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EXHIBIT 10.12
BAM! ENTERTAINMENT, INC.
CO-SALE AND RIGHT OF FIRST REFUSAL AGREEMENT
This Co-Sale and Right of First Refusal Agreement (the "Agreement") is
made and entered into as of December 28, 2000, by and among BAM! Entertainment,
Inc., a Delaware corporation (the "Company"), Xxxxxxx X. Xxxxx ("Xxxxx") and
Xxxxxxx Xxxxxxxx ("Xxxxxxxx") and each purchaser listed on Exhibit A hereto
which Purchasers include Musci and Xxxxxxxx (the "Purchasers"),
RECITALS
X. Xxxxx and Xxxxxxxx (each a "Founder") are the beneficial owners of an
aggregate of 213,506 shares of the Common Stock and upon the consummation of the
transaction described in the "Purchase Agreement" (as defined below), will own
833,625 shares of Series A Preferred Stock and 56,658 shares of Series B
Preferred Stock of the Company. (Such shares of Common Stock hereafter is
referred to as the "Common Stock" and such shares of Series A and Series B
Preferred Stock are referred to as the "Preferred Stock".
B. Purchasers are purchasing shares of the Company's Series B Preferred
Stock (the "Series B Stock") pursuant to that certain Series B Preferred Stock
Purchase Agreement (the "Purchase Agreement") of even date herewith.
C. Purchasers purchasing the Series B Preferred Stock were induced to do
so in part by the Company's and Founders' agreement to enter into this
Agreement.
D. The parties desire to enter into this Agreement in order to grant
co-sale and right of first refusal rights to the Purchasers.
AGREEMENT
Now, therefore, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree hereto as follows:
1. Definitions. Any capitalized terms not defined herein shall have the
meanings ascribed to them in the Purchase Agreement.
2. Representations And Warranties.
2.1 Representations and Warranties of the Founders. Each of the
Founders, individually and not jointly, hereby represents, warrants and
covenants to the Company and the Purchasers as follows: (a) such Founder has
full authority, power and capacity to enter into this Agreement and perform its
obligations hereunder; (i) does not require such founder to obtain any approval,
consent or waiver of, or to make any filing with, any Person that has not been
obtained or made; and (ii) does not and will not result in a breach of,
constitute
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a default under, accelerate any obligation under or give rise to a right of
termination of any indenture or loan or credit agreement or any other material
agreement, contract, instrument, mortgage, lien, lease, permit, authorization,
order, writ, judgment, injunction, decree, determination or arbitration award to
which such Founder is a party or by which the property of such Founder is bound
or affected, or result in the creation or imposition of any mortgage, pledge,
lien, security interest or other charge or encumbrance on any of the assets or
properties of such Founder.
2.2 Representations and Warranties of the Company. The Company hereby
represents, warrants and covenants to the Founders and the Purchasers as
follows: (a) the Company has full corporate authority and power to enter into
this Agreement and perform its obligations hereunder; (b) this Agreement
constitutes the valid and binding obligation of the Company enforceable against
it in accordance with its terms, except: (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent the indemnification
provisions may be limited by applicable federal or state securities laws; and
(c) the execution, delivery and performance by the Company of this Agreement:
(i) to the best of its knowledge, does not and will not violate any laws, rules
or regulations of the United States or any state or other jurisdiction
applicable to the Company, or require the Company to obtain any approval,
consent or waiver of, or to make any filing with, any Person that has not been
obtained or made; and (ii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under or give rise to a
right of termination of any indenture or loan or credit agreement or any other
material agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which the Company is a party or by which the property of
the Company is bound or affected, or result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or encumbrance on any
of the assets or properties of the Company.
3. Restrictions On Transfer; Co-Sale Provisions. The following
provisions of this Section 3 shall terminate immediately upon, and shall not
apply with respect to, a Qualified Public Offering (as defined in the Company's
Amended and Restated Certificate of Incorporation (the "Restated Certificate")).
3.1 Restrictions on Transfer. Each Founder agrees that such Founder
will not, directly or indirectly transfer, donate, sell, assign, pledge,
hypothecate or grant security interest in (each a "Transfer") all or any portion
of the Common Stock now owned or hereafter acquired by such Founder, except in
connection with, and strictly in compliance with the conditions of this Section
3. "Transferred" means the accomplishment of a Transfer, and "Transferee" means
the recipient of a Transfer.
3.2 Permitted Transfers.
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Notwithstanding anything herein to the contrary, the provisions of Section 3.3
shall not apply to either of the Transfers listed below, provided that in each
case the Transferee shall have entered into a Joinder Agreement in substantially
the form attached hereto as Exhibit B providing that all Common Stock so
Transferred shall continue to be subject to all provisions of this Agreement as
if such Shares were still held by such Founder, except that no further Transfer
shall thereafter be permitted hereunder except in compliance with Section 3.3:
(a) Transfers by any Founder to the spouse, children or siblings
of such Founder or to a trust or family limited partnership for the benefit of
any of them; and
(b) Transfers upon the death of any Founder to such Founder's
heirs, executors or administrators or to a trust under such Founder's will, or
Transfers between such Founder and such Founder's guardian or conservator.
Notwithstanding anything to the contrary in this Agreement or any failure by a
Transferee under this Section 3.2 to execute a Joinder Agreement, such
Transferee shall take any Common Stock so Transferred subject to all provisions
of this Agreement as if such Common Stock were still held by the Founder making
such Transfer, whether or not they so agree in writing.
3.3 Co-Sale Option of Purchasers. In the event that any of the
Founders entertains a bona fide offer to purchase all or any portion of the
Common Stock held by such Founder (a "Transaction Offer") from any other person
(a "Buyer"), such Founder (a "Transferring Founder") may Transfer such Common
Stock only pursuant to and in accordance with the following provisions of this
Section 3.3:
(a) Co-Sale Notice. The Transferring Founder shall cause the
Transaction Offer and all of the terms thereof to be reduced to writing and
shall promptly notify the Company and each of the Purchasers of such
Transferring Founder's desire to effect the Transaction Offer and otherwise
comply with the provisions of this Section 3.3 (the "Co-Sale Notice"). To the
extent one or more Purchasers exercise their co-sale option (the "Co-Sale
Option") in accordance with this Section 3.3, the number of Common Stock that
the Transferring Founder may Transfer in the Transaction Offer shall be
correspondingly reduced.
(b) Purchaser Acceptance. Each of the Purchasers shall have the
right to exercise its Co-Sale Option by giving written notice of such intent to
participate (the "Co-Sale Acceptance Notice") to the Transferring Founder within
ten (10) days after receipt by such Purchaser of the Co-Sale Notice (the
"Co-Sale Election Period"). Each Co-Sale Acceptance Notice shall indicate the
maximum number of shares subject thereto which the Purchaser wishes to sell,
including the number of shares it would sell if one or more other Purchasers do
not elect to participate in the sale on the terms and conditions stated in the
Offer Notice. Any Purchaser holding Series B Series B Preferred Stock shall be
permitted to sell to the relevant Buyer in connection with any exercise of the
Co-Sale Option, at its option, (i) shares of Common Stock acquired upon
conversion of such Series B Series B Preferred Stock, (ii) an option to acquire
Common Stock when such Purchaser receives the same upon conversion of such
Series B Series B Preferred Stock, with the same effect as if Common Stock were
being conveyed, (iii) shares of
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Series B Preferred Stock and (iv) shares of Common Stock upon exercise of any
warrant held by such Purchaser (each of the foregoing, the "Purchaser Shares").
(c) Allocation of Shares. Each Purchaser shall have the right to
sell a portion of its Purchaser Shares pursuant to the Transaction Offer which
is equal to or less than the product obtained by multiplying the total number of
Purchaser Shares available for sale to the Buyer subject to the Transaction
Offer by a fraction, the numerator of which is the total number of Purchaser
Shares owned by such Purchaser and the denominator of which is the total number
of Purchaser Shares and Shares held by all Purchasers and the Transferring
Founder, in each case as of the date of the Offer Notice, subject to increase as
hereinafter provided.
(d) Co-Sale Closing. Within ten (10) calendar days after the end
of the Co-Sale Election Period, the Transferring Founder shall promptly notify
each participating Purchaser of the number of Purchaser Shares held by such
Purchaser that will be included in the sale and the date on which the
Transaction Offer will be consummated, which shall be no later than the later of
(i) thirty (30) calendar days after the end of the Co-Sale Election Period and
(ii) the satisfaction of any governmental approval or filing requirements, if
any. Each participating Purchaser may effect its participation in any
Transaction Offer hereunder by delivery to the Buyer, or to the Transferring
Founder for delivery to the Buyer, of one or more instruments or certificates,
properly endorsed for transfer, representing the Purchaser Shares it elects to
sell pursuant thereto. At the time of consummation of the Transaction Offer, the
Buyer shall remit directly to each participating Purchaser that portion of the
sale proceeds to which the participating Purchaser is entitled by reason of its
participation with respect thereto. No Shares may be purchased by the Buyer from
the Transferring Founder unless the Buyer simultaneously purchases from the
participating Purchasers all of the Purchaser Shares that they have elected to
sell pursuant to this Section 3.3.
(e) Liability of Purchasers. No Purchaser shall be required to
make any representations or warranties or to provide any indemnities in
connection therewith other than with respect to title to the Purchaser Shares
being conveyed.
(f) Sale to Third Party. Any Shares held by a Transferring
Founder that are the subject of the Transaction Offer and that the Transferring
Founder desires to Transfer following compliance with this Section 3.3, may be
sold to the Buyer only during the period specified in Section 3.3(d) and only on
terms no more favorable to the Transferring Founder than those contained in the
Offer Notice. Promptly after such Transfer, the Transferring Founder shall
notify the Company, which in turn shall promptly notify all the Purchasers, of
the consummation thereof and shall furnish such evidence of the completion and
time of completion of the Transfer and of the terms thereof as may reasonably be
requested by a Majority Interest. In the event that the Transaction Offer is not
consummated within the period required by this Section 3.3 or the Buyer fails
timely to remit to each participating Purchaser its respective portion of the
sale proceeds, the Transaction Offer shall be deemed to lapse, and any Transfer
of Shares pursuant to such Transaction Offer shall be in violation of the
provisions of this Agreement unless the Transferring Founder sends a new Offer
Notice and once again complies with the provisions of Section 3.3 with respect
to such Transaction Offer.
(g) Contemporaneous Transfers.
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If two or more Founders propose concurrent Transfers that are subject to this
Article III, then the relevant provisions of Section 3.3 shall apply separately
to each such proposed Transfer.
3.4 Effect of Prohibited Transfers. If any Transfer is made or
attempted contrary to the provisions of this Agreement, such purported Transfer
shall be void ab initio; the Company and the other parties hereto shall have, in
addition to any other legal or equitable remedies which they may have, the right
to enforce the provisions of this Agreement by actions for specific performance
(to the extent permitted by law); and the Company shall have the right to refuse
to recognize any Transferee as one of its stockholders for any purpose.
4. Restrictions on Transfer; Right of First Refusal.
4.1 Notice of Transfer. If a Founder proposes to Transfer any
Preferred Stock owned by him, then such Founder shall promptly give written
notice (the "Notice") to each of the Purchasers (for purposes of this Section
only, "Purchasers" shall exclude the Founder attempting to sell his shares of
Preferred Stock) at least thirty-five (35) days prior to the closing of such
Transfer. The Notice shall describe in reasonable detail the proposed Transfer
including, without limitation, the number of shares of Preferred Stock to be
transferred, the nature of such Transfer, the consideration to be paid, and the
name and address of each prospective purchaser or transferee. In the event that
the Transfer is being made pursuant to the provisions of Section 5, the Notice
shall state under which section the Transfer is being made.
4.2 Purchaser Right of First Refusal.
(a) Each Purchaser shall have the right, exercisable upon written
notice to the Founder (the "Purchaser Notice") within fifteen (15) days after
the receipt of the Notice, to purchase its pro rata share of the Preferred Stock
subject to the Notice and on the same terms and conditions as set forth therein.
The Purchasers who so exercise their rights (the "Participating Purchasers")
shall effect the purchase of the Preferred Stock, including payment of the
purchase price, not more than ten (10) days after delivery of the Purchaser
Notice, and at such time the Founder shall deliver to the Purchasers the
certificate(s) representing the Preferred Stock to be purchased by the
Participating Purchasers, each certificate to be properly endorsed for transfer.
(b) Each Purchaser's pro rata share shall be equal to the product
obtained by multiplying (x) the aggregate number of shares of Preferred Stock
covered by the Notice and (y) a fraction, the numerator of which is the number
of shares (on a fully diluted and converted basis) owned by the Participating
Purchaser at the time of the Transfer and the denominator of which is the total
number of shares (on a fully diluted and converted basis) owned by all of the
Purchasers at the time of the Transfer.
(c) In the event that not all of the Purchasers elect to purchase
their pro rata share of the Founder Stock available pursuant to their rights
under Section 4.2(a) within the time period set forth therein, then the Founder
shall promptly give written notice to each of the Participating Purchasers (the
"Overallotment Notice"), which shall set forth the number of
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shares of Preferred Stock not purchased by the other Purchasers, and shall offer
such Participating Purchasers the right to acquire such unsubscribed shares. The
Participating Purchasers shall have five (5) days after receipt of the
Overallotment Notice to deliver a written notice to the Founder (the
"Participating Purchasers Overallotment Notice") of its election to purchase its
pro rata share of the unsubscribed shares on the same terms and conditions as
set forth in the Notice. For purposes of this Section 4.2(c) the denominator
described in clause (y) of subsection 4.2(b) above shall be the total number of
shares owned by all Participating Purchasers at the time of Transfer. The
Participating Purchasers shall then effect the purchase of the Preferred Stock,
including payment of the purchase price, not more than five (5) days after
delivery of the Participating Purchasers Overallotment Notice to the Founder,
and at such time, the Founder shall deliver to the Participating Purchasers the
certificates representing the Preferred Stock to be purchased by the
Participating Purchasers, each certificate to be properly endorsed for transfer.
5. Exempt Transfers.
5.1 Securities Act. Notwithstanding the foregoing, the provisions of
Sections 2 and 3 shall not apply to the sale of any Stock to the public pursuant
to a registration statement filed with, and declared effective by, the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Securities Act").
5.2 Bylaws. This Agreement is subject to, and shall in no manner
limit the right which the Company may have to repurchase securities from Musci
and Xxxxxxxx pursuant to (i) a stock restriction agreement or other agreement
between the Company and Musci and Xxxxxxxx and (ii) any right of first refusal
set forth in the Bylaws of the Company.
6. Legend.
6.1 Certificate. Each certificate representing shares of Common Stock
now or hereafter owned by a Founder or issued to any person in connection with a
transfer pursuant to Section 2.2 hereof shall be endorsed with the following
legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN CO-SALE AGREEMENT BY AND BETWEEN THE
SHAREHOLDER, THE COMPANY AND CERTAIN HOLDERS OF STOCK OF THE COMPANY.
COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
SECRETARY OF THE COMPANY."
6.2 Instruct. The Purchasers agree that the Company may instruct its
transfer agent to impose transfer restrictions on the shares represented by
certificates bearing the legend referred to in Section 5.1 above to enforce the
provisions of this Agreement and the Company agrees to promptly do so. The
legend shall be removed upon termination of this Agreement.
7. Miscellaneous.
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7.1 Conditions to Exercise of Rights. Exercise of the Purchasers'
rights under this Agreement shall be subject to and conditioned upon, and the
Company shall use their best efforts to assist each party in, compliance with
applicable laws.
7.2 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
7.3 Amendment. Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only by the written consent of (i)
the Company, (ii) each of the Founders and (iii) a majority in interest of the
Purchasers. Any amendment or waiver effected in accordance with this Section 6.3
shall be binding upon each Purchaser, the Company, Musci, Xxxxxxxx and their
successors and assigns.
7.4 Assignment of Rights. This Agreement constitutes the entire
agreement between the parties relative to the specific subject matter hereof.
Any previous agreement among the parties relative to the specific subject matter
hereof is superseded by this Agreement. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors, assigns and legal representatives.
7.5 Term. This Agreement shall continue in full force and effect from
the date hereof through the earliest of the following dates, on which date it
shall terminate in its entirety:
(a) on the date of and immediately prior to the closing of a
firmly underwritten public offering of the Common Stock pursuant to a
registration statement filed with the Securities and Exchange Commission, and
declared effective under the Securities Act, that results in the conversion of
the Company's preferred stock.
(b) on the date of and immediately prior to the closing of a
sale, lease, or other disposition of all or substantially all of the Company's
assets or the Company's merger into or consolidation with any other corporation
or other entity, or any other corporate reorganization, in which the holders of
the Company's outstanding voting stock immediately prior to such transaction
own, immediately after such transaction, securities representing less than a
majority of the voting power of the corporation or other entity surviving such
transaction, provided that this Section 6.5(b) shall not apply to a merger
effected exclusively for the purpose of changing the domicile of the Company.
7.6 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) one (1) day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of receipt, or
(iv) three (3) days after deposit in first class U.S. mail, return receipt
requested. All communications shall be sent to the party to be notified at the
address as set forth on the signature page hereof or at such other address as
such party may designate by ten (10) days advance written notice to the other
parties hereto.
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7.1 Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
7.8 Entire Agreement. This Agreement and the Exhibits hereto, along
with the Purchase Agreement and each of the Exhibits and Schedules thereto,
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof and no party shall be liable or
bound to any other in any manner by any representations, warranties, covenants
and agreements except as specifically set forth herein and therein.
7.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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The foregoing Co-Sale Agreement is hereby executed as of the date first
above written.
COMPANY:
BAM! Entertainment, Inc.
By: /s/ XXXXXXX X. XXXXX
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Xxxxxxx X. Xxxxx, President
Musci
/s/ XXXXXXX X. XXXXX
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Xxxxxxx X. Xxxxx
Xxxxxxxx
/s/ XXXXXXX XXXXXXXX
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Xxxxxxx Xxxxxxxx
SERIES B PURCHASERS:
PAR CAPITAL MANAGEMENT, INC.
By: /s/ XXXXX X. XXXXX
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Name: Xxxxx X. Xxxxx
Title: Analyst
XXXXXX XXXXXX EARLY STAGE FUND, L.P.
By: MERCHANT BANKERS, INC.
as the general partner of Xxxxxx
Xxxxxx Early Stage Fund, L.P.
By: /s/ X. XXXXXXX
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Name: X. Xxxxxxx
Title: M.D.
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/s/ XXXXXXX X. XXXXX
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Xxxxxxx X. Xxxxx
/s/ XXXXXXX XXXXXXXX
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Xxxxxxx Xxxxxxxx
/s/ XXXXXX XXXXXX
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Xxxxxx Xxxxxx
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