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EXHIBIT 4.7
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR AN EXEMPTION THEREFROM UNDER THE ACT, THE RULES AND
REGULATIONS THEREUNDER AND APPLICABLE STATE LAWS.
DIGITAL ENTERTAINMENT NETWORK, INC.
a Delaware corporation
(the "Corporation")
8% Convertible Bridge Note due December 31, 2000
Los Angeles, California
As of May 19, 1999
$1,000,000.00
1. Principal and Interest. For value received, Digital
Entertainment Network, Inc., a Delaware corporation (the "Corporation"), hereby
promises to pay to Xxxx Xxxxxxx-Xxxxxx Revocable Trust U/A/D 7/28/97, or
registered assigns (the "Holder"), the principal sum advanced from time to time,
not to exceed One Million Dollars and no cents ($1,000,000.00), on December 31,
2000 (the "Maturity Date"), together with accrued and unpaid interest thereon
(computed on the basis of a three hundred sixty (360) day year of twelve (12)
thirty (30) day months) at the rate of eight percent (8%) per annum from the
date hereof, and with interest on any overdue principal and on any overdue
interest, at the rate of the lesser of thirteen percent (13%) per annum or the
highest rate permitted by applicable law until paid, with such interest payable
on demand; provided, however, upon the receipt of net proceeds of at least
$20,000,000 from the sale of the Corporation's Series B Preferred Stock (the
"Offering"), the Corporation shall within one business day thereafter repay to
the Holder the principal sum previously advanced hereunder, together with
accrued interest thereon, and this Note shall then be canceled. Payments of
principal and interest on this Note shall be made in lawful money of the United
States of America at the offices of the Corporation, or at such other office or
agency as the Holder shall have designated by written notice to the Corporation.
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2. Advances. The Corporation may draw down on the unborrowed
principal amount of this Note from time to time at any time prior to the
Maturity Date with reasonable notice to the Holder.
3. Prepayment. Subject to the proviso in Section 1, the Corporation
may prepay all or any part of this Note, at any time and without premium or
penalty, upon thirty (30) days' prior written notice to the Holder, together
with accrued interest on the principal amount so prepaid, provided that in the
event of any prepayment, the Corporation may not reborrow any amounts prepaid.
4. Conversion Right. The Holder shall have conversion rights as
follows:
(a) Conversion. The Holder shall have the right to convert
all, but not less than all, of the indebtedness represented by this Note (both
principal and interest accrued to the date of conversion) into shares of common
stock, par value $.01 per share (the "Common Stock") of the Corporation (the
"Conversion Shares") if the Offering has not been consummated prior to July 1,
1999. The number of Conversion Shares into which such indebtedness may be
converted shall be subject to adjustment in the event certain circumstances
occur prior to such conversion. In such event, such indebtedness shall be
converted into the largest whole number of shares of Conversion Shares
calculated by dividing the amount of such indebtedness by the then applicable
Conversion Price. The Conversion Price shall initially be $10.40. The Conversion
Price shall be adjusted as hereinafter provided.
(b) Mechanics of Conversion. Before the Holder shall be
entitled to receive certificates evidencing Conversion Shares into which the
indebtedness represented by this Note has been converted, the Holder shall
surrender this Note, duly endorsed, at the office of the Corporation, and shall
give written notice to the Corporation at such office that the Holder wishes to
receive certificates evidencing the Conversion Shares to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to the Holder a certificate or certificates for the number of shares of
Conversion Shares to which the Holder shall be entitled as aforesaid. Shares of
Conversion Shares shall not be issued to any person other than the record holder
of this Note on the date of conversion into such Conversion Shares, unless prior
to such conversion the record holder has provided the Corporation with such
documentation as Corporation may reasonably request to establish that such
transfer is exempt from registration or qualification under applicable law and
has made adequate provision for any fees or taxes payable in connection with
such transfer.
(c) Adjustments to Conversion Price for Certain Events.
(i) In case at any time prior to conversion into the
Conversion Shares of the indebtedness represented by this Note the Corporation
shall (A) subdivide its outstanding Common Stock, (B) combine its outstanding
Common Stock into a smaller number of shares or (C) issue by reclassification of
its Common Stock (including any such reclassification in connection with a
consolidation or merger) any shares, the Conversion Price
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in effect at the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the Holder of this
Note surrendered for conversion after such time shall be entitled to receive the
aggregate number and kind of shares which, if this Note had been converted
immediately prior to the taking of such action by the Corporation, the Holder
would have owned upon such conversion and been entitled to receive upon such
subdivision, combination or reclassification. Such adjustment shall be made
successively whenever any event listed above shall occur.
(ii) If the Corporation shall, commencing on the date
hereof and continuing for one hundred twenty (120) days thereafter, sell or
issue shares of Common Stock, or rights, options, warrants or other securities
convertible or exchangeable for shares of Common Stock (excluding securities
issued (A) in any of the transactions described in paragraph (i) of clause (c)
of this Section 3, (B) upon conversion of this Note, (C) upon the exercise or
conversion of any options, warrants and other securities convertible into or
exchangeable for shares of Common Stock, which options, warrants and other
securities are outstanding as of the date hereof or are issued after the date
hereof pursuant to the Corporation's Amended and Restated 1998 Incentive
Compensation Plan or are issued in lieu of cash compensation and (D) issued in
connection with a merger or acquisition or with respect to advertising sales or
distribution of programming) at a price per share of Common Stock (or exercise
price or conversion price per share of Common Stock, as the case may be) lower
than the Conversion Price, then such Conversion Price shall be reduced to a
price determined by multiplying the Conversion Price in effect immediately prior
thereto by a fraction, the numerator of which shall be the sum of (1) the number
of shares of Common Stock outstanding immediately prior to such sale or issuance
plus (2) the number of shares of Common Stock which the aggregate consideration
received for such sale or issuance (or the aggregate initial conversion or
exercise price of the convertible securities issued plus any other consideration
to be paid upon such exercise or conversion) would purchase at the Conversion
Price, as adjusted, on the applicable record date, and the denominator of which
shall be the number of shares of Common Stock outstanding immediately after such
issuance or sale (or into which the newly-issued rights, options, warrants or
convertible securities are initially exercisable or convertible as of the date
of such issuance or sale). If the Corporation shall sell or issue shares of
Common Stock in consideration for property other than cash or its equivalent,
then the price per share of Common Stock and fair value of such property shall
be determined in good faith by the Board of Directors of the Corporation. Any
such adjustment shall be determined and effective on the date of such sale or
issuance and not upon exercise or conversion, as the case may be, of such
rights, options, warrants or convertible or exchangeable securities. If any of
such rights, options, warrants or convertible or exchangeable securities expire
without having been exercised, converted or exchanged, the Conversion Price
shall be adjusted as if the rights, options, warrants or convertible or
exchangeable securities not so exercised, converted or exchanged had not been
sold or issued.
(iii) In case at any time prior to conversion of this
Note, the Corporation shall pay or make a stock dividend or other distribution
(payable otherwise than in cash out of funds legally available therefor) on any
class of its capital stock payable in shares
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of Common Stock or shares of its capital stock convertible into or exchangeable
for shares of Common Stock, the Conversion Price in effect at the opening of
business on the day following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution shall be
reduced so that the same shall equal the price determined by multiplying such
Conversion Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares of Common Stock or Common Stock
equivalents constituting such dividend or other distribution, such adjustment to
become effective immediately after the opening of business on the day following
the date fixed for such determination.
(iv) In case at any time prior to conversion of this
Note, the Corporation shall fix a record date for the making of a distribution,
by dividend or otherwise, to all holders of any class or series of its capital
stock, of evidences of its indebtedness or assets (including securities, but
excluding (x) any dividend or distribution referred to in paragraph (iii) of
this subsection (c) and (y) any dividend or distribution paid in cash out of
funds legally available therefor of the Corporation), then in each such case the
Conversion Price in effect after such record date shall be determined by
multiplying the Conversion Price in effect immediately prior to such record date
by a fraction, of which the numerator shall be the total number of outstanding
shares of such class or series of capital stock multiplied by the fair market
value per share of such class or series of capital stock (as in good faith
determined by the Board of Directors) on such record date, less the fair market
value (as determined in good faith by the Board of Directors) of the portion of
the assets or evidences of indebtedness so to be distributed, and of which the
denominator shall be the total number of outstanding shares of such class or
series of capital stock multiplied by such fair market value per share of such
class or series of capital stock. Such adjustment shall be made successively
whenever such a record date is fixed; and in the event that such distribution is
not so made, the Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such record date had not been fixed.
(v) No adjustment in the Conversion Price shall be
required unless such adjustment would require an increase or decrease of at
least ten cents ($0.10) in such Conversion Price; provided, however, that any
adjustment which by reason of this paragraph (v) is not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this subsection (c) shall be made to the nearest cent or
to the nearest 1/100 of a share, as the case may be.
(d) Certificates as to Adjustments. Upon the occurrence of
each adjustment or readjustment of any Conversion Price pursuant to this Section
3, the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to the
Holder a certificate executed by the Corporation's President or Chief Financial
Officer setting forth such adjustment or readjustment and showing in reasonable
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of the Holder, furnish
or cause to be
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furnished to the Holder a like certificate setting forth (i) such adjustments
and readjustments; (ii) the Conversion Price at the time in effect; and (iii)
the number of shares of Conversion Shares and the amount, if any, of other
property which at the time would be received upon the conversion of this Note.
(e) Notice of Record Date. In the event that the Corporation
shall propose at any time prior to conversion of this Note: (i) to declare any
dividend or distribution upon its Common Stock, whether in cash, property, stock
or other securities, whether or not a regular cash dividend and whether or not
out of earnings or earned surplus; (ii) to offer for subscription pro rata to
the holders of any class or series of its stock any additional shares of stock
of any class or series or other rights; (iii) to effect any reclassification or
recapitalization of its Common Stock outstanding involving a change in the
Common Stock; or (iv) to merge or consolidate with or into any other corporation
where the Corporation is not the surviving corporation, or sell, lease or convey
all or substantially all of its assets, or to liquidate, dissolve or wind up;
then, in connection with each such event, the Corporation shall send to the
Holder:
(A) at least five (5) days' prior written notice of
the record date for such dividend, distribution or subscription rights (and
specifying the date upon which the holders of Common Stock shall be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to above; and
(B) in the case of the matters referred to in (iii)
and (iv) above, at least five (5) days' prior written notice of the date when
the same shall take place (and specifying the date, if any, on which the holders
of Common Stock shall be entitled to exchange their Common Stock for securities
or other property deliverable upon the occurrence of such event).
(f) Reservation of Stock Issuable upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the indebtedness represented by this Note, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all indebtedness represented by this Note, and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all indebtedness represented by this Note, the
Corporation will take such action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.
5. Miscellaneous. The Corporation hereby waives presentment,
protest and all notices (of nonpayment, dishonor, protest, demand and otherwise)
in connection with the delivery, acceptance, performance, default, acceleration
or enforcement of this Note to the fullest extent permitted by applicable law.
Other than pursuant to a writing executed by the Holder, no failure to exercise
any right of the Holder with respect to this Note, or any delay in, or waiver
of, the exercise thereof, shall impair any such right or be deemed to be a
waiver thereof.
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Except as expressly stated herein to the contrary, payments received by
the Holder shall be applied in the following order: (a) to amounts due the
Holder other than for interest and/or principal under this Note, (b) interest
currently due and payable on this Note (including any interest on overdue
principal) and (c) to principal amounts on this Note then due and payable.
This Note and each of the provisions hereof shall be binding upon each
of the successors and permitted assigns of the Corporation, and may not be
assigned by the Corporation without the prior written consent of the Holder.
This Note is a registered note and is transferable only upon surrender
of this Note for registration of transfer, duly endorsed, or accompanied by a
written instrument of transfer duly executed, by the Holder or its attorney duly
authorized in writing.
This Note is made and delivered in Los Angeles, California, shall be
governed by and interpreted in accordance with the internal laws of the State of
California without giving effect to conflict of laws principles thereof, and
shall not be construed strictly against the drafter hereof.
DIGITAL ENTERTAINMENT NETWORK, INC.
By: /s/ H. XXXXX XXXXX III
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Name: H. Xxxxx Xxxxx III
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Title: Chief Executive Officer
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XXXX XXXXXXX-XXXXXX
REVOCABLE TRUST U/A/D 7/28/97
By: /s/ XXXX XXXXXXX-XXXXXX
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Name: Xxxx Xxxxxxx-Xxxxxx
Title: Trustee
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