Exhibit 4.5
WARRANT SHARES REGISTRATION RIGHTS AGREEMENT
WARRANT SHARES REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as
of May 24, 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. Of even date hereof, the Company's pending acquisition of VIS
Entertainment plc ("VIS") is going unconditional and the acquisition of SOE
Development Limited ("SOED") is closing.
B. The Company and the Initial Investors have (i) entered into financing
agreements of even date herewith, either a Securities Purchase Agreement or a
Settlement Agreement, as the case may be, providing for the issuance of (a)
shares of the Company's Series A Cumulative Convertible Preferred Stock, $10,000
liquidation preference per share, $0.001 par value, (b) shares of the Company's
Common Stock, $0.001 par value (the "COMMON STOCK"), or (c) 2% Secured
Convertible Debentures (the "FINANCING AGREEMENTS"); (ii) amended existing
promissory notes (the "SOED Notes") owing by SOED to the Initial Investors to
extend the term thereof and to make such notes convertible at the option of the
holder into shares of Common Stock; or (iii) effected the Financing Agreements,
the amendment to the SOED Notes or the going unconditional of VIS and the
closing of SOED. In connection with the foregoing, the Company has agreed, upon
the terms and subject to the conditions contained therein, to issue and sell to
the Initial Investors warrants (the "WARRANTS") to purchase shares of the
Company's Common Stock. The shares of Common Stock issuable upon exercise of
Warrants issued on the Closing Date under the foregoing are referred to herein
as the "WARRANT SHARES."
C. To induce the Initial Investors to execute and deliver the Financing
Agreements and/or effectuate the other transactions referenced in Recital B
above, 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) "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.
(ii) "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").
(iiiii) "REGISTRABLE SECURITIES" means (i) the Warrant Shares,
(ii) any Warrant Shares issuable pursuant to the anti-dilution provisions of the
Warrants, respectively, 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 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 Warrant 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.
(iiv) "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
Warrant Shares, which Registration Statement, to the extent allowable under the
Securities Act and the rules promulgated thereunder shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon exercise of the Warrants to
prevent dilution resulting from stock splits, stock dividends or similar
transactions (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
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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 two (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"), 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. The Company shall use its reasonable efforts to cause each
Registration Statement required to be filed pursuant to this Section 2(a) to
become effective as soon as practicable, but, as to the Initial Registration
Statement filed pursuant to this Section 2(a), in no event later than the
ninetieth (90th) calendar day after the Closing Date, and as to any Uncovered
Shares Amendment or Uncovered Shares Registration Statement, in no event later
than the 60th day after the Uncovered Shares Filing Deadline.
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 not be exclusive of any other remedies available at law or in equity).
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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 the Uncovered Share
Registration Deadline, as applicable, and prior to the date the 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 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, 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 $240,000. For example, if the Initial Registration Statement
is filed within the Filing Deadline but become 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:
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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
24 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 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
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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 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.
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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 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
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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 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 or agreements of even date
herewith may otherwise provide or (ii) in the case of the Common Stock
underlying the warrants to be issued to agents of the financing contemplated by
Securities Purchase Agreements of even date herewith) 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 any damages to such
Investor) 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
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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 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, (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
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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 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
10
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 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
11
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:
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, the Securities Purchase Agreement or the Warrants, the
Warrant 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
12
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 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.
13
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 CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CALIFORNIA. THE COMPANY AND PURCHASERS HEREBY IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN
THE STATE OF CALIFORNIA, CITY OF SAN JOSE 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 INVESTORS 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.
14
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.
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-one percent (51%) of the Registrable Securities (determined as
if all Warrants then outstanding had been exercised by the payment of cash) 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, (A) the number of
Registrable Securities held by an Investor shall be determined as if all
Warrants then outstanding and held by an Investor were exercised and (B) 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 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
15
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]
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: /s/ Ray Musci
----------------------------------------
Name: Ray Musci
Its: CEO
INITIAL INVESTORS:
APS Capital SA Lu Et Approve,
By: /s/ V Schauman - APS Capital SA
----------------------------------------
Name: Valerie Schauman Paris Le 19 Mai, 2004
Residence: 7 rue Paul Baudry
75008 Paris
France
Telephone No: +33 (1) 45438709
Attention: Valerie Schauman
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:
Martial Chaillet
By: /s/ Martial Chaillet
----------------------------
Name: Martial Chaillet
Residence: 12 rue de Cully
1091 Grandvaux
Switzerland
Telephone No.: +41 (79) 2120469
Telecopy No.: +41 22 839 72 49
Attention: Martial Chaillet
Email Address: martial.chaillet@mediawinpartners.com
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:
By: /s/ Alexander Mitchell
--------------------------
Name: Alexander Mitchell
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:
By: /s/ William R. Skutch
---------------------------
Name: William R. Skutch
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:
By: /s/ Michael Zimmerman
-------------------------
Name: Michael Zimmerman
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:
By: /s/ Ray Musci
---------------------------
Name: Ray Musci
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:
By: /s/ Mitchell P. Kopin
---------------------------
Name: Mitchell P. Kopin
Its: __________________________
President - Downsview Capital
The General Partner
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:
OMICRON MASTER TRUST
By: Omicron Capital L.P., as advisor
By: Omicron Capital Inc., its general partner
By: /s/ Bruce Bernstein
---------------------------
Name: Bruce Bernstein
Title: Managing Partner
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:
Iroquois Capital LP
By: /s/ Joshua Silverman
---------------------------
Name: Joshua Silverman
Its: Partner
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:
By: /s/ A.R. Williams
---------------------------
Name: A.R. Williams
Title: ________________________
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:
By: Mercator Trustees Limited As Trustees of the AR Williams 2000 Settlement
Name: AC Pickford /s/ AC Pickford
Title: Director
20/5/04
Name: R A Stevens /s/ R A Stevens
Title: Authorised Signatory
For Mercator Secretaries Limited
Corporate Secretary
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:
Laurus Master Fund, Ltd.
By: /s/ Illegible
----------------------------
Name: _________________________
Title: ________________________
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:
Vertical Ventures, LLC
By: /s/ Joshua Silverman
----------------------------
Name: Joshua Silverman
Title: Partner
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:
Nest Co Ltd
By: /s/ Hideo Oishi
---------------------------
Name: Hideo Oishi
Title: _______________________
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:
By: Phillips Sales, Inc.
Name: /s/ Illegible
-------------------------
Title: Secretary/Treasurer
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:
Performance Marketing, Inc.
By: /s/ Philip L. Rosenberg
---------------------------------
Name: Philip L. Rosenberg
Title: President
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:
Philip Rosenberg Sales, Ltd.
By: /s/ Philip L. Rosenberg
---------------------------------
Name: Philip L. Rosenberg
Title: President
17