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EXHIBIT 4
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 SEPTEMBER 1, 1997
$9,929,000.00 September 1, 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 Nine Million Nine Hundred Twenty Nine
Thousand Dollars ($9,929,000.00) (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
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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".
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 note 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.
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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 and CEO
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