EXHIBIT 4.4
BAM! ENTERTAINMENT, INC.
SECURITY AGREEMENT
Dated as of December 3, 2003
To: Laurus Master Fund, Ltd.
c/o Onshore Corporate Services, Ltd.
X.X. Xxx 0000 G.T
Queensgate House
South Church Street
Grand Cayman, Cayman Islands
Gentlemen:
1. To secure the payment of all Obligations (as hereafter defined), we
hereby grant to you a continuing security interest in all of the following
property now owned or at any time hereafter acquired by us, or in which we now
have or at any time in the future may acquire any right, title or interest (the
"Collateral"): all accounts, inventory, equipment, goods, documents, instruments
(including, without limitation, promissory notes), contract rights, general
intangibles, chattel paper, supporting obligations, investment property,
letter-of-credit rights, trademarks and tradestyles in which we now have or
hereafter may acquire any right, title or interest, all proceeds and products
thereof (including, without limitation, proceeds of insurance) and all
additions, accessions and substitutions thereto or therefore. In the event we
wish to finance the acquisition of any hereafter acquired equipment and have
obtained a commitment from a financing source to finance such equipment from an
unrelated third party, you agree to release your security interest on such
hereafter acquired equipment so financed by such third party financing source.
2. The term "Obligations" as used herein shall mean and include all
debts, liabilities and obligations owing by us to you hereunder and under
whether arising under, out of, or in connection with that certain Securities
Purchase Agreement dated as of the date hereof by and between the undersigned
and Laurus Master Fund, Ltd. ("Laurus") (the "Securities Purchase Agreement"),
that certain Secured Convertible Note dated as of the date hereof made by in
favor of Laurus (the "Term Note") the Warrant dated as of the date hereof made
by The undersigned in favor of Laurus in connection with the Term Note (the
"Term Note Warrant") that certain Registration Rights Agreement dated as of the
date hereof by and between the undersigned and Laurus in connection with the
Term Note (the "Term Note Registration Rights Agreement") (the Securities
Purchase Agreement, the Term Note, the Term Note Warrant and the Term Note
Registration Rights Agreement as each may be amended, modified, restated or
supplemented from time to time, are collectively referred to herein as the
"Documents").
3. We hereby represent, warrant and covenant to you that:
(a) we are a company validly existing, in good standing and
formed under the laws of the State of Delaware and we will provide you
thirty (30) days' prior written notice of any change in our state of
formation;
(b) our legal name is Bam! Entertainment, Inc., as set forth
in our Certificate of Incorporation as amended through the date hereof;
(c) we are the lawful owner of the Collateral and have the
sole right to grant a security interest therein and will defend the
Collateral against all claims and demands of all persons and entities;
(d) we will keep the Collateral free and clear of all
attachments, levies, taxes, liens, security interests and encumbrances
of every kind and nature ("Encumbrances"), other than Encumbrances
which (i) is set forth on Schedule 3(d) attached hereto; (ii) are
junior to the grant of the security interest hereunder (iii) which are
equipment or mechanics liens incurred in the ordinary course of
business or (iv) an Encumbrance which secures indebtedness of less than
$100,000 and such Encumbrance is removed or otherwise released within
ten (10) days of the creation thereof;
(e) we will at our own cost and expense keep the Collateral in
good state of repair (ordinary wear and tear excepted) and will not
waste or destroy the same or any part thereof other than ordinary
course discarding of items no longer used or useful in our business;
(f) we will not without your prior written consent, sell,
exchange, lease or otherwise dispose of the Collateral, whether by
sale, lease or otherwise, except for the sale of inventory in the
ordinary course of business and for the disposition or transfer in the
ordinary course of business during any fiscal year of obsolete and
worn-out equipment or equipment no longer necessary for our ongoing
needs, having an aggregate fair market value of not more than $50,000
and only to the extent that:
(i) the proceeds of any such disposition are used to
acquire replacement Collateral which is subject to your
security interest or are used to repay Obligations or to pay
general corporate expenses; or
(ii) following the occurrence of an Event of Default
which continues to exist the proceeds of which are remitted to
you to be held as cash collateral for the Obligations;
(g) we will insure the Collateral in your name as a loss payee
(and submit evidence of such designation to you within seven days of
the date hereof), against loss or damage by fire, theft, burglary,
pilferage, loss in transit and such other hazards in amounts and under
policies by insurers reasonably acceptable to you and all premiums
thereon shall be paid by us. If we fail to do so, you may procure such
insurance and the cost thereof shall constitute Obligations;
(h) we will at all reasonable times allow you or your
representatives free access to and the right of inspection of the
Collateral;
2
(i) upon the occurrence of an Event of Default (below) we
hereby indemnify and save you harmless from all loss, costs, damage,
liability and/or expense, including reasonable attorneys' fees, that
you may sustain or incur to enforce payment, performance or fulfillment
of any of the Obligations and/or in the enforcement of this Agreement
or in the prosecution or defense of any action or proceeding either
against you or us concerning any matter growing out of or in connection
with this Agreement, and/or any of the Obligations and/or any of the
Collateral except to the extent caused by your own gross negligence or
willful misconduct.
4. We shall be in default under this Agreement upon the happening of
any of the following events or conditions, each such event or condition an
"Event of Default:"
(a) we shall fail to pay when due or punctually perform any of
the Obligations within any applicable cure period and such failure
shall continue for a period of three (3) days following any failure to
make payment, or for a period of thirty (30) days following default for
any other such failure;
(b) any covenant, warranty, representation or statement made
or furnished to you by us or on our behalf was false in any material
respect when made or furnished;
(c) the loss, theft, substantial damage, destruction, sale or
encumbrance to or of any of the Collateral or the making of any levy,
seizure or attachment thereof or thereon except to the extent:
(i) such loss is covered by insurance proceeds which
are used to replace the item or repay us; or
(ii) said levy, seizure or attachment does not secure
indebtedness in excess of $250,000 and such levy, seizure or
attachment has not been removed or otherwise released within
ten (10) days of the creation or the assertion thereof;
(d) we shall become insolvent, cease operations, dissolve,
terminate our business existence, make an assignment for the benefit of
creditors, suffer the appointment of a receiver, trustee, liquidator or
custodian of all or any part of our property;
(e) any proceedings under any bankruptcy or insolvency law
shall be commenced by or against us and if commenced against us shall
not be dismissed within thirty (30) days; or
(f) an Event of Default (other than as described in 4(a)
above), shall have occurred under and as defined in the Note.
5. Upon the occurrence of any Event of Default and at any time
thereafter, you may declare all Obligations immediately due and payable and you
shall have the remedies of a secured party provided in the Uniform Commercial
Code as in effect in the State of New York, this Agreement and other applicable
law. Upon the occurrence of any Event of Default and at any time thereafter, you
will have the right to take possession of the Collateral and to maintain
3
such possession on our premises or to remove the Collateral or any part thereof
to such other premises as you may desire. Upon your request, we shall assemble
the Collateral and make it available to you at a place designated by you. If any
notification of intended disposition of any Collateral is required by law, such
notification, if mailed, shall be deemed properly and reasonably given if mailed
at least ten (10) days before such disposition, postage prepaid, addressed to us
either at our address shown herein or at any address appearing on your records
for us. Any proceeds of any disposition of any of the Collateral shall be
applied by you to the payment of all expenses in connection with the sale of the
Collateral, including reasonable attorneys' fees and other legal expenses and
disbursements and the reasonable expense of retaking, holding, preparing for
sale, selling, and the like, and any balance of such proceeds may be applied by
you toward the payment of the Obligations in such order of application as you
may elect, and we shall be liable for any deficiency.
6. Upon the occurrence of any Event of Default, you may, at your option
without waiving your right to enforce this Agreement according to its terms,
immediately or at any time thereafter and without notice to us, perform or
fulfill the same or cause the performance or fulfillment of the same for our
account and at our sole cost and expense, and the cost and expense thereof
(including reasonable attorneys' fees) shall be added to the Obligations and
shall be payable on demand with interest thereon at the highest rate permitted
by law.
7. Upon the occurrence of any Event of Default, and for so long as such
Event of Default shall be continuing, we appoint you, any of your officers,
employees or any other person or entity whom you may designate as our attorney,
with power to execute such documents in our behalf and to supply any omitted
information and correct patent errors in any documents executed by us or on our
behalf; to file financing statements against us covering the Collateral; to sign
our name on public records; and to do all other things you deem necessary to
carry out this Agreement. We hereby ratify and approve all acts of the attorney
and neither you nor the attorney will be liable for any acts of commission or
omission, nor for any error of judgment or mistake of fact or law other than
gross negligence or willful misconduct. This power being coupled with an
interest, is irrevocable so long as any Obligations remains unpaid or the Event
of Default shall be continuing but will automatically terminate upon the
irrevocable payment and performance of the Obligations.
8. No delay or failure on your part in exercising any right, privilege
or option hereunder shall operate as a waiver of such or of any other right,
privilege, remedy or option, and no waiver whatever shall be valid unless in
writing, signed by you and then only to the extent therein set forth, and no
waiver by you of any default shall operate as a waiver of any other default or
of the same default on a future occasion. Your books and records containing
entries with respect to the Obligations shall be admissible in evidence in any
action or proceeding, shall be binding upon us for the purpose of establishing
the items therein set forth and shall constitute prima facie proof thereof. You
shall have the right to enforce any one or more of the remedies available to
you, successively, alternately or concurrently. We agree to join with you in
executing financing statements or other instruments to the extent required by
the Uniform Commercial Code in form satisfactory to you and in executing such
other documents or instruments as may be required or deemed necessary by you for
purposes of affecting or continuing your security interest in the Collateral.
4
9. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York and cannot be terminated orally. All of the
rights, remedies, options, privileges and elections given to you hereunder shall
inure to the benefit of your successors and assigns. The term "you" as herein
used shall include your company, any parent of your company, any of your
subsidiaries and any co-subsidiaries of your parent, whether now existing or
hereafter created or acquired, and all of the terms, conditions, promises,
covenants, provisions and warranties of this Agreement shall inure to the
benefit of and shall bind the representatives, successors and assigns of each of
us and them. You and we hereby (a) waive any and all right to trial by jury in
litigation relating to this Agreement and the transactions contemplated hereby
and we agree not to assert any counterclaim in such litigation, (b) submit to
the nonexclusive jurisdiction of any New York State court sitting in the borough
of Manhattan, the city of New York and (c) waive any objection you or we may
have as to the bringing or maintaining of such action with any such court.
10. All notices from you to us shall be sufficiently given if mailed or
delivered to us at our address set forth below.
Very truly yours,
BAM! ENTERTAINMENT, INC.
By: /s/ Xxxxxxx Xxxxxx
-----------------------------
Name: Xxxxxxx Xxxxxx
-----------------------------
ACKNOWLEDGED: Title: CFO
-----------------------------
LAURUS MASTER FUND, LTD. Address:
By: [Illegible]
------------------------
Name:
------------------------
Title:
------------------------
5
