EXHIBIT 2
FORM OF STOCKHOLDERS AGREEMENT
INTRODUCTORY TABLE
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The following table identifies each of the EMusic stockholders who signed
Stockholders Agreements in the form of this Exhibit and indicates the total
number of shares of EMusic common stock covered by such stockholders'
Stockholders Agreements. The aggregate outstanding shares beneficially owned by
the identified individuals as of April 6, 2001, the date the Stockholders
Agreements were executed, represented approximately 17% of EMusic's outstanding
shares.
Stockholder Total Shares of Common Stock (1)
----------- --------------------------------
▇▇▇▇▇ ▇▇▇▇▇ (2) 558,000
Tor ▇▇▇▇▇▇ (3) 76,600
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (2) 793,200
▇▇▇▇▇ ▇▇▇▇▇ (4) 686,700
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (4) 433,761
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. (3)(4) 3,342,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (2) 540,000
▇▇▇▇▇▇ ▇. ▇▇▇▇ (3) 3,126,700
▇▇▇▇▇ ▇▇▇▇ ▇▇ (3) 348,900
▇▇▇▇▇ ▇. ▇▇▇▇ (4) 337,095
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (4) 1,106,100
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (4) 497,027
TOTAL: 11,976,083 SHARES
(1) Represents shares of common stock beneficially owned by the named
individual, as well as shares underlying options held by such person to
purchase shares of common stock. Options to purchase shares of common
stock may not be immediately exercisable. Further, there can be no
assurance that the holder of options that are immediately exercisable will
elect to exercise them. Excluding shares subject to issuance upon the
exercise of options, the aggregate number of shares held by the named
individuals is 7,466,303.
(2) Former Executive Officer
(3) Director
(4) Current Executive Officer
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of April 6,
2001, is made and entered into among UNIVERSAL MUSIC GROUP, INC., a California
corporation ("Parent"), UNIVERSAL ACQUISITION CORP., a Delaware corporation and
a wholly owned subsidiary of Parent ("Purchaser"), and each party listed under
the heading "STOCKHOLDER" on the signature page hereof (each a "Stockholder" and
collectively, the "Stockholders");
W I T N E S S E T H:
WHEREAS, as of the date hereof, each Stockholder owns beneficially and
of record the number of shares of common stock, par value $0.001 per share
("Company Common Stock"), of ▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation (the
"Company"), set forth opposite the Stockholder's name on Exhibit A hereto (the
total number of shares of Company Common Stock owned by the Stockholder, and any
other Company Common Stock that the Stockholder acquires, whether by means of
purchase, dividend, distribution, exercise of any stock options or otherwise,
prior to the termination of this Agreement, being collectively referred to as
the "Shares");
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company, Parent, and Purchaser are entering into an Agreement and
Plan of Merger of even date herewith (the "Merger Agreement"), which, upon the
terms and subject to the conditions set forth therein) provides for, among other
things, a tender offer (the "Offer") by Purchaser for the Company Common Stock
and the subsequent merger of Purchaser with and into the Company (the "Merger");
and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Parent and Purchaser have requested each Stockholder to agree, and in
order to induce Parent and Purchaser to enter into the Merger Agreement each
Stockholder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants, and agreements hereinafter set forth,
the parties hereto hereby agree as follows:
ARTICLE I
STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES
Each Stockholder, severally (and not jointly), hereby represents and
warrants to Parent and Purchaser with respect to itself and the Shares its holds
(as set forth on Exhibit A hereto) as follows:
Section 1.1 Due Organization and Authorization. Stockholder, if it is
a corporation or trust, is duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is formed. Stockholder possesses
the requisite power and authority to
execute, deliver, and perform this Agreement, to appoint Purchaser and Parent
(or any nominee thereof) as its Proxy (as defined below), and to consummate the
transactions contemplated hereby. This Agreement has been duly authorized and
validly executed and delivered by or on behalf of Stockholder and, assuming that
it has been duly authorized and validly executed and delivered by Parent and
Purchaser, constitutes a legal, valid, and binding obligation of Stockholder,
enforceable against Stockholder in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law). There is no beneficial owner of any of the Shares set forth
opposite Stockholder's name on Exhibit A hereto or other beneficiary or holder
of any other interest therein whose consent is required for the execution and
delivery of this Agreement or for the consummation by Stockholder of the
transactions contemplated hereby.
Section 1.2 No Conflicts; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Stockholder do not, and the
performance of this Agreement by Stockholder will not, (i) conflict with or
violate the charter documents or trust instruments of Stockholder, if
applicable, (ii) conflict with or violate any law applicable to Stockholder or
by which Stockholder or any of Stockholder's assets is bound or affected, or
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, acceleration, or cancellation of, or result in the
creation of a lien or encumbrance on any assets of Stockholder (including,
without limitation, the Shares) pursuant to any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, or other instrument or
obligation to which Stockholder is a party or by which Stockholder or any of its
assets are bound or affected.
(b) The execution and delivery of this Agreement by
Stockholder does not, and the performance of this Agreement by Stockholder will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority, domestic or
foreign, other than necessary filings under the Securities Exchange Act of 1934,
as amended.
Section 1.3 Title to Shares. Stockholder is the sole record and
beneficial owner of the Shares set forth opposite Stockholder's name on Exhibit
A hereto, free and clear of any pledge, lien, security interest, mortgage,
claim, proxy, voting restriction or other voting trust, agreement,
understanding, or arrangement of any kind, right of first refusal or other
limitation on disposition, adverse claim of ownership, or other encumbrance of
any kind, other than restrictions imposed by securities laws or pursuant to this
Agreement or the Merger Agreement. As of the date hereof, Stockholder does not
own beneficially or of record any other Shares.
Section 1.4 Information for Offer Documents and Proxy Statement. None
of the information relating to Stockholder and its affiliates provided by or on
behalf of Stockholder or its affiliates specifically for inclusion in the
various documents to be filed with the Securities and Exchange Commission
("SEC") in connection with the transactions contemplated by the Merger Agreement
(including, without limitation, the Schedule TO, Schedule 14D-9 and other
documents filed with the SEC and delivered to stockholders of the Company in
connection with the Offer (the "Offer Documents"), and, if applicable, the proxy
statement) will, at the respective times such documents are filed with the SEC
or are first
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published, sent or given to stockholders of the Company, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
ARTICLE II
STOCKHOLDERS' COVENANTS
Each Stockholder hereby severally (and not jointly) covenants to
Parent and Purchaser with respect to itself and the Shares its holds (as set
forth on Exhibit A hereto) as follows:
Section 2.1 Voting of Shares. Stockholder hereby agrees that from the
date hereof until the termination of the Agreement pursuant to Section 4.2
hereof (the "Term"), at any meeting of the stockholders of the Company however
called and in any action by written consent of the stockholders of the Company,
Stockholder shall vote its Shares (i) in favor of the Merger and the Merger
Agreement, (ii) against any Takeover Proposal (as defined in the Merger
Agreement) and against any proposal for action or agreement that would result in
a breach of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement or which is reasonably
likely to result in any of the Company's obligations under the Merger Agreement
not being fulfilled, any change in the directors of the Company (except as
contemplated by the Merger Agreement), any change in the present capitalization
of the Company or any amendment to the Company's corporate structure or
business, or any other action which could reasonably be expected to impede,
interfere with, delay, postpone or materially adversely affect the transactions
contemplated by this Agreement or the Merger Agreement or the likelihood of such
transactions being consummated and (iii) in favor of any other matter necessary
for consummation of the transactions contemplated by the Merger Agreement which
is considered at any such meeting of stockholders or in such consent, and in
connection therewith to execute any documents which are necessary or appropriate
in order to effectuate the foregoing, including the ability for Purchaser or its
nominee(s) to vote such Stockholder's Shares directly.
Section 2.2 Proxy. Stockholder hereby revokes all prior proxies or
powers of attorney with respect to any of its Shares. During the Term,
Stockholder hereby constitutes and appoints Parent and Purchaser, or any nominee
designated by Parent and Purchaser, with full power of substitution and
resubstitution at any time during the Term, as its true and lawful attorney and
proxy ("Proxy"), for and in its name, place, and stead, to demand that the
Secretary of the Company call a special meeting of the stockholders of the
Company for the purpose of considering any matter referred to in Section 2.1 and
to vote each Share held by Stockholder as its Proxy in respect of any such
matter, at every annual, special, adjourned, or postponed meeting of the
stockholders of the Company, including the right to sign its name (as
stockholder) to any consent, certificate, or other document relating to the
Company that the law of the State of Delaware might permit or require. THE
FOREGOING PROXY AND POWER OF ATTORNEY ARE IRREVOCABLE AND COUPLED WITH AN
INTEREST THROUGHOUT THE TERM. Stockholder will take such further action and
execute such other documents as may be necessary to effectuate the intent of
this Section 2.2.
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Section 2.3 Tender. Stockholder hereby agrees to tender in the Offer,
prior to the expiration date thereof (the "Expiration Date"), all Shares of
Company Common Stock owned beneficially and of record by it. Stockholder hereby
acknowledges and agrees that ▇▇▇▇▇▇'s and ▇▇▇▇▇▇▇▇▇'s obligation to accept for
payment and pay for such Shares in the Offer is subject to the terms and
conditions set forth in Annex A to the Merger Agreement.
Section 2.4 Restrictions on Transfer, Proxies and Non-Interference.
Stockholder hereby agrees, while this Agreement is in effect, and except as
contemplated hereby, not to (i) sell, transfer, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, pledge, encumbrance,
assignment or other disposition of, any of the Shares, (ii) grant any proxies,
deposit any Shares into a voting trust or enter into a voting agreement with
respect to any Shares, or (iii) take any action that would make any
representation or warranty of Stockholder contained herein untrue or incorrect
in any material respect or have the effect of preventing or disabling
Stockholder from performing Stockholder's obligations under this Agreement.
Section 2.5 Disclosure. Stockholder hereby authorizes Parent and
Purchaser to publish and disclose in the Offer Documents and, if approval of the
Company's stockholders is required under applicable law, the Company's proxy
statement (including all documents and schedules filed with the SEC), its
identity, its ownership securities of the Company, and the nature of its
commitments, arrangements, and understandings under this Agreement.
Section 2.6 No Solicitation. Stockholder covenants and agrees that,
during the Term, it shall not, directly or indirectly, solicit, initiate,
knowingly encourage, or take any other action designed to facilitate any
inquiries or the making of any proposal from any person (other than from Parent
or Purchaser) relating to (i) any acquisition of any Shares or (ii) any
transaction that constitutes a Takeover Proposal. Stockholder further covenants
and agrees that, during the Term, it shall not and shall not permit its agents
and other representatives to, participate in any discussions or negotiations
(except with Parent or Purchaser) regarding, or furnish to any person (other
than Parent or Purchaser) any information with respect to, or otherwise
cooperate in any way with, or assist or participate in or facilitate or
encourage, any effort or attempt by any person (other than Parent and Purchaser)
to make, any transaction (i) relating to any acquisition of any Shares, or (ii)
that may constitute a Takeover Proposal. Stockholder immediately shall cease and
cause to be terminated all existing discussions or negotiations of Stockholder
and its agents or other representatives with any person (other than Parent and
Purchaser) with respect to any of the foregoing. Stockholder shall notify Parent
and Purchaser promptly of any such proposal or offer, or any inquiry or contact
with any person with respect thereto, of which it becomes aware and shall, in
any such notice to Parent and Purchaser, indicate in reasonable detail the
identity of the person making such proposal, offer, inquiry, or contact and the
material terms and conditions of such proposal, offer, inquiry, or contact.
Notwithstanding any provision of this Section to the contrary and without
limiting the generality of Section 2.7, Stockholder may, and if any agent or
representative of Stockholder is a member of the Board of Directors of the
Company, such member of the Board of Directors of the Company may, in his or her
capacity as such director, take such actions, if any, as are permitted in such
capacity by Sections 1.3 or 5.2 of the Merger Agreement.
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Section 2.7 Stockholder Capacity. No person executing this Agreement
who is or becomes during the term hereof a director or officer of the Company
makes any agreement or understanding herein in his or her capacity as such
director or officer. Each Stockholder signs solely in its capacity as the record
holder and beneficial owner of such Stockholder's Shares and nothing herein
shall limit or affect any actions taken by any Stockholder in such Stockholder's
capacity as an officer or director of the Company. This Section 2.7 shall
survive termination of this Agreement.
ARTICLE III
COMPANY SECURITIES OPTION
Section 3.1 Grant of Option. In order to induce Parent and Purchaser
to enter into the Merger Agreement, each Stockholder hereby grants to Parent and
Purchaser an irrevocable option (the "Company Securities Option") to purchase
the Stockholder's Shares at a cash price per Share equal to the Offer Price as
defined in the Merger Agreement and used in this Agreement with the same
meaning) (the "Offer Price") equal to $ 0.57 in cash or any higher price paid or
to be paid by Parent or Purchaser pursuant to the Offer or the Merger or prior
to the termination of this Agreement pursuant to Section 4.2 below, but
excluding any price paid to any stockholder who exercises dissenters' rights in
connection with the Merger. The Company Securities Option shall be exercisable
pursuant to the terms of Section 3.2 below.
Section 3.2 Exercise of Company Securities Option. The Company
Securities Option (i) shall become exercisable, in whole but not in part, for
all Shares subject thereto (less any such Shares which Purchaser has accepted
for payment or paid for in the Offer) immediately after the expiration of the
Offer (or, if for any reasons later, immediately after the expiration of the
period, including any extensions thereof, during which shares of Company Common
Stock tendered pursuant to the Offer may by the terms of the Offer be accepted
or rejected) or, if later, the date on which there shall not be in effect any
preliminary or final injunction or other order issued by any court or
governmental, administrative, or regulatory agency or authority prohibiting the
exercise of the Company Securities Option pursuant to this Agreement, if, but
only if, Purchaser has accepted for payment all shares of Company Common Stock
tendered and not withdrawn in the Offer, and (ii) shall remain exercisable for a
period of sixty (60) days after the first such date on which the Company
Securities Option becomes exercisable pursuant to clause (i) of this sentence.
If the Company Securities Option does not become exercisable under this Section
3.2 due to (a) the termination or withdrawal of the Offer prior to the
Expiration Date (or the later date specified in the second parenthetical of this
Section 3.2), or (b) the failure of Purchaser to accept for payment all shares
of Company Common Stock tendered and not withdrawn in the Offer, it shall be
deemed to have expired. In the event that Parent or Purchaser wishes to exercise
the Company Securities Option, Parent or Purchaser, prior to the expiration
thereof, shall send a written notice to Stockholder identifying the place for
the closing of such purchase at least two (2) business days prior to such
closing.
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ARTICLE IV
MISCELLANEOUS
Section 4.1 Definitions. Terms used but not otherwise defined in this
Agreement, have the meanings assigned to such terms in the Merger Agreement.
Section 4.2 Termination. This Agreement shall terminate and be of no
further force and effect (i) by the written mutual consent of the parties
hereto, or (ii) automatically and without any required action of the parties
hereto upon the earlier to occur of (A) the Effective Time, (B) the closing of
the exercise of the Company Securities Option or the expiration of the Company
Securities Option, (C) the termination of the Merger Agreement in accordance
with its terms, or (D) the acceptance for payment of all of the Shares pursuant
to the Offer, whichever occurs earlier. The termination of this Agreement shall
not relieve any party hereto from any liability for any breach of this Agreement
prior to termination.
Section 4.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given (i) upon hand
delivery or (ii) upon confirmed delivery by a nationally recognized overnight
courier, to the following address or to such other address that a party hereto
might later specify by like notice:
(a) If to Parent or Purchaser, to:
Universal Music Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President, eLabs Division
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-1560
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
(b) If to a Stockholder, to its address set forth on Exhibit A
hereto.
Section 4.4 Severability. In the event that any provision in this
Agreement is held invalid, illegal, or unenforceable in a jurisdiction, such
provision shall be modified or deleted as to the jurisdiction involved but only
to the minimum extent necessary to render the same valid, legal, and
enforceable. The validity, legality, and enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby nor shall
the validity, legality, or enforceability of such provision be affected thereby
in any other jurisdiction.
Section 4.5 Entire Agreement. This Agreement and the Merger
Agreement, as it may be amended from time to time, constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties, or any of them, with respect thereto.
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Section 4.6 Assignment. No party may assign or delegate this
Agreement or any right, interest, or obligation hereunder; provided, that,
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Parent or Purchaser, in its sole discretion, may assign or delegate its rights
and obligations hereunder to any direct or indirect wholly-owned subsidiary of
Universal Studios, Inc.
Section 4.7 No Third-Party Beneficiaries. This Agreement shall be
binding upon, inure solely to the benefit of, and be enforceable by only the
parties hereto, their respective successors, and permitted assigns, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
person, other than the parties hereto, their respective successors, and
permitted assigns, any rights, remedies, obligations, or liabilities of any
nature whatsoever.
Section 4.8 Waiver of Appraisal Rights. Stockholder hereby waives any
rights of appraisal or rights to dissent from the Merger.
Section 4.9 Further Assurance. Each party hereto shall execute and
deliver such additional documents and take all such further action as may be
necessary or desirable to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Agreement.
Section 4.10 Certain Events. Stockholder agrees that this Agreement
and the obligations hereunder shall attach to Stockholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of such
Shares shall pass, whether by operation of law or otherwise. Notwithstanding any
transfer of Shares, the transferor shall remain liable for the performance of
all obligations under this Agreement.
Section 4.11 No Waiver. The failure of any party hereto to exercise
any right, power, or remedy provided under this Agreement or otherwise available
at law or in equity, the failure of any party hereto to insist upon compliance
by any other party hereto with its obligations hereunder, or the existence of
any custom or practice of the parties at variance with the terms hereof shall
not constitute a waiver by such party of its right to exercise any such or other
right, power, or remedy or to demand such compliance.
Section 4.12 Specific Performance. The parties hereto acknowledge that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or
otherwise breached. Accordingly, the parties agree that an aggrieved party shall
be entitled to injunctive relief to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court having
jurisdiction, this being in addition to any other right or remedy to which such
party may be entitled under this Agreement, at law, or in equity.
Section 4.13 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without effect
to provisions thereof relating to conflicts of law.
Section 4.14 Headings. The descriptive headings in this Agreement were
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
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Section 4.15 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 4.16 Shares Not Held Of Record. Every provision of this
Agreement which requires a Stockholder to take action with respect to such
Stockholder's Shares shall be interpreted to include a requirement that such
Stockholder cause such action to be taken by the owner of record of any Shares
beneficially owned by such Stockholder that such Stockholder does not hold of
record.
[Remainder of this page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have each caused this Agreement
to be executed in a manner sufficient to bind them as of the date first written
above.
UNIVERSAL MUSIC GROUP, INC.
By:_________________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Operating Officer
UNIVERSAL ACQUISITION CORP.
By:_________________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President, Secretary and Treasurer
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STOCKHOLDER
By:_____________________________________
Name:
Title:
Exhibit A