AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT AND
NETWORK SERVICES AGREEMENT
THIS AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT AND NETWORK
SERVICES AGREEMENT (the "Amendment") is entered into as of June 28, 1996 by
and between PSINET INC. ("Seller") and MINDSPRING ENTERPRISES, INC. ("Buyer").
WHEREAS, Seller and Buyer are parties to that certain Asset Purchase
Agreement of even date herewith (the "Purchase Agreement") and that certain
Network Services Agreement of even date herewith (the "Network Services
Agreement"); and
WHEREAS, capitalized terms that are used but not otherwise defined
herein shall have the meanings ascribed to them in the Purchase Agreement;
and
WHEREAS, Seller and Buyer desire to amend the Purchase Agreement and
the Network Services Agreement, and provide for the replacement of the First
Note (as defined in the Purchase Agreement), all in accordance with and
subject to the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby
amend the Purchase Agreement, the Network Services Agreement and the First
Note, as follows:
1. The following shall be inserted at the end of the section
entitled "Conversion" in the First Note, as replaced in accordance with
Paragraph 2 hereof, and in the corresponding section of each of the forms of
the First Note, the Second Note, the Third Note and the Fourth Note, attached
as Exhibits 2.3 (a), (b), (c), and (d), respectively, to the Purchase
Agreement:
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.
2. The defined term "Purchase Agreement" in the forms of the First
Note, the Second Note, the Third Note and the Fourth Note is hereby amended
to include the following:
which term shall include all amendments thereto.
3. Upon execution of this Amendment, Buyer shall re-execute the
First Note in the form attached hereto as Exhibit A and deliver the same to
Buyer, and, promptly thereafter, Seller shall return to Buyer the original
First Note, which shall be deemed replaced by such re-executed First Note.
4. If, as of the date that notice of the next annual meeting of
stockholders of Buyer is required to be mailed, any of the Notes remain
outstanding such that upon conversion, the aggregate amount of Common Stock
that would be issued pursuant to all of the Notes would exceed 19.9% of the
issued and outstanding Common Stock as of June 28, 1996, then Buyer shall
request from its stockholders at such annual meeting the approval referred to
in Paragraph 1 above.
5. By their signatures hereto, ITC Holding Company, Inc. and
Xxxxxxx X. Xxxxxx agree to vote all shares of Common Stock, and other capital
stock of Buyer, held by them in favor of the approval referred to in
paragraph 1 above, whenever such approval is requested by Buyer of its
stockholders.
6. Section 2.3(c) of the Purchase Agreement is hereby amended by
inserting the following at the end thereof:
or, in the event that funds were raised through a stock
offering or other financing which Buyer would have been required to use
to pay down the principal and accrued but unpaid interest under the
Third Note pursuant to Section 3.4 after the principal and accrued but
unpaid interest under the First Note and the Second Note were paid in
full, Buyer shall pay to Seller such funds, not to exceed what would
otherwise be the initial principal amount of the Third Note, and the
initial principal amount of the Third Note so issued shall be reduced
accordingly.
7. Section 2.3(d) of the Purchase Agreement is hereby amended
by inserting the following at the end thereof:
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, or, in the event that funds were raised through a stock
offering or other financing which Buyer would have been required to use
to pay down the principal and accrued but unpaid interest under the
Fourth Note pursuant to Section 3.4 after the principal and accrued but
unpaid interest under the First Note, the Second Note and the Third Note
were paid in full, Buyer shall pay to Seller such funds, not to exceed
what would otherwise be the initial principal amount of the Fourth Note,
and the initial principal amount of the Fourth Note so issued shall be
reduced accordingly.
8. The period at the end of Section 2.3(d) of the Purchase
Agreement is hereby replaced with a semicolon and the following is hereby
added to the Purchase Agreement as new Section 2.3(e):
(e) Buyer shall deliver to Seller within ten (10) days after the
Third Measurement Date a fully executed copy of the Fifth Note, or, in the
event that funds were raised through a stock offering or other financing
which Buyer would have been required to use to pay down the principal and
accrued but unpaid interest under the Fifth Note pursuant to Section 3.4
after the principal and accrued but unpaid interest under the First Note, the
Second Note, the Third Note and the Fourth Note were paid in full, Buyer
shall pay to Seller such funds, not to exceed what would otherwise be the
initial principal amount of the Fifth Note, and the initial principal amount
of the Fifth Note so issued shall be reduced accordingly.
9. The phrase "First Measurement Date" in Section 3.3(a) of the
Purchase Agreement is hereby replaced with "November 30, 1996." The
following is hereby inserted after the last sentence of Section 3.3(a) of the
Purchase Agreement:
No later than December 10, 1996, Buyer shall notify Seller of
the number of customers of Buyer signed up by Seller pursuant to this Section
3.3(a).
10. Section 3.3(b) of the Purchase Agreement is hereby amended and
restated to read as follows:
(b) (i) After the First Closing Date, Buyer shall use reasonable
efforts to seek confirmation from the Subscribers to Seller's Pipeline
service (A) that such Subscribers desire to be switched to Buyer's network
and (B) of the Subscribers' relevant subscription information. After the
Second Closing, Buyer shall produce and ship software and other necessary
materials (collectively, "Kits") to allow Subscribers, who have confirmed
that they desire to switch to Buyer's network to make such switch, promptly
following receipt of such confirmation. Buyer shall pay the costs of such
production and shipment initially, but on the Second Measurement Date and
upon presentation of reasonably
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satisfactory documentation of such costs Seller shall pay to Buyer fifty
percent (50%) of Buyer's costs actually incurred in connection with such
production and shipment and Buyer shall offset the amount due from Seller
against the payments otherwise due Seller under the Notes.
(ii) After the First Closing Date, Buyer shall use reasonable
efforts to seek confirmation from the Subscribers to Seller's Interramp
service (A) that such Subscribers desire to be switched to Buyer's network
and (B) of the Subscribers' relevant subscription information. After the
Second Closing, Buyer shall assist Subscribers to Seller's Interramp service,
who have confirmed that they desire to switch to Buyer's network, to
configure their current software to work on Buyer's network. After the
Second Closing, Buyer shall also produce and ship Kits upon request to
Subscribers to Seller's Interramp service who have requested such Kits and
have confirmed their desire to switch to Buyer's network. Buyer shall pay
the costs of such production and shipment initially, but on the Second
Measurement Date and upon presentation of reasonably satisfactory
documentation of such costs Seller shall pay to Buyer fifty percent (50%) of
Buyer's costs actually incurred in connection with such production and
shipment and Buyer shall offset the amount due from Seller against the
payments otherwise due Seller under the Notes.
(iii) Notwithstanding, the foregoing provisions of this
Section 3.3(b), Subscribers who do not transition to Buyer's network shall be
considered Continuing Subscribers if they otherwise satisfy the definition of
"Continuing Subscribers" set forth in Annex 1 to this Agreement. In no event
shall the aggregate payments made by Seller to Buyer under (i) and (ii) above
exceed $400,000.
11. Seller's total obligations under Sections 3.3(d) and (e) of the
Purchase Agreement shall be satisfied by paying Buyer Three Thousand Dollars
($3,000) at the Second Closing.
12. The phrase "First Measurement Date" in Section 3.3(f) of the
Purchase Agreement is hereby replaced with "date specified by Buyer in a
written notice to Seller but in no event later than December 31, 1996."
13. Section 3.4 of the Purchase Agreement is hereby amended and
restated as follows:
3.4 Securities Offering.
Buyer shall use Best Efforts to complete a stock offering or other
financing in order to refinance the Notes. In the event that the Buyer is
able to raise funds through the sale of securities, Buyer shall apply the
proceeds of such an offering to pay down the Notes according to the following
formula:
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(a) if the net proceeds (which term shall mean gross proceeds less
normal offering expenses) of any offering or other financing exceed thirty
million dollars ($30,000,000.00), Buyer shall use all of such net proceeds,
up to the amount of principal and accrued but unpaid interest outstanding
under the Notes, to pay down the Notes promptly following the closing of such
offering or other financing;
(b) if the net proceeds of any offering or other financing are
between twenty and thirty million dollars ($20,000,000.00-30,000,000.00),
Buyer shall use seventy-five percent (75%) of such net proceeds, up to the
amount of principal and accrued but unpaid interest outstanding under the
Notes, to pay down the Notes promptly following the closing of such offering
or other financing;
(c) if the net proceeds of any offering or other financing are
between ten and twenty million dollars ($10,000,000.00-20,000,000.00), Buyer
shall use fifty percent (50%) of such net proceeds, up to the amount of
principal and accrued but unpaid interest outstanding under the Notes, to pay
down the Notes promptly following the closing of such offering or other
financing; and
(d) if the net proceeds of any offering or other financing are
between one and ten million dollars ($1,000,000.00 - $10,000,000.00), Buyer
shall use thirty-three percent (33%) of such net proceeds, up to the amount
of principal and accrued but unpaid interest outstanding under the Notes, to
pay down the Notes promptly following the closing of such offering or other
financing.
14. The following is hereby added as new Section 4.24 of the
Purchase Agreement:
4.24 INTELLECTUAL PROPERTY.
The Intellectual Property constitutes all intellectual property of
Seller, used or useful in connection with the Assets and the Business, other
than that intellectual property described on SCHEDULE 4.11 which is not
described on SCHEDULE ANNEX 2, including, without limitation, (i) all
inventions (whether patentable or unpatentable and whether or not reduced to
practice) used or useful in connection with the Assets and the Business, all
improvements thereto and all patents, patent applications and patent
disclosures, (ii) all trademarks, service marks, trade dress, logos, trade
names, and corporate names (including without limitation the Pipeline domain
name and the Pipeline Name) used or useful in connection with the Assets and
the Business, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (iii) all
copyrightable works, all copyrights and maskworks and all applications,
registrations and renewals in connection therewith used or useful in connection
with the Assets and the Business, (iv) all trade secrets and confidential
information used or useful in connection with the Assets and the Business
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(including, without limitation, all ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, business and marketing plans and proposals and
other information or material within the definition of a "trade secret" as
set forth in Section 1(4) of the Uniform Trade Secrets Act (1995), (v) all
computer programs (including, without limitation, data and related
documentation) used or useful in connection with the Assets and the Business
including without limitation the Pipeline Software, (vi) all other
intellectual property used or useful in connection with the Assets and the
Business, (vii) all rights as a licensee or authorized user of the
intellectual property of any third party, (ix) the source code for Seller's
Interramp auto-registration software along with a perpetual license to use
and modify, but not resell, such software, and (x) all copies and tangible
embodiments of the foregoing in whatever form or medium.
15. The outside date for the Second Closing set forth in Section
8.1 of the Purchase Agreement is hereby extended from August 31, 1996 to
September 3, 1996.
16. The Network Services Agreement is hereby amended by (i)
replacing the text of Section 4.1 thereof with the following:
"[intentionally deleted]", (ii) redesignating the text of Section 1.6 thereof
as Section 1.6(a) and (iii) adding the following as Section 1.6(b):
During the term of this Agreement, PSINet shall allow
MindSpring to co-locate up to 4 racks of equipment at PSINet's network
operations center, which is currently located in Troy, New York. During the
term of this Agreement, MindSpring shall allow PSINet to co-locate up to 2
racks of equipment at the Harrisburg Facility (as defined in the Purchase
Agreement). Each of PSINet and MindSpring may permit the other to increase
the number of racks of equipment which such person is permitted to co-locate
pursuant to this subsection at PSINet's operations center and at the
Harrisburg Facility, respectively, as may be mutually agreed. MindSpring
shall pay PSINet $1,000 per month for each of MindSpring's two excess racks.
In connection with the 4 racks of equipment installed by MindSpring at
PSINet's network operations center, PSINet shall supply MindSpring with
bandwidth equal to the bandwidth of a T1 line for no additional cost, and
such additional bandwidth as MindSpring may reasonably request for an
additional charge equal to PSINet's T1 price.
17. The definitions of "Continuing Subscribers," "First Measurement
Date," "Intellectual Property," "Sales Term" and "Second Measurement Date"
set forth in Annex 1 to the Purchase Agreement are hereby amended to read as
follows:
CONTINUING SUBSCRIBERS shall mean those Subscribers who remain
Buyer's customers (regardless of whether or not they transition to Buyer's
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network) and current in their payments to Buyer for services as of the First
Measurement Date, as well as those customers of Buyer signed up by Seller
pursuant to Section 3.3(a) who remain Buyer's customers (regardless of
whether or not they transition to Buyer's network) and current in their
payments to Buyer for service as of (i) the First Measurement Date, with
respect to customers signed up before October 1, 1996, (ii) the Second
Measurement Date with respect to customers signed up between October 1, 1996
and October 31, 1996, and (iii) the Third Measurement Date with respect to
customers signed up between November 1, 1996 and November 30, 1996.
FIRST MEASUREMENT DATE shall mean November 15, 1996.
INTELLECTUAL PROPERTY shall mean all intellectual property of
Seller listed on Schedule Annex 2 attached hereto.
SALES TERM shall mean the period of five (5) years after
November 30, 1996.
SECOND MEASUREMENT DATE shall mean December 15, 1996.
18. The following are hereby added to Annex 1 to the Purchase
Agreement as new definitions:
FIFTH NOTE shall mean the promissory note in the form attached
hereto as EXHIBIT 2.3(e) in an original principal amount equal to the excess,
if any, of the Purchase Price determined as of the Third Measurement Date
over the sum of the Cash Payment and the original amounts of the First Note,
Second Note, Third Note and Fourth Note.
THIRD MEASUREMENT DATE shall mean January 15, 1997.
19. SCHEDULE 2.3(e) attached hereto shall be deemed SCHEDULE 2.3(e)
of the Purchase Agreement, as amended by this Amendment, and SCHEDULE ANNEX 2
attached hereto shall be deemed SCHEDULE ANNEX 2 of the Purchase Agreement,
as amended by this Amendment.
20. The Purchase Agreement and the Network Services Agreement are
hereby ratified and confirmed and, except as expressly modified hereby, shall
continue unmodified and in full force and effect.
21. This Amendment may be executed in separate counterparts, none
of which need contain the signatures of all parties, each of which shall be
deemed to be an original, and all of which taken together constitute one and
the same instrument. It shall not be necessary in making proof of this
Amendment to produce or account for more than the number of counterparts
containing the respective signatures of, or on behalf of, all of the parties
hereto.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Amendment, or has caused this Amendment to be duly executed and delivered in
its name on its behalf, all as of the day and year first above written.
BUYER
MINDSPRING ENTERPRISES, INC.
By: /s/ Xxxxxxx X. Xxxxxx (SEAL)
---------------------------
Name: Xxxxxxx X. Xxxxxx
-------------------------------
Title: Chairman & CEO
------------------------------
SELLER
PSINET INC.
By: /s/ Xxxxxx X. Xxxxx (SEAL)
---------------------------
Name: Xxxxxx X. Xxxxx
-------------------------------
Title: C.O.O.
------------------------------
By their signatures hereto, the undersigned hereby agree to the
terms of paragraph 4 above, as of the date first set forth above.
ITC HOLDING COMPANY, INC.
By: /s/ J. Xxxxxxx Xxx (SEAL)
---------------------------
Name: J. Xxxxxxx Xxx
-------------------------------
Title: CFO
------------------------------
/s/ Xxxxxxx X. Xxxxxx (SEAL)
-------------------------------
XXXXXXX X. XXXXXX, individually
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Exhibit and Schedules to the Amendment No. 1 to the Asset Purchase Agreement
have been omitted.
The following is a list of the omitted Exhibit and Schedules which the
Company agrees to furnish supplementally to the Commission upon request:
Exhibit:
--------
Exhibit A Form of Amended First Convertible Note
Schedules:
----------
Schedule 2.3(e) Form of Fifth Convertible Note
Schedule Annex 2 Intellectual Property
