Exhibit 10.13
NON-COMPETITION AND
NON-SOLICITATION AGREEMENT
THIS NON-COMPETITION AND
NON-SOLICITATION AGREEMENT (this “Agreement”) is made
and entered into as of September 22, 2005 by and among Digital
Music Group, Inc., a Delaware corporation (“DMG”), and
the undersigned member (“Member”) of Rio Bravo
Entertainment, LLC. Doing business as Pyschobaby, a Delaware
limited liability company (the “Company”). The Closing
Date (as defined in the Asset Purchase 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 Asset
Purchase Agreement dated as of September 22, 2005 (the “Asset
Purchase Agreement”) pursuant to which DMG shall acquire
certain contractual assets of the Company (the
“Acquisition”).
B. Member acknowledges that he is a
substantial interest holder and a manager of the
Company.
C. As a condition and mutual
inducement to the Acquisition, and to preserve the value of the
assets being acquired by DMG after the Acquisition, the Asset
Purchase Agreement contemplates, among other things, that Member
shall enter into this Agreement and that this Agreement shall
become effective on the Effective Date.
D. The Acquisition 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 Member 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”), Member
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; provided,
however, so long as Member pays to DMG, within thirty (30) days of
receipt, any net profits (after deduction of reasonable expenses)
he or the Company receives from Bug Digital, any work Member
provides to Bug Digital shall not be considered a Competing
Business Purpose. Member agrees that the Company shall not transfer
or assign its agreement with Bug Digital to any party other than
DMG and shall as soon as reasonably practicable, after the date
hereof, transfer each agreement with Bug Digital to DMG.
(b) Beginning on the Effective Date
and for the duration of the Non-Competition Period, Member shall
not, directly or indirectly, without the prior written consent of
DMG, solicit,
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encourage or take any other action
which is intended to induce or encourage, or has the effect of
inducing
