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EXHIBIT 4.5
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT
BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION THEREFROM UNDER THE ACT,
THE RULES AND REGULATIONS THEREUNDER AND APPLICABLE STATE LAWS.
DIGITAL ENTERTAINMENT NETWORK, INC.
a Delaware corporation
(the "Corporation")
8% Convertible Note due December 31, 1999
Los Angeles, California
As of October 27, 1998
$484,945.38
1. Principal and Interest. For value received, Digital
Entertainment Network, Inc., a Delaware corporation (the "Corporation"), hereby
promises to pay to Xxxx X. Xxxxxxxx, as Trustee of the Xxxx Xxxxxxxx Revocable
Trust U/A/D 7/28/97, or registered assigns (the "Holder"), the principal sum of
Four Hundred Eighty-Four Thousand Nine Hundred Forty-Five Dollars and
Thirty-Eight cents ($484,945.38), on December 31, 1999, together with accrued
and unpaid interest thereon (computed on the basis of a three hundred sixty
(360) day year of twelve (12) thirty (30) day months) at the rate of eight
percent (8%) per annum from the date hereof, and with interest on any overdue
principal and on any overdue interest, at the rate of the lesser of thirteen
percent (13%) per annum or the highest rate permitted by applicable law until
paid, with such interest payable on demand. Payments of principal and interest
on this Note shall be made in lawful money of the United States of America at
the offices of the Corporation, or at such other office or agency as the Holder
shall have designated by written notice to the Corporation.
2. Prepayment. The Corporation may prepay all or any part of this
Note, at any time and without premium or penalty, upon thirty (30) days' prior
written notice to the Holder, together with accrued interest on the principal
amount so prepaid, provided that in the event of any prepayment, the Corporation
may not reborrow any amounts prepaid.
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3. Conversion Right. The Holder shall have conversion rights as
follows:
(a) Conversion. The Holder shall have the right to convert
all, but not less than all, of the indebtedness represented by this Note (both
principal and interest accrued to the date of conversion) into shares of common
stock, par value $.01 per share (the "Common Stock") of the Corporation (the
"Conversion Shares"). The number of Conversion Shares into which such
indebtedness may be converted shall be subject to adjustment in the event
certain circumstances occur prior to such conversion. In such event, such
indebtedness shall be converted into the largest whole number of shares of
Conversion Shares calculated by dividing the amount of such indebtedness by the
then applicable Conversion Price. The Conversion Price shall initially be $2.25.
The Conversion Price shall be adjusted as hereinafter provided.
(b) Mechanics of Conversion. Before the Holder shall be
entitled to receive certificates evidencing Conversion Shares into which the
indebtedness represented by this Note has been converted, the Holder shall
surrender this Note, duly endorsed, at the office of the Corporation, and shall
give written notice to the Corporation at such office that the Holder wishes to
receive certificates evidencing the Conversion Shares to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to the Holder a certificate or certificates for the number of shares of
Conversion Shares to which the Holder shall be entitled as aforesaid. Shares of
Conversion Shares shall not be issued to any person other than the record holder
of this Note on the date of conversion into such Conversion Shares, unless prior
to such conversion the record holder has provided the Corporation with such
documentation as Corporation may reasonably request to establish that such
transfer is exempt from registration or qualification under applicable law and
has made adequate provision for any fees or taxes payable in connection with
such transfer.
(c) Adjustments to Conversion Price for Certain Events.
(i) In case at any time prior to conversion into the
Conversion Shares of the indebtedness represented by this Note the Corporation
shall (A) subdivide its outstanding Common Stock, (B) combine its outstanding
Common Stock into a smaller number of shares or (C) issue by reclassification of
its Common Stock (including any such reclassification in connection with a
consolidation or merger) any shares, the Conversion Price in effect at the
effective date of such subdivision, combination or reclassification shall be
proportionately adjusted so that the Holder of this Note surrendered for
conversion after such time shall be entitled to receive the aggregate number and
kind of shares which, if this Note had been converted immediately prior to the
taking of such action by the Corporation, the Holder would have owned upon such
conversion and been entitled to receive upon such subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any event
listed above shall occur.
(ii) If the Corporation shall, commencing on the date
hereof and continuing for one hundred twenty (120) days thereafter, sell or
issue shares of Common Stock, or rights, options, warrants or other securities
convertible or exchangeable for shares of
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Common Stock (excluding securities issued (A) in any of the transactions
described in paragraph (i) of clause (c) of this Section 3, (B) upon conversion
of this Note, (C) upon the exercise or conversion of any options, warrants and
other securities convertible into or exchangeable for shares of Common Stock,
which options, warrants and other securities are outstanding as of the date
hereof or are issued after the date hereof pursuant to the Corporation's 1998
Incentive Compensation Plan and (D) issued in connection with a merger or
acquisition or with respect to advertising sales or distribution of programming)
at a price per share of Common Stock (or exercise price or conversion price per
share of Common Stock, as the case may be) lower than the Conversion Price, then
such Conversion Price shall be reduced to a price determined by multiplying the
Conversion Price in effect immediately prior thereto by a fraction, the
numerator of which shall be the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such sale or issuance plus (2) the number of
shares of Common Stock which the aggregate consideration received for such sale
or issuance (or the aggregate initial conversion or exercise price of the
convertible securities issued plus any other consideration to be paid upon such
exercise or conversion) would purchase at the Conversion Price, as adjusted, on
the applicable record date, and the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such issuance or sale (or
into which the newly-issued rights, options, warrants or convertible securities
are initially exercisable or convertible as of the date of such issuance or
sale). If the Corporation shall sell or issue shares of Common Stock in
consideration for property other than cash or its equivalent, then the price per
share of Common Stock and fair value of such property shall be determined in
good faith by the Board of Directors of the Corporation. Any such adjustment
shall be determined and effective on the date of such sale or issuance and not
upon exercise or conversion, as the case may be, of such rights, options,
warrants or convertible or exchangeable securities. If any of such rights,
options, warrants or convertible or exchangeable securities expire without
having been exercised, converted or exchanged, the Conversion Price shall be
adjusted as if the rights, options, warrants or convertible or exchangeable
securities not so exercised, converted or exchanged had not been sold or issued.
(iii) In case at any time prior to conversion of this
Note, the Corporation shall pay or make a stock dividend or other distribution
(payable otherwise than in cash out of funds legally available therefor) on any
class of its capital stock payable in shares of Common Stock or shares of its
capital stock convertible into or exchangeable for shares of Common Stock, the
Conversion Price in effect at the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced so that the same shall equal the
price determined by multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination and the denominator shall
be the sum of such number of shares and the total number of shares of Common
Stock or Common Stock equivalents constituting such dividend or other
distribution, such adjustment to become effective immediately after the opening
of business on the day following the date fixed for such determination.
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(iv) In case at any time prior to conversion of this
Note, the Corporation shall fix a record date for the making of a distribution,
by dividend or otherwise, to all holders of any class or series of its capital
stock, of evidences of its indebtedness or assets (including securities, but
excluding (x) any dividend or distribution referred to in paragraph (iii) of
this subsection (c) and (y) any dividend or distribution paid in cash out of
funds legally available therefor of the Corporation), then in each such case the
Conversion Price in effect after such record date shall be determined by
multiplying the Conversion Price in effect immediately prior to such record date
by a fraction, of which the numerator shall be the total number of outstanding
shares of such class or series of capital stock multiplied by the fair market
value per share of such class or series of capital stock (as in good faith
determined by the Board of Directors) on such record date, less the fair market
value (as determined in good faith by the Board of Directors) of the portion of
the assets or evidences of indebtedness so to be distributed, and of which the
denominator shall be the total number of outstanding shares of such class or
series of capital stock multiplied by such fair market value per share of such
class or series of capital stock. Such adjustment shall be made successively
whenever such a record date is fixed; and in the event that such distribution is
not so made, the Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such record date had not been fixed.
(v) No adjustment in the Conversion Price shall be
required unless such adjustment would require an increase or decrease of at
least ten cents ($0.10) in such Conversion Price; provided, however, that any
adjustment which by reason of this paragraph (v) is not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this subsection (c) shall be made to the nearest cent or
to the nearest 1/100 of a share, as the case may be.
(d) Certificates as to Adjustments. Upon the occurrence of
each adjustment or readjustment of any Conversion Price pursuant to this Section
3, the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to the
Holder a certificate executed by the Corporation's President or Chief Financial
Officer setting forth such adjustment or readjustment and showing in reasonable
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of the Holder, furnish
or cause to be furnished to the Holder a like certificate setting forth (i) such
adjustments and readjustments; (ii) the Conversion Price at the time in effect;
and (iii) the number of shares of Conversion Shares and the amount, if any, of
other property which at the time would be received upon the conversion of this
Note.
(e) Notice of Record Date. In the event that the Corporation
shall propose at any time prior to conversion of this Note: (i) to declare any
dividend or distribution upon its Common Stock, whether in cash, property, stock
or other securities, whether or not a regular cash dividend and whether or not
out of earnings or earned surplus; (ii) to offer for subscription pro rata to
the holders of any class or series of its stock any additional shares of stock
of any class or series or other rights; (iii) to effect any reclassification or
recapitalization
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of its Common Stock outstanding involving a change in the Common Stock; or (iv)
to merge or consolidate with or into any other corporation where the Corporation
is not the surviving corporation, or sell, lease or convey all or substantially
all of its assets, or to liquidate, dissolve or wind up; then, in connection
with each such event, the Corporation shall send to the Holder:
(A) at least five (5) days' prior written notice of
the record date for such dividend, distribution or subscription rights (and
specifying the date upon which the holders of Common Stock shall be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to above; and
(B) in the case of the matters referred to in (iii)
and (iv) above, at least five (5) days' prior written notice of the date when
the same shall take place (and specifying the date, if any, on which the holders
of Common Stock shall be entitled to exchange their Common Stock for securities
or other property deliverable upon the occurrence of such event).
(f) Reservation of Stock Issuable upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the indebtedness represented by this Note, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all indebtedness represented by this Note, and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all indebtedness represented by this Note, the
Corporation will take such action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.
4. Miscellaneous. The Corporation hereby waives presentment,
protest and all notices (of nonpayment, dishonor, protest, demand and otherwise)
in connection with the delivery, acceptance, performance, default, acceleration
or enforcement of this Note to the fullest extent permitted by applicable law.
Other than pursuant to a writing executed by the Holder, no failure to exercise
any right of the Holder with respect to this Note, or any delay in, or waiver
of, the exercise thereof, shall impair any such right or be deemed to be a
waiver thereof.
Except as expressly stated herein to the contrary, payments received by
the Holder shall be applied in the following order: (a) to amounts due the
Holder other than for interest and/or principal under this Note, (b) interest
currently due and payable on this Note (including any interest on overdue
principal) and (c) to principal amounts on this Note then due and payable.
This Note and each of the provisions hereof shall be binding upon each
of the successors and permitted assigns of the Corporation, and may not be
assigned by the Corporation without the prior written consent of the Holder.
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This Note is a registered note and is transferable only upon surrender
of this Note for registration of transfer, duly endorsed, or accompanied by a
written instrument of transfer duly executed, by the Holder or its attorney duly
authorized in writing.
This Note is made and delivered in Los Angeles, California, shall be
governed by and interpreted in accordance with the internal laws of the State of
California without giving effect to conflict of laws principles thereof, and
shall not be construed strictly against the drafter hereof.
DIGITAL ENTERTAINMENT NETWORK, INC.
By: /s/ XXXX XXXXX
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Name: Xxxx Xxxxx
Title: Executive Vice President
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