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                                                                   EXHIBIT 10.20

                              MANNKIND CORPORATION

                             2001 STOCK AWARDS PLAN

            SECTION 1. PURPOSE OF PLAN

            The purpose of this 2001 Stock Awards Plan ("Plan") of MannKind
Corporation, a Delaware corporation (the "Company"), is to enable the Company
and its affiliates to attract, retain and motivate their directors, employees
and consultants by providing for or increasing the proprietary interests of such
persons in the Company.

            SECTION 2. PERSONS ELIGIBLE UNDER PLAN

            Any person who is a director, employee or consultant of the Company
or any of its affiliates (a "Grantee") shall be eligible to be considered for
the grant of Awards (as hereinafter defined) hereunder; provided, however, that
only those Grantees who are employees of the Company or any of its subsidiaries
shall be eligible to be considered for the grant of Incentive Stock Options (as
hereinafter defined) hereunder. "Affiliate" shall have the same meaning for
purposes of this Plan as in Section 260.140.41 of Title 10 of the California
Administrative Code but, for purposes of stock options intended to be incentive
stock options granted under this Plan, "affiliate" shall include only parents
and subsidiaries of the Company within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended.

            SECTION 3. AWARDS

            (a)   The Board of Directors of the Company (the "Board") or the
Committee (as hereinafter defined), on behalf of the Company, is authorized
under this Plan to enter into any type of arrangement with a Grantee that is not
inconsistent with the provisions of this Plan and that, by its terms, involves
or might involve the issuance of (i) shares of Common Stock, par value $.01 per
share, of the Company (the "Common Shares") or (ii) a Derivative Security (as
such term is defined in Rule 16a-1 promulgated under the Securities Exchange Act
of 1934, as such Rule may be amended from time to time) with an exercise or
conversion privilege at a price related to the Common Shares or with a value
derived from the value of the Common Shares. The entering into of any such
arrangement is referred to herein as the "grant" of an "Award."

            (b)   Awards are not restricted to any specified form or structure
and may include, without limitation, sales or bonuses of stock, restricted
stock, stock options, reload stock options, stock purchase warrants, other
rights to acquire stock, securities convertible into or redeemable for stock,
stock appreciation rights, limited stock appreciation rights, phantom stock,
dividend equivalents, performance units or performance shares, and an Award may
consist of one such security or benefit, or two or more of them in tandem or in
the alternative.

            (c)   Common Shares may be issued pursuant to an Award for any
lawful consideration as determined by the Committee, including, without
limitation, services rendered by the recipient of such Award.

            (d)   Awards in the form of options shall provide for an exercise
price which is not less than 85% of the fair value of the stock at the time the
option is granted, except that the price shall be 110% of the fair value in the
case of any person who owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company. For purposes of this
Paragraph (d) the fair value of stock issuable upon exercise of an option shall
be determined by the Board of Directors of the Company or Committee taking into
account the following:

            (i) If stock of the same class is publicly traded in an active
      market of substantial depth, the recent market price of such securities.

            (ii) If stock of the same class has not been so publicly traded, the
      price at which securities of reasonably comparable corporations (if any)
      in the same industry are being traded, subject to appropriate adjustment
      for the dissimilarities between the corporations being compared.

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            (iii) In the absence of any reliable indicator under subparagraph
      (i) or (ii) above, the earnings history, book value and prospects of the
      Company in the light of market conditions generally.

            (e)   The exercise period for awards granted in the form of options
shall be not more than 120 months from the date the option is granted.

            (f)   Awards granted in the form of options shall provide that
neither the option nor any interest therein may be sold, assigned, conveyed,
gifted, pledged, hypothecated or otherwise transferred in any manner other than
by will or the laws of descent and distribution.

            (g)   Awards granted in the form of options shall be exercisable at
the rate of at least 20% per year over five years from the date the option is
granted subject to the conditions in (4) below. However, in the case of an
option granted to officers, directors or consultants of the Company or any of
its affiliates, the option may become fully exercisable subject to reasonable
conditions such as continued employment, at any time or during any period
established by the Company.

            (h)   Unless employment is terminated for cause as defined by
applicable law, awards granted in the form of options shall provide that the
holder of the option shall have the right to exercise in the event of
termination of employment to the extent that the holder is entitled to exercise
on the date employment terminates as follows:

            (i) At least six months from the date of termination if termination
      was caused by death or disability.

            (ii) At least 30 days from the date of termination if termination
      was caused other than by death or disability.

            (i)   No Awards shall be granted pursuant to this Plan if, after the
granting of the Award, the number of Common Shares subject to such Award and all
other Awards then outstanding under this Plan and all other stock option, stock
bonus, stock purchase and other similar plans for employees, directors and/or
consultants exceeds 30% of the then outstanding shares of Common Stock of all
classes (determined by treating all shares of convertible preferred or
convertible senior common stock as if they had been converted but not taking
into account any shares subject to promotional waivers under Section 260.141 of
Title 10 of the California Administrative Code), all as determined pursuant to
Section 260.140.45 of Title 10 of the California Administrative Code..

            (j)   Subject to the other specific provisions of this Plan, the
Board or the Committee, in its sole and absolute discretion, shall determine all
of the terms and conditions of each Award granted under this Plan, which terms
and conditions may include, among other things:

            (i) a provision permitting the recipient of such Award, including
      any recipient who is a director or officer of the Company, to pay the
      purchase price of the Common Shares or other property issuable pursuant to
      such Award, or such recipient's tax withholding obligation with respect to
      such issuance, in whole or in part, by any one or more of the following:

                  (A)   the delivery of previously owned shares of capital stock
            of the Company (including "pyramiding") or other property,

                  (B)   a reduction in the amount of Common Shares or other
            property otherwise issuable pursuant to such Award, or

                  (C)   the delivery of a promissory note, the terms and
            conditions of which shall be determined by the Committee; or

            (ii) a provision required in order for such Award to qualify as an
      incentive stock option under Section 422 of the Internal Revenue Code (an
      "Incentive Stock Option").

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            SECTION 4. STOCK SUBJECT TO PLAN

            (a)   The aggregate number of Common Shares that may be issued
pursuant to all Incentive Stock Options granted under this Plan shall not exceed
5,000,000. Such maximum number does not include the number of Common Shares
subject to the unexercised portion of any Incentive Stock Option granted under
this Plan that expires or is terminated. Such maximum number of Common Shares is
subject to adjustment as provided in Section 7 hereof (and is referred to herein
as the "Share Limitation").

            (b)   At any time, the aggregate number of Common Shares issued and
issuable pursuant to all Awards (including all Incentive Stock Options) granted
under this Plan shall not exceed the Share Limitation, subject to adjustment as
provided in Section 7 hereof.

            (c)   For purposes of Section 4(b) hereof, the aggregate number of
Common Shares issued and issuable pursuant to Awards granted under this Plan
shall at any time be deemed to be equal to the sum of the following:

            (i) the number of Common Shares which were issued prior to such time
      pursuant to Awards granted under this Plan excluding (except for purposes
      of computing the Share Limitation applicable to Incentive Stock Options
      granted under this Plan) shares which were reacquired by the Company
      pursuant to provisions in the Awards with respect to which those shares
      were issued giving the Company the right or obligation to reacquire such
      shares upon the occurrence of certain events; plus

            (ii) the number of Common Shares which are or may be issuable at or
      after such time pursuant to outstanding Awards granted under this Plan
      prior to such time.

            (d)   The maximum number of shares as to which Awards under this
Plan can be made to any employee in any calendar year under this Plan is
1,000,000.

            SECTION 5. DURATION OF PLAN

            No Awards shall be granted under this Plan after October 7, 2011.
Although Common Shares may be issued after October 7, 2011 pursuant to Awards
granted prior to such date, no Common Shares shall be issued under this Plan
after October 7, 2021.

            SECTION 6. ADMINISTRATION OF PLAN

            (a)   This Plan shall be administered by the Board or a committee
thereof (the "Committee") consisting of two or more directors.

            (b)   Subject to the provisions of this Plan, the Board or the
Committee shall be authorized and empowered to do all things necessary or
desirable in connection with the administration of this Plan, including, without
limitation, the following:

            (i) adopt, amend and rescind rules and regulations relating to this
      Plan;

            (ii) determine which persons meet the requirements of Section 2
      hereof for eligibility under this Plan and to which of such eligible
      persons, if any, Awards shall be granted hereunder;

            (iii) grant Awards to eligible persons and determine the terms and
      conditions thereof, including the number of Common Shares issuable
      pursuant thereto;

            (iv) determine whether, and the extent to which adjustments are
      required pursuant to Section 7 hereof; and

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            (v) interpret and construe this Plan and the terms and conditions of
      any Award granted hereunder.

            SECTION 7. ADJUSTMENTS

            If the outstanding securities of the class then subject to this Plan
are increased, decreased or exchanged for or converted into a different number
or kind of shares or securities of the Company as a result of a reorganization,
merger, consolidation, recapitalization, restructuring, combination,
reclassification, stock dividend, stock split, reverse stock split or the like,
then, unless the terms of such transaction or document evidencing an Award shall
provide otherwise, the Committee may make appropriate and proportionate
adjustments in (a) the number and type of shares or other securities of the
Company that may be acquired pursuant to Incentive Stock Options and other
Awards theretofore granted under this Plan and (b) the maximum number and type
of shares or other securities of the Company that may be issued pursuant to
Incentive Stock Options and other Awards thereafter granted under this Plan in
the aggregate and/or to any employee in any calendar year..

            SECTION 8. AMENDMENT AND TERMINATION OF PLAN

            The Board may amend or terminate this Plan at any time and in any
manner; provided, however, that (a) no such amendment or termination shall
deprive the recipient of any Award theretofore granted under this Plan, without
the consent of such recipient, of any of his or her rights thereunder or with
respect thereto; and (b) no such amendment shall increase the aggregate number
of Common Shares that may be issued pursuant to all Incentive Stock Options
granted under this Plan (except pursuant to Section 7 hereof) or change, alter
or modify the employees or class of employees eligible to receive Incentive
Stock Options under the Plan without the approval of the stockholders of the
Company, which approval must be obtained within 12 months after the adoption of
such amendment by the Board.

            SECTION 9. EFFECTIVE DATE OF PLAN

            This Plan shall be effective as of October 8, 2001, the date upon
which it was approved by the Board and the holders of a majority of Common Stock
of the Company; provided, however, that no Common Shares may be issued under
this Plan until it has been approved by a majority vote of the holders of the
outstanding shares of Common Stock of the Company at a meeting duly held or by
written consent in accordance with the laws of the State of Delaware. If an
Award granted under this Plan takes the form of an option and it is exercised
before stockholder approval is obtained or if stockholder approval is not
obtained within 12 months before or after the date set forth above upon which
this Plan was approved by the Board, then the exercise shall be rescinded. No
shares subject to any such option shall be counted in determining whether such
stockholder approval is obtained.

            SECTION 10. STOCK EXCHANGE REQUIREMENTS; APPLICABLE LAWS

            Notwithstanding anything to the contrary in this Plan, no Common
Shares purchased upon exercise of an Award, and no certificate representing all
or any part of such shares, shall be issued or delivered if (a) such shares have
not been admitted to listing upon official notice of issuance on each stock
exchange upon which shares of that class are then listed, (b) such shares have
not been listed on any automated quotation system (including the Nasdaq National
Market and the Nasdaq Small Cap Market) on which shares of that class are then
quoted or (c) in the opinion of counsel to the Company, such issuance or
delivery would cause the Company to be in violation of or to incur liability
under any Federal, state or other securities law, or any requirement of any
listing agreement to which the Company is a party, or any other requirement of
law or of any administrative or regulatory body having jurisdiction over the
Company.

            SECTION 11. INFORMATION TO GRANTEES

            The Company will provide to all Grantees of Awards under this Plan
consolidated financial statements of the Company at least annually on or before
120 days after the end of each fiscal year of the Company.

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Such financial statements shall consist of a balance sheet, income statement and
statement of cash flows and shall be audited if the Company is then employing
independent certified public accountants to audit its financial statements.

            SECTION 12. COMPLIANCE WITH EXEMPTION REQUIREMENTS

            This Plan is intended to comply with the requirements of Section
25102(o) of the California Corporate Securities Law and the regulations of the
California Department of Corporations referred to therein. This Plan shall be
interpreted in such a manner as to comply with these requirements. In the event
this Plan omits any provision required to be included herein by those
requirements, that provision is incorporated by reference herein. In the event
any provision of this Plan is inconsistent with any of such requirements, that
provision shall be deemed deleted from this Plan and any required provision
shall be deemed added to this Plan.

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                                                                     EXHIBIT 4.1

      THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
      WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
      AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK
      ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE,
      PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE
      SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO BAM!
      ENTERTAINMENT, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

            Right to Purchase up to 166,667 Shares of Common Stock of
                            BAM! Entertainment, Inc.

                          COMMON STOCK PURCHASE WARRANT

No. L-2                                                Issue Date:  May 21, 2004

      BAM! ENTERTAINMENT, INC. a corporation organized under the laws of the
State of Delaware, hereby certifies that, for value received, LAURUS MASTER
FUND, LTD., or assigns (the "Holder"), is entitled, subject to the terms set
forth below, to purchase from the Company (as defined herein) from and after the
Issue Date of this Warrant and at any time or from time to time before 5:00
p.m., New York time, through the close of business May 21, 2011 (the "Expiration
Date"), 166,667 fully paid and nonassessable shares of Common Stock, subject to
adjustment as set forth in Section 1.6 and as otherwise provided herein (as
hereinafter defined), $0.01 par value per share, at the applicable Exercise
Price per share (as defined below). The number and character of such shares of
Common Stock and the applicable Exercise Price per share are subject to
adjustment as provided herein. Capitalized terms used but not defined herein
shall have the meanings given them in that certain Note dated as of December 3,
2003 by the Company in favor of the Holder in the original principal amount of
$1,500,000 (the "Note").

      As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:

            (a) The term "Company" shall include BAM! Entertainment, Inc. and
      any corporation which shall succeed, or assume the obligations of, BAM!
      Entertainment, Inc. hereunder.

            (b) The term "Common Stock" includes (i) the Company's Common Stock,
      par value $0.01 per share; and (ii) any other securities into which or for
      which any of the securities described in (a) may be converted or exchanged
      pursuant to a plan of recapitalization, reorganization, merger, sale of
      assets or otherwise.

            (c) The term "Other Securities" refers to any stock (other than
      Common Stock) and other securities of the Company or any other person
      (corporate or otherwise)

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      which the holder of the Warrant at any time shall be entitled to receive,
      or shall have received, on the exercise of the Warrant, in lieu of or in
      addition to Common Stock, or which at any time shall be issuable or shall
      have been issued in exchange for or in replacement of Common Stock or
      Other Securities pursuant to Section 4 or otherwise.

            (d) The "Exercise Price" applicable under this Warrant shall be as
      follows:

                  (i)   a price of $0.63 for all shares acquired hereunder.

      1. Exercise of Warrant.

            1.1 Number of Shares Issuable upon Exercise. From and after the date
hereof through and including the Expiration Date, the Holder shall be entitled
to receive, upon exercise of this Warrant in whole or in part, by delivery of an
original or fax copy of an exercise notice in the form attached hereto as
Exhibit A (the "Exercise Notice"), shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4.

            1.2 Fair Market Value. For purposes hereof, the "Fair Market Value"
of a share of Common Stock as of a particular date (the "Determination Date")
shall mean:

            (a) If the Company's Common Stock is traded on the American Stock
      Exchange or another national exchange or is quoted on the National or
      SmallCap Market of The Nasdaq Stock Market, Inc. ("Nasdaq"), then the
      closing or last sale price, respectively, reported for the last business
      day immediately preceding the Determination Date.

            (b) If the Company's Common Stock is not traded on the American
      Stock Exchange or another national exchange or on the Nasdaq but is traded
      on the NASD OTC Bulletin Board, then the mean of the average of the
      closing bid and asked prices reported for the last business day
      immediately preceding the Determination Date.

            (c) Except as provided in clause (d) below, if the Company's Common
      Stock is not publicly traded, then as the Holder and the Company agree or
      in the absence of agreement by arbitration in accordance with the rules
      then in effect of the American Arbitration Association, before a single
      arbitrator to be chosen from a panel of persons qualified by education and
      training to pass on the matter to be decided.

            (d) If the Determination Date is the date of a liquidation,
      dissolution or winding up, or any event deemed to be a liquidation,
      dissolution or winding up pursuant to the Company's charter, then all
      amounts to be payable per share to holders of the Common Stock pursuant to
      the charter in the event of such liquidation, dissolution or winding up,
      plus all other amounts to be payable per share in respect of the Common
      Stock in liquidation under the charter, assuming for the purposes of this
      clause (d) that all of the shares of Common Stock then issuable upon
      exercise of the Warrant are outstanding at the Determination Date.

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            1.3 Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.

            1.4 Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the holders of the Warrant
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent (as hereinafter described) and shall accept, in
its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.

            1.5 Lockup. Notwithstanding whether or not the securities issuable
upon exercise of the Warrants become registered or otherwise tradeable without
restriction, the Holder hereby agrees that, until the occurrence of the
Compliance Event or a Non-Compliance Event (each as defined in the Note), it
shall not directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of the Warrants or any securities of the Borrower
issuable upon exercise of the Warrants during such period. In order to enforce
the foregoing covenant, the Borrower may impose stop-transfer instructions with
respect to the Warrants and the securities issuable upon exercise of the
Warrants until the end of such period.

            1.6 Non-Compliance Event. Notwithstanding the foregoing, upon the
occurrence of the Non-Compliance Event (as defined in the Note), the aggregate
number of shares issuable upon exercise of this Warrant shall be automatically
increased to 500,000 and the exercise price of said Warrants shall be adjusted
to a price equal to the lesser of (i) the closing bid price of the Borrower's
Common Stock on the Nasdaq Stock Market on the Business Day immediately
preceding the date of the occurrence of the Non-Compliance Event, and (y) the
average of the closing bid price of the Borrower's Common Stock on the Nasdaq
Stock Market for the five (5) Business Days immediately preceding the date of
the occurrence of the Non-Compliance Event.

            1.7 Lock-up on Non-Compliance Event. Notwithstanding the foregoing,
upon the occurrence of the Non-Compliance Event, the Lock-up referenced in
Section 1.5 herein shall be extended as to all Warrants referenced in Section
1.6 herein for a period of 180 days from the date of the occurrence of the
Non-Compliance Event.

      2. Procedure for Exercise.

            2.1 Delivery of Stock Certificates, Etc., on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder 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 payment made for such shares in accordance herewith. As soon as
practicable after the exercise of this Warrant in full or in part, and in any

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event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such Holder
is entitled upon such exercise pursuant to Section 1 or otherwise.

            2.2 Exercise. Payment may be made either (i) in cash or by certified
or official bank check payable to the order of the Company equal to the
applicable aggregate Exercise Price, (ii) by delivery of the Warrant, or shares
of Common Stock and/or Common Stock receivable upon exercise of the Warrant in
accordance with Section (b) below, or (iii) by a combination of any of the
foregoing methods, for the number of Common Shares specified in such Exercise
Notice (as such exercise number shall be adjusted to reflect any adjustment in
the total number of shares of Common Stock issuable to the Holder per the terms
of this Warrant) and the Holder shall thereupon be entitled to receive the
number of duly authorized, validly issued, fully-paid and non-assessable shares
of Common Stock (or Other Securities) determined as provided herein.
Notwithstanding any provisions herein to the contrary, if the Fair Market Value
of one share of Common Stock is greater than the Exercise Price (at the date of
calculation as set forth below), in lieu of exercising this Warrant for cash,
the Holder may elect to receive shares equal to the value (as determined below)
of this Warrant (or the portion thereof being exercised) by surrender of this
Warrant at the principal office of the Company together with the properly
endorsed Exercise Notice in which event the Company shall issue to the Holder a
number of shares of Common Stock computed using the following formula:

      X=Y   (A-B)
            -----
              A

      Where X =   the number of shares of Common Stock to be issued to the
                  Holder

      Y =         the number of shares of Common Stock purchasable under the
                  Warrant or, if only a portion of the Warrant is being
                  exercised, the portion of the Warrant being exercised (at the
                  date of such calculation)

      A =         the Fair Market Value of one share of the Company's Common
                  Stock (at the date of such calculation)

      B =         Exercise Price (as adjusted to the date of such calculation)

      3. Effect of Reorganization, Etc.; Adjustment of Exercise Price.

            3.1 Reorganization, Consolidation, Merger, Etc. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other

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person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, as a condition to the consummation of such a
transaction, proper and adequate provision shall be made by the Company whereby
the Holder of this Warrant, on the exercise hereof as provided in Section 1 at
any time after the consummation of such reorganization, consolidation or merger
or the effective date of such dissolution, as the case may be, shall receive, in
lieu of the Common Stock (or Other Securities) issuable on such exercise prior
to such consummation or such effective date, the stock and other securities and
property (including cash) to which such Holder would have been entitled upon
such consummation or in connection with such dissolution, as the case may be, if
such Holder had so exercised this Warrant, immediately prior thereto, all
subject to further adjustment thereafter as provided in Section 4.

            3.2 Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, concurrently with any distributions made to holders of its Common
Stock, shall at its expense deliver or cause to be delivered to the Holder the
stock and other securities and property (including cash, where applicable)
receivable by the Holder of the Warrant pursuant to Section 3.1, or, if the
Holder shall so instruct the Company, to a bank or trust company specified by
the Holder and having its principal office in New York, NY as trustee for the
Holder of the Warrant (the "Trustee").

            3.3 Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does not continue in full force and effect after the
consummation of the transactions described in this Section 3, then the Company's
securities and property (including cash, where applicable) receivable by the
Holders of the Warrant will be delivered to Holder or the Trustee as
contemplated by Section 3.2.

      4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Exercise Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Exercise Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Exercise Price then in effect. The
Exercise Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be increased to a number determined by multiplying the number of
shares of Common Stock that

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would otherwise (but for the provisions of this Section 4) be issuable on such
exercise by a fraction of which (a) the numerator is the Exercise Price that
would otherwise (but for the provisions of this Section 4) be in effect, and (b)
the denominator is the Exercise Price in effect on the date of such exercise.

      5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 11 hereof).

      6. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrant, shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the Warrant.

      7. Assignment; Exchange of Warrant. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") in whole or in
part. On the surrender for exchange of this Warrant, with the Transferor's
endorsement in the form of Exhibit B attached hereto (the "Transferor
Endorsement Form") and together with evidence reasonably satisfactory to the
Company demonstrating compliance with applicable securities laws, which shall
include, without limitation, a legal opinion from the Transferor's counsel that
such transfer is exempt from the registration requirements of applicable
securities laws, the Company at its expense but with payment by the Transferor
of any applicable transfer taxes) will issue and deliver to or on the order of
the Transferor thereof a new Warrant of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "Transferee"), calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.

      8. Replacement of Warrant. On 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 of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

                                       6
<PAGE>

      9. Registration Rights. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in a Registration Rights Agreement entered into by the Company and
Purchaser dated as of even date of this Warrant.

      10. Maximum Exercise. The Holder shall not be entitled to exercise this
Warrant on an exercise date, in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates on an exercise date,
and (ii) the number of shares of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this proviso is being made on
an exercise date, which would result in beneficial ownership by the Holder and
its affiliates of more than 4.99% of the outstanding shares of Common Stock of
the Company on such date. For the purposes of the proviso to 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-3 thereunder. Notwithstanding the foregoing, the restriction described in
this paragraph may be revoked upon 75 days prior notice from the Holder to the
Company and is automatically null and void upon an Event of Default under the
Note.

      11. Warrant Agent. The Company may, by written notice to the each Holder
of the Warrant, appoint an agent for the purpose of issuing Common Stock (or
Other Securities) on the exercise of this Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 7, and replacing this Warrant
pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.

      12. Transfer on the Company's Books. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.

      13. Notices, Etc. All notices and other communications from the Company to
the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.

      14. Voluntary Adjustment by the Company. Upon the occurrence of the
Compliance Event, the Company may thereafter, at any time during the term of
this Warrant reduce the then current Exercise Price to any amount and for any
period of time deemed appropriate by the Board of Directors of the Company. In
the event of the Non-Compliance Event, this paragraph shall no force or effect.

      15. No Shorting. The Purchaser or any of its affiliates and investment
partners will not and will not cause any person or entity, directly or
indirectly, to engage in "short sales" of the Company's Common Stock or any
other hedging strategies.

      16. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which

                                       7
<PAGE>

enforcement of such change, waiver, discharge or termination is sought. This
Warrant shall be governed by and construed in accordance with the laws of State
of New York without regard to principles of conflicts of laws. Any action
brought concerning the transactions contemplated by this Warrant shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York; provided, however, that the Holder may choose to waive
this provision and bring an action outside the state of New York. The
individuals executing this Warrant on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury. The prevailing party
shall be entitled to recover from the other party its reasonable attorney's fees
and costs. In the event that any provision of this Warrant is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Warrant.
The headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision. The Company acknowledges that legal
counsel participated in the preparation of this Warrant and, therefore,
stipulates that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be applied in the interpretation of this
Warrant to favor any party against the other party.

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK;
                            SIGNATURE PAGE FOLLOWS.]

                                       8
<PAGE>

      IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.

                                        BAM! ENTERTAINMENT, INC.

WITNESS:

                                        By: /s/  Raymond Musci
                                            --------------------
                                        Name: Raymond Musci
/s/ Stephen Ambler                      Title: CEO
------------------------

                                       9
<PAGE>

                                    EXHIBIT A

                              FORM OF SUBSCRIPTION
                   (To Be Signed Only On Exercise Of Warrant)

TO: BAM! Entertainment, Inc.

      Attention: Chief Financial Officer

      The undersigned, pursuant to the provisions set forth in the attached
Warrant (No.____), hereby irrevocably elects to purchase (check applicable box):

______      ________ shares of the Common Stock covered by such Warrant; or

______      the maximum number of shares of Common Stock covered by such Warrant
            pursuant to the cashless exercise procedure set forth in Section 2.

      The undersigned herewith makes payment of the full Exercise Price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):

______      $__________ in lawful money of the United States; and/or

______      the cancellation of such portion of the attached Warrant as is
            exercisable for a total of _______ shares of Common Stock (using a
            Fair Market Value of $_______ per share for purposes of this
            calculation); and/or

______      the cancellation of such number of shares of Common Stock as is
            necessary, in accordance with the formula set forth in Section 2.2,
            to exercise this Warrant with respect to the maximum number of
            shares of Common Stock purchasable pursuant to the cashless exercise
            procedure set forth in Section 2.

      The undersigned requests that the certificates for such shares be issued
in the name of, and delivered to ______________________________________________
whose address is
___________________________________________________________________________.

      The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.

Dated: ___________      _______________________________________________________
                        (Signature must conform to name of holder as
                        specified on the face of the Warrant)

                        Address: ______________________________________________
                                 ______________________________________________

                                       A-1

<PAGE>

                                    EXHIBIT B

                         FORM OF TRANSFEROR ENDORSEMENT
                   (To Be Signed Only On Transfer Of Warrant)

      For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of BAM! Entertainment, Inc. into which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of BAM!
Entertainment, Inc. with full power of substitution in the premises.

<TABLE>
<CAPTION>
                                            Percentage               Number
Transferees             Address            Transferred            Transferred
-----------             -------            -----------            ------------
<S>                     <C>                <C>                    <C>
____________      ____________________     ____________           ____________

____________      ____________________     ____________           ____________

____________      ____________________     ____________           ____________

____________      ____________________     ____________           ____________
</TABLE>

Dated: ___________          ____________________________________________________
                              (Signature must conform to name of holder as
                                  specified on the face of the Warrant)

                            Address: __________________________________________
                                     __________________________________________

                            SIGNED IN THE PRESENCE OF:

                            __________________________________________
                                              (Name)

ACCEPTED AND AGREED:
[TRANSFEREE]

__________________________________________
                 (Name)

                                       B-1

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