EXHIBIT 10.2
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. SUBJECT TO COMPLIANCE
WITH THE REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS, THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY
BE PLEDGED OR HYPOTHECATED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY THIS WARRANT OR ANY OF THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS WARRANT.
WARRANT
TO PURCHASE COMMON STOCK
OF
MEDIABAY, INC.
Issue Date: March __, 2005 Warrant No. __
THIS CERTIFIES that [NAME] or any subsequent holder hereof (the "Holder"),
has the right to purchase from MEDIABAY, INC., a Florida corporation (the
"Company"), up to [NUMBER] fully paid and nonassessable shares of the Company's
common stock, no par value (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 and from time to time beginning on the date that is six (6)
months following the date on which this Warrant is originally issued (the "Issue
Date") and ending at 6:00 p.m., eastern time, on the date that is sixty-six (66)
months following the Issue Date (or, if such date is not a Business Day, on the
Business Day immediately following such date) (the "Expiration Date"). This
Warrant is issued pursuant to a Securities Purchase Agreement, dated as of March
__, 2005 (the "Securities Purchase Agreement"). Capitalized terms used herein
and not otherwise defined shall have the respective meanings set forth in the
Securities Purchase Agreement.
1. Exercise.
(a) Right to Exercise; Exercise Price. The Holder shall have the
right to exercise this Warrant at any time and from time to time during the
period beginning on the on the date that is six (6) months following 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"). The "Exercise Price" for
each Warrant Share purchased by the Holder upon the exercise of this Warrant
shall be equal to $0.56, subject to adjustment for the events specified in
Section 6 below.
(b) Exercise Notice. In order to exercise this Warrant, the Holder
shall send to the Company by facsimile transmission, at any time prior to 6:00
p.m., eastern time, on the Business Day on which the Holder wishes to effect
such exercise (the "Exercise Date"), (i) a notice of exercise in substantially
the form attached hereto as Exhibit A (the "Exercise Notice"), and (ii) a copy
of the original Warrant, and, in the case of a Cash Exercise (as defined below),
the Holder shall pay the Exercise Price to the Company by wire transfer. The
Holder shall promptly thereafter send the original of the Exercise Notice and
the original Warrant to the Company. The Exercise Notice shall state the name or
names in which the shares of Common Stock that are issuable on such exercise
shall be issued. In the case of a dispute between the Company and the Holder 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 issue to the Holder
the number of Warrant Shares that are not disputed within the time periods
specified in Section 2 below and shall submit the disputed calculations to a
certified public accounting firm of national reputation (other than the
Company's regularly retained accountants) within two (2) Business Days following
the date on which the Holder's 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.
(c) 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.
(d) Cancellation of Warrant. This Warrant shall be canceled upon its
exercise in full 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 or, if later, upon the Company's receipt of the
Warrant following such partial exercise, 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.
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(e) Investment Representations. The delivery by the Holder to the
Company of an Exercise Notice shall be deemed to be a representation and
warranty made by such Holder of the representations and warranties set forth in
Sections 2.2, 2.4, 2.5, 2.6 and 2.8 of the Securities Purchase Agreement as to
the Warrant Shares to be issued upon such exercise.
2. Delivery of Warrant Shares Upon Exercise. Upon receipt of a fax copy of
an Exercise Notice pursuant to Section 1 above, the Company shall, (A) in the
case of a Cash Exercise, no later than the close of business on the later to
occur of (i) the third (3rd) Business Day following the Exercise Date specified
in such Exercise Notice and (ii) such later date on which the Company shall have
received payment of the Exercise Price, (B) in the case of a Cashless Exercise
(as defined below), no later than the close of business on the third (3rd)
Business Day following the Exercise Date specified in such Exercise Notice, and
(C) 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),
(B) or (C) 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, as long as the Company's designated transfer agent (the
"Transfer Agent") participates in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program ("FAST") and no restrictive legend is
required pursuant to the terms of this Warrant or the Securities Purchase
Agreement, by 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 Holder so specifies in a 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.
Warrant Shares delivered to the Holder shall not contain any restrictive legend
unless such legend is required pursuant to the terms of the Securities Purchase
Agreement.
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 and such failure to deliver
Warrant Shares continues for two (2) Business Days following the delivery of
written notice thereof from such Holder (an "Exercise Default"), 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 fifteen percent (15%) per annum and the maximum interest 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 each calendar month following the calendar month in which such
amount has accrued. The first occurrence of an Exercise Default with respect to
a Holder shall not be deemed to be a Fundamental Change (under and as defined in
the Articles of Amendment) giving rise to a Mandatory Redemption right under the
Articles of Amendment provided such Exercise Default is cured within two (2)
Business Days following written notice to the Company thereof, and no Exercise
Default with respect to any Holder shall be deemed to be a Fundamental Change
giving rise to a Mandatory Redemption right with respect to any other Holder.
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(b) In the event of an Exercise Default, the Holder may, upon
written notice to the Company (an "Exercise Default Notice"), regain on the date
of such notice the rights of the Holder under the exercised portion of this
Warrant that is the subject of such Exercise Default. In the event of such
Exercise Default and delivery of an Exercise Default Notice, the Holder shall
retain all of the Holder's rights and remedies with respect to the Company's
failure to deliver such Warrant Shares (including without limitation the right
to receive the cash payments as specified in Section 3(a) above).
(c) The Holder's rights and remedies hereunder are cumulative, and
no right or remedy is exclusive of any other. In addition to the amounts
specified herein, the Holder shall have the right to pursue all other remedies
available to it at law or in equity (including, without limitation, a decree of
specific performance and/or injunctive relief). 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).
4. Exercise Limitations. In no event shall a Holder be permitted to
exercise this Warrant, or part hereof, if, upon such exercise, either:
(a) the number of shares of Common Stock beneficially owned by the
Holder, together with its Affiliates (other than shares which would otherwise be
deemed beneficially owned except for being subject to a limitation on conversion
or exercise analogous to the limitation contained in this Section 4(a)), would
exceed the Exercise Limitation (as defined below) in effect at such time. As
used herein, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and the rules
thereunder. To the extent that the limitation contained in this Section 4(a)
applies, the submission of an Exercise Notice by the Holder shall be deemed to
be the Holder's representation that this Warrant is exercisable pursuant to the
terms hereof and the Company shall be entitled to rely on such representation
without making any further inquiry as to whether this Section 4(a) applies.
Nothing contained herein shall be deemed to restrict the right of a Holder to
exercise this Warrant, or part thereof, at such time as such exercise will not
violate the provisions of this Section 4(a). For purposes hereof, "Exercise
Limitation" means, at a given time, 4.99% of the number of shares of Common
Stock issued and outstanding at such time (assuming for such purposes, that the
such exercise or partial exercise has been effected as of the relevant date);
provided, however, that the Holder may elect, upon sixty-one (61) days' prior
written notice from the Holder to the Company, to change the Exercise Limitation
applicable to the Holder and its Affiliates to 9.5% of the number of shares of
Common Stock issued and outstanding at such time (assuming for such purposes,
that the such exercise or partial exercise has been effected as of the relevant
date). This Section 4(a) may not be amended unless such amendment is approved by
the holders of a majority of the Common Stock then outstanding; or
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(b) the number of Warrant Shares that the Holder would receive upon
such exercise, when added to the number of Warrant Shares previously received by
the Holder pursuant to this Warrant and the other Warrants issued pursuant to
the Securities Purchase Agreement and the number of shares of Common Stock
received by the Holder upon conversion of the Preferred Shares, would exceed the
product of (A) 19.99% of the number of shares of Common Stock outstanding on the
Issue Date immediately prior to the Closing (subject to adjustment upon a stock
split, stock dividend or similar event) (the "Cap Amount") multiplied by (B) a
fraction, the numerator of which is the number of Warrant Shares originally
issuable under this Warrant and the denominator of which is the aggregate number
of Warrant Shares originally issuable under all of the Warrants (such product,
the "Allocation Amount"); provided, that none of the provisions of this
paragraph (b) shall apply if Stockholder Approval (as defined below) has been
obtained or the Holder has delivered to the Company a legal opinion reasonably
acceptable to the Company that such approval is not required under the
applicable listing requirements of the Principal Market. In the event that any
Holder to which this Warrant was originally issued shall sell or otherwise
transfer any part of this Warrant, the remaining Warrant Shares constituting
such transferring Holder's Allocation Amount shall be allocated between the
transferring Holder and the transferee in proportion to amount of this Warrant
transferred. In the event that, at any time, the aggregate number of Warrant
Shares issued and issuable under this Warrant and the Holder's Preferred Shares
exceeds eighty percent (80%) of the Holder's Allocation Amount, the Company
shall, upon the written request of the Holder, hold as promptly as reasonably
practicable a special meeting of its stockholders for the purpose of obtaining,
and use its best all commercially reasonable efforts to obtain, Stockholder
Approval. In the event that the stockholders do not approve such transactions at
such meeting, the Company shall continue to use all commercially reasonable its
best efforts to seek such approval as soon as practicable after such meeting,
but no less frequently than quarterly thereafter. "Stockholder Approval" means
the affirmative vote of the holders of such number of votes cast at a meeting of
stockholders approving the issuance of Common Stock in excess of the Cap Amount
as may be required under the applicable listing requirements of the Principal
Market.
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5. Payment of the Exercise Price; Cashless Exercise. The Holder may pay
the Exercise Price in either of the following forms or, at the election of
Holder, a combination thereof:
(a) through a cash exercise (a "Cash Exercise") by delivering
immediately available funds, or
(b) if an effective Registration Statement is not available for the
resale of all of the Warrant Shares issuable hereunder at the time an Exercise
Notice is delivered to the Company, through a cashless exercise (a "Cashless
Exercise"), as hereinafter provided. The Holder may effect a Cashless Exercise
by surrendering this Warrant to the Company and noting on the Exercise Notice
that the Holder wishes to effect a Cashless Exercise, upon which the Company
shall issue to the Holder the number of Warrant Shares determined as follows:
X = Y x (A-B)/A
where: X = the number of Warrant Shares to be issued to the Holder;
Y = the number of Warrant Shares with respect to
which this Warrant is being exercised;
A = the Market Price (as defined in the Articles of
Amendment) as of the Exercise Date; and
B = the Exercise Price.
For purposes of Rule 144, it is intended and acknowledged that the Warrant
Shares issued in a Cashless Exercise transaction shall be deemed to have been
acquired by the Holder, and the holding period for the Warrant Shares required
by Rule 144 shall be deemed to have been commenced, on the Issue Date.
6. 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 required herein results in a fraction of a
cent, the Exercise Price shall be rounded up or down to the nearest one
hundredth of a cent.
(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) the outstanding
shares of Common Stock into a greater number of shares, then effective upon the
close of business on the record date for effecting such subdivision, the
Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company, at any time after the Issue Date,
combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the outstanding shares of Common Stock into a
smaller number of shares, then, effective upon the close of business on the
record date for effecting such combination, the Exercise Price in effect
immediately prior to such combination will be proportionally increased.
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(b) Distributions. If, at any time after the Issue Date, the Company
declares or makes any distribution of cash or any other assets (or rights to
acquire such assets) to holders of Common Stock, as a partial liquidating
dividend or otherwise, including without limitation any dividend or distribution
to the Company's stockholders in 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
twenty (20) 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
earlier of such dates being referred to as the "Determination Date"). In the
Distribution Notice to a Holder, the Company shall indicate whether the Company
has elected (A) to deliver to such Holder, upon any exercise of this Warrant
after the Determination Date, the same amount and type of assets being
distributed in such Distribution as though the Holder were, on the Determination
Date, a holder of a number of shares of Common Stock into which this Warrant is
exercisable as of such Determination 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) or (B) upon any exercise of this Warrant on or
after the Determination Date, to reduce the Exercise Price applicable to such
exercise by reducing the Exercise Price in effect on the Business Day
immediately preceding the Record Date by an amount equal to the fair market
value of the assets to be distributed divided by the number of shares of Common
Stock as to which such Distribution is to be made, such fair market value to be
reasonably determined in good faith by the Company's Board of Directors. If the
Company does not notify the Holders of its election pursuant to the preceding
sentence on or prior to the Determination Date, the Company shall be deemed to
have elected clause (A) of the preceding sentence.
(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 paragraph (c), is deemed to have issued or sold, any shares of
Common Stock for per share consideration less than the Exercise Price on the
date of such issuance or sale (a "Dilutive Issuance"), then effective
immediately upon such Dilutive Issuance, the Exercise Price shall be adjusted so
as to equal the consideration received or receivable by the Company (on a per
share basis) for the 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). For the avoidance of doubt, no adjustment shall be made pursuant to this
clause (c)(i) if such adjustment would result in an increase in the Exercise
Price then in effect.
(ii) Effect On Exercise Price Of Certain Events. For purposes
of determining the adjusted Exercise Price under subparagraph (i) of this
paragraph (c), the following will be applicable:
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(A) Issuance Of Purchase Rights. If the Company issues or
sells any options, warrants or other rights to purchase or subscribe
for Common Stock or Convertible Securities ("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 any securities or other
instruments which are convertible into or exercisable or
exchangeable for Common Stock ("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 be
outstanding and 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 thereof (determined in accordance with the
calculation method set forth in subparagraph (ii)(B) below) at the
time such Convertible Securities first become convertible,
exercisable or exchangeable, 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). 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 be outstanding and to have been issued and sold by the
Company for such price per share. If the Convertible Securities so
issued or sold do not have a fluctuating conversion or exercise
price or exchange ratio, then 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 (x) 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 thereof (determined in
accordance with the calculation method set forth in this
subparagraph (ii)(B)), by (y) the maximum total number of shares of
Common Stock issuable upon the exercise, conversion or exchange of
all such Convertible Securities. If the Convertible Securities so
issued or sold have a fluctuating conversion or exercise price or
exchange ratio (a "Variable Rate Convertible Security"), then for
purposes of the first sentence of this subparagraph (B), the "price
per share for which Common Stock is issuable upon such conversion,
exercise or exchange" shall be deemed to be the lowest price per
share which would be applicable (assuming all holding period and
other conditions to any discounts contained in such Variable Rate
Convertible Security have been satisfied) if the conversion price of
such Variable Rate Convertible Security on the date of issuance or
sale thereof were seventy-five percent (75%) of the actual
conversion price on such date (or such higher minimum conversion
price if such Variable Rate Convertible Security is subject to a
minimum conversion price) (the "Assumed Variable Market Price"),
and, further, if the conversion price of such Variable Rate
Convertible Security at any time or times thereafter is less than or
equal to the Assumed Variable Market Price last used for making any
adjustment under this paragraph (c) with respect to any Variable
Rate Convertible Security, the Exercise Price in effect at such time
shall be readjusted to equal the Exercise Price which would have
resulted if the Assumed Variable Market Price at the time of
issuance of the Variable Rate Convertible Security had been
seventy-five percent (75%) of the actual conversion price of such
Variable Rate Convertible Security existing at the time of the
adjustment required by this sentence; provided, however, that if the
conversion or exercise price or exchange ratio of a Convertible
Security may fluctuate solely as a result of provisions designed to
protect against dilution, such Convertible Security shall not be
deemed to be a Variable Rate Convertible Security. 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.
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(C) Change In Option Price Or Conversion Rate. If, following
an adjustment to the Exercise Price upon the issuance of Purchase
Rights or Convertible Securities pursuant to a Dilutive Issuance,
there is a change at any time in (x) the 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; or (z) the rate at which any Convertible
Securities are convertible into or exercisable or exchangeable for
Common Stock (in each such case, other than under or by reason of
provisions designed to protect against dilution), 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 additional consideration
or changed conversion, exercise or exchange rate, as the case may
be, at the time initially issued or sold.
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(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 therefore. 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, 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 publicly traded securities, in which case
the amount of consideration received by the Company will be the
Market Price thereof on the date of receipt. Notwithstanding
anything else herein to the contrary, if Common Stock Purchase
Rights or Convertible Securities are issued or sold in conjunction
with each other as part of a single transaction or in a series of
related transactions, the Holder may elect to determine the amount
of consideration deemed to be received by the Company therefor by
deducting the fair value of any type of securities (the "Disregarded
Securities") issued or sold in such transaction or series of
transactions. If the Holder makes an election pursuant to the
immediately preceding sentence, no adjustment to the Exercise Price
shall be made pursuant to this paragraph (c) for the issuance of the
Disregarded Securities or upon any conversion, exercise or exchange
thereof. 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.
(E) Issuances Without Consideration Pursuant to Existing
Securities. If the Company issues (or becomes obligated to issue)
shares of Common Stock pursuant to any anti-dilution or similar
adjustments (other than as a result of stock splits, stock dividends
and the like) contained in any Convertible Securities or Purchase
Rights outstanding as of the date hereof, then all shares of Common
Stock so issued shall be deemed to have been issued for no
consideration.
(iii) Exceptions To Adjustment Of Exercise Price.
Notwithstanding the foregoing, no adjustment to the Exercise Price shall be made
pursuant to this paragraph (c) upon the issuance of any Excluded Securities. For
purposes hereof, "Excluded Securities" means (A) securities purchased under the
Securities Purchase Agreement; (B) securities issued upon conversion of the
Preferred Shares or exercise of the Warrants; (C) shares of Common Stock
issuable or issued to (x) employees, consultants, officers or directors from
time to time either directly or upon the exercise of options, in such case
granted or to be granted by the Board of Directors or a committee thereof,
pursuant to one or more stock option plans, stock incentive plans or restricted
stock plans or stock purchase plans in effect as of the Closing Date or approved
by the Board of Directors including a majority of the Company's independent
directors (as such term is defined under Rule 4200(a)(15) of the Nasdaq Market
Rules), or (y) consultants or vendors pursuant to options or warrants to
purchase Common Stock that are outstanding on the date hereof or issued
hereafter, provided such issuances are approved by the Board of Directors;
provided, that in the case of any such options described in this clause (C) that
are issued after the date hereof, only options exercisable for a maximum of 10%
of the number of shares outstanding on the Closing Date shall be included as
"Excluded Securities" (it being understood that such number does not include any
options the issuance of which is not a Dilutive Issuance); (D) except as
required by paragraph (c)(ii)(E) above, shares of Common Stock issued in
connection with any Convertible Securities or Purchase Rights outstanding on the
date hereof; (E) shares of Common Stock issued to a Person in connection with a
joint venture, strategic alliance or other commercial relationship with such
Person relating to the operation of the Company's business and not for the
purpose of raising equity capital; (F) shares of Common Stock issued in
connection with the acquisition by the Company of any corporation or other
entity or of substantially all of the assets of any corporation or other entity
or division or business unit thereof occurring after the Effective Date.
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(iv) Notice Of Adjustments. Upon the occurrence of one or more
adjustments or readjustments of the Exercise Price pursuant to this paragraph
(c) 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 notice (an "Adjustment Notice") setting forth such
adjustment or readjustment or change and showing in detail the facts upon which
such adjustment or readjustment or change is based, and, on or before the time
that it delivers an Adjustment Notice, publicly disclose the contents thereof.
The failure of the Company to deliver an Adjustment Notice shall not affect the
validity of any such adjustment.
(d) 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 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
(including, without limitation, cash) of the Company or another entity (other
than any exchange of shares, recapitalization, reorganization, redemption or
other similar event that does not result in a change in the identity, percentage
ownership or relative rights of the stockholders of the Company), 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)
Trading Days written notice prior to the earlier of (x) the closing or
effectiveness of such Major Transaction and (y) the record date for the receipt
of such shares of stock or securities or other assets. In the event of a Major
Transaction, the Holder shall be permitted (but shall not be required) to either
(i) require the Company to repurchase this Warrant for an amount equal to the
value of this Warrant calculated pursuant to the Black-Scholes pricing model
(with a maximum volatility of 100%) or (ii) 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 upon such exercise, the same per share consideration payable to the other
holders of Common Stock in connection with such Major Transaction. 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.
11
(e) Adjustments; Additional Shares, Securities or Assets. In the
event that at any time, as a result of an adjustment made pursuant to this
Section 6, 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. Any adjustment
made herein that results in a decrease in the Exercise Price shall also effect a
proportional increase in the number of shares of Common Stock into which this
Warrant is exercisable.
7. 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. 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 (other than a pledge), 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.
9. 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.
12
10. 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.
11. Certain Agreements of the Company.
The Company hereby covenants and agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares shall, upon issuance
in accordance with the terms of this Warrant, be validly issued, fully paid and
non-assessable and free from all taxes, liens, claims and encumbrances.
(b) Certain Actions Prohibited. The Company shall not, by amendment
of its Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities, or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed by it hereunder, but will at all
times in good faith assist in the carrying out of all the provisions of this
Warrant and in the taking of all such action as may reasonably be requested by
the holder of this Warrant in order to protect the economic benefit inuring to
the holder hereof and the exercise privilege of the holder of this Warrant
against impairment, consistent with the tenor and purpose of this Warrant.
Without limiting the generality of the foregoing, the Company (i) shall not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect, and (ii) shall
take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
12. 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:
If to the Company:
MediaBay, Inc.
0 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxx Xxxxxx 00000
Attn: Chief Executive Officer and
Chief Financial Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
13
with a copy to:
Blank Rome LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
and if to the Holder, to such address as the Holder shall have furnished to the
Company in writing.
13. 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.
14. 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.
15. Successors and Assigns. The terms and conditions of this Warrant shall
inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties including, without limitation, upon any entity
succeeding to the Company by merger, consolidation, or acquisition of all or
substantially all of the Company's assets.
16. Entire Agreement. This Warrant, the Securities Purchase Agreement, the
Articles of Amendment, the Registration Rights Agreement, and the other
Transaction Documents 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, the Articles of Amendment, the Registration Rights Agreement, and the
other Transaction Documents supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof,
including, without limitation, any nondisclosure or similar agreement heretofore
entered into between the Holder and the Company.
17. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
[Signature Page to Follow]
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IN WITNESS WHEREOF, the Company has duly executed and delivered this
Warrant as of the Issue Date.
MEDIABAY, INC.
By:
------------------------------------
Name:
Title:
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 ___________________________
evidenced by the attached Warrant (the "Warrant"). Capitalized terms used herein
and not otherwise defined shall have the respective meanings set forth in the
Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:
______ a Cash Exercise with respect to _________________ Warrant
Shares; and/or
______ a Cashless Exercise with respect to _________________ Warrant
Shares, as permitted by Section 5(b) of the attached Warrant.
2. Payment of Exercise Price. In the event that the Holder has elected a
Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the Holder shall pay the sum of $________________ to the
Company in accordance with the terms of the Warrant.
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 _____________________ evidenced by the
attached Warrant.
Date:
-----------------------------
-----------------------------------
Name of Registered Holder
By:
-------------------------------
Name:
Title:
Transferee Name and Address:
-----------------------------------
-----------------------------------
-----------------------------------
