EXHIBIT 4.9
EXHIBIT C
TO SECURITIES PURCHASE AGREEMENT
COMMON STOCK REGISTRATION RIGHTS AGREEMENT
COMMON STOCK REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as
January 29, 2004, by and among BAM! ENTERTAINMENT, INC., a corporation organized
under the laws of the State of Delaware (the "COMPANY"), and the undersigned
(the "INITIAL INVESTORS").
WHEREAS:
A. The Company and the Initial Investors have entered into a
Securities Purchase Agreement dated the date hereof (the "SECURITIES PURCHASE
AGREEMENT;" capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement). In
connection with the Securities Purchase Agreement, the Company has agreed, upon
the terms and subject to the conditions contained therein, to issue and sell to
the Initial Investors shares of the Company's common stock, $0.001 par value
(the "COMMON STOCK"). The shares of Common Stock issued on the Closing Date
under the Securities Purchase Agreement are referred to herein as the "SHARES."
B. To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"SECURITIES ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investors, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
(i) "ADDITIONAL INVESTMENT RIGHTS" shall mean
rights issued to Initial Investors' further to the Securities Purchase Agreement
to purchase additional shares of Common Stock and warrants to purchase Common
Stock (all as more fully described in Exhibit B to the Securities Purchase
Agreement).
(ii) "INVESTORS" means the Initial Investors and
any transferees or assignees who agree to become bound by the provisions of this
Agreement in accordance with
Section 9 hereof.
(iii) "REGISTER," "REGISTERED," and "REGISTRATION"
refer to a registration effected by preparing and filing a Registration
Statement or Statements in compliance with the Securities Act and pursuant to
Rule 415 under the Securities Act or any successor rule providing for offering
securities on a continuous basis ("RULE 415"), and the declaration or ordering
of effectiveness of such Registration Statement by the United States Securities
and Exchange Commission (the "SEC").
(iv) "REGISTRABLE SECURITIES" means (i) the
Shares, (ii) any shares of Common Stock issuable upon exercise of the Additional
Investment Rights (the "Additional Investment Right Shares") and (iii) any
shares of capital stock issued or issuable, from time to time (with any
adjustments), as a distribution on or in exchange for or otherwise with respect
to any of the foregoing; provided, however, that the treatment of these
securities as Registrable Securities shall terminate if and when such securities
can be resold under Rule 144(k) under the Securities Act and provided further
however, that any shares of capital stock issued or issuable, from time to time
(with any adjustments), in exchange for or otherwise with respect to any Shares
or Additional Investment Right Shares shall not be considered Registrable
Securities to the extent such shares of capital stock are covered by another,
current and effective registration statement permitting the resale without
restriction of such shares.
(v) "REGISTRATION STATEMENT" means one or more
registration statements of the Company under the Securities Act registering all
of the Registrable Securities, including the Initial Registration Statement, any
Uncovered Shares Amendments and Uncovered Shares Registration Statements (each,
as defined below).
2. REGISTRATION.
a. Mandatory Registration. The Company shall file with
the United States Securities and Exchange Commission ("SEC"), on the date which
is on or before thirty (30) calendar days after the Closing Date (the "FILING
DEADLINE") a Registration Statement on Form S-3 (or, if Form S-3 is not then
available, on such form of Registration Statement as is then available to effect
a registration of all of the Registrable Securities) covering the resale of the
Shares and any Additional Investment Right Shares issued upon exercise of the
Additional Investment Rights (the "INITIAL REGISTRATION STATEMENT"). The
Registrable Securities included in the Initial Registration Statement shall be
registered on behalf of the Investors as set forth in Section 11(k) hereof. The
Initial Registration Statement (and each amendment or supplement thereto, and
each request for acceleration of effectiveness thereof) shall be provided to the
Initial Investors and their counsel at least 2 Business Days prior to its filing
or other submission. If for any reason (including, but not limited to, a
determination by the staff of the SEC that all or any portion of the Registrable
Securities cannot be included in the Initial Registration Statement (an "SEC
DETERMINATION")) the Initial Registration Statement declared effective by the
SEC does not include all of the Registrable Securities (any such shares that are
not included being the "UNCOVERED SHARES"), the Company shall prepare and file
with the SEC, as soon as practicable, but in any event prior to the tenth (10th)
Business Day after becoming aware of the existence of any Uncovered Shares (such
date referred to herein as the "UNCOVERED SHARE FILING DEADLINE"),
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either (a) an amendment (the "UNCOVERED SHARES AMENDMENT") to the Initial
Registration Statement effecting a registration of the Uncovered Shares or (b) a
registration statement which registers the Uncovered Shares (the "UNCOVERED
SHARES REGISTRATION STATEMENT"). The Uncovered Shares Amendment or the Uncovered
Shares Registration Statement (and each amendment or supplement thereto, and
each request for acceleration of effectiveness thereof) shall be provided to the
Initial Investors and their counsel at least concurrently with its filing or
other submission. The Company shall use its reasonable efforts to cause each of
the Initial Registration Statement and the Uncovered Shares Amendment or the
Uncovered Shares Registration Statement to become effective as soon as
practicable after the filing thereof.
b. Payments by the Company. The Company shall use its
reasonable efforts to cause each Registration Statement required to be filed
pursuant to Section 2(a) hereof to become effective as soon as practicable, but,
as to the Initial Registration Statement filed pursuant to Section 2(a), in no
event later than the ninetieth (90th) calendar day after the Closing Date (the
"REGISTRATION DEADLINE"), and as to any Uncovered Shares Amendment or Uncovered
Shares Registration Statement, in no event later than the ninetieth (90th) day
after the Uncovered Share Filing Deadline (the "UNCOVERED SHARE REGISTRATION
DEADLINE"). If the Registration Statement(s) covering the Registrable Securities
required to be filed by the Company pursuant to Section 2(a) hereof is not filed
with the SEC by the Filing Deadline or the Uncovered Share Filing Deadline, as
applicable, or declared effective by the SEC on or before the Registration
Deadline or the Uncovered Share Registration Deadline, as applicable, or if,
after a Registration Statement has been declared effective by the SEC, sales of
all the Registrable Securities required to be included therein (except, in the
case of the Initial Registration Statement, for Uncovered Shares which are the
subject of an SEC Determination) cannot be made pursuant to the Registration
Statement, then the Company will make payments to the Investors in such amounts
and at such times as shall be determined pursuant to this Section 2(c) as
partial relief for the damages to the Investors by reason of any such delay in
or reduction of their ability to sell the Registrable Securities (which remedy
shall be exclusive of any other remedies available at law or in equity).
c. The Company shall pay to each Investor an amount
equal to (i) the Investment Amount (as defined in the Securities Purchase
Agreement) paid by such Investor pursuant to the Securities Purchase Agreement
(or if such Investor is not an Initial Investor, the Investment Amount paid by
such Investor's transferor or assignor pursuant to the Securities Purchase
Agreement (the "Aggregate Purchase Price"), multiplied by (ii) one percent (1%)
(with respect to the period commencing on the Filing Deadline, the Uncovered
Filing Deadline, the Registration Deadline or the Uncovered Share Registration
Deadline, as applicable, multiplied by (iii) the sum of (x) the quotient
calculated by dividing (A) the number of days after the Filing Deadline or
Uncovered Share Filing Deadline, as applicable, and prior to the date the
Registration Statement or Uncovered Share Amendment or Uncovered Share
Registration Statement, as applicable, in each case as required to be filed
pursuant to Section 2(a), is filed with the SEC by (B) thirty, plus (y) the
quotient calculated by dividing (A) the number of days after the Registration
Deadline or Uncovered Share Registration Deadline, as applicable, and prior to
the date the Registration Statement or Uncovered Share Amendment or Uncovered
Share Registration Statement, as applicable, in each case as filed pursuant to
Section 2(a), is declared effective by the SEC by (B) thirty, plus (z) the
quotient calculated by dividing (A) the sum of the
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number of additional days that sales of any Registrable Securities required to
be included in a Registration Statement (except, in the case of the Initial
Registration Statement, for any Uncovered Shares which are the subject of an SEC
Determination) cannot be made pursuant to a Registration Statement after such
Registration Statement has been declared effective; provided, however, however,
that the total amount of payments pursuant to this Section 2(c) shall not
exceed, when aggregated with all such payments paid to all Investors under the
Securities Purchase Agreement $35,000. For example, if the Initial Registration
Statement is filed within the Filing Deadline but becomes effective thirty (30)
days after the Registration Deadline, the Company would pay $10,000 for each
$1,000,000 of Aggregate Purchase Price. If the Company is unable to pay all
amounts due and payable with respect to the penalties, the Company will pay the
Investors such amounts pro rata based upon the total amounts payable to each
Investor as a percentage of the total amounts payable to all Investors.
d. Eligibility for Form S-3. The Company represents and
warrants that it is eligible to register the resale of Registrable Securities on
a registration statement on Form S-3 under the Securities Act, and that the
Company is not aware of any facts or circumstances (including without limitation
any required approvals or waivers or any circumstances that may delay or prevent
the obtaining of accountant's consents) that would prohibit or delay the
preparation and filing of a registration statement on Form S-3 with respect to
the Registrable Securities provided that such registration is not deemed a
"primary offering", in which case the Company could face potential qualification
problems regarding the requirement of having an aggregate market value held by
non-affiliates of $75 million or more. The Company shall use its reasonable
efforts to file all reports required to be filed by the Company with the SEC in
a timely manner so as to maintain or, if applicable, regain its eligibility for
the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare and file with the SEC, on
or before the Filing Deadline or the Uncovered Share Filing Deadline, as
applicable, the applicable Registration Statement required by Section 2(a) and
shall use its reasonable efforts to cause such Registration Statement to become
effective as soon as practicable after such filing. The Company shall use its
best efforts to keep such Registration Statement effective pursuant to Rule 415
for a period of 12 months from the date it became effective (the "REGISTRATION
PERIOD"). In the event that the sale of Registrable Securities by one or more
Investors is determined by the SEC to constitute a primary offering, upon the
written request from time to time of any such Investor, the Company shall as
promptly as practicable cause a Registration Statement to be amended and/or one
or more additional Registration Statements (which may be requested on a
sequential basis) to be filed (as specified by the applicable Investors) and to
be declared effective; and take all other actions reasonably requested by such
Investors to effectuate the offering of Registrable Securities. If the Initial
Registration Statement is not filed on Form S-3, the Company shall, as soon as
it is eligible to do so, file a post-effective amendment on Form S-3 to the
Initial Registration Statement to the extent permitted by the SEC or, if not so
permitted, file a new Registration Statement on Form S-3 to permit sales of the
Registrable Securities pursuant to Rule
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429 under the Securities Act; and the Company shall use its reasonable efforts
to cause such post-effective amendment or Registration Statement to become
effective as soon as possible. Each Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein and all
documents incorporated by reference therein) filed pursuant to this Agreement
(i) shall comply in all material respects with the requirements of the
Securities Act and the rules and regulations of the SEC promulgated thereunder
and (ii) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein not misleading. The financial statements of the Company
included in the Registration Statement or incorporated by reference therein will
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC applicable with
respect thereto. Such financial statements shall be prepared in accordance with
U.S. generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and shall fairly present in all material respects the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to immaterial year-end adjustments).
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities of the Company covered by the Registration
Statement. Notwithstanding any provision in this Agreement to the contrary, the
Company's obligations hereunder to file a Registration Statement, to have the
same declared effective and to keep a registration statement continuously in
effect under the Securities Act shall be suspended (a "Grace Period") if the
fulfillment of such obligations would require the Company to make a disclosure
that would, in the reasonable judgment of the Company's Board of Directors, have
a Material Adverse Effect (as such term is defined in the Securities Purchase
Agreement) on the Company or a material adverse effect on the future prospects
of the Company or its stockholders; provided, that the Registration Statement
shall be suspended for a total of no more than ninety (90) days during any
twelve (12) month period. The provisions of Section 2(b) hereof shall not be
applicable during and shall be tolled as a result of any Grace Period.
c. The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement (i) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto. In the case of the Registration Statement referred to in
Section 2(a), the Company shall furnish to each Investor which requests (i) a
copy of any request to accelerate the effectiveness of any Registration
Statement or amendment thereto, (ii) on the date of effectiveness of the
Registration Statement or any amendment thereto, a notice stating that the
Registration Statement or amendment has been declared effective, and (iii) such
number
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of copies of a prospectus, including a preliminary prospectus, and all
amendments and supplements thereto and such other documents as such Investor may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor. In responding to comments from the staff of
the SEC, the Company shall cooperate with any Investor that notifies the Company
that it desires to be consulted with respect to such process. Such cooperation
shall solely consist of providing any such Investor with: a reasonable
opportunity to comment on the text and substance of proposed written responses
to the extent such comment relates to such investor or its plan of distribution
of the Registrable Securities. To the extent that issues raised by the staff of
the SEC have an impact primarily on any such investor rather than the Company,
the Company shall give reasonable deference to such Investor's requests with
respect to the process and substance of responses with respect to such issues.
d. The Company shall use its reasonable efforts to (i)
register and qualify the Registrable Securities covered by the Registration
Statement under such other securities or "blue sky" laws of such jurisdictions
in the United States as each Investor who holds Registrable Securities being
offered reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its certificate of incorporation or bylaws,
which in each case the Board of Directors of the Company determines to be
contrary to the best interests of the Company and its stockholders.
e. As promptly as practicable after becoming aware of
such event, the Company shall notify each Investor by telephone or facsimile of
the happening of any event, of which the Company has knowledge, as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and use its reasonable efforts promptly to prepare a supplement
or amendment to the Registration Statement to correct such untrue statement or
omission and deliver such number of copies of such supplement or amendment to
each Investor as such Investor may reasonably request.
f. The Company shall use its reasonable efforts to
prevent the issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest practicable date (including in each
case by amending or supplementing such Registration Statement) and to notify
each Investor who holds Registrable Securities being sold of the issuance of
such order and the resolution thereof (and if such Registration Statement is
supplemented or amended, deliver such number of copies of such supplement or
amendment to each Investor as such Investor may
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reasonably request).
g. The Company shall make available for inspection by
(i) any Investor whose Registrable Securities are included in a Registration
Statement and (ii) one firm of attorneys and one firm of accountants or other
agents retained by the Investors (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company, as shall be reasonably deemed necessary by each Inspector to enable
each Inspector to exercise its due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information which any
Inspector may reasonably request for purposes of such due diligence.
h. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, (iv) such
information has been made generally available to the public other than by
disclosure in violation of this Agreement, or (v) such Investor consents to the
form and content of any such disclosure. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to such Investor prior to making such disclosure, and
allow the Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
i. The Company shall use its reasonable efforts to
promptly either (i) secure the designation and quotation, of all the Registrable
Securities covered by the Registration Statement on The Nasdaq Stock Market, or
(ii) cause all the Registrable Securities covered by the Registration Statement
to be listed on the NYSE or the AMEX or another national securities exchange and
on each additional national securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such exchange.
j. The Company shall provide a transfer agent and
registrar, which may be a single entity, for the Registrable Securities not
later than the effective date of the Registration Statement.
k. The Company shall cooperate with the Investors who
hold Registrable Securities being offered to facilitate the timely preparation
and delivery of certificates (not bearing any restrictive legends) representing
Registrable Securities to be offered pursuant to the Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the Investors may reasonably request and registered in such names as the
Investors may request.
l. At the request of an Initial Investor or Investors
who holds a majority-in-interest of the Registrable Securities, the Company
shall prepare and file with the SEC such
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amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with the
Registration Statement each as approved by the Company, which approval shall not
be unreasonably withheld or delayed, as may be necessary in order to change the
plan of distribution set forth in such Registration Statement.
m. The Company shall comply with applicable federal and
state securities laws and regulations related to a Registration Statement and
offering and sale of securities.
n. From and after the date of this Agreement, the
Company shall not, and shall not agree to, allow the holders of any securities
of the Company (except (i) to the extent existing agreements may otherwise
provide or (ii) in the case of the Common Stock underlying the warrants to be
issued to HDB as placement agent or its co-placement agents of the financing
contemplated by the Securities Purchase Agreement) to include any of their
securities in any Registration Statement under Section 2(a) hereof or any
amendment or supplement thereto under Section 3(b) hereof without the consent of
the holders of a majority in interest of the Registrable Securities.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations
of the Company to complete the registration pursuant to this Agreement with
respect to the Registrable Securities of a particular Investor (or to make any
payments or other damages to such investor pursuant to Section 2(b)) that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. At
least five (5) Business Days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of any
information the Company requires from each such Investor.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
5. EXPENSES OF REGISTRATION.
The Company shall pay (or reimburse the Purchasers for) all fees and
expenses incident to the performance of or compliance with this Agreement by the
Company, including without limitation (a) all registration and filing fees and
expenses, including without limitation those related to filings with the
Commission, any trading market and in connection with applicable state
securities or Blue Sky laws, (b) printing expenses (including without limitation
expenses of
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printing certificates for Registrable Securities and of printing prospectuses
requested by the Purchasers), (c) messenger, telephone and delivery expenses,
(d) fees and disbursements of counsel for the Company and up to $5,000 in the
aggregate for Proskauer Rose LLP, counsel to Vertical Ventures, LLC, (e) fees
and expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement, and (f) all
listing fees to be paid by the Company to the trading market.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will
indemnify, hold harmless and defend (i) each Investor who holds such Registrable
Securities, and (ii) the directors, officers, partners, members, employees and
agents of such Investor and each person who controls any Investor within the
meaning of Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), if any (each, an
"INDEMNIFIED PERSON"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "CLAIMS") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities (the matters in the
foregoing clauses (i) through (iii) being, collectively, "VIOLATIONS"). Subject
to the restrictions set forth in Section 6(c) with respect to the number of
legal counsel, the Company shall reimburse the Investors and each other
Indemnified Person, promptly as such expenses are incurred and are due and
payable, for any reasonable legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by such Indemnified Person
expressly for use in the Registration Statement or any such amendment thereof or
supplement thereto; (ii) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without an unconditional release of the
Company and all of its controlling persons, employees and agents, or without the
prior written consent of the Company, which consent shall not be unreasonably
withheld; and (iii) with respect to any prospectus, shall not inure to the
benefit of any Indemnified Person if the untrue statement or omission of
material fact contained in such
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prospectus was corrected on a timely basis in the prospectus, as then amended or
supplemented, if such corrected prospectus was timely made available by the
Company pursuant to Section 3(c) hereof, and the Indemnified Person was promptly
advised in writing not to use the incorrect prospectus prior to the use giving
rise to a Violation and such Indemnified Person, notwithstanding such advice,
used it. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
b. In connection with any Registration Statement in
which an Investor is participating, each such Investor agrees severally and not
jointly to indemnify, hold harmless and defend, to the same extent and in the
same manner set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement, its employees, agents,
attorneys and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act, and any
other stockholder selling securities pursuant to the Registration Statement or
any of its directors or officers or any person who controls such stockholder
within the meaning of the Securities Act or the Exchange Act (collectively and
together with an Indemnified Person, an "INDEMNIFIED PARTY"), against any Claim
to which any of them may become subject, under the Securities Act, the Exchange
Act or otherwise, insofar as such Claim arises out of or is based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement; and subject to Section 6(c) such Investor will
reimburse any reasonable legal or other expenses (promptly as such expenses are
incurred and are due and payable) reasonably incurred by them in connection with
investigating or defending any such Claim; provided, however, that the indemnity
agreement contained in this Section 6(b) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without an unconditional
release of such Investor and all of its controlling persons, employees and
agents, or without the prior written consent of such Investor, which consent
shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Agreement (including this Section 6(b) and
Section 7) for only that amount as does not exceed the net proceeds actually
received by such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact by the
Investor contained in the preliminary prospectus was corrected on a timely basis
in the prospectus, as then amended or supplemented, and the Indemnified Party
failed to utilize such corrected prospectus.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to assume control of the defense thereof with counsel mutually
satisfactory to the indemnifying party and
10
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that such indemnifying party shall not be entitled to assume such
defense and an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the reasonable fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential conflicts of interest between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding or the actual or potential defendants in, or targets of, any such
action include both the Indemnified Person or the Indemnified Party and the
indemnifying party and any such Indemnified Person or Indemnified Party
reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are in conflict with those
available to such indemnifying party. The indemnifying party shall pay for only
one separate legal counsel for all Indemnified Persons or the Indemnified
Parties, as applicable, and such legal counsel shall be selected by Investors
holding a majority-in-interest of the Registrable Securities included in the
Registration Statement to which the Claim relates, if the Investors are entitled
to indemnification hereunder, or by the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any other person who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any indemnification or
other obligations under this Agreement) by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
8. REPORTS UNDER THE EXCHANGE ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
11
a. file with the SEC in a timely manner and make and
keep available all reports and other documents required of the Company under the
Securities Act and the Exchange Act so long as the Company remains subject to
such requirements (it being understood that nothing herein shall limit the
Company's obligations under Section 5(c) of the Securities Purchase Agreement)
and the filing and availability of such reports and other documents as is
required for the applicable provisions of Rule 144; and
b. furnish to each Investor so long as such Investor
owns Registrable Securities, promptly upon request, (i) a written statement by
the Company that it has complied with the reporting requirements of Rule 144,
the Securities Act and the Exchange Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably requested
to permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
assignable by each Investor to any transferee of all or any portion of the
Registrable Securities if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company after such assignment, (ii) the Company is furnished
with written notice of (a) the name and address of such transferee or assignee
and (b) the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment, the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, (iv)
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein, and (v) such transfer shall have been made
in accordance with the applicable requirements of the Securities Purchase
Agreement. In addition, and notwithstanding anything to the contrary contained
in this Agreement or the Securities Purchase Agreement, the Shares may be
pledged, and all rights of the Investors under this Agreement or any other
agreement or document related to the transaction contemplated hereby may be
assigned, without further consent of the Company, to a bona fide pledgee in
connection with an Investor's margin or brokerage accounts.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions 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), by Investors who hold fifty-one percent (51%)
in interest of the Registrable Securities or, in the case of a waiver, with the
written consent of the party charged with the enforcement of any such provision.
Any amendment or waiver effected in accordance with this Section 10 shall be
binding upon each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company
12
receives conflicting instructions, notices or elections from two or more persons
or entities with respect to the same Registrable Securities, the Company shall
act upon the basis of instructions, notice or election received from the
registered owner of such Registrable Securities.
b. Any notices required or permitted to be given under
the terms of this Agreement 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 (5) days after being placed in the mail,
if mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
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 an Investor, at such address as such Investor
shall have provided in writing to the Company or such other address as such
Investor furnishes by notice given in accordance with this Section 11(b).
Each party hereto may from time to time change its address or facsimile
number for notices under this Section 11(b) by giving at least ten (10) days'
prior written notice of such changed address or facsimile number, in the case of
the Investors to the Company, and in the case of the Company to all of the
Investors.
c. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
d. Governing Law; Venue; Waiver Of Jury Trail. ALL
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS AGREEMENT SHALL BE GOVERNED BY AND
13
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE
COMPANY AND PURCHASERS HEREBY IRREVOCABLY SUBMIT 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 BROUGHT BY THE COMPANY OR ANY
PURCHASER HEREUNDER, 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 WAIVE, AND AGREE NOT TO
ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY
PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
ANY SUCH COURT, OR 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 AND PURCHASERS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.
e. This Agreement, the Securities Purchase Agreement and
the Warrants (including all schedules and exhibits thereto) constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement, the Securities Purchase Agreement and the Warrants supersede all
prior agreements and understandings among the parties hereto and thereto with
respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not form part of or effect the interpretation of this
Agreement.
h. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed signature page(s)
hereof to be physically delivered to the other party within five (5) days of the
execution hereof..
14
i. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents, approvals and other determinations to
be made by the Investors pursuant to this Agreement shall be made by the
Investors holding more than fifty percent (50%) of the Registrable Securities
then held by all Investors.
k. The initial number of Registrable Securities included
on any Registration Statement and each increase to the number of Registrable
Securities included thereon shall be registered on behalf of each Investor pro
rata based on the number of Registrable Securities held by each Investor at the
time of such establishment or increase, as the case may be. In the event an
Investor shall sell or otherwise transfer any of such holder's Registrable
Securities, each transferee shall be deemed to have registered on its behalf a
pro rata portion of the number of Registrable Securities included on a
Registration Statement for such transferor. Any shares of Common Stock included
on a Registration Statement on behalf of any person or entity which does not
hold any Registrable Securities shall be deemed registered on behalf of the
remaining Investors, pro rata based on the number of shares of Registrable
Securities then held by such Investors. For the avoidance of doubt, no provision
of this subsection shall operate to reduce the number of Registrable Securities
registered on behalf of any Investor pursuant to the first sentence of this
subsection.
l. For purposes of this Agreement, the term "Business
Day" means any day other than a Saturday or Sunday or a day on which banking
institutions in the State of New York or California are authorized or obligated
by law, regulation or executive order to close.
m. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.
n. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by any other
person.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
BAM! ENTERTAINMENT, INC.
By: /s/ Stephen Ambler
------------------------------------
Name: Stephen Ambler
Its: CFO/VP Finance
INITIAL INVESTORS:
By: ______________________________________
Name: ____________________________________
Its: _____________________________________
16
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
BAM! ENTERTAINMENT, INC.
By: ______________________________________
Name: ____________________________________
Its: _____________________________________
INITIAL INVESTORS:
AS CAPITAL PARTNERS, LLC
By: /s/ Michael Coughlin
--------------------------------------
Name: Michael Coughlin
Its: CFO
17
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
BAM! ENTERTAINMENT, INC.
By: ______________________________________
Name: ____________________________________
Its: _____________________________________
INITIAL INVESTORS:
BASSO EQUITY OPPORTUNITY HOLDING FUND LTD.
By: /s/ John Lepore
---------------------------------------
Name: John Lepore
Its: Authorized Signatory
18
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
BAM! ENTERTAINMENT, INC.
By: ______________________________________
Name: ____________________________________
Its: _____________________________________
INITIAL INVESTORS:
BRISTOL INVESTMENT FUND, LTD.
By: /s/ Paul Kessler
--------------------------------------
Name: Paul Kessler
Its: Director
19
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
BAM! ENTERTAINMENT, INC.
By: ______________________________________
Name: ____________________________________
Its: _____________________________________
INITIAL INVESTORS:
CRANSHIRE CAPITAL, L.P.
By: /s/ Mitchell P. Kopin
--------------------------------------
Name: Mitchell P. Kopin
Its: President - Cranshire Capital,
Inc. - the General Partner
20
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
BAM! ENTERTAINMENT, INC.
By: ______________________________________
Name: ____________________________________
Its: _____________________________________
INITIAL INVESTORS:
CRESCENT INTERNATIONAL LTD
By: /s/ Maxi Brezzi
---------------------------------------
Name: Maxi Brezzi
Its: Authorized Signatory
21
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
BAM! ENTERTAINMENT, INC.
By: ______________________________________
Name: ____________________________________
Its: _____________________________________
INITIAL INVESTORS:
OMICRON MASTER TRUST
By: /s/ Bruce Bernstein
--------------------------------------
Name: Bruce Bernstein
Its: Managing Partner
22
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
BAM! ENTERTAINMENT, INC.
By: ______________________________________
Name: ____________________________________
Its: _____________________________________
INITIAL INVESTORS:
SRG CAPITAL, LLC
By: /s/ Andrew J. Turchin
--------------------------------------
Name: Andrew J. Turchin
Its: Chief Financial Officer
23
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
BAM! ENTERTAINMENT, INC.
By: ______________________________________
Name: ____________________________________
Its: _____________________________________
INITIAL INVESTORS:
TRUK INTERNATIONAL FUND, LP
By: /s/ Stephen Saltzstein
-------------------------------------
Name: Stephen Saltzstein
Its: Principal
24
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
BAM! ENTERTAINMENT, INC.
By: ______________________________________
Name: ____________________________________
Its: _____________________________________
INITIAL INVESTORS:
TRUK OPPORTUNITY FUND, LLC
By: /s/ Stephen Saltzstein
--------------------------------------
Name: Stephen Saltzstein
Its: Principal
25
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
BAM! ENTERTAINMENT, INC.
By: ______________________________________
Name: ____________________________________
Its: _____________________________________
INITIAL INVESTORS:
VERTICAL VENTURES, LLC
By: /s/ Joshua Silverman
-------------------------------------
Name: Joshua Silverman
Its: Partner
26