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SECURED CONVERTIBLE PROMISSORY NOTE

Convertible Promissory Note

SECURED CONVERTIBLE PROMISSORY NOTE | Document Parties: LOCAL MATTERS INC. | APTAS, INC You are currently viewing:
This Convertible Promissory Note involves

LOCAL MATTERS INC. | APTAS, INC

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Title: SECURED CONVERTIBLE PROMISSORY NOTE
Governing Law: Colorado     Date: 3/22/2006

SECURED CONVERTIBLE PROMISSORY NOTE, Parties: local matters inc. , aptas  inc
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Exhibit 4.14

THIS SECURED CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (the "ACT"). NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE PAYEE SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.


SECURED CONVERTIBLE PROMISSORY NOTE

$10,000,000.00

 

April 14, 2005
Denver, Colorado

         FOR VALUE RECEIVED , APTAS, INC. , a Delaware corporation (" Company "), hereby promises to pay to YP WEB PARTNERS, LLC , a Louisiana limited liability company (" Payee "), in lawful money of the United States of America and in immediately available funds, the principal sum of Ten Million Dollars ($10,000,000) (the " Original Face Amount ") together with accrued and unpaid interest thereon, each due and payable on the dates, in the manner, and subject to the terms and conditions set forth below. The " Unconverted Face Amount " shall mean an amount equal to $10,000,000 less (i) all cash principal payments to Payee pursuant to Section 1.2 of this Note, (ii) the portion of the principal amount of this Note that has been converted into Company common stock pursuant to Section 1.2 of this Note and (iii) the portion of the principal amount of this Note that has been converted into Company common stock pursuant to Section 8 of this Note. The " Outstanding Principal Amount " shall mean an amount equal to the Reduced Original Face Amount calculated in accordance with Section 1.1 of this Note less (i) all cash payments to Payee pursuant to Section 1.2 of this Note, (ii) the portion of the principal amount of this Note converted into Company common stock pursuant to Section 1.2 of this Note and (iii) the portion of the principal amount of this Note that has been converted into Company common stock pursuant to Section 8 of this Note.

        This Promissory Note (the " Note ") is the Note referred to in and is executed and delivered in connection with that certain Asset Purchase Agreement dated as of even date herewith executed by Company, the Payee and the Members (as defined therein) (as the same may from time to time be amended, modified or supplemented or restated, the " Purchase Agreement "). Additional rights and obligations of Payee are set forth in the Purchase Agreement. All capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Purchase Agreement.

         1.    Reduction of Original Face Amount; Principal Repayment.     

         1.1    Reduction of Original Face Amount.     If the Payee Assets (as defined in Exhibit A hereto) fail to generate in calendar year 2005 the Minimum Race specified in Exhibit A hereto, the Original Face Amount shall, retroactively as of the date of this Note, be reduced to an amount equal to the product of: (x) $10,000,000 multiplied by (y) the Actual Race for calendar year 2005, calculated in accordance with Exhibit A annexed hereto, divided by the Target Race specified in Exhibit A hereto (the " Reduced Original Face Amount "). The date of such calculation, which shall occur on the third day after the date on which the calculation of Actual Race for calendar 2005 is final as provided in Exhibit A hereto, is hereinafter referred to as the " Principal Reduction Date ." The calculation of accrued interest hereon shall be correspondingly adjusted. If such calculation indicates that Company paid excess interest, Company shall be entitled to deduct the excess interest from the next interest or principal payment due hereunder. Any reduction in the Original Face Amount pursuant to the foregoing shall be treated by the parties to the Purchase Agreement as a reduction to the purchase price described in Section 1.2 of the Purchase Agreement.

         1.2    Principal Repayment.     The Outstanding Principal Amount or the Unconverted Face Amount, as applicable, shall be due and payable as provided in this Section 1.2. For purposes of


 

this Note, an Installment Date shall be (i) the earlier of (a) May 1, 2006 or (b) the one-year anniversary of the closing of an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the " Act "), covering the offer and sale of the Company's common stock (an " IPO ") and (ii) each of the first and second anniversaries of the date referred to in clause (i) above; provided that , in no event will the first Installment Date occur prior to the Principal Reduction Date. Notwithstanding the foregoing , if, pursuant to the preceding sentence, the first Installment Date is to occur prior to the later of (A) the expiration of the Lock-Up Period or (B) the earlier to occur of (i) the first date on which Conversion Shares (as defined below) to be issued to Payee on the applicable Installment Date may be sold under Rule 144 under the Act or (ii) the S-3 Eligibility Date (as defined in Section 4 of this Note) (such date determined in accordance with clauses (A) and (B) is referred to herein as the " Deferred Date "), the first Installment Date, at the election of the Payee, shall instead take place on the latest of (i) May 1, 2006, (ii) the Principal Reduction Date, or (iii) that certain date which is fifteen days after the Deferred Date, and each subsequent Installment Date shall occur on the first and second anniversaries of such date. The "Maturity Date" is the date of the last Installment Date. At least ten days prior to each Installment Date, Payee shall deliver notice to the Company (an " Election ") indicating whether it desires (i) to be paid the Applicable Cash Payment (as defined below) (the " Cash Payment Option ") or (ii) to receive the Conversion Shares (as defined below) (the " Share Conversion Option "). If Payee elects the Cash Payment Option, Company shall pay the Applicable Cash Payment on the applicable Installment Date. If Payee elects the Share Conversion Option, the Company shall deliver to Payee as soon as practicable following the applicable Installment Date, but in no event later than five business days thereafter, a certificate representing a number of shares of Company common stock equal to the Conversion Shares. If Payee fails to timely notify Company of its election prior to each applicable Installment Date, Payee shall be deemed to have elected the Share Conversion Option and the Company shall deliver to Payee a stock certificate representing a number of shares of Company common stock equal to the Conversion Shares. The S-3 Availability Date with respect to the sale of any Conversion Shares issuable pursuant to this Section 1.2 shall not be later than thirty (30) days following the later of the date of the Election or the Installment Date.

        For purposes of this Agreement, the " Conversion Shares " shall mean (i) on the first Installment Date, one-third of the Unconverted Face Amount outstanding on the First Installment Date, together with accrued and unpaid interest on such Unconverted Face Amount, converted into Company's common stock pursuant to the formula described in Section 8.1 (the " Conversion Formula "); (ii) on the second Installment Date, one-half of the Unconverted Face Amount outstanding on the second Installment Date, together with accrued and unpaid interest on such Unconverted Face Amount, converted into Company's common stock in accordance with the Conversion Formula; and (iii) on the third Installment Date, the Unconverted Face Amount outstanding on the third Installment Date, together with accrued and unpaid interest on such Unconverted Face Amount, converted into Company's common stock in accordance with the Conversion Formula.

        For purposes of this Agreement, the " Applicable Cash Payment " shall mean (i) on the first Installment Date, one-third of the Outstanding Principal Amount outstanding on the first Installment Date, together with accrued and unpaid interest on such Outstanding Principal Amount; (ii) on the second Installment Date, one-half of the Outstanding Principal Amount outstanding on the second Installment Date, together with accrued and unpaid interest on such Outstanding Principal Amount; and (iii) on the third Installment Date, the Outstanding Principal Amount outstanding on the third Installment Date, together with accrued and unpaid interest on such Outstanding Principal Amount.

        Sections 8.3 through 8.7 shall apply to each conversion of this Note pursuant to the Share Conversion Option.

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         2.    Interest Rate.     Company further promises to pay interest on the Outstanding Principal Amount hereof from the date hereof until payment in full, which interest shall be payable at the rate of eight percent (8%) per annum. Except as provided in Sections 1.2, 8.1 and 8.2, interest payments hereunder shall be due and payable in cash quarterly in arrears within thirty (30) days following the end of each calendar quarter, commencing with the first calendar quarter of 2005, pro rated for partial periods. Prior to the IPO, at Company's election, interest payments hereunder may be made in lieu of cash by issuing to Payee a number of shares of Company common stock as equals (i) the amount of interest due and payable upon this Note divided (ii) by the fair market value of one share of Company common stock, as determined in good faith by the Board of Directors of the Company, which, for purposes of this Note, shall equal the exercise price of incentive stock options granted by the Company most recently prior to the applicable interest payment. Notwithstanding the foregoing, at all times prior to the closing of an IPO, so long as the Payee Assets are generating not less than fifty percent (50%) of the Target Race specified in Exhibit A hereto (pro rated over twelve months) for the calendar quarter to which the interest payment applies, the interest payments shall be made only in cash. Interest shall be calculated on the basis of a 365-day year for the actual number of days elapsed. Upon the occurrence and during the continuance of an Event of Default, Payee shall have the right by written notice to Company to prospectively increase the interest rate under this Note to be equal to fourteen (14%) percent per annum until such Event of Default is cured, but in no event to exceed the maximum rate allowed by law on commercial loans.

         3.    Place of Payment.     All amounts payable hereunder shall be payable at the office of Payee, 3445 North Causeway Blvd., Metairie, LA, 70002, unless another place of payment shall be specified in writing by Payee.

         4.    Registration Rights.     In case the Company shall receive from the Payee (or its assigns) a written request or requests that the Company effect a registration on Form S-3 (or any successor to Form S-3) or any similar short-form registration statement and any related qualification or compliance with respect to all or a part of the Company common stock issued or issuable upon conversion of this Note, the Company will as soon as practicable (and in any event not later than the time period specified in the applicable section of this Note relating to the conversion), effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all of the shares of Company common stock as are specified in such request; provided, however , that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 4 if Form S-3 (or any successor or similar form) is not available for such offering by the Payee (or its assigns). The effective date of a registration statement referred to herein is referred to herein as the " S-3 Availability Date ." The date on which the Company is first eligible to file registration statements on Form S-3 is referred to herein as the " S-3 Eligibility Date ." The Payee's (and its assigns') registration rights pursuant to this Section 4 shall expire if (a) the Company has completed its IPO and is subject to the provisions of the Exchange Act, (b) such Payee (together with its assigns and their respective affiliates, partners and former partners) holds less than 1% of the Company's outstanding Company common stock and (c) all Shares of Company common stock held by and issuable to such Payee (and its affiliates, partners, former partners, members and former members) may be sold under Rule 144 during any ninety (90) day period.

         5.    Application of Payments.     Payment on this Note shall be applied first to accrued interest, and thereafter to the outstanding principal balance hereof.

         6.    Secured Note.     The full amount of this Note is secured by the collateral (the " Collateral ") identified and described as security therefor in the Security Agreement of even date herewith (the " Security Agreement ") executed by and delivered by Company to Payee. Company shall not, directly or indirectly, create, permit or suffer to exist, and shall defend the Collateral against and take such other action as is necessary to remove, any Lien (as defined in the Security Agreement) on or in the Collateral, or in any portion thereof, except as permitted pursuant to the Security Agreement. Payee

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shall release its lien on the Collateral upon delivery by Company to a restricted account acceptable to Payee, in its reasonable discretion and over which Payee has a first lien and security interest, of cash collateral in an amount equal to the then Outstanding Principal Amount and all accrued but unpaid interest on this Note.

         7.    Set off.     All payments to be made under this Note shall be subject to setoff under the terms and conditions set forth in Section 5 of the Purchase Agreement. Any such setoffs shall be applied first to accrued interest and thereafter to installments of unpaid principal in the order of their maturity commencing with the earliest such installment.

         8.    Conversion.     

         8.1    Optional Conversion (Payee).     At any time beginning on the later of (x) the first anniversary of the date of this Note and (y) the Deferred Date, and ending on the Maturity Date, the Unconverted Face Amount, including all accrued and unpaid interest thereon, shall be convertible, in whole or in part, at the option of the Payee into that number of shares of the Company's common stock equal to the number obtained by dividing the portion of the Unconverted Face Amount that is to be converted into Company common stock, plus all accrued and unpaid interest thereon, by the initial price per share of the Company's common stock (prior to any underwriter discount) (the " IPO Price ") paid in the IPO as adjusted as provided in this Section 8 (the " Conversion Price "); provided, however, that this Note may not be converted pursuant to this Section 8.1 at any time following notice of any claim for indemnification pursuant to Section 5 of the Purchase Agreement unless Payee deposits with an escrow agent reasonably acceptable to Company a number of shares of Company common stock having a fair market value equal to one hundred ten percent (110%) of the amount of such claim in accordance with an escrow agreement reasonably acceptable to the Company and the Payee. The S-3 Availability Date with respect to any conversion effected pursuant to this Section 8.1 shall not be later than thirty (30) days following the surrender of the Note pursuant to Section 8.3 below.

         8.2    Optional Conversion (Company).     Provided this Note has not earlier been conver


 
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