EXHIBIT 4.1
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
To Purchase 100,000 Shares of Common Stock of
ARTISTdirect, Inc.
THIS COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies that,
for value received, DKR SoundShore Oasis Holding Fund Ltd. (the "Holder"), is
entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time (i) on or after the first to occur
of (A) September 30, 2005, if the acquisition target, which is mutually
acceptable to ARTISTdirect, Inc., a Delaware corporation (the "Company") and the
Holder (the "Acquisition Candidate"), has not executed a definitive purchase
agreement with any person or entity on or prior to such date or (B) the date
that the Company notifies the Holder that the Acquisition Candidate has executed
a definitive purchase agreement with a party other than (1) the Company or (2)
the Holder or its affiliates (which shall include for this purpose only, any
party that that submits a competing bid to acquire the Acquisition Candidate and
such party receives financing to fund all or any portion of such acquisition
from the Holder or any of its affiliate funds) (the first to occur of (i)(A) and
(i)(B) is referred to as the "Initial Exercise Date") and (ii) on or prior to
the earlier of (A) the occurrence of a Fundamental Transaction (as defined
below) and (B) the close of business on the fifth anniversary of the Initial
Exercise Date (the "Termination Date") but not thereafter, to subscribe for and
purchase from the Company up to 100,000 shares (the "Warrant Shares") of Common
Stock, par value $0.01 per share, of the Company (the "Common Stock"). The
purchase price of one share of Common Stock under this Warrant shall be equal to
the Exercise Price, as defined in Section 1(b). The Company shall notify the
Holder of the triggering of the Initial Exercise Date within two (2) trading
days and such notice shall be in accordance with Section 4(j) below.
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Section 1. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented
by this Warrant may be made, in whole or in part, at any time or times on
or after the Initial Exercise Date and on or before the Termination Date
by delivery to the Company of a duly executed original or facsimile copy
of the Notice of Exercise Form annexed hereto (or such other office or
agency of the Company as it may designate by notice in writing to the
registered Holder at the address of such Holder appearing on the books of
the Company); provided, however, within five (5) trading days of the date
said Notice of Exercise is delivered to the Company, the Holder shall have
surrendered this Warrant to the Company and the Company shall have
received full payment of the aggregate Exercise Price for shares thereby
purchased by wire transfer of immediately available funds or cashier's
check drawn on a United States bank (unless exercised by means of a
"cashless exercise" in accordance with Section 1(c) below).
b) Exercise Price. The exercise price of the Common Stock under this
Warrant shall be $1.00 per share, subject to adjustment hereunder (the
"Exercise Price").
c) Cashless Exercise. If at any time after one (1) year from the
date of issuance of this Warrant there is no effective registration
statement filed with the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended (the "Securities Act") registering,
or no current prospectus available for, the resale of the Warrant Shares
by the Holder, then this Warrant may also be exercised at such time by
means of a "cashless exercise" in which the Holder shall be entitled to
receive a certificate for the number of Warrant Shares equal to the
quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the average closing price of the Common Stock over the five
(5) trading days immediately preceding the date of such
election (the "Closing Price"), as such closing price is
reported on the Over-the-Counter Bulletin Board, or if the
Company's Common Stock ceases trading on the Over-the-Counter
Bulletin Board, such other national securities trading market
in which the primary trading of the Common Stock of the
Company occurs;
(B) = the Exercise Price of this Warrant, as adjusted; and
(X) = the number of Warrant Shares then issuable upon exercise of
this Warrant in accordance with the terms of this Warrant by
means of a cash exercise rather than a cashless exercise;
provided, however, that the Holder's ability to exercise all or any
portion of this Warrant by means of a "cashless exercise" shall be
postponed if, within the twenty (20) trading days preceding the date of
such election, Holder or any of its affiliates has traded, placed any
order for or bid upon any shares of the Company's Common Stock on the open
market with the intent or expectation of manipulating the price of the
Company's Common Stock.
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Notwithstanding anything herein to the contrary (but subject to
Section 1(d)), on the Termination Date, this Warrant shall be
automatically exercised via cashless exercise pursuant to this Section
1(c), so long as the Exercise Price is less than the Closing Price.
d) Exercise Limitations; Xxxxxx's Restrictions. The Holder shall not
have the right to exercise any portion of this Warrant, pursuant to
Section 1(c) or otherwise, to the extent that after giving effect to such
issuance after exercise, the Holder (together with such Holder's
affiliates), as set forth on the applicable Notice of Exercise, would
beneficially own in excess of 4.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to such issuance. For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its affiliates shall include the
number of shares of Common Stock issuable upon exercise of this Warrant
with respect to which the determination of such sentence is being made,
but shall exclude the number of shares of Common Stock which would be
issuable upon (A) exercise of the remaining, non-exercised portion of this
Warrant beneficially owned by such Holder or any of its affiliates and (B)
exercise or conversion of the unexercised or non-converted portion of any
other securities of the Company (including, without limitation, any other
Warrants) subject to a limitation on conversion or exercise analogous to
the limitation contained herein beneficially owned by such Holder or any
of its affiliates. Except as set forth in the preceding sentence, for
purposes of this Section 1(d), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act of 1934, as amended (the
"Exchange Act"), it being acknowledged by a Holder that the
Company is not representing to such Holder that such calculation is in
compliance with Section 13(d) of the Exchange Act and such Holder is
solely responsible for any schedules required to be filed in accordance
therewith and any other obligations of Holder arising thereunder or under
any other state or federal securities or "blue sky" laws or regulations.
To the extent that the limitation contained in this Section 1(d) applies,
the determination of whether this Warrant is exercisable (in relation to
other securities owned by such Holder) and of which a portion of this
Warrant is exercisable shall be in the sole discretion of Holder, and the
submission of a Notice of Exercise shall be deemed to be each Holder's
determination of whether this Warrant is exercisable (in relation to other
securities owned by such Holder) and of which portion of this Warrant is
exercisable, in each case subject to such aggregate percentage limitation,
and the Company shall have no obligation to verify or confirm the accuracy
of such determination. For purposes of this Section 1(d), in determining
the number of outstanding shares of Common Stock, the Holder may rely on
the number of outstanding shares of Common Stock as reflected in the later
of (x) the Company's most recent Form 10-Q or Form 10-K, as the case may
be, (y) a more recent public announcement or filing with the SEC by the
Company or (z) any other notice by the Company or the Company's transfer
agent setting forth the number of shares of Common Stock outstanding. Upon
delivery of written notice of a Holder, the Company shall within two (2)
trading days confirm in writing to such Holder the number of shares of
Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this
Warrant, by such Holder or its affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. Further, the
Holder shall
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not have the right to exercise any portion of this Warrant while such
Holder (or any of such Holder's affiliates) is in possession of material,
confidential and non-public information regarding the Company; including,
but not limited to, information regarding any pending financing or
strategic transactions.
e) Mechanics of Exercise.
i. Authorization of Warrant Shares. The Company covenants that
all Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant, be duly authorized,
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than
taxes in respect of any transfer occurring contemporaneously with
such issue).
ii. Delivery of Certificates Upon Exercise. Certificates for
shares purchased hereunder shall be transmitted by the transfer
agent of the Company to the Holder by crediting the account of the
Holder's prime broker registered on the books of the Depository
Trust Company through its Deposit Withdrawal Agent Commission
("DWAC") ---- system, if the Company is a participant in such
system, and otherwise by physical delivery of the certificate to the
address specified by the Holder in the Notice of Exercise within
five (5) trading days from the delivery to the Company of the Notice
of Exercise Form, surrender of this Warrant and payment of the
aggregate Exercise Price as set forth above ("Warrant Share Delivery
Date"). This Warrant shall be deemed to have been exercised on the
date the Exercise Price is received by the Company. The Warrant
Shares shall be deemed to have been issued, and Holder or any other
person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the
date the Warrant has been exercised by payment to the Company of the
Exercise Price and all taxes required to be paid by the Holder, if
any, pursuant to Section 1(e)(vii) prior to the issuance of such
shares, have been paid.
iii. Delivery of New Warrants Upon Exercise. If this Warrant
is exercised in part, the Company shall, at the time of delivery of
the certificate or certificates representing Warrant Shares, deliver
to Holder a new Warrant evidencing the rights of Holder to purchase
the remaining unpurchased Warrant Shares called for by this Warrant,
which new Warrant shall in all other respects, be identical with
this Warrant.
iv. Rescission Rights. If the Company fails to cause its
transfer agent to transmit to the Holder or its nominee a
certificate or certificates representing the Warrant Shares pursuant
to this Section 1(e)(iv) by the
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Warrant Share Delivery Date, then the Holder will have the right to
rescind such exercise.
v. Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Exercise. In addition to any other rights
available to the Holder, if the Company fails to cause its transfer
agent to transmit to the Holder, or its nominee, one or more
certificates representing the Warrant Shares pursuant to an exercise
on or before the Warrant Share Delivery Date, and if after such date
the Holder is required by its broker to purchase (in an open market
transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares which the
Holder in good faith anticipated receiving upon such exercise (a
"Buy-In"), then the Company shall (1) pay in cash to the Holder the
amount by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (A) the
number of Warrant Shares that the Company was required to deliver to
the Holder in connection with the exercise at issue times (B) the
price at which the sell order giving rise to such purchase
obligation was executed, and (2) at the option of the Holder, either
reinstate the portion of the Warrant and equivalent number of
Warrant Shares for which such exercise was not honored or deliver to
the Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder purchases
Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted exercise of shares of Common
Stock with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (1) of the immediately preceding
sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In, together
with applicable confirmations and other evidence reasonably
requested by the Company. Nothing herein shall limit a Holder's
right to pursue any other remedies available to it hereunder, at law
or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing shares of Common
Stock upon exercise of the Warrant as required pursuant to the terms
hereof.
vi. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the
exercise of this Warrant. As to any fraction of a share which Holder
would otherwise be entitled to purchase upon such exercise, the
Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the
Exercise Price.
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vii. Charges, Taxes and Expenses. Issuance of certificates for
Warrant Shares shall be made without charge to the Holder for any
issue or other incidental expense in respect of the issuance of such
certificate, all of which taxes (excluding any applicable transfer
tax incidental thereto) and expenses shall be paid by the Company,
and such certificates shall be issued in the name of the Holder or
in one or more such names as may be directed by the Holder;
provided, however, that in the event certificates for Warrant Shares
are to be issued in a name other than the name of the Holder, this
Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the
Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any expenses in respect of the
issuance of certificates for Warrant Shares, including, but not
limited to, any incidental expenses or taxes (including any
applicable transfer tax).
viii. Closing of Books. The Company will not close its
stockholder books or records in any manner which prevents the timely
exercise of this Warrant, pursuant to the terms hereof.
Section 2. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while
this Warrant is outstanding: (A) pays a stock dividend or otherwise makes
one or more distributions on all shares of its Common Stock or any other
equity or equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Company pursuant to this Warrant), (B) sub-divides
outstanding shares of Common Stock into a larger number of shares, (C)
combines (including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (D) issues by
reclassification of shares of Common Stock any shares of capital stock of
the Company, then in each case the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding immediately before
such event and of which the denominator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding immediately
after such event and the number of shares issuable upon exercise of this
Warrant shall be proportionately adjusted. Any adjustment made pursuant to
this Section 2(a) shall become effective immediately after the record date
for the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective
date in the case of a sub-division, combination or reclassification.
b) Adjustment Due to Dilutive Issuance.
i. Dilutive Issuances On or Prior to December 31, 2005. If at
any time on or prior to December 31, 2005, the Company or any
subsidiary thereof, as applicable, while any portion of this Warrant
is outstanding, shall sell, issue or grant any option or warrant to
acquire its Common Stock, or reprice any outstanding options or
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warrants exercisable into Common Stock, or otherwise sell, issue or
grant any securities at any time convertible, exchangeable or
exercisable into Common Stock ("Common Stock Equivalents"), other
than Excluded Stock (as defined below), at a price per share less
than the Exercise Price in effect on the date of such issuance (or
deemed issuance) of such shares of Common Stock or Common Stock
Equivalents (such lower price, the "Base Share Price" and such
issuances other than with respect to Excluded Stock collectively, a
"Dilutive Issuance") then, the Exercise Price shall be reduced to
equal the Base Share Price and the number of Warrant Shares issuable
hereunder shall be increased such that the aggregate Exercise Price
payable hereunder, after taking into account the decrease in the
Exercise Price, shall be equal to the aggregate Exercise Price prior
to such adjustment.
ii. Dilutive Issuances Subsequent to December 31, 2005. If at
any time subsequent to December 31, 2005, the Company or any
subsidiary thereof, as appropriate, makes a Dilutive Issuance while
any portion of this Warrant is outstanding, then immediately upon
the Dilutive Issuance, the Exercise Price will adjusted to a price
equal to the quotient obtained by using the following formula:
Z= (A + B) / X
Where:
(A)= the product of (x) the total number of shares of Common Stock
(excluding shares of Excluded Stock) outstanding immediately prior to such
issuance multiplied by (y) the applicable Exercise Price in effect
immediately prior to such issuance;
(B)= the consideration received by the Company upon such issuance;
and
(X)= the total number of shares of Common Stock outstanding
(excluding shares of Excluded Stock) immediately after the issuance of
such Common Stock.
Any such adjustments made pursuant to this Section 2(b) shall be made
whenever such Common Stock or Common Stock Equivalents are issued. The
Company shall notify the Holder in writing, no later than five (5)
business days following the issuance of any Common Stock or Common Stock
Equivalents subject to this section (such notice the "Dilutive Issuance
Notice"). For purposes of clarification, whether or not the Company
provides a Dilutive Issuance Notice pursuant to this Section 2(b), upon
the occurrence of any Dilutive Issuance, after the date of such Dilutive
Issuance, the Holder will be entitled to receive a number of Warrant
Shares based upon the adjustments set forth above regardless of whether
the Holder accurately provides notice describing the adjusted Exercise
Price in the Notice of Exercise.
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For purposes of this Section 2(b), "Excluded Stock" shall mean shares of
Common Stock or Common Stock Equivalents issued by the Company (i) prior
to April 1, 2005, (ii) to employees, officers, directors and consultants
of the Company in the ordinary course of business, (iii) under a
Compensatory Benefit Plan (as defined in Rule 701 of the Securities Act of
1933, as amended), (iv) with respect to which the provisions of Section
2(a), 2(c) and/or 2(d) apply, (v) to the Holder or any of its affiliates,
or (vi) upon conversion of any Common Stock Equivalents for which
adjustment of the Exercise Price has previously been made pursuant to
Section 2(b).
c) Pro Rata Distributions. If the Company, at any time prior to the
Termination Date, shall distribute to all holders of Common Stock (and not
to Holders of the Warrants) evidences of its indebtedness or assets
(including cash and cash dividends) or rights or warrants to subscribe for
or purchase any security other than the Common Stock (which shall be
subject to Section 2(b)), then in each such case the Exercise Price shall
be adjusted by multiplying the Exercise Price in effect immediately prior
to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be
the average closing price of the Common Stock over the ten (10) trading
days immediately preceding the record date (as reported by the
Over-the-Counter Bulletin Board, or if the Company's Common Stock ceases
trading on the Over-the-Counter Bulletin Board, such other national
securities trading market in which the primary trading of the Common Stock
of the Company occurs), and of which the numerator shall be such average
closing price of the Common Stock over the ten (10) trading days
immediately preceding the record date (as reported by the Over-the-Counter
Bulletin Board, or if the Company's Common Stock ceases trading on the
Over-the-Counter Bulletin Board, such other national securities trading
market in which the primary trading of the Common Stock of the Company
occurs) less the then per share fair market value at such record date of
the portion of such assets or evidence of indebtedness so distributed
applicable to one outstanding share of the Common Stock as determined by
the Board of Directors in good faith. In either case the adjustments shall
be described in a statement provided to the Holder of the portion of
assets or evidences of indebtedness so distributed or such subscription
rights applicable to one share of Common Stock. Such adjustment shall be
made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
d) Fundamental Transaction. If, at any time while this Warrant is
outstanding, (A) the Company effects any merger or consolidation of the
Company with or into another entity, (B) the Company effects any sale of
all or substantially all of its assets in one or a series of related
transactions, (C) any tender offer or exchange offer (whether by the
Company or another person or entity) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares
for other securities, cash or property, or (D) the Company effects any
reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (in any such case, a
"Fundamental Transaction"), then, this Warrant shall be cancelled and
shall no longer be in force or effect.
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e) Calculations. All calculations under this Section 2 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 2, the number of shares of Common Stock
deemed to be issued and outstanding as of a given date shall be the sum of
the number of shares of Common Stock (excluding treasury shares, if any)
issued and outstanding.
f) Voluntary Adjustment By Company. The Company may at any time
during the term of the Warrant reduce the then current Exercise Price to
any amount and for any period of time deemed appropriate by the Board of
Directors of the Company (in its discretion).
g) Notice to Holders.
i. Adjustment to Exercise Price. Whenever the Exercise Price
is adjusted pursuant to this Section 2, the Company shall promptly
mail to each Holder a notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
ii. Notice to Allow Exercise by Xxxxxx. If (A) the Company
shall declare a dividend (or any other distribution) on the Common
Stock; (B) the Company shall declare a special non-recurring cash
dividend on or a redemption of the Common Stock; (C) the Company
shall authorize the granting to all holders of the Common Stock
rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; (D) the approval of the
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to
which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of any compulsory
share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize a
Fundamental Transaction or the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company; then, in
each case, the Company shall cause to be mailed to the Holder at its
last address as it shall appear upon the Warrant Register (as
defined below) of the Company, at least twenty (20) calendar days
prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption,
rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer
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or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of
record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided, that the failure to -------- mail such notice or
any defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in such
notice. The Holder is entitled to exercise this Warrant during the
twenty (20) day period commencing on the date of such notice to the
effective date of the event triggering such notice.
Section 3. Transfer of Warrant.
a) Transferability. Subject to compliance with any applicable
securities laws and regulations and the conditions set forth in Sections
3(d) and 4(a) hereof, this Warrant and all rights hereunder are
transferable, in whole or in part, upon surrender of this Warrant at the
principal office of the Company, together with a written assignment of
this Warrant substantially in the form attached hereto duly executed by
the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute and
deliver one or more new Warrants in the name of the assignee(s) and in the
denomination(s) specified in such instrument of assignment, and shall
issue to the assignor a new Warrant containing identical terms and
conditions as this Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of
Warrant Shares without having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with other
Warrants containing identical terms and conditions upon presentation
hereof at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants are to
be issued, signed by the Holder or its agent or attorney. Subject to
compliance with Section 3(a), as to any transfer which may be involved in
such division or combination, the Company shall execute and deliver one or
more new Warrants in exchange for the Warrant(s) to be divided or combined
in accordance with such notice.
c) Warrant Register. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent actual
written notice to the contrary.
d) Transfer Restrictions. If, at the time of the surrender of this
Warrant in connection with any transfer of this Warrant, the transfer of
this Warrant shall not be registered pursuant to an effective registration
statement filed with the SEC under the Securities Act and under applicable
state securities or blue sky laws, the Company may require, as a condition
of allowing such transfer (i) that the Holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel (which opinion shall be in form, substance and scope customary for
opinions of counsel in
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comparable transactions) to the effect that such transfer may be made
without registration under the Securities Act and under applicable state
securities or blue sky laws, (ii) that the Holder or transferee execute
and deliver to the Company an investment letter in form and substance
acceptable to the Company and (iii) that the transferee be an "accredited
investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8)
promulgated under the Securities Act or a qualified institutional buyer as
defined in Rule 144A(a) under the Securities Act.
Section 4. Miscellaneous.
a) If at any time prior to the Termination Date there is not an
effective registration statement filed with the SEC under the Securities
Act covering all of the Warrant Shares and the Company shall determine to
prepare and file with the SEC a registration statement relating to an
offering for its own account or the account of others under the Securities
Act of any of its equity securities, then the Company shall send to each
Holder a written notice of such determination and, if within fifteen (15)
days after the date of such notice, any such Holder shall so request in
writing, the Company shall include in such registration statement all or
any part of such Warrant Shares such holder requests to be registered;
provided, however, that, (i) the Company shall not be required to register
any Warrant Shares pursuant to this Section 4(a) that are eligible for
resale pursuant to Rule 144(k) promulgated under the Securities Act or
that are the subject of a then effective registration statement filed with
the SEC under the Securities Act; or (ii) if managing underwriter of any
offering by the Company, for its own account or the account of others, or
the Company's Board of Directors, determines that marketing factors
require limitation of the number of shares that may be included in a
registration statement, the Company may, at its discretion, limit or
exclude the Warrant Shares from such registration.
b) Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws and Section 4 of this Warrant, this
Warrant and all rights hereunder are transferable, in whole or in part, at
the office or agency of the Company by the Holder in person or by duly
authorized attorney, upon surrender of this Warrant together with the
Assignment Form annexed hereto properly endorsed. The transferee shall
sign an investment letter in form and substance reasonably satisfactory to
the Company.
c) No Rights as Stockholder Until Exercise. This Warrant does not
entitle the Holder to any voting rights or other rights as a stockholder
of the Company prior to the exercise hereof. Upon the surrender of this
Warrant and the payment of the aggregate Exercise Price (or by means of a
cashless exercise), the Warrant Shares so purchased shall be and be deemed
to be issued to such Holder, or nominee, as the record owner of such
shares as of the close of business on the later of the date of such
surrender or payment.
d) Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant or any stock certificate relating to
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the Warrant Shares, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it (which, in the case of
the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in lieu of
such Warrant or stock certificate.
e) Saturdays, Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the expiration of any right required or
granted herein shall be a Saturday, Sunday or a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding
day not a Saturday, Sunday or legal holiday.
f) Authorized Shares.
The Company covenants that during the period the Warrant is
outstanding, it will reserve from its authorized and unissued Common Stock
a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall
constitute the granting of full authority to its officers who are charged
with the duty of executing stock certificates to execute and issue the
necessary certificates for the Warrant Shares upon the exercise of the
purchase rights under this Warrant. The Company will take all such
reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law
or regulation, or of any requirements of the trading market upon which the
Common Stock may be listed; provided, however, that the Company shall have
five (5) trading days to report the issuance of the Warrant Shares to the
then applicable trading market.
Except and to the extent as waived or consented to by the Holder,
the Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and
in the taking of all such actions as may be necessary or appropriate to
protect the rights of Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing, the Company
will (a) not increase the par value of any Warrant Shares above the amount
payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares upon the exercise of this Warrant, and (c)
use commercially reasonable efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.
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g) Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be
determined in accordance with the laws of the State of New York.
h) Restrictions. THE HOLDER ACKNOWLEDGES THAT THE WARRANT SHARES
ACQUIRED UPON THE EXERCISE OF THIS WARRANT, IF NOT REGISTERED, WILL HAVE
RESTRICTIONS UPON RESALE IMPOSED BY APPLICABLE STATE AND FEDERAL
SECURITIES LAWS AND REGULATIONS AND THE CERTIFICATES ISSUED HEREUNDER WILL
CONTAIN CUSTOMARY RESTRICTIVE LEGENDS.
i) Non-waiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Xxxxxx's rights,
powers or remedies, notwithstanding the fact that all rights hereunder
terminate on the Termination Date. If the Company willfully and knowingly
fails to comply with any provision of this Warrant, which results in any
material damages to the Holder, the Company shall pay to Holder such
amounts as shall be sufficient to cover any costs and expenses including,
but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or
remedies hereunder.
j) Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder by the Company shall be
delivered via personal delivery, facsimile transmission or first class
registered or certified mail at (a) 00 Xxxxxx Xxxxxx, Xxxxxxx Xxxxx,
Xxxxxxxx XX00, Xxxxxxx or facsimile number 000-000-0000, or such other
address or facsimile number as the Holder shall have furnished to the
Company in writing or (b) if to the Company, at 00000 Xxxxxxxx Xxxxxxxxx,
Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000 or facsimile number
000-000-0000.
k) Limitation of Liability. No provision hereof, in the absence of
any affirmative action by Holder to exercise this Warrant or purchase
Warrant Shares, and no enumeration herein of the rights or privileges of
Holder, shall give rise to any liability of Holder for the purchase price
of any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
l) Remedies. Holder, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and
hereby agrees to waive the defense in any action for specific performance
that a remedy at law would be adequate.
m) Successors and Assigns. Subject to applicable securities laws,
this Warrant and the rights and obligations evidenced hereby shall inure
to the benefit of and be binding upon the successors of the Company and
the successors and permitted assigns of Holder. The provisions of this
Warrant are intended to be for the benefit of all Holders
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from time to time of this Warrant and shall be enforceable by any such
Holder of Warrant Shares.
n) Amendment. This Warrant may be modified or amended or the
provisions hereof waived only by the written consent of the Company and
the Holder.
o) Disclosure. The Company may disclose the terms of this Warrant to
third parties, or file a copy of such Warrant as an exhibit to a filing
with the SEC, to the extent the Company determines that it is required to
do so under applicable federal securities laws or as required by the rules
of the trading market in which the primary trading of the Common Stock of
the Company occurs.
p) Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this Warrant.
q) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
r) Early Termination. The Holder acknowledges and agrees that if (i)
the Company consummates an acquisition of the Acquisition Candidate that
is financed in part by or on behalf of the Holder or its affiliates, or
(b) the Company and the Acquisition Candidate execute a letter of intent
for the acquisition of the Acquisition Candidate, and Xxxxxx fails or
refuses to fund $25 million into an escrow account, as contemplated by
that certain financing commitment letter dated as of April 14, 2005 and
delivered by Holder to the Company, this Warrant shall be, without
additional consideration, immediately rescinded and treated as if it was
never in force or effect.
********************
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: April 26, 2005
ARTISTDIRECT, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxx
________________________________________
Name: Xxxxxx X. Xxxxxxxxxx
_______________________________________
Title: Chief Financial Officer
_____________________________________
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NOTICE OF EXERCISE
To: ARTISTDIRECT, INC.
(1) The undersigned hereby elects to purchase ________ Warrant
Shares of the Company pursuant to the terms of the attached Warrant (only if
exercised in full), and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
(2)Payment shall take the form of (check applicable box):
[ ]in lawful money of the United States; or
[ ] the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in
subsection 1(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 1(c).
(3) Please issue a certificate or certificates representing said
Warrant Shares in the name of the undersigned or in such other name as is
specified below:
__________________________________
The Warrant Shares shall be delivered to the following:
__________________________________
__________________________________
__________________________________
(4) Accredited Investor. The undersigned is an "accredited investor"
as defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
(5) The undersigned hereby represents and warrants to the Company
that within the twenty (20) trading days preceding the date hereof, neither the
undersigned or any of its affiliates has traded, placed any order for or bid
upon any shares of the Company's Common Stock on the open market with the intent
or expectation of manipulating the price of the Company's Common Stock.
[SIGNATURE OF HOLDER]
Name of Investing Entity: ______________________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: __________________________________________________________________________
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ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________________ whose address is
_________________________________________________________________________
_________________________________________________________________________
Dated: ______________, _______
Holder's Signature: __________________________________________
Holder's Address: ____________________________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
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