EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of September
30, 2003, by and among BAM! ENTERTAINMENT, INC., a corporation organized under
the laws of the State of Delaware (the "COMPANY"), and the purchasers (the
"PURCHASERS") set forth on the execution pages hereof (the "EXECUTION PAGES").
WHEREAS:
A. The Company and each Purchaser are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by the provisions of Regulation D ("REGULATION D"), as promulgated by
the United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "SECURITIES ACT").
B. Each Purchaser desires to purchase, severally and not jointly,
subject to the terms and conditions stated in this Agreement, (i) shares of the
Company's common stock, $0.001 par value (the "COMMON STOCK"), (ii) warrants in
the form attached hereto as Exhibit A (including any warrants issued in
replacement thereof, the "WARRANTS"), to acquire shares of Common Stock; and
(iii) additional investment rights in the form attached hereto as Exhibit B (the
"Additional Investment Rights"). The shares of Common Stock issuable upon
exercise of or otherwise pursuant to the Warrants are referred to herein as the
"WARRANT SHARES." The shares of Common Stock issuable upon exercise of the
Additional Investment Rights are referred to herein as the "ADDITIONAL
INVESTMENT RIGHT SHARES." The warrants issuable upon exercise of the Additional
Investment Rights are referred to herein as the "ADDITIONAL INVESTMENT RIGHT
WARRANTS." The shares of Common Stock issuable upon exercise of or otherwise
pursuant to the Additional Investment Right Warrants are referred to herein as
the "ADDITIONAL INVESTMENT RIGHT WARRANT SHARES."
C. Contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Common Stock
Registration Rights Agreement in the form attached hereto as Exhibit C (the
"COMMON STOCK REGISTRATION RIGHTS AGREEMENT"), and a Warrant Shares Registration
Rights Agreement in the form attached hereto as Exhibit D (the "WARRANT SHARES
REGISTRATION RIGHTS AGREEMENTS" and collectively with the Common Stock
Registration Rights Agreement the "REGISTRATION RIGHTS AGREEMENTS") pursuant to
which the Company has agreed to provide certain registration rights under the
Securities Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.
NOW, THEREFORE, the Company and the Purchasers hereby agree as follows:
1. CERTAIN DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings ascribed to them as provided below:
"AFFILIATE" or "AFFILIATES" means, with respect to any Person, any
other Person that directly or indirectly controls, is controlled by, or is under
common control with, such Person.
"BUSINESS DAY" shall mean any day on which the principal United States
securities exchange or trading market on which the Common Stock is listed or
traded.
"COMMON STOCK EQUIVALENTS" means, collectively, Options and Convertible
Securities.
"CONVERTIBLE SECURITIES" means any stock or securities (other than
Options) convertible into or exercisable or exchangeable for Common Stock.
"INVESTMENT AMOUNT" shall mean the dollar amount to be invested in the
Company at the Closing pursuant to this Agreement by a Purchaser, as set forth
on the Execution Page hereto executed by such Purchaser.
"LIEN" means any lien, charge, claim, security interest, encumbrance,
right of first refusal or other restriction.
"MATERIAL ADVERSE EFFECT" shall mean an event that (i) adversely affect
the legality, validity or enforceability of any Transaction Document, (ii) have
or result in a material adverse effect on the results of operations, assets,
prospects, business or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) adversely impair the Company's ability
to perform fully on a timely basis its obligations under any of the Transaction
Document; provided, that none of the following alone shall be deemed, in and of
itself, to constitute a Material Adverse Effect: (i) a change in the market
price or trading volume of the Common Stock or (ii) changes in general economic
conditions or changes affecting the industry in which the Company operates
generally (as opposed to Company-specific changes) so long as such changes do
not have a disproportionate effect on the Company and its Subsidiaries taken as
a whole.
"OPTIONS" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
"PERSON" means an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"PRO RATA PERCENTAGE" shall mean, with respect to any Purchaser, a
percentage computed by dividing such Purchaser's Investment Amount by the
aggregate Investment Amounts of all Purchasers.
"SECURITIES" shall mean the Shares, the Warrants, the Warrant Shares,
the Additional Investment Rights, the Additional Investment Right Shares and the
Additional Investment Right Warrant Shares.
2
"SHARES" means the shares of Common Stock to be issued and sold by the
Company and purchased by the Purchasers at the Closing.
"SUBSIDIARY" or "SUBSIDIARIES," when used with respect to subsidiaries
of the Company in Section 4 of this Agreement, means or includes only a
"Significant Subsidiary" as defined in Rule 405 of Regulation C under the
Securities Act.
"TRANSACTION DOCUMENTS" means this Agreement, the Warrants, the
Additional Investment Rights, the Registration Rights Agreements, the Transfer
Agent Instructions and any other documents or agreements executed in connection
with the transactions contemplated hereunder.
"TRANSFER AGENT" means American Stock Transfer & Trust Company, or any
other transfer agent selected by the Company.
"TRANSFER AGENT INSTRUCTIONS" means the Transfer Agent Instructions, in
the form of Exhibit E, executed by the Company and delivered to and acknowledged
in writing by the Transfer Agent.
2. PURCHASE AND SALE OF SHARES AND WARRANTS.
a. Generally. Except as otherwise provided in this Section 2 and
subject to the satisfaction (or waiver) of the conditions set forth in Section 6
and Section 7 below, each Purchaser shall purchase the number of Shares,
Warrants and Additional Investment Rights determined as provided in this Section
2, and the Company shall issue and sell such number of Shares, Warrants and
Additional Investment Rights to each Purchaser for such Purchaser's Investment
Amount as provided below. The Company's agreement with each of the Purchasers is
a separate agreement, and the sale of the Securities to each of the Purchasers
is a separate sale.
b. Number of Closing Shares and Warrants; Form of Payment;
Closing Date.
i. On the Closing Date (as defined below), the Company
shall sell and each Purchaser shall buy (A) the number of Shares as is equal to
the quotient of (I) such Purchaser's Investment Amount divided by (II) $0.96,
(B) Warrants exercisable for a number of shares of Common Stock equal to 90% of
the number of Shares referred to in subclause (A) above and (C) an Additional
Investment Right to purchase that number of Additional Investment Right Shares
and Additional Investment Rights Warrants, each as set forth on Exhibit F
hereto. On the Closing Date, each Purchaser shall pay the Company an amount
equal to such Purchaser's Investment Amount.
ii. On the Closing Date, each Purchaser shall pay its
Investment Amount by wire transfer to the Company, in accordance with the
Company's written wiring instructions against delivery of certificates
representing the Shares and duly executed Warrants and Additional Investment
Rights being purchased by such Purchaser, and the Company shall deliver such
Shares, Warrants and Additional Investment Rights against delivery of the such
Purchaser's Investment Amount.
3
iii. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the sale of the Shares, Warrants and Additional Investment Rights pursuant to
this Agreement (the "CLOSING") shall be 3:00 p.m. California time on October 1,
2003 or such other date or time as the Purchasers and the Company may mutually
agree ("CLOSING DATE"). The Closing shall occur at the Proskauer Rose LLP, or at
such other place as Purchasers and the Company may otherwise mutually agree.
3. THE PURCHASER'S REPRESENTATIONS AND WARRANTIES.
Each Purchaser severally and not jointly represents and warrants to the
Company as follows:
a. Purchase for Own Account. The Purchaser is purchasing the
Securities for the Purchaser's own account and not with a present view towards
the distribution thereof. The Purchaser understands that the Purchaser must bear
the economic risk of this investment indefinitely, unless the Securities are
registered pursuant to the Securities Act and any applicable state securities or
blue sky laws or an exemption from such registration is available, and that the
Company has no present intention of registering any such Securities other than
as contemplated by the Registration Rights Agreements. Notwithstanding anything
in this Section 3(a) to the contrary, by making the foregoing representation,
the Purchaser does not agree to hold the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption from
registration under the Securities Act and any applicable state securities laws;
provided, that in the case of any transfer of the Securities pursuant to an
exemption, such transfer is made in accordance with the provisions of Section
3(e).
b. Information. The Purchaser has been furnished all materials
(excluding any material nonpublic information) relating to the business,
finances and operations of the Company and its Subsidiaries and materials
relating to the offer and sale of the Securities that have been requested by the
Purchaser. The Purchaser has been afforded the opportunity to ask questions of
the Company and has received what the Purchaser believes to be satisfactory
answers to any such inquiries. The Purchaser understands that its investment in
the Securities involves a high degree of risk.
c. Governmental Review. The Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
d. Authorization; Enforcement. The Purchaser has the requisite
power and authority to enter into and perform its obligations under this
Agreement and to purchase the Securities in accordance with the terms hereof.
This Agreement has been duly and validly authorized, executed and delivered on
behalf of the Purchaser and is a valid and binding agreement of the Purchaser
enforceable against the Purchaser in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other laws affecting creditors' rights and remedies generally and
to general principles of equity (regardless of whether enforcement is sought in
a proceeding at law or in equity).
4
e. Transfer or Resale. The Purchaser understands that (i) except
as provided in the Registration Rights Agreements, the Securities have not been
and are not being registered under the Securities Act or any state securities
laws, and may not be transferred unless (a) subsequently registered thereunder
or sold pursuant to Rule 144(k) under the Securities Act, or (b) the Purchaser
shall have delivered to the Company an opinion of counsel reasonably acceptable
to the Company (which opinion shall be in form, substance and scope customary
for opinions of counsel in comparable transactions) to the effect that the
Securities to be sold or transferred may be sold or transferred under an
exemption from such registration, and (ii) neither the Company nor any other
Person is under any obligation to register such Securities under the Securities
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder, in each case, other than pursuant to the Registration
Rights Agreements.
f. Legends. The Purchaser understands that the Securities may
bear a restrictive legend in substantially the following form:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH
THESE SECURITIES ARE EXERCISABLE] HAVE [NOT] 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.
Certificates evidencing Securities shall not be required to contain
such legend or any other legend (i) while a Registration Statement covering the
resale of such Securities is effective under the Securities Act provided the
Purchasers at the time any of the Purchasers request a removal of the Legend on
any certificate evidencing all or any portion of any of the Securities or to
transfer any of the same, it (or a broker acting on such Purchaser's behalf)
provides to the Company (or to the Transfer Agent on the Company's behalf),
reasonable written assurances to the effect that any of the Securities, sold or
to be sold by such Purchasers have been, or will be, sold in accordance with the
plan of distribution set forth in the Prospectus and in compliance with the
prospectus delivery requirements under the Securities Act., or (ii) following
any sale of such Securities pursuant to Rule 144, or (iii) if such Securities
are eligible for sale under Rule 144(k), or (iv) if such legend is not required
under applicable requirements of the Securities Act
5
(including judicial interpretations and pronouncements issued by the Staff of
the SEC). The Company shall cause its counsel to issue the legal opinion
included in the Transfer Agent Instructions to the Transfer Agent on the
Effective Date. Following the Effective Date or at such earlier time as a legend
is no longer required for certain Securities, the Company will no later than
three Business Days following the delivery by a Purchaser to the Company or the
Transfer Agent of a legended certificate representing such Securities, deliver
or cause to be delivered to such Purchaser a certificate representing such
Securities that is free from all restrictive and other legends. The Company may
not make any notation on its records or give instructions to any transfer agent
of the Company that enlarge the restrictions on transfer set forth in this
Section.
The Company acknowledges and agrees that a Purchaser may from time to
time pledge or grant a security interest in some or all of the Securities in
connection with a bona fide margin agreement or other loan or financing
arrangement secured by the Securities and, if required under the terms of such
agreement, loan or arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or transfer would
not be subject to approval of the Company and no legal opinion of the pledgee,
secured party or pledgor shall be required in connection therewith, but such
legal opinion may be required in connection with a subsequent transfer following
default by the Purchaser transferee of the pledge. Further, no notice shall be
required of such pledge. At the appropriate Purchaser's expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of
selling stockholders thereunder.
g. Investor Status. The Purchaser is an "ACCREDITED INVESTOR"
within the meaning of Rule 501 Regulation D under the Securities Act. In the
normal course of its business, it invests in or purchases securities similar to
the Securities and it has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of
purchasing the Securities. The Purchaser is not a registered broker dealer or an
Affiliate of any broker or dealer registered under Section 15(a) of the Exchange
Act, or a member of the National Association of Securities Dealers, Inc. or a
Person engaged in the business of being a broker dealer.
h. Restricted Securities. The Purchaser understands that the
Securities are characterized as "restricted securities" under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act only in certain limited circumstances.
i. No Short Positions or Stock Ownership. Except as previously
disclosed to the Company in writing, each Purchaser has not, prior to the 30
Business Days prior to the Closing Date, entered into any Short Sales. For
purposes of this Section 3.2(i), a "SHORT SALE" by a Purchaser means a sale of
Common Stock that is marked as a short sale and that is executed at a time when
such Purchaser has no equivalent offsetting long position in the Common Stock.
For purposes of determining whether a Purchaser has an equivalent offsetting
long position in the Common Stock, all Common Stock and all Common Stock that
would be issuable upon conversion or exercise in full of all Options then held
by such Purchaser (assuming that such
6
Options were then fully convertible or exercisable, notwithstanding any
provisions to the contrary, and giving effect to any conversion or exercise
price adjustments scheduled to take effect in the future) shall be deemed to be
held long by such Purchaser.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser as follows:
a. Organization and Qualification. Each of the Company and its
Subsidiaries is a corporation duly organized and existing under the laws of the
jurisdiction in which it is incorporated, and has the requisite corporate power
to own its properties and to carry on its business as now being conducted. Each
of the Company and its Subsidiaries is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which the nature
of the business conducted by it makes such qualification necessary and where the
failure so to qualify would have a Material Adverse Effect. The Company has no
direct or indirect Subsidiaries other than those listed in Schedule 4(a). Except
as disclosed in Schedule 4 (a), the Company owns, directly or indirectly, all of
the capital stock or comparable equity interests of each Subsidiary free and
clear of any Lien, and all the issued and outstanding shares of capital stock or
comparable equity interests of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights.
b. Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Warrants, the Additional Investment Rights, the Additional
Investment Right Warrants and the Registration Rights Agreements, to issue and
sell the Shares, the Warrants, the Additional Investment Rights, the Additional
Investment Right Shares and the Additional Investment Right Warrants in
accordance with the terms hereof and to issue the Warrant Shares and the
Additional Investment Right Warrant Shares upon exercise of the Warrants and the
Additional Investment Right Warrants, respectively, in accordance with the terms
of said warrants; (ii) the execution, delivery and performance of this
Agreement, the Warrants, the Additional Investment Rights, the Additional
Investment Right Warrants and the Registration Rights Agreements by the Company
and the consummation by it of the transactions contemplated hereby and thereby
(including, without limitation, the reservation for issuance and issuance of the
Shares and the Additional Investment Rights Shares and the issuance of the
Warrants, the Additional Investment Rights and the Additional Investments Right
Warrants and the reservation for issuance and issuance of the Warrant Shares and
the Additional Investment Right Warrants Shares) have been duly authorized by
the Company's Board of Directors and no further consent or authorization of the
Company, its Board of Directors or its shareholders is required; (iii) this
Agreement has been duly executed and delivered by the Company; and (iv) this
Agreement constitutes, and, upon execution and delivery by the Company and the
other parties thereto to the extent required of the Registration Rights
Agreements, the Warrants, the Additional Investment Rights, and the Additional
Investments Rights Warrants, such agreements will constitute, valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other laws affecting
creditors' rights and remedies generally and to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity).
7
c. Capitalization. The capitalization of the Company as of the
date hereof is set forth on Schedule 4(c), including the authorized capital
stock, the number of shares issued and outstanding, the number of shares
issuable and reserved for issuance pursuant to the Company's stock option plans,
the number of shares issuable and reserved for issuance pursuant to securities
exercisable for, or convertible into or exchangeable for any shares of capital
stock. All of such outstanding shares of the Company's capital stock have been,
or upon issuance will be, validly issued, fully paid and nonassessable. Except
as set forth on Schedule 4(c), no shares of capital stock of the Company
(including the Shares, the Warrant Shares, the Additional Investment Right
Shares and the Additional Investment Right Warrant Shares) or any of the
Subsidiaries are subject to preemptive rights or any other similar rights of the
shareholders of the Company or any liens or encumbrances. Except for the
Securities and as disclosed in Schedule 4(c), as of the date of this Agreement,
(i) there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever to which the Company or any of
its Subsidiaries is a party relating to the issuance by the Company or any of
its Subsidiaries of securities or rights convertible into or exercisable or
exchangeable for, any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or such Subsidiaries, and (ii) there are no agreements or arrangements under
which the Company or any of its Subsidiaries is obligated to register the sale
of any of its or their securities under the Securities Act (except the
Registration Rights Agreements). Except as set forth on Schedule 4(c), there are
no securities or instruments containing antidilution or similar provisions that
may be triggered by the issuance of the Securities in accordance with the terms
of this Agreement, the Warrants, the Additional Investment Rights, the
Additional Investment Right Warrants or the Registration Rights Agreements and
the holders of the securities and instruments listed on such Schedule 4(c) have
waived any rights they may have under such antidilution or similar provisions in
connection with the issuance of the Securities in accordance with the terms of
this Agreement, the Warrants, the Additional Investment Rights, the Additional
Investment Right Warrants or the Registration Rights Agreements. The Company has
made available to each Purchaser true and correct copies of the Company's
Certificate of Incorporation as in effect on the date hereof ("CERTIFICATE OF
INCORPORATION"), the Company's By-laws as in effect on the date hereof (the
"BY-LAWS") and all other instruments and agreements governing securities
convertible into or exercisable or exchangeable for capital stock of the
Company, except for stock options granted under any benefit plan of the Company.
d. Issuance of Shares. The Shares are duly authorized and when
issued and paid for in accordance with the terms hereof, will be validly issued,
fully paid and non-assessable, and free from all taxes and Liens (other than
those imposed through acts or omissions of the Purchaser thereof) and will not
be subject to preemptive rights or other similar rights of shareholders of the
Company. The Warrant Shares, the Additional Investment Right Shares and the
Additional Investment Rights Warrant Shares are duly authorized and reserved for
issuance, and, upon exercise of the Warrants, the Additional Investment Rights
and/or the Additional Investment Right Warrants, as the case may be, in
accordance with the terms thereof, will be validly issued, fully paid and
non-assessable and free from all taxes and Liens (other than those imposed
through acts or omissions of the Purchaser thereof) and will not be subject to
preemptive rights or other similar rights of shareholders of the Company.
e. No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreements, the Warrants and the Additional
Investment Rights by the
8
Company, and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the reservation for issuance
and issuance of the Shares, the Warrant Shares, the Additional Investment Right
Shares and the Additional Investment Right Warrant Shares and the issuance of
the Warrants, the Additional Investment Rights and the Additional Investment
Right Warrants) will not (i) conflict with or result in a violation of the
Certificate of Incorporation or By-laws or (ii) conflict with, or constitute a
default (or an event which, with notice or lapse of time or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including (assuming the
accuracy of the representations and warranties of the Purchasers) the United
States federal and state securities laws and regulations) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected (except, with respect to
clause (ii), for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). Neither the Company nor any of its
Subsidiaries is in violation of its Certificate of Incorporation, By-laws and
other organizational documents and neither the Company nor any of its
Subsidiaries is in default (and no event has occurred which, with notice or
lapse of time or both, would put the Company or any of its Subsidiaries in
default) under, nor has there occurred any event giving others (with notice or
lapse of time or both) any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party, except for actual or possible violations,
defaults or rights as would not, individually or in the aggregate, have a
Material Adverse Effect. The businesses of the Company and its Subsidiaries are
not being conducted in violation of any law, ordinance or regulation of any
governmental entity, except for actual or possible violations, if any, the
sanctions for which either singly or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the Securities Act and any applicable state securities laws and
assuming the accuracy of the representations and warranties of the Purchasers,
the Company is not required to obtain any consent, approval, authorization or
order of, or make any filing or registration with, any court or governmental
agency or any regulatory or self regulatory agency in order for it to execute,
deliver or perform any of its obligations under this Agreement including without
limitation the issuance and sale of the Shares, Warrants and the Additional
Investment Rights as provided hereby), the Warrants and the Additional
Investment Rights Warrants (including without limitation the issuance of the
Warrant Shares and the Additional Investment Right Warrant Shares) or the
Registration Rights Agreements, in each case in accordance with the terms hereof
or thereof. The Company is not currently in violation of the listing or
maintenance requirements of The Nasdaq Stock Market. The Company does not
reasonably anticipate that the Common Stock will be delisted by The Nasdaq Stock
Market in the twelve month period following the Closing Date based on its rules
(and interpretations thereof) as currently in effect.
f. SEC Documents; Financial Statements. Since September 1, 2002,
the Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and has filed all
registration statements and other documents required to be filed by it with the
SEC pursuant to the Securities Act (all of the foregoing filed prior to the date
hereof, and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein, being hereinafter
referred to herein as the "SEC
9
DOCUMENTS"). The Company has made available to each Purchaser via the SEC's
Electronic Data Gathering, Analysis and Retrieval (XXXXX) system true and
complete copies of the SEC Documents. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any statements made in any such SEC Documents that are or were
required to be updated or amended under applicable law have been so updated or
amended. As of their respective dates, the financial statements of the Company
included in the SEC Documents complied in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
applicable with respect thereto. Such financial statements have been prepared in
accordance with United States 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 fairly present in all
material respects the consolidated financial position of the Company and its
Subsidiaries as of the dates thereof and the results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal and recurring year-end audit adjustments). Except as set
forth in the SEC Documents, the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to the date of such SEC Documents and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in such
SEC Documents, which liabilities and obligations referred to in clauses (i) and
(ii), individually or in the aggregate, would not have a Material Adverse
Effect.
g. Absence of Certain Changes. Since the date of the latest
audited financial statements included within the SEC Documents, except as
specifically disclosed in the SEC Documents, (i) there has been no event,
occurrence or development that, individually or in the aggregate, has had or
that could result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to generally accepted accounting principals or
required to be disclosed in filings made with the SEC, (iii) the Company has not
altered its method of accounting or the identity of its auditors, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option and stock purchase plans.
h. Absence of Litigation. Except as disclosed in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory organization
or body pending or, to the knowledge of the Company, threatened against or
affecting the Company, or any of its Subsidiaries, or any of their directors or
officers in their capacities as such which would have a Material Adverse Effect.
10
i. Intellectual Property. The Company and each of its
Subsidiaries owns or is licensed to use all patents, patent applications,
trademarks, trademark applications, trade names, service marks, copyrights,
copyright applications, licenses, permits, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures) and other similar rights and proprietary knowledge
(collectively, "INTANGIBLES") necessary for the conduct of its business as now
being conducted and as proposed to be conducted. Except as disclosed in the SEC
Documents, neither the Company nor any of its Subsidiaries has received written
notice that it is infringing upon or in conflict with any third party
Intangibles. Except as disclosed in the SEC Documents, neither the Company nor
any of its Subsidiaries has entered into any consent, indemnification,
forbearance to xxx or settlement agreements with respect to the validity of the
Company's or such Subsidiary's ownership or right to use its Intangibles. The
Intangibles are valid and enforceable, and, without the Company intending to
allow such result, no registration relating thereto has lapsed, expired or been
abandoned or canceled or is the subject of cancellation or other adversarial
proceedings, and all applications therefor are pending and in good standing. The
Company has complied with its contractual obligations relating to the protection
of the Intangibles used pursuant to licenses with such exceptions that would not
and will not have a Material Adverse Effect. To the Company's knowledge, no
Person is infringing on or violating the Intangibles owned or used by the
Company.
j. Environment. Except as disclosed in the SEC Documents (i)
there is no environmental liability, nor factors likely to give rise to any
environmental liability, affecting any of the properties of the Company or any
of its Subsidiaries that, individually or in the aggregate, would have a
Material Adverse Effect and (ii) neither the Company nor any of its Subsidiaries
has violated any environmental law applicable to it now or previously in effect,
other than such violations or infringements that, individually or in the
aggregate, have not had and will not have a Material Adverse Effect.
k. Title. The Company and each of its Subsidiaries has good title
in fee simple to all real property and good title to all personal property owned
by it which is material to its business, free and clear of all liens,
encumbrances and defects except for such defects in title that, individually or
in the aggregate, would not have a Material Adverse Effect. Any real property
and facilities held under lease by the Company or any of its Subsidiaries are
held by the Company or such Subsidiary under valid, subsisting and enforceable
leases with such exceptions which have not had and will not have a Material
Adverse Effect.
l. Insurance. Except as disclosed in the SEC Documents, the
Company and its Subsidiaries maintain such insurance relating to their business,
operations, assets, key-employees and officers and directors as is appropriate
to their business, assets and operations, in such amounts and against such risks
as are customarily carried and insured against by owners of comparable
businesses, assets and operations, and such insurance coverages will be
continued in full force and effect to and including the Closing Date other than
those insurance coverages in respect of which the failure to continue in full
force and effect would not reasonably be expected to have a Material Adverse
Effect.
m. Acknowledgment Regarding the Purchasers' Purchase of the
Securities. The Company acknowledges and agrees that no Purchaser is acting as a
financial advisor or is acting
11
as a fiduciary of the Company (or in any similar capacity) with respect to this
Agreement or the transactions contemplated hereby, and the relationship between
the Company and the Purchasers is "arms length" and that any statement made by
any Purchaser or any of its Affiliates, representatives or agents in connection
with this Agreement and the transactions contemplated hereby is not advice or a
recommendation and is merely incidental to such Purchaser's purchase of
Securities and has not been relied upon by the Company, its officers or
directors in any way except for the Purchaser's representations and warranties
in Section 3 hereof. The Company further represents to the Purchaser that the
Company's decision to enter into this Agreement has been based solely on an
independent evaluation by the Company and its representatives.
n. No Brokers. Except as described in Schedule 4(n), all of which
are payable at the Closing, to the knowledge of the Company, to registered
broker-dealers, no brokerage or finder's fees or commissions are or will be
payable by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement, and the Company has not taken any
action that would cause any Purchaser to be liable for any such fees or
commissions.
o. Tax Status. The Company and each of its Subsidiaries has made
or filed all material federal, state and local income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company or the applicable Subsidiary has
set aside on its books provisions adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no material unpaid taxes claimed to be due by the
taxing authority of any jurisdiction. The Company has not executed a waiver with
respect to any statute of limitations relating to the assessment or collection
of any federal, state or local tax. None of the Company's tax returns have been
or is being audited by any taxing authority.
p. No General Solicitation. Neither the Company nor to the
knowledge of the Company any Person participating on the Company's behalf in the
transactions contemplated hereby has conducted any "general solicitation" or
"general advertising" as such terms are used in Regulation D, with respect to
any of the Securities being offered hereby; provided, however, that the Company
makes no representation or warranty with respect to the activities of any of the
placement agents or any Affiliate of any of them engaged by the Company in
connection with the transactions contemplated by this Agreement (collectively
the "PLACEMENT AGENTS").
q. Securities Laws. Neither the Company, nor any Affiliate of the
Company, nor any Person acting on its behalf or on behalf of such Affiliate,
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security under circumstances that would require
registration of the Securities being offered hereby under the Securities Act or
cause this offering of Securities to be integrated with any prior offering of
securities of the Company for purposes of the Securities Act provided, however,
that the Company makes no representation or warranty with respect to the
activities of any of the Placement Agents or any of Affiliate of any of them.
Assuming the truth and accuracy of the Purchasers' representations and
warranties, the offer, sale and delivery of shares of Common Stock upon exercise
of the Warrants will be exempt from the registration requirements of Section 5
of the Securities Act.
12
r. Form S-3 Eligibility. The Company is currently eligible to
register the resale of its Common Stock on a registration statement on Form S-3
under the Securities Act. The Company is not aware of any facts or circumstances
(including without limitation any required approvals or waivers of 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 (as defined in
the Registration Rights Agreements) 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.
s. Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or their agents
or counsel with any information that constitutes or might constitute material,
nonpublic information. The Company understands and confirms that each of the
Purchasers will rely on the foregoing representations in effecting transactions
in securities of the Company. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf of the
Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or information
exists with respect to the Company or any of its Subsidiaries or its or their
business, properties, prospects, operations or financial conditions, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed, except, until such time as the press release is issued as
contemplated by Section 5(i), the execution of this Agreement. The Company
acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.
t. Solvency. Based on the financial condition of the Company as
of the Closing Date, (i) the Company's fair saleable value of its assets exceeds
the amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities) as
they mature; (ii) the Company's assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and (iii)
the current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its debt when such amounts are required to be paid. The Company
does not intend to incur debts beyond its ability to pay such debts as they
mature (taking into account the timing and amounts of cash to be payable on or
in respect of its debt).
u. Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
13
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
v. Transactions With Affiliates and Employees. Except as set
forth on Schedule 4(v), none of the officers or directors of the Company and, to
the knowledge of the Company, none of the employees of the Company is presently
a party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
5. COVENANTS AND OTHER AGREEMENTS.
a. Satisfaction of Conditions. The parties shall use their
reasonable efforts to satisfy in a timely manner each of the conditions set
forth in Section 6 and Section 7 of this Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Purchaser promptly after such filing. The Company shall, on
or before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Purchasers
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to each Purchaser on or prior to the
Closing Date.
c. Reporting Status. So long as a Purchaser beneficially owns any
Securities or has the right to acquire any Securities pursuant to this
Agreement, the Company shall use its reasonable efforts to timely file all
reports required to be filed with the SEC pursuant to the Exchange Act, and
shall not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would permit such termination.
d. Use of Proceeds. The Company shall use the net proceeds from
the sale of the Shares, the Warrants and the Additional Investment Rights,
including proceeds received upon exercise of the Additional Investment Rights,
for general corporate purposes and working capital, but in no event shall the
Company use such net proceeds to repurchase any outstanding securities of the
Company.
e. Financial Information. For the Registration Period (as defined
in the Registration Rights Agreements), the Company agrees to send to each
Purchaser within ten days after the filing with the SEC, to the extent not
available through the SEC's XXXXX system, a copy of its Annual Report on Form
10-K, its Quarterly Reports on Form 10-Q, its proxy and information statements
and any Current Reports on Form 8-K.
f. Reservation of Shares. The Company has and shall at all times
have authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to
14
provide for the issuance of the Shares as provided in Section 2 hereof, and the
full exercise of the Warrants, the Additional Investment Rights and the
Additional Investment Right Warrants and the issuance of the Warrant Shares, the
Additional Investment Right Shares and the Additional Investment Right Warrants
Shares in connection therewith and as otherwise required hereby and thereby. The
Company shall not reduce the number of shares of Common Stock reserved for
issuance under this Agreement (except as a result of the issuance of the Shares
hereunder), the Warrants (except as a result of the issuance of the Warrant
Shares upon the exercise of the Warrants), the Additional Investment Rights
(except as a result of the issuance of Additional Investment Right Shares upon
exercise of the Additional Investment Rights and except as a result of the
issuance of the Additional Investment Right Warrant Shares upon the exercise of
the Additional Investment Right Warrants) or the Registration Rights Agreements,
without the consent of the Purchasers.
g. Listing. The Company will apply for the listing of the Shares,
Warrant Shares, the Additional Investment Right Shares and the Additional
Investment Right Warrants Shares, in each case, upon each national securities
exchange and automated quotation system, if any, upon which shares of Common
Stock are then listed or quoted and shall maintain, so long as any other shares
of Common Stock shall be so listed, such listing of all Shares and Additional
Investment Rights Shares from time to time issuable hereunder and under the
Additional Investment Rights, respectively, and all Warrant Shares and
Additional Investment Right Warrant Shares from time to time issuable upon
exercise of the Warrants and the Additional Investment Right Warrants,
respectively. The Company shall use its reasonable efforts to include its shares
of Common Stock in The Nasdaq Stock Market at the earliest practical date and,
in any event, by the date the first registration statement covering the resale
of the Shares is declared effective by the SEC and will comply in all respects
with the Company's reporting, filing and other obligations under the bylaws or
rules of The Nasdaq Stock Market.
h. No Integrated Offerings. The Company shall not make any offers
or sales of any security (other than the Securities) under circumstances that
would require registration of the Securities being offered or sold hereunder
under the Securities Act or cause this offering of Securities to be integrated
with any other non-exempt offering of securities other than the Additional
Investment Rights and securities issuable thereunder, warrants issuable to any
of the Placement Agents in connection with the transactions contemplated by this
Agreement and the shares of common stock issuable upon exercise of such
warrants.
i. Securities Laws Disclosure; Publicity. The Company shall, on
or before 9:30 a.m., Eastern Standard Time, on September 30, issue a press
release reasonably acceptable to the Purchasers disclosing the transactions
contemplated hereby. No later than the first Business Day following the Closing
Date, the Company shall file a Current Report on Form 8-K with the SEC (the "8-K
FILING") describing the transactions contemplated by the Transaction Documents
and including as exhibits to such Current Report on Form 8-K this Agreement and
the form of Warrants, in the form required by the Exchange Act. Thereafter, the
Company shall timely make any filings and notices required by the SEC or
applicable law with respect to the transactions contemplated hereby and provide
copies thereof to the Purchasers promptly after filing. Except with respect to
the 8-K Filing and the press release referenced above (a copy of which will be
provided to the Purchasers for their review as early as practicable prior to its
filing), the Company shall, at least two Business Days prior to the filing or
dissemination of any disclosure required by this paragraph, provide a copy
thereof to the Purchasers for their review. The
15
Company and the Purchasers shall consult with each other in issuing any press
releases or otherwise making public statements or filings and other
communications with the SEC or any regulatory agency or The Nasdaq Stock Market
with respect to the transactions contemplated hereby, and neither party shall
issue any such press release or otherwise make any such public statement, filing
or other communication without the prior consent of the other, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement, filing or
other communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the SEC or any regulatory agency or The Nasdaq
Stock Market, without the prior written consent of such Purchaser, except to the
extent such disclosure (but not any disclosure as to the controlling Persons
thereof) is required by law or The Nasdaq Stock Market regulations, in which
case the Company shall provide the Purchasers with prior notice of such
disclosure. The Company shall not, and shall cause each of its Subsidiaries and
its and each of their respective officers, directors, employees and agents not
to, provide any Purchaser with any material nonpublic information regarding the
Company or any of its Subsidiaries from and after the filing of the 8-K Filing
without the express written consent of such Purchaser. No Purchaser shall have
any liability to the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, stockholders or agents for any such
disclosure. Subject to the foregoing, neither the Company nor any Purchaser
shall issue any press releases or any other public statements with respect to
the transactions contemplated hereby; provided, however, that the Company shall
be entitled, without the prior approval of any Purchaser, to make any press
release or other public disclosure with respect to such transactions (i) in
substantial conformity with the 8-K Filing and contemporaneously therewith and
(ii) as is required by applicable law and regulations (provided that in the case
of clause (i) the Purchasers shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release).
Each press release disseminated in the United States to the public generally
during the 12 months preceding the date of this Agreement did not at the time of
release contain any untrue statement of a material fact.
j. Furnishing of Information. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Securities and Exchange Act of 1933, as amended (the "EXCHANGE ACT"). Upon the
request of any Purchaser, the Company shall deliver to such Purchaser a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. During the earlier of (i) the date two years from the
Closing Date or (ii) as long as any Purchaser owns Securities, if the Company is
not required to file reports pursuant to such laws, it will prepare and furnish
to the Purchasers and make publicly available in accordance with paragraph (c)
of Rule 144 such information as is required for the Purchasers to sell the
Securities under Rule 144. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request to satisfy the
provisions of Rule 144 applicable to the issuer of securities relating to
transactions for the sale of securities pursuant to Rule 144.
k. Integration. The Company shall not, and shall use its best
efforts to ensure that no Affiliate of the Company shall, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers, or
that would be integrated with the
16
offer or sale of the Securities for purposes of the rules and regulations of The
Nasdaq Stock Market.
l. Subsequent Placements.
(1) From the date hereof until the Registration Statement (as
defined in the Registration Rights Agreements) is declared effective by the SEC
(the "BLOCKOUT PERIOD"), the Company will not, directly or indirectly, offer,
sell, grant any option to purchase, or otherwise dispose of (or announce any
offer, sale, grant or any option to purchase or other disposition of) any of its
or the Subsidiaries' equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security that is, at
any time during its life and under any circumstances, convertible into or
exchangeable or exercisable for Common Stock or Common Stock Equivalents (any
such offer, sale, grant, disposition or announcement being referred to as a
"SUBSEQUENT PLACEMENT"). The restrictions contained in this Section 5(1) shall
not apply to Excluded Stock (as defined below).
(2) From the end of the Blockout Period until the one year
anniversary thereof, the Company will not, directly or indirectly, effect any
Subsequent Placement unless the Company shall have first complied with this
Section 5(1)(2).
(i) The Company shall deliver to each Purchaser a written notice
(the "OFFER") of any proposed or intended issuance or sale or exchange of the
securities being offered (the "OFFERED SECURITIES") in a Subsequent Placement,
which Offer shall (w) identify and describe the Offered Securities, (x) describe
the price and other terms upon which they are to be issued, sold or exchanged,
and the number or amount of the Offered Securities to be issued, sold or
exchanged, (y) identify the Persons or entities (if known) to which or with
which the Offered Securities are to be offered, issued, sold or exchanged and
(z) offer to issue and sell to or exchange with each Purchaser the Offered
Securities, based on such Purchaser's pro rata portion of the aggregate purchase
price paid by the Purchasers for all of the Shares purchased hereunder (the
"BASIC AMOUNT"), and with respect to each Purchaser that elects to purchase its
Basic Amount, any additional portion of the Offered Securities attributable to
the Basic Amounts of other Purchasers as such Purchaser shall indicate it will
purchase or acquire should the other Purchasers subscribe for less than their
Basic Amounts (the "UNDERSUBSCRIPTION AMOUNT").
(ii) To accept an Offer, in whole or in part, a Purchaser must
deliver a written notice to the Company prior to the end of the five (5)
Business Day period of the Offer, setting forth the portion of the Purchaser's
Basic Amount that such Purchaser elects to purchase and, if such Purchaser shall
elect to purchase all of its Basic Amount, the Undersubscription Amount, if any,
that such Purchaser elects to purchase (in either case, the "NOTICE OF
ACCEPTANCE"). If the Basic Amounts subscribed for by all Purchasers are less
than the total of all of the Basic Amounts, then each Purchaser who has set
forth an Undersubscription Amount in its Notice of Acceptance shall be entitled
to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however, that if the
Undersubscription Amounts subscribed for exceed the difference between the total
of all the Basic Amounts and the Basic Amounts subscribed for (the "AVAILABLE
UNDERSUBSCRIPTION AMOUNT"), each Purchaser who has subscribed for any
Undersubscription Amount shall be entitled to purchase on that portion of the
Available Undersubscription Amount as the Basic Amount of such Purchaser bears
to the
17
total Basic Amounts of all Purchasers that have subscribed for Undersubscription
Amounts, subject to rounding by the Board of Directors to the extent its deems
reasonably necessary
(iii) The Company shall have ten (10) Business Days from the
expiration of the period set forth in Section 5(1)(2)(ii) above to issue, sell
or exchange all or any part of such Offered Securities as to which a Notice of
Acceptance has not been given by the Purchasers (the "REFUSED SECURITIES"), but
only to the offerees described in the Offer (if so described therein) and only
upon terms and conditions (including, without limitation, unit prices and
interest rates) that are not more favorable to the acquiring Person or Persons
or less favorable to the Company than those set forth in the Offer.
(iv) In the event the Company shall propose to sell less than all
the Refused Securities (any such sale to be in the manner and on the terms
specified in Section 5(1)(2)(iii) above), then each Purchaser may, at its sole
option and in its sole discretion, reduce the number or amount of the Offered
Securities specified in its Notice of Acceptance to an amount that shall be not
less than the number or amount of the Offered Securities that the Purchaser
elected to purchase pursuant to Section 5(l)(2) (ii) above multiplied by a
fraction, (i) the numerator of which shall be the number or amount of Offered
Securities the Company actually proposes to issue, sell or exchange (including
Offered Securities to be issued or sold to Purchasers pursuant to Section
5(1)(2) (ii) above prior to such reduction) and (ii) the denominator of which
shall be the original amount of the Offered Securities. In the event that any
Purchaser so elects to reduce the number or amount of Offered Securities
specified in its Notice of Acceptance, the Company may not issue, sell or
exchange more than the reduced number or amount of the Offered Securities unless
and until such securities have again been offered to the Purchasers in
accordance with Section 5(l)(2)(i) above.
(v) Upon the closing of the issuance, sale or exchange of all or
less than all of the Refused Securities, the Purchasers shall acquire from the
Company, and the Company shall issue to the Purchasers, the number or amount of
Offered Securities specified in the Notices of Acceptance, as reduced pursuant
to Section 5(1)(2)(iv) above if the Purchasers have so elected, upon the terms
and conditions specified in the Offer. The purchase by the Purchasers of any
Offered Securities is subject in all cases to the preparation, execution and
delivery by the Company and the Purchasers of a purchase agreement relating to
such Offered Securities reasonably satisfactory in form and substance to the
Purchasers and their respective counsel.
(vi) Any Offered Securities not acquired by the Purchasers or other
Persons in accordance with Section 5(1)(2)(iii) above may not be issued, sold or
exchanged until they are again offered to the Purchasers under the procedures
specified in this Agreement.
(vii) The restrictions contained in paragraphs 5(1)(1) and (2) of
this Section shall not apply to any of the following "EXCLUDED SECURITIES:" (A)
the Shares, (B) the Warrants, (C) the Additional Investment Rights, (D) the
Additional Investment Right Warrants, (E) any warrants issued to any of the
Placement Agents, (F) any shares of Common Stock issued upon exercise of the
Warrants, the Additional Investment Rights, the Additional Investment Right
Warrants or any warrants issued to any of the Placement Agents or (G) any Common
Stock issued (1) upon exercise or conversion of any options or other securities
described in Schedule 4(c) (provided that such exercise or conversion occurs in
accordance with the terms thereof, without amendment or modification, and that
the applicable exercise or conversion price or ratio is described in such
18
schedule), (2) in connection with any grant of options, warrants or the issuance
of additional securities to employees, officers, directors or consultants of the
Company pursuant to a stock option plan or stock purchase plan duly adopted by
the Company's board of directors or in respect of the issuance of Common Stock
upon exercise of any such options or warrants, (C) pursuant to a bona fide firm
commitment underwritten public offering through any investment banker (excluding
any equity line) in an aggregate offering amount greater than $5,000,000, or (D)
in connection with a bona fide joint venture or development agreement or
strategic partnership or to an independent Person, the primary purpose of which
is not to raise equity capital.
m. Reimbursement. If any Purchaser or any of its Affiliates or
any officer, director, partner, controlling Person, employee or agent of a
Purchaser or any of its Affiliates (a "RELATED PERSON") becomes involved in any
capacity in any Proceeding brought by or against any Person in connection with
or as a result of any misrepresentation, breach or inaccuracy of any
representation, warranty, covenant or agreement made by the Company in any
Transaction Documents, the Company will indemnify and hold harmless such
Purchaser or Related Person for its reasonable legal and other expenses
(including the costs of any investigation, preparation and travel) and for any
Losses incurred in connection therewith, as such expenses or Losses are
incurred, excluding only Losses that result directly from such Purchaser's or
Related Person's gross negligence or willful misconduct. The conduct of any
Proceedings for which indemnification is available under this paragraph shall be
governed by Section 6 of the Registration Rights Agreements. The indemnification
obligations of the Company under this paragraph shall be in addition to any
liability that the Company may otherwise have and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Purchasers and any such Related Persons. The Company also
agrees that neither the Purchasers nor any Related Persons shall have any
liability to the Company or any Person asserting claims on behalf of or in right
of the Company in connection with or as a result of the transactions
contemplated by the Transaction Documents, except to the extent that any Losses
incurred by the Company result from the gross negligence or willful misconduct
of the applicable Purchaser or Related Person in connection with such
transactions. If the Company breaches its obligations under any Transaction
Document, then, in addition to any other liabilities the Company may have under
any Transaction Document or applicable law, the Company shall pay or reimburse
the Purchasers on demand for all costs of collection and enforcement (including
reasonable attorneys fees and expenses). Without limiting the generality of the
foregoing, the Company specifically agrees to reimburse the Purchasers on demand
for all costs of enforcing the indemnification obligations in this paragraph.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell Shares,
Warrants and Additional Investment Rights to a Purchaser at the Closing
hereunder is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions thereto; provided, however, that these conditions
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion.
a. The applicable Purchaser shall have executed the signature
page to this Agreement and the Registration Rights Agreements, and delivered the
same to the Company.
19
b. The applicable Purchaser shall have delivered such Purchaser's
Investment Amount in accordance with Section 2(b) above.
c. The representations and warranties of the applicable Purchaser
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date), and the applicable
Purchaser shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the applicable Purchaser at or prior to
the Closing Date.
d. No statute, rule, regulation, executive order, decree, ruling,
injunction, action, proceeding or interpretation shall have been enacted,
entered, promulgated, endorsed or adopted by any court or governmental authority
of competent jurisdiction or any self-regulatory organization, or the staff of
any thereof, having authority over the matters contemplated hereby which
questions the validity of, or challenges or prohibits the consummation of, any
of the transactions contemplated by this Agreement.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE SHARES AND
WARRANTS.
The obligation of each Purchaser hereunder to purchase Shares, Warrants
and Additional Investment Rights to be purchased by it hereunder is subject to
the satisfaction, at or before the Closing Date, of each of the following
conditions, provided, however, that these conditions are for such Purchaser's
sole benefit and may be waived by such Purchaser at any time in such Purchaser's
sole discretion:
a. The Company shall have executed the signature pages to this
Agreement and the Registration Rights Agreements, and delivered the same to the
Purchaser.
b. The Company shall have delivered to the Purchaser duly
executed certificates representing the number of Shares, duly executed Warrants
and duly executed Additional Investment Rights as provided in Section 2(b)
above.
c. The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Purchaser
shall have received a certificate, executed on behalf of the Company by its
Chief Executive Officer or Chief Financial Officer, dated as of the Closing
Date, to the foregoing effect and attaching true and correct copies of the
resolutions adopted by the Company's Board of Directors authorizing the
execution, delivery and performance by the Company of its obligations under this
Agreement, the Warrants, the Additional Investment Rights and the Registration
Rights Agreements.
20
d. No statute, rule, regulation, executive order, decree, ruling,
injunction, action, proceeding or interpretation shall have been enacted,
entered, promulgated, endorsed or adopted by any court or governmental authority
of competent jurisdiction or any self-regulatory organization, or the staff of
any thereof, having authority over the matters contemplated hereby which
questions the validity of, or challenges or prohibits the consummation of, any
of the transactions contemplated by this Agreement.
e. From the date of this Agreement through the Closing Date,
there shall not have occurred any Material Adverse Effect.
f. The Purchasers shall have received an opinion of the Company's
counsel, dated as of the Closing Date, relating to the matters set forth in
Exhibit F attached hereto.
g. The Company shall have delivered a duly executed Transfer
Agent Instructions acknowledged by the Transfer Agent.
8. GOVERNING LAW MISCELLANEOUS.
a. 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 NEW YORK. THE COMPANY AND PURCHASERS HEREBY IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN
THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE
BROUGHT BY THE COMPANY OR ANY PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR
WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH
RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY
IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING
BROUGHT BY THE COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN
EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS
IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND PURCHASERS HEREBY WAIVE ALL
RIGHTS TO A TRIAL BY JURY.
b. Counterparts. 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
21
of a copy of this Agreement bearing the signature of the party so delivering
this Agreement. In the event any signature is delivered by facsimile
transmission, the party using such means of delivery shall cause the manually
executed Execution Page(s) hereof to be physically delivered to the other party
within five (5) days of the execution hereof.
c. Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. Entire Agreement; Amendments; Waiver. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Purchasers
make any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the Company and, by the Purchasers as
provided in Section 8(m) hereof. Notwithstanding the preceding sentence, the
parties hereto recognize that certain amendments may be requested by the Nasdaq
Trading and Market Services in order that the Shares and Warrant Shares issued
hereunder be accepted for listing on The Nasdaq Stock Market and agree that
approval for such amendments shall be given. Any waiver by the Purchasers, on
the one hand, or the Company, on the other hand, of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision of or any breach of any other provision of this
Agreement. The failure of the Purchasers, on the one hand, or the Company, on
the other hand to insist upon strict adherence to any term of this Agreement on
one or more occasions shall not be considered a waiver or deprive that party of
the right thereafter to insist upon strict adherence to that term or any other
term of this Agreement.
f. Notices. 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 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.
000 Xxxx Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx Xxxxx
President
22
With a copy to:
Xxxxxxxxxxx & Xxxxxxxx LLP
00000 Xxxxx Xxxxxx Xxxx, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone (000) 000-0000
Fax (000) 000-0000
Attention: Xxxxxx Xxxxxxx, Esq.
If to the Purchaser, to the address set forth under the Purchaser's name on the
Execution Page hereto executed by such Purchaser.
Each party hereto may from time to time change its address or facsimile number
for notices under this Section 8(f) by giving at least ten (10) days' prior
written notice of such changed address or facsimile number, in the case of the
Purchasers to the Company, and in the case of the Company to all of the
Purchasers.
g. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Purchasers. Any Purchaser may
assign its rights under this Agreement to any Person to whom such Purchaser
assigns or transfers any Securities, provided such transferee agrees in writing
to be bound, with respect to the transferred Securities, by the provisions
hereof that apply to the "Purchasers." Notwithstanding anything to the contrary
herein, Securities may be assigned to any Person in connection with a bona fide
margin account or other loan or financing arrangement secured by such
Securities.
h. Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary and (in each case) may enforce the indemnity provisions directly
against the parties with obligations thereunder.
i. Survival. The representations and warranties of the Company
and the agreements and covenants of the Company shall survive the Closing
notwithstanding any due diligence investigation conducted by or on behalf of the
Purchasers. Moreover, none of the representations and warranties made by the
Company herein shall act as a waiver of any rights or remedies a Purchaser may
have under applicable federal or state securities laws.
j. Further Assurances. 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.
k. Termination. In the event that the Closing Date shall not have
occurred on or before October 4, 2003, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date. Notwithstanding
any termination of this Agreement, any party
23
not in breach of this Agreement shall preserve all rights and remedies it may
have against another party hereto for a breach of this Agreement prior to or
relating to the termination hereof.
l. Joint Participation in Drafting. Each party to this Agreement
has participated in the negotiation and drafting of this Agreement, the
Registration Rights Agreements and the Warrants. As such, the language used
herein and therein shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction will
be applied against any party to this Agreement, the Registration Rights
Agreements or the Warrants.
m. Determinations. All consents, approvals and other
determinations to be made by the Purchasers pursuant to this Agreement and all
waivers and amendments to or of any provisions in this Agreement prior to the
Closing Date to be binding upon a Purchaser shall be made by such Purchaser and
except as otherwise expressly provided herein, all consents, approvals and other
determinations to be made by the Purchasers pursuant to this Agreement and all
waivers and amendments to or of any provisions in this Agreement after the
Closing Date shall be made by Purchasers that have invested more than fifty-one
percent (51%) of the aggregate Investment Amounts invested by all Purchasers.
n.iii Fees and Expenses. At the Closing, the Company shall pay to
Vertical Ventures, LLC an aggregate of $20,000 for their legal fees and expenses
incurred in connection with the preparation and negotiation of the Transaction
Documents. In lieu of the foregoing payment, Vertical Ventures, LLC may retain
such amount at the Closing or require the Company to pay such amount directly to
Proskauer Rose LLP. Except as expressly set forth in the Transaction Documents
to the contrary, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all transfer agent fees,
stamp taxes and other taxes and duties levied in connection with the issuance of
the Securities.
o. Rescission and Withdrawal Right. Notwithstanding anything to
the contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
p. Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
24
q. Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
r. Payment Set Aside. To the extent that the Company makes a
payment or payments to any Purchaser hereunder or pursuant to the Warrants or
any Purchaser enforces or exercises its rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company by a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
s. Adjustments in Share Numbers and Prices. In the event of any
stock split, subdivision, dividend or distribution payable in shares of Common
Stock (or other securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly shares of Common Stock), combination
or other similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.
t. Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Shares pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any other Purchaser (or any other Person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. Each Purchaser acknowledges that no other Purchaser has
acted as agent for such Purchaser in connection with making its investment
hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not
25
be necessary for any other Purchasers to be joined as an additional party in any
proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
26
IN WITNESS WHEREOF, the undersigned Purchasers and the Company have
caused this Agreement to be duly executed as of the date first above written.
COMPANY:
BAM! ENTERTAINMENT, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: CEO
27
THE PURCHASERS: VERTICAL VENTURES, LLC
By: /s/ XXXXXX XXXXXXXXX
-----------------------------------
Name: XXXXXX XXXXXXXXX
Title: Partner
Investment Amount: $ 758,000
Residence: 000, XXXXXXXXX XXXXXX, 00xx XX.
XX, XX 00000
Address:
-------------------------------
---------------------------------------
---------------------------------------
Telephone No.: (000)000-0000
Telecopy No.: (000)000-0000
Attention: XXXXXX XXXXXXXXX
Email Address:
-------------------------
27
THE PURCHASERS:
CRESCENT INTERNATIONAL LTD
By: /s/ MAXI BREZZI
-----------------------------------
Name: MAXI BREZZI
Title: AUTHORIZED SIGNATORY
Investment Amount: $315,000
Residence: BERMUDA
Address: X/X XXXXXXXXXX(XXXXXXXXXXX)XX
00 XX.XXXXX-XXXXX
XX 0000 XXXXXXXX, XXXXXX
XXXXXXXXXXX
Telephone No.: ( )x0000 0000000
Telecopy No.: ( )x0000 00000000
Attention: MCRAW/M.BREZZI
Email Address: XXXXXXX@XXXXXXXX.XXX
with copies of all notices to:
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
Telephone No.: ( )
--------------------
Telecopy No.: ( )
--------------------
Attention:
-----------------------------
Email Address:
-------------------------
THE PURCHASERS:
SMITHFIELD FIDUCIARY LLC
By: /s/ Xxxx X.Chill
-------------------------------------
Name : Xxxx X.Chill
Title: Authorized Signatory
Investment Amount: $225,000.00
Residence: Cayman Islands
Address: c/o Highbridge Capital
Management, LLC
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: (000)000-0000
Telecopy No.: (000)000-0000
Attention: Xxx X. Xxxxxx / Xxxx X. Chill
Email Address: xxx.xxxxxx@xxxxx.xxx
xxxx.xxxxx@xxxxx.xxx
28
THE PURCHASERS:
Truk Opportunity Fund, LLC
By: /s/ Xxxxxxx Xxxxxxxxxx
----------------------
Name: Xxxxxxx Xxxxxxxxxx
Title: Principal
Investment Amount: $ 22,080
Residence: ----------------
---------------------------
---------------------------
Address: 00 Xxxxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxx, X.X. 00000
---------------------------
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxxxx
Email Address:---------------
with copies of all notices to:
Xxxx Xxxx
XXxxx@XXXXxxxxxx.xxx
----------------------------
----------------------------
Telephone No.: (000)000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxx Xxxx
Email Address: XXxxx@XXXXxxxxxx.xxx
29
THE PURCHASERS:
XXX Securities, LLC
By: XXX Securities, LLC
------------------
Name: Xxxxxxx Xxxxxxxx /s/ Xxxxxxx Xxxxxxxx
Title: CFO
Investment Amount: $ 85,440=89,000 Shares
Residence:
000 Xxxxxxxx, 0xx Xxxxx
XX, XX 00000
Address:
000 Xxxxxxxx, 0xx Xxxxx
XX, XX 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxx Xxxxxxxx
Email Address: xxxxxxx@xxx.xxx
with copies of all notices to:
XXX Securities, LLC
000 Xxxxxxxx, 0xx Xxxxx
XX, XX 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxx Xxxxxxxx
Email Address: xxxxxxx@xxx.xxx
30
THE PURCHASERS:
AIG DKR SOUNDSHORE PRIVATE
INVESTORS HOLDING FUND LTD.
By: /s/ Xxxxxxx Xxxxxx
---------------------
Name: Xxxxxxx Xxxxxx
Title: Alternate Director
Investment Amount: $ 96,000
Address: 0000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxx
Email Address: xxxxxxx@xxxxxxxxxx.xxx
with copies of all notices to:
Xxxx Xxxxxxxxxx
(same address as above)
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
31
THE PURCHASERS:
OTAPE Investments LLC
By: /s/ [ILLEGIBLE]
------------------
Name:
-----------------
Title: General Counsel
Investment Amount: $ 300,000-288,000 Shares
Residence:------------------
----------------------------
----------------------------
Address: Xxx Xxxxxxxxxxxxxx Xx.
Xxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxx Xxxxxx/Xxxx Xxxxxxx
Email Address: Xxxx.Xxxxxx@xx.xxx
Xxxx.Xxxxxxx@xx.xxx
with copies of all notices to:
----------------------------
----------------------------
----------------------------
----------------------------
Telephone No.: ( ) -------
Telecopy No.: ( ) -------
Attention: -----------------
Email Address:--------------
32
EXHIBIT A
TO SECURITIES PURCHASE AGREEMENT
VOID AFTER 5:00 P.M., CALIFORNIA TIME,
ON SEPTEMBER 30, 2008
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR
SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS OFFERED, SOLD OR
TRANSFERRED UNDER AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS. NOTWITHSTANDING THE FOREGOING, THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.
Date: September 30, 2003
BAM! ENTERTAINMENT, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, ___________________, or its
registered assigns, is entitled to purchase from BAM! ENTERTAINMENT, INC., a
corporation organized under the laws of the State of Delaware (the "COMPANY"),
at any time or from time to time during the period specified in Section 2
hereof, _______ fully paid and nonassessable shares of the Company's common
stock, $0.001 par value (the "COMMON STOCK"), at an exercise price per share
(the "EXERCISE PRICE") of $1.87. The number of shares of Common Stock
purchasable hereunder (the "WARRANT SHARES") and the Exercise Price are subject
to adjustment as provided in Section 4 hereof. The term "WARRANTS" means this
Warrant and the other Warrants of the Company issued pursuant to that certain
Securities Purchase Agreement, dated as of September 30, 2003, by and among the
Company and the other signatories thereto (the "SECURITIES PURCHASE AGREEMENT").
This Warrant is subject to the following terms, provisions and
conditions:
1. (a) Manner of Exercise; Issuance of Certificates. Subject to the
provisions hereof, including, without limitation, the limitations contained in
Section 7 hereof, this Warrant may be exercised at any time during the Exercise
Period (as defined below) by the holder hereof, in
whole or in part, by delivery of a completed exercise agreement in the form
attached hereto (the "EXERCISE AGREEMENT"), to the Company by 5 p.m. California
time on any Business Day at the Company's principal executive offices (or such
other office or agency of the Company as it may designate by notice to the
holder hereof) and upon payment to the Company as provided in Section 1(b) below
of the applicable Exercise Price for the Warrant Shares specified in the
Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued
to the holder hereof or such holder's designee, as the record owner of such
shares, as of the close of business on the date on which this Warrant shall have
been surrendered and the completed Exercise Agreement shall have been delivered
and payment shall have been made for such shares as set forth above or, if such
day is not a Business Day, on the next succeeding Business Day. The Warrant
Shares so purchased, representing the aggregate number of shares specified in
the Exercise Agreement, shall be delivered to the holder hereof within a
reasonable time, not exceeding five (5) Business Days, after this Warrant shall
have been so exercised (the "DELIVERY PERIOD"). If the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, and so long as the certificates therefor do not
require a legend and the holder is not obligated to return such certificate for
the placement of a legend thereon, the Company shall cause its transfer agent to
electronically transmit the Warrant Shares so purchased to the holder by
crediting the account of the holder or its nominee with DTC through its Deposit
Withdrawal Agent Commission system ("DTC TRANSFER"). If the aforementioned
conditions to a DTC Transfer are not satisfied, the Company shall deliver to the
holder physical certificates representing the Warrant Shares so purchased.
Further, the holder may instruct the Company to deliver to the holder physical
certificates representing the Warrant Shares so purchased in lieu of delivering
such shares by way of DTC Transfer. Any certificates so delivered shall be in
such denominations as may be requested by the holder hereof, shall be registered
in the name of such holder or such other name as shall be designated by such
holder and, following the date on which the Warrant Shares may be sold by the
holder pursuant to Rule 144(k) promulgated under the Securities Act (or a
successor rule), shall not bear any restrictive legend. If this Warrant shall
have been exercised only in part, then, unless this Warrant has expired, the
Company shall, at its expense, at the time of delivery of such certificates,
deliver to the holder a new Warrant representing the number of shares with
respect to which this Warrant shall not then have been exercised.
(b) Payment of Exercise Price. The holder shall pay the Exercise Price
in immediately available funds; provided, however, if the Registration Statement
did not become effective on or before the Registration Deadline (as defined in
that certain Common Stock Registration Rights Agreement of even date herewith
between the Company and the Initial Investors set forth therein) and is not
effective at the time holder exercises this Warrant, the holder hereof may
satisfy its obligation to pay the Exercise Price through a "cashless exercise,"
in which event the Company shall issue to the holder hereof the number of
Warrant Shares determined as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued to
the holder.
2
Y = the number of Warrant Shares
with respect to which this Warrant is being
exercised.
A = the average of the Closing
Prices for the five Trading Days immediately
prior to (but not including) the Exercise
Date.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it
is intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
holder hereof, and the holding period for the Warrant Shares shall be deemed to
have commenced, on the date this Warrant was originally issued pursuant to the
Purchase Agreement.
2. Period of Exercise. Except as set forth in Section 7(g) and (h)
below, this Warrant may be exercised at any time or from time to time (an
"EXERCISE DATE") during the period (the "EXERCISE PERIOD") beginning on (a) the
date hereof and ending (b) at 5:00 p.m., California time, on the fifth annual
anniversary of the date of original issuance hereof. Notwithstanding anything to
the contrary herein, the Exercise Period shall be extended for each day
following the effective date that the that the holder hereof may not sell shares
under the Registration Statement (as defined in the in that certain Warrant
Share Registration Rights Agreement of even date herewith between the Company
and the Initial Investors set forth therein) or pursuant to Rule 144(k) under
the Securities Act if the holder effected a "cashless exercise of this Warrant
pursuant to Section .
3. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid and nonassessable and free from all taxes, liens, claims and encumbrances.
(b) Reservation of Shares. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise in full of this Warrant (without giving effect
to the limitations on exercise set forth in Section 7(g) or 7(h) hereof).
(c) Listing. The Company has secured the listing of the shares of
Common Stock issuable upon exercise of or otherwise pursuant to this Warrant
upon each national securities exchange or automated quotation system, if any,
upon which shares of Common Stock are then listed or become listed (subject to
official notice of issuance upon exercise of this Warrant) and shall maintain,
so long as any other shares of Common Stock shall be so listed, such listing of
all shares of Common Stock from time to time issuable upon the exercise of or
otherwise pursuant to this Warrant; and the Company shall so list on each
national securities exchange or automated quotation system, as the case may be,
and shall maintain such listing of, any other shares of
3
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.
4
(b) Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 4 other than a Company
Reduction as defined in Section 4(k), the number of shares of Common Stock
issuable upon exercise of this Warrant shall be increased or decreased to equal
the quotient obtained by dividing (i) the product of (A) the Exercise Price in
effect immediately prior to such adjustment, multiplied by (B) the number of
shares of Common Stock issuable upon exercise of this Warrant immediately prior
to such adjustment, by (ii) the adjusted Exercise Price .
(c) Consolidation, Merger or Sale. In case of any consolidation
of the Company with, or merger of the Company into, any other entity, or in case
of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company at any time during the Exercise Period, then as a condition of such
consolidation, merger or sale or conveyance, adequate provision will be made
whereby the holder of this Warrant will have the right to acquire and receive
upon exercise of this Warrant in lieu of the shares of Common Stock immediately
theretofore acquirable upon the exercise of this Warrant, such shares of stock,
securities, cash or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Warrant had such consolidation,
merger or sale or conveyance not taken place. In any such case, the Company will
make appropriate provision to insure that the provisions of this Section 4 will
thereafter be applicable as nearly as may be in relation to any shares of stock
or securities thereafter deliverable upon the exercise of this Warrant. The
Company will not effect any consolidation, merger or sale or conveyance unless
prior to the consummation thereof, the successor entity (if other than the
Company) assumes by written instrument the obligations under this Warrant and
the obligations to deliver to the holder of this Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the holder
may be entitled to acquire. If a transaction constitutes or results in a Change
of Control, then at the request of the holder hereof delivered before the 90th
day after such transaction, the Company (or any such successor or surviving
entity) will purchase the Warrant from the holder of this Warrant for a purchase
price, payable in cash within five Business Days after such request (or, if
later, on the effective date of such transaction), equal to the Black-Scholes
value of the remaining unexercised portion of this Warrant on the date of such
request. For the purposes of this Section, "CHANGE OF CONTROL" means the
consummation of a "Rule 13e-3 transaction" as defined in Rule 13e-3 under the
Exchange Act with respect to the Company that is initiated or agreed to by a
member of the Company's management.
(d) Distribution of Assets. In case the Company shall declare or
make any distribution of its assets (other than cash) (or rights to acquire its
assets (other than cash)) to all holders of Common Stock as a partial
liquidating dividend, stock repurchase, by way of return of capital or otherwise
(including any dividend or distribution to the Company's stockholders of shares
(or rights to acquire shares) of capital stock of a subsidiary) (a
"DISTRIBUTION"), at any time during the Exercise Period, then, upon exercise of
this Warrant for the purchase of any or all of the shares of Common Stock
subject hereto, the holder of this Warrant shall be entitled to receive its
pro-rata amount of such assets (or such rights) as would have been payable to
the holder had such holder been the holder of such shares of Common Stock on the
record date for the determination of stockholders entitled to such Distribution.
(e) Notice of Adjustment. Upon the occurrence of any event which
requires any adjustment of the Exercise Price other than a Company Reduction as
defined in Section 4(k), then, and in each such case, the Company shall give
notice thereof to the holder of this Warrant,
5
which notice shall state the Exercise Price resulting from such adjustment and
the increase or decrease in the number of Warrant Shares issuable upon exercise
of this Warrant, setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based. Such calculation shall be
certified by the chief financial officer of the Company.
(f) Minimum Adjustment of the Exercise Price. No adjustment of
the Exercise Price shall be made in an amount of less than 1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be made,
but any such lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(g) No Fractional Shares. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the closing bid price of a
share of Common Stock on the Principal Market on the date of such exercise.
(h) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to
the holders of the Common Stock any additional shares of stock of any class or
other rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date or estimated date on which the books of the Company shall
close or a record shall be taken for determining the holders of Common Stock
entitled to receive any such dividend, distribution, or subscription rights or
for determining the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable estimate
thereof by the Company) when the same shall take place. Such notice shall also
specify the date on which the holders of Common Stock shall be entitled to
receive such dividend, distribution, or subscription rights or to exchange their
Common Stock for stock or other securities or property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be. Such notice shall be given at
least fifteen (15) days prior to the record date or the date on which the
Company's books are closed in respect thereto. Failure to give any such notice
or any defect therein shall not affect
6
the validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv)
above. Notwithstanding the foregoing, the Company may publicly disclose the
substance of any notice delivered hereunder prior to delivery of such notice to
the holder of this Warrant.
(i) Certain Events. If, at any time during the Exercise Period,
any event occurs of the type contemplated by the adjustment provisions of this
Section 4 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Section 4(e) hereof, and the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by such
event.
(j) Certain Definitions.
(i) "BUSINESS DAY" means any day, other than a Saturday or
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law, regulation or executive order to close.
(ii) "COMMON STOCK," for purposes of this Section 4,
includes the Common Stock and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation, provided
that the shares purchasable pursuant to this Warrant shall include only Common
Stock in respect of which this Warrant is exercisable, or shares resulting from
any subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 4(c) hereof, the stock or other securities or
property provided for in such Section.
(iii) "PRINCIPAL MARKET" means the Nasdaq Stock Market or,
if the Common Stock is not traded on the Nasdaq Stock Market, then the principal
securities exchange or trading market for the Common Stock.
(k) Adjustment of Exercise Price by the Company. To the extent
permitted by applicable law, the Company at any time shall have the right to
reduce the Exercise Price (a "COMPANY REDUCTION") by any amount for any period
of time; provided that the conditions of this Section 4(k) are satisfied. The
Company may exercise its right to Company Reduction by delivering to each holder
of the Warrants written notice (a "COMPANY REDUCTION NOTICE") at least 15
Business Days prior to the first day of the Company Reduction Period (as defined
below). The Company Reduction Notice shall state the reduced Exercise Price (the
"Alternative Exercise Price") and the period (the "Company Reduction Period")
during which the Alternative Exercise Price will be in effect, which Company
Reduction Period must be at least 15 Business Days in duration. A Company
Reduction Notice shall be irrevocable. The Exercise Price shall be adjusted upon
the expiration of the Company Reduction Period to the Exercise Price that
otherwise would then be in effect if the Company Reduction had not occurred.
Notwithstanding anything to the contrary in this Section 4(k), the Alternative
Exercise Price shall at no time be greater than the Exercise Price that
otherwise would be in effect during such Company Reduction Period if such
Company Reduction had not occurred.
5. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
7
6. No Rights or Liabilities as a Stockholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a stockholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. Transfer, Exchange, Redemption and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights granted
to the holder hereof are transferable in whole or in part, at any one time, upon
surrender of this Warrant, together with a properly executed assignment in the
form attached hereto, at the office or agency of the Company referred to in
Section 7(e) below, provided, however, that any transfer or assignment shall be
subject to the conditions set forth in Sections 7(f), 7(g) 7(h) and 8 hereof and
to the provisions of Sections 3(e) and 3(f) of the Securities Purchase
Agreement. Until due presentment for registration of transfer on the books of
the Company, the Company may treat the registered holder hereof as the owner and
holder hereof for all purposes, and the Company shall not be affected by any
notice to the contrary. Notwithstanding anything to the contrary contained
herein, the registration rights described in Section 8 hereof are assignable
only in accordance with the provisions of the Warrant Shares Registration Rights
Agreement.
(b) Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the holder hereof at the
office or agency of the Company referred to in Section 7(e) below, for new
Warrants of like tenor of different denominations representing in the aggregate
the right to purchase the number of shares of Common Stock which may be
purchased hereunder, each of such new Warrant to represent the right to purchase
such number of shares as shall be designated by the holder hereof at the time of
such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Section 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Section 7.
(e) Warrant Register. The Company shall maintain, at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose name
this Warrant has been issued, as well as the name and address of each transferee
and each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of
the surrender of
8
this Warrant in connection with any exercise, transfer, or exchange of this
Warrant, this Warrant (or, in the case of any exercise, the Warrant Shares
issuable hereunder), shall not be registered under the Securities Act and under
applicable state securities or blue sky laws, the Company may require, as a
condition of allowing such exercise, transfer, or exchange, (i) that the holder
or transferee of this Warrant, as the case may be, furnish to the Company a
written opinion of counsel (which opinion shall be reasonably acceptable to the
Company and shall be in form, substance and scope customary for opinions of
counsel in comparable transactions) to the effect that such exercise, transfer,
or exchange may be made without registration under the Securities Act and under
applicable state securities or blue sky laws, (ii) that the holder or transferee
execute and deliver to the Company an investment letter in form and substance
reasonably acceptable to the Company and (iii) that the transferee be an
"ACCREDITED INVESTOR" as defined in Rule 501(a) promulgated under the Securities
Act; provided that no such opinion, letter, or status as an "accredited
investor" shall be required in connection with a transfer pursuant to Rule 144
under the Securities Act.
(g) Additional Restrictions on Exercise or Transfer.
Notwithstanding anything in Section 1 or Section 3 hereof to the contrary, this
Warrant shall not be exercisable to the extent (but only to the extent) that (a)
the number of shares of Common Stock beneficially owned by the holder of this
Warrant and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unexercised portion of
the Warrants or the unexercised or unconverted portion of any other securities
of the Company subject to a limitation on exercise or exercise analogous to the
limitation contained herein) and (b) the number of shares of Common Stock
issuable upon exercise of the Warrants (or portion thereof) with respect to
which the determination described herein is being made, would result in
beneficial ownership by such holder and its affiliates of more than 4.99% (the
"MAXIMUM PERCENTAGE") of the outstanding shares of Common Stock. To the extent
the above limitation applies, the determination of whether and to what extent
this Warrant shall be exercisable with respect to other securities owned by such
holder shall be in the sole discretion of the holder and submission of this
Warrant for full or partial exercise shall be deemed to be the holder's
determination of whether and the extent to which this Warrant is exercisable, in
each case subject to such aggregate percentage limitation. No prior inability to
exercise the Warrants pursuant to this Section shall have any effect on the
applicability of the provisions of this Section with respect to any subsequent
determination of exercisability. For purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G
thereunder, except as otherwise provided in clause (a) hereof. By written notice
to the Company, the holder may waive the provisions of this Section or increase
or decrease the Maximum Percentage to any other percentage specified in such
notice, but (i) any such waiver or increase will not be effective until the 61st
day after such notice is delivered to the Company, and (ii) any such waiver or
increase or decrease will apply only to the holder and not to any other holder
of Warrants.
(h) Limitation on Number of Warrant Shares. Notwithstanding any
provision hereof to the contrary, the Company shall not be obligated to issue
any Warrant Shares upon exercise of the Warrants if the issuance of such shares
would exceed that number of shares which the Company may issue upon exercise of
the Warrants (the "Exchange Cap") without breaching the Company's obligations
under the rules and regulations of the Principal Market, except that such
limitation shall not apply in the event that the Company obtains the approval of
its stockholders as required by the applicable rules of the Principal Market (or
any successor rule or regulation) for issuances of Shares in excess of such
amount. Until such approval is obtained, no
9
purchaser of the Warrants pursuant to the Securities Purchase Agreement (the
"Purchasers") shall be issued, upon exercise of the Warrants, Shares in an
amount greater than the product of (i) the Exchange Cap amount then in effect
multiplied by (ii) a fraction, the numerator of which is the number of shares of
Common Stock issued to such Purchaser pursuant to the Securities Purchase
Agreement and the denominator of which is the aggregate number of shares of
Common Stock issued to all Purchases pursuant to the Securities Purchase
Agreement (the "Cap Allocation Amount"). In the event that any Purchaser shall
sell or otherwise transfer any of such Purchaser's Warrants, the transferee
shall be allocated a pro rata portion of such Purchaser's Cap Allocation Amount.
In the event that any holder of the Warrants shall convert and exercise, as the
case may be, all of such holder's Warrants into a number of Shares which, in the
aggregate, is less than such holder's Cap Allocation Amount, then the difference
between such holder's Cap Allocation Amount and the number of Shares actually
issued to such holder shall be allocated to the respective Cap Allocation
Amounts of the remaining holders of Warrants on a pro rata basis in proportion
to the number of Shares then issuable under the Warrants then held by each such
holder. The restrictions contained in this Section 7(h) may not be amended
without the consent of the holder of this Warrant and the holders of a majority
of the Company's outstanding Common Stock (excluding the holder of this Warrant
to the extent (and only to the extent) at the record date for determining
stockholders entitled to vote thereon, such holder holds any of the Company's
Common Stock purchased pursuant to the Securities Purchase Agreement or upon
exercise of the any Warrants sold thereunder).
8. Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) are entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Warrant Shares
Registration Rights Agreement, including the right to assign such rights to
certain assignees, as set forth therein.
9. Notices. Any notices required or permitted to be given under the
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier, or by confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
10
If to the Company:
BAM! Entertainment, Inc.
000 Xxxx Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx Xxxxx
President
With a copy to:
Xxxxxxxxxxx & Xxxxxxxx LLP
00000 Xxxxx Xxxxxx Xxxx, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone (000) 000-0000
Fax (000) 000-0000
Attention: Xxxxxx Xxxxxxx, Esq.
If to the holder, at such address as such holder shall have
provided in writing to the Company, or at such other address as such holder
furnishes by notice given in accordance with this Section 10, and, for any
notice under Section 3.
10. Governing Law; Venue; Waiver Of Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this warrant shall
be governed by and construed and enforced in accordance with the laws of the
state of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the city of New York,
borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the transaction
documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. The Company hereby waives all rights to a trial by jury.
11
11. Miscellaneous.
(a) Amendments. Except as provided in Section 8(g) hereof, this
Warrant and any provision hereof may only be amended by an instrument in writing
signed by the Company and the holder hereof.
(b) Descriptive Headings. The descriptive headings of the several
Sections of this Warrant are inserted for purposes of reference only, and shall
not affect the meaning or construction of any of the provisions hereof.
(c) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
(d) Subject to the restrictions on transfer set forth on the
first page hereof, this Warrant may be assigned by the holder. This Warrant may
not be assigned by the Company. This Warrant shall be binding on and inure to
the benefit of the parties hereto and their respective successors and assigns.
Subject to the preceding sentence, nothing in this Warrant shall be construed to
give to any Person other than the Company and the holder any legal or equitable
right, remedy or cause of action under this Warrant.
(e) The Company will not, by amendment of its governing documents
or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the holder hereof against impairment. Without limiting
the generality of the foregoing, the Company (i) will not increase the par value
of any Warrant Shares above the amount payable therefor on such exercise, (ii)
will take all such action as may be reasonably necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares on the exercise of this Warrant, and (iii) will not close its
stockholder books or records in any manner which interferes with the timely
exercise of this Warrant.
(f) In addition to any other rights available to a holder hereof,
if the Company fails to deliver to the holder hereof a certificate representing
Warrant Shares by the fifth Business Day after the date on which delivery of
such certificate is required by this Warrant, and if after such fifth Business
Day the holder hereof purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the holder hereof
of the Warrant Shares that the holder hereof anticipated receiving from the
Company (a "Buy-In"), then the Company shall, within three Business Days after
the holder hereof requests and in the discretion of the holder hereof, either
(i) pay cash to the holder hereof in an amount equal to the holder's total
purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "Buy-In Price"), at which point the Company's
obligation to deliver such certificate (and to issue such Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to the holder hereof
a certificate or certificates representing such Common Stock and pay cash to the
holder hereof in an amount equal to the excess (if any) of the Buy-In
12
Price over the product of (A) such number of shares of Common Stock, times (B)
the Closing Price on the date of the event giving rise to the Company's
obligation to deliver such certificate. Notwithstanding anything to the
contrary, this Section 11(f) shall not apply if the Company has used its best
efforts to deliver the certificates, but such certificates were not delivered
due to the Transfer Agent's failure to deliver the certificates in accordance
with timely instructions from the Company.
(g) The Company's obligations to issue and deliver Warrant Shares
in accordance with the terms hereof are absolute and unconditional, irrespective
of any action or inaction by the holder hereof to enforce the same, any waiver
or consent with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the holder hereof or any other Person of any obligation to the Company
or any violation or alleged violation of law by the holder hereof or any other
Person, and irrespective of any other circumstance which might otherwise limit
such obligation of the Company to the holder hereof in connection with the
issuance of Warrant Shares. Nothing herein shall limit a right of the holder
hereof to pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company's failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
13
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
BAM! ENTERTAINMENT, INC.
By:
-----------------------------------------
Name:
Title:
14
FORM OF EXERCISE AGREEMENT
(TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)
To: BAM! Entertainment, Inc.
000 Xxxx Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx Xxxxx
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.
EXHIBIT B
TO SECURITIES PURCHASE AGREEMENT
NEITHER THESE SECURITIES NOR THE SECURITIES FOR 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"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES OR BLUE SKY 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 SECURED BY SUCH
SECURITIES.
BAM! ENTERTAINMENT, INC.
ADDITIONAL INVESTMENT RIGHT
Additional Investment Right No. ___ Dated: September 30, 2003
Bam! Entertainment, Inc., a Delaware corporation (the "COMPANY"), hereby
certifies that, for value received, ___________________ or its registered
assigns (the "HOLDER"), is entitled to purchase from the Company (a) up to a
total of _______ shares of common stock, $.001 par value per share (the "COMMON
STOCK"), of the Company (each such share, an "ADDITIONAL INVESTMENT RIGHT SHARE"
and all such shares, the "ADDITIONAL INVESTMENT RIGHT SHARES") at an exercise
price equal to $0.96 per share (as adjusted from time to time as provided in
Section 9, the "EXERCISE PRICE"), and (b) only as part of and in connection with
the purchase of the Additional Investment Right Shares, warrants in the form
attached hereto as Exhibit 1 to purchase up to ______ shares of Common Stock
(including any warrants issued in replacement thereof, the "ADDITIONAL
INVESTMENT RIGHT WARRANTS"), at any time and from time to time from and after
the date hereof and through and including the 45th Business Day following the
effective date of the Registration Statement (the "EFFECTIVE DATE") (the
"EXPIRATION DATE"), and subject to the following terms and conditions. This
Additional Investment Right (this "ADDITIONAL INVESTMENT RIGHT") is one of a
series of similar additional investment rights issued pursuant to that certain
Securities Purchase Agreement, dated as of the date hereof, by and among the
Company and the Purchasers identified therein (the "PURCHASE AGREEMENT"). All
such additional investment rights are referred to herein, collectively, as the
"ADDITIONAL INVESTMENT RIGHTS." Common Stock issuable upon exercise of the
Additional Investment Right Warrants
shall be known herein as the "ADDITIONAL INVESTMENT RIGHT WARRANT SHARES".
Concurrently with the issuance of Additional Investment Right Shares to the
Holders further to the exercise of this Additional Investment Right, the Holder
shall be issued Additional Investment Right Warrants exercisable for a number of
Additional Investment Right Warrant Shares equal to 90% of the number of
Additional Investment Right Shares so issued to the Holder upon such exercise.
The term "Registration Statement" as used in this paragraph shall have the
meaning set forth on the Common Stock Registration Rights Agreement between the
Company and the Initial Investors therein of even date herewith.
1. Definitions. In addition to the terms defined elsewhere in this
Additional Investment Right, capitalized terms that are not otherwise defined
herein have the meanings given to such terms in the Purchase Agreement.
2. Registration of Additional Investment Right. The Company shall
register this Additional Investment Right, upon records to be maintained by the
Company for that purpose (the "ADDITIONAL INVESTMENT RIGHT REGISTER"), in the
name of the record Holder hereof from time to time. The Company may deem and
treat the registered Holder of this Additional Investment Right as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.
3. Registration of Transfers. The Company shall register the assignment
and transfer of any portion of this Additional Investment Right in the
Additional Investment Right Register, upon surrender of this Additional
Investment Right, with the Form of Assignment attached hereto duly completed and
signed, to the Transfer Agent or to the Company at its address specified herein.
Upon any such registration or transfer, a new additional investment right to
purchase Common Stock, in substantially the form of this Additional Investment
Right (any such new additional investment right, a "NEW ADDITIONAL INVESTMENT
RIGHT"), evidencing the portion of this Additional Investment Right so
transferred shall be issued to the transferee and a New Additional Investment
Right evidencing the remaining portion of this Additional Investment Right not
so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Additional Investment Right by the transferee thereof
shall be deemed the acceptance by such transferee of all of the rights and
obligations of a holder of an Additional Investment Right.
4. Exercise and Duration of Additional Investment Right.
(a) This Additional Investment Right shall be exercisable by the
registered Holder at any time and from time to time on or after the date hereof
to and including the Expiration Date. At 6:30 P.M., New York City time on the
Expiration Date, the portion of this Additional Investment Right not exercised
prior thereto shall be and become void and of no value.
(b) The Holder may exercise this Additional Investment Right by
delivering to the Company (i) an exercise notice, in the form attached hereto
(the "EXERCISE NOTICE"), appropriately completed and duly signed, and (ii)
payment of the Exercise Price for the number of Additional Investment Right
Shares and Additional Investment Right Warrants as to which this Additional
Investment Right is being exercised (which may take the form of a "cashless
2
exercise" if so indicated in the Exercise Notice and if a "cashless exercise"
may occur at such time pursuant to this Section 10 below), and the date such
items are delivered to the Company (as determined in accordance with the notice
provisions hereof) is an "EXERCISE DATE." The Holder shall not be required to
deliver the original Additional Investment Right in order to effect an exercise
hereunder. Execution and delivery of the Exercise Notice shall have the same
effect as cancellation of the original Additional Investment Right and issuance
of a New Additional Investment Right evidencing the right to purchase the
remaining number of Additional Investment Right Shares and Additional Investment
Right Warrants.
5. Delivery of Additional Investment Right Shares and Additional
Investment Right Warrants.
(a) Upon exercise of this Additional Investment Right, the
Company shall promptly (but in no event later than three Trading Days after the
Exercise Date) issue or cause to be issued and cause to be delivered to or upon
the written order of the Holder and in such name or names as the Holder may
designate, a certificate for the Additional Investment Right Shares and
Additional Investment Right Warrants issuable upon such exercise, free of
restrictive legends unless a registration statement covering the resale of the
Additional Investment Right Shares or the Additional Investment Right Warrant
Shares, respectively, and naming the Holder as a selling stockholder thereunder
is not then effective and the Additional Investment Right Shares or the
Additional Investment Right Warrant Shares, respectively, are not freely
transferable without volume restrictions pursuant to Rule 144 under the
Securities Act. The Holder, or any Person so designated by the Holder to receive
Additional Investment Right Shares and Additional Investment Right Warrants,
shall be deemed to have become holder of record of such Additional Investment
Right Shares and Additional Investment Right Warrants as of the Exercise Date.
The Company shall, upon request of the Holder, use its best efforts to deliver
Additional Investment Right Shares hereunder electronically through the
Depository Trust Corporation or another established clearing corporation
performing similar functions.
(b) This Additional Investment Right is exercisable, either in
its entirety or, from time to time, for a portion of the number of Additional
Investment Right Shares and Additional Investment Right Warrants further to
terms set forth in the first paragraph of the Additional Investment Right. Upon
surrender of this Additional Investment Right following one or more partial
exercises, the Company shall issue or cause to be issued, at its expense, a New
Additional Investment Right evidencing the right to purchase the remaining
number of Additional Investment Right Shares and Additional Investment Right
Warrants.
(c) In addition to any other rights available to a Holder, if the
Company fails to deliver to the Holder a certificate representing Additional
Investment Right Shares on the date on which delivery of such certificate is
required by this Additional Investment Right, such Holder may notify the Company
via facsimile, mail or any other means, of its failure to deliver the
certificate (a "DELIVERY FAILURE NOTICE"). If the Company fails to deliver to
the Holder a certificate representing Additional Investment Right Shares by the
fifth Business Day after delivery of the Delivery Failure Notice by the Holder
and if after such fifth Business Day after the delivery of the Delivery Failure
Notice the Holder purchases (in an open market transaction or otherwise) shares
of Common Stock to deliver in satisfaction of a sale by the Holder of the
Additional Investment Right Shares that the Holder anticipated receiving from
the Company (a
3
"BUY-IN"), then the Company shall, within three Trading Days after the Holder's
request and in the Holder's discretion, either (i) pay cash to the Holder 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 a certificate or certificates representing
such Common Stock and pay cash to the Holder 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 5(c) 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.
(d) The Company's obligations to issue and deliver Additional
Investment Right Shares and Additional Investment Right Warrants in accordance
with the terms hereof are absolute and unconditional, irrespective of any action
or inaction by the Holder 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 or any
other Person of any obligation to the Company or any violation or alleged
violation of law by the Holder or any other Person, and irrespective of any
other circumstance which might otherwise limit such obligation of the Company to
the Holder in connection with the issuance of Additional Investment Right
Shares. Nothing herein shall limit a Holder's right 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 Additional Investment Right as required pursuant to
the terms hereof.
6. Charges, Taxes and Expenses. Issuance and delivery of certificates
for shares of Common Stock and the Additional Investment Right Warrants upon
exercise of this Additional Investment Rights shall be made without charge to
the Holder for any issue or transfer tax, withholding tax, transfer agent fee or
other incidental tax or expense in respect of the issuance of such certificates,
all of which taxes and expenses shall be paid by the Company; provided, however,
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the registration of any certificates for
Additional Investment Right Shares, Additional Investment Rights or any
Additional Investment Right Warrants in a name other than that of the Holder or
an Affiliate thereof. The Holder shall be responsible for all other tax
liability that may arise as a result of holding or transferring this Additional
Investment Right or receiving Additional Investment Right Shares and Additional
Investment Right Warrants upon exercise hereof.
7. Replacement of Additional Investment Right. If this Additional
Investment Right is mutilated, lost, stolen or destroyed, the Company shall
issue or cause to be issued in exchange and substitution for and upon
cancellation hereof, or in lieu of and substitution for this Additional
Investment Right, a New Additional Investment Right, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and customary and reasonable indemnity, if requested. Applicants for
a New Additional Investment Right
4
under such circumstances shall also comply with such other reasonable
regulations and procedures and pay such other reasonable third-party costs as
the Company may prescribe.
8. Reservation of Additional Investment Right Shares and Additional
Investment Right Warrant Shares. The Company covenants that it will at all times
reserve and keep available out of the aggregate of its authorized but unissued
and otherwise unreserved Common Stock, solely for the purpose of enabling it to
issue Additional Investment Right Shares upon exercise of this Additional
Investment Right and Additional Investment Right Warrant Shares upon exercise of
the Additional Investment Right Warrants as herein provided and as provided in
the Additional Investment Right Warrants, the number of Additional Investment
Right Shares which are then issuable and deliverable upon the exercise of this
entire Additional Investment Right and the number of Additional Investment Right
Warrant Shares which are then issuable and deliverable upon the exercise of any
Additional Investment Right Warrants, free from preemptive rights or any other
contingent purchase rights of persons other than the Holder (taking into account
the adjustments and restrictions of Section 9). The Company covenants that all
Additional Investment Right Shares and Additional Investment Right Warrant
Shares so issuable and deliverable shall, upon issuance and the payment of the
applicable exercise price in accordance with the terms hereof, or the Additional
Investment Warrants, as the case may be, be duly and validly authorized, issued
and fully paid and nonassessable. The Company will take all such action as may
be necessary to assure that such shares of Common Stock may be issued as
provided herein and further to the Additional Investment Right Warrants without
violation of any applicable law or regulation, or of any requirements of any
securities exchange or automated quotation system upon which the Common Stock
may be listed.
9. Certain Adjustments. The Exercise Price and number of Additional
Investment Right Shares issuable upon exercise of this Additional Investment
Right are subject to adjustment from time to time as set forth in this Section
9. The exercise price and number of Additional Investment Right Warrant Shares
issuable upon exercise of the Additional Investment Right Warrants shall be
subject to adjustment further to Section 4 of said Additional Investment Right
Warrants and the Additional Investment Right Warrants.
(a) Stock Dividends and Splits. If the Company, at any time while
this Additional Investment Right is outstanding, (i) pays a stock dividend on
its Common Stock or otherwise makes a distribution on any class of capital stock
that is payable in shares of Common Stock, (ii) subdivides outstanding shares of
Common Stock into a larger number of shares, or (iii) combines outstanding
shares of Common Stock into a smaller number of shares, then in each such case
the Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding immediately before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event. Any adjustment made pursuant to
clause (i) of this paragraph shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clauses (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such
subdivision or combination.
(b) Pro Rata Distributions. If the Company, at any time while
this Additional Investment Right is outstanding, distributes to holders of
Common Stock (i) evidences of its indebtedness, (ii) any security (other than a
distribution of Common Stock covered by the
5
preceding paragraph), (iii) rights or warrants to subscribe for or purchase any
security, or (iv) any other asset (in each case, "DISTRIBUTED PROPERTY"), then
in each such case the Exercise Price in effect immediately prior to the record
date fixed for determination of stockholders entitled to receive such
distribution shall be adjusted (effective on such record date) to equal the
product of such Exercise Price times a fraction of which the denominator shall
be the average of the Closing Prices for the five Trading Days immediately prior
to (but not including) such record date and of which the numerator shall be such
average less the then fair market value of the Distributed Property distributed
in respect of one outstanding share of Common Stock, as determined by the
Company's independent certified public accountants that regularly examine the
financial statements of the Company (an "APPRAISER"). In such event, the Holder,
after receipt of the determination by the Appraiser, shall have the right to
select an additional appraiser (which shall be a nationally recognized
accounting firm), in which case such fair market value shall be deemed to equal
the average of the values determined by each of the Appraiser and such
appraiser. As an alternative to the foregoing adjustment to the Exercise Price,
at the request of the Holder delivered before the 90th day after such record
date, the Company will deliver to such Holder, within five Trading Days after
such request (or, if later, on the effective date of such distribution), the
Distributed Property that such Holder would have been entitled to receive in
respect of the Additional Investment Right Shares for which this Additional
Investment Right could have been exercised immediately prior to such record
date. If such Distributed Property is not delivered to a Holder pursuant to the
preceding sentence, then upon expiration of or any exercise of the Additional
Investment Right that occurs after such record date, such Holder shall remain
entitled to receive, in addition to the Additional Investment Right Shares
otherwise issuable upon such exercise (if applicable), such Distributed
Property.
(c) Fundamental Transactions. If, at any time while this
Additional Investment Right is outstanding, (i) the Company effects any merger
or consolidation of the Company with or into another Person, (ii) the Company
effects any sale of all or substantially all of its assets in one or a series of
related transactions, (iii) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (iv) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(other than as a result of a subdivision or combination of shares of Common
Stock covered by Section 9(a) above) (in any such case, a "FUNDAMENTAL
TRANSACTION"), then the Holder shall have the right thereafter to receive, upon
exercise of this Additional Investment Right, the same amount and kind of
securities, cash or property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been, immediately prior to
such Fundamental Transaction, the holder of the number of Additional Investment
Right Shares then issuable upon exercise in full of this Additional Investment
Right (the "ALTERNATE CONSIDERATION"). The aggregate Exercise Price for this
Additional Investment Right will not be affected by any such Fundamental
Transaction, but the Company shall apportion such aggregate Exercise Price among
the Alternate Consideration in a reasonable manner reflecting the relative value
of any different components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as
to the Alternate Consideration it receives upon any exercise of this Additional
Investment Right following such Fundamental Transaction. At the Holder's
request, any
6
successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new additional investment right consistent with the
foregoing provisions and evidencing the Holder's right to purchase the Alternate
Consideration for the aggregate Exercise Price upon exercise thereof. The terms
of any agreement pursuant to which a Fundamental Transaction is effected shall
include terms requiring any such successor or surviving entity to comply with
the provisions of this paragraph (c) and insuring that the Additional Investment
Right (or any such replacement security) will be similarly adjusted upon any
subsequent transaction analogous to a Fundamental Transaction. If any
Fundamental Transaction constitutes or results in a Change of Control (as
defined below), then at the request of the Holder delivered before the 90th day
after such Fundamental Transaction, the Company (or any such successor or
surviving entity) will purchase the Additional Investment Right from the Holder
for a purchase price, payable in cash within five Business Days after such
request (or, if later, on the effective date of the Fundamental Transaction),
equal to the Black Scholes value of the remaining unexercised portion of this
Additional Investment Right on the date of such request. For the purposes of
this Section 9(c), "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) Number of Additional Investment Right Shares. Simultaneously
with any adjustment to the Exercise Price pursuant to paragraphs (a) or (b) of
this Section, the number of Additional Investment Right Shares that may be
purchased upon exercise of this Additional Investment Right shall be increased
or decreased proportionately, so that after such adjustment the aggregate
Exercise Price payable hereunder for the increased or decreased number of
Additional Investment Right Shares shall be the same as the aggregate Exercise
Price in effect immediately prior to such adjustment.
(e) Calculations. All calculations under this Section 9 shall be
made to the nearest cent or the nearest 1/100th of a share, as applicable. The
number of shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Company, and the disposition
of any such shares shall be considered an issue or sale of Common Stock.
(f) Notice of Adjustments. Upon the occurrence of each adjustment
pursuant to this Section 9, the Company at its expense will promptly compute
such adjustment in accordance with the terms of this Additional Investment Right
and prepare a certificate setting forth such adjustment, including a statement
of the adjusted Exercise Price and adjusted number or type of Additional
Investment Right Shares or other securities issuable upon exercise of this
Additional Investment Right (as applicable), describing the transactions giving
rise to such adjustments and showing in detail the facts upon which such
adjustment is based. Upon written request, the Company will promptly deliver a
copy of each such certificate to the Holder and to the Company's Transfer Agent.
(g) Notice of Corporate Events. If the Company (i) declares a
dividend or any other distribution of cash, securities or other property in
respect of its Common Stock, including, without limitation, any granting of
rights or warrants to subscribe for or purchase any capital stock of the Company
or any Subsidiary, (ii) authorizes or approves, enters into any agreement
contemplating or solicits stockholder approval for any Fundamental Transaction
or (iii)
7
authorizes the voluntary dissolution, liquidation or winding up of the affairs
of the Company, then the Company shall deliver to the Holder a notice describing
the material terms and conditions of such transaction, at least fifteen (15)
days prior to the applicable record or effective date on which a Person would
need to hold Common Stock in order to participate in or vote with respect to
such transaction, and the Company will take all steps reasonably necessary in
order to insure that the Holder is given the practical opportunity to exercise
this Additional Investment Right prior to such time so as to participate in or
vote with respect to such transaction; provided, however, that the failure to
deliver such notice or any defect therein shall not affect the validity of the
corporate action required to be described in such notice.
10. Payment of Exercise Price. The Holder shall pay the Exercise Price
in immediately available funds; provided, however, if the Registration Statement
did not become effective on or before Required Effectiveness Date and is not
continuously effective through the Expiration Date, the Holder may satisfy its
obligation to pay the Exercise Price through a "cashless exercise," in which
event the Company shall issue to the Holder the number of Additional Investment
Right Shares determined as follows:
X = Y [(A-B)/A]
where:
X = the number of Additional Investment
Right Shares to be issued to the Holder.
Y = the number of Additional Investment
Right Shares with respect to which this
Additional Investment Right 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 Additional Investment Right
Shares issued in a cashless exercise transaction shall be deemed to have been
acquired by the Holder, and the holding period for the Additional Investment
Right Shares shall be deemed to have commenced, on the date this Additional
Investment Right was originally issued pursuant to the Purchase Agreement.
11. Limitation on Exercise. Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that may be acquired by
the Holder upon any exercise of this Additional Investment Right (or otherwise
in respect hereof) shall be limited to the extent necessary to insure that,
following such exercise (or other issuance), the total number of shares of
Common Stock then beneficially owned by such Holder and its Affiliates and any
other Persons whose beneficial ownership of Common Stock would be aggregated
with the Holder's for purposes of Section 13(d) of the Exchange Act, does not
exceed 4.999% (the "MAXIMUM PERCENTAGE") of the total number of issued and
outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon such exercise).
8
For such purposes, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. Each delivery of an Exercise Notice hereunder will constitute a
representation by the Holder that it has evaluated the limitation set forth in
this paragraph and determined that issuance of the full number of Additional
Investment Right Shares requested in such Exercise Notice is permitted under
this paragraph. The Company's obligation to issue shares of Common Stock in
excess of the limitation referred to in this Section shall be suspended (and
shall not terminate or expire notwithstanding any contrary provisions hereof)
until such time, if any, as such shares of Common Stock may be issued in
compliance with such limitation. 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 Additional Investment
Rights.
12. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Additional Investment Right Shares or Additional
Investment Right Warrants to purchase fractional Additional Investment Right
Warrant Shares on the exercise of this Additional Investment Right. If any
fraction of a Additional Investment Right Share or if any Additional Investment
Right Warrant to purchase a fraction of an Additional Investment Right Warrant
Share would, except for the provisions of this Section, be issuable upon
exercise of this Additional Investment Right, the number of Additional
Investment Right Shares and/or Additional Investment Right Warrant Shares
issuable upon exercise of the Additional Investment Right Warrants, as the case
may be, to be issued will be rounded up to the nearest whole share or right to
purchase the nearest whole share, as the case may be.
13. Notices. Any and all notices or other communications or deliveries
hereunder (including without limitation any Exercise Notice) shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Trading Day or
later than 6:30 p.m. (New York City time) on any Trading Day, (iii) the Trading
Day following the date of deposit with a nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address and facsimile numbers for such notices or
communications shall be as set forth in the Purchase Agreement.
14. Additional Investment Right Agent. The Company shall serve as
additional investment right agent under this Additional Investment Right. Upon
30 days' notice to the Holder, the Company may appoint a new additional
investment right agent. Any corporation into which the Company or any new
additional investment right agent may be merged or any corporation resulting
from any consolidation to which the Company or any new additional investment
right agent shall be a party or any corporation to which the Company or any new
additional investment right agent transfers substantially all of its corporate
trust or shareholders services business shall be a successor additional
investment right agent under this Additional Investment Right without any
further act. Any such successor additional investment right agent
9
shall promptly cause notice of its succession as additional investment right
agent to be mailed (by first class mail, postage prepaid) to the Holder at the
Holder's last address as shown on the Additional Investment Right Register.
15. Miscellaneous.
(a) Subject to the restrictions on transfer set forth on the
first page hereof, this Additional Investment Right may be assigned by the
Holder. This Additional Investment Right may not be assigned by the Company
except to a successor in the event of a Fundamental Transaction. This Additional
Investment Right 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 Additional Investment Right 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 Additional Investment Right. This
Additional Investment Right may be amended only in writing signed by the Company
and the Holder and their successors and assigns.
(b) 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
Additional Investment Right, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder against
impairment. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any Additional Investment Right Shares or
Additional Investment Right 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 Additional Investment Right Shares or Additional Investment
Right Warrant Shares on the exercise of this Additional Investment Right and the
Additional Investment Right Warrants, respectively, and (iii) will not close its
shareholder books or records in any manner which interferes with the timely
exercise of this Additional Investment Right.
(c) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. THE CORPORATE LAWS OF
THE STATE OF DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF
THE COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS ADDITIONAL INVESTMENT RIGHT
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
10
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.
(d) The headings herein are for convenience only, do not
constitute a part of this Additional Investment Right and shall not be deemed to
limit or affect any of the provisions hereof.
(e) In case any one or more of the provisions of this Additional
Investment Right shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Additional
Investment Right 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 Additional
Investment Right.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
11
IN WITNESS WHEREOF, the Company has caused this Additional Investment
Right to be duly executed by its authorized officer as of the date first
indicated above.
BAM! ENTERTAINMENT, INC.
By:
-----------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
12
FORM OF EXERCISE NOTICE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Additional Investment Right)
To: BAM! ENTERTAINMENT, INC.
The undersigned is the Holder of Additional Investment Right No. _______ (the
"ADDITIONAL INVESTMENT RIGHT") issued by BAM! ENTERTAINMENT, INC., a Delaware
corporation (the "Company"). Capitalized terms used herein and not otherwise
defined have the respective meanings set forth in the Additional Investment
Right.
1. The Additional Investment Right is currently exercisable to purchase a
total of ______ Additional Investment Right Shares and _______
Additional Investment Right Warrants.
2. The undersigned Holder hereby exercises its right to purchase ________
Additional Investment Right Shares and Additional Investment Right
Warrants exercisable for ______ shares of Common Stock (which number of
shares underlying said Additional Investment Right Warrants shall be
equal to 90% of the Additional Investment Right Shares so issued upon
exercise of the Additional Investment Right).
2. The Holder intends that payment of the Exercise Price shall be made as
(check one):
____ "Cash Exercise"
____ "Cashless Exercise"
3. If the holder has elected a Cash Exercise, the holder shall pay the sum
of $____________ to the Company in accordance with the terms of the
Additional Investment Right.
4. Pursuant to this exercise, the Company shall deliver to the holder
_______________ Additional Investment Right Shares and Additional
Investment Right Warrants exercisable for ______ shares of Common Stock
(which number of shares underlying said Additional Investment Right
Warrants shall be equal to 90% of the Additional Investment Right Shares
so issued upon exercise of the Additional Investment Right).
5. Following this exercise, the Additional Investment Right shall be
exercisable to purchase a total of ______________ Additional Investment
Right Shares and Additional Investment Right Warrants exercisable for
_____ shares of Common Stock (which number of shares underlying said
Additional Investment Right Warrants shall be equal to 90% of said
remaining Additional Investment Right Shares).
Date: , Name of Holder:
-------------- -----
(Print)
--------------------------------------
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Additional Investment Right)
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Additional Investment
Right]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Additional Investment Right to purchase ____________ shares of Common Stock and
warrants to purchase shares of the Common Stock (which number of shares
underlying said warrants shall be equal to 90% of the shares so sold, assigned
and transferred) of BAM! ENTERTAINMENT, INC. to which the within Additional
Investment Right relates and appoints ________________ attorney to transfer said
right on the books of BAM! ENTERTAINMENT, INC. with full power of substitution
in the premises.
Dated: ,
--------------- ----
----------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Additional Right)
----------------------------------------
Address of Transferee
----------------------------------------
----------------------------------------
In the presence of:
-----------------------------
EXHIBIT C
TO SECURITIES PURCHASE AGREEMENT
COMMON STOCK REGISTRATION RIGHTS AGREEMENT
COMMON STOCK REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as
September 30, 2003, by and among BAM! ENTERTAINMENT, INC., a corporation
organized under the laws of the State of Delaware (the "COMPANY"), and the
undersigned (the "INITIAL INVESTORS").
WHEREAS:
A. The Company and the Initial Investors have entered into a Securities
Purchase Agreement dated the date hereof (the "SECURITIES PURCHASE AGREEMENT;"
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement). In
connection with the Securities Purchase Agreement, the Company has agreed, upon
the terms and subject to the conditions contained therein, to issue and sell to
the Initial Investors shares of the Company's common stock, $0.001 par value
(the "COMMON STOCK"). The shares of Common Stock issued on the Closing Date
under the Securities Purchase Agreement are referred to herein as the "SHARES."
B. To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"SECURITIES ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investors, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
(i) "ADDITIONAL INVESTMENT RIGHTS" shall mean rights
issued to Initial Investors' further to the Securities Purchase Agreement to
purchase additional shares of Common Stock and warrants to purchase Common Stock
(all as more fully described in Exhibit B to the Securities Purchase Agreement).
(ii) "INVESTORS" means the Initial Investors and any
transferees or assignees who agree to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(iii) "REGISTER," "REGISTERED," and "REGISTRATION" refer
to a registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("RULE 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iv) "REGISTRABLE SECURITIES" means (i) the Shares, (ii)
any shares of Common Stock issuable upon exercise of the Additional Investment
Rights (the "Additional Investment Right Shares") and (iii) any shares of
capital stock issued or issuable, from time to time (with any adjustments), as a
distribution on or in exchange for or otherwise with respect to any of the
foregoing; provided, however, that the treatment of these securities as
Registrable Securities shall terminate if and when such securities can be resold
under Rule 144(k) under the Securities Act and provided further however, that
any shares of capital stock issued or issuable, from time to time (with any
adjustments), in exchange for or otherwise with respect to any Shares or
Additional Investment Right Shares shall not be considered Registrable
Securities to the extent such shares of capital stock are covered by another,
current and effective registration statement permitting the resale without
restriction of such shares.
(v) "REGISTRATION STATEMENT" means one or more
registration statements of the Company under the Securities Act registering all
of the Registrable Securities, including the Initial Registration Statement, any
Uncovered Shares Amendments and Uncovered Shares Registration Statements (each,
as defined below).
2. REGISTRATION.
a. Mandatory Registration. The Company shall file with the United
States Securities and Exchange Commission ("SEC"), on the date which is on or
before forty-five (45) calendar days after the Closing Date (the "FILING
DEADLINE") a Registration Statement on Form S-3 (or, if Form S-3 is not then
available, on such form of Registration Statement as is then available to effect
a registration of all of the Registrable Securities) covering the resale of the
Shares and any Additional Investment Right Shares issued upon exercise of the
Additional Investment Rights (the "INITIAL REGISTRATION STATEMENT"). The
Registrable Securities included in the Initial Registration Statement shall be
registered on behalf of the Investors as set forth in Section 11(k) hereof. The
Initial Registration Statement (and each amendment or supplement thereto, and
each request for acceleration of effectiveness thereof) shall be provided to the
Initial Investors and their counsel at least 5 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
2
registers the Uncovered Shares (the "UNCOVERED SHARES REGISTRATION Statement").
The Uncovered Shares Amendment or the Uncovered Shares Registration Statement
(and each amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to the Initial Investors and their
counsel at least concurrently with its filing or other submission. The Company
shall use its reasonable efforts to cause each of the Initial Registration
Statement and the Uncovered Shares Amendment or the Uncovered Shares
Registration Statement to become effective as soon as practicable after the
filing thereof.
b. Payments by the Company. The Company shall use its reasonable
efforts to cause each Registration Statement required to be filed pursuant to
Section 2(a) hereof to become effective as soon as practicable, but, as to the
Initial Registration Statement filed pursuant to Section 2(a), in no event later
than the one hundred and twentieth (120th) calendar day after the Closing Date
(the "REGISTRATION DEADLINE"), and as to any Uncovered Shares Amendment or
Uncovered Shares Registration Statement, in no event later than the ninetieth
(90th) day after the Uncovered Share Filing Deadline (the "UNCOVERED SHARE
REGISTRATION DEADLINE"). If the Registration Statement(s) covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not filed with the SEC by the Filing Deadline or the Uncovered
Share Filing Deadline, as applicable, or declared effective by the SEC on or
before the Registration Deadline or the Uncovered Share Registration Deadline,
as applicable, or if, after a Registration Statement has been declared effective
by the SEC, sales of all the Registrable Securities required to be included
therein (except, in the case of the Initial Registration Statement, for
Uncovered Shares which are the subject of an SEC Determination) cannot be made
pursuant to the Registration Statement, then the Company will make payments to
the Investors in such amounts and at such times as shall be determined pursuant
to this Section 2(c) as partial relief for the damages to the Investors by
reason of any such delay in or reduction of their ability to sell the
Registrable Securities (which remedy shall be exclusive of any other remedies
available at law or in equity).
c. The Company shall pay to each Investor an amount equal to (i)
the Investment Amount (as defined in the Securities Purchase Agreement) paid by
such Investor pursuant to the Securities Purchase Agreement (or if such Investor
is not an Initial Investor, the Investment Amount paid by such Investor's
transferor or assignor pursuant to the Securities Purchase Agreement (the
"Aggregate Purchase Price"), multiplied by (ii) one percent (1%) (with respect
to the period commencing on the Filing Deadline, the Uncovered Filing Deadline,
the Registration Deadline or the Uncovered Share Registration Deadline, as
applicable, multiplied by (iii) the sum of (x) the quotient calculated by
dividing (A) the number of days after the Filing Deadline or Uncovered Share
Filing Deadline, as applicable, and prior to the date the Registration Statement
or Uncovered Share Amendment or Uncovered Share Registration Statement, as
applicable, in each case as required to be filed pursuant to Section 2(a), is
filed with the SEC by (B) thirty, plus (y) the quotient calculated by dividing
(A) the number of days after the Registration Deadline or Uncovered Share
Registration Deadline, as applicable, and prior to the date the Registration
Statement or Uncovered Share Amendment or Uncovered Share Registration
Statement, as applicable, in each case as filed pursuant to Section 2(a), is
declared effective by the SEC by (B) thirty, plus (z) the quotient calculated by
dividing (A) the sum of the 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
3
Uncovered Shares which are the subject of an SEC Determination) cannot be made
pursuant to a Registration Statement after such Registration Statement has been
declared effective; provided, however, however, that the total amount of
payments pursuant to this Section 2(c) shall not exceed, when aggregated with
all such payments paid to all Investors under the Securities Purchase Agreement
$35,000. For example, if the Initial Registration Statement is filed within the
Filing Deadline but becomes effective thirty (30) days after the Registration
Deadline, the Company would pay $10,000 for each $1,000,000 of Aggregate
Purchase Price. If the Company is unable to pay all amounts due and payable with
respect to the penalties, the Company will pay the Investors such amounts pro
rata based upon the total amounts payable to each Investor as a percentage of
the total amounts payable to all Investors.
d. Eligibility for Form S-3. The Company represents and warrants
that it is eligible to register the resale of Registrable Securities on a
registration statement on Form S-3 under the Securities Act, and that the
Company is not aware of any facts or circumstances (including without limitation
any required approvals or waivers or any circumstances that may delay or prevent
the obtaining of accountant's consents) that would prohibit or delay the
preparation and filing of a registration statement on Form S-3 with respect to
the Registrable Securities provided that such registration is not deemed a
"primary offering", in which case the Company could face potential qualification
problems regarding the requirement of having an aggregate market value held by
non-affiliates of $75 million or more. The Company shall use its reasonable
efforts to file all reports required to be filed by the Company with the SEC in
a timely manner so as to maintain or, if applicable, regain its eligibility for
the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare and file with the SEC, on or before
the Filing Deadline or the Uncovered Share Filing Deadline, as applicable, the
applicable Registration Statement required by Section 2(a) and shall use its
reasonable efforts to cause such Registration Statement to become effective as
soon as practicable after such filing. The Company shall use its best efforts to
keep such Registration Statement effective pursuant to Rule 415 for a period of
12 months from the date it became effective (the "REGISTRATION PERIOD"). In the
event that the sale of Registrable Securities by one or more Investors is
determined by the SEC to constitute a primary offering, upon the written request
from time to time of any such Investor, the Company shall as promptly as
practicable cause a Registration Statement to be amended and/or one or more
additional Registration Statements (which may be requested on a sequential
basis) to be filed (as specified by the applicable Investors) and to be declared
effective; and take all other actions reasonably requested by such Investors to
effectuate the offering of Registrable Securities. If the Initial Registration
Statement is not filed on Form S-3, the Company shall, as soon as it is eligible
to do so, file a post-effective amendment on Form S-3 to the Initial
Registration Statement to the extent permitted by the SEC or, if not so
permitted, file a new Registration Statement on Form S-3 to permit sales of the
Registrable Securities pursuant to Rule 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.
4
Each Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein and all documents incorporated by reference
therein) filed pursuant to this Agreement (i) shall comply in all material
respects with the requirements of the Securities Act and the rules and
regulations of the SEC promulgated thereunder and (ii) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein not misleading.
The financial statements of the Company included in the Registration Statement
or incorporated by reference therein will comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC applicable with respect thereto. Such financial
statements shall be prepared in accordance with U.S. generally accepted
accounting principles, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they
may not include footnotes or may be condensed or summary statements) and shall
fairly present in all material respects the consolidated financial position of
the Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to immaterial year-end
adjustments).
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities of the Company covered by the Registration
Statement. Notwithstanding any provision in this Agreement to the contrary, the
Company's obligations hereunder to file a Registration Statement, to have the
same declared effective and to keep a registration statement continuously in
effect under the Securities Act shall be suspended (a "Grace Period") if the
fulfillment of such obligations would require the Company to make a disclosure
that would, in the reasonable judgment of the Company's Board of Directors, have
a Material Adverse Effect (as such term is defined in the Securities Purchase
Agreement) on the Company or a material adverse effect on the future prospects
of the Company or its stockholders; provided, that the Registration Statement
shall be suspended for a total of no more than ninety (90) days during any
twelve (12) month period. The provisions of Section 2(b) hereof shall not be
applicable during and shall be tolled as a result of any Grace Period.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement (i) promptly after the
same is prepared and publicly distributed, filed with the SEC, or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto. In the case of the Registration Statement referred to in Section 2(a),
the Company shall furnish to each Investor which requests (i) a copy of any
request to accelerate the effectiveness of any Registration Statement or
amendment thereto, (ii) on the date of effectiveness of the Registration
Statement or any amendment thereto, a notice stating that the Registration
Statement or amendment has been declared effective, and (iii) such number 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
5
to facilitate the disposition of the Registrable Securities owned by such
Investor. In responding to comments from the staff of the SEC, the Company shall
cooperate with any Investor that notifies the Company that it desires to be
consulted with respect to such process. Such cooperation shall solely consist of
providing any such Investor with: a reasonable opportunity to comment on the
text and substance of proposed written responses to the extent such comment
relates to such investor or its plan of distribution of the Registrable
Securities. To the extent that issues raised by the staff of the SEC have an
impact primarily on any such investor rather than the Company, the Company shall
give reasonable deference to such Investor's requests with respect to the
process and substance of responses with respect to such issues.
d. The Company shall use its reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration Statement
under such other securities or "blue sky" laws of such jurisdictions in the
United States as each Investor who holds Registrable Securities being offered
reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its certificate of incorporation or bylaws,
which in each case the Board of Directors of the Company determines to be
contrary to the best interests of the Company and its stockholders.
e. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor by telephone or facsimile of the
happening of any event, of which the Company has knowledge, as a result of which
the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and use its reasonable efforts promptly to prepare a supplement
or amendment to the Registration Statement to correct such untrue statement or
omission and deliver such number of copies of such supplement or amendment to
each Investor as such Investor may reasonably request.
f. The Company shall use its reasonable efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest practicable date (including in each
case by amending or supplementing such Registration Statement) and to notify
each Investor who holds Registrable Securities being sold of the issuance of
such order and the resolution thereof (and if such Registration Statement is
supplemented or amended, deliver such number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request).
6
g. The Company shall make available for inspection by (i) any
Investor whose Registrable Securities are included in a Registration Statement
and (ii) one firm of attorneys and one firm of accountants or other agents
retained by the Investors (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company, as shall be reasonably deemed necessary by each Inspector to enable
each Inspector to exercise its due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information which any
Inspector may reasonably request for purposes of such due diligence.
h. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, (iv) such
information has been made generally available to the public other than by
disclosure in violation of this Agreement, or (v) such Investor consents to the
form and content of any such disclosure. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to such Investor prior to making such disclosure, and
allow the Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
i. The Company shall use its reasonable efforts to promptly
either (i) secure the designation and quotation, of all the Registrable
Securities covered by the Registration Statement on The Nasdaq Stock Market, or
(ii) cause all the Registrable Securities covered by the Registration Statement
to be listed on the NYSE or the AMEX or another national securities exchange and
on each additional national securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such exchange.
j. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
k. The Company shall cooperate with the Investors who hold
Registrable Securities being offered to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends) representing
Registrable Securities to be offered pursuant to the Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the Investors may reasonably request and registered in such names as the
Investors may request.
l. At the request of an Initial Investor or Investors who holds a
majority-in-interest of the Registrable Securities, the Company shall prepare
and file with the SEC such 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
7
Company, which approval shall not be unreasonably withheld or delayed, as may be
necessary in order to change the plan of distribution set forth in such
Registration Statement.
m. The Company shall comply with applicable federal and state
securities laws and regulations related to a Registration Statement and offering
and sale of securities.
n. From and after the date of this Agreement, the Company shall
not, and shall not agree to, allow the holders of any securities of the Company
(except (i) to the extent existing agreements may otherwise provide or (ii) in
the case of the Common Stock underlying the warrants to be issued to HDB as
placement agent or its co-placement agents of the financing contemplated by the
Securities Purchase Agreement) to include any of their securities in any
Registration Statement under Section 2(a) hereof or any amendment or supplement
thereto under Section 3(b) hereof without the consent of the holders of a
majority in interest of the Registrable Securities.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor (or to make any payments or
other damages to such investor pursuant to Section 2(b)) that such Investor
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five (5)
Business Days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of any information the Company
requires from each such Investor.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
5. EXPENSES OF REGISTRATION.
The Company shall pay (or reimburse the Purchasers for) all fees and
expenses incident to the performance of or compliance with this Agreement by the
Company, including without limitation (a) all registration and filing fees and
expenses, including without limitation those related to filings with the
Commission, any trading market and in connection with applicable state
securities or Blue Sky laws, (b) printing expenses (including without limitation
expenses of printing certificates for Registrable Securities and of printing
prospectuses requested by the Purchasers), (c) messenger, telephone and delivery
expenses, (d) fees and disbursements of
8
counsel for the Company and up to $5,000 in the aggregate for Proskauer Rose
LLP, counsel to Vertical Ventures, LLC, (e) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, and (f) all listing fees to be paid
by the Company to the trading market.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, and (ii) the directors, officers, partners, members, employees and
agents of such Investor and each person who controls any Investor within the
meaning of Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), if any (each, an
"INDEMNIFIED PERSON"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "Claims") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities (the matters in the
foregoing clauses (i) through (iii) being, collectively, "VIOLATIONS"). Subject
to the restrictions set forth in Section 6(c) with respect to the number of
legal counsel, the Company shall reimburse the Investors and each other
Indemnified Person, promptly as such expenses are incurred and are due and
payable, for any reasonable legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by such Indemnified Person
expressly for use in the Registration Statement or any such amendment thereof or
supplement thereto; (ii) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without an unconditional release of the
Company and all of its controlling persons, employees and agents, or without the
prior written consent of the Company, which consent shall not be unreasonably
withheld; and (iii) with respect to any prospectus, shall not inure to the
benefit of any Indemnified Person if the untrue statement or omission of
material fact contained in such 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)
9
hereof, and the Indemnified Person was promptly advised in writing not to use
the incorrect prospectus prior to the use giving rise to a Violation and such
Indemnified Person, notwithstanding such advice, used it. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, its employees, agents,
attorneys and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act, and any
other stockholder selling securities pursuant to the Registration Statement or
any of its directors or officers or any person who controls such stockholder
within the meaning of the Securities Act or the Exchange Act (collectively and
together with an Indemnified Person, an "INDEMNIFIED PARTY"), against any Claim
to which any of them may become subject, under the Securities Act, the Exchange
Act or otherwise, insofar as such Claim arises out of or is based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement; and subject to Section 6(c) such Investor will
reimburse any reasonable legal or other expenses (promptly as such expenses are
incurred and are due and payable) reasonably incurred by them in connection with
investigating or defending any such Claim; provided, however, that the indemnity
agreement contained in this Section 6(b) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without an unconditional
release of such Investor and all of its controlling persons, employees and
agents, or without the prior written consent of such Investor, which consent
shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Agreement (including this Section 6(b) and
Section 7) for only that amount as does not exceed the net proceeds actually
received by such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact by the
Investor contained in the preliminary prospectus was corrected on a timely basis
in the prospectus, as then amended or supplemented, and the Indemnified Party
failed to utilize such corrected prospectus.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
assume control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and 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
10
or Indemnified Party shall have the right to retain its own counsel with the
reasonable fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
conflicts of interest between such Indemnified Person or Indemnified Party and
any other party represented by such counsel in such proceeding or the actual or
potential defendants in, or targets of, any such action include both the
Indemnified Person or the Indemnified Party and the indemnifying party and any
such Indemnified Person or Indemnified Party reasonably determines that there
may be legal defenses available to such Indemnified Person or Indemnified Party
which are in conflict with those available to such indemnifying party. The
indemnifying party shall pay for only one separate legal counsel for all
Indemnified Persons or the Indemnified Parties, as applicable, and such legal
counsel shall be selected by Investors holding a majority-in-interest of the
Registrable Securities included in the Registration Statement to which the Claim
relates, if the Investors are entitled to indemnification hereunder, or by the
Company, if the Company is entitled to indemnification hereunder, as applicable.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
actually prejudiced in its ability to defend such action. The indemnification
required by this Section 6 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as such expense,
loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any other person who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any indemnification or
other obligations under this Agreement) by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
8. REPORTS UNDER THE EXCHANGE ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
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
11
Act so long as the Company remains subject to such requirements (it being
understood that nothing herein shall limit the Company's obligations under
Section 5(c) of the Securities Purchase Agreement) and the filing and
availability of such reports and other documents as is required for the
applicable provisions of Rule 144; and
b. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
assignable by each Investor to any transferee of all or any portion of the
Registrable Securities if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company after such assignment, (ii) the Company is furnished
with written notice of (a) the name and address of such transferee or assignee
and (b) the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment, the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, (iv)
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein, and (v) such transfer shall have been made
in accordance with the applicable requirements of the Securities Purchase
Agreement. In addition, and notwithstanding anything to the contrary contained
in this Agreement or the Securities Purchase Agreement, the Shares may be
pledged, and all rights of the Investors under this Agreement or any other
agreement or document related to the transaction contemplated hereby may be
assigned, without further consent of the Company, to a bona fide pledgee in
connection with an Investor's margin or brokerage accounts.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), by Investors who hold fifty-one percent (51%)
in interest of the Registrable Securities or, in the case of a waiver, with the
written consent of the party charged with the enforcement of any such provision.
Any amendment or waiver effected in accordance with this Section 10 shall be
binding upon each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with
12
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.
000 Xxxx Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx Xxxxx
President
With a copy to:
Xxxxxxxxxxx & Xxxxxxxx LLP
00000 Xxxxx Xxxxxx Xxxx, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone (000) 000-0000
Fax (000) 000-0000
Attention: Xxxxxx Xxxxxxx, Esq.
If to an Investor, at such address as such Investor shall
have provided in writing to the Company or such other address as such Investor
furnishes by notice given in accordance with this Section 11(b).
Each party hereto may from time to time change its address or facsimile
number for notices under this Section 11(b) by giving at least ten (10) days'
prior written notice of such changed address or facsimile number, in the case of
the Investors to the Company, and in the case of the Company to all of the
Investors.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. Governing Law; Venue; Waiver Of Jury Trial. 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
13
OF NEW YORK. THE COMPANY AND PURCHASERS HEREBY IRREVOCABLY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF
NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY
THE COMPANY OR ANY PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY
TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO
THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY
WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE
COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY AND PURCHASERS HEREBY WAIVE ALL RIGHTS TO A TRIAL
BY JURY.
e. This Agreement, the Securities Purchase Agreement and the
Warrants (including all schedules and exhibits thereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Agreement, the
Securities Purchase Agreement and the Warrants supersede all prior agreements
and understandings among the parties hereto and thereto with respect to the
subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not form part of or effect the interpretation of this
Agreement.
h. This Agreement may be executed in two or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party. This Agreement, once executed by a party, may be delivered to the
other parties hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement. In the event
any signature is delivered by facsimile transmission, the party using such means
of delivery shall cause the manually executed signature page(s) hereof to be
physically delivered to the other party within five (5) days of the execution
hereof..
i. Each party shall do and perform, or cause to be done and
performed, all
14
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
j. All consents, approvals and other determinations to be made by
the Investors pursuant to this Agreement shall be made by the Investors holding
more than fifty percent (50%) of the Registrable Securities then held by all
Investors.
k. The initial number of Registrable Securities included on any
Registration Statement and each increase to the number of Registrable Securities
included thereon shall be registered on behalf of each Investor pro rata based
on the number of Registrable Securities held by each Investor at the time of
such establishment or increase, as the case may be. In the event an Investor
shall sell or otherwise transfer any of such holder's Registrable Securities,
each transferee shall be deemed to have registered on its behalf a pro rata
portion of the number of Registrable Securities included on a Registration
Statement for such transferor. Any shares of Common Stock included on a
Registration Statement on behalf of any person or entity which does not hold any
Registrable Securities shall be deemed registered on behalf of the remaining
Investors, pro rata based on the number of shares of Registrable Securities then
held by such Investors. For the avoidance of doubt, no provision of this
subsection shall operate to reduce the number of Registrable Securities
registered on behalf of any Investor pursuant to the first sentence of this
subsection.
l. For purposes of this Agreement, the term "Business Day" means
any day other than a Saturday or Sunday or a day on which banking institutions
in the State of New York or California are authorized or obligated by law,
regulation or executive order to close.
m. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
n. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by any other person.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
BAM! ENTERTAINMENT, INC.
By:
---------------------------------
Name:
-------------------------------
Its:
-------------------------------
INITIAL INVESTORS:
By:
---------------------------------
Name:
-------------------------------
Its:
-------------------------------
16
EXHIBIT D
TO SECURITIES PURCHASE AGREEMENT
WARRANT SHARES REGISTRATION RIGHTS AGREEMENT
WARRANT SHARES REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated
as of September 30, 2003, by and among BAM! ENTERTAINMENT, INC., a corporation
organized under the laws of the State of Delaware (the "COMPANY"), and the
undersigned (the "INITIAL Investors").
WHEREAS:
A. The Company and the Initial Investors have entered into a Securities
Purchase Agreement dated the date hereof (the "SECURITIES PURCHASE AGREEMENT;"
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement). In
connection with the Securities Purchase Agreement, the Company has agreed, upon
the terms and subject to the conditions contained therein, to issue and sell to
the Initial Investors (i) warrants (the "WARRANTS") to purchase shares of the
Company's common stock, $0.001 par value (the "COMMON STOCK"). The shares of
Common Stock issuable upon exercise of the Warrants issued on the Closing Date
under the Securities Purchase Agreement are referred to herein as the "WARRANT
SHARES."
B. To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"SECURITIES ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investors, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
(i) "ADDITIONAL INVESTMENT RIGHTS" shall mean rights
issued to the Initial Investors' further to the Securities Purchase Agreement to
purchase additional shares of Common Stock and Warrants (all as more fully
described in Exhibit B to the Securities Purchase Agreement).
(ii) "INVESTORS" means the Initial Investors and any
transferees or assignees who agree to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(iii) "REGISTER," "REGISTERED," and "REGISTRATION" refer
to a registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("RULE 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iv) "REGISTRABLE SECURITIES" means (i) the Warrant
Shares, (ii) any shares of Common Stock issuable upon exercise of Warrants
purchased upon exercise of the Additional Investment Rights (the "Additional
Investment Right Warrant Shares"), (iii) any Warrant Shares or Additional
Investment Right Warrant Shares issuable pursuant to the anti-dilution
provisions of the Warrants and the Additional Investment Right Warrants,
respectively, and (iv) 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, Warrant Shares or Additional Investment Right 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.
(v) "REGISTRATION STATEMENT" means one or more
registration statements of the Company under the Securities Act registering all
of the Registrable Securities, including the Initial Registration Statement, any
Uncovered Shares Amendments and Uncovered Shares Registration Statements (each,
as defined below).
2. REGISTRATION.
a. Mandatory Registration. The Company shall file with the United
States Securities and Exchange Commission ("SEC"), on the date which is on or
before forty-five (45) 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 and any Additional Investment Right Warrant Shares issued upon
exercise of the Additional Investment Rights, 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 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
2
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 one hundred and twentieth (120th) 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. Eligibility for Form S-3. The Company represents and warrants
that it is eligible to register the resale of Registrable Securities on a
registration statement on Form S-3 under the Securities Act, and that the
Company is not aware of any facts or circumstances (including without limitation
any required approvals or waivers or any circumstances that may delay or prevent
the obtaining of accountant's consents) that would prohibit or delay the
preparation and filing of a registration statement on Form S-3 with respect to
the Registrable Securities provided that such registration is not deemed a
"primary offering", in which case the Company could face potential qualification
problems regarding the requirement of having an aggregate market value held by
non-affiliates of $75 million or more. The Company shall use its reasonable
efforts to file all reports required to be filed by the Company with the SEC in
a timely manner so as to maintain or, if applicable, regain its eligibility for
the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare and file with the SEC, on or before
the Filing Deadline or the Uncovered Share Filing Deadline, as applicable, the
applicable Registration Statement required by Section 2(a) and shall use its
reasonable efforts to cause such Registration Statement to become effective as
soon as practicable after such filing. The Company shall use its best efforts to
keep such Registration Statement effective pursuant to Rule 415 for a period of
12 months from the date it became effective (the "REGISTRATION PERIOD"). In the
event that the sale of Registrable Securities by one or more Investors is
determined by the SEC to constitute a
3
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 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.
4
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.
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
5
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 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.
6
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 may otherwise provide or (ii) in
the case of the Common Stock underlying the warrants to be issued to HDB as
placement agent or its co-placement agents of the financing contemplated by the
Securities Purchase Agreement) to include any of their securities in any
Registration Statement under Section 2(a) hereof or any amendment or supplement
thereto under Section 3(b) hereof without the consent of the holders of a
majority in interest of the Registrable Securities.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor (or 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 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
7
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 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
8
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
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
9
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 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.
10
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 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
11
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.
000 Xxxx Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx Xxxxx
President
With a copy to:
Xxxxxxxxxxx & Xxxxxxxx LLP
00000 Xxxxx Xxxxxx Xxxx, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone (000) 000-0000
Fax (000) 000-0000
Attention: Xxxxxx Xxxxxxx, Esq.
If to an Investor, at such address as such Investor shall have provided in
writing to the Company or such other address as such Investor furnishes by
notice given in accordance with this Section 11(b).
Each party hereto may from time to time change its address or facsimile
number for notices under this Section 11(b) by giving at least ten (10) days'
prior written notice of such changed address or facsimile number, in the case of
the Investors to the Company, and in the
12
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 Trial. 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 NEW YORK. THE COMPANY AND PURCHASERS HEREBY IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN
THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE
BROUGHT BY THE COMPANY OR ANY PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR
WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH
RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY
IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING
BROUGHT BY THE COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN
EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS
IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND PURCHASERS HEREBY WAIVE ALL
RIGHTS TO A TRIAL BY JURY.
e. This Agreement, the Securities Purchase Agreement and the
Warrants (including all schedules and exhibits thereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Agreement, the
Securities Purchase Agreement and the Warrants supersede all prior agreements
and understandings among the parties hereto and thereto with respect to the
subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not form part of or effect the interpretation of this
Agreement.
13
h. This Agreement may be executed in two or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party. This Agreement, once executed by a party, may be delivered to the
other parties hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement. In the event
any signature is delivered by facsimile transmission, the party using such means
of delivery shall cause the manually executed signature page(s) hereof to be
physically delivered to the other party within five (5) days of the execution
hereof..
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 New York or California are authorized or obligated by law,
regulation or executive order to close.
m. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
14
n. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by any other person.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
BAM! ENTERTAINMENT, INC.
By:
---------------------------------
Name:
-------------------------------
Its:
-------------------------------
INITIAL INVESTORS:
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
EXHIBIT E
TO SECURITIES PURCHASE AGREEMENT
September 30, 2003
American Stock Transfer & Trust Company
0000 00xx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx
Re: BAM Entertainment, Inc. -- Transfer Agent Instructions
Dear Xx. Xxxxxx:
Reference is made to the Securities Purchase Agreements (the
"Purchase Agreement"), dated as of September 30, 2003, among BAM! Entertainment,
Inc., a Delaware corporation (the "Company") and the purchasers named therein
(the "Purchasers") pursuant to which the Company is issuing shares (the
"Shares") of the Company's common stock, $0.001 par value per share (the "Common
Stock"), Warrants to purchase Common Stock (the "Warrant Shares") and Additional
Investment Rights to purchase Common Stock (the "Additional Investment Right
Shares") and Warrants to purchase Common Stock (the "Additional Investment Right
Warrant Shares").
The Company has agreed with the Purchasers that it will instruct
you to: (A) issue the Shares, Warrant Shares, Additional Investment Right Shares
and Additional Investment Right Warrant Shares free of all restrictive legends
under the Securities Act of 1933, if, at the time of such issue, (i) a
registration statement covering the resale of such Shares and Warrant Shares has
been declared and is effective by the Commission under the Securities Act and
the additional requirements set forth in the opinion letter in the form attached
hereto as Exhibit I have been complied with, (ii) such Common Stock are eligible
for sale under Rule 144(k) or (iii) such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission); or (B) reissue the Common
Stock (if such shares were originally issued with a restrictive legend) free of
all restrictive and other legends (i) upon the effectiveness of a registration
statement covering the resale of the Common Stock or (ii) following the delivery
of an appropriate opinion of counsel (a) any sale of such Common Stock pursuant
to Rule 144 or (b) such Common Stock are eligible for sale under Rule 144(k) or
(c) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the Staff of the Commission).
In furtherance of this instruction, upon the effectiveness of the
Registration Statement (as defined in the Purchase Agreement) we have instructed
our counsel to deliver to you their opinion letter in the form attached hereto
as EXHIBIT I to the effect therein.
Other than as set forth herein, you need not require further
letters from us or our counsel to effect any reissuance of shares of Common
Stock issued as of the date hereof to the
Purchasers as contemplated by the Purchase Agreement and this letter. This
letter should serve as our standing irrevocable instructions with regard to this
matter.
Please be advised that the Purchasers have relied upon this
instruction letter as an inducement to enter into the Purchase Agreement. Please
execute this letter in the space indicated to acknowledge your agreement to act
in accordance with these instructions.
Very truly yours,
BAM! ENTERTAINMENT, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
RECEIPT ACKNOWLEDGED:
American Stock Transfer & Trust Company
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
EXHIBIT E
TO SECURITIES PURCHASE AGREEMENT
Exhibit I [ACTUAL ISSUANCE SUBJECT TO APPROVAL OF K&L OPINION COMMITTEE]
[Counsel's Letterhead]
[Date]
American Stock Transfer Trust Company
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: ____________
Re: BAM! Entertainment, Inc. -- Legend Removal relating to an aggregate of
_________ shares of common stock and ________ shares of common stock
issuable upon exercise of Warrants
Ladies and Gentlemen:
We have been requested by our client, BAM Entertainment, Inc. (the "Company"),
to furnish our opinion to you concerning removal of the Legend referred to below
on certificates evidencing up _______ shares (the "Shares") of common stock,
$0.001 par value (the "Common Stock"), of the Company and _______ shares of
Common Stock of the Company (the "Warrant Shares") that may be issued from time
to time upon exercise of warrants (the "Warrants") held by the purchasers (such
purchasers and their permitted assigns being hereinafter referred to as the
"Purchasers") named in that certain Securities Purchase Agreement dated
September __ 2003, by and between the Company and the Purchasers.
We understand that the transfer of the Shares and the Warrant Shares is
restricted on the Company's stock records, and each certificate for the Shares
bear, and in the case of the Warrant Shares will bear, a legend (the "Legend")
restricting such transfer, otherwise than pursuant to registration or an
exemption from registration under the Securities Act of 1933 (the "Securities
Act").
In connection with rendering the opinion set forth below, we have examined
copies of the following documents (collectively, the "Supporting Documents"):
(a) The Company's Registration Statement on Form S-3 (File No.
333-________) filed with the Securities and Exchange Commission (the
"SEC") on ________, 2003 relating to the Shares and Warrant Shares [and
Amendments 1, ___ and ____ thereto filed _______, ______ and ______]
(the "Registration Statement"); and
(b) The Company's prospectus ("the Prospectus") dated _________
filed with the SEC on _________ pursuant to Rule 424(b)(3) under the
Securities Act of 1933 (the "Act") relating to the Shares and Warrant
shares and which names each of Purchaser as a selling stockholder
thereunder (a copy of which is enclosed herewith).
We have been advised orally by a member of the staff of the SEC that the
SEC has entered an order declaring the Registration Statement effective under
the Securities Act of 1933, as amended (the "1933 Act"), on ___ __, 2003. We
have no knowledge that any stop order suspending its effectiveness has been
issued or that any proceedings for that purpose are pending before, or
threatened by, the SEC.
For the purposes of this opinion, we have made the assumptions that are
customary in opinion letters of this kind, including the assumptions that each
document submitted to us is accurate and complete, that each document that is an
original is authentic, that each such document that is a copy conforms to an
authentic original, that all signatures on each such document are genuine, and
that no changes have occurred or will occur in the facts reflected in the
Supporting Documents. We have assumed the legal capacity of the Purchasers and
that the all Warrant Shares will be issued pursuant to the terms of the
Warrants. We have not verified any of those assumptions.
For the purposes of this opinion, we have also assumed that:
1. At the time of any sale of any of the Shares or Warrant Shares, no
stop order suspending the effectiveness of the Registration Statement will have
been issued or any proceedings for that purpose will be pending before, or
threatened by, the SEC;
2. Any sale of any of the Shares or Warrant does not occur during a
Grace Period (as defined in Section 3(b)) of each of those certain Common Stock
Registration Rights Agreement and Warrant Shares Registration Rights Agreement
dated September __, 2003 between the Company and the Purchasers; and
3. The Purchasers sell the Shares and Warrant Shares in accordance with
the "Plan of Distribution" set forth in the Prospectus and comply with the
prospectus delivery requirements under Section 5(b)(2) of the Securities Act
and, at the time any of the Purchasers request a removal of the Legend on any
certificate evidencing all or any portion of the Shares or Warrant Shares or to
transfer any of the same, it (or a broker acting on such Purchaser's behalf)
provides to the Company (or to you on the Company's behalf), reasonable written
assurances to the effect that any of the Shares or Warrant Shares, as the case
may be, sold or to be sold by such Purchasers have been, or will be, sold in
accordance with the plan of distribution set forth in the Prospectus and in
compliance with the prospectus delivery requirements under the Securities Act.
4
Based solely on our review of the Supporting Documents and subject to
the foregoing and the other matters set forth below, it is our opinion a
proposed transfer and sale of any of the Shares or Warrant Shares by the
Purchasers, effected pursuant to the plan of distribution described in the
Registration Statement and Prospectus and in compliance with the prospectus
delivery requirements under the Securities Act, will be in conformity with the
Securities Act inasmuch as such Shares will be sold pursuant to an effective
Registration Statement. Accordingly, the Legend on the certificates for the
Shares and Warrant Shares and the restrictions on the Company's records
concerning the transfer of the Shares and the Warrant Shares under the
Securities Act may be removed.
The foregoing opinion is limited to the registration provisions of the
Securities Act and relates only to the Shares and the Warrant Shares. It does
not address any other provision of law, any other securities, or any other
aspect of the subject transaction.
We are furnishing this opinion letter to you solely in connection with
the above matter. You may not rely on this opinion letter in any other
connection, and it may not be furnished to or relied upon by any other person
for any purpose, without our specific prior written consent.
Sincerely,
cc: Bam Entertainment, Inc.
Attention: ___________
5
EXHIBIT F
TO SECURITIES PURCHASE AGREEMENT
VERTICAL VENTURES LLC: $ 758,000 42.68018%
789,584 Shares
710,625 Warrants
Additional Investment Rights to purchase: 704,223 Additional Investment Right Shares
Additional Investment Right Warrants to purchase
633,801 Additional Investment Right Warrant Shares
CRESCENT INTERNATIONAL LTD: $ 315,000 17.73648%
328,125 Shares
295,313 Warrants
Additional Investment Rights to purchase: 292,652 Additional Investment Right Shares
Additional Investment Right Warrants to purchase
263,387 Additional Investment Right Warrant Shares
SMITHFIELD FIDUCIARY LLC: $ 225,000 12.668919%
234,375 Shares
210,938 Warrants
Additional Investment Rights to purchase: 209,037 Additional Investment Right Shares
Additional Investment Right Warrants to purchase
188,133 Additional Investment Right Warrant Shares
TRUK OPPORTUNITY FUND, LLC: $ 22,080 1.24324%
23,000 Shares
20,700 Warrants
Additional Investment Rights to purchase: 20,513 Additional Investment Right Shares
Additional Investment Right Warrants to purchase
18,463 Additional Investment Right Warrant Shares
XXX SECURITIES, LLC: $ 85,440 4.81081%
89,000 Shares
80,100 Warrants
Additional Investment Rights to purchase: 79,378 Additional Investment Right Shares
Additional Investment Right Warrants to purchase
71,440 Additional Investment Right Warrant Shares
AID DKR SOUNDSHORE PRIVATE $ 96,000 5.4054%
INVESTORS HOLDING FUND, LTD: 100,000 Shares
90,000 Warrants
Additional Investment Rights to purchase: 89,191 Additional Investment Right Shares
Additional Investment Right Warrants to purchase
80,270 Additional Investment Right Warrant Shares
OTAPE INVESTMENTS LLC: $ 274,480 15.45495%
285,916 Shares
257,324 Warrants
Additional Investment Rights to purchase: 255,006 Additional Investment Right Shares
Additional Investment Right Warrants to purchase
229,506 Additional Investment Right Warrant Shares
EXHIBIT G
LEGAL OPINION
Pursuant to Section 7(f) of the Securities Purchase Agreement, the Company's
counsel shall provide an opinion relating to the following matters
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
2. The Company (a) has the corporate power to execute, deliver and
perform its obligations under the Transaction Documents, (b) has taken all
corporate action necessary to authorize the execution, delivery and performance
of the Transaction Documents, and (c) has duly executed and delivered the
Transaction Documents. Each of the Transaction Documents is a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
3. The issuance and sale of the Shares, Warrants, Warrant Shares,
Additional Investment Rights, Additional Investment Right Shares, Additional
Investment Right Warrants and Additional Investment Right Warrant Shares have
been duly authorized. The Shares, the Warrants and the Additional Investment
Rights, when issued and sold in accordance with the terms of the Purchase
Agreement, and the Warrant Shares, when issued and sold in accordance with terms
of the Warrants, the Additional Investment Right Shares, when issued and sold in
accordance with the terms of the Additional Investment Rights, and the
Additional Investment Right Warrant Shares, when issued and sold in accordance
with the terms of the Additional Investment Right Warrants, will be validly
issued, fully paid and non-assessable. The stockholders of the Company have no
preemptive rights with respect to the issuance of the Shares, Warrant Shares,
Additional Investment Right Shares or Additional Investment Right Warrant Shares
under any statute or the Company's Certificate of Incorporation or By-laws.
4. Subject to the accuracy of the Purchasers' representations in Section
3 of the Purchase Agreement and the Company's representations in Sections 4(p)
and 4(q) of the Purchase Agreement and assuming that the activities of any of
the Placement Agents, if imputed to the Company, would not violate such
representations, it is not necessary to register the Shares, Warrants, Warrant
Shares, Additional Investment Rights, Additional Investment Right Shares,
Additional Investment Right Warrant and Additional Investment Right Warrant
Shares under the Securities Act of 1933 in connection with the offer and
issuance of such securities to the Purchasers under the circumstances
contemplated by the Purchase Agreement.
5. Except for the notification of the Nasdaq National Market, the filing
with the SEC of a Form D as required under Regulation D and the filing with the
SEC of a registration statement as required by the Registration Rights Agreement
and such blue sky filings as may be required (as to which we render no opinion),
the execution and delivery by the Company of the Transaction Documents, and the
performance by the Company of its obligations under the Transaction Documents,
do not require the Company to obtain any approval by or make any filing with any
governmental authority under the General Corporation Law of the State of
Delaware or any statute, rule, or regulation of the State of California or the
United States.
6. The execution, delivery and performance by the Company of the
Transaction Documents, the consummation by the Company of the transactions
contemplated thereby and the compliance by the Company with the terms thereof do
not (a) violate or constitute a default under (i) the Certificate of
Incorporation or the By-laws of the Company, or (ii) any agreement, note, lease,
mortgage, deed or other instrument listed as an exhibit to the Company's Annual
Report on Form 10-K for the year ended June 30, 2003, or (b) result in any
violation of the General Corporation Law of the State of Delaware or any
applicable statute regulation of the State of California or the United States.
7. To the knowledge of such counsel, the Company meets the eligibility
requirement for the use of Form S-3 for the registration of the Shares and the
Warrant Shares.
8. To our knowledge, at the date of this opinion letter, there is no
action or proceeding pending before any court, governmental agency or
arbitrator, or overtly threatened in writing, against the Company, except as
disclosed in the Company's filings with the Securities and Exchange Commission.
In rendering the foregoing opinion, please note that we have not conducted a
docket search in any jurisdiction with respect to litigation that may be pending
against the Company or any of its Subsidiaries or officers or directors, nor
have we undertaken any further inquiry, beyond obtaining the Officers
Certificate.
9. The Company is not an "investment company" or an entity controlled by
an "investment company," as such terms are defined in the Investment Company Act
of 1940.
2
SCHEDULE 4(a)
SUBSIDIARIES
Bam Entertainment Limited
Bam Studios (Europe) Limited
SCHEDULE 4C
AUTHORIZED STOCK:
Common Stock 100000000 shares at $0.001 par value
Redeemable Convertible Preferred Stock 10000000 shares at $0.001 par value
ISSUED AND OUTSTANDING STOCK:
Common Stock 14814040 shares (see below)
Redeemable Convertible Preferred Stock 0 shares
STOCK OPTION PLAN
Number of shares reserved for issuance 3500000 shares
Number of shares issued under plan 156312 shares
Number of options outstanding 1773208 shares (see below)
OPTIONS GRANTED OUTSIDE OF PLAN
Number of options outstanding 268800 shares (see below)
EMPLOYEE SHARE PURCHASE PLAN
Number of shares reserved for issuance 705000 shares
Number of shares issued under plan 31752 shares
WARRANTS
Number of warrants outstanding 878450 (see below)
Warrant agreements that require a
registration agreement be filed: Southpaw (see below)
Page 1 of 2
SCHEDULE 4C
CAPITALIZATION TABLE
SHARES
OWNED WARRANTS OPTIONS
NAME 22-SEP-03 22-SEP-03 22-SEP-03 TOTAL
Aardman 35000 35000
Xxxxxx Xxxxxxx 5212 132906 138118
AR Xxxxxxxx Settlement 2205361 2205361
Xxxxxxx Xxxxx 8000 8000
Xxxxxxx Xxxxx 2410 2410
Xxxxxxxxxxxxx Xxxxxx 11675 11675
Xxxxxxxxxx Xxxxx 89576 89576
Xxxxxxxx Xxxx 15315 15315
Xxxxx Xxx 71300 71300
Xxxxx Xxxxxxx 8000 8000
Xxxxxxxxxxx Xxxxx 26834 26834
Xxxxxx Xxxxx 17183 17183
Xxxxxxx Xxxxx 57917 57917
Xxxx Xxxx 89576 109600 199176
Xxxx Xxxxx 63328 63328
Xxxxxxxx Xxxxxx 23963 23963
Franchise Films 68738 68738
Xxxxxxxx Xxxxx 27975 27975
Xxxxxx Xxxxxx 659397 350789 1010186
Xxxxx Xxxx 2815 2815
Xxxxxxxxxxx & Xxxxxxxx 47000 47000
Xxxxxx Xxxx 206667 206667
Xxxxx Xxxxxx 45825 10000 55825
Xxxxx Xxxxx 5030 5030
Xxxxxx Xxxx 4000 4000
Xxxxxx Xxxx 25000 25000
Xxxxxxxxx Xxxxxx 13419 10183 23602
Xxxxxxxx Xxxx 10033 10033
Xxxxxx Xxxxxx 16450 16450
Xxxxx Xxxxxxx 3109964 116978 3226942
Xxxxxxxx Xxxxxx 29063 29063
Xxxxx Xxxxx 29375 29375
Par Investment Ptrs 1489810 1489810
Xxxxxxx Xxxxx 28450 28450
Sammah Laili 5633 5633
Selected Ventures LLC 206211 206211
Xxxxxxx Xxxxx 18720 18720
Xxxxxx Xxxxxx 3000 48800 51800
Southpaw 200000 200000
Spyglass 470000 470000
Xxxxxx, Xxxxxx 250000 250000 (250000 options outside of plan)
Xxxxxxxx Xxxxxx 57600 57600
Xxxxx Xxxxx 38800 38800 (18800 options outside of plan)
Transcap 100000 100000
Tsele Magnolia 26463 26463
Valencia Phoenix 6500 6500
VIS 10000 10000
Xxxxxxxx Xxxxxxx G 35000 38800 73800
Xxxxxxxx Xxxxxxx R 109519 116978 226497
Xxxxx Xxxxx 7500 7500
Xxxx Xxxxxx 21425 21425
Other 6683432 6683432
TOTAL 14814040 878450 2042008 17734498
Page 2 of 2
