EXHIBIT 10.35
[FORM OF INITIAL NOTE]
11.0% SENIOR
CONVERTIBLE NOTE
$_________________ New York, New York
[_____________]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES OR "BLUE SKY" LAWS AND MAY NOT BE OFFERED
OR SOLD EXCEPT IN COMPLIANCE WITH THE REQUIREMENTS
IMPOSED THEREBY.
FOR VALUE RECEIVED, the undersigned, America Online Latin America,
Inc., a Delaware corporation (the "COMPANY"), promises to pay to AOL Time Warner
Inc., a Delaware corporation ("AOLTW") or the registered Holder (as defined
below), in lawful money of the United States and in immediately available funds,
the principal amount of $________ (the "FACE AMOUNT") and Interest thereon
calculated from the date hereof, all in accordance with the provisions of this
Note.
This Note is one of a series of Notes issued pursuant to a Note
Purchase Agreement, dated as of March 8, 2002 between the Company and AOLTW (as
amended, supplemented or otherwise modified from time to time, the "AGREEMENT")
and the Holder is entitled to the benefits thereof. Unless the context otherwise
requires, as used herein, "NOTE" means any of the 11.0% Senior Convertible Notes
issued pursuant to the Agreement, any PIK Notes (as defined below) and any other
similar senior convertible notes issued by the Company in exchange for, or to
effect a transfer of, any Note and "NOTES" means all such Notes in the
aggregate.
SECTION 1. Accrual of Interest. Interest shall accrue at the rate of
eleven percent (11.0%) per year (based on a year of 365 days for the actual days
elapsed) on the outstanding Face Amount of this Note, compounded quarterly
("INTEREST").
SECTION 2. Payment of Principal and Interest on Note.
(a) SCHEDULED PAYMENT OF PRINCIPAL. The Company shall pay the
outstanding Face Amount of this Note, together with all accrued and unpaid
Interest thereon, if any, in cash to the Holder on March 8, 2007 (the "FINAL
MATURITY DATE") by wire transfer of immediately available U.S. Dollars to such
account of the Holder as the Holder shall designate in writing to the Company;
provided that, if prior to the Final Maturity Date the Holder shall have
exercised its conversion rights pursuant to subsection 4.1 with respect to all
or a portion of the Face Amount of this Note and accrued but unpaid Interest
thereon by delivery of a notice of conversion in accordance with subsection
4.1(c), payment by the Company under this Section 2(a) of such portion of the
Face Amount and Interest on this Note shall not be made on such date but if the
Holder shall thereafter have revoked its notice of conversion with respect to
such portion of this Note proposed to be converted in accordance with subsection
4.1, such payment shall be made within 10 days following such revocation.
(b) PAYMENT OF INTEREST. Commencing on June 30, 2002, the
Company shall pay Interest on this Note quarterly in arrears on each March 31,
June 30, September 30 and December 31 of each calendar year and on the Final
Maturity Date, or if any such day is not a business day, on the next succeeding
business day (each an "INTEREST PAYMENT DATE") to the holder of record on the
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date which is 15 days before the applicable Interest Payment Date. Any Interest
payable on this Note shall be paid on each Interest Payment Date, at the
Company's option: (A) in cash, (B) subject to Section 2(c) below, through the
issuance of an 11% senior convertible note in the form of EXHIBIT 1 attached
hereto (each a "PIK NOTE" and, collectively, the "PIK NOTES") or (C) subject to
Section 2(c) below, through the issuance of Applicable Shares having an
aggregate Fair Market Value on such Interest Payment Date equal to the amount of
Interest payable on this Note on such Interest Payment Date. At least 15 days
prior to each Interest Payment Date, the Company shall deliver a written notice
to the Holder stating the form in which Interest will be paid on such Interest
Payment Date. Each PIK Note issued as of any Interest Payment Date shall have an
initial Face Amount equal to the amount of Interest payable on this Note on such
Interest Payment Date and shall have an initial conversion price equal to the
Fair Market Value on such Interest Payment Date of one share of Class A Common
Stock. Any PIK Notes issued to the Holder under this Section 2(b) in respect of
payments of Interest shall be duly authorized and validly issued and any
Applicable Shares issued to the Holder under this Section 2(b) in respect of
payments of Interest shall be duly authorized, validly issued, fully-paid and
non-assessable. Interest payable on this Note which is paid in cash shall be
made by wire transfer of immediately available U.S. Dollars to such account of
the Holder as the Holder shall designate in writing to the Company not less than
two business days prior to the Interest Payment Date. Notwithstanding anything
to the contrary in this Section 2(b), Interest payable on the Final Maturity
date shall be paid in cash.
(c) RESTRICTIONS ON PAYMENTS OF INTEREST IN PIK NOTES AND
APPLICABLE SHARES. (i) Interest payable on this Note on any Interest Payment
Date shall not be paid in PIK Notes or Applicable Shares, and shall be paid in
cash, to the extent that (x) the Fair Market Value of the Class A Common Stock
on such Interest Payment Date is below $3.020 (as adjusted for stock splits,
subdivisions and other changes in the Class A Common Stock) and (y) the sum of
the total number of Restricted Shares plus the number of shares of Class A
Common Stock which would be directly or indirectly issuable upon conversion of
the PIK Notes or Applicable Shares proposed to be issued as Interest on such
Interest Payment Date would equal or exceed 13,411,443 (as adjusted for stock
splits, subdivisions and other changes in the Class A Common Stock), unless
approval of the Company's shareholders has been obtained with respect to such
issuances all in compliance with Rule 4350 of the Marketplace Rules of the
National Association of Securities Dealers, Inc.
(ii) Interest payable on this Note on any Interest
Payment Date shall not be paid through the issuance of PIK Notes or Applicable
Shares, and shall be paid in cash, if the sum of (A) the Applicable Shares into
which all outstanding Notes and any PIK Notes proposed to be issued in respect
of payment of such Interest may be convertible at such time, (B) the Applicable
Shares proposed to be issued in respect of payment of such Interest and (C) the
aggregate number of Applicable Shares outstanding on a fully diluted basis
immediately before issuance of any PIK Notes and/or Applicable Shares exceeds
the number of Applicable Shares authorized in the Certificate.
(iii) Interest payable on this Note on any Interest
Payment Date shall not be paid in Applicable Shares until all required filings
under the HSR Act shall have been made and any required waiting period under the
HSR Act shall have expired or been terminated, in each case, with respect to the
receipt of Applicable Shares by the Holder (the "REQUIRED HSR APPROVAL").
Interest payable on this Note on any Interest Payment Date on which no Required
HSR Approval is needed for the payment of Interest in the form of Applicable
Shares shall not be paid through the issuance of PIK Notes.
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SECTION 3. Redemption.
(a) REDEMPTION AT THE OPTION OF THE COMPANY. At any time and
from time to time on or after the date which is eighteen months after the
Initial Closing Date, the Company may, at its option, redeem all or a portion of
this Note at a price equal to the Redemption Price, paid in cash in U.S.
Dollars, PROVIDED that any redemption by the Company under this Section 3(a)
shall be in respect of an aggregate outstanding Face Amount of Notes and accrued
Interest thereon of at least $10,000,000. If the Company elects to redeem this
Note, it shall deliver a written notice of redemption to the Holder at least 10
business days prior to the date of redemption specified in such notice.
(b) MANDATORY REDEMPTION BY THE COMPANY.
(i) If, after the date hereof but before the Final
Maturity Date, the Company or any of its Subsidiaries, directly or indirectly,
(A) issues or sells any shares of Capital
Stock or other Securities (including pursuant to the
exercise or conversion of any rights, options,
warrants or other rights, but without duplication
with respect to clause (B) below) to any Person for
cash or Cash Equivalents or incurs any Indebtedness
(other than Indebtedness permitted under clauses (a),
(b), (c), (e), (f), (g), (h), (i) and (j) of Section
6.2) (each such issuance or incurrence, a
"FINANCING"), other than (x) a Financing consummated
since the Initial Closing Date which when taken
together with all other Financings consummated since
the Initial Closing Date does not in the aggregate
exceed $10,000,000 and (y) Financings which are
Exempted Financings, or
(B) engages in an Asset Sale other than
Asset Sales consummated since the Initial Closing
Date which when taken together with all other Asset
Sales consummated since the Initial Closing Date does
not in the aggregate exceed $10,000,000,
then the Company shall use all Net Cash Proceeds received by the Company or any
of its Subsidiaries from such Financing or Asset Sale, as the case may be, to
redeem the Notes at the Redemption Price, payable in cash.
(ii) The Company shall deliver a written notice to
the Holder at least 30 days (or such shorter time as is reasonably necessary)
prior to the date of the closing of the Financing or Asset Sale, as the case may
be, and shall specify in such notice the expected date of the closing of, and
the amount and kind of the proceeds to be received in, such Financing or Asset
Sale.
(iii) The Company shall provide the Holder with
written notice of the redemption required by Section 3(b)(i) on the day of the
closing of the Financing or Asset Sale, as the case may be, and shall redeem the
Note and pay the Redemption Price in accordance with the procedures for
redemption set forth in Section 3(c) (including Section 3(c)(v) thereof) unless
it shall have first received written notice from the Holder specifying that the
Holder has exercised its right to decline redemption with respect to all or any
portion of this Note; provided that nothing in this Section 3(b)(iii) shall give
the Holder the right to decline redemption with respect to a redemption under
Section 3(a).
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(iv) Notwithstanding anything to the contrary in
Section 3(b)(i), in connection with any Financing or Asset Sale, as the case may
be, the Face Amount of the Notes, plus accrued but unpaid Interest thereon, to
be redeemed in connection with such Financing or Asset Sale shall be reduced on
a dollar-for-dollar basis to the extent the maximum aggregate principal amount
of Notes required to be purchased by the Purchaser (as defined in the Agreement)
under the Agreement has been reduced in accordance with the terms of the
Agreement as a result of such Financing or Asset Sale.
(c) PROCEDURES FOR REDEMPTION; PAYMENT OF REDEMPTION PRICE.
(i) The Redemption Price payable on this Note when
redeemed, on any redemption set forth herein, shall be paid to the Holder in
cash by wire transfer of immediately available U.S. Dollars to an account
specified in writing by the Holder.
(ii) Written notice of redemption shall specify the
date and place of the redemption of this Note, and require the Holder, in the
case of a redemption of the entire outstanding Face Amount of this Note plus
accrued but unpaid Interest thereon, to surrender this Note to the Company on
the redemption date at the Company's principal place of business free and clear
of all Liens. The date such written notice is delivered to the Holder is the
"REDEMPTION RECORD DATE." The redemption date shall be not fewer than 10
business days nor more than 60 days after the Redemption Record Date; PROVIDED,
HOWEVER, that in the event of any redemption under Section 3(b) hereof, the
redemption date shall be as soon as practicable following the event giving rise
to such redemption (but in any event no more than three days after the delivery
of the written notice of redemption related to such redemption delivered by the
Company pursuant to such section). On the redemption date, the Redemption Price
shall be paid in cash to the Holder or on the order of the Holder to some other
Person, in each case by wire transfer of immediately available U.S. Dollars to
an account designated in writing by the Holder. In the case of a redemption of
the entire outstanding Face Amount of this Note plus accrued but unpaid Interest
thereon, this Note shall be thereafter canceled by the Company. Upon any partial
redemption of this Note pursuant to this Section 3, the Holder shall present and
surrender this Note free and clear of all Liens to the Company at the Company's
principal place of business and the Company shall execute and deliver (at its
own expense) a new Note having an aggregate principal amount equal to and in
exchange for the unredeemed portion of the aggregate Face Amount of this Note
plus accrued Interest thereon so surrendered. Any notice of redemption delivered
by the Company to the Holder under this Section 3 shall be irrevocable.
(iii) If a notice of redemption has been given
pursuant to this Section 3 and the Holder shall, prior to the close of business
on the second business day immediately preceding the redemption date, give
written notice to the Company pursuant to Section 4 below of the conversion of
this Note then such redemption shall not become effective as to the portion
(which may be all) of this Note to be converted and such conversion shall become
effective as provided in Section 4.
(iv) In the event the Company fails to deliver a
written notice of redemption when required to do so pursuant to Section 3(a) and
Section 3(b), a written notice of redemption shall be deemed to be delivered by
the Company to the Holder on the date such delivery was due, and thereafter the
redemption to which such notice relates shall occur in accordance with the terms
of this Section 3.
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(v) To the greatest extent possible, any partial
redemption pursuant to this Section 3 shall be made from all holders of
outstanding Notes on a PRO RATA basis, determined based on their relative
percentage ownership of the aggregate Face Amount of the Notes outstanding at
the time of such redemption and any notice of redemption in respect of any such
partial redemption shall specify the aggregate Face Amount of Notes to be
redeemed in such redemption. To the greatest extent possible, any such partial
redemption shall first redeem the PIK Notes held by the holders of the Notes in
reverse order of their issuance and then redeem the Initial Notes of such
holders in their reverse order of issuance.
SECTION 4. Conversion Rights.
SUBSECTION 4.1 HOLDER'S RIGHT TO CONVERT.
(a) OPTIONAL CONVERSION. (i) Subject to and upon compliance
with the provisions of this Section 4, at any time after the date hereof, and
from time to time, this Note shall be convertible, in whole or in part, at the
option of the Holder, into duly authorized, validly issued, fully paid and
nonassessable Applicable Shares at the then effective Conversion Rate.
(ii) Notwithstanding anything to the contrary in
subsection 4.1(a), conversion of this Note, in whole or in part, at the election
of the Holder pursuant to subsection 4.1(a)(i) shall not occur and shall be
postponed until all filings under the HSR Act and, if the Holder is not AOLTW or
an Affiliate of AOLTW, under any Other Investment Laws, shall have been made and
any required waiting period under the HSR Act shall have expired or been
terminated, in each case, with respect to the receipt of Applicable Shares by
the Holder. If at any time the Holder reasonably believes that additional
filings under the HSR Act are required to be made (and any required waiting
periods relating thereto to have expired or been terminated) or any approvals
under any applicable Other Investment Laws, in order for the Holder to exercise
any Conversion Rights hereunder, then the Company shall (i) take promptly all
actions necessary to make the filings required of the Company and its Affiliates
under the HSR Act or any other applicable law, rule or regulation and under any
Other Investment Laws, (ii) comply at the earliest practicable date with any
request for additional information received by the Company or its Affiliates
from the Federal Trade Commission or the Antitrust Division of the Department of
Justice pursuant to the HSR Act and any non-U.S. Governmental Authority pursuant
to any applicable Other Investment Laws and (iii) promptly cooperate with the
Holder in connection with the Holder's preparation of any necessary filings or
submissions under the HSR Act and under any Other Investment Laws, and in
connection with resolving any investigation or other regulatory inquiry
concerning the transactions contemplated by the Agreement and the Notes
commenced by either the Federal Trade Commission or the Antitrust Division of
the Department of Justice or state attorneys general and any such non-U.S.
Governmental Authority pursuant to any applicable Other Investment Laws. The
Company shall also, at the request of the Holder, make additional filings under
the HSR Act and under any applicable Other Investment Laws, and again comply
with the preceding sentence as the Holder shall reasonably request from time to
time in order to fully realize the rights and benefits under this Agreement and
the Notes.
(iii) Notwithstanding anything to the contrary in
subsection 4.1(a), conversion of this Note, in whole or in part, into Applicable
Shares at the election of the Holder pursuant to subsection 4.1(a)(i) shall not
occur and shall be postponed to the extent that after such conversion, the
aggregate number of Applicable Shares outstanding will exceed the authorized
number of such Applicable Shares in the Certificate. In such event, any
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conversion of this Note, in whole or in part, into Applicable Shares pursuant to
subsection 4.1(a)(i) shall be postponed until the authorized number of such
Applicable Shares is sufficient to complete any such conversion of this Note.
(iv) In the event at any time the Conversion Rights
of the Holder may be limited in any way (including, without limitation, under
subsection 4.1(a)(ii) or subsection 4.1(a)(iii)), the Company shall, in addition
to its obligations described above, use its reasonable best efforts to take all
actions necessary or advisable to cause such limitations to be removed and to
provide to the Holder the full rights and benefits of its Conversion Rights
hereunder.
(b) NO FRACTIONAL SHARES. No fractional Applicable Shares
shall be issued upon conversion of this Note. In lieu of fractional shares, the
Company shall pay cash equal to such fraction multiplied by the Conversion Price
per share of the Applicable Shares in effect as of the Conversion Date.
(c) MECHANICS OF CONVERSION.
(i) In order to exercise its rights pursuant to this
subsection 4.1, the Holder shall deliver written notice to the Company in the
form of EXHIBIT 2 to this Note stating that such Holder (A) owns this Note free
and clear of any Liens and (B) elects to convert all or part of the outstanding
Face Amount of this Note, plus any accrued but unpaid Interest in respect of
such amount. Such notice shall state the outstanding Face Amount of this Note,
plus any accrued but unpaid Interest in respect of such amount, which the Holder
seeks to convert. The date contained in the notice shall be the conversion date,
unless such date is delayed while conversion is restricted pursuant to
subsection 4.1(a)(ii) or subsection 4.1(a)(iii) (such later date, the
"CONVERSION DATE") and the Holder shall be deemed to own the underlying
Applicable Shares free and clear of all Liens as of such date and shall be
treated for all purposes as the record holder of such Applicable Shares at the
close of business on the Conversion Date. As soon as practicable (but no later
than three business days) after the Conversion Date, the Company shall issue and
deliver to the Holder a certificate or certificates for the number of Applicable
Shares to which the Holder is entitled and the Holder shall surrender this Note
to the Company in exchange for delivery of such certificates by the Company and,
in the case of a partial redemption, a new Note with a Face Amount equal to the
unconverted portion of the Note shall be delivered to the Holder with the
certificates. A notice of conversion by a Holder under this subsection 4.1(c)(i)
shall be irrevocable until the later of (x) 30 days after its delivery and (y)
the Conversion Date set forth therein and thereafter shall be revocable at any
time upon delivery by the Holder of a written notice of revocation to the
Company if a certificate or certificates for the number of Applicable Shares to
which the Holder is entitled with respect to the conversion specified in such
notice has not been issued and delivered to the Holder.
(ii) The Company shall at all times during which the
Notes are outstanding, reserve and keep available out of its authorized but
unissued stock, for the purpose of effecting the conversion of the Notes, such
number of its duly authorized shares of (A) Applicable Shares as shall from time
to time be sufficient to effect the conversion of all of the outstanding Notes,
(B) Series B Preferred Stock as shall from time to time be sufficient to effect
the conversion of the outstanding Series F Preferred Stock, if any, issued upon
conversion of the Notes, (C) Class B Common Stock, par value $.01 per share (the
"CLASS B COMMON STOCK") as shall from time to time be sufficient to effect the
conversion of the outstanding Series B Preferred Stock issued upon conversion of
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the Notes and conversion of Series F Preferred Stock and (D) Class A Common
Stock, par value, $.01 per share (the "CLASS A COMMON STOCK") as shall from time
to time be sufficient to effect the conversion of (y) the outstanding Class B
Common Stock obtained as, or as a result of conversion of, Applicable Shares
which are Series B Preferred Stock and (z) the outstanding Notes.
(iii) If at any time the number of authorized but
unissued shares of Series F Preferred Stock, Series B Preferred Stock, Class B
Common Stock or Class A Common Stock, as the case may be, shall not be
sufficient to effect the conversion of all the then outstanding Notes and the
conversion of any Capital Stock directly or indirectly issuable upon conversion
of the Notes or received upon conversion of such Capital Stock, the Company will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Series F Preferred Stock,
Series B Preferred Stock, Class B Common Stock and Class A Common Stock, as the
case may be, to such number of shares as shall be sufficient for such purpose.
SUBSECTION 4.2 ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES. The
Conversion Price of this Note shall be subject to adjustment from time to time
as follows:
(a) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF ADDITIONAL
COMMON STOCK. (i) In the event that, at any time after the Initial Closing Date
or from time to time, the Company shall issue any Additional Common Stock in a
bona fide underwritten public offering, (x) for a consideration per share equal
to or less than 90% of the Closing Price of such Additional Common Stock in
effect as of the day of such issuance, then and in such event, the Conversion
Price of this Note shall be reduced (but in no event increased), concurrently
with such issue, to a price equal to the issue price per share of such shares of
Additional Common Stock or (y) for a consideration per share equal to or less
than 93% of the Closing Price of such Additional Common Stock but greater than
90% of the Closing Price thereof, in each case in effect as of the day of such
issuance, then and in such event, the Conversion Price of this Note shall be
reduced, concurrently with such issue to a price equal to the Conversion Price
immediately prior to such issue multiplied by a fraction, (A) the numerator of
which shall be the sum of (1) the number of shares of Common Stock outstanding
immediately prior to the issuance of such Additional Common Stock or issuable
upon conversion at such time of all Series B Preferred Stock, Series C Preferred
Stock and Series F Preferred Stock outstanding immediately prior to the issuance
of such Additional Common Stock, (2) 100% of the number of shares of Common
Stock of the Company directly or indirectly issuable upon conversion or exercise
of Options or Convertible Securities (other than Series B Preferred Stock,
Series C Preferred Stock and Series F Preferred Stock) which have per share
conversion or exercise prices as of the date of issuance of such Additional
Common Stock less than the Closing Price of such Additional Common Stock on such
date, (3) 50% of the number of shares of Common Stock of the Company directly or
indirectly issuable upon conversion or exercise of Options or Convertible
Securities (other than Series B Preferred Stock, Series C Preferred Stock and
Series F Preferred Stock) which have per share conversion or exercise prices as
of the date of issuance of such Additional Common Stock equal to or greater than
the Closing Price of such Additional Common Stock on such date and (4) the total
number of shares of Additional Common Stock which could have been purchased at
the Closing Price of such Additional Common Stock with the aggregate
consideration received by the Company through the issuance of such Additional
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Common Stock and (B) the denominator of which shall be the sum of (1) the number
of shares of Common Stock outstanding immediately prior to issuance of such
Additional Common Stock or issuable upon conversion at such time of all Series B
Preferred Stock, Series C Preferred Stock and Series F Preferred Stock
outstanding immediately prior to the issuance of such Additional Common Stock,
(2) 100% of the number of shares of Common Stock of the Company directly or
indirectly issuable upon conversion or exercise of Options or Convertible
Securities (other than Series B Preferred Stock, Series C Preferred Stock and
Series F Preferred Stock) which have per share conversion or exercise prices as
of the date of issuance of such Additional Common Stock less than the Closing
Price of such Additional Common Stock on such date, (3) 50% of the number of
shares of Common Stock of the Company directly or indirectly issuable upon
conversion or exercise of Options or Convertible Securities (other than Series B
Preferred Stock, Series C Preferred Stock and Series F Preferred Stock) which
have per share conversion or exercise prices as of the date of issuance of such
Additional Common Stock equal to or greater than the Closing Price of such
Additional Common Stock on such date and (4) the total number of shares of
Additional Common Stock issued on such date.
(ii) In the event that, at any time after the Initial
Closing Date or from time to time, the Company shall issue Additional Common
Stock in any manner other than in a bona fide underwritten public offering, (x)
for a consideration per share equal to or less than 90% of the Fair Market Value
of such Additional Common Stock in effect as of the date of and immediately
prior to such issue, then and in such event, the Conversion Price of this Note
shall be reduced (but in no event increased), concurrently with such issue, to a
price equal to the issue price per share of such Additional Common Stock or (y)
for a consideration per share less than the Fair Market Value of such Additional
Common Stock but greater than 90% of the Fair Market Value thereof, in each case
in effect as of the date of and immediately prior to such issue, then and in
such event, the Conversion Price of this Note shall be reduced, concurrently
with such issue to a price equal to the Conversion Price immediately prior to
such issue multiplied by a fraction, (A) the numerator of which shall be the sum
of (1) the number of shares of Common Stock outstanding immediately prior to the
issuance of such Additional Common Stock or issuable upon conversion at such
time of all Series B Preferred Stock, Series C Preferred Stock and Series F
Preferred Stock outstanding immediately prior to the issuance of such Additional
Common Stock, (2) 100% of the number of shares of Common Stock of the Company
directly or indirectly issuable upon conversion or exercise of Options or
Convertible Securities (other than Series B Preferred Stock, Series C Preferred
Stock and Series F Preferred Stock) which have per share conversion or exercise
prices as of the date of issuance of such Additional Common Stock less than the
Closing Price of such Additional Common Stock, (3) 50% of the number of shares
of Common Stock of the Company directly or indirectly issuable upon conversion
or exercise of Options or Convertible Securities other than which have per share
conversion or exercise prices as of the date of issuance of such Additional
Common Stock equal to or greater than the Closing Price of such Additional
Common Stock, (4) the total number of shares of Additional Common Stock which
could have been purchased at the Fair Market Value of such Additional Common
Stock with the aggregate consideration received by the Company through the
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issuance of such Additional Common Stock and (B) the denominator of which shall
be the sum of (1) the number of shares of Common Stock outstanding immediately
prior to issuance of such Additional Common Stock or issuable upon conversion at
such time of all Series B Preferred Stock, Series C Preferred Stock and Series F
Preferred Stock outstanding immediately prior to the issuance of such Additional
Common Stock, (2) 100% of the number of shares of Common Stock of the Company
directly or indirectly issuable upon conversion or exercise of Options of
Convertible Securities (other than Series B Preferred Stock, Series C Preferred
Stock and Series F Preferred Stock) which have per share conversion or exercise
prices as of the date of issuance of such Additional Common Stock less than the
Closing Price of such Additional Common Stock on such date, (3) 50% of the
number of shares of Common Stock of the Company directly or indirectly issuable
upon conversion or exercise of Options or Convertible Securities (other than
Series B Preferred Stock, Series C Preferred Stock and Series F Preferred Stock)
which have per share conversion or exercise prices as of the date of issuance of
such Additional Common Stock equal to or greater than the Closing Price of such
Additional Common Stock on such date and (4) the number of shares of Additional
Common Stock issued on such date.
(b) DEEMED ISSUANCES OF ADDITIONAL COMMON STOCK. (i) OPTIONS
AND CONVERTIBLE SECURITIES. In the event that at any time or from time to time
after the Initial Closing Date, the Company shall issue any Options or
Convertible Securities (other than (x) Convertible Securities issued upon
conversion of Series B Preferred Stock, Series C Preferred Stock or Series F
Preferred Stock outstanding on the Initial Closing Date, issued upon conversion
of Notes or in payment of interest on Notes, issued in payment of dividends on
such preferred stock, issued upon exercise of the AOL Warrant (as defined
below), (y) Notes issued pursuant to the terms of the Agreement or (z) Options
to officers, directors and employees of the Company pursuant to a stock option
plan approved by the Board) or shall fix a record date for the determination of
holders of any class of securities entitled to receive any such Options or
Convertible Securities, then for purposes of the definition of "ADDITIONAL
COMMON STOCK" the maximum number of shares of Common Stock (as set forth in the
instrument relating thereto without regard to any provisions contained therein
for a subsequent anti-dilution adjustment of such number) directly or indirectly
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be shares of Additional Common Stock issued as of
the time of such issue or, in the case such a record date shall have been fixed,
as of the close of business on such record date; PROVIDED that in any such case
in which shares of Additional Common Stock are deemed to be issued:
(A) no further adjustment in the Conversion Price
shall be made upon the subsequent issue of Convertible Securities or
shares of Additional Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any
increase or decrease in the consideration payable to the Company, or
increase or decrease in the number of shares of Additional Common Stock
issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities;
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities
which shall not have been exercised, the Conversion Price computed upon
the original issue thereof (or upon the occurrence of a record date
with respect thereto) and any subsequent adjustments based thereon
shall, upon such expiration, be recomputed as if:
9
(1) in the case of Convertible Securities or
Options for shares of Additional Common Stock, only the shares
of Additional Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities were issued, and the consideration
received therefor was the consideration actually received by
the Company for the issue of all such Options, whether or not
exercised, plus the consideration actually received by the
Company upon such exercise or for the issue of all such
Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any, actually
received by the Company upon such conversion or exchange, and
(2) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually
issued upon the exercise thereof were issued at the time of
issue of such Options, and the consideration received by the
Company for the shares of Additional Common Stock deemed to
have been then issued was the consideration actually received
by the Company for the issue of all such Options, whether or
not exercised, plus the consideration deemed to have been
received by the Company upon the issue of the Convertible
Securities with respect to which such Options were actually
exercised;
(D) no readjustment pursuant to clauses (C)(1) and
(C)(2) above shall have the effect of increasing the Conversion Price
to an amount which exceeds the lower of (i) the Conversion Price on the
Initial Closing Date, or (ii) the Conversion Price that would have
resulted from any issuance of shares of Additional Common Stock between
the original adjustment date and such readjustment date and/or any
adjustment under section 4.2(b)(ii), 4.2(d), or 4.2(e);
(E) in the case of any Options which expire by their
terms not more than 30 days after the date of issue thereof, no
adjustment of the Conversion Price shall be made until the expiration
or exercise of all such Options issued on the same date, whereupon such
adjustment shall be made in the same manner provided in clause (C)
above; and
(F) if such record date shall have been fixed and
such Options or Convertible Securities are not issued on the date fixed
therefor, the adjustment previously made in the Conversion Price which
became effective on such record date shall be canceled as of the close
of business on such record date, and thereafter the Conversion Price
shall be adjusted pursuant to subsection 4.2(a) as of the actual date
of their issuance.
(ii) STOCK DIVIDENDS, STOCK DISTRIBUTIONS,
SUBDIVISIONS AND COMBINATIONS AND CONSOLIDATIONS. In the event the Company at
any time or from time to time after the Initial Closing Date shall declare or
pay any dividend or make any other distribution on the shares of Capital Stock
payable in shares of Capital Stock, or effect a subdivision of the outstanding
shares of Capital Stock (by reclassification or otherwise than by payment of a
dividend in shares of Capital Stock) or in the event that the outstanding shares
of Capital Stock shall be combined (by reclassification or otherwise), then and
in any such event, the Conversion Price shall be proportionately reduced or
increased to reflect the change in the total number of shares of such Capital
Stock outstanding as a result of such dividend, distribution, subdivision or
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combination, provided that, in connection with any dividend, distribution,
subdivision or combination of Common Stock of the Company, no such adjustment
shall be made with respect to the Conversion Price as it applies to the
conversion of the Notes into shares of Series F Preferred Stock or Series B
Preferred Stock if the conversion rate of such shares is appropriately adjusted
in connection with such action pursuant to the Certificate:
(A) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive
such dividend or distribution, or
(B) in the case of any such subdivision or
combination at the close of business on the date immediately prior to
the date upon which such corporate action becomes effective.
If such record date shall have been fixed and such dividend or distribution
shall not have been paid on the date fixed therefor, the adjustment previously
made in the Conversion Price which became effective on such record date shall be
canceled as of the close of business on such record date, and thereafter the
Conversion Price shall be adjusted pursuant to subsection 4.2(a) as of the time
of actual payment of such dividend or distribution.
(c) DETERMINATION OF CONSIDERATION. For purposes of this
Section 4, the consideration received by the Company for the issue of any shares
of Additional Common Stock shall be computed as follows:
(i) CASH AND PROPERTY. Such consideration shall:
(A) insofar as it consists of cash, be computed as
the net amount of cash actually received by the Company plus in the
case of issuances registered under the Securities Act or pursuant to
Rule 144A of the Securities Act, reasonable and customary commissions
or concessions paid by the Company to underwriters, dealers or others
performing similar services in connection with such issuance;
(B) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue,
as determined in good faith by the Board or, to the extent in excess of
$2,000,000, an independent appraiser; and
(C) in the event shares of Additional Common Stock
are issued for cash and property other than cash, by the proportion of
each such consideration so received, computed as provided in clauses
(1) and (2) above, as determined in good faith by the Board or, to the
extent in excess of $2,000,000, an independent appraiser.
(ii) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Company for shares of Additional Common
Stock deemed to have been issued pursuant to subsection 4.2(b)(i), relating to
Options and Convertible Securities, shall be determined by dividing:
(A) the total amount, if any, received or receivable
by the Company as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent
adjustment of such consideration) payable to the Company upon the
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exercise of such Options or the conversion or exchange of such
Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and
the conversion or exchange of such Convertible Securities, by
(B) the maximum number of shares of Additional Common
Stock (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent anti-dilution
adjustment of such number) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities.
(d) ADJUSTMENTS FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If any Applicable Shares issuable upon conversion of this Note
shall be changed into the same or a different number of shares of any other
series of shares, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares provided for
above), the Conversion Price and other terms of this Note then in effect shall,
concurrently with the effectiveness of such reorganization or reclassification,
be proportionately adjusted such that this Note shall be convertible into, in
lieu of the number of shares of Applicable Shares which the Holder would
otherwise have been entitled to receive, a number of shares of such other series
of shares equivalent to the number of shares of Applicable Shares that would
have been subject to receipt by the Holder upon conversion of this Note
immediately before such change. After such event and after giving effect to the
provisions of this subsection 4.2(d), the provisions of Section 4.2 shall apply
to this Note and the shares of such other series of shares into which this Note
has become convertible as nearly as consistent with the application of the
provisions Section 4.2 prior to such event.
(e) REORGANIZATION, MERGERS, CONSOLIDATIONS, OR SALES OF
ASSETS. Without in any way limiting the provisions of Section 7, if at any time
or from time to time there shall be a capital reorganization of the shares of
Capital Stock (other than a subdivision, combination, reclassification, or
exchange of shares provided for elsewhere in this subsection 4.2) or a merger or
consolidation of the Company with or into another corporation, or the sale of
all or substantially all of the Company's and its subsidiaries' consolidated
properties and assets to any other person (collectively, a "CAPITAL
REORGANIZATION"), then, as a part of such Capital Reorganization provision shall
be made so that the Holder shall thereafter be entitled to receive upon
conversion of this Note, the number of shares or other securities or property of
the Company, or of the successor corporation resulting from such Capital
Reorganization, to which a holder of shares of Applicable Shares deliverable
upon conversion would have been entitled upon such Capital Reorganization. In
any such case, appropriate adjustment shall be made in the application of the
provisions of this subsection 4.2 with respect to the rights of the Holder after
the Capital Reorganization to the end that the provisions of this subsection 4.2
(including adjustment of the Conversion Price then in effect and the number of
shares purchasable upon conversion of this Note) shall be applicable after that
event as nearly equivalent as may be practicable.
(f) NO IMPAIRMENT. The Company will not, by amendment of its
Certificate or through any reorganization, recapitalization, transfer of assets,
merger, consolidation, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company but will at all
times in good faith assist in the carrying out of all the provisions of this
subsection 4.2 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the Holder against
impairment. Without limiting the obligations of the Company described in the
foregoing sentence, the Company shall not engage in any reorganization,
recapitalization, transfer of assets, merger, consolidation, dissolution, issue
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or sale of securities or any other voluntary action which would cause
adjustments to the Conversion Price under this subsection 4.2 such that the
Conversion Price after giving effect to any such adjustment would be less than
$3.020 (as adjusted for stock splits, subdivisions and other changes in the
Class A Common Stock after the date hereof), unless approval of the Company's
shareholders has been obtained with respect to the issuance of Applicable Shares
of this Note at a Conversion Price less than such amount upon conversion, all in
compliance with Rule 4350 of the Marketplace Rules of the National Association
of Securities Dealers, Inc.
(g) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of any Conversion Price pursuant to this subsection
4.2, the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to the Holder a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Company
shall, upon the written request at any time of the Holder, furnish or cause to
be furnished to the Holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the Conversion Price at the time in effect, and (iii)
the class and number of Applicable Shares and the amount, if any, of other
property which at the time would be received upon the conversion of this Note.
(h) MINIMUM ADJUSTMENT OF CONVERSION PRICE. If the amount of
any adjustment of the Conversion Price required pursuant to this Section 4.2
would be less than one tenth (1/10) of one percent (1%) of the Conversion Price
in effect at the time such adjustment is otherwise so required to be made, such
amount shall be carried forward and adjustment with respect thereto made at the
time of and together with any subsequent adjustment which, together with such
amount and any other amount or amounts so carried forward, shall aggregate at
least one tenth (1/10) of one percent (1%) of such Conversion Price.
(i) NOTICES OF RECORD DATE. Without in any way limiting the
provisions of Section 6 or 7, in the event that the Company shall propose at any
time:
(i) to declare any dividend or distribution upon the
shares of Capital Stock, whether in cash, property, shares or other securities,
whether or not a regular cash dividend and whether or not out of earnings or
earned surplus;
(ii) to offer for subscription PRO RATA to the
holders of any class or series of its outstanding Capital Stock any additional
shares of any class or series or any other Securities or property, or to receive
any other rights;
(iii) to effect a Capital Reorganization; or
(iv) to merge with any other corporation, or sell,
lease or convey substantially all its property or business, or to liquidate
dissolve or wind up;
then, in connection with such event, the Company shall send to the Holder at
least 20 days' prior written notice of the date on which a record shall be taken
for such dividend, distribution or subscription rights (and specifying the date
on which the holders of shares of Capital Stock shall be entitled thereto) or
for determining rights to vote in respect of the matters referred to in clauses
(iii) and (iv) above. With regard to the matters referenced in clauses (iii) and
(iv) above, such written notice shall describe the material terms and conditions
of the proposed transaction; PROVIDED, HOWEVER, that any notice required by this
subsection 4.2(i) may be waived by the Holder.
13
SECTION 5. Affirmative Covenants. The Company agrees it will, and will
cause its Subsidiaries, as applicable, to, perform or cause to be performed the
obligations set forth below.
SUBSECTION 5.1 NOTICES, ETC. In addition to any other notices and
information required under this Note, the Company will promptly furnish to the
Holder, the following notices and information:
(a) notice of any development that results in, or could
reasonably be expected to result in, a Material Adverse Effect;
(b) notice of the occurrence of any Default;
(c) notice of the filing or commencement of any action, suit
or proceeding by or before any arbitrator or governmental authority against or
affecting the Company or any Subsidiary that could reasonably be expected to be
adversely determined and, if adversely determined, could reasonably be expected
to result in a Material Adverse Effect; and
(d) promptly following any request therefor, such other
information regarding the operations, business affairs and financial condition
of the Company or any Subsidiary, or compliance with the terms of this
Agreement, as the Holder may reasonably request (it being understood that the
Company shall not be required to provide any information or documents which are
subject to confidentiality provisions the nature of which prohibit such
disclosure).
SUBSECTION 5.2 MAINTENANCE OF EXISTENCE; COMPLIANCE WITH LAWS, ETC. The
Company will, and will cause each of its Significant Subsidiaries to, (i) do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its legal existence and the rights, licenses, permits, privileges and
franchises material to the conduct of its business in the ordinary course,
including the payment (before the same become delinquent) of all material taxes
imposed upon the Company or its Significant Subsidiaries or upon their property,
except to the extent being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP have been
set aside on the books of the Company or its Subsidiaries, as applicable, and
(ii) comply in all respects with all agreements to which it or any of its
Significant Subsidiaries is a party, to the extent the non-compliance therewith
could reasonably be expected to result in a Material Adverse Effect; PROVIDED
that the foregoing shall not prohibit any merger or consolidation or other
transaction permitted under subsection 6.5.
SUBSECTION 5.3 MAINTENANCE OF PROPERTIES. The Company will, and will
cause each of its Significant Subsidiaries to, maintain, preserve, protect and
keep its and their respective properties in good repair, working order and
condition (ordinary wear and tear excepted), and make necessary repairs,
renewals and replacements so that the business carried on by the Company and its
Significant Subsidiaries may be properly conducted at all times, unless the
Company or such Subsidiary determines in good faith that the continued
maintenance of such property is no longer economically desirable.
SUBSECTION 5.4 INSURANCE. The Company will, and will cause each of its
Significant Subsidiaries to (or will, with respect to each of its Significant
Subsidiaries), maintain:
(a) insurance on its property with financially sound and
reputable insurance companies against loss and damage in at least the amounts
(and with only those deductibles) customarily maintained, and against such risks
as are typically insured against in the same general area, by Persons of
14
comparable size engaged in the same or similar business as the Company and its
Significant Subsidiaries (it being understood that maintenance of the coverage
held by the Company and its Significant Subsidiaries on the Initial Closing Date
shall be deemed to be in compliance with this clause in respect of the property
then owned); and
(b) all worker's compensation, employer's liability insurance
or similar insurance as may be required under the laws of any state or
jurisdiction in which it may be engaged in business.
SUBSECTION 5.5 BOOKS AND RECORDS. The Company will, and will cause
each of its Subsidiaries to, keep books and records in accordance with GAAP
which accurately reflect all of its business affairs and transactions and permit
the Holder or any of its representatives other than Excluded Persons (as defined
below), at reasonable times and intervals (which, in the absence of an Event of
Default, shall be no more than twice per year by any Holder or group of Holders)
upon reasonable prior notice to the Company, to visit the offices of the Company
and its Significant Subsidiaries, to discuss such Person's financial matters
with its officers and employees, and its independent public accountants (and the
Company hereby authorizes such independent public accountant, upon the
occurrence and during the continuance of any Event of Default, to discuss such
Person's financial matters with the Holder or its representatives other than
Excluded Persons whether or not any representative of the Company is present,
and if no Event of Default has occurred and is continuing, only if a
representative of the Company is present) and to examine (and photocopy extracts
from) any of its books and records, in each case subject to applicable
confidentiality restrictions of the Company and its Significant Subsidiaries;
provided that in the absence of an Event of Default, any visit by the Holder
under this Subsection 5.5 shall be initiated at the direction of the Majority
Holders and the Majority Holders shall be required to give reasonable notice to
all other holders of the Notes prior to any visit to the Company. The Company
shall pay any fees of such independent public accountant incurred in connection
with any Holder's exercise of its rights pursuant to this subsection during an
Event of Default, or if such visits or discussions occur not more than once per
year, in the absence of an Event of Default.
SUBSECTION 5.6 FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. The
Company will furnish the Holder the following financial statements, reports,
notices and information:
(a) as soon as available and in any event within 45 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year, an
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
the end of such Fiscal Quarter and consolidated statements of income and cash
flow of the Company and its Subsidiaries for such Fiscal Quarter and for the
period commencing at the end of the previous Fiscal Year and ending with the end
of such Fiscal Quarter, and including (in each case), in comparative form the
figures for the corresponding Fiscal Quarter in, and year to date portion of,
the immediately preceding Fiscal Year, certified as complete and correct in all
material respects by the chief financial or accounting Authorized Officer of the
Company;
(b) as soon as available and in any event within 90 days after
the end of each Fiscal Year, a copy of the consolidated balance sheet of the
Company and its Subsidiaries, and the related consolidated statements of income
and cash flow of the Company and its Subsidiaries for such Fiscal Year, setting
forth in comparative form the figures for the immediately preceding Fiscal Year,
audited (without any Impermissible Qualification) by independent public
accountants of recognized national standing or otherwise reasonably acceptable
15
to the Majority Holders, and stating that, in performing the examination
necessary to deliver the audited financial statements of the Company, no
knowledge was obtained of any Event of Default (or a statement as to such
accountants' knowledge of any Event of Default);
(c) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials filed by
the Company with the SEC or with any national securities exchange, or
distributed by the Company to its public security holders generally, as the case
may be (other than registration statements on Form S-8, filings under Section
16(a) or 13(d) of the Exchange Act of 1934, as amended, and routine filings
related to employee benefit plans);
(d) promptly upon receipt thereof, copies of all "management
letters" submitted to the Company by the independent public accountants referred
to in clause (b) in connection with each audit made by such accountants; and
Information required to be delivered pursuant to clauses (a), (b) and (c) of
this subsection shall be deemed to have been delivered on the date on which the
Company provides notice to the Holder that such information has been posted on
the Company's website, on the internet at the website address listed on such
notice or at βββ.βββ.βββ and accessible by the Holder without charge.
SUBSECTION 5.7 RULE 144. The Company covenants that:
(a) it will file the reports required to be filed by the
Company under the Securities Act and the Exchange Act, so as to enable the
Holder to sell the Applicable Shares or any Capital Stock into which such
Applicable Shares, or such Capital Stock, are convertible (the "CONVERSION
SHARES") pursuant to Rule 144 under the Securities Act;
(b) it shall cooperate with the Holder in connection with any
sale, transfer or other disposition by the Holder of any Conversion Shares
pursuant to Rule 144 under the Securities Act;
(c) it will take such action as the Holder may reasonably
request, all to the extent required from time to time to enable the Holder to
sell its Conversion Shares without registration under the Securities Act within
the limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act, including providing any legal opinions; and
(d) upon the request of the Holder, it shall deliver to the
Holder a written certification of a duly authorized officer as to whether it has
complied with such requirements.
SECTION 6. Negative Covenants. The Company covenants and agrees with
the Holder that:
SUBSECTION 6.1 BUSINESS ACTIVITIES. The Company will not, and will not
permit any of its Subsidiaries to, engage in any business activity except
Permitted Businesses.
SUBSECTION 6.2 INDEBTEDNESS. The Company will not, and will not permit
any of its Subsidiaries to, create, incur, assume or permit to exist any
Indebtedness, other than:
(a) Indebtedness in respect of the Notes;
16
(b) Indebtedness existing as of the Initial Closing Date which
is identified in Item 6.2 of the Disclosure Schedule;
(c) Indebtedness (i) incurred in the ordinary course of
business of the Company and its Subsidiaries (including current accounts payable
extended by suppliers on normal trade terms in connection with purchases of
goods and services which are not overdue for a period of more than 90 days or,
if overdue for more than 90 days, as to which either (x) such amounts are
accrued on the books of the Company or such Subsidiary or (y) a dispute exists
and adequate reserves in conformity with GAAP have been established on the books
of the Company or such Subsidiary) and (ii) in respect of performance, surety or
appeal bonds provided in the ordinary course of business, but excluding (in each
case) Indebtedness incurred through the borrowing of money or Guarantee
Obligations in respect thereof;
(d) Indebtedness (i) in respect of industrial revenue bonds or
other similar governmental or municipal bonds, (ii) evidencing the deferred
purchase price of newly acquired property or incurred to finance the acquisition
of such property of the Company and its Subsidiaries (pursuant to purchase money
mortgages or otherwise, whether owed to the seller or a third party) (provided
that such Indebtedness is incurred within 180 days of the acquisition of such
property), (iii) incurred to finance the construction or improvement of property
or assets owned by the Company or any of its Subsidiaries and (iv) that
constitutes Capitalized Lease Liabilities; PROVIDED THAT, Indebtedness permitted
under this clause (d) shall not exceed in the aggregate $5,000,000 at any time
outstanding.
(e) intercompany Indebtedness among the Company and its wholly
owned Subsidiaries;
(f) Indebtedness of a Person existing at the time such Person
became a Subsidiary of the Company or was merged or consolidated into the
Company or into any Subsidiary, but only if such Indebtedness was not created or
incurred in contemplation of such Person becoming a Subsidiary or being merged
or consolidated into the Company or into any Subsidiary;
(g) Hedging Obligations incurred by the Company or any of its
Subsidiaries solely as bona fide ββββββ and not for speculative purposes;
(h) Indebtedness arising from guarantees to suppliers,
lessors, licensors, contractors or customers incurred in the ordinary course of
business;
(i) Guarantee Obligations of any Subsidiary with respect to
Indebtedness of the Company or a direct or indirect wholly owned Subsidiary
permitted under this Section 6.2;
(j) renewals and refinancing of any Note or any Indebtedness
permitted above; provided that the principal amount of such Indebtedness does
not exceed the principal amount of the Indebtedness refinanced; and
(k) other unsecured Indebtedness of the Company and its
Subsidiaries in an aggregate principal amount at any time outstanding not to
exceed $25,000,000; PROVIDED that no Indebtedness otherwise permitted by this
clause (k) shall be assumed, created or otherwise incurred if a Default has
occurred and is then continuing or would result therefrom.
17
SUBSECTION 6.3 LIENS. The Company will not, and will not permit any of
its Subsidiaries to, create, incur, assume or permit to exist any Lien upon any
of its property (including Capital Stock of any Person), revenues or assets,
whether now owned or hereafter acquired, except the following (collectively
"PERMITTED LIENS"):
(a) Liens existing as of the Initial Closing Date and
disclosed in Item 6.3 of the Disclosure Schedule, and refinancings thereof;
PROVIDED that no such Lien shall encumber any additional property and the amount
of Indebtedness or other obligations secured by such Lien is not increased from
that existing on the Initial Closing Date (as such Indebtedness or other
obligations may have been permanently reduced subsequent to the Initial Closing
Date);
(b) Liens securing Indebtedness of the type permitted under
clause (d) of subsection 6.2; PROVIDED that (i) such Lien is granted within 180
days after such Indebtedness is incurred, (ii) the Indebtedness secured thereby
does not exceed 100% of the lesser of the cost or the fair market value of the
applicable property, improvements or equipment at the time of such acquisition
(or construction) and (iii) such Lien secures only the assets that are the
subject of the Indebtedness referred to in such clause;
(c) Liens securing Indebtedness permitted by clause (g) of
subsection 6.2; PROVIDED that such Liens existed prior to such Person becoming a
Subsidiary, were not created in anticipation thereof;
(d) Liens incidental to the ordinary conduct of the Company's
business or the ownership of its assets which were not incurred in connection
with the borrowing of money, such as carrier's, warehousemen's, materialmen's,
landlord's and mechanic's liens, and which do not in the aggregate materially
detract from the value of its assets or materially impair the use thereof in the
ordinary course of its business;
(e) Liens incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment insurance or
other forms of governmental insurance or benefits, or to secure performance of
tenders, statutory obligations, bids, leases or other similar obligations (other
than for borrowed money) entered into in the ordinary course of business or to
secure obligations on surety and appeal bonds or performance bonds;
(f) judgment Liens which do not otherwise result in an Event
of Default under Section 7(a)(iv);
(g) easements, rights-of-way, zoning restrictions, minor
defects or irregularities in title and other similar encumbrances not
interfering in any material respect with the value or use of the property to
which such Lien is attached;
(h) Liens for Taxes, assessments or governmental charges or
levies, or otherwise arising by operation of law, which Liens are not yet due
and payable or which are being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books;
(i) leases or subleases granted to other Persons not
materially interfering with the conduct of the business of the Company or any of
its Subsidiaries;
18
(j) Liens arising solely by virtue of any statutory provisions
relating to banker's liens, rights of set-off or similar rights and remedies as
to deposit accounts or other funds maintained with a creditor depositary
institution;
(k) other Liens in respect of property or assets of the
Company or any Subsidiary so long as the aggregate principal amount of the
Indebtedness secured by such βββββ does not exceed $1,000,000 at such time (it
being understood that any Lien permitted under any other clause in this
subsection shall not be included in the computation described in this clause);
and
(l) any extension, renewal or replacement of the foregoing
Liens; PROVIDED that the Liens permitted hereunder shall not cover any
additional Indebtedness or property (other than like property substituted for
property covered by such ββββ).
SUBSECTION 6.4 INVESTMENTS AND ACQUISITIONS. The Company will not, and
will not permit any of its Subsidiaries to, make any Investment, except for:
(i) the purchase of all or substantially all of
Capital Stock or assets of another Person constituting the acquisition of a
business unit;
(ii) Investments in cash and Cash Equivalents;
(iii) Investments received in connection with the
bankruptcy or reorganization of, or settlement of delinquent accounts and
disputes with, customers and suppliers, in each case in the ordinary course of
business;
(iv) Investments constituting capital expenditures
scheduled to be made in accordance with a business plan approved by the Board;
(v) Investments by way of contributions to capital or
purchase of Capital Stock by the Company or any Subsidiary of the Company in or
from any wholly owned Subsidiary;
(vi) Investments constituting (A) accounts receivable
arising, (B) trade debt granted or (C) deposits made in connection with, the
purchase price of goods or services, in each case in the ordinary course of
business;
(vii) Investments consisting of any deferred portion
of the sales price received by the Company or any Subsidiary in connection with
any Disposition permitted under Section 6.8;
(viii) Hedging Obligations;
(ix) Investments in Capital Stock of any Person
received in exchange for bona fide services provided to such Person or its
Affiliates by the Company or any of its Subsidiaries in the ordinary course of
business; and
(x) other Investments not to exceed in the aggregate
$1,000,000 at any time;
19
PROVIDED that, in the case of each of clauses (i), (iv), (vii), (ix) and (x)
above, before the taking of such actions, no Default shall have occurred and be
continuing, and after giving effect thereto no Default shall occur.
SUBSECTION 6.5 MERGER, CONSOLIDATION ETC. The Company shall not, and
shall not permit its Subsidiaries to, consolidate or merge with any other Person
or Dispose of its properties and assets substantially as an entirety to any
Person, and the Company shall not permit any Person to convey, transfer or lease
its properties and assets substantially as an entirety to the Company, unless:
(a) in the event that the Company shall consolidate with or
merge into another Person or Dispose of its properties and assets substantially
as an entirety to any Person, the Person formed by such consolidation or into
which the Company is merged or the Person which acquires the properties and
assets of the Company in such Disposition shall be a corporation, limited
liability company, partnership or trust organized and validly existing under the
laws of the United States of America, any State thereof or the District of
Columbia;
(b) in the event that the Company shall consolidate or merge
with another Person and the entity surviving such transaction or transferee
entity is not the Company, or Dispose of its properties and assets substantially
as an entirety to any Person, , then such surviving or transferee entity shall
expressly assume, by delivery of a written instrument in form reasonably
satisfactory to the Holder, all of the Company's rights and obligations under
this Note;
(c) immediately after giving effect to such transaction, no
Default shall have occurred and be continuing and there shall not have occurred
as a result thereof a significant deterioration of the creditworthiness of the
resulting obligor in respect of this Note from that of the Company prior to
giving effect thereto in the reasonable and good faith determination of the
Holder; and
(d) the Company shall have delivered to the Holder a
certificate of an Authorized Officer stating that such consolidation, merger,
Disposition, conveyance, transfer or lease indenture, complies with this Section
6.5 (except to the extent relating to the determination of the Holder referred
to in clause (c) above).
SUBSECTION 6.6 TRANSACTIONS WITH AFFILIATES. The Company will not, and
will not permit any of its Subsidiaries to, enter into or cause or permit to
exist any arrangement, transaction or contract (including for the purchase,
lease or exchange of property or the rendering of services) with any of its
Affiliates (other than AOLTW and AOL and any of their respective Affiliates,
and, in the case the Holder is not AOLTW or any of its Affiliates, other than
Banco Itau, S.A., Aspen Investments LLC and Atlantis Investments LLC and any of
their respective Affiliates), unless such arrangement, transaction or contract
(i) is on fair and reasonable terms no less favorable to the Company or such
Subsidiary than it could obtain in an arm's-length transaction with a Person
that is not an Affiliate, (ii) is of the kind which would be entered into by a
prudent Person in the position of the Company or such Subsidiary with a Person
that is not one of its Affiliates, (iii) was entered into prior to the Initial
Closing Date or contemplated by any agreement entered into prior to the Initial
Closing Date, or (iv) is with officers, directors, representatives or other
employees of the Company and its Subsidiaries relating specifically to
employment as such.
SUBSECTION 6.7 RESTRICTED PAYMENTS, ETC.(a) The Company will not, and
will not permit any of its Subsidiaries to, declare or make a Restricted
Payment, or make any deposit for any Restricted Payment, other than (i)
20
Restricted Payments made by Subsidiaries to the Company or by Subsidiaries to
other wholly owned Subsidiaries, (ii) subject to Section 4.2, if applicable,
declare and make dividends on or redeem preferred stock of the Company in each
case only in accordance with the respective terms of such preferred stock and
payable only in shares of its Capital Stock, and (iii) subject to Section 4.2,
repurchase shares of its Capital Stock or Options held by the officers,
directors and employees of the Company, so long as such repurchase is pursuant
to, and in accordance with the terms of, management and/or employee stock plans,
stock subscription agreements or shareholder agreements approved by the Board or
as required by applicable law; PROVIDED that before the taking of the action
described in clause (iii), no Default shall have occurred and be continuing, and
after giving effect thereto no Default shall occur.
SUBSECTION 6.8 DISPOSITIONS. The Company will not, and will not permit
any of its Subsidiaries to, make any Disposition, except:
(a) the Disposition of obsolete or worn out property in the
ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
(c) an Investment permitted under Section 6.4;
(d) the settlement of accounts receivable arising in the
ordinary course of business, but only in connection with the compromise or
collection thereof in the ordinary course of business;
(e) Dispositions made by a Subsidiary to the Company or any of
its wholly owned Subsidiaries;
(f) licenses or sublicenses of trademarks, trade names,
copyrights, patents and other intellectual property entered into by the Company
or any of its Subsidiaries in the ordinary course of business; and
(g) the Disposition of other property having a fair market
value not to exceed $2,000,000 in the aggregate for any fiscal year of the
Company; PROVIDED that all of the consideration therefor must be cash.
SECTION 7. Events of Default.
(a) DEFINITION. For purposes of this Note, an "EVENT OF
DEFAULT" shall be deemed to have occurred if:
(i) the Company fails to pay when due (A) the
principal or Face Amount on this Note on the Final Maturity Date, upon optional
or mandatory redemption, or otherwise or (B) Interest on the Note and such
default on the payment of Interest shall continue unremedied for a period of
five days after such amount was due;
(ii) The Company or any Significant Subsidiary shall
21
(A) become insolvent or generally fail to pay, or
admit in writing its inability or unwillingness generally to pay, debts
as they become due;
(B) apply for, consent to, or acquiesce in the
appointment of a trustee, receiver, sequestrator or other custodian for
any substantial part of the property of any thereof, or make a general
assignment for the benefit of creditors;
(C) in the absence of such application, consent or
acquiescence in or permit or suffer to exist the appointment of a
trustee, receiver, sequestrator or other custodian for a substantial
part of the property of any thereof, and such trustee, receiver,
sequestrator or other custodian shall not be dismissed or discharged
within 60 days, if in the U.S., or 90 days, if outside the U.S.;
(D) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law or any dissolution,
winding up or liquidation proceeding, in respect thereof, and, if any
such case or proceeding is not commenced by the Company or any
Significant Subsidiary, such case or proceeding shall be consented to
or acquiesced in by the Company or any Significant Subsidiary, as the
case may be, or shall result in the entry of an order for relief or
shall remain undismissed, unstayed or undischarged for 60 days, if in
the U.S., or 90 days, if outside the U.S.; or
(E) take any action authorizing, or in furtherance
of, any of the foregoing;
(iii) the Company (A) fails to observe or perform any
covenant under Section 5.1(b) or Section 6 of this Note or (B) fails to observe
or perform any other covenant contained in this Note or in the Agreement, and
such breach or failure continues for a period of 30 days from the date of its
occurrence;
(iv) any judgment or order for the payment of money
individually or in the aggregate in excess of $5,000,000 (exclusive of any
amounts covered by insurance (less any applicable deductible) and as to which
the insurer is not contesting its responsibility to cover such judgment or
order) shall be rendered against the Company or any of its Subsidiaries and such
judgment shall not have been vacated or discharged or stayed pending appeal (for
so long as such appeal is pending) or satisfied pending appeal by the posting of
a bond or guaranty (for so long as such appeal is pending) within 60 days, if in
the U.S., or 120 days, if outside the U.S. (but only if the Company has used its
reasonable best efforts to cause such judgment to be vacated, discharged or
stayed pending appeal), in each case after the entry thereof or enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order and shall not have been dismissed, stayed or discharged within the period
prescribed by applicable law;
(v) a default shall occur in the payment of any
amount when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any principal or stated amount of, or interest or
fees on, any Indebtedness of the Company or any of its Subsidiaries having an
outstanding principal amount, individually or in the aggregate, in excess of
$10,000,000, or a default shall occur in the performance or observance of any
obligation or condition with respect to such Indebtedness if the effect of such
default is to accelerate the maturity of any such Indebtedness or such default
shall continue unremedied for any applicable period of time sufficient to permit
the holder or holders of such Indebtedness, or any trustee or agent for such
22
holders, to cause or declare such Indebtedness to become due and payable or to
require such Indebtedness to be prepaid, redeemed, purchased or defeased, or
require an offer to purchase or defease such Indebtedness to be made, prior to
its expressed maturity; PROVIDED that this Section shall not apply to secured
Indebtedness that becomes due as a result of the voluntary sale or transfer of
the property or assets securing such Indebtedness and is promptly paid in full;
or
(vi) at any time the number of authorized but
unissued shares of Series F Preferred Stock, Series B Preferred Stock, Class B
Common Stock or Class A Common Stock, as the case may be, shall not be
sufficient to effect the conversion of all the then outstanding Notes and the
conversion of any Capital Stock directly or indirectly issuable upon conversion
of the Notes or received upon conversion of such Capital Stock and such
circumstance continues unremedied for a period of 30 days from the date of its
occurrence.
(b) CONSEQUENCES OF EVENTS OF DEFAULT. (i) If an Event of
Default has occurred pursuant to this Note, then (A) the Holder may by notice to
the Company terminate any remaining obligation of the Holder to purchase
additional Notes under the Agreement and any such obligation shall thereafter
cease to have further force and effect and (B) the Holder may by notice to the
Company declare all or any portion of the Face Amount of, and accrued but unpaid
Interest on, this Note due and payable and demand immediate payment of the
Redemption Price thereon in cash in U.S. Dollars; PROVIDED, HOWEVER, that if an
Event of Default has occurred pursuant to Section 7(a)(ii), then (x) this Note
shall automatically and immediately become due and payable at the Redemption
Price without notice and (y) any remaining obligation of the Holder to purchase
additional Notes under the Agreement shall terminate and thereafter cease to
have further force and effect.
(ii) Subject to the other provisions of this Note,
the Holder shall also have, upon the occurrence and continuance of an Event of
Default, any other rights which the Holder may have pursuant to applicable law
in equity, or contract.
SECTION 8. Amendment and Waiver. Except as otherwise expressly provided
herein, the provisions of this Note may be amended, and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the prior written consent of
the Holders owning a majority of the then outstanding aggregate Face Amount of
all Notes (the "MAJORITY HOLDERS"); PROVIDED, however, that without the prior
written consent of the Holder, no such action shall (i) change the amount of
Notes whose holders must consent to an amendment, (ii) change the stated rate of
or extend the stated time for or manner in which interest accrues or payment of
interest is made on this Note, (iii) reduce the amount of or any provision
relating to the scheduled payment of principal on this Note, or (iv) make this
Note payable in any money or at any place other than as stated in this Note. Any
amendment, consent or waiver permitted to be effected and actually effected by
the Majority Holders in accordance with the preceding sentence shall be binding
upon all holders of the Notes.
SECTION 9. Costs of Collection. In the event that the Company fails to
pay when due the full amounts due hereunder (including, without limitation, upon
acceleration in connection with an Event of Default), the Company shall
indemnify and hold harmless the Holder from and against all reasonable costs and
expenses incurred in connection with the enforcement of the provision or
collection of such amounts (including, without limitation, reasonable attorneys'
fees and expenses.)
23
SECTION 10. Registration of Transfer and Exchange Generally.
(a) REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE
GENERALLY. The Company shall keep at its principal executive offices a register
(the register maintained in such being herein sometimes collectively referred to
as the "NOTE REGISTER") in which the Company shall provide for the registration
of Notes and of transfers and exchanges of Notes. At the option of the Holder,
this Note may be exchanged for other Notes, of a like aggregate principal amount
in minimum denomination of $10,000,000 and bearing such restrictive legends as
may be required by law upon surrender of this Note to be exchanged at the
Company's principal executive offices. Whenever any Notes are so surrendered for
exchange, the Company shall execute and make available for delivery the Notes
which the Holder is entitled to receive. All Notes issued upon any registration
of transfer or exchange of Notes shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits as the Notes
surrendered upon such registration of transfer or exchange. Every Note presented
or surrendered for registration of transfer or for exchange shall (if so
required by the Company) be duly endorsed, or be accompanied by a written
instrument of transfer, in form satisfactory to the Company, duly executed by
the Holder or his attorney duly authorized in writing. No service charge shall
be made for any registration of transfer or exchange of any Notes.
(b) REGISTRATION RIGHTS/STOCKHOLDERS AGREEMENT. (i) TRANSFERS
BY AND AMONG AOLTW AND ITS SUBSIDIARIES. In connection with any assignment, sale
or transfer of this Note to AOLTW or to any of its Subsidiaries in accordance
with the terms of this Note, the Company shall execute and deliver to, and such
assignee shall agree in writing to become a party to (in the event that such
assignee is not yet a party), by executing a counterpart signature page to (A)
the Second Amended and Restated Registration Rights Agreement (as defined in the
Agreement) and the registration rights of the Class A Common Stock issued or
issuable, directly or indirectly, by the Company upon conversion of or as
interest on the Notes shall be assigned to such assignee in accordance with
Section 10.6 of the Second Amended and Restated Registration Rights Agreement
and (B) the Second Amended and Restated Stockholders Agreement (as defined in
the Agreement).
(ii) TRANSFERS BY AND AMONG PERSONS NOT A SUBSIDIARY
OF AOLTW. In connection with any assignment, sale or transfer of this Note to
any Person not a Subsidiary of AOLTW (an "UNAFFILIATED HOLDER") in accordance
with the terms of this Note, the Company shall execute and deliver to such
Unaffiliated Holder the Assignee Registration Rights Agreement attached to the
Agreement as Exhibit E thereto. Within 30 days of receipt by the Unaffiliated
Holder of such agreement from the Company, the Unaffiliated Holder shall have
the right (i) to become a party to such agreement by executing a counterpart
signature page to such agreement and thereafter, the Class A Common Stock issued
or issuable, directly or indirectly, by the Company upon conversion of or as
interest on the Notes shall be deemed "Registrable Securities" thereunder in
accordance with its terms or (ii) refuse to become a party to such agreement;
provided that failure to deliver a counterpart signature page to such agreement
to the Company within such 30 day period shall constitute refusal for the
purposes of clause (ii) above. Any Unaffiliated Holder to which this Note is to
be transferred shall be a third-party beneficiary for the purposes of this
Section 10(b)(ii).
24
(c) RESTRICTIONS ON TRANSFER.
(i) The Holder understands that this Note and the
Applicable Shares, and any securities issued in respect of or in exchange for
this Note or the Applicable Shares, may bear one or more restrictive legends
regarding registration under applicable securities laws and any other legends
that may be required by law or by any agreement binding upon the Holder, this
Note or the Applicable Shares. If requested by the Company, in connection with
any assignment, sale or transfer of this Note, the Holder shall furnish the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such assignment, sale or transfer will not require registration under the
Securities Act and thereafter, the Company, at the request of the Holder, shall
exchange this Note for one or more Notes which eliminate any restrictive legends
that are no longer required by law or by any agreement binding upon the Holder.
(ii) The Holder may only transfer this Note in
denominations of not less than $10,000,000.
(iii) The Holder may not transfer this Note to a
Competitor.
(d) βββββββββ, DESTROYED, LOST AND STOLEN NOTES. If any
mutilated Note is surrendered to the Company, the Company shall execute and make
available for delivery in exchange therefor a new Note of like tenor and
principal amount and bearing a number not contemporaneously outstanding. If
there shall be delivered to the Company (i) evidence to its reasonable
satisfaction of the destruction, loss or theft of any Note and (ii) such
security or indemnity as may be required by the Company to save itself harmless,
then, in the absence of notice to the Company that such Note has been acquired
by a protected purchaser, the Company shall execute and make available for
delivery, in lieu of any such destroyed, lost or stolen Note, a new Note of like
tenor and principal amount and bearing a number not contemporaneously
outstanding. Every new Note issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Note shall be at any time enforceable by anyone.
SECTION 11. Notices and Other Communications. All notices and other
communications to the Holder hereunder are to be delivered to the Holder at the
address set forth on EXHIBIT 3 attached hereto or to such other address or to
the attention of such other person, as specified by prior written notice to the
Company.
SECTION 12. Confidentiality. The Holder and each transferee of a Holder
shall hold all non-public information obtained by the Holder or such transferee
Holder pursuant to the requirements of this Note as confidential; PROVIDED,
HOWEVER, the Holder may disclose such confidential information (i) to its
employees, directors, officers, outside auditors, counsel and other professional
advisors (except those employees, directors and officers who are also employees,
directors or officers of a Competitor ("EXCLUDED PERSONS")) or those of any of
its Affiliates that are not Competitors (which auditors, counsel and advisors
shall be informed of the confidential nature of such information and that such
information may not be disclosed), (ii) subject to an agreement to comply with
the provisions of this Section, to any actual or prospective assignee of this
Note, (iii) in response to any order of any court, Governmental Authority or as
may otherwise be required pursuant to any foreign, federal, state or local law,
statute, rule or regulation, (iv) if required to do so in connection with any
litigation or similar proceeding pursuant to a request for discovery, subpoena
25
or other compulsory process, (v) that has been publicly disclosed by the
Company, (vi) in connection with the exercise of any remedy under this Note or
(vii) with the prior written consent of the Company. In the event that such
ββββββ receives a request to disclose all or any part of the non-public
information under the terms of a subpoena or other order issued by a court
having jurisdiction or by a governmental body, or, by any law or regulation, the
Holder agrees that it shall promptly notify the Company of the existence, terms
and circumstances surrounding such a request, so that the Company may seek an
appropriate protective order or other remedy, and the Holder will cooperate and
assist the Company in seeking such order or remedy if reasonably requested by
the Company. If disclosure of such information is required, the Holder agrees
that it will exercise reasonable efforts to obtain an order or other reliable
assurance that confidential treatment will be accorded to such of the disclosed
information which the Company so designates.
SECTION 13. Additional Definitions. The following are defined terms
used in this Note but not otherwise defined herein:
"ADDITIONAL COMMON STOCK" means all shares of Common Stock issued (or,
pursuant to subsection 4.2(b), deemed to be issued) by the Company after the
Initial Closing Date, other than shares of Common Stock issued or issuable (or,
pursuant to subsection 4.2(b), deemed to be issued) by the Company:
(i) upon conversion of (A) shares of Class B Common Stock, Class C
Common Stock, Series B Preferred Stock or Series C Preferred
Stock or exercise of Options that were outstanding as of the
Initial Closing Date in accordance with the terms of such
Class B Common Stock, Class C Common Stock, Series B Preferred
Stock or Series C Preferred Stock or Options as in effect on
such date and (B) any and all shares of Capital Stock issuable
upon any and all further conversions of such shares of Capital
Stock in accordance with their respective terms:
(ii) upon conversion of (A) the Notes into Applicable Shares in
accordance with its terms as in effect on such date, (B) such
Applicable Shares into shares of Capital Stock in accordance
with their respective terms and (C) any and all shares of
Capital Stock issuable upon any and all further conversions of
such shares of Capital Stock in accordance with their
respective terms;
(iii) upon conversion of (A) Applicable Shares issued as interest on
the Notes in accordance with their respective terms as in
effect on such date and (B) any and all shares of Capital
Stock issuable upon any and all further conversions of such
shares of Capital Stock in accordance with their respective
terms;
(iv) (A) upon exercise of the warrant issued to AOL dated August 7,
2000 to purchase 16,541,250 shares of Capital Stock in
accordance with its terms as in effect on such date and (B)
upon conversion of any and all shares of Capital Stock
issuable upon any and all further conversions of such shares
of Capital Stock in accordance with their respective terms;
(v) (A) as dividends on the Series B Preferred Stock, the Series C
Preferred Stock or the Series F Preferred Stock outstanding as
of the Initial Closing Date in accordance with the terms of
such Series B Preferred Stock, Series C Preferred Stock or
Series F Preferred Stock as in effect on such date, (B) as
dividends on the shares of Capital Stock issued as dividends
26
on the Applicable Shares and (C) upon conversion of any and
all shares of Capital Stock issuable upon any and all further
conversions of such shares of Capital Stock issued as such
dividends in accordance with their respective terms as in
effect on such date;
(vi) (A) as dividends on the Applicable Shares issued upon
conversion of or as interest on, Notes in accordance with
their respective terms as in effect on such date and (B) )
upon conversion or exchange of any and all shares of Capital
Stock issuable upon any and all further conversions or
exchanges of such shares of Capital Stock issued as such
dividends in accordance with their respective terms;
(vii) to officers, directors and employees of the Company pursuant
to a stock option plan approved by the Board; and
(viii) in any event for which adjustment is made pursuant to
subsections 4.2(b)(ii).
"AFFILIATE" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such specified Person, for so
long as such Person remains so associated to the specified Person.
"AOL" means America Online, Inc., a Delaware corporation.
"AOLTW AFFILIATED HOLDER" means each of AOLTW's Wholly Owned Affiliates
and Employees.
"APPLICABLE SHARES" means
(i) prior to the occurrence of a Class B Triggering Event (as
defined in the Certificate), if AOLTW or any AOLTW Affiliated
Holder is the Holder
(A) the Series F Preferred Stock, prior to the automatic
conversion of the Series F Preferred Stock into
Series B Preferred Stock pursuant to the certificate
of designation with respect to the Series F Preferred
Stock; and
(B) the Series B Preferred Stock, after the automatic
conversion of the Series F Preferred Stock into
Series B Preferred Stock pursuant to the certificate
of designation with respect to the Series F Preferred
Stock.
(ii) after the occurrence of a Class B Triggering Event, or if any
Person other than AOLTW or any AOLTW Affiliated Holder is the
Holder, the Class A Common Stock.
"ASSET SALE" means any Disposition (other than Dispositions permitted
under clauses (b), (c), (d), (e) and (f) of Section 6.8) of property, rights or
other assets or series of related Dispositions of property, rights or other
assets that yields aggregate gross proceeds to the Company or any of its
Subsidiaries (valued at the initial principal amount thereof in the case of
non-cash proceeds consisting of notes or other debt securities and valued at
fair market value in the case of other non-cash proceeds) in excess of $100,000.
"AUTHORIZED OFFICER" means, with respect to any Person, the Chief
Executive Officer, President, Vice-President, Treasurer, Secretary or Assistant
Secretary.
27
"BOARD" means the Board of Directors of the Company.
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in The City of
New York.
"CASH EQUIVALENTS" means (a) marketable direct obligations issued by,
or guaranteed by, the United States Government or any agency thereof or any
state, commonwealth or territory of the United States, by any political
subdivision or taxing authority of any such state, commonwealth or territory or
by any foreign government, the securities of which state, commonwealth,
territory, political subdivision, taxing authority or foreign government (as the
case may be); (b) certificates of deposit, time deposits, eurodollar time
deposits or overnight bank deposits; (c) commercial paper of an issuer rated at
least A-1 by Standard & Poor's Ratings Services ("S&P") or P-1 by βββββ'β
Investors Service, Inc. ("MOODY'S"), or carrying an equivalent rating by a
nationally recognized rating agency, if both of the two named rating agencies
cease publishing ratings of commercial paper issuers generally; (d) repurchase
obligations of any commercial bank satisfying the requirements of clause (b) of
this definition with respect to securities issued or fully guaranteed or insured
by the United States government; (e) securities with maturities of one year or
less from the date of acquisition; (f) shares of money market mutual or similar
funds which invest in assets satisfying the requirements of clauses (a) through
(e) of this definition; (g) instruments issued or guaranteed by the government
of Brazil or Mexico or any other jurisdiction where the Company or any of its
Subsidiaries conducts business (other than Argentina).
"CAPITAL STOCK" means, with respect to any Person at any time, any and
all shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of capital stock, partnership interests (whether
general or limited) or equivalent ownership interests in or issued by such
Person, and with respect to the Company includes, without limitation, any and
all shares of Class A Common Stock, Class B Common Stock, Class C Common Stock
par value $.01 per share of the Company, Series B Preferred Stock, Series C
Redeemable Convertible Preferred Stock of the Company and Series F Preferred
Stock.
"CAPITALIZED LEASE LIABILITIES" means, with respect to any Person, all
monetary obligations of such Person and its Subsidiaries under any leasing or
similar arrangement which have been (or, in accordance with GAAP, should be)
classified as capitalized leases, and for purposes of this Note the amount of
such obligations shall be the capitalized amount thereof, determined in
accordance with GAAP.
"CERTIFICATE" means the Restated Certificate of Incorporation of the
Company as in effect from time to time.
"CLOSING PRICE" shall mean, as of any date, with respect to (i) a share
of any Common Stock of the Company, the last sale price as of the most
recently-ended trading day for a share of Class A Common Stock of the Company as
quoted on any national securities exchange or on the NASDAQ National Market
System as reported in the Eastern Edition of The Wall Street Journal, or if the
Class A Common Stock shall not be listed on any such exchange or traded on any
such automated quotation system, the closing or latest reported price for Class
A Common Stock in the over-the-counter market as of the most recently-ended
trading day as reported by NASDAQ or another reputable reporting service (as
reasonably determined by the Board of Directors of the Company), or if the
shares of Class A Common Stock shall not be so reported on such trading day,
28
then the Closing Price per share of such Class A Common Stock shall be the fair
market value thereof as determined by an investment banking firm selected by
AOLTW and reasonably acceptable to the Company, and (ii) a share of preferred
stock of the Company which is convertible into Common Stock, the Closing Price
as of such date of the number of shares of Class A Common Stock into which such
share of preferred stock is convertible or ultimately convertible on such date.
"CODE" means the Internal Revenue Code of 1986, and the regulations
thereunder, in each case as amended, reformed or otherwise modified from time to
time.
"COMMON STOCK" means all common stock of the Company, including ,
without limitation, Class A Common Stock, Class B Common Stock and Class C
Common Stock, and any other shares, interests, participations or other
equivalents the value of which is related to the value of the common stock of
the Company.
"COMPETITOR" means any Person that competes or any Person whose
Affiliates compete in a material way with the Company or any of its operating
companies including, without limitation: βββββ.βββ, StarMedia, Yahoo, βββ.βββ,
TerraLycos, Universo Online, Prodigy and Ciudad Internet. For purposes of this
definition of "Competitor" only, Affiliate of any Person shall mean any other
Person that, directly or indirectly, controls, is under common control with or
is controlled by that Person. For purposes of this definition, "Control"
(including, with its correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. Notwithstanding the
above, "COMPETITOR" shall not include any Person (or any of such Person's
Affiliates) who does not compete in a material way with the Company or any of
its operating companies and who is primarily engaged in the business of making
private equity investments and that owns securities representing no more than
20% of the outstanding voting power of any Competitor so long as such Person
owning such securities has no more than the right to one director on the board
of directors (or comparable representative on a comparable governing body) of
such Competitor; but "COMPETITOR" shall include the Affiliates of such Person to
the extent any such Affiliate competes in a material way with the Company or any
of its operating companies.
"CONTENT" means either (i) text or (ii) multimedia information which
contains any combination of text, graphics, video, sound, still images or the
like in digital form or such other forms as may become available in the future.
"CONVERSION DATE" has the meaning specified in subsection 4.1(c).
"CONVERSION PRICE" means the price, subject to adjustment as provided
in subsection 4.2, at which Applicable Shares shall be deliverable upon
conversion of this Note at the Conversion Rate without the payment of additional
consideration by the Holder, which price shall initially be $3.624.
"CONVERSION RATE" means the rate, as of any Conversion Date, determined
by dividing (i) the portion of the Face Amount of this Note outstanding on such
date proposed to be converted into Applicable Shares outstanding on such date,
plus any accrued and unpaid Interest on the Face Amount of this Note proposed to
be converted into Applicable Shares, by (ii) the Conversion Price in effect as
of such date.
29
"CONVERSION RIGHTS" means the right of the Holder to convert this Note
into shares of Applicable Shares pursuant to Section 4.
"CONVERTIBLE SECURITIES" shall mean any evidences of indebtedness
(other than the Notes), shares of Capital Stock or other securities directly or
indirectly convertible into or exerciseable or exchangeable (including upon the
further conversion, exercise or exchange of underlying securities) for Common
Stock of the Company.
"DEFAULT" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event of
Default.
"DISPOSITION" (or similar words such as "DISPOSE") means any direct or
indirect sale, transfer, license, lease, contribution or other conveyance
(including by way of merger) of, or the granting of options, warrants or other
rights to, any of the Company's or its Subsidiaries' property, rights or other
assets (including accounts receivable and Capital Stock of Subsidiaries) to any
other Person (other than to the Company or any Subsidiary) in a single
transaction or series of related transactions.
"EMPLOYEE" shall mean, with respect to a Parent Entity as of any date,
any then current employee of such Parent Entity or of any Wholly Owned Affiliate
of such Parent Entity.
"EXEMPTED FINANCINGS" means, collectively, any issuance or sale any
shares of Capital Stock or other Securities (including pursuant to the exercise
or conversion of any rights, options, warrants or other rights) to officers,
directors and employees of the Company pursuant to a stock option plan approved
by the Board.
"FAIR MARKET VALUE" shall mean as of any date, with respect to (i) a
share of any Common Stock, the last closing price for a share of Class A Common
Stock of the Company as quoted on any national securities exchange or on the
NASDAQ National Market System for the 20 trading days ending on the second
trading day prior to such date as reported in the Eastern Edition of The Wall
Street Journal, or if the Class A Common Stock shall not be listed on any such
exchange or traded on any such automated quotation system, the closing or latest
reported price for Class A Common Stock in the over-the-counter market on each
trading day on which such shares are not so listed or traded as reported by
NASDAQ or another reputable reporting service (as reasonably determined by the
Board of Directors of the Company), or if the shares of Class A Common Stock
shall not be so reported on any of such trading days, then the Fair Market Value
per share of such Class A Common Stock shall be the fair market value thereof as
determined by an investment banking firm selected by AOLTW and reasonably
acceptable to the Company, and (ii) a share of preferred stock of the Company
which is convertible into Common Stock, the Fair Market Value of the number of
shares of Class A Common Stock into which such share of preferred stock is
convertible or ultimately convertible on such date; provided that if an event or
circumstance occurs during the 20 trading-day period used to determine the Fair
Market Value of a particular share of common or preferred stock and such event
or circumstance is addressed under the provisions of Section 4.2 hereof, then
the Fair Market Value of such share of common or preferred stock determined
under this definition shall be equitably adjusted for such event or circumstance
in a manner as nearly consistent with the application of the provisions Section
4 as may be practicable.
"FISCAL QUARTER" means a quarter ending on the last day of March, June,
September or December.
30
"FISCAL YEAR" means any period of twelve consecutive calendar months
ending on December 31; references to a Fiscal Year with a number corresponding
to any calendar year (E.G., the "2002 Fiscal Year") refer to the Fiscal Year
ending on December 31 of such calendar year.
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time.
"GUARANTEE OBLIGATIONS" of or by any Person (the "GUARANTOR") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or purporting
to guarantee any Indebtedness of any other Person (the "PRIMARY OBLIGOR") in any
manner, whether directly or indirectly, and including any obligation of the
guarantor, direct or indirect, (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or to purchase (or to
advance or supply funds for the purchase of) any security for the payment
thereof, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness;
PROVIDED that the term Guarantee Obligations shall not include endorsements for
collection or deposit in the ordinary course of business.
"HEDGING OBLIGATIONS" means, with respect to any Person, all
liabilities of such Person under currency exchange agreements, interest rate
swap agreements, interest rate cap agreements and interest rate collar
agreements, and all other agreements or arrangements designed to protect such
Person against fluctuations in interest rates or currency exchange rates.
"HOLDER" means the Person in whose name this Note (or any other Note as
the context may imply) is registered in the Note Register.
"HSR ACT" means the ββββ-βββββ-ββββββ Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"IMPERMISSIBLE QUALIFICATION" means any qualification or exception to
the opinion or certification of any independent public accountant as to any
financial statement of the Company (a) which is of a "going concern" or similar
nature or (b) which relates to the limited scope of examination of matters
relevant to such financial statement.
"INDEBTEDNESS" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money or
advances and all obligations of such Person evidenced by bonds, debentures,
notes or similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such Person;
(c) all Capitalized Lease Liabilities of such Person;
(d) net Hedging Obligations of such Person;
31
(e) whether or not so included as liabilities in accordance
with GAAP, all obligations of such Person to pay the deferred purchase price of
property or services (excluding (x) current accounts payable in the ordinary
course of business which are not overdue for a period of more than 90 days or,
if overdue for more than 90 days, as to which either (A) such amounts are
accrued on the books of such Person or (B) a dispute exists and adequate
reserves in conformity with GAAP have been established on the books of such
Person and (y) payment obligations of such Person pursuant to agreements entered
into in the ordinary course of business, which payment obligations are
contingent on another Person's satisfactory provision of goods and services),
and indebtedness of others secured by a Lien on property owned or being acquired
by such Person (including indebtedness arising under conditional sales or other
title retention agreements, but excluding operating leases or Synthetic Lease),
whether or not such indebtedness shall have been assumed by such Person or is
limited in recourse (but only to the extent of the lesser of the fair market
value of the property subject to such Lien and the amount of such indebtedness);
(f) obligations arising under Synthetic Leases; and
(g) all Guarantee Obligations of such Person in respect of any
of the foregoing. Notwithstanding the foregoing, Indebtedness shall not include
any obligations to make Tax Distributions. The Indebtedness of any Person shall
include the Indebtedness of any other Person (including any partnership in which
such Person is a general partner) to the extent such Person is liable therefor
as a result of such Person's ownership interest in or other relationship with
such Person, except to the extent the terms of such Indebtedness provide that
such Person is not liable therefore.
"INITIAL CLOSING DATE" means the date of the First Closing (as defined
in the Agreement).
"INTERACTIVE SERVICES" means the provision of Content or Communication
Services which may be provided through the use of any protocols, standards, or
platforms (including Internet or Internet derivative protocols, standards, and
platforms) for remote access by narrowband or broadband infrastructure,
including without limitation POTS, ISDN, ADSL, satellite, cable, fiber optics,
wireless and hybrid CD-ROM.
"INVESTMENT" by any Person means any direct or indirect (a) loan,
advance or other extension of credit or contribution to any other Person (by
means of transfer of cash or other property to others, payments for property or
services for the account or use of others, mergers or otherwise), (b) purchase
or acquisition of Capital Stock, bonds, notes, debentures or other securities
(including any option, warrant or other right to acquire any of the foregoing)
or evidences of Indebtedness issued by any other Person (whether by merger,
consolidation, amalgamation or otherwise and whether or not purchased directly
from the issuer of such securities or evidences of Indebtedness) or (c) purchase
or acquisition (in one transaction or a series of related transactions) of any
assets of any other Person. Investments shall exclude (i) extensions of trade
credit and advances to customers and suppliers and (ii) endorsements of
negotiable instruments for collection, in each case, to the extent made in the
ordinary course of business and in accordance with customary industry practice.
"LIEN" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in
(including sales of accounts), on or of such asset and (b) the interest of a
vendor or a lessor under any conditional sale agreement, capital lease or title
retention agreement (or any financing lease having substantially the same
economic effect as any of the foregoing, but excluding any operating leases)
relating to such asset.
32
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, assets (including intangible assets), operations, or condition
(financial or otherwise) of the Company and its Subsidiaries, taken as a whole.
"NET CASH PROCEEDS" means (a) in connection with any Asset Sale, the
proceeds thereof in the form of cash and Cash Equivalents (including any such
proceeds received by way of deferred payment of principal pursuant to a note or
installment receivable or purchase price adjustment receivable or otherwise, but
only as and when received) of such Asset Sale, net of attorneys' fees,
accountants' fees, investment banking fees and other customary fees and expenses
actually incurred in connection therewith and net of taxes paid or reasonably
estimated to be payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements) and (b) in
connection with any Financing, the proceeds thereof in the form of cash and Cash
Equivalents, net of attorneys' fees, accountants' fees, investment banking fees,
and other customary fees and expenses actually incurred in connection therewith
and net of taxes paid or reasonably estimated to be payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing issuance or sale of Capital Stock or other Securities).
"OPTION" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire Capital Stock of the Company or Convertible
Securities.
"OTHER INVESTMENT LAWS" means any non-U.S. national antitrust,
competition, merger or similar law, rule or regulation.
"PERMITTED BUSINESS" means (i) any business engaged in by any of the
Company and its Subsidiaries as of the Initial Closing Date, (ii) providing
Interactive Services, (iii) providing Content, management and related activities
on the AOL online service or any other AOL-branded property, including creating,
maintaining and managing for AOL, English and Spanish-language versions of a
mini-channel directed at the Hispanic audience in the United States, and (iv)
activities necessary or desirable to conduct any of the foregoing activities or
reasonably incidental thereto.
"PERSON" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, limited liability company, government or any
agency or political subdivision hereof or any other entity.
"REDEMPTION PRICE" means a redemption price for this Note or any
portion thereof equal to the sum of (x) 100% of the Face Amount thereof PLUS (y)
accrued but unpaid Interest thereon, in each case to and including the date of
redemption.
"RESTRICTED PAYMENT" means any dividend or other distribution (whether
in cash, securities or other property) with respect to any shares of any class
of Capital Stock of the Company or any Subsidiary, or any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such shares of Capital Stock of the Company
or any Subsidiary or any Option of the Company or any Subsidiary, except for
payments made pursuant to a stock plan approved by the Board.
"RESTRICTED SHARES" means the aggregate number of shares of Class A
Common Stock directly or indirectly (without duplication) (i) issuable or issued
upon conversion of Series F Preferred Stock that were issued as a dividend on
the Series F Preferred Stock or Series B Preferred Stock that were issued as a
33
dividend on the Series B Preferred Stock issuable or issued in respect of
interest on the Notes or upon conversion of the Notes (ii) issued in respect of
redemptions of Series F Preferred Stock in accordance with the terms of the
Series F Preferred Stock or Series B Preferred Stock in accordance with the
terms of the Series B Preferred Stock issuable or issued in respect of interest
on the Notes or upon conversion of the Notes (iii) issuable or issued upon
conversion of (x) PIK Notes, (y) shares of Series F Preferred Stock, Series B
Preferred Stock and Class B Common Stock that were issued as interest on the
Notes and (z) shares of Series F Preferred Stock, Series B Preferred Stock and
Class B Common Stock issuable upon conversion of the PIK Notes and (iv) issued
as interest on the Notes, in each case, for a value less than $3.020 per share
(as adjusted for stock splits, subdivisions and other changes in the Class A
Common Stock).
"REVENUES" means, for any applicable period, the revenues listed in the
most recently prepared consolidation statements of operations of the Company and
its Subsidiaries with respect to such period.
"RULE 144" means Rule 144 promulgated by the United States Securities
and Exchange Commission pursuant to the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission having substantially the same effect as such Rule.
"SECURITIES" means (i) any shares of the Company's Capital Stock or
other debt or equity securities of the Company, (ii) any security convertible,
with or without consideration, into any shares of the Company's Capital Stock or
other debt or equity securities of the Company (including any option to purchase
such a convertible security), (iii) any security carrying any warrant to or
right to subscribe to or purchase any shares of the Company's Capital Stock or
other debt or equity securities of the Company, and (iv) any warrant or right
convertible into or exercisable for, with or without consideration, any shares
of the Company's Capital Stock or other debt or equity securities of the
Company.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERIES B PREFERRED STOCK" means the Series B Redeemable Convertible
Preferred Stock, par value $.01 per share, of the Company.
"SERIES F PREFERRED STOCK" means the Series F Redeemable Convertible
Preferred Stock, par value $.01 per share, of the Company.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary of the Company which
together with all Subsidiaries of such Subsidiary, holds, owns or contributes,
as the case may be, 5% or more of the Revenues or assets (determined as of the
last day of the immediately preceding full fiscal quarter) of the Company and
its Subsidiaries, on a consolidated basis.
"SUBSIDIARY" of any Person means any corporation, association,
partnership, joint venture, limited liability company or other business entity
of which more than 50% of the total voting power of shares of Capital Stock or
other interests (including partnership and joint venture interests) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by, or the managing member, general partner or other
34
solely controlling affiliate of such corporation, association, partnership,
joint venture, limited liability company or other business entity is, (i) such
Person, (ii) such Person and one or more Subsidiaries of such Person or (iii)
one or more Subsidiaries of such Person. Unless otherwise specified herein, each
reference to a Subsidiary will refer to a Subsidiary of the Company.
"SYNTHETIC LEASE" means, as applied to any Person, any lease (including
leases that may be terminated by the lessee at any time, but excluding operating
leases) of any property (whether real, personal or mixed) (a) that is not a
capital lease in accordance GAAP and (b) in respect of which the lessee retains
or obtains ownership of the property so leased for federal income tax purposes,
other than any such lease under which that Person is the lessor.
"TAXES" means all income, stamp or other taxes, duties, levies,
imposts, charges, assessments, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any governmental
authority, and all interest, penalties or similar liabilities with respect
thereto.
"TAX DISTRIBUTION" means, with respect to any period, distributions
made to any Person by a Subsidiary of such Person on or with respect to income
and other Taxes, which distributions are not in excess of the tax liabilities
that would have been payable by such Subsidiary on a stand-alone basis, and
which are calculated in accordance with, and made no earlier than as required
by, the terms of the applicable organization document which require such
distribution.
"VOTING SECURITIES" means, with respect to any Person, Capital
Securities of any class or kind ordinarily having the power to vote for the
election of directors, managers or other voting members of the governing body of
such Person.
"WHOLLY OWNED SUBSIDIARY" means any Subsidiary all of the outstanding
Capital Stock of which (other than any director's qualifying shares or
investments by foreign nationals mandated by applicable laws) is owned directly
or indirectly by the Company.
"WHOLLY OWNED AFFILIATE" shall mean with respect to any Person any
other Person which is directly or indirectly wholly owned by such Person,
directly or indirectly wholly owns such Person or is directly or indirectly
wholly owned by the same Person as such Person, with such ownership to mean
possession of both 100% of the equity interest and 100% of the voting interest,
except for directors' qualifying shares, if any. Any Person that is directly or
indirectly wholly owned by the ββββββββ Family shall be deemed a Wholly Owned
Affiliate of ODC, and any Person that is directly or indirectly wholly owned by
AOLTW, shall be deemed a Wholly Owned Affiliate of AOLTW.
SECTION 14. Governing Law. THIS NOTE SHALL BE GOVERNED BY, CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
35
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed in its name by its authorized officer.
Dated: [_________] AMERICA ONLINE LATIN AMERICA, INC.
By:
-------------------------------------------
Name:
Title:
STATE OF NEW YORK
___________________, ss March __, 2002
On this _____ day of March 2002, before me appeared ____________________, who
being by me duly sworn did depose and say that he/she is the ___________________
of America Online Latin America, Inc. and that being duly authorized he/she did
execute the foregoing Note and that the foregoing Note is the free act and deed
of said corporation.
-------------------------------
Notary Public
My Commission expires:
36
EXHIBIT 1
FORM OF PIK NOTE
EXHIBIT 2
(TO BE EXECUTED BY REGISTERED HOLDER
IN ORDER TO CONVERT NOTE)
CONVERSION NOTICE
FOR
11% SENIOR CONVERTIBLE NOTE DUE 2007
The undersigned, as the Holder of the 11% Senior Convertible Note Due
2007 of America Online Latin America, Inc. (the "COMPANY"), in the outstanding
principal amount of U.S. $______________ (the "NOTE"), hereby (i) confirms that
that such Holder owns the Note free and clear of all Liens (as defined in the
Note) and (ii) elects to convert that portion of the outstanding principal
amount of, and accrued but unpaid Interest on (as defined in this Note) on, the
Note shown on the next page into shares of the Company's Applicable Shares (as
defined in the Note) according to the conditions of the Note, as of the date
written below. The undersigned hereby requests that share certificates for the
Applicable Shares to be issued to the undersigned pursuant to this Conversion
Notice be issued in the name of, and delivered to, the undersigned or its
designee as 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. No fee will be charged to the Holder for any conversion,
except for transfer taxes, if any.
Conversion Information: NAME OF ββββββ:
---------------------------
By:
---------------------------------------
Print Name:
Print Title:
Print Address of Holder:
------------------------------------------
------------------------------------------
Issue Applicable Shares to:
---------------
at:
---------------------------------------
------------------------------------------
Date of Conversion
------------------------------------------
Applicable Conversion Price
THE COMPUTATION OF THE NUMBER OF APPLICABLE SHARES TO BE
RECEIVED IS SET FORTH ON THE ATTACHED PAGE
Page 2 to Conversion Notice for:
---------------------------------------------
(Name of Holder)
COMPUTATION OF NUMBER OF APPLICABLE
SHARES TO BE RECEIVED
A. Face Amount of this Note converted: $___________
B. Accrued, unpaid Interest on the Face Amount
of this Note converted: $___________
TOTAL DOLLAR AMOUNT CONVERTED (TOTAL OF A + B) $___________
Conversion Price $___________
Number of Applicable Shares
= TOTAL DOLLAR AMOUNT CONVERTED
-----------------------------
Conversion Price
Number of Applicable Shares = ____________________
Please issue and deliver ___ new Note(s) in the following amounts:
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2
EXHIBIT 3
ADDRESS OF HOLDER
[INSERT ADDRESS]