Document:

EX-10.1

Exhibit 10.1

EXECUTION COPY

 

ASSET PURCHASE AGREEMENT

BY AND AMONG

THE ORCHARD ENTERPRISES, INC.

AS “PURCHASER”

AND

TEEVEE TOONS, INC.

D/B/A TVT RECORDS,

DEBTOR AND DEBTOR IN POSSESSION

AS “SELLER”

DATED AS OF JULY 3, 2008

ASSET PURCHASE AGREEMENT

 

     This Asset Purchase Agreement, dated as of July 3, 2008 is made by and between Purchaser and
Seller, and based on the following recitals. Certain capitalized terms used in this Agreement and
not otherwise defined have the meanings set forth in Article 9 herein.

     WHEREAS, on the Petition Date Seller filed a petition for relief under chapter 11 of the
Bankruptcy Code, thereby commencing Case No. 08-10562 (ALG);

     WHEREAS, on May 1, 2008, the Bankruptcy Court entered the Sale Procedures Order establishing
procedures governing the marketing and sale of Seller’s assets, including that parties may submit
written offers for Seller’s assets together with a clean, unmarked Asset Purchase Agreement through
June 9, 2008, which date was subsequently extended to June 16, 2008; and

     WHEREAS, Purchaser desires to acquire certain of Seller’s assets, and Seller desires to sell
and assign those assets, all in the manner and on the terms and conditions set forth herein;

     NOW, THEREFORE, in consideration of the foregoing and the representations and warranties set
forth herein, and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

 

 

ARTICLE 1

PURCHASE AND SALE

SECTION 1.01. Acquired Assets.

	(a)	 	Assets. Subject to the satisfaction or waiver of the conditions set forth in this
Agreement, including the approval by the Bankruptcy Court of this Agreement and the
transactions contemplated herein, at the Closing and as of the Closing Date, Seller shall
sell, assign, transfer, convey and deliver to Purchaser, and Purchaser shall purchase or
assume, as the case may be all of Seller’ rights, title, and interests in and to the assets,
contracts, property, rights and claims of Seller relating to the Business, wherever located,
whether real, personal or mixed, whether tangible or intangible, including, without
limitation, the following (but excluding Excluded Assets) (collectively, the “Acquired
Assets”):

	 	(i)	 	Seller’s Accounts Receivable generated by or otherwise related to the Acquired
Assets or the Business, a detailed schedule and aging report of which as of the date
hereof is attached hereto as Schedule 1.01(a)(i), which gross Accounts receivable shall
not be materially less in the aggregate as of the Closing;
	 
	 	(ii)	 	That certain real property lease described on Schedule 1.01(a)(ii) hereto (the
“Lease”), and any improvements located thereon;
	 
	 	(iii)	 	Seller’s personal property, including furniture, equipment, supplies and
Inventory (other than the Excluded Inventory), including, without limitation, the items
described on Schedule 1.01(a)(iii) hereto;
	 
	 	(iv)	 	Seller’s books, records and other information relating to the Business,
including all financial and accounting statements, sales and promotional materials and
records, customer lists, supplier lists, mailing lists, distribution lists, business
plans, demographic information, credit information, costs and pricing information,
reference catalogs and other data and information relating to the Business or the
Acquired Assets.
	 
	 	(v)	 	All of Seller’s advances, expenses, rents, credits and security deposits
“pre-paid” relating to the Business or the Acquired Assets;
	 
	 	(vi)	 	all claims, causes of action, choses in action, rights of recovery and rights
of set-off of any kind in favor of Seller and pertaining to, or arising out of, the
Acquired Assets or the Business or offsetting any Assumed Liability, other than
Avoidance Actions;
	 
	 	(vii)	 	all guarantees, warranties, indemnities and similar rights in favor of Seller
or otherwise relating to the Business or the Acquired Assets;
	 
	 	(viii)	 	all Masters, including, without limitation, those Masters set forth on Schedule
1.01(a)(viii) hereto;

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	 	(ix)	 	those executory Contracts set forth in Schedule 1.01(a)(ix), as that schedule
may be amended from time to time prior to the Closing by Purchaser (the “Assumed
Contracts”), it being understood that the inclusion of any such contract as an Assumed
Contract and an Acquired Asset shall be subject to the entry of a
Bankruptcy Court order or the agreement of the non-debtor party to the applicable
contract;
	 
	 	(x)	 	all of Seller’s rights, title and interest in Intellectual Property related to
the Acquired Assets or the Business; and
	 
	 	(xi)	 	the right to collect, receive and retain all royalties and other monies earned
from any source or sources with respect to the Masters or the Business which have not
been received by Seller by the Initial Closing Date regardless of when earned,
including, without limitation, all vendor receipts, royalty overrides, joint venture
participations and other income or income participations of any description related to
the Business (other than the Excluded Assets). For the avoidance of doubt, from and
after the Initial Closing, Seller shall turn over to Purchaser within five business
days after receipt of cleared funds, all monies received by seller with respect to the
foregoing along with any supporting statements and documents that Purchaser may
reasonably request .

	(b)	 	As of Closing, (i) all of Seller’s right, title and interest in and to the Acquired Assets
shall be immediately vested in Purchaser free and clear of all Liens, Claims and Other
Interests other than the Permitted Exceptions and (ii) risk of loss as to the Acquired Assets
shall pass from the Seller to Purchaser.

SECTION 1.02. Excluded Assets.

	(a)	 	The following shall constitute Excluded Assets: (i) Avoidance Actions; (ii) Excluded
Contracts; (iii) the Subsidiary Interests; (iv) the HFA Inventory and the Excluded Inventory;
(v) all cash and cash equivalents of Seller; (vi) Seller’s rights under this Agreement and all
cash and non-cash consideration payable or deliverable to Seller pursuant to the terms and
provisions hereof; (vii) insurance proceeds, claims and causes of action with respect to or
arising in connection with (1) any lease or contract which is not assigned to Purchaser at the
Closing, or (2) any item of tangible or intangible property not acquired by Purchaser at the
Closing; (viii) life insurance policies of officers and other employers of Seller; (ix) all
employee benefit plans, employment agreements and any other similar arrangements (written or
oral) maintained by Seller relating to employment, employee health, welfare and benefits with
respect to any employee of Seller; and (x) any other assets that Purchaser determines are not
desirable to the ongoing operation of the Business as of the Closing and thereafter.
	 
	(b)	 	For the avoidance of doubt, Purchaser may nonetheless elect to receive the HFA Inventory,
either before or after the Closing Date as “work in process” and not make such

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	 	 	HFA Inventory
available for resale until Purchaser has procured all necessary mechanical or other licenses
to permit the resale of such Excluded Inventory.

SECTION 1.03. Assumed Liabilities.

	(a)	 	Subject to the terms and conditions of this Agreement, upon the sale, transfer, assignment
and conveyance of the Acquired Assets to Purchaser at Closing, Purchaser shall assume from
Seller and thereafter pay, perform or otherwise satisfy all debts, liabilities and obligations
of Seller owing on account of the following (provided that no such assumption, payment,
performance or satisfaction shall reduce the Purchase Price) (collectively, the “Assumed
Liabilities”):

	 	(i)	 	the obligations and liabilities of the Seller accruing and to be performed on
or after the Closing under the Assumed Contracts; and
	 
	 	(ii)	 	any liabilities arising after the Closing out of the ownership of the Acquired
Assets by Purchaser.

	(b)	 	Purchaser shall assume Liability for curing monetary defaults required to effectuate
assumption and assignment in the aggregate amount of $1,000,000 related to the Assumed
Contracts excluding the Lease. To the extent that the cure amounts for such Assumed Contracts
exceed $1,000,000, then Purchaser shall have the option of not assuming any such Assumed
Contracts so that the cure amounts will not exceed $1,000,000; provided, however, that Seller
shall have no obligation to fund any cure costs with respect to Assumed Contracts except with
respect to the Lease. Purchaser shall designate in one or more writings to Seller (to be
delivered before, at or after the Closing) those executory contracts and unexpired leases that
will not become Assumed Contracts in accordance with the provisions of this Section 1.03(b).
	 
	(c)	 	Purchaser shall pay an additional $25,000 at the Closing for the purposes of curing any
monetary defaults under the Lease. To the extent that the Liabilities on the Assumed
Contracts (excluding the Lease) are less than $1,000,000, the difference between $1,000,000
and the actual cure amounts may, at the discretion of Seller, be used to fund any additional
cure cost in excess of $25,000 necessary to assume the Lease.
	 
	(d)	 	Purchaser shall cooperate with Seller in providing to the Bankruptcy Court any evidence
necessary to prove adequate assurance of future performance necessary to effect the assumption
and assignment of the Assumed Contracts. Purchaser shall be responsible for all costs and
expenses incurred after the Closing Date that are necessary in connection with providing
adequate assurance of future performance with respect to the Assumed Contracts.
	 
	(e)	 	If, prior to the Closing Date, any Assumed Contract that Purchaser desires to have assumed
and assigned pursuant to Section 1.01 is not assumed and assigned to Purchaser pursuant to a
final, non-appealable order of the Bankruptcy Court, Purchaser agrees that if the non-debtor
party to the applicable Assumed Contract does not consent to the assignment and assumption of
such Assumed Contract before the Closing Date (any such Assumed Contract, a “Non-Assigned
Contract”), then such Non-Assigned Contract shall

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	 	 	not be deemed to be an Assumed Contract
within the meaning of Section 1.01 and, subject to the satisfaction of the conditions
precedent set forth in Article 6, Purchaser
shall nonetheless remain obligated to fulfill its obligations hereunder; provided, however,
that Purchaser and Seller shall agree to either (i) an adjustment to the Purchase Price in
respect of the Non-Assigned Contract to the extent the Non-Assigned Contract is a Material
Contract, the amount of which adjustment will be negotiated in good faith by the parties;
provided, further, that in no event shall any adjustment(s) in the Purchase Price pursuant
to this option exceed $500,000 in the aggregate; (ii) enter into an arrangement with Seller
with respect to the Non-Assigned Contract in accordance with Section 5.08 hereof; or (iii)
use Purchaser and Seller’s best efforts to obtain a final, non-appealable order of the
Bankruptcy Court effectuating the assumption and assignment of the Assumed Contract even if
such efforts take place after the Initial Closing.

SECTION 1.04. Excluded Liabilities. Other than the Assumed Liabilities, Purchaser is not
assuming any other Liability of Seller, the Business, Seller’s Affiliates, their respective
businesses or any other Liability otherwise relating to the Acquired Assets, of whatever nature,
whether presently in existence or arising hereafter, and all such other liabilities and obligations
shall be retained by and remain obligations and liabilities of Seller, including the following:

	(a)	 	any Liability under any Environmental Laws arising or accruing before the Closing;
	 
	(b)	 	any Liability for borrowed money, including accrued interest and fees, arising or accruing
before the Closing;
	 
	(c)	 	any Liability for any and all Taxes for all periods prior to the Closing Date;
	 
	(d)	 	any Liability of Seller or its Affiliates arising out of or resulting from Seller’s or its
Affiliates non-compliance with any applicable law;
	 
	(e)	 	any Liability relating to Excluded Assets; and
	 
	(f)	 	any Liability for any fees and expenses incurred or owed in connection with the
administration of the Chapter 11 Case, the fees and expenses of attorneys, accountants,
financial advisors, consultants and other professionals retained by Seller or the Committee,
incurred or owed in connection with the administration of the Chapter 11 Case, and all out of
pocket expenses of Seller in connection with the transactions contemplated under this
Agreement..

SECTION 1.05. Purchase Price. The aggregate consideration for the purchase and sale of the
Acquired Assets shall be an amount in cash equal to $5,050,000 (which amount shall include the
Deposit previously paid by Purchaser) (the “Purchase Price”). For the avoidance of doubt, except
as expressly provided in Section 1.03(e) with respect to Non-Assigned Contracts, the Purchase Price
shall not be reduced in the event that Purchaser elects not to assume one or more of the Assumed
Contracts listed on Schedule 1.01(a)(ix) in its sole discretion, and not as a result of disputes or
objections related to assumption and assignment asserted or filed in the Bankruptcy Court.

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ARTICLE 2

CLOSING

SECTION 2.01. Closing. The Initial Closing shall take place at the offices of Stevens &
Lee, P.C., at 485 Madison Avenue, 20th Floor, New York, New York 10022, at 10:00 a.m.
(EDT) as soon as practicable after the conditions set forth in Article 6 shall have been satisfied
or waived (if waivable), and in no event later than July 3, 2008 (the “Initial Closing Date”).
There will be a Subsequent Closing with respect to those executory contracts and unexpired leases
that become Assumed Contracts following the Bankruptcy Court hearing on or about July 11, 2008 (the
“Additional Assumed Contracts”). Such Subsequent Closing shall take place as soon as practicable,
but not later than two business days following the entry of an order of the Bankruptcy Court
regarding the assumption and assignment of the Additional Assumed Contracts irrespective of whether
such order authorizes or rejects such assignment (the “Subsequent Closing Date”). All Proceedings
to be taken and all documents to be delivered by all parties at either the Initial Closing or the
Subsequent Closing, as applicable, shall be deemed to have been taken and executed simultaneously
at the applicable Closing and no such Proceeding shall be deemed to have been taken nor any such
document executed or delivered until all have been taken, executed and delivered. The Initial
Closing and Subsequent Closing shall be collectively referred to herein as the “Closing” where
appropriate and all references to the Closing Date shall include the Initial Closing Date and any
Subsequent Closing Dates, as appropriate.

SECTION 2.02. Seller’s Deliveries at Initial Closing. At the Initial Closing, Seller shall
deliver to Purchaser the following:

	(a)	 	such deeds, bills of sale, assignments of leases and contracts (except for the Additional
Assumed Contracts), quitclaim deeds with respect to real property, and any other instruments
of conveyance that, in form reasonably acceptable to Purchaser and that in the reasonable
judgment of Purchaser, are necessary to consummate the transactions contemplated herein and to
effectively vest in Purchaser good, valid and insurable title to the Acquired Assets, free and
clear of all Liens, Claims and Other Interests other than the Permitted Exceptions; and
	 
	(b)	 	such other customary closing documents, instruments or certificates required to be delivered
in connection with the consummation of the transactions contemplated herein.

SECTION 2.03. Purchaser’s Deliveries at Initial Closing. At the Initial Closing,

	(a)	 	Purchaser shall irrevocably deliver to Seller an amount equal to the Purchase Price minus the
Deposit (“Cash Consideration”). The Cash Consideration shall be paid by wire transfer of
immediately available funds into an account designated by Seller. The Cash Consideration
shall be divided into two components: (i) $2,500,000 shall be immediately payable to the
Seller; and (ii) $2,150,000 shall be deposited into escrow with Stevens & Lee, P.C., counsel
for the Seller pending the Subsequent Closing. In addition to the foregoing amounts,
Purchaser shall also pay in cash the $25,000 to cure the Lease shall be paid by wire transfer
of immediately available funds into an account designated by Seller.

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	(b)	 	The assumption by Purchaser of the Assumed Contracts and the Assumed Liabilities, except for
the Additional Assumed Contracts and associated Assumed Liabilities, shall be
effected on the Closing Date by an instrument of assumption and other instruments of
transfer and conveyance.

SECTION 2.04. Possession. Right to possession of the Acquired Assets shall transfer to
Purchaser as of the Initial Closing, except for the Additional Assumed Contracts, which shall
transfer to Purchaser as of the Subsequent Closing. Seller shall transfer and deliver to Purchaser
on the Initial or Subsequent Closing, as the case may be, such keys, lock and safe combinations and
other similar items as Purchaser shall require to obtain immediate and full occupation and control
of the Acquired Assets, and shall also make available to Purchaser at their then existing locations
all documents in Seller’s possession that are required to be transferred to Purchaser by this
Agreement, as set forth herein.

SECTION 2.05. Further Assurances. After the Initial and Subsequent Closings, Purchaser and
Seller may from time to time, at the reasonable request of the other party, execute and deliver
instruments, documents and agreements and take other actions as such other party may reasonably
request, in order to more effectively consummate the transactions contemplated herein; provided,
however, that the requesting party will prepare such additional documents and instruments and will
handle any submittal, applications, processing, recording and registrations. Upon request from
time to time, Seller shall to the extent then legally permitted to do so and at the Purchaser’s
cost and expense, execute and deliver all documents, take all rightful oaths, and use commercially
reasonable efforts to do all other acts that may be reasonably necessary or desirable, in the
reasonable opinion of counsel for Purchaser, to perfect or record the title of Purchaser, or any
successor of Purchaser, to the Acquired Assets transferred or to be transferred under this
Agreement. Purchaser shall cooperate with Seller’s representatives concerning their rights to
visit, inspect and review the Acquired Assets, including as to information requests, and shall
provide access to the books and records related to the Acquired Assets or the Business, and will
reasonably cooperate with Seller’s representatives to permit the administration of Seller’s estate
after the Closing.

SECTION 2.06. Allocation of Purchase Price. Purchaser and Seller agree to allocate the
Purchase Price in accordance with the rules under Section 1060 of the Code. Such Purchase Price
allocation shall be prepared by Purchaser and delivered to Seller within 30 days of the Subsequent
Closing. Absent a manifest error in Purchaser’s preparation and/or calculation of such allocation,
Seller hereby agrees that it shall accept Purchaser’s allocation of the Purchase Price. If there
is such an error in Purchaser’s preparation of the allocation of the Purchase Price, the parties
will work in good faith to correct such error(s) and agree an appropriate allocation of the
Purchase Price in accordance with Section 1060. Seller and Purchaser agree to act in accordance
with the computations and allocations contained in the allocation prepared by Purchaser or
otherwise agreed between the parties in accordance with the provisions of this Section 2.06, as
applicable, in any relevant tax returns or filings, including any forms or reports required to be
filed pursuant to Section 1060 of the Code, the Treasury Regulations promulgated thereunder or any
provisions of local, state and foreign law (“1060 Forms”), and to cooperate in the preparation of
any 1060 Forms and to file such 1060 Forms in the manner required by applicable law.

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SECTION 2.07. Purchaser’s Deliveries at Subsequent Closing. At the Subsequent Closing,

	(a)	 	Upon receipt of a certificate of compliance with Section 6.03(b) from Seller, Stevens & Lee,
P.C. shall be authorized to deliver to Seller $2,550,000 from the Stevens & Lee, P.C., escrow
account, less any adjustment to the Purchase Price pursuant to Section 1.03(e) in an amount
not to exceed $500,000.
	 
	(b)	 	The assumption by the Purchaser of the Additional Assumed Contracts and associated Assumed
Liabilities shall be effected on the Subsequent Closing Date by an instrument of assumption
and other instruments of transfer and conveyance.
	 
	(c)	 	The remaining portion, if any, of the $500,000 related to the Purchase Price adjustment for
Assumed Contracts shall remain in the Stevens & Lee, P.C. escrow account until (i) the parties
have effectuated the assumption and assignment with respect to the applicable Additional
Assumed Contracts; (ii) the parties agree that they will not be able to effectuate assumption
and assignment of any Additional Assumed Contracts(s); or (iii) July 3, 2009, at which point
in time the funds remaining after any prior deduction to the Purchase Price shall either be
(x) if further adjustments to the Purchase Price are warranted pursuant to Section 2.08(c),
delivered to Purchaser or (y) to the extent no further adjustments are warranted or funds
remain after all such adjustments have been made, released to Seller.

SECTION 2.08. Seller’s Deliveries at Subsequent Closing. At the Subsequent Closing, Seller
shall deliver to Purchaser the following:

	(a)	 	such assignments of leases and contracts for the Additional Assumed Contracts in form
reasonably acceptable to Purchaser and that in the reasonable judgment of Purchaser, are
necessary to consummate the transactions contemplated herein and to effectively vest in
Purchaser good, valid and insurable title to the Additional Assumed Contracts, free and clear
of all Liens, Claims and Other Interests other than the Permitted Exceptions; and
	 
	(b)	 	such other customary closing documents, instruments or certificates required to be delivered
in connection with the consummation of the transactions contemplated herein, including,
without limitation, a certificate of compliance with Section 6.03(b).
	 
	(c)	 	In the event the parties agree on the adjustment to the Purchase Price, if any, as
contemplated by Section 1.03(e), Seller shall irrevocably authorize the delivery to Purchaser
of the amount of the Purchase Price adjustment within two business days of such agreement. In
the event the parties are unable to agree on the adjustment to the Purchase Price, if any, as
contemplated by Section 1.03(e), then the Bankruptcy Court shall resolve the adjustment to the
Purchase Price.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Purchaser as follows, as of the date hereof and as of the
Closing:

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SECTION 3.01. Organization, Qualification, Etc. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its incorporation, and
has all requisite corporate power and, subject to any required Bankruptcy Court approval, authority
to own, lease or operate its properties and assets and to carry on the Business as Currently
Conducted, and is in good standing in all jurisdictions in which it owns or leases real property,
except where the failure so to qualify or to be so licensed would not have or reasonably be
expected to result in a Material Adverse Affect.

SECTION 3.02. Authorization, Etc. Subject to the Bankruptcy Court’s entry of the Sale
Order, Seller has obtained full corporate authorization to enter into, execute, deliver and perform
under this Agreement, and to consummate the transactions contemplated herein, in accordance with
its Articles of Incorporation, By-laws and any other governing rules and applicable law and no
further corporate action on the part of Seller is necessary to authorize such execution, delivery,
performance or consummation. Subject to the applicable provisions of the Bankruptcy Code and
Bankruptcy Rules, Seller has all requisite corporate power to own, lease and operate its
properties, to carry on its business as now being conducted and, subject to Seller’s obtaining the
Sale Order, to execute, deliver and perform this Agreement and all writings relating hereto.
Subject to the Bankruptcy Court’s entry of the Sale Order, this Agreement constitutes the legal,
valid and binding obligation of Seller, enforceable against Seller in accordance with its terms.
Subject to the Bankruptcy Court’s entry of the Sale Order and upon execution of the documents to be
executed and delivered at the Closing or otherwise pursuant to this Agreement (the “Ancillary
Documents”) by Seller, such documents shall constitute the legal, valid and binding obligations of
Seller, enforceable in accordance with their terms.

SECTION 3.03. No Conflicts or Violations. Subject to the Bankruptcy Court’s entry of the
Sale Order, the execution and delivery of this Agreement, the consummation of the transactions
herein contemplated, and the performance of, fulfillment of and compliance with the terms and
conditions hereof by Seller do not and will not: (a) conflict with or result in a breach of the
articles of incorporation or the by-laws of Seller; (b) violate any statute, law, rule or
regulation, or any order, writ, injunction or decree of any Governmental Entity except for
consents, declarations, filings and registrations the failure to have which, individually or in the
aggregate, would not reasonably be excepted to have a Material Adverse Effect; (c) violate or
conflict with or constitute a default under any agreement, instrument or writing of any nature to
which Seller is a party or by which Seller or its assets or properties may be bound or (d) result
in the imposition of a Lien, Claim or Other Interest, other than Permitted Exceptions, upon or with
respect to any of the Acquired Assets. Subject to entry of an order approving assignment and
assumption of the Assumed Contracts, neither the execution and delivery hereof nor the consummation
of the transactions contemplated hereby will contravene, conflict with, result in a violation of
(or any event that, with notice or lapse of time or both, would constitute a violation of) any of
the terms or requirements of, or give any person the right to accelerate, revoke, withdraw,
suspend, cancel, terminate or modify, or result in the inability of Purchaser to enjoy the benefits
of, such Assumed Contract.

SECTION 3.04. Litigation. Schedule 3.04 lists all Proceedings (other than the Chapter 11
Case) commenced against the Seller or with respect to the Acquired Assets or the Business. No
Proceeding listed on Schedule 3.04 has had, or would reasonably be expected to result in, a
Material Adverse Effect, and except for the pendency of the Chapter 11 Case, there is no

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Proceeding
pending or, to the Knowledge of Seller, threatened against or affecting Seller, the
Business or the Acquired Assets which could reasonably be expected to have a Material Adverse
Effect.

SECTION 3.05. Title to Property. Seller has good and marketable title to, or a valid
license or leasehold interest in, all of the Acquired Assets. Upon transfer of the Acquired Assets
to Purchaser in accordance with this Agreement, Purchaser shall receive good and marketable title
thereto or a valid license or leasehold interest therein free and clear of all Liens, Claims and
Other Interests other than the Permitted Exceptions.

SECTION 3.06. Bankruptcy Filings. All Seller’s motions, notices and other papers filed
with the Bankruptcy Court: (a) comply in all material respects with the requirements of the
Bankruptcy Code and the Bankruptcy Rules; and (b) did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein, in the light of the
circumstances under which they were made.

SECTION 3.07. Confidentiality. Seller has taken all steps reasonably necessary to preserve
the confidential nature of all material confidential information (including any trade secrets and
other proprietary information) related to the Acquired Assets. All use, disclosure or
appropriation of such material confidential information owned by any Seller by or to a third party
has been pursuant to the terms of a written agreement between such Seller and such third party.

SECTION 3.08. Cure Amount. Schedule 3.08 sets forth the amount as of July 3, 2008 that, to
the Seller’s Knowledge, is required to be paid to cure any outstanding defaults under each Assumed
Contract.

SECTION 3.09. Assumed Contracts. Seller has provided or made available to Purchaser true
and correct copies or other evidence of each Assumed Contract. Subject only to the payment of the
cure amounts set forth on Schedule 3.08 and the entry of appropriate orders of the Bankruptcy
Court, (a) each Assumed Contract is in full force and effect and is enforceable against each party
thereto in accordance with its terms; (b) there does not exist under any Assumed Contract any event
of default or event or condition that, after notice or lapse of time or both, would constitute a
violation, breach or event of default thereunder; or (c) there is no other material dispute pending
or threatened under any of the Assumed Contracts.

SECTION 3.10. Labor Matters.

	(a)	 	Schedule 3.10 lists each of the directors and officers of the Seller. Seller is not a party
to any collective bargaining agreements, there are no labor unions or other organizations
representing any employee of Seller, and no labor unions or other organizations have filed a
petition with the National Labor Relations Board or any other Governmental Entity seeking
certification as the collective bargaining representative of any employee of Seller. No labor
union or organization is engaged in or threatening to engage in any organizing activity with
respect to any employee of Seller. Seller is not delinquent in material payments to any of
its employees for any wages, salaries, commissions, bonuses or other direct compensation for
any services performed for Seller, as the case may be, or

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	 	 	material amounts required to be
reimbursed to such employees. There are no strikes,
slowdowns, stoppages of work, or any other concerted interference with normal operations
existing of a material nature that are pending or, to the Knowledge of Seller, threatened
against or involving Seller. Seller does not have Liability with respect to any
misclassification of any person as (x) an independent contractor rather than as an employee,
or with respect to any employee leased from another employer, or (y) an employee exempt from
state or federal overtime regulation.
	 
	(b)	 	Seller has not taken any action that would constitute a “mass layoff”, “mass termination” or
“plant closing” within the meaning of WARN or otherwise trigger notice requirements or
Liability under any federal, local, state or foreign plan closing notice or collective
dismissal law.

SECTION 3.11. Employee Benefits.

	(a)	 	Neither Seller nor any of its present or former ERISA Affiliates have any Liability or
potential Liability, direct or indirect, under any Employee Benefit Plan, with respect to any
current or former employees, directors, independent contractors, consultants of Seller.
	 
	(b)	 	Neither Seller nor any of its present or former ERISA Affiliates is or has ever maintained or
been obligated to contribute to a Multiple Employer Plan, a Multi-Employer Plan or a Defined
Benefit Pension Plan.

SECTION 3.12. Intellectual Property. As of the Closing Date, Seller owns or has the right
to use all Intellectual Property used in the conduct of the Business, except where any failure to
own or have such right to use the Intellectual Property individually or in the aggregate could not
reasonably be expected to result in a Material Adverse Effect. Except as set forth in Schedule
3.12(a), no Claim has been asserted and is pending by any Person challenging or questioning the use
of any such Intellectual Property or the validity or effectiveness of any such Intellectual
Property, nor does Seller know of any valid basis for any such claim except for such claims that in
the aggregate could not reasonably be expected to resulting a Material Adverse Effect. The use of
such Intellectual Property by Seller does not infringe on the rights of any Person, except for such
claims and infringements that, individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect. All federal, state and foreign registrations of, and
applications for, Intellectual Property and all unregistered Intellectual Property material to the
business of Seller that are owned or licensed by or to Seller on the Closing Date are described in
Schedule 3.12(b).

SECTION 3.13. Environmental Obligations. Except as has not and would not reasonably be
expected to have a Material Adverse Effect, there has been no Release or, to the Knowledge of
Seller, Threat of Release, of any Hazardous Materials from the business premises of Seller, or from
any portion of the real property where any Hazardous Materials were generated, manufactured,
refined, transferred, produced, imported, used, or processed from or from any other asset (whether
real property, personal property or mixed) in which Seller has or had an interest. There are no
pending or, to the Knowledge of Seller, threatened claims, liens, Proceedings, or Orders resulting
from any Environmental Health and Safety Liabilities or arising

11

 

under or pursuant to any
Environmental Law with respect to or affecting any business premises
or real property or other assets (whether real property, personal property, or mixed) in which
Seller has or had an interest. Seller have delivered to Purchaser true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or initiated by Seller or
any agent or representative of Seller pertaining to Hazardous Materials or Hazardous Activities in,
on, or under the business premises, or real property of Seller, or concerning compliance, by Seller
or any prior owner or operator or occupant of such property for which there might be continuing
owner Liability, with Environmental Laws.

SECTION 3.14. Accounts Receivable. The Accounts Receivable represent (and to the extent
not yet existing, will represent) valid obligations owing to Seller and have been (or will be)
created on the standard terms of trade offered by Seller and Seller reasonably believes that they
are (or will be) fully collectible by Purchaser following the Closing, subject to ordinary
disputes, returns and allowances for bad debts.

SECTION 3.15. Brokers. No Person is entitled to any brokerage, financial advisory,
finder’s or similar fee or commission payable by Purchaser in connection with the transactions
contemplated herein, except for Getzler Henrich & Associates, LLC, which has been duly retained
pursuant to orders of the Bankruptcy Court. For the avoidance of doubt, Seller hereby acknowledges
and agrees that any fees, commissions or expenses due and owing to Getzler, Henrich & Associates
LLC will be deemed to be an Excluded Liability and shall be the sole responsibility of Seller.

SECTION 3.16. No Other Representations and Warranties. Except for the representations and
warranties contained in this Section 3, neither Seller nor any other person makes any other express
or implied representation or warranty on behalf of Seller.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants to Seller as follows, as of the date hereof and as of the
Closing:

SECTION 4.01. Organization. Purchaser is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation.

SECTION 4.02. Authorization. Subject to the Bankruptcy Court’s entry of the Sale Order,
Purchaser has obtained full authorization to enter into, execute, deliver, and perform under this
Agreement and to consummate the transactions contemplated herein, in accordance with its
organizational documents and any other governing rules and applicable law. Subject to the
applicable provisions of Bankruptcy Code and Bankruptcy Rules, Purchaser has all requisite
corporate power to own, lease and operate the Acquired Assets and, subject to Purchaser’s obtaining
the Sale Order, to execute, deliver and perform this Agreement and all writings relating hereto.
Subject to the Bankruptcy Court’s entry of the Sale Order, this Agreement constitutes the legal,
valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its
terms. Subject to the Bankruptcy Court’s entry of the Sale Order and upon execution of

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 the Ancillary Documents by Purchaser, such documents shall constitute the legal, valid and binding
obligations of Purchaser, enforceable in accordance with their terms.

SECTION 4.03. No Conflicts or Violations. Subject to the Bankruptcy Court’s entry of the
Sale Order, the execution and delivery of this Agreement, the consummation of the transactions
herein contemplated, and the performance of, fulfillment of and compliance with the terms and
conditions hereof by Purchaser do not and will not: (i) conflict with or result in a breach of the
articles of incorporation or the by-laws or equivalent organizational documents of Purchaser; (ii)
violate any statute, law, rule or regulation, or any order, writ, injunction or decree of any
Governmental Entity; or (iii) violate or conflict with or constitute a default under any material
agreement, instrument or writing of any nature to which Purchaser is a party or by which Purchaser
or a material portion of its assets or properties may be bound.

SECTION 4.04. Brokers. No Person is entitled to any brokerage, financial advisory,
finder’s or similar fee or commission payable by Purchaser in connection with the transactions
contemplated herein.

SECTION 4.05. No other Representations and Warranties. Except for the representations and
warranties contained in this Section 4, neither Purchaser nor any other person makes any other
express or implied representation or warranty on behalf of Purchaser.

ARTICLE 5

COVENANTS

SECTION 5.01. Notice of Sale. Seller shall provide all notices of this Agreement and the
transactions contemplated herein as required by the Bankruptcy Code, the Bankruptcy Rules and other
applicable laws and rules.

SECTION 5.02. Access and Information. Prior to the Closing, Seller shall afford to
Purchaser and to Purchaser’s legal counsel, consultants, and other authorized representatives
reasonable access during normal business hours to Seller’s Business, including to Seller’s books,
records, properties and personnel, and shall furnish as promptly as practicable to Purchaser any
and all such information as Purchaser reasonably may request with respect thereto.

SECTION 5.03. Additional Matters. Subject to the terms and conditions herein, except as
provided by the Bankruptcy Code, the Bankruptcy Rules or any other orders entered or approvals or
authorizations granted by the Bankruptcy Court, Purchaser and Seller agree to use their best
efforts to do (or cause to be done) all things necessary, proper or advisable to consummate and
make effective the transactions contemplated herein, including to obtain all necessary waivers,
consents and approvals required herein.

SECTION 5.04. Public Announcements. Purchaser and Seller shall consult with each other
before issuing any press release or making any public statement or communication with respect to
this Agreement or the transactions contemplated herein, and neither party shall issue any such
press release or make any such statement or communication without the prior consent of the other
party, which shall not be unreasonably withheld; provided, however, that a party may issue such
press release or make such statement or communication, without the consent of the other

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party, to the extent it may be required by law, rule, regulation or Court order, upon the advice of counsel.

SECTION 5.05. Conduct of Business. (a) Seller agrees that, from the date of this
Agreement to the relevant Closing Date, except as required or specifically permitted by this
Agreement or unless Purchaser shall otherwise agree in writing, Seller shall operate and conduct
its Business only in the ordinary course of business consistent with past practices and shall use
best efforts to preserve and maintain the Acquired Assets and Seller’s relationships with
suppliers, customers, clients, employees, artists agents and others having business dealings with
Seller. Without limiting the generality of the forgoing during the period from the date of this
Agreement to the Closing Date, Seller shall:

          (i) use commercially reasonable efforts to keep available the services of Seller’s significant
employees, independent contractors and agents;

          (ii) comply in all material respects with Seller’s obligations under the Assumed Contracts and
comply in all material respects with all applicable laws;

          (iii) maintain in full force and effect all registrations of all Intellectual Properties
included in or related to the Acquired Assets, to the extent applicable;

          (iv) maintain the Seller’s status as a corporation duly organized, validly existing and in
goods standing under the laws of its state of incorporation; and

          (v) not accelerate or otherwise modify it regular practices for collecting Accounts
Receivable.

(b) Without limiting the generality of Section 5.05(a), during the period from the date of this
Agreement to the relevant Closing Date, without the consent of Purchaser, Seller shall not:

          (i) create, incur or assume any debt relating to the Acquired Assets other than in the
ordinary course of business and consistent with past practice;

          (ii) waive or release any rights or Claims held by Seller or cancel, compromise, release or
assign any indebtedness owed to it;

          (iii) other than as contemplated by Section 5.10, not transfer, sell or otherwise convey any
of the Acquired Assets;

          (iv) subject any of the Acquired Assets to any Lien, Claim or Other Interest (other than
Permitted Exception), or in any way create or consent to the creation of any title condition
affecting the Acquired Assets;

          (v) enter into, renew, terminate, amend or modify any Assumed Contract;

          (vi) license any Intellectual Property included in or related to the Acquired Assets;

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          (vii) with respect to any employees of Seller make any promise or commitments to any such
person that Purchaser will employ or retain such person after the Closing Date;

          (viii) knowingly take action that would cause any representation or warranty herein to be
untrue; or

          (ix) agree to do, or enter into negotiations to with respect to, any of the foregoing actions.

SECTION 5.06. Bankruptcy Court Approval.

	(a)	 	Seller shall use its best efforts to obtain, as promptly as practicable and in no event later
than June 26, 2008, entry of the Sale Order.
	 
	(b)	 	Subject to the Sale Procedures Order and the Sale Order, Seller shall promptly make any
filings, take all actions, and use best efforts to obtain any and all other approvals and
orders necessary or appropriate for consummation of the transactions contemplated herein,
subject to Seller’s obligations to comply with any order of the Bankruptcy Court and other
applicable law.
	 
	(c)	 	In the event an appeal is taken, or a stay pending appeal is requested or reconsideration is
sought, from either the Sale Procedures Order or the Sale Order, Seller shall immediately
notify Purchaser of such appeal or stay request and shall provide to Purchaser within one
business day a copy of the related notice of appeal or order of stay or application for
reconsideration. Seller shall also provide Purchaser with written notice, (and copies of) any
other or further notice of appeal, motion or application filed in connection with any appeal
from or application for reconsideration of, either of such orders and any related briefs.

SECTION 5.07. Permits. Prior to the Closing, Seller shall use its best efforts to: (a)
identify all material permits necessary to operate the Business from and after the Closing; and (b)
obtain consents to the transfer of such material permits which are transferable to Purchaser at or
prior to Closing and which are not otherwise covered by the Sale Order; and (c) cooperate with
Purchaser with respect to the transfer of all material permits.

SECTION 5.08. Consents; Assignments. Seller and Purchaser shall use best efforts to obtain
any consent, approval or amendment required to novate and/or assign all agreements, leases,
licenses, and other rights of any nature whatsoever included in the Acquired Assets. In the event
and to the extent that Seller and Purchaser are unable to obtain any such required consent,
approval or amendment, or if any attempted assignment would be ineffective or would adversely
affect the rights of Seller with respect to the Acquired Assets so that Purchaser would not in fact
receive all the rights with respect to the Acquired Assets, Seller and Purchaser will cooperate in
a mutually agreeable arrangement under which Purchaser may (to the extent permitted by law,
including without limitation, the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure,

15

 

 and any Local Rules or orders of the Bankruptcy Court, or the terms of any applicable agreement) obtain
the benefits and assume the obligations with respect to such Acquired Asset in
accordance with this Agreement, including sub-contracting, sub-licensing, or sub-leasing to
Purchaser, or under which Seller would enforce for the benefit of Purchaser, with Purchaser
assuming Seller’ obligations, any and all rights of Seller against a third party thereto. To the
extent such arrangements are made, Seller shall, without further consideration, pay and remit to
Purchaser promptly all monies, rights, and other considerations received in respect of Purchaser’s
performance of such obligations. Following the Closing, Seller shall use best efforts to obtain
required consents with respect to any Acquired Assets which are not assigned to Purchaser pursuant
to the Sale Order. If and when any such consent shall be obtained or such agreement, lease,
license, or other right shall otherwise become assignable or able to be novated, Seller shall
promptly assign and novate all their rights and obligations thereunder to Purchaser without the
payment of any further consideration.

SECTION 5.09. Competing Transaction. If the Bankruptcy Court determines that a Competing
Transaction presents a “higher or better” offer made for the Acquired Assets following the Auction,
Seller will have the right to enter into an agreement providing for the Competing Transaction and
terminate this Agreement pursuant to Section 7.01.

SECTION 5.10. Access to Records. Purchaser shall preserve for a period of six years after
the Closing Date all records relating to the Acquired Assets existing prior to the Closing Date.
After the Closing Date, where there is a legitimate purpose (including, without limitation, as
necessary for the administration of the bankruptcy case), Purchaser shall provide Seller with
access, (i) during all times, to all information, data, and books and records of Purchaser in
electronic form, and (ii) upon prior reasonable written request specifying the need therefor,
during regular business hours, to all information, data and books and records of Purchaser, in any
form other than electronic form, but, in each case, only to the extent relating to the Acquired
Assets prior to the Closing Date, and Seller and its representatives shall have the right to make
copies of such books and records; provided, however, that the foregoing right of access shall not
be exercisable in such a manner as to interfere unreasonably with the normal operations and
business of Purchaser. Notwithstanding the foregoing, the Purchaser need not supply the Seller
with any information pursuant to this Section 5.11 which Purchaser is under a legal obligation not
to supply or take any action which would constitute a waiver of attorney-client, attorney work
product or other privilege.

SECTION 5.11. Recordings. At closing, Seller shall deliver all sound recordings, recorded
masters, and tangible embodiments of sound recordings, and Seller shall not retain any copies in
any form or medium of the foregoing.

SECTION 5.12. Confidentiality. Prior to the Closing, Seller shall treat as confidential
and safeguard any and all proprietary, secret or confidential information related to Seller, the
Business and the Purchaser. From and after the Closing Date, Seller agrees that it will not, nor
will it permit any of its Affiliates to, make use of, divulge or disclose to any third party (other
than the Purchaser or any agent or employee of the Purchaser) any information of any proprietary,
secret or confidential nature related to the Business, the Acquired Assets or the Purchaser. From
and after the Closing Date, Purchaser agrees that it will not, nor will it permit any of its
Affiliates to, make use of, divulge or disclose to any third party (other than Seller or

16

 

any agent or employee of Seller) any information of any proprietary, secret or confidential nature related to
Seller or the Excluded Assets. The foregoing shall not prohibit or restrict the
Purchaser or the Seller from disclosing or using any such information in connection with any
disclosure or information requirement of applicable law, including without limitation, the
Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, and any Local Rules or orders of the
Bankruptcy Court, or the rules and regulations of any exchange or similar organization on which its
securities are traded.

SECTION 5.13. Nondisparagement. From and after the Closing Date, Seller, on behalf of
itself and each of its present and former directors, officers, employees, agents and equity
holders, agrees that neither it nor they will engage in any conduct with the intent to injure the
reputation and interest of the Purchaser, its Affiliates and the Business (including, without
limitation recording artists and other non-Debtor parties to any Assumed Contracts), and shall not
disparage, induce or encourage others to disparage the Purchaser, its Affiliates and the Business
(including, without limitation recording artists and other non-Debtor parties to any Assumed
Contracts), or make or cause to be made any statement that is critical of or otherwise maligns the
business reputation of the Purchaser, its Affiliates and the Business (including, without
limitation recording artists and other non-Debtor parties to any Assumed Contracts).

SECTION 5.14. Disclosure Supplements. From time to time prior to the Closing, with respect
to any matter arising after the date hereof which, if existing or occurring as of the date hereof,
would have been required to be set forth or described in this Agreement or which is necessary to
complete or correct any information in this Agreement or in any representation or warranty of
Seller which has been rendered inaccurate thereby, then Seller shall promptly supplement or amend
this Agreement as necessary to complete or correct such information. No such supplement or
amendment will be deemed to cure any breach of any representation or warranty made in this
Agreement or to affect the conditions to the obligations of the parties.

SECTION 5.15. Transition; Separation of Operations. From and after the date hereof, the
parties agree to cooperate and to act in good faith to ensure a smooth transition of operations
from Seller to Purchaser, and a separation of operations between Purchaser and Seller’s affiliates,
TVT Music, Inc. and TVT Music Enterprises, LLC (collectively, the “Publishing Entities”). In
particular, the parties agree to enter into (a) a Data Sharing Agreement in substantially the form
attached hereto as Exhibit A addressing the separation of systems, data and records of the
Publishing Entities from the records of the Seller (the “Data Sharing Agreement”); and (b) a
Sub-Lease in substantially the form attached hereto as Exhibit B allowing for the continued
post-Closing use and occupancy of that portion of the Leased premises by the Publishing Entities on
the terms and conditions set forth therein (the “Sub-Lease”). In addition, the parties agree to
cooperate to and to act in good faith with respect to (x) the post-Closing acquisition of certain
furniture and equipment used by the Publishing Entities from the Purchaser and (y) any other
necessary or appropriate arrangements to ensure a smooth transition of operations from Seller to
Purchaser, and a separation of operations between Purchaser and the Publishing Entities. For the
avoidance of doubt, Purchaser shall not be obligated to give the Publishing entities access to
either the Leased premises or the systems, data and records of the Publishing Entities or Purchaser
until such time as the Data Sharing Agreement and the Lease are executed and delivered. For the
further avoidance of doubt, nothing in this Section 5.15 shall affect Seller’s rights under Section
5.10.

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In addition, Seller and Purchaser hereby acknowledge and agree that: (i) Purchaser shall reimburse
Seller for the prorated portion of the rent and utilities for the Leased premises for the portion
of the month of July, 2008 subsequent to the Initial Closing; and (ii) that with respect to the
continued administration of Additional Assumed Contracts between the Initial Closing and the
Subsequent Closing, Purchaser shall be responsible for reimbursing Seller for the salary of one
employee of Seller, to be mutually agreed upon between the parties, who will be performing such
administration; provided, however, that the parties acknowledge and agree that any amounts payable
by Purchaser pursuant to this sentence shall be netted against any amounts payable by Seller
pursuant to the Data Sharing Agreement and the Sub-Lease.

SECTION 5.16. Seller Employees.

	(a)	 	For the avoidance of doubt, Purchaser and Seller hereby acknowledge and agree that Purchaser
shall not be obligated to offer employment to, hire or otherwise employ any current or former
employee of Seller or any of its Affiliates. Further, Purchaser is not assuming, not shall it
be responsible for any severance, stay bonus or any other similar or equivalent compensation
arrangement or obligation with respect to any present or former employee of Seller or its
Affiliates.
	 
	(b)	 	Purchaser shall not be responsible with respect to any current or former employees of Seller
or its Affiliates or any such employee’s beneficiaries for compliance with WARN or any other
law, including any requirement to provide for and discharge any and all notifications,
benefits and liabilities to such employees or any applicable Governmental Entity that might be
imposed as a result of the consummation of the transactions contemplated by this Agreement or
otherwise.
	 
	(c)	 	Purchaser shall not be responsible for or assume liability for administration of and
compliance with the continuation coverage requirements for “group health plans” under COBRA
with respect to any current or former employee of Seller or its Affiliates or any such
employee’s covered dependents who incur a COBRA qualifying event or loss of coverage under any
group health plan at any time immediately following the Closing.

ARTICLE 6

CONDITIONS PRECEDENT

SECTION 6.01. Conditions Precedent to Obligation of Seller and Purchaser. The respective
obligations of each party to effect the transactions contemplated herein shall be subject to the
satisfaction of the following conditions:

	(a)	 	all waiting periods, if any, applicable to this Agreement and the transactions contemplated
herein shall have expired or been terminated and all other authorizations, consents, orders
and approvals shall have been obtained; and
	 
	(b)	 	there shall not be any statute, rule or regulation, enjoining or prohibiting the consummation
of the Closing and no court of competent jurisdiction shall have issued, and there shall not
have been commenced and be continuing any action by any Governmental Entity seeking any order,
decree or ruling enjoining or prohibiting the consummation of the Closing.

18

 

SECTION 6.02. Conditions Precedent to Obligation of Seller. The obligation of Seller to
effect the transactions contemplated herein shall be subject to the satisfaction or waiver at or
prior to the Closing of the following additional conditions:

	(a)	 	Purchaser shall have performed in all material respects its obligations under this Agreement
required to be performed by Purchaser at or prior to the Closing.

	(b)	 	The representations and warranties of Purchaser contained in this Agreement shall be true and
correct in all respects on the date of this Agreement and as of the Closing Date as if made at
and as of such date except to the extent such representations are expressly made as of an
earlier date.

	(c)	 	The Sale Order shall have been entered by the Bankruptcy Court, and such order shall not have
been stayed, modified, reversed or amended in any manner adverse to Purchaser or Seller, and
Seller shall have received from the Bankruptcy Court all other orders, approvals and consents
reasonably required to transfer the Acquired Assets and to consummate the transactions
contemplated herein.

SECTION 6.03. Conditions Precedent to Obligation of Purchaser. The obligation of Purchaser
to effect the transactions contemplated herein shall be subject to the satisfaction or waiver at or
prior to the Closing of the following additional conditions:

	(a)	 	Seller shall have performed in all material respects their obligations under this Agreement
required to be performed by Seller at or prior to the Closing.

	(b)	 	The representations and warranties of Seller contained in this Agreement shall be true and
correct in all respects on the date of this Agreement and as of the Closing Date as if made at
and as of such date except to the extent such representations are expressly made as of an
earlier date; provided, however, that with respect to the Subsequent Closing, (x) only those
representations and warranties of Seller contained in Sections 3.01, 3.02, 3.03, 3.04, 3.08,
3.09 and 3.12 shall be true and correct in all respects on the date of this Agreement and as
of the Subsequent Closing Date as if made at and as of such date except to the extent such
representations are expressly made as of an earlier date and (y) such representations and
warranties need only be true and correct with respect to and to the extent that they impact
the Additional Assumed Contracts.

	(c)	 	The Sale Order, in a form reasonably acceptable to Purchaser, stating, among other things,
that the Acquired Assets shall be acquired by Purchaser free and clear of any Liens, Claims
and Other Interests of any kind or nature, shall have been entered by the Bankruptcy Court,
and such order shall not have been stayed, modified, reversed or amended in any manner adverse
to Purchaser, and Seller shall have received from the Bankruptcy Court all other orders,
approvals and consents reasonably required to transfer the Acquired Assets and to consummate
the transactions contemplated herein, and Purchaser shall have received evidence thereof
reasonably satisfactory to Purchaser and its counsel.

	(d)	 	With the exception of $1,000,000 of cure costs for Assumed Contracts, the Liability for which
is being assumed by Purchaser, and the $25,000 for cure costs necessary to assume

19

 

	 	 	the Lease, which is paid at the Initial Closing, Purchaser shall have no liability for any
“cure costs” and Administrative Expenses in respect of Assumed Contracts

	(e)	 	Upon consummation of the transactions contemplated herein, Purchaser will have acquired good
title in and to, or a valid leasehold interest in, as applicable, each of the Acquired Assets,
free and clear of all Liens, Claims and Other Interests, other than those related to the
Assumed Liabilities and Permitted Exceptions.

	(f)	 	Seller shall have procured an order of the Bankruptcy Court authorizing the assumption and
assignment of the Lease and shall have conveyed to Purchaser all equipment and fixtures
belonging to the Seller that are located at Seller’s premises covered by the Lease.

ARTICLE 7

TERMINATION

SECTION 7.01. Termination. This Agreement may be terminated:

	(a)	 	by mutual written agreement of Seller and Purchaser at any time prior to the Closing;

	(b)	 	by either one of Seller or Purchaser, in the event a Competing Transaction is approved by the
Bankruptcy Court;

	(c)	 	by Purchaser at any time prior to the Closing, in the event any of the conditions set forth
in Section 6.01 or Section 6.03 shall have become incapable of fulfillment or cure and shall
not have been waived by Purchaser (if waivable), provided that Purchaser is not then in breach
of this Agreement;

	(d)	 	by Seller at any time prior to the Closing, in the event any of the conditions set forth in
Section 6.01 or Section 6.02 shall have become incapable of fulfillment or cure and shall not
have been waived by Seller (if waivable), provided that Seller is not then in breach of this
Agreement;

	(e)	 	by Purchaser, in the event Seller’s bankruptcy case is converted to a case under chapter 7 of
the Bankruptcy Code.

SECTION 7.02. Effect of Termination. If this Agreement is terminated under Section 7.01,
the terminating party shall forthwith give written notice thereof to the other party, and this
Agreement will thereafter become void and have no further force and effect, and all further
obligations of Seller and Purchaser to each other under this Agreement will terminate without
further Liability of Seller or Purchaser to the other, except that each party will return all
documents, work papers and other material of any other party relating to the transactions
contemplated herein, whether so obtained before or after the execution hereof, to the party
furnishing the same, and all confidential information received by either party with respect to the
business of the other party will be returned immediately. If this Agreement is terminated other
than pursuant to Section 7.01(d) because of Purchaser’s failure to satisfy the terms and conditions
of Sections 6.02(a) or (b), then within 5 business days after such termination, the Deposit shall
be returned to Purchaser.

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ARTICLE 8

MISCELLANEOUS PROVISIONS

SECTION 8.01. Survival of Representations, Warranties. Except as otherwise set forth
herein, no representations or warranties in this Agreement or in any instrument delivered pursuant
to this Agreement shall survive beyond the Initial Closing.

SECTION 8.02. Bulk Transfers. Purchaser waives compliance with the provisions of all
applicable laws relating to bulk transfers in connection with the acquisition of the Acquired
Assets.

SECTION 8.03. “AS IS” Transaction; Representations and Warranties; Schedules and Exhibits.

	(a)	 	Purchaser hereby acknowledges and agrees that, except as otherwise expressly provided in this
Agreement or in the schedules hereto prepared by Seller, Seller makes no representations or
warranties whatsoever, express or implied, with respect to Seller, the Acquired Assets or the
Assumed Liabilities (including, without limitation, income to be derived from or expenses to
be incurred in connection with the Acquired Assets, the physical condition of any personal or
real property comprising a part of the Acquired Assets or which is the subject of any of the
Assumed Liabilities to be assumed by Purchaser at the Closing Date, the environmental
condition or other matter relating to the physical condition of any real property or
improvements which are the subject of any assigned lease to be assumed by Purchaser at the
Closing Date, the zoning of any such real property or improvements, the value or
transferability of the Acquired Assets (or any portion thereof), the terms, amount, validity
or enforceability of any Assumed Liabilities, or the merchantability or fitness of the
Acquired Assets). WITHOUT IN ANY WAY LIMITING THE FOREGOING AND EXCEPT AS OTHERWISE EXPRESSLY
SET FORTH IN THIS AGREEMENT, SELLER HEREBY DISCLAIMS ANY WARRANTY (EXPRESS OR IMPLIED) OF
MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE OR NON-INFRINGEMENT AS TO ANY PORTION OF
THE ACQUIRED ASSETS. Purchaser further acknowledges that Purchaser has conducted an
independent inspection and investigation of the condition of the Acquired Assets, as Purchaser
deemed necessary or appropriate, and that in proceeding with its acquisition of the Acquired
Assets Purchaser is doing so based solely upon such independent inspections and investigations
and representations, warranties, terms and conditions of this Agreement and the Ancillary
Documents, but subject to the satisfaction or waiver of the closing conditions specified
herein. Accordingly, if the Closing occurs, Purchaser will accept the Acquired Assets at the
Closing Date “AS IS,” “WHERE IS,” and “WITH ALL FAULTS,” subject to the provisions of this
Agreement and the Sale Order.

	(b)	 	Each of Purchaser and Seller agree neither Seller nor any of the respective officers,
directors, stockholders, employees, affiliates, representatives or agents of Seller shall have
any Liability or responsibility arising out of, or relating to, any information (whether
written or oral), documents or materials furnished by Seller or any of their officers,
directors, stockholders, employees, affiliates or any of their respective

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	 	 	representatives or agents, and any information, documents or materials made available to
Purchaser in certain “data rooms,” management presentations or any other form in expectation
of the transactions contemplated by this Agreement, except to the extent Seller or any of
the respective officers, directors, stockholders, employees, affiliates, representatives or
agents of Seller has knowingly misled Purchaser in connection with the foregoing.

	(c)	 	All Exhibits and Schedules hereto are hereby incorporated by reference and made a part of
this Agreement. Any fact or item which is clearly disclosed on any Schedule or Exhibit to this
Agreement in such a way as to make its relevance to a representation or representations made
elsewhere in this Agreement or to the information called for by another Schedule or other
Schedules (or Exhibit or other Exhibits) to this Agreement readily apparent shall be deemed to
be an exception to such representation or representations or to be disclosed on such other
Schedule or Schedules (or Exhibit or Exhibits), as the case may be, notwithstanding the
omission of a reference or cross-reference thereto.

SECTION 8.04. Notices. All notices, claims, demands and other communications hereunder
shall be in writing and shall be deemed given upon (a) confirmation of receipt of a facsimile
transmission; (b) confirmed delivery by a standard overnight carrier or when delivered by hand, or
(c) the expiration of three (3) business days after the day when mailed by registered or certified
mail (postage prepaid, return receipt requested), addressed to the respective parties at the
following addresses (or such other address for a party as shall be specified by like notice):

If to Purchaser:

The Orchard Enterprises, Inc.

100 Park Avenue, 2nd Floor

New York, NY 10017

Fax: 212.201.9203

Attn: Greg Scholl and Stanley Schneider, Esq.

with a copy to counsel at:

Reed Smith LLP

599 Lexington Avenue, 28th Floor

New York, NY 10022

Attn: Antone P. Manha, Jr., Esq. and David M. Grimes, Esq.

If to Seller:

Getzler Henrich & Associates LLC

295 Madison Avenue, 20th Floor

New York, NY 10017

Fax: 212.697.4812

Attn: Peter Furman and Elan Ben-Avi

and

22

 

TeeVee Toons, Inc. d/b/a TVT Records

23 East 4th Street

New York, NY 10003

Fax: 212.979.0842

Attn: Steve Gottlieb and Vera Savcic

with a copy to counsel at:

Stevens & Lee, P.C.

485 Madison Avenue, 20th Floor

New York, New York 10022

Fax: 212.319.8505

Attn: Alec P. Ostrow, Esq. and Constantine Pourakis, Esq.

SECTION 8.05. Headings; Certain Terms. The headings contained herein are for reference
purposes only and shall not affect meanings or interpretations. All references to “$” or dollars
shall be to United States dollars and all references to “days” shall be to calendar days unless
otherwise specified.

SECTION 8.06. Binding Effect; Assignment. This Agreement shall be binding upon and inure
to the benefit of the Parties hereto and their respective successors and permitted assigns. This
Agreement shall not be assigned by operation of law or otherwise; provided that Purchaser may,
without the prior consent of Seller, assign all or part of its rights or obligations under this
Agreement to one or more of its Affiliates.

SECTION 8.07. Entire Agreement. This Agreement, together with the Ancillary Documents,
represents the entire agreement and understanding between the Parties with respect to the
transactions contemplated herein. This Agreement supersedes all prior agreements, understandings,
arrangements, covenants, representations or warranties, written or oral, by any officer, employee
or representative of either Party dealing with the subject matter hereof.

SECTION 8.08. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard to the rules of
conflict of laws. Purchaser and Seller irrevocably and unconditionally consent to submit to the
jurisdiction of the Bankruptcy Court for all matters arising out of or relating to this Agreement
and the transactions contemplated herein, and the parties agree not to commence any litigation
relating thereto except in the Bankruptcy Court.

SECTION 8.09. Expenses. Except as set forth in this Agreement, whether or not the
transactions contemplated herein are consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated herein shall be paid by the party incurring
such expenses. The foregoing shall not affect the legal right, if any, that any party hereto may
have to recover expenses from any other party that breaches its obligations hereunder.

SECTION 8.10. Amendment. This Agreement may not be amended except by writing signed by
both parties hereto.

23

 

SECTION 8.11. Waiver. At any time prior to the Closing, the parties hereto may: (a)
extend the time for the performance of any of the obligations or other acts of the other parties
hereto; (b) waive any inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto applicable to such party; and (c) waive compliance with any of
the agreements or conditions contained herein applicable to such party. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.

SECTION 8.12. Counterparts; Effectiveness. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which shall constitute one
and the same agreement. This Agreement shall become effective when each party hereto shall have
received counterparts thereof signed by all the other parties hereto.

SECTION 8.13. Severability; Validity; Parties of Interest. The provisions of this
Agreement are severable, such that if any provision of this Agreement or the application thereof to
any Person or circumstance is held invalid or unenforceable, the remainder of this Agreement, and
the application of such provision to other Persons or circumstances, shall not be affected thereby.
Nothing in this Agreement, express or implied, is intended to confer upon any Person not a party to
this Agreement any rights or remedies of any nature whatsoever under or by reason of this
Agreement.

ARTICLE 9

DEFINITIONS

SECTION 9.01. Defined Terms. The terms below shall have the following meanings, as used in
this Agreement:

     “Accounts Receivable” means all trade accounts receivable and other rights to payment from
customers and the full benefit of all security for such accounts or rights to payment, including
all trade accounts receivable representing amounts receivable in respect of products or services
delivered to customers, all other accounts or notes receivable and the full benefit of all security
for such accounts or notes and any claim, remedy or other right related to any of the foregoing.

     “Acquired Assets” means the assets described in Section 1.01.

     “Additional Assumed Contracts” has the meaning set forth in Section 2.01.

     “Administrative Expenses” means post-petition administrative claims and expenses, as ordered
by the Bankruptcy Court.

     “Affiliate” means, with respect to any Person, any other Person directly or indirectly
controlling, controlled by, or under common control with such other Person.

     “Agreement” means this Asset Purchase Agreement by and among Purchaser and Seller, including
all exhibits, schedules and other documents relating hereto.

24

 

     “Ancillary Documents” has the meaning set forth in Section 3.02.

     “Assumed
Contracts” has the meaning set forth in Section 1.01(a)(ix).

     “Assumed Liabilities” has the meaning set forth in Section 1.03.

     “Auction” means the auction for the purchase and sale of Seller’s assets and Business, to take
place in accordance with the Sale Procedures Order beginning June 19, 2008 at 10:00 a.m. (Eastern
Time).

     “Avoidance Actions” means all claims and causes of action held by Seller and its estate as of
the Closing arising under Bankruptcy Code sections 544 — 550, other than section 549.

     “Bankruptcy Code” means title 11 of the United States Code.

     “Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of New
York.

     “Bankruptcy Rules” means the Federal Rules of Bankruptcy Procedures.

     “Business” means the record label business operations conducted by Seller as of the Petition
Date.

     “Chapter 11 Case” means that certain proceeding for relief filed by the Debtor under
Bankruptcy Code under Case No. 08-10562 (ALG) in the United States Bankruptcy Court for the
Southern District of New York.

     “Claims” mean losses, liabilities, claims (as defined in Section 101 of the Bankruptcy Code),
damages or expenses (including reasonable legal fees and expenses) whatsoever, whether known or
unknown, fixed, liquidated, contingent or otherwise.

     “Closing” means the consummation of the transactions contemplated herein.

     “Closing Date” has the meaning set forth in Section 2.01.

     “COBRA” means Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, and as codified in Code Section 4980B and ERISA Sections 601 through 608.

     “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the
regulations promulgated thereunder.

     “Committee” means the Official Committee of Unsecured Creditors in the Chapter 11 Case.

     “Competing Transaction” means any transfer, disposition or retention under a Chapter 11 plan
of reorganization of all or substantially all of the Acquired Assets or any significant portion
thereof, or any transfer of an ownership interest in Seller, the Business or any significant

25

 

portion thereof, in a single transaction or a series of related transactions that are effected
in accordance with the Sale Procedures Order.

     “Contracts” mean all written or material oral purchase orders, sales agreements, service
contracts, distribution agreements, sales representative agreements, employment or consulting
agreements, real property leases, other leases, product warranty or service agreements and other
commitments, agreements and undertakings of any nature, including quotations and bids outstanding
on the Closing Date to which Seller is a party or otherwise relate to, impact or arise out of the
Business or the Acquired Assets.

     “Currently Conducted” means as currently conducted and as conducted during the six month
period preceding the date of this Agreement.

     “Data Sharing Agreement” has the meaning set forth in Section 5.15.

     “Defined Benefit Pension Plan” shall have the meaning set forth in Section 3(35) of ERISA.

     “Deposit” means that Good Faith Deposit paid to Seller by the Purchaser pursuant to the Sale
Procedures Order, together with interest accrued thereon in accordance with the Sale Procedures
Order.

     “Employee Benefit Plan” means any (a) qualified or non-qualified Employee Pension Plan
(including any Multiple Employer Plans or Multi-Employer Plans), (b) Employee Welfare Benefit Plan,
or (c) other written or unwritten plan, program or arrangement, whether or not subject to ERISA and
whether or not funded, providing for employment, compensation, consulting, severance, termination
pay, deferred compensation, equity compensation, bonus, fringe benefits, retirement benefits, or
other employee benefits or remuneration of any kind.

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

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

     “Environment” shall mean soil, land, surface or subsurface strata, surface waters (including
navigable waters and ocean waters), groundwaters, drinking water supply, stream sediments, ambient
air (including indoor air), plant and animal life and any other environmental medium or natural
resource.

     “Environmental, Health and Safety Liabilities” shall mean any Liability or other
responsibility arising from or under any Environmental Law, including those consisting of or
relating to: (a) any environmental, health or safety matter or condition (including on-site or
off-site contamination, occupational safety and health and regulation of any chemical substance or
product); (b) any fine, penalty, judgment, award, settlement, legal or administrative proceeding,
damages, loss, claim, demand or response, remedial or inspection cost or expense arising under any
Environmental Law; (c) financial responsibility under any Environmental Law for cleanup costs or
corrective action, including any cleanup, removal, containment or other remediation or response
actions required by any Environmental Law (whether or not required or requested by

26

 

any Governmental Entity or any other person) and for any natural resource damages; or (d) any
other compliance, corrective or remedial measure required under any Environmental Law.

     “Environmental Laws” means any federal, state, local or foreign law (including common law),
treaty, judicial decision, regulation, rule, judgment, order, decree, injunction, permit or
governmental restriction or any agreement with any governmental authority or other third party,
relating to the environment, human health and safety or to pollutants, contaminants, wastes or
chemicals or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous
substances, wastes or materials.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules
and regulations promulgated thereunder.

     “ERISA Affiliate” means, with respect to any Person, any other Person that is a member of a
“controlled group of corporations” with, or is under “common control” with, or is a member of the
same “affiliated service group” with such Person as defined in Section 414(b), 414(c), 414(m) or
414(o) of the Code.

     “Excluded Assets” has the meaning set forth in Section 1.02.

     “Excluded Contracts” means any executory Contracts and unexpired leases or other Contract that
Purchaser determines not to assume in connection with the Agreement and the transactions
contemplated herein, as such list may be amended from time to time prior to the Closing.

     “Excluded Inventory” means the Inventory identified on Schedule 1.02(b).

     “Excluded Liabilities” has the meaning set forth in Section 1.04.

     “GAAP” means generally accepted United States accounting principles consistently applied over
all relevant periods.

     “Governmental Entity” means any court, administrative agency, regulatory body, commission or
other Governmental Entity or instrumentality of the United States or any other country or any
state, county, municipality or other governmental division of any country.

     “Hazardous Activity” shall mean the distribution, generation, handling, importing, management,
manufacturing, processing, production, refinement, Release, storage, transfer, transportation,
treatment or use (including any withdrawal or other use of groundwater) of a Hazardous Material in,
on, under, about or from any property owned or leased by Seller into the Environment and any other
act, business, operation or thing that increases the danger, or risk of danger, or poses an
unreasonable risk of harm, to persons or property on or off the property owned or leased by Seller.

     “Hazardous Material” shall mean any substance, material, chemical or waste that is listed, or
contains material amounts of one or more components that are defined, designated or classified as
hazardous, acutely hazardous, toxic, radioactive or dangerous under any applicable Environmental
Law, as well as any industrial waste, industrial wastewater sewage, asbestos or

27

 

asbestos containing material, petroleum and any derivative or by-products thereof, crude oil
or any fraction thereof, or polychlorinated biphenyls (PCBs).

     “HFA Inventory” means the Inventory identified on Schedule 1.02(a).

     “Including” shall always be read to mean “including without limitation” or “including but not
limited to.”

     “Initial Closing” shall mean the first closing where substantially all Acquired Assets, except
for the Additional Assumed Contracts, are transferred to the Purchaser.

     “Initial Closing Date” has the meaning set forth in Section 2.01.

     “Intellectual Property” means any and all (x) (i) inventions (whether patentable or
unpatentable and whether or not reduced to practice), improvements thereto, patents, patent
applications, provisional applications, patent equivalents, statutory invention registrations, and
any disclosures, revivals, renewals, reissuances, divisions, continuations, continuations-in-part,
revisions, extensions, reexaminations, or certifications relating to the foregoing, (ii)
trademarks, service marks, trade names, devices, designs, icons, logos, slogans, or Internet domain
names, or any other designation of origin, source or sponsorship, together with the goodwill
relating to any of the foregoing, (iii) copyrights (including renewals), copyrightable works, works
of authorship, and moral rights, (iv) computer software and programs (excluding commercial,
off-the-shelf software), databases, and mask works, and (v) confidential or proprietary
information, including trade secrets, know-how, knowledge, technology and technical information,
processes, formulae, discoveries, technical advances, designs or design protocols, devices,
instructions, specifications, products and methods, as well as (y) any documentation and media
constituting, describing or relating to any of the foregoing, and (z) any applications or
registrations for any of the foregoing.

     “Inventory” means all of Seller’s inventory held for resale and all of Seller’s raw materials,
work in process, finished products, wrapping, packaging and similar items, wherever located.

     “Knowledge” means the actual knowledge, after due inquiry, of the executive officers of Seller
as of the date of this Agreement.

     “Lease” shall have the meaning set forth in Section 1.01(a)(ii).

     “Liability” means any and all direct or indirect indebtedness, liabilities, obligations,
claims, damages, deficiencies or responsibilities, whether known or unknown, accrued or fixed,
absolute or contingent, matured or unmatured, secured or unsecured or determined or determinable,
whether or not of a kind required by GAAP to be set forth on a financial statement, including those
arising under any Law and those arising under any contract.

     “Liens, Claims and Other Interests” means any mortgage, pledge, hypothecation, right of
others, claim, security interest, encumbrance, lease, sublease, license, occupancy agreement,
adverse claim or interest, easement, covenant, encroachment, burden, title defect, title retention
agreement, voting trust agreement, interest, equity, option, lien, right of first refusal, charge
or

28

 

other restrictions or limitations of any nature whatsoever on the assets and properties of
Seller, including such as may arise under the Acquired Assets.

     “Masters” means all sound and audiovisual recordings, recorded masters, and tangible
embodiments of such recordings, all derivates or derivative works thereof, all copyrights and
related Intellectual Property rights associated therewith, as well as:

(A) all related rights created in connection therewith, including, without
limitation, all related rights, privileges and licenses (including, without
limitation, so called “controlled composition” licenses) granted to Seller (or its
predecessors in interest) in the various agreements pursuant to which Seller (or its
predecessors in interest) acquired rights in such sound recordings, audiovisual
recordings or recorded masters with each and every contributor of rights in such
recordings;

(B) all tape masters, reference lacquers, work parts, out-takes, all copies of each
finished phonorecord (in all configurations and versions) and all other materials
with respect to all sound recordings in Seller’s possession, custody or control;

(C) all tapes, masters, original source film, soundtracks, work parts, out-takes,
videoclips, videograms (in all configurations and versions) and all other materials
with respect to all audiovisual recordings in Seller’s possession, custody or
control; and

(D) all negatives, proofs and related elements, finished artwork, line copy,
credits and all other materials necessary for Purchaser’s use in preparing labels,
liners, inner sleeves and other packaging of sound or audiovisual recordings in all
configurations and for the advertising and promotion of the foregoing by Purchaser.

     “Material Adverse Effect” means any change, effect, event or circumstance, that, individually
or in the aggregate, is materially adverse to the Acquired Assets or the ability of the Seller to
perform its obligations under this Agreement, except for any change, effect, event, or circumstance
relating to (i) the economy or the financial markets in general, (ii) the announcement of this
Agreement or the transaction contemplated hereby, (iii) changes in applicable laws after the date
hereof, (iv) the fact that Seller is operating as a debtor-in-possession under the Bankruptcy Code,
or (v) changes in GAAP or regulatory accounting principles after the date hereof.

     “Material Contract” any executory Contract that is both (a) with a Person, including any
Affiliate of such Person, that appears on the “Schedule of Objecting Parties” that is attached as
Exhibit A to the Sale Order entered by the Bankruptcy Court on June 26, 2008, and (b) set forth on
Schedule 1.01(a)(ix).

     “Multi-Employer Plan” shall have the meaning set forth in Section 3(37) of ERISA.

     “Multiple Employer Plan” shall have the meaning set forth in Section 413 of the Code.

29

 

     “Order” means any judgment, decision, decree, injunction or similar order of any Governmental
Entity, in each case whether preliminary or final.

     “Permitted Exceptions” means imperfections of title, restrictions or encumbrances, if any,
that (a) are caused solely by Purchaser, or (b) cannot be released or cured under Bankruptcy Code
sections 363 or 365 and that either (i) would not involve material costs to correct or remove or
(ii) do not materially impair the use and operation of such asset in the Business.

     “Person” means any person or entity, whether an individual, trustee, corporation, partnership,
limited partnership, limited liability company, trust, unincorporated organization, business
association, firm, joint venture or Governmental Entity.

     “Petition Date” means February 19, 2008.

     “Proceeding” means any suit, action, proceeding or investigation (whether at law or equity,
before or by any federal, state or foreign commission, court tribunal, board, agency or
instrumentality, or before any arbitrator.

     “Publishing Entities” has the meaning set forth in Section 5.15.

     “Purchase Price” has the meaning set forth in Section 1.05.

     “Purchaser” means The Orchard Enterprises, Inc..

     “Release” shall mean any release, spill, emission, leaking, pumping, pouring, dumping,
emptying, injection, deposit, disposal, discharge, dispersal, leaching or migration on or into the
Environment or into or out of any property.

     “Sale Order” means the Order to be entered by the Bankruptcy Court approving the purchase and
sale of Seller’s Business.

     “Sale Procedures Order” means the Bankruptcy Court’s Order (A) Approving Bid Procedures for
the Debtor’s Assets, (B) Authorizing Debtor to Offer Certain Bid Protections and (C) Scheduling
Final Sale Hearing and Approving Form and Manner of Notice Thereof entered May 1, 2008.

     “Seller” means TeeVee Toons, Inc. d/b/a TVT Records, as debtor and debtor in possession.

     “Sub-Lease” has the meaning set forth in Section 5.15.

     “Subsequent Closing” means the date or dates after the Initial Closing where the Additional
Assumed Contracts are transferred to Purchaser.

     “Subsequent Closing Date” has the meaning set forth in Section 2.01.

30

 

     “Subsidiary Interests” means all of Seller’s stock, membership and other equity interests in
its Subsidiaries and Affiliates, including TVT Music, Inc. and each of its Subsidiaries.

     “Subsidiary” means, with respect to any Person, as of any date of determination, any other
Person as to which such Person owns, directly or indirectly, or otherwise controls, more than 50%
of the voting shares or other similar interests or the sole general partner interest or managing
member or similar interest of such Person.

     “Tax” or “Taxes” means any federal, state, local or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property, sales, use, transfer, registration,
value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.

     “Threat of Release” shall mean a reasonable likelihood of a Release that may require action in
order to prevent or mitigate damage to the Environment that may result from such Release.

     “WARN” means the United States Worker Adjustment and Retraining Notification Act and the rules
and regulations promulgated thereunder.

[Remainder of page intentionally blank; next pages are signature pages]

31

 

     IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be executed on their
behalf, as of the date first above written.

	 	 	 	 	 
	 	“PURCHASER”

THE ORCHARD ENTERPRISES, INC.

 	 
	 	By:  	/s/ Greg Scholl
 	 
	 	 	Name:  	Greg Scholl 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 
	 	“SELLER”

TEEVEE TOONS, INC. D/B/A TVT RECORDS, DEBTOR AND DEBTOR IN POSSESSION

 	 
	 	By:  	/s/ Steven Gottlieb
 	 
	 	 	Name:  	Steven Gottlieb 	 
	 	 	Title:  	President 	 
	 

32exv4w1

Exhibit 4.1

2006 EQUITY INCENTIVE PLAN

     1. Purpose. The purpose of this 2006 Equity Incentive Plan (the “Plan”) is to advance
the interests of Foothills Resources, Inc. (the “Company”) and its Affiliates (as defined below) by
inducing eligible individuals of outstanding ability and potential to join and remain with, or to
provide consulting or advisory services to, the Company or its Affiliates, by encouraging and
enabling eligible employees, Outside Directors (as defined below), consultants, and advisors to
acquire proprietary interests in the Company, and by providing participating eligible employees,
Outside Directors, consultants, and advisors with an additional incentive to promote the success of
the Company. These purposes are accomplished by providing for the granting of Incentive Stock
Options, Nonqualified Stock Options, Reload Options, Stock Appreciation Rights, and Restricted
Stock (all as defined below) to eligible employees, Outside Directors, consultants, and advisors.

     2. Definitions. As used in the Plan, the following terms have the meanings indicated:

          (a) “Affiliate” means a “parent corporation” or a “subsidiary corporation” (as set forth in
Code Sections 424(e) and 424(f), respectively) of the Company.

          (b) “Applicable Withholding Taxes” means the aggregate minimum amount of federal, state,
local, and foreign income, payroll, and other taxes that an Employer is required to withhold in
connection with the grant, vesting, or exercise of any Award.

          (c) “Award” means an Incentive Stock Option, a Nonqualified Stock Option, a Reload Option, a
Stock Appreciation Right, or Restricted Stock.

          (d) “Beneficiary” means the person or entity designated by the Participant, in a form approved
by the Company, to exercise the Participant’s rights with respect to an Award after the
Participant’s death. If the Participant does not validly designate a Beneficiary, or if the
designated person no longer exists, then the Participant’s Beneficiary shall be his or her estate.

          (e) “Board” means the Board of Directors of the Company.

          (f) “Cause” shall have the same meaning given to such term (or other term of similar meaning)
to any written employment or other similar agreement between the Participant and the Company or an
Affiliate for purposes of termination of employment under such agreement, and in the absence of any
such agreement or if such agreement does not include a definition of “Cause” (or other term of
similar meaning), the term “Cause” shall mean (i) any material breach by the Participant of any
agreement to which the Participant and the Company or an Affiliate are parties, (ii) any continuing
act or omission to act by the Participant which may have a material and adverse effect on the
Company’s business or on the Participant’s ability to perform services for the Company or an
Affiliate, including, without limitation, the commission of any crime (other than minor traffic
violations), or (iii) any material misconduct or material neglect of duties by the Participant in
connection with the business or affairs of the Company or an Affiliate.

 

 

          (g) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any
rulings or regulations promulgated thereunder.

          (h) “Committee” means the Board, the Compensation Committee of the Board, or such other
committee of the Board as the Board appoints to administer the Plan; provided, however, that should
Section 162(m) of the Code and Section 16 of the Securities Exchange Act of 1934 apply to Awards
under the Plan, if any member of the Committee does not qualify as both an “outside director” for
purposes of Code Section 162(m) and a “nonemployee director” for purposes of Rule 16b-3, the
remaining members of the Committee (but not less than two members) shall be constituted as a
subcommittee of the Committee to act as the Committee for purposes of the Plan.

          (i) “Commission” means the U.S. Securities and Exchange Commission.

          (j) “Company” means Foothills Resources, Inc., a Nevada corporation, and its subsidiaries.

          (k) “Company Stock” means common stock, par value $0.001 per share, of the Company. In the
event of a change in the capital structure of the Company affecting the common stock (as provided
in Section 14), the shares resulting from such a change in the common stock shall be deemed to be
Company Stock within the meaning of the Plan.

          (l) “Date of Grant” means the date on which the Committee grants an Award or such future date
as may be determined by the Committee.

          (m) “Disability” means a disability within the meaning of Code Section 22(e)(3).

          (n) “Employer” means the Company and each Affiliate that employs one or more Participants.

          (o) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (p) “Fair Market Value” means on any given date the fair market value of Company Stock as of
such date, as determined by the Committee. If the Common Stock is listed on a national securities
exchange or traded on the over-the-counter market, Fair Market Value means the closing selling
price or, if not available, the closing bid price or, if not available, the high bid price of the
Common Stock quoted on such exchange, or on the over-the-counter market as reported by the NASDAQ
Stock Market (“NASDAQ”), or if the Common Stock is not listed on NASDAQ, then by the National
Quotation Bureau, Incorporated, on the day immediately preceding the day on which the Award is
granted or exercised, as the case may be, or, if there is no selling or bid price on that day, the
closing selling price, closing bid price, or high bid price on the most recent day which precedes
that day and for which such prices are available.

          (q) “Incentive Stock Option” means an Option that qualifies for favorable income tax treatment
under Code Section 422.

2

 

          (r) “Mature Shares” means shares of Company Stock for which the shareholder has good title,
free and clear of all liens and encumbrances, and which the shareholder either (i) has held for at
least 6 months or (ii) has purchased on the open market.

          (s) “Nonqualified Stock Option” means an Option that is not an Incentive Stock Option.

          (t) “Option” means a right to purchase Company Stock granted under the Plan, at a price
determined in accordance with the Plan.

          (u) “Outside Director” means a member of the Board who is not an employee of, or a consultant
or advisor to, the Company or an Affiliate as of the Date of Grant.

          (v) “Participant” means any employee, Outside Director, consultant, or advisor (including
independent contractors, professional advisors, and service providers) of the Company or an
Affiliate who receives an Award under the Plan.

          (w) “Restricted Stock” means Company Stock awarded under Section 9 of the Plan.

          (x) “Reload Option” means a reload option grant made in accordance with Section 7 of the Plan.

          (y) “Rule 16b-3” means Rule 16b-3 of the Commission promulgated under the Exchange Act. A
reference in the Plan to Rule 16b-3 shall include a reference to any corresponding rule (or number
redesignation) of any amendments to Rule 16b-3 enacted after the effective date of the Plan’s
adoption.

          (z) “Securities Act” means the Securities Act of 1933, as amended.

          (aa) “Stock Appreciation Right” means a right to receive amounts awarded under Section 8.

     3. Stock Subject to Section 14 of the Plan, there shall be reserved for issuance under
the Plan an aggregate of 2,000,000 shares of Company Stock, which may be authorized but unissued
shares, or shares held in the Company’s treasury, or shares purchased from stockholders expressly
for use under the Plan. Shares allocable to Awards granted under the Plan that expire, are
forfeited, are cancelled without the delivery of the shares, or otherwise terminate unexercised,
may again be available for Awards under the Plan For purposes of determining the number of shares
that are available for Awards under the Plan, the number shall also include the number of shares
surrendered by a Participant actually or by attestation or retained by the Company in payment of
Applicable Withholding Taxes, and any Mature Shares surrendered by a Participant upon exercise of
an Option or in payment of Applicable Withholding Taxes. Shares issued under the Plan through the
settlement, assumption, or substitution of outstanding awards or obligations to grant future awards
as a condition of an Employer acquiring another entity shall not reduce the maximum number of
shares available for delivery under the Plan.

3

 

     4. Eligibility. Subject to the terms of the Plan, the Committee shall have the power
and complete discretion, as provided in Section 13, to select eligible employees, Outside
Directors, consultants, and advisors to receive an Award under the Plan; provided, however, that
any Award shall be subject to the following terms and conditions:

          (a) Only those individuals who are employees (including officers) of the Company or an
Affiliate at the Date of Grant shall be eligible to receive an Incentive Stock Option under the
Plan.

          (b) All employees (including officers) and Outside Directors of, or consultants and advisors
to, either the Company or an Affiliate at the Date of Grant shall be eligible to receive
Nonqualified Stock Options, Stock Appreciation Rights, and Restricted Stock; provided, however,
that Nonqualified Stock Options, Stock Appreciation Rights, and Restricted Stock may not be granted
to any’ such consultants and advisors unless (i) bona fide services have been or are to be rendered
by such consultant or advisor and (ii) such services are not m connection with the offer or sale of
securities in a capital raising transaction.

          (c) Anything herein to the contrary notwithstanding, any recipient of an Award under the Plan
must be includable in the definition of “employee” provided in the general instructions to Form S-8
Registration Statement under the Securities Act.

          (d) The grant of an Award shall not obligate an Employer to pay any employee, Outside
Director, consultant, or advisor any particular amount of remuneration, to continue the employment
of the employee or engagement of the Outside Director, consultant, or advisor after the grant, or
to make further grants to the employee, Outside Director, consultant, or advisor at any time
thereafter.

     5. Stock Options.

          (a) The Committee may make grants of Options to Participants. Except as otherwise provided
herein, the Committee shall determine the number of shares for which Options are granted, the
Option exercise price per share, whether the Options are Incentive Stock Options or Nonqualified
Stock Options, and any other terms and conditions to which the Options are subject.

          (b) The exercise price of shares of Company Stock covered by an Option shall be not less than
100 percent of the Fair Market Value of Company Stock on the Date of Grant Except as provided in
Section 14, (i) the exercise price of an Option may not be decreased after the Date of Grant and
(ii) a Participant may not surrender an Option in consideration for the grant of a new Option with
a lower exercise price or another Award. If a Participant’s Option is cancelled before its
termination date, the Participant may not receive another Option within 6 months of the
cancellation unless the exercise price of such Option is no less than the exercise price of the
cancelled Option.

          (c) All Options granted hereunder shall be subject to the following terms and conditions.

4

 

               (i) All Options shall be evidenced by a written stock option agreement (the “Stock Option
Agreement”) setting forth all the relevant terms of the Award.

               (ii) No Option shall be exercisable more than 10 years after the Date of Grant.

               (iii) The aggregate Fair Market Value, determined at the Date of Grant, of shares for which
Incentive Stock Options become exercisable by a Participant during any calendar year shall not
exceed $100,000

               (iv) If an Incentive Stock Option is granted to an employee who owns, at the Date of Grant,
more than 10 percent of the total combined voting power of all classes of stock of the Company or
an Affiliate, then (A) the option price of the shares subject to the Incentive Stock Option shall
be at least 110% of the Fair Market Value of the Company Stock at the Date of Grant and (B) such
Incentive Stock Option shall not be exercisable after the expiration of 5 years from the Date of
Grant.

               (v) If the employment of an employee by, or the services of an Outside Director for, or
consultant or advisor to, the Company or an Affiliate should be terminated for Cause or terminated
voluntarily by the grantee, then any outstanding Option shall terminate immediately. If such
employment or services terminates for any other reason, unless otherwise provided in a written
employment, consulting or other related agreement executed between the Company and the employee,
Outside Director or consultant or advisor, any such Option exercisable as of the date of
termination may be exercised at any time within 3 months of termination. For purposes of this
subsection, (A) the retirement of an individual either pursuant to a pension or retirement plan
maintained by the Company or an Affiliate or at the applicable normal retirement date prescribed
from time to time by the Company shall be deemed to be termination of the individual’s employment
other than voluntarily or for Cause, and (B) an individual who leaves the employ or services of the
Company or an Affiliate to become an employee or Outside Director of, or a consultant or advisor
to, an entity that has assumed the Option as a result of a corporate reorganization or the like
shall not be considered to have terminated employment or services.

               (vi) If the holder of an Option under the Plan ceases employment or services because of
Disability while employed by, or while serving as an Outside Director for or a consultant or
advisor to, the Company or an Affiliate, then such Option may, subject to the provisions of
subsection (viii) below and the provisions of any effective written employment, consulting or other
related agreement executed between the Company and the employee, Outside Director or consultant or
advisor, be exercised at any time within 1 year after the termination of employment or services due
to the Disability.

               (vii) If the holder of an Option under the Plan dies (A) while employed by, or while serving
as an Outside Director for or a consultant or advisor to, the Company or an Affiliate, or (B)
within 3 months after the termination of employment or services other than voluntarily by the
grantee or for Cause, then such Option may, subject to the provisions of subsection (viii) below
and the provisions of any effective written employment, consulting or other related agreement
executed between the Company and the employee, Outside Director or

5

 

consultant or advisor,, be exercised by the Participant’s Beneficiary at any time within 1
year after the Participant’s death.

               (viii) An Option may not be exercised after termination of employment, termination of
directorship, termination of consulting or advisory services, Disability or death except to the
extent that the bolder was entitled to exercise the Option at the time of such termination or as
otherwise provided in a currently effective written employment, consulting or other related
agreement executed between the Company and the employee, Outside Director or consultant or advisor,
and in any event may not be exercised after the expiration of the Option in accordance with the
terms of the grant.

               (ix) The employment relationship of an employee of the Company or an Affiliate shall be
treated as continuing intact while the employee is on military or sick leave or other bona fide
leave of absence if such leave does not exceed 90 days or, if longer, so long as the employee’s
right to reemployment is guaranteed either by statute or by contract.

          (d) The holder of any Option granted under the Plan shall have none of the rights of a
stockholder with respect to the shares covered by the Option until such stock shall be transferred
to the holder upon the exercise of the Option.

     6. Grants to Outside Directors. Awards, other than Incentive Stock Options, may be
made to Outside Directors. The Committee shall have the power and complete discretion to select
Outside Directors to receive Awards. The Committee shall have the complete discretion, under
provisions consistent with Section 13, to determine the terms and conditions, the nature of the
Award and the number of shares to be allocated as part of each Award for each Outside Director.
The grant of an Award shall not obligate the Company to make further grants to the Outside Director
at any time thereafter or to retain any person as a director for any period of time.

     7. Reload Options. The Committee may grant Options with a reload feature. A reload
feature shall only apply when the exercise price is paid by delivery of Company Stock in accordance
with Section 10. The Stock Option Agreement for the Option containing the reload feature shall
provide that the holder of the Option shall receive, contemporaneously with the payment of the
exercise price in shares of Common Stock, a Reload Option to purchase that number of shares of
Company Stock equal to the sum of (i) the number of shares used to exercise the Option, and (ii)
with respect to Nonqualified Stock Options, the number of shares used to satisfy Applicable
Withholding Taxes. The terms of the Plan applicable to the Option shall be equally applicable to
the Reload Option with the following exceptions: (i) the option price per share of Company Stock
deliverable upon the exercise of the Reload Option (A) in the case of a Reload Option that is an
Incentive Stock Option being granted to a Participant who owns more than 10 percent of the total
combined voting power of all classes of stock of the Company or an Affiliate, shall be 1l0% of the
Fair Market Value of a share of Company Stock on the Date of Grant of the Reload Option, and (B) in
the case of a Reload Option which is an Incentive Stock Option being granted to any other
Participant, or which is a Nonqualified Stock Option, shall be the Fair Market Value of a share of
Company Stock on the Date of Grant of the Reload Option; and (ii) the term of the Reload Option
shall be evidenced by an appropriate amendment to the Stock Option Agreement for the Option which
gave rise to the Reload Option. If the exercise

6

 

price of an Option containing a reload feature is paid in cash and not in shares of Company
Stock, the reload feature shall have no application with respect to such exercise.

     8. Stock Appreciation Rights. Concurrently with, or subsequent to, the award of any
Option to purchase one or more shares of Common Stock, the Committee may, in its sole discretion,
award to the optionee with respect to each share of Common Stock covered by an Option a related
Stock Appreciation Right, which permits the optionee to be paid the appreciation on the related
Option in lieu of exercising the Option. The Committee shall establish as to each award of Stock
Appreciation Rights the terms and conditions to which the Stock Appreciation Rights are subject,
provided, however, that the following terms and conditions shall apply to all Stock Appreciation
Rights:

          (a) A Stock Appreciation Right granted with respect to an Incentive Stock Option must be
granted together with the related Option. A Stock Appreciation Right granted with respect to a
Nonqualified Stock Option may be granted together with, or subsequent to, the grant of the related
Option.

          (b) A Stock Appreciation Right shall entitle the Participant, upon exercise of the Stock
Appreciation Right, to receive in exchange an amount equal to the excess of (i) the Fair Market
Value on the date of exercise of Company Stock covered by the surrendered Stock Appreciation Right
over (ii) the Fair Market Value of Company Stock on the Date of Grant of the Stock Appreciation
Right. The Committee may limit the amount that the Participant will be entitled to receive upon
exercise of a Stock Appreciation Right.

          (c) A Stock Appreciation Right may be exercised only if and to the extent the underlying
Option is exercisable, and a Stock Appreciation Right may not be exercisable in any event more than
10 years after the Date of Grant.

          (d) A Stock Appreciation Right may only be exercised at a time when the Fair Market Value of
Company Stock covered by the Stock Appreciation Right exceeds the Fair Market Value of Company
Stock on the Date of Grant of the Stock Appreciation Right. The Stock Appreciation Right may
provide for payment in Company Stock or cash, or a fixed combination of Company Stock and cash, or
the Committee may reserve the right to determine the manner of payment at the time the Stock
Appreciation Right is exercised.

          (e) To the extent a Stock Appreciation Right is exercised, the underlying Option shall be
cancelled, and the shares of Company Stock represented by the Option shall no longer be available
for Awards under the Plan.

     9. Restricted Stock Awards.

          (a) The Committee may make grants of Restricted Stock to a Participant. The Committee shall
establish as to each award of Restricted Stock the terms and conditions to which the Restricted
Stock is subject, including the period of time before which all restrictions shall lapse and the
Participant shall have full ownership of the Company Stock The Committee in its discretion may
award Restricted Stock without cash consideration. All Restricted Stock Awards shall be evidenced
by a Restricted Stock Agreement setting forth all the relevant terms of the Award.

7

 

          (b) Restricted Stock may not be sold, assigned, transferred, pledged, hypothecated, or
otherwise encumbered or disposed of until the restrictions have lapsed or been removed.
Certificates representing Restricted Stock shall be held by the Company until the restrictions
lapse, and the Participant shall provide the Company with appropriate stock powers endorsed in
blank.

     10. Method of Exercise of Options.

          (a) Options may be exercised by the Participant (or his or her legal guardian or personal
representative) by giving written notice of the exercise to the Company at its principal office
(attention of the Corporate Secretary) pursuant to procedures established by the Company. The
notice shall state the number of shares the Participant has elected to purchase under the Option.
Such notice shall be accompanied, or followed within 10 days of delivery thereof, by payment of the
full exercise price of such shares The exercise price may be paid in cash by means of a check
payable to the order of the Company or, if the terms of an Option permit, (i) by delivery or
attestation of Mature Shares (valued at their Fair Market Value) in satisfaction of all or any part
of the exercise price, (ii) by delivery of a properly executed exercise notice with irrevocable
instructions to a broker to deliver to the Company the amount necessary to pay the exercise price
from the sale or proceeds of a loan from the broker w the respect to the sale of Company Stock or a
broker loan secured by the Company Stock, or (iii) a combination of (i) and (ii)

          (b) (Unless prior to the exercise of the Option the shares issuable upon such exercise have
been registered with the Securities and Exchange Commission pursuant to the Securities Act of 1933,
the notice of exercise shall be accompanied by a representation or agreement of the individual or
entity exercising the Option to the Company to the effect that such shares are being acquired for
investment purposes and not with a view to the distribution thereof, and such other documentation
as may be required by the Company, unless in the opinion of counsel to the Company such
representation, agreement or documentation is not necessary to comply with any such act.

          (c) The Company shall not be obligated to deliver any Company Stock until the shares have been
listed on each securities exchange or market on which the Company Stock may then be listed or until
there has been qualification under or compliance with such federal or state laws, rules or
regulations as the Company may deem applicable. The Company shall use reasonable efforts to obtain
such listing, qualification and compliance.

     11. Tax Withholding. Each Participant shall agree as a condition of receiving an
Award payable in the form of Company Stock to pay to the Employer, or make an arrangement
satisfactory to the Employer regarding the payment to the Employer of, Applicable Withholding
Taxes. Under procedures established by the Committee or its delegate, a Participant may elect to
satisfy Applicable Withholding Taxes by (i) making a cash payment or authorizing additional
withholding from cash compensation, (ii) delivering Mature Shares (valued at their Fair Market
Value), or (iii) if the applicable Stock Option Agreement or Restricted Stock Agreement permits,
having the Company retain that number of shares of Company Stock (valued at their Fair Market
Value) that would satisfy all or a specified portion of the Applicable Withholding Taxes.

8

 

     12. Transferability of Awards. Awards shall not be transferable except by will or by
the laws of descent and distribution.

     13. Administration of the Plan.

          (a) The Committee shall administer the Plan. Subject to the terms and conditions set forth in
the Plan, the Committee shall have general authority to impose any term, limitation, or condition
upon an Award that the Committee deems appropriate to achieve the objectives of the Award and of
the Plan. The Committee may adopt rules and regulations for carrying out the Plan with respect to
Participants and Beneficiaries. The interpretation and construction of any provision of the Plan
by the Committee shall be final and conclusive as to any Participant or Beneficiary.

          (b) The Committee shall have the power to amend the terms and conditions of previously granted
Awards so long as the terms as amended are consistent with the terms of the Plan and provided that
the consent of the Participant is obtained with respect to any amendment that would be detrimental
to him or her, except that such consent will not be required if such amendment is for the purpose
of complying with Rule 16b-3 or any requirement of the Code or of other securities laws applicable
to the Award.

          (c) The Committee shall have the power and complete discretion (t) to delegate to any
Individual, or to any group of individuals employed by the Company or any Affiliate, the authority
to grant Awards under the Plan and (ii) to determine the terms and limitations of any delegation of
authority; provided, however, that the Committee may not delegate power and discretion to the
extent such action would cause noncompliance with, or the imposition of penalties, excise taxes, or
other sanctions under, applicable corporate law, Rule 16b-3, Code Section 162(m) or 409A, or any
other applicable securities or tax law.

          (d) If a Participant or former Participant (A) becomes associated with, recruits or solicits
customers or other employees of the Company or an Affiliate, is employed by, renders services to,
or owns any interest in (other than any nonsubstantial interest, as determined by the Committee)
any business that is in competition with the Company or any of its Affiliates, or (B) engages in,
or has engaged in, conduct which the Committee determines to be detrimental to the interests of the
Company or any of its Affiliates, the Committee may, in its sole discretion,

               (i) cancel all outstanding Awards, including immediately terminating any Options held by the
Participant, regardless of whether then exercisable,

               (ii) require the Participant or former Participant to repay any payment or benefit received
under an Award within the previous 2 years, and/or

               (iii) offset any other amounts owed to the Participant by any payment received under an Award
within the previous 2 years.

     14. Change in Capital Structure.

          (a) In the event of a stock dividend, stock split, or combination of shares, share exchange,
share distribution, recapitalization or merger in which the Company is the surviving

9

 

corporation, a spin-off or split-off of a subsidiary or Affiliate, or other change in the
Company’s capital stock (including, but not limited to, the creation or issuance to shareholders
generally of rights, options, or warrants for the purchase of common stock or preferred stock of
the Company), the aggregate number and kind of shares of stock or securities of the Company to be
subject to the Plan and to Awards then outstanding or to be granted, the maximum number of shares
or securities which may be delivered under the Plan under Sections 3(a), 3(b), or 9, the per share
exercise price of Options, the terms of Awards, and other relevant provisions shall be
proportionately and appropriately adjusted by the Committee in its discretion, and the
determination of the Committee shall be binding on all persons. If the adjustment would produce
fractional shares with respect to any unexercised Option, the Committee may adjust appropriately
and in a nondiscriminatory manner the number of shares covered by the Option so as to eliminate the
fractional shares.

          (b) If the Company is a party to a consolidation or a merger in which the Company is not the
surviving corporation, a transaction that results in the acquisition of substantially all of the
Company’s outstanding stock by a single person or entity, or a sale or transfer of substantially
all of the Company’s assets, the Committee may take such actions with respect to outstanding Awards
as the Committee deems appropriate.

     15. Effective Date. The effective date of the Plan is April 4, 2006. The Plan shall
be submitted to the shareholders of the Company for approval. Until (i) the Plan has been approved
by the Company’s shareholders, and (ii) the requirements of any applicable federal or state
securities laws have been met, no Restricted Stock shall be awarded, and no Option shall be granted
or exercisable, that is not contingent on these events.

     16. Termination, Modification. If not sooner terminated by the Board, this Plan shall
terminate at the close of business on April 4, 2016. No Awards shall be made under the Plan after
its termination. The Board may amend or terminate the Plan as it shall deem advisable; provided,
however, that no change shall be made that increases the total number of shares of Company Stock
reserved for issuance pursuant to Awards granted under the Plan (except pursuant to Section 14), or
reduces the minimum exercise price for Options, or exchanges an Option for another Award, unless
such change is authorized by the shareholders of the Company. Except as otherwise specifically
provided herein, a termination or amendment of the Plan shall not, without the consent of the
Participant, adversely affect a Participant’s rights under an Award previously granted to him or
her.

     17. American Jobs Creation Act of 2004.

          (a) It is intended that the Plan comply in all applicable respects with the American Jobs
Creation Act of 2004 and Code Section 409A, as either may be amended from time to time, and any
rulings, regulations, or other guidelines promulgated under either or both statutes (such statutes,
rulings, regulations and other guidelines to be referred to collectively herein as “Section 409A”),
This Plan, and any amendments thereto, shall therefore be interpreted and implemented at all times
so as to (i) ensure compliance with Section 409A and (ii) avoid any penalty or early taxation of
any payment or benefit under the Plan.

10

 

          (b) Anything herein to the contrary notwithstanding, the Board shall approve and implement
such amendments as it deems necessary or desirable to ensure compliance with Section 409A and to
avoid any penalty or early taxation of any payment or benefit under this Plan; provided, however,
that no change shall be made that increases the total number of shares of Company Stock reserved
for issuance pursuant to Awards granted under the Plan (except pursuant to Section 14), or reduces
the minimum exercise price for Options, or exchanges an Option for another Award, unless such
change is authorized by the shareholders of the Company. No such amendment shall require the
consent of any Participant.

     18. Interpretation and Venue. Except to the extent preempted by applicable federal
law, the terms of this Plan shall be governed by the laws of the State of Nevada without regard to
its conflict of laws rules.

11

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