EXHIBIT 4.1
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO BAM! ENTERTAINMENT, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE TERM NOTE
FOR VALUE RECEIVED, BAM! ENTERTAINMENT, INC., a Delaware corporation
(the "BORROWER"), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o
Ironshore Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate House, South
Church Street, Grand Cayman, Cayman Islands, Fax: 000-000-0000 (the "HOLDER") or
its registered assigns or successors in interest, on order, the sum of ONE
MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000), together with any accrued
and unpaid interest hereon, on December 3, 2004 (the "MATURITY DATE") if not
sooner paid.
Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in that certain Securities Purchase Agreement
dated as of the date hereof between the Borrower and the Holder (the "PURCHASE
AGREEMENT").
The following terms shall apply to this Note:
ARTICLE I
INTEREST & AMORTIZATION
1.1 Interest Rate and Payment. Subject to Sections 4.10 and 5.6 hereof,
interest payable on this Note shall accrue at a rate of seven percent (7%) per
annum (the "INTEREST RATE"). Subject to the provisions of Articles II and III
hereof, interest shall be payable in cash, monthly in arrears commencing on
January 2, 2004 ("Monthly Interest Amount"), on the first day of each
consecutive calendar month thereafter and on the Maturity Date, whether by
acceleration or otherwise.
1.2 Monthly Principal Payments.Amortizing payments of the aggregate
principal amount outstanding under this Note at any time (the "PRINCIPAL
AMOUNT") shall begin on February 1, 2004 and shall recur on the first calendar
day of each succeeding month thereafter until the Maturity Date (each, an
"AMORTIZATION DATE"). Subject to Section 3.4 below, beginning on the first
Amortization Date, the Borrower shall make monthly payments to the Holder on
each Repayment Date, each in the amount of $166,666.67, together with any
accrued and unpaid interest to date on such portion of the Principal Amount plus
any and all other amounts which are then owing under this Note but have not been
paid (collectively, the "MONTHLY AMOUNT").
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ARTICLE II
BORROWER PAYMENT OPTIONS
2.1 Effectiveness. The provisions of this Article II shall be effective
only after the Nasdaq has approved the Borrower's additional listing application
covering the Conversion Shares (as that term is defined herein) and determined
that the Facility should not be integrated with the Borrower's private placement
(the "SEPTEMBER FINANCING") effected pursuant to a Securities Purchase Agreement
dated as of September 30, 2003 by and among the Borrower and certain purchasers
thereto (the "COMPLIANCE EVENT"). In the event that Nasdaq determines that this
Note would be integrated with the September Financing (the "NON-COMPLIANCE
EVENT"), the provisions of this Article II shall never become effective.
2.2 (a) Payment of Monthly Amount in Cash or Common Stock. Subject to
the terms hereof, the Borrower shall have the sole option to determine whether
to satisfy payment of the Monthly Amount on each date a payment under the Note
is due and payable (a "REPAYMENT DATE") either in cash or in shares of Common
Stock (as defined in the Purchase Agreement), or a combination of both. Each
month by the tenth (10th) day of such month, the Borrower shall deliver to the
Holder a written irrevocable notice in the form of Exhibit B attached hereto
electing to pay the Monthly Amount payable on the next Repayment Date in either
cash or Common Stock, or a combination of both (each, a "REPAYMENT ELECTION
NOTICE") (the date by which such notice is required to be given being
hereinafter referred to as the "NOTICE DATE"). If a Repayment Election Notice is
not delivered to the Holder by the applicable Notice Date for such Repayment
Date, then the Monthly Amount due on such Repayment Date shall be paid in cash.
Any portion of the Monthly Amount paid in cash on a Repayment Date, shall be
paid to the Holder an amount equal to (x) 103% of the principal portion of the
Monthly Amount plus (y) any accrued and unpaid interest in satisfaction of such
obligation. If the Borrower repays all or a portion of the Monthly Amount in
shares of Common Stock, the number of such shares to be issued for such
Repayment Date shall be the number determined by dividing (x) the portion of the
Monthly Amount to be paid in shares of Common Stock, by (y) the Fixed Conversion
Price. For purposes hereof, the "FIXED CONVERSION PRICE" means $1.33 (which has
been determined on the date of this Note as an amount equal to 103% of the
average closing price for the five (5) trading days immediately prior to the
date of this Note).
(b) Monthly Amount Common Stock Payment Guidelines. Subject to Sections
2.1(a) and 2.2 hereof, if the Borrower has elected to pay all or a portion of
the Monthly Amount due on such Repayment Date in shares of Common Stock and the
closing price of the Common Stock as reported by Bloomberg, L.P. on the
Principal Market (as defined in Section 4.7 hereof) for any of the ten (10)
trading days preceding a Repayment Date was less than 115% of the Fixed
Conversion Price, then the Borrower shall pay in cash instead. Any part of the
Monthly Amount due on such Repayment Date that the Borrower did not elect to pay
in shares of Common Stock shall be paid by the Borrower in cash on such
Repayment Date. Any part of the Monthly Amount due on such Repayment Date which
the Borrower elected to pay in shares of Common Stock but which must be paid in
cash (as a
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result of the closing price of the Common Stock on one or more of the five (5)
trading days preceding the applicable Repayment Date was less than 115% of the
Fixed Conversion Price) shall be paid within three (3) business days of the
applicable Repayment Date.
2.2 No Effective Registration. Notwithstanding anything to the contrary
herein, the Borrower shall not repay any part of its obligations to the Holder
hereunder in Common Stock if (i) there fails to exist an effective current
Registration Statement (as defined in the Registration Rights Agreement)
covering the shares of Common Stock to be issued in connection with such
payment, or (ii) an Event of Default hereunder exists and is continuing, unless
such Event of Default is cured within any applicable cure period or is otherwise
waived in writing by the Holder .
2.3 Optional Prepayments in Common Stock. Subject to Section 2.2
hereof, if the average closing price of the Common Stock on the Principal Market
is greater than 115% of the Fixed Conversion Price for a period of at least five
(5) consecutive trading days, then the Borrower may, at its sole option, provide
the Holder written notice (a "PREPAYMENT CALL NOTICE") requiring the conversion
at the then applicable Fixed Conversion Price of all or a portion of the
outstanding principal, interest and fees outstanding under this Note (subject to
compliance with Section 2.3 and 3.2), together with accrued interest on the
amount being prepaid, as of the date set forth in such Prepayment Call Notice
(the "PREPAYMENT CALL DATE"). The Prepayment Call Date shall be at least ten
(10) trading days following the date of the Prepayment Call Notice On the
Prepayment Call Date, the Borrower shall deliver to the Holder certificates
evidencing the shares of Common Stock issued in satisfaction of the principal
and interest being prepaid. Notwithstanding the foregoing, the Borrower's right
to issue shares of Common Stock in satisfaction of its obligations under this
Note shall be subject to the limitation that the number of shares of Common
Stock issued in connection with any Prepayment Call Notice shall not exceed 25%
of the aggregate dollar trading volume of the Common Stock for the ten (10)
trading days immediately preceding the Prepayment Call Date (as such volume is
reported by Bloomberg L.P.). If the price of the Common Stock falls below 115%
of the then applicable Fixed Conversion Price during the ten (10) trading day
period immediately preceding the Prepayment Call Date, then the Holder will then
be required to convert only such amount of the Note as shall equal twenty five
percent (25%) of the aggregate dollar trading volume (as such volume is reported
by Bloomberg L.P.) for each day that the Common Stock has exceeded 115% of the
then applicable Fixed Conversion Price. Notwithstanding anything contained
herein, in no event shall the sum of (i) number of shares of Common Stock and
Registered Common Stock issuable further to Articles II and III hereof plus (ii)
the number of shares of Common Stock underlying warrants issued by the Borrower
to the Holder (the "Warrant Shares") exceed 19.99% of the Common Stock of the
Borrower outstanding on the date hereof.
The Borrower shall not be permitted to give the Holder more than one
Prepayment Call Notice under this Note during any 22-day period.
Any principal amount of this Note which is prepaid pursuant to this
Section 2.3 shall be deemed to constitute payments of outstanding principal
applying to Monthly Amounts for the remaining Repayment Dates in chronological
order.
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2.4 Optional Redemption in Cash. The Borrower will have the option of
prepaying this Note in full ("OPTIONAL REDEMPTION") by paying to the Holder a
sum of money equal to one hundred fifteen percent (115%) of the principal amount
of this Note together with accrued but unpaid interest thereon and any and all
other sums due, accrued or payable to the Holder arising under this Note or the
Purchase Agreement or any Related Document (as defined in the Purchase
Agreement) (the "REDEMPTION AMOUNT") outstanding on the day written notice of
redemption (the "NOTICE OF REDEMPTION") is given to the Holder, which Notice of
Redemption shall specify the date for such Optional Redemption (the "REDEMPTION
PAYMENT DATE"). A Notice of Redemption shall not be effective with respect to
any portion of this Note for which the Holder has a pending election to convert
pursuant to Section 3.1 and the Redemption Amount shall be determined as if such
election to convert had been completed immediately prior to the date of the
Notice of Redemption. The Redemption Payment Date shall not be earlier than the
day after the date of the Notice of Redemption and not later than seven (7) days
after the date of the Notice of Redemption. On the Redemption Payment Date, the
Redemption Amount must be paid in good funds to the Holder. In the event the
Borrower fails to pay the Redemption Amount by the Redemption Payment Date, then
such Redemption Notice will be null and void.
ARTICLE III
CONVERSION RIGHTS
3.1. Effectiveness. The provisions of this Article III shall be
effective only upon the occurrence of a Compliance Event In the event of the
occurrence of a Non-Compliance Event, the provisions of Article II shall have no
force or effect.
3.2. Holder's Conversion Rights. The Holder shall have the right, but
not the obligation, to convert all or any portion of the then aggregate
outstanding principal amount of this Note, together with interest and fees due
hereon, into shares of Common Stock or Registered Common Stock as applicable,
subject to the terms and conditions set forth in this Article III. The Holder
may exercise such right by delivery to the Borrower of a written notice of
conversion not less than one (1) day prior to the date upon which such
conversion shall occur. The date upon which such conversion shall occur is (the
"CONVERSION DATE").
3.3 Conversion Limitation. Notwithstanding anything contained herein to
the contrary, the Holder shall not be entitled to convert pursuant to the terms
of this Note an amount that would be convertible into that number of Conversion
Shares which would exceed the difference between the number of shares of Common
Stock and Registered Common Stock, if any, beneficially owned by such Holder or
issuable upon exercise of warrants held by such Holder and 4.99% of the
outstanding shares of Common Stock of the Borrower. For the purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and
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Regulation 13d-3 thereunder. The Holder may void the Conversion Share limitation
described in subparagraph (a) above of this Section 3.3 upon 10 days prior
notice to the Borrower or without any notice requirement upon an Event of
Default but only to the extent that the 19.99% limitation set forth in Section
2.3 remains an absolute limitation on the number of Shares of Common Stock and
Registered Common Stock issuable further to the provisions of this Note and the
Warrant Shares.
3.3 Mechanics of Xxxxxx's Conversion. (a) In the event that the Holder
elects to convert this Note into Common Stock, the Holder shall give notice of
such election by delivering an executed and completed notice of conversion
("NOTICE OF CONVERSION") to the Borrower and such Notice of Conversion shall
provide a breakdown in reasonable detail of the Principal Amount, accrued
interest and fees being converted. On each Conversion Date (as hereinafter
defined) and in accordance with its Notice of Conversion, the Holder shall make
the appropriate reduction to the Principal Amount, accrued interest and fees as
entered in its records and shall provide written notice thereof to the Borrower
within two (2) business days after the Conversion Date. Each date on which a
Notice of Conversion is delivered or telecopied to the Borrower in accordance
with the provisions hereof shall be deemed a Conversion Date (the "CONVERSION
DATE"). A form of Notice of Conversion to be employed by the Holder is annexed
hereto as Exhibit A.
(b) Pursuant to the terms of the Notice of Conversion, the Borrower
will issue instructions to the transfer agent accompanied by an opinion of
counsel within one (1) business day of the date of the delivery to Borrower of
the Notice of Conversion and shall cause the transfer agent to transmit the
certificates representing the Conversion Shares to the Holder by crediting the
account of the Holder's designated broker with the Depository Trust Corporation
("DTC") through its Deposit Withdrawal Agent Commission ("DWAC") system within
three (3) business days after receipt by the Borrower of the Notice of
Conversion (the "DELIVERY DATE"). In the case of the exercise of the conversion
rights set forth herein the conversion privilege shall be deemed to have been
exercised and the Conversion Shares issuable upon such conversion shall be
deemed to have been issued upon the date of receipt by the Borrower of the
Notice of Conversion. The Holder shall be treated for all purposes as the record
holder of such Common Stock, unless the Holder provides the Borrower written
instructions to the contrary.
3.4 Conversion Mechanics.
(a) The number of shares of Common Stock to be issued upon each
conversion of this Note shall be determined by dividing that portion of the
principal and interest and fees to be converted, if any, by the then applicable
Fixed Conversion Price. In the event of any conversions of outstanding principal
amount under this Note in part pursuant to this Article III, such conversions
shall be deemed to constitute conversions of outstanding principal amount
applying to Monthly Amounts for the remaining payment dates in chronological
order.
(b) The Fixed Conversion Price and number and kind of shares or other
securities to be
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issued upon conversion is subject to adjustment from time to time upon the
occurrence of certain events, as follows:
A. Stock Splits, Combinations and Dividends. If the shares of Common
Stock are subdivided or combined into a greater or smaller number of shares of
Common Stock, or if a dividend is paid on the Common Stock in shares of Common
Stock, the Fixed Conversion Price or the Conversion Price, as the case may be,
shall be proportionately reduced in case of subdivision of shares or stock
dividend or proportionately increased in the case of combination of shares, in
each such case by the ratio which the total number of shares of Common Stock
outstanding immediately after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event.
B. During the period the conversion right exists, the Borrower will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of Common Stock upon the full conversion of
this Note. The Borrower represents that upon issuance, such shares will be duly
and validly issued, fully paid and non-assessable. The Borrower agrees that its
issuance of this Note shall constitute full authority to its officers, agents,
and transfer agents who are charged with the duty of executing and issuing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock upon the conversion of this Note.
C. Share Issuances. Subject to the provisions of this Section 3.4, if
the Borrower shall at any time prior to the conversion or repayment in full of
the Principal Amount issue any shares of Common Stock to a person other than the
Holder or an affiliate of the Holder except (i) pursuant to Subsections A or B
above; (ii) pursuant to options, warrants, or other obligations to issue shares
outstanding on the date hereof as disclosed to Holder in writing; or (iii)
pursuant to options or stock that may be issued under any employee incentive
stock option and/or stock option or stock purchase plan adopted by the Borrower)
or (iv) in connection with a bona fide joint venture, development agreement,
strategic partnership, equipment lease financing, or real estate leasing
transaction that does not raise equity capital for the Borrower for a
consideration per share (the "Offer Price") less than the Fixed Conversion Price
in effect at the time of such issuance, then the Fixed Conversion Price shall be
immediately reset pursuant to the formula below. For purposes hereof, the
issuance of any security of the Borrower convertible into or exercisable or
exchangeable for Common Stock shall result in an adjustment to the Fixed
Conversion Price at the time of issuance of such securities.
If the Corporation issues any additional shares pursuant to
Section 3.4 above that require a reset of the then applicable Fixed Conversion
Price, then, and thereafter successively upon each such issue, the Fixed
Conversion Price shall be adjusted by multiplying the then applicable Fixed
Conversion Price by the following fraction:
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----------------------------------------
A + B
----------------------------------------
(A + B) + [((C - D) x B) / C]
----------------------------------------
A = Actual shares outstanding prior to such offering
B = Actual shares sold in the offering
C = Fixed Conversion Price
D = Offering price
D. Reclassification, etc. If the Borrower at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed
to evidence the right to purchase an adjusted number of such securities and kind
of securities as would have been issuable as the result of such change with
respect to the Common Stock immediately prior to such reclassification or other
change.
3.5 Issuance of New Note. Upon any partial conversion of this Note, a
new Note containing the same date and provisions of this Note shall, at the
request of the Holder, be issued by the Borrower to the Holder for the principal
balance of this Note and interest which shall not have been converted or paid.
The Borrower will pay no costs, fees or any other consideration to the Holder
for the production and issuance of a new Note.
ARTICLE IV
EVENTS OF DEFAULT
If an Event of Default (as defined below) occurs and is continuing, the
Borrower's rights under Sections 2.2, 2.3 and 2.4 shall immediately cease and be
of no further effect until such time as the Event of Default has been cured, or
has been waived by the Holder. Upon the occurrence and continuance of an Event
of Default beyond any applicable grace period, the Holder may make all sums of
principal, interest and other fees then remaining unpaid hereon and all other
amounts payable hereunder due and payable within five (5) days after written
notice from Holder to Borrower (each occurrence being a "DEFAULT NOTICE
PERIOD"). In the event of such an acceleration, the amount due and owing to the
Holder shall be 125% of the outstanding principal amount of the Note (plus
accrued and unpaid interest and fees, if any). If, with respect to any Event of
Default other than a payment default described in Section 4.1 below, within the
Default Notice Period the Borrower cures the Event of Default, the Event of
Default will be deemed to no longer exist and any rights and remedies of Holder
pertaining to such Event of Default will be of no further force or effect.
The occurrence of any of the following events is an "EVENT OF DEFAULT":
4.1 Failure to Pay Principal, Interest or other Fees. The Borrower
fails to pay when due any installment of principal, interest or other fees
hereon in accordance herewith after the expiration
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of any grace period referred to in Section 4.10 hereof, or the Borrower fails to
pay when due any amount due under any other promissory note in excess of
$200,000 issued by Borrower.
4.2 Breach of Covenant. The Borrower breaches any material covenant or
other term or condition of this Note or the Purchase Agreement in any material
respect and such breach, if subject to cure, continues for a period of thirty
(30) days after the occurrence thereof.
4.3 Breach of Representations and Warranties. Any material
representation or warranty of the Borrower made herein, in the Purchase
Agreement, or in any Related Document (as defined in the Purchase Agreement)
shall be materially false or misleading and shall not be cured for a period of
thirty (30) days after the occurrence thereof.
4.4 Receiver or Trustee. The Borrower shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business; or such
a receiver or trustee shall otherwise be appointed.
4.5 Judgments. Any money judgment, writ or similar final process shall
be entered or filed against the Borrower or any of its property or other assets
for more than $300,000, and shall remain unvacated, unbonded or unstayed for a
period of ninety (90) days.
4.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower.
4.7 Stop Trade. An SEC stop trade order or Principal Market trading
suspension of the Common Stock shall be in effect for 5 consecutive days or 5
days during a period of 10 consecutive days, excluding in all cases a suspension
of all trading on a Principal Market, provided that the Borrower shall not have
been able to cure such trading suspension within 30 days of the notice thereof
or list the Common Stock on another Principal Market within 60 days of such
notice. The "Principal Market" for the Common Stock shall include the NASD OTC
Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System, American
Stock Exchange, or New York Stock Exchange (whichever of the foregoing is at the
time the principal trading exchange or market for the Common Stock, or any
securities exchange or other securities market on which the Common Stock is then
being listed or traded.
4.8 Failure to Deliver Common Stock or Replacement Note. The Borrower's
failure to timely deliver Common Stock to the Holder pursuant to and in the form
required by this Note, and Section 9 of the Securities Purchase Agreement, or if
required, a replacement Note if such failure to timely deliver Common Stock
shall not be cured within two (2) Business Days or such failure to deliver a
replacement Note is not cured within seven (7) Business Days.
4.9 Default Under Related Agreements. The occurrence and continuance of
any Event of Default as defined in the Related Agreements.
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DEFAULT RELATED PROVISIONS
4.10 Payment Grace Period. The Borrower shall have a three (3) Business
Day grace period to pay any monetary amounts due under this Note or the Purchase
Agreement or any Related Document, after which grace period a default interest
rate of five percent (5%) per annum above the then applicable interest rate
hereunder shall apply to the monetary amounts due.
4.11 Conversion Privileges. The conversion privileges set forth in
Article III shall remain in full force and effect immediately from the date
hereof and until this Note is paid in full.
4.12 Cumulative Remedies. The remedies under this Note shall be
cumulative.
ARTICLE V
MISCELLANEOUS
5.1 Failure or Indulgence Not Waiver. No failure or delay on the part
of the Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
5.2 Notices. Any notice herein required or permitted to be given shall
be in writing and shall be deemed effectively given: (a) upon personal delivery
to the party notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Borrower at the address provided in the Purchase Agreement executed in
connection herewith, and to the Holder at the address provided in the Purchase
Agreement for such Holder, with a copy to Xxxx X. Xxxxxx, Esq., 000 Xxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, facsimile number (000) 000-0000,
or at such other address as the Borrower or the Holder may designate by ten days
advance written notice to the other parties hereto. A Notice of Conversion shall
be deemed given when made to the Borrower pursuant to the Purchase Agreement.
5.3 Amendment Provision. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument issued pursuant to Section 3.5
hereof, as it may be amended or supplemented.
5.4 Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns. All consents , approvals, waivers, amendments and other
determinations to be made by the Holder hereunder shall be made by Holders
holding at least fifty one percent (51%) of the aggregate outstanding principal
of
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the Note, and may be assigned by the Holder in accordance with the requirements
of the Purchase Agreement.
5.5 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by the Borrower concerning the
transactions contemplated by this Agreement shall be brought only in the state
courts of New York or in the federal courts located in the State of New York.
Both parties and the individual signing this Note on behalf of the Borrower
agree to submit to the jurisdiction of such courts. The prevailing party shall
be entitled to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this Note is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or unenforceability of any other provision of this Note. Nothing contained
herein shall be deemed or operate to preclude the Holder from bringing suit or
taking other legal action against the Borrower in New York or in the federal
courts in the state of New York or in any other jurisdiction to collect on the
Borrower's obligations to Holder, to realize on any collateral or any other
security for such obligations, or to enforce a judgment or other court in favor
of the Holder.
5.6 Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.
5.7 Security Interest. The holder of this Note has been granted a
security interest in certain assets of the Borrower more fully described in a
Security Agreement dated as of December 3, 2003.
5.8 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.
5.9 Cost of Collection. If default is made in the payment of this Note,
the borrower shall pay to Holder reasonable costs of collection, including
reasonable attorney's fees.
[Balance of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF, Xxxxxxxx has caused this Convertible Term Note to
be signed in its name effective as of this 3rd day of December, 2003.
BAM! ENTERTAINMENT, INC.
By: /s/ Xxxxxxx Xxxxxx
------------------------------
Name: Xxxxxxx Xxxxxx
----------------------------
Title: CFO
---------------------------
WITNESS:
/s/ [Illegible]
-------------------------
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EXHIBIT A
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert all or part of the Note into
Common Stock)
[Name and Address of Holder]
The Undersigned hereby elects to convert $_________ of the principal due on
[specify applicable Repayment Date] under the Convertible Term Note issued by
BAM! ENTERTAINMENT, INC. dated December 3, 2003 by delivery of Shares of Common
Stock of BAM! ENTERTAINMENT, INC. on and subject to the conditions set forth in
Article II of such Note.
1. Date of Conversion
---------------------
2. Shares To Be Delivered:
---------------------
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
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EXHIBIT B
REPAYMENT ELECTION NOTICE
(To be executed by the Borrower in order to pay all or part of a Monthly Amount
with Common Stock)
[Name and Address of Holder]
BAM! ENTERTAINMENT, INC. hereby elects to pay $_________ of the Monthly Amount
due on [specify applicable Repayment Date] under the Convertible Term Note
issued by BAM! ENTERTAINMENT, INC. dated December 3, 2003 by delivery of Shares
of Common Stock of BAM! ENTERTAINMENT, INC. on and subject to the conditions set
forth in Article II of such Note.
1. Fixed Conversion Price: $
-----------------------
2. Amount to be paid: $
-----------------------
3. Shares To Be Delivered (2 divided by 1):
------------------
Date: BAM! ENTERTAINMENT, INC.
------------
By:
--------------------------
Name:
------------------------
Title:
-----------------------
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