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EXHIBIT 10.35
THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE. THIS NOTE AND ANY OF SUCH SECURITIES MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT RELATING TO SUCH TRANSACTION
UNDER THE ACT AND ALL OTHER APPLICABLE SECURITIES LAWS, OR PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE ACT AND OTHER APPLICABLE
SECURITIES LAWS.
CONVERTIBLE SECURED PROMISSORY NOTE
$700,000 November 29, 2000
FOR VALUE RECEIVED, YELLOWBRIX, INC., a Delaware corporation (the
"Company"), hereby promises to pay to the order of ABN AMRO Capital (USA) Inc.
(the "Holder") the sum of seven hundred thousand dollars and NO cents ($700,000)
(the "Note Amount") or such lesser sum as shall have been advanced to the
Company by the Holder, all as hereinafter provided with interest thereon from
the date of issuance of this Note at the rate set forth in Section 2.1 hereof.
The Purchase Agreement (as defined below) provides for the Holder to make
advances to the Company from time to time and further provides that all such
advances are evidenced by this Note. The aggregate amount from time to time
outstanding hereunder, and each payment of interest and principal with respect
hereto, shall be recorded on the books and records of the Purchaser, and
endorsed on the grid attached hereto which is part of this Note. The aggregate
amount reflected on such books and records as outstanding at any time, including
any entries by the Purchaser and the Company on the attached grid, shall be
prima facie evidence of the aggregate amount owing and unpaid hereunder as of
such time. All payments to be made by the Company in repayment of interest and
principal or other amounts due hereunder shall be made in currency of the United
States of America which at the time of payment shall be legal tender for the
payment of public or private debts.
1. THE NOTE.
1.1 Related Transactions. This "Note" is one of a duly authorized
series of Convertible Secured Promissory Notes initially dated November 29, 2000
(the "Notes") issued pursuant to that certain Note and Warrant Purchase
Agreement, dated as of November 29, 2000 (the "Purchase Agreement"), by and
among the Company, ABN AMRO Capital (USA) Inc., and to such other persons to
whom Notes are sold thereunder (collectively, the "Investors"). Capitalized
terms used but not otherwise defined herein shall have the meanings given to
them in the Purchase Agreement.
1.2 Payment. All payments of interest and principal or other amounts
payable under this Note shall be payable in immediately available funds to the
account of the Holder as the Holder may from time to time designate in writing
to the Company.
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2. PAYMENTS OF PRINCIPAL AND INTEREST.
2.1 Rate of Interest. This Note shall accrue interest on the unpaid
outstanding principal balance hereof at the rate equal to the prime rate as
published by The Wall Street Journal in the section titled "Money Rates" (which
generally is the base rate on corporate loans posted by at least 75 percent of
the 30 largest commercial banks) as in effect from time to time, plus two
percent (2%) (Prime Rate + 2%) per annum, calculated on a the basis of a 360-day
year and payable at maturity. If any principal, installment of interest or other
payment is not paid in full on the due date thereof (whether by maturity,
prepayment, or acceleration) or any Event of Default has occurred and is
continuing, then the outstanding principal balance of the Notes, any overdue
installment of interest (to the extent permitted by applicable law), including
interest accruing after the commencement of any proceeding under any bankruptcy
or insolvency law, and all other payments will bear interest from the due date
of such payment, or from and after an Event of Default, at a rate equal to the
Prime Rate plus five percent (5%) ("Default Rate"). The outstanding principal
balance of the Notes shall bear interest at the Default Rate from and after any
Event of Default. The Company shall pay to the holders of the Notes all
reasonable out-of-pocket costs and expenses, incurred by such holders in any
effort to collect the Notes and the other payments, including the reasonable
attorneys fees and expenses for services rendered in connection therewith, and
pay interest on such costs and expenses to the extent not paid when demanded at
the Default Rate.
2.2 Mandatory Principal and Interest Payment. Unless converted into
shares of the Company's capital stock, in accordance with Section 4 hereof, and
subject to acceleration of the maturity of this Note in connection with the
occurrence of an Event of Default or Change in Control, the total amount of
principal due under this Note and all accrued and unpaid interest thereon shall
be paid in a single lump sum on November 29, 2001 (the "Repayment Date").
3. PREPAYMENTS PRIOR TO MATURITY.
3.1 Company Requested Prepayment. Subject to the terms of this Section
3, not withstanding any other provisions of this Note, and upon two (2) days
prior written notice and without penalty, the Company may prepay the Notes in
whole or in part. All prepayments on the Notes shall be applied pro rata against
the amounts then owed on the Notes such that the amount prepaid on each Note
will bear the same ratio to the total amount then being prepaid on all the Notes
as the amount of principal and accrued interest outstanding on each Note bears
to the total amount of principal and accrued interest outstanding on all of the
Notes. Any prepayments received with respect to this Note shall first be applied
to the accrued but unpaid interest then outstanding, with the remainder, if any,
applied to principal.
3.2 Holder Requested Prepayment. If at any time prior to the Repayment
Date, the Company sells any of its capital stock in a single transaction or
series of substantially related transactions from which less than the amount
equal to $10,000,000 minus the Over-Advance (as defined below) in gross proceeds
are raised, other than a transaction involving the exercise of employee or
consultant or other existing stock options and the exercise of employee,
consultant or other existing warrants (a "Non-Qualified Financing"), the Holder
shall have the right, within
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five business days of receiving notice of such Non-Qualified Financing from the
Company in writing, to demand the repayment of all, but not less than all, of
the outstanding principal and accrued interest on the Notes in one lump sum
within three days of the closing of such Non-Qualified Financing.
4. CONVERSION OF NOTE.
4.1 Automatic Conversion
4.1.1 Qualified Financing. If at any time prior to the Repayment
Date (a) the Company sells shares of its preferred stock ("Capital Stock
Equivalents") in a single transaction or a series of substantially related
transactions from which at least the amount equal to $10,000,000 minus the
Over-Advance of gross proceeds are raised, exclusive of amounts raised from the
Purchase Agreement (the "Placement") and excluding costs and expenses relating
to the Placement, or (b) the Company completes an initial public offering of its
Common Stock from which gross proceeds payable to the Company are at least $30
million, exclusive of costs and expenses related to such offering (the "IPO"),
(each of an IPO and a Placement shall be considered a "Qualified Financing"),
then the unpaid principal amount and all accrued and unpaid interest owing under
this Note (as of the date of the initial closing of the Qualified Financing (the
"Threshold Closing Date")) shall automatically and without further action of the
Holder be converted into a number of shares of the same class or series of
capital stock or Capital Stock Equivalents sold in the Qualified Financing,
which number shall equal the amount of unpaid principal and interest due
hereunder as of the Threshold Closing Date divided by the price per share (the
"Mandatory Conversion Price") of the capital stock or Capital Stock Equivalents
sold in the Qualified Financing. As of the Threshold Closing Date, (i) this Note
shall automatically convert into shares of capital stock and Capital Stock
Equivalents as set forth in this Section 4.1.1, (ii) the Holder of this Note
shall be deemed to be the person or persons in whose name or names any
certificate for such shares of capital stock or Capital Stock Equivalents shall
be issuable upon the automatic conversion of this Note, and (iii) this Note
shall be deemed canceled and all amounts previously due and payable shall be
deemed to be fully paid. The "Over-Advance" shall mean the amount of any and all
Notes and Advances (as defined in the Note and Warrant Purchase Agreement of
even date herewith) in excess of $2,000,000.
4.1.2 Condition to Conversion. Any conversion under Section 4.1.1
shall be subject to all the terms and conditions contained in the Qualified
Financing applicable to the shares of capital stock or Capital Stock Equivalents
into which this Note is convertible, including the conversion rights or exercise
rights in connection with convertible securities or other Capital Stock
Equivalents being issued in the Qualified Financing and the Holder of this Note
shall be entitled to all of the benefits and rights of the purchasers of capital
stock or Capital Stock Equivalents into which this Note is convertible. The
Holder and the Company agree to execute, and become a party to, each of the
agreements which the subscribers and the Company execute
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in connection with the Qualified Financing or any other agreements substantially
identical thereto.
4.2 Optional Conversion Upon an Extraordinary Event.
4.2.1 Extraordinary Event. Subject to and upon compliance with
the provisions hereof, commencing on the date this Note is issued through the
Repayment Date, in the event of any Change in Control (as defined in the
Purchase Agreement) and at the option of the Holder, all of the principal amount
then owing from time to time under this Note and all accrued and unpaid interest
thereon may (i) become immediately due and payable, or (ii) prior to the payment
thereof, be converted, in whole and not in part, into fully paid and
non-assessable shares of the Company's Common Stock at the Alternative
Conversion Price determined under Section 4.2.2 hereof. To determine the number
of Conversion Shares issuable upon conversion of any amount due under this
Section 4.2.1, the amount being converted shall be divided by such Alternative
Conversion Price. The Company will provide the Holder with notice of the date
scheduled for the closing of the Change in Control and the Alternative
Conversion Price at least five (5) days prior to such scheduled date and shall
give the Holder reasonable opportunity to review all relevant documents with
respect to the Change in Control and to ask questions of the Company's
management and to receive other information reasonably requested of the Company
in the Change of Control transaction.
4.2.2 Alternative Conversion Price. Under Section 4.2.1, the
price at which Common Stock shall be issuable upon conversion of this Note (the
"Alternative Conversion Price") shall equal seventy percent (70%) of the Fair
Market Value of one share of the Company's Common Stock with Fair Market Value
determined as follows:
(a) If the Change in Control is effectuated through an
investment in the Company, the Fair Market Value shall be equal to the amount
paid for one share of the Company's Common Stock (or common stock equivalent).
(b) If the Change of Control is accomplished by an acquisition
of the Company for cash consideration, the Fair Market Value shall be the amount
paid for one share of Common Stock in the acquisition.
(c) If the Change in Control is accomplished by the acquisition
of the Company's capital stock in exchange for the capital stock of another
company (the "Other Company"), and in such acquisition a value is prescribed in
terms of a preestablished maximum or minimum price payable for a share of
capital stock, Fair Market Value shall mean the value of the securities and
other consideration received for a share of the Company's capital stock in such
acquisition. Such value shall be established by utilizing the same valuation
standards against which the preestablished maximum or minimum price is being
determined.
(d) If the Change in Control is accomplished by the acquisition
of the Company's capital stock in exchange for the capital stock of the Other
Company in which there is no preestablished maximum or minimum price payable for
a share of the Company's capital stock, Fair Market Value shall mean the value
of the Other Company's capital stock being
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exchanged equal to the value per share received by holders of the Company's
Common Stock pursuant to such Change in Control. In the event that the Fair
Market Value of the Other Company's common stock cannot be determined as
described in Sections 4.2.2(a) through (d), the Fair Market Value shall be the
fair value as determined in good faith by the Board of Directors of the Company
and the Other Company and in accordance with good financial practice. In the
event such securities are not registered or are subject to an agreement or other
restriction limiting their free marketability, the absence or loss of that
marketability shall be considered by the Board of Directors in making its good
faith determination of Fair Market Value.
(e) The pro rata value per share, after taxes, of each share of
capital stock of the Company in the event of a sale of all or substantially all
of the assets and property of the Company, where such sale would be deemed a
liquidation or winding up of the Company.
4.3 Unconditional Optional Conversion.
4.3.1 Conversion. Subject to and upon compliance with the
provisions hereof, at the option of the Holder, any or all of the principal
amount and accrued and unpaid interest through the date of conversion under this
Note may, at any time be converted, in whole or in any part, into fully paid and
non-assessable shares of the Company's Common Stock at the Optional Conversion
Price as determined in Section 4.3.2 hereof. The number of shares of Common
Stock issuable shall be determined by dividing the principal and interest being
converted hereunder by the Optional Conversion Price then in effect under
Section 4.3.2.
4.3.2 Optional Conversion Price. The Optional Conversion Price
for purposes of any conversion made pursuant to Section 4.3.1 shall be the Fair
Market Value of the Common Stock upon conversion. The "Fair Market Value" for
purposes of this Section 4.3.2 shall be the price agreed upon by the Company's
Board of Directors and the Holders acting in good faith. The Holder of this Note
may at any time request that the Board of Directors provide the Holder with the
Fair Market Value of the Common Stock.
4.4 Optional Conversion Upon Failure to Consummate Qualified
Financing. If the Company fails to consummate a Qualified Financing before the
Repayment Date, subject to and upon compliance with the provisions hereof, at
the option of the Holder, any or all of the principal amount and accrued and
unpaid interest through the date of conversion under this Note may, at any time
be converted, in whole or in any part, into fully paid and non-assessable shares
of the Company's Series A Preferred Stock as follows: the number of Series A
Preferred Stock issuable upon the conversion pursuant to this Section 4.4 shall
equal the Note Amount and accrued interest divided by 10; provided, however,
that a conversion price of $1.78 per share shall apply to the conversion of such
Series A Preferred Stock into Common Stock as described in Section 3.2 of the
Certificate of Designation of such Series A Preferred Stock.
4.5 Manner of Exercise of Conversion Privilege. In order to exercise
the conversion privilege under Section 4.2, 4.3 or 4.4 above, the Holder of this
Note shall give written notice to the Company that the Holder elects to convert
all or a portion of this Note which notice shall also
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specify the amount of principal and/or accrued and unpaid interest to which such
conversion relates. Any such notice of conversion shall supersede any obligation
to pay principal or interest under this Note if such notice is received by the
Company prior to the actual receipt by the Holder of the payment. As promptly as
practicable after receipt of such notice, but in any case not later than ten
(10) days thereafter, the Company shall issue and shall deliver to such Holder
or such person or persons designated by such Holder a certificate or
certificates for the number of full shares of capital stock issuable upon such
conversion of the principal and/or interest in accordance with the provisions
hereof and any cash adjustment payable pursuant to Section 4.11 hereof, without
charge to the Holder for any issuance tax in respect thereof or other cost
incurred by the Company in connection with such conversion and the related
issuance of capital stock. The conversion shall become effective on the date the
notice of conversion is received by the Company, and the person or persons in
whose name or names any certificate for the capital stock shall be issuable upon
such conversion shall be deemed to have become on said date the holder or
holders of record of the capital stock represented by that certificate. The
Company will not close its books against the transfer of capital stock issued or
issuable upon conversion of this Note, or portion thereof, in any manner which
would interfere with the timely conversion of this Note, or portion thereof.
4.6 Splits, Subdivisions or Combinations of Shares and Stock
Dividends. If the Company at any time while this Note remains outstanding shall
split, subdivide, combine its Common Stock or other capital stock or declare a
stock dividend, the applicable conversion price shall be proportionately
decreased in the case of a split or subdivision or share dividend, or
proportionately increased in the case of a combination. Any adjustment under
this Section 4.6 shall become effective when the split, subdivision or
combination becomes effective.
4.7 No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or Bylaws or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 4.7 and in the taking of all such action as may be necessary or
appropriate in order to protect the exercise and conversion rights of the Holder
against impairment.
4.8 Notice of Adjustments. Upon the occurrence of each event
establishing or adjusting the applicable conversion price, the Company at its
expense shall promptly furnish to the Holder written notice setting forth such
established or adjusted Conversion Price.
4.9 Reorganization, Reclassification, Consolidation, Merger or Sale.
Subject to Section 4.2 above, if any capital reorganization or reclassification
of the capital stock of the Company, or any consolidation or merger of the
Company with another entity, or the sale of all or substantially all of the
assets of the Company to another entity, or any exchange of capital stock of the
Company for cash or any other securities or assets, shall be effected in such a
way that holders of the Company's capital stock shall be entitled to receive
stock, securities, cash or assets with respect to or in exchange for capital
stock, then, as a condition of such reorganization, reclassification,
consolidation, merger, sale or exchange, lawful and adequate
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provisions shall be made whereby the Holder hereof shall thereafter have the
right to purchase and receive, upon the basis and upon the terms and conditions
specified in this Note and in lieu of the capital stock immediately purchasable
and receivable upon the exercise of the rights represented hereby, such shares
of stock, securities, cash or assets as may be issued or payable with respect to
or in exchange for a number of shares of outstanding capital stock equal to the
number of shares of capital stock immediately purchasable and receivable upon
the exercise of the rights represented hereby. In any such case, appropriate
provision shall be made with respect to the rights and interests of the Holder
of this Note to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the applicable conversion price) shall
thereafter be applicable, as nearly as may be practicable, in relation to any
shares of stock, securities, cash or assets thereafter deliverable upon the
exercise hereof.
4.10 Reservation of Shares. The Company shall at all times reserve and
keep available out of the aggregate of its authorized but unissued Common Stock
or other capital stock or its issued Common Stock or other capital stock held in
its treasury, or both, for the purpose of effecting the conversion of this Note,
such number of shares of Common Stock, capital stock or Capital Stock
Equivalents as shall then be issuable upon the conversion of this Note. The
Company covenants that all shares of Common Stock or capital stock issued on
conversion of this Note shall be duly and validly issued and fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof.
4.11 Fractional Shares. No fractional shares of capital stock shall be
issued upon conversion of this Note. Instead of any fractional share which would
otherwise be issuable upon conversion of this Note, the Company shall pay to the
Holder of this Note a cash adjustment in respect of such fractional interest in
an amount equal to the portion of the then applicable conversion price for each
share.
5. EVENTS OF DEFAULT.
5.1 Events of Default Defined. The principal and interest due and
owing on this Note may be declared, at the option of the Majority Holders (as
defined in the Purchase Agreement), or become, in certain circumstances,
immediately due and payable, upon an "Event of Default" as defined in the
Purchase Agreement.
5.2 Notification. If an Event of Default as defined above shall occur
the Company will notify the Holder promptly in writing by mail of the Event of
Default describing it in reasonable detail, including a statement of the nature
and length of existence thereof, and what action the Company proposes to take
with respect thereto.
6. SUITS FOR ENFORCEMENT UPON DEFAULT.
If an Event of Default shall have occurred, then and in any such event
each Holder, at any time at their option, declare the principal of and the
accrued interest due under the Notes to be due and payable, whereupon the same
shall forthwith mature and become due and payable without demand, protest,
notice of protest and notice of default, presentment for payment and
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diligence in collection, all of which are hereby expressly waived by the
Company. In case any Event of Default shall occur, each Holder may proceed to
protect and enforce their rights hereunder by a suit in equity, action at law or
other appropriate proceeding. The Company covenants that if default be made in
any payment of any principal of or interest on this Note, it will pay to the
Holder of this Note and to the holders of all the Notes to the extent permitted
under applicable law such further reasonable amount as shall be sufficient to
cover the cost and expenses of collection, including reasonable compensation to
the attorneys which each Holder retains and any court costs incurred for all
services rendered in that connection. No course of dealing and no delay on the
part of any of the Holders in exercising any rights shall operate as a waiver
thereof or otherwise prejudice their rights and no consent or waiver shall
extend beyond the particular case involved.
7. SECURITY INTEREST.
Pursuant to the terms of that certain Security Agreement, dated as of
November 29, 2000 ("Security Agreement"), by and among the Company and the
Investors, in order to secure the repayment of the Notes, the Company has
granted a blanket security interest to the Holder, the holders of all of the
other Notes and various other prior investors in the Company's assets (the
"Collateral"). The security interest will terminate upon repayment in full of
all amounts owing in respect of all of the Notes as set forth in the Security
Agreement.
During the period when Notes are outstanding or any amounts remain
payable in connection therewith, the Company shall not, without the prior
written consent of the Majority Holders, create or permit to be created any
other liens or security interests in or assignments of any portion of the
Company's interest in the Collateral, other than the Permitted Liens (as defined
in the Purchase Agreement).
8. NOTICES.
Any request, demand, authorization, direction, notice, consent, waiver or
other document permitted by this Note to be made upon, given or furnished to, or
filed with the Company or the Holder shall be sufficient for every purpose
hereunder if in writing and mailed to the Company, addressed to it at
YellowBrix, Inc., 66 Canal Center Plaza, Suite 700, Alexandria, Virginia 22314
(or such subsequent address as the Company shall advise the Holder hereof in
writing) and if to the Holder at the address for the Holder reflected in the
Company's records (or at such other address as the Holder hereof shall advise
the Company in writing). All notices required hereunder shall be deemed to have
been given or made when actually delivered to or received by the party to which
the notice is addressed at its respective address.
9. MUTILATION, DESTRUCTION, LOSS, OR REISSUANCE.
Upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of a Note or any note issued in exchange
therefor and, if requested in the case of any such loss, theft or destruction,
upon delivery of an indemnity bond or other agreement or security reasonably
satisfactory to the Company, or, in the case of any such
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mutilation, upon surrender and cancellation of such note, the Company will issue
a new note, of like tenor and amount and dated the date to which interest has
been paid, in lieu of such lost, stolen, destroyed or mutilated note, provided,
however, if any note of which a Holder, its nominee, or any of its partners or
affiliates is the registered holder is lost, stolen or destroyed, the affidavit
of the registered holder setting forth the circumstances with respect to such
loss, theft or destruction shall be accepted as satisfactory evidence thereof,
and no indemnification bond or other security shall be required as a condition
to the execution and delivery by the Company of a new note in replacement of
such lost, stolen or destroyed note other than the registered holder's written
agreement to indemnify the Company.
10. SUCCESSORS.
All of the covenants, stipulations, promises and agreement in this Note
contained by or on behalf of the Company shall bind and inure to the benefit of
its successors whether so expressed or not and also to the benefit of the Holder
and its successors.
11. AMENDMENT.
The Majority Holders shall have the right to amend the provisions of all
the Notes, provided, that no such waiver shall extend the maturity of this Note,
change the principal amount, reduce the interest rate payable hereunder, affect
the conversion rights in respect of this Note, or alter the provisions of
Section 6, or 7 of this Note, without the consent of each Holder affected
thereby.
12. GOVERNING LAW.
This Note shall be deemed to be a contract made under the laws of the
State of Delaware without regard to conflict of law principles and for all
purposes shall be construed in accordance with the laws thereof. This Note shall
be subject to and governed by the terms and conditions of the Purchase
Agreement.
13. PRESENTMENT.
The Company hereby waives diligence, presentment, demand and protest of
every kind whatsoever. The failure of any Holder hereof to exercise any of its
rights hereunder in any particular instance shall not constitute a waiver of the
same or of any other right in that or any subsequent instance.
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IN WITNESS WHEREOF, the Company has caused this Note to be
executed in its corporate name by its duly authorized officers and to be dated
as of the day and year first above written.
ATTEST: YELLOWBRIX, INC.
By: /s/ KEVIN S. LAPIDUS By: /s/ DAVID C. HOPPMANN
-------------------- ---------------------
Kevin S. Lapidus, Secretary David C. Hoppmann, Chief Executive Officer
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ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of Outstanding Notation
Date Amount of Advance Principal Paid Principal Balance Made By
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<S> <C> <C> <C> <C>
November 29, 2000 $700,000 $ $ YellowBrix
ABN AMRO Capital
(USA) Inc.
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</TABLE>
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