Exhibit 4.2
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 60,000 Shares of Common Stock of
ARTISTdirect, Inc.
THIS COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies that, for
value received, CCM Master Qualified 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 60,000 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
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market with the intent or expectation of manipulating the price of the
Company's Common Stock.
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
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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 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.
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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 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
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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.
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.
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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 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
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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.
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
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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.
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,
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consolidation, merger, sale, transfer 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
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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
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
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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 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
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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.
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) 0000 0xx Xxxxxx, Xxx Xxxx, XX 00000,
xxxxxxxxx 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.
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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 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 the
Company consummates an acquisition of the Acquisition Candidate, 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: May 25, 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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