Document:

REGISTRATION RIGHTS AGREEMENT

         THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is entered into
as of the 30th day of March 2007, by and among SRKP 6, Inc., a Delaware
corporation (the "COMPANY"), Vicor Technologies, Inc., a Delaware corporation
("VICOR"), WestPark Capital, Inc. ("WestPark") and the holders of the Company's
common stock listed on Exhibit A who are signatories hereof (such holders
together with WestPark, each an "SRKP SECURITYHOLDER" and collectively the "SRKP
SECURITYHOLDERS").

                                    RECITALS
                                    --------

         A. Vicor is a party to a certain Agreement and Plan of Merger dated as
of July 28, 2006 (the "MERGER AGREEMENT"), pursuant to which upon the Closing
Date (as defined below), Vicor will become a wholly-owned subsidiary of the
Company and the existing Vicor stockholders will obtain majority ownership and
control of the Company (the "MERGER"). All capitalized terms used but not
defined herein have the meanings ascribed to them in the Merger Agreement.

         B. As an inducement to the SRKP Securityholders' approval of the
Merger, the Company desires to grant to the SRKP Securityholders certain
registration rights with respect to the shares of Common Stock, and shares of
Common Stock underlying other securities, held by such SRKP Securityholders as
of the effective date of the Merger.

         C. Concurrently with the execution of this Agreement, the Company,
Vicor and certain stockholders of the Company (other than the holders of the
common stock listed on Exhibit A hereto) have entered into that certain
Registration Rights Agreement dated of even date herewith (the "OTHER
REGISTRATION AGREEMENT"), pursuant to which the Company and Vicor have agreed to
file a registration statement on Form SB-2 or other appropriate form to register
shares of the Company's Common Stock held by such holders (the "FIRST
STATEMENT"). Pursuant to the Other Registration Agreement, the Company and Vicor
have agreed to file the First Statement no later than April 15, 2007, all as
provided in and on the terms and conditions set forth in the Other Registration
Agreement.

         D. The consummation of the Merger and the other transactions
contemplated by the Merger Agreement are conditioned on the execution and
delivery of this Agreement, and the parties hereto desire to sign and deliver
this Agreement pursuant to their respective rights under the foregoing described
arrangements and agreements, and in connection with the Merger and the
transactions contemplated by the Merger Agreement.

                                    AGREEMENT
                                    ---------

         NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

         1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following respective meanings:

            1.1 The "Closing Date" shall mean the first business day after
satisfaction of the conditions set forth in Section 7 of the Merger Agreement or
as soon as practicable thereafter following satisfaction or waiver of the
conditions set forth in Section 7 of the Merger Agreement.

            1.2 The term "Common Stock" means the common stock of the Company,
par value $0.0001 per share.

            1.3 The term "Holder" means each SRKP Securityholder or any of such
parties' respective successors and permitted assigns who acquire in accordance
with this Agreement Registrable Securities directly or indirectly from a SRKP
Securityholder, including from any permitted assignee as set forth in Section 3.

            1.4 The terms "register," "registered," and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.

            1.5 The term "Registration Filing Date" has the meaning set forth in
the Other Registration Agreement.

            1.6 The term "Registration Second Filing Date" means 10 days after
the end of the six (6) month period that immediately follows the Registration
Filing Date.

            1.7 The term "Registrable Securities" means (i) any shares of Common
Stock held by the SRKP Securityholders as of the effective date of the Merger,
(ii) any shares of Common Stock underlying any other securities of the Company
held by the SRKP Securityholders as of the effective date of the Merger, or
(iii) any shares of Common Stock issuable with respect to the securities
referred to in clauses (i) and (ii) above by virtue of any stock split,
combination, stock dividend, merger, consolidation or other similar event or by
virtue of other anti-dilution protection; provided, however, that shares of
Common Stock that are considered to be Registrable Securities shall cease to be
Registrable Securities (A) upon the sale thereof pursuant to an effective
registration statement, (B) upon the sale thereof pursuant to Rule 144 (or
successor rule) under the Securities Act, or (C) when such securities cease to
be outstanding.

            1.8 The term "Registration Statement" means a Form SB-2 or other
appropriate registration document under the Securities Act.

                                       3

            1.9 The term "SEC" means the United States Securities and Exchange
Commission.

            1.10 The term "Securities Act" means the Securities Act of 1933, as
amended.

        2.  REGISTRATION RIGHTS

            2.1 Registration Requirement. The Company shall file a registration
statement on Form SB-2 or other appropriate registration document under the
Securities Act (the "REGISTRATION STATEMENT") for resale of the Registrable
Securities and shall use its reasonable best efforts to maintain the
Registration Statement effective for a period of twenty-four (24) months at the
Company's expense (the "EFFECTIVENESS PERIOD"). The Company and Vicor shall use
their reasonable best efforts to (a) file such Registration Statement (or cause
such Registration Statement to be filed) no later than the Registration Second
Filing Date, and (b) to cause such Registration Statement to become effective
within one hundred twenty (120) days (or one hundred fifty (150) days in case of
a full review by the SEC) after the Registration Second Filing Date (as
applicable, the "REQUIRED EFFECTIVENESS DATE"). Notwithstanding anything
contained herein to the contracy, the Company shall not file the Registration
Statement, and Vicor shall not cause the Registration Statement to be filed, at
any time before the end of the six (6) month period that immediately follows the
Registration Filing Date, unless otherwise agreed by the Company and the other
parties hereto in writing; and without limiting any other provision hereof, any
breach of such obligations shall constitute a material breach of this Agreement
by the Company and/or Vicor (as applicable). Notwithstanding anything else to
the contrary, if (y) the Registration Statement is not filed by the Registration
Second Filing Date, or (z) the Registration Statement is not declared effective
by the SEC on or before the Required Effectiveness Date due to the failure of
the Company to fulfill its obligations under this Agreement, the Company shall
be required to issue, as liquidated damages, to the SRKP Securityholders shares
of SRKP Common Stock equal to a total of 0.0333% of the shares of SRKP Common
Stock covered by the Registration Statement for each day that the Registration
Statement has not been filed or declared effective by the SEC, as applicable.
This requirement to issue shares of SRKP Common Stock shall remain in effect
until the Registration Statement is filed or is declared effective by the SEC,
as applicable. Any shares issued to the SRKP Securityholders under this
provision shall be allocated to each SRKP Securityholder based on the
percentages of ownership listed on Exhibit A to this Agreement.

            2.2 Limitation to Registration Requirement. Notwithstanding any
other provisions of this Agreement, the Company shall not be obligated to effect
any registration of the Registrable Securities or take any other action pursuant
to this Section 2 in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act.

            2.3 Expenses of Registration. Except as otherwise expressly set
forth, the Company shall bear all expenses incurred by the Company in compliance
with the registration obligation of the Company, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company incurred in connection with any registration,
qualification or compliance pursuant to this Agreement and all underwriting

                                       4

discounts, selling commissions and expense allowances applicable to the sale of
any securities by the Company for its own account in any registration. All
underwriting discounts, selling commissions and expense allowances applicable to
the sale by any SRKP Securityholder of Registrable Securities and all fees and
disbursements of counsel for the SRKP Selling Stockholder shall be borne by the
SRKP Securityholder.

            2.4 Indemnification.

            (a) To the extent permitted by law the Company will indemnify each
SRKP Securityholder, each of its officers, directors, agents, employees and
partners, and each person controlling such SRKP Securityholder, with respect to
each registration, qualification or compliance effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls any
underwriter, and their respective counsel against all claims, losses, damages
and liabilities (or actions, proceedings or settlements in respect thereof)
arising out of or based on (i) any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document prepared by the Company (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or (ii) any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by the Company of the
Securities Act or any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and subject to the
provisions of Section 2.4(c) below, will reimburse each such SRKP
Securityholder, each of its officers, directors, agents, employees and partners,
and each person controlling such SRKP Securityholder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses as they are reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement (or alleged untrue statement) or omission (or alleged omissions) based
upon written information furnished to the Company by (or on behalf of) such SRKP
Securityholder or underwriter, or if the person asserting any such loss, claim,
damage or liability (or action or proceeding in respect thereof) did not receive
a copy of an amended preliminary prospectus or the final prospectus (or the
final prospectus as amended and supplemented) at or before the written
confirmation of the sale of such Registrable Securities to such person because
of the failure of the SRKP Securityholder or underwriter to so provide such
amended preliminary or final prospectus (or the final prospectus as amended and
supplemented); provided, however, that the indemnity agreement contained in this
subsection shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
the SRKP Securityholder, any such partner, officer, director, employee, agent or
controlling person of such SRKP Securityholder, or any such underwriter or any
person who controls any such underwriter; provided, however, that the
obligations of the Company hereunder shall be limited to an amount equal to the
portion of net proceeds represented by the Registrable Securities pursuant to
this Agreement.

                                       5

            (b) To the extent permitted by law, each SRKP Securityholder whose
Registrable Securities are included in any registration, qualification or
compliance effected pursuant to this Agreement will indemnify the Company, and
its directors, officers, agents, employees and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of the Securities
Act and the rules and regulations thereunder, each other such SRKP
Securityholder and each of their officers, directors, partners, agents and
employees, and each person controlling such SRKP Securityholder, and their
respective counsel against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company and such SRKP Securityholders, directors, officers, partners,
persons, underwriters or control persons for any legal or any other expenses as
they are reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such SRKP
Securityholder; provided, however, that the obligations of any SRKP
Securityholder hereunder shall be limited to an amount equal to the net proceeds
to such SRKP Securityholder from Registrable Securities sold under such
registration statement, prospectus, offering circular or other document as
contemplated herein; provided, further, that the indemnity agreement contained
in this subsection shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the SRKP Securityholder, which consent shall not be unreasonably
withheld or delayed.

            (c) Each party entitled to indemnification under this Section (the
"INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense; and provided further that if any Indemnified
Party reasonably concludes that there may be one or more legal defenses
available to it that are not available to the Indemnifying Party, or that such
claim or litigation involves or could have an effect on matters beyond the scope
of this Agreement, then the Indemnified Party may retain its own counsel at the
expense of the Indemnifying Party; and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless and only to
the extent that such failure to give notice results in material prejudice to the
Indemnifying Party. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information

                                       6

regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.

            (d) If the indemnification provided for in this Section is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.

            2.5 Transfer or Assignment of Registration Rights. The Registrable
Securities, and any related benefits to the SRKP Securityholder hereunder may be
transferred or assigned by the SRKP Securityholder to a permitted transferee or
assignee, provided that the Company is given written notice of such transfer or
assignment, stating the name and address of said transferee or assignee and
identifying the Registrable Securities with respect to which such registration
rights are being transferred or assigned; provided further that the transferee
or assignee of such Registrable Securities shall be deemed to have assumed the
obligations of the SRKP Securityholder under this Agreement by the acceptance of
such assignment and shall, upon request from the Company, evidence such
assumption by delivery to the Company of a written agreement assuming such
obligations of the SRKP Securityholder.

            2.6 Registration Procedures. In the case of the registration
effected by the Company pursuant to this Agreement, the Company will keep the
SRKP Securityholder advised in writing as to the initiation of each registration
and as to the completion thereof. The Company will:

            (a) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of securities covered by such
registration statement;

            (b) Respond as promptly as reasonably practicable to any comments
received from the SEC with respect to a registration statement or any amendment
thereto.

            (c) Notify the SRKP Securityholder as promptly as reasonably
practicable and (if requested by any such person) confirm such notice in writing
no later than one trading day following the day (A) when a prospectus or any
prospectus supplement or post-effective

                                       7

amendment to a registration statement is proposed to be filed and (B) with
respect to a registration statement or any post-effective amendment, when the
same has become effective;

            (d) Furnish such number of prospectuses and other documents incident
thereto, including supplements and amendments, as the SRKP Securityholder may
reasonably request;

            (e) Furnish to the SRKP Securityholder, upon request, a copy of all
documents filed with and all correspondence from or to the SEC in connection
with any such registration statement other than non-substantive cover letters
and the like;

            (f) Use its reasonable best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of a
registration statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment; and

            (g) Use its reasonable best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission.

            2.7 Statement of Beneficial Ownership. The Company may require the
SRKP Securityholder to furnish to the Company a certified statement as to the
number of shares of Common Stock beneficially owned by such SRKP Securityholder
and the controlling person thereof and any other such information regarding the
SRKP Securityholder, the Registrable Securities held by the SRKP Securityholder
and the intended method of disposition of such securities as shall be reasonably
required with respect to the registration of the SRKP Securityholder's
Registrable Securities. Each SRKP Securityholder hereby understands and agrees
that the Company may, in its sole discretion, exclude that SRKP Securityholder's
Registrable Securities from the Registration Statement in the event that the
SRKP Securityholder fails to provide such information requested by the Company
within the time period reasonably specified by the Company or is required to do
so by law or the SEC.

            2.8 Compliance. SRKP Securityholder covenants and agrees that such
SRKP Securityholder will comply with the prospectus delivery requirements of the
Securities Act as applicable to such SRKP Securityholder in connection with
sales of Registrable Securities pursuant to the registration statement required
hereunder.

        3.  MISCELLANEOUS

            3.1 Successors and Assigns. Except as otherwise expressly provided
herein, the rights of the Holders hereunder may not be assigned without the
consent of the Company. Any reference in this Agreement to a Holder shall be
deemed a reference to such transferee, and any reference to the "Holders" shall
be deemed to include such transferee. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties. Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective permitted successors and assigns any rights, remedies, obligations,
or liabilities under or by reason of this Agreement.

                                       8

3.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida. Any actions or proceedings
that arise out of or in connection with this Agreement shall be brought in the
applicable state or Federal court located in Palm Beach County, Florida, and
each party hereto hereby waives any objection to such selection of venue,
including, without limitation, an objection based on the assertion that such
venue constitutes an inconvenient forum.

            3.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

            3.4 Notices. Any notice required or permitted under this Agreement
shall be in writing and shall be delivered in person or mailed by certified or
registered mail, return receipt requested, directed to (i) the Company or Vicor
at the addresses set forth below the applicable signature hereof or (ii) to a
Holder at the address therefor as set forth in the Company's records or, in any
such case, at such other address or addresses as shall have been furnished in
writing by such party to the others. The giving of any notice required hereunder
may be waived in writing by the parties hereto. Every notice or other
communication hereunder shall be deemed to have been duly given or served on the
date on which personally delivered, or on the date actually received, if sent by
mail or telex, with receipt acknowledged.

            3.5 Amendments and Waivers. Any provision of this Agreement may be
amended and the observance of any provision of this Agreement may be waived or
amended (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company, Vicor and the
Holders of at least a majority of the Registrable Securities then issued and
outstanding. Any amendment or waiver effected in accordance with this Section
3.5 shall be binding upon each Holder of any securities subject to this
Agreement at the time outstanding (including securities into which such
securities are convertible), each future Holder and all such securities, and the
Company.

            3.6 Further Assurances. Each Holder and the Company shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things reasonably necessary, proper or advisable under
applicable law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and the other
documents contemplated hereby and consummate and make effective the transactions
contemplated hereby.

            3.7 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provisions shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provisions were so excluded and shall be enforceable in accordance with its
terms.

            3.8 Entire Agreement. All prior agreements of the parties concerning
the subject matter of this Agreement are expressly superseded by this Agreement.
This Agreement contains the entire Agreement of the parties concerning the
subject matter hereof. Any oral representations or modifications of this
Agreement shall be of no effect.

                            [Signature Page Follows]

                                       9

         IN WITNESS WHEREOF, the parties hereto have caused this REGISTRATION
RIGHTS AGREEMENT to be duly executed as of the date first above written.

SRKP 6 INC., A DELAWARE CORPORATION

By:
              ------------------------------------------------

Name:
              ------------------------------------------------

Title:
              ------------------------------------------------

VICOR TECHNOLOGIES, INC., A DELAWARE CORPORATION

By:
              ------------------------------------------------

Name:
              ------------------------------------------------

Title:
              ------------------------------------------------

WESTPARK CAPITAL, INC.

By:
              ------------------------------------------------

Name:
              ------------------------------------------------

Title:
              ------------------------------------------------

                           HOLDERS' SIGNATURE PAGE TO

                          REGISTRATION RIGHTS AGREEMENT

IF AN INDIVIDUAL:

                                   (Signature)

             (Type or print name as it should appear on certificate)

IF A CORPORATION, GENERAL/LIMITED PARTNERSHIP, LLC, TRUST OR OTHER ENTITY:

             (Type or print name as it should appear on certificate)

         By:

               -------------------------------------------------------
               Name
               Title:

ADDRESS:
            -----------------------------------------

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

TELEPHONE:  (         )
             --------- ------------------------------
FACSIMILE:  (         )
             --------- ------------------------------

                                    EXHIBIT A

                              SRKP SECURITYHOLDERS

Richard Rappaport

Anthony C. Pintsopoulosexv10w1

 

Exhibit 10.1

EXECUTION COPY

 

PURCHASE AND SALE AGREEMENT

By and Among

NAVARRE CORPORATION,

NAVARRE ENTERTAINMENT MEDIA, INC.

and

KOCH ENTERTAINMENT LP

May 11, 2007

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE I
	 	 	 	 
	DEFINITIONS
	 	 	 	 
	 
	 	 	 	 
	1.1 Definitions
	 	 	1	 
	1.2 Construction
	 	 	1	 
	 
	 	 	 	 
	ARTICLE II
	 	 	 	 
	PURCHASE AND SALE
	 	 	 	 
	 
	 	 	 	 
	2.1 Purchase and Sale of Shares
	 	 	2	 
	2.2 Purchase Price
	 	 	2	 
	2.3 Excluded Assets and Liabilities
	 	 	2	 
	2.4 Closing Balance Sheet; Adjusted Working Capital
	 	 	2	 
	2.5 Closing
	 	 	3	 
	2.6 Deliveries at Closing
	 	 	4	 
	 
	 	 	 	 
	ARTICLE III
	 	 	 	 
	REPRESENTATIONS AND WARRANTIES OF SELLER
	 	 	 	 
	 
	 	 	 	 
	3.1 Ownership of Shares
	 	 	6	 
	3.2 Organization; Existence and Good Standing
	 	 	6	 
	3.3 Authority; Enforceability
	 	 	6	 
	3.4 No Violations
	 	 	6	 
	3.5 Legal Proceedings
	 	 	7	 
	3.6 Broker
	 	 	7	 
	3.7 Organization; Existence and Good Standing
	 	 	7	 
	3.8 Authority; Enforceability
	 	 	7	 
	3.9 Capitalization of the Company
	 	 	7	 
	3.10 Subsidiaries
	 	 	8	 
	3.11 No Violations
	 	 	8	 
	3.12 Legal Requirements and Permits
	 	 	9	 
	3.13 Legal Proceedings
	 	 	9	 
	3.14 Environmental
	 	 	9	 
	3.15 Tax Matters
	 	 	10	 
	3.16 Financial Matters
	 	 	12	 
	3.17 Absence of Certain Changes
	 	 	13	 
	3.18 Employee Benefit Plans
	 	 	15	 
	3.19 Employees; Employment Matters
	 	 	15	 
	3.20 Agreements, Contracts and Commitments
	 	 	16	 
	3.21 Real Property
	 	 	17	 
	3.22 Personal Property
	 	 	17	 

Navarre Entertainment Media, Inc.

Purchase and Sale Agreement

Table of Contents

i 

 

	 	 	 	 	 
	3.23 Intellectual Property
	 	 	17	 
	3.24 Insurance
	 	 	18	 
	3.25 Bank Accounts
	 	 	18	 
	3.26 Related Party Transactions
	 	 	18	 
	3.27 Broker
	 	 	18	 
	 
	 	 	 	 
	ARTICLE IV
	 	 	 	 
	REPRESENTATIONS AND WARRANTIES OF PURCHASER
	 	 	 	 
	 
	 	 	 	 
	4.1 Organization; Existence and Good Standing
	 	 	19	 
	4.2 Authority; Enforceability
	 	 	19	 
	4.3 No Violations
	 	 	19	 
	4.4 Legal Proceedings
	 	 	19	 
	4.5 Availability of Funds
	 	 	20	 
	4.6 Broker
	 	 	20	 
	 
	 	 	 	 
	ARTICLE V
	 	 	 	 
	COVENANTS AND OTHER AGREEMENTS
	 	 	 	 
	 
	 	 	 	 
	5.1 Covenants Regarding Conduct of Business
	 	 	20	 
	5.2 Consents
	 	 	22	 
	5.3 Access and Assistance
	 	 	22	 
	5.4 Employee Matters
	 	 	22	 
	5.5 Inventory
	 	 	23	 
	5.6 Transition Services Agreement
	 	 	23	 
	5.7 Non-Competition
	 	 	23	 
	5.8 Payment of Liabilities
	 	 	23	 
	5.9 Public Announcements
	 	 	23	 
	5.10 Commercially Reasonable Efforts
	 	 	24	 
	5.11 Tax Matters
	 	 	24	 
	5.12 Closing Balance Sheet
	 	 	26	 
	 
	 	 	 	 
	ARTICLE VI
	 	 	 	 
	CONDITIONS TO CLOSING
	 	 	 	 
	 
	 	 	 	 
	6.1 Purchaser’s Closing Conditions
	 	 	26	 
	6.2 Seller’s Closing Conditions
	 	 	27	 
	 
	 	 	 	 
	ARTICLE VII
	 	 	 	 
	TERMINATION RIGHTS
	 	 	 	 
	 
	 	 	 	 
	7.1 Termination Rights
	 	 	28	 
	7.2 Effect of Termination
	 	 	28	 

Navarre Entertainment Media, Inc.

Purchase and Sale Agreement

Table of Contents

ii 

 

	 	 	 	 	 
	ARTICLE VIII
	 	 	 	 
	INDEMNIFICATION
	 	 	 	 
	 
	 	 	 	 
	8.1 Indemnification by Purchaser
	 	 	29	 
	8.2 Indemnification by Seller
	 	 	29	 
	8.3 Limitations and Other Indemnity Claim Matters
	 	 	29	 
	8.4 Claim Procedures
	 	 	30	 
	8.5 Sole Remedy
	 	 	31	 
	 
	 	 	 	 
	ARTICLE IX
	 	 	 	 
	GENERAL
	 	 	 	 
	 
	 	 	 	 
	9.1 Entire Agreement; Successors and Assigns
	 	 	31	 
	9.2 Specific Performance
	 	 	31	 
	9.3 Amendments
	 	 	32	 
	9.4 Notices
	 	 	32	 
	9.5 Governing Law
	 	 	33	 
	9.6 Waiver of Jury Trial
	 	 	33	 
	9.7 Severability
	 	 	33	 
	9.8 Transaction Costs and Expenses
	 	 	33	 
	9.9 Counterparts
	 	 	33	 

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	EXHIBITS
	 	 
	 
	 	 
	Exhibit A

	 	Definitions
	Exhibit B

	 	Independent Music Labels
	Exhibit C

	 	Label Account Payables (as of April 30, 2007)
	 
	 	 
	SCHEDULES
	 	 
	 
	 	 
	Schedule 2.3(a)

	 	Inactive Labels
	Schedule 3.7

	 	Organization; Existence and Good Standing
	Schedule 3.11

	 	No Violations – Company
	Schedule 3.13

	 	Legal Proceedings
	Schedule 3.14(a)

	 	Environmental Compliance
	Schedule 3.14(c)

	 	Environmental Permits
	Schedule 3.15

	 	Tax Matters
	Schedule 3.16(a)

	 	Financial Statements
	Schedule 3.16(b)

	 	Exceptions to Financial Statements
	Schedule 3.17

	 	Absence of Certain Changes
	Schedule 3.19(b)

	 	Terms of Employment; Leave
	Schedule 3.20(a)

	 	Scheduled Contracts
	Schedule 3.23(a)

	 	Intellectual Property
	Schedule 3.26

	 	Related Party Transactions
	Schedule 5.1(g)

	 	Benefit Matters
	Schedule 5.1(m)

	 	Material Contracts
	Schedule 5.10

	 	Asset Allocation

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GLOSSARY OF DEFINED TERMS

     The location of the definition of each capitalized term used in this Agreement is set forth in
this Glossary:

	 	 	 	 	 
	Adjusted Working Capital
	 	 	A-1	 
	Affiliate
	 	 	A-1	 
	Agreement
	 	 	1	 
	Benefit Plans
	 	 	A-1	 
	Business Day
	 	 	A-1	 
	CERCLA
	 	 	A-2	 
	Charter Documents
	 	 	A-1	 
	Claim
	 	 	32	 
	Claim Notice
	 	 	32	 
	Closing
	 	 	4	 
	Closing Balance Sheet
	 	 	3	 
	Closing Date
	 	 	4	 
	COBRA
	 	 	A-1	 
	Code
	 	 	A-1	 
	Company
	 	 	1	 
	Company Plans
	 	 	A-1	 
	Confidential Information
	 	 	A-1	 
	Consolidated Group
	 	 	A-2	 
	Contract
	 	 	A-2	 
	Employee Pension Benefit Plan
	 	 	A-2	 
	Employee Welfare Benefit Plan
	 	 	A-2	 
	Environmental Laws
	 	 	A-2	 
	Environmental Permits
	 	 	11	 
	ERISA
	 	 	A-2	 
	ERISA Affiliate
	 	 	A-2	 
	Escrow Agent
	 	 	A-2	 
	Escrow Agreement
	 	 	6	 
	Excluded Items
	 	 	2	 
	Execution Date
	 	 	1	 
	Financial Statements
	 	 	13	 
	Form
	 	 	26	 
	GAAP
	 	 	A-2	 
	Governmental Entity
	 	 	A-2	 
	Hazardous Materials
	 	 	A-3	 
	Inactive Labels
	 	 	2	 
	Indemnification Basket
	 	 	32	 
	Indemnification Cap
	 	 	32	 
	Indemnitees
	 	 	31	 
	Indemnitor
	 	 	32	 
	Independent Accounting Firm
	 	 	3	 
	Independent Label
	 	 	25	 
	Insurance Policies
	 	 	19	 
	Intellectual Property
	 	 	19	 
	Inventory
	 	 	24	 
	Inventory Escrow Amount
	 	 	5	 
	Knowledge
	 	 	A-3	 
	Labels
	 	 	A-3	 
	Legal Proceeding
	 	 	A-3	 
	Legal Requirement
	 	 	A-3	 
	Lien
	 	 	A-3	 
	Lien Terminations
	 	 	5	 
	Losses
	 	 	31	 
	Material Adverse Effect
	 	 	A-3	 
	Notice of Disagreement
	 	 	3	 
	Notices
	 	 	34	 
	Parties
	 	 	1	 
	Party
	 	 	1	 
	Permits
	 	 	A-3	 
	Permitted Liens
	 	 	A-3	 
	Person
	 	 	A-4	 
	Prohibited Business
	 	 	25	 
	Prohibited Transaction
	 	 	A-4	 
	Purchase Price
	 	 	2	 
	Purchaser
	 	 	1	 
	Purchaser Indemnified Taxes
	 	 	A-4	 
	Purchaser Indemnitees
	 	 	31	 
	Purchaser Related Party
	 	 	A-4	 
	Purchaser’s Parent
	 	 	A-4	 
	Release
	 	 	A-4	 
	Responsible Officer
	 	 	A-4	 
	Scheduled Contracts
	 	 	17	 
	Section 338(h)(10) Elections
	 	 	26	 
	Securities Act
	 	 	A-4	 
	Seller
	 	 	1	 
	Seller Indemnitees
	 	 	31	 
	Shares
	 	 	1	 
	Straddle Period
	 	 	A-5	 
	Subsidiary
	 	 	A-5	 
	Tax
	 	 	A-5	 
	Tax Benefit
	 	 	A-5	 
	Tax Items
	 	 	11	 
	Tax Proceeding
	 	 	27	 
	Tax Return
	 	 	A-5	 
	Taxing Authority
	 	 	A-5	 
	Termination Date
	 	 	A-5	 
	Trademarks
	 	 	19	 
	Transaction Documents
	 	 	A-5	 
	Transfer Taxes
	 	 	27	 
	Transition Services Agreement
	 	 	24	 

Navarre Entertainment Media, Inc.

Purchase and Sale Agreement

Glossary of Defined Terms

 

 

PURCHASE AND SALE AGREEMENT

     THIS PURCHASE AND SALE AGREEMENT (including the exhibits and schedules hereto, each as amended
or restated from time to time, this “Agreement”), dated as of May 11, 2007 (the “Execution Date”),
is by and among KOCH Entertainment LP, a Delaware limited partnership (“Purchaser”), Navarre
Entertainment Media, Inc., a Minnesota corporation (the “Company”), and Navarre Corporation, a
Minnesota corporation ( “Seller”). Purchaser, the Company and Seller are individually referred to
herein as a “Party” and collectively as the “Parties.”

RECITALS

     WHEREAS, on the date hereof Seller owns all of the issued and outstanding capital stock of the
Company, being 100,000 shares of common stock, with no par value (the “Shares”);

     WHEREAS, Seller desires to sell the Shares to Purchaser, and Purchaser desires to purchase the
Shares from Seller, in each case, subject to the terms and conditions set forth in this Agreement;
and

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements
herein contained, and intending to be legally bound hereby, the Parties hereto agree as follows:

AGREEMENTS

ARTICLE I

DEFINITIONS

     1.1 Definitions. In addition to the terms defined in the body of this Agreement, capitalized terms used herein
will have the meanings given to them in Exhibit A. The Glossary, which follows the Table
of Contents, sets forth the location in this Agreement of the definition for each capitalized term
used herein.

     1.2 Construction. All article, section, subsection, schedule and exhibit references used in this Agreement are to
this Agreement unless otherwise specified. All schedules and exhibits attached to this Agreement
constitute a part of this Agreement and are incorporated herein. Unless the context of this
Agreement clearly requires otherwise: (a) the singular includes the plural and the plural includes
the singular wherever and as often as may be appropriate, (b) the words “includes” or “including”
means “including without limitation,” and (c) the words “hereof,” “herein,” “hereunder” and similar
terms in this Agreement refer to this Agreement as a whole and not any
particular section or article in which such words appear. All references to Dollars or “$” are to
United States dollars. All references to “days” are to calendar days.

Navarre Entertainment Media, Inc.

Purchase and Sale Agreement

 

 

ARTICLE II

PURCHASE AND SALE

     2.1 Purchase and Sale of Shares. Subject to the terms and conditions of this Agreement, at the Closing, the Seller shall sell,
assign, convey, transfer and deliver to Purchaser, and Purchaser shall purchase and accept from
Seller, the Shares.

     2.2 Purchase Price. Subject to the terms and conditions of this Agreement, in exchange for all of the Shares,
Purchaser shall pay, in accordance with Section 2.6(b), the following amount in immediately
available funds (the “Purchase Price”): (a) the sum of (i) Six Million Five Hundred Thousand
Dollars ($6,500,000) and (ii) the amount of any advance (if any)
paid by the Company to a Label designated by Purchaser prior to the Closing; provided that the amount of such advance has been approved in writing
by Purchaser prior to the payment of such advance; less (b) an amount equal to the excess of the
Adjusted Working Capital over $3,500,000.

     2.3 Excluded Assets and Liabilities. At or prior to Closing, the Company shall transfer the following assets and liabilities to
Seller (“Excluded Items”):

          (a) the distribution and licensing agreements between the Company and certain inactive music
labels as set forth on Schedule 2.3(a) (the “Inactive Labels”);

          (b) all accounts receivable of the Company, except debit balances payable to the Company by
the Labels, as of the Closing Date;

          (c) any liability related to any employee of the Company that will not be employed by
Purchaser after the Closing, including the termination of any such employee;

          (d) any indebtedness of the Company as of the Closing Date;

          (e) all payables, if any, related to the Inactive Labels, including costs and liabilities
related to the termination of any agreements with Inactive Labels;

          (f) all liabilities of the Company relating to the Company Plans; and

          (g) all other liabilities of the Company as of the Closing Date, or related to events or
circumstances that occurred or arose prior to the Closing Date, except for liabilities otherwise
included in the Adjusted Working Capital.

Seller shall indemnify the Company and the Purchaser for any damages related to the Excluded Items
pursuant to Article IX.

     2.4 Closing Balance Sheet; Adjusted Working Capital. Within forty-five (45) days after the Closing Date, Seller shall prepare and deliver to
Purchaser an unaudited balance sheet of the assets and liabilities of the Company as of the Closing
Date, including a detailed and updated ledger of all components of Adjusted Working Capital, and
Seller’s calculation of the Adjusted Working Capital of the Company as of the

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Closing Date (the
“Closing Balance Sheet”), each to be prepared without regard to interim-period accounting
conventions and procedures and without giving effect to any purchase accounting adjustments
required by reason of or related to the transactions contemplated by this Agreement or the
Transaction Documents. Any Adjusted Working Capital amount in excess of $3,500,000 shall be
immediately paid by Seller to Purchaser. During the one hundred twenty (120) days immediately
following its receipt of the Closing Balance Sheet, but in no event prior to October 31, 2007,
Purchaser and its third-party accountants shall, at Purchaser’s expense, be entitled to review the
Closing Balance Sheet and any working papers, trial balances and similar materials related thereto.
The Closing Balance Sheet shall become final and binding upon the parties on the later of (a)
November 1, 2007 and (b) the one hundred twenty-first (121st) day following delivery thereof to
Purchaser unless Purchaser gives written notice to Seller of its disagreement with the Closing
Balance Sheet (a “Notice of Disagreement”) prior to such date. Any Notice of Disagreement shall
specify in reasonable detail the nature of any disagreement so asserted. If a timely Notice of
Disagreement is delivered by Purchaser, then the Closing Balance Sheet, shall become final and
binding upon the parties on the earlier of (i) the date the parties hereto resolve in writing all
differences they have with respect to any matter specified in the Notice of Disagreement or (ii)
the date all matters in dispute are finally resolved by the Independent Accounting Firm (as defined
below). During the thirty (30) days immediately following the delivery of any Notice of
Disagreement, Seller and Purchaser shall seek in good faith to resolve in writing any differences
which they may have with respect to any matters specified in such Notice of Disagreement. During
such period, Seller and Purchaser shall provide access to the other’s working papers prepared in
connection with the preparation of the Closing Balance Sheet. If Seller and Purchaser are unable
to resolve their differences within such thirty (30) day period, Seller and Purchaser shall submit
to Deloitte Touche Tohmatsu which both parties represent has no material prior relationship with
Seller or Purchaser (the “Independent Accounting Firm”) for review and resolution any and all
matters which remain in dispute and which are included in the Notice of Disagreement. The
Independent Accounting Firm shall reach a final resolution of all matters and shall furnish such
resolution in writing to Seller and Purchaser as soon as practicable, but in no event more than
thirty (30) days after such matters have been referred to the Independent Accounting Firm. Such
resolution shall be made in accordance with this Agreement and will be conclusive and binding upon
Seller and Purchaser. The fees and
expenses of the Independent Accounting Firm shall be allocated to and paid by Seller and Purchaser
fifty percent (50%) each. Any additional amount of Adjusted Working Capital determined by the
Parties or by the Independent Accounting Firm in excess of the amount previously paid to Purchaser
shall be paid by Seller to Purchaser immediately upon final resolution.

     2.5 Closing. Subject to the terms and conditions of this Agreement, the closing of the purchase and sale of
the Shares (the “Closing”) will take place at 10:00 a.m., New York time at the offices of Vinson &
Elkins L.L.P., 666 Fifth Avenue, 26th Floor, New York, New York 10103, on the third Business Day
following the satisfaction or waiver of the last condition in Article VII to be satisfied or
waived, or at such other time and place as Purchaser and Seller agree (the “Closing Date”).

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Purchase and Sale Agreement

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     2.6 Deliveries at Closing.

          (a) By the Seller. Subject to the terms and conditions of this Agreement, at the Closing,
Seller shall execute and deliver, or cause to be executed and delivered, to Purchaser each of the
following documents (where the execution or delivery of the documents is contemplated), deliver, or
cause to be delivered, to Purchaser each of the following items (where the delivery of the items is
contemplated), and will take or cause to be taken, the following actions, where the taking of
action is contemplated:

     (i) the stock certificates representing ownership of the Shares duly endorsed in blank
by Seller and the original minute books and stock ledgers for the Company;

     (ii) a certificate of the Secretary of State (or other applicable Governmental Entity)
of the state of organization of Seller, dated not more than 10 days prior to the Closing
Date, as to the existence or qualification (as the case may be) and good standing of Seller;

     (iii) a certificate, dated as of the Closing Date, signed by an appropriate officer of
Seller, certifying (A) that attached to such certificate are true and complete copies of the
Charter Documents of Seller and (B) as to the incumbency and specimen signature of the
representative of Seller executing this Agreement and each other Transaction Document or any
certificate or instrument furnished by Seller pursuant thereto, and (C) that this Agreement
and each other Transaction Document executed by Seller is duly and validly authorized and
constitutes a binding obligation of Seller;

     (iv) a certificate, dated as of the Closing Date, signed by a Responsible Officer of
Seller certifying that the conditions set forth in Sections 7.1(a) and 7.1(b) with respect
to Seller have been satisfied;

     (v) a certificate of the Secretary of State (or other applicable Governmental Entity)
of the state of organization of the Company, and each state where the Company is qualified
to do business as a foreign entity, dated not more than 10 days prior to the Closing Date,
as to the existence or qualification (as the case may be) and, where applicable, good
standing of the Company;

     (vi) a certificate, dated as of the Closing Date, signed by the Secretary of the
Company certifying (A) that attached to such certificate are true and complete copies of (1)
the Charter Documents of the Company, and (2) all resolutions of the Board of Directors of
the Company relating to this Agreement and the transactions contemplated hereby, and (B) as
to the incumbency and specimen signature of each Responsible Officer of the Company
executing this Agreement and each other Transaction Document or any certificate or
instrument furnished pursuant thereto;

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     (vii) a certificate, dated as of the Closing Date, signed by a Responsible Officer of
the Company certifying that the conditions set forth in Sections 7.1(a) and 7.1(b) with
respect to the Company have been satisfied;

     (viii) a Uniform Commercial Code Termination Statement or other satisfactory release,
in the sole discretion of Purchaser, of the lien on the Company’s assets by each of General
Electric Capital Corporation and Monroe Capital Advisors, LLC (the “Lien Terminations”);

     (ix) an IRS Form 8023 duly executed by Seller pursuant to Section 5.11(c);

     (x) the Escrow Agreement, duly executed by Seller;

     (xi) the Transition Services Agreement, duly executed by Seller; and

     (xii) the written resignations, effective as of the Closing Date, of the directors and
officers of the Company indicated in writing by Purchaser.

          (b) By Purchaser. Subject to the terms and conditions of this Agreement, at the Closing,
Purchaser shall execute and deliver, or cause to be executed and delivered, to Seller each of the
following documents (where the execution or delivery of the documents is contemplated), deliver, or
cause to be delivered, to Seller each of the following items (where the delivery of other items is
contemplated) and take, or cause to be taken, the following actions (where the taking of action is
contemplated):

     (i) payment of the Purchase Price in immediately available funds which shall be wired
to a bank account designated by Seller pursuant to wire transfer instructions provided to
Purchaser by Seller;

     (ii) Purchaser shall deposit $3,000,000 of the Purchase Price (the “Inventory Escrow
Amount”) in an escrow account to be held,
safeguarded and released upon the receipt by Purchaser of substantially all of the
Inventory pursuant to the terms of the Escrow Agreement, among Purchaser, Seller and the
Escrow Agent, in such form as the Parties shall mutually agree (the “Escrow Agreement”);

     (iii) the Escrow Agreement, duly executed by Purchaser;

     (iv) the Transition Services Agreement, duly executed by Purchaser;

     (v) a certificate of the Secretary of State of the state of organization of Purchaser,
dated not more than 10 days prior to the Closing Date, as to the existence and good standing
of Purchaser;

     (vi) a certificate, dated as of the Closing Date, signed by the Secretary of Purchaser
certifying (A) that attached to such certificate are true and complete copies of the Charter
Documents of Purchaser, (B) as to the incumbency and specimen signature of each Responsible
Officer

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Purchase and Sale Agreement

5

 

 of Purchaser executing this Agreement and each other Transaction Document or any
certificate or instrument furnished pursuant hereto and (C) that this Agreement and each
other Transaction Document executed by Purchaser is duly and validly authorized and
constitutes a binding obligation of Purchaser; and

     (vii) a certificate, dated as of the Closing Date, signed by a Responsible Officer of
Purchaser certifying that the conditions set forth in Section 6.2(a) and 7.2(b) have been
satisfied.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

     Seller represents and warrants to Purchaser as of the Execution Date and as of the Closing
Date as follows:

     3.1 Ownership of Shares. Seller is the sole record and beneficial owner of the Shares, which, as of the Closing Date,
shall be fully transferable to Purchaser free and clear of all Liens. Except for the Shares,
Seller does not own of record or beneficially, or have any interest in, or right to acquire, any
shares of capital stock of the Company.

     3.2 Organization; Existence and Good Standing. Seller is duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has full corporate power and authority to own, lease
or otherwise hold and operate the properties and assets its owns, leases and operates, including
the Shares, and to carry on its business as such business is currently conducted. Seller is not
required to be qualified to do business as a foreign corporation in any jurisdiction in order to
own or sell the Shares or perform its obligations hereunder.

     3.3 Authority; Enforceability. Seller has the full corporate power and authority to execute this Agreement and the other
Transaction Documents to which Seller is a party, and, as of the Closing Date, shall have the full
corporate power and authority to perform its obligations under this Agreement and the other
Transaction Documents to which Seller is a party. The execution, delivery and performance of this
Agreement has been, and the execution, delivery and performance of the other Transaction Documents
to which Seller is a party have been, duly and validly authorized by Seller. This Agreement
constitutes, and each of the other Transaction Documents to which Seller is a party constitute, the
valid and binding obligation of Seller, enforceable against Seller in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or
other Legal Requirements relating to or affecting creditors’ rights generally or by equitable
principles.

     3.4 No Violations. The execution and delivery of this Agreement and the other Transaction Documents to which Seller
is a party does not and will not, and the performance and compliance with the terms and conditions
hereof and thereof by Seller and the consummation of the transactions contemplated hereby and
thereby by Seller will not:

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6

 

          (a) violate, conflict with, result in a breach or constitute a default under any of the
provisions of Seller’s Charter Documents; or

          (b) as of the Closing Date, violate, conflict with, result in a breach or constitute a default
under any provision of, or require any notice or filing (other than as may be required under the U.
S. Federal or various state securities laws), consent, authorization or approval under any Legal
Requirement binding upon Seller or any Contract to which Seller is a party or which it or its
assets are otherwise bound or subject to (other than consents, authorizations and approvals which
shall be obtained prior to the Closing Date).

     3.5 Legal Proceedings. There are no Legal Proceedings pending or, to the knowledge of Seller, threatened that (a)
challenge the validity or enforceability of Seller’s obligations under this Agreement or other
Transaction Documents to which such Seller is a party or (b) seek to prevent, delay or otherwise
would reasonably be expected to adversely affect the consummation by Seller of the transactions
contemplated herein or therein.

     3.6 Broker. Seller is not liable for any investment banking fee, finder’s fee, brokerage payment or other
like payment in connection with the origination, negotiation or consummation of the transactions
contemplated herein that will be the obligation of the Company or Purchaser. Seller is not a
party to any agreement, and has not committed any act which might give rise to any valid claim
against Purchaser or the Company for any such fee commission or similar payment.

     3.7 Organization; Existence and Good Standing. The Company is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated. The Company has all requisite power and
authority to own, lease and operate the properties and assets it currently owns, leases and
operates and to carry on its business as such business is currently conducted. The Company is
qualified to do business as a foreign corporation in each jurisdiction shown in Schedule
3.7, which are all jurisdictions where the nature of its properties or business requires such
qualification.

     3.8 Authority; Enforceability. The Company has the full corporate power and authority to execute this Agreement and other
Transaction Documents to which it is a party, and, as of the Closing Date, shall have the full
corporate power and authority to perform its obligations under this Agreement and the other
Transaction Documents to which it is a party. The execution, delivery and performance of this
Agreement has been, and the execution, delivery and performance of the other Transaction Documents
to which the Company is a party have been, duly and validly authorized by the Company. This
Agreement constitutes, and each of the other Transaction Documents to which the Company is a party
constitute the valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other Legal Requirements relating to or affecting creditors’ rights
generally or by equitable principles.

     3.9 Capitalization of the Company.

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Purchase and Sale Agreement

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          (a) The Shares constitute all of the issued and outstanding shares of capital stock of the
Company. The Shares have been duly authorized and validly issued and are fully paid and
non-assessable and were issued in conformity with all applicable Legal Requirements and were not
issued in violation of, and are not subject to, any purchase option, call option, right of first
refusal, preemptive right, subscription right or any similar right under any provision of the
Minnesota Business Corporations Act, the Company’s Charter Documents or any Contract to which the
Company is or was a party or by which it is or was otherwise bound. The Shares are held of record
by Seller.

          (b) There are no Contracts (including, without limitation, options, warrants, calls and
preemptive rights) obligating the Company (i) to issue, sell, pledge, dispose of or encumber any
shares of any class of its capital stock or any securities convertible, exercisable or exchangeable
into any class of its capital stock, (ii) to redeem, purchase or acquire in any manner any class of
its capital stock or any securities that are convertible, exercisable or exchangeable
into any shares of any class of its capital stock, or (iii) to make any dividend or
distribution of any kind with respect to its capital stock.

          (c) There are no outstanding or authorized stock appreciation rights, phantom stock rights,
stock-based performance units, profit participation, or similar rights affecting the capital stock
of the Company. Except for the Company’s Charter Documents, the Company is not a party to any
voting trusts, proxies, or other shareholder or similar agreements or understandings with respect
to the voting, repurchase, or transfer of the capital stock of the Company.

          (d) The Company has delivered to Purchaser true and complete copies of the Company’s Charter
Documents, as amended to date. The Company has delivered to Purchaser true and complete copies of
all minute books and stock ledgers of the Company.

     3.10 Subsidiaries. The Company has no Subsidiaries. The Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock or any other equity interest in any corporation,
association or other business entity.

     3.11 No Violations. Except as set forth on Schedule 3.11, the execution and delivery of this Agreement and
the other Transaction Documents to which the Company is a party by the Company does not and will
not, and the performance and compliance with the terms and conditions hereof and thereof by the
Company and the consummation of the transactions contemplated hereby and thereby will not:

          (a) violate or conflict with any of the provisions of the Company’s Charter Documents;

          (b) as of the Closing Date, violate or conflict with, in any material respect, any provision
of or require any filing (other than as may be required under the U. S. Federal or various state
securities laws), consent, authorization or approval under any Legal Requirement binding upon the
Company; or

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          (c) violate or conflict with, in any material respect, require the consent of the counterparty
to (other than consents which shall be obtained prior to the Closing Date), or constitute a
material default (or any event which, with or without due notice or lapse of time, or both, would
constitute a material default), or give rise to any material payment obligation, right of amendment
(with respect to any material term), termination or cancellation under any Scheduled Contract.

     3.12 Legal Requirements and Permits. The Company is in compliance in all material respects with all applicable Legal Requirements,
except to the extent that such noncompliance would not reasonably be expected to have a Material
Adverse Effect on the Company. The Company holds all material Permits, licenses, certificates,
approvals, registrations, franchises, rights, qualifications and other authorizations of federal,
state and local governments, agencies and regulatory authorities required or advisable for the
conduct of the Company’s business as operated on the date hereof, except to the extent that the
failure to obtain or retain such Permits, licenses, certificates, approvals, registrations,
franchises, rights, qualifications and/or other authorizations would not reasonably be expected to
have a Material Adverse Effect on the Company. The Company has not received any notice of any (i)
order, rule or directive, or any proposed order, rule or directive, issued by any Governmental
Entity against the Company or (ii) threatened legal or regulatory proceeding which could adversely
affect in any material respect the business or assets of the Company or any Permit required to be
obtained and maintained by the Company. Notwithstanding the foregoing, this Section 3.12 shall not
apply to any matters relating to compliance with Environmental Laws or tax matters as it is the
Parties’ intent that Sections 3.14 and 3.15, as applicable, shall cover such matters.

     3.13 Legal Proceedings. Except as set forth in Schedule 3.13, as of the Execution Date, there are no Legal
Proceedings pending or, to the Knowledge of the Company, threatened against the Company. Except as
set forth on Schedule 3.13, as of the Execution Date, the Company is not subject to or in
violation of any judgment, order, award, injunction or decree of any Governmental Entity. As of
the Closing Date, there shall not be any Legal Proceedings pending, or to the Knowledge of the
Company, threatened against the Company that, if determined adversely, would have a Material
Adverse Effect. As of the Closing Date, the Company shall not be subject to or in violation of any
judgment, order, award, injunction or decree of any Governmental Entity which would result in or
have a Material Adverse Effect.

     3.14 Environmental.

          (a) Except as set forth in Schedule 3.14(a):

     (i) The Company and its properties and operations are in compliance in all material
respects with Environmental Laws.

     (ii) The Company and its properties and operations are not subject to any pending or,
to the Knowledge of the Company, threatened proceedings or investigations by or before any
Governmental Entity pursuant to Environmental Laws.

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     (iii) The Company has not received any written notice, notification, demand, request
for information, citation, summons, complaint or order pursuant to Environmental Laws
relating to the Company and asserting that the Company has failed to comply in
any material respect with any applicable Environmental Law. The Company has not
received any written notice that it is a potentially responsible party under CERCLA or any
similar state or local law with respect to any on-site or off-site location.

     (iv) There has been no Release of Hazardous Materials by the Company or former
Subsidiary (while such Subsidiary was owned by the Company) on any real property now or
previously leased by the Company or any former Subsidiaries (while such Subsidiaries were
owned by the Company) in respect of which a Governmental Entity has required or under
Environmental Law may require any material remedial action.

          (b) The Company has delivered to Purchaser or its representatives all Phase I environmental
assessment reports and related documents in the Company’s possession relating to its current
facilities or the real property currently leased by it except such reports or related documents
that were prepared at Purchaser’s request. Except for such reports and related documents, there
has been no environmental investigation, study or other third party analyses or audit report
prepared by, for, or provided to the Company in relation to its business.

          (c) Schedule 3.14(c) sets forth a true and complete list of all material Permits
required under any Environmental Law (“Environmental Permits”) in connection with the ownership and
operation of the business as of the Execution Date. The Company has obtained all material
Environmental Permits required for operation of the business, enabling the business to operate as
of the Closing Date in the ordinary course of business consistent with past practices.

          (d) This Section 3.14 and the first sentence of Section 3.13 contain the sole and exclusive
representations and warranties of the Company with respect to environmental matters relating to the
Company, including any matters arising under Environmental Laws.

     3.15 Tax Matters. Except as set forth on Schedule 3.15:

          (a) All Tax Returns that were required to be filed by or with respect to the Company have been
duly and timely filed. All items of income, gain, loss, deduction and credit or other items (“Tax
Items”) required to be included in such Tax Returns have been so included and all such Tax Items
and any other information provided in such Tax Returns are true, correct and complete. All Taxes
owed by the Company that are or have become due have been timely paid in full. All Tax withholding
and deposit requirements imposed on or with respect to the Company have been satisfied in full in
all respects. There are no Liens on any of the assets of the Company that arose in connection with
any failure (or alleged failure) to pay any Tax; provided, however, that Seller makes no
representations or warranties as to Liens for Taxes not yet due and payable.

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          (b) Schedule 3.15 lists all federal, state, local and foreign income Tax Returns filed
by or with respect to the Company for all taxable years since the Company’s inception and ending
prior to the Closing Date, indicates those Tax Returns that have been audited, indicates those Tax
Returns that are currently the subject of audit, and indicates those Tax Returns whose audits have
been closed.

          (c) There is no claim against the Company for any Taxes, and no assessment, deficiency or
adjustment has been asserted, proposed, or threatened and no audit or other proceeding by any
Governmental Entity is pending with respect to any Tax Return or Taxes of or with respect to the
Company, other than those disclosed (and to which are attached true and complete copies of all
audit or similar reports) on Schedule 3.15.

          (d) No claim has ever been made by an authority in a jurisdiction where the Company does not
file Tax Returns that the Company is or may be subject to taxation in that jurisdiction.

          (e) There is not in force any extension of time with respect to the due date for the filing of
any Tax Return of or with respect to the Company or any waiver or agreement for any extension of
time for the assessment or payment of any Tax of or with respect to the Company.

          (f) There are no written Tax allocation or sharing agreements or unwritten Tax allocation or
sharing arrangements affecting the Company. No payments are due or will become due by the Company
pursuant to any such agreement or arrangement or any tax indemnification agreement.

          (g) None of the property of the Company is held in an arrangement that could be classified as
a partnership for Tax purposes, and the Company does not own any interest in any controlled foreign
corporation (as defined in section 957 of the Code), passive foreign investment company (as defined
in section 1297 of the Code) or other entity the income of which is or could be required to be
included in the income of the Company.

          (h) None of the assets of the Company has been financed with or directly or indirectly secures
any debt the interest of which is Tax exempt under section 103(a) of the Code. None of the
property of the Company is “tax-exempt use property” (within the meaning of section 168(h) of the
Code) or “tax-exempt bond financed property” (within the meaning of section 168(g)(5) of the Code).

          (i) The Company has not agreed to make any material adjustment pursuant to Section 481(a) of
the Code (or any predecessor provision) by reason of any change in any accounting method, and there
is no application pending with any Governmental Entity requesting permission for any changes in any
accounting method of the Company which will or would reasonably cause the Company to include any
material adjustment in taxable income for any taxable period (or portion thereof) ending after the
Closing Date. The Company will not be required to include in any period ending after the Closing
Date any income that accrued in a prior period but was not recognized in any prior period as a result of the installment method
of accounting, the completed contract method of accounting, the long term contract method of
accounting or the cash method of accounting.

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          (j) The Company has not executed or entered into any agreement or arrangement with any
Governmental Entity that requires the Company to take any action or to refrain from taking any
action with respect to any Tax Return or Taxes of or with respect to the Company.

          (k) To the extent applicable, the Company has properly and in a timely manner documented its
transfer pricing methodology in compliance with Section 6662(e) (and any related sections) of the
Code, the Treasury regulations promulgated thereunder and any comparable provisions of state,
local, domestic or foreign Tax law.

          (l) The Company has not constituted either a “distributing corporation” or a “controlled
corporation” in a distribution of stock intended to qualify for tax-free treatment under section
355 of the Code (1) in the two years prior to the date of this Agreement or (2) in a distribution
which could otherwise constitute part of a “plan” or “series of related transactions” (within the
meaning of section 355(e) of the Code) in conjunction with the transactions contemplated by this
Agreement.

          (m) The Company has not consummated or participated in, and is not currently participating in,
any transaction that was or is a “tax shelter,” “listed transaction” or “reportable transaction” as
defined in sections 6662, 6662A, 6011, 6012, 6111 or 6707A of the Code or the Treasury Regulations
promulgated thereunder, including, but not limited to, transactions identified by the Internal
Revenue Service by notice, regulation or other form of published guidance as set forth in Treasury
Regulation section 1.6011-4(b)(2).

For the purpose of this Section 3.15, references to the Company shall be deemed to
include any predecessor thereof or any Person from which the Company incurs a liability for Taxes
as a result of transferee or successor liability.

     3.16 Financial Matters.

          (a) Set forth on Schedule 3.16(a) are actual and complete copies of Seller’s audited
profit and loss statements for the fiscal years 2005 and 2006 and the unaudited profit and loss
statements for the fiscal year 2007 (collectively, the “Financial Statements”).

          (b) Except as disclosed in Schedule 3.16(b), the Financial Statements have been
prepared based upon the books and records of the Seller and in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, subject, in the case of the unaudited
financial statements, to normal, recurring year end adjustments, and the absence of
explanatory footnote disclosures required by GAAP, and fairly present in all material respects
the financial condition and results of operation of the Seller at the respective dates described
above (and the results of operations of the Seller for the respective periods).

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          (c) Set forth on Schedule 3.16(c) are actual copies of unaudited, internally prepared
income statements and other financial statements, relating to the Company and the division of the
Seller that was transferred to the Company in connection with the reorganization of Seller
effective April 1, 2007, that were used by Seller in the preparation of the Financial Statements.

          (d) Since March 31, 2007, the Company has not incurred any obligation or liability (whether
accrued, absolute, contingent or otherwise) of the type required to be reflected on a consolidated
balance sheet of the Company prepared in accordance with GAAP applied on a consistent basis except
liabilities and obligations incurred in the ordinary course of business or in connection with the
sale of the Company.

     3.17 Absence of Certain Changes. As of the Execution Date and except as set forth on Schedule 3.17 or except as otherwise
contemplated by this Agreement, since April 1, 2007:

          (a) the Company has not amended its Charter Documents;

          (b) the Company has conducted its business only in, and has not engaged in any material
transaction outside of, the ordinary course of business;

          (c) there has not been any damage, destruction or other casualty loss with respect to any
asset or property owned or leased by the Company that has resulted, or is reasonably likely to
result, in losses in excess of $50,000 individually or $100,000 in the aggregate;

          (d) the Company has not mortgaged, pledged or subjected to any Lien (other than a Permitted
Lien), any of the assets or properties of the Company;

          (e) the Company has not made any change in its accounting principles, practices or
methodologies;

          (f) the Company has not entered into any employment, consulting, severance, termination,
Benefit Plan or other benefit agreement or other agreement with any of the employees or former
employees of the Company relating to compensation;

          (g) the Company has not (i) increased the compensation payable to any of its officers or
employees, other than normal and customary increases consistent with past practice or increases
that otherwise were required by the Company’s obligations pursuant to applicable Legal Requirements
or contracts in effect as of April 1, 2007, (ii) increased severance obligations payable to any of
its officers or employees, (iii) made or committed to make any bonus payment
to any of its employees or agents other than payments or arrangements in the ordinary course
of business consistent with past practices or (iv) loaned money to any officer or employee of the
Company;

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          (h) other than in the ordinary course of business, the Company has not waived or released any
material right or claim of or in favor of the Company or cancelled or waived any debts or claims
against any officer, manager or employee of the Company;

          (i) the Company has not sold, assigned or transferred, other than in the ordinary course of
business and consistent with past practices, any material assets;

          (j) the Company has not acquired by merger, consolidation or otherwise any material assets or
business of, any corporation, partnership, association or other business organization or division
thereof;

          (k) except as set forth on Schedule 3.13, the Company or, to Knowledge of the Company,
any other party, has not terminated, amended or modified, or threatened to terminate, amend or
modify, any material Scheduled Contract or material Permit;

          (l) there has not been any strike, walkout, or other significant labor event or threat
thereof, which in any case has materially adversely affected the business of the Company, or any
other new or continued event, development or condition involving labor matters which has or could
materially adversely affect the business of the Company;

          (m) there has not been any actual or, to the Knowledge of the Company, threatened change, in
the Company’s relations with, or any loss or, to the Knowledge of the Company, threatened loss of,
any relationship of the Company with its Labels, landlords, suppliers or customers which,
individually or in the aggregate, has had or would reasonably be expected to have a Materially
Adverse Effect on the Company;

          (n) the Company has not written off as uncollectible any notes owed to the Company or accounts
receivable of the Company or written down the value of any asset or inventory of the Company other
than in immaterial amounts or in the ordinary course of business consistent with past practice;

          (o) the Company has not created, incurred, assumed or guaranteed any material obligations or
liabilities (whether absolute, accrued, contingent or otherwise and whether due or to become due),
except in the ordinary course of business;

          (p) the Company has not altered in any material respect the manner in which it collects
accounts receivable or pays accounts payable;

          (q) all accounts payable due the Labels have been paid by the Company in the ordinary course,
all past due amounts payable on such accounts shall be paid as of the Closing Date and no past due
amounts payable on such accounts shall remain outstanding after the
Closing Date, in each case in accordance with the applicable distribution and licensing
agreements between the Company and each Label (without invoking any grace periods); or

          (r) the Company has not agreed to do any of the foregoing.

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     3.18 Employee Benefit Plans.

          (a) Each Company Plan (i) is in compliance in all material respects with all applicable laws,
including ERISA and the Code and (ii) has been administered in all material respects in accordance
with its governing instruments.

          (b) All contributions, premiums and other payments required to be made by the Company to the
Company Plans have been made timely, excluding any such failures that individually or in the
aggregate are not material, and there are no material benefit obligations that have not been
properly accounted for in Seller’s financial statements or disclosed in the footnotes thereto in
accordance with GAAP.

          (c) To the Knowledge of the Company, (i) there have been no Prohibited Transactions with
respect to any Company Plan which could reasonably be expect to result in any liability to the
Company, or any of its employees and (ii) there has been no breach of fiduciary duty (including
violations under Part 4 of Title I of ERISA) with respect to any Company Plan.

          (d) The Company does not sponsor, maintain, or contribute to a nonqualified deferred
compensation plan within the meaning of Code Section 409A, except to the extent that such
arrangement will (i) be terminated by the Closing Date and (ii) not give rise to Tax described in
Section 409A(a)(1)(B).

     3.19 Employees; Employment Matters.

          (a) The Company has previously provided the following information to Purchaser which it
represents is current and correct in all material respects as of the Execution Date:

     (i) (A) the name, job title, original hire date, service date, bonus, if any, paid for
fiscal period ending April 1, 2007, accrued and unused vacation as of April 1, 2007, and
current annual salary (or rate of pay) of each of such entity’s employees, and (B) other
compensation (including, without limitation, normal bonus, profit-sharing, pension benefits
and other compensation) now payable to each of the Company’s employees;

     (ii) any increase to become effective after the date of this Agreement in the total
compensation or rate of total compensation (including, without limitation, normal
bonus, profit-sharing, pension benefits and other compensation) payable to each such
person; and

     (iii) all presently outstanding loans and advances (other than routine travel advances
to be repaid or formally accounted for within 60 days) made by the Company to, or made to
the Company by, any director, officer or employee of the Company.

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          (b) Except as set forth on Schedule 3.19(b), (i) the terms of employment of all
employees of the Company are such that their employment may be terminated at will with notice given
at any time and (ii) there are no severance payments which are payable by the Company to any such
person under the terms of any Contract. Schedule 3.19(b) lists all of the employees who
are currently on leave relating to work-related injuries and/or receiving disability benefits under
any Benefit Plan.

          (c) The Company is not a party to any collective bargaining agreement or labor union contract.
As of the Execution Date, with respect to the Company, there is no pending or, to the Knowledge of
the Company, threatened (i) union organizational activity or (ii) application for certification of
a collective bargaining agent.

          (d) All persons classified by the Company as independent contractors satisfy the requirements
of applicable Legal Requirements to be so classified, and the Company has fully and accurately
reported its compensation on IRS Forms 1099 when required to do so. No individual who has
performed services for or on behalf of the Company and who has been treated by the Company as an
independent contractor is classifiable as a “leased employee” within the meaning of Section
414(n)(2) of the Code with respect to the Company.

     3.20 Agreements, Contracts and Commitments.

          (a) Schedule 3.20(a) contains a true and complete list as of the Execution Date, and
the Company has delivered to Purchaser complete and correct copies, of the Contracts described
below to which the Company is a party (collectively, the “Scheduled Contracts”):

     (i) each distribution or licensing agreement with the Labels;

     (ii) each Contract that has a remaining term in excess of one year, cannot be
terminated on less than 90 days’ notice (without a monetary penalty) and involves future
payments, performance or services or delivery of goods or materials to or by the Company of
any amount or value reasonably expected to exceed $25,000 in any future 12-month period;

     (iii) each license agreement of the Company with respect to patents, trademarks,
copyrights or other intellectual property rights currently used or to be used by
the Company (other than those relating to commercial-off-the-shelf software entered
into in the ordinary course of business, the annual fees for which do not exceed $10,000
individually, or $25,000 in the aggregate);

     (iv) each joint venture, partnership and other similar Contract involving the sharing
of profits of the Company with any third-party;

     (v) each Contract that limits the freedom of the Company to compete in any line of
business, to compete within any geographic area or with any Person or
otherwise materially
restricts the Company’s ability to solicit or hire any Person or solicit business from any
Person;

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     (vi) each collective bargaining agreement or other Contract to or with any labor unions
involving the Company’s employees;

     (vii) any and all broker, distributor or dealer agreements that involve future payments
of amounts reasonably expected to exceed $25,000 in any future 12-month period;

     (viii) any and all agreements requiring the incurrence of debt for borrowed money by
the Company; and

     (ix) each amendment in respect of any of the foregoing.

          (b) The Scheduled Contracts are in full force and effect. To the Knowledge of the Company,
except for the consent requirements listed on Schedule 3.11 or as otherwise set forth on
Schedule 3.13, no event has occurred that, with notice, the passage of time or both, or
shall occur as a result of the execution of this Agreement and the consummation of the transaction
contemplated hereby, would constitute a default by the Company or any other party under, or failure
of the Company or any other party to comply with a material provision of, any of the Scheduled
Contracts, or otherwise give any party a right of termination or material modification thereof.
Neither the Company or, to the Knowledge of the Company, the other party or parties to such
Scheduled Contracts (i) is in default under the terms of any such Scheduled Contract, (ii) has
received a notice that it is in default under, or not in material compliance with, any provision of
any Scheduled Contracts or (iii) has delivered any notice to another party alleging any default
under, or failure to comply with any material provision of any Scheduled Contract. Each such
Scheduled Contract is the valid and binding obligation of the Company, as applicable, and to the
Knowledge of the Company, the other party or parties thereto, enforceable by the Company in
accordance with the terms of such Scheduled Contracts except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other Legal Requirements relating
to or affecting creditors’ rights generally or by equitable principles.

     3.21 Real Property. The Company does not own, nor is it a party to any lease of, any real property.

     3.22 Personal Property. The Company has good title to the Inventory, which shall be free and clear of all Liens, except
Permitted Liens, as of Closing.

     3.23 Intellectual Property.

          (a) Schedule 3.23(a) identifies (i) the registered trademarks and service marks
(collectively, “Trademarks”), (ii) the
patents and pending applications to patent any technology or
design, and (iii) the registrations of and applications to register copyrights which are owned by
the Company (the “Intellectual Property”).

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          (b) The Company has good title (free of Liens other than Permitted Liens) to, or are duly
licensed to use (or permitted by similar agreement to use) each item of Intellectual Property. The
use by the Company of the Intellectual Property does not infringe any rights of any third party
and, to the Knowledge of the Company, no activity of any third party infringes upon the rights of
the Company with respect to any of the Intellectual Property. The Company has not received notice
of any claims asserted by any Person with respect to challenging the ownership, validity,
enforceability or use of the Intellectual Property, nor to Knowledge of the Company, are there any
valid grounds for any such bona fide claims. To the extent the Company uses any Intellectual
Property owned by a third party, the Company has a license with such third party for the use of
such Intellectual Property and is not in default under any such license.

     3.24 Insurance. The Company, or its Affiliates, has maintained liability (including product liability) casualty,
property loss and other insurance coverage (“Insurance Policies”) upon the Company’s assets and
business operations, in such amounts, of such kinds and with such insurance carriers as the
Company’s and its Affiliates believes are generally deemed appropriate and sufficient for companies
of a similar size engaged in similar types of business and operations, except to the extent that
the failure to obtain or maintain such insurance would not reasonably be expected to have a
Material Adverse Effect on the Company. The Insurance Policies are in full force and effect as of
the Execution Date and shall be in full force and effect at Closing.

     3.25 Bank Accounts. The Company does not have any bank accounts or safe deposit or lock boxes.

     3.26 Related Party Transactions. Except as set forth in Schedule 3.26, as of the Closing Date no stockholder, officer or
director of the Company or immediate family member thereof (a) shall be a party to any material
agreement with the Company or (b) shall own any interest in any assets of the Company.

     3.27 Broker. The Company is not liable for any investment banking fee, finder’s fee, brokerage payment or
other like payment in connection with the origination, negotiation or consummation of the
transactions contemplated herein that will be the obligation of the Company or Purchaser. The
Company is not a party to any agreement, and has not committed any act which might give rise to any
valid claim against the Company or Purchaser for any such fee, commission or similar payment.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

     Purchaser hereby represents and warrants to the Company and Seller as of the Execution Date
and as of the Closing Date as follows:

     4.1 Organization; Existence and Good Standing. Purchaser is a limited partnership, validly existing and in good standing under the laws of the
State of Delaware. Purchaser has all requisite power and authority to own, lease and operate the
properties and assets it currently owns, leases and operates and to carry on its business as such
business is currently conducted. Purchaser is qualified to do business as a limited partnership in
all jurisdictions where the nature of its properties or business requires such qualification.

     4.2 Authority; Enforceability. Purchaser has the full power, legal capacity and authority to execute this Agreement and to
perform its obligations under this Agreement and the other Transaction Documents to which it is a
party, and to perform its obligations under this Agreement and the other Transaction Documents to
which Purchaser is a party. The execution, delivery and performance of this Agreement has been,
and the execution, delivery and performance of the other Transaction Documents to which Purchaser
is a party have been duly and validly authorized by Purchaser. This Agreement constitutes, and
each of the other Transaction Documents to which Purchaser is a party constitute, the valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other
Legal Requirements relating to or affecting creditors’ rights generally or by equitable principles.
Purchaser has, in accordance with all Legal Requirements, the Charter Documents of Purchaser, and
any Contracts to which Purchaser is a party, obtained all approvals and taken all actions necessary
for the authorization, execution, delivery and performance by Purchaser, of this Agreement and the
other Transaction Documents.

     4.3 No Violations. The execution and delivery of this Agreement and the other Transaction Documents by Purchaser
does not and will not, and the performance and compliance with the terms and conditions hereof and
thereof by Purchaser and the consummation of the transactions
contemplated hereby and thereby by
Purchaser will not:

          (a) violate, conflict with, result in a breach or constitute a default under any of the
provisions of Purchaser’s Charter Documents; or

          (b) violate, conflict with, result in a breach or constitute a default under any provision of
or require any notice, filing, consent, authorization or approval under any Legal Requirement
binding upon Purchaser or any Contract to which Purchaser is a party or which it or its assets are
otherwise bound or subject to.

     4.4 Legal Proceedings. There are no Legal Proceedings pending or, to the knowledge of Purchaser, threatened against
Purchaser that (a) challenge the validity or enforceability of any of Purchaser’s obligations under
this Agreement or the other Transaction

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Documents to which Purchaser is a party or (b) seek to
prevent, delay or otherwise would reasonably be expected to adversely affect the consummation by
Purchaser of the transactions contemplated herein or therein.

     4.5 Availability of Funds. Purchaser will have at the Closing sufficient cash in immediately available funds to pay the
Purchase Price, to provide the Company with sufficient working capital and to pay any and all other
amounts payable by Purchaser pursuant to this Agreement and to effect the transactions contemplated
hereby.

     4.6 Broker. Purchaser is not liable for any investment banking fee, finder’s fee, brokerage payment or other
like payment in connection with the origination, negotiation or consummation of the transactions
contemplated herein that will be the obligation of the Company or Seller. Purchaser is not a party
to any agreement, and has not committed any act which might give rise to any valid claim against
Seller or the Company for any such fee, commission or similar payment.

ARTICLE V

COVENANTS AND OTHER AGREEMENTS

     5.1 Covenants Regarding Conduct of Business. From the date hereof through Closing, except as permitted or required by the other terms of this
Agreement or consented to or approved in writing by Purchaser, which consent or approval will not
be unreasonably withheld or delayed, the Company shall conduct the business operations, activities
and practices of the Company in all material respects consistent with its past practices (including
with respect to managing working capital, collection of accounts
receivable and payment of accounts payable). Without limiting the foregoing, without the consent
or approval of Purchaser, which consent or approval will not be unreasonably withheld, the Company
shall not, except as otherwise permitted or required by the other terms of this Agreement:

          (a) amend its Charter Documents;

          (b) change the number of its shares of authorized or issued capital stock (or other authorized
capital) or issue, grant or sell any equity interests (or options or warrants) or any other
securities or obligations convertible into or exchangeable for shares of its capital stock;

          (c) declare or pay dividends or make any other distributions in respect of its capital stock,
or purchase, redeem or otherwise acquire or retire for value any shares of its capital stock;

          (d) incur any indebtedness for borrowed money ;

          (e) mortgage, pledge or subject to any Lien (other than a Permitted Lien), any of the assets
or properties of the Company;

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          (f) settle any litigation, action or claim other than (i) claims involving less than $50,000
in the aggregate or (ii) settlements settled through insurance proceeds;

          (g) other than in the ordinary course of business or except as required by applicable Legal
Requirements or Benefit Plans or as set forth on Schedule 5.1(g), (i) increase the annual
level of compensation of any executive officer or other employee of the Company, (i) grant any
bonus, benefit or other direct or indirect compensation to any executive officer or other employee,
(iii) materially increase the coverage or benefits available under any (or create any new)
severance pay, termination pay, vacation pay, company awards, salary continuation for disability,
sick leave, deferred compensation, bonus or other incentive compensation, insurance, pension or
other employee benefit plan or arrangement made to, for, or with any of the executive officers or
other employee of the Company or otherwise modify or amend or terminate any such plan or
arrangement or (iv) enter into any employment, deferred compensation, severance, consulting,
non-competition or similar agreement (or amend any such agreement) involving any executive officer
or other employee;

          (h) make, change or revoke any election in respect of Taxes, change an annual accounting
period, make any agreement or settlement with any Taxing Authority, file any amended Tax Return,
surrender any right to claim a refund of Taxes, or consent to any extension or waiver of the
limitation period applicable to any Tax claim or assessment;

          (i) except as may be required as a result of applicable Legal Requirements or under GAAP,
change in any material respect any accounting method;

          (j) sell, assign, lease or otherwise dispose of any of its assets or properties, except in the
ordinary course of business;

          (k) terminate, amend or fail to renew any material Permit other than in the ordinary course of
business and consistent with past practice;

          (l) terminate, amend or fail to renew any insurance policies covering the assets and business
operations of the Company other than in the ordinary course of business and consistent with past
practice;

          (m) commit a breach of or fail to perform material obligations under, or except as set forth
on Schedule 5.1(m), amend, modify or terminate any material Contract without Purchaser’s
prior written consent;

          (n) other than in the ordinary course of business, waive or release any material right or
claim in favor of the Company or cancel or waive any debts or claims against any officer, manager
or employee of the Company;

          (o) enter into any Contract that would constitute a Scheduled Contract and that would involve
future payments, performance of services or delivery of goods or materials to or by the Company of
any amount or value reasonably expected to exceed $25,000 in any future

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12-month period; provided,
notwithstanding the foregoing, this clause (o) shall not prohibit the Company from entering into
any Contract that solely involves obligations that the Company is not prohibited from incurring
under the other clauses of this Section 6.1.; or

          (p) take or agree to take any of the actions described above.

     5.2 Consents. The Company and the Purchaser shall use commercially reasonable efforts to obtain, prior to
Closing, any third party consents required in connection with the transactions contemplated by this
Agreement.

     5.3 Access and Assistance.

          (a) Upon receipt of reasonable advance notice, the Company will afford to Purchaser and its
authorized representatives reasonable access from the Execution Date through the Closing Date,
during normal business hours, solely in furtherance of Purchaser’s investigation of the Company and
the transactions contemplated hereby, to the Company’s offices, properties, and books and records,
and to the Company’s officers and management team, and will furnish to Purchaser such additional
information regarding the business of the Company as Purchaser may reasonably request, to the
extent that such access and disclosure would not violate the terms of any agreement to which the
Company is bound, any applicable Legal Requirement, result in any loss of attorney-client or other
privilege or significantly disrupt the
Company’s operations. All information obtained pursuant to this Section shall be Confidential
Information and shall not be disclosed without the prior written consent of the Company, except as
required by Applicable Law or administrative processes. Notwithstanding anything to the contrary
contained herein, prior to Closing, without prior written consent of the Company, which may be
withheld for any reason, Purchaser shall not contact any suppliers to, or customers of, the Company
with respect to the transactions contemplated hereby.

          (b) From and after the Execution Date, Seller shall cooperate fully (and prior to the Closing
shall cause the Company to cooperate fully), as and to the extent reasonably requested by the
Purchaser, in connection with the filing of Tax Returns. From and after the Closing Date, Seller
shall cooperate fully, as and to the extent reasonably requested by the Purchaser, in connection
with the filing of Tax Returns and any audit, litigation or other proceeding with respect to Taxes.
In each case, such cooperation shall include the retention and (upon the Purchaser’s request) the
provision of records and information which are reasonably relevant to any such Tax Return filing,
audit, litigation or other proceeding and making employees available on a mutually convenient basis
to provide additional information and explanation of any material provided hereunder.

     5.4 Employee Matters. If requested by Purchaser, Seller shall use commercially reasonable efforts to assist Purchaser
in the retention of certain employees of the Company, as identified by Purchaser. Neither Seller
nor the Company shall make any written or oral commitment to any employee of the Company with
respect to continued employment by the Company after Closing without the prior written consent of
Purchaser.

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     5.5 Inventory. Immediately following Closing, the Company shall use commercially reasonable efforts to prepare
and deliver the inventory of the Company related to the Labels (the “Inventory”), except for Label
overstock as designated by Purchaser (which Seller shall store for Purchaser free of charge at its
facilities through October 31, 2007 pursuant to the Transition Services Agreement) at Seller’s sole
risk and expense, to Purchaser’s warehouse located at 22 Harbor Park Drive, Port Washington, New
York or at another location as mutually agreed by the Parties. Purchaser and Seller agree to
determine a mutually agreeable procedure for the transfer of all Inventory returned to Seller by
the customers of the Company after the Closing Date.

     5.6 Transition Services Agreement. At Closing, the Parties shall enter into a transition services agreement relating to those
activities necessary or desirable to consummate the transactions contemplated by this Agreement, in
such form as the Parties shall mutually agree (the “Transition Services Agreement ”), including,
but not necessarily limited to the provision of warehouse space for Label overstock free of charge
through October 31, 2007
and office space for up to five employees of Purchaser or the Company free of charge through
December 31, 2007.

     5.7 Non-Competition. For a period of three years after the Closing, neither Seller nor its Affiliates shall directly
or indirectly in the territory of North America (a) engage in any business (a “Prohibited
Business”) that engages in the business of the distribution of music from Independent Labels or (b)
own a majority interest in, finance, manage or control or participate in or be connected with, as a
general partner or a majority stockholder, any Prohibited Business; provided, however, that nothing
in this Section 5.7 shall prohibit or prevent Seller or any of its Affiliates from (i) purchasing
any content company that may also be engaged in the music content business that includes music
distribution of its own products, provided that music content shall not be the primary purpose of
such company’s business, and (ii) continuing its existing music and content distribution business
through its subsidiary BCI Eclipse Company, LLC consistent with its current and historical business
operations. For the purposes of this Section 5.7, the term “Independent Label” shall mean a
recording label that is not controlled or majority-owned by EMI, Sony BMG, Universal Music Group or
Warner Music Group.

     5.8 Payment of Liabilities. Following the Closing Date, Purchaser shall cause the Company to continue to pay its liabilities
(other than liabilities which are Excluded Items) when and as they come due and in the ordinary
course of business. Neither Purchaser nor the Company shall reduce, offset, deduct, settle or
compromise such liabilities if such act would have a Material Adverse Effect on Seller. Following
the Closing Date, Seller shall continue to pay the liabilities which are Excluded Items when and as
they come due. Seller shall not reduce, offset, deduct, settle or compromise such liabilities if
such act would have a Material Adverse Effect on the Company or Purchaser.

     5.9 Public Announcements. The Parties agree that, except to the extent necessary to comply with the requirements of (a)
applicable Legal Requirements, (b) any listing agreements with securities exchanges or (c) the
rules, regulations or orders of any other Governmental Entity, no press release or similar public
announcement or communication prior to the Closing shall be made or caused to be made concerning
the specific terms of this Agreement unless approved in advance by Purchaser and Seller.

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     5.10 Commercially Reasonable Efforts. Subject to the terms and conditions of this Agreement, each of Purchaser, Seller and the Company
shall use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or desirable to consummate the transactions
contemplated by this Agreement and the other Transaction Documents and to ensure the satisfaction
of its conditions to Closing set forth herein.

     5.11 Tax Matters

          (a) Tax Returns. With respect to any Tax Return (other than a Tax Return required to
be filed by or with respect to any Consolidated Group) that is required to be filed after the
Closing Date with respect to the Company, Purchaser shall cause such Tax Return to be prepared.
Not later than 30 days prior to the due date (including extensions) of each such Tax Return,
Purchaser shall deliver a copy of such Tax Return to Seller and shall permit Seller to review and
comment on such Tax Return and shall make such revisions to such Tax Return as are reasonably
requested by Seller. Not later than 5 days prior to the due date of such Tax Return (including any
extensions thereon), Seller shall pay to the Purchaser the amount of Purchaser Indemnified Taxes
with respect to such Tax Return.

          (b) Proration of Straddle Period. In the case of Taxes that are payable with respect
to any Straddle Period, the portion of any such Tax that is attributable to the portion of such
Straddle Period ending on the Closing Date shall be:

     (i) in the case of Taxes that are either (a) based upon or related to income or
receipts, or (b) imposed in connection with any sale or other transfer or assignment of
property (real or personal, tangible or intangible), deemed equal to the amount that would
be payable if the taxable years of the Company ended with (and included) the Closing Date;
and

     (ii) in the case of Taxes that are imposed on a periodic basis with respect to the
assets of the Company, deemed to be (a) the amount of such Taxes for the entire period (or,
in the case of such Taxes determined on an arrears basis, the amount of such Taxes for the
immediately preceding period), multiplied by (b) a fraction the numerator of which is the
number of calendar days in the portion of the Straddle Period ending on the Closing Date and
the denominator of which is the number of calendar days in the entire Straddle Period.

          (c) Section 338(h)(10) Election. Seller shall join Purchaser’s Parent in making a
timely, irrevocable and effective election under section 338(h)(10) of the Code and any similar
election under any applicable state, local or foreign income Tax law (collectively the “Section
338(h)(10) Elections”) with respect to Purchaser’s purchase of the Shares. To facilitate such
election, at the Closing Seller shall deliver to Purchaser

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an IRS
Form 8023 or successor form and
any applicable form under applicable state, local or foreign income Tax law (the “Form”) with
respect to Purchaser’s purchase of the Shares, which Form shall have been duly executed by Seller.
Purchaser’s Parent shall (A) cause the Form to be duly executed by an authorized person for
Purchaser’s Parent; (B) complete the schedules, if any, required to be attached thereto; (C)
provide a copy of the executed Form and schedules to Seller and provide a reasonable opportunity
for Seller to review, comment and Purchaser shall make any reasonable changes requested by Seller;
and (D) duly
and timely file the Form as prescribed by Treasury Regulation 1.338(h)(10)-1 or the
corresponding provisions of applicable state, local or foreign income Tax law. Purchaser shall
agree with Seller on an allocation of the purchase price and the liabilities of the Company (plus
other relevant items) among the assets of the Company pursuant to section 338 of the Code and the
regulations thereunder, and Purchaser’s Parent, Purchaser, the Company and Seller will file all Tax
Returns (including amended returns and claims for refund) and information reports in a manner
consistent with such allocation.

          (d) Bulk Sale. Seller will comply with all bulk sale reporting requirements and/or
other similar reporting requirements involving business transfers in those jurisdictions in which
Seller has or could have nexus reporting requirements, other than bulk sale reporting requirements
that are specifically the obligation of the Purchaser. Purchaser will comply with all bulk sale
reporting requirements and/or other similar reporting requirements involving business transfers in
those jurisdictions in which Purchaser has or could have nexus reporting requirements, other than
bulk sale reporting requirements that are specifically the obligation of the Seller.

          (e) Cooperation. Purchaser, the Company and Seller shall cooperate fully, and shall
cause each of its respective Affiliates to cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax Returns pursuant to this Section
5.11 and any audit, litigation or other proceeding (each a “Tax Proceeding”) with respect to any
Tax. Such cooperation shall include the retention and (upon the other party’s request) the
provision of records and information which are reasonably relevant to any such Tax Return or Tax
Proceeding and making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Seller will, and will cause the
Company to retain all books and records with respect to Tax matters pertinent to the Company
relating to any Taxable period beginning before the Closing Date. The Parties further agree, upon
request by any other party, to use commercially reasonable efforts to obtain any certificate or
other document from any Governmental Entity or any other Person as may be necessary to mitigate,
reduce or eliminate any Transfer Tax that could be imposed on one or more other Parties (including,
but not limited to, with respect to the transactions contemplated hereby) provided, however, that
such Party shall not be obligated to obtain any such certificate or document if or to the extent
that such certificate or document shall have a Materially Adverse Effect on such Party. Purchaser
and Seller further agree, upon request, to provide the other party with all information regarding
the Company that either party may be required to report to any Governmental Entity.

          (f) Transfer Taxes. Each of the Parties will pay their own sale, use, transfer or
gains tax, stamp tax, stock transfer tax, or other similar Tax
imposed on such party as a result of
the transactions contemplated by this Agreement (collectively, “Transfer Taxes”), and any penalties
or interest with respect to such Transfer Taxes, which are levied upon such person by the
applicable U.S. Federal or state tax authorities.

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     5.12 Closing Balance Sheet. Seller shall prepare the Closing Balance Sheet in accordance with GAAP and with past practice
and such Closing Balance Sheet shall be true and correct.

ARTICLE VI

CONDITIONS TO CLOSING

     6.1 Purchaser’s Closing Conditions. Purchaser’s obligation to consummate the transactions contemplated under this Agreement is
subject to the satisfaction (or to the extent permitted by applicable Legal Requirements, waiver by
Purchaser), on or prior to the Closing Date, of each of the following conditions:

          (a) Seller and the Company shall have performed and complied in all material respects with all
covenants required by this Agreement to be performed or complied with by Seller or the Company, as
the case may be, on or prior to the Closing Date;

          (b) The representations and warranties of Seller in this Agreement shall be true and correct
in all material respects as of the Execution Date (except to the extent such representations speak
to an earlier date, in which case as of such earlier date) and as of the Closing Date (except to
the extent such representations speak to an earlier date, in which case as of such earlier date).
The representations and warranties of the Company in this Agreement shall be true and correct in
all material respects as of the Execution Date (except to the extent such representations speak to
an earlier date, in which case as of such earlier date). The representations and warranties of the
Company in this Agreement shall be true and correct as of the Closing Date (except to the extent
such representations speak to an earlier date, in which case as of such earlier date) except to the
extent the failure of such representations and warranties to be true and correct as of the Closing
Date (i) relates to events or circumstances first occurring after the Execution Date, (ii) is not
attributable to a breach of the Company’s covenants in Section 6.1 and (iii) has not had, and is
not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect
(provided that for purposes of determining whether the condition set forth in this sentence has
been satisfied, all “Material Adverse Effect” and other materiality qualifiers contained in the
Company’s representations and warranties shall be disregarded). For purposes of determining
whether the condition in this Section 6.1(b) has been satisfied, any breach of representation or
warranty arising from Seller’s or the Company’s compliance with the express terms of this Agreement
shall be disregarded;

          (c) Seller shall have delivered to Purchaser a certificate as to the satisfaction of the
conditions set forth in Sections 6.1(a) and (b), dated as of the Closing and executed by an officer
of Seller;

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          (d) No restraining order, injunction or other order issued by any court of competent
jurisdiction preventing the consummation of the purchase and sale of the Shares or the other
transactions contemplated by this Agreement and the other Transaction Documents (brought by a third
party not affiliated with the Parties) shall be in effect;

          (e) Since the Execution Date, the Company shall not have suffered any Material Adverse Effect;

          (f) Purchaser shall have received the Lien Terminations;

          (g) Purchaser shall have obtained prior approval to consummate the transaction set forth
herein from Toronto Dominion Bank; and

          (h) Purchaser shall have received a certificate of non-foreign status by Seller which meets
the requirements of Treasury Regulation Section 1.1445-2(b)(2).

     6.2 Seller’s Closing Conditions. Seller’s obligations to consummate the transactions contemplated under this Agreement are
subject to the satisfaction (or to the extent permitted by applicable Legal Requirements, waiver by
the Seller), on or prior to the Closing Date, of each of the following conditions:

          (a) Purchaser shall have performed and complied in all material respects with all covenants
required by this Agreement to be performed or complied with by it on or prior to the Closing Date;

          (b) The representations and warranties of Purchaser contained in this Agreement shall be true
and correct in all material respects as if made on and as of the Closing Date (except to the extent
such representations speak to an earlier date, in which case as of such earlier date);

          (c) Purchaser shall have delivered to Seller a certificate as to the satisfaction of the
conditions set forth in Sections 6.2(a) and (b), dated as of the Closing and executed by an officer
of Purchaser;

          (d) Seller and the Company shall have obtained the Lien Terminations necessary to consummate
the transaction set forth herein; and

          (e) No restraining order, injunction or other order issued by any court of competent
jurisdiction preventing the consummation of the purchase and sale of the Shares or the other
transactions contemplated by this Agreement and the other Transaction Documents (brought by a third
party not affiliated with the Parties) shall be in effect.

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ARTICLE VII

TERMINATION RIGHTS

     7.1 Termination Rights. This Agreement may be terminated at any time prior to the Closing as follows:

          (a) By mutual written consent of Seller and Purchaser;

          (b) By Seller or Purchaser in the event that the Closing has not occurred on or prior to the
Termination Date; provided, however, that the right to terminate this Agreement under this Section
7.1(b) shall not be available to any Party whose breach of its representations and warranties in
this Agreement or whose failure to perform any of its covenants and agreements under this Agreement
shall have been a material contributing cause of, or resulted in, the failure of the Closing to
occur on or before the Termination Date;

          (c) By Seller or Purchaser if any permanent injunction, decree or judgment by any Governmental
Entity preventing the consummation of the transactions contemplated hereby shall have become final
and non-appealable;

          (d) By Seller, in the event (i) Seller is not in breach of this Agreement and none of its
representations and warranties shall have become and continue to be untrue in a manner that would
cause the condition set forth in Section 6.1(b) not to be satisfied or a failure by Seller to
perform its covenants in such a manner as would cause the condition set forth in Section 6.1(a) not
to be satisfied, and (ii) there shall have been a breach of Purchaser’s representations and
warranties in this Agreement or a failure by Purchaser to perform its covenants in this Agreement
in such a manner that the conditions to the Closing set forth in Sections 6.2(a) or 6.2(b) are not
reasonably likely to be satisfied prior to the later of (A) the Termination Date or (B) if capable
of cure, within ten (10) days after written notice thereof to such other Party prior to the
Termination Date; or

          (e) By Purchaser in the event (i) Purchaser is not in breach of this Agreement and none of its
representations and warranties shall have become and continue to be untrue in a manner that would
cause the conditions set forth in Section 6.2(b) or a failure by Purchaser to perform its covenants
in such a manner as would cause the condition set forth in Section 6.2(a) not to be satisfied, and
(ii) there shall have been a breach of Seller’s or the Company’s representations and warranties in
this Agreement or a failure by the Company to perform its covenants in this Agreement in such a
manner that the conditions to the Closing set forth in Section 6.1(a) or 6.1(b) are not reasonably
likely to be satisfied prior to the later of (A) the Termination Date or (B) if capable of cure,
within ten (10) days after written notice thereof to such other Party prior to the Termination
Date.

     7.2 Effect of Termination. In the event of the termination of this Agreement pursuant to Section 7.1, all obligations of
the Parties hereto shall terminate, except for the provisions of this Section 7.2, and Sections
5.9, 8.7, 9.1, 9.2, 9.3, 9.4, 9.5 and 9.8; provided, further, that in the

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event this Agreement is
terminated pursuant to Section 7.1(b), 7.1(d) or 7.1(e), nothing herein shall prejudice the ability
of the non-breaching party from seeking damages from any other Party for any willful and
intentional breach of this Agreement, including attorneys’ fees and the right to pursue any remedy
at law or in equity, and otherwise the Parties shall have no liability to each other under or
relating to this Agreement.

ARTICLE VIII

INDEMNIFICATION

     8.1 Indemnification by Purchaser. Subject to the other terms of this Article VIII, from and after the Closing, Purchaser and the
Company shall indemnify, defend and hold harmless Seller and its Affiliates and their respective
partners, members, directors, officers, shareholders, employees, successors and assigns
(collectively, the “Seller Indemnitees”) from and against any and all damages, claims, liabilities,
losses, costs and expenses (including reasonable fees and expenses of counsel and court costs)
(collectively, “Losses”) arising out of or resulting from (a) the failure of any of the
representations or warranties made by Purchaser in Article IV to be true and correct; (b) the
failure of Purchaser to perform any of its covenants or obligations under this Agreement; or (c)
any and all losses and/or liabilities affecting Seller arising out of Purchaser’s operation of the
Company following the Closing Date.

     8.2 Indemnification by Seller. Subject to the other terms of this Article VIII, from and after the Closing, Seller shall
indemnify, defend and hold harmless Purchaser and its Affiliates (which shall include the Company
after the Closing) and their respective partners, members, directors, officers, shareholders,
employees, successors and assigns (collectively, the “Purchaser Indemnitees” and, together with the
Seller Indemnitees, the “Indemnitees”) from and against any and all Losses arising out of or
resulting from (a) the Excluded Items; (b) the failure of any of the representations or warranties
made by Seller in Article III to be true and correct; (c) Purchaser Indemnified Taxes or (d) the
failure of Seller to perform any of its covenants or obligations under this Agreement.

     8.3 Limitations and Other Indemnity Claim Matters. Notwithstanding anything to the contrary in this Agreement, the following terms shall apply to
any claim for monetary damages arising out of this Agreement or related to the transactions
contemplated hereby:

          (a) In no event shall any Indemnitee be entitled to assert any Claim under Section 8.1(a) or
Section 8.2(b) unless such Claim is first made on or prior to the eighteen-month anniversary of the
Closing Date; provided, however, that such eighteen-month survival period shall not apply to any
Claim against Seller that arises from a breach of its representation in Sections 3.14 and 3.15 or
Purchaser Indemnified Taxes, which Claims may be asserted until the expiration of the statute of
limitations applicable thereto; and provided, further that such eighteen-month survival period
shall not apply to any Claim against Seller that arises from a breach of its representations in
Sections 3.1, 3.2, 3.3, 3.6, 3.7, 3.8 or 3.9 which Claims may be asserted indefinitely.

          (b) Nothing in this Agreement is intended by the Parties or shall be deemed or otherwise
construed to limit Purchaser’s ability to bring or

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recover
monetary damages for a fraud claim under
the U. S. Federal securities laws against Seller based on Seller’s Knowledge of a misstatement of a
material fact made by the Company through its representations and warranties contained in Article
III, as qualified by the Company’s disclosure schedules. Purchaser’s sole and exclusive remedy in
respect of any such fraud claim under the U.S. Federal securities laws against Seller shall be for
monetary damages and shall be capped at the Purchase Price.

          (c) The Parties agree that the obligations of Purchaser to indemnify Seller pursuant to
Section 8.1, on one hand, and Seller to indemnify Purchaser pursuant to Section 8.2, on the other
hand, shall become operative after the aggregate amount of all claims for indemnification under
Section 8.1 or Section 8.2, as applicable, exceeds Two Hundred Fifty Thousand and no/100 Dollars
($250,000.00) (the “Indemnification Basket”). Further, the aggregate maximum liability of
Purchaser to indemnify Seller pursuant to Section 8.1, on one hand, and Seller to indemnify
Purchaser pursuant to Section 8.2, on the other hand, shall not exceed Four Million and 00/100
Dollars ($4,000,000.00) (the “Indemnification Cap”); provided that any Losses arising out of or
resulting from any Purchaser Indemnified Taxes shall not be subject to such Indemnification Cap.

     8.4 Claim Procedures.

     (a) Each Indemnitee agrees that promptly after it becomes aware of facts giving rise to a
claim by it for indemnification pursuant to this Article VIII, such Indemnitee must assert its
claim for indemnification under this Article VIII (each, a “Claim”) by providing a written notice
(a “Claim Notice”) to the Person allegedly required to provide indemnification protection under
this Article VIII (each, an “Indemnitor”) specifying, in reasonable detail, the nature and basis
for such Claim (e.g., the underlying representation, warranty or covenant alleged to have been
breached). Notwithstanding the foregoing, an Indemnitee’s failure to send or delay in sending a
third party Claim Notice will not relieve the Indemnitor from liability hereunder with respect to
such Claim except to the extent the Indemnitor is prejudiced by such failure or delay.

     (b) In the event of the assertion of any third party Claim for which, by the terms hereof, an
Indemnitor is obligated to indemnify an Indemnitee, the Indemnitor will have the right, at such
Indemnitor’s expense, to assume the defense of same including the appointment and selection of
counsel on behalf of the Indemnitee so long as such counsel is reasonably acceptable to the
Indemnitee. If the Indemnitor elects to assume the defense of any such third party Claim, it shall
within 30 days notify the Indemnitee in writing of its intent to do so. Subject to Section 8.4(c),
the Indemnitor will have the right to settle or compromise or take any corrective or remediation
action with respect to any such Claim by all appropriate proceedings, which proceedings will be
diligently prosecuted by the Indemnitor to a final conclusion or settled at the discretion of the
Indemnitor. The Indemnitee will be entitled, at its own cost, to participate
with the Indemnitor in the defense of any such Claim. If the Indemnitor assumes the defense
of any such third-party Claim but fails to diligently prosecute such Claim, or if the Indemnitor
does not assume the defense of any such Claim, the Indemnitee may assume control of such defense
and in the event it is finally determined by a court of competent jurisdiction that the Claim was a
matter for which the Indemnitor is required to provide
indemnification under the terms of this Article X, the Indemnitor will bear the reasonable costs and expenses of such defense (including
fees and expenses of counsel).

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     (c) Notwithstanding anything to the contrary in this Agreement, the Indemnitor will not be
permitted to settle, compromise, take any corrective or remedial action or enter into an agreed
judgment or consent decree, in each case, that subjects the Indemnitee to any criminal liability,
requires an admission of guilt or wrongdoing on the part of the Indemnitee or imposes any
continuing obligation on or requires any payment from the Indemnitee without the Indemnitee’s prior
written consent.

     8.5 Sole Remedy. Indemnification as provided in this Article VIII shall be the sole and exclusive monetary remedy
of the Parties hereto with respect to any claims or damages arising from or related to this
Agreement and the transaction contemplated thereby, except for claims of fraud.

ARTICLE IX

GENERAL

     9.1 Entire Agreement; Successors and Assigns.

          (a) Except for documents and agreements executed pursuant hereto, this Agreement supersedes
all prior oral discussions and written agreements among the Parties with respect to the subject
matter of this Agreement (including the Letter of Intent dated May 3, 2007 and any other term sheet
or similar agreement or document relating to the transactions contemplated hereby). This Agreement,
including the exhibits and schedules hereto and other documents delivered in connection herewith,
contains the sole and entire agreement between the Parties hereto with respect to the subject
matter hereof.

          (b) All of the terms, covenants, representations, warranties and conditions of this Agreement
will be binding upon, and inure to the benefit of, and be enforceable by, the Parties and their
respective successors and permitted assigns (and in the case of indemnities to the benefit of all
persons indemnified). Nothing herein expressed or implied is intended or will be construed to
confer upon or to give any Person not a Party any rights or remedies under or by reason of this
Agreement, except for the indemnified parties expressly identified in this Agreement.

          (c) Neither this Agreement nor any of the rights, interests or obligations hereunder shall be
assignable by (i) the Company or Seller without the prior written consent of Purchaser or (ii)
Purchaser without the prior written consent of Seller.

     9.2 Specific Performance. Each Party acknowledges that the remedies at law of the Parties for a breach or threatened
breach of this Agreement would be inadequate and, in recognition of this fact, any Party, without
posting any bond, and in addition to all other remedies that may be available, shall be entitled to
obtain equitable relief in the form of specific performance, a temporary restraining order, a
temporary or permanent injunction or any other equitable remedy that may then be available.

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     9.3 Amendments. This Agreement may be amended, modified or superseded, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived, only by a written instrument
executed by Purchaser and Seller or, in the case of a waiver, by or on behalf of Purchaser (if
Purchaser is waiving compliance) or Seller (if Seller is waiving compliance). The failure of any
Party at any time or times to require performance of any provisions hereof will in no manner affect
the right at a later time to enforce the same. No waiver by any Party of any condition, or of any
breach of any term, covenant, representation or warranty contained in this Agreement, in any one or
more instances, will be deemed to be or construed as a further or continuing waiver of any such
condition or breach or a waiver of any other condition or of any breach of any other term,
covenant, representation or warranty.

     9.4 Notices. Unless otherwise provided herein, all notices, requests, consents, approvals, demands and other
communications to be given hereunder (collectively, “Notices”) will be in writing and will be
deemed given upon (a) confirmation of receipt of a facsimile transmission, (b) confirmed delivery
by a standard overnight carrier or when delivered by hand, (c) actual receipt or (d) the expiration
of four Business Days after the day when mailed by registered or certified mail (postage prepaid,
return receipt requested), addressed to the respective Parties listed below at the following
addresses (or such other address for a Party hereto as will be specified by like notice):

     If to Purchaser, to:

KOCH Entertainment LP

22 Harbor Park Drive

Port Washington, NY 11050

Attention: Michael Koch

Facsimile: 516-484-4981

with a copy to:

Vinson & Elkins L.L.P.

666 Fifth Avenue, 26th Floor

New York, NY 10103

Attention: Robert Seber

Facsimile: (212) 237-0100

     If to Seller, to:

Navarre Corporation

7400 49th Avenue North

New Hope, MN 55428

Attention: J. Reid Porter

Facsimile: (763) 504-1107

Navarre Entertainment Media, Inc.

Purchase and Sale Agreement

32

 

     with a copy to:

Winthrop & Weinstine, P.A.

225 South Sixth Street, Suite 3500

Minneapolis, MN 55402-4629

Attention: Scott J. Dongoske

Facsimile: (612) 604-6864

     9.5 Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF THAT WOULD CAUSE
THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION).

     9.6 Waiver of Jury Trial To the fullest extent permitted by law, each of the Parties hereto hereby irrevocably waives
all right to trial by jury in any action, proceeding or counterclaim arising out of or relating to
this Agreement or any of the transactions contemplated by this Agreement.

     9.7 Severability. In the event any of the provisions hereof are held to be invalid or unenforceable under
applicable Legal Requirements, the remaining provisions hereof will not be affected thereby. In
such event, the Parties hereto agree and consent that such provisions and this Agreement will be
modified and reformed so as to effect the original intent of the Parties as closely as possible
with respect to those provisions which were held to be invalid or unenforceable.

     9.8 Transaction Costs and Expenses. Seller, on the one hand, and Purchaser, on the other hand, will bear all of their own costs,
fees and expenses, if any, incurred by or on its behalf in connection with this Agreement, the
other Transaction Documents and the purchase and sale of the Shares. Seller will ensure that none
of the costs, fees and expenses for which it is responsible will be charged to the Company.

     9.9 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which will be
deemed an original, but all of which will constitute on agreement.

[Signature Pages Follow]

Navarre Entertainment Media, Inc.

Purchase and Sale Agreement

33

 

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

	 	 	 	 	 	 	 
	 	 	COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	NAVARRE ENTERTAINMENT MEDIA, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ J. Reid Porter
 

	 	 
	 	 	Name: J. Reid Porter	 	 
	 	 	Title: Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	SELLER:	 	 
	 
	 	 	 	 	 	 
	 	 	NAVARRE CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ J. Reid Porter
 

	 	 
	 	 	Name: J. Reid Porter	 	 
	 	 	Title: Executive Vice President and Chief Financial

Officer	 	 
	 
	 	 	 	 	 	 
	 	 	PURCHASER:	 	 
	 
	 	 	 	 	 	 
	 	 	KOCH ENTERTAINMENT LP	 	 
	 
	 	 	 	 	 	 
	 	 	By: Koch Entertainment GP LLC	 	 
	 	 	Its: General Partner	 	 

	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Michael Koch
 

	 	 
	 	 	Name: Michael Koch	 	 
	 	 	Title: Chief Executive Officer	 	 

Navarre Entertainment Media, Inc.

Purchase and Sale Agreement

Signature Page

 

 

EXHIBIT A

DEFINITIONS

     “Adjusted Working Capital” means, as of the Closing Date, an amount equal to (i) all accounts
payable which are payable to the Labels by the Company, including pre-paid advance balances and
return reserve balances, less (ii) the Inventory. Exhibit C sets forth a list of the net
accounts payable related to the Labels as of April 30, 2007.

     “Affiliate” means with respect to an entity, any other entity controlling, controlled by or
under common control with such entity. As used in this definition, the term “control,” including
the correlative terms “controlling,” “controlled by” and “under common control with,” means the
possession, directly or indirectly, of the power to direct or cause the direction of the management
or policies of an entity, whether through ownership of voting securities, by contract or otherwise.

     “Benefit Plans” means any “employee benefit plan”, within the meaning of Section 3(3) of
ERISA, and any bonus, deferred compensation, incentive compensation, stock and stock-based plan,
program or arrangement.

     “Business Day” means any day other than a Saturday, a Sunday or a day on which banks in New
York City are authorized or required by law to be closed.

     “Charter Documents” means, with respect to any Person, the certificate of incorporation,
articles of incorporation or association and by-laws, the limited liability company agreement, or
limited partnership agreement or other agreement or agreements that establish the legal personality
of such Person, in each case as amended to date.

     “COBRA” means Section 4980B of the Code, Part 6 of Title I of ERISA, similar provisions of
state law and applicable regulations relating to any of the foregoing.

     “Code” means the Internal Revenue Code of 1986, as amended, or any amending or superseding tax
laws of the United States of America.

     “Company Plans” means all Benefit Plans maintained, administered or contributed to, directly
or indirectly, by the Company.

     “Confidential Information” means any information relating to the Company’s business; provided,
“Confidential Information” shall not include any information that (a) was, at the time of
disclosure, in the public domain, (b) is published or otherwise becomes part of the public domain
through no fault of the disclosing Person, its employees or its representatives, (c) was already
known by, or in the possession of, a Person at the time of disclosure, provided that such Person
received the information in a lawful manner,
(d) was received from a third party who had a lawful right to disclose such information or (e)
was independently developed by a Person without reference to Confidential Information.

Navarre Entertainment Media, Inc.

Purchase and Sale Agreement

Exhibit A

 

 

     “Consolidated Group” means any affiliated, consolidated, combined, unitary or similar group
for Tax purposes of which Seller or the Company (or any predecessor thereof) is or was a member on
or prior to the Closing Date.

     “Contract” means any contract, commitment, lease, license, mortgage, bond, note or other
instrument evidencing indebtedness, or other legally binding agreement, and all amendments thereof,
but excluding any Permits.

     “Employee Pension Benefit Plan” has the meaning set forth in Section 3(2) of ERISA.

     “Employee Welfare Benefit Plan” has the meaning set forth in Section 3(1) of ERISA.

     “Environmental Laws” means all applicable U.S. federal, state, local and other Legal
Requirements (and administrative or judicial interpretations by any Governmental Entity having the
force and effect of Legal Requirements) relating to pollution or the protection of human health and
safety from the effects of pollution or the environment (which includes its ambient air, surface
water, ground water, land surface and subsurface strata), including but not limited to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the
Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et. seq. (“CERCLA”), Legal
Requirements relating to emissions, discharges, releases or threatened releases of Hazardous
Substances, or otherwise relating to the manufacture, processing, distribution, use, existence,
treatment, storage, disposal, arrangement for transport, arrangement for disposal, transport,
reporting or handling of Hazardous Substances, but not including zoning and land use laws.

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

     “ERISA Affiliate” means each Person that is or was required to be treated as a single employer
with the Company under Section 414 of the Code or Section 4001(b)(1) of ERISA.

     “Escrow Agent” means Wells Fargo Bank, N.A.

     “GAAP” means generally accepted accounting principles in the United States as promulgated by
the Financial Accounting Standards Board, or its predecessors or successors, as of the date of the
statement to which such term refers.

     “Governmental Entity” means any court, governmental department, commission, council, board,
agency, bureau or other instrumentality of the United States of America, any foreign jurisdiction,
or any state, provincial, county, municipality or local governmental unit thereof, including any
Taxing Authority.

     “Hazardous Materials” means any substance, pollutant, contaminant, or waste, or any
constituent of any such substance, pollutant, contaminant or waste, the use, handling, presence,
release or disposal of which is in any way regulated by or pursuant to any applicable Environmental
Law.

Navarre Entertainment Media, Inc.

Purchase and Sale Agreement

Exhibit A

 

 

     “Knowledge” means the actual knowledge, after due inquiry, of J. Reid Porter, Eric Paulson,
Robert Freese, Cary Deacon and Ryan Urness.

     “Labels” means certain independent music labels as set forth on Exhibit B in which the
Company has distribution and licensing agreements.

     “Legal Proceeding” means any judicial, administrative or arbitral actions, suits, hearings,
inquiries, investigations or other proceedings (public or private) before any Governmental Entity.

     “Legal Requirement” means all applicable laws (including, except as set forth in Section 3.12,
Environmental Laws), statutes, rules, regulations, codes, ordinances, Permits, bylaws, variances,
policies, judgments, injunctions, orders, guidelines, conditions and licenses of a Governmental
Entity having jurisdiction over the assets or the properties of any Party and the operations
thereof.

     “Lien” means any lien, claim, restriction, charge, mortgage, pledge, condemnation award,
expropriation award, encumbrance, hypothecation, lease, sublease, preferential purchase right,
option, conditional sales contract, security interest or encumbrance of any nature whatsoever.

     “Material Adverse Effect” means any circumstance involving a change in or effect on a Party’s
business (a) that is, or is reasonably likely in the future to be, individually or in the
aggregate, materially adverse to the business operations, earnings, results of operations, assets
or liabilities or the financial condition of such Party, other than changes or effects that are
generally applicable in the United States economy or the United States securities markets (provided
that such events, effects or changes do not effect such Party’s business in a disproportionate
manner), or (b) that is reasonably likely to prevent or materially delay or impair the ability of
the applicable Party to consummate the transactions contemplated by this Agreement.

     “Permits” means all of the permits, licenses, variances, exemptions, orders, franchises,
certificates and approvals of all Governmental Entities necessary to conduct the
Company’s business in compliance with all Legal Requirements.

     “Permitted Liens” means (i) statutory Liens for current Taxes or assessments, or other similar
governmental charges, not yet delinquent or the amount or validity of which is being contested in
good faith by appropriate proceedings and for which adequate reserves have been established in
accordance with GAAP, (ii) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or
other similar Liens arising or incurred in the ordinary course of business not yet delinquent or
the amount or validity of which is being contested in good faith by appropriate proceedings, (iii)
zoning, entitlement and other land use or
environmental regulations by any Governmental Entity that have not been materially violated;
(iv) Liens that represent purchase money security interests for personal property purchased in the
ordinary course of business; (v) Liens created by or arising out of the express terms of any Real
Property Lease, and (vi) such other Liens that would not, individually or in the aggregate,
reasonably be expected materially and adversely to affect the value, marketability or continued use
(consistent with the historical use thereof) of the assets subject thereto.

Navarre Entertainment Media, Inc.

Purchase and Sale Agreement

Exhibit A

 

 

     “Person” means any natural person, corporation, company, partnership (general or limited),
limited liability company, trust or other entity.

     “Prohibited Transaction” has the meaning set forth in Section 406 of ERISA and Section 4975 of
the Code.

     “Purchaser Indemnified Taxes” means any and all Taxes together with any costs, expenses,
losses or damages (including court and administrative costs and reasonable legal fees and expenses
incurred in investigating and preparing for any audit, litigation or other proceeding) arising out
of or incident to the determination, assessment or collection of such Taxes (a) imposed on the
Company in respect of its income, business, property or operations or for which it may otherwise be
liable, with respect to (i) any taxable period or portion thereof ending on or prior to the Closing
Date or (ii) the portion of any Straddle Period ending on the Closing Date (determined in
accordance with Section 5.11(b)); (b) resulting from the breach of the representations and
warranties set forth in Section 3.15 or covenants set forth in Section 5.11; (c) of
any member of an affiliated, consolidated, combined or unitary group of which the Company (or any
predecessor of the Company) is or was a member on or prior to the Closing Date by reason of the
liability of the Company pursuant to Treasury Regulation Section 1.1502-6(a) of the Code or any
analogous or similar state, local or foreign law; (d) of any other Person for which the Company has
been liable as a transferee or successor, by contract or otherwise; (e) the Taxes following from
the deemed asset sale contemplated by this Agreement resulting from the making of the 338(h)(10)
Elections or (f) that are Transfer Taxes required to be paid by Seller pursuant to Section 5.11(f).

     “Purchaser’s Parent” means Earl Street Capital, Inc.

     “Purchaser Related Party” means Purchaser, any Affiliate of Purchaser and any other Person in
which Purchaser or any Affiliate thereof has a direct or indirect financial interest.

     “Release” means, with respect to any Hazardous Material, any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into
any surface or ground water, drinking water supply, soil, surface or subsurface strata or medium,
or the ambient air.

     “Responsible Officer” means with respect to any Person, any vice-president or more senior
officer of such Person.

     “Securities Act” means the Securities Act of 1933, as amended from time to time.

     “Straddle Period” means any Tax period that begins on or before the Closing Date and ends
after the Closing Date.

     “Subsidiary” means any corporation, partnership, limited liability company or other legal
entity of which the Company (either alone or together with any other Subsidiary) owns, directly or
indirectly, 50% or more of the stock or other equity or partnership interests the holders of which
are generally entitled to vote for the election of the board of
directors or other governing body
of such corporation or other legal entity or of which the Company controls the management.

Navarre Entertainment Media, Inc.

Purchase and Sale Agreement

Exhibit A

 

 

     “Tax” or “Taxes” means (i) any taxes and similar assessments imposed by any Taxing Authority,
including income, profits, gross receipts, net proceeds, alternative or add-on minimum, ad valorem,
value added, sales, use, real property, personal property (tangible and intangible), environmental,
stamp, leasing, lease, user, excise, duty, franchise, capital stock, transfer, registration,
withholding, social security (or similar), unemployment, disability, payroll, employment, fuel,
excess profits, occupational, premium, windfall profit, severance, actual or estimated, or other
similar charge, including any interest, penalty, or addition thereto, whether disputed or not, (ii)
all liability for the payment of any amounts of the type described in clause (i) as the result of
being (or ceasing to be) a member of an affiliated, consolidated, combined or unitary group (or
being included (or required to be included) in any Tax Return related thereto); and (iii) all
liability for the payment of any amounts as a result of an express or implied obligation to
indemnify or otherwise assume or succeed to the liability of any other person with respect to the
payment of any amounts of the type described in clause (i) or clause (ii).

     “Tax Benefit” means the reduction in the amount of Taxes that otherwise would have been paid
by any Indemnitee as result of incurring any Losses.

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

     “Taxing Authority” means, with respect to any Tax, the Governmental Entity or political
subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of
such Tax for such entity or subdivision, including any governmental or quasi-governmental entity or
agency that imposes, or is charged with collecting, social security or similar charges or premiums.

     “Termination Date” means June 30, 2007.

     “Transaction Documents” means, collectively, this Agreement, the Escrow Agreement, Transition
Services Agreement and all of the certificates, instruments and agreements required to be delivered
by the Parties at the Closing.

Navarre Entertainment Media, Inc.

Purchase and Sale Agreement

Exhibit A

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