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EXHIBIT 10.28
UBL MERCHANDISER AGREEMENT
This Agreement, dated as of April 1, 1999, between Giant Merchandising
("Merchandiser"), ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and The
Ultimate Band List, LLC ("UBL"), ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, is being entered into in light of the following:
A. Merchandiser is in the business of manufacturing and selling
merchandise containing the names, photographs and other likenesses, biographical
material and other personal identification (collectively, "Personal
Identification") of artists.
▇. ▇▇▇ is in the business of operating an Internet web site (the "UBL
Store") that, among other things, sells merchandise containing the Personal
Identification of the various artists.
C. Merchandiser and UBL are entering into this Agreement in order to set
forth the terms and conditions upon which Merchandiser has agreed to sell
merchandise to UBL for resale over the UBL Site.
NOW, THEREFORE, in consideration of the foregoing and the mutual
benefits contained herein, the parties hereto agree as follows:
1. Term: The term of this Agreement (the "Term") shall be four (4) years
commencing on the date of this Agreement.
2. Merchandise Sales:
(a) Merchandiser agrees to sell to UBL during the Term, for resale
over the UBL Site upon the terms and conditions set forth below, all merchandise
manufactured by or under the control of Merchandiser, except to the extent
Merchandiser does not have the right to sell such merchandise to web site retail
outlets. Merchandiser agrees to use reasonable efforts to diligently and timely
fulfill UBL's orders of merchandise under this Agreement.
(b) Merchandiser agrees to sell all such merchandise to UBL at
Merchandiser's standard wholesale prices (i.e., the prices that Merchandiser
generally charges its other wholesale customers, subject to Merchandiser's
customary volume discounts). Merchandiser represents and warrants that attached
hereto as Exhibit A are Merchandiser's standard wholesale prices as of the
execution of this Agreement. Merchandiser shall notify UBL of any changes to its
standard wholesale prices, which changes shall only apply to merchandise ordered
by UBL after its receipt of such notice from Merchandiser. Notwithstanding the
foregoing, the parties agree and acknowledge that Merchandiser may not have
standard wholesale prices for certain collectible or limited edition items, in
which case the wholesale price shall be reasonably determined by Merchandiser.
(c) UBL shall remit payment to Merchandiser for all product
purchased from Merchandiser under this Agreement pursuant to invoices therefor
rendered to UBL, it being
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understood that payment shall not be due earlier than the date [***] after the
arrival at the Center of the applicable product items and UBL's receipt of an
invoice from Merchandiser therefor.
(d) Merchandiser shall use reasonable efforts to cause each person
or entity who manufactures and distributes product under license from
Merchandiser (a "Sublicensee") to sell merchandise to UBL hereunder upon [***]
payment terms and at no more than the Sublicensee's standard wholesale prices.
If a Sublicensee is unwilling to do so, Merchandiser may elect (in its
discretion) to purchase the applicable merchandise from such Sublicensee and
sell same to UBL pursuant to [***] payment terms, provided that the purchase
price charged by Merchandiser to UBL shall not be greater than the lesser of (i)
the price Merchandiser paid for such merchandise, or (ii) the lowest price the
applicable Sublicensee offered the merchandise to UBL.
(e) Merchandiser agrees that UBL may at any time return (not for
credit) to Merchandiser any unsold products sold to UBL by Merchandiser or a
Sublicensee. UBL shall pay all costs (including all associated freight and
insurance costs) of returning any unsold products from the Center to
Merchandiser's warehouse. Merchandiser agrees to use its commercially reasonably
efforts to promptly sell such returned product at liquidation prices (subject to
Merchandiser's commercially reasonable efforts to maximize the liquidation
proceeds) and to remit to UBL, within [***] after each such sale, [***] of the
net proceeds thereof. As used in this paragraph 2(e), the term "net proceeds"
shall mean the gross amount payable or credited to Merchandiser from such sales
less Merchandiser's verifiable direct third party out-of-pocket costs in
connection with such sales.
(f) Notwithstanding anything to the contrary contained herein, any
"Merchandiser Product" sold on the UBL Site pursuant to a particular "Store
Agreement" [as such terms are defined in the agreement between Merchandiser and
ARTISTdirect New Media, LLC, of even date herewith (the "ADMN Agreement")] shall
not be subject to this Agreement, it being the intention of the parties that all
such Merchandiser Product shall be subject to the terms and conditions of the
ADMN Agreement and the applicable Store Agreement.
3. Warrant. In further consideration of Merchandiser's entering into and
fully performing its obligations under this Agreement, and in exchange for the
payment by Merchandiser to ARTISTdirect, LLC ("AD") of one dollar ($1.00), upon
the consummation of the transaction that currently is contemplated to occur
whereby AD will become the beneficial owner of one hundred percent 100% of the
outstanding membership interests of UBL (the "Rollup"), UBL shall cause AD to
grant to Merchandiser a warrant to acquire common units of AD representing
approximately one percent (1%) of AD's outstanding membership interests for an
aggregate exercise price not to exceed One Million Twenty-One Thousand
Forty-Five Dollars ($1,021,045), which warrant shall be subject to the terms
generally set forth in Exhibit B attached hereto; provided, however, that if the
Rollup shall not occur prior to July 31, 1999, then UBL shall then grant to
Merchandiser a warrant substantially in the form of Exhibit B attached hereto.
4. Representations and Warranties; Indemnity:
--------------------------
[***] Confidential treatment has been requested for the bracketed portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
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(a) Each party hereto represents and warrants that: (i) it has the
full right, power and authority to enter into and to perform this Agreement;
(ii) it is not under any restriction or obligation that may or will impair such
party's full performance of this Agreement; and (iii) it shall not at any time
do or authorize any person or entity to do anything inconsistent with, or
anything that might diminish, impair or interfere with any of the other party's
rights hereunder.
(b) Each party hereto agrees to indemnify and hold the other and its
members, employees, attorneys, agents, successors, affiliates, assigns and
licensees harmless against any claim, liability, cost and expenses (including
attorneys' and accountants' fees reasonably incurred) in connection with any
breach or alleged breach of this Agreement the indemnifying party. In this
regard, the indemnified party shall not settle any claim without first notifying
the indemnifying party of the terms of any proposed settlement and obtaining its
consent thereto.
(c) Merchandiser acknowledges that UBL is making no representations
and warranties concerning anticipated success of the UBL Store, the amount of
compensation payable to Merchandiser hereunder, and/or the current or future
value of UBL or the warrants described in paragraph 3 above. Likewise, UBL
acknowledges that Merchandiser is making no representations and warranties
concerning anticipated success of the UBL Store or the amount of compensation
payable to UBL with respect thereto.
5. Notices:
(a) All notices and payments to either party hereto shall be sent to
such party's address first mentioned herein, or such other address as a party
hereto may hereafter designate by notice to the other. All notices sent under
this Agreement must be in writing to be effective, and must be sent by a third
party messenger, by air courier service with a written acknowledgment of
receipt, by registered or certified mail, return receipt requested, or through a
telegraph office. The date of personal delivery, of mailing or faxing, or the
date of delivery to a telegraph office, as the case may be, of any such notice
shall be deemed the date of the giving thereof (except, with respect to notices
of change of address, the date of which will be the date of receipt by the
receiving party). Until UBL notifies Merchandiser otherwise, a copy of all
notices hereunder to UBL shall be simultaneously sent as aforesaid to ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇;
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. Until Merchandiser notifies UBL otherwise, a
copy of all notices hereunder to Merchandiser shall be simultaneously sent as
aforesaid to Warner Music Group Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇; Attention: Legal Department.
(b) No failure by a party hereto to perform any of its obligations
hereunder shall be deemed a breach of this Agreement, unless the party claiming
a breach has given the other party hereto notice of such alleged breach in
reasonable detail and such alleged breach is not cured within fifteen (15)
business days [ten (10) business days for non-payments] after the giving of such
notice, provided this sentence shall not apply to breaches incapable of being
cured (e.g., representations and warranties).
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6. Miscellaneous:
(a) All references to "this Agreement," "hereof," "herein" and words
of similar connotation include all exhibits attached hereto, unless specified
otherwise. This Agreement is intended by the parties hereto as a final
expression of their understanding and agreement with respect to the subject
matter hereof and as a complete and exclusive statement of the terms thereof;
this Agreement supersedes all prior and contemporaneous negotiations,
understandings, and agreements between the parties hereto with respect to the
subject matter hereof. The parties acknowledge and agree that neither party
hereto has made any representations or promises in connection with this
Agreement or the subject matter hereof not contained herein. Nothing in this
Agreement shall be construed to require the commission of any act contrary to
law, and wherever there is a conflict between any provisions of this Agreement
and any statute, law, ordinance, order or regulation contrary to which the
parties hereto have no legal right to contract, such statute, law, ordinance,
order or regulation shall prevail; provided that, in such event, (a) the
provision of this Agreement so affected shall be limited only to the extent
necessary to permit the compliance with the minimum legal requirements, (b) no
other provisions of this Agreement shall be affected thereby, and (c) all such
other provisions shall remain in full force and effect. The parties hereto shall
negotiate in good faith to replace any invalid, illegal or unenforceable
provision (the "Invalid Provision") with a valid provision, the effect of which
comes as close as possible to that of the Invalid Provision. This Agreement
cannot be canceled, modified, amended or waived, in part or in full, in any
manner except by an instrument in writing signed by the party to be charged. No
waiver by UBL, whether expressed or implied, of any provision of this Agreement
or default hereunder shall affect UBL's right to thereafter enforce such
provision or to exercise the right or remedy set forth in this Agreement in the
event of any other default, whether or not similar. Words in the singular number
shall include the plural, and vice versa. Whenever examples are used in this
Agreement with the words "including," "for example," "e.g.," "such as," "etc."
or any derivation thereof, such examples are intended to be illustrative and not
in limitation thereof. The paragraph headings herein are used solely for
convenience and shall not be used in the interpretation or construction of this
Agreement.
(b) In entering into this Agreement and providing services pursuant
hereto, Merchandiser and UBL each have and shall have the status of independent
contractors. Nothing herein contained shall contemplate or constitute either
party being an agent or employee of the other party, and nothing herein shall
constitute a partnership, joint venture or fiduciary relationship between the
parties.
(c) This Agreement shall be deemed to have been entered into in the
State of California and the validity, interpretation and legal affect of this
Agreement shall be governed by the laws of the State of California applicable to
contracts entered into and performed entirely within the State of California.
The courts located in the County of Los Angeles, California (state and federal),
only, will have jurisdiction of any controversy regarding this Agreement; any
action or other proceeding which involves such a controversy will be brought in
those courts, in California and not elsewhere.
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THE ULTIMATE BAND LIST, LLC GIANT MERCHANDISING
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ [Illegible]
------------------------- -------------------------
(an authorized signatory) (an authorized signatory)
(i)
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EXHIBIT A
MERCHANDISER'S STANDARD WHOLESALE PRICE LIST
(AS OF JUNE 11, 1999)
ITEM PRICE
---- -----
T-shirt (adult) [***]*
T-shirt (youth) [***]*
Baby T [***]*
Tank top (women's) [***]*
Long-sleeve shirt
(men's/women's) [***]*
Football jersey [***]*
Tie-dye shirt [***]*
Baseball jersey (men's) [***]*
Baseball jersey
(women's) [***]*
Poly T (women's) [***]*
Hats [***]*
---------------
* Confidential treatment has been requested for bracketed portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
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EXHIBIT B
THE ULTIMATE BAND LIST, LLC
WARRANT TO PURCHASE 385,300 COMMON UNITS
WARRANT NO. 1999-1
THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS
WARRANT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT IS FURTHER SUBJECT TO CERTAIN RESTRICTIONS
ON TRANSFER CONTAINED HEREIN AND IN THAT CERTAIN AMENDED AND RESTATED OPERATING
AGREEMENT OF THE ULTIMATE BAND LIST, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY
DATED JULY 28, 1998, AS AMENDED.
WARRANT TO PURCHASE
LIMITED LIABILITY COMPANY COMMON UNITS
This certifies that Giant Merchandising ("Merchandiser") is entitled, on
or after April 1, 1999, to become a Member in The Ultimate Band List, LLC, a
California limited liability company (the "Company"), on and subject to the
terms and conditions contained herein and in the "Operating Agreement" (as
defined below), with the number of Common Units in the Company set forth in
Section 1 below, in return for a capital contribution by Merchandiser to the
Company of cash consideration in an amount equal to Two and 65/100 Dollars
($2.65) per Common Unit (subject to adjustment as hereinafter provided, the
"Warrant Price").
Except as otherwise specifically provided herein, terms used by not
otherwise defined herein shall have those meanings as set forth in that certain
Amended and Restated Operating Agreement of The Ultimate Band List, LLC, a
California limited liability company dated July 28, 1998, as amended (the
"Operating Agreement"). A true and correct copy of the Operating Agreement is
attached hereto.
This Warrant is subject to the following terms and conditions:
1. Common Units Subject to Warrant: Vesting.
(a) Definitions.
(i) "Determination Date" means April 30, 2003;
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(ii) "Merchandiser Agreement" means that certain Merchandiser
Agreement dated as of April 1, 1999 between the Company and Merchandiser;
(iii) "Qualifying Terms" means on a consignment basis or on terms
requiring payment no earlier than the date ninety (90) days after the receipt by
the "Center" (as defined in the Merchandiser Agreement) of the applicable
product items;
(iv) "Merchandiser Product" means merchandise provided to the
Company on Qualifying Terms by either Merchandiser or any "Sublicensee" (as
defined in the Merchandiser Agreement);
(v) "Gross Merchandiser Product Revenue" shall mean the amount
actually received by the Company in respect of Merchandiser Product sold to
customers who place orders through the "UBL Store" (as defined in the
Merchandiser Agreement), including any directly related shipping and handling
revenues collected by the Company from such customers;
(vi) "Deductible Amounts" shall mean all shipping and handling
costs; third party fulfillment fees, warehouse charges and related charges;
sales, use and value-added taxes; credit card and other third party service
fees; agent commissions; and any credits for returns, rebates, cancellations and
exchanges;
(vii) "Adjusted Gross Merchandiser Product Revenue" shall mean Gross
Merchandiser Product Revenue less the Deductible Amounts; and
(viii) "Highest Sales" means the greatest Adjusted Gross
Merchandiser Product Revenue during any period of twelve (12) consecutive
calendar months of the term of the Merchandiser Agreement (i.e., between April
1, 1999 and March 31, 2003).
(b) This Warrant may be exercised with respect to:
(i) 192,650 Common Units at any time on or before March 31, 2004;
and
(ii) an additional 96,325 Common Units for each full Five Hundred
Thousand Dollars ($500,000) in Highest Sales in excess of One Million Dollars
($1,000,000); provided that the number of additional Common Units that may be
acquired pursuant to this Section 1(b)(ii) shall be subject to a maximum of
192,650 (i.e., for Highest Sales of Two Million Dollars ($2,000,000) or more).
On or before the Determination Date, the Company shall notify Merchandiser of
the Highest Sales.
2. Term. Except for the rights conferred upon the Company pursuant to
Section 8 below, this Warrant, and Merchandiser's right to exercise this
Warrant, shall terminate immediately upon the first to occur of the
following:
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(a) the close of business (i.e., 5:00 p.m., Los Angeles time) on April
30, 2008;
(b) the termination of the Merchandiser Agreement prior to the
expiration of the full term thereof either (i) by the Company due to a material
breach thereof by Merchandiser, which breach remains uncured for the period
specified in Section 5(b) of the Merchandiser Agreement or (ii) by Merchandiser
other than due to a material breach thereof by the Company, which breach remains
uncured for the period specified in Section 5(b) of the Merchandiser Agreement;
or
(c) the breach by Merchandiser of any material provision of this
Warrant.
3. Method of Exercise; Payment; Issuance of New Warrant: Transfer and
Exchange. This Warrant may be exercised by Merchandiser, in whole or in
part, by the surrender of this Warrant, properly endorsed, at the
principal office of the Company at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (or at such other location within the State of
California or the State of New York as the Manager may advise
Merchandiser in writing), and by (a) payment to the Company in cash or
immediately available funds of the Warrant Price of the Common Units
being purchased, and (b) delivery to the Company of a customary
investment letter executed by Merchandiser, representing and warranting
that the Common Units are being acquired for Merchandiser's own account,
for investment purposes only, and not with a view to the distribution,
resale or other distribution thereof in violation of applicable
securities laws, and acknowledging the issuance and transfer of the
Common Units are subject to the requirements of federal and state
securities laws. Merchandiser, in lieu of exercising this Warrant for a
specified number of Common Units (the "Exercised Units") and paying the
aggregate exercise price therefor (the "Exercise Price"), may elect to
receive a number of Common Units equal to the number of Exercised Units,
minus a number of Common Units having an aggregate "Fair Market Value"
(as defined below) equal to the Exercise Price. After any such election,
the number of Common Units covered by this Warrant shall be deemed
automatically reduced by the number of Exercised Shares. For purposes of
this Warrant, "Fair Market Value" means (a) if the Common Units are then
publicly traded, the closing sale price of the Common Units on its
principal stock exchange or market system (or the average of the closing
bid and asked prices, if closing sales prices are not reported) for the
ten (10) consecutive trading days immediately prior to the date of any
such "net exercise," or (b) in all other cases, as determined by the
Manager in its sole, good faith discretion. In the event of any
exercise, or any such "net exercise," of less than all of the rights
represented by this Warrant, the Company shall issue to Merchandiser a
new warrant evidencing the ability of Merchandiser to purchase the
balance of the number of Common Units from the Company, and shall
deliver such warrant to Merchandiser promptly following such partial
exercise. The Company agrees that the Common Units issuable to
Merchandiser upon exercise of this Warrant and Merchandiser's making the
applicable payment to the Company in respect thereof, Merchandiser and
the Common Units issued to Merchandiser with respect to such exercise
shall become subject to the terms and conditions of the Operating
Agreement, including without limitation, the obligation to sell Common
Units and the restrictions on transfer of Common Units contained
therein. In this regard, Merchandiser acknowledges that it shall only
become a Member and be entitled to the rights as a Member once
Merchandiser validly exercises
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this Warrant in accordance with the terms hereof and executes a
signature page to the Operating Agreement whereby it agrees to be bound
by all of the terms thereof, excluding the non-competition covenant
contained in Section 3.10 thereof, from which Merchandiser shall be
exempted.
4. Due Authorization and Issuance. The Company covenants and agrees that
any and all of the Common Units issued to Merchandiser in accordance
with the terms hereof will, upon such issuance, be duly authorized,
validly issued and free from all preemptive rights of any holder of
Common Units in the Company, free and clear of all taxes, liens and
charges with respect to such issuance. The Company further covenants and
agrees that, during the period within which this Warrant may be
exercised, the Company will take no action that would prohibit the
issuance of Common Units required to be issued in accordance with the
terms and conditions hereof on such exercise.
5. Fractional Common Units. No fractional Common Units shall be issued in
connection with any exercise hereunder but in lieu of such fractional
Common Units, the Company shall make a cash payment therefor upon the
basis of the fair market value of the Common Units, as determined by the
Manager in its sole, good faith discretion.
6. Certain Adjustments.
(a) If the outstanding Common Units are changed into or exchanged for a
different number or kind of securities of the Company or a successor entity
(including a "C-corporation" that becomes the successor or parent of the Company
in connection with a roll-up or similar exchange transaction in connection with
an initial public offering) through a capital reorganization or
reclassification, or if the number of outstanding Common Units is changed
through a split of Common Units, reverse split of Common Units or issuance of a
Common Unit dividend, then a reasonable and appropriate adjustment shall be made
by the Company in (i) the number or kind of Common Units that may be purchased
pursuant to the exercise of this Warrant, and (ii) the number, exercise price,
or kind of securities subject to this Warrant. Any such adjustment in this
Warrant, however, shall be made without a change in the total price applicable
to the unexercised portion of this Warrant but with a corresponding adjustment
in the price for each Common Unit covered by this Warrant. In making such
adjustments, or in determining that no such adjustments are necessary, the
Company may rely upon the advice of counsel and accountants to the Company, and
the reasonable determination of the Company shall be binding.
(b) Upon (i) the dissolution, liquidation, or sale of all or
substantially all of the business, properties and assets of the Company, (ii)
any reorganization, merger, consolidation, sale or exchange of securities in
which the Company does not survive, (iii) any reorganization, merger,
consolidation, sale or exchange of securities in which the Company does survive
and any of the Company's members have the opportunity to receive cash,
securities of another' entity and/or other property in exchange for their Common
Units (other than a "roll-up" or similar exchange transaction in connection with
an initial public offering), or (iv) any acquisition by any person or group (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended), of
beneficial ownership of more than fifty percent (50%) of the Company's then
outstanding Common Units (each of the events described in clauses (i), (ii),
(iii), or (iv) is
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referred to herein as an "Extraordinary Event"), this Warrant shall terminate
unless it survives the Extraordinary Event pursuant to Section 6(d) below.
(c) Merchandiser shall have the right until ten (10) days before the
effective date of any Extraordinary Event to exercise, in whole or in part, this
Warrant, but only to the extent to which it is exercisable pursuant to the
provisions hereof. In this regard, the Company shall notify Merchandiser in
writing of the Company's intent to engage in any Extraordinary Event on or
before the date (the "Notice Date") that is no less than thirty (30) days before
the effective date of such Extraordinary Event. In addition, notwithstanding
anything to the contrary contained herein, if an Extraordinary Event shall occur
during the term of the Merchandiser Agreement, then, solely for purposes of
determining the extent to which this Warrant is exercisable in accordance with
this Section 6(c), Highest Sales shall be determined either: (i) with reference
to each period of twelve (12) consecutive calendar months of the term of the
Merchandiser Agreement prior to the Notice Date; or (ii) if fewer than twelve
(12) months have elapsed since the commencement of the term of the Merchandiser
Agreement, on an annualized basis.
(d) If an Extraordinary Event occurs during the term of the Merchandiser
Agreement, then the Company shall be obligated to either, in its sole
discretion: (i) cause this Warrant to survive such Extraordinary Event or (ii)
cause the surviving entity (which may be the Company), or any other entity that,
after giving effect to the Extraordinary Event, owns, directly or indirectly,
fifty percent (50%) or more of the Company's then outstanding Common Units, to
tender to Merchandiser a substitute warrant to purchase units or other equity
interests in such entity containing terms and provisions substantially
preserving, in the reasonable, good faith discretion of the Company, the rights
and benefits of this Warrant to the extent then outstanding (a "Substitute
Warrant"). If an Extraordinary Event occurs after the term of the Merchandiser
Agreement, in its sole and absolute discretion, the Company may permit this
Warrant to survive such Extraordinary Event. In addition, if an Extraordinary
Event occurs after the term of the Merchandiser Agreement, in its sole and
absolute discretion, the surviving entity (which may be the Company), or another
entity, may, but shall not be so obligated, tender to Merchandiser a Substitute
Warrant.
(e) The grant of this Warrant shall not affect in any way the right or
power of the Company to make adjustments, reclassification or changes in its
capital or business structures or to merge, consolidate, dissolve, or liquidate
or to sell or transfer all or any part of its business or assets or undertake
any other permitted limited liability company action.
(f) Upon the occurrence of each adjustment of this Warrant pursuant to
this Section 6, the Company at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish to
Merchandiser a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Company shall, upon the written request of Merchandiser, furnish or cause to
be furnished to Merchandiser a like certificate setting forth: (i) such
adjustments and readjustments; (ii) the applicable Exercise Price at the time in
effect; and (iii) the number of Common Units, if any, and the amount, if any, of
other securities or property that at the time would be received upon the
exercise of this Warrant.
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(g) Other Action Affecting Common Units. The Company will not, by
amendment of its Articles of Organization or the Operating Agreement, or through
any reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, dividend or other distribution of cash
or property, or any other voluntary action, avoid or seek to,: avoid the rights
granted to Merchandiser hereunder or the observance or performance of any of the
terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions hereof, and
in the taking of all such actions as may be necessary or appropriate in order to
protect the rights of Merchandiser as set forth herein against impairment.
7. Payment of Taxes. The Company will pay all taxes (other than taxes based
upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of Common Units upon exercise of this
Warrant.
8. Drag-Along Obligation.
(a) Definition of Equity Securities. For purposes of this Warrant,
"Equity Securities" shall mean all (i) Units, all rights, options or warrants to
purchase Units, all securities of any type whatsoever that are convertible into
or exchangeable for Units, and all rights, options or warrants to purchase
securities that are convertible into or exchangeable for Units and (ii) all
shares, options, warrants, general or limited partnership interests, limited
liability company membership interests, participations or other equivalents
(regardless of how designated) of or in a corporation, partnership, limited
liability company or equivalent entity that are issued in exchange for any of
the items described in the preceding clause (ii).
(b) The Obligation. Notwithstanding anything to the contrary contained
herein, if the Manager finds an acquirer for all or any portion of its interest
in the Company (whether such acquisition is by way of purchase of assets, Common
Units or successor Equity SECURITIES, merger, recapitalization or other form of
transaction, and including, without limitation, a roll-up transaction that is
for the purpose of a reorganization among the Company and its Affiliates), then,
at the request of the Manager, Merchandiser shall sell or otherwise transfer a
corresponding portion of any Common Units (or successor Equity Securities) then
held by Merchandiser to such acquirer on the same terms and conditions as apply
to the sale or other transfer by the Manager. Merchandiser to such acquirer on
the same terms and conditions as apply to the sale or other transfer by the
Manager. Merchandiser further agrees timely to take such other actions as the
Manager may reasonably request in connection with the approval of the
consummation of such sale or other transfer, including, without limitation,
voting in favor of such sale or other transfer and waiving any dissenters'
rights, executing such agreements, powers of attorney, voting proxies or other
documents and instruments as may. be necessary or desirable to consummate such
sale or other transfer, and, in the event that such sale or other transfer is
structured as a recapitalization, transferring and retaining such portion of
Common Units (or successor Equity Securities) and rights under this Warrant as
may be requested by the Manager.
9. Tag-along Right.
(a) Definition of Excluded Transferee. For purposes of this Warrant,
"Excluded Transferee" shall mean: (i) ▇▇▇▇ ▇▇▇▇▇▇; (ii) ▇▇▇▇▇▇ ▇▇▇▇▇▇; (iii) a
spouse, descendant or parent
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of ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇; (iv) a descendant of any Person listed in
clauses (i), (ii) or (iii) above; (v) a trust for the sole benefit of any one or
more of the Persons listed in clauses (i), (ii), (iii) or (iv) above; (vi)
ARTISTdirect New Media, LLC ("ADNM"); or (vii) any Affiliate of any Person
listed in clauses (i), (ii), (iii), (iv), (v) or (vi) above.
(b) The Right. If ADNM, or any direct or indirect successor, assignee or
transferee of ADNM (each a "Transferor"), proposes alone or with others to
Transfer, directly or indirectly, to any Person that is not an Excluded
Transferee, any Equity Securities (each, a "Subject Interest") that represent a
fully-diluted Percentage of twenty percent (20%) or more, in a single
transaction or series of transactions, and the Common Units (or substitute
Equity Securities) issued to Merchandiser) pursuant to this (or any successor)
Warrant (the "Securities") include (at such time or upon exercise, conversion or
exchange) any Equity Securities of the same class as the Subject Interest (the
"Subject Interest Class"), the would-be Transferor shall provide Merchandiser
with not less than thirty (30) days' prior written notice of such proposed sale,
which notice shall include all of the material terms and conditions of such
proposed sale and which shall identify such purchaser (the "Sale Notice"), and
Merchandiser shall have the option, exercisable by written notice to the
Transferor within twenty (20) days after the receipt of the Sale Notice, to
participate in such transaction pro rata with the Transferor at the same time
as, and upon the same terms and conditions as (including all direct or indirect
consideration) the Transferor Transfers his Equity Securities in the Company.
Merchandiser may sell all or any portion of the Securities held by Merchandiser
(or issuable to Merchandiser upon exercise, conversion or exchange of any of the
Securities) that are of the class of Equity Securities that includes the Subject
Interest Class (the "Merchandiser's Securities") equal to the product obtained
by multiplying (i) the Subject Interest by (ii) a fraction, the numerator of
which is Merchandiser's Securities and the denominator of which is the total
number of Equity Securities of the Subject Interest Class then owned by the
Transferor, Merchandiser, and any other Person that has tag-along rights with
respect to the proposed Transfer by Transferor. To the extent that Merchandiser,
or any other Person that has tag-along rights with respect to the proposed
Transfer by Transferor, shall exercise its tag-along right, the number of Equity
Securities that the Transferor may Transfer in the transaction shall be
correspondingly reduced.
(c) Expenses. In any transaction in which Merchandiser sells or
otherwise disposes of any of the Merchandiser's Securities pursuant to this
Section 9, Merchandiser shall bear its pro rata share of the reasonable expenses
incurred by the Transferor in connection with the sale of the Subject Interest.
(d) Exempt Sales. The rights and obligations set forth in this Section 9
shall not apply to any sale of Equity Securities made in connection with or
following an initial public offering of common stock of the corporate successor
of the Company.
10. Transferability of Warrant.
(a) Except as set forth in Section 10(b) below, this Warrant may not be
sold, conveyed, transferred, alienated, donated, encumbered or otherwise
disposed of by Merchandiser and, accordingly, any purported such transaction in
violation of this Section 10 shall be void ab initio, of no force or effect.
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(b) Notwithstanding Section 10(a) above, but subject to applicable
securities laws, Merchandiser may transfer all, but not less than all, of this
Warrant, to any Affiliate of Merchandiser, provided that no such transfer shall
be effective until the transferee agrees in writing to be bound by all of the
provisions of this Warrant, including Section 8 above.
11. Investment Representation. Merchandiser represents and warrants to the
Company that Merchandiser is acquiring this Warrant for Merchandiser's
own account for investment and not with a view to, or for resale in
connection with, any distribution thereof. Merchandiser acknowledges
that this Warrant and the Common Units that may be purchased under this
Warrant have not been, registered under the Securities Act, by reason of
a specific exemption from the registration provisions of the Securities
Act that depends upon, among other things, the bona fide nature of the
investment intent of Merchandiser as expressed herein.
12. Representation Regarding Exercise Price. The Company hereby represents
and warrants to Merchandiser that the Exercise Price was calculated by
applying a value of the Company that does not exceed the value of the
Company that applied in the Company's most recent issuance of Common
Units to an unrelated third party.
13. Amendment and Waiver; Successors. This Warrant may only be amended or
supplemented, and any waiver or departure from the provisions hereof may
only be given, with the consent of the Manager and Merchandiser. All of
the covenants and provisions of this Warrant by or for the benefit of
the Company and Merchandiser shall bind and inure to the benefit of them
and their respective permitted successors and assigns hereunder.
14. Notices. All notices required by this Warrant to merchandiser shall be
sent to Giant Merchandising, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, or such other address as Merchandiser may hereafter designate by
notice to the Company. All notices sent under this Agreement to the
Company or the Manager shall be sent to the address indicated in Section
3 above. All notices required by this Warrant must be in writing to be
effective, and must be sent by a third party messenger, by air courier
service with a written acknowledgment of receipt, by registered or
certified mail, return receipt requested, or through a telegraph office.
The date of personal delivery, of mailing, or the date of delivery to a
telegraph office. The date of any such notice shall be deemed the date
of the giving thereof (except, with respect to notices of change of
address, the date of which will be the date of receipt by the receiving
party). Until the Company notifies Merchandiser otherwise, a copy of all
notice hereunder to the Company shall be simultaneously sent as
aforesaid to ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
15. Descriptive Headings and Governing Law. The descriptive headings of the
several paragraphs of this Warrant are inserted for convenience only and
do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties
shall be governed by, the laws of the State of California.
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16. Lost Warrant. The Manager and the Company represent and warrant to
Merchandiser that upon receipt of evidence reasonably satisfactory to
the Manager and the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction upon receipt of an indemnity reasonably satisfactory to the
Manager and the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Manager and the Company
will make and deliver a new Warrant in lieu of the lost, stolen,
destroyed or mutilated Warrant.
IN WITNESS WHEREOF, Merchandiser, the Company and the Manager
have caused this Warrant to be duly executed and issued by their respective
officers thereunto duly authorized as of the 1st day of April, 1999.
"COMPANY" "MERCHANDISER"
THE ULTIMATE BAND LIST, LLC Giant Merchandising
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ By:
------------------------------- ------------------------------
Its: Co-Chief Executive Officer (an authorized signatory)
"MANAGER"
ARTISTdirect New Media, LLC
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Its: Co-Chief Executive Officer
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