Exhibit 2
MODIFICATION AGREEMENT
THIS MODIFICATION AGREEMENT (the "Agreement") is made effective as of
June 1, 2001 (the "Effective Date"), by and between ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ("Holder"),
and EasyLink Services Corporation ("EasyLink" or the "Company").
W I T N E S S E T H:
- - - - - - - - - -
A. Holder is the holder of a promissory note issued by EasyLink in
the original principal amount of $9,188,235 (the " Original
Note").
B. EasyLink has requested that Holder modify the Original Note as set
forth herein and forbear from exercising his rights and remedies
under the Original Note, and, subject to the terms and conditions
contained herein, Holder has agreed to do so for the period
provided herein.
NOW, THEREFORE, for and in consideration of the mutual covenants set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Representations of EasyLink. EasyLink hereby represents and warrants
to Holder as follows:
(a) Neither the execution of this Agreement, nor the consummation
of the transactions contemplated thereby, will constitute a violation of, or
will conflict with, any agreement entered into by EasyLink, or any order, decree
or judgment made against EasyLink.
(b) This Agreement has been duly authorized by all requisite
corporate action on the part of EasyLink, has been duly executed and delivered
by EasyLink and constitutes the vald and binding obligation of EasyLink
enforceable in accordance with its terms.
2. Forbearance and Waiver. Provided that EasyLink complies with all
terms and conditions of this Agreement, Holder hereby waives all current
defaults under the Original Note and defers all payments under the Original Note
until November 30, 2001, subject to Holder's right to revoke this waiver and
deferral at any time by giving written notice to Easylink that the waiver is
being terminated in the event that EasyLink fails to comply with its obligations
hereunder. All deferred payments under the Original Note will continue to accrue
interest at the late payment interest rate specified in the Original Note. Upon
termination of the waiver and deferral, all deferred payments, including
applicable interest, will be immediately due and payable.
Nothing in this paragraph or in any other provision of this Agreement
shall be deemed to be a waiver of any of Holder's rights under the Original Note
or otherwise available to Holder at law or in equity. In addition, nothing in
this Agreement shall be construed to release EasyLink from any liability under
the Original Note. Holder hereby expressly reserves all such remedies.
3. Restructure. If EasyLink consummates a restructuring arrangement
with AT&T Corp. with respect to its outstanding $35 million note and lessors
holding at least 90% of the outstanding obligations under EasyLink's existing
equipment leases (other than exceptions agreed to by Holder) on terms and
conditions, taken as a whole, that are not more favorable to any of such
creditors than the terms hereof (the "Other Creditor's Condition"), then the
Original Note shall be amended and restated in the form of the Note (as defined
below) and converted into the right to receive the Shares and the Warrants and
EasyLink shall enter the Registration Rights Agreement on the following terms
and conditions:
(a) EasyLink shall execute and deliver to Holder a promissory
note in the principal amount of $2,682,964 (the "Note"). The Note shall be in
the form attached hereto as Exhibit A.
(b) EasyLink shall deliver 2,682,964 shares of EasyLink's
Class A common stock, par value $.01 per share ("Shares") to Holder. Such number
of Shares shall be appropriately adjusted in the event the Company shall effect
a stock split, stock dividend or stock combination on or before the date of the
closing of the issuance of the Shares (the "Closing Date").
(c) EasyLink shall deliver warrants to purchase 2,682,964
shares of EasyLink's Class A common stock, par value $.01 per share
("Warrants"), to Holder. The Warrants shall be in the form attached hereto as
Exhibit B. The Warrants shall expire ten (10) years from the date of issue and
shall have an exercise price equal to the average of the closing prices of
EasyLink's Class A common stock over the 30 trading days ending two days before
the Closing Date. The initial exercise price under the Warrants and the number
of shares issuable upon exercise of the Warrants shall be appropriately adjusted
in the event the Company shall effect a stock split, stock dividend or stock
combination on or before the Closing Date and thereafter shall be subject to
adjustment as provided in the form of Warrants.
(d) EasyLink will execute, and Holder shall be entitled to
become a party to a registration rights agreement which will obligate EasyLink
to file within 45 days from the Closing Date a registration statement covering
the resale of the Shares and the shares issuable upon exercise of the Warrants
and to use all reasonable commercial efforts to cause such registration
statement to become effective as soon as practicable thereafter. The
Registration Rights Agreement shall be in the form attached hereto as Exhibit C.
(e) Holder has the right to examine all other agreements with
other creditors and to ensure that the Other Creditors Condition has been
satisfied. EasyLink shall deliver all agreements with other creditors to Holder.
4. Compliance with Act; Disposition of Shares of Common Stock.
(a) Compliance with Act. Holder of the Note, the Shares and
the Warrants (collectively, the "Securities"), by acceptance thereof, agrees
that the Securities, and the shares to be issued upon conversion of the Note or
payment of interest on the Note or prepayment of the Note (collectively, the
"Conversion Shares") or exercise of the Warrants (the "Warrant Shares") are
being acquired for investment and that such holder will not offer, sell or
otherwise dispose of the Securities, the Conversion Shares or the Warrant Shares
except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Act") or any applicable state
securities laws. Upon conversion of the Note or exercise of the Warrants, unless
the Conversion or Warrant Shares being acquired are registered under the Act and
any applicable state securities laws or an exemption from such registration is
available, Holder shall confirm in writing that the Conversion or Warrant Shares
so purchased are being acquired for investment and not with a view toward
distribution or resale in violation of the Act. The Securities, the Conversion
Shares and the Warrant Shares (unless registered under the Act and any
applicable state securities laws) shall be stamped or imprinted with a legend in
substantially the following form:
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" THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED."
The Company agrees that Berlack, Israels & ▇▇▇▇▇▇▇▇ LLP is acceptable
counsel to issue an opinion contemplated by the foregoing legend. Said legend
shall be removed by the Company, upon the request of a holder, at such time as
the restrictions on the transfer of the applicable security shall have
terminated. In addition, in connection with the issuance of the Securities and,
by acceptance of the Securities, Holder specifically represents to the Company,
as of the date hereof and upon the date of issuance of the Securities as
follows:
(1) Holder is aware of the Company's business affairs and
financial condition, and has acquired information about the Company
sufficient to reach an informed and knowledgeable decision to acquire
the Securities. Holder is acquiring the Securities for its own account
for investment purposes only and not with a view to, or for the resale
in connection with, any "distribution" thereof in violation of the Act.
(2) Holder understands that the Securities have not been
registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona
fide nature of Holder's investment intent as expressed herein.
(3) Holder further understands that the Securities must be
held indefinitely unless subsequently registered under the Act and
qualified under any applicable state securities laws, or unless
exemptions from registration and qualification are otherwise available.
Holder is aware of the provisions of Rule 144, promulgated under the
Act.
(4) Holder is an "accredited investor" as such term is defined
in Rule 501 of Regulation D promulgated under the Act.
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(b) Disposition of Securities, Conversion Shares or Warrant
Shares. With respect to any offer, sale or other disposition of any of the
Securities, the Conversion Shares or the Warrant Shares prior to registration
thereof, Holder agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of
Holder's counsel, or other evidence, if reasonably satisfactory to the Company,
to the effect that such offer, sale or other disposition may be effected without
registration or qualification (under the Act as then in effect or any federal or
state securities law then in effect) thereof and indicating whether or not under
the Act certificates for the Securities, the Conversion Shares or the Warrant
Shares to be sold or otherwise disposed of require any restrictive legend as to
applicable restrictions on transferability in order to ensure compliance with
such law. Upon receiving such written notice and reasonably satisfactory opinion
(it being understood that Berlack, Israels & ▇▇▇▇▇▇▇▇▇ LLP is acceptable counsel
to issue such an opinion) or other evidence, the Company, as promptly as
practicable but no later than fifteen (15) days after receipt of the written
notice, shall notify such holder that such holder may sell or otherwise dispose
of such Securities, Conversion Shares or Warrant Shares, all in accordance with
the terms of the notice delivered to the Company. If a determination has been
made pursuant to this Section 4(b) that the opinion of counsel for Holder or
other evidence is not reasonably satisfactory to the Company, the Company shall
so notify Holder promptly with details thereof after such determination has been
made. Notwithstanding the foregoing, the Securities, the Conversion Shares or
the Warrant Shares may, as to such federal laws, be offered, sold or otherwise
disposed of in accordance with Rule 144 under the Act, provided that the Company
shall have been furnished with such information as the Company may reasonably
request to provide a reasonable assurance that the provisions of Rule 144 have
been satisfied. Each certificate representing Securities, Conversion Shares or
Warrant Shares thus transferred (except a transfer pursuant to Rule 144) shall
bear a legend as to the applicable restrictions on transferability in order to
ensure compliance with such laws, unless in the aforesaid opinion of counsel for
Holder, such legend is not required in order to ensure compliance with such
laws. The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions. The Company agrees to take use reasonable
commercial efforts to take all actions reasonably necessary to enable the
Securities, the Conversion Shares and the Warrant Shares to be eligible for sale
under Rule 144 upon satisfaction of any required holding periods under Rule 144.
(c) Applicability of Restrictions. Neither any restrictions of
any legend described in the Securities, the Conversion Shares or the Warrant
Shares nor the requirements of Section 4(b) above shall apply to any transfer
of, or grant of a security interest in, the Securities, the Conversion Shares or
the Warrant Shares or any part hereof (i) to a partner of Holder if Holder is a
partnership or to a member of Holder if Holder is a limited liability company,
(ii) to a partnership of which Holder is a partner or to a limited liability
company of which Holder is a member, or (iii) to any affiliate of Holder if
Holder is a corporation; provided, however, in any such transfer, if applicable,
the transferee shall on the Company's request agree in writing to be bound by
the terms of this Agreement as if an original holder hereof.
5. Expenses. EasyLink agrees to pay all costs, fees, and
expenses of Holder in the enforcement of this Agreement.
6. Binding Effect; Integration. This Agreement shall be
binding upon the parties and their respective heirs, successors and assigns.
This Agreement, together with the Original Note and the Exhibits hereto,
constitutes the entire agreement and understanding among the parties relating to
the subject matter hereof, and supersedes all prior proposals, negotiations,
agreements, and understandings related to this matter.
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7. Severability. The provisions of this Agreement are intended
to be severable. If any of the provisions of this initial Agreement shall be
held invalid or unenforceable in whole or in part in any jurisdiction, such
provision shall, as to such jurisdiction, be ineffective to the extent of such
invalidity or enforceability without in any matter affecting the validity or
enforceability of such provision in any other jurisdiction or the remaining
provisions of this Agreement in any jurisdiction.
8. Governing Law. This Agreement shall be governed and
construed in accordance with the substantive laws of the State of New York,
without regard to the choice of law principles of such state.
9. Survival. All representations, warranties, covenants,
agreements, undertakings, waivers and releases contained herein shall survive
the Closing Date.
10. Amendment. No amendment, modification, rescission, waiver
or release of any provision of this Agreement shall be effective unless the same
shall be in writing and signed by the parties hereto.
11. Venue; Jurisdiction; Jury Trial Waiver. EasyLink and
Holder each hereby irrevocably: (1) consent to the jurisdiction of any state or
federal court sitting in the State of New York; (2) agree that venue shall be
proper in any court of competent jurisdiction located in the Borough of
Manhattan, the City and State of New York; and (3) waive the right to trial by
jury on any controversy arising out of or relating to this Agreement.
12. Notices. All notices and communications provided for
hereunder shall be in writing and sent (1) by telecopy if the sender on the same
day sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), or (2) by registered or certified mail with return
receipt requested (postage prepaid), or (3) by a recognized overnight delivery
service (with charges prepaid). Any such notice must be sent:
(a) if to Holder, to him at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, or at such other address as you or it shall have specified to
the Company in writing, or
(b) if to the Company, to the Company at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, to the attention of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
with a copy to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ at the same address, or at such other
address as the Company shall have specified to Holder in writing.
Notices under this Section 12 will be deemed given only when
actually received.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of
the effective date.
/s/ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
EASYLINK SERVICES CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Print Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Its: Chairman
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EXHIBIT A
THIS NOTE AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
EASYLINK SERVICES CORPORATION
PROMISSORY NOTE
$2,682,964 Effective as of June 1, 2001
FOR VALUE RECEIVED EASYLINK SERVICES CORPORATION, a Delaware
corporation ("EasyLink" or the "Company") promises to pay to ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
("Holder"), or his registered assigns, the principal sum of TWO MILLION SIX
HUNDRED EIGHTY TWO THOUSAND NINE HUNDRED SIXTY FOUR DOLLARS ($2,682,964), or
such lesser amount as shall equal the outstanding principal amount hereof,
together with interest from June 1, 2001 on the unpaid principal balance at the
rate specified herein, payable as provided herein.
The following is a statement of the rights of Holder and the conditions
to which this Note is subject, and to which Holder, by the acceptance of this
Note, agrees:
1. Definitions. As used in this Note, the following capitalized terms
have the following meanings:
"Affiliate," with respect to any Person, means (i) any director,
officer or employee of such Person, (ii) any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person, and (iii) any Person beneficially owning or holding 5% or more of
any class of voting securities of such Person or any corporation of which such
Person beneficially owns or holds, in the aggregate, 5% or more of any class of
voting securities. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. The term "Affiliate," when used herein without reference
to any Person shall mean an Affiliate of the Company.
"Bankruptcy Law" shall mean Title 11 of the United States Code (11
U.S.C. Section 101 et. seq.), as amended from time to time, or any similar
federal, state or foreign bankruptcy, insolvency or similar law.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which commercial banks in New York City are required or authorized to be
closed.
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Capital Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at the time any determination thereof is to be
made shall be the amount of the liability in respect of a capital lease that
would at such time be so required to be capitalized on a balance sheet in
accordance with GAAP.
"Closing Date" has the meaning given in Section 3(b) of the
Modification Agreement between the Company and ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ dated as of June
1, 2001.
"Common Stock" means Class A common stock, par value $.01 per share, of
Company or any shares into which such shares have been changed pursuant to any
recapitalization, merger, consolidation or similar event.
"Company" includes the corporation initially executing this Note and
any Person which shall succeed to or assume the obligations of Company as
permitted under this Note.
"Conversion Date" has the meaning given in Section 9.
"Conversion Price" has the meaning given in Section 9.
"Conversion Shares" has the meaning given in Section 9(c).
"Custodian" shall mean any custodian, receiver, trustee, assignee,
sequester, liquidator or similar official under any Bankruptcy Law.
"Daily Market Price" means the last reported per share sale price,
regular way on such day, or, if no sale takes place on such day, the average of
the reported closing per share bid and asked prices on such day, regular way, in
either case as reported on the Nasdaq National Market or, if the Common Stock is
not quoted or admitted to trading on such quotation system, on the principal
national securities exchange or quotation system on which such Common Stock may
be listed or admitted to trading or quoted, or, if not listed or admitted to
trading or quoted on any national securities exchange or quotation system, the
average of the closing per share bid and asked prices of such Common Stock on
the over-the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or similar generally accepted reporting service,
or, if not so available in such manner, as furnished by any Nasdaq member firm
selected from time to time by the Board of Directors of the Company for that
purpose, or, if not so available in such manner, as otherwise determined in good
faith by the Board of Directors of the Company.
"Event of Default" has the meaning given in Section 6 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Existing Debt" has the meaning given in Section 3(c) hereof.
"Fair Market Value" has the meaning given in Section 2 hereof.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"Guaranty" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment
of such indebtedness or obligation, or (ii) to maintain any working
capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make available
funds for the purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the
obligor under any Guaranty, the indebtedness or other obligations that are the
subject of such Guaranty shall be assumed to be direct obligations of such
obligor.
"Holder" shall mean the Person specified in the introductory paragraph
of this Note or any Person who shall at the time be the registered holder of
this Note.
"Indebtedness" with respect to any Person means, at any time, without
duplication,
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable arising in
the ordinary course of business but including all liabilities created
or arising under any conditional sale or other title retention
agreement with respect to any such property);
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(c) all liabilities appearing on its balance sheet in
accordance with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not it
has assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its
account by banks and other financial institutions (whether or not
representing obligations for borrowed money);
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of
a type described in any of clauses (a) through (f) hereof.
Indebtedness of any Person shall include all obligations of such Person
of the character described in clauses (a) through (g) to the extent such Person
remains legally liable in respect thereof notwithstanding that any such
obligation is deemed to be extinguished under GAAP.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person.
"Material Subsidiary" means any Subsidiary of Company which at the date
of determination is a "significant subsidiary" as defined in Rule 1-02(w) of
Regulation S-X under the Securities Act and the Exchange Act (as such Regulation
is in effect on the date hereof).
"Obligations" shall mean and include all loans, advances, debts,
liabilities and obligations, howsoever arising, owed by Company to Holder of
every kind and description (whether or not evidenced by any note or instrument
and whether or not for the payment of money), now existing or hereafter arising
under or pursuant to the terms of this Note and the other Operative Agreements,
including, all interest, fees, charges, expenses, attorneys' fees and costs and
accountants' fees and costs chargeable to and payable by Company hereunder and
thereunder, in each case, whether direct or indirect, absolute or contingent,
due or to become due, and whether or not arising after the commencement of a
proceeding under the Bankruptcy Law (including post-petition interest) and
whether or not allowed or allowable as a claim in any such proceeding.
"Operative Agreements" shall mean that certain Modification Agreement
dated as of June 1, 2001 by and between Holder and Company.
"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
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"Preferred Stock" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation."Securities Act" has the meaning given in
Section 5 hereof.
"Subsidiary" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if a 50%
or more interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of Company.
"Swaps" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"Wholly-Owned Subsidiary" means, at any time, any Subsidiary one
hundred percent (100%) of all of the equity interests (except directors'
qualifying shares) and voting interests of which are owned by any one or more of
the Company and the Company's other Wholly-Owned Subsidiaries at such time;
provided that in the event that the Company or its other Wholly-Owned
Subsidiaries do not own one hundred percent (100%) of the equity interests of a
Subsidiary, but the only other shareholders of such Subsidiary are Affiliates,
employees, officers and/or directors of the Company or another Wholly-Owned
Subsidiary, then such Subsidiary shall be deemed a Wholly-Owned Subsidiary for
purposes of this Agreement.
2. Interest. The unpaid principal balance hereof shall bear interest at
a rate equal to 12% per annum. Interest shall be payable quarterly commencing
three months after the Closing Date either in cash or, at Easylink's option, in
registered shares of Common Stock having a Fair Market Value equal to 120% of
the cash interest amount. Easylink shall provide written notice to Holder at
least thirty days prior to the scheduled interest payment date of whether it
intends to pay the dividend in cash or Common Stock. After receipt of such
notice, Holder may elect not to receive such payment in Common Stock by
providing written notice of such election to Easylink at least ten days prior to
the scheduled interest payment date. If Holder elects not to be paid in Common
Stock, Easylink shall have the option of either paying such interest in cash or
deferring such interest. All deferred interest shall accrue interest at the
specified interest rate, compounded monthly. The "Fair Market Value" of the
shares of Common Stock, for purposes of this Section, shall be equal to the
average of the closing trading prices of the Common Stock during the 30-day
period immediately prior to the prepayment date (or if on any day there shall be
no closing trading price then the closing trading price shall be deemed to be
the average of the closing bid and ask prices on such day) on the principal
market on which such securities are then traded. All accrued and unpaid deferred
interest shall be payable beginning on the second anniversary of the date of the
Note and quarterly thereafter with each scheduled payment of principal. Deferred
interest on any portion of principal prepaid shall be paid on the date of such
prepayment as provided herein. The late payment interest rate (which will be
applicable during any period in which an Event of Default exists or in the event
of a late payment) shall be 15% per annum.
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3. Scheduled Installments of Principal; Mandatory Prepayment. (a)
Principal shall be payable in thirteen quarterly payments of $206,382 (subject
to proportionate reduction to reflect prior prepayments) commencing on the
second anniversary of the Closing Date. Notwithstanding anything to the
contrary, the Note (that is, principal and accrued interest) shall be paid in
full by the fifth anniversary of the Closing Date.
(b) On or before June 30, 2002 or, if the Company shall give written
notice thereof on or before June 30, 2001, on or before July 30, 2002, up to
$1,341,482 of the Note plus accrued interest thereon shall be subject to
mandatory prepayment upon the fifth business day after the closing of one or
more equity or equity-linked financings in which the Company raises cash in an
aggregate cumulative amount in excess of $10,000,000 ("Eligible Financings"). In
such event, the Company shall prepay the Note in an amount (up to $1,341,482 of
principal plus accrued interest thereon) equal to 5.4% of the net proceeds in
excess of $10,000,000 received in one or more Eligible Financings. If $1,341,482
of principal plus accrued interest thereon is required to be prepaid, such
amount shall be repaid in full for $670,741 (plus 50% of accrued interest on the
original principal amount being prepaid prior to such reduction) in cash and the
number of shares of Common Stock having a "Fair Market Value" equal to $670,741
plus 50% of the accrued interest on the original principal amount being prepaid
prior to such reduction. If less than $1,341,482 of principal shall be
mandatorily prepaid at any time, the cash payment and number of shares issuable
in connection with the prepayment shall be reduced proportionately. The Company
shall give the Holder at least 30 days written notice in advance of such
prepayment. The "Fair Market Value" of the shares of Common Stock, for purposes
of this subparagraph (b), shall be equal to the average of the closing trading
prices of the Common Stock d during the 30-day period immediately prior to the
prepayment date (or if on any day there shall be no closing trading price then
the closing trading price shall be deemed to be the average of the closing bid
and ask prices on such day) on the principal market on which such securities are
then traded.
4. Optional Prepayments. At any time and from time to time on or before
June 30, 2002, the Company may prepay at its option up to $1,341,482 of the Note
and accrued interest thereon upon the same terms and conditions (that is, cash
and shares of Common Stock, etc.) as set forth above in Section 3(b) for
mandatory prepayment. At any time and from time to time, the Company may prepay
all or a portion of the outstanding principal hereof, together with accrued
interest hereon, in cash so long as the Company gives the Holder at least 30
days irrevocable written notice in advance of such prepayment. The Company's
decision to prepay this Note will not, in any way, affect the Holder's right of
conversion on or before the prepayment as provided in Section 9 herein.
6
5. Representations and Warranties of Company. The Company hereby
represents and warrants to the Holder that:
(a) This Note, when issued, sold and delivered for the
consideration provided for herein, will be duly and validly issued, fully paid
and nonassessable.
(b) The offer and sale of this Note solely to Holder is exempt
from the registration and prospectus delivery requirements of the Securities Act
of 1933, as amended (the "Securities Act"), and the securities registration and
qualification requirements of the currently effective provisions of the
securities laws of all applicable states.
(c) The Conversion Shares and the shares issuable in payment
of interest have been duly authorized and reserved and, if and when issued upon
conversion of the Note, in accordance with the terms hereof, will be validly
issued, fully paid and non-assessable, and the issuance of the Conversion Shares
will not be subject to any preemptive or similar rights.
6. Events of Default. An "Event of Default" shall exist if any of the
following conditions or events shall occur and be continuing:
(a) Company defaults in the payment of any interest on the
Note when the same becomes due and payable and the default continues for a
period of 30 days; or
(b) Company defaults in the payment of any principal of the
Note when the same becomes due and payable, whether at maturity or otherwise; or
(c) Company breaches in any material respect any
representation or warranty contained in this Note or the any of the Operative
Agreements, or fails to observe or perform any other covenant or agreement
contained in this Note or the Operative Agreements required to be performed by
it, and such breach is not cured or such failure continues for a period of 60
days after the receipt of written notice by Company from the Holder stating that
such notice is a "Notice of Default"; or
(d) a default under any credit agreement, mortgage, indenture
or instrument under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by Company or any Material
Subsidiary (or the payment of which is subject to a Guaranty by Company or any
of Company's Material Subsidiaries), whether such Indebtedness or Guarantee
exists on the date of this Note or is created hereafter, which default (i) is
caused by a failure to pay when due any principal of or interest on such
Indebtedness within the grace period, if any, provided for in such Indebtedness
(which failure continues beyond any applicable grace period) (a "Payment
Default") or (ii) results in the acceleration of such Indebtedness prior to its
express maturity (without such acceleration being rescinded or annulled) and, in
each case, the principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness under which there is a Payment
Default or the maturity of which has been so accelerated, aggregates $15,000,000
or more and after written receipt by Company from the Holder stating that such
notice is a "Notice of Default"; or
7
(e) a final, non-appealable judgment or final non-appealable
judgments (other than any judgment as to which a reputable insurance company has
accepted full liability) for the payment of money are entered by a court or
courts of competent jurisdiction against Company or any Material Subsidiary and
remain unstayed, unbonded or undischarged for a period (during which execution
shall not be effectively stayed) of 60 days, provided that the aggregate of all
such judgments exceeds $5,000,000; or
(f) Company or any Material Subsidiary pursuant to or within
the meaning of any Bankruptcy Law: (i) commences a voluntary case or proceeding;
or (ii) consents to the entry of an order for relief against Company or any
Material Subsidiary in an involuntary case or proceeding; or (iii) consents to
the appointment of a Custodian of Company or any Material Subsidiary or for all
or any substantial part of its property; or (iv) makes a general assignment for
the benefit of its creditors; or (v) take corporate or similar action to effect
any of the foregoing; or
(g) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (i) is for relief against Company or any
Material Subsidiary in an involuntary case or proceeding; or (ii) appoints a
Custodian of Company or any Material Subsidiary or for all or any substantial
part of the property of Company or any Material Subsidiary; or (iii) orders the
liquidation of Company or any Material Subsidiary; and in each case referred to
in this subsection (g) the order or decree remains unstayed and in effect for 60
days.
7. Rights of Holder upon Default.
(a) If an Event of Default with respect to Company described in Section
6(f) or (g) has occurred (other than an Event of Default described in clause (i)
of Section 6(f) or described in clause (v) of Section 6(f) by virtue of the fact
that such clause encompasses clause (i) of Section 6(f)), the Note shall
automatically become immediately due and payable. If any other Event of Default
has occurred and is continuing, the Holder may at any time at its option, by
notice or notices to Company, declare the Note to be immediately due and
payable.
(b) Notwithstanding the foregoing, if (i) any Event of Default
described in Section 6 (a) or (b) has occurred and is continuing, the Holder of
the Note may at any time, at its option, by notice or notices to Company,
declare the Note to be immediately due and payable; or (ii) any Event of Default
described in Section 6(d) has occurred and is continuing and the Payment Default
giving rise to such Event of Default is cured or the acceleration giving rise to
such Event of Default is annulled or rescinded within 30 days after receipt of
written notice of such Event of Default by Company from the Holder of the Note
stating that such notice is a "Notice of Default," then such Event of Default
and any declaration under Section 7(a) above shall be deemed automatically
annulled and rescinded. Upon the Note becoming due and payable under this
Section 7, whether automatically or by declaration, the Note will forthwith
mature and the entire unpaid principal amount hereof, plus all accrued and
unpaid interest thereon, shall all be immediately due and payable, in each and
every case without presentment, demand, protest or further notice, all of which
are hereby waived.
8
(c) If any Default or Event of Default has occurred and is continuing,
and irrespective of whether the Note has become or has been declared immediately
due and payable under Section 7, the Holder may proceed to protect and enforce
its rights by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in the
Operative Agreements, or for an injunction against a violation of any of the
terms hereof or thereof, or in aid of the exercise of any power granted hereby
or thereby or by law or otherwise.
8. Representations and Warranties of Holder. By its acceptance of this
Note, the Holder makes the following representations and warranties:
(a) The Holder is aware of Company's business affairs and
financial condition, and has acquired information about Company sufficient to
reach an informed and knowledgeable decision to acquire this Note. The Holder is
acquiring this Note for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution" thereof
in violation of the Securities Act.
(b) The Holder understands that this Note, and the securities
into which it is convertible, have not been registered under the Securities Act
in reliance upon a specific exemption therefrom, which exemption depends upon,
among other things, the bona fide nature of the Holder's investment intent as
expressed herein.
(c) The Holder further understands that this Note, and the
securities into which it is convertible, must be held indefinitely unless
subsequently registered under the Securities Act and qualified under any
applicable state securities laws, or unless exemptions from registration and
qualification are otherwise available. The Holder is aware of the provisions of
Rule 144, promulgated under the Securities Act.
(d) The Holder is an "accredited investor" as such term is
defined in Rule 501 of Regulation D promulgated under the Securities Act.
9. Conversion.
9.1 Conversion Privilege. The Holder may convert the principal
amount thereof (or any portion thereof that is an integral multiple of
$1,000) into fully paid and nonassessable shares of Class A common
stock, par value $.01 per share, of Company at any time prior to the
close of business on the Business Day immediately preceding the final
maturity date of the Note at the Conversion Price then in effect,
except that, with respect to the principal amount of the Note that is
subject to optional or mandatory prepayment, such conversion right
shall terminate at the close of business on the Business Day
immediately preceding the prepayment date (unless Company shall default
in making the prepayment, including interest, when it becomes due, in
which case the conversion right shall terminate at the close of
business on the date on which such default is cured).
9
The number of shares of Class A common stock issuable upon
conversion of a Note is determined by dividing the principal amount of
the Note so converted by the Conversion Price in effect on the
Conversion Date.
"Conversion Price" means ONE UNITED STATES DOLLAR ($1.00), as
the same may be adjusted from time to time as provided in this Section.
Provisions of this Agreement that apply to conversion of all
of the Note also apply to conversion of a portion of it. The Holder is
not entitled to any rights of a holder of Class A common stock until
such holder has converted such Note into Class A common stock, and then
only to the extent that such Note is deemed to have been converted into
Class A common stock under this Section 9.1.
9.2 Conversion Procedure
To convert the Note, the Holder must (1) complete and sign a
notice of election to convert substantially in the form attached hereto
(or complete and manually sign a facsimile thereof) and deliver such
notice to Company, (2) surrender the Note to Company, (3) furnish
appropriate endorsements or transfer documents if required by Company
and (4) pay any transfer or similar tax, if required by Company in
accordance with Section 9.4 hereof. The date on which the Holder
satisfies all of those requirements is the conversion date (the
"Conversion Date"). As promptly as practicable on or after the
Conversion Date, Company shall issue and deliver to the Holder a
certificate or certificates for the number of whole shares of Class A
common stock issuable upon the conversion and a check or other payment
for any fractional share in an amount determined pursuant to Section
9.3. The Person in whose name the certificate is registered shall
become the stockholder of record on the Conversion Date and, as of such
date, such Person's rights as a holder of a Note with respect to the
converted Note shall cease and such converted Note shall no longer be
deemed outstanding; provided, however, that, except as otherwise
provided in this Section 9.2, no surrender of a Note on any date when
the stock transfer books of Company shall be closed shall be effective
to constitute the Person entitled to receive the shares of Class A
common stock upon such conversion as the stockholder of record of such
shares of Class A common stock on such date, but such surrender shall
be effective to constitute the Person entitled to receive such shares
of Class A common stock as the stockholder of record thereof for all
purposes at the close of business on the next succeeding day on which
such stock transfer books are open; provided further, however, that
such conversion shall be at the Conversion Price in effect on the date
that such Note shall have been surrendered for conversion, as if the
stock transfer books of Company had not been closed.
No payment or adjustment will be made for accrued and unpaid
interest on a converted Note or for dividends or distributions on
shares of Class A common stock issued upon conversion of a Note, except
that, if the Holder surrenders the Note for conversion after the close
of business on any record date for the payment of an installment of
interest and prior to the opening of business on the next succeeding
interest payment date, then, notwithstanding such conversion, accrued
and unpaid interest payable on the Note on such interest payment date
shall be paid on such interest payment date to the person who was the
holder of the Note (or one or more predecessor Notes) at the close of
business on such record date. Holders of Class A common stock issued
upon conversion will not be entitled to receive any dividends payable
to holders of Class A common stock as of any record time before the
close of business on the Conversion Date.
10
Upon surrender of a Note that is converted in part, Company
shall issue to the Holder a new Note equal in principal amount to the
unconverted portion of the Note surrendered.
9.3 Fractional Shares. Company will not issue fractional
shares of Class A common stock upon conversion of a Note. In lieu
thereof, Company will pay an amount in cash based upon the Daily Market
Price of the Class A common stock on the trading day prior to the
Conversion Date.
9.4. Taxes on Conversion. The issuance of certificates for
shares of Class A common stock upon the conversion of the Note shall be
made without charge to the converting Holder for such certificates or
for any tax in respect of the issuance of such certificates, and such
certificates shall be issued in the respective names of, or in such
names as may be directed by, the H or Holders of the converted Note;
provided, however, that in the event that certificates for shares of
Class A common stock are to be issued in a name other than the name of
the Holder of the Note converted, such Note, when surrendered for
conversion, shall be accompanied by an instrument of assignment or
transfer, in form satisfactory to Company, duly executed by the
registered holder thereof or his duly authorized attorney; and provided
further, however, that Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificates in a name other than
that of the Holder of the converted Note, and Company shall not be
required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to
Company the amount of such tax or shall have established to the
satisfaction of Company that such tax has been paid or is not
applicable.
9.5. Company to Provide Stock. The Company shall at all times
reserve and keep available, free from preemptive rights, out of its
authorized but unissued Class A common stock, solely for the purpose of
issuance upon conversion of the Note as herein provided, a sufficient
number of shares of Class A common stock to permit the conversion of
the Note for shares of Class A common stock.
The Company shall take such action from time to time as shall
be necessary so that par value of the Class A common stock shall at all
times be equal to or less than the Conversion Price then in effect.
The Company shall from time to time take all action necessary
so that the Class A common stock which may be issued upon conversion of
the Note or in payment of interest on the Note, immediately upon their
issuance (or, if such Class A common stock is subject to restrictions
on transfer under the Securities Act, upon their resale pursuant to an
effective registration statement or in a transaction pursuant to which
the certificate evidencing such Class A common stock shall no longer
bear a restrictive common stock legend), will be listed on the Nasdaq
National Market or such other interdealer quotation system and market
or principal securities exchanges, if any, on which other shares of
Class A common stock of Company are then listed or quoted.
11
9.6. Adjustment of Conversion Price. The Conversion Price
shall be subject to adjustment from time to time as follows:
(a) In case Company shall (i) pay a dividend in
shares of Class A common stock to holders of Class A common stock (or
any event treated as such for U.S. Federal income tax purposes), (ii)
make a distribution in shares of Class A common stock to holders of
Class A common stock (or any event treated as such for U.S. Federal
income tax purposes), (iii) subdivide its outstanding shares of Class A
common stock into a greater number of shares of Class A common stock or
(iv) combine its outstanding shares of Class A common stock into a
smaller number of shares of Class A common stock, the Conversion Price
in effect immediately prior to such action shall be adjusted so that
the holder of this Note thereafter surrendered for conversion shall be
entitled to receive the number of shares of Class A common stock which
he would have owned immediately following such action had the Note been
converted immediately prior thereto. Any adjustment made pursuant to
this subsection (a) shall become effective immediately after the record
date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision or combination.
(b) In case Company shall issue rights, options or
warrants to all holders of Class A common stock entitling them to
subscribe for or purchase shares of Class A common stock (or securities
convertible into Class A common stock) at a price per share (or having
a conversion price per share) less than the Current Market Price per
share (as determined pursuant to subsection (f) below) of the Class A
common stock on the record date for determining the holders of the
Class A common stock entitled to receive such rights, options or
warrants, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in
effect immediately prior to such record date by a fraction of which the
numerator shall be the number of shares of Class A common stock
outstanding as of the close of business on such record date plus the
number of shares of Class A common stock which the aggregate offering
price of the total number of shares of Class A common stock so offered
(to the holders of outstanding Class A common stock) for subscription
or purchase (or the aggregate conversion price of the convertible
securities so offered) would purchase at such Current Market Price (as
determined pursuant to subsection (f) below), and of which the
denominator shall be the number of shares of Class A common stock
outstanding on such record date plus the number of additional shares of
Class A common stock so offered for subscription or purchase (or into
which the convertible securities so offered are convertible). Such
adjustments shall become effective immediately after such record date.
For the purposes of this subsection (b), the number of shares of Class
A common stock at any time outstanding shall not include shares held in
the treasury of Company but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of such Class
A common stock. The Company shall not issue any rights, options or
warrants in respect of shares of Class A common stock held in the
treasury of Company. In determining whether any rights, options or
warrants entitle the holders to subscribe for or purchase shares of
Class A common stock at less than the Current Market Price, and in
determining the aggregate offering price of such shares of Class A
common stock, there shall be taken into account any consideration
received by Company for such rights, warrants, or options, the value of
such consideration, if any, other than cash, to be determined by the
Board of Directors.
12
(c) In case Company shall distribute to all holders
of Class A common stock shares of capital stock of Company (other than
Class A common stock), evidences of indebtedness, cash, rights, options
or warrants entitling the holders thereof to subscribe for or purchase
securities (other than rights, options or warrants described in
subsection (b) above) or other assets (including securities of Persons
other than Company but excluding (i) dividends or distributions paid
exclusively in cash except as described in subsection (d) below, (ii)
dividends and distributions described in subsection (a) above and (iii)
distributions in connection with the consolidation, merger or transfer
of assets covered by Section 9.11), then in each such case the
Conversion Price shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the date of such distribution by a fraction of
which the numerator shall be the Current Market Price (determined as
provided in subsection (f) below) of the Class A common stock on the
record date mentioned below less the fair market value on such record
date (as determined by the Board of Directors, whose determination
shall be conclusive evidence of such fair market value and described in
a board resolution) of the portion of the evidences of indebtedness,
shares of capital stock, cash, rights, options, warrants or other
assets so distributed applicable to one share of Class A common stock
(determined on the basis of the number of shares of the Class A common
stock outstanding on the record date), and of which the denominator
shall be such Current Market Price of the Class A common stock. Such
adjustment shall become effective immediately after the record date for
the determination of the holders of Class A common stock entitled to
receive such distribution. Notwithstanding the foregoing, in case
Company shall distribute rights, options or warrants to subscribe for
additional shares of Company's capital stock (other than rights,
options or warrants referred to in subsection (b) above) ("Rights") to
all holders of Class A common stock, Company may, in lieu of making any
adjustment pursuant to the foregoing provisions of this subsection (c)
of Section 9.6 make proper provision so that the holder of the Note who
converts the Note (or any portion thereof) after the record date for
such distribution and prior to the expiration or redemption of the
Rights shall be entitled to receive upon such conversion, in addition
to the shares of Class A common stock issuable upon such conversion
(the "Conversion Shares"), a number of Rights to be determined as
follows: (i) if such conversion occurs on or prior to the date for the
distribution to the holders of Rights of separate certificates
evidencing such Rights (the "Distribution Date"), the same number of
Rights to which a holder of a number of shares of Class A common stock
equal to the number of Conversion Shares is entitled at the time of
such conversion in accordance with the terms and provisions of and
applicable to the Rights; and (ii) if such conversion occurs after the
Distribution Date, the same number of Rights to which a holder of the
number of shares of Class A common stock into which the principal
amount of the Note so converted was convertible immediately prior to
the Distribution Date would have been entitled on the Distribution Date
in accordance with the terms and provisions of and applicable to the
Rights.
13
(d) In case Company shall, by dividend or otherwise,
at any time make a distribution to all holders of its Class A common
stock exclusively in cash (including any distributions of cash out of
current or retained earnings of Company but excluding any cash that is
distributed as part of a distribution requiring a Conversion Price
adjustment pursuant to subsection (c) of this Section) in an aggregate
amount that, together with the sum of (x) the aggregate amount of any
other distributions made exclusively in cash to all holders of Class A
common stock within the 12 months preceding the date fixed for
determining the stockholders entitled to such distribution (the
"Distribution Record Date") and in respect of which no Conversion Price
adjustment pursuant to subsection (c) or (e) of this Section or this
subsection (d) has been made plus (y) the aggregate amount of all
Excess Payments in respect of any tender offers or other negotiated
transactions by Company or any of its Subsidiaries for Class A common
stock concluded within the 12 months preceding the Distribution Record
Date and in respect of which no Conversion Price adjustment pursuant to
subsections (c) or (e) of this Section or this subsection (d) has been
made, exceeds 12 1/2% of the product of the Current Market Price per
share (determined as provided in subsection (f) of this Section) of the
Class A common stock on the Distribution Record Date multiplied by the
number of shares of Class A common stock outstanding on the
Distribution Record Date (excluding shares held in the treasury of
Company), the Conversion Price shall be reduced so that the same shall
equal the price determined by multiplying such Conversion Price in
effect immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this subsection (d) by a fraction of which
the numerator shall be the Current Market Price per share (determined
as provided in subsection (f) of this Section) of the Class A common
stock on the Distribution Record Date less the sum of the aggregate
amount of cash and the aggregate Excess Payments so distributed, paid
or payable within such 12-month period (including, without limitation,
the distribution in respect of which such adjustment is being made)
applicable to one share of Class A common stock (which shall be
determined by dividing the sum of the aggregate amount of cash and the
aggregate Excess Payments so distributed, paid or payable with respect
to outstanding shares of Class A common stock within such 12 months
(including, without limitation, the distribution in respect of which
such adjustment is being made) by the number of shares of Class A
common stock outstanding on the Distribution Record Date) and the
denominator shall be such Current Market Price per share (determined as
provided in subsection (f) of this Section) of the Class A common stock
on the Distribution Record Date, such reduction to become effective
immediately prior to the opening of business on the day following the
Distribution Record Date.
14
(e) In case a tender offer or other negotiated
transaction made by Company or any Subsidiary of Company for all or any
portion of the Class A common stock shall be consummated, if an Excess
Payment is made in respect of such tender offer or other negotiated
transaction and the aggregate amount of such Excess Payment, together
with the sum of (x) the aggregate amount of any distributions, by
dividend or otherwise, to all holders of the Class A common stock made
in cash (including any distributions of cash out of current or retained
earnings of Company) within the 12 months preceding the date of payment
of such current negotiated transaction consideration or expiration of
such current tender offer, as the case may be (the "Purchase Date"),
and as to which no adjustment in the Conversion Price pursuant to
subsection (c) or (d) of this Section or this subsection (e) has been
made plus (y) the aggregate amount of all Excess Payments in respect of
any other tender offers or other negotiated transactions by Company or
any of its Subsidiaries for Class A common stock concluded within the
12 months preceding the Purchase Date and in respect of which no
adjustment in the Conversion Price pursuant to subsection (c) or (d) of
this Section or this subsection (e) has been made, exceeds 12 1/2% of
the product of the Current Market Price per share (determined as
provided in subsection (f) of this Section) of the Class A common stock
on the Purchase Date multiplied by the number of shares of Class A
common stock outstanding on the Purchase Date (including any tendered
shares but excluding any shares held in the treasury of Company), the
Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying such Conversion Price in effect
immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this subsection (e) by a fraction of which
the numerator shall be the Current Market Price per share (determined
as provided in subsection (f) of this Section) of the Class A common
stock on the Purchase Date less the sum of the aggregate amount of cash
and the aggregate Excess Payments so distributed, paid or payable
within such 12 month period (including, without limitation, the Excess
Payment in respect of which such adjustment is being made) applicable
to one share of Class A common stock (which shall be determined by
dividing the sum of the aggregate amount of cash and the aggregate
Excess Payments so distributed, paid or payable with respect to
outstanding shares of Class A common stock within such 12 months
(including, without limitation, the Excess Payment in respect of which
such adjustment is being made) by the number of shares of Class A
common stock outstanding on the Purchase Date) and the denominator
shall be such Current Market Price per share (determined as provided in
subsection (f) of this Section) of the Class A common stock on the
Purchase Date, such reduction to become effective immediately prior to
the opening of business on the day following the Purchase Date.
(f) The "Current Market Price" per share of Class A
common stock on any date shall be deemed to be the average of the Daily
Market Prices for the shorter of (i) 30 consecutive Business Days
ending on the last full Trading Day on the exchange or market referred
to in determining such Daily Market Prices prior to the time of
determination or (ii) the period commencing on the date next succeeding
the first public announcement of the issuance of such rights or such
warrants or such other distribution or such tender offer or other
negotiated transaction through such last full Trading Day on the
exchange or market referred to in determining such Daily Market Prices
prior to the time of determination.
15
(g) "Excess Payment" means the excess of (i) the
aggregate of the cash and fair market value (as determined by the Board
of Directors, whose determination shall be conclusive evidence of such
fair market value and described in a board resolution) of other
consideration paid by Company or any of its Subsidiaries with respect
to the shares acquired in a tender offer or other negotiated
transaction over (ii) the Daily Market Price on the Trading Day
immediately following the completion of the tender offer or other
negotiated transaction multiplied by the number of acquired shares.
(h) The Company reserves the right to make such
reductions in the Conversion Price in addition to those required in the
foregoing provisions as it considers to be advisable in order that any
event treated for United States federal income tax purposes as a
dividend of stock or stock rights will not be taxable to the
recipients.
(i) The Company from time to time may decrease the
Conversion Price by any amount for any period of at least 20 days
(which decrease is irrevocable during such period), in which case
Company shall give at least 15 days' notice of such decrease, if the
Board of Directors has made a determination that such decrease would be
in the best interests of Company, which determination shall be
conclusive; provided however that in no case shall Company decrease the
Conversion Price to less than 80% of the Current Market Price.
(j) In any case in which this Section 9.6 shall
require that an adjustment be made immediately following a record date
for an event, Company may elect to defer, until such event, issuing to
the Holder of the Note converted after such record date the shares of
Class A common stock and other capital stock of Company issuable upon
such conversion over and above the shares of Class A common stock and
other capital stock of Company issuable upon such conversion on the
basis of the Conversion Price prior to adjustment; and, in lieu of the
shares the issuance of which is so deferred, Company shall issue or
cause its transfer agents to issue due bills or other appropriate
evidence of the right to receive such shares.
9.7. No Adjustment. No adjustment in the Conversion Price
shall be required until cumulative adjustments amount to 1.0% or more
of the Conversion Price as last adjusted; provided, however, that any
adjustments which by reason of this Section 9.7 are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 9 shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case
may be. No adjustment need be made for rights to purchase Class A
common stock pursuant to a Company plan for reinvestment of dividends
or interest. No adjustment need be made for a change in the par value
or no par value of the Class A common stock.
9.8. Other Adjustments. (a) In the event that, as a result of
an adjustment made pursuant to Section 9.6 above, the Holder of the
Note thereafter surrendered for conversion shall become entitled to
receive any shares of capital stock of Company other than shares of its
Class A common stock, thereafter the Conversion Price of such other
shares so receivable upon conversion of the Note shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Class A
common stock contained in this Section 9.
16
(b) In the event that any shares of Class A common
stock issuable upon exercise of any of the rights, options or warrants
referred to in Section 9.6(b) and Section 9.6(c) hereof are not
delivered prior to the expiration of such rights, options, or warrants,
the Conversion Price shall be readjusted to the Conversion Price which
would otherwise have been in effect had the adjustment made upon the
issuance of such rights, options or warrants been made on the basis of
delivery of only the number of such rights, options and warrants which
were actually exercised.
(c) In any case in which Section 9.6 shall require
that an adjustment be made immediately following a record date for a
dividend or distribution and the dividend or distribution does not
occur, the Conversion Price shall again be adjusted to the Conversion
Price that would then be in effect if such dividend or distribution had
not been declared.
9.9. Notice of Adjustment. Whenever the Conversion Price is
adjusted, Company shall promptly mail to the Holder a notice of the
adjustment. Such notice shall briefly state the facts requiring the
adjustment and the manner of computing it and shall be signed by a
Senior Financial Officer.
9.10. Notice of Certain Transactions. In the event that: (a)
Company takes any action which would require an adjustment in the
Conversion Price; (b) Company takes any action described in Section
9.11; or (c) there is a dissolution or liquidation of Company; Company
shall mail to the Holder a notice stating the proposed record or
effective date, as the case may be. The Company shall mail the notice
at least 15 days before such date; however, failure to mail such notice
or any defect therein shall not affect the validity of any transaction
referred to in clause (a), (b) or (c) of this Section 9.10.
17
9.11. Effect of Reclassifications, Consolidations, Mergers,
Continuances or Sales on Conversion Privilege. If any of the following
shall occur, namely: (i) any reclassification or change of outstanding
shares of Class A common stock issuable upon conversion of the Note
(other than a change in par value, or from par value to no par value,
or from no par value to par value, or as a result of a subdivision or
combination), (ii) any consolidation or merger to which Company is a
party other than a merger in which Company is the continuing
corporation and which does not result in any reclassification of, or
change (other than a change in name, or par value, or from par value to
no par value, or from no par value to par value or as a result of a
subdivision or combination) in, outstanding shares of Class A common
stock, (iii) any continuance in a new jurisdiction other than a
continuance which does not result in any reclassification of, or change
(other than a change in name, or par value, or from par value to no par
value, or from no par value to par value) in, outstanding shares of
Class A common stock, or (iv) any sale or conveyance of all or
substantially all of the property of Company (determined on a
consolidated basis), then Company, or such successor or purchasing
corporation, as the case may be, shall, as a condition precedent to
such reclassification, change, consolidation, merger, continuance, sale
or conveyance, execute and deliver to the Holder a written notice
providing that the Holder shall have the right to convert the Note into
the kind and amount of shares of stock and other securities and
property (including cash) receivable upon such reclassification,
change, consolidation, merger, continuance, sale or conveyance by a
holder of the number of shares of Class A common stock deliverable upon
conversion of such Note immediately prior to such reclassification,
change, consolidation, merger, continuance, sale or conveyance. Such
notice shall provide for adjustments of the Conversion Price which
shall be as nearly equivalent as may be practicable to the adjustments
of the Conversion Price provided for in this Section 9. The foregoing,
however, shall not in any way affect the right a Holder of a Note may
otherwise have, pursuant to clause (ii) of the last sentence of
subsection (c) of Section 9.6, to receive Rights upon conversion of a
Note. If, in the case of any such reclassification, change,
consolidation, merger, continuance, sale or conveyance, the stock or
other securities and property (including cash) receivable thereupon by
a holder of Class A common stock includes shares of stock or other
securities and property of a corporation or other business entity other
than the successor or purchasing corporation, as the case may be, in
such reclassification, change, consolidation, merger, continuance, sale
or conveyance, then such notice shall also be executed by such other
corporation or other business entity and shall contain such additional
provisions to protect the interests of the Holder of the Note as the
Board of Directors of Company shall reasonably consider necessary by
reason of the foregoing. The provision of this Section 9.11 shall
similarly apply to successive reclassifications, changes,
consolidations, mergers, continuances, sales or conveyances.
9.12. Cancellation of Converted Notes. All Notes delivered for
conversion shall be delivered to Company to be canceled.
10. Successors and Assigns. Subject to the restrictions on transfer
described in the Operative Agreements or Section 13 below, the rights and
obligations of Company and Holder of this Note shall be binding upon and benefit
the successors, assigns, heirs, administrators and transferees of the parties.
11. Waiver and Amendment. Any provision of this Note may be amended,
waived or modified upon the written consent of Company and Holder.
12. Assignment by Company. Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by Company without the prior written consent of
Holder except in connection with an assignment in whole to a successor
corporation to Company in connection with a reincorporation of Company in
another state of the United States.
13. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier or personal delivery at the
respective addresses of the parties as set forth in the Operative Agreements or
on the register maintained by Company. Any party hereto may by notice so given
change its address for future notice hereunder. Notice shall conclusively be
deemed to have been given when received.
18
14. Payment. Cash payment shall be made in lawful tender of the United
States.
15. Expenses; Waivers. If action is instituted to collect this Note,
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
16. No Impairment. The Company will not, by amendment of its Articles
and/or Certificate of Incorporation or Bylaws, or through reorganization,
consolidation, merger, dissolution, issue or sale of securities, sale of assets
or any other voluntary action, willfully avoid or seek to avoid the observance
or performance of any of the terms of this Note, but will at all times and in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
Holder under this Note against wrongful impairment. Without limiting the
generality of the foregoing, Company will take all such action as may be
necessary or appropriate in order that Company may duly and validly issue fully
paid and nonassessble Conversion Shares upon the conversion of this Note.
17. Severability. If one or more provisions of this Note are held to be
unenforceable under applicable law, such provision(s) shall be excluded from
this Note and the remainder of the Note shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.
19
18. Governing Law. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the State of New York, without regard to the conflicts of law
provisions of the State of New York, or of any other state.
IN WITNESS WHEREOF, Company has caused this Note to be issued as of the
date first written above.
EASYLINK SERVICES CORPORATION,
a Delaware corporation
By:
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, Chairman
20
ELECTION TO CONVERT
To EasyLink Services Corporation:
The undersigned owner of the Convertible Promissory Note dated as June
1, 2001 (the "Note") hereby irrevocably exercises the option to convert the
Note, or the portion below designated, into Class A common stock of EasyLink
Services Corporation in accordance with the terms of the Note, and directs that
the shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated below. If shares are to
be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto.
The undersigned agrees to be bound by the terms of the Note relating to
the Class A common stock issued upon conversion of the Note. If you want to
convert the Note in whole, check the box below. If you want to convert the Note
in part, indicate the portion of the Note to be converted in the space provided
below.
In whole / /
or
Portion of Note to be converted ($1,000 or any integral multiple
thereof): $______________
Date: ______________
21
Name of Holder:
Signature of Authorized Representative of Holder
______________________________________ (Sign exactly as your name
appears on the other side of this Note)
Medallion Signature Guarantee:_____________________________________
Please print or typewrite your name and address, including zip code,
and social security or other identifying number:
If the Class A common stock is to be issued and delivered to someone
other than you, please print or typewrite the name and address, including zip
code, and social security or other identifying number of that person:
22
EXHIBIT B
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
EASYLINK SERVICES CORPORATION
WARRANT TO PURCHASE 2,682,964 SHARES
OF CLASS A COMMON STOCK
THIS CERTIFIES THAT, for value received, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ and his
assignees are entitled to subscribe for and purchase 2,682,964 shares (as
adjusted pursuant to Section 4 hereof, the "Shares") of the Class A Common
Stock, par value $.01 per share ("Common Stock"), of EASYLINK SERVICES
CORPORATION, a Delaware corporation (the "Company"), at the price of $0.61 per
share (such price and such other price as shall result, from time to time, from
the adjustments specified in Section 4 hereof is herein referred to as the
"Warrant Price"), subject to the provisions and upon the terms and conditions
hereinafter set forth. As used herein, (a) the term "Date of Grant" shall mean
November 27, 2001, and (b) the term "Other Warrants" shall mean any other
warrants issued by the Company in connection with the transaction with respect
to which this Warrant was issued, and any warrant issued upon transfer or
partial exercise of or in lieu of this Warrant. The term "Warrant" as used
herein shall be deemed to include Other Warrants unless the context clearly
requires otherwise.
1. Term. The purchase right represented by this Warrant is exercisable,
in whole or in part, at any time and from time to time from the Date of Grant
through ten (10) years after the Date of Grant.
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A-1
duly completed and executed) at the principal office of the Company and by the
payment to the Company, by certified or bank check, or by wire transfer to an
account designated by the Company (a "Wire Transfer") of an amount equal to the
then applicable Warrant Price multiplied by the number of Shares then being
purchased; or (b) exercise of the "net issuance" right provided for in Section
9.2 hereof. The person or persons in whose name(s) any certificate(s)
representing the Shares shall be issuable upon exercise of this Warrant shall be
deemed to have become the holder(s) of record of, and shall be treated for all
purposes as the record holder(s) of, the shares represented thereby (and such
shares shall be deemed to have been issued) immediately prior to the close of
business on the date or dates upon which this Warrant is exercised. In the event
of any exercise of the rights represented by this Warrant, certificates for the
shares of stock so purchased shall be delivered to the holder hereof as soon as
possible and in any event within thirty (30) days after such exercise and,
unless this Warrant has been fully exercised or expired, a new Warrant
representing the portion of the Shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the holder
hereof as soon as possible and in any event within such thirty-day period;
provided, however, if requested by the holder of this Warrant, the Company shall
cause its transfer agent to deliver the certificate representing Shares issued
upon exercise of this Warrant to a broker or other person (as directed by the
holder exercising this Warrant) within the time period required to settle any
trade made by the holder after exercise of this Warrant.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all preemptive rights and taxes, liens and charges
with respect to the issue thereof. During the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for the purpose of the issue upon exercise of the
purchase rights evidenced by this Warrant, a sufficient number of shares of its
Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any
reclassification or change of securities of the class issuable upon exercise of
this Warrant (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination), or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company
is the acquiring and the surviving corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant), or in case of any sale of all or substantially all of the assets
of the Company, the Company, or such successor or purchasing corporation, as the
case may be, shall duly execute and deliver to the holder of this Warrant a new
Warrant (in form and substance satisfactory to the holder of this Warrant), or
the Company shall make appropriate provision without the issuance of a new
Warrant, so that the holder of this Warrant shall have the right to receive upon
exercise of this Warrant, at a total purchase price not to exceed that payable
upon the exercise of the unexercised portion of this Warrant, and in lieu of the
shares of Common Stock theretofore issuable upon exercise of this Warrant, the
kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change, merger or sale by a holder of the
number of shares of Common Stock then purchasable under this Warrant. Any new
Warrant shall provide for adjustments that shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 4. The provisions
of this Section 4(a) shall similarly apply to successive reclassifications,
changes, mergers and sales.
-2-
(b) Subdivision or Combination of Shares. If the Company at
any time while this Warrant remains outstanding and unexpired shall subdivide or
combine its outstanding shares of Common Stock, the Warrant Price shall be
proportionately decreased and the number of Shares issuable hereunder shall be
proportionately increased in the case of a subdivision and the Warrant Price
shall be proportionately increased and the number of Shares issuable hereunder
shall be proportionately decreased in the case of a combination.
(c) Stock Dividends and Other Distributions. If the Company at
any time while this Warrant is outstanding and unexpired shall (i) pay a
dividend with respect to its Common Stock payable in Common Stock, then the
Warrant Price shall be adjusted, from and after the date of determination of
shareholders entitled to receive such dividend or distribution, to that price
determined by multiplying the Warrant Price in effect immediately prior to such
date of determination by a fraction (A) the numerator of which shall be the
total number of shares of Common Stock outstanding immediately prior to such
dividend or distribution, and (B) the denominator of which shall be the total
number of shares of Common Stock outstanding immediately after such dividend or
distribution; or (ii) make any other distribution with respect to Common Stock
(except any distribution specifically provided for in Sections 4(a) and 4(b) and
other than ordinary cash dividends declared by the board of directors pursuant
to a regular dividend program adopted by the board of directors), then, in each
such case, provision shall be made by the Company such that the holder of this
Warrant shall receive upon exercise of this Warrant a proportionate share of any
such dividend or distribution as though it were the holder of the Shares as of
the record date fixed for the determination of the shareholders of the Company
entitled to receive such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in
the Warrant Price, the number of Shares purchasable hereunder shall be adjusted,
to the nearest whole share, to the product obtained by multiplying the number of
Shares purchasable immediately prior to such adjustment in the Warrant Price by
a fraction, the numerator of which shall be the Warrant Price immediately prior
to such adjustment and the denominator of which shall be the Warrant Price
immediately thereafter.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, and shall cause copies of such certificate to be mailed
(without regard to Section 13 hereof, by first class mail, postage prepaid) to
the holder of this Warrant.
6. Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the Common Stock on the date of exercise as reasonably determined in
good faith by the Company's Board of Directors.
7. Rights as Shareholders; Information. No holder of this Warrant, as
such, shall be entitled to vote or receive dividends or be deemed the holder of
Common Stock which may at any time be issuable upon the exercise hereof for any
purpose, nor shall anything contained herein be construed to confer upon the
holder of this Warrant, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until this
Warrant shall have been exercised and the Shares purchasable upon the exercise
hereof shall have become deliverable, as provided herein. Notwithstanding the
foregoing, the Company will transmit to the holder of this Warrant such
information, documents and reports as are generally distributed to the holders
of any class or series of the securities of the Company concurrently with the
distribution thereof to the shareholders.
-3-
8. Registration Rights. The Shares purchasable hereunder have certain
registration rights pursuant to the Registration Rights Agreement dated as of
the date on which the Warrant is issued.
9. Additional Rights.
9.1 Acquisition Transactions. The Company shall provide the holder of
this Warrant with at least twenty (20) days' written notice prior to closing
thereof of the terms and conditions of any of the following transactions (to the
extent the Company has notice thereof): (i) the sale, lease, exchange,
conveyance or other disposition of all or substantially all of the Company's
property or business, or (ii) its merger into or consolidation with any other
corporation (other than a wholly-owned subsidiary of the Company), or any
transaction (including a merger or other reorganization) or series of related
transactions, in which more than 50% of the voting power of the Company is
disposed of.
9.2 Right to Convert Warrant into Stock: Net Issuance.
(a) Right to Convert. In addition to and without limiting the
rights of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "Conversion Right")
into shares of Common Stock as provided in this Section 9.2 at any time or from
time to time during the term of this Warrant. Upon exercise of the Conversion
Right with respect to a particular number of shares subject to this Warrant (the
"Converted Warrant Shares"), the Company shall deliver to the holder (without
payment by the holder of any exercise price or any cash or other consideration)
that number of shares of fully paid and nonassessable Common Stock as is
determined according to the following formula:
X = B - A
---------
Y
Where: X = the number of shares of Common Stock that shall be
issued to holder
Y = the fair market value, as hereinafter defined, of
one share of Common Stock
A = the aggregate Warrant Price of the
specified number of Converted Warrant Shares
immediately prior to the exercise of the
Conversion Right (i.e., the number of
Converted Warrant Shares multiplied by the
Warrant Price)
B = the aggregate fair market value of the
specified number of Converted Warrant Shares
(i.e., the number of Converted Warrant
Shares multiplied by the fair market value
of one Converted Warrant Share)
-4-
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined). For purposes
of Section 9 of this Warrant, shares issued pursuant to the Conversion Right
shall be treated as if they were issued upon the exercise of this Warrant.
(b) Method of Exercise. The Conversion Right may be exercised by
the holder by the surrender of this Warrant at the principal office of the
Company together with a written statement (which may be in the form of Exhibit
A-1) specifying that the holder thereby intends to exercise the Conversion Right
and indicating the number of shares subject to this Warrant which are being
surrendered (referred to in Section 9.2(a) hereof as the Converted Warrant
Shares) in exercise of the Conversion Right. Such conversion shall be effective
upon receipt by the Company of this Warrant together with the aforesaid written
statement, or on such later date as is specified therein (the "Conversion
Date"). Certificates for the shares issuable upon exercise of the Conversion
Right and, if applicable, a new warrant evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Conversion Date and
shall be delivered to the holder within thirty (30) days following the
Conversion Date.
(c) Determination of Fair Market Value. For purposes of this
Section 9.2, "fair market value" of a share of Common Stock as of a particular
date (the "Determination Date") shall mean:
(i) If traded on a securities exchange, the fair market value
of the Common Stock shall be deemed to be the average of the closing prices of
the Common Stock on such exchange over the five trading days immediately prior
to the Determination Date;
(ii) If traded on the Nasdaq Stock Market or other
over-the-counter system, the fair market value of the Common Stock shall be
deemed to be the average of the closing sale prices, or if there shall be no
closing sale price on any day the average of the closing bid and ask prices for
such day, of the Common Stock over the five trading days immediately prior to
the Determination Date; and
(iii) If there is no public market for the Common Stock, then
fair market value shall be determined by mutual agreement of the holder of this
Warrant and the Company.
If closing prices or closing bid and ask prices are no longer reported by a
securities exchange or other trading system, the closing price or closing bid
and ask prices shall be that which is reported by such securities exchange or
other trading system at 4:00 p.m. New York City time on the applicable trading
day.
9.3 Exercise Prior to Expiration. To the extent this Warrant is not
previously exercised as to all of the Shares subject hereto, and if the fair
market value of one share of the Common Stock is greater than the Warrant Price
then in effect, this Warrant shall be deemed automatically exercised pursuant to
Section 9.2 above (even if not surrendered) immediately before its expiration.
To the extent this Warrant or any portion thereof is deemed automatically
exercised pursuant to this Section 9.3, the Company agrees to promptly notify
the holder hereof of the number of Shares, if any, the holder hereof is to
receive by reason of such automatic exercise.
-5-
9.4 Listing of Shares. The Company shall from time to time take all
action necessary so that the Common Stock which may be issued upon exercise of
this Warrant, immediately upon their issuance (or, if such Common Stock is
subject to restrictions on transfer under the Securities Act of 1933, as amended
(the "Act"), upon their resale pursuant to an effective registration statement
or in a transaction pursuant to which the certificate evidencing such Common
Stock shall no longer bear a restrictive common stock legend), will be listed on
the Nasdaq National Market or such other interdealer quotation system and market
or principal securities exchanges, if any, on which other shares of Common Stock
of Company are then listed or quoted.
10. Representations and Warranties. The Company represents and
warrants to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies.
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable and free from preemptive
rights.
(c) The rights, preferences, privileges and restrictions
granted to or imposed upon the classes and series of the Company's capital stock
and the holders thereof are as set forth in the Certificate of Incorporation
("Articles").
(d) The execution and delivery of this Warrant are not, and
the issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Articles or by-laws,
do not and will not contravene any law, governmental rule or regulation,
judgment or order applicable to the Company, and do not and will not conflict
with or contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration or filing with or the taking of any action in
respect of or by, any Federal, state or local government authority or agency or
other person, except for the filing of notices pursuant to federal and state
securities laws, which filings will be effected by the time required thereby.
(e) There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, could have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
-6-
(f) The number of shares of Common Stock of the Company
outstanding on the date hereof, on a fully diluted basis (assuming the
conversion or exchange of all outstanding convertible or exchangeable securities
and the exercise of all outstanding options and warrants), does not exceed
250,000,000 shares.
(g) The issuance of the Warrant pursuant to the Modification
Agreement is not subject to the registration requirements of the Act.
11. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
12. Notices. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of the
Company or to the Company or the holder hereof at the address indicated therefor
in the Modification Agreement dated as of June 1, 2001 between the initial
holder hereof and the Company.
13. Binding Effect on Successors. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets, and all of the obligations
of the Company relating to the Shares issuable upon the exercise or conversion
of this Warrant shall survive the exercise, conversion and termination of this
Warrant and all of the covenants and agreements of the Company shall inure to
the benefit of the successors and assigns of the holder hereof.
14. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
15. Descriptive Headings. The descriptive headings of the various
Sections of this Warrant are inserted for convenience only and do not constitute
a part of this Warrant. The language in this Warrant shall be construed as to
its fair meaning without regard to which party drafted this Warrant.
16. Governing Law. This Warrant and all actions arising out of or in
connection with this Warrant shall be governed by and construed in accordance
with the laws of the State of New York, without regard to the conflicts of law
provisions of the State of New York, or of any other state.
17. Survival of Representations, Warranties and Agreements. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
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18. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
19. No Impairment of Rights. The Company will not, by amendment of its
Articles or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holder of this Warrant against impairment.
20. Severability. The invalidity or unenforceability of any provision
of this Warrant in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction, or affect any other
provision of this Warrant, which shall remain in full force and effect.
21. Recovery of Litigation Costs. If any legal action or other
proceeding is brought for the enforcement of this Warrant, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Warrant, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
22. Entire Agreement; Modification. This Warrant constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
The Company has caused this Warrant to be duly executed and delivered
as of the Date of Grant specified above.
EASYLINK SERVICES CORPORATION
By
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▇▇▇▇▇▇ ▇▇▇▇▇▇, Chairman
Address: EasyLink Services Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive
Officer
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EXHIBIT A-1
NOTICE OF EXERCISE
To: EasyLink Services Corporation (the "Company")
1. The undersigned hereby:
/ / elects to purchase________ shares of Common Stock of
the Company pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase
price of such shares in full, or
/ / elects to exercise its net issuance rights pursuant
to Section 9.2 of the attached Warrant with respect
to________shares of Common Stock.
2. Please issue a certificate or certificates representing ________
shares in the name of the undersigned or in such other name or names as are
specified below:
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(Name)
-------------------------------------------
-------------------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
all except as in compliance with applicable securities laws.
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(Signature)
------------------
(Date)
Exhibit C
See Exhibit D to Exhibit 99.1 to the Company's Current Report on Form 8-K dated
October 1, 2001 for Form of Registration Rights Agreement.
