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
