EXHIBIT 4 (l)
As of October 6, 1998
United Resources Partners (Xxxxxx Xxxxx)
Xxxxx Xxxxxxxx
Xxxxxxx Xxxxxx
Xxxxx Xxxxx
Re: Digital LAVA Inc. (the "Company")
Gentlemen:
This letter will confirm our understanding concerning your agreement to
forebear from and waive certain rights pursuant to promissory notes previously
issued to you by the Company. Each of you is referred to below as a "Holder" and
collectively as the "Holders".
The Company currently has the following outstanding obligations to the
Holders severally represented by five (5) promissory notes (the "Notes")
Lender Amount Date of Note Rate Maturity
United Resources $50,000 5/30/97 6.00% 5/30/98
(Xxxxxx Xxxxx)
United Resources $50,000 5/30/97 6.00% 5/30/98
(Xxxx Xxxxx)
X. Xxxxxxxx $50,000 5/30/97 6.00% 5/30/98
X. Xxxxxx $25,000 5/30/97 6.00% 5/30/98
X. Xxxxx $12,500 5/30/97 6.00% 5/30/98
The Company acknowledges that, subject to the terms and conditions of this
letter agreement, the outstanding principal amount of the Notes, and interest
thereon, are now due and payable, the Company has failed to make such payments
pursuant to the Notes, and the Company has no defense against payment of the
Notes.
In connection with the loans represented by the Notes, the Company has
previously issued to the Holders severally warrants to purchase shares of the
Common Stock of the Company (the "Warrants") in the current amounts and for the
current exercise price as follows:
Lender No. of Warrants Current Exercise Price
United Resources 50,000 $.90
(Xxxxxx Xxxxx)
United Resources 50,000 $.90
(Xxxx Xxxxx)
X. Xxxxxxxx 50,000 $.90
X. Xxxxxx 25,000 $.90
X. Xxxxx 12,500 $.90
In consideration for the agreement of each Holder to waive (i) acceleration
of their respective Notes, and (ii) the failure of the Company to repay the
amounts previously owed under the Notes, and for the other covenants set forth
below, each of the Holders severally and the Company agree as follows:
1. Extension of Maturity Date. The maturity date of each Note is hereby
extended to June 30, 1999. Within three (3) business days of the receipt by the
Company of the proceeds (the "Payment Date") from the Company's initial public
offering currently being initiated by the Company (the "IPO"), the Company shall
pay to each Holder, pro rata in proportion to the principal amount of the Notes
held by each Holder, the aggregate sum of $93,750.
2. Payment of Interest. On the Payment Date, the Company shall pay to the
Holders interest accrued on the aggregate outstanding principal balance of the
Notes of $187,500 at the rate of 6% per annum, calculated as set forth in the
Notes, for the period from June 1, 1997, through and including May 30, 1998, and
shall also pay to the Holders on the Payment Date interest on the aggregate
outstanding principal balance of the Notes of $187,500 at the rate of 12% per
annum, calculated as set forth in the Notes, for the period from June 1, 1998,
through and including the Payment Date. Thereafter, the Notes shall bear
interest on the outstanding principal balance at the rate of 12% per annum
payable monthly in arrears on each monthly anniversary of the Payment Date
(prorated for any partial months), commencing with the first month following the
Payment Date, until paid in full. The outstanding principal balance of the Notes
may be prepaid in whole or in part at any time without premium or penalty.
3. Defaults; Acceleration. Each of the Holders hereby severally and jointly
waives any claims it may have against the Company resulting from the failure by
the Company to make any payments due under the Notes prior to the date of this
letter agreement. If (i) the IPO is terminated by the Company, (ii) the IPO is
not successfully consummated on or before December 31, 1998, or (iii) the
Company fails to make any interest payment on the Notes due and payable on or
after the Payment Date, then from and after the earliest to occur of the
foregoing events the entire outstanding principal balance of the Notes shall
become due and
payable, the interest rate payable to the Holders for the period from June 1,
1998 through the date of payment to the Holders of the entire outstanding
principal balance of the Notes shall be increased by 4%, for a total interest
rate during such period of 16%, and such interest shall be payable on demand.
4. Warrants. As further consideration for the waiver and forbearance of the
Holders set forth above, the Company hereby extends the period in which the
Warrants may be exercised by the Holders to 5:30 p.m. New York time on May 30,
2005. In addition, the "Exercise Price" (as defined in the Warrants) is hereby
reduced to $.70 per share.
5. Security Interest. To secure the Company's obligations under the Notes
as amended pursuant to this letter agreement, the Company hereby agrees to enter
into and deliver to the Holders, for their joint and several benefit, the
Security Agreement of even date with this letter agreement (the "Security
Agreement") naming Xx. Xxxxxx Xxxxx as collateral agent for the Holders and
certain other secured parties referred to below (the "Collateral Agent"). In
addition, the Company shall execute and deliver to counsel for the Holders a
UCC-1 Financing Statement with respect to the collateral subject to the Security
Agreement (the "Financing Statement"). Holders' counsel shall hold the Financing
Statement in escrow, and shall not file or permit the filing of the Financing
Statement unless and until the earliest to occur of (i) the termination of the
IPO by the Company, (ii) the Payment Date, or (iii) December 31, 1998. If the
Financing Statement is filed upon the occurrence of the event or date referenced
in subparts (i) and (ii) above, the Holders acknowledge and agree that the liens
perfected on and as of such date shall be junior and subordinate to the liens,
if any, granted by the Company to State Street Bank and Trust Company on behalf
of certain secured lenders to the Company having loaned the aggregate principal
amount of $1,750,000 to the Company between November, 1997 and February, 1998.
The Holders agree that, upon payment to the Holders of all amounts due under the
Notes, the Holders shall cause the collateral agent to execute and deliver to
the Company all instruments as the Company may prepare and request necessary to
terminate the Financing Statement and the Security Agreement, immediately upon
the request of the Company.
6. Expenses. The Company hereby agrees to reimburse the Holders in the
amount of $7,500 for legal fees and expenses incurred by the Holders,
immediately upon execution of this letter agreement.
7. Miscellaneous. This letter agreement, and the amendments and waivers
contained herein, shall not be effective unless and until this letter agreement
shall have been signed by the Company and each of the Holders. This letter
agreement may be executed in multiple counterparts, each of which when taken
together shall constitute one and the same agreement.
This letter agreement shall be governed by the laws of the State of New
York, without application of conflict of law principals. The parties hereby
consent to the jurisdiction of state and federal courts located in the county of
New York, New York, for purposes of any action in connection with this letter
agreement, and hereby further consent to service of process by U.S. registered
mail, postage prepaid, to the Company c/x Xxxxxxxxxx Xxxxxxxxx
Xxxxxx & Xxxxxx LLP, 00 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000, Attn:
Xxxx X. Xxxxxxxxx, and to the Lenders c/x Xxxxxxxx & Xxxxxxxxxx LLP, Seven
Xxxxxx Farm Road, Roseland, NJ 07068, Attn: Xxxxxxx X. Xxxxxxxxxx, or to such
other address as either party may notify the other in accordance with this
paragraph.
This letter agreement sets forth the entire understanding of the Company
and the Holders concerning the matters addressed above, and may not be amended
except by written instrument signed by the Company and each Holder that agrees
to be bound by such amendment. This letter agreement shall be binding on, and
shall inure to the benefit of, the Company, the Holders severally, and each of
their respective heirs, successors, assigns and representatives. Except as set
forth above, the Notes, the Warrants, and all agreements and instruments
evidencing the Notes, the Warrants and any other agreements between or among any
of the Holders and the Company prior to the date hereof shall remain in full
force and effect in accordance with their respective terms.
Please sign this letter agreement where indicated below and return it to
the Company or our counsel at your earliest convenience.
Sincerely,
Digital LAVA, Inc.
By: /s/ Xxxxx Xxxxxx
-----------------------------------------
An Authorized Officer
Accepted and agreed as of the date
first written above, by:
United Resources Partners
By: /s/ Xxxxxx Xxxxx
--------------------------------
An Authorized Partner
/s/ Xxxxx Xxxxxxxx
-------------------------------------
Xxxxx Xxxxxxxx
/s/ Xxxxxxx Xxxxxx
-------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxx Xxxxx
-------------------------------------
Xxxxx Xxxxx
