EXECUTION COPY
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
OF
ARTISTdirect, Inc.
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AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
This Amended and Restated Stockholders Agreement (the "Agreement") is made
as of November 12, 1999, by and among ARTISTdirect, Inc., a Delaware corporation
(the "Company"), ARTISTdirect Investors, LLC, a California limited liability
company ("AD Investors"), Xxxx X. Xxxxxx ("Xxxxxx"), Xxxxxx X. Xxxxxx
("Xxxxxx"), the Xxxxxx Children's Trust (the "Xxxxxx Trust"), the Xxxxxx
Children's Trust (the "Xxxxxx Trust", and collectively with the Xxxxxx Trust,
the "Trusts"), Xxxxx Xxxxxxxx ("Xxxxxxxx"), L&G Associates One, a California
general partnership ("L&G"), Xxxxx Xxxxxx ("Xxxxxx"), Xxxxx X. Xxxxxxx
("Xxxxxxx"), Xxxxxx Xxxxx ("Xxxxx") (each of which are members of AD Investors),
Constellation Venture Capital, L.P., a Delaware limited partnership
("Constellation Domestic"), Constellation Ventures (BVI), Inc., a British Virgin
Islands corporation ("Constellation Offshore" and, together with Constellation
Domestic, "Constellation"), Toronto Dominion Investments, Inc., a Delaware
corporation ("TDI"), Psilos Group Partners, L.P., a Delaware limited partnership
("Psilos Group"), CCP/Psilos UBL, LLC, a Delaware limited liability company
("CCP UBL"), CCP/Psilos ARTISTdirect, LLC, a Delaware limited liability company
("CCP AD" and, together with Psilos Group, TDI and CCP UBL, "Psilos"), Dream
Media Internet Ventures, LLC, a Delaware limited liability company
("DreamMedia"), Xxxx Xxxxxx ("Kawabe"), Xxxx Xxxxx ("Xxxxx"), Xxxxx Xxxx
("Xxxx"), Xxxx Di Dia ("Di Dia"), Xxxxx X. Van Dalsem ("Van Dalsem"), Xxxxx X.
Xxxxxxxxx ("Gradstein"), Chase Venture Capital Associates, L.P., a California
limited partnership ("Chase Ventures"), Xxxxxxxxx/ARTISTdirect Partners, LLC, a
Delaware limited liability company ("Xxxxxxxxx"), Flatiron Fund 1998/99, LLC, a
Delaware limited liability company ("Flatiron Fund"), Flatiron Associates, LLC,
a Delaware limited liability company ("Flatiron" and, together with Chase
Ventures, Flatiron Fund and Xxxxxxxxx, "Chase"), Spinnaker Technology Fund, LP,
a Delaware limited partnership ("Spinnaker Fund"), Spinnaker Founders Fund, LP,
a Delaware limited partnership ("Spinnaker Founders"), Spinnaker Clipper Fund,
LP, a Delaware limited partnership ("Spinnaker Clipper" and, together with
Spinnaker Fund and Spinnaker Founders, "Xxxxxx Funds"), Meadowlane Enterprises
Ltd., a British Virgin Islands corporation ("Meadowlane"), and Universal Music
Group, Inc., a California corporation ("Universal").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the parties hereto desire to establish through this Agreement
certain rights, obligations and restrictions with respect to the securities of
the Company.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein and for other good and valuable consideration, and with the
intent of being legally bound, the parties hereto agree as follows:
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ARTICLE I
SECTION 1.1. Definitions. For purposes of this Agreement, capitalized
terms used herein shall have the following meanings:
"AD" shall mean ARTISTdirect, LLC, a predecessor of the Company by merger.
"ADNM" shall mean ARTISTdirect New Media, LLC, a California limited
liability company.
"Affiliate" of a party shall mean any entity which directly or indirectly
Controls, is Controlled by or is under common Control with such party.
"ARI" shall mean American Recordings, Inc., a New York corporation.
"Audit Committee" shall mean the Audit Committee of the Board of
Directors.
"Board of Directors" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day other than Saturday, Sunday and any
other day on which banks in New York or California are not open for business.
"Bylaws" shall mean the Bylaws of the Company, as amended from time to
time.
"Certificate of Incorporation" shall mean the Amended and Restated
Certificate of Incorporation of the Company, as amended from time to time.
"Chase Designee Threshold" shall mean that Chase and its Affiliates
(including CCP UBL and CCP AD) own in the aggregate, directly or indirectly,
Common Stock and Preferred Stock (on an as converted basis) in an amount not
less than 25% of the Preferred Stock (on an as converted basis) originally
issued in accordance with the terms and provisions of the Merger Agreement.
"Chief Executive Officer" shall mean the Chief Executive Officer of the
Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended (including
corresponding provisions of subsequent or successor revenue laws).
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"Common Stockholder" shall mean each Person who or that executes a
counterpart of this Agreement and that is a holder of Common Stock in accordance
with the terms of this Agreement.
"Common Stock" shall mean the Common Stock, $.01 par value per share, of
the Company.
"Company" shall have the meaning set forth in the preamble to this
Agreement, including its predecessor by merger, AD.
"Compensation Committee" shall mean the Compensation Committee of the
Board of Directors.
"Constellation Designee Threshold" shall mean that Constellation and their
Affiliates own in the aggregate, directly or indirectly, Common Stock and
Preferred Stock (on an as converted basis) in an amount not less than 25% of the
Preferred Stock (on an as converted basis) originally issued in accordance with
the terms and provisions of the Merger Agreement.
"Control" shall mean the power to direct the affairs of an entity by
reason of ownership of equity securities, by contract, or otherwise.
"DGCL" shall mean the Delaware General Corporation Law, as in effect from
time to time.
"Director" shall mean any of the members of the Board of Directors.
"Dissolution" shall mean the happening of any of the events set forth in
Section 6.1.
"Elson Option" shall mean the option held by Xxxxxxx Xxxxx ("Xxxxx") to
acquire an equity interest in the Company pursuant to that certain Settlement
Agreement and Mutual General Release between Elson, on the one hand, and the
Company, MGE, LLC, Xxxxxx and Xxxxxx, on the other hand, dated as of October 23,
1997.
"Employment Agreements" shall mean the employment agreements of Xxxxxx and
Xxxxxx, as such agreements may be amended, supplemented or otherwise modified
from time to time in accordance with the terms of the Employment Agreements.
"Equity Securities" shall mean all shares, options, warrants, general or
limited partnership interests, limited liability company membership interest,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or entity whether voting or
nonvoting, including common stock, preferred stock, or any other "equity
security" (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission ("SEC") under
the Exchange Act).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
all rules and regulations promulgated thereunder.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Fiscal Year" shall mean the fiscal and taxable year of the Company, which
shall be the year ending December 31, unless another period is required by the
Code.
"Founders" shall mean Xxxxxx and Xxxxxx.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Indebtedness" of any Person shall mean (i) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services with respect to which a Person is liable, contingent or otherwise, as
obligor or otherwise (other than obligations to trade creditors incurred in the
ordinary course of business which are not more than 30 days past due), (ii) all
obligations evidenced by notes, bonds, debentures or similar instruments, (iii)
all indebtedness created or arising under any conditional sale or other title
retention agreements with respect to property acquired by such Person, (iv) any
commitment by which a Person assures a creditor against loss (including
contingent reimbursement obligations with respect to letters of credit), (v) any
obligations under capitalized leases with respect to which a Person is liable,
contingently or otherwise, (vi) any unsatisfied obligation for "withdrawal
liability" to a "multiemployer plan" as such terms are defined under ERISA or
for other liabilities under Title IV of ERISA, (vii) any indebtedness of another
described in (i) through (vi) above guaranteed in any manner by such Person
(including, without limitation, guarantees in the form of an agreement to
repurchase or reimburse) or which is secured by a lien or encumbrance on such
Person's assets to the extent of the indebtedness guaranteed or the assets
subject to such lien or encumbrance.
"Law" means any federal, state, local or foreign law (including common
law), statute, code, ordinance, rule, regulation or other requirement or
guideline.
"Majority of Stockholders" shall mean the affirmative vote of those
Stockholders holding at least a majority of the aggregate outstanding
Percentages held by all Stockholders.
"Material Adverse Effect" shall mean any material adverse effect on the
business, assets, operations, prospects or condition (financial or otherwise) of
the Company or any of its subsidiaries.
"Merger Agreement" shall mean that certain Agreement and Plan of Merger
between ARTISTdirect, Inc. and ARTISTdirect, LLC dated as of October 6, 1999.
"Officer" shall mean any person designated as an officer by the Board of
Directors.
"Operating Agreement" shall mean that certain Second Amended and Restated
Operating Agreement of ARTISTdirect, LLC made as of May 18, 1999 by and among
the various parties that are signatories thereto.
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"Percentage" shall mean, as to a Stockholder, the percentage represented
by (i) the number of shares of Common Stock held by such Stockholder (or
issuable upon conversion of such Stockholder's Preferred Stock and the accrued
and unpaid dividends thereon), divided by (ii) the total number of shares of
Common Stock outstanding (or issuable upon conversion of the outstanding
Preferred Stock and such accrued and unpaid dividends); provided, that when
calculating the Percentage held by (x) Xxxxxx, the number of shares of Common
Stock held by Xxxxxx shall include the number of shares of Common Stock held by
the Xxxxxx Trust, and (y) Xxxxxx, the number of shares of Common Stock held by
Xxxxxx shall include the number of shares of Common Stock held by the Xxxxxx
Trust.
"Person" shall mean any individual, corporation, limited liability
company, partnership, trust or unincorporated organization, or governmental
authority or any agency or political subdivision thereof or other entity.
"Preemptive Threshold" shall have the meaning set forth in Section
2.1(a)(ii).
"Preferred Stock" shall mean the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock.
"Preferred Stockholders" shall mean the Series A Preferred Stockholders,
the Series B Preferred Stockholders and the Series C Preferred Stockholders.
"Public Market Sale" shall mean any sale of Common Stock after a QIPO
which is made pursuant to Rule 144 promulgated by the SEC under the Securities
Act or which is made pursuant to a registration statement filed with and
declared effective by the SEC.
"QIPO" means a public offering of common stock of the Company at a price
at least twice the then-current Conversion Price of Series B Preferred Stock (as
defined in the Certificate of Incorporation) per share with net proceeds to the
Company of no less than $25 million and firmly underwritten by any of the
underwriters listed on Exhibit B attached hereto, or any other underwriter of
equal quality and national reputation.
"Xxxxx Entity" shall mean any corporation or other entity wholly owned and
Controlled, directly or indirectly, by Xxxx Xxxxx.
"Second Securities Purchase Agreement" means that certain Securities
Purchase Agreement entered into as of May 18, 1999 by and among the Company and
the other parties who are signatories thereto, as it may be amended from time to
time.
"Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations promulgated thereunder.
"Selling Stockholder" shall mean a Stockholder desiring to sell Common
Stock or Preferred Stock.
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"Series A Preferred Stockholder" shall mean each Person who holds Series A
Preferred Stock.
"Series A Preferred Stock" means a share of the 10% Series A Convertible
Preferred Stock of the Company.
"Series B Preferred Stockholder" shall mean each Person who holds Series B
Preferred Stock.
"Series B Preferred Stock" means a share of the 10% Series B Convertible
Preferred Stock of the Company.
"Series C Preferred Stockholder" shall mean each Person who holds Series C
Preferred Stock.
"Series C Preferred Stock" means a share of the Series C Convertible
Preferred Stock of the Company.
"Series C Preferred Stock Purchase Agreement" shall mean that certain
Series C Preferred Stock Purchase Agreement dated as of the date hereof, among
the Company, Meadowlane and Universal.
"Stockholder" shall mean any Common Stockholder or Preferred Stockholder.
"Subsidiaries" shall mean any Person more than 50% of the voting interest
of which is owned, directly or indirectly, by the Company or any Subsidiary of
the Company.
"Transfer" shall mean, when used as a noun, any sale, hypothecation,
pledge, assignment, attachment, disposal, loan, gift, levy or other transfer,
and, when used as a verb, to sell, hypothecate, pledge, assign, attach, dispose,
loan, gift, levy or otherwise transfer; provided, that a "Transfer" shall not
include any conversion (in and of itself) of Preferred Stock to Common Stock.
"UBL" shall mean the Ultimate Band List, LLC, a California limited
liability company and a Subsidiary of the Company.
"Voting Agreement" shall mean that certain Voting Agreement and Power of
Attorney, by and among Geiger, Muller, the Company, ADNM, UBL and Constellation
dated July 28, 1998.
"Meadowlane Designee Threshold" shall mean that Meadowlane and its
Affiliates own in the aggregate, directly or indirectly, Common Stock and
Preferred Stock (on an as converted basis) in an amount not less than 25% of the
Series C Preferred Stock originally issued to Meadowlane and its Affiliates in
accordance with the terms and provisions of the Series C Stock Purchase
Agreement.
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"Yokomoto Deferred Compensation Obligation" shall mean that certain
deferred compensation owed by the Company to Yokomoto pursuant to that certain
Deferred Compensation Agreement dated as of April 1, 1998 by and between the
Company and Yokomoto.
"Universal Designee Threshold" shall mean that Universal and its
Affiliates own in the aggregate, directly or indirectly, Common Stock and
Preferred Stock (on an as converted basis) in an amount not less than 25% of the
Series C Preferred Stock originally issued to Universal and its Affiliates in
accordance with the terms and provisions of the Series C Stock Purchase
Agreement.
ARTICLE II
Common Stockholders; Financing
SECTION 2.1. Issuance of Additional Common Stock or Preferred Stock.
(a) (i) Each of Geiger, Muller, Xxxxx, Constellation, Psilos, Chase,
Xxxxxx Funds, Meadowlane, Universal and, to the extent provided herein, Di Dia,
Gradstein, Van Dalsem, Yokomoto, L&G and Xxxxxx, shall have a preemptive right
to purchase, all (or any part) of their pro rata share of additional Common
Stock and/or Preferred Stock that the Company may, from time to time, propose to
sell and issue to any Person or Persons (each, a "Proposed Issuance"), unless
such Proposed Issuance falls within the exclusions described in (ii) below. For
purposes of this Section 2.1(a), such parties' pro rata share shall equal their
respective Percentages immediately preceding the Proposed Issuance in question.
In the event the Company proposes to undertake a Proposed Issuance of additional
Common Stock and/or Preferred Stock, then, with respect to each such Proposed
Issuance, the Company shall give each of Geiger, Muller, Xxxxx, Constellation,
Psilos, Chase, Xxxxxx Funds, Meadowlane and Universal written notice of its
intention, describing the price and the material terms and conditions upon which
the Company proposes to make such Proposed Issuance. Such parties shall have
fifteen (15) Business Days from the date such notice is given to agree, by
giving written notice to the Company and stating therein the number of shares of
Common Stock and/or Preferred Stock to be issued, to purchase all or any portion
of their respective pro rata share of such additional Common Stock and/or
Preferred Stock for the price and upon the terms and conditions applicable to
the Proposed Issuance; except that the purchase price payable by an electing
Stockholder shall be payable in cash, based on the fair market value of any
non-cash consideration for the Proposed Issuance. If any such party fails to
deliver such notice within such fifteen (15) Business Day period, it shall be
deemed not to have exercised its preemptive right under this Section 2.1(a).
Notwithstanding the foregoing, the Company shall notify any parties not
exercising their respective preemptive rights with respect to all of their
respective pro rata shares hereunder ("Nonexercising Parties") if the price
and/or the terms and/or conditions applicable to the Proposed Issuance are
modified so as to become materially more favorable to such Nonexercising
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Parties than those specified in the initial notice and such Nonexercising
Parties shall then have a new opportunity to participate and shall have ten (10)
Business Days from the date the notice describing the new price and/or terms
and/or conditions is given to agree to purchase all or any portion of their
respective pro rata share of such additional Common Stock and/or Preferred Stock
for the price and upon the terms and/or conditions applicable to the Proposed
Issuance ultimately consummated by giving written notice to the Company and
stating therein the number of additional shares of Common Stock and/or Preferred
Stock to be purchased. If any such Nonexercising Party fails to deliver such
notice within such ten (10) Business Day period, it shall be deemed not to have
exercised its preemptive right under this Section 2.1(a). In addition, the
Company shall notify any parties previously agreeing to exercise their
respective preemptive rights with respect to any of their respective pro rata
shares hereunder (the "Exercising Parties") if the price and/or the terms and/or
conditions applicable to the Proposed Issuance are modified so as to become
materially less favorable or if there is any change in price, to such parties
than those specified in the initial or subsequent notice to such Exercising
Parties, as applicable, and such Exercising Parties shall have the right to
elect not to purchase any Common Stock or Preferred Stock by giving written
notice to the Company of such election within ten (10) Business Days of its
receipt of the notice describing such new price and/or terms and/or conditions.
If any such Exercising Party fails to deliver such notice within such ten (10)
Business Day Period, it shall remain obligated to participate in such Proposed
Issuance. Any party that determines to participate in any transaction in
accordance with this Section 2.1(a) shall have sixty (60) days (commencing on
the expiration of the related notice period) to consummate the purchase from the
Company of their share of such Common Stock or Preferred Stock. Notwithstanding
anything to the contrary in this subparagraph (i), if the Proposed Issuance is
to be made to any party or its respective Affiliates, then such party shall not
have any preemptive rights and shall not be entitled to receive any notices from
the Company with respect to such Proposed Issuance. If, and only if, Xxxxx
exercises his preemptive rights hereunder, Di Dia, Gradstein and Van Dalsem
shall have a preemptive right to purchase all or any part of the product of (x)
his respective pro rata share of the Proposed Issuance and (y) the percentage
(expressed as a decimal) of Xxxxx'x pro rata share with respect to which Xxxxx
exercised his preemptive rights, and the Company shall notify Di Dia, Gradstein
and Van Dalsem of the Proposed Issuance, describing the price and general terms
upon which the Company proposes to make such Proposed Issuance and the
percentage (expressed as a decimal) of Xxxxx'x pro rata share with respect to
which Xxxxx exercised his preemptive right. If, and only if, Xxxxxx and/or
Xxxxxx exercise their respective preemptive rights hereunder, Yokomoto, L&G and
Xxxxxx shall have a preemptive right to purchase all or any part of the product
of (x) his or its respective pro rata share of the Proposed Issuance and (y) the
percentage (expressed as a decimal) of Xxxxxx and Xxxxxx'x combined pro rata
share with respect to which Xxxxxx and/or Xxxxxx exercise their preemptive
rights, and the Company shall notify Yokomoto, L&G and Xxxxxx of the Proposed
Issuance, describing the price and general terms upon which the Company proposes
to make such Proposed Issuance and the percentage (expressed as a decimal) of
Xxxxxx and Xxxxxx'x combined pro rata share with respect to which Xxxxxx and/or
Xxxxxx exercised their preemptive rights. Any exercises by Di Dia, Gradstein,
Van Dalsem, Yokomoto, L&G and/or Xxxxxx shall be in accordance with the
provisions of this Section 2.1(a), and all of the time periods, notice
requirements and other matters set forth herein shall apply as though such
parties were expressly named herein.
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(ii) Notwithstanding subparagraph (i) of this paragraph (a), the
provisions of paragraph (a) shall not be applicable (x) to any issuance of (A)
Common Stock of the Company in a QIPO, (B) Common Stock upon the exercise of any
options or warrants which are outstanding as of the date hereof, (C) Common
Stock issued upon the exercise of options granted pursuant to the Company's
stock option plans or pursuant to employee benefits plans that are approved and
adopted by the Board of Directors (provided that the exercise price of such
options is equal to or greater than the fair market value of the Common Stock
when such options were granted, as determined by the Board of Directors), (D)
Common Stock to be issued upon the exercise of options and warrants to be
granted to lenders and/or vendors of the Company with the approval of the Board
of Directors (provided, that the exercise price of such options and warrants is
equal to or greater than the fair market value of the Common Stock at the time
such options and warrants were issued, as determined by the Board of Directors),
(E) securities issued in connection with one or more acquisitions of securities
or assets of any Person, or (F) Common Stock issued on the conversion of a
Stockholder's Preferred Stock and accrued and unpaid dividends thereon, and (y)
at any time after the earlier of a QIPO or, with respect to each Stockholder,
individually, such time that any such party and their Affiliates own in the
aggregate directly or indirectly (including through the ownership of Preferred
Stock) Common Stock in an amount less than the "Preemptive Threshold," which
shall mean 2% of the Common Stock of the Company, calculated on a fully diluted
basis; provided, however, that when calculating whether any such party has
fallen below the Preemptive Threshold, no effect shall be given to securities
issued in connection with (1) grants to lenders and vendors specified in Section
2.1(a)(ii)(x)(D) above or (2) acquisitions as specified in Section
2.1(a)(ii)(x)(E).
(b) (i) To the extent additional shares of Common Stock are issued
to any third party as a result of a breach of the representation by ARI
contained in Section 6(a)(ii) of that certain Contribution Agreement dated as of
August 5, 1997, by and between ARI and the UBL (the "Contribution Agreement"),
(A) a number of shares equal to twenty percent (20%) of such additional shares
shall be contributed to the Company by Xxxxx, and (B) a number of shares equal
to eighty percent (80%) of such additional shares shall be contributed by the
Stockholders (other than Constellation, Psilos, Dream Media, Kawabe, Chase,
Xxxxxx Funds, Meadowlane and Universal) on a pro rata basis in proportion to
their respective Percentages as of the date of such issuance. Notwithstanding
the foregoing, the Founders and Xxxxx may agree to apportion amongst themselves
any contribution of shares which would otherwise be made solely by Xxxxx.
(ii) To the extent additional shares of Common Stock are
issued to any third party as a result of a breach of the representation by ADNM
contained in Section 6(b)(ii) of the Contribution Agreement, (A) a number of
shares equal to twenty percent (20%) of such additional shares shall be
contributed to the Company by the Stockholders (other than Xxxxx, Constellation,
Psilos, Dream Media, Kawabe, Chase, Xxxxxx Funds, Meadowlane and Universal), on
a pro rata basis in proportion to their respective Percentages as of the date of
such dilutive event and (B) a number of shares equal to eighty percent (80%) of
such additional shares shall be contributed to the Company by the Stockholders
(other than Constellation, Psilos, Dream Media, Kawabe, Chase, Xxxxxx Funds,
Meadowlane and Universal) on a pro rata basis in proportion to their respective
Percentages as of the date of such issuance. Notwithstanding the
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foregoing, the Founders and Xxxxx may agree to apportion amongst themselves any
contribution of shares which would otherwise be made solely by Xxxxx.
(c) Notwithstanding Section 2.1(a), the Stockholders hereby
authorize the Board of Directors to issue additional Common Stock in connection
with the following transactions: any issuance of (A) Common Stock in a QIPO, (B)
Common Stock upon the exercise of options or warrants which are outstanding as
of the date of this Agreement, (C) Common Stock issued upon the exercise of
options granted pursuant to any stock option plan or employee benefits plan that
is approved and adopted by the Board of Directors (provided, that the exercise
price of such options and warrants is equal to or greater than the fair market
value of Common Stock at the time such options and warrants were issued, as
determined by the Board of Directors), (D) Common Stock to be issued upon the
exercise of options and warrants to be granted to lenders and/or vendors of the
Company with the approval of the Board of Directors (provided, that the exercise
price of such options and warrants is equal to or greater than the fair market
value of Common Stock at the time such options and warrants were issued, as
determined by the Board of Directors), (E) securities issued in connection with
one or more acquisitions of securities or assets of any Person, and (F) Common
Stock issued on the conversion of Preferred Stock and accrued and unpaid
dividends thereon.
SECTION 2.2. Drag-along Obligation.
(a) If the Founders find an acquiror for all or any portion of their
Common Stock (whether such sale is by way of purchase of assets or Common Stock,
merger, recapitalization or other form of transaction), and in connection with
such transaction, Xxxx determines not to exercise the Xxxx Redemption Right (as
described in Section 2.5 below and if such right is applicable to such
transaction), then at the request of the Founders, whether or not the Xxxx
Redemption Right is then exercisable, Xxxx shall sell or otherwise transfer the
same percentage of his Common Stock to such acquiror on the same terms and
conditions that apply to the sale or other transfer by the Founders of their
Common Stock. At any time during which the Xxxx Redemption Right shall remain
exercisable: (A) Xxxx shall not be obligated to sell or otherwise transfer his
Common Stock pursuant to this Section 2.2 to any acquiror that is an Affiliate
of the Founders unless the acquiror, the Founders or another Affiliate of the
Founders provides to Xxxx a substantially equivalent right extending for no less
time than the time during which the Xxxx Redemption Right would otherwise then
remain exercisable and (B) Xxxx shall not be obligated to sell or otherwise
transfer his Common Stock pursuant to this Section 2.2 to any acquiror that is
not an Affiliate of the Founders unless the consideration provided to Xxxx is in
the form of cash and/or marketable securities. Xxxx further agrees to timely
take such other actions as the Founders may reasonably request in connection
with the approval of the consummation of such sale or other transfer, including,
voting all of his Common Stock in favor of such sale, waiving any dissenters'
rights, and executing such agreements, powers of attorney, voting proxies or
other documents and instruments as may be necessary or desirable to consummate
such sale or other transfer and, in the event such sale or other transfer is
structured as a recapitalization,
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agreeing to transfer and retain those percentages of his Common Stock as are
requested by the Founders.
(a) If the Founders find an acquiror for all or any portion of their
Common Stock (whether such sale is by way of purchase of assets or Common Stock,
merger, recapitalization, or other form of transaction), and in connection with
such transaction, Xxxxx agrees to sell or otherwise transfer shares of his
Common Stock to such acquiror on the same terms and conditions that apply to the
sale or other transfer by the Founders of their Common Stock, then, at the
request of Founders, each of Di Dia, Gradstein and Van Dalsem shall sell or
otherwise transfer the same percentage of his or its Common Stock as is
transferred by the Founders, to such acquiror on the same terms and conditions
that apply to the sale or other transfer by the Founders of their Common Stock.
Notwithstanding the foregoing, in the event that Xxxxx does not agree to sell or
otherwise transfer any of his Common Stock to the acquiror, each of Di Dia,
Gradstein and/or Van Dalsem may nonetheless agree, in his or its sole
discretion, to transfer at the request of the Founders, the same percentage of
his or its Common Stock to such acquiror on the same terms and conditions that
apply to the sale or other transfer by the Founders of their Common Stock. If Di
Dia, Gradstein and/or Van Dalsem (i) is required to sell or otherwise transfer
Common Stock pursuant to the first sentence of this Section 2.2(b), or (ii)
otherwise agrees to sell or otherwise transfer Common Stock pursuant to the
second sentence hereof, each selling or transferring party further agrees to
timely take such other actions as the Founders may reasonably request in
connection with the approval of the consummation of such sale or other transfer,
including voting all of his or its Common Stock in favor of such a sale, waiving
any dissenters' rights, and executing such agreements, powers of attorney,
voting proxies and other documents and instruments as may be necessary or
desirable to consummate such sale or other transfer and, in the event such sale
or other transfer is structured as a recapitalization, agreeing to transfer and
retain those percentages of his or its Common Stock as are requested by the
Founders.
SECTION 2.3. Tag-Along Rights.
(a) If at any time prior to a QIPO (or thereafter with respect to
any Transfer not involving a Public Market Sale), Xxxxxx or Xxxxxx or any direct
or indirect successor, assignee, heir, devisee, donee, legatee or transferee of
either of them (each a "Transferor"), proposes alone or with others to Transfer
(directly or indirectly) any Equity Securities (each, a "Subject Interest") in
the Company which comprises five percent (5%) or more of all then outstanding
securities of the class of Equity Securities which includes the Subject Interest
(the "Subject Interest Class") in a single transaction or series of transactions
and the Securities include (at such time or upon exercise, conversion or
exchange) any Equity Securities of the Subject Interest Class, the would-be
Transferor shall provide holders of the Equity Securities of the Subject
Interest Class (which for all purposes of this subparagraph (a) shall also
include Xxxxx, Di Dia, Gradstein and Van Dalsem) and each holder of Preferred
Stock which is convertible into the Subject Interest Class with not less than
thirty (30) days' prior written notice of such proposed sale, which notice shall
include all of the material terms and conditions of such proposed sale and which
shall identify such purchaser (the "Sale Notice"), and each such holder shall
have the
12
option, exercisable by written notice to the Transferor within twenty (20) days
after the receipt of the Sale Notice, to participate in such transaction pro
rata with the Transferor at the same time as, and upon the same terms and
conditions as (including all direct or indirect consideration) the Transferor
Transfers his or her Equity Securities in Company. Each such holder may sell all
or any portion of the Securities held by such holder (or issuable to such holder
upon exercise, conversion or exchange of any Security) which are of the class of
Equity Securities which includes the Subject Interest Class (the "Holder's
Securities") equal to the product obtained by multiplying (i) the Subject
Interest by (ii) a fraction, the numerator of which is the Holder's Securities
and the denominator of which is the total number of Equity Securities of the
Subject Interest Class then owned by the Transferor, such holder, any other
holders of Equity Securities of the Company entitled to rights of participation
pursuant to this Section 2.3(a), any holders of Equity Securities issued
pursuant to those warrants outstanding as of the date hereof and any other
holders of Equity Securities entitled to rights of participation pursuant to a
written agreement with Xxxxxx and/or Xxxxxx. To the extent that one or more of
such holders exercises such rights of participation, the number of Equity
Securities that the Transferor may Transfer in the transaction shall be
correspondingly reduced. Where the Equity Securities being transferred are
Common Stock, such calculation shall be based on an assumed conversion of a
Preferred Stockholder's Preferred Stock into Common Stock to the extent such
Preferred Stockholder elects to exercise its rights hereunder.
(b) If any holder fails to exercise its option (each, a
"Non-Participant") to participate in such transaction as set forth in Section
2.3(a) above, the would-be Transferor shall provide notice of such failure to
the holders of the Securities that did exercise their option to participate (the
"Participants"). The Participants shall have ten (10) days from the date such
notice was given to agree to sell their Pro Rata Share of the unsold portion
which all Non-Participants in the aggregate were entitled to sell pursuant to
the provisions of Section 2.3(a) but elected not to sell. For the purposes of
this Section 2.3(b), the term "Pro Rata Share" shall equal the product obtained
by multiplying (i) the unsold portion by (ii) a fraction, the numerator of which
is Holder's Common Stock and Preferred Stock and the denominator of which is the
total number of shares of Common Stock and (on an as converted basis) Preferred
Stock held by all Participants (or issuable to such Participants upon exercise,
conversion or exchange of any Security) which are of the class of Equity
Securities which includes the Subject Interest Class.
(c) The provisions of this Section 2.3 shall not apply to any
Transfer to: (i) Xxxxxx; (ii) Xxxxxx; (iii) a spouse, descendant or parent of
Xxxxxx or Xxxxxx; (iv) a descendant of any Person listed in clauses (i), (ii) or
(iii) above; (v) a trust for the sole benefit of any one or more of the Persons
listed in clauses (i), (ii), (iii) or (iv) above; (vi) ADNM; or (vii) any
controlled Affiliate of any Person listed in clauses (i), (ii), (iii), (iv), (v)
or (vi) above.
SECTION 2.4. Right of First Offer.
A Preferred Stockholder desiring to make a Transfer (a "Selling
Stockholder") pursuant to Section 5.5(c) of this Agreement, shall be required to
give advance notice thereof (a "Transfer Notice") to the Company, including in
such Transfer Notice the number of shares of stock, the
13
price and the other terms and conditions upon which it is willing to sell such
stock. The Company shall have ten (10) Business Days from the date the Transfer
Notice is given (the "First Offer Exercise Period") to elect by notice to the
Selling Stockholder whether or not to purchase the entire quantity of stock so
offered for the price and on the terms and conditions so specified; provided,
however, that if there is more than one Selling Stockholder, the Company shall
elect whether or not to purchase the entire quantity of securities of all
Selling Stockholders. In the event that the Company elects to purchase such
stock on the terms set forth in the Transfer Notices, the Company shall pay the
price so specified on the terms so specified within ninety (90) days of the date
of the Transfer Notice(s), and the Selling Stockholder(s) shall Transfer all
such stock to the Company. If within the First Offer Exercise Period, Company
does not give notice electing to purchase all of such stock, the Selling
Stockholder(s) may Transfer all such stock to any third party (an "Outside
Transferee") at any time after the expiration of the First Offer Exercise
Period, provided the purchase price for such stock is no less than the purchase
price offered to the Company, and the other terms offered to the Outside
Transferee are no more favorable to the Selling Stockholder than those set forth
in the Transfer Notice. Notwithstanding the proceeding sentence, if the Selling
Stockholder(s) do not Transfer such stock as provided in the preceding sentence
within one hundred twenty (120) days after the expiration of the First Offer
Exercise Period, any Transfer by the Selling Stockholder(s) of its stock shall
again be subject to the terms of this Section 2.4. Any subsequent Transfer of
stock previously Transferred in accordance with the provisions of this Section
2.4 shall not be subject to this Section 2.4. The Company may assign its rights
under this Section 2.4 to any transferee designated by its Board of Directors;
provided that if any such transferee is an existing Stockholder (or its
Affiliate), the Company shall offer each other existing Stockholder who is a
party to this Agreement (or who was transferred Preferred Stock or Common Stock
in accordance with the provisions of Article V) a pro-rata portion of such
rights based on the total number of Equity Securities of the Company held by all
Stockholders.
SECTION 2.5. Redemption of Stock at the Option of Xxxx.
(a) Triggering Events. Upon a "Triggering Event" (as defined below),
Xxxx shall have the right (the "Xxxx Redemption Right") to cause the Company,
upon written notice by Xxxx as described below, to redeem all (but not less than
all) of the "Subject Shares" (as defined below) then held by Xxxx, for an
aggregate purchase price (the "Xxxx Redemption Price") equal to the product of
Two Million Eight Hundred Thousand Dollars ($2.8 million) and a fraction, the
numerator of which is the number of Subject Shares then held by Xxxx, and the
denominator of which is the total number of Subject Shares. For purposes of the
preceding sentence, "Subject Shares" shall mean the aggregate number of shares
of Common Stock of the Company originally issued to Xxxx pursuant to the terms
of the Operating Agreement, as the foregoing may be adjusted from time to time.
In the event that Xxxx sells or otherwise transfers less than all of the Subject
Shares pursuant to Section 2.2 of this Agreement, the Xxxx Redemption Price
shall be increased or decreased, as applicable, by an amount equal to: (1) the
Xxxx Redemption Price that would be payable to Xxxx upon exercise of the Xxxx
Redemption Right if the Subject Shares sold by Xxxx pursuant to Section 2.2 of
this Agreement were the only Subject Shares then held
14
by Xxxx minus (2) the Fair Market Value of the consideration received by Xxxx in
respect of the Subject Shares so sold or otherwise transferred pursuant to
Section 2.2 of this Agreement. For example, if, pursuant to Section 2.2 of this
Agreement, Xxxx sells or otherwise transfers fifty percent (50%) of the Subject
Shares to a third party in a bona fide transaction for consideration having a
Fair Market Value equal to $1,000,000, the Xxxx Redemption Price with respect to
the remaining Subject Shares would be increased by $400,000 (i.e., from
$1,400,000 to $1,800,000). Alternatively, if the Fair Market Value of such
consideration instead were $2,000,000, the Xxxx Redemption Price with respect to
the remaining Subject Shares would be decreased by $600,000 (i.e., from
$1,400,000 to $800,000). For purposes of this Section 2.5, "Triggering Event"
shall mean the earlier to occur of any of the following: (x) February 17, 2002
(the "Termination Date"); (y) a merger or sale of all or substantially all of
the assets or equity of the Company at any time on or before the Termination
Date with or to a third party unaffiliated with the Company; or (z) consummation
by the Company of an initial public offering of shares of equity securities at
any time on or before the Termination Date; provided, that with respect to a
Triggering Event specified in clause (x), if within thirty (30) calendar days of
the Termination Date, Xxxx has not notified the Company in writing that he
elects to exercise the Xxxx Redemption Right, then such right shall immediately
expire and be of no further force or effect (and regardless of whether other
"Triggering Events" may subsequently occur). In the event of a Triggering Event
specified in clauses (y) or (z) above, the Company will provide Xxxx with prior
written notice of the potentiality of such event (including written materials
that describe the basic terms of the relevant transaction and including, in the
case of an initial public offering, the estimated public offering price range),
and Xxxx shall provide the Company with notice in writing within fifteen (15)
calendar days of the receipt of the Company's notice as to whether or not Xxxx
wishes to exercise the Xxxx Redemption Right in connection with the consummation
of the relevant transaction. In all such events, to the extent that Xxxx
provides written notice that he does not wish to exercise the Xxxx Redemption
Right, or fails to provide such notice within the relevant period of time, as
applicable, the Xxxx Redemption Right shall immediately expire and be of no
further force or effect (and regardless of whether other "Triggering Events" may
subsequently occur). In the event that the Triggering Event specified in clause
(x) above has occurred and Xxxx has properly elected to exercise the Xxxx
Redemption Right as specified in this subparagraph (a), the Xxxx Redemption
Price may at the election of the Company be paid in six (6) substantially equal
monthly installments, with eight percent (8%) simple interest, commencing on the
first day of the month following the date that the Company has received its
notice from Xxxx; provided, that the Company may elect to prepay the Xxxx
Redemption Price in full at any time without penalty.
(b) Rights of Xxxx Pending Payment. Until such time as the Xxxx
Redemption Price plus accrued interest in respect thereof is paid in full, Xxxx
shall retain all rights in respect of his Common Stock as if no such redemption
had occurred. Upon payment in full of the Xxxx Redemption Price and any accrued
interest thereon, the Common Stock previously held by Xxxx shall be canceled.
(c) Special Right in Liquidation. Notwithstanding anything contained
in the Company's Certificate of Incorporation to the contrary, in the event of a
Liquidation (as defined
15
in Section 2 of the Certificate of Incorporation), and notwithstanding the order
of priority contained in Section 2(a) of the Certificate of Incorporation, if
the Xxxx Redemption Right shall not have expired and Xxxx elects to exercise
such Xxxx Redemption Right in connection with such Liquidation, an amount equal
to the Xxxx Redemption Price as calculated pursuant to Section 2.5(a) above (and
regardless of whether such Liquidation constitutes a Triggering Event under such
Section), shall be payable to Xxxx, on or before any amounts are distributed
among the holders of the Company's Common Stock and Preferred Stock pursuant to
Section 2(a)(iii) contained therein, but after the amounts payable to the
holders of the Series A Preferred Stock, the holders of the Series B Preferred
Stock and the holders of the Series C Preferred Stock have been paid to such
holders pursuant to Section 2(a)(i) and 2(a)(ii), respectively, contained in
such Certificate of Incorporation.
SECTION 2.6. Mandatory Redemption of Founders' Common Stock.
In the event that Elson exercises his option to acquire Common Stock of
the Company pursuant to the Elson Option, the Corporation shall automatically
redeem an amount of shares of Common Stock from each of the Founders equal to
50% of the number of shares of Common Stock issued to Elson. The amount payable
by the Company to each of Xxxxxx and Xxxxxx in connection with such redemption
shall be equal to 50% of the number of shares of Common Stock redeemed
multiplied by the issue price per unit paid by Elson. The amount payable
hereunder shall be paid in cash or immediately available funds within thirty
(30) days after the exercise (and payment of the exercise price) of the Elson
Option.
ARTICLE III
Board of Directors
SECTION 3.1. Composition. During the term of this Agreement as set forth
in Section 6.1 hereof (the "Term"), the Stockholders and, to the extent
permitted by law, the Company, shall take such corporate actions as may be
reasonably required to ensure that (i) the number of Directors constituting the
Board of Directors shall at all times be nine (9) and (ii) such Directors shall
be nominated in accordance with Section 3.2 hereof.
SECTION 3.2. Nomination. During the Term, the Stockholders shall vote all
of the shares of the Company's voting securities now or hereafter owned by them,
whether beneficially or otherwise, and take all appropriate corporate action to
elect the following nominees as Directors of the Company:
(a) By Constellation. One Director shall be designated by
Constellation by the joint written instructions of Constellation Domestic and
Constellation Offshore, subject to the reasonable approval of a Majority of
Stockholders, and may be removed only by the joint written instructions of
Constellation Domestic and Constellation Offshore; provided, however, that
16
Constellation shall no longer have the right to designate and remove its
Director from and after such time as Constellation shall no longer meet the
Constellation Designee Threshold.
(b) By Chase. One Director shall be designated by Chase by the
written instructions of Chase, subject to the reasonable approval of a Majority
of Stockholders, and may be removed only by the written instructions of Chase;
provided, however, that Chase shall no longer have the right to designate and
remove its Director from and after such time as Chase shall no longer meet the
Chase Designee Threshold.
(c) By Meadowlane. Promptly following expiration or early
termination of the applicable waiting period, if any, under the HSR Act with
respect to the transactions contemplated by the Series C Stock Purchase
Agreement, one Director shall be designated by Meadowlane by the written
instructions of Meadowlane, subject to the reasonable approval of a Majority of
Stockholders, and may be removed only by the written instructions of Meadowlane;
provided, however, that Meadowlane shall no longer have the right to designate
and remove its Director from and after such time as Meadowlane shall no longer
meet the Meadowlane Designee Threshold.
(d) By Universal. One Director shall be designated by Universal by
the written instructions of Universal, subject to the reasonable approval of a
Majority of Stockholders, and may be removed only by the written instructions of
Universal; provided, however, that Universal shall no longer have the right to
designate and remove its Director from and after such time as Universal shall no
longer meet the Universal Designee Threshold.
(e) By Xxxxxx and Xxxxxx. Five Directors shall be designated and may
be removed by Xxxxxx and Xxxxxx (acting collectively and not individually), and
subject to the approval of a Majority of the Stockholders, which approval shall
not be unreasonably withheld. Upon the termination of each of Constellation's
and/or Chase's and/or Meadowlane's and/or Universal's rights to designate a
Director pursuant to Section 3.2(a), (b) and (c) above, respectively, the
seventh and/or eighth and/or ninth Directors also shall be designated and may be
removed by Xxxxxx and Xxxxxx (acting collectively and not individually) pursuant
to this Section 3.2(d). Notwithstanding the foregoing, at all times at least one
of the Directors designated by Xxxxxx and Xxxxxx shall be an independent
individual (the "Independent Director") with relevant industry experience.
SECTION 3.3. Removal/Replacement. Each nomination or any proposal to
remove any Director from the Board of Directors shall be made by delivering to
the Company a notice signed by the party or parties entitled to such nomination
or proposal. As promptly as practicable, but in any event within ten (10) days
after delivery of such notice, the Company shall take or cause to be taken such
corporate actions as may be reasonably required to cause the election or removal
proposed in such notice. Such corporate actions may include calling a meeting or
soliciting a written consent of the Board of Directors, or calling a meeting or
soliciting a written consent of the Stockholders. Upon the resignation of a
Director, or upon a Director's death or incapacity,
17
Constellation (in the case of the Constellation appointed Director), Chase (in
the case of the Chase appointed Director), Meadowlane (in the case of the
Meadowlane appointed Director), Universal (in the case of the Universal
appointed director) or Xxxxxx and Xxxxxx (acting collectively and not
individually) (in the case of a Director appointed by Xxxxxx and Xxxxxx) shall
designate a replacement Director, subject in each case to the approval of a
Majority of the Stockholders, which approval shall not be unreasonably withheld.
SECTION 3.4. Committees.
(a) Audit Committee. The Audit Committee shall consist of at least
two but not more than three members of the Board of Directors. One member of the
Audit Committee shall be the Chase Director (provided that Chase's right to
designate a Director pursuant to Section 3.2(b) above has not terminated) and
one member shall be the Independent Director. In addition, so long as
Constellation's right to designate a Director pursuant to Section 3.2(a) above
has not terminated, Constellation shall have the right to have its Director
appointed as the third member of the Audit Committee.
(b) Compensation Committee. The Compensation Committee shall consist
of three members of the Board of Directors. One member of the Compensation
Committee shall be the Constellation Director (provided that Constellation's
right to designate a Director pursuant to Section 3.2(a) above has not
terminated), one member shall be the Chase Director (provided that Chase's right
to designate a Director pursuant to Section 3.2(b) above has not terminated),
and the third member shall be the Independent Director.
(c) Additional Committees. Each of Constellation and Chase shall be
entitled to designate a member of any additional committee of the Board of
Directors. The right of Constellation and Chase to appoint a member to any
additional committees of the Board of Directors shall cease upon the termination
of their respective rights to designate a Director pursuant to Section 3.2(a)
and Section 3.2(b) above.
SECTION 3.5. Voting. Each Stockholder shall vote all shares of the
Company's voting securities now or hereafter owned by them, whether beneficially
or otherwise, for the election to the Board of Directors of all individuals
nominated in accordance with Section 3.2, 3.3 and 3.4 and for the removal from
the Board of all Directors proposed to be removed in accordance with Section
3.3. No Stockholders will take any actions, including voting its shares or
giving a proxy over the shares, in a manner which is inconsistent with the
provisions of this Article III.
SECTION 3.6. Board Observer Rights. Upon the termination of
Constellation's right to designate a Director pursuant to Section 3.2(a) above,
or the election of Constellation not to designate a Director pursuant to Section
3.2(a) above, Constellation Domestic, Constellation Offshore, or any single
transferee of either of them, by the joint written instruction of Constellation
Domestic and Constellation Offshore, shall be entitled to designate one
non-voting observer (the "Constellation Observer") to be admitted to each
meeting of the Board of Directors
18
of the Company, including telephonic meetings, such designation subject to the
reasonable approval of the Board of Directors. Upon the termination of Chase's
right to designate a Director pursuant to Section 3.2(b) above, or the election
of Chase not to designate a Director pursuant to Section 3.2(b) above, Chase or
any single transferee thereof, by written instruction of Chase, shall be
entitled to designate one non-voting observer (the "Chase Observer") to be
admitted to each meeting of the Board of Directors of the Company, including
telephonic meetings, such designation subject to the reasonable approval of the
Board of Directors. Upon the termination of Meadowlane's right to designate a
Director pursuant to Section 3.2(c) above, or the election of Meadowlane not to
designate a Director pursuant to Section 3.2(c) above, Meadowlane or any single
transferee thereof, by written instruction of Meadowlane, shall be entitled to
designate one non-voting observer (the "Meadowlane Observer") to be admitted to
each meeting of the Board of Directors of the Company, including telephonic
meetings, such designation subject to the reasonable approval of the Board of
Directors. Upon the termination of Universal's right to designate a Director
pursuant to Section 3.2(d) above, or the election of Universal not to designate
a Director pursuant to Section 3.2(d) above, Universal or any single transferee
thereof, by written instruction of Universal, shall be entitled to designate one
non-voting observer (the "Universal Observer") to be admitted to each meeting of
the Board of Directors of the Company, including telephonic meetings, such
designation subject to the reasonable approval of the Board of Directors. Xxxxxx
Funds and Psilos, and Xxxxx at any time when he is not then a Director, shall
each also, by written instruction, be entitled to designate one non-voting
observer (the "Xxxxxx Observer," the "Psilos Observer," and the "Xxxxx
Observer," respectively, and collectively with the Constellation Observer, the
Chase Observer, the Meadowlane Observer and the Universal Observer, the
"Observers") to be admitted to such meetings, such designation also subject to
the reasonable approval of the Board of Directors. The Company shall give the
Observers written notice of each meeting of the Board of Directors at the same
time and in the same manner as it is required to notify Directors. In addition,
the Company shall deliver to the Observers all written materials and other
information (including, without limitation, copies of the minutes of all
meetings and written consents in lieu of meetings, along with all attachments
thereto and written notice of the effectiveness of any such written consent)
provided or available to the Directors in connection with meetings or written
consents at such time and in the same manner that such materials and information
are provided to the Directors. The Observers shall have all of the rights of a
Director (including the right to attend any meeting), except for the right to
vote on any matters or attend meetings of Committees of the Board of Directors.
SECTION 3.7. Expenses. The Company shall reimburse Directors for
reasonable expenses incurred in connection with attendance at meetings of the
Board of Directors and committees thereof.
SECTION 3.8. Related Party Transactions. The Company shall not enter into
any agreement with any Stockholder, manager, officer or director of the Company,
or any "affiliate" or "associate" of such persons (as such terms are defined in
the rules and regulations promulgated under the Securities Act), including
without limitation any agreement or other arrangement providing for the
furnishing of services by, rental of real or personal property from,
19
or otherwise requiring payments to, any such person or entity, without the
consent of at least a majority of the directors of the Board of Directors having
no interest in such agreement or arrangement.
ARTICLE IV
Covenants and Agreements of the Company
SECTION 4.1. Errors and Omissions Policy.
The Company shall secure and maintain at all times an errors and omissions
insurance policy (covering, among others, the officers and directors of the
Company) with a stated policy limit of no less than $1,000,000 (which will be
increased to $5,000,000 upon consummation of a QIPO). Xxxxx, Constellation,
Psilos, Chase, Meadowlane and Universal shall be additional named insureds on
such policy so long as such coverage of Xxxxx, Constellation, Psilos, Chase,
Meadowlane and Universal is reasonably available at a reasonable cost.
SECTION 4.2. Life Insurance.
The Company has secured and shall maintain at all times life insurance
policies for Xxxxxx and Xxxxxx in the principal amount of $2,000,000 each. The
Company will be the beneficiary of the policies. The applicable policy will be
terminated if Xxxxxx or Xxxxxx is no longer a direct or indirect Common
Stockholder of the Company.
SECTION 4.3. Books and Records.
The Company will keep accurate books and records relating to transactions
with respect to the assets of the Company based on book values using federal
income tax accounting principles. The Company will also keep the following books
and records at the Company's principal office: (a) a current list of the full
name and last known business, residence or mailing address of each Stockholder,
(b) a copy of the Company's Certificate of Incorporation and Bylaws and of this
Agreement, (as well as any signed powers of attorney pursuant to which any such
document was executed); (c) a copy of the Company's federal, state and local
income tax returns and reports, and annual financial statements of the Company,
for all Fiscal Years as to which the applicable statute of limitations have not
run; and (d) minutes, or minutes of action (or written consent without a
meeting), of every meeting of the Stockholders or the Board of Directors.
SECTION 4.4. Information.
(a) Each Stockholder (other than Di Dia, Gradstein and Van Dalsem)
has the right to the fullest extent granted under the DGCL to obtain from the
Company: (i) a current list of the full name and last known business, residence
or mailing address of each Stockholder; (ii) a copy
20
of the Certificate of Incorporation, Bylaws and of this Agreement (as well as
any signed powers of attorney pursuant to which any such document was executed);
(iii) a copy of the Company's federal, state and local income tax returns and
reports, and annual financial statements of the Company, for all Fiscal Years as
to which the applicable statute of limitations have not run; and (iv) minutes
(or written consents without a meeting) of every meeting (or action taken by
consent) of the Stockholders and the Board of Directors.
(b) The Company shall deliver to each Stockholder (other than Di
Dia, Gradstein and Van Dalsem), as soon as practicable, but in any event within
90 days after the end of each Fiscal Year of the Company, audited financial
statements, including an income statement of the Company for such period and a
balance sheet and statement of the stock held by each Stockholder as of the end
of such period. Such audited financial statements shall be prepared in
accordance with U.S. GAAP and audited by a Big Five accounting firm or a firm of
similar reputation and standing.
(c) Financial Statements. Until the earlier of a QIPO or such time
as Chase, Constellation, Xxxxxx Funds, Psilos, Meadowlane, Universal or Xxxxx,
as applicable, together with its respective Affiliates own in the aggregate
directly or indirectly, Common Stock and/or Preferred Stock of the Company (on
an as converted basis) with a fair market value of less than $200,000 (the
"Information Threshold"), the Company shall deliver to Chase, Constellation,
Xxxxxx Funds, Psilos, Meadowlane, Universal or Xxxxx, as applicable, the
following information; provided, however, that if the Information Threshold is
not then met at the time any of the information in Sections 5.4(c)(i) through
(iv) is required to be delivered by the Company and the Company is otherwise
delivering such information to any other Stockholder (other than any Stockholder
that receives such information on a confidential basis in connection with the
provision of services to the Company or any of its Subsidiaries), then such
information shall also be delivered to Chase, Constellation, Xxxxxx Funds,
Psilos, Meadowlane, Universal and Xxxxx:
(i) Monthly Statements. As soon as available, and in any event
within thirty (30) days after the end of each month, copies of the consolidated
and consolidating balance sheets of Company and its Subsidiaries as of the end
of such month, and statements of income and retained earnings and statements of
cash flows of Company and its Subsidiaries for such month and for the portion of
the Fiscal Year ending with such month, in each case setting forth in
comparative form the figures for the corresponding period of the preceding
Fiscal Year, all in reasonable detail, and certified by the chief financial
officer of Company as being true and correct and as having been prepared in
accordance with GAAP, subject to year-end audit adjustments;
(ii) Quarterly Statements. As soon as available, and in any
event within forty-five (45) days after the end of each respective quarterly
fiscal period (except the last) of each Fiscal Year of Company, copies of the
consolidated and consolidating balance sheets of Company and its Subsidiaries as
of the end of such quarterly fiscal period, and the respective statements of
income and retained earnings and statements of cash flows of Company and its
21
Subsidiaries for such quarterly fiscal period and for the portion of the Fiscal
Year ending with such period, in each case setting forth in comparative form the
figures for the corresponding period of the preceding Fiscal Year, all in
reasonable detail, and certified by the chief financial officer of Company, as
appropriate, as being true and correct and as having been prepared in accordance
with GAAP, subject to year-end audit adjustments;
(iii) Annual Statements. As soon as available and in any event
within ninety (90) days after the close of each respective Fiscal Year of the
Company, copies of the audited consolidated and consolidating balance sheets of
the Company as of the close of such Fiscal Year and the respective audited
statements of income and retained earnings and statements of cash flows of the
Company for such Fiscal Year, in each case, setting forth in comparative form
the figures for the preceding Fiscal Year, all in reasonable detail and
accompanied by an opinion thereon (which shall not be qualified by reason of any
limitation imposed by the Company) of a "Big Five" (or comparable) independent
public accounting firm selected by the Company and reasonably satisfactory to
Purchasers to the effect that such financial statements have been prepared in
accordance with U.S. GAAP and fairly present the financial conditions and
results of operations of the Company and that the examination of such accounts
in connection with such financial statements has been made in accordance with
generally accepted auditing standards and, accordingly, includes such tests of
the accounting records and such other auditing procedures as were considered
necessary in the circumstances;
(iv) Audit Reports. Within five (5) days of receipt thereof,
one copy of each written report submitted to the Company by independent
accountants in any annual, quarterly or special audit made.
(v) Annual Operating Plan and Projections. The Company will
deliver to the Board of Directors within 30 days prior to the beginning of each
quarter and each Fiscal Year an operating plan with respect to such quarter or
Fiscal Year, as the case may be (each, an "Operating Plan"), and each Operating
Plan shall include with respect to Company and its Subsidiaries projected
consolidated balance sheets, projected consolidated cash flow statements,
including summary details of cash disbursements (including for capital
expenditures), and projected consolidated income statements, in each case for
any Fiscal Year on a quarterly basis with appropriate supporting details, and
each Operating Plan shall have been approved by the Audit Committee of the
Company. To the extent practicable, the Company shall, and shall cause each of
its Subsidiaries to, conduct its business and operations in a manner that is
consistent with the Operating Plan that relates to such quarter or Fiscal Year.
(vi) Other Information. If requested by any of Chase,
Constellation, Xxxxxx Funds, Psilos, Meadowlane, Universal or Xxxxx, the Company
will deliver to Chase, Constellation, Xxxxxx Funds, Psilos, Meadowlane,
Universal or Xxxxx, as applicable, such other information respecting the
Company's or any of its Subsidiaries' business, financial condition or prospects
as Chase, Constellation, Xxxxxx Funds, Psilos, Meadowlane, Universal or Xxxxx
may, from time to time, reasonably request.
22
(d) Access. For so long as the Information Threshold is met, the
Company shall permit representatives of any of Chase, Constellation, Xxxxxx
Funds, Meadowlane, Universal and Xxxxx to visit and inspect any of the
properties of such Company, to examine the corporate books and records and make
copies or extracts therefrom and to discuss the affairs, finances and accounts
of such Company with the officers, employees, counsel, accountants, independent
auditors or other representatives of such Company, all at such reasonable times,
upon reasonable notice and as often as Chase, Constellation, Xxxxxx Funds,
Meadowlane, Universal or Xxxxx, as applicable, may reasonably request.
(e) Maintenance of Existence and Conduct of Business. The Company
shall, and shall cause its Subsidiaries to: (i) maintain insurance coverages and
their books, accounts and records in the ordinary course of business and
consistent with past practice; (ii) use its commercially reasonable best efforts
to comply in all material respects with all Laws applicable to the Company;
(iii) maintain and keep their material properties and equipment in good repair,
working order and condition, ordinary wear and tear excepted; (iv) maintain,
preserve and protect all of its Intellectual Property; (v) pay and discharge
when payable all taxes, assessments and charges imposed upon its properties or
assets or upon the income or profits therefrom (in each case before the same
becomes delinquent and before penalties accrue thereon) and (vi) perform in all
material respects their obligations under all Material Contracts and commitments
to which any of them is a party or by which any of them or their respective
property or assets is bound, except where the failure to so perform would not
have a Material Adverse Effect.
(f) QIPO Allocation Right. The Company shall reasonably attempt,
subject to the approval of its lead underwriter (in such underwriter's sole
discretion), to provide each Series B Preferred Stockholder and Xxxxx with the
option to purchase up to that portion of the primary shares issued by the
Company in a QIPO multiplied by the fully diluted ownership percentage in the
Company then held by such Series B Preferred Stockholder or Xxxxx, as
applicable.
(g) Voting Agreements. Every eleven (11) months (calculated from
July 28, 1998) and from time to time, upon the reasonable request of the
Preferred Stockholders, each of Xxxxxx and Xxxxxx shall execute and deliver (i)
a new voting agreement and power of attorney in form and substance substantially
similar to that previously entered into and (ii) such other documents as may be
necessary in the opinion of counsel to the Preferred Stockholders to give effect
to the Founders Voting Agreement and Power of Attorney dated July 28, 1998.
(h) Employee Agreements. The Company shall require all employees and
independent contractors to enter into a confidentiality and invention agreement
that among other things, assigns all of the employee's or independent
contractor's inventions and works for hire made during work hours to the
Company.
(i) Rights Under Issuance Agreements. Each Preferred Stockholder
shall be designated as "Other Members" under the respective Issuance,
Noncompetition and
23
Nonsolicitation Agreements between the Company and each of Xxxxx Xxxxxxxx, Xxxxx
Xxxxxx and Xxxxxx Xxxxx. The right of Preferred Stockholders to be so designated
"Other Members" pursuant to this Section 4.4(i) shall terminate with respect to
Company upon the date the Preferred Stockholders shall no longer satisfy the
applicable "Preemptive Threshold" as defined herein.
ARTICLE V
Transfer Restrictions
SECTION 5.1. Restrictions on Transfer of Stock.
No Person shall directly or indirectly Transfer any share of Common Stock
or Preferred Stock except as may be expressly permitted by this Agreement and,
if applicable, subject to the Voting Agreement.
(a) Except as provided in Section 5.1(c), no Person shall Transfer
any share of Common Stock or Preferred Stock without the consent of the Board of
Directors.
(b) No share of Common Stock or Preferred Stock may be Transferred
unless the transferee executes and delivers to the Chief Executive Officer an
instrument pursuant to which it agrees to be bound by the terms of this
Agreement.
(c) Subject to Section 5.1(d), (i) an individual Stockholder may
assign, without consent, all or any of such Stockholder's shares of Common Stock
or Preferred Stock to such Stockholder's spouse, or to a descendant or parent,
of such Stockholder, or to descendants of any of them, or, in the case of L&G,
to the partners of L&G, or to a trust or entity for the sole benefit of any one
or more of the foregoing but such Stockholder shall retain all voting rights
with respect to such Common Stock or Preferred Stock, and any such assignee
shall have no voting rights or other voice in the management of the Company
unless such assignee shall have executed and delivered to the Chief Executive
Officer an instrument pursuant to which it agrees to be bound by this Agreement
and (ii) Xxxxx may assign, without consent, all or any of its shares of Common
Stock to his spouse, descendant or parent, or to descendants of any of them, to
a trust for the sole benefit of any one or more of the foregoing, or to a Xxxxx
Entity (any such permitted assignee is referred to herein as a "Permitted Xxxxx
Assignee"); provided, however, that Xxxxx shall retain all voting rights with
respect to such Common Stock, and no Permitted Xxxxx Assignee shall have any
voting rights or other voice in the management of the Company unless such
assignee shall have executed and delivered to the Chief Executive Officer an
instrument pursuant to which it agrees to be bound by this Agreement. The
Stockholders hereby consent to the issuance of Common Stock to a Xxxxx Entity in
the event that Xxxxx assigns all, but not less than all, of his shares of Common
Stock to one or more Permitted Xxxxx Assignees and such Common Stockholder shall
succeed to all of the rights and benefits of Xxxxx set forth herein.
24
(d) No Transfer of Common Stock or Preferred Stock, or Transfer of
an indirect interest in the Company shall be made if such Transfer, or the
transferee's, as the case may be, ownership of such Common Stock or Preferred
Stock or indirect interest in the Company, would:
(i) result in the violation of the Securities Act of 1933 or
any other applicable federal or state laws;
(ii) be a violation of or a default (or an event that, with
notice or the lapse of time or both, would constitute a default) under, or
result in an acceleration of any Indebtedness under, any note, mortgage, loan
agreement or similar instrument or document to which the Company is a party;
(iii) be a Transfer to an individual who is not legally
competent or who has not achieved his or her majority under the law of the state
(excluding trusts for the benefit of minors); or
(iv) cause the Company or any Stockholder (other than the
transferee) to be subject to any excise tax pursuant to Chapter 42A of Subtitle
D of the Code.
The Company shall not transfer on its books any Common Stock or Preferred
Stock, unless, in the opinion of counsel to the Company, there has been
compliance with all of the material conditions hereof affecting the Common Stock
or Preferred Stock and any such attempted Transfer in violation of this
Agreement shall be void and of no effect.
SECTION 5.2. [Intentionally Omitted].
SECTION 5.3. Transferee Rights.
Any transferee of Common Stock or Preferred Stock who is not transferred
Common Stock or Preferred Stock in accordance with this Agreement shall not have
any rights under this Agreement and shall only have the rights of a Stockholder
as provided by Delaware law. To the extent of any Common Stock or Preferred
Stock Transferred, the transferor Stockholder shall not possess any right or
power as a Stockholder under the terms of this Agreement and may not exercise
any such right or power directly or indirectly on behalf of the transferee.
SECTION 5.4. Effect of Transfer.
Any Stockholder that makes a Transfer of all of the shares of Common Stock
or Preferred Stock held of record by such Stockholder will be treated as
resigning from any and all positions with the Company and shall immediately
cause any and all of its designees and representatives to resign immediately
from any and all positions held with the Company on the effective date of such
Transfer. Any Stockholder that makes a Transfer of some (but not all) of its
shares of
25
Common Stock or Preferred Stock will continue as a Stockholder (with respect to
the shares of Common Stock or Preferred Stock retained). The rights and
obligations of any resigning Stockholder or of any transferee of Common Stock or
Preferred Stock will be governed by the other provisions of this Agreement.
SECTION 5.5. Transfer Limitations.
Transfers by Constellation, Psilos, Chase, Xxxxxx Funds Meadowlane or
Universal shall not be subject to Section 5.1(a). These Stockholders shall have
the right to Transfer all or any portion of their respective Preferred Stock (or
Common Stock received upon conversion pursuant to the Certificate of
Incorporation) so long as Transfers are made only to:
(a) Affiliates;
(b) the partners or members of such Stockholders, if partnerships
(and the equityholders of any successor entities thereto), and their Affiliates;
(c) up to three Persons that are not Affiliates (and their
Affiliates) of such Stockholders; provided, that a material part of the business
of such Person is not (i) the ownership or operation of a music Web site which
is competitive in any material respect to the Company's or any of its
Subsidiaries' businesses or (ii) any World Wide Web site that sells or offers to
sell music-related products or services, including, without limitation,
"Records," which shall mean any devices or other means, whether utilizing
technology existing as of the date hereof or devised hereafter, on or by which
sound may be recorded, transmitted or reproduced, with or without a visual
reproduction, primarily for home and/or consumer use, including, without
limitation, analog disc records, analog tape cassettes, compact discs,
mini-discs, digital audio tapes, video cassettes, laser discs, and downloading
via the internet; and
(d) Persons as to which the Board of Directors consents.
Notwithstanding anything herein to the contrary, any Person to whom Common Stock
or Preferred Stock is Transferred in accordance with this Section 5.5 shall be
entitled to the rights and subject to the obligations of the transferring
Stockholder pursuant to this Agreement and as specified and qualified in the
Second Securities Purchase Agreement; provided, that such transferee Stockholder
shall have voting rights but no right to designate a Director or a member of any
committee of the Board of Directors unless the transferee Stockholder is
transferred 75% of the Equity Securities of the transferor Stockholder and the
transferor Stockholder so notifies the Company in writing thereof. The
restrictions on Transfers contained in this Section 5.5 shall terminate upon the
closing of a QIPO and shall terminate as to Common Stock or Preferred Stock upon
the closing of any other initial public offering of securities of the Company.
Any amendment of this Section 5.5 which is adverse to a Stockholder shall only
be binding as to those holders of Common Stock or Preferred Stock which agree in
writing thereto, and any
26
amendment of this Section 5.5 for the benefit of any Stockholder shall apply to
all Stockholders who otherwise would have rights under this Section 5.5.
ARTICLE VI
General Provisions
SECTION 6.1. Amendment; Termination.
(a) No amendment shall be made to Section 3.6 hereof without the
consent of the Person entitled to designate the Observer pursuant to such
section and, for so long as the Designee Threshold is satisfied, no amendment
shall be made to Section 3.2(a), 3.2(b) or 3.2(c), 3.2(d) or the definitions of
"Chase Designee Threshold," "Constellation Designee Threshold," "Meadowlane
Designee Threshold" or "Universal Designee Threshold," as applicable, contained
in Section 1.1 hereof without the consent of Constellation, Chase, Meadowlane or
Universal, as applicable, and no amendment shall be made to Section 3.2(e)
without the consent of Xxxxxx and Xxxxxx. No course of performance or other
conduct subsequently pursued or acquiesced in, and no oral agreement or
representation subsequently made, by the Stockholders, whether or not relied or
acted upon, and no usage of trade, whether or not relied or acted upon, shall
amend this Agreement or impair or otherwise affect any Stockholder's obligations
pursuant to this Agreement or any rights and remedies of a Stockholder pursuant
to this Agreement. No amendment shall be made to this Agreement without the
prior written consent of those parties that are adversely affected thereby.
(b) This Agreement shall terminate and all rights and obligations
hereunder shall cease upon the occurrence of any of the following:
(i) the written agreement of the Stockholders;
(ii) the tenth anniversary of the date hereof;
(iii) All Stockholders together shall own less than 10% of the
Common Stock outstanding (calculated on a fully diluted basis);
(iv) except as provided in Section 2.5(c) with respect to the
Xxxx Redemption Right, the dissolution, liquidation or winding up of the
Company; or
(v) the consummation of a QIPO (provided, that the provisions
contained in Section 2.3 relating to Transfers after a QIPO not involving a
Public Market Sale, the provisions contained in Section 2.6 regarding the
mandatory redemption of the Founders' Common Stock, and the provisions contained
in Section 4.1 relating to errors and omissions insurance, shall survive the
consummation of a QIPO, and shall only terminate in accordance with the other
provisions contained in this Section 6.1(b)).
27
SECTION 6.2. Waivers Generally.
No delay in the exercise of any right will operate as a waiver of such
right. No single or partial exercise of any right will preclude its further
exercise. A waiver of any right on any one occasion will not be construed as a
bar to, or waiver of, any such right on any other occasion.
SECTION 6.3. Equitable Relief.
If any Stockholder proposes to Transfer its Common Stock or Preferred
Stock in violation of the terms of this Agreement, the Company or any
Stockholder may apply to any court of competent jurisdiction for an injunctive
order prohibiting such proposed Transfer except upon compliance with the terms
of this Agreement, and the Company or any Stockholder may institute and maintain
any action or proceeding against the Person proposing to make such Transfer to
compel the specific performance of this Agreement. Any attempted Transfer in
violation of this Agreement is null and void, and of no force and effect. The
Person against whom such action or proceeding is brought waives the claim or
defense that an adequate remedy at law exists, and such Person will not urge in
any such action or proceeding the claim or defense that such remedy at law
exists.
SECTION 6.4. Remedies for Breach.
The rights and remedies of the Stockholders set forth in this Agreement
are neither mutually exclusive nor exclusive of any right or remedy provided by
law, in equity or otherwise. The Stockholders agree that all legal remedies
(such as monetary damages) as well as all equitable remedies (such as specific
performance) will be available for any breach or threatened breach of any
provision of this Agreement.
SECTION 6.5. Costs.
If the Company or any Stockholder retains counsel for the purpose of
enforcing or preventing the breach or any threatened breach of any provision of
this Agreement or for any other remedy relating to it, then the prevailing party
will be entitled to be reimbursed by the nonprevailing party for all costs and
expenses so incurred (including reasonable attorney's fees, costs of bonds, and
fees and expenses for expert witnesses).
SECTION 6.6. Counterparts.
This Agreement may be signed in multiple counterparts. Each counterpart
will be considered an original, but all of them in the aggregate will constitute
one instrument.
SECTION 6.7. Notices.
All notices under this Agreement will be in writing and will be delivered
or sent to a Stockholder at the address or fax number listed on Annex I hereto,
or at such other address or fax number as a Stockholder may give by notice to
the Company and all other Stockholders, with
28
such copies to such parties as are indicated on Annex I hereto. Any notices
given to any Stockholder in accordance with this Agreement will be deemed to
have been duly given and received: (a) in the case of personal delivery,
telecopier or television, on the date of such delivery (assuming delivery is
confirmed) (b) in the case of overnight guaranteed delivery air courier, on the
Business Day after the date when sent, (c) in the case of mailing on the third
Business Day following such mailing.
SECTION 6.8. Date of Performance.
Whenever this Agreement provides for any action to be taken on a day which
is not a Business Day, such action shall be taken on the next following Business
Day.
SECTION 6.9. Limited Liability.
The liability of each Stockholder, officer or agent of the Company shall
be limited as set forth in this Agreement, the DGCL and other applicable law. No
Stockholder, officer or agent of the Company is liable for any debts,
obligations or liabilities of the Company or each other, whether arising in
tort, contract or otherwise, solely by reason of being a Stockholder, officer or
agent of the Company, or acting (or omitting to act) in such capacities or
participating (as an employee, consultant, contractor or otherwise) in the
conduct of the business of the Company, except that a Stockholder shall remain
personally liable for the payment of such Stockholder's capital contribution and
as otherwise set forth in this Agreement, the DGCL and other applicable law.
SECTION 6.10. Partial Invalidity.
Wherever possible, each provision of this Agreement will be interpreted in
such a manner as to be effective and valid under applicable law. However, if for
any reason any one or more of the provisions of this Agreement are held to be
invalid, illegal or unenforceable in any respect, such action will not affect
any other provision of this Agreement. In such event this Agreement will be
construed as if such invalid, illegal or unenforceable provision had never been
contained in it.
SECTION 6.11. Entire Agreement.
This Agreement contains the entire agreement among the Stockholders with
respect to the subject matter of this Agreement, and supersedes each course of
conduct previously pursued or acquiesced in, and each oral agreement and
representation previously made, by the Stockholders with respect thereto,
whether or not relied or acted upon, including but not limited to that certain
Stockholders' Agreement dated as of October 6, 1999, among the Company and
certain of the Stockholders.
SECTION 6.12. Benefit.
29
The contribution obligations of each Stockholder will inure solely to the
benefit of the other Stockholders and the Company, without conferring on any
other Person any rights of enforcement or other rights.
SECTION 6.13. Binding Effect.
This Agreement is binding upon, and inures to the benefit of, the Common
Stockholders and their transferees, successors and assigns, provided that,
except as provided in Section 5.5, any transferee will have only the rights
specified in Section 5.3 unless such transferee is otherwise a Stockholder
hereunder. Notwithstanding anything to the contrary contained herein, upon a
sale of all of the Common Stock held by Xxxxx or the Xxxxx Entity, if any, which
is a Common Stockholder, or the occurrence of any other event that causes Xxxxx
to no longer have Control over the Xxxxx Entity (other than death or disability
of Xxxxx), if any, which is a Common Stockholder, then Section 2.1(a) (as it
relates to Xxxxx) shall be deemed deleted from this Agreement.
SECTION 6.14. Confidentiality.
(a) The parties to this Agreement acknowledge and agree that each
Stockholder and the Company's customers may from time to time make certain of
their confidential business information available to the Company. The Company
and each other party hereto agree that it shall not use or disclose to any third
party any information concerning the customers, trade secrets, methods,
processes or procedures or any other confidential business information of the
Company or any other party to this Agreement which it learns during the course
of its performance of this Agreement, without the prior written consent of the
Board of Directors (unless otherwise permitted by Section 6.14(c)).
(b) The parties further acknowledge and agree that in the event of a
breach or threatened breach of this Section 6.14, the Company may have no
adequate remedy in money damages and, accordingly, may be entitled to
appropriate injunctive relief against such breach or threatened breach. The
obligations contained in this Section 6.14 will survive the cancellation or
other termination of this Agreement.
(c) This Section 6.14 shall not prevent any disclosure of
information to the extent required by applicable law or regulation. Any party
required to make such disclosure, to the extent reasonably practicable, shall
(i) afford the Company the opportunity to seek to prevent such disclosure or
obtain an appropriate protective order or other relief and (ii) cooperate with
the Company's efforts to do so.
SECTION 6.15. Further Assurances.
Each Stockholder agrees, without further consideration, to sign and
deliver such other documents of further assurance as may reasonably be necessary
to effectuate the provisions of this Agreement.
30
SECTION 6.16. Headings.
Article and section titles have been inserted for convenience of reference
only. They are not intended to affect the meaning or interpretation of this
Agreement.
SECTION 6.17. Terms.
Terms used with initial capital letters will have the meanings specified,
applicable to both singular and plural forms, for all purposes of this
Agreement. All pronouns (and any variation) will be deemed to refer to the
masculine, feminine or neuter, as the identity of the Person may require. The
singular or plural includes the other, as the context requires or permits. The
word include (and any variation) is used in an illustrative sense rather than in
a limiting sense. The word day means a calendar day, unless otherwise specified.
SECTION 6.18. Governing Law; Consent to Jurisdiction.
This Agreement will be governed by, and construed in accordance with, the
laws of the State of Delaware (without giving effect to Delaware choice of law
provisions). Any conflict or apparent conflict between this Agreement and the
DGCL will be resolved in favor of this Agreement except as otherwise required by
the DGCL. In any action or proceeding arising out of, related to, or in
connection with this Agreement, the parties consent to be subject to the
jurisdiction and venue of the Court of Chancery of the State of Delaware and the
United States District Court for the District of Delaware. Each of the parties
consents to the service of process in any action commenced hereunder by
certified or registered mail, return receipt requested, or by any other method
or service acceptable under federal law or the laws of the State of Delaware. AS
TO ANY ACTION OR PROCEEDING ARISING OUT OF, RELATED TO OR IN CONNECTION WITH
THIS AGREEMENT, THE PARTIES HEREBY AGREE TO WAIVE THEIR RIGHTS TO A TRIAL BY
JURY.
SECTION 6.19. No Drafting Presumption.
In interpreting the provisions of this Agreement, no presumption shall
apply against any Stockholder that otherwise would operate against such
Stockholder by reason of such document having been drafted by such Stockholder
or at the direction of such Stockholder or an Affiliate of such Stockholder.
SECTION 6.20. Legends.
All certificates evidencing Common Stock or Preferred Stock that are
issued to any of the Stockholders shall be legended as follows (in addition to
any other legend required to be placed thereon):
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS AND OBLIGATIONS WITH RESPECT TO THE TRANSFER, PLEDGE,
HYPOTHECATION, DISTRIBUTION AND
31
VOTING THEREOF AS SET FORTH IN A STOCKHOLDERS AGREEMENT WHICH MAY BE
REVIEWED AT THE PRINCIPAL PLACE OF BUSINESS OF THE CORPORATION AND A COPY
OF WHICH MAY BE OBTAINED FROM THE CORPORATION WITHOUT CHARGE UPON WRITTEN
REQUEST THEREFOR.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED."
The Company hereby agrees that, except in unusual circumstances, it will not
require an opinion of counsel for transfers made pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended to date, or any
successor or similar exemption.
SECTION 6.21. Facsimile Signature.
This Agreement and any amendments hereto or thereto, to the extent signed
and delivered by means of a facsimile machine, shall be treated in all manner
and respects as an original agreement or instrument and shall be considered to
have the same binding effect as if it were the original signed version thereof
delivered in person. At the request of any party hereto, each other party hereto
or thereto shall re-execute original forms thereof and deliver them to all other
parties. No party hereto shall claim that this Agreement or such document is
invalid, not binding or unenforceable based upon the use of a facsimile machine
to deliver a signature, or the fact that any signature or agreement or
instrument was transmitted or communicated through the use of a facsimile
machine, and each such party forever waives any such claim or defense.
32
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
ARTISTdirect, Inc.
_________________________________________________
By: Xxxx X. Xxxxxx
Its: Chief Executive Officer
ARTISTdirect Investors, LLC
_________________________________________________
By: Xxxx X. Xxxxxx
Its: Manager
_________________________________________________
XXXX XXXXX
CONSTELLATION VENTURE CAPITAL, L.P.
By: Constellation Ventures Management LLC, as
General Partner
By: _____________________________________________
Name:
Title:
CONSTELLATION VENTURES (BVI), INC.
By: Constellation Ventures Management LLC
By: _____________________________________________
Name: Xxxxxxxx X. Xxxxxxxx
Title: President and Chief Executive
Officer
33
PSILOS GROUP PARTNERS, L.P.
By: Psilos Group Investors, LLC
Its: General Partner
____________________________________________
By: Xxxxxx X. Xxxxxx, Ph.D.
Its: Senior Managing Director
DREAM MEDIA INTERNET VENTURES, L.L.C.
____________________________________________
Its:
____________________________________________
XXXX XXXXXX
____________________________________________
XXXXX XXXX
CCP/PSILOS UBL, LLC
By: Psilos Group Investors, LLC
Its: Managing Member
____________________________________________
By: Xxxxxx X. Xxxxxx, Ph.D
Its: Senior Managing Director
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners,
its General Partner
By: _______________________________________
Name:
Title:
34
XXXXXXXXX/ARTISTDIRECT PARTNERS, LLC
By: Chase Venture Capital Associates, L.P.,
its Managing Partner
By: Chase Capital Partners,
its General Partner
By: ________________________________________
Name:
Title:
CCP/PSILOS ARTISTDIRECT, LLC
By: Psilos Group Investors, LLC
Its: Managing Member
By: ________________________________________
Name: Xxxxxx X. Xxxxxx, Ph.D
Title: Senior Managing Director
FLATIRON ASSOCIATES, LLC
By: ________________________________________
Xxxx Xxxxxx
Managing Member
FLATIRON FUND 1998/99, LLC
By: ________________________________________
Xxxx Xxxxxx
Managing Member
35
TORONTO DOMINION INVESTMENTS, INC.
By: ________________________________________
Xxxxxx Xxxxxxx
Vice President
SPINNAKER TECHNOLOGY FUND, L.P.
By: Xxxxxx Capital Management, L.L.C.
its General Partner
By: ________________________________________
Xxxx Xxxxx
Controller
SPINNAKER FOUNDERS FUND, L.P.
By: Xxxxxx Capital Management, L.L.C.
its General Partner
By: ________________________________________
Xxxx Xxxxx
Controller
SPINNAKER CLIPPER FUND, L.P.
By: Xxxxxx Capital Management, L.L.C.
its General Partner
By: ________________________________________
Xxxx Xxxxx
Controller
MEADOWLANE ENTERPRISES, LTD.
By: ________________________________________
36
UNIVERSAL MUSIC GROUP, INC.
By: ________________________________________
________________
____________________________________________
XXXXX X. XXXXXXX
____________________________________________
XXXX DI DIA
____________________________________________
XXXXX X. XXXXXXXXX
____________________________________________
XXXXX X. VAN XXXXXX
XXXXXX CHILDREN'S TRUST
____________________________________________
Xxxxx Xxxxxxxx, Trustee
XXXXXX CHILDREN'S TRUST
____________________________________________
Xxxxx Xxxxxxxx, Trustee
____________________________________________
XXXXX XXXXXX
____________________________________________
XXXXXX XXXXX
37
L&G ASSOCIATES ONE,
a California general partnership
____________________________________________
Xxxxx X. Xxxxxx
Managing Partner
____________________________________________
XXXX X. XXXXXX
____________________________________________
XXXXXX XXXXXX
____________________________________________
XXXXX XXXXXXXX
38
AMENDMENT NO. 1 TO AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
This Amendment No. 1 to Amended and Restated Stockholders Agreement (the
"Agreement") is made as of December 20, 1999, by and among ARTISTdirect, Inc., a
Delaware corporation (the "Company"), ARTISTdirect Investors, LLC, a California
limited liability company ("AD Investors"), Xxxx X. Xxxxxx ("Xxxxxx"), Xxxxxx X.
Xxxxxx ("Xxxxxx"), the Xxxxxx Children's Trust (the "Xxxxxx Trust"), the Xxxxxx
Children's Trust (the "Xxxxxx Trust", and collectively with the Xxxxxx Trust,
the "Trusts"), Xxxxx Xxxxxxxx ("Xxxxxxxx"), L&G Associates One, a California
general partnership ("L&G"), Xxxxx Xxxxxx ("Xxxxxx"), Xxxxx X. Xxxxxxx
("Xxxxxxx"), Xxxxxx Xxxxx ("Xxxxx") (each of which are members of AD Investors),
Constellation Venture Capital, L.P., a Delaware limited partnership
("Constellation Domestic"), Constellation Ventures (BVI), Inc., a British Virgin
Islands corporation ("Constellation Offshore" and, together with Constellation
Domestic, "Constellation"), Toronto Dominion Investments, Inc., a Delaware
corporation ("TDI"), Psilos Group Partners, L.P., a Delaware limited partnership
("Psilos Group"), CCP/Psilos UBL, LLC, a Delaware limited liability company
("CCP UBL"), CCP/Psilos ARTISTdirect, LLC, a Delaware limited liability company
("CCP AD" and, together with Psilos Group, TDI and CCP UBL, "Psilos"), Dream
Media Internet Ventures, LLC, a Delaware limited liability company
("DreamMedia"), Xxxx Xxxxxx ("Kawabe"), Xxxx Xxxxx ("Xxxxx"), Xxxxx Xxxx
("Xxxx"), Xxxx Di Dia ("Di Dia"), Xxxxx X. Van Dalsem ("Van Dalsem"), Xxxxx X.
Xxxxxxxxx ("Gradstein"), Chase Venture Capital Associates, L.P., a California
limited partnership ("Chase Ventures"), Xxxxxxxxx/ARTISTdirect Partners, LLC, a
Delaware limited liability company ("Xxxxxxxxx"), Flatiron Fund 1998/99, LLC, a
Delaware limited liability company ("Flatiron Fund"), Flatiron Associates, LLC,
a Delaware limited liability company ("Flatiron" and, together with Chase
Ventures, Flatiron Fund and Xxxxxxxxx, "Chase"), Spinnaker Technology Fund, LP,
a Delaware limited partnership ("Spinnaker Fund"), Spinnaker Founders Fund, LP,
a Delaware limited partnership ("Spinnaker Founders"), Spinnaker Clipper Fund,
LP, a Delaware limited partnership ("Spinnaker Clipper" and, together with
Spinnaker Fund and Spinnaker Founders, "Xxxxxx Funds"), Meadowlane Enterprises
Ltd., a British Virgin Islands corporation ("Meadowlane"), Universal Music
Group, Inc., a California corporation ("Universal"), BMG Music d/b/a BMG
Entertainment, a New York general partnership ("BMG"), Yahoo! Inc., a Delaware
corporation ("Yahoo!"), Sony Music, a Group of Sony Music Entertainment Inc., a
Delaware corporation ("Sony"), Art-Dir Holdings Inc., a Delaware corporation
("Art-Dir Holdings") and Maverick Recording Company, a California general
partnership ("Maverick").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the parties hereto (other than BMG, Yahoo!, Sony, Art-Dir
Holdings and Maverick) previously entered into an Amended and Restated
Stockholders Agreement dated as of November 12, 1999 (the "Existing Stockholders
Agreement") to establish certain rights, obligations and restrictions with
respect to the securities of the Company.
1
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein and for other good and valuable consideration, and with the
intent of being legally bound, the parties hereto agree as follows:
SECTION 6.22. Amendments to Existing Stockholders Agreement. The Existing
Stockholders Agreement is hereby amended as follows:
(a) Each of BMG, Yahoo!, Sony, Art-Dir Holdings, Maverick shall be
added as a party to the Existing Stockholders Agreement.
(b) A new definition for "Majority of Labels" shall be added in
Section 1.1 of the Existing Stockholders Agreement as follows:
""Majority of Labels" shall mean the holders of a majority of the Series C
Preferred Stock held by Universal, Sony, BMG, Art-Dir Holdings, Yahoo!,
Maverick and each of their Affiliates."
(c) The first three sentences of Section 2.1(a)(i) of the
Existing Stockholders Agreement are hereby amended and restated in their
entirety as follows:
"Each of Geiger, Muller, Xxxxx, Constellation, Psilos, Chase, Xxxxxx
Funds, Meadowlane, Universal, BMG, Yahoo!, Sony, Art-Dir Holdings,
Maverick and, to the extent provided herein, Di Dia, Gradstein, Van
Dalsem, Yokomoto, L&G and Xxxxxx, shall have a preemptive right to
purchase, all (or any part) of their pro rata share of additional Common
Stock and/or Preferred Stock that the Company may, from time to time,
propose to sell and issue to any Person or Persons (each, a "Proposed
Issuance"), unless such Proposed Issuance falls within the exclusions
described in (ii) below. For purposes of this Section 2.1(a), such
parties' pro rata share shall equal their respective Percentages
immediately preceding the Proposed Issuance in question. In the event the
Company proposes to undertake a Proposed Issuance of additional Common
Stock and/or Preferred Stock, then, with respect to each such Proposed
Issuance, the Company shall give each of Geiger, Muller, Xxxxx,
Constellation, Psilos, Chase, Xxxxxx Funds, Meadowlane, Universal, BMG,
Yahoo!, Sony, Art-Dir Holdings, Maverick written notice of its intention,
describing the price and the material terms and conditions upon which the
Company proposes to make such Proposed Issuance."
(d) Section 2.1(b) of the Existing Stockholders Agreement is hereby
amended and restated in its entirety as follows:
"(i) To the extent additional shares of Common Stock are issued to any
third party as a result of a breach of the representation by ARI
2
contained in Section 6(a)(ii) of that certain Contribution Agreement dated
as of August 5, 1997, by and between ARI and the UBL (the "Contribution
Agreement"), (A) a number of shares equal to twenty percent (20%) of such
additional shares shall be contributed to the Company by Xxxxx, and (B) a
number of shares equal to eighty percent (80%) of such additional shares
shall be contributed by the Stockholders (other than Constellation,
Psilos, Dream Media, Kawabe, Chase, Xxxxxx Funds, Meadowlane, Universal,
BMG, Yahoo!, Sony, Art-Dir Holdings and Maverick) on a pro rata basis in
proportion to their respective Percentages as of the date of such
issuance. Notwithstanding the foregoing, the Founders and Xxxxx may agree
to apportion amongst themselves any contribution of shares which would
otherwise be made solely by Xxxxx.
"(ii) To the extent additional shares of Common Stock are issued to any
third party as a result of a breach of the representation by ADNM
contained in Section 6(b)(ii) of the Contribution Agreement, (A) a number
of shares equal to twenty percent (20%) of such additional shares shall be
contributed to the Company by the Stockholders (other than Xxxxx,
Constellation, Psilos, Dream Media, Kawabe, Chase, Xxxxxx Funds,
Meadowlane, Universal, BMG, Yahoo!, Sony, Art-Dir Holdings and Maverick),
on a pro rata basis in proportion to their respective Percentages as of
the date of such dilutive event and (B) a number of shares equal to eighty
percent (80%) of such additional shares shall be contributed to the
Company by the Stockholders (other than Constellation, Psilos, Dream
Media, Kawabe, Chase, Xxxxxx Funds, Meadowlane, Universal, BMG, Yahoo!,
Sony, Art-Dir Holdings and Maverick) on a pro rata basis in proportion to
their respective Percentages as of the date of such issuance.
Notwithstanding the foregoing, the Founders and Xxxxx may agree to
apportion amongst themselves any contribution of shares which would
otherwise be made solely by Xxxxx."
(e) Section 3.2(d) of the Existing Stockholders Agreement is hereby
amended and restated in its entirety as follows:
"By Universal. One Director (who shall not be a director, officer or
employee of Universal or any of its Affiliates) shall be designated by
Universal by the written instructions of Universal, subject to (i) the
reasonable approval of a Majority of Stockholders and (ii) the affirmative
vote of a Majority of Labels, and may be removed only by the written
instructions of Universal and a Majority of Labels; provided, however,
that Universal shall no longer have the right to designate and remove its
Director from and after such time as Universal shall no longer meet the
Universal Designee Threshold."
(f) The last sentence of Section 3.3 of the Existing Stockholders
Agreement is hereby amended and restated in its entirety as follows:
"Upon the resignation of a Director, or upon a Director's death or
incapacity,
3
Constellation (in the case of the Constellation appointed Director), Chase
(in the case of the Chase appointed Director), Meadowlane (in the case of
the Meadowlane appointed Director), Universal (in the case of the
Universal appointed director) or Xxxxxx and Xxxxxx (acting collectively
and not individually) (in the case of a Director appointed by Xxxxxx and
Xxxxxx) shall designate a replacement Director, subject in each case to
the approval of a Majority of the Stockholders, which approval shall not
be unreasonably withheld; provided, that in the case of the Universal
appointed director, such replacement Director (a) shall not be a director,
officer or employee of Universal or any of its Affiliates and (b) shall be
subject to the additional approval of the affirmative vote of a Majority
of Labels."
(g) The second sentence of Section 4.1 of the Existing Stockholders
Agreement is hereby amended and restated in its entirety as follows:
SECTION 6.23.
"Xxxxx, Constellation, Psilos, Chase, Meadowlane, Universal, BMG, Yahoo!,
Sony, Art-Dir Holdings and Maverick shall be additional named insureds on
such policy so long as such coverage of Xxxxx, Constellation, Psilos,
Chase, Meadowlane, Universal, BMG, Yahoo!, Sony, Art-Dir Holdings and
Maverick is reasonably available at a reasonable cost."
(e) The first paragraph of Section 4.4(c) of the Existing
Stockholders Agreement is hereby amended and restated in its entirety as
follows:
"(c) Financial Statements. Until the earlier of a QIPO or such time as
Chase, Constellation, Xxxxxx Funds, Psilos, Meadowlane, Universal, BMG,
Yahoo!, Sony, Art-Dir Holdings, Maverick or Xxxxx, as applicable, together
with its respective Affiliates own in the aggregate directly or
indirectly, Common Stock and/or Preferred Stock of the Company (on an as
converted basis) with a fair market value of less than $200,000 (the
"Information Threshold"), the Company shall deliver to Chase,
Constellation, Xxxxxx Funds, Psilos, Meadowlane, Universal, BMG, Yahoo!,
Sony, Art-Dir Holdings, Maverick or Xxxxx, as applicable, the following
information; provided, however, that if the Information Threshold is not
then met at the time any of the information in Sections 5.4(c)(i) through
(iv) is required to be delivered by the Company and the Company is
otherwise delivering such information to any other Stockholder (other than
any Stockholder that receives such information on a confidential basis in
connection with the provision of services to the Company or any of its
Subsidiaries), then such information shall also be delivered to Chase,
Constellation, Xxxxxx Funds, Psilos, Meadowlane, Universal, BMG, Yahoo!,
Sony, Art-Dir Holdings, Maverick and Xxxxx:"
(f) Section 4.4(c)(vi) of the Existing Stockholders Agreement is
hereby amended and restated in its entirety as follows:
4
"Other Information. If requested by any of Chase, Constellation, Xxxxxx
Funds, Psilos, Meadowlane, Universal, BMG, Yahoo!, Sony, Art-Dir Holdings,
Maverick or Xxxxx, the Company will deliver to Chase, Constellation,
Xxxxxx Funds, Psilos, Meadowlane, Universal, BMG, Yahoo!, Sony, Art-Dir
Holdings, Maverick or Xxxxx, as applicable, such other information
respecting the Company's or any of its Subsidiaries' business, financial
condition or prospects as Chase, Constellation, Xxxxxx Funds, Psilos,
Meadowlane, Universal, BMG, Yahoo!, Sony, Art-Dir Holdings, Maverick or
Xxxxx may, from time to time, reasonably request."
(g) Section 4.4(d) of the Existing Stockholders Agreement is hereby
amended and restated in its entirety as follows:
"Access. For so long as the Information Threshold is met, the Company
shall permit representatives of any of Chase, Constellation, Xxxxxx Funds,
Meadowlane, Universal, BMG, Yahoo!, Sony, Art-Dir Holdings, Maverick and
Xxxxx to visit and inspect any of the properties of the Company, to
examine the corporate books and records and make copies or extracts
therefrom and to discuss the affairs, finances and accounts of such
Company with the officers, employees, counsel, accountants, independent
auditors or other representatives of the Company, all at such reasonable
times, upon reasonable notice and as often as Chase, Constellation, Xxxxxx
Funds, Meadowlane, Universal, BMG, Yahoo!, Sony, Art-Dir Holdings,
Maverick or Xxxxx, as applicable, may reasonably request."
(h) The first sentence of Section 5.5 of the Existing Stockholders
Agreement is hereby amended and restated in its entirety as follows:
"Transfers by Constellation, Psilos, Chase, Xxxxxx Funds, Meadowlane,
Universal, BMG, Yahoo!, Sony, Art-Dir Holdings or Maverick shall not be
subject to Section 5.1(a)."
(i) Annex 1 of the Existing Stockholders Agreement is hereby amended
by adding the following addresses:
BMG Music d/b/a BMG Entertainment
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Vice President, Corporate Development
Yahoo! Inc.
0000 Xxxxxxx Xxxxxxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
5
Attention: Senior Vice President, Corporate Development
Sony Music, a Group of Sony Music Entertainment, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Senior Vice President, Business Affairs and Administration
Art-Dir Holdings Inc.
c/o Time Warner Inc.
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Maverick Recording Company
c/o Maverick Records LLC
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Attn: Xx. Xxxxxx Xxxxxx
Facsimile: (000) 000-0000
and:
SR/MDM Venture, Inc.
c/o Warner Bros. Records Inc.
0000 Xxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000-0000
Attn: Vice Chairman
Facsimile: (000) 000-0000
SECTION 6.24. No Other Changes. Except as expressly set forth in Section 1
above, all of the provisions of the Existing Stockholders Agreement shall remain
in full force and effect.
6
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
ARTISTdirect, Inc.
_________________________________________________
By: Xxxx X. Xxxxxx
Its: Chief Executive Officer
ARTISTdirect Investors, LLC
_________________________________________________
By: Xxxx X. Xxxxxx
Its: Manager
_________________________________________________
XXXX XXXXX
CONSTELLATION VENTURE CAPITAL, L.P.
By: Constellation Ventures Management LLC, as
General Partner
By: _____________________________________________
Name:
Title:
CONSTELLATION VENTURES (BVI), INC.
By: Constellation Ventures Management LLC
By: _____________________________________________
Name: Xxxxxxxx X. Xxxxxxxx
Title: President and Chief Executive
Officer
7
PSILOS GROUP PARTNERS, L.P.
By: Psilos Group Investors, LLC
Its: General Partner
____________________________________________
By: Xxxxxx X. Xxxxxx, Ph.D.
Its: Senior Managing Director
DREAM MEDIA INTERNET VENTURES, L.L.C.
____________________________________________
By:
Its:
____________________________________________
XXXX XXXXXX
____________________________________________
XXXXX XXXX
CCP/PSILOS UBL, LLC
By: Psilos Group Investors, LLC
Its: Managing Member
____________________________________________
By: Xxxxxx X. Xxxxxx, Ph.D
Its: Senior Managing Director
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners,
its General Partner
By: ________________________________________
Name:
Title:
8
XXXXXXXXX/ARTISTDIRECT PARTNERS, LLC
By: Chase Venture Capital Associates, L.P.,
its Managing Partner
By: Chase Capital Partners,
its General Partner
By: ________________________________________
Name:
Title:
CCP/PSILOS ARTISTDIRECT, LLC
By: Psilos Group Investors, LLC
Its: Managing Member
By: ________________________________________
Name: Xxxxxx X. Xxxxxx, Ph.D
Title: Senior Managing Director
FLATIRON ASSOCIATES, LLC
By: ________________________________________
Xxxx Xxxxxx
Managing Member
FLATIRON FUND 1998/99, LLC
By: ________________________________________
Xxxx Xxxxxx
Managing Member
9
TORONTO DOMINION INVESTMENTS, INC.
By: ________________________________________
Xxxxxx Xxxxxxx
Vice President
SPINNAKER TECHNOLOGY FUND, L.P.
By: Xxxxxx Capital Management, L.L.C.
its General Partner
By: ________________________________________
Xxxx Xxxxx
Controller
SPINNAKER FOUNDERS FUND, L.P.
By: Xxxxxx Capital Management, L.L.C.
its General Partner
By: ________________________________________
Xxxx Xxxxx
Controller
SPINNAKER CLIPPER FUND, L.P.
By: Xxxxxx Capital Management, L.L.C.
its General Partner
By: ________________________________________
Xxxx Xxxxx
Controller
10
MEADOWLANE ENTERPRISES, LTD.
By: ________________________________________
________________
UNIVERSAL MUSIC GROUP, INC.
By: ________________________________________
________________
____________________________________________
XXXXX X. XXXXXXX
____________________________________________
XXXX DI DIA
____________________________________________
XXXXX X. XXXXXXXXX
____________________________________________
XXXXX X. VAN XXXXXX
XXXXXX CHILDREN'S TRUST
____________________________________________
Xxxxx Xxxxxxxx, Trustee
XXXXXX CHILDREN'S TRUST
____________________________________________
Xxxxx Xxxxxxxx, Trustee
11
____________________________________________
XXXXX XXXXXX
____________________________________________
XXXXXX XXXXX
L&G ASSOCIATES ONE,
a California general partnership
____________________________________________
Xxxxx X. Xxxxxx
Managing Partner
____________________________________________
XXXX X. XXXXXX
____________________________________________
XXXXXX XXXXXX
BMG MUSIC d/b/a BMG ENTERTAINMENT
By: ________________________________________
________________________________________
________________________________________
YAHOO! INC.
By: ________________________________________
________________________________________
________________________________________
12
SONY MUSIC, a Group of SONY MUSIC
ENTERTAINMENT, INC.
By: ________________________________________
________________________________________
________________________________________
ART-DIR HOLDINGS INC.
By: ________________________________________
________________________________________
________________________________________
____________________________________________
XXXXX X. XXXXXXXX
MAVERICK RECORDING COMPANY
By:_________________________________________
Name: Xxx Xxxxxx
Its: Co-Chief Executive Officer
13
