Exhibit 10.6
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER THE SECURITIES LAWS OF ANY STATE. THIS NOTE MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND SUCH REGISTRATION OR
QUALIFICATION AS MAY BE NECESSARY UNDER THE SECURITIES LAWS OF ANY STATE, OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
OR QUALIFICATION IS NOT REQUIRED.
MINDSPRING ENTERPRISES, INC.
CONVERTIBLE NOTE,
DUE JUNE 28, 1997
$2,000,000.00 June 28, 1996
FOR VALUE RECEIVED, the undersigned, MINDSPRING ENTERPRISES, INC., a
Delaware corporation (herein called the "Company"), hereby promises to pay to
PSINET, INC., a New York corporation, or registered assigns (hereinafter
called the "Payee"), the principal sum of Two Million Dollars ($2,000,000.00)
(the "Principal", which shall be subject to increase or decrease as set forth
below), together with interest on the unpaid principal amount hereof from the
date hereof, until paid in full, said interest to be due and payable on the
first anniversary of the date of this Note, when the entire balance of this
Note shall be due and payable in full, equal to the interest rate published
as the "prime rate" in the "Money Rates" section of THE WALL STREET JOURNAL
(the "PRIME RATE") plus three percent (3%). In no event, however, shall this
Note bear interest in excess of the maximum rate of interest permitted by
applicable law. All payments hereunder shall be made in lawful money of the
United States of America, and shall be subject to the offset and deduction
provisions described herein.
In the event of a change in the Prime Rate, interest on the outstanding
principal balance hereof will be adjusted accordingly, it being the intent
hereof that the rate of said interest shall increase or decrease simultaneously
with and to the same extent as an increase or decrease in the Prime Rate.
Should THE WALL STREET JOURNAL during the term hereof abolish or abandon the
practice of publishing the Prime Rate, then the Prime Rate used during the
remainder of said term shall be the rate from time to time announced by
Citibank, N.A. as its "prime rate".
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In the event that this Note is not redeemed in full within ninety (90) days
after the date of this Note, the Principal shall increase by five percent (5%)
of the Principal then outstanding. The Principal shall increase in a like
manner each ninety (90) days thereafter that this Note is not redeemed in full.
LATE CHARGES
If the entire amount of any principal payment and/or interest is not paid
in full within five (5) days after the date when due, the Company shall pay to
the Payee a late fee equal to two percent (2%) of the amount not paid.
SALE OF NOTE; TRANSFER OF SECURITIES
Neither this Note nor the shares of Common Stock issuable upon exercise of
the conversion rights herein have been registered under the Securities Act of
1933, as amended (the "1933 Act") or under the securities laws of any state.
Neither this Note nor any such shares, when issued, may be sold, transferred,
pledged or hypothecated in the absence of (1) an effective registration
statement for this Note, or the shares, as the case may be, under the 1933 Act,
and such registration or qualification as may be necessary under the securities
laws of any state, or (2) an opinion of counsel in form and substance reasonably
satisfactory to the Company that such registration or qualification is not
required. The Company may cause the certificate or certificates evidencing all
or any of the shares issued upon exercise of the conversion rights contained in
this Note before such registration and qualification of such shares to bear the
following legend:
"The shares evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended, or under the securities laws
of any state. The shares may not be sold, transferred, pledged or
hypothecated in the absence of an effective registration statement under
the Securities Act of 1933, as amended, and such registration or
qualification as may be necessary under the securities laws of any state,
or an opinion of counsel reasonably satisfactory to the Company that such
registration or qualification is not required."
This Note shall be registered on books of the Company that shall be kept at
its principal office for that purpose, and shall be transferable only on such
books by the registered owner hereof in person or by duly authorized attorney
upon surrender of this Note properly endorsed, and only in compliance with the
next preceding paragraph hereof.
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REDEMPTION
The Company may redeem this Note, by payment, in the case of full
redemption, in full of the entire principal amount thereof then outstanding,
together with all interest accrued thereon until the date of redemption. In the
case of any partial redemption hereof, payments shall be applied first to
payment of any accrued interest owing hereunder, and then against principal
owing hereunder.
CONVERSION
In the event that this Note is not redeemed in full by the first
anniversary of the date of this Note, the registered owner of this Note is
hereby given the right to convert all, but not less than all, of the total
amount due under this Note into fully paid and nonassessable shares of the
common stock, $0.01 par value per share, of the Company (the "Common Stock") as
follows:
(1) CONVERSION PRICE. The registered owner of this Note shall
receive one share of Common Stock for a price equal to the closing price of the
common stock of the Company traded on the Nasdaq Stock Market as of the end of
the trading day on the Second Closing Date, PROVIDED, HOWEVER, that if the
Second Closing Date has not occurred, then as of the end of the trading day on
the First Closing Date (as defined in the Purchase Agreement).
(2) PROCEDURE FOR CONVERSION. In order to exercise the conversion
privilege, the registered owner shall surrender this Note to the Company at its
main office, accompanied by written notice to the Company that such owner elects
to convert the total amount due under this Note and an opinion of counsel in
form and substance satisfactory to the Company that the issuance of shares of
Common Stock upon such conversion has been registered under the 1933 Act and
registered or qualified as necessary under applicable state securities laws, or
that such registration and qualification are not required. As promptly as
practicable after the receipt of such notice and opinion and surrender of this
Note as aforesaid, the Company shall issue and deliver to the registered owner a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of this Note (or specified portion hereof). Such
conversion shall be deemed to have been effected at the close of business on the
date on which such notice shall have been received by the Company and this Note
shall have been surrendered as aforesaid. If this Note is converted in part
only, upon such conversion the Company shall execute and deliver to the Payee,
at the expense of the Company, a new Note in principal amount equal to the
unconverted portion of this Note. No fractional shares shall be issued upon
conversion of this Note and any portion of the principal or interest hereof
that would otherwise be convertible into a fractional share shall be paid in
cash.
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The Company shall at all times reserve and keep available a number of its
authorized but unissued shares of Common Stock sufficient to permit the exercise
in full by the registered owner of this Note of its conversion rights hereunder.
Notwithstanding the foregoing, in no event shall this Note be convertible
into Common Stock if, as a result of such conversion, the aggregate amount of
Common Stock that would be issued pursuant to the Notes (as such term is defined
in the Purchase Agreement, as defined herein) exceeds 19.9% of the issued and
outstanding Common Stock as of June 28, 1996, unless approval by the Company's
stockholders has been obtained. In addition, if the approval of the Company's
stockholders referred to in the immediately preceding sentence has not been
obtained by the time this Note would otherwise be convertible as provided above,
the registered owner of this Note may convert this Note in part on the terms and
conditions set forth in this section entitled "Conversion" (with the written
notice of conversion to specify the amount to be converted); PROVIDED, HOWEVER,
that if the registered holder of this Note converts this Note in part pursuant
to this sentence, the registered holder shall present to Buyer for conversion
the Note representing the unconverted balance of this Note within ten (10) days
following receipt of written notice from Buyer that the stockholders consent
referred to in the immediately preceding sentence has been obtained.
DEFAULT
In case of the failure to pay, when due, the principal, any interest, or
any other sum payable hereunder, and continuance of such failure for five (5)
business days after the date on which such principal, interest or other sum is
due (whether upon maturity hereof, upon any installment payment date, upon any
prepayment date, upon acceleration, or otherwise), the Payee may declare this
Note to be due and payable in full.
MISCELLANEOUS
Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Note, and (in case of loss, theft or
destruction) of indemnity reasonably satisfactory to it, and upon reimbursement
to the Company of all reasonable expenses incidental thereto, and upon surrender
and cancellation of this Note, if mutilated, the Company will make and deliver a
new Note of like tenor in the principal amount of this Note then outstanding in
lieu of such Note. Any Note so made and delivered shall be dated as of the date
to which interest has been paid on the Note lost, stolen, destroyed or
mutilated.
The Company shall have the right to offset and/or deduct, from time to time
and at any time, any amounts of principal or interest payable under this Note
against Losses (as defined in the Asset Purchase Agreement by and between the
Company and Payee, dated as of June 28, 1996 ("Purchase Agreement", which term
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shall include all amendments thereto)) asserted against, resulting to, imposed
upon or incurred by the Company for which the Company has a right or claim for
indemnification pursuant to ARTICLE 10 of the Purchase Agreement
The Company hereby waives presentment, demand, notice, protest and other
demands and notices in connection with the delivery, acceptance or enforcement
of this Note.
No delay or omission on the part of the Payee in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note, and a waiver, delay or omission on any one occasion shall not be
construed as a bar to or waiver of any such right on any future occasion.
The Company hereby agrees to pay on demand all costs and expenses,
including, without limitation, reasonable attorneys' fees and legal expenses,
incurred or paid by Xxxxx in enforcing this Note.
The terms of this Note shall be governed by and construed in accordance
with the laws of the State of New York (but not including the choice of law
rules thereof).
This Note shall not be valid or obligatory for any purpose until
authenticated by the execution hereof by the Chairman, President or a Vice
President of the Company and registered upon the books of the Company as
hereinabove provided.
IN WITNESS WHEREOF, MINDSPRING ENTERPRISES, INC., a Delaware corporation,
has caused this Note to be signed in its corporate name by its President or a
Vice President, by authority xxxx xxxxx, all as of the day and year first above
written.
MINDSPRING ENTERPRISES, INC.
By: /S/ XXXXXXX X. XXXXXX
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Title: CHAIRMAN & CEO
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