Exhibit 10.4
FORM OF
ON DEMAND DISTRIBUTION LIMITED NON-EXECUTIVE SHARE OPTION
OPTION EXCHANGE AGREEMENT (the "AGREEMENT")
WHEREAS
A. The Optionholder was granted option(s) (the "OLD OPTION") over ordinary
shares in On Demand Distribution Limited ("OD2") pursuant to a letter
agreement dated 24th April, 2003 effecting the Old Option (the "OLD
OPTION AGREEMENT").
B. Loudeye Corp. of 1130 Rainier Avenue South Seattle, Washington 98144,
USA ("LOUDEYE") has made an offer (the "OFFER") to acquire all of the
issued and to be issued ordinary share capital of OD2, pursuant to an
offer document dated 22 June 2004 (the "OFFER DOCUMENT").
C. This Agreement is conditional upon and shall have no effect until the
Offer becomes unconditional in all respects (the "EFFECTIVE DATE").
D. Pursuant to the terms of paragraph 10 of the Old Option Agreement, the
Optionholder has agreed to release the Old Option in consideration of
the grant to him/her of the Exchanged Option (as defined in clause 1).
THE PARTIES AGREE AS FOLLOWS:-
1. DETAILS OF THE EXCHANGED OPTION
DETAILS OF VESTING: the Exchanged Option will be fully vested
and exercisable on the Effective Date, but
will not be vested or exercisable to any
extent until then
DESCRIPTION OF SHARES UNDER shares of Common Stock, par value $0.001
EXCHANGED OPTION: per share, of Loudeye Corp ("LOUDEYE
SHARES")
MAXIMUM NUMBER OF LOUDEYE A = 0.8706 x B; where:
SHARES UNDER EXCHANGED OPTION:
A = number of Loudeye Shares
under the Exchanged Option; and
B = number of OD2 Shares under
the Old Option
Price at which each Loudeye Share USD0.001
can be purchased on exercise of
the Exchanged Option ("NEW
EXERCISE PRICE"):
2. RELEASE OF THE OLD OPTION
As of the Effective Date (i) the Optionholder releases the Old Option
by releasing OD2 from its obligations under the Old Option to issue OD2
Shares to the Optionholder under the terms of the Old Option Agreement;
and (ii) the Optionholder agrees that he/she has no rights whatsoever
under or in respect of:
a. the Old Option; or
b. the Old Option Agreement.
3. GRANT OF THE EXCHANGED OPTION
3.1 As of the Effective Date, Loudeye hereby grants to the Optionholder the
Exchanged Option.
3.2 The Exchanged Option will be subject to the terms and conditions set
out or referred to in this Agreement, as amended from time to time.
4. EXERCISE AND LAPSE OF THE EXCHANGED OPTION
4.1 The Exchanged Option will only be validly exercised if exercised in
accordance with this Agreement.
4.2 To exercise the Exchanged Option, the Optionholder must complete the
Notice of Exercise attached to this Agreement as the Exhibit.
4.3 In the event that the Optionholder ceases to hold the office of
non-executive director of OD2, the Exchanged Option shall lapse three
months after the later to occur of:
a. the date on which you cease to hold the office of
non-executive director of OD2; or
b. the date on which you cease to hold any Loudeye Shares.
4.4 Subject to the other provisions of this Agreement, in the event of the
Optionholder's death, your personal representatives may exercise the
Exchanged Option during the period of 12 months after the date of
death, after which it shall lapse.
4.5 The Exchanged Option shall not under any circumstances be capable of
exercise later than 24 April 2013.
5. TAX AND NATIONAL INSURANCE CONTRIBUTIONS
5.1 All liability for any tax, or Employer's NICs (as defined in clause 5.5
below) or employee's National Insurance contributions (or their
equivalent in any non-UK jurisdiction) in respect of the grant or
exercise of or other dealing in the Exchanged Option or sale of the
Loudeye Shares ("TAX") will be the responsibility of and borne by the
Optionholder, or where the Optionholder has died, his personal
representatives (the Optionholder and his personal representatives
(where applicable) together in this clause 5 referred to as the
"OPTIONHOLDER").
5.2 Neither Loudeye nor OD2 makes any representation to the Optionholder
with regard to the Tax that may arise as a consequence of surrendering
and releasing the Old Option, the grant of the Exchanged Option or the
exercise of the Exchanged Option.
5.3 The Optionholder will indemnify and keep indemnified his or her
employer, Loudeye and OD2 from and against any liability for, or
obligation to pay, any Tax.
5.4 The Exchanged Option cannot be exercised until the Optionholder has
entered into an election with his/her employer (in a form approved by
Loudeye and the Inland Revenue) (an "ELECTION AGREEMENT") under which
any liability of that employer or Loudeye for Employer's NICs arising
in respect of the issuance, vesting, exercise of or other dealing in
the Exchanged Option is transferred to and met by the Optionholder.
5.5 "EMPLOYER'S NICS" means the amount of employer's National Insurance
contributions that arise upon the grant or exercise of or other dealing
in the Exchanged Option or sale of the Loudeye Shares less the amount
of employer's NICs that would have arisen had the Optionholder
exercised his Non-Executive Options at the fair market value at 21 June
2004 (with `fair market value' per OD2 Share for this purpose (as
determined by the OD2 Board) being 62.80p).
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR CERTAIN OTHER
TRANSACTIONS
6.1 Subject to any required action by the stockholders of Loudeye, the
number of Loudeye Shares under the Exchanged Option and the New
Exercise Price shall be proportionately adjusted for any increase or
decrease in the number of Loudeye Shares resulting from a stock split,
reverse stock split, stock dividend, combination, recapitalization or
reclassification of Loudeye Shares, or any other increase or decrease
in the number of issued Loudeye Shares effected without receipt of
consideration by Loudeye which occurs after the Effective Date;
provided, however, that conversion of any convertible securities of
Loudeye shall not be deemed to have been "effected without receipt of
consideration" and further provided that the exercise price shall not
be reduced below the par value per Loudeye Share. Such adjustment shall
be made by the Board of Loudeye, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided
herein, no issuance by Loudeye of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect,
and no adjustment by reason thereof shall be made with respect to, the
number or price of Loudeye Shares under the Exchanged Option.
6.2 In the event of the dissolution or liquidation of Loudeye, the
Exchanged Option shall lapse and terminate immediately prior to the
consummation of such action, unless otherwise determined by the Board
of Loudeye.
6.3 In the event of a Corporate Transaction (as defined below), the
Exchanged Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of
such successor corporation (the "SUCCESSOR CORPORATION"), unless the
Successor Corporation does not agree to assume the award or to
substitute an equivalent option, in which case the Exchanged Option
shall lapse and terminate upon the consummation of the transaction.
6.4 Notwithstanding the terms of clause 6.3, in the event of a Change in
Control (as defined below), if:
a. the Successor Corporation so agrees, the Exchanged Option may
either be:
(i) assumed or replaced with an equivalent option by the
Successor Corporation; or
(ii) replaced with a cash incentive program of the
Successor Corporation based on the value of the
Exchanged Option at the time of the consummation of
the transaction.
b. the Exchanged Option is not being assumed or replaced with an
equivalent option by the Successor Corporation, then to the
extent that it is not exercised prior to consummation of a
Change of Control transaction, the Exchanged Option shall
lapse and terminate upon such consummation.
6.5 For purposes of this clause 6.4, a Exchanged Option shall be considered
assumed, without limitation, if, at the time of issuance of the stock
or other consideration upon a Corporate Transaction or a Change of
Control, as the case may be, the Optionholder would be entitled to
receive upon exercise of the new award the same number and kind of
shares of stock or the same amount of property, cash or securities as
such holder would have been entitled to receive upon the occurrence of
the transaction if the Optionholder had been, immediately prior to such
transaction, the holder of the number of Loudeye Shares covered by the
award at such time (after giving effect to any adjustments in the
number of shares covered by the Exchanged Option as provided for in
this Agreement); provided that if such consideration received in the
transaction is not solely common stock of the Successor Corporation,
the Board of Loudeye may, with the consent of the Successor
Corporation, provide for the consideration to be received upon exercise
of the award to be solely common stock of the Successor Corporation
equal to the fair market value of the per share consideration received
by holders of the Loudeye's common stock in the transaction.
6.6 For purposes of this Agreement, "CHANGE OF CONTROL" means a sale of all
or substantially all of Loudeye's assets, or any merger or
consolidation of Loudeye with or into another corporation other than a
merger or consolidation in which the holders of more than 50% of the
shares of capital stock of Loudeye outstanding immediately prior to
such transaction continue to hold (either by the voting securities
remaining outstanding or by their being converted into voting
securities of the surviving entity) more than 50% of the total voting
power represented by the voting securities of Loudeye, or such
surviving entity, outstanding immediately after such transaction.
6.7 For purposes of this Agreement, "CORPORATE TRANSACTION" means a sale of
all or substantially all of Loudeye's assets, or a merger,
consolidation or other capital reorganization of Loudeye with or into
another corporation.
7. OPTIONHOLDER'S ACKNOWLEDGEMENT AND UNDERTAKING
7.1 The Optionholder acknowledges and agrees:
a. that nothing in this Agreement shall confer upon the
Optionholder any right with respect to the continuation of
his/her employment or appointment as an officer by any OD2 or
any associated company;
b. the Exchanged Option does not form part of the terms of the
Optionholder's appointment to the office of non-executive
director of OD2 or in any way entitle the Optionholder to take
into account the Exchanged Option in calculating any
compensation or damages on the termination of his office which
might otherwise be payable to him; and
c. to accept as binding, conclusive and final all decisions or
interpretations made by or on behalf of Loudeye in respect of
any questions arising under this Agreement.
8. TRANSFER
The Exchanged Option is not transferable.
9. MISCELLANEOUS
9.1 Notwithstanding anything to the contrary, the Optionholder agrees to
cooperate with Loudeye to further amend the Exchanged Option to the
extent Loudeye determines it is necessary or desirable in order to
accommodate United States legal or tax considerations or to conform
such Exchanged Option to the terms and conditions of the Loudeye 2000
Stock option Plan (titled the Loudeye Technologies, Inc. 2000 Stock
Plan) and any form option agreements thereunder, provided that any
amendment which adversely affects the rights of Employee Optionholders
as a whole to a material extent requires the prior consent of Employee
Optionholder(s) holding between them more than 50 per cent. of the
outstanding Exchanged Options.
9.2 Any Notice to be given to the Optionholder in respect of the Exchanged
Option shall be delivered to the Optionholder in person or sent by
first class pre-paid post to you at your last known home address,
according to Loudeye's records, or at such other address as may appear
to Loudeye to be appropriate. Any notice so delivered or sent to the
Optionholder will be deemed to have been given on the date of delivery,
or, as the case may be, on the next following business day after the
date of posting.
9.3 This Agreement is governed by and is to be construed in accordance with
the laws of the State of Delaware of the United States of America.
9.4 The Optionholder agrees that the Loudeye Shares issuable upon exercise
of the Exchanged Option shall be subject to the transfer restrictions
set forth in Part D of Appendix I of the Offer Document and, unless
registered under the Securities Act of 1933, as amended, will bear the
following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, REGULATION S PROMULGATED UNDER
THE ACT OR ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY
LAWS AND, IN THE CASE OF A TRANSACTION NOT SUBJECT TO SUCH REGISTRATION
REQUIREMENTS, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE
REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE ACT.
EXHIBIT
NOTICE OF EXERCISE
To: Loudeye Corp.
Attn: Stock Option Administrator
Subject: Notice of Intention to Exercise Exchanged Option
This is official notice that the undersigned ("OPTIONHOLDER") intends
to exercise Optionholder's option to purchase __________ shares of
Loudeye Corp. Common Stock, under and pursuant to the Option Exchange
Agreement (the "AGREEMENT") dated _______________as follows:
Grant Number: __________________________________
Date of Purchase: __________________________________
Number of Loudeye Shares: __________________________________
New Exercise Price per Loudeye Share: __________________________________
Method of Payment of
Purchase Price: __________________________________
Social Security No.: __________________________________
The shares should be issued as follows:
Name: ______________________________
Address: ______________________________
______________________________
______________________________
I agree:
(a) pursuant to clause 5 of the Agreement to indemnify Loudeye Corp. and
any of its subsidiaries, including my employer in respect of any Tax
(as defined in clause 5.1 of the Option Exchange Agreement) which
arises as a result of the grant, exercise of or other deaking in the
Exchanged Option; and
(b) that the issue of these Loudeye Shares to me shall be conditional upon
my first making arrangements to the satisfaction of Loudeye Corp. to
discharge any such Tax, including the giving of an appropriate power of
attorney and (if required by Loudeye Corp.) entering into an election
pursuant to clause 5 of the Agreement to transfer the primary
responsibility to pay employer's National Insurance contributions to
myself.
Signed: ______________________________ Date: ______________________________
Name: ______________________________
NOTES:
(1) This form must be accompanied by payment of the aggregate New Exercise
Price for the Loudeye Shares in respect of which the Exchanged Option
is exercised.
(2) IMPORTANT neither Loudeye nor OD2 gives any advice to you on the tax
consequences of exercising the Exchanged Option. If you are unsure of
the tax liabilities that may arise, you should take professional advice
before exercising the Exchanged Option