Exhibit 10.1
MODIFICATION
AGREEMENT
THIS MODIFICATION AGREEMENT (this
“Agreement”) is dated as of February 6, 2009, by
and between ELANDIA INTERNATIONAL INC., a Delaware corporation (the
“Company”) and STANFORD INTERNATIONAL BANK LTD., an
Antiguan banking corporation (“Stanford”).
RECITALS
WHEREAS, the Company and Stanford
entered into that certain Credit Agreement, dated as of
July 21, 2008, as amended by (i) that certain First
Amendment to Credit Agreement dated as of September 5, 2008,
(ii) that certain Fourth Amendment to Preferred Stock Purchase
Agreement and Second Amendment to Credit Agreement dated as of
September 17, 2008 and (iii) that certain Third Amendment
to Credit Agreement dated as of November 14, 2008 (the
foregoing amendments together with the original Credit Agreement,
collectively, the “Credit Agreement”), whereby Stanford
committed to loan the Company up to $40,000,000 on the terms and
conditions set forth in the Credit Agreement;
WHEREAS, an amount equal to
$12,000,000 has been funded under the Credit Agreement and,
together with accrued interest thereon, is currently outstanding
under the Credit Agreement;
WHEREAS, pursuant to the terms of
the Credit Agreement, Stanford is required to fund the balance of
the amount committed under the Credit Agreement during February and
March 2009;
WHEREAS, as of the date hereof, the
Company has agreed to amend the Credit Agreement in order to, among
other things, terminate Stanford’s obligation to fund any
further amounts thereunder subject to the terms and conditions set
forth herein and in a Fourth Amendment to Credit Agreement to be
entered into by the Company and Stanford;
WHEREAS, in partial consideration of
the Company agreeing to the foregoing amendment of the Credit
Agreement, Stanford has agreed to (i) convert and exchange
$12,000,000 representing all amounts of principal outstanding under
the Credit Agreement (the “Converted Debt”) into
1,777,778 shares of Series B Convertible Preferred Stock of the
Company (the “Series B Preferred Stock”) in accordance
with the terms and conditions set forth herein, and
(ii) cancel any accrued and unpaid interest outstanding on
such principal amount;
WHEREAS, as additional consideration
of the Company agreeing to the foregoing amendment to the Credit
Agreement, Stanford has agreed to surrender for cancellation by the
Company 16,148,612 shares of the common stock of the Company, par
value $0.00001 (the “Common Stock”) as a result of
which Stanford shall beneficially own no more than 49.9% of the
issued and outstanding Common Stock of the Company;
WHEREAS, the Company desires to
provide an option to Stanford (the “Option”) to
purchase 592,593 shares of Series B Preferred Stock for an
aggregate purchase price of $4,000,000 in accordance with the terms
and conditions set forth herein;
WHEREAS, Stanford desires to place
all of its shares of Common Stock and Series B Preferred Stock with
a voting trustee subject to the terms and conditions to be set
forth in a voting trust agreement as contemplated
hereby;
WHEREAS, as a result of the
transactions contemplated hereby, the Executive Employment
Agreement of Pete R. Pizarro, the Chief Executive Officer of the
Company (“Pizarro”) shall be amended as provided herein
(the “Pizarro Amendment”);
WHEREAS, it is a material inducement
to Stanford’s entering into this Agreement for Pizarro and
the Company to enter into the Pizarro Amendment; and
WHEREAS, the Compensation Committee
of the Board of Directors of the Company (acting on the
recommendation of an independent compensation advisor) has
(i) determined that the Pizarro Amendment is advisable,
(ii) determined that the Pizarro Amendment and the
transactions contemplated thereby, including the additional
compensation to be provided to Pizarro, are fair to and in the best
interests of the Company, and (iii) approved the Pizarro
Amendment and the transactions contemplated thereby.
NOW, THEREFORE, IN CONSIDERATION of
the mutual covenants contained in this Agreement, and for other
good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the parties agree as follows:
AGREEMENT
1. Amendment to Credit
Agreement . Upon the execution of this Agreement, the parties
shall execute a Fourth Amendment to Credit Agreement (the
“Fourth Amendment”), in the form attached as Exhibit
“A” hereto, pursuant to which, among other things:
(a) all obligations and commitments of Stanford to fund any
further amounts under the Credit Agreement shall be terminated; and
(b) all Loan Documents (as such term in defined in the Credit
Agreement) shall be cancelled with no further force and effect.
Upon execution of the Fourth Amendment, Stanford shall tender for
cancellation all original promissory notes, guaranties and security
and pledge agreements executed by the Company in connection with
the Credit Agreement. In addition, the parties shall enter into a
Termination Agreement, in the form attached as Exhibit
“B” hereto, pursuant to which all registration rights
agreements executed by the Company in favor of Stanford shall be
terminated with no further force and effect.
2. Conversion and Exchange .
Stanford hereby agrees, subject to the issuance of the Series B
Preferred Stock as provided in Section 3 below and the
tendering by Stanford of the promissory note(s) evidencing the
Converted Debt, to convert the Converted Debt into the Series B
Preferred Stock concurrent with the execution of this Agreement
(the “Conversion Time”). Upon the issuance of the
Series B Preferred Stock, the Converted Debt shall automatically be
cancelled and retired and shall cease to exist, and the holder of
any note that, immediately prior to the Conversion Time,
represented issued and outstanding Converted Debt shall cease
to
2
have any rights with respect thereto, including
any claims for any default occurring or other liability arising
prior to the Conversion Time, except the right to receive, upon the
surrender of such note, the Series B Preferred Stock contemplated
hereby.
3. Issuance of Series B Preferred
Stock . At the Conversion Time, the Company shall, and hereby
agrees to issue one or more stock certificates evidencing the
Series B Preferred Stock which stock shall be initially registered
in the name of Stanford, and transferred to the trustee on the date
hereof pursuant to the Voting Trust Agreement among Stanford, the
Company and Pete Pizarro. The Series B Preferred Stock shall have
the terms set forth in the Amended and Restated Certificate of
Designations, Rights and Preferences of the Series B Preferred
Stock in the form attached as Exhibit “C” hereto (the
“Amended and Restated Certificate of Designation”).
Simultaneously with the execution hereof, the Board of Directors of
the Company shall cause the Company’s certificate of
incorporation to be amended to incorporate the terms and provisions
of the Amended and Restated Certificate of Designation.
4. Surrender of Common Stock
. Upon the execution of this Agreement, Stanford shall surrender
and deliver to the Company for cancellation stock certificates,
along with duly endorsed stock powers, evidencing 16,148,612 shares
of Common Stock. Immediately following such surrender, the Company
certifies that Stanford will beneficially own 49.9% of the
outstanding Common Stock of the Company.
5. Option to Purchase Series B
Preferred Stock . Upon the execution of this Agreement, the
Company shall issue an option to Stanford in the form attached as
Exhibit “D” hereto (the “Option”) pursuant
to which the Company shall grant to Stanford an option to purchase
592,593 shares of Series B Preferred Stock for an aggregate
purchase price of $4,000,000 in accordance with the terms and
conditions set forth therein. The Option shall be exercisable at
any time, upon written notice to the Company, on or prior to
March 31, 2009. In the event that the Option is not fully
exercised by Stanford, then the Conversion Rate for the Series B
Preferred Stock shall be immediately adjusted as set forth in the
Amended and Restated Certificate of Designation.
6. Voting Trust Agreement .
Upon the execution of this Agreement, Stanford shall execute a
Voting Trust Agreement in the form of Exhibit “E”
attached hereto pursuant to which Stanford shall place all shares
of Common Stock and Series B Preferred Stock that it currently owns
into a voting trust and such shares shall be subject to the
provisions set forth therein.
7. Amendment to Pizarro
Employment Agreement . Upon the execution of this Agreement,
the Company and Pete R. Pizarro, the Company’s Chief
Executive Officer, shall enter into an Amendment to Executive
Employment Agreement in the form of Exhibit “F”
attached hereto.
8. Representations and Warranties
of the Company . The Company represents and warrants to
Stanford as follows:
a. Corporate Existence and
Power . The Company is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
organization and is duly qualified or licensed to transact
b
