Exhibit 10.4
SECURED PROMISSORY NOTE
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$700,000 Los Angeles, California
November 12, 1999
FOR VALUE RECEIVED, the undersigned, MEDIACHASE LTD., a Delaware
corporation ("Borrower") promises to pay to the order of XXXXXXXXXXXXXXX.XXX,
INC., a Nevada corporation ("Lender"), at 0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxx
Xxxxxx, Xxxxxxxxxx 00000, or at such other place as Lender may from time to time
designate, the principal sum of Seven Hundred Thousand Dollars ($700,000), or so
much thereof as shall have been advanced against this Note and shall be
outstanding, and to pay interest on the unpaid principal balance from time to
time outstanding at the rate of ten percent (10%) per annum until paid,
commencing on the date hereof. Principal and interest under this Note shall be
due and payable in full on the earlier of (i) January 31, 2000, and (ii) the
Transaction Closing Date (as hereinafter defined). As used herein, the term
"Transaction Closing Date" shall mean the date on which the transactions
contemplated by that certain Deal Memo, dated September 9, 1999, between
Borrower and Online Films, LLC, a Delaware limited liability company and an
entity in which Lender holds a 91.847% membership interest, are consummated.
Lender is hereby authorized (but not obligated, and no failure by Lender to
do so shall relieve Borrower of its obligation hereunder to repay all amounts
advanced hereagainst and interest thereon), at its option, to endorse the date
and amount of each advance made against this Note and each payment of principal
and interest thereon made with respect to this Note on Schedule "A" attached
hereto and by this reference incorporated herein. Borrower acknowledges that
Five Hundred Sixty Thousand Dollars ($560,000) has been loaned to Borrower under
that certain Loan Agreement, dated October 28, 1999 and that certain Promissory
Note, dated October 28, 1999, each between Borrower and Lender, which Loan
Agreement and Promissory Note (as well as predecessor loan agreements and notes
executed by Borrower or XxxxxxxxXX.xxx in favor of Lender) shall, upon the
execution of this Note, be replaced and superceded by this Note and be of no
further force or effect.
In no contingency or event whatsoever, whether by reason of advancement of
the proceeds hereof, acceleration of maturity of the unpaid principal balance,
or otherwise, shall the amount paid or agreed to be paid to Lender for the use
or forbearance of money advanced hereunder exceed the highest lawful rate
permissible under any law which a court of competent jurisdiction may deem
applicable hereto. If, from any circumstances whatsoever, the performance of
any provision of this Note would cause such limit to be exceeded, then, ipso
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facto, the obligation to be fulfilled shall be reduced to such limit, and if
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from any circumstances whatsoever Lender ever receives as interest an amount
which would exceed the highest lawful rate, the amount which would be excessive
interest shall be applied to the reduction of the unpaid principal balance due
hereunder and not to the payment of interest.
At the option of Lender exercised by written notice to Borrower, this Note
shall become immediately due and payable upon failure to pay when due any
payment of principal, interest or expenses due hereunder, which non-payment
continues for a period of 30 days thereafter; provided that in the event at the
conclusion of such 30 day period, Xxxxxxxx has delivered to Lender a copy of a
bona fide commitment letter from a third party to provide financing in an amount
at least equal to all amounts due and payable hereon, such 30 day grace period
shall be extended for another 30 days, at the conclusion of which this Note
shall become due and payable in full. This Note shall automatically become due
and payable, without notice or demand and without the need for any action or
election by Xxxxxx, upon the occurrence at any time of any of the following
events of default: (i) the commencement of proceedings in bankruptcy or for the
reorganization of Borrower, or the readjustment of any of the debts of Borrower,
under the Federal Bankruptcy Code, as amended, or any party thereof, or under
any other laws, whether state or federal, for the relief of debtors, now or
hereafter existing, by Borrower, or against Borrower,
which shall not be discharged within thirty (30) days of their commencement;
(ii) the appointment of a receiver, trustee or custodian for Borrower or for any
substantial part of the assets of Borrower, or the institution of proceedings
for the dissolution or the full or partial liquidation of Borrower, and such
receiver or trustee shall not be discharged within thirty (30) days of his or
its appointment, or such proceedings shall not be discharged within thirty (30)
days of their commencement, or the discontinuance of the business or the
material change in the nature of the business of Borrower; or (iii) the
liquidation or dissolution of Borrower.
As security for the full and timely payment of the amounts payable by
Borrower to Lender pursuant to this Note, Borrower hereby grants to Lender a
continuing first priority security interest in and lien upon and pledges and
assigns to Lender for security purposes, all of its right, title and interest
throughout the universe in and to the Collateral (as defined below), whether now
or hereafter acquired and wherever located. In the event that Borrower defaults
in its obligation to pay any amounts due hereunder (which default is not cured
within the grace period set forth above), Lender shall have, in addition to all
of its rights and remedies under this Note, all of the rights and remedies of a
secured party under applicable law and in equity (including, without limitation,
all of the rights and remedies of a secured party under the Uniform Commercial
Code of the State of California). The term "Collateral" shall mean all right,
title and interest in any personal property assets of Xxxxxxxx used solely in
connection with the operation of the business of XxxxxxxxXX.xxx or
XxxxxxXxxx.xxx, whether now owned or hereafter acquired and wherever located,
including, without limitation, any accounts, accounts receivable, contract
rights, general intangibles, inventory, equipment, goods, documents,
instruments, chattel paper, cash, deposit accounts, policies of insurance, work-
in-progress (including all work with respect to the website for
xxxxxxxxxxxxxxx.xxx) and all products, replacements or substitutions for, and
proceeds of, and accessions and additions to any and all of the foregoing
property and interests in property, and all payments under any indemnity,
warranty or guarantee payable by reason of loss or damage to or otherwise with
respect to any of the foregoing Collateral, and all books and records relating
solely to any of the foregoing Collateral. At Borrower's sole cost and expense,
Borrower will duly execute and deliver to Lender such further agreements,
documents and instruments (including, without limit, Uniform Commercial Code
financing statements naming Borrower as a debtor and Lender as secured party,
and describing the Collateral) and do or cause to be done such further acts as
may be necessary or proper to evidence and/or perfect the security interests of
Lender in the Collateral or to otherwise carry out more effectively the
provisions and purposes of this Note, in each case as Lender may from time to
time request. Without limiting the generality of the foregoing, Xxxxxxxx agrees
to promptly negotiate in good faith with Xxxxxx upon request to the end of
completing a security agreement confirming the grant of the security interest
granted herein, containing such terms and conditions as are customary in
transactions of this nature.
Until such time as all amounts payable by Borrower to Lender pursuant to
this Note are paid in full, Borrower agrees that it shall not directly or
indirectly, whether voluntarily, involuntarily, by operation of law or otherwise
sell, assign, transfer, exchange, lease, lend, grant any option with respect to
or dispose of any of the Collateral other than pursuant to arms-length
transactions done in the ordinary course of the business of either
XxxxxxxxXX.xxx or XxxxxxXxxx.xxx and other than Permitted Encumbrances (as
hereafter defined) (each, a "Transfer"). As used herein, the term "Permitted
Encumbrances" shall mean (i) mechanic's, materialmen's and similar liens, (ii)
liens for taxes not yet due and payable or for taxes being contested in good
faith through appropriate proceedings, (iii) purchase money liens and liens
securing rental payments under capital lease arrangements arising pursuant to
arms-length transactions, (iv) liens and security interests granted in the
ordinary course of business in favor of any laboratory, guild, union or similar
entity securing obligations of Borrower or Lender in connection with the
business of XxxxxxxxXX.xxx or XxxxxxXxxx.xxx, and (v) liens, security interests
and other encumbrances contemplated by a business plan for XxxxxxxxXX.xxx or
XxxxxxXxxx.xxx approved in
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writing by Xxxxxx or any other liens, security interests or encumbrances
otherwise approved in writing by Xxxxxx.
Notwithstanding anything to the contrary set forth herein, Xxxxxxxx agrees
that to the extent any of the Collateral is encumbered by any other lien or
security interest, other than a Permitted Encumbrance, of any party other than
Lender, Borrower shall promptly obtain from such other party either (i) a
release of such other party's lien or security interest in such Collateral (a
"Release"), or (ii) an agreement to subordinate such other party's lien or
security interest in such Collateral to that of the Lender (a "Subordination").
In the event Borrower is unable to obtain a Release or Subordination, or
Borrower breaches its agreement above with respect to Transfers of Collateral
(each, an "Indemnification Event"), the Borrower shall indemnify and hold Lender
harmless from and against all direct, out of pocket losses, liabilities, claims,
damages, costs and expenses incurred by Xxxxxx and arising out of or resulting
from the occurrence of such Indemnification Event; provided, however, that in no
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event shall Borrower be responsible for any lost profits or any other
consequential, exemplary, special or incidental damages, directly or indirectly
relating thereto. Notwithstanding anything to the contrary set forth in this
Note, Lender shall have direct recourse against Borrower and its assets to the
extent necessary for the enforcement of Borrower's indemnification obligations
set forth in this paragraph.
Subject to Xxxxxxxx's indemnification obligations above, Xxxxxx
acknowledges and agrees that, in the event that there is a default by Borrower
hereunder, Xxxxxx's sole recourse for repayment of any amounts due under this
Note shall be by proceeding against the Collateral and that Lender shall not
have recourse against Borrower or any assets of Borrower other than the
Collateral.
In the event that on or after the Maturity Date, Borrower pays in full all
principal, interest and any other amounts due under this Note, all of the
obligations of the parties under the Deal Memo referenced above (or otherwise in
connection with the transactions contemplated therein) shall be deemed
terminated and of no further force and effect. At such time, any interest that
Lender may have in any assets of Borrower (or in any assets used in connection
with the operation of XxxxxxxxXX.xxx or XxxxxxXxxx.xxx) shall be deemed
irrevocably and automatically assigned to Borrower and Lender shall have no
further right, title or interest therein. In such case, Xxxxxx agrees to
execute and deliver to Borrower such further agreements, documents, instruments
and information and to do or cause to be done such further acts as may be
necessary or proper to evidence and/or perfect such assignment or to otherwise
carry out more effectively the provisions and purposes of this paragraph.
If this Note is not paid when due (after notice and opportunity to cure as
provided above), whether at maturity or by acceleration, Borrower promises to
pay all costs of collection, including without limitation, reasonable attorneys'
fees, and all expenses in connection with the protection or realization of the
Collateral securing this Note, whether or not suit is filed hereon or thereon.
The principal of this Note may not be prepaid in whole or in part at any
time.
No single or partial exercise of any power hereunder or under any security
agreement or other agreement securing this Note shall preclude other or further
exercise thereof or the exercise of any other power. Lender shall at all times
(after a default which is not timely cured) have the right to proceed against
any portion of the security held herefor in any such order and in any such
manner as Lender may deem fit, without waiving any rights with respect to any
other security. No delay or omission on the part of Lender in exercising any
right hereunder shall operate as a waiver of such right or of any other right
under this Note. The acceptance of any amount due and payable hereunder shall
not operate as a waiver with respect to any other amount then owing and unpaid.
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Presentment, demand, protest, notices of protest, dishonor and nonpayment
of this Note and all notices of every kind are hereby waived by Xxxxxxxx, except
as otherwise provided herein. To the extent permitted by applicable law, the
defense of the statute of limitations is hereby waived by Xxxxxxxx.
Principal and interest evidenced hereby are payable only in lawful money of
the United States. The receipt of a check shall not, in itself, constitute
payment hereunder unless and until paid in good funds.
Whenever any payment on this Note shall be stated to be due on a day which
is not a business day, such payment shall be made on the next succeeding
business day and such extension of time shall be included in the computation of
the payment of interest of this Note.
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This Note is to be governed by and construed in accordance with the laws of
the State of California except to the extent United States federal law permits
Lender to contract for, charge or receive a greater amount of interest. In any
action brought under or arising out of this Note, Borrower hereby consents to
the in personam jurisdiction of any state or federal court sitting in Los
Angeles, California waives any claim or defense that such forum is not
convenient or proper, and consents to service of process by any means authorized
by California law.
MEDIACHASE LTD.
By:__________________________
Name:
Title:
Acknowledged and Agreed to:
XXXXXXXXXXXXXXX.XXX, INC.
By:__________________________
Name:
Title:
ONLINE FILMS, LLC
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
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Schedule "A"
ADVANCES AND PAYMENTS OF PRINCIPAL
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Date Amount of Advance Amount of Principal Unpaid Principal Notation
Paid or Prepaid Balance Made By
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6
ALLONGE
TO
SECURED PROMISSORY NOTE
Reference is hereby made to that certain Secured Promissory Note,
dated November 12, 1999, in the original principal amount of Seven Hundred
Thousand Dollars ($700,000), made by the undersigned to the order of
XxxxxxxxXxxxxxx.xxx, Inc., a Nevada corporation (the "Note"), to which this
Allonge is attached. All capitalized terms used herein but not otherwise defined
herein shall have the meanings ascribed to them in the Note.
The Note is hereby amended by changing the original principal amount
thereof from Seven Hundred Thousand Dollars ($700,000) to One Million Forty
Thousand Dollars ($1,040,000), and accordingly all references therein to "Seven
Hundred Dollars ($700,000)" are hereby deleted, and "One Million Forty Thousand
Dollars ($1,040,000)" shall be inserted in lieu thereof.
The undersigned acknowledges that all amounts payable by the
undersigned to Lender under the Note, as increased by this Allonge, are secured
by a first priority security interest of Lender in the Collateral.
IN WITNESS WHEREOF, the undersigned has executed this Allonge,
effective as of November ___, 1999.
MEDIACHASE LTD., a Delaware corporation
By: _____________________________________
Name:
Title:
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