Exhibit 99.3
MODIFICATION AGREEMENT
AGREEMENT dated as of June 1, 2001 between EasyLink Services Corp.,
successor to Xxxx.xxx, Inc., having an address at 000 Xxxxxxxx Xxxxxx, Xxxxxx,
XX 00000 (the "Debtor") and Associates Leasing, Inc., 0000 Xxxxx Xxxxx, Xxxxx
000, Xxxxx, XX 00000 ("Lessor").
W I T N E S S E T H :
WHEREAS, the Debtor and the XXX Xxxxxxxxxxx ("EMC") have entered into
Master Lease #11954, together with Supplement No. 3 and Supplement No. 4 thereto
for the lease of equipment identified on each Supplement (collectively referred
to as the "Leases");
WHEREAS, the Leases have been assigned to the Lessor;
WHEREAS, the Debtor is in default under the Leases for, among other
reasons, the failure to make due and timely payments thereunder and the
remaining rentals, calculated as such default, is $964,488.00 and $754,390.00
(with present value balances of $947,818.93 and $741,195.77 calculated through
August 14, 2001) respectively under Supplement No. 3 and No. 4;
WHEREAS, Debtor needs the equipment described in Supplement Xx. 0 xxx
Xx. 0 ("xxx Xxxxxxxxx") for a limited time period after which it is no longer
essential to the Debtor's business;
WHEREAS, the Lessor is entitled to exercise all of its rights and
remedies under the Leases by virtue of the Debtor's defaults thereunder,
including, without limitation, the right to recover possession of the Equipment;
WHEREAS, the Debtor is desirous of returning the Equipment to the
Lessor and providing for repayment of the unpaid lease balance;
WHEREAS, the Debtor has requested that the Lessor forbear from
enforcing its remedies under the Leases in exchange for the covenants,
conditions and agreements contained herein, including, without limitation, the
Debtor's: (a) agreement to return the Equipment to the Lessor, and (b) grant of
certain security interests;
NOW THEREFORE and in consideration of the mutual covenants, conditions
and representations hereinafter set forth and for other good and valuable
consideration, the adequacy and receipt of which the parties acknowledge, the
parties agree as follows:
1
1. Recitals. The Recitals set forth above are hereby incorporated
herein and expressly made a part of this Agreement.
2. Forbearance. Provided the Debtor complies with all of its
obligations hereunder, no payments under the Leases shall be due from the Debtor
during the period June 1 - October 31, 2001. All arrears, together with all late
charges, interest and attorneys' fees due under the Leases shall become
immediately due and payable upon the sooner to occur of November 1, 2001 or a
default hereunder. Provided the Debtor has not defaulted hereunder, upon
satisfaction of the conditions contained in P. 3 hereof, the Debtor's
obligations under the Leases shall be replaced by the convertible promissory
note described in P. 4 hereof and until such replacement the Leases shall remain
in full force and effect.
3. Conditions to Agreement to Forebear. The Lessor shall forbear
from commencing any legal action (or seeking self-help recovery of the
Equipment) as a result of any defaults existing as of the date hereof under the
Leases and shall likewise forbear during the period commencing as of the date
hereof and continuing through October 31, 2001 (the "Forbearance Period")
subject to the following conditions: (a) the right of the Lessor to commence
such legal action and/or seek self-help recovery of possession of the Equipment
in the future in the event of a default by the Debtor hereunder (or under the
Leases following the Forbearance Period) is preserved; (b) the entry into a
security agreement, by September 30, 2001, among the Debtor, the Lessor and
other creditors who require such security regarding a general lien in the
non-working capital assets of the Debtor other than the Equipment, pursuant to
the blanket lien to be afforded as required by paragraph "6" hereof; (c) during
the Forbearance Period, the Debtor shall continue to perform each and every
obligation under the Leases, except for the monthly payments due to the Lessor
and, in such case, shall make such payments as modified herein; (d) no later
than September 10, 2001, return to the Lessor all the Equipment (with all data
of the Debtor removed) in good working condition as required to be maintained by
the manufacturer, reasonable wear and tear excepted (Debtor will also identify
to Lessor a contact name to arrange for the Equipment recovery); (e) the Debtor
will have raised no less than $10,000,000.00 of capital by October 31, 2001 (the
"Financing Condition"); and (f) the Debtor will have entered in forbearance
agreements, on or before the satisfaction of the Financing Condition, with AT&T
Corp. with respect to its outstanding note in the principal amount of
approximately $35,000,000.00, Xxxxxx Xxx Xxxx with respect to his outstanding
note in the original principal amount of approximately $9,200,000.00 and lessors
holding at least ninety (90%) all 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 Creditors Condition").
4. Repayment of Balance of Indebtedness. Upon satisfaction in a
timely manner of the conditions contained in P. 3 hereof, the Leases will
terminate (provided that any terms that survive termination pursuant to the
Leases shall continue to survive termination hereunder), and the Debtor will
issue to Lessor, in form satisfactory to Lessor, a convertible promissory note
in exchange for the conversion of all present and future payments under the
Leases on the following terms and conditions:
2
(a) A convertible promissory note in the principal amount of
$486,108.00 ("Note") in the form annexed hereto as Exhibit "A". The Note shall
be for a five (5) year term commencing June 1, 2001 and accrue interest at a
rate of 12.0%. The Note will accrue interest for the first two years and will
thereafter require principal amortization starting at the end of second year.
The interest and principal payments will be payable quarterly and will fully
amortize the Note by end of fifth year. The Note will be convertible into shares
of the Debtor common stock at an exercise price of $1.00 per share at the
request of Lessor at any time during the term. The Note will be secured by a
lien on Debtor's assets other than working capital assets. This lien will be
subordinate to (i) all liens existing as of the date hereof, Permitted Liens (as
defined on Exhibit "C" hereto) and (ii) up to $25,000,000.00 of senior secured
debt in connection with new funding coming into the Debtor. Finally, these liens
will be pari passu with all other debt that is secured by the same assets unless
the other debt is expressly subordinated.
(b) Upon thirty (30) days prior written notice, the Debtor,
provided the Note has not been converted, may irrevocably elect at any time and
from time to time to prepay the outstanding balance of the Note, or any portion
thereof, plus accrued interest for cash in such amount.
(c) 486,108 shares of the Debtor's common stock ("Shares").
The Debtor will be required to file a registration statement covering the resale
of the Shares and the shares issuable upon exercise of the Warrants (the
"Warrant Shares") and the shares issued on conversion of the Note within 45 days
from the closing on the issuance of the Note, Shares and Warrant Shares and to
use all reasonable commercial efforts to cause such registration statement to
become effective as soon as practicable thereafter. The Shares, Warrant Shares
and Conversion Shares will be governed by the Registration Rights Agreement in
the form annexed as Exhibit "B".
(d) 486,108 warrants to purchase the Debtor's common stock
("Warrants") in the form annexed hereto as Exhibit "D". The Warrants shall
expire ten (10) years from the date of issue and shall have an exercise price
equal to the average of the closing prices of the Debtor's common stock over the
30 trading days ending two days before the closing on the issuance of the Note,
Shares and Warrant Shares.
(e) Lessor has the right to examine all other agreements with
other creditors and to ensure that the Other Creditors Condition has been
satisfied.
(f) On or before June 30, 2002, up to 100% of the Note and
accrued interest thereon shall be subject to mandatory prepayment upon the 5th
business day after the closing of one or more equity or equity-linked financings
in which the Debtor raises cash in an aggregate cumulative amount in excess of
3
the Financing Condition. In such event, the Debtor shall prepay the Note with
(i) cash in an amount (up to 50% of principal plus accrued interest thereon)
equal to 0.9% of the net proceeds in excess of $10,000,000.00 received in one or
more Eligible Financings and (ii) stock having a Fair Market Value equal to the
cash payment. For example, if Lessor's share of the cash proceeds is
$100,000.00, then EasyLink would be obligated to prepay $200,000.00 of the Note,
$100,000.00 in cash and $100,000.00 in stock having a Fair Market value equal to
$100,000.00. The "Fair Market Value" of the shares of Common Stock, for purposes
of this subsection (i) shall be equal to the average closing market price of the
Common Stock during the 10 trading days ending one week before the prepayment
date or, if there shall be no closing price on any day, then the closing price
on such day shall be deemed to be the average of the closing bid and asked
prices on such day.
Upon the expiration of the Forbearance Period, and provided the
conditions to the delivery of the Note have not been met, all sums due to the
Lessor shall be immediately due and payable. If at that time the Debtor fails to
pay the entire lease balance (along with accrued interest charges and attorneys'
fees), then the Lessor shall be fully entitled to pursue all of its legal rights
and remedies under the Leases (and all other remedies provided in P. 7) and the
Debtor acknowledges that it presently has no offset, setoffs, defenses or
counterclaims to the institution of such action, and agrees not to assert any
offset, defense, setoff or counterclaim in any legal action instituted by any
Lessor except for Lessor's breach of the terms of this Agreement. In the event
that the balance of a Lessor's debt is not paid in full upon the expiration of
the Forbearance Period, the Lessor shall be entitled to all interest, penalties,
late charges, attorneys' fees and other amounts provided for in the Leases
respectively.
5. Grant of Security Interest. To secure all obligations of the
Debtor to the Lessor whether arising hereunder or under the Leases, together
with any extensions or renewals thereof and any amendments or modifications
thereto, Debtor shall grant and convey to the Lessor and other creditors who
require such security, a security interest in, and mortgages to such parties,
all general intangibles, machinery, equipment, inventory, patents, trademarks,
including products and proceeds thereof, all additions, attachments and
accessions thereto and any and all insurance or other proceeds arising therefrom
(the "Collateral") subordinated (except as to the Equipment) to all existing
liens or liens contemplated by P. 4(a). The Debtor will coordinate the creation
of a security agreement among all lessors and other creditors who are or become
a party thereto and shall appoint an independent agent for all creditors
respecting such lien.
6. Default.
A. On the occurrence of any one or more of the following
events, the Debtor shall be in default of this agreement:
(i) the existence of any lien or encumbrance on the assets of
the Debtor in favor of any party other than Permitted Liens or liens
contemplated in P. 4(a) hereof;
4
(ii) If the Debtor (a) shall file a petition or request for
liquidation, reorganization, arrangement, adjudication as a bankrupt, relief as
a debtor or other similar relief under any bankruptcy, insolvency or other
similar laws of the United States of America, or any state or territory thereof
or any foreign jurisdiction now or hereafter in effect; (b) shall make a general
assignment for the benefit of creditors; (c) shall consent to the appointment of
a receiver or trustee for the Debtor or its assets including, without
limitation, the appointment of or taking by a "custodian" as defined in the
Federal Bankruptcy Code; (d) shall make any or send any notice of any intended
bulk sale pursuant to the Uniform Commercial Code; or (e) shall execute a
consent to any other type of insolvency proceeding (under the Federal Bankruptcy
Code or otherwise) or of any formal or informal proceeding for the dissolution
or liquidation of or settlement of claims against, or winding up of affairs of
the Debtor;
(iii) the appointment of a receiver, trustee, custodian or
officer performing similar functions for the Debtor or any of its assets,
including, without limitation, the appointment of or taking possession by a
"custodian" as defined in the Federal Bankruptcy Code;
(iv) the filing against the Debtor of a request for a petition
for liquidation, reorganization, arrangement, adjudication as a bankruptcy or
other relief under the bankruptcy, insolvency or similar laws of the United
States of America or any state or territory thereof or any foreign jurisdiction
now or hereafter in effect; or the institution against the Debtor of any other
type of insolvency proceeding (under the Federal Bankruptcy Code or otherwise)
or of any formal or informal proceeding for the dissolution, liquidation of or
settlement of claims against or winding up of affairs of the Debtor that is not
dismissed within sixty (60) days of filing. The Debtor agrees that the Lessor
may intervene and seek appropriate relief in such involuntary proceeding for the
purpose of protecting the Lessor's interest in the assets of the Debtor and in
the Equipment;
(v) Failure by the Debtor to timely perform any covenant or
condition hereunder;
(vi) Failure by the Debtor to timely make any payment due
hereunder or to perform any covenant or condition due under the Leases; or
(vii) If any representation or warranty contained herein is
false in a material respect.
B. If an event of default hereunder remains uncured for a period
of three (3) working days after written notice to the Debtor, then: (i) the
Lessor's agreement herein contained respecting forbearance and reduction of
payments shall be null and void; (ii) all sums due under the Leases shall become
immediately due and payable; (iii) the Forbearance Period shall terminate
immediately and without notice to the Debtor; (iv) the Lessor shall be free to
5
commence all appropriate legal action and to otherwise enforce their rights and
remedies and the Agent on behalf of the Lessor shall be free to foreclose upon
the lien in the Collateral and in connection therewith, the Debtor waives the
right to receive any notices of default or rights to cure defaults otherwise
provided in the leases.
7. Representations and Warranties. The Debtor hereby represents,
warrants and agrees that:
A. The lease balance due to the Lessor is now due and payable
without any offsets, deductions, defenses, claims and counterclaims of any kind;
B. The Debtor has taken all necessary action to make this
Agreement valid and enforceable;
C. This Agreement constitutes the legal, valid and binding
obligation of the Debtor enforceable in accordance with its terms;
D. (i) The authorization, execution and delivery of this
Agreement and the documents contemplated to be delivered hereunder and the
confirmation of the transaction contemplated hereby shall, to the best of the
Debtor's knowledge, be enforceable and binding upon the Debtor, and (ii) the
Agreement does not: (a) violate, conflict with or result in the breach of any
terms or provisions of or require any notice, filing or consent under any
applicable governmental statutes or regulations or any judgment, decree, writ,
injunction, order or award of any arbitrator or authority binding upon the
Debtor; and (b) conflict with result in the breach of any terms or provisions
of, require any notice or consent under, give rise to a right of termination of,
constitute a default under, result in the acceleration of or give rise to a
right to accelerate any obligation under any loan agreement, lease, mortgage,
indenture, financing agreement or any other agreement or instrument of any kind
to which the Debtor is a party of by which its property or assets are bound;
E. The Debtor has not received, prior to the date hereof, any
written notices of any violation of any governmental statutes or regulations
relating to its business which remain uncured; and
F. The Debtor has negotiated this Agreement at arms length with
the Lessor assisted by experienced legal counsel of the Debtor's choice.
8. Expenses. The Debtor agrees to pay all ordinary and reasonable
expenses of Lessor's fees and disbursements of counsel in connection with the
enforcement of the rights of the Lessor under this Agreement which expenses if
advanced by the Lessor, until repayment by the Debtor, shall be considered costs
of preservation of the Lessor's assets and shall be added to the debt due Lessor
and shall be secured by the Equipment and the Collateral.
6
9. Insurance. Debtor shall provide to Lessor evidence that the
Equipment is insured in accordance with the terms of the Leases.
10. Cross Default. Any default by the Debtor under this Agreement
shall constitute a default under the Leases and any default under any of the
Leases (as modified hereby) shall constitute a default under this Agreement.
11. Financial Disclosure. The Debtor shall continue to be
obligated to furnish to the Lessor all financial information and other documents
as specified in the applicable Leases. If the Debtor is not a public company or
not filing its required public disclosures, then, as long as there are any sums
due and owing to the Lessor pursuant to the Leases, the Debtor shall furnish to
the Lessor monthly financial statement reflecting actual company performance and
forecast of expected future financial performance. The Debtor will be responsive
to all requests made by the Lessor respecting both financial and nonfinancial
information concerning the Debtor's operation including the sale of any of the
Debtor's assets or business units.
12. No Waiver. Except as otherwise provided herein, this Agreement
shall not constitute a waiver of any default under the Leases or of any right or
remedy of the Lessor, all of which are expressly reserved. No delay or omission
by the Lessor in the exercise or any right or remedy shall operate as a waiver
thereof or of any other right or remedy.
13. Right to Cure; No Survival.
A. Except as expressly provided for herein, the Leases shall
continue in full force and effect and are in all respects ratified and
reaffirmed;
B. The Agreements made by the Lessor herein are subject to the
conditions that (i) if any court or tribunal, including without limitation a
Bankruptcy Court, shall determine that any payment received by the Lessor under
this Agreement or the document executed in connection therewith, should be
rescinded, voided or rendered void or voidable as a preferential transfer,
impermissible set off or fraudulent conveyance unless otherwise returned or
disgorged by the Lessor for any reason including, without limitation, the
insolvency, bankruptcy or reorganization or any party hereto, or (ii) if any
representation or warranty contained in this Agreement shall have proven to be
false or misleading, then (a) the Lessor's agreements herein contained shall, at
Lessor's election, be null and void, (b) the Leases shall be in full force and
effect notwithstanding the terms of this Agreement and (c) the Debtor shall be
immediately liable to the Lessor under the Leases for any disgorged or returned
payments and all amounts that remain unpaid to Lessor by the Debtor hereunder or
under the Leases.
C. The Debtor agrees that all of the representations, warranties,
covenants and agreements as set forth in this Agreement shall survive the
execution of this Agreement or the termination thereof. In the event any such
7
representations or warranties are not materially true, accurate and/or complete
and/or any of the agreements of the Debtor contained herein are breached in any
material respect, the Debtor shall be liable to the Lessor for any and all
losses, costs, damages and/or expenses (including attorneys' fees) to the extent
not covered by insurance incurred by the Lessor as a result of any such breach,
misrepresentation and/or false warranty.
14. Miscellaneous.
A. Counterparts, etc. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original
but all the counterparts shall constitute one and the same instrument.
B. Entire Agreement, etc. This Agreement constitutes the
entire contract between the parties hereto with respect to the subject matter
hereof and shall supersede and take the place of any other instrument purporting
to be an agreement of the parties hereto relating to the transactions
contemplated hereby. This Agreement may not be changed orally but only by an
agreement in writing signed by a duly authorized officer of the party to be
bound. This Agreement shall be governed by the laws of the State of New York.
Notwithstanding anything to the contrary in the Registration Rights Agreement
annexed hereto as Exhibit "B", the laws of the State of New York will govern all
matters as between the Debtor and Lessor including any matter under the
Registration Rights Agreement.
C. Third parties. The provisions of this Agreement, whether
express or implied, shall not give any third party (other than successors and
assigns of the Lessor) any benefit of any equitable or legal right, remedy or
claim under applicable law.
D. Notices.Any notices to be given hereunder shall be duly
given as delivered sent by telecopy or nationally recognized overnight courier
as follows:
To the Debtor: TO THE ADDRESSES IDENTIFIED ON
PAGE 1
with a copy to: Xxxxx Xxxxxxxx (at the address for the Debtor)
To the Lessor: TO THE ADDRESSES IDENTIFIED ON
PAGE 1
with a copy to: Moritt, Hock, Hamroff & Xxxxxxxx, LLP
000 Xxxxxx Xxxx Xxxxx
Xxxxx 000
Xxxxxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxxx, Esq.
(Phone: (000) 000-0000)
(Fax: (000) 000-0000)
8
and shall be deemed effective: (i) upon delivery to the overnight courier; or
(ii) if transmitted by telecopier, upon receipt of confirmation that telecopier
has been so transmitted.
E. Manner of Notice. The attorneys for the parties hereto may
but should not be required to give any notices under this Agreement on behalf of
their respective clients.
F. Jury Trial Waiver. DEBTOR WAIVES ANY RIGHT TO A TRIAL BY
JURY WHICH IT MAY HAVE IN ACTION OR PROCEEDING IN LAW OR EQUITY IN CONNECTION
WITH THIS AGREEMENT OR THE TRANSACTIONS RELATED HERETO. THE DEBTOR ACKNOWLEDGES
THAT THIS WAIVER IS KNOWINGLY AND FREELY GIVEN.
G. Further Documents. The Debtor hereby agrees to execute and
deliver to the Lessor such further documents and instruments as may be
reasonably necessary or proper to fully effectuate the intent of this Agreement.
EASYLINK SERVICES CORPORATION, ASSOCIATES LEASING, INC.
successor to XXXX.XXX, INC.
BY: /s/ Xxxxx Xxxxxxxx BY: /s/ Xxxxx X. XxXxxx
-------------------------- -------------------------------
ITS: EVP & General Counsel ITS: VP
-------------------------- -------------------------------
9
EXHIBIT A
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
$486,108 Effective: June 1, 2001
FOR VALUE RECEIVED EASYLINK SERVICES CORPORATION, a Delaware corporation
("Company") promises to pay to ASSOCIATES LEASING, INC. ("Holder"), or its
registered assigns, the principal sum of Four Hundred Eighty Six Thousand One
Hundred Eight Dollars ($486,108), or such lesser amount as shall equal the
outstanding principal amount hereof together with interest from the effective
date of this Note on the unpaid principal balance at a rate equal to 12.0% per
annum, computed on the basis of twelve 30 day months. No payment shall be due
during the first twenty-four (24) months from the effective date. Commencing on
June 1, 2003, Company shall make quarterly payments in an amount sufficient to
fully amortize the principal and accrued interest by May 31, 2006. 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 the Company for that purpose, or, if not so available in such manner, as
otherwise determined in good faith by the Board of Directors of the 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.
2
"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
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);
3
(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);
(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 (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"Material Subsidiary" means any Subsidiary of the 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.
4
"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
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 the 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 on
June 1, 2003 and thereafter quarterly on the first business day of such month.
3. Mandatory Prepayment. 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 in which Company raises cash in an aggregate cumulative
amount in excess of $10 million, ("Eligible Financings"). In such event, the
Company shall prepay the note with (i) cash in an amount (up to 50% of principal
hereof plus accrued interest hereon) equal to 0.9% 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
Associate's share of the cash proceeds is $100,000 then EasyLink would be
obligated to pre-pay $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.
5
4. Optional Prepayment. At any time and from time to time on or before
June 30, 2002, the Company may prepay all or a portion of the outstanding
principal hereof and accrued interest hereon upon the same terms and conditions
(i.e. cash and Common Stock etc.) as set forth in Section 3 above for mandatory
prepayment, so long as Company gives Purchaser 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 Purchaser at
least 30 days irrevocable written notice in advance of such prepayment.
Company's decision to prepay this Note will not, in any way, affect Purchaser's
right of conversion on or before the prepayment as provided in Section 9 herein.
5. Representations and Warranties of the 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) the Company defaults in the payment of any interest on any
Note when the same becomes due and payable and the default continues for a
period of 30 days; or
(b) the Company defaults in the payment of any principal or
premium, if any, on any Note when the same becomes due and payable, whether at
maturity or otherwise; or
(c) the 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 the 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 the Company or any Material
Subsidiary (or the payment of which is Guaranteed by the Company or any of the
Company's Material Subsidiaries), whether such Indebtedness or Guarantee exists
6
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 the Company from any Holder of Notes
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 the 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) the 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 the 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. Rights of Holder upon Default.
(a) If an Event of Default with respect to the 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 the 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 the Company,
declare all the Notes held by it or them 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
7
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 the 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 have been
declared immediately due and payable under Section 7, the holder of the Note at
the time outstanding may proceed to protect and enforce the rights of such
holder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Note or 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 Purchaser. By its acceptance of
this Note, Holder makes the following representations and warranties:
(a) 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 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.
(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 the Company at
8
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
any 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 the
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, the Company
shall 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 the
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 the Company had not been closed.
9
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 any holder surrenders a 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 such Note on such interest payment date
shall be paid on such interest payment date to the person who was the
holder of such 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, the
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 tock upon conversion of a Note. In lieu
thereof, the 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 any 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
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 the Company, duly
executed by the registered holder thereof or his duly authorized
attorney; and provided further, however, that the 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 the
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 the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been
paid or is not applicable.
10
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 Notes as herein provided, a sufficient
number of shares of Class A common stock to permit the conversion of
all outstanding Notes for shares of Class A common stock, including but
not limited to those to be issued to the Holder upon conversion of the
Note.
All shares of Class A common stock which may be issued upon
conversion of the Notes 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
Notes, 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 the 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 the 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
the holder of any 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 such Notes
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 the 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
11
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 the 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 the 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 the 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 the Company shall distribute to all
holders of Class A common stock shares of capital stock of the 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 the 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 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
12
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 the Company shall distribute rights, options or
warrants to subscribe for additional shares of the 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, the
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 each holder of a Note who converts such 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 the 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 the 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 the Company or any of its Subsidiaries for Class A
common stock concluded within the 12 months preceding the Distribution
Record 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 the 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
13
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 the Company or any Subsidiary of the 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 the 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 the 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 the 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 (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
14
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 the 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 the
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 the Company, which determination shall be
conclusive; provided however that in no case shall the Company decrease
the Conversion Price to less than 80% of the Current Market Price.
(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, the Company may elect to defer, until such event, issuing
to the holder of any Note converted after such record date the shares
of Class A common stock and other capital stock of the Company issuable
upon such conversion over and above the shares of Class A common stock
and other capital stock of the 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, the Company shall
issue or cause its transfer agents to issue due bills or other
appropriate evidence of the right to receive such shares.
15
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 any
Note thereafter surrendered for conversion shall become entitled to
receive any shares of capital stock of the Company other than shares of
its Class A common stock, thereafter the Conversion Price of such other
shares so receivable upon conversion of any Notes 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, the Company shall promptly mail to Noteholders 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.
9.10. Notice of Certain Transactions. In the event that: (a)
the Company takes any action which would require an adjustment in the
Conversion Price; (b) the Company takes any action described in Section
9.11; or (c) there is a dissolution or liquidation of the Company; the
Company shall mail to Noteholders 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.
16
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 Notes (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 the Company is
a party other than a merger in which the 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 the Company (determined on a consolidated basis), then the 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 Noteholders a written notice providing that the holder
of each Note then outstanding shall have the right to convert such 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 holders of the Notes as the
Board of Directors of the 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.
9.12. Cancellation of Converted Notes. All Notes delivered for
conversion shall be delivered to the 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.
17
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 the 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 Loan Agreement 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,
18
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, the Company will take all such action as may be
necessary or appropriate in order that the 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 B
EASYLINK SERVICES CORPORATION
REGISTRATION RIGHTS AGREEMENT
Dated as of June 1, 2001
EASYLINK SERVICES CORPORATION
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is made as of June 1, 2001 (the
"Agreement") by and between EasyLink Services Corporation, a Delaware
corporation ("EasyLink") and GATX Technology Services Corporation, a Delaware
corporation ("GATX"). One or more additional securityholders of EasyLink may
become a party to this Agreement by signing an Accession Agreement agreeing to
bound by the terms and conditions hereof; in such case the securities specified
therein shall be deemed to be Registrable Securities (as defined below)
hereunder. As used herein, "Holders" shall mean GATX and such securityholders
who enter into an Accession Agreement with EasyLink, and "Holder" shall mean any
one of such Holders.
RECITALS
A. EasyLink desires to sell and issue to GATX and to the other Holders
and GATX and such other Holders desire to purchase from EasyLink shares (the
"Shares") of Class A common stock, par value $.01 per share ("Class A Common
Stock"), Convertible Notes (the "Notes") and warrants ("Warrants"; the Shares,
the Warrants and the Notes are sometimes collectively referred to herein as the
"Securities") to purchase Class A common stock pursuant to one or more
modification and/or restructuring agreements (the "Restructuring Agreements").
B. In order to induce GATX to purchase the Securities pursuant to the
Restructuring Agreements, EasyLink desires to grant to GATX and the other
Holders certain registration rights with respect to the Shares and all of the
shares of Class A common stock issuable upon conversion of the Notes or upon
exercise of the Warrants (the "Conversion Shares"), all on the terms and
conditions set forth herein.
In consideration of the foregoing and the promises and covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
following respective meanings:
"Act" means the U.S. Securities Act of 1933, as amended from
time to time.
"Agreement" means this Agreement, as the same may be amended
or supplemented from time to time in accordance with the terms hereof.
"Class A Common Stock" has the meaning set forth in the
recitals above.
"Conversion Shares" has the meaning set forth in the recitals
above.
"Mandatory Registration" has the meaning set forth in Section
2.01(a) of this Agreement.
"Holders" has the meaning set forth in the preface above.
"Indemnified Party" and "Indemnifying Party" have the meanings
set forth in Section 2.07(c) of this Agreement.
"Piggyback Registration" has the meaning set forth in Section
2.02 of this Agreement.
"Registrable Securities" means (i) the Shares and the
Conversion Shares, (ii) any Class A common stock of EasyLink issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
that is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of the securities referenced in clause (i) and
this clause (ii), and (iii) any other shares of capital stock of EasyLink into
or for which the securities referenced in clauses (i) and (ii) may be converted
into or exchanged pursuant to a recapitalization or reclassification of
EasyLink's capital stock; provided, however, that Registrable Securities shall
not include any securities that (w) have been registered and sold pursuant to
the Act, (x) have been distributed to the public through a broker, dealer or
market maker pursuant to Rule 144 under the Act, (y) are eligible for public
resale under Rule 144(k) under the Securities Act or in accordance with the law
governing any non-U.S. exchange where the Common Stock is publicly listed or (z)
have been sold in a transaction exempt from registration under the Act so that
all transfer restriction and restrictive legends with respect thereto are
removed upon consummation of such sale.
"Registration Expenses" means all expenses incident to EasyLink's
performance of or compliance with this Agreement, including, without limitation,
(i) all registration, filing, securities exchange listing, rating agency and
National Association of Securities Dealers fees, (ii) all registration, filing,
qualification and other fees and expenses of complying with securities or blue
sky laws of all jurisdictions in which the securities are to be registered and
any legal fees and expenses incurred in connection with the blue sky
qualification of the Registrable Securities and the determination of their
eligibility for investment under the laws of all such jurisdictions, (iii) all
word processing, duplicating, printing, messenger and delivery expenses, (iv)
the fees and disbursements of counsel for EasyLink and of its independent public
accountants, including, without limitation, the expenses of any special audits
or "cold comfort" letter required by or incident to such performance and
compliance, (v) in connection with any firm commitment, underwritten offering,
the reasonable fees and disbursements of any one counsel or one accounting firm
retained by GATX, not to exceed $15,000 in the aggregate for all of such fees
and disbursements, (vi) premiums and other costs of policies of insurance of
EasyLink against liabilities arising out of the public offering of the
Registrable Securities being registered to the extent EasyLink elects to obtain
3
such insurance, and (vii) any fees and disbursements of underwriters customarily
paid by issuers or sellers of securities (but excluding underwriting discounts
and commissions), if any, relating to the Registrable Securities.
"SEC" means the U.S. Securities and Exchange Commission.
Other capitalized terms that are used herein that are not defined herein shall
have the respective meanings ascribed to such terms in the Restructuring
Agreements.
ARTICLE II
REGISTRATION RIGHTS
EasyLink, GATX and the other Holders covenant and agree as follows:
SECTION 2.01 Mandatory Registration
(a) Registration Obligation. Within 45 days from the Closing of the
Restructuring Agreements, EasyLink agrees to prepare and file a registration
statement on Form S-3 or such other form that EasyLink may then use for an
offering to be made on a continuous basis pursuant to Rule 415 (the
"Registration Statement") covering all of the Registrable Securities and to use
reasonable commercial efforts to cause the Registration Statement to become
effective as soon as practicable thereafter (the "Mandatory Registration").
SECTION 2.02 Piggyback Registration.
(a) Right to Piggyback. If EasyLink proposes to register any of its
securities under the Act in connection with a firm commitment underwritten
offering (other than registrations solely for the registration of shares in
connection with an employee benefit plan or a merger or consolidation and other
than pursuant to Section 2.01) at any time before all of the Registrable
Securities are eligible for public resale by Holders pursuant to Rule 144(k)
under the Act, whether or not for sale for EasyLink's own account, and the
registration form to be used may be used for the registration of Registrable
Securities (a "Piggyback Registration"), EasyLink will at each such time give
prompt written notice to Holders of its intention to do so and of Holders's
rights under this Section 2.02. Upon the written request of any Holders made
within 30 days after the receipt of any such notice (which request shall specify
the Registrable Securities intended to be disposed of by Holders and the
intended method of distribution thereof), EasyLink will use its reasonable
commercial efforts to effect the registration under the Act of all Registrable
Securities which EasyLink has been so requested to register by Holders, to the
extent required to permit the disposition (in accordance with such intended
methods thereof) of the Registrable Securities so to be registered, provided
that if, at any time after giving written notice of its intention to register
any securities and prior to the effective date of the registration statement
filed in connection with such registration, EasyLink shall determine for any
reason not to register or to delay registration of such securities, EasyLink
may, at its election, give written notice of such determination to Holders and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the registration expenses under
4
Section 2.05 in connection therewith), without prejudice, however, to the rights
of Holders under Section 2.01, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable Securities,
for the same period as the delay in registering such other securities. No
registration proposed or effected under this Section 2.02 shall relieve EasyLink
of its obligation to effect any Mandatory Registration under Section 2.01.
(b) Priority in Piggyback Registrations. If the managing underwriter of
a Piggyback Registration advises EasyLink in writing that, in its opinion, the
number of shares of Registrable Securities requested or proposed to be included
in such offering exceeds the number that can be sold in such offering without
materially affecting the offering price of any such securities, EasyLink shall
include in such registration (i) first, to the extent that securities of
EasyLink are included in such registration, (A) such securities proposed to be
sold by EasyLink and (B) the securities of EasyLink held by persons who have
preferential registration rights to include such securities in such Piggyback
Registration in accordance with the agreements with respect to such registration
rights between EasyLink and Holders; and (ii) second, to the extent that such
Registrable Securities may be included in such registration without materially
affecting the offering price of the securities referred to in clause (i), in the
opinion of such managing underwriter, the Registrable Securities requested by
Holders to be included in such Piggyback Registration pursuant to Section
2.02(a) and any other securities of EasyLink held by persons other than Holders
having rights to participate in such Piggyback Registration that are
non-preferential to Holders of the Registrable Securities, pro rata among all
such holders on the basis of the total number of securities of EasyLink,
including Registrable Securities, requested to be included therein.
(c) Selection of Underwriters. EasyLink shall select the investment
banker(s) and manager(s) for the offering under Section 2.02.
(d) Underwritten Piggyback Registrations. If EasyLink at any time
proposes to register any of its securities under the Act as to which rights
under this Section 2.02 have been exercised and such securities are to be
distributed by or through one or more underwriters, EasyLink will, if requested
by Holders as provided in Section 2.02(a) and subject to the provisions of
Section 2.02 (a) and (b), use its reasonable commercial efforts to arrange for
such underwriters to include all the Registrable Securities to be offered and
sold by Holders among the securities to be distributed by such underwriters.
Holders shall be a party to the underwriting agreement between EasyLink and such
underwriters and may, at its option, require that any or all of the
representations and warranties by, and the other agreements on the part of,
EasyLink to and for the benefit of such underwriters shall also be made to and
for the benefit of Holders and that any or all of the conditions precedent to
the obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of Holders. Holders shall not be
required to make any representations or warranties to or agreements with
EasyLink or the underwriters other than representations, warranties or
agreements regarding Holders, Holders's title to Registrable Securities and
Holders's intended method of distribution and any other representation required
by law.
5
SECTION 2.03 Obligations of EasyLink.
In furtherance of its obligations under Section 2.01 or 2.02 to use its
commercially reasonable efforts to effect the registration of the Registrable
Securities, EasyLink shall, as expeditiously as reasonably possible,
(a) Within 45 days after the date of issuance of the Note, the
Shares and the Warrants, prepare and file with the SEC a registration statement
with respect to such Registrable Securities and thereafter use its commercially
reasonable efforts to cause such registration statement to become effective and
keep such registration statement effective until (i) in the case of a Mandatory
Registration, the time when all Registrable Securities are eligible for sale by
Holders pursuant to Rule 144(k) and (ii) in the case of a Piggyback
Registration, until 90 days after the effectiveness of such registration
statement;
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Act with
respect to the disposition of all securities covered by such registration until
the earlier of the time periods specified in Section 2.03(a) and such time as
all of such securities have been disposed of in accordance with the intended
methods of disposition by Holders set forth in such registration statement;
(c) Furnish to Holders such numbers of copies of such
registration statement and of each amendment and supplement thereto (in each
case including all exhibits) and prospectus, including any preliminary
prospectus, in conformity with the requirements of the Act, and such other
documents as Holders may reasonably request in order to facilitate the
disposition of the Registrable Securities;
(d) Use its commercially reasonable efforts to register and
qualify the securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions (domestic or foreign) as
Holders shall reasonably request, to keep such registration or qualification in
effect for so long as such registration statement remains in effect, and to take
any other action which may be reasonably necessary or advisable to enable
Holders to consummate the disposition in such jurisdictions of the securities
owned by Holders, except that EasyLink shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this Section
2.03(d) be obligated to be so qualified, to subject itself to taxation in any
such jurisdiction or to consent to general service of process in any such
jurisdiction;
(e) Use its reasonable commercial efforts to (i) obtain the
withdrawal of any order suspending the effectiveness of such registration
statement or sales thereunder at the earliest possible time and (ii) cause all
Registrable Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable Holders to consummate the disposition of such Registrable
Securities;
(f) In connection with any firm commitment underwritten
offering, furnish to Holders a signed counterpart, addressed to Holders (and the
underwriters, if any) of
6
(i) an opinion of counsel for EasyLink dated the date
of the closing under the underwriting agreement, reasonably
satisfactory in form and substance to such underwriter, and
(ii) a "comfort" letter, dated the effective date of
such registration statement (and dated the date of the closing under
the underwriting agreement), signed by the independent public
accountants who have certified EasyLink's financial statements included
in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to the underwriters in underwritten public
offerings of securities;
(g) Notify in writing Holders, at any time when a prospectus
relating thereto is required to be delivered under the Act, (a) upon discovery
that, or upon the happening of any event as a result of which, the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, and (b) of any request
for any amendment of or supplement to any registration statement or other
document relating to such offering promptly after receipt of such request from
the SEC or any other regulatory body or other body having jurisdiction and, in
either case, at the request of Holders promptly prepare and furnish to Holders a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(h) Otherwise comply with all applicable federal and state
securities laws and rules and regulations of the SEC, and will furnish to
Holders draft and final versions of each registration statement and prospectus
used in connection therewith prior to the filing thereof, and any amendment or
supplement to such registration statement or prospectus and shall not file any
thereof to which Holders shall have reasonably objected on the grounds that such
registration statement, prospectus, amendment or supplement does not comply in
all material respects with the requirements of the Act or the rules or
regulations thereunder;
(i) Provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such registration
statement; and
(j) Use its reasonable commercial efforts to list all
Registrable Securities covered by such registration statement on each securities
exchange and inter-dealer quotation system on which similar securities issued by
EasyLink are then listed.
7
(k) EasyLink may require Holders as to which any registration
is being effected to furnish EasyLink such information regarding Holders and the
distribution of such securities as EasyLink may from time to time reasonably
request in writing to the extent necessary to comply with applicable securities
laws in connection with the preparation and filing of such registration
statement.
Section 2.04 Furnish Information.
It shall be a condition precedent to the obligations of
EasyLink to take any action pursuant to Article 2 that Holders shall furnish to
EasyLink such information regarding Holders, the Registrable Securities held by
Holders and the intended method of disposition thereof as EasyLink or its
appointed agents shall reasonably request and as shall be required in connection
with the action to be taken by EasyLink.
Section 2.05 Registration Expenses.
In the case of any registration effected pursuant to Section
2.01 or 2.02, EasyLink shall bear all Registration Expenses; provided, however,
that Holders shall bear the fees and costs of its own counsel (other than to the
extent provided in the definition of "Registration Expenses" in connection with
a firm commitment, underwritten offering) and all brokers' discounts and
commissions with respect to the Registrable Securities sold by such Person.
Section 2.06 Use of Prospectus.
(e) Each of the Holders agrees that if EasyLink notifies
Holders in writing of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, Holders will discontinue immediately its disposition of
securities pursuant to the registration statement until Holders receives copies
of an amended or supplemented prospectus, and if so directed by EasyLink, will
deliver to EasyLink all copies then in Holders's possession of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice.
Section 2.07 Indemnification.
If any Registrable Securities are included in a registration statement
pursuant to Section 2.01 or 2.02, then,
(a) EasyLink shall indemnify and hold harmless Holders, agents
for and officers and directors of Holders, any underwriter of the Registrable
Securities and each Person, if any, who controls any such Person within the
meaning of the Act, against any losses, claims, damages or liabilities, joint or
several (or actions in respect thereof), to which they may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained in
the registration statement, or any amendments or supplements to the registration
8
statement, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or any violation by EasyLink of any
rule or regulation promulgated under the Act or any state securities law or rule
or regulation applicable to EasyLink, and will reimburse Holders, the agents
for, and officers and directors of Holders, any underwriter of the Registrable
Securities or any such controlling Person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that EasyLink
shall not be liable to a Holder or any such person in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or omission based upon and in conformity with
information furnished to EasyLink in writing by such Holder or person expressly
for use in such registration statement or prospectus.
(b) Each Holder shall indemnify and hold harmless EasyLink,
each of its directors and each of its officers who have signed such registration
statement against any losses, claims, damages or liabilities to which EasyLink
or any such director or officer may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities arise out of or are based
upon any untrue or alleged untrue statement of any material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained in the registration statement or any amendments or
supplements to the registration statement, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in such
registration statement, preliminary prospectus, or amendments or supplement
thereto, in reliance upon and in conformity with information furnished by such
Holder in writing expressly for the purpose of inclusion in such registration
statement, preliminary prospectus or amendments or supplements, and such Holder
will reimburse any legal or other expenses actually and reasonably incurred by
EasyLink or any such director, officer or controlling Person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, that such Holder's liability under this Section 2.06(b) shall not
exceed the amount of the gross proceeds of the offering of such Holder's
Registrable Securities included therein.
(c) Each party entitled to indemnification (the "Indemnified
Party") shall give notice to the party required to provide indemnification
("Indemnifying Party") promptly after such Indemnified Party has knowledge of
any claim as to which indemnity may be sought, and shall permit the Indemnifying
Party (at its expense) to assume the defense of any such claim or any litigation
resulting therefrom; provided, however, that counsel for the Indemnifying Party,
who shall conduct the defense of such claim or litigation, shall be reasonably
satisfactory to the Indemnified Party, and the Indemnified Party may participate
in such defense at such party's expense; provided, further, that the failure by
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 2.06, except to the
extent that the failure results in an omission of actual notice to the
Indemnifying Party and such Indemnifying Party is materially damaged as a result
of the failure to give notice. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to the entry of any judgment or enter into any settlement that does not
include as an unconditional term the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim or
litigation.
9
SECTION 2.08 Contribution.
(a) If the indemnification provided for in Section 2.07 is
unavailable to the Indemnified Party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then each
such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and the Indemnified Party on the other in
connection with the statement or omission which resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue statement (or alleged
untrue statement) of a material fact or the omission (or alleged omission) to
state a material fact relates to information supplied by the Indemnifying Party
or the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and Holders agree that it would not be just and equitable if
contribution pursuant to this Section 2.08 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above. The amount paid or payable by an
Indemnified Party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to in this Article 2 shall be deemed to
include any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
(b) No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
SECTION 2.09 Transfer of Registration Rights.
The registration rights of Holders under this Article 2 may be assigned
and transferred (i) by Holders to any Affiliate of Holders to whom any of the
Securities or Conversion Shares owned by Holders are transferred, and (ii) by
Holders to any transferee who acquires a majority of the Registrable Securities
(adjusted to reflect subsequent stock splits, combinations, stock dividends and
recapitalizations) initially issued to Holders; provided, however, that EasyLink
is given written notice by Holders at the time of such assignment and transfer
stating the name and address of the transferee and identifying the securities
with respect to which the rights under this Article 2 are being assigned and
transferred. For the purposes of this Section 2.09, a change in control of an
Affiliate of Holders holding shares entitling such Affiliate to the registration
rights hereunder, such that such Affiliate is subsequent to such change of
control no longer an Affiliate of Holders, shall be deemed an attempted transfer
of the registration rights hereunder and such former Affiliate of Holders shall
not be entitled to such registration rights except to the extent such transfer
would be permitted under clause (ii) above.
10
ARTICLE III
MISCELLANEOUS
SECTION 3 Successors and Assigns.
Except as otherwise provided herein, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto (including permitted transferees of
any shares of Registrable Securities). Nothing in this Agreement is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liability under or
by reason of this Agreement, except as expressly provided in this Agreement.
SECTION 3.01 Notices.
All notices and other communications required or permitted hereunder
shall be in writing, shall be effective when given, and shall in any event be
deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit
with the U.S. Postal Service or other applicable postal service, if delivered by
first class mail, postage prepaid, (b) upon delivery, if delivered by hand or
transmitted via facsimile (confirmed by letter sent by first class mail, postage
prepaid with the U.S. Postal Service or other applicable postal service), or (c)
one business day after the business day of deposit with Federal Express or
similar reputable, international overnight courier, freight prepaid. Such
notices, demands and other communications shall be sent to EasyLink at the
address set forth below and to Holders at such address set forth on Schedule A
to the Restructuring Agreements or at such address or to the attention of such
other person as the recipient party has specified by prior written notice to the
sending party. The address for EasyLink is:
EasyLink Services Corporation
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx, Chief Executive Officer
Fax No.: 000-000-0000
with a copy at the same address (Fax number 000-000-0000) to:
Xxxxx X. Xxxxxxxx, Esq.
or at such other address as a party may designate by ten (10) days advance
written notice to the other party pursuant to the provisions above.
SECTION 3.02 Enforcement.
The parties agree that each Holder has an independent right to enforce
EasyLink's performance of the provisions of this Agreement and that any Holder
may bring an action or proceeding against EasyLink in connection with this
Agreement without notice to any other Holder. Each Holder further agrees that
they are neither necessary nor indispensable parties in an action brought by
another Holder against EasyLink in connection with this Agreement.
11
SECTION 3.03 Governing Law; Forum and Consent to Jurisdiction.
(a) Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
the State of Florida.
(b) Submission to Jurisdiction; Service of Process. (i) EasyLink and
Holders agree that any action or proceeding brought by Holders in connection
with this Agreement may be brought (and any action or proceeding brought by
EasyLink against Holders in connection herewith shall exclusively be brought) in
the courts of the State of New York sitting in the Borough of Manhattan or of
the United States of America for the Southern District of New York and, by
execution and delivery of this Agreement, EasyLink and Holders hereby
irrevocably waive any objection, including, without limitation, any objection to
the laying of venue or based on the grounds of forum non conveniens, which it
may now or hereafter have to the bringing of any such action or proceeding by
EasyLink or Holders in such non-exclusive jurisdictions.
(ii) EasyLink hereby irrevocably appoint CT Corporation System (the "Process
Agent"), with an office on the date hereof at 0000 Xxxxxxxx, Xxx Xxxx, XX 00000,
Xxxxxx Xxxxxx of America, as their agent to receive on their behalf service of
copies of the summons and complaint and any other process that may be served in
any such action or proceeding. EasyLink irrevocably consents to the service of
process of any of the aforesaid courts in any such action or proceeding by the
mailing of copies thereof by registered mail, postage prepaid, to it at its
address set forth in this Agreement or to the Process Agent at its address
specified above.
SECTION 3.04 Waivers; Amendments.
The waiver by the undersigned of any of the provisions of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach. This Agreement may be amended, and any provision of this Agreement may
be waived, only by a written amendment executed by (i) in the case of any
amendment affecting the rights or obligations of EasyLink, EasyLink and (ii) in
the case of any amendment affecting the rights or obligations of Holders,
holders of a majority of the Registrable Securities then outstanding (including
Conversion Shares issuable upon conversion of then outstanding Notes and
Warrants).
SECTION 3.05 Headings.
The section headings contained in this Agreement are for reference
purposes only and shall not affect the construction and interpretation of this
Agreement.
SECTION 3.06 Severability.
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
12
SECTION 3.07 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same instrument. This Agreement may contain more than one counterpart of the
signature page and may be executed by the affixing of the signatures of each of
the parties hereto to one of these counterpart signature pages. All of the
counterpart signature pages shall be read as though one, and they shall have the
same force and effect as though all of the signers had signed a single signature
page.
SECTION 3.08 Aggregation of Stock.
All shares of Registrable Securities held or acquired by affiliated
entities or persons shall be aggregated together for the purpose of determining
the availability of any rights under this Agreement.
SECTION 3.09 Construction.
The parties hereto have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise favoring
or disfavoring any party hereto by virtue of the authorship of any of the
provisions of this Agreement.
13
SECTION 3.10 Entire Agreement.
This Agreement contains the entire agreement of the parties hereto. The
parties hereto are not bound by any oral statements that are made outside of
this Agreement.
WHEREAS, the parties hereto have executed this Agreement as of
the date first above written.
EASYLINK SERVICES CORPORATION
By:
--------------------------
Xxxxxx Xxxxxxxx
Chief Executive Officer
14
Exhibit "C"
"Permitted Liens" means:
(a) Liens securing the Note;
(b) Liens securing Purchase Money Indebtedness, provided such Liens do
not extend to any assets of the Company other than the assets so acquired;
(c) 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;
(d) 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;
(e) 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;
(f) Liens existing on the date of this Agreement;
(g) 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;
(h) 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;
(i) 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;
(j) any interest or title of a lessor under any Capital Lease
Obligation;
(k) Liens not provided for in clauses (a) through (j) above securing
Indebtedness provided that the Note is secured by the assets subject to such
Liens on an equal and ratable basis or on a basis prior to such Liens; provided
that to the extent that such Liens secured Indebtedness that is subordinated to
the Note, such Liens shall be subordinated to and be later in priority than the
Note on the same basis; and
(l) extensions, renewals or refundings of any Liens referred to in
clauses (a) through (k) above, 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.
"Purchase Money Indebtedness" means
(a) 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
(b) Indebtedness of the Company which refinances indebtedness referred
to in clause (a) of this definition, provided that such refinancing satisfies
the proviso of such clause (a).
2
EXHIBIT D
THIS WARRANT HAS 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, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE
APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THIS WARRANT.
EASYLINK SERVICES CORPORATION
WARRANT TO PURCHASE [486,108] SHARES
OF CLASS A COMMON STOCK
THIS CERTIFIES THAT, for value received, Associates Leasing, Inc. and
its assignees are entitled to subscribe for and purchase 486,108 shares [subject
to appropriate adjustment prior to closing for any stock split, stock dividend
or stock combination] (as adjusted pursuant to Section 4 hereof, the "Shares")
of the fully paid and nonassessable Class A Common Stock, par value $.01 per
share ("Common Stock"), of EASYLINK SERVICES CORPORATION, a Delaware corporation
(the "Company"), at the price of $ [To Be Determined Prior to Closing] per share
(such price and such other price as shall result, from time to time, from the
adjustments specified in Section 4 hereof is herein referred to as the "Warrant
Price"), subject to the provisions and upon the terms and conditions hereinafter
set forth. As used herein, (a) the term "Date of Grant" shall mean [Closing
Date], 2001, and (b) the term "Other Warrants" shall mean any other warrants
issued by the Company in connection with the transaction with respect to which
this Warrant was issued, and any warrant issued upon transfer or partial
exercise of or in lieu of this Warrant. The term "Warrant" as used herein shall
be deemed to include Other Warrants unless the context clearly requires
otherwise.
1. Term. The purchase right represented by this Warrant is exercisable,
in whole or in part, at any time and from time to time from the Date of Grant
through ten (10) years after the Date of Grant.
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A-1
duly completed and executed) at the principal office of the Company and by the
payment to the Company, by certified or bank check, or by wire transfer to an
account designated by the Company (a "Wire Transfer") of an amount equal to the
then applicable Warrant Price multiplied by the number of Shares then being
purchased; or (b) exercise of the "net issuance" right provided for in Section
10.2 hereof. The person or persons in whose name(s) any certificate(s)
representing the Shares shall be issuable upon exercise of this Warrant shall be
deemed to have become the holder(s) of record of, and shall be treated for all
purposes as the record holder(s) of, the shares represented thereby (and such
shares shall be deemed to have been issued) immediately prior to the close of
business on the date or dates upon which this Warrant is exercised. In the event
of any exercise of the rights represented by this Warrant, certificates for the
shares of stock so purchased shall be delivered to the holder hereof as soon as
possible and in any event within thirty (30) days after such exercise and,
unless this Warrant has been fully exercised or expired, a new Warrant
representing the portion of the Shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the holder
hereof as soon as possible and in any event within such thirty-day period;
provided, however, if requested by the holder of this Warrant, the Company shall
cause its transfer agent to deliver the certificate representing Shares issued
upon exercise of this Warrant to a broker or other person (as directed by the
holder exercising this Warrant) within the time period required to settle any
trade made by the holder after exercise of this Warrant.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all preemptive rights and taxes, liens and charges
with respect to the issue thereof. During the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for the purpose of the issue upon exercise of the
purchase rights evidenced by this Warrant, a sufficient number of shares of its
Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any
reclassification or change of securities of the class issuable upon exercise of
this Warrant (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), or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company
is the acquiring and the surviving corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant), or in case of any sale of all or substantially all of the assets
of the Company, the Company, or such successor or purchasing corporation, as the
case may be, shall duly execute and deliver to the holder of this Warrant a new
Warrant (in form and substance satisfactory to the holder of this Warrant), or
the Company shall make appropriate provision without the issuance of a new
Warrant, so that the holder of this Warrant shall have the right to receive upon
exercise of this Warrant, at a total purchase price not to exceed that payable
upon the exercise of the unexercised portion of this Warrant, and in lieu of the
shares of Common Stock theretofore issuable upon exercise of this Warrant, the
kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change, merger or sale by a holder of the
number of shares of Common Stock then purchasable under this Warrant. Any new
Warrant shall provide for adjustments that shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 4. The provisions
of this Section 4(a) shall similarly apply to successive reclassifications,
changes, mergers and sales.
-2-
(b) Subdivision or Combination of Shares. If the Company at
any time while this Warrant remains outstanding and unexpired shall subdivide or
combine its outstanding shares of Common Stock, the Warrant Price shall be
proportionately decreased and the number of Shares issuable hereunder shall be
proportionately increased in the case of a subdivision and the Warrant Price
shall be proportionately increased and the number of Shares issuable hereunder
shall be proportionately decreased in the case of a combination.
(c) Stock Dividends and Other Distributions. If the Company at
any time while this Warrant is outstanding and unexpired shall (i) pay a
dividend with respect to its Common Stock payable in Common Stock, then the
Warrant Price shall be adjusted, from and after the date of determination of
shareholders entitled to receive such dividend or distribution, to that price
determined by multiplying the Warrant Price in effect immediately prior to such
date of determination by a fraction (A) the numerator of which shall be the
total number of shares of Common Stock outstanding immediately prior to such
dividend or distribution, and (B) the denominator of which shall be the total
number of shares of Common Stock outstanding immediately after such dividend or
distribution; or (ii) make any other distribution with respect to Common Stock
(except any distribution specifically provided for in Sections 4(a) and 4(b) and
other than ordinary cash dividends declared by the board of directors pursuant
to a regular dividend program adopted by the board of directors), then, in each
such case, provision shall be made by the Company such that the holder of this
Warrant shall receive upon exercise of this Warrant a proportionate share of any
such dividend or distribution as though it were the holder of the Shares as of
the record date fixed for the determination of the shareholders of the Company
entitled to receive such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in
the Warrant Price, the number of Shares purchasable hereunder shall be adjusted,
to the nearest whole share, to the product obtained by multiplying the number of
Shares purchasable immediately prior to such adjustment in the Warrant Price by
a fraction, the numerator of which shall be the Warrant Price immediately prior
to such adjustment and the denominator of which shall be the Warrant Price
immediately thereafter.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, and shall cause copies of such certificate to be mailed
(without regard to Section 13 hereof, by first class mail, postage prepaid) to
the holder of this Warrant.
6. Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the Common Stock on the date of exercise as reasonably determined in
good faith by the Company's Board of Directors.
7. Rights as Shareholders; Information. No holder of this Warrant, as
such, shall be entitled to vote or receive dividends or be deemed the holder of
Common Stock which may at any time be issuable upon the exercise hereof for any
purpose, nor shall anything contained herein be construed to confer upon the
-3-
holder of this Warrant, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until this
Warrant shall have been exercised and the Shares purchasable upon the exercise
hereof shall have become deliverable, as provided herein. Notwithstanding the
foregoing, the Company will transmit to the holder of this Warrant such
information, documents and reports as are generally distributed to the holders
of any class or series of the securities of the Company concurrently with the
distribution thereof to the shareholders.
8. Registration Rights. The Shares purchasable hereunder have certain
registration rights pursuant to the Registration Rights Agreement dated as of
the date on which the Warrant is isued.
9. Additional Rights.
9.1 Acquisition Transactions. The Company shall provide the holder of
this Warrant with at least twenty (20) days' written notice prior to closing
thereof of the terms and conditions of any of the following transactions (to the
extent the Company has notice thereof): (i) the sale, lease, exchange,
conveyance or other disposition of all or substantially all of the Company's
property or business, or (ii) its merger into or consolidation with any other
corporation (other than a wholly-owned subsidiary of the Company), or any
transaction (including a merger or other reorganization) or series of related
transactions, in which more than 50% of the voting power of the Company is
disposed of.
9.2 Right to Convert Warrant into Stock: Net Issuance.
(a) Right to Convert. In addition to and without limiting the
rights of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "Conversion Right")
into shares of Common Stock as provided in this Section 9.2 at any time or from
time to time during the term of this Warrant. Upon exercise of the Conversion
Right with respect to a particular number of shares subject to this Warrant (the
"Converted Warrant Shares"), the Company shall deliver to the holder (without
payment by the holder of any exercise price or any cash or other consideration)
that number of shares of fully paid and nonassessable Common Stock as is
determined according to the following formula:
X = B - A
-----
Y
Where: X = the number of shares of Common Stock that shall be
issued to holder
Y = the fair market value of one share of Common Stock
A = the aggregate Warrant Price of the specified number
of Converted Warrant Shares immediately prior to the
exercise of the Conversion Right (i.e., the number of
Converted Warrant Shares multiplied by the Warrant
Price)
-4-
B = the aggregate fair market value of the specified
number of Converted Warrant Shares (i.e., the number
of Converted Warrant Shares multiplied by the fair
market value of one Converted Warrant Share)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined). For purposes
of Section 9 of this Warrant, shares issued pursuant to the Conversion Right
shall be treated as if they were issued upon the exercise of this Warrant.
(b) Method of Exercise. The Conversion Right may be exercised
by the holder by the surrender of this Warrant at the principal office of the
Company together with a written statement (which may be in the form of Exhibit
A-1) specifying that the holder thereby intends to exercise the Conversion Right
and indicating the number of shares subject to this Warrant which are being
surrendered (referred to in Section 9.2(a) hereof as the Converted Warrant
Shares) in exercise of the Conversion Right. Such conversion shall be effective
upon receipt by the Company of this Warrant together with the aforesaid written
statement, or on such later date as is specified therein (the "Conversion
Date"). Certificates for the shares issuable upon exercise of the Conversion
Right and, if applicable, a new warrant evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Conversion Date and
shall be delivered to the holder within thirty (30) days following the
Conversion Date.
(c) Determination of Fair Market Value. For purposes of this
Section 9.2, "fair market value" of a share of Common Stock as of a particular
date (the "Determination Date") shall mean:
(i) If traded on a securities exchange, the fair
market value of the Common Stock shall be deemed to be the average of the
closing prices of the Common Stock on such exchange over the five trading days
immediately prior to the Determination Date;
(ii) If traded on the Nasdaq Stock Market or other
over-the-counter system, the fair market value of the Common Stock shall be
deemed to be the average of the closing sale prices, or if there shall be no
closing sale price on any day the average of the closing bid and ask prices for
such day, of the Common Stock over the five trading days immediately prior to
the Determination Date; and
(iii) If there is no public market for the Common
Stock, then fair market value shall be determined by mutual agreement of the
holder of this Warrant and the Company.
If closing prices or closing bid and ask prices are no longer reported by a
securities exchange or other trading system, the closing price or closing bid
and ask prices shall be that which is reported by such securities exchange or
other trading system at 4:00 p.m. New York City time on the applicable trading
day.
-5-
9.3 Exercise Prior to Expiration. To the extent this Warrant is not
previously exercised as to all of the Shares subject hereto, and if the fair
market value of one share of the Common Stock is greater than the Warrant Price
then in effect, this Warrant shall be deemed automatically exercised pursuant to
Section 9.2 above (even if not surrendered) immediately before its expiration.
To the extent this Warrant or any portion thereof is deemed automatically
exercised pursuant to this Section 9.3, the Company agrees to promptly notify
the holder hereof of the number of Shares, if any, the holder hereof is to
receive by reason of such automatic exercise.
10. Representations and Warranties. The Company represents and warrants
to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies.
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable and free from preemptive
rights.
(c) The rights, preferences, privileges and restrictions
granted to or imposed upon the classes and series of the Company's capital stock
and the holders thereof are as set forth in the Certificate of Incorporation
("Articles").
(d) The execution and delivery of this Warrant are not, and
the issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Articles or by-laws,
do not and will not contravene any law, governmental rule or regulation,
judgment or order applicable to the Company, and do not and will not conflict
with or contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration or filing with or the taking of any action in
respect of or by, any Federal, state or local government authority or agency or
other person, except for the filing of notices pursuant to federal and state
securities laws, which filings will be effected by the time required thereby.
(e) There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, could have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
(f) The number of shares of Common Stock of the Company
outstanding on the date hereof, on a fully diluted basis (assuming the
conversion or exchange of all outstanding convertible or exchangeable securities
and the exercise of all outstanding options and warrants), does not exceed
[________] shares.
-6-
11. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
12. Notices. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of the
Company or to the Company at the address indicated therefor on the signature
page of this Warrant.
13. Binding Effect on Successors. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets, and all of the obligations
of the Company relating to the Shares issuable upon the exercise or conversion
of this Warrant shall survive the exercise, conversion and termination of this
Warrant and all of the covenants and agreements of the Company shall inure to
the benefit of the successors and assigns of the holder hereof.
14. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
15. Descriptive Headings. The descriptive headings of the various
Sections of this Warrant are inserted for convenience only and do not constitute
a part of this Warrant. The language in this Warrant shall be construed as to
its fair meaning without regard to which party drafted this Warrant.
16. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Delaware.
17. Survival of Representations, Warranties and Agreements. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
18. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
-7-
19. No Impairment of Rights. The Company will not, by amendment of its
Articles or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times 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 of this Warrant against impairment.
20. Severability. The invalidity or unenforceability of any provision
of this Warrant in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction, or affect any other
provision of this Warrant, which shall remain in full force and effect.
21. Recovery of Litigation Costs. If any legal action or other
proceeding is brought for the enforcement of this Warrant, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Warrant, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
22. Entire Agreement; Modification. This Warrant constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
The Company has caused this Warrant to be duly executed and delivered
as of the Date of Grant specified above.
EASYLINK SERVICES CORPORATION
By
--------------------------
Title
-----------------------
Address:
-8-
EXHIBIT A-1
NOTICE OF EXERCISE
To: [COMPANY] (the "Company")
1. The undersigned hereby:
[ ] elects to purchase________ shares of Common Stock of
the Company pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase
price of such shares in full, or
[ ] elects to exercise its net issuance rights pursuant
to Section 10.2 of the attached Warrant with respect
to________shares of Common Stock.
2. Please issue a certificate or certificates representing
________ shares in the name of the undersigned or in such other name or names as
are specified below:
---------------------------------------
(Name)
---------------------------------------
---------------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
all except as in compliance with applicable securities laws.
---------------------------------------
(Signature)
----------------
(Date)
