Document:

exv4w3

 

Exhibit 4.3

MAKEMUSIC! INC.

LOAN AND INVESTMENT AGREEMENT

     This Loan and Investment Agreement (the “Agreement”) is entered into and
made effective as of July 17, 2003 by and between MakeMusic! Inc., a Minnesota
corporation (the “Company”), and Entrepreneurs Funds BV, an entity organized
under the laws of The Netherlands (the “Investor”).

RECITALS

     WHEREAS, the Company has determined that it is in its best interest to
secure additional financing in the form of senior, secured debt obligations to
provide additional working capital for the Company’s operations;

     WHEREAS, the Investor desires to lend funds to the Company on the terms
and conditions set forth in this Agreement.

     NOW, THEREFORE, in consideration of the foregoing, the mutual promises set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

AGREEMENT

     1.     Investment. The Company hereby agrees to sell and the Investor hereby
agrees to purchase that certain Senior, Secured Promissory Note (the “Note”),
in substantially the form of Exhibit A attached to and incorporated into this
Agreement, in the aggregate principal amount (“Principal”) to be determined by
the Company in its discretion not later than August 25, 2003, of Five Hundred
Thousand Dollars ($500,000), Seven Hundred Fifty Thousand Dollars ($750,000) or
One Million Dollars ($1,000,000). Interest (“Interest”) on the outstanding
Principal shall accrue at an annual rate of twenty percent (20%), calculated on
the basis of actual number of days elapsed in a 360-day year. The Company
shall notify the Investor as to the amount of Principal it desires in writing
on or prior to August 25, 2003; and, against payment thereof by Investor in
lawful currency of the United States due on or before September 11, 2003, the
Company shall promptly, and in any event within three (3) U.S. business days,
prepare and issue the Note for such Principal amount to the Investor.

     Principal shall be due and payable on December 25, 2003. The Company may
not pre-pay the Note prior to its schedule maturity. Principal shall be
payable in lawful currency of the United States. Accrued Interest shall be
payable in the form of a warrant (“Warrant”), in substantially the form of
Exhibit B attached to and incorporated into this Agreement, to purchase 24,100
shares of common stock of the Company, $0.01 par value (“Common Stock”), in the
event the Principal equals $500,000, 36,200 shares of Common Stock in the event
the Principal equals $750,000 or 48,200 shares of Common Stock in the event the
Principal equals $1,000,000. The calculation of such share amounts is set
forth in Exhibit D to this Agreement. The Warrant shall be issued together
with the Note as provided in the foregoing paragraph. The

 

 

Investor shall complete the form W-8BEN, which has been provided by the
Company, and returned concurrently with the delivery of this Agreement executed
by the Investor.

     Shares of Common Stock issuable upon exercise of the Warrant are herein
referred to as the “Warrant Shares”. The Note, the Warrant, the Warrant
Shares, the Security Warrant (defined below) and the Security Warrant Shares
(defined below) are collectively referred to in this Agreement as the
“Securities.”

     2.     Security. The Note shall be secured by the issuance to Investor of a
warrant (“Security Warrant”), in substantially the form of Exhibit C attached
to and incorporated into this Agreement, to purchase to purchase up to 242,000
shares of Common Stock of the Company in the event the Principal equals
$500,000, up to 362,300 shares of Common Stock in the event the Principal
equals $750,000 or to purchase up to 483,000 shares of Common Stock in the
event the Principal equals $1,000,000 (such shares hereinafter referred to as
“Security Warrant Shares”). The calculation of such share amounts is set forth
in Exhibit D to this Agreement. The Security Warrant shall not become
exercisable unless and until an Event of Default (as defined below) has
occurred and, if provided for, remained uncured (as contemplated in Section 4
hereof), and then only to the extent, determined on a percentage basis, that
the unpaid Principal amount bears to the original Principal amount. The
Security Warrant shall be issued together with the Note and the Warrant as
provided in Section 1 hereof.

     3.     Seniority. The payment of Principal under the Note shall be senior to
the payment of certain other debt of the Company, as provided for in the Note.

     4.     Default. The Company shall be in default under the Note upon the
happening after the date of this Agreement of any of the events identified in
Section 5 of the Note.

     5.     Reservation of Shares of Common Stock. The Company shall, during the
time that the Warrant or the Security Warrant remain outstanding, reserve and
keep available from its authorized but unissued shares of Common Stock, a
sufficient number of shares to issue the Warrant Shares and Security Warrant
Shares.

     6.     Transfer Restrictions. The Securities shall be subject to certain
restrictions on transfer as identified in this Agreement, the Note, the Warrant
and the Security Warrant.

     7.     Representations and Warranties of the Company. The Company represents
and warrants to the Investor the following:

	 	(a)	 	The Company is duly organized, validly existing and in good
standing under the laws of the State of Minnesota.
	 
	 	(b)	 	This Agreement has been duly authorized by all necessary
corporate action on behalf of the Company, has been duly executed
and delivered by an authorized officer of the Company, and is a
valid and binding agreement on the part of the Company. All
corporate action necessary to the authorization, issuance, and
delivery of the Securities will be taken prior to issuance of the
Securities.
	 
	 	(c)	 	The Note, the Warrant and the Security Warrant, when issued
and delivered to the Investor, will constitute valid and binding
obligations of the Company in

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	 	 	 	accordance with their terms, except as enforceability may be
limited by the application of bankruptcy, insolvency, moratorium or
similar laws affecting the rights of creditor generally. The
Warrant Shares and Security Warrant Shares have been reserved for
issuance and, when issued upon exercise of the Warrant or Security
Warrant in accordance with their respective terms, as the case may
be, will be duly authorized, validly issued and outstanding, fully
paid, nonassessable.

     8.     Representations and Warranties of Investor. The Investor hereby
represents and warrants to the Company and its officers, directors,
shareholders, employees and agents as follows:

	 	(a)	 	Information About the Company. The Investor has obtained and
reviewed all information about the Company as the Investor believes
relevant to the decision to purchase the Securities including,
without limitation, filings that the Company has made with the
Securities and Exchange Commission (“SEC”). The Investor has also
had the opportunity to ask questions of, and to receive answers
from, the Company or an agent or a representative of the Company
concerning the terms and conditions of the investment and the
business and affairs of the Company.
	 
	 	(b)	 	High Degree of Risk. The Investor realizes that this
investment involves a high degree of risk, including, without
limitation, the risks related to the business and industry of the
Company identified in the Company’s annual report on Form 10-KSB for
the year ended December 31, 2002 and other filings the Company has
made with the SEC and the following risks related to this offering:

	•	 	the Company needs additional capital, which it may not obtain;
	 
	•	 	if additional financing is not obtained, the Company may be unable
to repay the Notes and may need to pursue other strategic courses of
action, which may significantly adversely impact the liquidity of the
Company’s securities, the status of the Company as a public company and
the business operations of the Company;
	 
	•	 	there are substantial restrictions on the transfer of the Securities;

	 
	•	 	the market price for the Company’s stock is volatile;
	 
	•	 	the market for the Company’s common
stock is limited and may be
further limited if the Company’s common stock is delisted from the
Nasdaq SmallCap Market; and
	 
	•	 	the Investor will be relying on management’s judgment regarding the
use of proceeds from the Note.

	 	(c)	 	Ability to Bear the Risk. The Investor is able to bear the
economic risk of the investment, including the total loss of such
investment.
	 
	 	(d)	 	Business Sophistication. The Investor is experienced and
knowledgeable in financial and business matters to the extent that
the Investor is capable of evaluating the merits and risks of the
prospective investment in the Securities.

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	 	(e)	 	Residency. The Investor is an entity organized under the
laws of The Netherlands. The Securities are being purchased by the
Investor in the Investor’s name solely for the Investor’s own
beneficial interest and not as nominee for, on behalf of, for the
beneficial interest of, or with the intention to transfer to, any
other person, trust, or organization.
	 
	 	(f)	 	Accredited Status. The Investor is an “accredited investor”
as such term is defined by Regulation D of the Securities Act of
1933, as amended (the “Act”).
	 
	 	(g)	 	Regulation S. The Investor:
	 

	 	(1)	 	certifies that he/she/it is not a “U.S. Person”
as that term is defined in Regulation S of the Act, and is not
acquiring the Securities for the account or benefit of any
U.S. Person, or else is a U.S. Person purchasing securities in
a transaction that does not require registration under the
Act; and
	 
	 	(2)	 	agrees to exercise his/her/its rights under the
Warrant and the Security Warrant, if at all, only in
accordance with the provisions of Regulation S, in conjunction
with a registration under the Act, or pursuant to an available
exemption from such registration, and further agrees not to
engage in hedging transactions with regard to the Warrant
Shares and Security Warrant Shares unless in compliance with
the Act.

     9.     Investment Purpose in Acquiring the Securities. The Investor and the
Company acknowledge that the Securities have not been registered under the Act
or applicable state securities laws and that the Securities will be issued to
the Investor in reliance on exemptions from the registration requirements of
the Act and applicable state securities laws and in reliance on the Investor’s
and the Company’s representations and agreements contained herein. The
Investor is acquiring the Securities for the account of the Investor for
investment purposes only and not with a view to their immediate resale or
distribution. The Investor has no present intention to divide his, her or its
participation with others or to resell or otherwise dispose of all or any part
of the Securities. In making these representations, the Investor understands
that, in the view of the Commission, exemption of the Securities from the
registration requirements of the Act would not be available if, notwithstanding
the representations of the Investor, the Investor has in mind merely acquiring
the Securities for resale upon the occurrence or non-occurrence of some
predetermined event.

     10. Compliance with Securities Act. The Investor agrees that if the
Securities or any part thereof are sold or distributed in the future, the
Investor shall sell or distribute them pursuant to the requirements of the Act
and applicable state securities laws. The Investor agrees that the Investor
will not transfer any part of the Securities without: (i) obtaining a “no
action” letter from the Commission and applicable state securities commissions;
(ii) obtaining an opinion of counsel satisfactory in form and substance to the
Company to the effect that such transfer is exempt from the registration
requirements under the Act and applicable state securities laws; or (iii)
registration.

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     11.     Restrictive Legends. The Investor agrees that the Company may place
one or more restrictive legends on any certificates evidencing the Securities
containing substantially the following language:

		
	 	The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, have not been registered
under any state securities law, and are subject to a subscription and
investment representation agreement. They may not be sold, offered for
sale, transferred, assigned, pledged or otherwise distributed for value
unless there is an effective registration under the Securities Act of
1933, as amended, and under the applicable state securities laws, or the
Company receives an opinion of counsel acceptable to the Company stating
that such transaction is exempt from registration and prospectus delivery
requirements of the Securities Act of 1933, as amended, and under the
applicable state securities laws.

     12.     Knowledge of Restrictions upon Transfer of the Securities. The
Investor understands that the Securities are not freely transferable and may in
fact be prohibited from sale for an extended period of time and that, as a
consequence thereof, the Investor must bear the economic risk of an investment
in the Securities for an indefinite period of time and may have extremely
limited opportunities to dispose of the Securities.

     13.     Binding Effect. Neither this Agreement nor any interest herein shall
be assignable by the Investor without the prior written consent of the Company.
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto, and their respective heirs, legal
representatives, successors and assigns.

     14.     Representations to Survive Delivery. The representations, warranties
and agreements of the Company and of the Investor contained in this Agreement
will remain operative and in full force and effect and will survive the receipt
of funds by the Company, and the issuance to the Investor of the Securities.

     15.     Miscellaneous Provisions.

	 	(a)	 	Registration Obligations; Cash Payment.

       (1)  The Company shall use its reasonable efforts to prepare and file with
the SEC prior to December 25, 2003 a registration statement on Form S-3 (or any
successor to Form S-3), covering the resale of the Warrant Shares (but not
Security Warrant Shares, which are provided for in Section 15(a)(3) hereof) and
use its reasonable efforts, as soon as reasonably practicable thereafter, to
cause such registration to be declared effective and to effect any related
qualification or compliance with respect to all such Warrant Shares. The
Company agrees that it will cause any Form S-3 filed and declared effective
pursuant to this Section 15(a)(1) to remain effective until the earlier of the
date that all Warrant Shares covered by the Form S-3 (i) have been sold,
transferred or disposed of pursuant to the Form S-3 or otherwise, or (ii) are
eligible for sale pursuant to Rule 144(k). Notwithstanding anything to the
contrary, each holder of Warrants or Warrant Shares understands and
acknowledges that there may be periods during which the Company may determine,
in good faith, that it is in the best interest of the Company and its
stockholders to defer disclosure of non-public information until such
information has reached a more advanced stage and that during such periods
sales of Warrant Shares and the effectiveness of any Form S-3 filed pursuant to
this Section 15(a)(1) may be suspended or delayed. Each holder of Securities
agrees

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that upon receipt of any written notice from the Company of a suspension
pursuant to this Section 15(a)(1), it will forthwith discontinue its
disposition of Warrant Shares pursuant to the Form S-3 until receipt by such
holder that the use of the Form S-3 may be resumed.

     (2)  The Company agrees to pay accrued Interest in lawful currency of the
United States on December 25, 2003 if the Company has not prepared and filed
with the SEC, and had declared effective by the SEC, all prior to December 25,
2003, a registration statement on Form S-3 covering the resale of the Warrant
Shares.

     (3)  The Company shall use its reasonable efforts to prepare and file with
the SEC as soon as is practical, and in any event within thirty (30) days of
the occurrence of an event of default (as contemplated in Section 4 hereof) a
registration statement on Form S-3 (or any successor to Form S-3), covering the
resale of the Security Warrant Shares (but not the Warrant Shares, which are
covered by Section 15(a)(1) hereof) and use its reasonable efforts, as soon as
reasonably practicable thereafter, to cause such registration to be declared
effective and to effect any related qualification or compliance with respect to
all such Security Warrant Shares. The Company agrees that it will cause any
Form S-3 filed and declared effective pursuant to this Section 15(a)(3) to
remain effective until the earlier of the date that all Security Warrant Shares
covered by the Form S-3 (i) have been sold, transferred or disposed of pursuant
to the Form S-3 or otherwise, or (ii) are eligible for sale pursuant to Rule
144(k). Notwithstanding anything to the contrary, each holder of Security
Warrants or Security Warrant Shares understands and acknowledges that there may
be periods during which the Company may determine, in good faith, that it is in
the best interest of the Company and its stockholders to defer disclosure of
non-public information until such information has reached a more advanced stage
and that during such periods sales of Security Warrant Shares and the
effectiveness of any Form S-3 filed pursuant to this Section 15(a)(3) may be
suspended or delayed. Each holder of Securities agrees that upon receipt of
any written notice from the Company of a suspension pursuant to this Section
15(a)(3), it will forthwith discontinue its disposition of Warrant Shares
pursuant to the Form S-3 until receipt by such holder that the use of the Form
S-3 may be resumed.

     (b)  Indemnification.

     (1)  The Company hereby indemnifies the Investor, and the officers and
directors of the Investor who control the Investors, within the meaning of
Section 15 of the Act, against all losses, claims, damages, and liabilities
caused by (1) any untrue statement or alleged untrue statement of a material
fact contained in any registration statement or prospectus (and as amended or
supplemented if the Company shall have furnished any amendments thereof or
supplements thereto), any preliminary prospectus or any state securities law
filings related to the registration of the Warrant Shares pursuant to Section
15(a)(1) and Security Warrant Shares pursuant to Section 15(a)(3); (2) any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
except insofar as such losses, claims, damages or liabilities are caused by any
untrue statement or omission contained in information furnished in writing to
the Company by such holder expressly for use therein.

     (2) The Investor agrees to indemnify the Company, and each current and
future officer, director, employee, agent and shareholder of the Company,
against and to hold them harmless from any damage, loss, liability, claim or
expense including, without limitation, reasonable attorneys’ fees resulting
from or arising out of the inaccuracy or alleged inaccuracy of

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any of the representations, warranties or statements of the Investor contained
in this Agreement, the Note, the Warrant and the Security Warrant including
without limitation any violation or alleged violation of the registration
requirements of the Act or applicable state law in connection with any
subsequent sale of the Securities or any portion thereof by Investor. Investor
also agrees it will indemnify and hold harmless the Company, each of its
officers who signs any registration statement related to the registration of
the Warrant Shares pursuant to Section 15(a)(1) and the Security Warrant Shares
pursuant to Section 15(a)(3), and each person, if any, who controls the
Company, within the meaning of Section 15 of the Act, with respect to losses,
claims, damages or liabilities which are caused by any untrue statement or
omission contained in information furnished in writing to the Company by such
holder expressly for use therein.

     (c)  Arbitration. Any dispute regarding this Agreement or the Investor’s
investment in the Company (including without limitation claims pursuant to
federal or state securities laws), including any claim which is made against
any placement agent or broker-dealer involved in the offer or sale of the
Securities, shall be resolved by arbitration which shall be the sole forum for
resolution of any such disputes. Unless otherwise agreed by the parties, any
such proceedings shall be brought in Minneapolis, Minnesota U.S.A. pursuant to
the Rules and Code of Arbitration of the American Arbitration Association.\

     (d)  Governing Law; Venue. This Agreement shall be governed by, and
construed in accordance with, the substantive laws of the State of Minnesota
without reference to Minnesota conflict of laws provisions. Subject in all
cases to Section 15(b) hereof, actions or proceedings litigated in connection
with this Agreement, if any, shall be venued exclusively in the state and
federal courts located in the County of Hennepin, State of Minnesota.

     (e)  Notice. All notices or other communications required or permitted
hereunder shall be in writing. A written notice or other communication shall
be deemed to have been delivered hereunder: (i) if delivered by hand, when
such notice is received from the notifying party; (ii) if transmitted by
facsimile, on the next business day following the day so transmitted; (iii) if
timely delivered to a reputable express courier, on the fifth business day
following the day so delivered; or (iv) if delivered by mail, on the seventh
business day following the date such notice or other communication is deposited
in the U.S. Mail for delivery by certified or registered mail addressed to the
other party, or when actually received, whichever occurs earlier.

     (f)  Counterparts. This Agreement may be executed by the Company and by
the Investor in separate counterparts, each of which shall be deemed an
original.

(signature pages follow)

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     In witness whereof, the parties have duly executed this Agreement as of
the date first se t forth above in a manner appropriate to each.

ENTREPRENEURS FUND B.V.

	 	 	 	 
	By	 	
/s/ Paul Kloppenborg

	 
	 	 	
/s/ Jan Van Veldhoven

	 
	Its	 	
CEO

Mailing Address:

Facsimile No.:

Tel. No.:

MAKEMUSIC! INC.

By      /s/ Philip Sean Lafleur

Its      Chief Executive Officer

Mailing Address:

6210 Bury Drive

Eden Prairie, MN 55346

U.S.A.

Facsimile No.: 952-906-3617

Tel. No.: 952-937-9611

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Exhibit A

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND ANY SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION THEREOF MAY BE
MADE ONLY (i) IN A REGISTRATION OR QUALIFICATION OR (ii) IF AN EXEMPTION FROM
REGISTRATION OR QUALIFICATION IS AVAILABLE AND THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL TO THAT EFFECT REASONABLY SATISFACTORY TO THE COMPANY.

MAKEMUSIC! INC.

20% SENIOR, SECURED PROMISSORY NOTE

	 	 	 	 	 	 	 
	Principal:	 	 	
$500,000	 	 	September 11, 2003

     FOR VALUE RECEIVED, the undersigned, MakeMusic! Inc., organized and
existing under the laws of the State of Minnesota, whose mailing address is
6210 Bury Drive, Eden Prairie, MN 55346 (the “Maker”), for value received,
hereby unconditionally promises to pay to the order of Entrepreneurs Fund, BV,
an entity organized under the laws of The Netherlands, or its successors and
assigns (the “Holder”), at such place as may be designated from time to time by
the Holder, any outstanding unpaid principal together with all accrued and
unpaid interest thereon in accordance with the terms of this promissory note
(the “Note”).

     The Note is being issued pursuant to the terms of that certain Loan and
Investment Agreement dated July 17, 2003 (“Agreement”) by and between the Maker
and the original Holder. This Note and the Holder hereof are subject to and
entitled to all the benefits provided for in the Agreement. The provisions of
the Agreement are incorporated herein by reference with the same force and
effect as if fully set forth herein. In the event of a conflict or
inconsistency between the Note and the Agreement, the Agreement shall govern.

     1.     Payment. Principal is due and payable on December 25, 2003. The
Company may not pre-pay the Note prior to its scheduled maturity. Principal
shall be payable in lawful currency of the United States. Accrued Interest
shall be payable in the form of a warrant (“Warrant”), in substantially the
form of Exhibit B attached to and incorporated into the Agreement. This Note
shall accrue interest at the rate of 20% per annum, calculated on the basis of
a 360-day year.

     2.     Security. The Note is secured by the issuance to Investor of a warrant
(“Security Warrant”), in substantially the form of Exhibit C attached to and
incorporated into the Agreement, to purchase up to 24,100 shares of Common
Stock of the Company (“Security

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Warrant Shares”). The Warrant shall not become exercisable unless and until an
Event of Default (as defined in Section 5 hereof) has been determined to have
occurred and, if provided for, remained uncured, and then only to the extent,
determined on a percentage basis, that the unpaid Principal amount bears to the
original Principal amount.

     3.     Seniority. The payment of Principal under the Note shall be prior to
and in preference of payment of all, and the Company shall make prior payment
on any, other indebtedness of the Company, whether currently outstanding or
hereafter incurred, payable to any bank, insurance company, or other lending
institution regularly engaged in the business of lending money, indebtedness in
connection with the acquisition or lease of capital equipment and pursuant to
the terms of investment securities issued by the Company, which indebtedness
shall not include accounts payable and other similar indebtedness incurred from
time to time in the ordinary course of business by the Company.

     4.     Compliance with Securities Laws and Other Transfer Restrictions.

     (a)  The Holder of this Note, by acceptance hereof, agrees, represents and
warrants that this Note is being acquired for investment, that the Holder has
no present intention to resell or otherwise dispose of all or any part of this
Note, and that the Holder will not offer, sell or otherwise dispose of all or
any part of this Note except under circumstances which will not result in a
violation of the Act or applicable state securities laws. The Maker may
condition any transfer, sale, pledge, assignment or other disposition on the
receipt, from the party to whom this Note is to be so transferred, of any
representations and agreements requested by the Maker in order to permit such
issuance or transfer to be made pursuant to exemptions from registration under
federal and applicable state securities laws.

     (b)  In the event the Holder of this Note desires to transfer this Note,
the Holder shall provide the Maker with a Form of Assignment, in the form
attached hereto describing the manner of such transfer, and, if so elected, an
opinion of counsel (reasonably acceptable to the Maker) that the proposed
transfer may be effected without registration or qualification under applicable
securities laws, whereupon such Holder shall be entitled to transfer this Note
in accordance with the notice delivered by such Holder to the Maker. If, in
the opinion of the counsel referred to in this Subsection, the proposed
transfer or disposition described in the written notice given may not be
effected without registration or qualification of this Note, the Maker shall
give written notice thereof to the Holder hereof, and such Holder will limit
its activities in respect to such proposed transfer or disposition as, in the
opinion of such counsel, are permitted by law.

     (c)  The Maker may place one or more restrictive legends on the Note, which
legends set forth the restrictions contained herein, and may further place a
“stop transfer” restriction in the Maker’s books and records with respect to
the Note. The restrictions set forth in this Note shall be binding upon any
holder, donee, assignee or transferee of the Note.

     5. Events of Default. The occurrence of any one or more of the following
events (whether such occurrence shall be voluntary or involuntary or occur or
be effected by operation of law or otherwise) shall constitute an “Event of
Default” hereunder:

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	 	     (i) the failure of the Maker to pay Principal and accrued Interest on
December 25, 2003;
	 
	 	     (ii) cessation of the business of the Company;
	 
	 	     (iii) the failure of the Maker to generally meet its debts, other than
those arising from this Note, as they mature for a period of ninety (90) days;
	 
	 	     (iv) the commencement by the Maker of any bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceedings under any
federal or state law;
	 
	 	     (v) the commencement against the Maker, of any bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceeding under any
federal or state law by creditors of the Maker, provided that such default
shall not be deemed an Event of Default if such proceeding is controverted
within ten (10) days and dismissed and vacated within thirty (30) days of
commencement, except in the event that any of the actions sought in any such
proceeding shall occur or the Maker shall take action to authorize or effect
any of the actions in any such proceeding; and
	 
	 	     (vi) breach by the Maker of any warranty, representation or covenant
contained in the Agreement or in the Note; provided that such default of any of
the warranties, representations or covenants shall not be deemed to be an Event
of Default unless and until such Default shall remain unremedied for a period
of thirty (30) consecutive days from the date of such breach.

     Upon the occurrence of and Event of a Default, the Holder (A) shall have
the right, at its option and not subject to demand or notice, to declare all or
any part of the Note immediately due and payable and (B) may exercise, in
addition to the rights and remedies granted in this Agreement and the Security
Warrant, all of the rights and remedies of a holder under the Note and under
applicable law.

     6.     Miscellaneous Provisions.

     (h)  No amendment hereunder shall be effective unless in writing signed by
the Maker and the Holder. Neither the failure on the part of the Holder in
exercising any right or remedy, nor any single or partial exercise of any other
right or remedy, shall operate as a waiver. The acceptance by the Holder of
any payment hereunder which is less than payment in full of all amounts due and
payable at the time of such payment shall not constitute a waiver of the right
to exercise any of the options hereunder at that time or at any subsequent
time.

     (i)  The Maker hereby: (i) waives diligence, presentment, demand for
payment, notice of dishonor, notice of non-payment, protest, notice of protest,
and any and all other demands in connection with the delivery, acceptance,
performance, default or enforcement of this Note.

     (j) The terms and provisions hereof shall inure to the benefit of, and be
binding upon, the respective successors and assigns of the Holder. The Maker
may not assign this Note without the prior approval of the Holder. This Note
shall be governed by and construed and enforced in accordance with the laws of
the State of Minnesota without giving effect to such state’s choice of law
principles.

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     (k)  No recourse for the payment of the principal of or any interest on
this Note, or for any claim based hereon or otherwise in respect hereof, and no
recourse under or upon any obligation, covenant or agreement of the Maker in
any Note, or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, shareholder, officer or director as
such, past, present or future, of the Maker or of any successor corporation
either directly or through the Maker or any successor corporation, whether by
virtue of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.

     (l)  Upon receipt by the Maker of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Note, and in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it,
and upon reimbursement to the Maker of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Note, if mutilated, the
Maker will make and deliver a new Note of like tenor and dated as of the
initial Note, in lieu of this Note.

     (m)  All notices or other communications required or permitted hereunder
shall be in writing. A written notice or other communication shall be deemed
to have been sufficiently given: (i) if delivered by hand, when such notice is
received from the notifying party; (ii) if transmitted by facsimile, on the
next business day following the day so transmitted; (iii) if timely delivered
to a reputable express courier, on the fifth business day following the day so
delivered; or (iv) if delivered by mail, on the seventh day following the date
such notice or other communication is deposited in the U.S. Mail for delivery
by certified or registered mail addressed to the other party, or when actually
received, whichever occurs earlier.

     IN WITNESS WHEREOF, the Maker has caused this Note to be executed by its
authorized representative, who certifies that he has all necessary authority on
behalf of the Maker to execute this Note and bind the Maker to the terms
hereof.

	 	 	 	 
	 	
MAKEMUSIC! INC.
	 
	 	By	 	
/s/ Barbara S. Remley

Its            CFO

12

 

FORM OF ASSIGNMENT

MAKEMUSIC! INC.

     FOR VALUE RECEIVED, the undersigned registered owner of this 20% Senior,
Secured Promissory Note (the “Note”) hereby sells, assigns and transfers unto
the Assignee named below all of the rights of the undersigned under the within
Note as set forth below:

	 	 	 	 	 	 	 	 	 	 	 
	Name of Assignee	 	Address	 	 	Principal Amount of Note	 
	
	 	
	 	 	
	 
	 
	 
	 
	 

and does hereby irrevocably constitute and appoint
_________________ Attorney to make such transfer on the books of
MAKEMUSIC! INC. maintained for the purpose, with full power of substitution in
the premises. The undersigned understands that compliance with the provisions
of the Note is necessary to effect any assignment or transfer.

     The undersigned hereby certifies that (1) the Assignee is not a “U.S.
Person” as that term is defined in Regulation S to the Securities and Exchange
Act of 1933, as amended, or (2) that the undersigned has delivered a written
opinion of counsel to MAKEMUSIC! INC. to the effect that the Warrant may be
validly transferred to the Assignee pursuant to an exempt from registration
thereunder.

	 	 	 
	Dated: _______________________,
______	 	
Dated: _______________________,
______
	 
	
Signature	 	

Second Signature (if necessary)
	 
	
Print Name	 	
Print Name

13

 

Exhibit B

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND ANY SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION THEREOF MAY BE
MADE ONLY (i) IN A REGISTRATION OR QUALIFICATION OR (ii) IF AN EXEMPTION FROM
REGISTRATION OR QUALIFICATION IS AVAILABLE AND THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL TO THAT EFFECT REASONABLY SATISFACTORY TO THE COMPANY.

WARRANT TO PURCHASE

SHARES OF COMMON STOCK

OF

MAKEMUSIC! INC.

Issuance Date: September 11, 2003

     THIS CERTIFIES that, subject to the terms and conditions herein set forth,
ENTREPRENEURS FUND, BV, an entity organized under the laws of The Netherlands,
or its registered assigns, is entitled to purchase from MAKEMUSIC! INC., a
Minnesota corporation (the “Company”), at any time after September 11, 2003 and
on or prior to 5:00 p.m., Minneapolis, Minnesota time on March 11, 2005 24,100
shares of Common Stock (as defined below) (the “Warrant Shares”) at the Warrant
Exercise Price (as defined below). The $.01 par value common stock of the
Company is herein referred to as the “Common Stock”. The “Warrant Exercise
Price” shall equal the closing bid price of one share of Common Stock on the
Nasdaq SmallCap Market on July 17, 2003.

     This Warrant and the rights granted hereby are subject to the following
terms and conditions:

     1.     Adjustment of Warrant Exercise Price and Number of Warrant Shares. The
provisions in this Warrant relating to the Warrant Exercise Price and the
number of Warrant Shares to be issued upon exercise of this Warrant shall be
subject to adjustment from time to time as hereinafter provided in this
Section.

     (a)  Upon each adjustment of the Warrant Exercise Price, the holder of this
Warrant shall thereafter be entitled to purchase, at the Warrant Exercise Price
resulting from such adjustment, the number of shares of Common Stock obtained
by multiplying the Warrant Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock purchasable hereto
immediately prior to such adjustment and dividing the product thereof by the
Warrant Exercise Price resulting from such adjustment.

     (b) In case the Company shall at any time subdivide its outstanding Common
Stock into a greater number of shares or declare a dividend payable in Common
Stock, the Warrant Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced

14

 

and the number of shares of Common Stock purchasable pursuant to this Warrant
shall be proportionately increased, and conversely, in case the Company’s
outstanding Common Stock shall be combined into a smaller number of shares, the
Warrant Exercise Price in effect immediately prior to such combination shall be
proportionately increased and the number of shares of Common Stock purchasable
upon the exercise of this Warrant shall be proportionately reduced.

     (c)  If any capital reorganization or reclassification of the capital stock
of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets (“Substituted Property”)
with respect to or in exchange for such Common Stock, then, as a condition of
such reorganization, reclassification, consolidation, merger or sale, the
holder shall have the right to purchase and receive upon the basis and upon the
terms and conditions specified in this Warrant, and in lieu of the Common Stock
of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, such Substituted Property as would
have been issued or delivered to the holder if it had exercised this Warrant
and had received upon exercise of this Warrant the Common Stock prior to such
reorganization, reclassification, consolidation, merger, or sale. The Company
shall not effect any such consolidation, merger, or sale, unless prior to the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume the obligation to deliver to the holder such Substituted
Property as, in accordance with the foregoing provisions, the holder may be
entitled to purchase.

     (d)  If the Company takes any other action, or if any other event occurs
which does not come within the scope of the provisions of Sections 2(b) or
2(c), but which should, in the Company’s reasonable judgment, result in an
adjustment in the Warrant Exercise Price and/or the number of shares subject to
the Warrant in order to fairly protect the purchase rights of the holder, an
appropriate adjustment in such purchase rights shall be made by the Company.

     (e)  Upon any adjustment of the Warrant Exercise Price or the number of
shares issuable upon exercise of this Warrant, the Company shall give written
notice thereof, by express delivery or first-class mail, postage prepaid,
addressed to the holder at the address of the holder as shown on the books of
the Company, which notice shall state the Warrant Exercise Price resulting from
such adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.

     2.     No Fractional Shares. No fractional shares will be issued in
connection with any exercise of this Warrant. In lieu of any fractional share
which would otherwise be issuable, the Company shall round up to the nearest
whole number of shares.

     3.     No Shareholder Rights. This Warrant shall not entitle its holder to
vote, receive dividends or exercise any of the rights of a shareholder of the
Company prior to exercise of this Warrant.

     4.     Covenants of the Company. The Company covenants that during the period
this Warrant is exercisable, the Company will reserve from its authorized and
unissued shares of Common Stock a sufficient number of shares of Common Stock
to provide for the issuance of

15

 

Warrant Shares upon the exercise of this Warrant. The Company further
covenants that all Warrant Shares that may be issued upon the exercise of this
Warrant will, upon payment and issuance, be duly authorized and issued, fully
paid and nonassessable shares of Common Stock.

     5.     Exercise of Warrant. This Warrant may be exercised by the registered
holder, in whole or in part, by providing the Company with at least five (5)
U.S. business days’ written notice of such holder’s intent to exercise and by
surrendering this Warrant at the principal office of the Company, together with
the Exercise Form attached hereto duly executed, accompanied by payment in full
of the amount of the aggregate Warrant Exercise Price in cash or check payable
to the Company. Notwithstanding anything to the contrary in this Warrant, in
no event shall a partial exercise be for Warrant Shares with an aggregate
exercise price of less than $5,000. Upon partial exercise hereof, a new
warrant or warrants containing the same date and provisions as this Warrant
shall be issued by the Company to the registered holder for the number of
Warrant Shares with respect to which this Warrant shall not have been
exercised. A Warrant shall be deemed to have been exercised immediately prior
to the close of business on the date the Company is in receipt of this Warrant,
a completed Exercise Form, all documents the Company may reasonably request
from the holder for the purpose of complying with applicable securities and
other laws, and payment for the number of Warrant Shares being acquired upon
exercise of this Warrant. The holder entitled to receive the Warrant Shares
issuable upon such exercise shall be treated for all purposes as the holder of
record of such Warrant Shares as of the close of business on such date. After
such date, the Company shall issue and deliver to the holder or holders
entitled to receive the same, a certificate or certificates for the number of
full Warrant Shares issuable upon such exercise.

     The holder has been advised that the Warrant Shares and the Warrant have
not been registered under the Act, or state securities laws pursuant to
exemptions from the Act and such laws, and that the Company’s ability and
obligation to issue Warrant Shares are dependent upon the availability of
exemptions from registration under the Act and state securities law for such
issuance. In the event that the Company does not meet the requirements for an
exemption to registration under the Act and state securities laws for issuance
of the Warrant Shares, the Company shall issue the Warrant Shares at the first
opportunity an exemption is available.

     The holder agrees to exercise its rights under the Warrant, if at all,
only in accordance with the provisions of Regulation S, in conjunction with a
registration under the Act, or pursuant to an available exemption from such
registration, and further agrees not to engage in hedging transactions with
regard to the Warrant Shares unless in compliance with the Act.

     Notwithstanding anything herein to the contrary, the Company shall have
the right to delay any exercise for the purpose of ensuring the availability of
an exemption under applicable securities laws for the issuance of the Warrant
Shares to the holder in light of the transactions by the Company in its
securities. If the Company elects to delay any such exercise, the Company
shall inform the holder, in writing, of such delay and the terms of such delay.
Any such delay shall not lead to any change in the Warrant Exercise Price or
the terms of the Warrant and shall not extend the term of any Warrant unless
such delay would extend past the expiration date of such Warrant. In such
case, the expiration date shall be extended to thirty (30) days after the end
of such delay.

     6.     Acceleration of Warrant Termination. For purposes of this section,
“Change of Control” shall mean the sale or lease of all or substantially all of
the Company’s assets or a

16

 

merger or other transaction in which the holders of the Company’s voting
capital stock before such transaction hold less than fifty percent of the
outstanding voting capital stock of the successor entity after the transaction.
Immediately prior to the Company completing a Change of Control, the Company
shall automatically have the right to call and terminate the Warrant, without
paying any additional consideration. The Company shall deliver prior written
notice to the holder (“Call Notice”) of a Change of Control and the
effectiveness of the call right. The holder shall have forty-five (45) days
from the date of the Call Notice (“Call Period”) during which the holder may
exercise the Warrant. If the Warrant is not exercised during the Call Period,
the holder shall deliver the Warrant to the Company for cancellation.
Cancellation of the Warrant shall be effective on the Company’s books and
records notwithstanding the holder’s failure to deliver the Warrant to the
Company for cancellation.

     7.     Compliance with Securities Laws and Other Transfer Restrictions.

     (a)  The holder of this Warrant, by acceptance hereof, agrees, represents
and warrants that this Warrant and the Warrant Shares which may be issued upon
exercise hereof are being acquired for investment, that the holder has no
present intention to resell or otherwise dispose of all or any part of this
Warrant or any Warrant Shares, and that the holder will not offer, sell or
otherwise dispose of all or any part of this Warrant or any Warrant Shares
except under circumstances which will not result in a violation of the Act or
applicable state securities laws. The Company may condition any transfer,
sale, pledge, assignment or other disposition on the receipt from the party to
whom this Warrant is to be so transferred or to whom Warrant Shares are to be
issued or so transferred, of any representations and agreements requested by
the Company in order to permit such issuance or transfer to be made pursuant to
exemptions from registration under federal and applicable state securities
laws. Upon exercise of this Warrant, the holder hereof shall, if requested by
the Company, confirm in writing holder’s investment purpose and acceptance of
the restrictions on transfer of the Warrant Shares, as well as any
representations and agreements requested by the Company in order to permit the
issuance of Warrant Shares to be made pursuant to exemptions from registration
under federal and applicable state securities laws.

     (b)  In the event the holder of this Warrant desires to transfer this
Warrant, the holder shall provide the Company with a Form of Assignment, in the
form attached hereto describing the manner of such transfer, and, if so
elected, an opinion of counsel (reasonably acceptable to the Company) that the
proposed transfer may be effected without registration or qualification under
applicable securities laws, whereupon such holder shall be entitled to transfer
this Warrant in accordance with the notice delivered by such holder to the
Company. If, in the opinion of the counsel referred to in this Section, the
proposed transfer or disposition described in the written notice given may not
be effected without registration or qualification of this Warrant, the Company
shall give written notice thereof to the holder hereof, and such holder will
limit its activities in respect to such proposed transfer or disposition as, in
the opinion of such counsel, are permitted by law. The Company may place one
or more restrictive legends on the Warrant or any certificates representing the
Warrant Shares which set forth the restrictions contained herein, and may
further place a “stop transfer” restriction in the Company’s books and records
with respect to the Warrant and any Warrant Shares. The restrictions set forth
in this Warrant shall be binding upon any holder, donee, assignee or transferee
of the Warrant or the Warrant Shares.

     8.     Subdivision of Warrant. At the request of the holder of this Warrant
in connection with a transfer or exercise of a portion of the Warrant, upon
surrender of such

17

 

Warrant for such purpose to the Company, the Company will issue and exchange
therefor warrants of like tenor and date representing in the aggregate the
right to purchase such number of shares of Common Stock as shall be designated
by such holder at the time of such surrender; provided, however, that the
Company’s obligations to subdivide securities under this Section shall be
subject to and conditioned upon the compliance of any such subdivision with
applicable securities laws.

     9.     Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of the initial
Warrant, in lieu of this Warrant.

     10.     Miscellaneous. This Warrant shall be governed by the laws of the
state of Minnesota without reference to such state’s choice of laws provisions.
The headings in this Warrant are for purposes of convenience and reference
only, and shall not be deemed to constitute a part hereof. Neither this
Warrant nor any term hereof may be changed, waived, discharged or terminated
orally but only by an instrument in writing signed by the Company and the
registered holder hereof. All notices or other communications required or
permitted hereunder shall be in writing. A written notice or other
communication shall be deemed to have been sufficiently given: (i) if
delivered by hand, when such notice is received from the notifying party; (ii)
if transmitted by facsimile, on the next business day following the day so
transmitted; (iii) if timely delivered to a reputable express courier, on the
fifth business day following the day so delivered; or (iv) if delivered by
mail, on the seventh day following the date such notice or other communication
is deposited in the U.S. Mail for delivery by certified or registered mail
addressed to the other party, or when actually received, whichever occurs
earlier.

     ISSUED this 11th day of September, 2003.

	 	 	 	 	 	 
	 	 	MAKEMUSIC! INC.
	 
		 	
By
	 	/s/ Barbara S. Remley

Its:  CFO

18

 

FORM OF ASSIGNMENT

MAKEMUSIC! INC.

     FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of shares of Common Stock set forth below:

	 	 	 	 	 	 	 	 	 	 	 
	Name of Assignee	 	Address	 	 	Number of Shares	 
	
	 	
	 	 	
	 
	 
	 
	 
	 

and does hereby irrevocably constitute and appoint
__________________ Attorney to make such transfer on the books of
MAKEMUSIC! INC. maintained for the purpose, with full power of substitution in
the premises. The undersigned understands that compliance with the provisions
of the Warrant is necessary to effect any assignment or transfer.

     The undersigned hereby certifies that (1) the Assignee is not a “U.S.
Person” as that term is defined in Regulation S to the Securities and Exchange
Act of 1933, as amended, or (2) that the undersigned has delivered a written
opinion of counsel to MAKEMUSIC! INC. to the effect that the Warrant may be
validly transferred to the Assignee pursuant to an exempt from registration
thereunder.

Dated: ___________________________ , _____

Signature

Print Name

19

 

EXERCISE FORM

MAKEMUSIC! INC.

(To be executed only upon exercise of Warrant)

     The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchases ____________________ of the number of
shares of Common Stock of MAKEMUSIC! INC. purchasable with this Warrant, and
herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant.

     The undersigned agrees to deliver a completed and executed subscription,
investment or similar document requested by the Company in connection with the
purchase of shares of Common Stock upon exercise of this Warrant.

     The undersigned hereby certifies that (1) he/she/it is not a “U.S. Person”
as that term is defined in Regulation S to the Securities and Exchange Act of
1933, as amended, and the Warrant is not being exercised on behalf of a U.S.
Person or (2) that the undersigned has delivered a written opinion of counsel
to MAKEMUSIC! INC. to the effect that the issuance of shares of Common Stock
are exempt from registration thereunder.

Dated: ___________________________ , _____

Signature of Registered Owner

20

 

Exhibit C

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND ANY SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION THEREOF MAY BE
MADE ONLY (i) IN A REGISTRATION OR QUALIFICATION OR (ii) IF AN EXEMPTION FROM
REGISTRATION OR QUALIFICATION IS AVAILABLE AND THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL TO THAT EFFECT REASONABLY SATISFACTORY TO THE COMPANY.

WARRANT TO PURCHASE

SHARES OF COMMON STOCK

OF

MAKEMUSIC! INC.

Issuance Date: September 11, 2003

     THIS CERTIFIES that, subject to the terms and conditions herein set forth,
ENTREPRENEURS FUND, BV, an entity organized under the laws of The Netherlands,
or its registered assigns, is entitled to purchase from MAKEMUSIC! INC., a
Minnesota corporation (the “Company”), at any time after the date (the
“Exercise Date”) of the occurrence of an Event of Default (as determined in
accordance with the next paragraph hereof), and on or prior to 5:00 p.m.,
Minneapolis, Minnesota time on the 10-year anniversary of the Exercise Date,
that number of shares of Common Stock (as defined below) (the “Security
Warrant Shares”) at the Warrant Exercise Price (as defined below) as equals the
product of (A) 242,000 multiplied by (B) a fraction yielded by dividing (x) the
Unpaid Principal (as defined below) on the Exercise Date by (y) the Original
Principal. The $.01 par value common stock of the Company is herein referred
to as the “Common Stock”. The “Warrant Exercise Price” shall equal the closing
bid price of one share of Common Stock on the Nasdaq SmallCap Market on July
17, 2003. The “Original Principal” amount shall mean $500,000. The “Unpaid
Principal” amount shall mean the Original Principal or such lesser amount as
then remains outstanding pursuant to that certain Senior, Secured Promissory
Note (the “Note”) of even date as the Issuance Date.

     This Warrant shall not become exercisable unless and until an Event of
Default (as defined in the Note) has occurred. Whether an Event of Default has
occurred shall be determined (1) by the written acknowledgement of such
occurrence by the Company or (2) in accordance with the provisions of the Loan
and Investment Agreement between the Company and Entrepreneurs Fund, BV dated
July 17, 2003 and the Note.

     This Warrant and the rights granted hereby are subject to the following
terms and conditions:

21

 

		
	 	     1. Adjustment of Warrant Exercise Price and Number of Security Warrant
Shares. The provisions in this Warrant relating to the Warrant Exercise Price
and the number of Security Warrant Shares to be issued upon exercise of this
Warrant shall be subject to adjustment from time to time as hereinafter
provided in this Section.

     (a)  Upon each adjustment of the Warrant Exercise Price, the holder of this
Warrant shall thereafter be entitled to purchase, at the Warrant Exercise Price
resulting from such adjustment, the number of shares of Common Stock obtained
by multiplying the Warrant Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock purchasable hereto
immediately prior to such adjustment and dividing the product thereof by the
Warrant Exercise Price resulting from such adjustment.

     (b)  In case the Company shall at any time subdivide its outstanding Common
Stock into a greater number of shares or declare a dividend payable in Common
Stock, the Warrant Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Common
Stock purchasable pursuant to this Warrant shall be proportionately increased,
and conversely, in case the Company’s outstanding Common Stock shall be
combined into a smaller number of shares, the Warrant Exercise Price in effect
immediately prior to such combination shall be proportionately increased and
the number of shares of Common Stock purchasable upon the exercise of this
Warrant shall be proportionately reduced.

     (c)  If any capital reorganization or reclassification of the capital stock
of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets (“Substituted Property”)
with respect to or in exchange for such Common Stock, then, as a condition of
such reorganization, reclassification, consolidation, merger or sale, the
holder shall have the right to purchase and receive upon the basis and upon the
terms and conditions specified in this Warrant, and in lieu of the Common Stock
of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, such Substituted Property as would
have been issued or delivered to the holder if it had exercised this Warrant
and had received upon exercise of this Warrant the Common Stock prior to such
reorganization, reclassification, consolidation, merger, or sale. The Company
shall not effect any such consolidation, merger, or sale, unless prior to the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume the obligation to deliver to the holder such Substituted
Property as, in accordance with the foregoing provisions, the holder may be
entitled to purchase.

     (d)  If the Company takes any other action, or if any other event occurs
which does not come within the scope of the provisions of Sections 2(b) or
2(c), but which should, in the Company’s reasonable judgment, result in an
adjustment in the Warrant Exercise Price and/or the number of shares subject to
the Warrant in order to fairly protect the purchase rights of the holder, an
appropriate adjustment in such purchase rights shall be made by the Company.

     (e) Upon any adjustment of the Warrant Exercise Price or the number of
shares issuable upon exercise of this Warrant, the Company shall give written
notice thereof, by express delivery or first-class mail, postage prepaid,
addressed to the holder at the address of the holder as shown on the books of
the Company, which notice shall state the Warrant Exercise Price

22

 

resulting from such adjustment and the increase or decrease, if any, in the
number of shares purchasable at such price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.

     2.     No Fractional Shares. No fractional shares will be issued in
connection with any exercise of this Warrant. In lieu of any fractional share
which would otherwise be issuable, the Company shall round up to the nearest
whole number of shares.

     3.     No Shareholder Rights. This Warrant shall not entitle its holder to
vote, receive dividends or exercise any of the rights of a shareholder of the
Company prior to exercise of this Warrant.

     4.     Covenants of the Company. The Company covenants that during the period
this Warrant is exercisable, the Company will reserve from its authorized and
unissued shares of Common Stock a sufficient number of shares of Common Stock
to provide for the issuance of Security Warrant Shares upon the exercise of
this Warrant. The Company further covenants that all Security Warrant Shares
that may be issued upon the exercise of this Warrant will, upon payment and
issuance, be duly authorized and issued, fully paid and nonassessable shares of
Common Stock.

     5.     Exercise of Warrant. This Warrant may be exercised by the registered
holder, in whole or in part, by providing the Company with at least five (5)
U.S. business days’ written notice of such holder’s intent to exercise and by
surrendering this Warrant at the principal office of the Company, together with
the Exercise Form attached hereto duly executed, accompanied by payment in full
of the amount of the aggregate Warrant Exercise Price in cash or check payable
to the Company. Notwithstanding anything to the contrary in this Warrant, in
no event shall a partial exercise be for Security Warrant Shares with an
aggregate exercise price of less than $5000. Upon partial exercise hereof, a
new warrant or warrants containing the same date and provisions as this Warrant
shall be issued by the Company to the registered holder for the number of
Security Warrant Shares with respect to which this Warrant shall not have been
exercised. A Warrant shall be deemed to have been exercised immediately prior
to the close of business on the date the Company is in receipt of this Warrant,
a completed Exercise Form, all documents the Company may reasonably request
from the holder for the purpose of complying with applicable securities and
other laws, and payment for the number of Security Warrant Shares being
acquired upon exercise of this Warrant. The holder entitled to receive the
Security Warrant Shares issuable upon such exercise shall be treated for all
purposes as the holder of record of such Security Warrant Shares as of the
close of business on such date. After such date, the Company shall issue and
deliver to the holder or holders entitled to receive the same, a certificate or
certificates for the number of full Security Warrant Shares issuable upon such
exercise.

		
	 	     The holder has been advised that the Security Warrant
Shares and the Warrant have not been registered under the
Act, or state securities laws pursuant to exemptions from the
Act and such laws, and that the Company’s ability and
obligation to issue Security Warrant Shares are dependent
upon the availability of exemptions from registration under
the Act and state securities law for such issuance. In the
event that the Company does not meet the requirements for an
exemption to registration under the Act and state securities
laws for issuance of the Security

23

 

		
	 	Warrant Shares, the Company shall issue the Security Warrant
Shares at the first opportunity an exemption is available.

		
	 	     The holder agrees to exercise its rights under the
Warrant, if at all, only in accordance with the provisions of
Regulation S, in conjunction with a registration under the
Act, or pursuant to an available exemption from such
registration, and further agrees not to engage in hedging
transactions with regard to the Security Warrant Shares
unless in compliance with the Act.

     Notwithstanding anything herein to the contrary, the Company shall have
the right to delay any exercise for the purpose of ensuring the availability of
an exemption under applicable securities laws for the issuance of the Security
Warrant Shares to the holder in light of the transactions by the Company in its
securities. If the Company elects to delay any such exercise, the Company
shall inform the holder, in writing, of such delay and the terms of such delay.
Any such delay shall not lead to any change in the Warrant Exercise Price or
the terms of the Warrant and shall not extend the term of any Warrant unless
such delay would extend past the expiration date of such Warrant. In such
case, the expiration date shall be extended to thirty (30) days after the end
of such delay.

     6.     Acceleration of Warrant Termination. For purposes of this section,
“Change of Control” shall mean the sale or lease of all or substantially all of
the Company’s assets or a merger or other transaction in which the holders of
the Company’s voting capital stock before such transaction hold less than fifty
percent of the outstanding voting capital stock of the successor entity after
the transaction. Immediately prior to the Company completing a Change of
Control, the Company shall automatically have the right to call and terminate
the Warrant, without paying any additional consideration. The Company shall
deliver prior written notice to the holder (“Call Notice”) of a Change of
Control and the effectiveness of the call right. The holder shall have
forty-five (45) days from the date of the Call Notice (“Call Period”) during
which the holder may exercise the Warrant. If the Warrant is not exercised
during the Call Period, the holder shall deliver the Warrant to the Company for
cancellation. Cancellation of the Warrant shall be effective on the Company’s
books and records notwithstanding the holder’s failure to deliver the Warrant
to the Company for cancellation.

     7.     Compliance with Securities Laws and Other Transfer Restrictions.

     (a) The holder of this Warrant, by acceptance hereof, agrees, represents
and warrants that this Warrant and the Security Warrant Shares which may be
issued upon exercise hereof are being acquired for investment, that the holder
has no present intention to resell or otherwise dispose of all or any part of
this Warrant or any Security Warrant Shares, and that the holder will not
offer, sell or otherwise dispose of all or any part of this Warrant or any
Security Warrant Shares except under circumstances which will not result in a
violation of the Act or applicable state securities laws. The Company may
condition any transfer, sale, pledge, assignment or other disposition on the
receipt from the party to whom this Warrant is to be so transferred or to whom
Security Warrant Shares are to be issued or so transferred, of any
representations and agreements requested by the Company in order to permit such
issuance or transfer to be made pursuant to exemptions from registration under
federal and applicable state securities laws. Upon exercise of this Warrant,
the holder hereof shall, if requested by the Company, confirm in writing
holder’s investment purpose and acceptance of the restrictions on transfer of
the Security Warrant Shares,

24

 

as well as any representations and agreements requested by the Company in order
to permit the issuance of Security Warrant Shares to be made pursuant to
exemptions from registration under federal and applicable state securities
laws.

     (b)  In the event the holder of this Warrant desires to transfer this
Warrant, the holder shall provide the Company with a Form of Assignment, in the
form attached hereto describing the manner of such transfer, and an opinion of
counsel (reasonably acceptable to the Company) that the proposed transfer may
be effected without registration or qualification under applicable securities
laws, whereupon such holder shall be entitled to transfer this Warrant in
accordance with the notice delivered by such holder to the Company. If, in the
opinion of the counsel referred to in this Section, the proposed transfer or
disposition described in the written notice given may not be effected without
registration or qualification of this Warrant, the Company shall give written
notice thereof to the holder hereof, and such holder will limit its activities
in respect to such proposed transfer or disposition as, in the opinion of such
counsel, are permitted by law. The Company may place one or more restrictive
legends on the Warrant or any certificates representing the Security Warrant
Shares which set forth the restrictions contained herein, and may further place
a “stop transfer” restriction in the Company’s books and records with respect
to the Warrant and any Security Warrant Shares. The restrictions set forth in
this Warrant shall be binding upon any holder, donee, assignee or transferee of
the Warrant or the Security Warrant Shares.

     8.     Subdivision of Warrant. At the request of the holder of this Warrant
in connection with a transfer or exercise of a portion of the Warrant, upon
surrender of such Warrant for such purpose to the Company, the Company will
issue and exchange therefor warrants of like tenor and date representing in the
aggregate the right to purchase such number of shares of Common Stock as shall
be designated by such holder at the time of such surrender; provided, however,
that the Company’s obligations to subdivide securities under this Section shall
be subject to and conditioned upon the compliance of any such subdivision with
applicable securities laws.

     9.     Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of the initial
Warrant, in lieu of this Warrant.

     10.
   Miscellaneous. This Warrant shall be governed by the laws of the
state of Minnesota without reference to such state’s choice of laws provisions.
The headings in this Warrant are for purposes of convenience and reference
only, and shall not be deemed to constitute a part hereof. Neither this
Warrant nor any term hereof may be changed, waived, discharged or terminated
orally but only by an instrument in writing signed by the Company and the
registered holder hereof. All notices or other communications required or
permitted hereunder shall be in writing. A written notice or other
communication shall be deemed to have been sufficiently given: (i) if
delivered by hand, when such notice is received from the notifying party; (ii)
if transmitted by facsimile, on the next business day following the day so
transmitted; (iii) if timely delivered to a reputable express courier, on the
fifth business day following the day so delivered; or (iv) if delivered by
mail, on the seventh day following the date such notice or other

25

 

communication is deposited in the U.S. Mail for delivery by certified or
registered mail addressed to the other party, or when actually received,
whichever occurs earlier.

     ISSUED this 11th day of September, 2003.

	 	 	 	 
	 	
MAKEMUSIC! INC.
	 
	 	By	 	
/s/ Barbara S. Remley

Its     CFO

26

 

FORM OF ASSIGNMENT

MAKEMUSIC! INC.

     FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of shares of Common Stock set forth below:

	 	 	 	 	 	 	 	 	 	 	 
	Name of Assignee	 	Address	 	 	Number of Shares	 
	
	 	
	 	 	
	 
	 
	 
	 
	 

     and does hereby irrevocably constitute and appoint
________________ Attorney to make such transfer on the books of
MAKEMUSIC! INC. maintained for the purpose, with full power of substitution in
the premises. The undersigned understands that compliance with the provisions
of the Warrant is necessary to effect any assignment or transfer.

     The undersigned hereby certifies that (1) the Assignee is not a “U.S.
Person” as that term is defined in Regulation S to the Securities and Exchange
Act of 1933, as amended, or (2) that the undersigned has delivered a written
opinion of counsel to MAKEMUSIC! INC. to the effect that the Warrant may be
validly transferred to the Assignee pursuant to an exempt from registration
thereunder.

Dated: ___________________________ , _____

Signature

Print Name

27

 

EXERCISE FORM

MAKEMUSIC! INC.

(To be executed only upon exercise of Warrant)

     The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchases ___________________ of the number of
shares of Common Stock of MAKEMUSIC! INC. purchasable with this Warrant, and
herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant.

     The undersigned agrees to deliver a completed and executed subscription,
investment or similar document requested by the Company in connection with the
purchase of shares of Common Stock upon exercise of this Warrant.

     The undersigned hereby certifies that (1) he/she/it is not a “U.S. Person”
as that term is defined in Regulation S to the Securities and Exchange Act of
1933, as amended, and the Warrant is not being exercised on behalf of a U.S.
Person or (2) that the undersigned has delivered a written opinion of counsel
to MAKEMUSIC! INC. to the effect that the issuance of shares of Common Stock
are exempt from registration thereunder.

Dated: ___________________________ , _____

Signature of Registered Owner

28exv4w4

 

Exhibit 4.4

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND ANY SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION THEREOF MAY BE
MADE ONLY (i) IN A REGISTRATION OR QUALIFICATION OR (ii) IF AN EXEMPTION FROM
REGISTRATION OR QUALIFICATION IS AVAILABLE AND THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL TO THAT EFFECT REASONABLY SATISFACTORY TO THE COMPANY.
SALE OR OTHER TRANSFER OF THESE SECURITIES IS FURTHER RESTRICTED FOR UP TO 180
DAYS FOLLOWING THE ISSUANCE OF THIS WARRANT BY THE TERMS OF A BRIDGE LOAN AND
INVESTMENT AGREEMENT, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE
OFFICES OF THE COMPANY.

WARRANT TO PURCHASE

SHARES OF COMMON STOCK

OF

MAKEMUSIC! INC.

VOID AFTER 5:00 P.M. MINNEAPOLIS, MINNESOTA TIME ON FEBRUARY 27, 2008

Issuance Date: February 28,
2003
                                             
                                             
                                             
             
 Warrant No.      

     THIS CERTIFIES that, subject to the terms and conditions herein set forth,
     or his/her/its registered assigns, is entitled to purchase from
MAKEMUSIC! INC., a Minnesota corporation (the “Company”), at any time after the
Issuance Date and prior to the fifth anniversary of the issuance date,      
shares of Common Stock (as defined below) (the “Warrant Shares”) at the Warrant
Exercise Price (as defined below). The $.01 par value common stock of the
Company is herein referred to as the “Common Stock”. The “Warrant Exercise
Price” shall equal the average closing bid price of one share of Common Stock
on the Nasdaq SmallCap Market for the 60 trading days immediately preceding the
first closing of the offering in accordance with the Company’s Private
Placement Memorandum dated December 2, 2002, as supplemented January 31, 2003;
that such per share price shall be $3.20.

     This Warrant and the rights granted hereby are subject to the following
terms and conditions:

1.     Adjustment of Warrant Exercise Price and Number of Warrant Shares. The
provisions in this Warrant relating to the Warrant Exercise Price and the
number of Warrant Shares to be issued upon exercise of this Warrant shall be
subject to adjustment from time to time as hereinafter provided in this
Section.

		
	 	     (a) Upon each adjustment of the Warrant Exercise Price, the holder of this
Warrant shall thereafter be entitled to purchase, at the Warrant Exercise Price
resulting from such adjustment, the number of shares of Common Stock obtained
by multiplying the Warrant Exercise Price in effect immediately prior to such
adjustment by the number of shares of

1

 

		
	 	Common Stock purchasable hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Exercise Price resulting from such
adjustment.
	 
	 	     (b) In case the Company shall at any time subdivide its outstanding Common
Stock into a greater number of shares or declare a dividend payable in Common
Stock, the Warrant Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Common
Stock purchasable pursuant to this Warrant shall be proportionately increased,
and conversely, in case the Company’s outstanding Common Stock shall be
combined into a smaller number of shares, the Warrant Exercise Price in effect
immediately prior to such combination shall be proportionately increased and
the number of shares of Common Stock purchasable upon the exercise of this
Warrant shall be proportionately reduced.
	 
	 	     (c) If any capital reorganization or reclassification of the capital stock
of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets (“Substituted Property”)
with respect to or in exchange for such Common Stock, then, as a condition of
such reorganization, reclassification, consolidation, merger or sale, the
holder shall have the right to purchase and receive upon the basis and upon the
terms and conditions specified in this Warrant, and in lieu of the Common Stock
of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, such Substituted Property as would
have been issued or delivered to the holder if it had exercised this Warrant
and had received upon exercise of this Warrant the Common Stock prior to such
reorganization, reclassification, consolidation, merger, or sale. The Company
shall not effect any such consolidation, merger, or sale, unless prior to the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume the obligation to deliver to the holder such Substituted
Property as, in accordance with the foregoing provisions, the holder may be
entitled to purchase.
	 
	 	     (d) If the Company takes any other action, or if any other event occurs
which does not come within the scope of the provisions of Sections 2(b) or
2(c), but which should, in the Company’s reasonable judgment, result in an
adjustment in the Warrant Exercise Price and/or the number of shares subject to
the Warrant in order to fairly protect the purchase rights of the holder, an
appropriate adjustment in such purchase rights shall be made by the Company.
	 
	 	     (e) Upon any adjustment of the Warrant Exercise Price or the number of
shares issuable upon exercise of this Warrant, the Company shall give written
notice thereof, by express delivery or first-class mail, postage prepaid,
addressed to the holder at the address of the holder as shown on the books of
the Company, which notice shall state the Warrant Exercise Price resulting from
such adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.

2.     No Fractional Shares. No fractional shares will be issued in connection
with any exercise of this Warrant. In lieu of any fractional share which would
otherwise be issuable, the Company shall round up to the nearest whole number
of shares.

2

 

3.     No Shareholder Rights. This Warrant shall not entitle its holder to vote,
receive dividends or exercise any of the rights of a shareholder of the Company
prior to exercise of this Warrant.

4.     Covenants of the Company. The Company covenants that during the period this
Warrant is exercisable, the Company will reserve from its authorized and
unissued shares of Common Stock a sufficient number of shares of Common Stock
to provide for the issuance of Warrant Shares upon the exercise of this
Warrant. The Company further covenants that all Warrant Shares that may be
issued upon the exercise of this Warrant will, upon payment and issuance, be
duly authorized and issued, fully paid and nonassessable shares of Common
Stock.

5.     Exercise of Warrant. This Warrant may be exercised by the registered
holder, in whole or in part, by providing the Company with at least 10 business
days’ written notice of such holder’s intent to exercise and by surrendering
this Warrant at the principal office of the Company, together with the Exercise
Form attached hereto duly executed, accompanied by payment in full of the
amount of the aggregate Warrant Exercise Price in cash or check payable to the
Company. Notwithstanding anything to the contrary in this Warrant, in no event
shall a partial exercise be for Warrant Shares with an aggregate exercise price
of less than $1,000. Upon partial exercise hereof, a new warrant or warrants
containing the same date and provisions as this Warrant shall be issued by the
Company to the registered holder for the number of Warrant Shares with respect
to which this Warrant shall not have been exercised. A Warrant shall be deemed
to have been exercised immediately prior to the close of business on the date
the Company is in receipt of this Warrant, a completed Exercise Form, all
documents the Company may reasonably request from the holder for the purpose of
complying with applicable securities and other laws, and payment for the number
of Warrant Shares being acquired upon exercise of this Warrant. The holder
entitled to receive the Warrant Shares issuable upon such exercise shall be
treated for all purposes as the holder of record of such Warrant Shares as of
the close of business on such date. After such date, the Company shall issue
and deliver to the holder or holders entitled to receive the same, a
certificate or certificates for the number of full Warrant Shares issuable upon
such exercise.

     The holder has been advised that the Warrant Shares and the Warrant are
not being registered under the Act, or state securities laws pursuant to
exemptions from the Act and such laws, and that the Company’s ability and
obligation to issue Warrant Shares are dependent upon the availability of
exemptions from registration under the Act and state securities law. In the
event that the Company does not meet the requirements for an exemption to
registration under the Act and state securities laws for issuance of the
Warrant Shares upon exercise of the Warrant, the Company shall issue the
Warrant Shares at the first opportunity an exemption is available, but shall
not be under any obligation to register the Warrant Shares under the Act at any
time.

     Notwithstanding anything herein to the contrary, the Company shall have
the right to delay any exercise for the purpose of ensuring the availability of
an exemption under applicable securities laws for the issuance of the Warrant
Shares to the holder in light of the transactions by the Company in its
securities. If the Company elects to delay any such exercise, the Company
shall inform the holder, in writing, of such delay and the terms of such delay.
Any such delay shall not lead to any change in the Warrant Exercise Price or
the terms of the Warrant and shall not extend the term of any Warrant unless
such delay would extend past the expiration date of such Warrant. In such
case, the expiration date shall be extended to thirty (30) days after the end
of such delay.

3

 

6.     Acceleration of Warrant Termination. For purposes of this section, “Change
of Control” shall mean the sale or lease of all or substantially all of the
Company’s assets or a merger or other transaction in which the holders of the
Company’s voting capital stock before such transaction hold less than fifty
percent of the outstanding voting capital stock of the successor entity after
the transaction. Immediately prior to the Company completing a Change of
Control, the Company shall automatically have the right to call and terminate
the Warrant, without paying any additional consideration. The Company shall
deliver prior written notice to the holder (“Call Notice”) of a Change of
Control and the effectiveness of the call right. The holder shall have
forty-five (45) days from the date of the Call Notice (“Call Period”) during
which the holder may exercise the Warrant. If the Warrant is not exercised
during the Call Period, the holder shall deliver the Warrant to the Company for
cancellation. Cancellation of the Warrant shall be effective on the Company’s
books and records notwithstanding the holder’s failure to deliver the Warrant
to the Company for cancellation.

7.     Compliance with Securities Laws and Other Transfer Restrictions.

		
	 	     (a) The holder of this Warrant, by acceptance hereof, agrees, represents
and warrants that this Warrant and the Warrant Shares which may be issued upon
exercise hereof are being acquired for investment, that the holder has no
present intention to resell or otherwise dispose of all or any part of this
Warrant or any Warrant Shares, and that the holder will not offer, sell or
otherwise dispose of all or any part of this Warrant or any Warrant Shares
except under circumstances which will not result in a violation of the Act or
applicable state securities laws. The Company may condition any transfer,
sale, pledge, assignment or other disposition on the receipt from the party to
whom this Warrant is to be so transferred or to whom Warrant Shares are to be
issued or so transferred, of any representations and agreements requested by
the Company in order to permit such issuance or transfer to be made pursuant to
exemptions from registration under federal and applicable state securities
laws. Upon exercise of this Warrant, the holder hereof shall, if requested by
the Company, confirm in writing holder’s investment purpose and acceptance of
the restrictions on transfer of the Warrant Shares, as well as any
representations and agreements requested by the Company in order to permit the
issuance of Warrant Shares to be made pursuant to exemptions from registration
under federal and applicable state securities laws.
	 
	 	     (b) In the event the holder of this Warrant desires to transfer this
Warrant, the holder shall provide the Company with a Form of Assignment, in the
form attached hereto describing the manner of such transfer, and an opinion of
counsel (reasonably acceptable to the Company) that the proposed transfer may
be effected without registration or qualification under applicable securities
laws, whereupon such holder shall be entitled to transfer this Warrant in
accordance with the notice delivered by such holder to the Company. If, in the
opinion of the counsel referred to in this Section, the proposed transfer or
disposition described in the written notice given may not be effected without
registration or qualification of this Warrant, the Company shall give written
notice thereof to the holder hereof, and such holder will limit its activities
in respect to such proposed transfer or disposition as, in the opinion of such
counsel, are permitted by law. The Company may place one or more restrictive
legends on the Warrant or any certificates representing the Warrant Shares
which set forth the restrictions contained herein, and may further place a
“stop transfer” restriction in the Company’s books and records with respect to
the Warrant and any Warrant Shares. The restrictions set forth in this Warrant
shall be binding upon any holder, donee, assignee or transferee of the Warrant
or the Warrant Shares.

4

 

		
	 	     (c) The holder will not, for a period of 180 days after the issuance date
of this Warrant, sell, transfer or otherwise dispose of, or agree to sell,
transfer or otherwise dispose of any of the Warrants or Warrant Shares or sell,
transfer or otherwise dispose of, or agree to sell, transfer or otherwise
dispose of any options, rights or warrants to purchase any of the Warrants or
Warrant Shares beneficially held by the holder. The foregoing restrictions do
not prohibit gifts to donees or transfers by will or the laws of descent to
heirs or beneficiaries provided that such donees, heirs and beneficiaries shall
be bound by these restrictions.

8.     Registration Rights.

		
	 	     (a) If at any time after the issuance date of this Warrant and prior to
the end of the one-year period following complete exercise of this Warrant, the
Company proposes to register under the 1933 Act (except by a Form S-4 or Form
S-8 Registration Statement or any successor forms thereto) or qualify for a
public distribution under Section 3(b) of the 1933 Act, any of its securities,
it will give written notice to the holder of this Warrant, any Warrants issued
in exchange hereof and any Warrant Shares of its intention to do so and, on the
written request of any such holder given within twenty (20) days after receipt
of any such notice (which request shall specify the interest in this Warrant or
the Warrant Shares intended to be sold or disposed of by such holder and
describe the nature of any proposed sale or other disposition thereof), the
Company will use its best efforts to cause all such Warrant Shares, the holder
of which shall have requested the registration or qualification thereof, to be
included in such registration statement proposed to be filed by the Company;
provided, however, that if a greater number of Warrant Shares is offered for
participation in the proposed offering than in the reasonable opinion of the
managing underwriter of the proposed offering can be accommodated without
adversely affecting the proposed offering, then the amount of Warrant Shares
proposed to be offered by such holder for registration, as well as the number
of securities of any other selling shareholders participating in the
registration, shall be proportionately reduced to a number deemed satisfactory
by the managing underwriter, which number of shares to be sold by selling
shareholders may be zero.
	 
	 	     (b) With respect to each inclusion of securities in a registration
statement pursuant to this Section 8, the Company shall bear the following
fees, costs, and expenses: all registration, filing and NASD fees, printing
expenses, fees and disbursements of counsel and accountants for the Company,
fees and disbursements of counsel for the underwriter or underwriters of such
securities (if the Company is required to bear such fees and disbursements),
all internal expenses, the premiums and other costs of policies of insurance
against liability arising out of the public offering, and legal fees and
disbursements and other expenses of complying with state securities laws of any
jurisdictions in which the securities to be offered are to be registered or
qualified. Fees and disbursements of special counsel and accountants for the
selling holders, underwriting discounts and commissions, and transfer taxes for
selling holders and any other expenses relating to the sale of securities by
the selling holders not expressly included above shall be borne by the selling
holders;
	 
	 	     (c) The Company hereby indemnifies the holder of this Warrant and of any
Warrant Shares, and the officers and directors, if any, who control such
holder, within the meaning of Section 15 of the 1933 Act, against all losses,
claims, damages, and liabilities caused by (1) any untrue statement or alleged
untrue statement of a material fact contained in any registration statement or
prospectus (and as amended or supplemented if the Company shall have furnished
any amendments thereof or supplements thereto), any preliminary prospectus or
any state securities law filings related to the registration of the

5

 

		
	 	Warrant Shares pursuant to this Section 8; (2) any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading except insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or omission contained in information furnished
in writing to the Company by such holder expressly for use therein. Holder by
its acceptance hereof severally agrees that it will indemnify and hold harmless
the Company, each of its officers who signs any such registration statement
related to the registration of the Warrant Shares pursuant to this Section 8,
and each person, if any, who controls the Company, within the meaning of
Section 15 of the 1933 Act, with respect to losses, claims, damages or
liabilities which are caused by any untrue statement or omission contained in
information furnished in writing to the Company by such holder expressly for
use therein.

9.     Subdivision of Warrant. At the request of the holder of this Warrant in
connection with a transfer or exercise of a portion of the Warrant, upon
surrender of such Warrant for such purpose to the Company, the Company will
issue and exchange therefor warrants of like tenor and date representing in the
aggregate the right to purchase such number of shares of Common Stock as shall
be designated by such holder at the time of such surrender; provided, however,
that the Company’s obligations to subdivide securities under this Section shall
be subject to and conditioned upon the compliance of any such subdivision with
applicable securities laws.

10.     Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of the initial
Warrant, in lieu of this Warrant.

11.     Miscellaneous. This Warrant shall be governed by the laws of the state of
Minnesota without reference to such state’s choice of laws provisions. The
headings in this Warrant are for purposes of convenience and reference only,
and shall not be deemed to constitute a part hereof. Neither this Warrant nor
any term hereof may be changed, waived, discharged or terminated orally but
only by an instrument in writing signed by the Company and the registered
holder hereof. All notices or other communications required or permitted
hereunder shall be in writing. A written notice or other communication shall
be deemed to have been sufficiently given: (i) if delivered by hand, when such
notice is received from the notifying party; (ii) if transmitted by facsimile
or timely delivered to a reputable express courier, on the next business day
following the day so transmitted or delivered; or (iii) if delivered by mail,
on the seventh day following the date such notice or other communication is
deposited in the U.S. Mail for delivery by certified or registered mail
addressed to the other party, or when actually received, whichever occurs
earlier.

     ISSUED this 28th day of February, 2003.

MAKEMUSIC! INC.

	 	 	 	 	 	 
	By	 	 

	 
	 	 	
Its
	 	 

Chief Financial Officer

6

 

FORM OF ASSIGNMENT

MAKEMUSIC! INC.

     FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of shares of Common Stock set forth below:

	 	 	 	 	 	 	 	 	 	 	 
	Name of Assignee	 	Address	 	 	Number of Shares	 
	
	 	
	 	 	
	 
	 
	 
	 
	 
	 

and does hereby irrevocably constitute and appoint
     Attorney to make such transfer on the books of
MAKEMUSIC! INC. maintained for the purpose, with full power of substitution in
the premises. The undersigned understands that compliance with the provisions
of the Warrant is necessary to effect any assignment or transfer.

Dated:  
____________________, ______

____________________________

Signature

____________________________

Print Name

7

 

EXERCISE FORM

MAKEMUSIC! INC.

(To be executed only upon exercise of Warrant)

     The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchases ___________________________ of the number of
shares of Common Stock of MAKEMUSIC! INC. purchasable with this Warrant, and
herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant.

     The undersigned agrees to deliver a completed and executed subscription,
investment or similar document requested by the Company in connection with the
purchase of shares of Common Stock upon exercise of this Warrant.

Dated:  ____________________
, ______

____________________________

Signature of Registered Owner

____________________________

Street Address

____________________________

City, State, Zip Code

____________________________

IRS Identification Number

8

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