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EXHIBIT 10.18
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement, dated as of February 15, 1999 (this
"Agreement"), is entered into by and among Launch Media, Inc., a Delaware
corporation, with an address at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and each of the undersigned purchasers
(collectively the "Purchasers" and individually a "Purchaser") listed on the
Schedule of Purchasers attached hereto as Exhibit A (the "Schedule of
Purchasers").
RECITAL
A. On the terms and subject to the conditions set forth herein, Purchasers
are willing to purchase from Company and Company is willing to sell to
Purchasers, an aggregate of up to $1,500,000 of Convertible Subordinated
Promissory Notes (the "Notes") to be issued by the Company in the principal
amounts set forth opposite each Purchaser's name on the Schedule of Purchasers.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and the
representations, warranties, and conditions set forth below, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. The Note.
(a) Issuance of Notes. In reliance upon the representations,
warranties and covenants of the parties set forth herein, the Company agrees to
issue, sell and deliver to the Purchasers, and the Purchasers agree to purchase
from the Company, the Notes. The purchase price for the Notes shall be payable
in immediately available funds.
(b) Terms of the Note. The terms and conditions of the Notes are set
forth in the form of Note attached as Exhibit B hereto. Capitalized terms not
otherwise defined herein shall have the meaning set forth in Exhibit B attached
hereto.
(c) Delivery. The Company will deliver to each Purchaser the Notes
to be purchased by such Purchaser against receipt by Company of the purchase
price for such Note.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to Purchaser that the statements contained in the
following paragraphs of this Section 2 are all true and correct as of the time
of issuance of the Note:
(a) Organization and Standing: Articles and Bylaws. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted and proposed to be conducted.
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(b) Corporate Power. The Company has all requisite legal and
corporate power to enter into, execute and deliver this Agreement and the Note.
This Agreement, and upon this issuance the Note, will be, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except as the same may be limited by bankruptcy, insolvency, moratorium,
and other laws of general application affecting the enforcement of creditors'
rights.
(c) Authorization.
(1) Corporate Action. Other than obtaining the waiver of the
right to notice and right of first refusal granted to each of the holders of
Series A, Series B, Series C and/or Series D Stock of the Company under Section
3.1 of the Second Amended and Restated Investors Rights Agreement, dated
February 27, 1998, as amended, by and among the Company and certain stockholders
of the Company (the "Rights Agreement"), which such waiver shall be obtained
prior to any borrowing hereunder and issuance of the Note, all corporate and
legal action on the part of the Company, its officers, directors and
stockholders necessary for the execution and delivery of this Agreement and the
Note, the sale and issuance of the Note and the performance of the Company's
obligations hereunder and under the Note, have been taken.
(2) Valid Issuance. The Note, any shares of Common Stock or
Preferred Stock issued upon conversion or exercise of the Note, and any shares
of Common Stock issued upon conversion of such Preferred Stock (collectively,
the "Securities"), when issued in compliance with the provisions of this
Agreement, the Note or the terms of the Common Stock or Preferred Stock, as the
case may be, will be validly issued, fully paid and nonassessable and will be
free of any liens or encumbrances, provided, however, that the Securities may be
subject to restrictions on transfer under state and/or federal securities laws
as set forth herein, and as may be required by future changes in such laws.
(d) Government Consent, Etc. No consent, approval, order or
authorization of, or designation, registration, declaration or filing with, any
federal, state, local or provincial or other governmental authority on the part
of the Company is required in connection with the valid execution and delivery
of this Agreement, the Note, or the offer, sale or issuance of the Securities,
other than, if required, filings or qualifications under the California
Corporate Securities Law of 1968, as amended (the "California Law"), or other
applicable blue sky laws, which filings or qualifications, if required, will be
timely filed or obtained by the Company.
(e) Litigation. There is no action, suit, proceeding or arbitration
("Action") pending, and there is no Action, claim or investigation currently
threatened, against the Company, its activities, properties or assets, or
against any officer, director or employee of the Company in connection with such
officer's, director's or employee's relationship with or actions taken on behalf
of the Company. The Company is not a party to or subject to the provisions of
any material order, writ, injunction, judgment or decree of any court or
governmental agency or instrumentality and there is no Action or claim by the
Company currently pending or which the Company intends to initiate.
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(f) Taxes. The Company has fully and timely, properly and accurately
filed or obtained appropriate extensions for all tax returns and reports
required to be filed by it, including all federal, foreign, state and local tax
returns and estimates for all years and periods (and portions thereof) for which
any such returns, reports or estimates were due. All such returns, reports and
estimates were prepared in the manner required by applicable law. All income,
sales, use, occupation, property or other taxes or assessments due from the
Company have been paid. There are no pending assessments, asserted deficiencies
or claims for additional taxes that have not been paid. The reserves for taxes,
if any, reflected on the Company Financial Statements are adequate and there are
no tax liens on any property or assets of Company. There have been no audits or
examinations of any tax returns or reports by any applicable governmental
agency. No state of facts exists or has existed which would constitute grounds
for the assessment of any penalty or of any further tax liability beyond that
shown on the respective tax reports, returns or estimates. There are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any federal, state or local income tax return or report for any
period. All taxes which Company has been required to collect or withhold have
been duly withheld or collected and, to the extent required, have been paid to
the proper taxing authority.
(g) Capitalization.
(1) The entire duly authorized capital stock of the Company
consists of 45,000,000 shares of Common Stock, $0.001 par value, and 32,902,029
shares of Preferred Stock, $0.001 par value, of which 1,900,800 shares have been
designated Series A Stock, 3,064,102 shares have been designated Series B Stock,
7,900,117 shares have been designated Series C Stock and 20,037,010 shares have
been designated Series D Stock.
(2) Immediately prior to the Closing, 4,676,882 shares of
Common Stock, 1,900,800 shares of Series A Stock, 3,064,102 shares of Series B
Stock, 7,900,117 shares of Series C Stock and 16,726,133 shares of Series D
Stock will be issued and outstanding.
(3) Except for (i) the conversion privileges of the Series A,
Series B, Series C and Series D Stock, (ii) 5,401,512 shares of Common Stock
reserved for issuance pursuant to the Company's 1994 and 1998 Stock Option
Plans, as amended (the "Incentive Plan"), of which 2,614,749 shares are subject
to outstanding options and 2,786,763 shares are available for future grant,
(iii) options to purchase 47,000 shares of Common Stock of the Company issued
separately from the Incentive Plan, (iv) warrants to purchase 2,901,028 shares
of Common Stock issued to ▇▇▇▇▇ & Company Incorporated, (v) warrants to purchase
an aggregate of 2,242,187 shares of Series D Stock issued to General Electric
Capital Corporation and NBC Multimedia, Inc., (vi) 4,377,782 shares of Common
Stock to be issued in connection with the Company's acquisition of
AreohveeOnline Partnership, d.b.a. ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, and (vii) the rights
provided in the Rights Agreement, there are no other outstanding shares of
capital stock, options, warrants or rights or outstanding rights of first
refusal, preemptive rights or other rights, options, warrants, conversion
rights, or other agreements either directly or indirectly for the purchase or
acquisition from the Company of any shares of its capital stock.
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(4) All shares of the Company's capital stock have been duly
authorized, were validly issued and are fully paid and non-assessable.
(h) Disclosure. The Company has fully provided the Purchaser with
all information which the Purchaser has requested for deciding whether to
purchase the Note and all information which the Company believes is reasonably
necessary to enable the Purchaser to make such a decision. Neither this
Agreement nor any other statement or certificate made or delivered in connection
with the Agreement and the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein not misleading.
3. Representations and Warranties by the Purchaser. The Purchaser
represents and warrants to the Company as of the time of issuance of the Note as
follows:
(a) Investment Intent: Authority. This Agreement is made with the
Purchaser in reliance upon such Purchaser's representation to the Company,
evidenced by Purchaser's execution of this Agreement, that Purchaser is
acquiring the Notes for investment for such Purchaser's own account, not as
nominee or agent, for investment and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the Securities Act or the California Law. Purchaser has the full right,
power, authority and capacity to enter into and perform this Agreement and the
Agreement will constitute a valid and binding obligation upon Purchaser, except
as the same may be limited by bankruptcy, insolvency, moratorium, and other laws
of general application affecting the enforcement of creditors' rights.
(b) Securities Not Registered. Purchaser understands and
acknowledges that the offering of the Note pursuant to this Agreement will not
be registered under the Securities Act or qualified under the California law on
the grounds that the offering and sale of securities contemplated by this
Agreement are exempt from registration under the Securities Act and exempt from
qualification pursuant to section 25102(f) of the California law, and that the
Company's reliance upon such exemptions is predicated upon such Purchaser's
representations set forth in this Agreement. The Purchaser acknowledges and
understands that resale of the Securities may be restricted indefinitely unless
the Securities are subsequently registered under the Securities Act and
qualified under the California law or an exemption from such registration and
such qualification is available.
(c) No Transfer. Purchaser covenants that in no event will it
dispose of any of the Securities other than in conjunction with an effective
registration statement for the Securities under the Securities Act or pursuant
to an exemption therefrom, or in compliance with Rule 144 promulgated under the
Securities Act or to an entity affiliated with said Purchaser and other than in
compliance with the applicable securities regulation laws of any state.
(d) Knowledge and Experience. Purchaser (i) has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of such Purchaser's prospective investment in the Securities;
(ii) has the ability to bear the economic risks of such Purchaser's prospective
investment; (iii) has had all questions which have been asked by such Purchaser
satisfactorily answered by the Company; and (iv) has not been
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offered the Securities by any form of advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any such media.
4. Waiver of Right of First Refusal. Each of the undersigned holders of
Series A, Series B, Series C and/or Series D Stock of the Company hereby waives
its right to notice and right of first refusal (the "Waiver") granted under
Section 3.1 of the Rights Agreement, solely with respect to the sale and
issuance of the additional shares of stock issuable upon conversion of the Notes
being issued hereunder. The Waiver shall not apply to any other shares of stock
issued by the Company in connection with a subsequent equity financing.
Notwithstanding anything else to the contrary herein, any shares of Common Stock
or Preferred Stock issued upon conversion or exercise of the Note, and any
shares of Common Stock issued upon conversion of such Preferred Stock, shall
receive the same registration rights as the Registrable Securities (as such term
is defined in the Rights Agreement).
5. Miscellaneous.
(a) Waivers and Amendments. Any provision of this Agreement may be
amended, waived or modified upon the written consent of the Company and the
Purchaser.
(b) Governing Law. This Agreement and all actions arising out of or
in connection with this Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
conflicts of law provisions of the State of Delaware or of any other state.
(c) Entire Agreement. This Agreement together with the Exhibit A
attached hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
(d) Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent via facsimile,
overnight courier service or mailed by certified or registered mail, postage
prepaid, return receipt requested, addressed or sent (a) if to a Purchaser, at
the address or facsimile number of the Purchaser set forth below such party's
name on Exhibit A, or at such other address or number as the Purchaser shall
have furnished to the Company in writing, or (b) if to the Company, at ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ or
at such other address or number as the Company shall have furnished to the
Purchasers in writing.
(e) Validity. If any provision of this Agreement or the Note shall
be judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall be deemed to constitute one instrument.
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(g) Protection of Confidential Information. Confidential or
proprietary information disclosed by either party under this Agreement, as well
as the existence and terms of this Agreement (subject to Section 5(h) below),
shall be considered confidential information (the "Confidential Information")
and shall not be disclosed by the Company or any Purchaser to any third party.
The Company or any Purchaser shall immediately notify the other parties of any
information that comes to its attention which might indicate that there has been
a loss of confidentiality with respect to the Confidential Information. In the
event that the Company or any Purchaser is requested or becomes legally
compelled (by statute or regulation or by oral questions, interrogatories,
request for information or documents, subpoena, criminal or civil investigative
demand or similar process, including without limitation, in connection with any
public or private offering of the Company's capital stock) to disclose any of
the Confidential Information, such party (the "Disclosing Party") shall provide
the other parties (the "Non-Disclosing Parties") with prompt written notice of
that fact so that the other parties may seek (with the cooperation and
reasonable efforts of the Disclosing Party) a protective order, confidential
treatment or other appropriate remedy. In such event, the Disclosing Party shall
furnish only that portion of the Confidential Information which is legally
required and shall exercise reasonable efforts to obtain reliable assurance that
confidential treatment will be accorded the Confidential Information to the
extent reasonably requested by the Non-Disclosing Parties. The provisions of
this Section 5(g) shall be in addition to, and not in substitution for, the
provisions of any separate nondisclosure agreement executed by the parties
hereto with respect to the transaction contemplated hereby.
(h) Disclosure of Terms; Press Releases. Notwithstanding the
provisions of Section 5(g) above, from and after the Closing, the Company and
each Purchaser may disclose the existence of this Agreement and Purchasers'
investment in the Company solely to such party's investors, investment bankers,
lenders, accountants, legal counsel, business partners, and bona fide
prospective investors, employees, lenders and business partners, in each case
only where such persons or entities are under appropriate nondisclosure
obligations. The Company shall not issue any press release or make any other
announcement to the general public or in any professional or trade publication
regarding this Agreement or any of the terms hereof without the prior written
consent of each of the Purchasers, which consent may be withheld at the sole
discretion of the Investors. If the Company or any Purchaser determines that any
disclosure not otherwise authorized by this Agreement is required by law or
regulation, then the provisions of Section 5(g) regarding disclosure of
Confidential Information by a Disclosing Party shall govern.
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IN WITNESS WHEREOF, the parties have caused this Note Purchase Agreement
dated February 15, 1999, to be duly executed and delivered by their proper and
duly authorized officers as of the date and year first written above.
COMPANY:
LAUNCH MEDIA, INC., a Delaware
corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chief Financial Officer
PURCHASERS:
AVALON TECHNOLOGY LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Title: President
--------------------------------
GORAN ENTERPRISES LIMITED
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
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EXHIBIT A
SCHEDULE OF PURCHASERS
PURCHASERS AMOUNT OF NOTE
---------- --------------
Avalon Technology LLC $1,000,000
Goran Enterprises Limited 500,000
----------
TOTAL: $1,500,000
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EXHIBIT B
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
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THIS NOTE AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$__________ February _____, ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
FOR VALUE RECEIVED, Launch Media, Inc., a Delaware corporation
("Company"), promises to pay to ____________________ (the "Holder"), or its
registered assigns, the principal sum of $__________, or such lesser amount as
shall then equal the outstanding principal amount hereof, together with interest
from the date of this Note on the unpaid principal balance at a rate equal to
eight and one-half percent (8.5%) per annum. The interest rate shall be computed
on the basis of the actual number of days elapsed and a year of 365 days. All
unpaid principal, together with the balance of unpaid and accrued interest and
other amounts payable hereunder, if not converted by the provisions of Section 5
below, shall be due and payable on demand at any time after the earlier of (i)
February 29, 2000 (the "Maturity Date"), or (ii) when such amounts are declared
due and payable by the Holder upon or after the occurrence of an Event of
Default (as defined below).
The following is a statement of the rights of the Holder and the
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following capitalized terms have
the following meanings:
(a) "Obligations" shall mean all principal and accrued interest due
hereunder.
(b) "Conversion Shares" means (i) if the Company consummates the IPO
(as defined in Section 5(a) below) prior to August 31, 1999, shares of Common
Stock, or (ii) if the Company does not consummate the IPO by August 31, 1999, or
in the event of a merger or consolidation of the Company into or with another
corporation in which the stockholders of the Company shall own less than fifty
percent (50%) of the voting securities of the surviving corporation or the sale,
transfer or other disposition (but not including a transfer or disposition by
pledge or mortgage to a bona fide lender) of all or substantially all of the
assets of the Company (an "Acquisition Transaction"), shares of the Company's
Series D Stock.
(c) "Senior Indebtedness" shall mean, unless expressly subordinated
to or made on a parity with the amounts due under this Note, the principal of
(and premium, if any), unpaid interest on and amounts reimbursed, fees,
expenses, costs of enforcement and other amounts due in connection with, (i)
indebtedness of Company, or with respect to which
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Company is a guarantor, to banks, commercial finance lenders, insurance
companies, leasing or equipment financing institutions or other lending
institutions regularly engaged in the business of lending money (excluding
venture capital, investment banking or similar institutions which sometimes
engage in lending activities but which are primarily engaged in investments in
equity securities), which is for money borrowed, or purchase or leasing of
equipment in the case of lease or other equipment financing, by Company, whether
or not secured, and (ii) any debentures, notes or other evidence of indebtedness
issued in exchange for such Senior Indebtedness, or any indebtedness arising
from the satisfaction of such Senior Indebtedness by a guarantor.
2. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Note:
(a) Failure to Pay. Company shall fail to pay (i) when due any
principal payment on the due date hereunder or (ii) any interest or other
payment required under the terms of this Note on the date due and such payment
shall not have been made within fifteen (15) days of Company's receipt of
Holder's written notice to Company of such failure to pay;
(b) Voluntary Bankruptcy or Insolvency Proceedings. The Company
shall (i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the benefit of its
or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v)
become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it, or (vii) take any action for the purpose of effecting any
of the foregoing; or
(c) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings
for the appointment of a receiver, trustee, liquidator or custodian of Company
or of all or a substantial part of the property thereof, or an involuntary case
or other proceedings seeking liquidation, reorganization or other relief with
respect to Company or the debts thereof under any bankruptcy, insolvency or
other similar law or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or discharged within
thirty (30) days of commencement.
3. Rights of Holder Upon Default. Upon the occurrence or existence of any
Event of Default and at any time thereafter during the continuance of such Event
of Default, Holder may declare all outstanding Obligations payable by Company
hereunder to be immediately due and payable without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived. In
addition to the foregoing remedies, upon the occurrence or existence of any
Event of Default, Holder may exercise any other right, power or remedy granted
to it or otherwise permitted to it by law, either by suit in equity or by action
at law, or both.
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4. Subordination. The indebtedness evidenced by this Note is hereby
expressly subordinated, to the extent and in the manner hereinafter set forth,
in right of payment to the prior payment in full of all of Company's Senior
Indebtedness.
(a) Insolvency Proceedings. If there shall occur any receivership,
insolvency, assignment for the benefit of creditors, bankruptcy, reorganization,
or arrangements with creditors (whether or not pursuant to bankruptcy or other
insolvency laws), sale of all or substantially all of the assets, dissolution,
liquidation, or any other marshaling of the assets and liabilities of Company,
no amount shall be paid by Company in respect of the principal of, interest on
or other amounts due with respect to this Note at the time outstanding, unless
and until the principal of and interest on the Senior Indebtedness then
outstanding shall be paid in full.
(b) Subrogation. Subject to the payment in full of all Senior
Indebtedness, the holder of this Note shall be subrogated to the rights of the
holder(s) of such Senior Indebtedness (to the extent of the payments or
distributions made to the holder(s) of such Senior Indebtedness pursuant to the
provisions of this Section 4) to receive payments and distributions of assets of
Company applicable to the Senior Indebtedness. No such payments or distributions
applicable to the Senior Indebtedness shall, as between Company and its
creditors, other than the holders of Senior Indebtedness and the Holder, be
deemed to be a payment by Company to or on account of this Note; and for
purposes of such subrogation, no payments or distributions to the holders of
Senior Indebtedness to which the Holder would be entitled except for the
provisions of this Section 4 shall, as between Company and its creditors, other
than the holders of Senior Indebtedness and the Holder, be deemed to be a
payment by Company to or on account of the Senior Indebtedness.
(c) No Impairment. Nothing contained in this Section 4 shall impair,
as between Company and Holder, the obligation of Company, subject to the terms
and conditions hereof, to pay to the Holder the principal hereof and interest
hereon as and when the same become due and payable, or shall prevent the Holder
of this Note, upon default hereunder, from exercising all rights, powers and
remedies otherwise provided herein or by applicable law.
(d) Reliance of Holders of Senior Indebtedness. Holder, by its
acceptance hereof, shall be deemed to acknowledge and agree that the foregoing
subordination provisions are, and are intended to be, an inducement to and a
consideration of each holder of Senior Indebtedness, whether such Senior
Indebtedness was created or acquired before or after the creation of the
indebtedness evidenced by this Note, and each such holder of Senior Indebtedness
shall be deemed conclusively to have relied on such subordination provisions in
acquiring and holding, or in continuing to hold, such Senior Indebtedness.
5. Conversion.
(a) Conversion into the Conversion Shares. All of the principal and
accrued interest then outstanding on the Note shall be automatically converted
into the Conversion Shares at the earlier of (1) the closing of an underwritten
public offering of Common Stock pursuant to a
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effective registration statement under the Securities Act of 1933, as amended,
with a sales price per share of Common Stock (as adjusted for combinations,
stock dividends, subdivisions or split-ups) of at least $2.00 and with aggregate
gross proceeds to the Company, at the public offering price, of at least
$15,000,000 (the "IPO"), (2) immediately prior to the closing of an Acquisition
Transaction or (3) February 29, 2000. If such IPO has already occurred by August
31, 1999, the Company shall take all actions necessary to authorize shares of
its Common Stock in sufficient quantity to permit the conversion required by
this paragraph. If the IPO has not occurred by August 31, 1999, the Holder shall
at any time between August 31, 1999 and February 29, 2000 have the option to
convert the Note into shares of the Company's Series D Stock in accordance with
the provisions of this Section 5(a). If the IPO has not occurred by August 31,
1999 or the Company enters into a definitive Agreement providing for an
Acquisition Transaction, the Company shall take all actions necessary to
authorize shares of its Series D Stock in sufficient quantity to permit the
conversion required by this paragraph. If such conversion occurs as part of the
IPO, the price per share for the conversion shall be eighty percent (80%) of the
price per share of the Common Stock sold in the IPO. If such conversion occurs
without completion of the IPO or in connection with an Acquisition Transaction,
the price per share for the conversion shall be $1.53 per share, adjusted for
any stock splits, dividends or combinations made in the Common Stock of the
Company after the date hereof.
(b) Notice Regarding IPO. On the closing of the IPO, written notice
shall be delivered to the Holder of this Note at the address last shown on the
records of Company for the Holder or given by the Holder to Company for the
purpose of notice or, if no such address appears or is given, at the place where
the principal executive office of Company is located, notifying the Holder of
the terms and conditions of the IPO, the conversion price, the principal and
accrued interest outstanding on the Note, the date on which any such conversion
will occur and calling upon such Holder, to surrender to Company, in the manner
and at the place designated, the Note.
(c) Mechanics and Effect of Conversion. No fractional shares of
Common or Preferred Stock shall be issued upon conversion of this Note. Upon the
conversion of all of the principal and accrued interest outstanding under this
Note, in lieu of Company issuing any fractional shares to the Holder, Company
shall pay to the Holder the amount of outstanding principal that is not so
converted. Upon full conversion of this Note, Company shall be forever released
from all its obligations and liabilities under this Note.
6. Successors and Assigns. Subject to the restrictions on transfer
described in Section 8 below, the rights and obligations of Company and the
Holder of this Note shall be binding upon and benefit the successors, assigns,
heirs, administrators and transferees of the parties.
7. Waiver and Amendment. Any provision of this Note may be amended, waived
or modified upon the written consent of Company and the Holder.
8. Transfer of this Note. This Note may not be transferred in violation of
any restrictive legend set forth hereon. Each new Note issued upon transfer of
this Note shall bear a
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legend as to the applicable restrictions on transferability in order to ensure
compliance with the Act, unless in the opinion of counsel for Company such
legend is not required in order to ensure compliance with the Act. Company may
issue stop transfer instructions to its transfer agent in connection with such
restrictions. Prior to presentation of this Note for registration of transfer,
Company shall treat the registered holder hereof as the owner and holder of this
Note for the purpose of receiving all payments of principal and interest hereon
and for all other purposes whatsoever, whether or not this Note shall be overdue
and Company shall not be affected by notice to the contrary.
9. Assignment by Company. Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by Company, without the prior written consent of
the Holder.
10. Treatment of Note. To the extent permitted by generally accepted
accounting principles, Company will treat, account and report the Note as debt
and not equity for accounting purposes and with respect to any returns filed
with federal, state or local tax authorities.
11. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier or personal delivery at the
respective addresses of the parties as set forth in the records maintained by
the Company. Any party hereto may by notice so given change its address for
future notice hereunder. Notice shall conclusively be deemed to have been given
when received.
12. Payment. Payment shall be made in lawful tender of the United States.
13. Expenses; Waivers. If action is instituted to collect this Note,
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
14. Governing Law. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the State of California, without regard to the conflicts of law
provisions of the State of California or of any other state.
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IN WITNESS WHEREOF, Company has caused this Note to be issued as of the
date first written above.
LAUNCH MEDIA, INC.
a Delaware corporation
By:
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Title:
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