THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
WARRANT TO PURCHASE COMMON STOCK
OF
THE SINGING MACHINE COMPANY, INC.
Issue Date: February 21, 2006 Warrant No. 2
THIS CERTIFIES that koncepts International Limited or any subsequent
holder hereof (the "Holder"), has the right to purchase from THE SINGING MACHINE
COMPANY, INC., a Delaware corporation (the "Company"), up to 1,250,000 fully
paid and nonassessable shares of the Company's common stock, par value $0.01 per
share (the "Common Stock"), subject to adjustment as provided herein, at a price
per share equal to the Exercise Price (as defined below), at any time beginning
on the date hereof (the "the "Issue Date") and ending at 6:00 p.m., eastern
time, on the date that is the Third anniversary of the Issue Date (the
"Expiration Date").
1. Exercise.
(a) Right to Exercise. The Holder shall have the right to exercise this
Warrant at any time and from time to time during the period beginning on the
Issue Date and ending on the Expiration Date as to all or any part of the shares
of Common Stock covered hereby (the "Warrant Shares").
(b) Exercise Price. The "Exercise Price" for each Warrant Share
purchased by the Holder upon the exercise of this Warrant shall be equal to
$0.280, subject to adjustment for the events specified in Section 4 below;
provided, however that if required by law, until this Warrant, the Securities
Purchase Agreement between the Company and Holder dated as of the date hereof
(the "Securities Purchase Agreement") and the transactions contemplated herein
and therein are approved by the holders of a majority of the outstanding shares
of capital stock of the Company entitled to vote ("Shareholder Approval"), ,
other than as a result of adjustments for the events specified in Section 4(a)
below. Payment of the Exercise Price is made in cash or by certified or official
bank check payable to the order of the Company equal to the applicable aggregate
Exercise Price for the number of Common Shares specified in such Exercise Notice
(as defined below) (as such exercise number shall be adjusted to reflect any
adjustment in the total number of shares of Common Stock issuable to the Holder
per the terms of this Warrant).
(c) Exercise Notice. In order to exercise this Warrant, the Holder
shall send by facsimile transmission, at any time prior to 6:00 p.m., eastern
time, on the business day (which means any day other than a Saturday, a Sunday
or a day which commercial banks located in New York City are permitted by law to
close) on which the Holder wishes to effect such exercise (the "Exercise Date"),
to the Company an executed copy of the notice of exercise in the form attached
hereto as Exhibit A (the "Exercise Notice"), the original Warrant and the
Exercise Price, which shall not be required if the Exercise Notice indicates the
Holder's election to effect a cashless exercise. The Exercise Notice shall also
state the name or names (with address) in which the shares of Common Stock that
are issuable on such exercise shall be issued. In the case of a dispute as to
the calculation of the Exercise Price or the number of Warrant Shares issuable
hereunder (including, without limitation, the calculation of any adjustment
pursuant to Section 6 below), the Company shall promptly issue to the Holder the
number of Warrant Shares that are not disputed and shall submit the disputed
calculations to a certified public accounting firm of national recognition
(other than the Company's independent accountants), reasonably acceptable to
Holder, within two (2) business days following the date on which the Exercise
Notice is delivered to the Company. The Company shall cause such accountant to
calculate the Exercise Price and/or the number of Warrant Shares issuable
hereunder and to notify the Company and the Holder of the results in writing no
later than three (3) business days following the day on which such accountant
received the disputed calculations (the "Dispute Procedure"). Such accountant's
calculation shall be deemed conclusive absent manifest error. The fees of any
such accountant shall be borne by the party whose calculations were most at
variance with those of such accountant.
(d) Limitations on Exercise. Notwithstanding anything to the contrary
contained herein, and only if required by law, until Shareholder Approval is
obtained, no holder of this Warrant shall be entitled to exercise this Warrant,
if after exercise such holder will, with the shares of Common Stock issued on
exercise and any other shares of the Company's Common Stock then held by such
holder, hold more than 19.99% of the outstanding Common Stock or voting power of
the Company on the date of such exercise.
(e) Holder of Record. The Holder shall, for all purposes, be deemed to
have become the holder of record of the Warrant Shares specified in an Exercise
Notice on the Exercise Date specified therein, irrespective of the date of
delivery of such Warrant Shares. Except as specifically provided herein, nothing
in this Warrant shall be construed as conferring upon the Holder hereof any
rights as a stockholder of the Company prior to the Exercise Date.
(f) Cancellation of Warrant. This Warrant shall be canceled upon its
exercise and, if this Warrant is exercised in part, the Company shall, at the
time that it delivers Warrant Shares to the Holder pursuant to such exercise as
provided herein, issue a new warrant, and deliver to the Holder a certificate
representing such new warrant, with terms identical in all respects to this
Warrant (except that such new warrant shall be exercisable into the number of
shares of Common Stock with respect to which this Warrant shall remain
unexercised); provided, however, that the Holder shall be entitled to exercise
all or any portion of such new warrant at any time following the time at which
this Warrant is exercised, regardless of whether the Company has actually issued
such new warrant or delivered to the Holder a certificate therefor.
2
2. Delivery of Warrant Shares Upon Exercise. Upon receipt of an
Exercise Notice pursuant to Section 1 above, the Company shall: (a) no later
than the close of business on the later to occur of (i) the third (3rd) business
day following the Exercise Date set forth in such Exercise Notice and (ii) such
later date on which the Company shall have received payment of the Exercise
Price, and (b) with respect to Warrant Shares that are the subject of a Dispute
Procedure, the close of business on the third (3rd) business day following the
determination made pursuant to Section 1(b) (each of the dates specified in (A)
or (B) being referred to as a "Delivery Date"), issue and deliver or caused to
be delivered to the Holder the number of Warrant Shares as shall be determined
as provided herein. The Company shall effect delivery of Warrant Shares to the
Holder by, as long as the Transfer Agent participates in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program ("FAST"), crediting
the account of the Holder or its nominee at DTC (as specified in the applicable
Exercise Notice) with the number of Warrant Shares required to be delivered, no
later than the close of business on such Delivery Date. In the event that the
Transfer Agent is not a participant in FAST, or if the Warrant Shares are not
otherwise eligible for delivery through FAST, or if the Holder so specifies in
an Exercise Notice or otherwise in writing on or before the Exercise Date, the
Company shall effect delivery of Warrant Shares by delivering to the Holder or
its nominee physical certificates representing such Warrant Shares, no later
than the close of business on such Delivery Date.
3. Failure to Deliver Warrant Shares.
(a) In the event that the Company fails for any reason to deliver to
the Holder the number of Warrant Shares specified in the applicable Exercise
Notice on or before the Delivery Date therefor (an "Exercise Default"), and such
default continues for seven (7) business days following delivery of a written
notice of such default by the Holder to the Company, the Company shall pay to
the Holder payments ("Exercise Default Payments") in the amount of: (i) (N/365)
multiplied by (ii) the aggregate Exercise Price of the Warrant Shares which are
the subject of such Exercise Default multiplied by (iii) the lower of ten
percent (10%) and the maximum rate permitted by applicable law (the "Default
Interest Rate"), where "N" equals the number of days elapsed between the
original Delivery Date of such Warrant Shares and the date on which all of such
Warrant Shares are issued and delivered to the Holder. Cash amounts payable
hereunder shall be paid on or before the fifth (5th) business day of the
calendar month following the calendar month in which such amount has accrued.
(b) In the event that the Holder has not received certificates
representing the Warrant Shares by the seventh (7th) business day following an
Exercise Default, the Holder may notify the Company in writing of its election
to revoke the Exercise Notice that is the subject of such default, in which
case, effective as of the date of such revocation notice, such Exercise Notice
shall be deemed rescinded and of no further force or effect.
(c) Nothing herein shall limit the Holder's right to pursue actual
damages for the Company's failure to issue and deliver Warrant Shares on the
applicable Delivery Date (including, without limitation, damages relating to any
purchase of Common Stock by the Holder to make delivery on a sale effected in
anticipation of receiving Warrant Shares upon exercise, such damages to be in an
amount equal to: (a) the aggregate amount paid by the Holder for the Common
Stock so purchased minus (b) the aggregate amount of net proceeds, if any,
received by the Holder from the sale of the Warrant Shares issued by the Company
pursuant to such exercise), and the Holder shall have the right to pursue all
remedies available to it at law or in equity (including, without limitation, a
decree of specific performance and/or injunctive relief); provided, however,
that, in the event, following an Exercise Default, the Company delivers to the
Holder the Warrant Shares that are required to be issued by the Company pursuant
to such exercise, the Holder shall use commercially reasonable efforts to sell
such shares promptly following such delivery.
3
4. Anti-Dilution Adjustments; Distributions; Other Events. The Exercise
Price and the number of Warrant Shares issuable hereunder shall be subject to
adjustment from time to time as provided in this Section 6. In the event that
any adjustment of the Exercise Price or the number of Warrant Shares as required
herein results in a fraction of a cent or fraction of a share, as applicable,
such Exercise Price or number of Warrant Shares shall be rounded up or down to
the nearest cent or share, as applicable.
(a) Subdivision or Combination of Common Stock. If the Company, at any
time after the Issue Date, subdivides (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a greater number of shares, then after the date of record for
effecting such subdivision, the Exercise Price in effect immediately prior to
such subdivision will be proportionately reduced. Any adjustment made pursuant
to the foregoing sentence that results in a decrease in the Exercise Price shall
also effect a proportional increase in the number of Warrant Shares into which
this Warrant is exercisable. If the Company, at any time after the initial
issuance of this Warrant, combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) its shares of Common Stock into a
smaller number of shares, then, after the date of record for effecting such
combination, the Exercise Price in effect immediately prior to such combination
will be proportionally increased. Any adjustment made pursuant to the foregoing
sentence that results in an increase in the Exercise Price shall also effect a
proportional decrease in the number of Warrant Shares into which this Warrant is
exercisable.
(b) Distributions. If the Company shall declare or make any
distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a partial liquidating dividend or otherwise (including any
dividend or distribution to the Company's stockholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary) (a "Distribution"),
the Company shall deliver written notice of such Distribution (a "Distribution
Notice") to the Holder at least five (5) business days prior to the earlier to
occur of (i) the record date for determining stockholders entitled to such
Distribution (the "Record Date") and (ii) the date on which such Distribution is
made (the "Distribution Date"). The Holder shall be entitled to receive the same
amount and type of assets being distributed in such Distribution as though the
Holder were a holder on the Record Date therefor of a number of shares of Common
Stock into which this Warrant is exercisable as of such Record Date (such number
of shares to be determined at the Exercise Price then in effect and without
giving effect to any limitations on such exercise contained in this Warrant or
the Subscription Agreement).
4
(c) Dilutive Issuances.
(i) Adjustment Upon Dilutive Issuance. If, at any time after
the Issue Date, the Company issues or sells, or in accordance with subparagraph
(ii) of this Section 4(c), is deemed to have issued or sold, any shares of
Common Stock for no consideration or for a consideration per share less than the
Exercise Price on the date of such issuance or sale (or deemed issuance or sale)
(a "Dilutive Issuance"), then effective immediately upon the Dilutive Issuance,
the Exercise Price shall be adjusted so as to equal an amount determined by
multiplying such Exercise Price by the following fraction:
N0 + N1
-------
N0 + N2
where:
N0 = the number of shares of Common Stock
outstanding immediately prior to the
issuance, sale or deemed issuance or sale of
such additional shares of Common Stock in
such Dilutive Issuance without taking into
account any shares of Common Stock issuable
upon conversion, exchange or exercise of any
securities or other instruments which are
convertible into or exercisable or
exchangeable for Common Stock ("Convertible
Securities") or options, warrants or other
rights to purchase or subscribe for Common
Stock or Convertible Securities ("Purchase
Rights");
N1 = the number of shares of Common Stock which
the aggregate consideration, if any,
received or receivable by the Company for
the total number of such additional shares
of Common Stock so issued, sold or deemed
issued or sold in such Dilutive Issuance
(which, in the case of a deemed issuance or
sale, shall be calculated in accordance with
subparagraph (ii) below) would purchase at
the Exercise Price in effect immediately
prior to such Dilutive Issuance; and
N2 = the number of such additional shares of
Common Stock so issued, sold or deemed
issued or sold in such Dilutive Issuance.
Notwithstanding the foregoing, no adjustment shall be made pursuant
hereto if such adjustment would result in an increase in the Exercise Price.
(ii) Effect On Exercise Price Of Certain Events. For purposes
of determining the adjusted Exercise Price under subparagraph (i) of this
Section 4(c), the following will be applicable:
5
(A) Issuance Of Purchase Rights. If the Company
issues or sells any Purchase Rights, whether or not immediately
exercisable, and the price per share for which Common Stock is issuable
upon the exercise of such Purchase Rights (and the price of any
conversion of Convertible Securities, if applicable) is less than the
Exercise Price in effect on the date of issuance or sale of such
Purchase Rights, then the maximum total number of shares of Common
Stock issuable upon the exercise of all such Purchase Rights (assuming
full conversion, exercise or exchange of Convertible Securities, if
applicable) shall, as of the date of the issuance or sale of such
Purchase Rights, be deemed to have been issued and sold by the Company
for such price per share. For purposes of the preceding sentence, the
"price per share for which Common Stock is issuable upon the exercise
of such Purchase Rights" shall be determined by dividing (x) the total
amount, if any, received or receivable by the Company as consideration
for the issuance or sale of all such Purchase Rights, plus the minimum
aggregate amount of additional consideration, if any, payable to the
Company upon the exercise of all such Purchase Rights, plus, in the
case of Convertible Securities issuable upon the exercise of such
Purchase Rights, the minimum aggregate amount of additional
consideration payable upon the conversion, exercise or exchange of all
such Convertible Securities (determined in accordance with the
calculation method set forth in subparagraph (ii)(D) below), by (y) the
maximum total number of shares of Common Stock issuable upon the
exercise of all such Purchase Rights (assuming full conversion,
exercise or exchange of Convertible Securities, if applicable). Except
as provided in Section 6(c)(ii)(C) hereof, no further adjustment to the
Exercise Price shall be made upon the actual issuance of such Common
Stock upon the exercise of such Purchase Rights or upon the conversion,
exercise or exchange of Convertible Securities issuable upon exercise
of such Purchase Rights.
(B) Issuance Of Convertible Securities. If the
Company issues or sells any Convertible Securities, whether or not
immediately convertible, exercisable or exchangeable, and the price per
share for which Common Stock is issuable upon such conversion, exercise
or exchange is less than the Exercise Price in effect on the date of
issuance or sale of such Convertible Securities, then the maximum total
number of shares of Common Stock issuable upon the conversion, exercise
or exchange of all such Convertible Securities shall, as of the date of
the issuance or sale of such Convertible Securities, be deemed to have
been issued and sold by the Company for such price per share. For the
purposes of the immediately preceding sentence, the "price per share
for which Common Stock is issuable upon such conversion, exercise or
exchange" shall be determined by dividing (A) the total amount, if any,
received or receivable by the Company as consideration for the issuance
or sale of all such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company upon
the conversion, exercise or exchange of all such Convertible Securities
(determined in accordance with the calculation method set forth in
subparagraph (ii)(D)), by (B) the maximum total number of shares of
Common Stock issuable upon the exercise, conversion or exchange of all
such Convertible Securities. Except as provided in Section 6(c)(ii)(C)
hereof, no further adjustment to the Exercise Price shall be made upon
the actual issuance of such Common Stock upon conversion, exercise or
exchange of such Convertible Securities.
(C) Change In Option Price Or Conversion Rate. If
there is a change at any time in (x) the purchase price or amount of
additional consideration payable to the Company upon the exercise of
any Purchase Rights; (y) the amount of additional consideration, if
any, payable to the Company upon the conversion, exercise or exchange
of any Convertible Securities the adjustment for which is not otherwise
covered under Section 6(c)(ii)(B) above; or (z) the rate at which any
Convertible Securities are convertible into or exercisable or
exchangeable for Common Stock, then in any such case, the Exercise
Price in effect at the time of such change shall be readjusted to the
Exercise Price which would have been in effect at such time had such
Purchase Rights or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or changed
conversion, exercise or exchange rate, as the case may be, at the time
initially issued or sold.
6
(D) Calculation Of Consideration Received. If any
Common Stock, Purchase Rights or Convertible Securities are issued or
sold for cash, the consideration received therefor will be the amount
received by the Company therefor, after deduction of all underwriting
discounts or allowances in connection with such issuance, grant or
sale. In case any Common Stock, Purchase Rights or Convertible
Securities are issued or sold for a consideration part or all of which
shall be other than cash, including in the case of a strategic or
similar arrangement in which the other entity will provide services to
the Company, purchase services from the Company or otherwise provide
intangible consideration to the Company, the amount of the
consideration other than cash received by the Company (including the
net present value of the consideration expected by the Company for the
provided or purchased services) shall be the fair market value of such
consideration, except where such consideration consists of securities,
in which case the amount of consideration received by the Company will
be the average of the last sale prices thereof on the principal market
for such securities during the period of ten Trading Days immediately
preceding the date of receipt. In case any Common Stock, Purchase
Rights or Convertible Securities are issued in connection with any
merger or consolidation in which the Company is the surviving
corporation, the amount of consideration therefor will be deemed to be
the fair market value of such portion of the net assets and business of
the non-surviving corporation as is attributable to such Common Stock,
Purchase Rights or Convertible Securities, as the case may be. The
independent members of the Company's Board of Directors shall calculate
reasonably and in good faith, using standard commercial valuation
methods appropriate for valuing such assets, the fair market value of
any consideration other than cash or securities; provided, however,
that if the Holder does not agree to such fair market value calculation
within three business days after receipt thereof from the Company, then
such fair market value shall be determined in good faith by an
investment banker or other appropriate expert of national reputation
selected by the Holder and reasonably acceptable to the Company, with
the costs of such appraisal to be borne by the Company.
(iii) Exceptions To Adjustment Of Exercise Price.
Notwithstanding the foregoing, no adjustment to the Exercise Price shall be made
pursuant to this Section 6(c) upon the issuance of any Excluded Securities. For
purposes hereof, "Excluded Securities" means (1) securities purchased under the
Securities Purchaser Agreement; (2) securities issued upon conversion or
exercise of the Warrants (as defined in the Securities Purchase Agreement); (3)
shares of Common Stock issuable or issued to employees, consultants or directors
from time to time upon the exercise of options, in such case granted or to be
granted in the discretion of the Board of Directors pursuant to one or more
stock option plans or restricted stock plans in effect as of the Issue Date; (4)
shares of Common Stock issued in connection with any stock split, stock dividend
or recapitalization of the Company; (5) securities issued upon conversion of
outstanding shares of the Company's Convertible Preferred Stock outstanding as
of the date of this Warrant, if any, provided that the terms of such preferred
stock have not been amended since the date hereof; (6) securities issued upon
conversion or exercise of Debentures or Warrants issued under the Securities
Purchase Agreement, dated as of August 20., 2003 and (7) 1,820,600 shares
issuable upon exercise of currently outstanding warrants and options listed on
Schedule 1 hereto.
7
(iv) Notice Of Adjustments. Upon the occurrence of each
adjustment or readjustment of the Exercise Price pursuant to this Section 4
resulting in a change in the Exercise Price by more than one percent (1%), or
any change in the number or type of stock, securities and/or other property
issuable upon exercise of this Warrant, the Company, at its expense, shall
promptly compute such adjustment or readjustment or change and prepare and
furnish to the Holder a certificate setting forth such adjustment or
readjustment or change and showing in detail the facts upon which such
adjustment or readjustment or change is based. The Company shall, upon the
written request at any time of the Holder, furnish to the Holder a like
certificate setting forth: (i) such adjustment or readjustment or change, (ii)
the Exercise Price at the time in effect and (iii) the number of shares of
Common Stock and the amount, if any, of other securities or property which at
the time would be received upon exercise of this Warrant.
(a) Major Transactions. In the event of a merger, consolidation,
business combination, tender offer, exchange of shares, recapitalization,
reorganization, redemption or other similar event, as a result of which shares
of Common Stock of the Company shall be changed into the same or a different
number of shares of the same or another class or classes of stock or securities
or other assets of the Company or another entity or the Company shall sell all
or substantially all of its assets (each of the foregoing being a "Major
Transaction"), the Company will give the Holder at least twenty (20) days
written notice prior to the closing of such Major Transaction in a manner that
does not constitute disclosure of material non-public information (unless
otherwise previously consented to in writing by the Holder), and: (i) the Holder
shall be permitted to exercise this Warrant in whole or in part at any time
prior to the record date for the receipt of such consideration and shall be
entitled to receive, for each share of Common Stock issuable to Holder for such
exercise, the same per share consideration payable to the other holders of
Common Stock in connection with such Major Transaction, and (ii) if and to the
extent that the Holder retains any portion of this Warrant following such record
date, the Company will cause the surviving or, in the event of a sale of assets,
purchasing entity, as a condition precedent to such Major Transaction, to assume
the obligations of the Company under this Warrant, with such adjustments to the
Exercise Price and the securities covered hereby as may be necessary in order to
preserve the economic benefits of this Warrant to the Holder.
(b) Adjustments; Additional Shares, Securities or Assets. In the event
that at any time, as a result of an adjustment made pursuant to this Section 4,
the Holder of this Warrant shall, upon exercise of this Warrant, become entitled
to receive securities or assets (other than Common Stock) then, wherever
appropriate, all references herein to shares of Common Stock shall be deemed to
refer to and include such shares and/or other securities or assets; and
thereafter the number of such shares and/or other securities or assets shall be
subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 6.
5. Fractional Interests.
No fractional shares or scrip representing fractional shares
shall be issuable upon the exercise of this Warrant, but on exercise of this
Warrant, the Holder hereof may purchase only a whole number of shares of Common
Stock. If, on exercise of this Warrant, the Holder hereof would be entitled to a
fractional share of Common Stock or a right to acquire a fractional share of
Common Stock, the Company shall, in lieu of issuing any such fractional share,
pay to the Holder an amount in cash equal to the product resulting from
multiplying such fraction by the market price as of the Exercise Date.
8
6. Transfer of this Warrant.
The Holder may sell, transfer, assign, pledge or otherwise
dispose of this Warrant, in whole or in part, as long as such sale or other
disposition is made pursuant to an effective registration statement or an
exemption from the registration requirements of the Securities Act. Upon such
transfer or other disposition, the Holder shall deliver this Warrant to the
Company together with a written notice to the Company, substantially in the form
of the Transfer Notice attached hereto as Exhibit B (the "Transfer Notice"),
indicating the person or persons to whom this Warrant shall be transferred and,
if less than all of this Warrant is transferred, the number of Warrant Shares to
be covered by the part of this Warrant to be transferred to each such person.
Within three (3) business days of receiving a Transfer Notice and the original
of this Warrant, the Company shall deliver to the each transferee designated by
the Holder a Warrant or Warrants of like tenor and terms for the appropriate
number of Warrant Shares and, if less than all this Warrant is transferred,
shall deliver to the Holder a Warrant for the remaining number of Warrant
Shares.
7. Benefits of this Warrant.
This Warrant shall be for the sole and exclusive benefit of
the Holder of this Warrant and nothing in this Warrant shall be construed to
confer upon any person other than the Holder of this Warrant any legal or
equitable right, remedy or claim hereunder.
8. Loss, Theft, Destruction or Mutilation of Warrant.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity reasonably satisfactory to the Company, and upon
surrender of this Warrant, if mutilated, the Company shall execute and deliver a
new Warrant of like tenor and date.
9. Notice or Demands.
Any notice, demand or request required or permitted to be
given by the Company or the Holder pursuant to the terms of this Warrant shall
be in writing and shall be deemed delivered (i) when delivered personally or by
verifiable facsimile transmission, unless such delivery is made on a day that is
not a business day, in which case such delivery will be deemed to be made on the
next succeeding business day, (ii) on the next business day after timely
delivery to an overnight courier and (iii) on the business day actually received
if deposited in the U.S. mail (certified or registered mail, return receipt
requested, postage prepaid), addressed as follows:
9
If to the Company:
The Singing Machine Company, Inc.
0000 Xxxxx Xxxx, Xxxxxxxx X-0
Xxxxxxx Xxxxx, XX 00000
Attn: Yi Xxxx Xxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy (not constituting notice) to:
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If to Holder:
At the address set forth below Holder's signature on the
Securities Purchase Agreement.
with a copy (not constituting notice) to:
Xxxxxx & Associates
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000-0000
Attn: Xxxxx Xxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
10. Attorney's Fees. In the event any litigation, arbitration,
mediation, or other proceeding ("Proceeding") is initiated by any party(ies)
against any other party(ies) to enforce, interpret or otherwise obtain judicial
or quasi-judicial relief in connection with this Agreement, the prevailing
party(ies) in such Proceeding shall be entitled to recover from the unsuccessful
party(ies) all costs, expenses, actual attorney's and expert witness fees,
relating to or arising out of: (i) such Proceeding (whether or not such
Proceeding proceeds to judgment), and (ii) any post-judgment or post-award
proceeding including, without limitation, one to enforce any judgment or award
resulting from any such Proceeding. Any such judgment or award shall contain a
specific provision for the recovery of all such subsequently incurred costs,
expenses, actual attorney and expert witness fees.
10
11. Applicable Law.
This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely within the State of
New York.
12. Amendments.
No amendment, modification or other change to, or waiver of
any provision of, this Warrant may be made unless such amendment, modification
or change is set forth in writing and is signed by the Company and the Holder.
13. Entire Agreement.
This Warrant, the Securities Purchase Agreement and the Registration
Rights Agreement, and the schedules and exhibits hereto and thereto, constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Warrant, the Securities Purchase Agreement and the Registration Rights Agreement
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
14. Headings.
The headings in this Warrant are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
[Signature Page to Follow]
11
IN WITNESS WHEREOF, the Company has duly executed and delivered this
Warrant as of the Issue Date.
THE SINGING MACHINE COMPANY, INC.
By: /s/ Yi Xxxx Xxxx
-------------------------------
Yi Xxxx Xxxx
Interim Chief Executive Officer
EXHIBIT A to WARRANT
EXERCISE NOTICE
The undersigned Holder hereby irrevocably exercises the right to
purchase of the shares of Common Stock ("Warrant Shares") of The Singing Machine
Company, Inc. evidenced by the attached Warrant (the "Warrant").
The Holder elects to make payment of the full Exercise Price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
________ $__________ in lawful money of the United States; and/or
________ the cancellation of such portion of the attached Warrant as is
exercisable for a total of _______ shares of Common Stock
(using a Market Price of $_______ per share for purposes of
this calculation); and/or
________ the cancellation of such number of shares of Common Stock as
is necessary, in accordance with the formula set forth in
Section 1(c), to exercise this Warrant with respect to the
maximum number of shares of Common Stock purchasable pursuant
to the cashless exercise procedure set forth in Section 1(c).
Date: ______________________
-----------------------------------
Name of Registered Holder
By: ______________________________
Name:
Title:
EXHIBIT B to WARRANT
TRANSFER NOTICE
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons named below the right to
purchase shares of the Common Stock of The Singing Machine Company, Inc.
evidenced by the attached Warrant.
Date: ______________________
-----------------------------------
Name of Registered Holder
By: ______________________________
Name:
Title:
Transferee Name and Address:
-----------------------------
-----------------------------
-----------------------------
Schedule 1
Outstanding Options and Warrants
Private Warrants Issued Vested Expiration
-------- -------- ----------
Xxxx Capital Partners LLP 4.025 103,896 9/8/2003 9/8/2003 9/7/2006
Omicron Master Trust 4.025 285,714 9/8/2003 9/8/2003 9/7/2006
SF Capital Partners, Ltd. 4.025 57,143 9/8/2003 9/8/2003 9/7/2006
Bristol Investment Fund, Ltd. 4.025 34,286 9/8/2003 9/8/2003 9/7/2006
Ascend Offshore Fund, Ltd. 4.025 54,629 9/8/2003 9/8/2003 9/7/2006
Ascend Partners LP 4.025 6,651 9/8/2003 9/8/2003 9/7/2006
Ascend Partners Sapient LP 4.025 18,720 9/8/2003 9/8/2003 9/7/2006
-
Omicron Master Trust 1.52 18,750 2/9/2004 2/9/2004 9/7/2006
SF Capital Partners, Ltd. 1.52 3,750 2/9/2004 2/9/2004 9/7/2006
Bristol Investment Fund, Ltd. 1.52 2,250 2/9/2004 2/9/2004 9/7/2006
Ascend Offshore Fund, Ltd. 1.52 3,585 2/9/2004 2/9/2004 9/7/2006
Ascend Partners LP 1.52 437 2/9/2004 2/9/2004 9/7/2006
Ascend Partners Sapient LP 1.52 1,229 2/9/2004 2/9/2004 9/7/2006
-------
Unexercised Warrants 591,040
=======
Option: Employee stock options as of February 21, 2006: 1,289,560 shares
