EXECUTION COPY.
AMENDED AND RESTATED
NOTE PURCHASE AGREEMENT
THIS AMENDED AND RESTATED NOTE PURCHASE AGREEMENT (this "AGREEMENT") is
made and entered into as of the 31st day of October, 1996, by and between
EARTHLINK NETWORK, INC. (the "COMPANY"), and UUNET TECHNOLOGIES, INC. ("UUNET").
RECITALS
A. UUNET will purchase a one-year term, unsecured convertible promissory
note in the original principal amount of $5,000,000, bearing a simple rate of
interest equal to the prime rate as established by CoastFed Bank, N.A. as of the
Closing Date (as defined below) plus 2%, and convertible into shares of the
Company's Common Stock, par value $0.01 per share (the "CONVERSION SHARES"), in
the form of EXHIBIT A attached hereto (the "CONVERTIBLE NOTE"), for an aggregate
cash purchase price of Five Million Dollars ($5,000,000).
B. The Company currently plans to file a Registration Statement with
respect to a proposed initial public offering of its capital stock (the
"PROPOSED PUBLIC OFFERING").
C. The Company and UUNET agree that, subject to Section 6.3 hereof, UUNET
shall be entitled to convert the principal and accrued but unpaid interest under
the Convertible Note into Conversion Shares at the applicable "Conversion Price"
determined pursuant to Section 6.1 hereof.
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
1. AUTHORIZATION AND CLOSING.
1.1 AUTHORIZATION. As of the Closing (as defined below), the Company
shall have authorized the issuance and the reservation for issuance, as
applicable, pursuant to the terms and conditions of this Agreement, of (i)
the Convertible Note, and (ii) the Conversion Shares into which the
Convertible Note may be converted.
1.2 PURCHASE AND SALE OF CONVERTIBLE NOTE; PAYMENT. At the Closing,
subject to the terms and conditions set forth herein, the Company shall
issue and sell to UUNET and UUNET shall purchase from the Company the
Convertible Note for the purchase price of FIVE MILLION DOLLARS
($5,000,000) (the "PURCHASE PRICE") payable by cashier's check or by wire
transfer at the Company's direction; PROVIDED, HOWEVER, that UUNET may
offset from such purchase price any amounts due or "past due" from the
Company to UUNET according to the payment terms of invoices for network
services
previously rendered by UUNET to the Company.
1.3 CLOSING. The closing of the purchase and sale of the Convertible Note
(the "CLOSING") shall take place at the Company's offices, 0000 Xxx Xxxx
Xxxxx, Xxxxxxxx, Xxxxxxxxxx at 9:00 a.m., local time, on October 31, 1996
or at such other time and place as the Company and UUNET may mutually agree
upon (the "CLOSING DATE").
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to UUNET that:
2.1 INCORPORATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
has all requisite corporate power and authority to own and operate its
properties and to conduct its business as now conducted or proposed to be
conducted.
2.2 AUTHORIZED CAPITAL STOCK; QUALIFICATION. The Company has authorized
and outstanding capital stock as set forth on SCHEDULE 2.2 hereto. All of
the outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. The
Company is qualified to do business in each jurisdiction except where the
failure to be so qualified would have a material adverse effect on the
business, results of operations or financial condition of the Company (a
"MATERIAL ADVERSE EFFECT").
2.3 OPTIONS, WARRANTS, RESERVED SHARES. Except as set forth on SCHEDULE
2.3 hereto, there are no outstanding options, warrants, rights (including
conversion or preemptive rights) or agreements for the purchase or
acquisition from the Company of any shares of its capital stock or any
securities convertible into or ultimately exchangeable or exercisable for
any shares of the Company's capital stock. Except as set forth on SCHEDULE
2.3, no shares of the Company's outstanding capital stock, or stock
issuable upon exercise or exchange of any outstanding options, warrants or
rights, or other stock issuable by the Company, are subject to any rights
of first refusal or other rights to purchase such stock in favor of the
Company.
2.4 DUE AUTHORIZATION. All corporate action on the part of the Company
necessary for the authorization, execution, delivery and performance of the
Company under this Agreement and the Convertible Note, and the
authorization, issuance, reservation for issuance and delivery of all of
the Conversion Shares has been taken or will be taken prior to the Closing,
and this Agreement constitutes, and the Convertible Note when executed,
will constitute, valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except as
enforcement may be limited by (a) applicable bankruptcy, insolvency,
reorganization or others laws of general application relating to or
affecting the enforcement of creditors' rights generally, and (b) the
effect of rules of law governing the availability of equitable remedies.
The Conversion Shares have
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been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of this Agreement, will be duly and validly
issued, fully paid and nonassessable.
2.5 LITIGATION. Except as set forth on SCHEDULE 2.5 hereto, there is no
action, suit, proceeding, claim, arbitration or investigation (an "ACTION")
pending or, to the best of the Company's knowledge, currently threatened,
against the Company or its properties or assets. The Company is not a party
to or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality.
2.6 STATUS OF PROPRIETARY ASSETS.
(a) OWNERSHIP. Except as set forth on SCHEDULE 2.6(a) hereto,
the Company has full title and ownership of, or has license to,
all patents, patent applications, trademarks, service marks,
trade names, copyrights, moral rights, mask works, trade secrets,
confidential and proprietary information, compositions of matter,
formulas, designs, proprietary rights, know-how and processes
(all of the foregoing collectively hereinafter referred to as the
"PROPRIETARY ASSETS") necessary to enable it to carry on its
business as now conducted. No third party has any ownership
right, title, interest, claim in or lien on any of the
Proprietary Assets owned by the Company.
(b) LICENSES; OTHER AGREEMENTS. Except as set forth on SCHEDULE
2.6(b) hereto, the Company has not granted, and, to the best of
the Company's knowledge, there are not outstanding, any options,
licenses or agreements of any kind relating to any Proprietary
Asset of the Company.
(c) NO INFRINGEMENT. To the best of the Company's knowledge,
the Company has not violated or infringed, and is not currently
violating or infringing, and except as set forth on SCHEDULE
2.6(c) hereto, the Company has not received any communications
alleging that the Company has violated or infringed, any
Proprietary Asset of any other person or entity.
2.7 COMPLIANCE WITH CHARTER DOCUMENTS AND MATERIAL AGREEMENTS. The
Company is not in violation of any provisions of its Certificate of
Incorporation or Bylaws. The execution, delivery and performance of this
Agreement and the Convertible Note and the consummation of the transactions
contemplated hereby or thereby will not result in any such violation, nor
will they conflict with or constitute, with or without the passage of time
or the giving of notice or both, a default under any agreement or contract
of the Company or result in the creation of any lien, charge or encumbrance
upon any asset of the Company thereunder, which default or lien would
reasonably be expected to have a Material Adverse Effect.
2.8 TITLE TO PROPERTY AND ASSETS. Except as set forth on SCHEDULE 2.8,
the Company
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owns all of its properties and assets free and clear of all mortgages,
deeds of trust, liens, encumbrances, security interests and claims except
for statutory liens for the payment of current taxes that are not yet
delinquent and liens, encumbrances and security interests which arise in
the ordinary course of business and which do not materially affect material
properties and assets of the Company.
2.9 FINANCIAL STATEMENTS. SCHEDULE 2.9 consists of (a) an audited balance
sheet of the Company as of December 31, 1994 and 1995 and Xxxxx 00, 0000,
(x) the results of its operations and cash flows for the period from May
26, 1994 through December 31, 1994 and for the year ended December 31,
1995, (c) an unaudited balance sheet of the Company at June 30, 1996, and
(d) unaudited statements of operations and cash flows of the Company for
the six months ended June 30, 1995 and June 30, 1996 (the items referenced
in (a) through (d) above being collectively referred to as the "FINANCIAL
STATEMENTS"). The Financial Statements (x) have been prepared in
accordance with the books and records of the Company, (y) present fairly
the financial position of the Company at the date or dates therein
indicated and the results of operations for the periods therein specified,
and (z) have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis except, with respect to quarterly
statements included therein, for the omission of notes thereto and normal
year-end audit adjustments. Such Financial Statements supersede any
similar statements relating to the same dates or periods previously
provided by the Company to UUNET.
2.10 ACTIVITIES SINCE BALANCE SHEET DATE. Since June 28, 1996, the date of
the most recent balance sheet included in the Financial Statements, there
has not been:
(a) except as set forth on SCHEDULE 2.10, any damage, destruction or
loss, whether or not covered by insurance, materially and adversely
affecting the assets, properties, financial condition, operating
results, prospects or business of the Company (as presently conducted
and as presently proposed to be conducted);
(b) any waiver by the Company of a valuable right or of a material
debt owed to it;
(c) any satisfaction or discharge of any lien, claim or encumbrance
or payment of any obligation by the Company except such a
satisfaction, discharge or payment made in the ordinary course of
business that is not material to the assets, properties, financial
condition, operating results or business of the Company;
(d) any material change or amendment to a material contract or
arrangement by which the Company, or any of its assets or properties
is bound or subject, except for changes or amendments which are
contemplated by or disclosed in this Agreement;
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(e) to the Company's knowledge, any other event or condition of any
character which could reasonably be expected to have a Material
Adverse Effect.
2.11 DISCLOSURE. This Agreement and the Exhibits and Schedules hereto do
not contain any untrue statement of a material fact and, when read together
with that certain Prospectus of the Company dated June 27, 1996 and that
certain Draft Prospectus of the Company relating to the Proposed Public
Offering and dated October 17, 1996, do not omit to state a material fact
necessary to make the statements made pursuant hereto, in light of the
circumstances under which they were made, not misleading; except that, with
respect to any financial projections submitted to UUNET, the Company
represents and warrants only that such financial projections were prepared
based on reasonable assumptions and management's good faith estimates as of
the date thereof.
3. REPRESENTATIONS AND WARRANTIES OF UUNET. UUNET hereby represents and
warrants to the Company that:
3.1 AUTHORIZATION. This Agreement constitutes a valid and legally binding
obligation of UUNET, enforceable in accordance with its terms except as
enforcement may be limited by (a) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or
affecting the enforcement of creditors' rights generally, and (b) the
effect of rules of law governing the availability of equitable remedies.
UUNET represents that it has full power and authority to enter into this
Agreement.
3.2 PURCHASE FOR OWN ACCOUNT. The Convertible Note and the Conversion
Shares, if and when issued, are being and will be acquired for investment
for UUNET's own account, not as a nominee or agent for any other person or
entity, and not with a view to the public resale or distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "1933
Act"), and UUNET has no present intention of selling, granting any
participation in, or otherwise distributing the same.
3.3 DISCLOSURE OF INFORMATION. UUNET has received or has had full access
to all the information it considers necessary or appropriate to make an
informed investment decision with respect to the Convertible Note and
Conversion Shares. UUNET further has had an opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of
this Agreement, the Convertible Note and the Conversion Shares and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to UUNET or to which UUNET
had access. UUNET has received the Prospectus and has conducted due
diligence of the Company satisfactory to UUNET.
3.4 INVESTMENT SOPHISTICATION AND EXPERIENCE. UUNET is a sophisticated
investor that understands that the purchase of the Convertible Note
involves substantial risk.
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UUNET has experience as an investor in securities of companies in similar
stages of development as is the Company. UUNET is able to fend for itself,
can bear the economic risk of its investment in the Convertible Note and
the Conversion Shares and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of
its investment in the Convertible Note and the Conversion Shares and
protecting its own interests in connection with such investment.
3.5 RESTRICTED SECURITIES. UUNET understands that the Convertible Note
and any Conversion Shares that may later be acquired by UUNET are
"restricted securities" under the 1933 Act inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and that under the 1933 Act, applicable state securities laws and the
applicable regulations thereunder such securities may be resold only in
certain limited circumstances. In this connection, UUNET represents that
UUNET is familiar with Rule 144 promulgated under the 1933 Act and
understands the resale limitations imposed thereby and by applicable state
securities laws. UUNET understands that the Company is under no obligation
to register any of the securities sold hereunder except as provided in the
Registration Rights Agreement as described below. UUNET understands that no
public market now exists for the Common Stock of the Company and that,
notwithstanding the Company's efforts to effect the Proposed Public
Offering, no assurance can be given that a public market will ever exist
for the Conversion Shares.
3.6 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting the
generality of the representations set forth above, UUNET further agrees not
to make any disposition of all or any portion of the Convertible Note or
the Conversion Shares unless and until:
(a) there is then in effect a registration statement under the 1933
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) UUNET shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of
the circumstances surrounding the proposed disposition, and (ii) UUNET
shall have furnished the Company, at the expense of UUNET or its
transferee, with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition will not require registration of such
securities under the 1933 Act or any applicable state securities laws.
4. CONDITIONS TO UUNET'S OBLIGATIONS. The obligations of UUNET under this
Agreement shall be subject to the fulfillment or waiver, at or before the
Closing, of each of the following conditions, the waiver of which shall not be
effective against UUNET unless given by written, oral or telephone communication
to the Company or to its counsel:
4.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties of
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the Company made or contained herein are true and correct in all material
respects at and as of the Closing Date as if made on and as of the Closing
Date.
4.2 PERFORMANCE. The Company has performed and complied in all material
respects with all agreements and conditions contained herein required to be
performed or complied with by it at or before the Closing.
4.3 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents
incident thereto shall be reasonably satisfactory in form and substance to
UUNET and to its counsel, and they shall each have received all such
counterpart originals and certified or other copies of such documents as
they may reasonably request. Such documents shall include:
(a) CERTIFIED CHARTER DOCUMENTS. A copy of the Certificate of
Incorporation and the Bylaws of the Company, certified by its
Secretary as true and correct copies thereof; and
(b) GOOD STANDING CERTIFICATE. A good standing certificate issued by
the Secretary of State of the State of Delaware, dated within five (5)
business days of the Closing Date, with respect to the Company.
4.4 NO MATERIAL CHANGE. There shall not have been, since the date of
execution of this Agreement, any material adverse change in the business,
operations, properties, assets or financial condition of the Company.
4.5 ELECTION OF DIRECTOR. All necessary corporate action shall have been
taken for Xxxx Xxxxxxxx to have been added to the Board of Directors of the
Company.
4.6 RELATED AGREEMENTS. Each of the following related agreements shall
have been executed and delivered by the parties thereto:
(a) CONVERTIBLE NOTE substantially in the form of EXHIBIT A hereto;
(b) AN ADDENDUM TO THE COMPANY'S AMENDED AND RESTATED REGISTRATION
RIGHTS AGREEMENT, adding UUNET as a party thereto and granting to
UUNET with respect to the Conversion Shares, if and when issued, those
certain "piggyback" and Form S-3 registration rights as set forth
therein, substantially in the form of EXHIBIT B hereto;
(c) STOCKHOLDERS AGREEMENT, executed by the stockholders named
therein agreeing to vote their shares, following the Closing of the
transactions contemplated hereby, to elect to the Company's board of
directors the nominee as specified in writing by UUNET, substantially
in the form of EXHIBIT C hereto; and
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(d) ADDENDUM NO. 1 (THE "ADDENDUM") TO NETWORK SERVICES AGREEMENT
(the "Commercial Agreement"), pursuant to which UUNET provides certain
network services for the Company's products and services,
substantially in the form of EXHIBIT D hereto.
5. CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations of the Company to
UUNET under this Agreement are subject to the fulfillment or waiver, on or
before the Closing, of each of the following conditions by UUNET:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
UUNET made or contained herein are true and correct in all material
respects at and as of the Closing Date as if made on and as of the Closing
Date.
5.2 PAYMENT OF PURCHASE PRICE. UUNET shall have delivered to the Company
the Purchase Price.
5.3 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents
incident thereto shall be reasonably satisfactory in form and substance to
the Company and to the Company's legal counsel, and the Company shall have
received all such counterpart originals and certified or other copies of
such documents as it may reasonably request.
5.4 RELATED AGREEMENTS. UUNET shall have executed and delivered the
Addendum to Registration Rights Agreement and the Addendum substantially in
the forms of Exhibits B and D hereto, respectively.
6. CONVERSION OF CONVERTIBLE NOTE.
6.1 CONVERSION PRICE.
(a) IPO CONVERSION PRICE. If the conversion of the Convertible Note
occurs following a "Qualifying Public Offering" as described in
Section 6.3(a)(i) hereof, the "Conversion Price" shall be the lesser
of (i) $8.00 per share or (ii) 120% of the weighted average price per
share of Common Stock paid by the holders of the Series A Convertible
Preferred Stock of the Company named on Schedule II hereto (the
"Holders"), after giving effect to (i) the conversion by the Holders
of 1,818,182 shares of Series A Preferred Stock into an equivalent
number of shares of Common Stock at a conversion price of $5.50 per
share and (ii) any purchase of shares of Common Stock the Holders may
make in the Proposed Public Offering.
By way of example and not limitation, in September 1996, the
Holders
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purchased 1,818,182 shares at $5.50 per share of Series A Convertible
Preferred Stock, which shares are convertible on a one-for-one basis
into shares of Common Stock. If the price at which the Common Stock
is sold in the Proposed Public Offering is $8.00 per share and the
Holders purchase 625,000 such shares in that offering, then the
Holders' weighted average purchase price per share in the two
transactions would be calculated as follows:
$15,000,000 (total investment) DIVIDED BY 2,443,182 shares =
$6.14 per share;
and, 120% thereof would equal $7.37. Because that amount is less than
$8.00 per share, in this example it would represent the Conversion
Price.
(b) NON-IPO CONVERSION PRICE. If the conversion of the Convertible
Note does not occur pursuant to subsection (a) above (e.g., does not
occur following a Qualifying Public Offering), the "Conversion Price"
shall equal $6.60 per share.
(c) ADJUSTMENT. Notwithstanding anything set forth in (a) and (b)
above the Conversion Price shall be subject to adjustment as provided
in SECTION 6.2 hereof.
6.2 ADJUSTMENTS.
(a) If the Company shall declare and pay on shares of its Common
Stock a dividend payable in Common Stock or shall split the then
outstanding Common Stock into a greater number of shares, the
Conversion Price shall be proportionately decreased and, conversely,
if at any time the Company shall combine shares of Common Stock into a
smaller number of shares, the Conversion Price shall be
proportionately increased as of such time.
(b) In the case of (i) any reclassification of or changes in the
Common Stock other than as provided in SECTION 6.2(a) above, (ii) a
consolidation, merger, share exchange or other business combination
transaction involving the Company, or (iii) a sale or conveyance to
another corporation of the property and assets of the Company as an
entirety or substantially as an entirety, in each case as a result of
which holders of Common Stock shall be entitled to receive shares,
other securities or other property or assets (including cash) with
respect to or in exchange for such Common Stock, UUNET will be
entitled thereafter to receive, upon conversion of the Convertible
Note contemporaneous with the closing of any such transaction, the
kind and amount of shares, other securities or other property or
assets which UUNET would have owned or been entitled to receive upon
such reclassification, change, consolidation, merger, share exchange,
combination, sale or conveyance had the Convertible Note been
converted immediately prior to such transaction.
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(c) If the Company shall issue or sell shares of Common Stock
(including shares now or hereafter held in the treasury of the
Company) at a price per share, or shall grant rights, options or
warrants having an exercise price per share, or securities convertible
into Common Stock having a conversion price per share, less than the
Conversion Price in effect at that time, then, forthwith upon such
issue or sale, the Conversion Price shall be reduced to the amount
(calculated to the nearest one hundredth of a cent) determined by
dividing (x) an amount equal to the sum of (A) the number of shares of
Common Stock outstanding immediately prior to such issue or sale
multiplied by the then existing Conversion Price, and (B) the
aggregate consideration, if any, received by the Company upon such
issue or sale, by (y) the total number of shares of Common Stock
outstanding immediately after such issue or sale; PROVIDED, HOWEVER,
that no such adjustment shall be made with respect to (i) the issuance
of shares of Common Stock upon the exercise or conversion of rights,
options, warrants or other securities convertible into Common Stock
outstanding on the date of this Agreement, (ii) rights, options or
warrants granted by the Company, with the approval of its Board of
Directors or the Compensation Committee thereof, to employees,
directors and consultants of the Company as compensation for service
to the Company in any such capacities, if such rights, options or
warrants are granted at an exercise price not less than the fair
market value of a share as of the date of grant ("Compensatory
Securities") or (iii) Common Stock issued upon exercise of
Compensatory Securities. The securities described in clauses (i),
(ii) and (iii) preceding are referred to in Schedule I hereof as
"Exempted Securities." For purposes of this Section 6.2(c),
paragraphs 1. through 3., inclusive, of Schedule I hereto shall also
be applicable.
(d) Whenever the Conversion Price or number of Conversion Shares are
adjusted, as herein provided, the Company shall promptly notify UUNET
of such adjustment(s) setting forth its computations of such
adjustment.
6.3 CONVERSION RIGHT; TIME OF CONVERSION. (a) The Convertible Note
shall be convertible at the option of UUNET, subject to the following:
(i) If the Company effects a "Qualifying Public Offering" within
the meaning of the Company's Certificate of Designation,
Preferences and Rights of Series A Convertible Preferred Stock
filed with the Delaware Secretary of State on September 10, 1996,
as it may be amended from time to time, not later than the first
anniversary of the Closing Date, then the Convertible Note may,
at any time thereafter, be converted into Conversion Shares at
the Conversion Price set forth in Section 6.1(a) hereof.
(ii) If the Company does not effect a "Qualifying Public
Offering" not
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later than the first anniversary of the Closing Date or if, prior
to the first anniversary of the Closing Date, a "Conversion
Event" (as defined in paragraph (iii) below) occurs, then the
Convertible Note may be converted into Conversion Shares at the
Conversion Price set forth in Section 6.1(b) hereof.
(iii) A "Conversion Event" entitling UUNET to convert the
Convertible Note into Convertible Shares prior to the first
anniversary of the Closing Date at the Conversion Price set forth
in Section 6.1(b) hereof shall have occurred if (A) the Company
terminates the Commercial Agreement for convenience pursuant to
Section D of the Addendum, (B) the Company is in material breach
or default under the Commercial Agreement or (C) UUNET's
continued holding of the indebtedness represented by the
Convertible Note shall cause UUNET or its parent corporation, MFS
Communications Company, Inc. ("MFS"), to be in default under
existing debt obligations of UUNET or MFS or if such debt shall
cause MFS to be unable to obtain its lenders' consents to the
pending merger of MFS and WorldCom, Inc.; PROVIDED THAT in order
to avail itself of this subsection (C), an appropriate financial
officer of UUNET or MFS, as appropriate, shall provide a
certification to the Company concerning the bona fide nature of
such event, including without limitation, supporting
documentation with respect thereto, such as, if applicable,
detailed calculations of ratios or coverage requirements
underlying the same.
(b) Notwithstanding paragraph (a) above, the Convertible Note may not
be converted prior to the Due Date (as defined therein) in the absence
of (i) a Qualifying Public Offering, (ii) the occurrence of a
Conversion Event or (iii) pursuant to the exercise by the Company of
the prepayment option set forth in Section 2 of the Convertible Note.
6.4 CALCULATION OF CONVERSION SHARES. The Convertible Note shall be
converted into such number of whole Conversion Shares as are calculated by
dividing all unpaid principal and accrued interest due and owing under the
Convertible Note by the Conversion Price, as adjusted pursuant to Section
6.2. Any resulting fractional share shall be paid in cash at the
Conversion Price.
6.5 SURRENDER AND DELIVERY. Upon delivery to UUNET of certificates
representing the number of fully paid and non-assessable Conversion Shares
computed pursuant to this SECTION 6, UUNET shall surrender the Convertible
Note to the Company for cancellation.
6.6 RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at
all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion
of the Convertible Note, such
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number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of the entire principal balance and
accrued interest of the Convertible Note. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of the Convertible Note, the Company will take such
corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number
of shares as shall be sufficient for such purpose.
7. EVENTS OF DEFAULT; REMEDIES.
7.1 EVENTS OF DEFAULT. If any one or more of the following events shall
occur, it shall be deemed an "Event of Default" hereunder and under the
Convertible Note:
(a) default by the Company in the due and punctual payment of the
principal, interest or both on the Convertible Note when and as the
same shall become due and payable or any material breach by the
Company of any covenant set forth in Section 8 hereof;
(b) any representation or warranty made by the Company herein shall
have been false or misleading in any material respect when made;
(c) the Company becomes insolvent or unable to meet its obligations
as they mature, makes a general assignment for the benefit of its
creditors, consents to the appointment of a trustee or a receiver or
admits in writing its inability to pay its debts as they mature;
(d) a trustee or receiver for the Company or for any part of the
properties of the Company is appointed without the consent of the
Company and such trustee or receiver is not discharged within sixty
(60) days of its appointment;
(e) bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings are instituted by or against the Company and,
if instituted against it, the same are consented to by the Company or
remain undismissed for a period of sixty (60) days; or
(f) the Company terminates the Commercial Agreement for convenience
pursuant to Section D of the Addendum; provided, however, that if upon
such termination UUNET elects to convert the Convertible Note pursuant
to Section 6.3, no Event of Default shall be deemed to have occurred.
7.2 DEFAULT. Upon an Event of Default, in addition to the remedies
provided elsewhere in this Agreement, and at law and in equity, UUNET may,
at any time thereafter, at its option, declare the Convertible Note to be
immediately due and payable,
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whereupon the maturity of the then unpaid balance of the Convertible Note
shall be accelerated and the same and all interest accrued thereon shall
forthwith become due and payable.
7.3 REMEDIES. In case any one or more Events of Default shall occur and be
continuing, UUNET may proceed to protect and enforce its rights or remedies
either by suit in equity or by action at law, or both, whether for the
specific performance of any covenant, agreement or other provisions
contained herein, or in the Convertible Note, or proceed to enforce any
other legal, equitable or statutory right or remedy or the remedies it may
have including those set forth in SECTION 7.2 hereof.
7.4 REMEDIES NOT EXCLUSIVE. No right or remedy conferred herein is
intended to be exclusive of any other right or remedy contained herein or
in any instrument or document delivered in connection with or pursuant to
this Agreement, and every such right or remedy contained herein and therein
or now or hereafter existing at law or in equity or by statute, or
otherwise may be exercised separately or in any combination.
7.5 COURSE OF DEALING. No course of dealing between the Company and UUNET
or any failure or delay on either party's part in exercising any rights or
remedies hereunder shall operate as a waiver of any rights or remedies of
the parties and no single or partial exercise of any rights or remedies
hereunder shall operate as a waiver or preclude the exercise of any other
rights or remedies hereunder.
7.6 TRANSFER. The Convertible Note shall be registered in the name of
UUNET on the books of the Company. No transfer of the Convertible Note
shall be valid unless made by UUNET or by its attorney duly authorized in
writing for that purpose. Upon due presentment for registration of
transfer of the Convertible Note, a new Convertible Note (also a
"CONVERTIBLE NOTE") in the face amount of the then unpaid principal balance
of the Convertible Note being transferred, shall be issued to the
transferee, whose name shall then be registered on the books of the Company
and who shall be subject to the terms of this Agreement as if such
transferee were an original party to this Agreement. No service charge
shall be made for any such transfer, but the Company may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto. UUNET may transfer the Convertible Note and/or
the Conversion Shares and assign its rights thereunder, provided that the
transfer of the Convertible Note and/or the Conversion Shares will be
subject to the restriction that no such transfer will be effected until
UUNET has obtained either an opinion of counsel satisfactory to the Company
and its counsel to the effect that the proposed transfer will not result in
a violation of the 1933 Act or applicable state securities laws.
8. COVENANTS OF THE COMPANY. The Company further covenants and agrees that,
so long as the Convertible Note is outstanding, the Company shall:
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8.1 PAYMENTS. Promptly make all payments of principal and interest on the
Convertible Note when due, and comply with the other provisions hereof;
8.2 COMPLIANCE WITH LAWS. Comply in all material respects with all
federal, state and local laws, ordinances and regulations applicable to its
business;
8.3 CONDUCT OF BUSINESS. Conduct its business in the usual and ordinary
course;
8.4 CORPORATE EXISTENCE. Maintain its corporate existence and right to
carry on its business and duly procure all necessary renewals and
extensions thereof and use its best efforts to maintain, preserve and renew
all such rights, powers, privileges and franchises; provided, however, that
nothing herein contained shall be construed to prevent the Company from
ceasing or omitting to exercise any rights, powers, privileges or
franchises that in the judgment of its board of directors can no longer be
exercised in its best interests, but provided further that any such
cessation or omission shall not adversely affect the Convertible Note or
the obligations of the Company under this Agreement;
8.5 BOOKS AND RECORDS. At all times maintain proper books or records of
account in which full, true and correct entries will be made of its
transactions in accordance with generally accepted accounting principles,
consistently applied, and set aside on its books reserves for depreciation,
depletion, obsolescence and amortization of its properties, determined in
accordance with generally accepted accounting principles, consistently
applied, and all other proper reserves, similarly determined, that should
be set aside in connection with its business;
8.6 TAXES. Pay and discharge promptly all taxes, assessments, and
governmental charges or levies imposed upon it or upon its income or upon
any part thereof, as well as all claims of any kind (including claims for
labor, materials and supplies) that, if unpaid, might by law become a lien
or charge upon its property; provided, however, that the Company shall not
be required to pay any such tax, assessment, charge, levy, or claim if the
amount, applicability or validity thereof shall be contested in good faith
by appropriate proceedings and if it shall have set aside on its books
reserves (segregated to the extent required by generally accepted
accounting principles) deemed by it adequate with respect thereto;
8.7 INDEBTEDNESS. Pay or cause to be paid the principal of and interest
on all material indebtedness for borrowed monies heretofore or hereafter
incurred or assumed by the Company when and as the same shall become due
and payable unless such indebtedness be renewed or extended on terms no
less favorable than the original terms thereof;
8.8 REGISTRATION RIGHTS. If the Company shall take action pursuant to
Section 9(d) of its Amended and Restated Registration Rights Agreement
dated as of June 1, 1996 to grant more favorable registration rights than
those set forth in such Agreement to any
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party other than UUNET, then the Company shall notify UUNET thereof and
shall use its best efforts to grant also to UUNET registration rights
comparable to those being granted to such other party; and
8.9 COMPLIANCE WITH INDEBTEDNESS. Faithfully observe, perform, and
discharge all covenants, conditions and obligations that are imposed on it
by any and all indentures and other agreements securing or evidencing such
indebtedness or pursuant to which such indebtedness was incurred, and not
permit the occurrence of any act or omission that is or may be declared to
be a default thereunder, unless waived by the holder of such indebtedness;
provided, however, that the Company shall not be required to make any
payment or to take any other action by reason of the provisions of this
Section if it is contesting in good faith its obligation to make such
payment or to take such action and shall have set aside on its books
adequate reserves (to the extent, and segregated if and to the extent,
required by generally accepted accounting principles) with respect thereto.
9. COVENANT OF UUNET; CONFIDENTIALITY. UUNET further covenants and agrees
that UUNET will not publish or disclose, either directly or indirectly, any
information relating to the Proposed Public Offering, including, but not limited
to, (i) the fact that the Company is in the process of effectuating the Proposed
Public Offering, or (ii) a prospectus or any information contained in a
prospectus or any other document filed by the Company with the Securities and
Exchange Commission in connection with the Proposed Public Offering.
10. MISCELLANEOUS.
10.1 SURVIVAL OF WARRANTIES. The representations, warranties and covenants
of the Company and UUNET contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing
until the conversion of the Convertible Note or until the first anniversary
of this Agreement, whichever occurs first.
10.2 SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors
and assigns of the parties.
10.3 GOVERNING LAW. This Agreement shall be governed by and construed
under the internal laws of the State of Delaware without reference to
principles of conflict of laws or choice of laws.
10.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.5 HEADINGS. The headings and captions used in this Agreement are used
for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and
15
schedules shall, unless otherwise provided, refer to sections and
paragraphs hereof and exhibits and schedules attached hereto, all of which
exhibits and schedules are incorporated herein by this reference.
10.6 NOTICES. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or
upon deposit with the United States Post Office, by registered or certified
mail, postage prepaid and addressed as follows:
If to UUNET: UUNET Technologies, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xx. Xxxxx Xxxxxx
with a copy to: Xxxxxxx X. Knee, Esq., at the foregoing
address
If to the Company: EarthLink Network, Inc.
0000 Xxx Xxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: President
with a copy to: Xxxxx X. Hobby, Esq.
Hunton & Xxxxxxxx
NationsBank Plaza
600 Peachtree Street, NE
Suite 4100
Xxxxxxx, Xxxxxxx 00000
or at such other address as either may designate by giving ten (10) days
advance written notice to all other parties.
10.7 NO FINDER'S FEES. Each party represents that it neither is nor will
be obligated for any finder's or broker's fee or commission in connection
with this transaction. UUNET agrees to indemnify and to hold harmless the
Company from any liability for any commission or compensation in the nature
of a finder's or broker's fee (and any asserted liability) for which UUNET
or any of its officers, partners, employees, or representatives is
responsible. The Company agrees to indemnify and hold harmless UUNET from
any liability for any commission or compensation in the nature of a
finder's or broker's fee (and any asserted liability) for which the Company
or any of its officers, employees or representatives is responsible.
10.8 COSTS, EXPENSES. Each party shall be responsible for its own costs
and expenses,
16
including without limitation professional fees and expenses, related to the
negotiation, preparation and execution of this Agreement, the Convertible
Note and the other agreements related thereto.
10.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Company and UUNET.
10.10 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms.
10.11 ENTIRE AGREEMENT. This Agreement, together with all Exhibits and
Schedules hereto, and the Convertible Note constitute the entire agreement
and understanding of the parties with respect to the subject matter hereof
and supersede any and all prior negotiations, correspondence, agreements,
understandings, duties or obligations between the parties with respect to
the subject matter hereof.
10.12 FURTHER ASSURANCES. From and after the date of this Agreement,
upon the request of either party, the other party shall execute and deliver
such instruments, documents or other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
UUNET TECHNOLOGIES, INC. EARTHLINK NETWORK, INC.:
/s/ Xxxxx Xxxxxx /s/ Sky X. Xxxxxx
------------------------- -------------------------
(Authorized Signature) Sky X. Xxxxxx
Xxxxx Xxxxxx Sky X. Xxxxxx
------------------------- -------------------------
(Printed Name) (Printed Name)
V.P. Chairman
------------------------- -------------------------
(Title) (Title)
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SCHEDULE I
For purposes of Section 6.2(c) hereof, the following clauses 1. through 3.,
inclusive, of this Schedule I shall also be applicable:
1. If the Company shall grant any rights, options or warrants to purchase
Common Stock or to purchase securities convertible into Common Stock (other than
Exempted Securities), and the purchase price per share for which Common Stock is
issuable upon the exercise or conversion of such securities (determined by
dividing (x) the total amount, if any, received or receivable by the Company as
consideration for the granting of all such rights, options or warrants, plus the
minimum aggregate amount of additional consideration payable to the Company upon
the exercise of all such rights, options or warrants, plus, in the case of
convertible securities, the minimum aggregate amount of additional consideration
payable upon the conversion thereof, by (y) the maximum aggregate number of
shares of Common Stock issuable upon the exercise of such rights, options or
warrants or upon the conversion of any such convertible securities issuable upon
the exercise of such rights, options or warrants) shall be less than the
Conversion Price in effect immediately prior to the time of the granting of such
rights, options, warrants or convertible securities, then the maximum aggregate
number of shares of Common Stock issuable upon the exercise of such rights,
options or warrants or upon the conversion of the total maximum amount of such
convertible securities issuable upon the exercise of such rights, options or
warrants shall (as of the date of grant thereof) be deemed to be outstanding and
to have been issued for such price per share. No further adjustments of the
Conversion Price shall be made upon the actual issue of such Common Stock or
convertible securities upon the exercise or conversion of such securities,
except as otherwise provided in clause 3. below;
2. If the Company shall issue or sell any convertible securities (other
than Exempted Securities), and the purchase per share for which Common Stock is
issuable upon such conversion (determined by dividing (x) the total amount
received or receivable by the Company as consideration for the issue or sale of
all such convertible securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion thereof, by
(y) the maximum aggregate number of shares of Common Stock issuable upon the
conversion of all such convertible securities) shall be less than the Conversion
Price in effect immediately prior to the time of such issue or sale, then the
maximum number of shares of Common Stock issuable upon conversion of all such
convertible securities shall (as of the date of the issue or sale thereof) be
deemed outstanding and to have been issued for such price per share, PROVIDED
THAT, except as otherwise specified in clause 3. below, (A) no further
adjustments of the Conversion Price shall be made upon the actual issue of such
Common Stock upon conversion of such convertible securities, and (B) if any such
issue or sale of such convertible securities is made upon the exercise of any
rights to subscribe for or to purchase or upon exercise of any option to
purchase any such convertible securities, no further adjustment of the
Conversion Price shall be made by reason of such issue or sale; and
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3. If the purchase price or number of shares purchasable provided for in
any right, warrant or option referred to in clause 1. above, or the rate at
which any convertible securities referred to in clause 1. or 2. above are
convertible into Common Stock shall change at any time (other than under or by
reason of provisions designed to protect against dilution in connection with
events for which provision for adjustments in the Conversion Price are provided
for herein), the Conversion Price then in effect hereunder shall forthwith be
readjusted to such Conversion Price as would have been obtained had the
adjustments made upon the issuance of such rights, warrants, options or
convertible securities been made upon the basis of the changed terms; and on the
expiration of any such right, warrant or option referred to in clause 1. above
or the termination of any such right to convert such Convertible Securities
referred to in clause 1. or 2. above, the Conversion Price then in effect
hereunder shall forthwith be readjusted to such Conversion Price as would have
been obtained had the adjustments made upon the issuance of such rights,
warrants or options or convertible securities been made upon the basis of the
issuance of only the number of shares of Common Stock, if any, theretofore
actually delivered upon the exercise of such rights, warrants or options or upon
the conversion of such convertible securities.
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SCHEDULE II
NAME
Quantum Industrial Partners LDC
Xxxxxxx X. Xxxxxxxxxxxxx
Xxxxxxx Xxxxx
Xxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxx
Xxxxxxxxx X. Xxxxxx
Xxxx XxXxxxx
Xxxxxxx X. Xxxx
Xxxx X. Xxxxxx
Trust for Xxxxxxxxx X. Xxxxx Under Xxxxxx
Xxxxx 1982 Private Lead Trust Dated as of
April 1, 1982
Trust for Xxxxxx Xxxxx Under Xxxxxx Xxxxx
1982 Private Lead Trust Dated as of
April 1, 1982
Trust for Xxxxxxx Xxxxx Under Xxxxxx Xxxxx
1982 Private Lead Trust Dated as of
April 1, 1982
Trust for Xxxxxxxx Xxxxx Under Xxxxxx Xxxxx
1982 Private Lead Trust Dated as of
April 1, 1982
Trust for Xxxxxx Xxxxx Under Xxxxxx Xxxxx
1982 Private Lead Trust Dated as of
April 1, 1982
Xxxxxx Xxxxx
20
