EXHIBIT 10.47
AMENDMENT NUMBER TWO TO
NOTE AND WARRANT PURCHASE AGREEMENTS
THIS AMENDMENT NUMBER TWO TO NOTE AND WARRANT PURCHASE AGREEMENTS (this
"AMENDMENT"), is made and entered into as of the 19th day of December, 2001, by
and between BRILLIANT DIGITAL ENTERTAINMENT, INC., a Delaware corporation (the
"COMPANY"), located at 0000 Xxxxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxx Xxxxx,
XX 00000, and XXXXXX XXXXX, on behalf of himself ("TOIBB"), located at 0000
Xxxxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxx Xxxxx, XX 00000, and acknowledged
and consented to by the Purchasers.
RECITALS
A. The Company is a party to (i) that certain Note and Warrant Purchase
Agreement, dated April 19, 2001, between the Company and Toibb, (ii) that
certain Note and Warrant Purchase Agreement, dated April 19, 2001, between the
Company and Europlay 1, LLC, and (iii) that certain Note and Warrant Purchase
Agreement, dated April 26, 2001, between the Company and Xxxxxxx Xxxx Inc.
(each, an "ORIGINAL AGREEMENT" and collectively, the "ORIGINAL AGREEMENTS"),
pursuant to which the Company borrowed funds from each of the Purchasers
identified in the Original Agreements, and in consideration therefore each such
Purchaser was issued common stock purchase warrants and a convertible promissory
note in the principal amount set forth on the Signature Page to the Purchaser's
respective Original Agreement. The Original Agreements were amended by that
certain Amendment to Note and Warrant Purchase Agreements, dated as of May 23,
2001, between the Company and Toibb. All capitalized terms used herein and not
defined herein shall have the meanings given such terms in the Original
Agreements.
B. The Company has requested that Xxxxxx Xxxxx and another party make
additional loans to the Company to finance the Company's and its subsidiaries'
operations (the "New Loans"). In connection with, and as a condition to, the
making of the New Loans, the Original Agreements, the Convertible Notes, the
Security Agreement and certain other documents will be amended pursuant to
certain documents (the "Amendment Documents") that will be executed and
delivered in connection with the New Loans. It is a condition to the making of
the New Loans that the Original Agreements be amended in the manner set forth
herein.
C. Section 11.8 of each of the Original Agreements permits Toibb, on behalf
of himself and the other Purchasers as Agent, to amend each of the Original
Agreements with the consent of the Company.
D. The Company and Toibb desire to amend each of the Original Agreements to
provide for a new Conversion Price for the Convertible Notes and a new exercise
price for the Warrants, to further provide for an automatic adjustment to the
Conversion Price for the Convertible Notes in the event that the Company issues
certain Additional Stock (as defined below) at a price per share below the
Conversion Price, and to add certain additional covenants and Events of Default,
and the Purchasers desire to acknowledge and consent to such amendments.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
each of the Original Agreements is hereby amended as follows:
1. The language of SECTION 1.2 of the Original Agreements is hereby deleted
in its entirety and replaced with the following language:
"AGREEMENT TO PURCHASE AND SELL CONVERTIBLE NOTES. The Company agrees to
issue and sell to the Purchaser, and the Purchaser agrees to purchase from the
Company, a Convertible Note in the principal amount set forth on the Signature
Page to this Agreement (the "COMMITTED AMOUNT") on the terms and conditions set
forth herein. Additionally, in further consideration of the Purchaser's purchase
of the Convertible Note hereunder, the Company agrees to issue to the Purchaser,
and the Purchaser agrees to accept from the Company, a Warrant initially
exercisable for a number of Warrant Shares equal to two hundred percent (200%)
of the Committed Amount (the "WARRANT COVERAGE") at a price equal to 1.125 times
the lesser of (i) $0.20 or (ii) the volume weighted average price of a share of
the Common Stock on the American Stock Exchange, or any exchange on which the
Common Stock is then traded, over any five (5) consecutive trading days
commencing on December 14, 2001 and terminating at 5:00 p.m. Pacific Time on
November 10, 2002 (subject to appropriate adjustment for stock splits, stock
dividends, combinations, recapitalizations and the like). The number and type of
shares issuable upon exercise of the Warrant is subject to adjustment as set
forth in the Warrant."
2. The language of SECTION 2.1 of the Original Agreements is hereby deleted
in its entirety and replaced with the following language:
"OPTIONAL CONVERSION. From and after the Closing Date, the Purchaser shall
have the right, at its option, by giving written notice to the Company at its
principal office at any time prior to the full repayment of the Convertible
Note, to convert in whole or in part the outstanding principal amount of the
Convertible Note and all accrued interest thereon into a number of Conversion
Shares equal to the quotient obtained by dividing the outstanding principal
amount of the Convertible Note and all accrued interest thereon at a price per
share equal to the lesser of (i) $0.20 (the "FIXED CONVERSION PRICE") or (ii)
the volume weighted average price of a share of the Common Stock on the American
Stock Exchange, or any exchange on which the Common Stock is then traded, over
any five (5) consecutive trading days commencing on December 14, 2001 and
terminating at 5:00 p.m. Pacific Time on November 10, 2002 (subject to
appropriate adjustment for stock splits, stock dividends, combinations,
recapitalizations and the like) ((i) and (ii) above are collectively referred to
as the "CONVERSION PRICE")."
3. SECTIONS 2.2, 2.3, 2.4 AND 2.5 of the Original Agreements are hereby
renumbered to be SECTIONS 2.3, 2.4, 2.5 AND 2.6, and a new SECTION 2.2 is hereby
added to read as follows:
"ISSUANCE OF ADDITIONAL STOCK BELOW THE CONVERSION PRICE. If the Company
shall issue any Additional Stock (as defined below) without consideration or for
a consideration per share less than the Fixed Conversion Price in effect
immediately prior to the issuance of such Additional Stock, the Fixed Conversion
Price in effect immediately prior to each such issuance shall automatically be
adjusted on a full ratchet basis such that the new Fixed Conversion Price of the
shares subject to
Page 2
conversion shall be equal to the value of the consideration paid per each share
of Additional Stock issued. For purposes of this SECTION 2.2, "ADDITIONAL STOCK"
shall mean any shares of Common Stock issued or issuable by the Company, other
than (i) shares of Common Stock issued pursuant to any stock split, stock
subdivision, stock dividend, redemption, conversion or other reclassification of
securities, or recapitalization, (ii) shares of Common Stock, or options or
warrants to purchase Common Stock, issued or issuable to employees, consultants
or directors of the Company for the primary purpose of soliciting or retaining
their employment or services directly or pursuant to a stock option plan or
restricted stock plan approved by the Board of Directors of the Company, (iii)
shares of Common Stock, or options or warrants to purchase Common Stock, issued
to financial institutions or lessors in connection with commercial credit
arrangements, equipment financings or similar transactions, provided such
issuances are primarily for other than equity financing purposes and are
approved by the Board of Directors of the Company, (iv) shares of Common Stock,
or options or warrants to purchase Common Stock, issued to any corporate or
other strategic partners of the Company, provided such issuances are primarily
for other than equity financing purposes and are approved by the Board of
Directors of the Company, (v) shares of Common Stock of the Company issuable
upon exercise of warrants, options, notes or other rights to acquire securities
of the corporation outstanding as of December 3, 2001, and (vi) shares of Common
Stock, or warrants or options to purchase shares of Common Stock issued in
connection with bona fide acquisitions, mergers or similar transactions;
PROVIDED, HOWEVER, that the exceptions to the definition of Additional Stock
provided for in clauses (ii), (iii), (iv) and (vi) above shall apply only with
respect to an aggregate number of shares of Common Stock issued or issuable by
the Company thereunder equal to 1.5% of the number of shares of Common Stock
outstanding as of December 3, 2001."
4. A new SECTION 4.3 is hereby added to the Original Agreements, to read in
full as follows:
"4.3 NOTICE OF TITLE 11 FILING. The Company shall provide to the Purchaser
written notice of any decision or corporate action taken by the Company
authorizing the filing by the Company of a voluntary petition for relief under
Title 11 of the United States Code at least ten (10) days prior to the date
selected for such filing."
5. A new SECTION 4.4 is hereby added to the Original Agreements, to read in
full as follows:
"4.4 WAIVER OF RIGHTS UNDER SECTION 362 OF THE BANKRUPTCY CODE. In the
event that the Company files a petition under the United States Bankruptcy Code
or under any other similar federal or state law, the Company unconditionally and
irrevocably agrees that the Agent, on behalf of the Purchaser, shall be
entitled, and the Company hereby unconditionally and irrevocably consents, to
relief from the automatic stay so as to allow the Agent to exercise its rights
and remedies under the Security Agreement with respect to the Collateral (as
such term is defined in the Security Agreement), including taking possession of
the Collateral, foreclosing on its lien or security interests or otherwise
exercising its rights and remedies with respect to the Collateral. In such
event, the Company hereby agrees it shall not, in any manner, oppose or
otherwise delay any motion filed by the Agent for relief from the automatic
stay."
6. A new SECTION 4.5 is hereby added to the Original Agreements, to read in
full as follows:
Page 3
"4.5 SALE OF ASSETS. The Company hereby agrees that in the event the
Company commences a bankruptcy proceeding under Chapter 11 of the United States
Bankruptcy Code, the Company shall, at the request of the Buyers (as defined
herein) file, within the first twenty (20) days of the commencement of the
bankruptcy case a motion under section 363 of the Bankruptcy Code asking the
Court to approve the sale of all or substantially all of the assets of the
Company and its subsidiaries to Xxxxxx Xxxxx and such other Purchasers that
desire to participate in the sale (collectively, the "BUYERS"), on terms and
conditions acceptable to the Buyers, including the right of the Buyers to credit
bid any indebtedness owed to them."
7. A new SECTION 4.6 is hereby added to the Original Agreements, to read in
full as follows:
"4.6 DEBTOR IN POSSESSION FINANCING. The Company hereby agrees that in the
event the Company decides to commence a bankruptcy proceeding under Chapter 11
of the United States Bankruptcy Code, the Company shall give Xxxxxx Xxxxx and
such other Purchasers that desire to participate in the financing (collectively,
the "LENDERS") the right of first refusal (but without any corresponding
obligation of the Lenders) with respect to the provision to the Company and its
subsidiaries of debtor in possession financing."
8. The language of SECTION 6.1(B) of the Original Agreements is hereby
deleted in its entirety and replaced with the following language:
"A default or event of default shall occur in respect of any of the other
Convertible Notes, in respect of any of the Secured Convertible Promissory Notes
issued by the Company on December 19, 2001 or in respect of any other
indebtedness of the Company that exceeds, in the aggregate, $75,000 and, if
subject to a cure right, such default or event of default shall not be cured
within the applicable cure period;"
9. The language of SECTION 6.1(D) of the Original Agreements is hereby
deleted in its entirety and replaced with the following language:
"The Company (i) shall generally not pay or shall be unable to pay its
debts as such debts become due, or (ii) shall make an assignment for the benefit
of creditors or petition or apply to any tribunal for the appointment of a
custodian, receiver or trustee for it or a substantial part of its assets, or
(iii) shall commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect, or (iv) shall have had any
such petition or application filed or any such proceeding commenced against it
that is not dismissed within thirty (30) days, or (v) shall indicate, by any act
or intentional and purposeful omission, its consent to, approval of or
acquiescence in any such petition, application, proceeding or order for relief
or the appointment of a custodian, receiver or trustee for it or a substantial
part of its assets, or (vi) shall suffer any such custodianship, receivership or
trusteeship to continue undischarged for a period of thirty (30) days or more;"
10. The language of SECTION 6.1(h) of the Original Agreements is hereby
deleted in its entirety and replaced with the following language:
"(h) A default or event of default shall occur in respect of any agreement
of the Company that requires the payment by the Company of an amount in excess
of $75,000;
Page 4
11. A new SECTION 6.1(i) is hereby added to the Original Agreements, to
read in full as follows:
"(i) The Company shall fail to provide the Agent with a copy of a signed
letter of intent with an investor who is, and on terms and conditions that are,
reasonably satisfactory to the Agent, dated no later than February 28, 2002,
pursuant to which such investor agrees to acquire equity in the Company in
consideration for an investment of at least three million dollars ($3,000,000)
(the "EQUITY INVESTMENT");
12. A new SECTION 6.1(j) is hereby added to the Original Agreements, to
read in full as follows:
"(j) The Equity Investment shall fail to fund by April 15, 2002; or"
13. A new SECTION 6.1(k) is hereby added to the Original Agreements, to
read in full as follows:
"(k) Either of the Company's agreements with Consumer Empowerment B.V.
(better known as "Kazaa") or StreamCast Networks, Inc. (better known as
"Morpheus") shall be terminated or amended in such a way as to result in a
Material Adverse Effect."
14. The paragraph at the end of SECTION 6.1 of the Original Agreements is
hereby deleted in its entirety and replaced with the following language:
"With respect to any Event of Default described above in SUBSECTIONS
6.1(e), (f) and (h) that is capable of being cured and that does not already
provide its own cure procedure (a "CURABLE DEFAULT"), the occurrence of such
Curable Default shall not constitute an Event of Default hereunder if the
Company provides notice to the Purchaser of such Curable Default in accordance
with the provisions hereof within three (3) business days of the Company
learning of such default and such Curable Default is fully cured and/or
corrected within fifteen (15) days of the Company's notice thereof to
Purchaser."
15. A new SECTION 11.13 is hereby added to the Original Agreements, to read
in full as follows:
"11.13 AUDIT RIGHTS. Purchaser shall have the continuing right, without
hindrance or delay, to inspect, audit, check and make extracts from the
Company's books, records, journals, orders, receipts and other accounting
records at the office of the Company at the address set forth on the first page
of this Agreement at any time during regular business hours upon one business
day's advance notice (absent an Event of Default then existing). The Purchaser
shall also during any such examination be provided with reasonable access to the
officers of the Company."
16. A new SECTION 11.14 is hereby added to the Original Agreements, to read
in full as follows:
"11.14 WAIVER OF JURY TRIAL. The Company and Purchaser each waive all right
to trial by jury in any action or proceeding to enforce or defend any rights or
remedies hereunder or relating hereto."
Page 5
17. MISCELLANEOUS. Except as expressly set forth in this Amendment, all of
the terms of the Original Agreements shall remain in full force and effect. All
references in the Original Agreements to the "Convertible Notes", the "Security
Agreement", the "Warrants" or any of the other documents executed in connection
with the Original Agreements shall mean and be a reference to such documents as
and to the extent they are amended by the Amendment Documents and all references
in such documents to the Original Agreements shall mean and be a reference to
the Original Agreements as amended hereby. This Amendment shall be governed by
and construed in accordance with the laws of the State of California applicable
to contracts made in, and to be performed within, said state.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment, or
have caused this Amendment to be executed by their duly authorized officers, as
of the day and year first above written.
BRILLIANT DIGITAL ENTERTAINMENT, INC.,
a Delaware corporation
By: /S/ XXXXXX XXXXXX
------------------------------
Xxxxxx Xxxxxx
Title: Chief Operating Officer and
Chief Financial Officer
/S/ XXXXXX XXXXX
--------------------------------------
Xxxxxx Xxxxx, on behalf of
himself and the other Purchasers
Acknowledged and Agreed to
as of the date first above written:
EUROPLAY 1, LLC
By: /S/ XXXX XXXX
-------------------------------
Xxxx Xxxx
Its: Manager
XXXXXXX XXXX, INC.
By: /S/ XXXXX XXXXXX
-------------------------------
Xxxxx Xxxxxx
Its:
-------------------------------
SIGNATURE PAGE TO AMENDMENT NUMBER TWO TO
NOTE AND WARRANT PURCHASE AGREEMENTS
Page 6
