Document:

ex10-1.htm

    Exhibit
      10.1

     

    
      MUTUAL
        SEPARATION AGREEMENT

      

      THIS
        MUTUAL SEPARATION AGREEMENT (this
“Agreement”), is entered into by and among James Caparro (hereinafter, the
“Executive”), Entertainment Distribution Company, Inc. (formerly, Glenayre
        Technologies, Inc.), a Delaware corporation (the “Company”), Glenayre
        Electronics, Inc., a Delaware corporation and subsidiary of the Company (“GEI”),
        and Entertainment Distribution Company, LLC, a Delaware limited liability
        company and subsidiary of the Company (“LLC”).

      

      WHEREAS,
        GEI, LLC and
        Executive are parties to that certain Letter Agreement dated May 9, 2005
        regarding Executive’s employment by LLC, as amended by that certain Letter
        Agreement dated November 6, 2006 among the Company, GEI and Executive
        regarding Executive’s employment by the Company and GEI (as so amended, the
“Employment Agreement”);

      

      WHEREAS,
        the Executive
        is currently employed as (i) President and Chief Executive Officer of the
        Company and serves as a Director on the Company’s board of directors (the
“Board”), (ii) President and Chief Executive Officer of GEI, (iii) President and
        Chief Executive Officer of LLC and serves as a Director on LLC’s board of
        directors (the “LLC Board”), and (iv) serves as a director of Entertainment
        Distribution Holding GMBH and/or Entertainment Distribution Company GMBH
        (collectively, “GMBH”);

      

      WHEREAS,
        the Company,
        GEI and LLC  together with Executive have mutually agreed that it is
        in their respective best interests to bring the employment of the Executive
        to
        an end, in accordance with the term and conditions of this Agreement;
        and

      

      WHEREAS,
        the parties
        wish to set forth their mutual understanding concerning Executive’s
        (i) separation from employment with each of the Company, GEI and the LLC
        and (ii) continuing role as a non-executive member of the LLC
        Board,  including with respect to the continuation of compensation,
        benefits and the other matters set forth herein.

      

      NOW,
        THEREFORE, in
        consideration of the foregoing and of the mutual covenants and agreements
        set
        forth herein, and other good and valuable consideration, the receipt and
        sufficiency of which are hereby acknowledged, the parties agree as
        follows:

      

      1.  Effective
        Date.  The Executive’s last day of
        employment as President and Chief Executive Officer of each of the Company,
        GEI
        and LLC shall be November 5, 2007 (the “Effective Date”).  On the
        Effective Date, Executive shall also cease to serve as a member of the Board
        and
        as a director of GMBH and in any other capacity with the Company’s subsidiaries
        and affiliates, except as set forth in Section 2 of this Agreement.

      

      2.  Role
        at LLC.  From and after the Effective
        Date and until termination of this Agreement pursuant to Section 7 hereof,
        Executive shall continue on the LLC Board serving as non-executive
        Chairman.  During the term hereof, Executive shall devote his business
        attention and ability to the performance of his duties as non-executive
        Chairman, and shall not seek or obtain any other employment or perform any
        services for or on behalf of any other person or entity; provided that Executive
        may continue to serve on the Board of Directors of The TJ Martel
        Foundation.

      

      3.  Consideration.  In
        consideration of the Executive’s agreement to terminate his employment with the
        Company, GEI, LLC and their affiliates and in consideration of his continuing
        role as non-executive Chairman of the LLC Board, the Executive shall receive
        the
        payments and benefits described in this Section 3.  The Executive
        acknowledges and agrees that the payment and benefits provided in this Section
        3
        are in full satisfaction of any amounts provided for in the
        Employment

       

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      Agreement,
        and are conditioned upon the Executive’s execution and non-revocation of this
        Agreement.  The Executive acknowledges and agrees that he is not
        entitled to, and will not receive, any wage, commission, bonus, vacation,
        sick,
        personal, severance, expense, or other reimbursement or other payments or
        benefits from the Company, LLC or any of their affiliates, other than those
        provided in this Section 3.  This Agreement supersedes and replaces
        all provisions of the Employment Agreement relating to compensation, benefits
        and severance.

      

      a.           Cash
        Compensation.  In consideration for execution of this
        Agreement and Executive’s continued service as non-executive Chairman of the LLC
        Board, the Company shall make to Executive (i) eight semi-monthly payments
        of
        $31,250 commencing on the regular payroll date on or about November 15, 2007
        and
        continuing on the same and last payroll day of November, 2007 and each of
        the
        succeeding and ensuing three calendar months thereafter, (ii) a single payment
        of $62,500 on or before March 15, 2008, and (iii) a lump sum payment of $687,500
        on the first payroll payment date in January 2008 (collectively the “Installment
        Payments”).  In addition, on or before November 15, 2007, the Company
        shall make a final payment of accrued salary through November 2, 2007, accrued
        but unused vacation up to $40,000 and any related 401(k) matching contribution
        to Executive accrued and owed to Executive in connection with his employment
        for
        any period prior to, through and including November 2, 2007.  Further,
        within ten days after Executive’s submission of supporting evidence of the same,
        the Company shall reimburse Executive for all expenses incurred by Executive
        in
        connection with his employment for any period prior to, through and including
        the Effective Date, so long as such expenses conform to the Company’s
        reimbursement policy described in Section 6 below.  In addition to the
        foregoing, Executive shall remain entitled to receive all accrued and vested
        benefits owed to Executive under each of the Company's 401(k) plan and
        deferred compensation plan, which benefits shall remain payable in accordance
        with the terms of the governing plan under which such benefits are
        provided.

      

      b.           Acceleration
        of Payments.  In the event that there is a sale or disposition of
        all or substantially all of the assets of the Company or LLC, or a sale or
        disposition of a majority of the outstanding equity of LLC, in either case
        prior
        to March 15, 2008, within two (2) weeks following the closing of any such
        event,
        the Company shall pay to Executive all Installment Payments remaining to
        be paid
        under Section 3a. above.

      

      c.           Health
        Insurance Program.  Notwithstanding anything to the contrary
        contained in any of the Company’s health and welfare plans or other health
        insurance programs (collectively, the “Health Insurance Program”), following the
        Effective Date through October 31, 2008, the Executive and his dependent
        family
        members currently participating in such program shall continue to participate
        pursuant to elections made prior to the Effective Date in the Company’s Health
        Insurance Program as though the Executive was employed by the Company, at
        the
        Company’s expense, or if such continued participation is not permitted by the
        Health Insurance Program, the Company shall pay the cost of Executive’s
        continued participation in such program pursuant the Consolidated Omnibus
        Budget
        Reconciliation Act of 1985 (COBRA) through October 31, 2008.  Subject
        to the foregoing, it is the parties’ intent that Executive’s right to elect to
        continue coverage for himself and his dependent family members under the
        Health
        Insurance Program pursuant to COBRA shall occur, commence and continue as
        measured from and after March 15, 2008.

      

      4.  Withholding
        Taxes.  The Company reserves the right to withhold
        applicable taxes from any amounts paid pursuant to this Agreement to the
        extent
        required by law.  The Executive shall be responsible for any and all
        tax liability imposed on amounts paid hereunder.

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      5.  Provision
        of Office Space and
        Equipment.  During the term of this Agreement, the
        Executive shall be provided with office space in the Company’s New York office
        and office equipment, including, without limitation, a laptop, Blackberry
        and
        email access, in each case, sufficient to enable the Executive to perform
        his
        duties as non-executive Chairman of the LLC Board.  Such office space
        shall be provided for Executive’s use, although Executive may choose to work
        from an alternative location so long as Executive makes himself available
        to the
        Company as required to satisfy his obligations under Section 2
        hereof.

      

      6.  Expense
        Reimbursement.  During the term of this Agreement, LLC
        shall reimburse Executive for entertainment expenses incurred by him in his
        capacity as non-executive Chairman so long as such expenses are incurred
        and
        approved in accordance with the Company’s expense reimbursement policy, as
        modified on September 2, 2007 and any individual expense exceeding $1,000
        has
        been pre-approved by the Chief Executive Officer of the Company.

      

      7.  Term.  This
        Agreement and Executive’s service as non-executive Chairman of the LLC Board
        shall terminate upon the earlier to occur of (i) the five month anniversary
        of
        the date of this Agreement, or (ii) a sale or disposition described in Section
        3b. of this Agreement, subject to satisfaction of any payments required by
        Sections 3 of this Agreement.

      

      8.  Representations
        and Promises:   The Executive
        acknowledges and agrees that:

      

      a.           This
        Agreement is the entire agreement relating to Executive’s service with the
        Company, GEI, and LLC and any claims or future rights that Executive might
        have
        with respect to the Company, GEL and LLC, except as expressly set forth or
        referenced herein.  This Agreement may be amended only by a written
        agreement that is signed by all of the parties hereto.  This Agreement
        is a legally admissible, enforceable agreement governed by Federal law and
        the
        laws of New York.

      

      b.           When
        Executive decided to sign this Agreement, Executive was not relying on any
        representations that were not in this Agreement.

      

      c.           Executive
        has not suffered any job-related wrongs or injuries, such as any type of
        discrimination, for which Executive might still be entitled to compensation
        or
        relief in the future.  Executive has properly reported all hours that
        Executive has worked and Executive has been paid all wages, overtime,
        commissions, compensation, benefits, and other amounts that the Company or
        any
        LLC should have paid Executive in the past.

      

      d.           If
        the Company, LLC or Executive successfully asserts that any provision in
        this
        Agreement is void, the rest of the Agreement shall remain valid and enforceable
        unless the other party to this Agreement elects to cancel it.  If this
        Agreement is cancelled by Executive, Executive will repay the consideration
        and
        other benefits Executive received for signing it.

      

      e.           If
        Executive initially did not think any representation Executive is making
        in this
        Agreement was true or if Executive initially was uncomfortable making it,
        Executive has resolved all of his doubts and concerns before signing this
        Agreement.  Executive has carefully read this Agreement, fully
        understands what it means, is entering into it knowingly and voluntarily,
        and
        all of Executive’s representations in it are true.  The Company would
        not have given Executive the consideration or other benefits Executive is
        getting in exchange for this Agreement but for Executive’s representations and
        promises which Executive is making by signing it.

       

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      f.           Executive
        has been given sufficient time to review this Agreement and has read and
        understand the terms of this Agreement and has voluntarily accepted these
        terms.  Executive has consulted with an attorney prior to executing
        this Agreement.

      

      9.  Return
        of Company Property.  On or before the termination date
        set forth pursuant to Section 7 hereof and except as otherwise provided under
        Section 3(d) of this Agreement, the Executive will return to the Company
        (i) all
        files, documents, records, and copies of the foregoing (whether in hard or
        electronic form), (ii) any other any real, intellectual and/or other property
        belonging to the Company or LLC or materials containing the Company’s or LLC’s
        confidential information in the Executive’s possession or control and (iii) any
        other Company or LLC property requested by the Company.

      

      10.  Communication.  Executive
        agrees to refrain from making any disparaging, derogatory or negative statements
        about the Company, GEI, LLC or any of their affiliates, or any of their past
        or
        present officers, directors, agents or employees.  The Company, GEI
        and LLC agree to refrain from making and agree to cause their present officers,
        directors, agents or employees to refrain from making any disparaging,
        derogatory or negative statements about Executive.  In addition, the
        Company shall provide Executive with a copy of any public announcement,
        disclosure, statement or other communication (including the Form 8-K to be
        filed
        by the Company upon execution of this Agreement) concerning Executive’s prior
        relationship with or separation from service from any one or more of Company,
        GEI, LLC or GMBH, prior to its release or filing with the Securities and
        Exchange Commission.

      

      11.  Confidential
        Information.  Executive acknowledges that, in connection
        with his employment, Executive has acquired or had access to non-public
        information that the Company and LLC treat as proprietary or confidential,
        including, without limitation, information relating to the Company’s and LLC’s
        business, operations, assets, investments and strategic plans. Executive
        agrees
        to maintain the confidentiality of such information and not disclose or make
        such information available to any third party, without the prior written
        consent
        of the Company.  All such confidential information shall continue to
        be subject to the restrictions and exceptions set forth in Section 4 of the
        Employment Agreement, which section shall continue in full force and effect
        in
        accordance with the terms thereof following execution of this
        Agreement.

      

      12.  Ownership
        Interests in LLC.  The parties acknowledge that Executive
        owns certain “Class B Units,” “Tier One Profits Interests,” “Tier Two Profits
        Interests” and “Tier Three Profits Interests” (each as identified or defined
        under the Employment Agreement (including in particular Section 3(j) thereof)
        and the LLC Agreement and all being collectively referred to herein as the
        “Subject LLC Interests”) in the LLC which were previously or are currently
        acquired, held or issued in Executive’s name.  The parties
        acknowledged that Executive has met the conditions set forth in Section 3(j)
        of
        the Employment Agreement with respect to the vesting of the Subject LLC
        Interests referenced in such Section 3(j).  Nothing in this Agreement
        shall impair, amend, alter or in any way affect Executive’s continuing ownership
        of the Subject LLC Interests or Executive’s continuing rights under the LLC
        Agreement, the provisions of that certain letter agreement dated May 31,
        2005
        from GEI pertaining to such Subject LLC Interests, any provisions of the
        Employment Agreement relating to such Subject LLC Interests and any other
        written agreements relating thereto.

      

      13.  Continuation
        of Certain Terms of Employment Agreement.  The parties
        acknowledge that the confidential information, non-competition and
        non-solicitation and ownership of intellectual property provisions set forth
        in
        Sections 4, 5 and 6 of the Employment Agreement shall continue in full force
        and
        effect in accordance with the terms thereof.

       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      14.  Effect
        on other Documents and
        Agreements.  Nothing in this Agreement shall impair,
        alter or in any way affect either (i) the provisions of any one or more
        of that certain Limited Liability Company Agreement of Entertainment
        Distribution Company, LLC dated effective March 17, 2005 or the articles
        of
        formation, by-laws or other governing constituent documents for any one or
        more of the Company, GEI, LLC, or GMBH (collectively the "Companies") including,
        without limit, any provisions extending any rights of indemnification or
        defense
        to Executive in his capacity as an employee, officer, director, representative,
        agent or fiduciary of any of the Companies or (ii) Executive's right to
        receive coverage under, and in accordance with the terms of,
        the liability insurance policies, if any, currently maintained by any one
        or more of the Companies for the benefit of their past or present
        employees, officers, directors, representatives, agents or fiduciaries, as
        such
        policies shall be amended, modified or otherwise altered by the Companies
        from
        time to time.

      

      15.  Remedies
        for Early Termination.  If the
        Company terminates Executive’s position as non-executive Chairman on the LLC
        Board prior to the termination of this Agreement pursuant to Section 7 of
        this
        Agreement, the Company shall promptly make all remaining payments required
        to be
        made to Executive pursuant to Section 3 of this Agreement, or if necessary
        to
        continue to qualify for exclusion from the provisions of Rule 409A of the
        Internal Revenue Code, shall continue to make such payments on the schedule
        set
        forth in Section 3 of this Agreement.  If Executive terminates his
        position as non-executive Chairman on the LLC Board prior to the termination
        of
        this Agreement pursuant to Section 7 of this Agreement, the Company shall
        have
        no further obligation to make any payments to Executive pursuant to Section
        3 of
        this Agreement from the date of such termination.

      

      16.  Acknowledgement.  The
        Executive acknowledges that he has read this Agreement, fully understands
        its
        content and effect, and without duress or coercion, knowingly and voluntarily
        assents to its terms.

      

      17.  Miscellaneous.  This
        Agreement shall be subject to and governed by the laws of the State of New
        York.  This Agreement constitutes the entire agreement between the
        parties and supersedes all previous communications between the parties with
        respect to the subject matter of this Agreement.  This Agreement shall
        be binding upon and inure to the benefit of the parties hereto and their
        respective successors and permitted assigns.  No amendment to this
        Agreement shall be binding upon either party unless in writing and signed
        by or
        on behalf of such party.  This Agreement may be executed in
        counterparts, each of which shall be binding on the parties and have the
        full
        legal effect of the original.

      

      

      [Signatures
        contained on the following page.]

       

       

       

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      

      

      IN
        WITNESS WHEREOF,
        the parties hereto have executed or caused to be executed this Agreement
        on the
        respective dates specified below.

       

       

      
        	 	/s/
                James
                Caparro                                                       	 
	 	JAMES
                CAPARRO	 
	 	 	 
	 	 	 
	 	Date:     
                November 5,
                2007                                        	 

      

      

      

       

       

      
 

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

         

        
          COUNTERPART
            SIGNATURE PAGE

           

           

          
             

            
              	 	ENTERTAINMENT
                      DISTRIBUTION COMPANY, INC.	 
	 	 	 
	 	 	 
	 	By:
                                /s/ Clarke H.
                      Bailey                      	 
	 	Name:      Clarke
                      H.
                      Bailey                            	 
	 	Title:        Chairman                                       	 
	 	 	 
	 	Date:      
                      November 5,
                      2007                        	 

            

            

            
    

          

        

      

       

       

      
        
        

        
          7

          
            

          

        

        
        

         

        
          COUNTERPART
            SIGNATURE
            PAGE           

           

           

          
             

            
              	 	GLENAYRE
                      ELECTRONICS, INC.	 
	 	 	 
	 	 	 
	 	By:
                                /s/ Clarke H.
                      Bailey                      	 
	 	Name:      Clarke
                      H.
                      Bailey                            	 
	 	Title:        Chairman                                       	 
	 	 	 
	 	Date:      
                      November 5,
                      2007                        	 

            

            

            
                               

               

               

              
                
                

                
                  7

                  
                    

                  

                

                
                

                 

                
                  COUNTERPART
                    SIGNATURE
                    PAGE           

                   

                   

                  
                     

                    
                      	 	ENTERTAINMENT
                              DISTRIBUTION COMPANY, LLC	 
	 	 	 
	 	 	 
	 	By:
                                        /s/ Clarke H.
                              Bailey                      	 
	 	Name:      Clarke
                              H.
                              Bailey                            	 
	 	Title:        Chairman                                       	 
	 	 	 
	 	Date:      
                              November 5,
                              2007                        	 

                    

                    

                  

                

              

            

          

        

      

      

      7ex10-1.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).

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      “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

       

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      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, 

      
 

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      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 

       

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      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

       

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      (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;

       

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      (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).

       

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      (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:

       

       

      
        
          
          

        

        
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      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

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