EXHIBIT 10.23
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SECURED CONVERTIBLE DEMAND NOTE
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$20,000,000 as of FEBRUARY 1, 1999
Andover, Massachusetts
FOR VALUE RECEIVED, the undersigned ENGAGE TECHNOLOGIES, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of CMGI, INC.,
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a Delaware corporation (the "Lender"), ON DEMAND the lesser of (i) the principal
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sum of Twenty Million Dollars ($20,000,000) or (ii) the aggregate unpaid
principal amount of all advances hereunder, together with accrued interest
thereon. Interest, if not paid, shall be added to principal monthly (and
interest shall thereafter accrue thereon) on the last day of each calendar month
at the rate of seven percent (7%) per annum based on the average of (i) the
aggregate unpaid principal amount of all advances made hereunder as of the last
day of the immediately preceding month and (ii) the aggregate unpaid principal
amount of all advances made hereunder as of the last day of the month for which
interest is being calculated. The unpaid principal balance and all accrued
interest on this Note at any time shall be determined from the records of the
Lender which shall constitute presumptive evidence of such amounts and may be
summarized on Schedule I hereto, which may be updated by the Lender from time to
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time to reflect new advances and repayment or conversion of indebtedness. As
soon as practicable after each January 31, April 30, July 31 and October 31
(each a "Fiscal Quarter End"), the Borrower shall provide notice to the Lender
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of the Conversion Price applicable to the fiscal quarter then ended.
NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS NOTE SHALL OBLIGATE THE LENDER TO
MAKE ANY ADVANCES HEREUNDER.
Advances in the aggregate amount of $9,347,451 (representing $5,334,605
advanced on or before April 30, 1998, an additional $2,418,456 advanced on or
before July 31, 1998, an additional $598,117 advanced on or before October 31,
1998 and an additional $996,273 advanced on or before January 31, 1999, in each
case including interest accrued during the applicable fiscal quarter) made by
the Lender to the Borrower prior to the date hereof shall be converted into
164,371 shares of Series C Stock (as defined below) of the Borrower (based upon
applicable conversion prices of $4.75, $6.95, $8.50 and $9.74, respectively) as
soon as practicable after the date hereof without further accrual of interest
thereon and shall not constitute advances hereunder.
The Lender, in its sole discretion, will at any time and from time to time
have the option, exercisable by written notice to the Borrower in substantially
the form attached as Exhibit A hereto, to require the Borrower to satisfy all or
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any part of the indebtedness represented by this Note (including both principal
and accrued interest) by issuing to the Lender (or its nominee(s)) shares of the
Borrower's capital stock in the following manner:
(A) prior to a Qualified Public Offering, the Borrower shall issue
that number of shares of its Series C Convertible Preferred Stock, $0.01
par value per share (the "Series C Stock"), equal to one-tenth of the
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quotient of (i) the aggregate
amount of principal and interest to be so converted for any particular date
divided by (ii) the applicable Conversion Price (as defined below,
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proportionately adjusted in the event that from time to time following the
date of determination thereof there occurs any stock dividend, stock split,
reverse stock split, recapitalization, or other similar event affecting the
Borrower's Series C Stock); and
(B) following a Qualified Public Offering, the Borrower shall issue
that number of shares of its common stock, $0.01 par value per share (the
"Common Stock"), equal to the quotient of (i) the aggregate amount of
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principal and interest to be so converted for any particular date divided
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by (ii) the applicable Conversion Price (as defined below, proportionately
adjusted in the event that from time to time following the date of
determination thereof there occurs any stock dividend, stock split, reverse
stock split, recapitalization, or other similar event affecting the
Borrower's Common Stock).
A "Qualified Public Offering" shall mean a transaction which triggers the
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mandatory conversion into Common Stock of the Series C Stock pursuant to the
terms of Section 5(b) of the Certificate of Designation of the Series C Stock.
The "Conversion Price" applicable to the conversion of the principal amount
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of advances made, and interest accrued, during any particular fiscal quarter
shall be determined as of the Fiscal Quarter End for that particular fiscal
quarter by dividing (i) the total enterprise valuation of the Borrower (as
determined by the Board of Directors of the Borrower in good faith and in a
manner satisfactory to the Lender in all respects) as of the Fiscal Quarter End
for that particular fiscal quarter by (ii) the number of shares of the
Borrower's Common Stock outstanding at such Fiscal Quarter End determined on a
fully-diluted, as-if-converted basis (and assuming the conversion of all
convertible securities, the grant of all options available under any option
plans and the exercise of all options, whether vested and unvested, warrants and
other rights to acquire equity interests in the Borrower of any nature
whatsoever). It is expressly contemplated that advances made, and interest
accrued, during each fiscal quarter will have a different applicable Conversion
Price depending upon the total enterprise valuation and number of shares of
Common Stock deemed outstanding as of the Fiscal Quarter End for that particular
fiscal quarter. Notwithstanding the foregoing, (i) the Conversion Price
applicable to the principal amount of advances made, and interest accrued,
during the fiscal quarter in which a Qualified Public Offering occurs shall be
equal to the price per share of Common Stock to the public in such offering and
(ii) the Conversion Price applicable to the principal amount of any advances
made, and interest accrued, during a fiscal quarter if the Lender elects to
convert such advances and/or interest prior to the Fiscal Quarter End of such
fiscal quarter shall be the Conversion Price in effect for the immediately
preceding fiscal quarter.
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This Note may be voluntarily prepaid in whole or in part at any time
without premium or penalty upon thirty (30) days written notice to the Lender.
Any such prepayment shall be applied to advances and compounded interest in
inverse order of incurrence.
If any payment of principal or interest hereon shall become due on a day
which is not a day on which banks are open for normal business hours in Andover
or Boston, Massachusetts, such payment shall be made on the next succeeding
business day and such extension of time shall in such case be included in
computing interest in connection with such payment.
Payments of both principal and interest hereon shall be made in immediately
available funds at the office of the Lender, at Andover, Massachusetts, or at
such other place as the holder hereof shall designate to the Borrower in
writing, in lawful money of the United States of America.
This Note will be secured by certain assets of the Borrower pursuant to a
certain Security Agreement and a certain Intellectual Property Security
Agreement (the "Security Agreements"), to be entered into between the Borrower
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and the Lender. The rights of the Lender under this paragraph are in addition
to any other rights and remedies (including other rights of setoff) which the
Lender may have. The Lender shall be permitted to exercise its rights as a
secured party under the Security Agreements to the extent permitted by
applicable law.
Except to the extent otherwise required by the context of this Note, the
word "Lender" wherever used herein shall mean and include the holder of this
Note originally issued to CMGI, Inc.
This Note for all purposes shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts without regard to its
conflicts of laws rules. The Borrower waives presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default and enforcement of this Note. The Borrower
hereby irrevocably and unconditionally submits, for itself and its property, to
the non-exclusive jurisdiction of the courts of the Commonwealth of
Massachusetts and of the United States District Court for the District of
Massachusetts, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Note or the Security Agreements,
or for recognition or enforcement of any judgment, and the Borrower hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such Massachusetts court
(or, to the extent permitted by law, in such Federal court). The Borrower agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Note shall affect any
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right that the Lender may otherwise have to bring any action or proceeding
relating to this Note against the Borrower or its properties in the courts of
any jurisdiction.
THE LENDER AND THE BORROWER AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR
SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM
OR ANY OTHER ACTION BASED UPON, OR ARISING OUT OF, THIS NOTE, ANY RELATED
INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG
ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS
PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE LENDER AND THE BORROWER, AND THESE
PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR THE
BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS
PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
If any provision of this Note shall be held invalid or unenforceable by any
court of competent jurisdiction, that holding shall not invalidate or render
unenforceable any other provision hereof.
Executed and delivered as an instrument under seal in Andover,
Massachusetts as of the date first above written.
ENGAGE TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Financial Officer
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SCHEDULE I
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ACTIVITY PURSUANT TO
SECURED CONVERTIBLE DEMAND NOTE
OF
ENGAGE TECHNOLOGIES, INC.
Dated: as of February 1, 1999
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PAYMENT
PRINCIPAL RECEIVED OR APPLICABLE NEW
AMOUNT OF INDEBTEDNESS CONVERSION PRINCIPAL
DATE ADVANCE CONVERTED PRICE BALANCE
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EXHIBIT A
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Notice of Election to Convert
TO: ENGAGE TECHNOLOGIES, INC.
Reference is made to the Secured Convertible Demand Note of Engage
Technologies, Inc. dated February 1, 1999 (the "Note"). Capitalized terms used
herein and not defined herein shall have the meanings given them in the Note. In
accordance with the terms of the Note, the undersigned hereby elects to convert
the following indebtedness into shares of Series C Stock or Common Stock, as the
case may be:
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Number of Shares of
Date of Advance or Amount of Series C stock (or
Capitalization of Indebtedness to be Applicable Conversion Common Stock) to be
Interest Converted Price Issued
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Please issue a certificate or certificates representing said shares of
Series C Stock or Common Stock, as the case may be, in the name of the
undersigned or in such other name as is specified below:
___________________________________
(Name)
___________________________________
___________________________________
(Address)
CMGI, INC.
By:____________________________________
Name:
Title:
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