EXHIBIT 10.3
SIDE LETTER
THIS SIDE LETTER, is made as of October 28, 2003, by and among BAM!
ENTERTAINMENT, INC., a corporation organized under the laws of the State of
Delaware (the "COMPANY"), and the parties set forth on the execution pages
hereof (each of said parties a "PURCHASER"). All capitalized terms that are not
otherwise defined herein have the meaning given to such terms in that Securities
Purchase Agreement dated as of September 30, 2003, (the "Agreement").
WHEREAS:
A. The Company and each Purchaser executed and delivered the Agreement
whereby securities of the Company were issued in reliance upon the exemption
from securities registration afforded by the provisions of Regulation D, as
promulgated by the SEC under the Securities Act.
B. The Company and each Purchaser executed the First Amendment to
Securities Purchase Agreement to Securities Purchase Agreement dated as of
October 27, 2003 whereby, the Company and each Purchaser mutually agree to amend
Exhibit F to the Agreement so that approval by the Company's stockholders is not
required.
C. The Company seeks the continued involvement of each Purchaser after
that period which is one year from the date of the Additional Blackout Period as
that term is defined below.
NOW, THEREFORE, in consideration of the above recitals and the mutual
agreements herein contained and for other good and valuable consideration, the
Company and each Purchaser hereby agree as follows:
(1) From the date which is one year from the date the Registration
Statement (as defined in the Registration Rights Agreements) is declared
effective by the SEC until the one year anniversary thereof (the "ADDITIONAL
BLOCKOUT PERIOD"), the Company will not, directly or indirectly, offer, sell,
grant any option to purchase, or otherwise dispose of (or announce any offer,
sale, grant or any option to purchase or other disposition of) any of its or the
Subsidiaries' equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security that is, at
any time during its life and under any circumstances, convertible into or
exchangeable or exercisable for Common Stock or Common Stock Equivalents (any
such offer, sale, grant, disposition or announcement being referred to as an
"ADDITIONAL SUBSEQUENT PLACEMENT"), unless the Company shall have first complied
with this Section (1). The restrictions contained in this Section (l) shall not
apply to Excluded Stock (as defined in the Agreement).
(i) The Company shall deliver to each Purchaser a written notice
(the "ADDITIONAL OFFER") of any proposed or intended issuance or sale or
exchange of the securities being offered (the "ADDITIONAL OFFERED SECURITIES")
in a Additional Subsequent Placement, which Additional Offer shall (w) identify
and describe the Additional Offered Securities, (x) describe the price and other
terms upon which they are to be issued, sold or exchanged, and the
number or amount of the Additional Offered Securities to be issued, sold or
exchanged, (y) identify the Persons or entities (if known) to which or with
which the Additional Offered Securities are to be offered, issued, sold or
exchanged and (z) offer to issue and sell to or exchange with each Purchaser the
Offered Securities, based on the following percentages: Vertical Ventures LLC,
77.1% and Smithfield Fiduciary LLC, 22.9% (the "ADDITIONAL BASIC AMOUNT"), and
with respect to each Purchaser that elects to purchase its Additional Basic
Amount, any additional portion of the Additional Offered Securities attributable
to the Additional Basic Amounts of other Purchasers as such Purchaser shall
indicate it will purchase or acquire should the other Purchasers subscribe for
less than their Additional Basic Amounts (the "ADDITIONAL UNDERSUBSCRIPTION
AMOUNT").
(ii) To accept an Additional Offer, in whole or in part, a Purchaser
must deliver a written notice to the Company prior to the end of the three (3)
Business Day period of the Offer, setting forth the portion of the Purchaser's
Additional Basic Amount that such Purchaser elects to purchase and, if such
Purchaser shall elect to purchase all of its Basic Amount, the Undersubscription
Amount, if any, that such Purchaser elects to purchase (in either case, the
"ADDITIONAL NOTICE OF ACCEPTANCE"). If the Additional Basic Amounts subscribed
for by all Purchasers are less than the total of all of the Additional Basic
Amounts, then each Purchaser who has set forth an Additional Undersubscription
Amount in its Additional Notice of Acceptance shall be entitled to purchase, in
addition to the Additional Basic Amounts subscribed for, the Additional
Undersubscription Amount it has subscribed for; provided, however, that if the
Additional Undersubscription Amounts subscribed for exceed the difference
between the total of all the Additional Basic Amounts and the Additional Basic
Amounts subscribed for (the "ADDITIONAL AVAILABLE UNDERSUBSCRIPTION AMOUNT"),
each Purchaser who has subscribed for any Additional Undersubscription Amount
shall be entitled to purchase on that portion of the Additional Available
Undersubscription Amount as the Additional Basic Amount of such Purchaser bears
to the total Basic Amounts of all Purchasers that have subscribed for
Undersubscription Amounts, subject to rounding by the Board of Directors to the
extent its deems reasonably necessary
(iii) The Company shall have ten (10) Business Days from the
expiration of the period set forth in Section (1)(ii) above to issue, sell or
exchange all or any part of such Additional Offered Securities as to which an
Additional Notice of Acceptance has not been given by the Purchasers (the
"ADDITIONAL REFUSED SECURITIES"), but only to the offerees described in the
Additional Offer (if so described therein) and only upon terms and conditions
(including, without limitation, unit prices and interest rates) that are not
more favorable to the acquiring Person or Persons or less favorable to the
Company than those set forth in the Additional Offer.
(iv) In the event the Company shall propose to sell less than all
the Additional Refused Securities (any such sale to be in the manner and on the
terms specified in Section (1)(iii) above), then each Purchaser may, at its sole
option and in its sole discretion, reduce the number or amount of the Additional
Offered Securities specified in its Additional Notice of Acceptance to an amount
that shall be not less than the number or amount of the Additional Offered
Securities that the Purchaser elected to purchase pursuant to Section (1) (ii)
above multiplied by a fraction, (i) the numerator of which shall be the number
or amount of Additional Offered Securities the Company actually proposes to
issue, sell or exchange (including Additional Offered Securities to be issued or
sold to Purchasers pursuant to Section (1) (ii) above prior to such reduction)
and (ii) the denominator of which shall be the original amount of the
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Additional Offered Securities. In the event that any Purchaser so elects to
reduce the number or amount of Additional Offered Securities specified in its
Additional Notice of Acceptance, the Company may not issue, sell or exchange
more than the reduced number or amount of the Additional Offered Securities
unless and until such securities have again been offered to the Purchasers in
accordance with Section (1)(i) above.
(v) Upon the closing of the issuance, sale or exchange of all or
less than all of the Additional Refused Securities, the Purchasers shall acquire
from the Company, and the Company shall issue to the Purchasers, the number or
amount of Additional Offered Securities specified in the Additional Notices of
Acceptance, as reduced pursuant to Section (1)(iv) above if the Purchasers have
so elected, upon the terms and conditions specified in the Additional Offer. The
purchase by the Purchasers of any Additional Offered Securities is subject in
all cases to the preparation, execution and delivery by the Company and the
Purchasers of a purchase agreement relating to such Additional Offered
Securities reasonably satisfactory in form and substance to the Purchasers and
their respective counsel.
(vi) Any Additional Offered Securities not acquired by the
Purchasers or other Persons in accordance with Section (1)(iii) above may not be
issued, sold or exchanged until they are again offered to the Purchasers under
the procedures specified in this Side Letter.
(2) Notwithstanding the foregoing, the provisions of Section (1) herein
shall not apply to any Purchaser to the extent that the involvement of such
Purchaser in any Additional Offer would cause said Additional Offer to be
integrated with any prior offering of securities by the Company in a manner that
would require the registration under the Securities Act or the approval by the
Company's stockholders of the sale of the Additional Offered Securities under
applicable rules and regulations of NASDAQ.
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IN WITNESS WHEREOF, the undersigned Purchasers and the Company have caused
this Side Letter to be duly executed as of the date first above written.
COMPANY:
BAM! ENTERTAINMENT, INC.
By: /s/ Xxxxxxx Xxxxx
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Name: Xxxxxxx Xxxxx
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Title: Chief Executive Officer
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THE PURCHASERS:
VERTICAL VENTURES, LLC
By: /s/ Xxxxxx Xxxxxxxxx
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Name: Xxxxxx Xxxxxxxxx
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Title: Partner
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Residence:
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Address: 000 Xxxxxxxxx Xxx., 00xx Xxxxx
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XX, XX 00000
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Telephone No.: (000)000-0000
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Telecopy No.: (000)000-0000
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Attention:
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Email Address:
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SMITHFIELD FIDUCIARY LLC
By: /s/ Xxxx X. Chill
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Name: Xxxx X. Chill
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Title: Authorized Signatory
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Residence: Cayman Islands
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Address: c/o Highbridge Capital
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Management, LLC
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0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
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Telephone No.: (000)000-0000
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Telecopy No.: (000)000-0000
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Attention: Xxx X. Xxxxxx / Xxxx X. Chill
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Email Address: xxx.xxxxxx@xxxxx.xxx
xxxx.xxxxx@xxxxx.xxx
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