"THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED
TO THE PRIOR PAYMENT IN FULL OF THE SENIOR OBLIGATIONS (AS DEFINED IN
THE SUBORDINATION AGREEMENT HEREINAFTER REFERRED TO) PURSUANT TO, AND
TO THE EXTENT PROVIDED IN, THE SUBORDINATION AGREEMENT, DATED AS OF MAY
27, 2002 (AS AMENDED), AMONG THE ENTITIES THERETO, WHICH INCLUDE THE
MAKER HEREOF, THE PAYEE NAMED HEREIN, AND FLEET NATIONAL BANK, AS
AGENT."
NOTE
New York, New York
August 16, 2002
FOR VALUE RECEIVED, the undersigned, CROSS MEDIA MARKETING
CORPORATION, a Delaware corporation with its principal offices and place of
business at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Borrower"),
promises to pay to the order of LANCER OFFSHORE, INC. (the "Lender"), at c/o
Lancer Management Group, 000 Xxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000
or at such other place as may be designated from time to time by the Lender, the
unpaid amount of all sums that have been advanced to or for the benefit of the
Borrower in accordance with the terms hereof, the principal sum of ONE MILLION
SIX HUNDRED FIFTY THOUSAND DOLLARS ($1,650,000), lawful money of the United
States of America, plus all accrued and unpaid interest (as provided for in this
Note) through the Repayment Date (defined below).
1. Principal and Interest
Borrower shall pay the entire unpaid principal balance hereunder and
accrued and unpaid interest thereon on the fifth business day following demand
by Lender on or after the earlier of (i) August 16, 2003 or (ii) the receipt by
the Company of debt and/or equity financing resulting in at least $5,000,000 of
gross proceeds to the Company (the "Maturity Date").
The principal amount of this Note outstanding from time to time
shall bear interest at the annual rate of 10%, payable quarterly, in arrears, on
November 16, February 16, May 16 and August 16 of each year and on the date the
entire principal amount of this Note is repaid (the "Repayment Date").
There shall be no prepayment premium in the event the Borrower
prepays any principal or accrued interest thereon.
2. Conversion
(a) If this Note is not paid in full on the Maturity Date,
thereafter, the Lender may, at its option, at any time prior to the Repayment
Date, convert all or a portion of the then outstanding principal amount of this
Note and/or accrued and unpaid interest thereon, into shares of common stock,
par value $.001 per share of the Company (the "Common Stock"), at the initial
conversion rate of $1.91 of principal and/or interest for one share of Common
Stock (the "Conversion Rate"), subject to adjustment as provided below.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its Common Stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares or (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
(each of (i) through (iii) an "Action"), then the Conversion Rate shall be
adjusted to be equal to the product of (i) a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately prior to such
Action and the denominator of which is the number of shares of Common Stock
outstanding immediately following such Action, multiplied by (ii) the Conversion
Rate immediately prior to such Action. An adjustment made pursuant to this
Subsection 2(a) shall become effective immediately after the record date in the
case of a dividend or distribution and shall become effective immediately after
the effective date in the case of a subdivision, combination or
reclassification.
(c) In the event of any capital reorganization or reclassification,
or any consolidation or merger to which the Company is a party other than a
merger or consolidation in which the Company is the continuing corporation, or
in case of any sale or conveyance to another entity of the property of the
Company as an entirety or substantially as an entirety, or in the case of any
statutory exchange of securities with another corporation (including any
exchange effected in connection with a merger of a third corporation into the
Company), the Holder of this Note shall have the right thereafter to receive on
the conversion of this Note the kind and amount of securities, cash or other
property which the Holder would have owned or have been entitled to receive
immediately after such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance had this Note been converted immediately
prior to the effective date of such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance and in any such
case, if necessary, appropriate adjustment shall be made in the application of
the provisions set forth in this Section 2 with respect to the rights and
interests thereafter of the Holder of this Note to the end that the provisions
set forth in this Section 2 shall thereafter correspondingly be made applicable,
as nearly as may reasonably be, in relation to any shares of stock or other
securities or property thereafter deliverable on the conversion of this Note.
The above provisions of this Subsection 2(c) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, statutory
exchanges, sales or conveyances. The issuer of any shares of stock or other
securities or property thereafter deliverable on the exercise of this Note shall
be responsible for all of the agreements and obligations of the Company
hereunder. A sale of all or substantially all of the assets of the Company for a
consideration consisting primarily of securities shall be deemed a consolidation
or merger for the foregoing purposes.
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(d) No adjustment in the Conversion Rate shall be required unless
such adjustment would require an increase or decrease of at least $0.05 per
share of Common Stock; provided, however, that any adjustments which by reason
of this Subsection 2(d) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 2 shall be made to the nearest cent or to the nearest 1/100th of a
share, as the case may be. Anything in this Section 2 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Conversion Rate, in addition to those required by this Section 2, as it in its
discretion shall deem to be advisable in order that any stock dividend,
subdivision of shares or distribution of rights to purchase stock or securities
convertible or exchangeable for stock hereafter made by the Company to its
stockholders shall not be taxable.
(e) If, as a result of an adjustment made pursuant to this Section
2, the Holder of this Note thereafter surrendered for conversion shall become
entitled to receive shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Company, the Board of Directors
(whose determination shall be conclusive and shall be described in a written
notice to the Holder of this Note promptly after such adjustment) shall
determine the allocation of the adjusted Conversion Rate between or among shares
or such classes of capital stock or shares of Common Stock and other capital
stock.
3. Warrants
In the event that this Note is not repaid on or prior to February
16, 2003 (the "Trigger Date"), the Borrower shall issue to the Lender a warrant,
in the form attached as Exhibit A hereto, to purchase a number of shares of its
common stock, par value $0.001 per share Common Stock equal to 500,000
multiplied by the Outstanding Percentage (defined below). The "Outstanding
Percentage" on the Trigger Date shall mean the principal amount of this Note
outstanding on the Trigger Date divided by $1,650,000.
4. Subordination
Notwithstanding any other term or provision contained in this Note,
all obligations, liabilities and indebtedness of the Borrower now or hereafter
existing, whether fixed or contingent and whether for principal, interest
(including interest accruing after the filing of a petition under the Federal
Bankruptcy Code, to the extent allowed), fees, expenses or otherwise ("Debt") in
respect of this Note, are subordinated and junior in right of payment to all
Debt under the Credit Agreement dated as of March 19, 2002 (as amended), by and
among the Borrower, Media Outsourcing, Inc., National Syndications, Inc. and
Preferred Consumer Marketing, Inc., as joint and several borrowers, the banks,
financial institutional lenders party thereto, and Fleet as agent and issuing
lender (the "Credit Agent"), to the extent provided in the Subordination
Agreement dated as of May 27, 2002, as amended through the date hereof, by and
among the Lender and Fleet National Bank, as agent and issuing lender.
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5. Miscellaneous
This Note may not be waived, changed, modified or discharged orally,
but only by agreement in writing signed by the party against whom any
enforcement of any waiver, change modification or discharge is sought.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
WHOLLY WITHIN THE STATE OF NEW YORK. BORROWER HEREBY WAIVES THE RIGHT TO A JURY
TRIAL AND CONSENTS TO JURISDICTION IN THE FEDERAL OR XXXXX XXXXXX XX XXX XXXXX
XX XXX XXXX WITH RESPECT TO THE ENFORCEMENT OF THE TERMS HEREOF AND THE
COLLECTION OF THE OBLIGATIONS HEREUNDER.
IN WITNESS WHEREOF, the Borrower has duly executed this Note the day
and year first above written.
CROSS MEDIA MARKETING CORPORATION
By: /s/ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxxx
Chairman and Chief Executive Officer
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