ex10-1.htm


    Exhibit
      10.2

     

    
      EXECUTION
        VERSION

       

      STOCKHOLDERS
        AGREEMENT

       

      This
        STOCKHOLDERS AGREEMENT dated as of November 5, 2007 (this “Stockholders
        Agreement”) is made and entered into by and among Entertainment
        Distribution Company, Inc., a Delaware corporation (the
“Company”), Chap-Cap Activist Partners Master Fund, Ltd. and
        Chap-Cap Partners II Master Fund, Ltd., Cayman Islands exempted companies
        (collectively, the “Funds”), Chapman Capital L.L.C., a Delaware
        limited liability company (“Chapman Capital”) and Robert L.
        Chapman, Jr., an individual (“Chapman,” and together with the
        Funds and Chapman Capital, each a “Stockholder” and,
        collectively, the “Stockholders”).

       

      WHEREAS,
        each Stockholder is the beneficial owner of the number of shares of common
        stock, par value $0.02 per share, of the Company (the “Common
        Stock”) listed next to such Stockholder’s name on SCHEDULE I hereto
        (the “Chapman Shares”); and

       

      WHEREAS,
        the Stockholders and the Company wish to provide for representation on the
        Board
        of Directors of the Company (the “Board of Directors”) for the
        Stockholders and certain agreements as to the Common Stock beneficially owned
        by
        the Stockholders, or otherwise as to which a Stockholder has voting power,
        all
        as hereinafter set forth.

       

      NOW,
        THEREFORE, in consideration of the mutual covenants and agreements set forth
        in
        this Stockholders Agreement, and for other good and valuable consideration,
        the
        receipt and sufficiency of which are hereby acknowledged, the parties hereto
        agree as follows:

       

      ARTICLE
        I.
DEFINITIONS

       

      1.1  DEFINITIONS.  Except
        as otherwise specifically indicated, the following terms have the following
        meanings for all purposes of this Stockholders Agreement:

       

      “Affiliate”
        has the meaning assigned thereto in Rule 12b-2 promulgated under the Exchange
        Act.

       

      “Beneficially
        Owns” (or comparable variations thereof) has the meaning set forth in
        Rule 13d-3 promulgated under the Exchange Act.

       

      “Board
        of Directors” is defined in the recitals hereof.

       

      “Bylaws”
        means the Restated Bylaws of the Company, as the same may be amended and
        restated from time to time.

       

      “Certificate
        of Incorporation” means the Restated Certificate of Incorporation of
        the Company, as the same may be amended and restated from time to
        time.

       

      “Chapman”
        is defined in the recitals hereof.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      “Chapman
        Capital” is defined in the recitals hereof.

       

      “Chapman
        Designee” means Chapman and any other individual subsequently
        designated from time to time pursuant to Section 2.1 by the Stockholders;
        provided, however, that no individual who is an officer, director,
        partner or stockholder of any competitor of the Company or any of its
        subsidiaries (other than a stockholder which owns less than 5% of the voting
        stock or power of a competitor which is a publicly-traded company) shall
        serve
        as a Chapman Designee.

       

      “Chapman
        Shares” is defined in the recitals hereof.

       

      “Commission”
        means the Securities and Exchange Commission.

       

      “Common
        Stock” is defined in the recitals hereof.

       

      “Company”
        is defined in the recitals hereof.

       

      “Convertible
        Securities” means securities of the Company which are convertible or
        exchangeable (whether presently convertible or exchangeable or not) into
        Voting
        Securities.

       

      “Equity
        Securities” means Voting Securities, Convertible Securities and Rights
        to Purchase Voting Securities.

       

      “Exchange
        Act” means the Securities Exchange Act of 1934, as amended, and the
        rules and regulations promulgated thereunder.

       

      “Funds”
        is defined in the recitals hereof.

       

      “Governmental
        or Regulatory Authority” means any court, tribunal, arbitrator,
        authority, agency, commission, official or other instrumentality of the United
        States, any foreign country or any domestic or foreign state, county, city
        or
        other political subdivision, or any stock exchange or market in which the
        Common
        Stock is listed for trading or traded.

       

      “Independent
        Director” means any member of the Board of Directors who is not
        excluded from qualification as an independent director (for all purposes
        other
        than service on the Company’s audit or compensation committees) by the
        enumerated per se exclusions from such qualification contained in the
        listing requirements of The Nasdaq Stock Market LLC for listed companies
        not
        utilizing the “controlled company” exception, and who satisfies all other
        requirements set forth in the definition of “independent director” under Rule
        4200 of The Nasdaq Stock Market LLC.

       

      “Joint
        Release” is defined in Section 7.1 hereof.

       

      “Outstanding
        Voting Securities” means at any time the then issued and outstanding
        Voting Securities (not including shares issuable upon the conversion of any
        Convertible Securities or upon the exercise of any Rights to Purchase Voting
        Securities).

       

       

      
        
          
          

        

        
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      “Person”
        means any individual, corporation, limited liability company, partnership,
        trust, other entity or group (within the meaning of Section 13(d)(3) of the
        Exchange Act).

       

      “Reports”
        is defined in Section 7.1 hereof.

       

      “Representatives”
        of any Person means such Person’s directors, officers, employees, legal,
        investment banking and financial advisors, accountants and any other agents
        and
        representatives of such entity.

       

      “Restricted
        Group” means, collectively, (i) each Stockholder; (ii) any and all
        Affiliates of any Stockholder and any Person as to which voting power over
        Voting Securities, directly or indirectly, is controlled or shared by a
        Stockholder; (iii) the then current officers, employees, directors or managing
        members of any Person described in clauses (i) or (ii) above; (iv) with respect
        to any Person described in clauses (i) or (ii) above who is an individual,
        (a)
        any and all immediate family members of such Person, (b) the heirs, executors,
        personal representatives and administrators of any of the foregoing Persons,
        (c)
        any and all trusts established for the benefit of any of the foregoing Persons
        and (d) any and all charitable foundations the investment decisions of which
        are
        controlled by any of the foregoing Persons; and (v) the other members of
        any and
        all groups (within the meaning of Section 13(d)(3) of the Exchange Act) of
        which
        any Stockholder or any Person described in clauses (i) or (ii) above is a
        member.

       

      “Rights
        to Purchase Voting Securities” means options and rights issued by the
        Company (whether presently exercisable or not) to purchase Voting Securities
        or
        Convertible Voting Securities.

       

      “Schedule
        13D Transaction” means any action or transaction described in any of
        paragraphs (a) through (j) of Item 4 of Schedule 13D promulgated by the
        Commission, provided, that, “Schedule 13D Transaction” shall not
        include any transaction described in paragraph (a) of Item 4 of Schedule
        13D if,
        after taking into account all such contemporaneous transactions, the aggregate
        beneficial ownership of the Stockholders (i) does not exceed 20% of the total
        outstanding Voting Securities of the Company (calculated in accordance with
        Item
        5 of Schedule 13D) and (ii) is not less than 5% of the total outstanding
        Voting
        Securities of the Company (calculated in accordance with Item 5 of Schedule
        13D).

       

      “Stockholder”
        or “Stockholders” is defined in the recitals
        hereof.

       

      “Stockholders
        Agreement” is defined in the recitals hereof.

       

      “Termination
        Date” is defined in Section 7.2 hereof.

       

      “Termination
        Event” means the earliest of: (i) the date of the annual stockholder
        meeting of the Company to be held during 2009; (ii) the first date on which
        there shall be no Chapman Designee then in office as a member of the Board
        of
        Directors and the Stockholders shall not have named a successor to the Chapman
        Designee in accordance with Section 2.1(c) hereof; (iii) the first date on
        which
        (a) any member of the Restricted Group engages in any of the activities
        prohibited by Article IV or breaches any other provision of this Agreement,
        in
        each

       

       

      
        
          
          

        

        
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      case,
        if
        such violation is not wholly cured within three (3) business days following
        written notice thereof by the Company, (b) any member of the Restricted Group
        engages in a Schedule 13D Transaction, or (c) the filing of an amendment
        to the
        Schedule 13D previously filed by certain of the Stockholders with the Commission
        indicating that any member of the Restricted Group has a plan or proposal
        to
        engage in, or that it has engaged in, a Schedule 13D Transaction (other than
        an
        amendment filed following the execution and delivery of this Stockholders
        Agreement announcing such execution and delivery or subsequent filings
        necessitated by the terms of this Agreement and actions by the parties
        hereunder); (iv) the first date on which any member of the Restricted Group
        (a)
        sells, transfers or otherwise disposes of any or all of the Voting Securities
        such that the Restricted Groups’ aggregate beneficial ownership of Voting
        Securities is reduced to less than 5% of the total outstanding Voting Securities
        of the Company (calculated in accordance with Item 5 of Schedule 13D) or
        (b) acquires any additional Voting Securities such that the Restricted
        Groups’ aggregate beneficial ownership of Voting Securities is increased to
        greater than 20% of the total outstanding Voting Securities of the Company
        (calculated in accordance with Item 5 of Schedule 13D); or (v) the first
        date on
        which (a) the Company is no longer required to file periodic reports with
        the
        Commission pursuant to the requirements of Sections 13 or 15 of the Exchange
        Act
        or (b) any person or group of related persons (within the meaning of Section
        13(d)(3) of the Exchange Act) shall become the
        beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of shares
        representing more than 50% of the aggregate ordinary voting power represented
        by
        the Company’s issued and outstanding voting stock.

       

      “Voting
        Securities” means the Common Stock and any other securities of the
        Company of any kind or class having the power generally to vote for the election
        of directors.

       

      ARTICLE
        II.
BOARD
        OF DIRECTORS

       

      2.1  COMPOSITION
        OF BOARD OF DIRECTORS.

       

      (a)  No
        later
        than November 5, 2007, the Board of Directors shall, pursuant to the powers
        granted to it under the Bylaws, appoint Chapman as the initial Chapman Designee
        to the appropriate class of the Board of Directors, determined in accordance
        with the Certificate of Incorporation, to fill a current vacancy on the Board
        of
        Directors and to serve in such capacity from such date of election through the
        Termination Date.

       

      (b)  Until
        the
        Termination Date, the Board of Directors shall, cause the nomination for
        election or appointment of the Chapman Designee to the Board of Directors,
        including as necessary by nominating the Chapman Designee to stand for election
        as a director of the Company in accordance with the Company’s procedures for
        nomination of directors as provided for in its Bylaws, recommend such election
        and solicit proxies in respect thereof, and vote the shares of Common Stock
        represented by all proxies granted by stockholders in connection with the
        solicitation of proxies by the Board of Directors in favor of the Chapman
        Designee at any meeting where such election is considered, except for such
        proxies that specifically indicate a vote to withhold authority with respect
        to
        the Chapman Designee.

       

      (c)  Until
        the
        Termination Date, the Board of Directors shall cause any vacancy created
        on the
        Board of Directors by reason of the death, resignation or removal of the
        


       

      
        
          
          

        

        
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      then
        serving Chapman Designee to be filled promptly by a successor Chapman Designee
        named by the Stockholders as follows:

       

      (i)  In
        the
        event of the death or disability of a Chapman Designee, or following the
        termination of employment of a Chapman Designee with all of the Stockholders,
        the Stockholders shall be entitled to designate a replacement for the vacancy
        left by the death or disability, or termination of such full-time employment,
        of
        such Chapman Designee by written notice delivered to the Company to serve
        on the
        Board of Directors in accordance with Section 7.4 of this Agreement. Such
        subsequently designated Chapman Designee shall be an individual of high personal
        integrity and ethics, relevant expertise and professional experience and
        such
        other qualifications, as determined by the nominating committee of the Board
        of
        Directors. Such subsequent nomination shall be promptly reviewed by and subject
        to the approval of the nominating committee of the Board of Directors and
        thereafter such replacement shall be promptly elected or appointed to the
        Board
        of Directors, provided such approval of the nominating committee and of the
        Board of Directors shall not be unreasonably withheld or delayed.

       

      (ii)  The
        Stockholders shall provide the information requested pursuant to Section
        2.2 to
        the Company and the Board of Directors regarding any substitute Chapman Designee
        permitted under this Section 2.1(c).

       

      (d)  While
        serving on the Board of Directors and any committee thereof, the Chapman
        Designee shall be entitled to all the rights and privileges of the other
        directors and committee members, including, without limitation, access to
        the
        Company’s outside advisors; provided, that, the Chapman Designee
        shall not be entitled to participate in or observe, and shall upon the good
        faith request of the Board of Directors or any such committee recuse himself
        or
        herself from, any meeting or portion thereof at which the Board of Directors
        or
        any such committee is evaluating and/or taking action with respect to (x)
        the
        ownership of Voting Securities specifically by any member of the Restricted
        Group, (y) the exercise of any of the Company’s rights or enforcement of any of
        the obligations of any member of the Restricted Group under this Stockholders
        Agreement or (z) any transaction proposed by, or with, or any other matter
        related specifically to, any member of the Restricted Group. The Board of
        Directors or any such committee shall be entitled to take such actions as
        it
        shall deem reasonably necessary or appropriate to carry out the provisions
        of
        the preceding sentence.

       

      (e)  The
        Stockholders shall no longer be entitled to have a Chapman Designee serve
        on the
        Board of Directors from and after the Termination Date, at which time the
        Stockholders will cause the Chapman Designee to immediately resign from the
        Board of Directors.  In furtherance thereof, the parties agree that
        this Stockholders Agreement shall constitute the Chapman Designee’s resignation
        upon the occurrence of the Termination Date and such resignation shall
        automatically be effective on the Termination Date without any further action
        by
        any party.

       

      2.2  INFORMATION
        ABOUT THE CHAPMAN DESIGNEE.  The Stockholders shall promptly provide
        to the Company, as the Company may from time to time reasonably request,
        information regarding the Chapman Designee for purposes of determining whether
        the Chapman Designee is an Independent Director or for inclusion in any form,
        report, schedule, 

      
 

       

      
        
          
          

        

        
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      registration
        statement, definitive proxy statement or other documents required to be filed
        by
        the Company with the Commission or any other Governmental or Regulatory
        Authority. 

       

      2.3  BOARD
        AND
        COMPANY POLICIES.  It shall be a precondition to the right of the
        initial Chapman Designee, and his respective successors, to attend any meeting
        of the Board of Directors or committee thereof that such individual shall
        have
        agreed, in the same manner as each other member of the Board of Directors,
        to
        abide by the policies of the Board of Directors and the committees thereof
        (including, without limitation, the Company’s Code of Ethics) and any policies
        of the Company applicable to members of the Board of Directors (including,
        without limitation, any insider trading policy).

       

      ARTICLE
        III.
VOTING
        OF SHARES

       

      3.1  VOTING
        OF
        SHARES BY THE RESTRICTED GROUP.  Until the Termination Date, at each
        meeting of stockholders of the Company held for the purpose of electing any
        member of the Board of Directors, the Stockholders shall cause all Voting
        Securities beneficially owned by any member of the Restricted Group to be
        present at such meeting for purposes of establishing a quorum and to be voted
        (x) for the nominees recommended by the Board of Directors (provided such
        nominees include the Chapman Designee as necessary to continue the Chapman
        Designee’s position on the Board of Directors) and (y) on all other proposals of
        the Board of Directors not covered by clause (z) below, as such member of
        the
        Restricted Group determines is appropriate, and (z) in accordance with the
        recommendation of the Board of Directors on any proposals of any other
        stockholder of the Company who is also proposing one or more nominees for
        election as director in opposition to the nominees of the Board of Directors
        at
        such meeting.  No later than five business days prior to each such
        meeting of stockholders, the Stockholders shall cause all Voting Securities
        beneficially owned by any member of the Restricted Group to be voted in
        accordance with this Section 3.1. No Stockholder shall revoke or change any
        vote
        in connection with any such meeting of stockholders unless such revocation
        or
        change is required or permitted in accordance with the first sentence of
        this
        Section 3.1.

       

      ARTICLE
        IV.
STANDSTILL
        AND OTHER AGREEMENTS

       

      4.1  STANDSTILL.  From
        the date hereof through the Termination Date, no member of the Restricted
        Group
        will, directly or indirectly, (i) engage in any “solicitation” of “proxies” (as
        such terms are used in the proxy rules promulgated under the Exchange Act,
        but
        disregarding the exclusion in clause (iv) of Rule 14a-1(l)(2) but including
        any
        exempt solicitation pursuant to Rule 14a-2(b)(1) or (2)), submit any proposal
        (including nominations of director candidates, except as provided in Section
        2.1) for consideration at any annual or special meeting of the stockholders
        of
        the Company (including pursuant to Rule 14a-8 promulgated under the Exchange
        Act), (ii) form, join or in any way participate in a “group” (as defined in
        Section 13(d)(3) of the Exchange Act) with respect to any Equity Securities
        which proposes to take any action or enter into any transaction that is
        prohibited by this Section, nor will they provide any financing to any
such
        group for any such purpose, or (iii) engage in any Schedule 13D Transaction
        or
        file any amendment to the Schedule 13D previously filed by the Stockholders
        with
        the Commission indicating that any member of the Restricted Group has a plan
        or
        proposal to engage in, or that it 


       

       

      
        
          
          

        

        
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      has
        engaged in, a Schedule 13D Transaction (other than an amendment filed following
        the execution and delivery of this Stockholders Agreement announcing such
        execution and delivery or subsequent filings necessitated by the terms of
        this
        Agreement and actions by the parties thereunder); provided, that,
        the foregoing prohibition shall not impair or affect the exercise by the
        Chapman
        Designee of his or her fiduciary duties as a director of the Company in his
        or
        her capacity as such or prohibit filings believed in good faith to be required
        by law as a consequence thereof; and provided, further, that any
        such filings shall be provided to the Company in advance of filing and the
        Company shall be provided at least two days to comment thereon (it being
        understood that such filings may be required to be filed with the Commission
        promptly). 

       

      4.2  NON-DISPARAGEMENT.  Except
        as set forth in Section 7.1, from the date hereof through the Termination
        Date,
        (A) all members of the Restricted Group shall at all times refrain from taking
        any action or making publicly any statement (whether orally or in writing)
        that
        denigrates, disparages or defames the goodwill or reputation of the Company,
        its
        Affiliates or any of their respective current of former officers, directors,
        employees, partners or securityholders and (B) no member of the Restricted
        Group
        shall make any negative statement to third parties (whether orally or in
        writing
        and, including without limitation, in any Schedule 13D filing with the
        Commission) regarding the Company, its Affiliates or any of their respective
        current of former officers, directors, employees, partners or
        securityholders.

       

      4.3  FIDUCIARY
        AND OTHER DUTIES.  The Chapman Designee acknowledges his obligations
        under Section 2.4 of this Agreement are in addition to the fiduciary duties
        and
        common law duties of trust and confidentiality under which every member of
        the
        Board of Directors of a Delaware company operates.

       

      ARTICLE
        V.
REPRESENTATIONS
        AND WARRANTIES OF THE STOCKHOLDERS 

       

      Each
        Stockholder hereby represents and
        warrants to the Company as follows:

      


      5.1  AUTHORITY.  This
        Stockholders Agreement has been duly and validly executed and delivered by
        each
        Stockholder and constitutes a legal, valid and binding obligation of such
        Stockholder enforceable against such Stockholder in accordance with its terms,
        except as enforceability may be limited by bankruptcy, insolvency,
        reorganization, moratorium or other similar laws affecting the enforcement
        of
        creditors’ rights generally and by general equitable principles (regardless of
        whether such enforceability is considered in a proceeding in equity or at
        law).

       

      5.2  NO
        CONFLICTS.  The execution and delivery by each Stockholder of this
        Stockholders Agreement do not, and the performance by each Stockholder of
        such
        Stockholder’s obligations under this Stockholders Agreement and the consummation
        of the transactions contemplated hereby will not: 

       

      (a)  conflict
        with or result in a violation or breach of any term or provision of any law,
        statute, rule or regulation or any order, judgment or decree of any Governmental
        or Regulatory Authority applicable to such Stockholder or any of such
        Stockholder’s properties or assets; or

       

       

      
        
          
          

        

        
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      (b)  (i)
        conflict with or result in a violation or breach of, (ii) constitute (with
        or
        without notice or lapse of time or both) a default under, (iii) require such
        Stockholder to obtain any consent, approval or action of, make any filing
        with
        or give any notice to any Person as a result or under the terms of, or (iv)
        result in the creation or imposition of any lien upon any of such Stockholder’s
        properties or assets under, any contract, agreement, plan, permit or license
        to
        which such Stockholder is a party.

       

      5.3  GOVERNMENTAL
        APPROVALS AND FILINGS.  No consent, approval or action of, filing with
        or notice to any Governmental or Regulatory Authority on the part of any
        Stockholder is required in connection with the execution and delivery of
        this
        Stockholders Agreement, other than any filing with the Commission required
        in
        connection with the execution and/or delivery of this Stockholders Agreement
        or
        the joint press release referred to in Section 7.1. 

       

      5.4  CHAPMAN
        SHARES.  Except for the Chapman Shares listed on
Schedule I hereto, the members of the Restricted Group do not
        beneficially own any shares of Common Stock.

       

      ARTICLE
        VI.
REPRESENTATIONS
        AND WARRANTIES OF THE COMPANY 

       

      The
        Company hereby represents and
        warrants to the Stockholders as follows:

      


      6.1  INCORPORATION.  The
        Company is a corporation duly incorporated, validly existing and in good
        standing under the laws of the State of Delaware.  The Company has the
        requisite corporate power and authority to execute and deliver this Stockholders
        Agreement, to perform its obligations hereunder and to consummate the
        transactions contemplated hereby. 

       

      6.2  AUTHORITY.  The
        execution and delivery by the Company of this Stockholders Agreement, and
        the
        performance by the Company of its obligations hereunder, have been duly and
        validly authorized by the Board of Directors, no other corporate action on
        the
        part of the Company or its stockholders being necessary.  This
        Stockholders Agreement has been duly and validly executed and delivered by
        the
        Company and constitutes a legal, valid and binding obligation of the Company
        in
        accordance with its terms, except as enforceability may be limited by
        bankruptcy, insolvency, reorganization, moratorium or other similar laws
        affecting the enforcement of creditors’ rights generally and by general
        equitable principles (regardless of whether such enforceability is considered
        in
        a proceeding in equity or at law). 

       

      6.3  NO
        CONFLICTS.  The execution and delivery by the Company of this
        Stockholders Agreement do not, and the performance by the Company of its
        obligations under this Stockholders  Agreement and the consummation of
        the transactions contemplated hereby will not:

       

      (a)  conflict
        with or result in a violation or breach of any of the terms, conditions or
        provisions of the Certificate of Incorporation or Bylaws;

       

       

      
        
          
          

        

        
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      (a)  conflict
        with or result in a violation or breach of any term or provision of any law,
        statute, rule or regulation or any order, judgment or decree of any Governmental
        or Regulatory Authority applicable to the Company or any of its properties
        or
        asset; or

       

      (b)  (i)
        conflict with or result in a violation or breach of, (ii) constitute (with
        or
        without notice or lapse of time or both) a default under, (iii) require the
        Company to obtain any consent, approval or action of, make any filing with
        or
        give any notice to any Person as a result or under the terms of or (iv) result
        in the creation or imposition of any lien upon the Company or any of its
        properties or assets under, any contract, agreement, plan, permit or license
        to
        which the Company is a party.

       

      6.4  GOVERNMENTAL
        APPROVALS AND FILINGS.  No consent, approval or action of, filing with
        or notice to any Governmental or Regulatory Authority on the part of the
        Company
        is required in connection with the execution and delivery of this Stockholders
        Agreement, other than any filing with the Commission required in connection
        with
        the execution and/or delivery of this Stockholders Agreement or the joint
        press
        release referred to in Section 7.1. 

       

      ARTICLE
        VII.
GENERAL
        PROVISIONS

       

      7.1  PUBLICITY.  The
        Company and Chapman Capital will cooperate with each other in connection
        with
        the preparation and filing with the Commission of the reports and any other
        filings required of the Company and the Restricted Group in connection with
        the
        execution and delivery of this Stockholders Agreement (the
“Reports”), and no member of the Restricted Group shall submit
        or file any Reports with the Commission without the prior written approval
        of
        the Company (such approval not to be unreasonably
        withheld).  Following the execution of this Stockholders Agreement,
        Chapman Capital and the Company will issue a joint press release announcing
        the
        execution and delivery of this Stockholders Agreement in the form attached
        hereto as Exhibit A (the “Joint
        Release”).  Other than with respect to the Reports and the
        Joint Release, no member of the Restricted Group shall (a) make any filing
        with,
        or submit any documents to, the Commission or (b) issue any public announcement
        or press release, regarding the subject matter of this Stockholders Agreement
        or
        with respect to the Company, its Affiliates or any of their respective current
        of former officers, directors, employees, partners or securityholders, without
        the prior written approval of the Company (such approval not to be unreasonably
        withheld); provided, however, the Company’s prior written approval
        shall not be required for (i) the filing with the Commission of a Form 4,
        Form 5
        or an amendment to the Schedule 13D previously filed by certain of the
        Stockholders, in each case, that is required to be filed to report a transaction
        which is expressly permitted by this Stockholders Agreement and (ii) any
        filing or submission to the Commission or the issuance of any public
        announcement or press release, if the contents thereof are limited to the
        information included in the Joint Release.

       

      7.2  TERMINATION

       

      This
        Stockholders Agreement shall terminate and be of no further effect upon the
        earliest occurrence of a Termination Date (as defined below).

       

       

      
        
          
          

        

        
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      (a)  Upon
        the
        occurrence of a Termination Event contemplated by clauses (i) or (ii) of
        the
        definition thereof, this Stockholders Agreement shall automatically terminate
        and be of no further effect without further action by any party (such date
        shall
        be a “Termination Date”).

       

      (b)  Upon
        the
        occurrence of a Termination Event contemplated by clauses (iii), (iv) or
        (v) of
        the definition thereof, the Company shall cause the Board of Directors to
        meet
        within four weeks after becoming aware of the occurrence of such Termination
        Event to determine whether to waive such Termination Event or to terminate
        this
        Stockholders Agreement.  Promptly following the Board of Directors’
determination, the Company shall provide prompt written notice to the Restricted
        Group of (y) the Board of Directors’ determination to waive the Termination
        Event, in which case this Stockholders Agreement shall continue in full force
        and effect or (z) the Board of Directors’ determination to terminate this
        Stockholders Agreement, in which case this Stockholders Agreement shall
        automatically terminate and be of no further effect without further action
        by
        any party (the date of such notice shall be a “Termination
        Date”).  For the avoidance of doubt, the parties acknowledge
        that the approval of a majority of the members of the Board of Directors,
        other
        than the Chapman Designee, shall be sufficient for the Board of Directors
        to act
        pursuant to this Section 7.2(b).

       

      7.3  AMENDMENT
        AND WAIVER.

       

      (a)  This
        Stockholders Agreement may be amended, supplemented or modified only by a
        written instrument duly executed by or on behalf of each party
        hereto.

       

      (b)  Neither
        this Stockholders Agreement nor any term hereof may be waived other than
        by a
        written instrument. No waiver by any party of any term or condition of this
        Stockholders Agreement, in any one or more instances, shall be deemed to
        be or
        construed as a waiver of the same or any other term or condition of this
        Stockholders Agreement on any future occasion. Failure by either party to
        enforce any term of this Stockholders Agreement will not be deemed a waiver
        of
        future enforcement of that or any other term in this Stockholders Agreement
        or
        any other agreement that may be in place between the
        parties. All remedies, either under this Stockholders
        Agreement or by law or otherwise afforded, will be cumulative and not
        alternative.

       

      7.4  NOTICES.

       

      (a)  For
        all
        purposes of this Stockholders Agreement, the Company shall not be required
        to
        recognize any notice purportedly delivered by or on behalf of any Stockholder
        or
        any other member of the Restricted Group unless such notice is delivered
        to the
        Company by or on behalf of Chapman Capital.

       

      (b)  All
        notices, requests and other communications hereunder must be in writing and
        will
        be deemed to have been duly given only if delivered personally or by facsimile
        transmission
        or by reputable overnight courier (postage prepaid) to the parties at the
        following addresses or facsimile numbers:

       

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      If
        to any Stockholder or other member
        of the Restricted Group, to:

      


      Chapman
        Capital L.L.C.

      1007
        N. Sepulveda Blvd.
        #129

      Manhattan
        Beach, California
        90267

      Facsimile
        No.:  (310)
        373-0443

      Email:
        chapman@chapcap.com

      Attn:  Robert
        L. Chapman,
        Jr.

      


      


      If
        to the Company, to:

      


      Entertainment
        Distribution Company,
        Inc.

      825
        8th Avenue

      23rd
        Floor

      New
        York, New York 10089

      Facsimile
        No.:  (212)
        333-8544

      Email:
        jordan.copland@edcllc.com

      Attn:  Jordan
        M.
        Copland

      


      with
        a copy to:

      


      Paul,
        Hastings, Janofsky & Walker
        LLP

      600
        Peachtree Street, N.E.

      Suite
        2400

      Atlanta,
        Georgia 30308

      Facsimile
        No.:  (404)
        815-2424

      Email:
        elizabethnoe@paulhastings.com

      Attn:  Elizabeth
        H. Noe,
        Esq.

      


      All
        such
        notices, requests and other communications will (i) if delivered personally
        to
        the address as provided in this Section, be deemed given upon delivery, (ii)
        if
        delivered by facsimile transmission to the facsimile number as provided in
        this
        Section, be deemed given upon receipt, and (iii) if delivered by overnight
        courier in the manner described above to the address as provided in this
        Section, be deemed given upon receipt (in each case regardless of whether
        such
        notice, request or other communication is received by any other person to
        whom a
        copy of such notice, request or other communication is to be delivered pursuant
        to this Section). Any party from time to time may change its address, facsimile
        number or other information for the purpose of notices to that party by giving
        notice specifying such change to the other parties hereto.

      


      7.5  ENTIRE
        AGREEMENT.  This Stockholders Agreement and the Schedule hereto
        supersede all prior discussions and agreements among the parties hereto with
        respect to the subject matter hereof, and contains the sole and entire agreement
        among the parties hereto with respect to the subject matter hereof.

       

      7.6  NO
        THIRD
        PARTY BENEFICIARY.  The terms and provisions of this Stockholders
        Agreement are intended solely for the benefit of each party hereto and the
        other




      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

        members of the Restricted Group, and it is not the
          intention
          of the parties to confer third-party beneficiary rights upon any other
          Person.

      

       

      7.7  NO
        ASSIGNMENT; BINDING EFFECT.  Neither this Stockholders Agreement nor
        any right, interest or obligation hereunder may be assigned by any parties
        hereto without the prior written consent of the other party hereto and any
        attempt to do so will be void. Subject to the preceding sentence, this
        Stockholders Agreement is binding upon, inures to the benefit of and is
        enforceable by the parties hereto and their respective successors and assigns
        and legal representatives.

       

      7.8  SPECIFIC
        PERFORMANCE.  The parties acknowledge that money damages are not an
        adequate remedy for violations of any provision of this Stockholders Agreement
        and that any party may, in such party’s sole discretion, apply to a court of
        competent jurisdiction for specific performance for injunctive or such other
        relief as such court may deem just and proper in order to enforce any such
        provision or prevent any violation hereof and, to the extent permitted by
        applicable law, each party waives any objection to the imposition of such
        relief.

       

      7.9  HEADINGS.  The
        headings used in this Stockholders Agreement have been inserted for convenience
        of reference only and do not define or limit the provisions hereof.

       

      7.10  INVALID
        PROVISIONS.  If any provision of this Stockholders Agreement is held
        to be illegal, invalid or unenforceable under any present or future law,
        and if
        the intended rights of any party hereto under this Stockholders Agreement
        will
        not be forfeited in any material respect as a result thereof (i) such provision
        will be fully severable, (ii) this Stockholders Agreement will be construed and
        enforced as if such illegal, invalid or unenforceable provision had never
        comprised a part hereof and (iii) the remaining provisions of this Stockholders
        Agreement will remain in full force and effect and will not be affected by
        the
        illegal, invalid or unenforceable provision or by its severance
        herefrom.

       

      7.11  GOVERNING
        LAW.  This Stockholders Agreement shall be governed by and construed
        in accordance with the laws of the State of New York applicable to a contract
        executed and performed in such State, without giving effect to the conflicts
        of
        laws principles thereof.

       

      7.12  CONSENT
        TO JURISDICTION AND SERVICE OF PROCESS.  Each party hereby irrevocably
        submits to the exclusive jurisdiction of any state or federal court of competent
        jurisdiction in the State of New York in any action, suit or proceeding arising
        in connection with this Stockholders Agreement, agrees that any such action,
        suit or proceeding shall be brought only in such courts (and waives any
        objection based on forum non conveniens or any other objection to venue
        therein to the extent permitted by law), and agrees to delivery of service
        of
        process by any of the methods by which notices may be given pursuant to Section
        7.4, with such service being deemed given as provided in such Section;
provided, however, that such consent to jurisdiction is solely for
        the purpose referred to in this Section 7.12 and shall not be deemed to be
        a
        general submission to the jurisdiction of said courts or in the State of
        New
        York other than for such purpose. Nothing herein shall affect the right of
        any
        party to serve process in any other manner
        permitted by law or to commence legal proceedings or otherwise proceed against
        the other in any other jurisdiction.

       

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      7.13  COUNTERPARTS.  This
        Stockholders Agreement may be executed in any number of counterparts, each
        of
        which will be deemed an original, but all of which together will constitute
        one
        and the same instrument. 

       

       

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF, each party hereto
        has signed this Stockholders Agreement, or caused this Stockholders Agreement
        to
        be signed on its behalf, as of the date first above written.

      


      
        	 	
                ENTERTAINMENT
                  DISTRIBUTION COMPANY, INC.

              
	 	 
	 	
                By:  _/s/
                  Clarke H.
                  Bailey           
                  

                Name:
                  Clarke H. Bailey

                Title:
                  Chairman of the Board

              
	 	 
	 	
                CHAP-CAP
                  ACTIVIST PARTNERS MASTER FUND, LTD.

              
	 	 
	 	
                By:  _/s/
                  Robert L. Chapman, Jr.   

                Name:
                  Robert L. Chapman, Jr.

                Title:
                  Managing Member of the Investment Manager

              
	 	 
	 	
                CHAP-CAP
                  PARTNERS II MASTER FUND, LTD.

              
	 	 
	 	
                By:  _/s/
                  Robert L. Chapman, Jr.   

                Name:
                  Robert L. Chapman, Jr.

                Title:
                  Managing Member of the Investment Manager

              
	 	 
	 	
                CHAPMAN
                  CAPITAL L.L.C.

              
	 	 
	 	
                By:  _/s/
                  Robert L. Chapman, Jr.   

                Name:
                  Robert L. Chapman, Jr.

                Title:
                  Managing Member

              
	 	 
	 	
                ROBERT
                  L. CHAPMAN, JR.

              
	 	 
	 	
                _/s/
                  Robert L. Chapman, Jr.    

                 

              
	 	 
	 	 


      

       

       

      
 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      SCHEDULE
        I

      


      


      SHARES
        OF
        COMMON STOCK BENEFICIALLY OWNED BY THE STOCKHOLDERS

      


      


      
        	
                STOCKHOLDER

              	
                NUMBER

              
	
                Robert
                  L. Chapman, Jr.*

              	
                9,053,680

              
	
                Chapman
                  Capital L.L.C.*

              	
                9,053,680

              
	
                Chap-Cap
                  Activist Partners Master Fund, Ltd.

              	
                5,534,814

              
	
                Chap-Cap
                  Partners II Master Fund, Ltd.

              	
                3,518,866

              


      

      


      *
        The
        indicated Stockholders beneficially own the shares indicated by virtue of
        their
        control of the other Stockholders.

       

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      EXHIBIT
        A

      


      JOINT
        RELEASE