Document:

fluid_8k-ex1001.htm

    Exhibit
      10.1

    
      

       

      

       

      

       

      

       

      STOCK
        PURCHASE AGREEMENT

       

      BY
        AND AMONG

       

      FLUID
        MEDIA NETWORKS, INC.

       

      (“BUYER”),

       

      TRUSONIC,
        INC.,

       

      (THE
        “COMPANY”),

       

      AND

       

      CERTAIN
        STOCKHOLDERS OF TRUSONIC, INC.

       

      (“SELLERS”)

       

      

       

      OCTOBER
        17, 2007

       

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      TABLE
        OF CONTENTS

      
        TABLE
          OF
          CONTENTS

        

        
          	
                  I.    
                      DEFINITIONS.

                	
                  1

                
	
                  1.01

                	
                  Certain
                    Definitions

                	
                  1

                
	
                  1.02

                	
                  Interpretation

                	
                  10

                
	 	 	 
	
                  II.      
                    SALE
                    AND TRANSFER OF SHARES; CLOSING

                	
                  10

                
	
                  2.01

                	
                  Sale
                    and Transfer of Shares

                	
                  10

                
	
                  2.02

                	
                  Purchase
                    Price

                	
                  10

                
	
                  2.03

                	
                  Closing

                	
                  12

                
	
                  2.04

                	
                  Closing
                    Deliveries

                	
                  12

                
	
                  2.05

                	
                  Option
                    holders

                	
                  13

                
	 	 	 
	
                  III.      
                    REPRESENTATIONS
                    AND WARRANTIES OF THE COMPANY AND SELLERS

                	
                  14

                
	
                  3.01

                	
                  Due
                    Organization; Subsidiaries; Etc.

                	
                  14

                
	
                  3.02

                	
                  Capitalization

                	
                  14

                
	
                  3.03

                	
                  Authorization;
                    Good Title Conveyed

                	
                  15

                
	
                  3.04

                	
                  Financial
                    Statements

                	
                  15

                
	
                  3.05

                	
                  No
                    Undisclosed Liabilities

                	
                  16

                
	
                  3.06

                	
                  Compliance
                    with Law; Licenses

                	
                  16

                
	
                  3.07

                	
                  No
                    Conflicts

                	
                  17

                
	
                  3.08

                	
                  Contracts

                	
                  18

                
	
                  3.09

                	
                  Legal
                    Proceedings; Orders

                	
                  20

                
	
                  3.10

                	
                  Taxes

                	
                  20

                
	
                  3.11

                	
                  Absence
                    of Certain Changes

                	
                  21

                
	
                  3.12

                	
                  Employee
                    Benefit Plans

                	
                  23

                
	
                  3.13

                	
                  Intellectual
                    Property

                	
                  25

                
	
                  3.14

                	
                  Environmental
                    Matters

                	
                  28

                
	
                  3.15

                	
                  Labor
                    Matters

                	
                  29

                
	
                  3.16

                	
                  Brokers
                    and Finders

                	
                  31

                
	
                  3.17

                	
                  Condition
                    and Sufficiency of Assets

                	
                  31

                
	
                  3.18

                	
                  Books
                    and Records

                	
                  31

                
	
                  3.19

                	
                  Real
                    Properties

                	
                  31

                
	
                  3.20

                	
                  Tangible
                    Property

                	
                  32

                
	
                  3.21

                	
                  Employees

                	
                  33

                
	
                  3.22

                	
                  Insurance

                	
                  33

                
	
                  3.23

                	
                  Banking
                    Relationships

                	
                  33

                
	
                  3.24

                	
                  Insolvency
                    Proceedings

                	
                  33

                
	
                  3.25

                	
                  Territorial
                    Restrictions

                	
                  33

                
	
                  3.26

                	
                  Customers

                	
                  34

                
	
                  3.27

                	
                  Suppliers

                	
                  34

                
	
                  3.28

                	
                  Distributors

                	
                  34

                
	
                  3.29

                	
                  Accounts
                    Receivable

                	
                  34

                
	
                  3.30

                	
                  Inventory

                	
                  34

                

        

        

        

        
          
            
            

          

          
            i

            
              

            

          

          
            
            

          

        

        

        
          	
                  3.31

                	
                  Transactions
                    with Certain Persons

                	
                  35

                
	 	 	 
	
                  IV.      
                    REPRESENTATIONS
                    AND WARRANTIES OF BUYER

                	
                  36

                
	
                  4.01

                	
                  Organization
                    of Buyer; Authorization

                	
                  36

                
	
                  4.02

                	
                  No
                    Conflicts

                	
                  36

                
	
                  4.03

                	
                  Legal
                    Proceedings; Orders

                	
                  36

                
	
                  4.04

                	
                  Brokers
                    and Finders

                	
                  37

                
	
                  4.05

                	
                  Investment
                    Intent, etc

                	
                  37

                
	 	 	 
	V.      
                  COVENANTS
                  AND AGREEMENTS OF SELLERS AND THE COMPANY	
                  37

                
	
                  5.01

                	
                  Release

                	
                  37

                
	
                  5.02

                	
                  Landmark
                    Loans

                	
                  38

                
	
                  5.03

                	
                  Elsberry
                    Bonus

                	
                  38

                
	
                  5.04

                	
                  Access
                    to Information

                	
                  38

                
	 	 	 
	
                  VI.      
                    INDEMNIFICATION;
                    REMEDIES

                	
                  38

                
	
                  6.01

                	
                  Survival
                    of Representations and Warranties

                	
                  38

                
	
                  6.02

                	
                  Indemnification
                    by Sellers

                	
                  38

                
	
                  6.03

                	
                  Indemnification
                    by Buyer

                	
                  39

                
	
                  6.04

                	
                  Procedures
                    for Indemnification

                	
                  39

                
	
                  6.05

                	
                  Indemnification
                    Limitations

                	
                  41

                
	
                  6.06

                	
                  Subrogation

                	
                  41

                
	
                  6.07

                	
                  No
                    Double Recovery

                	
                  41

                
	
                  6.08

                	
                  Treatment
                    of Indemnity Payments Between the Parties

                	
                  41

                
	
                  6.09

                	
                  Reduction
                    of Losses

                	
                  41

                
	 	 	 
	
                  VII.      
                    CERTAIN
                    TAX MATTERS

                	
                  42

                
	
                  7.01

                	
                  Filing
                    of Tax Returns

                	
                  42

                
	
                  7.02

                	
                  Tax
                    Contests

                	
                  42

                
	 	 	 
	
                  VIII.      
                    MISCELLANEOUS

                	
                  43

                
	
                  8.01

                	
                  Expenses

                	
                  43

                
	
                  8.02

                	
                  Public
                    Announcements

                	
                  43

                
	
                  8.03

                	
                  Appointment
                    of Seller Representative as Attorney-in-Fact

                	
                  43

                
	
                  8.04

                	
                  Successors

                	
                  43

                
	
                  8.05

                	
                  Further
                    Assurances

                	
                  44

                
	
                  8.06

                	
                  Waiver

                	
                  44

                
	
                  8.07

                	
                  Entire
                    Agreement; Amendment

                	
                  44

                
	
                  8.08

                	
                  Governing
                    Law

                	
                  44

                
	
                  8.09

                	
                  Consent
                    to Jurisdiction

                	
                  44

                
	
                  8.10

                	
                  Assignment

                	
                  44

                
	
                  8.11

                	
                  Notices

                	
                  44

                
	
                  8.12

                	
                  Headings

                	
                  45

                
	
                  8.13

                	
                  Counterparts

                	
                  45

                
	
                  8.14

                	
                  Schedules

                	
                  45

                

        

        

        

        
          
            
            

          

          
            ii

            
              

            

          

          
            
            

          

        

        
          	
                  8.15

                	
                  Severability

                	
                  45

                
	
                  8.16

                	
                  Advice
                    of Counsel

                	
                  45

                
	
                  8.17

                	
                  No
                    Third?Party Beneficiaries

                	
                  46

                

        

        

      Exhibits

      Exhibit
        A                      Form
        of Promissory Note

      Exhibit
        B                      Form
        of Security Agreement

      Exhibit
        C                      Form
        of Employment Agreement

      Exhibit
        D                      Form
        of Consulting Agreement

      Exhibit
        E                      Known
        Liabilities

      

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

      SCHEDULES

      

      [TO
        BE INSERTED]

      

      

      
        
          
          

        

        
          iv

          
            

          

        

        
          
          

        

      

      

      

      STOCK
        PURCHASE AGREEMENT

       

      This
        STOCK PURCHASE AGREEMENT (this “Agreement”) is made as of October 17,
        2007 by and among Fluid Media Networks, Inc., a Nevada corporation
        (“Buyer”), Trusonic Inc., a Delaware corporation (the “Company”),
        Joseph J. Tebo and the other Stockholders whose names appear on Schedule
        2.01
        attached to and made a part of this Agreement (each a “Seller” and
        collectively, “Sellers”).

       

      RECITALS

       

      WHEREAS,
        the Company owns and operates
        the Business (as defined in Section 1.01 below) with its principal place
        of
        business in California;

       

      WHEREAS,
        Sellers own 2,744,269.70
        shares of Common Stock, constituting one hundred percent (100%) of all of
        the
        issued and outstanding capital stock of the Company, and each of the Sellers
        has
        approved, and deems it advisable and in the best interests of such Seller,
        to
        consummate, the sale of 2,744,269.70 shares of Common Stock of the Company,
        constituting One Hundred Percent (100%) of the issued and outstanding capital
        stock of the Company, calculated on a fully diluted basis (collectively,
        the
“Shares”) to Buyer;

       

      WHEREAS,
        each of the Boards of
        Directors of Buyer and the Company has approved, and deems it advisable and
        in
        the best interests of its respective stockholders to consummate, the acquisition
        of the Shares by Buyer upon the terms and subject to the conditions set forth
        herein.

       

      AGREEMENT

       

      NOW,
        THEREFORE, in consideration of the foregoing and the mutual representations,
        warranties, covenants and agreements set forth herein, intending to be legally
        bound hereby, the parties hereto agree as follows:

       

      I.      
        DEFINITIONS.

       

      1.01           Certain
        Definitions.  For
        purposes of this Agreement, the following terms shall have the following
        meanings:

       

      “Accounts
        Receivable” shall have the meaning set forth in Section 3.29.

       

      “Affiliate”
        of any Person shall mean a Person which directly or indirectly through one
        or
        more intermediaries, controls, or is controlled by, or is under common control
        with, such Person (whether by voting securities, contract or
        otherwise).

       

      “Agreement”
        shall have the meaning set forth in the Preamble.

       

      “Artists
        Guild” means any guild, union, or collective bargaining entity representing
        artists, performers, or other talent, including, without limitation, American
        Federation of Musicians, Songwriters Guild, American Federation of Television
        and Radio Artists, American Society of Media Photographers, Graphic Artists
        Guild, Writers Guild of America, and Screen Actors Guild.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      “Benefit
        Plans” shall have the meaning set forth in
        Section 3.12(a).

       

      “Business”
        means the business conducted by the Company of providing background music
        service for business locations worldwide.

       

      “Business
        Day” shall mean any day that is not a Saturday, Sunday or statutory holiday
        in the State of California.

       

      “Buyer”
        shall have the meaning set forth in the Preamble.

       

      “Buyer
        Indemnified Party” shall have the meaning set forth in Section 6.02.

       

      “CERCLA”
        shall mean the Comprehensive Environmental Response, Compensation and Liability
        Act of 1980, 42 U.S.C. § 9601 et seq., as amended and in effect as of the
        Closing Date.

       

      “Cleanup”
        shall mean all actions required by applicable Environmental Laws to investigate,
        remove, remediate, abate, neutralize, treat, dispose, prevent Releases or
        threatened Releases of Hazardous Substances, implement institutional or
        engineering controls, or conduct post-remedial monitoring and care in connection
        with the remediation of Hazardous Substances on real property.

       

      “Closing”
        shall have the meaning set forth in Section 2.03.

       

      “Closing
        Cash Consideration” shall have the meaning set forth in Section
        2.02(a)(ii).

       

      “Closing
        Date” shall mean the date and time as of which the Closing actually takes
        place.

       

      “Closing
        Date Net Working Capital” shall have the meaning set forth in Section
        2.02(c).

       

      “Closing
        Date Net Working Capital Statement” shall have the meaning set forth in
        Section 2.02(c).

       

      “COBRA”
        shall have the meaning set forth in Section 3.12(d).

       

      “Code”
        shall mean the Internal Revenue Code of 1986, as amended, and the rules and
        regulations promulgated thereunder.

       

      “Company”
        shall have the meaning set forth in the Preamble.

       

      “Common
        Stock” shall have the meaning set forth in Section 3.02(a).

       

      “Consulting
        Agreement” shall have the meaning set forth in Section 2.04(a)(v).

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

       

      “Contingent
        Employment Term” shall have the meaning set forth in Section
        2.02(d).

       

      “Contract”
        shall mean any agreement, arrangement, commitment, indemnity, indenture,
        instrument or lease, including any and all amendments, supplements, and
        modifications (whether oral or written) thereto, whether or not in
        writing.

       

      “Copyrights”
        means all (i) all copyrights, whether or not published,  protected or
        registered under the Copyright Act of 1909 or the Copyright Act of 1976 (as
        either shall be amended from time to time, and any predecessor or successor
        statute thereto), applications for registration of copyrights, all works
        of
        authorship, and all secondary and subsidiary rights therein; (ii) art,
        audiovisual works, animations, compilations, collective works, computer software
        and programs, data, databases, designs, emblems, films, film clips, graphics,
        images, illustrations, likenesses, literary works, logos, motion pictures,
        musical compositions, music videos, performances, photographs, pictorial
        works,
        song lyrics, sound clips, sound
        recordings,      scripts, screenplays, video
        recordings, and all other copyrightable subject matter; (iii) all renewals,
        derivative works, enhancements, improvements, modifications, updates, new
        releases or other revisions thereof; and (iv) publication rights, display
        rights, attribution rights, integrity rights, performance rights (including
        digital performance rights), mechanical rights, synchronization rights,
        publishing rights, approval rights, reproduction rights, rights to create
        derivative works, distribution rights, or moral rights.

       

      “Elsberry
        Bonus” shall mean that certain bonus due and owing to Ken Elsberry in the
        amount of Eighty Thousand Dollars ($80,000).

       

      “Employment
        Agreement” shall have the meaning set forth in Section 2.04(a)(v).

       

      “Environment”
        shall have the meaning assigned to that term under CERCLA.

       

      “Environmental
        Claim” means any claim, action, cause of action, investigation or written
        notice by any Person alleging potential liability (including, without
        limitation, potential liability for investigatory costs, Cleanup costs,
        governmental response costs, natural resources damages, property damages,
        personal injuries, or penalties) arising out of, based on or resulting from
        the
        presence or Release of any Hazardous Substances at any location currently
        or
        formerly owned, operated or leased by the Company or to which Hazardous
        Substances generated by the Company have migrated or been sent for
        disposal.

       

      “Environmental
        Condition” shall refer to any contamination or damage to the environment
        caused by or relating to the actual or threatened Release of Hazardous
        Substances by the Company or any other Person into the
        environment.  With respect to claims by employees, independent
        contractors or other third parties, Environmental Condition shall also include
        the exposure of persons to Hazardous Substances.

       

      “Environmental
        Laws” shall mean any state, federal or local laws, ordinances, codes,
        regulations, statutes, orders, judgments, decrees, permits or licenses relating
        to pollution, natural resources, protection of human health or the Environment,
        including, without limitation, laws and regulations relating to the use,
        treatment, storage, release, disposal or transportation of Hazardous Substances
        or the handling and disposal of medical and biological waste.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      “Environmental
        Noncompliance” means material violation of an Environmental
        Law.

       

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

       

      “ERISA
        Affiliate” shall mean with respect to any Person (i) any corporation
        which is a member of a controlled group of corporations, within the meaning
        of
        Section 414(b) of the Code, of which that Person is a member, (ii) any
        trade or business (whether or not incorporated) which is a member of a group
        of
        trades or businesses under common control, within the meaning of
        Section 414(c) of the Code, of which that Person is a member and
        (iii) any member of an affiliated service group, within the meaning of
        Section 414(m) and (o) of the Code, of which that Person or any entity
        described in clause (i) or (ii) is a member.

       

      “Final
        Note Maturity Date” shall mean the final maturity date of each Note, which
        date shall be two (2) years from the date each Note is issued.

       

      “Financial
        Statements” shall have the meaning set forth in Section
        3.04(a).

       

      “GAAP”
        shall mean United States generally accepted accounting principles.

       

      “Governmental
        Authority” shall mean any United States or foreign government or any agency,
        bureau, board, commission, court, department, official, political subdivision,
        tribunal or other instrumentality of any government, whether federal, state
        or
        local, domestic or foreign.

       

      “Hazardous
        Substances” shall mean (i) any hazardous or toxic waste, substance or
        material defined in any Environmental Law, (ii) asbestos-containing
        material, (iii)  medical and biological waste, (iv) polychlorinated
        biphenyls, (v) petroleum products, including gasoline, fuel oil, crude oil
        and constituents of such petroleum products and (vi) any other chemicals,
        materials or substances, exposure to which is prohibited, limited, or regulated
        by any Environmental Laws.

       

      “Indebtedness”
        means (i) all indebtedness for borrowed money or for the deferred purchase
        price
        of property or services (other than current trade liabilities incurred in
        the
        ordinary course of business and payable in accordance with customary practices),
        and (ii) any other indebtedness that is evidenced by a note, bond, indenture,
        debenture or similar instrument.

       

      “Indemnified
        Party” shall have the meaning set forth in Section 6.04(a).

      

      “Indemnifying
        Party” shall have the meaning set forth in Section 6.04
        (a).

       

      “Intellectual
        Property” shall have the meaning set forth in
        Section 3.13(a).

       

      “Intellectual
        Property” shall mean any Marks, Patents, Copyrights, Trade Secrets, Net
        Properties, methods, processes, proprietary information, protocols, schematics,
        specifications, software, software code (in any form, including source code
        and
        executable or object code), algorithms, databases, diagrams, drawings, formulae,
        techniques, user interfaces, and other forms of technology (whether or not
        embodied in any tangible form and including all tangible embodiments of the
        foregoing, such as instruction manuals, laboratory notebooks, prototypes,
        samples, studies and summaries), owned or used by the Company in the
        Business.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      “Intellectual
        Property Rights”  shall mean all past, present, and future rights
        of the following types, which may exist or be created under the laws of any
        jurisdiction in the world: (A) Marks, Patents, Copyrights, Trade Secrets,
        Net
        Properties; and (B) all rights in or relating to registrations, renewals,
        extensions, combinations, divisions, and reissues of, and applications for,
        any
        of the rights referred to in clause (A), owned, used or held by the Company
        in
        the Business.

       

      “Interim
        Balance Sheet” shall have the meaning set forth in
        Section 3.04(a)(iii).

       

      “Inventory”
        shall mean all quantities of inventory, including raw materials,
        work-in-process, finished goods (whether or not in the possession of the
        Company
        or Sellers), consigned inventory, replacement and component parts, materials,
        supplies and packaging items.

       

      “Knowledge,”
        shall mean the knowledge of each Seller and each of the officers and directors
        of the Company after diligent inquiry.

       

      “Known
        Liabilities” shall mean the matters set forth on Exhibit E
        hereto.

       

      “Landmark
        Loans” shall mean all Indebtedness arising from that certain: (i) Business
        Loan Agreement dated as of January 25, 2006, by and between the Company as
        borrower and Landmark National Bank as lender, in the original principal
        amount
        of One Hundred Fifty Thousand Dollars ($150,000), and (ii) that certain Business
        Loan Agreement dated as of June 21, 2004, by and between the Company as borrower
        and Landmark National Bank as lender, in the original principal amount of
        Two
        Hundred Fifty Thousand Dollars ($250,000).

       

      “Law”
        shall mean any constitutional provision or any statute or other law, rule
        or
        regulation of any Governmental Authority and any decree, injunction, judgment,
        order, ruling, assessment or writ.

       

      “Leased
        Real Property” shall have the meaning set forth in Section 3.19.

       

      “Leased
        Tangible Property” shall have the meaning set forth in Section 3.20(b).

       

      “Leases”
        shall have the meaning set forth in Section 3.19.

       

      “Legal
        Proceeding” shall mean any action, suit, litigation, arbitration, proceeding
        (including any civil, criminal, administrative, investigative or appellate
        proceeding), hearing, inquiry, audit, examination or investigation commenced,
        brought, conducted or heard by or before any court or other Governmental
        Authority or any arbitrator or arbitration panel.

       

      “Licenses”
        shall mean all licenses, permits, authorizations, approvals, consents and
        waivers issued, granted, given or otherwise made available by or under the
        authority of any Governmental Authority or pursuant to any Law.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      “Lien”
        shall mean any lien, pledge, mortgage, deed of trust, security interest,
        claim,
        lease, charge, option, adverse claim, right of first refusal, easement,
        servitude, encroachment or other survey defect, transfer restriction or other
        encumbrance of any nature whatsoever (including without limitation, any claims
        of spouses under applicable community property laws).

       

      “Loss”
        or “Losses” means any claim, liability, shortage, damage, diminution in
        value, settlement, deficiency, expense (including reasonable attorneys' and
        accountants' fees), assessment, Tax, or loss of any kind.

       

      “Marks”
        means all names, all assumed fictional business names, trade names, registered
        and unregistered trademarks and service marks, logos, brand names, product
        names, slogans, and any trademark or service mark application therefore and
        all
        associated goodwill.

       

      “Material
        Adverse Effect” shall mean, with respect to any entity or group of entities,
        any event, circumstance, condition, change, occurrence, fact or effect that,
        individually or in the aggregate, is reasonably expected to be materially
        adverse to the condition (financial or otherwise), properties, assets,
        liabilities, business, operations, or results of operations of such
        entity.

       

      “Material
        Contract” shall mean any Contract required to be listed in
Schedule 3.08(a).

       

      “Minimum
        Net Working Capital” shall mean One Hundred Eighty Thousand Dollars
        ($180,000).

       

      “Music
        Contracts” shall have the meaning set forth in Section
        3.08(a)(i).

       

      “Music
        Rights Holder” means any record label, music publisher, songwriter, artist,
        photographer, or any other holder of any rights in any sound recording, musical
        composition, artwork (including album art, liner notes, and other collateral
        works), chart, music database or other Copyright.

       

      “Net
        Properties” means all internet web sites, URLs and internet domain
        names.

       

      “Net
        Working Capital” shall mean the excess of the Company’s current assets over
        the Company’s current liabilities, where the Company’s “current assets” are
        comprised of all of the Company’s cash, accounts receivable, inventory, current
        portion of notes receivable and prepaid expenses, and the Company’s “current
        liabilities” are comprised of trade payables, current portion of bank loans and
        current portion of accrued trade expenses (each determined in the same manner
        and using the same accounting methods, methodologies and principles applied
        in
        preparing the audited financial statements of the Company for the twelve
        (12)
        month period ended December 31, 2006).

      

      “Non-Competition
        Agreements” shall have the meaning set forth in Section
        2.04(a)(vii).

       

      “Note”
        and “Notes” shall have the meaning set forth in Section
        2.06(e).

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      “O’Neill”
        shall have the meaning set forth in Section 2.02(d).

       

      “Option”
        or “Options” shall have the meaning set forth in Section 2.05(a)
        hereof.

       

      “Option
        Holder” or “Option Holders” shall have the meaning set forth in
        Section 2.05(a)

       

      “Order”
        shall mean any award, decision, injunction, judgment, order, decree, ruling,
        writ, subpoena or verdict entered, issued, made or rendered by any Governmental
        Authority or by any arbitrator.

       

      “OSHA
        Laws” shall mean the Occupational Safety and Health Act, 29 U.S.C. §651 et
        seq., each state law corresponding thereto and all applicable laws, now or
        hereafter in effect relating thereto.

       

      “Owned
        Real Properties” shall have the meaning set forth in Section 3.19.

       

      “Owned
        Tangible Property” shall have the meaning set forth in Section 3.20(a).

       

      “Patents”
        means all patents, patent applications and extensions, continuations and
        renewals thereof and inventions and discoveries that may be
        patentable.

       

      “Performance
        Rights Society” means any performance rights society or clearinghouse
        concerning the performance, reproduction, display, or distribution of
        Copyrights, including, without limitation, American Society of Composers,
        Authors and Publishers (ASCAP), Broadcast Music, Inc. (BMI), Recording Industry
        Association of America (RIAA), The Society of European Stage Authors and
        Composers (SESAC), SoundExchange, Inc. and The Harry Fox Agency
        (HFA).

       

      “Permanent
        Disability” means that such person is unable to engage in any substantial
        gainful activity by reason of any medically determinable physical or mental
        impairment which can be expected to result in death or which has lasted,
        or can
        be expected to last, for a continuous period of not less than nine
        months.

       

      “Permitted
        Liens” shall mean:

       

      (i) mechanics’,
        processor’s, materialmen’s, carriers’, warehousemen’s, repairmen’s, landlord’s
        and similar Liens arising by operation of Law or arising in the ordinary
        course
        of business and securing obligations of the Company that are not overdue
        for a
        period of more than sixty (60) days or are being contested in good faith by
        appropriate proceedings diligently pursued, provided that, in the case of
        Liens being contested, provision for the payment of such Liens has been made
        on
        the books of the Company;

       

      (ii) Taxes
        which are not yet due or payable or are being contested in good
        faith.

       

      “Person”
        shall mean any individual, corporation, limited liability company, partnership,
        firm, joint venture, association, joint-stock company, trust, unincorporated
        organization, or other organization, whether or not a legal entity, and any
        Governmental Authority.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      “Preferred
        Stock” shall have the meaning set forth in Section 3.02(a).

       

      “Proprietary
        Rights Agreement” shall have the meaning set forth in Section 3.21.

       

      “Publicity
        Rights” shall mean all publicity rights or privacy rights (or waivers or
        quitclaims thereof) of any person or entity related thereto.

       

      “Purchase
        Price” shall have the meaning set forth in
        Section 2.02(a).

       

      “Related
        Person” shall mean with respect to a particular individual:

       

      (a) each
        other member of such individual’s Family;

       

      (b) any
        Person that is directly or indirectly controlled by such individual or one
        or
        more members of such individual’s Family;

       

      (c) any
        Person in which such individual or members of such individual’s Family hold
        (individually or in the aggregate) a Material Interest; and

       

      (d) any
        Person with respect to which such individual or one or more members of such
        individual’s Family serves as a director, officer, partner, executor, or trustee
        (or in a similar capacity).

       

      With
        respect to a specified Person other than an individual:

       

      (a) any
        Affiliate of such specified Person;

       

      (b) any
        Person that holds a Material Interest in such specified Person;

       

      (c) each
        Person that serves as a director, officer, partner, executor, or trustee
        of such
        specified Person (or in a similar capacity);

       

      (d) any
        Person in which such specified Person holds a Material Interest;

       

      (e) any
        Person with respect to which such specified Person serves as a general partner
        or a trustee (or in a similar capacity); and

       

      (f) any
        Related Person of any individual described in clause (b) or (c).

       

      For
        purposes of this definition, (a) the “Family” of an individual
        includes (i) the individual, (ii) the individual’s spouse and former
        spouses, (iii) any other natural person who is related to the individual or
        the individual’s spouse within the second degree, and (iv) any other
        natural person who resides with such individual, and (b) “Material
        Interest” means direct or indirect beneficial ownership (as defined in
        Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities
        or other voting interests representing at least fifty percent (50%) of the
        outstanding voting power of a Person or equity securities or other equity
        interests representing at least 50% of the outstanding equity securities
        or
        equity interests in a Person.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      “Release”
        and “Releases” shall have the meaning assigned to that term under
        CERCLA.

       

      “Releasee”
        and “Releasees” shall have the meaning set forth in Section 5.01.

       

      “Reports”
        shall have the meaning set forth in Section 3.14(g).

       

      “Representative”
        means, as to any Person, such Person’s Affiliates and its and their directors,
        officers, employees, agents, advisors (including without limitation, financial
        advisors, counsel and accountants) and direct and indirect controlling
        persons.

       

      “Requirement
        of Law” shall mean, as to any Person, the certificate or articles of
        incorporation and by-laws, partnership agreements, articles or certificate
        of
        formation or organization, limited liability company or operating agreement,
        or
        other organizational or governing documents of such Person, and any applicable
        law, treaty, ordinance, order, judgment, rule, decree, regulation, or
        determination of an arbitrator, court, or other Governmental Authority,
        including, without limitation, rules, regulations, orders, and requirements
        for
        permits, licenses, registrations, approvals, or authorizations, in each case
        as
        such now exist or may be hereafter amended and are applicable to or binding
        upon
        such Person or any of its property or to which such Person or any of its
        property is subject.

       

      “Returns”
        shall have the meaning set forth in Section 3.29.

       

       “Security
        Agreement” shall have the meaning set forth in Section
        2.02(a)(ii)

       

      “Seller
        Indemnified Party” shall have the meaning set forth in Section 6.03.

       

      “Seller
        Representative” shall have the meaning set forth in Section 8.03(a).

       

      “Sellers”
        shall have the meaning set forth in the Preamble.

       

      “Stockholders”
        shall mean the Sellers and all of the other holders of capital stock of the
        Company.

       

      “Shares”
        shall have the meaning set forth in the Recitals.

       

      “Straddle
        Period Taxes” shall have the meaning set forth in Section 6.02(b).

       

      “Tangible
        Property” shall have the meaning set forth in Section 3.20(d).

       

      “Tangible
        Property Leases” shall have the meaning set forth in Section 3.20(b).

       

      “Tax”
        or “Taxes” shall mean any and all taxes (whether Federal, state, local or
        foreign), including, without limitation, income, profits, franchise, gross
        receipts, payroll, sales, employment, use, property, withholding, excise,
        occupation, value added, ad valorem, transfer and other taxes, duties or
        assessments of any nature whatsoever, together with any interest, penalties
        or
        additions to tax imposed with respect thereto, imposed, assessed or collected
        by
        or under the authority of any Governmental Authority or payable pursuant
        to any
        tax-sharing agreement or any other contract relating to the sharing or payment
        of any such tax.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      “Tax
        Audits” shall have the meaning set forth in Section 7.02(a).

       

      “Tax
        Returns” shall mean any returns, (including any information returns),
        reports, statements, notices, claims for refund, forms or other documents
        or
        information (including any schedule or attachment thereto, and including
        any
        amendment thereto) filed with or submitted to, or required to be filed with
        or
        submitted to, any Governmental Authority in connection with the determination,
        assessment, collection or payment of any Tax or in connection with the
        administration, implementation or enforcement of, or compliance with, any
        legal
        requirement relating to any Tax.

       

      “Tebo”
        shall have the meaning set forth in Section 2.04(b)(vi).

       

      “Termination
        Event” shall have the meaning set forth in Section 2.02(d).

       

      “Transaction
        Documents” shall mean this Agreement, the Employment Agreements, the Note,
        the Security Agreement, and other documents related to the transactions
        contemplated by this Agreement.

       

      “Trade
        Secrets” means all know-how, trade secrets, confidential or proprietary
        information, data, customer lists, software, technical information, data,
        process technology, plans, drawings and blue prints and, including without
        limitation, any other information entitled to protection under Requirements
        of
        Law as a trade secret.

       

      “WARN
        Act” shall have the meaning set forth in Section 3.15(j).

       

      “Withholding
        Deficiency” shall have the meaning set forth in Section
        2.05(c).

       

      1.02           Interpretation.  The
        words “hereof,” “herein,” “hereby” and “hereunder,” and words of like import,
        refer to this Agreement as a whole and not to any particular
        Section hereof.  References herein to any Section or Schedule
        refer to such Section of, or such Schedule to, this Agreement, unless the
        context otherwise requires.  All pronouns and any variations thereof
        refer to the masculine, feminine or neuter gender, singular or plural, as
        the
        context may require.

       

      II.      
        SALE
        AND TRANSFER OF SHARES; CLOSING.

       

      2.01 Sale
        and Transfer of Shares.  Subject
        to the terms and conditions of this Agreement, at the Closing, Sellers will
        cause the Stockholders to sell, convey, assign, transfer and deliver to Buyer,
        and Buyer will purchase from each Stockholder, the number of Shares set forth
        opposite such Stockholder’s name on Schedule 2.01, which in the aggregate
        shall constitute One Hundred Percent (100%) of the issued and outstanding
        capital stock of the Company, calculated on a fully diluted basis, free and
        clear of all Liens.

       

      2.02 Purchase
        Price.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (a) The
        purchase price for the Shares (the “Purchase Price”) shall be payable as
        follows: 

       

      (i) An
        aggregate of Four Million Dollars ($4,000,000), of which Five Hundred Thousand
        Dollars ($500,000) has been deposited by Buyer into an escrow account (the
        “Escrowed Funds” and together with the balance of the foregoing cash
        payment, the “Closing Cash Consideration”), payable by Buyer to each
        Stockholder in such amounts and in accordance with Schedule 2.02(b);
        plus

       

      (ii) Two
        Million Dollars ($2,000,000) payable by delivery of one or more promissory
        notes, in substantially the form attached hereto as Exhibit A (each, a
“Note,” and collectively, the “Notes”), to each of the
        Stockholders in the amounts specified in Schedule 2.02(a), such Notes to
        be secured by Buyer’s assets pursuant to the security agreement (the “
        Security Agreement”), substantially in the form attached hereto at
Exhibit B.

       

      (b) At
        the Closing, the Closing Cash Consideration shall be paid by Buyer to each
        Stockholder or the Company, as applicable, by wire transfer of immediately
        available funds to the accounts specified by the Stockholders or the Company
        in
Schedule 2.02(b).  The parties acknowledge and agree that, as
        set forth more fully in Section 2.05 hereof, the Closing Cash Consideration
        otherwise payable to certain of the Stockholders will be paid directly to
        the
        Company in repayment of the Option Notes with any portion of the Closing
        Cash
        Consideration remaining after payment in full of the applicable Option Note,
        less any required withholdings, to be wired by the Company to the applicable
        Stockholder within three (3) business days of the Closing Date.

       

      (c) Net
        Working Capital Purchase Price Adjustment.  On the Closing Date,
        Seller Representative shall deliver to Buyer a statement (the “Closing Date
        Net Working Capital Statement”) prepared on a basis consistent with the
        Company's Interim Balance Sheet (as hereinafter defined), setting forth the
        Net
        Working Capital of Company as of the Closing Date (the “Closing Date Net
        Working Capital”), including the amount of cash (net of checks paid but
        uncleared), if any, to be delivered to the Company at Closing.  If the
        Closing Date Net Working Capital is less than the Minimum Net Working Capital,
        then the Closing Cash Consideration shall be decreased dollar-for-dollar
        by the
        amount, if any, by which the Closing Date Net Working Capital is less than
        the
        Minimum Net Working Capital.

       

      (d)
Additional
        Purchase Price
        Adjustment.  In the event that subsequent to the execution of the
        Employment Agreement but prior to the one (1) year anniversary of the date
        hereof (the “Contingent Employment Term”), Daniel K. O’Neill (“O’Neill”) either
        resigns as an employee of the Company (other than a resignation pursuant
        to
        Section 2.04(a)(ii)) or is terminated for Cause (as such term is defined
        in the
        Employment Agreement) (either, a “Termination Event”), then the principal amount
        under the Note issued to O’Neill shall be reduced as follows: (i) if any such
        Termination Event occurs on or prior to the six (6) month anniversary of
        the
        Closing Date, the first installment under the Note issued to O’Neill shall be
        deemed forfeited by O’Neill, and O’Neill shall have no right to receive the
        first installment under the Note issued to O’Neill; or (ii) if any such
        Termination Event occurs after the six (6) month anniversary of the Closing
        Date
        (but during the Contingent Employment Term), then the first installment under
        the Note issued to O’Neill shall be reduced to an amount equal to the product
        determined by multiplying the amount of the first installment otherwise payable
        to O’Neill under his Note (subject to any reductions pursuant to Article VI
        hereof) by a fraction, the numerator of which is the number of calendar days
        lapsed since the Closing Date and the date of the Termination Event and the
        denominator of which is three hundred sixty-five (365).

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      2.03 Closing.  The
        purchase and sale (the “Closing”) provided for in this Agreement will
        take place at the offices of Buyer’s counsel, Nixon Peabody, LLP, at The Gas
        Company Tower, 555 West Fifth Street, 46th Floor,
        Los
        Angeles, California 90013, on the date hereof or at such other time or on
        such
        other date or at such other place as may be mutually agreed by the
        parties.

       

      2.04 Closing
        Deliveries.  At
        the Closing:

       

      (a) Sellers
        will deliver to Buyer:

       

      (i) certificates
        representing the Shares, duly and validly endorsed (or accompanied by duly
        and
        validly executed stock powers) for transfer to Buyer;

       

      (ii) the
        written resignations of each of the officers and directors of the Company
        set
        forth on Schedule 2.04(a)(ii), effective as of the Closing
        Date;

       

      (iii) (A)
        a certificate of good standing issued by the Secretary of State of Delaware,
        and
        (B) a certificate of good standing issued by the Secretary of State of each
        of
        the jurisdictions where the Company is qualified or licensed to transact
        business as a foreign entity, as set forth on Schedule
        2.04(a)(iii)(B);

       

      (iv) written
        evidence reasonably satisfactory to Buyer that all fees, commissions, and
        charges of any broker, finder or investment banker engaged by the Company
        and
        any Seller in connection with the transactions contemplated by this Agreement
        have been or at the Closing will be paid in full, and the Company and Sellers
        have been released from any further obligations related thereto;

       

      (v) the
        employment agreement (“Employment Agreement”), in substantially the form
        set forth on Exhibit C between the Company and O’Neill, duly and
        validly executed by O’Neill;

       

      (vi) the
        consulting agreement (“Consulting Agreement”), in substantially the form
        set forth on Exhibit D between the Company and TEBOGROUP, Inc., duly and
        validly executed by the TEBOGROUP, Inc.

       

      (vii) written
        evidence that all of the Known Liabilities have been resolved to the
        satisfaction of Buyer in its sole and absolute discretion, provided, however,
        that if, notwithstanding the best efforts of Sellers and the Company, the
        Company and Sellers are unable to resolve any of the Known Liabilities prior
        to
        the Closing, Sellers shall fully cooperate with Buyer in resolving such Known
        Liabilities following the Closing Date, provided, however, that the Buyer
        shall
        consult with the Seller Representative regarding the continuing defense and
        settlement of each of the Known Liabilities, and that subsequent to the Closing,
        the Known Liabilities may not be settled without the joint written approval
        of
        the Buyer and the Seller’s Representative (provided, however, the consent of
        Seller’s Representative shall not be unreasonably withheld);

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      (viii) written
        consents of the parties set forth on Schedule 3.07, provided, however,
        that Buyer may proceed with the Closing without receipt of such written consents
        and without written waiver, the failure to provide such consents not being
        considered a breach by the Company or Stockholders of this
        Agreement.  After the Closing, Company and Stockholders will continue
        to use reasonable best efforts to obtain any consents not delivered at
        Closing.

       

      (ix) the
        Closing Date Net Working Capital Statement pursuant to Section
        2.02(c);

       

      (x) written
        evidence reasonably satisfactory to Buyer that any Related Party Agreements
        have
        been terminated and that the Company and Sellers have been released from
        any
        further obligations related thereto; and

       

      (xi) all
        other previously undelivered documents required to be delivered by Sellers
        or
        the Company to Buyer at or prior to the Closing in connection with the
        consummation of the transactions completed by this Agreement.

       

      (b) Buyer
        will deliver:

       

      (i) to
        each Seller and the Company, as applicable, the Closing Cash Consideration
        pursuant to Section 2.02(a)(i);

       

      (ii) to
        each Seller, the Notes pursuant to Section 2.02(a)(ii), duly and validly
        executed by the Buyer;

       

      (iii) to
        Sellers, the Security Agreement pursuant to Section 2.02(a)(ii), duly and
        validly executed by the buyer;

       

      (iv) to
        O’Neill, the Employment Agreement pursuant to Section 2.04(a)(v), duly and
        validly executed by the Company;

       

      (v) to
        TEBOGROUP, Inc., the Consulting Agreement pursuant to Section 2.04(a)(vi),
        duly
        and validly executed by the Company; and

       

      (vi) to
        Sellers and/or the Company, as applicable, all other previously undelivered
        documents required to be delivered by Buyer to Sellers or the Company at
        or
        prior to the Closing in connection with the consummation of the transactions
        completed by this Agreement.

       

      2.05 Option
        holders.  Immediately prior to the Closing Date, the Company had
        options outstanding representing Two Hundred Eight Thousand (208,000) shares
        of
        the Company’s Common Stock (each, an “Option” and collectively, the
“Options”).  On or before the Closing Date, each holder of an
        Option (each, an “Option Holder” and collectively, the “Option
        Holders”), has exercised his/her/its respective Option by delivering to the
        Company the exercise price for such Options or delivering to the Company
        a
        promissory note in an amount equal to the exercise price for the Common Stock
        subject to such Option (each, an “Option Note”).  Each Option
        Holder whose Option was exercised by executing and delivering an Option Note
        to
        the Company has authorized the repayment of such Option Note by instructing
        the
        Buyer to deliver to the Company at the Closing the Closing Cash Consideration
        otherwise payable to such Option Holder pursuant to Section 2.01
        hereof.  Upon receipt of such Closing Cash Consideration, the Company
        shall retain from such Closing Cash Consideration an amount equal to the
        principal amount of each Option Note in satisfaction of such Option Note
        and
        remit any portion of the Closing Cash Consideration remaining after payment
        of
        the Option Note to the respective Option Holder, less any required
        withholdings.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      III.      
        REPRESENTATIONS
        AND WARRANTIES OF THE COMPANY AND SELLERS.

       

      Except
        as
        set forth in the Disclosure Schedules to this Article III, the Company and
        Sellers hereby represent and warrant, as of the Closing Date, severally and
        not
        jointly, to Buyer as follows:

       

      3.01 Due
        Organization; Subsidiaries; Etc.

       

      (a) The
        Company is a corporation duly organized, validly existing and in good standing
        under the laws of the State of Delaware and has all necessary corporate or
        other
        power and authority:  (i) to conduct its Business in the manner
        in which it is currently being conducted and as proposed to be conducted;
        and
        (ii) to own and use its assets.

       

      (b) The
        Company is qualified or licensed to do business as a foreign entity, and
        is in
        good standing under the laws of all jurisdictions where the nature of its
        business requires such qualification.

       

      (c) The
        Company has no subsidiaries.  The Company does not directly or
        indirectly own and has not owned any securities or other interest of any
        other
        Person.  The Company is not and has not been a general partner of any
        general partnership, limited partnership or other Person or a participant
        in any
        joint venture or other similar arrangement.

       

      3.02 Capitalization.

       

      (a) The
        authorized capital stock of the Company consists of (i) nine million (9,000,000)
        shares of common stock, $0.00001 par value per share (“Common Stock”), of
        which 2,774,670 shares are issued and outstanding and (ii) one million
        (1,000,000) shares of preferred stock, $0.00001 par value per share
        (“Preferred Stock”), none of which are issued and
        outstanding.  The Shares comprise all of the issued and outstanding
        capital stock of the Company.  Sellers are the record and beneficial
        owners and holders of all of the Shares.

       

      (b) Each
        Seller represents, severally and not jointly, that at the Closing such Seller’s
        Shares shall be free and clear of all Liens other than transfer restrictions
        under federal and state securities laws.  No Seller owns any
        securities issued by, or other obligations of, the Company other than those
        listed on Schedule 2.01 or contemplated by this Agreement or another
        Transaction Document.  No legend or other reference to any purported
        Lien appears upon any certificate representing capital stock or other equity
        securities of the Company other than transfer restrictions under federal
        and
        state securities laws.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      (c) The
        Shares have been duly authorized and validly issued, are fully paid and
        nonassessable, and were issued in compliance with all applicable federal
        and
        state securities laws, and upon transfer to Buyer, shall be free of restrictions
        on transfer other than restrictions imposed by applicable federal or state
        securities laws or by any other Transaction Documents.  Except as set
        forth on Schedule 3.02(c), there are no outstanding options, warrants,
        restricted stock agreements, rights (including conversion, exchange or
        preemptive rights), or agreements of any kind for the purchase or acquisition
        from the Company of any of its capital stock or other securities, or proxy
        or
        stockholder agreements or other agreements with respect to the voting of
        any of
        the Company’s capital stock or other securities, and the Company is under no
        obligation, nor has it granted any rights, to register any class of its capital
        stock or other securities.

       

      (d) On
        or before the Closing Date, all of the Company’s outstanding Options will have
        been exercised or terminated.  As such, on the Closing Date there
        shall be no outstanding Options to purchase any securities of the
        Company. 

       

      3.03 Authorization;
        Good Title Conveyed.

       

      (a) The
        Company and each Seller has all requisite power and authority to execute
        and
        deliver this Agreement, and any other Transaction Document to which it is
        a
        party, and to consummate the transactions contemplated hereby and thereby,
        and
        has taken all necessary corporate or other action to authorize the execution,
        delivery and performance of this Agreement and the other Transaction Documents
        to which it is a party.  This Agreement and the Transaction Documents
        have been duly and validly executed and delivered by the Company and each
        Seller
        party thereto and constitute the legal, valid and binding agreements of the
        Company and such Seller, enforceable against the Company and such Seller
        in
        accordance with their terms, except as such enforceability may be limited
        by
        applicable bankruptcy, moratorium, insolvency, reorganization, fraudulent
        conveyance or other Laws affecting the enforcement of creditors’ rights
        generally, by general equitable principles, including, without limitation,
        those
        limiting the availability of specific performance, injunctive relief and
        other
        equitable remedies.

       

      (b) The
        stock certificates and stock powers to be executed and delivered by Sellers
        to
        Buyer at the Closing will be valid and binding obligations of Sellers,
        enforceable in accordance with their respective terms, and will effectively
        vest
        in Buyer good, valid and marketable title to all the Shares to be transferred
        to
        Buyer pursuant to and as contemplated by this Agreement free and clear of
        any
        and all Liens other than transfer restrictions under state and federal
        securities laws.

       

      3.04 Financial
        Statements.

       

      (a) Schedule
        3.04 contains the following financial statements of the Company
        (collectively, the “Financial Statements”):

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      (i) The
        audited balance sheet of the Company as of December 31, 2006, and the related
        [audited] statements of operations, stockholders’ equity and cash flows for the
        fiscal year then ended (together with accompanying notes thereto);

       

      (ii) The
        audited balance sheet of the Company as of December 31, 2004 and 2005, and
        the
        related [audited] statements of operations, stockholders’ equity and cash flows
        for the fiscal years then ended (together with accompanying notes thereto);
        and

       

      (iii) The
        internally prepared balance sheet of the Company as of August 31, 2007 (the
        “Interim Balance Sheet”) and the related statements of operations,
        stockholders’ equity and cash flows for the period from January 1, 2007 through
        August 31, 2007.

       

      (b) The
        Financial Statements are consistent with the books and records of the Company,
        and fairly present in all material respects the financial condition, assets
        and
        liabilities of the Company as of the dates and periods indicated (subject
        to, in
        the case of interim financial statements, normal and customary year-end
        adjustments), and were prepared in accordance with GAAP (except as otherwise
        indicated therein or in the notes thereto).  The books and records of
        the Company, all of which have been made available to Buyer, are complete
        and
        correct and have been properly kept and maintained.

       

      3.05 No
        Undisclosed Liabilities.  The
        Company does not have any obligation or liability of any nature (whether
        known
        or unknown, matured or unmatured, fixed or contingent) which is required
        by GAAP
        to be listed as a liability or reserved for on its balance sheet in excess
        of
        Five Thousand Dollars ($5,000) other than those set forth in the Financial
        Statements or those that will be taken into account in the Closing Date Net
        Working Capital calculation.  All Indebtedness owed to the Company by
        any Seller or any Related Person of any Seller will be paid in full on or
        before
        the Closing Date.

       

      3.06 Compliance
        with Law; Licenses.

       

      (a) Except
        as set forth in Schedule 3.06(a):

       

      (i) the
        Company is in compliance in with, and immediately following the consummation
        of
        the transactions contemplated herein and in the Transaction Documents, will
        be
        in compliance with, each Law applicable to it and/or to the conduct or operation
        of its Business and its ownership and use of any of its assets, except where
        failure to so comply would not be reasonably expected to have a Material
        Adverse
        Effect;

       

      (ii) to
        the Knowledge of the Company and Sellers, no event has occurred or circumstance
        exists that (with or without notice or lapse of time) (A) would reasonably
        be expected to constitute or result in a violation by the Company of, or
        a
        failure on the part of the Company to comply with, any Law, or (B) would
        reasonably be expected to give rise to any obligation on the part of the
        Company
        to undertake, or to bear all or any portion of the cost of, any remedial
        action
        of any nature in any such case; and

       

      (iii) the
        Company has not received any written notice from any Governmental Authority
        or
        any other Person regarding (A) any actual, alleged, possible, or potential
        violation of, or failure to comply with, any Law, or (B) any actual,
        alleged, possible, or potential obligation on the part of the Company to
        undertake, or to bear all or any portion of the cost of, any remedial action
        of
        any nature.

       

      
        
          
          

        

        
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      (b) Schedule
        3.06(b) contains a complete and accurate list of each material License that
        is held by the Company.  Each License listed in Schedule
        3.06(b) is valid and in full force and effect, and the Company has delivered
        true, correct and complete copies of all such Licenses to
        Buyer.  Except as set forth in Schedule 3.06(b):

       

      (i) the
        Company is in compliance in all material respects with the terms and
        requirements of the Licenses identified in Schedule 3.06(b);

       

      (ii) no
        event has occurred or circumstance exists that may (with or without notice
        or
        lapse of time or both) (A) constitute or result directly or indirectly in a
        violation of or a failure to comply with any term or requirement of any License
        listed in Schedule 3.06(b), or (B) result, directly or
        indirectly, in the revocation, withdrawal, suspension, cancellation or
        termination of, or any material modification to, any License listed in
Schedule 3.06(b); and

       

      (iii) the
        Company has not received any written notice from any Governmental Authority
        or
        any other Person regarding (A) any violation of, or failure to comply with,
        any term or requirement of any License listed on Schedule 3.06(b), or
        (B) any revocation, withdrawal, suspension, cancellation or termination of,
        or material modification to, any License listed on Schedule
        3.06(b).

       

      The
        Licenses listed in Schedule 3.06(b) collectively constitute all of the
        Licenses necessary to permit the Company to lawfully conduct and operate
        its
        Business in the manner it currently conducts and operates such Business and
        to
        permit the Company to own and use its assets in the manner in which it currently
        owns and uses such assets.

       

      3.07 No
        Conflicts.

       

      (a) Except
        for the consents set forth on Schedule 3.07, no filing or registration
        with, or permit, authorization, consent or approval of, or notification to,
        any
        Governmental Authority or any third party is required by any Seller or the
        Company in connection with the execution, delivery and performance by the
        Company and Sellers of this Agreement or the consummation by Sellers and
        the
        Company of the transactions contemplated hereby.

       

      (b) The
        execution and delivery of this Agreement and the consummation by Sellers
        and the
        Company of any of the transactions contemplated hereby or in the Transaction
        Documents do not and will not directly or indirectly (with notice or without
        notice or lapse of time or both):

       

      (i) contravene,
        conflict with, or result in a violation of (A) any provision of the
        Certificate of Incorporation or bylaws of the Company, or (B) any resolution
        adopted by the board of directors or the stockholders of the
        Company;

       

      
        
          
          

        

        
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      (ii) contravene,
        conflict with, or result in a violation or an event which with notice or
        lapse
        of time or both would constitute a default under or give any Governmental
        Authority or other Person the right to challenge any of the transactions
        contemplated hereby or to exercise any remedy or obtain any relief under,
        any
        Law or any Order to which the Company or any Seller, or any of the assets
        owned
        or used by the Company, may be subject;

       

      (iii) contravene,
        conflict with, or result in a violation or event which with notice or lapse
        of
        time or both would constitute a default of any of the terms or requirements
        of,
        or give any Governmental Authority or any other Person the right to revoke,
        withdraw, suspend, cancel, terminate, or modify, any License that is listed
        on
Schedule 3.06(b);

       

      (iv) contravene,
        conflict with, or result in a violation, breach or an event which with notice
        or
        lapse of time or both would constitute a default of any provision of, or
        give
        any Person the right to declare a default or exercise any remedy under, or
        to
        accelerate the maturity or performance of, or to cancel, terminate or modify,
        any Material Contract; or

       

      (v) result
        in the imposition or creation of any Lien (other than a Permitted Lien) upon
        or
        with respect to any of the assets owned or used by the Company.

       

      3.08 Contracts.

       

      (a) Schedule 3.08(a)
        contains a complete and accurate list, and Sellers have delivered or made
        available to Buyer true, correct and complete copies of the following Contracts
        to which the Company is a party which will remain in effect after the Closing
        (each, a “Material Contract”) (for the avoidance of doubt, equipment or
        bank leases or loans and the agreements and documents evidencing such which
        are
        to be paid off in full at Closing shall not be Material Contracts
        hereunder):

       

      (i) Each
        Contract relating to the use, performance, reproduction, distribution, or
        other
        exploitation of sound recordings, musical compositions or works or the
        manufacture, advertisements, distribution and lease of programs embodying
        any of
        the foregoing (collectively, the “Music Contracts”);

       

      (ii) each
        Contract that is executory in whole or in part and involves the delivery of
        goods or materials by the Company, or the performance of services by the
        Company, the remaining unpaid balance of which is in excess of
        $5,000;

       

      (iii) each
        Contract that is executory in whole or in part and involves the delivery of
        goods or materials to the Company or the performance of services for the
        Company, the remaining unpaid balance of which is in excess of
        $5,000;

       

      (iv) each
        Contract that is executory in whole or in part and was not entered into in
        the
        ordinary course of business and that involves future expenditures or receipts
        by
        the Company in excess of $5,000;

       

      (v) each
        lease, rental or occupancy agreement, license agreement, installment and
        conditional sale agreement, and any other similar Contract, in each case,
        affecting the ownership of, leasing of, title to, use of, or any leasehold
        or
        other similar interest in, any real or personal property;

       

      
        
          
          

        

        
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      (vi) except
        for standard “shrink wrapped, off the shelf,” commercially available third-party
        software used by the Company, each licensing agreement or any other Contract
        with respect to the ownership or use of any Intellectual Property, including
        Contracts with current or former employees, consultants or contractors regarding
        the appropriation or the non-disclosure of any Intellectual
        Property;

       

      (vii) each
        collective bargaining agreement and any other Contract to or with any labor
        union or other similar employee representative of a group of employees of
        the
        Company;

       

      (viii) each
        joint venture or partnership agreement and any other similar Contract (however
        named) involving a sharing of profits or losses by the Company with any other
        Person;

       

      (ix) each
        Contract providing for payments to or by the Company based on a percentage
        of
        sales, purchases or profits, other than payments for goods and
        services;

       

      (x) each
        note, bond, indenture and other instrument and agreement evidencing, creating
        or
        otherwise relating to obligations for borrowed money and each guarantee of
        obligations for borrowed money;

       

      (xi) as
        of August 31, 2007, each purchase order exceeding $5,000 between the Company
        and
        any Person which will not be fulfilled prior to the Closing;

       

      (xii) each
        Contract that is executory in whole or in part and requires capital expenditures
        in excess of $5,000 by the Company;

       

      (xiii) all
        agreements containing covenants not to compete on the part of a Seller or the
        Company or otherwise restricting the ability of the Company or any Seller
        to
        engage in any aspect of the Business;

       

      (xiv) each
        Contract with any current or former employee, consultant, director or officer
        of
        the Company, or pursuant to which the Company has any liability to any current
        or former employee, consultant, officer or director, other than employee
        benefit
        plans and policies; and

       

      (xv) each
        Contract between the Company and any of its Affiliates.

       

      (b) Except
        as set forth in Schedule 3.08(b), each Material Contract is in full
        force and effect and is enforceable against the Company and, to the Knowledge
        of
        the Company and Sellers, the other party thereto in accordance with its terms
        (subject to bankruptcy, insolvency and other proceedings at law or in equity
        relating to the rights of creditors generally and by general equitable
        principles, including, without limitation, those limiting the availability
        of
        specific performance, injunctive relief and other equitable remedies and
        those
        providing for equitable defenses).

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      (c) The
        Company, and, to the Knowledge of the Company and Sellers, each other party
        to a
        Material Contract, is in material compliance with the terms and conditions
        of
        each Material Contract.  Except as set forth in
Schedule 3.08(c), neither the Company nor any Seller has received
        any written notice of, and has no Knowledge of, any actual or alleged breach
        or
        violation of, or default under, any Material Contract, and no event has occurred
        which, with the giving of notice or the lapse of time or both, would constitute
        a breach or violation of, or default under, any Material Contract on the
        part of
        the Company or, to the Knowledge of the Company and Sellers, on the part
        of any
        other party thereto.  Except as set forth on Schedule 3.08(c),
        the Company has made all Artists Guild, Performance Rights Society, Music
        Rights
        Holder, union, public performance and all other payments due under the Music
        Contracts.

       

      (d) To
        the Knowledge of the Company and Sellers, there are no renegotiations of
        or
        attempts to renegotiate any material amounts paid or payable to the Company
        under current or completed Material Contracts with any Person.

       

      (e) Except
        as set forth in Schedule 3.08(e), the Company has not been assessed or
        asked to pay any liquidated damages or any other type of damages, fines or
        penalties under any Material Contract since December 31, 2004.

       

      3.09 Legal
        Proceedings; Orders.  Except
        for the Known Liabilities and those matters set forth on Schedule 3.09,
        there are no Legal Proceedings (including, without limitation, any Legal
        Proceeding by any Governmental Authority) pending or, to the Knowledge of
        the
        Company and the Sellers, threatened against the Company or the properties
        or
        assets of the Company.  Except for the Known Liabilities, there are no
        Legal Proceedings (including, without limitation, any Legal Proceeding by
        any
        Governmental Authority) pending or, to the Knowledge of the Company and the
        Sellers, threatened against the Company or any Seller that challenge the
        validity or propriety of any of the transactions contemplated by this Agreement
        or any of the Transaction Documents or that challenge or question the legal
        right of the Company to conduct the operations of the Business as presently
        or
        previously conducted.  There are no other orders, decrees or
        settlement agreements to which the Company is a party except for the Known
        Liabilities.  Except for the Known Liabilities, there is no agreement
        (non-compete or otherwise), commitment, judgment, injunction, order or decree
        to
        which the Company or any Seller is a party or that otherwise would reasonably
        be
        expected to be binding upon any Seller, the Company, its assets or the Business
        which has or would reasonably be expected to have the effect of materially
        prohibiting or impairing the use of any of its assets or the operation of
        the
        Business by Buyer.  The Company and Sellers have not entered into any
        agreement under which the operations of the Business are restricted from
        selling, licensing or otherwise distributing any of its products to, or
        providing services to, customers or potential customers or any class of
        customers, in any geographic area, during any period of time or in any segment
        of the market.

       

      3.10 Taxes.  Except
        as set forth on Schedule 3.10: (i) the Company has timely and duly filed
        all Tax Returns required to have been filed by it; (ii) all such Tax Returns
        are
        true, accurate and complete; (iii) Sellers have delivered or made available
        to
        Buyer copies of, and Schedule 3.10 contains a complete and accurate list
        of, all such Tax Returns relating to income or franchise taxes filed since
        December 31, 2004; (iv) the Company has paid, or made provision in 

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      the
        Financial Statements for the payment of all Taxes that have or may
        have become
        due pursuant to those Tax Returns or otherwise, or pursuant to any assessment
        received by Sellers or the Company, except such Taxes, if any, as are listed
        in
Schedule 3.10 and are being contested in good faith by appropriate
        proceedings; (v) the Company is currently not the beneficiary of any extension
        of time within which to file any Tax Return; (vi) to the Knowledge of the
        Company and the Sellers, no claim has been threatened by a Governmental
        Authority in a jurisdiction where the Company does not file Tax Returns that
        either the Company is or may be subject to taxation by that jurisdiction;
        (vii)
        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; (viii) no unpaid Tax
        deficiency has been asserted or is pending against or with respect to the
        Company by any Tax authority; (ix) the Company has collected or withheld
        all
        amounts currently required to be collected or withheld by it for any Taxes,
        and
        all such amounts have been paid to the appropriate Governmental Authority
        or set
        aside in appropriate accounts for future payment when due; (x) the Company
        is in
        compliance with, and its records contain all information and documents currently
        necessary to comply with, all applicable information reporting and Tax
        withholding requirements; (xi) the balance sheets contained in the Financial
        Statements described in Section 3.04(a)(i) fully and properly reflect, as
        of the
        dates thereof, the liabilities of the Company for all accrued Taxes; (xii)
        for
        periods ending after the date of the most recent Financial Statements provided
        to Buyer, the books and records of the Company fully and properly reflect
        its
        liabilities for all accrued Taxes; (xiii) the Company has not granted and
        is not
        subject to, any waiver of the period of limitations for the assessment of
        Tax
        for any currently open taxable period; (xiv) the Company is not required
        to
        include in income any amount for an adjustment pursuant to Section 481 of
        the
        Code or the Regulations thereunder or any similar provision of Law; (xv)
        the
        Company is not a party to any Tax allocation or sharing agreement; (xvi)
        the
        Company (A) has not been a member of an affiliated group of corporations
        (within
        the meaning of Section 1504(a) of the Code) filing a consolidated federal
        income
        Tax Return and (B) has no any liability for the Taxes of any Person under
        Regulations Section 1.1502-6 (or any similar provision of state, local or
        foreign law), as a transferee or successor, by contract or otherwise; (xvii)
        the
        Company is not and has not been during the last five (5)-year period, a U.S.
        real property holding corporation within the meaning of Section 897 of the
        Code,
        and none of the Shares is a U.S. real property interest within the meaning
        of
        Section 897(c)(1) of the Code; (xviii) the United States federal and state
        Tax
        Returns of the Company have been audited by the relevant Governmental Authority
        or are closed by applicable statute of limitations for all taxable years
        through
        December, 31, 2006; (xix) the Company is not a party to any agreement, plan
        or
        arrangement, whether written or unwritten, that could result in the payment
        of
        any “excess parachute payments” within the meaning of Section 280G of the Code
        (or any corresponding provision of state, local or foreign tax law) as a
        result
        of the transactions contemplated by this Agreement; and (xx) the Company
        has not
        constituted either a “distributing corporation” or a “controlled corporation” in
        a distribution of stock qualifying for tax-free treatment under Section 355
        of
        the Code in the two years prior to the date of this Agreement or 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).

       

      3.11 Absence
        of Certain Changes. Except
        as set forth in Schedule 3.11, since August 31, 2007, the Company
        has conducted its Business only in the ordinary course of business consistent
        with past practice, and there has not been any:

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      (a) change
        in the Company’s authorized or issued capital stock or other equity securities;
        grant of any stock option or restricted shares or right to purchase shares
        of
        capital stock or other equity securities of the Company; issuance of any
        security convertible into such capital stock or other equity security; grant
        of
        any registration rights; purchase, redemption, retirement, or other acquisition
        by the Company of any shares of any such capital stock or other equity
        securities; or declaration or payment of any dividend or other distribution
        or
        payment in respect of shares of capital stock or other equity
        securities;

       

      (b) Material
        Adverse Effect, and to the Knowledge of the Company and Sellers no event,
        fact
        or circumstance has occurred that, individually or in the aggregate, would
        reasonably be expected to result in a Material Adverse Effect;

       

      (c) revaluation
        by the Company or any Seller of any of the Company’s assets, including without
        limitation, any write-offs, increases or decreases in any reserves or any
        write-up or write-down of the value of inventory, property, plant, equipment
        or
        any other property or any change in any assumptions underlying, or facts
        relating to, or methods of calculating, any bad debt, contingency or other
        reserves, except for normal depreciation in the ordinary course of business
        and
        consistent with past practice;

       

      (d) amendment
        to the Certificate of Incorporation or bylaws, or other organizational document,
        of the Company;

       

      (e) grant,
        payment or increase by the Company of any bonuses, salaries, or other
        compensation to any stockholder, director, officer, employee or independent
        contractor or entry into any engagement, employment, severance, change of
        control or similar Contract with any director, officer, employee or independent
        contractor other than any of the foregoing which is granted consistent with
        past
        practice or to a Contract in existence prior to December 31, 2006;

       

      (f) adoption
        of changes in the payments to or benefits under, any profit sharing, bonus,
        deferred compensation, savings, insurance, pension, retirement, or other
        employee benefit plan for or with any current or former employees, consultants
        or directors of the Company;

       

      (g) material
        delay or failure to pay or perform any current liability (including accounts
        payable) of the Company when due;

       

      (h) termination,
        amendment, modification or waiver of, or any breach, violation or default
        by any
        party that would reasonably be expected to have a Material Adverse Effect
        under,
        any Material Contract outside the ordinary course of business and consistent
        with past practice;

       

      (i) change
        in the conduct of the Business, including, without limitation, billing and
        collection practices, deferral of payment of liabilities, or any other activity,
        which may result in any current asset or current liability being reflected
        on
        the Company’s balance sheet in a manner either (A) inconsistent with the
        Company’s past practices and or (B) not otherwise in the ordinary course of
        business;

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      (j) forgiveness,
        waiver or agreement to extend repayment of any Indebtedness or other obligation
        owed by or to the Company;

       

      (k) disposition
        or lapse of any rights to use any proprietary right of the Company;

       

      (l) entry
        into, termination of, or receipt of notice of termination of (i) any
        license, distributorship, dealer, sales representative, joint venture, credit,
        or similar agreement, or (ii) any Contract or transaction involving a total
        remaining commitment by or to the Company of at least $10,000;

       

      (m) sale
        (other than sales of inventory in the ordinary course of business consistent
        with past practice), lease, or other disposition of any asset or property
        of the
        Company (including, without limitation, any Intellectual Property), other
        than
        in the ordinary course of business consistent with past practice, or mortgage,
        pledge, or imposition of any Lien (other than a Permitted Lien) on any asset
        or
        property of the Company;

       

      (n) cancellation
        or waiver of any claims or rights that would reasonably be expected to result
        in
        a Material Adverse Effect;

       

      (o) any
        change (other than any required change) in the accounting methods (including
        any
        change in depreciation or amortization policies or rates) by the Company
        or any
        revaluation by the Company or any of its assets;

       

      (p) material
        change in the federal, state or local Tax liability of the Company, other
        than
        as a result of this Agreement, the other Transaction Documents or the
        transactions contemplated hereby or thereby; or

       

      (q) agreement,
        whether oral or written, by the Company to do any of the foregoing (other
        than
        negotiations with Buyer and its representatives regarding the transactions
        contemplated by this Agreement).

       

      3.12 Employee
        Benefit Plans.

       

      (a) Schedule
        3.12(a) contains a true and complete list and summary of all employee
        benefit plans, programs, agreements, arrangements or payroll practices,
        including, without limitation, any “employee benefit plans” within the meaning
        of Section 3(3) of ERISA, any deferred compensation arrangements and bonus
        compensation plans or policies, all retirement, pension, profit sharing,
        bonus,
        severance pay, disability, health, vacation and sick leave benefits plans,
        stock-based incentive plans, employment or severance agreements, in any case,
        maintained or sponsored by or entered into by the Company or under which
        the
        Company may have any current or future liability (collectively, “Benefit
        Plans”).  With respect to any Benefit Plan, (i) no actions, suits
        or claims (other than routine claims for benefits in the ordinary course)
        are
        pending or, to the Knowledge of the Company and the Sellers, threatened,
        (ii) to
        the Knowledge of the Company and the Sellers, no facts or circumstances exist
        that would reasonably be expected to give rise to any such actions, suits
        or
        claims, (iii) no administrative investigation, audit or other administrative
        proceeding by the Department of Labor, the Pension Benefit Guaranty Corporation,
        the Internal Revenue Service or other Governmental Authorities are pending
        or,
        to the Knowledge of the Company and the Sellers, threatened, and (iv) all
        contributions and premiums required by law or by the terms of any Benefit
        Plan
        or any agreement relating thereto have been timely made.  Each of the
        Benefit Plans has been maintained, in all material respects, in accordance
        with
        its terms and all provisions of all applicable laws and regulations, and
        each
        Benefit Plan which is intended to be qualified within the meaning of Code
        section 401(a) is so qualified and is entitled to rely on an opinion letter
        issued by the Internal Revenue Service as to its qualification, and nothing
        has
        occurred, whether by action or failure to act, that would reasonably be expected
        to cause the loss of such qualification.

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      (b) With
        respect to each of the Benefit Plans, the Company has made available to Buyer
        true and complete copies of each of the following documents, as applicable
        and
        to the extent each exists:

       

      (i) a
        copy of the plan document (including all amendments thereto) for each written
        Benefit Plan or a written description of any Benefit Plan that is not otherwise
        in writing;

       

      (ii) a
        copy of the summary plan descriptions (including all summaries of material
        modifications to date) and other material communications to
        employees

       

      (iii) a
        copy of the most recent financial statement, actuarial report and annual
        Form
        5500 (including all accompanying schedules and attachments);

       

      (iv) if
        the Benefit Plan is funded through a trust or any other funding vehicle,
        a copy
        of the trust or other funding agreement (including all amendments thereto)
        and
        the latest financial statements thereof, if any;

       

      (v) all
        contracts relating to the Benefit Plans with respect to which the Company
        may
        have any liability, including insurance contracts, investment management
        agreements, subscription and participation agreements and record keeping
        agreements; and

       

      (vi) the
        most recent opinion letter received from the Internal Revenue Service with
        respect to each Benefit Plan that is intended to be qualified under Section
        401(a) of the Code.

       

      (c) Neither
        the Company nor any current or former ERISA Affiliate has ever maintained,
        sponsored or contributed to any Benefit Plan which is subject to Title IV
        of
        ERISA or Section 412 of the Code, and no event or fact exists which could
        give
        rise to any liability to the Company or any ERISA Affiliate under Title IV
        of
        ERISA or Section 412 of the Code.

       

      (d) Neither
        the Company nor any ERISA Affiliate maintains retiree life or retiree health
        insurance plans that provide for continuing benefits or coverage for any
        participant or any beneficiary of a participant except as may be required
        under
        the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
        (“COBRA”) or at the sole expense of the participant or any participant's
        beneficiary.  Each of the Company and any ERISA Affiliate that
        maintains a “group health plan” within the meaning of Section 5000(b)(1) of the
        Code has complied in all material respects with the notice and continuation
        requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle I of
        ERISA
        and the regulations thereunder.

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      (e) Except
        as set forth on Schedule 3.12(e), no Benefit Plan exists that, as a
        result of the transaction contemplated by this Agreement (either alone or
        in
        connection with another event), could result in the payment to any current
        or
        former employee or director of the Company of any money or other property
        or
        could result in the acceleration or provision of any other rights or benefits
        to
        any current or former employee or director of the Company.  No amounts
        payable under any Benefit Plan could fail to be deductible for federal income
        tax purposes by virtue of Code Section 280G.

       

      (f) The
        Company has at all times properly classified all individuals providing services
        to the Company as employees or independent contractors, as
        applicable.

       

      3.13 Intellectual
        Property.

       

      (a) Schedule
        3.13(a) contains a complete and accurate list and summary description,
        including any royalties and other consideration paid or received by the Company,
        and the Company has delivered or made available to Buyer accurate and complete
        copies, of all contracts or agreements relating to the Intellectual Property
        or
        the Intellectual Property Rights, except for any license implied by the sale
        of
        a product and perpetual, paid-up licenses for commonly available software
        programs with a value of less than Five Hundred Dollars ($500) under which
        the
        Company is the licensee. There are no outstanding and, to the Company’s
        Knowledge of Sellers and the Company, no threatened disputes or disagreements
        with respect to any such contract or agreement.

       

      (b) The
        Intellectual Property and Intellectual Property Rights include all those
        necessary or reasonably appropriate for the operation of the Company’s Business
        as it is currently conducted or anticipated to be conducted by the
        parties.  The Company is the owner or valid licensee of all right,
        title and interest in and to each of the Intellectual Property and Intellectual
        Property Rights, free and clear of all Liens, and has the right to use without
        payment to any Person all of the Intellectual Property and Intellectual Property
        Rights, other than in respect of licenses listed on Schedule 3.13(b)
        without payment to any third party (including, without limitation, any
        Performance Rights Society, Artists Guild, or other Music Rights
        Holder).  Except for the Known Liabilities, no Intellectual Property
        or Intellectual Property Rights have been or are now involved in any dispute,
        opposition, invalidation, arbitration, cancellation or Legal Proceeding and,
        to
        the Company’s Knowledge of Sellers and the Company, no such action is threatened
        with respect to any Intellectual Property or Intellectual Property Rights
        of the
        Company.  None of the Intellectual Property or Intellectual Property
        Rights of the Company is infringed or, to the Company’s Knowledge of Seller and
        the Company, has been challenged, interfered with or threatened in any
        way.

       

      (c) All
        former and current independent contractors, employees, directors and officers
        of
        the Company have executed valid and binding contracts with the Company that
        assign to the Company all rights to any inventions, improvements, discoveries,
        works of authorship or information or Intellectual Property or Intellectual
        Property Rights created or discovered by such independent contractors,
        employees, directors and officers of the Company in the course of engagement
        or
        employment or otherwise relating to or used in the Business of the
        Company.  No such independent contractor, employee, officer or
        director of the Company has entered into any contract, obligation, promise,
        commitment, undertaking or understanding (whether oral, written, express
        or
        implied) that restricts or limits in any way the scope or type of work in
        which
        such independent contractor, employee, officer, or director may be engaged
        or
        requires such independent contractor, employee, officer, or director to
        transfer, assign, or disclose information concerning his or her work to any
        party other than the Company.

       

      
        
          
          

        

        
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      (d) Schedule
        3.13(d) contains a complete and accurate list and summary description of all
        Patents (including identifying numbers and dates of filing and issuance)
        owned
        or used by the Company in the Business (the “Company
        Patents”).  All of the issued Company Patents are currently in
        compliance with formal legal requirements (including payment of filing,
        examination and maintenance fees and proofs of working or use), are valid
        and
        enforceable, and are not subject to any maintenance fees or taxes or actions
        falling due within one hundred eighty (180) days after the Closing
        Date.  Except as set forth on Schedule 3.13(d), no Company
        Patent has been or is now involved in any interference, reissue, reexamination,
        opposition or Legal Proceeding.  No Company Patent is infringed or, to
        the Company’s Knowledge of Sellers and the Company, has been challenged or
        threatened in any way and none of the products manufactured or sold, services
        provided nor any process or know-how used, by the Company infringes or is
        alleged to infringe any patent or other proprietary right of any other
        Person.

       

      (e) Schedule
        3.13(e) contains a complete and accurate list and summary description of all
        Marks (including, without limitation, identifying registration numbers,
        registration dates, application numbers, and filing dates) owned or used
        by the
        Company in the Business (the “Company Marks”).  All of the
        Company Marks that have been registered with the United States Patent and
        Trademark Office or any other Governmental Authority, are currently in material
        compliance with all formal Requirements of Law (including the timely
        post-registration filing of affidavits of use and incontestability and renewal
        applications), are valid and enforceable and are not subject to any maintenance
        fees or Taxes or actions falling due within one hundred eighty (180) days
        after
        the Closing Date.  No Company Mark has been or is now involved in any
        opposition, invalidation, cancellation or Legal Proceeding and, to the Company’s
        Knowledge, no such action is threatened with respect to any of the Company
        Marks. No Company Mark is infringed or, to the Company’s Knowledge of Sellers
        and the Company, has been challenged or threatened in any way. None of the
        Company Marks infringe or is alleged to infringe any trade name, trademark
        or
        service mark of any other Person.

       

      (f) Schedule
        3.13(f) contains a complete and accurate list and summary description of all
        Copyrights owned or used in the Business (the “Company
        Copyrights”).  All of the registered Company Copyrights are
        currently in compliance with formal Requirements of Law, are valid and
        enforceable, and are not subject to any maintenance fees or taxes or actions
        falling due within one hundred eighty (180) days after the date of
        Closing.  No Company Copyright has been or is now involved in any
        Legal Proceeding.  No Company Copyright is infringed or, to the
        Seller’s Knowledge, has been challenged or threatened in any
        way.  None of the subject matter of any of the Company Copyrights
        infringes or is alleged to infringe any copyright of any Person or is a
        derivative work based upon the work of any other Person.

       

      
        
          
          

        

        
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      (g) Schedule
        3.13(g) contains a complete and accurate list of all Publicity
        Rights.

       

      (h) Schedule
        3.13(h) contains a brief description of (1) any Trade Secret owned or used
        in the Business (the “Company Trade Secrets”), (2) any policies,
        procedures for recording Company Trade Secrets or intellectual property
        development, and (3) any Company Trade Secret that has been deposited into
        escrow for the benefit of another party, and if so, a description of the
        deposit.  With respect to each Company Trade Secret, the documentation
        relating to such Company Trade Secret is current, accurate and sufficient
        in
        detail and content to identify and explain it and to allow its full and proper
        use without reliance on the knowledge or memory of any
        individual.  The Company has taken all reasonable precautions to
        protect the secrecy, confidentiality and value of all the Company Trade Secrets
        (including the enforcement by the Company of a policy requiring each employee
        or
        contractor to execute proprietary information and confidentiality agreements
        substantially in the Company’s standard form, and all current and former
        employees and contractors of the Company have executed such an
        agreement).  The Company has good title to and an absolute right to
        use the Company Trade Secrets.  The Company Trade Secrets are not part
        of the public knowledge or literature and, to the Company’s Knowledge of Sellers
        and the Company, have not been used, divulged or appropriated either for
        the
        benefit of any Person (other than the Company) or to the detriment of the
        Company.  No Company Trade Secret has been or is now involved in any
        Legal Proceeding.  No Company Trade Secret is subject to any adverse
        claim or has been challenged or threatened in any way or infringes any
        intellectual property right of any other Person.

       

      (i) Schedule
        3.13(i) contains a complete and accurate list and summary description of all
        Net Properties owned or used in the Business (the “Company Net
        Properties”).  All Company Net Properties have been registered in
        the name of the Company and are in material compliance with all formal
        Requirements of Law.  No Company Net Properties have been or are now
        involved in any dispute, opposition, invalidation, arbitration, cancellation
        or
        Legal Proceeding and, to Company’s Knowledge of Sellers and the Company, no such
        action is threatened with respect to any Company Net Property.  None
        of the Company Net Properties is infringed or, to the Company’s Knowledge of
        Seller and the Company, have been challenged, interfered with or threatened
        in
        any way. None of the Company Net Properties infringe, interferes with or
        is
        alleged to interfere with or infringe the trademark, copyright, domain name
        or
        other intellectual property of any other Person.

       

      (j) The
        Company has designed, engineered, installed, and operated the Company’s Host
        Systems and instituted and enforced such policies and procedures with respect
        to
        the Company’s Host Systems, so that they are secure and to prevent unauthorized
        use or access.  To the Company’s Knowledge of Sellers and the Company,
        the Company’s Host Systems have not been compromised through unauthorized use or
        access. The Company has delivered to Buyer true, complete and current copies
        of
        any privacy policies that the Company has established for its Business or
        customers.  The Company is in material compliance with its privacy
        policies, as well as any other privacy requirements imposed on the Company
        or
        its Business by Governmental Authorities or Requirements of Law.

       

      
        
          
          

        

        
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      (k) The
        Company has used commercially reasonable methods to ensure that the Company’s
        Host Systems do not contain any malicious or surreptitious code or device,
        such
        as a virus, worm, time or logic bomb, disabling device, Trojan horse or other
        malicious or surreptitious code.

       

      (l) The
        Company has not used any third party software or work that is subject to
        an open
        source license (including the GNU Public License) or any “copyleft”, “freeware”
or similar license, the terms of which impose any restrictions on the Company’s
        use of any computer software owned or used by the Seller in the Business,
        or
        which in any way limit the Company’s ownership of and freedom to act regarding
        any Intellectual Property or Intellectual Property Right associated with
        such
        software or work that the Company has developed using or incorporating such
        third-party software or work.

       

      (m) The
        Company (a) complies with all applicable privacy laws and regulations regarding
        the collection, retention, use and disclosure of personal information, and
        (b) takes all appropriate and industry standard measures to protect and
        maintain the confidential nature of the personal information provided to
        the
        Company by individuals.  The Company has adequate technological and
        procedural measures in place to protect personal information collected from
        individuals against loss, theft and unauthorized access or
        disclosure.  The Company does not collect information from or target
        children under the age of thirteen.  The Company does not sell, rent
        or otherwise make available to third parties any personal information submitted
        by individuals.  Other than as constrained by applicable laws and
        regulations, the Company is not restricted in its use and/or distribution
        of
        personal information collected by the Company.

       

      3.14 Environmental
        Matters.  Except
        as set forth on Schedule 3.14:

       

      (a) The
        Company and each Leased Property is now and at all times during the past
        five
        (5) years has been in material compliance with all applicable Environmental
        Laws.  None of the Sellers or the Company has received any written or
        oral communication, whether from a Governmental Authority alleging that the
        Company is not in compliance or otherwise relating to any potential liability
        or
        violation under such Environmental Laws.

       

      (b) The
        Company has obtained all permits required under Environmental Laws that are
        required in connection with the conduct of the Business, all of which are
        sufficient in scope for the conduct of the Business as currently conducted,
        and
        are valid, subsisting and in full force and effect.  The Company is in
        material compliance with all terms and conditions of such environmental permits,
        and no action, suit or other proceeding which would reasonably be expected
        to
        result in the revocation or suspension or limitation of any such environmental
        permits is pending or threatened, and the Company has not engaged in any
        conduct
        which would reasonably be expected to cause the revocation or suspension
        or
        limitation of any such environmental permits.

       

      (c) There
        are no Environmental Claims pending or to the Knowledge of the Company and
        the
        Sellers threatened against the Company or, to the Knowledge of Sellers and
        the
        Company, against any Person whose liability for any Environmental Claim the
        Company has or may have retained either contractually or by operation of
        Law,
        under or relating to Environmental Laws, including, without limitation, those
        that involve or relate to Environmental Conditions, Environmental Noncompliance
        or Releases, of any Hazardous Substances on or from any real property
        constituting the Owned Real Properties, the Leased Real Property or any other
        real property or facility formerly owned, leased or used by the
        Company.

       

      
        
          
          

        

        
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      (d) To
        the Knowledge of the Company and Sellers, there are no past or present
        Environmental Conditions or Releases of any Hazardous Substances which are
        reasonably likely to form the basis of any Environmental Claim against the
        Company, or to the Knowledge of the Company and Sellers, against any Person
        whose liability for any Environmental Claim the Company has or may have retained
        or assumed either contractually or by operation of law.

       

      (e) The
        Company has not, and to the Knowledge of the Company and Sellers, no other
        Person has placed, stored, deposited, discharged, buried, dumped or disposed
        of
        Hazardous Substances in a manner that caused or is reasonably likely to have
        caused contamination requiring remediation pursuant to Environmental Law
        or
        damage to the environment or otherwise placed, stored, deposited, discharged,
        buried, dumped or disposed of any other wastes in violation of applicable
        Environmental Laws on any property currently or formerly owned, operated
        or
        leased by the Company, except for inventories of such substances to be used,
        and
        wastes generated therefrom, in the ordinary course of business of the Company
        (which inventories and wastes, if any, were and are stored or disposed of in
        compliance with all applicable Environmental Laws).

       

      (f) The
        Company has not assumed, contractually or, to the Knowledge of the Company
        and
        Sellers, by operation of law, any liabilities or obligations under any
        Environmental Laws.

       

      (g) The
        Company has delivered or otherwise made available for inspection to Buyer,
        true,
        complete and correct copies and results of any reports, studies, analyses,
        tests
        or monitoring (“Reports”) possessed or initiated by the Company
        pertaining to Hazardous Substances in, on, beneath or adjacent to any property
        currently or formerly owned, operated or leased by the Company, or regarding
        the
        Company's compliance with applicable Environmental Laws.  A list of
        all such Reports can be found in Schedule 3.14(g).

       

      (h) To
        the Knowledge of the Company and the Sellers, all properties owned, operated
        or
        leased by the Company do not contain any: underground storage tanks; asbestos;
        polychlorinated biphenyls; underground injection wells; radioactive materials;
        or septic tanks or waste disposal pits in which process wastewater or any
        Hazardous Substances may have been discharged or disposed.

       

      3.15 Labor
        Matters.  Except
        as set forth in Schedule 3.15:

       

      (a) Schedule
        3.15 sets forth the following information for all employees of the Company
        immediately prior to the Closing:  name, identifying code, job title,
        rate of pay, and date of hire, together with a description of each License,
        if
        any, held by each such Person that is material to the Business, as
        applicable.  To the extent any employee is on a leave of absence,
        Schedule 3.15 indicates the nature of such leave of absence and such employee’s
        anticipated date of return to active employment.  To the Knowledge of
        the Company, none of the employees listed on Schedule 3.15 has any plans
        or
        intends to terminate his or their employment or engagement, except as may
        be
        required pursuant to this Agreement or any of the Transaction
        Documents.  Upon termination of the employment of any employee of the
        Company, none of the Company or the Buyer will by reason of any action taken
        or
        not taken prior to the Closing be liable to any of such employees for severance
        pay or any other payments, except as may be required pursuant to this Agreement
        or the Transaction Documents;

       

      
        
          
          

        

        
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      (b) The
        Company is conducting and has for the past five (5) years conducted its Business
        in compliance in all material respects with all applicable Laws relating
        to
        employment or labor, including, without limitation, those Laws relating to
        wages, hours, collective bargaining, unemployment insurance, workers’
compensation, equal employment opportunity, OSHA Laws and the payment and
        withholding of Taxes.  Schedule 3.15 sets forth all expenses,
        obligations and liabilities relating to any claims by employees and former
        employees (including dependents and spouses) of the Company against the Company
        made since December 31, 2004, and the extent of any specific accrual on or
        reserve therefore set forth on the Financial Statements, for (i) costs, expenses
        and other liabilities under any workers compensation laws, requirements or
        programs and (ii) any other medical costs and expenses, other than under
        benefit
        plans provided by the Company.  Except as set forth on Schedule
        3.15, in the past 12 months, to the Knowledge of the Company and Sellers,
        no
        event has occurred and no claim or injury exists, which would reasonably
        be
        expected to give rise to a material claim by employees or former employees
        (including the dependents and spouses thereof) of the Company under any workers
        compensation laws, requirements or programs or for any other material medical
        costs and expenses.

       

      (c) There
        is no labor strike, slowdown, work stoppage or lockout in effect, or, to
        the
        Knowledge of the Company and the Seller, threatened against the Company,
        and the
        Company has not experienced any such labor controversy within the past three
        (3)
        years.  There is no union representation or organizing effort pending
        or threatened against the Company.

       

      (d) There
        is no charge or complaint pending against the Company before the Equal
        Employment Opportunity Commission, the Office of Federal Contract Compliance
        Programs or any similar state, local or foreign agency responsible for the
        prevention of unlawful employment practices.

       

      (e) The
        Company is not a party to, or otherwise bound by, any consent decree with,
        or
        citation by, any Governmental Authority relating to employees or employment
        practices.

       

      (f) Except
        as set forth in Schedule 3.15(f), the Company has paid in full all wages,
        salaries, commissions, bonuses and other direct compensation for all services
        performed by its employees and independent contractors, other than amounts
        that
        have not yet become payable in accordance with the Company’s customary
        practices.

       

      (g) Except
        as set forth in Schedule 3.15(g), no union or other collective bargaining
        unit has been certified as representing any of the employees of the Company,
        nor
        has the Company agreed to recognize any union or other collective bargaining
        unit.

       

      
        
          
          

        

        
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      (h) The
        Company has complied with the applicable provision of the Immigrations Reform
        and Control Act of 1986, Pub. L. 99-603, which makes it unlawful to hire,
        recruit or refer for a fee for employment, unauthorized aliens in the United
        States, and which requires employees to verify an employee’s identity and right
        to work in the United States through completion of Immigration and
        Naturalization Service Form I-9.  The Company has undertaken
        reasonable precautions as required by Law to ensure that its employees and
        independent contractors have complied will all applicable immigration
        laws.

       

      (i) Subject
        to Buyer’s compliance with Section 5.10, the Company is in material compliance
        with its obligations pursuant to the Worker, Adjustment and Retraining
        Notification Act of 1988 (“WARN Act”), and in compliance with all other
        notification and bargaining obligations arising under any collective bargaining
        agreement, statute or otherwise.  The Company has not received written
        notice of, and has no reason to believe that it may receive such notice,
        the
        intent of any federal, state, local or foreign agency responsible for the
        enforcement of employment laws to conduct an investigation of or relating
        to the
        Company with respect to the employment of its employees and no such
        investigation is in progress.

       

      3.16 Brokers
        and Finders.  Except
        as set forth in Schedule 3.16, no broker, finder, agent or similar
        intermediary has acted on behalf of the Company or and Seller in connection
        with
        this Agreement or any of the transactions contemplated hereby, and there
        are no
        brokerage commissions, finders’ fees or similar fees or commissions payable in
        connection therewith based on any Contract with Sellers or the Company or
        any
        action taken by Sellers or the Company.

       

      3.17 Condition
        and Sufficiency of Assets.
        The
        buildings, plants and equipment of the Company (including Leased Real Property)
        are in all respects in normal usable condition and repair, normal wear and
        tear
        excepted, and are suitable and adequate for the uses to which they are currently
        being put.  The buildings, plants and equipment of the Company are
        sufficient for the continued conduct of the Company’s Business after the Closing
        in substantially the same manner as conducted prior to the Closing.

       

      3.18 Books
        and Records.  The
        books of account, minute books, stock record books and other records of the
        Company are true, correct and complete and have been maintained in accordance
        with sound business practices, including the maintenance of an adequate system
        of internal controls.  The minute books of the Company contain true,
        correct and complete records of all meetings of, and corporate action taken
        by,
        the stockholders of the Company and the Company Board of Directors, and no
        meeting of any of the stockholders or the Company Board of Directors has
        been
        held for which minutes have not been prepared and are not contained in such
        minute books.  True, correct and complete copies of all minute books
        and all stock record books of the Company have heretofore been delivered
        to
        Buyer.

       

      3.19 Real
        Properties.  The Company does not own any real property (“Owned
        Real Property”) and has no option, right or other agreement to acquire any
        interests in any real property.  Schedule 3.19 contains a
        complete and correct list of all real property leases, warehouse leases,
        subleases, licenses and occupancy agreements pursuant to which the Company
        

       

      
        
          
          

        

        
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      is
        a
        lessor, lessee, sublessor, sublessee, licensor or licensee of real property,
        setting forth the address, landlord and tenant for each (the “Leased Real
        Property”).  The Company has delivered to Buyer correct and
        complete copies of each of the agreements set forth in Schedule
3.19, including all amendments thereto and all nondisturbance
        agreements in connection therewith.  Each lease, sublease, license or
        other agreement set forth in Schedule 3.19 (the “Leases”) is
        legal, valid, binding, enforceable in accordance with its terms (subject
        to
        bankruptcy, insolvency and other proceedings at law or in equity relating
        to the
        rights of creditors generally) and in full force and effect.  No party
        is in default, violation or breach in any material respect under any of the
        same, and to the Knowledge of Sellers and the Company, no event has occurred
        and
        is continuing thereunder that constitutes or, with notice or the passage
        of time
        or both, would constitute a default, violation or breach in any material
        respect
        thereunder.  All lessors under the Leases have consented to the
        consummation of the transactions contemplated hereby, to the extent that
        the
        applicable Lease requires such consent, without requiring any modification
        of
        any of the rights or obligations of the tenant under such Leases.  The
        Company has good and valid title to the leasehold estate under each lease,
        sublease, license or other agreement set forth in Schedule 3.19,
        free and clear of all Liens (other than Permitted Liens).  The Company
        or Sellers enjoys peaceful and undisturbed possession under the
        same.  

       

      3.20 Tangible
        Property.

       

      (a) Schedule 3.20(a)
        contains the Company’s depreciation ledger of all material machinery, equipment,
        fixtures, motor vehicles and other tangible personal property owned by the
        Company (collectively, the “Owned Tangible Property”).  Except
        as set forth in Schedule 3.20(a),
        the Company has good title to all Owned Tangible Property free and clear
        of all
        Liens (other than Permitted Liens).

       

      (b) Schedule 3.20(b)
        contains a list of (i) all material machinery, equipment, fixtures and
        other tangible personal property owned by a third party subject to any capital
        lease or rental agreement to which the Company is a party (collectively,
        the
“Leased Tangible Property”) and (ii) the leases of the Leased
        Tangible Property (the “Tangible Property Leases”).  Each of
        the Tangible Property Leases is in full force and effect and constitutes
        a valid
        and binding obligation of the Company and, to the Knowledge of Sellers and
        the
        Company, the other party thereto, enforceable in accordance with its terms
        (subject to bankruptcy, insolvency and other proceedings at law or in equity
        relating to the rights of creditors generally).

       

      (c) The
        Company has not received notice of, and no event has occurred and the Company
        and Sellers have no Knowledge of any facts or circumstances which (with the
        giving of notice or lapse of time or both) would constitute, a violation
        or
        breach of, or default under (beyond any applicable grace or cure period),
        any of
        the Tangible Property Leases on the part of the Company or, to the Knowledge
        of
        Sellers and the Company, on the part of any other party thereto.

       

      (d) All
        Owned Tangible Property and all Leased Tangible Property (collectively, the
        “Tangible Property”) is in normal and usable working condition, normal
        wear and tear excepted, and is suitable for the purposes for which it is
        used or
        is being replaced with suitable and appropriate tangible personal property
        in
        normal and usable working condition.

       

      
        
          
          

        

        
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      3.21 Employees.  Schedule
        3.15 set forth a true, correct and complete list of the names and current
        salaries of all of the employees of the Company.  No director or
        officer, or to the Knowledge of the Company and Sellers, no employee or
        independent contractor of the Company is a party to, or is otherwise bound
        by,
        any agreement or arrangement, including any confidentiality, noncompetition,
        or
        proprietary rights agreement, between such employee, independent contractor,
        officer or director and any other Person (“Proprietary Rights
        Agreement”), that in any way adversely affects (a) the performance of
        his or her duties as an employee, independent contractor, officer or director
        of
        the Company or (b) the ability of the Company to conduct its Business,
        including any Proprietary Rights Agreement with any Seller.  Except as
        set forth in Schedule 3.21 no Seller, and to the Knowledge of Sellers and
        the Company, no director, officer or other key employee or independent
        contractor of the Company currently intends to terminate his or her employment
        or relationship with the Company.  Except as set forth in Schedule
        3.21, the Company is not party to any employment agreement.

       

      3.22 Insurance.  There
        is in full force and effect one or more policies of insurance insuring the
        Company, the Owned Real Properties and the Leased Real Properties and the
        Business against such losses and risks and in such amounts as are usual and
        customary in the Business in relation to similarly sized companies engaging
        in
        the Business in the Company’s geographic
        location.  Schedule 3.22 contains a complete list of all
        of the Company’s policies of insurance in effect as of the date
        hereof.  All of such policies are in full force and effect and there
        is no default (beyond any applicable grace or cure period) with respect to
        any
        provision contained in any such policy, nor has there been any failure to
        give
        any notice or present any material claim under any liability policy in a
        timely
        fashion or in the manner or detail required by such liability
        policy.  The Company maintains, and for the last five (5) years, has
        maintained, workers compensation insurance, and, except as set forth in
Schedule 3.22, such workers compensation has been sufficient for the
        conduct of the Company’s Business.  The Company has delivered or made
        available copies of all such policies to Buyer.  Except as set forth
        in Schedule 3.22, there are no outstanding unpaid premiums or
        claims, and no retroactive or retrospective premium adjustments with respect
        to
        such policies, and no notice of cancellation or nonrenewal or refusal of
        coverage has been received by the Company or any Seller with respect to,
        any
        such policy.

       

      3.23 Banking
        Relationships.  Schedule 3.23
        sets forth the names, account numbers and locations of all banks, trust
        companies, savings and loan associations and other financial institutions
        at
        which the Company has a banking relationship.

       

      3.24 Insolvency
        Proceedings.  Neither
        the Company, any of the Shares nor any of the Company’s assets is the subject of
        any pending, rendered or, to the Knowledge of the Company, threatened insolvency
        proceedings of any character.  The Company has not made an assignment
        for the benefit of creditors or taken any action with a view to or that would
        constitute a valid basis for the institution of any such insolvency
        proceedings.  

       

      3.25 Territorial
        Restrictions.  The
        Company is not restricted by any written agreement or understanding with
        any
        other Person from carrying on the Business anywhere in the world, except
        for
        such restrictions of Governmental Authorities as are generally applicable
        to the
        industry in which the Company currently operates.

       

      
        
          
          

        

        
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      3.26 Customers.  Schedule  3.26
        sets forth the names and addresses of the ten (10) largest (based upon revenues)
        customers, contractors and other Persons from whom the Company derived revenues
        for the twelve (12) month periods ended December 31, 2006 and December 31,
        2005,
        and the amount for which each such customer, contractor or other Person was
        invoiced during such periods.  The Company has not received any
        written notice that any such customer, contractor or other Person set forth
        in
Schedule 3.27 has ceased, or will cease, to purchase or use products or
        services of the Company, or has substantially reduced, or will substantially
        reduce, the purchase or use of the products or services of the Company on
        or
        after the Closing Date.  The Company is current and in substantial
        compliance with respect to all of its obligations to all of its customers,
        contractors and each other Person from whom it derives revenues.

       

      3.27 Suppliers.  Schedule
        3.27 sets forth the name and address of each supplier, vendor or other
        provider of services to the Company from which the Company ordered raw
        materials, supplies and other goods and services in the aggregate amount
        of
        $15,000 or more in each of the twelve (12) month periods ended December 31,
        2006
        and 2005.  Neither the Company nor any Seller has received any written
notice that any such supplier, vendor or other provider of services has
        ceased, or will cease, to supply such raw materials, supplies or other goods
        or
        services to the Company on or after the Closing Date, or has substantially
        reduced, or will substantially reduce, the supply of such items or services
        to
        the Company on or after the Closing Date.  The Company is current and
        in substantial compliance with respect to all of its obligations to its
        suppliers, vendors and other providers of services.

       

      3.28 Distributors.  No
        distributor, contractor, broker, dealer, agent or representative, other than
        employees of the Company, has an oral or written agreement or understanding
        to
        sell or otherwise provide products or services of the Company.

       

      3.29 Accounts
        Receivable.  A
        complete and correct list of all accounts receivable of the Company as of
        August
        31, 2007 (“Accounts Receivable”) has been delivered to Buyer and sets
        forth the aging of such Accounts Receivable, a complete and correct copy
        of
        which is attached hereto as Schedule 3.29.  The Accounts
        Receivable and all accounts receivable since December 31, 2006 represent
        bona
        fide sales actually made or services actually performed on or prior to such
        date
        in the ordinary course of business of the Company and consistent with past
        practices.  Except as set forth in Schedule 3.29, to the
        Knowledge of the Company and the Sellers, there is no contest, claim or right
        of
        set-off contained in any oral or written agreement with any account debtor
        relating to the amount or validity of any Account Receivable, or any other
        account receivable created after December 31, 2006, other than returns, refunds
        or similar concessions granted in the ordinary course of business consistent
        with past practice (“Returns”), none of which, individually or in the
        aggregate, are material.  The Accounts Receivable and all accounts
        receivable since December 31, 2006 are valid and, to the Knowledge of Sellers
        and the Company, collectible at the recorded amounts thereof in the ordinary
        course of business of the Company, subject to Returns and reserves made in
        the
        ordinary course of business of the Company, none of which, individually or
        in
        the aggregate, are material.

       

      3.30 Inventory.  All
        Inventory reflected on the Financial Statements is of good, usable and
        merchantable quality.  Inventory maintained by the Company as of the
        Closing Date is or shall be (a) adequate for the conduct of the Business
        in the
        Company’s ordinary course, and (b) consistent with the Inventory levels and
        Inventory balance maintained by the Company as of 

       

      
        
          
          

        

        
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      December
        31, 2005 and 2006.  All Inventory is of such quality as to meet
        applicable governmental quality control standards and is recorded on the
        books
        of the Company at the lower of cost or market value determined in accordance
        with GAAP consistent with past practices.  All Inventory is located at
        either the principal place of business of the Company or at such other locations
        at which the Company is conducting business in the ordinary course consistent
        with past practice and all Inventory located at such other locations is
        reasonably expected to be sold in connection with the conducting of such
        business.  All finished goods Inventory is saleable in the ordinary
        course of business.  Purchase commitments for raw materials and parts
        are not in excess of normal requirements and are consistent with past practice
        and none were at a price materially in excess of market prices existing on
        the
        date such commitments were made.

       

      3.31 Transactions
        with Certain Persons.

       

      (a) Except
        as set forth on Schedule 3.31(a), no officer or director of the Company
        nor any Related Person of such individual is presently, or within the past
        three
        (3) years has been, a party to any transaction with the Company, including
        without limitation, any Contract, Lease or other arrangement (i) providing
        for
        the furnishing of services by (other than as officers, directors or employees
        of
        the Company); (ii) providing for the rental of real or personal property
        from;
        or (iii) otherwise requiring payments to (other than for services or expenses
        as
        directors, officers or employees of the Company in the ordinary course of
        business consistent with past practice) any such individual or any corporation,
        partnership, trust or other entity in which any such individual has an interest
        as a stockholder, officer, director, trustee or partner (excepting holdings
        solely for passive investment purposes of securities of publicly held and
        traded
        entities constituting less than five percent (5%) of the equity of any such
        entity) (“Related Party Agreements”).  The Company does not
        have outstanding any Contract or other arrangement or commitment with any
        Seller
        or any director or officer of the Company or with any Seller.

       

      (b) Except
        as set forth on Schedule 3.31(b) or pursuant to or under ay Transaction
        Document:  no Seller nor any officer or director of the Company owns
        or holds, directly or indirectly, any interest in (excepting holdings solely
        for
        passive investment purposes of securities of publicly held and traded entities
        constituting less than five percent (5%) of the equity of any such entity),
        or
        is an officer, director, employee or consultant of any Person that is, a
        competitor, lessor, lessee, customer or landlord of the Company or which
        conducts a business similar to the Business conducted by the
        Company.  No Seller nor any officer, member of management or director
        of the Company (i) owns or holds, directly or indirectly, in whole or in
        part,
        any the Intellectual Property used in the Business, (ii) has any Claim against
        the Company, except for claims for accrued payroll or vacation pay or accrued
        benefits under any Benefit Plan existing on the date hereof, (iii) owes any
        money to the Company or (iv) has any material interest in any property, real
        or
        personal, tangible or intangible, used in the Business.

       

      
        
          
          

        

        
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      IV.      
        REPRESENTATIONS
        AND WARRANTIES OF BUYER.

       

      Buyer
        hereby represents and warrants to the Company and Sellers as
        follows:

       

      4.01 Organization
        of Buyer; Authorization.

       

      (a) Buyer
        is a corporation duly organized, validly existing and in good standing under
        the
        Laws of the State of Delaware and has all necessary corporate or other power
        and
        authority to conduct its business in the manner in which it is currently
        being
        conducted.

       

      (b) Buyer
        has full corporate power and authority to execute, deliver and perform this
        Agreement and the other Transaction Documents to which it is a party, and
        to
        consummate the transactions contemplated hereby and thereby.  The
        execution and delivery by Buyer of this Agreement and the other Transaction
        Documents to which it is a party, and the performance by Buyer of its
        obligations hereunder and thereunder, have been duly and validly authorized
        by
        all necessary corporate action on the part of Buyer.  This Agreement
        and the other Transaction Documents to which it is a party have been duly
        and
        validly executed and delivered by Buyer and constitute the legal, valid and
        binding agreements of Buyer, enforceable against Buyer in accordance with
        their
        terms, except as such enforceability may be limited by bankruptcy, moratorium,
        insolvency, reorganization, fraudulent conveyance or other Laws affecting
        the
        enforcement of creditors’ rights generally, by general equitable principles,
        including, without limitation, those limiting the availability of specific
        performance, injunctive relief and other equitable remedies and those providing
        for equitable defenses or by applicable federal and state securities laws
        as
        they relate to the indemnification provisions set forth herein.

       

      4.02 No
        Conflicts.

       

      (a) Except
        for filings required to effect or arising in connection with consummating
        the
        transactions contemplated herein (including without limitation, filings required
        pursuant to federal and state securities laws), no filing or registration
        with,
        or permit, authorization, consent or approval of, or notification to, any
        Governmental Authority is required by Buyer in connection with the execution
        and
        delivery by Buyer of this Agreement and the other Transaction Documents to
        which
        it is a party and the consummation by Buyer of the transactions contemplated
        hereby and thereby.

       

      (b) The
        execution and delivery by Buyer of this Agreement and the consummation of
        any of
        the transactions contemplated hereby and thereby do not and will not, directly
        or indirectly (with or without notice or lapse of time or
        both):  (i) violate any provision of the Certificate of
        Incorporation or bylaws of Buyer, (ii)  violate, or be in conflict with, or
        constitute a default (or an event which, with notice or lapse of time or
        both,
        would constitute a default) under, any material Contract to which Buyer is
        a
        party, except for such material Contracts wherein the other party thereto
        has
        consented to the consummation of the transactions contemplated hereby or
        thereby, or (iii) violate any Law applicable to Buyer.

       

      4.03 Legal
        Proceedings; Orders.  There
        are no Legal Proceedings (including, without limitation, any Legal Proceeding
        by
        any Governmental Authority) pending or threatened against Buyer or its
        properties or assets, that challenge, or may have the effect of preventing,
        making illegal or otherwise interfering with, any of the transactions
        contemplated hereby.  Neither Buyer nor any of the assets owned or
        used by it is subject to any Order that could prevent, enjoin, alter or
        materially delay any of the transactions contemplated hereby.

       

      
        
          
          

        

        
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      4.04 Brokers
        and Finders.  Except
        as set forth on Schedule 4.04, no broker, finder, agent or similar
        intermediary has acted on Buyer’s behalf in connection with this Agreement or
        any of the transactions contemplated hereby, and there are no brokerage
        commissions, finders’ fees or similar fees or commissions payable in connection
        therewith based on any Contract with Buyer or any action taken by
        Buyer.

       

      4.05 Investment
        Intent, etc.  Buyer
        is acquiring the Shares for its own account and not with a view to their
        distribution within the meaning of Section 2(11) of the Securities Act of
        1933, as amended. Buyer understands that the Shares have not been
        registered for sale under any federal or state securities Laws and that the
        Shares are being sold to Buyer pursuant to an exemption from registration
        provided under such Laws; acknowledges that the representations and warranties
        set forth in this Section 4.05 are given with the intention that Sellers
        rely on
        them for purposes of claiming such exemption; understands that it must bear
        the
        economic risk of the Shares for an indefinite period of time as they cannot
        be
        sold unless subsequently registered under applicable federal and state
        securities Laws or unless an exemption from registration is available
        therefrom.

       

      Buyer
        has
        acquired sufficient information about the Company to reach an informed and
        knowledgeable decision to acquire the Shares pursuant to this Agreement;
        has
        sufficient knowledge and experience in financial and business matters so
        as to
        be capable of evaluating the merits and risks of acquiring the Shares; and
        is
        capable of bearing the economic risks of such investment.

       

      V.      
        COVENANTS
        AND AGREEMENTS OF SELLERS AND THE COMPANY

       

      5.01 Release.  Each
        Seller, on behalf of himself, herself or itself, and each of his, her or
        its
        Related Persons, hereby releases and forever discharges Buyer and the Company,
        and each of their respective individual, joint or mutual, past, present and
        future Representatives, Affiliates, stockholders, controlling persons,
        subsidiaries, successors and assigns (individually, a “Releasee” and
        collectively, “Releasees” ) from any and all claims, demands, Legal
        Proceedings, causes of action, Orders, Contracts, debts and liabilities,
        both at
        law and in equity, which such Seller, or any of his, her or its Related Persons,
        now has or has previously had against the respective Releasees arising
        contemporaneously with or prior to the Closing Date or on account of or arising
        out of any matter, cause or event occurring contemporaneously with or prior
        to
        the Closing Date; provided, however, that nothing contained herein shall
        operate
        to release any obligations of Buyer or the Company (a) arising on or after
        the
        Closing Date; (b) arising under this Agreement, under any other Transaction
        Document or under any other agreement, document, instrument or arrangement
        entered into on or after the Closing Date; (c) which are accrued payroll
        or
        employment compensation which are to be paid in normal intervals; (d) under
        any
        employee benefit plans provided in the ordinary course of business consistent
        with past practice; (e) under any indemnification provisions of the Company’s
        Certificate of Incorporation, bylaws, or director and officer insurance
        policies; or (f) which is a counter-claim or contribution claim in response
        to a
        claim asserted against a Seller under Article VI.

       

      
        
          
          

        

        
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      5.02 Landmark
        Loans.  The
        Buyer, the Company, O’Neill and Tebo shall use good faith efforts and endeavor
        to cause each of O’Neill and Tebo to be released as guarantors under the
        Landmark Loans, and all documents entered into in connection therewith, on
        the
        Closing Date or as soon as reasonably practicable thereafter.  In the
        event the parties are unable to cause O’Neill and/or Tebo to be released as
        guarantors under the Landmark Loans on or prior to fifteen  (15)
        calendar days after Closing Date, Buyer shall cause the Landmark Loans to
        be
        paid and satisfied in full.  Buyer hereby agrees to indemnify, defend
        and hold harmless each of Tebo and/or O’Neill pursuant to the provisions of
        Article VI from and against, and pay to O’Neill and/or Tebo, as applicable, any
        and all Losses (as such term is defined herein) of Tebo and/or O’Neill arising
        out of, relating to, or caused by any liability of Tebo and/or O’Neill under the
        Landmark Loans relating to any period after the Closing Date.

       

      5.03 Elsberry
        Bonus.  On or before the Closing Date, the Company shall cause the
        Elsberry Bonus to be paid to Ken Elsberry.

       

      5.04 Access
        to Information.  In order to facilitate the resolution of any
        claims made against or by Sellers or for any other reasonable purpose, Buyer
        shall (i) retain the records relating to the Company and the Business
        corresponding to periods prior to the Closing in a manner reasonably consistent
        with the prior practice of the Company and (ii) upon reasonable notice, afford
        the officers, employees, agents and representatives of Seller reasonable
        access
        during normal business hours to such books and records.

       

      VI.      
        INDEMNIFICATION;
        REMEDIES.

       

      6.01 Survival
        of Representations and Warranties.  Sellers’,
        the Company’s and Buyer’s representations and warranties shall survive for a
        period of twelve (12) months following the Closing Date; provided, however,
        that
        the representations and warranties contained in Sections 3.05, 3.07, 3.09,
        3.13
        and 4.03 shall survive for a period of eighteen (18) months; provided, further,
        that the representations and warranties contained in Section 3.10 shall survive
        for the applicable statute of limitations, plus an additional sixty (60)
        days;
        and provided further, that the representations and warranties contained in
        Sections 3.01, 3.02, 3.03 and 4.01 shall survive
        indefinitely.  Notwithstanding anything to the contrary contained
        herein, an Indemnified Party (as hereinafter defined) shall preserve his,
        her or
        its rights to bring any action with respect to a claim for indemnification
        hereunder by providing notice to the Indemnifying Party (as hereinafter defined)
        of such claim on or prior to the expiration of the survival period.

       

      6.02 Indemnification
        by Sellers.  Subject
        to the provisions of Section 6.05 hereof, Sellers shall severally and not
        jointly, pro rata in accordance with each Seller’s percentage interests in the
        aggregate principal amount of the Notes, indemnify, defend and hold harmless
        Buyer and each of its Affiliates (which, following the Closing, shall include
        the Company), and its and their respective directors, officers, employees,
        stockholders, partners, members, managers, agents and representatives (each,
        a
“Buyer Indemnified Party”) from and against, and pay to the Buyer
        Indemnified Parties:

       

      (a) any
        and all Losses, whether or not involving a third party claim, incurred by
        such
        Buyer Indemnified Party, in connection with, based upon, attributable to,
        arising from or as a result of: (i)
        the failure of any representation or
        warranty of the Sellers and or the Company contained in
        this Agreementto be true and correct as of the Closing Date (or as 

       

      
        
          
          

        

        
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      of
        an
        earlier date if a representation or warranty expressly states that it is
        being
        made as of an earlier date)  (provided, however, that each Seller’s
        obligation to indemnify Buyer Indemnified Parties and pay their reasonable
        costs
        and expenses for a breach such Seller of his, her or its representations
        and
        warranties contained in Section 3.02(b) shall be several to such Seller and
        shall not be offset pro rata against the Notes of the other Sellers); and
        (ii)
        any breach by any Seller or the Company of, or failure by any Seller or the
        Company to perform, any of its covenants or obligations contained in this
        Agreement; and (iii) any Known
        Liabilities; and

       

      (b) Any
        and all Losses arising out of, relating to (i) any Tax year beginning before
        and
        ending after the Closing Date (“Straddle Period Taxes”) to the extent
        allocable to the Sellers as provided for below, and (ii) any transfer, gains,
        documentary, sales, use, registration, stamp, value added or other similar
        Taxes
        payable by reason of the transactions contemplated by this Agreement (with
        respect to item (ii), to the extent any such Taxes arise from any tax treatment
        of the transaction inconsistent with a stock purchase
        transaction).  Straddle Period Taxes allocable to the Sellers shall be
        deemed to be (A) in the case of Taxes imposed on a periodic basis (such as
        real
        or personal property Taxes), 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 a fraction, the
        numerator of which is the number of calendar days in the straddle period
        ending
        on and including the Closing Date and the denominator of which is the number
        of
        calendar days in the entire relevant straddle period and (B) in the case
        of
        Taxes not described in (A) above (such as franchise Taxes, Taxes that are
        based
        upon or related to income or receipts, based upon occupancy or imposed in
        connection with any sale or other transfer or assignment of property (real
        or
        personal, tangible or intangible)), the amount of any such Taxes shall be
        determined based on an actual or hypothetical “closing of the books” as of the
        close of business on the Closing Date.

       

      6.03 Indemnification
        by Buyer. Buyer
        shall indemnify, defend and hold harmless Sellers and each of their Affiliates
        and their respective directors, officers, employees, stockholders, partners,
        members, managers, agents and representatives (each, a “Seller
        Indemnified Party”) from and against, and pay to the Seller Indemnified
        Parties:

       

      (a) any
        and all Losses, whether or not involving a third party claim, incurred by
        such
        Seller Indemnified Party, in connection with, based upon, attributable to,
        arising from or as a result of: (i) the failure of any representation or
        warranty of the Buyer contained in this Agreement to be true and correct
        as of
        the Closing Date (or as of an earlier date if a representation and warranty
        expressly states that it is being made as of an earlier date); and (ii) any
        breach by Buyer of, or failure by Buyer to perform, any of its covenants
        or
        obligations contained in this Agreement; and

       

      (b) Any
        and all Losses arising out of, relating to, or caused by any liability of
        the
        Company for any Taxes of the Company with respect to (i) any Tax year or
        portion
        thereof beginning after the Closing Date (“Post-Closing Period Taxes”),
        and (ii) the portion of Straddle Period Taxes not allocable to Sellers pursuant
        to Section 6.02(b).

       

      6.04 Procedures
        for Indemnification.  Except
        as provided in Section 7.02,
        the procedures for indemnification shall be as follows:

       

      
        
          
          

        

        
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      (a) The
        party claiming the indemnification (the “Indemnified Party”) shall
        promptly give notice to the party from whom the indemnification is claimed
        (the
“Indemnifying Party”) of any claim whether between the parties or brought
        by a third party against the Indemnified Party, specifying in reasonable
        detail
        (i) the factual basis for such claim and (ii) the amount of the
        claim.  If a claim relates to an action, suit, or proceeding filed by
        a third party against the Indemnified Party, such notice shall be given by
        the
        Indemnified Party to the Indemnifying Party promptly but in any event within
        five (5) Business Days after written notice of such action, suit, or proceeding
        shall have been given to the Indemnified Party.  Failure to give
        prompt notice shall not affect the indemnification obligations hereunder
        in the
        absence of actual prejudice.

       

      (b) Following
        receipt of notice from the Indemnified Party of a claim, the Indemnifying
        Party
        shall have thirty (30) days in which to make such investigation of the claim
        as
        the Indemnifying Party shall deem necessary or desirable.  For the
        purposes of such investigation, the Indemnified Party agrees to make available
        to the Indemnifying Party and or its authorized representative(s) the
        information relied upon by the Indemnified Party to substantiate the
        claim.  If the Indemnified Party and the Indemnifying Party agree at
        or prior to the expiration of said thirty (30) day period (or any agreed
        upon
        extension thereof) to the validity and amount of such claim, or if the
        Indemnifying Party does not respond to such notice, the Indemnifying Party
        shall
        immediately pay to the Indemnified Party the full amount of the claim, or,
        in
        the case of a Buyer Indemnified Party, may offset the amount of such claim,
        pro
        rata against the Notes, pursuant to the provisions set forth in Section
        6.05.

       

      (c) With
        respect to any third party claim as to which the Indemnified Party is seeking
        indemnification hereunder, the Indemnifying Party shall have the right at
        its
        own expense to participate in or, if it so elects, to assume control of the
        defense of such claim, and the Indemnified Party shall cooperate fully with
        the
        Indemnifying Party, subject to reimbursement for reasonable actual out-of-pocket
        expense (other than legal or other professional expenses) incurred by the
        Indemnified Party as the result of a request by the Indemnifying Party to
        so
        cooperate.  If the Indemnifying Party elects to assume control of the
        defense of any third-party claim, the Indemnified Party shall have the right
        to
        participate in (but not control) the defense of such claim at its own
        expense.  The Indemnifying Party shall not, without the prior written
        consent of the Indemnified Party (such consent not to be unreasonably delayed,
        withheld or conditioned), settle, compromise or offer to settle or compromise
        any such claim or demand on a basis which would result in the imposition
        of a
        consent order, injunction or decree which would restrict the future activity
        or
        conduct of the Indemnified Party or any subsidiary or Affiliate thereof or
        if
        such settlement or compromise does not include an unconditional release of
        the
        Indemnified Party for any liability arising out of such claim or demand or
        any
        related claim or demand.

       

      (d) If
        a claim, whether between the parties or by a third party, requires immediate
        action, the parties will make all reasonable efforts to reach a decision
        with
        respect thereto as expeditiously as possible.

       

      (e) If
        the Indemnifying Party does not elect to assume control or otherwise participate
        in the defense of any third-party claim, the Indemnifying Party shall be
        bound
        by the results obtained in good faith by the Indemnified Party with respect
        to
        such claim.

       

      
        
          
          

        

        
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      6.05 Indemnification
        Limitations.  Except for any fraud or willful misrepresentation,
        as to which claims may be brought without limitation as to time or
        amount, the
        sole recourse of each Buyer Indemnified Parties under this Article VI for
        indemnification shall be to offset against any amounts due to Sellers under
        the
        Notes, pro rata in accordance with their percentage interests in the aggregate
        principal amount of the Notes, the amount of any claim for indemnification
        made
        in good faith by Buyer Indemnified Parties.  Notwithstanding the
        foregoing, each Buyer Indemnified Party shall be entitled to indemnification
        under this Article VI: (i) with respect to a Known Liability or Known
        Liabilities, only to the extent the amount of such Known Liability or Known
        Liabilities in the aggregate exceeds One Million Three Hundred Thousand Dollars
        ($1,300,000); and (ii) with respect to a breach of any representation, warranty,
        covenant or obligation of Sellers and/or the Company herein, to the extent
        the
        Losses from such breach individually or in the aggregate exceed Two Hundred
        Thousand Dollars ($200,000).

       

      6.06 Subrogation.  Upon
        making an indemnity payment pursuant to this Agreement, the Indemnifying
        Party
        will, to the extent of such payment, be subrogated to all rights of the
        Indemnified Party against any third party in respect of the damages to which
        the
        payment related.  Without limiting the generality of any other
        provision hereof, each such Indemnified Party and Indemnifying Party will
        duly
        execute upon request all instruments reasonably necessary to evidence and
        perfect the above described subrogation rights.

       

      6.07 No
        Double Recovery.  Notwithstanding
        anything herein to the contrary, no party shall be entitled to indemnification
        or reimbursement under any provision of this Agreement for any amount to
        the
        extent such party or its Affiliate has been indemnified or reimbursed for
        such
        amount under any other provision of this Agreement or the Schedules attached
        hereto, or any document executed in connection with this Agreement or
        otherwise.

       

      6.08 Treatment
        of Indemnity Payments Between the Parties.  Unless
        otherwise required by applicable Law, all indemnification payments shall
        constitute adjustments to the Purchase Price for all Tax purposes, and no
        party
        shall take any position inconsistent with such characterization on any Tax
        Return, in any Tax Audit or judicial or administrative proceeding or
        otherwise.

       

      6.09 Reduction
        of Losses.   Each
        of the parties shall use its commercially reasonable efforts to collect the
        proceeds of any insurance that would have the effect of reducing any Losses
        for
        which it may seek indemnification under this Article VI (in which case such
        proceeds shall reduce such Losses).  To the extent any Losses of an
        Indemnified Party for which it may seek indemnification under this Article
        VI
        are reduced by its receipt of payment under insurance policies or from third
        parties (collectively, “Proceeds”), such Proceeds (net of the expenses of
        the recovery thereof) shall be credited against such Losses.  However,
        if indemnification payments under this Agreement shall have been made by
        an
        Indemnifying Party to an Indemnified Party prior to the receipt of such
        Proceeds, then the Indemnified Party shall remit to the Indemnifying Party
        the
        amount of such Proceeds (net of the expenses of the recovery thereof) to
        the
        extent of indemnification payments received in respect of such
        Losses.  Nothing in this Section 6.09
        shall impose upon any party any obligation to obtain insurance coverage for
        any
        Losses, whether occurring before or after the Closing Date.  All
        Losses for which indemnification is sought under Article VI shall be determined
        net of any Tax effects relating thereto.

       

      
        
          
          

        

        
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      VII.      
        CERTAIN
        TAX MATTERS.

       

      7.01 Filing
        of Tax Returns.

       

      (a) Periods
        Ending on or Before the Closing Date.  Sellers shall prepare or
        cause to be prepared and filed or cause to be filed on a timely basis all
        Tax
        Returns for the Company for all periods ending on or prior to the Closing
        Date
        which are required to be filed before the Closing Date.  Each such Tax
        Return shall be true, correct and complete when filed.  Sellers shall
        cause the Company to pay all Taxes shown as due on such Tax
        Returns.  Buyer shall prepare or cause to be prepared and file or
        cause to be filed all Tax Returns for the Company for all periods ending
        on or
        prior to the Closing Date which are required to be filed after the Closing
        Date. Buyer shall permit Seller Representative to review
        and comment on each such Tax Return described in the preceding sentence at
        least
        ten (10) days prior to filing and shall consider such revisions to such Tax
        Returns as are reasonably suggested by Seller Representative.

       

      (b) Periods
        Beginning Before and Ending After the Closing Date.  To the extent
        that any Tax Returns of the Company relate to any Tax periods which begin
        before
        the Closing Date and end after the Closing Date, Buyer shall prepare or cause
        to
        be prepared and file or cause to be filed any such Tax Returns.  Buyer
        shall permit Sellers to review and reasonably comment on each such Tax Return
        described in the preceding sentence, for which Sellers may have Tax liability,
        at least ten (10) days prior to filing such Tax Returns.  Any Taxes of
        the Company with respect to the portion of such period ending on the Closing
        Date shall be borne by the Sellers (consistent with the method for allocating
        Straddle Period Taxes in Section 6.02(b)).  Any
        credits relating to a taxable period that begins before and ends after the
        Closing Date shall be allocated to the pre- and post-Closing portions of
        such
        taxable period in a manner consistent with the method for allocating Straddle
        Period Taxes in Section 6.02(b).  All
        determinations necessary to give effect to the foregoing allocations shall
        be
        made in a manner consistent with prior practice of the Company.

       

      7.02 Tax
        Contests.

       

      (a) Notification
        of Contests.  Buyer shall notify Sellers in writing within fifteen
        (15) days of receipt by Buyer or the Company of written notice of any pending
        or
        threatened U.S. federal, state, local or non-U.S. audits, examinations,
        investigations or other administrative proceedings (such audits, examinations,
        investigations and other administrative proceedings referred to collectively
        as
“Tax Audits”) or assessments, which may affect the liability for Taxes of
        Sellers.  Sellers shall notify Buyer in writing within fifteen (15)
        days of receipt by any Seller of written notice of any pending or threatened
        Tax
        Audits or assessments, which may affect the liability for Taxes (including,
        without limitation, under this Agreement) of Buyer or the Company.  If
        Sellers, on the one hand, or Buyer, on the other hand, fails to give such
        prompt
        notice to the other Party it shall not be entitled to indemnification for
        any
        Taxes arising in connection with such Tax Audit or assessment if such failure
        to
        give notice materially adversely affects the other Party's right to participate
        in the Audit or assessment. 

       

      (b) Which
        Party Controls.

       

      
        
          
          

        

        
          42

          
            

          

        

        
          
          

        

      

       

      (i) Sellers’
        Items.  If such Tax Audit relates to any period ending prior to
        the Closing Date or for any Taxes for which Sellers, either individually
        or
        collectively, are liable in full hereunder, Sellers shall at their expense
        control the defense and settlement of such Tax Audit.

       

      (ii) Buyer's
        Items.  Buyer shall at its expense control the defense and
        settlement of all other Tax Audits related to the Company.

       

      (iii) Participation
        Rights.  Notwithstanding the provisions set forth above, any Party
        whose liability for Taxes may be affected by a Tax Audit shall be entitled
        to
        participate at its expense in such defense and to employ counsel of its choice
        at its expense.

       

      VIII.      
        MISCELLANEOUS.

       

      8.01 Expenses.  Sellers
        shall bear their own expenses incurred in connection with the preparation,
        execution and performance of this Agreement and the transactions contemplated
        hereby, including all fees and expenses of agents, representatives, counsel,
        accountants and investment banks.

       

      8.02 Public
        Announcements.  Subject
        to any requirement of applicable Law, all public announcements or similar
        publicity with respect to this Agreement or the transactions contemplated
        hereby
        shall be made or issued only with the prior written consent of
        Buyer.

       

      8.03 Appointment
        of Seller Representative as Attorney-in-Fact.

       

      (a) Any
        action to be taken by the Sellers hereunder shall be taken for the Sellers
        by
        Joseph J. Tebo who shall serve as their representative (the “Seller
        Representative”). In the event of the death or Permanent Disability of
        Seller Representative, Sellers holding a majority of the Shares immediately
        prior to the Closing may appoint a substitute therefor. Each Seller, by his,
        her
        or its execution of this Agreement, hereby irrevocably appoints Seller
        Representative as his, her or its agent, proxy and attorney-in-fact for all
        purposes of this Agreement, the other Transaction Documents and any ancillary
        agreements.  Any person or entity not a party to this Agreement shall
        be entitled to rely for all purposes on all acts, notices, instructions and
        communications of Seller Representative as the acts, notices, instructions
        and
        communications of the Sellers and the delivery, in accordance with this
        Agreement, of any notices or communications to Seller Representative shall
        be in
        all respects equivalent to delivery to the Sellers.  In performing its
        duties as such, Seller Representative shall not incur any liability to any
        Seller except for its willful misconduct.

       

      (b) Each
        of the Sellers appointing Seller Representative hereunder hereby expressly
        acknowledges and agrees that Seller Representative is authorized to act on
        behalf of such Seller notwithstanding any dispute or disagreement among such
        Sellers, and that any Person shall be entitled to rely on any and all action
        taken by Seller Representative under this Agreement without liability to,
        or
        obligation to inquire of, any of such Sellers.

       

      8.04 Successors.  This
        Agreement shall be binding upon and shall inure to the benefit of the parties
        hereto and their respective successors and permitted assigns.

       

      
        
          
          

        

        
          43

          
            

          

        

        
          
          

        

      

       

      8.05 Further
        Assurances.  Each
        of the parties hereto agrees that it will, from time to time after the date
        of
        this Agreement, execute and deliver such other certificates, documents and
        instruments and take such other action as may be reasonably requested by
        the
        other party to carry out the actions and transactions contemplated by this
        Agreement.

       

      8.06 Waiver.

       

      (a) No
        failure on the part of any party to exercise any power, right, privilege
        or
        remedy under this Agreement, and no delay on the part of any party in exercising
        any power, right, privilege or remedy under this Agreement, shall operate
        as a
        waiver of such power, right, privilege or remedy; and no single or partial
        exercise of any such power, right, privilege or remedy shall preclude any
        other
        or further exercise thereof or of any other power, right, privilege or
        remedy.

       

      (b) No
        party shall be deemed to have waived any claim arising out of this Agreement,
        or
        any power, right, privilege or remedy under this Agreement, unless the waiver
        of
        such claim, power, right, privilege or remedy is expressly set forth in a
        written instrument duly executed and delivered on behalf of such party; and
        any
        such waiver shall not be applicable or have any effect except in the specific
        instance in which it is given.

       

      8.07 Entire
        Agreement; Amendment.  This
        Agreement (together with the other Transaction Documents, certificates,
        agreements, Schedules, exhibits, instruments and other documents referred
        to
        herein) constitutes the entire agreement among the parties with respect to
        the
        subject matter hereof and thereof and supersedes all prior agreements, both
        written and oral, with respect to such subject matter.  This Agreement
        may not be amended except by a written agreement executed by the party charged
        with the amendment.

       

      8.08 Governing
        Law.  THIS
        AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
        OF THE
        STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.

       

      8.09 Consent
        to Jurisdiction.  Any
        controversy, dispute or claim of any nature whatsoever arising out of, in
        connection with or in relation to this Term Sheet or the transaction
        contemplated herein will be resolved by final and binding arbitration in
        accordance with the Streamlined Rules of and by a retired judge at JAMS,
        Inc. in
        Los Angeles and all parties hereto consent to the personal jurisdiction of
        the
        State of California for such arbitration and enforcement of any award by
        JAMS.  The prevailing party in any dispute will be entitled to recover
        all reasonable attorney’s fees, costs and expenses in addition to other
        allowable costs.

       

      8.10 Assignment.  No
        party may assign this Agreement, or any of its rights or obligations hereunder,
        to any other Person without the prior written consent of the other parties
        hereto, except that Buyer may make such an assignment to an Affiliate without
        prior consent.

       

      8.11 Notices.  All
        notices and other communications hereunder shall be in writing and shall
        be
        deemed to have been duly given (a) when delivered personally, (b) when
        transmitted by facsimile (transmission confirmed), (c) on the fifth
        Business Day following mailing by registered or certified mail (return receipt
        requested), or (d) on the next Business Day following deposit with an
        overnight delivery service of national reputation, to the parties at the
        following addresses and facsimile numbers (or at such other address or facsimile
        number for a party as may be specified by like notice):

       

      
        
          
          

        

        
          44

          
            

          

        

        
          
          

        

      

       

       

      
        	
                If
                  to Buyer:

                 

                Fluid
                  Media Networks, Inc.

                5813-A
                  Uplander Way

                Culver
                  City, California 90230

                Attention:  Justin
                  Beckett

                Facsimile:
                  (310) 665-0735

              	
                with
                  a copy to:

                 

                Nixon
                  Peabody, LLP

                The
                  Gas Company Tower

                555
                  West Fifth Street, 46th
                  Floor

                Los
                  Angeles, CA 90013

                Attention:  Jenny
                  Chen-Drake, Esq.

                Facsimile:    (213)
                  629-6001

              
	 	 
	
                If
                  to Sellers:

                 

                See
                  addresses as set forth on the signature pages hereto

              	
                with
                  copy to:

                 

                Foley
                  & Larder LLP

                402
                  W. Broadway, Suite 2100

                San
                  Diego, CA 92101

                Attention:
                  Kenneth D. Polin, Esq.

                Facsimile:  (619)
                  234-6655

              
	 	 
	
                If
                  to the Company:

                 

                Trusonic
                  Inc.

                7825
                  Fay Ave.

                Suite
                  LL-A

                La
                  Jolla, California 92037

                Facsimile:  (858)
                  362-2324

              	
                with
                  copy to:

                 

                Foley
                  & Larder LLP

                402
                  W. Broadway, Suite 2100

                San
                  Diego, CA 92101

                Attention:
                  Kenneth D. Polin, Esq.

                Facsimile:  (619)
                  234-3510

                 

              

      

       

      

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

       

      8.13 Counterparts.  This
        Agreement may be executed in multiple counterparts, all of which shall be
        considered one and the same agreement.  This Agreement may also be
        executed via facsimile or via image or pdf file sent by electronic mail,
        which
        shall be deemed an original.

       

      8.14 Schedules.  The
        Schedules to this Agreement are incorporated by reference herein and are
        made a
        part hereof as if they were fully set forth herein.

       

      8.15 Severability.  The
        invalidity of any term or terms of this Agreement shall not affect any other
        term of this Agreement, which shall remain in full force and
        effect.

       

      8.16 Advice
        of Counsel.  Each
        party to this Agreement has consulted with legal counsel of its own choosing,
        or
        has had the opportunity to consult with legal counsel, and has read and
        understood all of the terms and provisions of this Agreement.  This
        Agreement shall not be construed against any party by reason of the drafting
        or
        preparation hereof.

       

      
        
          
          

        

        
          45

          
            

          

        

        
          
          

        

      

       

      8.17 No
        Third-Party Beneficiaries.  There
        are no third party beneficiaries of this Agreement or of the transactions
        contemplated hereby and nothing contained herein shall be deemed to confer
        upon
        any Person other than the parties hereto (and their permitted successors
        and
        assigns) any right to insist upon or to enforce the performance of any of
        the
        obligations contained herein.

       

      

      [The
        remainder of the page is intentionally left blank.]

       

      
        
          
          

        

        
          46

          
            

          

        

        
          
          

        

      

       

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

       

      BUYER

       

      
        	
                FLUID
                  MEDIA NETWORKS, INC.,

                a
                  Nevada corporation

                 

                By:  /s/
                  Justin Beckett            

                Justin
                  F. Beckett

                Chief
                  Executive Officer

                 

              	 

      

      

       

      
        	
                THE
                  COMPANY AND SELLERS

              	 	 
	
                TRUSONIC
                  INC.,

                a
                  Delaware corporation

                 

                 

                By: 
                  /s/ Joseph J. Tebo            

                Joseph
                  J. Tebo

                Chief
                  Executive Officer and President

                 

              	 	 
	
                ALCOY
                  INVESTMENTS, LLC, a

                California
                  limited liability company

                 

                By: 
                  /s/ Victor Vilplana            

                Name:
                  Victor Vilplana

                Its: Managing
                  Member

                Address:   

                 

              	 	
                 

                 

                 

                /s/
                  Catherine Eikel            

                CATHERINE
                  EIKEL

                 

                Address:      

              
	
                 

                /s/
                  Clement J. O'Neill            

                CLEMENT
                  J. O’NEILL, Trustee of the O’Neill Family Trust dated July 4,
                  1995

                 

                Address:  

              	 	
                 

                /s/
                  Daniel K. O'Neill            

                DANIEL
                  K. O’NEILL, Trustee of the Daniel K. O’Neill Trust dated May 1,
                  1995

                 

                Address:       

              

      

       

      
        
          
          

        

        
          47

          
            

          

        

        
          
          

        

      

      
 

      
        	
                /s/
                  Todd Felton            

                TODD
                  FELTON

                 

                Address: 

              	 	
                /s/
                  Kenneth Elsberry            

                KENNETH
                  ELSBERRY

                 

                Address:    

                 

                 

              
	 	 	 
	
                GRIFFEN,
                  LLC

                 

                By: /s/
                  Thomas R. Lafleur            

                Name:  Thomas
                  R. Lafleur

                Its:  President

                 

                Address:      

              	 	
                 

                 

                /s/
                  James J. Tebo            

                JAMES
                  J. TEBO

                 

                Address:      
                  

              
	 	 	 
	
                /s/
                  Jean Cote                     

                JEAN
                  COTE

                 

                /s/
                  Randa Cote                    

                RANDA
                  COTE

                 

                Address:       
                  

                 

                 

              	 	
                /s/
                  Joseph J. Tebo            

                JOSEPH
                  J. TEBO, Trustee of the Tebo Family Trust dated September 30,
                  1994

                 

                 

                Address:    

              
	 	 	 
	
                
                  /s/
                    David McAnulty                

                

                DAVID
                  McANULTY

                 

                Address:  
                  

                 

                 

              	 	
                
                  /s/
                    Catherine Mullican            

                

                CATHERINE
                  MULLICAN

                 

                Address:      
                  

              
	 	 	 
	
                
                  /s/
                    Derrick Oien                

                

                DERRICK
                  OIEN

                Address:  
                  

                 

                 

              	 	
                
                  /s/
                    Robert Eikel                

                

                ROBERT
                  EIKEL

                Address:   

                 

              

      

       

       

      
        
          
          

        

        
          48

          
            

          

        

        
          
          

        

      

      
 

      
        	
                 

                 

              	 	 
	
                
                  /s/
                    Neil T. Hadfield                

                

                NEIL
                  T. HADFIELD, Co-Trustee of the Neil T. Hadfield & Margaret A. Jackson
                  Trust U/A/D 8/25/98

                 

                
                  /s/
                    Margaret A. Jackson            

                

                MARGARET
                  A. JACKSON, Co-Trustee of the Neil T. Hadfield & Margaret A. Jackson
                  Trust U/A/D 8/25/98

                 

                Address:            

                 

                 

              	 	
                
                  /s/
                    Robert E. Eikel                

                

                ROBERT
                  E. EIKEL, Trustee of the Robert and Mary Eikel Trust dated
                  2/25/98

                 

                 

                Address:  
                  

              
	 	 	 
	
                
                  /s/
                    Scott Annett                

                

                SCOTT
                  ANNETT

                 

                Address:   
                  

                 

                 

              	 	
                
                  /s/
                    Scott Bjerke                

                

                SCOTT
                  BJERKE

                 

                Address:  
                  

              
	 	 	 
	
                
                  /s/
                    Michelle Lazenby             

                

                SHELLEY
                  LAZENBY

                 

                
                  /s/
                    Jeff Lazenby                

                

                JEFF
                  LAZENBY

                 

                Address:   

                 

                 

              	 	
                
                  /s/
                    Danny Sterne                

                

                DANNY
                  STERNE

                 

                Address:   
                  

              
	 	 	 
	
                
                  /s/
                    Tim Ward                

                

                TIMOTHY
                  WARD

                 

                Address:   
                  

                 

                 

              	 	
                
                  /s/
                    Eric Wennas                

                

                ERIC
                  WENNAS

                 

                Address:  
                  

              
	 	 	 
	
                
                  /s/
                    Dave Whitaker            

                

                DAVE
                  WHITAKER

                 

                Address:   

              	 	 

      

       

       

       

      49fluid_8k-ex1002.htm

    Exhibit
      10.2

     

    
      SECURED
        PROMISSORY NOTE

      

      

      

      
        	
                Principal
                  Amount: _________

              	 	
                Date
                  Made:     October 17,
                  2007

              
	
                (subject
                  to adjustment as stated below)

              	 	 
	 	 	
                Los
                  Angeles, California

              

      

      

      FOR
        VALUE RECEIVED,
        the undersigned, Fluid Media Networks, Inc., a Nevada corporation
        (“Borrower”), promises to pay to the order of _________
        (“Lender”), at Los Angeles, California, or at such other place as Lender
        may from time to time designate by written notice to Borrower in accordance
        with
        this secured promissory note (the “Note”), in lawful money of the United
        States of America, in the manner and at the rate provided herein, the principal
        sum of ________ Dollars ($_____) (the “Principal Amount”) (subject to
        adjustment as provided below), on or prior to October 16, 2009 (such date,
        the
“Maturity Date”).  This Note is being made concurrently with
        and pursuant to the Stock Purchase Agreement, of even date herewith (the
        “Stock Purchase Agreement”), by and among Borrower, pursuant to which
        Borrower is purchasing one hundred percent (100%) of the issued and outstanding
        shares of capital stock of Trusonic, Inc. (“Company”) from the stockholders of
        Company.  Except as otherwise expressly set forth herein, defined
        terms shall have such meanings ascribed to them in the Stock Purchase
        Agreement.  Borrower further agrees as follows:

      

      Article
        1.                      Adjustments.  Borrower
        shall have the right to set-off, upon prior written notice to Lender specifying
        in reasonable detail the basis for such set-off, against any amount due
        hereunder, the amount of any claim for indemnification or payment of damages
        from Lender to which Borrower may be entitled under the Stock Purchase
        Agreement, as provided in Section 6.05 thereof. If it is ultimately determined
        pursuant to the Stock Purchase Agreement that Lender is entitled to all or
        a
        portion of such amount, then such amount shall be paid promptly to Lender,
        together with interest thereon at the interest rate provided herein from
        the
        date such amount was disputed through the date of payment.

       

      Article
        2.                      Interest;
        Payments.

       

      (a)           This
        Note shall accrue simple interest at the rate of seven percent (7%) per
        annum.

       

      (b)           This
        Note shall be payable in two (2) payments, as follows:  (a) one
        payment of  _________ Dollars ($_____), representing principal and
        accrued interest (the “First Installment”), payable one (1) year from the date
        of this Note (the “First Installment Payment Date”), and (b) the remaining
        principal, together with all accrued interest (the “Second Installment”), in the
        amount of ________ Dollars ($____), shall be payable on the Maturity
        Date.

       

      (c)           This  Note
        shall be payable by certified or bank cashier’s check or by wire transfer of
        immediately available funds to an account designated by Lender in
        writing.

       

      
        
           

        

        
          1
            of 4

          
            

          

        

        
           

        

      

       

      Article
        3.                    Security
        Interest.  Simultaneous with the making of this Note,
        Lender shall be granted a security interest (the “Security Interest”), in
        and to all of the assets of Lender and the Company pursuant to the terms
        and
        conditions of a security agreement, dated as of even date hereof (the
“Security Agreement”).  The Security Interest shall continue to
        secure this Note until this Note has been paid in full or is otherwise satisfied
        in accordance with the terms hereof.

       

      Article
        4.                     Default.

       

      (a)                      It
        shall be an event of default (“Event of Default”): (i) upon the failure
        by Borrower to pay the First Installment on or before the First Installment
        Payment Date (subject to a ten (10) day grace period during which Borrower
        may
        cure any such failure to
        pay); providedhowever, that Borrower’s
        failure to pay the First Installment while there exists any dispute as to
        the
        amount to be paid hereunder as provided in Article 1 of this Note shall not
        be
        deemed an Event of Default (ii) upon the failure by Borrower to pay the Second
        Installment on or before the Maturity Date (subject to a ten (10) day grace
        period during which Borrower may cure any such failure to
        pay); providedhowever, that Borrower’s
        failure to pay the Second Installment while there exists any dispute as to
        the
        amount to be paid hereunder as provided in Article 1 of this Note shall not
        be
        deemed an Event of Default; (iii) upon the breach or failure by Borrower
        to
        perform any material warranty, covenant or undertaking of Borrower in this
        Note
        (except with respect to the payment of principal or interest, which is addressed
        in clause (i) and/or clause (ii) of this subsection (a)), and each of such
        breach or failure to perform is not cured within thirty (30) days following
        the
        receipt by Borrower of written notice thereof by Lender; (iv) upon the material
        breach or default of any covenant or obligation of Borrower under the Stock
        Purchase Agreement or of Borrower or the Company under the Security Agreement;
        or (v) in the event that Borrower shall (A) apply for or consent to the
        appointment of, or the taking of possession by, a receiver, custodian, trustee
        or liquidator of all or substantially all of its property, (B) make a general
        assignment for the benefit of creditors, (C) admit in writing its inability
        to
        pay its debts as they become due, (D) commence a voluntary case under the
        federal bankruptcy laws (as now or hereafter in effect), (E) be adjudicated
        as bankrupt or insolvent, (F) file a petition or take advantage of any other
        law
        providing for the relief of debtors, or (G) acquiesce to, or fail to have
        dismissed within forty-five (45) days, any petition filed against it in any
        involuntary case under such bankruptcy law.

       

      (b)                 Upon
        the occurrence of an Event of Default, interest shall accrue on the principal
        amount due under this Note at the rate of ten percent (10%) per annum and
        Lender
        will have the option, by written notice to Borrower, to declare the entire
        balance of principal hereunder together with all accrued and unpaid interest
        thereon immediately due and payable and to exercise all rights and remedies
        available to it.  No delay or omission on the part of Lender hereof in
        exercising any right under this Note or otherwise shall operate as a waiver
        of
        such right.

       

      Article
        5.                     Waivers.

       

      (a)                      Borrower
        waives demand, presentment, protest, notice of protest, notice of dishonor,
        and
        all other notices or demands of any kind or nature with respect to this Note,
        together with diligence in collecting and the bringing of suit against
        Borrower.

       

      (b)                      Borrower
        agrees that a waiver of rights under this Note shall not be deemed to be
        made by
        Lender unless such waiver shall be in writing, duly signed by Lender, and
        each
        such waiver, if any, shall apply only with respect to the specific instance
        involved and shall in no way impair the rights of Lender or the obligations
        of
        Borrower in any other respect at any other time.  No notice to or
        demand on Borrower will be deemed to be a waiver of any obligation of Borrower
        or of the right of Lender to take further action without notice or demand
        as
        provided in this Note.

       

      
        
           

        

        
          2
            of 4

          
            

          

        

        
           

        

      

       

      Article
        6.                    Assignment
        of Note.  This Note and each of the provisions hereof
        shall be binding upon each of the successors and assigns of
        Borrower.  Borrower may not assign or transfer this Note or any of its
        obligations under this Note, without the prior written consent of Lender,
        which
        consent shall not be unreasonably withheld.

       

      Article
        7.                    Jurisdiction
        and Service of Process.  Any controversy, dispute or
        claim of any nature whatsoever arising out of, in connection with or in relation
        to Note or the transaction contemplated herein will be resolved by final
        and
        binding arbitration in accordance with the Streamlined Rules of and by a
        retired
        judge at JAMS, Inc. in Los Angeles and all parties hereto consent to the
        personal jurisdiction of the State of California for such arbitration and
        enforcement of any award by JAMS.  The prevailing party in any dispute
        will be entitled to recover all reasonable attorney’s fees, costs and expenses
        in addition to other allowable costs.  Lender further agrees that
        service of any process, summons, notice or document by U.S. registered mail
        to
        its respective address set forth in Section 8(d) shall be effective service
        of
        process for any action or proceeding brought against it in any such
        arbitration.

       

      Article
        8.                     Miscellaneous.

       

      (a)                 This
        Note may be altered only by written agreement signed by the party against
        whom
        enforcement of any waiver, change, modification, or discharge is
        sought.  This Note may not be modified by an oral agreement, even if
        supported by new consideration.

       

      (b)                 This
        Note is made and delivered in Los Angeles, California, shall be governed
        by, and
        construed in accordance with, the laws of the State of California, without
        giving effect to such state’s principles of conflict of laws, and shall not be
        construed strictly against the drafter hereof.

       

      (c)                 This
        Note constitutes a final written expression of all the terms of the agreement
        between the parties regarding the subject matter hereof, is a complete and
        exclusive statement of those terms, and supersedes all prior and contemporaneous
        agreements, understandings, and representations between the
        parties.  If any provision or any word, term, clause, or other part of
        any provision of this Note shall be invalid for any reason, the same shall
        be
        ineffective, but the remainder of this Note shall not be affected and shall
        remain in full force and effect.

       

      (d)                 Any
        notice or other communication required or permitted to be given hereunder
        shall
        be in writing and shall be mailed by certified mail, return receipt requested
        (or by the most nearly comparable method if mailed from or to a location
        outside
        of the United States of America) or by Federal Express, Express Mail, or
        mail
        nationally recognized overnight delivery or courier service, or delivered
        in
        person or by facsimile, or similar telecommunications equipment, against
        receipt
        therefore at the address of such party set forth in this subsection 8(d)
        (or to
        such other address as the party shall have furnished in writing in accordance
        with the provisions of this subsection 8(d)).

       

      
        
           

        

        
          3
            of 4

          
            

          

        

        
           

        

      

      

       

      Lender:

      

      

      Borrower:               Fluid
        Media Networks, Inc.

      5813
        Uplander Way, Unit
        #A

      Culver
        City, CA 
90230-6607

      Attention:

      Facsimile:

      

      

      

      Such
        addresses may be changed by notice given as provided in this
        subsection.  Notices shall be effective upon the date of receipt;
        provided, however, that a notice sent via telecopier shall be deemed effective
        upon the date indicated on proof of transmittal; notice sent via overnight
        delivery shall be deemed effective two (2) business days after deposit with
        such
        delivery service; and notice sent by U.S. certified mail shall be deemed
        effective five (5) business days after deposit with the U.S. mail.

       

      (e)                 This
        Note is transferable only upon surrender of this Note for registration of
        the
        transfer, duly endorsed, or accompanied by a written instrument of transfer
        duly
        executed, by Lender or their attorney duly authorized in writing.

       

      (f)                 This
        Note is issued by Borrower in consideration for the purchase of the shares
        of
        capital stock of Company pursuant to the Stock Purchase Agreement.

       

      

      

      IN
        WITNESS WHEREOF,
        Borrower has executed this Note effective as of the date first set forth
        above.

      

      BORROWER

      

      Fluid
        Media Networks,
        Inc.

      

      

      By:
        __________________________________

      

      Name:  _______________________________

      

      Title:  ________________________________

      

      

      
 

       

      4 of
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