Document:

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                                                                    EXHIBIT 10.1

                                                                  Execution Copy

                            ASSET PURCHASE AGREEMENT

     Agreement entered into as of the 28th day of April, 2006 (the "Execution
Date"), by and among Muze Inc., a Delaware corporation ("Buyer"), Loudeye Corp.,
a Delaware corporation ("Loudeye"), and Loudeye Enterprise Communications, Inc.,
a Delaware corporation and wholly-owned subsidiary of Loudeye ("LEC"). Loudeye
and LEC are sometimes referred to individually as a "Seller" and collectively as
"Sellers". Buyer and Sellers are referred to collectively herein as the
"Parties".

                                   ----------

     Sellers desire to sell and assign to Buyer certain of Sellers' assets and
liabilities relating to Sellers' U.S.-based operations, specifically Sellers'
digital music store platforms developed in the U.S. for Seller's current U.S.
business (commonly referred to as version 10.6 and version 11), encoding
services, digital music samples services (the "Samples Service"), hosting
services (specifically, on-demand hosting of content from third party web sites
and delivery of that content to specific URLs for identified customers) and
Internet radio services (collectively, the "Business"), and Buyer desires to
purchase said assets and assume said liabilities, all on the terms and subject
to the conditions contained in this Agreement. Loudeye is retaining all assets
that are not Acquired Assets (as defined below), including all of its
non-U.S.-based operations, all of the capital stock of Loudeye's subsidiaries
(other than Loudeye Sample Services, Inc., a Delaware corporation and
wholly-owned subsidiary of Loudeye ("LSS")), and all assets and operations
relating to the digital media store services business of On Demand Distribution
Limited.

     Now, therefore, in consideration of the representations, warranties and
covenants herein, the Parties agree as follows.

     1. Purchase and Sale of Assets.

     (a) Acquired Assets. On and subject to the terms and conditions of this
Agreement, at the Closing (as defined herein) Buyer shall purchase from Sellers,
and Sellers shall sell, transfer, convey, and deliver to Buyer, all of the
Assets of the Sellers primarily relating to the Business that are specified on
Part 1 of Schedule 1(a) hereto (the "Acquired Assets"), free and clear of all
mortgages, pledges, liens, encumbrances or other security interests created by
or through any of the Sellers (all of the foregoing, "Liens").

     (b) Excluded Assets. Buyer shall not acquire any assets of Sellers that are
not Acquired Assets (collectively, "Excluded Assets"). The Excluded Assets shall
include, without limitation:

          (i) title to any patents other than U.S. Patent 6,873,877;

          (ii) the third party software identified in Part 1 of Schedule 1(b);

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          (iii) office furniture, workstations, supplies, telephones and similar
tangible assets identified in Part 2 of Schedule 1(b) principally used by
personnel of Sellers who are not Retained Employees (as defined herein);

          (iv) all cash, cash equivalents and marketable securities, including,
but not limited to, any and all cash, check, money order, wire transfer or other
deposits of the Sellers received prior to the Effective Time (as defined herein)
and deposited into the bank or other deposit accounts of the Sellers prior to
the Effective Time, whether or not such deposits have cleared, other than the
Prepaids (as defined below);

          (v) all contracts, licenses and agreements, including prepaid amounts
under such contracts, licenses and agreements, that are not Assigned Contracts
including the license agreements identified in Part 3 of Schedule 1(b);

          (vi) all accounts receivable, including any unbilled accounts
receivable, of the Sellers as of the Closing Date, a recent summary schedule of
which is included in Part 4 of Schedule 1(b) (the "Accounts Receivable");

          (vii) all intercompany rights or obligations, including intracompany
receivables, advances or indebtedness between any Sellers and LSS before the
Effective Time;

          (viii) minute books and corporate records of Loudeye or any subsidiary
of Loudeye other than LSS;

          (ix) treasury shares of Loudeye or shares of any subsidiary of Loudeye
other than LSS;

          (x) all insurance policies, contracts or arrangements and rights
thereunder;

          (xi) any assets of any employee benefit plan of any Seller and any
rights under any such plan or any contract, agreement or arrangement between any
employee or consultant and Sellers;

          (xii) all personnel records and other records Sellers are required by
law to retain (it being understood that Buyer may receive copies thereof to the
extent relating to the Acquired Assets or the Retained Employees and as
permitted under applicable law and subject to applicable confidentiality
obligations and restrictions);

          (xiii) all claims for refunds or credits of taxes and other
governmental charges of whatever nature arising out of operation of the Business
prior to the Effective Time;

          (xiv) all defenses, claims, counter-claims, rights of offset and other
actions against any person asserting or seeking to enforce any liability against
the Sellers;

          (xv) all rights, demands, claims, and actions of Sellers (except to
the extent related to an Acquired Asset or an Assumed Liability);

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          (xvi) any bids received from any other person in connection with the
proposed sale of the Business or the Acquired Assets and any analyses prepared
by or on behalf of Sellers of any bids for the Business or any materials
relating to the negotiations with any potential bidder;

          (xvii) any trademarks of Sellers including, without limitation,
Loudeye(R) and the stylized Loudeye logo;

          (xviii) any registered domain names of Sellers other than the
Transferred Domains identified on Schedule 1(a);

          (xix) any and all assets principally associated with either Sellers'
live webcasting business or LEC's LEX online conferencing business;

          (xx) any and all assets formerly associated with Overpeer Inc.'s
business which have not as of the Execution Date been integrated into the
Business;

          (xxi) any and all prospective customer relationships (including all
sales information, contacts proposals and any other information pertaining
thereto) other than prospective customers of the encoding services, Samples
Service, hosting services and Internet radio services; and

          (xxii) any rights of any Seller under this Agreement.

In addition, Sellers may retain a copy of any agreements, contracts, licenses,
customer lists, support call records, royalty data and e-mail files included in
the Acquired Assets for archival purposes only, it being understood that Sellers
will preserve the confidentiality of such materials and will not use them for
any commercial purposes other than as required in such agreements, contracts or
licenses solely with regard to Excluded Liabilities to be performed or satisfied
by Sellers, for example with respect to label reporting and label and/or
customer audit rights.

     (c) Assumed Liabilities. On and subject to the terms and conditions of this
Agreement, at the Closing (as defined herein) Buyer shall assume and agree to
pay, perform, discharge and satisfy when due in accordance with their terms the
following liabilities:

          (i) the offers of employment contemplated by Section 4(d);

          (ii) all liabilities, including deposits, under any contracts,
licenses and permits that are included in the Acquired Assets, including the
Assigned Contracts, accruing, arising out of or relating to periods after the
Effective Time or, if later, the date any such contracts, licenses and permits
are validly assigned to Buyer;

          (iii) all liabilities resulting from Buyer's exercise of its
sublicense rights under any of the Sublicensed Contracts (as defined herein);

          (iv) all post-Effective Time liabilities of Sellers under the written
warranty agreements identified on Schedule 2(c);

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          (v) all severance, termination, sick pay, vacation pay and personal
leave time obligations of the Retained Employees, provided that no such payments
are required to be paid as of the Closing Date;

          (vi) all liabilities of Loudeye relating to or arising from the
Samples Service; and

          (vii) all liabilities and obligations relating to Non-assignable
Assets (including any claims (contractual or otherwise) asserted by third
parties with respect to the treatment or performance of such Non-assignable
Assets contemplated under Section 1(h));

          the obligations in clauses (i) through (vii) above being collectively
referred to as the "Assumed Liabilities"). For avoidance of doubt, the
liabilities and obligations of LSS shall continue to remain with LSS following
the transfer of LSS's capital stock contemplated by this Agreement.

     (d) Excluded Liabilities. Other than the Assumed Liabilities, Buyer shall
not assume, and Sellers shall retain, all other liabilities and obligations of
Sellers (the "Excluded Liabilities"), including without limitation (i) any
liability of Sellers for taxes; (ii) any liability of Sellers for any employment
related claims or under Sellers' employee benefit, option, bonus or other
welfare plans except as otherwise specifically included in the Assumed
Liabilities; (iii) any liability arising under any litigation matter commenced
prior to the Closing or relating to an event that occurred prior to the Closing
except as otherwise specifically included in the Assumed Liabilities; or (iv)
any contingent liability except as otherwise specifically included in the
Assumed Liabilities.

     (e) Purchase Price. The purchase price for the Acquired Assets shall be
$11,000,000 (the "Purchase Price"). On the Execution Date, Buyer shall pay the
Purchase Price as follows: (i) to SVB, the SVB Payoff Amount (as defined in
Section 5(a)(vi)), and (ii) to Loudeye, $11,000,000 less the SVB Payoff Amount.
The Purchase Price shall be paid by wire transfer of immediately available funds
pursuant to the wire transfer instructions appear on Schedule 1(e) hereto.
Loudeye shall hold that portion of the Purchase Price paid to it in escrow from
the time of receipt through the Effective Time.

     (f) Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Loudeye Corp., 1130 Rainier
Avenue South, Seattle, Washington 98144 concurrently with execution and delivery
of this Agreement (the "Closing Date"). It is presently anticipated that the
Closing Date will be on April 30, 2006. The Closing will be effective as of
11:59 p.m. on the Closing Date (the "Effective Time").

     (g) Deliveries at the Closing. At the Closing:

          (i) Seller will deliver to Buyer the various certificates,
instruments, and documents referred to in Section 6(a) below;

          (ii) the Parties will execute and deliver the Bill of Sale, Assignment
and Assumption Agreement substantially in the form of Exhibit A hereto (the
"Bill of Sale");

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          (iii) Buyer and Sellers will execute and deliver the Sublease
substantially in the form of Exhibit B (the "Sublease");

          (iv) Buyer and Loudeye will execute and deliver a Patent Assignment
substantially in the form of Exhibit C;

          (v) Buyer and Loudeye will execute and deliver a Patent License
Agreement substantially in the form of Exhibit D hereto (the "License
Agreement");

          (vi) Buyer and Loudeye will execute and deliver an Encoding Services
Agreement substantially in the form of Exhibit E (the "Encoding Agreement");

          (vii) Buyer (as licensee) and Loudeye (as licensor) and will execute
and deliver a Samples Services License Agreement substantially in the form of
Exhibit F hereto (the "Samples Services License");

          (viii) Buyer (as assignee) and Loudeye (as assignor) will execute and
deliver assignment and assumption agreements in forms agreed between Buyer and
Loudeye with respect to each of the major recorded label company U.S. territory
digital download licenses agreements identified in Schedule 2(e);

          (ix) Loudeye will deliver one or more share certificates evidencing
100% of the outstanding capital stock of Loudeye Samples Services, Inc., a
Delaware corporation ("LSS"), duly endorsed in blank or accompanied by stock
transfer powers duly executed in blank; and

          (x) Buyer will deliver to Seller the consideration specified in
Section 1(e) above.

The Bill of Sale, the Sublease, the Patent Assignment, the License Agreement,
the Encoding Agreement, the Samples Services License and the Major Label
Assignments are collectively referred to as the "Transaction Agreements".

     (h) Non-Assignable Assets. Nothing in this Agreement nor the consummation
of the transactions contemplated hereby shall be construed as an attempt or
agreement to assign any Acquired Asset that by its terms or by law is
non-assignable without a Consent (as defined herein) (a "Non-assignable Assets")
unless and until such Consent shall have been obtained. With regard to any
Non-assignable Assets, the applicable Seller and Buyer shall cooperate in
efforts to obtain required Consents post-Closing and in a mutually acceptable
arrangement under which (i) Buyer would obtain the rights and benefits and
assume the liabilities and obligations (which shall be considered Assumed
Liabilities for purposes of this Agreement) under such Non-assignable Assets in
accordance with this Agreement including by sub-contracting, sub-licensing, or
sub-leasing to Buyer (provided that the applicable Seller shall not be required
to take any action or make any omission that could result in a breach of the
applicable agreement), or (ii) such Non-assignable Assets would be held, as of
and from the Closing Date, by the applicable Seller in trust for Buyer and the
covenants and obligations thereunder in accordance with all applicable
agreements would be performed by Buyer in such Seller's name.

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     (i) Sublicense by Sellers. Sellers, as applicable, hereby grant Buyer
non-exclusive, royalty-free as to Sellers, licenses under the Sublicensed
Contracts on parallel terms to Sellers' rights and obligations under the
Sublicensed Contracts.

     (j) License by Buyer. Buyer grants Loudeye and LEC a non-exclusive,
royalty-free, perpetual, non-transferable, non-sublicensable (except to
affiliates of Loudeye), non-assignable (except that Loudeye may assign the
license to a successor in interest to substantially all its business, whether by
merger, stock purchase, consolidation, sale of assets or otherwise), worldwide
license for Loudeye's and LEC's respective internal use only to use and retain
archive copies of the Loudeye software platforms and associated know-how,
expertise and documentation which constitute part of the Acquired Assets listed
in Sections 1-5 of Schedule 1(a).

     (k) Prepaids, Advances and Other Adjustments. Schedule 1(k) identifies (i)
deposits paid and/or invoiced to Loudeye by EMI DSP customers as of March 31,
2006, less the amount of any accounts receivable balances owed to Loudeye by
such DSPs as of April 25, 2006, (ii) deposits and advances paid by Loudeye to
record labels with respect to contracts that are Acquired Assets under this
Agreement (which amount is payable from Muze to Loudeye and which shall be
offset against the deposits and prepaids set out in (i) and (iii) herein), and
(iii) a pro rated portion of platform service fees paid by O2 Germany to Loudeye
(collectively, the "Prepaids"). Loudeye will pay to Muze an amount equal to
total net Prepaids as reflected on Schedule 1(k) within five (5) business days
of the earlier of the date of the effective assignment and assumption of the O2
Germany service contracts by Muze or the date of a direct agreement being
entered into between Muze and O2 Germany, which direct agreement constitutes the
equivalent of an assignment and assumption of the O2 Germany service contracts
by Muze.

     2. Representations and Warranties of Sellers. The Sellers jointly and
severally represent and warrant to Buyer as follows:

     (a) Organization of Sellers. Each Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.

     (b) Authorization of Transaction. Each Seller has the requisite corporate
power and authority to execute and deliver this Agreement and the Transaction
Agreements to which it is a party, and to perform its obligations hereunder and
thereunder. The execution and delivery by each Seller of this Agreement and the
Transaction Agreements to which it is a party, and the performance by each
Seller of its obligations hereunder and thereunder, have been duly authorized by
all requisite corporate action on the part of such Seller. This Agreement
constitutes, and the Transaction Agreements, when executed and delivered by each
Seller party thereto, will constitute, the valid and legally binding obligations
of such Seller, enforceable in accordance with their respective terms.

     (c) Noncontravention. Neither the execution and the delivery of this
Agreement or the Transaction Agreements, nor the consummation of the
transactions contemplated hereby or thereby, will: (i) violate any law or other
restriction of any government, governmental agency, or court to which any Seller
is subject or any provision of the Certificate of Incorporation, as amended, or
Bylaws of any Seller, or (ii) except with respect to Assigned Contracts
requiring

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consent to assignment and identified on the Schedules to this Agreement,
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which any Seller is a party or by which it
is bound or to which any of the Acquired Assets is subject (or result in the
imposition of any Lien upon any of the Acquired Assets).

     (d) Title to Assets; No Liens. Sellers own outright all the Acquired Assets
that they purport to own and have a valid leasehold interest in all the Acquired
Assets that they purport to lease, in each case free and clear of all Liens
except (i) as specifically identified in Schedule 2(d) and (ii) with respect to
the SVB Lien (as defined below). Loudeye owns 100% of the capital stock of LSS,
and there are no outstanding options, subscription rights, convertible
securities or other rights in favor of any third party to acquire any capital
stock of LSS.

     (e) Assigned Contracts. Schedule 2(e) lists contracts, licenses and other
agreements to which any of the Sellers is a party that are to be assigned to or
assumed by Buyer as part of the Acquired Assets (collectively, the "Assigned
Contracts"). Each Assigned Contract that is assigned to Buyer at the Closing
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms for the benefit of Buyer following the consummation of
the transactions contemplated hereby.

     (f) Sublicensed Contracts. Schedule 2(f) lists the licenses to which any of
the Sellers is a party that are to be sublicensed to Buyer (collectively, the
"Sublicensed Contracts"). Each Seller has all requisite power and authority to
sublicense the Sublicensed Contracts to which it is a party.

     (g) "AS-IS" Transaction. Except as expressly provided herein, no Seller
makes any representations or warranties whatsoever, express or implied, with
respect to any matter relating to the Business or the Acquired Assets or Assumed
Liabilities, and the Acquired Assets and Assumed Liabilities are being
transferred on an "as-is" basis and no representation or warranty is given in
respect thereof.

     3. Representations and Warranties of Buyer. Buyer represents and warrants
to Sellers as follows:

     (a) Organization of Buyer. Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware.

     (b) Authorization of Transaction. Buyer has the requisite corporate power
and authority to execute and deliver this Agreement and the Transaction
Agreements, and to perform its obligations hereunder and thereunder. The
execution and delivery by Buyer of this Agreement and the Transaction
Agreements, and the performance by Buyer of its obligations hereunder and
thereunder, have been duly authorized by all requisite corporate action on the
part of Buyer. This Agreement constitutes, and the Transaction Agreements, when
executed and delivered by Buyer, will constitute, the valid and legally binding
obligations of Buyer, enforceable in accordance with their respective terms.

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     (c) Noncontravention. Neither the execution and the delivery of this
Agreement or the Transaction Agreements, nor the consummation of the
transactions contemplated hereby or thereby, will violate any law or other
restriction of any government, governmental agency, or court to which Buyer is
subject or any provision of the Certificate of Incorporation or By-laws of
Buyer.

     (d) "AS-IS" Transaction. Buyer acknowledges it has had an opportunity to
conduct such independent inspection and investigation of the condition of the
Acquired Assets and all other matters relating to or affecting the Acquired
Assets or Assumed Liabilities as Buyer deems necessary or appropriate and that
in proceeding with the transactions contemplated by this Agreement Buyer is
doing so based solely upon such independent investigation and the accuracy of
the express warranties contained in Section 2(a) through 2(f) above. Buyer
accepts the Acquired Assets and Assumed Liabilities "AS-IS," "WHERE IS," and
"WITH ALL FAULTS."

     4. Covenants.

     (a) General. Each of the Parties will use its commercially reasonable
efforts to take all action and to do all things necessary in order to consummate
and make effective the transactions contemplated by this Agreement (including
effecting the satisfaction, but not waiver, of the closing conditions set forth
in Section 6 below). Without limiting the foregoing, Sellers will (between the
date hereof and the Closing Date, and if necessary from and after the Closing
Date) use commercially reasonable efforts (with Buyer's reasonable cooperation)
to give such notices to, make such filings with, or obtain any authorization,
consent, or approval of any person or entity as may be necessary in order to
effect the transfer to Buyer of any of the Acquired Assets, including any
contracts, licenses, intellectual property rights or permits (all of the
foregoing, the "Consents").

     (b) Operation of Business. Between the date hereof and the Closing Date,
Sellers will not engage in any practice, take any action, or enter into any
transaction outside the ordinary course of business with regard to the Acquired
Assets. Without limiting the foregoing, Sellers will use commercially reasonable
efforts to keep their business and properties (to the extent the same relate to
the Acquired Assets) substantially intact, including their present operations,
physical facilities, working conditions, and relationships with lessors,
licensors, suppliers, customers and employees.

     (c) Full Access. Between the date hereof and the Closing Date, Sellers will
permit representatives of Buyer to have full access during normal business hours
and subject to applicable confidentiality and nondisclosure obligations, and in
a manner so as not to interfere with the normal business operations of Sellers,
to all premises (specifically including the facilities to be assigned to the
Buyer under the Sublease), properties, personnel, books, records (including tax
records), contracts, and documents of or pertaining to the Acquired Assets and
the Assumed Liabilities.

     (d) Employees. Buyer shall offer employment to the employees of Sellers
identified in Schedule 4(d) (the "Retained Employees"), such employment offers
to be effective May 2, 2006. With regard to all Retained Employees, the base
salaries offered shall be at least as much as their current base salaries. Buyer
shall carry over all of the severance, vacation, sick and

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personal leave time each Retained Employee had accrued but not used as of the
Closing Date (to the extent the Retained Employee is not required to be paid in
respect of the same as of the Closing Date). Notwithstanding anything in this
Section 4(d) to the contrary, nothing herein shall be deemed to require that (A)
the employment by Buyer of any Retained Employee be continued for any specific
period of time or (B) except as provided in contractual agreements between
Loudeye and any Retained Employee, the compensation of any Retained Employee be
maintained at any particular level for any specific period of time. To the
extent a Retained Employee is subject to noncompetition obligations to Loudeye
and accepts the offer of employment by Buyer contemplated in this Section 1(d),
Loudeye waives enforcement of such noncompetition obligations against Buyer
and/or such Retained Employee solely with respect to such employment by Buyer.

     (e) Tax Matters. Reasonably promptly following the Closing Date, Buyer will
propose an allocation of the Purchase Price among the Acquired Assets, which
shall be reasonably acceptable to Sellers (the "Allocation"). The Allocation
will be consistent with U.S. generally accepted accounting principles as applied
by Sellers, to the extent permitted by Buyer's auditors. The Parties shall file
all tax returns in a manner consistent with such Allocation and shall not take
any position on their respective tax returns that is inconsistent with such
Allocation. Any sales, use or transfer taxes resulting from the transactions
contemplated by this Agreement will be shared equally by Sellers, on the one
hand, and Buyer, on the other hand.

     (f) Press Release. Prior to Closing, Sellers will prepare and the Parties
will mutually agree a press release announcing the transaction contemplated
hereby. In addition, prior to Closing Loudeye will prepare disclosures required
by applicable securities laws and regulations including the filing as required
of the complete, unredacted text of this Agreement and any Transaction
Documents, and Loudeye will provide Buyer copies of such disclosures in advance
of issuance. Except for such press release and disclosures, neither Sellers, on
the one hand, nor Buyer, on the other hand, shall, without the prior approval of
the other, make any press release or other announcement concerning the existence
of this Agreement or the terms of the transactions contemplated by this
Agreement, except as and to the extent that any such Party shall be so obligated
by applicable law, in which case the other Party shall be advised and the
Parties shall use their reasonable commercial efforts to cause a mutually
agreeable release or announcement to be issued.

     (g) Further Assurances. From time to time following the Closing Date,
Sellers and Buyer shall execute, acknowledge and deliver all such further
conveyances, notices, assumptions, releases and such other instruments, and
shall take such further actions, as may be necessary or appropriate to assure
fully to Buyer all of the properties, rights, titles, interests, estates,
remedies, powers and privileges intended to be conveyed to Buyer under this
Agreement and to assure fully to Sellers the assumption of the liabilities and
obligations intended to be assumed by Buyer under this Agreement, and to
otherwise make effective the transactions contemplated hereby.

     (h) Accounts Receivable. Buyer will use commercially reasonable efforts to
cooperate with Seller in collecting all Accounts Receivable, it being understood
that Buyer shall have no liability to Seller for any failure to collect any
Accounts Receivable except in the case of Buyer's gross negligence or willful
misconduct. Sellers retain the right to contact any third

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parties with Accounts Receivable balances that remain uncollected despite
Buyer's reasonable efforts to collect same and to undertake commercially
reasonable actions relating to collection, including referral to collection
agencies, litigation or otherwise with regard to delinquent balances. Any
amounts recovered by Buyer from a third party that has an Accounts Receivable
balance with Sellers shall be applied:

          (i) first, to any outstanding Accounts Receivable balance invoiced by
Sellers with an invoice date that is less than 61 days prior to the Closing Date
(notwithstanding any contrary invoice number specified in the remittance);

          (ii) second, to any invoice number that is specified in the
remittance;

          (iii) third, (i.e., if no invoice number is specified in the
remittance, or if a payment is received from a party whose earlier payment
specified a later invoice number but was nevertheless applied to an Accounts
Receivable balance in accordance with clause (i) above), to any accounts
receivable balance invoiced by Buyer after the Closing Date; and

          (iv) fourth, to any accounts receivable balance invoiced by Sellers 61
days or more prior to the Closing Date.

     (i) Sublicensed Contracts. Buyer shall timely perform any and all actions,
including royalty reporting, payment, content takedown, etc., as required
pursuant to the terms of each Sublicensed Contract. Buyer acknowledges and
agrees that Buyer's sublicense rights under each Sublicensed Contract shall
expire as of the termination date of each such Sublicensed Contract. Immediately
following the Closing Date, Buyer and Loudeye shall contact each primary
licensor under each Sublicensed Contract to initiate discussion regarding Buyer
obtaining direct license rights from each such primary licensor. Loudeye and
Buyer will use commercially reasonable efforts to facilitate Buyer's efforts to
obtain such direct license rights. To the extent consent to sublicense a
Sublicensed Contract has not been obtained by the Effective Time, such
Sublicensed Contract shall be a Non-assignable Asset for all purposes under this
Agreement and shall be managed under Section 1(h)(ii) of this Agreement until
such time as consent to sublicense has been granted by the applicable third
party or a direct agreement between Buyer and the applicable third party has
been executed.

     (j) SVB Lien. On or prior to the Closing Date, Loudeye shall have repaid or
cause to have been repaid in full all indebtedness secured by the SVB Lien such
that the SVB Lien shall be released.

     (k) Intercompany Accounts. On or prior to the Closing Date, Sellers shall
have canceled or terminated all intercompany indebtedness between LSS, on the
one hand, and Sellers or their respective subsidiaries, on the other hand.

     (l) Professional Services. For the periods indicated below, Muze agrees to
permit and will direct the appropriate Retained Employees to provide a
reasonable degree of ongoing professional services to Sellers free of charge so
as to enable Loudeye to continue to operate its business during such period,
such professional services to be at the request of a Loudeye employee directed
in email to a designated representative of Muze. Following culmination of the
periods indicated below, Sellers may request reasonable additional transitional
professional

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services for up to an additional four weeks (or longer if mutually agreed to)
with respect to each category of services listed below, provided that any such
services will be the subject of a negotiated professional services agreement and
shall be charged at an arms length negotiated rate.

<TABLE>
<CAPTION>
FUNCTION                                NUMBER OF WEEKS OF TRANSITION SERVICES
--------                                --------------------------------------
<S>                                     <C>
Human Resources                         8 weeks
Accounting                              3 weeks
Legal Filing                            3 weeks
IT support (email, phones, electronic   8 weeks
records, etc.)
</TABLE>

     (m) Loudeye Muze Database License. Buyer acknowledges and agrees that the
Muze Database License--Retail between Loudeye and Muze dated June 3, 2004,
terminated March 31, 2006, and any Muze invoices delivered to Loudeye pursuant
to such agreement for services post-March 31, 2006 are null and void.

     5. Intentionally deleted.

     6. Intentionally deleted.

     7. Survival; Indemnity.

     (a) Survival. The representations and warranties of the Parties shall
survive the Closing for a period of twelve months.

     (b) Indemnification.

          (i) Sellers shall jointly and severally indemnify and hold harmless
Buyer against any losses, claims, damages, judgments, settlements or liabilities
(collectively, "Losses") that Buyer may incur, to the extent that such Losses
arise out of or result from:

          (A) the breach of any representation or warranty made herein by any
     Seller;

          (B) the nonperformance of any covenant made herein by any Seller;

          (C) any liability for any commission or compensation in the nature of
     a finder's fee (and the costs and expenses of defending against such
     liability or asserted liability) for which any Seller or any of its
     officers, stockholders or representatives is responsible;

          (D) the Excluded Liabilities;

          (E) any amounts owing to UMG Recordings, Inc. under an Agreement for
     Universal Sounds Recordings dated July 19, 2004, prior to the effective
     date of an assignment of such agreement to Buyer; or

<PAGE>

          (F) any amounts due to Warner Music Group, Inc. under a Digital Music
     Download Agreement--Loudeye dated July 8, 2004, and for all other
     liabilities and obligations to Warner relating to transactions under such
     agreement in the time period occurring on or before the Effective Time;

and shall reimburse Buyer for any reasonable legal or other expenses
("Expenses") incurred by it in connection with investigating or defending
against any such Losses.

          (ii) Buyer shall indemnify and hold harmless Sellers against any
Losses that any Seller may incur, to the extent that such Losses arise out of or
result from:

          (A) the breach of any representation or warranty made herein by Buyer;

          (B) the nonperformance of any covenant made herein by Buyer;

          (C) any liability for any commission or compensation in the nature of
     a finder's fee (and the costs and expenses of defending against such
     liability or asserted liability) for which Buyer or any of its officers,
     stockholders or representatives is responsible;

          (D) any liabilities or obligations of LSS;

          (E) the Assumed Liabilities; or

          (F) any liability arising out of the ownership or operation of the
     Acquired Assets after the Effective Time other than the Excluded
     Liabilities;

and shall reimburse Sellers for any reasonable Expenses incurred by any of them
in connection with investigating or defending against any such Losses.

     (c) Procedures.

          (i) Promptly after receipt by a party (the "Indemnified Party") of
notice of a Loss or the commencement of any action, suit or proceeding (a
"Proceeding") against which it believes it is indemnified under this Section 7,
the Indemnified Party shall so notify the party or parties obligated to provide
such indemnification under this Section 7 (the "Indemnifying Party"); provided,
however, that the failure so to notify the Indemnifying Party shall only relieve
it from any liability that it may have to the Indemnified Party to the extent
that the Indemnifying Party is actually prejudiced by such failure.

          (ii) The Indemnifying Party shall, in a writing delivered within 30
days after receipt of a notice of Loss or Proceeding given pursuant to Section
7(c)(i), either: (A) acknowledge liability for such Loss or the amount in
controversy in such Proceeding and pay the Indemnified Party the amount of such
Loss or the amount in controversy in such Proceeding in cash in immediately
available funds (or establish by agreement with the Indemnified Party an
alternative payment arrangement); (B) acknowledge liability, as between the
Indemnifying Party and the Indemnified Party, for such Loss or the subject
matter in such Proceeding but disavow the validity of the Loss or Proceeding or
the amount thereof and, in the case of a Proceeding,

<PAGE>

advise whether the Indemnifying Party elects to assume the defense thereof in
accordance with Section 7(c)(iv); or (C) in writing object (or reserve the right
to object until additional information is obtained) to the claim for
indemnification or the amount thereof and set forth the grounds therefor in
reasonable detail. If the Indemnifying Party does not so respond to the
Indemnified Party within such 30-day period, the Indemnifying Party shall be
deemed to have acknowledged its liability for such indemnification claim as
between the Indemnifying Party and the Indemnified Party (but shall not be
deemed to have acknowledged liability to any other Person), and the Indemnified
Party may exercise any and all of its rights under applicable law to collect
such amount.

          (iii) An Indemnifying Party shall not, without the prior written
consent of the Indemnified Party (which shall not be unreasonably withheld),
settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened Proceeding in respect of which indemnification or
contribution is sought hereunder, unless such settlement, compromise or consent:
(1) requires no action and imposes no restriction on the part of the Indemnified
Party, (2) does not require any admission of wrongdoing on the part of the
Indemnified Party and (3) includes a full and unconditional release of the
Indemnified Party.

          (iv) Subject to Section 7(c)(v) and if the Indemnifying Party has
responded to the notice given by the Indemnified Party in accordance with
Section 7(c)(ii)(B), the Indemnifying Party shall be entitled to assume the
legal defense of a Proceeding at its own expense with counsel reasonably
satisfactory to the Indemnified Party. The Indemnified Party may employ separate
counsel in any Proceeding and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the Indemnified Party
unless: (A) the employment of such counsel shall have been specifically
authorized in writing by the Indemnifying Party, (B) the Indemnifying Party
shall have failed to assume the defense of such action or (C) the Indemnified
Party has been advised in writing by counsel that a reasonable likelihood exists
of a conflict of interest between the Indemnifying Party and the Indemnified
Party. If the Indemnifying Party does not assume the defense of a Proceeding as
to which it has acknowledged liability, as between itself and the Indemnified
Party, pursuant to Section 7(c)(ii)(B), the Indemnified Party may require the
Indemnifying Party to reimburse it on a current basis for its reasonable
Expenses incurred in connection therewith and the Indemnifying Party shall be
bound by the result obtained with respect thereto by the Indemnified Party.

          (v) In the case of a Loss as to which the Indemnifying Party shall
have responded pursuant to Section 7(c)(ii)(C), the parties shall attempt in
good faith to resolve their differences for a period of 20 days following
receipt by the Indemnified Party of such response. If the parties are unable to
resolve their differences within such period, the Indemnified Party may submit
the matter to a court of competent jurisdiction in accordance with the
provisions of Section 8(i).

     (d) Limitations. The liability of an Indemnifying Part under this Section 7
shall be subject to the following limitations: (i) no Indemnifying Party shall
have any liability for any Losses or Expenses until the aggregate amount of all
Losses and Expenses suffered or incurred by the Indemnified Party exceeds
$100,000, in which case the Indemnifying Party shall be liable only for those
Losses and Expenses in excess of $100,000, and (ii) except in a case of (A)
fraud, (B) Sellers' indemnification obligations under Sections 7(b)(i)(D), (E)
and (F), or (C) Buyer's

<PAGE>

indemnification obligations under Sections 7(b)(ii)(D), (E) and (F), the
Indemnifying Party's aggregate liability for Losses and Expenses shall not
exceed $2,000,000.

     (e) Sole Remedy. The provisions of this Section 7 shall be the sole and
exclusive remedy of each Party with respect to the subject matter of Section 7,
except in a case of fraud.

     8. Miscellaneous.

     (a) Entire Agreement. This Agreement, together with the Schedules and
Exhibits hereto and the other Transaction Agreements, constitute the entire
agreement between the Parties and supersede any prior understandings,
agreements, or representations by or between the Parties, written or oral, to
the extent they related in any way to the subject matter hereof.

     (b) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Parties named herein and their respective successors and
permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party. Buyer, on the one hand, and Sellers, on the other hand, may
assign its or their rights and obligations under this Agreement and all of the
Transaction Agreements without the approval or consent of the other Party to a
successor in interest to the business of Buyer or Sellers (as applicable),
whether by merger, sale of assets or otherwise.

     (c) Counterparts. This Agreement may be executed in one or more
counterparts, by facsimile, .PDF or otherwise, each of which shall be deemed an
original but all of which together will constitute one and the same instrument.

     (d) Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

     (e) Notices. All notices, claims and other communications required or
permitted hereunder will be in writing. Any notice, claim or other communication
hereunder shall be deemed duly given if (and then two business days after) it is
sent by registered or certified mail, return receipt requested, postage prepaid
and addressed to the intended recipient as set forth below:

     If to Sellers:

          Loudeye Corp.
          1130 Rainier Avenue South
          Seattle, Washington 98144
          Attention: Eric S. Carnell, General Counsel
          Facsimile No.: (206) 832-4009

<PAGE>

     Copy to:

          Latham & Watkins LLP
          633 West Fifth Street, Suite 4000
          Los Angeles, California, 90071
          Attention: W. Alex Voxman
          Facsimile No.: (213) 891-8763

     If to Buyer:

          Muze Inc.
          304 Hudson Street, 8th Floor
          New York, New York 10013
          Attention: Thomas Goldsworthy
          Facsimile No.: (212) 741-1246

     Copy to:

          Sonnenschein Nath & Rosenthal LLP
          1221 Avenue of the Americas
          New York, New York 10020
          Attention: Michael R. Flynn
          Facsimile No.: (212) 768-6800

Any Party may send any notice, claim or other communication hereunder to the
intended recipient at the address set forth above via personal delivery,
expedited courier, messenger service, facsimile or ordinary mail, but no such
notice, claim or other communication shall be deemed to have been duly given
unless it actually is received (or receipt is refused) by the intended
recipient. Either Party may change its address for notices by giving the other
notice in the manner herein set forth.

     (f) Amendments and Waivers. No amendment or waiver of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Party against whom enforcement of such amendment or waiver is sought. No waiver
of any default, misrepresentation or breach hereunder, whether intentional or
not, shall be deemed to extend to any prior or subsequent default,
misrepresentation or breach hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence.

     (g) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.

     (h) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington without giving effect to any
choice or conflict of law provision or rule that would cause the application of
the laws of any jurisdiction other than the State of Washington.

<PAGE>

     (i) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in King County, Washington,
in any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
Party with respect thereto. Each Party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or in equity.

     (j) Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTION AGREEMENTS. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE TRANSACTION AGREEMENTS, AS APPLICABLE, BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8(j).

     (k) Attorney Fees. In the event either Party brings an action to enforce or
interpret any of the provisions of this Agreement, the "prevailing party" in
such action shall, in addition to any other recovery, be entitled to its
reasonable attorneys' fees and expenses arising from such action and any appeal
related thereto, whether or not such matter proceeds to court. For purposes of
this Agreement, "prevailing party" shall mean, in the case of a Person asserting
a claim, that such Person is successful in obtaining substantially all of the
relief sought, and in the case of a Person defending against or responding to a
claim, that such Person is successful in denying substantially all of the relief
sought.

     (l) No Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to or shall confer on any person or entity other than the
Parties hereto and their respective successors or assigns any rights (including
any rights as a third party beneficiary), remedies, obligations or liabilities
under or by reason of this Agreement.

     (m) Bulk Transfer Laws. Buyer acknowledges that Sellers will not comply
with the provisions of any bulk transfer laws of any jurisdiction in connection
with the transactions contemplated by this Agreement.

           [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE
                            IN COUNTERPARTS FOLLOWS.]

<PAGE>

                  [SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]

     IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.

                                      MUZE INC.

                                      By: /s/ Thomas Goldsworthy
                                          --------------------------------------
                                      Name: Thomas Goldsworthy
                                      Title: Chief Financial Officer

                                      LOUDEYE CORP.

                                      By: /s/ Michael A. Brochu
                                          --------------------------------------
                                      Name: Michael A. Brochu
                                      Title: President & Chief Executive Officer

                                      LOUDEYE ENTERPRISE COMMUNICATIONS, INC.

                                      By: /s/ Chris J. Pollak
                                          --------------------------------------
                                      Name: Chris J. Pollak
                                      Title: Vice Presidentexv4w1

 

EXHIBIT 4.1

FRANKLIN BANK CORP.

 

CERTIFICATE OF DESIGNATIONS

Pursuant to Section 151 of the General

Corporation Law of the State of Delaware

 

SERIES A NON-CUMULATIVE PERPETUAL PREFERRED STOCK

Par Value $.01 Per Share

     FRANKLIN BANK CORP., a Delaware corporation (the “Corporation”), through the
undersigned duly authorized officer and in accordance with the provisions of Section 103 and 151 of
the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY that pursuant to
authority expressly conferred upon the Board of Directors of the Corporation (the “Board of
Directors”) by the provisions of Section 151 of the General Corporation Law of the State of
Delaware and Article 4 of the Amended and Restated Certificate of Incorporation of the Corporation,
and pursuant to authority expressly conferred by the Board of Directors upon a Special Committee
thereof (the “Committee”) by resolutions of the Board of Directors adopted on March 1,
2006, the Committee unanimously adopted in accordance with law the following resolution on May
[___], 2006 creating a series of shares of preferred stock of the Corporation designated as “Series
A Non-Cumulative Perpetual Preferred Stock”:

     RESOLVED, that pursuant to the authority vested in the Committee and in accordance with the
resolutions of the Board of Directors adopted March 1, 2006, the provisions of Article 4 of the
Amended and Restated Certificate of Incorporation of the Corporation and other applicable law, a
series of preferred stock, par value $.01 per share, of the Corporation be and hereby is created,
and that the designation and number of shares thereof and the voting and other powers,
designations, preferences and relative, participating, optional or other special rights of the
shares of such series, and the qualifications, limitations and restrictions thereof (in addition to
the powers, designations, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions thereof set forth in the Amended and
Restated Certificate of Incorporation of the Corporation that are applicable to all series), are
hereby fixed as follows:

          Section 1. Designation of Series. The distinctive serial designation of such series of
preferred stock is “Series A Non-Cumulative Perpetual Preferred Stock” (“Series A Preferred
Stock”). Each share of Series A Preferred Stock shall be identical in all respects to every
other share of Series A Preferred Stock, except as to the respective dates from which dividends
thereon shall accrue, to the extent such dates may differ as permitted pursuant to Section 4(a)
below.

          Section 2. Number of Shares. The authorized number of shares of Series A Preferred Stock
initially shall be 3,450,000. Such number may from time to time be decreased (but not below the
number of shares of Series A Preferred Stock then outstanding) by the Board of Directors (or a duly
authorized committee of the Board of Directors) by a certificate executed, acknowledged and filed
with the Secretary of State of the State of Delaware setting forth a statement that a specified
decrease therein has been authorized and directed by a resolution duly adopted by the Board of
Directors (or a duly authorized committee of the Board of Directors). In case the number of
authorized shares of the Series A Preferred Stock shall be so decreased, the number of shares so
specified in the certificate shall resume the status of authorized but unissued shares of preferred
stock, undesignated as to series. Shares of Series A Preferred Stock that are redeemed, purchased
or otherwise acquired by the Corporation shall be cancelled and shall revert to authorized but
unissued shares of preferred stock, undesignated as to series.

          Section 3. Definitions. As used herein with respect to Series A Preferred Stock:

          a. “Board of Directors” means the board of directors of the Corporation.

          b. “Bylaws” means the Amended and Restated Bylaws of the Corporation, as they may be
amended and restated from time to time.

 

 

          c. “Business Day” means a day that is a Monday, Tuesday, Wednesday, Thursday or Friday
and is not a day on which banking institutions in New York City generally are authorized or
obligated by law, regulation or executive order to close.

          d. “Certificate of Designations” means this Certificate of Designations relating to
the Series A Preferred Stock, as it may be amended from time to time.

          e. “Certificate of Incorporation” means the Amended and Restated Certificate of
Incorporation of the Corporation, as it may be amended and restated from time to time, and shall
include this Certificate of Designations.

          f. “Clearing Agency” means an organization registered as a “clearing agency” pursuant
to Section 17A of the Exchange Act. The Depository Trust Corporation will be the initial Clearing
Agency.

          g. “Clearing Agency Participant” means a broker, dealer, bank, other financial
institution or other Person for whom from time to time the Clearing Agency effects book-entry
transfers and pledges of securities deposited with the Clearing Agency.

          h. “Common Stock” means the common stock, par value $.01 per share, of the
Corporation.

          i. “Dividend Parity Stock” means any class or series of stock of the Corporation
hereafter authorized ranking equally with Series A Preferred Stock as to the payment of dividends.

          j. “Dividend Payment Date” has the meaning assigned to such term in Section 4(a) of
this Certificate of Designations.

          k. “Dividend Period” means each period commencing on a Dividend Payment Date (other
than the first Dividend Period, which shall commence upon the Issue Date) and continuing to, but
not including, the next succeeding Dividend Payment Date; provided, that for any share of the
Series A Preferred Stock issued after the Issue Date, the first Dividend Period for such share may
commence on and include such other date as the Board of Directors (or a duly authorized committee
of the Board of Directors) shall determine and publicly disclose and shall continue to, but not
include, the next succeeding Dividend Payment Date.

          l. “Dividend Rate” means [___]% per annum and no more.

          m. “Dividend Record Date” means a date fixed by the Board of Directors (or a duly
authorized committee of the Board of Directors) for the purpose of determining the holders of the
Series A Preferred Stock entitled to receive a dividend, and which shall be not more than 60 nor
less than 10 days prior to a Dividend Payment Date.

          n. “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          o. “Issue Date” means the initial date of delivery of shares of Series A Preferred
Stock.

          p. “Junior Stock” means the Common Stock and any other class or series of stock of the
Corporation hereafter authorized over which the Series A Preferred Stock has preference or priority
either or both as to the payment of dividends and in the distribution of assets on any liquidation,
dissolution or winding up of the Corporation.

          q. “Liquidation Parity Stock” means any class or series of stock of the Corporation
hereafter authorized ranking equally with the Series A Preferred Stock as to the distribution of
assets on any liquidation, dissolution or winding up of the Corporation.

          r. “Liquidation Preference” means $25.00 per share of Series A Preferred Stock.

-2-

 

          s. “Owner” means each Person who is the beneficial owner of a share of Series A
Preferred Stock as reflected in the records of the Clearing Agency or, if a Clearing Agency
Participant is not the Owner, then as reflected in the records of a Person maintaining an account
with the Clearing Agency (directly or indirectly, in accordance with the rules of the Clearing
Agency).

          t. “Nonpayment Event” has the meaning assigned to such term in Section 7(b).

          u. “Parity Stock” means any class or series of stock of the Corporation hereafter
authorized ranking equally with the Series A Preferred Stock as to both the payment of dividends
and the distribution of assets on any liquidation, dissolution or winding up of the Corporation.

          v. “Person” means any individual, corporation, partnership, joint venture, trust,
limited liability company, unincorporated organization or government or any agency or political
subdivision thereof.

          w. “Preferred Stock Director(s)” has the meaning(s) assigned to such terms in Section
7(b).

          x. “Redemption Price” means $25.00 per share of Series A Preferred Stock.

          y. “Series A Preferred Stock Certificate” means a certificate evidencing ownership of
a share or shares of Series A Preferred Stock.

          z. “Voting Parity Stock” means, with respect to any election or removal of a Preferred
Stock Director, any and all classes and series of Dividend Parity Stock, Parity Stock or any other
class or series of preferred stock as to which the conditions precedent to the vesting of the right
to vote for a total of two directors have occurred and are continuing, such that the holders
thereof are entitled to vote with respect to such matter.

          Section 4. Dividends.

          a. General.

                         i. Dividend Payment Dates, Dividend Rate, Etc. Holders of Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors (or a duly authorized
committee of the Board of Directors), but only out of funds legally available therefor,
non-cumulative cash dividends at the Dividend Rate applied to the Liquidation Preference per share.
Such dividends shall be payable quarterly (as provided below in this Section 4 (a)), but only
when, as and if declared by the Board of Directors (or a duly authorized committee of the Board of
Directors), on each March 15, June 15, September 15, and December 15 (the “Divided Payment Dates”
and each a “Dividend Payment Date”), commencing June 15, 2006. Dividends that are payable on the
Series A Preferred Stock on any Dividend Payment Date will be payable to holders of record of the
Series A Preferred Stock as they appear on the stock register of the Corporation on the applicable
Dividend Record Date.

                         ii. Business Day Convention. Any day that is a Dividend Record Date shall be a Dividend
Record Date whether or not such day is a Business Day. If any Dividend Payment Date is not a
Business Day, then dividends will be payable on the first Business Day following such Dividend
Payment Date, with the same force and effect as if payment were made on the date such payment was
originally payable.

                         iii. Day Count Convention. The amount of dividends payable per share of Series A Preferred
Stock on each Dividend Payment Date will be computed on the basis of a 360-day year of twelve
30-day months.

          b. Non-Cumulative Dividends. Dividends on shares of Series A Preferred Stock shall not be
cumulative. Holders of shares of Series A Preferred Stock shall not be entitled to receive any
dividends not declared by the Board of Directors (or a duly authorized committee of the Board of
Directors). Dividends not declared by the Board of Directors (or a duly authorized committee of the Board of Directors)
shall not cumulate and shall not be payable, and the Corporation shall have no obligation to pay
dividends with respect to any Dividend

-3-

 

Period for which a dividend is not declared, or to pay
interest with respect to such dividends, or any sum of money in lieu of interest, whether or not
dividends are declared on Series A Preferred Stock for any
subsequent Dividend
Period. Holders of
shares of Series A Preferred Stock shall not be entitled to any dividends, whether payable in cash,
securities or other property, other than dividends (if any) declared and payable on the Series A
Preferred Stock as specified in this Section 4 (subject to the other provisions of this Certificate
of Designations).

          c. Priority of Dividends.

                         i. Junior Stock. So long as any share of Series A Preferred Stock remains outstanding, during
a Dividend Period no dividend whatsoever shall be declared or paid, and no distribution shall be
made, in respect of any Junior Stock, other than a dividend payable solely in Junior Stock, and no
shares of Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the
Corporation, directly or indirectly (other than (i) purchases or acquisitions of the Common Stock
in connection with (a) the Corporation’s obligations under any employee benefit plans of the
Corporation or (b) the Corporation’s obligations pursuant to any contract or security outstanding
on the date hereof, which contract or security requires the Corporation to purchase shares of the
Common Stock, (ii) as a result of a reclassification of the Corporation’s capital stock or the
exchange or conversion of one class or series of the Corporation’s capital stock for another class
or series of the Corporation’s capital stock, (iii) the purchase of fractional interests in shares
of the Corporation’s capital stock pursuant to the conversion or exchange provisions of (y) the
capital stock or other security being converted or exchanged, or (z) any plan of merger, exchange,
consolidation or similar arrangement involving the Corporation, or (iv) dividends or distributions
in the Common Stock (or rights to acquire Junior Stock) or repurchases or redemptions of capital
stock solely from the issuance or exchange of capital stock (other than repurchases or redemptions
of Junior Stock from the issuance or exchange of capital stock of the Corporation ranking senior or
pari passu to the Series A Preferred Stock) or redemptions or repurchases of any rights outstanding
under a shareholder rights plan of the Corporation) unless the full dividends for the latest
completed Dividend Period on all outstanding shares of Series A Preferred Stock have been declared
and paid. Subject to this Section 4(c)(i), but not otherwise, such dividends (payable in cash,
stock or otherwise), as may be determined by the Board of Directors (or a duly authorized committee
of the Board of Directors) may be declared and paid on the Common Stock and any other Junior Stock
from time to time out of any funds legally available therefor, and the shares of Series A Preferred
Stock shall not be entitled to participate in any such dividend.

                         ii. Parity Stock. When dividends are not paid in full on the Series A Preferred Stock, any
Dividend Parity Stock and any Parity Stock on any Dividend Payment Date (or, in the case of
Dividend Parity Stock and Parity Stock having dividend payment dates different from the Dividend
Payment Dates, on a dividend payment date falling within a Dividend Period), for any reason, all
dividends declared upon the Series A Preferred Stock and all such Dividend Parity Stock and Parity
Stock and payable on such Dividend Payment Date (or, in the case of Dividend Parity Stock and
Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend
payment date falling within a Dividend Period) shall be declared pro rata so that the respective
amounts of such dividends shall bear the same ratio to each other as all dividends per share on the
shares of Series A Preferred Stock and all such Dividend Parity Stock and Parity Stock otherwise
payable on the applicable Dividend Payment Date (subject to their having been declared by the Board
of Directors (or a duly authorized committee of the Board of Directors) out of legally available
funds and including, in the case of any Dividend Parity Stock or Parity Stock that bears cumulative
dividends, all accrued but unpaid dividends) bear to each other.

          Section 5. Liquidation Rights.

          a. Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, holders of Series A Preferred Stock shall be entitled
to receive, out of the assets of the Corporation or proceeds thereof available for distribution to
stockholders of the Corporation and after satisfaction of all liabilities and obligations to
creditors of the Corporation, before any distribution or payment out of the assets of the
Corporation may be made to or set aside for the holders of Common Stock and any other Junior Stock,
in full an amount equal to the Liquidation Preference, together with an amount equal to any
declared and unpaid dividends, but without accumulation of any undeclared dividends.

-4-

 

          b. Partial Payment. If the assets of the Corporation are not sufficient to pay the Liquidation
Preference plus any declared and unpaid dividends, without accumulation of any undeclared
dividends, in full to all holders of Series A Preferred Stock, any Liquidation Parity Stock and any
Parity Stock, the amounts paid to the holders of Series A Preferred Stock, Liquidation Parity Stock
and Parity Stock shall be paid pro rata in accordance with the aggregate Liquidation Preference of
the Series A Preferred Stock and the aggregate liquidation preference of all such Liquidation
Parity Stock and Parity Stock, respectively.

          c. Residual Distributions. If the Liquidation Preference, plus any declared and unpaid
dividends, without accumulation of any undeclared dividends, have been paid in full to all holders
of Series A Preferred Stock, and the liquidation preference of any Liquidation Parity Stock and
Parity Stock has been paid in full to all holders of such Liquidation Parity Stock and Parity
Stock, the holders of Junior Stock shall be entitled to receive all remaining assets of the
Corporation (or proceeds thereof) according to their respective rights and preferences, without any
participation by the holders of the Series A Preferred Stock.

          d. Merger, Etc. Not Liquidation. For purposes of this Section 5, the merger, statutory share
exchange or consolidation of the Corporation with any other corporation or entity, including a
merger, statutory share exchange or consolidation in which the holders of Series A Preferred Stock
receive cash, securities or property for their shares, or the sale, lease or exchange of all or
substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution
or winding up of the Corporation.

          Section 6. Redemption.

          a. Redemption. The Series A Preferred Stock may not be redeemed by the Corporation prior to
May [___], 2011. At any time (and from time to time) on or after May [___], 2011, at the option of
the Board of Directors (or a duly authorized committee of the Board of Directors) and upon notice
given as provided in Section 6(d), the Corporation may redeem the shares of Series A Preferred
Stock at the Redemption Price in cash, plus any declared and unpaid dividends to the date fixed for
redemption, without accumulation of any undeclared dividends. Any declared but unpaid dividends
payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend
Period shall not be paid to the holder entitled to receive the Redemption Price on the redemption
date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend
Record Date relating to the Dividend Payment Date as provided in Section 4 above.

          b. Partial Redemption. In case of any redemption of less than all of the shares of Series A
Preferred Stock at the time outstanding, the shares to be redeemed shall be selected either (i) pro
rata from the holders of record of the shares of Series A Preferred Stock in proportion to the
number of shares held by such holders, (ii) by lot, or (iii) in such other manner as the Board of
Directors (or a duly authorized committee of the Board of Directors) may determine to be fair and
equitable. Subject to the provisions hereof, the Board of Directors (or a duly authorized committee
of the Board of Directors) shall have full power and authority to prescribe the terms and
conditions upon which shares of Series A Preferred Stock shall be redeemed from time to time. If
less than all the shares represented by any Series A Preferred Stock Certificate are redeemed, a
new Series A Preferred Stock Certificate shall be issued representing the unredeemed shares without
charge to the holder thereof.

          c. Restriction on Redemption. Unless full dividends on the Series A Preferred Stock in respect
of the most recently completed Dividend Period have been or contemporaneously are declared and paid
or full dividends have been declared and a sum sufficient for the payment thereof has been set
apart for payment in respect of the most recently completed Dividend Period, no Series A Preferred
Stock, Dividend Parity Stock, or Parity Stock may be redeemed unless all outstanding Series A
Preferred Stock is redeemed.

          d. Notice of Redemption. Notice of every redemption of shares of Series A Preferred Stock
shall be mailed by first class mail, postage prepaid, addressed to the holders of record of the
shares to be redeemed at their respective last addresses appearing on the books of the Corporation.
Such mailing shall be at least 30 days and not more than 60 days before the date fixed for
redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have
been duly given, whether or not the holder receives such notice, but failure duly to give such
notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of
Series A Preferred Stock designated for redemption shall not affect the validity of the proceedings
for the redemption of any other shares of Series A Preferred Stock. Notwithstanding the foregoing,
if the Series A Preferred

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Stock or any depositary shares representing interests in the Series A Preferred Stock are
issued in book-entry form through the Depositary Trust Company or any other Clearing Agency, notice
of redemption may be given to the holders of the Series A Preferred Stock at such time and in any
manner permitted or required by such Clearing Agency. Each notice shall state (i) the redemption
date; (ii) the number of shares of Series A Preferred Stock to be redeemed; (iii) the Redemption
Price; (iv) the place or places where the shares of Series A Preferred Stock are to be redeemed;
and (v) that dividends on the shares of Series A Preferred Stock to be redeemed will cease to
accrue on the redemption date.

          e. Effectiveness of Redemption. If notice of redemption has been duly given and if on or
before the redemption date specified in the notice all funds necessary for the redemption have been
set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata
benefit of the holders of the shares called for redemption, so as to be and continue to be
available therefor, then, notwithstanding that any Series A Preferred Stock Certificate for any
share so called for redemption has not been surrendered for cancellation, on and after the
redemption date all shares so called for redemption shall cease to be outstanding and all rights
with respect to such shares shall forthwith on such redemption date cease and terminate, except
only the right of the holders thereof to receive the amount payable on such redemption without
interest. Any funds unclaimed at the end of three years from the redemption date shall, to the
extent permitted by law, be released to the Corporation, after which time the holders of the shares
so called for redemption shall look only to the Corporation for payment of the redemption price of
such shares.

          f. No Sinking Fund. The Series A Preferred Stock will not be subject to any mandatory
redemption, sinking fund or other similar provisions. Holders of Series A Preferred Stock will have
no right to require redemption of any shares of Series A Preferred Stock.

          Section 7. Voting Rights.

          a. General. The holders of Series A Preferred Stock shall not have any voting rights except as
set forth in this Section 7 or as otherwise required by law.

          b. Right to Elect Two Directors Upon Nonpayment Event. If the Corporation has failed to pay
dividends on Series A Preferred Stock for at least six Dividend Periods, whether or not consecutive
(a “Nonpayment Event”), the number of directors then constituting the Board of Directors shall
automatically be increased by two and (i) the holders of Series A Preferred Stock, together with
(ii) the holders of any class or series of Voting Parity Stock, voting together as a single class,
shall be entitled to elect the two additional directors (the “Preferred Stock Directors” and each a
“Preferred Stock Director”); provided, that it shall be a qualification for election for any
Preferred Stock Director that the election of such director shall not cause the Corporation to be
in violation of (y) any corporate governance requirement of The Nasdaq Stock Market (or any
national securities exchange, interdealer quotation system of a registered national securities
association or other trading facility on which securities of the Corporation may then be listed or
traded), including any requirement that listed or traded companies must have a majority (or other
specified percentage) of independent directors or (z) any requirement or policy of any bank
regulatory authority having jurisdiction over the Corporation or its banking subsidiary; provided
further, that it shall be a qualification for election for any Preferred Stock Director that the
nominees for such position provide in writing to the Corporation, the holders of the Series A
Preferred Stock and the holders of all classes and series of Voting Parity Stock that are similarly
entitled to vote for the election of the Preferred Stock Directors the information with respect to
such nominee that would be required to be provided in a proxy statement prepared in accordance with
Regulation 14A under the Exchange Act and the rules and regulations thereunder; and provided
further, that the Board of Directors shall at no time include more than two Preferred Stock
Directors (including, for purposes of this limitation, all directors that holders of Voting Parity
Stock are entitled to elect pursuant to like voting rights).

          Election of the Preferred Stock Directors after a Nonpayment Event initially shall be at a
special meeting of the holders of Series A Preferred Stock and the holders of any class or series
of Voting Parity Stock, voting together as a single class, called as hereinafter provided (unless
the Nonpayment Event or the request to call such meeting shall occur or be received, respectively,
less than 90 days before the date fixed for the next annual meeting of stockholders of the
Corporation, in which case such election shall be held only at such next annual meeting of
stockholders), and thereafter at each subsequent annual meeting of stockholders of the Corporation.
At

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any time after a Nonpayment Event, the Secretary of the Corporation may, and upon the written
request of the holders of at least 20% of the outstanding shares of Series A Preferred Stock or the
Voting Parity Stock (addressed to the Secretary at the principal office of the Corporation) shall,
give notice of a special meeting of the holders of shares of Series A Preferred Stock and the
holders of any class or series of Voting Parity Stock, for the election of the two directors to be
elected by them as herein provided, such notice to be made by notice similar to that provided in
the Bylaws for a special meeting of the stockholders or as required by law. If any such special
meeting so required to be called shall not be called by the Secretary within 20 days after receipt
of any such request, then any holder of shares of Series A Preferred Stock or the Voting Parity
Stock may (at the Corporation’s expense) call such meeting, upon notice as herein provided, and for
that purpose shall have access to the stock books of the Corporation. The directors elected at any
such special meeting shall hold office until the next annual meeting of the stockholders if such
office shall not have previously terminated as herein provided. In case any vacancy shall occur
among the Preferred Stock Directors, a successor shall be elected by the Board of Directors to
serve until the next annual meeting of the stockholders upon the nomination of the then remaining
Preferred Stock Director, or the successor of such remaining director. Any Preferred Stock
Director may be removed at any time without cause by the holders of a majority of the shares of
Series A Preferred Stock and any class or series of Voting Parity Stock, voting together as a
single class.

          The right of the holders of Series A Preferred Stock and such Voting Parity Stock to elect
such additional two directors shall cease (but subject always to the same provisions for the
vesting of such voting rights in the case of the subsequent occurrence of a Nonpayment Event), and
the terms of office of all persons elected as directors by the holders of Series A Preferred Stock
and such Voting Parity Stock shall forthwith terminate and the number of directors constituting the
Board of Directors shall be reduced accordingly whenever (i) full dividends have been paid
regularly on the Series A Preferred Stock and such Voting Parity Stock then outstanding, if any,
for at least four consecutive Dividend Periods after a Nonpayment Event; or (ii) all outstanding
shares of Series A Preferred Stock and such Voting Parity Stock shall have been redeemed or called
for redemption upon proper notice and sufficient funds shall have been set aside by the Corporation
for the benefit of the holders of the Series A Preferred Stock and such Voting Parity Stock to
effect such redemption.

          c. Certain Voting Rights. So long as any share of Series A Preferred Stock is outstanding, in
addition to any other vote or consent of stockholders required by law or by the Certificate of
Incorporation, the vote or consent of the holders of at least 66-2/3% of the shares of Series A
Preferred Stock at the time outstanding, voting together as a single class, given in person or by
proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall
be necessary for effecting or validating:

                         i. Changes Adversely Affecting Series A Preferred Stock. Any amendment, alteration or repeal
of any provision of the Certificate of Incorporation or Bylaws that would alter or change the
voting powers, preferences or special rights of the Series A Preferred Stock so as to affect it
adversely; provided, that the amendment of the Certificate of Incorporation so as to authorize or
create, or to increase the authorized amount of, any Junior Stock, Liquidation Parity Stock,
Dividend Parity Stock or Parity Stock or any shares of any class or series or any securities
convertible into shares of any class or series of Junior Stock, Liquidation Parity Stock, Dividend
Parity Stock or Parity Stock, shall not be deemed to affect adversely the voting powers,
preferences or special rights of the Series A Preferred Stock;

                         ii. Authorization of Senior Stock. Any amendment or alteration of the Certificate of
Incorporation to authorize or create, or increase the authorized amount of, any shares of any class
or series or any securities convertible into shares of any class or series of capital stock of the
Corporation ranking prior to Series A Preferred Stock in the payment of dividends or in the
distribution of assets on any liquidation, dissolution or winding up of the Corporation; or

                         iii. Extraordinary Corporate Transactions. Consummation of a binding share exchange or
reclassification involving the Series A Preferred Stock or a merger or consolidation of the
Corporation with another entity, unless in each case (i) shares of Series A Preferred Stock remain
outstanding or, in the case of any such merger or consolidation with respect to which the
Corporation is not the surviving or resulting entity, are converted into or exchanged for
preference securities of the surviving or resulting entity or its ultimate parent, and (ii) such
shares of Series A Preferred Stock remaining outstanding or such preference securities, as the case
may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not
materially less favorable to

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the holders thereof than the rights, preferences, privileges and voting powers of the Series A
Preferred Stock, taken as a whole;

provided, however, that any increase in the amount of the authorized or issued Series A Preferred
Stock or authorized preferred stock or the creation and issuance, or an increase in the authorized
or issued amount, of other Junior Stock, Liquidation Parity Stock, Dividend Parity Stock and/or
Parity Stock (whether such stock bears dividends on a cumulative or a non-cumulative basis) of the
Corporation will not be deemed to adversely affect the special rights, preferences, privileges or
voting powers of the Series A Preferred Stock.

          If an amendment, alteration, repeal, share exchange, reclassification, merger or consolidation
described above in this Section 7(c) would adversely affect one or more but not all series of
preferred stock (including the Series A Preferred Stock for this purpose), then only the series
affected and entitled to vote shall vote as a class.

          No vote or consent of the holders of Series A Preferred Stock shall be required pursuant to
this Section 7(c) if, at or prior to the time when the act with respect to which such vote would
otherwise be required, all outstanding shares of Series A Preferred Stock shall have been redeemed
or called for redemption upon proper notice and sufficient funds shall have been set aside by the
Corporation for the benefit of the holders of Series A Preferred Stock to effect such redemption.

          d. Changes for Clarification. Without the consent of the holders of the Series A Preferred
Stock, so long as such action does not adversely affect the rights, preferences, privileges and
voting powers of the Series A Preferred Stock, taken as a whole, the Corporation may amend, alter,
supplement or repeal any terms of the Series A Preferred Stock:

                         i. to cure any ambiguity, or to cure, correct or supplement any provision contained in this
Certificate of Designations that may be defective or inconsistent; or

                         ii. to make any provision with respect to matters or questions arising with respect to the
Series A Preferred Stock that is not inconsistent with the provisions of this Certificate of
Designations.

          Section 8. No Conversion or Preemptive Rights. The Series A Preferred Stock is not entitled to
any conversion, preemptive or subscription rights in respect of any securities of the Corporation,
or any warrants, rights or options issued or granted with respect thereto, regardless of how such
securities, or such warrants, rights or options, may be designated, issued or granted.

          Section 9. Other Rights. The shares of Series A Preferred Stock shall not have any voting
powers, preferences or relative, participating, optional or other special rights, or
qualifications, limitations or restrictions thereof, other than as set forth herein or in the
Certificate of Incorporation.

          Section 10. Severability of Provisions. Whenever possible, each provision hereof shall be
interpreted in an manner as to be effective and valid under applicable law, but if any provision
hereof is held to be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should
determine that a provision hereof would be valid or enforceable if a period of time were extended
or shortened or a particular percentage were increased or decreased, then such court may make such
change as shall be necessary to render the provision in question effective and valid under
applicable law.

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     IN WITNESS WHEREOF, FRANKLIN BANK CORP. has caused this certificate to be signed by Anthony J.
Nocella, its President and Chief Executive Officer, this [___]th day of May, 2006.

	 	 	 	 	 
	 	FRANKLIN BANK CORP.

 	 
	 	By:  	   
 	 
	 	 	Name:  	Anthony J. Nocella 	 
	 	 	Title:  	President & Chief Executive
Officer 	 
	 

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