Document:

Warrant issued to Heidrick & Struggles, Inc.

  
 Exhibit 4.1 

 
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT. THIS
WARRANT AND THE SECURITIES TO BE ISSUED UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”) OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS. 
  
 WARRANT TO PURCHASE 115,000 SHARES 
 OF THE COMMON STOCK OF 
 drugstore.com inc. 
  
 EFFECTIVE DATE: February 14, 2005 
  
 EXPIRATION DATE: February 14, 2008 
  
 This certifies that HEIDRICK &
STRUGGLES, INC. or its transferees or assigns (each individually, the “Holder”) for the agreed upon value of $1.00 and for other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, shall be entitled to purchase from DRUGSTORE.COM INC., a Delaware corporation (the “Company”), having its principal place of business at 13920 Southeast Eastgate Way, Suite
300, Bellevue, WA 98005, a maximum of 115,000 fully paid and nonassessable shares of the Company’s Common Stock (“Common Stock”) for cash at a price equal to $2.36 per share (the “Exercise
Price”) at any time, or from time to time, up to and including 5:00 p.m. Pacific time on the Expiration Date, upon the surrender to the Company at its principal place of business (or at such other location as the Company may advise the
Holder in writing) of this Warrant properly endorsed, a Form of Subscription in substantially the form attached hereto duly filled in and signed and, as applicable, upon payment in cash or by check of the aggregate Exercise Price for the number of
shares for which this Warrant is being exercised determined in accordance with the provisions hereof, or the surrender of the right to acquire the number of shares of Common Stock determined in accordance with Section 1.2. The Exercise Price and the
number of shares of Common Stock purchasable hereunder are subject to adjustment as provided in Section 3 of this Warrant. 
  
 The Warrant is being issued pursuant to the Agreement between the Company and the Holder dated as of February 14, 2005 (the “Purchase
Agreement”). The Holder of this Warrant is subject to certain restrictions, and entitled to certain rights as set forth in the Purchase Agreement. This Warrant is referred to as the “Warrant” in the Purchase Agreement. 
  
 This Warrant is subject to the following terms and conditions: 
  
 1. EXERCISE; ISSUANCE OF
CERTIFICATES; PAYMENT FOR SHARES. 
  
 1.1 General. This Warrant is exercisable at the option of the holder of record hereof at any time or from time, to time, up
to the Expiration Date for all or any part of the shares of Common Stock (but not for a fraction of a share), which may be purchased hereunder. This Warrant may be exercised by the holder of record hereof by tendering to the Company at its 

  

 
principal office a completed notice of exercise in the form attached hereto as Exhibit A (the “Notice of Exercise”). The Company
agrees that the shares of Common Stock purchased under this Warrant shall be and are deemed to be issued to the Holder hereof as the record owner of such shares as of the close of business on the date on which this Warrant, properly endorsed, and
appropriate payment for such shares shall have each been delivered to the Company at its principal place of business. Certificates for the shares of Common Stock so purchased, together with any other securities or property to which the Holder is
entitled upon such exercise, shall be delivered to the Holder by the Company at the Company’s expense within a reasonable time after the rights represented by this Warrant have been so exercised, and in any event, within ten (10) business days
of such exercise. In case of a purchase of less than all the shares which may be purchased under this Warrant, the Company shall cancel this Warrant and execute and deliver a new Warrant or Warrants of like tenor for the balance of the shares
purchasable under the Warrant surrendered upon such purchase to the Holder hereof within a reasonable time. Each stock certificate so delivered shall be in such denominations of Common Stock as may be requested by the Holder hereof and shall be
registered in the name designated by such Holder.  
  
 1.2 Net Issue Exercise. Holder agrees that it cannot “net issue exercise” this Warrant in accordance with the provisions of this section, except in connection with or following an
Organic Change (as defined in Section 3.3 below). Notwithstanding any provisions herein to the contrary, if the fair market value of one share of the Company’s Common Stock is greater than the Exercise Price (at the date of calculation as set
forth below), in lieu of exercising this Warrant for cash, the Holder may elect a “Net Issue Exercise” pursuant to which it will receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being
exercised) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Form of Subscription and notice of such election in which event the Company shall issue to the Holder a number of shares of Common
Stock computed using the following formula: 
  

			
	X =	 	Y (A-B)
	 	 	      A

  
 Where X = the number
of shares of Common Stock to be issued to the Holder 
  
 Y = the
number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised (at the date of such exercise) 
  
 A = the fair market value of one share of the Company’s Common Stock

  
 B = Exercise Price (as adjusted to the date of such
exercise). 
  
 For purposes of the above calculation, the fair market value of one
share of Common Stock shall be determined by the Company’s Board of Directors in good faith, as of the date of exercise of the Warrant; provided, however, that where there is a public market for the Company’s Common Stock, the fair market
value per share shall be the average of the closing prices of the Company’s 

  

 2. 

 
Common Stock quoted on the Nasdaq National Market (or similar system) or on any exchange on which the Common Stock is listed, whichever is applicable, over
the five (5) trading day period commencing on the trading day immediately following the day on which the Warrant is exercised. 
  
 2. SHARES TO BE FULLY PAID; RESERVATION
OF SHARES. The Company covenants and agrees that all shares of Common Stock which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be duly authorized, validly issued,
fully paid and nonassessable and free from all preemptive rights of any shareholder and free of all taxes, liens and charges with respect to the issue thereof. The Company further covenants and agrees that, during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have authorized and reserved, for the purpose of issue or transfer upon exercise of the subscription rights evidenced by this Warrant, a sufficient number of shares of
authorized but unissued Common Stock, or other securities and property, when and as required to provide for the exercise of the rights represented by this Warrant. The Company will take all such action as may be reasonably necessary to assure that
such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any domestic securities exchange upon which the Common Stock may be listed; provided, however, that the
Company shall not be required to effect a registration under Federal or State securities laws with respect to such exercise. The Company will not take any action which would result in any adjustment of the Exercise Price (as set forth in Section 3
hereof) if the total number of shares of Common Stock issuable (i) upon exercise of the Warrant would exceed 10% of the total number of shares of Common Stock outstanding on the Effective Date or (ii) after such action upon exercise of all
outstanding warrants, together with all shares of Common Stock then outstanding and all shares of Common Stock then issuable upon exercise of all options and upon the conversion of all convertible securities and other equity purchase rights then
outstanding, would exceed the total number of shares of Common Stock then authorized by the Company’s Articles/Certificate of Incorporation (the “Company Charter”). 
  
 3. ADJUSTMENT OF EXERCISE PRICE AND
NUMBER OF SHARES. The Exercise Price and the number of shares purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time upon the occurrence of certain events
described in Sections 3.1 and 3.2 below. Upon each adjustment of the Exercise Price, the Holder of this Warrant shall thereafter be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of shares obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares purchasable pursuant hereto immediately prior to such adjustment, and dividing the product thereof by the Exercise Price resulting from such
adjustment. 
  
 3.1 Subdivision or
Combination of Stock. In case the Company shall at any time subdivide its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced,
and conversely, in case the outstanding shares of Common Stock of the Company shall be combined into a smaller number of shares (by reverse stock split or otherwise), the Exercise Price in effect immediately prior to such combination shall be
proportionately increased. 
  
 3.2
Dividends in Common Stock, Other Stock, Property, Reclassification. If at any time or from time to time the Holders of Common Stock (or any shares of stock or other 

  

 3. 

 
securities at the time receivable upon the exercise of this Warrant) shall have received or become entitled to receive, without payment therefor, 

 
 (a) Common Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible into or exchangeable for Common Stock, or any rights or options to subscribe for, purchase or otherwise acquire any of the foregoing by way of dividend or other distribution,

  
 (b) any cash paid or payable otherwise
than as a cash dividend, or 
  
 (c) Common
Stock or additional stock or other securities or property (including cash) by way of spinoff, split-up, reclassification, combination of shares or similar corporate rearrangement, (other than shares of Common Stock issued as a stock split or
adjustments in respect of which shall be covered by the terms of Section 3.1 above), 
  
 then, and in each such case, the Holder hereof shall, upon the exercise of this Warrant, be entitled to receive, in addition to the number of shares of Common Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash in the cases referred to in clauses (b) and (c) above) (collectively, “Other Property”) which such Holder would hold on the date of such exercise
had he been the holder of record of such Common Stock as of the date on which holders of Common Stock received or became entitled to receive such Other Property. Notwithstanding the foregoing, the Company may, in lieu of delivering such Other
Property to the Holder, adjust the Exercise Price of the Warrant or the number of shares of Common Stock to be delivered upon exercise of the Warrant as the Board of Directors, in its reasonable judgment, deems appropriate and equitable, in order to
take into account the value of such Other Property. 
  
 3.3 Reorganization, Consolidation, Merger or Sale. If any recapitalization or reorganization of the capital stock of the Company other than pursuant to Section 3.2(c) above, or any consolidation or merger of the Company
with another corporation, or the sale of all or substantially all of its assets shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities, or other assets or property as consideration for such
holders’ shares of Common Stock (an “Organic Change”), then, as a condition of such Organic Change, lawful and adequate provisions shall be made by the Company whereby the Holder hereof shall thereafter have the right to
purchase and receive (in lieu of the shares of the Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented by this Warrant) such shares of stock, securities or other assets or
property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the
rights represented by this Warrant. In the event of any Organic Change, appropriate provision shall be made by the Company with respect to the rights and interests of the Holder of this Warrant to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Exercise Price and of the number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be applicable, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof. Prior to the consummation of any such consolidation, merger or sale, the successor entity (if other than the Company) resulting from such consolidation or the corporation purchasing such assets shall
assume by written instrument reasonably 

  

 4. 

 
satisfactory in form and substance to the Holders executed and mailed or delivered to the registered Holder hereof at the last address of such Holder
appearing on the books of the Company, the obligation to deliver to such Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. 
  
 3.4 Certain Events. If any change in the
outstanding Common Stock of the Company or any other event occurs as to which the other provisions of this Section 3 are not strictly applicable or if strictly applicable would not fairly protect the purchase rights of the Holder of the Warrant in
accordance with such provisions, then the Board of Directors of the Company shall make an adjustment in the number and class of shares available under the Warrant, the Exercise Price or the application of such provisions, so as to protect such
purchase rights as aforesaid. The adjustment shall be such as will give the Holder of the Warrant upon exercise for the same aggregate Exercise Price the total number, class and kind of shares as the Holder would have owned had the Warrant been
exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment. 
  
 3.5 Notices of Change. 
  
 (a) Immediately upon any adjustment in the number or class of shares subject to this Warrant and/or of the Exercise Price, the
Company shall give written notice thereof to the Holder, setting forth in reasonable detail and certifying the calculation of such adjustment. 
  
 (b) The Company shall give written notice to the Holder at least 10 business days prior to the date on which the Company closes its
books or takes a record for determining rights to receive any dividends or distributions. 
  
 (c) The Company shall also give written notice to the Holder at least 30 business days prior to the date on which an Organic Change
shall take place. 
  
 4. ISSUE
TAX. The issuance of certificates for shares of Common Stock upon the exercise of the Warrant shall be made without charge to the Holder of the Warrant for any issue tax (other than any applicable
income taxes) in respect thereof; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised. 
  
 5.
CLOSING OF BOOKS. The Company will at no time close its transfer books against the transfer of any warrant or of any shares of Common Stock issued or issuable upon the exercise of any warrant
in any manner which interferes with the timely exercise of this Warrant, unless otherwise required to do so by law. 
  
 6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION
OF LIABILITY. Nothing contained in this Warrant shall be construed as conferring upon the Holder hereof the right to vote or to consent or to receive notice as a shareholder of the Company or any other matters or
any rights whatsoever as a shareholder of the Company. No dividends or interest shall be payable or accrued in respect of this Warrant or the interest represented hereby or the shares purchasable hereunder until, and only to the extent that, this
Warrant shall have been exercised. 

  

 5. 

 
No provisions hereof, in the absence of affirmative action by the holder to purchase shares of Common Stock, and no mere enumeration herein of the rights or
privileges of the holder hereof, shall give rise to any liability of such Holder for the Exercise Price or as a shareholder of the Company, whether such liability is asserted by the Company or by its creditors. 
  
 7. WARRANTS TRANSFERABLE. Subject
to compliance with applicable federal and state securities laws and the provisions of Section 10(c) below, this Warrant and all rights hereunder are transferable, in whole or in part, without charge to the holder hereof (except for transfer taxes),
upon surrender of this Warrant properly endorsed. Each taker and holder of this Warrant, by taking or holding the same, consents and agrees that this Warrant, when endorsed in blank, shall be deemed negotiable, and that the holder hereof, when this
Warrant shall have been so endorsed, may be treated by the Company, at the Company’s option, and all other persons dealing with this Warrant as the absolute owner hereof for any purpose and as the person entitled to exercise the rights
represented by this Warrant, or to the transfer hereof on the books of the Company any notice to the contrary notwithstanding; but until such transfer on such books, the Company may treat the registered owner hereof as the owner for all
purposes. 
  
 8. RIGHTS
AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and obligations of the Company, of the holder of this Warrant and of the holder of shares of Common
Stock issued upon exercise of this Warrant, shall survive the exercise of this Warrant. 
  
 9. FURTHER REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. 
  
 (a) Articles and Bylaws. The Company
has made available to Holder true, complete and correct copies of the Company Charter and Bylaws, as amended, through the date hereof. 
  
 (b) Due Authority. The execution and delivery by the Company of this Warrant and the performance of all obligations
of the Company hereunder, including the issuance to Holder of the right to acquire the shares of Common Stock, have been duly authorized by all necessary corporate action on the part of the Company, and the Warrant is not inconsistent with the
Company Charter or Bylaws and constitutes a legal, valid and binding agreement of the Company, enforceable in accordance with its terms. 
  
 (c) Consents and Approvals. No consent or approval of, giving of notice to, registration with, or taking of any other
action in respect of any state, federal or other governmental authority or agency is required with respect to the execution, delivery and performance by the Company of its obligations under this Warrant, except for any filing required by applicable
federal and state securities laws, which filing will be effective by the time required thereby. 
  
 (d) Issued Securities. All issued and outstanding shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. All outstanding shares of capital stock were issued in full compliance with all federal and state securities laws. 
  

 6. 

 (e) Exempt Transaction. Subject to the accuracy of the Holders
representations in Section 10 hereof, the issuance of the Common Stock upon exercise of this Warrant will constitute a transaction exempt from (i) the registration requirements of Section 5 of the Securities Act of 1933, as amended (the
“1933 Act”), in reliance upon Section 4(2) thereof, and (ii) the qualification requirements of the applicable state securities laws. 
  
 (f) Compliance with Rule 144. At the written request of the Holder, who proposes to sell Common Stock issuable upon
the exercise of the Warrant in compliance with Rule 144 promulgated by the Securities and Exchange Commission, the Company shall furnish to the Holder, within thirty (30) days after receipt of such request, a written statement confirming the
Company’s compliance with the filing requirements of the Securities and Exchange Commission as set forth in such Rule, as such Rule may be amended from time to time. 
  
 10. REPRESENTATIONS AND COVENANTS OF
THE HOLDER. 
  
 This Warrant has been entered into by the Company in reliance upon the following representations and covenants of the Holder: 
  
 (a) Investment Purpose. The Warrant and the Common Stock issuable upon exercise of the Warrant will be acquired for
investment and not with a view to the sale or distribution of any part thereof, and the Holder has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption pursuant to the 1933
Act. 
  
 (b) Private Issue.
The Holder understands (i) that the Warrant and the Common Stock issuable upon exercise of this Warrant is not registered under the 1933 Act or qualified under applicable state securities laws on the ground that the issuance contemplated by this
Warrant will be exempt from the registration and qualifications requirements thereof pursuant to Section 4(2) of the 1933 Act and any applicable state securities laws, and (ii) that the Company’s reliance on such exemption is predicated on the
representations set forth in this Section 10. 
  
 (c) Disposition or Transfer of Holders Rights. In no event will the Holder make a disposition of, or otherwise transfer, the Warrant or the Common Stock issuable upon exercise of the Warrant unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if requested by the Company, it shall have furnished the Company with an opinion of counsel (which counsel may either be inside or outside counsel to the Holder) satisfactory to
the Company and its counsel to the effect that (A) appropriate action necessary for compliance with the 1933 Act has been taken, or (B) an exemption from the registration requirements of the 1933 Act is available. Notwithstanding the foregoing, the
restrictions imposed upon the transferability of any of its rights to acquire Common Stock or Common Stock issuable on the exercise of such rights do not apply to transfers from the beneficial owner of any of the aforementioned securities to its
nominee or from such nominee to its beneficial owner, and shall terminate as to any particular share of Common Stock when (1) such security shall have been effectively registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been issued to the Holder at its request by 

  

 7. 

 
the staff of the Securities and Exchange Commission or a ruling shall have been issued to the Holder at its request by such Commission stating that no action
shall be recommended by such staff or taken by such Commission, as the case may be, if such security is transferred without registration under the 1933 Act in accordance with the conditions set forth in such letter or ruling and such letter or
ruling specifies that no subsequent restrictions on transfer are required. Whenever the restrictions imposed hereunder shall terminate, as hereinabove provided, the Holder or holder of a share of Common Stock then outstanding as to which such
restrictions have terminated shall be entitled to receive from the Company, without expense to such holder, one or more new certificates for the Warrant or for such shares of Common Stock not bearing any restrictive legend. 
  
 (d) Financial Risk. The Holder has such
knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment, and has the ability to bear the economic risks of its investment. 
  
 (e) Risk of No Registration. The Holder
understands that if the Company does not register with the Securities and Exchange Commission pursuant to Section 12 of the 1933 Act, or file reports pursuant to Section 15(d), of the Securities Exchange Act of 1934 (the “1934
Act”), or if a registration statement covering the securities under the 1933 Act is not in effect when it desires to sell (i) the Warrant, or (ii) the Common Stock issuable upon exercise of the Warrant, it may be required to hold such
securities for an indefinite period. The Holder also understands that any sale of the Warrant or the Common Stock issuable upon exercise of the Warrant which might be made by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule. 
  
 (f) Accredited Investor. Holder is an “accredited investor” within the meaning of Rule 501 of Regulation D under the 1933 Act, as presently in effect. 
  
 11. MODIFICATION AND
WAIVER. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought. 
  
 12. NOTICES. Any notice, request or other
document required or permitted to be given or delivered to the holder hereof or the Company shall be delivered or shall be sent by an established overnight service provider (e.g., Federal Express), or registered or certified mail, postage prepaid,
to each such holder at its address as shown on the books of the Company or to the Company at the address indicated therefor in the first paragraph of this Warrant or such other address as either may from time to time provide to the other in
accordance with this Section. 
  
 13.
BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any corporation succeeding the Company by merger, consolidation or acquisition of all or substantially all of the
Company’s assets. All of the obligations of the Company relating to the Common Stock issuable upon the exercise of this Warrant shall survive the exercise and termination of this Warrant. All of the covenants and agreements of the Company shall
inure to the benefit of the successors and assigns of the holder hereof.  
  
 14. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of the several sections and paragraphs of this Warrant are
inserted for convenience only and do not 

  

 8. 

 
constitute a part of this Warrant. This Warrant shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the
laws of the State of Washington, without giving effect to principles of conflicts of laws. 
  
 15. LOST WARRANTS. The Company represents and warrants to the Holder hereof that upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or in the case of any
such mutilation upon surrender and cancellation of such Warrant, the Company, at its expense, will make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant.  
  
 16. FRACTIONAL SHARES. No
fractional shares shall be issued upon exercise of this Warrant. The Company shall, in lieu of issuing any fractional share, pay the holder entitled to such fraction a sum in cash equal to such fraction multiplied by the then effective Exercise
Price. 
  

 9. 

 IN WITNESS WHEREOF, the Company has caused this
Warrant to be duly executed by its officers, thereunto duly authorized. 
  

			
	DRUGSTORE.COM INC.
	a Delaware corporation
		
	By:	 	 /s/ Dawn Lepore

	 Name:
	 	 Dawn G. Lepore

	 Title:
	 	 Chief Executive Officer

  

	
	ATTEST:
	
	 /s/ Alesia Pinney

	 Secretary

  

			
	ACCEPTED AND AGREED:
	
	 HEIDRICK & STRUGGLES, INC.
 a Delaware corporation

		
	By:	 	 /s/ Eileen Kamerick

	 Name:
	 	 Eileen Kamerick

	 Title:
	 	 Chief Financial Officer

  

  
 EXHIBIT A 

 
 NOTICE OF EXERCISE 
  
 Date:
                                , 200   
  
 drugstore.com inc. 
 13920 Southeast Eastgate Way, Suite 300 
 Bellevue, WA 98005 
  
 Attn: President 
  
 Ladies and Gentlemen: 
  

	 ̈	The undersigned hereby elects to exercise the warrant issued to it by drugstore.com inc. (the “Company”) and dated ___________ _____, (the
“Warrant”) and to purchase thereunder __________________________________ shares of the Common Stock of the Company (the “Shares”) at a purchase price of ___________________________________________
Dollars ($__________) per Share or an aggregate purchase price of __________________________________ Dollars ($__________) (the “Exercise Price”). Pursuant to the terms of the Warrant the undersigned has delivered the
Exercise Price herewith in full in cash or by certified check or wire transfer. 

  

	 ̈	The undersigned hereby elects to convert
                                        
         percent (            %) of the value of the Warrant into shares of Common Stock, pursuant to the net exercise provisions of
Section 1.2 of the Warrant. 

  
 The undersigned represents that is
acquiring the Common Stock for its own account, to hold for investment, and the undersigned will not make any sale, transfer or other disposition of the Common Stock in violation of the Securities Act of 1933, as amended (the “Securities
Act”), or in violation of any applicable state securities law. 
  
 The
undersigned has been advised that the Common Stock has not been registered under the Securities Act or state securities laws on the ground that this transaction is exempt from registration, and that reliance by the Company on such exemptions is
predicated in part on the undersigned’s representations set forth in this Notice of Exercise. 
  
 The undersigned has been informed that under the Securities Act, the Common Stock must be held indefinitely unless it is subsequently registered under the Act or unless an exemption from such registration is available
with respect to any proposed transfer or disposition by the undersigned of the Common Stock. 
  
 Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below: 
  
 Name:
                                        
             
  

			
		
	Address:	 	 
	
	 

  

			
	Very truly yours,
	
	 
		
	By:	 	 
		
	 Title: 
	 	 

  

 2.Warrant to Purchase Shares of Common Stock Issued to Gary Johnson

 Exhibit 10.1 
  

					
	 No. WPCS-1
	 	 	 	Warrant to Purchase 41,067 Shares of
Common Stock (subject
to adjustment)

  
 WARRANT TO PURCHASE
COMMON STOCK 
  
 OF 
  
 PORTALPLAYER, INC. 
  
 Void after November 17, 2014 
  
 This certifies that, for services rendered and value received, receipt and
sufficiency of which are hereby acknowledged, GARY JOHNSON, or his registered assigns (the “Holder”), is entitled, subject to the terms and conditions set forth below, to purchase from PORTALPLAYER, INC., a Delaware corporation (the
“Company”), FORTY-ONE THOUSAND SIXTY-SEVEN (41,067) shares of fully paid and nonassessable shares of Common Stock of the Company at a purchase price of $4.50 per share. The number, character and Exercise Price of such shares of
Common Stock are subject to adjustment as provided below and all references to “Warrant Shares” and “Exercise Price” (as defined below) herein shall be deemed to include any such adjustment or series of adjustments. The term
“Warrant” as used herein shall mean this Warrant, and any warrants delivered in substitution or exchange therefor as provided herein. 
  
 1. Term of Warrant. Subject to the terms and conditions set forth herein, this Warrant shall be exercisable, in whole or in part, during the term
commencing on the date hereof and ending at 5:00 p.m., Pacific standard time, on November 17, 2014, and shall be void thereafter (the “Exercise Period”). 
  
 2. Number of Shares, Exercise Price. 
  
 (a) This Warrant shall be exercisable for FORTY-ONE THOUSAND SIXTY-SEVEN (41,067) shares of Common Stock, as adjusted
from time to time pursuant to Section 12 hereof (the “Warrant Shares”). 
  
 (b) The Exercise Price at which this Warrant may be exercised shall be $4.50 per share, as adjusted from time to time pursuant to Section 12 hereof (the “Exercise Price”). 
  
 3. Exercise of Warrant. 
  
 (a) Cash Exercise. This Warrant may be exercised by the Holder by (i)
the surrender of this Warrant to the Company, with the Notice of Exercise annexed hereto duly completed and executed on behalf of the Holder, at the office of the Company (or such other office or agency of the Company as it may designate by notice
in writing to the Holder at the address of the Holder appearing on the books of the Company) during the Exercise Period and (ii) the delivery of payment to the Company, for the account of the Company, by cash, wire transfer of immediately available
funds to a bank account specified by the Company, or by certified or bank cashier’s 

  

 -1- 

 
check, of the Exercise Price for the number of Warrant Shares specified in the Exercise Form in lawful money of the United States of America. The Company
agrees that such Warrant Shares shall be deemed to be issued to the Holder as the record holder of such Warrant Shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for the Warrant Shares
as aforesaid. A stock certificate or certificates for the Warrant Shares specified in the Exercise Form shall be delivered to the Holder as promptly as practicable thereafter. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of the stock certificate or certificates, deliver to the Holder a new Warrant evidencing the rights to purchase the remaining Warrant Shares, which new Warrant shall in all other respects be identical with this
Warrant. No adjustments shall be made on Warrant Shares issuable on the exercise of this Warrant for any cash dividends paid or payable to holders of record of Common Stock prior to the date as of which the Holder shall be deemed to be the record
holder of such Warrant Shares. 
  
 (b) Net Issue Exercise.
In lieu of exercising this Warrant pursuant to Section 3(a) hereof, this Warrant may be exercised by the Holder by the surrender of this Warrant to the Company, with a duly executed Exercise Form marked to reflect Net Issue Exercise and specifying
the number of Warrant Shares to be purchased, during normal business hours on any Business Day during the Exercise Period. The Company agrees that such Warrant Shares shall be deemed to be issued to the Holder as the record holder of such Warrant
Shares as of the close of business on the date on which this Warrant shall have been surrendered as aforesaid. Upon such exercise, the Holder shall be entitled to receive shares equal to the value of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant to the Company together with notice of such election in which event the Company shall issue to Holder a number of shares of the Company’s Common Stock computed as of the date of surrender of this Warrant
to the Company using the following formula: 
  

					
	X =	 	Y(A-B)  	  	 
	 	 	A	  	 

  

					
	 Where
	  	X =	 	the number of shares of Common Stock to be issued to Holder under this Section 3(b);
			
	 	  	Y =	 	the number of shares of Common Stock otherwise purchasable under this Warrant (as adjusted to the date of such calculation);
			
	 	  	A =	 	the fair market value of one share of the Company’s Common Stock (at the date of such calculation);
			
	 	  	B =	 	the Exercise Price (as adjusted to the date of such calculation).

  
 (c) Fair Market
Value. For purposes of Section 3(b) hereof, if there exists a public market for the Company’s Common Stock at the time of such exercise, the fair market value of one share of the Company’s Common Stock shall mean, as of any such
exercise date: 
  
 (i) the fair market value of
the shares of Common Stock as determined from the last closing price per share of the Company’s Common Stock on the principal 

  

 -2- 

 
national securities exchange on which the Common Stock is listed or admitted to trading, or 
  
 (ii) the fair market value of the shares of Common Stock as determined from the last reported sales price
per share of the Company’s Common Stock on the Nasdaq National Market or the Nasdaq Small-Cap Market (collectively, “Nasdaq”) if the Company’s Common Stock is not listed or traded on any such exchange, or 
  
 (iii) the fair market value of the shares of Common Stock as
determined from the average of the bid and asked price per share as reported in the “pink sheets” published by the National Quotation Bureau, Inc. (the “pink sheets”) if the Company’s Common Stock is not listed or traded on
any exchange or Nasdaq, or 
  
 (iv) if there is
no such public market for the Company’s Common stock or if such quotations are not available, the fair market value per share of the Company’s Common Stock on the date such notice was received by the Company as reasonably determined in
good faith by the Board of Directors of the Company. 
  
 (d) This
Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Common Stock issuable upon such exercise shall be
treated for all purposes as the holder of record of such shares as of the close of business on such date. As promptly as practicable on or after such date and in any event within ten (10) days thereafter, the Company at its expense shall issue and
deliver to the person or persons entitled to receive the same a certificate or certificates for the number of shares issuable upon such exercise. In the event that this Warrant is exercised in part, the Company at its expense will execute and
deliver a new Warrant of like tenor exercisable for the number of shares for which this Warrant may then be exercised. 
  
 4. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.
In lieu of any fractional share to which the Holder would otherwise be entitled, the Company shall make a cash payment equal to the Exercise Price multiplied by such fraction. 
  
 5. Withholding Taxes. To the extent required by applicable federal, state, local or foreign law, the Holder or his
successor shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with the exercise of the Warrant. The Company shall not be required to issue any Warrant Shares until such
obligations are satisfied. The Company may permit the Holder to satisfy all or part of his withholding or income tax obligations by having the Company withhold all or a portion of any Warrant Shares that otherwise would be issued to him or by
surrendering all or a portion of any Warrant Shares that he previously acquired. Such Warrant Shares shall be valued at their Fair Market Value on the date when taxes otherwise would be withheld in cash. In no event may the Holder have Warrant
Shares withheld that would otherwise be issued to him in excess of the number necessary to satisfy the legally required minimum tax withholding. 
  

 -3- 

 6. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and
cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount. 
  
 7. Rights of Stockholders. Subject to Sections 10 and 12 of this Warrant, the Holder shall not be entitled to vote or receive dividends or be
deemed the holder of Common Stock or any other securities of the Company that may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, change of par value, or change of stock to no par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise
until the Warrant shall have been exercised as provided herein. 
  
 8. Transfer of Warrant. 
  
 (a) Warrant
Register. The Company will maintain a register (the “Warrant Register”) containing the names and addresses of the Holder or Holders. Any Holder of this Warrant or any portion thereof may change his address as shown on the Warrant
Register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the
address shown on the Warrant Register. Until this Warrant is transferred on the Warrant Register of the Company, the Company may treat the Holder as shown on the Warrant Register as the absolute owner of this Warrant for all purposes,
notwithstanding any notice to the contrary. 
  
 (b) Warrant
Agent. The Company may, by written notice to the Holder, appoint an agent for the purpose of maintaining the Warrant Register referred to in Section 8(a) hereof, issuing the Common Stock or other securities then issuable upon the exercise of
this Warrant, exchanging this Warrant, replacing this Warrant, or any or all of the foregoing. Thereafter, any such registration, issuance, exchange, or replacement, as the case may be, shall be made at the office of such agent. 
  
 (c) Transferability and Nonnegotiability of Warrant. This Warrant may
not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and the transferee (including the delivery of investment representation letters and legal opinions
reasonably satisfactory to the Company, if such are requested by the Company). Notwithstanding the foregoing, no investment representation letter or opinion of counsel shall be required for any transfer of this Warrant (or any portion thereof) or
any shares of Common Stock issued upon exercise hereof or conversion thereof (i) in compliance with Rule 144 or Rule 144A of the Securities Act of 1933, as amended (the “1933 Act”), (ii) by gift, will or intestate succession by the Holder
to his or her spouse or lineal descendants or ancestors or any trust for any of the foregoing or (iii) to a wholly-owned subsidiary or constituent 

  

 -4- 

 
partner (including limited partners), stockholder, member, retired partner or member of the Holder; provided that in each of the foregoing cases the
transferee agrees in writing to be subject to the terms of this Section 8(c). In addition, if the holder of the Warrant (or any portion thereof) or any Common Stock issued upon exercise hereof or conversion thereof delivers to the Company an
unqualified opinion of counsel that no subsequent transfer of such Warrant or Common Stock shall require registration under the 1933 Act, the Company shall, upon such contemplated transfer, promptly deliver new documents/certificates for such
Warrant or Common Stock that do not bear the legend set forth in Section 8(e)(ii) hereof. Subject to the provisions of this Warrant with respect to compliance with the 1933 Act, title to this Warrant may be transferred by endorsement (by the Holder
executing the Assignment Form annexed hereto) and delivery in the same manner as a negotiable instrument transferable by endorsement and delivery. 
  
 (d) Exchange of Warrant Upon a Transfer. On surrender of this Warrant for exchange, properly endorsed on the Assignment Form and subject to the
provisions of this Warrant with respect to compliance with the 1933 Act and with the limitations on assignments and transfers and contained in this Section 8, the Company at its expense shall issue to or on the order of the Holder a new warrant or
warrants of like tenor, in the name of the Holder or as the Holder (on payment by the Holder of any applicable transfer taxes) may direct, for the number of shares issuable upon exercise hereof. 
  
 (e) Compliance with Securities Laws. 
  
 (i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Common Stock to be issued upon exercise hereof or conversion thereof are being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment, and that
the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Common Stock to be issued upon exercise hereof or conversion thereof except under circumstances that will not result in a violation of the 1933 Act or any
applicable state securities laws. Upon exercise of this Warrant, the Holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of Common Stock so purchased are being acquired solely for the
Holder’s own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale. 
  
 (ii) This Warrant and all shares of Common Stock issued upon exercise hereof or conversion thereof shall be stamped or imprinted with
legends in substantially the following form (in addition to any legend required by state securities laws): 
  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE OWNED BY A PERSON, OR PERSONS, WHO MAY BE CONSIDERED AN AFFILIATE FOR PURPOSES OF RULE 144 UNDER THE
SECURITIES ACT OF 1933 (THE “ACT”). NO TRANSFER OF THESE SECURITIES OR ANY INTEREST THEREIN MAY BE MADE, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, UNLESS THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL, 

  

 -5- 

 
SATISFACTORY TO IT, THAT SUCH TRANSFER DOES NOT REQUIRE REGISTRATION UNDER THE ACT. 
  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN AGREEMENT BY THE REGISTERED HOLDER HEREOF NOT TO OFFER,
SELL, CONTRACT TO SELL, PLEDGE OR OTHERWISE DISPOSE OF SUCH SECURITIES (THE “LOCK-UP AGREEMENT”) FOR A PERIOD OF 180 DAYS FOLLOWING NOVEMBER 18, 2004, THE DATE OF THE FINAL PROSPECTUS FILED BY PORTALPLAYER, INC. WITH THE SECURITIES AND
EXCHANGE COMMISSION; PROVIDED HOWEVER THAT IF (1) DURING THE LAST 17 DAYS OF THE INITIAL LOCK-UP PERIOD, PORTALPLAYER RELEASES EARNINGS RESULTS OR MATERIAL NEWS OR A MATERIAL EVENT RELATING TO PORTALPLAYER OCCURS OR (2) PRIOR TO THE EXPIRATION OF
THE INITIAL LOCK-UP PERIOD, PORTALPLAYER ANNOUNCES THAT IT WILL RELEASE EARNINGS RESULTS DURING THE 16-DAY PERIOD BEGINNING ON THE LAST DAY OF THE INITIAL LOCK-UP PERIOD, THEN IN EACH CASE THE LOCK-UP PERIOD WILL BE EXTENDED UNTIL THE EXPIRATION OF
THE 18-DAY PERIOD BEGINNING ON THE DATE OF RELEASE OF THE EARNINGS RESULTS OR THE OCCURRENCE OF THE MATERIAL NEWS OR MATERIAL EVENT. 
  
 (iii) The Company agrees to remove promptly, upon the request of the holder of this Warrant and Securities issuable upon exercise of the
Warrant, the legend set forth in Section 8(e)(ii) hereof from the documents/certificates for such securities upon full compliance with this Agreement and Rules 144 and 145. 
  
 9. Reservation of Stock. The Company covenants that during the term this Warrant is exercisable, the Company will
reserve from its authorized and unissued Common Stock or other shares issuable upon exercise of the Warrant a sufficient number of shares to provide for the issuance of Common Stock upon the exercise of this Warrant (and shares of its Common Stock
for issuance on conversion of such Common Stock) and, from time to time, will take all steps necessary to amend its Amended and Restated Certificate of Incorporation (the “Restated Certificate”) to provide sufficient reserves of shares of
Common Stock issuable upon exercise of the Warrant. The Company further covenants that all shares that may be issued upon the exercise of rights represented by this Warrant and payment of the Exercise Price, all as set forth herein, will be free
from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously or otherwise specified herein). The Company agrees that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon the exercise of this Warrant. 
  

 -6- 

 10. Notices. 
  
 (a) In case: 
  
 (i) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the
exercise of this Warrant) for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right; 

 
 (ii) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation, or any conveyance of all or substantially all of the assets of the Company to another corporation; 
  
 (iii) of any voluntary dissolution, liquidation or
winding-up of the Company; or 
  
 (iv) of any
redemption or conversion of all outstanding Preferred Stock or Common Stock; 
  
 then, and in each such case, the Company will mail or cause to be mailed to the Holder or Holders a notice specifying, as the case may be, (A) the date on which a record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or right, or (B) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation, winding-up, redemption or conversion is
to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such stock or securities at the time receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock
(or such stock or securities at the time receivable upon the exercise of this Warrant) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up. Such notice shall be mailed at least fifteen (15) days prior to the date therein specified. 
  
 (b) All such notices, advices and communications shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery
and (ii) in the case of mailing, on the third (3rd) business day following the date of such mailing if sent to a United States address and on the tenth (10th) business day following the date of such mailing if sent to an address outside the United
States. 
  
 11. Amendments. This Warrant and any term
hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Company and the Holder. 
  

 -7- 

 12. Adjustments. The Exercise Price and the number of shares purchasable hereunder are subject to
adjustment from time to time as follows: 
  
 (a) Merger, Sale
of Assets, etc. If at any time while this Warrant, or any portion thereof, is outstanding and unexpired there shall be (i) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for
herein), (ii) a merger or consolidation of the Company with or into another corporation in which the Company is not the surviving entity, or a reverse triangular merger in which the Company is the surviving entity but the shares of the
Company’s capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (iii) a sale or transfer of the Company’s properties
and assets as, or substantially as, an entirety to any other person, then, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if this Warrant had
been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 12. The foregoing provisions of this Section 12(b) shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant. If the per-share consideration payable to the holder hereof for
shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company’s Board of Directors. In all events, appropriate
adjustment (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the transaction, to the end that the
provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant. 
  
 (b) Reclassification, etc. If the Company, at any time while this
Warrant, or any portion thereof, remains outstanding and unexpired by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of
securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to
the purchase rights under this Warrant immediately prior to such reclassification or other change and the Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 12. No adjustment shall
be made pursuant to this Section 12(b), upon any conversion or redemption of the Common Stock which is the subject of Section 12(a) hereof. 
  
 (c) Split, Subdivision or Combination of Shares. If the Company at any time while this Warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase rights under this Warrant exist, into a different number of securities of the same class, then (i) in the case of a split or subdivision, the Exercise Price for such
securities shall be proportionately decreased and the securities issuable upon exercise of this Warrant shall be proportionately increased, and (ii) in the case of a combination, 

  

 -8- 

 
the Exercise Price for such securities shall be proportionately increased and the securities issuable upon exercise of this Warrant shall be proportionately
decreased. 
  
 (d) Adjustments for Dividends in Stock or Other
Securities or Property. If while this Warrant, or any portion hereof, remains outstanding and unexpired the holders of the securities as to which purchase rights under this Warrant exist at the time shall have received, or, on or after the
record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefor, other or additional stock or other securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition to the number of shares of the security receivable upon exercise of this Warrant, and without payment of any additional consideration therefor, the amount of such other
or additional stock or other securities or property (other than cash) of the Company that such holder would hold on the date of such exercise had it been the holder of record of the security receivable upon exercise of this Warrant on the date
hereof and had thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and/or all other additional stock available by it as aforesaid during such period, giving effect to all adjustments
called for during such period by the provisions of this Section 12. 
  
 (e) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment pursuant to this Section 12, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms
hereof and furnish reasonably promptly to each Holder of this Warrant a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the
written request, at any time, of any such Holder, furnish or cause to be furnished to such Holder a like certificate setting forth: (i) such adjustments and readjustments; (ii) the Exercise Price at the time in effect; and (iii) the number of shares
and the amount, if any, of other property that at the time would be received upon the exercise of the Warrant. 
  
 (f) No Impairment. The Company will not, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 12 and in the taking of all such action as may be necessary or appropriate in order to protect the
rights of the Holders of this Warrant against impairment. 
  
 13.
Representations and Covenants of Holder. This Warrant has been entered into by the Company in reliance upon the following representations and covenants of the Holder which the Holder hereby makes by execution of this Warrant. 
  
 (a) Investment Purpose. The right to acquire the Warrant Shares will
be acquired for investment and not with a view to the sale or distribution of any part thereof, and the Holder has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption.

  
 (b) Private Issue. The Holder understands (i) that the
Warrant Shares issuable upon exercise of this Warrant are not registered under the 1933 Act or qualified under applicable state 

  

 -9- 

 
securities laws on the ground that the issuance contemplated by this Warrant will be exempt from the registration and qualifications requirements thereof,
and (ii) that the Company’s reliance on such exemption is predicated on the representations set forth in this Section 14. 
  
 (c) Financial Risk. The Holder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its investment. 
  
 (d) Indefinite Holding Period. The Holder understands that it may be required to hold the Warrant Shares for an indefinite period. The Holder also understands that any sale of its rights as the Holder to
purchase the Warrant Shares which might be made by it in reliance upon Rule 144 under the 1933 Act may be made only in accordance with the terms and conditions of that Rule. 
  
 (e) Accredited Investor. Holder is an “accredited investor” within the meaning of the Securities and
Exchange Rule 501 of Regulation D, as presently in effect. 
  
 14.
Miscellaneous. 
  
 (a) This Warrant shall be governed by
the laws of the State of California as applied to agreements entered into in the State of California by and among residents of the State of California. 
  
 (b) In the event of a dispute with regard to the interpretation of this Warrant, the prevailing party may collect the cost of attorney’s fees,
litigation expenses or such other expenses as may be incurred in the enforcement of the prevailing party’s rights hereunder. 
  

 -10- 

 (c) This Warrant shall be exercisable as provided for herein, except that in the event that the
expiration date of this Warrant shall fall on a Saturday, Sunday and or United States federally recognized Holiday, this expiration date for this Warrant shall be extended to 5:00 p.m. Pacific standard time on the business day following such
Saturday, Sunday or recognized Holiday. 
  
 IN WITNESS WHEREOF,
the parties have executed this Warrant as of the date hereof. 
  
 Dated: November 17, 2004 
  

			
	 PORTALPLAYER, INC.

		
	By	 	 /s/ Svend-Olav Carlsen

	 Title
	 	 Vice President and Chief Financial Officer

	
	 HOLDER

	
	 /s/ Gary Johnson

  

 -11- 

  
 NOTICE OF EXERCISE

  
 To: PORTALPLAYER, INC. 
  
 (1) The undersigned hereby elects to purchase
                     shares of Common Stock of PORTALPLAYER, INC., pursuant to the terms of the attached Warrant, and  ̈ tenders herewith payment of the purchase price for such shares in full or  ̈ elects the net exercise option. 
  
 (2) In exercising this Warrant, the undersigned hereby confirms and acknowledges that the shares of Common Stock to be issued upon conversion thereof are being acquired solely for the account of the undersigned and not as a nominee for any
other party, or for investment, and that the undersigned will not offer, sell or otherwise dispose of any such shares of Common Stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any
applicable state securities laws. 
  
 (3) Please issue a
certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below: 
  

					
	 	 	 	 	 
			
	  	 	 	 	  
	 	 	 	 	(Name)
			
	  	 	 	 	  
	 	 	 	 	(Name)

  
 (4) Please issue a new
Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below: 
  

					
			
	  	 	 	 	  
	 	 	 	 	(Name)
			
	________________________	 	 	 	  
	 (Date)
	 	 	 	(Signature)

  
 ASSIGNMENT FORM

  
 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

	 	 No. of Shares

	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 

  
 and does hereby irrevocably constitute
and appoint Attorney
                                        
             to make such transfer on the books of PORTALPLAYER, INC., maintained for the purpose, with full power of substitution in the premises. 
  
 The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this Warrant and the shares of stock to be issued upon exercise hereof or conversion thereof are being acquired for investment and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any shares of stock
to be issued upon exercise hereof or conversion thereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended, or any applicable state securities laws. Further, the Assignee has acknowledged that
upon exercise of this Warrant, the Assignee shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of stock so purchased are being acquired for investment and not with a view toward
distribution or resale. 
  
 Dated:
                                . 
  

	
	
	 
	Signature of Holder

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