EXHIBIT 4.2
EXHIBIT B
TO SECURITIES PURCHASE AGREEMENT
NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS. NOTWITHSTANDING THE FOREGOING, THESE SECURITIES AND
THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
BAM! ENTERTAINMENT, INC.
ADDITIONAL INVESTMENT RIGHT
Additional Investment Right No. 1 Dated: January 29, 2004
Bam! Entertainment, Inc., a Delaware corporation (the "COMPANY"), hereby
certifies that, for value received, ______________ or its registered assigns
(the "HOLDER"), is entitled to purchase from the Company (a) up to a total of
_____________ shares of common stock, $.001 par value per share (the "COMMON
STOCK"), of the Company (each such share, an "ADDITIONAL INVESTMENT RIGHT SHARE"
and all such shares, the "ADDITIONAL INVESTMENT RIGHT SHARES") at an exercise
price equal to $0.92 per share (as adjusted from time to time as provided in
Section 9, the "EXERCISE PRICE"), and (b) only as part of and in connection with
the purchase of the Additional Investment Right Shares, warrants in the form
attached hereto as Exhibit 1 to purchase up to _______________ shares of Common
Stock (including any warrants issued in replacement thereof, the "ADDITIONAL
INVESTMENT RIGHT WARRANTS"), at any time and from time to time from and after
the date hereof and through and including the 45th Business Day following the
effective date of the Registration Statement (the "EFFECTIVE DATE") (the
"EXPIRATION DATE"), and subject to the following terms and conditions. This
Additional Investment Right (this "ADDITIONAL INVESTMENT RIGHT") is one of a
series of similar additional investment rights issued pursuant to that certain
Securities Purchase Agreement, dated as of the date hereof, by and among the
Company and the Purchasers identified therein (the "PURCHASE AGREEMENT"). All
such additional investment rights are referred to herein, collectively, as the
"ADDITIONAL
INVESTMENT RIGHTS." Common Stock issuable upon exercise of the Additional
Investment Right Warrants shall be known herein as the "ADDITIONAL INVESTMENT
RIGHT WARRANT SHARES". Concurrently with the issuance of Additional Investment
Right Shares to the Holders further to the exercise of this Additional
Investment Right, the Holder shall be issued Additional Investment Right
Warrants exercisable for a number of Additional Investment Right Warrant Shares
equal to 90% of the number of Additional Investment Right Shares so issued to
the Holder upon such exercise. The term "Registration Statement" as used in this
paragraph shall have the meaning set forth on the Common Stock Registration
Rights Agreement between the Company and the Initial Investors therein of even
date herewith.
1. Definitions. In addition to the terms defined elsewhere in this
Additional Investment Right, capitalized terms that are not otherwise defined
herein have the meanings given to such terms in the Purchase Agreement.
2. Registration of Additional Investment Right. The Company shall
register this Additional Investment Right, upon records to be maintained by the
Company for that purpose (the "ADDITIONAL INVESTMENT RIGHT REGISTER"), in the
name of the record Holder hereof from time to time. The Company may deem and
treat the registered Holder of this Additional Investment Right as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.
3. Registration of Transfers. The Company shall register the assignment
and transfer of any portion of this Additional Investment Right in the
Additional Investment Right Register, upon surrender of this Additional
Investment Right, with the Form of Assignment attached hereto duly completed and
signed, to the Transfer Agent or to the Company at its address specified herein.
Upon any such registration or transfer, a new additional investment right to
purchase Common Stock, in substantially the form of this Additional Investment
Right (any such new additional investment right, a "NEW ADDITIONAL INVESTMENT
RIGHT"), evidencing the portion of this Additional Investment Right so
transferred shall be issued to the transferee and a New Additional Investment
Right evidencing the remaining portion of this Additional Investment Right not
so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Additional Investment Right by the transferee thereof
shall be deemed the acceptance by such transferee of all of the rights and
obligations of a holder of an Additional Investment Right.
4. Exercise and Duration of Additional Investment Right.
(a) This Additional Investment Right shall be exercisable by the
registered Holder at any time and from time to time on or after the date hereof
to and including the Expiration Date. At 6:30 P.M., New York City time on the
Expiration Date, the portion of this Additional Investment Right not exercised
prior thereto shall be and become void and of no value.
(b) The Holder may exercise this Additional Investment Right by
delivering to the Company (i) an exercise notice, in the form attached hereto
(the "EXERCISE NOTICE"), appropriately completed and duly signed, and (ii)
payment of the Exercise Price for the number of Additional Investment Right
Shares and Additional Investment Right Warrants as to which
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this Additional Investment Right is being exercised (which may take the form of
a "cashless exercise" if so indicated in the Exercise Notice and if a "cashless
exercise" may occur at such time pursuant to this Section 10 below), and the
date such items are delivered to the Company (as determined in accordance with
the notice provisions hereof) is an "EXERCISE DATE." The Holder shall not be
required to deliver the original Additional Investment Right in order to effect
an exercise hereunder. Execution and delivery of the Exercise Notice shall have
the same effect as cancellation of the original Additional Investment Right and
issuance of a New Additional Investment Right evidencing the right to purchase
the remaining number of Additional Investment Right Shares and Additional
Investment Right Warrants.
5. Delivery of Additional Investment Right Shares and Additional
Investment Right Warrants.
(a) Upon exercise of this Additional Investment Right, the
Company shall promptly (but in no event later than three Trading Days after the
Exercise Date) issue or cause to be issued and cause to be delivered to or upon
the written order of the Holder and in such name or names as the Holder may
designate, a certificate for the Additional Investment Right Shares and
Additional Investment Right Warrants issuable upon such exercise, free of
restrictive legends unless a registration statement covering the resale of the
Additional Investment Right Shares or the Additional Investment Right Warrant
Shares, respectively, and naming the Holder as a selling stockholder thereunder
is not then effective and the Additional Investment Right Shares or the
Additional Investment Right Warrant Shares, respectively, are not freely
transferable without volume restrictions pursuant to Rule 144 under the
Securities Act. The Holder, or any Person so designated by the Holder to receive
Additional Investment Right Shares and Additional Investment Right Warrants,
shall be deemed to have become holder of record of such Additional Investment
Right Shares and Additional Investment Right Warrants as of the Exercise Date.
The Company shall, upon request of the Holder, use its best efforts to deliver
Additional Investment Right Shares hereunder electronically through the
Depository Trust Corporation or another established clearing corporation
performing similar functions.
(b) This Additional Investment Right is exercisable, either in
its entirety or, from time to time, for a portion of the number of Additional
Investment Right Shares and Additional Investment Right Warrants further to
terms set forth in the first paragraph of the Additional Investment Right. Upon
surrender of this Additional Investment Right following one or more partial
exercises, the Company shall issue or cause to be issued, at its expense, a New
Additional Investment Right evidencing the right to purchase the remaining
number of Additional Investment Right Shares and Additional Investment Right
Warrants.
(c) In addition to any other rights available to a Holder, if the
Company fails to deliver to the Holder a certificate representing Additional
Investment Right Shares on the date on which delivery of such certificate is
required by this Additional Investment Right, such Holder may notify the Company
via facsimile, mail or any other means, of its failure to deliver the
certificate (a "DELIVERY FAILURE NOTICE"). If the Company fails to deliver to
the Holder a certificate representing Additional Investment Right Shares by the
fifth Business Day after delivery of the Delivery Failure Notice by the Holder
and if after such fifth Business Day after the delivery of the Delivery Failure
Notice the Holder purchases (in an open market transaction or otherwise) shares
of Common Stock to deliver in satisfaction of a sale by the Holder of the
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Additional Investment Right Shares that the Holder anticipated receiving from
the Company (a "BUY-IN"), then the Company shall, within three Trading Days
after the Holder's request and in the Holder's discretion, either (i) pay cash
to the Holder in an amount equal to the Holder's total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased (the
"BUY-IN PRICE"), at which point the Company's obligation to deliver such
certificate (and to issue such Common Stock) shall terminate, or (ii) promptly
honor its obligation to deliver to the Holder a certificate or certificates
representing such Common Stock and pay cash to the Holder in an amount equal to
the excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Price on the date of the event
giving rise to the Company's obligation to deliver such certificate.
Notwithstanding anything to the contrary, this Section 5(c) shall not apply if
the Company has used its best efforts to deliver the certificates, but such
certificates were not delivered due to the Transfer Agent's failure to deliver
the certificates in accordance with timely instructions from the Company.
(d) The Company's obligations to issue and deliver Additional
Investment Right Shares and Additional Investment Right Warrants in accordance
with the terms hereof are absolute and unconditional, irrespective of any action
or inaction by the Holder to enforce the same, any waiver or consent with
respect to any provision hereof, the recovery of any judgment against any Person
or any action to enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder or any
other Person of any obligation to the Company or any violation or alleged
violation of law by the Holder or any other Person, and irrespective of any
other circumstance which might otherwise limit such obligation of the Company to
the Holder in connection with the issuance of Additional Investment Right
Shares. Nothing herein shall limit a Holder's right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with respect to the
Company's failure to timely deliver certificates representing shares of Common
Stock upon exercise of the Additional Investment Right as required pursuant to
the terms hereof.
6. Charges, Taxes and Expenses. Issuance and delivery of certificates
for shares of Common Stock and the Additional Investment Right Warrants upon
exercise of this Additional Investment Rights shall be made without charge to
the Holder for any issue or transfer tax, withholding tax, transfer agent fee or
other incidental tax or expense in respect of the issuance of such certificates,
all of which taxes and expenses shall be paid by the Company; provided, however,
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the registration of any certificates for
Additional Investment Right Shares, Additional Investment Rights or any
Additional Investment Right Warrants in a name other than that of the Holder or
an Affiliate thereof. The Holder shall be responsible for all other tax
liability that may arise as a result of holding or transferring this Additional
Investment Right or receiving Additional Investment Right Shares and Additional
Investment Right Warrants upon exercise hereof.
7. Replacement of Additional Investment Right. If this Additional
Investment Right is mutilated, lost, stolen or destroyed, the Company shall
issue or cause to be issued in exchange and substitution for and upon
cancellation hereof, or in lieu of and substitution for this Additional
Investment Right, a New Additional Investment Right, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and customary
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and reasonable indemnity, if requested. Applicants for a New Additional
Investment Right under such circumstances shall also comply with such other
reasonable regulations and procedures and pay such other reasonable third-party
costs as the Company may prescribe.
8. Reservation of Additional Investment Right Shares and Additional
Investment Right Warrant Shares. The Company covenants that it will at all times
reserve and keep available out of the aggregate of its authorized but unissued
and otherwise unreserved Common Stock, solely for the purpose of enabling it to
issue Additional Investment Right Shares upon exercise of this Additional
Investment Right and Additional Investment Right Warrant Shares upon exercise of
the Additional Investment Right Warrants as herein provided and as provided in
the Additional Investment Right Warrants, the number of Additional Investment
Right Shares which are then issuable and deliverable upon the exercise of this
entire Additional Investment Right and the number of Additional Investment Right
Warrant Shares which are then issuable and deliverable upon the exercise of any
Additional Investment Right Warrants, free from preemptive rights or any other
contingent purchase rights of persons other than the Holder (taking into account
the adjustments and restrictions of Section 9). The Company covenants that all
Additional Investment Right Shares and Additional Investment Right Warrant
Shares so issuable and deliverable shall, upon issuance and the payment of the
applicable exercise price in accordance with the terms hereof, or the Additional
Investment Warrants, as the case may be, be duly and validly authorized, issued
and fully paid and nonassessable. The Company will take all such action as may
be necessary to assure that such shares of Common Stock may be issued as
provided herein and further to the Additional Investment Right Warrants without
violation of any applicable law or regulation, or of any requirements of any
securities exchange or automated quotation system upon which the Common Stock
may be listed.
9. Certain Adjustments. The Exercise Price and number of Additional
Investment Right Shares issuable upon exercise of this Additional Investment
Right are subject to adjustment from time to time as set forth in this Section
9. The exercise price and number of Additional Investment Right Warrant Shares
issuable upon exercise of the Additional Investment Right Warrants shall be
subject to adjustment further to Section 4 of said Additional Investment Right
Warrants and the Additional Investment Right Warrants.
(a) Stock Dividends and Splits. If the Company, at any time while
this Additional Investment Right is outstanding, (i) pays a stock dividend on
its Common Stock or otherwise makes a distribution on any class of capital stock
that is payable in shares of Common Stock, (ii) subdivides outstanding shares of
Common Stock into a larger number of shares, or (iii) combines outstanding
shares of Common Stock into a smaller number of shares, then in each such case
the Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding immediately before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event. Any adjustment made pursuant to
clause (i) of this paragraph shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clauses (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such
subdivision or combination.
(b) Pro Rata Distributions. If the Company, at any time while
this Additional Investment Right is outstanding, distributes to holders of
Common Stock (i) evidences of its
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indebtedness, (ii) any security (other than a distribution of Common Stock
covered by the preceding paragraph), (iii) rights or warrants to subscribe for
or purchase any security, or (iv) any other asset (in each case, "DISTRIBUTED
PROPERTY"), then in each such case the Exercise Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution shall be adjusted (effective on such record date) to
equal the product of such Exercise Price times a fraction of which the
denominator shall be the average of the Closing Prices for the five Trading Days
immediately prior to (but not including) such record date and of which the
numerator shall be such average less the then fair market value of the
Distributed Property distributed in respect of one outstanding share of Common
Stock, as determined by the Company's independent certified public accountants
that regularly examine the financial statements of the Company (an "APPRAISER").
In such event, the Holder, after receipt of the determination by the Appraiser,
shall have the right to select an additional appraiser (which shall be a
nationally recognized accounting firm), in which case such fair market value
shall be deemed to equal the average of the values determined by each of the
Appraiser and such appraiser. As an alternative to the foregoing adjustment to
the Exercise Price, at the request of the Holder delivered before the 90th day
after such record date, the Company will deliver to such Holder, within five
Trading Days after such request (or, if later, on the effective date of such
distribution), the Distributed Property that such Holder would have been
entitled to receive in respect of the Additional Investment Right Shares for
which this Additional Investment Right could have been exercised immediately
prior to such record date. If such Distributed Property is not delivered to a
Holder pursuant to the preceding sentence, then upon expiration of or any
exercise of the Additional Investment Right that occurs after such record date,
such Holder shall remain entitled to receive, in addition to the Additional
Investment Right Shares otherwise issuable upon such exercise (if applicable),
such Distributed Property.
(c) Fundamental Transactions. If, at any time while this
Additional Investment Right is outstanding, (i) the Company effects any merger
or consolidation of the Company with or into another Person, (ii) the Company
effects any sale of all or substantially all of its assets in one or a series of
related transactions, (iii) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (iv) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(other than as a result of a subdivision or combination of shares of Common
Stock covered by Section 9(a) above) (in any such case, a "FUNDAMENTAL
TRANSACTION"), then the Holder shall have the right thereafter to receive, upon
exercise of this Additional Investment Right, the same amount and kind of
securities, cash or property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been, immediately prior to
such Fundamental Transaction, the holder of the number of Additional Investment
Right Shares then issuable upon exercise in full of this Additional Investment
Right (the "ALTERNATE CONSIDERATION"). The aggregate Exercise Price for this
Additional Investment Right will not be affected by any such Fundamental
Transaction, but the Company shall apportion such aggregate Exercise Price among
the Alternate Consideration in a reasonable manner reflecting the relative value
of any different components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as
to the Alternate Consideration it receives upon any exercise of this Additional
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Investment Right following such Fundamental Transaction. At the Holder's
request, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new additional investment right
consistent with the foregoing provisions and evidencing the Holder's right to
purchase the Alternate Consideration for the aggregate Exercise Price upon
exercise thereof. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this paragraph (c) and
insuring that the Additional Investment Right (or any such replacement security)
will be similarly adjusted upon any subsequent transaction analogous to a
Fundamental Transaction. If any Fundamental Transaction constitutes or results
in a Change of Control (as defined below), then at the request of the Holder
delivered before the 90th day after such Fundamental Transaction, the Company
(or any such successor or surviving entity) will purchase the Additional
Investment Right from the Holder for a purchase price, payable in cash within
five Business Days after such request (or, if later, on the effective date of
the Fundamental Transaction), equal to the Black Scholes value of the remaining
unexercised portion of this Additional Investment Right on the date of such
request. For the purposes of this Section 9(c), "CHANGE OF CONTROL" means the
consummation of a "Rule 13e-3 transaction" as defined in Rule 13e-3 under the
Exchange Act with respect to the Company that is initiated or agreed to by a
member of the Company's management.
(d) Number of Additional Investment Right Shares. Simultaneously
with any adjustment to the Exercise Price pursuant to paragraphs (a) or (b) of
this Section, the number of Additional Investment Right Shares that may be
purchased upon exercise of this Additional Investment Right shall be increased
or decreased proportionately, so that after such adjustment the aggregate
Exercise Price payable hereunder for the increased or decreased number of
Additional Investment Right Shares shall be the same as the aggregate Exercise
Price in effect immediately prior to such adjustment.
(e) Calculations. All calculations under this Section 9 shall be
made to the nearest cent or the nearest 1/100th of a share, as applicable. The
number of shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Company, and the disposition
of any such shares shall be considered an issue or sale of Common Stock.
(f) Notice of Adjustments. Upon the occurrence of each adjustment
pursuant to this Section 9, the Company at its expense will promptly compute
such adjustment in accordance with the terms of this Additional Investment Right
and prepare a certificate setting forth such adjustment, including a statement
of the adjusted Exercise Price and adjusted number or type of Additional
Investment Right Shares or other securities issuable upon exercise of this
Additional Investment Right (as applicable), describing the transactions giving
rise to such adjustments and showing in detail the facts upon which such
adjustment is based. Upon written request, the Company will promptly deliver a
copy of each such certificate to the Holder and to the Company's Transfer Agent.
(g) Notice of Corporate Events. If the Company (i) declares a
dividend or any other distribution of cash, securities or other property in
respect of its Common Stock, including, without limitation, any granting of
rights or warrants to subscribe for or purchase any capital stock of the Company
or any Subsidiary, (ii) authorizes or approves, enters into any agreement
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contemplating or solicits stockholder approval for any Fundamental Transaction
or (iii) authorizes the voluntary dissolution, liquidation or winding up of the
affairs of the Company, then the Company shall deliver to the Holder a notice
describing the material terms and conditions of such transaction, at least
fifteen (15) days prior to the applicable record or effective date on which a
Person would need to hold Common Stock in order to participate in or vote with
respect to such transaction, and the Company will take all steps reasonably
necessary in order to insure that the Holder is given the practical opportunity
to exercise this Additional Investment Right prior to such time so as to
participate in or vote with respect to such transaction; provided, however, that
the failure to deliver such notice or any defect therein shall not affect the
validity of the corporate action required to be described in such notice.
10. Payment of Exercise Price. The Holder shall pay the Exercise Price
in immediately available funds; provided, however, if the Registration Statement
did not become effective on or before Required Effectiveness Date and is not
continuously effective through the Expiration Date, the Holder may satisfy its
obligation to pay the Exercise Price through a "cashless exercise," in which
event the Company shall issue to the Holder the number of Additional Investment
Right Shares determined as follows:
X = Y [(A-B)/A]
where:
X = the number of Additional Investment
Right Shares to be issued to the Holder.
Y = the number of Additional Investment
Right Shares with respect to which this
Additional Investment Right is being
exercised.
A = the average of the Closing Prices for
the five Trading Days immediately prior to
(but not including) the Exercise Date.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged that the Additional Investment Right
Shares issued in a cashless exercise transaction shall be deemed to have been
acquired by the Holder, and the holding period for the Additional Investment
Right Shares shall be deemed to have commenced, on the date this Additional
Investment Right was originally issued pursuant to the Purchase Agreement.
11. Limitation on Exercise. Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that may be acquired by
the Holder upon any exercise of this Additional Investment Right (or otherwise
in respect hereof) shall be limited to the extent necessary to insure that,
following such exercise (or other issuance), the total number of shares of
Common Stock then beneficially owned by such Holder and its Affiliates and any
other Persons whose beneficial ownership of Common Stock would be aggregated
with the Holder's for purposes of Section 13(d) of the Exchange Act, does not
exceed 4.999% (the "MAXIMUM PERCENTAGE") of the total number of issued and
outstanding shares of Common
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Stock (including for such purpose the shares of Common Stock issuable upon such
exercise). For such purposes, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. Each delivery of an Exercise Notice hereunder will
constitute a representation by the Holder that it has evaluated the limitation
set forth in this paragraph and determined that issuance of the full number of
Additional Investment Right Shares requested in such Exercise Notice is
permitted under this paragraph. The Company's obligation to issue shares of
Common Stock in excess of the limitation referred to in this Section shall be
suspended (and shall not terminate or expire notwithstanding any contrary
provisions hereof) until such time, if any, as such shares of Common Stock may
be issued in compliance with such limitation. By written notice to the Company,
the Holder may waive the provisions of this Section or increase or decrease the
Maximum Percentage to any other percentage specified in such notice, but (i) any
such waiver or increase will not be effective until the 61st day after such
notice is delivered to the Company, and (ii) any such waiver or increase or
decrease will apply only to the Holder and not to any other holder of Additional
Investment Rights.
12. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Additional Investment Right Shares or Additional
Investment Right Warrants to purchase fractional Additional Investment Right
Warrant Shares on the exercise of this Additional Investment Right. If any
fraction of a Additional Investment Right Share or if any Additional Investment
Right Warrant to purchase a fraction of an Additional Investment Right Warrant
Share would, except for the provisions of this Section, be issuable upon
exercise of this Additional Investment Right, the number of Additional
Investment Right Shares and/or Additional Investment Right Warrant Shares
issuable upon exercise of the Additional Investment Right Warrants, as the case
may be, to be issued will be rounded up to the nearest whole share or right to
purchase the nearest whole share, as the case may be.
13. Notices. Any and all notices or other communications or deliveries
hereunder (including without limitation any Exercise Notice) shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Trading Day or
later than 6:30 p.m. (New York City time) on any Trading Day, (iii) the Trading
Day following the date of deposit with a nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address and facsimile numbers for such notices or
communications shall be as set forth in the Purchase Agreement.
14. Additional Investment Right Agent. The Company shall serve as
additional investment right agent under this Additional Investment Right. Upon
30 days' notice to the Holder, the Company may appoint a new additional
investment right agent. Any corporation into which the Company or any new
additional investment right agent may be merged or any corporation resulting
from any consolidation to which the Company or any new additional investment
right agent shall be a party or any corporation to which the Company or any new
additional investment right agent transfers substantially all of its corporate
trust or shareholders services business shall be a successor additional
investment right agent under this Additional
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Investment Right without any further act. Any such successor additional
investment right agent shall promptly cause notice of its succession as
additional investment right agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder's last address as shown on the Additional
Investment Right Register.
15. Miscellaneous.
(a) Subject to the restrictions on transfer set forth on the
first page hereof, this Additional Investment Right may be assigned by the
Holder. This Additional Investment Right may not be assigned by the Company
except to a successor in the event of a Fundamental Transaction. This Additional
Investment Right shall be binding on and inure to the benefit of the parties
hereto and their respective successors and assigns. Subject to the preceding
sentence, nothing in this Additional Investment Right shall be construed to give
to any Person other than the Company and the Holder any legal or equitable
right, remedy or cause of action under this Additional Investment Right. This
Additional Investment Right may be amended only in writing signed by the Company
and the Holder and their successors and assigns.
(b) The Company will not, by amendment of its governing documents
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 of this
Additional Investment Right, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder against
impairment. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any Additional Investment Right Shares or
Additional Investment Right Warrant Shares above the amount payable therefor on
such exercise, (ii) will take all such action as may be reasonably necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Additional Investment Right Shares or Additional Investment
Right Warrant Shares on the exercise of this Additional Investment Right and the
Additional Investment Right Warrants, respectively, and (iii) will not close its
shareholder books or records in any manner which interferes with the timely
exercise of this Additional Investment Right.
(c) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. THE CORPORATE
LAWS OF THE STATE OF DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE
RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS ADDITIONAL
INVESTMENT RIGHT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO
THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR
DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE
TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT
IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT
TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH
10
EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT
UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND
SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL
BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED
BY LAW. THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.
(d) The headings herein are for convenience only, do not
constitute a part of this Additional Investment Right and shall not be deemed to
limit or affect any of the provisions hereof.
(e) In case any one or more of the provisions of this Additional
Investment Right shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Additional
Investment Right shall not in any way be affected or impaired thereby and the
parties will attempt in good faith to agree upon a valid and enforceable
provision which shall be a commercially reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Additional
Investment Right.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
11
IN WITNESS WHEREOF, the Company has caused this Additional Investment
Right to be duly executed by its authorized officer as of the date first
indicated above.
BAM! ENTERTAINMENT, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
12
FORM OF EXERCISE NOTICE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Additional Investment Right)
To: BAM! ENTERTAINMENT, INC.
The undersigned is the Holder of Additional Investment Right No. _______ (the
"ADDITIONAL INVESTMENT RIGHT") issued by BAM! ENTERTAINMENT, INC., a Delaware
corporation (the "Company"). Capitalized terms used herein and not otherwise
defined have the respective meanings set forth in the Additional Investment
Right.
1. The Additional Investment Right is currently exercisable to purchase a
total of ______ Additional Investment Right Shares and _______
Additional Investment Right Warrants.
2. The undersigned Holder hereby exercises its right to purchase ________
Additional Investment Right Shares and Additional Investment Right
Warrants exercisable for ______ shares of Common Stock (which number of
shares underlying said Additional Investment Right Warrants shall be
equal to 90% of the Additional Investment Right Shares so issued upon
exercise of the Additional Investment Right).
2. The Holder intends that payment of the Exercise Price shall be made as
(check one):
____ "Cash Exercise"
____ "Cashless Exercise"
3. If the holder has elected a Cash Exercise, the holder shall pay the sum
of $____________ to the Company in accordance with the terms of the
Additional Investment Right.
4. Pursuant to this exercise, the Company shall deliver to the holder
_______________ Additional Investment Right Shares and Additional
Investment Right Warrants exercisable for ______ shares of Common Stock
(which number of shares underlying said Additional Investment Right
Warrants shall be equal to 90% of the Additional Investment Right Shares
so issued upon exercise of the Additional Investment Right).
5. Following this exercise, the Additional Investment Right shall be
exercisable to purchase a total of ______________ Additional Investment
Right Shares and Additional Investment Right Warrants exercisable for
_____ shares of Common Stock (which number of shares underlying said
Additional Investment Right Warrants shall be equal to 90% of said
remaining Additional Investment Right Shares).
Date: , Name of Holder:
---------------- -----
(Print)
----------------------
By:
--------------------------
Name:
------------------------
Title:
-----------------------
(Signature must conform in
all respects to name of
holder as specified on the
face of the Additional
Investment Right)
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Additional Investment
Right]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Additional Investment Right to purchase ____________ shares of Common Stock and
warrants to purchase shares of the Common Stock (which number of shares
underlying said warrants shall be equal to 90% of the shares so sold, assigned
and transferred) of BAM! ENTERTAINMENT, INC. to which the within Additional
Investment Right relates and appoints ________________ attorney to transfer said
right on the books of BAM! ENTERTAINMENT, INC. with full power of substitution
in the premises.
Dated: ,
--------------- ----
----------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Additional Right)
----------------------------------------
Address of Transferee
----------------------------------------
----------------------------------------
In the presence of:
---------------------------
EXHIBIT 1
TO ADDITIONAL INVESTMENT RIGHT
VOID AFTER 5:00 P.M., CALIFORNIA TIME,
ON JANUARY 29, 2009
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR
SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS OFFERED, SOLD OR
TRANSFERRED UNDER AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS. NOTWITHSTANDING THE FOREGOING, THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.
January 29, 2004
BAM! ENTERTAINMENT, INC.
ADDITIONAL INVESTMENT RIGHT STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, ______________________, or its
registered assigns, is entitled to purchase from BAM! ENTERTAINMENT, INC., a
corporation organized under the laws of the State of Delaware (the "COMPANY"),
at any time or from time to time during the period specified in Section 2
hereof, _______ fully paid and nonassessable shares of the Company's common
stock, $0.001 par value (the "COMMON STOCK"), at an exercise price per share
(the "EXERCISE PRICE") equal to the greater of (i) $1.40 and (ii) the lesser of
(x) the closing bid price of the Company's Common Stock on the Nasdaq Stock
Market on the Business Day immediately preceding the exercise date of the
Additional Investment Right, and (y) the average of the closing bid price of the
Company's Common Stock on the Nasdaq Stock Market for the five (5) Business Days
immediately preceding the exercise date of the Additional Investment Right. The
number of shares of Common Stock purchasable hereunder (the "WARRANT SHARES")
and the Exercise Price are subject to adjustment as provided in Section 4
hereof. The term "WARRANTS" means this Warrant and the other Warrants of the
Company issued further to the exercise of Additional Investment Rights issued
pursuant to that certain Securities Purchase Agreement, dated as of January 29,
2004, by and among the Company and the other signatories thereto (the
"SECURITIES PURCHASE AGREEMENT"). Capitalized terms used herein but not defined
shall have the meaning ascribed to them in the Securities Purchase Agreement.
This Warrant is subject to the following terms, provisions and
conditions:
1. (a) Manner of Exercise; Issuance of Certificates. Subject to the
provisions hereof, including, without limitation, the limitations contained in
Section 7 hereof, this Warrant may be exercised at any time during the Exercise
Period (as defined below) by the holder hereof, in whole or in part, by delivery
of a completed exercise agreement in the form attached hereto (the "EXERCISE
AGREEMENT"), to the Company by 5 p.m. California time on any Business Day at the
Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof) and upon payment to
the Company as provided in Section 1(b) below of the applicable Exercise Price
for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares
so purchased shall be deemed to be issued to the holder hereof or such holder's
designee, as the record owner of such shares, as of the close of business on the
date on which this Warrant shall have been surrendered and the completed
Exercise Agreement shall have been delivered and payment shall have been made
for such shares as set forth above or, if such day is not a Business Day, on the
next succeeding Business Day. The Warrant Shares so purchased, representing the
aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding five (5)
Business Days, after this Warrant shall have been so exercised (the "DELIVERY
PERIOD"). If the Company's transfer agent is participating in the Depository
Trust Company ("DTC") Fast Automated Securities Transfer program, and so long as
the certificates therefor do not require a legend and the holder is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall cause its transfer agent to electronically transmit the Warrant
Shares so purchased to the holder by crediting the account of the holder or its
nominee with DTC through its Deposit Withdrawal Agent Commission system ("DTC
TRANSFER"). If the aforementioned conditions to a DTC Transfer are not
satisfied, the Company shall deliver to the holder physical certificates
representing the Warrant Shares so purchased. Further, the holder may instruct
the Company to deliver to the holder physical certificates representing the
Warrant Shares so purchased in lieu of delivering such shares by way of DTC
Transfer. Any certificates so delivered shall be in such denominations as may be
requested by the holder hereof, shall be registered in the name of such holder
or such other name as shall be designated by such holder and, following the date
on which the Warrant Shares may be sold by the holder pursuant to Rule 144(k)
promulgated under the Securities Act (or a successor rule), shall not bear any
restrictive legend. If this Warrant shall have been exercised only in part,
then, unless this Warrant has expired, the Company shall, at its expense, at the
time of delivery of such certificates, deliver to the holder a new Warrant
representing the number of shares with respect to which this Warrant shall not
then have been exercised.
(b) Payment of Exercise Price. The holder shall pay the Exercise
Price in immediately available funds; provided, however, if the Registration
Statement did not become effective on or before the Registration Deadline (as
defined in that certain Common Stock Registration Rights Agreement of even date
herewith between the Company and the Initial Investors set forth therein) and is
not effective at the time holder exercises this Warrant, the holder hereof may
satisfy its obligation to pay the Exercise Price through a "cashless exercise,"
in which event the Company shall issue to the holder hereof the number of
Warrant Shares determined as follows:
X = Y [(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 average of the Closing Prices
for the five Trading Days immediately prior
to (but not including) the Exercise Date.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
holder hereof, and the holding period for the Warrant Shares shall be deemed to
have commenced, on the date this Warrant was originally issued pursuant to the
Purchase Agreement.
2. Period of Exercise. Except as set forth in Section 7(g) and (h)
below, this Warrant may be exercised at any time or from time to time (an
"EXERCISE DATE") during the period (the "EXERCISE PERIOD") beginning on (a) the
date hereof and ending (b) at 5:00 p.m., California time, on January 29, 2009.
Notwithstanding anything to the contrary herein, the Exercise Period shall be
extended for each day following the effective date that the that the holder
hereof may not sell shares under the Registration Statement (as defined in the
in that certain Warrant Share Registration Rights Agreement of even date
herewith between the Company and the Initial Investors set forth therein) or
pursuant to Rule 144(k) under the Securities Act if the holder effected a
"cashless exercise of this Warrant pursuant to Section .
3. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid and nonassessable and free from all taxes, liens, claims and encumbrances.
(b) Reservation of Shares. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant,
a sufficient number of shares of Common Stock to provide for the exercise in
full of this Warrant (without giving effect to the limitations on exercise set
forth in Section 7(g) or 7(h) hereof).
(c) Listing. The Company has secured the listing of the shares of
Common Stock issuable upon exercise of or otherwise pursuant to this Warrant
upon each national securities exchange or automated quotation system, if any,
upon which shares of Common Stock are then listed or become listed (subject to
official notice of issuance upon exercise of this Warrant) and shall maintain,
so long as any other shares of Common Stock shall be so listed, such listing of
all shares of Common Stock from time to time issuable upon the exercise of or
otherwise pursuant to this Warrant; and the Company shall so list on each
national securities exchange or automated quotation system, as the case may be,
and shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of or otherwise pursuant to this Warrant if
and so long as any shares of the same class shall be listed on such national
securities exchange or automated quotation system.
(d) Certain Actions Prohibited. The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issuance 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.
Without limiting the generality of the foregoing, the Company (i) will 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) will
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.
(e) Successors and Assigns. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets.
(f) Blue Sky Laws. The Company shall, on or before the date of
issuance of any Warrant Shares, take such actions as the Company shall
reasonably determine are necessary to qualify the Warrant Shares for, or obtain
exemption for the Warrant Shares for, sale to the holder of this Warrant upon
the exercise hereof under applicable securities or "blue sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the holder of this Warrant prior to such date; provided, however, that the
Company shall not be required to qualify as a foreign corporation or file a
general consent to service of process in any such jurisdiction.
4. Antidilution Provisions. During the Exercise Period, the Exercise
Price and the number of Warrant Shares issuable upon the exercise of the
Warrants, shall be subject to adjustment from time to time as provided in this
Section 4.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
or down to the nearest cent; provided that, in no event shall the Exercise Price
per share be reduced below $0.01.
(a) Subdivision or Combination of Common Stock. If the Company,
at any time during the Exercise Period, subdivides (by any stock split, stock
dividend, recapitalization,
reorganization, reclassification or otherwise) its shares of Common Stock into a
greater number of shares, then, after the date of record for effecting such
subdivision, the Exercise Price in effect immediately prior to such subdivision
will be proportionately reduced. If the Company, at any time during the Exercise
Period, combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) its shares of Common Stock into a smaller number
of shares, then, after the date of record for effecting such combination, the
Exercise Price in effect immediately prior to such combination will be
proportionately increased.
(b) Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 4 other than a Company
Reduction as defined in Section 4(k), the number of shares of Common Stock
issuable upon exercise of this Warrant shall be increased or decreased to equal
the quotient obtained by dividing (i) the product of (A) the Exercise Price in
effect immediately prior to such adjustment, multiplied by (B) the number of
shares of Common Stock issuable upon exercise of this Warrant immediately prior
to such adjustment, by (ii) the adjusted Exercise Price .
(c) Consolidation, Merger or Sale. In case of any consolidation
of the Company with, or merger of the Company into, any other entity, or in case
of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company at any time during the Exercise Period, then as a condition of such
consolidation, merger or sale or conveyance, adequate provision will be made
whereby the holder of this Warrant will have the right to acquire and receive
upon exercise of this Warrant in lieu of the shares of Common Stock immediately
theretofore acquirable upon the exercise of this Warrant, such shares of stock,
securities, cash or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Warrant had such consolidation,
merger or sale or conveyance not taken place. In any such case, the Company will
make appropriate provision to insure that the provisions of this Section 4 will
thereafter be applicable as nearly as may be in relation to any shares of stock
or securities thereafter deliverable upon the exercise of this Warrant. The
Company will not effect any consolidation, merger or sale or conveyance unless
prior to the consummation thereof, the successor entity (if other than the
Company) assumes by written instrument the obligations under this Warrant and
the obligations to deliver to the holder of this Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the holder
may be entitled to acquire. If a transaction constitutes or results in a Change
of Control, then at the request of the holder hereof delivered before the 90th
day after such transaction, the Company (or any such successor or surviving
entity) will purchase the Warrant from the holder of this Warrant for a purchase
price, payable in cash within five Business Days after such request (or, if
later, on the effective date of such transaction), equal to the Black-Scholes
value of the remaining unexercised portion of this Warrant on the date of such
request. For the purposes of this Section, "CHANGE OF CONTROL" means the
consummation of a "Rule 13e-3 transaction" as defined in Rule 13e-3 under the
Exchange Act with respect to the Company that is initiated or agreed to by a
member of the Company's management.
(d) Distribution of Assets. In case the Company shall declare or
make any distribution of its assets (other than cash) (or rights to acquire its
assets (other than cash)) to all holders of Common Stock as a partial
liquidating dividend, stock repurchase, by way of return of capital or otherwise
(including any dividend or distribution to the Company's stockholders of shares
(or rights to acquire shares) of capital stock of a subsidiary) (a
"DISTRIBUTION"), at any
time during the Exercise Period, then, upon exercise of this Warrant for the
purchase of any or all of the shares of Common Stock subject hereto, the holder
of this Warrant shall be entitled to receive its pro-rata amount of such assets
(or such rights) as would have been payable to the holder had such holder been
the holder of such shares of Common Stock on the record date for the
determination of stockholders entitled to such Distribution.
(e) Notice of Adjustment. Upon the occurrence of any event which
requires any adjustment of the Exercise Price other than a Company Reduction as
defined in Section 4(k), then, and in each such case, the Company shall give
notice thereof to the holder of this Warrant, which notice shall state the
Exercise Price resulting from such adjustment and the increase or decrease in
the number of Warrant Shares issuable upon exercise of this Warrant, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. Such calculation shall be certified by the chief
financial officer of the Company.
(f) Minimum Adjustment of the Exercise Price. No adjustment of
the Exercise Price shall be made in an amount of less than 1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be made,
but any such lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(g) No Fractional Shares. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the closing bid price of a
share of Common Stock on the Principal Market on the date of such exercise.
(h) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to
the holders of the Common Stock any additional shares of stock of any class or
other rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date or estimated date on which the books of the Company shall
close or a record shall be taken for determining the holders of Common Stock
entitled to receive any such dividend, distribution, or subscription rights or
for determining the holders of Common Stock entitled to vote in respect
of any such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not then known, a
reasonable estimate thereof by the Company) when the same shall take place. Such
notice shall also specify the date on which the holders of Common Stock shall be
entitled to receive such dividend, distribution, or subscription rights or to
exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding-up, as the case may be. Such notice
shall be given at least fifteen (15) days prior to the record date or the date
on which the Company's books are closed in respect thereto. Failure to give any
such notice or any defect therein shall not affect the validity of the
proceedings referred to in clauses (i), (ii), (iii) and (iv) above.
Notwithstanding the foregoing, the Company may publicly disclose the substance
of any notice delivered hereunder prior to delivery of such notice to the holder
of this Warrant.
(i) Certain Events. If, at any time during the Exercise Period,
any event occurs of the type contemplated by the adjustment provisions of this
Section 4 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Section 4(e) hereof, and the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by such
event.
(j) Certain Definitions.
(i) "BUSINESS DAY" means any day, other than a Saturday or
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law, regulation or executive order to close.
(ii) "COMMON STOCK," for purposes of this Section 4,
includes the Common Stock and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation, provided
that the shares purchasable pursuant to this Warrant shall include only Common
Stock in respect of which this Warrant is exercisable, or shares resulting from
any subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 4(c) hereof, the stock or other securities or
property provided for in such Section.
(iii) "PRINCIPAL MARKET" means the Nasdaq Stock Market or,
if the Common Stock is not traded on the Nasdaq Stock Market, then the principal
securities exchange or trading market for the Common Stock.
5. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Stockholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a stockholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant
Shares, and no mere enumeration herein of the rights or privileges of the holder
hereof, shall give rise to any liability of such holder for the Exercise Price
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
7. Transfer, Exchange, Redemption and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights granted
to the holder hereof are transferable in whole or in part, at any one time, upon
surrender of this Warrant, together with a properly executed assignment in the
form attached hereto, at the office or agency of the Company referred to in
Section 7(e) below, provided, however, that any transfer or assignment shall be
subject to the conditions set forth in Sections 7(f), 7(g) 7(h) and 8 hereof and
to the provisions of Sections 3(e) and 3(f) of the Securities Purchase
Agreement. Until due presentment for registration of transfer on the books of
the Company, the Company may treat the registered holder hereof as the owner and
holder hereof for all purposes, and the Company shall not be affected by any
notice to the contrary. Notwithstanding anything to the contrary contained
herein, the registration rights described in Section 8 hereof are assignable
only in accordance with the provisions of the Warrant Shares Registration Rights
Agreement.
(b) Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the holder hereof at the
office or agency of the Company referred to in Section 7(e) below, for new
Warrants of like tenor of different denominations representing in the aggregate
the right to purchase the number of shares of Common Stock which may be
purchased hereunder, each of such new Warrant to represent the right to purchase
such number of shares as shall be designated by the holder hereof at the time of
such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Section 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Section 7.
(e) Warrant Register. The Company shall maintain, at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose name
this Warrant has been issued, as well as the name and address of each transferee
and each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be
registered under the Securities Act and under applicable state securities or
blue sky laws, the Company may require, as a condition of allowing such
exercise, transfer, or exchange, (i) that the holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of counsel
(which opinion shall be reasonably acceptable to the Company and shall be in
form, substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such exercise, transfer, or exchange may be
made without registration under the Securities Act and under applicable state
securities or blue sky laws, (ii) that the holder or transferee execute and
deliver to the Company an investment letter in form and substance reasonably
acceptable to the Company and (iii) that the transferee be an "ACCREDITED
INVESTOR" as defined in Rule 501(a) promulgated under the Securities Act;
provided that no such opinion, letter, or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under the
Securities Act.
(g) Additional Restrictions on Exercise or Transfer.
Notwithstanding anything in Section 1 or Section 3 hereof to the contrary, this
Warrant shall not be exercisable to the extent (but only to the extent) that (a)
the number of shares of Common Stock beneficially owned by the holder of this
Warrant and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unexercised portion of
the Warrants or the unexercised or unconverted portion of any other securities
of the Company subject to a limitation on exercise or exercise analogous to the
limitation contained herein) and (b) the number of shares of Common Stock
issuable upon exercise of the Warrants (or portion thereof) with respect to
which the determination described herein is being made, would result in
beneficial ownership by such holder and its affiliates of more than 4.99% (the
"MAXIMUM PERCENTAGE") of the outstanding shares of Common Stock. To the extent
the above limitation applies, the determination of whether and to what extent
this Warrant shall be exercisable with respect to other securities owned by such
holder shall be in the sole discretion of the holder and submission of this
Warrant for full or partial exercise shall be deemed to be the holder's
determination of whether and the extent to which this Warrant is exercisable, in
each case subject to such aggregate percentage limitation. No prior inability to
exercise the Warrants pursuant to this Section shall have any effect on the
applicability of the provisions of this Section with respect to any subsequent
determination of exercisability. For purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G
thereunder, except as otherwise provided in clause (a) hereof. By written notice
to the Company, the holder may waive the provisions of this Section or increase
or decrease the Maximum Percentage to any other percentage specified in such
notice, but (i) any such waiver or increase will not be effective until the 61st
day after such notice is delivered to the Company, and (ii) any such waiver or
increase or decrease will apply only to the holder and not to any other holder
of Warrants.
(h) Limitation on Number of Warrant Shares. Notwithstanding any
provision hereof to the contrary, the Company shall not be obligated to issue
any Warrant Shares upon exercise of the Warrants if the issuance of such shares
would exceed that number of shares which the Company may issue upon exercise of
the Warrants (the "Exchange Cap") without breaching the Company's obligations
under the rules and regulations of the Principal Market, except that such
limitation shall not apply in the event that the Company obtains the approval of
its stockholders as required by the applicable rules of the Principal Market (or
any successor rule or regulation) for issuances of Shares in excess of such
amount. Until such approval is obtained, no purchaser of the Warrants pursuant
to the Securities Purchase Agreement (the "Purchasers")
shall be issued, upon exercise of the Warrants, Shares in an amount greater than
the product of (i) the Exchange Cap amount then in effect multiplied by (ii) a
fraction, the numerator of which is the number of shares of Common Stock issued
to such Purchaser pursuant to the Securities Purchase Agreement and the
denominator of which is the aggregate number of shares of Common Stock issued to
all Purchases pursuant to the Securities Purchase Agreement (the "Cap Allocation
Amount"). In the event that any Purchaser shall sell or otherwise transfer any
of such Purchaser's Warrants, the transferee shall be allocated a pro rata
portion of such Purchaser's Cap Allocation Amount. In the event that any holder
of the Warrants shall convert and exercise, as the case may be, all of such
holder's Warrants into a number of Shares which, in the aggregate, is less than
such holder's Cap Allocation Amount, then the difference between such holder's
Cap Allocation Amount and the number of Shares actually issued to such holder
shall be allocated to the respective Cap Allocation Amounts of the remaining
holders of Warrants on a pro rata basis in proportion to the number of Shares
then issuable under the Warrants then held by each such holder. The restrictions
contained in this Section 7(h) may not be amended without the consent of the
holder of this Warrant and the holders of a majority of the Company's
outstanding Common Stock (excluding the holder of this Warrant to the extent
(and only to the extent) at the record date for determining stockholders
entitled to vote thereon, such holder holds any of the Company's Common Stock
purchased pursuant to the Securities Purchase Agreement or upon exercise of the
any Warrants sold thereunder).
8. Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) are entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Warrant Shares
Registration Rights Agreement, including the right to assign such rights to
certain assignees, as set forth therein.
9. Notices. Any notices required or permitted to be given under the
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier, or by confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
BAM! Entertainment, Inc.
000 Xxxx Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx Xxxxx
President
With a copy to:
Xxxxxxxxxxx & Xxxxxxxx LLP
00000 Xxxxx Xxxxxx Xxxx, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone (000) 000-0000
Fax (000) 000-0000
Attention: Xxxxxx Xxxxxxx, Esq.
If to the holder, at such address as such holder shall have provided in
writing to the Company, or at such other address as such holder furnishes by
notice given in accordance with this Section 10, and, for any notice under
Section 3.
10. Governing Law; Venue; Waiver Of Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this warrant shall
be governed by and construed and enforced in accordance with the laws of the
state of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the city of New York,
borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the transaction
documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. The Company hereby waives all rights to a trial by jury.
11. Miscellaneous.
(a) Amendments. Except as provided in Section 8(g) hereof, this
Warrant and any provision hereof may only be amended by an instrument in writing
signed by the Company and the holder hereof.
(b) Descriptive Headings. The descriptive headings of the several
Sections of this Warrant are inserted for purposes of reference only, and shall
not affect the meaning or construction of any of the provisions hereof.
(c) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
(d) Subject to the restrictions on transfer set forth on the
first page hereof, this Warrant may be assigned by the holder. This Warrant may
not be assigned by the Company. This Warrant shall be binding on and inure to
the benefit of the parties hereto and their respective successors and assigns.
Subject to the preceding sentence, nothing in this Warrant shall be construed to
give to any Person other than the Company and the holder any legal or equitable
right, remedy or cause of action under this Warrant.
(e) The Company will not, by amendment of its governing documents
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 of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder hereof against impairment. Without limiting the generality of the
foregoing, the Company (i) will not increase the par value of any Warrant Shares
above the amount payable therefor on such exercise, (ii) will take all such
action as may be reasonably necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable Warrant Shares on the
exercise of this Warrant, and (iii) will not close its stockholder books or
records in any manner which interferes with the timely exercise of this Warrant.
(f) In addition to any other rights available to a holder hereof,
if the Company fails to deliver to the holder hereof a certificate representing
Warrant Shares by the fifth Business Day after the date on which delivery of
such certificate is required by this Warrant, and if after such fifth Business
Day the holder hereof purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the holder hereof
of the Warrant Shares that the holder hereof anticipated receiving from the
Company (a "Buy-In"), then the Company shall, within three Business Days after
the holder hereof requests and in the discretion of the holder hereof, either
(i) pay cash to the holder hereof in an amount equal to the holder's total
purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "Buy-In Price"), at which point the Company's
obligation to deliver such certificate (and to issue such Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to the holder hereof
a certificate or certificates representing such Common Stock and pay cash to the
holder hereof in an amount equal to the excess (if any) of the Buy-In Price over
the product of (A) such number of shares of Common Stock, times (B) the Closing
Price on the date of the event giving rise to the Company's obligation to
deliver such certificate. Notwithstanding anything to the contrary, this Section
11(f) shall not apply if the Company has used its best efforts to deliver the
certificates, but such certificates were not delivered due to the Transfer
Agent's failure to deliver the certificates in accordance with timely
instructions from the Company.
(g) The Company's obligations to issue and deliver Warrant Shares
in accordance with the terms hereof are absolute and unconditional, irrespective
of any action or inaction by the holder hereof to enforce the same, any waiver
or consent with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the holder hereof or any other Person of any obligation to the Company
or any violation or alleged violation of law by the holder hereof or any other
Person, and irrespective of any other circumstance which might otherwise limit
such obligation of the Company to the holder hereof in connection with the
issuance of Warrant Shares. Nothing herein shall limit a right of the holder
hereof to pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company's failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
BAM! ENTERTAINMENT, INC.
By:
-----------------------------------------
Name:
Title:
FORM OF EXERCISE AGREEMENT
(TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)
To: BAM! Entertainment, Inc.
000 Xxxx Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx Xxxxx
President
The undersigned hereby irrevocably exercises the right to purchase _____________
shares of the Common Stock of BAM! ENTERTAINMENT, INC., a corporation organized
under the laws of the State of Delaware (the "COMPANY"), and tenders herewith
payment of the Exercise Price in full, in the amount of $_____________, in cash,
by certified or official bank check or by wire transfer for the account of the
Company or exercises this Warrant pursuant to the "cashless exercise" provisions
thereof; or
The undersigned agrees not to offer, sell, transfer or otherwise dispose
of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws.
[ ] The undersigned requests that the Company cause its transfer agent to
electronically transmit the Common Stock issuable pursuant to this
Exercise Agreement to the account of the undersigned or its nominee
(which is _________________) with DTC through its Deposit Withdrawal
Agent Commission System ("DTC TRANSFER").
[ ] In lieu of receiving the shares of Common Stock issuable pursuant to
this Exercise Agreement by way of DTC Transfer, the undersigned hereby
requests that the Company cause its transfer agent to issue and deliver
to the undersigned physical certificates representing such shares of
Common Stock.
The undersigned requests that a Warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant, in the name of the Holder and
delivered to the undersigned at the address set forth below:
Dated:
------------------------ ------------------------------------
Signature of Holder
-------------------------------------
Name of Holder (Print)
Address:
-------------------------------------
-------------------------------------
-------------------------------------
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the attached Warrant, with respect to
the number of shares of Common Stock covered thereby issuable pursuant to the
attached Warrant set forth hereinbelow, to:
Name of Assignee Address No of Shares
---------------- ------- ------------
, and hereby irrevocably constitutes and appoints_______________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated: ,
---------------------- ----
In the presence of
------------------
Name:
--------------------------------
Signature:
----------------------
Title of Signing Officer or
Agent (if any):
-----------------
Address:
----------------------
----------------------
Note: The above signature should
correspond exactly with the
name on the face of the within
Warrant.
