SECOND AMENDMENT AND WAIVER TO SENIOR SECURED NOTE
SECOND
AMENDMENT AND WAIVER TO SENIOR SECURED NOTE
This
SECOND AMENDMENT
AND WAIVER TO SENIOR SECURED NOTE
(this
“Amendment”)
amends
that Senior Secured Note due January 30, 2010, as amended on February 12, 2008
(the “Secured
Note”)
issued
pursuant to the Securities Purchase Agreement, dated July 30, 2007 (the
“Purchase
Agreement”)
by and
among TWISTBOX ENTERTAINMENT, INC., a Delaware corporation (the “Company”),
certain subsidiaries of the Company and VALUEACT SMALLCAP MASTER FUND, L.P.
(the
“Investor”)
and is
made and entered into as of October 23, 2008 by and between the Company and
the
Investor. Capitalized terms used and not otherwise defined in this Amendment
are
used herein as defined in the Secured Note.
WITNESSETH:
WHEREAS,
the Company and the Investor desire to amend certain provisions of the Secured
Note and to waive compliance with certain provisions of the Secured
Note.
WHEREAS,
Section 13 of the Secured Note provides that the terms thereof may be amended
or
waived only pursuant to a written instrument executed by the Company and the
holders of 75% of the aggregate principal amount of all Notes issued pursuant
to
the Purchase Agreement.
WHEREAS,
the Investor owns 100% of the aggregate principal amount of all Notes issued
pursuant to the Purchase Agreement.
NOW,
THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the
parties hereby agree as follows:
1. Waiver.
1.1 Waiver
of Section 5.
The
Investor hereby waives compliance with the covenants set forth in Section 5
of
the Secured Note with respect to the issuance by Guarantor to the Sellers (as
defined below) of that certain promissory note in the principal amount of
$5,375,000 in connection with that certain Stock Purchase Agreement, entered
into by and among Guarantor, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (“▇▇▇▇▇▇▇▇▇”),
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (“MacLeitch”)
and
the shareholders of AMV Holding Limited (“AMV”)
signatories thereto (together with ▇▇▇▇▇▇▇▇▇ and MacLeitch, the “Sellers”),
dated
as of October 8, 2008, relating to Guarantor’s acquisition of 100% of the share
capital of AMV and 80% of the share capital of Fierce Media Limited (the
“Purchase
Agreement”).
2. Amendment.
2.1 Amendment
to Section 1.
Section
1 of the Secured Note is hereby amended by adding the following new paragraph
after the fourth paragraph of Section 1:
“PIK
Election.
Notwithstanding anything to the contrary set forth herein, the Company may,
at
its option, in lieu of making any cash payments to the Investor with respect
to
the two Interest Payment Dates occurring on January 1, 2009 and July 1, 2009,
elect that the amount of any Interest due and payable on such dates be added
to
the principal amount then due under this Note. An election by the Company to
pay
the Interest on any Interest Payment Date by adding the amount of such payment
to the Principal under this Note is hereafter referred to as a “PIK
Election.”
The
Company shall provide written notice of a PIK Election to the Investor not
less
than five days prior to the Interest Payment Date to which such PIK Election
relates.”
2.2
Amendment
to Section 1.
Section
1 of the Secured Note is hereby amended by adding the following language to
the
end of Section 1:
“If
the
Company makes any payments of principal due under the Note on October 23, 2008
up to an aggregate principal payment of FIVE MILLION DOLLARS ($5,000,000),
an
equivalent amount of principal shall automatically be converted into fully
paid
and nonassessable shares of common stock, par value $0.0001 per share (the
“Mandalay Common Stock”)
of
Mandalay Media, Inc., the Company’s parent company, at a price per share equal
to $2.67 (the “Conversion”).
In
connection with any Conversion, the Company shall send a written conversion
notice to the Investor. Such notice shall state the date on which the Conversion
became effective and all instructions and materials necessary to enable Investor
to receive the certificate(s) representing the shares of Mandalay Common Stock
into which such principal amount due under this Note has been
converted.
If
required by the Company, Investor shall deliver an instrument of cancellation
executed by the Investor in form and substance reasonably acceptable to the
Company evidencing the payment of the principal amount due under this Note
that
has been converted into Mandalay Common Stock.
The
Company shall, promptly after the date of Conversion, issue and deliver to
such
holder of this Note, or to his or its nominees, a certificate or certificates
for the number of shares of Mandalay Common Stock to which such holder shall
be
entitled. The Investor shall not have, solely on account of such status as
a
holder of this Note, any rights of a stockholder of Mandalay Media, Inc., either
at law or in equity, except as provided in this Note.
2.3 Amendment
to Section 3. The
Secured Note is hereby amended by adding the following paragraph to Section
3:
“(m)
Guarantor shall fail to observe its covenant contained in Section 6 of this
Note.”
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2.4 Amendment
to Section 5.
The
Secured Note is hereby amended by deleting the first two sentences following
Section 5(e) and replacing such text with the following:
“The
Company and Mandalay Media, Inc., the Company’s parent corporation (the
“Guarantor”),
collectively shall (a) not be required to maintain any minimum cash balance
until April 23, 2009, (b) maintain a cash balance of not less than $4,000,000
from April 24, 2009 until July 23, 2009 and (c) maintain a cash balance of
not
less than $5,000,000 on and after July 24, 2009, to be held in a “deposit
account”, as such term is defined in Article 9 of the Uniform Commercial
Code as in effect from time to time in the State of New York (the “UCC”), free
and clear of all Liens except as set forth in the Guarantee and Security
Agreement and will provide the Investor with reasonable proof of such cash
balance as reasonably requested by the Investor from time to time.”
2.5 Amendment
to Section 6(a)(v).
The
Secured Note is hereby amended by replacing the text of Section 6(a)(v) with
the
following:
“Indebtedness
in connection with a receivables facility not in excess of the lesser of (x)
$10,000,000 or (y) 85% of the Net Receivables Balance (as defined in the
Guarantee and Security Agreement) at any point in time, which Indebtedness
shall
rank pari passu in right of payment to the Notes, provided, that,
notwithstanding anything to the contrary set forth herein, Investor acknowledges
and agrees that (and shall take all action reasonably necessary to ensure that)
the Receivables (as defined in the Guarantee and Security Agreement) of the
Company used to procure and maintain such receivables facility shall not be
subject to any Lien of Investor (the “Receivables Facility”)
during
the term of such Receivables Facility,”
2.6 Amendment
to Section 6. The
Secured Note is hereby amended by adding the following language to the end
of
Section 6:
“Until
all principal and interest and any other amounts due and payable under this
Note
have been paid in full in cash, Guarantor shall not, and shall not permit any
Subsidiary to, without the prior written approval of the Investor holding a
majority in principal amount of the Notes, prepay any Indebtedness incurred
pursuant to that certain promissory note issued by Guarantor to ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and the shareholders of AMV Holding Limited in the
principal amount of FIVE MILLION THREE HUNDRED SEVENTY-FIVE THOUSAND DOLLARS
($5,375,000)
on
October 23, 2008 (the “Promissory
Note”)
other
than prepayments with proceeds raised in an equity financing by Guarantor and
subject to the terms and conditions set forth in Section 1(c) and Section 1(d)
of the Promissory Note.”
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3. Costs
and Expenses.
The
Company agrees to pay for the reasonable legal expenses of the Investor for
the
negotiation and preparation of this Amendment in the aggregate amount of up
to
$100,000.
4. Effectiveness
of this Amendment.
This
Amendment shall have no force or effect until immediately prior to the Closing
(as defined in the Purchase Agreement).
5. Full
Force and Effect.
Except
as modified by this Amendment, all other terms and conditions in the Secured
Note shall remain in full force and effect.
6. Effect.
Unless
the context otherwise requires, the Secured Note and this Amendment shall be
read together and shall have effect as if the provisions of the Secured Note
and
this Amendment were contained in one agreement. After the effective date of
this
Amendment, all references in the Secured Note to “this Note,” “hereto,”
“hereof,” “hereunder” or words of like import referring to the Secured Note
shall mean the Secured Note as modified by this Amendment.
7. Counterparts.
This
Amendment may be executed in separate counterparts, all of which taken together
shall constitute a single instrument.
[SIGNATURE
PAGE FOLLOWS]
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IN
WITNESS WHEREOF, the parties hereto have executed this Amendment effective
as of
the day and year first above written.
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THE
COMPANY:
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TWISTBOX
ENTERTAINMENT, INC.
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By:
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/s/
▇▇▇ ▇▇▇▇▇
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Name:
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▇▇▇
▇▇▇▇▇
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Title:
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President
and Chief Executive Officer
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INVESTOR:
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VALUEACT
SMALLCAP MASTER FUND, L.P.,
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By
VA Smallcap Partners, LLC, its General Partner
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By:
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/s/
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name:
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▇▇▇▇▇
▇▇▇▇▇▇▇▇
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Title:
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Managing
Member
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By:
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/s/
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name:
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▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
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Title:
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President
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