EXHIBIT 10.2
THIS OPTION AND THE UNDERLYING SHARES OF COMMON STOCK ISSUED UPON ITS
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND NO SALE OR TRANSFER OF THIS OPTION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF
COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT.
Right to Purchase up to 500,000 shares of Common Stock
-of-
SONIC GARDEN, INC.
Common Stock Purchase Option
SONIC GARDEN, INC., a California corporation whose address is
000 Xxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxxxxxx, XX 00000 (the "Company")
hereby certifies that SEABURY, LTD. ("Optionor") or its assigns (the
"Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time before 5:00
P.M., California time, on December 31, 2002 (the "Exercise Period"),
500,000 fully paid and non-assessable shares of Common Stock of the
Company (the "Option Shares"), at a purchase price per share of Fifty
Cents (USD$0.50) (such purchase price per share as adjusted from time to
time, as herein provided, is hereinafter referred to as the "Purchase
Price"). The number and character of such shares of Common Stock and
the Purchase Price are subject to adjustment as provided herein.
As used herein, the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include SONIC GARDEN, INC. and
any corporation or other entity that shall succeed or assume the obligations
of the Company hereunder.
(b) The term "Common Stock" shall mean the Company's Common
Stock as authorized on the date hereof.
(c) The term "Option" shall mean this Common Stock Purchase
Option.
(d) The term "Option Shares" shall mean the shares of Common Stock
issuable upon exercise of this Option.
1. Exercise of Options.
1.1. Full Exercise. This Option may be exercised as to the Option
Shares in full by the Holder hereof (without the payment of any further
consideration than the aggregate Purchase Price) by surrender of this
Option, with the attached form of subscription duly executed by such
Holder and payment in the amount of the Purchase Price in form and
substance satisfactory to the Company and that the Company has received
payment in cash (or in such other form as is authorized and approved in
advance by the Board of Directors of the Company, in its sole
discretion) for each such Option Share, in aggregate, to the Company at
its principal office.
1.2. Partial Exercise. This Option may be exercised in part as to
the Option Shares by the Holder hereof (without the payment of any further
consideration) by surrender of this Option in the manner and at the
place provided in Section 1.1. On any such partial exercise, the
Company at its expense will forthwith issue and deliver to the Holder
hereof a new Option or Options of like tenor, in the name of the Holder
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hereof, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock for which such Option or Options may
still be exercised.
2. Delivery of Stock Certificates, etc. on Exercise. As soon as
practicable after the exercise of this Option in full or in part, and in
any event within 10 days thereafter, the Company at its expense will
cause to be issued in the name of and delivered to the Holder hereof, a
certificate or certificates for the number of fully paid and
nonassessable shares of Common Stock. The Company shall issue fractions
of shares of Common Stock on the exercise of this Option to the extent
required.
3. Adjustments upon Changes in Capitalization. The total number of
shares of Common Stock which may be purchased upon the exercise of this
Option shall be appropriately adjusted by the Company:
(a) for any increase or decrease in the number of outstanding
shares of Common Stock resulting from a stock dividend, subdivision,
combination, or reclassification of shares or any other change in the
corporate structure or shares of the Company; or
(b) in the event that the Company sells or issues any of its
equity securities or any right to acquire such securities at a price less
than the Purchase Price contained in this Option during the Option Period.
In such case, the Company shall issue the appropriate number of
additional shares of its common stock to reflect a Purchase Price equal
to the lower Purchase Price.
4. Representations and Warranties. The Company hereby represents and
warrants as follows:
(a) It is a California corporation duly organized and in
good standing in all jurisdictions where it is legally necessary;
(b) The execution, delivery and performance of this Option,
in the time and manner herein specified, will not conflict with, result in a
breach of, or constitute a default under any existing agreement, indenture,
or other instrument to which the Company is a party or by it may be bound
or affected;
(c) It has full legal authority to enter into this Option
and to perform the same in the time and manner contemplated;
(d) It owns extensive intellectual property and a web
infrastructure which enables the Company's consumers to access a multitude
of digital music services, including both streaming and downloadable music,
copyright compliant online music storage with dashboard accessibility
capabilities, and extensive music merchandise, news and artist
information;
(e) It owns approximately $60,000 in computer-related hardware
used in conjunction with the aforementioned product offerings;
(f) It owns the domain names: xxxxxxxxxxx.xxx, xxxxxxxxxxxx.xxx,
xxxxxxxxxxxx.xxx, and xxxxxxxxxxxxxxx.xxx;
(g) It is not a party to any outstanding litigation and is not
aware of any threatened litigation.
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5. Notices of Record Date. In the event of
(a) any taking by the Company of a record of the Holders of any
class or securities for the purpose of determining the Holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock or any
class or any other securities or property, or to receive any other
right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or
any transfer of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or option to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities (other than the issue of Common Stock on
the exercise of this Option), then and in each such event the Company will
mail or cause to be mailed to each Holder of this Option a notice specifying
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time,
if any is to be fixed, as of which the Holders of record of Common Stock
(or other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for securities or other property
deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up,
and (iii) the amount and character of any stock or other securities, or
rights or options with respect thereto, proposed to be issued or
granted, the date of such proposed issue or grant and the persons or
class of persons to whom such proposed issue or grant is to be offered
or made. Such notice shall be mailed at least 20 days prior to the date
specified in such notice on which any such action is to be taken.
6. Registration Rights under the Act.
6.1. Definitions.
(a) The term "Public Offering" shall mean an underwritten or
direct public offering of equity securities of the Company pursuant to an
effective registration statement under the Act covering the offer and
sale of equity securities of such entity to the public.
(b) The term "Registrable Securities" shall mean the Common Stock
underlying this Option.
(c) The term "Registration Statement" shall mean any registration
statement of the Company that covers any of the Registrable Securities
pursuant to the provisions of this Option.
5.2 Piggyback Rights. The Company agrees that if at any time
during the twenty-four (24) month period after the date of this Option
it or any successor in interest proposes to file a Registration
Statement in connection with a Public Offering of any of its equity
securities that may be used for the registration of the Registrable
Securities under the Securities Act of 1933, as amended (the "Act") (a
"Piggyback Registration Statement"), then the Company shall in each case
give prompt written notice (the "Piggyback Notice") of such proposed
filing to the Holder before the anticipated filing date of such
Piggyback Registration Statement, but in no event less than thirty (30)
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days prior to such filing date, which Piggyback Notice shall offer the
Holder the opportunity to include in such Piggyback Registration
Statement such number of Registrable Securities as it may request. The
Holder shall advise the Company in writing within twenty (20) days after
the date of receipt of the Piggyback Notice (which request shall set
forth the amount of Registrable Securities for which Registration is
requested). The Company shall include in any such Piggyback
Registration Statement all Registrable Securities so requested to be
included.
7. Reservation of Stock, etc., Issuable on Exercise of this Option.
The Company will at all times reserve and keep available, solely for
issuance and delivery on the exercise of this Option, all shares of
Common Stock from time to time issuable on the exercise of this Option.
8. Replacement of this Option. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of any Option and, in the case of any such loss, theft or
destruction of any Option, on delivery of an indemnity agreement or
security reasonably satisfactory in form and amount to the Company or,
in the case of any such mutilation, on surrender and cancellation of
such Option, the Company at Holder's expense will execute and deliver,
in lieu thereof, a new Option of like tenor.
9. Option Agent. The Company may, by written notice to the Holder of
this Option, appoint an agent for the purpose of issuing Common Stock on
the exercise of this Option pursuant to Section 1 hereof and replacing
Options pursuant to Section 7 hereof, or either of the foregoing, and
thereafter any such issuance or replacement, as the case may be, shall
be made at such office by such agent.
10. Negotiability, etc. This Option is issued upon the following
terms, to all of which each Holder or owner hereof by the taking hereof
consents and agrees:
(a) this Option is fully assignable by the Holder without the
Company's prior written consent; and
(b) until the Company receives written notice of any transfer
of the Option, the Company may treat the registered Holder hereof as the
absolute owner hereof for all purposes.
11. Notices, etc. All notices and other communications from the
Company to the Holder of this Option shall be mailed by first class
registered or certified mail, postage prepaid, or Federal Express or any
other generally recognized overnight courier at such address as may have
been furnished to the Company in writing by such Holder or, until any
such Holder furnishes to the Company an address, then to, and at the
address of, the last Holder of this Option who has so furnished an
address to the Company.
12. Miscellaneous. This Option and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed
by the party against which enforcement of such change, waiver, discharge
or termination is sought. This Option shall be construed and enforced
in accordance with and governed by the laws of the State of California.
The headings in this Option are for purposes of references only, and
shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision. If any
arbitration, litigation, action, suit, or other proceeding is instituted
to remedy, prevent or obtain relief from a breach of this Option, in
relation to a breach of this Option or pertaining to a declaration of
rights under this Option, the prevailing party will recover all such
party's attorneys' fees incurred in each and every such action, suit or
other proceeding, including any and all appeals or petitions therefrom.
13. Restrictive Legends. The Common Stock issued upon exercise of this
Option shall be subject to a stop-transfer order and the certificate or
certificates evidencing any such Common Stock shall bear the following
legends:
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"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). SUCH SHARES CANNOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO (A) AN EFFECTIVE
REGISTRATION STATEMENT, OR (B) AN OPINION OF COUNSEL
FOR THE HOLDER, SATISFACTORY TO COUNSEL FOR THE
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE ACT.
Dated as of February 20, 2002
SONIC GARDEN, INC.
By:______________________
Xxxx X. Xxxxxxxx, Xx.
Title: President & CEO
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FORM OF SUBSCRIPTION
(To be signed only on exercise of this Option)
OPTION EXERCISE NOTICE AND SUBSCRIPTION AGREEMENT
Attention: Corporate Secretary
1. Exercise of Option. The undersigned ("Purchaser") hereby elects
to purchase __________________________ shares (the "Shares") of common
stock of Sonic Garden, Inc. (the "Company"), pursuant to the stock
option agreement as of February ____, 2002, by and between
___________________ and the Company (the "Option"). All capitalized
terms not otherwise defied herein shall have the meanings set forth in
the Option.
2. Representations of Purchaser. Purchaser represents and Options to
the Company that:
(a) Purchaser has received, read and understands: (i) the Option;
and (ii) this Option Exercise Notice and Agreement ("Agreement") and
agrees to be bound by the terms and conditions thereof.
(b) Purchaser has access to all information regarding the Company and
its present and prospective business, assets, liabilities and financial
condition which have been filed with the Securities and Exchange
Commission pursuant to Section 13 of the Securities Act of 1934, as
amended (the "Exchange Act"), and Purchaser has had the opportunity to
ask questions of the Company's representatives concerning such matters
and this investment.
(c) Purchaser is fully aware that investment in the Shares involves
risk and that no assurances can be given as to the future performance
of the Shares.
(d) If Purchaser is "directly or indirectly the beneficial owner of
more than 10 per cent of the Shares," or an "officer" or "director" of
the Company, within the meaning of Section 16 of the Exchange Act,
Purchaser recognizes that the Shares purchased hereby may give rise to
liability to the Company for short swing profits under Section 16 of the
Exchange Act.
(e) Purchaser is acquiring the Shares for Purchaser's own account and
for investment and not with a view to distribution. The Purchaser
understands that such Shares may not have been registered under the
Securities Act of 1933, as amended (the "Act"), and, accordingly, such
Shares may not be sold or transferred in the absence of such
registration or exemption therefrom under the Act.
(f) Purchaser is not purchasing the Shares on the basis of material
information that has not been publicly disclosed.
(g) If Purchaser effects a transfer of any of the Shares purchased
hereby which does not comply with applicable law or any of the
provisions of this Agreement, Purchaser agrees to indemnify and hold the
Company harmless from any loss, liability, claim, damage or expense
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occasioned thereby, including, without limitation, reasonable attorney's
fees and costs of suit.
(h) Purchaser acknowledges and understands that no United States
federal or state agency has passed upon or made any recommendation or
endorsement of the Shares purchased hereby.
(i) Purchaser is fully aware of the tax consequences associated with
the exercise of the Option and the disposition of the Shares acquired
thereby.
3. Restrictive Legend. Purchaser understands and agrees that if
the sale by Purchaser of the Shares is not covered by an effective
Registration Statement under the Securities Act the Company may, in its
discretion, cause the legend set forth below, or a legend substantially
equivalent hereto, to be placed upon any certificate(s) evidencing
ownership of the Shares purchased hereby, together with any other
legends that may be required by state or federal securities laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT.
4. Notice. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal
delivery or upon deposit in the United States mail by certified or
registered mail, return receipt requested, with postage and fees
prepaid, addressed to the other party at its address as shown below
beneath its signature, or to such other address as such party may desig
nate in writing from time to time to the other party.
5. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
6. Entire Document. The Option (including the Registration Terms and
Conditions attached thereto) is incorporated herein by reference. This
Agreement and the Option constitute the entire agreement of the parties
and supersede all prior undertakings, agreements, representations,
warranties and understandings with respect to the subject matter hereof.
7. Headings. The headings contained in this Agreement are for
reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
8. Governing Law. This Agreement and all action taken hereunder shall
be enforced, governed and construed by and interpreted under the laws of
the State of California applicable to contracts made and to be performed
wholly within such State without giving effect to the principles of
conflict of laws thereof.
9. Purchase Price; Delivery of Payment; Withholding. The purchase
price of the Shares purchased hereunder is $_____, being equal to the
number of Shares to be purchased hereunder pursuant to the exercise of
the Option described in Paragraph 1 hereof, multiplied by the exercise
price as set forth in the Option. Purchaser hereby pays the purchase
price of $_____ in full by delivery of $_____ in cash.
IN WITNESS WHEREOF, Xxxxxxxxx has executed this Agreement this
_____ day of _________________, __________.
_______________________________
Name:
Address:
_______________________________
_______________________________
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