ASSET PURCHASE AGREEMENT BY AND AMONG ENTERTAINMENT DISTRIBUTION COMPANY (USA), LLC, AS PURCHASER, AND UMG MANUFACTURING & LOGISTICS, INC., AND UNIVERSAL MUSIC & VIDEO DISTRIBUTION, CORP., AS SELLERS DATED AS OF MAY 9, 2005

<PAGE>

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

ASSET PURCHASE AGREEMENT

BY AND AMONG

ENTERTAINMENT DISTRIBUTION COMPANY (USA), LLC,

AS PURCHASER,

AND

UMG MANUFACTURING & LOGISTICS, INC.,

AND

UNIVERSAL MUSIC & VIDEO DISTRIBUTION, CORP.,

AS SELLERS

DATED AS OF MAY 9, 2005

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

<PAGE>

ASSET PURCHASE AGREEMENT dated as of May 9, 2005, by and among

ENTERTAINMENT DISTRIBUTION COMPANY (USA), LLC, a Delaware limited liability

company ("Purchaser"), and UMG MANUFACTURING & LOGISTICS, INC., a Delaware

corporation ("UML"), and UNIVERSAL MUSIC & VIDEO DISTRIBUTION, CORP., a Delaware

corporation ("UMVD," and together with UML, each a "Seller" and together the

"Sellers").

PREAMBLE

WHEREAS, Sellers conduct the U.S. Business;

WHEREAS, Sellers conduct a business similar to the U.S. Business in

Hannover, Germany (the "European Business");

WHEREAS, Sellers desire to sell to Purchaser, and Purchaser desires to

purchase from Sellers, certain specified Assets of Sellers related to the U.S.

Business, subject to Purchaser's assumption of certain specified Liabilities of

Sellers related to the U.S. Business, all on the terms and subject to the

conditions contained in this Agreement;

WHEREAS, pursuant to a Share Purchase Agreement dated as of the date

hereof (the "Share Purchase Agreement"), Affiliates of Sellers have agreed to

sell to Purchaser (or its Affiliate), all of the Equity Interests of Universal

Manufacturing and Logistics GmbH relating to the European Business; and

WHEREAS, certain capitalized terms used in this Agreement are defined on

Annex I attached hereto and incorporated herein.

ACCORDINGLY, in consideration of the premises and the mutual

representations hereinafter set forth and other good and valuable consideration,

the receipt and sufficiency of which are hereby acknowledged, the parties hereto

hereby agree as follows.

ARTICLE 1

PURCHASE AND SALE OF ASSETS

1.1 TRANSFER OF PURCHASED ASSETS.

(a) On the terms and subject to the conditions contained in this

Agreement, at the Closing, Sellers shall (and shall cause their Affiliates to)

sell, transfer, convey, assign and deliver to Purchaser, free and clear of all

Encumbrances (with the exception of Permitted Encumbrances), and Purchaser shall

purchase and acquire from Sellers (or their Affiliates, as applicable), all of

the right, title and interest of Sellers (or the applicable Affiliate) in, to

and under the Assets of every kind, nature and description, whether real,

personal or mixed, tangible or intangible, exclusively used in, held for use in

or otherwise relating exclusively to the U.S. Business (but excluding all the

Excluded Assets), including the following:

(i) all Inventory;

1

<PAGE>

(ii) all Other Inventory;

(iii) without regard to the use of the term "exclusively" used

in the initial paragraph of Section 1.1(a), all machinery, equipment,

fixtures, office furniture, tools and other tangible Assets, including all

manufacturing, production, maintenance, packaging, testing and other

machinery, tooling and equipment, molds, presses, motor vehicles and other

vehicles, spare or replacement parts, metal parts, silk screens,

furniture, office equipment, supplies and other items of tangible personal

property used in the U.S. Business and located at the Facilities (other

than office furniture used by employees to be retained by Sellers or their

Affiliates in Fishers, Indiana) or listed in Section 1.1(a)(iii) of the

Seller Disclosure Schedule;

(iv) all rights under all Contracts specifically and

exclusively relating to the U.S. Business (other than the Excluded

Contracts) (collectively, the "Assigned Contracts");

(v) the Owned Real Property of Sellers and their Affiliates,

together with all appurtenances to such Real Property and all structures,

fixtures, equipment, machinery and improvements, in each case as required

to operate the Real Property located thereon;

(vi) the leases for Real Property listed in Section 5.9(b) of

the Seller Disclosure Schedule (the "Leases");

(vii) all Permits in favor of Sellers as of the Closing that

relate to or are necessary for or used in connection with the operation of

the Purchased Assets as heretofore operated by Sellers as set forth in

Section 5.13(b) of the Seller Disclosure Schedule except for and to the

extent such permits relate to the Excluded Assets, provided, however, such

Permits shall be included within the Purchased Assets only to the extent

they are lawfully transferable to Purchaser;

(viii) all other sales and promotional literature and all

books, records, files and data (including customer and supplier lists),

production records, engineering records, purchasing and sales records,

personnel and payroll records, accounting records, mailing lists, customer

and vendor lists and records, either in computer or original or

photostatic form, whether or not in computer or machine readable format,

in each case that are located at the Facilities, except (a) to the extent

such materials are subject to confidentiality or non-disclosure agreements

in favor of third parties (with any such materials listed in Section

1.1(a)(viii) of the Seller Disclosure Schedule) whose consent to transfer

is not obtained; (b) for personnel and payroll records and files where

information is not otherwise available at the Facilities, (i) copies of

which will be provided to Purchaser to the extent permitted by Law, and

(ii) will be deemed included in this Section 1.1(a)(viii) whether or not

located at the Facilities; and (c) for any such materials that use or

include either Seller's tradenames or trademarks;

(ix) all rights, recoveries, rights to claims, refunds,

counterclaims, rights to offset, other rights, causes of action, choses in

actions, Proceedings (known or

-2-

<PAGE>

unknown, matured or unmatured, accrued or contingent) against third

parties (including all warranty and other contractual claims (express,

implied or otherwise)), rights of recovery, rights of set-off and similar

rights of Sellers which relate to or arise out of the Post-Closing Period

and relate to the Purchased Assets or the U.S. Business (unless any such

rights can be allocated to the Excluded Assets or the Excluded

Liabilities, and then less such amount);

(x) all Requisite Rights;

(xi) all unexpired warranties and guarantees that are

transferable to Purchaser that Sellers have received from vendors,

suppliers or manufacturers with respect specifically to the Purchased

Assets or the U.S. Business for matters that arise in the Post-Closing

Period; provided, however, nothing set forth in this paragraph shall be

construed as a representation by Sellers that any unexpired warranty or

guarantee remains enforceable;

(xii) all stationery, sales and purchase orders, forms,

labels, shipping material, catalogs, brochures, art work (other than

production components), photographs and advertising material located at

the Facilities and used in the U.S. Business, except for any materials

that use or include either Seller's tradenames (other than labels or

shipping materials used in the manufacturing or distribution of any

product by Purchaser for or to either Seller (or their Affiliates) which

shall be Purchased Assets and may only be used in the provision of

services to Sellers and their Affiliates at no charge to Sellers and their

Affiliates);

(xiii) the goodwill of the U.S. Business as a going concern,

and subject to the provisions of Section 7.6(b) hereof, the right to

represent to third parties that Purchaser acquired the U.S. Business from

Sellers;

(xiv) the Employee Plans sponsored and maintained by Sellers,

or one of their Affiliates, and related Assets, each as set forth in

Section 1.1(a)(xiv) of the Seller Disclosure Schedule (the "Assumed

Employee Plans");

(xv) the prepayments, prepaid expenses, advances, credits from

suppliers and deposits with or paid to third parties and paid for by

Purchaser pursuant to Section 3.4 hereof;

(xvi) the Assets related exclusively to the separate

distribution function located at Gloversville, New York; and

(xvii) all other Assets listed in Section 1.1(a)(xvii) of the

Seller Disclosure Schedule.

(b) For convenience of reference, the Assets that are to be sold,

transferred, conveyed and assigned to Purchaser by Sellers at the Closing

pursuant to Section 1.1(a) are collectively called the "Purchased Assets" in

this Agreement.

-3-

<PAGE>

1.2 ASSETS NOT BEING TRANSFERRED.

Anything contained in Section 1.1 or elsewhere in this Agreement to the

contrary notwithstanding, there are expressly excluded from the Purchased Assets

the following Assets (the "Excluded Assets"):

(a) cash, cash equivalents and securities held by Sellers as of the

Closing;

(b) accounts receivable of Sellers arising prior to the Closing Date

and any amounts outstanding that have been invoiced by Sellers prior to the

Closing Date, in each case whether current or noncurrent;

(c) all insurance claims (and related policies) and all rights under

any insurance policy, insurance reserves and accruals, insurance deposits,

including reserves, deposits, dividends, refunds or premium adjustments relating

to worker's compensation, insurance prepayments and all rights thereunder with

respect to claims arising prior to the Closing, except to the extent such policy

insures for occurrences that are included in the Assumed Liabilities (it being

understood however that Sellers will not be obligated to take any action under

any such policy to seek any recovery on behalf of Purchaser with respect to such

Assumed Liabilities);

(d) the Supplied Production Components listed in Section 1.2(d) of

the Seller Disclosure Schedule and the Finished Goods (the "Excluded

Inventory");

(e) all prepayments, prepaid expenses, advances, credits from

suppliers and deposits with or paid to third parties, except as are paid for by

Purchaser pursuant to Section 3.4 hereof;

(f) all of Sellers' (and their Affiliates') right, title and

interest in their Employee Plans and the related Assets, except the Assumed

Employee Plans (the "Excluded Employee Plans");

(g) all rights in either Seller's corporate charters, qualifications

to do business as a foreign corporation, arrangements with registered agents

relating to such qualifications, taxpayer or other identification numbers,

seals, minute books, stock transfer books, and blank stock certificates of

Sellers;

(h) all of Sellers' rights arising under this Agreement;

(i) all rights to receive mail and other communications addressed to

Sellers, or addressed to any of the Facilities, solely to the extent such mail

or other communication relates solely to Excluded Assets or Excluded

Liabilities, which mail and communications shall be promptly forwarded by

Purchaser to Sellers;

(j) all rights, recoveries, refunds, credits, counterclaims, rights

to offset, other rights, choses and Proceedings (known or unknown, matured or

unmatured, accrued or contingent) for Taxes relating to the Pre-Closing Tax

Period;

-4-

<PAGE>

(k) all rights to claims, refunds, causes of action, choses in

actions, rights of recovery, rights of set-off and similar rights in favor of

Sellers of any kind relating to or arising out of the Pre-Closing Period, or

relating to the Excluded Assets or Excluded Liabilities (unless any such rights

can be allocated to the Purchased Assets or the Assumed Liabilities and then

less such allocable amount);

(l) any and all personnel and employment records of or related to

the operation of the Facilities or otherwise related to Sellers' personnel,

whether or not maintained at or by the Facilities, other than those personnel

records included in the Purchased Assets under Section 1.1(a)(viii);

(m) the Assets related exclusively to the separate marketing and

sales, credit and collections, technology and customer service located at the

facility in Fishers, Indiana which are set forth in Section 1.2(m) of the Seller

Disclosure Schedule hereof;

(n) the Excluded Contracts;

(o) any and all Equity Interests owned by Sellers;

(p) the rights to any of Sellers' and their Affiliates' tradenames,

trademarks, service marks (whether or not registered), including, the use of the

name "UML," "UMVD," "UMG" or any formulation including the word "Universal,"

except as permitted in Section 1.1(a)(xii) in connection with the provision of

services to Sellers and their Affiliates or the use of any name under which the

U.S. Business prior to Closing has done business;

(q) the Assets at the facility located in Gloversville, New York,

including all real property in Gloversville, New York, other than those Assets

that relate exclusively to the distribution operations; and

(r) all other Assets listed in Section 1.2(r) of the Seller

Disclosure Schedule.

1.3 FURTHER ASSURANCES.

Sellers shall, at any time and from time to time after the Closing, upon

the written request of Purchaser, do, execute, acknowledge and deliver, and

cause to be done, executed, acknowledged or delivered, all such further acts,

deeds, assignments, transfers, conveyances, powers of attorney or assurances as

may be reasonably required to sell, transfer, convey, assign and deliver to

Purchaser, or to aid and assist in the collection of or reducing to possession

by Purchaser, of the applicable Purchased Assets, or to vest in Purchaser good

and marketable title to the Purchased Assets. Additionally, Sellers agree, for a

period of two years after the Closing, upon the written request of Purchaser

(with Purchaser being required in any such instance to reimburse Sellers for

their out-of-pocket costs, including the cost of any temporary employees or the

overtime costs of regular employees), to assist Purchaser in compiling

historical information for any financing of the U.S. Business (including the

compilation of financial information or otherwise) and to comply with any

financial reporting obligations imposed by law, including the provision of

audited financial statements for the years ended December 31, 2002, 2003 and

2004 in accordance with GAAP; provided, however, that (a) Sellers and their

Affiliates shall receive indemnities reasonably acceptable to them to protect

them from any and all Liabilities arising from or related to the

-5-

<PAGE>

provision and use of such information (except to the extent that any such

Liabilities result from Sellers' breach of any representations or warranties

under this Agreement) and (b) the requirements on Sellers and their Affiliates

pursuant to this sentence shall not require the performance of tasks that

unreasonably interfere with the ordinary course performance of the regular

employment duties of the employees of Sellers and their Affiliates.

1.4 ASSIGNMENT OF CONTRACTS, RIGHTS, ETC.

Anything contained in this Agreement to the contrary notwithstanding, this

Agreement and the transactions contemplated hereby shall not constitute an

agreement (whether by operation of Law or otherwise) or attempted agreement to

transfer, sublease or assign any Contract, or any Proceeding or right with

respect to any benefit or obligation arising thereunder or resulting therefrom,

or any Permit, if an attempted transfer, sublease or assignment thereof, without

the required consent of any other party thereto, would constitute a breach

thereof or in any way adversely affect the rights or increase the obligations of

Purchaser or Sellers thereunder and consent to transfer has not been obtained.

The parties shall use reasonable commercial efforts to obtain the consent of any

such third party to any of the foregoing to the transfer or assignment thereof

to Purchaser in all cases in which such consent is required for such transfer or

assignment; provided, however, the expenditure of out-of-pocket costs or other

out-of-pocket economic concessions shall not be required by Sellers. If such

consent is not timely obtained, the parties shall enter into such commercially

reasonable cooperative arrangements (at no additional material costs to Sellers)

to provide for Purchaser the benefits and obligations thereunder (at the ongoing

expense of Purchaser, with such ongoing expense not to exceed the ongoing

expense that would have been incurred under such consent, including maintaining

any corporate "group" cost allocations in a manner consistent with past

practice) and any and all rights of Sellers thereunder against the other party

thereto. If any such arrangement is not commercially reasonably practicable,

then such Contract, Proceeding or Permit, as the case may be, shall be deemed to

be an Excluded Asset or an Excluded Liability, as the case may be.

ARTICLE 2

ASSUMED OBLIGATIONS; EXCLUDED OBLIGATIONS

2.1 LIABILITIES BEING ASSUMED AT CLOSING.

On the terms and subject to the conditions contained in this Agreement and

without limiting the representations and warranties in Article 5, and except for

the Excluded Liabilities, simultaneously with the sale, transfer, conveyance and

assignment to Purchaser of the Purchased Assets, Purchaser shall assume and pay,

discharge and perform, as and when due only the following Liabilities

(collectively, the "Assumed Liabilities"):

(a) Liabilities arising solely out of events, acts or transactions

occurring after the Closing under the Assigned Contracts and the Permits that

are included in the Purchased Assets;

-6-

<PAGE>

(b) Liabilities for amounts due for third-party materials or

services received by Purchaser on or after the Closing Date, whether or not such

amounts would be classified as accounts payable (including accrued expenses and

interest) in accordance with GAAP;

(c) all Environmental Costs or Liabilities imposed or required by

Environmental Health and Safety Laws arising in connection with or to the extent

resulting from any events, facts or circumstances arising after the Closing Date

relating to any Site, or the operations of the Purchaser or any of its

Affiliates or their respective assigns at any time after the Closing Date, other

than Sellers' Environmental Obligations;

(d) Liabilities to the Transferred Employees for which Purchaser

will be responsible as set forth in Article 8;

(e) any and all Liabilities (including those Liabilities relating to

Proceedings) arising under or with respect to (A) personal injury, property

damage, workers' compensation, violation of Law, comprehensive and general

liability claims, medical claims or any other actual or threatened Proceeding,

(B) returns, product liability, guaranteed sales, advertising commitments,

allowances, customer chargebacks or any other customer allowance and (C)

commissions or other payments due to sales representatives, in each case in

clauses (A), (B) and (C) above, only to the extent any Liability or portion

thereof results from or arises out of events, facts or circumstances occurring

or existing after the Closing Date or which are based on or related to the

manufacture, distribution or sale of products or performance of services after

the Closing Date;

(f) any and all Liabilities arising out of any Proceeding relating

to or arising out of the U.S. Business or the Purchased Assets, only to the

extent such Liability or portion thereof results from or arises out of events,

facts or circumstances occurring or existing after the Closing Date;

(g) any and all Liabilities arising by reason of any violation or

alleged violation of any Law or Order, only to the extent such Liability or

portion thereof results from or arises out of events, facts or circumstances

occurring or existing after the Closing Date; and

(h) any and all Liabilities not otherwise enumerated in Section 2.1

which in any way, and only to the extent that they, arise out of or are related

to or associated with the ownership, possession, use or operation of the

Purchased Assets or any business conducted therewith or therefrom after the

Closing.

2.2 LIABILITIES NOT BEING ASSUMED.

(a) EXCEPT FOR THE ASSUMED LIABILITIES, PURCHASER SHALL NOT AND DOES

NOT ASSUME ANY LIABILITIES (AS DEFINED HEREIN) OF SELLERS (OR ANY PREDECESSOR OF

SELLERS OR ANY PRIOR OWNER OF ALL OR ANY PART OF THE U.S. BUSINESS OR PURCHASED

ASSETS), THEIR AFFILIATES OR RELATING TO THE U.S. BUSINESS, WHETHER OR NOT

ARISING OUT OF OR RELATING TO THE PURCHASED ASSETS OR THE U.S. BUSINESS OR ANY

OTHER BUSINESS OF SELLERS OR THEIR AFFILIATES, ALL OF SUCH LIABILITIES SHALL

-7-

<PAGE>

AT AND AFTER THE CLOSING REMAIN THE EXCLUSIVE RESPONSIBILITY OF SELLERS OR THEIR

AFFILIATES (AS APPLICABLE).

(b) Without limiting the generality of Section 2.2(a), Purchaser is

not assuming any of the following Liabilities:

(i) any and all Liabilities (including any accrued expenses

and interest) for accounts payable and notes payable for third- party

materials or services received by Sellers or the U.S. Business prior to

the Closing Date;

(ii) any and all Liabilities for Taxes of Sellers or any of

their Affiliates, and all Liabilities for Taxes relating to the

Pre-Closing Tax Period (in each case, except with respect to Transfer

Taxes (which are governed by Section 9.2(b)), regardless of whether

arising as a result of or in connection with the transactions contemplated

hereby or otherwise);

(iii) any and all Liabilities (including those Liabilities

relating to Proceedings) arising under or with respect to (A) personal

injury, property damage, workers' compensation, violation of Law,

comprehensive and general liability claims, medical claims or any other

actual or threatened Proceeding, (B) returns, product liability,

guaranteed sales, advertising commitments, allowances, customer

chargebacks or any other customer allowance and (C) commissions or other

payments due to sales representatives, in each case in clauses (A), (B)

and (C) above, only to the extent any Liability or portion thereof results

from or arises out of events, facts or circumstances occurring or existing

on or before the Closing Date or which are based on or related to the

manufacture, distribution or sale of products or the performance of

services on or before the Closing Date, notwithstanding that the date on

which the Proceeding or Liability is asserted is after the Closing Date;

(iv) any and all Liabilities arising out of any Proceeding

relating to or arising out of the U.S. Business or the Purchased Assets,

only to the extent such Liability or portion thereof results from or

arises out of events, facts or circumstances occurring or existing on or

before the Closing Date, including all Proceedings listed in Section 5.12

of the Seller Disclosure Schedule;

(v) any and all Liabilities relating to an Excluded Asset;

(vi) any and all Proceedings or Liabilities arising under any

Contract which is not an Assigned Contract;

(vii) any and all Liabilities of Sellers or any of their

Affiliates arising by reason of any violation or alleged violation of any

Law or Order, only to the extent such Liability or portion thereof results

from or arises out of events, facts or circumstances occurring or existing

on or prior to the Closing Date, notwithstanding that the date on which

any Proceeding or Liability is asserted is after the Closing Date;

-8-

<PAGE>

(viii) any and all Liabilities of Sellers or any of their

Affiliates, to any of their respective Affiliates, except as expressly

provided in any of the Assigned Contracts, this Agreement or a Related

Document;

(ix) any and all Proceedings by and all Liabilities to

employees and independent contractors for periods prior to and including

the Closing Date, including any Proceedings or Liabilities arising out of

any employee benefit plan or arrangement (other than Liabilities to

provide benefits to participants and beneficiaries under the Assumed

Employee Plans), and including any Liabilities for accrued vacation and

sick time of the employees who are not Transferred Employees, Sellers' or

any of their Affiliates failure to deposit or fund any amounts withheld

from employees pursuant to any retirement plan or arrangement or retiree

medical plan or arrangement, or any unfunded retirement plan or

arrangement or retiree medical plan or arrangement or any obligations to

current or former plan participants or beneficiaries under any plan or

arrangement intended to provide benefits to current or former employees of

Sellers or any of their Affiliates that is not expressly included in the

Purchased Assets under Section 1.1(a)(xiv) of the Seller Disclosure

Schedule or provided for in Article 8;

(x) any and all Liabilities of Sellers or any of their

Affiliates to financial institutions or other Persons for Indebtedness or

with respect to Indebtedness or Liabilities of others which Sellers or any

of their Affiliates has guaranteed other than in connection with an

Assigned Contract, in which case, the Liability shall transfer to

Purchaser or be extinguished;

(xi) any and all Liabilities of Sellers or any of their

Affiliates relating to or arising out of and all Liabilities of Sellers or

any of their Affiliates under or arising out of this Agreement and/or any

Related Document or with respect to the transactions contemplated hereby

and thereby, including legal and accounting fees and expenses incurred by

Sellers or any of their Affiliates; and

(xii) all Environmental Costs or Liabilities imposed or

required by Environmental Health and Safety Laws, arising in connection

with or to the extent resulting from any events, facts or circumstances

existing on or before the Closing Date relating to any Site, or the

operations of Sellers or any of their Affiliates or their respective

predecessors and assigns at such Site at any time on or before the Closing

Date, including any Post-Closing effects thereof (regardless of whether

such matters have been disclosed in this Agreement, the Seller Disclosure

Schedule or otherwise), except to the extent, and only to the extent, that

such Post-Closing effects are caused by or contributed to by Purchaser,

Purchaser's Affiliates, employees, contractors or assigns, including (A)

the presence, Release, threatened Release, or migration of any Hazardous

Materials, at from, in, to, on or under any Site in concentrations

requiring remediation or corrective action pursuant to applicable

Environmental, Health and Safety Laws or at any location to which

Hazardous Materials were sent by or on behalf of either Seller or any of

their Affiliates or any of their respective predecessors or assigns

("Off-Site Disposal Location"); (B) exposure to or injury (including

death) of Persons as a result of Hazardous Materials at or emanating from

any Site or Off-Site Disposal Location; (C) any fine or penalty resulting

from a violation of any Environmental, Health and Safety

-9-

<PAGE>

Law or Permit by Sellers or any of their Affiliates or their respective

predecessors and assigns (all of the above collectively defined as

"Sellers' Environmental Obligations").

For purposes of this subparagraph, Purchaser shall not be

deemed to have contributed to a condition existing on or before the

Closing Date if there is no Purchaser Environmental Knowledge of such

condition, provided, however, that Purchaser shall be deemed to have

contributed to such condition if there is Purchaser Environmental

Knowledge of such condition, and Purchaser shall have failed to provide

timely notification of such condition to Sellers.

(c) For convenience of reference, the Liabilities not being assumed

by Purchaser pursuant to Section 2.2(b) of this Agreement are hereinafter

collectively called the "Excluded Liabilities" in this Agreement.

(d) For sake of clarity, the parties hereto provide the following

example to illustrate the effect of events, facts and circumstances that exist

on or before the Closing Date and after the Closing Date. If a personal injury

claim is made after the Closing Date related to the operation of any Facility,

then to the extent the claim relates to actions on or prior to the Closing Date,

the Sellers would be responsible for any Liabilities attributable to that time

period, and to the extent the claim relates to actions after the Closing Date;

the Purchaser would be responsible for any Liabilities attributable to that time

period; it being the intention of the parties that the mere existence of the

event, fact or circumstance on or prior to the Closing Date shall not result in

the Liability being solely that of the Sellers.

ARTICLE 3

PURCHASE PRICE

3.1 PURCHASE PRICE.

The aggregate consideration to be paid at the Closing by Purchaser to

Sellers for the Purchased Assets shall be $28,000,000 (the "Purchase Price").

The Purchase Price will be paid as provided in Section 3.2 and shall be subject

to adjustments as provided in Sections 3.3 and 3.4.

3.2 PAYMENT OF PURCHASE PRICE AT CLOSING.

At the Closing, subject to the satisfaction of the conditions set forth in

this Agreement, the Purchase Price shall be paid by Purchaser to Sellers by wire

transfer of immediately available funds to the account designated by Sellers.

The Closing shall be deemed effective as of 24:00 on the Closing Date/00:00 the

day after the Closing Date German Time.

3.3 INVENTORY PURCHASE PRICE ADJUSTMENT.

(a) On or as promptly as practicable after the Closing Date,

Purchaser shall take, using either Transferred Employees or a third-party entity

reasonably acceptable to Sellers, a physical count of the Inventory (and a

simultaneous physical identification of the Finished Goods). Representatives of

Sellers shall be given an opportunity in all reasonable respects and in good

faith to (i) observe, along with their accountants, such taking of the Inventory

(and such physical identification of the Finished Goods) and (ii) to conduct

test counts of the Inventory (and such

-10-

<PAGE>

physical identification of the Finished Goods) and in connection with such test

counts Purchaser agrees not to release an area from the process until such

opportunity to take test counts has been provided to Sellers. Following

preparation of an inventory report, Sellers shall be given an opportunity in all

reasonable respects to review the inventory report and work papers.

(b) Within forty-five (45) days after the Closing Date, Purchaser

shall prepare and deliver, or cause to be prepared and delivered, to Sellers a

statement as of the Closing Date (collectively, the "Initial Inventory

Statement", and in its final and binding form as determined pursuant to this

Section 3.3(b), the "Final Inventory Statement") setting forth the aggregate

value of Inventory as of the Closing Date (the "Applicable Inventory"). Unless

otherwise agreed upon, the Initial Inventory Statement and the Final Inventory

Statement shall be prepared in accordance with GAAP, except with respect to the

valuations to be applied to the Supplied Production Components and WIP as set

forth in the respective definitions of such terms. The Initial Inventory

Statement shall become final and binding upon the parties on the tenth Business

Day following receipt thereof by Sellers unless Sellers give written notice of

their disagreement (with such notice so timely delivered referred to herein as a

"Notice of Disagreement") to Purchaser prior to such date in accordance with

Section 13.7 hereof. Any Notice of Disagreement shall specify in reasonable

detail the basis and amount of any disagreement. In the event of a Notice of

Disagreement, then the Initial Inventory Statement (as revised in accordance

with clause (x) or (y) below) shall only become final and binding upon the

parties on the earlier of (x) the date the parties hereto resolve any

differences they have with respect to any matter specified in the Notice of

Disagreement or (y) the date any matters in dispute are resolved by an

accounting firm jointly selected by Purchaser and Sellers or, if the parties are

unable to agree, an independent accounting firm jointly selected by Purchaser's,

on the one hand, and Sellers', on the other hand, independent accounting firms

(such firm, the "Accounting Firm"). During the thirty (30) days immediately

following the delivery of a Notice of Disagreement, Purchaser and Sellers shall

seek in good faith to resolve in writing any differences which they may have

with respect to any matter specified in the Notice of Disagreement. At the end

of such 30-day period, or such longer period as may be mutually agreed, either

Purchaser, on the one hand, or Sellers, on the other hand, shall submit for

review and resolution by the Accounting Firm any and all matters which remain in

dispute and are related to the matters included in the Notice of Disagreement,

and the Accounting Firm shall make a final determination with respect to the

dispute, which determination shall be binding on the parties. In making such

determination: (i) the Accounting Firm shall determine only those matters which

remain in dispute and which were included in the Notice of Disagreement and (ii)

the scope of any dispute shall be limited as to whether the calculation in

dispute under the Notice of Disagreement was done in accordance with this

Section 3.3. The Final Inventory Statement shall become final and binding on

Purchaser and Sellers on the date the Accounting Firm delivers the Final

Inventory Statement to the parties. Each party shall pay its own fees and

expenses incurred in connection with any Notice of Disagreement; provided, that

the fees and expenses of the Accounting Firm pursuant to this Section 3.3 shall

be borne one-half each by Purchaser, on the one hand, and Sellers, on the other

hand.

(c) Within two (2) Business Days after the date the Final Inventory

Statement becomes final and binding pursuant to Section 3.3(b), Purchaser will

reduce Sellers' accounts payable balance due to Purchaser pursuant to the

Manufacturing and Distribution Agreements

-11-

<PAGE>

(and issue a credit to be utilized immediately against any such future accounts

payable balance if the existing accounts payable balance is not of sufficient

size) in an aggregate amount equal to the value of the Applicable Inventory set

forth in the Final Inventory Statement; provided, however, that if Sellers

provide a Notice of Disagreement and certain amounts in the Initial Inventory

Statement are undisputed, then Purchaser shall make a partial adjustment for

such undisputed amounts within five (5) Business Days after such Notice of

Disagreement and a final adjustment within two (2) Business Days after the Final

Inventory Statement becomes final and binding pursuant to Section 3.3(b).

3.4 ADJUSTMENT FOR PREPAYMENTS, ETC.

At least five (5) Business Days prior to Closing, Sellers shall provide

Purchaser with an officer's certificate certifying in good faith the amount of

their prepayments, prepaid expenses, advances, credits from suppliers and

deposits actually with or paid to third parties (the "Prepayment

Certification"), together with reasonable supporting documentation from such

third parties. At the Closing, Purchaser shall pay to Sellers (by wire transfer

of immediately available funds to the account designated by Sellers), the

aggregate amount reflected in the Prepayment Certification (the "Adjustment

Payment")). If the Prepayment Certification is not acceptable to Purchaser, the

Purchaser shall give written notice of its disagreement to Seller in accordance

with Section 13.7 hereof. Any such notice of disagreement shall specify in

reasonable detail the basis and amount of any disagreement. During the thirty

(30) days immediately following the delivery of such notice of disagreement, the

parties shall seek in good faith to resolve in writing any differences which

they may have with respect to any matter specified in such notice of

disagreement. If at the end of such thirty (30) day period, such disagreement

remains unresolved, then the Accounting Firm shall resolve any such dispute in a

commercially reasonable manner and the Accounting Firm shall make a final

determination with respect to any such dispute, which determination shall be

binding on the parties. If such final determination indicates that the amount

paid by Purchaser at Closing for Sellers' prepayments, prepaid expenses,

advances, credits from suppliers and deposits actually with or paid to third

parties exceeded the actual amount of such items, within two (2) Business Days

of the Accounting Firm providing written notice to Sellers of the such final

determination, Sellers shall pay to Purchaser (by wire transfer of immediately

available funds to the account designated by Purchaser) the aggregate amount of

any such overpayment. If such final determination indicates that the amount paid

by Purchaser at Closing for Sellers' prepayments, prepaid expenses, advances,

credits from suppliers and deposits actually with or paid to third parties was

less than the actual amount of such items, within two (2) Business Days of the

Accounting Firm providing written notice to Purchaser of the such final

determination, the Purchaser shall pay to Sellers (by wire transfer of

immediately available funds to the account designated by Sellers) the aggregate

amount of any such underpayment. Each party shall pay its own fees and expenses

incurred in connection with any dispute relating to the Prepayment

Certification; provided, that the fees and expenses of the Accounting Firm

pursuant to this Section 3.4 shall be borne one-half each by Purchaser, on the

one hand, and Sellers, on the other hand.

3.5 ALLOCATION OF PURCHASE PRICE.

Within ninety (90) days after the Closing Date, Purchaser shall prepare an

allocation schedule allocating the aggregate deemed sales price payable

hereunder as determined by

-12-

<PAGE>

applying Federal Income Tax principles among the Purchased Assets in accordance

with applicable Law (the "Allocation Schedule"), subject to the consent of

Sellers, which consent shall not be unreasonably withheld. The Allocation

Schedule shall be binding on all parties for all applicable purposes, including

tax purposes, and no party shall file any Tax Returns or take any other action

which is inconsistent with the Allocation Schedule. The parties acknowledge and

agree that the making of a protective election out of the installment method

shall not be a breach of this Agreement, including this Section 3.5.

ARTICLE 4

THE CLOSING

4.1 THE CLOSING.

The closing (the "Closing") of the transactions contemplated by this

Agreement shall take place at the offices of Greenberg Traurig LLP, counsel for

Purchaser, at 200 Park Avenue, New York, New York, on May 31, 2005 or on the

next month-end occurring after the satisfaction or waiver of all of the

conditions set forth in Article 10 (other than those conditions which by their

nature are to be satisfied at the Closing) (the "Closing Date").

4.2 INSTRUMENTS OF TRANSFER.

At the Closing, Sellers and Purchaser shall execute and deliver a bill of

sale and assignment and assumption agreements in substantially the form set

forth in Exhibit 4.2 (collectively, the "Bills of Sale and Assumption

Agreements").

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF

SELLERS

Sellers jointly and severally represent and warrant to Purchaser as of the

date hereof as follows:

5.1 ORGANIZATION, POWER, AUTHORITY AND GOOD STANDING.

(a) Each Seller is a corporation, duly organized, validly existing

and in good standing under the Laws of its jurisdiction of organization and has

all requisite corporate power and authority to own, lease and operate its Assets

and to carry on its business as currently conducted.

(b) Sellers are each duly qualified and in good standing to transact

business as a foreign Person in those jurisdictions set forth opposite its name

in Section 5.1(b) of the Seller Disclosure Schedule, which constitute all the

jurisdictions in which the character of the property owned, leased or operated

by Sellers or the nature of the business or activities conducted by Sellers

makes such qualification necessary, except where the failure to be so qualified

has not had or would not reasonably be expected to have a Material Adverse

Effect.

-13-

<PAGE>

(c) Each Seller has not, within the last five years, (i) used any

trade names or assumed names other than the trade names or assumed names set

forth opposite its name in Section 5.1(c)(i)of the Seller Disclosure Schedule or

(ii) operated any business other than the U.S. Business or as set forth in

Section 5.1(c)(ii) of the Seller Disclosure Schedule.

5.2 AUTHORITY; NON-CONTRAVENTION.

Each Seller has all requisite corporate power and authority to execute,

deliver and perform its obligations under this Agreement and each Related

Document to which it is or will be a party and to consummate the transactions

contemplated hereby and thereby. The execution, delivery and performance by each

Seller of this Agreement and each Related Document to which it is or will be a

party, and performance of its obligations hereunder and thereunder have been

duly and validly authorized by all necessary action on the part of each Seller

and its shareholders. This Agreement and each Related Document to which each

Seller is or will be a party has been, or upon the execution thereof will be,

duly and validly executed and delivered by each Seller and constitutes, or upon

its execution and delivery will constitute, a valid and binding obligation of

each Seller, enforceable against each Seller in accordance with its terms,

except as the enforcement thereof may be limited by bankruptcy, insolvency,

reorganization, moratorium, fraudulent conveyance, fraudulent transfer or other

similar laws relating to or affecting enforcement of creditors' rights generally

or by general equitable principles. Neither the execution and delivery of,

and/or performance by each Seller of its obligations under this Agreement and

each Related Document to which it is or will be a party, nor the consummation by

each Seller of the transactions contemplated hereby and thereby shall (a)

conflict with or result in any violation or breach of, any of the terms,

conditions or provisions of, or constitute (with due notice or lapse of time, or

both) a default (with or without notice), or give rise to any right of

termination, cancellation or acceleration or result in the creation of any

Encumbrance upon any of the Purchased Assets or Sellers, under any provision of

its Organizational Documents or any Contract to which such Seller is a party or

by which it or any of its Assets is or may be bound, except, with respect to

Contracts only, where such violation, breach, or default, would not reasonably

be expected to have a Material Adverse Effect or (b) contravene any Law or cause

the suspension or revocation of any material Permit included in the Purchased

Assets and presently in effect, which affects or binds Sellers, except where all

such contraventions, suspensions or revocations would in the aggregate not

reasonably be expected to have a Material Adverse Effect.

5.3 CONSENTS AND AUTHORIZATIONS.

Except as set forth in Section 5.3 of the Seller Disclosure Schedule, no

consent, approval, Permit, Order, notification or authorization of, or any

registration, declaration or filing with, any Governmental Entity or any third

Person is required in connection with the execution, delivery and performance by

either Seller or any of their Affiliates of this Agreement or any Related

Document to which it is or will be a party or the consummation by Sellers of the

transactions contemplated hereby or thereby.

-14-

<PAGE>

5.4 SUBSIDIARIES.

None of Sellers has any Subsidiary or owns any Equity Interests in any

Person that operates any portion of the U.S. Business.

5.5 ABSENCE OF CHANGES.

Since December 31, 2004, except as set forth in Section 5.5 of the Seller

Disclosure Schedule and except for the transactions contemplated by this

Agreement, there has not been:

(a) any change in the Tax or other accounting methods or practices

followed by Seller, any change in depreciation or amortization policies or rates

previously adopted or any write-up of inventory or other Assets, to the extent

any such change would reasonably be expected to adversely affect the U.S.

Business after the Closing Date;

(b) any sale, transfer or assignment of any of Sellers' Assets

used in the U.S. Business at the Facilities involving more than $1,000,000 in

the aggregate, except in the ordinary course of business consistent with past

practice; or

(c) any agreement, whether in writing or otherwise, to take any of

the foregoing actions.

5.6 TAX MATTERS.

(a) Sellers have timely filed all Tax Returns that each was

required to file. All such Tax Returns were correct and complete. All Taxes owed

by Sellers (whether or not shown on any Tax Return) have been paid. Except as

otherwise set forth in Section 5.6(a) of the Seller Disclosure Schedule, neither

Seller is currently the beneficiary of any extension of time within which to

file any Tax Return. Each Seller has withheld and timely paid all Taxes required

to have been withheld and paid in connection with amounts paid or owing to any

employee, independent contractor, creditor, stockholder, or other third party,

and all Forms W-2 and 1099 required with respect thereto have been properly

completed and timely filed. Except as set forth in Section 5.6(a) of the Seller

Disclosure Schedule, neither Seller has waived any statute of limitations in

respect of Taxes or agreed to any extension of time with respect to a Tax

assessment or deficiency.

(b) Except as set forth in Section 5.6(b) of the Seller Disclosure

Schedule, there is no dispute or claim concerning any Tax Liability of any

Seller either (i) claimed or raised by any Tax Authority in writing or (ii) as

to which any Seller has Knowledge.

(c) Neither Seller has made any payments, is obligated to make any

payments, or is a party to any agreement that could obligate it to make any

payments that will not be deductible under Section 280G or 162(m) of the Code.

Neither Seller is a party to any Tax allocation or sharing agreement that will

bind Purchaser after the Closing. Except as set forth in Section 5.6(c) of the

Seller Disclosure Schedule, neither Seller (i) has been a member of an

affiliated group filing a consolidated federal Income Tax Return (other than a

group the common parent of which was Vivendi Universal Holding II Corporation)

or (ii) has any Liability for the

-15-

<PAGE>

Taxes of any Person (other than its own) under Reg. Section 1.1502-6 (or any

similar provision of state, local, or foreign law), as a transferee or

successor, by contract, or otherwise. Neither Seller is or has ever been a

"United States real property holding corporation" within the meaning of Section

897(c)(2) of the Code.

(d) Neither Seller is, nor has ever been, a party to any tax

sharing, indemnity or similar agreement allocating Tax Liability that will not

be terminated on the Closing Date without any future Liability to Purchaser

(including for past Taxes).

(e) No written claim has been made in the past five years by any

Taxing Authority in a jurisdiction in which Sellers or any of their Subsidiaries

do not file Tax Returns that any such Person is or may be subject to taxation by

that jurisdiction.

(f) No Encumbrance (except for Permitted Encumbrances) for Taxes

exists with respect to any Assets of Sellers or any of their Subsidiaries.

(g) Section 5.6(g) of the Seller Disclosure Schedule lists all of

the jurisdiction in which Sellers or any of their Subsidiaries is required to

file a Tax Return or pay Taxes.

5.7 FINANCIAL INFORMATION.

(a) Section 5.7(a) of the Seller Disclosure Schedule attached

hereto contains true, correct and complete copies of the following:

(i) an unaudited statement of expenses of the U.S. Business

for the fiscal years ending December 25, 2004 and December 20, 2003 and

the quarter ended March 26, 2005 ("Historical Expenses"); and

(ii) an unaudited statement of the number of units

manufactured by the U.S. Business for the fiscal years ending December 25,

2004, December 20, 2003 and December 21, 2002 and the quarter ended March

26, 2005 ("Manufactured Volumes").

(b) The Historical Expenses and Manufactured Volumes accurately

and completely show in all material respects the expenses and volumes of the

Company in the period indicated. The Historical Expenses and Manufactured

Volumes have been prepared from, and are consistent with, the books and records

of the Sellers. The Historical Expenses have been prepared using certain

assumptions for the allocation of internal overheads or other internal charges.

Such allocations and overheads may not be reflective of the actual costs

incurred by Sellers or that would be incurred by Purchaser in the operation of

the U.S. Business. The financial information referred to in this Section 5.7 was

prepared in accordance with Sellers' practices for the preparation of internal

financial statements and reflect the consistent application of accounting

principles throughout the periods involved except as otherwise disclosed

therein. The Historical Expenses have been prepared in accordance with GAAP

except that the Historical Expenses are subject to a lack of footnotes and, for

the interim period, a lack of normal and recurring year-end adjustments.

-16-

<PAGE>

5.8 TITLE TO PURCHASED ASSETS AND RELATED MATTERS.

(a) Except as set forth in Section 5.8 of the Seller Disclosure

Schedule, Sellers at the Closing will have, and will transfer to Purchaser, good

and marketable title in each of the Purchased Assets that are tangible in

nature, or a valid leasehold interest, free and clear of all Encumbrances,

except for Permitted Encumbrances. Except as set forth in Section 5.8 of the

Seller Disclosure Schedule, the Purchased Assets and the rights conveyed to

Purchaser under this Agreement, including the Licensed Requisite Rights and the

Assigned Contracts, and the Related Documents, including the provision of

materials and services under the Transition Services Agreement and the Leases,

constitute the Assets used in the U.S. Business that together are sufficient for

the conduct of the U.S. Business immediately following the Closing in

substantially the same manner as currently conducted.

(b) All of the Purchased Assets are in good operating condition

and repair considering their respective years in service (except for normal wear

and tear and taking into account the intermittent nature of the use of certain

equipment that shall not be held to a condition and repair of full-time use) and

are suitable for the uses for which they are used in the U.S. Business.

5.9 REAL PROPERTY-OWNED OR LEASED.

(a) Section 5.9(a) of the Seller Disclosure Schedule contains a

correct and complete list of all of the owned real property of Sellers or any of

their Affiliates used in the operations of the U.S. Business (the "Owned Real

Property"). Sellers are not parties to an agreement, and have not agreed, to

subject the Purchased Real Property to any easements, rights, duties,

obligations, covenants, conditions, restrictions, limitations or agreements not

of record.

(b) Section 5.9(b) of the Seller Disclosure Schedule contains a

correct and complete list of all real property leased, subleased, or licensed

pursuant to an occupancy agreement by Sellers or any of their Affiliates used in

the operations of the U.S. Business (the "Leased Real Property"), and sets forth

the names of the lessor and the lessee.

(c) The Owned Real Property and the Leased Real Property

(together, the "Real Property") constitute all real property used or occupied by

the operations of the U.S. Business.

(d) To the Knowledge of Sellers with respect to the Real Property,

except as set forth in Section 5.9(d) of the Seller Disclosure Schedule: (i) no

portion thereof is subject to any pending condemnation, zoning or other land use

Proceeding by any Governmental Entity which would have a material adverse effect

on the use and operation of any portion of the Real Property for its intended

purpose; (ii) there are no Contracts to which either Seller or any of their

Affiliates is a party, granting to any party or parties except Sellers the right

of use or occupancy of any portion of the parcels of the Real Property other

than agreements for the placement of equipment by vendors; (iii) there are no

parties in possession of the Real Property except Sellers and their Affiliates;

and (iv) no notice of any increase in the assessed valuation of the Real

Property and no notice of any contemplated special assessment has been received

by Sellers or

-17-

<PAGE>

any of their Affiliates and to the Knowledge of Seller, there is no threatened

increase in assessed valuation or threatened special assessment pertaining to

any of the Real Property.

(e) Each Lease is valid and enforceable in accordance with its

terms and in full force and effect. Sellers have not and, to Seller's Knowledge,

the other parties thereto have not violated any provision of, or committed or

failed to perform any act which could constitute a material default under the

provisions of, any Lease.

(f) There are no material disputes or forbearance programs in

effect as to any Leased Real Property.

(g) In addition to the Leases, Purchaser has been furnished with

true, correct and complete copies of all material amendments, modifications or

supplements, memoranda of leases and all current estoppel certificates,

subordination, non disturbance and attornment agreements, if any, entered into

or received by Sellers and related to the Leases.

(h) There is no law, ordinance, order, regulation or requirement

now in existence, including, without limitation, any Environmental, Health and

Safety Law, which would require any material expenditure to modify or improve

any of the Real Property, as it is currently used and assuming no changes to its

use or the Real Property or any structures thereon, in order to bring it into

compliance therewith.

(i) There is no pending, or to Sellers' Knowledge threatened,

governmental proceeding which could impair or curtail the current access from

the Owned Real Property to public roads.

(j) To Sellers' Knowledge, there are presently in existence water,

sewer, gas and/or electrical lines or private systems on the Real Property which

have been completed, installed and paid for and which are sufficient to service

adequately the current operations of each building or facility located on the

Real Property.

(k) To Sellers' Knowledge, there are no material structural,

electrical, mechanical, plumbing, air conditioning, heating or other defects in

the buildings located on the Real Property and the roofs of the building located

on the Real Property are free from material structural defects, leaks and are in

good condition, ordinary wear and tear excepted.

5.10 INTELLECTUAL PROPERTY.

(a) Section 5.10(a) of the Seller Disclosure Schedule sets forth a

correct and complete list of all Licensed Requisite Rights, other than normal

and routine commercially available off the shelf software agreements. There are

no Owned Requisite Rights.

(b) Sellers have a valid license or other right to use the

Licensed Requisite Rights all of which licenses are in full force and effect and

neither of Sellers has violated any provision of, or committed or failed to

perform any act which could constitute a default under, the provisions of any

such licenses.

-18-

<PAGE>

(c) Except as set forth in Section 5.10(c) of the Seller

Disclosure Schedule, each Seller has previously made available to Purchaser

correct and complete copies of each Contract under or pursuant to which the

Licensed Requisite Rights are licensed to Sellers and/or their Affiliates, other

than normal and routine commercially available off the shelf software license

agreements.

(d) Purchaser's continued operation of the U.S. Business as

presently conducted, including the manufacture, use or sale of any Product or

the use of any process now used or offered by Sellers or their Affiliates will

not, infringe, violate, misappropriate or conflict with any Intellectual

Property Rights of any Person who licenses the Intellectual Property Rights to

Sellers or to the Knowledge of Sellers, any other Person.

5.11 AGREEMENTS, NO DEFAULTS, ETC.

(a) Section 5.11(a) of the Seller Disclosure Schedule contains a

true and complete list of all Contracts that both:

(i) specifically and exclusively relate to the U.S. Business

to which either Seller (or any of their Affiliates) is currently a party;

and

(ii) (A) involve the payment or receipt by Sellers of at

least $50,000 in the case of any single Contract during the last fiscal

year or pursuant to which Sellers expects to pay or receive at least

$50,000 in the case of any single Contract during the current fiscal year;

(B) have a binding remaining term of at least one year which cannot be

cancelled without penalty on written notice of 60 days or less, provided

the aggregate of the payments remaining on all Contracts that have a

binding term of less than one year and may be cancelled without penalty on

written notice of sixty days or less does not exceed $150,000; (C) contain

a covenant limiting the freedom of either Seller to engage in any line of

the U.S. Business in any geographic area or to compete with any Person

that limits the conduct of either Seller; (D) provide for the employment

of any officer, employee or consultant or any other type of Contract or

understanding with any officer, employee or consultant, including any

agreement or understanding relating to severance payments; (E) provide for

indemnification by either Seller with respect to Liabilities relating to

any Site of either Seller or any of its respective predecessor Persons or

with respect to Liabilities under any Environmental, Health and Safety Law

or for the investigation, remediation, or clean up of and Hazardous

Materials other than as entered into in the ordinary course of business

when entering into a service agreement with a service provider or

contractor performing services for the U.S. Business or (F) provide for

any joint venture, partnership or similar arrangement by either Seller.

(b) All such Contracts are legal, valid and binding obligations of

the Sellers and are in full force and effect. Neither of Sellers have and, to

Seller's Knowledge, none of the other parties thereto have violated any

provision of, or committed or failed to perform any act which could constitute a

material default under the provisions of, any such Contract.

-19-

<PAGE>

(c) Section 5.11(c) of the Seller Disclosure Schedule contains a

true and complete list or description of all Contracts that relate to or are

used by the U.S. Business that are not Assigned Contracts (the "Excluded

Contracts").

(d) Section 5.11(d) of the Seller Disclosure Schedule contains a

true and complete list of all Assigned Contracts that are between or among

either Seller and its Affiliates.

(e) Except as set forth in Section 5.11(e) of the Seller

Disclosure Schedule, Purchaser has been furnished with true and complete copies

of all written items individually listed in Sections 5.11(a), 5.11(c) and

5.11(d) of the Seller Disclosure Schedule.

5.12 LITIGATION, ETC.

Except as disclosed in Section 5.12 of the Seller Disclosure Schedule,

there are no (a) Proceedings pending or, to the Knowledge of Sellers, threatened

against Sellers or any of their Affiliates relating to the U.S. Business,

including the Licensed Requisite Rights, whether at law or in equity, whether

civil or criminal in nature or before or by any Governmental Entity or

arbitrator, or (b) Orders of any Governmental Entity or arbitrator involving or

against Sellers or their Affiliates related to the U.S. Business, including the

Licensed Requisite Rights. Except as disclosed in Section 5.12 of the Seller

Disclosure Schedule, during the past two (2) years, there have not been any

settled or finally determined material Proceedings against Sellers or their

Subsidiaries relating to the U.S. Business, including the Licensed Requisite

Rights.

5.13 COMPLIANCE WITH LAWS.

(a) Except as set forth in Section 5.13(a) of the Seller

Disclosure Schedule, and other than as specifically addressed elsewhere in this

Agreement, each Seller (i) is in compliance with and during the past two (2)

years has complied with and operated and maintained the U.S. Business in

compliance with, all Laws applicable to it and the U.S. Business, except where

the failure to so comply would not reasonably be expected to have a Material

Adverse Effect and (ii) has all Permits from, and during the past two (2) years

has had all Permits from and has made all filings with and payments to, all

Governmental Entities required to conduct the U.S. Business as currently

conducted, except where the failure to have such Permits or make such filings or

payments would in the aggregate not reasonably be expected to have a Material

Adverse Effect. Neither of Sellers has received any written notice regarding any

actual or alleged violation by such Seller of any material Laws in connection

with the U.S. Business.

(b) Section 5.13(b) of the Seller Disclosure Schedule contains a

correct and complete list of all material Permits used by or held for use in the

U.S. Business (copies of which have been previously provided to Purchaser).

(c) No event has occurred that would reasonably be expected to

constitute or result directly in a violation of or a failure to comply with the

term or requirement of any Permit or result in the revocation, withdrawal,

suspension, cancellation or termination of any Permit.

-20-

<PAGE>

5.14 INSURANCE.

(a) Section 5.14(a) of the Seller Disclosure Schedule contains a

correct and complete list of all currently existing policies of liability,

theft, fidelity, life, fire, product liability, workmen's compensation, health

and other forms of insurance for the U.S. Business (specifying the insurer,

amount of coverage, type of insurance, policy number, deductible or retention

amount, policy term and any claims submitted to the insurance company and not

acted upon that were exclusively related to the U.S. Business). Such insurance

coverage or similar insurance coverage has been maintained at all times in the

past three years during the course of the operation of the U.S. Business.

(b) Except as set forth in Section 5.14(b) of the Seller

Disclosure Schedule, with respect to each policy of insurance listed in Section

5.14(a) of the Seller Disclosure Schedule: (i) all premiums due are currently

paid, and neither Sellers nor any of their Affiliates party to such policies is

in default in any respect with respect to its obligations under such policy; and

(ii) neither Sellers nor any of their Affiliates has received any written notice

that such policy has been or shall be canceled or terminated or will not be

renewed or that the issuer of any policy of insurance is not willing to perform

its obligations thereunder.

5.15 LABOR RELATIONS; EMPLOYEES.

(a) Section 5.15(a) of the Seller Disclosure Schedule sets forth a

complete and correct list, as of the date hereof (which list shall be updated by

Sellers no more than three days prior to the Closing for any employment changes

occurring in compliance with this Agreement or in the ordinary course of the

U.S. Business and consistent with historical practices from the date hereof

until the Closing), of all employees of each of Sellers providing services to

the U.S. Business (the "U.S. Business Employees"). Opposite the name of each

individual listed in Section 5.15(a) of the Seller Disclosure Schedule is (i) a

notation classifying each as officer, regular employee, leased employee,

temporary employee, part-time employee, or consultant and providing the position

of each; (ii) such person's current base salary or compensation rate (including

bonuses and commissions); (iii) such person's current accrual of vacation pay;

(iv) the respective dates upon which each individual commenced employment; (iv)

a notation as to whether such person is a member of a union related to each

Seller and, if a member of a union, the name of the union to which they are a

member; and (v) a notation as to whether such person is on leave. All regular

full-time employees listed in Section 5.15(a) of the Seller Disclosure Schedule

(except as noted thereon) are devoting all or substantially all of their

business time to a Seller, and, to the Knowledge of Sellers, none of the

employees listed in Section 5.15(a) of the Seller Disclosure Schedule has

provided written notice that he or she intends to terminate his or her

employment or engagement. Unless otherwise noted in Section 5.15(a) of the

Seller Disclosure Schedule, each such person is employed or retained on an

"at-will" basis. Except as set forth in Section 5.15(a) of the Seller Disclosure

Schedule, no bonus, severance or other payments or benefits of any kind are due

to any U.S. Business Employee listed in Section 5.15(a) of the Seller Disclosure

Schedule, except such payments or benefits due under any of the plans listed in

Section 5.16(b) of the Seller Disclosure Schedule or under any Excluded Employee

Plan.

-21-

<PAGE>

(b) Except as set forth in Section 5.15(b) of the Seller

Disclosure Schedule and in each instance with respect to a Seller or the U.S.

Business: (i) neither Seller is party to any collective bargaining agreement

with respect to any U.S. Business Employees, (ii) no collective bargaining agent

has been certified as a representative of any of the U.S. Business Employees and

(iii) to each of Seller's Knowledge no organizing activity or representation

campaign or election is now in progress with respect to any U.S. Business

Employee. Except as set forth in Section 5.15(b) of the Seller Disclosure

Schedule, there are no written unfair labor practice complaints, written

grievances, strikes, slowdowns, work stoppages, picketing, or lockouts, or

written requests for union representation pending, or to the Knowledge of

Sellers, threatened, relating to or affecting either Seller or the U.S.

Business. No event has occurred that is likely to give rise to any such

complaint, dispute, grievance, controversy, strike, slowdown, work stoppage,

picketing, or lockout, or request for representation, in each case, which could

have a Material Adverse Effect on Sellers, individually or in the aggregate,

except as disclosed in Section 5.15(b) of the Seller Disclosure Schedule. Except

as set forth in Section 5.15(b) of the Seller Disclosure Schedule, there are no

currently pending labor-related negotiations with any group or other

organization purporting to represent the U.S. Business Employees or the U.S.

Business.

(c) Except as set forth in Section 5.15(c) of the Seller

Disclosure Schedule, there are no Proceedings regarding harassment,

discrimination, wages, hours, collective bargaining, employment standards,

employment classifications, working conditions, immigration, disability, equal

opportunity, occupational safety and health, the payment of social security and

other taxes, or any other employment-related issue or claim, pending or, to the

Knowledge of Sellers, threatened, relating to or affecting any employee listed

in Section 5.15(a) of the Seller Disclosure Schedule, except for such

Proceedings which (i) by their nature are confidential and for which Sellers

have no Knowledge or (ii) have been filed yet have not been disclosed (via

notice or otherwise) to either Seller. Except as set forth in Section 5.13 of

the Seller Disclosure Schedule, Sellers and their Affiliates (to the extent any

are acting in the capacity as an employer of a U.S. Business Employee) have

complied in all material respects with all Laws during the past two years

relating to the hiring and retention of all U.S. Business Employees listed in

Section 5.15(a) of the Seller Disclosure Schedule which relate to wages, hours,

equal opportunity, collective bargaining, employment standards, employment

classifications, working conditions, immigration, disability, the payment of

social security and other taxes, and any other employment-related Laws. Except

as set forth in Section 5.15(c) of the Seller Disclosure Schedule, neither

Seller nor any of its Affiliates has received notice during the past year of the

intent of any Governmental Entity responsible for the enforcement of labor or

employment Laws to conduct an investigation of either Seller or its Affiliates

exclusively with respect to the U.S. Business, and no such investigation is

ongoing, pending or, to the Knowledge of Sellers, threatened.

(d) Except as set forth in Section 5.15(d) of the Seller

Disclosure Schedule, during the ninety (90) days prior to the date of this

Agreement, neither Seller with respect to the U.S. Business has experienced a

"plant closing" or "mass layoff" within the meaning of the U.S. Worker

Adjustment and Retraining Notification Act, 29 U.S.C. Sections 2101 et seq., or

the regulations promulgated thereunder (collectively, the "WARN Act"). Further,

except to the extent disclosed in Section 5.15(d) of the Seller Disclosure

Schedule, no employee of the U.S.

-22-

<PAGE>

Business has suffered a "separation from employment" or "employment loss" as

those terms are defined by the WARN Act, for ninety (90) days prior to the date

of this Agreement.

(e) Neither Seller nor any of its Affiliates is delinquent in any

payment to any U.S. Business Employee for any material wages, salaries,

commissions, bonuses or other compensation for any services performed by them or

amounts required to be reimbursed to such U.S. Business Employees.

5.16 ERISA COMPLIANCE.

(a) "Employee Plan" means any "employee benefit plan" (as that

term is defined in Section 3(3) of ERISA), as well as any other bonus, equity

compensation, deferred compensation, incentive compensation, stock purchase,

stock option, severance or termination plan, hospitalization or other medical,

life or other insurance, supplemental unemployment benefits, pension, profit

sharing or retirement plan, or other employee benefit plan, program or

arrangement involving direct or indirect compensation, fringe benefits or

perquisites under which Sellers, or any Person that is a member of a "controlled

group of corporations" with or is under "common control" with Sellers as defined

in Section 414(b) or (c) of the Code ("ERISA Affiliate"), has any present or

future obligations or Liability on behalf of its current or former employees,

directors or agents of the U.S. Business or their dependents or beneficiaries.

(b) Section 5.16(b) of the Seller Disclosure Schedule contains a

true and complete list of all Assumed Employee Plans. None of the Assumed

Employee Plans are subject to Title IV of ERISA.

(c) To the Knowledge of Sellers, except as set forth in Section

5.16(c) of the Seller Disclosure Schedule with respect to the Assumed Employee

Plans and the Vivendi Universal 401(k) Plan (the "Sellers' 401(k)"), and

together with the Assumed Employee Plans, the "Selected Plans":

(i) Each Selected Employee Plan has been established,

maintained, operated and administered in accordance with its terms and in

material compliance with ERISA, the Code, the regulations and published

authorities thereunder, and all other Laws applicable to the Selected

Employee Plans;

(ii) Neither of the Sellers nor any of their ERISA

Affiliates, nor any other "disqualified person" or "party in interest" (as

defined in Section 4975 of the Code and Section 3(14) of ERISA,

respectively) with respect to any Selected Employee Plan has committed any

act or omission which could subject Purchaser or its ERISA Affiliates to

any material Tax or penalty, including without limitation any Tax or

penalty imposed under Chapter 43 of the Code or Section 502(i), (j) or (l)

of ERISA and neither Sellers nor any ERISA Affiliate has any Liability to

the Pension Benefit Guaranty Corporation with respect to any Employee Plan

other than current quarterly premiums payable in the ordinary course of

business;

(iii) All contributions due and payable on or before the

Closing Date in respect of any Selected Employee Plan have been made in

full and proper form and adequate accruals have been provided for in the

financial statements for all other

-23-

<PAGE>

contributions or amounts in respect of the Selected Employee Plans for

periods ending on the Closing Date;

(iv) There are no Proceedings (except for routine benefit

claims) pending or, to the Knowledge of Sellers, threatened against any

Assumed Employee Plan or its assets or arising out of any Selected

Employee Plan, or to the Knowledge of Sellers, pending or threatened

against any other Person relating to any Selected Employee Plan, and, to

the Knowledge of Sellers, no reasonable basis exists for any such

Proceeding against any Selected Employee Plan or its assets or arising out

of any Selected Employee Plan;

(v) With respect to any Selected Employee Plan that provides

medical benefits to any former employee, independent contractor or

director, such plan may be amended by Sellers, or any of its subsidiaries,

as applicable, on and after the Closing, including by an amendment which

reduces or eliminates benefits to participants who are currently receiving

benefits, other than any former employees of Sellers receiving COBRA

coverage; provided, however, that the notice requirement of ERISA Section

104(b) has been satisfied; and

(vi) Except as specified in Section 5.16(c)(vi) of the Seller

Disclosure Schedule, (A) Purchaser shall not be obligated to pay

separation, severance, termination or similar benefits under any Selected

Employee Plan as a result of any transaction contemplated by this

Agreement, nor will any such transaction accelerate the time of payment or

vesting, or increase the amount, of any benefit or other compensation due

to any individual; and (B) the transactions contemplated by this Agreement

shall not be the direct or indirect cause of any amount paid or payable by

Purchaser under any Selected Employee Plan being classified as an excess

parachute payment under Section 280G of the Code.

(d) Sellers have delivered or made available to Purchaser true and

complete copies of the following documents relating to the Selected Employee

Plans or other Employee Plans that are a health, life insurance or disability

plan to enable Purchaser to satisfy its obligations under Section 8.5: (i) all

such Employee Plan documents or summary descriptions of such Employee Plans;

(ii) the current summary plan description, if any, for each of such Employee

Plans; (iii) any Form 5500 for any Assumed Employee Plan filed in each of the

two most recent plan years, including all schedules thereto and audited

financial statements with attached opinions of independent accountants; (iv) the

most recent determination letter from the Internal Revenue Service for any

Assumed Employee Plan that is intended to be qualified under Section 401(a) of

the Code; (v) the most recent actuarial report, if any, for any Assumed Employee

Plan; (vi) the Form PBGC-1, if any, filed for any Assumed Employee Plan in each

plan year; and (vii) in the case of any Assumed Employee Plan that includes a

"cash or deferred arrangement" as defined in Section 401(k)(2) of the Code,

copies of the non-discrimination testing results for the three (3) most recent

years.

-24-

<PAGE>

(e) Purchaser shall not have any Liability under any Excluded

Employee Plans, regardless of whether such Liability was incurred before, on or

after the Closing Date unless the Secondment Agreements are entered into, and

then as specifically provided for in the Secondment Agreements.

5.17 ENVIRONMENTAL MATTERS.

(a) Except as set forth in Section 5.17(a) of the Seller

Disclosure Schedule, Sellers possess all Permits and governmental authorizations

required under Environmental, Health and Safety Law to operate the U.S. Business

as currently operated, and, at the time of Closing are in material compliance

with all applicable Environmental, Health and Safety Laws and Permits.

(b) Except as set forth in Section 5.17(b) of the Seller

Disclosure Schedule, in the past five years, neither Seller nor any of their

Affiliates has received any written notice regarding any actual or alleged

material violation by Sellers or any of their Affiliates of any Environmental,

Health and Safety Laws in connection with the U.S. Business.

(c) Except as set forth in Section 5.17(c) of the Seller

Disclosure Schedule, there are no pending, or to Sellers' Knowledge, threatened,

Environmental Claims, against Sellers or any of their Affiliates arising out of

the operation of any of the Facilities, the operation of the U.S. Business, or

any Off-Site Disposal Location to which Hazardous Materials or materials

containing Hazardous Materials were sent for handling, storage, treatment or

disposal from the Facilities.

(d) Except as set forth in Section 5.17(d) of the Seller

Disclosure Schedule, there have been no Releases of Hazardous Materials into the

soil or groundwater of the Facilities in concentrations legally requiring

notification, remediation or other corrective action (other than de minimis

quantities of Hazardous Materials).

(e) Sellers have provided Purchaser with correct and complete

copies of all Phase I or Phase II studies, environmental compliance audits, and

periodic environmental compliance updates completed by Sellers or on behalf of

Sellers with respect to the Sites conducted in the past five years.

(f) Except as set forth in Section 5.17(f) of the Seller

Disclosure Schedule, there are no Encumbrances (other than Permitted

Encumbrances) arising under or pursuant to any Environmental, Health and Safety

Law on any Facility and material to the continued operation of the U.S. Business

as currently conducted, including those which would be reasonably expected to

give rise to the imposition of special conditions under any Environmental,

Health and Safety Law with respect to the ownership, occupancy, development, use

or transferability of any such Facility.

(g) Except as set forth in Section 5.17(g) of the Seller

Disclosure Schedule, there is not now and there has never been any

asbestos-containing material in any form or condition, any underground storage

tanks or above-ground storage tanks containing Hazardous Materials, any

landfill, waste pile, surface impoundment (other than for storm water), or

article or equipment containing polychlorinated biphenyls on or at any of the

Real Properties.

-25-

<PAGE>

5.18 BROKERS.

Neither Sellers nor any of their Affiliates has employed any broker or

finder or incurred any Liability for any brokerage fees, commissions or finders'

fees in connection with the transactions contemplated hereby for which Purchaser

will have any Liability after the Closing.

5.19 SUPPLIERS AND VENDORS; FRANCHISEES AND LICENSEES.

Except as set forth in Section 5.19 of the Seller Disclosure Schedule, in

the ordinary course of business, since October 31, 2004, no material supplier or

vendor used in connection with the U.S. Business and no Person providing

material maintenance services to the U.S. Business has canceled or otherwise

terminated any Contract or, to the Knowledge of Seller, threatened to cancel or

otherwise terminate, its relationship with Sellers or any of their Subsidiaries

or has during that period decreased, limited or otherwise modified, or, to the

Knowledge of Sellers, threatened to decrease, limit or otherwise modify, the

services, supplies or materials it provides to the U.S. Business unless at the

request or with the consent of Sellers in the ordinary course of the business.

5.20 INVENTORIES; PREPAYMENTS AND CREDITS.

(a) Since December 31, 2004, the Inventory related to the U.S.

Business has been maintained in the ordinary course of business.

(b) The amount of the U.S. Business' prepayments, prepaid

expenses, advances, credits from suppliers and deposits with or paid to third

parties is less than $550,000.

5.21 SOLVENCY AND PAYMENT OF LIABILITIES.

Each of Sellers will on the Closing Date, either as a result of the

transactions contemplated by this Agreement or otherwise, (a) not be insolvent,

as such term is defined in the Title 11 Bankruptcy of the United States Code or

any New York statute relating to insolvency, (b) shall have debts not greater

than all of its property and (c) will be able to pay its debts as they mature.

5.22 NO OTHER REPRESENTATIONS AND WARRANTIES.

SELLERS ARE NOT MAKING ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,

OF ANY NATURE WHATSOEVER, WITH RESPECT TO SELLERS OR ANY OF SELLERS' AFFILIATES

OR TO ANY OF THE ASSETS OR LIABILITIES BEING ACQUIRED, EXCEPT FOR THE

REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS ARTICLE 5.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF

PURCHASER

Purchaser represents and warrants to Sellers on the date hereof as

follows:

-26-

<PAGE>

6.1 ORGANIZATION; AUTHORITY.

(a) Purchaser is a limited liability company duly organized,

validly existing and in good standing under the Laws of the jurisdiction of

organization and has all requisite power and authority to own, lease and operate

its Assets and to carry on its business as currently conducted and as presently

proposed to be conducted. Section 6.1(a) of the Purchaser Disclosure Schedule

sets forth the names of each member of Purchaser.

(b) Purchaser is, or will on the Closing Date be, duly qualified

and in good standing to transact business as a foreign Person in those

jurisdictions set forth opposite its name in Section 6.1(b) of the Purchaser

Disclosure Schedule, which constitute all of the jurisdictions in which the

character of the property owned, leased or operated by Purchaser or the nature

of the business or activities conducted by Purchaser and as presently proposed

to be conducted makes such qualification necessary, except where the failure to

be so qualified has not had or would not reasonably be expected to have a

Purchaser Material Adverse Effect.

6.2 ACTION; AUTHORITY; NON-CONTRAVENTION.

Purchaser has all requisite power and authority to execute, deliver and

perform its obligations under this Agreement and each Related Document to which

it is or will be a party and to consummate the transactions contemplated hereby

and thereby. The execution, delivery and performance by Purchaser of this

Agreement and each Related Document to which it is or will be a party, and

performance of its obligations hereunder and thereunder have been duly and

validly authorized by all necessary action on the part of Purchaser and its

members. This Agreement and each Related Document to which Purchaser is or will

be a party has been, or upon the execution thereof will be, duly and validly

executed and delivered by Purchaser and constitutes, or upon its execution and

delivery will constitute, a valid and binding obligation of Purchaser,

enforceable against Purchaser in accordance with its terms, except as the

enforcement thereof may be limited by bankruptcy, insolvency, reorganization,

moratorium, fraudulent conveyance, fraudulent transfer or other similar laws

relating to or affecting enforcement of creditors' rights generally or by

general equitable principles. Neither the execution and delivery of, and/or

performance by Purchaser of its obligations under this Agreement and each

Related Document to which it is or will be a party, nor the consummation by

Purchaser of the transactions contemplated hereby and thereby shall (a) conflict

with or result in any violation or breach of, any of the terms, conditions or

provisions of, or constitute (with due notice or lapse of time, or both) a

default (with or without notice), or give rise to any right of termination,

cancellation or acceleration or result in the creation of any Encumbrance upon

any of the Assets of Purchaser, under any provision of its Organizational

Documents or any Contract to which Purchaser is a party or by which it or any of

its Assets is or may be bound, except, with respect to Contracts only, where

such violation, breach, or default, would not reasonably be expected to have a

Purchaser Material Adverse Effect or (b) violate, or result in the creation of

an Encumbrance (other than a Permitted Encumbrance) upon any of Purchaser's

Assets as a result of, any Laws applicable to Purchaser or any of its properties

or Assets, except where such violation or Encumbrance would not reasonably be

expected to have a Purchaser Material Adverse Effect.

-27-

<PAGE>

6.3 BROKERS.

Purchaser has not employed any broker or finder or incurred any Liability

for any brokerage fees, commissions or finders' fees in connection with the

transactions contemplated hereby for which Sellers or their Affiliates will have

any Liability after the Closing.

6.4 CONSENTS.

No consent, approval, Order or authorization of, or registration,

declaration or filing with or notification to, any Governmental Entity or any

third party is required in connection with the execution, delivery and

performance by Purchaser of this Agreement or the Related Documents to which

Purchaser is or will be a party or the consummation of the transactions

contemplated hereby or thereby.

6.5 AVAILABILITY OF FUNDS.

As of the date hereof and as of the Closing Date, Purchaser and/or its

Affiliates have the financial ability to satisfy Purchaser's obligations under,

and to consummate the transactions contemplated by, this Agreement.

6.6 SOLVENCY AND PAYMENT OF LIABILITIES.

Purchaser will on and immediately after the Closing, either as a result of

the transactions contemplated by this Agreement or otherwise, (a) not be

insolvent, as such term is defined in the Title 11 Bankruptcy of the United

States Code or any New York statute relating to insolvency, (b) shall have debts

not greater than all of its property and (c) will be able to pay its debts as

they mature.

ARTICLE 7

COVENANTS AND AGREEMENTS

7.1 ACCESS TO RECORDS AND PROPERTIES OF SELLERS; INVESTIGATIONS.

(a) From and after the date hereof until the earlier of the

Closing or the termination of this Agreement pursuant to Article 10, Sellers

shall afford (a) to Purchaser, Purchaser's potential lenders and Affiliates and

each of their respective authorized representatives, including accountants,

consultants and attorneys, free and full access at all reasonable times during

normal business hours to the Purchased Assets, business, facilities, properties,

books, records (including tax returns filed and in preparation), consultants,

and key employees of or relating exclusively to the U.S. Business in order that

Purchaser shall have the full opportunity to make such investigation as it shall

reasonably desire to make of the affairs of Sellers, and Sellers shall cooperate

fully in connection therewith, and (b) to the respective independent certified

public accountants of Purchaser, free and full access at all reasonable times

during normal business hours to the records of the independent certified public

accountants of Sellers. The investigation contemplated by this Section 7.1 and

any knowledge obtained by Purchaser prior to Closing shall not affect or

otherwise diminish or obviate in any respect any of the representations and

warranties or the indemnification rights of Purchaser Indemnified

-28-

<PAGE>

Persons contained in this Agreement. The parties hereto agree to use their

reasonable efforts to minimize any disruption to any other party's business in

connection with the conduct of the due diligence process contemplated herein.

Any information, documents or other material provided pursuant to this Section

7.1 shall be subject to the terms and conditions set forth in the

Confidentiality Agreement between the Universal Music Group and Glenayre

Electronics, Inc., dated as of December 17, 2004 (the "Confidentiality

Agreement").

(b) After the Closing, if requested by Purchaser, Sellers agree to

provide copies, at Purchaser's expense, of the property records, plans,

specifications and surveys relating to the Facilities.

7.2 CONDUCT PENDING CLOSING.

(a) Other than as set forth in Section 7.2 of the Seller

Disclosure Schedule, from and after the date hereof until the earlier of the

Closing or the termination of this Agreement pursuant to Article 10, Sellers

shall and shall cause their Affiliates to:

(i) conduct the U.S. Business, in all material respects, as

currently conducted and only in the ordinary course consistent with past

practice;

(ii) use commercially reasonable efforts to (A) maintain the

Purchased Assets, relations with present employees, suppliers, licensees

and operations as an ongoing operation in accordance with past custom and

practice, and (B) comply in all material respects with all applicable Laws

affecting or relating to the U.S. Business;

(iii) maintain in good standing all material Permits held by

Sellers to be transferred to Purchaser in respect of the U.S. Business on

a timely basis; and

(iv) maintain the Facilities consistent with past practice.

(b) Other than as set forth in Section 7.2 of the Seller

Disclosure Schedule, from and after the date hereof until the earlier of the

Closing or the termination of this Agreement pursuant to Article 10, Sellers

shall not, and Sellers shall cause their Affiliates not to:

(i) take or omit to take any action that is within the

control of Sellers which would result in the representations and

warranties contained in this Agreement and the Related Documents being

untrue on the Closing Date, other than such action as shall have been

previously agreed to in writing by the parties hereto;

(ii) sell, lease, license, transfer or otherwise dispose of

or mortgage, pledge or otherwise suffer to exist any Encumbrance (except

Permitted Encumbrances) on any of the Purchased Assets, except for sales

of inventory in the ordinary course of business or an Encumbrance that

upon its terms expires before the Closing;

(iii) modify, amend or terminate any material Contract that is

included in the Purchased Assets or waive, release or assign any material

rights thereunder;

-29-

<PAGE>

(iv) make any Tax election or settle or compromise any income

Tax Liability that could reasonably be anticipated to adversely affect the

U.S. Business after the Closing Date;

(v) change its practices, policies or procedures with

respect to the timing of the payment of accounts payable or the collection

of accounts receivable;

(vi) adopt, amend or otherwise modify in any respect any

Assumed Employee Plan or enter into, amend or otherwise modify any

collective bargaining agreement with any labor union or similar

organization that applies to, or covers, U.S. Business Employees, except,

in each case, as required by Law;

(vii) grant to any Employee whose annual salary is $100,000 or

more any increase in cash compensation, except as is required under

existing Employment Contracts, any renewal of an Employment Contract in

the ordinary course of the business or any Employee Plan;

(viii) enter into any contract relating to the provision of

services by Sellers in respect of the U.S. Business or the distribution,

sale or marketing by third parties of Sellers' services relating to the

U.S. Business in an amount in excess of $100,000;

(ix) purchase or make any contract for the purchase of an

amount of assets or properties, other than purchases in the ordinary

course of business or less than $100,000 in the aggregate;

(x) make any new commitments which would require expenditure

of more than $100,000 in the aggregate other than in the ordinary course

of business; or

(xi) agree or otherwise commit to take any of the actions set

forth above.

7.3 EFFORTS TO CONSUMMATE.

(a) Subject to the terms and conditions of this Agreement, each

party shall use commercially reasonable efforts to take or cause to be taken all

actions and do or cause to be done all things required under all applicable

Laws, in order to consummate the transactions contemplated hereby.

(b) From and after the date hereof until the earlier of the

Closing or the termination of this Agreement pursuant to Article 12, Purchaser

and Sellers shall use commercially reasonable efforts to satisfy each of the

closing conditions set forth in Article 10 to the extent such satisfaction is

within their power. Without limiting the foregoing, each party hereto shall

execute and deliver each Related Document to which it is a party.

(c) Purchaser shall be responsible, at Purchaser's expense, for

obtaining all Permits necessary for Purchaser to operate the U.S. Business.

Prior to the Closing Date, Sellers

-30-

<PAGE>

shall assist Purchaser in obtaining, at Purchaser's expense, all Permits

necessary for Purchaser to operate the U.S. Business.

(d) For every collective bargaining agreement listed in Section

5.15(b) of the Seller Disclosure Schedule, Sellers agree that they will

cooperate with Purchaser's effort to secure the agreement of the signatory labor

organization and/or union to the terms and conditions of employment proposed by

Purchaser for the employees who are subject to such collective bargaining

agreement as of the Closing Date.

7.4 NO SOLICITATION.

(a) Sellers each agree, and agree to cause their respective

Affiliates, directors, employees, advisors and representatives not to, directly

or indirectly,

(i) solicit, facilitate, encourage or discuss any proposals,

inquiries or offers relating to, Another Transaction,

(ii) (A) participate or engage in discussions or negotiations

with, or (B) disclose or provide any non-public information relating to

itself or the U.S. Business to, or afford access to any of its properties,

books or records to any Person with respect to Another Transaction, or

(iii) enter into any agreement or agreement in principle, in

connection with, any acquisition, disposition, business combination,

merger, or similar transaction involving Another Transaction;

provided, however, that (i) Sellers may take any of the actions described

in clause (ii) of this subsection (a) in response to any Person that has

made a bona fide written Acquisition Proposal if, but only if, (A) such

Person has submitted a written Acquisition Proposal which did not result

from a violation by any Seller of its obligations under this Section 7.4,

(B) the Sellers' boards of directors have determined in good faith by

resolution duly adopted, after consultation with outside legal counsel and

its financial advisor, that such Acquisition Proposal constitutes or would

reasonably be expected to lead to a Superior Proposal, (C) in the case of

Section 7.4(a)(ii)(B), such Person has entered into a confidentiality

agreement with either or both of the Sellers, on terms that are no less

fa