties, and their successors or permitted
assigns, any right, remedy, obligation or liability under or by reason of this
Agreement, or result in such Person being deemed a third-party beneficiary
hereof, except as provided in Article XI.

       

      Section 12.10   Waiver;
Amendment.  Any
agreement on the part of a Party to any extension or waiver of any provision
hereof shall be valid only if set forth in writing signed on behalf of such
Party.  A waiver by a Party of the performance of any covenant,
agreement, obligation, condition, representation or warranty shall not be
construed as a waiver of any other covenant, agreement, obligation, condition,
representation or warranty.  A waiver by any Party of the performance
of any act shall not constitute a waiver of the performance of any other act or
an identical act required to be performed at a later time.  This
Agreement may not be amended, modified or supplemented except by written
agreement of the Parties.

       

      
        
          
          

        

        
          53

          
            

          

        

        
          
          

        

         

      

      Section 12.11   Integration.  This
Agreement and the Ancillary Agreements supersede all negotiations, agreements
and understandings among the Parties with respect to the subject matter hereof
(except for that certain non-disclosure letter agreement, dated as of June 1,
2007, by and between the Purchaser and the Sellers as amended or extended from
time to time) and constitute the entire agreement among the Parties with respect
thereto.

       

      Section 12.12    Compliance with Bulk Sales
Laws

       

      .  The
Purchaser acknowledges that, notwithstanding anything in this Agreement to the
contrary, the Sellers will not comply with the provision of the bulk sales Laws
of any jurisdiction in connection with the transactions contemplated by this
Agreement to the extent they are applicable.  The Purchaser hereby
waives compliance by the Sellers with the provisions of such bulk sales
Laws.

       

      Section 12.13   Interpretation.  Where
the context requires, the use of a pronoun of one gender or the neuter is to be
deemed to include a pronoun of the appropriate gender.  References
herein to any Law, including, without limitation, CERCLA, ERISA, HIPAA, and the
WARN Act, shall be deemed to refer to such Law, as amended from time to time,
and all rules and regulations promulgated thereunder.

       

      Section 12.14    Cooperation Following the
Closing.  Following
the Closing, each Party shall deliver to the other Parties such further
information and documents and shall execute and deliver to the other Parties
such further instruments and agreements as any other Party shall reasonably
request to consummate or confirm the transactions provided for herein, to
accomplish the purpose hereof or to assure to any other Party the benefits
hereof.

       

      Section 12.15    No Third-Party
Beneficiaries.  Nothing
in this Agreement, express or implied, is intended to or shall confer upon any
Person other than the Parties and their respective successors and permitted
assigns any legal or equitable right, benefit or remedy of any nature under or
by reason of this Agreement, except as provided in
Article XI.  No provision in this Agreement shall modify or amend
any other agreement, plan, program, or document unless this Agreement explicitly
states that the provision “amends” such other agreement, plan, program, or
document.  This provision shall not prevent the Parties from enforcing
any provision in this Agreement, but no other Person shall be entitled to
enforce any provision in this Agreement on the grounds that it is an amendment
to another agreement, plan, program, or document unless the provision is
explicitly designated as such in this Agreement, and the Person is otherwise
entitled to enforce the other agreement, plan, program, or
document.  If a Person not entitled to enforce this Agreement brings a
lawsuit or other action to enforce any provision in this Agreement as an
amendment to another agreement, plan, program, or document, and that provision
is construed to be such an amendment despite not being explicitly designated as
one in this Agreement, that provision shall lapse retroactively as of its
inception, thereby precluding it from having any amendatory effect.

       

      Section 12.16    Transaction
Costs.  Except
as otherwise expressly provided in this Agreement, (a) the Purchaser shall pay
its own fees, costs and expenses incurred in connection herewith and the
transactions contemplated hereby, including the fees, costs and expenses of its
financial advisors, accountants and counsel, and (b) the Sellers shall pay the
fees, costs and expenses of the Sellers incurred in connection herewith and the
transactions contemplated hereby, including the fees, costs and expenses of the
financial advisors, accountants and counsel to the Sellers.  If this
Agreement is terminated, nothing herein shall relieve either Party from
liability for any willful and material breach of this Agreement occurring prior
to such termination, and the obligation of each Party to pay its own fees, costs
and expenses will be subject to any rights of such Party arising
therefrom.

       

      
        
          
          

        

        
          54

          
            

          

        

        
          
          

        

      

       

      IN
WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed, as
of the date first above written.

       

      

       

      
        
          
            
              
                
                  
                    	 	Sellers:	 
	 	 	 
	 	ENTERTAINMENT
      DISTRIBUTION COMPANY, LLC	 
	 	 	 	 
	
                             

                          	
                            By:
      

                          	/s/
      Thomas Costabile	 
	 	Name:	Thomas
      Costabile	 
	 	Title:	President
      and COO	 

                  

                

              

            

          

        

         

        
          
            
              
                
                  
                    
                      
                        	 	 	 
	 	ENTERTAINMENT
      DISTRIBUTION COMPANY (USA), LLC	 
	 	 	 	 
	
                                 

                              	
                                By:

                              	/s/
      Thomas Costabile	 
	 	Name:	Thomas
      Costabile	 
	 	Title:	President
      and COO	 

                      

                    

                  

                

              

            

          

        

        
           

          
            
              
                
                  
                    
                      	 	Purchaser:	 
	 	 	 
	 	SONY
      DADC US INC.	 
	 	 	 	 
	
                               

                            	
                              By:
      

                            	/s/ Michael
      Frey 	 
	 	Name:	Michael
    Frey	 
	 	Title:	President	 
	 	 	 	 

                    

                  

                

              

            

          55ex10-2.htm

    
      

    

    Exhibit 10.2

    
      

      
        
          EXECUTION

          

          SEVENTH
AMENDMENT TO CREDIT AGREEMENT

          

          THIS SEVENTH AMENDMENT TO CREDIT
AGREEMENT (this “Amendment”), dated as
of October 31, 2008, is by and among ENTERTAINMENT DISTRIBUTION COMPANY,
LLC, a Delaware limited liability company (the “Borrower”), those
Domestic Subsidiaries of the Borrower identified as a “Guarantor” on the
signature pages hereto (individually a “Guarantor” and
collectively the “Guarantors”), the
financial institutions party hereto as lenders (the “Lenders”) and WACHOVIA BANK, NATIONAL
ASSOCIATION, as administrative agent under the Credit Agreement (defined
below) (in such capacity, the “Administrative
Agent”).

          

          W
I T N E S S E T H

          

          WHEREAS, the Borrower, the
Guarantors, Glenayre Electronics, Inc., a Colorado corporation, the Lenders and
the Administrative Agent are parties to that certain Credit Agreement dated as
of May 31, 2005 (as previously amended, modified or supplemented and as further
amended, modified, supplemented, restated or amended and restated from time to
time, the “Credit
Agreement”; capitalized terms used herein shall have the meanings
ascribed thereto in the Credit Agreement as amended hereby); and

          

          WHEREAS, the Borrower and the
Lenders have agreed to amend the Credit Agreement on the terms and conditions
set forth herein;

          

          NOW, THEREFORE, in
consideration of the agreements hereinafter set forth, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:

          

          

          ARTICLE
I

          AMENDMENTS
TO CREDIT AGREEMENT

          

          1.1           Amendment
to Section 1.1.  Section 1.1 of
the Credit Agreement is hereby amended as follows:

           

          
                (a)    Each
of the following defined terms is hereby amended and restated in its entirety as
follows:

          

          

                “Commitment” shall
mean the Euro Revolving Commitment and the Term Loan Commitment, individually or
collectively, as appropriate.

          

          
            
            

          

          

          
            
            

          

          
                “Commitment” shall
mean the Euro Revolving Commitment and the Term Loan Commitment, individually or
collectively, as appropriate.

          

          
             

          

          “Commitment
Percentage” shall mean the Euro Revolving CommitmentPercentage and/or the
Term Loan Commitment Percentage, as appropriate.

          

          
            
               

            

            
               

              
                

              

            

            
               

            

             

          

          “Commitment Period”
shall mean the period from and including theClosing Date to but not including
the Euro Revolving Commitment TerminationDate.

          
             

                “Consolidated EBITDA”
shall mean, for any period, the sum of (a) Consolidated Net Income for such
period, plus
(b) an amount which, in the determination of Consolidated Net Income for such
period, has been deducted for (i) Consolidated Interest Expense, (ii) total
federal, state, local and foreign income taxes and (iii) depreciation and
amortization expense, all as determined in accordance with GAAP (except for the
exclusion of Rebate Payments).  Notwithstanding the foregoing, (i) for
the fiscal quarter ended September 30, 2008, Consolidated EBITDA shall be
calculated by adding to the number determined pursuant to the foregoing sentence
non-cash charges not exceeding $9,900,000 in the aggregate relating to the
impairment charge taken in 2007 in connection with the Acquisition, to the
extent such non-cash charges were deducted in the determination of Consolidated
Net Income for the applicable period, and (ii) for the fiscal quarter ended
December 31, 2008, and each fiscal quarter thereafter, Consolidated EBITDA shall
be calculated by adding to the number determined pursuant to the foregoing
sentence impairment charges, non-cash charges and one-time charges for the Sony
Sale and any charges related to U.S. operations or discontinued operations (but
not including any ongoing overhead from U.S. operations), which charges shall
not exceed $16,000,000 in the aggregate, to the extent such charges were
deducted in the determination of Consolidated Net Income for the applicable
period.

             

                “Credit Party” shall
mean any of the Borrower, the Guarantors and the Euro
Borrowers.

          
            
            

          

          
                “Fixed Charge Coverage
Ratio” shall mean, with respect to the Credit Parties and their
Subsidiaries on a Consolidated basis for the twelve (12) month period ending on
the last day of any fiscal quarter of the Credit Parties, the ratio of (a) the
sum of Consolidated EBITDA for such period plus for the fiscal
quarters ending December 31, 2008, March 31, 2009, June 30, 2009, and September
30, 2009 only, the amount of restricted cash on the balance sheet of
Entertainment Distribution Company GmbH as of the date of determination in an
amount not to exceed $24,000,000, to (b) the sum of Consolidated Interest
Expense for such period plus Scheduled Funded
Debt Payments for such period (excluding for the fiscal quarters ending December
31, 2008, and March 31, 2009 only, the $9,000,000 principal payment due upon the
closing date under the Sony Sale Agreement) plus cash taxes paid
during such period plus Consolidated
Capital Expenditures for such period.

             

            
                  “Loan” shall mean a
Euro Revolving Loan and/or the Term Loan, as appropriate.

            

             

            
              
                 

              

              
                2

                
                  

                

              

              
                 

              

               

                  “Maturity Date” shall
mean (a) with respect to the Term Loan, the TermLoan Maturity Date and (b) with
respect to the Euro Revolving Loans, the EuroRevolving Commitment Termination
Date.

            

          

          

          “Note” or “Notes” shall mean the
Euro Revolving Notes and/or the TermNotes, collectively, separately or
individually, as appropriate.

          

              “Required Lenders”
shall mean, at any time, Lenders holding in the aggregate more than 50% of (i)
the Commitments (and Participation Interests therein) or (ii) if the Commitments
have been terminated, the outstanding Dollar Amount (determined as of the most
recent Revaluation Date) of Loans and Participation Interests; provided, however, (a) that if
any Lender shall be a Defaulting Lender at such time, then there shall be
excluded from the determination of Required Lenders, Obligations (including
Participation Interests) owing to such Defaulting Lender and such Defaulting
Lender’s Commitments, or after termination of the Commitments, the principal
balance of the Obligations owing to such Defaulting Lender and (b) for purposes
of Sections 6.8, 7.2, 8.5 and 10.8 and clauses (ix) and (x) and the last
paragraph of Section 9.1, if there are fewer than three (3) Lenders
(including any Defaulting Lender), Required Lenders shall mean all Lenders
(other than any Defaulting Lender).

           

          
                “Revaluation Date”
shall mean: (a) each date that a new Loan is made; (b) each date an existing
Loan is extended, converted or continued; (c) the date of any reduction of
the Aggregate Euro Revolving Committed Amount pursuant to the terms of
Section 2.6; and (d) such additional dates as the Administrative Agent
or the Required Lenders shall reasonably determine.

          

           

          
                “Security Documents”
means  (i) the Security Agreement, (ii) the Pledge Agreement, (iii)
the Intermediate Parent Pledge Agreement, (iv) the Foreign Collateral Documents,
(v) the Mortgage Instruments, (vi) any Cash Collateral Account Agreement(s),
(vii) the Assignment of Tax Refunds, (viii) the Collateral Assignment of the
Sony Sale Agreement, (ix) the GER Security Documents, (x) the UK Security
Documents, and (xi) such other documents executed and/or delivered in connection
with the attachment and perfection of the Administrative Agent’s security
interests and liens arising thereunder, including, without limitation, UCC
financing statements and any collateral documentation (in addition to the Pledge
Agreement) with respect to the pledge of (i) 65% of the Capital Stock of
any  Foreign Subsidiary by a U.S. entity, and (ii) 100% of the Capital
Stock of any Foreign Subsidiary by a non-U.S. entity.

             

                (b)       The
following defined terms are hereby added to the Credit Agreement in appropriate
alphabetical order:

                “Aggregate Euro Revolving
Committed Amount” means 2 million Euros, as such aggregate maximum amount
may be reduced from time to time as provided in Section 2.7.

          

          
            
            

          

          

          
            
               

            

            
              3

              
                

              

            

            
               

            

          

          
            
            

          

          

          
                “Clean-up Period”
means, for any Clean-up Year, a period of any 30 consecutive days during such
Clean-up Year.

          
            
            

          

              “Clean-up Year” means
a period of twelve consecutive calendar months, beginning on the Seventh
Amendment Effective Date and on each anniversary thereof.

           

              “Euro Borrower” and
“Euro
Borrowers” means each of Entertainment Distribution Company GmbH, a
German company, and EDC Blackburn Limited, a UK company, collectively,
separately or individually, as appropriate.

        

        
           

              “Euro Borrower
Joinder” means a Joinder to this Agreement executed by each of the Euro
Borrowers.

          

          
            
            

          

          
                “Euro Revolving
Commitment” shall mean, with respect to each Lender, the commitment of
such Lender to make Euro Revolving Loans in an aggregate principal amount at any
time outstanding up to such Lender’s Euro Revolving Committed
Amount.

          

          
             

          

          
            
            

          

          
                “Euro Revolving Commitment
Percentage” shall mean, for each Lender, the percentage identified as its
Euro Revolving Commitment Percentage on its signature page to the Seventh
Amendment, as such percentage may be modified in connection with any assignment
made in accordance with the provisions of Section 9.6(c).

          

           

          
            
            

          

          
                “Euro Revolving Commitment
Period” shall mean the period from and including the Seventh Amendment
Effective Date to but not including the Euro Revolving Commitment Termination
Date.

          

          
            
            

          

          

          
            
            

          

          
                “Euro Revolving Commitment
Termination Date” shall mean June 10, 2010.

             

          

          
                “Euro Revolving Committed
Amount” shall mean the amount of each Lender’s Euro Revolving Commitment
identified on its signature page to the Seventh Amendment, as such amount may be
reduced from time to time in accordance with the provisions hereof.

             

          

          
                “Euro Revolving
Lender” shall mean each Lender with a Euro Revolving
Commitment.

          

           

          “Euro Revolving Loans”
shall have the meaning set forth in Section 2.1.

           

          
                “Euro Revolving Note”
or “Euro Revolving
Notes” shall mean the promissory notes of the Euro Borrowers in favor of
each of the Euro Revolving Lenders evidencing the Euro Revolving Loans provided
pursuant to Section 2.1(e), individually or collectively, as appropriate, as
such promissory notes may be amended, restated, modified, supplemented,
extended, renewed or replaced from time to time.

             

            
              
                 

              

              
                4

                
                  

                

              

              
                 

              

            

          

          
            
            

          

          

          
                “GER Guaranty” means a
Guaranty Agreement executed by Entertainment Distribution Holding GmbH, a German
company, with respect to the obligations of Entertainment Distribution Company
GmbH under this Agreement.

          

           

              “GER Security
Documents” shall mean such documents required by the Administrative Agent
to be executed and/or delivered in connection with the attachment and perfection
of the Administrative Agent’s security interests and liens (i) on the assets of
Entertainment Distribution Company GmbH, and (ii) relating to the pledge of the
Capital Stock of Entertainment Distribution Company GmbH and Entertainment
Distribution Holding GmbH.

          

              “Holdback Amount” means the amount of
“Additional Purchase Price” as such term is defined in the Sony Sale Agreement
(which amount shall not exceed $2,000,000), as has been earned by the Borrower
pursuant to Section 3.3 of the Sony Sale Agreement and held by
Sony.

          

              “North Carolina
Mortgage” shall mean a Mortgage Instrument executed by the Borrower in
favor of the Administrative Agent with respect to the North Carolina Property,
and if required, as amended consistent with the Seventh Amendment.

           

              “North Carolina
Property” shall mean that certain real property and improvements owned by
the Borrower and situated at 700 South Battleground Ave., Hwy. 29, Grover,
Cleveland County, North Carolina and consisting of approximately 100
acres.

          

              “Seventh Amendment”
shall mean that certain Seventh Amendment to Credit Agreement dated as of
October 31, 2008, by and among the Borrower, the Guarantors, the Parent, the
Administrative Agent and the Lenders.

           

              “Sony” means Sony DADC
US Inc.

          

              “Sony Sale” shall mean
the sale by the Borrower of the Sony Sale Assets to Sony for a purchase price in
an amount not less than $25,000,000 pursuant to the Sony Sale
Agreement.

          

              “Sony Sale Agreement”
shall mean the Asset Purchase Agreement dated October 31, 2008, by and among the
Borrower, the Guarantor and Sony, as in effect on the date of the Seventh
Amendment.

          

              “Sony Sale Assets”
shall mean the assets of the Credit Parties listed on  Schedule 1.1(S)(1) to
the Credit Agreement.

          

          
            
               

            

            
              5

              
                

              

            

            
               

            

             

          

              “Sony Subordination
Agreement” shall mean the Subordination Agreement among the Borrower, the
Guarantor, the Administrative Agent and Sony in the form attached hereto as
Schedule
1.1(S)(2).

          

              “UK Guaranty” means a
Guaranty Agreement executed by EDC UK Holdings Limited, a UK company, and
Glenayre Electronics (UK) Limited, a UK company, with respect to the obligations
of EDC Blackburn Limited under this Agreement.

          

              “UK Security
Documents” shall mean shall mean such documents required by the
Administrative Agent to be executed and/or delivered in connection with the
attachment and perfection of the Administrative Agent’s security interests and
liens (i) on the assets of EDC Blackburn Limited, and (ii) relating to the
pledge of the Capital Stock of EDC Blackburn Limited, EDC UK Holdings Limited
and Glenayre Electronics (UK) Limited.

          

          (c)        The
following defined terms are hereby deleted from the Credit Agreement, along with
all references to such terms in the Credit Agreement and the other Credit
Documents:

          

          
            	
                     
      

                  	
                    “Aggregate
      Revolving Committed Amount”

                  

          

          
            	
                     
      

                  	
                    “Commitment
      Fee”

                  

          

          
            	
                     
      

                  	
                    “Issuing
      Lender”

                  

          

          
            	
                     
      

                  	
                    “Issuing
      Lender Fees”

                  

          

          
            	
                     
      

                  	
                    “Letter
      of Credit Fee”

                  

          

          
            	
                     
      

                  	
                    “Letters
      of Credit”

                  

          

          
            	
                     
      

                  	
                    “LOC
      Commitment”

                  

          

          
            	
                     
      

                  	
                    “LOC
      Commitment Percentage”

                  

          

          
            	
                     
      

                  	
                    “LOC
      Committed Amount”

                  

          

          
            	
                     
      

                  	
                    “LOC
      Documents”

                  

          

          
            	
                     
      

                  	
                    “LOC
      Obligations”

                  

          

          
            	
                     
      

                  	
                    “Revolving
      Commitment”

                  

          

          
            	
                     
      

                  	
                    “Revolving
      Commitment Percentage”

                  

          

          
            	
                     
      

                  	
                    “Revolving
      Commitment Termination Date”

                  

          

          
            	
                     
      

                  	
                    “Revolving
      Committed Amount”

                  

          

          
            	
                     
      

                  	
                    “Revolving
      Lender”

                  

          

          
            	
                     
      

                  	
                    “Revolving
      Loans”

                  

          

          
            	
                     
      

                  	
                    “Revolving
      Note”

                  

          

          
            	
                     
      

                  	
                    “Swingline
      Commitment”

                  

          

          
            	
                     
      

                  	
                    “Swingline
      Committed Amount”

                  

          

          
            	
                     
      

                  	
                    “Swingline
      Lender”

                  

          

          
            	
                     
      

                  	
                    “Swingline
      Loan”

                  

          

          
            	
                     
      

                  	
                    “Swingline
      Note”

                  

          

           

          
            
               

            

            
              6

              
                

              

            

            
               

            

             

          

          1.2           Amendment
to Section 2.1.  Section 2.1 of
the Credit Agreement is hereby amended and restated in its entirety as
follows:

          

           

          Section 2.1    Euro Revolving
Loans.

           

          

          (a)           Euro Revolving
Commitment.  During the Commitment Period but not during any
Clean-Up Period, subject to the terms and conditions hereof, each Euro Revolving
Lender severally, but not jointly, agrees to make revolving credit loans in
Euros (“Euro Revolving
Loans”) to any Euro Borrower from time to time in an aggregate principal
amount of up to the Aggregate Euro Revolving Committed Amount for the purposes
hereinafter set forth; provided, however, that (i)
with regard to each Euro Revolving Lender individually, the sum of such Euro
Revolving Lender’s Revolving Commitment Percentage of outstanding Euro Revolving
Loans shall not exceed such Lender’s Euro Revolving Committed Amount and (ii)
with regard to the Euro Revolving Lenders collectively, the sum of the
outstanding Euro Revolving Loans shall not exceed the Aggregate Euro Revolving
Committed Amount.  Euro Revolving Loans shall consist of LIBOR Rate
Loans, and may be repaid and reborrowed in accordance with the provisions
hereof.  LIBOR Rate Loans shall be made by each Euro Revolving Lender
at its LIBOR Lending Office.

          

          (b)           Euro Revolving Loan
Borrowings.

          

          (i)    Notice of
Borrowing.  A Euro Borrower shall request a Euro Revolving Loan
borrowing by written notice (or telephone notice promptly confirmed in writing
which confirmation may be by fax) to the Administrative Agent not later than
10:00 A.M. (Charlotte, North Carolina time) on the third Business Day prior to
the date of the requested borrowing.  Each such request for borrowing
shall be irrevocable and shall specify (A) that a Euro Revolving Loan is
requested, (B) the date of the requested borrowing (which shall be a Business
Day), (C) the aggregate principal amount to be borrowed, and (D) the Interest
Period(s) therefor.  A form of Notice of Borrowing (a “Notice of Borrowing”)
is attached as Schedule
2.1(b)(i).  If the Borrower shall fail to specify in any such
Notice of Borrowing an applicable Interest Period, then such notice shall be
deemed to be a request for an Interest Period of one month.  The
Administrative Agent shall give notice to each Euro Revolving Lender promptly
upon receipt of each Notice of Borrowing, the contents thereof and each such
Euro Revolving Lender’s share thereof.

          

          (ii)    Minimum
Amounts.  Each Euro Revolving Loan shall be in a minimum
aggregate amount of 250,000 Euros and in integral multiples of 100,000 Euros in
excess thereof.

          

          
            
               

            

            
              7

              
                

              

            

            
               

            

             

          

          (iii)    Advances.  Each
Euro Revolving Lender will make its Euro Revolving Commitment Percentage of each
Euro Revolving Loan borrowing available to the Administrative Agent for the
account of the requesting Euro Borrower at the office of the Administrative
Agent specified in Section 9.2, or at such other office as the Administrative
Agent may designate in writing, by 2:00 P.M. (Charlotte, North Carolina time) on
the date specified in the applicable Notice of Borrowing in Euros and in funds
immediately available to the Administrative Agent.  Such borrowing
will then be made available to the requesting Euro Borrower by the
Administrative Agent by crediting the account of such Euro Borrower on the books
of such office with the aggregate of the amounts made available to the
Administrative Agent by the Euro Revolving Lenders and in like funds as received
by the Administrative Agent.

          

          (c)           Repayment.  The
principal amount of all Euro Revolving Loans shall be due and payable in full on
the Euro Revolving Commitment Termination Date, unless accelerated sooner
pursuant to Section 7.2.

           

          (d)   Interest.  Subject to
the provisions of Section 2.9, Euro Revolving Loans shall bear interest at a per
annum rate equal to the sum of the LIBOR Rate plus
3.50%.

          
            
            

          

          

          Interest
on Euro Revolving Loans shall be payable in arrears on each Interest Payment
Date.

          

          (e)           Euro Revolving
Notes.  Each Euro Revolving Lender’s Euro Revolving Committed
Amount shall be evidenced by a duly executed promissory note of the Euro
Borrowers to such Euro Revolving Lender requesting a promissory note in
substantially the form of Schedule
2.1(e).

           

          
            (f)           Clean-Up
Period.  The
Euro Borrowers shall, on the first day of each Clean-up Period, prepay in full
all Euro Revolving Loans outstanding on such day.  On each subsequent
day of each Clean-up Period, the Euro Borrowers shall prepay in full all Euro
Revolving Loans, if any, outstanding on such day.

            
              (g)          Mandatory
Prepayment.  If
the Administrative Agent notifies the Euro Borrowers at any time that the total
outstanding Euro Revolving Loans at such time exceeds the Dollar Amount equal to
$2,500,000, then, immediately after receipt of such notice, the Euro Borrowers
shall prepay Euro Revolving Loans in an aggregate amount sufficient to reduce
such total outstanding Euro Revolving Loans as of such date of payment to the Dollar Amount
equal to $2,500,000.

            

          

          
            

            (h)          Repayment.  All
payments by the Euro Borrowers hereunder with respect to principal and interest
on Euro Revolving Loans shall be made to the Administrative Agent, for the
account of the respective Lenders to which such payment is owed, at the
applicable Administrative Agent’s Office in Euros and in immediately available
funds not later than  10:00 A.M. (Charlotte, North Carolina time) on
the dates specified herein. Without limiting the generality of the foregoing,
the Administrative Agent may require that any payments due under this Agreement
be made in the United States.  If, for any reason, any Euro Borrower
is prohibited by any Law from making any required payment hereunder in Euros,
such Euro Borrower shall make such payment in Dollars in the Dollar Amount of
the Euro payment amount.

             

            
              
                 

              

              
                8

                
                  

                

              

              
                 

              

               

            

            
              (i)           Use of
Proceeds.  The
proceeds of the Euro Revolving Loans shall be used by the Euro Borrowers for
working capital purposes of the Euro Borrowers and for no other purpose
(including without limitation to repay
debt).

               

              
                (j)          Obligations; Collateral
Therefor.  Notwithstanding
anything to the contrary contained in this Agreement or any other Credit
Document, the obligations of the Euro Borrowers under this Agreement and all
other Credit Documents are limited solely to the Euro Revolving Loans and, with
respect to such Euro Revolving Loans, the obligations of the Euro Borrowers are
several and not joint, such that each Euro Borrower is obligated solely to repay
the Euro Revolving Loans made to it (and not any Euro Revolving Loans made to
any other Euro Borrower).  The obligations of each Euro Borrower shall
be secured solely by the Collateral pledged by such Euro Borrower (and not by
any Collateral pledged by any other Credit
Party)

                
                   

                  
                    (k)         Provisions
Applicable.  Except
as expressly provided herein, the provisions set forth in this Agreement that
refer and apply to Revolving Commitments, Revolving Loans, Revolving Lenders and
words of similar import shall be deemed to refer and apply to the Euro Revolving
Commitments, the Euro Revolving Loans, and the Euro Revolving Lenders,
respectively.

                  

                

              

            

          

          
            
            

          

          

          1.3           Amendment
to Section 2.2(b).  Section 2.2(b) of
the Credit Agreement is hereby amended and restated in its entirety as
follows:

          

          Section
2.2(b)                   Repayment of Term
Loan.  The principal amount of the Term Loan shall be repaid in
four (4) installments as follows:

          

          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  	
                                                          Principal
      Amortization

                                                          Payment
      Date

                                                        	
                                                          Term
      Loan Principal

                                                          Amortization
      Payment

                                                        
	
                                                          December
      31, 2008

                                                        	
                                                          $9,000,000

                                                        
	
                                                          date
      of Closing under the Sony Sale Agreement

                                                        	
                                                          $9,000,000

                                                        
	
                                                          December
      31, 2009

                                                        	
                                                          $2,000,000

                                                        
	
                                                          June
      30, 2010

                                                        	
                                                          $2,500,000

                                                        
	
                                                          Term
      Loan Maturity Date

                                                        	
                                                          $4,500,000

                                                        

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

          

          1.4           Deletion
of Section 2.3. Section 2.3 of the
Credit Agreement is hereby deleted in its entirety and replaced with the phrase
“Intentionally
Omitted.”

          

          1.5           Deletion
of Section 2.4. Section 2.4 of the
Credit Agreement is hereby deleted in its entirety and replaced with the phrase
“Intentionally
Omitted.”

          

          
            
               

            

            
              9

              
                

              

            

            
               

            

          

           

          1.6           Amendment
of Section 2.5.  Sections 2.5 of the Credit Agreement is hereby
amended and restated in its entirety as follows:

          

           

                                          Section
2.5    Fees.

           

          

          (a)           Commitment
Fee.  In consideration of the Euro Revolving Commitments, the
Euro Borrowers agrees to pay to the Administrative Agent for the ratable benefit
of the Lenders holding Euro Revolving Commitments a commitment fee (the “Euro Commitment Fee”) in
an amount equal to 0.45% per annum on the average daily unused amount of the
Aggregate Euro Revolving Committed Amount.  The Euro Commitment Fee
shall be payable quarterly in arrears on the 15th day
following the last day of each calendar quarter for the prior calendar
quarter.

          

          (b)           Administrative
Fee.  The Borrower agrees to pay to the Administrative Agent
the annual administrative fee as described in the Fee Letter.

          

          1.7           Amendment
of Section 2.7(b)(ii).  Section 2.7(b)(ii) of the Credit
Agreement is hereby amended and restated in its entirety as
follows:

          

          Section
2.7(b)(ii)    Prepayments:  Mandatory:  Asset
Dispositions; Certain Other Events. Promptly following any Asset
Disposition (or related series of Asset Dispositions), the Borrower shall prepay
the Loans in an aggregate amount equal to one hundred percent (100%) of the Net
Cash Proceeds derived from such Asset Disposition (or related series of Asset
Dispositions) (such prepayment to be applied as set forth in clause (vi)
below).

          

          1.8           Amendment
to Section 2.7(b)(v).  Section 2.7(b)(iv) of the Credit
Agreement is hereby amended and restated in its entirety as
follows:

          

          Section
2.7(b)(v)    Excess Cash
Flow.  Within one hundred five (105) days after the end of each
fiscal quarter ending December 31, commencing with the fiscal quarter ending
December 31, 2008, the Borrower shall prepay the Loans in an amount equal to 50%
of the Excess Cash Flow earned during the twelve-month period then ended (such
prepayments to be applied as set forth in clause (vi) below); provided, that if the
Leverage Ratio is less than or equal to 1.00 to 1.00 as of the end of any fiscal
year as demonstrated by the officer’s Compliance Certificate most recently
delivered pursuant to Section 5.2(b), the Borrower shall not be required to
prepay the Loans on account of the Excess Cash Flow earned during such prior
fiscal year.

           

          1.9           Amendment
of Section 2.7(b)(vi).  Section
2.7(b)(vi) of the Credit Agreement is hereby amended and restated in its
entirety as follows:

          
 

          
            
               

            

            
              10

              
                

              

            

            
               

            

          

           

          Section
2.7(b)(vi)    Application of Mandatory
Prepayments.  All amounts required to be paid pursuant to this
Section 2.7(b) shall be applied as follows: (A) with respect to all amounts
prepaid pursuant to Sections 2.7(b)(ii) through (iv), (1) first, to the Term
Loan (on a pro rata basis across the remaining amortization payments set forth
in Section 2.2(b), and (2) second to outstanding Euro Revolving Loans (with a
corresponding permanent reduction in the Euro Revolving Committed Amount), and
(B) with respect to all amounts prepaid pursuant to Section 2.7(b)(v), with
respect to each Excess Cash Flow prepayment for the twelve-month period ended
June 30, 2009, and each Excess Cash Flow prepayment to be made thereafter (w)
first, 50% of such amount to be applied to the amortization payment due
hereunder pursuant to Section 2.2(b) December 31, 2009, (x) second, 50% of such
amount to be applied to the remaining amortization payments due hereunder
pursuant to Section 2.2(b) thereafter on a pro rata basis until the Term Loan is
paid in full, and (y) third, to the outstanding Euro Revolving
Loans.  Within the parameters of the applications set forth above,
prepayments shall be applied first to Alternate Base Rate Loans and then to
LIBOR Rate Loans in direct order of Interest Period maturities.  Each
Lender shall receive its pro rata share of any such prepayment based on its Euro
Revolving Commitment Percentage or Term Loan Commitment Percentage, as
applicable. All prepayments under this Section 2.7(b) shall be subject to
Section 2.17 and be accompanied by interest on the principal amount prepaid
through the date of prepayment.

           

          1.10         Amendment
of Section 2.9.  Section 2.9 of the Credit Agreement is hereby
amended and restated in its entirety as follows:

           

           

          Section 2.9    Default Rate and Payment
Dates.

           

          

          (a)  If all or a portion of
the principal amount of any Loan which is a LIBOR Rate Loan shall not be paid
when due or continued as a LIBOR Rate Loan in accordance with the provisions of
Section 2.10 (whether at the stated maturity, by acceleration or otherwise),
such overdue principal amount of such Loan shall be converted to an Alternate
Base Rate Loan at the end of the Interest Period applicable
thereto.

          

          (b) If all or a portion of the
principal amount of any LIBOR Rate Loan shall not be paid when due, such overdue
amount shall bear interest at a rate per annum which is equal to the rate that
would otherwise be applicable thereto plus 6% until the end
of the Interest Period applicable thereto, and thereafter at a rate per annum
which is equal to the Alternate Base Rate plus the sum of the
Applicable Percentage then in effect for Alternate Base Rate Loans and 6% (the
“ABR Default
Rate”) or (ii) if any interest payable on the principal amount of any
Loan or any fee or other amount, including the principal amount of any Alternate
Base Rate Loan, payable hereunder shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), such overdue amount shall bear
interest at a rate per annum which is equal to the ABR Default Rate, in each
case from the date of such non-payment until such amount is paid in full (after
as well as before judgment).  Upon the occurrence, and during the
continuance, of any other Event of Default hereunder, at the option of the
Required Lenders, the principal of and, to the extent permitted by law, interest
on the Loans and any other amounts owing hereunder or under the other Credit
Documents shall bear interest, payable on demand, at a per annum rate which is
(A) in the case of principal, the rate that would otherwise be applicable
thereto plus 6%
or (B) in the case of interest, fees or other amounts, the ABR Default Rate
(after as well as before judgment).

          

          
            
               

            

            
              11

              
                

              

            

            
               

            

             

          

          (c) Interest on each Loan shall be
payable in arrears on each Interest Payment Date; provided that interest
accruing pursuant to paragraph (b) of this Section 2.9 shall be payable from
time to time on demand.

          

          1.11           New
Section 2.21 (“Sony Sale Matters”).  A new Section
2.21 is hereby added to the Credit Agreement following Section 2.20 thereof as
follows:

          

          Section 2.21    Sony Sale
Matters.  Notwithstanding anything to the contrary set forth
herein, the Administrative Agent and the Lenders hereby consent to the Sony Sale
and waive the application of Section 6.9 of this Agreement to any limitations on
payment of dividends by Borrower set forth in the “Security Documents” as
defined by the Sony Sale Agreement, subject to the terms and conditions of this
Section 2.21.

          

          (a)           Proceeds.  Notwithstanding
anything to the contrary contained in Section 2.7(b), the Borrower shall make
the following payments in connection with the proceeds of the Sony
Sale:

          

          (i)           Closing
Proceeds.  All proceeds of the Sony Sale paid at the closing
thereof shall be paid directly to the Administrative Agent and applied as
follows :  (1)  $18,000,000 shall be paid by the Borrower to
the Administrative Agent for the benefit of the Lenders as a repayment of the
principal of the Term Loan in accordance with Section 2.2(b) hereof, (2) to the
extent the purchase price of the Sony Sale exceeds $25,000,000, the Borrower
shall pay to the Administrative Agent for the benefit of the Lenders any
proceeds in excess of $25,000,000 as a repayment of the Term Loan on a pro rata
basis across the remaining principal payments set forth in Section 2.2(b) (with
any excess to be applied  in the order specified in Section
2.7(b)(vi)(B) hereof), (3) payment in full of the outstanding Revolving Loans
(with a corresponding reduction in and cancellation of the Revolving
Commitment), and (4) the remainder, together with all cash maintained by the
Borrower at such time (which shall include any cash received from one or more of
the Euro Borrowers which is currently anticipated to be 5 million Euros) shall
be paid by the Borrower to the Administrative Agent, which shall be held and
disbursed in accordance with Section 2.21(b) hereof.

          

          (ii)           Earn-Outs.  Subject
to the terms of the Sony Sale Agreement, any portion of the Holdback Amount that
is not used to satisfy indemnification obligations of the Credit Parties under
the Sony Sale Agreement shall, when otherwise due and payable to the Borrower,
be paid directly to the Administrative Agent for the benefit of the Lenders as a
repayment of the Term Loan on a pro rata basis across the remaining principal
payments set forth in Section 2.2(b) (with any excess to be
applied  in the order specified in Section 2.7(b)(vi)(B)
hereof).  Once annually, commencing on June 30, 2009, the Borrower
shall notify the Administrative Agent of the aggregate amount of indemnification
claims asserted and payments made under the Sony Sale Agreement.

          

          
            
               

            

            
              12

              
                

              

            

            
               

            

             

          

          (b)           Wind-Down
Funds.  On or before the date of closing of the Sony Sale, the
Borrower shall have paid to the Administrative Agent the proceeds specified in
Section 2.21(a) hereof in cash in an aggregate amount not less than $8,700,000
(collectively, the “Wind-Down Funds”),
which shall be deposited into one or more collateral accounts at Wachovia owned
by and titled in the name of the Administrative Agent for the benefit of the
Lenders, each of which shall be subject to a Cash Collateral
Agreement.  The collateral accounts shall consist of a checking
account (the “Checking
Account”) with an initial balance of $250,000 and one or more money
market accounts (each a “Money Market
Account”) which will contain the balance of the Wind-Down Funds less
$250,000.

          

          (i)           Checking
Account.  Absent an Event of Default, the Borrower may use the
funds in the Checking Account for wind-down activities pursuant to the Wind-Down
Budget (as defined below). Commencing on February 10, 2009, and within 10 days
following the end of each month thereafter, the Borrower shall deliver to the
Administrative Agent invoices evidencing the amounts spent by the Borrower from
the Checking Account on wind-down activities for the prior month, together with
identification of the line item or items and categories of such costs in the
Wind-Down Budget.  Within 2 Business Days following the Administrative
Agent’s receipt of such invoices and line item and category information
sufficient to support the prior month’s expenditures from the Checking Account,
the Administrative Agent shall cause funds to be transferred from a Money Market
Account to the Checking Account such that the balance in the Checking Account is
$250,000; provided that if an Event of
Default exists and is continuing, the Administrative Agent shall not be
obligated to transfer funds to the Checking Account.

          

          (ii)           Money Market
Accounts.  From time to time, but in no event more than six (6)
times per month with respect to each Money Market Account, the Borrower may
submit to the Administrative Agent requests for disbursements of the Wind-Down
Funds, together with (i) the invoices evidencing such amounts for which
disbursement is requested and (ii) identification of the line item or items and
category where such costs are included in that certain Wind-Down Budget dated
September, 2008 (the “Wind-Down
Budget”).  Upon receipt of such request and supporting
invoices, the Administrative Agent shall, within 2 Business Days
following receipt of such request and supporting invoices, disburse such
portions of the Wind-Down Funds from such Money Market Accounts to the Borrower
for such wind-down activities; provided that (1) upon the
completion of all wind-down activities in a certain category of the Budget, (a)
half of all Wind-Down Funds allocated to such category in the Budget and not
disbursed, shall be used to repay the Term Loan on a pro rata basis across the
remaining principal payments set forth in Section 2.2(b)(with any excess to be
applied  in the order specified in Section 2.7(b)(vi)(B) hereof), and
(b) the remaining half of such Wind-Down Funds allocated to such category and
not disbursed shall remain Wind-Down Funds subject to the provisions of this
Agreement, and (2) if an Event of Default exists and is continuing, the
Administrative Agent shall not be obligated to disbursement the Wind-Down
Funds.

          

          (c)           Fees.  The
Borrower shall pay to the Administrative Agent for the ratable benefit of the
Lenders holding the Term Loan the following fees on the following dates: (1) if
the Borrower has not sold the North Carolina Property on or before December 31,
2009, and the proceeds of such sale have not been used to repay the Term Loan on
or before such date, the Borrower shall pay to the Administrative Agent for the
benefit of the Lenders holding the Term Loan a fee in the amount of $100,000 on
December 31, 2009, and (2) if the Term Loan has not been paid in full prior to
December 31, 2010, the Borrower shall pay to the Administrative Agent for the
benefit of the Lenders holding the Term Loan a fee in the amount of $300,000 on
December 31, 2010; provided that if any portion
of the principal payment of the Term Loan due on December 31, 2010, has been
paid prior to such date, the $300,000 fee will be prorated so as not to apply to
such portion as has already been repaid.

          

          
            
               

            

            
              13

              
                

              

            

            
               

            

          

           

          1.12         Amendment
of Section 5.9.  Section 5.9 of
the Credit Agreement is hereby amended and restated in its entirety as
follows:

           

          Section 5.9    Financial
Covenants.

          
            
            

          

           

          (a)           Leverage
Ratio.  The
Leverage Ratio, as of the last day of each fiscal quarter of the Credit Parties,
beginning with the fiscal quarter ending December 31, 2008, shall be less than
or equal to 2.00 to 1.00.

           

          
            (b)          Fixed Charge Coverage
Ratio.  The
Fixed Charge Coverage Ratio, as of the last day of each fiscal quarter of the
Credit Parties, beginning with the fiscal quarter ending December 31, 2008,
shall be greater than or equal to (i) 1.00 to 1.00 for the fiscal quarter ending
December 31, 2008, and (ii) 1.25 to 1.00 for the fiscal quarter ending March 31,
2009, and each fiscal quarter thereafter.

            

              (c)           Consolidated Capital
Expenditures.  Consolidated Capital Expenditures as of the end
of each 12-month period, beginning with the 12-month period ending December 31,
2008, shall be less than or equal to $5,000,000.

               

            

          

           

          1.13         Amendment
of Section 7.1(a).  Section 7.1(a) of the Credit Agreement is
hereby amended and restated in its entirety as follows:

           

           

          Section
7.1(a)  Payment
Default.  Any Credit Party shall fail to pay any principal on
any Loan when due in accordance with the terms of the Credit Documents; or any
Credit Party shall fail to pay any interest on any Loan or any fee or other
amount payable under the Credit Documents when due in accordance with the terms
thereof or hereof and such failure shall continue unremedied for three (3)
Business Days; or

           

          1.14         Amendment
of Section 7.1(c).  Section 7.1(c) of
the Credit Agreement is hereby amended and restated in its entirety as
follows:

          

          Section 7.1(c)  Covenant
Default.  (i) Any Credit Party shall fail to perform, comply
with or observe any term, covenant or agreement applicable to it contained in
Sections 5.1, 5.2, 5.4, 5.7, 5.9, 5.11, 5.13 or Article VI hereof; or (ii) any
Credit Party shall fail to comply with any other covenant contained in this
Credit Agreement or the other Credit Documents or any other agreement, document
or instrument among any Credit Party, the Administrative Agent and the Lenders
or executed by any Credit Party in favor of the Administrative Agent or the
Lenders (other than as described in Sections 7.1(a) or 7.1(c)(i) above), and
such breach or failure to comply is not cured within thirty (30) days of its
occurrence; or

          

          
            
               

            

            
              14

              
                

              

            

            
               

            

             

          

          1.15         Amendment
of Section 7.1(e).  Section 7.1(e) of
the Credit Agreement is hereby amended and restated in its entirety as
follows:

          

          Section 7.1(e)    Bankruptcy
Default.  (i) The Parent, the Immediate Parent, any Credit
Party or any of their Subsidiaries shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its assets, or the Parent, the Immediate
Parent, any Credit Party or any of their Subsidiaries shall make a general
assignment for the benefit of its creditors; or (ii) there shall be commenced
against any of the Parent, the Immediate Parent, any Credit Party or any of
their Subsidiaries any case, proceeding or other action of a nature referred to
in clause (i) above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against the
Parent, the Immediate Parent, any Credit Party or any of their Subsidiaries any
case, proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending appeal
within 60 days from the entry thereof; or (iv) the Parent, the Immediate Parent,
any Credit Party or any of their Subsidiaries shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clauses (i), (ii), or (iii) above; or (v) the
Parent, the Immediate Parent, any Credit Party or any of their Subsidiaries
shall generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or

          

          1.16         New
Section 7.3.  A new Section 7.3 is hereby
added to the Credit Agreement immediately following Section 7.2 thereof as
follows:

          

                         
Section 7.3    Appointment of
Receiver.  Upon the occurrence of an Event of Default, each of
the Credit Parties agrees and consents to the appointment by a court of
competent jurisdiction of a receiver to manage, operate, sell, and/or liquidate
each of the Credit Parties and any or all of the Credit Parties' businesses and
to do such things and take such actions as the receiver deems necessary with
respect to such Credit Parties and Credit Parties' businesses.

          

          1.17         New
Section 7.4.  A new Section 7.4
is hereby added to the Credit Agreement immediately following Section 7.3
thereof as follows:

          

           

          Section 7.4    Indemnification.

           

          
            
               

            

            
              15

              
                

              

            

            
               

            

          

           

          (i)           If,
after receipt of any transfer or payment of all or any part of any one or all of
the Obligations, the Administrative Agent or any Lender is compelled to
surrender such transfer or payment to any person or entity for any reason
(including, without limitation, a determination that such payment is void or
voidable as a preference or fraudulent conveyance, an impermissible setoff, or a
diversion of trust funds), then this Agreement and the other documents executed
in connection herewith shall continue in full force and effect, and the Credit
Parties shall be liable, jointly and severally, for, and shall indemnify, defend
and hold harmless the Administrative Agent and such Lender with respect to the
full amount so surrendered (subject to Section 2.1(j) hereof).

           

           

          (ii)           The
provisions of this section shall survive the termination of this Agreement and
shall be and remain effective notwithstanding the payment of any or all of the
Obligations to the Administrative Agent and the Lenders, the cancellation of any
of the Credit Documents, the release of any encumbrance securing the Obligations
or any other action which the Administrative Agent or any Lender may have taken
in reliance upon its receipt of such payment.  Any cancellation of any
of the Credit Documents, release of any encumbrance or other such action shall
be deemed to have been conditioned upon any payment of any or all of the
Obligations having become final and irrevocable.

           

          1.18         Amendment
of Section 9.17.   Section 9.17 of
the Credit Agreement is hereby amended and restated in its entirety as
follows:

          

           

          Section
9.17    Forum; Waiver of Jury
Trial.  THE CREDIT PARTIES AGREE THAT ANY SUIT FOR THE
ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING IN
NEW YORK COUNTY, NEW YORK, AND CONSENT TO THE NONEXCLUSIVE JURISDICTION OF SUCH
COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE CREDIT PARTIES
BY MAIL AT THE ADDRESS SET FORTH IN THIS AGREEMENT.  THE CREDIT
PARTIES HEREBY WAIVE ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT FORUM.  THE CREDIT PARTIES, THE ADMINISTRATIVE AGENT AND
THE LENDERS MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE
RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS
OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS, (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PART, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF ADMINISTRATIVE AGENT OR
ANY LENDER RELATING TO THE ADMINISTRATION OF THE LOANS OR ENFORCEMENT OF THE
CREDIT DOCUMENTS, AND AGREE THAT NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH
ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED.  EXCEPT AS PROHIBITED BY LAW, THE CREDIT PARTIES HEREBY WAIVE
ANY RIGHT THEY MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES.  THE CREDIT PARTIES CERTIFY THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF THE ADMINISTRATIVE AGENT OR ANY LENDER HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE ADMINISTRATIVE AGENT OR SUCH
LENDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER.  THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE
ADMINISTRATIVE AGENT AND THE LENDERS TO ACCEPT THIS AGREEMENT AND TO CONTINUE TO
EXTEND CREDIT UNDER THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS.

           

          
            
               

            

            
              16

              
                

              

            

            
               

            

          

           

          1.19         New
Section 9.20 (“Judgment Currency”).   A new Section
9.20 is hereby added to the Credit Agreement following Section 9.19 thereof as
follows:

           

           

          Section
9.20      Judgment
Currency.    If, for
the purposes of obtaining judgment in any court, it is necessary to convert a
sum due hereunder or any other Credit Document in one currency into another
currency, the rate of exchange used shall be that at which in accordance with
normal banking procedures the Administrative Agent could purchase the first
currency with such other currency on the Business Day preceding that on which
final judgment is given.  The obligation of each Euro Borrower in
respect of any such sum due from it to the Administrative Agent or any Lender
hereunder or under the other Credit Documents shall, notwithstanding any
judgment in a currency (the “Judgment Currency”)
other than that in which such sum is denominated in accordance with the
applicable provisions of this Agreement (the “Agreement Currency”),
be discharged only to the extent that on the Business Day following receipt by
the Administrative Agent or such Lender, as the case may be, of any sum adjudged
to be so due in the Judgment Currency, the Administrative Agent or such Lender,
as the case may be, may in accordance with normal banking procedures purchase
the Agreement Currency with the Judgment Currency.  If the amount of
the Agreement Currency so purchased is less than the sum originally due to the
Administrative Agent or any Lender from any Euro Borrower in the Agreement
Currency, such Euro Borrower agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify the Administrative Agent or such
Lender, as the case may be, against such loss.  If the amount of the
Agreement Currency so purchased is greater than the sum originally due to the
Administrative Agent or any Lender in such currency, the Administrative Agent or
such Lender, as the case may be, agrees to return the amount of any excess to
such Euro Borrower (or to any other Person who may be entitled thereto under
applicable law).

          

           

          1.20         Amended
Schedule 5.2(b).
Schedule
5.2(b) (Compliance Certificate) to the Credit Agreement is hereby amended
and restated in its entirety in the form attached to this Amendment as Schedule
5.2(b)-Amended.

           

          
            
               

            

            
              17

              
                

              

            

            
               

            

          

           

          
            ARTICLE
II

          

          CONDITIONS
TO EFFECTIVENESS

          

           

          2.1           Closing
Conditions.

           

          

          The matters set forth in Article I of
this Amendment shall become effective upon the date (the “Seventh Amendment Effective
Date”) upon which the following conditions have been satisfied (in form
and substance reasonably acceptable to the Administrative Agent), which date
shall not be later than March 31, 2009; provided, however, that the
matters set forth in Article III (other than Section 3.1) of this Amendment
shall become effective upon the date of execution and delivery by all parties of
this Amendment:

          

          (a)           Executed Amendment and other
Credit Documents.  The Administrative Agent shall have received
(i) a copy of this Amendment duly executed by each of the Credit Parties, the
Lenders and the Administrative Agent, (ii) for the account of each Lender with a
Euro Revolving Commitment requesting a promissory note, a Euro Revolving Note,
(iii) counterparts of the UK Security Documents and the UK Guaranty, (iv)
counterparts of the GER Security Documents and the GER Guaranty, (v) the Euro
Borrower Joinder, (vi) counterparts of the Dutch Pledge Agreement (and related
items required under the Second Amendment), (vii) the Assignment of Tax Refunds,
(viii) the Collateral Assignment of the Sony Sale Agreement and acknowledgement
thereof from the buyer thereunder, (ix) the Cash Collateral Agreements relating
to the Wind-Down Funds, (x) a stock power and UCC-1 financing statement relating
to the pledge under the Intermediate Parent Pledge Agreement, (xi) the Sony
Subordination Agreement, and (xii) counterparts of any other Credit Document, in
each case conforming to the requirements of this Credit Agreement and executed
by a duly authorized officer of each party thereto, and in each case in form and
substance satisfactory to the Lenders.

           

          
            (b)           Authority
Documents.  The Administrative Agent shall have received the
following:

             

                (i)    Articles of Incorporation/Charter
Documents.  Copies of the articles of incorporation or other
charter documents, as applicable, of each Credit Party certified to be true and
complete as of a recent date by the appropriate Governmental Authority or a
public notary, as applicable, of the state of its
organization.

          

          
             

            
                  (ii)    Resolutions.  Copies
of resolutions of the board of directors or the shareholders, as applicable, of
each Credit Party approving and adopting the Amendment, the transactions
contemplated therein and authorizing execution and delivery thereof, certified
by a secretary or assistant secretary, managing director or other duly
authorized person, as the case may be, of such Credit Party as of the Seventh
Amendment Effective Date to be true and correct and in force and effect as of
such date.

               

              
                
                   

                

                
                  18

                  
                    

                  

                

                
                   

                

                 

              

              
                    (iii)    Bylaws/Operating
Agreement.  To the extent applicable to the Credit Parties, a
copy of the bylaws or comparable operating agreement of each Credit Party
certified by a secretary or assistant secretary, managing director or other duly
authorized person, as the case may be, of such Credit Party as of the Seventh
Amendment Effective Date to be true and correct and in force and effect as of
such date.

              

            

          

          
            
            

          

          
             

                (iv)    Good
Standing.  To the extent applicable to the Credit Parties,
copies of certificates of good standing, existence or its equivalent with
respect to the each Credit Party certified as of a recent date by the
appropriate Governmental Authorities of the state or country of incorporation or
organization and each other state or country in which the failure to so qualify
and be in good standing could reasonably be expected to have a Material Adverse
Effect on the business or operations of the Credit Parties and their
Subsidiaries in such state.

             

                (v)           Incumbency.  An
incumbency certificate of each Credit Party certified by a secretary or
assistant secretary, managing director or other duly authorized person, as the
case may be, to be true and correct as of the Seventh Amendment Effective
Date.

          

          

          (c)           Legal Opinions of
Counsel.   The Administrative Agent shall have received
opinions of legal counsel (including UK and GER counsel to the extent required
by the Administrative Agent) for the Credit Parties, dated the Seventh Amendment
Effective Date and addressed to the Administrative Agent and the Lenders, in
form and substance reasonably acceptable to the Administrative
Agent.

           

          (d)           Personal Property
Collateral.  The
Administrative Agent shall have received, in form and substance reasonably
satisfactory to the Administrative
Agent:

          
     (i)    searches
of Uniform Commercial Code filings in the jurisdiction of the chief executive
office of each Credit Party, the State of incorporation or organization of each
Credit Party and each jurisdiction where any Collateral is located or where a
filing would need to be made in order to perfect the Administrative Agent’s
security interest in the Collateral, copies of the financing statements on file
in such jurisdictions and evidence that no Liens exist other than Permitted
Liens, and analagous searches under UK and GER law to the extent
applicable;

           

              (ii)    UCC
financing statements for each appropriate jurisdiction as is necessary, in the
Administrative Agent’s reasonable discretion, to perfect the Administrative
Agent’s security interest in the Collateral and such analagous filings as
necessary under UK and GER law; and

           

          
                (iii)    original stock
certificates or other certificates evidencing the Capital Stock pledged pursuant
to the Pledge Agreements, together with an undated stock power for each such
certificate duly executed in blank by the registered owner
thereof.

          

          
            
            

          

          
            

            
              
                 

              

              
                19

                
                  

                

              

              
                 

              

               

            

            (e)           Real Property
Collateral.  The
Administrative Agent shall have received, in form and substance reasonably
satisfactory to the Administrative Agent:

          

          
            
            

          

              (i)    fully
executed and notarized amendments to the Mortgage Instruments, if required by
the Administrative Agent; and

           

              (ii)   a title
report in respect of each of the Mortgaged Properties.

          

          (f)           Insurance. The
Administrative Agent shall have received updated certificates of insurance
evidencing liability and casualty insurance meeting the requirements set forth
in this Agreement or in the Security Documents and business interruption
insurance satisfactory to the Administrative Agent.

          

          (g)           Sony Sale Documents; Sony
Sale.  There shall not have been any material modification,
amendment, supplement or waiver to the Sony Sale Agreement or the other
documents executed in connection therewith without the prior written consent of
the Administrative Agent.  The Sony Sale shall have been, or
simultaneously with the effectiveness of this Agreement shall be, fully
consummated in accordance with the terms of the Sony Sale
Agreement.

          

          (h)           Up-Front
Fee.  The Borrower shall have paid or caused to be paid a
renewal fee to the Administrative Agent for the ratable benefit of the Lenders
holding the Term Loan in connection with this Amendment in an aggregate amount
equal to $50,000.

          

          (i)           Payment of Revolving
Loans.  The Administrative Agent shall have received payment in
full in cash of all outstanding Revolving Loans, at which time the Revolving
Commitments, the Swingline Commitments and the LOC Commitments are
terminated.

          

          (j)           Compliance
Matters.  The Euro Borrowers shall have delivered to the
Administrative Agent such information as is necessary for approval under the
Administrative Agent’s compliance program.

          

          (k)           Other.  The
Administrative Agent shall have received such other documents, agreements or
information which it may reasonably request relating to the Credit Parties and
the transactions contemplated by this Amendment and any other matters relevant
hereto or thereto, all in form and substance satisfactory to the Administrative
Agent in its sole good faith discretion.

           

          
            
               

            

            
              20

              
                

              

            

            
               

            

          

           

          ARTICLE
III

          MISCELLANEOUS

          

          3.1           Amended
Terms; Release.

          

          (a)           Amended
Terms.  All references to the Credit Agreement in each of the
Credit Documents shall hereafter mean the Credit Agreement as amended by this
Amendment.  Except as specifically amended hereby or otherwise agreed,
the Credit Agreement is hereby ratified and confirmed and shall remain in full
force and effect according to its terms.

          

          (b)           Release.  Upon
satisfaction of the conditions set forth in Article II hereof as determined by
the Administrative Agent in its sole discretion, the Administrative Agent shall
release its liens and security interests on the Sony Sale Assets on the Seventh
Amendment Effective Date.

          

          3.2           Representations
and Warranties of Credit Parties.  Each of the Credit
Parties represents and warrants as follows as of the date hereof:

          

          (a)           It
has taken all necessary action to authorize the execution, delivery and
performance of this Amendment.

          

          (b)           This
Amendment has been duly executed and delivered by such Person and constitutes
such Person’s valid and legally binding obligations, enforceable in accordance
with its terms, except as such enforceability may be subject to
(i) bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or similar laws affecting creditors’ rights generally and
(ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity).

          

          (c)           No
consent, approval, authorization or order of, or filing, registration or
qualification with, any Governmental Authority or third party is required in
connection with the execution, delivery or performance by such Person of this
Amendment or the transaction contemplated herein.

          

          (d)           The
representations and warranties set forth in Article III of the Credit
Agreement are true and correct in all material respects as of the date hereof
(except for those which expressly relate to an earlier date).

          

          3.3           Acknowledgment
of Guarantors and Parent.  The Guarantors and Parent
acknowledge and consent to all of the terms and conditions of this Amendment and
agree that this Amendment and all documents executed in connection herewith do
not operate to reduce or discharge the Guarantors’ and Parent’s obligations
under the Credit Documents.

          

          3.4           Credit
Document.  This Amendment
shall constitute a Credit Document under the terms of the Credit
Agreement.

          

          
            
               

            

            
              21

              
                

              

            

            
               

            

             

          

          3.5           Entirety.  This
Amendment and the other Credit Documents embody the entire agreement between the
parties hereto and supersede all prior agreements and understandings, oral or
written, if any, relating to the subject matter hereof.

          

          3.6           Counterparts;
Telecopy.  This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall constitute one and the same
instrument.  Delivery of an executed counterpart to this Amendment by
telecopy shall be effective as an original and shall constitute a representation
that an original will be delivered.

          

          3.7           GOVERNING
LAW.  THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

          

          3.8           Consent
to Jurisdiction; Service of Process; Waiver of Jury Trial.  The jurisdiction,
services of process and waiver of jury trial provisions set forth in Sections
9.14 and 9.17 of the Credit Agreement are hereby incorporated by reference,
mutatis
mutandis.

          

          3.9           Fees.  The Borrower
agrees to pay all fees and expenses of the Administrative Agent and the Lenders
in connection with the preparation, execution and delivery of this Amendment,
the restructuring of the Loans as contemplated thereby, and in connection
therewith, due diligence concerning the Credit Parties and the Collateral,
including, without limitation, the fees and expenses of Reed Smith LLP and King
& Spalding LLP.

          

          3.10         Release.  The Credit
Parties hereby release and forever discharge Administrative Agent, the Lenders
and their agents, employees, attorneys, professionals, and representatives from
any and all claims, counterclaims, liabilities, and causes of action existing on
the date of execution of this Amendment and effective as of the Seventh
Amendment Effective Date (collectively, the “Claims”) of every
nature and description, whether known or unknown, suspected or unsuspected,
foreseen or unforeseen, actual or potential, and whether arising at law or in
equity, under the common law, state law, federal law, or any other law, in
connection with the Credit Agreement or any other Credit Document, or arising
out of or relating to Administrative Agent’s or any Lender’s administration of
or conduct in connection with the Credit Agreement or another Credit Document,
or otherwise, it being the Credit Parties’ intention to effect a general release
of all such Claims.

          

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              22

              
                

              

            

            
               

            

             

          

          IN WITNESS WHEREOF the Borrower, the
Guarantors, the Parent, the Lenders, and the Administrative Agent have caused
this Amendment to be duly executed on the date first above written.

           

           

          
            
              	      
                      BORROWER:

                    	      
                      ENTERTAINMENT
      DISTRIBUTION COMPANY,

                    	 
	 	      
                      LLC, a Delaware limited
      liability company

                    	 
	 	 	 	 
	
                       

                    	
                      By:
      

                    	/s/ Thomas
      Costabile	 
	 	Name: 	Thomas
      Costabile	 
	 	Title:	President
      and COO	 
	 	 	 	 

            

          

           

          
             

            
              
                	      
                              
                          GUARANTORS:

                        

                      	      
                        ENTERTAINMENT
      DISTRIBUTION COMPANY

                      	 
	 	      
                              
                           (USA), LLC, a Delaware limited liability
      company

                        

                      	 
	 	 	 	 
	
                         

                      	
                        By:
      

                      	/s/ Thomas
      Costabile	 
	 	Name: 	Thomas
      Costabile	 
	 	Title:	President
      and COO	 
	 	 	 	 

              

            

            
              

               

              
                
                  
                    	      
                                  
                              PARENT:

                            

                          	      
                                  
                              GLENAYRE ELECTRONICS,
      INC., a Colorado
      corporation

                            

                          	 
	 	      
                                  
                               

                            

                          	 
	 	 	 	 
	
                             

                          	
                            By:
      

                          	/s/ Clarke
      H. Bailey	 
	 	Name: 	Clarke
      H. Bailey	 
	 	Title:	Interim CEO	 
	 	 	 	 

                  

                

                

                   

                  
                    
                       

                    

                    
                       

                      
                        

                      

                    

                    
                       

                    

                  

                  
                     

                     

                    
                      
                        	      
                                      
                                        
                                    ADMINISTRATIVE
      AGENT

                                  

                                

                              	      
                                WACHOVIA
      BANK,

                              	 
	      
                                AND
      LENDERS: 

                              	      
                                      
                                  NATIONAL
      ASSOCIATION,

                                

                              	 
	 	as
      Administrative Agent and as a Lender	 
	 	 	 	 
	
                                 

                              	
                                By:
      

                              	/s/ Brian
      L. Martin	 
	 	Name: 	Brian
      L. Martin	 
	 	Title:	SVP	 
	 	 	 	 

                      

                    

                    

                       

                      
                        
                          
                            	      
                                          
                                       

                                    

                                  	      
                                    Euro
      Revolving Commitment Percentage:

                                  	100%
	 	      
                                          
                                      Euro
      Revolving Committed
      Amount:  

                                    

                                  	2
      million Euros

                             

                            
                              	 	ING
      CAPITAL LLC, as a Lender	 
	 	 	 	 
	
                                       

                                    	
                                      By:
      

                                    	/s/ Andrew
      C. Scepe	 
	 	Name: 	Andrew
      C. Scepe	 
	 	Title:	Vice
      President

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