Exhibit 99.7
MODIFICATION AGREEMENT
THIS MODIFICATION AGREEMENT (the "Agreement") is made effective as of
June 1, 2001 (the "Effective Date"), by and among MicroTech Leasing Corp.
("MicroTech") and EasyLink Services Corporation ("EasyLink").
W I T N E S S E T H:
A. MicroTech and EasyLink entered into Xxxxx # 00000 dated March
18, 1999 and Xxxxx # 00000 dated May 7, 1999 (both of the aforementioned Leases
and all amendments and lease schedules thereto are collectively referred to
herein as the "Lease").
B. Pursuant to the Lease, EasyLink leased certain equipment from
MicroTech (the "Leased Equipment) as more fully described in the Lease.
C. EasyLink has requested that MicroTech modify certain terms and
conditions of the Lease as set forth herein and forbear from exercising its
rights and remedies under the Lease, and MicroTech has agreed to do so for the
period provided herein and subject to EasyLink's strict compliance with the
terms and conditions set forth herein; and
D. MicroTech has agreed to a modification of the payment terms of
the Lease as set forth herein.
NOW, THEREFORE, for and in consideration of the mutual covenants set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Recitals. The foregoing recitals are true and correct and are hereby
incorporated into the text of this Agreement by this reference.
2. Ratification, Reaffirmation and Acknowledgement. EasyLink
acknowledges, ratifies, reaffirms, confirms and agrees to all of the terms,
covenants, conditions set forth in the Lease and confirms that $1,038,468.14
(hereinafter collectively referred to as the "Indebtedness") is due and payable
by EasyLink to MicroTech as of August 1, 2001 pursuant to the terms of the Lease
without offset, counterclaim or defenses.
3. Representations of EasyLink. EasyLink hereby represents and warrants
to MicroTech the following:
(a) Neither the execution of this Agreement, nor the
consummation of the terms thereof by EasyLink will constitute a violation of, or
will conflict with, any agreement entered into by any of said parties, or any
order, decree or judgment made against any of the parties.
(b) There is no pending action or proceeding against or
involving the Leased Equipment.
(c) With the exception of the payment terms in the Lease,
MicroTech may under the terms of the Lease exercise all rights and remedies
under the Lease.
(d) EasyLink, recognizing that MicroTech has changed its
position and will change its position in reliance on the foregoing
representations, acknowledgments, and warranties of EasyLink, further agrees
that:
(i) If EasyLink should default under the terms of
this Agreement and the default is not cured within 7 days after notice
from MicroTech, MicroTech may exercise its rights and remedies as
provided for in the Lease; and
(ii) EasyLink will not attempt to delay or frustrate
MicroTech's exercise its rights and remedies under the Lease, nor raise
any defenses to same.
(e) The Lease is in full force and effect as of the date
hereof, is enforceable according to its terms, and there are no defenses or
offsets to the collection by MicroTech of sums due thereunder.
4. Representations, Covenants and Warranties of MicroTech and EasyLink.
MicroTech and EasyLink hereby jointly and severally represent and warrant as
follows:
(a) All terms and conditions of the Lease not otherwise
modified herein shall continue in full force and effect during the term of this
Agreement.
(b) References in this Agreement to the exercise of rights and
remedies provided for in the Lease shall mean those rights and remedies in the
Lease with the exception of the Indebtedness, which shall be governed by the
Forbearance Note described below.
5. Forbearance Note. On the date hereof, EasyLink shall execute and
deliver to MicroTech a promissory note in the principal amount of $1,038,468.14
(the "Forbearance Note). The Forbearance Note shall be payable on demand after
October 31, 2001, and shall accrue interest at the rate of 12% per annum
beginning from August 1, 2001. A copy of the form of the Forbearance Note is
attached as Exhibit A. The Forbearance Note shall continue to be secured by the
Leased Equipment pursuant to the Lease, provided that MicroTech shall release
such security interest in any Leased Equipment that MicroTech sells to EasyLink
pursuant to Section 6 or otherwise.
6. Terms and Conditions.
(a) On or before September 22, 2001, EasyLink shall return to
MicroTech Leased Equipment or equivalent equipment reasonably acceptable to
MicroTech (collectively the "Returned Equipment") having a minimum aggregate
value of at least 50% of the original equipment cost of which totals $907,776.67
("OEC"). EasyLink shall, at its own cost and expense, deliver the Returned
Equipment to PCR Corp., 00 Xxx Xxxxx Xxxx, Xxxxxxxxx, XX 00000 (the "MicroTech
Location"). MicroTech may, in its sole discretion, notify EasyLink what Leased
Equipment MicroTech wants included in the Returned Equipment and EasyLink shall
use its best efforts to include such equipment in the Returned Equipment.
(b) On or before October 22, 2001, EasyLink, at its own cost
and expense, shall deliver the remaining Leased Equipment to the MicroTech
Location.
(c) Notwithstanding the above, EasyLink will purchase, for
17.5% of the original equipment cost (the "Equipment Purchase Payment"), any and
all of the Leased
2
Equipment that MicroTech does not request to be returned by September 22, 2001,
2001 and any missing and/or damaged equipment (unless replaced with equivalent
equipment reasonably acceptable to MicroTech). All amounts due MicroTech by
EasyLink under this paragraph (c) shall be paid upon the earlier of October 31,
2001 or completion of raising the Additional Capital as set forth in Section 10
below. For each business day that the Equipment Purchase Payment is late,
EasyLink will pay MicroTech a liquidated damage amount equal to 2.5% of the
amount of the payment shortfall. EasyLink, at its option, may pay the liquidated
damage amount in cash or shares of EasyLink Class A common stock, par value $.01
per share (such shares to be valued at the average of the closing prices of
EasyLink's Class A common stock for 10 trading days ending one week before the
penalty payment date or, if on any trading day there is no closing price then
the closing price for such day shall be deemed to be the average of the closing
bid and asked prices on such day).
(d) On or before September 22, 2001, EasyLink will grant
Micro-Tech a lien on EasyLink's assets to secure the obligations under the
Forbearance Note subject to the following provisions:
(1) the lien will not cover working capital and will permit the
issuance of up to $25 million of debt with more senior Liens to raise
new cash capital,
(2) the lien will also be subordinate to existing Liens and Permitted
Liens (as defined below),
(3) the lien under the security agreement will be pari pasu with other
debt secured by such lien, and
(4) EasyLink will arrange for a collateral agent to manage liens for
all parties under such agreement, both existing and new, such as new
trade and other creditors.
As used herein, "Lien" means, with respect to any Person, any mortgage,
lien, pledge, charge, security interest or other encumbrance, or any interest or
title of any vendor, lessor, lender or other secured party to or of such Person
under any conditional sale or other title retention agreement or Capital Lease,
upon or with respect to any property or asset of such Person.
As used herein, "Permitted Liens" means:
(1) Liens securing the Note;
(2) Liens securing Purchase Money Indebtedness, provided such
Liens do not extend to any assets of the Company other than the assets so
acquired;
(3) Liens on property of a Person existing at the time such
Person is merged into or consolidated with any of the Company, provided, that
such Liens were not incurred in connection with, or in contemplation of, such
merger or consolidation;
(4) Liens on property existing at the time of acquisition
thereof by any of the Company; provided that such Liens were not incurred in
connection with, or in contemplation of, such acquisition and do not extend to
any assets of any of the Company other than the property so acquired;
3
(5) Liens to secure the performance of statutory obligations,
surety or appeal bonds or performance bonds, or landlords', carriers',
warehousemen's, mechanics', suppliers', materialmen's or other like Liens, in
any case incurred in the ordinary course of business and with respect to amounts
for which an adequate reserve or other appropriate provision, if any, as is
required by GAAP shall have been made therefor;
(6) Liens existing on the date of this Agreement;
(7) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded; provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor;
(8) Liens incurred in the ordinary course of business of the
Company with respect to obligations that do not exceed $5 million in principal
amount in the aggregate at any one time outstanding;
(9) Liens securing Indebtedness issued in exchange for, or the
proceeds of which are used to extend, refinance, renew, replace, substitute or
refund in whole or in part Indebtedness that is secured by such Liens; provided
that such Liens shall not extend to assets other than the assets that secure
such Indebtedness being refinanced;
(10) any interest or title of a lessor under any Capital Lease
Obligation; and
(11) extensions, renewals or refundings of any Liens referred
to in clauses (1) through (10) above or this clause (11), provided that any such
extension, renewal or refunding does not extend to any assets or secure any
Indebtedness not securing or secured by the Liens being extended, renewed or
refinanced.
As used herein, "Purchase Money Indebtedness" means:
(1) Indebtedness of the Company incurred (within 180 days of
such purchase) to finance the purchase of any assets (including the purchase of
equity interests of Persons that are not Affiliates of the Company) of the
Company, provided that the amount of Indebtedness thereunder does not exceed
100% of the purchase cost of such assets; or
(2) Indebtedness of the Company which refinances indebtedness
referred to in clause (1) of this definition, provided that such refinancing
satisfies the proviso of such clause (1).
7. Forbearance and Waiver. Provided that (i) EasyLink executes the
Forbearance Note, (ii) EasyLink complies with all terms and conditions of this
Agreement, and (iii) no additional default occurs under the Lease, then
MicroTech agrees that it shall forbear from exercising its remedies under the
Lease until October 31, 2001 (the "Forbearance Period"). In the event EasyLink
at any time fails to comply with clause (i), (ii) or (iii) hereinabove,
MicroTech shall be entitled to immediately exercise any and all rights it may
have under this Agreement and the Lease and may declare the Forebearance Note to
be immediately due and payable.
4
Nothing in this paragraph or in any other provision of this Agreement
shall be deemed to be a waiver of any of MicroTech's rights under the Lease or
otherwise available to MicroTech at law or in equity. In addition, nothing in
this Agreement shall be construed to release EasyLink from any liability under
the Lease. MicroTech hereby expressly reserves all such remedies.
8. Anti-Novation. It is the intent of the parties that this Agreement
shall not constitute a novation, and shall in no way adversely affect the lien
priority of the Lease, to the extent applicable. In the event that this
Agreement, or any part hereof, shall be construed by a court of competent
jurisdiction as operating to affect the lien priority of the Lease over the
claim which would otherwise be subordinate thereto, then to the extent that
third parties acquiring an interest in such property between the time of
execution of the Lease and the execution hereof are hereby prejudiced, this
Agreement or such portion hereof as shall be so construed, shall be void and of
no force and effect and this Agreement shall constitute, as to that portion, a
subordinate lien on the collateral incorporating by reference the terms of the
Lease, and which Lease shall then be enforced pursuant to the terms therein
contained, independent of this Agreement; provided, however, that
notwithstanding the foregoing, the parties hereto as between themselves shall be
bound by all terms and conditions hereof until all indebtedness evidenced by the
Lease has been satisfied.
9. Default. EasyLink acknowledges that but for this Agreement it would
be in default under the Lease and that, upon default under this Agreement or
upon further default under the Lease, MicroTech may immediately exercise any and
all rights provided to MicroTech under the Lease and applicable law, including,
without limitation, an action on the Forbearance Note against EasyLink. EasyLink
hereby acknowledges and admits that in any action on the Forebearance Note
commenced after October 31, 2001, MicroTech shall be entitled to a judgment as a
matter of law, and EasyLink hereby waives, abandons and relinquishes all
defenses thereto and agrees not to seek or to prevent either the entry of a
final judgment against EasyLink for payment of the indebtedness due under the
Lease, or any post-judgment remedy allowed by law. EasyLink hereby releases
MicroTech and its officers, directors, shareholders, agents, attorneys,
successors and assigns, from any and all claims, actions, demands, and causes of
actions, whether in contract, tort or otherwise, existing as of the date of this
Agreement which relate to or arise from the Lease, or pertaining directly or
indirectly thereto. Further, upon the occurrence of a Default under this
Agreement, MicroTech shall be entitled to exercise any and all rights and
remedies against EasyLink by virtue of the defaults under the Lease existing as
of the date hereof, EasyLink acknowledging and agreeing that MicroTech shall not
be deemed to have waived or relinquished such rights or remedies by reason of
entering into this Agreement.
10. Restructure. If EasyLink (i) is not in material default under this
Agreement or any of the non-payment terms of the Lease; (ii) successfully raises
a minimum of $10,000,000.00 of capital by no later than October 31, 2001 (the
"Financing Condition"); and (iii) enters into a restructuring arrangement with
AT&T Corp. with respect to its outstanding note in the original principal amount
of $35 million, Xxxxxx Xxx Xxxx with respect to his outstanding note in the
original principal amount of $9.2 million and lessors holding at least 90% of
its equipment lease obligations on terms and conditions taken as a whole that
are not more favorable to such parties than the terms hereof (the "Other
Creditor's Condition"), then the Lease shall be terminated and MicroTech will
convert the Forbearance Note into the Note, the Shares and the other rights
provided below and EasyLink shall enter the Registration Rights Agreement on the
following terms and conditions:
5
(a) EasyLink shall execute and deliver to MicroTech a
convertible promissory note in the principal amount of $303,233 ("Note"). The
Note shall be in the form of Exhibit B attached hereto. The initial conversion
price of the Note shall be appropriately adjusted in the event the Company shall
effect a stock split, stock dividend or stock combination on or before the
closing. The Equipment Purchase Payment shall continue to be secured by the
Leased Equipment pursuant to the Lease, provided that MicroTech shall release
such security interest in any Leased Equipment that MicroTech sells to EasyLink
pursuant to Section 6 or otherwise. The Note shall be secured by the lien under
the security agreement entered into pursuant to Section 6(d) above on the same
terms and conditions. In addition to the payments on the Note, on the third
anniversary of the date of issuance of the Note, EasyLink shall make a balloon
payment to MicroTech in the amount of $181,555.
(b) EasyLink shall deliver 454,849 shares of EasyLink's Class
A common stock ("Shares") to MicroTech. Such number of Shares shall be
appropriately adjusted in the event the Company shall effect a stock split,
stock dividend or stock combination on or before the closing.
(c) EasyLink and MicroTech will execute an Accession Agreement
pursuant to which MicoTech shall become a party to the registration rights
agreement which will obligate EasyLink to file a registration statement covering
the resale of the Shares within 45 days from the closing of the restructuring
and to use all reasonable commercial efforts to cause such registration
statement to become effective as soon as practicable thereafter. A copy of the
form of Registration Rights Agreement is attached as Exhibit C.
(d) MicroTech has the right to examine all other agreements
with other creditors and to ensure that the Other Creditors Condition has been
satisfied. EasyLink shall deliver any agreement with another creditor to
MicroTech within two (2) business days of MicroTech having made request for the
agreement.
11. Compliance with Act; Disposition of Shares of Common Stock.
(a) Compliance with Act. The holder of the Note and the Shares
(collectively, the "Securities"), by acceptance thereof, agrees that the
Securities, and the shares to be issued upon conversion of the Note (the
"Conversion Shares") are being acquired for investment and that such holder will
not offer, sell or otherwise dispose of the Securities or the Conversion Shares
except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Act") or any applicable state
securities laws. Upon conversion of the Note, unless the Conversion Shares being
acquired are registered under the Act and any applicable state securities laws
or an exemption from such registration is available, the holder hereof shall
confirm in writing that the Conversion Shares so purchased are being acquired
for investment and not with a view toward distribution or resale in violation of
the Act and shall confirm such other matters related thereto as may be
reasonably requested by the Company. The Securities and the Conversion Shares
(unless registered under the Act and any applicable state securities laws) shall
be stamped or imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION
STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER
EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATIONS ARE NOT REQUIRED, OR (iii) RECEIPT OF NO-ACTION LETTERS
FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES."
6
Said legend shall be removed by the Company, upon the request of a
holder, at such time as the restrictions on the transfer of the applicable
security shall have terminated. In addition, in connection with the issuance of
the Securities, the holder specifically represents to the Company, as of the
date hereof and upon the date of issuance of the Securities, by acceptance of
the Securities as follows:
(1) The holder is aware of the Company's business
affairs and financial condition, and has acquired information about the
Company sufficient to reach an informed and knowledgeable decision to
acquire the Securities. The holder is acquiring the Securities for its
own account for investment purposes only and not with a view to, or for
the resale in connection with, any "distribution" thereof in violation
of the Act.
(2) The holder understands that the Securities have
not been registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona
fide nature of the holder's investment intent as expressed herein.
(3) The holder further understands that the
Securities must be held indefinitely unless subsequently registered
under the Act and qualified under any applicable state securities laws,
or unless exemptions from registration and qualification are otherwise
available. The holder is aware of the provisions of Rule 144,
promulgated under the Act.
(4) The holder is an "accredited investor" as such
term is defined in Rule 501 of Regulation D promulgated under the Act.
(b) Disposition of Securities or Conversion Shares. With
respect to any offer, sale or other disposition of any of the Securities or the
Conversion Shares prior to registration thereof, the holder hereof agrees to
give written notice to the Company prior thereto, describing briefly the manner
thereof, together with a written opinion of such holder's counsel, or other
evidence, if reasonably satisfactory to the Company, to the effect that such
offer, sale or other disposition may be effected without registration or
qualification (under the Act as then in effect or any federal or state
securities law then in effect) thereof and indicating whether or not under the
Act certificates for the Securities or the Conversion Shares to be sold or
otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to ensure compliance with such law.
Upon receiving such written notice and reasonably satisfactory opinion or other
evidence, the Company, as promptly as practicable but no later than fifteen (15)
days after receipt of the written notice, shall notify such holder that such
holder may sell or otherwise dispose of such Securities or Conversion Shares,
all in accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this Section 11(b) that the opinion of
counsel for the holder or other evidence is not reasonably satisfactory to the
Company, the Company shall so notify the holder promptly with details thereof
after such determination has been made. Notwithstanding the foregoing, the
Securities or the Conversion Shares may, as to such federal laws, be offered,
sold or otherwise disposed of in accordance with Rule 144 under the Act,
provided that the Company shall have been furnished with such information as the
Company may reasonably request to provide a reasonable assurance that the
provisions of Rule 144 have been satisfied. Each certificate representing
7
Securities or the Conversion Shares thus transferred (except a transfer pursuant
to Rule 144) shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with such laws, unless in the
aforesaid opinion of counsel for the holder, such legend is not required in
order to ensure compliance with such laws. The Company may issue stop transfer
instructions to its transfer agent in connection with such restrictions.
(c) Applicability of Restrictions. Neither any restrictions of
any legend described in the Securities or the Conversion Shares nor the
requirements of Section 11(b) above shall apply to any transfer of, or grant of
a security interest in, the Securities or the Conversion Shares or any part
hereof (i) to a partner of the holder if the holder is a partnership or to a
member of the holder if the holder is a limited liability company, (ii) to a
partnership of which the holder is a partner or to a limited liability company
of which the holder is a member, or (iii) to any affiliate of the holder if the
holder is a corporation; provided, however, in any such transfer, if applicable,
the transferee shall on the Company's request agree in writing to be bound by
the terms of this Agreement as if an original holder hereof.
12. Expenses. EasyLink agrees to pay all costs, fees, and expenses of
MicroTech in the enforcement of this Agreement.
13. Integration. This Agreement, together with the Lease, constitutes
the entire agreement and understanding among the parties relating to the subject
matter hereof, and supersedes all prior proposals, negotiations, agreements, and
understandings related to this matter.
14. Severability. The provisions of this Agreement are intended to be
severable. If any of the provisions of this initial Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction, such provision
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or enforceability without in any matter affecting the validity or enforceability
of such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
15. Governing Law. This Agreement shall be governed and construed in
accordance with the subsequent laws of the State of New York, without regard to
the choice of law or principles of such state.
16. Survival. All representations, warranties, covenants, agreements,
undertakings, waivers and releases contained herein shall survive the
termination of the forbearance period and payment in full of the obligations of
EasyLink.
17. Amendment. No amendment, modification, rescission, waiver or
release of any provision of this Agreement shall be effective unless the same
shall be in writing and signed by the parties hereto.
18. Venue; Jurisdiction; Jury Trial Waiver. EasyLink and MicroTech each
hereby irrevocably: (1) consent to the jurisdiction of any state or federal
court sitting in the City of New York, Borough of Manhattan, State of New York;
(2) agree that venue shall be proper in any court of competent jurisdiction
located in the City of New York, Borough of Manhattan, State of New York; and
(3) waive the right to trial by jury on any controversy arising out of or
relating to this Agreement or the Lease.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
8
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of
the effective date.
MicroTech Leasing Corp.
000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
By: /s/ Xxxxxx X. Xxxxxx
--------------------------
Xxxxxx X. Xxxxxx
Vice President
EasyLink Services Corporation
By: /s/ Xxxxx Xxxxxxxx
--------------------------
Print Name: Xxxxx Xxxxxxxx
Its: EVP & General Counsel
9
EXHIBIT A
PROMISSORY NOTE
Date of Note: August 1, 2001
Amount of Note: $1,038,468.14
FOR VALUE RECEIVED, the undersigned ("Maker") does hereby covenant and promise
to pay to the order of MICROTECH LEASING CORP., or its successors or assigns,
("Lender"), at 000 Xxxxxxx Xxxx Xxxx, Xxxxxxxxx, XX 00000 or at such other place
as Lender may designate to Maker in writing from time to time, in legal tender
of the United States, the sum of One Million Thirty-Eight Thousand Four Hundred
Sixty Eight and 14/100 Dollars ($1,038,468.14), together with all accrued
interest, which shall be due and payable upon the following terms and conditions
contained in this Note.
1. Interest Rate: This Note shall bear interest commencing August 1,
2001 computed at the rate of twelve percent (12%) per annum on the outstanding
principal balance. In all cases, interest shall be calculated on the basis of a
year of 360 days with twelve 30-day months (i.e., interest will accrue and be
paid for each full calendar month based on 1/12 of the annual interest and on
the actual number of calendar days elapsed for any partial month). Interest
shall be due and payable on the date when principal of the Note is due and
payable.
2. Term: The Note shall be due and payable in full on demand from
Lender to Maker (the "Maturity Date"), which demand may be made at any time
after October 31, 2001.
3. Payment Terms The entire outstanding principal balance plus any
accrued but unpaid interest thereon shall be due and payable in full on the
Maturity Date.
4. Prepayment: This Note may be prepaid, in whole or in part, at any
time during the term hereof.
5. Default Interest Rate: All delinquent principal and installments of
interest shall bear interest from the date that said payments are due at a rate
equal to seventeen percent (17%) per annum calculated in the same manner as set
forth in Section 1.
6. Acceleration: Should any default occur in the payment as stipulated
above of either the interest or principal, or should a default occur under that
certain Modification Agreement executed by and between Lender and Maker dated of
even date herewith (and such default is not cured with fifteen (15) days after
Lender provides notice to Maker), then in either event, the principal of this
Note or any unpaid part thereof and all accrued interest thereon shall, in the
sole discretion of Lender, at once become due and payable and may be collected
forthwith without notice to the undersigned, regardless of the stipulated date
of maturity. However, Lender may, in the sole discretion of Lender, accept
payments made by Maker after any default has occurred, without waiving any of
Lender's rights herein.
7. Costs: In the event that this Note is collected by law or through
attorneys at law, or under advice therefrom (whether such attorneys are
employees of Lender or an affiliate of Lender or are outside counsel), Maker and
1
any endorser, guarantor or other person primarily or secondarily liable for
payment hereof hereby, severally and jointly agree to pay all costs of
collection, including reasonable attorneys' fees including charges for
paralegals and others working under the direction or supervision of Lender's
attorneys, whether or not suit is brought, and whether incurred in connection
with collection, trial, appeal, bankruptcy or other creditors' proceedings or
otherwise.
8. Documentary Stamp Tax Liability. The Maker shall pay any and all
documentary stamp tax and/or any other excise tax due and payable on this Note.
The Maker shall further indemnify and save harmless Lender from any documentary
stamp tax or intangibles tax assessed by the State of New York, including,
without limitation, any penalties and interest (the "Taxes"). The Maker hereby
waives any right that it may have now or in the future to raise nonpayment of
the Taxes as a defense to the collection of this Note.
9. Usury: Nothing herein contained, nor any transaction related
thereto, shall be construed or so operate as to require Maker or any person
liable for the repayment of same, to pay interest in an amount or at a rate
greater than the maximum allowed by applicable law. Should any interest or other
charges paid by Maker, or any parties liable for the payment of the loan made
pursuant to this Note, result in the computation or earning of interest in
excess of the maximum legal rate of interest permitted under the law in effect
while said interest is being earned, then any and all of that excess shall be
and is waived by Lender, and all that excess shall be automatically credited
against and in reduction of the principal balance, and any portion of the excess
that exceeds the principal balance shall be paid by Lender to Maker or any
parties liable for the payment of the loan made pursuant to this Note so that
under no circumstances shall the Maker, or any parties liable for the payment of
the loan hereunder, be required to pay interest in excess of the maximum rate
allowed by applicable law.
10. Continuing Security Interest: This Note shall continue to be
secured by the Leased Equipment pursuant to the Lease (as such terms are defined
in the Modification Agreement).
11. Jurisdiction: The laws of the State of New York shall govern the
interpretation and enforcement of this Note. In the event that legal action is
instituted to collect any amounts due under, or to enforce any provision of,
this instrument, Maker and any endorser, guarantor or other person primarily or
secondarily liable for payment hereof consent to, and by execution hereof submit
themselves to, the jurisdiction of the courts of the Borough of Manhattan, City
and and State of New York, and, notwithstanding the place of residence of any of
them or the place of execution of this instrument, such litigation may be
brought in or transferred to a court of competent jurisdiction in and for the
Borough of Manhattan, City and and State of New York.
12. Miscellaneous:
a. TIME IS OF THE ESSENCE OF THIS NOTE.
b. It is agreed that the granting to Maker or any other party
of an extension or extensions of time for the payment of any sum or
2
sums due under this Note or for the performance of any covenant or
stipulation thereof or the taking of other or additional security shall
not in any way release or affect the liability of Maker under this
Note.
c. This Note may not be changed orally, but only by an
agreement in writing, signed by the party against whom enforcement of
any waiver, change, modification or discharge is sought.
d. All parties to this Note, whether Maker, principal, surety,
guarantor or endorser, hereby waive presentment for payment, demand,
notice, protest, notice of protest and notice of dishonor.
e. Anything herein to the contrary notwithstanding, the
obligations of Maker under this Note shall be subject to the limitation
that payments of interest shall not be required to the extent that
receipt of any such payment by Lender would be contrary to provisions
of law applicable to Lender limiting the maximum rate of interest which
may be charged or collected by Lender.
f. Maker acknowledges that Lender shall have no obligation
whatsoever to renew, modify or extend this Note or to refinance the
indebtedness under this Note upon the maturity thereof, except as
specifically provided herein.
g. Lender shall have the right to accept and apply to the
outstanding balance of this Note any and all payments or partial
payments received from Maker after the due date therefor, whether this
Note has been accelerated or not, without waiver of any of Lender's
rights to continue to enforce the terms of this Note and to seek any
and all remedies provided for herein or in any instrument securing the
same, including, but not limited to, the right to foreclose on such
security.
h. The term "Maker" as used herein, in every instance shall
include the makers of this Note, and its heirs, executors,
administrators, successors, legal representatives and assigns, and
shall denote the singular and/or plural, the masculine and/or feminine,
and natural and/or artificial persons whenever and wherever the context
so requires or admits.
i. If more than one party executes this Note, all such parties
shall be jointly and severally liable for the payment of this Note.
13. Waiver of Jury Trial: MAKER AND LENDER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS NOTE AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR LENDER ENTERING INTO THIS AGREEMENT.
3
IN WITNESS WHEREOF, Maker has duly executed this Note effective the day
and year first above written.
MAKER:
EASYLINK SERVICES CORPORATION
By:
---------------------------
Print Name:
-------------------
Title:
------------------------
4
EXHIBIT B
THIS NOTE AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
EASYLINK SERVICES CORPORATION
CONVERTIBLE PROMISSORY NOTE
$303,233 Effective: August 1, 2001
FOR VALUE RECEIVED EASYLINK SERVICES CORPORATION, a Delaware
corporation ("Company") promises to pay to MICROTECH LEASING CORP. ("Holder"),
or its registered assigns, the principal sum of THREE HUNDRED THREE THOUSAND TWO
HUNDRED THIRTY THREE DOLLARS ($303,233), or such lesser amount as shall equal
the outstanding principal amount hereof, together with interest from August 1,
2001 on the unpaid principal balance at a rate equal to 12.0% per annum,
computed on the basis of twelve 30 day months, payable as provided herein.
The following is a statement of the rights of Holder and the conditions
to which this Note is subject, and to which Holder, by the acceptance of this
Note, agrees:
1. Definitions. As used in this Note, the following capitalized terms
have the following meanings:
"Affiliate," with respect to any Person, means (i) any director,
officer or employee of such Person, (ii) any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person, and (iii) any Person beneficially owning or holding 5% or more of
any class of voting securities of such Person or any corporation of which such
Person beneficially owns or holds, in the aggregate, 5% or more of any class of
voting securities. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. The term "Affiliate," when used herein without reference
to any Person shall mean an Affiliate of Company.
"Bankruptcy Law" shall mean Title 11, U.S. Code or any similar federal,
state or foreign bankruptcy, insolvency or similar law.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which commercial banks in New York City are required or authorized to be
closed.
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Capital Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at the time any determination thereof is to be
made shall be the amount of the liability in respect of a capital lease that
would at such time be so required to be capitalized on a balance sheet in
accordance with GAAP.
"Common Stock" means Class A common stock, par value $.01 per share, of
Company or any shares into which such shares have been changed pursuant to any
recapitalization, merger, consolidation or similar event.
"Company" includes the corporation initially executing this Note and
any Person which shall succeed to or assume the obligations of Company as
permitted under this Note.
"Conversion Price" has the meaning given in Section 9.1 hereof.
"Conversion Shares" has the meaning given in Section 9.6 (c) hereof.
"Custodian" shall mean any custodian, receiver, trustee, assignee,
sequester, liquidator or similar official under any Bankruptcy Law.
"Daily Market Price" means the last reported per share sale price,
regular way on such day, or, if no sale takes place on such day, the average of
the reported closing per share bid and asked prices on such day, regular way, in
either case as reported on the NASDAQ National Market or, if such Class A common
stock is not quoted or admitted to trading on such quotation system, on the
principal national securities exchange or quotation system on which such Class A
common stock may be listed or admitted to trading or quoted, or, if not listed
or admitted to trading or quoted on any national securities exchange or
quotation system, the average of the closing per share bid and asked prices of
such Class A common stock on the over-the-counter market on the day in question
as reported by the National Quotation Bureau Incorporated, or similar generally
accepted reporting service, or, if not so available in such manner, as furnished
by any NASDAQ member firm selected from time to time by the Board of Directors
of Company for that purpose, or, if not so available in such manner, as
otherwise determined in good faith by the Board of Directors of Company.
"Default Rate" has the meaning given in Section 16 hereof.
"Event of Default" has the meaning given in Section 6 hereof.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"Guaranty" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
2
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment
of such indebtedness or obligation, or (ii) to maintain any working
capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make available
funds for the purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the
obligor under any Guaranty, the indebtedness or other obligations that are the
subject of such Guaranty shall be assumed to be direct obligations of such
obligor.
"Holder" shall mean the Person specified in the introductory paragraph
of this Note or any Person who shall at the time be the registered holder of
this Note.
"Indebtedness" with respect to any Person means, at any time, without
duplication,
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable arising in
the ordinary course of business but including all liabilities created
or arising under any conditional sale or other title retention
agreement with respect to any such property);
(c) all liabilities appearing on its balance sheet in
accordance with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not it
has assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its
account by banks and other financial institutions (whether or not
representing obligations for borrowed money);
3
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of
a type described in any of clauses (a) through (f) hereof.
Indebtedness of any Person shall include all obligations of such Person
of the character described in clauses (a) through (g) to the extent such Person
remains legally liable in respect thereof notwithstanding that any such
obligation is deemed to be extinguished under GAAP.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person.
"Material Subsidiary" means any Subsidiary of Company which at the date
of determination is a "significant subsidiary" as defined in Rule 1-02(w) of
Regulation S-X under the Securities Act and the Exchange Act (as such Regulation
is in effect on the date hereof).
"Obligations" shall mean and include all loans, advances, debts,
liabilities and obligations, howsoever arising, owed by Company to Holder of
every kind and description (whether or not evidenced by any note or instrument
and whether or not for the payment of money), now existing or hereafter arising
under or pursuant to the terms of this Note and the other Operative Agreements,
including, all interest, fees, charges, expenses, attorneys' fees and costs and
accountants' fees and costs chargeable to and payable by Company hereunder and
thereunder, in each case, whether direct or indirect, absolute or contingent,
due or to become due, and whether or not arising after the commencement of a
proceeding under Title 11 of the United States Code (11 U. S. C. Section 101 et
seq.), as amended from time to time (including post-petition interest) and
whether or not allowed or allowable as a claim in any such proceeding.
"Operative Agreements" shall mean that certain Modification Agreement
dated August _____, 2001 by and between Holder and Company and any and all
agreements and documents to be executed and delivered in connection therewith.
"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"Preferred Stock" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"Prepayment Notice" has the meaning given in Section 3 hereof.
"Subsidiary" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
4
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if a 50%
or more interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of Company.
"Swaps" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"Trading Day" shall mean (a) if the applicable security is quoted on
the NASDAQ National Market, a day on which trades may be made thereon, (b) if
the applicable security is listed or admitted for trading on the NYSE or another
national securities exchange, a day on which the NYSE or such other national
securities exchange is open for business or (c) if the applicable security is
not so listed, admitted for trading or quoted, any day that is a Business Day.
2. Interest. Accrued interest on this Note shall be due and payable
quarterly, commencing on the first business day of the month immediately
following 90 days after the date of issuance hereof. Interest on any portion of
the principal hereof that is prepaid shall be paid on the date of such
prepayment as provided herein. EasyLink may make interest payments in cash or
shares of Common Stock, provided that (i) if paid in Common Stock, the Fair
Market Value of the Common Stock must be equal to 120% of the cash interest
payment due and (ii) payment in shares of Common Stock will not be permitted if
Company's free cash balance on the interest payment date is in excess of $20
million. The "Fair Market Value" of the a share of Common Stock, for purposes of
this Section 2, shall be equal to the average of the closing market prices of
the Common Stock during the 10 trading days ending one week before the interest
payment date (or, if there shall be no such closing price on any day, the
closing market price on such day shall be deemed to be the average of the
closing bid and asked prices on such day).
3. Scheduled Installments of Principal; Mandatory Prepayment. (a)
Company shall make equal semi-annual installment payments of principal in the
amount of $43,319 (subject to proportionate reduction as a result of a
prepayment) commencing on the second anniversary of the date of the Restructure
Note and semi-annually thereafter until paid in full (7 semi-annual payments in
all).
(b) On or before June 30, 2002, up to 100% of the principal hereof and
accrued interest hereon shall be subject to mandatory prepayment upon the 5th
business day after the closing of one or more equity or equity-linked financings
5
in which Company raises cash in an aggregate cumulative amount in excess of $10
million ("Eligible Financings"). In such event, Company shall prepay the note
with (i) cash in an amount (up to 50% of principal hereof plus accrued interest
hereon) equal to 0.61% of the net proceeds in excess of $10 million received in
one or more Eligible Financings and (ii) Common Stock having a Fair Market Value
equal to the cash payment. For example, if the Holder's share of the cash
proceeds is $100,000, then Company would be obligated to prepay $200,000 of the
note, $100,000 in cash and $100,000 in stock having a Fair Market value equal to
$100,000. The "Fair Market Value" of the shares of Common Stock, for purposes of
this Section 3, shall be equal to the average of the closing market prices of
the Common Stock during the 10 trading days ending one week before the
prepayment date (or, if there shall be no such closing price on any day, the
closing market price on such day shall be deemed to be the average of the
closing bid and asked prices on such day).
4. Optional Prepayment. At any time and from time to time on or before
June 30, 2002, Company may prepay all or a portion of the outstanding principal
hereof and accrued interest hereon upon the same terms and conditions (that is,
cash and Common Stock) as set forth in Section 3 above for mandatory prepayment,
so long as Company gives the Holder at least 30 days irrevocable written notice
in advance of such prepayment. At any time and from time to time, Company may
prepay all or a portion of the outstanding principal hereof, together with
accrued interest hereon, so long as Company gives the Holder at least 30 days
irrevocable written notice in advance of such prepayment. The Company's decision
to prepay this Note will not, in any way, affect the Holder's right of
conversion on or before the prepayment as provided in Section 9 herein.
5. Representations and Warranties of Company. The Company hereby
represents and warrants to the Holder that:
(a) This Note, when issued, sold and delivered for the
consideration provided for herein, will be duly and validly issued, fully paid
and nonassessable.
(b) The offer and sale of this Note solely to Holder is exempt
from the registration and prospectus delivery requirements of the Securities Act
of 1933, as amended (the "Securities Act") and the securities registration and
qualification requirements of the currently effective provisions of the
securities laws of all applicable states.
(c) The Conversion Shares have been duly authorized and
reserved and, if and when issued upon conversion of the Note, in accordance with
the terms hereof, will be validly issued, fully paid and non-assessable, and the
issuance of the Conversion Shares will not be subject to any preemptive or
similar rights.
6. Events of Default. An "Event of Default" shall exist if any of the
following conditions or events shall occur and be continuing:
(a) Company defaults in the payment of any interest on the
Note when the same becomes due and payable and the default continues for a
period of 30 days; or
6
(b) Company defaults in the payment of any principal or
premium, if any, on the Note when the same becomes due and payable, whether at
maturity or otherwise; or
(c) Company breaches in any material respect any
representation or warranty contained in this Note or the any of the Operative
Agreements, or fails to observe or perform any other covenant or agreement
contained in this Note or the Operative Agreements required to be performed by
any of them, and such breach is not cured or such failure continues for a period
of 60 days after the receipt of written notice by Company from the Holder
stating that such notice is a "Notice of Default"; or
(d) a default under any credit agreement, mortgage, indenture
or instrument under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by Company or any Material
Subsidiary (or the payment of which is Guaranteed by Company or any of Company's
Material Subsidiaries), whether such Indebtedness or Guarantee exists on the
date of this Agreement or is created hereafter, which default (i) is caused by a
failure to pay when due any principal of or interest on such Indebtedness within
the grace period, if any, provided for in such Indebtedness (which failure
continues beyond any applicable grace period) (a "Payment Default") or (ii)
results in the acceleration of such Indebtedness prior to its express maturity
(without such acceleration being rescinded or annulled) and, in each case, the
principal amount of such Indebtedness, together with the principal amount of any
other such Indebtedness under which there is a Payment Default or the maturity
of which has been so accelerated, aggregates $15,000,000 or more and after
written receipt by Company from the Holder stating that such notice is a "Notice
of Default"; or
(e) a final, non-appealable judgment or final non-appealable
judgments (other than any judgment as to which a reputable insurance company has
accepted full liability) for the payment of money are entered by a court or
courts of competent jurisdiction against Company or any Material Subsidiary and
remain unstayed, unbonded or undischarged for a period (during which execution
shall not be effectively stayed) of 60 days, provided that the aggregate of all
such judgments exceeds $5,000,000; or
(f) Company or any Material Subsidiary pursuant to or within
the meaning of any Bankruptcy Law: (i) commences a voluntary case or proceeding;
or (ii) consents to the entry of an order for relief against such company or any
Material Subsidiary in an involuntary case or proceeding; or (iii) consents to
the appointment of a Custodian of such company or any Material Subsidiary or for
all or any substantial part of its property; or (iv) makes a general assignment
for the benefit of its creditors; or (v) take corporate or similar action to
effect any of the foregoing; or
(g) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (i) is for relief against Company or any
Material Subsidiary in an involuntary case or proceeding; or (ii) appoints a
Custodian of such company or any Material Subsidiary or for all or any
substantial part of the property of such company or any Material Subsidiary; or
(iii) orders the liquidation of such company or any Material Subsidiary; and in
each case referred to in this subsection (g) the order or decree remains
unstayed and in effect for 60 days.
7
7. Rights of Holder upon Default.
(a) If an Event of Default with respect to Company described in Section
6(f) or (g) has occurred (other than an Event of Default described in clause (i)
of Section 6(f) or described in clause (v) of Section 6(f) by virtue of the fact
that such clause encompasses clause (i) of Section 6(f)), the Note then
outstanding shall automatically become immediately due and payable. If any other
Event of Default has occurred and is continuing, the Holder may at any time at
its option, by notice or notices to Company, declare the Note to be immediately
due and payable.
(b) Notwithstanding the foregoing, if (i) any Event of Default
described in Section 6 (a) or (b) has occurred and is continuing, the Holder of
the Note may at any time, at its option, by notice or notices to Company,
declare the Note to be immediately due and payable; or (ii) any Event of Default
described in Section 6 (d) has occurred and is continuing and the Payment
Default giving rise to such Event of Default is cured or the acceleration giving
rise to such Event of Default is annulled or rescinded within 30 days after
receipt of written notice of such Event of Default by Company from the Holder of
the Note stating that such notice is a "Notice of Default," then such Event of
Default and any declaration under Section 7 (a) above shall be deemed
automatically annulled and rescinded. Upon the Note becoming due and payable
under Section 7, whether automatically or by declaration, the Note will
forthwith mature and the entire unpaid principal amount hereof, plus all accrued
and unpaid interest thereon, shall all be immediately due and payable, in each
and every case without presentment, demand, protest or further notice, all of
which are hereby waived.
(c) If any Default or Event of Default has occurred and is continuing,
and irrespective of whether the Note has become or has been declared immediately
due and payable under Section 7, the holder of the Note at the time outstanding
may proceed to protect and enforce its rights by an action at law, suit in
equity or other appropriate proceeding, whether for the specific performance of
any agreement contained herein or in the Operative Agreements, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.
8. Representations and Warranties of Holder. By its acceptance of this
Note, the Holder makes the following representations and warranties:
(a) The Holder is aware of Company's business affairs and
financial condition, and has acquired information about Company sufficient to
reach an informed and knowledgeable decision to acquire this Note. The Holder is
acquiring this Note for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution" thereof
in violation of the Act.
(b) The Holder understands that this Note, and the securities
into which it is convertible, have not been registered under the Act in reliance
upon a specific exemption therefrom, which exemption depends upon, among other
things, the bona fide nature of the Holder's investment intent as expressed
herein.
8
(c) The Holder further understands that this Note, and the
securities into which it is convertible, must be held indefinitely unless
subsequently registered under the Act and qualified under any applicable state
securities laws, or unless exemptions from registration and qualification are
otherwise available. The Holder is aware of the provisions of Rule 144,
promulgated under the Act.
(d) The Holder is an "accredited investor" as such term is
defined in Rule 501 of Regulation D promulgated under the Securities Act.
9. Conversion.
9.1 Conversion Privilege. The holder of this Note may convert
the principal amount thereof (or any portion thereof that is an
integral multiple of $1,000) into fully paid and nonassessable shares
of Class A common stock, par value $.01 per share, of Company at any
time prior to the close of business on the Business Day immediately
preceding the final maturity date of the Note at the Conversion Price
then in effect, except that, with respect to the principal amount of
the Note that is subject to optional or mandatory prepayment, such
conversion right shall terminate at the close of business on the
Business Day immediately preceding the prepayment date (unless Company
shall default in making the prepayment, including interest, when it
becomes due, in which case the conversion right shall terminate at the
close of business on the date on which such default is cured).
The number of shares of Class A common stock issuable upon
conversion of a Note is determined by dividing the principal amount of
the Note so converted by the Conversion Price in effect on the
Conversion Date.
"Conversion Price" means ONE UNITED STATES DOLLAR ($1.00)
[subject to appropriate adjustment in the event of a stock split, stock
dividend or stock combination prior to closing], as the same may be
adjusted from time to time as provided in this Section.
Provisions of this Agreement that apply to conversion of all
of a Note also apply to conversion of a portion of it. A holder of a
Note is not entitled to any rights of a holder of Class A common stock
until such holder has converted such Note into Class A common stock,
and only to the extent that such Note is deemed to have been converted
into Class A common stock under this Section 9.1.
9.2 Conversion Procedure
To convert the Note, the Holder must (1) complete and sign a notice of
election to convert substantially in the form attached hereto (or
complete and manually sign a facsimile thereof) and deliver such notice
to Company, (2) surrender the Note to Company, (3) furnish appropriate
endorsements or transfer documents if required by Company and (4) pay
any transfer or similar tax, if required by Company in accordance with
Section 9.4 hereof. The date on which the holder satisfies all of those
requirements is the conversion date (the "Conversion Date"). As
promptly as practicable on or after the Conversion Date, Company shall
9
issue and deliver to the holder a certificate or certificates for the
number of whole shares of Class A common stock issuable upon the
conversion and a check or other payment for any fractional share in an
amount determined pursuant to Section 9.3. The Person in whose name the
certificate is registered shall become the stockholder of record on the
Conversion Date and, as of such date, such Person's rights as a holder
of a Note with respect to the converted Note shall cease and such
converted Note shall no longer be deemed outstanding; provided,
however, that, except as otherwise provided in this Section 9.2, no
surrender of a Note on any date when the stock transfer books of
Company shall be closed shall be effective to constitute the Person
entitled to receive the shares of Class A common stock upon such
conversion as the stockholder of record of such shares of Class A
common stock on such date, but such surrender shall be effective to
constitute the Person entitled to receive such shares of Class A common
stock as the stockholder of record thereof for all purposes at the
close of business on the next succeeding day on which such stock
transfer books are open; provided further, however, that such
conversion shall be at the Conversion Price in effect on the date that
such Note shall have been surrendered for conversion, as if the stock
transfer books of Company had not been closed.
No payment or adjustment will be made for accrued and unpaid
interest on a converted Note or for dividends or distributions on
shares of Class A common stock issued upon conversion of a Note, except
that, if the Holder surrenders the Note for conversion after the close
of business on any record date for the payment of an installment of
interest and prior to the opening of business on the next succeeding
interest payment date, then, notwithstanding such conversion, accrued
and unpaid interest payable on the Note on such interest payment date
shall be paid on such interest payment date to the person who was the
holder of the Note (or one or more predecessor Notes) at the close of
business on such record date. Holders of Class A common stock issued
upon conversion will not be entitled to receive any dividends payable
to holders of Class A common stock as of any record time before the
close of business on the Conversion Date.
If a holder converts more than one Note at the same time, the
number of whole shares of Class A common stock issuable upon the
conversion shall be based on the total principal amount of Notes
converted.
Upon surrender of a Note that is converted in part, Company
shall issue to the holder a new Note equal in principal amount to the
unconverted portion of the Note surrendered.
9.3 Fractional Shares. Company will not issue fractional
shares of Class A common stock upon conversion of a Note. In lieu
thereof, Company will pay an amount in cash based upon the Daily Market
Price of the Class A common stock on the Trading Day prior to the
Conversion Date.
9.4. Taxes on Conversion. The issuance of certificates for
shares of Class A common stock upon the conversion of the Note shall be
made without charge to the converting Noteholder for such certificates
or for any tax in respect of the issuance of such certificates, and
such certificates shall be issued in the respective names of, or in
such names as may be directed by, the holder or holders of the
10
converted Note; provided, however, that in the event that certificates
for shares of Class A common stock are to be issued in a name other
than the name of the holder of the Note converted, such Note, when
surrendered for conversion, shall be accompanied by an instrument of
assignment or transfer, in form satisfactory to Company, duly executed
by the registered holder thereof or his duly authorized attorney; and
provided further, however, that Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificates in a name other than
that of the holder of the converted Note, and Company shall not be
required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to
Company the amount of such tax or shall have established to the
satisfaction of Company that such tax has been paid or is not
applicable.
9.5. Company to Provide Stock. The Company shall at all times
reserve and keep available, free from preemptive rights, out of its
authorized but unissued Class A common stock, solely for the purpose of
issuance upon conversion of the Note as herein provided, a sufficient
number of shares of Class A common stock to permit the conversion of
the Note for shares of Class A common stock.
All shares of Class A common stock which may be issued upon
conversion of the Note shall be duly authorized, validly issued, fully
paid and nonassessable when so issued. The Company shall take such
action from time to time as shall be necessary so that par value of the
Class A common stock shall at all times be equal to or less than the
Conversion Price then in effect.
The Company shall from time to time take all action necessary
so that the Class A common stock which may be issued upon conversion of
the Note, immediately upon their issuance (or, if such Class A common
stock is subject to restrictions on transfer under the Act, upon their
resale pursuant to an effective registration statement or in a
transaction pursuant to which the certificate evidencing such Class A
common stock shall no longer bear a restrictive common stock legend),
will be listed on the Nasdaq National Market or such other interdealer
quotation system and market or principal securities exchanges, if any,
on which other shares of Class A common stock of Company are then
listed or quoted.
9.6. Adjustment of Conversion Price. The Conversion Price
shall be subject to adjustment from time to time as follows:
(a) In case Company shall (i) pay a dividend in
shares of Class A common stock to holders of Class A common stock (or
any event treated as such for U.S. Federal income tax purposes), (ii)
make a distribution in shares of Class A common stock to holders of
Class A common stock (or any event treated as such for U.S. Federal
income tax purposes), (iii) subdivide its outstanding shares of Class A
common stock into a greater number of shares of Class A common stock or
(iv) combine its outstanding shares of Class A common stock into a
smaller number of shares of Class A common stock, the Conversion Price
in effect immediately prior to such action shall be adjusted so that
11
the holder of this Note thereafter surrendered for conversion shall be
entitled to receive the number of shares of Class A common stock which
he would have owned immediately following such action had the Note been
converted immediately prior thereto. Any adjustment made pursuant to
this subsection (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 or combination.
(b) In case Company shall issue rights, options or
warrants to all holders of Class A common stock entitling them to
subscribe for or purchase shares of Class A common stock (or securities
convertible into Class A common stock) at a price per share (or having
a conversion price per share) less than the Current Market Price per
share (as determined pursuant to subsection (f) below) of the Class A
common stock on the record date for determining the holders of the
Class A common stock entitled to receive such rights, options or
warrants, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in
effect immediately prior to such record date by a fraction of which the
numerator shall be the number of shares of Class A common stock
outstanding as of the close of business on such record date plus the
number of shares of Class A common stock which the aggregate offering
price of the total number of shares of Class A common stock so offered
(to the holders of outstanding Class A common stock) for subscription
or purchase (or the aggregate conversion price of the convertible
securities so offered) would purchase at such Current Market Price (as
determined pursuant to subsection (f) below), and of which the
denominator shall be the number of shares of Class A common stock
outstanding on such record date plus the number of additional shares of
Class A common stock so offered for subscription or purchase (or into
which the convertible securities so offered are convertible). Such
adjustments shall become effective immediately after such record date.
For the purposes of this subsection (b), the number of shares of Class
A common stock at any time outstanding shall not include shares held in
the treasury of Company but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of such Class
A common stock. The Company shall not issue any rights, options or
warrants in respect of shares of Class A common stock held in the
treasury of Company. In determining whether any rights, options or
warrants entitle the holders to subscribe for or purchase shares of
Class A common stock at less than the Current Market Price, and in
determining the aggregate offering price of such shares of Class A
common stock, there shall be taken into account any consideration
received by Company for such rights, warrants, or options, the value of
such consideration, if any, other than cash, to be determined by the
Board of Directors.
(c) In case Company shall distribute to all holders
of Class A common stock shares of capital stock of Company (other than
Class A common stock), evidences of indebtedness, cash, rights, options
or warrants entitling the holders thereof to subscribe for or purchase
securities (other than rights, options or warrants described in
subsection (b) above) or other assets (including securities of Persons
other than Company but excluding (i) dividends or distributions paid
exclusively in cash except as described in subsection (d) below, (ii)
dividends and distributions described in subsection (a) above and (iii)
distributions in connection with the consolidation, merger or transfer
of assets covered by Section 9.11), then in each such case the
12
Conversion Price shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the date of such distribution by a fraction of
which the numerator shall be the Current Market Price (determined as
provided in subsection (f) below) of the Class A common stock on the
record date mentioned below less the fair market value on such record
date (as determined by the Board of Directors, whose determination
shall be conclusive evidence of such fair market value and described in
a board resolution) of the portion of the evidences of indebtedness,
shares of capital stock, cash, rights, options, warrants or other
assets so distributed applicable to one share of Class A common stock
(determined on the basis of the number of shares of the Class A common
stock outstanding on the record date), and of which the denominator
shall be such Current Market Price of the Class A common stock. Such
adjustment shall become effective immediately after the record date for
the determination of the holders of Class A common stock entitled to
receive such distribution. Notwithstanding the foregoing, in case
Company shall distribute rights, options or warrants to subscribe for
additional shares of Company's capital stock (other than rights,
options or warrants referred to in subsection (b) above) ("Rights") to
all holders of Class A common stock, Company may, in lieu of making any
adjustment pursuant to the foregoing provisions of this subsection (c)
of Section 9.6 make proper provision so that the holder of the Note who
converts the Note (or any portion thereof) after the record date for
such distribution and prior to the expiration or redemption of the
Rights shall be entitled to receive upon such conversion, in addition
to the shares of Class A common stock issuable upon such conversion
(the "Conversion Shares"), a number of Rights to be determined as
follows: (i) if such conversion occurs on or prior to the date for the
distribution to the holders of Rights of separate certificates
evidencing such Rights (the "Distribution Date"), the same number of
Rights to which a holder of a number of shares of Class A common stock
equal to the number of Conversion Shares is entitled at the time of
such conversion in accordance with the terms and provisions of and
applicable to the Rights; and (ii) if such conversion occurs after the
Distribution Date, the same number of Rights to which a holder of the
number of shares of Class A common stock into which the principal
amount of the Note so converted was convertible immediately prior to
the Distribution Date would have been entitled on the Distribution Date
in accordance with the terms and provisions of and applicable to the
Rights.
(d) In case Company shall, by dividend or otherwise,
at any time make a distribution to all holders of its Class A common
stock exclusively in cash (including any distributions of cash out of
current or retained earnings of Company but excluding any cash that is
distributed as part of a distribution requiring a Conversion Price
adjustment pursuant to subsection (c) of this Section) in an aggregate
amount that, together with the sum of (x) the aggregate amount of any
other distributions made exclusively in cash to all holders of Class A
common stock within the 12 months preceding the date fixed for
determining the stockholders entitled to such distribution (the
"Distribution Record Date") and in respect of which no Conversion Price
adjustment pursuant to subsection (c) or (e) of this Section or this
subsection (d) has been made plus (y) the aggregate amount of all
Excess Payments in respect of any tender offers or other negotiated
transactions by Company or any of its Subsidiaries for Class A common
stock concluded within the 12 months preceding the Distribution Record
13
Date and in respect of which no Conversion Price adjustment pursuant to
subsections (c) or (e) of this Section or this subsection (d) has been
made, exceeds 12 1/2% of the product of the Current Market Price per
share (determined as provided in subsection (f) of this Section) of the
Class A common stock on the Distribution Record Date multiplied by the
number of shares of Class A common stock outstanding on the
Distribution Record Date (excluding shares held in the treasury of
Company), the Conversion Price shall be reduced so that the same shall
equal the price determined by multiplying such Conversion Price in
effect immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this subsection (d) by a fraction of which
the numerator shall be the Current Market Price per share (determined
as provided in subsection (f) of this Section) of the Class A common
stock on the Distribution Record Date less the sum of the aggregate
amount of cash and the aggregate Excess Payments so distributed, paid
or payable within such 12-month period (including, without limitation,
the distribution in respect of which such adjustment is being made)
applicable to one share of Class A common stock (which shall be
determined by dividing the sum of the aggregate amount of cash and the
aggregate Excess Payments so distributed, paid or payable with respect
to outstanding shares of Class A common stock within such 12 months
(including, without limitation, the distribution in respect of which
such adjustment is being made) by the number of shares of Class A
common stock outstanding on the Distribution Record Date) and the
denominator shall be such Current Market Price per share (determined as
provided in subsection (f) of this Section) of the Class A common stock
on the Distribution Record Date, such reduction to become effective
immediately prior to the opening of business on the day following the
Distribution Record Date.
(e) In case a tender offer or other negotiated
transaction made by Company or any Subsidiary of Company for all or any
portion of the Class A common stock shall be consummated, if an Excess
Payment is made in respect of such tender offer or other negotiated
transaction and the aggregate amount of such Excess Payment, together
with the sum of (x) the aggregate amount of any distributions, by
dividend or otherwise, to all holders of the Class A common stock made
in cash (including any distributions of cash out of current or retained
earnings of Company) within the 12 months preceding the date of payment
of such current negotiated transaction consideration or expiration of
such current tender offer, as the case may be (the "Purchase Date"),
and as to which no adjustment in the Conversion Price pursuant to
subsection (c) or (d) of this Section or this subsection (e) has been
made plus (y) the aggregate amount of all Excess Payments in respect of
any other tender offers or other negotiated transactions by Company or
any of its Subsidiaries for Class A common stock concluded within the
12 months preceding the Purchase Date and in respect of which no
adjustment in the Conversion Price pursuant to subsection (c) or (d) of
this Section or this subsection (e) has been made, exceeds 12 1/2% of
the product of the Current Market Price per share (determined as
provided in subsection (f) of this Section) of the Class A common stock
on the Purchase Date multiplied by the number of shares of Class A
common stock outstanding on the Purchase Date (including any tendered
shares but excluding any shares held in the treasury of Company), the
Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying such Conversion Price in effect
14
immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this subsection (e) by a fraction of which
the numerator shall be the Current Market Price per share (determined
as provided in subsection (f) of this Section) of the Class A common
stock on the Purchase Date less the sum of the aggregate amount of cash
and the aggregate Excess Payments so distributed, paid or payable
within such 12 month period (including, without limitation, the Excess
Payment in respect of which such adjustment is being made) applicable
to one share of Class A common stock (which shall be determined by
dividing the sum of the aggregate amount of cash and the aggregate
Excess Payments so distributed, paid or payable with respect to
outstanding shares of Class A common stock within such 12 months
(including, without limitation, the Excess Payment in respect of which
such adjustment is being made) by the number of shares of Class A
common stock outstanding on the Purchase Date) and the denominator
shall be such Current Market Price per share (determined as provided in
subsection (f) of this Section) of the Class A common stock on the
Purchase Date, such reduction to become effective immediately prior to
the opening of business on the day following the Purchase Date.
(f) The "Current Market Price" per share of Class A
common stock on any date shall be deemed to be the average of the Daily
Market Prices for the shorter of (i) 30 consecutive Business Days
ending on the last full Trading Day on the exchange or market referred
to in determining such Daily Market Prices prior to the time of
determination or (ii) the period commencing on the date next succeeding
the first public announcement of the issuance of such rights or such
warrants or such other distribution or such tender offer or other
negotiated transaction through such last full Trading Day on the
exchange or market referred to in determining such Daily Market Prices
prior to the time of determination.
(g) "Excess Payment" means the excess of (i) the
aggregate of the cash and fair market value (as determined by the Board
of Directors, whose determination shall be conclusive evidence of such
fair market value and described in a board resolution) of other
consideration paid by Company or any of its Subsidiaries with respect
to the shares acquired in a tender offer or other negotiated
transaction over (ii) the Daily Market Price on the Trading Day
immediately following the completion of the tender offer or other
negotiated transaction multiplied by the number of acquired shares.
(h) The Company reserves the right to make such
reductions in the Conversion Price in addition to those required in the
foregoing provisions as it considers to be advisable in order that any
event treated for United States federal income tax purposes as a
dividend of stock or stock rights will not be taxable to the
recipients.
(i) The Company from time to time may decrease the
Conversion Price by any amount for any period of at least 20 days
(which decrease is irrevocable during such period), in which case
Company shall give at least 15 days' notice of such decrease, if the
Board of Directors has made a determination that such decrease would be
in the best interests of Company, which determination shall be
conclusive; provided however that in no case shall Company decrease the
Conversion Price to less than 80% of the Current Market Price.
15
(j) In any case in which this Section 9.6 shall
require that an adjustment be made immediately following a record date
for an event, Company may elect to defer, until such event, issuing to
the holder of the Note converted after such record date the shares of
Class A common stock and other capital stock of Company issuable upon
such conversion over and above the shares of Class A common stock and
other capital stock of Company issuable upon such conversion on the
basis of the Conversion Price prior to adjustment; and, in lieu of the
shares the issuance of which is so deferred, Company shall issue or
cause its transfer agents to issue due bills or other appropriate
evidence of the right to receive such shares.
9.7. No Adjustment. No adjustment in the Conversion Price
shall be required until cumulative adjustments amount to 1.0% or more
of the Conversion Price as last adjusted; provided, however, that any
adjustments which by reason of this Section 9.7 are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 9 shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case
may be. No adjustment need be made for rights to purchase Class A
common stock pursuant to a Company plan for reinvestment of dividends
or interest. No adjustment need be made for a change in the par value
or no par value of the Class A common stock.
9.8. Other Adjustments. (a) In the event that, as a result of
an adjustment made pursuant to Section 9.6 above, the holder of the
Note thereafter surrendered for conversion shall become entitled to
receive any shares of capital stock of Company other than shares of its
Class A common stock, thereafter the Conversion Price of such other
shares so receivable upon conversion of the Note shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Class A
common stock contained in this Section 9.
(b) In the event that any shares of Class A common
stock issuable upon exercise of any of the rights, options or warrants
referred to in Section 9.6(b) and Section 9.6(c) hereof are not
delivered prior to the expiration of such rights, options, or warrants,
the Conversion Price shall be readjusted to the Conversion Price which
would otherwise have been in effect had the adjustment made upon the
issuance of such rights, options or warrants been made on the basis of
delivery of only the number of such rights, options and warrants which
were actually exercised.
(c) In any case in which Section 9.6 shall require
that an adjustment be made immediately following a record date for a
dividend or distribution and the dividend or distribution does not
occur, the Conversion Price shall again be adjusted to the Conversion
Price that would then be in effect if such dividend or distribution had
not been declared.
9.9. Notice of Adjustment. Whenever the Conversion Price is
adjusted, Company shall promptly mail to the Holder a notice of the
adjustment. Such notice shall briefly state the facts requiring the
adjustment and the manner of computing it and shall be signed by a
Senior Financial Officer.
16
9.10. Notice of Certain Xxxxxxxxxxxx.Xx the event that: (a)
Company takes any action which would require an adjustment in the
Conversion Price; (b) Company takes any action described in Section
9.11; or (c) there is a dissolution or liquidation of Company; Company
shall mail to the Holder a notice stating the proposed record or
effective date, as the case may be. The Company shall mail the notice
at least 15 days before such date; however, failure to mail such notice
or any defect therein shall not affect the validity of any transaction
referred to in clause (a), (b) or (c) of this Section 9.10.
9.11. Effect of Reclassifications, Consolidations, Mergers,
Continuances or Sales on Conversion Privilege. If any of the following
shall occur, namely: (i) any reclassification or change of outstanding
shares of Class A common stock issuable upon conversion of the Note
(other than a change in par value, or from par value to no par value,
or from no par value to par value, or as a result of a subdivision or
combination), (ii) any consolidation or merger to which Company is a
party other than a merger in which Company is the continuing
corporation and which does not result in any reclassification of, or
change (other than a change in name, or par value, or from par value to
no par value, or from no par value to par value or as a result of a
subdivision or combination) in, outstanding shares of Class A common
stock, (iii) any continuance in a new jurisdiction which does not
result in any reclassification of, or change (other than a change in
name, or par value, or from par value to no par value, or from no par
value to par value) in, outstanding shares of Class A common stock, or
(iv) any sale or conveyance of all or substantially all of the property
of Company (determined on a consolidated basis), then Company, or such
successor or purchasing corporation, as the case may be, shall, as a
condition precedent to such reclassification, change, consolidation,
merger, continuance, sale or conveyance, execute and deliver to the
Holder a written notice providing that the Holder shall have the right
to convert the Note into the kind and amount of shares of stock and
other securities and property (including cash) receivable upon such
reclassification, change, consolidation, merger, continuance, sale or
conveyance by a holder of the number of shares of Class A common stock
deliverable upon conversion of such Note immediately prior to such
reclassification, change, consolidation, merger, continuance, sale or
conveyance. Such notice shall provide for adjustments of the Conversion
Price which shall be as nearly equivalent as may be practicable to the
adjustments of the Conversion Price provided for in this Section 9. The
foregoing, however, shall not in any way affect the right a holder of a
Note may otherwise have, pursuant to clause (ii) of the last sentence
of subsection (c) of Section 9.6, to receive Rights upon conversion of
a Note. If, in the case of any such reclassification, change,
consolidation, merger, continuance, sale or conveyance, the stock or
other securities and property (including cash) receivable thereupon by
a holder of Class A common stock includes shares of stock or other
securities and property of a corporation or other business entity other
than the successor or purchasing corporation, as the case may be, in
such reclassification, change, consolidation, merger, continuance, sale
or conveyance, then such notice shall also be executed by such other
corporation or other business entity and shall contain such additional
provisions to protect the interests of the holder of the Note as the
Board of Directors of Company shall reasonably consider necessary by
reason of the foregoing. The provision of this Section 9.11 shall
similarly apply to successive reclassifications, changes,
consolidations, mergers, continuances, sales or conveyances.
17
9.12. Cancellation of Converted Notes. All Notes delivered for
conversion shall be delivered to Company to be canceled.
10. Successors and Assigns. Subject to the restrictions on transfer
described in Sections 12 and 13 below, the rights and obligations of Company and
Holder of this Note shall be binding upon and benefit the successors, assigns,
heirs, administrators and transferees of the parties.
11. Waiver and Amendment. Any provision of this Note may be amended,
waived or modified upon the written consent of Company and Holder.
12. Transfer of this Note or Securities Issuable on Conversion Hereof.
With respect to any offer, sale or other disposition of this Note or securities
into which such Note may be converted, Holder will give written notice to
Company prior thereto, describing briefly the manner thereof, together with, if
requested by Company, a written opinion of Holder's counsel, to the effect that
such offer, sale or other distribution may be effected without registration or
qualification (under any federal or state law then in effect). Upon receiving
such written notice and reasonably satisfactory opinion, if so requested,
Company, as promptly as practicable, shall notify Holder that Holder may sell or
otherwise dispose of this Note or such securities, all in accordance with the
terms of the notice delivered to Company. If a determination has been made
pursuant to this Section 12 that the opinion of counsel for Holder is not
reasonably satisfactory to Company, Company shall so notify Holder promptly
after such determination has been made. Each Note thus transferred and each
certificate representing the securities thus transferred shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the Act, unless in the opinion of counsel for Company such legend is not
required in order to ensure compliance with the Act. Company may issue stop
transfer instructions to its transfer agent in connection with such
restrictions. Subject to the foregoing transfers of this Note shall be
registered upon registration books maintained for such purpose by or on behalf
of Company. Prior to presentation of this Note for registration of transfer,
Company shall treat the registered holder hereof as the owner and holder of this
Note for the purpose of receiving all payments of principal and interest hereon
and for all other purposes whatsoever, whether or not this Note shall be overdue
and Company shall not be affected by notice to the contrary.
13. Assignment by Company. Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by Company without the prior written consent of
Holder except in connection with an assignment in whole to a successor
corporation to Company in connection with a reincorporation of Company in
another state of the United States.
14. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier or personal delivery at the
respective addresses of the parties as set forth in the Modification Agreement
18
or on the register maintained by Company. Any party hereto may by notice so
given change its address for future notice hereunder. Notice shall conclusively
be deemed to have been given when received.
15. Payment. Payment shall be made in lawful tender of the United
States.
16. Default Rate; Usury. During any period in which an Event of Default
has occurred and is continuing, Company shall pay interest on the unpaid
principal balance hereof at a rate per annum equal to the rate otherwise
applicable hereunder plus four percent (4%). In the event any interest is paid
on this Note which is deemed to be in excess of the then legal maximum rate,
then that portion of the interest payment representing an amount in excess of
the then legal maximum rate shall be deemed a payment of principal and applied
against the principal of this Note.
17. Expenses; Waivers. If action is instituted to collect this Note,
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
18. No Impairment. The Company will not, by amendment of its Articles
and/or Certificate of Incorporation or Bylaws, or through reorganization,
consolidation, merger, dissolution, issue or sale of securities, sale of assets
or any other voluntary action, willfully avoid or seek to avoid the observance
or performance of any of the terms of this Note, but will at all times and in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder under this Note against wrongful impairment. Without limiting the
generality of the foregoing, Company will take all such action as may be
necessary or appropriate in order that Company may duly and validly issue fully
paid and nonassessble Conversion Shares upon the conversion of this Note.
19. Severablity. If one or more provisions of this Note are held to be
unenforceable under applicable law, such provision(s) shall be excluded from
this Note and the balance of the Note shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.
19
20. Governing Law. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the State of New York, without regard to the conflicts of law
provisions of the State of New York, or of any other state.
IN WITNESS WHEREOF, Company has caused this Note to be issued as of the
date first written above.
EASYLINK SERVICES CORPORATION,
a Delaware corporation
By:
-----------------------------------------
Title:
--------------------------------------
20
ELECTION TO CONVERT
To EasyLink Services Corporation:
The undersigned owner of the Convertible Promissory Note dated _______
(the "Note") hereby irrevocably exercises the option to convert the Note, or the
portion below designated, into Class A common stock of EasyLink Services
Corporation in accordance with the terms of the Note, and directs that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated below. If shares are to
be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto.
The undersigned agrees to be bound by the terms of the Note relating to
the Class A common stock issued upon conversion of the Note. If you want to
convert the Note in whole, check the box below. If you want to convert the Note
in part, indicate the portion of the Note to be converted in the space provided
below.
In whole / /
or
Portion of Note to be converted ($1,000 or any integral multiple
thereof): $______________
Date: ______________
Name of Holder:
Signature of Authorized Representative of Holder
21
______________________________________ (Sign exactly as your name
appears on the other side of this Note)
Medallion Signature Guarantee:_____________________________________
Please print or typewrite your name and address, including zip code,
and social security or other identifying number:
If the Class A common stock is to be issued and delivered to someone
other than you, please print or typewrite the name and address, including zip
code, and social security or other identifying number of that person:
22
Exhibit C
See Exhibit D to Exhibit 99.1 for Form of Registration Rights Agreement
