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                                                                    Exhibit 10.4

                               FACTORING AGREEMENT

        THIS FACTORING AGREEMENT ("Agreement") made and executed this 25th day
of February, 2002 by and between BAM! ENTERTAINMENT, INC., Delaware corporation
("Client") and CENTURY BUSINESS CREDIT CORPORATION ("Factor")

        1. PURCHASE OF ACCOUNTS RECEIVABLE :

            1 .1. Appointment as Factor. Client hereby appoints Factor to act as
its sole factor. Client hereby agrees to assign and sell, and does hereby assign
and sell, to Factor, and Factor hereby agrees to purchase all of Client's
Receivables whether now existing or hereafter arising without any further act or
instrument. For all purposes hereof, the term "Receivables" shall mean and
include all accounts, contract rights, general intangibles, chattel papers,
instruments, documents and all forms of obligations owing to Client arising from
or out of the sale of merchandise and/or the rendition of services, all proceeds
thereof, all Client's: a) rights to merchandise represented thereby; b) rights
under insurance policies covering merchandise or services; c) rights against
carriers of said merchandise; and d) right, title, security interests and
guarantees with respect to each Receivable, including all rights of replevin and
reclamation and stoppage in transit and all other rights of an unpaid seller of
merchandise or services.

            1 .2. Written Credit Approval. Client shall submit to Factor the
principal terms of each customers' orders for written credit approval. Factor
may, in its discretion, approve in writing all or a portion of Client's
customers' orders either by establishing a credit line limited to a specific
amount for a specific customer, or by approving all or a portion of a proposed
purchase order submitted by Client ("Approved Receivables"). No credit approval
shall be effective unless in writing and unless the goods are shipped or the
services rendered within the time specified in the written credit approval or
within 30 days after the approval is given, if no time is specified. No written
credit approval or terms of sale shall be changed without Factor's written
approval. Factor shall have the right to withdraw its credit approval or
withdraw or adjust a credit line at any time before delivery of merchandise or
rendition of services. Factor shall not be liable to any person or in any manner
for refusing to approve the credit of any customer.

            1 .3. Written Schedules. Client shall execute and deliver to Factor
written schedules of all Receivables sold or assigned hereunder in form
satisfactory to Factor, together with copies of customer's invoices or the
equivalent and upon Factor's request, conclusive

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evidence of delivery for all goods sold or rendition of services and all other
information or documents Factor may require. Client's failure to execute and
deliver such schedule of Receivables shall not affect the assignment of such
Receivables hereunder.

            1.4. Remittances. All customers' invoices shall be marked indicating
that the Receivable evidenced by the invoice is owned by and payable to Factor
in a manner satisfactory to Factor. All remittances, checks, bills and other
proceeds of sales shall be property of Factor and Client authorizes Factor to
endorse its name on any and all checks or other forms of remittances received in
payment of Receivables whenever such endorsement is deemed to be necessary by
Factor to effect collection thereof. If any remittances are made directly to
Client, Client shall hold the same in trust for the benefit of Factor and will
immediately deliver to Factor the identical checks, documents, instruments or
moneys received in the same form as received by Client. Client has been advised
that Factor may employ a lockbox account for the deposit of remittances received
in payment of Receivables, and Client consents thereto.

            1.5. Credit Limits. Factor may limit its purchase of Receivables
arising from sales to any one customer, and in such event, and in any instance
in which Factor does not approve the credit standing of that customer or the
terms of sale, Factor nevertheless agrees to purchase such Receivables from
Client and Client shall sell and assign the same to Factor hereunder, but with
full recourse to Client in the event of nonpayment thereof for any reason
whatsoever ("Non-Approved Receivables").

            1.6. Minimum Amounts. All sample sales or invoices in the amount of
$100 or less shall be with full recourse to Client in the event of nonpayment
thereof for any reason whatsoever regardless of whether or not the same was
approved as to credit. As to Non- Approved Receivables, Factor shall have the
right to charge the same back at any time, together with interest, if any.

        2. REPRESENTATIONS AND WARRANTIES.

            2.1. Receivables. Client represents and warrants that each and every
Receivable now or hereafter assigned to Factor: a) represents a bona fide sale
and delivery of merchandise or rendition of services to customers in the
ordinary course of its business; b) represents merchandise or services which
have been received and accepted by Client's customers without dispute or claim
of any kind and shall be free and clear of any offset, deduction, counterclaim,
lien, encumbrance or any other claim or dispute (real or claimed), including,
without limitation, claims or disputes as to price, terms, delivery, quantity or
quality and claims of release from liability or because of any act of God, or a
public enemy, or war, or because of the requirements of law or of rules, orders
or regulations having the force of law; c) will be for an

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amount certain payable in United States funds in accordance with the terms of
the invoice covering said sale, which shall not be changed without Factor's
written approval; d) except for Factor's security interest therein and except
for the security interest of Transcap Financial therein which is to be
terminated concurrently with the effective date hereof, there are no security
interests, liens or encumbrances thereon and it will at all times be kept free
and clear of same except in Factor's favor; e) Client has title thereto and
Client has the legal rights to sell, assign, transfer and set over the same to
Factor; f) all documents to be delivered to Factor in connection therewith will
be genuine and be enforceable. Client agrees to indemnify Factor against any
liability, loss or expense caused by or arising out of the rejection of
merchandise or services or claims or deductions of every kind and nature by
Client's customers, other than those resulting from the financial inability of
Client's customer, whose credit standing Factor has approved, to make payment.

            2.2. Chargebacks. In the event of Client's breach of any of the
foregoing representations and/or warranties, Factor shall have, in addition to
all other rights under this Agreement, the right to chargeback to Client
immediately the full amount of the Receivables affected thereby together with
interest, but such chargeback shall not be deemed a reassignment thereof, and
Factor shall retain a security interest in such Receivable and in the
merchandise represented thereby until such Receivable is fully paid, settled or
discharged and all Client's Obligations (as hereinafter defined) to Factor are
fully satisfied. Factor shall not, however, have the right to chargeback to
Client any Approved Receivable which is unpaid solely because of such customer's
financial inability to pay.

        3. PURCHASE PRICE

            3.1. Calculation of Purchase Price. The purchase price ("Purchase
Price") of Receivables sold and assigned hereunder shall be the net amount
thereof, as herein defined, less the amount of Factor's commission on the
purchase of such Receivables as provided in Section 4 hereof. As used herein,
the term "net amount" of Receivables shall mean the gross amount of Receivables
less returns, allowances and discounts to, or taken by, customers upon shortest
or longest selling terms, as Factor may elect. Such Purchase Price, less: a) any
reserves which Factor may have established; b) any sums advanced, remitted or
otherwise paid to Client or for Client's account or debited to Client's account;
and c) any other charges authorized hereunder, shall be payable by Factor to
Client five (5) business days after collection of the Receivables (the "Payable
Date"). However, if any Approved Receivable as to which Factor has approved the
credit standing of the customer shall not be paid by reason of the customer's
bankruptcy or insolvency, Factor will pay Client the Purchase Price thereof on
the earlier to occur of: (i) the first business day of the month following such
customer's bankruptcy, or (ii) after 120 days past

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the payment due date of such Approved Receivable provided nonpayment of such
Approved Receivable is not as a result of a dispute.

            3.2. Advances. Factor may, at Client's request but in Factor's sole
discretion, make advance payments to Client with respect to the Purchase Price
of Receivables prior to the aforesaid time or times of Factor's obligation to
make payment thereof in an amount up to 75% of the net amount thereof. Such
advance payments, which shall be debited by Factor to Client's account with
Factor, shall bear interest at the Contract Rate (as that term is defined in
Section 4.4 hereof) from the date of such advance until the Payable Date.

            3.3. Reserves. Factor may reserve out of the Purchase Price of all
Receivables sold and assigned an amount which, in Factor's judgment, is
sufficient to protect it against possible returns, claims, allowances, expenses
and recourse to Client on Receivables sold and assigned to Factor and against
other contingencies for which Client may be chargeable hereunder.

            3.4. Overadvances. From time to time Client may request advances
from Factor in excess of the advance formula set forth in Section 3.2 hereof, or
as from time to time adjusted by Factor. Factor may in its sole discretion make
such advances (hereinafter called "Overadvances"). Interest on Overadvances
shall be at a rate of 1.0% per annum in excess of the Contract Rate of interest
as calculated pursuant to the provisions of Section 4 hereof. All Overadvances
are discretionary by Factor, may be terminated at any time, and are payable on
demand. Nothing herein shall limit or restrict Factor's right to adjust advance
formulas upward or downward based upon Factor's lending criteria and collateral
evaluations which are established in Factor's sole discretion.

        4. COMMISSIONS AND INTEREST

            4.1. Factoring Commission. For its services hereunder, (a) Factor
shall receive a Commission equal to the following applicable amount: (i) one
(1.0%) percent of the gross amount of Receivables purchased Annually (as defined
hereinbelow) hereunder if such gross amount is Ten Million Dollars ($10,000,000)
or less, (ii) three-quarters of one percent (0.75%) of the gross amount of
Receivables purchased Annually hereunder if such gross amount is in excess of
Ten Million Dollars ($10,000,000) but less than Fifty Million Dollars
($50,000,000), or (iii) one-half of one percent (0.50%) of the gross amount of
Receivables purchased Annually hereunder if such gross amount is in excess of
Fifty Million Dollars ($50,000,000); and (b) in the case of any Receivables from
a customer who is a debtor-in-possession, Factor shall receive an additional
commission equal to no less than one (1%) percent for 15 day selling

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terms and two (2%) percent for 30 day selling terms, of the gross invoice amount
of each Receivable, which commission shall be due and payable as of the date a
Receivable arises, and shall then be chargeable to Client's account. The minimum
factoring commission on each invoice in respect of any Receivable shall be $4.50
however, invoices transmitted electronically to Factor, in a manner satisfactory
to Factor, will not be subject to such minimum factoring commission but will
otherwise remain subject to any other factoring commissions. As used herein,
"Annually" means each and every yearly period commencing with the effective date
hereof, with the effective date occurring on the date that this Agreement is
executed by both Client and Factor.

            4.2. Extended Terms. The commission specified in Section 4.1 hereof
is based upon maximum selling terms of ninety (90) days, and no more extended
terms or additional dating shall be granted by Client to any customer without
Factor's prior written approval. If such approval is given by Factor, Factor's
commission with respect to the Receivables covered thereby shall be increased by
an additional one-quarter of one (1/4%) percent for each additional thirty (30)
days or portion thereof of extended terms or additional dating.

            4.3. Minimum Commissions. The minimum aggregate factoring
commissions payable under this Agreement for each contract year hereof shall be
$150,000, which, to the extent of any deficiency (after giving effect to
commissions payable under subparagraph (a)), shall be chargeable to Client's
account with Factor yearly.

            4.4. Monthly Statement and Calculation of Interest. Factor will send
Client a monthly account current as of the end of each month. Unless Factor
receives a written objection to any account current rendered by Factor within
thirty (30) days after the mailing of such account current, it shall be deemed
accepted by Client and shall become conclusive and binding upon Client. All
debit balances shall be payable to Factor on demand and shall bear interest at
the rate of interest then in effect as hereinafter provided (herein called the
"Contract Rate"); such interest is payable daily but shall be charged to
Client's account monthly as a cash advance. The Contract Rate of interest
hereunder shall be equal to the Prime Rate (as hereinafter defined) plus 1.0%
per annum. Such Contract Rate is based upon the highest announced prime, base or
reference rate charged by Wells Fargo Bank, N. A. to substantial and responsible
corporate commercial borrowers ("Prime Rate") which is now 4.75% per annum, and
is neither tied to any external rate of interest or index, nor does it
necessarily reflect the lowest rate of interest actually charged to any
particular class or category of customers by such Bank. Such Contract Rate shall
be increased or decreased as the case may be, as such Prime Rate is increased or
decreased and to the extent thereof; each such change to be effective as at the
first of the month following the month the related change in such Prime Rate
occurs; but

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in no event shall the Contract Rate of interest hereunder be less than 4% per
annum nor in excess of the maximum rate Factor is permitted to charge by law.

            4.5. Credit Balances. On the last day of each month, Factor shall
credit Client's account with interest on the average daily balance of matured
funds and cash collateral in Client's account, if any, at the Prime rate minus 2
1/2% per annum.

        5. SECURITY INTEREST

            5.1. Grant of Security Interest. As security for all "Obligations"
(as herein defined), Client hereby grants to Factor a continuing security
interest in, a general lien upon and/or a right of setoff of, all of Client's
presently existing and hereafter created assets, including, without limitation:
(i) the Receivables; (ii) present and future accounts, contract rights, chattel
paper, documents, instruments, notes, drafts, acceptances, deposit accounts and
all other debts, obligations and liabilities in whatever form owing to Client
from any person, firm, corporation or other legal entity whether now existing or
hereafter arising or acquired (the "Accounts"); all Client's right, title and
interest, and all of Debtor's rights, remedies, guarantees, security and liens,
in, to and in respect of the Accounts, including, without limitation, rights of
stoppage in transit, replevin, repossession and reclamation and other rights and
remedies of an unpaid vendor, lienor or secured party, guaranties or other
contracts of suretyship with respect to the Accounts, deposits or other security
for the obligation of any account debtor, rights to the proceeds of letters of
credit, all tort claims and credit and other insurance; all Client's right,
title and interest in, to and in respect to all merchandise which is represented
by or evidenced by any Account, and all returned, rejected, reclaimed or
repossessed goods; all books, records, ledger cards and other property and
general intangibles at any time evidencing or relating to the Accounts; (iii)
now owned or hereafter acquired and wherever located merchandise inventory and
other personal property held for sale or lease or to be furnished under
contracts of service or held as raw materials, work in process or finished goods
and supplies or materials used or consumed in the Client's business or used in
connection with the manufacture or furnishing of such goods acquired under or as
a result of purchase guaranties issued by Factor or letters of credit or
guarantees issued by banks or third parties or under Factor's responsibility at
Factor's request for the benefit of the Client and all wrapping, packaging,
advertising and shipping materials and all documents relating thereto, (the
"Inventory"); and all books, records, ledger sheets and other records, property
and general intangibles at any time relating to the inventory; (iv) all
machinery, equipment, spare parts, vehicles, furniture and fixtures, including,
without limitation, dies, tools, jigs and molds, all warranties by third parties
relating thereto, and all attachments, accessions and equipment now or hereafter
affixed thereto or used in connection therewith, and all substitutions and
replacements thereof, wherever located, whether now

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owned or hereafter acquired (the "Equipment"); and all books, records and other
property and general intangibles at any time relating to the Equipment; (v)
general intangibles, whether now owned or hereafter acquired, whether now
existing or hereafter arising, including, without limitation, all trademarks,
patents, copyrights, service marks, brand names, trade names, trade styles,
together with the goodwill of the business represented thereby, all computer
programs and computer software, all licenses and permits; all claims for moneys
due, including, but not limited to, that arising from policies and certificates
of insurance, securities, choses in action as well as tax refunds from any
federal, state or municipal government, agency or subdivision thereof or taxing
authority, and all credit balances with Factor and all Client's claims against
Factor (whether now or hereafter existing and whether arising under this
Agreement or otherwise) and all excess pension funds and all books, records and
other property at any time relating to all the foregoing, including, without
limitation, all rights to royalties and other rights under license and franchise
agreements; (vi) all Client's property of every kind and description, tangible
or intangible, at any time in Factor's possession or subject to Factor's
control, whether now or hereafter existing or now owned or hereafter acquired
and wherever located; (vii) all products and proceeds of all of the foregoing,
in any form, including, without limitation, any claim against third parties for
loss or damage to or destruction of any or all of the foregoing. As used herein,
the term "Obligations" means and includes all loans, advances, indebtedness,
liabilities, obligations, debit balances, covenants and duties owing by Client
or any of Client's subsidiaries or affiliates to Factor or Factor's parent,
subsidiary or affiliate of every kind and description (whether now or hereafter
existing and whether arising under this Agreement or otherwise), direct or
indirect, absolute or contingent, due or to become due, including, without
limitation, any indebtedness, liabilities or obligations owing by Client to
others which Factor has acquired by assignment, participation or otherwise, and
further including, without limitation, all interest, fees, charges, expenses and
attorneys' fees for which Client may be obligated hereunder. Amounts owing to
Factor in respect of Client's purchases from other persons, firms or
corporations factored by Factor or its parent, subsidiary or affiliate are to be
considered Obligations and as advances against Client's account and may be
charged by Factor to Client's account at any time whether before or after the
maturity of such amounts.

            5.2. Cooperation. Client agrees to execute such further instruments
and financing statements as may be required by any law in connection with the
transactions contemplated hereby and to cooperate with Factor in the filing or
recording and renewal thereof, and Client hereby authorizes Factor (and appoints
any person whom Factor designates as its attorney with power) to sign Client's
name on any such instrument and on financing statements under the Uniform
Commercial Code. Client hereby authorizes Factor to file financing statements
containing the following collateral description: "All of Debtor's Assets now
owned or hereafter acquired" or such lesser amount of assets as Factor may
determine. Recourse to security shall

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not be required and Client shall at all times remain liable for the repayment on
demand of all Obligations.

        6. CUSTOMER DISPUTES AND CLAIMS: RETURNED GOODS

            6.1. Disputes and Claims. Client shall immediately notify Factor in
each instance of the return, rejection, loss of or damage to merchandise
represented by any Receivable, of any request for extension of time to pay or
request for credit or adjustment, or of any merchandise dispute or other dispute
or claim relating to any Receivable or to the merchandise or services covered
thereby or tending in any way to diminish the sum certain payable thereon. If
any such dispute, controversy or claim is not promptly settled by Client, Factor
may, if it so elects, settle, compromise, adjust or otherwise enforce or dispose
of by litigation or otherwise, any such dispute, controversy or claim, at
Client's expense, and upon such terms and conditions as Factor in its sole
discretion shall deem proper, but Factor shall have no obligation to do so.
Client shall not grant any allowances, credits or adjustments to customers, nor
accept any return of merchandise, without Factor's prior written consent in each
instance

            6.2. Returned Merchandise. If advances under Section 3.2 hereof have
been made and are outstanding and if any merchandise shall be returned by or
recovered from the customer or held subject to bill and hold invoices, Client
shall forthwith pay Factor the full amount of such Receivable, either in cash or
by the assignment of new Receivables hereunder, and until such payment or
assignment, such merchandise shall be held by Client in trust for the benefit of
Factor, shall be segregated and identified by Client as property held in trust
for benefit of Factor, and upon Factor's request Client shall, at its expense,
deliver the same to Factor or for Factor's account or upon its order to such
place or places as Factor may designate. Factor may sell or cause the sale of
any such merchandise, at such prices and upon such terms as it may deem proper,
and in the event of any public sale thereof, Factor may be the purchaser. The
proceeds of any such sale or sales shall first be charged with the costs and
expenses of any incident to such sale, and the balance, if any, shall be
credited to Client's account.

            6.3. Credit Memoranda. Copies of all credit memoranda to be issued
to any customer shall be furnished by Client to Factor and only the customer
shall be entitled to the benefit thereof. Factor may charge $4.50 to Client's
account for each invoice in respect of any credit memoranda or change of terms.

        7. FEES AND EXPENSES

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            7.1. Monitoring Fees and Other Expenses. Upon Factor's performance
of any collateral monitoring function, any field examination, or other business
analysis, ("Monitoring") there shall be charged to Client's account, an amount
equal to $750 per day, per person, for each person employed to perform such
Monitoring together with all costs, disbursements and expenses incurred by
Factor during such Monitoring provided, that in the absence of an Event of
Default, the aggregate fees, costs, disbursements and expenses for such
Monitoring shall be limited to $10,000 per year, with the first yearly period
commencing on the effective date of this Agreement. In addition, Client shall
pay to Factor all costs, expenses and liabilities incurred, in connection with:
(a) the execution and delivery of this Agreement and any agreement, instrument
or document delivered pursuant hereto or in connection herewith (collectively,
the "Other Agreements"), including (i) a reasonable allowance for attorneys'
fees and (ii) a documentation fee in the amount of $1,000; (b) any waiver,
amendment, supplement, consent or modification hereof or thereof; and (c) the
filing or perfecting of any security interest in any collateral securing the
Obligations or any guaranty therefor. Factor shall also be entitled to charge
Client's account for all costs and expenses incurred (including reasonable
attorneys fees) in connection with: (i) obtaining or enforcing payment of any
Obligation; (ii) the prosecution or defense of any action or proceeding
concerning any matter arising out of or connected with this Agreement, any Other
Agreement, or any of the Receivables assigned hereunder, including, without
limitation, effecting collection of Receivables whether by adjustments,
litigation or otherwise, and realization upon recovered or returned merchandise
and defending successfully in whole or in part any and all actions or
proceedings brought by Client; (ii) obtaining performance of the Obligations
under this Agreement or any Other Agreement, including, but not limited to, the
enforcement or defense of Factor's security interests, assignments of rights and
liens as valid perfected security interests; (iii) any attempt to inspect,
verify, protect, collect, sell, liquidate or otherwise dispose of any collateral
for the Obligations; (iv) any appraisals or re-appraisals of any property (real
or personal) pledged to Factor as collateral for the Obligations; and (v) any
consultations in connection with any of the foregoing. In addition to the
foregoing, Factor shall charge Client's account with fees relating to
telecopying, wire transfers, special or additional reports and other services at
such rates as shall be charged by Factor to its clients from time to time. All
such costs and expenses together with all filing, recording and search fees,
taxes and interest payable by Client to Factor shall be payable on demand may be
charged to Client's account and shall constitute Obligations hereunder and shall
be secured by the collateral therefor.

        8. INDEMNITIES

            8.1. Indemnification. Client hereby indemnifies and holds Factor and
its affiliates, and their respective employees, attorneys and agents (each, an
"Indemnified Person"), harmless from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and

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expenses of any kind or nature whatsoever (including attorneys' fees and
disbursements and other costs of investigation or defense, including those
incurred upon any appeal) which may be instituted or asserted against or
incurred by any such Indemnified Person as the result of any financial
accommodation having been extended, suspended or terminated under this Agreement
or any Other Agreement or with respect to the execution, delivery, enforcement,
performance and administration of, or in any other way arising out of or
relating to, this Agreement or any Other Agreement, and any actions or failures
to act with respect to any of the foregoing, except to the extent that any such
indemnified liability is finally determined by a court of competent jurisdiction
to have resulted solely from such Indemnified Person's gross negligence or
willful misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO
CLIENT OR TO ANY OTHER PARTY FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL
DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF ANY FINANCIAL ACCOMMODATION HAVING
BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY OTHER
AGREEMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR
THEREUNDER.

            8.2. Taxes. If any tax by any governmental authority (other than
income and franchise taxes) is or may be imposed on or as a result of any
transaction between Client and Factor, or in respect to sales or the merchandise
affected by such sales, which Factor is or may be required to withhold or pay,
Client agrees to indemnify and hold Factor harmless in respect of such taxes,
and Client will repay Factor the amount of any such taxes, which shall be
charged to Client's account, and until Client shall furnish Factor with
indemnity therefor (or supply Factor with evidence satisfactory to Factor that
due provision for the payment thereof has been made), Factor may hold without
interest any balance standing to Client's credit and Factor shall retain its
security interest in any and all collateral held by Factor.

        9. TERMINATION AND DEFAULT

            9.1. Term. The term of this Agreement shall begin as of the
effective date hereof and continue until the last day of the twenty-fourth month
hereafter (as such date may be renewed from time to time pursuant to the terms
hereof, the "Maturity Date") and thereafter shall be automatically renewed from
year to year unless terminated on such last day of such month or any anniversary
thereof by Client giving Factor at least sixty (60) days prior written notice by
registered or certified mail, return receipt requested. Factor shall have the
right to terminate this Agreement at any time by giving Client sixty (60) days
prior written notice. Notwithstanding the foregoing, Client shall be allowed to
terminate this Agreement prior to the Maturity Date: (1) for any reason, with a
minimum of ninety (90) days prior written notice,

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provided that Client pay Factor an early termination fee in an amount equal to
the Minimum Commissions that would have accrued, pursuant to Section 4.3 hereof,
through the Maturity Date; and (2) at any time, without an early termination
fee, if such termination is in connection with Client's obtaining of replacement
financing from Wells Fargo Bank, N.A.

            9.2. Defaults. Notwithstanding the foregoing, Factor may terminate
this Agreement without notice and all Obligations shall, unless and to the
extent that Factor otherwise elects, become immediately due and payable without
notice or demand upon the occurrence and during the continuance of any one or
more of the following events (each an "Event of Default"): a) Client fails to
pay any Obligation when due; b) Client commits any breach of or default in the
performance of its representations, warranties or covenants whether contained
herein or in any instrument or document delivered pursuant hereto or in any
other Agreement, instrument, or document under which it is obligated to Factor;
c) Client or any Guarantor, surety or other party liable upon any Obligation (i)
makes any false or untrue representation to Factor in connection with this
Agreement or any transaction relating thereto; (ii) become(s) unable to pay its
debts as they mature; (iii) make(s) a general assignment for the benefit of
creditors, suspend(s) the transaction of Client's or any Guarantor's usual
business, convene(s) or cause(s) to be convened a meeting of Client or any
Guarantor's creditors or principal creditors or take(s) advantage of the
insolvency laws of any State, or a case is commenced or a petition in bankruptcy
or for an arrangement or reorganization under the Federal Bankruptcy Code is
filed by or against Client or any such other party or a custodian or receiver
(or other court designee performing the functions of a receiver) is appointed
for or takes possession of Client's or any such other party's assets or affairs
or an order for relief in a case commenced under the Federal Bankruptcy Code is
entered; or d) any Guarantor, surety or other party liable upon any Obligations
shall die; e) Client shall be dissolved; f) there shall be issued or filed
against Client, any Guarantor, surety or other party liable upon any
Obligations, any tax lien; g) any Guarantor challenges the effectiveness of or
seeks or purports to terminate the effectiveness of the applicable Guaranty; h)
any Guarantor fails to comply with the provisions of the applicable Guaranty;
(i) or there shall be issued or filed against Client any attachment, injunction,
execution, or judgment which is not removed within thirty (30) days after same
was issued or filed.

            9.3. Continuing Obligations. Notwithstanding any termination of this
Agreement Client shall continue to deliver Receivables information to Factor and
turn over all collections to Factor as herein provided until all Obligations
shall have been fully paid and satisfied, and until then this Agreement shall
remain in full force and effect as to and be binding upon Client, and Factor
shall be entitled to retain its security interest in all existing and future
Receivables and other security and collateral.

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            9.4. Remedies. Upon the occurrence of any of the Events of Default
specified in Section 9.2 hereof, Factor shall have all the rights and remedies
of a secured party under the Uniform Commercial Code and other applicable laws
with respect to all collateral in which it has a security interest, such rights
and remedies being in addition to all of its other rights and remedies provided
for herein. Factor may sell or cause to be sold any or all of such collateral,
in one or more sales or parcels, at such prices and upon such terms as it may
deem best, and for cash or on credit or for future delivery, without its
assumption of any credit risk, and at a public or private sale as it may deem
appropriate. Unless the collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Factor will give Client reasonable notice of the time and place of any public
sale thereof or of the time after which any private sale or any other intended
disposition thereof is to be made. At any such sale, Factor may disclaim
warranties of title, possession, quiet enjoyment and the like and any such
disclaimer shall not effect the commercial reasonableness of the sale. The
requirements of reasonable notice shall be met if any such notice is mailed,
postage prepaid, to Client's address shown herein, at least five (5) days before
the time of the sale or disposition thereof. Factor may invoice any such sale in
Factor's name or in Client's name, as Factor may elect, as the seller, and in
such latter event such invoice shall be marked payable to Factor as provided in
Section 1.4 hereof. Factor may be the purchaser at any such public sale and
thereafter hold the property so sold at public sale, absolutely, free from any
claim or right of any kind, including any equity of redemption. The proceeds of
sale shall be applied first to all costs and expenses of, and incident to, such
sale, (including attorneys' fees), and then to the payment (in such order as
Factor may elect) of all Obligations. Factor will return any excess to Client
and Client shall remain liable for any deficiency.

        10. MISCELLANEOUS

            10.1. No Pledge of Credit. Client shall not be entitled to pledge
Factor's credit for any purpose whatsoever.

            10.2. Waivers. Client waives presentment and protest of any
instruments and all notices thereof, notice of default and all other notices to
which it might otherwise be entitled. Client shall maintain, at its expense,
proper books of account.

            10.3 Right of Inspection. Factor shall have the right to inspect and
make extracts from such books and all files, records and correspondence at all
reasonable times.

                                      -12-
<PAGE>

            10.4 No Pledge or Sale of Receivables. During the term of this
Agreement Client shall not sell or assign, negotiate, pledge or grant any
security interest in any Receivables or Goods (as said term is defined in
Article 9 of the Uniform Commercial Code) to any one other than Factor.

            10.5. Organization and Locations. Client certifies that its address
as set forth in this Agreement is its mailing address, its chief place of
business, and the office at which its records relating to Receivables are kept.
Client further certifies that its state of incorporation or organization is the
State of Delaware and it shall not change its state of incorporation or
organization without Factor's written consent. Client shall not effect any
change of its mailing address, its chief place of business, or the office in
which its records relating to Receivables are kept, without first giving Factor
thirty days prior written notice thereof. Client shall provide to Factor, upon
request, a Certificate of Good Standing from the Secretary of State of the state
of incorporation or organization of the undersigned and from every state where
the undersigned is qualified to do business.

            10.6. Financial Statements. Client shall furnish to Factor, and
Client shall cause all, corporate guarantors of the Obligations, if any, to
furnish monthly internally prepared financial statements within 30 days after
the end of each calendar month, quarterly financial statements within 60 days
after the end of each of its fiscal quarters, and annual financial statements
within 90 days after the end of each of its fiscal years, all in form and
substance acceptable to Factor and reviewed, in the case of quarterly
statements, and audited, in the case of annual statements, by an independent
certified public accountant acceptable to Factor. Client shall cause all
individual guarantors of the Obligations, if any, to furnish to Factor his/her
personal financial statement in form and substance acceptable to Factor within
30 days after each anniversary of the date on which he/she furnishes to Factor
the first such statement.

            10.7 Solvency; Governing Law; Jurisdiction. Client warrants that it
is solvent, knows of no present or pending situation which could render it
insolvent and it will remain solvent during the term of this Agreement. The
validity of this Agreement, its construction, interpretation, and enforcement
and the rights of the parties hereto shall be determined under, governed by, and
construed in accordance with the laws of the State of California; provided,
however, that the laws of the state in which the collateral is located shall
govern with respect to (a) the creation of liens on collateral located in such
state and (b) the method, manner and procedure for foreclosure of Factor's lien
upon any portion of the collateral located in such state and the enforcement in
such state of Factor's other remedies with respect to the collateral located in
such state.

                                      -13-
<PAGE>

            The parties agree that all actions or proceedings, arising in
connection with this Agreement shall be tried and litigated only in the state
courts located in the County of Los Angeles, State of California, the federal
courts whose venue includes the County of Los Angeles, State of California, or,
at Factor's sole option, in any other court in which Factor shall initiate legal
or equitable proceedings and which has subject matter jurisdiction over the
matter in controversy, including any jurisdiction in which any of the collateral
is located. The parties expressly submit and consent in advance to such
jurisdiction in any action or proceeding commenced in any such court, and the
parties hereby waive any objection which either may have based upon the lack of
personal jurisdiction and hereby consent to the granting of such legal or
equitable relief as is deemed appropriate by any such court. Furthermore, Client
waives, to the extent permitted under applicable law, any right Client may have
to assert the doctrine of "forum non conveniens" or to object to venue to the
extent any proceedings are brought in accordance with the paragraph.

            Each of the parties to this Agreement hereby waives personal service
of any summons or complaint or other process or papers to be issued in any
action or proceeding involving any such controversy and hereby agrees that
service of such summons or complaint or process may be made by registered or
certified mail to the other party at the address appearing herein; failure on
the part of either party to appear or answer within thirty (30) days after such
mailing of such summons, complaint or process shall constitute a default
entitling the other party to enter a judgment or order as demanded or prayed for
therein to the extent that said Court or duly authorized officer thereof may
authorize or permit.

            10.8. Waiver of Jury Trial. FACTOR AND CLIENT DO HEREBY WAIVE ANY
AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND ARISING
ON, OUT OF, BY REASON OF, OR RELATING IN WAY TO, THIS AGREEMENT OR THE
INTERPRETATION OR ENFORCEMENT THEREOF OR TO ANY TRANSACTIONS THEREUNDER. IN THE
EVENT FACTOR COMMENCES ANY ACTION OR PROCEEDING AGAINST CLIENT, CLIENT WILL NOT
ASSERT ANY OFFSET OR COUNTERCLAIM, OF WHATEVER NATURE OR DESCRIPTION, IN ANY
SUCH ACTION OR PROCEEDING .

            10.9. No Waiver of Rights. No failure or delay by Factor in
exercising any of its powers or rights hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such power or right
preclude other or further exercise thereof or the exercise of any other right or
power. Factor's rights, remedies and benefits hereunder are cumulative and

                                      -14-
<PAGE>

not exclusive of any other rights, remedies or benefits which Factor may have.
This Agreement may only be modified in writing and no waiver by Factor will be
effective unless in writing and then only to the extent specifically stated.

            10.10. Notices. All notices and other communications by either party
hereto shall be in writing and shall be sent to the other party at the address
specified herein.

            10.11. Assignment. Factor shall have the right to assign this
Agreement and all of Client's rights hereunder shall inure to the benefit of
Factor's successors and assigns; and this Agreement shall inure to the benefit
of and shall bind Client's respective successors and assigns.

        11. COVENANTS

            11.1. Minimum Liquidity. Client shall at all times maintain minimum
Liquidity (as defined below) of at least Fifteen Million Dollars ($15,000,000).
"Liquidity" shall mean, for any time period, the sum of Client's unrestricted
cash located in the United States plus the amount of cash collateral deposited
by Client with Factor pursuant to Section 2.3 of that certain Letter of Credit
and Security Agreement, entered into concurrently herewith, plus the amount of
advance payments with respect to the Purchase Price of Receivables that remain
unutilized and available pursuant to the terms of Section 3.2 hereof.

            11.2. Intercompany Distributions. Client covenants that it shall not
upstream, sidestream or downstream any funds advanced by Factor to an entity
affiliated with it including, without limitation, to Client's subsidiary in
England.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

        IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.

                                      -15-
<PAGE>

                                        BAM! ENTERTAINMENT, INC.,
                                        A Delaware corporation

                                        By:  /s/ RAYMOND MUSCI
                                             -----------------------------------
                                        Title: C.E.O.
                                               ---------------------------------

                                        Address: 333 W. Santa Clara Street, #716
                                                 San Jose, California 95113

                                        CENTURY BUSINESS CREDIT
                                                   CORPORATION

                                        By:  /s/ ILLEGIBLE
                                             -----------------------------------
                                        Title: President
                                               ---------------------------------

                                        Address:  333 South Grand Avenue,
                                                  Suite 4150
                                                  Los Angeles, California 90071

                                      -16-<PAGE>
                                                                    Exhibit 10.5

                     LETTER OF CREDIT AND SECURITY AGREEMENT

Supplement to Factoring Agreement/Security Agreement (Accounts Receivable-
Financing)

        THIS SUPPLEMENT ("Supplement") made and executed this 25th day of
February, 2002 by and between BAM! ENTERTAINMENT, INC. a Delaware corporation
("Client") and CENTURY BUSINESS CREDIT CORPORATION ("Factor").

1. SUPPLEMENT TO AGREEMENT

1.1. Supplement. This Supplement shall constitute a supplement to the Factoring
Agreement, Security Agreement (Accounts Receivable - Financing), or both,
entered into between Factor and Client and any other agreements documents
amendments or supplements executed in connection therewith (collectively, the
"Agreement".) All of the terms and conditions of the Agreement which are not
inconsistent with the terms and conditions of this Supplement shall apply with
full force and effect to all Transactions covered by this Supplement.

2. TRANSACTIONS

2.1. Letter of Credit. From time to time, upon Client's request but subject, in
each instance, to Factor's approval thereof, Factor will guarantee payment by
Client to banks under letters of credit to be opened by Client in a bank
designated by Factor, in Client's name and for Client's account, and any drafts
thereunder, for the purchase of merchandise required by Client in the regular
course of Client's business (a "Letter of Credit"). In each such instance Client
will execute an application for credit on the form of such bank requesting
Factor to deliver same to the bank and to cause it to issue an irrevocable
Letter of Credit in conformity with the application.

2.2. Scope. The term "Transaction", whenever used in this Supplement, shall mean
and include any such Letter of Credit which may be made or issued by Factor
hereunder, or any drafts thereunder, any air release, steamship guaranty or
other indemnity issued in connection with any Letter of Credit, all merchandise
which may be the subject of any Letter of Credit so guaranteed and all documents
and instruments of every kind relating thereto, including, without limitation,
all documents of title, transport, indebtedness and payment, or evidencing any
thereof.

<PAGE>

2.3. Terms. Each Transaction hereunder shall be in such form and shall contain
such terms, conditions and provisions as Factor, in Factor's sole discretion,
may elect. The aggregate amount of each Transaction shall be reserved against
advances which would otherwise be available under Section 3.2 of the Agreement
(the "Advance Reserve"). In the event insufficient advance availability exists
under Section 3.2 of the Agreement to institute the Advance Reserve, prior to
and for each Transaction, Client shall deposit with Factor sufficient cash
collateral so that the amount of such Transaction has been fully reserved for
through a combination of an Advance Reserve and cash collateral. For each
Transaction, Factor agrees to release 50% of the Advance Reserve and/or cash
collateral applicable to such Transaction, upon the presentment of a valid
purchase order for the purchase of the merchandise involved in such Transaction,
with such purchase order to be approved by Factor in its sole discretion. The
release of the Advance Reserve and/or cash collateral will be effectuated by
such means as determined by Factor in its sole and absolute discretion.

2.4. Limitations. The total amount of Transactions hereunder which may be
outstanding at any time may be limited by Factor, in Factor's sole and absolute
discretion. Nothing herein contained shall be deemed or construed to grant to
Client any right, power or authority to pledge Factor's credit in any manner or
to any extent whatever.

2.5. Issuance. All Letters of Credit guaranteed by Factor hereunder shall be
issued in Client's name.

3. CLIENT'S OBLIGATIONS; REPRESENTATIONS AND WARRANTIES

3.1. Payment. Client shall promptly pay, satisfy and discharge, in full, as and
when due, all debts, liabilities and obligations of any kind incurred by Client
in connection with each and every Transaction, including, without limitation,
all fees and charges of any bank; and Client shall pay to Factor, forthwith upon
demand and in full, any and all moneys which Factor may pay or be obligated to
pay on, under, in connection with, or by reason of, any Transaction, including
all communication expenses and attorney's fees.

3.2. Indemnities. Client shall indemnify Factor and any bank which may issue any
Letter of Credit guaranteed by Factor hereunder or any air release, steamship
guarantee or other indemnity and any correspondent of any such bank which may
have any connection with any Transaction or any drafts thereunder or any air
release, steamship guarantee or other indemnity, and hold Factor and them
harmless against any and all claims, losses, liabilities, expense, demands and
causes of action which may be made, asserted, or brought against Factor, or any
of them, arising on, under, in connection with, or by reason of, any
Transaction.

                                       2
<PAGE>

3.3. Additional Documents. Client shall, upon Factor's request, execute and
deliver to Client any trust receipts which Factor may require in connection with
the release to Client of any merchandise or documents and any financing
statements that Factor may, from time to time, require.

3.4. Insurance. Client shall cause all merchandise which may be the subject of
any Transaction to be fully insured under an all risk United States dollar
policy, at Client's sole cost, but for Factor's account and benefit as Factor's
interest may appear, in amounts and by insurance companies satisfactory to
Factor; and shall deliver to Factor forthwith proof of full payment of all
premiums thereon. Upon Client's failure or refusal, for any reason, to deliver
any such prepaid policies to Factor, Factor shall have the right, but not the
obligation, to procure such policies and to pay the premiums thereon for
Client's account; and Client shall pay to Factor, forthwith, the amount of such
premiums so paid by Factor with interest thereon computed as provided in Section
8.2 hereof. Client's liability to Factor hereunder shall not be affected,
impaired, released, or discharged, in whole or in part, by reason of any loss,
theft, or destruction of, or depreciation or damage to, any merchandise which is
not fully covered by the proceeds of insurance thereon actually received by
Factor, regardless of the cause of any such loss, theft, destruction,
depreciation or damage, or absence or nonreceipt of insurance proceeds and
whether such nonreceipt of insurance proceeds is caused by the failure of the
insurer to pay claims or otherwise.

3.5. Importation. Client agrees that any necessary import, export or other
licenses or certificates for the import or handling of the Collateral (as
defined in Section 5.1 hereof) will have been promptly procured; all foreign and
domestic governmental laws and regulations in regard to the shipment and
importation of the Collateral, or the financing thereof will have been promptly
and fully complied with; and any certificates in that regard that Factor may at
any time request will be promptly furnished. In this connection, Client warrants
and represents that all shipments made under any such Letters of Credit are in
accordance with the governmental laws and regulations of the countries in which
the shipments originate and terminate, and are not prohibited by any such laws
and regulations.

3.6. Taxes and Duties. Client assumes all risk, liability and responsibility
for, and agrees to pay and discharge, all present and future local, state,
federal or foreign taxes, duties, or levies. Any embargo, restriction, law,
custom or regulation of any country, state, city, or other political
subdivision, where the Collateral is or may be located, or wherein payments are
to be made, or wherein drafts may be drawn, negotiated, accepted, or paid, shall
be solely Client's risk, liability and responsibility.

                                       3
<PAGE>

3.7. Solvency. Client is and will continue to be solvent.

3.8. Genuineness. Each Letter of Credit Client presents to Factor naming Client
as beneficiary shall be genuine, correct and complete and will not have been
drawn against except to the extent stated to Client in writing at the time of
such presentation; and all invoices, receipts and other documents and
instruments of every kind which Client presents, displays, or delivers to Factor
for any purpose will be genuine, correct and complete.

4. POWER OF ATTORNEY

4.1. Scope. In connection with all Transactions, Client hereby appoints each
officer of Factor's corporation as Client's attorney-in-fact, with full power
and authority in each of them (i) to sign and endorse Client's name upon all
Title Documents; (ii) in Client's name or Factor's, to complete any Transaction,
to obtain, execute and deliver all necessary or proper documents in connection
therewith and to collect the proceeds thereof; (iii) upon any default under the
Agreement, or this Supplement, or in any Transaction, to cancel, rescind,
terminate, modify, amend, or adjust in any other way, in whole or in part, any
pending Transaction; and (iv) upon Client's refusal to do so following Factor's
request, in Client's name and for Client's account, to do any and all other acts
and things which may be necessary or proper in connection with this Supplement
or any Transaction, or both, or to enable Factor to obtain payment of any monies
owed to Factor, or for which Client may thereafter become liable to Factor, in
any Transaction or otherwise hereunder. The said power and authority is coupled
with an interest and shall be irrevocable until all Transactions shall have been
fully consummated and all monies owed to Factor have been paid in full.

5. SECURITY

5.1. Collateral. As collateral security for the full payment, performance and
discharge of any and all of Client's debts, obligations and liabilities to
Factor, whether arising under the Agreement, or hereunder, or otherwise, whether
direct or indirect, liquidated or not, absolute or contingent, due or not due,
now existing or hereafter arising, Client hereby pledges to Factor and grants to
Factor a general lien upon and continuing security interest in and a right to
set-off against, all now existing and hereafter arising Documents of Title, and
goods and inventory, together with all credit balances, equities other property,
tangible or intangible, now or hereafter existing in any of Client's accounts
with Factor, including, but not limited to, Client's account with Factor
hereunder and under the Agreement and all property and securities of every kind
and nature which have been or at

                                       4
<PAGE>
any time hereafter may be delivered to or otherwise come into Factor's
possession, custody or control, as collateral security, or for safekeeping, or
for any other or different purpose of any kind or which shall be in transit to
Factor or set apart for Factor by anyone for Factor, in any way, by Client or
for Client's account, or in which Client may have any interest, whether Factor
shall accept the same for the purpose for which delivered or not, and any and
all proceeds of said property and securities and every part thereof
("Collateral"); with the right to Factor, in Factor's discretion, to resort
first to any part of said security and to apply any proceeds thereof to Client's
Obligations in such order and amounts as Factor may elect. Recourse to security
shall not be required.

5.2. Additional Security. As further security for the payment of all of Client's
debts, obligations and liabilities hereunder, Client shall, in connection with
each Transaction, assign to Factor the purchase order, selling order, letter of
credit in Client's favor and all other instruments which Factor may require; and
all of the same shall be deemed to have been automatically assigned to Factor
and shall become Factor's property immediately upon the occurrence of each
Transaction and without any formal assignment thereof. All invoices, cash,
checks, drafts, notes, documents, bills of lading, warehouse, shipping and dock
receipts, and other title, payment, or other instruments pertaining to each
Transaction (collectively, "Title Documents") and the merchandise relating
thereto shall be deemed to be Factor's sole property and in furtherance thereof,
Client shall instruct all suppliers, shippers, carriers, forwarders, warehouses,
banks and other persons holding or receiving any of such Title Documents or
merchandise to deliver the same to Factor or upon Factor's order. If any of the
Title Documents shall come into Client's possession, Client shall hold same in
trust for Factor and shall forthwith deliver the same to Factor in their
original form. Unless Factor instructs otherwise, Client may dispose of
merchandise imported by Client in connection with Transactions in the ordinary
course of Client's business

5.3. Additional Rights. Any rights, remedies, duties or obligations granted or
undertaken by Client to any bank in any application for Letters of Credit, or
any standing agreement relating to Letters of Credit or otherwise, shall be
deemed to have been granted to Factor and apply in all respects to Factor and
shall be in addition to any rights, remedies, duties or obligations contained
herein

6. STEAMSHIP GUARANTIES AND AIRWAY RELEASES

6.1. Guaranties and Releases. From time to time, merchandise purchased by Client
under Letters of Credit may arrive at a designated location before receipt and
availability of the Documents of Title that would permit Client to obtain
possession of the merchandise. Upon Client's request but subject, in each
instance, to Factor's approval

                                       5
<PAGE>
thereof, Factor will cause Factor's banks to issue air releases, steamship
guarantees or other such indemnities on Client's behalf in respect of Letters of
Credit opened through such banks to induce carriers to release to Client
shipments of merchandise without presentation of the original bills of lading or
other evidence of shipment properly endorsed. Upon issuance of such air way
releases, steamship guarantees or other indemnities, Client irrevocably and
unconditionally waives any and all discrepancies, mistakes, defects or omissions
in any of the documents presented or to be presented to Factor's banks for
negotiation or acceptance in connection therewith and Client hereby agrees to
indemnify Factor and hold Factor harmless from and against any and all
consequences which may result from the issuance of such air releases, steamship
guaranties or other indemnities. Upon issuance of an airway release, steamship
guarantee or other indemnity, Factor shall have the right prior to presentation,
negotiation or acceptance of documents at Factor's banks under the relative
Letters of Credit to charge to Client's account the face amount of such
outstanding airway releases, steamship guarantees or indemnities.

7. FACTOR'S RESPONSIBILITY

7.1. Limitation of Liability. Factor shall not be liable or responsible, in any
manner or to any extent, for any error, act or omission by Factor, or by any
bank or any other party, in following Client's instructions or those contained
in any Letter of Credit in connection with or relating to any Transaction or
waivers of discrepancies issued hereunder and any drafts under any such
Transaction, or any Documents of Title, transport, payment, or indebtedness or
any other instruments or documents, whether or not transferred to Factor
hereunder, or the completion of execution of any Transaction; or for any loss or
depreciation of, or damage to, any merchandise, Documents of Title, transport,
payment, or indebtedness of any other documents or instruments, regardless of
the cause of any thereof. All Transactions hereunder shall be entirely without
recourse against Factor in any event.

7.2. Reliance. Factor and any bank shall have the right to rely upon any oral,
telecopy or other facsimile instruction or communication received from Client in
connection with any proposed modifications, deviations, extensions or other
actions affecting a Transaction, including, without limitation, waivers of
discrepancies. Factor retains Factor's independent right to refuse any documents
presented containing discrepancies despite the fact that Factor has contacted
Client and Client has accepted such discrepancies.

7.3. Waiver of Discrepancies. Factor reserves the sole right, in Factor's sole
discretion, to waive any discrepancies, defects or mistakes in any of the
documents presented to Factor or Factor's banks for negotiation or acceptance

                                       6
<PAGE>
8. FEES

8.1. Compensation. In addition to any commissions, discount, interest, charges,
fees or expenses charged to Factor for Client's account by any bank, or by
Factor under Schedule 1 hereto, in connection with any Transaction (all of which
will be charged to Client's account and when made by the bank shall be
conclusive on Client), Client shall pay to Factor, as compensation for the
issuance of Letters of Credit by Factor hereunder and for all services which
Factor may render hereunder, the following:

        a) As to Letters of Credit:

            (i) an issuance (opening) charge equal to 1/4 of 1% of the full face
amount of each Letter of Credit; plus

            (ii) 1/4 of 1% of the amount of each increase of any such Letter of
Credit; plus

            (iii) 1/4 of 1% of the full face amount of each Letter of Credit for
each 30 day period or part thereof from such date of issuance to the expiration
date and 1/4 of 1% of the then outstanding face amount thereof for each 30 day
extension or part thereof in excess of such expiration date; plus

            (iv) a charge equal to not less than 1/4 of 1% on each negotiation
under each Letter of Credit.

8.2. Interest. In addition to the foregoing, interest, shall be computed at a
rate to be fixed as provided in the Agreement, on all funds actually paid by
Factor to any bank, supplier, or other party on, under, by reason of, or in
connection with any Letter of Credit issued by Factor hereunder or any
Transaction covered thereby.

8.3. Commission. Notwithstanding the termination of the Agreement or this
Supplement, Client shall pay a fee to Factor equal to the factoring commission
under the Agreement on any sales that would have been created arising from
inventory purchased by Client directly or indirectly with the proceeds of
Letters of Credit opened by Factor.

8.4. Standard Charges. Attached hereto as Schedule 1 are the standard
commissions, charges, fees and expenses of our banks (including our standard
processing charge per item) as of the date hereof, which Schedule may be amended
from time to time upon written notice to you.

                                       7
<PAGE>

8.5. Costs. Client shall reimburse Factor for all reasonable out-of-pocket costs
and expenses (including legal fees and disbursements) incurred by Factor in
connection with the execution and delivery of this Supplement and perfection of
Factor's security interest in the Collateral, or to obtain or enforce payment of
any of Client's Obligations to Factor hereunder.

9. FACTOR'S REMEDIES

9.1. Remedies. In the event of any default by Client under the Agreement or
hereunder, Factor shall have the right to sell, at public or private sale, all
Collateral and documents relating thereto which Factor may hold as security and
shall generally have all of the rights and remedies of a secured party under the
Uniform Commercial Code. Factor may become the purchaser at any public sale,
free of any claim or equity of redemption. Factor shall give Client reasonable
notice of the time and place of any public sale thereof or of the time after
which any private sale thereof is to be made. The requirement of reasonable
notice shall be met if such notice is mailed, postage prepaid, to Client at
Client's last known address at least five days before the time of any such sale.
Net proceeds of any such sale or sales, after deduction of all expenses of every
kind relating thereto (including reasonable attorneys fees), shall be applied to
payment of all of Client's Obligations to Client, whether arising out of this
Supplement or otherwise, in such order of application as Factor may elect. Any
surplus which may result shall be paid to Client or as otherwise required by
law.and Client shall continue liable for any deficit.

10. MISCELLANEOUS

10.1. Term. The term of this Supplement shall commence on the date hereof and
shall continue until the term of the Agreement ends under the provisions
thereof.

10.2. Waiver. Client waives presentment, demand, protest, notice of nonpayment
and notice of protest as to all instruments, as well as any and all other
notices to which Client might otherwise be entitled. Factor's failure to enforce
any right or remedy hereunder or Factor's waiver of any default hereunder shall
not constitute a waiver of any such right of remedy or of any subsequent
default. This Supplement shall be binding upon and inure to the benefit of
Client's and Factor's respective successors and assigns.

10.3. Recapture. To the extent Factor, or any beneficiary of a Transaction to
whom Factor may owe an obligation receives payment on account of the Obligations
herein described, which payment is thereafter set aside or required to be repaid
by Factor in whole or in part, then, to the extent of any sum not finally
retained by Factor or such beneficiary (regardless of whether such sum is
recovered from Factor by Client, Client's

                                       8
<PAGE>

estate or trustee or any party acting for, on behalf of or through Client or as
Client's representative), Client's obligations to Factor shall be reinstated and
the security interests created hereby shall remain in full force and effect (or
be reinstated) until Client shall have made payment to Factor, which payment
shall be due on demand.

10.4. Entire Agreement. This Supplement contains Factor's sole and entire
understanding and agreement with respect to its entire subject matter, and all
prior negotiations, disclaimers, commitments, agreements and understandings
heretofore had between Factor and Client with respect thereto are hereby merged
herein. This Supplement cannot be changed or terminated orally.

10.5. Governing Law. This Supplement is executed and delivered in the State of
California and shall be governed, construed and interpreted, as to validity,
enforcement and in all other respects, in accordance with the law of the State
of California. Termination of this Agreement shall not affect Obligations on
Transactions having their inception prior thereto.

10.6. Waiver of Jury Trial. EACH OF CLIENT AND FACTOR HEREBY WAIVES TRIAL BY
JURY AND THE RIGHT THERETO IN ANY ACTION OR PROCEEDING OF ANY KIND ARISING ON,
OUT OF, OR BY REASON OF, OR RELATING IN ANY WAY TO THIS SUPPLEMENT OR THE
INTERPRETATION OR ENFORCEMENT THEREOF, OR TO ANY TRANSACTIONS HEREUNDER .

        IN WITNESS WHEREOF, the parties hereto have executed this Supplement as
of the day and year first above written.

                                                CENTURY BUSINESS CREDIT
                                                CORPORATION

                                                By:  /s/ ILLEGIBLE
                                                    ---------------------------
                                                Title:  President
                                                       ------------------------

                                                BAM! ENTERTAINMENT, INC.,
                                                a Delaware corporation

                                                By:  /s/ RAYMOND MUSCI
                                                    ---------------------------
                                                Title:  C.E.O.
                                                       ------------------------

                                       9
<PAGE>

                            AUTHORIZED SIGNATURES OF

                            BAM! ENTERTAINMENT, INC.

February 25, 2002

Century Business Credit Corporation
333 South Grand Avenue, Suite 4150
Los Angeles, California 90017

Gentlemen:

The names of the persons authorized, to make, sign and deliver on behalf of this
Corporation, Letters of Credit and amendments to Letters of Credit, authorize
the waiver of discrepancies, and authorize the issuance of air releases and/or
steamship indemnities, relative to Factor's Factoring Contract or Security
Agreement - Accounts Receivable - Financing, and any Supplement thereto, with
Century Business Credit Corporation, are as follows:

NAME (PRINT)                                            SIGNATURE
------------                                            ---------

Raymond Musci                                 /s/ RAYMOND MUSCI
                                             -----------------------------------
Stephen Ambler                                /s/ SM AMBLER
                                             -----------------------------------
Lynnie Nojadera                               /s/ LYNNIE NOJADERA
                                             -----------------------------------

                                Very truly  yours,

                                BAM! ENTERTAINMENT, INC.,
                                a Delaware corporation

                                By:  /s/ RAYMOND MUSCI
                                    -------------------------------------------
                                Title:  C.E.O.
                                       ----------------------------------------

                                       10
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                                   SCHEDULE 1
                        IMPORT LETTER OF CREDIT AGREEMENT
                                BANK FEE SCHEDULE
                             AS OF FEBRUARY __, 2002

Issuance (Opening)                                   $100 Flat

Cable Notification                                   $ 25 Per Page

Amendment Fee                                        $ 75 Flat (1-3)
                                                     $100 Flat (After 3)

Negotiation Commission           Refer to L/C Supplement Agreement/$100 Minimum

Processing Fee                   $100 Per Invoice Negotiated

Discrepancy Fee                                      $150 Per Discrepancy

Document Against Payment                             1/2% Flat
                                                     $100 Minimum

Expiration Commission            1/4% Flat/$100 Minimum

Authorization to Pay/                                1/4% Flat/$100 Minimum
    Reinstatement of Expired Letter of Credit

Letter of Indemnity                                  $100 Flat to Issue and
  (Steamship Guarantee)                              $ 50 Flat for Each 30 Days
            Outstanding

Air Release                                          $100 Flat

                                       11

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