Exhibit 4.2
VOID AFTER 5:00 P.M., CALIFORNIA TIME, ON MAY 24, 2009
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), or the securities laws of any state of the United
States. The securities represented hereby may not be offered or sold in
the absence of an effective registration statement for the securities
under applicable securities laws unless offered, sold or transferred under
an available exemption from the registration requirements of those laws.
NOTWITHSTANDING THE FOREGOING, THESE SECURITIES AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY SUCH SECURITIES.
Date: May 24, 2004
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 $0.594. 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 May 24, 2004, 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)(i) 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 (unless exercise is pursuant to
book-entry) 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 either a registration statement or 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 (unless exercise is pursuant to book-entry).
(ii)Book-Entry. Notwithstanding anything to the contrary set forth herein,
upon exercise of any portion of this Warrant in accordance with the terms
hereof, the holder of this Warrant shall not be required to physically surrender
this Warrant to the Company unless such holder is purchasing the full amount of
Warrant Shares represented by this Warrant. The holder of this Warrant and the
Company shall maintain records showing the number of Warrant Shares so purchased
hereunder and the dates of such purchases or shall use such other method,
reasonably satisfactory to the holder and the Company, so as not to require
physical surrender of this Warrant upon each such exercise. In connection
therewith a form of ledger to maintain a record of such transactions is attached
hereto. The holder of this Warrant and any assignee, by acceptance of this
Warrant or a new Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following exercise of any portion of this Warrant,
the number of Warrant Shares which may be purchased upon exercise of this
Warrant may be less than the number of Warrant Shares set forth on the face
hereof.
(b) Payment of Exercise Price. The holder shall pay the Exercise Price in
immediately
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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) or is not effective at the
time holder exercises this Warrant, the holder hereof may satisfy its obligation
to pay the Exercise Price through a "cashless exercise," in which event the
Company shall issue to the holder hereof the number of Warrant Shares determined
as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued to
the holder.
Y = the number of Warrant Shares with respect to
which this Warrant is being exercised.
A = the average of the Closing Prices for the five
Trading Days immediately prior to (but not including)
the Exercise Date.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
holder hereof, and the holding period for the Warrant Shares shall be deemed to
have commenced, on the date this Warrant was originally issued pursuant to the
Purchase Agreement.
2. Period of Exercise. Except as set forth in Section 7(g) and (h)
below, this Warrant may be exercised at any time or from time to time (an
"EXERCISE DATE") during the period (the "EXERCISE PERIOD") beginning on (a) the
date hereof and ending (b) at 5:00 p.m., California time, on 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
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accordance with the terms of this Warrant, be validly issued, fully paid and
nonassessable and free from all taxes, liens, claims and encumbrances.
(b) Reservation of Shares. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise in full of this Warrant (without giving effect to the
limitations on exercise set forth in Section 7(g) or 7(h) hereof).
(c) Listing. The Company has secured the listing of the shares of
Common Stock issuable upon exercise of or otherwise pursuant to this Warrant
upon each national securities exchange or automated quotation system, if any,
upon which shares of Common Stock are then listed or become listed (subject to
official notice of issuance upon exercise of this Warrant) and shall maintain,
so long as any other shares of Common Stock shall be so listed, such listing of
all shares of Common Stock from time to time issuable upon the exercise of or
otherwise pursuant to this Warrant; and the Company shall so list on each
national securities exchange or automated quotation system, as the case may be,
and shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of or otherwise pursuant to this Warrant if
and so long as any shares of the same class shall be listed on such national
securities exchange or automated quotation system.
(d) Certain Actions Prohibited. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issuance or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant. Without
limiting the generality of the foregoing, the Company (i) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Exercise Price then in effect, and (ii) will take all such
actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant.
(e) Successors and Assigns. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets.
(f) Blue Sky Laws. The Company shall, on or before the date of
issuance of any Warrant Shares, take such actions as the Company shall
reasonably determine are necessary to qualify the Warrant Shares for, or obtain
exemption for the Warrant Shares for, sale to the holder of this Warrant upon
the exercise hereof under applicable securities or "blue sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the holder of this Warrant prior to such date; provided, however, that the
Company shall not be required to qualify as a foreign corporation or file a
general consent to service of process in any such jurisdiction.
4. Antidilution Provisions. During the Exercise Period, the Exercise
Price and the number of Warrant Shares issuable upon the exercise of the
Warrants, shall be subject to adjustment from time to time as provided in this
Section 4.
In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up or down
to the nearest cent; provided
that, in no event shall the Exercise Price per share be reduced below $0.01.
(a) Subdivision or Combination of Common Stock. If the Company, at
any time during the Exercise Period, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company, at
any time during the Exercise Period, combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the date of record for
effecting such combination, the Exercise Price in effect immediately prior to
such combination will be proportionately increased.
(b) Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 4 other than a Company
Reduction as defined in Section 4(k), the number of shares of Common Stock
issuable upon exercise of this Warrant shall be increased or decreased to equal
the quotient obtained by dividing (i) the product of (A) the Exercise Price in
effect immediately prior to such adjustment, multiplied by (B) the number of
shares of Common Stock issuable upon exercise of this Warrant immediately prior
to such adjustment, by (ii) the adjusted Exercise Price .
(c) Consolidation, Merger or Sale. In case of any consolidation of
the Company with, or merger of the Company into, any other entity, or in case of
any sale or conveyance of all or substantially all of the assets of the Company
other than in connection with a plan of complete liquidation of the Company at
any time during the Exercise Period, then as a condition of such consolidation,
merger or sale or conveyance, adequate provision will be made whereby the holder
of this Warrant will have the right to acquire and receive upon exercise of this
Warrant in lieu of the shares of Common Stock immediately theretofore acquirable
upon the exercise of this Warrant, such shares of stock, securities, cash or
assets as may be issued or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore acquirable and receivable upon
exercise of this Warrant had such consolidation, merger or sale or conveyance
not taken place. In any such case, the Company will make appropriate provision
to insure that the provisions of this Section 4 will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor entity (if other than the Company) assumes by written
instrument the obligations under this Warrant and the obligations to deliver to
the holder of this Warrant such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the holder may be entitled to acquire.
If a transaction constitutes or results in a Change of Control, then at the
request of the holder hereof delivered before the 90th day after such
transaction, the Company (or any such successor or surviving entity) will
purchase the Warrant from the holder of this Warrant for a purchase price,
payable in cash within five Business Days after such request (or, if later, on
the effective date of such transaction), equal to the Black-Scholes value of the
remaining unexercised portion of this Warrant on the date of such request. For
the purposes of this Section, "CHANGE OF CONTROL" means the consummation of a
"Rule 13e-3 transaction" as defined in Rule 13e-3 under the Exchange Act with
respect to the Company that is initiated or agreed to by a member of the
Company's management.
(d) Distribution of Assets. In case the Company shall declare or
make any distribution of its assets (other than cash) (or rights to acquire its
assets (other than cash)) to all holders of Common Stock as a partial
liquidating dividend, stock repurchase, by way of return of
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capital or otherwise (including any dividend or distribution to the Company's
stockholders of shares (or rights to acquire shares) of capital stock of a
subsidiary) (a "DISTRIBUTION"), at any time during the Exercise Period, then,
upon exercise of this Warrant for the purchase of any or all of the shares of
Common Stock subject hereto, the holder of this Warrant shall be entitled to
receive its pro-rata amount of such assets (or such rights) as would have been
payable to the holder had such holder been the holder of such shares of Common
Stock on the record date for the determination of stockholders entitled to such
Distribution.
(e) Notice of Adjustment. Upon the occurrence of any event which
requires any adjustment of the Exercise Price other than a Company Reduction as
defined in Section 4(k), then, and in each such case, the Company shall give
notice thereof to the holder of this Warrant, which notice shall state the
Exercise Price resulting from such adjustment and the increase or decrease in
the number of Warrant Shares issuable upon exercise of this Warrant, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. Such calculation shall be certified by the chief
financial officer of the Company.
(f) Minimum Adjustment of the Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(g) No Fractional Shares. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the closing bid price of a share of
Common Stock on the Principal Market on the date of such exercise.
(h) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date or estimated date on which the books of the Company shall
close or a record shall be taken for determining the holders of Common Stock
entitled to receive any such dividend, distribution,
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or subscription rights or for determining the holders of Common Stock entitled
to vote in respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up and (b) in the case of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not then known, a
reasonable estimate thereof by the Company) when the same shall take place. Such
notice shall also specify the date on which the holders of Common Stock shall be
entitled to receive such dividend, distribution, or subscription rights or to
exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding-up, as the case may be. Such notice
shall be given at least fifteen (15) days prior to the record date or the date
on which the Company's books are closed in respect thereto. Failure to give any
such notice or any defect therein shall not affect the validity of the
proceedings referred to in clauses (i), (ii), (iii) and (iv) above.
Notwithstanding the foregoing, the Company may publicly disclose the substance
of any notice delivered hereunder prior to delivery of such notice to the holder
of this Warrant.
(i) Certain Events. If, at any time during the Exercise Period,
any event occurs of the type contemplated by the adjustment provisions of this
Section 4 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Section 4(e) hereof, and the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by such
event.
(j) Certain Definitions.
(i) "BUSINESS DAY" means any day, other than a Saturday or
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law, regulation or executive order to close.
(ii) "COMMON STOCK," for purposes of this Section 4, includes
the Common Stock and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only Common Stock in
respect of which this Warrant is exercisable, or shares resulting from any
subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 4(c) hereof, the stock or other securities or
property provided for in such Section.
(iii) "PRINCIPAL MARKET" means the Nasdaq Stock Market or, if
the Common Stock is not traded on the Nasdaq Stock Market, then the principal
securities exchange or trading market for the Common Stock.
(k) Redemption at Company's Election. The Company may at the
option of its Board of Directors, by at least thirty-days' ("NOTICE PERIOD")
written notice to the holder (the "REDEMPTION NOTICE"), redeem this Warrant, in
whole, provided that (i) the Closing Price for twenty of the preceding thirty
Trading Days ("PRICING PERIOD") is equal to or greater than $3.00 (as may be
adjusted for any stock splits, etc.), (ii) at all times during the Notice Period
and Pricing Period, either (A) all of the Warrant Shares underlying this Warrant
to be redeemed are then registered under an effective registration statement or
(B) may be sold pursuant to Rule 144 during a three-month period without
registration under the Securities Act, (iii) at all times during the Notice
Period and Pricing Period, sufficient shares of Common Stock of the Company are
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authorized and reserved for issuance upon the full exercise of this Warrant and
(iv) at all times during the Notice Period and Pricing Period, all of the
Warrant Shares issuable upon exercise of this Warrant are then listed on either
the Nasdaq Small Cap Market, Nasdaq National Market System, American Stock
Exchange or New York Stock Exchange, as the case may be. The Redemption Notice
shall set forth a date, not less than thirty days after the date of the
Redemption Notice, on which the redemption of this Warrant shall occur (the
"REDEMPTION DATE"). On the Redemption Date, (i) the Company shall pay the holder
by certified check an amount equal to the product of (x) $0.01 (as adjusted in
proportion to any adjustment to the Exercise Price pursuant to Section 3 hereof)
multiplied by (y) the number of Warrant Shares so redeemed; and (ii) the holder
shall deliver the original copy of this Warrant marked "REDEEMED" to the
Company. If the Company shall redeem this Warrant in part, the Company shall, at
the Redemption Date, provided that the holder shall have delivered the original
copy of this Warrant marked "REDEEMED" to the Company, deliver to the holder a
new Warrant evidencing the rights of the holder to purchase the unredeemed
shares of Common Stock called for by this Warrant, which new Warrant shall in
all other respects be identical with this Warrant. Nothing in this Section 4(k)
shall prevent the exercise of the Warrants at any time prior to the Redemption
Date.
(l) 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.
5. 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.
6. 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
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right to purchase such number of shares as shall be designated by the holder
hereof at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Section 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Section 7.
(e) Warrant Register. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of
the surrender of this Warrant in connection with any exercise (but only when the
Warrant Shares are to be issued other than in the name of the holder of the
Warrant), 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
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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.
7. 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.
8. Notices. Any notices required or permitted to be given under the
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier, or by confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
BAM! Entertainment, Inc.
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.
10
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.
9. 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.
10. 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
11
protect the rights of the holder hereof against impairment. Without limiting the
generality of the foregoing, the Company (i) will not increase the par value of
any Warrant Shares above the amount payable therefor on such exercise, (ii) will
take all such action as may be reasonably necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable Warrant
Shares on the exercise of this Warrant, and (iii) will not close its stockholder
books or records in any manner which interferes with the timely exercise of this
Warrant.
(f) In addition to any other rights available to a holder hereof,
if the Company fails to deliver to the holder hereof a certificate representing
Warrant Shares by the fifth Business Day after the date on which delivery of
such certificate is required by this Warrant, and if after such fifth Business
Day the holder hereof purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the holder hereof
of the Warrant Shares that the holder hereof anticipated receiving from the
Company (a "Buy-In"), then the Company shall, within three Business Days after
the holder hereof requests and in the discretion of the holder hereof, either
(i) pay cash to the holder hereof in an amount equal to the holder's total
purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "Buy-In Price"), at which point the Company's
obligation to deliver such certificate (and to issue such Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to the holder hereof
a certificate or certificates representing such Common Stock and pay cash to the
holder hereof in an amount equal to the excess (if any) of the Buy-In Price over
the product of (A) such number of shares of Common Stock, times (B) the Closing
Price on the date of the event giving rise to the Company's obligation to
deliver such certificate. Notwithstanding anything to the contrary, this Section
11(f) shall not apply if the Company has used its best efforts to deliver the
certificates, but such certificates were not delivered due to the Transfer
Agent's failure to deliver the certificates in accordance with timely
instructions from the Company.
(g) The Company's obligations to issue and deliver Warrant Shares
in accordance with the terms hereof are absolute and unconditional, irrespective
of any action or inaction by the holder hereof to enforce the same, any waiver
or consent with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the holder hereof or any other Person of any obligation to the Company
or any violation or alleged violation of law by the holder hereof or any other
Person, and irrespective of any other circumstance which might otherwise limit
such obligation of the Company to the holder hereof in connection with the
issuance of Warrant Shares. Nothing herein shall limit a right of the holder
hereof to pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company's failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
12
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
BAM! ENTERTAINMENT, INC.
By: _____________________________________
Name:
Title:
13
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.
RECORD OF WARRANT EXERCISES
HOLDER: ____________________ INITIAL NO. OF WARRANT SHARES__________
NUMBER OF REMAINING
UNEXERCISED WARRANT SHARES
NUMBER OF WARRANT SHARES UNDERLYING WARRANT FOLLOWING INITIALS
DATE OF EXERCISE PURCHASED UPON EXERCISE EXERCISE (CORP./HOLDER)
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