Exhibit 10.42
▇▇▇▇▇▇.▇▇▇/▇▇▇▇▇▇ Audio
Advertising Agreement
This Agreement is entered into as of this 9th day of June, 1999 by and
between Liquid Audio, Inc., a California corporation with a principal place of
business at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Liquid Audio"), and
▇▇▇▇▇▇.▇▇▇, Inc., a Washington corporation with a principal place of business at
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
("▇▇▇▇▇▇.▇▇▇").
A. The parties are interested in performing certain cooperative marketing
activities.
B. In consideration of those activities, Liquid Audio is willing to grant to
▇▇▇▇▇▇.▇▇▇ certain rights to purchase shares of its Common Stock.
NOW, THEREFORE, for good and valuable consideration, the receipt of which is the
hereby acknowledged, the parties hereby agree as follows:
1. The parties will each perform cooperative marketing activities as follows:
(a) Relationship/▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ promotion: Within 30 days of the date
hereof, the parties will issue a mutually acceptable press release
stating that they have entered into a year-long promotional
relationship, and that the initial activity in connection with such
relationship shall be a promotion related to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
(b) Liquid Artist Program: During the 30 day period commencing on the date
hereof (or such other period as the parties may agree upon), the
parties will negotiate in good faith the terms of an agreement under
which ▇▇▇▇▇▇.▇▇▇ will implement Liquid Audio's Liquid Artist program on
the ▇▇▇▇▇▇.▇▇▇ site; provided, that neither party shall have any
liability by reason of any failure or refusal to enter into any such
agreement for any reason.
2. Liquid Audio will grant Amazon net exercise warrants ("Warrants") to
purchase up to 381,203 shares of the Common Stock of Liquid Audio, currently
comprising two and one-half percent (2.5%) of the fully-diluted capital stock of
Liquid Audio. The forms of the Warrants are set forth as Exhibits A and B
attached hereto. The exercise price will be $6.56 per share. The Warrants
will be exercisable for five years from the date hereof, and shall be subject to
the conditions on exercise set forth herein. The Warrants will be allocated as
follows:
. Relationship/▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ promotion - 66 2/3% of the total or 254,135
shares
. Liquid Artist - 33 1/3% of the total or 127,068
shares
3. The Warrants set forth on Exhibit A shall be exercisable immediately as
set forth therein. ▇▇▇▇▇▇.▇▇▇ agrees not to transfer the shares issued on
exercise of the warrant for one year as to the date of exercise. The Warrants
set forth on Exhibit B shall be subject to conditions on exercisability as
follows. Unless these conditions are met, the applicable Warrant will not be
exercisable.
(a) Exhibit B Warrant: The Warrant set forth on Exhibit B shall first
become exercisable as to one-half of the shares at the time of the
signing of a definitive agreement (if any) between ▇▇▇▇▇▇.▇▇▇ and
Liquid Audio concerning the implementation of the Liquid Artist program
on the ▇▇▇▇▇▇.▇▇▇ site. The remaining Warrants set forth on Exhibit B
will be exercisable with respect to one-twelfth thereof for each month
during the first year of the program commencing on the date the Liquid
Artist program is available on the ▇▇▇▇▇▇.▇▇▇ site, for so long as
▇▇▇▇▇▇.▇▇▇ continues to maintain the Liquid Artist program on its site
subject to the terms negotiated in the definitive agreement (if any).
4. Liquid Audio will offer ▇▇▇▇▇▇.▇▇▇ most favored customer pricing on
applicable products and services for a period of one year from the date hereof,
or for the term of the Liquid Artist agreement, whichever is greater.
5. Subject to the terms and conditions of this Agreement, each party (the
"Indemnifying Party") agrees to indemnify, defend and hold the other party (the
"Indemnified Party") harmless against any liabilities and expenses (including
reasonable attorneys' fees), actually paid by a party in settlement of, or held
against a party arising out of, a claim that the use or embodiment of the
Indemnifying Party's contribution to any of the activities described herein
infringes any right of any third party when used as contemplated under this
Agreement; provided that the Indemnified Party agrees that the Indemnifying
Party shall be released from the foregoing obligations to the extent it is
prejudiced by any failure by the Indemnified Party to provide the Indemnifying
Party with (i) prompt written notice of the claim, (ii) full control over the
defense or settlement of such claim (except that the Indemnifying Party shall
not enter into or acquiesce to any settlement which contains any admission of or
stipulation to any guilt, fault, liability or wrongdoing on the part of the
Indemnified Party without the Indemnified Party's prior written consent), and
(iii) reasonable assistance in connection with the defense or settlement of such
claim. Subject to the foregoing, the Indemnified Party shall be entitled to
participate in the defense and settlement of any such claim, at its own expense,
with counsel of its own choosing.
THE FOREGOING STATES EACH PARTY'S ENTIRE LIABILITY AND OBLIGATION (EXPRESS,
IMPLIED, STATUTORY OR OTHERWISE) WITH RESPECT TO INTELLECTUAL PROPERTY
INFRINGEMENT OR CLAIMS THEREFOR. EXCEPT TO THE EXTENT THE SAME ARE AWARDED IN
CONNECTION WITH ANY THIRD PARTY CLAIM AGAINST WHICH A PARTY IS OBLIGATED TO
INDEMNIFY THE OTHER PARTY PURSUANT TO THIS SECTION 5, IN NO EVENT SHALL EITHER
PARTY BE LIABLE FOR LOST PROFITS, LOSS OF DATA, COST OF PROCUREMENT OF GOODS AND
SERVICES OR FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, OR INCIDENTAL DAMAGES,
HOWEVER CAUSED, ON ANY THEORY OF LIABILITY AND WHETHER OR NOT SUCH PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING UNDER ANY CAUSE OF
ACTION AND IN ANY WAY OUT OF THIS AGREEMENT OR THE DESIGNS, PRODUCTS,
INFORMATION OR OTHER TECHNOLOGY PROVIDED PURSUANT TO THIS AGREEMENT. THE
PROVISIONS OF THIS SECTION SHALL APPLY NOTWITHSTANDING THE FAILURE OF ANY
LIMITED REMEDIES HERE UNDER.
6. Each party acknowledges that the cooperative marketing efforts to be
undertaken hereunder are speculative in nature and that there is no guarantee
that the materials contributed by either party shall be sufficient or error
free. THEREFORE, EACH PARTY PROVIDES INFORMATION TO THE OTHER PARTY "AS IS," AND
NEITHER PARTY MAKES ANY
WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE WITH RESPECT TO TECHNICAL
INFORMATION, AND EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE.
7. Nothing contained herein shall be construed to imply a joint venture or
principal and agent relationship between the parties, and neither party shall
have any right, power or authority to create any obligation, express or implied,
with respect to any third party in connection with their performance hereunder.
8. General.
(a) Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California without reference to
conflict of law principles.
(b) Arbitration. Any dispute or claim arising out of or in connection with
this Agreement shall be finally settled by binding arbitration in San Jose,
California (if arbitration is initiated by ▇▇▇▇▇▇.▇▇▇) or Seattle, Washington
(if arbitration is initiated by Liquid Audio) under the rules of arbitration of
the American Arbitration Association by one arbitrator appointed in accordance
with said rules. Judgment on the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof. Notwithstanding the foregoing, the
parties may apply to any court of competent jurisdiction for injunctive relief
without breach of this arbitration provision.
(c) Force Majeure. If the performance of this Agreement or any obligations
hereunder is prevented, restricted or interfered with by reason of fire or other
casualty or accident, strikes or labor disputes, war or other violence, any law,
order, proclamation, ordinance, demand or requirement of any government agency,
or any other act or condition beyond the control of the parties hereto, the
party so affected upon giving prompt notice to the other party shall be excused
from such performance during such prevention, restriction or interference for a
period of up to ninety (90) days.
(d) Assignment. Neither party may assign or delegate this Agreement or any
of its licenses, rights or duties under this Agreement without the prior written
consent of the other, except (i) to a person or entity into which it has merged
or which has otherwise succeeded to all or substantially all of its business and
assets, and which has assumed in writing or by operation of law its obligations
under this Agreement, or (ii) to any entity that controls or is controlled by or
under common control with a party hereto or of which a party beneficially owns
at least 50% of the equity interest therein.
(e) Authority. Each party represents that all corporate action necessary for
the authorization, execution and delivery of this Agreement by such party and
the performance of its obligations hereunder has been taken.
(f) Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, or otherwise delivered by hand, by messenger or by
telecommunication, addressed to the addresses first set forth above or at such
other address furnished with a notice in the manner set forth herein. Such
notices shall be deemed to have been served when delivered or, if delivery is
not accomplished by reason of some fault of the addressee, when tendered.
(g) Partial Invalidity. If any paragraph, provision, or clause thereof in
this Agreement shall be found or be held to be invalid or unenforceable in any
jurisdiction in which this
Agreement is being performed, the remainder of this Agreement shall be valid and
enforceable. The waiver of one breach or default hereunder shall not constitute
the waiver of any subsequent breach or default.
(h) Entire Agreement. This Agreement and the Exhibits hereto represent and
constitute the entire agreement between the parties, may only be amended in
writing signed by both parties, and supersede all prior agreements and
understandings with respect to the matters covered by this Agreement. The
parties acknowledge that they have not relied upon any representations other
than the representations set forth herein.
AGREED AS OF THE DATE SET FORTH ABOVE:
LIQUID AUDIO, INC. ▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇ By:
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Print Name:▇▇▇▇▇▇ ▇▇▇▇▇ Print Name:
------------------ -----------------
Title:VP Business Development Title:
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Agreement is being performed, the remainder of this Agreement shall be valid and
enforceable. The waiver of one breach or default hereunder shall not constitute
the waiver of any subsequent breach or default.
(h) Entire Agreement. This Agreement and the Exhibits hereto represent and
constitute the entire agreement between the parties, may only be amended in
writing signed by both parties, and supersede all prior agreements and
understandings with respect to the matters covered by this Agreement. The
parties acknowledge that they have not relied upon any representations other
than the representations set forth herein.
AGREED AS OF THE DATE SET FORTH ABOVE:
LIQUID AUDIO, INC. ▇▇▇▇▇▇.▇▇▇, INC.
By: By: /s/ ▇▇▇▇ Ciph
-------------------------- -------------------------
Print Name: Print Name: ▇▇▇▇ Ciph
------------------ -----------------
Title: Title: VP
----------------------- ----------------------
COMMON STOCK PURCHASE WARRANT
THIS WARRANT HAS BEEN, AND THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED
PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "SHARES") WILL BE, ACQUIRED SOLELY
FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE SHARES (TOGETHER, THE
"SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
DISPOSITION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF THE ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS.
No. W-A Void after June 9, 2004
LIQUID AUDIO, INC.
WARRANT TO PURCHASE 254,135 SHARES OF COMMON STOCK
THIS CERTIFIES THAT, for value received, ▇▇▇▇▇▇.▇▇▇, Inc. (the "Holder") is
entitled to subscribe for and purchase from Liquid Audio, Inc., a California
corporation (the "Company"), 254,135 shares (as adjusted pursuant to Section 3
hereof) of the fully paid and nonassessable Common Stock, no par value (the
"Shares"), of the Company at the price of $6.56 per share (the "Exercise Price")
(as adjusted pursuant to Section 3 hereof), subject to the provisions and upon
the terms and conditions hereinafter set forth.
This Warrant is subject to the following terms and conditions:
1. Method of Exercise; Payment.
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(a) Cash Exercise. The purchase rights represented by this Warrant may
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be exercised by the Holder, in whole or in part, from time to time by the
surrender of this Warrant (with the notice of exercise form (the "Notice of
Exercise") attached hereto as Exhibit A duly executed) at the principal office
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of the Company, and by the payment to the Company of an amount equal to the
Exercise Price multiplied by the number of the Shares being purchased, which
amount may be paid, at the election of the Holder, by wire transfer or certified
check payable to the order of the Company. The person or persons in whose
name(s) any certificate(s) representing Shares shall be issuable upon exercise
of this Warrant shall be deemed to have become the holder(s) of record of, and
shall be treated for all purposes as the record holder(s) of, the Shares
represented thereby (and such Shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised.
(b) Net Issue Exercise. In lieu of exercising this warrant pursuant to
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Section l(a) hereof, the Holder may elect to receive a number of Shares equal to
the value (as determined below) of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with Notice of Exercise in which alternative No. 1 is initiated by the
Holder. In such event, the Company shall issue to the Holder a number of Shares
computed using the following formula:
X = Y (A-B)
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A
Where X = the number of Shares to be issued to the Holder.
Y = the number of Shares subject to this warrant.
A = the fair market value of one share of the Company's Common Stock.
B = the Exercise Price (as adjusted to the date of such calculation).
(c) Fair market Value. For purposes of this Section 1, the fair market
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value of the Company's Common Stock shall mean:
(i) The average of the closing bid and asked prices of the
Company's Common Stock quoted in the Over-The-Counter Market Summary or the
closing price quoted on any exchange on which the Common Stock is listed,
whichever is applicable, as published in the Western Edition of The Wall Street
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Journal for the ten trading days prior to the date of determination of fair
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market value;
(ii) If the Company's Common Stock is not traded Over-The-
Counter or on an exchange, fair market value of the Common Stock per share shall
be the price per share as determined by the Company's Board of Directors.
Receipt and acknowledgment of this warrant by the Holder shall be definitely
deemed to be an acknowledgment and acceptance of any such fair market value
determination by the Company's Board of Directors as the final and binding
determination of such value for purposes of this Agreement.
(d) Stock Certificates. In the event of any exercise of the
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rights represented by this Warrant, certificates for the shares of Common Stock
so purchased shall be delivered to the
Holder within 30 days of such exercise and, unless this Warrant has been fully
exercised or has expired, a new Warrant representing the shares with respect to
which this Warrant shall not have been exercised shall also be issued to the
Holder within such time.
2. Stock Fully Paid; Reservation of Shares. All of the Shares
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issuable upon the exercise of the rights represented by this Warrant will, upon
issuance and receipt of the Exercise Price therefor, be fully paid and
nonassessable, and free from all preemptive rights, rights of first refusal or
first offer, taxes, liens and charges with respect to the issuance thereof.
During the period within which the rights represented by this Warrant may be
exercised, the Company shall at all times have authorized and reserved for
issuance sufficient shares of its Common Stock to provide for the exercise of
the rights represented by this Warrant.
3. Adjustment of Exercise Price and Number of Shares. Subject to
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the provisions of Section 12 hereof, the number and kind of Shares purchasable
upon the exercise of this Warrant and the Exercise Price therefor shall be
subject to adjustment from time to time upon the occurrence of certain events,
as follows:
(a) Reclassification, Consolidation or Merger. In case of any
-----------------------------------------
reclassification of the Common Stock (other than a change in par value, or as a
result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger with another corporation in which the Company is a
continuing corporation and in which the Company's stockholders immediately
preceding such consolidation or merger own at least 50% of the voting securities
of the Company following such consolidation or merger and which does not result
in any reclassification of the Shares issuable upon exercise of this Warrant),
or in case of any sale of all or substantially all of the assets of the Company,
the Company, or such successor or purchasing corporation as the case may be,
shall execute a new Warrant, providing that the holder of this Warrant shall
have the right to exercise such new Warrant, and procure upon such exercise and
payment of the same aggregate Exercise Price, in lieu of the Shares of Common
Stock theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reclassification, change, consolidation, sale of all or substantially all of the
Company's assets or merger by a holder of an equivalent number of shares of
Common Stock. Such new Warrant shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 3. The provisions of this subsection (a), subject to Section 12 hereof,
shall similarly apply to successive reclassifications, consolidations, mergers,
and the sale of all or substantially all of the Company's assets.
(b) Stock Splits, Dividends and Combinations. In the event that
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the Company shall at any time subdivide the outstanding shares of Common Stock,
or shall issue a stock dividend on its outstanding shares of Common Stock, the
number of Shares issuable upon exercise of this Warrant immediately prior to
such subdivision or to the issuance of such stock dividend shall be
proportionately increased, and the Exercise Price shall be proportionately
decreased, and in the event that the Company shall at any time combine the
outstanding shares of Common Stock, the number of Shares issuable upon exercise
of this Warrant immediately prior to such combination shall be
proportionately decreased, and the Exercise Price shall be proportionately
increased, effective at the close of business on the date of such subdivision,
stock dividend or combination, as the case may be.
4. Notices.
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(a) Upon any adjustment of the Exercise Price and any increase
or decrease in the number of Shares purchasable upon the exercise of this
Warrant in accordance with Section 3 hereof, then, and in each such case, the
Company, within thirty (30) days thereafter, shall give written notice thereof
to the Holder at the address of such Holder as shown on the books of the Company
which notice shall state the Exercise Price as adjusted and, if applicable, the
increased or decreased number of Shares purchasable upon the exercise of this
Warrant, setting forth in reasonable detail the method of calculation of each.
(b) In the event that the Company shall propose at any time to
effect a Public Offering, the Company shall send to the Holder at least thirty
(30) days prior written notice of the date when the same is anticipated to take
place.
(c) The Company shall send to the Holder not less than thirty
(30) days before the expiration of this Warrant, a written notice of the date on
which this Warrant will expire.
(d) Any written notice by the Company required or permitted
hereunder shall be given by hand delivery or first class mail, postage prepaid,
addressed to the Holder at the address shown on the books of the Company for the
Holder.
5. Transfer of Warrant Except in accordance with the conditions
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contained in Section 6 hereof, this Warrant and all rights hereunder are not
transferable. In order to effect any transfer of all or a portion of this
warrant or the Shares, the transferor shall deliver a completed and duly
executed Notice of Transfer (attached hereto as Exhibit B).
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6. Condition of Exercise or Transfer of Warrant.
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(a) Unless exercised pursuant to an effective registration
statement under the Act which includes the Shares so exercised, it shall be a
condition to any exercise or transfer of this Warrant that the Company shall
have received, at the time of such exercise or transfer, a representation in
writing from the recipient or transferee in the form attached hereto as Exhibit
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A-1 or Exhibit B-1, respectively, that the Shares being issued upon exercise, or
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this Warrant (or portion hereof) transferred, as the case may be, are being
acquired for investment and not with a view to any sale or distribution thereof.
(b) It shall be a further condition to any transfer of this
Warrant, or of any or all of the Shares issued upon exercise of this Warrant,
other than a transfer registered under the Act, that the Holder shall have given
written notice to the Company which shall describe the manner and circumstances
of the proposed transfer and be accompanied by a written opinion of Holder's
legal
counsel or a "no-action" letter reasonably satisfactory to the Company stating
that such transfer is exempt from the registration and delivery requirements of
the Act and applicable state securities laws.
(c) Each certificate evidencing the Shares issued upon exercise
of this Warrant, or transfer of such shares (other than a transfer registered
under the Act or any subsequent transfer of shares so registered) shall be
stamped or imprinted with a legend substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT.
Subject to this Section 6, the Company may instruct its transfer agent not
to register the transfer of all or a part of this Warrant, or any of the Shares,
unless one of the conditions specified in the above legend is satisfied.
7. Removal of Legend. Upon request of a holder of a certificate
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with the legend referred to in Section 6 hereof, the Company shall issue to such
holder a new certificate therefor free of any transfer legend, if, with such
request, the Company shall have received either an opinion of counsel or a "no-
action" letter referred to in Section 6(b) of this agreement to the effect that
any transfer by such holder of the shares evidenced by such certificate will not
violate the Act and applicable state securities laws; provided, however, that
the Company shall not be obligated to remove any such legends prior to the
closing date of the Public Offering.
8. Fractional Shares. No fractional shares of Common Stock will be
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issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor upon the basis of the
Exercise Price then in effect.
9. Representations and Warranties of the Company. The Company
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represents and warrants to the Holder as follows:
(a) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms;
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable;
(c) The rights, preferences, privileges and restrictions
granted to or imposed upon the Shares and the holders thereof are as set forth
in the Company's Certificate of Incorporation, a true and complete copy of which
has been delivered to the original Holder of this Warrant; and
(d) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Certificate of
Incorporation or Bylaws, as amended.
10. Representations and Warranties by the Holder. The Holder
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represents and warrants to the Company as follows:
(a) This Warrant is being acquired for its own account, for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Act. Upon
exercise of this Warrant, the Holder shall, if so requested by the Company,
confirm in writing, in a form reasonably satisfactory to the Company, that the
Shares issuable upon exercise of this Warrant are being acquired for investment
and not with a view toward distribution or resale.
(b) The Holder understands that the Warrant and the Shares have
not been registered under the Act by reason of their issuance in a transaction
exempt from the registration and prospectus delivery requirements of the Act
pursuant to Section 4(2) thereof, and that they must be held by the Holder
indefinitely, and that the Holder must therefore bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is registered
under the Act or is exempted from such registration. The Holder further
understands that the Shares have not been qualified under the California
Securities Law of 1968 (the "California Law") by reason of their issuance in a
transaction exempt from the qualification requirements of the California Law
pursuant to Section 25102(f) thereof, which exemption depends upon, among other
things, the bona fide nature of the Holder's investment intent expressed above.
(c) The Holder has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of
the purchase of this Warrant and the Shares purchasable pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.
(d) The Holder is able to bear the economic risk of the
purchase of the Shares pursuant to the terms of this Warrant.
11. Rights of Stockholders. No holder of this Warrant shall be
----------------------
entitled, as a Warrant holder, to vote or receive dividends or be deemed the
holder of Common Stock or any other securities of the Company which may at any
time be issuable on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the holder of this Warrant, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock,
change of par value, consolidation, merger, conveyance, or otherwise) or to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise until the Warrant shall have been exercised and the Shares purchasable
upon the exercise hereof shall have become deliverable, as provided herein.
12. Expiration of Warrant. This Warrant shall expire and shall no
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longer be exercisable as of 5:00 p.m., California local time, on June 9, 2004.
13. Miscellaneous.
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(a) This Warrant is being delivered in the State of California
and shall be construed and enforced in accordance with and governed by the laws
of such State.
(b) The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof.
(c) The terms of this Warrant shall be binding upon and shall
inure to the benefit of any successors or assigns of the Company and of the
holder or holders hereof and of the Shares issued or issuable upon the exercise
hereof.
(d) This Warrant and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof.
(e) The Company shall not, by amendment of its Articles of
Incorporation, or through any other means, directly or indirectly, avoid or seek
to avoid the observance or performance of any of the terms of this Warrant and
shall at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the holder of this Warrant against impairment.
(f) Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation, upon surrender and cancellation of such Warrant,
the Company at its expense will execute and deliver to the holder of record, in
lieu thereof, a new Warrant of like date and tenor.
(g) This Warrant and any provision hereof may be amended,
waived or terminated only by an instrument in writing signed by the Company and
the Holder.
(h) Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Issued this 9th day of June, 1999.
LIQUID AUDIO, INC.
By: /s/ illegible
--------------------------------
Title: VP Business Development
-----------------------------
Acknowledged and Accepted:
▇▇▇▇▇▇.▇▇▇, Inc.
________________________
By:_____________________
Authorized Signatory
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Issued this 9th day of June, 1999.
LIQUID AUDIO, INC.
By:
--------------------------------
Title:
-----------------------------
Acknowledged and Accepted:
▇▇▇▇▇▇.▇▇▇, Inc.
________________________
By: /s/ illegible
---------------------
Authorized Signatory
EXHIBIT A
---------
NOTICE OF EXERCISE
-------------------
TO: Liquid Audio, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
1. In lieu of exercising the attached Warrant for cash or check, the
undersigned hereby elects to effect the net issuance provision of Section l(b)
of this Warrant and receive ____________ (leave blank if you choose Alternative
No. 2 below) shares of Common Stock pursuant to the terms of this Warrant.
(Initial here if the undersigned elects this alternative). ___________.
2. The undersigned hereby elects to purchase _______________ (leave
blank if you choose alternative No. 1 above) shares of Common Stock of Liquid
Audio, Inc. pursuant to the terms of this Warrant, and tenders herewith payment
of the purchase price of such shares in full.
3. Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
--------------------------------------------
(Name)
--------------------------------------------
--------------------------------------------
(Address)
4. The undersigned hereby represents and warrants that the aforesaid
shares of Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale, in connection with the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares and all representations and warranties of
the undersigned set forth in Section 10 of the attached Warrant are true and
correct as of the date hereof. In support thereof, the undersigned agrees to
execute an Investment Representation Statement in a form substantially similar
to the form attached to the Warrant as Exhibit A-1.
-----------
--------------------------------
(Signature and Date)
Title:
--------------------------
EXHIBIT A-l
------------
INVESTMENT REPRESENTATION STATEMENT
PURCHASER :
SELLER : LIQUID AUDIO, INC.
COMPANY : LIQUID AUDIO, INC.
SECURITY : COMMON STOCK ISSUED UPON EXERCISE OF THE COMMON STOCK PURCHASE
WARRANT ISSUED ON ____________, ____
AMOUNT : _______________ SHARES
DATE :
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Seller and to the Company the following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
Act").
(b) I understand that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand that, in
the view of the Securities and Exchange Commission (the "SEC"), the statutory
basis for such exemption may be unavailable if my representation was predicated
solely upon a present intention to hold these Securities for the minimum capital
gains period specified under tax statutes, for a deferred sale, for or until an
increase or decrease in the market price of the Securities, or for a period of
one year or any other fixed period in the future.
(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, I understand
that the Company is under no obligation to register the Securities. In addition,
I understand that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel for
the Company.
(d) I am familiar with the provisions of Rule 144, promulgated
under the Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or
indirectly, from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions.
The Securities may be resold in certain limited circumstances subject to
the provisions of Rule 144, which requires among other things: (1) the
availability of certain public information about the Company, (2) the resale
occurring not less than one year after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities less
than two years, (3) the sale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934) and the amount of
securities being sold during any three month period not exceeding the specified
limitations stated therein, if applicable.
(e) I agree, in connection with the Company's initial
underwritten public offering of the Company's securities, (1) not to sell, make
short sale of, loan, grant any options for the purchase of, or otherwise dispose
of any shares of Common Stock of the Company held by me (other than those shares
included in the registration) without the prior written consent of the Company
or the underwriters managing such initial underwritten public offering of the
Company's securities for one hundred eighty (180) days from the effective date
of such registration, and (2) I further agree to execute any agreement
reflecting (1) above as may be requested by the underwriters at the time of the
public offering; provided however that the officers and directors of the Company
-------- -------
who own the stock of the Company also agree to such restrictions.
(f) I further understand that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 is
not exclusive, the Staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial burden
of proof in establishing that an exemption from registration is available for
such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
------------------------
(Signature)
By:
---------------------
Title:
------------------
Date: ,
---------- --------
EXHIBIT B
----------
NOTICE OF TRANSFER
(To be signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _________________________________ the right represented by the attached
Warrant to purchase _______________* shares of Common Stock of Liquid Audio,
Inc., to which the attached warrant relates, and appoints ______________________
Attorney to transfer such right on the books of Liquid Audio, Inc. with full
power of substitution in the premises.
Dated:
------------------
--------------------------------------------------
(Signature must conform in all respects to name of
Holder as specified on the face of the Warrant)
--------------------------------------------------
(Address)
Signed in the presence of:
------------------------------
* Insert here the number of shares without making any adjustment for
additional shares of Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of the Warrant,
may be deliverable upon exercise.
EXHIBIT B-1
------------
INVESTMENT REPRESENTATION STATEMENT
PURCHASER :
TRANSFEROR :
COMPANY : LIQUID AUDIO, INC.
SECURITY : COMMON STOCK PURCHASE WARRANT ORIGINALLY ISSUED ON
_______________, ________
AMOUNT : ___________ SHARES
DATE :
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Seller and to the Company the following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
Act").
(b) I understand that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand that, in
the view of the Securities and Exchange Commission (the "SEC"), the statutory
basis for such exemption may be unavailable if my representation was predicated
solely upon a present intention to hold these Securities for the minimum capital
gains period specified under tax statutes, for a deferred sale, for or until an
increase or decrease in the market price of the Securities, or for a period of
one year or any other fixed period in the future.
(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, I understand
that the Company is under no obligation to register the Securities. In addition,
I understand that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel for
the Company.
(d) I am familiar with the provisions of Rule 144, promulgated
under the Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or
indirectly, from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions.
The Securities may be resold in certain limited circumstances subject to
the provisions of Rule 144, which requires among other things: (1) the
availability of certain public information about the Company, (2) the resale
occurring not less than one year after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities less
than two years, (3) the sale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934) and the amount of
securities being sold during any three month period not exceeding the specified
limitations stated therein, if applicable.
(e) I agree, in connection with the Company's initial
underwritten public offering of the Company's securities, (1) not to sell, make
short sale of, loan, grant any options for the purchase of, or otherwise dispose
of any shares of Common Stock of the Company held by me (other than those shares
included in the registration) without the prior written consent of the Company
or the underwriters managing such initial underwritten public offering of the
Company's securities for one hundred eighty (180) days from the effective date
of such registration, and (2) I further agree to execute any agreement
reflecting (1) above as may be requested by the underwriters at the time of the
public offering; provided however that the officers and directors of the Company
-------- -------
who own the stock of the Company also agree to such restrictions.
(f) I further understand that in the event all of the
applicable requirements of Rule 144 is not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 is
not exclusive, the Staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial burden
of proof in establishing that an exemption from registration is available for
such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
--------------------------------
(Signature)
By:
-----------------------------
Title:
--------------------------
Date: ,
---------- ----------------
COMMON STOCK PURCHASE WARRANT
THIS WARRANT HAS BEEN, AND THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED
PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "SHARES") WILL BE, ACQUIRED SOLELY
FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE SHARES (TOGETHER, THE
"SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
DISPOSITION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF THE ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS.
No. W-B Void after June 9, 2004
LIQUID AUDIO, INC.
WARRANT TO PURCHASE 127,068 SHARES OF COMMON STOCK
THIS CERTIFIES THAT, for value received, ▇▇▇▇▇▇.▇▇▇, Inc. (the "Holder") is
entitled to subscribe for and purchase from Liquid Audio, Inc., a California
corporation (the "Company"), 127,068 shares (as adjusted pursuant to Section 3
hereof) of the fully paid and nonassessable Common Stock, no par value (the
"Shares"), of the Company at the price of $6.56 per share (the "Exercise Price")
(as adjusted pursuant to Section 3 hereof), subject to the provisions and upon
the terms and conditions hereinafter set forth.
This Warrant is subject to the following terms and conditions:
1. Conditions of Exercise. The Holder is not entitled to exercise the
----------------------
rights issued under this warrant, unless and until the following conditions have
been met:
(a) this Warrant shall first become exercisable as to one-half (1/2)
of the shares at the time of the signing of a definitive agreement, if any,
between the Holder and the Company concerning the implementation of the Liquid
Artist program on the ▇▇▇▇▇▇.▇▇▇ site.
(b) The remaining Warrants under this Agreement will be exercisable
with respect to one-twelfth thereof for each month during the first year of the
program commencing on the date the Liquid Artist program is available on the
▇▇▇▇▇▇.▇▇▇ site and continuing for so long as the Holder maintains the Liquid
Artist program on its site subject to the terms negotiated in the definitive
agreement, if any.
2. Method of Exercise; Payment.
------------------------------
(a) Cash Exercise. The purchase rights represented by this Warrant may
-------------
be exercised by the Holder, in whole or in part, from time to time by the
surrender of this Warrant (with the notice of exercise form (the "Notice of
Exercise") attached hereto as Exhibit A duly executed) at the principal office
of the Company, and by the payment to the Company of an amount equal to the
Exercise Price multiplied by the number of the Shares being purchased, which
amount may be paid, at the election of the Holder, by wire transfer or certified
check payable to the order of the Company. The person or persons in whose
name(s) any certificate(s) representing Shares shall be issuable upon exercise
of this Warrant shall be deemed to have become the holder(s) of record of, and
shall be treated for all purposes as the record holder(s) of, the Shares
represented thereby (and such Shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised.
(b) Net Issue Exercise. In lieu of exercising this warrant pursuant to
Section l(a) hereof, the Holder may elect to receive a number of Shares equal to
the value (as determined below) of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with Notice of Exercise in which alternative No. 1 is initiated by the
Holder. In such event, the Company shall issue to the Holder a number of Shares
computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of Shares to be issued to the Holder.
Y = the number of Shares subject to this warrant.
A = the fair market value of one share of the Company's Common Stock.
B = the Exercise Price (as adjusted to the date of such calculation).
(c) Fair market Value. For purposes of this Section 1, the fair market
-----------------
value of the Company's Common Stock shall mean:
(i) The average of the closing bid and asked prices of the
Company's Common Stock quoted in the Over-The-Counter Market Summary or the
closing price quoted on any exchange on which the Common Stock is listed,
whichever is applicable, as published in the Western
Edition of The Wall Street Journal for the ten trading days prior to the date of
determination of fair market value;
(ii) If the Company's Common Stock is not traded Over-The-
Counter or on an exchange, fair market value of the Common Stock per share shall
be the price per share as determined by the Company's Board of Directors.
Receipt and acknowledgment of this warrant by the Holder shall be definitely
deemed to be an acknowledgment and acceptance of any such fair market value
determination by the Company's Board of Directors as the final and binding
determination of such value for purposes of this Agreement.
(d) Stock Certificates. In the event of any exercise of the rights
represented by this Warrant, certificates for the shares of Common Stock so
purchased shall be delivered to the Holder within 30 days of such exercise and,
unless this Warrant has been fully exercised or has expired, a new Warrant
representing the shares with respect to which this Warrant shall not have been
exercised shall also be issued to the Holder within such time.
3. Stock Fully Paid; Reservation of Shares. All of the Shares issuable
---------------------------------------
upon the exercise of the rights represented by this Warrant will, upon issuance
and receipt of the Exercise Price therefor, be fully paid and nonassessable, and
free from all preemptive rights, rights of first refusal or first offer, taxes,
liens and charges with respect to the issuance thereof. During the period within
which the rights represented by this Warrant may be exercised, the Company shall
at all times have authorized and reserved for issuance sufficient shares of its
Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. Adjustment of Exercise Price and Number of Shares. Subject to the
-------------------------------------------------
provisions of Section 12 hereof, the number and kind of Shares purchasable upon
the exercise of this Warrant and the Exercise Price therefor shall be subject to
adjustment from time to time upon the occurrence of certain events, as follows:
(a) Reclassification, Consolidation or Merger. In case of any
-----------------------------------------
reclassification of the Common Stock (other than a change in par value, or as a
result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger with another corporation in which the Company is a
continuing corporation and in which the Company's stockholders immediately
preceding such consolidation or merger own at least 50% of the voting securities
of the Company following such consolidation or merger and which does not result
in any reclassification of the Shares issuable upon exercise of this Warrant),
or in case of any sale of all or substantially all of the assets of the Company,
the Company, or such successor or purchasing corporation as the case may be,
shall execute a new Warrant, providing that the holder of this Warrant shall
have the right to exercise such new Warrant, and procure upon such exercise and
payment of the same aggregate Exercise Price, in lieu of the Shares of Common
Stock theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reclassification, change, consolidation, sale of all or substantially all of the
Company's assets or merger by a holder of an equivalent number of shares of
Common Stock. Such new Warrant shall provide for adjustments which shall be as
nearly equivalent
as may be practicable to the adjustments provided for in this Section 3. The
provisions of this subsection (a), subject to Section 12 hereof, shall similarly
apply to successive reclassifications, consolidations, mergers, and the sale of
all or substantially all of the Company's assets.
(b) Stock Splits, Dividends and Combinations. In the event that the
----------------------------------------
Company shall at any time subdivide the outstanding shares of Common Stock, or
shall issue a stock dividend on its outstanding shares of Common Stock, the
number of Shares issuable upon exercise of this Warrant immediately prior to
such subdivision or to the issuance of such stock dividend shall be
proportionately increased, and the Exercise Price shall be proportionately
decreased, and in the event that the Company shall at any time combine the
outstanding shares of Common Stock, the number of Shares issuable upon exercise
of this Warrant immediately prior to such combination shall be proportionately
decreased, and the Exercise Price shall be proportionately increased, effective
at the close of business on the date of such subdivision, stock dividend or
combination, as the case may be.
5. Notices.
-------
(a) Upon any adjustment of the Exercise Price and any increase or
decrease in the number of Shares purchasable upon the exercise of this Warrant
in accordance with Section 3 hereof, then, and in each such case, the Company,
within thirty (30) days thereafter, shall give written notice thereof to the
Holder at the address of such Holder as shown on the books of the Company which
notice shall state the Exercise Price as adjusted and, if applicable, the
increased or decreased number of Shares purchasable upon the exercise of this
Warrant, setting forth in reasonable detail the method of calculation of each.
(b) In the event that the Company shall propose at any time to effect
a Public Offering, the Company shall send to the Holder at least thirty (30)
days prior written notice of the date when the same is anticipated to take
place.
(c) The Company shall send to the Holder not less than thirty (30)
days before the expiration of this Warrant, a written notice of the date on
which this Warrant will expire.
(d) Any written notice by the Company required or permitted hereunder
shall be given by hand delivery or first class mail, postage prepaid, addressed
to the Holder at the address shown on the books of the Company for the Holder.
6. Transfer of Warrant Except in accordance with the conditions
-------------------
contained in Section 6 hereof, this Warrant and all rights hereunder are not
transferable. In order to effect any transfer of all or a portion of this
warrant or the Shares, the transferor shall deliver a completed and duly
executed Notice of Transfer (attached hereto as Exhibit B).
---------
7. Condition of Exercise or Transfer of Warrant.
--------------------------------------------
(a) Unless exercised pursuant to an effective registration statement
under the Act which includes the Shares so exercised, it shall be a condition to
any exercise or transfer of this
Warrant that the Company shall have received, at the time of such exercise or
transfer, a representation in writing from the recipient or transferee in the
form attached hereto as Exhibit A-1 or Exhibit B-1, respectively, that the
----------- -----------
Shares being issued upon exercise, or this Warrant (or portion hereof)
transferred, as the case may be, are being acquired for investment and not with
a view to any sale or distribution thereof.
(b) It shall be a further condition to any transfer of this Warrant,
or of any or all of the Shares issued upon exercise of this Warrant, other than
a transfer registered under the Act, that the Holder shall have given written
notice to the Company which shall describe the manner and circumstances of the
proposed transfer and be accompanied by a written opinion of Holder's legal
counsel or a "no-action" letter reasonably satisfactory to the Company stating
that such transfer is exempt from the registration and delivery requirements of
the Act and applicable state securities laws.
(c) Each certificate evidencing the Shares issued upon exercise of
this Warrant, or transfer of such shares (other than a transfer registered under
the Act or any subsequent transfer of shares so registered) shall be stamped or
imprinted with a legend substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT.
Subject to this Section 6, the Company may instruct its transfer agent not
to register the transfer of all or a part of this Warrant, or any of the Shares,
unless one of the conditions specified in the above legend is satisfied.
8. Removal of Legend. Upon request of a holder of a certificate with the
-----------------
legend referred to in Section 6 hereof, the Company shall issue to such holder a
new certificate therefor free of any transfer legend, if, with such request, the
Company shall have received either an opinion of counsel or a "no-action" letter
referred to in Section 6(b) of this agreement to the effect that any transfer by
such holder of the shares evidenced by such certificate will not violate the Act
and applicable state securities laws; provided, however, that the Company shall
not be obligated to remove any such legends prior to the closing date of the
Public Offering.
9. Fractional Shares. No fractional shares of Common Stock will be
-----------------
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor upon the basis of the
Exercise Price then in effect.
10. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to the Holder as follows:
(a) This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in accordance
with its terms;
(b) The Shares have been duly authorized and reserved for issuance by
the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable;
(c) The rights, preferences, privileges and restrictions granted to or
imposed upon the Shares and the holders thereof are as set forth in the
Company's Certificate of Incorporation, a true and complete copy of which has
been delivered to the original Holder of this Warrant; and
(d) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Certificate of
Incorporation or Bylaws, as amended.
11. Representations and Warranties by the Holder. The Holder represents
--------------------------------------------
and warrants to the Company as follows:
(a) This Warrant is being acquired for its own account, for investment
and not with a view to, or for resale in connection with, any distribution or
public offering thereof within the meaning of the Act. Upon exercise of this
Warrant, the Holder shall, if so requested by the Company, confirm in writing,
in a form reasonably satisfactory to the Company, that the Shares issuable upon
exercise of this Warrant are being acquired for investment and not with a view
toward distribution or resale.
(b) The Holder understands that the Warrant and the Shares have not
been registered under the Act by reason of their issuance in a transaction
exempt from the registration and prospectus delivery requirements of the Act
pursuant to Section 4(2) thereof, and that they must be held by the Holder
indefinitely, and that the Holder must therefore bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is registered
under the Act or is exempted from such registration. The Holder further
understands that the Shares have not been qualified under the California
Securities Law of 1968 (the "California Law") by reason of their issuance in a
transaction exempt from the qualification requirements of the California Law
pursuant to Section 25102(f) thereof, which exemption depends upon, among other
things, the bona fide nature of the Holder's investment intent expressed above.
(c) The Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of this Warrant and the Shares purchasable pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.
(d) The Holder is able to bear the economic risk of the purchase of
the Shares pursuant to the terms of this Warrant.
12. Rights of Stockholders. No holder of this Warrant shall be entitled,
----------------------
as a Warrant holder, to vote or receive dividends or be deemed the holder of
Common Stock or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issuance of stock, reclassification of stock, change of
par value, consolidation, merger, conveyance, or otherwise) or to receive notice
of meetings, or to receive dividends or subscription rights or otherwise until
the Warrant shall have been exercised and the Shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.
13. Expiration of Warrant. This Warrant shall expire and shall no longer
---------------------
be exercisable as of 5:00 p.m., California local time, on June 9, 2004.
14. Miscellaneous.
-------------
(a) This Warrant is being delivered in the State of California and
shall be construed and enforced in accordance with and governed by the laws of
such State.
(b) The headings in this Warrant are for purposes of reference only,
and shall not limit or otherwise affect any of the terms hereof.
(c) The terms of this Warrant shall be binding upon and shall inure to
the benefit of any successors or assigns of the Company and of the holder or
holders hereof and of the Shares issued or issuable upon the exercise hereof.
(d) This Warrant and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
(e) The Company shall not, by amendment of its Articles of
Incorporation, or through any other means, directly or indirectly, avoid or seek
to avoid the observance or performance of any of the terms of this Warrant and
shall at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the holder of this Warrant against impairment.
(f) Upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company or, in the case of any
such mutilation, upon surrender and cancellation of such Warrant, the Company at
its expense will execute and deliver to the holder of record, in lieu thereof, a
new Warrant of like date and tenor.
(g) This Warrant and any provision hereof may be amended, waived or
terminated only by an instrument in writing signed by the Company and the
Holder.
(h) Receipt of this Warrant by the holder hereof shall constitute
acceptance of and agreement to the foregoing terms and conditions.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Issued this 9th day of June, 1999.
LIQUID AUDIO, INC.
By: /s/ illegible
---------------------------------
Title: VP Business Development
------------------------------
Acknowledged and Accepted:
▇▇▇▇▇▇.▇▇▇, Inc.
----------------
By:_____________________
Authorized Signatory
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Issued this 9th day of June, 1999.
LIQUID AUDIO, INC.
By:
---------------------------------
Title:
------------------------------
Acknowledged and Accepted:
▇▇▇▇▇▇.▇▇▇, Inc.
----------------------------
By: /s/ illegible
-------------------------
Authorized Signatory
EXHIBIT A
---------
NOTICE OF EXERCISE
-------------------
TO: Liquid Audio, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
1. In lieu of exercising the attached Warrant for cash or check,
the undersigned hereby elects to effect the net issuance provision of Section
l(b) of this Warrant and receive ____________ (leave blank if you choose
Alternative No. 2 below) shares of Common Stock pursuant to the terms of this
Warrant. (Initial here if the undersigned elects this alternative).
___________.
2. The undersigned hereby elects to purchase _______________ (leave
blank if you choose alternative No. 1 above) shares of Common Stock of Liquid
Audio, Inc. pursuant to the terms of this Warrant, and tenders herewith payment
of the purchase price of such shares in full.
3. Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
------------------------------------
(Name)
------------------------------------
------------------------------------
(Address)
4. The undersigned hereby represents and warrants that the
aforesaid shares of Common Stock are being acquired for the account of the
undersigned for investment and not with a view to, or for resale, in connection
with the distribution thereof, and that the undersigned has no present intention
of distributing or reselling such shares and all representations and warranties
of the undersigned set forth in Section 10 of the attached Warrant are true and
correct as of the date hereof. In support thereof, the undersigned agrees to
execute an Investment Representation Statement in a form substantially similar
to the form attached to the Warrant as Exhibit A-1.
-----------
----------------------------------------
(Signature and Date)
Title:
----------------------------------
EXHIBIT A-l
------------
INVESTMENT REPRESENTATION STATEMENT
PURCHASER :
SELLER : LIQUID AUDIO, INC.
COMPANY : LIQUID AUDIO, INC.
SECURITY : COMMON STOCK ISSUED UPON EXERCISE OF THE COMMON STOCK PURCHASE
WARRANT ISSUED ON ____________, ____
AMOUNT : _______________ SHARES
DATE :
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Seller and to the Company the following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
Act").
(b) I understand that the Securities have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of my investment intent
as expressed herein. In this connection, I understand that, in the view of the
Securities and Exchange Commission (the "SEC"), the statutory basis for such
exemption may be unavailable if my representation was predicated solely upon a
present intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Securities, or for a period of one year or
any other fixed period in the future.
(c) I further understand that the Securities must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from registration is otherwise available. Moreover, I understand that the
Company is under no obligation to register the Securities. In addition, I
understand that the certificate evidencing the Securities will be imprinted with
a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel for
the Company.
(d) I am familiar with the provisions of Rule 144, promulgated under
the Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or
indirectly, from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions.
The Securities may be resold in certain limited circumstances subject to
the provisions of Rule 144, which requires among other things: (1) the
availability of certain public information about the Company, (2) the resale
occurring not less than one year after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities less
than two years, (3) the sale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934) and the amount of
securities being sold during any three month period not exceeding the specified
limitations stated therein, if applicable.
(e) I agree, in connection with the Company's initial underwritten
public offering of the Company's securities, (1) not to sell, make short sale
of, loan, grant any options for the purchase of, or otherwise dispose of any
shares of Common Stock of the Company held by me (other than those shares
included in the registration) without the prior written consent of the Company
or the underwriters managing such initial underwritten public offering of the
Company's securities for one hundred eighty (180) days from the effective date
of such registration, and (2) I further agree to execute any agreement
reflecting (1) above as may be requested by the underwriters at the time of the
public offering; provided however that the officers and directors of the Company
-------- -------
who own the stock of the Company also agree to such restrictions.
(f) I further understand that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
--------------------------------
(Signature)
By:
-----------------------------
Title:
-------------------------
Date: ,
-------------- ------------
EXHIBIT B
----------
NOTICE OF TRANSFER
(To be signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _________________________________ the right represented by the attached
Warrant to purchase _______________* shares of Common Stock of Liquid Audio,
Inc., to which the attached warrant relates, and appoints ______________________
Attorney to transfer such right on the books of Liquid Audio, Inc. with full
power of substitution in the premises.
Dated:
--------------
--------------------------------------------------
(Signature must conform in all respects to name of
Holder as specified on the face of the Warrant)
--------------------------------------------------
(Address)
Signed in the presence of:
-------------------------------
* Insert here the number of shares without making any adjustment for
additional shares of Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of the Warrant,
may be deliverable upon exercise.
EXHIBIT B-1
------------
INVESTMENT REPRESENTATION STATEMENT
PURCHASER :
TRANSFEROR :
COMPANY : LIQUID AUDIO, INC.
SECURITY : COMMON STOCK PURCHASE WARRANT ORIGINALLY ISSUED ON
_______________, ________
AMOUNT : ___________ SHARES
DATE :
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Seller and to the Company the following:
(g) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
Act").
(h) I understand that the Securities have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of my investment intent
as expressed herein. In this connection, I understand that, in the view of the
Securities and Exchange Commission (the "SEC"), the statutory basis for such
exemption may be unavailable if my representation was predicated solely upon a
present intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Securities, or for a period of one year or
any other fixed period in the future.
(i) I further understand that the Securities must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from registration is otherwise available. Moreover, I understand that the
Company is under no obligation to register the Securities. In addition, I
understand that the certificate evidencing the Securities will be imprinted with
a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel for
the Company.
(j) I am familiar with the provisions of Rule 144, promulgated under
the Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or
indirectly, from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions.
The Securities may be resold in certain limited circumstances subject to
the provisions of Rule 144, which requires among other things: (1) the
availability of certain public information about the Company, (2) the resale
occurring not less than one year after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities less
than two years, (3) the sale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934) and the amount of
securities being sold during any three month period not exceeding the specified
limitations stated therein, if applicable.
(k) I agree, in connection with the Company's initial underwritten
public offering of the Company's securities, (1) not to sell, make short sale
of, loan, grant any options for the purchase of, or otherwise dispose of any
shares of Common Stock of the Company held by me (other than those shares
included in the registration) without the prior written consent of the Company
or the underwriters managing such initial underwritten public offering of the
Company's securities for one hundred eighty (180) days from the effective date
of such registration, and (2) I further agree to execute any agreement
reflecting (1) above as may be requested by the underwriters at the time of the
public offering; provided however that the officers and directors of the Company
-------- -------
who own the stock of the Company also agree to such restrictions.
(l) I further understand that in the event all of the applicable
requirements of Rule 144 is not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
--------------------------------
(Signature)
By:
----------------------------
Title:
-------------------------
Date: ,
------------------- ------
