Exhibit 4.7
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISEABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.
ARTISTDIRECT, INC.
WARRANT TO PURCHASE COMMON STOCK
Number of Shares of Common Stock: 237,500
Date of Issuance: July 28, 2005 ("ISSUANCE DATE")
ARTISTdirect, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Libra FE, LP, a California limited
partnership, the registered holder hereof or its permitted assigns (the
"HOLDER"), is entitled, subject to the terms set forth below, to purchase from
the Company, at the Exercise Price (as defined below) then in effect, upon
surrender of this Warrant to Purchase Common Stock (including any Warrants to
Purchase Common Stock issued in exchange, transfer or replacement hereof, the
"WARRANT"), at any time or times on or after the date hereof (the "INITIAL
EXERCISABILITY DATE"), but not after 11:59 p.m., New York Time, on the
Expiration Date (as defined below), 237,500 fully paid nonassessable shares of
Common Stock (as defined below) (the "WARRANT SHARES"). Except as otherwise
defined herein, capitalized terms in this Warrant shall have the meanings set
forth in Section 16. This Warrant constitutes the Warrants to purchase Common
Stock (the "LIBRA WARRANTS") issued pursuant to Section 2 of that certain
Engagement Agreement dated as of June 21, 2005, by and among the Company and
Libra Securities, LLC ("Libra").
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions
hereof (including, without limitation, the limitations set forth in Section
1(f)), this Warrant may be exercised by the Holder on any day on or after the
Initial Exercisability Date, in whole or in part, by (i) delivery of a written
notice, in the form attached hereto as Exhibit A (the "EXERCISE NOTICE"), of the
Holder's election to exercise this Warrant and (ii) (A) payment to the Company
of an amount equal to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the "AGGREGATE
EXERCISE PRICE") in cash or wire transfer of immediately available funds or (B)
by notifying the Company that this Warrant is being exercised pursuant to a
Cashless Exercise (as defined in Section 1(d)). The Holder shall not be required
to deliver the original Warrant in order to effect an exercise hereunder.
Execution and delivery of the Exercise Notice with respect to less than all of
the Warrant Shares shall have the same effect as cancellation of the original
Warrant and issuance of a new Warrant evidencing the right to purchase the
remaining number of Warrant Shares. On or before the first Business Day
following the date on which the Company has received each of the Exercise Notice
and the Aggregate Exercise Price (or notice of a Cashless Exercise) (the
"EXERCISE DELIVERY DOCUMENTS"), the Company shall transmit by facsimile an
acknowledgment of confirmation of receipt of the Exercise Delivery Documents to
the Holder and the Company's transfer agent (the "Transfer Agent"). On or before
the third (3RD) Business Day following the date on which the Company has
received all of the Exercise Delivery Documents (the "Share Delivery Date"), the
Company shall (X) provided that the Transfer Agent is participating in The
Depository Trust Company ("DTC") DEPOSIT WITHDRAWAL AGENT COMMISSION Program
("DWAC"), credit such aggregate number of shares of Common Stock to which the
Holder is entitled pursuant to such exercise to the Holder's or its designee's
balance account with DTC through its DWAC System, or (Y) if the Transfer Agent
is not participating in the DTCDWAC, issue and dispatch by overnight courier to
the address as specified in the Exercise Notice, a certificate, registered in
the Company's share register in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder is entitled pursuant to
such exercise. Upon delivery of the Exercise Notice and Aggregate Exercise Price
referred to in clause (ii)(A) above or notification to the Company of a Cashless
Exercise referred to in Section 1(d), the Holder shall be deemed for all
corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised, irrespective of the date
of delivery of the certificates evidencing such Warrant Shares. If this Warrant
is submitted in connection with any exercise pursuant to this Section 1(a) and
the number of Warrant Shares represented by this Warrant submitted for exercise
is greater than the number of Warrant Shares being acquired upon an exercise,
then the Company shall as soon as practicable and in no event later than three
Business Days after any exercise and at its own expense, issue a new Warrant (in
accordance with Section 8(d)) representing the right to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which this Warrant is
exercised. No fractional shares of Common Stock are to be issued upon the
exercise of this Warrant, but rather the number of shares of Common Stock to be
issued shall be rounded up to the nearest whole number. The Company shall pay
any and all taxes which may be payable with respect to the issuance and delivery
of Warrant Shares upon exercise of this Warrant.
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(b) Exercise Price. For purposes of this Warrant, "EXERCISE
PRICE" means $2.00, subject to adjustment as provided herein.
(c) Company's Failure to Timely Deliver Securities. If the
Company shall fail for any reason or for no reason to issue to the Holder within
FIVE (5) Business Days of receipt of the Exercise Delivery Documents, a
certificate for the number of shares of Common Stock to which the Holder is
entitled and register such shares of Common Stock on the Company's share
register or to credit the Holder's balance account with DTC for such number of
shares of Common Stock to which the Holder is entitled upon the Holder's
exercise of this Warrant, then, in addition to all other remedies available to
the Holder, the Company shall pay in cash to the Holder on each day after such
FIFTH (5TH) Business Day that the issuance of such shares of Common Stock is not
timely effected an amount equal to 0.5% of the product of (A) the sum of the
number of shares of Common Stock not issued to the Holder on a timely basis and
to which the Holder is entitled and (B) the Closing Sale Price of the shares of
Common Stock on the Trading Day immediately preceding the last possible date
which the Company could have issued such shares of Common Stock to the Holder
without violating Section 1(a). In addition to the foregoing, if within three
(3) Trading Days after the Company's receipt of the facsimile copy of a Exercise
Notice, the Company shall fail to issue and deliver a certificate to the Holder
and register such shares of Common Stock on the Company's share register or
credit the Holder's balance account with DTC for the number of shares of Common
Stock to which the Holder is entitled upon such holder's exercise hereunder, and
if on or after such Trading Day the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Holder of shares of Common Stock issuable upon such exercise that
the Holder anticipated receiving from the Company (a "BUY-IN"), then the Company
shall, within three Business Days after the Holder's request and in the Holder's
discretion, either (i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "BUY-IN PRICE"), at which point the Company's
obligation to deliver such certificate (and to issue such shares of Common
Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such shares of Common Stock
and pay cash to the Holder in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Common Stock,
times (B) the Closing Bid Price on the date of exercise.
(d) Cashless Exercise. Notwithstanding anything contained
herein to the contrary, the Holder may, in its sole discretion, exercise this
Warrant in whole or in part and, in lieu of making the cash payment otherwise
contemplated to be made to the Company upon such exercise in payment of the
Aggregate Exercise Price, elect instead to receive upon such exercise the "Net
Number" of shares of Common Stock determined according to the following formula
(a "CASHLESS EXERCISE"):
(A x B) - (A x C)
Net Number = ________________
B
For purposes of the foregoing formula:
A= the total number of shares with respect to which this Warrant is
then being exercised.
B= the Closing Sale Price of the shares of Common Stock (as reported
by Bloomberg) on the date immediately preceding the date of the
Exercise Notice.
C= the Exercise Price then in effect for the applicable Warrant
Shares at the time of such exercise.
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(e) Disputes. In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall promptly issue to the Holder the number of Warrant Shares that are
not disputed and resolve such dispute in accordance with Section 13.
(f) Limitations on Exercises.
(i) The Company shall not effect the exercise of this
Warrant pursuant to Section 1(d) or otherwise, and the Holder shall not have the
right to exercise this Warrant, to the extent that after giving effect to such
exercise, such Person (together with such Person's affiliates) would
beneficially own in excess of 4.99% (the "MAXIMUM PERCENTAGE") of the shares of
Common Stock outstanding immediately after giving effect to such exercise. For
purposes of the foregoing sentence, the aggregate number of shares of Common
Stock beneficially owned by such Person and its affiliates shall include the
number of shares of Common Stock issuable upon exercise of this Warrant with
respect to which the determination of such sentence is being made, but shall
exclude shares of Common Stock which would be issuable upon (i) exercise of the
remaining, unexercised portion of this Warrant beneficially owned by such Person
and its affiliates and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company beneficially owned by
such Person and its affiliates (including, without limitation, any convertible
notes or convertible preferred stock or warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained herein. Except as
set forth in the preceding sentence, for purposes of this paragraph, beneficial
ownership shall be calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended. For purposes of this Warrant, in determining
the number of outstanding shares of Common Stock, the Holder may rely on the
number of outstanding shares of Common Stock as reflected in (1) the Company's
most recent Form 10-KSB, Form 10-QSB, Current Report on Form 8-K or other public
filing with the Securities and Exchange Commission, as the case may be, (2) a
more recent public announcement by the Company or (3) any other notice by the
Company or the Transfer Agent setting forth the number of shares of Common Stock
outstanding. For any reason at any time, upon the written or oral request of the
Holder, the Company shall within two (2) Business Days confirm orally and in
writing to the Holder the number of shares of Common Stock then outstanding. In
any case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of the Company,
including the Libra Warrants, by the Holder and its affiliates since the date as
of which such number of outstanding shares of Common Stock was reported. By
written notice to the Company, the Holder may increase or decrease the Maximum
Percentage to any other percentage specified in such notice; provided that any
such increase will not be effective until the sixty-first (61st) day after such
notice is delivered to the Company.
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(ii) Until the Stockholder Approval (as defined in the
Note and Warrant Purchase Agreement entered into by the Company and dated as of
July 28, 2005) is obtained and a Certificate of Amendment has been filed by the
Company to increase the number of its authorized shares of Common Stock and such
Certificate of Amendment has been accepted by the Delaware Secretary of State,
the Holder may not exercise any portion of this Warrant.
(g) Value of the Warrants. The Company and the Holder hereby also
acknowledge and agree (i) that the readily ascertainable fair market value to be
ascribed to this Warrant at the time of issuance for purposes of Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code") shall be $59,375
(calculated as $0.25 per share of Common Stock underlying the Warrant on the
Issuance Date); (2) Section 83(a) of the Code shall not apply upon exercise or
disposition of the Warrants; and (3) each party shall report the issuance of the
Warrants for federal and state income tax purposes in a manner consistent with
this paragraph and not take any position inconsistent therewith on its tax
returns without the consent of the other parties hereto.
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
Exercise Price and the number of Warrant Shares shall be adjusted from time to
time as follows:
(a) Adjustment upon Issuance of shares of Common Stock. If at
any time after the first anniversary of the Effective Date (as defined in the
Registration Rights Agreement), the Company issues or sells, or in accordance
with this Section 2(a) is deemed to have issued or sold, any shares of Common
Stock (including the issuance or sale of shares of Common Stock owned or held by
or for the account of the Company for a consideration per share, but excluding
shares of Common Stock deemed to have been issued or sold by the Company in
connection with any Excluded Security (as defined herein)) (the "New Securities
Issuance Price") less than a price (the "Applicable Price") equal to $3.00 (the
foregoing a "Dilutive Issuance"), then immediately after such Dilutive Issuance,
the Exercise Price then in effect shall be reduced, and in no event increased,
to an amount (rounded to the nearest cent) equal to the product of (A) the
Exercise Price in effect immediately prior to such Dilutive Issuance and (B) the
quotient determined by dividing (1) the sum of (I) the product derived by
multiplying the Exercise Price in effect immediately prior to such Dilutive
Issuance and the number of shares of Common Stock Deemed Outstanding immediately
prior to such Dilutive Issuance plus (II) the consideration, if any, received by
the Company upon such Dilutive Issuance, by (2) the product derived by
multiplying (I) the Exercise Price in effect immediately prior to such Dilutive
Issuance by (II) the number of shares of Common Stock Deemed Outstanding
immediately after such Dilutive Issuance. If and whenever prior to the first
anniversary of the Effective Date (as defined in the Registration Right
Agreement), the Company issues or sells, or in accordance with this Section 2 is
deemed to have issued or sold, any shares of Common Stock (including the
issuance or sale of shares of Common Stock owned or held by or for the account
of the Company) for a New Securities Issuance Price that is less than the
Exercise Price in effect immediately prior to such issue or sale or deemed
issuance or sale, then immediately after such issue or sale, the Exercise Price
then in effect shall be reduced to an amount equal to such New Securities
Issuance Price. Upon each such adjustment of the Exercise Price pursuant to the
immediately preceding sentence, the number of Warrant Shares shall be adjusted
to the number of shares of Common Stock determined by multiplying the Exercise
Price
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in effect immediately prior to such adjustment by the number of Warrant Shares
acquirable upon exercise of this Warrant immediately prior to such adjustment
and dividing the product thereof by the Exercise Price resulting from such
adjustment. For purposes of determining the adjusted Exercise Price under this
Section 2(a), the following shall be applicable:
(i) Issuance of Options. If the Company in any manner grants
any Options and the lowest price per share for which one share
of Common Stock is issuable upon the exercise of any such
Option or upon conversion, exercise or exchange of any
Convertible Securities issuable upon exercise of any such
Option is less than the Applicable Price or the Exercise Price
in effect immediately prior to such issue or sale, then such
share of Common Stock shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the
granting or sale of such Option for such price per share. For
purposes of this Section 2(a)(i), the "lowest price per share
for which one share of Common Stock is issuable upon exercise
of such Options or upon conversion, exercise or exchange of
such Convertible Securities" shall be equal to the sum of the
lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one share of
Common Stock upon the granting or sale of the Option, upon
exercise of the Option and upon conversion, exercise or
exchange of any Convertible Security issuable upon exercise of
such Option. No further adjustment of the Exercise Price or
number of Warrant Shares shall be made upon the actual
issuance of such shares of Common Stock or of such Convertible
Securities upon the exercise of such Options or upon the
actual issuance of such shares of Common Stock upon
conversion, exercise or exchange of such Convertible
Securities.
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities and the
lowest price per share for which one share of Common Stock is
issuable upon the conversion, exercise or exchange thereof is
less than the Applicable Price or the Exercise Price in effect
immediately prior to such issue or sale, then such share of
Common Stock shall be deemed to be outstanding and to have
been issued and sold by the Company at the time of the
issuance or sale of such Convertible Securities for such price
per share. For the purposes of this Section 2(a)(ii), the
"lowest price per share for which one share of Common Stock is
issuable upon the conversion, exercise or exchange" shall be
equal to the sum of the lowest amounts of consideration (if
any) received or receivable by the Company with respect to one
share of Common Stock upon the issuance or sale of the
Convertible Security and upon conversion, exercise or exchange
of such Convertible Security. No further adjustment of the
Exercise Price or number of Warrant Shares shall be made upon
the actual issuance of such shares of Common Stock upon
conversion, exercise or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible
Securities is made upon
6
exercise of any Options for which adjustment of this Warrant
has been or is to be made pursuant to other provisions of this
Section 2(a), no further adjustment of the Exercise Price or
number of Warrant Shares shall be made by reason of such issue
or sale.
(iii) Change in Option Price or Rate of Conversion. If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion,
exercise or exchange of any Convertible Securities, or the
rate at which any Convertible Securities are convertible into
or exercisable or exchangeable for shares of Common Stock
increases or decreases at any time, the Exercise Price and the
number of Warrant Shares in effect at the time of such
increase or decrease shall be adjusted to the Exercise Price
and the number of Warrant Shares which would have been in
effect at such time had such Options or Convertible Securities
provided for such increased or decreased purchase price,
additional consideration or increased or decreased conversion
rate, as the case may be, at the time initially granted,
issued or sold. For purposes of this Section 2(a)(iii), if the
terms of any Option or Convertible Security that was
outstanding as of the date of issuance of this Warrant are
increased or decreased in the manner described in the
immediately preceding sentence, then such Option or
Convertible Security and the shares of Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall
be deemed to have been issued as of the date of such increase
or decrease. No adjustment pursuant to this Section 2(a)(iii)
shall be made if such adjustment would result in an increase
of the Exercise Price then in effect or a decrease in the
number of Warrant Shares.
(iv) Calculation of Consideration Received. In case any Option
is issued in connection with the issue or sale of other
securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options will be
deemed to have been issued for a consideration of $0.01. If
any shares of Common Stock, Options or Convertible Securities
are issued or sold or deemed to have been issued or sold for
cash, the consideration received therefor will be deemed to be
the net amount received by the Company therefor. If any shares
of Common Stock, Options or Convertible Securities are issued
or sold for a consideration other than cash, the amount of
such consideration received by the Company will be the fair
value of such consideration, except where such consideration
consists of securities, in which case the amount of
consideration received by the Company will be the Closing Sale
Price of such security on the date of receipt. If any shares
of Common Stock, Options or Convertible Securities are issued
to the owners of the non-surviving entity in connection with
any merger in which the Company is the surviving entity, the
amount of consideration therefor will be deemed to be the fair
value of such portion of the net assets and business of the
7
non-surviving entity as is attributable to such shares of
Common Stock, Options or Convertible Securities, as the case
may be. The fair value of any consideration other than cash or
securities will be determined jointly by the Company and the
Required Holders. If such parties are unable to reach
agreement within ten (10) days after the occurrence of an
event requiring valuation (the "VALUATION EVENT"), the fair
value of such consideration will be determined within five (5)
Business Days after the tenth day following the Valuation
Event by an independent, reputable appraiser jointly selected
by the Company and the Required Holders. The determination of
such appraiser shall be final and binding upon all parties
absent manifest error and the fees and expenses of such
appraiser shall be borne by the Company.
(v) Record Date. If the Company takes a record of the holders
of shares of Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in
shares of Common Stock, Options or in Convertible Securities
or (B) to subscribe for or purchase shares of Common Stock,
Options or Convertible Securities, then such record date will
be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other
distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(b) Adjustment upon Subdivision or Combination of Common
Stock. If the Company at any time on or after the Issuance Date subdivides (by
any stock split, stock dividend, recapitalization or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision will
be proportionately reduced and the number of Warrant Shares will be
proportionately increased. If the Company at any time on or after the Issuance
Date combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination will
be proportionately increased and the number of Warrant Shares will be
proportionately decreased. Any adjustment under this Section 2(b) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(c) Other Events. If any event occurs of the type contemplated
by the provisions of this Section 2 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company's Board of Directors will make an appropriate adjustment in the Exercise
Price and the number of Warrant Shares so as to protect the rights of the
Holder; provided that no such adjustment pursuant to this Section 2(c) will
increase the Exercise Price or decrease the number of Warrant Shares as
otherwise determined pursuant to this Section 2.
3. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare
or make any dividend or other distribution of its assets (or rights to acquire
its assets) to holders of shares of Common Stock, by way of return of capital or
otherwise (including, without
8
limitation, any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a
"DISTRIBUTION"), at any time after the issuance of this Warrant, then, in each
such case:
(a) any Exercise Price in effect immediately prior to the
close of business on the record date fixed for the determination of holders of
shares of Common Stock entitled to receive the Distribution shall be reduced,
effective as of the close of business on such record date, to a price determined
by multiplying such Exercise Price by a fraction of which (i) the numerator
shall be the Closing Bid Price of the shares of Common Stock on the Trading Day
immediately preceding such record date minus the value of the Distribution (as
determined in good faith by the Company's Board of Directors) applicable to one
share of Common Stock, and (ii) the denominator shall be the Closing Bid Price
of the shares of Common Stock on the trading day immediately preceding such
record date; and
(b) the number of Warrant Shares shall be increased to a
number of shares equal to the number of shares of Common Stock obtainable
immediately prior to the close of business on the record date fixed for the
determination of holders of shares of Common Stock entitled to receive the
Distribution multiplied by the reciprocal of the fraction set forth in the
immediately preceding paragraph (a); provided that in the event that the
Distribution is of shares of Common Stock (or common equity) ("OTHER SHARES OF
COMMON EQUITY") of a company whose shares of common equity are traded on a
national securities exchange or a national automated quotation system, then the
Holder may elect to receive a warrant to purchase Other Shares of Common Equity
in lieu of an increase in the number of Warrant Shares, the terms of which shall
be identical to those of this Warrant, except that such warrant shall be
exercisable into the number of shares of Other Shares of Common Equity that
would have been payable to the Holder pursuant to the Distribution had the
Holder exercised this Warrant immediately prior to such record date and with an
aggregate exercise price equal to the product of the amount by which the
exercise price of this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding paragraph (a) and the number
of Warrant Shares calculated in accordance with the first part of this paragraph
(b).
4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.
(a) Purchase Rights. In addition to any adjustments pursuant
to Section 2 above, if at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
shares of Common Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled
to acquire or receive, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which the Holder could have acquired if the Holder had
held the number of shares of Common Stock acquirable upon complete exercise of
this Warrant (without regard to any limitations on the exercise of this Warrant)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of shares of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights.
9
(b) Fundamental Transactions. The Company shall not enter into
or be party to a Fundamental Transaction unless (i) the Successor Entity assumes
in writing all of the obligations of the Company under this Warrant and the
other Transaction Documents in accordance with the provisions of this Section
(4)(b) pursuant to written agreements in form and substance satisfactory to the
Required Holders and approved by the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of Warrants in
exchange for such Warrants a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to this Warrant,
including, without limitation, an adjusted exercise price equal to the value for
the shares of Common Stock reflected by the terms of such Fundamental
Transaction, and exercisable for a corresponding number of shares of capital
stock equivalent to the shares of Common Stock acquirable and receivable upon
exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction, and satisfactory to the
Required Holders and (ii) the Successor Entity (including its Parent Entity) is
a publicly traded corporation whose common stock is quoted on or listed for
trading on an Eligible Market. Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of such Fundamental Transaction, the provisions of
this Warrant referring to the "Company" shall refer instead to the Successor
Entity), and may exercise every right and power of the Company and shall assume
all of the obligations of the Company under this Warrant with the same effect as
if such Successor Entity had been named as the Company herein. Upon consummation
of the Fundamental Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon exercise of this Warrant at any
time after the consummation of the Fundamental Transaction, in lieu of the
shares of the Common Stock (or other securities, cash, assets or other property)
purchasable upon the exercise of the Warrant prior to such Fundamental
Transaction, such shares of stock, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had this Warrant been converted immediately
prior to such Fundamental Transaction, as adjusted in accordance with the
provisions of this Warrant. In addition to and not in substitution for any other
rights hereunder, prior to the consummation of any Fundamental Transaction
pursuant to which holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for shares of Common
Stock (a "CORPORATE EVENT"), the Company shall make appropriate provision to
insure that the Holder will thereafter have the right to receive upon an
exercise of this Warrant at any time after the consummation of the Fundamental
Transaction but prior to the Expiration Date, in lieu of the shares of the
Common Stock (or other securities, cash, assets or other property) purchasable
upon the exercise of the Warrant prior to such Fundamental Transaction, such
shares of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights) which the Holder
would have been entitled to receive upon the happening of such Fundamental
Transaction had the Warrant been exercised immediately prior to such Fundamental
Transaction. Provision made pursuant to the preceding sentence shall be in a
form and substance reasonably satisfactory to the Required Holders. The
provisions of this Section shall apply similarly and equally to successive
Fundamental Transactions and Corporate Events and shall be applied without
regard to any limitations on the exercise of this Warrant.
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5. COMPANY'S RIGHT OF MANDATORY EXERCISE.
(a) Mandatory Exercise. If at any time following the Issuance
Date (i) a Mandatory Exercise Triggering Event occurs and (ii) on each day
during the period commencing on the Mandatory Exercise Notice Date and ending on
the Mandatory Exercise Date (each, as defined below), the Equity Conditions are
satisfied or waived in writing by the Holder, the Company shall have the right
to require the Holder to exercise all or any outstanding portion of this Warrant
as designated in the Mandatory Exercise Notice (the "MANDATORY EXERCISE AMOUNT")
into fully paid, validly issued and nonassessable shares of Common Stock in
accordance with Section 1 hereof (including, without limitation, the Holder's
right to exercise any portion of this Warrant pursuant to the cashless exercise
provisions as set forth in Section 1(d)) at the then applicable Exercise Price
as of the Mandatory Exercise Date (as defined below) (a "MANDATORY EXERCISE").
The Company may exercise its right to require exercise under this Section 5(a)
by delivering within not more than three (3) Trading Days following the end of
such Mandatory Exercise Measuring Period a written notice thereof by facsimile
and overnight courier to all, but not less than all, of the holders of the LIBRA
Warrants and the Transfer Agent (the "MANDATORY EXERCISE NOTICE" and the date
all of the holders received such notice is referred to as the "MANDATORY
EXERCISE NOTICE DATE"). The Mandatory Exercise Notice shall be irrevocable.
Notwithstanding the foregoing, the Company may only elect to pursue Mandatory
Exercise simultaneously with an election to pursue mandatory conversion of the
subordinated indebtedness and warrants issued pursuant to the Securities
Purchase Documents (as defined in the Note Purchase Agreement).
(b) Pro Rata Exercise Requirement. If the Company elects to
cause an exercise of all or any outstanding portion of this Warrant pursuant to
Section 5(a), then it must simultaneously take the same action with respect to
all of the LIBRA Warrants. The Mandatory Exercise Notice shall state the Trading
Day selected for the Mandatory Exercise (the "MANDATORY EXERCISE DATE") in
accordance with Section 5(a), which Trading Day shall be at least twenty (20)
Business Days but not more than sixty (60) Business Days following the Mandatory
Exercise Notice Date. If the Company has elected a Mandatory Exercise, the
mechanics of exercise set forth in Section 1 shall apply, to the extent
applicable, as if the Company and the Transfer Agent had received from the
Holder on the Mandatory Exercise Date a Mandatory Exercise Notice with respect
to the Mandatory Exercise Amount being exercised pursuant to the Mandatory
Exercise.
6. NONCIRCUMVENTION. The Company hereby covenants and agrees that
the Company will not, by amendment of its Articles of Incorporation, Bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the LIBRA Warrants are outstanding, take all
action necessary to reserve and keep available out of its authorized and
unissued shares of Common Stock, solely for the purpose of effecting the
exercise of the LIBRA Warrants, 130% of the number of shares of Common Stock as
shall from time to time be necessary to effect the exercise of the LIBRA
Warrants then outstanding (without regard to any limitations on exercise).
11
7. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, the Holder, solely in such Person's capacity as a
holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall
anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person's capacity as the Holder of this Warrant, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant Shares which such
Person is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on the Holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 7, the Company shall provide the Holder with copies
of the same notices and other information given to the stockholders of the
Company generally, contemporaneously with the giving thereof to the
stockholders.
8. REISSUANCE OF WARRANTS.
(a) Transfer of Warrant. If this Warrant is to be transferred,
the Holder shall surrender this Warrant to the Company, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 8(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less then the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 8(d)) to the Holder representing the right to purchase the number
of Warrant Shares not being transferred.
(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the Company in
customary form and, in the case of mutilation, upon surrender and cancellation
of this Warrant, the Company shall execute and deliver to the Holder a new
Warrant (in accordance with Section 8(d)) representing the right to purchase the
Warrant Shares then underlying this Warrant.
(c) Exchangeable for Multiple Warrants. This Warrant is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Warrant or Warrants (in accordance with Section 8(d))
representing in the aggregate the right to purchase the number of Warrant Shares
then underlying this Warrant, and each such new Warrant will represent the right
to purchase such portion of such Warrant Shares as is designated by the Holder
at the time of such surrender; provided, however, that no Warrants for
fractional shares of Common Stock shall be given.
12
(d) Issuance of New Warrants. Whenever the Company is required
to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant
(i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated
on the face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 8(a) or Section 8(c), the Warrant Shares designated by the Holder
which, when added to the number of shares of Common Stock underlying the other
new Warrants issued in connection with such issuance, does not exceed the number
of Warrant Shares then underlying this Warrant), (iii) shall have an issuance
date, as indicated on the face of such new Warrant which is the same as the
Issuance Date, and (iv) shall have the same rights and conditions as this
Warrant.
13
9. NOTICES. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Warrant must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business Day after deposit
with an overnight courier service, in each case properly addressed to the party
to receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
ARTISTdirect, Inc.
10900 Wilshire Boulevard,
Suite 1400
Los Angeles, California 90024
Telephone: (310) 208-8525
Facsimile: (310) 550-4069
Attention: Robert N. Weingarten
Copy to:
Richardson & Patel LLP
10900 Wilshire Boulevard, Suite 500
Los Angeles, California 90024
Telephone: (310) 208-1182
Facsimile: (310) 208-1154
Attention: Erick E. Richardson, Esq.
Copy to:
Sheppard, Mullin, Richter & Hampton LLP
333 South Hope Street, Suite 4300
Los Angeles, California 90071
Telephone: (213) 620-1780
Facsimile: (310) 620-1398
Attention: David H. Sands, Esq.
If to the Holder:
Libra FE, L.P.
c/o Libra Securities, LLC
11766 Wilshire Blvd., Suite 870
Los Angeles, California 90025
Telephone: (310) 312-5682
Facsimile: (310) 312-5640
Attention: General Counsel
14
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively;
provided however that the foregoing clause (B) shall only be valid if such
communication contained in the facsimile is delivered by an overnight courier
service within 24 hours of the transmission of facsimile.The Company shall
provide the Holder with prompt written notice of all actions taken pursuant to
this Warrant, including in reasonable detail a description of such action and
the reason therefore. Without limiting the generality of the foregoing, the
Company will give written notice to the Holder (i) immediately upon any
adjustment of the Exercise Price, setting forth in reasonable detail, and
certifying, the calculation of such adjustment and (ii) at least fifteen days
prior to the date on which the Company closes its books or takes a record (A)
with respect to any dividend or distribution upon the shares of Common Stock,
(B) with respect to any grants, issuances or sales of any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
to holders of shares of Common Stock or (C) for determining rights to vote with
respect to any Fundamental Transaction, dissolution or liquidation, provided in
each case that such information shall be made known to the public prior to or in
conjunction with such notice being provided to the Holder.
10. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Required
Holders; provided that no such action may increase the exercise price of any
LIBRA Warrants or decrease the number of shares or class of stock obtainable
upon exercise of any LIBRA Warrants without the written consent of the Holder.
No such amendment shall be effective to the extent that it applies to less than
all of the holders of the LIBRA Warrants then outstanding.
11. GOVERNING LAW. This Warrant shall be governed by and construed
and enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by,
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
12. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be
jointly drafted by the Company and the Holder and shall not be construed against
any person as the drafter hereof. The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant.
13. DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Exercise Price or the arithmetic calculation of the Warrant
Shares, the Company shall submit the disputed determinations or arithmetic
calculations via facsimile within two (2) Business Days
15
of receipt of the Exercise Notice giving rise to such dispute, as the case may
be, to the Holder. If the Holder and the Company are unable to agree upon such
determination or calculation of the Exercise Price or the Warrant Shares within
three (3) Business Days of such disputed determination or arithmetic calculation
being submitted to the Holder, then the Company shall, within two (2) Business
Days submit via facsimile (a) the disputed determination of the Exercise Price
to an independent, reputable investment bank selected by the Company and
approved by the Holder or (b) the disputed arithmetic calculation of the Warrant
Shares to the Company's independent, outside accountant. The Company shall cause
at its expense the investment bank or the accountant, as the case may be, to
perform the determinations or calculations and notify the Company and the Holder
of the results no later than ten (10) Business Days from the time it receives
the disputed determinations or calculations. Such investment bank's or
accountant's determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.
14. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder right
to pursue actual damages for any failure by the Company to comply with the terms
of this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
15. TRANSFER. This Warrant may be offered for sale, sold,
transferred or assigned without the consent of the Company.
16. CERTAIN DEFINITIONS. For purposes of this Warrant, the following
terms shall have the following meanings:
(a) "APPROVED STOCK PLAN" means any employee benefit, option
or incentive plan which has been approved by the Board of Directors of the
Company, pursuant to which the Company's securities may be issued to any
employee, consultant, officer or director for services provided to the Company.
(b) "BLOOMBERG" means Bloomberg Financial Markets.
(c) "BUSINESS DAY" means any day other than Saturday, Sunday
or other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
(d) "COMMON STOCK" means (i) the Company's shares of Common
Stock, par value $.01 per share, and (ii) any share capital into which such
Common Stock shall have been changed or any share capital resulting from a
reclassification of such Common Stock.
16
(e) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means, for
any security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price,
as the case may be, then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the "pink sheets" by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid
Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price, as the case may be, of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved pursuant to Section 13. All
such determinations to be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during the applicable
calculation period.
(f) "CONVERTIBLE SECURITIES" means any stock or securities
(other than Options) directly or indirectly convertible into or exercisable or
exchangeable for shares of Common Stock.
(g) "ELIGIBLE MARKET" means the Principal Market, The New York
Stock Exchange, Inc., the American Stock Exchange, the Nasdaq National Market or
The Nasdaq SmallCap Market.
(h) "EQUITY CONDITIONS" means each of the following
conditions: (i) during the period beginning on the date that is three months
prior to the applicable date of determination and ending on and including the
applicable date of determination (the "EQUITY CONDITIONS MEASURING PERIOD"), the
Company shall have delivered shares of Common Stock upon any exercise or
conversion of the LIBRA Warrants or any subordinated indebtedness or warrants
issued pursuant to the Securities Purchase Documents (as defined in the Note
Purchase Agreement); (ii) on each day of the Equity Conditions Measuring Period,
the Common Stock shall be listed on the Principal Market or an Eligible Market
and delisting or suspension by such market or exchange shall not have been
threatened either (A) in writing by such market or exchange or (B) by falling
below the minimum listing maintenance requirements of such market or exchange;
(iii) during each day of the Equity Conditions Measuring Period, there shall not
have occurred (x) the public announcement of a pending, proposed or intended
Fundamental Transaction which has not been abandoned, terminated or consummated,
(y) an event of default on any indebtedness of the Company or (z) an event that
with the passage of time or giving of notice, and assuming it were not cured,
would constitute an event of default on any indebtedness of the Company; (iv) on
each day of the Equity Conditions Measuring Period, the registration
17
statement or registration statements required pursuant to the Registration
Rights Agreement shall be effective and available for the sale of all of the
Registrable Securities in accordance with the terms of the Registration Rights
Agreement; and (v) on each day of the Equity Conditions Measuring Period and for
the thirty Trading Days thereafter, the registration statements required
pursuant to the Registration Rights Agreement shall be or shall be expected to
be effective and available for the sale of all of the Registrable Securities in
accordance with the terms of the Registration Rights Agreement.
(i) "EXCLUDED SECURITIES" means any shares of Common Stock
issued or issuable: (i) in connection with any Approved Stock Plan; (ii) upon
conversion, redemption or exchange of the subordinated indebtedness or warrants
issued pursuant to the Securities Purchase Documents on the Issuance Date
(including any shares of Common Stock issued as an interest payment pursuant to
the Securities Purchase Documents); (iii) pursuant to a bona fide firm
commitment underwritten public offering with a nationally recognized underwriter
which generates gross proceeds to the Company in excess of $25,000,000 (other
than an "at-the-market offering" as defined in Rule 415(a)(4) under the 1933 Act
and "equity lines"); (iv) upon conversion of any convertible security
outstanding on the Issuance Date so long as the terms of such securities are not
thereafter amended, modified or changed; (v) to employees, directors or
consultants in the ordinary course of business in consideration for services
provided to the Company (to the extent the value of the securities are based on
fair market value as based on the Closing Sales Price on the date of issuance)
in an amount not to exceed an aggregate of 200,000 shares in any twelve (12)
month period and (vi) upon the issuance or conversion of any security issued by
the Company that is contemplated on the capitalization table provided to the
Holder on the Issuance Date.
(j) "EXPIRATION DATE" means the date eighty-four months after
the Issuance Date or, if such date falls on a day other than a Business Day or
on which trading does not take place on the Principal Market (a "HOLIDAY"), the
next date that is not a Holiday.
(k) "FUNDAMENTAL TRANSACTION" means that the Company shall,
directly or indirectly, in one or more related transactions, (i) consolidate or
merge with or into (whether or not the Company is the surviving corporation)
another Person, or (ii) sell, assign, transfer, convey or otherwise dispose of
all or substantially all of the properties or assets of the Company to another
Person, or (iii) allow another Person to make a purchase, tender or exchange
offer that is accepted by the holders of more than the 50% of either the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the Person or Persons making or party to, or associated or affiliated
with the Persons making or party to, such purchase, tender or exchange offer),
or (iv) consummate a stock purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person whereby such other Person acquires
more than the 50% of the outstanding shares of Common Stock (not including any
shares of Common Stock held by the other Person or other Persons making or party
to, or associated or affiliated with the other Persons making or party to, such
stock purchase agreement or other business combination), or (v) reorganize,
recapitalize or reclassify its Common Stock.
(l) "MANDATORY EXERCISE TRIGGERING EVENT" means the Closing
Sale Price of the Common Stock equals or exceeds $3.50 (subject to appropriate
adjustments for stock
18
splits, stock dividends, stock combinations and other similar transactions after
the Issuance Date) for each of any fifteen (15) consecutive Trading Days (the
"MANDATORY EXERCISE MEASURING PERIOD") (with a minimum trading volume of 200,000
shares of Common Stock on each such Trading Day).
(m) "OPTIONS" means any rights, warrants or options to
subscribe for or purchase shares of Common Stock or Convertible Securities.
(n) "PARENT ENTITY" of a Person means an entity that, directly
or indirectly, controls the applicable Person and whose common stock or
equivalent equity security is quoted or listed on an Eligible Market, or, if
there is more than one such Person or Parent Entity, the Person or Parent Entity
with the largest public market capitalization as of the date of consummation of
the Fundamental Transaction.
(o) "PERSON" means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
(p) "PRINCIPAL MARKET" means the OTC Bulletin Board.
(q) "REGISTRATION RIGHTS AGREEMENT" means that certain
registration rights agreement by and among the Company and the holder.
(r) "REQUIRED HOLDERS" means the holders of the LIBRA Warrants
representing at least a majority of shares of Common Stock underlying the LIBRA
Warrants then outstanding.
(s) "SUCCESSOR ENTITY" means the Person (or, if so elected by
the Required Holders, the Parent Entity) formed by, resulting from or surviving
any Fundamental Transaction or the Person (or, if so elected by the Required
Holders, the Parent Entity) with which such Fundamental Transaction shall have
been entered into.
(t) "TRADING DAY" means any day on which the Common Stock is
traded on the Principal Market, or, if the Principal Market is not the principal
trading market for the Common Stock, then on the principal securities exchange
or securities market on which the Common Stock is then traded; provided that
"Trading Day" shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York Time).
[SIGNATURE PAGE FOLLOWS]
19
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common
Stock to be duly executed as of the Issuance Date set out above.
ARTISTDIRECT, INC.
By: /s/ Robert Weingarten
------------------------------
Name: Robert Weingarten
Title: Chief Financial Officer
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK
ARTISTDIRECT, INC.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("Warrant Shares") of
ARTISTdirect, Inc., a Delaware corporation (the "COMPANY"), evidenced by the
attached Warrant to Purchase Common Stock (the "WARRANT"). Capitalized terms
used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:
_________ a "Cash Exercise" with respect to __________ Warrant
Shares; and/or
_________ a "Cashless Exercise" with respect to __________ Warrant
Shares.
2. Payment of Exercise Price. In the event that the holder has elected a
Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.
Date: _______________ __, ______
___________________________________
Name of Registered Holder
By: ____________________________________
Name:
Title:
A-1
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs
American Stock Transfer & Trust Company to issue the above indicated number of
shares of Common Stock in accordance with the Transfer Agent Instructions dated
July 28, 2005 from the Company and acknowledged and agreed to by American Stock
Transfer & Trust Company.
ARTISTDIRECT, INC.
By: _________________________________
Name:
Title:
A-2