Exhibit 10.4
NON-QUALIFIED STOCK OPTION AGREEMENT
MEDIABAY, INC.
AGREEMENT made as of this April 4, 2005 (the "Grant Date")
between MediaBay, Inc. (the "Company"), a Florida corporation, having a
principal place of business in Cedar Knolls, New Jersey, and Xxxxxxxx X.
Xxxxxxxx (the "Grantee") residing at 0000 Xxxxxxxxxx Xxxxx, Xxxxxxxxxx,
Xxxxxxxxxxxx 00000-0000.
WHEREAS, the Company desires to grant to the Grantee a
Non-Qualified Stock Option to purchase 850,000 shares of its common stock, no
par value (the "Shares"), under and for the purposes of the 2004 Stock Incentive
Plan of the Company (the "Plan"), pursuant to the terms thereof;
WHEREAS, the Company and the Grantee understand and agree that
unless otherwise defined herein any terms used herein have the same meanings as
in the Plan.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the parties
hereto agree as follows:
1. Grant of Option. The Company hereby grants to the Grantee
the right and option (the "Option") to purchase all or any part of an aggregate
of 850,000 shares of its common stock, no par value, on the terms and conditions
and subject to all the limitations set forth herein and in the Plan, which is
incorporated herein by reference. The Grantee acknowledges receipt of a copy of
the Plan.
2. Purchase Price. The purchase price of the 850,000 of the
Shares covered by the Option shall be $0.59 per share.
3. Exercise of Option. The Option granted hereby shall vest
immediately and be exercisable on the following dates:
1 Three Hundred Forty Thousand (340,000) the date hereof;
2 One Hundred Seventy Thousand (170,000) on April 4, 2006;
3 One Hundred Seventy Thousand (170,000) on April 4, 2007;
and,
4 One Hundred Seventy Thousand (170,000) on April 4, 2008
4. Term of Option. The Option shall terminate on ten (10)
years from the date hereof (i.e., April 4, 2015), but shall be subject to
earlier termination as provided herein or in the Plan.
If the Grantee ceases to perform services as an employee for
the Company for any reason other than death, disability, termination of services
as an employee for "Cause" (as defined in the Plan) or voluntary termination of
services as a employee, the Option may be exercised within ninety (90) days
after the date the Grantee ceases to provide services as an employee to the
Company, or within Ten (10) years from the date hereof, whichever is earlier,
but may not be exercised thereafter. In such event, the Option shall be
exercisable only to the extent that the right to purchase Shares under the Plan
has accrued and is in effect at the date of such cessation of services as an
employee.
In the event the Grantee's services as an employee are
terminated by the Company for "Cause" (as defined in the Plan), or voluntarily
by the Grantee, the Grantee's right to exercise any unexercised portion of this
Option shall cease forthwith, and this Option shall thereupon terminate.
In the event of Disability of the Grantee (as determined by
the Board of Directors of the Company and as to the fact and date of which the
Grantee is notified by the Board in writing), the Option shall be exercisable
within one (1) year after the date of such Disability or, if earlier, within the
originally prescribed term of the Option. In such event, the Option shall be
exercisable to the extent that the right to purchase the Shares hereunder has
accrued on the date the Grantee becomes Disabled and is in effect as of such
determination date.
In the event of the death of the Grantee while performing
services as an employee to the Company or within thirty (30) days after the
termination of services as an employee (other than termination for cause or
without consent of the Company), the Option shall be exercisable to the extent
exercisable but not exercised as of the date of death and in such event, the
Option must be exercised, if at all, within three (3) months after the date of
death of the Grantee or, if earlier, within the originally prescribed term of
the Option.
5. Non-Assignability. The Option shall not be transferable by
the Grantee otherwise than by will or by the laws of descent and distribution
and shall be exercisable, during the Grantee's lifetime, only by the Grantee.
The Option shall not be assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise) and shall not be subject to execution, attachment
or similar process. Any attempted transfer, assignment, pledge, hypothecation or
other disposition of the Option or of any rights granted hereunder contrary to
the provisions of this Section 5, or the levy of any attachment or similar
process upon the Option or such right, shall be null and void.
6. Exercise of Option and Issue of Shares. The Option may be
exercised in whole or in part (to the extent that it is exercisable in
accordance with its terms) by giving written notice to the Company, together
with the tender of the Option price. Such written notice shall be signed by the
person exercising the Option, shall state the number of Shares with respect to
which the Option is being exercised, shall contain any warranty required by
Section 7 below and shall otherwise comply with the terms and conditions of this
Agreement and the Plan. Except as specifically set forth herein, the holder
acknowledges that any income or other taxes due from him with respect to this
Option or the Shares issuable pursuant to this Option shall be the
responsibility of the holder. The holder of this Option shall have rights as a
shareholder only with respect to any Shares covered by the Option after due
exercise of the Option and tender of the full exercise price for the Shares
being purchased pursuant to such exercise.
7. Purchase for Investment; Restrictions on Transfer. Unless
the offering and sale of the Shares to be issued upon the particular exercise of
the Option shall have been effectively registered under the Securities Act of
1933, as now in force or hereafter amended, or any successor legislation (the
"Act"), the Company shall be under no obligation to issue the Shares covered by
such exercise unless and until the following conditions have been fulfilled:
(a) The person(s) who exercise the Option shall
warrant to the Company, at the time of such exercise, that such person(s) are
acquiring such Shares for his or her own account, for investment and not with a
view to, or for sale in connection with, the distribution of any such Shares, in
which event the person(s) acquiring such Shares shall be bound by the provisions
of the following legend which shall be endorsed upon the certificate(s)
evidencing their option Shares issued pursuant to such exercise:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"). Such shares may not be sold, transferred or otherwise
disposed of unless they have first been registered under the
Act or, unless, in the opinion of counsel satisfactory to the
Company's counsel, such registration is not required."
(b) The Company shall have received an opinion of its
counsel that the Shares may be issued upon such particular exercise in
compliance with the Act without registration thereunder. Without limiting the
generality of the foregoing, the Company may delay issuance of the Shares until
completion of any action or obtaining of any consent, which the Company deems
necessary under any applicable law (including without limitation state
securities or "blue sky" laws).
(c) The Grantee agrees that in the event of a public
offering of the Company's securities, the Grantee will not sell, contract to
sell, sell or grant any option, right, warrant or option to purchase, purchase
any option or contract to sell, pledge, hypothecate or otherwise transfer or
dispose of (each, a "Transfer") any of the Shares during the Lock-Up Period (as
defined below). The "Lock-Up Period" means the period commencing on the date
that the registration statement relating to an underwritten public offering is
filed with the Securities and Exchange Commission (the "SEC") and ending on the
date agreed to by the Underwriter of such offering and the Company with respect
to the Shares, but in no event later than 120 days following the date such
registration statement is declared effective by the SEC. The Grantee
acknowledges that upon exercise of this Option, the Company will instruct its
transfer agent to place an appropriate legend on the certificate representing
the Shares. The Grantee agrees to execute a lock-up agreement as aforesaid with
the Company and/or any such underwriter, if requested.
8. Notices. Any notices required or permitted by the terms of
this Agreement or the Plan shall be given by registered or certified mail,
return receipt requested, addressed as follows:
To the Company: MediaBay, Inc.
0 Xxxxxxxxx Xxxxxx
Xxxxx Xxxxxx, Xxx Xxxxxx 00000
To the Grantee: Xxxxxxxx X. Xxxxxxxx
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given when
mailed in accordance with the foregoing provisions. Either party hereto may
change the address of which notices shall be given by providing the other party
hereto with written notice of such change.
9. Governing Law. This Agreement shall be construed and
enforced in accordance with the law of the State of Florida.
10. Benefit of Agreement. This Agreement shall be for the
benefit of and shall be binding upon the heirs, executors, administrators and
successors of the parties hereto.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its duly authorized officer, and the Grantee has hereunto set his
hand, all as of the day and year first above written.
MEDIABAY, INC.
By: /s/ Xxxx X. Xxxx
--------------------------------
Name: Xxxx X. Xxxx
Title: Vice Chairman and
Chief Financial Officer
/s/ Xxxxxxxx X. Xxxxxxxx
-------------------------------------
Xxxxxxxx X. Xxxxxxxx, Grantee
