CONFlDENTIALITY AGREEMENT
This Confidentiality Agreement ("Agreement") is entered into as of this __
day of ________, 2000 by and between CDnow, Inc., a Pennsylvania corporation,
and its affiliates (collectively, "CDNOW") and Bertelsmann AG, an
Aktiengeseallschaft organized and existing under the laws of Germany, and its
affiliates (collectively, "Party2"). In this Agreement, CDNOW and Party2 are
sometimes collectively referred to as the "parties" and individually as a
"party".
The parties have commenced discussions and intend to explore the
possibility of a business combination or other form of transaction (the
"Transaction"). To further such exploration, a party may provide to the other
party certain nonpublic information regarding itself and its business and
operations.
In consideration of the mutual covenants and restrictions set forth in
this Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally
bound, the parties hereto agree to and will abide by the restricts set forth
in this Agreement.
The term "person" as used in this Agreement shall be interpreted to
include, without limitation, any corporation, partnership, individual,
association, trust or other entity or organization. The term "representatives"
as used in the Agreement with respect to any person shall include agents
(including, without limitation, financia1 advisors, consultants, lawyers,
accountants or other professional advisors) and partners, directors, officers,
employees and current and prospective financing sources for the Transaction of
such person.
A. Agreements of CDNOW
1. CDNOW agrees to treat confidentially all written and proprietary
information concerning Party2 and its assets and businesses that is furnished
to CDNOW or its representatives by or on behalf of Party2 whether before or
after the date of this Agreement (collectively, "the Party2 Evaluation
Material"). The term Party2 Evaluation Material also includes all notes,
analysts, compilations, studies or other documents prepared by or on behalf of
CDNOW or others containing, or based in whole or in part on, any such
information. The term Party2 Evaluation Material, however, does not include
information which (i) is or becomes generally available to the public other
than as a result of a disclosure directly or indirectly by CDNOW or its
representatives in violation of this Agreement (ii) is or becomes available to
CDNOW or its representatives in a non-confidential basis from a source, other
than Party2 or one of its representatives, which to the knowledge of CDNOW and
its representatives is not prohibited from disclosing such information by a
contractual, legal or fiduciary obligation, or (iii) has been independently
developed by CDNOW or its representatives without violating any of its
obligations under this Agreement. The parties acknowledge that some or all of
the Party2 Evaluation Material is proprietary and may be commercially
sensitive, and agree to exchange such information in a manner consistent with
applicable laws.
2. CDNOW agrees the Party2 Evaluation Material will be used by CDNOW and
its representatives solely for the purpose of evaluating the Transaction. CDNOW
further agrees to take all reasonable precautions necessary to assure that the
Party2 Evaluation Material is disclosed only to those of CDNOWs representatives
who (i) need such material for purposes of evaluating the Transaction and (ii)
have been advised by CDNOW of this Agreement and who have been instructed to
treat the Party2 Evaluation Material in accordance with the provisions of this
Agreement. CDNOW shall be responsible to Party2 for any breach of this
Agreement by CDNOW or its representatives.
3. Except as required by law or the applicable rules of any national
securities exchange or market (and then only on advice of CDNOWs counsel and
upon prompt, prior written notice to Party2 of such requirement, or if
paragraph (A)(4) is applicable, then only in accordance with paragraph (A)(4)
or as othewise agreed in writing), neither CDNOW nor its representatives will
disclose to any third party (i) the fact that the Party2 Evaluation Material
has been requested or made available to CDNOW, (ii) the fact that
investigations, discussions or negotiations between CDNOW and Party2 are taking
or have taken place, or (iii) any of the terms, conditions or other facts with
respect to the Transaction, including the status thereof.
4. In the event that CDNOW or its representatives are requested or become
legally compelled in a proceeding before a court, arbitrator or administrative
agency, of competent jurisdiction, to disclose (i) any portion of the Party2
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Evaluation Material, (ii) the fact that the Party2 Evaluation Material has been
requested or made available to CDNOW, (iii) the fact that investigations,
discussions or negotiations between CDNOW and Party2 are taking place, or (iv)
any of the terms, conditions or other facts with respect to the Transaction,
including the status thereof; CDNOW will, and will direct its representatives
to, provide Party2 with prompt written notice of such request or legal
compulsion to permit Party2, at Party2's option either (i) to seek a protective
order or other appropriate remedy or (ii) to waive compliance by CDNOW and/or
its representatives with the provisions of this Agreement. If a protective
order or other remedy is not obtained or Party2 fails to waive compliance with
the provisions of this Agreement, CDNOW agrees that it will, and will direct
its representatives to, disclose only that information that its counsel advises
(except that no advice of counsel shall be required in the case of oral
testimony where (i) it is impracticable to obtain such advice and (ii) counsel
has advised the testifying witness of the obligations imposed by this paragraph
(A)(4) prior to his or her testimony) is legally required to be disclosed and
will exercise reasonable efforts, and will direct its representatives to
exercise reasonable efforts, to cooperate with Party2 to obtain reliable
assurance that confidential treatment will be accorded to the information so
disclosed.
5. CDNOW will, and will direct its representatives to, promptly upon the
request of Party2, either (i) deliver to Party2 the Party2 Evaluation Material
and all copies thereof, or (ii) destroy the Party2 Evaluation Material. Once
Party2 makes the foregoing request, the determination of whether to return or
destroy the files shall be made by CDNOW, With respect to that portion of the
Party2 Evaluation Material that consists of analyses, compilations, studies or
other documents prepared by or on behalf of CDNOW or its representatives, these
will be destroyed immediately upon Party2's request. CDNOW shall advise Party2
that the: foregoing has been done.
6. CDNOW acknowledges that neither Party2 nor any of its representatives
hereby makes any express or implied representation or warranty as to the
accuracy or completeness of the Party2 Evaluation Material, or that they have
provided CDNOW with all of the information CDNOW has requested. Except as
provided in a definitive agreement for a Transaction, CDNOW agrees that neither
Party2 nor its representatives nor any affiliate of Party2 shall have any
liability to CDNOW or any of its representatives resulting from the use of the
Party2 Evaluation Material by CDNOW or its representatives or their reliance
thereon. Neither CDNOW nor Party2 nor any affiliate of Party2 will have any
obligations with respect to the Transaction or any other transaction which may
be discussed until a definitive agreement shall be executed and delivered by
the parties. For purposes of this paragraph, the term "definitive agreement"
includes an executed letter of intent or other written agreement between the
parties but does not include any written or verbal acceptance of any proposal
on the part of any party.
7. No failure or delay by Party2 in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. It is agreed that
Party2 would be irreparably harmed by a breach of this Agreement by CDNOW or
its representatives and shall be entitled to seek equitable relief, including,
without limitation, injunction and specific performance, in the event of any
such breach, and CDNOW further agrees to waive any requirement for security or
posting of any bond in connection with such remedy. Such remedy shall not be
deemed to be the exclusive remedy for a breach by CDNOW or its representatives
of this Agreement but shall be in addition to all other remedies available at
law or equity to Party2.
8. CDNOW acknowledges it is aware, and agrees it will advise its
representatives who are informed as to the matters which are the subject of
this letter, that under certain circumstances the United States securities laws
prohibit a person who has received from an issuer material, non-public
information concerning the matters which are the subject of this letter, from
purchasing or selling securities of such issuer or from communicating such
information to any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities.
9. So long as a Transaction is not consummated, for a period of one year
from the date hereof, without the prior written consent of Party2, CDNOW will
not solicit to hire any person employed by Party2 or its subsidiaries or
affiliates at any time during such period and to whom CDNOW had been introduced
after the date hereof as a result of the process contemplated by this
Agreement; provided that this paragraph shall not prohibit CDNOW from
soliciting to hire any employee (i) whose employment with Party2 or such
subsidiary or affiliate has been teminated by Party2 or such subsidiary or
affiliate prior to the commencement of employment discussions between CDNOW and
such employee or (ii) who initiates discussions regarding such employment
without any direct solicitation by CDNOW or (iii) responds to any public
advertisement placed by CDNOW.
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10. CDNOW agrees that should it enter into a confidentiality or similar
agreement in respect of a CDNOW Business Combination Proposal (as defined
below) with provisions that are less restrictive to the other party than those
set forth in paragraph (B)(10) of this Agreement, it shall give notice thereof
to Party2 and a copy of such less restrictive provisions, and this Agreement
will be deemed to be amended so that Party2 will have the benefit of such less
restrictive provisions.
B. Agreements of Party2
1. Party2 agrees to treat confidentially all written secret and
proprietary information concerning CDNOW and its assets and businesses that is
furnished to Party2 or its representatives by or on behalf of CDNOW whether
before or after the date of this Agreement (collectively, the "CDNOW Evaluation
Material"). The term CDNOW Evaluation Material also includes all notes,
analyses, compilations, studies or other documents prepared by Party2 or others
containing, or based in whole or in part on, any such information. The term
CDNOW Evaluation Marerial, however, does not include information which (i) is
or becomes generally available to the public other than as a result of a
disclosure directly or indirectly by Party2 or its representatives in violation
of this Agreement, (ii) is or becomes available to Party2 or its
representatives on a non-confidential basis from a source, other than CDNOW or
one of its representatives, which to the knowledge of Party2 and its
representatives is not prohibited from disclosing such information by a
contractual, legal or fiduciary obligation, or (iii) has been independently
developed by Party2 or its representatives without violating any of its
obligations under this Agreement. The parties acknowledge that some or all of
the CDNOW Evaluation Material is proprietary and may be commercially sensitive,
and agree to exchange such information in a manner consistent with applicable
laws.
2. Party2 agrees the CDNOW Evaluation Material will be used by Party2 and
its representatives solely for the purpose of evaluating the Transaction.
Party2 further agrees to take all reasonable precautions necessary to assure
that the CDNOW Evaluation Material is disclosed only to those of Party2's
representatives who (i) need such material for purposes of evaluating the
Transaction and (ii) have been advised by Party2 of this Agreement and who have
been insuucted to treat the CDNOW Evaluation Material in accordance with the
provisions of this Agreement. Party2 shall be responsible for any breach of
this Agreement by Party2 or its representatives.
3. Except as required by law or the applicable rules of any national
securities exchange or market (and then only on advice of Party2's counsel and
upon prompt, prior written notice to CDNOW of such requirement, or if paragraph
(B)(4) is applicable, then only in accordance with paragraph (B)(4) or as
otherwise agreed in writing), neither party2 nor its representatives will
disclose to any third party (i) the fact that the CDNOW Evaluation Material has
been requested of made available to Party2, (ii) the fact that investigations,
discussions or negotiations between Party2 and CDNOW are taking or have taken
place, or (iii) any of the terms, conditions or other facts with respect to the
Transaction, including the status thereof. Notwithstanding the foregoing or any
other provision of this Agreement, there shall be no restriction on the ability
of Party2 or its representatives to disclose the CDNOW Evaluation Materials or
information described in (i), (ii) and (iii) of the preceding sentence to
xxxxxxxxxxxxxx.xxx inc. and xxxxxxxxxxxxxx.xxx llc or any of their
representatives, provided that prior to such disclosure, if any,
xxxxxxxxxxxxxx.xxx inc. and xxxxxxxxxxxxxx.xxx llc execute an agreement with
CDNOW in substantially the same form as this Agreement.
4. In the event that Party2 or its representatives are requested or become
legally compelled in a proceeding before a court, arbitrator or administrative
agency, of competent jurisdiction, to disclose (i) any portion of the CDNOW
Evaluation Material, (ii) the fact that the CDNOW Evaluation Material has been
requested or made available to Party2, (iii) the fact that investigations,
discussions or negotiations between Party2 and CDNOW are taking place, or (iv)
any of the terms, conditions or other facts with respect to the Transaction,
including the status thereof, Party2 will, and will direct its representatives
to, provide CDNOW with prompt written notice of such request or legal
compulsion to permit CDNOW at CDNOW's option either (i) to seek a protective
order or other appropriate remedy or (ii) to waive compliance by Party2 and/or
its representatives with the provisions of this Agreement. If a protective
order or other remedy is not obtained or CDNOW fails to waive compliance with
the provisions of this Agreement, Party2 agrees that it will, and will direct
its representatives to, disclose only that information that its counsel advises
(except that no advice of counsel shall be required in the case of oral
testimony where (i) it is impracticable to obtain such advice and (ii) counse1
has advised the testifying witness of the
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obligations imposed by this paragraph (B)(4) prior to his or her testimony) is
legally required to be disclosed and will exercise reasonable efforts, and will
direct its representatives to exercise reasonable efforts, to cooperate with
CDNOW to obtain reliable assurance that confidential treatment will be accorded
to the information so disclosed.
5. Party2 will, and will direct its representatives to, promptly upon the
request of CDNOW either (i) deliver to CDNOW the CDNOW Evaluation Material and
all copies thereof, or (ii) destroy the CDNOW Evaluation Material. Once CDNOW
makes the foregoing request, the determination of whether to return or destroy
the files shall be made by Party2. With respect to that portion of the CDNOW
Evaluation Material that consists of analyses, compilations, studies or other
documents prepared by Party2 or its representatives, these wiIl be destroyed
immediately upon CDNOWs request. Party2 shall advise CDNOW that the foregoing
has been done.
6. Party2 acknowledges that neither CDNOW nor any of its representatives
hereby makes any express or implied representation or warranty as to the
accuracy or completeness of the CDNOW Evaluation Material, or that they have
provided Party2 with all of the information Party2 has requested. Except as
provided in a definitive agreement for a Transaction, Party2 agrees that
neither CDNOW nor its representatives nor any affiliate of CDNOW shall have any
liability to Party2 or any of its representatives resulting from the use of the
CDNOW Evaluation Material by Party2 or its representatives or their reliance
thereon. Neither Party2 nor CDNOW nor any affiliate of CDNOW, will have any
obligations with respect to the Transaction or any other transaction which may
be discussed until a definitive agreement shall be executed and delivered by
the parties. For purposes of this paragraph, the term definitive agreement
includes an executed letter of intent or other written agreement between the
parties but does not include any written or verbal acceptance of any proposal
on the part of any party.
7. No failure or delay by CDNOW in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power of privilege hereunder. It is agreed that
CDNOW would be irreparably harmed by a breach of this Agreement by Party2 or
its representatives and shall be entitled to seek equitable relief, including,
without limitation, injunction and specific performance, in the event of any
such breach, and Party2 further agrees to waive any requirement for security or
posting of any bond in connection with such remedy. Such remedy shall not be
deemed to be the exclusive remedy for a breach by Party2 or its representatives
of this Agreement but shall be in addition to all other remedies available at
law or equity to CDNOW.
8. Party2 acknowledges it is aware, and agrees it will advise its
representatives who are informed as to the matters which are the subject of
this letter, that under certain circumstances the United States securities laws
prohibit a person who has received from an issuer material, non-public
information concerning the matters which are the subject of this letter, from
purchasing or selling securities of such issuer or from communicating such
information to any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities.
9. So long as a Transaction is not consummated, for a period of one year
from the date hereof, without the prior written consent of CDNOW, Party2 will
not solicit to hire any person employed by CDNOW or its subsidiaries at any
time during (i) such period and to whom Party2 had been introduced after the
date hereof as a result of the process contemplated by this Agreement; provided
that this paragraph shall not prohibit Party2 from soliciting to hire any
employee whose employment with CDNOW or such subsidiary has been terminated by
CDNOW or such subsidiary prior to the commencement of employment discussions
between Party2 and such employee or (ii) who initiates discussions regarding
such employment without any direct solicitation by Party2 or (iii) responds to
any public advertisement placed by Party2.
C. Joint Agreements
1. CDNOW and Party2 hereby agree that this Agreement shall terminate two
(2) years after the date hereof. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to any principles or rules involving conflicts of law, and any disputes
arising under this Agreement shall be brought solely in the state or federal
courts serving New York, New York and each party hereby irrevocably consents to
the jurisdiction of such courts with regard to such disputes. This Agreement,
and the rights and obligations of the parties hereunder, shall terminate on the
second anniversary of the date hereof.
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2. This Agreement shall inure to the benefit of and be binding upon CDNOW
and Party2 and their respective affiliates, successors and assigns, including
any successor to CDNOW or Party2 or substantially all of CDNOW or Party2's
assets or business, by merger, consolidation, purchase of assets, purchase of
stock or otherwise.
3. All notices hereunder shall be in writing and be deemed to have been
given when delivered by messenger, transmitted by facsimile transmission (with
a confirming copy sent no later than the next business day by a nationally
recognized overnight courier for delivery the next business day after being
sent), the second business day after being sent by nationally recognized
overnight courier or five days after being mailed by registered or certified
mail, postage prepaid, as follows:
If to CDNOW;
CDnow, Inc,
0000 Xxxxxxxx Xxxxx
Xxxx Xxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx
Vice President and General Counsel
Phone: (000) 000-0000
Fax: (000) 000-0000
If to Party2:
_____________________________________
_____________________________________
_____________________________________
_____________________________________
Phone:_______________________________
Fax:_________________________________
4. If any provision of this Agreement is determined to be invalid or
unenforceable for any reason, in whole or in part, the remaining provisions of
this Agreement shall be unaffected thereby and shall remain in full force and
effect to the fullest extent permitted by applicable law. This Agreement may be
executed in several counterparts and execution copies may be exchanged by
facsimile, all of which together shall constitute one and the same agreement.
The parties' duly authorized representatives have executed this Agreement
as set forth below.
For and on behalf of CDNOW:
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxxx
-----------------------------
Title: V.P. & General Counsel
----------------------------
Date: 6/16/00
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For and on behalf of Party2:
By: /s/ Xxxxxxx Xxxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxxx
-----------------------------
Title: President & CEO, Bertelsmann
AG E-Commerce
----------------------------
Date: June 15, 2000
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