UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1996
----------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission File Number: 0-17158
AMNEX, INC.
(Exact name of registrant as specified in its charter)
New York 11-2790221
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Park Avenue, Suite 2507, New York, New York 10178
(Address of principal executive offices) (Zip Code)
(212) 867-0166
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports); and (2) has been subject to such filing requirements for
the past 90 days. [ X ] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: Common Stock, $.001 par value:
24,392,505 shares at September 30, 1996.
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - September 30, 1996 and
December 31, 1995
Condensed Consolidated Statements of Income - Three and Nine months
ended September 30, 1996 and 1995
Condensed Consolidated Statements of Cash Flows - Nine months
ended September 30, 1996 and 1995
Condensed Consolidated Statements of Shareholders'Equity - Nine months
ended September 30, 1996
Notes to Condensed Consolidated Financial Statements -September 30,1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
<PAGE>
<TABLE>
<CAPTION>
AMNEX, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
September 30, December 31,
1996 1995
(Unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 1,807 $ 94
Trade receivables, less allowance for doubtful accounts
of $3,802 in 1996 and $2,954 in 1995 26,748 17,080
Parts inventory 369 289
Deferred income taxes 121 121
Note receivable 11 1,290
Customer advances 3,403 3,940
Deposits and other current assets 981 602
--------- ------
Total current assets 33,440 23,416
Property and equipment, net 14,618 11,595
Deposits and other 2,049 3,953
Intangible assets, net 7,061 1,361
Goodwill, net 29,675 9,255
--------- --------
$ 86,843 $ 49,580
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Short-term debt $ 16,420 $ 11,865
Accounts payable 4,275 4,266
Accrued expenses 10,508 3,200
Accrued commissions 4,088 2,062
Current portion of capital lease obligations 2,113 756
Current portion of long-term debt 880 737
-------- --------
Total current liabilities 38,284 22,886
Long-term debt, due to related parties 1,198
Capital lease obligations 2,819 2,170
Long-term debt, less current portion 5,461 4,132
-------- --------
Total liabilities 47,762 29,188
------- -------
Commitments and contingencies
Minority interest 10
Shareholders' equity:
Preferred stock, $.001 par; authorized 5,000,000 shares 10,882 9,023
Common stock, $.001 par; authorized 40,000,000 shares,
issued 24,410,755 shares at September 30, 1996 and 19,484,030
shares at December 31, 1995 24 19
Capital in excess of par value 52,453 39,963
Common stock issuable 2,630
Accumulated deficit (26,442) (28,137)
------- -------
39,547 20,868
Less: 18,250 Common Shares held in treasury, at cost (476) (476)
--------- ----------
Total shareholders' equity 39,071 20,392
------- --------
$ 86,843 $ 49,580
======= =======
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
AMNEX, INC.
Condensed Consolidated Statements of Income
For the Three and Nine Months Ended September 30, 1996 and 1995
(in thousands, except per share amounts)
(Unaudited)
Three months ended September 30, Nine months ended September 30,
1996 1995 1996 1995
<S> <C> <C> <C>
Revenues $ 37,430 $ 30,391 $ 88,188 $ 80,644
------ ------ ------ ------
Costs and expenses:
Cost of sales 29,325 25,529 70,863 66,635
Selling, general and administrative 5,216 3,197 11,414 9,001
Depreciation and amortization 883 483 1,807 1,374
--- --- ----- -----
35,424 29,209 84,084 77,010
------ ------ ------ ------
Operating income 2,006 1,182 4,104 3,634
Interest expense 869 456 1,973 1,368
--- --- ------ ------
Income before income taxes 1,137 726 2,131 2,266
Provision for income taxes 240 221 436 891
--- --- -------- --------
Net income $ 897 $ 505 $ 1,695 $ 1,375
=== === ========== ==========
Preferred share dividend 154 153 462 386
--- --- -------- --------
Net income available for common share $ 743 $ 352 $ 1,233 $ 989
=== === ========= ========
Earnings per common share $ 0.03 $ 0.02 $ 0.06 $ 0.05
==== ==== ==== ====
Weighted average number of shares
outstanding used in computing
earnings per common share: 24,666 19,796 22,014 19,118
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
AMNEX, INC.
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1996 and 1995
(in thousands)
(Unaudited)
1996 1995
-------------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,695 $ 1,375
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,124 2,110
Provision for losses on receivables (494) (778)
Changes in operating assets and liabilities:
Trade receivables 546 (5,113)
Parts inventory (80)
Note receivable 1,279
Customer advances,
deposits and other current assets 564 (105)
Deposits and other assets 169 (475)
Accounts payable and accrued expenses (3,888) (316)
------- -----
Net cash provided by (used in) operating activities 3,915 (3,302)
--------- -------
Cash flows from investing activities:
Cash paid on acquisition of Teleplus dealer agreement (1,500)
Cash paid on acquisition of pay telephones (150)
Cash received on acquisition 910
Phone contracts purchased (579)
Proceeds on disposition of assets 867
Expenditures for property and equipment (1,840) (2,161)
------- -------
Net cash used in investing activities (2,292) (2,161)
------ -------
Cash flows from financing activities:
Proceeds from sale of Preferred Shares 2,000 3,052
Proceeds from sale of Common Shares 225
Proceeds from the exercise of options 136 1,052
Payment of Stock Registration costs (20)
Borrowings (repayments) under revolving credit, net (621) 1,666
Payments on related party debt (146)
Payments on long-term debt (557) (70)
Principal payments under capital lease obligations (927) (230)
------- ----------
Net cash provided by financing activities 90 5,470
------- ---------
Net increase in cash and cash equivalents 1,713 7
Cash and cash equivalents at beginning of period 94 593
------- -------
Cash and cash equivalents at end of period $ 1,807 $ 600
========= =======
See notes to consolidated financial statements
<PAGE>
Supplemental disclosure of cash flow information:
Nine months ended September 30, 1996:
1. In January 1996, the holder of an aggregate of 50,000 shares of the
Company's Series E Preferred Stock elected to convert such shares
into 50,000 shares of the Company's Common Stock.
2. Interest of approximately $1,601,000 was paid.
3. Income taxes of approximately $244,000 were paid.
4. Capital lease obligations incurred to acquire property and equipment were
approximately $1,548,000.
5. The Company issued 4,099,086 Common Shares upon acquisition of Capital
Network System, Inc.
6. The Company issued 550,725 Common Shares upon acquisition of National
Business Exchange, Inc.
7. The Company holds 1,052,336 issuable Common Shares for the acquisition of
the Teleplus, Inc. Dealer Agreement.
8. The Company issued 44,643 Common Shares pursuant to the conversion of
$150,000 of debt plus accrued interest thereon.
9. The Company issued 54,340 Common Shares for the acquisition of pay
telephones.
Nine months ended September 30, 1995:
1. The Company issued 125,000 Common Shares pursuant to an equity participation
agreement.
2. The Company issued 332,500 Common Shares pursuant to the conversion of 33,250
Series B Preferred Shares.
3. Interest of approximately $1,421,000 was paid.
4. Income taxes of approximately $151,000 were paid.
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
AMNEX, INC.
Condensed Consolidated Statement of
Shareholders' Equity December 31, 1995
through September 30, 1996
(in thousands, except par value)
(Unaudited)
Balance, Exercise Conversion Issuance of Common Balance,
December 31, of Stock of Preferred Preferred Conversion Issuance of Stock Net September 30,
1995 Options Shares Shares of Debt Common Shares Issuable Income 1996
--------------- ---------- ------------ ----------- ------- -------------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Common stock,
$.001 par value,
Shares 19,484 53 50 45 4,779 24,411
Amount $ 19 $ 1 $ $ $ $ 4 $ $ $ 24
Capital in excess of
par value 39,963 135 141 156 12,058 52,453
Preferred stock
Series B 362 362
Series D 3,533 3,533
Series E 3,052 (141) 2,911
Series F 2,076 2,076
Series G 2,000 2,000
Common stock issuable 2,630 2,630
Accumulated deficit (28,137) 1,695 (26,442)
Treasury stock (476) (476)
---------- ---------- ---------- ---------- ------- ----------- ---------- -------- ----------
Total shareholders'
equity $ 20,392 $ 136 $ $ 2,000 $ 156 $ 12,058 $ 2,630 $ 1,695 $ 39,071
======= ======== ========== ======== ======= ========== ======== ====== ======
</TABLE>
See notes to consolidated financial statements
<PAGE>
AMNEX, INC.
Note to the Condensed Consolidated Financial Statements
1. Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information in response to the requirements of Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, the accompanying
unaudited condensed consolidated financial statements contain all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
financial position as of September 30, 1996; results of operations for the
three and nine months ended September 30, 1996 and 1995; cash flows for the
nine months ended September 30, 1996 and 1995; and changes in shareholders'
equity for the nine months ended September 30, 1996. For further information,
refer to AMNEX's financial statements and notes thereto included in the
Company's Form 10-K for the year ended December 31, 1995. The December 31,
1995 balance sheet has been derived from AMNEX's audited financial statements
as of that date.
2. Preferred Stock
In January 1996, the holder of an aggregate of 50,000 shares of the
Company's Series E Preferred Stock elected to convert such shares into 50,000
shares of the Company's Common Stock.
In September 1996, the Company obtained proceeds of $2,000,000 through
the sale of an aggregate of 100,000 Series G Preferred Shares at $20 per
share. The Series G Preferred Shares have the following rights and
preferences, among others: (i) 5% cumulative dividend payable in cash or, at
the option of the Board of Directors of the Company and subject to the
requirements of applicable law, in Common Shares or additional Series G
Preferred Shares of the Company, only upon conversion of the Series G
Preferred Shares; (ii) voting rights, with the number of votes equaling the
number of Common Shares issuable upon conversion of the Series G Preferred
Shares as of the original issue date thereof; (iii) the right to convert each
share into Common Shares of the Company at a conversion price generally equal
to the lesser of (a) the average per share market value for the five trading
days immediately preceding September 19, 1996 and (b) 80% of the average per
share market value for the five trading days immediately preceding the
conversion; and (iv) a liquidation preference of $20 per share plus an amount
equal to accrued but unpaid dividends per share.
3. Acquisition of Capital Network Systems Inc.("CNSI")
On April 26, 1996, the stockholders of CNSI signed a Stock Purchase
Agreement (the "Acquisition")with the Company which provides for the exchange
of 100% of the common stock of CNSI for AMNEX common stock. There were
4,099,086 shares of unregistered AMNEX Common Stock exchanged with the
stockholders of CNSI in addition to certain payments made and to be made of
approximately $1.1 million. The Acquisition closed on June 28, 1996, effective
June 30, 1996. The accompanying financial statements give effect to the
acquisition occuring effective June 30, 1996 and the results from operations
has been reflected in the Statement of Operations for the three months ended
September 30, 1996. The acquisition was accounted for as a purchase.
The estimated purchase price and allocation thereof is presented below:
<TABLE>
<S> <C>
(in thousands)
Market value of shares issued $ 14,859
Less: Discount for unregistered stock based upon
a preliminary estimate of independent appraisal (4,458)
Add: Cash consideration to be paid 1,094
------
11,495
Add: Assumption of CNSI affitiate indebtedness which was not acquired 150
Forgiveness for related party receivables - current 409
Forgiveness for related party receivables - long-term 249
Forgiveness of debt due from CNSI affiliate, which was not acquired 540
Employee termination benefits 1,763
Lease termination costs 898
Reduction of switching equipment to net realizable value 1,076
Estimated costs associated with Acquisition Agreement 970
Write-off of deferred financing costs 104
---
Estimated Purchase Price $ 17,654
======
</TABLE>
<PAGE>
Allocation of the purchase price on the basis of fair value in excess
of book value:
<TABLE>
<S> <C>
Book value of CNSI net assets acquired $ (2,467)
Goodwill 20,059
------
Estimated Purchase Price $ 17,654
=======
</TABLE>
The pro forma unaudited results of operations for the nine months ended
September 30, 1996 and 1995 assuming the consummation of the CNSI acquisition
as of the beginning of 1996 and 1995 are as follows (in thousands, except per
share amounts):
<TABLE>
<S> <C> <C>
1996 1995
---- ----
Revenues $ 112,563 $ 112,994
Net income 2,875 (368)
Net income per Common Share $ 0.10 $ (0.02)
</TABLE>
4. Acquisition of Teleplus, Inc. Dealer Agreement ("Teleplus")
On August 31, 1996, Teleplus assigned to the Company its Dealer
Agreement with CNSI in exchange for cash and AMNEX common stock. In exchange
for the Dealer Agreement there are 1,052,336 of unregistered AMNEX
Common Stock issuable to Teleplus, 526,168 issuable on January 30, 1997
and 526,168 issuable on January 30, 1998.
The purchase price and allocation thereof is presented below:
<TABLE>
<S> <C>
Market value of shares issuable $ 3,757
Less: Discount for unregistered stock based upon
a preliminary estimate of independent appraisal (1,127)
Add: Cash consideration paid 1,500
-----
Estimated Purchase Price $ 4,130
=====
Allocation of the purchase price on the basis of fair value in
excess of book value:
Covenant not to compete $ 10
Intangibles 4,120
------
Estimated Purchase Price $ 4,130
=====
</TABLE>
5. Acquisition of National Business Exchange, Inc.("NBE")
On September 30, 1996, the stockholders of NBE signed a Stock
Purchase Agreement with the Company which provides for the exchange of 80% of
the common stock of NBE for 550,725 shares of unregistered AMNEX Common Stock
having a market value of $1.9 million. After accounting for an unregistered
stock discount and estimated acquisition costs the estimated purchase price is
$1.68 million and has been allocated based on the fair value of the assets
acquired.
6. Subsequent Event
On November 8, 1996, the Company entered into an Asset Purchase
Agreement with, among others, Coastal Telecom Payphone Company, Inc. with
regard to the acquisition of, among other assets, approximately 4,300 pay
telephones located primarily in New Jersey. The Asset Purchase Agreement
provides for an aggregate purchase price for the assets to be acquired of $10
million, payable to the extent of $2.5 million in cash, and the balance in
approximately 2,308,000 Common Shares of the Company. The Asset Purchase
Agreement also provides for an additional payment, in consideration of certain
restrictive covenants granted by each seller, among other consideration, of
$2.0 million payable to the extent of $1.5 million in cash and the balance in
approximately 154,000 Common Shares of the Company. The Company's obligation
to pay the cash portion of the purchase price and additional consideration is
subject to the receipt of financing. The Company has received a commitment
letter for a loan in excess of the $4.0 million required to consummate the
Asset Purchase Agreement and anticipates that it will be able to close the
transaction on the scheduled closing date of November 15, 1996. In the event
financing is not received, then , in lieu of tendering the $2.5 million cash
portion of the purchase price and the $1.5 million cash portion of the
additional consideration, the Company shall be obligated to deliver an
aggregate of approximately 1,846,000 Common Shares of the Company. The
purchase price is subject to adjustment under certain circumstances.
As indicated above, the closing of the Asset Purchase Agreement is
scheduled to occur on November 15, 1996, however, if the Company shall not
have received the proceeds of the financing by such date, then the closing
date may be deferred to a date not later than December 16, 1996. The
consummation of the transaction is subject to the satisfaction of a
number of conditions to closing. No assurances can be given that the Asset
Purchase Agreement will be consummated on the terms set forth above or
otherwise.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three and Nine Months Ended September 30, 1996 Compared with
Three and Nine Months Ended September 30, 1995
Results of Operations
Revenues for the three months ended September 30, 1996 and 1995 were
$37.4 million and $30.4 million, respectively, and $88.1 million and $80.6
million, for the nine months ended September 30 1996 and 1995, respectively.
The 1996 third quarter revenues included a full three months of operations
from CNSI, which was acquired on June 28, 1996. Revenues from this transaction
for the three months ended September 30, 1996 were $8.5 million, with $6.3
million derived from international operations and the remaining from the
domestic 0+ and 1+ line of business. The 1996 third quarter operations also
included $1.6 million in revenues from the Company's coin sent paid product
and $1.6 million in revenues from the Company's payphone operations, these
lines of business generated no appreciable revenues during the three months
ended September 30, 1995. Other Company revenues for the quarter were $23.1
million for domestic operator services, $2.3 million for 1+ long distance and
$0.5 million from integrated services. As projected, domestic operator
services continued their decline in volumes from the previous year's third
quarter results, a decline of $4.7 million or 16.7 % for the three month
period ended September 30 1996 compared to 1995. This has been more than
offset by increased revenues from the CSNI acquisition, new 1+ coin sent paid
revenues and Crescent operations (pay phones), as noted above. The decrease in
domestic operator services revenue has been caused by continuing trends
impacting the operator services industry, including (i) increases in the
number of consumers who dial access numbers, rather than dialing "0+" and
utilizing the operator services company who provides services for the
telephone used (referred to in the industry as "Dial Around") and (ii)
continued efforts by governmental regulatory agencies to establish maximum
rates which may be charged for "0+" calls ("Rate Caps"). For the most recent
three month period, domestic operator services provided 68.1% of total
revenues, while making up 93.2% of revenue for the same period last year. This
planned revenue shift is consistent with the Company's efforts to develop and
acquire revenue sources from new product lines.
Cost of sales, as a percentage of revenues, was 78.3% and 84.0% for the
three months ended September 30, 1996 and 1995, respectively and 80.4% and
82.6% for the nine months ended September 30, 1996 and 1995, respectively. The
decrease relates to improved profit margins with the change of the product mix
now offered by the Company. As the Company continues to rely less on domestic
operator services, overall Company margins will continue to improve.
Particularly, for the quarter, bad debt and billing and collection costs have
decreased as a percent of sales as the international business (CNSI), coin
sent paid and the payphone operation(Crescent) realize less dilution of
receivables. Operator wages continued their decrease from a year ago as cost
control measures implemented at the end of 1995 have been maintained. As a
percentage of revenues, operator wages for the period September 30, 1996 and
1995 were 2.4% and 3.8%, respectively.
Selling, general, and administrative expenses, as a percentage of
revenues, were 12.9% and 11.1%, respectively, for the nine months ended
September 30, 1996 and 1995. The increase relates directly to the acquisition
of CNSI, which has redundant selling, general and administrative expenses. As
part of the CNSI consolidation and integration plan, these costs are
specifically targeted for reduction or elimination. Approximately $1.3 million
of such costs were absorbed in operations for the three month period ended
September 30, 1996. A significant portion of these costs have now been reduced
or eliminated providing cost savings in future periods that will be reflected
in earnings.
Interest expense was $883 thousand and $483 thousand for the three
months period ended September 30, 1996 and 1995, respectively. This is due to
additional capital lease obligations of the integrated services product lines
and increased loans associated with the Crescent acquisition in October 1995.
Furthermore, it reflects approximately $280 thousand in interest for CNSI,
represented by short term and long term borrowing assumed as part of the
acquisition.
The Company's Management has established goals to strategically
position the Company in markets which will lower its cost of sales, improve
profit margins and secure its customer base. This is expected to be achieved
in part through the development and deployment of new technologies as well as
through strategic acquisitions.
As part of that strategy, as discussed more fully in Note 5 of the
Condensed Consolidated Notes to the Financial Statements, the Company
purchased 80% of NBE as of September 30, 1996. As a furtherance of the
Company's strategy, this acquisition should provide significant synergies
to the existing cost structure of AMNEX, while providing a new and expanding
business in billing and collection niche markets. There are no of results of
operations of NBE in the statement of operations for the three or nine month
periods ended September 30, 1996 and 1995. In addition, and as part
of the consolidation plan of CNSI, the Company purchased CNSI's Dealer
Agreement with Teleplus Inc. This will continue to increase margins in
the Mexico international market, by eliminating specific commissions to
brokers and agents.
The Company may enter into other lines of business, through acquisition
or internal development, where such lines of business are expected to meet its
strategic goals.
Liquidity and Capital Resources
The Company had a working capital deficiency of $4.8 million at
September 30, 1996, as compared to working capital of $530 thousand at
December 31, 1995. The September 30, 1996 working capital deficiency reflects
an improvement of $1.6 million since June 30, 1996. The most significant
changes occurred in the second quarter of 1996 due to the CNSI acquisition. As
of the June 28, 1996 closing, CNSI carried over a working capital deficiency
of approximately $3.5 million. In addition, acquisition related accruals for
reserves, transaction costs and obligations totaled another $4.7 million.
The Company experienced a dramatic improvement in net cash provided by
(used in) operating activities during the nine months ended September 30,
1996. Net cash provided by operating activities was $3.9 million for the nine
month period ended September 30, 1996, as compared to cash used in operating
activities of $(3.3) million for the period ended September 30, 1995. The
improvement was primarily due to improved collection efforts with respect to
the Company's trade receivables and customer advances, as well as cash flow
provided by the Company's coin sent paid and payphone operations.
In addition, as explained in more detail in Note 2, the Company
obtained $2.0 million from the issuance of Series G Preferred Stock. As part
of the agreement, additional equity lines of credit of $8.0 million are
available to the Company, subject to the satisfaction of certain
conditions,over the course of the next four quarters ending September 30,
1997. The lines are available in the maximum amounts of $0.5 million, $2.5
million, $2.5 million and $2.5 million for each of the next four quarters,
should the Company , at its own discretion, but subject to the satisfaction of
certain conditions, choose to draw down the equity lines. These draws would be
similar in structure to the Series G Preferred Stock mentioned in Note 2 of
the condensed consolidated financial statements.
For a description of the acquisition of NBE, see Note 5 of the Notes to
Condensed Consolidated Financial Statements.
Recent Developments
For a description of the terms of a certain Asset Purchase Agreement,
dated as of November 8, 1996, between the Company and, among others, Coastal
Telecom Payphone Company, Inc. (which agreement has not yet been consummated),
see Note 6 of the Notes to Condensed Consolidated Financial Statements.
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4 Submission of Matters to a Vote of Security Holders
None.
Item 5 Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<S> <C>
2.1 Asset Purchase Agreement dated as of August 31, 1996 by and
between Teleplus, Inc. and AMNEX, Inc.
3.1 Certificate of Amendment of Certificate of Incorporation filed September 16, 1996
3.2 Restated Certificate of Incorporation, as amended
3.3 By-Laws, as amended
10.1 Convertible Preferred Stock Purchase Agreement dated as of September 19, 1996 between
AMNEX, Inc. and Southbrook International Investments, Ltd.
27 Financial Data Schedule
</TABLE>
<PAGE>
(b) Reports on Form 8-K
One Current Report on Form 8-K was filed during the
quarter ended September 30, 1996 as follows:
Date of Report (date of earliest event reported):
June 28, 1996
Items Reported: 2 and 7
Financial Statements Filed:
Capital Network System, Inc.
Historical Financial Statements
Report of Independent Auditors
Consolidated Balance Sheet as of September 30, 1995 and
Consolidated Statement of Operations for the years ended
September 30, 1995, 1994 and 1993
Consolidated Statement of Changes in Stockholders'
Deficit for the years ended September 30,
1995, 1994 and 1993
Consolidated Statement of Cash Flows for the years ended
September 30, 1995, 1994 and 1993
Notes to the Consolidated Financial Statements
Interim Period Consolidated Financial Statements
(Unaudited)
Consolidated Balance Sheet as of June 30, 1996
Consolidated Statement of Operations for the nine
months ended June 30, 1996 and 1995
Consolidated Statement of Changes in Stockholders'
Deficit for the nine months ended June 30, 1996
Consolidated Statement of Cash Flows for the nine months
ended June 30, 1996 and 1995
Notes to the Consolidated Financial Statements
AMNEX, INC.
Pro Forma Consolidated Financial Statements (Unaudited)
Pro Forma Condensed Consolidated Balance Sheet as of
June 30, 1996
Pro Forma Condensed Consolidated Statement of Operations
for the six months ended June 30, 1996
Pro Forma Condensed Consolidated Statement of Operations
for the twelve months ended December 31, 1995
Notes to Pro Forma Condensed Consolidated Financial
Statements
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMNEX, INC.
By:____/s/ Peter M. Izzo, Jr.____
Peter M. Izzo, Jr.
President and Chief Executive Officer
Date: November 14,1996
By:____/s/ Richard L. Stoun______
Richard L. Stoun Chief Accounting Officer
Date:November 14, 1996
ASSET PURCHASE AGREEMENT
Dated as of August 31, 1996
by and between
TELEPLUS, INC.
and
AMNEX, INC.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
PAGE
SECTION 1. Certain Definitions.............................................................................4
SECTION 2. Assignment of Dealer Agreement..................................................................6
2.1 Dealer Agreement To Be Assigned........................................................6
SECTION 3. Consideration...................................................................................6
3.1 Amount of Purchase Price...............................................................6
3.2 Payment of Purchase Price..............................................................6
3.3 Due and Payable Commissions............................................................7
SECTION 4. Representations and Warranties of Seller........................................................7
4.1 Good Standing..........................................................................7
4.2 Authorization; Consents; Conflicts.....................................................7
4.3 No Additional Agreements...............................................................8
4.4 No Amounts Due and Owing...............................................................8
4.5 Legal Proceedings......................................................................8
4.6 Orders, Decrees, Etc...................................................................9
4.7 Governmental Approvals.................................................................9
4.8 No Omissions...........................................................................9
4.9 Investment Intent......................................................................9
4.10 Restricted Securities.....................................................................10
SECTION 5. Representations and Warranties of Buyer................................................................11
5.1 Good Standing.........................................................................11
5.2 Authorization.........................................................................11
5.3 No Additional Agreements..............................................................11
5.4 Orders, Decrees, Etc..................................................................12
5.5 Governmental Approvals................................................................12
5.6 No Omissions..........................................................................12
5.7 Restricted Securities.................................................................12
SECTION 6. Non-Disclosure, Non Interference.......................................................................13
6.1 Non-Disclosure........................................................................13
6.2 Non-Interference......................................................................13
SECTION 7. Non-Competition................................................................................13
7.1 Non-Competition.......................................................................13
7.2 Non-Solicitation......................................................................14
7.3 Specific Performance..................................................................15
7.4 Severability..........................................................................15
SECTION 8. Indemnification........................................................................................15
8.1 Indemnification by Seller.............................................................15
8.2 Indemnification by Buyer..............................................................16
8.3 Procedures for Indemnification........................................................16
SECTION 9. Registration Rights....................................................................................16
9.1 Required Registration.................................................................16
9.2 Procedure for Registration............................................................17
9.3 Piggyback Registration................................................................17
9.4 Indemnification by Buyer..............................................................19
9.5 Indemnification by Seller.............................................................20
9.6 Holdback Agreement....................................................................21
SECTION 10. Survival of Representations;
Effect of Certificates................................................................22
10.1 Survival..............................................................................22
SECTION 11. No Broker.............................................................................................22
SECTION 12. Notices...............................................................................................23
SECTION 13. Miscellaneous.........................................................................................24
13.1 Entire Agreement......................................................................24
13.2 Governing Law; Arbitration............................................................25
13.3 Benefit of Parties; Assignment........................................................25
13.4 Pronouns..............................................................................26
13.5 Headings..............................................................................26
13.6 Counterparts..........................................................................26
13.7 Further Assurances....................................................................26
</TABLE>
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of August 31, 1996 (this
"Agreement") by and between TelePlus, Inc., a Texas corporation ("Seller"),
and AMNEX, Inc., a New York corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Buyer desires to purchase from Seller and Seller
desires to sell to Buyer, all of the rights of Seller resulting in the
termination of Seller's interest in and to that certain Mexico Sales
Representative Agreement (the "Dealer Agreement") dated November 3, 1993
between Seller and Capital Network System, Inc., a Texas corporation and a
wholly-owned subsidiary of Buyer ("CNSI"), upon the terms and conditions and
for the purchase price hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and for other good and valuable consideration set forth
herein, the parties hereto agree as follows:
SECTION 1. Certain Definitions. For purposes of this
Agreement, the following terms shall have the respective meanings
set forth below:
"Actions" means any claims, actions, complaints, grievances,
suits, proceedings and investigations, whether at law, in equity or in
admiralty or before any court, arbitrator, arbitration panel or Governmental
Authority.
"Closing" means the closing of the transactions contemplated
hereby, which shall take place simultaneously with the execution and delivery
of this Agreement on the date first above written.
"Closing Date" means the date first above written.
"Commission" means the Securities and Exchange
Commission.
"Costs and Expenses" shall include all of the costs and
expenses relating to the Registration Statement involved, including but not
limited to registration, filing and qualification fees, blue-sky expenses,
printing expenses, reasonable fees and disbursements of counsel to Buyer,
counsel to
<PAGE>
Seller, and accounting fees; provided, however, that underwriting discounts
and commissions and reimbursable underwriters' expenses will be borne pro rata
by the holders of the securities included in the Registration Statement.
"Damages" mean losses, liabilities, costs, damages, claims,
taxes and expenses (including attorneys fees and expenses.)
"Dealer Agreement" means that certain Mexico Sales
Representative Agreement dated November 3, 1993 between Seller and CNSI.
"Governmental Authority" means any agency, instrumentality,
department, commission, court, tribunal or board of any government, whether
foreign or domestic and whether national, federal, state, provincial or local.
"Laws" mean laws, rules, regulations, codes, orders,
ordinances, judgments, injunctions, decrees and policies.
"Lien" means any security interest, lien, mortgage, claim,
charge, pledge, restriction, equitable interest or encumbrance of any nature.
"Person" means any natural person, corporation, business
trust, joint venture, association, company, firm, partnership, or other entity
or government or Governmental Authority.
"Registration Statement" means an appropriate shelf
registration statement pursuant to Rule 415 under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal law then in effect.
SECTION 2. Assignment of Dealer Agreement.
2.1. Dealer Agreement To Be Assigned. Seller hereby sells,
conveys, transfers, assigns and delivers to Buyer, its successors and assigns,
free and clear of all Liens, all of Seller's right, title and interest in and
to the Dealer Agreement and Buyer hereby buys and accepts, the Dealer
Agreement.
SECTION 3. Consideration.
3.1. Amount of Purchase Price. The total consideration
<PAGE>
(the "Purchase Price") to be paid by Buyer for assignment and termination of
Seller's interest in the Dealer Agreement and the covenant not to compete set
forth in Section 7 hereof (the "Covenant") shall be $5,250,000 of which
$10,000 shall be allocated to the Covenant.
3.2. Payment of Purchase Price.
(a) Concurrently with the execution hereof, Buyer
is paying to Seller $1,500,000 of the Purchase Price (the "Initial Payment"),
by the delivery by Buyer to Seller of a certified or bank cashier's check in
such amount payable to the order of Seller or by means of a wire transfer in
such amount to an account number and depository designated by Seller; and
(b) $3,750,000.00 of the Purchase Price shall be
payable as follows:
(i) on January 30, 1997 Buyer shall issue and
deliver 526,168 shares of Common Stock of Buyer, $.001 par value per share
(the "AMNEX Common Stock"), to Seller; and
(ii) on January 30, 1998 Buyer shall issue and
deliver 526,168 shares of AMNEX Common Stock to Seller. Such number of shares
of AMNEX Common Stock (collectively, the "AMNEX Shares") have been determined
by averaging the closing share price as reflected in the "Close" column in the
NASDAQ/Wall Street Journal Quotation of Buyer's Common Stock for the 30
trading days preceding August 1, 1996, as reported by the NASDAQ Stock Market.
(c) Until such time as the AMNEX Shares are
registered under the Securities Act pursuant to Section 12 hereof, the AMNEX
Shares shall be unregistered and subject to certain trading restrictions which
shall be as set forth in Rule 144 promulgated under the Securities Act.
3.3. Due and Payable Commissions. Buyer shall pay Seller
within the time specified by the Dealer Agreement all monies and commissions
due, payable and/or accrued through the Closing Date (i.e., commissions for
July and August 1996 services shall be paid in September and October 1996,
respectively).
SECTION 4. Representations and Warranties of Seller.
Seller hereby warrants and represents to and agrees with Buyer as
follows:
<PAGE>
4.1. Good Standing. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas,
has full power and authority to own, lease and operate its properties and
assets and to conduct its business as now being conducted, and is duly
qualified or licensed to do business as a foreign corporation in each
jurisdiction in which the nature of its business or its ownership or leasing
of property requires such qualification, except where the failure to be so
qualified as a foreign corporation would not materially adversely affect the
business of Seller.
4.2. Authorization; Consents; Conflicts.
The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of Seller and all other corporate action of Seller
necessary to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been taken. This
Agreement constitutes the valid and binding obligation of Seller enforceable
against it in accordance with the terms hereof. No consent of any lender,
trustee, security holder of Seller, or other Person is required for Seller to
enter into and deliver this Agreement or to consummate the transactions
contemplated hereby, nor do the Articles of Incorporation or By-Laws of Seller
or any Contract, mortgage or other instrument to which Seller is a party or by
which Seller is bound or affecting any of its properties conflict with or
restrict the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
4.3. No Additional Agreements. The Dealer Agreement, a true
and correct copy of which is attached on Schedule 4.3, represents the only
Contract, agreement, instrument or understanding between Seller and CNSI,
other than this Agreement and no other Person other than CNSI has any rights
arising out of or related to the Dealer Agreement and is, to the best of
Seller's knowledge, in full force and effect. To the best of Seller's
knowledge, Seller is not in breach of the Dealer Agreement.
4.4. No Amounts Due and Owing. To the best of Seller's
knowledge, there are no amounts due and owing to Seller from
either Buyer or CNSI other than commissions for July and August
1996 referred in Section 3.3 hereof.
4.5. Legal Proceedings. Except for the ATI Settlement
described in Section 4.6, below, there are no Actions (whether or
not purportedly on behalf of Seller) pending or, to the knowledge
<PAGE>
of Seller, threatened against or affecting Seller or any of its properties,
rights or business. Seller is not in default with respect to any order, writ,
injunction or decree of any Governmental Authority that may effect the Dealer
Agreement. The ATI Settlement will not have an adverse effect on the Dealer
Agreement.
4.6. Orders, Decrees, Etc. There are no orders, decrees,
injunctions, rulings, decisions, directives, consents or regulations of any
court or any Governmental Authority issued against, or binding on, Seller
which do or may affect, limit or control the Dealer Agreement, except for that
certain Agreed Order of Dismissal With Prejudice and to Dissolve Cash
Bond and Compromise Settlement Agreement and Mutual Release in the case
styled, TelePlus, Inc. and Capital Network System, Inc. vs. American
Telesource International, Inc., et al., (CA95-CI-01168) in the District
Court, Bexar County, Texas, 45th Judicial District (the "ATI Settlement").
4.7. Governmental Approvals. No governmental authori zation,
approval, order, license, permit, franchise, or consent and no registration,
declaration or filing by Seller or any shareholder or Affiliate of Seller with
any Governmental Authority is required in connection with the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby.
4.8. No Omissions. Seller does not, as of the date of this
Agreement, know of any facts or circumstances not disclosed to Buyer which
indicate that the Dealer Agreement may be adversely affected or which
otherwise reasonably should be disclosed to Buyer in order to make any of the
representations or warranties made herein on the part of the Seller not
misleading. No representation or warranty by Seller contained in this
Agreement, and no statement contained in any Schedule, Exhibit, certificate or
other instrument furnished to Buyer under or in connection with this
Agreement, contains any untrue statement of any material fact, or omits to
state any material fact necessary in order to make the statements contained
herein or therein not misleading.
4.9. Investment Intent. Seller is acquiring the AMNEX
Shares for its own account and not with a present view to, or for
sale in connection with, any distribution thereof in violation of
the Securities Act of 1933, as amended (the "Securities Act").
Seller consents to the placement of the following legend on each
certificate representing the AMNEX Shares:
<PAGE>
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
TRANSFERRED OR SOLD UNLESS (i) A REGISTRATION STATEMENT UNDER
SUCH ACT IS THEN IN EFFECT WITH RESPECT THERETO, (ii) A
WRITTEN OPINION FROM COUNSEL FOR THE ISSUER OR OTHER COUNSEL
FOR THE HOLDER REASONABLY ACCEPTABLE TO THE ISSUER HAS BEEN
DELIVERED TO THE ISSUER TO THE EFFECT THAT NO SUCH
REGISTRATION IS REQUIRED OR (iii) A 'NO ACTION' LETTER OR ITS
THEN EQUIVALENT HAS BEEN ISSUED BY THE STAFF OF THE SECURITIES
AND EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER OR
SALE."
4.10. Restricted Securities. Seller understands that the AMNEX
Shares will not be registered when issued and delivered to Seller under the
Securities Act for the reason that the sale provided for in this Agreement is
exempt pursuant to Section 4 of the Securities Act and that the reliance of
Buyer on such exemption is predicated in part on Seller's representations set
forth herein. Seller represents that it is experienced in evaluating companies
such as Buyer, is able to fend for itself, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits
and risks of its investment, and has the ability to suffer the total loss of
its investment. Seller further represents that Buyer has furnished it with
Buyer's Annual Report on Form 10-K for the year ended December 31, 1995 and
subsequent reports on Form 10-Q and 8-K (the "AMNEX Public Documents) and that
Seller has reviewed the same and has been afforded the opportunity to obtain
such other information as it has deemed necessary to evaluate its investment
in AMNEX Common Stock, ask questions of and receive answers from the Company
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 the accuracy of any information furnished to it or to
which it had access.
Seller understands that the AMNEX Shares may not be sold,
transferred or otherwise disposed of without registration under the Securities
Act or an exemption therefrom and that in the absence of an effective
registration statement covering the Shares or an available exemption from
registration under the Securities Act, the AMNEX Shares must be held
indefinitely.
SECTION 5. Representations and Warranties of Buyer.
Buyer warrants and represents to and agrees with Seller as
follows:
<PAGE>
5.1. Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York,
has full power and authority to own, lease and operate its properties and
assets and to conduct its business as now being conducted, and is duly
qualified or licensed to do business as a foreign corporation in each
jurisdiction in which the nature of its business or its ownership or leasing
of property requires such qualification, except where the failure to be so
qualified as a foreign corporation would not materially adversely affect the
business of Buyer.
5.2. Authorization. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Board of Directors of Buyer and all other
corporate action of Buyer, including all shareholder approvals, authorizations
and ratifications, necessary to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been taken. This Agreement constitutes a binding obligation of Buyer
enforceable against Buyer in accordance with its terms. No consent of any
lender, trustee, security holder of Buyer, or other Person is required for
Buyer to enter into and deliver this Agreement or to consummate the
transactions contemplated hereby, nor do the Certificate of Incorporation or
By-Laws of Buyer or any Contract, mortgage or other instrument to which Buyer
is a party or by which Buyer is bound or affecting any of its properties
conflict with or restrict the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
5.3. No Additional Agreements. Buyer is not in default
with respect to any order, writ, injunction or decree of any
Governmental Authority that may effect the Dealer Agreement.
5.4. Orders, Decrees, Etc. There are no orders,
decrees, injunctions, rulings, decisions, directives, consents or
regulations of any court or any Governmental Authority issued
against, or binding on, Buyer which do or may affect, limit or
control the Dealer Agreement, except for that certain Agreed Order
of Dismissal With Prejudice and to Dissolve Cash Bond and
Compromise Settlement Agreement and Mutual Release in the case
styled TelePlus, Inc. and Capital Network System, Inc. vs.
American Telesource International, Inc., et al., (CA95-CI-01168)
in the District Court, Bexar County, Texas, 45th Judicial
District.
5.5. Governmental Approvals. No governmental authoriza tion,
approval, order, license, permit, franchise, or consent and no registration,
declaration or filing by Buyer or any shareholder or Affiliate of Buyer with
any Governmental Authority is required in connection with the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby.
5.6. No Omissions. No representation or warranty by Buyer
contained in this Agreement, and no statement contained in any Schedule,
Exhibit, certificate or other instrument furnished to Buyer under or in
connection with this Agreement, and no AMNEX Public Document contains any
untrue statement of any material fact, or omits to state any material fact
necessary in order to make the statements contained herein or therein not
misleading.
5.7. Restricted Securities. As and when required by this
Agreement, the Buyer shall issue, deliver to Seller and register the AMNEX
Shares, and when issued, the AMNEX Shares will be duly authorized, validly
issued, fully paid and non-assessable, and listed for trading on, the Nasdaq
Stock Market or such national securities exchange on which the AMNEX Shares
are then listed, if any.
SECTION 6. Non-Disclosure, Non Interference.
6.1. Non-Disclosure. The Seller recognizes the interest
of Buyer in maintaining the confidential nature of the proprietary
and other business and commercial information of Buyer and CNSI.
a. In consideration thereof, Seller shall not,
except to the extent necessary to fulfill this Agreement, or, except as
authorized in writing by Buyer, directly or indirectly, publish, disclose or
use, or authorize anyone else to publish, disclose or use, any secret or
confidential matter, or proprietary or other confidential business information
not in the public domain and acquired by Seller, relating to any aspect of the
operations, customers, marketing, contracts, activities, research,
investigations or obligations of any of Buyer or CNSI now known to the Seller
as a result of the Dealer Agreement, (the "Confidential Information").
b. In the event that Seller becomes legally
required to disclose any Confidential Information, Seller shall provide Buyer
with prompt notice so that it may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Section 6.1. In the
event that such protective order or other remedy is not obtained, or that
Buyer waives compliance with the provisions of this Section 6.1, Seller shall
<PAGE>
furnish only that portion of the Confidential Information which is legally
required to be furnished, in the opinion of counsel to Seller.
6.2. Non-Interference. Seller shall not (a) infringe or
interfere with any of Buyer's or CNSI's copyright, trademark or
trade name rights, or any profits therefrom, or (b) use or
disclose, for itself or for the benefit of another, any
Confidential Information.
SECTION 7. Non-Competition
7.1. Non-Competition. For a period of three years from and
after the date hereof, Seller shall not (a) sell, directly or indirectly,
either for itself or as an agent for another, any telecommunications product
or service to any person or entity for which Seller was paid by CNSI or any of
its affiliates any type of compensation, commission or fee, including without
limitation, the 2% Fee (as such term is defined in the Dealer Agreement) (such
person or entity being referred to herein as a "Current CNSI Customer"),
unless CNSI's contract with a Current CNSI Customer has been terminated or
expired and a period of sixty (60) days has elapsed since the date of such
termination or expiration, (b) compete, directly or indirectly, by providing
or offering to provide, directly or indirectly, either for itself or as an
agent for another, operator services to any person or entity that is not a
Current CNSI Customer but subsequent to the date of this Agreement, enters
into and is under a contract with Buyer or CNSI for the provision of operator
services in Mexico (a "Future CNSI Customer"), (c) request, induce or attempt
to influence any Current CNSI Customer or Future CNSI Customer to limit,
curtail or cancel its business with Buyer or CNSI, (d) engage in any activity
that would tend to disparage or diminish Buyer's or CNSI's reputation, or (e)
request, induce or attempt to influence any current or future officer,
director, employee, consultant, agent or representative of Buyer or CNSI to
commit any act that, if committed by Seller, would constitute a breach of any
provision of this Section 7. Buyer and Seller expressly acknowledge and agree
that the terms and conditions of this Agreement shall not limit Seller from
selling, directly or indirectly, either for itself or as an agent for another,
any telecommunications product or service to any person or entity which is
not, at the time of such sale(s), and has not been for a period of sixty (60)
days preceding such sale(s), a Current CNSI Customer or which is not, at the
time of such sale(s), a Future CNSI Customer, or from selling any
telecommunication product or service other than operator services to any
Future CNSI Customer.
<PAGE>
7.2. Non-Solicitation. Neither Seller nor any Affiliate of
Seller, and neither Buyer or CNSI nor any of their respective Affiliates, for
a period of three years from and after the date hereof, shall, directly or
indirectly, hire, offer to hire, entice away, retain, employ or solicit or
attempt to solicit (either for itself or as agent for another) for employment
or induce, persuade or encourage any person to leave the other party's employ
who, prior to the date hereof was, or during such period will be, employed or
retained by the other party as a consultant, agent, employee or otherwise. For
purposes of this Section 7.2, a person shall be deemed to be in the "employ"
of CNSI or Buyer if such person is employed by an affiliate of Buyer or by an
unaffiliated entity conducting business as an employment agency, including
without limitation, Manpower, Inc, and Seller after due inquiry is aware of
such relationship.
7.3. Specific Performance. Seller acknowledges and agrees that
any breach of Section 6 above or this Section 7 is likely to result in
irreparable injury to Buyer, that monetary damages will be an inadequate
remedy of such breach and that, accordingly, in addition to any other remedy
that Buyer may have, Buyer shall be entitled to enforce the specific
performance of such Section 6 and this Section 7 and to seek both permanent
and temporary relief in the event of any breach hereof.
7.4. Severability. The parties acknowledge that the time,
scope, geographic area and other provisions of this Section 7 have been
specifically negotiated by sophisticated commercial parties and agree that all
such provisions are reasonable under the circumstances of the transactions
contemplated by this Agreement. If any portion of this Section 7 shall be
determined to be invalid and unenforceable as written, each such portion shall
be enforced to the extent reasonable under the circumstances and such
determination shall not affect the validity or enforceability of the balance
hereof, and such balance shall remain in full force and effect. It is
understood that Seller is entering into this non-competition agreement in
order to induce Buyer to enter into this Agreement.
SECTION 8. Indemnification.
8.1. Indemnification by Seller. Seller agrees to indemnify and
hold Buyer harmless from and against any and all Damages which Buyer may
sustain at any time by reason of the breach or inaccuracy of or failure to
comply with any warranties, representations, conditions, covenants or
agreements of Seller contained in this Agreement, or in any agreement or
document
<PAGE>
delivered pursuant hereto or in connection with this Agreement or arising out
of the consummation of the transactions contemplated hereby.
8.2. Indemnification by Buyer. Buyer agrees to indemnify and
hold Seller harmless from and against any and all Damages which Seller may
sustain at any time by reason of the breach or inaccuracy of or failure to
comply with any warranties, representations, conditions, covenants or
agreements of Buyer contained in this Agreement, or in any agreement or
document delivered pursuant hereto or in connection with this Agreement or
arising out of the consummation of the transactions contemplated hereby.
8.3. Procedures for Indemnification. In the event that any
claim is asserted against any party hereto, or any party hereto is made a
party defendant in any action or proceeding, and such claim, action or
proceeding involves a matter which is the subject of this indemnification,
then such party (an "Indemnified Party") shall give written notice to the
other party hereto (the "Indemnifying Party") of such claim, action or
proceeding, and such Indemnifying Party shall have the right to join in the
defense of said claim, action or proceeding at such Indemnifying Party's own
cost and expense and, if the Indemnifying Party agrees in writing to be bound
by and to promptly pay the full amount of any final judgment from which no
further appeal may be taken and if the Indemnified Party is reasonably assured
of the Indemnifying Party's ability to satisfy such agreement, then at the
option of the Indemnifying Party, such Indemnifying Party may take over the
defense of such claim, action or proceeding, except that, in such case, the
Indemnified Party shall have the right to join in the defense of said claim,
action or proceeding at its own cost and expense.
SECTION 9. Registration Rights.
9.1. Required Registration. For purposes of this Section 9
only, the term "Registrable Securities" shall mean the AMNEX Shares acquired
pursuant to this Agreement, provided, however, that if such shares of AMNEX
Shares owned by Seller may be sold, pursuant to an exemption from the
registration requirements of the Securities Act, including, without
limitation, pursuant to Rule 144 under the Securities Act, such shares shall
not be deemed to be Registrable Securities. Buyer shall in good faith use its
reasonable its best efforts to cause a Registration Statement covering
one-half of the Registrable Shares to become effective with the Commission on
or prior to August 31, 1997 and
<PAGE>
to remain effective until the completion of the distribution of the
Registrable Shares to be offered or sold, but in any case not longer than such
period as is required for the intended method of distribution, or such shorter
period which will terminate when all Registrable Shares covered by such
Registration Statement have been sold or withdrawn. Buyer shall in good faith
use its reasonable best efforts to cause a Registration Statement covering the
remaining of the Registrable Shares to become effective with the Commission on
or prior to August 31, 1998 and to remain effective until the completion of
the distribution of the Registrable Shares to be offered or sold, but in any
case not longer than such period as is required for the intended method of
distribution, or such shorter period which will terminate when all AMNEX
Shares covered by such Registration Statement have been sold or withdrawn.
Buyer shall bear all of the Costs and Expenses of such Registration
Statements.
9.2. Procedure for Registration. In connection with the filing
of a Registration Statement pursuant to Section 9.1 hereof, Buyer shall in
good faith use its reasonable its best efforts to qualify, the Registrable
Shares being registered for sale under the securities or blue-sky laws of such
states and jurisdictions within the United States as shall be reasonably
requested by Seller; provided, however, that Buyer shall not be required in
connection therewith or as a condition thereto to qualify to do business, to
become subject to taxation or to file a consent to service of process
generally in any of the aforesaid states or jurisdictions;
9.3. Piggyback Registration. Subject to the requirements of
Section 9.1 above, if at any time Buyer shall propose the filing of a
registration statement on an appropriate form under the Securities Act of any
securities of Buyer, otherwise than pursuant to Section 9.1 hereof and other
than a registration statement on Forms S-8 or S-4 or any equivalent form then
in effect, then Buyer shall give Seller notice of such proposed registration
and shall include in any registration statement relating to such securities
all or a portion of the Registrable Shares then owned by Seller, which Seller
shall request, by notice given by such Seller to Buyer within 15 days after
the giving of such notice by Buyer, to be so included; provided, however, the
number of Registrable shares owned by Seller to be included shall not exceed
that percentage of the Registrable Shares as would equal the percentage
obtained by dividing the number of Registrable Shares actually issued to
Seller by the number of shares of AMNEX Common Stock then outstanding,
calculated on a fully diluted basis to be registered
<PAGE>
as part of such offering. For example, if Buyer has 30,000,000 shares of AMNEX
Common Stock outstanding, calculated on a fully diluted basis, and Seller has
3,000,000 Registrable Shares (10%) and Buyer intends to register 3,000,000
shares of AMNEX Common Stock (10%), then Seller shall have the right to
piggyback 300,000 Registrable Shares (10% of the newly registered shares of
common stock). In the event of the inclusion of Registrable Shares pursuant to
this Section 9.3, Buyer shall bear all of the Costs and Expenses of such
registration. In the event the distribution of securities of Buyer covered by
a Registration Statement referred to in this Section 9.3 is to be
underwritten, then Buyer's obligation to include Registrable Shares in such
Registration Statement shall be subject, at the option of Buyer, to the
following further conditions, unless Seller refuses to be bound by such
conditions in which event the terms of Paragraph 9.1, hereof, shall control:
(a) The distribution for the account of Seller
shall be underwritten by the same underwriters who are underwriting the
distribution of the securities for the account of Buyer and/or any other
persons whose securities are covered by such Registration Statement, and
Seller will enter into an agreement with such underwriters containing
customary provisions;
(b) If the underwriting agreement entered into
with the aforesaid underwriters contains restrictions upon the sale of
securities of Buyer, other than the securities which are to be included in the
proposed distribution, for a period not exceeding 180 days from the effective
date of the Registration Statement, then such restrictions will be binding
upon Seller and, if requested by Buyer, Seller will enter into a written
agreement to that effect; and
(c) If the underwriters advise Buyer that they are
unwilling to include any or all of Seller's securities in the proposed
underwriting because such inclusion will interfere with the orderly sale and
distribution of the securities being offered by Buyer, then the number of
Seller's securities to be included will be reduced pro rata on the basis of
the number of shares owned by Seller, or there will be no inclusion of
Seller's securities in the registration statement and proposed distribution,
in accordance with such statement by the underwriters.
9.4. Indemnification by Buyer. Buyer will indemnify
and hold harmless Seller, any underwriter (as defined in the
Securities Act) each partner, officer and shareholder, director of
<PAGE>
Seller, and each person, if any, who controls Seller or such underwriter
within the meaning of the Securities Act (but, in the case of an underwriter
or a controlling person, only if such underwriter or controlling person
indemnifies the persons mentioned in subdivision (b) of Section 9.5 hereof in
the manner set forth therein), against any losses, claims, damages or
liabilities, joint or several, to which Seller or any such underwriter,
partner, officer, shareholder, director or controlling person becomes subject,
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) are caused by any untrue
statement or alleged untrue statement of any material fact contained in any
preliminary prospectus (if used prior to the effective date of the
Registration Statement), or contained, on the effective date thereof, in any
Registration Statement under which AMNEX Shares were registered under the
Securities Act, the prospectus contained therein, or any amendment or
supplement thereto, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and Buyer will
reimburse Seller and any such underwriter, partner, officer, shareholder,
director or controlling person for any legal or other expenses reasonably
incurred by Seller, or any such partner, officer, director, underwriter or
controlling person in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that Buyer will
not be liable to any such persons in any such case to the extent that any such
loss, claim, damage, liability or action arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with information furnished to Buyer in
writing by such person expressly for inclusion in any of the foregoing
documents; provided, further, however, that the foregoing indemnity agreement
is subject to the condition that, insofar as it relates to any untrue
statement, alleged untrue statement, omission or alleged omission made in any
preliminary prospectus but eliminated or remedied in the final prospectus
(filed pursuant to Rule 424 of the Securities Act), such indemnity agreement
shall not inure to the benefit of Seller and its partners, officers,
shareholder, and directors, underwriter, broker or other person acting on
behalf of Seller and each other person, if any, who controls any of the
foregoing persons within the meaning of the Securities Act from whom the
person asserting any loss, claim, damage, liability or expense purchased the
AMNEX Shares which are the subject thereof, if a copy of such final prospectus
had been made available to such person and Seller, underwriter, broker or
other person acting on behalf of Seller and such final prospectus was not
delivered to
<PAGE>
such person with or prior to the written confirmation of the sale of such
AMNEX Shares.
9.5. Indemnification by Seller. Seller shall:
(a) Furnish in writing all information to Buyer
concerning itself and its holdings of securities of Buyer as shall be
required in connection with the preparation and filing of any
Registration Statement covering any AMNEX Shares; and
(b) Indemnify and hold harmless Buyer, each of its
directors, each of its officers who has signed a Registration
Statement, each person, if any, who controls Buyer within the meaning
of the Securities Act and any underwriter (as defined in the Securities
Act) for Buyer, against any losses, claims, damages or liabilities to
which Buyer or any such director, officer, controlling person or
underwriter may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) are caused by any untrue or alleged untrue statement
of any material fact contained in any preliminary prospectus (if used
prior to the effective date of the Registration Statement) or contained
on the effective date thereof, in any Registration Statement under
which AMNEX Shares were registered under the Securities Act, the
prospectus contained therein, or any amendment or supplement thereto,
or arising out of or based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; in each case
to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with information furnished in writing
to Buyer by Seller expressly for inclusion in any of the foregoing
documents, and Seller shall reimburse Buyer and any such underwriter,
officer, director or controlling person for any legal or other expenses
reasonably incurred by Seller or any such director, officer or
controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action. Notwithstanding the
foregoing provisions of this Section 9.5, Seller shall not be required
to indemnify Buyer or any such underwriter, officer, director or
controlling persons for any amount in excess of the amount of the
proceeds received by Seller.
9.6. Holdback Agreement. If Buyer at any time shall
<PAGE>
register shares of stock under the Securities Act for sale to the public
(other than on Form S-4 or Form S-8 promulgated under the Securities Act or
any successor forms thereto), and the board of directors of Buyer reasonably
determines that public sales of AMNEX Shares would materially interfere with
such offering, then Seller shall not sell publicly, make any short sale of,
grant publicly any option for the purchase of, or otherwise dispose publicly
of, any AMNEX Shares (other than those AMNEX Shares included in such
registration pursuant to Sections 9.1 or 9.3). The board of directors shall,
as promptly as practicable, give Seller written notice of any such
development. In the event of a request by the board of directors of the Buyer
that Seller refrain from effecting any public sales of the AMNEX Shares (other
than those AMNEX Shares included in such registration statement pursuant to
Section 9.1 or 9.3), Buyer shall be required to lift such restrictions
regarding effecting public sales or distributions as soon as reasonably
practicable after the board of directors shall reasonably determine that
public sales by the Seller shall not interfere with such offering, provided,
that in no event shall any requirement that the Seller refrain from effecting
public sales of the AMNEX Shares extend for more than 90 days and provided
further, that in no event shall Seller be required to refrain from effecting
public sales of the AMNEX Shares for more than one 90 day period within any 12
month period.
Buyer shall obtain the agreement of any person permitted to sell shares of
stock in a registration to be bound by and to comply with this Section 9.6 as
if such person was a stockholder hereunder.
SECTION 10. Survival of Representations; Effect of
Certificates.
10.1. Survival. The parties hereto agree that all
representations, warranties, covenants, conditions and agreements contained
herein or in any instrument or other document delivered pursuant to this
Agreement or in connection with the transactions contemplated hereby shall
survive the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and any investigation or audit made by any
party hereto.
SECTION 11. No Broker. Buyer, on the one hand, and Seller, on
the other hand, each represents to the other that no broker or finder has been
involved with any of the transactions relating to this Agreement. If a claim
by any broker or finder that such broker or finder represented or was retained
by Seller, on the one hand, or Buyer, on the other hand, in connection
herewith, Seller, on the one hand, or Buyer, on the other hand, as
<PAGE>
the case may be, agrees to indemnify and hold the other harmless from and
against any and all loss, liability, cost, damage, claim and expense,
including, without limitation, attorneys' fees and disbursements, which may be
incurred in connection with such claim.
SECTION 12. Notices. All notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
deemed to have been given when hand delivered, when received if sent by
telecopier or by same day or overnight recognized commercial courier service
or three business days after being mailed in any general or branch office of
the United States Postal Service, enclosed in a registered or certified
postpaid envelope, addressed to the address of the parties stated below or to
such changed address as such party may have fixed by notice:
To Seller: TelePlus, Inc.
23705 I.H. 10 West, Suite 210
San Antonio, Texas 78257
Fax: 210-698-3901
Attn: Robert T. Mahler
- copy to -
Gresham, Davis, Gregory, Worthy
& Moore
112 East Pecan, Ninth Floor
San Antonio, Texas 78205-1542
Fax: 210-226-5154
Attn: Peter E. Hosey, Esq.
<PAGE>
To Buyer: AMNEX, Inc.
100 West Lucerne Circle,
Suite 100,
Orlando, Florida 32801
407-246-0005
Attn: John Kane
- copy to -
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004-2696
Telecopier: 212-806-6006
Attn: Susan O. Posen, Esq.
provided, that any notice of change of address shall be effective only upon
receipt.
SECTION 13. Miscellaneous.
13.1. Entire Agreement. This Agreement, including the Exhibits
and Schedules hereto, sets forth the entire agreement and understanding
between the parties and merges and supersedes all prior discussions,
agreements and understandings of every kind and nature among them as to the
subject matter hereof, and no party shall be bound by any condition,
definition, warranty or representation other than as expressly provided for in
this Agreement or as may be on a date on or subsequent to the date hereof duly
set forth in writing signed by each party which is to be bound thereby. Unless
otherwise expressly defined, terms defined in the Agreement shall have the
same meanings when used in any Exhibit or Schedule and terms defined in any
Exhibit or Schedule shall have the same meanings when used in the Agreement or
in any other Exhibit or Schedule. This Agreement (including the Exhibits and
Schedules hereto) shall not be changed, modified or amended except by a
writing signed by each party to be charged and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by each party to be charged.
13.2. Governing Law; Arbitration. THIS AGREEMENT AND
ITS VALIDITY, CONSTRUCTION AND PERFORMANCE SHALL BE GOVERNED IN
ALL RESPECTS BY THE LAWS OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES HERETO AGREE TO
ARBITRATE IN LIEU OF LITIGATION. ALL CLAIMS, CONTROVERSIES,
<PAGE>
DISPUTES, DIFFERENCES OR QUESTIONS BETWEEN THE PARTIES HERETO ARISING OUT OF
OR RELATING TO THE PERFORMANCE, BREACH, CONSTRUCTION, INTERPRETATION OR EFFECT
OF THIS AGREEMENT OR ANY CLAUSE CONTAINED HEREIN, OR CONCERNING ANY SUCH
RIGHTS AND LIABILITIES OF THE PARTIES HERETO, SHALL BE SUBMITTED TO BINDING
ARBITRATION UNDER THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION
ASSOCIATION. SUBJECT TO THE TERMS AND PROVISIONS SET FORTH HEREIN, SUCH
ARBITRATOR(S) SHALL HAVE FULL POWER AND AUTHORITY TO AWARD ANY AND ALL
APPROPRIATE DAMAGES AND OTHER RELIEF, INCLUDING BUT NOT LIMITED TO DAMAGES FOR
LOST PROFITS OR REVENUES, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, AND
SPECIFIC PERFORMANCE. THE ARBITRATION PROCEEDINGS SHALL TAKE PLACE IN THE CITY
OF NEW YORK, NEW YORK, AND THE JUDGMENT AND DETERMINATION OF SUCH PROCEEDINGS
SHALL BE BINDING ON ALL PARTIES HERETO. JUDGMENT UPON ANY AWARD RENDERED BY
ANY ARBITRATOR(S) APPOINTED HEREUNDER MAY BE ENTERED INTO ANY COURT HAVING
COMPETENT JURISDICTION THEREOF. ALL COSTS OF ARBITRATION SHALL BE BORNE
EQUALLY BY THE ARBITRATING PARTIES HERETO, EXCEPT FOR ATTORNEYS' FEES, AS TO
WHICH EACH SUCH PARTY SHALL BEAR ITS OWN COSTS. WITHIN FIFTEEN DAYS AFTER
WRITTEN NOTICE BY ONE PARTY TO THE OTHER PARTY OF ITS DEMAND FOR ARBITRATION,
WHICH DEMAND SHALL SET FORTH THE NAME AND ADDRESS OF ITS DESIGNATED
ARBITRATOR, THE OTHER PARTY SHALL SELECT ITS DESIGNATED ARBITRATOR AND SO
NOTIFY THE DEMANDING PARTY. WITHIN FIFTEEN DAYS THEREAFTER, THE TWO
ARBITRATORS SO SELECTED SHALL SELECT THE THIRD ARBITRATOR. THE DISPUTE SHALL
BE HEARD BY THE ARBITRATORS WITHIN SIXTY DAYS AFTER SELECTION OF THE THIRD
ARBITRATOR. THE DECISION OF ANY TWO ARBITRATORS SHALL BE BINDING UPON THE
PARTIES. IN DEFAULT OF EITHER SIDE NAMING ITS ARBITRATOR AS AFORESAID OR IN
DEFAULT OF THE SELECTION OF THE SAID THIRD ARBITRATOR AS AFORESAID, THE
AMERICAN ARBITRATION ASSOCIATION SHALL DESIGNATE SUCH ARBITRATOR UPON THE
APPLICATION OF EITHER PARTY.
13.3. Benefit of Parties; Assignment. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. The Agreement may not be assigned
by Seller except with the prior written consent of Buyer. Nothing herein
contained shall confer or is intended to confer on any third party or entity
which is not a party to this Agreement any rights under this Agreement.
13.4. Pronouns. Whenever the context requires, the
use in this Agreement of a pronoun of any gender shall be deemed
to refer also to any other gender, and the use of the singular
shall be deemed to refer also to the plural.
<PAGE>
13.5. Headings. The headings in the sections, para graphs,
Schedules and Exhibits of this Agreement are inserted for convenience of
reference only and shall not constitute a part hereof. The words "herein,"
"hereof," "hereto" and "hereunder," and other words of similar import refer to
this Agreement as a whole and not to any particular provision of this
Agreement.
13.6. Counterparts. This Agreement may be executed in
counterparts, all of which together shall constitute one Agreement binding on
all the parties hereto, notwithstanding that such parties are not signatories
to the original or the same counterpart. The parties also agree that for
purposes of satisfying Section 3.2, hereof, a facsimile copy of an executed
counter-part original shall be treated as an original instrument until
replaced by the executed counter-part original.
13.7. Further Assurances. Buyer and Seller shall do and
perform such further acts and execute and deliver such further instruments as
may be required by law or reasonably requested by either party at such
requesting party's expense to carry out and effectuate the purposes of this
Agreement.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed on the day and year first above written.
TELEPLUS, INC.
By:_______________________
Name:
Title:
AMNEX, INC.
By:_______________________
Name:
Title:
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
AMNEX, INC.
Under Section 805 of the Business Corporation Law
Pursuant to the provisions of Section 805 of the Business Corporation
Law, the undersigned, being the Chairman of the Board and Secretary,
respectively, of AMNEX, INC. (the "Company"), DO HEREBY CERTIFY AND SET FORTH:
1. The name of the Company is AMNEX, Inc. The Company was formed under
the name NY-Tel Communications, Inc.
2. The Certificate of Incorporation of the Company was filed by the
Department of State on March 15, 1985.
3. The Certificate of Incorporation of the Company is hereby amended by
the addition of a provision stating the number, designation, relative rights,
preferences and limitations of a series of shares of Preferred Stock, $.001 par
value, as fixed by the Board of Directors.
4. The foregoing amendment to the Certificate of Incorporation is
effected by adding the following Section (i) to Article (4) thereof:
"(i) Series G Preferred Shares. A series of Preferred Stock is hereby
created, to be limited in amount to 145,000 of the 5,000,000 authorized shares
of Preferred Stock. The designation, relative rights, powers, preferences,
qualifications and limitations are as follows:
1
<PAGE>
Section 1. Designation, Amount and Par Value. The series of
Preferred Stock shall be designated as the Series G Convertible Preferred Stock
(the "Series G Preferred Stock"), and the number of shares so designated shall
be 145,000, of which 20,000 is reserved for issuance solely for payment of stock
dividends, if any, hereunder. The par value of each share of Preferred Stock
shall be $.001. Each share of Preferred Stock shall have a stated value of $20
per share (the "Stated Value"). The Series G Preferred Stock shall rank, with
respect to dividends and distributions upon a Liquidation (as hereinafter
defined) or otherwise, pari passu with each other series of preferred stock of
the Company outstanding as of the Original Issue Date, including without
limitation the Company's Series B Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock and Series F Preferred Stock, and shall rank pari passu
with respect to dividends and distributions upon a Liquidation or otherwise with
each other series of preferred stock of the Company hereafter created unless the
terms of such other series of preferred stock expressly states that such series
ranks junior to the Series G Preferred Stock. All such other series of preferred
stock ranking pari passu with the Series G Preferred Stock is referred to as the
"Other Preferred Stock."
Section 2. Dividends.
(a) Holders of Series G Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors out of funds legally
available therefor, and the Company shall pay, cumulative dividends at the rate
per share (as a percentage of the Stated Value per share) equal to 5% per annum,
payable, in cash or (at the Company's option) shares of Common Stock or
additional Series G Preferred Stock, which the Company shall immediately convert
into shares of Common Stock at the Conversion Ratio (as hereinafter defined), in
arrears on the Conversion Date (as hereinafter defined) without interest.
Dividends on the Series G Preferred Stock shall accrue daily
2
<PAGE>
commencing the Original Issue Date (as defined in Section 7) and shall be deemed
to accrue on such date whether or not earned or declared and whether or not
there are profits, surplus or other funds of the Company legally available for
the payment of dividends. The party that holds the Series G Preferred Stock on
an applicable record date for any dividend payment will be entitled to receive
such dividend payment and any other accrued and unpaid dividends which accrued
prior to such dividend payment date, without regard to any sale or disposition
of such Series G Preferred Stock subsequent to the applicable record date but
prior to the applicable dividend payment date. Except as otherwise provided
herein, if at any time the Company pays less than the total amount of dividends
then accrued to the Series G Preferred Stock, such payment shall be distributed
ratably among the holders of such series based upon the number of shares held by
each holder.
(b) So long as any Series G Preferred Stock shall remain
outstanding, neither the Company nor any subsidiary thereof shall redeem,
purchase or otherwise acquire directly or indirectly any Junior Securities (as
defined in Section 7), nor shall the Company directly or indirectly pay or
declare any dividend or make any distribution (other than a dividend or
distribution described in Section 5) upon, nor shall any distribution be made in
respect of, any Junior Securities, nor shall any monies be set aside for or
applied to the purchase or redemption (through a sinking fund or otherwise) of
any Junior Securities unless all dividends on the Series G Preferred Stock for
all past dividend periods shall have been paid.
Section 3. Voting Rights. The holders of Series G Preferred
Stock shall be entitled vote on all matters for which holders of the Company's
Common Stock are entitled to vote, and shall vote together with such Common
Stock as a single class. Each share of Series G Preferred Stock shall be
entitled to the number of votes on such matters as equals the number of shares
of
3
<PAGE>
Common Stock issuable upon conversion of such share of Series G Preferred Stock
had such share been converted on the Original Issue Date in accordance with the
terms hereof. So long as any shares of Series G Preferred Stock are outstanding,
the Company shall not, without the affirmative vote of the holders of a majority
of the shares of the Series G Preferred Stock then outstanding, (i) alter or
change adversely the powers, preferences or rights given to the Series G
Preferred Stock (except that the foregoing shall not be construed to limit the
ability of the Company, without the vote of such holders, to grant such voting
rights or, subject to the other provisions set forth herein, conversion rights,
as it may determine with regard to shares of its capital stock now or hereafter
authorized) or (ii) authorize or create any class of stock ranking as to
dividends or distribution of assets upon a Liquidation (as defined below) senior
to, or prior to the Series G Preferred Stock.
Section 4. Liquidation. Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a "Liquidation"),
the holders of shares of Series G Preferred Stock shall be entitled to receive
out of the assets of the Company, whether such assets are capital or surplus,
for each share of Series G Preferred Stock an amount equal to the Stated Value,
plus an amount equal to accrued but unpaid dividends per share, whether declared
or not, but without interest, before any distribution or payment shall be made
to the holders of any Junior Securities, and if the assets of the Company shall
be insufficient to pay in full such amounts, then the entire assets to be
distributed shall be distributed among the holders of Series G Preferred Stock
ratably in accordance with the respective amounts that would be payable on such
shares if all amounts payable thereon were paid in full. A sale, conveyance or
disposition of all or substantially all of the assets of the Company or the
effectuation by the Company of a transaction or series of related transactions
in which more than 50% of the voting power of the Company is disposed of shall
be deemed a
4
<PAGE>
Liquidation; provided that, a consolidation or merger of the Company with or
into any other company or companies shall not be treated as a Liquidation, but
instead shall be subject to the provisions of Section 5. The Company shall mail
written notice of any such liquidation, not less than 45 days prior to the
payment date stated therein, to each record holder of Series G Preferred Stock.
Section 5. Conversion.
(a) Each share of Preferred Stock shall be convertible into
shares of Common Stock at the Conversion Ratio at the option of the holder in
whole or in part at any time after the expiration of the earlier to occur of (i)
90 days after the Original Issue Date and (ii) the date that the Securities and
Exchange Commission (the "Commission") declares effective under the Securities
Act of 1933, as amended (the "Securities Act"), the registration statement (the
"Registration Statement") contemplated by the Registration Rights Agreement (the
"Registration Rights Agreement"), by and between the Company and the original
holder of Series G Preferred Stock relating to the Series G Preferred Stock and
the shares of Common Stock into which the Series G Preferred Stock is
convertible in accordance with the terms hereof. Any conversion under this
Section 5(a) shall be of a minimum amount of at least 1,000 shares of Series G
Preferred Stock. The holder shall effect conversions by surrendering the
certificate or certificates representing the shares of Series G Preferred Stock
to be converted to the Company, together with the form of conversion notice
attached hereto as Exhibit A (the "Holder Conversion Notice") in the manner set
forth in Section 5(j). Each Holder Conversion Notice shall specify the number of
shares of Series G Preferred Stock to be converted and the date on which such
conversion is to be effected, which date may not be prior to the date the holder
delivers such Notice by facsimile (the "Holder Conversion Date"). Subject to
Section 5(c) and, as to the original holder (or its sole designee), subject to
Section 3.11 of the Purchase
5
<PAGE>
Agreement (as defined in Section 7), each Holder Conversion Notice, once given,
shall be irrevocable. If the holder is converting less than all shares of Series
G Preferred Stock represented by the certificate or certificates tendered by the
holder with the Holder Conversion Notice, the Company shall promptly deliver to
the holder a certificate for such number of shares as have not been converted.
(b) Provided that 10 Trading Days shall have elapsed from the
date the Commission declared the Registration Statement effective under the
Securities Act, each share of the Series G Preferred Stock shall be convertible
into shares of Common Stock at the Conversion Ratio at the option of the Company
in whole or in part at any time on or after the expiration of one year after the
Original Issue Date; provided, however, that the Company is not permitted to
deliver a Company Conversion Notice (as defined below) within 10 days of issuing
any press release or other public statement relating to such conversion. The
Company shall effect such conversion by delivering to the holders of such shares
of Series G Preferred Stock to be converted a written notice in the form
attached hereto as Exhibit B (the "Company Conversion Notice"), which Company
Conversion Notice, once given, shall be irrevocable. Each Company Conversion
Notice shall specify the number of shares of Preferred Stock to be converted and
the date on which such conversion is to be effected, which date will be at least
one Trading Day after the date the Company delivers such Notice by facsimile to
the holder (the "Company Conversion Date"). The Company shall give such Company
Conversion Notice in accordance with Section 5(j) below at least one Trading Day
before the Company Conversion Date. Any such conversion shall be effected on a
pro rata basis among the holders of Series G Preferred Stock. Upon the
conversion of shares of Series G Preferred Stock pursuant to a Company
Conversion Notice, the holders of the Series G Preferred Stock shall
6
<PAGE>
surrender the certificates representing such shares at the office of the Company
or of any transfer agent for the Series G Preferred Stock or Common Stock. If
the Company is converting less than all shares of the Series G Preferred Stock,
the Company shall, upon conversion of such shares subject to such Company
Conversion Notice and receipt of the certificate or certificates representing
such shares of Series G Preferred Stock deliver to the holder or holders a
certificate for such number of shares of Series G Preferred Stock as have not
been converted. Each of a Holder Conversion Notice and a Company Conversion
Notice is sometimes referred to herein as a "Conversion Notice," and each of a
"Holder Conversion Date" and a "Company Conversion Date" is sometimes referred
to herein as a "Conversion Date."
(c) (i) If on any Conversion Date for any shares of Series G
Preferred Stock applicable to any conversion under Section 5(a) or 5(b), the
average Per Share Market Value of the Common Stock for the five (5) Trading Days
immediately preceding the Conversion Date exceeds 150% of the Initial Conversion
Price (as hereinafter defined), the number of shares issuable upon conversion of
such shares of Series G Preferred Stock shall be reduced by a number of shares
equal to 50% of (A) the amount by which such Per Share Market Value exceeds 150%
of the Initial Conversion Price, divided by (B) such average Per Share Market
Value, times (C) the number of shares which would otherwise be issuable upon
such conversion, but for the reduction provided for in this Section 5(c)(i).
(ii) Not later than three Trading Days after the
Conversion Date, the Company will deliver to the holder (i) a certificate or
certificates which shall be free of restrictive legends and trading restrictions
(other than those then required by law and as set forth in the Purchase
Agreement), representing the number of shares of Common Stock being acquired
upon the
7
<PAGE>
conversion of shares of Series G Preferred Stock and (ii) one or more
certificates representing the number of shares of Series G Preferred Stock not
converted; provided, however that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon conversion of
any shares of Series G Preferred Stock until certificates evidencing such shares
of Series G Preferred Stock are either delivered for conversion to the Company
or any transfer agent for the Series G Preferred Stock or Common Stock, or the
holder notifies the Company that such certificates have been lost, stolen or
destroyed and provides a bond (or other adequate security reasonably acceptable
to the Company) satisfactory to the Company to indemnify the Company from any
loss incurred by it in connection therewith. The Company shall, upon request of
the holder, use its best efforts to deliver any certificate or certificates
required to be delivered by the Company under this Section 5(c) electronically
through the Depository Trust Corporation or another established clearing
corporation performing similar functions. In the case of a conversion pursuant
to a Holder Conversion Notice, if such certificate or certificates are not
delivered by the date required under this Section 5(c), the holder shall be
entitled by written notice to the Company at any time on or before such holder's
receipt of such certificate or certificates thereafter, to rescind such
conversion, in which event the Company shall immediately return the certificates
representing the shares of Preferred Stock tendered for conversion.
(d) (i) The conversion price for each share of Series G
Preferred Stock (the "Conversion Price") in effect on any Conversion Date shall
be the lesser of (a) the average Per Share Market Value for the five (5) Trading
Days immediately preceding the Original Issuance Date (the "Initial Conversion
Price") and (b) 80% of the average Per Share Market Value for the five (5)
Trading Days immediately preceding the Conversion Date; provided, however, that
the percentage
8
<PAGE>
set forth in clause (b) above is subject to reduction in accordance with the
Registration Rights Agreement.
(ii) If the Company, at any time while any shares of
Series G Preferred Stock are outstanding, (a) shall pay a stock dividend or
otherwise make a distribution or distributions on shares of its Junior
Securities payable in shares of its capital stock (whether payable in shares of
its Common Stock or of capital stock of any class), (b) subdivide outstanding
shares of Common Stock into a larger number of shares, (c) combine outstanding
shares of Common Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any shares of capital stock of the
Company, the Initial Conversion Price designated in Section 5(d)(i)(a) shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding before such event and of which the denominator shall be
the number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section 5(d)(ii) shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification.
(iii) If the Company, at any time while any shares of
Series G Preferred Stock are outstanding, shall issue rights or warrants to all
holders of Common Stock (and not to the holders of the Series G Preferred Stock)
entitling them to subscribe for or purchase shares of Common Stock at a price
per share less than the Per Share Market Value of Common Stock at the record
date mentioned below, the Initial Conversion Price designated in Section 5(d)(i)
(a) shall be multiplied by a fraction, of which the denominator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
on the date of issuance of such rights or warrants plus the number
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<PAGE>
of additional shares of Common Stock offered for subscription or purchase, and
of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such rights or
warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered would purchase at such Per Share Market Value.
Such adjustment shall be made whenever such rights or warrants are issued, and
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such rights or warrants. However, upon the
expiration of any right or warrant to purchase Common Stock the issuance of
which resulted in an adjustment in the Initial Conversion Price designated in
Section 5(d)(i)(a) pursuant to this Section 5(d)(iii), if any such right or
warrant shall expire and shall not have been exercised, the Initial Conversion
Price designated in Section 5(d)(i)(a) shall immediately upon such expiration be
recomputed and effective immediately upon such expiration be increased to the
price which it would have been (but reflecting any other adjustments in the
Conversion Price made pursuant to the provisions of this Section 5 after the
issuance of such rights or warrants) had the adjustment of the Conversion Price
made upon the issuance of such rights or warrants been made on the basis of
offering for subscription or purchase only that number of shares of Common Stock
actually purchased upon the exercise of such rights or warrants actually
exercised.
(iv) If the Company, at any time while shares of Series G
Preferred Stock are outstanding, shall distribute to all holders of Common Stock
(and not to holders of Series G Preferred Stock) evidences of its indebtedness
or assets or rights or warrants to subscribe for or purchase any security
(excluding those referred to in Section 5(d)(iii) above) then in each such case
the Initial Conversion Price at which each share of Series G Preferred Stock
shall thereafter be convertible shall be determined by multiplying the Initial
Conversion Price in effect immediately prior
10
<PAGE>
to the record date fixed for determination of stockholders entitled to receive
such distribution by a fraction of which the denominator shall be the Per Share
Market Value of Common Stock determined as of the record date mentioned above,
and of which the numerator shall be such Per Share Market Value of the Common
Stock on such record date less the then fair market value at such record date of
the portion of such assets or evidence of indebtedness so distributed applicable
to one outstanding share of Common Stock as determined by the Board of Directors
in good faith; provided, however that in the event of a distribution exceeding
ten percent (10%) of the net assets of the Company, such fair market value shall
be determined by a nationally recognized or major regional investment banking
firm or firm of independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial statements of the
Company) (an "Appraiser") selected in good faith by the holders of a majority in
interest of the shares of Series G Preferred Stock; and provided, further that
the Company, after receipt of the determination by such Appraiser shall have the
right to select an additional Appraiser, in which case the fair market value
shall be equal to the average of the determinations by each such Appraiser. In
either case the adjustments shall be described in a statement provided to all
holders of Preferred Stock of the portion of assets or evidences of indebtedness
so distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned above.
(v) All calculations under this Section 5 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.
(vi) Whenever the Initial Conversion Price is adjusted
pursuant to Section 5(d)(ii),(iii), (iv) or (v), the Company shall promptly mail
to each holder of Series G Preferred Stock,
11
<PAGE>
a notice setting forth the Initial Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
(vii) In case of any reclassification of the Common
Stock, any consolidation or merger of the Company with or into another person,
the sale or transfer of all or substantially all of the assets of the Company or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the holders of the Series G Preferred
Stock then outstanding shall have the right thereafter to convert such shares
only into the shares of stock and other securities and property receivable upon
or deemed to be held by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange, and the holders of the
Series G Preferred Stock shall be entitled upon such event to receive such
amount of securities or property as the shares of the Common Stock of the
Company into which such shares of Series G Preferred Stock could have been
converted immediately prior to such reclassification, consolidation, merger,
sale, transfer or share exchange would have been entitled. The terms of any such
consolidation, merger, sale, transfer or share exchange shall include such terms
so as to continue to give to the holder of Series G Preferred Stock the right to
receive the securities or property set forth in this Section 5(d)(vii) upon any
conversion following such consolidation, merger, sale, transfer or share
exchange. This provision shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
(viii) If:
(a) the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
(b) the Company shall declare a special
nonrecurring cash
12
<PAGE>
dividend on or a redemption of its Common
Stock; or
(c) the Company shall authorize the granting to
all holders of the Common Stock rights or
warrants to subscribe for or purchase any
shares of capital stock of any class or of
any rights; or
(d) the approval of any stockholders of the
Company shall be required in connection with
any reclassification of the Common Stock of
the Company (other than a subdivision or
combination of the outstanding shares of
Common Stock), any consolidation or merger
to which the Company is a party, any sale
or transfer of all or substantially all of
the assets of the Company, or any
compulsory share exchange whereby the Common
Stock is converted into other securities,
cash or property; or
(e) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or
winding-up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Series G Preferred Stock, and shall cause to be
mailed to the holders of Preferred Stock at their last addresses as they shall
appear upon the stock books of the Company, at least 20 calendar days prior to
the applicable record or effective date hereinafter specified, a notice stating
(x) the date
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<PAGE>
on which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined, or (y) the
date on which such reclassification, consolidation, merger, sale, transfer,
share exchange, dissolution, liquidation or winding-up is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding-up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
(ix) In any case in which this Section shall require that
an adjustment be made effective as of the record date for a specified event, the
Company may elect to defer until occurrence of such event (A) issuing to the
holder, if Series G Preferred Stock is to be converted after such record date,
the Underlying Shares and other capital stock of the Company, if any, issuable
upon such conversion over and above the Underlying Shares and other capital
stock of the Company, if any, issuable upon such conversion thereof on the basis
of the Conversion Price prior to adjustment and (B) paying to the holder any
amount in cash in lieu of a fractional share pursuant to the terms hereof,
provided, however, that the Company shall deliver to the holder a due bill or
other appropriate instrument evidencing the holder's right to receive such
additional Underlying Shares, other capital stock and/or cash upon the
occurrence of the event requiring such adjustment.
(e) If at any time conditions shall arise by reason of action
taken by the Company which in the opinion of the Board of Directors are not
adequately covered by the other provisions
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<PAGE>
hereof and which might materially and adversely affect the rights of the holders
of Series G Preferred Stock (different than or distinguished from the effect
generally on rights of holders of any class of the Company's capital stock) or
if at any time any such conditions are expected to arise by reason of any action
contemplated by the Company, the Company shall mail a written notice briefly
describing the action contemplated and the material adverse effects of such
action on the rights of the holders of Series G Preferred Stock at least 20
calendar days prior to the effective date of such action, and an Appraiser
selected by the holders of majority in interest of the Series G Preferred Stock
shall give its opinion as to the adjustment, if any (not inconsistent with the
standards established in this Section 5), of the Conversion Price (including, if
necessary, any adjustment as to the securities into which shares of Series G
Preferred Stock may thereafter be convertible) and any distribution which is or
would be required to preserve without diluting the rights of the holders of
shares of Series G Preferred Stock; provided, however, that the Company, after
receipt of the determination by such Appraiser, shall have the right to select
an additional Appraiser, in which case the adjustment shall be equal to the
average of the adjustments recommended by each such Appraiser. The Board of
Directors shall make the adjustment recommended forthwith upon the receipt of
such opinion or opinions or the taking of any such action contemplated, as the
case may be; provided, however, that no such adjustment of the Conversion Price
shall be made which in the opinion of the Appraiser(s) giving the aforesaid
opinion or opinions would result in an increase of the Conversion Price to more
than the Conversion Price then in effect.
(f) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued Common Stock solely for
the purpose of issuance upon conversion of Series G Preferred Stock as herein
provided, free from preemptive rights or any other actual
15
<PAGE>
contingent purchase rights of persons other than the holders of Series G
Preferred Stock, such number of shares of Common Stock as shall be issuable
(taking into account the adjustments and restrictions of Section 5(b) and
Section 5(d) hereof) upon the conversion of all outstanding shares of Series G
Preferred Stock, and in no circumstances shall such reserved and available
shares of Common Stock be less than twice the number of shares of Common Stock
which would be issuable upon conversion of the Series G Preferred Stock were
such conversion effected on the Original Issue Date. The Company covenants that
all shares of Common Stock that shall be so issuable shall, upon issue, be duly
and validly authorized, issued and fully paid and nonassessable.
(g) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Per Share Market Value at such time. If
the Company elects not, or is unable, to make such a cash payment, the holder of
a share of Series G Preferred Stock shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.
(h) The issuance of certificates for shares of Common Stock on
conversion of Series G Preferred Stock shall be made without charge to the
holders thereof for any documentary stamp or similar taxes that may be payable
in respect of the issue or delivery of such certificate, provided that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the holder of such shares of Preferred
Stock so converted and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to
16
<PAGE>
the satisfaction of the Company that such tax has been paid.
(i) Shares of Series G Preferred Stock converted into Common
Stock or redeemed pursuant to the terms hereof shall be canceled and shall have
the status of authorized but unissued shares of preferred stock.
(j) Each Holder Conversion Notice shall be given by facsimile
and by mail, postage prepaid, addressed to the attention of the Chief Financial
Officer of the Company at the facsimile telephone number and address of the
principal place of business of the Company. Each Company Conversion Notice shall
be given by facsimile and by mail, postage prepaid, addressed to each holder of
Series G Preferred Stock at the facsimile telephone number and address of such
holder appearing on the books of the Company or provided to the Company by such
holder for the purpose of such Company Conversion Notice, or if no such
facsimile telephone number or address appears or is so provided, at the
principal place of business of the holder. Any such notice shall be deemed given
and effective upon the earliest to occur of (i)(a) if such Conversion Notice is
delivered via facsimile at the facsimile telephone number specified in this
Section 5(j) prior to 6:00 p.m. (Eastern Standard Time) on any date, such date
(or, in the case of a Company Conversion Notice, the next Trading Day) or such
later date as is specified in the Conversion Notice, and (b) if such Conversion
Notice is delivered via facsimile at the facsimile telephone number specified in
this Section 5(j) after 6:00 p.m. (Eastern Standard Time) on any date, the next
date (or, in the case of a Company Conversion Notice, the next Trading Day after
such next day) or such later date as is specified in the Conversion Notice, (ii)
five days after deposit in the United States mails or (iii) upon actual receipt
by the party to whom such notice is required to be given.
17
<PAGE>
Section 6. Company Redemption Option.
The Company may, at its option, redeem any outstanding and
unconverted Series G Preferred Stock on the third anniversary of the Original
Issue Date (the "Optional Redemption Date"), provided that the Company notifies
the holders thereof no later than the third business day prior to the Optional
Redemption Date of its intention to do so.
If the Company elects to redeem such outstanding and
unconverted shares of Series G Preferred Stock, the redemption price per share
(the "Optional Redemption Price") shall equal the Conversion Price on the
Optional Redemption Date and shall be paid by the Company to the holders of such
unconverted Series G Preferred Stock on the Optional Redemption Date. If any
portion of the Optional Redemption Price shall not be paid by the Company within
7 calendar days after the Optional Redemption Date, such Optional Redemption
Price shall be increased by an amount accruing from the 7th day to the 21st day
after the Optional Redemption Date at the rate of 5% per annum, from the 22nd
day to the 60th day at 8% per annum and from the 61st day until paid at the rate
of 12% per annum. However, if any portion of the Optional Redemption Price
remains unpaid more than 7 calendar days after the Optional Redemption Date,
then the holder may elect, by written notice to the Company given within 45 days
after the Optional Redemption Date, to either (i) demand conversion in
accordance with the formula and the time frame therefor set forth in Section 5
for a conversion at the option of the holder hereof of all Series G Preferred
Shares for which the Optional Redemption Price, plus interest, has not been paid
in full (the "Unpaid Optional Redemption Shares"), in which event the Per Share
Market Price for such shares shall be the lower of the Per Share Market Price
calculated on the Optional Redemption Date and the Per Share Market Price as of
the holder's written demand for conversion, or (ii) demand that the Company
withdraw its election to force such
18
<PAGE>
redemption. If the holder elects option (i) above, the Company shall within
three business days of its receipt of such election deliver to the holder the
shares of Common Stock issuable upon conversion of the Unpaid Shares subject to
such holder conversion demand and otherwise perform its obligations hereunder
with respect thereto; or, if the Holder elects option (ii) above, the Company
shall promptly, and in any event not later than three business days from receipt
of holder's notice of such election, return to the holder all of the Unpaid
Optional Redemption Shares.
Section 7. Definitions. For the purposes hereof, the
following terms shall have the following meanings:
"Common Stock" means shares now or hereafter authorized of the
class of Common Stock, par value $.001, of the Company and stock of any other
class into which such shares may hereafter have been reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, of which
the numerator is Stated Value plus accrued but unpaid dividends (which shall not
include dividends paid upon conversion) and of which the denominator is the
Conversion Price at such time.
"Junior Securities" means the Common Stock and all other
equity securities of the Company, except the Other Preferred Stock.
"Original Issue Date" shall mean the date of the first
issuance of any shares of the Series G Preferred Stock regardless of the number
of transfers of any particular shares of Series G Preferred Stock and regardless
of the number of certificates which may be issued to evidence such Series G
Preferred Stock.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on The NASDAQ
SmallCap Market or other market or
19
<PAGE>
stock exchange on which the Common Stock has been listed or if there is no such
price on such date, then the closing bid price on such market or exchange on the
date nearest preceding such date, or (b) if the Common Stock is not listed on
The NASDAQ SmallCap Market or any market or stock exchange, the closing bid for
a share of Common Stock in the over-the-counter market, as reported by the
NASDAQ Stock Market at the close of business on such date, or (c) if the Common
Stock is not quoted on the NASDAQ Stock Market, the closing bid price for a
share of Common Stock in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to
its functions of reporting prices), of (d) if the Common Stock is no longer
reported by the National Quotation Bureau Incorporated (or similar organization
or agency succeeding to its functions of reporting prices), then the average of
the "Pink Sheet" quotes for the relevant conversion period as determined by the
holder, or (e) if the Common Stock is no longer publicly traded the fair market
value of a share of Common Stock as determined by an Appraiser (as defined in
Section 5(d)(iv) above) selected in good faith by the holders of a majority in
interest of the shares of the Series G Preferred Stock; provided, however, that
the Company, after receipt of the determination by such Appraiser, shall have
the right to select an additional Appraiser, in which case, the fair market
value shall be equal to the average of the determinations by each such
Appraiser.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Convertible Preferred Stock
Purchase Agreement between the Company and the original holder of the Series G
Preferred Stock.
"Trading Day" means (a) a day on which the Common Stock is
traded on The NASDAQ SmallCap Market or principal stock exchange on which the
Common Stock has been listed, or (b) if the Common Stock is not listed on The
NASDAQ SmallCap Market or any stock exchange, a day on which the Common Stock is
traded in the over-the-counter market, as reported by the NASDAQ Stock Market,
or (c) if the Common Stock is not quoted on the NASDAQ Stock Market, a day on
which the Common Stock is quoted in the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices).
20
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert shares of Series G Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series G
Convertible Preferred Stock indicated below, into shares of Common Stock, par
value U.S.$.001 per share (the "Common Stock"), of AMNEX, Inc. (the "Company")
according to the conditions hereof, as of the date written below. If shares are
to be issued in the name of a person other than undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by the Company
in accordance therewith. No fee will be charged to the Holder for any
conversion, except for such transfer taxes, if any.
Conversion calculations: ___________________________________________________
Date to Effect Conversion
___________________________________________________
Number of shares of Series G Preferred Stock to be
Converted
___________________________________________________
Applicable Conversion Price
___________________________________________________
Signature
___________________________________________________
Name:
___________________________________________________
Address:
The Company undertakes to promptly upon its receipt of this conversion
notice (and, in any case prior to the time it effects the conversion requested
hereby), notify the converting holder by facsimile of the number of shares of
Common Stock outstanding on such date and the number of shares of Common Stock
which would be issuable to the holder if the conversion requested in this
conversion notice were effected in full, whereupon, the holder may, within one
day of the notice from the Company, revoke the conversion requested hereby to
the extent that it determines that such conversion would result in it owning in
excess of 4.9% of the outstanding shares of Common Stock on such date, and the
Company shall issue to the holder one or more certificates representing shares
of Series G Preferred Stock which have not been converted as a result of this
provision. If the holder waives the applicability of this limitation by notice
to the Company delivered upon its receipt of the Company's notice regarding the
number of outstanding shares of Common Stock or if the Purchaser fails to
respond to the Company's notice within one day thereafter, the Company shall
effect in full the conversion requested in this notice.
21
<PAGE>
EXHIBIT B
AMNEX, INC.
NOTICE OF CONVERSION AT
THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of AMNEX, Inc. (the "Company") hereby
notifies the addressee hereof that the Company hereby elects to exercise its
right to convert [ ] shares of its Series G Convertible Preferred Stock held by
the Holder into shares of Common Stock, par value U.S.$.001 per share (the
"Common Stock") of the Company according to the terms hereof, as of the date
written below. No fee will be charged to the Holder for any conversion
hereunder, except for such transfer taxes, if any which may be incurred by the
Company if shares are to be issued in the name of a person other than the person
to whom this notice is addressed.
Conversion calculations: ___________________________________________________
Date to Effect Conversion
___________________________________________________
Number of Shares of Preferred Stock to be Converted
___________________________________________________
Applicable Conversion Price
___________________________________________________
Number of Shares of Common Stock Outstanding as at
the Close of Trading on the Conversion Date
AMNEX, INC.
By:________________________________________________
Title:__________________________________________
22
<PAGE>
5. This Amendment has been adopted by the Board of Directors of the
Corporation under the authority granted to it pursuant to Section 502 of the
Business Corporation Law.
IN WITNESS WHEREOF, the undersigned have signed this Certificate as
of the 13th day of September, 1996 and affirm that the statements made herein
are true under the penalties of perjury.
/s/ Kenneth G. Baritz
---------------------
Kenneth G. Baritz
Chairman of the Board
/s/ Amy S. Gross
----------------
Amy S. Gross
Secretary
23
RESTATED CERTIFICATE OF INCORPORATION
OF
AMNEX, INC.
(AS AMENDED THROUGH SEPTEMBER 16, 1996)
(1) The name of the corporation is AMNEX, Inc. (the
"Corporation").
(2) The Corporation is formed to engage in any act or activity for
which corporations may be organized under the Business Corporation Law of the
State of New York, provided that it is not formed to engage in any act or
activity which requires the consent or approval of any state official,
department, board, agency, or other body without such consent or approval first
being obtained.
(3) The office of the Corporation in the State of New York shall be
located in the County of New York.
(4) (a) The aggregate number of shares of stock which the Corporation
shall have the authority to issue is Forty-five Million (45,000,000) of which
Forty Million (40,000,000) are Common Shares, $.001 par value per share, and
Five Million (5,000,000) are Preferred Shares, $.001 par value per share.
(b) The Board of Directors hereby is vested with the authority to
provide for the issuance of the Preferred Shares, at any time and from time to
time, in one or more series, each of such series to have such voting powers,
designations, preferences and
1
<PAGE>
relative participating, optional, conversion and other rights, and such
qualifications, limitations or restrictions thereon as expressly provided in the
resolution or resolutions duly adopted by the Board of Directors providing for
the issuance of such shares or series thereof. The authority which hereby is
vested in the Board of Directors shall include, but not be limited to, the
authority to provide for the following matters relating to each series of the
Preferred Shares:
(i) The designation of any series.
(ii) The number of shares initially constituting any
such series.
(iii) The increase, and the decrease, to a number not
less than the number of the outstanding shares of any such series, of the number
of shares constituting such series theretofore fixed.
(iv) The rate or rates and the times at which dividends
on the Preferred Shares or any series thereof shall be paid, and whether or not
such dividends shall be cumulative, and, if such dividends shall be cumulative,
the date or dates from and after which they shall accumulate.
(v) Whether or not the Preferred Shares or series
thereof shall be redeemable, and, if such shares shall be
2
<PAGE>
redeemable, the terms and conditions of such redemption, including but not
limited to the date or dates upon or after which such shares shall be redeemable
and the amount per share which shall be payable upon such redemption, which
amount may vary under different conditions and at different redemption dates.
(vi) The amount payable on the Preferred Shares or
series thereof in the event of the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; provided, however, that the
holders of shares ranking senior to other shares shall be entitled to be paid,
or to have set apart for payment, not less than the liquidation value of such
shares before the holders of the Common Shares or the holders of any other
series of Preferred Shares ranking junior to such shares.
(vii) Whether or not the Preferred Shares or series
thereof shall have voting rights, in addition to the voting rights provided
by law, and, if such shares shall have such voting rights, the terms and
conditions thereof, including but not limited to the right of the holders of
such shares to vote as a separate class either alone or with the holders of
shares of one or more other class or series of Preferred Shares and the right to
have more than one vote per share.
3
<PAGE>
(viii) Whether or not a sinking fund shall be provided for
the redemption of the Preferred Shares or series thereof, and, if such a sinking
fund shall be provided, the terms and conditions thereof.
(ix) Whether or not a purchase fund shall be provided
for the Preferred Shares or series thereof, and, if such a purchase fund shall
be provided, the terms and conditions thereof.
(x) Whether or not the Preferred Shares or series
thereof shall have conversion privileges, and, if such shares shall have
conversion privileges, the terms and conditions of conversion, including
but not limited to any provision for the adjustment of the conversion rate or
the conversion price.
(xi) Any other relative rights, preferences,
qualifications, limitations and restrictions.
(c) Series A Preferred Shares. A series of Preferred Shares is
hereby created, to be limited in amount to 30,000 of the 5,000,000 authorized
but unissued Preferred Shares. The designation, relative rights, powers,
preferences, qualifications and limitations are as follows:
(i) Designation of Series. The designation of the series of
Preferred Shares created hereby shall be Series A
4
<PAGE>
Preferred Shares (hereinafter the "Series A Preferred
Shares").
(ii) Dividends.
(A) The holders of Series A Preferred Shares, in preference to
the holders of Common Shares, shall be entitled to receive,
when and as declared by the Board of Directors, dividends at
the rate of eight dollars ($8.00) per share per annum, and no
more. Subject to the requirements of applicable law, dividends
on the Series A Preferred Shares shall be payable annually,
when and as declared by the Board of Directors, commencing in
1993. Such dividends on the Series A Preferred Shares shall be
cumulative so that if all or any part of such dividends shall
not have been paid or distributed in any year, or declared and
set apart, the amount of the deficiency (without interest)
shall be paid or distributed, or declared and set apart,
before any dividend or other distribution shall be paid upon,
or declared and set apart for, Common Shares. Declared but
unpaid dividends shall not bear interest.
(B) Except as hereinafter provided and subject to the
requirements of applicable law, including, without limitation,
the obtaining of any necessary approvals or consents from the
holders of the Common Shares of the Corporation, any dividend
declared on the Series A Preferred Shares shall be paid in
cash or, at the option of the Corporation, in Common Shares of
the Corporation having a market price, on the day immediately
preceding the date on which such dividend is declared (the
"Valuation Date"), equal to the amount of the dividend. As
used herein, the term "market price" shall mean the closing
selling price or, if not available, the mean of the closing
bid and asked prices, or, if not available, the mean of the
highest bid and lowest asked prices, of the Common Shares as
quoted on a national securities exchange, or in the
over-the-counter market as reported by NASDAQ or, if not
available, by the National Quotation Bureau, Incorporated, as
the case may be, or, if there is no selling or bid or asked
price on a particular day, then the closing selling price or,
if not available, the
5
<PAGE>
mean of the closing bid and asked prices, or, if not
available, the mean of the highest bid and lowest asked prices
on the nearest trading date before that day and for which such
prices are available, and if the Common Shares are not listed
on such an exchange or traded in such a market on the
Valuation Date, then the market price shall be determined by
the Board of Directors by taking into consideration all
relevant factors, including, but not limited to, the
Corporation's net worth, prospective earning power and
dividend paying capacity.
(iii) Voting Rights. The holders of the Series A Preferred Shares
shall be entitled to vote on all matters at all meetings of
the shareholders of the Corporation, and shall be entitled to
such number of votes for each Series A Preferred Share
entitled to vote at such meetings as is set forth below,
voting together with the holders of Common Shares, and other
Preferred Shares who are entitled to vote, if any such shares
are then outstanding, and not as a separate class, except as
required by law. The number of votes to which the holders of
the Series A Preferred Shares shall be entitled to vote for
each Series A Preferred Share shall equal the number of Common
Shares of the Corporation into which such Series A Preferred
Share shall be convertible on or after October 1, 1992
(without giving effect to any reductions in the Conversion
Price, as hereinafter defined, as provided for in subsection
(v) (A) hereof).
(iv) Redemption.
(A) In the event any holder or holders of Series A Preferred
Shares shall give written notice to the Corporation of an
election to convert such shares into Common Shares of the
Corporation as provided for in subsection (v)(B)(ii) hereof
(whether or not such holder shall have theretofore surrendered
the certificate(s) representing the Series A Preferred Shares
for conversion), the Corporation may elect, at its option, by
notice given prior to any Effective Conversion Date (as
hereinafter defined) as provided in (B) below, to redeem all
or any part of the outstanding Series A Preferred
6
<PAGE>
Shares with respect to which an election to convert has been
given to the Corporation at a price per share in cash equal to
one hundred thirty dollars ($130.00) (the "Redemption Price")
plus all accrued and unpaid dividends with respect to such
Series A Preferred Shares.
(B) Notice of every redemption shall be given by mailing the
same to every holder of record of any shares then to be
redeemed, prior to any Effective Conversion Date and not less
than ten (10) nor more than thirty (30) days prior to the date
fixed as the date for the redemption thereof (the "Redemption
Date"), at the respective addresses of such holders as the
same shall appear on the stock transfer books of the
Corporation. The notice described above shall state that the
shares specified in such notice will be redeemed by the
Corporation at the Redemption Price plus all accrued and
unpaid dividends on the Redemption Date, upon the surrender
for cancellation, at the place designated in such notice, of
the certificate(s) representing the shares so to be redeemed,
properly endorsed for transfer, or accompanied by a proper
instrument of assignment and transfer, and bearing all
necessary transfer tax stamps thereto affixed and cancelled
(provided, however, that such surrender shall not be required
if the holder of record shall have theretofore duly
surrendered the certificate(s) representing the Series A
Preferred Shares in accordance with the conversion provisions
set forth in subsection (v) hereof). On and after the
Redemption Date, each holder of shares called for redemption
shall be entitled to receive therefore, in cash, the
Redemption Price, plus accrued and unpaid dividends as of the
Redemption Date, upon presentation and surrender at the place
designated in such notice of the certificate(s) for shares
held by such holder and called for redemption, properly
endorsed for transfer or accompanied by proper instruments of
assignment or transfer, and bearing all necessary transfer tax
stamps thereto affixed and cancelled (provided, however, that
such surrender shall not be required if the holder of record
shall have theretofore surrendered the certificate(s)
representing the Series A Preferred Shares in accordance with
the conversion provisions set forth in subsection (v) hereof).
If the
7
<PAGE>
Corporation shall give notice of redemption as aforesaid (and
unless the Corporation shall fail to pay the Redemption Price
of the shares duly presented for redemption, plus all accrued
and unpaid dividends as of the Redemption Date, in accordance
with such notice), all shares called for redemption shall be
deemed to have been redeemed on the Redemption Date, whether
or not the certificates for said shares shall be surrendered
for redemption and cancellation, and said shares so called for
redemption shall from and after said date cease to represent
any interest whatever in the Corporation or its property, and
the holders thereof shall have no rights other than the right
to receive the Redemption Price, plus all accrued and unpaid
dividends as of the Redemption Date, but without any right to
receive dividends or interest thereon from or after said date.
All Series A Preferred Shares redeemed under the provisions of
this subsection shall be forthwith retired and cancelled.
(v) Conversion.
(A) Conversion Right and Price. Subject to the Corporation's
redemption right as provided for in subsection (iv) hereof,
each Series A Preferred Share shall be convertible, at the
option of the holder thereof, at any time on or after October
1, 1992, at the office of the Corporation, into such number of
Common Shares of the Corporation as is determined by dividing
one hundred dollars ($100.00) by the Conversion Price (as
hereinafter defined). For purposes hereof, the term
"Conversion Price" shall mean twenty six and two-thirds cents
($.26 - 2/3), subject to adjustment as hereinafter set forth;
provided, however, that, in the event the Corporation's
Pre-tax Net Income (as hereinafter defined) for the twelve
(12) month period ending June 30, 1993 (the "12 Month Period")
shall not exceed one million dollars ($1,000,000), then,
effective with the determination of the Corporation's Pre-tax
Net Income for the 12 Month Period (there being no retroactive
adjustment), the Conversion Price shall instead be as follows:
(i) if the Corporation attains a Pre-tax Net Income for the 12
Month Period, but such Pre-tax Net
8
<PAGE>
Income is equal to or less than one million dollars
($1,000,000), the Conversion Price shall be twenty cents
($.20); and (ii) if the Corporation does not attain a Pre-tax
Net Income for the 12 Month Period, the Conversion Price shall
be thirteen and one-third cents ($.13 - 1/3). For purposes
hereof, the terms "Pre-tax Net Income" and "Net Loss" shall
mean the Corporation's consolidated net income or loss before
all taxes determined in accordance with generally accepted
accounting principles, as calculated by the Company's Chief
Financial Officer, except that any pre-tax effect of certain
reductions in conversion prices provided for in that certain
Agreement dated as of March 11, 1992 by and among the Company,
David A. Lyons, Steven G. Chrust and Friedli Corporate Finance
AG, shall be excluded. For purposes hereof, the Corporation's
Pre-tax Net Income or Net Loss for the fiscal quarter ending
December 31, 1992 shall be deemed equal to the difference
between the Corporation's Pre-tax Net Income or Net Loss for
the fiscal year ending December 31, 1992, as audited and
reported upon by the independent auditors of the Corporation,
and the Corporation's Pre-tax Net Income or Net Loss for the
nine (9) month period ending September 30, 1992.
(B) Procedure. Before any holder of Series A Preferred Shares
shall be entitled to receive Common Shares upon conversion,
the holder shall (i)(a) surrender the certificate(s) therefor,
duly endorsed, at the office of the Corporation and (ii) shall
give written notice to the Corporation at such office that the
holder elects to convert the same into Common Shares and shall
further state therein the number of Series A Preferred Shares
being converted. Subject to the provisions hereof, effective
thirty (30) days following the later of the receipt by the
Corporation of the certificate(s) pursuant to and in
accordance with (i) above and the written notice pursuant to
and in accordance with (ii) above (such thirtieth (30th) day
being hereinafter referred to as the "Effective Conversion
Date"), the holder shall thereupon be deemed to be the holder
of record of the Common Shares issuable upon conversion,
notwithstanding that the stock transfer books of the
Corporation shall
9
<PAGE>
then be closed or that the certificate(s) representing such
Common Shares shall not then be actually delivered to the
holder. Subject to the provisions hereof, immediately
following the Effective Conversion Date, the Corporation shall
cause its transfer agent to issue and deliver to such holder
of Series A Preferred Shares a certificate(s) for the number
of Common Shares to which the holder shall be entitled.
Notwithstanding anything hereinabove to the contrary, in the
event the Corporation shall exercise its redemption rights
pursuant to subsection (iv) hereof, the Corporation shall be
under no obligation to issue Common Shares to the holder and
the holder's sole rights shall be as set forth under such
subsection (iv).
(C) Adjustment of Conversion Price.
(i) In the event that the Corporation shall (i) pay any
dividend on its capital stock payable in Common Shares (except
with respect to the dividend payable to the holders of the
Series A Preferred Shares); (ii) effect a subdivision of its
outstanding shares into a greater number of Common Shares (by
reclassification, stock split or otherwise than by payment of
a dividend in Common Shares); (iii) effect a combination or
consolidation of its outstanding Common Shares into a lesser
number of Common Shares (by reclassification, reverse split or
otherwise); (iv) issue by reclassification, exchange or
substitution of its Common Shares any shares of capital stock
of the Corporation or effect any other transaction having
similar effect, the Conversion Price in effect immediately
prior to such action shall be adjusted so that upon the
exercise of the conversion right hereof at any time after the
occurrence of any event described above, the holder shall be
entitled to receive the Common Shares to which such holder
would have been finally entitled, after giving effect to the
occurrence of such event, as if such holder had converted the
Series A Preferred Shares immediately prior to the occurrence
of such event. An adjustment made pursuant to this paragraph
(C) shall become effective immediately after the record date
in the case of a dividend and shall become effective
immediately after the effective date in
10
<PAGE>
the case of a subdivision, combination, reclassification,
exchange or substitution.
(ii) In case of any consolidation or merger to which the
Corporation is a party, other than a merger or consolidation
in which the Corporation is the surviving or continuing
corporation and which does not result in any reclassification
of, or change (other than a change in par value or from par
value to no par value or from no par value to par value, or as
a result of subdivision or combination) in, outstanding Common
Shares, then the Corporation, or such successor corporation,
as the case may be, shall make appropriate provision so that,
subject to the Corporation's redemption rights described
hereinabove, the holder of each Series A Preferred Share then
outstanding shall have the right to convert such share into
the kind and amount of shares or other securities and property
receivable upon such consolidation or merger by a holder of
the number of Common Shares into which such Series A Preferred
Shares might have been converted immediately prior to such
consolidation or merger.
(D) Fractional Shares. No fractional Common Shares shall be
issued upon conversion of Series A Preferred Shares. In lieu
of any fractional shares to which the holder would otherwise
be entitled, the Corporation shall pay, in cash, an amount
equal to the product of (1) such fraction of a share times (2)
the market price (as hereinabove defined) of one Common Share
on the Effective Conversion Date.
(E) Reservation of Shares Issuable Upon Conversion. The
Corporation shall at all times use its best efforts to reserve
and keep available out of its authorized but unissued Common
Shares, solely for the purpose of effecting the conversion of
the Series A Preferred Shares, such number of its Common
Shares as shall from time to time be sufficient to effect the
conversion of all outstanding Series A Preferred Shares, and
if at any time the number of authorized but unissued Common
Shares shall not be sufficient to effect the conversion of all
then outstanding Series A Preferred Shares, the
11
<PAGE>
Corporation will, as its sole obligation, subject to the
requirements of applicable state law, take such corporate
action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued Common Shares to such
number of shares as shall be sufficient for such purposes;
provided, however that nothing contained herein shall preclude
the Corporation from satisfying its obligations in respect of
the conversion of the Series A Preferred Shares by delivery of
purchased Common Shares which are held in the treasury of the
Corporation.
(F) Lost, Stolen or Destroyed Certificates. In the event that
the holder shall notify the Corporation that the
certificate(s) representing Series A Preferred Shares have
been lost, stolen or destroyed and either (i) provide a
letter, in form satisfactory to the Corporation, to the effect
that he will indemnify the Corporation from any loss incurred
by it in connection therewith, and/or (ii) provide an
indemnity bond in such amount as is reasonably required by the
Corporation, the Corporation having the option of electing
either (i) or (ii) or both, the Corporation may, in its sole
discretion, accept such letter and/or indemnity bond in lieu
of the surrender of the certificate(s) as required by
subsections (iv) and (v) hereof.
(G) Statutory Restrictions. The foregoing provisions
for conversion of the Series A Preferred Shares shall be
subject to all applicable statutory limitations and
restrictions.
(vi) Liquidation Preference. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation, the holders of Series A Preferred Shares will be
entitled to receive, prior and in preference to any
distribution of the assets or surplus funds of the Corporation
to the holders of any Common Shares by reason of the ownership
thereof, an amount equal to (1) the fixed sum of one hundred
dollars ($100.00) per share and no more and (2) all accrued
and unpaid dividends due with respect to the Preferred Shares
(the "Preferential Amount"). If, upon the occurrence of such
an event, the
12
<PAGE>
assets and funds thus distributed among the holders of Series
A Preferred Shares shall be insufficient to permit the payment
to such holders of the full Preferential Amount, then, the
entire assets and funds of the Corporation legally available
for distribution shall be distributed ratably among the
holders of Series A Preferred Shares in accordance with the
respective amounts which would be payable on such shares if
all amounts payable thereon were paid in full. After the
payment or setting apart of the full Preferential Amounts
required to be paid to the holders of Series A Preferred
Shares, the holders of Common Shares or any other stock of the
Corporation ranking in liquidation junior to the Series A
Preferred Shares shall be entitled to receive ratably all
remaining assets or surplus funds of the Corporation. Neither
the merger or consolidation of the Corporation, nor the sale,
lease or conveyance of all or part of its assets, shall be
deemed to be a liquidation, dissolution or winding up of the
affairs of the Corporation, either voluntarily or
involuntarily, within the meaning of this section.
(vii) Sinking Fund. The Series A Preferred Shares shall not be
entitled to the benefit of any sinking fund to be applied to
their purchase or redemption.
(d) Series B Preferred Shares. A series of Preferred Shares is
hereby created, to be limited in amount to 356,000 of the 5,000,000 authorized
Preferred Shares. The designation, relative rights, powers, preferences,
qualifications and limitations are as follows:
(i) Designation of Series. The designation of the series of
Preferred Shares created hereby shall be Series B Preferred
Shares (hereinafter the "Series B Preferred Shares").
(ii) Dividends.
13
<PAGE>
(A) The holders of Series B Preferred Shares, in preference to
the holders of Common Shares and on a pari passu basis with
the holders of Series A Preferred Shares, if any, shall be
entitled to receive, when and as declared by the Board of
Directors, dividends at the rate of forty cents ($.40) per
share per annum, and no more. Subject to the requirements of
applicable law, dividends on the Series B Preferred Shares
shall be payable annually, when and as declared by the Board
of Directors, commencing in 1993. Such dividends on the Series
B Preferred Shares shall be cumulative so that if all or any
part of such dividends shall not have been paid or distributed
in any year, or declared and set apart, the amount of the
deficiency (without interest) shall be paid or distributed, or
declared and set apart, before any dividend or other
distribution shall be paid upon, or declared and set apart
for, Common Shares. Declared but unpaid dividends shall not
bear interest. For dividend purposes, Series B Preferred
Shares shall be deemed to have been issued as of the date of
issuance of the Series A Preferred Shares for which they were
exchanged.
(B) Except as hereinafter provided and subject to the
requirements of applicable law, including, without limitation,
the obtaining of any necessary approvals or consents from the
holders of the Common Shares and/or Series A Preferred Shares
of the Corporation, any dividend declared on the Series B
Preferred Shares shall be paid in cash or, at the option of
the Corporation, in Common Shares of the Corporation having a
market price, on the day immediately preceding the date on
which such dividend is declared (the "Valuation Date"), equal
to the amount of the dividend. As used herein, the term
"market price" shall mean the closing selling price or, if not
available, the mean of the closing bid and asked prices, or,
if not available, the mean of the highest bid and lowest asked
prices, of the Common Shares as quoted on a national
securities exchange, or in the over-the-counter market as
reported by NASDAQ or, if not available, by the National
Quotation Bureau, Incorporated, as the case may be, or, if
there is no selling or bid or asked price on a particular day,
then the closing selling price or, if not available, the mean
of the closing bid and asked
14
<PAGE>
prices, or, if not available, the mean of the highest bid and
lowest asked prices on the nearest trading date before that
day and for which such prices are available, and if the Common
Shares are not listed on such an exchange or traded in such a
market on the Valuation Date, then the market price shall be
determined by the Board of Directors by taking into
consideration all relevant factors, including, but not limited
to, the Corporation's net worth, prospective earning power and
dividend paying capacity.
(iii) Voting Rights. The holders of the Series B Preferred Shares
shall be entitled to vote on all matters at all meetings of
the shareholders of the Corporation, and shall be entitled to
such number of votes for each Series B Preferred Share
entitled to vote at such meetings as is set forth below,
voting together with the holders of Common Shares, and other
Preferred Shares who are entitled to vote, if any such shares
are then outstanding, and not as a separate class, except as
required by law. The number of votes to which the holders of
the Series B Preferred Shares shall be entitled to vote for
each Series B Preferred Share shall equal the number of Common
Shares of the Corporation into which such Series B Preferred
Share is convertible.
(iv) Redemption.
(A) In the event any holder or holders of Series B Preferred
Shares shall give written notice to the Corporation of an
election to convert such shares into Common Shares of the
Corporation as provided for in subsection (v)(B)(ii) hereof
(whether or not such holder shall have theretofore surrendered
the certificate(s) representing the Series B Preferred Shares
for conversion), the Corporation may elect, at its option, by
notice given prior to any Effective Conversion Date (as
hereinafter defined) as provided in (B) below, to redeem all
or any part of the outstanding Series B Preferred Shares with
respect to which an election to convert has been given to the
Corporation at a price per share in cash equal to six dollars
fifty cents ($6.50) (the
1 15
<PAGE>
"Redemption Price") plus all accrued and unpaid dividends with
respect to such Series B Preferred Shares.
(B) Notice of every redemption shall be given by mailing the
same to every holder of record of any shares then to be
redeemed, prior to any Effective Conversion Date and not less
than ten (10) nor more than thirty (30) days prior to the date
fixed as the date for the redemption thereof (the "Redemption
Date"), at the respective addresses of such holders as the
same shall appear on the stock transfer books of the
Corporation. The notice described above shall state that the
shares specified in such notice will be redeemed by the
Corporation at the Redemption Price plus all accrued and
unpaid dividends on the Redemption Date, upon the surrender
for cancellation, at the place designated in such notice, of
the certificate(s) representing the shares so to be redeemed,
properly endorsed for transfer, or accompanied by a proper
instrument of assignment and transfer, and bearing all
necessary transfer tax stamps thereto affixed and cancelled
(provided, however, that such surrender shall not be required
if the holder of record shall have theretofore duly
surrendered the certificate(s) representing the Series B
Preferred Shares in accordance with the conversion provisions
set forth in subsection (v) hereof). On and after the
Redemption Date, each holder of shares called for redemption
shall be entitled to receive therefor, in cash, the Redemption
Price, plus accrued and unpaid dividends as of the Redemption
Date, upon presentation and surrender at the place designated
in such notice of the certificate(s) for shares held by such
holder and called for redemption, properly endorsed for
transfer or accompanied by proper instruments of assignment or
transfer, and bearing all necessary transfer tax stamps
thereto affixed and cancelled (provided, however, that such
surrender shall not be required if the holder of record shall
have theretofore surrendered the certificate(s) representing
the Series B Preferred Shares in accordance with the
conversion provisions set forth in subsection (v) hereof). If
the Corporation shall give notice of redemption as aforesaid
(and unless the Corporation shall fail to pay the Redemption
Price of the shares duly presented for
16
<PAGE>
redemption, plus all accrued and unpaid dividends as of the
Redemption Date, in accordance with such notice), all shares
called for redemption shall be deemed to have been redeemed on
the Redemption Date, whether or not the certificates for said
shares shall be surrendered for redemption and cancellation,
and said shares so called for redemption shall from and after
said date cease to represent any interest whatever in the
Corporation or its property, and the holders thereof shall
have no rights other than the right to receive the Redemption
Price, plus all accrued and unpaid dividends as of the
Redemption Date, but without any right to receive dividends or
interest thereon from or after said date. All Series B
Preferred Shares redeemed under the provisions of this
subsection shall be forthwith retired and cancelled.
(v) Conversion.
(A) Conversion Right and Price. Subject to the Corporation's
redemption right as provided for in subsection (iv) hereof,
each Series B Preferred Share shall be convertible, at the
option of the holder thereof, at the office of the
Corporation, into such number of Common Shares of the
Corporation as is determined by dividing five dollars ($5.00)
by the Conversion Price (as hereinafter defined). For purposes
hereof, the term "Conversion Price" shall mean fifty cents
($.50), subject to adjustment as hereinafter set forth.
(B) Procedure. Before any holder of Series B Preferred Shares
shall be entitled to receive Common Shares upon conversion,
the holder shall (i)(a) surrender the certificate(s) therefor,
duly endorsed, at the office of the Corporation and (ii) shall
give written notice to the Corporation at such office that the
holder elects to convert the same into Common Shares and shall
further state therein the number of Series B Preferred Shares
being converted. Subject to the provisions hereof, effective
thirty (30) days following the later of the receipt by the
Corporation of the certificate(s) pursuant to and in
accordance with (i) above and the written
17
<PAGE>
notice pursuant to and in accordance with (ii) above, or such
shorter period of time as the Board of Directors shall
determine with respect to any particular conversion (such
thirtieth (30th) day or end of shorter period of time being
hereinafter referred to as the "Effective Conversion Date"),
the holder shall thereupon be deemed to be the holder of
record of the Common Shares issuable upon conversion,
notwithstanding that the stock transfer books of the
Corporation shall then be closed or that the certificate(s)
representing such Common Shares shall not then be actually
delivered to the holder. Subject to the provisions hereof,
immediately following the Effective Conversion Date, the
Corporation shall cause its transfer agent to issue and
deliver to such holder of Series B Preferred Shares a
certificate(s) for the number of Common Shares to which the
holder shall be entitled. Notwithstanding anything hereinabove
to the contrary, in the event the Corporation shall exercise
its redemption rights pursuant to subsection (iv) hereof, the
Corporation shall be under no obligation to issue Common
Shares to the holder and the holder's sole rights shall be as
set forth under such subsection (iv).
(C) Adjustment of Conversion Price.
(i) In the event that the Corporation shall (i) pay any
dividend on its capital stock payable in Common Shares (except
with respect to the dividend payable to the holders of the
Series B Preferred Shares); (ii) effect a subdivision of its
outstanding shares into a greater number of Common Shares (by
reclassification, stock split or otherwise than by payment of
a dividend in Common Shares); (iii) effect a combination or
consolidation of its outstanding Common Shares into a lesser
number of Common Shares (by reclassification, reverse split or
otherwise); (iv) issue by reclassification, exchange or
substitution of its Common Shares any shares of capital stock
of the Corporation or effect any other transaction having
similar effect, the Conversion Price in effect immediately
prior to such action shall be adjusted so that upon the
exercise of the conversion right hereof at any time after the
occurrence of any event described above, the holder shall be
entitled to receive the Common
18
<PAGE>
Shares to which such holder would have been finally entitled,
after giving effect to the occurrence of such event, as if
such holder had converted the Series B Preferred Shares
immediately prior to the occurrence of such event. An
adjustment made pursuant to this paragraph (C) shall become
effective immediately after the record date in the case of a
dividend and shall become effective immediately after the
effective date in the case of a subdivision, combination,
reclassification, exchange or substitution.
(ii) In case of any consolidation or merger to which the
Corporation is a party, other than a merger or consolidation
in which the Corporation is the surviving or continuing
corporation and which does not result in any reclassification
of, or change (other than a change in par value or from par
value to no par value or from no par value to par value, or as
a result of subdivision or combination) in, outstanding Common
Shares, then the Corporation, or such successor corporation,
as the case may be, shall make appropriate provision so that,
subject to the Corporation's redemption rights described
hereinabove, the holder of each Series B Preferred Share then
outstanding shall have the right to convert such share into
the kind and amount of shares or other securities and property
receivable upon such consolidation or merger by a holder of
the number of Common Shares into which such Series B Preferred
Shares might have been converted immediately prior to such
consolidation or merger.
(D) Fractional Shares. No fractional Common Shares shall be
issued upon conversion of Series B Preferred Shares. In lieu
of any fractional shares to which the holder would otherwise
be entitled, the Corporation shall pay, in cash, an amount
equal to the product of (i) such fraction of a share times
(ii) the market price (as hereinabove defined) of one Common
Share on the Effective Conversion Date.
(E) Reservation of Shares Issuable Upon Conversion. The
Corporation shall at all times use its best efforts to
reserve and keep available out of its authorized but
19
<PAGE>
unissued Common Shares, solely for the purpose of effecting
the conversion of the Series B Preferred Shares, such number
of its Common Shares as shall from time to time be sufficient
to effect the conversion of all outstanding Series B Preferred
Shares, and if at any time the number of authorized but
unissued Common Shares shall not be sufficient to effect the
conversion of all then outstanding Series B Preferred Shares,
the Corporation will, as its sole obligation, subject to the
requirements of applicable state law, take such corporate
action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued Common Shares to such
number of shares as shall be sufficient for such purposes;
provided, however that nothing contained herein shall preclude
the Corporation from satisfying its obligations in respect of
the conversion of the Series B Preferred Shares by delivery of
purchased Common Shares which are held in the treasury of the
Corporation.
(F) Lost, Stolen or Destroyed Certificates. In the event that
the holder shall notify the Corporation that the
certificate(s) representing Series B Preferred Shares have
been lost, stolen or destroyed and either (i) provide a
letter, in form satisfactory to the Corporation, to the effect
that he will indemnify the Corporation from any loss incurred
by it in connection therewith, and/or (ii) provide an
indemnity bond in such amount as is reasonably required by the
Corporation, the Corporation having the option of electing
either (i) or (ii) or both, the Corporation may, in its sole
discretion, accept such letter and/or indemnity bond in lieu
of the surrender of the certificate(s) as required by
subsections (iv) and (v) hereof.
(G) Statutory Restrictions. The foregoing provisions
for conversion of the Series B Preferred Shares shall be
subject to all applicable statutory limitations and
restrictions.
(vi) Liquidation Preference. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation, the holders of Series B Preferred Shares
20
<PAGE>
will be entitled to receive, prior and in preference to any
distribution of the assets or surplus funds of the Corporation
to the holders of any Common Shares by reason of the ownership
thereof, and on a pari passu basis with the holders of the
Series A Preferred Shares, if any, an amount equal to (i) the
fixed sum of five dollars ($5.00) per share and no more and
(ii) all accrued and unpaid dividends due with respect to the
Series B Preferred Shares (the "Preferential Amount"). If,
upon the occurrence of such an event, the assets and funds
thus distributed among the holders of Series B Preferred
Shares shall be insufficient to permit the payment to such
holders of the full Preferential Amount, then, the entire
assets and funds of the Corporation legally available for
distribution to the holders of the Series B Preferred Shares
shall be distributed ratably among such holders in accordance
with the respective amounts which would be payable on such
shares if all amounts payable thereon were paid in full. After
the payment or setting apart of the full Preferential Amounts
required to be paid to the holders of Series A and Series B
Preferred Shares, the holders of Common Shares or any other
stock of the Corporation ranking in liquidation junior to the
Series A and Series B Preferred Shares shall be entitled to
receive ratably all remaining assets or surplus funds of the
Corporation. Neither the merger or consolidation of the
Corporation, nor the sale, lease or conveyance of all or part
of its assets, shall be deemed to be a liquidation,
dissolution or winding up of the affairs of the Corporation,
either voluntarily or involuntarily, within the meaning of
this section.
(vii) Sinking Fund. The Series B Preferred Shares shall not be
entitled to the benefit of any sinking fund to be applied to
their purchase or redemption.
(e) Series C Preferred Shares. A series of Preferred
Shares is hereby created, to be limited in amount to 1,090,910 of the 5,000,000
authorized Preferred Shares. The designation, relative rights, powers,
preferences, qualifications and limitations are as follows:
21
<PAGE>
(i) Designation of Series. The designation of the series of
Preferred Shares created hereby shall be Series C Preferred
Shares (hereinafter the "Series C Preferred Shares").
(ii) Dividends.
(A) The holders of Series C Preferred Shares, in preference to
the holders of Common Shares and on a pari passu basis with
the holders of Series A Preferred Shares and Series B
Preferred Shares, if any, shall be entitled to receive, when
and as declared by the Board of Directors, dividends at the
rate of twenty-seven and one-half cents ($.275) per share per
annum, and no more. Subject to the requirements of applicable
law, dividends on the Series C Preferred Shares shall be
payable annually, when and as declared by the Board of
Directors, commencing in 1994. Such dividends on the Series C
Preferred Shares shall be cumulative so that if all or any
part of such dividends shall not have been paid or distributed
in any year, or declared and set apart, the amount of the
deficiency (without interest) shall be paid or distributed, or
declared and set apart, before any dividend or other
distribution shall be paid upon, or declared and set apart
for, Common Shares. Declared but unpaid dividends shall not
bear interest.
(B) Except as hereinafter provided and subject to the
requirements of applicable law, including, without limitation,
the obtaining of any necessary approvals or consents from the
holders of the Common Shares and/or Series A Preferred Shares
and/or Series B Preferred Shares of the Corporation, any
dividend declared on the Series C Preferred Shares shall be
paid in cash or, at the option of the Corporation, in Common
Shares of the Corporation having a market price, on the day
immediately preceding the date on which such dividend is
declared (the "Valuation Date"), equal to the amount of the
dividend. As used herein, the term "market price" shall
22
<PAGE>
mean the closing selling price or, if not available, the mean
of the closing bid and asked prices, or, if not available, the
mean of the highest bid and lowest asked prices, of the Common
Shares as quoted on a national securities exchange, or in the
over-the-counter market as reported by NASDAQ or, if not
available, by the National Quotation Bureau, Incorporated, as
the case may be, or, if there is no selling or bid or asked
price on a particular day, then the closing selling price or,
if not available, the mean of the closing bid and asked
prices, or, if not available, the mean of the highest bid and
lowest asked prices on the nearest trading date before that
day and for which such prices are available, and if the Common
Shares are not listed on such an exchange or traded in such a
market on the Valuation Date, then the market price shall be
determined by the Board of Directors by taking into
consideration all relevant factors, including, but not limited
to, the Corporation's net worth, prospective earning power and
dividend paying capacity.
(iii) Voting Rights. The holders of the Series C Preferred Shares
shall be entitled to vote on all matters at all meetings of
the shareholders of the Corporation, and shall be entitled to
such number of votes for each Series C Preferred Share
entitled to vote at such meetings as is set forth below,
voting together with the holders of Common Shares, and other
Preferred Shares who are entitled to vote, if any such shares
are then outstanding, and not as a separate class, except as
required by law. The number of votes to which the holders of
the Series C Preferred Shares shall be entitled to vote for
each Series C Preferred Share shall equal the number of Common
Shares of the Corporation into which such Series C Preferred
Share is convertible multiplied by six (6).
(iv) Redemption. The Series C Preferred Shares shall not be
subject to mandatory redemption by either the Corporation
or the holders thereof.
23
<PAGE>
(v) Conversion.
(A) Conversion Right and Price. Each Series C Preferred Share
shall be convertible, at the option of the holder thereof, at
the office of the Corporation, into such number of Common
Shares of the Corporation as is determined by dividing two
dollars seventy-five cents ($2.75) by the Conversion Price (as
hereinafter defined). For purposes hereof, the term
"Conversion Price" shall mean two dollars seventy-five cents
($2.75), subject to adjustment as hereinafter set forth.
(B) Procedure. Before any holder of Series C Preferred Shares
shall be entitled to receive Common Shares upon conversion,
the holder shall (i)(a) surrender the certificate(s) therefor,
duly endorsed, at the office of the Corporation and (ii) shall
give written notice to the Corporation at such office that the
holder elects to convert the same into Common Shares and shall
further state therein the number of Series C Preferred Shares
being converted. Subject to the provisions hereof, effective
thirty (30) days following the later of the receipt by the
Corporation of the certificate(s) pursuant to and in
accordance with (i) above and the written notice pursuant to
and in accordance with (ii) above, or such shorter period of
time as the Board of Directors shall determine with respect to
any particular conversion (such thirtieth (30th) day or end of
shorter period of time being hereinafter referred to as the
"Effective Conversion Date"), the holder shall thereupon be
deemed to be the holder of record of the Common Shares
issuable upon conversion, notwithstanding that the stock
transfer books of the Corporation shall then be closed or that
the certificate(s) representing such Common Shares shall not
then be actually delivered to the holder. Subject to the
provisions hereof, immediately following the Effective
Conversion Date, the Corporation shall cause its transfer
agent to issue and deliver to such holder of Series C
Preferred Shares a certificate(s) for the number of Common
Shares to which the holder shall be entitled.
(C) Adjustment of Conversion Price.
(i) In the event that the Corporation shall (a) pay any
dividend on its Common Shares payable in Common Shares;
24
<PAGE>
(b) effect a subdivision of its outstanding shares into a
greater number of Common Shares (by reclassification, stock
split or otherwise than by payment of a dividend in Common
Shares); (c) effect a combination or consolidation of its
outstanding Common Shares into a lesser number of Common
Shares (by reclassification, reverse split or otherwise); (d)
issue by reclassification, exchange or substitution of its
Common Shares any shares of capital stock of the Corporation
or effect any other transaction having similar effect, the
Conversion Price in effect immediately prior to such action
shall be adjusted so that upon the exercise of the conversion
right hereof at any time after the occurrence of any event
described above, the holder shall be entitled to receive the
Common Shares to which such holder would have been finally
entitled, after giving effect to the occurrence of such event,
as if such holder had converted the Series C Preferred Shares
immediately prior to the occurrence of such event. An
adjustment made pursuant to this paragraph (C) shall become
effective immediately after the record date in the case of a
dividend and shall become effective immediately after the
effective date in the case of a subdivision, combination,
reclassification, exchange or substitution.
(ii) In case of any consolidation or merger to which the
Corporation is a party, other than a merger or consolidation
in which the Corporation is the surviving or continuing
corporation and which does not result in any reclassification
of, or change (other than a change in par value or from par
value to no par value or from no par value to par value, or as
a result of subdivision or combination) in, outstanding Common
Shares, then the Corporation, or such successor corporation,
as the case may be, shall make appropriate provision so that
the holder of each Series C Preferred Share then outstanding
shall have the right to convert such share into the kind and
amount of shares or other securities and property receivable
upon such consolidation or merger by a holder of the number of
Common Shares into which such Series C Preferred Shares might
have been converted immediately prior to such consolidation or
merger.
25
<PAGE>
(D) Fractional Shares. No fractional Common Shares shall be
issued upon conversion of Series C Preferred Shares. In lieu
of any fractional shares to which the holder would otherwise
be entitled, the Corporation shall pay, in cash, an amount
equal to the product of (i) such fraction of a share times
(ii) the market price (as hereinabove defined) of one Common
Share on the Effective Conversion Date.
(E) Reservation of Shares Issuable Upon Conversion. The
Corporation shall at all times use its best efforts to reserve
and keep available out of its authorized but unissued Common
Shares, solely for the purpose of effecting the conversion of
the Series C Preferred Shares, such number of its Common
Shares as shall from time to time be sufficient to effect the
conversion of all outstanding Series C Preferred Shares, and
if at any time the number of authorized but unissued Common
Shares shall not be sufficient to effect the conversion of all
then outstanding Series C Preferred Shares, the Corporation
will, as its sole obligation, subject to the requirements of
applicable state law, take such corporate action as may, in
the opinion of its counsel, be necessary to increase its
authorized but unissued Common Shares to such number of shares
as shall be sufficient for such purposes; provided, however
that nothing contained herein shall preclude the Corporation
from satisfying its obligations in respect of the conversion
of the Series C Preferred Shares by delivery of purchased
Common Shares which are held in the treasury of the
Corporation.
(F) Lost, Stolen or Destroyed Certificates. In the event that
the holder shall notify the Corporation that the
certificate(s) representing Series C Preferred Shares have
been lost, stolen or destroyed and either (i) provide a
letter, in form satisfactory to the Corporation, to the effect
that he will indemnify the Corporation from any loss incurred
by it in connection therewith, and/or (ii) provide an
indemnity bond in such amount as is reasonably required by the
Corporation, the Corporation having the option of electing
either (i) or (ii) or both, the Corporation may, in its sole
26
<PAGE>
discretion, accept such letter and/or indemnity bond in lieu
of the surrender of the certificate(s) as required by
subsections (iv) and (v) hereof.
(G) Statutory Restrictions. The foregoing provisions for
conversion of the Series C Preferred Shares shall be subject
to all applicable statutory limitations and restrictions.
(vi) Liquidation Preference. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation, the holders of Series C Preferred Shares will be
entitled to receive, prior and in preference to any
distribution of the assets or surplus funds of the Corporation
to the holders of any Common Shares by reason of the ownership
thereof, and on a pari passu basis with the holders of the
Series A and Series B Preferred Shares, if
any, an amount equal to (i) the fixed sum of two dollars
seventy-five ($2.75) per share and no more and (ii) all
accrued and unpaid dividends due with respect to the Series C
Preferred Shares (the "Preferential Amount"). If, upon the
occurrence of such an event, the assets and funds thus
distributed among the holders of Series C Preferred Shares
shall be insufficient to permit the payment to such holders of
the full Preferential Amount, then, the entire assets and
funds of the Corporation legally available for distribution to
the holders of the Series C Preferred Shares shall be
distributed ratably among such holders in accordance with the
respective amounts which would be payable on such shares if
all amounts payable thereon were paid in full. After the
payment or setting apart of the full Preferential Amounts
required to be paid to the holders of Series A, Series B and
Series C Preferred Shares, the holders of Common Shares or any
other stock of the Corporation ranking in liquidation junior
to the Series A, Series B and Series C Preferred Shares shall
be entitled to receive ratably all remaining assets or surplus
funds of the Corporation. Neither the merger or consolidation
of the Corporation, nor the sale, lease or conveyance of all
or part of its assets, shall be deemed to be a liquidation,
dissolution or winding up of the
27
<PAGE>
affairs of the Corporation, either voluntarily or
involuntarily, within the meaning of this section.
(vii) Sinking Fund. The Series C Preferred Shares shall not be
entitled to the benefit of any sinking fund to be applied to
their purchase or redemption.
(f) Series D Preferred Shares. A series of Preferred Shares is
hereby created, to be limited in amount to 1,413,337 of the 5,000,000 authorized
Preferred Shares. The designation, relative rights, powers, preferences,
qualifications and limitations are as follows:
(i) Designation of Series. The designation of the series of
Preferred Shares created hereby shall be Series D Preferred
Shares (hereinafter the "Series D Preferred Shares").
(ii) Dividends.
(A) The holders of Series D Preferred Shares, in preference to
the holders of Common Shares and on a pari passu basis with
the holders of Series A Preferred Shares, Series B Preferred
Shares and Series C Preferred Shares, if any, shall be
entitled to receive, when and as declared by the Board of
Directors, dividends at the rate of twenty-five cents ($.25)
per share per annum, and no more. Subject to the requirements
of applicable law, dividends on the Series D Preferred Shares
shall be payable annually, when and as declared by the Board
of Directors, commencing in 1994. Such dividends on the Series
D Preferred Shares shall be cumulative so that if all or any
part of such dividends shall not have been paid or distributed
in any year, or declared and set apart, the amount of the
deficiency (without interest) shall be paid or distributed, or
declared and set apart, before any dividend or other
distribution shall be paid upon, or declared and set apart
for, Common Shares. Declared but unpaid dividends shall not
bear interest.
28
<PAGE>
For dividend purposes, in the event Series D Preferred Shares
are issued in exchange for Series C Preferred Shares, the
Series D Preferred Shares shall be deemed to have been issued
as of the date of issuance of the Series C Preferred Shares
for which they were exchanged.
(B) Except as hereinafter provided and subject to the
requirements of applicable law, including, without limitation,
the obtaining of any necessary approvals or consents from the
holders of the Common Shares and/or Series A Preferred Shares
and/or Series B Preferred Shares and/or Series C Preferred
Shares of the Corporation, any dividend declared on the Series
D Preferred Shares shall be paid in cash or, at the option of
the Corporation, in Common Shares of the Corporation having a
market price, on the day immediately preceding the date on
which such dividend is declared (the "Valuation Date"), equal
to the amount of the dividend. As used herein, the term
"market price" shall mean the closing selling price or, if not
available, the mean of the closing bid and asked prices, or,
if not available, the mean of the highest bid and lowest asked
prices, of the Common Shares as quoted on a national
securities exchange, or in the over-the-counter market as
reported by NASDAQ or, if not available, by the National
Quotation Bureau, Incorporated, as the case may be, or, if
there is no selling or bid or asked price on a particular day,
then the closing selling price or, if not available, the mean
of the closing bid and asked prices, or, if not available, the
mean of the highest bid and lowest asked prices on the nearest
trading date before that day and for which such prices are
available, and if the Common Shares are not listed on such an
exchange or traded in such a market on the Valuation Date,
then the market price shall be determined by the Board of
Directors by taking into consideration all relevant factors,
including, but not limited to, the Corporation's net worth,
prospective earning power and dividend paying capacity.
(iii) Voting Rights. The holders of the Series D Preferred
Shares shall be entitled to vote on all matters at all
meetings of the shareholders of the Corporation, and
29
<PAGE>
shall be entitled to such number of votes for each Series D
Preferred Share entitled to vote at such meetings as is set
forth below, voting together with the holders of Common
Shares, and other Preferred Shares who are entitled to vote,
if any such shares are then outstanding, and not as a separate
class, except as required by law. The number of votes to which
the holders of the Series D Preferred Shares shall be entitled
to vote for each Series D Preferred Share shall equal the
number of Common Shares of the Corporation into which such
Series D Preferred Share is convertible multiplied by six (6).
(iv) Redemption. The Series D Preferred Shares shall not be
subject to mandatory redemption by either the Corporation
or the holders thereof.
(v) Conversion.
(A) Conversion Right and Price. Each Series D Preferred Share
shall be convertible, at the option of the holder thereof, at
the office of the Corporation, into such number of Common
Shares of the Corporation as is determined by dividing two
dollars fifty cents ($2.50) by the Conversion Price (as
hereinafter defined). For purposes hereof, the term
"Conversion Price" shall mean two dollars fifty cents ($2.50),
subject to adjustment as hereinafter set forth.
(B) Procedure. Before any holder of Series D Preferred Shares
shall be entitled to receive Common Shares upon conversion,
the holder shall (i)(a) surrender the certificate(s) therefor,
duly endorsed, at the office of the Corporation and (ii) shall
give written notice to the Corporation at such office that the
holder elects to convert the same into Common Shares and shall
further state therein the number of Series D Preferred Shares
being converted. Subject to the provisions hereof, effective
thirty (30) days following the later of the receipt by the
Corporation of the certificate(s) pursuant to and in
accordance with (i) above and the written notice pursuant to
and in accordance with (ii) above, or such shorter period of
time as the Board of Directors
30
<PAGE>
shall determine with respect to any particular conversion
(such thirtieth (30th) day or end of shorter period of time
being hereinafter referred to as the "Effective Conversion
Date"), the holder shall thereupon be deemed to be the holder
of record of the Common Shares issuable upon conversion,
notwithstanding that the stock transfer books of the
Corporation shall then be closed or that the certificate(s)
representing such Common Shares shall not then be actually
delivered to the holder. Subject to the provisions hereof,
immediately following the Effective Conversion Date, the
Corporation shall cause its transfer agent to issue and
deliver to such holder of Series D Preferred Shares a
certificate(s) for the number of Common Shares to which the
holder shall be entitled.
(C) Adjustment of Conversion Price.
(i) In the event that the Corporation shall (a) pay any
dividend on its Common Shares payable in Common Shares; (b)
effect a subdivision of its outstanding shares into a greater
number of Common Shares (by reclassification, stock split or
otherwise than by payment of a dividend in Common Shares); (c)
effect a combination or consolidation of its outstanding
Common Shares into a lesser number of Common Shares (by
reclassification, reverse split or otherwise); (d) issue by
reclassification, exchange or substitution of its Common
Shares any shares of capital stock of the Corporation or
effect any other transaction having similar effect, the
Conversion Price in effect immediately prior to such action
shall be adjusted so that upon the exercise of the conversion
right hereof at any time after the occurrence of any event
described above, the holder shall be entitled to receive the
Common Shares to which such holder would have been finally
entitled, after giving effect to the occurrence of such event,
as if such holder had converted the Series D Preferred Shares
immediately prior to the occurrence of such event. An
adjustment made pursuant to this paragraph (C) shall become
effective immediately after the record date in the case of a
dividend and shall become effective immediately after the
effective date in the case of a subdivision, combination,
reclassification, exchange or substitution.
31
<PAGE>
(ii) In case of any consolidation or merger to which the
Corporation is a party, other than a merger or consolidation
in which the Corporation is the surviving or continuing
corporation and which does not result in any reclassification
of, or change (other than a change in par value or from par
value to no par value or from no par value to par value, or as
a result of subdivision or combination) in, outstanding Common
Shares, then the Corporation, or such successor corporation,
as the case may be, shall make appropriate provision so that
the holder of each Series D Preferred Share then outstanding
shall have the right to convert such share into the kind and
amount of shares or other securities and property receivable
upon such consolidation or merger by a holder of the number of
Common Shares into which such Series D Preferred Shares might
have been converted immediately prior to such consolidation or
merger.
(D) Fractional Shares. No fractional Common Shares shall be
issued upon conversion of Series D Preferred Shares. In lieu
of any fractional shares to which the holder would otherwise
be entitled, the Corporation shall pay, in cash, an amount
equal to the product of (i) such fraction of a share times
(ii) the market price (as hereinabove defined) of one Common
Share on the Effective Conversion Date.
(E) Reservation of Shares Issuable Upon Conversion. The
Corporation shall at all times use its best efforts to reserve
and keep available out of its authorized but unissued Common
Shares, solely for the purpose of effecting the conversion of
the Series D Preferred Shares, such number of its Common
Shares as shall from time to time be sufficient to effect the
conversion of all outstanding Series D Preferred Shares, and
if at any time the number of authorized but unissued Common
Shares shall not be sufficient to effect the conversion of all
then outstanding Series D Preferred Shares, the Corporation
will, as its sole obligation, subject to the requirements of
applicable state law, take such corporate action as may, in
the opinion of its counsel, be necessary to increase its
authorized but unissued Common Shares to such number of shares
as shall be sufficient
32
<PAGE>
for such purposes; provided, however that nothing contained
herein shall preclude the Corporation from satisfying its
obligations in respect of the conversion of the Series D
Preferred Shares by delivery of purchased Common Shares which
are held in the treasury of the Corporation.
(F) Lost, Stolen or Destroyed Certificates. In the event that
the holder shall notify the Corporation that the
certificate(s) representing Series D Preferred Shares have
been lost, stolen or destroyed and either (i) provide a
letter, in form satisfactory to the Corporation, to the effect
that he will indemnify the Corporation from any loss incurred
by it in connection therewith, and/or (ii) provide an
indemnity bond in such amount as is reasonably required by the
Corporation, the Corporation having the option of electing
either (i) or (ii) or both, the Corporation may, in its sole
discretion, accept such letter and/or indemnity bond in lieu
of the surrender of the certificate(s) as required by
subsections (iv) and (v) hereof.
(G) Statutory Restrictions. The foregoing provisions for
conversion of the Series D Preferred Shares shall be subject
to all applicable statutory limitations and restrictions.
(vi) Liquidation Preference. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation, the holders of Series D Preferred Shares will be
entitled to receive, prior and in preference to any
distribution of the assets or surplus funds of the Corporation
to the holders of any Common Shares by reason of the ownership
thereof, and on a pari passu basis with the holders of the
Series A, Series B and Series C Preferred Shares, if any, an
amount equal to (i) the fixed sum of two dollars fifty cents
($2.50) per share and no more and (ii) all accrued and unpaid
dividends due with respect to the Series D Preferred Shares
(the "Preferential Amount"). If, upon the occurrence of such
an event, the assets and funds thus distributed among the
holders of Series D Preferred Shares shall be insufficient to
permit the payment to such holders of the
33
<PAGE>
full Preferential Amount, then, the entire assets and funds of
the Corporation legally available for distribution to the
holders of the Series D Preferred Shares shall be distributed
ratably among such holders in accordance with the respective
amounts which would be payable on such shares if all amounts
payable thereon were paid in full. After the payment or
setting apart of the full Preferential Amounts required to be
paid to the holders of Series A, Series B, Series C and Series
D Preferred Shares, the holders of Common Shares or any other
stock of the Corporation ranking in liquidation junior to the
Series A, Series B, Series C and Series D Preferred Shares
shall be entitled to receive ratably all remaining assets or
surplus funds of the Corporation. Neither the merger or
consolidation of the Corporation, nor the sale, lease or
conveyance of all or part of its assets, shall be deemed to be
a liquidation, dissolution or winding up of the affairs of the
Corporation, either voluntarily or involuntarily, within the
meaning of this section.
(vii) Sinking Fund. The Series D Preferred Shares shall not be
entitled to the benefit of any sinking fund to be applied to
their purchase or redemption.
(g) Series E Preferred Shares. A series of Preferred Shares is
hereby created, to be limited in amount to 1,085,000 of the 5,000,000 authorized
Preferred Shares. The designation, relative rights, powers, preferences,
qualifications and limitations are as follows:
(i) Designation of Series. The designation of the series of
Preferred Shares created hereby shall be Series E Preferred
Shares (hereinafter the "Series E Preferred Shares").
(ii) Dividends.
34
<PAGE>
(A) The holders of Series E Preferred Shares, in preference to
the holders of Common Shares and on a pari passu basis with
the holders of Series A Preferred Shares, Series B Preferred
Shares, Series C Preferred Shares and Series D Preferred
Shares, if any, shall be entitled to receive, when and as
declared by the Board of Directors, dividends at the rate of
twenty-two and one-half cents ($.225) per share per annum, and
no more. Subject to the requirements of applicable law,
dividends on the Series E Preferred Shares shall be payable
annually, when and as declared by the Board of Directors,
commencing in 1996. Such dividends on the Series E Preferred
Shares shall be cumulative so that if all or any part of such
dividends shall not have been paid or distributed in any year,
or declared and set apart, the amount of the deficiency
(without interest) shall be paid or distributed, or declared
and set apart, before any dividend or other distribution shall
be paid upon, or declared and set apart for, Common Shares.
Declared but unpaid dividends shall not bear interest.
(B) Except as hereinafter provided and subject to the
requirements of applicable law, including, without limitation,
the obtaining of any necessary approvals or consents from the
holders of the Common Shares and/or Series A Preferred Shares
and/or Series B Preferred Shares and/or Series C Preferred
Shares and/or Series D Preferred Shares of the Corporation,
any dividend declared on the Series E Preferred Shares shall
be paid in cash or, at the option of the Corporation, in
Common Shares of the Corporation, the number of which shall be
equal to the amount of the dividend divided by the Conversion
Price (as hereinafter defined) then in effect.
(iii) Voting Rights. The holders of the Series E Preferred Shares
shall be entitled to vote on all matters at all meetings of
the shareholders of the Corporation, and shall be entitled to
such number of votes for each Series E Preferred Share
entitled to vote at such meetings as is set forth below,
voting together with the holders of Common Shares, and other
Preferred Shares who are entitled to vote, if any such shares
are then outstanding, and not as a separate class, except as
35
<PAGE>
required by law. The number of votes to which the holders of
the Series E Preferred Shares shall be entitled to vote for
each Series E Preferred Share shall equal the number of Common
Shares of the Corporation into which such Series E Preferred
Share is convertible.
(iv) Redemption. The Series E Preferred Shares shall not be
subject to mandatory redemption by either the Corporation
or the holders thereof.
(v) Conversion.
(A) Conversion Right and Price. Each Series E Preferred Share
shall be convertible, at the option of the holder thereof, at
the office of the Corporation, into such number of Common
Shares of the Corporation as is determined by dividing two
dollars eighty-one and one-quarter cents ($2.8125) by the
Conversion Price (as hereinafter defined). For purposes
hereof, the term "Conversion Price" shall mean two dollars
eighty-one and one-quarter cents ($2.8125), subject to
adjustment as hereinafter set forth.
(B) Procedure. Before any holder of Series E Preferred Shares
shall be entitled to receive Common Shares upon conversion,
the holder shall (i)(a) surrender the certificate(s) therefor,
duly endorsed, at the office of the Corporation and (ii) shall
give written notice to the Corporation at such office that the
holder elects to convert the same into Common Shares and shall
further state therein the number of Series E Preferred Shares
being converted. Subject to the provisions hereof, effective
thirty (30) days following the later of the receipt by the
Corporation of the certificate(s) pursuant to and in
accordance with (i) above and the written notice pursuant to
and in accordance with (ii) above, or such shorter period of
time as the Board of Directors shall determine with respect to
any particular conversion (such thirtieth (30th) day or end of
shorter period of time being hereinafter referred to as the
"Effective Conversion Date"), the holder shall thereupon be
deemed to be the holder of record of the Common Shares
issuable upon conversion, notwithstanding that the stock
transfer
36
<PAGE>
books of the Corporation shall then be closed or that the
certificate(s) representing such Common Shares shall not then
be actually delivered to the holder. Subject to the provisions
hereof, immediately following the Effective Conversion Date,
the Corporation shall cause its transfer agent to issue and
deliver to such holder of Series E Preferred Shares a
certificate(s) for the number of Common Shares to which the
holder shall be entitled.
(C) Adjustment of Conversion Price.
(i) In the event that the Corporation shall (a) pay any
dividend on its Common Shares payable in Common Shares; (b)
effect a subdivision of its outstanding shares into a greater
number of Common Shares (by reclassification, stock split or
otherwise than by payment of a dividend in Common Shares); (c)
effect a combination or consolidation of its outstanding
Common Shares into a lesser number of Common Shares (by
reclassification, reverse split or otherwise); (d) issue by
reclassification, exchange or substitution of its Common
Shares any shares of capital stock of the Corporation or
effect any other transaction having similar effect, the
Conversion Price in effect immediately prior to such action
shall be adjusted so that upon the exercise of the conversion
right hereof at any time after the occurrence of any event
described above, the holder shall be entitled to receive the
Common Shares to which such holder would have been finally
entitled, after giving effect to the occurrence of such event,
as if such holder had converted the Series E Preferred Shares
immediately prior to the occurrence of such event. An
adjustment made pursuant to this paragraph (C) shall become
effective immediately after the record date in the case of a
dividend and shall become effective immediately after the
effective date in the case of a subdivision, combination,
reclassification, exchange or substitution.
(ii) In case of any consolidation or merger to which the
Corporation is a party, other than a merger or consolidation
in which the Corporation is the surviving or continuing
corporation and which does not result in any reclassification
of, or change (other than a change
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<PAGE>
in par value or from par value to no par value or from no par
value to par value, or as a result of subdivision or
combination) in, outstanding Common Shares, then the
Corporation, or such successor corporation, as the case may
be, shall make appropriate provision so that the holder of
each Series E Preferred Share then outstanding shall have the
right to convert such share into the kind and amount of shares
or other securities and property receivable upon such
consolidation or merger by a holder of the number of Common
Shares into which such Series E Preferred Shares might have
been converted immediately prior to such consolidation or
merger.
(iii) In the event, as of June 30, 1996, the Common Shares are
listed on an Exchange or traded in the OTC Market and the June
1996 Common Share Price (as hereinafter defined) does not
equal or exceed the Conversion Price then in effect, the
Conversion Price shall thereupon, effective June 30, 1996, be
reduced to equal the June 1996 Common Share Price. As used
herein, (a) the term "June 1996 Common Share Price" shall mean
the average of the "market prices" of the Common Shares of the
Corporation during the last five (5) trading days immediately
preceding June 30, 1996 and (b) the term "market price" shall
mean the closing bid price or, if not available, the highest
bid price of the Common Shares as quoted on an Exchange or in
the OTC Market, as reported by NASDAQ or, if not available, by
NQBI.
(D) Fractional Shares. No fractional Common Shares shall be
issued upon conversion of Series E Preferred Shares. In lieu
of any fractional shares to which the holder would otherwise
be entitled, the Corporation shall pay, in cash, an amount
equal to the product of (i) such fraction of a share times
(ii) the market price (as hereinabove defined) of one Common
Share on the Effective Conversion Date.
(E) Reservation of Shares Issuable Upon Conversion. The
Corporation shall at all times use its best efforts to reserve
and keep available out of its authorized but unissued Common
Shares, solely for the purpose of effecting the conversion of
the Series E Preferred
38
<PAGE>
Shares, such number of its Common Shares as shall from time to
time be sufficient to effect the conversion of all outstanding
Series E Preferred Shares, and if at any time the number of
authorized but unissued Common Shares shall not be sufficient
to effect the conversion of all then outstanding Series E
Preferred Shares, the Corporation will, as its sole
obligation, subject to the requirements of applicable state
law, take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued
Common Shares to such number of shares as shall be sufficient
for such purposes; provided, however that nothing contained
herein shall preclude the Corporation from satisfying its
obligations in respect of the conversion of the Series E
Preferred Shares by delivery of purchased Common Shares which
are held in the treasury of the Corporation.
(F) Lost, Stolen or Destroyed Certificates. In the event that
the holder shall notify the Corporation that the
certificate(s) representing Series E Preferred Shares have
been lost, stolen or destroyed and either (i) provide a
letter, in form satisfactory to the Corporation, to the effect
that he will indemnify the Corporation from any loss incurred
by it in connection therewith, and/or (ii) provide an
indemnity bond in such amount as is reasonably required by the
Corporation, the Corporation having the option of electing
either (i) or (ii) or both, the Corporation may, in its sole
discretion, accept such letter and/or indemnity bond in lieu
of the surrender of the certificate(s) as required by the
subsection (v).
(G) Statutory Restrictions. The foregoing provisions for
conversion of the Series E Preferred Shares shall be subject
to all applicable statutory limitations and restrictions.
(vi) Liquidation Preference. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation, the holders of Series E Preferred Shares
will be entitled to receive, prior and in preference to
any distribution of the assets or surplus funds of the
39
<PAGE>
Corporation to the holders of any Common Shares by reason of
the ownership thereof, and on a pari passu basis with the
holders of the Series A, Series B, Series C and Series D
Preferred Shares, if any, an amount equal to (i) the fixed sum
of two dollars eighty-one and one-quarter cents ($2.8125) per
share and no more and (ii) all accrued and unpaid dividends
due with respect to the Series E Preferred Shares (the
"Preferential Amount"). If, upon the occurrence of such an
event, the assets and funds thus distributed among the holders
of Series E Preferred Shares shall be insufficient to permit
the payment to such holders of the full Preferential Amount,
then, the entire assets and funds of the Corporation legally
available for distribution to the holders of the Series E
Preferred Shares shall be distributed ratably among such
holders in accordance with the respective amounts which would
be payable on such shares if all amounts payable thereon were
paid in full. After the payment or setting apart of the full
Preferential Amounts required to be paid to the holders of
Series A, Series B, Series C, Series D and Series E Preferred
Shares, the holders of Common Shares or any other stock of the
Corporation ranking in liquidation junior to the Series A,
Series B, Series C, Series D and Series E Preferred Shares
shall be entitled to receive ratably all remaining assets or
surplus funds of the Corporation. Neither the merger or
consolidation of the Corporation, nor the sale, lease or
conveyance of all or part of its assets, shall be deemed to be
a liquidation, dissolution or winding up of the affairs of the
Corporation, either voluntarily or involuntarily, within the
meaning of this section.
(vii) Sinking Fund. The Series E Preferred Shares shall not be
entitled to the benefit of any sinking fund to be applied to
their purchase or redemption.
(h) Series F Preferred Shares. A series of Preferred Shares is
hereby created, to be limited in amount to 415,250 of the 5,000,000 authorized
Preferred Shares. The designation, relative rights, powers, preferences,
qualifications and limitations are as follows:
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<PAGE>
(i) Designation of Series. The designation of the series of
Preferred Shares created hereby shall be Series F Preferred
Shares (hereinafter the "Series F Preferred Shares").
(ii) Dividends.
The holders of Series F Preferred Shares, on a pari passu
basis with the holders of the Corporation's Common Shares
(based upon the number of Common Shares into which the Series
F Preferred Shares are convertible), shall be entitled to
receive such dividends as may be declared by the Board of
Directors. Declared but unpaid dividends shall not bear
interest.
The rights of the holders of the Series F Preferred Shares
shall be junior and subordinate to the rights of the holders
of the Series A, Series B, Series C, Series D and Series E
Preferred Shares of the Corporation to receive dividends, as
well as to the right of any other series of Preferred Shares
of the Corporation hereafter created which shall have any
preferential right to receive dividends before the holders of
the Common Shares.
(iii) Voting Rights. The holders of the Series F Preferred Shares
shall be entitled to vote on all matters at all meetings of
the shareholders of the Corporation, and shall be entitled to
such number of votes for each Series F Preferred Share
entitled to vote at such meetings as is set forth below,
voting together with the holders of Common Shares, and other
Preferred Shares who are entitled to vote, if any such shares
are then outstanding, and not as a separate class, except as
required by law. The number of votes to which the holders of
the Series F Preferred Shares shall be entitled to vote for
each Series F Preferred Share shall equal the number of Common
Shares of the Corporation into which such Series F Preferred
Share is convertible.
41
<PAGE>
(iv) Redemption. The Corporation may elect, at its option, at any
time and from time to time, by notice given as provided below,
to redeem all or any part of the outstanding Series F
Preferred Shares, from any or all holders thereof, at a
redemption price of five dollars ($5.00) per share (the
"Redemption Price").
If the Corporation elects to redeem all or any part of the
outstanding Series F Preferred Shares, notice of such
redemption (the "Redemption Notice") shall be given by mailing
the same to every holder of record of any shares then to be
redeemed, not less than thirty (30) prior to the date fixed as
the date for the redemption thereof (the "Redemption Date"),
at the respective addresses of such holders as the same shall
appear on the stock transfer books of the Corporation. The
Redemption Notice shall state that the shares specified in
such notice will be redeemed by the Corporation at the
Redemption Price on the Redemption Date, upon the surrender
for cancellation, at the place designated in such notice, of
the certificate(s) representing the shares so to be redeemed,
properly endorsed for transfer, or accompanied by a proper
instrument of assignment and transfer, and bearing all
necessary transfer tax stamps thereto affixed and canceled.
Following receipt of the Redemption Notice and at any time
before the Redemption Date, each holder of shares called for
redemption may elect to convert all or any part of such shares
into Common Shares of the Corporation pursuant to and in
accordance with (v) below. On and after the Redemption Date,
each holder of shares called for redemption who has not
converted such shares shall be entitled to receive therefor,
in cash, the Redemption Price upon presentation and surrender
at the place designated in such notice of the certificate(s)
for shares held by such holder and called for redemption,
properly endorsed for transfer or accompanied by proper
instruments of assignment or transfer, and bearing all
necessary transfer tax stamps thereto affixed and
42
<PAGE>
canceled. If the Corporation shall give notice of redemption
as aforesaid, all shares called for redemption and not
converted shall be deemed to have been redeemed on the
Redemption Date, whether or not the certificates for said
shares shall be surrendered for redemption and cancellation,
and said shares so called for redemption shall from and after
said date cease to represent any interest whatever in the
Corporation or its property, and the holders thereof shall
have no rights other than the right to receive the Redemption
Price, without interest thereon.
(v) Conversion.
(A) Conversion Right and Price. Each Series F Preferred Share
shall be convertible, at the option of the holder thereof, at
the office of the Corporation, into such number of Common
Shares of the Corporation as is determined by dividing five
dollars ($5.00) by the Conversion Price (as hereinafter
defined). For purposes hereof, the term "Conversion Price"
shall mean five dollars ($5.00), subject to adjustment as
hereinafter set forth.
(B) Procedure. Before any holder of Series F Preferred Shares
shall be entitled to receive Common Shares upon conversion,
the holder shall (i)(a) surrender the certificate(s) therefor,
duly endorsed, at the office of the Corporation and (ii) shall
give written notice to the Corporation at such office that the
holder elects to convert the same into Common Shares and shall
further state therein the number of Series F Preferred Shares
being converted. Subject to the provisions hereof, effective
thirty (30) days following the later of the receipt by the
Corporation of the certificate(s) pursuant to and in
accordance with (i) above and the written notice pursuant to
and in accordance with (ii) above, or such shorter period of
time as the Board of Directors shall determine with respect to
any particular conversion (such thirtieth (30th) day or end of
shorter period of time being hereinafter referred to as the
"Effective
43
<PAGE>
Conversion Date"), the holder shall thereupon be deemed to be
the holder of record of the Common Shares issuable upon
conversion, notwithstanding that the stock transfer books of
the Corporation shall then be closed or that the
certificate(s) representing such Common Shares shall not then
be actually delivered to the holder. Subject to the provisions
hereof, immediately following the Effective Conversion Date,
the Corporation shall cause its transfer agent to issue and
deliver to such holder of Series F Preferred Shares a
certificate(s) for the number of Common Shares to which the
holder shall be entitled.
(C) Adjustment of Conversion Price.
(i) In the event that the Corporation shall (a) pay any
dividend on its Common Shares payable in Common Shares; (b)
effect a subdivision of its outstanding shares into a greater
number of Common Shares (by reclassification, stock split or
otherwise than by payment of a dividend in Common Shares); (c)
effect a combination or consolidation of its outstanding
Common Shares into a lesser number of Common Shares (by
reclassification, reverse split or otherwise); (d) issue by
reclassification, exchange or substitution of its Common
Shares any shares of capital stock of the Corporation or
effect any other transaction having similar effect, the
Conversion Price in effect immediately prior to such action
shall be adjusted so that upon the exercise of the conversion
right hereof at any time after the occurrence of any event
described above, the holder shall be entitled to receive the
Common Shares to which such holder would have been finally
entitled, after giving effect to the occurrence of such event,
as if such holder had converted the Series F Preferred Shares
immediately prior to the occurrence of such event. An
adjustment made pursuant to this paragraph (C) shall become
effective immediately after the record date in the case of a
dividend and shall become effective immediately after the
effective date in the case of a subdivision, combination,
reclassification, exchange or substitution.
44
<PAGE>
(ii) In case of any consolidation or merger to which the
Corporation is a party, other than a merger or consolidation
in which the Corporation is the surviving or continuing
corporation and which does not result in any reclassification
of, or change (other than a change in par value or from par
value to no par value or from no par value to par value, or as
a result of subdivision or combination) in, outstanding Common
Shares, then the Corporation, or such successor corporation,
as the case may be, shall make appropriate provision so that
the holder of each Series F Preferred Share then outstanding
shall have the right to convert such share into the kind and
amount of shares or other securities and property receivable
upon such consolidation or merger by a holder of the number of
Common Shares into which such Series F Preferred Shares might
have been converted immediately prior to such consolidation or
merger.
(iii) In the event, as of October 10, 1997, the Common Shares
are listed on a national securities exchange (an "Exchange")
or traded in the over-the-counter market (the "OTC Market")
and the October 1997 Common Share Price (as hereinafter
defined) does not equal or exceed the Conversion Price then in
effect, the Conversion Price shall thereupon, effective
October 10, 1997, be reduced to equal the October 1997 Common
Share Price. As used herein, (a) the term "October 1997 Common
Share Price" shall mean the average of the "market prices" of
the Common Shares of the Corporation during the trading days
from October 1, 1997 through October 10, 1997 and (b) the term
"market price" shall mean the closing price or, if not
available, the average of the closing bid and asked prices or,
if not available, the average of the highest bid and lowest
asked prices of the Common Shares as quoted on an Exchange or
in the OTC Market, as reported by NASDAQ or, if not available,
by the National Quotation Bureau, Incorporated; provided,
however, that, in no event shall the Conversion Price be
reduced to less than three dollars fifty cents ($3.50) per
share (subject to adjustment pursuant to the provisions of
subparagraphs (i) and (ii) of this paragraph (C)) pursuant to
the
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<PAGE>
provisions of this subparagraph (iii). Any adjustment pursuant
to the provisions of this subparagraph (iii) shall apply only
to such Series F Preferred Shares which are outstanding as of
the effective date of the adjustment and shall not apply
retroactively with respect to any Series F Preferred Shares
theretofore converted.
(D) Fractional Shares. No fractional Common Shares shall be
issued upon conversion of Series F Preferred Shares. In lieu
of any fractional shares to which the holder would otherwise
be entitled, the Corporation shall pay, in cash, an amount
equal to the product of (i) such fraction of a share times
(ii) the market price (as hereinabove defined) of one Common
Share on the Effective Conversion Date.
(E) Reservation of Shares Issuable Upon Conversion. The
Corporation shall at all times use its best efforts to reserve
and keep available out of its authorized but unissued Common
Shares, solely for the purpose of effecting the conversion of
the Series F Preferred Shares, such number of its Common
Shares as shall from time to time be sufficient to effect the
conversion of all outstanding Series F Preferred Shares, and
if at any time the number of authorized but unissued Common
Shares shall not be sufficient to effect the conversion of all
then outstanding Series F Preferred Shares, the Corporation
will, as its sole obligation, subject to the requirements of
applicable state law, take such corporate action as may, in
the opinion of its counsel, be necessary to increase its
authorized but unissued Common Shares to such number of shares
as shall be sufficient for such purposes; provided, however
that nothing contained herein shall preclude the Corporation
from satisfying its obligations in respect of the conversion
of the Series F Preferred Shares by delivery of purchased
Common Shares which are held in the treasury of the
Corporation.
(F) Lost, Stolen or Destroyed Certificates. In the
event that the holder shall notify the Corporation that
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<PAGE>
the certificate(s) representing Series F Preferred Shares have
been lost, stolen or destroyed and either (i) provide a
letter, in form satisfactory to the Corporation, to the effect
that he will indemnify the Corporation from any loss incurred
by it in connection therewith, and/or (ii) provide an
indemnity bond in such amount as is reasonably required by the
Corporation, the Corporation having the option of electing
either (i) or (ii) or both, the Corporation may, in its sole
discretion, accept such letter and/or indemnity bond in lieu
of the surrender of the certificate(s) as required by this
subsection (v).
(G) Statutory Restrictions. The foregoing provisions for
conversion of the Series F Preferred Shares shall be subject
to all applicable statutory limitations and restrictions.
(vi) Liquidation Preference. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation, the holders of Series F Preferred Shares will be
entitled to receive, prior and in preference to any
distribution of the assets or surplus funds of the Corporation
to the holders of any Common Shares by reason of the ownership
thereof, and on a pari passu basis with
the holders of the Series A, Series B, Series C, Series D and
Series E Preferred Shares, if any, an amount equal to the
fixed sum of five dollars ($5.00) per share and no more (the
"Preferential Amount"). If, upon the occurrence of such an
event, the assets and funds thus distributed among the holders
of Series F Preferred Shares shall be insufficient to permit
the payment to such holders of the full Preferential Amount,
then, the entire assets and funds of the Corporation legally
available for distribution to the holders of the Series F
Preferred Shares shall be distributed ratably among such
holders in accordance with the respective amounts which would
be payable on such shares if all amounts payable thereon were
paid in full. After the payment or setting apart of the full
Preferential Amounts required to be paid to the holders of
Series A, Series B, Series
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<PAGE>
C, Series D, Series E and Series F Preferred Shares, the
holders of Common Shares or any other stock of the Corporation
ranking in liquidation junior to the Series A, Series B,
Series C, Series D, Series E and Series F Preferred Shares
shall be entitled to receive ratably all remaining assets or
surplus funds of the Corporation. Neither the merger or
consolidation of the Corporation, nor the sale, lease or
conveyance of all or part of its assets, shall be deemed to be
a liquidation, dissolution or winding up of the affairs of the
Corporation, either voluntarily or involuntarily, within the
meaning of this section.
(vii) Sinking Fund. The Series F Preferred Shares shall not be
entitled to the benefit of any sinking fund to be applied to
their purchase or redemption.
(i) Series G Preferred Shares. A series of Preferred Stock is
hereby created, to be limited in amount to 145,000 of the 5,000,000 authorized
shares of Preferred Stock. The designation, relative rights, powers,
preferences, qualifications and limitations are as follows:
Section 1. Designation, Amount and Par Value. The
---------------------------------
series of Preferred Stock shall be designated as the Series G Convertible
Preferred Stock (the "Series G Preferred Stock"), and the number of shares so
designated shall be 145,000, of which 20,000 is reserved for issuance solely for
payment of stock dividends, if any, hereunder. The par value of each share of
Preferred Stock shall be $.001. Each share of Preferred Stock shall have a
stated value of $20 per share (the "Stated Value"). The Series G Preferred Stock
shall rank, with respect to dividends and distributions upon a Liquidation (as
hereinafter defined) or otherwise, pari passu with each other series of
preferred stock of the Company outstanding as of the Original Issue Date,
including without limitation the Company's Series B Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock and Series F Preferred
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<PAGE>
Stock, and shall rank pari passu with respect to dividends and distributions
upon a Liquidation or otherwise with each other series of preferred stock of the
Company hereafter created unless the terms of such other series of preferred
stock expressly states that such series ranks junior to the Series G Preferred
Stock. All such other series of preferred stock ranking pari passu with the
Series G Preferred Stock is referred to as the "Other Preferred Stock."
Section 2. Dividends.
----------------------
(a) Holders of Series G Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors out of funds legally
available therefor, and the Company shall pay, cumulative dividends at the rate
per share (as a percentage of the Stated Value per share) equal to 5% per annum,
payable, in cash or (at the Company's option) shares of Common Stock or
additional Series G Preferred Stock, which the Company shall immediately convert
into shares of Common Stock at the Conversion Ratio (as hereinafter defined), in
arrears on the Conversion Date (as hereinafter defined) without interest.
Dividends on the Series G Preferred Stock shall accrue daily commencing the
Original Issue Date (as defined in Section 7) and shall be deemed to accrue on
such date whether or not earned or declared and whether or not there are
profits, surplus or other funds of the Company legally available for the payment
of dividends. The party that holds the Series G Preferred Stock on an applicable
record date for any dividend payment will be entitled to receive such dividend
payment and any other accrued and unpaid dividends which accrued prior to such
dividend payment date, without regard to any sale or disposition of such Series
G Preferred Stock subsequent to the applicable record date but prior to the
applicable dividend payment date. Except as otherwise provided herein, if at any
time the Company pays less than the total amount of dividends then accrued to
the Series G Preferred Stock, such payment shall be distributed ratably among
the holders of such series based upon the number of shares held by each holder.
(b) So long as any Series G Preferred Stock shall remain
outstanding, neither the Company nor any subsidiary thereof shall redeem,
purchase or otherwise acquire directly or indirectly any Junior Securities (as
defined in Section 7), nor shall the Company
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<PAGE>
directly or indirectly pay or declare any dividend or make any distribution
(other than a dividend or distribution described in Section 5) upon, nor shall
any distribution be made in respect of, any Junior Securities, nor shall any
monies be set aside for or applied to the purchase or redemption (through a
sinking fund or otherwise) of any Junior Securities unless all dividends on the
Series G Preferred Stock for all past dividend periods shall have been paid.
Section 3. Voting Rights. The holders of Series G Preferred
---------------------------
Stock shall be entitled vote on all matters for which holders of the Company's
Common Stock are entitled to vote, and shall vote together with such Common
Stock as a single class. Each share of Series G Preferred Stock shall be
entitled to the number of votes on such matters as equals the number of shares
of Common Stock issuable upon conversion of such share of Series G Preferred
Stock had such share been converted on the Original Issue Date in accordance
with the terms hereof. So long as any shares of Series G Preferred Stock are
outstanding, the Company shall not, without the affirmative vote of the holders
of a majority of the shares of the Series G Preferred Stock then outstanding,
(i) alter or change adversely the powers, preferences or rights given to the
Series G Preferred Stock (except that the foregoing shall not be construed to
limit the ability of the Company, without the vote of such holders, to grant
such voting rights or, subject to the other provisions set forth herein,
conversion rights, as it may determine with regard to shares of its capital
stock now or hereafter authorized) or (ii) authorize or create any class of
stock ranking as to dividends or distribution of assets upon a Liquidation (as
defined below) senior to, or prior to the Series G Preferred Stock.
Section 4. Liquidation. Upon any liquidation, dissolution or
-----------------------
winding-up of the Company, whether voluntary or involuntary (a "Liquidation"),
the holders of shares of Series G Preferred Stock shall be entitled to receive
out of the assets of the Company, whether such assets are capital or surplus,
for each share of Series G Preferred Stock an amount equal to the Stated Value,
plus an amount equal to accrued but unpaid dividends per share, whether declared
or not, but without interest, before any distribution or payment shall be made
to the holders of any Junior Securities, and if the assets of the Company shall
be insufficient to pay in full such amounts, then the entire assets to be
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<PAGE>
distributed shall be distributed among the holders of Series G Preferred Stock
ratably in accordance with the respective amounts that would be payable on such
shares if all amounts payable thereon were paid in full. A sale, conveyance or
disposition of all or substantially all of the assets of the Company or the
effectuation by the Company of a transaction or series of related transactions
in which more than 50% of the voting power of the Company is disposed of shall
be deemed a Liquidation; provided that, a consolidation or merger of the Company
with or into any other company or companies shall not be treated as a
Liquidation, but instead shall be subject to the provisions of Section 5. The
Company shall mail written notice of any such liquidation, not less than 45 days
prior to the payment date stated therein, to each record holder of Series G
Preferred Stock.
Section 5. Conversion.
-----------------------
(a) Each share of Preferred Stock shall be convertible into
shares of Common Stock at the Conversion Ratio at the option of the holder in
whole or in part at any time after the expiration of the earlier to occur of (i)
90 days after the Original Issue Date and (ii) the date that the Securities and
Exchange Commission (the "Commission") declares effective under the Securities
Act of 1933, as amended (the "Securities Act"), the registration statement (the
"Registration Statement") contemplated by the Registration Rights Agreement (the
"Registration Rights Agreement"), by and between the Company and the original
holder of Series G Preferred Stock relating to the Series G Preferred Stock and
the shares of Common Stock into which the Series G Preferred Stock is
convertible in accordance with the terms hereof. Any conversion under this
Section 5(a) shall be of a minimum amount of at least 1,000 shares of Series G
Preferred Stock. The holder shall effect conversions by surrendering the
certificate or certificates representing the shares of Series G Preferred Stock
to be converted to the Company, together with the form of conversion notice
attached hereto as Exhibit A (the "Holder Conversion Notice") in the manner set
forth in Section 5(j). Each Holder Conversion Notice shall specify the number of
shares of Series G Preferred Stock to be converted and the date on which such
conversion is to be effected, which date may not be prior to the date the holder
delivers such Notice by facsimile (the "Holder Conversion Date"). Subject to
Section 5(c) and, as to the original holder (or its sole designee), subject to
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<PAGE>
Section 3.11 of the Purchase Agreement (as defined in Section 7), each Holder
Conversion Notice, once given, shall be irrevocable. If the holder is converting
less than all shares of Series G Preferred Stock represented by the certificate
or certificates tendered by the holder with the Holder Conversion Notice, the
Company shall promptly deliver to the holder a certificate for such number of
shares as have not been converted.
(b) Provided that 10 Trading Days shall have elapsed from the
date the Commission declared the Registration Statement effective under the
Securities Act, each share of the Series G Preferred Stock shall be convertible
into shares of Common Stock at the Conversion Ratio at the option of the Company
in whole or in part at any time on or after the expiration of one year after the
Original Issue Date; provided, however, that the Company is not permitted to
deliver a Company Conversion Notice (as defined below) within 10 days of issuing
any press release or other public statement relating to such conversion. The
Company shall effect such conversion by delivering to the holders of such shares
of Series G Preferred Stock to be converted a written notice in the form
attached hereto as Exhibit B (the "Company Conversion Notice"), which Company
Conversion Notice, once given, shall be irrevocable. Each Company Conversion
Notice shall specify the number of shares of Preferred Stock to be converted and
the date on which such conversion is to be effected, which date will be at least
one Trading Day after the date the Company delivers such Notice by facsimile to
the holder (the "Company Conversion Date"). The Company shall give such Company
Conversion Notice in accordance with Section 5(j) below at least one Trading Day
before the Company Conversion Date. Any such conversion shall be effected on a
pro rata basis among the holders of Series G Preferred Stock. Upon the
conversion of shares of Series G Preferred Stock pursuant to a Company
Conversion Notice, the holders of the Series G Preferred Stock shall surrender
the certificates representing such shares at the office of the Company or of any
transfer agent for the Series G Preferred Stock or Common Stock. If the Company
is converting less than all shares of the Series G Preferred Stock, the Company
shall, upon conversion of such shares subject to such Company Conversion Notice
and receipt of the certificate or certificates representing such shares of
Series G Preferred Stock deliver to the holder or holders a certificate for such
number of shares of Series G Preferred Stock as have not been converted. Each of
a Holder
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<PAGE>
Conversion Notice and a Company Conversion Notice is sometimes referred to
herein as a "Conversion Notice," and each of a "Holder Conversion Date" and a
"Company Conversion Date" is sometimes referred to herein as a "Conversion
Date."
(c) (i) If on any Conversion Date for any shares of Series G
Preferred Stock applicable to any conversion under Section 5(a) or 5(b), the
average Per Share Market Value of the Common Stock for the five (5) Trading Days
immediately preceding the Conversion Date exceeds 150% of the Initial Conversion
Price (as hereinafter defined), the number of shares issuable upon conversion of
such shares of Series G Preferred Stock shall be reduced by a number of shares
equal to 50% of (A) the amount by which such Per Share Market Value exceeds 150%
of the Initial Conversion Price, divided by (B) such average Per Share Market
Value, times (C) the number of shares which would otherwise be issuable upon
such conversion, but for the reduction provided for in this Section 5(c)(i).
(ii) Not later than three Trading Days after the
Conversion Date, the Company will deliver to the holder (i) a certificate or
certificates which shall be free of restrictive legends and trading restrictions
(other than those then required by law and as set forth in the Purchase
Agreement), representing the number of shares of Common Stock being acquired
upon the conversion of shares of Series G Preferred Stock and (ii) one or more
certificates representing the number of shares of Series G Preferred Stock not
converted; provided, however that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon conversion of
any shares of Series G Preferred Stock until certificates evidencing such shares
of Series G Preferred Stock are either delivered for conversion to the Company
or any transfer agent for the Series G Preferred Stock or Common Stock, or the
holder notifies the Company that such certificates have been lost, stolen or
destroyed and provides a bond (or other adequate security reasonably acceptable
to the Company) satisfactory to the Company to indemnify the Company from any
loss incurred by it in connection therewith. The Company shall, upon request of
the holder, use its best efforts to deliver any certificate or certificates
required to be delivered by the Company under this Section 5(c) electronically
through the Depository Trust Corporation or another established clearing
corporation performing similar functions. In the case of a
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<PAGE>
conversion pursuant to a Holder Conversion Notice, if such certificate or
certificates are not delivered by the date required under this Section 5(c), the
holder shall be entitled by written notice to the Company at any time on or
before such holder's receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event the Company shall immediately return the
certificates representing the shares of Preferred Stock tendered for conversion.
(d) (i) The conversion price for each share of Series G
Preferred Stock (the "Conversion Price") in effect on any Conversion Date shall
be the lesser of (a) the average Per Share Market Value for the five (5) Trading
Days immediately preceding the Original Issuance Date (the "Initial Conversion
Price") and (b) 80% of the average Per Share Market Value for the five (5)
Trading Days immediately preceding the Conversion Date; provided, however, that
the percentage set forth in clause (b) above is subject to reduction in
accordance with the Registration Rights Agreement.
(ii) If the Company, at any time while any shares
of Series G Preferred Stock are outstanding, (a) shall pay a stock dividend or
otherwise make a distribution or distributions on shares of its Junior
Securities payable in shares of its capital stock (whether payable in shares of
its Common Stock or of capital stock of any class), (b) subdivide outstanding
shares of Common Stock into a larger number of shares, (c) combine outstanding
shares of Common Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any shares of capital stock of the
Company, the Initial Conversion Price designated in Section 5(d)(i)(a) shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding before such event and of which the denominator shall be
the number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section 5(d)(ii) shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification.
(iii) If the Company, at any time while any shares
of Series G Preferred Stock are outstanding, shall issue rights or
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warrants to all holders of Common Stock (and not to the holders of the Series G
Preferred Stock) entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Per Share Market Value of Common Stock
at the record date mentioned below, the Initial Conversion Price designated in
Section 5(d)(i)(a) shall be multiplied by a fraction, of which the denominator
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants plus the number of shares which the aggregate offering
price of the total number of shares so offered would purchase at such Per Share
Market Value. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants.
However, upon the expiration of any right or warrant to purchase Common Stock
the issuance of which resulted in an adjustment in the Initial Conversion Price
designated in Section 5(d)(i)(a) pursuant to this Section 5(d)(iii), if any such
right or warrant shall expire and shall not have been exercised, the Initial
Conversion Price designated in Section 5(d)(i)(a) shall immediately upon such
expiration be recomputed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting any other
adjustments in the Conversion Price made pursuant to the provisions of this
Section 5 after the issuance of such rights or warrants) had the adjustment of
the Conversion Price made upon the issuance of such rights or warrants been made
on the basis of offering for subscription or purchase only that number of shares
of Common Stock actually purchased upon the exercise of such rights or warrants
actually exercised.
(iv) If the Company, at any time while shares of
Series G Preferred Stock are outstanding, shall distribute to all holders of
Common Stock (and not to holders of Series G Preferred Stock) evidences of its
indebtedness or assets or rights or warrants to subscribe for or purchase any
security (excluding those referred to in Section 5(d)(iii) above) then in each
such case the Initial Conversion Price at which each share of Series G Preferred
Stock shall thereafter be convertible shall be determined by
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<PAGE>
multiplying the Initial Conversion Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Per Share
Market Value of Common Stock determined as of the record date mentioned above,
and of which the numerator shall be such Per Share Market Value of the Common
Stock on such record date less the then fair market value at such record date of
the portion of such assets or evidence of indebtedness so distributed applicable
to one outstanding share of Common Stock as determined by the Board of Directors
in good faith; provided, however that in the event of a distribution exceeding
ten percent (10%) of the net assets of the Company, such fair market value shall
be determined by a nationally recognized or major regional investment banking
firm or firm of independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial statements of the
Company) (an "Appraiser") selected in good faith by the holders of a majority in
interest of the shares of Series G Preferred Stock; and provided, further that
the Company, after receipt of the determination by such Appraiser shall have the
right to select an additional Appraiser, in which case the fair market value
shall be equal to the average of the determinations by each such Appraiser. In
either case the adjustments shall be described in a statement provided to all
holders of Preferred Stock of the portion of assets or evidences of indebtedness
so distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned above.
(v) All calculations under this Section 5 shall be
made to the nearest cent or the nearest 1/100th of a share, as the
case may be.
(vi) Whenever the Initial Conversion Price is
adjusted pursuant to Section 5(d)(ii),(iii), (iv) or (v), the Company shall
promptly mail to each holder of Series G Preferred Stock, a notice setting forth
the Initial Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.
(vii) In case of any reclassification of the
Common Stock, any consolidation or merger of the Company with or
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<PAGE>
into another person, the sale or transfer of all or substantially all of the
assets of the Company or any compulsory share exchange pursuant to which the
Common Stock is converted into other securities, cash or property, the holders
of the Series G Preferred Stock then outstanding shall have the right thereafter
to convert such shares only into the shares of stock and other securities and
property receivable upon or deemed to be held by holders of Common Stock
following such reclassification, consolidation, merger, sale, transfer or share
exchange, and the holders of the Series G Preferred Stock shall be entitled upon
such event to receive such amount of securities or property as the shares of the
Common Stock of the Company into which such shares of Series G Preferred Stock
could have been converted immediately prior to such reclassification,
consolidation, merger, sale, transfer or share exchange would have been
entitled. The terms of any such consolidation, merger, sale, transfer or share
exchange shall include such terms so as to continue to give to the holder of
Series G Preferred Stock the right to receive the securities or property set
forth in this Section 5(d)(vii) upon any conversion following such
consolidation, merger, sale, transfer or share exchange. This provision shall
similarly apply to successive reclassifications, consolidations, mergers, sales,
transfers or share exchanges.
(viii) If:
(a) the Company shall declare a dividend
(or any other distribution) on its
Common Stock; or
(b) the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
(c) the Company shall authorize the
granting to all holders of the
Common Stock rights or warrants to
subscribe for or purchase any shares
of capital stock of any class or of
any rights; or
(d) the approval of any stockholders of
the Company shall be required in
connection with any reclassification
of the Common Stock of the Company
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<PAGE>
(other than a subdivision or combination
of the outstanding shares of Common
Stock), any consolidation or merger to
which the Company is a party, any sale or
transfer of all or substantially all of
the assets of the Company, or any
compulsory share exchange whereby the
Common Stock is converted into other
securities, cash or property; or
(e) the Company shall authorize the
voluntary or involuntary
dissolution, liquidation or winding-
up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Series G Preferred Stock, and shall cause to be
mailed to the holders of Preferred Stock at their last addresses as they shall
appear upon the stock books of the Company, at least 20 calendar days prior to
the applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding-up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up; provided, however, that the failure to
mail such notice or any defect therein or in the mailing thereof shall not
affect the validity of the corporate action required to be specified in such
notice.
(ix) In any case in which this Section shall require
that an adjustment be made effective as of the record date for a
specified event, the Company may elect to defer until occurrence of
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<PAGE>
such event (A) issuing to the holder, if Series G Preferred Stock is to be
converted after such record date, the Underlying Shares and other capital stock
of the Company, if any, issuable upon such conversion over and above the
Underlying Shares and other capital stock of the Company, if any, issuable upon
such conversion thereof on the basis of the Conversion Price prior to adjustment
and (B) paying to the holder any amount in cash in lieu of a fractional share
pursuant to the terms hereof, provided, however, that the Company shall deliver
to the holder a due bill or other appropriate instrument evidencing the holder's
right to receive such additional Underlying Shares, other capital stock and/or
cash upon the occurrence of the event requiring such adjustment.
(e) If at any time conditions shall arise by reason of action
taken by the Company which in the opinion of the Board of Directors are not
adequately covered by the other provisions hereof and which might materially and
adversely affect the rights of the holders of Series G Preferred Stock
(different than or distinguished from the effect generally on rights of holders
of any class of the Company's capital stock) or if at any time any such
conditions are expected to arise by reason of any action contemplated by the
Company, the Company shall mail a written notice briefly describing the action
contemplated and the material adverse effects of such action on the rights of
the holders of Series G Preferred Stock at least 20 calendar days prior to the
effective date of such action, and an Appraiser selected by the holders of
majority in interest of the Series G Preferred Stock shall give its opinion as
to the adjustment, if any (not inconsistent with the standards established in
this Section 5), of the Conversion Price (including, if necessary, any
adjustment as to the securities into which shares of Series G Preferred Stock
may thereafter be convertible) and any distribution which is or would be
required to preserve without diluting the rights of the holders of shares of
Series G Preferred Stock; provided, however, that the Company, after receipt of
the determination by such Appraiser, shall have the right to select an
additional Appraiser, in which case the adjustment shall be equal to the average
of the adjustments recommended by each such Appraiser. The Board of Directors
shall make the adjustment recommended forthwith upon the receipt of such opinion
or opinions or the taking of any such action contemplated, as the case may be;
provided, however, that no such adjustment of the Conversion Price shall be made
which in the
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<PAGE>
opinion of the Appraiser(s) giving the aforesaid opinion or opinions would
result in an increase of the Conversion Price to more than the Conversion Price
then in effect.
(f) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued Common Stock solely for
the purpose of issuance upon conversion of Series G Preferred Stock as herein
provided, free from preemptive rights or any other actual contingent purchase
rights of persons other than the holders of Series G Preferred Stock, such
number of shares of Common Stock as shall be issuable (taking into account the
adjustments and restrictions of Section 5(b) and Section 5(d) hereof) upon the
conversion of all outstanding shares of Series G Preferred Stock, and in no
circumstances shall such reserved and available shares of Common Stock be less
than twice the number of shares of Common Stock which would be issuable upon
conversion of the Series G Preferred Stock were such conversion effected on the
Original Issue Date. The Company covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly and validly authorized, issued
and fully paid and nonassessable.
(g) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Per Share Market Value at such time. If
the Company elects not, or is unable, to make such a cash payment, the holder of
a share of Series G Preferred Stock shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.
(h) The issuance of certificates for shares of Common Stock on
conversion of Series G Preferred Stock shall be made without charge to the
holders thereof for any documentary stamp or similar taxes that may be payable
in respect of the issue or delivery of such certificate, provided that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the holder of such shares of Preferred
Stock so converted and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
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(i) Shares of Series G Preferred Stock converted into Common
Stock or redeemed pursuant to the terms hereof shall be canceled and shall have
the status of authorized but unissued shares of preferred stock.
(j) Each Holder Conversion Notice shall be given by facsimile
and by mail, postage prepaid, addressed to the attention of the Chief Financial
Officer of the Company at the facsimile telephone number and address of the
principal place of business of the Company. Each Company Conversion Notice shall
be given by facsimile and by mail, postage prepaid, addressed to each holder of
Series G Preferred Stock at the facsimile telephone number and address of such
holder appearing on the books of the Company or provided to the Company by such
holder for the purpose of such Company Conversion Notice, or if no such
facsimile telephone number or address appears or is so provided, at the
principal place of business of the holder. Any such notice shall be deemed given
and effective upon the earliest to occur of (i)(a) if such Conversion Notice is
delivered via facsimile at the facsimile telephone number specified in this
Section 5(j) prior to 6:00 p.m. (Eastern Standard Time) on any date, such date
(or, in the case of a Company Conversion Notice, the next Trading Day) or such
later date as is specified in the Conversion Notice, and (b) if such Conversion
Notice is delivered via facsimile at the facsimile telephone number specified in
this Section 5(j) after 6:00 p.m. (Eastern Standard Time) on any date, the next
date (or, in the case of a Company Conversion Notice, the next Trading Day after
such next day) or such later date as is specified in the Conversion Notice, (ii)
five days after deposit in the United States mails or (iii) upon actual receipt
by the party to whom such notice is required to be given.
Section 6. Company Redemption Option.
--------------------------------------
The Company may, at its option, redeem any outstanding and
unconverted Series G Preferred Stock on the third anniversary of the Original
Issue Date (the "Optional Redemption Date"), provided that the Company notifies
the holders thereof no later than the third business day prior to the Optional
Redemption Date of its intention to do so.
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<PAGE>
If the Company elects to redeem such outstanding and
unconverted shares of Series G Preferred Stock, the redemption price per share
(the "Optional Redemption Price") shall equal the Conversion Price on the
Optional Redemption Date and shall be paid by the Company to the holders of such
unconverted Series G Preferred Stock on the Optional Redemption Date. If any
portion of the Optional Redemption Price shall not be paid by the Company within
7 calendar days after the Optional Redemption Date, such Optional Redemption
Price shall be increased by an amount accruing from the 7th day to the 21st day
after the Optional Redemption Date at the rate of 5% per annum, from the 22nd
day to the 60th day at 8% per annum and from the 61st day until paid at the rate
of 12% per annum. However, if any portion of the Optional Redemption Price
remains unpaid more than 7 calendar days after the Optional Redemption Date,
then the holder may elect, by written notice to the Company given within 45 days
after the Optional Redemption Date, to either (i) demand conversion in
accordance with the formula and the time frame therefor set forth in Section 5
for a conversion at the option of the holder hereof of all Series G Preferred
Shares for which the Optional Redemption Price, plus interest, has not been paid
in full (the "Unpaid Optional Redemption Shares"), in which event the Per Share
Market Price for such shares shall be the lower of the Per Share Market Price
calculated on the Optional Redemption Date and the Per Share Market Price as of
the holder's written demand for conversion, or (ii) demand that the Company
withdraw its election to force such redemption. If the holder elects option (i)
above, the Company shall within three business days of its receipt of such
election deliver to the holder the shares of Common Stock issuable upon
conversion of the Unpaid Shares subject to such holder conversion demand and
otherwise perform its obligations hereunder with respect thereto; or, if the
Holder elects option (ii) above, the Company shall promptly, and in any event
not later than three business days from receipt of holder's notice of such
election, return to the holder all of the Unpaid Optional Redemption Shares.
Section 7. Definitions. For the purposes hereof, the
-----------------------
following terms shall have the following meanings:
"Common Stock" means shares now or hereafter authorized
of the class of Common Stock, par value $.001, of the Company and
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stock of any other class into which such shares may hereafter have been
reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, of which
the numerator is Stated Value plus accrued but unpaid dividends (which shall not
include dividends paid upon conversion) and of which the denominator is the
Conversion Price at such time.
"Junior Securities" means the Common Stock and all other
equity securities of the Company, except the Other Preferred Stock.
"Original Issue Date" shall mean the date of the first
issuance of any shares of the Series G Preferred Stock regardless of the number
of transfers of any particular shares of Series G Preferred Stock and regardless
of the number of certificates which may be issued to evidence such Series G
Preferred Stock.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on The NASDAQ
SmallCap Market or other market or stock exchange on which the Common Stock has
been listed or if there is no such price on such date, then the closing bid
price on such market or exchange on the date nearest preceding such date, or (b)
if the Common Stock is not listed on The NASDAQ SmallCap Market or any market or
stock exchange, the closing bid for a share of Common Stock in the
over-the-counter market, as reported by the NASDAQ Stock Market at the close of
business on such date, or (c) if the Common Stock is not quoted on the NASDAQ
Stock Market, the closing bid price for a share of Common Stock in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), of (d) if the Common Stock is no longer reported by the
National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the "Pink
Sheet" quotes for the relevant conversion period as determined by the holder, or
(e) if the Common Stock is no longer publicly traded the fair market value of a
share of Common Stock as determined by an Appraiser (as defined in Section
5(d)(iv) above) selected in good faith by the holders of a majority in interest
of the shares of the Series G Preferred Stock; provided, however, that the
Company, after receipt of the determination by such Appraiser, shall have the
right to select an additional Appraiser, in which
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<PAGE>
case, the fair market value shall be equal to the average of the determinations
by each such Appraiser.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Convertible Preferred
Stock Purchase Agreement between the Company and the original
holder of the Series G Preferred Stock.
"Trading Day" means (a) a day on which the Common Stock is
traded on The NASDAQ SmallCap Market or principal stock exchange on which the
Common Stock has been listed, or (b) if the Common Stock is not listed on The
NASDAQ SmallCap Market or any stock exchange, a day on which the Common Stock is
traded in the over-the-counter market, as reported by the NASDAQ Stock Market,
or (c) if the Common Stock is not quoted on the NASDAQ Stock Market, a day on
which the Common Stock is quoted in the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices).
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EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert shares of Series G Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series G
Convertible Preferred Stock indicated below, into shares of Common Stock, par
value U.S.$.001 per share (the "Common Stock"), of AMNEX, Inc. (the "Company")
according to the conditions hereof, as of the date written below. If shares are
to be issued in the name of a person other than undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by the Company
in accordance therewith. No fee will be charged to the Holder for any
conversion, except for such transfer taxes, if any.
Conversion calculations: ___________________________________________________
Date to Effect Conversion
---------------------------------------------------
Number of shares of Series G Preferred
Stock to be Converted
---------------------------------------------------
Applicable Conversion Price
---------------------------------------------------
Signature
---------------------------------------------------
Name:
---------------------------------------------------
Address:
The Company undertakes to promptly upon its receipt of this conversion
notice (and, in any case prior to the time it effects the conversion requested
hereby), notify the converting holder by facsimile of the number of shares of
Common Stock outstanding on such date and the number of shares of Common Stock
which would be issuable to the holder if the conversion requested in this
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<PAGE>
conversion notice were effected in full, whereupon, the holder may, within one
day of the notice from the Company, revoke the conversion requested hereby to
the extent that it determines that such conversion would result in it owning in
excess of 4.9% of the outstanding shares of Common Stock on such date, and the
Company shall issue to the holder one or more certificates representing shares
of Series G Preferred Stock which have not been converted as a result of this
provision. If the holder waives the applicability of this limitation by notice
to the Company delivered upon its receipt of the Company's notice regarding the
number of outstanding shares of Common Stock or if the Purchaser fails to
respond to the Company's notice within one day thereafter, the Company shall
effect in full the conversion requested in this notice.
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EXHIBIT B
AMNEX, INC.
NOTICE OF CONVERSION AT
THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of AMNEX, Inc. (the "Company") hereby
notifies the addressee hereof that the Company hereby elects to exercise its
right to convert [ ] shares of its Series G Convertible Preferred Stock held by
the Holder into shares of Common Stock, par value U.S.$.001 per share (the
"Common Stock") of the Company according to the terms hereof, as of the date
written below. No fee will be charged to the Holder for any conversion
hereunder, except for such transfer taxes, if any which may be incurred by the
Company if shares are to be issued in the name of a person other than the person
to whom this notice is addressed.
Conversion calculations: ___________________________________________________
Date to Effect Conversion
---------------------------------------------------
Number of Shares of Preferred Stock
to be Converted
---------------------------------------------------
Applicable Conversion Price
---------------------------------------------------
Number of Shares of Common Stock
Outstanding as at the Close of Trading on
the Conversion Date
AMNEX, INC.
By:________________________________________________
Title:__________________________________________
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(5) No holder of any shares of the Corporation shall, because of his
ownership of shares of the Corporation, have a pre-emptive or other right to
purchase, subscribe for, or take any part of any shares of the Corporation, or
any part of any notes, debentures, bonds, or other securities convertible into
or providing for options or warrants to purchase shares of the Corporation which
are issued, offered, or sold by the Corporation after its incorporation, whether
the shares, notes, debentures, bonds, or other securities be authorized by this
certificate of incorporation or by an amended certificate duly filed and in
effect at the time of the issuance, offer, or sale of such shares, notes,
debentures, bonds, or other securities. Any part of the shares authorized by
this Certificate of Incorporation, or by an amended certificate duly filed, and
any part of any notes, debentures, bonds, or other securities convertible into
or providing for options or warrants to purchase shares of the Corporation may
at any time be issued, offered for sale, and sold or disposed of by the
Corporation, pursuant to a resolution of its Board of Directors and to such
persons and upon such terms and conditions as the Board of Directors may, in its
sole discretion, deem proper and advisable, without first offering to existing
shareholders any part of such shares, notes, debentures, bonds, or other
securities.
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(6) The Secretary of State is designated as the agent of the
Corporation upon whom process against the Corporation may be
served, and the address to which the Secretary of State shall mail
a copy of any process against the Corporation served upon him is
101 Park Avenue, New York, New York 10178, Attention: Vice
President - General Counsel.
(7) A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for damages for any breach of duty in his
capacity as a director, unless a judgment or other final adjudication adverse to
him establishes that (i) his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law or (ii) he personally
gained in fact a financial or other advantage to which he was not legally
entitled or (iii) his acts violated Section 719 of the Business Corporation Law.
Neither the amendment nor repeal of this Article 7, nor the adoption of any
provision of the Certificate of Incorporation inconsistent with this Article 7,
shall eliminate or reduce the effect of this Article 7 in respect of any matter
occurring, or any cause of action, suit or claim that but for this Article 7
would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
69
BY-LAWS
OF
AMNEX, INC.
(As Amended Through August 31, 1996)
ARTICLE I
OFFICES
Section 1. Principal Office
The principal office of the Corporation shall be in City of
New York, County of New York, State of New York.
Section 2. Additional Offices
The Corporation may also have offices and places of business
at such other places, within or without the State of New York, as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Time and Place
The annual meeting of the shareholders of the Corporation and
all special meetings of shareholders may be held at such time and place within
or without the State of New York as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. Annual Meeting
The annual meeting of shareholders shall be held on the 3rd
Tuesday in June of each year, if not a legal holiday, and, if a legal holiday,
then on the next business day thereafter, and the shareholders shall then elect
a Board of Directors and transact such other business as may properly be brought
before the meeting. To be properly brought before an annual meeting, business
must be (a) specified in the notice of meeting (or any supplement thereto) given
by, at the direction of or upon authority granted by the Board of Directors, (b)
otherwise brought before the meeting by, at the direction of or upon authority
granted by the Board of Directors, or (c) subject to ARTICLE II, Section 10
hereof, otherwise properly brought before the meeting by a shareholder. For
business to be properly brought before an annual meeting by a shareholder, the
shareholder must have given timely notice thereof in writing to the Secretary of
the Company. To be timely, a shareholder's notice must be received at the
principal executive offices of the Company not less than 60 days nor more than
90 days prior to the meeting; provided, however, that, in the event that less
than 70 days' notice of the date of the meeting is given to shareholders and
public disclosure of the meeting date, pursuant to a press release, is either
not made or is made less than 70 days prior to the meeting date, then notice by
the shareholder to be timely must be so received not later than the close of
business on the tenth day following the earlier of (a) the day on which such
notice of the date of the annual meeting was mailed to shareholders or (b) the
day on which any such public disclosure was made.
A shareholder's notice to the Secretary must set forth as to
each matter the shareholder proposes to bring before the annual meeting (a) a
brief description of the business desired to be brought before the annual
meeting, and the reasons for conducting such business at the annual meeting, (b)
the name and address, as they appear on the Company's books, of the shareholder
proposing such business, (c) the class and number of shares of the Company which
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are beneficially owned by the shareholder, and (d) any material interest of the
shareholder in such business. Notwithstanding anything in the By-Laws to the
contrary, but subject to ARTICLE II, Section 10 hereof, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth in this Section 2. The Chairman of an annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Section 2,
and, if he should so determine, he shall so declare to the meeting, and any such
business not properly brought before the meeting shall not be transacted.
Section 3. Notice of Annual Meeting
Written notice of the place, date and hour of the annual
meeting of shareholders shall be given personally or by mail to each shareholder
entitled to vote thereat, not less than ten (10) nor more than fifty (50) days
prior to the meeting.
Section 4. Special Meetings
Special meetings of the shareholders, for any purposes, unless
otherwise prescribed by law or by the Certificate of Incorporation, may be
called by the President, Chairman of the Board or any Director of the
Corporation. Such request shall state the purpose or purposes of the proposed
meetings.
Section 5. Notice of Special Meeting
Written notice of a special meeting of shareholders stating
the place, date and hour of the meeting, the purpose or purposes for which the
meeting is called, and by or at whose direction it is being issued, shall be
given personally or by mail to each shareholder entitled to vote thereat, not
less than ten (10) nor more than fifty (50) days prior to the meeting.
Section 6. Quorum
Except as otherwise provided by the Certificate of
Incorporation, the holders of a majority of the shares of the Corporation issued
and outstanding and entitled to vote thereat shall be necessary to and shall
constitute a quorum for the transaction of business at all meetings of the
shareholders. If a quorum shall not be present at any meeting of the
shareholders, the shareholders entitled to vote thereat present in person or
represented by proxy shall have power to adjourn the meeting from time to time
until a quorum shall be present. At any such adjourned meeting at which a quorum
may be present, any business may be transacted which might have been transacted
at the meeting as originally called.
Section 7. Voting
(a) At any meeting of the shareholders, every shareholder
having the right to vote shall be entitled to vote in person or by proxy. Except
as otherwise provided in the Certificate of Incorporation, each shareholder
shall have one (1) vote for each share of stock having voting power which is
registered in his name on the books of the Corporation.
(b) Except as otherwise provided by law or by the Certificate
of Incorporation or these By-Laws, all elections of Directors shall be decided
by a plurality of the votes cast and all other matters shall be decided by a
majority of the votes cast.
(c) At each meeting of the shareholders, the polls shall be
opened and closed, the proxies and ballots shall be received and be taken in
charge, and all questions touching the qualification of voters, the validity of
proxies and the acceptance or rejection of votes shall be decided by one (1) or
more inspectors. Such inspector(s) shall be appointed by the Board of Directors
or the chairman of the meeting. If, for any reason, any inspector(s) appointed
shall fail to attend or refuse or be unable to serve, inspectors in place of any
so failing to attend or refusing or unable to serve shall be appointed in like
manner. Such inspector(s), before entering upon the discharge of his/their
duties, shall be sworn faithfully to execute the duties of inspector(s) at such
meeting with strict impartiality and according to the best of his/their ability,
and the oath so taken shall be subscribed by him/them.
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Section 8. Proxies
A proxy, to be valid, shall be executed in writing by the
shareholder or by his attorney-in-fact. No proxy shall be valid after the
expiration of eleven (11) months from the date thereof unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the shareholder
executing it, except in those cases where an irrevocable proxy is permitted by
law.
Section 9. Consents
Whenever by any provision of law or of the Certificate of
Incorporation or of these By-Laws the vote of shareholders at a meeting thereof
is required or permitted to be taken in connection with any corporate action,
the meeting and vote of shareholders may be dispensed with if all the
shareholders who would have been entitled to vote upon the action if such
meeting were held shall consent in writing to such corporate action being taken.
Nothing in this Section 9 shall be construed so as to alter or modify any
provision of law under which the written consent of the holders of less than all
outstanding shares is sufficient for corporate action.
Section 10. Notice and Qualification of Shareholder Nominees to
Board
Only persons who are nominated in accordance with the
procedures set forth in this Section 10 shall be qualified for election as
Directors. Nominations of persons for election to the Board of Directors of the
Company may be made at a meeting of shareholders by or at the direction of the
Board of Directors or by any shareholder of the Company entitled to vote for the
election of Directors at the meeting who complies with the procedures set forth
in this Section 10. In order for persons nominated to the Board of Directors,
other than those persons nominated by or at the direction of the Board of
Directors, to be qualified to serve on the Board of Directors, such nomination
shall be made pursuant to timely notice in writing to the Secretary of the
Company. To be timely, a shareholder's notice must be received at the principal
executive offices of the Company not less than 60 days nor more than 90 days
prior to the meeting; provided, however, that, in the event that less than 70
days' notice of the date of the meeting is given to shareholders and public
disclosure of the meeting date, pursuant to a press release, is either not made
or is made less than 70 days prior to the meeting date, then notice by the
shareholder to be timely must be so received not later than the close of
business on the tenth day following the earlier of (a) the day on which such
notice of the date of the meeting was mailed to shareholders or (b) the day on
which such public disclosure was made.
A shareholder's notice to the Secretary must set forth (a) as
to each person whom the shareholder proposes to nominate for election or
re-election as a Director (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the Company which are
beneficially owned by such person and (iv) any other information relating to
such person that is required to be disclosed in solicitation of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
from time to time (including, without limitation, such documentation as is
required by Regulation 14A to confirm that such person is a bona fide nominee);
and (b) as to the shareholder giving the notice (i) the name and address, as
they appear on the Company's books, of such shareholder and (ii) the class and
number of shares of the Company which are beneficially owned by such
shareholder. At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a Director shall furnish to the Secretary
of the Company that information required to be set forth in a shareholder's
notice of nomination which pertains to the nominee. No person shall be qualified
for election as a Director of the Company unless nominated in accordance with
the procedures set forth in this Section 10. The Chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with procedures prescribed by the By-Laws, and, if he
should so determine, he shall so declare to the meeting, and the defective
nomination shall be disregarded.
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ARTICLE III
DIRECTORS
Section 1. Number; Tenure
(a) The number of Directors constituting the entire Board of
Directors shall be fixed from time to time by resolution of the Board but shall
not be less than three (3), except that where all the shares of the Corporation
are owned beneficially and of record by less than three (3) shareholders, the
number of Directors may be less than three (3) but not less than the number of
shareholders.
(b) Directors shall be elected at the annual meeting of the
shareholders, except as provided in Section 3 of this Article III, and each
Director shall be elected to serve until his successor has been elected and has
qualified.
Section 2. Resignation; Removal
Any Director may resign at any time. The Board of Directors
may remove a Director for cause. Any or all of the Directors may be removed with
or without cause by a vote of the shareholders. These provisions for the removal
of Directors apply to the extent permitted by the laws of the State of New York.
Section 3. Vacancies
If any vacancies occur in the Board of Directors by reason of
the death, resignation, retirement, disqualification or removal from office of
any Director with or without cause or if any new directorships are created, the
Directors then in office may choose successors, or fill the newly created
directorships, and the Directors so chosen shall hold office until the next
annual meeting of the shareholders and until their successors shall be duly
elected and qualified, unless sooner displaced.
Section 4. Executive Committee and Other Committees
The Board of Directors, by resolution adopted by a majority of
the entire Board, may designate from among its members an Executive Committee
and other committees, each consisting of three or more Directors, which
committees shall serve at the pleasure of the Board of Directors. The Board of
Directors may designate one or more Directors as alternate members of any such
committee, who may replace any absent member or members of such committee. The
Board of Directors, by resolution adopted by a majority of the entire Board, may
remove a member of any such committee with or without cause. To the extent
provided in said resolution and to the extent permitted by the laws of the State
of New York, each such committee shall have and may exercise the powers of the
Board of Directors. Each of such committees shall keep regular minutes of its
proceedings and shall report thereon to the Board from time to time as required.
ARTICLE IV
MEETINGS OF THE BOARD
Section 1. Place
The Board of Directors of the Corporation may hold meetings,
both regular and special, either within or without the State of New York.
Section 2. Regular Meetings
Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board.
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Section 3. Special Meetings
Special meetings of the Board of Directors may be called by
the Chairman of the Board or the President, and, upon the written demand of at
least two (2) Directors, shall be called by the Secretary, in each case on one
(1) day's notice to each Director, either personally, by overnight mail, by
telegram, by telecopier or by telephone.
Section 4. Quorum
At all meetings of the Board of Directors, a majority of the
Directors then in office, shall be necessary to constitute a quorum for the
transaction of business. If a quorum shall not be present at any meeting of the
Board of Directors, a majority of the Directors present thereat may adjourn the
meeting from time to time until a quorum shall be present. One (1) day's notice
of any such adjournment shall be given, either personally, by mail, by telegram,
by telecopier or by telephone to each Director who was not present and, unless
announced at the meeting, to the other Directors.
Section 5. Action of the Board
Unless otherwise required by law, the vote of a majority of
the Directors present at the time of the vote, if a quorum is present at such
time, shall be the act of the Board.
Section 6. Participation in Meeting by Electronic Means
Any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of the Board of Directors or any
committee thereof by means of a conference telephone or similar communication
equipment allowing all persons participating in such meeting to hear each other
at the same time. Participation by such means shall constitute presence in
person at such meeting.
Section 7. Action in Lieu of Meeting
Any action required or permitted to be taken by the Board of
Directors or any committee thereof may be taken without a meeting if all members
of the Board of Directors or the committee consent in writing to the adoption of
a resolution authorizing the action. The resolution and the written consents
thereto by the members of the Board of Directors or committee shall be filed
with the minutes of the proceedings of the Board of Directors or committee.
Section 8. Compensation
Directors, as such, shall not receive any stated salary for
their services, but, by resolution of the Board of Directors, a fixed fee and
expenses of attendance, if any, may be allowed for attendance at each regular or
special meeting of the Board; provided, however, that nothing herein contained
shall be construed to preclude any Director from serving the Corporation in any
other capacity and receiving compensation therefor.
ARTICLE V
NOTICES
Section 1. Form; Delivery
Notices to Directors and shareholders shall be in writing
(except as provided herein) and may be delivered personally or by mail or, with
respect to Directors only, by telegram, telecopier or telephone. Such notice is
deemed to be given, if by mail, when deposited in the United States mail, with
postage thereon prepaid and, if by telegram, when ordered or, if a delayed
delivery is ordered, as of such delayed delivery time, and, if by telecopier,
when transmitted and directed to Directors at their addresses as they appear on
the records of the Corporation.
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Section 2. Waiver
Whenever a notice is required to be given by any statute, the
Certificate of Incorporation or these By-Laws, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to such notice. In addition,
any shareholder attending a meeting of shareholders in person or by proxy
without protesting prior to the conclusion of the meeting the lack of notice
thereof to him, and any Director attending a meeting of the Board of Directors
or committee thereof without protesting prior to the meeting or at its
commencement such lack of notice shall be conclusively deemed to have waived
notice of such meeting.
ARTICLE VI
OFFICERS
Section 1. Officers
The officers of the Corporation shall be a Chairman of the
Board, a President, one or more Vice-Presidents, a Secretary, a Treasurer, and
such other officers as may be determined by the Board of Directors.
Section 2. Authority and Duties
All officers, as between themselves and the Corporation, shall
have such authority and perform such duties in the management of the Corporation
as may be provided in these By-Laws, or, to the extent not so provided, by the
Board of Directors.
Section 3. Term of Office; Removal
All officers shall be elected by the Board of Directors and
shall hold office for such time as may be prescribed by the Board. Any officer
or agent elected or appointed by the Board may be removed with or without cause
at any time by the Board.
Section 4. Compensation
The compensation of all officers of the Corporation shall be
fixed by the Board of Directors, and the compensation of agents shall either be
so fixed or shall be fixed by officers thereunto duly authorized. The fact that
any officer is a Director shall not preclude him from receiving a salary as an
officer, or from voting upon the resolution providing the same.
Section 5. Vacancies
If an office becomes vacant for any reason, the Board of
Directors may fill the vacancy. Any officer so appointed or elected by the Board
shall serve only until the unexpired term of his predecessor shall have expired
unless re-elected by the Board.
Section 6. The Chairman of the Board
The Chairman of the Board of Directors shall be the Chief
Executive Officer of the Corporation; he shall preside at all meetings of the
Board of Directors and shareholders; he shall be ex-officio a member of all
standing committees and shall perform such other duties as from time to time may
be assigned to him by the Board of Directors.
Section 7. The President
The President shall be the Chief Operating Officer of the
Corporation; he shall have general and active management and control of the
day-to-day business and affairs of the Corporation, subject to the control of
the Board of Directors, and shall see that all orders and resolutions of the
Board are carried into effect.
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Section 8. The Vice-President
The Vice-President or, if there be more than one, the
Vice-Presidents in the order of their seniority or in any other order determined
by the Board of Directors, shall, in the absence or disability of the President,
perform the duties and exercise the powers of the President, and shall generally
assist the President and perform such other duties as the Board, the Chairman of
the Board or the President shall prescribe.
Section 9. The Secretary
The Secretary shall attend all meetings of the Board of
Directors and all meetings of the shareholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. He shall give, or
cause to be given, notice of all meetings of the shareholders and special
meetings of the Board, and shall perform such other duties as may be prescribed
by the Board, the Chairman of the Board or the President, under whose
supervision he shall act. He shall keep in safe custody the seal of the
Corporation and, when authorized by the Board, affix the same to any instrument
requiring it and, when so affixed, it shall be attested by his signature or by
the signature of the Treasurer or an Assistant Treasurer or Assistant Secretary.
He shall keep in safe custody the certificate books and shareholder records and
such other books and records as the Board may direct and shall perform all other
duties incident to the office of the Secretary.
Section 10. The Assistant Secretary
During the absence or disability of the Secretary, any
Assistant Secretary, or if there be more than one, the one so designated by the
Secretary or by the Board of Directors, shall have all the powers and functions
of the Secretary.
Section 11. The Treasurer
The Treasurer shall have the care and custody of the corporate
funds and other valuable effects, including securities, and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all monies and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Board of Directors. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board, taking proper vouchers for such
disbursements, and shall render the Directors, at the regular meeting of the
Board, or whenever they may require it, an account of all his transactions as
Treasurer and of the financial condition of the Corporation.
Section 12. The Assistant Treasurer
During the absence or disability of the Treasurer, any
Assistant Treasurer, or if there be more than one, the one so designated by the
Treasurer or by the Board of Directors, shall have all the powers and functions
of the Treasurer.
Section 13. Bonds
In case the Board of Directors shall so require, any officer
or agent of the Corporation shall give the Corporation a bond for such term, in
such sum and with such surety or sureties as shall be satisfactory to the Board
for the faithful performance of the duties of his office, and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
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ARTICLE VIII
SHARE CERTIFICATES
Section 1. Form; Signature
The certificates for shares of the Corporation shall be in
such form as shall be determined by the Board of Directors and shall be numbered
consecutively and entered in books of the Corporation as they are issued. Each
certificate shall exhibit the registered holder's name and the number and class
of shares, and shall be signed by the Chairman of the Board, the President or a
Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary, and shall bear the seal of the Corporation or a
facsimile thereof. Where any such certificate is counter-signed by a transfer
agent, or registered by a registrar, the signature of any such officer may be a
facsimile signature. In case any officer who signed or whose facsimile signature
or signatures was placed on any such certificate shall have ceased to be such
officer before such certificate is issued, it may nevertheless be issued by the
Corporation with the same effect as if he were such officer at the date of
issue.
Section 2. Lost Certificates
The Board of Directors may direct a new share certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost or destroyed
upon the making of an affidavit of that fact by the person claiming the
certificate to be lost or destroyed. When authorizing such issue of a new
certificate or certificates, the Board may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost or destroyed.
Section 3. Registration of Transfer
Upon surrender to the Corporation or any transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the Corporation or such transfer agent to issue a new certificate to the
person entitled thereto, cancel the old certificate and record the transaction
upon its books.
Section 4. Registered Shareholders
Except as otherwise provided by law, the Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends or other distributions and to vote as
such owner, and to hold liable for calls and assessments a person registered on
its books as the owner of shares, and shall not be found to recognize any
equitable or legal claim to or interest in such share or shares on the part of
any other person, whether or not it has actual or other notice thereof.
Section 5. Record Date
For the purpose of determining the shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment thereof,
or to express consent to or dissent from any proposal without a meeting, or for
the purpose of determining shareholders entitled to receive payment of any
dividend or the allotment of any rights, or for the purpose of any other action
affecting the interest of shareholders, the Board of Directors may fix, in
advance, a record date. Such date shall not be more than fifty (50) nor less
than ten (10) days before the date of any such meeting, nor more than fifty (50)
days prior to any other action.
In each such case, except as otherwise provided by law, only
such persons as shall be shareholders of record on the date so fixed shall be
entitled to notice of, and to vote at, such meeting and any adjournment thereof,
or to express such consent or dissent, or to receive payment of such dividend or
such allotment or rights, or otherwise to be recognized as shareholders for the
related purpose, notwithstanding any registration or transfer of shares on the
books of the Corporation after any such record date so fixed.
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ARTICLE IX
GENERAL PROVISIONS
Section 1. Fiscal Year
The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
Section 2. Dividends
Dividends upon the capital stock of the Corporation may be
declared by the Board of Directors at any regular or special meeting and may be
paid in cash, in property, in shares of the capital stock or any combination
thereof, subject to the provisions of the laws of the State of New York.
Section 3. Reserves
Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purposes as the Board shall deem conducive to the interests of the Corporation,
and the Board may modify or abolish any such reserve in the manner in which it
was created.
Section 4. Check
All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
Section 5. Seal
The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Corporate Seal New
York". The seal may be used by causing it or a facsimile thereof to be impressed
or affixed or otherwise reproduced.
ARTICLE X
INDEMNIFICATION
Section 1. Actions by or in the right of the Corporation
Any person made, or threatened to be made, a party to an
action by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he, his testator or intestate, is or was a Director
or officer of the Corporation, or is or was serving at the request of the
Corporation as a Director or officer of any other corporation of any type or
kind, domestic or foreign, of any partnership, joint venture, trust, employee
benefit plan or other enterprise, shall be indemnified by the Corporation
against amounts paid in settlement and reasonable expenses, including attorneys'
fees, actually and necessarily incurred by him in connection with the defense or
settlement of such action, or in connection with an appeal therein, to the
fullest extent permitted by the laws of State of New York.
Section 2. Action or Proceeding Other than by or in the Right
of the Corporation
Any person made, or threatened to be made, a party to an
action or proceeding (other than one by or in the right of the Corporation to
procure a judgment in its favor), whether civil or criminal, including an action
by or in the right of any other corporation of any type or kind, domestic or
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foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which any Director or officer of the Corporation served in any
capacity at the request of the Corporation, by reason of the fact that he, his
testator or intestate, was a Director or officer of the Corporation, or served
such other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise in any capacity, shall be indemnified by the Corporation
against judgments, fines, amounts paid in settlement and reasonable expenses,
including attorney's fees actually and necessarily incurred as a result of such
action or proceeding, or any appeal therein, to the fullest extent permitted by
the laws of the State of New York.
Section 3. Opinion of Counsel
In taking any action or making any determination pursuant to
this Article, the Board of Directors and each Director, officer or employee,
whether or not interested in any such action or determination, may rely upon an
opinion of counsel selected by the Board.
Section 4. Other Indemnification; Limitation
The Corporation's obligation under this Article shall not be
exclusive or in limitation of, but shall be in addition to, any other rights to
which any such person may be entitled by (i) a resolution of shareholders, (ii)
a resolution of Directors or (iii) an agreement providing for such
indemnification. All of the provisions of this Article X of the By-Laws shall be
valid only to the extent permitted by the Certificate of Incorporation and the
laws of the State of New York.
ARTICLE XI
AMENDMENTS
Section 1. Power to Amend
These By-Laws shall be subject to amendment or repeal, and
additional By-Laws may be adopted, either by the Board of Directors at any
regular or special meeting of the Board or by written consent in lieu of a
meeting, or by the shareholders at any regular or special meeting of the
shareholders, or by written consent in lieu of a meeting.
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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Between
AMNEX, INC.
and
SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.
------------------------------
Dated as of September 19, 1996
------------------------------
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TABLE OF CONTENTS
PAGE
ARTICLE I PURCHASE AND SALE OF PREFERRED SHARES.........................-1-
1.1 Purchase and Sale.............................................-1-
1.2 Purchase Price................................................-2-
1.3 The Closings..................................................-2-
(a) The Series G Closings.................................-2-
(b) The Series H Closing..................................-3-
(c) The Series I Closing..................................-4-
(d) The Series J Closing..................................-4-
ARTICLE II REPRESENTATIONS AND WARRANTIES................................-5-
2.1 Representations, Warranties and Agreements of the
Company.......................................................-5-
(a) Organization and Qualification........................-5-
(b) Authorization; Enforcement............................-5-
(c) Capitalization........................................-6-
(d) Issuance of Shares....................................-6-
(e) No Conflicts..........................................-6-
(f) Consents and Approvals................................-7-
(g) Litigation; Proceedings...............................-7-
(h) No Default or Violation...............................-8-
(i) Intentionally Omitted.................................-8-
(j) Disclosure Materials..................................-8-
(k) Private Offering......................................-8-
(l) SEC Documents.........................................-8-
(m) Seniority.............................................-9-
2.2 Representations and Warranties of the Purchaser...............-9-
(a) Organization; Authority...............................-9-
(b) Investment Intent.....................................-9-
(c) Purchaser Status......................................-9-
(d) Experience of Purchaser...............................-9-
(e) Ability of Purchaser to Bear Risk of
Investment............................................-10-
(f) Prohibited Transactions...............................-10-
(g) Access to Information.................................-10-
(h) Non-Broker-Dealer Status..............................-10-
(i) Reliance..............................................-10-
ARTICLE III OTHER AGREEMENTS OF THE PARTIES...............................-10-
3.1 Transfer Restrictions.................................-10-
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3.2 Stop Transfer Instruction.............................-11-
3.3 Furnishing of Information.............................-11-
3.4 Notice of Certain Events..............................-12-
3.5 Copies and Use of Disclosure Materials................-12-
3.6 Blue Sky Laws.........................................-12-
3.7 Solicitation Materials................................-12-
3.8 Subsequent Financial Statements.......................-12-
3.9 Certain Agreements....................................-13-
3.10 Purchaser Ownership of Common Stock...................-14-
3.11 Listing of Underlying Shares..........................-14-
3.12 Conversion Procedures.................................-15-
3.13 Purchaser's Rights if Trading in Common Stock is
Suspended.............................................-15-
3.14 No Violation of Applicable Law........................-15-
3.15 Repurchase or Redemption Restrictions.................-15-
3.16 Piggyback Registration Rights.........................-15-
3.17 Notice of Breaches....................................-16-
3.18 Confidentiality.......................................-16-
ARTICLE IV CONDITIONS.....................................................-17-
4.1(a) Conditions Precedent to the Obligation of the
Company to Sell the Series G Shares...................-17-
(i) Accuracy of the Purchaser's Representations
and Warranties................................-17-
(ii) Performance by the Purchaser..................-17-
(iii) No Injunction.................................-17-
(iv) Required Approvals............................-17-
(b) Conditions Precedent to the Obligation of the
Purchaser to Purchase the Series G Shares.............-17-
(i) Accuracy of the Company's Representations
and Warranties................................-17-
(ii) Performance by the Company....................-17-
(iii) No Injunction.................................-18-
(iv) Adverse Changes...............................-18-
(v) No Suspensions of Trading in Common Stock.....-18-
(vi) Listing of Common Stock.......................-18-
(vii) Legal Opinions................................-18-
(viii) Required Approvals............................-18-
(ix) Shares of Common Stock........................-18-
(x) Delivery of Stock Certificates................-18-
(xi) Registration Rights Agreement.................-18-
(xii) Warrant.......................................-19-
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(xiii) Underlying Shares Registration Statement......-19-
(xiv) Certificate of Amendment......................-19-
(xv) Company Certificates..........................-19-
4.2(a) Conditions Precedent to the Obligation of the
Company to Sell the Series H Shares, the Series I
Shares or the Series J Shares.........................-19-
(i) Series G Closing..............................-19-
(ii) Accuracy of the Purchaser's Representations
and Warranties................................-19-
(iii) Performance by the Purchaser..................-20-
(iv) No Injunction.................................-20-
(v) Required Approvals............................-20-
(b) Conditions Precedent to the Obligation of the
Purchaser to Purchase the Series H Shares, the
Series I Shares or the Series J Shares................-20-
(i) Series G Closing..............................-20-
(ii) Accuracy of the Company's Representations
and Warranties................................-20-
(iii) Performance by the Company....................-20-
(iv) Underlying Shares Registration Statements.....-20-
(v) No Injunction.................................-21-
(vi) Adverse Changes...............................-21-
(vii) Trading Volume................................-21-
(viii) Litigation....................................-21-
(ix) Management....................................-21-
(x) No Suspensions of Trading in Common Stock.....-21-
(xi) Listing of Common Stock.......................-22-
(xii) Legal Opinions................................-22-
(xiii) Required Approvals............................-22-
(xiv) Shares of Common Stock........................-22-
(xv) Delivery of Stock Certificates................-22-
ARTICLE V TERMINATION....................................................-22-
5.1 Termination by Mutual Consent.........................-22-
5.2 Termination by the Company............................-23-
5.3 Termination by the Purchaser..........................-23-
ARTICLE VI MISCELLANEOUS..................................................-24-
6.1 Fees and Expenses.....................................-24-
6.2 Entire Agreement; Amendments..........................-25-
6.3 Notices...............................................-25-
6.4 Amendments; Waivers...................................-26-
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<PAGE>
6.5 Headings..............................................-26-
6.6 Successors and Assigns................................-26-
6.7 No Third-Party Beneficiaries..........................-26-
6.8 Governing Law.........................................-27-
6.9 Survival..............................................-27-
6.10 Execution.............................................-27-
6.11 Publicity.............................................-27-
6.12 Severability..........................................-27-
6.13 Delivery of W-8.......................................-27-
Exhibit A - Series G Terms
Exhibit B - Registration Rights Agreement
Exhibit C - Conversion Procedures
Exhibit D(1) - Form of Outside Counsel Legal Opinion
Exhibit D(2) - Form of Inhouse Counsel Legal Opinion
Exhibit E(1) - Form of Warrant
Exhibit E(2) - Form of Warrant
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<PAGE>
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"), dated
as of September 19, 1996, between Southbrook International Investments, Ltd., a
corporation organized and existing under the laws of the British Virgin Islands
(the "Purchaser"), and Amnex, Inc., a corporation organized and existing under
the laws of New York (the "Company").
WHEREAS, the Company desires to issue and sell to the Purchaser and the
Purchaser desires to acquire shares of the Company's Series G Convertible
Preferred Stock, par value $.001 per share (the "Series G Preferred"), the
Company's Series H Convertible Preferred Stock, par value $.001 per share (the
"Series H Preferred"), the Company's Series I Convertible Preferred Stock, par
value $.001 per share (the "Series I Preferred") and the Company's Series J
Convertible Preferred Stock, par value $.001 per share (the "Series J
Preferred").
IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and the Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED SHARES
1.1 Purchase and Sale. (a) Subject to the terms and conditions set forth
herein, the Company shall issue and sell to the Purchaser, and the Purchaser
shall purchase (a) an aggregate of up to 125,000 shares of Series G Preferred
(collectively, the "Series G Shares"); (b) an aggregate of up to 125,000 shares
of Series H Preferred (collectively, the "Series H Shares"; (c) an aggregate of
up to 125,000 shares of Series I Preferred (collectively, the "Series I
Shares"); and (d) an aggregate of up to 125,000 shares of the Series J Preferred
(collectively, the "Series J Shares"). The Series G Shares, the Series H Shares,
the Series I Shares, and the Series J Shares are collectively referred to as the
"Shares." Notwithstanding anything to the contrary set forth in this Agreement,
the Company shall have no obligation to sell Series G Shares, other than in
accordance with Section 1.3(a), Series H Shares, Series I Shares or Series J
Shares.
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<PAGE>
(b) The Series G Preferred shall have the respective rights,
preferences and privileges set forth in Exhibit A attached hereto (the "Series G
Terms"), which shall be incorporated into a Certificate of Amendment to be
approved by the Purchaser and filed by the Company with the Secretary of State
of New York (the "Series G Amendment"). The Series H Preferred, the Series I
Preferred and the Series J Preferred shall have respective rights, preferences
and privileges identical to the Series G Terms as set forth in Exhibit A,
mutatis mutandis, except that the Conversion Price for conversion of such Shares
shall be the lesser of the Market Price at the Original Issue Date of such
Shares or the percentage of the Market Price at the Conversion Date of such
Shares determined by reference to the following schedule:
Market Capitalization Percentage of Market Price
$40,000,000 - $89,329,999 80%
$89,330,000 - $95,142,999 82.5%
$95,143,000 - $134,329,999 84%
$134,330,000 or more 85%
The Series H Shares, the Series I Shares and the Series J Shares shall be
authorized pursuant to one or more certificates of amendment to the Company's
Certificate of Incorporation to be prepared by the Company, subject to the
approval of the Purchaser, and filed by the Secretary of State of New York (such
certificates of amendment, together with the Series G Amendment, are referred to
as the "Certificates of Amendment").
For purposes of this Agreement, "Conversion Price," "Original Issue
Date," "Conversion Date" "Trading Day" and "Per Share Market Value" shall have
the meanings set forth in the Series G Terms; "Market Capitalization" shall mean
the product of the Outstanding Shares at the Original Issue Date of the
particular series of Shares being issued and with respect to which the
computation is being made, multiplied by the average Per Share
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<PAGE>
Market Value for the twenty (20) Trading Days immediately preceding the Original
Issue Date of the particular series of Shares being issued; "Outstanding Shares"
shall mean 24,000,000 plus the number of shares of common stock, $.001 par
value, of the Company ("Common Stock") theretofore issued to the Purchaser or
into which Shares theretofore issued to the Purchaser may then be converted; and
"Market Price" as at any date shall mean the average Per Share Market Value for
the five (5) Trading Days immediately preceding such date.
1.2 Purchase Price. The purchase price for the Shares shall be
$20.00 per share.
1.3 The Closings.
(a) The Series G Closings. (i) The initial closing of the
purchase and sale of Series G Shares (the "Initial Series G Closing") shall take
place at the offices of Robinson Silverman Pearce Aronsohn & Berman LLP
("Robinson Silverman"), 1290 Avenue of the Americas, New York, New York 10104,
immediately following the execution hereof or upon the satisfaction of the
conditions set forth in Section 4.1. The date of the Initial Series G Closing is
hereinafter referred to as the "Initial Series G Closing Date". At the Initial
Series G Closing, the Company shall sell and issue to the Purchaser, and the
Purchaser shall purchase, 100,000 shares of Series G Preferred (the "Initial
Series G Shares"), for an aggregate purchase price of $2,000,000.
(ii) At the election of the Company, a second
closing of the purchase and sale of Series G Shares (the "Second Series G
Closing") shall take place at the offices of Robinson Silverman at such time,
which may not be later than the 30th day after the Underlying Shares
Registration Statement (hereinafter defined) relating to the Common Stock into
which the Initial Series G Shares may be converted has been filed and has been
declared effective by the Securities and Exchange Commission (the "SEC" or the
"Commission") in accordance with the Registration Rights Agreement, as may be
designated by the Company upon not less than ten (10) days notice to the
Purchaser given on or after the date such Underlying Shares Registration
Statement is declared effective by the Commission; provided that the Second
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-3-
<PAGE>
Series G Closing may take place only upon satisfaction of the conditions set
forth in Section 4.1(a) and 4.1(b) and only if the Underlying Shares
Registration Statement relating to the Common Stock into which the Initial
Series G Shares may be converted has been filed and has been declared effective
by the SEC in accordance with the Registration Rights Agreement. The date of the
Second Series G Closing is referred to as the "Second Series G Closing Date." At
the Second Series G Closing, the Company shall sell and issue to the Purchaser,
and the Purchaser shall purchase, such number (but in no event more than 25,000)
of Series G Shares as may be designated by the Company in its notice of the
Second Series G Closing.
(iii) At each Series G Closing, (a) the Company
shall deliver to the Purchaser (1) one or more stock certificates representing
the Series G Shares being issued and sold at such closing, registered in the
name of the Purchaser and (2) all documents, instruments and writings required
to have been delivered at or prior to the Series G Closing by the Company
pursuant to this Agreement; and (b) the Purchaser shall deliver to the Company
(1) the purchase price for the number of shares of Series G Preferred being
purchased at such closing as determined pursuant to this Article I in United
States dollars in immediately available funds by wire transfer to an account
designated in writing by the Company prior to the particular Series G Closing
Date and (2) all documents, instruments and writings required to have been
delivered at or prior to such Series G Closing by the Purchaser pursuant to this
Agreement and the Registration Rights Agreement.
(b) The Series H Closing. (i) At the election of the Company,
the closing of the purchase and sale of the Series H Shares (the "Series H
Closing") shall take place at the offices of Robinson Silverman at such time as
the Company may designate, provided, however, in no case shall the Series H
Closing take place until the conditions set forth in Section 4.2 have been
satisfied and (A) earlier than the later of December 1, 1996, or ten days after
notice from the Company to the Purchaser of its election to sell to the
Purchaser Series H Shares given on or after the date that the Underlying Shares
Registration Statements relating to the Initial Series G Shares, and, if there
has occurred a Second Series G Closing, the Series G Shares sold
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-4-
<PAGE>
thereat have been declared effective by the Commission, or (B) later than March
31, 1997 (the "Series H Closing Expiration Date"). The date of the Series H
Closing is hereinafter referred to as the "Series H Closing Date".
(ii) At the Series H Closing, (a) the
Company shall sell and issue to the Purchaser, and the Purchaser shall purchase
from the Company, such number (up to 125,000) shares of Series H Preferred as
the Company may elect to issue and sell to the Purchaser, (b) the Company shall
deliver to the Purchaser (1) one or more stock certificates representing the
Series H Shares, registered in the name of the Purchaser and (2) all documents,
instruments and writings required to have been delivered at or prior to the
Series H Closing by the Company pursuant to this Agreement and the Registration
Rights Agreement and (c) the Purchaser shall deliver to the Company (1) the
purchase price for the Series H Shares being purchased as determined pursuant to
this Article I in immediately available funds by wire transfer to an account
designated in writing by the Company prior to the Series H Closing Date and (2)
all documents, instruments and writings required to have been delivered at or
prior to Series H Closing by the Purchaser pursuant to this Agreement and the
Registration Rights Agreement.
(c) The Series I Closing. (i) At the election of the Company,
the closing of the purchase and sale of Series I Shares (the "Series I Closing")
shall take place at the offices of Robinson Silverman at such time as the
Company may designate, provided, however, in no case shall the Series I Closing
take place until the conditions set forth in Section 4.2 have been satisfied and
(A) earlier than the later of April 1, 1997, or ten days after notice from the
Company to the Purchaser of its election to sell to the Purchaser Series I
Shares given on or after the date that the Underlying Shares Registration
Statement covering Shares issued at the last prior Closing hereunder has been
declared effective, or (B) later than June 30, 1997 (the "Series I Expiration
Date"). The date of the Series I Closing is referred to as the "Series I Closing
Date."
(ii) At the Series I Closing, (a) the Company
shall sell and issue to the Purchaser, and the Purchaser shall
purchase from the Company, such number (up to 125,000) shares of
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-5-
<PAGE>
Series I Preferred as the Company may elect to issue and sell to the Purchaser,
(b) the Company shall deliver to the Purchaser (1) one or more stock
certificates representing the Series I Shares being sold at the Series I
Closing, registered in the name of the Purchaser and (2) all documents,
instruments and writings required to have been delivered at or prior to the
Series I Closing by the Company pursuant to this Agreement and the Registration
Rights Agreement, and (c) the Purchaser shall deliver to the Company (1) the
purchase price for the Series I Shares being purchased, as determined pursuant
to this Article I, in immediately available funds by wire transfer to an account
designated in writing by the Company prior to the Series I Closing Date, and (2)
all documents, instruments and writings required to have been delivered at or
prior to the Series I Closing by the Purchaser pursuant to this Agreement and
the Registration Rights Agreement.
(d) The Series J Closing. (i) At the election of the Company,
the closing of the purchase and sale of Series J Shares (the "Series J Closing")
shall take place at the offices of Robinson Silverman at such time as the
Company may designate, provided, however, in no case shall the Series J Closing
take place until the conditions set forth in Section 4.2 have been satisfied and
(A) earlier than the later of July 1, 1997, or ten days after notice from the
Company to the Purchaser of its election to sell to the Purchaser Series J
Shares given on or after the date that the Underlying Shares Registration
Statement covering Shares issued at the last prior Closing hereunder has been
declared effective, or (B) later than September 30, 1997 (the "Series J
Expiration Date"). The date of the Series J Closing is referred to as the
"Series J Closing Date."
(ii) At the Series J Closing, (a) the Company
shall sell and issue to the Purchaser, and the Purchaser shall purchase from the
Company, such number (up to 125,000) shares of Series J Preferred as the Company
may elect to issue and sell to the Purchaser, (b) the Company shall deliver to
the Purchaser (1) one or more stock certificates representing the Series J
Shares being sold at the Series J Closing, registered in the name of the
Purchaser and (2) all documents, instruments and writings required to have been
delivered at or prior to the Series J Closing by the Company pursuant to this
Agreement and the
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-6-
<PAGE>
Registration Rights Agreement, and (c) the Purchaser shall deliver to the
Company (1) the purchase price for the Series J Shares being purchased, as
determined pursuant to this Article I, in immediately available funds by wire
transfer to an account designated in writing by the Company prior to the Series
J Closing Date, and (2) all documents, instruments and writings required to have
been delivered at or prior to the Series J Closing by the Purchaser pursuant to
this Agreement and the Registration Rights Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the
Company. The Company hereby makes the following representations
and warranties to the Purchaser:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the State of New York, with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted. The Company has no subsidiaries other than as set forth in
the Schedule 2.1(a) attached hereto (collectively, the "Subsidiaries"). Each of
the Subsidiaries is a corporation, duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, with the
full corporate power and authority to own and use its properties and assets and
to carry on its business as currently conducted. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
would not, individually or in the aggregate, have a material adverse effect on
the results of operations, assets, prospects, or financial condition of the
Company and the Subsidiaries, taken as a whole (a "Material Adverse Effect").
10306-00006/387702.5
-7-
<PAGE>
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated hereby and by the Registration Rights Agreement, dated the date
hereof, between the Company and the Purchaser, in the form of Exhibit B (the
"Registration Rights Agreement") and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of this Agreement, the
Warrants (hereinafter defined) and the Registration Rights Agreement by the
Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the part of the
Company. Each of this Agreement and the Registration Rights Agreement has been
duly executed and delivered by the Company and constitutes the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company is set forth in Schedule 2.1(c). No shares of
Common Stock are entitled to preemptive or similar rights. Except as disclosed
in Schedule 2.1(c), there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to, or,
except as a result of the purchase and sale of the Shares hereunder, securities,
rights or obligations convertible into or exchangeable for, or giving any person
any right to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate of incorporation, bylaws or other charter
documents, except that annual meetings of shareholders have not always been held
in accordance with the respective bylaws.
(d) Issuance of Shares. The Shares are duly
authorized, and when paid for in accordance with the terms hereof
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<PAGE>
shall be validly issued, fully paid and nonassessable. The Company has and at
all times while the Shares and the Warrants are outstanding will maintain an
adequate reserve of duly authorized shares of Common Stock to enable it to
perform its obligations under this Agreement, the Warrants and the Certificates
of Amendment and in no circumstances shall such reserved and available shares of
Common Stock be less than twice the number of shares of Common Stock which would
be issuable upon conversion of the Shares issued pursuant to the terms hereof
were such conversion effectuated on the Original Issue Date for such Shares.
When issued in accordance with the terms hereof and the Certificates of
Amendment, the shares of Common Stock into which the Shares may be converted
(the "Underlying Shares") will be duly authorized, validly issued, fully paid
and nonassessable; and when issued upon exercise of the Warrants in accordance
with their respective terms, the Common Stock issuable on exercise of the
Warrants (the "Warrant Shares") will be duly authorized, validly issued, fully
paid and nonassessable.
(e) No Conflicts. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and will not (i) conflict with or violate any provision of its
certificate of incorporation or bylaws (each as amended through the date hereof)
or (ii) subject to obtaining the consents referred to in Section 2.1(f),
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company is a party, or (iii) to the
knowledge of the Company result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company is subject (including Federal and
state securities laws and regulations, subject to the accuracy of the
Purchaser's representations herein), or by which any property or asset of the
Company is bound or affected, except in the case of each of clauses (ii) and
(iii), such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect. The business of the Company is not being
conducted in
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<PAGE>
violation of any law, ordinance or regulation of any governmental authority,
except for violations which, individually or in the aggregate, do not have a
Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth in
Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other person in connection with the execution,
delivery and performance by the Company of this Agreement or the Registration
Rights Agreement, except for (i) the filings of the Certificates of Amendment
with respect to the Shares with the Secretary of State of New York, which
filings shall be effected prior to the Initial Series G Closing Date, the Series
H Closing Date, the Series I Closing Date and Series J Closing Date, as
appropriate, (ii) the filing of the registration statements contemplated by the
Registration Rights Agreement (the "Underlying Shares Registration Statements")
with the SEC, which shall be filed in the time periods set forth in the
Registration Rights Agreement, (iii) applications for the listing of the
Underlying Shares and the Warrant Shares with the Nasdaq Small Cap Market, and
(iv) other than, in all other cases, where the failure to obtain such consent,
waiver, authorization or order, or to give or make such notice or filing, would
not materially impair or delay the ability of the Company to effect the Series G
Closings, the Series H Closing, the Series I Closing or the Series J Closing and
to deliver to the Purchaser the Shares (and, upon conversion of the Shares, the
Underlying Shares) or the Warrants (and, upon exercise of the Warrants, the
Warrant Shares) in the manner contemplated hereby and the Registration Rights
Agreement free and clear of all liens and
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<PAGE>
encumbrances of any nature whatsoever (together with the consents, waivers,
authorizations, orders, notices and filings referred to in Section 2.1(f) and
Schedule 2.1(f), the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically dis closed
in the Disclosure Materials (as defined below) or in Schedule 2.1(g), there is
no action, suit, notice of violation, proceeding or, to the best knowledge of
the Company, investigation pending or, to the best knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries or any of
their respective properties before or by any court, governmental or
administrative agency or regulatory authority (Federal, State, county, local or
foreign) which (i) relates to or challenges the legality, validity or
enforceability of this Agreement, the Registration Rights Agreement, the
Warrants or the Shares, (ii) could, individually or in the aggregate, have a
Material Adverse Effect or (iii) could, individually or in the aggregate,
materially impair the ability of the Company to perform fully on a timely basis
its obligations under this Agreement, the Warrants or the Registration Rights
Agreement.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of any indenture, loan or
credit agreement or any other agreement or instrument to which it is a party or
by which it or any of its properties is bound, except such conflicts or defaults
as do not have a Material Adverse Effect, (ii) is in violation of any order of
any court, arbitrator or governmental body, except for such violations as do not
have a Material Adverse Effect, or (iii) is in violation of any statute, rule or
regulation of any governmental authority which could (individually or in the
aggregate) (x) adversely affect the legality, validity or enforceability of this
Agreement or the Registration Rights Agreement, (y) have a Material Adverse
Effect or (z) adversely impair the Company's ability or obligation to perform
fully on a timely basis its obligations under this Agreement or the Registration
Rights Agreement.
(i) Intentionally Omitted.
(j) Disclosure Materials. The SEC Documents (hereinafter
defined) and the Schedules to this Agreement furnished by or on behalf of the
Company (collectively, the "Disclosure Materials") do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
(k) Private Offering. The offer and sale of the Shares, the
Warrants, the Underlying Shares and the Warrant Shares are exempt from
registration under Section 5 of the Securities Act of 1933, as amended (the
"Securities Act").
(l) SEC Documents. The Company has filed all reports required
to be filed by it under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including pursuant to Section 13(a) or 15(d) thereof, for the
two years preceding the date hereof (or such shorter period
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as the Company was required by law to file such material) (the foregoing
materials being collectively referred to herein as the "SEC Documents") on a
timely basis, or has received a valid extension of such time of filing. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved, except as may be otherwise indicated in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal year-end audit
adjustments. Since the date of the financial statements included in the
Company's last filed Quarterly Report on Form 10-Q, there has been no event,
occurrence or development that has had a Material Adverse Effect which is not
specifically disclosed in any of the Disclosure Materials.
(m) Seniority. No class of equity securities of the Company is
senior to the Shares in right of payment, whether upon liquidation, dissolution
or otherwise. The Shares will be pari passu in all respects as to dividends and
liquidation distributions with the Company's outstanding Series B, Series D,
Series E and Series F Convertible Preferred Stock.
2.2 Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a corporation
duly and validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Purchaser has the requisite power and
authority to enter into and to consummate the transactions contemplated hereby
and by the Registration Rights Agreement and otherwise to carry out its
obligations hereunder and thereunder. The purchase of the Shares by the
Purchaser hereunder has been duly authorized by all necessary action on the part
of the Purchaser. Each of this Agreement and the Registration Rights Agreement
has been duly executed and delivered by the Purchaser or on its behalf and
constitutes the valid and legally binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity.
(b) Investment Intent. The Purchaser is acquiring the
Shares, the Warrants to be issued to it hereunder, the Underlying Shares and
the Warrant Shares issuable upon exercise of such Warrants for its own account
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for investment purposes only and not with a view to or for distributing or
reselling such Shares, Warrants, Warrant Shares or Underlying Shares or any part
thereof or interest therein, without prejudice, however, to the Purchaser's
right, subject to the provisions of this Agreement and the Registration Rights
Agreement, at all times to sell or otherwise dispose of all or any part of such
Shares, Warrants, Warrant Shares or Underlying Shares under an effective
registration statement under the Securities Act and in compliance with
applicable State securities laws or under an exemption from such registration.
(c) Purchaser Status. At the time the Purchaser was offered the
Shares and the Warrants to be issued to it hereunder, it was, and at the date
hereof, it is, at each Closing Date and each date of exercise of such Warrants
and the Underlying Shares, it will be, an "accredited investor" as defined in
Rule 501(a) under the Securities Act.
(d) Experience of Purchaser. The Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Shares, Warrants to be
issued to it hereunder, Warrant Shares relating thereto and Underlying Shares
and has so evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. The
Purchaser is able to bear the economic risk of an investment in the Shares,
Warrants to be issued to it hereunder, Warrant Shares relating thereto and
Underlying Shares and, at the present time, is able to afford a complete loss of
such investment.
(f) Prohibited Transactions. The Shares, Warrants to be issued
to it hereunder, Warrant Shares relating to such Warrants and Underlying Shares
to be purchased by the Purchaser are not being acquired, directly or indirectly,
with the assets of any "employee benefit plan", within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended.
(g) Access to Information. The Purchaser acknowledges receipt
of the Disclosure Materials and further acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Shares, the Warrants, the Warrant Shares and
the Underlying Shares and the merits and risks of investing in such securities;
(ii) access to information about the Company and the Company's financial
condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the opportunity to
obtain such additional information which the Company possesses or can acquire
without unreasonable effort or expense that is necessary to make an informed
investment decision with respect to the investment and to verify the accuracy
and completeness of the information contained in the Disclosure Materials.
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(h) Non-Broker-Dealer Status. The Purchaser is not a
broker-dealer and is not affiliated or associated with any broker-dealer.
(i) Reliance. The Purchaser understands and acknowledges that
(i) the Shares and Warrants to be issued to it hereunder are being offered and
sold, and the Underlying Shares and the Warrant Shares relating to such Warrants
are being offered, to it without registration under the Securities Act in a
private placement that is exempt from the registration provisions of the
Securities Act and (ii) the availability of such exemption, depends in part on,
and that the Company will rely upon the accuracy and truthfulness of, the
foregoing representations and the Purchaser hereby consents to such reliance.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. If the Purchaser should decide to dispose of
any of the Shares or Warrant to be purchased by it hereunder (and upon
conversion or exercise thereof, any Underlying Shares or Warrant Shares), the
Purchaser understands and agrees that it may do so only (i) pursuant to an
effective registration statement under the Securities Act or (ii) pursuant to an
available exemption from registration under the Securities Act. In connection
with any transfer of any Shares, the Warrant, Underlying Shares or Warrant
Shares other than pursuant to an effective registration statement, the Company
may require that the transferor provide to the Company an opinion of counsel
experienced in the area of United States securities laws selected by the
transferor, the form and substance of which opinion shall be, reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such Shares, Warrant, Underlying Shares or Warrant Shares under
the Securities Act or any State securities laws.
The Purchaser agrees to the imprinting, so long as appropriate, of the
following legend on certificates representing the Shares and the Underlying
Shares:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER.
The legend set forth above shall be removed following a resale of
Underlying Shares or Warrant Shares, as the case may be, pursuant to an
effective registration statement under the Securities Act or sooner if in the
opinion of counsel to the Company experienced in the area of United States
securities laws such legend is no longer required under applicable
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requirements of the Securities Act. The certificates representing the Shares and
the Underlying Shares and Warrant Shares shall also bear any other legends
required by applicable Federal or state securities laws, which legends may be
removed when, in the opinion of counsel to the Company experienced in the
applicable securities laws, such legends are no longer required under the
applicable requirements of such securities laws. The Company agrees that it will
provide the Purchaser, upon request, with a substitute certificate or
certificates, free from such legend at such time as such legend is no longer
applicable. The Purchaser agrees that, in connection with any transfer of
Shares, Underlying Shares or Warrant Shares by it pursuant to an effective
registration statement under the Securities Act, the Purchaser will comply with
all prospectus delivery requirements of the Securities Act. The Company makes no
representation, warranty or agreement as to the availability of any exemption
from registration under the Securities Act with respect to any resale of Shares,
Underlying Shares or Warrant Shares.
3.2 Stop Transfer Instruction. The Purchaser agrees that the Company
shall be entitled to make a notation on its records and give instructions to any
transfer agent of the Company in order to implement the restrictions on transfer
set forth in this Agreement.
3.3 Furnishing of Information. As long as the Purchaser owns Shares or
Underlying Shares, the Company will promptly furnish to it all reports filed by
the Company pursuant to Section 13(a) or 15(d) of the Exchange Act (or if the
Company is not at the time required to file reports pursuant to such sections,
annual and quarterly reports comparable to those required by Section 13(a) or
15(d) of the Exchange Act).
3.4 Notice of Certain Events. The Company shall (i) advise the Purchaser
promptly after obtaining knowledge thereof, and, if requested by the Purchaser,
confirm such advice in writing, of (A) the issuance by any state securities
commission of any stop order suspending the qualification or exemption from
qualification of the Shares or the Common Stock for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purpose by any state
securities commission or other regulatory authority, or (B) any event that makes
any statement of a material fact made in the Disclosure Materials untrue or that
requires the making of any additions to or changes in the Disclosure Materials
in order to make the statements therein, in the light of the circumstances under
which they are made, not misleading, (ii) use its best efforts to prevent the
issuance of any stop order or order suspending the qualification or exemption
from qualification of the Shares or the Underlying Shares under any state
securities or Blue Sky laws, and (iii) if at any time any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Shares or the Underlying
Shares under any such laws, use its best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time.
3.5 Copies and Use of Disclosure Materials. The Company shall furnish
the Purchaser, without charge, as many copies of the Disclosure Materials, and
any amendments or supplements thereto, as the Purchaser may reasonably
request. The Company consents to the use of the Disclosure Materials, and any
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amendments and supplements thereto, by the Purchaser in connection with resales
of the Shares or the Underlying Shares other than pursuant to an effective
registration statement.
3.6 Blue Sky Laws. In accordance with the Registration Rights Agreement,
the Company shall qualify the Shares, the Underlying Shares and the Warrant
Shares under the securities or Blue Sky laws of such jurisdictions as the
Purchaser may reasonably request and shall continue such qualification at all
times through the third anniversary of the last Closing Date; provided, however,
that neither the Company nor its Subsidiaries shall be required in connection
therewith to qualify as a foreign corporation where they are not now so
qualified or take any action that would subject the Company to general service
in any such jurisdiction where it is not then so subject or subject the Company
to any material tax in any such jurisdiction where it is not then so subject.
3.7 Solicitation Materials. The Company shall not (i) distribute any
offering materials in connection with the offering and sale of the Shares, the
Underlying Shares or the Warrant Shares other than the Disclosure Materials and
any amendments and supplements thereto prepared in compliance herewith or (ii)
solicit any offer to buy or sell the Shares, the Underlying Shares or the
Warrant Shares by means of any form of general solicitation or advertising.
3.8 Subsequent Financial Statements. As long as the Purchaser owns Shares
or Underlying Shares, the Company shall furnish to the Purchaser, promptly after
they are filed with the Commission, a copy of all financial statements for any
period subsequent to the period covered by the financial statements included in
the Disclosure Materials.
3.9 Certain Agreements. (a) The Company covenants and agrees that it
shall not directly or indirectly, without the prior consent of the Purchaser,
offer, sell, grant any option to purchase, or otherwise dispose (or announce any
offer, sale, grant or any option to purchase or other disposition) of any of its
or its Affiliates equity or equity-equivalent securities to a third party (other
than in connection with a financing of an acquisition of assets or securities
and other than in connection with payment of services rendered to the Company by
such third party and other than securities issued upon exercise of any currently
outstanding options or warrants or upon conversion of any currently outstanding
convertible debt or preferred stock disclosed in Schedule 2.1(c) or shares of
Common Stock issuable upon conversion of Shares or upon exercise of the Warrant
in accordance herewith and the Warrant issued to Brown Simpson, LLC in
connection with the sale of the Shares) at a price which is, on the face thereof
or implied therein, less than the market price or fair market value for such
securities (a "Subsequent Discounted Financing") for a period of 120 days after
the date of this Agreement without first offering the Purchaser the opportunity
(which shall remain open for a period of five business days from the date the
Purchaser receives notice thereof) to purchase all but not less than all of such
additional equity or equity- equivalent securities, unless (A) the Company
provides the Purchaser a written notice (the "Subsequent Financing Notice") of
its intention to effect such Subsequent Discounted Financing, which Subsequent
Financing Notice shall
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describe in reasonable detail the proposed terms of such Subsequent Discounted
Financing and the amount of proceeds intended to be raised thereunder and (B)
(i) the Purchaser shall not have notified the Company within five business days
of its receipt of the Subsequent Financing Notice of its willingness to enter
into good faith negotiations to provide (or to cause its sole designee to
provide) financing to the Company on substantially the terms set forth in the
Subsequent Financing Notice or (ii) if the Purchaser notifies the Company of its
willingness to provide such financing in accordance with paragraph (B)(i) of
this Section, the Purchaser does not provide such financing in a commercial
reasonably and expeditious period of time, provided that such failure is not
attributable to a failure by the Company to act reasonably and expeditiously
with respect to such negotiations. If the Purchaser shall fail to notify the
Company of its intention to enter into such negotiations within the time period
contemplated by paragraph (B)(i) of this Section or does not provide the funding
in accordance with paragraph (B)(ii) of this Section, the Company may effect the
Subsequent Discounted Financing substantially upon the terms set forth in the
Subsequent Financing Notice (to persons, or their Affiliates, specified in such
Subsequent Financing Notice); provided, that the Company shall provide the
Purchaser with a second Subsequent Financing Notice, and the Purchaser shall
again have the right of first refusal set forth above in this Section 3.9(a), if
the Subsequent Discounted Financing subject to the initial Subsequent Financing
Notice shall not for any reason have been consummated substantially on the terms
set forth in such Subsequent Financing Notice (or with persons different than
those specified in such Subsequent Financing Notice unless such different
persons are Affiliates of those persons specified) within 60 days after the date
of the initial Subsequent Financing Notice and the Company desires to consummate
such Subsequent Discounted Financing.
(b) The Company covenants and agrees that it shall not directly
or indirectly, without the prior consent of the Purchaser, offer, sell, grant
any option to purchase, or otherwise dispose (or announce any offer, sale, grant
or any option to purchase or other disposition) of any of its or its Affiliates
equity or equity-equivalent securities to a third party, at a price which is
equal to or greater than (both on the face thereof and implied in such
transaction), the market price or fair market value for such securities (a
"Subsequent Non-Discounted Financing") for a period of 120 days after the date
of this Agreement without providing the Purchaser a notice thereof which
describes the material terms of such Subsequent Non-Discounted Financing..
(c) From the date hereof through the final Closing Date, the
Company shall not and shall cause the Subsidiaries not to, without the consent
of the Purchaser, (i) amend its certificate of incorporation, bylaws or other
charter documents so as to adversely affect any rights of the Purchaser
(provided, that amendments to the Company's certificate of incorporation solely
to increase the authorized capitalization of the Company, or subject to the
other terms hereof, to effect stock splits or reverse stock splits of the Common
Stock, shall not require the consent of the Purchaser); (ii) declare, authorize,
set aside or pay any dividend or other distribution with respect to the Common
Stock; (iii) repay, repurchase or offer to repay,
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repurchase or otherwise acquire shares of its Common Stock; or (iv) enter into
any agreement with respect to any of the foregoing.
3.10 Purchaser Ownership of Common Stock. The Purchaser may not use its
ability to convert Shares hereunder or under the terms of the Certificates of
Amendment or to exercise its rights under the Warrant, to the extent that such
conversion or exercise would result in the Purchaser owning more than 4.9% of
the outstanding shares of the Common Stock; provided, however, that this Section
3.10 shall not affect the Company's right under Section 5(b) of each of the
Certificates of Amendment to force the Purchaser to convert Shares under the
circumstances set forth in such section. The Company shall, promptly upon its
receipt of a Holder Conversion Notice tendered by the Purchaser (or its
designee) under the Certificate of Amendment, and upon its receipt of a notice
of exercise under the terms of the Warrant, notify the Purchaser of the number
of shares of Common Stock outstanding on such date and the number of Underlying
Shares and Warrant Shares which would be issuable to the Purchaser (or its
designee, as the case may be) if the conversion requested in such Conversion
Notice or exercise requested in such exercise notice were effected in full,
whereupon, notwithstanding anything to the contrary set forth in the
Certificates of Amendment or the Warrant, the Purchaser may revoke such
conversion or exercise to the extent that it determines that such conversion or
exercise would result in the Purchaser owning in excess of 4.9% of such
outstanding shares of Common Stock.
3.11 Listing of Underlying Shares. The Company shall take all steps
necessary to cause the Underlying Shares and Warrant Shares to be approved for
listing in the Nasdaq Small Cap Market (or other national securities exchange or
market on which the Common Stock is listed) no later than the date required
thereby, and shall provide to the Purchaser evidence of such listing, and shall
maintain the listing of its Common Stock on such exchange.
3.12 Conversion Procedures. Exhibit C attached hereto sets forth the
procedures with respect to the conversion of the Shares, including the forms of
conversion notice to be provided upon conversion, instructions as to the
procedures for conversion, the form of legal opinion, if necessary, that shall
be rendered to the Company's transfer agent and such other information and
instructions as may be reasonably necessary to enable the Purchaser to exercise
its right of conversion smoothly and expeditiously.
3.13 Purchaser's Rights if Trading in Common Stock is Suspended. In the
event that at any time within the two-year period after the last Closing Date
trading in the shares of the Common Stock is suspended for three or more
consecutive days on the principal market or exchange for such shares (other than
as a result of the suspension of trading in securities on such market or
exchange generally or temporary suspensions pending the release of material
information), at Purchaser's option exercisable by written notice to the
Company, the Company shall repurchase all Shares and all Underlying Shares then
held by such Purchaser, at an aggregate purchase price equal to (A) the product
of the Market Price as of the Trading Day immediately preceding the day of such
notice multiplied by the number of shares of Common Stock into which the Shares
to be purchased are then convertible (or in the case of
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Underlying Shares, the number of Underlying Shares to be purchased), plus (B)
interest on such amount accruing from the 7th day to the 21st day after such
notice at the rate of 5% per annum, from the 21st day to the 60th day at 8% per
annum, from the 60th day to the 90th day at the rate of 12% per annum and from
the 90th day until paid at the rate of 24% per annum.
3.14 No Violation of Applicable Law. Notwithstanding any provision of
this Agreement to the contrary, if any repurchase or redemption of shares
otherwise required under this Agreement or the Registration Rights Agreement
would be prohibited by the relevant provisions of the New York Business
Corporation Law, such repurchase or redemption shall be effected as soon as it
is permitted under such law; provided, however, that, interest payable by the
Company with respect to any such redemption or repurchase shall continue to
accrue in accordance with Section 3.13 during any such period.
3.15 Repurchase or Redemption Restrictions. Notwithstanding any provision
of this Agreement to the contrary, if any repurchase or redemption of shares
otherwise required under this Agreement would be prohibited in the absence of
consent from any lender of the Company or the Subsidiaries, or by the holders of
any class of securities of the Company, the Company shall use its best efforts
to obtain such consent as promptly as practicable after the repurchase or
redemption is required. Interest payable by the Company with respect to any such
redemption or repurchase shall continue to accrue in accordance with Section
3.13 until such consent is obtained. Nothing contained in this Section 3.15
shall be construed as a waiver by the Purchaser of any rights it may have by
virtue of any breach of any representation or warranty of the Company herein as
to the absence of any requirement to obtain any such consent.
3.16 Piggyback Registration Rights. For each of the Series G Preferred,
Series H Preferred, Series I Preferred and Series J Preferred, as applicable,
which are issued pursuant to this Agreement, during the period commencing the
date hereof and ending on the earlier to occur of (i) the two-year anniversary
of such applicable Closing and (ii) the date the applicable Underlying Shares
Registration Statement required to be filed by the Company is declared effective
under the Securities Act by the SEC, the Company may not file any registration
statement that provides for the registration of shares of Common Stock to be
sold by other shareholders of the Company unless the Company provides the
Purchaser with not less than seven (7) Trading Days' notice of its intention to
file such registration statement and provides the Purchaser the option to
include any or all of the applicable Underlying Shares and Warrant Shares
therein. Such registration rights shall not apply to registration statements
relating solely to (i) employee benefit plans notwithstanding the inclusion of a
resale prospectus for securities received under such employee benefit plan, or
(ii) business combinations unless the registration statement relates to
securities to be received by the holders of the Common Stock of the Company.
Prior to the Initial Series G Closing Date, the Company shall withdraw its
pending registration statement on Form S-3, Registration Statement No. 333-5657.
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3.17 Notice of Breaches. Each of the Company and the Purchaser shall give
prompt written notice to the other of any breach of any representation, warranty
or other agreement contained in this Agreement or in the Registration Rights
Agreement, as well as any events or occurrences arising after the date hereof
and prior to, with respect to a Series G Closing, the Initial or Second Series G
Closing Date or, with respect to the Series H Closing, the Series H Closing
Date, or, with respect to the Series I Closing, the Series I Closing Date or,
with respect to the Series J Closing, the Series J Closing Date, which would
reasonably be likely to cause any representation or warranty or other agreement
of such party, as the case may be, contained herein or in the Registration
Rights Agreement to be incorrect or breached as of such Closing Date. However,
no disclosure by either party pursuant to this Section 3.18 shall be deemed to
cure any breach of any representation, warranty or other agreement contained
herein or in the Registration Rights Agreement. Neither the Company, any
Subsidiary nor the Purchaser will take, or agree to commit to take, any action
that is intended to make any representation or warranty of the Company or the
Purchaser, as the case may be, contained herein or in the Registration Rights
Agreement inaccurate in any respect at the Series G Closing Date, Series H
Closing Date, Series I Closing Date or Series J Closing Date, as applicable.
Notwithstanding the generality of the foregoing, the Company shall
promptly notify the Purchaser of any notice or claim (written or oral) that it
receives from any lender of the Company to the effect that the consummation of
the transactions contemplated hereby or by the Registration Rights Agreement
violates or would violate any written agreement or understanding between such
lender and the Company, and the Company shall promptly furnish by facsimile to
the Purchaser a copy of any written statement in support of or relating to such
claim or notice.
3.18 Confidentiality. The Purchaser agrees to keep confidential any
acquisition agreement or term sheet relating thereto delivered to it by the
Company until such documents shall hereafter become publicly or generally known
through no action of Purchaser.
ARTICLE IV
CONDITIONS
4.1(a) Conditions Precedent to the Obligation of the Company to Sell the
Series G Shares. The obligation of the Company to sell the Series G Shares to
the Purchaser is subject to the satisfaction or waiver by the Company, at or
before the Initial or Second Series G Closing, as the case may be, of each of
the following conditions:
(i) Accuracy of the Purchaser's Representations and
Warranties. The representations and warranties of the Purchaser shall be true
and correct in all material respects as of the date when made and as of the
Initial Series G Closing Date or the Second Series G Closing Date, as
applicable, as though made on and as of such date (except that representations
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and warranties that are made as of a specific date need be true in all
material respects only as of such date);
(ii) Performance by the Purchaser. The Purchaser shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Purchaser at or prior to such Series G
Closing;
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
or promulgated by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by this
Agreement; and
(iv) Required Approvals. All Required Approvals shall
have been obtained other than those relating solely to the Series H Shares,
Series I Shares or Series J Shares.
(b) Conditions Precedent to the Obligation of the Purchaser to
Purchase the Series G Shares. The obligation of the Purchaser hereunder to
acquire and pay for the Series G Shares is subject to the satisfaction or waiver
by the Purchaser, at or before the Initial or Second Series G Closing, as the
case may be, of each of the following conditions:
(i) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Initial
Series G Closing Date (or the Second Series G Closing Date, as applicable) as
though made on and as of such date (except that representations and warranties
that are made as of a specific date need be true in all material respects only
as of such date);
(ii) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to such Series G Closing;
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
or promulgated by any court of governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by this
Agreement;
(iv) Adverse Changes. Since the date of the financial
statements included in the Company's Quarterly Report on Form 10-Q last filed
prior to the date of this Agreement, no event which in the judgment of the
Purchaser had a Material Adverse Effect shall have occurred which is not
disclosed in the Disclosure Materials (for purposes hereof, changes in the
market price of the Common Stock after the Initial Series G Closing Date may
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be considered in determining whether a material adverse change has occurred, and
a market price of $2.00 or less shall be a material adverse change);
(v) No Suspensions of Trading in Common Stock. The
trading in the Common Stock shall not have been suspended by the SEC or the
National Association of Securities Dealers, Inc. (except for any suspension of
trading of limited duration solely to permit dissemination of material
information regarding the Company);
(vi) Listing of Common Stock. The Common Stock shall have
at all times between the date hereof and such Series G Closing Date been, and on
such Series G Closing Date be, listed for trading on the Nasdaq Small Cap Market
or Nasdaq National Market;
(vii) Legal Opinions. The Company shall have delivered to
the Purchaser the opinion of Certilman Balin Adler & Hyman, LLP, outside counsel
to the Company, and the opinion of its inhouse counsel (together with such
forementioned outside counsel, the "Company Counsel"), in substantially the
forms set forth in Exhibit D(1) and D(2) (the "Legal Opinions");
(viii) Required Approvals. All Required Approvals shall
have been obtained other than those relating solely to the Series H Shares, the
Series I Shares or the Series J Shares;
(ix) Shares of Common Stock. On such Closing Date the
Company shall have duly reserved for issuance on conversion of Series G Shares
sufficient Underlying Shares;
(x) Delivery of Stock Certificates. The Company shall
have delivered to the Purchaser or its designee the stock certificate(s)
representing the Series G Shares to be issued and sold at such closing,
registered in the name of the Purchaser, each in form satisfactory to Robinson
Silverman;
(xi) Registration Rights Agreement. The Company shall
have executed and delivered the Registration Rights Agreement and shall have
complied in all material respects with its obligations thereunder;
(xii) Warrants. With respect to the Initial Series G
Closing, the Company shall have executed and delivered to the Purchaser common
stock purchase warrants (the "Warrants"), substantially in the forms attached
hereto as Exhibit E(1) and (E)(2), pursuant to which (a) the Purchaser shall
have the right, at any time from the Initial Series G Closing Date through the
fifth anniversary of such date, to purchase up to
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<PAGE>
225,000 shares of Common Stock at an exercise price of $5.29 per share and (b)
Brown Simpson, LLC shall have the right, at any time from the Initial Series G
Closing Date through the fifth anniversary of such date, to purchase up to
50,000 shares of Common Stock at an exercise price of $3.53 per share.
(xiii) Underlying Shares Registration Statement. With
respect to the Second Series G Closing, the Underlying Shares Registration
Statement with respect to the Underlying Shares issuable on conversion of the
Initial Series G Shares and with respect to the Warrant Shares shall have been
filed with and declared effective by the SEC, and there shall be outstanding no
stop order suspending such effectiveness issued, pending or threatened to be
issued (it being agreed that the number of Underlying Shares to be initially
registered shall be determined in accordance with the provisions of the
Registration Rights Agreement);
(xiv) Certificate of Amendment. With respect to the
Initial Series G Closing, the Series G Amendment shall have been duly filed by
the Secretary of State of New York, and the Company shall have delivered a copy
thereof to the Purchaser certified by the Secretary of State of New York; and
(xv) Company Certificates. The Purchaser shall have
received a certificate, dated the appropriate Closing Date, signed by the
Secretary or an Assistant Secretary of the Company and certifying (A) that
attached thereto is a true, correct and complete copy of (I) the Company's
Certificate of Incorporation, as amended to the date thereof, (B) the Company's
By-Laws, as amended to the date thereof, and (C) resolutions duly adopted by the
Board of Directors of the Company authorizing the execution and delivery of this
Agreement, the Warrant and the Registration Rights Agreement and the issuance
and sale of the Series G Shares, the Warrant and the Underlying Shares and the
Warrant Shares, and (ii) the incumbency of the officers executing this
Agreement, the Registration Rights Agreement and the Warrant.
4.2(a) Conditions Precedent to the Obligation of the Company to Sell the
Series H Shares, the Series I Shares or the Series J Shares. The obligation of
the Company to sell the Series H Shares, the Series I Shares or the Series J
Shares to the Purchaser is subject to the satisfaction or waiver by the Company,
at or before the Series H Closing, the Series I Closing or the Series J Closing,
as applicable, of each of the following conditions:
(i) Series G Closing. The Initial Series G Closing shall
have occurred.
(ii) Accuracy of the Purchaser's Representations and
Warranties. The representations and warranties of the Purchaser shall be true
and correct in all material respects as of the date when made and as of the
Series H Closing Date, the Series I Closing Date and the Series J Closing Date,
as applicable, as though made on and as of such date (except that
representations and warranties that are made as of a specific date need be true
in all material respects only as of such date);
(iii) Performance by the Purchaser. The Purchaser shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Purchaser at or prior to the Series H Closing,
the Series I Closing Date and the Series J Closing Date, as applicable;
(iv) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
or promulgated by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by this
Agreement relating to the issuance or conversion of the Series H Shares, the
Series I Shares or the Series J Shares, as applicable; and
(v) Required Approvals. All Required Approvals shall
have been obtained.
10306-00006/387702.5
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<PAGE>
(b) Conditions Precedent to the Obligation of the Purchaser to
Purchase the Series H Shares, the Series I Shares or the Series J Shares. The
obligation of the Purchaser hereunder to acquire and pay for the Series H
Shares, the Series I Shares and the Series J Shares is subject to the
satisfaction or waiver by the Purchaser, at or before the Series H Closing, the
Series I Closing and the Series J Closing, as applicable, of each of the
following conditions:
(i) Series G Closing. The Initial Series G Closing shall
have occurred.
(ii) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company contained herein
and in the Registration Rights Agreement shall be true and correct in all
material respects as of the date when made and as of the Series H Closing Date,
the Series I Closing Date and the Series J Closing Date, as applicable, as
though made on and as of such date (except that representations and warranties
that are made as of a specific date need be true in all material respects only
as of such date);
(iii) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Series H Closing, the Series I Closing or the Series J Closing, as
applicable;
(iv) Underlying Shares Registration Statements. With
respect to the Series H Closing, the Underlying Shares Registration Statement
with respect to the Underlying Shares issuable on conversion of all outstanding
Series G Shares and with respect to the Warrant Shares shall have been declared
effective under the Securities Act by the SEC; with respect to the Series I
Closing, the Underlying Shares Registration Statement with respect to the
Underlying Shares issuable on conversion of all outstanding Series H Shares
shall have been declared effective under the Securities Act by the SEC; and with
respect to the Series J Closing, the Underlying Shares Registration Statement
with respect to the Underlying Shares issuable on conversion of all outstanding
Series I Shares shall have been declared effective by the SEC; and in each such
case such Underlying Registration Statement shall remain effective and shall not
be subject to any stop order and no stop order shall be pending or threatened
(it being agreed that the number of Underlying Shares to be initially registered
shall be determined in accordance with the provisions of the Registration Rights
Agreement); and
(v) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
or promulgated by any court of governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by this
Agreement relating to the issuance or conversion of any of the Shares;
(vi) Adverse Changes. Since the date of the financial
statements included in the Company's last filed Quarterly Report on Form 10-Q
last filed prior to the date of this Agreement, no event which in the judgment
of the Purchaser had a Material Adverse Effect shall have occurred which is not
disclosed in the SEC Documents (for purposes hereof, changes in the market price
of the Common Stock after the Initial Series G Closing Date may be considered in
determining whether a material adverse change has occurred, and a market price
of $2.00 per share or less shall be deemed to be material adverse change);
(vii) Trading Volume. For the period from the date hereof
through the applicable Closing Date, the average 30-day trading volume of the
Common Stock shall have been 50,000 or higher;
(viii) Litigation. No material litigation shall have been
instituted or threatened against the Company;
10306-00006/387702.5
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<PAGE>
(ix) Management. Peter Izzo, Jr. and Kenneth G. Baritz
shall at all times remain substantially in their current function substantially
under their current managerial positions in the Company without a material
diminution of managerial responsibilities and without a material diminution, as
measured from the date hereof, in their respective current Common Stock
ownership positions.
(x) No Suspensions of Trading in Common Stock. The
trading in the Common Stock shall not have been suspended by the SEC or the
National Association of Securities Dealers, Inc. (except for any suspension of
trading of limited duration solely to permit dissemination of material
information regarding the Company);
(xi) Listing of Common Stock. The Common Stock shall have
been at all times between the Series G Closing Date and the Series H Closing
Date, the Series I Closing Date and the Series J Closing Date, as applicable,
and on the applicable Closing Date be, listed for trading on the Nasdaq Small
Cap Market or Nasdaq National Market;
(xii) Legal Opinions. The Company shall have delivered to
the Purchaser the opinions of Company Counsel in form and substance reasonably
satisfactory to the Purchaser, dated the applicable Closing Date;
(xiii) Required Approvals. All Required Approvals shall
have been obtained;
(xiv) Shares of Common Stock. On each of the Series H
Closing Date, the Series I Closing Date and the Series J Closing Date, as
applicable, the Company shall have reserved for issuance to the Purchaser
sufficient Underlying Shares for issuance on conversion of the Series H Shares
issued, sufficient Underlying Shares for issuance on conversion of the Series I
Shares issued, and sufficient Underlying Shares for issuance on conversion of
the Series J Shares issued; and
(xv) Delivery of Stock Certificates. The Company shall
have delivered to the Purchaser or its designee the stock certificate(s)
representing the Shares, being purchased at such Closing, registered in the name
of the Purchaser, each in form satisfactory to Robinson Silverman.
ARTICLE V
TERMINATION
5.1 Termination by Mutual Consent. (a) This Agreement may be
terminated with respect to the transactions contemplated herein relating to both
the Shares and the Underlying Shares at any time prior to the Initial Series G
Closing by the mutual consent of the Company and the Purchaser.
(b) This Agreement may be terminated with respect to the
transactions contemplated herein relating solely to the Series H Shares at any
time prior to the Series H Closing by the mutual written consent of the Company
and the Purchaser.
(c) This Agreement may be terminated with respect to the
transactions contemplated herein relating solely to the Series I Shares at any
time prior to the Series I Closing by the mutual written consent of the Company
and the Purchaser.
(d) This Agreement may be terminated with respect to the
transactions contemplated herein relating solely to the Series J Shares at any
time prior to the Series J Closing by the mutual written consent of the Company
and the Purchaser.
10306-00006/387702.5
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<PAGE>
5.2 Termination by the Company. (a) This Agreement may be
terminated with respect to the transactions contemplated herein relating to both
the Shares and the Underlying Shares prior to the Second Series G Closing by the
Company, by giving notice of such termination to the Purchaser.
(b) This Agreement may be terminated with respect to the
transactions contemplated herein relating solely to the Series H Shares prior to
the Series H Closing by the Company, by giving notice of such termination to the
Purchaser.
(c) This Agreement may be terminated with respect to the
transactions contemplated herein relating solely to the Series I Shares prior to
the Series I Closing by the Company, by giving notice of such termination to the
Purchaser.
(d) This Agreement may be terminated with respect to the
transactions contemplated herein relating solely to the Series J Shares prior to
the Series J Closing by the Company, by giving notice of such termination to the
Purchaser.
5.3 Termination by the Purchaser. (a) This Agreement may be
terminated prior to the Second Series G Closing with respect to the transactions
contemplated herein relating to both the Shares and the Underlying Shares by the
Purchaser, by giving notice of such termination to the Company, if:
(i) the Company has breached any representation, warranty,
covenant or agreement contained in this Agreement and such breach is not
cured within five business days following receipt by the Company of
notice of such breach;
(ii) there has occurred an event since the date of the
financial statements included in the Company's Quarterly Report on Form
10-Q last filed prior to the date of this Agreement which could
reasonably be expected to have a Material Adverse Effect and which is not
disclosed in the Disclosure Materials;
(iii) trading in the Company's Common Stock has been
suspended by the SEC or the Nasdaq (except for any suspension of trading
of limited duration soley to permit dissemination of material information
regarding the Company); or
(iv) the Company's Common Stock shall have failed to be
listed for trading on the Nasdaq Small Cap Market and the Purchaser shall
have exercised its termination right herein provided within 10 business
days of obtaining knowledge of such delisting.
(b) This Agreement may be terminated by the Purchaser prior to
the Series H Closing with respect to the transactions contemplated herein
relating solely to the Series H Shares, or prior to the Series I Closing with
respect to the transactions contemplated herein relating solely to the Series I
Shares, or prior to the Series J Closing with respect to the transactions
contemplated herein relating solely to the Series J Shares, by giving notice of
such termination to the Company, if:
(i) after the Initial Series G Closing Date, the Company
has breached any representation, warranty, covenant or agreement
contained in this Agreement or in the Registration Rights Agreement and
such breach is not cured within five business days following receipt by
the Company of notice of such breach;
(ii) there has occurred an event since the date of the
financial statements included in the Company's Quarterly Report on Form
10-Q last filed prior to the date of this Agreement which in
10306-00006/387702.5
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<PAGE>
the Purchaser's judgment has had a Material Adverse Effect and which is
not disclosed in the Disclosure Materials;
(iii) trading in the Company's Common Stock has been
suspended by the SEC or the Nasdaq (except for any suspension of trading
of limited duration solely to permit dissemination of material
information regarding the Company;
(iv) the Company's Common Stock shall have failed to be
listed for trading on the Nasdaq Small Cap Market or Nasdaq National
Market at any time after the Initial Series G Closing Date, and the
Purchaser shall have exercised its termination right herein provided
within 10 Trading Days of obtaining knowledge of such delisting.
(v) the Underlying Shares Registration Statement with
respect to the Underlying Shares into which the Initial Series G Shares
may be converted and with respect to the Warrant Shares is not declared
effective under the Securities Act by the SEC prior to the 90th day after
the Initial Series G Closing Date; or the Underlying Shares Registration
Statement with respect to the Underlying Shares into which the Series G
Shares issued at the Second Series G Closing may be converted has not
been declared effective under the Securities Act by the SEC prior to the
90th day after the Second Series G Closing Date; or the Underlying Shares
Registration Statement with respect to the Underlying Shares into which
the Series H Shares may be converted has not been declared effective
under the Securities Act by the SEC prior to the 90th day after the
Series H Closing Date; or the Underlying Shares Registration Statement
with respect to the Underlying Shares into which the Series I Shares may
be converted has not been declared effective under the Securities Act by
the SEC prior to the 90th day after the Series I Closing Date (it being
agreed that, in each case, the initial number of Underlying Shares to be
registered shall be as determined in the Registration Rights Agreement).
ARTICLE VI
MISCELLANEOUS
6.1 Fees and Expenses. Each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, except as
set forth in the Registration Rights Agreement. The Company shall pay all stamp
and other taxes and duties levied in connection with the issuance of the Shares
pursuant hereto. The Purchaser shall be responsible for the Purchaser's own tax
liability that may arise as a result of the investment hereunder or the
transactions contemplated by this Agreement.
6.2 Entire Agreement; Amendments. This Agreement, together with
the Exhibits and Schedules hereto, and the Registration Rights Agreement contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters.
6.3 Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
10306-00006/387702.5
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<PAGE>
If to the Company: AMNEX, INC.
101 Park Avenue
New York, NY 10178
Attn: Kenneth G. Baritz
Fax: (212) 867-0092
With copies to: Fred S. Skolnik, Esq.
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, NY 11554
Fax: (516) 296-7111
If to the Purchaser: Southbrook International
Investments, Ltd.
c/o Trippoak Advisors, Inc.
630 Fifth Avenue, Suite 2000
New York, NY 10111
Attn: Robert L. Miller
Fax: (212) 332-3256
With copies to Brown Simpson, LLC
Carnegie Hall Tower
152 West 57th Street, 40th Floor
New York, NY 10019
Attn: James Simpson
Fax: (212) 243-1329
- and -
Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Attn: Kenneth L. Henderson, Esq.
and Eric L. Cohen, Esq.
Fax: (212) 541-1357
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
6.4 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchaser, or, in the case of a waiver,
by the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
6.5 Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
10306-00006/387702.5
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<PAGE>
6.6 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns. Neither the Company nor the Purchaser may assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other.
The assignment by a party of this Agreement or any rights hereunder shall not
affect the obligations of such party under this Agreement.
6.7 No Third-Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
6.8 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof.
6.9 Survival. The agreements and covenants contained in
Article III and this Article VI shall survive the delivery and conversion of the
Shares pursuant to this Agreement. The representations and warranties of the
Company and the Purchaser contained in Article II shall survive until a date
that is one year after the Closing.
6.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
6.11 Publicity. The Company and the Purchaser shall consult
with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed.
6.12 Severability. In case any one or more of the provisions
of this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
6.13 Delivery of W-8. The Purchaser shall deliver to the
Company a completed and executed Form W-8.
10306-00006/387702.5
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
Company:
AMNEX, INC.
By:__________________________________________
Name:_____________________________________
Title:____________________________________
Purchaser:
SOUTHBROOK INTERNATIONAL
INVESTMENTS, LTD.
By:__________________________________________
Name:_____________________________________
Title:____________________________________
10306-00006/387702.5
-30-
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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(Replace this text with the legend)
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<CIK> 0000793526
<NAME> AMNEX, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 1,807,000
<SECURITIES> 0
<RECEIVABLES> 30,550,000
<ALLOWANCES> (3,802,000)
<INVENTORY> 369,000
<CURRENT-ASSETS> 33,440,000
<PP&E> 27,149,000
<DEPRECIATION> (12,531,000)
<TOTAL-ASSETS> 86,843,000
<CURRENT-LIABILITIES> 38,284,000
<BONDS> 0
0
10,882,000
<COMMON> 24,411
<OTHER-SE> 28,141,000
<TOTAL-LIABILITY-AND-EQUITY> 86,843,000
<SALES> 0
<TOTAL-REVENUES> 88,188,000
<CGS> 0
<TOTAL-COSTS> 70,863,000
<OTHER-EXPENSES> 13,221,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,973,000
<INCOME-PRETAX> 2,131,000
<INCOME-TAX> 436,000
<INCOME-CONTINUING> 1,695,000
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<EPS-PRIMARY> .06
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