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. 1
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 2,500,000 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 First 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 $0.233,
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.
3
(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.
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.
6
(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.
(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.
8
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.
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
