Exhibit 10.5
 
FLUID AUDIO NETWORK, INC.
STOCK RESTRICTION AGREEMENT
 
THIS STOCK RESTRICTION AGREEMENT (the "Agreement") is entered into as of March
15, 2006 by and among Fluid Audio Network, Inc., a Delaware corporation (the
"Company") and Robert Buch (the "Stockholder").
 
RECITALS
 
A.    The Stockholder owns 431,338 of the outstanding shares of the Company's
Common Stock (the "Shares").
 
B.    The Company and the Stockholder wish to enter into this Agreement in order
to (a) protect the Company and the Company's other stockholders in the event the
Stockholder is no longer employed by the Company and (b) make the Company more
attractive to prospective investors and business partners.
 
NOW THEREFORE, THE PARTIES AGREE AS FOLLOWS:
 
1.    Definitions.
 
1.1    "Anti-Dilution Securities" means the securities issued by the Company
pursuant to Section 3(b) of the Restricted Stock Purchase Agreement.
 
1.2    "Cause" means a termination of Stockholder's engagement or
employment with the Company by the Company due to (A) Stockholder's (after the
cure period set forth below) gross negligence and/or misconduct (including but
not limited to dishonesty, fraud, deceit, material incidents of insubordination,
poor performance or excessive absenteeism or tardiness), (B) the conviction (by
trial, upon a plea or otherwise) of Stockholder of, or the admission of guilt by
Stockholder of, a felony or a crime involving moral turpitude or any other act
of dishonesty, fraud or deceit or is punishable by imprisonment of thirty (30)
days or more, provided, however, that nothing in this Agreement shall obligate
the Company to pay any compensation or benefits during any period that
Stockholder is unable to perform his duties hereunder due to any incarceration,
and also provided, however, that nothing shall prevent Consultant's termination
under another section of this Agreement if it provides independent grounds for
termination, (C) a material breach of the Agreement or a breach of fiduciary
duty to the Company, or (D) a breach of this Agreement that adversely affects
the Company; provided that the Company may not terminate Stockholder's
engagement pursuant to clauses (A) or (D), unless, as to matters that are
capable of cure, the Company has given Stockholder written notice of such
matters in specific detail and of its intention to so terminate Stockholder if
such matter is not remedied within ten (10) days after written notice thereof
from the Company.
 
1.3    "Change of Control" shall mean the occurrence of any one of
the following: (i) any "person", as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other
than the Company, a subsidiary, an affiliate, or a Company employee benefit
plan, including any trustee of such plan acting as  trustee) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of Company representing fifty percent (50%) or more
of the combined voting power of Company's then outstanding securities; (ii) a
sale of assets involving all or substantially all of die assets of Company; or
(iii) a merger, reorganization or other transaction of Company whether or not
another entity is the survivor, pursuant to which holders. of all the shares of
capital stock of Company outstanding prior to the transaction hold, as a group,
less than .fifty percent (50%) of the shares of capital stock of the Company
outstanding after the transaction; provided, however, that a transaction the
sole purpose of which is to change the Company's state of incorporation or to
raise capital for the Company shall not constitute a Chanue of Control.

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1.4    "Option Notice" has the meaning set forth in Section 2.3 hereof.
 
1.5    "Option Period" has the meaning set forth in. Section 2.1 hereof.
 
1.6    "Option Price" means $0.01 per share.
 
1.7    "Repurchase Option" has the meaning set forth in Section 2.1 hereof
 
1.8    "Restricted Shares" means, as of any date, the Shares and the
Anti-dilution Securities that remain subject to the Repurchase Option, as more
specifically set forth on Schedule I hereto and Section 2.1 hereof.
 
1.9    "Restricted Stock Purchase Agreement" means that certain Restricted Stock
Purchase Agreement, dated August 1, 2004, by and between Stockholder and the
Company.
 
1.10           "Securities Act" means the Securities Act of 1933, as amended.
 
1.11           "Termination Date" means the date on which Stockholder's
employment or consulting relationship with the Company terminates, whether
voluntarily or involuntarily, with or without cause, and including termination
resulting from Stockholder's death or disability.
 
1.12            "Unrestricted Shares" means, as of any date, the Shares and the
Anti-dilution Securities that are no longer subject to the Repurchase Option.
 
2.    Right of Companyto Repurchase Shares and the Anti-Dilution Securities.
 
2. I    Repurchase Option. The Restricted Shares shall initially consist of
260,600 of the Shares and all Anti-Dilution Securities. Effective as of the
Termination Date, the Company shall have an irrevocable_ exclusive option to
repurchase all or any portion of the Restricted Shares (the "Repurchase Option")
at the Option Price. The Repurchase Option will expire with respect to 8,986 of
the Restricted Shares on April 1, 2006, and with respect to an additional 8,986
of the Restricted Shares on the first day of each calendar month thereafter
until August I, 2008, so that the Repurchase Option shall have expired with
respect to all of the Restricted Shares on August 1, 2008. The Repurchase Option
with respect to any Anti-Dilution Securities shall expire in the same proportion
as the Shares (i.e., if upon issuance of the Anti-Dilution Securities the
Repurchase Right has expired with respect to 75% of the Shares, and 12 months
remain until the Repurchase Right shall have expired with respect to all of the
Shares, then the Repurchase Right shall apply to 25% of the Anti-Dilution
Securities upon issuance and shall expire ratably monthly over 12 months
thereafter).
 
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2.2    Repurchase Option Exercise Period. Subject to Section 2.5 hereof, the
Repurchase Option shall be exercisable for a period of sixty (60) days from the
Termination Date (such period, the "Option Period"); provided, however, that the
Company may extend the Option Period for up to one (1) year from the Termination
Date if the Board reasonably determines that such extension is necessary to
prevent a material adverse effect on the Company's financial or operational
status. If the Company so extends the Option Period, during the period between
the date of delivery of notice extending the Option Period and the earlier of
exercise of the Right of Repurchase and expiration of such one-year period. the
Stockholder hereby grants the Company with full power of substitution an
irrevocable proxy to vote such the shares subject to the Repurchase Option (or
execute a written consent) on all matters submitted to a vote of stockholders.
lithe Company elects to extend the Option Period, it shall deliver written
notice of same to Stockholder within thirty (30) days of the Termination Date. A
right to a Repurchase Option with respect to fractional shares shall be rounded
to the nearest whole share.
 
2.3    Exercise ofRepurchase Option. Subject to Section 2.5 hereof', the Company
shall, within sixty (60) days after the Termination Date, deliver written notice
to Stockholder of its election to exercise its Repurchase Option (the "Option
Notice"), and shall (A) deliver a check in the amount of the Option Price, (B)
in the event Stockholder is indebted to the Company, cancel Stockholder's debt
in an amount equal to the Option Price, or (C) take combined action under (A)
and (13), such that the combined payment and cancellation of indebtedness equals
the Option Price. Upon delivery of the Option Notice and compliance with (A),
(B) and/or (C) above. the Company shall become the legal and beneficial owner of
the repurchased securities and all rights and interest therein or related
thereto, and the Company shall have the right to transfer to its own name the
number of repurchased securities without further action by Stockholder.
 
2.4    Transfer ofSecurities. Stockholder acknowledges and agrees that in
addition to the limitations set forth herein. the Shares and the Anti-dilution
Securities are or will be subject to certain transfer restrictions set forth in
the Restricted Stock Purchase Agreement, and that certain Stockholders Agreement
to be made by and among the Company (the "Stockholders Agreement"), Stockholder
and certain other stockholders of the Company. Stockholder agrees that he shall
not transfer any of the Shares or Anti-dilution Securities except in accordance
with the terms and conditions set forth herein and in the Restricted Stock
Purchase Agreement and the Stockholders Agreement. In the event the Stockholder
transfers any of the Shares or Anti-dilution Securities, in addition such other
restrictions on transfer that may apply, any Restricted Shares at the time of
such transfer shall continue to be Restricted Shares in the possession of such
transferee.
 
2.5    Acceleration ofLapse of Repurchase Rights Upon Certain Events.
Notwithstanding the provisions of Section 2.1 hereof, the Repurchase Option
shall expire with respect to all Restricted Shares existing upon the
consummation of a Change or Control or a termination of Stockholder's engagement
or employment with the Company without Cause.
 
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3.    Company Enforcement.
 
3.1    Company Records. The Company shall not transfer on its books any of the
shares of Common Stock held by the Stockholder without first ascertaining
compliance with all of the applicable provisions of this Agreement with respect
to such transfer.
 
3.2    Stop-Transfer Orders.The Stockholder agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop-transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records. The Company shall not be
required to transfer on its books any Shares or Anti-dilution Securities that
have been sold or otherwise transferred in violation of any of the provisions of
this Agreement or any federal or state securities laws, or to treat as owner of
such Shares or Anti-dilution Securities or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares or
Anti-dilution Securities shall have been so transferred.
 
3.3    NoRegistration. Stockholder understands that the Shares and the
Anti-dilution Securities have not been registered under the Securities Act by
reason of a specific exemption therefrom, which exemption depends upon, among
other things, the bona fide nature of Stockholder's investment intent as
expressed herein.
 
3.4    Restricted Securities. Stockholder understands that the Shares and the
Anti-dilution Securities are "restricted securities" under applicable U.S.
federal and state securities laws and that, pursuant to these laws, he must hold
the Shares and the Anti-dilution Securities indefinitely unless they are
registered with the Securities and Exchange Commission and qualified by state
authorities, or unless an exemption from such registration and qualification
requirements is available. Stockholder acknowledges that the Company has no
obligation to register or qualify the Shares or the Anti-dilution Securities for
resale. Stockholder further acknowledges that if an exemption from registration
or qualification is available, it may be conditioned on various requirements
including, but not limited to, the time and manner of sale, the holding period
for the Shares and the Anti-dilution Securities, and requirements relating to
the Company which are outside of the Stockholder's control, and which the
Company is under no obligation and may not be able to satisfy.
 
3.5    No Transfer. Without limiting the representations set forth above, the
Stockholder will not make any disposition of all or any part of the Shares or
the Anti-dilution Securities which will result in the violation by the
Stockholder or by the Company of the Securities Act, the California Corporate
Securities Law of 1968, or any other applicable securities laws. Without
limiting the foregoing, the Stockholder agrees not to make any disposition of
all or any part of the Shares or the Anti-dilution Securities unless and until:
 
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(a)    There is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement and any applicable requirements of state
securities laws; or
 
(b)    The Stockholder has notified the Company of the proposed disposition and
has furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and, if reasonably requested by the
Company, the undersigned will have furnished to the Company a written opinion of
counsel, reasonably satisfactory to the Company, that such disposition will not
require registration of any securities under the Securities Act or the consent
of or a permit from appropriate authorities under any applicable state
securities law.
 
4.    Legend-Requirement.All certificates evidencing Shares and the
Anti-dilution Securities subject to this Agreement shall, during the term of
this Agreement, bear such restrictive legends as the Company and the Company's
counsel deem necessary or advisable under applicable law or pursuant to this
Agreement, including, without limitation, the following;
 
"CERTAIN OF THE SECURITIES REPRESENTED HEREBY MAY BE SUBJECT TO A RIGHT OF
REPURCHASE BY THE COMPANY PURSUANT TO AN AGREEMENT RELATING TO SUCH SECURITIES,
SHOULD THE PERSON INITIALLY ISSUED THESE SECURITIES CEASE TO BE EMPLOYED BY THE
COMPANY OR ANY AFFILIATE THEREOF, AND SUCH SECURITIES MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IF SUCH SECURITIES ARE SUBJECT TO SUCH RIGHT OF
REPURCHASE."
 
5.    Tax Advice.The Stockholder acknowledges that he has not relied and will
not rely upon the Company with respect to any tax consequences related to the
ownership, purchase, or disposition of the Shares and the Anti-dilution
Securities. The Stockholder assumes full responsibility for all such
consequences and for the preparation and filing of all tax returns and elections
which may or must be filed in connection with such Shares and the Anti-dilution
Securities. The Stockholder has executed and delivered to the Company an
Acknowledgment in the form of Exhibit A hereto.
 
6.    Miscellaneous.
 
6.1    Binding Effect.This Agreement shall be binding upon, and inure to the
benefit of, the executors. administrators, heirs, legal representatives,
successors, and assigns of the parties hereto.
 
6.2    Governing Law.This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California excluding those laws that
direct the application of another jurisdiction's laws.
 
6.3    Counterparts.This Agreement may be executed in counterparts, each of
which shall be deemed an original, but which together shall constitute one
instrument. This Agreement may also be executed and delivered by facsimile
signature and in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
 
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6.4    Notices.Any notice required or permitted by this Agreement shall be in
writing and shall be deemed sufficient when delivered personally or sent by
telegram or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address as set forth below the
signatures of the parties or as subsequently modified by written notice.
 
6.5    Entire Areement.This Agreement constitutes and contains the entire
agreement of the parties pertaining to its subject matter and supersedes any and
all prior and contemporaneous agreements, representations, and understandings;
provided however, that this Agreement amends only those provisions of the
Stockholder's stock purchase agreement with the Company relating to repurchase
rights with respect to shares held by the Stockholder.
 
6.6    Arbitration.Any and all disputes or controversies arising out of this
Agreement, except for the obligation of Stockholder to deliver certificates
representing the Shares or the Anti-dilution Securities, shall be finally
settled by arbitration conducted in Los Angeles County in accordance with the
then existing Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof; provided that nothing in this
Section 6.6 shall prevent a party from applying to a court of competent
jurisdiction to obtain temporary relief pending resolution of the dispute
through arbitration. The parties hereby agree that service of and notices in the
course of such arbitration at their respective addresses as provided for in
Section 6.4 shall be valid and sufficient. If any party to this Agreement seeks
to enforce its rights under this Agreement, the non-prevailing party shall pay
all costs and expenses incurred by the prevailing party, including reasonable
attorneys, fees.
 
6.7    Adjustments.This Agreement, and the rights and obligations of the parties
hereunder, shall be interpreted insofar as practicable to account for any stock
combination. stock dividend, stock split, recapitalization, or other similar
transaction occurring after the effective date of this Agreement.
 
6.8    Amendment.This Agreement may he amended, and any term hereof waived, by
the written consent of the Company and the Stockholder.
 
6.9    Enforcement.If any portion of this Agreement is determined to be invalid
or unenforceable, the remainder shall be valid and enforceable to the maximum
extent possible.
 
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In WITNESS WHEREOF, the parties hereto have executed this Stock Restriction
Agreement as of the date first above written.
 

Company: 
FLUID AUDIO NETWORK, INC.
a Delaware corporation 
        By:
[justinsignature1.jpg]
  Justin Beckett, Chief Executive Officer          
Address:        _________________________________
                        _________________________________
       
[robertsignature1.jpg]
____________________________________________
Robert Buch 
       
Address:        3967 Marcasel Ave
                        Los Angeles, CA 90066

 
 
CONSENT OF SPOUSE
(if applicable)
 
I, Heather Buch, spouse of Robert Buch, have read and hereby approve the
foregoing Agreement. By execution of this Agreement, I agree to be irrevocably
bound by the terms of this Agreement as to my interest, whether as community
property or otherwise, if any, in the Shares and the Anti-dilution Securities,
including, without limitation, the terms of Section 1 of this Agreement. I
hereby appoint my spouse as my attorney-in-fact with respect to any amendment or
exercise of any rights under the Agreement.,
 

  [heathersignature1.jpg]  
Purchaser's Spouse, if applicable
(Mark "N/A" if not applicable) 

 
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