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EXHIBIT 10.69
AMENDMENT AGREEMENT
This Amendment Agreement (this "AGREEMENT") is being entered into on
July 10, 2001 by and among AppliedTheory Corporation, a Delaware corporation
(the "COMPANY"), and Halifax Fund, L.P., a Cayman Island limited partnership,
Palladin Partners I, L.P., a Delaware limited partnership, Palladin Overseas
Fund Ltd., a Cayman Islands exempted company, XxXx Convertible Arbitrage Fund,
Ltd., a Cayman Islands exempted company, Lancer Securities (Cayman) Ltd., a
Cayman Islands exempted company, Xxxxxxx Associates, L.P., a Delaware limited
partnership and Xxxxxxx International, L.P., a Cayman Island limited partnership
(collectively, the "INVESTORS"). Terms used herein but not defined shall have
the meaning set forth in that certain related Amended and Restated Purchase
Agreement dated as of June 5, 2000 (the "PURCHASE AGREEMENT") by and among the
Company and the Investors, except where the context expressly indicates to the
contrary.
R E C I T A L S:
WHEREAS, on January 9, 2001, the Company and the Investors, among
others, entered into that certain Letter Agreement re Distribution of New
Documents (the "LETTER AGREEMENT"), pursuant to which certain transaction
documents were amended and restated (including the Purchase Agreement) and new
securities were issued (to replace ones previously issued);
WHEREAS, the Company and the Investors desire to enter into this
Agreement to further modify the provisions of the "NEW TRANSACTION DOCUMENTS"
(as defined in the Letter Agreement);
NOW THEREFORE, for $1.00 and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
T E R M S:
1. SECURITY AGREEMENT. The Company and its subsidiaries shall provide the
Investors with a continuing security interest in certain collateral to secure
prompt repayment of any and all indebtedness of the Company to each Investor and
to secure prompt performance by the Company of each of its covenants and duties
under this Agreement and the New Transaction Documents (modified as contemplated
hereby), all as set forth more fully in that certain Security Agreement (the
"SECURITY AGREEMENT") to be entered into between the Company and the Investors,
substantially in the form attached hereto as Exhibit 1, contemporaneously
herewith.
2. CONVERSION TERMS.
(a) The following changes shall be effected to the terms and
provisions of the Debentures governing conversion:
(i) The term "CONVERSION PRICE" shall be defined to mean the
right to convert the Debentures at the following prices: (i) $0.90, with respect
to (A) $6,500,000
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aggregate principal amount of Debentures and (B) interest accrued thereon from
and after June 5, 2000 (the "ISSUANCE DATE") plus any default payments not
previously added to principal; (ii) $1.22, with respect to (A) $6,500,000
aggregate principal amount of Debentures and (B) interest accrued thereon from
and after the Issuance Date plus any default payments not previously added to
principal; (iii) $1.80, with respect to (A) $6,500,000 aggregate principal
amount of Debentures and (B) interest accrued thereon from and after the
Issuance Date plus any default payments not previously added to principal; (iv)
$2.70, with respect to (A) $6,500,000 aggregate principal amount of Debentures
and (B) interest accrued thereon from and after the Issuance Date plus any
default payments not previously added to principal; (v) $3.60, with respect to
(A) the aggregate principal amount of Debentures in excess of $26,000,000
outstanding on the date hereof and (B) interest accrued thereon from and after
the Issuance Date plus any default payments not previously added to principal.
Each of such prices shall be subject to adjustment in accordance with Section
5(b)(ii) and Section 8 (excluding Section 8(b)(i)) of the Debentures. The
Conversion Prices shall be allocated among the Debentures owned by Investors in
proportion to the Outstanding Principal Amount of Debentures held by each such
Investor on the date hereof.
(ii) Sections 4(a), 4(b)(ii), 4(c), 5(b)(i)(B), 5(b)(i)(C),
5(c), 5(d), 6, 7 8(b)(i) and 18(l) of the Debentures are hereby deleted.
(iii) Section 5(b)(i)(A) is hereby amended to read as follows:
"(A) Subject to adjustments pursuant to Section
5(b)(ii) and Section 8 hereof, the Holder shall have the right to convert this
Debenture, at any time and from time to time, at the Conversion Price (as
defined in this Debenture). The date on which the Conversion Notice is given
shall be the Holder Conversion Date. Unless otherwise specified by the Holder,
Debentures submitted for conversion shall be converted at the lowest Conversion
Price available to the Holder with respect to such Debentures."
(iv) Section 5(b)(ii) of the Debentures is hereby amended to
read as follows:
"(ii) In addition to the foregoing and in addition to
any other rights or remedies which may be available to the Holder in this
Debenture or under the Purchase Agreement, the Registration Rights Agreement,
Amendment Agreement or the Security Agreement, if at any time the Company fails
for any reason to redeem the Debenture (or portion thereof, as applicable) in
cash and/or non-cash consideration pursuant to and in accordance with Section 6
of the Amendment Agreement or make any cash payment (other than interest
payments with respect to which the Holder has the right to require the Company,
or the Company has the right to elect and has elected, to pay PIK Interest in
lieu thereof) in accordance with the terms of this Debenture, the Purchase
Agreement, Registration Rights Agreement, the Amendment Agreement or the
Security Agreement, and such failure remains uncured for at least five (5)
Trading Days, then the Conversion Price shall be subject to further adjustment
(downwards only). The Conversion Price shall thereafter be equal to the lesser
of (x) the lowest Market Price for Shares of Common Stock during any of the five
(5) days prior to the date that the Holder submits a Conversion Notice (as
defined above) to the Company and (y) the Conversion Price otherwise applicable
at such time, in each case subject to further adjustment pursuant hereto and
Section 8."
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(v) The first clause of Section 8(b)(ii) which currently reads
"the Market Price for Shares of Common Stock on the Trading Day next preceding
such issue or sale," is hereby amended to read "90% of the Market Price for
Shares of Common Stock on the Trading Day next preceding such issue or sale."
(vi) The Debentures, as modified in accordance with the terms
of this Agreement, shall sometimes be referred to in this Agreement as the
"AMENDED DEBENTURES".
(b) Simultaneously with the execution of this Agreement, the Company
shall issue to each Investor one or more Amended Debentures (in such
denominations, aggregating, as to each Investor, the principal amount (plus
accrued interest and unpaid default payments) held by such Investor on the date
hereof, in such denominations requested by each such Investor) containing the
terms set forth in the Debentures as modified by this Agreement, in the form of
Exhibit 2 hereto.
(c) The right to convert the Amended Debentures in accordance with
the terms thereof (as modified by this Agreement) shall, except in the event
that an Investor shall have the right to convert at the Conversion Price
specified in Section 5(b)(ii) of the Amended Debentures, terminate upon the
closing of a Relevant Sale (as defined in the next sentence). For the purposes
hereof, a "RELEVANT SALE" shall mean a Sale of the Company (as defined below) in
which (i) immediately following such closing of the Sale of the Company, all or
substantially all of the assets of the Company held prior thereto, or all or
substantially all of the voting stock of the Company (depending upon the form of
the transaction), is held by or on behalf of the acquirer in such transaction;
(ii) the consideration paid by the acquirer is (or would be, but for Section 6
of this Agreement) received by the shareholders of the Company in such
transaction; and (iii) such consideration ("RELEVANT SALE CONSIDERATION")
consists solely of cash and/or Marketable Securities (as defined in the next
sentence). For the purposes hereof, "MARKETABLE Securities" shall mean
marketable, free trading shares of common stock of a publicly-traded company
that is traded on the NYSE, the American Stock Exchange, the NASDAQ National
Market System or the Nasdaq Small-Cap Market and that has a market
capitalization of not less than $50,000,000 and a public float of not less than
$37,500,000 as measured by the average closing stock price of the
publicly-traded company for the twenty (20) Trading Days prior to the Sale of
the Company; provided, however, that, if the Relevant Sale Consideration is less
than 50% cash, then such $50,000,000 and $37,500,000 threshold amounts shall be
increased by multiplying such amounts by a number equal to (x) 1 plus (y) a
fraction (A) the numerator of which is the difference between (I) 50% and (II)
the percentage of cash in the Relevant Sale Consideration and (B) the
denominator of which is 50%. By way of example only, if the shareholders were to
receive 25% cash, then the $50,000,000 threshold amount shall be increased to
$75,000,000 and the $37,500,000 threshold amount shall be increased to
$56,250,000.
(d) Contemporaneously with the execution of this Agreement, the
Debentures shall be delivered by the Investors to the Company in exchange for
the Amended Debentures (which Amended Debentures, collectively with this
Agreement, the Security Agreement and the Participation Certificates (as defined
below), shall be referred to as the "JULY 2001 TRANSACTION Documents"). No
service charge shall be made for such transfer or exchange.
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(e) Immediately upon the occurrence of the exchange referred to in
Section 2(d) above, and without further action on the part of the Company or the
Investors, the Debentures shall be deemed cancelled, and all references to the
"DEBENTURES" contained in any of the New Transaction Documents or the July 2001
Transaction Documents shall hereinafter be deemed to refer to the "AMENDED
DEBENTURES".
(f) The Company acknowledges that it will recognize that all of the
Amended Debentures have a Rule 144 holding period under the Securities Act that
commenced on June 5, 2000 for all purposes and further acknowledges that the
Company will act in accordance with that position.
3. REGISTRATION RIGHTS.
(a) All shares received and issuable upon conversion of the Amended
Debentures shall be considered Registrable Securities for the purpose of the
Registration Rights Agreement and are registered pursuant to the Company's
Registration Statement (No. 333-54420) that covers the disposition of
Registrable Securities issuable pursuant to the New Transaction Documents. To
the extent required to accomplish the foregoing, within ten (10) Trading Days
from the day hereof, the Company shall deliver to the Investors and file with
the SEC a prospectus supplement to the Registration Statement in accordance with
the rules and regulations under the Securities Act. Any such prospectus
supplement shall be submitted to the Investors at least two (2) Trading Days
prior to its filing for review and shall be subject to the Investors' prior
approval.
(b) The Company hereby represents that, upon the filing of the
prospectus supplement referred to in Section 3(a) above, the Company shall have
sufficient shares registered under the Company's Registration Statement (No.
333-54420) to cover the disposition of Registerable Securities issuable pursuant
to the conversion of the Amended Debentures if such conversion took place
immediately following the execution of this Agreement.
(c) (i) (i) Notwithstanding anything to the contrary, for the
purpose of Section 2(b)(ii) of the Registration Rights Agreement only, (A)
"Approved Markets" shall hereinafter mean any of the Nasdaq National Market
System, the American Stock Exchange, the New York Stock Exchange, the Nasdaq
Small Capitalization Market and the Nasdaq Bulletin Board and (B) references in
Section 2(b)(ii)(A) to being "listed with" the Approved Market shall hereinafter
be deemed to include being "quoted on" the Nasdaq Small Capitalization Market or
the Nasdaq Bulletin Board, and references in Section 2(b)(ii)(B) to being
"delisted from" the Approved Market shall hereinafter be deemed to include a
"halt from trading and/or quotation on" the Nasdaq Small Capitalization Market
or the Nasdaq Bulletin Board and not immediately thereafter being listed or
quoted on another Approved Market.
(ii) Section 2(f) of the Registration Rights Agreement is
hereby amended to read as follows:
"The Company shall file a Registration Statement with
respect to any Registrable Securities not included in the initial Registration
Statement within ten (10) business days of the date that there are Registrable
Securities not included in such initial
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Registration Statement (the "TRIGGERING DATE"). The Company shall use its best
efforts to (i) cause any such additional Registration Statement, when filed, to
become effective under the Securities Act within ninety (90) days of the
Triggering Date, and (ii) keep such additional Registration Statement effective
during the period described in Section 5 below. All of the registration rights
and remedies under this Agreement shall apply to the registration of such new
Registrable Securities, including without limitation the provisions providing
for Default Payments and Premium Redemption Price contained herein, except that
for the purpose of this Section 2(f) references to April 11, 2001 shall be
deemed to refer to the ninetieth (90th) day following the Triggering Date and
references to June 11, 2001 shall be deemed to refer to the ninetieth (90th) day
following the Triggering Date."
(iii) Notwithstanding anything to the contrary in the
Registration Rights Agreement, notices to the Company shall be sent to the
Company as provided in the Purchase Agreement.
(iv) All references to the Registration Rights Agreement
contained in any of the New Transaction Documents of the July 2001 Transaction
Documents shall hereinafter be deemed to refer to the Registration Rights
Agreement as hereby amended.
4. PURCHASE AGREEMENT.
(a) Section 3.6(A)(b)(x), Section 3.6(A)(b)(y) and Section
3.6(A)(b)(z) of the Purchase Agreement are hereby deleted.
(b) Section 3.17 of the Purchase Agreement is hereby deleted.
(c) Notwithstanding anything to the contrary in the Purchase
Agreement, notices to the Company shall be sent to the addresses set forth in
the Security Agreement.
(d) All references to the Purchase Agreement contained in any of the
New Transaction Documents of the July 2001 Transaction Documents shall
hereinafter be deemed to refer to the Purchase Agreement as hereby amended.
(e) The Company covenants that as long as any Amended Debenture or
Participation Certificate is outstanding: (i) the Company will not, either
directly or indirectly, sell or otherwise issue (other than (x) issuances or
sales of securities pursuant to employee or director option plans of the Company
approved by shareholders or up to 75,000 shares pursuant to contracts currently
in effect and disclosed to the Investors, (y) arrangements with the Investors
and (z) without the Investors' consent, the issuances or sales of securities in
connection with strategic acquisitions of other entities by the Company which
engage in businesses related or complementary to the Company's business and that
are not essentially capital raising transactions on behalf of the Company) in
the aggregate more than 4,068,000 shares of Common Stock (subject to adjustment
for stock splits and reverse splits) to any third parties in the aggregate; and
(ii) at no time shall the Company issue any shares of Common Stock at an
effective Per Share Selling Price (as defined in the Amended Debentures) equal
to less than a 20% discount of the average of the daily VWAP (as defined in the
Amended Debentures) for the 20 Trading Days immediately preceding the date of
such issuance. For purposes of the restriction set forth in Section 4(e)(i)
above, in the case of the issuance of any convertible
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securities, warrants, options or other rights to subscribe for or to purchase or
exchange for, shares of Common Stock ("DERIVATIVE SECURITIES"), the maximum
number of shares of Common Stock issuable upon exercise, exchange or conversion
of such Derivative Securities shall be deemed to be issued. With respect to
Derivative Securities, for purposes of the restriction set forth in Section
4(e)(ii) above, the Per Share Selling Price shall be equal to the lowest price
at which shares of Common Stock may be issued on conversion, exercise or
exchange of the Derivative Securities as of the issuance date of such Derivative
Securities or any subsequent date, whichever results in the lower Per Share
Selling Price. If such lowest price may change after issuance of the Derivative
Securities (for example, by reason of adjustments or resets resulting from
changes in the Market Price for shares of the Common Stock, or for any other
reason) then this restriction shall be recomputed to reflect such new "lowest
price."
5. WARRANTS. Contemporaneously with the execution of this Agreement, all
outstanding Warrants held by the Investors shall be automatically, and without
further action on the part of the Company or the Investors, cancelled, for no
additional consideration. Prior to or contemporaneously with the execution of
this Agreement, each Investor agrees to deliver to the Company all of its
outstanding Warrants (or an affidavit of lost certificate) for cancellation.
6. SALE OF THE COMPANY.
(a) The Company agrees to use its best efforts to (i) immediately
enter into negotiations with one or more third parties and (ii) try to reach an
agreement with such third parties pursuant to which there will occur a Relevant
Sale (as defined above).
(b) In the event of one or more Sales of the Company which occur on
or before the earlier of the Last Sale Date (as defined below) and the date of a
Relevant Sale, the Company shall be obligated to pay, or cause to be paid, to
the Investors a percentage of all consideration paid and payable, directly or
indirectly, by or on behalf of the acquirer to the Company, its subsidiaries,
its shareholders, its affiliates or any other person on behalf of the Company
(each a "PAYEE"), in accordance with the schedule set forth in Section 6(c)
below. Such payments shall be applied, as to each Investor, first, to redeem the
Outstanding Principal Amount of each Investor's Amended Debentures at a cash
redemption price equal to 100% of the Outstanding Principal Amount (plus all
accrued but unpaid interest and default payments (not previously added to
principal)) being redeemed. After all of an Investor's Amended Debentures have
been redeemed and/or converted in full, such Investor shall continue to be
entitled to receive the percentages of consideration set forth in Section 6(c)
resulting from each Sale of the Company, up to and including the first Relevant
Sale (as defined in Section 2(c) above) which occurs on or before the later of
(i) June 5, 2003 and (ii) the eighteen month anniversary of the first date upon
which there are no longer any Amended Debentures outstanding (the "LAST SALE
DATE"). For the avoidance of doubt, consideration paid and/or payable, directly
or indirectly, by or on behalf of the acquirer after the Last Sale Date and/or
the date of a Relevant Sale with respect to a Sale of the Company which occurred
prior to the earlier of the Last Sale Date and the date of a Relevant Sale are
covered by this Section 6. After an Investor's Amended Debentures have been
redeemed and/or converted in full, payments to be made to such Investor pursuant
to this Section 6(b) shall be made in accordance with the Participation
Certificates to be delivered by the Company to each Investor contemporaneously
herewith, the form of which is attached hereto as Exhibit 3 (the "PARTICIPATION
CERTIFICATES").
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A "SALE OF THE COMPANY" shall mean (i) a Change in Control
Transaction (as defined in the Amended Debentures) or (ii) a sale or transfer
(in a single transaction or a series of transactions) of all or substantially
all of the Company's assets either by the Company or any one or more
subsidiaries thereof, provided that the Company is not subject to bankruptcy
proceedings at any time from the date of the announcement of such sale through
the closing date thereof.
(c) In the case of any Sale of the Company which occurs on or before
the earlier of the Last Sale Date or the date of a Relevant Sale, the following
schedule shall govern.
(i) 100% of the consideration payable by or on behalf of the
acquirer in the Sale of the Company, up to $10,000,000, shall be paid to the
Investors;
(ii) 60% of the consideration between $10,000,000 and
$30,000,000 shall be paid to the Investors;
(iii) 20% of the consideration between $30,000,000 and
$50,000,000 shall be paid to the Investors; and
(iv) 10% of the consideration above $50,000,000 shall be paid
to the Investors.
For the avoidance of doubt, in a case where an initial Sale of the
Company resulted in consideration of $10,000,000, then, with respect to the next
Sale of the Company, the schedule would commence with paragraph (ii) above of
this Section 6(c).
(d) Any payments made to the Investors pursuant to this Section 6
shall occur, unless otherwise agreed to in writing by the Company and the
Investors, on the same date or dates as consideration is (or would be, but for
Section 6(c) above) first given to any Payee (the Company shall notify in
writing each Investor of such date at least twenty (20) Trading Days prior
thereto) (the "PAYMENT DATE"). On the Payment Date, if such payment is on
account of the redemption of an Investor's Amended Debentures, such Investor
shall (if such Amended Debenture is being redeemed in full) surrender the
Amended Debentures being redeemed to the Company and the Company shall redeem,
or cause to be redeemed, in cash the full Outstanding Principal Amount (plus all
accrued but unpaid interest and default payments (not previously added to
principal)). Unless otherwise agreed to in writing, any such payment shall occur
at the office of the Investors' counsel on the Payment Date. To the extent that
the schedule set forth in Section 6(c) does not result in the redemption in full
of the Amended Debentures following a Sale of the Company, then the remaining
Amended Debentures shall remain outstanding (subject to subsequent Sales of the
Company ), in full force and effect and secured pursuant to the terms of the
Security Agreement.
(e) If, subsequent to the date hereof and prior to the date of a
Sale of the Company, the Amended Debentures are converted into shares of Common
Stock in accordance with the terms of this Agreement and the Amended Debentures,
then there shall be a pro rata reduction in the dollar amounts set forth in the
schedule contained in Section 6(c) above. For the avoidance of doubt, if 50% of
the Amended Debentures are so converted, then paragraph (i) of Section 6(c)
would provide for 100% of the consideration up to $5 million; paragraph (ii)
would provide for 60% of the consideration between $5 million and $15 million;
and so on.
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(f) Amended Debentures shall be redeemed and consideration shall be
allocated among the Investors in proportion to the amount of Amended Debentures
owned by the Investors at the time of a Sale of the Company. In the event that
no Amended Debentures remain outstanding, consideration shall be allocated among
the Investors pursuant to the Participation Certificates in proportion to the
amount of Amended Debentures owned by the Investors as of the date hereof.
(g) If the consideration paid in connection with the Sale of the
Company is not cash, then each Investor, as to itself must approve the
consideration before it may be applied to redeem the Amended Debentures. If the
consideration is part cash and part securities, the Investors may elect to have
the Amended Debentures redeemed to the extent of the cash consideration only, or
may have their Amended Debentures redeemed based upon the amount of the cash
plus the value of the other consideration. If the consideration consist solely
of securities or other non-cash consideration, then the Investors may elect to
have their Amended Debentures redeemed to the extent provided in the schedule
contained in Section 6(c) or in such lesser amount as they may elect. In the
event that no Amended Debentures remain outstanding, consideration shall be paid
to the Investors in accordance with this Agreement and the Participation
Certificates. Consideration not consisting of cash but consisting of marketable
securities shall be valued at the lower of (i) the average of the closing price
of such security on its principal market during the twenty (20) Trading Days
immediately following the public announcement of the Sale of the Company or (ii)
the average of the closing price of the securities on the principal market
during the twenty (20) Trading Days immediately preceding the Sale of the
Company.
(h) If the consideration consists in whole or in part of non-cash
consideration, then the consideration paid to the Investors, assuming that they
agree to accept non-cash consideration, shall consist of the same proportions of
cash and non-cash consideration as is (or would be but for Section 6(c) above)
received by the Payees in connection with such Sale of the Company. In the event
that two or more Payees receive different proportions of cash and non-cash
consideration, each Investor shall be entitled to select which of such
proportions shall apply to such Investor.
(i) The Company shall give the Investors not less than thirty (30)
days' notice of the effective date of each Sale of the Company which is to occur
on or before the Last Sale Date. To the extent applicable, following the receipt
of such notice, if a portion of the consideration is to consist of non-cash
consideration, the Investors shall be entitled, up to the business day
immediately preceding the effective date of the Sale of the Company, to make
their election to have their Amended Debentures redeemed in consideration for
the non-cash assets. Each Investor shall be entitled to make its election with
respect to its Amended Debentures separately from the election made by any other
Investor. In addition, Amended Debentures may be converted up to closing of the
applicable redemptions.
(j) Nothing contained in this Section shall be deemed to reduce or
limit the rights and remedies available to the Investors in the case of an Event
of Default under the Amended Debentures.
7. REPLACEMENT OF THE BOARD.
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(a) For the purpose of this Section 6, "REPLACEMENT OF THE BOARD"
shall mean (i) a replacement of more than one-half of the members of the
Company's Board of Directors which is not approved by those individuals who are
members of the Company's Board of Directors on the date hereof, or (ii) Xxxxx X.
Xxxxxx ceases for any reason to serve as Chief Executive Officer or as a member
of the Company's Board of Directors.
(b) For so long as any Amended Debentures remain outstanding or any
Participation Certificate is still in effect, in the event of a Replacement of
the Board, the Company shall reconstitute its Board of Directors such that two
persons designated by the Majority-in-Interest (as defined in Section 7(f)
below) shall replace two members of the then-existing Board as members of the
Board. However, if necessary to avoid the obligation to file disclosure
documents under Rule 14f-1 under the Exchange Act with respect to the
Majority-in-Interest, in the event that there have been additional departures
from the Board at the time of reconstitution of the Board, the
Majority-in-Interest may (but shall not be obligated to) opt to reduce the
number of its designees.
(c) Thereafter, for so long as any of the Amended Debentures remain
outstanding or any Participation Certificates are still in effect, if one of the
members of the Board of Directors designated by the Majority-in-Interest to be
added to the Company's Board of Directors resigns, dies or becomes
incapacitated, the Company shall within one week fill such vacancy with a person
selected or approved by the Majority-in-Interest.
(d) The Company covenants not to increase the size of its Board of
Directors above 5 directors without the prior approval of the
Majority-in-Interest or in order to meet its obligations under Section 7(e)
below.
(e) If (i) the Company fails for any reason to take all actions
required of it pursuant to Section 7(b) and (c) above (whether by designating
the Majority-in-Interest's selections to vacancies (created through
resignations, removals or by increasing the size of the Board), designating the
Majority-in-Interest's selections as the Company's candidates at the Company's
annual meeting or otherwise) or (ii) the stockholders of the Company shall not
have voted in favor of the selections of the Majority-in-Interest at the next
meeting of stockholders at which directors are elected and the
Majority-in-Interest's selections are not otherwise appointed to serve on the
Board of Directors, then (x) an Event of Default under the Amended Debentures
and (y) a default under the Participation Certificates shall each be deemed to
have occurred and the Investors shall have all rights and remedies associated
therewith.
(f) For the purpose hereof, "Majority-in-Interest" means the
Investors holding a majority of the Amended Debentures outstanding at the time
of a Replacement of the Board. In the event that no Amended Debentures remain
outstanding, "Majority-in-Interest" shall mean Halifax Fund, L.P.
8. PRESS RELEASE AND FORM 8-K. Immediately following the execution of this
Agreement by all of the parties, the Company shall issue a press release in the
form of Exhibit 4 hereto. If the Company fails to issue the press release within
two (2) Trading Days following the date hereof, the Investors may issue a press
release covering the July 2001 Transaction Documents and complying with any
legal requirement applicable to the Investors. In addition, as
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soon as practical after the issuance of the press release, the Company shall
file a Form 8-K with the SEC which discloses the transactions contemplated by
the July 2001 Transaction Documents. The Investors shall have the opportunity to
review such Form 8-K prior to its filing.
9. EVENT OF DEFAULT. Section 18 of the Debentures is hereby amended to add
the following as additional Events of Default (as defined in the Amended
Debentures) under the Amended Debentures:
(a) the Company shall be in default under any of the July 2001
Transaction Documents (including, without limitation, breach of any of the
representations, warranties or covenants contained therein), and such default
continues beyond the applicable cure period provided therefor (if any);
(b) the Company and/or one or more of its affiliates shall be in
default of any of its indebtedness or other obligations (including, without
limitation, obligations consisting of one or more covenants or agreements)
currently owed, or owing in the future, by the Company and/or any of its
affiliates to one or more Lenders (as defined in the Security Agreement and
expressly including their successors and/or assigns), and such default continues
beyond the applicable cure period provided therefor (if any), other than an
Event of Default solely arising under Section 8.1(8) or 8.1(14) of the Revolving
Credit Agreement as defined in the Security Agreement;
(c) the Company and/or one or more of its affiliates shall be in
default of any indebtedness or other obligation currently owed, or owing in the
future, by the Company and/or any of its affiliates provided that such
obligation involves an amount equal to or greater than $100,000, and such
default continues beyond the applicable cure period provided therefor (if any).
10. DUE AUTHORIZATION. The Company hereby represents and warrants to each
of the Investors as of the date hereof that the Company has all requisite
corporate power and authority to enter into and perform this Agreement and the
other July 2001 Transaction Documents and the transactions contemplated hereby
and thereby. The Company further represents and warrants that this Agreement and
the other July 2001 Transaction Documents constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application.
11. INDEMNITY. The Company shall indemnify each of the Investors against
any loss, cost or damages (including reasonable attorney's fees and expenses but
excluding consequential damages) incurred as a result of the Company's breach of
any representation, warranty, covenant or agreement contained in any July 2001
Transaction Document or incurred as a result of the enforcement of this
indemnity.
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12. EXPENSES. The Company shall pay in immediately available funds, all
reasonable expenses (including, without limitation, UCC filing fees and
reasonable attorneys' fees and expenses of the Investors' Counsel) not to exceed
$175,000 incurred by the Investors in connection with the preparation,
negotiation, execution and delivery of the July 2001 Transaction Documents and
the related agreements and documents and the transactions contemplated hereunder
and thereunder. Contemporaneously with the execution of this Agreement, the
Company shall pay the amount estimated to be due for such fees and expenses
(which may include fees and expenses estimated to be incurred for completion of
the transaction including post-closing matters). In the event such amount is
ultimately less than the actual fees and expenses, the Company shall promptly
pay such deficiency upon receipt of an invoice regarding same. In the event such
amount is ultimately greater than the actual fees and expenses, such excess
shall promptly be returned to the Company.
13. CLOSING DOCUMENTS. Prior to or contemporaneously with the execution
and delivery of this Agreement, the Company shall deliver each of the Closing
Documents (as defined below) to the Investors. The obligations of each Investor
hereunder are subject to the Investors' receipt of such Closing Documents. The
requirement that the Investors receive the Closing Documents is for each
Investor's benefit and may be waived by each Investor at any time in writing in
its sole discretion. "CLOSING DOCUMENTS" means (v) an opinion of independent
counsel of the Company, in the form annexed hereto as Exhibit 5(a); (w) an
executed copy of the officer's certificate in the form attached hereto as
Exhibit 5(b); (x) the Amended Debentures issued by the Company in accordance
with this Agreement; (y) the Security Agreement executed by the Company; and (z)
the Participation Certificates issued by the Company in accordance with this
Agreement.
14. MISCELLANEOUS.
(a) Section 6 (other than Section 6.3 and Section 6.4) of the
Purchase Agreement is hereby incorporated herein by reference with such changes
as may be necessary mutatis mutandis to conform with this Agreement.
(b) All other provisions of the New Transaction Documents shall be
deemed to be changed mutatis mutandis to conform to the changes contemplated
herein.
(c) Except as set forth above, the New Transaction Documents and the
terms thereof shall remain unmodified and in full force and effect.
(d) In the event of any inconsistency or conflict between this
Agreement and the New Transaction Documents, the terms, provisions and
conditions of this Agreement shall govern and control.
(e) The Company hereby represents that all of the Company's
representations and warranties contained in the New Transaction Documents were
true and correct as of June 5, 2000 and, except as set forth on Schedule 1
hereto, are true and correct as of the date hereof (except for representations
and warranties made as of an earlier date, which shall be true and correct as of
such date).
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(f) The Company hereby represents that it has performed all
agreements and satisfied all conditions required to be performed or satisfied
prior to the date hereof by the July 2001 Transaction Documents when and as
required.
(g) The Company hereby acknowledges and agrees that it has no
pending claims against any of the Investors and hereby releases, acquits and
forever discharges each of the Investors from any and all actions, causes of
action, claims, demands, damages, judgments, debts, dues and suits of every
kind, nature and description whatsoever, which the Company ever had, now has or
may have against any Investor on or by reason of any matter, cause or thing
whatsoever through the date hereof (immediately prior to the execution of this
Agreement and the other July 2001 Transaction Documents).
(h) Each of the Investors hereby acknowledges and agrees that, to
its knowledge, it has no pending claims against the Company arising under the
New Transaction Documents and hereby releases, acquits and forever discharges
the Company from any and all actions, causes of action, claims, demands,
damages, judgments, debts, dues and suits of every kind, nature and description
whatsoever, which such Investor, as the case may be, ever had, now has or may
have against the Company from breaches of representations and warranties and
breaches of covenants arising under the New Transaction Documents through the
date hereof (immediately prior to the earlier of the execution of this Agreement
or the execution of any of the other July 2001 Transaction Documents).
(i) The Company hereby represents that no Event of Default (as
defined in the Amended Debentures) has occurred, is likely to occur or (except
to the extent resulting from the entry of judgment in pending litigation
disclosed in the Pre-Closing SEC Documents) is threatened, and no event has
occurred which constitutes or would constitute an Event of Default with notice
or the passage of time or both, as of the date hereof.
(j) This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same Agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the executing party with the same force and effect as if such
facsimile signature page were an original thereof.
(k) Each party shall indemnify each other party against any loss,
cost or damages (including reasonable attorney's fees but excluding
consequential damages) incurred as a result of such parties' breach of any
representation, warranty, covenant or agreement in this Agreement; or incurred
as a result of the enforcement of this indemnity.
(l) This Amendment Agreement, the other July 2001 Transaction
Documents, the other New Transaction Documents and the agreements and other
documents referred to herein and therein constitute the full and entire
understanding and agreement of the parties with respect to the matters covered
hereby and thereby, supercedes any prior understanding, memoranda or other
written or oral agreements between or among any of them respecting the matters
covered hereby and thereby and, except as specifically set forth herein or
therein, neither
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the Company nor any Investor makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
waived or amended other than by a written instrument signed by the party against
whom enforcement of any such amendment or waiver is sought.
(m) Notices to the parties hereto shall be sent to the addresses set
forth in the Security Agreement.
*** Signatures on the next page ***
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ACCEPTED AND AGREED TO AS OF
THE DATE FIRST ABOVE WRITTEN:
COMPANY:
APPLIEDTHEORY CORPORATION
By: /s/ Xxxxx Xxxxxx
--------------------------------------------
Name: Xxxxx Xxxxxx
Title: President
INVESTORS:
HALIFAX FUND, L.P.
By: The Palladin Group, L.P., as Attorney-in-Fact
By: /s/ Xxxxxxx Xxxxxxx
---------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Counsel
PALLADIN PARTNERS I, L.P.
By: The Palladin Group, L.P., as Attorney-in-Fact
By: /s/ Xxxxxxx Xxxxxxx
---------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Counsel
PALLADIN OVERSEAS FUND LTD.
By: The Palladin Group, L.P., as Attorney-in-Fact
By: /s/ Xxxxxxx Xxxxxxx
---------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Counsel
XxXX CONVERTIBLE ARBITRAGE FUND, LTD.
By: The Palladin Group, L.P., as Attorney-in-Fact
By: /s/ Xxxxxxx Xxxxxxx
---------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Counsel
[SIGNATURE PAGE TO AMENDMENT AGREEMENT]
*** Signatures continue on next page ***
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LANCER SECURITIES (CAYMAN) LTD.
By: The Palladin Group, L.P., as Attorney-in-Fact
By: /s/ Xxxxxxx Xxxxxxx
---------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Counsel
XXXXXXX ASSOCIATES, L.P.
By: /s/ Xxxx X. Xxxxxx
---------------------------------------------
Name: Xxxx X. Xxxxxx
Title: General Partner
XXXXXXX INTERNATIONAL, L.P.
By: Xxxxxxx International Capital Advisors Inc., as Attorney-in-Fact
By: /s/ Xxxx X. Xxxxxx
---------------------------------------
Name: Xxxx X. Xxxxxx, President
[SIGNATURE PAGE TO AMENDMENT AGREEMENT]