ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (the “ Agreement ”) is made and entered into as of November __, 2008 (the “ Execution Date ”) by and between CENTERSTAGING MUSICAL PRODUCTIONS, INC., a California corporation, as debtor and debtor in possession (“ Seller ”) under Case No.2:08-bk-13019-VZ (the “ Bankruptcy Case ”) in the United States Bankruptcy Court for the Central District of California (the “ Bankruptcy Court ”), and MIX ENTERTAINMENT HOLDINGS, LLC, a Delaware limited liability company, or its assignee (“ Purchaser ”). Capitalized terms used herein but not otherwise defined shall have the meanings set forth in Section 15.15 of this Agreement.

R E C I T A L S

WHEREAS, on March 10, 2008 (the “ Petition Date ”), Seller commenced the Bankruptcy Case by filing a voluntary petition for relief under Chapter 11 of the Bankruptcy Code with the Bankruptcy Court; and

WHEREAS, Seller is primarily engaged in the business of (i) providing production and support services for live musical performances for major television programs; (ii) renting its studio and soundstage facilities, and (iii) renting musical instruments and related equipment for use at its studios and other venues (such businesses as presently conducted by Seller, collectively, the “ Business ”) as debtor and debtor in possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code; and

WHEREAS, Seller wishes to sell, transfer, convey, assign and deliver to Purchaser, in accordance with Sections 363 and 365 and the other applicable provisions of the Bankruptcy Code, all of the Purchased Assets, together with the Assumed Liabilities of Seller upon the terms and subject to the conditions set forth in this Agreement (hereinafter collectively referred to as the “ Transaction ”);

WHEREAS, Purchaser wishes to purchase and take delivery of such Purchased Assets and Assumed Liabilities upon such terms and subject to such conditions;

WHEREAS, the Purchased Assets will be sold pursuant to a Sale Order of the Bankruptcy Court approving such sale under Section 363 of the Bankruptcy Code and such Sale Order will include the assumption and assignment of certain executory contracts, unexpired leases and liabilities thereunder under Section 365 of the Bankruptcy Code and the terms and conditions of this Agreement; and

WHEREAS, all of the obligations of the parties under this Agreement are conditioned upon the approval of the Bankruptcy Court in accordance with Article 3 hereof.

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

ARTICLE 1

PURCHASE AND SALE

Except as otherwise provided and subject to the terms and conditions set forth in this Agreement and subject to Bankruptcy Court approval, Seller agrees to sell, convey, assign, transfer and deliver to Purchaser, and Purchaser agrees to purchase from Seller at the Closing, all of Seller’s right, title and interest in and to the Purchased Assets, free and clear of all Liens, claims or interests of any type or nature, whether known or unknown, of Seller or any other party, other than the Assumed Liabilities.

ARTICLE 2

DESCRIPTION OF PURCHASED ASSETS; EXCLUDED ASSETS; ASSUMPTION OF LIABILITIES

Section 2.1.   Purchased Assets. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller shall sell, convey, transfer, assign and deliver to Purchaser, and Purchaser shall purchase, acquire and take assignment and delivery from Seller, all of Seller’s right and title to and interest in and to Seller’s business assets, properties, rights (contractual or otherwise) and its affirmative claims, but excluding the Excluded Assets (the assets so included, the “Purchased Assets”). The Purchased Assets shall consist of all of Seller’s right, title and interest in and to the following:

(a)   All equipment, machinery or other tangible personal property owned by Seller including, without limitation, the equipment, machinery and personal property listed on Schedule 2.1(a) hereto;

(b)   All of Seller’s right, title and interest in and to any and all intellectual property owned or utilized by the Seller, including, without limitation, patents, patent rights, patent applications, inventions, trade secrets, processes, formulas, customer lists, proprietary rights, proprietary knowledge, computer software, websites, URLs, domain names, trademarks, names, service marks, brand marks, brand names, trade names (including without limitation, the name CenterStaging Musical Productions and all goodwill associated therewith), source or object code, copyrights, trade secrets relating to or arising from any proprietary process, symbols and logos related to the Business and all applications therefor, registrations thereof and licenses and sublicenses or agreements in respect thereof, which Seller owns or has the right to use or to which Seller is a party and all filings, registrations or issuances of any of the foregoing with or by any federal, state, local or foreign regulatory, administrative or governmental office, as listed on Schedule 2.1(b) (excluding the Retained Intellectual Property, collectively, the “ Transferred Intellectual Property ”);

(c)   All leases of equipment, machinery or other tangible personal property to which Seller is a party, as listed on Schedule 2.1(c) hereto (the “ Personal Property Leases ”);

(d)   All contracts, agreements, contract rights, license agreements, customer contracts, distribution agreements, franchise rights and agreements, purchase and sales orders (if any), quotations and executory commitments, instruments, royalty agreements, third party guaranties, indemnifications, arrangements and understandings, whether oral or written, to which Seller is a party (whether or not legally bound thereby), as listed on Schedule 2.1(d) hereto (the “ Assumed Contracts ”);

(e)   All franchises, licenses, permits, consents, authorizations, approvals and certificates of any regulatory, administrative or other Governmental Authority, as listed on Schedule 2.1(e) hereto (the “ Permits ”);

(f)   All of Seller’s rights under leases of real property set forth on Schedule 2.1(f) hereto, together with all buildings, structures, installations, fixtures and all other leasehold improvements, appurtenant thereto or situated thereon and all other rights, interests and appurtenances of Seller pertaining thereto; provided, however, that such leases shall be subject to further negotiation and agreement by and between Purchaser and any lessor following execution of this Agreement but in any event prior to Closing (the “ Assumed Leases ”);

(g)   Seller’s marketing and sales materials relating to the Business;

(h)   Seller’s backlog ( i.e ., lease and sales (if any) orders, and orders for production and support services that have not been processed);

(i)   All of Seller’s customer or client lists, files, documentation, records and related documentation related to the Business, including, without limitation, those listed on Schedule 2.1(i) hereto, relating to the Purchased Assets; and

(j)   All of Seller’s other tangible and intangible assets, other than the Excluded Assets.

Section 2.2.   Excluded Assets . Notwithstanding the provisions of Section 2.1 , the Purchased Assets shall not include any of the following assets, properties and/or rights of Seller, (collectively, the “ Excluded Assets ”) and liens, claims or encumbrances against such Excluded Assets shall not be altered by virtue of this Agreement:

(a)   Any Contracts that are not Assumed Contracts as reflected in Schedule 2.2(a) (the “ Excluded Contracts ”);

(b)   Any items excluded pursuant to the provisions of Section 2.1 above;

(c)   All cash, bank accounts, certificates of deposit, commercial paper, annuities, treasury notes and bills and other marketable securities;

(d)   All accounts receivable;

(e)   All of Seller’s security deposits, prepaid expenses and other miscellaneous assets, as listed on Schedule 2.2(c)(d) and (e) hereto and all claims for refunds and/or credits by the Seller of any kind, including for Taxes;

(f)   All Employee Plans, including, without limitation, all of Seller’s severance, pension, retirement and other employee benefit plans.

(g)   All of Seller’s insurance policies relating to the Business or the Purchased Assets, subject to any claims of co-insureds, including, without limitation, all credits, cash or surrender value, all rights to any refunds, all rights to receive proceeds of insurance policies, any outstanding claims thereunder and all rights of offset, counterclaims and insurance coverage thereunder (collectively, the “ Insurance Policies ”), which such Insurance Policies are as set forth in Schedule 2.2(g) hereto (showing as to each policy or binder the carrier, policy or binder the carrier, policy number, coverage limits, expiration dates, annual premiums and a general description of the type of coverage provided).

(h)   All of Seller’s right, title and interests in and to high definition and other content, stored on digital video cassettes or other electronic mediums, available for multi-platform distribution as reflected in Schedule 2.2(h)(i) and (ii) (the “ Content Library ”), all copyrights, contract rights, content licenses or other general intangibles associated with the Content Library as reflected in Schedule 2.2(h)(iii) (the “ Retained Intellectual Property ”) and all web domain names and related logos as reflected in Schedule 2.2(h)(iv) and (v); provided however, it is contemplated and understood that Purchaser will be entering into a management contract with respect to the Content Library upon Closing, which contract will be subject to further negotiations by the Parties and which contract shall not preclude the sale of the Content Library at any time. It is understood that Seller has the right to refuse to enter into any management contract proposed by Purchaser.

(i)   Any and all tax refunds due to Seller prior to the effective date of the sale, and any and all NOLs in favor or Seller.

(j)   All known and unknown, liquidated or unliquidated, contingent or fixed, claims, rights or causes of action which Seller may have against any third party for avoidance and recovery of any preferential or fraudulent transfer.

(k)   All of Seller’s corporate minute books and organizational documents.

(l)   Any interest of the Seller in any affiliate.

(m)   Any claims which Seller or its bankruptcy estate may have against any of its directors, officers or employees.

Section 2.3.   Assumed Liabilities; Non-Assumed Liabilities .

(a)   At the Closing, Purchaser shall assume and agree to perform and discharge the following Liabilities of Seller to the extent not previously performed or discharged, and no others: (i) all Liabilities of Seller under the Personal Property Leases in an aggregate amount not to exceed $1,300,000, (ii) all Liabilities of Seller which first accrue and are to be performed from and after the Closing under the Assumed Contracts, the Assumed Leases (excluding (A) the Two Bills, LLC lease since Purchaser is entering into a new lease with Two Bills, LLC, as contemplated in Section 10.10, and (B) the Jan & Johnny, Inc. lease if Purchaser purchases the Hollywood Way Property as contemplated in Section 10.11) and the Personal Property Leases, which relate to periods of time on or after the Closing Date, and (iii) liabilities and obligations relating to and arising from Purchaser’s operation of the Purchased Assets after the Closing (items (i), (ii) and (iii) are collectively referred to herein as the “ Assumed Liabilities ”).

(b)   Other than the Assumed Liabilities, Purchaser shall not assume or be bound by or be obligated or responsible for any duties, responsibilities, commitments, expenses, obligations or liabilities of Seller or relating to the Purchased Assets or the Business (or which may be asserted against or imposed upon Purchaser as a successor or transferee of Seller as an acquirer of the Purchased Assets or the Business or otherwise as a matter of law) of any kind or nature, fixed or contingent, known or unknown, including, without limitation, the following (collectively, the “ Non-Assumed Liabilities ”):

ARTICLE 3

BANKRUPTCY COURT APPROVAL

Section 3.1.   History of Sale Procedures. The parties hereto acknowledge that Seller filed a motion (the “ Sales Procedures Motion ”) with the Bankruptcy Court seeking entry of an order which includes all of the following provisions (the “ Sale Procedures Order ”):

(a)   Competing offers to acquire the Purchased Assets shall:

(b)   If any bidders have submitted a qualifying competing bid in accordance with Section 3.1(a) hereof (each such bid, a “ Qualified Bid ”), then a public auction of the Purchased Assets (the “ Auction ”) shall be held at the Sale Hearing at the United States Bankruptcy Court for the Central District of California . The Auction shall be governed by the following procedures:

(c)   A hearing to approve the successful bid at the Auction shall be scheduled for no later than November 15, 2008, the parties hereby acknowledging satisfaction of this condition through the sale hearing set for November 13, 2008 at 10:00 a.m.(the “ Sale Hearing Date ”);

(d)   The Breakup Fee in the amount of reasonable costs and fees incurred by the Stalking Horse not to exceed $150,000 is approved and shall be paid to the Stalking Horse in the event that the Bankruptcy Court enters an order approving an offer to purchase the Purchased Assets submitted by a party other than the Stalking Horse or enters an order confirming a plan of reorganization of Seller (other than a plan under which the Stalking Horse acquires the Purchased Assets) no later than the closing of the sale of the Purchased Assets to a third party;

(e)   No other bidder for the Purchased Assets shall be entitled to payment of any breakup fee;

(f)   Any entity that fails to submit a timely, conforming Qualified Bid, as set forth above, shall be disqualified from bidding for the Purchased Assets at the Auction or the Sale Hearing; and

(g)   If no timely, conforming Qualified Bid is submitted, Seller shall request at the Sale Hearing that the Court approve the proposed sale of the Purchased Assets to the Stalking Horse under the Stalking Horse APA.

Section 3.2.   Entry of Order Approving Sale . Subject to Section 3.1 above, Seller shall use its best efforts to obtain entry of an order of the Bankruptcy Court approving the terms of this Agreement (the “ Sale Order ”) as soon as practicable following the mutual execution and delivery of this Agreement and approval of the Sale Procedures, but no later than November 15, 2008 (“ Sale Order Date ”). The Sale Order shall be in accordance with the terms of this Agreement, shall be in a form reasonably satisfactory to Purchaser and Seller, and shall:

(b)   Seller shall provide notice of any hearing on the motion to approve the Sale Order or any other matter before the Bankruptcy Court relating to this Agreement or the Transaction Documents, in each case as required by the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and the Local Bankruptcy Rules for the Central District of California or as otherwise ordered by the Bankruptcy Court.

(c)   Notwithstanding anything to the contrary in Section 3.1 or any other provision of this Agreement, in the event that a Qualified Bid of a third party or the Stalking Horse (either, an “ Alternative Buyer ,” and the underlying agreement between the Alternative Buyer and Seller, the “ Alternative APA ”) is approved by the Bankruptcy Court at the hearing on the Sale Motion, this Agreement shall become an approved “back-up bid” which may, if exercised by written election by Purchaser and delivered to Seller with twenty four (24) hours of the completion of the Sale hearing, remain open for acceptance by Seller for a period of thirty (30) days following the date upon which such hearing is concluded, but subject and subordinate in all respects to the rights of the Alternative Buyer under the Alternative APA. 

Section 3.3.   Certain Bankruptcy Undertakings by Seller .

(a)   Seller shall, in good faith, using its commercially reasonable efforts, seek entry of the Sale Order no later than November 15, 2008 and take such actions following the Execution Date as are necessary to consummate the Transactions contemplated by this Agreement in accordance with Sale Order and effectuate the Closing no later than December 31, 2008 (the “ Outside Date .”).

(b)   Recognizing that the transaction contemplated herein is subject to overbid, from and after the date hereof, except as ordered by the Bankruptcy Court and as is reasonably necessary to adequately market the Assets for overbid, Seller shall neither take any action, nor fail to take any action, which action or failure to act would reasonably be expected to (i) prevent or impede the consummation of the transactions contemplated by this Agreement in accordance with the terms of this Agreement; or (ii) result in (A) the reversal, avoidance, revocation, vacating or modification (in any manner that would reasonably be expected to materially and adversely affect Purchaser’s rights hereunder), or (B) the entry of a stay pending appeal.

(c)   Seller shall, in good faith, using its commercially reasonable efforts and with the cooperative efforts of Purchaser, attempt to obtain in the Sale Order an exemption from Transfer Taxes pursuant to Section 1146(c) of the Bankruptcy Code.

(d)   If the Sale Procedures Order, the Sale Order or any other order of the Bankruptcy Court relating to this Agreement shall be appealed by any Person (or a petition for certiorari or motion for rehearing or reargument shall be filed with respect thereto), Seller, with the cooperation and support of Purchaser, shall take all steps as may be reasonable and appropriate to defend against such appeal, petition or motion, and shall endeavor to obtain an expedited resolution of such appeal.

ARTICLE 4

INSTRUMENTS OF TRANSFER AND ASSUMPTION

Section 4.1.   Transfer Documents . At the Closing, Seller will deliver to Purchaser (a) one or more Bills of Sale in substantially the form attached hereto as Exhibit B (the “ Bill of Sale ”), and (b) all such other good and sufficient instruments of sale, transfer and conveyance consistent with the terms and provisions of this Agreement, including, without limitation, assignments of leases and the Transferred Intellectual Property, and any other assignments as shall be reasonably necessary to vest in Purchaser all of Seller’s right and title to, and interest in, the Purchased Assets.

Section 4.2.   Assignment and Assumption Documents . At the Closing, Purchaser and Seller will execute and deliver an Assignment and Assumption Agreement in substantially the form attached hereto as Exhibit C (the “ Assumption Agreement ”) in order to effect the assignment and assumption of the Assumed Liabilities.

ARTICLE 5

CONSIDERATION; ALLOCATION

Section 5.1.   Consideration . In exchange for the sale, assignment, transfer, conveyance and delivery from Seller of the Purchased Assets, at Closing Purchaser shall:

(a)   assume the Assumed Liabilities pursuant to this Agreement; and

(b)   pay by wire transfer to an account designated by Seller (which account shall be designated at least three (3) business days prior to the Closing) the amount of Three Million Eight Hundred Thousand Dollars ($3,800,000) (the “ Cash Payment ”);

(c)   Items (a) and (b) of this Section 5.1 are referred to collectively as the “ Consideration .”

(d)   The Cash Payment shall be paid to Seller at the Closing in immediately available, good funds of the United States of America (“ Good Funds ”).

Section 5.2.   Allocation of Consideration .

(a)   INTENTIONALLY OMITTED

(b)   Prior to Closing, Purchaser shall deliver to Seller Purchaser’s proposed allocation (the “ Allocation Statement ”) of the Consideration (including, without limitation, the Assumed Liabilities) among the Purchased Assets. The Allocation Statement shall allocate the Consideration and any item required to be treated as an adjustment to the Consideration among the various assets comprising the Purchased Assets in accordance with Treasury Regulation 1.1060-1 (or any comparable provisions of state or local tax law) or any successor provision. If Seller agrees with the Allocation Statement and the allocation among the Purchased Assets set forth therein, Purchaser and Seller shall report and file all tax returns (including any amended tax returns and claims for refund) consistent with such mutually agreed Consideration allocation, and shall take no position contrary thereto or inconsistent therewith (including in any audits or examinations by any taxing authority or any other proceedings). Purchaser and Seller shall file or cause to be filed any and all forms (including U.S. Internal Revenue Service Form 8594), statements and schedules with respect to such allocation, including any required amendments to such forms. If, on the other hand, Seller objects to, or otherwise disagrees with the Allocation Statement, Purchaser and Seller shall use their commercially reasonable efforts to agree upon the allocation of the Consideration among the Purchased Assets. In any event, Seller agrees to take no position in its tax returns, which are inconsistent with the Purchaser’s allocations of the Consideration for tax purposes. Seller shall be responsible for all fees associated with the preparation of tax returns. Notwithstanding any other provisions of this Agreement, Purchaser’s and Seller’s obligations under this Section 5.2 shall survive Closing.

Section 5.3.   Prorations . The following prorations relating to the Business and the Purchased Assets will be made as of the Closing Date, with Seller liable to the extent that such items can be determined to relate to any time period up to and including the Closing Date and Purchaser liable to the extent that such items can be determined to relate to periods subsequent to the Closing Date; provided , however , that for periods of time which straddle the Closing Date and for which the amounts attributable to any item cannot be readily allocable to a particular date, the obligations and liabilities shall be prorated between the Purchaser and the Seller based upon the total amount of days in any allocable period and the amount of days which precede the Closing (allocable to the Seller) and the amount of days during such period which are on or are on or after the Closing (allocable to the Purchaser):

(a)   Real, sales, ad valorem, personal property and all similar taxes and assessments relating to the Purchased Assets, the Business and the real property subject to the Assumed Leases;

(b)   Water, sewer and other similar types of taxes, and installments on special benefit assessments;

(c)   Electric, gas, telephone and utility charges;

(d)   Charges under maintenance and service contracts and fees under licenses transferred to or assumed by Purchaser;

(e)   Any and all payments due under Assumed Contracts, Assumed Leases or Personal Property Leases, subject to any payment restructurings with Bankruptcy Court approvals, and

(f)   Prepaid expenses of Seller to the extent that the benefit thereof will be available to Purchaser after the Closing Date.

Seller shall be responsible for all sales, transfer and documentary Taxes and recording fees and Taxes applicable to the transactions contemplated hereby or imposed by reason of the transfers of the Purchased Assets provided under this Agreement and any deficiency, interest or penalty asserted with respect thereto (collectively, the “ Transfer Taxes ”). Purchaser shall pay the fees and costs of recording or filing all applicable conveyance instruments contemplated hereunder. Purchaser shall pay all costs of applying for new Permits and obtaining the transfer of existing Permits which may be lawfully transferred.

ARTICLE 6

CLOSING

Section 6.1.   Closing Date . Subject to the terms and conditions hereof, the closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Greenberg Glusker Fields Claman & Machtinger, LLP or such other location as may be mutually agreed upon between the Parties on the date which is the third (3rd) business day following the date on which all conditions to Closing set forth in Articles 10 and 11 hereof have been satisfied or waived (the “ Closing Date ”). The Closing shall be effective as of 12:01 a.m. Pacific Time on the day after the Closing Date.

 

ARTICLE 7

SELLER’S REPRESENTATIONS AND WARRANTIES

Seller represents and warrants to Purchaser that the statements contained in this Article 7 are, to Seller’s Knowledge, true, correct and complete as of the date of this Agreement and will, to Seller’s Knowledge, be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article 7).

Section 7.1.   Organization, Qualification and Corporate Power . Seller is a corporation duly organized, validly existing and in good standing under the Laws of the state of California and has all necessary power and authority to own and operate its properties and to carry on its business as it is now being conducted and is in good standing under the Laws of each jurisdiction where such qualification is required, except where the lack of such qualification would not have a Material Adverse Effect and, subject to obtaining Bankruptcy Court approval of this Agreement as contemplated herein, to carry out the transactions contemplated by this Agreement and the other Transaction Documents. Seller has the power and authority to execute and deliver and, subject to entry of the Sale Order, perform its obligations under this Agreement and the other Transaction Documents, and to undertake the transactions contemplated hereby and thereby. As used herein, the term “ Transaction Documents ” means this Agreement and all other agreements, documents and instruments executed in connection herewith or required to be executed and/or delivered by the parties or any one or more of them in accordance with the provisions of this Agreement.

Section 7.2.   Authorization, Execution and Delivery of Agreement and Transaction Documents . The execution, delivery and performance of this Agreement and the other Transaction Documents by Seller and the transfer or assignment of the Purchased Assets to Purchaser have been duly and validly authorized and approved by all necessary corporate action. Subject to obtaining the Sale Order and pursuant thereto, Seller will have full power, right and authority to sell and convey to Purchaser the Purchased Assets owned by Seller. The Sale Order to be entered by the Bankruptcy Court shall provide that this Agreement is, and each of the other Transaction Documents when so executed and delivered will be, a valid and binding obligation of Seller, enforceable against such Seller in accordance with its terms.

Section 7.3.   Title to and Condition of Assets . Except as set forth in Schedule 7.3 hereto, Seller has good and marketable title to, or a valid leasehold interest in, all of the properties and assets included in the Purchased Assets, and upon the consummation of the transactions contemplated hereby and by the Transaction Documents, Purchaser will acquire good and marketable title to all of the Purchased Assets, free and clear of all Liens other than the Assumed Liabilities. The Purchased Assets include, without limitation, all assets, tangible or intangible, of any nature whatsoever, necessary for the conduct of the Business and are sufficient for the continued conduct of the Business after the Closing in substantially the same manner as conducted prior to the Closing.

Section 7.4.     Liabilities . Other than the Non-Assumed Liabilities, Seller has no Liabilities relating to the Purchased Assets or the Business due or to become due except the Assumed Liabilities.

Section 7.5.   Corporate Records . Seller has maintained the corporate records, which, in reasonable detail, accurately and fairly reflect the activities of Seller pertaining to the Business. Seller has not, in any manner that pertains to, or could affect, the Business or the Purchased Assets, engaged in any transaction, maintained any bank account or used any corporate funds except for transactions, bank accounts and funds which have been and are reflected in the normally maintained corporate records.

Section 7.6.   Legal Proceedings . Except as set forth on Schedule 7.6 hereto, there is no Legal Proceeding (a) pending or, to the Knowledge of Seller, threatened or anticipated against or affecting Seller, the Business or the Purchased Assets (or to the Knowledge of Seller, pending or threatened, against any of the officers, directors or employees of Seller with respect to their business activities related to or affecting the Business); (b) that challenges or that may have the effect of preventing, making illegal, delaying or otherwise interfering with any of the transactions contemplated by this Agreement; or (c) related to the Business or the Purchased Assets to which Seller is otherwise a party. To the Knowledge of Seller, there is no reasonable basis for any such Legal Proceeding.

Section 7.7.   Real Property . Seller does not own any real property.

Section 7.8.   No Violation of Laws or Agreements . The Sale Order shall contain findings by the Bankruptcy Court that the execution and delivery by Seller of this Agreement and the Transaction Documents contemplated hereby, the performance by Seller of its obligations hereunder and thereunder and the consummation by Seller of the transactions contemplated herein and therein will not violate in any material respect, (i) any statute or Law or any judgment, decree, order, regulation or rule of any court or Governmental Authority to which Seller is subject; (ii) result in any breach of, or constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, or give to any Person any rights of termination, amendment, acceleration or cancellation of, or result in the creation of any Lien on any of the Purchased Assets, any note, bond, mortgage, indenture, contract, agreement, lease, license, Permit, franchise or other instrument to which Seller is a party or by which any of the Purchased Assets are bound; and (iii) contravene, conflict with or result in a violation of any provision of any organizational documents of Seller.

Section 7.9.   Employee Benefits; ERISA Matters .

(a)   Schedule 7.9 hereto contains a complete list of all Employee Plans covering employees, directors or consultants or former employees, directors or consultants in, or related to, the Business (“ Business Employee Plans ”). Seller has made available to Purchaser true and complete copies of all Employee Plans, including written interpretations thereof and written descriptions thereof which have been distributed to Seller’s employees and for which Seller has copies, all annuity contracts or other funding instruments relating thereto, and a complete description of all Employee Plans which are not in writing.

(b)   Neither Seller nor any ERISA Affiliate sponsors, maintains, contributes to or has an obligation to contribute to, or has sponsored, maintained, contributed to or had an obligation to contribute to, any Pension Plan subject to Title IV of ERISA, any Multiemployer Plan.

(c)   Each Welfare Plan which covers or has covered employees or former employees of Seller or of its Affiliates in the Business and which is a “group health plan,” as defined in Section 607(1) of ERISA, has been operated in compliance with provisions of Part 6 of Title I, Subtitle B of ERISA and Section 4980B of the Code at all times.

(d)   There is no Legal Proceeding outstanding, relating to or seeking benefits under any Business Employee Plan that is pending, threatened or anticipated against Seller, any ERISA Affiliate or any Employee Plan.

(e)   Neither Seller nor any ERISA Affiliate has any liability for unpaid contributions under Section 515 of ERISA with respect to any Welfare Plan (i) covering employees, directors or consultants or former employees, directors or consultants in, or related to, the Business and (ii) with respect to which Purchaser may incur any Liability.

(f)   There are no liens arising under the Code or ERISA with respect to the operation, termination, restoration or funding of any Business Employee Plan or arising in connection with any excise tax or penalty tax with respect to any Business Employee Plan.

(g)   Each Business Employee Plan has at all times been maintained in all material respects, by its terms and in operation, in accordance with all applicable laws, including, without limitation, ERISA and the Code.

(h)   Seller and its ERISA Affiliates have made full and timely payment of all amounts required to be contributed under the terms of each Business Employee Plan and applicable Law or required to be paid as expenses or as Taxes under applicable Laws, under such Employee Plan, and Seller and its ERISA Affiliates shall continue to do so through the Closing Date.

(i)   Seller has no Business Employee Plan intended to qualify under Section 401 of the Code.

(j)   Neither the execution and delivery of this Agreement or other related agreements by Seller nor the consummation of the transactions contemplated hereby or thereby will result in the acceleration or creation of any rights of any person to benefits under any Employee Plan (including, without limitation, the acceleration of the vesting or exercisability of any stock options, the acceleration of the vesting of any restricted stock, the acceleration of the accrual or vesting of any benefits under any Pension Plan or the acceleration or creation of any rights under any severance, parachute or change in control agreement).

(k)   Neither Seller nor any ERISA Affiliate has incurred any liability with respect to any Employee Plan, which may create, or result in any liability to Purchaser.

(l)   No amounts payable under the Business Employee Plans will fail to be deductible for federal income tax purposes by virtue of Section 280G of the Code.

Section 7.10.   Labor Matters .

(a)   Except as set forth on Schedule 7.10 hereto, there are no employment, consulting, severance or indemnification contracts between the Seller and any of its employees. Seller is not a party to any union contract or collective bargaining agreement.

(b)   Except as set forth on Schedule 7.10 hereto, (i) Seller is not party to or bound by any collective bargaining or similar agreement with any labor organization; (ii) no employees of Seller are represented by any labor organization; (iii) Seller has no Knowledge of any union organizing activities among the employees of the Seller; and (iv) during the past year, there has been no actual or, to the Knowledge of Seller, threatened strikes, slowdowns, work stoppages or lockouts affecting the Seller.

(c)   Except as set forth on Schedule 7.10 hereto, Seller is and has been in compliance with all notice and other requirements under the WARN Act.

(d)   Except as set forth on Schedule 7.10 hereto,   to Seller’s Knowledge (i) there are no material claims (i.e., claims not covered by insurance) by any or on behalf of any of the employees of the Business pending with respect to their employment or benefits incident thereto with respect to sexual harassment and discrimination claims and claims arising under workers’ compensation laws which are not ordinary course of business claims for a business such as the Business (collectively, “ Employee Claims ”), and (ii) there have been no organizational efforts known to Seller during the past five years involving any of such employees to organize into a collective bargaining unit.

Section 7.11.   Transferred Intellectual Property . Seller is the sole owner of the Transferred Intellectual Property. No claims have been asserted or threatened nor has any Seller received notice of any such claim that (i) the operations of Seller infringe upon or misappropriate the rights of any other person in respect of any Transferred Intellectual Property, or (ii) any Transferred Intellectual Property or the use by Seller of such Transferred Intellectual Property is invalid or unenforceable. To the Knowledge of Seller, (i) no third party is engaging in any activity that infringes or misappropriates the Transferred Intellectual Property. Seller has not granted any material license or other right to any third party with respect to the Transferred Intellectual Property.

Section 7.12.   Defaults . Seller filed for Chapter 11 on March 10, 2008, and had numerous leases, contracts and agreements in default.

Section 7.13.   Environmental Matters . (A) Seller is in compliance with all applicable Environmental Laws, except where failure to be in compliance would not have a Material Adverse Effect; (B) there is no Environmental Claim pending against Seller; (C) Seller has obtained all material permits, approvals, identification numbers, licenses or other authorizations required under any applicable Environmental Laws (the “ Environmental Permits ”) and is and has been in compliance with their requirements; (D) to the Knowledge of the Seller there are no underground or aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed of on any real property currently owned or leased by Seller other than in compliance with Environmental Laws; (E) Seller has not undertaken or completed any investigation or assessment or remedial or response action relating to any such release, discharge or disposal of or contamination with Hazardous Materials at any site, location or operation of the Business, either voluntarily or pursuant to the order of any Governmental Entity or the requirements of any Environmental Law; and (F) there have been no Environmental Claims against the Seller.

Secti