EXHIBIT 10.4
SETTLEMENT AGREEMENT
This Settlement Agreement (the "Agreement") is entered into as of May 24, 2004,
between BAM Entertainment, Inc. ("BAM") and __________________________
("Creditor"), (also referred to collectively as the "Parties"), and reflects
full and complete settlement of the claims Creditor may have against BAM, as
described below.
WHEREAS, BAM has executed documentation regarding the acquisition of VIS
Entertainment plc ("VIS") and SOED Development Limited ("SOED").
The Parties hereby agree as follows:
1. EFFECTIVELY. This Agreement shall be effective upon execution by the
Parties of this Agreement and those referenced in Section 3 herein, and
the following events occurring contemporaneously with the effectiveness of
this Agreement (i) the going unconditional of the acquisition of VIS, and
(ii) the closing of the acquisition of SOED.
2. SETTLEMENT. Creditor, on behalf of itself, its subsidiaries, affiliates,
officers, directors, shareholders, successors, and/or assigns, hereby
agrees to settle, discharge and release BAM and each of its affiliates,
subsidiaries, successors, officers, directors, shareholders, employees and
agents (collectively, the "Released Parties") from any and all claims,
losses, debts, charges, damages, obligations, causes of action,
liabilities, penalties, costs, and expenses, of whatever nature, type,
kind, description or character, whether known or unknown, and which
Creditor holds or held as of the date of this Agreement against the
Released Parties (collectively, "Claims"), and which relate to the sum of
$_______ owing by BAM to Creditor as of the date hereby, which is known as
the "Outstanding Amount".
3. BAM PAYMENT. Upon the execution of this Agreement by the Parties, BAM
shall issue shares of its common stock (the "Shares") to the Creditor as
full and complete satisfaction of the Claims. The number of Shares to be
issued by BAM shall be the product of the Outstanding Amount divided by
the lesser of (i) the closing bid price of BAM's common stock on the
Nasdaq Stock Market on the business day immediately preceding the date of
this Agreement, and (ii) the average of the closing bid price of BAM's
common stock on the Nasdaq Stock Market for the five business days
immediately preceding the date of this Agreement (the "Per Share Price").
In addition, BAM shall issue to the Creditor five year warrants in the
form attached hereto as Exhibit A (the "Warrants") excercisable for 10% of
the Shares issuable hereunder at a per share exercise price equal to the
Per Share Price. Contemporaneous with the execution and delivery of this
Agreement, the Parties are executing and delivering a Common Stock
Registration Rights Agreement in the form attached hereto as Exhibit B
(the "Common Stock Registration Rights Agreement"), and a Warrant Shares
Registration Rights Agreement in the form attached hereto as Exhibit C
(the
Page 1 of 8
"Warrant Shares Registration Rights Agreements" and collectively with the
Common Stock Registration Rights Agreement the "Registration Rights
Agreements") pursuant to which BAM has agreed to provide certain
registration rights under the Securities Act of 1933, as amended (the
"Securities Act") and the rules and regulations promulgated thereunder,
and applicable state securities laws. The Shares, the Warrants and the
shares of Common Stock issuable upon exercise of the Warrants (the
"Warrant Shares") are the "Securities".
4. WAIVER OF CALIFORNIA CIVIL CODE SECTION 1542. Creditor acknowledges that
this release INCLUDES ANY AND ALL CLAIMS ARISING FROM OR RELATING TO, OR
IN ANY WAY GROWING OUT OF OR RESULTING FROM ANY OF THE OCCURRENCES OR
MATTERS REGARDING WHICH THIS SETTLEMENT IS GIVEN THAT HE OR SHE OR IT DOES
NOT KNOW OR SUSPECT TO EXIST and that the Creditor understands the
provisions of Section 1542 of the California Civil Code, which provides:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the time
of executing the release, which if known by him must have materially
affected his settlement with the debtor."
Creditor expressly waives and relinquishes every and any right or benefit
that it had, has or may have under Section 1542 of the California Civil
Code to the fullest extent that it may waive all such rights and benefits
pertaining to the matters released herein. In connection with the releases
being granted hereunder, Creditor acknowledges that it is aware that it
may discover facts in addition to or different from those that it may now
know or believe to be true with respect to the subject matter of this
Agreement, and that such facts may give rise to claims which are presently
unknown, unanticipated, and unsuspected. Nevertheless, it is the intention
of Creditor to hereby fully, finally, and forever settle and release all
such matters and claims and that, in furtherance of such intention, the
release given herein will be and remain a full and complete release
notwithstanding the discovery or existence of any such additional or
different facts.
5. WARRANTIES AND REPRESENTATIONS.
a) The Creditor represents and warrants to BAM as follows:
1). Purchase for Own Account. The Creditor is purchasing the
Securities for the Creditor's own account and not with a present view towards
the distribution thereof. The Creditor understands that the Creditor must bear
the economic risk of this investment indefinitely, unless the Securities are
registered pursuant to the Securities Act and any applicable state securities or
blue sky laws or an exemption from such registration is available.
Notwithstanding anything in this Section 4(c)(1) to the contrary, by making the
foregoing representation, the Creditor does not agree to hold the Securities for
any minimum or other specific term and reserves the right to dispose
Page 2
of the Securities at any time in accordance with or pursuant to a registration
statement or an exemption from registration under the Securities Act and any
applicable state securities laws; provided, that in the case of any transfer of
the Securities pursuant to an exemption, such transfer is made in accordance
with the provisions of Section 5(a)(5).
2) Information. The Creditor has been furnished all materials
(excluding any material nonpublic information) relating to the business,
finances and operations of BAM and its subsidiaries and materials relating to
the offer and sale of the Securities that have been requested by the Creditor.
The Creditor has been afforded the opportunity to ask questions of BAM and has
received what the Creditor believes to be satisfactory answers to any such
inquiries. The Creditor understands that its investment in the Securities
involves a high degree of substantial risk, including but not limited to, the
risk factors described in BAM's annual report on Form 10-K for the year ended
June 30, 2003 and its quarterly report on Form 10-Q for the three months ended
December 31, 2004, which were filed with the U.S. Securities and Exchange
Commission.
3) Governmental Review. The Creditor understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
4) Authorization; Enforcement. The Creditor has the requisite power
and authority to enter into and perform its obligations under this Agreement and
to purchase the Securities in accordance with the terms hereof. This Agreement
has been duly and validly authorized, executed and delivered on behalf of the
Creditor and is a valid and binding agreement of the Creditor enforceable
against the Creditor in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other laws affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
5) Transfer or Resale. The Creditor understands that (i) the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and may not be transferred unless (a) subsequently
registered thereunder or sold pursuant to Rule 144(k) under the Securities Act,
or (b) the Creditor shall have delivered to BAM an opinion of counsel reasonably
acceptable to BAM (which opinion shall be in form, substance and scope customary
for opinions of counsel in comparable transactions) to the effect that the
Securities to be sold or transferred may be sold or transferred under an
exemption from such registration.
6) Legends. The Creditor understands that the Securities may bear a
restrictive legend (the "Legend") in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
Page 3
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 MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.
Certificates evidencing the Securities shall not be required to
contain the Legend or any other legend (i) while any registration statement
covering the resale of the Shares is effective under the Securities Act provided
the Creditor (or a broker acting on the Creditor's behalf), upon requesting a
removal of the Legend on any certificate evidencing all or any portion of any of
the Securities or requesting to transfer any of the same, provides to BAM (or to
the transfer agent on BAM's behalf) reasonable written assurances to the effect
that any of the Securities, sold or to be sold by the Creditor have been, or
will be, sold in accordance with the plan of distribution set forth in the
prospectus that forms a part o the registration statement and in compliance with
the prospectus delivery requirements under the Securities Act, or (ii) following
any sale of such Shares pursuant to Rule 144, or (iii) if such Securities are
eligible for sale under Rule 144(k), or (iv) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the SEC). BAM shall
cause its counsel to issue the legal opinion included in the transfer agent
instructions to the transfer agent on the effective date of such registration
statement. Following such effective date or at such earlier time as a legend is
no longer required for the Shares, BAM will no later than three business days
following the delivery by the Creditor to BAM or the transfer agent of a
legended certificate representing the Securities, deliver or cause to be
delivered to the Creditor a certificate representing the Securities that is free
from all restrictive and other legends. BAM may not make any notation on its
records or give instructions to its transfer agent that enlarge the restrictions
on transfer set forth in this Section.
7) Investor Status. The Creditor is an "accredited investor" within
the meaning of Rule 501 Regulation D under the Securities Act. It has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of purchasing the Securities. The Creditor is
not a registered broker dealer or an affiliate of any broker or dealer
registered under Section 15(a) of the Exchange Act, or a member of the National
Association of Securities Dealers, Inc. or a person engaged in the business of
being a broker dealer.
Page 4
8) No Short Positions or Stock Ownership. Except as previously
disclosed to BAM in writing, the Creditor has not, prior to the 30 business days
prior to the date of this Agreement, entered into any Short Sales. For purposes
of this Section 5(c)(8), a "Short Sale" by the Creditor means a sale of BAM's
common stock that is marked as a short sale and that is executed at a time when
the Creditor has no equivalent offsetting long position in BAM's common stock.
For purposes of determining whether the Creditor has an equivalent offsetting
long position in BAM's common stock, all common stock and all common stock that
would be issuable upon conversion or exercise in full of all options then held
by the Creditor (assuming that such options were then fully convertible or
exercisable, notwithstanding any provisions to the contrary, and giving effect
to any conversion or exercise price adjustments scheduled to take effect in the
future) shall be deemed to be held long by the Creditor.
b) BAM represents and warrants the Creditor as follows:
1) Authorization; Enforcement. (i) BAM has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement, the Warrants, and the Registration Rights Agreements, to issue and
sell the Shares and the Warrants in accordance with the terms hereof and to
issue the Warrant Shares in accordance with the terms of the Warrants; (ii) the
execution, delivery and performance of this Agreement, the Warrants and the
Registration Rights Agreements (collectively, the "Related Agreements") by BAM
and the consummation by it of the transactions contemplated hereby and thereby
(including, without limitation, the reservation for issuance and issuance of the
Shares and the Warrants and the reservation for issuance and issuance of the
Warrant Shares) have been duly authorized by BAM's Board of Directors and no
further consent or authorization of BAM, its Board of Directors or its
shareholders is required; (iii) this Agreement and the Related Agreements have
been duly executed and delivered by BAM; and (iv) this Agreement and the Related
Agreements constitute, and, upon execution and delivery by BAM and the other
parties thereto to the extent required of the Registration Rights Agreements and
the Warrants, such agreements will constitute, valid and binding obligations of
BAM enforceable against BAM in accordance with their respective terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other laws affecting creditors' rights and remedies generally and
to general principles of equity (regardless of whether enforcement is sought in
a proceeding at law or in equity).
2) Issuance of Shares. The Shares are duly authorized and when
issued and paid for in accordance with the terms hereof, will be validly issued,
fully paid and non-assessable, and free from all taxes and liens (other than
those imposed through acts or omissions of the Creditor and will not be subject
to preemptive rights or other similar rights of shareholders of BAM. The Warrant
Shares are duly authorized and reserved for issuance, and, upon exercise of the
Warrants,, in accordance with the terms thereof, will be validly issued, fully
paid and non-assessable and free from all taxes and liens (other than those
imposed through acts or omissions of the Creditor and will not be subject to
preemptive rights or other similar rights of shareholders of BAM.
Page 5
3) No Conflicts. The execution, delivery and performance of this
Agreement and the Related Agreements by BAM, and the consummation by BAM of the
transactions contemplated hereby and thereby (including, without limitation, the
reservation for issuance and issuance of the Shares and the Warrant Shares, and
the issuance of the Warrants, will not (i) conflict with or result in a
violation of the Certificate of Incorporation or By-laws or (ii) conflict with,
or constitute a default (or an event which, with notice or lapse of time or
both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of any agreement, indenture
or instrument to which BAM or any of its subsidiaries is a party, or result in a
violation of any law, rule, regulation, order, judgment or decree (including
(assuming the accuracy of the representations and warranties of the Purchasers)
the United States federal and state securities laws and regulations) applicable
to BAM or any of its subsidiaries or by which any property or asset of BAM or
any of its subsidiaries is bound or affected (except, with respect to clause
(ii), for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a material adverse effect or BAM). Except as specifically contemplated by
this Agreement and as required under the Securities Act and any applicable state
securities laws and assuming the accuracy of the representations and warranties
of the Creditor, BAM is not required to obtain any consent, approval,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self regulatory agency in order for it
to execute, deliver or perform any of its obligations under this Agreement
(including without limitation the issuance and sale of the Shares and Warrants
as provided hereby), the Warrants (including without limitation the issuance of
the Warrant Shares) or the Registration Rights Agreements, in each case in
accordance with the terms hereof or thereof.
6. ENTIRE AGREEMENT. This Agreement is a fully integrated agreement
constituting the entire agreement and understanding of the Parties hereto,
and supersedes and replaces all negotiations, and all proposed agreements,
whether oral or written, between BAM and Creditor regarding the release of
the Claims. Each party acknowledges that it has read this Agreement and
has signed it freely and voluntarily without reliance on any
representations made by the other party hereto, its attorneys or its
representatives except as expressly set forth in this Agreement.
7. SEVERANCE. If any covenant, condition, or other provision herein contained
is held to be invalid, void, or illegal by any court of competent
jurisdiction, such covenant, condition or provision will be deemed severed
from the remainder of this Agreement. Such severance will in no way
affect, impair, or invalidate any other covenant, condition or other
provision herein. If such condition, covenant, or other provision is
deemed invalid due to its scope or breadth, such covenant, condition, or
other provision will be deemed valid to the extent of the scope or breadth
permitted by law.
Page 6
8. NO ORAL MODIFICATIONS. This Agreement may only be amended or modified by a
written agreement executed by or on behalf of each of the Parties hereto.
9. GOVERNING LAW AND VENUE. This Agreement is to be construed simply and
fairly and not strictly for or against any of the Parties hereto, and
shall be interpreted, enforced and governed by and under the laws of the
State of California.
10. NOTICE. All notices required to be given hereunder shall be in writing and
shall be deemed to have been given upon deposit in first class mail, sent
through a nationally recognized courier service, or transmission by
confirmed facsimile as follows:
BAM! Entertainment, Inc.
000 Xxxx Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxxx
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxxxxxx & Xxxxxxxx LLP
00000 Xxxxx Xxxxxx Xxxx., Xxxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
Creditor:
_________________________________
_________________________________
_________________________________
Attn: ___________________________
Facsimile: ______________________
11. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
all of which together shall constitute one and the same Agreement.
12. INDEPENDENT ADVICE. Each Party acknowledges that it has received
independent legal advice with respect to the advisability of making this
Agreement, and that it has received independent legal advice specifically
with respect to the meaning and effect of waiving California Civil Code,
section 1542.
13. SUCCESSORS AND ASSIGNS. This Agreement shall apply to, bind and inure to
the benefit of the Parties, and their successors-in-interest and assigns.
Page 7
In Witness Whereof, the Parties have duly executed and delivered this
Agreement as of the date first set forth above.
BAM ENTERTAINMENT, INC. [CREDITOR]
______________________________ ___________________________________
Name: ________________________ Name: _____________________________
Its: _________________________ Its: ______________________________
Page 8
