Notes:

Each share of our common stock issued and outstanding immediately prior to the effective time of the merger (other than shares of common stock held by Dimensional Associates, its affiliates or Merger Sub) will be automatically cancelled and converted at the effective time of the merger into the right to receive the following merger consideration: (1) $2.05 in cash, which we refer to as the “cash merger consideration”, and (2) a contingent right to receive a share of additional merger consideration, which we refer to as the “additional consideration”. The additional consideration will be paid, if on or prior to the six-month anniversary of the consummation of the merger, we, Dimensional Associates or any of our respective affiliates enter into a commitment, which we refer to as a “resale transaction”, to sell at least 80% of our outstanding voting securities or at least 80% of our assets. The additional consideration will be an amount equal to 15% of the difference between our enterprise value in the resale transaction and our enterprise value immediately prior to the consummation of the merger, as calculated in accordance with the terms of the merger agreement, which amount we refer to as the “resale profit”. The portion of any additional consideration payable to a holder of our shares and, if applicable, our stock options, restricted stock and stock appreciation rights, will be calculated in accordance with the terms of the merger agreement.

Source of Funds: "Dimensional Associates estimates that the total amount of funds required to purchase all of the outstanding shares of our common stock not currently owned by it or its affiliates, to pay the amounts owed to the holders of options and restricted stock awards under the Company Stock Plan, and to pay Dimensional’s and Merger Sub’s estimated fees and expenses of the merger, will be approximately $7.9 million. Dimensional Associates will fund the aggregate merger consideration and associated fees and expenses of Dimensional Associates and Merger Sub through the use of working capital on hand."

6/18/2010 - The vote date has been set to July 29, 2010. 

On June 25, 2010, Bidder B, submitted to the special committee a revised unsolicited written indication of interest to lead a group of investors in the acquisition of all of the outstanding shares of our common stock and Series A convertible preferred stock (including those held by Dimensional Associates and its affiliates) for $40,990,000 in cash. We refer to Bidder B’s proposal as the “Bidder B Proposal.” The Bidder B Proposal required The Orchard to enter into a binding memorandum of understanding that would provide Bidder B with a 40-day period to seek financing and would be financed by a capital raise to close concurrently with the acquisition. The Bidder B Proposal also required The Orchard to issue to Bidder B an option to purchase 1,577,768 shares of our common stock at $2.50 per share in the event that Dimensional Associates indicates that it is unwilling to sell its shares of our common stock and to accept $25 million for its shares of Series A convertible preferred stock. Bidder B stated that it had engaged an investment bank to serve as its financial advisor. Bidder B did not submit any financing commitments or other information about sources of financing for the proposed transaction.

At a meeting on July 7, 2010, the special committee discussed the Revised Bidder B Proposal. Representatives of Patterson Belknap and Morris, Nichols attended the meeting. The special committee again noted that the Revised Bidder B Proposal provided no committed financing and was subject to a 40-day financing contingency. The special committee concluded that it was unable to make a determination that the Revised Bidder B Proposal constitutes or is reasonably likely to lead to a “superior proposal” in accordance with the merger agreement. The special committee informed Bidder B of its decision on July 9, 2010.

Completion: 7/29/2010 - The Orchard, a global leader in music and video distribution and comprehensive digital strategy, announced the completion of its acquisition by Dimensional Associates, LLC, the New York-based private equity arm of JDS Capital Management, Inc. and the majority owner of The Orchard. At The Orchard's annual meeting of stockholders held today, The Orchard's stockholders voted to adopt the merger agreement entered into on March 15, 2010, as amended, providing for the acquisition by Dimensional Associates of the outstanding shares of common stock of The Orchard not already owned by Dimensional Associates and its affiliates.

Under the terms of the merger agreement, The Orchard's stockholders are entitled to receive $2.05 in cash, without interest and less any applicable withholding taxes, for each share of common stock they owned immediately prior to the effective time of the merger. The Orchard's common stock will cease trading on the Nasdaq Stock Market at the opening of trading on July 30, 2010 and will be delisted from the Nasdaq Stock Market.

Adoption of the merger agreement was subject to two votes. Under Delaware law, the merger agreement was required to be adopted by the holders of a majority of the voting power of the company’s common stock and Series A convertible preferred stock outstanding on the record date of June 11, 2010. Holders of approximately 81% of these shares voted in favor of the adoption of the merger agreement, representing 85% of the votes cast. In addition to the vote required under Delaware law, the merger agreement was required to be adopted by the holders of a majority of the voting power of the company’s common stock and Series A convertible preferred stock outstanding on the record date, other than Dimensional Associates and its affiliates. Holders of approximately 58% of these shares voted in favor of the adoption of the merger agreement.