EXHIBIT 4.1
VOID AFTER 5:00 P.M., CALIFORNIA TIME,
ON SEPTEMBER 30, 2008
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.
Date: September 30, 2003
BAM! ENTERTAINMENT, INC.
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") of $1.87. 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 pursuant to that certain
Securities Purchase Agreement, dated as of September 30, 2003, by and among the
Company and the other signatories thereto (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.
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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 the fifth annual
anniversary of the date of original issuance hereof. 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
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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.
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(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,
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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
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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.
(k) Adjustment of Exercise Price by the Company. To the extent
permitted by applicable law, the Company at any time shall have the right to
reduce the Exercise Price (a "COMPANY REDUCTION") by any amount for any period
of time; provided that the conditions of this Section 4(k) are satisfied. The
Company may exercise its right to Company Reduction by delivering to each holder
of the Warrants written notice (a "COMPANY REDUCTION NOTICE") at least 15
Business Days prior to the first day of the Company Reduction Period (as defined
below). The Company Reduction Notice shall state the reduced Exercise Price (the
"Alternative Exercise Price") and the period (the "Company Reduction Period")
during which the Alternative Exercise Price will be in effect, which Company
Reduction Period must be at least 15 Business Days in duration. A Company
Reduction Notice shall be irrevocable. The Exercise Price shall be adjusted upon
the expiration of the Company Reduction Period to the Exercise Price that
otherwise would then be in effect if the Company Reduction had not occurred.
Notwithstanding anything to the contrary in this Section 4(k), the Alternative
Exercise Price shall at no time be greater than the Exercise Price that
otherwise would be in effect during such Company Reduction Period if such
Company Reduction had not occurred.
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.
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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
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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
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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:
10
If to the Company:
BAM! Entertainment, Inc.
333 West Santa Clara Street, Suite 716
San Jose, CA 95113
Telephone No.: (408) 298-7500
Facsimile No.: (408) 298-9600
Attention: Raymond Musci
President
With a copy to:
Kirkpatrick & Lockhart LLP
10100 Santa Monica Blvd, 7th Floor
Los Angeles, California 90067
Telephone (310) 552-5000
Fax (310) 552-5001
Attention: Thomas Poletti, 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
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
12
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]
13
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
BAM! ENTERTAINMENT, INC.
By: _________________________________
Name:
Title:
14
FORM OF EXERCISE AGREEMENT
(TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)
To: BAM! Entertainment, Inc.
333 West Santa Clara Street, Suite 716
San Jose, CA 95113
Telephone No.: (408) 298-7500
Facsimile No.: (408) 298-9600
Attention: Raymond Musci
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.