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Exhibit
10.11
NON-COMPETITION AND
NON-SOLICITATION AGREEMENT
THIS NON-COMPETITION AND
NON-SOLICITATION AGREEMENT (this “Agreement”) is made
and entered into as of September 12, 2005 by and among Digital
Music Group, Inc., a Delaware corporation (“DMG”), and
the undersigned shareholder (“Shareholder”) of Digital
Musicworks International, Inc., a California corporation (the
“Company”). The Closing Date (as defined in the Merger
Agreement (as defined below)) shall be the “Effective
Date” of this Agreement.
RECITALS
A. Concurrent with the
execution of this Agreement, DMG and the Company have entered into
an Agreement and Plan of Reorganization dated as of September 12,
2005 (the “Merger Agreement”) pursuant to which the
Company shall merge with and into DMG (the
“Merger”).
B. Pursuant to the Merger,
all of the issued and outstanding shares of capital stock of the
Company will be converted into the right to receive shares of
Common Stock of DMG, upon the terms and subject to the conditions,
set forth in the Merger Agreement.
C. Shareholder acknowledges
that he is a substantial shareholder, officer and/or director of
the Company.
D. As a condition and mutual
inducement to the Merger, and to preserve the value of the business
being acquired by DMG after the Merger, the Merger Agreement
contemplates, among other things, that Shareholder shall enter into
this Agreement and that this Agreement shall become effective on
the Effective Date.
E. The Merger shall be
conditional upon and shall occur concurrent with the initial public
offering of shares of Common Stock of DMG.
NOW, THEREFORE, in
consideration of the mutual promises made herein, DMG and the
Shareholder hereby agree as follows:
1. Covenant Not to Compete
or Solicit.
(a) During the period
commencing on the Effective Date and ending on the third
anniversary of the Effective Date (the “Non-Competition
Period”), Shareholder shall not, other than on behalf of DMG,
directly or indirectly, without the prior written consent of DMG:
(i) engage in, anywhere in the United States in which DMG conducts
business (the “Restricted Area”), whether as an
employee, agent, consultant, advisor, independent contractor,
proprietor, partner, officer, director or otherwise, or have any
ownership interest in (except for ownership of one percent (1%) or
less of any publicly-held entity), or participate in or facilitate
the financing, operation, management or control of, any firm,
partnership, corporation, entity or business that engages or
participates in, a Competing Business Purpose (as defined below);
or (ii) interfere with the business of DMG or approach, contact or
solicit DMG’s customers in connection with a Competing
Business Purpose. For purposes of this Agreement, “Competing
Business Purpose” shall mean the acquisition, processing and
distribution of music content for digital download.
(b) Beginning on the
Effective Date and for the duration of the Non-Competition Period,
Shareholder shall not, directly or indirectly, without the prior
written consent of DMG, solicit, encourage or take any other action
which is intended to induce or encourage, or has the effect of
inducing
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or encouraging, any employee
of DMG or any subsidiary of DMG to (i) terminate his or her
employment with the DMG, or (ii) engage in any action in which
Shareholder would, under the provisions of Section 1(a)
hereof, be prohibited from engaging.
(c) The covenants contained
in Sections 1(a) and 1(b) hereof shall be construed as a series of
separate covenants, one for each country, province, state, city or
other political subdi
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