Exhibit 10.10
STOCK PURCHASE AND SHAREHOLDERS' AGREEMENT
STOCK PURCHASE AND SHAREHOLDERS' AGREEMENT, dated December 6, 1996
(the "Agreement"), by and among CDNOW, INC., a Pennsylvania corporation (the
"Company"), MILO PRODUCTIONS, INC., a Pennsylvania corporation ("Milo") , XXXXX
XXXX and XXXXXXX XXXX (together, the "Olims" and, together with the Company and
Milo, the "Defendants") and XXXXXXX XxXXXXXX, XXXXXXX XXXXXXX and XXXXXXX
XXXXXXX (collectively, the "MBL Individuals"), MBL ENTERTAINMENT, INC., an
Illinois corporation ("MBL" and together with the "MBL Individuals," the "MBL
Investors") and XXXX XXXXXXX ("Xxxxxxx" and together with the MBL Investors, the
"Investors") . As used herein, the term "Shareholders" shall mean the Olims and
the Investors, collectively.
Background
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The Investors and the Company wish to set forth certain agreements
regarding their future relationships and their rights and obligations with
respect to certain securities of the Company to be acquired by the Investors.
Terms
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In consideration of the mutual covenants contained herein and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
PURCHASE OF SECURITIES
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1.1 Sale and Purchase of Common Stock. In consideration of (a) the
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release and settlement of certain claims held by the Investors pursuant to
Section 1.3 of the Agreement; (b) the transfer to the Company by MBL of
substantially all of its properties, assets and rights pursuant to that certain
Agreement and Plan of Reorganization dated as of the date hereof by and among
the Company, MBL and each of the MBL Individuals (the "MBL Reorganization
Agreement") in the form attached hereto as Exhibit A; and (c) payment by Xxxxxxx
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to the Company of $1.2 million, the receipt of which is hereby acknowledged, the
Company hereby issues and transfers (y) to MBL, 147,101 shares of the Company's
common stock, no par value ("Common Stock") , and (z) Xxxxxxx, 153,639 shares of
Common Stock and a warrant to purchase Common Stock (the "Warrant") attached as
Exhibit B. As used herein, the term "Securities" shall mean the Warrant
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(including shares of Common Stock to be issued upon exercise thereof ) and the
Common Stock held by any party hereto, including shares of Common Stock and all
other securities of the Company (or a successor to the Company) received on
account of ownership of the Common Stock, including all securities issued in
connection with any merger, consolidation, stock dividend, stock distribution,
stock split, reverse stock split, stock combination, recapitalization,
reclassification, subdivision, conversion or similar transaction in respect
thereof.
1.2 Simultaneous Deliveries. The following deliveries will be made
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simultaneously with the signing of this Agreement: (a) the Company has
delivered to the Investors certificates for the Common Stock and the Warrant,
receipt of which is hereby acknowledged, in return for the consideration
specified in Section 1.1, receipt of which is hereby acknowledged by the
Company; and (b) the Company, the Olims, and the Investors have all executed and
delivered, a registration rights agreement (the "Registration Rights Agreement")
substantially in the form attached hereto as Exhibit C.
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1.3 Release; Waiver of California Civil Code Section 1542. Investors
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do hereby for themselves and for their respective agents, representatives,
predecessors, successors and assigns, and anyone claiming through or under them,
remise, release, and forever discharge Defendants and their present and former
agents, subsidiaries, affiliates, divisions, successors, representatives,
assigns, agents, officers, directors, partners, employees and shareholders, of
and from all manner of actions, causes of action, suits, claims, controversies,
covenants, contracts, agreements, promises, trespasses, damages, judgments, sums
of money, debts, dues, demands, obligations or liabilities of any nature
whatsoever, in law or in equity, known or unknown ("Claims"), which against the
said Defendants and their present and former parents, subsidiaries, affiliates,
divisions, successors, assigns, agents, officers, directors, partners, employees
and shareholders, the said Investors, their respective agents, representatives,
predecessors, successors and assigns ever had, or may have upon or by reason of
any matter alleged in MBL Entertainment, Inc., et al. v. CDNow, Inc., et al.,
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95-CV-5721 (E.D. Pa.) or which are based in any way upon or relate in any way to
a General Partnership Agreement entered into between MBL and Milo as of May 11,
1995, a Merchandising Agreement between MusicNow! and Xxxxx Xxxx, on behalf of
the Company, as of May 11, 1995, a Nondisclosure Agreement entered into between
Xxxxxxx and Xxxxx Xxxx on August 16, 1995, a Proposed Investment for the Company
and MusicNow! dated December 13, 1995 between the Olims, the Company, Milo, MBL,
JMA, Inc., Xxxxxxx and the MBL Individuals and any written or oral employment or
consulting contract, agreement or other arrangement between MBL or any of the
MBL Individuals, on the one hand, and the Company or any of its affiliates, on
the other.
Defendants do hereby for themselves and for their respective agents,
representatives, predecessors, successors and assigns, and anyone claiming
through or under them, remise, release, and forever discharge the investors and
their present and former agents, subsidiaries, affiliates, divisions,
successors, representatives, assigns, agents, officers, directors, partners,
employees and shareholders, of and from all Claims, which against the said
Investors and their present and former parents, subsidiaries, affiliates,
divisions, successors, assigns, agents, officers, directors, partners, employees
and shareholders, the said Defendants, their respective agents, representatives,
predecessors, successors and assigns ever had, or may have upon or by reason of
any matter alleged in MBL Entertainment, Inc., et al. v. CDNow, Inc., et al.,
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95-CV-5721 (E.D. Pa.) or which are based in any way upon or relate in any way to
a General Partnership Agreement entered into between MBL and Milo as of May 11,
1995, a Merchandising Agreement between MusicNow! and Xxxxx Xxxx,
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on behalf of the Company, as of May 11, 1995, a Nondisclosure Agreement entered
into between Xxxxxxx and Xxxxx Xxxx on August 16, 1995, a Proposed Investment
for the Company and MusicNow! dated December 13, 1995 between the Olims, the
Company, Milo, MBL, JMA, Inc., Xxxxxxx and the MBL Individuals, and any written
or oral employment or consulting contract, agreement or other arrangement
between MBL or any of the MBL Individuals, on the one hand, and the Company or
any of its affiliates, on the other.
The Investors and Defendants acknowledge that they have been advised
by legal counsel and are familiar with the provisions of California Civil Code
Section 1542, which provides as follows:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor."
Pursuant to this statute, as well as any other statutes or common-law
principles, whether of federal or state origin, of similar effect, each of the
Investors and Defendants expressly waive any rights with respect to any claims
relating to or arising from any claims released in this Section 1.3, which any
of the Investors and Defendants may have. In connection with such waivers, the
Investors and Defendants acknowledge that each is aware that it or he may later
discover claims presently unknown or unsuspected, or facts in addition to or
different from those which it or he now knows or believes to be true, with
respect to the matters released by the Agreement. Nevertheless, it is the
intention of the Investors and Defendants, and each of them, through the
Agreement, fully, finally and forever to settle and release all such claims
and/or facts.
1.4 Reorganization. It is intended that the acquisition of assets of
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MBL contemplated herein qualify as a tax-free reorganization pursuant to Section
368 (a) (1) (C) of the Internal Revenue Code of 1986, as amended (the "Code") .
In furtherance thereof, the MBL Individuals have agreed to cause the liquidation
of MBL pursuant to which the Common stock issued to MBL pursuant to Section 1.1
shall be distributed to the MBL Individuals as set forth
in the MBL Reorganization Agreement.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND
COVENANTS RELATING TO THE COMPANY
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Milo, the Company and the Olims represent and warrant jointly and
severally (but, in the case of the Olims, insofar as the representations and
warranties in paragraphs (i) and (j) of this
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Article II, only to the best of their knowledge) to, and covenant and agree
with, each of the Investors as follows:
(a) The Company is a corporation validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania and attached hereto as
Exhibit D and Exhibit E, respectively, are true and complete copies of the
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Company's Articles of Incorporation, as amended to date, and the Company's
Bylaws, as in effect on the date hereof.
(b) Milo and the Olims have full legal right, power and authority
(including in the case of Milo, the due authorization by all necessary corporate
action) to enter into this Agreement and to perform his or its obligations, as
the case may be, hereunder without the need for the consent of any other person;
and this Agreement has been duly authorized, executed and delivered and
constitutes the legal, valid and binding obligation of Milo and the Olims,
enforceable against them in accordance with the terms hereof.
(c) The Company has full corporate power and corporate authority to
make, execute, deliver and perform this Agreement and to carry out all of the
transactions provided for herein.
(d) The Company has taken such corporate action as is necessary or
appropriate to enable it to perform its obligations hereunder, including, but
not limited to, the issuance and sale of the Common Stock and the Warrant to be
issued by it, and this Agreement constitutes the legal, valid and binding
obligation of the Company, Milo and the Olims, enforceable against the Company,
Milo and the Olims in accordance with the terms hereof.
(e) The Common Stock is, and the shares of Common Stock issuable upon
the exercise of the Warrant will be, when issued in compliance with the
provisions of the Warrant, validly issued, fully paid, non-assessable, and free
of preemptive rights and similar rights and claims.
(f) The warrant constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms.
(g) The authorized capital stock of the Company consists solely of
5,000,000 shares of Common Stock, of which 1,006,827 shares are issued,
outstanding and held, as of the date hereof, as indicated in Schedule I. Except
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for the Warrant and this Agreement, there are no rights, subscriptions,
warrants, options, conversion rights, or agreements of any kind outstanding to
purchase from the Company, or otherwise require the Company to issue, any shares
of capital stock of the Company or securities or obligations of any kind
convertible into or exchangeable for any shares of capital stock of the Company
and the Company is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock.
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(h) Use of Proceeds. The Company shall use the proceeds from the sale
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of Common Stock and the Warrant solely for working capital and general corporate
purposes.
(i) Financial Statements.
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(i) Attached hereto as Schedule II are the balance sheet of the
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Company as of the end of the fiscal year ended December 31, 1995 and for the
eight months ended August 30, 1996 and the related statements of income and cash
flows for the respective fiscal periods then ended (all of the financial
statements referred to above in this provision are herein collectively referred
to as the "Financial Statements"). The Financial Statements fairly present the
financial position of the Company as of the respective dates set forth therein
and the results of the operations of the Company for the respective period or as
of the respective dates set forth therein, in each case in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved, except as otherwise noted.
(ii) The Company has no material liability or obligation of
any nature, whether due or to become due, absolute, contingent or otherwise,
including liabilities for or in respect of federal, state, local or foreign
taxes and any interest or penalties related hereto except for liabilities that
are (a) fully reflected on the Balance Sheet and (b) incurred in the ordinary
course of business consistent with past practice since the date of the Balance
Sheet and fully reflected as liabilities on the Company's books of account, none
of which individually or in the aggregate, has been materially adverse.
(j) Material Contracts. The Company has no subsidiaries and does not
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own or control any capital stock, partnership interests or similar right in
respect of any other business entity. Schedule III contains a correct and
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complete listing of all contracts, arrangements or agreements that are or could
reasonably be expected to be material to the business, properties, assets,
liabilities, condition (financial or otherwise), prospects or competitive
position of the Company including, but not limited to, any acquisition,
disposition, intellectual property, employment, consulting, joint venture,
strategic alliance, or other similar contract or agreement and all contracts,
arrangements or agreements entered into with the Olims, Milo or Xxxxxxx. The
Company is not in default under any such material contracts, and to the
Company's knowledge no other party to any such contracts is in default
thereunder.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF EACH INVESTOR
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3.1 Representations, Warranties and Covenants of Each Investor. Each
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of the Investors, as to itself only, severally represents and warrants to, and
covenants and agrees with, the Company that:
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(a) Such Investor has full legal right, power and authority
(including in the case of MBL, the due authorization by all necessary corporate
action) to enter into this Agreement and to perform such Investor's obligations
hereunder without the need for the consent of any other person; and this
Agreement has been duly authorized, executed and delivered and constitutes the
legal, valid and binding obligation of such Investor enforceable against such
Investor in accordance with the terms hereof. Furthermore, MBL and each of the
MBL Investors represents and warrants that MBL is the exclusive owner of, and
has any and all rights, title and interest in and to any Claims that any of the
MBL investors may have ever had against the Defendants.
(b) The Securities are being acquired by such Investor for
investment, and not with a view to any distribution thereof that would violate
the Securities Act of 1933, as amended (the "Securities Act"), or the applicable
state securities laws of any state.
(c) Such Investor understands that the Securities have not been
registered under the Securities Act or the securities laws of any state and must
be held indefinitely unless subsequently registered under the Securities Act and
any applicable state securities laws or unless an exemption from such
registration becomes or is available.
(d) Such Investor is financially able to hold the Securities for
long-term investment, believes that the nature and amount of the Securities
being purchased are consistent with such Investor's overall investment program
and financial position, and recognizes that there are substantial risks involved
in the purchase of the Securities.
3.2 Legend. The Warrant and the certificates representing the Common
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Stock shall bear the following legend in addition to any other legend required
under applicable law:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT
REGISTRATION OR EXEMPTION UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO THE
TERMS AND CONDITIONS OF A STOCK PURCHASE AND SHAREHOLDERS' AGREEMENT
BY AND AMONG THE COMPANY AND THE HOLDERS SPECIFIED THEREIN, A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
THE SALE, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES IS SUBJECT
TO THE TERMS OF SUCH
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AGREEMENT AND THE SECURITIES ARE TRANSFERABLE ONLY UPON PROOF OF
COMPLIANCE THEREWITH.
3.3 Notation. A notation will be made in the appropriate transfer
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records of the Company with respect to the restrictions on transfer of the
Securities referred to in this Agreement.
3.4 Reliance. Each Investor acknowledges that the Company and each
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of the other Investors is entering into this Agreement in reliance upon such
Investor's representations and warranties and other covenants and agreements
contained herein.
ARTICLE IV
AGREEMENT AMONG SHAREHOLDERS
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4.1 Restrictions on Transfers of Securities.
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The following restrictions on Transfer (as such term is defined
in this Section 4.1) shall apply to all Securities owned by any Shareholder:
(a) No Shareholder or Permitted Transferee (as such term is
defined in this Section 4.1), other than a Permitted Transferee by virtue of
Section 4.1(b) (iii) hereof, shall Transfer (other than in connection with a
redemption or purchase by the Company) any Securities unless (i) such Transfer
is to a Permitted Transferee and (ii) such Transfer otherwise complies with the
provisions of Article IV. No Shareholder or Permitted Transferee shall effect
any Transfer of Securities unless the transferee executes an agreement pursuant
to which such transferee agrees to be bound by the terms and provisions of this
Agreement applicable to the transferor (except as otherwise specifically
provided herein). Any purported Transfer in violation of this Agreement shall be
null and void and of no force and effect and the purported transferee shall have
no rights or privileges in or with respect to the Company. As used herein,
"Transfer" includes the making of any sale, exchange, assignment, hypothecation,
gift, security interest, pledge or other encumbrance, or any contract therefor,
any voting trust or other agreement or arrangement with respect to the transfer
of voting rights or any other beneficial interest in any of the Securities,
(other than the voting rights provisions described in Section 4.2) the creation
of any other claim thereto or any other transfer or disposition whatsoever,
whether voluntary or involuntary, affecting the right, title, interest or
possession in or to such Securities.
Prior to any proposed Transfer of any Securities, the holder
thereof shall give written notice to the Company describing the manner and
circumstances of the proposed Transfer. In advance of any such Transfer, the
holder thereof shall provide evidence to the Company, sufficient to the Company
in its reasonable discretion, that the proposed transferee shall be subject to
this Agreement. No recipient of any Securities pursuant to a Transfer shall be
entitled to any rights under this Agreement, including in particular those
rights described in Section 4.6, until and unless such transferee is made
subject to the terms of this Agreement. Each certificate evidencing
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the Securities transferred (except in the case of a transaction contemplated in
Section 4.1(b)(iii) hereof) shall bear the legends set forth in Section 3.2,
except that such certificate shall not bear such legend if the holder delivers a
written opinion of counsel, addressed to the Company and reasonably satisfactory
in form and substance to the Company, to the effect that such legend is not
required in order to establish compliance with any provision of the Securities
Act or applicable state securities laws.
Nothing in this Section 4.1(a) shall prevent the Transfer of
Securities by a Shareholder or a Permitted Transferee to one or more of its
Permitted Transferees or to the Company; provided, however, that each such
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Shareholder or Permitted Transferee (except a Permitted Transferee by virtue of
Section 4.1(b) (iii) hereof) shall take such Securities subject to and be fully
bound by the terms of this Agreement applicable to it with the same effect as if
it were a party hereto; and provided, further, that (i) no entity or person
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(other than a Permitted Transferee by virtue of Section 4.1(b)(iii) hereof)
shall be a Permitted Transferee unless such transferee executes a joinder to
this Agreement reasonably satisfactory in form and substance to the Company, and
(ii) no Transfer shall be effected except in compliance with the registration
requirements of the Securities Act or pursuant to an available exemption
therefrom.
(b) As used herein, "Permitted Transferee" shall mean:
(i) in the case of any Shareholder who is a natural
person, his or her spouse, parents (and, in the case of Xxxxxxx Xxxxxxx, his
spouse's parents), siblings, children or grandchildren (in each case, natural or
adopted), any trust for his or her benefit or the benefit of his or her spouse,
parents, siblings, children or grandchildren (in each case, natural or adopted),
or any corporation or partnership in which the direct and beneficial owner of
all of the equity interest is such individual Shareholder or Permitted
Transferee or his or her spouse, parents or his or her spouse's parents,
siblings, children or grandchildren (in each case, natural or adopted) (or any
trust for the benefit of such persons);
(ii) in the case of any Shareholder who is, in each case,
a natural person, the heirs, executors, administrators or personal
representatives upon the death of such Shareholder or Permitted Transferee or
upon the incompetency or disability of such Shareholder or Permitted Transferee
for purposes of the protection and management of his assets;
(iii) in the case of any Shareholder or Permitted
Transferee, any person or other entity if such person or other entity takes such
Securities pursuant to a sale in connection with a Public offering (as such term
is defined in this Section 4.1) or following a Public Offering in open market
transactions or pursuant to Rule 144 promulgated under the Securities Act;
(iv) in the case of MBL, any of Xxxxxxx XxXxxxxx, Xxxxxxx
Xxxxxxx and Xxxxxxx Xxxxxxx; and
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(v) in the case of Xxxxxxx or any of the MBL Individuals,
any of Xxxxxxx or another MBL Individual.
As used herein, "Public Offering" means a successfully
completed firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act in respect of the offer and sale
of shares of Common Stock for the account of the Company resulting in aggregate
gross proceeds to the Company and any shareholder selling shares of Common Stock
in such offering of not less than $20,000,000.
4.2 Voting Rights. Until the earlier of (i) the occurrence of a
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Public Offering or (ii) five (5) years from the date hereof, each MBL Investor
irrevocably agrees to vote such MBL Investor's Common Stock as directed by
Xxxxxxx and does hereby make, constitute, and appoint Xxxxxxx with full power of
substitution, the true and lawful attorney and proxy of such MBL Investor for
and in such MBL Investor's name, place, and stead in respect to the Common Stock
owned by such MBL Investor, to represent and vote for such MBL Investor at all
meetings, regular or special, of the shareholders of the company, to consent to
and waive notice of all such special or regular meetings, and to consent to any
matter requiring the consent of shareholders or for which the consent of
shareholders is requested by the Company; provided; however, that the provisions
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of this Section 4.2 shall not apply to any matter or transaction in which
Xxxxxxx or any of his Affiliates has a financial or other interest (other than
as a result of Xxxxxxx'x ownership of the Securities) and for which the approval
of certain holders of Common Stock is required pursuant to Section 4.7 hereof.
Each MBL Investor hereby agrees that this voting agreement, power of attorney
and proxy is coupled with an interest and is irrevocable, and each MBL Investor
hereby ratifies and confirms all that Xxxxxxx may lawfully do or cause to be
done by virtue hereof.
4.3 Board of Directors.
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(a) The Shareholders hereby agree to take, at any time and from
time to time, all action necessary and within their control (including without
limitation, calling special meetings of shareholders, voting in person or by
proxy the shares of Common Stock owned by them at annual or special meetings of
shareholders, and executing and delivering written consents) such that: (i) two
members of the Board of Directors of the Company, each with one half of one
vote, shall be Xxxxxxx and/or a person or persons designated by Xxxxxxx and (ii)
the Board of Directors of any direct or indirect subsidiary of the Company shall
be identical to that of the Company.
(b) Xxxxxxx may request that any director designated, by him be
removed (with or without cause) by written notice to the other Shareholders,
and, in any such event, each Shareholder shall promptly consent in writing or
vote or cause to be voted all shares of Common Stock now or hereafter owned or
controlled by it for the removal of such person as a director. In the event any
person ceases to be a director, such person shall also cease to be a member of
any committee of the Board of Directors of the Company.
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(c) In the event that a vacancy is created on the Company's
Board of Directors at any time by the death, disability, retirement, resignation
or removal (with or without cause) of a director designated by Xxxxxxx, or if
otherwise there shall exist or occur any vacancy on the Company's Board of
Directors in a directorship subject to designation by Xxxxxxx, such vacancy
shall not be filled by the remaining members of the Company's Board of Directors
but each Shareholder hereby agrees promptly to consent in writing or vote or
cause to be voted all shares of Common Stock now or hereafter owned or
controlled by it to elect that individual designated to fill such vacancy and
serve as a director, as shall be designated by Xxxxxxx.
(d) The provisions of this Section 4.3 shall not terminate as of
the occurrence of a Public Offering unless the underwriters for such Public
Offering deliver to the Investors an opinion to the effect that the continuation
of the provisions of this Section 4.3 would have a material adverse effect on
the pricing for such Public Offering; provided, however, that upon consummation
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of a Public Offering, Xxxxxxx shall resign or cause the resignation of one of
the directors of the Company appointed by him pursuant to subparagraph (a) of
this Section 4.3 and the non-resigning director shall remain a member of the
Board of Directors of the Company, with one vote.
4.4 Duties of the Olims; Noncompetition Agreements. In consideration
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of the payments, transfers and undertakings of the Investors pursuant to this
Agreement, each of the Olims agrees that so as long as he is employed or
otherwise serving as a director or consultant for the Company and, thereafter
(i) for three (3) years, if he voluntarily terminates his employment, director
or consulting relationship with the Company within three (3) years of the date
hereof, (ii) for three (3) years, if such employment, director or consulting
relationship is terminated by the Company for Cause, or (iii) for an additional
two (2) years if he voluntarily terminates his employment or consulting
relationship with the Company at any time after three (3) years from the date
hereof, he will not, directly or indirectly, engage or become interested
(whether as an owner, stockholder, partner, lender, investor, director, officer,
employee, consultant or otherwise) in any business or commercial enterprise that
is involved in Internet based retailing or any other business activity in which
the Company or any of its subsidiaries is now engaged or undertakes at any time
during such five (5) year term and while the Olims are employed by the Company
or, in the alternative, own, in the aggregate, at least ten percent (10%) of the
Common Stock then outstanding; provided that ownership by the Olims of not more
than one percent (1%) of the outstanding securities of any class of any
corporation that is listed on a national securities exchange or traded in the
over-the-counter market, shall not be considered a breach of this Section 4.4.
The Olims understand and hereby agree that the Investors would not be fairly
compensated by money damages for any breach of this Section 4.4 by the Olims and
therefore, in the event of a breach or threatened breach of this Section 4.4,
the Investors shall be entitled to seek specific performance, an injunction and
other equitable relief in addition to money damages and other legal remedies to
the extent that a court of competent jurisdiction determines such equitable
remedies to be appropriate under the circumstances.
As used herein, "Cause," shall mean a person's willful engagement in
conduct which violates the terms of this Section 4.4.
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4.5 Financial Statements and Other Information. So long as any
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Investor owns any of the Securities, the Company shall deliver to Xxxxxxx (it
being understood that Xxxxxxx shall be permitted to provide copies of any
information provided to him pursuant to this Section 4.5 to any of the
Investors):
(a) as soon as available and in any event within forty-five (45)
days after the end of each of the first three quarters of each fiscal year of
the Company, a consolidated balance sheet of the Company as of the end of such
period, and consolidated statements of income and cash flows of the Company for
the period then ended, each internally prepared in conformity with generally
accepted accounting principles applied on a consistent basis, except as
otherwise noted therein, and subject to the absence of footnotes and to year-end
adjustments; and
(b) as soon as available and in any event within ninety (90)
days after the end of each fiscal year of the Company, a consolidated and
consolidating balance sheet of the Company as of the end of such year, and
consolidated and consolidating statements of income and cash flows of the
Company for the year then ended prepared in conformity with generally accepted
accounting principles applied on a consistent basis, except as otherwise noted
therein, together with an independent auditor's report thereon of a nationally
recognized, "Big Six" firm or a firm approved by a majority of the Common Stock
held by the Investors as of the earlier of (i) the date hereof or (ii) the date
such auditor is first appointed to audit the books, records and financial
statements of the Company.
4.6 Preemptive Rights.
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(a) Except (x) in a Public Offering, (y) as a dividend on
outstanding shares of Common Stock, or (z) pursuant to any incentive or bonus
plan, agreement or arrangement approved by the Board of Directors for officers
and key employees of the Company in an amount not to exceed, together with any
other such bonus plan, agreement or arrangement then in existence in the
aggregate fifteen percent (15%) of the outstanding shares of Common Stock at
that time, if the Company proposes to issue and sell any of its shares of Common
Stock or any securities containing options or rights to acquire any shares of
Common Stock or any securities convertible into shares of Common Stock
(collectively, such stock or securities are referred to as the "New Issuance" to
any existing holder of the Company's Common Stock or any of their respective
Affiliates (as such term is defined in this Section 4, then the Company will
first offer to sell to each Investor a portion of each such New Issuance (after
deducting the amounts described in Section 4.6(b) below) equal to the quotient
determined by dividing (1) the number of outstanding shares of Common Stock held
by such Investor plus, in the case of Xxxxxxx, Common Stock which may be
acquired upon exercise of the Warrant on the date of such offer, by (2) the
aggregate number of outstanding shares of Common Stock immediately prior to such
issuance. Each Investor shall be entitled to purchase stock or other securities
in any New Issuance on the same terms and conditions (including price) as are
offered to any of the other Shareholders; provided that if all Shareholders
entitled to purchase stock or securities pursuant to this Section 4.6(a) are
required by the Company to also purchase other securities of the Company as a
condition to participating in such New
-11-
Issuance, Shareholders exercising their rights pursuant to this Section 4.6
(a) shall also be required to purchase the same strip of securities (on the same
terms and conditions including price) that all Shareholders are required to
purchase in order to purchase any stock or securities in such New Issuance.
In the event that an Investor does not elect to purchase his or its
portion of such New Issuance as determined in this Section 4.6 (the "Declined
Portion"), the Company shall give notice of such failure to the other Investors,
and the other Investors shall thereupon have the right and option to purchase in
the aggregate all, but not less than all, of the Declined Portion and may give
notice to the Company of such intention at any time not later than thirty (30)
days after the date on which such notice is sent by the Company to such
Investors. Each electing Investor's notice shall indicate the amount of the
Declined Portion that such investor desires to purchase. If such Investors elect
to purchase an aggregate number of shares in excess of the Declined Portion, the
Declined Portion shall be allocated among the Investors who desire to purchase
such shares in proportion to the number of shares of Common Stock (including, in
the case of Xxxxxxx, Common Stock issuable upon exercise of the Warrant) owned
by each of them; provided that no such other Investor shall become bound to
purchase any of such Declined Portion in excess of the number of such shares he,
she or it had elected to purchase. If the foregoing allocation procedure does
not allocate all of the Declined Portion (because one or more Investors would
otherwise have been allocated more than the number of shares he, she or it
elected to purchase), then the remaining part of the Declined Portion shall be
allocated among the other Investors who desire to purchase such shares in
proportion to the number of shares of Common Stock (including, in the case of
Xxxxxxx, Common Stock issuable upon exercise of the Warrant) owned by each of
them, and such allocation procedure shall continue until all such shares shall
have been allocated. Promptly upon determining the number of the shares which
each purchasing Investor will purchase and the purchase price therefor, the
Company shall send notices thereof to each of the purchasing Investors.
As used in this Article IV, "Affiliate" shall mean, with respect to
any specified person, any other person directly or indirectly controlling or
controlled by or under direct or indirect common control with such specified
person; it being understood that for purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with") , as used with respect to any person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such person, whether through the
ownership of voting securities, by agreement or otherwise, provided that
--------
beneficial ownership (as such term is defined in Rule 13d-3 promulgated under
the Securities Exchange Act of 1934, as amended) of ten percent (10%) or more of
the equity securities of a Person shall be deemed to be control.
(b) The Company will cause to be given to each Investor a
written notice setting forth the terms and conditions upon which such
Shareholders may purchase such shares or other securities pursuant to this
Section 4.6 (the "Preemptive Notice"). After receiving a Preemptive Notice, each
Investor must reply, in writing, within fifteen (15) days of the date of such
Preemptive Notice that such person agrees to purchase the stock or other
securities offered pursuant to this
-12-
Section 4.6 on the date of the proposed New Issuance (the "Preemptive Reply").
If any of such persons fails to make a Preemptive Reply in accordance with this
Section 4.6, the respective stock or other securities offered to such persons in
accordance with this Section 4.6 may thereafter, for a period not exceeding one
hundred twenty (120) days following the expiration of such fifteen (15) day
period, be issued, sold or subjected to rights or options at a price not less
than that at which they were offered to the Shareholders as provided herein. Any
such stock or other securities not so issued, sold or subjected to rights or
options during such one hundred twenty (120) day period will thereafter again be
subject to the preemptive rights provided for in this Section 4.6.
(c) Notwithstanding the foregoing, the provisions of this
Section 4.6 shall not be applicable to the issuance of shares of Common Stock
upon the conversion of shares of one class of Common Stock into shares of
another class or upon exercise of any securities previously issued by the
Company as a New Issuance pursuant to the terms and conditions of this Section
4.6.
4.7 Affiliate Transactions. Neither the Company nor any of its
----------------------
direct or indirect subsidiaries shall engage in any transactions with any
Affiliates except on terms and conditions that, in the reasonable judgment of
the Board of Directors of the Company, as evidenced by the unanimous approval of
such Board of Directors, are no less favorable to the Company or its direct or
indirect subsidiaries, as the case may be, than the terms and conditions which
the Company or such subsidiary, as the case may be, could obtain in a
transaction with an unaffiliated person on an arm's length basis; provided,
--------
however that so long as at the time of such transaction, there is one member of
-------
the Board of Directors of the Company who is not an Affiliate and whose
appointment was reasonably acceptable to the Olims and Xxxxxxx (the "Independent
Director"), only the approval of a majority of the Board of Directors, including
specifically the Independent Director, shall be required; provided, further that
-------- -------
any salary or other compensation to be paid to either of the Olims in any fiscal
year in excess of $150,000 shall require the unanimous approval of the Board of
Directors of the Company. In addition to such approval, if the Company proposes
to enter into any transaction with either or both of the Olims, on the one hand,
and Xxxxxxx, on the other hand, the Company shall not enter into such
transaction except with the affirmative vote of the holders of a majority of the
shares of the Company's Common Stock that are held by persons other than the
Olims, Xxxxxxx or any of their respective Affiliates. The restrictions
contained in this Section 4.7 shall not prohibit: (i) the payment of any
dividends, principal, interest or other amounts in respect of any of the
Securities in accordance with their terms; (ii) the prepayment or redemption of
any of the Securities in accordance with their terms; (iii) the grant of stock
options or similar rights to employees and directors of the Company in the
ordinary course of business and pursuant to plans approved by the Board of
Directors; provided further that such options or similar rights do not exceed,
-------- -------
in the aggregate, fifteen percent (15%) of the outstanding shares of Common
Stock at that time and (iv) fees, compensation, expense reimbursements or
employee benefit arrangements paid to and indemnity provided for the benefit of
directors, officers or employees of the Company or any direct or indirect
subsidiary of the Company in the ordinary course of business. The conditions of
this Section 4.7 will terminate upon the occurrence of a Public Offering.
-13-
4.8 Tag-Along.
---------
(a) (i)on or after the date hereof, except as otherwise
provided in Section 4.8(a)(v), no Seller (as such term is defined herein) shall
sell any Common Stock or security convertible into or exercisable for Common
Stock (together, "Convertible Securities") in any transaction unless all Holders
(as such term is defined herein) are offered an equal opportunity to participate
in such transaction or transactions on a pro rata basis (based on the number of
shares of Common Stock outstanding on a fully-diluted basis) and on identical
terms (including price and type of consideration paid); provided, however, that
-------- -------
the Olims may sell Common Stock to any purchaser, other than the Company, in an
arms-length transaction which, in the aggregate when combined with all other
sales made pursuant to this Section 4.8, constitutes no more than five percent
(5%) of the Common Stock held by the Olims taken together on such date without
compliance with the provisions of this Section 4.8. As used in this Section
4.8, "Seller" means the Olims and their Permitted Transferees (other than a
Permitted Transferee by virtue of Section 4.1(b)(iii)); and "Holders" means the
investors and their Permitted Transferees (other than a Permitted Transferee by
virtue of Section 4.1(b)(iii).
(ii) Prior to any sale of Common Stock or Convertible
Securities subject to these provisions, the Seller shall notify the company in
writing of the proposed sale. Such notice (the "Seller's Notice") shall set
forth: (A) the number of shares of Common Stock subject to the proposed sale;
(B) the name and address of the proposed purchaser; and (C) the proposed type
and amount of consideration and terms and conditions of payment offered by such
proposed purchaser. The Company shall promptly, and in any event within fifteen
(15) days, mail or cause to be mailed the Seller's Notice to each Holder, along
with a notice setting forth the number of shares of Common Stock such Holder is
entitled to sell pursuant to this Section 4.8. A Holder may exercise the tag-
along right by delivery of a written notice (the "Tag-Along Notice") to the
Seller within fifteen (15) days of the date the Company mailed or caused to be
mailed the Seller's Notice. The Tag-Along Notice shall state the number of
shares of Common Stock that the Holder proposes to include in the proposed sale.
If no Tag-Along Notice is received during the fifteen (15) day period referred
to above, the Seller shall have the right for a one hundred and twenty (120) day
period to effect the proposed sale of shares of Common Stock or Convertible
Securities, as the case may be, on terms and conditions no more favorable than
those stated in the notice and in accordance with the provisions of this Section
4.8.
(iii) Notwithstanding anything to the contrary, a
Seller may make any of the following sales without offering the Holders the
opportunity to participate: (a) sales by a Seller to any Permitted Transferee,
provided that the proposed purchaser (except a Permitted Transferee by virtue of
--------
Section 4.1(b)(iii) hereof) agrees in writing to be bound by the provisions of
this Agreement and (b) sales pursuant to an effective registration statement
under the Securities Act.
(iv) The tag-along obligations of the Sellers and the
rights of the Holders with respect thereto provided under this Section 4.8 shall
terminate upon the earlier of (a)
-14-
the closing of a Public Offering and (b) the date on which the Investors
collectively own less than five percent (5%) of the Common Stock.
(v) Notwithstanding the requirements of this Section
4.8, a Seller may sell Common Stock at any time without complying with the
requirements of Section 4.8(a)(ii) so long as the Seller deposits into escrow
with a nationally recognized financial institution at the time of sale that
amount of the consideration received in the sale equal to the "Escrow Amount" in
accordance with the terms of this clause (v). The "Escrow Amount" shall equal
that amount of consideration as all the Holders would have been entitled to
receive if they had the opportunity to participate in the sale on a pro rata
basis, determined as if each Holder (A) delivered a Tag-Along Notice to the
seller in the time period set forth in Section 4.8(a)(ii) and (B) proposed to
include all of its shares of Common Stock in the sale.
No later than the date of the sale, the Seller shall notify the
Company in writing of the proposed sale. Such notice (the "Escrow Notice")
shall set forth the information required in the Seller's Notice, and in
addition, such notice shall state the name of the escrow agent and, if the
consideration (in whole or in part) for the sale was cash, then the account
number of the escrow account. The Company shall promptly, and in any event
within ten (10) days, mail or cause to be mailed the Escrow Notice to each
Holder.
A Holder may exercise the tag-along right by delivery to the Seller,
within fifteen (15) days of the date the Company mailed or caused to be mailed
the Escrow Notice, of (i) a written notice specifying the number of shares of
Common Stock it proposes to sell, and (ii) the certificates for such Common
Stock, with stock powers duly endorsed in blank, or Convertible Securities, with
a duly executed Exercise Notice and, if applicable, payment of the Exercise
Price.
Promptly after the expiration of the fifteenth (15th) day after the
Company has mailed or caused to be mailed the Escrow Notice, (A) the Seller
shall purchase that number of shares of Common stock proposed to be sold by the
Holders as Seller would have been required to include in the sale had Seller
complied with the provisions of Section 4.8(a)(ii), (B) all shares of Common
Stock not required to be purchased by Seller shall be returned to the Holders
thereof; and (C) all remaining funds and other consideration held in escrow
shall be released to Seller. If Seller received consideration other than cash in
its sale, Seller shall purchase the shares of Common Stock tendered by paying to
the Holders non-cash consideration and cash in the same proportion as received
by Seller in the sale.
Seller shall pay all costs and expenses of the Escrow Agent, and any
interest on the Escrow Amount shall accrue to the benefit of the Company.
4.9 Observers' Rights. So long as the MBL Investors own in the
-----------------
aggregate at least seven and one half percent (7.5%) of the Common Stock
outstanding, the MBL Investors shall have the right to designate one (1)
observer (other than any of the MBL Individuals or any person related by blood
or marriage to any of the MBL Individuals) (the "Observer") to attend meetings
of
-15-
the Company's Board of Directors and committees thereof. The Company shall give
the Observer written notice of each meeting of the Board of Directors and
committees thereof at the same time and in the same manner as the members of the
Board of Directors or such committee receive notice of such meetings, and the
Company shall permit the Observer to attend as an observer all meetings of its
Board of Directors and committees thereof. The Observer shall be entitled to
receive all written materials and other information given to the directors in
connection with such meetings at the same time such materials and information
are given to the directors, and the Observer shall keep such materials and
information confidential. If the Company proposes to take any action by written
consent in lieu of a meeting of its Board of Directors or a committee thereof,
the Company shall give written notice thereof to the Observer prior to the
effective date of such consent. The Company shall provide to the Observer all
written materials and other information given to the directors in connection
with such action by written consent at the same time such materials and
information are given to the directors, and the Observer shall keep such
materials and information confidential. The Company shall pay the reasonable
out-of-pocket expenses of the Observer incurred in connection with attending
such meetings to the same extent that the Company pays for such expenses
incurred by the directors of the Company. The MBL Investors shall cause any
Observer to execute a confidentiality and nondisclosure agreement with the
Company, in form and substance reasonably satisfactory to the Company, whereby
the Observer covenants to keep confidential and not to disclose any and all
information Concerning the Company learned as a result of such person's status
as the Observer to the same extent that the directors of the Company are
obligated to do so under the Pennsylvania Business Corporation Law or any
successor statute.
4.1 Shareholder Suits. The investors and the Company hereby agree
-----------------
that in a shareholder derivative claim, suit or other proceeding (a
"Proceeding") involving, on the one hand, any of the investors and, on the other
hand, the Company, the non-prevailing party in such Proceeding shall pay any and
all costs, in particular the reasonable costs and expenses of attorneys and
other professionals, incurred by the prevailing party as a result of such
Proceeding.
4.1 Certain Tax Matters. In light of the Company's election to be
-------------------
treated as a subchapter S corporation for federal income tax purposes (a "S
Corporation") pursuant to the provisions of Section 1362 of the Code,
notwithstanding any other provisions of this Agreement or any other agreement
among the Company and the Shareholders, or any of them, the Shareholders shall
not sell, assign or transfer any shares of Common Stock to any person or
encumber any shares of Common Stock in any manner that could cause a termination
of the Company's status as a S Corporation without the prior written consent of
the Company. Any such sale, assignment, transfer or encumbrance shall be void.
If a transfer of shares of Common Stock does not comply with the provisions of
this Agreement, the purported transferee of the shares of Common Stock shall not
be considered a shareholder of the Company for any purpose whatsoever. Except
as otherwise provided in this Agreement, no Shareholder shall take any action
that would, whether standing alone or when taken with other actions, result in
the termination of the Company's status as a S corporation.
-16-
ARTICLE V
DEFINED TERMS
-------------
As used in this Agreement, the following terms shall have the following
meanings:
Term As Defined
---- ----------
on Page
-------
Agreement......................................................................... 1
Company........................................................................... 1
Milo.............................................................................. 1
Olims............................................................................. 1
Defendants........................................................................ 1
MBL Individuals................................................................... 1
MBL............................................................................... 1
MBL Investors..................................................................... 1
Xxxxxxx........................................................................... 1
Investors......................................................................... 1
Shareholders...................................................................... 1
MBL Reorganization Agreement...................................................... 1
Common Stock...................................................................... 1
Warrant........................................................................... 1
Securities........................................................................ 1
Registration Rights Agreement..................................................... 2
Claims............................................................................ 2
Code.............................................................................. 3
Financial Statements.............................................................. 5
Securities Act.................................................................... 6
SECURITIES ACT.................................................................... 7
Transfer.......................................................................... 8
Permitted Transferee.............................................................. 8
Public Offering................................................................... 9
New Issuance......................................................................12
Declined Portion..................................................................12
Affiliate.........................................................................13
Control...........................................................................13
Preemptive Notice.................................................................13
Preemptive Reply..................................................................13
Convertible Securities............................................................15
Seller............................................................................15
Holders...........................................................................15
Seller's Notice...................................................................15
Tag-Along Notice..................................................................15
-17-
Escrow Amount.....................................................................16
Escrow Notice.....................................................................16
Observer..........................................................................17
Proceeding........................................................................17
S Corporation.....................................................................18
ARTICLE VI
MISCELLANEOUS
-------------
6.1 Amendment and Modification. This Agreement may be amended or
--------------------------
modified, or any provision hereof may be waived, provided that such amendment or
waiver is set forth in a writing executed by: (i) the Company, (ii) the Olims,
(iii) Xxxxxxx and (iv) the MBL Investors. No course of dealing between or among
any persons having any interest in this Agreement will be deemed effective to
modify, amend or discharge any part of this Agreement or any rights or
obligations of any person under or by reason of this Agreement.
6.2 Survival of Representations and Warranties. All representations,
------------------------------------------
warranties, covenants and agreements set forth in this Agreement will survive
the execution and delivery of this Agreement and the Closing Date and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by an Investor or on its behalf.
6.3 Successors and Assigns; Entire Agreement. This Agreement and all
-----------------------------------------
of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective Successors and permitted assigns and
executors, administrators and heirs. This Agreement sets forth the entire
agreement and understanding among the parties as to the subject matter hereof
and merges and supersedes all prior discussions and understandings of any and
every nature among them.
6.4 Separability. In the event that any provision of this Agreement
------------
or the application of any provision hereof is declared to be illegal, invalid or
otherwise unenforceable by a court of competent jurisdiction, the remainder of
this Agreement shall not be affected except to the extent necessary to delete
such illegal, invalid or unenforceable provision unless that provision held
invalid shall substantially impair the benefits of the remaining portions of
this Agreement.
6.5 Notices. All notices provided for or permitted hereunder shall
-------
be made in writing by hand-delivery, registered or certified first-class mail,
telex, telecopier or air courier guaranteeing overnight delivery to the other
party at the following addresses (or at such other address as shall be given in
writing by any party to the others):
-18-
If to the Company, to:
CDNow, Inc.
000 Xxx Xxxxxxx Xxxx
Xxxxx 0
Xxxxxxx, XX 00000
Attention: Xx. Xxxxx Xxxx
Telecopier No.: (000) 000-0000
with a required copy to:
Xxxxxx Xxxxx & Bockius LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telecopier No.: (000) 000-0000
and
Xxxxxxx Xxxxxxxxxx & Xxxxxx, P.C.
Xxxxx 000
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxx Xxxxxxxxxx, Esq.
Telecopier No.: (000) 000-0000
If to Xxxxxxx, to:
Windup Entertainment Group, Inc.
00 Xxxxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
Telecopier No.: (000) 000-0000
with required copies to:
Xxxxx Xxxxxx & Xxxxxx
City Place, 00xx Xxxxx
Xxxxxxxx, XX 00000-0000
Attention: Xxxxx Xxxxx, Esq.
Telecopier No.: (000) 000-0000
and
-19-
Dechert Price & Xxxxxx
4000 Xxxx Atlantic Tower
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: G. Xxxxxx X'Xxxxxxx, Esquire
Telecopier No.: (000) 000-0000
If to the MBL investors, to:
MBL Entertainment, Inc.
c/o Xxxx XxXxxxxx & Associates
000 X. Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx/Xxxxxxx XxXxxxxx
Telecopier No.: (000) 000-0000
and
Xxxxxxx Xxxxxxx
000 Xxxxx Xxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Telecopier No.: (000) 000-0000
with required copies to:
Xxxx, Scholer, Fierman, Xxxx & Handler, LLP
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx, Esq.
Telecopier No.: (000) 000-0000
and
Xxxxxxxx & Xxxxxx, Ltd.
00 Xxxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000-0000
Attention: Xxxxx Xxxxxxx, Esquire
Telecopier No.: (000) 000-0000
and
-20-
Dechert Price & Xxxxxx
4000 Xxxx Atlantic Tower
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: G. Xxxxxx X'Xxxxxxx, Esquire
Telecopier No.: (000) 000-0000
If to Xxxxx and/or Xxxxxxx Xxxx, to:
c/o CDNow, Inc.
000 Xxx Xxxxxxx Xxxx
Xxxxx 0
Xxxxxxx, XX 00000
Attention: Xx. Xxxxx Xxxx
Telecopier No.: (000) 000-0000
with a required copy to:
Xxxxxx Xxxxx & Bockius LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telecopier No.: (000) 000-0000
and
Xxxxxxx Xxxxxxxxxx & Xxxxxx, P.C.
Xxxxx 000
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxx Xxxxxxxxxx, Esq.
Telecopier No.: (000) 000-0000
If to any of the Investors (other than as listed herein), to
their addresses as listed in the books of the Company.
All such notices shall be deemed to have been duly given:
when delivered by hand, if personally delivered; five (5) business days after
being deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and an the next business day,
if timely delivered to an air courier guaranteeing overnight delivery.
-21-
6.6 Governing Law. The validity, performance, construction and
-------------
effect of this Agreement shall be governed by and construed in accordance with
the internal law of the Commonwealth of Pennsylvania, without giving effect to
principles of conflicts of law.
6.7 Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not constitute a part of this Agreement, nor shall they
affect their meaning, construction or effect.
6.8 Counterparts. This Agreement may he executed in two or more
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same instrument.
6.9 Further Assurances. Each party shall use its reasonable efforts
------------------
to cooperate and take such action as may be reasonably requested by another
party in order to carry out the provisions and purposes of this Agreement and
the transactions contemplated hereby.
6.10 Remedies. In the event of a breach or a threatened breach by any
--------
party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The
parties agree that the provisions of this Agreement shall be specifically
enforceable, it being agreed by the parties that the remedy at law, including
monetary damages, for breach of such provision will be inadequate compensation
for any loss and that any defense in any action for specific performance that a
remedy at law would be adequate is waived.
6.11 Party No Longer Owning Securities. If a party hereto ceases to
---------------------------------
own any Securities, such party will no longer be deemed to be an Investor for
purposes of this Agreement.
6.12 Pronouns. Whenever the context may require, and pronouns used
--------
herein shall be deemed also to include the corresponding neuter, masculine or
feminine forms.
-22-
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase and Shareholders Agreement as of the day and year first above written.
CDNOW, INC.,
a Pennsylvania corporation
By: /s/ Xxxxxxx Xxxx
-----------------
Xxxxxxx Xxxx
Secretary and Treasurer
MILO PRODUCTIONS, INC.,
a Pennsylvania corporation
By: /s/ Xxxxxxx Xxxx
-------------------------------------------
Xxxxxxx Xxxx
Secretary and Treasurer
/s/ Xxxxx Xxxx
-------------------------------------------
Xxxxx Xxxx
/s/ Xxxxxxx Xxxx
-------------------------------------------
Xxxxxxx Xxxx
MBL ENTERTAINMENT, INC.,
an Illinois corporation
By: /s/ Xxxxxxx XxXxxxxx
-------------------------------------------------
Name:
Title:
/s/ Xxxx Xxxxxxx
--------------------------------------------
Xxxx Xxxxxxx
/s/ Xxxxxxx XxXxxxxx
--------------------------------------------
Xxxxxxx XxXxxxxx
/s/ Xxxxxxx Xxxxxxx
--------------------------------------------
Xxxxxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxxx
--------------------------------------------
Xxxxxxx Xxxxxxx
-23-
