EXHIBIT 10.48
LETTER OF AGREEMENT MODIFYING PROMISSORY NOTE AND WARRANT FOR 150,000 SHARES
("MODIFICATION AGREEMENT")
April 1, 2002
Xx. Xxxxx Xxxxxx
Westminster Properties, Inc.
0000 Xxxxxx Xxx., #000
Xxx Xxxxxxx, XX 00000
Dear Carlo:
This letter confirms our agreement concerning the modification of the
terms of (a) the promissory note dated October 9, 2001 (the "Original Note") in
the original principal amount of $300,000 from The End, Inc. ("The End"),
iNTELEFILM Corporation ("iNTELEFILM") and Harmony Holdings, Inc. ("Harmony") to
Westminster Properties, Inc. ("Westminster") and (b) the Warrant expiring
October 9, 2006 that entitles Westminster to purchase 150,000 shares of common
stock of iNTELEFILM at $2.00 per share (the "Warrant). We have agreed as
follows:
1. Original Note. The outstanding principal amount of the Original Note
will be reduced to $175,000 on or prior to April 1, 2002 and will be
restated and replaced effective April 1, 2002 with the promissory note
in the form of Exhibit A attached to this Modification Agreement (the
"Replacement Note"). You acknowledge that you have received principal
payments on the Original Note in the aggregate of $125,000 and payment
of the accrued and unpaid interest to and through March 31, 2002 so
that the outstanding principal amount of the Original Note is $175,000
on April 1, 2002.
2. Warrant. The exercise price of the Warrant will be reduced to $.46 per
share effective April 1, 2002 which is the same as the exercise price
of the warrant expiring October 9, 2006 to purchase 100,000 shares of
common stock of iNTELEFILM that was issued to Westminster pursuant to
the Mutual Release and Settlement Agreement dated October 9, 2001 (the
"Settlement Agreement") among The End, iNTELEFILM, Harmony and
Westminster.
3. Full Performance. The End, iNTELEFILM and Harmony have fully performed
their obligations under the Settlement Agreement.
4. Right to Invest. iNTELEFILM will provide Westminster an opportunity to
invest in the current private placement of iNTELEFILM's securities
described in the summary attached as Exhibit B to this Modification
Agreement, provided that Westminster represents that it is an
accredited investor and signs
the standard non-disclosure agreement that prospective investors sign
in connection with the private placement. iNTELEFILM reserves the
right to modify the terms of the private placement and the securities
offered as well as to withdraw the private placement if sufficient
cash purchasers do not subscribe. Westminster may elect to tender the
Replacement Note at par in payment of the subscription price for the
securities offered by iNTELEFILM in the private placement.
5. Advice of Counsel. The parties to this Modification Agreement have
consulted with and been advised by their own legal counsel concerning
this Modification Agreement and the transactions contemplated hereby.
If the foregoing correctly states our agreement, please execute this
Modification Agreement in the space provided below.
Sincerely,
iNTELEFILM, Corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
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Xxxxxxx X. Xxxxxxxx, Chief Financial Officer
HARMONY HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
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Xxxxxxx X. Xxxxxxxx, Chief Financial Officer
The undersigned hereby acknowledges its receipt and acceptance of and
agreement to the terms and conditions of Modification Agreement:
Westminster Properties, Inc.
By: /s/
--------------------------------
Its: President
Exhibit A
Form of Replacement Note
RESTATED PROMISSORY NOTE
$175,000.00
Los Angeles, California
April 1, 2002
FOR VALUE RECEIVED the undersigned, Harmony Holdings, Inc., a Delaware
Corporation, and iNTELEFILM Corporation, a Minnesota corporation, jointly and
severally (hereinafter collectively the "Company" or "Borrower"), do hereby
promise to pay to Westminster Properties, Inc., a Nevada Corporation ("Holder"),
or order, the principal sum of One Hundred Seventy-five Thousand and No/100
Dollars ($175,000.00), together with interest on the unpaid principal balance at
the rate of twelve percent (12%) per annum commencing as of April 1, 2002
through April 3, 2003 (the "Term"). The Company shall have the right to prepay
this Note, in whole or in part, without the prior written consent of Holder.
Principal, interest and the Additional Fee (as defined below) shall be payable
in lawful money of the United States.
During the Term interest only shall be payable quarterly on the unpaid principal
balance of this Promissory Note ("Note") and shall be calculated based on a 360
day year and shall be payable on each three month anniversary of the date
hereof. If not sooner converted and further subject to the mandatory prepayment
as provided below, the entire unpaid principal amount, all accrued and unpaid
interest, and the Additional Fee shall be due and payable on April 3, 2003 (the
"Maturity Date") or upon the earlier to occur (the mandatory prepayment date) of
(i) the receipt by iNTELEFILM Corporation of gross cash proceeds from the sale
of its equity securities (common stock and/or preferred stock) in the aggregate
of at least $4,000,000 (the "Equity Financing"), or (ii) a final judgment (not
subject to any further appeal) in an amount in excess of $4,000,000 in favor of
iNTELEFILM Corporation in its lawsuit against ABC Radio/Disney pending in the
United States District Court for the District of Minnesota, whichever first
occurs. Except for the repayment of this Note in connection with an Equity
Financing or the voluntary conversion by the Holder of this Note into securities
of the Company for which no Additional Fee is payable, the Company will pay
Holder an additional fee (the "Additional Fee") calculated at the rate of eight
percent (8%) per annum that the amount of principal so repaid has been
outstanding from April 1, 2002 to the date on which such principal amount and
any accrued and unpaid interest related to such principal amount is repaid. The
Additional Fee shall be due and payable when such principal amount is repaid
whether prior to, at, or after the stated maturity date. Payment of principal,
interest and Additional Fee hereunder shall be made by cashiers check delivered
to Holder at the address furnished to the Company for that purpose.
Any and all payments not received by Holder on their due date, shall accrue, a
late fee equal to Six (6%) percent of such amount due. This Note shall be
superior to any loans or advances made by iNTELEFILM Corporation to the other
borrower under this Note. Repayment of this Note is secured by a pledge of a
security interest in any and all of the Company's assets and the Company has
executed and delivered to Holder or Holder's counsel, proper UCC-1 forms in
recordable form in the County Recorder's Office of any
and all counties in which the Company and each of them conducts business. The
UCC-1 forms are accompanied by a list of such counties. The Company shall
execute and deliver a security agreement evidencing such security interest and
any financing statement reasonably requested by Holder upon execution hereof.
The secured pledge and UCC-1 shall be filed upon execution of this document.
Furthermore, Holder may at its option accelerate maturity of the loan
indebtedness in the event the assets of the Company or each of them, are (i)
sold or transferred by the Company, or (ii) made subject to any other lien or
security interest without the prior written consent of Holder, except for the
junior lien granted by iNTELEFILM Corporation in its assets to the holders of
its bridge notes dated October 4, 2001 in the aggregate original principal
amount of $1,553,000. The Company hereby represents and warrants that the lien
in favor of Holder constitutes a first priority security interest in the assets
of the Company. Holder is not required to subordinate its first lien on the
assets to any indebtedness of the Company. Nothing contained herein shall act to
affect, modify or alter the Holder priority of the security interest previously
recorded.
This Note shall be subject to a liquidation preference such that in the event of
liquidation or dissolution of the Company prior to the earlier of (i) payment in
full of the principal of and interest accrued on the Note or (ii) the date on
which the Note is converted, Holder shall be entitled to a priority in payment
over all other debts and obligations of the Company.
Each Borrower hereby represents and warrants that all board approval and
corporate resolutions have been obtained for the execution of this Note, the
attached Warrants and Mutual Release.
The Company agrees to pay Holder's costs of collection and enforcing this Note,
including reasonable attorneys' fees.
This Note shall be construed in accordance with the laws of the State of
Minnestoa as applied to contracts entered into by Minnesota residents within the
State of Minnesota, which contracts are to be performed entirely within the
State of Minnesota.
The Company submits for itself and its property in any legal action or
proceeding relating to this Note and any other documents executed and delivered
in connection herewith to which the Company is a party; or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive general
jurisdiction of the courts of the State of California and the Courts of the
Untied States of America for the Central District of California and appellate
courts thereof; consents that any such action or proceeding may be brought in
such courts and waives any objection to the venue of any action or proceeding in
any such court or that such action or proceeding was brought in an inconvenient
court and agrees that service of process in any such action or proceeding may be
effected by registered or certified mail, postage prepaid to the Company at the
address set forth below or such other address as the Company shall have
furnished to the Holder.
Notwithstanding the foregoing, all agreements between the Company and Holder are
expressly limited so that in no contingency or event whatsoever, whether by
reason of advancement of the proceeds hereof, acceleration of maturity of the
unpaid principal balance hereof, payment of the Additional Fee or otherwise
shall the amount paid or agreed to be paid to Holder for the use, forebearance
or detention of the money to be advanced hereunder exceed the highest lawful
rate permissible under the applicable usury law.
This Note replaces the promissory note dated October 9, 2001 (the "Prior Note")
from The End, Inc., Harmony Holdings, Inc. and iNTELEFILM Corporation to
Westminster Properties, Inc. in the original principal amount of $300,000, as
modified by the letter of promissory note extension dated February 27, 2002, and
the Holder is entitled to the securities interests granted to Holder pursuant to
the Prior Note.
IN WITNESS WHEREOF, the undersigned has executed this Convertible Promissory
Note as of the date set forth herein.
Harmony Holdings, Inc., iNTELEFILM Corporation
A Delaware Corporation A Minnesota Corporation
By: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxxxxx X.Xxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxx Name: Xxxxxxx X. Xxxxxxxx
Title: CFO Title: CFO
