Document:

EX-10.5

Exhibit 10.5

January 31, 2008

Phillip A. Damaska

c/o Exide Technologies

13000 Deerfield Parkway

Building 200

Alpharetta, Georgia 30004

Re: Amendment to Exide Technologies Stock Options

Dear Phil:

As originally adopted, the Exide Technologies 2004 Stock Incentive Plan (as amended and
restated, the “Plan”) based the exercise price for stock options granted by Exide Technologies (the
“Company”) under the Plan on a formula set forth in the Company’s outstanding warrant agreement,
which provides for an exercise price per share equal to the 10-day trailing average closing price
per share of the Company’s common stock prior to the date of grant of the option. Such exercise
prices in the case of certain options are less than the closing sale price per share of the
Company’s common stock on the NASDAQ Global Market (“Fair Market Value”) on the respective dates of
grant of such options. As a result, there is a risk to you, as holder of such options, that the
current exercise price currently in effect may be considered to be less than the Fair Market on the
date of grant. Unless remedial action is taken to adjust the Original Exercise Price (as defined
below) of these below market options, you may be subject to adverse tax consequences, including an
additional 20% tax under Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as
amended (the “Code”). Such adverse tax consequences may be avoided if the amendments described
below are made to the affected options.

Accordingly, the Company is proposing to amend each of your affected stock options referenced
below (the “Eligible Options”) to increase the exercise price currently in effect (the “Original
Exercise Price”) for the Eligible Options to the Fair Market Value on the date of grant of the
Eligible Option (the “Adjusted Exercise Price”) to avoid the adverse tax consequences described
above. The additional 20% tax under Section 409A does not apply to options that vested on or prior
to December 31, 2004 or that were granted with an exercise price at or above the Fair Market Value
on the date of grant.

1. Amendment. If you acknowledge and accept this amendment (this “Amendment”) of the Eligible
Options to increase the exercise price of those Eligible Options:

	 	(a)	 	the Original Exercise Price of each Eligible Option will
increase to the Adjusted Exercise Price; and

	 	(b)	 	the Company will pay to you a special cash payment(s) (any such
payment, a “Cash Payment”) payable with respect to each Eligible Option that is
amended pursuant to this Amendment in an amount determined by multiplying (1)
the amount by which the Adjusted Exercise Price exceeds the Original Exercise
Price for that Eligible Option by (2) the number of shares of the Company’s
common stock purchasable under that Eligible Option at the Adjusted Exercise
Price, as set forth below:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Number of Eligible	 	Original Exercise	 	Adjusted Exercise	 	Amount of Cash
	Grant Date	 	Options	 	Price	 	Price	 	Payment
	September 21, 2006

	 	 	34,900	 	 	$	3.64	 	 	$	3.66	 	 	$	698.00	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	March 22, 2007

	 	 	16,795	 	 	$	7.559	 	 	$	8.84	 	 	$	21,514.40	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

Under applicable Internal Revenue Service regulations, no Cash Payment may be made in
the same year that your Eligible Option is amended. Accordingly, subject to your continued
employment with the Company (as discussed below), a Cash Payment will be paid (1) on the
first regular payroll date after January 1, 2009 with respect to any portion of your amended
Eligible Options that has vested as of December 31, 2008 and (2) on the last business day of
the quarter in which any portion of your amended Eligible Options vests after December 31,
2008. Any Cash Payment, when made, will be subject to all applicable withholding taxes
required to be withheld by the Company.

With respect to any portion of your amended Eligible Options that has vested as of the date
of this Amendment, you already have qualified for the Cash Payment related to such vested
Eligible Options, and such Cash Payment will be paid to you on the Company’s first regular
payroll date after January 1, 2009.

With respect to any portion of your Eligible Options that has not vested as of the date
of this Amendment, you must remain employed by the Company on the date that each portion of
your amended Eligible Options vests to receive the related Cash Payment. For illustrative
purposes:

	 	(i)	 	the Cash Payment with respect to each portion of your amended
Eligible Options that vests during 2008 but after the date of this Amendment
will be paid on the Company’s first regular payroll date after January 1, 2009,
but only to the extent that you remain an employee of the Company on the date
that such portion vests; and

	 	(ii)	 	the Cash Payment with respect to each portion of your amended
Eligible Options that vests after December 31, 2008 will be paid on the last
business day of the quarter in which such portion vests, but only to the extent
you remain an employee of the Company on the date that such portion vests
(e.g., a Cash Payment would be paid on March 31, 2009 with respect to the
portion of your amended Eligible Options that vests during the first calendar
quarter of 2009 if you remain an employee of the Company on the vesting date(s)
during such quarter).

2. Accurate Description of Eligible Options. You acknowledge that the above table accurately
sets forth your Eligible Options.

3. Entire Agreement. This Amendment, together with the formal Stock Option Agreement (“Option
Agreement”) between you and the Company evidencing each of your Eligible Options (to the extent not
expressly amended hereby), and the Plan, represent the entire agreement of the parties with respect
to your Eligible Options and supersede any and all previous contracts, arrangements or
understandings between you and the Company with respect to such Eligible Options. This Amendment
may be amended at any time only by means of a writing signed by you and an authorized officer of
the Company.

4. Continuation of Option Agreements. Except for the foregoing increases to the exercise
prices per share for the Eligible Options, no other terms or provisions of the Option Agreement for
such Eligible Options or the Plan have been modified as a result of this Amendment, and those terms
and provisions continue in full force and effect.

5. Binding Effect. Except as otherwise provided in this Amendment, the Option Agreement (to
the extent not expressly amended hereby) or the Plan, every covenant, term and provision of this
Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective
heirs, legatees, legal representatives, successors, transferees and assigns.

6. Modifications. This Amendment, the Option Agreement or the Plan may be modified or amended
at any time by the Committee pursuant to Section 4 of the Plan (the “Committee”), provided that
your consent must be obtained for any modification that adversely alters or impairs any rights or
obligations under this Amendment, unless there is an express Plan provision permitting the
Committee to act unilaterally to make the modification.

7. Headings. Section and other headings contained in this Amendment are for reference
purposes only and are not intended to describe, interpret, define or limit the scope or intent of
this Amendment or any provision hereof.

8. Severability. Every provision of this Amendment, the Option Agreement (to the extent not
expressly amended hereby) or the Plan is intended to be severable. If any term hereof is illegal
or invalid for any reason, such illegality or invalidity shall not affect the validity or legality
of the remaining terms of this Amendment.

9. Governing Law. This Amendment shall be interpreted, administered and otherwise subject to
the laws of the State of Delaware (disregarding choice-of-law provisions).

10. Counterparts. This Amendment may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument.

To acknowledge and agree to the amendments described above, please execute and date this
Amendment where indicated on the attached signature page and return it to me by February 18, 2008,
which is the date this Amendment will become effective, at:

Brad S. Kalter

c/o Exide Technologies

13000 Deerfield Parkway

Building 200

Alpharetta, Georgia 30004

If you choose not to agree to amend your Eligible Options, you may be subject to the adverse
tax consequences of section 409A with respect to your Eligible Options. You will have sole
responsibility for any taxes, penalties or interest you may incur under Section 409A (and similar
state tax laws), and the Company will not reimburse you for any such taxes, penalties or interest.
No part of this Amendment should be relied upon as tax advice. The Company recommends that you
consult with your personal tax, financial and legal advisors to determine the tax and other
consequences of accepting or declining this Amendment.

Descriptions of the potential adverse tax consequences of Section 409A set forth herein are
for information purposes only and are not tax, financial or legal advice. Such information does
not constitute an opinion and is not intended or written to be used, and cannot be used, by any
taxpayer for the purpose of avoiding taxes, penalties or interest that may be imposed on the
taxpayer. You should not act upon this information without consulting with your personal tax,
financial and legal advisors.

[Signature page follows]

1

BY YOUR SIGNATURE BELOW, along with the signature of the Company’s authorized
representative, you and the Company agree that the Eligible Options listed above are amended and
will continue to be governed by the terms and conditions of this Amendment, the Option Agreement
(to the extent not expressly amended hereby) and the Plan.

EXIDE TECHNOLOGIES

By:      /s/ Barbara A. Hatcher     

Name: Barbara A. Hatcher

Title: Executive Vice President & General Counsel

Address: 13000 Deerfield Parkway

Building 200

Alpharetta, Georgia 30004

The undersigned hereby accepts this Amendment of the Option Agreement(s) relating to the
Eligible Options referenced above to increase the Original Exercise Price of such Eligible Options
to the Adjusted Exercise Price as set forth in this Amendment and the other terms of the Option
Agreement (to the extent not expressly amended hereby) and the Plan.

By:      /s/ Phillip A. Damaska     

Name: Phillip A. Damaska

Address:

2Filed by Bowne Pure Compliance

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is entered into as of February 20, 2008 (the
“Effective Date”) between Digital Music Group, Inc., a Delaware corporation (“DMGI”), and Nathan
Fong, a resident of 208 Melbourne Road, Great Neck, New York 11021 (the “Executive”).

Agreement

In consideration of the promises and the terms and conditions set forth in this Agreement, the
parties agree as follows:

1. Position and Duties. During the term of this Agreement, DMGI will employ
Executive, and Executive will serve DMGI as its Chief Financial Officer, or such other position as
assigned by the CEO. As such, Executive shall have such responsibilities, duties and authority as
reasonably accorded to and expected of this position. Subject to the terms of Sections 7.5 and 8.4
hereof, additional or different duties, titles or positions may from time to time be assigned to or
taken from Executive by the CEO of DMGI. Executive will report directly to the CEO. DMGI will
not materially change Executive’s role as a critical executive in the finance function as relates
to activities including but not limited to managing finance function staff; managing quarterly,
annual and other relevant financial reporting to the SEC; overseeing pro forma financial
projections; and the like; although it is understood that DMGI may assign and re-assign different
roles to its financial executives including Executive, as well as vary titles, specific duties,
reporting lines, and the like.

2. Performance of Duties. Executive will be based at and perform his duties under
this Agreement primarily at the New York, NY offices of DMGI. Executive hereby represents and
warrants that he is free to enter into and fully perform this Agreement and the agreements referred
to herein without breach of any agreement or contract to which he is a party or by which he is
bound. Executive hereby further represents and warrants that he has provided DMGI with copies of
any employment, confidentiality, non-competition or non-solicitation agreements currently binding
upon him.

3. Exclusive Service. Executive shall devote his full time and efforts (from a
business perspective) exclusively to this employment and apply all his skills, effort and
experience to the performance of his duties and advancing DMGI’s interests. Executive shall not be
engaged in any other business activity pursued for salary, fees, profit, gain or other pecuniary
advantage if such activity interferes with Executive’s duties and responsibilities hereunder.
Executive will not engage in any professional consulting activity nor serve on any corporate boards
except with the prior written approval of DMGI’s CEO, and Executive will otherwise refrain from
engaging in any activities inconsistent or in conflict with the performance of his duties
hereunder. However, the foregoing limitations shall not be construed as prohibiting Executive from
making personal investments in a passive form or manner that will not require his services in the
operation or affairs of the companies or enterprises in which such investments are made or from
engaging in charitable, civic or community activities that do not interfere with his duties to
DMGI.

 

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4. Compliance with Policies. DMGI has established policies, procedures and practices,
and Executive will comply with and be bound by all such policies, procedures and practices from time to time in effect during Executive’s employment to the extent DMGI has
informed Executive thereof. Executive will be employed in a position of leadership within DMGI and
will be expected to faithfully adhere to, execute and fulfill all corporate policies established by
DMGI, now and in the future, in addition to establishing systems for monitoring compliance with
such policies by other officers, employees and directors, particularly DMGI’s Code of Business
Conduct.

5. Confidential or Proprietary Information and Inventions.

5.1 Company Information. Executive agrees at all times during the term of his
employment and thereafter, to hold in strictest confidence and not to use, except for the benefit
of DMGI, or to disclose to any person, firm or corporation (except within the scope of his
employment) without written authorization of the CEO of DMGI, any Confidential Information of DMGI.
Executive understands that “Confidential Information” means any DMGI financial or operating
information, contents of music libraries, data bases, technical data, trade secrets or know-how,
including, but not limited to, research, product plans, products and processes, services, customer
lists, channel partner lists, target acquisition lists and customers, channel partners and target
acquisitions (including, but not limited to, customers, channel partners and target acquisitions of
DMGI on whom Executive called or with whom Executive became acquainted during the term of his
employment), market data, software, inventions, music processing techniques, formulas, technology,
designs, drawings, engineering, hardware configuration information, marketing, financial reports or
other business information disclosed to Executive by DMGI or prepared by Executive during his
employment by DMGI, either directly or indirectly, in writing, orally, by drawings, or by
observation of documents, technology or equipment. DMGI and Executive acknowledge that
Confidential Information does not include any of the foregoing items which have become publicly
known and made generally available through no wrongful act of Executive’s or of others who were
under confidentiality obligations as to the item or items involved.

5.2 Third Party Information. Executive recognizes that DMGI has received and in the
future will receive from third parties (including, but not limited to, vendors, customers, channel
partners and acquisition targets) their confidential or proprietary information subject to a duty
on DMGI’s part to maintain the confidentiality of such information and to use it only for certain
limited purposes. Executive agrees to hold all such confidential or proprietary information in the
strictest confidence and not to disclose it to any person, firm or corporation or to use it except
as necessary in carrying out his work for DMGI consistent with DMGI’s agreement with such third
party.

5.3 No Prior Inventions. Executive represents that, as of the Effective Date of this
Agreement, other than musical composition and sound recording copyrights, he has no inventions,
original works of authorship, developments, improvements or trade secrets which were made by him
prior to his employment with DMGI, which relate to DMGI’s business, operations, digitization
processes, music library or research and development.

5.4 Future Inventions. DMGI shall own all right, title and interest (including patent
rights, copyrights, trade secret rights, mask work rights, sui generis database rights and all
other intellectual and industrial property rights of any sort) to any and all inventions (whether
or not patentable), works of authorship, mask works, designs, know-how, ideas and information made
or conceived or reduced to practice, in the whole or in part, by Executive during the term of his
employment with DMGI to and only to the fullest extent allowed by applicable law; provided,
however, the foregoing shall only apply to any of the foregoing that are directly related
to the business of DMGI (collectively referred to herein as “ Inventions ”). Executive agrees that
he will promptly make full written disclosure to DMGI, will hold in trust for the sole right and
benefit of DMGI, and hereby assign to DMGI or its designee,

 

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all his right, title, and interest in and to any and all Inventions. To the extent allowed by
law, this section includes all right of paternity, integrity, disclosure and withdrawal and any
other rights that may be known as or referred to as “moral rights” or the like. To the extent
Executive retains any such moral rights under applicable law, Executive hereby ratifies and
consents to any action that may be taken with respect to such moral rights by or authorized by DMGI
and agrees not to assert any moral rights with respect thereto. Executive will confirm any such
ratifications, consents and agreements from time to time as requested by DMGI.

5.5 Maintenance of Records. Executive agrees to keep and maintain adequate and
current written records of all Inventions made by him (solely or jointly with others) during the
term of his employment with DMGI. The records will be in the form of notes, sketches, drawings and
any other format that may be specified by DMGI. The records will be available to and remain the
sole property of DMGI at all times.

5.6 Patent and Copyright Registrations. Executive agrees to assist DMGI, or its
designee, at DMGI’s expense, in every proper way to secure DMGI’s rights in any Inventions and any
copyrights, patents, mask work rights or other intellectual property rights relating thereto in any
and all countries, including the disclosure to DMGI of all pertinent information and data with
respect thereto, the execution of all applications, specifications, oaths, assignments and all
other instruments which DMGI shall reasonably deem necessary in order to apply for and obtain such
rights and in order to assign and convey to DMGI, its successors, assigns and nominees the sole and
exclusive rights, title and interest in and to such Inventions, and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto. Executive further agrees that
his obligation to execute or cause to be executed, when it is in his power to do so, any such
instrument or papers shall continue after the termination of this Agreement. If Executive is unable
because of his mental or physical incapacity or for any other reason to secure his signature to
apply for or to pursue any application for any United States or foreign patents or copyright
registrations covering Inventions or original works of authorship assigned to DMGI as above, then
Executive hereby irrevocably designates and appoints DMGI and its duly authorized officers and
agents as his agent and attorney in fact, to act for and in his behalf and stead to execute and
file any such applications and to do all other lawfully permitted acts to further the processing
and issuance of letters patent or copyright registrations thereon with the same legal force and
effect as if executed by Executive.

6. Compensation and Benefits.

6.1 Base Salary. Beginning on the Effective Date, DMGI shall pay Executive a base
salary of two hundred and twenty five thousand dollars ($225,000) per year, adjusted as provided
herein (the “Base Salary”), payable as earned in accordance with DMGI’s customary payroll practice.
On at least an annual basis, the Compensation Committee of the Board of Directors will review
Executive’s performance and consider an increase to the then current Base Salary as it deems
warranted by individual and corporate performance, market conditions and other factors. No
reductions will be made to Executive’s Base Salary unless it is part of a company-wide expense
reduction plan authorized by the Board of Directors of DMGI, applying ratably to the base salaries
of all senior executives and to the fees earned by Directors; provided, however,
that in no event may Executive’s Base Salary be reduced by more than fifteen percent (15%) at any
one time or in the aggregate over any twenty-four (24) month period without his consent.

6.2 Additional Benefits. Executive will be eligible to participate in DMGI’s employee
benefit plans of general application to DMGI’s senior executives in effect from time to time, as
amended, including without limitation, those plans covering pension and profit sharing, executive
perquisites, stock purchases, and, beginning as of March 1, 2008, those plans covering life,
health, and dental insurance in accordance with the rules established for

 

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individual participation in any such plan and applicable law. Once Executive is eligible for
health and dental insurance coverage hereunder, Executive’s spouse and dependents shall also be
eligible for such coverage in accordance with the terms of DMGI’s policies and plans and the
contracts with third party providers. In addition, beginning on the Effective Date, Executive will
receive such other benefits, including holidays and sick leave, as DMGI generally provides to its
senior executives.

6.3 Incentive Bonus Plan. For 2008 and all subsequent years during the Term, subject
to the terms of DMGI’s management incentive bonus plan, as amended from time to time (the “Bonus
Plan”), Executive will be eligible to earn cash bonuses on an annual basis, payable as determined
under the Bonus Plan, but not until such time as the Compensation Committee of the Board of
Directors of DMGI determines the targets, milestones, performance objectives and measurement
criteria to be met each fiscal year and approves the payment of specific cash bonuses after the end
of each fiscal year based upon the objective calculations and discretionary judgments as called for
in the Bonus Plan. For 2008, Executive shall be entitled to receive a discretionary cash bonus in
an amount and in accordance with the parameters set forth on Schedule A attached hereto.
Any such 2008 discretionary bonus, if earned, will be payable within two and one half (21/2) months
following the year in which it vests or is no longer subject to a substantial risk of forfeiture.

6.4 Expenses. Executive shall prepare and submit timely expense reports and DMGI will
reimburse Executive for all reasonable and necessary travel and other expenses incurred by
Executive in connection with DMGI’s business, provided that such expenses are in accordance with
DMGI’s applicable expense reporting and reimbursement policy and are properly documented and
accounted for in accordance with the requirements of the Internal Revenue Service.

6.5 Vacation. Executive will be entitled to paid vacation as set forth in DMGI’s
policies and/or employee manual (as they may be applicable to DMGI’s executive officers and key
employees), as approved by the Board of Directors.

6.6 Equity Incentive Awards. On the Effective Date, Executive will receive options to
purchase 33,333 shares of DMGI’s Common Stock (“Common Stock”) and 33,333 restricted shares of
Common Stock, with such options and shares being granted and awarded pursuant to and under the
terms and conditions of DMGI’s Amended and Restated 2005 Stock Plan (the “DMGI Stock Plan”). Such
stock options and shares of restricted Common Stock shall vest 33.3% after the first twelve months
and then quarterly in eight (8 equal installments of 8.33%) such that they will be fully vested
thirty six (36) months from the Effective Date; except that in the event of a Termination Without
Cause under Section 7.4 below or Termination for Good Reason under Section 7.5 below, the vesting
of the foregoing stock options and shares of restricted Common Stock shall be accelerated by six
(6) months. The stock options will expire on the seventh anniversary of the Effective Date.

7. Term and Termination. This Agreement will commence on the Effective Date and will
continue until the earlier of three (3) years after the Effective Date or when terminated pursuant
to any one of the following:

7.1 Death. The death of Executive shall immediately terminate this Agreement.

7.2 Disability. If, as a result of Disability, as determined by DMGI, Executive shall
have been absent from his full-time duties hereunder or unable to materially fulfill his full-time
duties (as determined by DMGI) hereunder for three (3) consecutive months, then thirty (30) days
after receiving written notice (which notice may occur on or after the end of

 

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such three (3) month period), DMGI may terminate Executive’s employment hereunder provided
Executive is unable to resume his full-time duties at the conclusion of such notice period. Also,
Executive may initiate termination of his employment under this Section 7.2 if as a result of
Disability his health should become impaired to an extent that makes the continued performance of
his duties hereunder hazardous to his physical or mental health, provided that Executive shall have
furnished DMGI with a written statement from a qualified doctor to such effect and provided,
further, that, at DMGI’s request made within ten (10) days from the date of receipt of such written
statement, Executive shall submit on a timely basis to an examination by a qualified doctor
selected by DMGI who is acceptable to Executive or Executive’s doctor (such acceptability will not
be unreasonably withheld) and such doctor shall have concurred with the conclusion of Executive’s
doctor. For purposes of this Agreement, “Disability” means the Executive is unable to engage in
any substantial gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last for a continuous
period of not less than twelve (12) months. In order to receive Disability benefits, Executive
must cooperate with DMGI in making such Disability determination, including providing such medical
evidence as may reasonably be requested by DMGI or submission to a medical examination(s) by a
qualified doctor(s) selected by DMGI. Executive must comply with any such requests within ten (10)
days.

7.3 For Cause. DMGI may terminate Executive’s employment under this Agreement for
“cause,” which shall be defined herein as follows: (a) Executive’s material breach of this
Agreement; (b) Executive’s negligence or insubordination in the performance or nonperformance
(continuing for ten (10) days after receipt of written notice from DMGI of the need to cure) of any
of Executive’s assigned duties and responsibilities hereunder; (c) Executive’s dishonesty, fraud,
misrepresentation or misconduct with respect to the business and affairs of DMGI; (d) Executive’s
violation of a material provision of DMGI’s Code of Business Conduct or other written corporate
policy; (e) Executive’s violation of any federal, state or local law or regulation applicable to
DMGI’s business; (f) Executive’s conviction of any felony crime; (g) Executive entering a plea of
nolo contendere to a felony crime or any other crime involving any act of moral turpitude; (h)
Executive’s misuse, misappropriation or embezzlement of funds or property belonging to DMGI or any
of its subsidiaries and affiliates; or (i) alcohol abuse or drug abuse by Executive which adversely
affects the performance of his assigned duties and responsibilities hereunder or compromises the
integrity and reputation of DMGI, its employees or its services (any of the foregoing, “Termination
for Cause”).

7.4 Without Cause. This Agreement may be terminated by DMGI thirty (30) days after
the effective date of a written notice sent to Executive stating that DMGI is terminating his
employment, without cause, which notice can be given by DMGI at any time after the Effective Date
at DMGI’s sole discretion, for any reason or for no reason (“Termination Without Cause”).

7.5 For Good Reason. Executive may elect to terminate his employment with DMGI on the
effective date of a written notice sent to DMGI from Executive stating that he is terminating
employment for “good reason,” which shall be defined herein as follows: (a) Executive’s level of
compensation (including Base Salary, fringe benefits and participation in non-discretionary bonus
programs under which awards are payable pursuant to objective financial or performance standards)
is reduced without his consent; provided, however, that a reduction of Executive’s compensation in
accordance with Section 6.1 will not constitute “good reason”; (b) Executive is required to
relocate his principal office of employment with DMGI outside of New York, NY without his consent;
(c) DMGI materially changes Executive’s role as a critical executive in the finance function as
referenced and subject to the terms of the last sentence of Section 1 above; or (d) a breach by
DMGI of any material provision of this Agreement which remains uncorrected for thirty (30) days
following written notice by Executive of such breach (“Termination for Good Reason”).

 

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7.6 Voluntary. This Agreement may be terminated by Executive on the effective date of
a written notice sent to DMGI from Executive stating that Executive is electing to terminate his
employment with DMGI without “good reason” as defined in Section 7.5 hereof (“ Voluntary
Termination ”).

8. Effect of Termination.

8.1 Termination as a Result of Death. In the event of any termination of this
Agreement pursuant to Section 7.1 hereof, no severance compensation is due to Executive’s estate;
provided, however, that DMGI will continue to pay accrued but unpaid salary,
accrued vacation and any other accrued but unpaid benefits and unreimbursed expenses through the
last day of the month in which Executive’s death occurs.

8.2 Termination as a Result of Disability. In the event of any termination of this
Agreement pursuant to Section 7.2 hereof, DMGI shall continue to pay Executive his Base Salary
under Section 6.1 hereof at Executive’s then-current salary and maintain his benefits under Section
6.2 hereof (i) through the remaining term of this Agreement which ends on the third anniversary of
the Effective Date, or (ii) for six (6) months, whichever period is shorter. In the event of a
disability termination pursuant to Section 7.2 hereof, Executive will not be eligible to receive
any ongoing benefits subsequent to the effective date of termination, other than continued
participation in any applicable DMGI disability plan, nor will there be any proration of any
potential annual incentive bonus under Section 6.3 hereof for the fiscal year in which such
termination occurs; provided, however, that DMGI will continue to pay accrued but
unpaid salary, accrued vacation and any other accrued but unpaid benefits and unreimbursed expenses
through the last day of the month in which Executive’s termination occurs.

8.3 Termination for Cause or Voluntary Termination. In the event of any termination
of this Agreement pursuant to Sections 7.3 or 7.6 hereof, DMGI shall pay Executive the compensation
and benefits otherwise payable to Executive under Section 6 hereof through the date of termination,
except that there will be no proration of any potential annual incentive bonus under Section 6.3
hereof for the fiscal year in which such termination occurs.

8.4 Termination Without Cause or for Good Reason. In the event of any termination of
this Agreement pursuant to Sections 7.4 or 7.5 hereof:

(a) DMGI shall continue to pay Executive his Base Salary under Section 6.1 hereof at
Executive’s then-current salary and maintain his benefits under Section 6.2 hereof (i) through the
remaining term of this Agreement which ends on the third anniversary of the Effective Date, or (ii)
for six (6) months, whichever period is shorter. If such benefits contemplated under Section 6.2
hereof cannot be maintained under the provisions and eligibility of the specific plans (see Section
8.6 below), then DMGI shall pay during the post-termination period the cash equivalent of the
company’s cost of benefits under any such company plan;

(b) DMGI will pay unreimbursed expenses and accrued vacation through the date of termination
pursuant to Sections 6.4 and 6.5 of this Agreement;

(c) For the fiscal year of termination, DMGI shall pay the pro rata portion of the annual
incentive bonus otherwise due to Executive pursuant to Section 6.3 hereof, such pro rata bonus
amount to be determined at the sole discretion of the Compensation Committee of the Board of
Directors based upon the targets, milestones, performance objectives and measurement criteria
established for the fiscal year and DMGI’s and Executive’s, as the case may be, actual performance
against such targets, milestones, performance objectives and measurement criteria. Notwithstanding
the forgoing, in the event of termination of this Agreement pursuant to Section 7.5, this subsection (c) will not be applicable unless DMGI determines, in its reasonable
judgment, that the Executive’s termination meets the requirements for Good Reason as set forth in
Section 7.5.

 

- 6 -

 

(d) The vesting of the Restricted Stock Award Agreement and the Stock Option Agreement that
Executive enters into with DMGI for the equity incentive awards set forth in Section 6.6 hereof
shall, in the event of a termination of employment pursuant to Sections 7.4 or 7.5 hereof, be
accelerated by six (6) months pursuant to the next to last sentence of Section 6.6. Notwithstanding
the forgoing, in the event of termination of this Agreement pursuant to Section 7.5, this
subsection (d) will not be applicable unless DMGI determines, in its reasonable judgment, that the
Executive’s termination meets the requirements for Good Reason as set forth in Section 7.5.

(e) In all cases, post-termination payments to Executive will be reduced for applicable
withholding taxes and will be payable on DMGI’s normal payroll dates or bonus payment dates during
the periods; provided, however, that if the total amount of the benefits available
to Executive under this Section 8.4, either alone or together with other payments which Executive
has the right to receive from DMGI, would constitute a “parachute payment” as defined in Section
280G of the Internal Revenue Code of 1986, as amended (the “ Code ”), then DMGI shall pay to
Executive at the time of termination an additional amount such that the net amount retained by
Executive, after deduction of the excise tax imposed by Section 4999 of the Code and any federal,
state and local income tax and excise tax imposed on such additional amount, shall be equal to the
amount payable to the Executive under this Section 8.4 as originally determined prior to the
deduction of the excise tax. All such amounts payable by DMGI shall be paid within thirty (30)
days of the Executive’s separation from service except as provided in Section 8.4(d). In the event
of any termination of this Agreement pursuant to Sections 7.4 or 7.5, Executive shall have no duty
or obligation whatsoever to seek similar or substitute employment or otherwise mitigate his
damages.

(f) If upon termination Executive is a “specified employee” within the meaning of Code section
409A(a)(2)(B)(i) and the regulations promulgated thereunder, then the payments under Sections
8.4(a) and (c) will not begin sooner than the date that is six (6) months following the date of
termination. In the event of a delay in payment provided under this Section 8.4(d), DMGI shall, on
the first day of the seventh month following such termination, pay Executive in a lump sum all
amounts that would have been paid under Section 8.4(a) and (c) through such date if such six-month
delay had not occurred; provided, further that all such amounts payable by DMGI under Section
8.4(c) shall be paid by the end of the Executive’s taxable year next following the Executive’s
taxable year in which the Executive remits the related taxes or, in the case of a tax audit or
litigation addressing the existence or amount of a tax liability, by the end of the Executive’s
taxable year following the Executive’s taxable year in which the taxes that are the subject of
audit or litigation are remitted to the taxing authority (or where as a result of such audit or
litigation no taxes are remitted, the end of the Executive’s taxable year following the Executive’s
taxable year in which the audit is completed or there is a final and nonappealable settlement or
other resolution of the litigation).

(g) Executive will only be deemed to have incurred a separation from service under Sections
8.2, 8.4 (a) and 8.4 (c) if it is reasonably anticipated that Executive will not provide
significant services for DMGI or an affiliate following such termination (a “Separation from
Service”). Whether a termination of employment is considered a Separation from Service will be
determined in accordance with Internal Revenue Code Section 409A, and such determination will be
based upon the facts and circumstances surrounding the termination of employment. While Executive
is on military leave, sick leave, or another bona fide leave of absence, the employment
relationship is treated as continuing intact if the period of leave does not exceed six months, or, if longer, so long as Executive has a guaranteed right to return to
employment either by law or by contract.

 

- 7 -

 

(h) As a condition of receiving any payments described under Section 8.4, Executive agrees to
execute, deliver and not to revoke (within the time period permitted by applicable law) a general
release of DMGI and its officers, directors, employees, and owners from any and all claims,
obligations and liabilities of any kind whatsoever arising from or in connection with the
Executive’s employment or termination of employment with DMGI or this Agreement (including without
limitation civil rights claims), in such form as requested by DMGI (with the attached Exhibit
A as an example of one such form), it being understood that such release shall not apply to
Executive’s rights to any payments or benefits due under this Agreement or any employee benefit
plan or program in which the Executive is a participant, any rights Executive may have to
indemnification and to coverage under directors’ and officers’ liability and similar insurance
maintained by DMGI.

8.5 Termination as a Result of Expiration of Agreement. If this Agreement is allowed
to expire three (3) years from the Effective Date without being renewed or otherwise extended, then
all the specific rights and obligations of the parties under this Agreement shall cease, including,
without limitation, Executive’s obligations under Section 9, and Executive shall become an at-will
employee of DMGI subject to its human resources and other corporate policies and its Employee
Handbook in effect at such time.

8.6 Rights under DMGI’s Stock Plan and Benefit Plans. In the event of termination and
the requirement for any benefits to be provided under this Section 8, except as otherwise expressly
provided herein, Executive’s rights hereunder and under DMGI’s Stock Plan, which governs stock
options and restricted stock awards, and all other benefit plans of general application, including
DMGI’s employee health and dental insurance coverage, shall be subject to and determined in
accordance with the provisions and eligibility of those plans, the related award agreements and the
provisions of applicable law.

9. Covenant Not to Compete or Solicit.

9.1 During the term of this Agreement and for a period of time thereafter equal to the longer
of (a) twelve (12) months and (b) the period during which the Executive continues to be entitled to
compensation or benefits pursuant to Section 8 hereof (the “Non-Competition Period”), Executive
shall not, other than on behalf of DMGI or any entity owned by or directly affiliated with DMGI,
directly or indirectly, without the prior written consent of DMGI: (i) engage in, anywhere in the
United States or the world in which DMGI or any of its affiliates and subsidiaries are conducting
business (the “Restricted Area”), whether as an employee, agent, consultant, advisor, independent
contractor, proprietor, partner, officer, director or otherwise, or have any ownership interest in
(except for ownership of two and one-half percent (2.5%) or less of any publicly-held entity), or
participate in or facilitate the financing, operation, management or control of, any firm,
partnership, corporation, entity or business that engages or participates in, a Competing Business
Purpose (as defined below); or (ii) approach, contact or solicit clients or customers of DMGI or
any of its affiliates and subsidiaries, including content owners and channel outlets with which
they have a relationship, in connection with a Competing Business Purpose. For purposes of this
Agreement, “Competing Business Purpose” shall mean the acquisition of digital rights to
Independently Owned Content (as defined below) (whether by purchase, license or through digital
distribution arrangements), the processing of Independently Owned Content into digital format for
placement in online music, mobile or video stores and other channel outlets, and the distribution
of digital music and video content to online music, mobile or video stores and other channel
outlets for purchase by consumers via electronic means such as transmissions, mobiletones and
streaming. Notwithstanding anything to the contrary herein, a Competing Business Purpose shall not

 

- 8 -

 

include the activities of any business unit or division of a major record label group (as of
the date hereof, Sony BMG, Universal Music Group, Warner Music Group or EMI Recorded Music) or
other entity, so long as the activities of such business unit or division are not related to the
acquisition, processing or distribution of Independently Owned Content. For purposes hereof,
“Independently Owned Content” means music content not owned or controlled by one of the four major
record label groups and video content not owned or controlled by a major movie or television studio
(as of the date hereof, Paramount Motion Pictures Group, Fox Filmed Entertainment, Sony Pictures
Entertainment, NBC/Universal, Warner Brothers Entertainment, and Buena Vista Motion Pictures Group,
together with the television production affiliates thereof).

9.2 During the Non-Competition Period, Executive shall not, directly or indirectly, either for
himself or for any other person or entity, without the prior written consent of DMGI, solicit,
encourage or take any other action which is intended to induce or encourage, or has the effect of
inducing or encouraging, any employee of DMGI or any of their affiliates or subsidiaries to
terminate his or her employment with DMGI or such affiliate or subsidiary, for any purpose.

9.3 The covenants contained in Sections 9.1 and 9.2 hereof shall be construed as a series of
separate covenants, one for each country, province, state, city or other political subdivision of
the Restricted Area. Except for geographic coverage, each such separate covenant shall be deemed
identical in terms to the covenant contained in Section 9.1 and Section 9.2, respectively. If, in
any judicial proceeding, a court refuses to enforce any of such separate covenants (or any part
thereof), then such unenforceable covenant (or such part) shall be eliminated from this Agreement
to the extent necessary to permit the remaining separate covenants (or portions thereof) to be
enforced. In the event that the provisions of this Section 9 are deemed to exceed the time,
geographic or scope limitations permitted by applicable law, then such provisions shall be reformed
to the maximum time, geographic or scope limitations, as the case may be, permitted by applicable
laws.

9.4 All of the covenants in this Section 9 shall be construed as an agreement independent of
any other provision in this Agreement, and the existence of any claim or cause of action of
Executive against DMGI, whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by DMGI of such covenants. Because of the difficulty of measuring
economic loss to DMGI as a result of any breach of the covenants in this Section 9, and because of
the immediate and potentially irreparable damage that could be caused to DMGI for which it would
have no other adequate remedy, Executive agrees that these covenants may be enforced by DMGI in the
event of a breach by him, by injunctions and/or restraining orders. It is further agreed by the
parties that the covenants in this Section 9 impose a reasonable restraint on Executive in light of
the activities and business of DMGI on the date of execution of this Agreement and the current
plans and DMGI Executive also acknowledges that the limitations of time, geography and scope of
activity agreed to in this Agreement are reasonable because, among other things: (A) DMGI is
engaged in a highly competitive industry, (B) Executive has unique access to, and will continue to
have access to, the trade secrets and know-how of DMGI, including, without limitation, the plans
and strategy (and, in particular, the competitive strategy) of DMGI, and (C) in the event
Executive’s employment with DMGI terminated, Executive should be able to obtain suitable and
satisfactory employment without violation of this Agreement.

10.  Return of DMGI Property. All records, documents, designs, patents, business
plans, financial information, manuals, correspondence, memoranda, data bases, lists and other
property delivered to or compiled by Executive by or on behalf of DMGI or its representatives, vendors, customers, channel partners and acquisition targets which pertain to the business of
DMGI shall be and remain the property of DMGI and be subject at all times to its discretion and
control. Upon termination of Executive’s employment for any reason, all such material which has
been collected or accumulated by Executive shall be delivered promptly to DMGI without request by
it.

 

- 9 -

 

11. Miscellaneous.

11.1 Arbitration. Executive and DMGI agree that any unresolved dispute, controversy
or claim arising out of, or relating to, this Agreement or any alleged breach hereof shall be
settled exclusively by binding arbitration, provided, however, that DMGI and Executive retain their
right to, and shall not be prohibited, limited or in any other way restricted from, seeking or
obtaining equitable relief from a court having jurisdiction over the parties. Any such arbitration
proceedings shall be conducted in New York, NY, in accordance with the commercial arbitration rules
of the American Arbitration Association in effect at that time. The arbitrator(s) shall not have
the authority to add to, detract from or modify any provision hereof nor to award punitive damages
to any injured party. The arbitrator(s) shall have the authority to order back pay, severance
compensation, vesting of options or other restricted equity awards (or cash compensation in lieu of
vesting), reimbursement of costs, including legal fees and other costs incurred to enforce this
Agreement or to defend against charges brought hereunder, and interest thereon in the event the
arbitrator(s) determines that DMGI has breached this Agreement. The arbitrator(s) shall have the
authority to order reimbursement of costs and any damages actually sustained by DMGI, including
legal fees and other costs incurred to enforce this Agreement or to defend against charges brought
hereunder, and interest thereon in the event the arbitrator(s) determines that Executive has
breached this Agreement. A decision by the arbitrator or a majority of the members of an
arbitration panel (not to exceed three (3) arbitrators) shall be final and binding, and judgment
upon the determination or award rendered by the arbitrator(s) may be entered in any court having
jurisdiction. The direct expense of any arbitration proceeding shall initially be borne by DMGI,
but the arbitrator(s) shall have the authority to reallocate such cost among the parties upon
conclusion of the proceedings.

11.2 Severability. If any provision of this Agreement shall be found by any
arbitrator or court of competent jurisdiction to be invalid or unenforceable, then the parties
hereby waive such provision to the extent that it is found to be invalid or unenforceable and to
the extent that to do so would not deprive one of the parties of the substantial benefit of its
bargain. Such provision shall, to the extent allowable by law and the preceding sentence, be
modified by such arbitrator or court so that it becomes enforceable and, as modified, shall be
enforced as any other provision hereof, all the other provisions continuing in full force and
effect.

11.3 Remedies. DMGI and Executive acknowledge that the service to be provided by
Executive is of a special, highly skilled, extraordinary and intellectual character, which gives it
peculiar value the loss of which cannot be reasonably or adequately compensated in damages in an
action at law. Accordingly, Executive hereby consents and agrees that for any breach or violation
by Executive of any of the provisions of this Agreement including, without limitation, Sections 3,
4, 5, 9 and 10 hereof, a restraining order and/or injunction may be issued against Executive, in
addition to any other rights and remedies DMGI may have, at law or equity, including without
limitation the recovery of money damages.

11.4 No Waiver. The failure by either party at any time to require performance or
compliance by the other of any of its obligations or agreements shall in no way affect the right to
require such performance or compliance at any time thereafter. The waiver by either party of a
breach of any provision hereof shall not be taken or held to be a waiver of any preceding or
succeeding breach of such provision or as a waiver of the provision itself. No waiver of any kind shall be effective or binding, unless it is in writing and is
signed by the party against whom such waiver is sought to be enforced.

 

- 10 -

 

11.5 Assignment. This Agreement and all rights hereunder are personal to Executive
and may not be transferred or assigned by Executive at any time. DMGI may assign its rights,
together with its obligations hereunder, to any parent, subsidiary, affiliate or successor, or in
connection with any sale, transfer or other disposition of all or substantially all of its business
and assets, provided, however, that any such assignee assumes DMGI’s obligations hereunder.

11.6 Withholding. All sums payable to Executive hereunder shall be reduced by all
federal, state, local and other withholding and similar taxes and payments required by applicable
law or by DMGI company policy and practice.

11.7 Entire Agreement. This Agreement constitutes the entire and only agreement
between the parties relating to employment of Executive with DMGI, and this Agreement supersedes
and cancels any and all previous contracts, arrangements or understandings with respect thereto,
whether verbal or in writing.

11.8 Amendment. This Agreement may not be amended or modified, except by an agreement
in writing executed by both parties hereto and approved by the Board of Directors of DMGI or its
Compensation Committee.

11.9 Notices. All notices and other communications required or permitted under this
Agreement shall be in writing and hand delivered, sent by telecopier, sent by certified first class
mail, postage pre-paid, or sent by nationally recognized express courier service. Such notices and
other communications shall be effective upon receipt if hand delivered or sent by telecopier, five
(5) days after mailing if sent by mail, and one (l) day after dispatch if sent by express courier,
to the following addresses, or such other addresses as any party shall notify the other party:

	 	 	 	 	 
	 

	 	If to DMGI:
	 	Digital Music Group, Inc 100 Park Avenue
	 

	 	 	 	Second Floor
	 

	 	 	 	New York, NY 10017 
	 

	 	 	 	Attention: Chairman of the Board of Directors
	 

	 	 	 	Facsimile: (212) 201-9292 
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Reed Smith LLP
	 

	 	 	 	599 Lexington Avenue
	 

	 	 	 	New York, NY 10022 
	 

	 	 	 	Attention: David M. Grimes
	 

	 	 	 	                    Antone P. Manha, Jr.
	 

	 	 	 	Facsimile: (212) 521-5450 
	 
	 	 	 	 
	 

	 	If to Executive:
	 	Nathan Fong
	 

	 	 	 	208 Melbourne Road
	 

	 	 	 	Great Neck, New York 11021 

 

- 11 -

 

11.10 Binding Nature. This Agreement shall be binding upon, and inure to the benefit
of, the successors and personal representatives of the respective parties hereto.

11.11 Headings. The headings contained in this Agreement are for reference purposes
only and shall in no way affect the meaning or interpretation of this Agreement. In this Agreement,
the singular includes the plural, the plural included the singular, the masculine gender includes
both male and female referents and the word “or” is used in the inclusive sense.

11.12 Counterparts. This Agreement may be executed in two or more counterparts,
including by facsimile, each of which shall be deemed to be an original but all of which, taken
together, constitute one and the same agreement.

11.13 Governing Law. This Agreement and the rights and obligations of the parties
hereto shall be construed in accordance with the laws of the State of New York, without giving
effect to the principles of conflict of laws.

11.14 Code Section 409A. The Company and Executive agree that this Agreement and the
rights granted to the Executive hereunder are intended to meet the requirements of paragraphs (2),
(3) and (4) of Section 409A(a)(1)(A) of the Code. Accordingly, the parties agree that during the
period ending on December 31, 2008 (or such later date as set forth by the Internal Revenue Service
for good faith compliance with guidance relating to Section 409A of the Code), the parties agree
that they shall negotiate in good faith to revise any provisions of this Agreement that might
otherwise fail to meet the requirements of paragraphs (2), (3) and (4) of Section 409A of Code;
provided, however, that nothing contained in this Section 11.14 shall be deemed to require the
Company to incur any material compensation expense in excess of that which would be incurred by it
in the absence of this Section 11.14.

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

	 	 	 	 	 	 	 
	 

	 	DIGITAL MUSIC GROUP, INC.
	 	 	 	EXECUTIVE
	By:
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 
	Name:

	 	Greg Scholl
	 	 	 	Nathan Fong
	Title:

	 	President & CEO	 	 	 	 

 

- 12 -

 

Schedule A

Bonus Amount: For the year ending December 31, 2008, Executive is eligible to receive a
bonus of up to $75,000 (the “Target Bonus”) based on the following parameters and performance
criteria:

1. Gross Revenue: If the Orchard has gross revenues for 2008 of (a) $70,000,000 or
more, the Executive is entitled to a bonus equal 33 1/3% of his Target Bonus, (b) $60,000,000 or
less, the Executive is not entitled to any bonus with respect to the Orchard’s gross revenues and
(c) more than $60,000,000 but less than $70,000,000, the Executive is entitled to a pro rata
portion of 33 1/3% of his Target Bonus;

2. Gross Margin: If the Orchard achieves a gross margin for 2008 equal to (a) 28.5%
or greater, the Executive is entitled to a bonus equal 33 1/3% of his Target Bonus, (b) 26.5% or
less, the Executive is not entitled to any bonus with respect to the Orchard’s gross margin and (c)
greater than 26.5% but less than 28.5%, the Executive is entitled to a pro rata portion of 33 1/3%
of his Target Bonus; and

3. Discretionary Component: The discretionary component is to be determined solely
by the CEO of DMGI and may be any amount up to 33 1/3% of the Executive’s Target Bonus.

 

- 13 -

 

Exhibit A- Form of Termination Agreement

Date:                     

Dear                     :

As discussed with you, your last day of work and the effective termination date of your
employment with The Orchard Enterprises, Inc. (the “Company”), is                                         (“Termination
Date”). This letter, when executed by both parties, shall serve as a termination agreement
(“Agreement”) between you and the Company. Please review the terms set forth below.

1. Employee Benefits

Please be aware that, pursuant to COBRA, you will be entitled to continue certain health
benefits as noted in Exhibit A, provided that you take the steps described in the Exhibit.

2. Release

By signing this Agreement, you release the Company from any known or unknown claims
that you may have against the Company.

You are giving this release on behalf of yourself and your heirs, personal representatives,
assigns or any other person who could make a claim based upon your employment relationship with the
Company.

The release applies to the Company and its past and present subsidiaries and affiliates, as
well as the past and present directors, officers, agents, attorneys, employees, successors and
assigns of any of them. These parties are together called the “Released Parties” in this
Agreement. The release also includes any employee benefit plans or funds sponsored or administered
by the Company (except that it does not apply to claims for vested benefits, if any, arising from
Company-sponsored retirement plans).

This is a general and complete release that applies to any claim, known or unknown and waives
any claim to further compensation or benefits. It includes claims relating to your employment with
and termination of employment with the Company.

This release specifically applies to claims under Title VII of the Civil Rights Act of 1964,
the Civil Rights Act of 1991, the Americans with Disabilities Act, the National Labor Relations
Act, the Worker Adjustment and Retraining Notification Act, the Employee Retirement Income Security
Act, the Family and Medical Leave Act, the Fair Labor Standards Act, the Age Discrimination in
Employment Act, the Older Worker’s Benefit Protection Act and any collective bargaining agreement,
any claims for attorneys fees, and any claims arising under any and all other federal, state and
local laws and under federal or state common law, including claims in contract and tort. It does
not apply to any claim that arises after you sign this Agreement, and it does not include claims
that cannot be released as a matter of law.

You acknowledge that this Agreement includes, without limitation, claims that you do not know
or suspect to exist in your favor at the time of execution hereof and that this Agreement has been
executed with the express intention of extinguishing all known and unknown claims.

You represent that you have not assigned or transferred, or purported to assign or transfer,
to any person or entity, any claim against any of the Released Parties, or any portion thereof or
interest therein.

You agree to permanently withdraw with prejudice all claims, if any, you have filed against
any Released Party. You agree never to seek any damages based on the claims released in this
Agreement.

In consideration for signing this agreement, you will be paid severance equal to
 _____ 
months
of pay at your current salary.

 

- 14 -

 

3. Employee Covenants

You acknowledge that you will remain bound by any confidentiality, nondisclosure or non-competition
agreements you have with the Company. Any such agreements are incorporated herein by reference.
Without limitation of anything contained in such agreements, at all times hereafter, you will hold
in strictest confidence and will not disclose, use, lecture upon or publish any of the Company’s
Proprietary Information (defined below), unless an officer of the Company expressly authorizes such
in writing. “Proprietary Information” shall mean any and all confidential and/or proprietary
knowledge, data or information of the Company, its parents, subsidiaries, affiliated entities,
customers and suppliers, including but not limited to information relating to Company’s record
label clients and on-line customers, business plans and strategies, products, processes, know-how,
designs, formulas, methods, developmental or experimental work, improvements, discoveries,
inventions, ideas, source and object codes, data, programs, other works of authorship, and plans
for research and development.

You acknowledge and agree that solely by reason of your employment by the Company, you have come
into contact with the Company’s record label clients, on-line customers, distributors, suppliers
and employees and have had access to Confidential and Proprietary Information regarding the
Company’s clients, customers, distributors and suppliers. Consequently, you covenant and agree
that for a period of one (1) year after the date of execution of this Agreement, you will not,
directly or indirectly, individually or on behalf of others, solicit a client, customer,
distributor, supplier or employee of the Company (except on behalf of the Company).

You agree never to use or disclose any Company information or trade secrets concerning the
operations, future plans or business methods of the Company.

You agree not to criticize the Company or any of its officers, directors, employees,
shareholders, affiliates or agents. The Company also agrees that none of its officers or directors
will criticize you.

You agree that the terms of this Agreement are confidential and shall not be disclosed to any
third party, with the exception of your attorneys or financial advisors, or as required by law or
in order to enforce the terms of this Agreement. In the event that you are ordered to disclose
information regarding this Agreement to a court, you agree to give the Company prompt notice of
such court order so that the Company can take appropriate action.

You agree that the Company would be irreparably harmed by any actual or threatened violation
of the Employee Covenants described in this section, and that the Company will be entitled to an
injunction prohibiting you from committing such violation.

4. Tender Back

You agree that in the event of any breach of this Agreement, including but not limited to,
your bringing any claim against any Released Party, you will immediately repay all or any portion
of the payments made to you hereunder, and the Company will have no obligation to make any further
payments to you under this Agreement, provided, however, that these provisions do not apply to any
claims brought pursuant to the Age Discrimination in Employment Act or the Older Workers Benefit
Protection Act, or other claims for which tender back may be prohibited under applicable law.

5. Expenses

The Company will reimburse you for all reasonable business expenses incurred through the
Termination Date upon proper presentation of supporting documentation, provided that appropriate
expense reports have been submitted no later than one (1) weeks following the Termination Date.

6. Company Property

You agree that all Company property, including but not limited to credit cards, keys,
documents, software, computer data, records, or any other materials, will be returned without
destruction or other damage no later than the Termination Date.

 

- 15 -

 

7. Non-Admission

You agree that this Agreement is not an admission of guilt or wrongdoing by the
Released Parties, and acknowledge that the Released Parties do not believe or admit that any of
them has done anything wrong.

8. Full Disclosure

You acknowledge that you have disclosed to the Company any information you have concerning any
conduct involving the Company that you have reason to believe may be unlawful or involve any false
claims to the United States or any other government having jurisdiction over the Company. You
promise to cooperate fully and voluntarily in any investigation the Company undertakes into matters
occurring during your employment with the Company, and you agree not to disclose to anyone who is
not assisting the Company with the investigation, other than your attorney, the fact of or the
subject matter of the investigation, except as required by law. You will accommodate your schedule
to cooperate with the Company and promptly provide such information. You acknowledge that nothing
in this Agreement prevents you from cooperating with any U.S. government investigation.

10. Revocation of Agreement

You understand that you may revoke this Agreement in writing within seven (7) days after you
sign it, and the Agreement shall not become effective or enforceable until the end of the seven-day
period. To be effective, before the end of the seven-day period, you must deliver, or fax and
mail, your written revocation to the Company, to the attention of the first Company representative
signing this Agreement using the contact information listed below the representative’s signature.
If you revoke this Agreement, the Company shall have no obligations under this Agreement.

11. Arbitration

You and the Company agree to resolve any claims we may have with each other or that you have
with any other released party (Arbitrable Dispute) through final and binding arbitration in
accordance with the rules of the American Arbitration Association. This arbitration agreement
applies first to any disputes about the validity, interpretation or effect of this Agreement or
alleged violations of it. If it is finally determined by an arbitrator or the Courts that the
Agreement is unenforceable, any claim against the Company, including claims of discrimination under
federal, state or local law, must also be arbitrated. Arbitration shall be the exclusive remedy
for any Arbitrable Dispute and any arbitration will take place at the office of the American
Arbitration Association closest to your place of work for the Company. This section does not limit
the Company’s right to seek and obtain an injunction pursuant to Paragraph 4.

12. Fee-Shifting

In the event of litigation or arbitration concerning the subject matter of this Agreement, the
prevailing party shall be entitled to recover all costs incurred by it, including such party’s
reasonable attorneys’ fees and reasonable compensation for the services of its internal personnel,
provided however that this provision shall not apply to any claims brought pursuant to the Age
Discrimination in Employment Act or the Older Workers Benefit Protection Act.

13. Other Important Provisions

This is the entire agreement between you and the Company. This Agreement may not be modified
in any manner except in writing signed by both you and an authorized Company official. You
acknowledge that the Company has made no representations or promises to you other than those in
this Agreement. If any provision in this Agreement is found to be unenforceable, all other
provisions will remain fully enforceable.

This Agreement binds your heirs, administrators, personal representatives, executors,
successors and assigns, and will apply to the benefit of all Released Parties and their respective
heirs, administrators, personal representatives, executors, successors and assigns.

 

- 16 -

 

This Agreement shall be construed as a whole according to its fair meaning. It shall not be
construed strictly for or against you or any released party. This Agreement shall be governed by
the statutes and common law of the State of New York.

	 	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Greg Scholl
	 

	 	 	 	President & CEO
	 

	 	 	 	The Orchard
	 

	 	 	 	100 Park Ave., 2nd Fl.
	 

	 	 	 	NY, NY 10017 
	 

	 	 	 	1-212-201-9280 

ACKNOWLEDGMENT

I have read this Agreement consisting of five pages (exclusive of attachments), I understand
its contents, and I willingly, voluntarily and knowingly accept and agree to the terms and
conditions of this Agreement. I acknowledge that I was advised to consult with an attorney prior
to executing this Agreement.

	 	 	 	 	 	 	 
	 

	 	 	 	 

[Date]
	 	 

“EXHIBIT A”

** CONTINUATION HEALTH CARE COVERAGE RIGHTS UNDER COBRA**

Introduction

(a) The right to COBRA continuation coverage was created by a federal law, the
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). COBRA continuation coverage can
become available to you and to other members of your family who are covered under the Plan when you
would otherwise lose your group health coverage. This notice generally explains COBRA continuation
coverage, when it may become available to you and your family, and what you need to do to protect
the right to receive it. This notice gives only a summary of your COBRA continuation coverage
rights. For more information about your rights and obligations under the Plan and under federal
law, you should either review the Plan’s Summary Plan Description or get a copy of the Plan
Document from the Plan Administrator.

The Plan Administrator is Jeff Nimerofsky, The Orchard Enterprises, Inc., 100 Park Avenue,
2nd floor, New York, NY 10017.

The Plan Administrator is responsible for administering COBRA continuation coverage.

11.14.2 What is continuation coverage?

 

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Federal law requires that most group health plans (including this Plan) give employees and their
families the opportunity to continue their health care coverage when there is a “qualifying event”
that would result in a loss of coverage under an employer’s plan. Depending on the type of
qualifying event, “qualified beneficiaries” can include the employee covered under the group health
plan, a covered employee’s spouse, and dependent children of the covered employee.

Continuation coverage is the same coverage that the Plan gives to other participants or
beneficiaries under the Plan who are not receiving continuation coverage. Each qualified
beneficiary who elects continuation coverage will have the same rights under the Plan as other
participants or beneficiaries covered under the Plan. Specific information describing continuation
coverage can be found in the Plan’s summary plan description (SPD), which can be obtained from Jeff
Nimerofsky, The Orchard Enterprises, Inc., 100 Park Avenue, 2nd floor, New York, NY 10017.

How long will continuation coverage last?

In the case of a loss of coverage due to end of employment or reduction in hours of employment,
coverage may be continued for up to 18 months. However, this coverage may be extended for a
limited time due to disability or another qualifying event.

In the case of losses of coverage due to an employee’s death, divorce or legal separation, the
employee’s enrollment in Medicare or a dependent child ceasing to be a dependent under the terms of
the plan, coverage may be continued for up to 36 months.

Continuation coverage will be terminated before the end of the maximum period if any required
premium is not paid on time, if a qualified beneficiary becomes covered under another group health
plan that does not impose any pre-existing condition exclusion for a pre-existing condition of the
qualified beneficiary, if a covered employee enrolls in Medicare, or if the employer ceases to
provide any group health plan for its employees. Continuation coverage may also be terminated for
any reason the Plan would terminate coverage of a participant or beneficiary not receiving
continuation coverage (such as fraud).

11.14.3 How can you elect continuation coverage?

Each qualified beneficiary listed on page one of this notice has an independent right to elect
continuation coverage. For example, both the employee and the employee’s spouse may elect
continuation coverage, or only one of them. Parents may elect to continue coverage on behalf of
their dependent children only. A qualified beneficiary must elect coverage by the date specified
on the Election Form. Failure to do so will result in loss of the right to elect continuation
coverage under the Plan. A qualified beneficiary may change a prior rejection of continuation
coverage any time until that date.

In considering whether to elect continuation coverage, you should take into account that a failure
to continue your group health coverage will affect your future rights under federal law. First,
you can lose the right to avoid having pre-existing condition exclusions applied to you by other
group health plans if you have more than a 63-day gap in health coverage, and election of
continuation coverage may help you not have such a gap. Second, you will lose the guaranteed right
to purchase individual health insurance policies that do not impose such pre-existing condition
exclusions if you do not get continuation coverage for the maximum time available to you. Finally,
you should take into account that you have special enrollment rights under federal law. You have
the right to request special enrollment in another group health plan for which you are otherwise
eligible (such as a plan sponsored by your spouse’s employer) within 30 days after your group
health coverage ends because of the qualifying event listed above. You will also have the same special enrollment right at the end of continuation coverage if you get
continuation coverage for the maximum time available to you.

 

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11.14.4 How much does continuation coverage cost?

Generally, each qualified beneficiary may be required to pay the entire cost of continuation
coverage. The amount a qualified beneficiary may be required to pay may not exceed 102 percent of
the cost to the group health plan (including both employer and employee contributions) for coverage
of a similarly situated plan participant or beneficiary who is not receiving continuation coverage
(or, in the case of an extension of continuation coverage due to a disability, 150 percent).

11.14.5 When and how must payment for continuation coverage be made?

First payment for continuation coverage

If you elect continuation coverage, you do not have to send any payment for continuation coverage
with the Election Form. However, you must make your first payment for continuation coverage within
45 days after the date of your election. (This is the date the Election Notice is post-marked, if
mailed.) If you do not make your first payment for continuation coverage within that 45 days, you
will lose all continuation coverage rights under the Plan.

Your first payment must cover the cost of continuation coverage from the time your coverage under
the Plan would have otherwise terminated up to the time you make the first payment. You are
responsible for making sure that the amount of your first payment is enough to cover this entire
period. You may contact Jeff Nimerofsky, the Plan Administrator, to confirm the correct amount of
your first payment.

Periodic payments for continuation coverage

After you make your first payment for continuation coverage, you will be required to pay for
continuation coverage for each subsequent month of coverage. Under the Plan, these periodic
payments for continuation coverage are due on the first of the month. If you make a periodic
payment on or before its due date, your coverage under the Plan will continue for that coverage
period without any break. The Plan will not send periodic notices of payments due for these
coverage periods.

Keep Your Plan Informed of Address Changes

In order to protect your family’s rights, you should keep the Plan Administrator informed of any
changes in the addresses of family members. You should also keep a copy, for your records, of any
notices you send to the Plan Administrator.

11.14.6 For More Information

This notice does not fully describe continuation coverage or other rights under the Plan. More
information about continuation coverage and your rights under the Plan is available in your summary
plan description or from the Plan Administrator. You can get a copy of your summary plan
description from: Jeff Nimerofsky, The Orchard Enterprises, Inc., 100 Park Avenue, 2nd floor, New
York, NY 10017, tel: 212-201-9280.

 

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For more information about your rights under ERISA, including COBRA, the Health Insurance
Portability and Accountability Act (HIPAA), and other laws affecting group health plans, contact
the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) in your area or
visit the EBSA web site at www.dol.gov/ebsa.

Plan Contact Information

	 	 	 
	Aetna Member Services—Medical

	 	888.802.3862 
	Aetna Member Services—Dental

	 	877.238.6200 
	VSP

	 	www.vsp.com
	—

	 	 
	The Orchard
	 	 
	100 Park Avenue, 2nd floor
	 	 
	New York, NY 10017
	 	 
	Attn: Jeff Nimerofsky
	 	 

 

- 20 -

 

Date:

(a) HEALTH INSURANCE TERMINATION

(b)

Dear                     :

Please complete the attached, “Election Form” in order to continue your health care coverage under
COBRA. If you do not elect to continue your health care coverage by completing the enclosed
“Election Form” and returning it to us, your coverage under the Plan will end due to the
termination of your employment.

Each of the following persons is entitled to elect to continue health care coverage under the Plan:

-Employee:

-Spouse (or former spouse of employee):

-Dependent children:

You [and/or, as appropriate, your spouse, and dependent children] are entitled to continue
your health care coverage for up to thirty-six (36) months. In order to maintain your current
level of Medical Coverage, your monthly continuation coverage will cost:

$                     (medical, dental and vision for yourself only/and spouse/and family).

Important — To elect continuation coverage you MUST complete the enclosed “Election Form” and
return it to us. You may mail it to the address shown on the Election Form. The completed
Election Form must be post-marked by                     . If you do not submit a completed Election
Form by this date, you will lose your right to elect continuation coverage.

(a) COBRA Continuation Coverage Election Form

(This page is to be completed and returned if COBRA coverage is requested.)

                                        

                                        

                                        

Important: This form must be completed and returned by mail, post-marked no later than                                         .
Send completed form to:

The Orchard Enterprises, Inc.

100 Park Avenue, 2nd floor

New York, NY 10017

Attn: Jeff Nimerofsky

 

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I (We) elect to continue our medical coverage in The Orchard Enterprises, Inc. health
insurance plan (the Plan) as indicated below:

	 	 	 	 	 	 	 
	Full Legal Name	 	Date of Birth	 	Relationship to Employee	 	Social Security No.
	 
	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 

 

	 	 	 
	 

	 	 
	Signature

	 	Date
	 
	 	 
	 

	 	 
	Print Name

	 	Relationship to individual(s) listed above
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	Print Address

	 	Telephone number

	 	 	 
	 

Email address

	 	 

 

- 22 -

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