Secured Promissory Note - MP3.com Inc. and Michael L. Robertson
SECURED PROMISSORY NOTE
San Diego, California
$4,820,343.14 April 2, 2001
1. Promise to Pay. For good and valuable consideration, the undersigned,
Michael L. Robertson ("Borrower"), unconditionally promises to pay to the order
of MP3.com, Inc., a Delaware corporation ("Lender" or the "Company"), at 4790
Eastgate Mall, San Diego, California 92121-1970, or at such other place as the
holder hereof may from time to time designate by written notice to Borrower, the
principal sum of Four Million Eight Hundred Twenty Thousand Three Hundred
Forty-Three and 14/100 Dollars ($4,820,343.14), or such amount as shall equal
the outstanding principal amount hereof, together with interest from the date of
this Note until paid on the unpaid principal balance at the rate of six and
75/100 percent (6.75%) per annum, compounded annually, computed on the basis of
the actual number of days elapsed and a year of 360 days. This Note and the
obligations of Borrower hereunder are secured by a Pledge and Security Agreement
between Borrower and Lender of even date herewith (the "Security Agreement").
The holder of this Note shall have full recourse to all assets and properties of
the Borrower, including without limitation the Collateral (as defined in the
Security Agreement) pledged to Lender in the Security Agreement, which
Collateral shall be held in escrow pursuant to the terms of an Escrow Agreement
between Borrower, Lender and the Escrow Agent named therein of even date
herewith (the "Escrow Agreement"); provided, however, Lender acknowledges and
agrees that it shall have no recourse to Borrower's principal residence. This
Note, the Security Agreement, the Escrow Agreement and all other documents and
instruments executed in connection herewith or therewith are collectively
referred to as the "Loan Documents."
2. Payment. The entire outstanding principal balance plus all accrued
interest and all other unpaid fees or other amounts to be paid or reimbursed by
Borrower pursuant to the Loan Documents shall be due and payable on the earlier
to occur of (i) the date that is one (1) year after the date of this Note, and
(ii) the date of consummation of any event, including but not limited to any
merger, sale, acquisition or other transaction, whereby the stockholders of the
Company are entitled to receive, in exchange for their shares of Common Stock of
the Company, cash or publicly-traded securities (such earlier date is referred
to herein as the "Demand Date"), provided, however, that all fees, expenses and
costs described in Section 7 below shall be payable upon demand. All payments
shall be applied first to fees and expenses to be paid or reimbursed by Borrower
pursuant to the Loan Documents, then to accrued interest, and then to the
principal balance. All payments shall be made in lawful money of the United
States.
3. Prepayment. The Borrower may from time to time prepay in whole or in
part without penalty or premium the principal hereof. Any prepayment of
principal shall be accompanied by payment of accrued interest on such principal
to the date of such prepayment.
4. Use of Proceeds. The proceeds of this Note shall be used by Borrower
for the purpose of meeting a margin call.
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5. Representations and Warranties. Borrower represents and warrants to
Lender as follows:
(a) Authorization. Each Loan Document has been duly executed and
delivered by Borrower and constitutes the legal, valid and binding obligation of
Borrower, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or other laws affecting
creditors' rights generally and the exercise of judicial discretion in
accordance with general equitable principles.
(b) No Conflict. The execution, delivery and performance of each
Loan Document by Borrower, and the compliance with the terms and conditions
hereof and thereof by Borrower, does not, with or without the giving of notice
or the lapse of time or both, conflict with, breach the terms or conditions of,
constitute a default under, or violate (i) any material agreement to which
Borrower is a party, or (ii) any judgment, decree, order, law, rule or
regulation applicable to Borrower.
(c) Litigation. There is no unsatisfied judgment, award, order,
writ, injunction, arbitration, decision or decree outstanding or any litigation,
proceeding, claim or investigation pending or, to the best knowledge of
Borrower, threatened against Borrower which may adversely affect the ability of
Borrower to enter into and perform Borrower's obligations under the Loan
Documents.
(d) Accuracy of Representations and Warranties; Disclosure. No
representation or warranty of Borrower set forth in this Note or any other Loan
Document, or any certificate or written statement furnished by Borrower for use
in connection with the transactions contemplated hereby contains any untrue
statement of material fact or omits to state a material fact necessary in order
to make the statements contained herein or therein not misleading.
6. Events of Default.
(a) At the option of the holder hereof, this Note shall become
immediately due and payable, without notice or demand, upon the occurrence at
any time of any of the following events of default (each event described under
subsection (a) or (b) below, an "Event of Default" or a "Default"):
(i) Any representation or warranty made by Borrower herein or in
connection with any other Loan Document shall prove to have been false
or incorrect in any material respect when made; or
(ii) Failure of Borrower to completely perform or observe when
due, any condition, covenant or obligation of Borrower herein or in
connection with any other Loan Document (including without limitation
Borrower's obligation to pay principal and interest due hereunder).
(b) This Note shall automatically become due and payable, without
notice or demand and without the need for any action or election by the holder
hereof, upon the occurrence at any time of any of the following Events of
Default:
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(i) The making of an assignment for the benefit of creditors by
Borrower; the voluntary appointment (at the request of any such party or
with the consent of any such party) of a receiver, custodian, liquidator
or trustee in bankruptcy of the property of Borrower; the filing by
Borrower of a petition in bankruptcy or an adjudication of Borrower as
bankrupt or insolvent; or the filing by Borrower of any petition or
answer seeking or acquiescing in any relief under any present or future
federal, state or other law or regulation relating to bankruptcy,
insolvency or other relief for debtors; or
(ii) The filing against Borrower of a petition seeking any relief
under any present or future federal, state or other law or regulation
relating to bankruptcy, insolvency or other similar relief for debtors,
or the involuntary appointment of a receiver, custodian, liquidator or
trustee in bankruptcy of the property of Borrower, and such petition or
appointment is not vacated or discharged within thirty (30) days after
the filing or making thereof.
Borrower shall promptly give notice in writing to Lender of the occurrence of
any Event of Default or any event reasonably likely to result in the occurrence
of an Event of Default.
7. Expenses. If this Note is not paid when due, whether at maturity or
by acceleration, the undersigned promises to pay all costs of collection,
including without limitation reasonable attorneys' fees, and all expenses in
connection with the protection or realization of any collateral securing this
Note or the enforcement of any guaranty hereof incurred by the holder hereof on
account of such collection, whether or not suit is filed hereon; and such costs
and expenses shall include without limitation all costs, attorneys' fees and
expenses incurred by the holder hereof in connection with any insolvency,
bankruptcy, reorganization, arrangement or other similar proceedings involving
Borrower, which in any way affect the exercise by the holder hereof of its
rights and remedies under this Note. The amount of such costs and expenses shall
be repaid to the holder hereof upon written demand therefor. Should interest not
be paid when due, it shall thereafter bear like interest as the principal.
8. Maximum Rate. Anything in this Note or any of the other Loan
Documents to the contrary notwithstanding, if at any time the rate of interest
on the Note together with all fees and charges, if any (collectively, the
"Charges"), contracted for, charged, received, taken or reserved by the holder
hereof which may be treated as interest under applicable law, computed over the
full term of the Note, exceeds the maximum legal limit (if any such limit is
applicable) under United States federal law or state law (to the extent not
preempted by federal law, if any), now or hereafter governing the interest
payable on the Note (the "Maximum Rate"), then the rate of interest on the Note,
together with all Charges, shall be limited to the Maximum Rate. If from any
circumstances, the holder hereof shall ever receive as interest an amount which
would exceed the Maximum Rate, such amount which would be excessive interest
shall be applied to the reduction of the unpaid principal balance hereunder
(whether or not due and payable) and not to the payment of interest.
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9. Miscellaneous.
(a) Presentment, demand, protest, notices of protest, dishonor and
non-payment of this Note and all notices of every kind are hereby waived. To the
extent permitted by applicable law, the defense of the statute of limitations is
hereby waived by Borrower.
(b) No single or partial exercise of any power hereunder shall
preclude other or further exercise thereof or the exercise of any other power.
The holder hereof shall at all times have the right to proceed against any
portion of any security held therefor in such order and in such manner as the
holder may deem fit, without waiving any rights with respect to any other
security. No delay or omission on the part of the holder hereof in exercising
any right hereunder shall operate as a waiver of such right or of any other
right under this Note. No waiver of any breach of any of the covenants or
conditions of this Note shall be construed to be a waiver of or acquiescence in
or a consent to any previous or subsequent breach of the same or any other
condition or covenant. The release of any party liable on this Note shall not
operate to release any other party liable hereon.
(c) No right, power or remedy conferred upon or reserved to the
holder hereof by this Note is intended to be exclusive of any other right, power
or remedy, but each and every such right, power and remedy shall be cumulative
and concurrent and shall be in addition to any other right, power and remedy
given hereunder or now or hereafter existing at law or in equity or by statute.
Every power or remedy given by this Note to the holder hereof or to which such
holder may be entitled may be exercised from time to time and as often as may be
deemed expedient by such holder, and such holder may pursue inconsistent
remedies.
(d) This Note shall be governed by and construed in accordance with
the internal laws of the State of California without regard to principles of
conflicts of laws, except to the extent preempted by United States federal law.
(e) Time is hereby declared to be of the essence of this Note and of
every part hereof. When the context and construction so require, all words used
in the singular herein shall be deemed to have been used in the plural and the
masculine shall include the feminine and the neuter and vice versa. Titles and
sections are for convenience only and neither limit nor amplify the provisions
of this Note, and all references herein to sections or paragraphs shall refer to
the corresponding sections or paragraphs of this Note unless specific reference
is made to such sections or paragraphs of another document or instrument.
(f) If any provision of this Note or the application thereof to any
person or circumstance shall be invalid or unenforceable to any extent, the
remainder of this Note and the application of such provision to other persons or
circumstances shall not be affected thereby and shall be enforced to the maximum
extent permitted by law.
(g) Any and all notices required by this Note shall be personally
delivered or sent by certified mail, return receipt requested, or sent by
machine confirmed facsimile transmission, addressed to a party at its address
set forth below, or at such other address as it may designate to the other party
in accordance with this paragraph. A notice shall be deemed effective
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when delivered if personally delivered, four (4) business days following mailing
if sent by certified mail, return receipt requested, and upon machine
confirmation of transmission when sent by facsimile.
If to Borrower: If to Lender:
Michael L. Robertson MP3.com, Inc.
c/o MP3.com, Inc. 4790 Eastgate Mall
4790 Eastgate Mall San Diego, California 92121-1970
San Diego, California 92121-1970 Attn: Chief Financial Officer
Telephone: (858) 623-7000 Telephone: (858) 623-7000
Facsimile: (858) 623-7003 Facsimile: (858) 623-7010
with a copy to: with a copy to:
___________________ Scott N. Wolfe, Esq.
___________________ Latham & Watkins
___________________ 12636 High Bluff Drive, Suite 300
___________________ San Diego, California 92130
Telephone: (___) ____________ Telephone: (858) 523-5400
Facsimile: (___) ____________ Facsimile: (858) 523-5450
The parties hereto may change their addresses by giving notice thereof to the
other parties hereto in conformity with this section.
(h) This Note may not be assigned by Borrower without the prior
written consent of the holder hereof. On or prior to the Demand Date, this Note
may not be assigned by Lender without the prior written consent of Borrower,
except that Lender may assign this Note to any affiliate of Lender without the
consent of Borrower. This Note shall be freely assignable by Lender without the
consent of Borrower (i) after the Demand Date, or (ii) upon the occurrence of
and during the continuation of an Event of Default. Subject to the foregoing
restriction, this Note shall inure to the benefit of the holder hereof, its
successors, assigns and representatives and shall bind Borrower, its successors,
assigns and representatives. This Note may not be modified, amended or
terminated except by a written agreement signed by Borrower and the holder
hereof.
(i) No offset or claim that Borrower now or may in the future have
against the holder of this Note shall relieve Borrower from paying any amounts
owing hereunder.
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IN WITNESS WHEREOF, Borrower has executed and delivered this Secured
Promissory Note effective as of the date first written above.
"Borrower"
Michael L. Robertson
/s/ Michael L. Robertson
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Signature Page to Secured Promissory Note
executed in favor of MP3.com, Inc.
dated April 2, 2001
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