AGREEMENT, dated as of January 28, 2004, by and between MediaBay, Inc., a
Florida corporation (the "Company"), Xxxxxx Xxxxxxx ("Xxxxxxx") and Huntingdon
Corporation ("Huntingdon").
W I T N E S S E T H
WHEREAS, the Company requires financing to meet its working capital
requirements and is seeking to raise up to $4,500,000 in debt financing;
WHEREAS, the Company has entered into a Financial Advisory and Investment
Banking Agreement (the "Advisory Agreement") with Xxxxxx Capital LLC ("Xxxxxx")
for Xxxxxx to identify sources of financing;
WHEREAS, pursuant to the Advisory Agreement, Rockwood, Inc. (the
"Placement Agent"), a broker-dealer licensed by the SEC and NASD, as designee of
Xxxxxx, will act as placement agent in connection with the private offering (the
"Financing") of convertible notes (the "Convertible Notes") and warrants;
WHEREAS, the Company has issued and outstanding convertible promissory
notes in the principal amounts of $1,000,000, $500,000 and $150,000
(collectively, the "Huntingdon Notes") to Huntingdon Corporation ("Huntingdon"),
which are convertible into shares of the Company's Common Stock at a rate of one
share per $2.00, $1.82 and $2.00 principal amount, respectively;
WHEREAS, the Company has other issued and outstanding convertible
promissory notes in the principal amounts of (i) $2,500,000, $800,000 and
$350,000 to Huntingdon, (ii) $1,984,250 to Xxxxxxx, and (iii) $500,000 to X.
Xxxxxxx Irrevocable ABC Trust (the "NH Trust"), of which Xxxxxxx is the sole
beneficiary and Xxxxxx Xxxxxxx, a director of the Company, is the sole trustee
(such notes referred to herein with the Huntingdon Notes as, the "Existing
Notes");
WHEREAS, the Existing Notes (other than the $800,000 principal amount
Existing Notes issued to Huntingdon, the $500,000 principal amount Existing
Notes issued to the NH Trust and the $1,984,250 principal amount Existing Note
issued to Xxxxxxx) are senior to or pari passu with all other debt of the
Company and all of the Existing Notes held by Xxxxxxx and Huntingdon have a
security interest (pari passu or subordinated only to the security interest
granted to the Company whose debt would be satisfied with the proceeds of the
Financing under the Company's credit agreement) in certain of the Company's
assets and certain of the assets of the Company's subsidiaries, to secure the
Company's obligations under the Existing Notes;
WHEREAS, the consent of Huntingdon, Xxxxxxx and the Trust is required for
the Company to complete the Financing;
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WHEREAS, the Placement Agent and purchasers of Convertible Notes in the
Financing require Xxxxxxx and Huntingdon to grant to the purchasers certain
rights with respect to the Existing Notes held by Xxxxxxx and Huntingdon,
including the rights to receive any funds received under the Existing Notes and
the related security agreements upon certain Events of Defaults under the
Convertible Notes pursuant to a letter agreement in the form attached as Exhibit
A (the "Letter Agreement"), for Xxxxxxx and Huntingdon to execute
Powers-of-Attorney relating to the Letter Agreement in the form of Exhibit B
hereto (the "Powers"), for Xxxxxxx and the Trust to grant certain proxies to
vote their shares of voting stock of the Company for specified purposes in
substantially the form of Exhibit C hereto (the "Proxies") and for Xxxxxxx,
Huntingdon and the Trust to execute lock-up agreements in the form of Exhibit D
hereto (the "Lock-up");
WHEREAS, in consideration for Xxxxxxx'x, Huntingdon's and the Trust's
consent to the Financing (in the form substantially the form of Exhibit E
hereto, the "Consents") and agreement to execute such documents in form
reasonably satisfactory to the Placement Agent and Xxxxxxx to effect the
foregoing resolution, upon receipt of Shareholders' Approval (defined below),
the Corporation shall issue new notes (the "New Notes") in exchange for the
Huntingdon Notes, with the same terms as the Huntingdon Notes, except that the
conversion price of the New Notes issued in exchange for the Huntingdon Notes
shall be $1.27, the last sale price of the Common Stock on the date hereof;
WHEREAS, pursuant to Rule 4350(i) of the Rules of Nasdaq, the Company is
required to obtain approval from its shareholders for the transactions
contemplated by this Agreement, including the issuance of the New Notes,
including the issuance of the New Notes (the "Shareholder Approval"); and
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the undersigned hereby agree as follows:
1. Covenants of Xxxxxxx and Huntingdon.
(a) Xxxxxxx agrees to execute the Letter Agreement, Powers, a Proxy,
a Lock-up and a Consent.
(b) Huntingdon agrees to execute a Letter Agreement, a Power, a
Lock-up and a Consent.
(c) The NH Trust agrees to execute a Proxy, a Lock-up and a Consent.
2. Covenant of the Company. The Company agrees to recommend to the
Company's shareholders in the proxy statement relating to its 2004 Annual
Meeting to authorize the Shareholder Approval and to take all such other actions
as necessary to obtain the Shareholder Approval.
3. Issuance of the New Notes. The Company agrees that upon obtaining
Shareholder Approval it will issue the New Notes to Huntingdon in exchange for
the Huntingdon Notes.
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4. Recitals. The Whereas clauses recited above are integral part of this
Agreement and are incorporated into this Agreement as though they were fully set
forth herein.
5. Counterparts; Facsimile Signatures. This Agreement may be executed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument,
facsimile signatures shall be effective and binding as original signatures.
IN WITNESS WHEREOF, the undersigned has executed this Agreement, effective
as of the date first written above.
MEDIABAY, INC.
By: /s/ Xxxx Xxxx
-----------------------------------
Xxxx Xxxx, Executive Vice President
and Chief Financial Officer
/s/ Xxxxxx Xxxxxxx
-----------------------------------
Xxxxxx Xxxxxxx
HUNTINGDON CORPORATION
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx, President
X. XXXXXXX IRREVOCABLE ABC TRUST
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx, Trustee
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