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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: June 28, 1996
(Date of earliest event reported)
AMNEX, INC.
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in charter)
New York 0-17158 11-2790221
- ---------------- ----------------------- -----------------------
(State or other (Commission File No.) (IRS Employer Identi-
jurisdiction of fication Number)
incorporation)
101 Park Avenue, New York, New York 10178
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 867-0166
--------------
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective June 28, 1996, AMNEX, Inc. (the "Company") acquired all of
the issued and outstanding capital stock of Capital Network System, Inc.
("CNSI") pursuant to a merger of the Company's wholly-owned subsidiary, AMNEX
Acquisition Company, with and into CNSI. CNSI, based in Austin, Texas, provides
a variety of telecommunications services for operator-assisted and direct-dialed
long distance telephone calls transmitted primarily from international points to
locations in the United States.
Pursuant to the acquisition agreement, as amended (the "Acquisition
Agreement"), the Company has issued to the former shareholders of CNSI (the
"Former CNSI Shareholders") an aggregate of 4,099,086 Common Shares of the
Company (the "Merger Shares") and two-year warrants for the purchase of an
aggregate of 400,000 Common Shares of the Company at an exercise price of $4.51
per share (the "Warrants"). Of the Merger Shares, 1,861,802 are being held in
escrow and will be available (i) to effect a reduction of the purchase price in
the event that the negative working capital of CNSI as of the closing date and
certain other amounts payable as of such date exceeded a certain threshold
amount as provided for in the Acquisition Agreement and (ii) to indemnify the
Company against certain breaches of the Acquisition Agreement as set forth
therein.
Concurrently with the closing, the Company advanced to CNSI cash in
the approximate amount of $1,000,000. Such proceeds have been used by CNSI to
pay certain employee separation costs.
Pursuant to the Acquisition Agreement, the Company agreed that, under
certain circumstances, it will use its best efforts to cause one-half of the
Merger Shares and one-half of the Common Shares of the Company acquired upon
exercise of the Warrants to be registered for sale under the Securities Act of
1933, as amended (the "Securities Act"), approximately 12 months after the
closing date. In addition, the Company agreed that, under certain
circumstances, it will use its best efforts to cause the remaining Merger
Shares, as well as the other Common Shares of the Company acquired upon exercise
of the Warrants, to be registered for sale thereunder approximately 24 months
after the closing date. In addition, pursuant to the Acquisition Agreement, the
Company granted certain piggyback registration rights with respect to the Merger
Shares and such Common Shares underlying the Warrants.
Pursuant to the Acquisition Agreement, a majority in interest of the
Former CNSI Shareholders shall have the right to nominate, at the Company's next
meeting of shareholders at which directors are elected, one member to join the
Company's Board of Directors. In addition, for a period of two years following
the closing date, the Former CNSI Shareholders shall be entitled to nominate
such number of directors of the Company as will approximately represent
(rounding down to the next lower number), by reference to the number of Common
Shares of the
2
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Company then held by them which are not saleable either pursuant to an effective
registration statement or Rule 144, promulgated under the Securities Act, their
proportionate share of the total number of Common Shares of the Company then
issued and outstanding. The parties agreed further that the initial nominee of
the Former CNSI Shareholders shall be Robert A. Rowland, who served as Chairman
of the Board of CNSI until the closing.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND
EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
To be filed by amendment.
(b) PRO FORMA FINANCIAL INFORMATION.
To be filed by amendment.
(c) EXHIBITS.
2.1 Stock Purchase Agreement, dated as of April 26, 1996, among
AMNEX, Inc., Robert A. Rowland, Delajane Rowland, Donald D.
Simmons, C. Michael Moehle, Barbara Ann Cromwell, Ellen E.
Wood, Daniel N. Matheson, Capital Network System, Inc.,
Capital Network International, Inc., Capital Network Mexico,
S.A. de C.V., and Point to Point Communications Company.
2.2 First Amendment to Stock Purchase Agreement, dated as of
June 28, 1996, by and among the foregoing parties as well as
Sirrom Capital Corporation and Spectrum Global
Telecommunications Pty Limited.
4 Form of Warrant, dated as of June 28, 1996, for the purchase
of an aggregate of 400,000 Common Shares of AMNEX, Inc.
23 Consent of Price Waterhouse LLP - to be filed by amendment.
3
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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 hereunto duly authorized.
AMNEX, INC.
Dated: July 12, 1996 By:/s/ Kenneth G. Baritz
----------------------------
Kenneth G. Baritz
Chairman of the Board
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STOCK PURCHASE AGREEMENT
AMONG
AMNEX, INC.
AS PURCHASER,
ROBERT A. ROWLAND
DELAJANE ROWLAND
DONALD D. SIMMONS
C. MICHAEL MOEHLE
BARBARA ANN CROMWELL
ELLEN E. WOOD
AND
DANIEL N. MATHESON
AS SELLERS,
AND
CAPITAL NETWORK SYSTEM, INC.
AND
CAPITAL NETWORK INTERNATIONAL, INC.,
CAPITAL NETWORK MEXICO, S.A. de C.V.,
AND
POINT TO POINT COMMUNICATIONS COMPANY
AS OF
APRIL 26, 1996
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TABLE OF CONTENTS
R E C I T A L S :
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1
DEFINED TERMS/SCHEDULES/CURRENCY . . . . . . . . . . . . . . . . . . 4
1.1 DEFINED TERMS. . . . . . . . . . . . . . . . . . . . . . . . 4
1.2 SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3 CURRENCY . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 2
PURCHASE AND SALE. . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 AGREEMENT OF PURCHASE AND SALE . . . . . . . . . . . . . . . 4
2.2 PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 ALLOCATION OF PURCHASE PRICE . . . . . . . . . . . . . . . . 6
2.4 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF EACH SELLER. . . . . . . . . . . . 6
3.1 AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 TITLE TO STOCK . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 ABSENCE OF BREACH; NO CONSENT. . . . . . . . . . . . . . . . 7
3.4 INVESTMENT REPRESENTATIONS.. . . . . . . . . . . . . . . . . 7
3.5 SELLER ACKNOWLEDGMENTS. . . . . . . . . . . . . . . . . . . 8
3.6 NO PURCHASER REPRESENTATIONS . . . . . . . . . . . . . . . . 8
3.7 SELLER SOPHISTICATION. . . . . . . . . . . . . . . . . . . . 9
3.8 NO PUBLIC SOLICITATION . . . . . . . . . . . . . . . . . . . 9
ARTICLE 4
CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF SELLERS. . . . 9
4.1 ORGANIZATION, GOOD STANDING AND POWER. . . . . . . . . . . . 9
4.2 SUBSIDIARIES; OFFICERS AND DIRECTORS . . . . . . . . . . . . 9
4.3 AUTHORIZATION AND CONSENTS . . . . . . . . . . . . . . . . .10
4.4 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . .11
4.5 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . .11
4.6 ABSENCE OF UNDISCLOSED LIABILITIES . . . . . . . . . . . . .12
4.7 NO ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . .12
4.8 ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . . . . . .13
4.9 CERTAIN INDEBTEDNESS AND ACCOUNTS PAYABLE. . . . . . . . . .13
4.10 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
4.11 TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . . .15
4.12 BROKER'S AND FINDER'S FEE. . . . . . . . . . . . . . . . . .15
4.13 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . .16
4.14 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . .16
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4.15 PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . .16
4.16 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.17 MATERIAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . .17
4.18 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . .18
4.19 EMPLOYEES AND EMPLOYEE BENEFITS. . . . . . . . . . . . . . .19
4.20 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . .23
4.21 ENVIRONMENTAL LAWS AND REGULATIONS . . . . . . . . . . . . .23
4.22 IMPROPER PAYMENTS. . . . . . . . . . . . . . . . . . . . . .23
4.23 BANK ACCOUNTS AND POWERS OF ATTORNEY . . . . . . . . . . . .24
4.24 BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . . .24
4.25 INQUIRY WITH RESPECT TO REPRESENTATIONS AND WARRANTIES . . .24
4.26 MATERIAL MISSTATEMENTS OR OMISSIONS. . . . . . . . . . . . .24
ARTICLE 5
CERTAIN REPRESENTATIONS, WARRANTIES
AND AGREEMENTS OF PURCHASER. . . . . . . . . . . . . . . . . . . . .24
5.1 ORGANIZATION, GOOD STANDING AND POWER. . . . . . . . . . . .24
5.2 AUTHORIZATION AND CONSENTS . . . . . . . . . . . . . . . . .24
5.3 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . .26
5.4 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . .26
5.5 NO ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . .26
5.6 BROKER'S AND FINDER'S FEE. . . . . . . . . . . . . . . . . .26
5.7 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . .26
5.8 INVESTMENT REPRESENTATIONS . . . . . . . . . . . . . . . . .27
5.9 DUE DILIGENCE INVESTIGATION. . . . . . . . . . . . . . . . .27
5.10 INQUIRY WITH RESPECT TO REPRESENTATIONS AND WARRANTIES . . .27
ARTICLE 6
COVENANTS OF SELLERS AND THE CNSI COMPANIES. . . . . . . . . . . . .27
6.1 AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . .27
6.2 DELIVERY OF SCHEDULES, ACCESS AND INFORMATION. . . . . . . .27
6.3 NO SOLICITATION. . . . . . . . . . . . . . . . . . . . . . .28
6.4 CONDUCT OF BUSINESS PRIOR TO CLOSING . . . . . . . . . . . .28
6.5 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . .30
6.6 PRESS RELEASE. . . . . . . . . . . . . . . . . . . . . . . .30
6.7 FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . .30
6.8 NEGATIVE WORKING CAPITAL AMOUNT AND OTHER AMOUNTS DUE. . . .30
6.9 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . .31
6.10 UNTRUTH OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . .31
6.11 NO TRANSFER OF SHARES. . . . . . . . . . . . . . . . . . . .31
6.12 TRANSFER TAXES . . . . . . . . . . . . . . . . . . . . . . .31
6.13 DELIVERY OF BOOKS AND RECORDS. . . . . . . . . . . . . . . .32
6.14 CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . .32
6.15 UPDATING OF EXHIBITS AND SCHEDULES . . . . . . . . . . . . .32
6.16 COOPERATION OF SELLERS . . . . . . . . . . . . . . . . . . .32
6.17 UTILIZATION OF S CORPORATION TAX BENEFITS. . . . . . . . . .33
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ARTICLE 7
COVENANTS OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . .33
7.1 AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . .33
7.2 COOPERATION OF PURCHASER . . . . . . . . . . . . . . . . . .33
7.3 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . .33
7.4 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . .33
7.5 CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . .34
7.6 PUBLICITY. . . . . . . . . . . . . . . . . . . . . . . . . .34
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF SELLERS . . . . . . . . . . . . . . . .34
8.1 CONDITIONS TO OBLIGATIONS OF SELLERS . . . . . . . . . . . .34
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF PURCHASER . . . . . . . . . . . . . . .36
9.1 CONDITIONS TO OBLIGATIONS OF PURCHASER . . . . . . . . . . .36
ARTICLE 10
CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
10.1 DATE OF CLOSING. . . . . . . . . . . . . . . . . . . . . . .39
10.2 ACTIONS BY SELLERS . . . . . . . . . . . . . . . . . . . . .39
10.3 ACTIONS BY PURCHASER . . . . . . . . . . . . . . . . . . . .40
10.4 ACTIONS BY CNSI COMPANIES. . . . . . . . . . . . . . . . . .40
10.5 SIMULTANEOUS TRANSACTIONS. . . . . . . . . . . . . . . . . .40
ARTICLE 11
INDEMNIFICATION: LIMITED SURVIVAL
OF CERTAIN REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . .41
11.1 INDEMNIFICATION BY SELLERS . . . . . . . . . . . . . . . . .41
11.2 SURVIVAL OF SELLERS' REPRESENTATIONS, WARRANTIES AND
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . .42
11.3 SELLERS INDEMNIFICATION:
NOTICE, PAYMENT AND DEFENSE OF INDEMNIFICATION CLAIMS. . . .42
11.4 INDEMNIFICATION BY PURCHASER . . . . . . . . . . . . . . . .45
11.5 SURVIVAL OF PURCHASER'S REPRESENTATIONS, WARRANTIES AND
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . .45
11.6 PURCHASER INDEMNIFICATION:
NOTICE, PAYMENT AND DEFENSE OF INDEMNIFICATION CLAIMS . . .46
11.7 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . .47
11.8 NON-INTERFERENCE INDEMNIFICATION . . . . . . . . . . . . . .48
ARTICLE 12
TERMINATION; WAIVER. . . . . . . . . . . . . . . . . . . . . . . . .48
12.1 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . .48
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12.2 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . .49
12.3 DEPOSIT AND BREAKUP FEE. . . . . . . . . . . . . . . . . . .49
ARTICLE 13
REGISTRATION RIGHTS OF SELLERS . . . . . . . . . . . . . . . . . . .50
13.1 SCHEDULED REGISTRATION RIGHTS. . . . . . . . . . . . . . . .50
13.2 PIGGYBACK REGISTRATIONS. . . . . . . . . . . . . . . . . . .50
13.3 EXPENSES OF REGISTRATION . . . . . . . . . . . . . . . . . .51
13.4 SELECTION OF UNDERWRITERS. . . . . . . . . . . . . . . . . .51
13.5 MODIFICATION AND TERMINATION OF REGISTRATION RIGHTS. . . . .51
13.6 INDEMNIFICATION WITH RESPECT TO REGISTRATION OF REGISTRABLE
SECURITIES AND SALES OF SUCH SECURITIES. . . . . . . . . . .51
13.7 PARTICIPATION IN UNDERWRITTEN REGISTRATION . . . . . . . . .53
13.8 TRANSFERS OF REGISTRATION RIGHTS . . . . . . . . . . . . . .53
ARTICLE 14
OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . .53
14.1 BOARD POSITION . . . . . . . . . . . . . . . . . . . . . . .53
14.2 TAX-FREE REORGANIZATION. . . . . . . . . . . . . . . . . . .54
14.3 WARN ACT.. . . . . . . . . . . . . . . . . . . . . . . . . .54
ARTICLE 15
CERTAIN DEFINED TERMS. . . . . . . . . . . . . . . . . . . . . . . .54
15.1 CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . . . . . .54
AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . . . . . . . . . .54
AFFILIATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
ALLOWED AMOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . .55
AMNEX COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . .55
ARTICLE 3 BREACH . . . . . . . . . . . . . . . . . . . . . . . . . .55
AUDITED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . .55
B. CROMWELL. . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
B. CROMWELL CNSI SHARES. . . . . . . . . . . . . . . . . . . . . . .55
BREACH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
BUSINESS DAY . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
CLAIM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
CLOSING BALANCE SHEET. . . . . . . . . . . . . . . . . . . . . . . .56
CLOSING ESTIMATE . . . . . . . . . . . . . . . . . . . . . . . . . .56
CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
CLOSING TIME . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
CNI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
CNM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
CNSI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
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CNSI BENEFIT ARRANGEMENT . . . . . . . . . . . . . . . . . . . . . .56
CNSI BENEFIT PLAN. . . . . . . . . . . . . . . . . . . . . . . . . .56
CNSI COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
CNSI ERISA AFFILIATE . . . . . . . . . . . . . . . . . . . . . . . .56
CNSI ERISA PENSION PLAN. . . . . . . . . . . . . . . . . . . . . . .56
CNSI ERISA WELFARE PLAN. . . . . . . . . . . . . . . . . . . . . . .56
CNSI MULTIEMPLOYER PLAN. . . . . . . . . . . . . . . . . . . . . . .56
CNSI SHAREHOLDERS AGREEMENT. . . . . . . . . . . . . . . . . . . . .56
CNSI SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
CONSENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
CONTRACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
CONTROL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
COUNSEL TO SELLERS . . . . . . . . . . . . . . . . . . . . . . . . .57
COUNSEL TO CNSI COMPANIES. . . . . . . . . . . . . . . . . . . . . .57
COUNSEL TO PURCHASER . . . . . . . . . . . . . . . . . . . . . . . .57
D. ROWLAND . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
D. ROWLAND CNSI SHARES . . . . . . . . . . . . . . . . . . . . . . .57
DEBTOR RELIEF LAWS . . . . . . . . . . . . . . . . . . . . . . . . .57
DEDUCTIBLE AMOUNT. . . . . . . . . . . . . . . . . . . . . . . . . .57
DEED OF RELEASE. . . . . . . . . . . . . . . . . . . . . . . . . . .57
EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . . . .57
EMPLOYEE.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
EMPLOYEE SEPARATION COSTS. . . . . . . . . . . . . . . . . . . . . .57
ENVIRONMENTAL LAWS . . . . . . . . . . . . . . . . . . . . . . . . .57
EQUITY INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . .58
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
ESCROW AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
EXHIBIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
FEI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
FINAL CLOSING ADJUSTMENT . . . . . . . . . . . . . . . . . . . . . .58
FINAL CLOSING PAYMENT. . . . . . . . . . . . . . . . . . . . . . . .58
FINAL RELEASE DATE . . . . . . . . . . . . . . . . . . . . . . . . .58
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . .58
FOREIGN TRIBUNAL . . . . . . . . . . . . . . . . . . . . . . . . . .58
FORM 10-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
GOVERNMENTAL ENTITY. . . . . . . . . . . . . . . . . . . . . . . . .58
HAZARDOUS SUBSTANCE. . . . . . . . . . . . . . . . . . . . . . . . .59
HOLDBACK SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . .59
HSR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
INDEMNIFICATION NOTICE . . . . . . . . . . . . . . . . . . . . . . .59
INDEMNIFICATION OBJECTION NOTICE . . . . . . . . . . . . . . . . . .59
INFUSED FUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . . .59
v
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INITIAL RELEASE DATE . . . . . . . . . . . . . . . . . . . . . . . .59
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
KEY EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .59
KNOWHOW LICENSE AGREEMENT. . . . . . . . . . . . . . . . . . . . . .59
LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
LIEN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
MAILING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
MARKET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
MATERIAL ADVERSE EFFECT OR MATERIAL ADVERSE CHANGE . . . . . . . . .60
MATERIAL ADVERSE EVENT . . . . . . . . . . . . . . . . . . . . . . .60
MATERIAL AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . .60
MATHESON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
MATHESON CNSI SHARES . . . . . . . . . . . . . . . . . . . . . . . .60
MAXIMUM LOSS AMOUNT. . . . . . . . . . . . . . . . . . . . . . . . .60
M. MOEHLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
M. MOEHLE CNSI SHARES. . . . . . . . . . . . . . . . . . . . . . . .60
NAT-TEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
NEGATIVE FACTOR. . . . . . . . . . . . . . . . . . . . . . . . . . .60
NEGATIVE WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . . .61
NEGATIVE WORKING CAPITAL ALLOWABLE . . . . . . . . . . . . . . . . .61
1995 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . .61
OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
ORDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
OTHER AMOUNTS DUE. . . . . . . . . . . . . . . . . . . . . . . . . .61
OTHER AMOUNTS DUE ALLOWABLE. . . . . . . . . . . . . . . . . . . . .61
OUTSIDE CNSI COMPANIES SHAREHOLDERS. . . . . . . . . . . . . . . . .61
OUTSIDE CNSI COMPANIES SHARES. . . . . . . . . . . . . . . . . . . .61
PAYABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
PERMITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
PERMITTED INDEMNIFICATION CLAIM. . . . . . . . . . . . . . . . . . .61
PERMITTED LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . .61
PERSON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
PIGGYBACK REGISTRATION . . . . . . . . . . . . . . . . . . . . . . .62
PRESS RELEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . .62
PROPORTIONATE INTEREST . . . . . . . . . . . . . . . . . . . . . . .62
PROPRIETARY RIGHTS.. . . . . . . . . . . . . . . . . . . . . . . . .62
PTP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . .62
PURCHASER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63
PURCHASER FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . .63
RCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63
RECEIVABLES OR ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . .63
RECOVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63
vi
<PAGE>
REGISTRABLE SECURITIES . . . . . . . . . . . . . . . . . . . . . . .63
REGISTRATION EXPENSES. . . . . . . . . . . . . . . . . . . . . . . .63
RELATED COMPANIES. . . . . . . . . . . . . . . . . . . . . . . . . .63
R. ROWLAND . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63
R. ROWLAND CNSI SHARES . . . . . . . . . . . . . . . . . . . . . . .63
ROWLAND DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . .63
ROWLAND RENEWAL NOTE . . . . . . . . . . . . . . . . . . . . . . . .63
RULE 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63
S CORPORATION SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . .63
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63
SECURITIES ACT . . . . . . . . . . . . . . . . . . . . . . . . . . .64
SECURITIES LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . .64
SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
SHAREHOLDER TAX RETURNS. . . . . . . . . . . . . . . . . . . . . . .64
SIMMONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
SIMMONS CNSI SHARES. . . . . . . . . . . . . . . . . . . . . . . . .64
SIRROM CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . .64
SIRROM DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
SIRROM WARRANTS. . . . . . . . . . . . . . . . . . . . . . . . . . .64
SPECTRUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
TAX-FREE TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . .64
TAXPAYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
TAX RETURN . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
TELMEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
TRADING DAY. . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
TRANSACTION DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . .65
TRIBUNAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
UNAUDITED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . .65
UNITED STATES SECURITIES LAWS. . . . . . . . . . . . . . . . . . . .65
UNITED STATES TRIBUNAL . . . . . . . . . . . . . . . . . . . . . . .65
WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
WARRANT EXPIRATION DATE. . . . . . . . . . . . . . . . . . . . . . .65
WARN ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
WOOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
WOOD CNSI SHARES . . . . . . . . . . . . . . . . . . . . . . . . . .65
ARTICLE 16
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . .65
16.1 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . .65
16.2 ENTIRE AGREEMENT; AMENDMENTS . . . . . . . . . . . . . . . .67
16.3 BINDING EFFECT/ASSIGNABILITY . . . . . . . . . . . . . . . .67
16.4 EXHIBITS/SCHEDULES . . . . . . . . . . . . . . . . . . . . .67
16.5 INVALID PROVISIONS . . . . . . . . . . . . . . . . . . . . .67
16.6 HEADINGS/CAPTIONS. . . . . . . . . . . . . . . . . . . . . .68
16.7 WAIVER; REMEDIES . . . . . . . . . . . . . . . . . . . . . .68
vii
<PAGE>
16.8 CONSENT TO JURISDICTION. . . . . . . . . . . . . . . . . . .68
16.9 ATTORNEY'S FEES AND COSTS. . . . . . . . . . . . . . . . . .68
16.10 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . .69
16.11 COUNTERPARTS, FACSIMILE SIGNATURES . . . . . . . . . . . . .69
16.12 REPRESENTATION BY COUNSEL: INTERPRETATION. . . . . . . . . .69
16.13 JOINDER OF SPOUSES . . . . . . . . . . . . . . . . . . . . .69
16.14 NOMINATION BY PURCHASER. . . . . . . . . . . . . . . . . . .69
16.15 MATTERS PERTAINING TO SPECTRUM NETWORK SYSTEMS LIMITED . . .69
EXHIBIT A
PAYMENTS TO SELLERS. . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B
FORM OF WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C
OPINION OF PURCHASER'S COUNSEL . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D
OPINION OF SELLERS' COUNSEL. . . . . . . . . . . . . . . . . . . . D-1
EXHIBIT E
ADDRESS OF SELLERS . . . . . . . . . . . . . . . . . . . . . . . . E-1
LIST OF SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . .Schedule-1
viii
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into as of April 26, 1996 (the
"EFFECTIVE DATE"), by and among AMNEX, INC. ("PURCHASER"), ROBERT A. ROWLAND
("R. ROWLAND"), DELAJANE ROWLAND ("D. ROWLAND"), DONALD D. SIMMONS ("SIMMONS"),
C. MICHAEL MOEHLE ("M. MOEHLE"), BARBARA ANN CROMWELL (formerly known as BARBARA
ANN MOEHLE) ("B. CROMWELL"), ELLEN E. WOOD ("WOOD"), and DANIEL N. MATHESON III
("MATHESON"), (R. Rowland, D. Rowland, Simmons, M. Moehle, B. Cromwell, Wood and
Matheson are referred to herein collectively as "SELLERS" and individually as a
"SELLER"), and CAPITAL NETWORK SYSTEM, INC. ("CNSI"), CAPITAL NETWORK
INTERNATIONAL, INC. ("CNI"), CAPITAL NETWORK MEXICO, S.A. DE C.V. ("CNM"), and
POINT TO POINT COMMUNICATIONS COMPANY ("PTP") (CNSI, CNI, CNM, and PTP are
referred to herein collectively as the "CNSI COMPANIES" and individually as a
"CNSI COMPANY").
R E C I T A L S :
A. R. Rowland owns shares of capital stock in the CNSI Companies as
follows:
Number of Shares of
CNSI COMPANY Common Stock Percentage Ownership
------------- ------------------- --------------------
1. CNSI 3,080,000 66.05%
2. CNI 210 21.00%
3. CNM 1 .01%
(collectively, the "R. ROWLAND CNSI SHARES").
B. D. Rowland owns shares of capital stock in the CNSI Companies as
follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ -------------------- --------------------
1. CNSI 220,000 4.72%
(collectively, the "D. ROWLAND CNSI SHARES").
1
<PAGE>
C. Simmons owns shares of capital stock in the CNSI Companies as follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ -------------------- --------------------
1. CNSI 440,000 9.44%
(collectively, the "SIMMONS CNSI SHARES").
D. M. Moehle owns shares of capital stock in the CNSI Companies as
follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ -------------------- --------------------
1. CNSI 495,000 10.62%
(collectively, the "M. MOEHLE CNSI SHARES").
E. B. Cromwell owns shares of capital stock in the CNSI Companies as
follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ -------------------- --------------------
1. CNSI 165,000 3.54%
(collectively, the "B. CROMWELL CNSI SHARES").
F. Wood owns shares of capital stock in the CNSI Companies as follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ -------------------- --------------------
1. CNSI 167,391 3.59%
(collectively, the "WOOD CNSI SHARES").
G. Matheson owns shares of capital stock in the CNSI Companies as
follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ -------------------- --------------------
1. CNSI 95,652 2.05%
(collectively, the "MATHESON CNSI SHARES").
2
<PAGE>
H. Persons and entities other than CNSI (which is the owner of 79% of the
issued and outstanding shares of capital stock of CNI) and Sellers
(collectively, the "OUTSIDE CNSI COMPANIES SHAREHOLDERS") own shares of capital
stock in the CNSI Companies (collectively, the "OUTSIDE CNSI COMPANIES SHARES")
as follows:
CNSI Outside Number of Shares of
Company Shareholder Common Stock Percentage Ownership
------- ----------- -------------------- --------------------
1. PTP W.S. Walker 1 .01%
2. PTP CNI 30,000 99.99%
3. CNM CNI 49,999 99.99%
I. Sirrom Capital, L.P., a Tennessee limited partnership ("SIRROM
CAPITAL"), currently owns warrants to purchase a total of 3.5% of the common
stock of CNSI pursuant to (i) the Stock Purchase Warrant dated November 15,
1993, issued by CNSI to Sirrom Capital, and (ii) the Stock Purchase Warrant
dated January 18, 1994, issued by CNSI to Sirrom Capital (collectively, the
"SIRROM WARRANTS").
J. The R. Rowland CNSI Shares, the D. Rowland CNSI Shares, the Simmons
CNSI Shares, the M. Moehle CNSI Shares, the B. Cromwell CNSI Shares, the Wood
CNSI Shares and the Matheson CNSI Shares are referred to herein collectively as
the "CNSI SHARES."
K. The CNSI Shares represent all of the issued and outstanding shares of
capital stock of the CNSI Companies, other than the Outside CNSI Companies
Shares owned by the Outside CNSI Companies Shareholders.
L. Upon the terms and subject to the conditions contained in this
Agreement, Purchaser is committed to make a loan to or investment in CNSI at the
Closing in an amount not to exceed $6,000,000 but in no event less than
$4,000,000 (the "INFUSED FUNDS"), which Infused Funds shall be used first to (i)
pay in full the Sirrom Debt and the J. Rowland Estate Debt, then (ii) pay
Employee Separation Costs (Employee Separation Costs payable at the Closing are
estimated to be $1,350,000, determined at the Effective Date), (iii) pay Other
Amounts Due, and then, to the extent Infused Funds are available, (iv) pay past
due accounts payable of the CNSI Companies.
M. Upon the terms and subject to the conditions hereinafter set forth,
Sellers desire to sell the CNSI Shares to Purchaser, and Purchaser desires to
purchase the CNSI Shares from Sellers.
THEREFORE, in consideration of the premises and the covenants and
agreements contained in this Agreement, the parties agree as follows:
3
<PAGE>
ARTICLE 1
DEFINED TERMS/SCHEDULES/CURRENCY
1.1 DEFINED TERMS. Capitalized terms used in this Agreement will have the
meanings given such terms in ARTICLE 15 or elsewhere in the text of this
Agreement, and variants and derivatives of such terms shall have correlative
meanings.
1.2 SCHEDULES. References to a Schedule will include any applicable
disclosure expressly set forth on the face of any other Schedule if specifically
cross-referenced to such other Schedule. The parties acknowledge that certain
agreements and documents listed on the Schedules are not to be delivered on the
Effective Date, but were previously made available to Purchaser or its
representatives in connection with the due diligence investigation of the CNSI
Companies conducted by Purchaser or will be made available to Purchaser or its
representatives after the Effective Date but prior to April 30, 1996, in
accordance with this Agreement. To the extent such agreements or documents were
not previously delivered or made available to Purchaser, Sellers and the CNSI
Companies are obligated to, and agree that they will, deliver them to Purchaser
as soon as possible after the Effective Date, but no later than April 30, 1996.
All such agreements and documents made available or delivered to Purchaser by
the CNSI Companies and Sellers will be originals or true and correct copies of
the originals of such agreements and documents. Each Schedule and the
information, agreements and documents expressly listed in each Schedule will be
considered a part of this Agreement as if set forth herein in full and will be
deemed to constitute representations and warranties under this Agreement,
limited as set forth in the applicable provision of this Agreement under which
such Schedule is delivered; PROVIDED, HOWEVER, that the representations and
warranties of Sellers set forth in this Agreement shall not be affected or
deemed modified, waived or limited in any respect by the information provided in
the Schedules except to the extent that any qualification, modification,
exception or limitation to any representation and warranty of Sellers is
expressly and conspicuously set forth on the face of a Schedule.
1.3 CURRENCY. All payments to be made under this Agreement are to be made
in United States dollars, and all references to money, currency and the like are
intended to be references to United States dollars unless expressly stated
otherwise.
ARTICLE 2
PURCHASE AND SALE
2.1 AGREEMENT OF PURCHASE AND SALE. Upon the terms and subject to the
conditions contained in this Agreement, and in reliance upon the
representations, warranties and covenants set forth herein, at the Closing the
Sellers will sell the CNSI Shares to Purchaser (or to a wholly-owned subsidiary
of Purchaser, as contemplated by SECTION 14.2 and SECTION 16.3), and Purchaser
(or its wholly-owned subsidiary, as contemplated by SECTION 14.2 and SECTION
16.3) will purchase or acquire the CNSI Shares from Sellers, free and clear of
any and all Liens; PROVIDED, HOWEVER, that Purchaser shall have the right to
structure the acquisition as one or more mergers with or into newly-formed
subsidiaries of Purchaser as set forth in SECTION 14.2 and SECTION 16.3.
4
<PAGE>
2.2 PURCHASE PRICE. The purchase price to be paid to Sellers by Purchaser
(or by its wholly-owned subsidiary) for the CNSI Shares will be an aggregate of
fifteen million dollars ($15,000,000) (the "PURCHASE PRICE"). The Purchase Price
will be paid to Sellers as follows:
(a) ISSUANCE OF SHARES AND DELIVERY OF STOCK CERTIFICATES AT CLOSING.
At the Closing, Purchaser will issue to Sellers that number of shares of
the Common Stock (par value $0.001 per share) of AMNEX, Inc. ("AMNEX COMMON
STOCK") having an aggregate Market Value on the Effective Date of
$15,000,000. Certificates representing all the shares of AMNEX Common
Stock issued to Sellers shall be delivered to Sellers at Closing in
accordance with their respective Proportionate Interests as set forth on
EXHIBIT A, except for that number of shares having an aggregate Market
Value on the Effective Date of $7,000,000 (the "HOLDBACK SHARES"). The
Holdback Shares will be placed in escrow with the Escrow Agent in
accordance with SECTION 10.3(a) and will be available, as provided in
SECTION 11.1(e), (i) to effect a reduction of the Purchase Price in the
event that the sum, calculated at the Closing Date, of (x) Negative Working
Capital and (y) Other Amounts Due payable as of the Closing Date (together,
the "NEGATIVE FACTOR") exceeds $4,200,000 (the "ALLOWED AMOUNT"), and (ii)
to indemnify Purchaser against Breaches of this Agreement, as set forth in
SECTION 11.1 of this Agreement.
(b) ISSUANCE OF WARRANTS AND DELIVERY OF CERTIFICATES EVIDENCING THE
WARRANTS AT CLOSING. At the Closing, Purchaser will issue to Sellers, in
accordance with their respective Proportionate Interests as set forth on
EXHIBIT A, Warrants to purchase a total of 400,000 shares of AMNEX Common
Stock (the "WARRANTS") and will deliver to Sellers certificates
substantially in the form of EXHIBIT B evidencing such Warrants. The
Warrants will be exercisable at any time within two years from the date of
issuance (the "WARRANT EXPIRATION DATE") at an exercise price of 120% of
Market Value on the Effective Date, and shall expire if not exercised
within that period.
(c) INITIAL RELEASE OF HOLDBACK SHARES FROM ESCROW. On the first
anniversary of the Closing (the "INITIAL RELEASE DATE"), Purchaser will
cause the Escrow Agent to deliver to Sellers, in accordance with their
respective Proportionate Interests as set forth on EXHIBIT A, certificates
representing that number of Holdback Shares having a Market Value on the
Effective Date (and irrespective of the actual Market Value of such
Holdback Shares on the Initial Release Date) of $2,000,000, LESS any
Holdback Shares released to Purchaser from escrow on or before the Initial
Release Date to (i) offset any excess of the Negative Factor above the
Allowed Amount and (ii) indemnify Purchaser against Breaches of this
Agreement at the Initial Release Date, and less such number of Holdback
Shares having the Market Value on the Effective Date as is equal to the
amount of Loss set forth in a pending Indemnification Notice delivered by
Purchaser prior to the Initial Release Date. Any offset of Holdback Shares
against any excess of the Negative Factor above the Allowed Amount will be
effected at or prior to the Initial Release Date in accordance with SECTION
6.8.
(d) FINAL RELEASE OF HOLDBACK SHARES FROM ESCROW. Eighteen months
after the Closing (the "FINAL RELEASE DATE"), Purchaser will cause the
Escrow Agent to deliver to Sellers, in accordance with their respective
Proportionate Interests as set forth on EXHIBIT A, certificates
representing the number of Holdback Shares, if any, which remain in escrow
with
5
<PAGE>
the Escrow Agent after the Initial Release Date and which have not been
used to indemnify Purchaser against Breaches of this Agreement or such
number of Holdback Shares having the Market Value on the Effective Date as
equals the amount of Loss set forth in an Indemnification Notice delivered
by Purchaser with respect to any alleged Breaches by Sellers of this
Agreement, all as set forth in SECTION 11.1 of this Agreement.
Neither the shares of AMNEX Common Stock to be issued to Sellers at
Closing, including the Holdback Shares, nor the Warrants nor the shares of AMNEX
Common Stock underlying the Warrants are registered securities, I.E., none of
such shares or Warrants have been registered under the Securities Act of 1933,
as amended (the "SECURITIES ACT"), or under the securities laws of any of the
states of the United States. It is understood by Sellers that all of such
shares and Warrants shall be considered to be "restricted securities," as that
term is commonly used and understood within the context of the federal and state
securities laws, and will be restricted as to transferability at the time they
are issued. The certificates representing such shares and Warrants will bear a
legend describing the restrictions on transferability.
2.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price will be allocated on
the basis of (a) ninety nine and 98/100 percent (99.98%) as the consideration
for the CNSI Shares (other than the CNI Shares and the CNM Shares), (b) 1/100
percent (.01%) as the consideration for the CNI Shares, and (c) 1/100 percent
(.01%) as the consideration for the CNM Shares; PROVIDED HOWEVER, Purchaser and
Sellers will cooperate and act in good faith to reallocate the Purchase Price
if, and only to the extent that, reallocation is necessary to comply with the
Code. The portion of the Purchase Price allocated and payable to each Seller
will be determined in accordance with each Seller's Proportionate Interest as
set forth on EXHIBIT A.
2.4 FURTHER ASSURANCES. Whenever requested by or on behalf of Purchaser,
but without further consideration, Sellers will (i) execute and deliver such
other instruments of sale, assignment, transfer and conveyance and take such
other action as Purchaser reasonably may request in order to vest in Purchaser
(or its wholly-owned subsidiary) or put Purchaser (or its wholly-owned
subsidiary) in possession of the CNSI Shares; (ii) provide such reasonable
information and assistance, at Purchaser's expense, as Purchaser reasonably may
request to allow Purchaser or its assigns to operate the business of the CNSI
Companies; and (iii) provide such reasonable information and assistance as
Purchaser reasonably may request to vest all rights, titles and interests in and
to the CNSI Shares in Purchaser (or its wholly-owned subsidiary) as provided in
this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF EACH SELLER
Each Seller severally (in proportion to each Seller's Proportionate
Interest) represents and warrants to, and agrees with, Purchaser as follows:
3.1 AUTHORITY. This Agreement has been duly and validly executed and
delivered by such Seller and constitutes a valid and binding agreement of such
Seller enforceable in accordance with its terms, except as enforcement may be
limited by Debtor Relief Laws. The Transaction Documents to be executed and
delivered by such Seller pursuant to this Agreement will evidence and constitute
6
<PAGE>
the valid and binding agreements of such Seller enforceable in accordance with
their respective terms (except as limited by Debtor Relief Laws) when so
executed and delivered by such Seller.
3.2 TITLE TO STOCK. Such Seller is the lawful owner of record, has good
and marketable title to and is the sole beneficial owner of the CNSI Shares
described as being owned by such Seller in the Recitals to this Agreement, and
holds such CNSI Shares free and clear of any Liens other than Permitted Liens,
and at the Closing, such Seller will convey all right, title and interest,
including but without limitation the beneficial title to and ownership of each
share constituting the CNSI Shares attributed to such Seller in the Recitals to
this Agreement to Purchaser (or its wholly-owned subsidiary) free and clear of
all Liens other than Liens granted to CNSI as collateral security for
indebtedness incurred in connection with the purchase of Shares by certain
Sellers.
3.3 ABSENCE OF BREACH; NO CONSENT. The execution, delivery and
performance of this Agreement and the other Transaction Papers to be executed
and delivered by such Seller do not: (i) contravene any order, writ, judgment,
injunction, decree, determination or award of any Tribunal which affects or
binds such Seller or any of the CNSI Shares owned by such Seller; or (ii)
conflict with or result in a breach of or default under any indenture, loan or
credit agreement or any other agreement or instrument to which such Seller is a
party or by which such Seller or the CNSI Shares owned by such Seller are bound;
or (iii) except for the consents reflected in SCHEDULE 3.3, require the
authorization, consent or approval of any Person.
3.4 INVESTMENT REPRESENTATIONS.
(a) Such Seller will acquire the shares of AMNEX Common Stock and the
Warrants for his or her own account for investment and not with a view to
the resale or distribution thereof. Such Seller will not transfer or
otherwise dispose of the shares of AMNEX Common Stock or the Warrants, or
any interest therein, in such manner as to violate any provisions of any
applicable Securities Laws. Such Seller agrees that the certificates
representing the shares of AMNEX Common Stock and the Warrants (and the
shares of AMNEX Common Stock to be issued upon exercise of the Warrants)
may bear legends to the effect that such shares and Warrants have not been
registered under any Securities Laws, and that no interest therein may be
transferred or otherwise disposed of in violation of the provisions of any
Securities Law. Such Seller understands that he or she must bear the
economic risk of his or her investment in the shares of AMNEX Common Stock
and the Warrants for an indefinite period, as such shares and Warrants
cannot be sold unless they are subsequently registered and/or qualified
under all applicable Securities Laws or an exemption from such registration
and/or qualification is available.
(b) Such Seller represents that Purchaser has furnished him or her
with Purchaser's recent filing with and report to the SEC on Form 10-K for
the year ended December 31, 1995 (the "FORM 10K") and that such Seller has
reviewed the same and has been afforded the opportunity to obtain such
other information as necessary to evaluate the investment in the shares of
AMNEX Common Stock and the Warrants contemplated by this Agreement. Such
Seller further represents and warrants that such Seller is either an
"accredited investor" within the meaning of Rule 501(a) promulgated under
the Securities Act, or has evaluated and is capable of evaluating the
merits and risks associated with the acquisition of the shares
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of AMNEX Common Stock and the Warrants, as provided for herein. Seller
acknowledges that such acquisition may entail significant risks.
3.5 SELLER ACKNOWLEDGMENTS. Such Seller acknowledges, understands and has
considered that:
(a) No Tribunal has made any finding or determination as to the
fairness of an investment in, or any recommendation or endorsement of an
investment in, Purchaser;
(b) Neither the shares of AMNEX Common Stock nor the Warrants have
been registered under the Securities Act or any state securities law, and
such shares and Warrants are being issued to Sellers in reliance upon
applicable exemptions; and
(c) The right to transfer any interest in the shares of AMNEX Common
Stock or in the Warrants is restricted, as described in this Agreement and
as required under applicable federal and state securities laws.
3.6 NO PURCHASER REPRESENTATIONS. Such Seller represents that none of the
following has been represented, guaranteed or warranted to such Seller by
Purchaser, or by any broker or agent engaged by Purchaser, or by their
respective agents, directors, officers or employees, or any other Person,
expressly or by implication:
(a) The length of time that such Seller will be required to retain
ownership of an interest in Purchaser, including, without limitation,
ownership of the shares of AMNEX Common Stock and the Warrants;
(b) The percentage profit and/or amount or type of consideration,
profit or loss to be realized, if any, as a result of an investment in
Purchaser; and
(c) That the past performance or experience on the part of Purchaser
or any officer, director or affiliate of Purchaser, or their partners,
associates, affiliates, agents or employers, or any other Person, will in
any way indicate the predictable results of the ownership of an interest in
Purchaser.
Such Seller has received no representations from Purchaser, its affiliates
or their employees, directors, officers or agents, other than those contained in
this Agreement. In making his or her decision to acquire an interest in
Purchaser, such Seller has relied solely upon his or her own review of
information and independent investigations made by him or her (and his or her
purchaser representative, if any) without assistance or influence of Purchaser,
its affiliates or their employees, directors, officers or agents.
3.7 SELLER SOPHISTICATION. Such Seller, or representative therefor, has
such knowledge and experience in financial and business matters, including the
investing in or dealing with businesses and activities similar to those of
Purchaser, that such Seller is capable of evaluating the merits and risks of an
investment in Purchaser, including the risk of holding indefinitely any
ownership interest in Purchaser acquired by such Seller, including, without
limitation, the shares of AMNEX Common
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Stock and the Warrants. Seller recognizes that the purchase of securities of
Purchaser involves a high degree of risk which may result in the loss of the
total amount of such investment.
3.8 NO PUBLIC SOLICITATION. Such Seller has not received any offer to
purchase the shares of AMNEX Common Stock or the Warrants or any other interest
in Purchaser pursuant to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio or pursuant to attendance at any seminar or meeting to
which he or she was invited by such general solicitation or general advertising.
ARTICLE 4
CERTAIN REPRESENTATIONS, WARRANTIES
AND AGREEMENTS OF SELLERS
In addition to the representations and warranties provided by Sellers in
ARTICLE 3, each Seller severally (in proportion to each Seller's Proportionate
Interest), represents and warrants to, and agrees with, Purchaser as follows:
4.1 ORGANIZATION, GOOD STANDING AND POWER. Each of CNSI and CNI (i) is a
corporation duly organized, validly existing and in good standing under the Laws
of Texas, (ii) is duly qualified to transact business in each jurisdiction where
the nature and extent of its business and properties requires qualification, and
(iii) possesses all requisite power and authority to own, lease and operate its
properties and to conduct its business as is now being conducted. CNM is a
limited liability company duly organized and validly existing and, upon (x) the
completion and filing of certain Tax Returns of CNM and the payment of Taxes at
the time such returns are filed on or prior to Closing, and (y) the holding of
an annual meeting of shareholders in accordance with applicable Laws of Mexico,
will be in good standing under the Laws of Mexico, with all requisite power and
authority to own, lease and operate its properties and to conduct its business
as is now being conducted; PTP is an exempted company incorporated in the Cayman
Islands with limited liability and is duly organized, validly existing and in
good standing under the Laws of the Cayman Islands, with all requisite power and
authority to own, lease and operate its properties and to conduct its business
as is now being conducted.
4.2 SUBSIDIARIES; OFFICERS AND DIRECTORS.
(a) SCHEDULE 4.2(a) contains a list of all Subsidiaries of CNSI and
each other Person in which CNSI or a Subsidiary has an equity, partnership
or joint venture interest (an "EQUITY INTEREST") and the names and
addresses of each beneficial owner of an Equity Interest in such Person
and, except as provided in SCHEDULE 4.2 (a), neither CNSI nor any other
CNSI Company has any Subsidiary or any investment, whether by way of
ownership of stock or other securities, equity, partnership or joint
venture interest, membership right or investment by loan, advance or
otherwise, in any corporation, partnership, firm, association or other
business entity.
(b) SCHEDULE 4.2(b) contains a list of all Equity Interests held by
Sellers in Related Companies.
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(c) SCHEDULE 4.2(c) contains a list of the names of all officers and
directors of the CNSI Companies and the Subsidiaries.
4.3 AUTHORIZATION AND CONSENTS
(a) Each CNSI Company possesses all requisite authority to execute,
deliver and comply with the terms of this Agreement and all other
Transaction Papers to which such CNSI Company is or is to become a party.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement have been duly authorized by
all necessary corporate action on the part of CNSI, CNI, and PTP (and prior
to the Closing will have been duly authorized by all necessary corporate
action on the part of CNM). This Agreement and all other Transaction Papers
to which any CNSI Company is a party have been duly executed and delivered,
and, assuming this Agreement constitutes a valid, binding and enforceable
obligation of Purchaser, constitutes legal, valid and binding obligations
of such CNSI Company enforceable in accordance with their respective terms,
except as enforcement may be limited by Debtor Relief Laws (and, solely in
the case of CNM, subject to formal action by the board of directors of CNM
prior to the Closing).
(b) Except for (i) the consent of the FCC, (ii) filings or
registrations with and/or authorizations, consents or approvals of
Tribunals in such states in which the CNSI Companies conduct their
business, and (iii) compliance with HSR, no filing or registration with, or
authorization, consent or approval of, any United States Tribunal is
required by or with respect to any CNSI Company in connection with the
execution and delivery of this Agreement by any CNSI Company or the
consummation by any CNSI Company of the transactions contemplated hereby.
(c) Except (i) as set forth in SCHEDULE 4.3, (ii) for violations or
conflicts that in the aggregate would not constitute a Material Adverse
Event, and (iii) for violations or conflicts that will be cured, waived or
terminated prior to the Closing, neither the execution and delivery of this
Agreement by any CNSI Company, nor the consummation of the transactions
contemplated hereby by any CNSI Company, will (x) violate or conflict with
any provision of the articles of incorporation or bylaws of CNSI or CNI, or
the charter documents of CNM or PTP, or (y) violate or conflict with any
provision of Law imposed by, or judgment, decree, injunction or other
decision issued by, any Tribunal which is or may be applicable to any CNSI
Company.
(d) Except (i) as set forth in SCHEDULE 4.3 and (ii) for any
violations, conflicts, breaches, defaults, rights or penalties that in the
aggregate do not constitute a Material Adverse Event, neither the execution
and delivery of this Agreement by any CNSI Company, nor the consummation of
the transactions contemplated hereby by any CNSI Company, will, violate or
conflict with, or result in a breach of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a
default) under, or give rise to a right of cancellation, termination or
acceleration of, or result in the creation of any Lien on any of the assets
of any CNSI Company under, the terms, conditions or provisions of (x) any
loan or credit agreement, security agreement, mortgage, indenture or any
other agreement or instrument to which any CNSI Company is a party or by
which any CNSI Company is
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bound or (y) any lease, license, contract or other agreement or instrument
to which any CNSI Company is a party or by which any CNSI Company is bound.
(e) Neither the execution and delivery of this Agreement by any CNSI
Company nor the consummation of the transactions contemplated hereby by any
CNSI Company, will result in, or require, the creation or imposition of any
Lien upon or with respect to any of the properties now or hereafter owned
by any CNSI Company.
(f) To the best of Sellers' knowledge, SCHEDULE 4.3 lists all consents
required by Sellers or any of the CNSI Companies to consummate the
transactions contemplated by this Agreement.
4.4 CAPITALIZATION. SCHEDULE 4.4 contains a description of the authorized
capital stock of each CNSI Company, the number of shares of such capital stock
that are issued and outstanding, the names and addresses (as shown on the books
and records of the CNSI Companies) of each holder of shares of capital stock of
each CNSI Company, and the number of shares of capital stock held of record by
each such holder. None of the CNSI Companies has any other capital stock
authorized or issued, and no CNSI Company has any treasury shares. All shares of
capital stock of each CNSI Company which are outstanding as of the Effective
Date are duly authorized, validly issued, fully paid and nonassessable, and have
not been issued in violation of any preemptive rights. Except for the Sirrom
Warrants, and certain rights arising under a certain Shareholders Agreement
dated as of October 1, 1990 (the "CNSI SHAREHOLDERS AGREEMENT"), among CNSI, R.
Rowland, M. Moehle, Simmons, and Jack Rowland, and their respective spouses,
there are no outstanding options, warrants, subscriptions, conversion or
exchange rights, preemptive rights or other agreements, claims or commitments
obligating any CNSI Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or obligating any CNSI
Company to grant, extend or enter into any such agreement or commitment.
4.5 FINANCIAL STATEMENTS.
(a) CNSI has delivered to Purchaser (i) the audited consolidated
financial statements (consisting of a consolidated balance sheet,
consolidated statement of operations, consolidated statement of changes in
stockholders deficit, consolidated statement of cash flows and notes
related thereto) of CNSI and its consolidated Subsidiaries (which consist
of FEI, CNI, CNM and PTP) for the fiscal years ended September 30, 1992,
1993 and 1994 (collectively, the "AUDITED FINANCIAL STATEMENTS"), (ii) a
draft of the consolidated financial statements of CNSI and its consolidated
Subsidiaries for the fiscal year ended September 30, 1995 (the "1995
FINANCIAL STATEMENTS"), and (iii) the unaudited consolidated financial
statements (consisting of a consolidated balance sheet, consolidated
statement of operations and consolidated statement of cash flow) of CNSI
and its consolidated Subsidiaries for the fiscal quarter ended December 31,
1995 and the calendar months ended January 31, 1996 and February 29, 1996
prepared by CNSI (together with unaudited monthly financial statements to
be delivered to Purchaser pursuant to SECTION 4.5(b), collectively, the
"UNAUDITED FINANCIAL STATEMENTS"; the Audited Financial Statements, the
1995 Financial Statement, and the Unaudited Financial Statements
collectively are called the "FINANCIAL STATEMENTS"). The Audited Financial
Statements and 1995 Financial Statements were prepared in conformity
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with GAAP and the Unaudited Financial Statements were prepared by CNSI
based upon the same accounting principles used in the preparation of the
Audited Financial Statements, except that the Unaudited Financial
Statements are subject to normal and recurring year-end audit adjustments
and do not contain footnotes. The Financial Statements are true, complete
and correct in all material respects and fairly present in all material
respects the consolidated financial position of the CNSI Companies as of
the respective dates thereof and the related consolidated results of
operations, stockholders' equity and cash flows for and during the
respective periods covered thereby.
(b) CNSI will prepare monthly and quarterly Unaudited Financial
Statements until the Closing Date on the same basis as heretofore prepared
and such Unaudited Financial Statements will be delivered to Purchaser
promptly after their preparation and such Unaudited Financial Statements
shall be deemed to be included within the definition of Financial
Statements for purposes of this Agreement.
4.6 ABSENCE OF UNDISCLOSED LIABILITIES.
(a) Except as set forth in SCHEDULE 4.6, all material obligations and
liabilities, contingent or otherwise, of the CNSI Companies arising from
events that occurred subsequent to September 30, 1995 and through February
29, 1996 have been fully accrued or reserved for in the Financial
Statements delivered to Purchaser in conformity with GAAP, and the CNSI
Companies have not incurred any material obligation or liability,
contingent or otherwise, subsequent to September 30, 1995 (other than
accounts payable and other obligations and liabilities incurred in the
ordinary course of business).
(b) CNI owns a 25% equity interest in Capital Network International
Sociedad Anonima, a limited liability company organized under the Laws of
Chile (the "CHILE INTEREST"). Neither CNI nor any other CNSI Company has
any liability, known or unknown, contingent or otherwise, attributable to
or associated with the Chile Interest.
4.7 NO ADVERSE CHANGE. Except (a) as set forth in SCHEDULE 4.7, and (b)
for Material Adverse Events resulting from actions of Telmex and Tribunals in
Mexico that have been disclosed in writing to Purchaser, since September 30,
1995, the business of the CNSI Companies has been conducted only in the ordinary
course and there has not been (i) any Material Adverse Change with regard to the
CNSI Companies (financial or otherwise) other than changes resulting from
general economic factors or regulatory changes affecting the telecommunication
industry in general; (ii) any material loss or damage (whether or not covered by
insurance) to any of the assets of the CNSI Companies which materially affects
or impairs the ability of the CNSI Companies to conduct their business as
previously conducted; (iii) the attaching, placing or granting of, or the
agreement to attach, place or grant, any Lien on any of the assets of the CNSI
Companies other than Permitted Liens in the ordinary course of business; (iv)
any sale or transfer of any material portion of the assets of the CNSI
Companies; (v) any change in the accounting systems, policies or practices of
the CNSI Companies (whether for tax or accounting purposes); (vi) any express
waiver by or on behalf of the CNSI Companies of any rights which have any
material value; (vii) any taking under condemnation or right of eminent domain
of any of the assets of the CNSI Companies; (viii) any entry into, termination
or material variation of any Material Agreement or material transaction
(including,
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without limitation, any material borrowing or capital expenditure or sale or
other disposition of any material assets) by the CNSI Companies; (ix) any
redemption, repurchase or other acquisition of any of their capital stock by the
CNSI Companies, or any issuance of capital stock of the CNSI Companies or of
securities convertible into or rights to acquire any such capital stock; (x) any
dividend or distribution declared, set aside or paid on capital stock of the
CNSI Companies; (xi) any transfer or right granted by the CNSI Companies of or
under any material lease, license, agreement, patent or trademark (other than
the transfer of certain rights to Spectrum Network Systems Limited or its
affiliates pursuant to the Deed of Release and the Knowhow License Agreement);
or (x) any individual capital expenditure or the execution of any lease or any
incurring of liability therefor by any of the CNSI Companies, involving payments
at an annualized rate of $50,000 or more in any one instance or at an annualized
rate of $250,000 or more in the aggregate. Except as set forth in SCHEDULE 4.7,
since September 30, 1995, no material changes have been made in (i) employee
compensation levels, (ii) the manner in which employees of the CNSI Companies
are compensated, or (iii) supplemental benefits provided to any employees.
4.8 ACCOUNTS RECEIVABLE. Except as set forth in SCHEDULE 4.8, the
accounts receivable shown on the Financial Statements, and such additional
accounts receivable as are reflected on the books of the CNSI Companies at the
Effective Date, are, and on the Closing Date will be, subject to any reserves
reflected on the Financial Statements or such books and further subject to the
qualifications set forth in SCHEDULE 4.8, good and collectible except for
accounts receivable that have been collected in the ordinary course of business.
The reserves reflected on the Financial Statements and the books of the CNSI
Companies represent an estimate of accounts receivable that, based on CNSI's
experience as a provider of long distance telecommunications services, are
anticipated to be uncollectible in the ordinary course of business. Except as
set forth in SCHEDULE 4.8, all accounts receivable owned by the CNSI Companies
and reflected on the Financial Statements (x) are valid, genuine and subsisting,
(y) arose out of the performance of services in the ordinary course of business
and (z) are owned free and clear of any Liens other than Permitted Liens.
4.9 CERTAIN INDEBTEDNESS AND ACCOUNTS PAYABLE. SCHEDULE 4.9 sets forth,
as of February 29, 1996, a complete list of all promissory notes, accounts
payable and other obligations and instruments for or relating to any borrowing
or amount payable by the CNSI Companies (except for borrowings which, in the
aggregate, do not exceed $25,000 and accounts payable which, in the aggregate,
do not exceed $100,000 and which have been incurred in the ordinary course of
business consistent with past practices), together with a list of all lenders,
promises and payees thereof. Except as set forth in SCHEDULE 4.9, the CNSI
Companies are not in default under the agreements or instruments or otherwise in
default with respect to any of the promissory notes, accounts payable or other
obligations and instruments described in SCHEDULE 4.9, except where such default
would not have a Material Adverse Effect.
4.10 TAXES.
(a) Except as provided in SCHEDULE 4.10, each CNSI Company, including
any predecessor of such CNSI Company (collectively, the "TAXPAYERS"), has
duly and timely filed all tax reports and returns required to be filed by
them, including all federal, state, local and foreign tax and information
returns and reports ("TAX RETURNS"), or has properly extended the time for
filing any such Tax Returns. Except as provided in Schedule 4.10, all
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such Tax Returns were correct and complete in all respects. The Taxpayers
have paid in full all Taxes (whether or not shown on a Tax Return), other
than the Taxes described in SCHEDULE 4.10, required to be paid by the
Taxpayers before such payment became delinquent or have made adequate
provision in the Financial Statements for the payment of all accrued and
unpaid Taxes, whether or not assessed or disputed as of the date of such
Financial Statements. Except as provided in SCHEDULE 4.10, all Taxes which
any Taxpayer has been required to collect or withhold have been duly
collected or withheld and, to the extent required when due, have been or
will be duly and timely paid to the proper taxing authority.
(b) Except as set forth in SCHEDULE 4.10, the federal income Tax
Returns of the Taxpayers have not been examined by the IRS for any period.
Except as set forth in SCHEDULE 4.10 there are no audits, inquiries,
investigations or examinations relating to any of the Taxpayers' Tax
Returns pending or, to the best of Sellers' knowledge, threatened, and
there are no claims which have been or may be asserted relating to any of
the Taxpayers' Tax Returns filed for any year which if determined adversely
would result in the assertion by any Governmental Entity of any Tax
deficiency against the Taxpayers. There have been no waivers or extensions
of statutes of limitations by the Taxpayers.
(c) No property of any of the Taxpayers is property which Purchaser or
such Taxpayer is or will be required to treat as owned by another person
pursuant to the "safe harbor leasing provisions" of the Code. No Taxpayer
is a party to any tax-sharing agreement or similar arrangement with any
other party. The Taxpayers have not made a disclosure on a Tax Return
pursuant to Code Section 6662(d)(2)(B)(ii) and the Regulations thereunder
or any other similar disclosure relating to any state, local or foreign tax
return. No Taxpayer has ever been a member of an affiliated, consolidated,
combined or unitary group of corporations for Tax purposes. No power of
attorney has been granted by any Taxpayer with respect to any matter
relating to any Taxes or Tax Returns of the Taxpayer which is currently in
force. No Taxpayer has participated in or cooperated with an international
boycott within the meaning of Code Section 999. No Taxpayer has filed a
consent pursuant to Code Section 341(f) or has agreed to have Code Section
341(f)(2) apply to any disposition of a subsection (f) asset (as such term
is defined in Code Section 341(f)(4)) owned by a Taxpayer. No Taxpayer is
required to include in income any adjustment pursuant to Code Section
481(a) by reason of a change in accounting method.
(d) SCHEDULE 4.10 contains a listing of the assets of each CNSI
Company, if any, with respect to which the tax basis differs from the book
basis for financial reporting purposes, and the amount of such tax basis.
(e) No Taxpayer has any liability for the Taxes of any other party (i)
under Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law), (ii) as a transferee or successor, (iii) by contract, or
(iv) otherwise.
(f) CNSI has elected and qualified as an "S" corporation, within the
meaning of the Code Section 1361 ET SEQ., for federal income tax purposes
for the period beginning with the organization of CNSI and intended to
terminate on the Closing Date (such period is herein called the "S
Period").
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(g) To the extent that a Seller has been a shareholder in a CNSI
Company during the period in which such CNSI Company has elected to be
treated as an "S" corporation for federal income Tax purposes
(collectively, the "S CORPORATION SHAREHOLDERS"), the S Corporation
Shareholders have filed all tax reports and returns required to be filed by
them ("SHAREHOLDER TAX RETURNS"), or, in the case of the Shareholder Tax
Return for the year ended December 31, 1995, appropriate extensions have
been filed. All such Shareholder Tax Returns which have been filed were
consistent with the Tax Returns filed by CNSI. There are no audits,
inquiries, investigations or examinations relating to any of the
Shareholder Tax Returns pending, and there are no claims which have been
asserted by any Tribunal relating to any of the Shareholder Tax Returns
which if determined adversely would result in the assertion by any
Governmental Entity of any Tax deficiency against the Taxpayers.
(h) Sellers shall not cause any CNSI Company to either accelerate the
recognition of items of loss, deduction or credit into the S Period, or
defer or delay the recognition of items of income or gain into taxable
periods after the S Period.
4.11 TRANSACTIONS WITH AFFILIATES. Except as set forth in SCHEDULE 4.11,
there are no loans, leases, agreements or other transactions between or among
(i) the CNSI Companies or (ii) any CSNI Company and any present or former
stockholder, director or officer of the CNSI Companies, or any member of such
stockholder's, director's or officer's immediate family. Except as set forth in
SCHEDULE 4.11 and except for the ownership of equity securities of publicly
traded companies, no stockholder, director or officer of the CNSI Companies nor
any of their respective spouses or immediate family members owns, directly or
indirectly, any interest in, or serves as an officer or director of, or in any
similar capacity for, any competitor, customer, provider or supplier of or to
the CNSI Companies or any organization which has a contract or arrangement with
the CNSI Companies.
4.12 BROKER'S AND FINDER'S FEE. No agent, broker, employee, officer,
stockholder or other person or entity acting or claiming on behalf of, or by,
through or under the authority of, Sellers or the CNSI Companies is or will be
entitled to any commission or broker's or finder's fee from Sellers or any CNSI
Company in connection with this Agreement or any of the transactions
contemplated hereby.
4.13 COMPLIANCE WITH LAWS. SCHEDULE 4.13 sets forth (i) a list and
description of all authorizations, licenses or permits issued to the CNSI
Companies by any Tribunal which are in effect on the Effective Date and which
are required to conduct the business of the CNSI Companies and (ii) a list and
description of all material reviews, audits, investigations or other proceedings
of, by or before any Tribunal as of the Effective Date and for the period of 12
months prior to the Effective Date and of which the CNSI Companies have received
notice or otherwise have knowledge (other than consumer and customer rate
complaints submitted to or filed with Tribunals which, in the judgment of the
CNSI Companies, are deemed to be in the ordinary course of the CNSI Companies'
business). Except as set forth in SCHEDULE 4.13, (x) the CNSI Companies possess
all necessary authorizations, licenses and permits necessary to permit them to
conduct their businesses as currently, and as proposed to be, conducted, (y) all
such authorizations, licenses and permits are in full force and effect and (z)
the CNSI Companies are not in violation of any applicable Law the failure to
comply with which would constitute a Material Adverse Event, nor is any CNSI
Company
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in violation of any judgment, injunction, order or decree of any Tribunal which
is applicable to any CNSI Company or the conduct of such CNSI Company's
business. Except as set forth in SCHEDULE 4.13, and except for the possibility
of a proceeding that might be initiated by the FCC as disclosed in writing to
Purchaser, there are no pending or, to the knowledge of Sellers, threatened
legal, administrative, arbitration or other actions, notices or proceedings nor
any pending or, to the knowledge of Sellers, threatened governmental
investigations by any Tribunal or by any public or private group which asserts
or alleges any violation of or non-compliance with any Laws. SCHEDULE 4.13
contains a description of the possible violation of certain Laws of Mexico
relating to the importation into Mexico of certain items of equipment, the
possible violation of certain Laws of Mexico related to the resale of cellular
telecommunications services, the failure timely to file certain Tax returns (and
to pay Taxes due upon filing such returns) in Mexico, and the alleged non-
compliance by CNI with certain Mexican telecommunications Laws. Sellers have no
knowledge of any violation of Laws by any customer of the CNSI Companies in
relation to any contract or agreement between such customer and the CNSI
Companies or otherwise pertaining to the business relationship between such
customer and the CNSI Companies.
4.14 LITIGATION. Except as set forth in SCHEDULE 4.14, there is no
Litigation pending or, to the knowledge of Sellers, threatened against or with
respect to any CNSI Company which, if determined adversely, would constitute a
Material Adverse Event, and there are no outstanding or unpaid judgments against
any CNSI Company.
4.15 PROPERTIES. The CNSI Companies have good and marketable title to, or
valid leasehold interests in, all properties and assets used in their businesses
or owned by them, free and clear of all Liens other than Permitted Liens. The
properties and assets owned, leased or licensed by the CNSI Companies constitute
all such properties and assets which are necessary to the businesses of the CNSI
Companies as presently conducted; and all such properties and assets which are
tangible are well maintained and in good operating condition, except for normal
wear and tear. The CNSI Companies do not own any real property.
4.16 LEASES. SCHEDULE 4.16 contains a list of all leases or agreements
under which the CNSI Companies are lessees of, or hold and operate, (i) any real
property owned by any third party which is material to the operation of the
business of the CNSI Companies and (ii) any personal property owned by any third
party which is material to the operation of the business of the CNSI Companies,
together with (in each case) the expiration date of each such lease or
agreement, the rental or other payments to be made thereunder, the terms of any
option to renew or purchase thereunder, the names of the lessee and lessor of
each such lease or agreement and a brief description of the property covered
thereby. Each such lease and agreement is subsisting and valid and binding in
accordance with its terms, and each of the CNSI Companies which is a lessee
under each such lease or agreement has performed all of its obligations
thereunder and is not in default under any such lease or agreement, other than
any such failure of performance or default which would not constitute a Material
Adverse Event and, to the best of such Sellers' knowledge, the lessor under each
such lease or agreement has performed all of its obligations thereunder in all
material respects.
4.17 MATERIAL AGREEMENTS. SCHEDULE 4.17 contains a list of all contracts
or agreements of the following types to which any CNSI Company is a party or by
which any CNSI Company is bound (individually a "MATERIAL AGREEMENT" and
collectively the "MATERIAL AGREEMENTS"):
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(i) NETWORK AGREEMENTS. Any contract or agreement pursuant to
which a CNSI Company obtains access to the telecommunications network
or circuitry owned or maintained by a third party;
(ii) BILLING AND COLLECTION AGREEMENTS. Any contract or
agreement pursuant to which a CNSI Company obtains billing and/or
collection services;
(iii) HARDWARE AND SOFTWARE. Any contract or agreement,
including any license, pursuant to which a CNSI Company (x) obtains
the use or right to use any switching equipment, data processing
equipment or other hardware or software which is material to the
business of the CNSI Companies or (y) is obligated for the purchase,
sale or maintenance of equipment or capital assets;
(iv) CUSTOMER AGREEMENTS. Any contract or agreement, including
but without limitation agreements with brokers, aggregators and
telephone location owners or agents, pursuant to which a CNSI Company
provides long distance or other telecommunications services and which
is with one of the 25 most significant domestic and 25 most
significant international (in terms of payments during the 90-day
period preceding February 29, 1996) customers of the CNSI Companies;
(v) LOAN AND SECURITY AGREEMENTS. Any contract or agreement
pursuant to which a CNSI Company has borrowed (or contracted to
borrow) money, received or contracted to receive financial
accommodation or granted a Lien in favor of a third party and which
involves a borrowing (or commitment or accommodation);
(vi) EMPLOYMENT AGREEMENTS. Any written employment agreement
(including any written separation agreement) with any officer or
employee of any CNSI Company, including any agreements pursuant to
which another party is subject to non-compete restrictions in relation
to any of the CNSI Companies;
(vii) INDEPENDENT CONTRACTOR AGREEMENTS. Any written
independent contractor agreement with any sales representative, agent,
broker, or consultant pursuant to which a CNSI Company obtains sales
representative or other services and which involves past or
anticipated future payments by a CNSI Company in excess of $100,000 in
the aggregate (over the stated term of the agreement) or which
otherwise is material to the business or prospects of the CNSI
Companies, including any agreements pursuant to which another party is
subject to non-compete restrictions in relation to any of the CNSI
Companies; and
(viii) OTHER AGREEMENTS. Any other contract or agreement
which has a remaining term of one year or more or is not cancelable
without penalty by a CNSI Company on not more than 30 days notice or
involves anticipated future payments by or to a CNSI Company in excess
of $100,000 in the aggregate (over the stated term of the agreement).
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True and correct copies of all Material Agreements listed in SCHEDULE 4.17
have been or will be made available for review by Purchaser at the offices of
CNSI in Austin, Texas. All such Material Agreements are in full force and effect
and, except as set forth in SCHEDULE 4.17, to the best of such Sellers'
knowledge, (x) the parties to such Material Agreements have in all material
respects performed all obligations to be performed by them at the Effective Date
and are not in default thereunder in any material respect, (y) no CNSI Company
has received notice of cancellation with respect to any such Material Agreement
or has been advised that the other party thereto intends to cancel any such
Material Agreement and (z) no material outstanding disputes have arisen under
any such Material Agreement. Except as set forth in SCHEDULE 4.17 and other than
(1) restrictions of general application to agreements and contracts entered into
by the CNSI Companies under applicable Laws in the United States and other
countries in which the CNSI Companies conduct their business, (2) restrictions
contained in, or applicable to, licenses, permits and authorizations issued or
granted to CNSI Companies by Tribunals and (3) restrictions contained in, or
applicable to, agreements and contracts between CNSI Companies and local
exchange carriers within and outside the United States, no CNSI Company is a
party to any agreement or contract with any third party that restricts the area
in which, the time within which or the method by which any CNSI Company may
conduct its business or market its products or services.
4.18 INTELLECTUAL PROPERTY.
(a) SCHEDULE 4.18 sets forth:
(i) All patents, patent applications, trademarks, trade names,
service marks, logos, domain names and copyrights which constitute
proprietary rights for which a registration exists or has been applied
for by the CNSI Companies and
(ii) All licenses of Proprietary Rights granted to any CNSI
Company by any third party which are material to the business
operation of the CNSI Companies.
(b) The Proprietary Rights constitute all of the Proprietary Rights
owned and/or used by any and all of the CNSI Companies reasonably necessary
or useful in the conduct of the business of any CNSI Company as of the
Effective Date of this Agreement and are free of any Liens. To the
knowledge of Sellers, except as set forth in SCHEDULE 4.18, no product
manufactured or sold, or process used, by any CNSI Company infringes upon
any of the Proprietary Rights or other such right of any other person or
entity in the United States or throughout the world. To the knowledge of
Sellers, except as set forth in SCHEDULE 4.18, no product manufactured or
sold by or process used by any other person or entity infringes any of the
Proprietary Rights of any CNSI Company in the United States or throughout
the world. Except as set forth in SCHEDULE 4.18, no claim of infringement,
misuse or misappropriation of any of the Proprietary Rights is pending or,
to Sellers' knowledge, threatened against any CNSI Company in any court or
before any governmental authority in the United States or throughout the
world. To the knowledge of Sellers, no other Proprietary Right is used in
or is necessary for the conduct of CNSI's business as now conducted. To
the knowledge of Sellers, except as set forth in SCHEDULE 4.18, CNSI is not
aware of any claim or allegations in the United States or elsewhere in the
world that would render any of the Proprietary Rights unenforceable or
invalid. CNSI has the right to produce,
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provide and sell the services and products, including those covered by the
Proprietary Rights, produced, provided and sold by it and to conduct its
business as heretofore conducted, and the consummation of the transaction
contemplated hereby will not alter or impair any such rights. No
shareholder, officer, director and/or employee of any CNSI Company owns or
has any interest in any of the Proprietary Rights.
4.19 EMPLOYEES AND EMPLOYEE BENEFITS.
(a) DEFINITIONS. The following terms, when used in this SECTION 4.19,
shall have the following meanings:
(i) "CNSI BENEFIT ARRANGEMENT" shall mean any employment or
consulting policy, practice or plan providing for insurance coverage
(including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation
benefits, severance, retirement benefits, life, health, disability or
accident benefits (including, without limitation, any "voluntary
employees' beneficiary association" as defined in Section 501(c)(9) of
the Code providing for the same or other benefits) or for deferred
compensation, profit-sharing, bonuses, stock options, stock
appreciation rights, stock purchases or other forms of incentive
compensation or post-retirement insurance, compensation or benefits
which (A) is not a CNSI ERISA Welfare Plan, CNSI ERISA Pension Plan or
CNSI Multiemployer Plan, (B) which is maintained, contributed to or
required to be contributed to, as the case may be, by a CNSI Company
or a CNSI ERISA Affiliate and (C) covers or covered any individual who
is currently, or was previously, retained or employed by any CNSI
Company or any CNSI ERISA Affiliate.
(ii) "CNSI BENEFIT PLANS" shall mean all CNSI Benefit
Arrangements, CNSI Multiemployer Plans, CNSI ERISA Pension Plans and
CNSI ERISA Welfare Plans.
(iii) "CNSI ERISA AFFILIATE" shall mean any entity (whether or
not incorporated) which is (or at any relevant time was) a member of a
"controlled group of corporations" with or under "common control" with
any CNSI Company (as such terms are defined in Section 4001 of ERISA
or Section 414(b) or (c) of the Code) or which, together with any CNSI
Company, would be treated as a single employer under Section 414(m) or
(o) of the Code.
(iv) "CNSI ERISA PENSION PLAN" shall mean any "employee pension
benefit plan" as defined in Section 3(2) of ERISA (other than a CNSI
Multiemployer Plan) (A) which any CNSI Company or any CNSI ERISA
Affiliate maintains, administers, contributes to or is required to
contribute to, or has ever maintained, administered, contributed to or
been required to contribute to, and (B) which covers or covered any
individual who is currently, or was previously, retained or employed
by any CNSI Company or any CNSI ERISA Affiliate.
(v) "CNSI ERISA WELFARE PLAN" shall mean any "employee welfare
benefit plan" as defined in Section 3(1) of ERISA, (A) which any CNSI
Company or any
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CNSI ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, and (B) which covers or covered any
individual who is currently, or was previously, retained or employed
by any CNSI Company or any CNSI ERISA Affiliate.
(vi) "CNSI MULTIEMPLOYER PLAN" shall mean any "multiemployer
plan," as defined in Section 4001(a)(3) of ERISA, (A) which any CNSI
Company or any CNSI ERISA Affiliate maintains, administers,
contributes to or is required to contribute to (directly or
indirectly), or after September 25, 1980, maintained, administered,
contributed to or was required to contribute to and (B) which covers
or covered any individual who is currently, or was previously,
retained or employed by any CNSI Company or any CNSI ERISA Affiliate.
(b) DISCLOSURE; DELIVERY OF COPIES OF RELEVANT DOCUMENTS AND OTHER
INFORMATION. SCHEDULE 4.19(b) contains a complete list of CNSI Benefit
Plans and complete copies of each of the following documents have been
delivered or made available by Sellers to Purchaser: (i) each CNSI Benefit
Plan document (and, if applicable, related trust agreements) and all
amendments thereto, and written descriptions thereof which have been
distributed to employees of the CNSI Companies or any CNSI ERISA Affiliate,
a complete description of any CNSI Benefit Plan which is not in writing,
and all annuity contracts or other funding instruments; (ii) each
determination letter issued by the Internal Revenue Service, with respect
to each CNSI ERISA Pension Plan and any pending application for such a
determination letter with respect to each CNSI ERISA Pension Plan; (iii)
Annual Reports on Form 5500 Series (including all applicable schedules
thereto) required to be filed with any governmental agency for each CNSI
Benefit Plan and Tax returns, if any (including all applicable schedules
thereto) for each trust related thereto for the most recent plan year and;
(iv) all financial statements and accountant's opinions relating to each
CNSI ERISA Pension Plan for the most recent plan year.
(c) VACATION TIME. Except as set forth in SCHEDULE 4.19(c), as of the
Effective Date, no current or former Employee has more than three weeks of
accrued vacation time.
(d) COMPLIANCE. Each CNSI ERISA Pension Plan, CNSI ERISA Welfare
Plan, CNSI Benefit Arrangement, related trust agreement, annuity contract
and other funding instrument complies, and has been maintained in material
compliance, with its terms and, both as to form and operation, with all
material applicable requirements, including all reporting and disclosure
requirements, prescribed by ERISA and the Code.
(e) CNSI MULTIEMPLOYER PLANS. Neither any CNSI Company nor any CNSI
ERISA Affiliate has, at any time, directly or indirectly contributed to or
had an obligation to contribute to a CNSI Multiemployer Plan.
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(f) COMPANY ERISA WELFARE PLANS.
(i) No condition exists which would prevent any CNSI Company from
amending or terminating any of its respective CNSI ERISA Welfare
Plans.
(ii) Except as disclosed in SCHEDULE 4.19(f), neither any CNSI
Company nor any CNSI ERISA Affiliate nor any CNSI Welfare Plan has any
present or future obligation to make any payment to or under any CNSI
ERISA Welfare Plan which provides benefits to retirees (other than as
required by Part 6 of Title I of ERISA and Sections 162(k) and 4980B
of the Code).
(iii) Each CNSI ERISA Welfare Plan which is a "group health
plan," as defined in Section 607(1) of ERISA, has been operated in
material compliance with the provisions of Part 6 of Title I of ERISA
and Sections 162(k) and 4980B of the Code at all times.
(g) ERISA PENSION PLANS.
(i) No CNSI ERISA Pension Plan is subject to the minimum funding
requirements of ERISA or Section 412 of the Code, or to Title IV of
ERISA. Except as set forth in the Financial Statements, neither any
CNSI Company nor any CNSI ERISA Affiliate has any liability for unpaid
contributions with respect to any CNSI Pension Plan.
(ii) Each CNSI ERISA Pension Plan (and each related trust
agreement, annuity contract or other funding instrument) which is
intended to be qualified and tax-exempt under the provisions of
Sections 401(a) and 501(a) of the Code is and has been so qualified
during the period from its adoption to the date hereof and has
received a determination letter that it is so qualified.
(h) UNRELATED BUSINESS TAXABLE INCOME. No CNSI Benefit Plan (or trust
or other funding vehicle pursuant thereto) is subject to any Tax under
Section 511 of the Code.
(i) DEDUCTIBILITY OF PAYMENTS. Except as set forth in SCHEDULE
4.19(i), there is no contract, agreement, plan or arrangement covering any
employee or former employee of any CNSI Company that, individually or
collectively, provides for the payment by any CNSI Company of any amount
(i) that is not deductible under Section 162(a)(1), 162(m) or 404 of the
Code or (ii) that is an "excess parachute payment" pursuant to Section 280G
of the Code.
(j) FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS. Except as disclosed
in SCHEDULE 4.19(j), no CNSI Company has engaged in any material
transaction in violation of Sections 404 or 406 of ERISA or any "prohibited
transaction," as defined in Section 4975(c)(1) of the Code, for which no
exemption exists under Section 408 of ERISA or Section 4975(c)(2) or (d) of
the Code.
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(k) LITIGATION. Except as disclosed in SCHEDULE 4.19(k), there are no
pending or threatened claims, actions or lawsuits (other than claims for
benefits in the normal course), asserted or instituted against (i) any CNSI
ERISA Welfare Plan or its assets, (ii) any CNSI ERISA Pension Plan or its
assets (iii) any fiduciary with respect to any CNSI ERISA Pension Plan or
CNSI ERISA Welfare Plan or (iv) any CNSI Company or any CNSI ERISA
Affiliate with respect to any CNSI Benefit Plan.
(l) NO AMENDMENTS. Neither any CNSI Company nor any CNSI ERISA
Affiliate has any announced plan or legally binding commitment to create
any additional CNSI Benefit Plans or to amend or modify any existing CNSI
Benefit Plan.
(m) NO OTHER LIABILITY. Except as disclosed in SCHEDULE 4.19(m), no
event has occurred in connection with which any CNSI Company or any CNSI
ERISA Affiliate or any CNSI Benefit Plan, directly or indirectly, could be
subject to any material liability (i) under any statute, regulation or
governmental order relating to any CNSI Benefit Plans or (ii) pursuant to
any obligation of any CNSI Company to indemnify any person against
liability incurred under any such statute, regulation or order as they
relate to the CNSI Benefit Plans.
(n) EMPLOYEES. CNSI has made available to Purchaser for Purchaser's
review a schedule setting forth the names, job titles, and annualized base
salary and bonuses concerning all Employees of the CNSI Companies for 1996.
Except for those current Employees who are parties to written employment
agreements (as described in SCHEDULE 4.17), all current Employees of the
CNSI Companies are employees at will and their employment may be terminated
at any time, subject only to applicable Laws. Except as set forth in
SCHEDULE 4.19(n), no CNSI Company has agreed, or is otherwise obligated, to
make a loan to, guarantee a loan of, or pay any severance payment to, any
current or former Employee. SCHEDULE 4.19(n) sets forth an estimate of the
aggregate amount of the Employee Separation Costs described in PARAGRAPH L
of the Recitals of this Agreement.
(o) VIOLATION. Except as set forth in SCHEDULE 4.19(o), to the best
of Sellers' knowledge, no current or former Employee is in violation in any
material respect of any term of any employment agreement, non-disclosure
agreement or other agreement between such Employee and any CNSI Company.
(p) UNIONS. The CNSI Companies have no collective bargaining or other
labor union agreements. There is no unfair labor practice complaint against
the CNSI Companies pending before the National Labor Relations Board and
there is no pending or, to the knowledge of Sellers, threatened labor
dispute, strike or work stoppage affecting the CNSI Companies, nor has
there been any of the same or any labor union organizing activity relating
to the CNSI Companies within the last three years.
(q) EMPLOYMENT MATTERS. Except as set forth on SCHEDULE 4.19, the
CNSI Companies are in material compliance with all federal, foreign, state
and local laws and regulations and the common law relating to employment,
including, without limitation, those dealing with wages, hours, overtime,
minimum wage, working conditions, occupational safety and health, worker's
compensation, statutory disability benefits, fringe benefits,
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collective bargaining, payment of social security and employment taxes,
discrimination in hiring, retention, promotion, pay and other terms and
conditions of employment, immigration, plant closings and notice
requirements.
4.20 INSURANCE. SCHEDULE 4.20 lists all insurance policies and coverage
maintained by or for the CNSI Companies, including but not limited to real and
personal property insurance, workers' compensation insurance and malpractice and
professional liability insurance. SCHEDULE 4.20 lists all insurance claims
submitted in connection with property damage or malpractice involving the CNSI
Companies during the last three years.
4.21 ENVIRONMENTAL LAWS AND REGULATIONS. To the best of Sellers'
knowledge, the CNSI Companies are in compliance with all applicable Laws imposed
by any United States Tribunal relating to pollution control and environmental
contamination including, but not limited to, all Laws governing the generation,
use, collection, discharge or disposal of Hazardous Materials and all Laws with
regard to recordkeeping, notification and reporting requirements respecting
Hazardous Materials. The CNSI Companies have not been alleged to be in violation
of or been subject to any administrative or judicial proceeding pursuant to such
Laws at any time during the last three years. To the best of Sellers' knowledge,
there are no facts or circumstances which could form the basis for the assertion
of any Claim against the CNSI Companies relating to environmental practices
asserted under CERCLA or RCRA or any other Law imposed by any United States
Tribunal. The CNSI Companies are not required to, and do not, maintain any
permits, licenses or approvals pursuant to any Environmental Laws.
4.22 IMPROPER PAYMENTS. Except for such actions which would not have a
Material Adverse Effect, neither the CNSI Companies nor any director, officer or
employee of the CNSI Companies, nor, to the best of Sellers' knowledge, any
agent engaged and authorized by the CNSI Companies, has (i) made or given any
bribes, kickbacks or other improper payments on behalf of the CNSI Companies to,
or received any such payments from, customers, vendors, suppliers or other
persons contracting with the CNSI Companies or (ii) made any unlawful payment to
foreign or domestic governmental officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
4.23 BANK ACCOUNTS AND POWERS OF ATTORNEY. SCHEDULE 4.23 sets forth (a)
the name and address of each bank in which the CNSI Companies has an account or
safe deposit box, the number of any such account or any such box and the names
of all persons authorized to draw thereon or to have access thereto, and (b) the
names of all persons, if any, holding powers of attorney from the CNSI Companies
and a summary statement of the terms thereof.
4.24 BOOKS AND RECORDS. The books, records and work papers of each CNSI
Company are complete and correct in all material respects and have been
maintained in accordance with good business and bookkeeping practices.
4.25 INQUIRY WITH RESPECT TO REPRESENTATIONS AND WARRANTIES. All
representations and warranties of Sellers contained in this ARTICLE 4 that are
stated to be "to the best knowledge," or "to the knowledge" of Sellers (or words
of like effect) are so stated based upon Sellers' actual knowledge, but in each
case after Sellers have made, or have caused to be made on their behalf,
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reasonable inquiries with respect to the matters covered thereby, including, but
not limited to inquiries of the Key Employees of the CNSI Companies. Actual
knowledge of any individual Seller will be imputed to all Sellers.
4.26 MATERIAL MISSTATEMENTS OR OMISSIONS. No representation or warranty by
Sellers in this Agreement or in any of the Sellers' Transaction Documents or in
any document, exhibit, certificate, opinion or schedule furnished to Purchaser
pursuant hereto or thereto, or in connection with the transactions contemplated
hereby or thereby, or in the Schedules or any document delivered at the Closing,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary to make the statements or facts
contained therein not misleading. The copies of all documents furnished to
Purchaser hereunder are true and complete copies of the originals thereof.
ARTICLE 5
CERTAIN REPRESENTATIONS, WARRANTIES
AND AGREEMENTS OF PURCHASER
Purchaser represents and warrants to, and agrees with, Sellers as follows:
5.1 ORGANIZATION, GOOD STANDING AND POWER. Purchaser (i) is a corporation
duly organized, validly existing and in good standing under the Laws of the
State of New York, (ii) is duly qualified to transact business in each
jurisdiction where the nature and extent of its business and properties requires
qualification and (iii) possesses all requisite power and authority to own,
lease and operate its properties and to conduct its business as is now being
conducted.
5.2 AUTHORIZATION AND CONSENTS
(a) Purchaser possesses all requisite authority to execute, deliver
and comply with the terms of this Agreement and all other Transaction
Papers to which Purchaser is or is to become a party. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement and all other
Transaction Papers to which Purchaser is a party have been duly executed
and delivered, and, assuming this Agreement constitutes a valid, binding
and enforceable obligation of Sellers and the CNSI Companies, constitute
legal, valid and binding obligations of Purchaser enforceable in accordance
with their respective terms, except as enforcement may be limited by Debtor
Relief Laws.
(b) Except for (i) the consent of the FCC, (ii) compliance with HSR,
(iii) a filing with the National Association of Securities Dealers, Inc.,
(iv) required registration under the "blue sky" laws of applicable
jurisdictions, including the State of New York, and (v) and as set forth
in SCHEDULE 5.2, no filing or registration with, or authorization, consent
or approval of, any Tribunal is required by or with respect to Purchaser in
connection with the execution and delivery of this Agreement by Purchaser
or the consummation by Purchaser of the
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transactions contemplated hereby. No representation or warranty
is made with respect to any Tribunal other than the FCC and other
United States Tribunals; HOWEVER, Purchaser has no knowledge that
any filing or registration with, or authorization, consent or
approval of, any Tribunal other than the FCC and any other United
States Tribunal is required in connection with Purchaser's
execution or consummation of this Agreement.
(c) Except (i) as set forth in SCHEDULE 5.2, (ii) for
violations or conflicts that in the aggregate would not
constitute a Material Adverse Event, and (iii) for
violations or conflicts that will be cured, waived or
terminated prior to the Closing, neither the execution and
delivery of this Agreement by Purchaser, nor the
consummation of the transactions contemplated hereby by
Purchaser, will (x) violate or conflict with any provision
of the charter documents of Purchaser, or (y) violate or
conflict with any provision of Law imposed by, or judgment,
decree, injunction or other decision issued by, any United
States Tribunal which is or may be applicable to Purchaser.
(d) Except (i) as set forth in SCHEDULE 5.2 and (ii)
for any violations, conflicts, breaches, defaults, rights or
penalties that in the aggregate do not exceed $500,000,
neither the execution and delivery of this Agreement by
Purchaser, nor the consummation of the transactions
contemplated hereby by Purchaser, will, to the best of
Purchaser's knowledge, violate or conflict with, or result
in a breach of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a
default) under, or give rise to a right of cancellation,
termination or acceleration of, or result in the creation of
any Lien on any of the assets of Purchaser under, the terms,
conditions or provisions of (x) any loan or credit
agreement, security agreement, mortgage, indenture or any
other agreement or instrument evidencing indebtedness for
money borrowed to which Purchaser is a party or by which
Purchaser is bound or (y) any lease, license, contract or
other agreement or instrument to which Purchaser is a party
or by which Purchaser is bound.
5.3 CAPITALIZATION. The Form 10-K contains a description
of the authorized capital stock of Purchaser and the number of
shares of such capital stock that are issued and outstanding, and
the number of treasury shares held, as of December 31, 1995.
Except as set forth in SCHEDULE 5.3, Purchaser has no other
capital stock authorized or issued, and Purchaser has no other
treasury shares. All shares of capital stock of Purchaser which
are outstanding as of the Effective Date are duly authorized,
validly issued, fully paid and nonassessable (subject to SECTION
630 of the New York Business Corporation Law), and have not been
issued in violation of any preemptive rights.
5.4 FINANCIAL STATEMENTS. Purchaser has delivered to
Sellers the audited financial statements of Purchaser and its
consolidated Subsidiaries for the fiscal year ended December 31,
1995, contained in the Form 10-K (the "PURCHASER FINANCIAL
STATEMENTS"). The Purchaser Financial Statements were prepared in
conformity with GAAP; and to the best of Purchaser's knowledge,
the Purchaser Financial Statements fairly present in all material
respects the consolidated financial position of Purchaser as of
the date thereof and the related consolidated results of
operations, stockholders' equity and cash flows for and during
the period covered thereby.
5.5 NO ADVERSE CHANGE. Except as set forth in SCHEDULE
5.5, since December 31, 1995, there has not been (i) any material
adverse change in the financial condition, business, properties,
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assets or results of operations of Purchaser (financial or
otherwise) other than changes in the ordinary course of business
or changes resulting from general economic factors or regulatory
changes affecting the telecommunications industry in general;
(ii) any material loss or damage (whether or not covered by
insurance) to any of the assets of Purchaser which materially
affects or impairs the ability of Purchaser to conduct its
business as previously conducted; (iii) any sale or transfer of
any material portion of the assets of Purchaser; (iv) any
material change in the accounting systems, policies or practices
of Purchaser; or (v) any entry into or termination of any
material commitment, contract, agreement, or transaction by
Purchaser other than in the ordinary course of business.
5.6 BROKER'S AND FINDER'S FEE. No agent, broker, employee,
officer, stockholder or other person or entity acting or claiming
on behalf of, or by, through or under the authority of, Purchaser
is or will be entitled to any commission or broker's or finder's
fee from Purchaser in connection with this Agreement or any of
the transactions contemplated hereby.
5.7 COMPLIANCE WITH LAWS. To the knowledge of Purchaser,
(x) Purchaser possesses all necessary authorizations, licenses
and permits necessary to permit Purchaser to conduct its
businesses as currently, and as proposed to be, conducted, (y)
all such authorizations, licenses and permits are in full force
and effect, except where such failure to have such authorization,
license or permit would not constitute a Material Adverse Event,
and (z) Purchaser is not in violation in any material respect of
any applicable Law the failure to comply with which would
constitute a Material Adverse Event, nor is Purchaser in
violation of any judgment, injunction, order or decree of any
Tribunal which is applicable to Purchaser or the conduct of
Purchaser's business. No representation or warranty is made with
respect to compliance with or violation of any Laws in effect in
any country other than the United States or as to any judgment,
injunction, order or decree of any Tribunal other than a United
States Tribunal; HOWEVER, Purchaser has no knowledge of any such
failure to comply with, or violation of, any such Laws nor of the
existence of any such judgments, injunctions orders or decrees.
5.8 INVESTMENT REPRESENTATIONS. The Purchaser (or its
wholly-owned subsidiary) will acquire the CNSI Shares for its own
account for investment and not with a view to the resale or
distribution thereof. Purchaser (or its wholly-owned subsidiary)
will not transfer or otherwise dispose of the CNSI Shares, or any
interest therein, in such manner as to violate any provisions of
the Securities Act or any other United States Securities Law
regulating the disposition thereof. Purchaser agrees that the
certificates representing the CNSI Shares may bear legends to the
effect that such shares have not been registered under the
Securities Act or such other United States Securities Laws, and
that no interest therein may be transferred or otherwise disposed
of in violation of the provisions thereof or of any rules and
regulations issued thereunder. Purchaser understands that it (or
its wholly-owned subsidiary) must bear the economic risk of its
investment in the CNSI Companies for an indefinite period, as the
CNSI Shares cannot be sold unless they are subsequently
registered under the Securities Act and qualified under United
States Securities Laws or an exemption from such registration and
qualification is available. Purchaser acknowledges that no public
market for the CNSI Shares presently exists and none may develop
in the future.
5.9 DUE DILIGENCE INVESTIGATION. Purchaser has undertaken
and completed a due diligence investigation of the CNSI
Companies, and, except as set forth in SCHEDULE 5.9, (x) has been
provided with all information concerning the CNSI Companies and
their business as Purchaser has
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requested, (y) has had access to all officers, employees, agents and
representatives of the CNSI Companies as Purchaser has requested and (z) is
satisfied with the results of its due diligence investigation; PROVIDED,
HOWEVER, that this SECTION 5.9 shall in no way limit or modify the conditions
to obligations of Purchaser set forth in ARTICLE 9.
5.10 INQUIRY WITH RESPECT TO REPRESENTATIONS AND WARRANTIES.
All representations and warranties of Purchaser contained in this
ARTICLE 5 that are stated to be "to the best knowledge," or "to
the knowledge" of Purchaser (or words of like effect) are so
stated based upon Purchaser's actual knowledge, but in each case
after Purchaser has made, or has caused to be made on its behalf,
reasonable inquiries with respect to the matters covered thereby.
ARTICLE 6
COVENANTS OF SELLERS AND THE CNSI COMPANIES
Between the Effective Date and the Closing Date, inclusive,
the CNSI Companies (and to the extent expressly stated, Sellers)
will comply with the following covenants and agreements, except
to the extent Purchaser may agree otherwise in writing:
6.1 AFFIRMATIVE COVENANTS. Subject to the terms and
conditions stated herein, Sellers and the CNSI Companies will
take every action reasonably required of Sellers and the CNSI
Companies to satisfy the conditions to Closing set forth in this
Agreement on or before the Closing Date and will exert all
reasonable efforts to cause the transactions contemplated by this
Agreement to be consummated.
6.2 DELIVERY OF SCHEDULES, ACCESS AND INFORMATION. The
CNSI Companies will deliver all schedules, documents, instruments
and other information required to be delivered after the
Effective Date pursuant to this Agreement in the form and on or
before any specified dates set forth in this Agreement, and will
exert reasonable efforts to provide such detail and back-up
information, calculations and schedules as reasonably may be
requested by Purchaser. The CNSI Companies will afford to
Purchaser and its representatives reasonable access during
reasonable hours throughout the period prior to the Closing to
all properties, books, contracts, commitments, computer programs
and data, reports, manuals and records (including but not limited
to Tax Returns), and to personnel and consultants, of the CNSI
Companies, and during such period, will furnish promptly to
Purchaser all other information concerning the business,
properties and personnel of the CNSI Companies as Purchaser may
reasonably request. Purchaser will maintain the confidentiality
of all such information as required by SECTION 7.5 hereof.
6.3 NO SOLICITATION. Until the earlier of the Closing or
the termination of this Agreement pursuant to ARTICLE 12, the
CNSI Companies and Sellers, and those acting on behalf of them,
will not, directly or indirectly, solicit, encourage or initiate
any discussion with, or negotiate or otherwise deal with, or
provide any information to, any Person other than Purchaser and
its representatives concerning any merger, sale of assets (other
than sales of assets in the ordinary course of business), or
similar transaction involving the CNSI Companies, or sale of any
capital stock of the CNSI Companies, or any interest therein.
Sellers or the CNSI Companies, as the case may be, will notify
Purchaser immediately upon receipt of any offer or proposal
relating to any of the foregoing and such notice will describe
the terms thereof and identify the party or parties thereto.
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6.4 CONDUCT OF BUSINESS PRIOR TO CLOSING. Sellers and the
CNSI Companies agree that, prior to the consummation of this
Agreement or to the termination of this Agreement pursuant to its
terms, unless Purchaser otherwise consents in writing (which
consent will not be unreasonably withheld or delayed), and except
as otherwise contemplated by this Agreement, each of the
following will be complied with:
(a) The business of the CNSI Companies will be
conducted in the ordinary and usual course and the CNSI
Companies will use reasonable best efforts to keep intact
their business organizations and good will, to keep
available the services of their respective officers and
employees and to maintain good relationships with suppliers,
lenders, creditors, distributors, employees, customers and
others having business or financial relationships with them,
and Sellers or the CNSI Companies will notify Purchaser of
any event, occurrence or emergency material to, and not in
the ordinary and usual course of business of, the CNSI
Companies.
(b) The CNSI Companies shall not (i) amend their
respective articles of incorporation or bylaws (or other
charter documents), (ii) split, combine or reclassify any of
their outstanding securities or (iii) declare, set aside or
pay any dividend or other distribution on, or make, agree or
commit to make any exchange for or redemption of, any of
their outstanding securities;
(c) The CNSI Companies will not issue or agree to
issue any additional shares of, or rights of any kind to
acquire any shares of, their capital stock of any class;
(d) Except for (i) Indebtedness existing on February
29, 1996, and reflected on CNSI's Financial Statements as of
such date, as such Indebtedness may be renewed or extended
(including, but without limitation, the renewal, extension
and modification of certain indebtedness owed by CNSI to R.
Rowland, as contemplated by SECTION 9.1(n)), and
(ii) accounts payable and other trade payables incurred in
the ordinary course of business, the CNSI Companies have not
created, incurred, or assumed, and will not create, incur or
assume any long-term or short-term Indebtedness for money
borrowed or make any capital expenditures or commitments for
capital expenditures in excess of $50,000 individually or
$250,000 in the aggregate between the Effective Date and the
Closing.
(e) Except as set forth in SCHEDULE 6.4(e), the CNSI
Companies will not (i) adopt, enter into or amend any bonus,
profit sharing, compensation, stock option, warrant,
pension, retirement, deferred compensation, employment,
severance, termination or other employee benefit plan,
agreement, trust fund or arrangement for the benefit or
welfare of any officer, director or employee of the CNSI
Companies or (ii) agree to any increase in the compensation
payable or to become payable to, or any increase in the
contractual term of employment of, any officer, director or
employee of the CNSI Companies;
(f) Other than in the ordinary course of business, the
CNSI Companies will not sell, lease, mortgage, encumber or
otherwise dispose of or grant any Lien in any of their
assets or properties except for Permitted Liens;
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(g) The CNSI Companies will not incur or modify any
contingent liability as a guarantor or otherwise with
respect to the obligations of third parties or as required
by Law;
(h) The CNSI Companies will not prepay any loans,
including, without limitation, loans from any stockholders,
officers, directors or employees, and will not make any
principal payments on any outstanding loans from any Seller
or make any change in their borrowing arrangements or
modify, terminate or vary any Material Agreement in a manner
that is adverse to any CNSI Company or release or assign any
rights or claims under any Material Agreement.
(i) The CNSI Companies will file (or extend the date
for filing) when due all United States federal, state, and
local Tax Returns, reports and declarations required to be
filed by any of them, and will pay, or make full and
adequate provision for the payment of, all Taxes due from or
payable by any of them;
(j) The CNSI Companies will exert reasonable efforts
to comply, and, in relation to any contract or agreement
between customers of the CNSI Companies and the CNSI
Companies or otherwise pertaining to the business
relationship between such customers and the CNSI Companies,
to cause customers of the CNSI Companies to comply, in all
material respects with all Laws applicable to them and their
operations;
(k) The CNSI Companies will maintain in full force and
effect insurance coverage of a type and amount customary in
their businesses, but not less than that presently in
effect;
(l) The CNSI Companies will not make any change in any
method of reporting income or expenses for United States
federal income Tax purposes; and
(m) The CNSI Companies will not knowingly take any
action which would prevent compliance with any of the
conditions in ARTICLES 8 OR 9 of this Agreement.
6.5 CONSENTS AND APPROVALS. Sellers and the CNSI Companies
will use reasonable efforts to obtain all necessary consents and
approvals required for their performance under this Agreement and
the transactions contemplated hereby, including, without
limitation, the consents referred to in SECTION 4.3 and, if
required by applicable Laws or any agreement restricting the
transfer or ownership of any of the CNSI Shares, the consent of
any Outside Shareholders to the transfer of the CNSI Shares to
Purchaser (or its wholly-owned subsidiary). Sellers and the CNSI
Companies will diligently and promptly proceed immediately after
the Effective Date to make all filings, applications, statements
and reports to all Tribunals which are required to be made prior
to the Closing Date by or on behalf of them pursuant to any
applicable Law in connection with this Agreement and the
transactions contemplated hereby and will use best efforts to
pursue the taking of all action necessary to obtain approval of
the transactions contemplated herein by the telecommunication
regulatory authorities of any jurisdiction in which the CNSI
Companies conduct business. As required in connection with the
performance of this Agreement by Sellers and the CNSI Companies,
Sellers and the CNSI Companies will provide such other
information and communications to all such Tribunals as Purchaser
may reasonably request. Between the Effective
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Date and the Closing Date, the CNSI Companies will promptly provide Purchaser
with copies of all correspondence and filings to or from all Tribunals
relating to the CNSI Companies (other than consumer and customer rate and
billing complaints submitted to or filed with Tribunals).
6.6 PRESS RELEASE. As soon as reasonably practicable
after the signing of this Agreement, Purchaser may cause a press
release (the "PRESS RELEASE") to be issued announcing the
execution of this Agreement and the proposed acquisition and the
anticipated business relationships between and among the parties
hereto, it being understood and agreed that the contents of the
Press Release shall be mutually agreed upon, in writing, by the
parties hereto, such approval to be subject to the PROVISO
contained in SECTION 7.6.
6.7 FINANCIAL INFORMATION. Sellers will cause the CNSI
Companies to, and the CNSI Companies will, deliver the Unaudited
Financial Statements required to be delivered pursuant to
SECTION 4.5(c).
6.8 NEGATIVE WORKING CAPITAL AMOUNT AND OTHER AMOUNTS DUE.
Prior to Closing, CNSI will use reasonable best efforts to reduce
its Negative Working Capital to an amount of not more than
$3,300,000.00 (the "NEGATIVE WORKING CAPITAL ALLOWABLE").
Sellers shall deliver to Purchaser three business days prior to
Closing, a good faith best estimate prepared by Sellers of
Negative Working Capital and Other Amounts Due ("the CLOSING
ESTIMATE"). Determination of the actual amount of CNSI's
Negative Working Capital at Closing will be made by Purchaser
within 75 days following the Closing Date and provided to Sellers
by reasonably applying CNSI's past accounting practices and GAAP
(the "FINAL CLOSING ADJUSTMENT"). Negative Working Capital for
purposes of the Closing Estimate and the Final Closing Adjustment
shall be computed before any accrual or payment of amounts
required to (i) make cash payments to Sellers for Taxes due by
reason of the forgiveness of all Indebtedness owed by Sellers to
CNSI which Taxes shall be computed by reference to the excess of
the taxable income resulting from such forgiveness over any 1996
sub-chapter S losses that Sellers are able to deduct on their tax
returns, and (ii) make cash payments to Sellers for the payment
of 1996 sub-chapter S tax liabilities (clause (i) and (ii)
collectively are referred to as "OTHER AMOUNTS DUE"), and CNSI
will use reasonable good faith efforts to limit the sum of Other
Amounts Due to no more than $900,000 (subject to Section 16.15)
(the "OTHER AMOUNTS DUE ALLOWABLE"). CNSI agrees to use its
reasonable best efforts to reduce the Other Amounts Due by the
application of acceptable accounting treatment of items (i) and
(ii)to preserve the most cash possible and reduce the Other
Amounts Due prior to Closing. Should the Closing Estimate
reflect that the aggregate of (i) Negative Working Capital and
(ii) Other Amounts Due exceeds $4,200,000, then the amount of
such excess shall be deducted from the Purchase Price. In the
event the Final Closing Adjustment exceeds the Closing Estimate,
Purchaser shall be entitled to receive from the escrow held by
the Escrow Agent, on or before the Initial Release Date, such
number of Holdback Shares as is equal to the amount of such
excess divided by the Market Value of the Shares as of the
Effective Date.
6.9 EXPENSES. Whether or not this Agreement is
consummated, all costs and expenses incurred by the CNSI
Companies and by Sellers in connection with this Agreement and
the transactions contemplated hereby, including but not limited
to legal and accounting fees, will be paid by CNSI; PROVIDED,
that CNSI will not pay in excess of $35,000 of such costs and
expenses incurred by Sellers in connection with this Agreement
and the transactions contemplated hereby (and Sellers
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will be responsible for any such costs and expenses that exceed $35,000),
which amount shall be accrued on the Closing Balance Sheet.
6.10 UNTRUTH OF REPRESENTATIONS AND WARRANTIES. Promptly
upon any Seller or the CNSI Companies becoming aware that any of
the representations and warranties of Sellers contained in this
Agreement was untrue in any material respect when made, or of any
event which would cause Sellers to be unable to deliver the
certificates contemplated by SECTION 9.1(e) hereof, Sellers will
give detailed written notice thereof to Purchaser and will use
all commercially reasonable efforts to prevent or promptly remedy
the same if it can be remedied.
6.11 NO TRANSFER OF SHARES. Unless and until this Agreement
is terminated, no Seller will directly or indirectly exchange,
transfer, assign, pledge or encumber any of the CNSI Shares owned
by such Seller, nor will any Seller grant, directly or
indirectly, any right to acquire, dispose of, vote or otherwise
control in any manner such CNSI Shares.
6.12 TRANSFER TAXES. Sellers will be responsible for and
will pay all stock transfer Taxes levied or to be levied on
Sellers by any Tribunal having jurisdiction with respect to the
sale of the Shares.
6.13 DELIVERY OF BOOKS AND RECORDS. At the Closing, Sellers
will deliver to Purchaser all original books and records which
relate to the CNSI Shares, the CNSI Companies or the
Subsidiaries.
6.14 CONFIDENTIALITY. Unless otherwise required by Law,
Sellers and the CNSI Companies will hold in confidence all
confidential information that has been disclosed by Purchaser and
will not use any such confidential information, or disclose any
such confidential information to other Persons, except in
connection with the transactions contemplated by this Agreement,
until such time as such information is otherwise publicly
available; PROVIDED, HOWEVER, that this sentence will not apply
to any information that becomes generally available to the
public, was available on a non-confidential basis to Sellers or
the CNSI Companies prior to its disclosure pursuant hereto, or
becomes available on a non-confidential basis from a third party
who is not bound to keep such information confidential. In the
event of the termination of this Agreement, Sellers and the CNSI
Companies will, and will cause their representatives to, deliver
to Purchaser or destroy all documents, work papers and other
material, and all copies thereof, obtained by any of them or on
their behalf from Purchaser as a result of this Agreement or in
connection herewith, whether obtained before or after the
execution hereof. Sellers and the CNSI Companies agree that
Purchaser will have standing and may avail itself of any remedy
at law or in equity, including an action for injunctive relief,
in the event of a breach or threatened breach by Purchaser of any
of the provisions of this SECTION 6.14. The obligations of
Sellers and the CNSI Companies under this SECTION 6.14 will
survive termination of this Agreement for any reason whatsoever
and will remain in effect until April 15, 1998, if this Agreement
is terminated. In the event this Agreement is terminated,
Sellers and the CNSI Companies agree that none of them will
solicit key employees of Purchaser or accept solicitations from
key employees of Purchaser.
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6.15 UPDATING OF EXHIBITS AND SCHEDULES. Purchaser, Sellers
and the CNSI Companies acknowledge that the information provided
to Purchaser in the various Schedules attached to this Agreement
may change in certain respects after the Effective Date and prior
to the Closing Date. In an effort to keep Purchaser reasonably
informed of such changes, Sellers will notify Purchaser of any
material changes, additions or events which may cause any
material change in or addition to the Schedules delivered by them
under this Agreement promptly after the occurrence of the same
and again at the Closing by delivery of appropriate updates to
all such Schedules. No notification of a change or addition to a
Schedule made pursuant to this SECTION 6.15 will be deemed to
cure any misrepresentation or breach of any warranty resulting
from such change or addition unless Purchaser agrees thereto in
writing, nor will any such notification be considered to
constitute or give rise to a waiver by Purchaser of any condition
set forth in this Agreement. Nothing contained herein will be
deemed to create or impose on Purchaser any duty to examine or
investigate any matter or thing for the purposes of verifying the
representations and warranties made by Sellers herein. Purchaser
will not be deemed to have waived any misrepresentation or breach
of warranty unless and until Purchaser has actual knowledge of
such misrepresentation or breach of warranty and executes such
waiver in writing.
6.16 COOPERATION OF SELLERS. Sellers will use all
reasonable efforts and shall cause the CNSI Companies to
cooperate with Purchaser and Counsel to Purchaser, and
Purchaser's accountants and agents, in carrying out the
transactions contemplated by this Agreement, and in delivering
all documents and instruments deemed reasonably necessary or
useful by Counsel to Purchaser including, without limitation, the
filing of a Notification and Report Form pursuant to HSR as soon
as practicable after the Effective Date but in no event later
than April 30, 1996.
6.17 UTILIZATION OF S CORPORATION TAX BENEFITS. Sellers
will use their best efforts to utilize all Tax benefits that may
be available to them by virtue of their ownership of CNSI Shares
under applicable Tax Laws on or prior to the Closing Date.
ARTICLE 7
COVENANTS OF PURCHASER
Between the Effective Date and the Closing Date, inclusive,
Purchaser will comply with the following covenants and
agreements, except to the extent Sellers may otherwise consent in
writing:
7.1 AFFIRMATIVE COVENANTS. Subject to the terms and
conditions stated herein, Purchaser will take every action
reasonably required of it to satisfy the conditions to Closing
set forth in this Agreement on or before the Closing Date and
will exert all reasonable efforts to cause the transactions
contemplated by this Agreement promptly to be consummated.
7.2 COOPERATION OF PURCHASER. Purchaser will use all
reasonable efforts to cooperate with Sellers and Counsel to
Sellers, and the CNSI Companies and Counsel to CNSI Companies,
and their respective accountants and agents, in carrying out the
transactions contemplated by this Agreement, and in delivering
all documents and instruments deemed reasonably necessary or
useful by Counsel to Sellers and/or Counsel to CNSI Companies
including, without limitation, the filing of a
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Notification and Report Form pursuant to HSR as soon as practicable
after the Effective Date but in no event later than April 30, 1996.
7.3 EXPENSES. Whether or not this Agreement is
consummated, all costs and expenses incurred by Purchaser in
connection with this Agreement and the transactions contemplated
hereby will be paid by Purchaser.
7.4 CONSENTS AND APPROVALS. Purchaser will use reasonable
efforts to obtain all necessary consents and approvals required
for its performance under this Agreement and the transactions
contemplated hereby. Purchaser will diligently and promptly
proceed immediately after the Effective Date to make all filings,
applications, statements and reports to all Tribunals which are
required to be made prior to the Closing Date by or on behalf of
it pursuant to any applicable Law in connection with this
Agreement and the transactions contemplated hereby including,
without limitation, the consents referred to in SCHEDULE 7.4, and
will use best efforts to pursue the taking of all action
necessary to obtain approval of the transactions contemplated
herein by the telecommunication regulatory authorities of any
jurisdiction in which the CNSI Companies conducts business. As
required in connection with the performance of this Agreement,
Purchaser will promptly provide such information and
communications to Tribunals, including, without limitation,
telecommunication Tribunals in any jurisdiction in which the CNSI
Companies conduct business, as such Tribunals reasonably may
request. Purchaser will not be required to cure any existing
regulatory compliance requirements in order to obtain such
consents and approvals. Within 10 business days after the
written request of Sellers, Purchaser will provide to Sellers a
status report as to all such filings and approvals.
7.5 CONFIDENTIALITY. Unless otherwise required by Law,
Purchaser will hold in confidence all confidential information
that has been disclosed by Sellers and the CNSI Companies and
will not use any such confidential information, or disclose such
confidential information to other Persons, except in connection
with the transaction contemplated by this Agreement, until such
time as such information is otherwise publicly available;
PROVIDED, HOWEVER, that this sentence will not apply to any
information that becomes generally available to the public, was
available on a non-confidential basis to Purchaser prior to its
disclosure pursuant hereto, or becomes available on a
non-confidential basis from a third party who is not bound to keep
such information confidential. In the event of the termination
of this Agreement, Purchaser will, and will cause its
representatives to, deliver to CNSI or destroy all documents,
work papers, and other material, and all copies thereof, obtained
by Purchaser or on its behalf from Sellers or the CNSI Companies
as a result of this Agreement or in connection herewith, whether
so obtained before or after the execution hereof. Purchaser
agrees that Sellers and the CNSI Companies will have standing and
may avail themselves of any remedy at law or in equity, including
an action for injunctive relief, in the event of a breach or
threatened breach by Purchaser of any of the provisions of this
SECTION 7.5. The obligations of Purchaser under this SECTION
7.5 will survive termination of this Agreement for any reason
whatsoever and will remain in effect until April 15, 1998, if
this Agreement is terminated. In the event this Agreement is
terminated, Purchaser agrees that it will not solicit CNSI key
employees or accept solicitations from CNSI key employees (other
than employees whose employment has been terminated by CNSI), so
long as Sellers continue to hold a majority of the CNSI Shares.
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7.6 PUBLICITY. Prior to the Closing, any public statement
or announcement by Purchaser, including but not limited to any
written news releases by Purchaser, pertaining to this Agreement
or the transactions contemplated hereby will be submitted to
Sellers and to the CNSI Companies for review and approval prior
to their release by Purchaser, and will be released only in a
form reasonably approved by Sellers and the CNSI Companies;
PROVIDED, HOWEVER, that (i) such approval will not be
unreasonably withheld and (ii) such review and approval will not
be required of statements and announcements by Purchaser if prior
review and approval would prevent the timely and accurate
dissemination of such statements and announcements as required to
comply, in the judgment of Counsel to Purchaser, with any
applicable Law.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF SELLERS
8.1 CONDITIONS TO OBLIGATIONS OF SELLERS. The obligations
of Sellers to consummate the transactions contemplated by this
Agreement will be subject to the fulfillment at or prior to the
Closing of the following conditions, unless Sellers waive such
fulfillment in whole or in part in writing:
(a) This Agreement and the transactions contemplated
hereby shall have received all approvals, consents,
authorizations and waivers from Tribunals and other third
parties (including those set forth on Schedule 4.3 and
including without limitation (i) Sirrom Capital, (ii)
lenders, holders of debt securities and lessors, (iii) the
Board of Directors of Purchaser and (iv) the shareholders of
Purchaser (if required under applicable Laws)) required by
Law or contract to consummate this Agreement and required to
keep all certificates of authority and licenses held by the
CNSI Companies in full force and effect after the Closing;
(b) There shall not be in effect a restraining order,
a preliminary or permanent injunction or other order by any
Tribunal which prohibits the consummation of the
transactions contemplated by this Agreement and no action or
proceeding shall have been instituted and remain pending
before any Tribunal seeking such relief or seeking damages
in respect to this Agreement or the consummation of the
transactions contemplated by this Agreement;
(c) Purchaser shall have performed, complied with and
satisfied in all material respects its agreements, covenants
and obligations contained in this Agreement required to be
performed, complied with and satisfied at or prior to the
Closing and shall have complied with all material Laws
relating to the transactions contemplated by this Agreement;
(d) The representations and warranties of Purchaser
set forth in this Agreement shall be true in all material
respects as of the Closing Date as if made as of such time;
(e) Sellers shall have received from Purchaser an
officers' certificate, executed by an authorized officer of
Purchaser (in his capacity as such), dated the Closing Date,
as to
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the satisfaction of the conditions stated in this
SECTION 8.1 (to the best of knowledge where appropriate);
(f) Sellers shall have received an opinion, dated the
Closing Date, of Counsel to Purchaser, substantially in the
form of EXHIBIT C.
(g) The Board of Directors of Purchaser shall have
taken all necessary corporate action to provide for the
issuance of the shares of AMNEX Common Stock and the
Warrants, as contemplated by this Agreement, and shall have
complied with all applicable Laws related to the due
authorization and issuance to Sellers of such shares and
Warrants.
(h) Since the Effective Date, there shall not have
been any Material Adverse Change in, or other event or
condition of any character which in any one case or in the
aggregate has a Material Adverse Effect, or reasonably can
be expected in any one case or in the aggregate to have a
Material Adverse Effect in the future related to, the
condition (financial or otherwise), assets, liabilities,
results of operations, or business of Purchaser (except for
legislative or regulatory changes related to the
telecommunications industry generally); and
(i) The waiting period applicable to the consummation
of the transactions contemplated by this Agreement under HSR
shall have expired or been terminated.
(j) Arrangements satisfactory to Purchaser and Sellers
concerning the disposition or exercise of the Sirrom
Warrants shall have been made.
(j) Arrangements satisfactory to Purchaser and Sellers
concerning the matters referred to in SECTION 16.15 shall
have been made.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF PURCHASER
9.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. The
obligations of Purchaser to consummate the transactions
contemplated by this Agreement will be subject to the fulfillment
at or prior to the Closing of the following conditions, unless
Purchaser waives such fulfillment in whole or in part in writing:
(a) This Agreement and the transactions contemplated
by this Agreement shall have received all approvals,
consents, authorizations and waivers from Tribunals and
other third parties (including the shareholders of
Purchaser, if necessary, and lenders, holders of debt
securities and lessors) required by Law or contract to
consummate this Agreement and required to keep all
certificates of authority and licenses held by the CNSI
Companies in full force and effect after the Closing;
(b) There shall not be in effect a restraining order,
a preliminary or permanent injunction or other order by any
Tribunal which prohibits the consummation of the
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transactions contemplated by this Agreement and no action or
proceeding shall have been instituted or remain pending
before any Tribunal seeking such relief or seeking damages
in respect to this Agreement or the consummation of the
transactions contemplated by this Agreement;
(c) Sellers shall have performed, complied with and
satisfied in all material respects each of their agreements,
covenants and obligations contained in this Agreement
required to be performed, complied with and satisfied on or
prior to the Closing and shall have complied with all Laws
relating to the transactions contemplated by this Agreement;
(d) The representations and warranties of Sellers set
forth in this Agreement shall be true in all material
respects as of the Effective Date and as of the Closing as
if made as of such time;
(e) Purchaser shall have received from Sellers a
certificate, dated the Closing Date, executed by Sellers,
and officers' certificates, executed by duly authorized
officers of the CNSI Companies (in their capacity as such),
dated the Closing Date, as to the satisfaction of the
conditions of this SECTION 9.1 (to the best of knowledge
where appropriate);
(f) Purchaser shall have received an opinion, dated
the Closing Date, of Counsel to Sellers, substantially in
the form of EXHIBIT D.
(g) Since the Effective Date, there shall not have
been any Material Adverse Change in, or other event or
condition of any character which in any one case or in the
aggregate has a Material Adverse Effect (including, without
limitation, arising from any matters disclosed on Schedules
delivered to Purchaser pursuant to SECTION 1.2 or SECTION
6.15), or reasonably can be expected in any one case or in
the aggregate to have a Material Adverse Effect in the
future related to, the condition (financial or otherwise),
assets, liabilities, results of operations, or business of
the CNSI Companies.
(h) None of the permits, certificates of authority or
licenses of the CNSI Companies listed on SCHEDULE 4.3 shall
have been canceled, revoked or suspended and no Tribunal
shall have instituted any proceeding, or given notice to the
CNSI Companies that it intends to institute any proceeding,
to take such action or to place the CNSI Companies in a
conservatorship or receivership due to its financial
condition or failure to comply or satisfy any Law;
(i) At the Closing, each Seller shall perform his or
her respective obligations of and actions to be taken by all
the Sellers at the Closing as described in this Agreement;
(j) At or prior to the Closing, the CNSI Companies
shall have received (and delivered copies thereof to
Purchaser) duly executed resignation letters from all
directors and officers of the CNSI Companies pursuant to
which such individuals resign as directors and officers of
the CNSI Companies effective as of the Closing;
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(k) At or prior to the Closing, since the Effective
Date there shall have been no material legislative or
regulatory changes related to the telecommunications
industry in the United States or Mexico which would have a
Material Adverse Effect on the CNSI Companies;
(l) On or prior to the Effective Date, the board of
directors of each CNSI Company shall have duly approved, in
accordance with the provisions of the bylaws or articles of
incorporation or applicable charter documents of that CNSI
Company, the execution of this Agreement and the
consummation of the transactions contemplated by this
Agreement; and on or before the Closing Date the board of
directors of each CNSI Company shall have duly approved the
registration in the register of members or stockholders, of
the transfer to and registration of Purchaser (or its
wholly-owned subsidiary) or its nominee as the registered
stockholder of those Shares forming the issued capital, or
part of the issued capital, of that CNSI Company;
(m) At or prior to the Closing, all loans and advances
due from any Seller to the CNSI Companies which are set
forth on SCHEDULE 9.1(m) shall have been forgiven and
canceled;
(n) At or prior to the Closing, CNSI shall have
renewed, extended and/or modified the Indebtedness owed by
CNSI to R. Rowland and described in SCHEDULE 9.1(n) (the
"ROWLAND DEBT") by executing an amended and restated
promissory note (the "ROWLAND RENEWAL NOTE") which, among
other things, shall be in the stated principal amount of the
sum of the outstanding principal balance of, and accrued but
unpaid interest on, the Rowland Debt (but in no event more
than $1,200,000), shall be payable to the order of R.
Rowland, shall bear interest at the rate of 10.5% per annum
with interest payable monthly, with principal only due and
payable one year and 30 days after Closing and which shall
be secured by a first priority perfected security interest
in CNSI's commercial credit card receivables, including the
reserve amounts held by the credit card billing company and
processing bank, with regard to CNSI's credit card
receivables;
(o) The J. Rowland Estate Debt shall be paid in full;
(p) Purchaser shall invest in, or lend to, CNSI the
Infused Funds Purchaser has committed to provide to CNSI,
according to PARAGRAPH L of the Recitals of this Agreement;
(q) Each Key Employee employed by CNSI at the Closing
Date and any Key Employee at the Effective Date whose
employment is terminated by CNSI after the Effective Date
but prior to the Closing Date shall have executed and
delivered a non-disclosure and non-competition agreement
acceptable to Purchaser; (but such condition shall not apply
to any Key Employee who voluntarily resigns from his or her
employment with CNSI after the Effective Date but prior to
the Closing Date);
(r) CNSI shall have (x) disposed of its entire
beneficial interest in Fulfillment Enterprises, Inc., a
Texas corporation ("FEI"), (y) entered into an agreement to
dispose of its beneficial interest in FEI, or (z) made other
arrangements with respect to FEI that are
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satisfactory to Purchaser, and such disposition, agreement
for disposition, or other arrangements shall be on terms acceptable
to Purchaser in its reasonable discretion;
(s) The Sellers who are the holders of shares of
capital stock of Nat-Tel Communications, Inc., a Texas
corporation ("NAT-TEL"), shall have (x) disposed of their
entire beneficial interest in Nat-Tel, (y) entered into an
agreement to dispose of their beneficial interest in Nat-Tel,
or (z) made other arrangements with respect to Nat-Tel
that are satisfactory to Purchaser, and such disposition,
agreement for disposition or other arrangements shall be on
terms acceptable to Purchaser;
(t) The CNSI Shareholders Agreement shall have been
terminated;
(u) No options, warrants or other rights to acquire
capital stock of any of the CNSI Companies shall be
outstanding, including, without limitation, the Sirrom
Warrants;
(v) The 1995 Financial Statements, together with the
report thereon by Price Waterhouse (subject only to a "going
concern" qualification), shall have been delivered to
Purchaser;
(w) The waiting period applicable to the consummation
of the transactions contemplated by this Agreement under HSR
shall have expired or been terminated;
(x) All Tax Returns and the payment of Taxes which are
due on or prior to Closing with respect to CNM shall have
been filed and paid and an annual meeting of shareholders of
CNM in accordance with applicable laws of Mexico shall have
been duly called and held;
(y) Arrangements satisfactory to Purchaser and Sellers
concerning the matters referred to in SECTION 16.15 shall
have been made and CNSI shall have obtained and delivered to
Purchaser a general release from Spectrum related to
transactions between the CNSI Companies and Spectrum prior
to the Effective Date; and
(z) Arrangements satisfactory to Purchaser and Sellers
concerning the disposition or exercise of the Sirrom
Warrants shall have been made.
ARTICLE 10
CLOSING
10.1 DATE OF CLOSING. Subject to ARTICLE 12, the Closing
will take place at the offices of Kuperman, Orr, Mouer & Albers,
P.C. in Austin, Texas, on the later to occur of 30 days after the
Effective Date or (b) the date which is ten (10) business days
after the date on which all Tribunal and third party consents
necessary for the consummation of the transactions contemplated
by this Agreement are obtained and all other conditions to
Closing are satisfied but in no event later than June 30, 1996,
unless extended by the mutual agreement of Purchaser and Sellers;
PROVIDED,
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HOWEVER, that this Agreement will terminate automatically and without
further notice if the Closing has not occurred by June 30, 1996.
10.2 ACTIONS BY SELLERS. At the Closing, each Seller will:
(a) STOCK. Deliver to Purchaser (or its wholly-owned
subsidiary) the original certificates representing the CNSI
Shares designated as owned by such Seller in the Recitals to
this Agreement duly endorsed for transfer, or with
appropriate stock powers, duly endorsed in blank by such
Seller, together with original or certified copies of
resolutions of the shareholders and directors of each CNSI
Company, and if applicable the Outside CNSI Companies
Shareholders, unconditionally consenting to and accepting
the transfer and registration of the Shares in each CNSI
Company, as appropriate, into the name of Purchaser (or its
wholly-owned subsidiary);
(b) CNSI SHAREHOLDERS AGREEMENT. Take such action as
may be required to terminate the CNSI Shareholders
Agreement;
(c) OTHER AGREEMENTS. Perform or shall have performed
all of the covenants and agreements contained in this
Agreement to be performed or complied with by such Seller at
or prior to the Closing hereunder, including, but without
limitation, the execution and delivery of all agreements and
other documents required to be executed and delivered
pursuant to SECTION 9.1; and
(d) BOOKS, RECORDS, AND PROPERTY. Deliver or shall
have delivered all books and records and property as
required to be delivered by Sellers under this Agreement.
10.3 ACTIONS BY PURCHASER. At the Closing, Purchaser will:
(a) PAYMENT. Issue to the Sellers all the shares of
AMNEX Common Stock and the Warrants called for by SECTION
2.2 of this Agreement, and, subject to SECTION 6.8, deliver
to Sellers certificates representing the Warrants and that
number of the shares of AMNEX Common Stock having an
aggregate Market Value of $8,000,000 at the Effective Date.
In addition, Purchaser shall put the Holdback Shares into
escrow with a national or state banking association
acceptable to Sellers (the "ESCROW AGENT") and pursuant to
an escrow agreement with the Escrow Agent that is acceptable
to Purchaser and Sellers (escrow fees payable under such
escrow agreement will be paid by Purchaser so long as such
fees do not exceed $5,000 per year, and Sellers will be
responsible for any escrow fees in excess of such amount).
The Holdback Shares shall be that number of shares of AMNEX
Common Stock issued to Sellers (but certificates for which
have not been delivered to Sellers) having an aggregate
Market Value of $7,000,000 at the Effective Date; and
(b) OTHER AGREEMENTS. Perform or shall have performed
all of the covenants and agreements contained in this
Agreement to be performed or complied with by Purchaser at
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or prior to the Closing hereunder, including, but without
limitation, all covenants and agreements related to the
issuance and delivery of the shares of AMNEX Common Stock
and the Warrants as contemplated by this Agreement.
10.4 ACTIONS BY CNSI COMPANIES. At the Closing, the CNSI
Companies will deliver to Purchaser all resolutions and
certificates required to be delivered by them pursuant to, or in
connection with, this Agreement.
10.5 SIMULTANEOUS TRANSACTIONS. All transactions to be
effected at the Closing will be deemed to have taken place
simultaneously, and no transaction will be deemed to have been
completed until all transactions are completed and all documents
delivered.
ARTICLE 11
INDEMNIFICATION: LIMITED SURVIVAL
OF CERTAIN REPRESENTATIONS AND WARRANTIES
11.1 INDEMNIFICATION BY SELLERS.
(a) Subject to subsections (b) and (c) below, each
Seller severally (in proportion to such Seller's
Proportionate Interest) agrees to indemnify Purchaser and to
hold it harmless from and against any Loss which Purchaser
may suffer, sustain or become subject to, as a result of a
Breach by Sellers or the CNSI Companies; PROVIDED, HOWEVER,
that with respect to a Breach by a Seller of any
representation, warranty or covenant contained in SECTION
3.1, 3.2 or 3.3 (an "ARTICLE 3 BREACH"), each Seller
severally agrees to indemnify Purchaser and to hold it
harmless from and against any Loss Purchaser may suffer or
sustain or become subject to, as a result of an Article 3
Breach by such Seller which indemnification is not subject
to limitations set forth in SECTIONS 11.1(b) or (c) or
SECTION 11.2.
(b) The indemnification provided in SECTION 11.1(a) is
subject to the following limitations:
(i) Sellers shall be obligated pursuant to this
SECTION 11.1 to honor an indemnity claim of Purchaser
for Losses (x) only if, from the Closing Date to the
date of such claim for indemnification, the aggregate
amount of Losses, less the aggregate amount of
Recoveries, exceeds the Deductible Amount and (y) then
only to the extent of such excess amount, not to exceed
the Maximum Loss Amount; and
(ii) Sellers will not be liable for any Losses
arising from any Breach unless an Indemnification
Notice specifying the nature of the Breach and of the
Losses for which payment or reimbursement is sought is
given by Purchaser to Sellers prior to the expiration
of the applicable representation or warranty as
specified in SECTION 11.2.
(c) The maximum Losses for which Sellers,
collectively, will be liable under this Agreement, whether
for one or more Breaches, will be the Maximum Loss Amount;
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PROVIDED, HOWEVER, that the Maximum Loss Amount will not be
in effect for Losses resulting from Breaches that are the
result of fraudulent or intentional wrongdoing on the part
of Sellers, if Sellers acknowledge fraudulent or intentional
wrongdoing or if any Tribunal having jurisdiction determines
that there has been fraudulent or intentional wrongdoing on
the part of Sellers.
(d) After Sellers have acknowledged in writing that
they are indemnifying Purchaser with respect to any claim
involving Litigation, Sellers will be entitled to assume the
defense of any such Litigation, as provided in SECTION
11.3(c); PROVIDED, that Purchaser may at its election
participate (at its own expense) in such defense to the
extent that in its sole discretion it believes that such
Litigation will materially affect its ongoing business or
the ongoing business of the CNSI Companies. In addition, in
the event of any audit or other administrative proceeding
involving a claim for Taxes for which Sellers may be
required to indemnify Purchaser, Purchaser will use (or will
cause the CNSI Companies to use) reasonable efforts to
defend such claim in good faith.
(e) In an effort to provide assurance to Purchaser
that there will be a source of payment for any Losses for
which indemnification is required to be made under this
SECTION 11.1, Sellers have agreed to defer receipt of the
Holdback Shares until the Initial Release Date (at which
time Holdback Shares with a Market Value at the Effective
Date of $2,000,000, less any offsets against such Holdback
Shares as provided in this Agreement, will be delivered to
Sellers) and the Final Release Date (at which time the
remaining Holdback Shares, less any offsets against such
Holdback Shares as provided in this Agreement, will be
delivered to Sellers). Purchaser will be entitled to
utilize the Holdback Shares to offset any Losses (in excess
of the Deductible Amount but no more than the Maximum Loss
Amount) for which it is entitled to indemnification under
this ARTICLE 11 (or pursuant to which Purchaser has given an
Indemnification Notice) and by the amount, if any, by which
the Negative Factor exceeds $4,200,000. The Holdback
Shares shall be deemed to have a value equal to the Market
Value of the Holdback Shares on the Effective Date at all
times while they are held in escrow, notwithstanding that
the actual Market Value thereof may differ at any particular
date. Notwithstanding any other provision of this SECTION
11.1(e), Sellers shall have the right to pay their
respective indemnification amounts pursuant to this SECTION
11.1 wholly in cash or in any other form of immediately
available funds acceptable to Purchaser. Any portion of the
Holdback Shares remaining after the payment of any
indemnification under this SECTION 11.1 will be released to
Sellers in accordance with SECTION 2.2(c) OR (d) of this
Agreement. Under no circumstances will Purchaser be
entitled to seek personal recourse to any Seller, or to any
assets of any Seller other than Holdback Shares for any
indemnification under this Agreement except for
indemnification for Losses resulting from the fraudulent
conduct or intentional wrongdoing of Seller, or Article 3
Breaches, as provided in SECTION 11.3(c).
11.2 SURVIVAL OF SELLERS' REPRESENTATIONS, WARRANTIES AND
COVENANTS. The representations, warranties and covenants of
Sellers set forth in ARTICLES 3 AND 4 of this Agreement or in any
certificate or other writing delivered to Purchaser pursuant to
this Agreement will survive the Closing and the consummation of
the transactions contemplated hereby for a period ending on the
Final Payment Date (and will then terminate and be of no further
force or effect) and will not be
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affected by any examination made for or on behalf of Purchaser; PROVIDED,
HOWEVER, that there will be no such limitation with respect to any matters
involving fraud or intentional wrongdoing or intentional omission or for
Article 3 Breaches and that, instead of the time limitation set forth above,
(i) the applicable time limitations for claims involving Taxes shall coincide
with the applicable time limitations contained in the Code (including any
extensions thereof), or any other applicable local, state, federal, or
foreign Tax Law, and (ii) the applicable time limitations for claims relating
to the representations and warranties set forth in Section 4.19 shall
coincide with the applicable statutes of limitations (including any
extensions thereof) under the Code, ERISA or other applicable law.
11.3 SELLERS INDEMNIFICATION: NOTICE, PAYMENT AND DEFENSE OF
INDEMNIFICATION CLAIMS.
(a) NOTICE. If either (i) a claim is made or brought
by Purchaser as the result of a Breach resulting in Losses
to Purchaser and Purchaser reasonably believes that such
claim, if successful, would give rise to indemnification by
Sellers under SECTION 11.1, or (ii) Purchaser becomes aware
of facts or circumstances establishing that Purchaser has
experienced or incurred Losses or may experience or incur
Losses which will give rise to a right of indemnification
under SECTION 11.1, then Purchaser shall provide an
Indemnification Notice to Sellers as soon as reasonably
practicable, but in no event later than 30 days after
Purchaser has notice or acquires actual knowledge of such
claim (provided, that failure timely to give such an
Indemnification Notice will not limit Sellers'
indemnification obligations hereunder except to the extent
that the delay in giving, or failure to give, the
Indemnification Notice adversely affects Sellers' ability to
defend against the claim). To the extent reasonably
practicable, the Indemnification Notice will describe the
nature of the Breach giving rise to the claim and the Losses
resulting from such Breach, and will include any relevant
supporting documentation. If Sellers do not object within 30
days after receipt of an Indemnification Notice to the
propriety of (i) the indemnification claims described in the
Indemnification Notice as being subject to the right of
indemnification pursuant to SECTION 11.1 and (ii) the amount
of Losses specified in the Indemnification Notice, the
indemnification claims described in the Indemnification
Notice shall be a Permitted Indemnification Claim. If,
however, Sellers contest the propriety of an indemnification
claim described in an Indemnification Notice and/or the
amount of Losses alleged to be owed as a result of the
Breach forming the basis for the claim of indemnification,
then Sellers shall deliver to Purchaser within 30 days after
receipt of the Indemnification Notice, an Indemnification
Objection Notice detailing all specific objections Sellers
have with respect to the indemnification claims contained in
the Indemnification Notice, and such disputed issues will be
resolved pursuant to the dispute resolution procedures set
forth in SECTION 11.7. Any undisputed indemnification claims
contained in an Indemnification Notice shall be deemed to be
final and binding upon Sellers and shall constitute a
Permitted Indemnification Claim. If any disputed issues
ultimately are resolved pursuant to the dispute resolution
procedures in SECTION 11.7, and if such determination of the
disputed issues results in all or any portion of an
indemnification claim properly being subject to
indemnification pursuant to SECTION 11.7, such
indemnification claim or portion thereof shall be final and
binding upon Sellers and shall constitute a Permitted
Indemnification Claim.
(b) PAYMENT. Sellers shall pay to Purchaser the
entire amount of all Losses associated with any Permitted
Indemnification Claim within 60 days after such claim is
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determined to be a Permitted Indemnification Claim,
utilizing Holdback Shares or by payment in cash or in
another form of immediately available funds acceptable to
Purchaser as provided in SECTION 11.1(e). Purchaser shall
be entitled to set-off from time-to-time the amount of any
Permitted Indemnification Claim against the Holdback Shares
if not paid by Sellers in cash prior to the date payment of
any such Permitted Indemnification Claim is due; PROVIDED,
that nothing contained in this paragraph or elsewhere in
this Agreement will entitle Purchaser to receive more than
the Maximum Loss Amount for all Permitted Indemnification
Claims, regardless of when such Permitted Indemnification
Claims arise or are satisfied; PROVIDED FURTHER, HOWEVER,
there will be no such limitation with respect to any matters
involving fraud or intentional wrongdoing or intentional
omission or for Article 3 Breaches. If, as the result of
Permitted Indemnification Claims arising from matters
involving fraud, intentional wrongdoing, intentional
omission, or Article 3 Breaches, the Permitted
Indemnification Claims exceed the value of the Holdback
Shares, the Sellers shall promptly pay Purchaser the amount
of all Losses associated with the Permitted Indemnification
Claims which exceed the value of the Holdback Shares,
subject to the limitations on amount of claims contained in
SECTION 11.1.
(c) DEFENSE OF THIRD PARTY CLAIMS. If a third party
claim related to a Breach by Sellers is made or brought
against Purchaser, Purchaser, within 10 days of notice of
such claim, shall advise Sellers of such claim in writing,
discuss with Sellers the actions necessary to respond to
such claim, and give Sellers 30 days to determine whether
Sellers wish to defend such claim, and Sellers, at the
election of any or more of them, shall be entitled to assume
control of the defense of such claim, at such electing
Seller's or Sellers' own expense and with counsel selected
by Sellers and reasonably satisfactory to Purchaser, and to
settle or compromise any such claim; PROVIDED that Purchaser
at all times also shall have the right to participate fully
in the defense of any such claim at its own expense. During
the time provided to Sellers to assess whether Sellers wish
to assume the defense of the claim, Purchaser shall take all
appropriate steps to file an appropriate answer or otherwise
respond in order to preserve all available defenses.
Failure of Sellers to give Purchaser written notice of their
election to defend such claim within 30 days after receipt
of notice thereof from Purchaser shall be deemed a waiver by
Sellers of their right to defend such claim. If Sellers
shall elect not to assume the defense of such claim (or if
Sellers shall be deemed to have waived their right to defend
such claim by their failure to elect to defend such claim
within 30 days as set forth above), Purchaser shall have the
right, but not the obligation, to undertake the sole defense
of, and to compromise or settle, the claim on behalf, for
the account, and at the risk and expense of Sellers
(including without limitation the payment by Sellers of the
attorneys' fees of Purchaser); PROVIDED, HOWEVER, that if
Purchaser undertakes the sole defense of such claim on
behalf, for the account, and at the risk and expense of
Sellers, it shall reasonably defend such claim in good faith
and shall apprise Sellers from time to time as Purchaser
deems appropriate, or upon the request of Sellers, of the
progress of such defense. In the event that Purchaser
desires to settle a claim, Purchaser shall send a written
notice to Sellers of any proposed settlement or compromise,
which settlement or compromise Sellers may reject, in their
reasonable judgment, within 15 days after receipt of such
notice. If Sellers reject the proposed settlement,
Purchaser shall not proceed with the settlement so long as
Sellers pay Purchaser's reasonable legal fees and expenses
during the further progress of the dispute, and promptly
reimburse Purchaser for the amount of any
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judgment for which Purchaser is ultimately found liable,
consistent with the limits otherwise set forth herein, which
exceed the amount of Purchaser's portion of the proposed settlement
rejected by Sellers. If one or more of Sellers assumes the defense
of any such claim, the obligation and authority of such
Sellers hereunder as to such claim shall include taking
reasonable steps necessary in the defense or settlement of
such claim. Sellers, in the defense of any such claim,
shall not consent to the entry of any judgment or enter into
any settlement (except with the prior written consent of
Purchaser) which does not include as an unconditional term
thereof the giving by the claimant to Purchaser of a release
from all liability in respect of such claim (which release
shall exclude only any obligations incurred in connection
with any such settlement). If the claim is one that cannot
by its nature be defended solely by Sellers, then Purchaser
shall make available, at Sellers' expense, all information
and assistance that Sellers reasonably may request.
11.4 INDEMNIFICATION BY PURCHASER.
(a) Subject to subsections (b) and (c) below,
Purchaser agrees to indemnify Sellers and to hold Sellers
(or any of them) harmless from and against any Loss, which
Sellers (or any of them) may suffer, sustain or become
subject to, as a result of the Breach by Purchaser.
(b) The indemnification provided in SECTION 11.4(a) is
subject to the following limitations:
(i) Purchaser shall be obligated pursuant to this
SECTION 11.4 to honor an indemnity claim of Sellers for
Losses (x) only if, from the Closing Date to the date
of such claim for indemnification, the aggregate amount
of Losses, less the aggregate amount of Recoveries,
exceeds the Deductible Amount and (y) then only to the
extent of such excess amount, not to exceed the Maximum
Loss Amount; and
(ii) Purchaser will not be liable for any Losses
arising from any Breach unless an Indemnification
Notice specifying the nature of the Breach and of the
Losses for which payment or reimbursement is sought is
given by Sellers to Purchaser prior to the expiration
of the applicable representation or warranty as
specified in SECTION 11.5.
(c) The maximum Losses for which Purchaser will be
liable under this Agreement, whether for one or more
Breaches, will be the Maximum Loss Amount; PROVIDED,
HOWEVER, that the Maximum Loss Amount will not be in effect
for Losses resulting from Breaches that are the result of
fraudulent or intentional wrongdoing on the part of
Purchaser, if Purchaser acknowledges fraudulent or
intentional wrongdoing or any Tribunal having jurisdiction
determines that there has been fraudulent or intentional
wrongdoing on the part of Purchaser.
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(d) After Purchaser has acknowledged in writing that
it is indemnifying Sellers with respect to any claim
involving Litigation, Purchaser will be entitled to assume
the defense of any such Litigation; PROVIDED, that Sellers
may at their election participate (at their own expense) in
such defense to the extent that in their sole discretion
they believe that such Litigation will materially affect
their ongoing business.
11.5 SURVIVAL OF PURCHASER'S REPRESENTATIONS, WARRANTIES AND
COVENANTS. The representations, warranties and covenants of
Purchaser set forth in ARTICLE 5 of this Agreement or in any
certificate or other writing delivered to Sellers pursuant to
this Agreement will survive the Closing and the consummation of
the transactions contemplated hereby for a period ending on the
Final Payment Date (and will then terminate and be of no further
force or effect) and will not be affected by any examination made
for or on behalf of Sellers; PROVIDED, HOWEVER, that there will
be no such limitation with respect to any matters involving fraud
or intentional wrongdoing or intentional omission.
11.6 PURCHASER INDEMNIFICATION: NOTICE, PAYMENT AND DEFENSE
OF INDEMNIFICATION CLAIMS.
(a) NOTICE. If either (i) a claim is made or brought
by Sellers as the result of a Breach resulting in Losses to
Sellers and Sellers reasonably believe that such claim, if
successful, would give rise to indemnification by Purchaser
under SECTION 11.4, or (ii) Sellers become aware of facts or
circumstances establishing that Sellers have experienced or
incurred Losses or may experience or incur Losses which will
give rise to a right of indemnification under SECTION 11.4,
then Sellers shall provide an Indemnification Notice to
Purchaser as soon as reasonably practicable, but in no event
later than 30 days after Sellers have notice or acquire
actual knowledge of such claim (provided, that failure
timely to give such an Indemnification Notice will not limit
Purchaser' indemnification obligations hereunder except to
the extent that the delay in giving, or failure to give, the
Indemnification Notice adversely affects Purchaser's ability
to defend against the claim). To the extent reasonably
practicable, the Indemnification Notice will describe the
nature of the Breach giving rise to the claim, the Losses
resulting from such Breach, and will include any relevant
supporting documentation. If Purchaser does not object
within 30 days after receipt of an Indemnification Notice to
the propriety of (i) the indemnification claims described in
the Indemnification Notice as being subject to the right of
indemnification pursuant to SECTION 11.4 and (ii) the amount
of Losses specified in the Indemnification Notice, the
indemnification claims described in the Indemnification
Notice shall be deemed to be a Permitted Indemnification
Claim. If, however, Purchaser contests the propriety of an
indemnification claim described in an Indemnification Notice
and/or the amount of Losses alleged to be owed as a result
of the Breach forming the basis for the claim of
indemnification, then Purchaser shall deliver to Sellers
within 30 days after receipt of the Indemnification Notice,
an Indemnification Notice detailing all specific objections
Purchaser has with respect to the indemnification claims
contained in the Indemnification Notice, and such disputed
issues will be resolved pursuant to the dispute resolution
procedures set forth in SECTION 11.7. Any undisputed
indemnification claims contained in an Indemnification
Notice shall be deemed to be final and binding upon
Purchaser and shall constitute a Permitted Indemnification
Claim. If any disputed issues ultimately are resolved
pursuant to the dispute resolution procedures in SECTION
11.7, and if such determination of the disputed
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issues results in all or any portion of an indemnification claim
properly being subject to indemnification pursuant to
SECTION 11.7, such indemnification claim or portion thereof
shall be final and binding upon Purchaser and shall
constitute a Permitted Indemnification Claim.
(b) PAYMENT. Purchaser shall pay to Sellers the
entire amount of all Losses associated with any Permitted
Indemnification Claim within 60 days after such claim is
determined to be a Permitted Indemnification Claim. All
such payments shall be made, at the option of Purchaser, (i)
by delivery to Sellers of such number of shares of AMNEX
Common Stock valued at their market value at the date of
such payment as is equal to the amount of a Permitted
Indemnification Claim or (ii) in United States dollars by
delivery of certified or cashier's checks or via wire
transfer to bank accounts designated by Sellers. Nothing
contained in this paragraph or elsewhere in this Agreement
will entitle Purchaser to receive more than the Maximum Loss
Amount for all Permitted Indemnification Claims, regardless
of when such Permitted Indemnification Claims arise or are
satisfied.
(c) DEFENSE OF THIRD PARTY CLAIMS. If a third party
claim related to a Breach by Purchaser is made or brought
against Sellers, Sellers, within 10 days of notice of such
claim, shall advise Purchasers of such claim in writing,
discuss with Purchaser the actions necessary to respond to
such claim, and give Purchaser thirty days to determine
whether Purchaser wishes to defend such claim, at
Purchaser's own expense and with counsel selected by
Purchaser and reasonably satisfactory to Sellers; PROVIDED
that Sellers at all times also shall have the right to
participate fully in the defense of any such claim at their
own expense. During the time provided to Purchaser to assess
whether Purchaser wishes to assume defense of the claim,
Sellers shall take all appropriate steps to file an
appropriate answer or otherwise respond in order to preserve
all available defenses. Failure of Purchaser to give
Sellers written notice of its election to defend such claim
within 30 days after receipt of notice thereof from Sellers
shall be deemed a waiver by Purchaser of its right to defend
such claim. If Purchaser shall elect not to assume the
defense of such claim (or if Purchaser shall be deemed to
have waived its right to defend such claim by its failure to
elect to defend such claim within 30 days as set forth
above), Sellers shall have the right, but not the
obligation, to undertake the sole defense of, and to
compromise or settle, the claim on behalf, for the account,
and at the risk and expense of Purchaser (including without
limitation the payment by Purchaser of the attorneys' fees
of Sellers); PROVIDED, HOWEVER, that if Sellers undertake
the sole defense of such claim on behalf, for the account,
and at the risk and expense of Purchaser, it shall
reasonably defend such claim in good faith and shall apprise
Purchaser from time to time as Sellers deem appropriate, or
upon the request of Purchaser, of the progress of such
defense. If Purchaser assumes the defense of such claim, the
obligation of Purchaser hereunder as to such claim shall
include taking reasonable steps necessary in the defense or
settlement of such claim. Purchaser, in the defense of such
claim, shall not consent to the entry of any judgment or
enter into any settlement (except with the PRIOR written
consent of Sellers) which does not include as an
unconditional term thereof the giving by the claimant to
Sellers of a release from all liability in respect of such
claim (which release shall exclude only any obligations
incurrred in connection with any such settlement). In the
event Sellers desire to settle a claim, Sellers shall send a
written notice to Purchaser of any proposed settlement or
compromise, which settlement or compromise Purchaser may
reject, in its reasonable judgment within 15 days after
receipt of such notice. If Purchaser
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rejects the proposed settlement, Sellers shall not proceed with
the Settlement so long as Purchaser pays Sellers' reasonable
legal fees during the further progress of the dispute, and
promptly reimburse Sellers for the amount of any judgment for
which Sellers are ultimately found liable, which exceeds the
amount of Sellers' portion of the proposed settlement rejected by
Purchaser. If the claim is one that cannot by its nature be
defended solely by Purchaser, then Sellers shall make available,
at Purchaser's expense, all information and assistance that
Purchaser reasonably may request.
11.7 ARBITRATION. Any controversy or claim arising out of
or relating to the indemnification provisions of this Agreement,
including the right to or amount of indemnity, shall be settled
by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") by three
arbitrators. Each of Sellers and Purchaser shall appoint one
arbitrator, who shall be an impartial person. If a party fails to
appoint an arbitrator within 30 days from the date a demand to
arbitrate was made, the AAA shall make the appointment of the
arbitrator. The two arbitrators thus appointed shall appoint the
third arbitrator, who shall be an impartial person. If said two
arbitrators fail to appoint the third arbitrator within 60 days
from the date a demand to arbitrate was made, the AAA shall make
the appointment of the third arbitrator, who shall be an
impartial person. Should any of the arbitrators appointed die,
resign, refuse or become unable to act before a decision is
given, the vacancy shall be filled by the method set forth in
this clause for the original appointment. The arbitration shall
be held in New York, New York. A decision by the arbitrators on
the validity and amount of any indemnification claim shall be
final and binding on all the parties. The arbitrators shall
execute and deliver to the respective parties the arbitration
panel's decision in writing. Judgment upon the award, if any,
rendered by the arbitrators (which must be expressed in United
States Dollars) may be entered in any court having jurisdiction
thereof. In any award, the arbitrators shall assess the
arbitration costs and expenses, including, without limitation,
attorneys' fees of the parties, in a manner deemed equitable by
the arbitrators, taking into account the arbitration decision.
11.8 NON-INTERFERENCE INDEMNIFICATION. CNSI agrees to hold
Purchaser harmless from and against any and all losses, costs,
claims, damages, expenses and liabilities, including without
limitation reasonable attorneys' fees and costs, resulting either
directly or indirectly from claims of any third party who may
allege that CNSI's execution of this Agreement or any other
related agreements with Purchaser has interfered with or violated
any contract right between themselves and CNSI. CNSI represents
and warrants that no such condition exists nor is anticipated and
that it is free to enter into the transactions contemplated by
this Agreement.
ARTICLE 12
TERMINATION; WAIVER
12.1 TERMINATION. This Agreement may be terminated, and the
transactions contemplated by this Agreement may be abandoned, at
any time prior to the Closing, as follows and in no other manner:
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(a) MUTUAL CONSENT. By the mutual consent of
Purchaser and Sellers;
(b) BY PURCHASER. By Purchaser at the Closing Date if
the sum of (i) Negative Working Capital and (ii) Other
Amounts Due is determined by Purchaser in its good faith
estimation on the Closing Date pursuant to SECTION 6.8 of
this Agreement to be in excess of $4,700,000;
(c) BY PURCHASER OR SELLERS: CONDITION PRECEDENT. By
Purchaser or Sellers, upon written notice to the other, if
the conditions to the obligations of such terminating party
to consummate the transaction, in the case of the Sellers,
as provided in ARTICLE 8 or, in the case of Purchaser, as
provided in ARTICLE 9, were not satisfied on the Closing
Date unless the failure of the condition is the result of
the material breach of this Agreement by the party seeking
to terminate;
(d) BY PURCHASER OR SELLERS: REPRESENTATIONS,
WARRANTIES AND COVENANTS. By Purchaser, on the one hand, or
Sellers, on the other, if (i) any representation or warranty
of the other hereunder shall not have been true and correct
in all material respects at the time at which made or as of
the Closing Date, or (ii) default shall be made by the other
in the due and timely observance or performance of any of
its covenants and agreements herein contained, but in such
event only if such representation or warranty cannot be made
true and correct or such default cannot be cured on or prior
to the earlier of 30 days after the non-defaulting or
non-breaching party notifies the other in writing of such
default or breach, specifying the nature thereof, unless
such date is extended by mutual agreement of Purchaser and
Sellers.
No termination of this Agreement shall affect the liability of
any party hereto for any breach hereof arising at, prior to or
out of such termination. Any public announcement of the
termination of this Agreement shall be made only by means of a
press release issued jointly by Purchaser and Sellers unless
otherwise required by Law.
12.2 WAIVER. At any time at or prior to the Closing,
Purchaser, on the one hand, or Sellers, on the other, may
(i) extend the time for the performance of any of the obligations
or other acts of the other party hereto, (ii) waive any
inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, or
(iii) waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party.
12.3 DEPOSIT AND BREAKUP FEE.
(a) As evidence of its good faith in entering into
this Agreement, Purchaser will deliver to CNSI on the
Effective Date a warrant for the purchase of 50,000
unregistered shares of AMNEX Common Stock, exercisable at a
price of $0.01 per share. The warrant will become
exercisable by CNSI if Sellers duly terminate this Agreement
pursuant to the provisions of SECTION 12.1(d); otherwise
such warrant will be delivered to Purchaser at the
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Closing or after the expiration of Seller's right to terminate
pursuant to SECTION 12.1 (d). In any event, the warrant
shall expire on July 1, 1997.
(b) As evidence of Sellers' good faith in entering
into this Agreement, CNSI will deliver to Purchaser on the
Effective Date its non-interest bearing demand promissory
note issued to the order of Purchaser in the principal
amount of $200,000. The demand note will be secured by the
assets of CNSI and also by the personal guarantee of Robert
A. Rowland, provided, that such guarantee may be enforced
against Robert A. Rowland only if Purchaser is unable to
obtain full payment of the note from CNSI and from the
assets of CNSI within 12 months of Purchaser's written
demand for payment on such note. Purchaser shall be
entitled to exercise its rights under the promissory note
only if Purchaser duly terminates this Agreement pursuant to
the provisions of SECTION 12.1(d); otherwise such note will
be canceled and delivered to CNSI at the Closing or after
the expiration of Purchaser's right to terminate pursuant to
SECTION 12.1(d).
ARTICLE 13
REGISTRATION RIGHTS OF SELLERS
Purchaser agrees that Sellers, and each of them, shall have
the securities registration rights set forth below in this
ARTICLE 13. For purposes of this ARTICLE 13 only, the term
"REGISTRABLE SECURITIES" shall mean any shares of AMNEX Common
Stock owned by a Seller which such Seller acquired pursuant to
this Agreement, and any shares of AMNEX Common Stock owned by
such Seller which shares such Seller has acquired upon exercise
of the Warrants; provided, however, that if such shares of AMNEX
Common Stock owned by a Seller may be sold, in the opinion of
Counsel to Purchaser, 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.
13.1 SCHEDULED REGISTRATION RIGHTS. Purchaser agrees that
it will use its best efforts to cause one-half of the Registrable
Securities to be registered for sale under the Securities Act,
and under the Securities Laws of a sufficient number of the
various states (to the extent that exemptions from registration
are not available) to reasonably assure that the offering can be
sold, approximately twelve months after the Closing Date.
Purchaser also agrees that it will use its best efforts to cause
the remaining Registrable Securities (including any Registrable
Securities that were registered but not sold in the previous
offering) to be registered approximately twenty-four months after
the Closing Date.
13.2 PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever Purchaser proposes
to register any of its securities under the Securities Act
for the sale by it for cash (which Purchaser may elect to do
in its sole discretion) and the registration form to be used
may be used for the registration of Registrable Securities
(a "PIGGYBACK REGISTRATION"), Purchaser will give written
notice to all holders of Registrable Securities of its
intention to effect such a registration at least 20 days
prior to the proposed filing date and will include in such
registration the Registrable Securities with respect to
which Purchaser has received written requests for inclusion
therein
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within 10 days prior to the proposed filing date.
Sellers' right to participate in a Piggyback Registration
shall not be available with respect to any offering of
securities by Purchaser pursuant to an employee benefit
plan, or in a transaction pursuant to Rule 145 promulgated
under the Securities Act or any offering required to be
registered on a registration form that does not permit the
registration of shares to be sold by a selling shareholder.
(b) PRIORITY ON PIGGYBACK REGISTRATIONS. If Purchaser
proposes to register a public offering of AMNEX Common Stock
and the managing underwriter or underwriters advise
Purchaser in writing that in their opinion the number of
shares of Registrable Securities requested to be included in
such registration exceeds the number that can be sold in
such offering or the number that can be sold without
materially lowering the price per share, then at the option
of such managing underwriter or underwriters, (i) the number
of shares of Registrable Securities to be added to the
registration statement shall be reduced (to zero if
necessary), and/or (ii) the holders of Registrable
Securities shall delay the sale of the shares of Registrable
Securities included in the registration statement until the
expiration of the ninety (90) day period commencing with the
effective date of the registration statement.
13.3 EXPENSES OF REGISTRATION. All expenses ("REGISTRATION
EXPENSES") incurred in effecting any registration pursuant to
this Agreement, including, without limitation, all registration,
qualification, and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for Purchaser, blue sky fees
and expenses, and expenses of any regular or special audits
required by any such registration shall be borne by Purchaser;
PROVIDED, HOWEVER, that all underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of
the Registrable Securities shall be borne by the holders of such
securities PRO RATA on the basis of the number of shares of
securities so registered and actually sold on their behalf. Each
of the holders of Registrable Securities requesting registration
of their securities shall pay all fees and disbursements of any
individual counsel retained by such holder.
13.4 SELECTION OF UNDERWRITERS. In any public offering of
shares of AMNEX Common Stock, Purchaser shall have the sole right
to select the managing underwriter(s) and the other underwriters
for the offering.
13.5 MODIFICATION AND TERMINATION OF REGISTRATION RIGHTS.
The terms of the registration rights granted to Sellers by this
ARTICLE 13 may be amended at any time by written agreement
between Purchaser on the one hand and the holders of seventy
percent (70%) or more of the Registrable Securities on the other
hand, and any such amendment thereafter will be binding upon
Purchaser and upon all holders of Registrable Securities. The
registration rights provided by SECTION 13.1 of this ARTICLE 13
shall terminate after the holders of Registrable Securities have
been afforded at least two full and unconditional opportunities
to have their Registrable Securities registered and sold in a
registered public offering by Purchaser in the United States. The
holders of Registrable Securities shall be deemed to have been
afforded such a full and unconditional opportunity whenever (1)
Purchaser shall have prepared and filed a registration statement
and included therein all Registrable Securities required to be
included pursuant to SECTION 13.1 as part of the offering, and
(2) the registration statement covering the Registrable
Securities shall have been declared effective by the SEC.
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13.6 INDEMNIFICATION WITH RESPECT TO REGISTRATION OF
REGISTRABLE SECURITIES AND SALES OF SUCH SECURITIES.
(a) Purchaser agrees to indemnify, to the extent
permitted by law, each holder of Registrable Securities, its
officers and directors and each Person who Controls such
holder (within the meaning of the Securities Act) against
all losses, claims, damages, liabilities and expenses caused
by any untrue or alleged untrue statement of material fact
provided by Purchaser contained in any registration
statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission by
Purchaser of a material fact required to be stated therein
or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in any
information furnished in writing to Purchaser by any such
holder expressly for use therein or by any such holder's
omission of a material fact or any holder's failure to
deliver a copy of the registration statement or prospectus
or any amendments or supplements thereto after Purchaser has
furnished such holder with a sufficient number of copies of
the same. In connection with an underwritten offering,
Purchaser and all sellers of Registrable Securities will
indemnify such underwriters, their officers and directors
and each Person who controls such underwriters (within the
meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the
holders of Registrable Securities.
(b) In connection with any registration statement in
which a holder of Registrable Securities is participating,
each such holder will furnish to Purchaser in writing such
information and affidavits as Purchaser reasonably requests
for use in connection with any such registration statement
or prospectus and, to the extent permitted by law, will
indemnify Purchaser, its directors and officers and each
person who controls Purchaser (within the meaning of the
Securities Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or
alleged untrue statements or material fact contained in the
registration statement, prospectus or preliminary prospectus
or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to
be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information
or affidavit so furnished in writing by such holder or is
caused by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or
supplements thereto after Purchaser has furnished the holder
with a sufficient number of copies of the same; PROVIDED
that the obligation to indemnify will be several, not joint
and several, among such holders of Registrable Securities
and the liability of each such holder of Registrable
Securities will be in proportion to and limited to the net
amount received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder
will (i) give prompt written notice to the indemnifying
party or claim with respect to which it seeks
indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such
indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such
claim with counsel reasonably
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satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for
any settlement made by the indemnified party without its
consent (but such consent will not be unreasonably
withheld). An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying
party with respect to such claims unless in the reasonable
judgment of any indemnified party concurred in by counsel
for the indemnified party a conflict of interest may exist
between such indemnified party and any other such
indemnified parties with respect to such claim.
(d) The indemnification provided for under this
Agreement will remain in full force and effect regardless of
any investigation made by or on behalf of the indemnified
party or any officer, director or controlling Person of such
indemnified party and will survive the transfer of
securities.
13.7 PARTICIPATION IN UNDERWRITTEN REGISTRATION. No person
may participate in any registration hereunder which is
underwritten unless such Person (a) agrees in writing to sell
such Person's securities on the basis provided in any
underwriting arrangements approved by the Purchaser and (b)
completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
13.8 TRANSFERS OF REGISTRATION RIGHTS. Whenever a Seller
assigns, sells, transfers or otherwise disposes of his
Registrable Securities to another person or entity, the rights of
the Seller under this ARTICLE 13 to require the registration of
such securities may be transferred along with the securities to
such other person, and that person may likewise transfer such
registration rights to a subsequent transferee of the securities,
but the number of times such rights may be transferred with
respect to any particular shares shall be limited to two.
13.9 RESTRICTIONS ON SALE. Each Seller agrees not to offer,
sell, or otherwise dispose of, directly or indirectly, any AMNEX
Common Stock, any right to acquire AMNEX Common Stock, or any
securities exercisable for or convertible into AMNEX Common
Stock, which are beneficially owned (as defined in the rules and
regulations of the Securities and Exchange Commission) by such
Seller within the period commencing on the date of filing of a
registration statement for the public offering of AMNEX Common
Stock (the "OFFERING") and continuing until 180 days following
the commencement date of the Offering (which commencement date
will be deemed to be the date of the final Prospectus used in
connection with the Offering), other than with the prior written
consent of Purchaser or to the extent that such Seller's shares
of AMNEX Common Stock are included for sale in such registration
statement.
ARTICLE 14
OTHER MATTERS
14.1 BOARD POSITION. In consideration of the ownership by
Sellers of AMNEX Common Stock, the Sellers (by decision of the
holders of a majority in interest of the issued and outstanding
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AMNEX Common Stock acquired by the Sellers pursuant to this
Agreement) shall have the right to nominate, at Purchaser's next
meeting of shareholders at which directors are elected following
the Closing Date, one member to join the Purchaser's Board of
Directors which presently consists of 5 directors. For the
period of two years following the Closing Date, Sellers shall be
entitled to nominate such number of Directors of Purchaser as
will approximately represent (rounding down to the next lower
number), by reference to the number of shares of AMNEX Common
Stock then held by them which are not saleable either pursuant to
an effective registration statement or Rule 144, their
proportionate share of the total number of shares of AMNEX Common
Stock then issued and outstanding. The nominee(s) of the Sellers
shall initially be Robert A. Rowland and any subsequent or
additional nominee of Sellers must meet Purchaser's reasonable
standards for its Board of Directors members, which standards are
consistent with the standards of other publicly held companies of
similar size.
14.2 TAX-FREE REORGANIZATION. Purchaser agrees to exert
commercially reasonable efforts after the Effective Date to
cooperate with Sellers and the CNSI Companies and take such steps
as may be necessary (including, without limitation, the formation
of a wholly-owned subsidiary to engage in a business combination
with CNSI) to enable the transactions contemplated by this
Agreement to qualify, in whole or in part, as a Tax-free
or Tax-deferred transaction under Section 368 of the Code (a "TAX-FREE
TRANSACTION"); PROVIDED, HOWEVER, that this SECTION 14.2 shall
not require Purchaser to (i) incur any Tax risk or more than an
insignificant potential Tax detriment or make any fundamental
change in its corporate structure or (ii) incur any additional
expense (including, without limitation, the fees of attorneys and
accountants) in structuring and documenting the transactions
contemplated by this Agreement as a Tax-Free Transaction.
Purchaser does not and will not make any representation or
warranty or give any assurance or guarantee as to the tax-free or
Tax-deferred nature of any structure by which the transactions
contemplated by this Agreement are consummated.
14.3 WARN ACT. Sellers and Purchaser agree that for
purposes of the Worker Adjustment and Retraining Notification Act
("WARN ACT"), the Closing will be the "Effective Date" as such
term is used in the WARN Act. Purchaser agrees that it will be
responsible for any notification required under the WARN Act at
and after the Closing and that Sellers will have no obligation
for any such notification prior to the Closing.
ARTICLE 15
CERTAIN DEFINED TERMS
15.1 CERTAIN DEFINITIONS. As used in this Agreement, the
following terms shall have the meanings set forth below:
AAA is defined in SECTION 11.7.
ACCOUNTS RECEIVABLE. Accounts receivable, notes receivable,
bonds, or other evidences of rights to receive a payment
appearing as assets on the books of the CNSI Companies or
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customarily required to be reflected as assets in balance sheets
of the CNSI Companies prepared in accordance with GAAP,
indicating money owed to the CNSI Companies.
ADJUSTMENT NOTE is defined in SECTION 16.15.
ADJUSTMENT TRANSACTION is defined in SECTION 16.15.
AFFILIATE. With respect to a Person, any other Person who
or which directly or indirectly owns or Controls, is under common
ownership or Control with, or is owned or Controlled by, such
Person.
AGREEMENT. This Stock Purchase Agreement, including all
Schedules and Exhibits hereto, as it may be renewed, extended,
restated, amended, modified or supplemented from time to time.
ALLOWED AMOUNT is defined in SECTION 2.2(a).
AMNEX COMMON STOCK is defined in SECTION 2.2(a).
ARTICLE 3 BREACH is defined in SECTION 11.1(a).
AUDITED FINANCIAL STATEMENTS is defined in SECTION 4.5(a).
B. CROMWELL is defined in the initial paragraph.
B. CROMWELL CNSI SHARES is defined in PARAGRAPH E of the
Recitals.
BREACH. Any of the following: (i) a breach by Purchaser or
Sellers, as the case may be, of any representation, warranty or
covenant contained in ARTICLES 3 AND 4, as to Sellers, or ARTICLE
5, as to Purchaser; (ii) the failure of Sellers to fulfill the
conditions to the obligations of Purchaser to consummate the
transactions contemplated by this Agreement that are set forth in
SECTION 9.1(r); (iii) the discovery of liabilities of the CNSI
Companies that do not appear on the Financial Statements; and
(iv) liabilities arising out of matters disclosed on SCHEDULE
4.6; PROVIDED, that liabilities and/or damages arising out of the
following matters shall not be deemed to constitute Breaches (and
the amount of any such liabilities and/or damages shall not be
deemed to constitute Losses): (i) the FCC Show Cause Order and
other regulatory compliance matters identified in SCHEDULE 4.13
(A)(1)(II)(b), (B)(1), (2), and (6) and (ii) compliance and
arbitration matters related to the Settlement Agreement in the
Teleplus Litigation as described in SCHEDULE 4.14 (1).
BUSINESS DAY. Any day that is not a Saturday or Sunday or a
day on which banks are authorized to be closed in the State of
Texas.
CERCLA. The Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and as in
effect on the date hereof.
CHILE INTEREST is defined in SECTION 4.6(b).
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CLAIM. Any and all claims, demands, actions, causes of
action, suits, proceedings, administrative proceedings, losses,
judgments, decrees, debts, damages, assessments, liabilities,
court costs, attorneys' fees and any other expenses.
CLOSING. The consummation of the transactions to take place
as described in ARTICLE 10.
CLOSING BALANCE SHEET. The balance sheet of the CNSI
Companies prepared in accordance with GAAP as of the Closing
Date.
CLOSING ESTIMATE is defined in SECTION 6.8
CLOSING DATE. The date on which the Closing occurs.
CLOSING TIME. The time on the Closing Date at which the
Closing occurs. All events that are to occur at the Closing Time
shall, for all purposes, be deemed to occur simultaneously,
except to the extent, if at all, that a specific order of
occurrence is otherwise described.
CNI is defined in the initial paragraph.
CNM is defined in the initial paragraph.
CNSI is defined in the initial paragraph.
CNSI BENEFIT ARRANGEMENT is defined in SECTION 4.19(a).
CNSI BENEFIT PLAN is defined in SECTION 4.19(a).
CNSI COMPANY is defined in the initial paragraph.
CNSI ERISA AFFILIATE is defined in SECTION 4.19(a).
CNSI ERISA PENSION PLAN is defined in SECTION 4.19(a).
CNSI ERISA WELFARE PLAN is defined in SECTION 4.19(a).
CNSI MULTIEMPLOYER PLAN is defined in SECTION 4.19(a).
CNSI SHAREHOLDERS AGREEMENT is defined in SECTION 4.4.
CNSI SHARES is defined in PARAGRAPH J of the Recitals.
CODE. The Internal Revenue Code of 1986, as amended and in
effect on the date of this Agreement.
CONFIDENTIAL INFORMATION is defined in SECTION 16.17.
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CONSENT. Any consent, approval, permit, notice, action,
authorization or giving of notice of or to any Person not a party
to this Agreement.
CONTRACT. With respect to any Person, any contract,
agreement, understanding or other instrument or obligation
(whether oral or written, pending or executory) to which such
Person is a party or by which such Person or such Person's
properties or assets are or may be bound.
CONTROL. Generally, the power to direct the management or
affairs of a Person.
COUNSEL TO SELLERS. Kuperman, Orr, Mouer & Albers, P.C.
Attn: Roy W. Mouer, Esq., 100 Congress Avenue, Suite 1400,
Austin, Texas 78701.
COUNSEL TO CNSI COMPANIES. Locke Purnell Rain Harrell, P.C.
Attn: Jane A. Matheson, Esq., and Daniel N. Matheson, Esq., 515
Congress Avenue, Suite 2500, Austin, Texas 78701.
COUNSEL TO PURCHASER. Stroock & Stroock & Lavan, Attn:
Susan O. Posen, Esq., 7 Hanover Square, New York, New York 10004.
D. ROWLAND is defined in the initial paragraph.
D. ROWLAND CNSI SHARES is defined in PARAGRAPH B of the
Recitals.
DEBTOR RELIEF LAWS. The Bankruptcy Code of the United
States of America and all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, fraudulent transfer or
conveyance, suspension of payments or similar Laws from time to
time in effect affecting the Rights of creditors generally.
DEDUCTIBLE AMOUNT. $75,000.
DEED OF RELEASE. The Deed of Release dated as of January
15, 1996, between Spectrum Services and CNI, pursuant to which
Spectrum Services and CNI have compromised and settled certain
matters related to a proposed joint venture between Spectrum
Services and CNI.
EFFECTIVE DATE. The date this Agreement is fully executed
and delivered, as set forth in the initial paragraph of this
Agreement.
EMPLOYEE. Any current employee, former employee or retired
employee (and any employee on disability or leave of absence) of
any CNSI Company.
EMPLOYEE SEPARATION COSTS. Any and all separation costs,
termination costs, benefits, consideration for non-competition
agreements, accrued vacation costs and other payments payable to
any employee of the CNSI Companies upon the termination of such
employee's employment at or after the Closing Date (including
those Employee Separation Costs referred to in SECTION 16.16).
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ENVIRONMENTAL LAWS. Any Laws relating to (i) emissions,
discharges, releases, threatened releases or the presence of
pollutants, contaminants, toxic materials, waste, Hazardous
Substances or other substances into or in the environment,
including, but not limited to, ambient air, surface water,
groundwater, publicly owned treatment works, septic systems or
land; (ii) the use, treatment, storage, disposal, handling,
manufacturing, sale, transportation or shipment of any Hazardous
Substance, toxic materials, waste, material, substances, products
or by-products as defined in CERCLA; or (iii) otherwise relating
to the pollution or protection of health, safety or environment.
EQUITY INTEREST is defined in SECTION 4.2(a).
ERISA. The Employee Retirement Income Security Act of 1974,
as amended and in effect on the date of this Agreement.
ESCROW AGENT is defined in SECTION 10.3(a).
EXHIBIT. An exhibit attached to this Agreement unless
otherwise specified.
FCC. The Federal Communications Commission of the United
States, or any successor Tribunal.
FEI is defined in SECTION 9.1(r).
FINAL CLOSING ADJUSTMENT is defined in SECTION 6.8.
FINAL CLOSING PAYMENT is defined in SECTION 6.8.
FINAL RELEASE DATE is defined in SECTION 2.2(d).
FINANCIAL STATEMENTS is defined in SECTION 4.5(a).
FOREIGN TRIBUNAL. Any Tribunal in any jurisdiction other
than the United States and other than any federal, state, or
local jurisdiction within the United States.
FORM 10-K is defined in SECTION 3.4(b).
GAAP. U.S. generally accepted accounting principles, as in
effect on the date of any statement, report or determination that
purports to be, or is required to be, prepared or made in
accordance with GAAP. All references herein to financial
statements prepared in accordance with GAAP shall mean in
accordance with GAAP consistently applied throughout the periods
to which reference is made.
GOVERNMENTAL ENTITY shall mean any governmental entity,
department, commission, board, agency or instrumentality, whether
federal, state or local, and whether domestic or foreign
(including any Tribunal).
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HAZARDOUS SUBSTANCE. Hazardous substance as defined in
CERCLA, RCRA or any similar Law adopted by a United States
Tribunal, or any petroleum or petroleum based substance, natural
gas or any other hazardous, toxic or noxious pollutant, material
or substance.
HOLDBACK SHARES is defined in SECTION 2.2(a).
HSR. The Hart Scott Rodino Antitrust Improvements Act of
1976 and the rules and regulations promulgated thereunder.
INDEBTEDNESS. With respect to any Person, all indebtedness,
liabilities and obligations, contingent or otherwise, which in
accordance with GAAP would be required to be presented upon such
Person's balance sheet as liabilities, but in any event including
liabilities secured by any Lien existing on property owned or
acquired by such Person or a subsidiary thereof, whether or not
the liability secured thereby shall have been assumed by or shall
otherwise be the Person's legal liability, capitalized lease
obligations and all guarantees, endorsements and other contingent
obligations in respect of Indebtedness of other Persons.
INDEMNIFICATION NOTICE. A written notice from Purchaser or
Sellers, as the case may be, of a claim of indemnification under
the indemnification provisions of ARTICLE 11.
INDEMNIFICATION OBJECTION NOTICE. A written notice from
Purchaser or Sellers, as the case may be, objecting to a claim
for indemnification by the other party (or parties).
INFUSED FUNDS is defined in PARAGRAPH L of the Recitals.
INITIAL RELEASE DATE is defined in SECTION 2.2(c).
IRS. The U.S. Internal Revenue Service or any successor
Tribunal.
KEY EMPLOYEES. Any person receiving over $100,000 annually
in compensation from any of the CNSI Companies.
KNOWHOW LICENSE AGREEMENT. The Knowhow License Agreement
dated as of January 15, 1996, between Spectrum and CNI, pursuant
to which CNI is licensing certain Intellectual Property to
Spectrum.
LAW. Any domestic, foreign or international law, treaty,
ordinance, statute, rule or regulation of any Tribunal or any
Order.
LIEN. With respect to any properties or assets, any
mortgage, pledge, hypothecation, assignment, security interest,
lien, Tax lien, assessment, lease, sublease, adverse claim, levy,
charge, liability or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind
or character whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as
any of the foregoing, and the filing of, or agreement to give,
any
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financing statement under the Uniform Commercial Code or
comparable Law of any jurisdiction) in respect of such properties
or assets.
LITIGATION. Any action, proceeding, claim, lawsuit or
investigation conducted or threatened by or before any Tribunal.
LOSS. Any loss, liability, deficiency, damage or expense
(including reasonable attorneys' fees and expenses, but excluding
lost profits and consequential damages) which Purchaser or
Sellers may suffer, sustain or become subject to, as a result of
the Breach by the other party (or parties).
MAILING is defined in SECTION 16.1.
MARKET VALUE. The average of the closing price of a share
of AMNEX Common Stock for the 60 trading days immediately
preceding the Effective Date.
MATERIAL ADVERSE EFFECT OR MATERIAL ADVERSE CHANGE. Any
adverse effect or change which would have an adverse effect or
change individually in the amount of $25,000, or, in the
aggregate, in excess of $100,000 on the business, operations,
affairs, condition (financial or otherwise), results of
operations, properties, assets, liabilities or prospects of any
Person.
MATERIAL ADVERSE EVENT. Any set of one or more
circumstances or events which, individually or collectively,
reasonably would be expected to result in (a) a Material Adverse
Effect, (b) a Material Adverse Change, or (c) an adverse effect
upon the validity or enforceability of this Agreement or any
other Transaction Paper.
MATERIAL AGREEMENT is defined in SECTION 4.17.
MATHESON is defined in the initial paragraph.
MATHESON AGREEMENT is defined in SECTION 16.16.
MATHESON CNSI SHARES is defined in PARAGRAPH 6 of the
Recitals.
MATURITY DATE is defined in SECTION 16.15.
MAXIMUM LOSS AMOUNT $7,000,000 during the period commencing
on the Effective Date and ending on the day next preceding the
Initial Release Date; and $5,000,000 during the period commencing
on the Initial Release Date and ending on the Final Release Date.
M. MOEHLE is defined in the initial paragraph.
M. MOEHLE CNSI SHARES is defined in PARAGRAPH D of the
Recitals.
NAT-TEL is defined in SECTION 9.1(s).
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NEGATIVE FACTOR is defined in SECTION 2.2(a).
NEGATIVE WORKING CAPITAL. The amount by which current
liabilities exceed current assets as determined in accordance
with GAAP and as reflected on the Closing Balance Sheet.
NEGATIVE WORKING CAPITAL ALLOWABLE is defined in SECTION
6.8.
1995 FINANCIAL STATEMENTS is defined in SECTION 4.5(a).
OFFERING is defined in SECTION 13.9.
ORDER. Any decision, judgment, order, writ, injunction,
decree, award or determination of any Tribunal.
OTHER AMOUNTS DUE is defined in SECTION 6.8.
OTHER AMOUNTS DUE ALLOWABLE is defined in SECTION 6.8.
OUTSIDE CNSI COMPANIES SHAREHOLDERS is defined in PARAGRAPH
H of the Recitals.
OUTSIDE CNSI COMPANIES SHARES is defined in PARAGRAPH H of
the Recitals.
PAYABLES. Liabilities of a Person arising from the
borrowing of money or the incurring of obligations for
merchandise, goods or services purchased appearing as liabilities
on the books of such Person, or customarily required to be
reflected as liabilities in the balance sheets of such Person
prepared in accordance with GAAP, indicating money owed by such
Person.
PBGC. The Pension Benefit Guaranty Corporation of the
United States.
PERMITS. All material licenses, permits, approvals or other
authorizations under any Law, applicable to the CNSI Companies or
otherwise required by any Tribunal in connection with the
operation of the CNSI Companies as presently operated.
PERMITTED INDEMNIFICATION CLAIM. A final and binding
indemnification claim as to which the amount of Losses has been
determined and the indemnifying party has either acknowledged
responsibility under the indemnification provisions of ARTICLE 11
or has been determined to be responsible pursuant to SECTION 11.7
or otherwise by a Tribunal having jurisdiction.
PERMITTED LIENS. The following Liens: (a) Liens in favor of
any CNSI Company granted by any Seller in and to any Shares owned
by such Seller; (b) Liens granted by any of the CNSI Companies as
collateral security for the indebtedness, liabilities and
obligations of the CNSI Companies listed in SCHEDULE 4.9; (c)
purchase money Liens in and to items of personal property owned
or acquired by any of the CNSI Companies in the ordinary course
of business to secure the purchase price thereof or to secure
indebtedness incurred solely to finance the acquisition of such
personal property; (d) Liens upon equipment created under
equipment leases entered into by any of the CNSI Companies in the
ordinary course of business; (e) pledges or deposits made to
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secure payment of workers' compensation, or to participate in any
fund in connection with workers' compensation, unemployment
insurance or social security programs; (f) good-faith pledges or
deposits made to secure performance of bids, tenders, contracts
or leases, not in excess of 25% of the aggregate amount due
thereunder, or to secure statutory obligations, surety or appeal
bonds, or indemnity, performance or other similar bonds in the
ordinary course of business; (g) the following, if either (x) no
amounts are due and payable and no Lien has been filed or agreed
to or (y) the validity or amount thereof is being contested in
good faith by lawful proceedings diligently conducted, reserve or
other provision has been made, levy and execution thereon have
been stayed, and neither the value nor the use of the property in
question are materially affected: (i) Liens upon, and defects of
title to, property, including any attachment of property or other
legal process prior to adjudication of a dispute on the merits;
(ii) Liens of mechanics, materialmen, warehousemen, carriers and
landlords, and similar Liens; and (iii) adverse judgments on
appeal; (h) Liens securing obligations to pay Taxes; (i) Liens
given by any CNSI Company in or to any of such CNSI Company's
properties that remain undischarged in whole or in part on the
Closing Date and in respect of which the CNSI Companies or
Sellers have provided to Purchaser: (i) a copy of all documents
evidencing the Lien; (ii) a description of all documents
evidencing the Lien; (ii) a description of all property
encumbered by the Lien; (iii) all material particulars of or
about the indebtedness, liabilities or obligations secured by the
Lien; and (iv) the identity of the holder of the Lien; and (j)
Liens in favor of Purchaser.
PERSON. Any individual, corporation, association,
partnership, joint venture, organization, business, trust or any
other entity or organization of any kind or character, including
a Tribunal.
PIGGYBACK REGISTRATION. is defined in SECTION 13.2(a).
PRESS RELEASE is defined in SECTION 6.6.
PROPORTIONATE INTEREST. The proportionate interest of each
Seller in and to the Shares, as reflected in EXHIBIT A hereto.
PROPRIETARY RIGHTS. All of the following that are primarily
used in connection with the CNSI Companies in the United States
and throughout the world: (i) all patents, patent applications,
inventions, whether or not patentable, and industrial designs,
(ii) all registered and unregistered trademarks, service marks,
domain names, logos, and trade names, including, without
limitation, rights to the trademarks "Capital Long Distance,"
"Capital Network" and "CNSI," (iii) copyrights, (iv) all
registrations, applications and renewals of any of the foregoing,
(v) all trade secrets and confidential information, including
know-how, customers lists, software, formulae, manufacturing and
production processes and techniques, mask works, research and
development information, investigations, drawings,
specifications, designs, plans, improvements, proposals,
technical and computer data, and (vi) contract rights in all
license agreements and sub-license agreements to and from third
parties relating to any of the foregoing.
PTP is defined in the initial paragraph.
PURCHASE PRICE is defined in SECTION 2.2.
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PURCHASER is defined in the initial paragraph.
PURCHASER FINANCIAL STATEMENTS is defined in SECTION 5.4.
RCRA. The Resource Conservation and Recovery Act, 42 U.S.C.
Sections 6901-6987, and any amendments thereto.
RECEIVABLES OR ACCOUNTS RECEIVABLE. Accounts receivable,
notes receivable and other obligations appearing as assets on the
books of a Person, or customarily required to be reflected as
assets in balance sheets of such Person prepared in accordance
with GAAP, indicating money owed to such Person.
RECOVERIES. Any and all of the following, applicable to
Purchaser or Sellers, as the case may be: (A) any recoveries by
Purchaser or Sellers, as the case may be, from any third party
directly relating to any Loss actually received by Purchaser or
Sellers, as the case may be, subsequent to the Closing Date; (B)
any credits realized or refunds actually received by Purchaser or
Sellers, as the case may be, from a third-party subsequent to the
Closing Date and attributable to a Loss, including, without
limitation, any Tax refunds or credits relating to any Tax period
ending on or before the day immediately preceding the Closing
Date; and (C) any reductions in United States or foreign,
federal, state or local, Tax liabilities realized by Purchaser or
Sellers, as the case may be, resulting from the facts giving rise
to a Loss (and each of the items described in (A), (B), and (C)
shall be deemed Recoveries regardless of whether Purchaser or
Sellers, as the case may be, has, or have, suffered the Loss at
the date such item is received or realized.
REGISTRABLE SECURITIES is defined in the initial paragraph
of ARTICLE 13.
REGISTRATION EXPENSES is defined in SECTION 13.3.
RELATED COMPANIES. Nat-Tel Communications, Inc., Ready-Call,
Inc., Billing & Outclearing Corp., Associated Telemarketing
& Research Corp., Advantage Operator Services, Inc., and Texas
Telecom, Inc.
R. ROWLAND is defined in the initial paragraph.
R. ROWLAND CNSI SHARES is defined in PARAGRAPH A of the
Recitals.
ROWLAND DEBT is defined in SECTION 9.1(n).
ROWLAND RENEWAL NOTE is defined in SECTION 9.1(n).
RULE 144. Rule 144 promulgated under the Securities Act, as
it may be amended.
S CORPORATION SHAREHOLDERS is defined in SECTION 4.10(g).
SEC. The U.S. Securities and Exchange Commission.
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SECURITIES ACT is defined in SECTION 2.2.
SECURITIES LAWS. The federal securities laws and the state
securities laws, collectively, together with applicable
regulations imposed by any relevant stock exchanges in the United
States and by the National Association of Securities Dealers,
Inc. ("NASD").
SELLER is defined in the initial paragraph.
SERVICES is defined in SECTION 16.17.
SHAREHOLDER TAX RETURNS is defined in SECTION 4.10(g).
SIMMONS is defined in the initial paragraph.
SIMMONS CNSI SHARES is defined in PARAGRAPH C of the
Recitals.
SIRROM CAPITAL is defined in PARAGRAPH I of the Recitals.
SIRROM DEBT. The outstanding principal balance of, and
accrued but unpaid interest on, (a) the Secured Promissory Note
dated November 15, 1993, in the stated principal amount of
$1,000,000, executed by CNSI and payable to the order of Sirrom
Capital, and (b) the Secured Promissory Note dated January 18,
1994, in the stated principal amount of $1,000,000 executed by
CNSI and payable to the order of Sirrom Capital.
SIRROM WARRANTS is defined in PARAGRAPH I of the Recitals.
SPECTRUM. Spectrum Network Systems Limited Partnership, a
limited liability company organized under the laws of Australia,
and its subsidiaries.
SUBSIDIARIES. CNI, CNM, FEI, PTP, and Capital Network
International Sociedad Anonima.
TAXES. All taxes, charges, fees, duties, levies or other
assessments, including, without limitation, income, gross
receipts, net proceeds, AD VALOREM, real and personal property
(tangible and intangible), sales, use, franchise, customs,
excise, value added, stamp, leasing, lease, user, transfer, fuel,
excess profits, occupational, employees' income withholding,
unemployment and Social Security taxes, which are imposed by any
Governmental Entity, and such term shall include any interest,
penalties or additions to tax attributable to such taxes.
TAX-FREE TRANSACTION is defined in SECTION 14.2.
TAXPAYER is defined in SECTION 4.10(a).
TAX RETURN is defined in SECTION 4.10(a).
TELMEX. Telefonos de Mexico, S.A. de C.V., and any
Affiliate thereof.
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TRADING DAY. Any day upon which the NASD's Automated
Quotation System ("NASDAQ") is open for and conducts its normal
business operations, including the quotation of prices for any
securities officially quoted by that organization.
TRANSACTION DOCUMENTS. This Agreement and any and all
other agreements, contracts, instruments, certificates,
statements, opinions and other documents executed and delivered
in connection with this Agreement and the transactions
contemplated by this Agreement.
TRIBUNAL. Any government, any arbitration panel, any court
or any governmental department, commission, board, bureau, agency
or instrumentality of the United States or any foreign or
domestic state, province, commonwealth, nation, territory,
possession, country, parish, town, township, village or
municipality (including any Governmental Entity).
UNAUDITED FINANCIAL STATEMENTS is defined in SECTION
4.5(a).
UNITED STATES SECURITIES LAWS. The Securities Act and
applicable securities Laws of any state within the United States
together with the applicable rules and regulations of any
relevant stock exchanges and of the NASD.
UNITED STATES TRIBUNAL. A Tribunal having jurisdiction
solely in the United States.
WARRANTS. Warrants to purchase AMNEX Common Shares in the
form of Exhibit B hereto.
WARRANT EXPIRATION DATE. The first anniversary of the
Closing Date.
WARN ACT is defined in SECTION 14.3.
WOOD is defined in the initial paragraph.
WOOD CNSI SHARES is defined in PARAGRAPH F of the Recitals.
ARTICLE 16
MISCELLANEOUS
16.1 NOTICES. Any notices, claims or demands which any
party is required or may desire to give to another under or in
conjunction with this Agreement shall be in writing, and shall be
given by addressing the same to such other party(ies) at the
address set forth below, and by (i) depositing the same so
addressed, postage prepaid, first class, certified or registered,
in the United States mail, as the case may be (herein referred to
as "MAILING"), (ii) overnight delivery by an internationally
recognized overnight courier service (E.G., UPS, Federal
Express), (iii) delivering the same personally to such other
party(ies), or (iv) transmitting by facsimile and Mailing the
original. Any notice shall be deemed to have been given five
days following the date of Mailing; two days after timely
delivery to an overnight courier; if by personal delivery, upon
such delivery; or if by facsimile, the day of transmission if
made within customary business hours of the
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party(ies) to whom sent, or if not transmitted within customary
business hours, the following business day.
(a) If to Sellers:
To the respective address of such
Seller set forth on EXHIBIT E
With a copy to Counsel to Sellers:
Kuperman, Orr, Mouer & Albers, P.C.
100 Congress Avenue, Suite 1400
Austin, Texas 78701
Attn: Roy W. Mouer, Esq.
Facsimile: 512/322-8143
(b) If to the CNSI Companies:
Capital Network System, Inc.
600 Congress Avenue, Suite 1360
Austin, Texas 78701
Attn: Robert A. Rowland, Chairman of the Board
Facsimile: 512/472-1173
With a copy to counsel to the CNSI Companies:
Locke Purnell Rain Harrell, P.C.
515 Congress Avenue, Suite 2500
Austin, Texas 78701
Attn: Jane A. Matheson, Esq. and Dan N. Matheson, Esq.
Facsimile: 512/305-4800
(c) If to Purchaser:
AMNEX, Inc.
100 W. Lucerne Circle, Suite 100
Orlando, Florida 32801-4400
Attn: John Kane, Executive Vice President
Facsimile: (407) 246-0005
With a copy to:
AMNEX, Inc.
101 Park Avenue
New York, New York 10178
Attn: Amy S. Gross, Esq., General Counsel
Facsimile: (212) 867-1591
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With a copy to Counsel to Purchaser:
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Susan O. Posen, Esq.
Facsimile: (212) 806-6006
Any party may change the address or facsimile telephone number
for notices to be sent to it by written notice delivered pursuant
to the terms of this SECTION 16.1.
16.2 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
other Transaction Papers to be delivered prior to or at Closing
set forth the entire understanding of the parties and supersede
all prior agreements or understandings, whether written or oral,
with respect to the subject matter hereof, including, without
limitation, the letter of intent dated March 18, 1996 between
Purchaser and CNSI and Sellers and the letter dated March 19,
1996 from Daniel Matheson to John Kane. This Agreement may be
amended, modified or supplemented only by a written agreement
executed by Purchaser and Sellers.
16.3 BINDING EFFECT/ASSIGNABILITY. This Agreement shall
extend to and be binding upon and inure to the benefit of the
parties hereto, and their respective heirs, legal
representatives, successors and permitted assigns. Purchaser
shall have the right at any time to assign this Agreement to any
affiliate of Purchaser without the necessity of seeking the
consent of Sellers; PROVIDED, HOWEVER, that Purchaser shall not
be relieved of any obligations as a result of such assignment and
that, in addition to Purchaser remaining liable, any such
assignee shall assume and become liable for any and all of
Purchaser's obligations under this Agreement. None of Sellers
shall be entitled to assign any of their respective rights or
obligations under this Agreement; PROVIDED, HOWEVER, that the
rights and obligations of a Seller may be assigned by operation
of Law or may be assigned to an individual retirement account,
pension plan, trust or other entity under the control of such
Seller but any such assignment shall not relieve or release such
Seller of any obligations hereunder as a result of such
assignment and that, in addition to such Seller remaining liable,
any such assignee shall assume and become liable for any and all
of such Seller's obligations under this Agreement.
16.4 EXHIBITS/SCHEDULES. All Exhibits and Schedules
referenced in this Agreement are incorporated herein by reference
and shall constitute a part of this Agreement.
16.5 INVALID PROVISIONS. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under present or
future Laws effective during the term hereof, such provisions
shall be fully severable and this Agreement shall be construed
and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof with the remaining
provisions remaining in full force and effect and not affected by
the illegal, invalid or unenforceable provision or by severance
herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision there shall be added automatically as
part of this Agreement a provision as similar in terms to such
illegal, invalid, or unenforceable provision as may be possible
and still be legal, valid and enforceable.
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16.6 HEADINGS/CAPTIONS. The captions to sections and
subsections of this Agreement have been inserted solely for
convenience and reference, and shall not control or affect the
meaning or construction of any of the provisions of this
Agreement.
16.7 WAIVER; REMEDIES. Waiver by any party hereto of any
breach of or exercise of any rights under this Agreement shall
not be deemed to be a waiver of similar or other breaches or
rights or a future breach of the same duty. The failure of a
party to take any action by reason of any such breach or to
exercise any such right shall not deprive any party of the right
to take any action at any time while the breach or condition
giving rise to such right continues. Except as expressly limited
by this Agreement, the parties shall have all remedies permitted
to them by this Agreement or Law, and all such remedies shall be
cumulative.
16.8 CONSENT TO JURISDICTION. Any judicial proceeding
brought against Purchaser or Sellers with respect to any claim
not related to the indemnification provisions of this Agreement
related to or arising under this Agreement may be brought in any
court of New York State located in the City of New York, or in
the United States District Court for the Eastern or the Southern
District of New York, and, by the execution and delivery of this
Agreement, each of Purchaser and Sellers (a) accepts, generally
and unconditionally, the exclusive jurisdiction of such courts
and any related appellate court and irrevocably agrees to be
bound by any judgment rendered thereby in connection with any
claim related to or arising under this Agreement, and (b)
irrevocably waives any objection it may now or hereinafter have
as to the venue of any such proceeding brought in such a court or
that such a court is an inconvenient forum. Each of Purchaser
and Sellers hereby waives personal service of process and
consents that service of process upon it may be made by certified
or registered mail, return receipt requested, at its address
specified or determined in accordance with the notice provision
of this Agreement, and service so made shall be deemed completed
on the third business day after such service is deposited in the
mail. Nothing herein shall affect the right of each of Purchaser
or Sellers to serve process in any other manner permitted by law.
16.9 ATTORNEY'S FEES AND COSTS. In the event of a breach by
any party to this Agreement and commencement of a subsequent
legal action in a court of Law or forum of arbitration, or in the
event legal counsel is consulted in the event of any such breach
or in anticipation of any such prospective legal action, the
prevailing party in any such dispute shall be entitled to
reimbursement of reasonable attorney's fees and court costs,
including, but not limited to, the costs of expert witnesses,
transportation, lodging and meal costs of the parties and
witnesses, costs of transcript preparation and other reasonable
and necessary direct and incidental costs of such dispute.
"Prevailing party" is the party in whose favor final judgment is
rendered.
16.10 GOVERNING LAW. This Agreement shall be construed
under and governed by the internal laws of the State of New York
without giving effect to principles of conflicts of laws.
16.11 COUNTERPARTS, FACSIMILE SIGNATURES. This
Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but which together shall
constitute one and the same agreement. The delivery of a
facsimile of a signed copy of this Agreement shall be deemed
delivery of an original.
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16.12 REPRESENTATION BY COUNSEL: INTERPRETATION.
Sellers, the CNSI Companies, and Purchaser acknowledge that each
party to this Agreement has been represented by counsel or has
had the opportunity to be represented by counsel in connection
with this Agreement and the transactions contemplated by this
Agreement. Accordingly, any rule of Law or any legal decision
that would require interpretation of any claimed ambiguities in
this Agreement against the party that drafted it has no
application and is expressly waived. The provisions of this
Agreement shall be interpreted in a reasonable manner to effect
the intent of Sellers, the CNSI Companies and Purchaser.
16.13 JOINDER OF SPOUSES. Each Seller shall cause
his/her spouse, as applicable, to join in and execute this
Agreement; and by such spouse's execution of this Agreement
he/she agrees to all of the terms and provisions of this
Agreement.
16.14 NOMINATION BY PURCHASER. In the event that
Purchaser nominates any other person or entity to acquire some or
all of the Shares in accordance with the provisions of this
Agreement, Purchaser shall:
(a) notify the Counsel to Sellers in writing of such
nomination prior to Closing; and
(b) notwithstanding any such nomination being made,
remain a party to and wholly bound to perform and discharge
all its obligations and liabilities otherwise provided for
pursuant to the provisions of, this Agreement.
16.15 MATTERS PERTAINING TO SPECTRUM NETWORK SYSTEMS
LIMITED. On or prior to the Closing, Sellers and Purchaser shall
cooperate with one another to cause CNSI to effect an adjustment
transaction with respect to the Deed of Release and the Knowhow
Agreement (the "ADJUSTMENT TRANSACTION"). Subject to concurrence
by Spectrum and the preparation and execution of definitive
documentation acceptable to Purchaser, Sellers, the CNSI
Companies, and Spectrum, and their respective counsel, the
Adjustment Transaction would be on the following basic terms:
(a) CNSI would execute and deliver a promissory note
(the "ADJUSTMENT NOTE") in the stated principal amount of
$1,500,000. The Adjustment Note would be payable to the
order of Spectrum, would bear interest at the rate of six
percent (6%) per annum until paid, and would mature on the
date which is 18 months after the date it is executed by
CNSI (the "MATURITY DATE"). The principal of the Adjustment
Note would be due and payable in full on the Maturity Date;
HOWEVER, the obligation of CNSI to pay the principal of the
Adjustment Note would be accelerated and the principal would
be payable in full, in CNSI Shares or shares of restricted
AMNEX Common Stock in lieu of cash, concurrently with the
Closing if the Closing takes place as contemplated by this
Agreement.
(b) In the event the obligation of CNSI to pay the
principal of the Adjustment Note is accelerated by the
occurrence of the Closing, then the following would occur:
68
<PAGE>
(i) The Purchase Price would be increased by
$410,000.
(ii) To the extent the Purchase Price is increased
by $410,000, the Other Amounts Due Allowable would be
reduced by $510,000 to $390,000.
16.16 MATTERS PERTAINING TO CERTAIN EMPLOYEES. In the
event that the employment of Dan Matheson pursuant to the
Employment Agreement dated as of October 1, 1995, between Dan
Matheson and CNSI (the "MATHESON AGREEMENT") is terminated prior
to the Closing Date, for purposes of computing Negative Working
Capital and Employee Separation Costs at Closing, the amounts
paid Mr. Matheson upon termination of the Matheson Agreement
shall be deemed to be included within the definition of Employee
Separation Costs and shall be excluded from the computation of
Negative Working Capital for purposes of this Agreement.
16.17 NON-DISCLOSURE, NON INTERFERENCE, AND NON-COMPETITION.
(a) NON-DISCLOSURE. Each Seller recognizes the
interests of the CNSI Companies in maintaining the confidential
nature of their proprietary and other business and commercial
information.
(i) In consideration thereof, each Seller shall
not, for a period of two years after the Closing Date (except as
authorized in writing by CNSI), 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
information not in the public domain and acquired by Seller,
relating to any aspect of the operations, activities, research,
investigations or obligations of any of the CNSI Companies
including, without limitation, (x) information pertaining to the
business of the CNSI Companies and (y) other confidential
information relating to the business, customers, trade practices,
trade secrets or intellectual property of the CNS Companies
(collectively, the "CONFIDENTIAL INFORMATION").
(ii) In the event that any Seller becomes legally
required to disclose any Confidential Information, such Seller
shall provide CNSI with prompt notice so that CNSI may seek a
protective order or other appropriate remedy and/or waive
compliance with the provisions of this SECTION 16.17(a). In the
event that such protective order or other remedy is not obtained,
or that CNSI waives compliance with the provisions of this
SECTION 16.17(a), such Seller shall furnish only that portion of
the Confidential Information which is legally required to be
furnished in the opinion of counsel to CNSI.
(b) NON-INTERFERENCE. Each Seller shall not (a)
infringe or interfere with any of the CNSI Companies' Proprietary
Rights, or any profits therefrom, or (b) use or disclose, for
himself or herself or for the benefit of another, any
Confidential Information to compete directly or indirectly with
the CNSI Companies in any market in which the CNSI Companies
provide Services. For purposes of this SECTION 16.17, "SERVICES"
shall mean any type of long distance operator services, 1 + long
distance services, or direct dial long distance services, and
"compete directly" means design, develop, provide, promote or
sell services or processes which compete directly with services
or processes marketed by the CNSI Companies; and "compete
indirectly" means be employed to
69
<PAGE>
design, develop, provide, promote, distribute or sell such services or
processes competing with the CNSI Companies.
(c) NON-COMPETITION. For a period of two years after
the Closing Date, each Seller shall not (x) compete directly or
indirectly (as defined in CLAUSE (b) hereof) with the CNSI
Companies in any current or currently planned market in which the
CNSI Companies sell or provide Services, (y) request, induce or
attempt to influence any current, future or prospective customer
of the CNSI Companies to terminate any current or prospective
business relationship with the CNSI Companies or to engage in any
competition, direct or indirect, with the CNSI Companies, or (z)
request, induce or attempt to influence any current or future
officer, director, employee, consultant, agent or representative
relationship with the CNSI Companies or to commit any act that,
if committed by such Seller, would constitute a breach of any
provision of this SECTION 16.17.
(d) INJUNCTIVE RELIEF. Each Seller acknowledges and
agrees that the CNSI Companies will have no adequate remedy at
law for any breach or threatened or attempted breach by such
Seller of the provisions of this SECTION 16.17. Accordingly,
each Seller agrees that each of the CNSI Companies may, in
addition to the other remedies that may be available to it under
this SECTION 16.17 or at law, commence proceedings in equity for
an injunction temporarily or permanently enjoining such Seller
from violating the provisions of this SECTION 16.17. For the
purposes of any such proceeding in equity, it shall be presumed
that the remedies at law available to each of the CNSI Companies
would be inadequate and that it would suffer irreparable harm as
a result of the violation of any provision of this SECTION 16.17
by Sellers.
(e) EFFECT OF PRIOR AGREEMENTS. To the extent that
any provisions in this Agreement conflict with the terms or
provisions of any other agreement to which any Seller was or is a
party, including any other agreement containing non-competition
restrictions, the terms of this SECTION 16.17 shall prevail.
(f) ENFORCEABILITY. If any provision of this SECTION
16.17 shall be found by any arbitration panel or court of
competent jurisdiction to be invalid or unenforceable, the
parties hereby waive such provision to the extent that it is
found to be invalid or unenforceable. Such provision, however,
shall be modified to the extent allowable by law by such panel or
court so that it becomes enforceable to the greatest extent
permissible, as modified, and shall be enforced as any other
provision hereof, all the other provisions continuing in full
force and effect.
70
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date set forth above.
PURCHASER: SELLERS:
AMNEX, Inc. /s/ ROBERT A. ROWLAND
------------------------------
ROBERT A. ROWLAND
By: /s/ JOHN KANE JOINDER BY SPOUSE:
----------------------------
Name Printed: John Kane
------------------
Title: Executive Vice President
------------------------- /s/ LINDA ROWLAND
-------------------------------
LINDA ROWLAND
/s/ DELAJANE ROWLAND
-------------------------------
DELAJANE ROWLAND
JOINDER BY SPOUSE:
- NONE -
/s/ DONALD D. SIMMONS
-------------------------------
DONALD D. SIMMONS
JOINDER BY SPOUSE:
/s/ CONNIE SIMMONS
-------------------------------
CONNIE SIMMONS
/s/ C. MICHAEL MOEHLE
-------------------------------
C. MICHAEL MOEHLE
JOINDER BY SPOUSE:
/s/ MARY H. MOEHLE
-------------------------------
MARY H. MOEHLE
71
<PAGE>
/s/ BARBARA ANN CROMWELL
-------------------------------
BARBARA ANN CROMWELL
JOINDER BY SPOUSE:
/s/ RICHARD CROMWELL
-------------------------------
RICHARD CROMWELL
/s/ ELLEN E. WOOD
-------------------------------
ELLEN E. WOOD
JOINDER BY SPOUSE:
/s/ BRIAN WOOD
-------------------------------
BRIAN WOOD
/s/ DANIEL N. MATHESON
-------------------------------
DANIEL N. MATHESON
JOINDER BY SPOUSE:
/s/ JANE MATHESON
-------------------------------
JANE MATHESON
CNSI COMPANIES:
CAPITAL NETWORK SYSTEM, INC.
By: /s/ ROBERT A. ROWLAND
---------------------------
Name Printed: Robert A. Rowland
Title: Chairman of the Board
CAPITAL NETWORK INTERNATIONAL, INC.
By: /s/ ROBERT A. ROWLAND
----------------------------
Name Printed: Robert A. Rowland
Title: Chairman of the Board
72
<PAGE>
CAPITAL NETWORK MEXICO, S.A. de C.V.
By: /s/ ROBERT A. ROWLAND
----------------------------
Name Printed: Robert A. Rowland
Title: Chairman of the Board
POINT TO POINT COMMUNICATIONS COMPANY
By: /s/ ROBERT A. ROWLAND
----------------------------
Name Printed: Robert A. Rowland
Title: President
73
<PAGE>
STOCK PURCHASE AGREEMENT
DATED AS OF APRIL 26, 1996
EXHIBIT A
PAYMENTS TO SELLERS
NAME OF SELLER PROPORTIONATE INTEREST*
1. R. Rowland 66.06%
2. D. Rowland 4.72%
3. Simmons 9.43%
4. M. Moehle 10.61%
5. B. Cromwell 3.54%
6. Wood 3.59%
7. Matheson 2.05%
-------
100.00%
- --------------
*These percentages may be adjusted at the Closing as a consequence of
transactions involving Spectrum and Sirrom Capital, as contemplated by this
Agreement. Any such adjustments will be stipulated in writing prior to the
Closing.
A-1
<PAGE>
STOCK PURCHASE AGREEMENT
DATED AS OF APRIL 26, 1996
LIST OF SCHEDULES
SCHEDULE
3.3 Certain Consents
4.2 List of Subsidiaries
4.3 Violation of or conflict with Laws
4.4 Capitalization
4.6 Undisclosed liabilities
4.7 Adverse changes
4.8 Accounts receivable exceptions
4.9 Notes, accounts payable and other obligations
4.10 Tax exceptions
4.11 Transactions with affiliates
4.13 Compliance with laws
4.14 Litigation
4.16 Leases of real and personal property
4.17 Material Agreements
4.18 Proprietary Rights
4.19 Employees and employee benefits
4.20 Insurance
4.23 Bank accounts and powers of attorney
Schedule-1
<PAGE>
5.2 Required consents; Purchaser violation of or conflicts
with Laws; violation of or defaults under agreements
5.3 Capitalization of Purchaser
5.4 Purchaser Financial Statements
5.5 Purchaser adverse changes
5.7 Purchaser licenses, etc.
5.9 Due Diligence Investigation
6.4(e) Future Compensation Changes
7.4 Purchaser consents and approvals
9.1(m) Payments of Loans and Advances
9.1(n) Renewal Rowland Note
Schedule-2
<PAGE>
FIRST AMENDMENT TO
STOCK PURCHASE AGREEMENT
This First Amendment to Stock Purchase Agreement (this "FIRST AMENDMENT")
is entered into as of June 28, 1996 (the "FIRST AMENDMENT EFFECTIVE DATE"), by
and among AMNEX, INC. ("PURCHASER"), ROBERT A. ROWLAND ("R. ROWLAND"), DELAJANE
ROWLAND ("D. ROWLAND"), DONALD D. SIMMONS ("SIMMONS"), C. MICHAEL MOEHLE ("M.
MOEHLE"), BARBARA ANN CROMWELL ("B. CROMWELL"), ELLEN E. WOOD ("WOOD"), DANIEL
N. MATHESON III ("MATHESON"), SIRROM CAPITAL CORPORATION ("SIRROM CAPITAL"),
SPECTRUM GLOBAL TELECOMMUNICATIONS PTY LIMITED ("SPECTRUM"), CAPITAL NETWORK
SYSTEM, INC. ("CNSI"), CAPITAL NETWORK INTERNATIONAL, INC. ("CNI"), CAPITAL
NETWORK MEXICO, S.A. de C.V. ("CNM"), and POINT TO POINT COMMUNICATIONS COMPANY
("POINT TO POINT").
R E C I T A L S:
A. Purchaser, R. Rowland, D. Rowland, Simmons, M. Moehle, B. Cromwell,
Wood, Matheson, and the CNSI Companies entered into the Stock Purchase Agreement
dated as of April 26, 1996 (the "STOCK PURCHASE AGREEMENT"), pursuant to which
Purchaser agreed to purchase the CNSI Shares from Sellers and Sellers agreed to
sell the CNSI Shares to Purchaser.
B. Purchaser, Sellers, and the CNSI Companies have agreed to structure
the transactions contemplated by the Stock Purchase Agreement, insofar as they
relate to the acquisition of all the issued and outstanding shares of common
stock, no par value, of CNSI from Sellers, to qualify as a Tax-Free Transaction.
Accordingly, Purchaser, Sellers, and the CNSI Companies, pursuant to Section
14.2 of the Stock Purchase Agreement, have agreed to undertake a merger in which
(i) AMNEX Acquisition Company, a newly formed Texas corporation ("AAC") that is
a wholly-owned subsidiary of Purchaser, will be merged with and into CNSI
pursuant to the Plan of Merger adopted unanimously by the shareholders of AAC
and CNSI and (ii) the CNSI Shares of each Seller will be converted into the
right to receive shares of AMNEX Common Stock and Warrants.
C. Sirrom Capital, having exercised the Sirrom Warrants, has received and
is the holder of CNSI Shares and Sirrom Capital desires to (i) become a party to
the Stock Purchase Agreement, as amended by this First Amendment, as a Seller,
and (ii) approve the merger by which its CNSI Shares will be converted into the
right to receive shares of AMNEX Common Stock and Warrants pursuant to the Plan
of Merger.
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 1
<PAGE>
D. Spectrum, in full payment and satisfaction of the Adjustment Note, has
received and is the holder of CNSI Shares and Spectrum desires to (i) become a
party to the Stock Purchase Agreement, as amended by this First Amendment, as a
Seller, and (ii) approve the merger by which its CNSI Shares will be converted
into the right to receive shares of AMNEX Common Stock and Warrants pursuant to
the Plan of Merger.
E. Purchaser, Sellers (including Sirrom Capital and Spectrum), and the
CNSI Companies desire to amend certain of the terms and conditions contained in
the Stock Purchase Agreement, as set forth in this First Amendment.
THEREFORE, in consideration of the premises and the covenants and
agreements contained in the Stock Purchase Agreement and in this First
Amendment, the parties agree as follows:
ARTICLE 1
DEFINED TERMS
All terms and expressions defined in the Stock Purchase Agreement (i.e.,
those with their initial letter capitalized) shall have the same respective
meanings when used in this First Amendment unless expressly provided otherwise.
Terms and expressions defined in the Stock Purchase Agreement whose meanings
have been amended by this First Amendment are used in this First Amendment with
such amended meanings.
ARTICLE 2
NO OTHER CHANGES
Except as expressly amended in this First Amendment, all of the terms and
provisions of the Stock Purchase Agreement are and shall be unchanged and shall
remain in full force and effect.
ARTICLE 3
AMENDMENTS TO THE STOCK PURCHASE AGREEMENT
The Stock Purchase Agreement is hereby amended to the extent provided in
this ARTICLE 3:
3.A ADMISSION OF SIRROM CAPITAL AND SPECTRUM AS PARTIES TO THE STOCK
PURCHASE AGREEMENT. Sirrom Capital and Spectrum are hereby made parties to the
Stock Purchase Agreement, as amended by this First Amendment. Sirrom Capital
and Spectrum shall be "Sellers" for all purposes and the shares of the common
stock, no par value, of CNSI held by Sirrom Capital and Spectrum shall be "CNSI
Shares" for all purposes.
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 2
<PAGE>
3.B AMENDMENT TO RECITALS. The Recitals to the Stock Purchase Agreement
are hereby amended to read in their entirety as follows:
"RECITALS:
A. At the Effective Date, R. Rowland owned shares of capital stock in the
CNSI Companies as follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ ------------ --------------------
1. CNSI 3,080,000 66.04%
2. CNI 210 21.00%
3. CNM 1 .01%
After giving effect to the Sirrom Transaction and the Spectrum Transaction,
R. Rowland's ownership of capital stock in the CNSI Companies is as follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ ------------ --------------------
1. CNSI 3,080,000 57.37%
2. CNI 210 21.00%
3. CNM 1 .01%
The shares of common stock of CNSI to be converted into the right to
receive shares of AMNEX Common Stock and Warrants by R. Rowland pursuant to this
Agreement collectively are called the "R. ROWLAND CNSI SHARES." The shares of
capital stock of CNI and CNM to be sold by R. Rowland to Purchaser pursuant to
this Agreement collectively are called the "R. ROWLAND CNI SHARES" and the "R.
ROWLAND CNM SHARES," respectively.
B. At the Effective Date, D. Rowland owned shares of capital stock in the
CNSI Companies as follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ ------------ --------------------
1. CNSI 220,000 4.72%
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 3
<PAGE>
After giving effect to the Sirrom Transaction and the Spectrum Transaction,
D. Rowland's ownership of capital stock in the CNSI Companies is as follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ ------------ --------------------
1. CNSI 220,000 4.10%
The shares of common stock of CNSI to be converted into the right to
receive shares of AMNEX Common Stock and Warrants by D. Rowland pursuant to this
Agreement collectively are called the "D. ROWLAND CNSI SHARES."
C. At the Effective Date, Simmons owned shares of capital stock in the
CNSI Companies as follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ ------------ --------------------
1. CNSI 440,000 9.44%
After giving effect to the Sirrom Transaction and the Spectrum Transaction,
Simmons' ownership of capital stock in the CNSI Companies is as follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ ------------ --------------------
1. CNSI 440,000 8.20%
The shares of common stock of CNSI to be converted into the right to
receive shares of AMNEX Common Stock and Warrants by Simmons pursuant to this
Agreement collectively are called the "SIMMONS CNSI SHARES."
D. At the Effective Date, M. Moehle owned shares of capital stock in the
CNSI Companies as follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ ------------ --------------------
1. CNSI 495,000 10.62%
After giving effect to the Sirrom Transaction and the Spectrum Transaction,
M. Moehle's ownership of capital stock in the CNSI Companies is as follows:
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 4
<PAGE>
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ ------------ --------------------
1. CNSI 495,000 9.22%
The shares of common stock of CNSI to be converted into the right to
receive shares of AMNEX Common Stock and Warrants by M. Moehle pursuant to this
Agreement collectively are called the "M. MOEHLE CNSI SHARES."
E. At the Effective Date, B. Cromwell owned shares of capital stock in
the CNSI Companies as follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ ------------ --------------------
1. CNSI 165,000 3.54%
After giving effect to the Sirrom Transaction and the Spectrum Transaction,
B. Cromwell's ownership of capital stock in the CNSI Companies is as follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ ------------ --------------------
1. CNSI 165,000 3.07%
The shares of common stock of CNSI to be converted into the right to
receive shares of AMNEX Common Stock and Warrants by B. Cromwell pursuant to
this Agreement collectively are called the "B. CROMWELL CNSI SHARES."
F. At the Effective Date, Wood owned shares of capital stock in the CNSI
Companies as follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ ------------ --------------------
1. CNSI 167,391 3.59%
After giving effect to the Sirrom Transaction and the Spectrum Transaction,
Wood's ownership of capital stock in the CNSI Companies is as follows:
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 5
<PAGE>
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ ------------ --------------------
1. CNSI 167,391 3.12%
The shares of common stock of CNSI to be converted into the right to
receive shares of AMNEX Common Stock and Warrants by Wood pursuant to this
Agreement collectively are called the "WOOD CNSI SHARES."
G. At the Effective Date, Matheson owned shares of capital stock in the
CNSI Companies as follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ ------------ --------------------
1. CNSI 95,652 2.05%
After giving effect to the Sirrom Transaction and the Spectrum Transaction,
Matheson's ownership of capital stock in the CNSI Companies is as follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ ------------ --------------------
1. CNSI 95,652 1.78%
The shares of common stock of CNSI to be converted into the right to
receive shares of AMNEX Common Stock and Warrants by Matheson pursuant to this
Agreement collectively are called the "MATHESON CNSI SHARES."
H. Sirrom Capital, after giving effect to the Sirrom Transaction and the
Spectrum Transaction, owns shares of capital stock in the CNSI Companies as
follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ ------------ --------------------
1. CNSI 187,918 3.50%
The shares of common stock of CNSI to be converted into the right to
receive shares of AMNEX Common Stock and Warrants by Sirrom Capital pursuant to
this Agreement collectively are called the "SIRROM CNSI SHARES," and the
transactions by which Sirrom Capital exercised the Sirrom Warrants and thereby
acquired the Sirrom CNSI Shares collectively are called the "SIRROM
TRANSACTION."
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 6
<PAGE>
I. Spectrum, after giving effect to the Sirrom Transaction and the
Spectrum Transaction, owns shares of capital stock of the CNSI Companies as
follows:
Number of Shares of
CNSI Company Common Stock Percentage Ownership
------------ ------------ --------------------
1. CNSI 518,116 9.65%
The shares of common stock of CNSI to be converted into the right to
receive shares of AMNEX Common Stock and Warrants by Spectrum pursuant to this
Agreement collectively are called the "SPECTRUM CNSI SHARES," and the
transactions by which the Promissory Note dated June 28, 1996 (the "ADJUSTMENT
NOTE") in the stated principal amount of $1,500,000 executed by CNSI and payable
to the order of Spectrum, was executed and delivered by CNSI, and paid and
satisfied in full by the issuance and delivery to Spectrum of the Spectrum CNSI
Shares, collectively are called the "SPECTRUM TRANSACTION."
J. Persons and entities other than CNSI (which is the owner of 79% of the
issued and outstanding shares of capital stock of CNI) and Sellers
(collectively, the "OUTSIDE CNSI COMPANIES SHAREHOLDERS") own shares of capital
stock in the CNSI Companies (collectively, the "OUTSIDE CNSI COMPANIES SHARES")
as follows:
CNSI Outside Number of Shares of Percentage
Company Shareholder Common Stock Ownership
------ ----------- ------------ ---------
1. PTP W.S. Walker 1 .01%
2. PTP CNI 30,000 99.99%
3. CNM CNI 49,999 99.99%
K. The R. Rowland CNSI Shares, the D. Rowland CNSI Shares, the Simmons
CNSI Shares, the M. Moehle CNSI Shares, the B. Cromwell CNSI Shares, the Wood
CNSI Shares, the Matheson CNSI Shares, the Sirrom CNSI Shares and the Spectrum
CNSI Shares are referred to herein collectively as the "CNSI SHARES."
L. The CNSI shares represent all of the issued and outstanding shares of
capital stock of CNSI; and the shares of capital stock of CNI, CNM and Point to
Point held by CNSI, together with the R. Rowland CNI Shares, the R. Rowland CNM
Shares, and the Outside CNSI Companies Shares, represent all the issued and
outstanding shares of capital stock of the other CNSI Companies.
M. Upon the terms and subject to the conditions contained in this
Agreement, Purchaser is committed to make loans, obtain financing or to invest
in CNSI at the Closing in an amount not to exceed $6,000,000 but in no event
less than $4,000,000 (the "INFUSED FUNDS"), which Infused Funds
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 7
<PAGE>
shall be used first to (i) guarantee by Purchaser of the Sirrom Debt (ii) repay
the J. Rowland Estate Debt, then (iii) pay Employee Separation Costs (Employee
Separation Costs payable at the Closing are estimated to be $1,350,000,
determined at the Effective Date), (iv) pay Other Amounts Due, and then, to the
extent Infused Funds are available, (v) pay past due accounts payable of the
CNSI Companies.
N. Upon the terms and subject to the conditions hereinafter set forth,
Sellers, pursuant to the Plan of Merger, desire to convert their CNSI Shares
into the right to receive shares of AMNEX Common Stock and Warrants and
Purchaser desires to issue shares of AMNEX Common Stock and Warrants in
connection with the merger of AAC with and into CNSI. In addition, R. Rowland
desires to sell the R. Rowland CNI Shares and the R. Rowland CNM Shares to
Purchaser, and Purchaser desires to purchase such shares from R. Rowland."
3.C AMENDMENTS TO ARTICLE 2. Article 2 of the Stock Purchase Agreement is
hereby amended to read in its entirety as follows:
"ARTICLE 2
MERGER; PURCHASE AND SALE
2.1 AGREEMENT OF MERGER. The Plan of Merger dated as of June 28,
1996 (the "PLAN OF MERGER"), among CNSI, Purchaser, and AMNEX Acquisition
Company, a newly formed Texas corporation ("AAC") and a wholly-owned subsidiary
of Purchaser, has been approved unanimously by the shareholders of CNSI and AAC,
respectively, has been executed by the parties thereto, and, concurrently with
the First Amendment, is in full force and effect. Upon the terms and conditions
contained in this Agreement, as amended by the First Amendment, and in the Plan
of Merger, and in reliance upon the representations, warranties, and covenants
set forth in this Agreement, as amended by the First Amendment, effective as of
the Closing Time, Purchaser, Sellers and the CNSI Companies agree that the
following transactions will be effected:
(a) MERGER. As provided in Article 1 of the Plan of Merger, at the
Effective Time, AAC will be merged into CNSI, the separate
existence of AAC will cease, and CNSI as the surviving
corporation shall continue to exist by virtue of and shall be
governed by the laws of the State of Texas.
(b) CONVERSION OF STOCK. As provided in Article 2 of the Plan of
Merger, at the Effective Time, the CNSI shares will be converted
into the right to receive shares of AMNEX Common Stock and
Warrants, with each Seller to receive the number of shares of
AMNEX Common Stock and Warrants set forth in Section 2.01 of the
Plan of Merger. Concurrently, the 1,000 outstanding shares of
capital stock of AAC ("AAC STOCK") will be converted into 1,000
fully-paid and non-assessable shares of common stock, without par
value, of CNSI ("CNSI COMMON STOCK").
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 8
<PAGE>
(c) MERGER CONSIDERATION: ISSUANCE AND DELIVERY OF STOCK
CERTIFICATES TO SELLERS. At the Closing and upon the filing of
the Articles of Merger, each Seller will deliver to Purchaser the
certificate or certificates evidencing such Seller's CNSI
Shares, duly endorsed for transfer to Purchaser or accompanied by
stock powers properly executed by such Seller. Simultaneously,
Purchaser will issue to each Seller certificates ("AMNEX SHARE
CERTIFICATES") evidencing the shares of AMNEX Common Stock and
Warrants with respect to such Seller's CNSI Shares. Certain of
the AMNEX Share Certificates will be delivered to Sellers at
Closing, and certain of the AMNEX Share Certificates will be
delivered to the Escrow Agent to be held as Holdback Shares
pursuant to the Escrow Agreement, in accordance with the
following schedule:
Seller Holdback Shares Non-Holdback Shares Total
- ------ --------------- ------------------- -----
(i) R. Rowland 1,035,250 1,217,436 2,252,686
(ii) D. Rowland 80,876 97,187 178,063
(iii) Simmons 161,752 194,374 356,126
(iv) M. Moehle 181,971 218,670 400,641
(v) B. Cromwell 60,657 72,890 133,547
(vi) Wood 61,514 73,919 135,433
(vii) Matheson 35,126 42,211 77,337
(viii) Sirrom Capital 63,429 76,222 139,651
(ix) Spectrum 181,227 217,775 399,002
--------- --------- ---------
TOTALS 1,861,802 2,210,684 4,072,486
(d) MERGER CONSIDERATION: ISSUANCE AND DELIVERY OF STOCK CERTIFICATES TO
THE ROWLAND GRANDCHILDREN'S TRUSTS. R. Rowland has delivered a letter
dated June 28, 1996 (the "INSTRUCTION LETTER") to Purchaser, in which
he has instructed Purchaser to issue AMNEX Share Certificates
representing an aggregate of 26,600 shares of AMNEX Common Stock to
the Rowland Grandchildren's Trusts established for the benefit of the
five grandchildren of R. Rowland (collectively, the "ROWLAND
GRANDCHILDREN'S TRUSTS"). In accordance with the Instruction Letter,
at the Closing (and upon delivery from R. Rowland of the certificate
or certificates evidencing the R. Rowland CNSI Shares, as provided in
paragraph (c) above), Purchaser will issue to each of the Rowland
Grandchildren's Trusts AMNEX Share Certificates evidencing 26,600
shares of AMNEX Common Stock, in accordance with the following
schedule:
(i) Rowland Grandchildren's Trust
f/b/o Robert Adrian Ashworth Hollis 5,320 shares
(ii) Rowland Grandchildren's Trust
f/b/o Nicolas McHenry Rowland Hollis 5,320 shares
(iii) Rowland Grandchildren's Trust
f/b/o Robert Rowland Blount 5,320 shares
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 9
<PAGE>
(iv) Rowland Grandchildren's Trust
f/b/o Charlotte McHenry Blount 5,320 shares
(v) Rowland Grandchildren's Trust
f/b/o Macon Howard Blount 5,320 shares
(e) MERGER CONSIDERATION: TOTAL SHARES OF AMNEX COMMON STOCK. As a
consequence of the issuance and delivery of the AMNEX Share
Certificates delivered pursuant to paragraphs (c) and (d) of this
SECTION 2.1, AMNEX shall have delivered the AMNEX Share Certificates
evidencing shares of AMNEX Common Stock, as follows:
<TABLE>
<CAPTION>
Holdback Non-Holdback
Seller/Issuee Shares Shares Total
- ------------- -------- ------------ -----
<S> <C> <C> <C>
(i) R. Rowland 1,035,250 1,217,436 2,252,686
(ii) D. Rowland 80,876 97,187 178,063
(iii) Simmons 161,752 194,374 356,126
(iv) M. Moehle 181,971 218,670 400,641
(v) B. Cromwell 60,657 72,890 133,547
(vi) Wood 61,514 73,919 135,433
(vii) Matheson 35,126 42,211 77,337
(viii)Sirrom Capital 63,429 76,222 139,651
(ix) Spectrum 181,227 217,775 399,002
(x) Rowland's Grandchildren's
Trust f/b/o -
- Robert Adrian Ashworth Hollis 0 5,320 5,320
- Nicolas McHenry Rowland Hollis 0 5,320 5,320
- Robert Rowland Blount 0 5,320 5,320
- Charlotte McHenry Blount 0 5,320 5,320
- Macon Howard Blount 0 5,320 5,320
--------- --------- ---------
TOTALS 1,861,802 2,237,284 4,099,086
</TABLE>
(f) MERGER CONSIDERATION: ISSUANCE OF WARRANTS AND DELIVERY OF
CERTIFICATES EVIDENCING THE WARRANTS. At the Closing and upon the
filing of the Articles of Merger, Purchaser will issue to Sellers
warrants to purchase a total of 400,000 shares of AMNEX Common Stock
("WARRANTS") and will deliver to Sellers certificates substantially in
the form of EXHIBIT B evidencing such Warrants. The number of
Warrants to be issued to each Seller is as follows:
Warrants
--------
(i) R. Rowland 222,205
(ii) M. Moehle 39,061
(iii) Simmons 34,720
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 10
<PAGE>
(iv) D. Rowland 17,360
(v) B. Cromwell 13,021
(vi) Wood 13,203
(vii) Matheson 7,540
FIRST AMENDEMENT TO STOCK PURCHASE AGREEMENT 11
<PAGE>
(vii) Sirrom Capital 13,988
(viii) Spectrum 38,902
-------
TOTAL 400,000
The Warrants will be exercisable at any time within two years
from the date of issuance (the "WARRANT EXPIRATION DATE") at an
exercise price of $4.51 per share, and shall expire if not
exercised within that period.
(g) ESCROW AGREEMENT. The Escrow Agreement governs the agreements
and understandings among Purchaser and Sellers concerning the
Holdback Shares, including their agreements regarding the
application of Holdback Shares to (i) offset any excess of the
Negative Factor above the Allowed Amount and (ii) indemnify
Purchaser against Breaches, and their agreements regarding the
release of Holdback Shares to Seller.
(h) RESTRICTED SECURITIES. Neither the shares of AMNEX Common Stock
to be issued to Sellers, including the Holdback Shares, nor the
Warrants nor the shares of AMNEX Common Stock underlying the
Warrants are registered securities, I.E., none of such shares or
Warrants have been registered under the Securities Act of 1933,
as amended (the "SECURITIES ACT"), or under the securities laws
of any of the states of the United States. It is understood by
Sellers that all of such shares and Warrants shall be considered
to be "restricted securities," as that term is commonly used and
understood within the context of the federal and state securities
laws, and will be restricted as to transferability at the time
they are issued. The AMNEX Share Certificates representing such
Shares and the Warrants will bear a legend describing the
restrictions on transferability.
(i) WAIVER OF CERTAIN RIGHTS. Sellers waive any Rights they may have
under Article 5.12 or other applicable provisions of the Texas
Business Corporation Act to dissent from any of the actions of
the CNSI Companies contemplated by, or intended to be effected
by, this Agreement, and any Rights they may have to require an
appraisal of the fair value of their Shares.
2.2 PURCHASE AND SALE OF R. ROWLAND CNI SHARES AND R. ROWLAND CNM
SHARES.
Upon the terms and subject to the conditions contained in this
Agreement, and in reliance upon the representations, warranties and covenants
set forth herein, at the Closing, R. Rowland will sell the R. Rowland CNI
Shares and the R. Rowland CNM Shares to Purchaser, and Purchaser will purchase
the R. Rowland CNI Shares and the R. Rowland CNM Shares, free and clear of any
and all Liens. The purchase price to be paid for such shares will be $100,
payable in the form of Purchaser's check payable to the order of R. Rowland. R.
Rowland will deliver the certificate or
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 12
<PAGE>
certificates evidencing the R. Rowland CNI Shares and the R. Rowland CNM Shares,
duly endorsed for transfer to Purchaser or accompanied by stock powers duly
executed by R. Rowland.
2.3 FURTHER ASSURANCES. Whenever requested by or on behalf of
Purchaser, but without further consideration, Sellers will (i) execute and
deliver such other instruments of sale, assignment, transfer and conveyance and
take such other action as Purchaser reasonably may request in order to vest in
Purchaser or put Purchaser in possession of the CNSI Shares, the R. Rowland CNI
Shares and the R. Rowland CNM Shares; (ii) provide such reasonable information
and assistance, at Purchaser's expense, as Purchaser reasonably may request to
allow Purchaser or its assigns to operate the business of the CNSI Companies;
and (iii) provide such reasonable information and assistance as Purchaser
reasonably may request to vest all rights, titles and interests in and to the
CNSI Shares, the R. Rowland CNI Shares and the R. Rowland CNM Shares in
Purchaser as provided in this Agreement."
3.D AMENDMENTS TO ARTICLE 4. The preamble to Article 4 is hereby amended
to read in its entirety as follows:
"ARTICLE 4
CERTAIN REPRESENTATIONS, WARRANTIES
AND AGREEMENTS OF SELLERS
In addition to the representations and warranties provided by Sellers in
ARTICLE 3, each of the Sellers (other than Spectrum and Sirrom Capital, who make
no representations or warranties of any kind under this ARTICLE 4) severally (in
proportion to each such Seller's Proportionate Interest), represents and
warrants to, and agrees with, Purchaser as follows:"
3.E AMENDMENTS TO SECTION 9.1. Section 9.1 of the Stock Purchase
Agreement is hereby amended in part as follows (paragraphs ((a), (b), (c), (d),
(e), (g), (h), (i), (j), (k), (l), (o), (p), (u), (v), (w) and (x), are
unchanged and remain in full force and effect):
3.E.1 Paragraph (f) of Section 9.1 is hereby amended to read in its
entirety as follows:
"(f) Purchaser shall have received an opinion, dated the Closing
Date, of Counsel to Sellers substantially in the form of EXHIBIT D, but
with such changes therein with respect to the merger transaction
contemplated in SECTION 2.1 as Purchaser and Counsel to Sellers shall
agree."
3.E.2 Paragraph (m) of Section 9.1 is hereby amended to read in its
entirety as follows:
"(m) At or prior to the Closing, all loans and advances due from R.
Rowland, M. Moehle, Simmons, Wood, Matheson, and the Estate of Jack Rowland
to CNSI shall have been forgiven and cancelled pursuant to the execution of
a Debt Cancellation Agreement in the form of EXHIBIT G."
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 13
<PAGE>
3.E.3 Paragraph (n) of Section 9.1 is hereby amended to read in its
entirety as follows:
"(n) At the Closing, CNSI shall have renewed, extended and modified
the indebtedness owed by CNSI to R. Rowland and described in SCHEDULE
9.1(N) (the "ROWLAND DEBT") by executing an amended and restated promissory
note (the "ROWLAND RENEWAL NOTE") in the form and on the terms of EXHIBIT
H. The Rowland Renewal Note shall be secured by a perfected security
interest, acceptable as to priority to R. Rowland and Purchaser, in CNSI's
commercial credit card receivables, including the reserve amounts held by
the credit card billing company and processing bank with regard to CNSI's
credit card receivables or in such other properties as shall be agreed upon
by Purchaser and R. Rowland, pursuant to a Security Agreement entered into
between CNSI and R. Rowland in the form of EXHIBIT I."
3.E.4 Paragraph (q) of Section 9.1 is hereby deleted in its entirety from
the Stock Purchase Agreement.
3.E.5 Paragraph (r) of Section 9.1 is hereby deleted in its entirety.
3.E.6 Paragraph (s) of Section 9.1 is hereby deleted in its entirety.
3.E.7 Paragraph (t) of Section 9.1 is hereby amended to read in its
entirety as follows:
"(t) The CNSI Shareholders Agreement shall have been terminated
pursuant to the execution of the Termination Agreement in the form and on
the terms of EXHIBIT K."
3.E.8 Paragraph (y) of Section 9.1 is hereby deleted in its entirety.
3.E.9 Paragraph (z) of Section 9.1 is hereby deleted in its entirety.
3.F AMENDMENTS TO ARTICLE 10. Article 10 of the Stock Purchase Agreement
is hereby amended to read in its entirety as follows:
"ARTICLE 10
CLOSING
10.1 DATE OF CLOSING. Subject to ARTICLE 12, the Closing will take
place at the offices of Locke Purnell Rain Harrell P.C. in Austin, Texas,
on June 28, 1996; PROVIDED, HOWEVER, that, unless extended in writing by
all parties to this Agreement, this Agreement will terminate automatically
and without further notice if the Closing has not occurred by July 3,
1996."
3.G AMENDMENTS TO ARTICLE 11. Article 11 of the Stock Purchase Agreement
is hereby amended in part as follows:
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 14
<PAGE>
3.G.1. Paragraph (a) of Section 11.1 of the Stock Purchase Agreement is
hereby amended to read in its entirety as follows:
"(a) Subject to subsections (b) and (c) below, each Seller (other than
Sirrom Capital and Spectrum) severally (in proportion to such Seller's
Proportionate Interest) agrees to indemnify Purchaser and to hold it harmless
from and against any Loss which Purchaser may suffer, sustain or become subject
to, as a result of a Breach by such Seller (other than Sirrom Capital and
Spectrum) or the CNSI Companies; PROVIDED, HOWEVER, that with respect to a
Breach by any Seller (including Sirrom Capital and Spectrum) of any
representation, warranty or covenant contained in SECTION 3.1., 3.2 or 3.3 (an
"ARTICLE 3 BREACH"), each Seller severally agrees to indemnify Purchaser and to
hold it harmless from and against any Loss Purchaser may suffer or sustain or
become subject to, as a result of an Article 3 Breach by such Seller which
indemnification is not subject to limitations set forth in SECTIONS 11.1(b) or
(c) or SECTION 11.2."
3.G. AMENDMENT TO ARTICLE 11. A new Section 11.9 is hereby added to and
made a part of the Stock Purchase Agreement as follows:
"11.9. ACCRUED RESERVE FOR CONTINGENT LIABILITIES. CNSI has
established a reserve in the amount of $100,000 (the "CONTINGENT RESERVE")
to be available for application to, and if necessary applied to, (a)
damages paid or payable as the result of any adverse judgment, (b)
settlement amounts paid or payable, and (c) legal fees and expenses and
other out-of-pocket defense costs paid or payable (the foregoing are
referred to collectively as the "CONTINGENT LIABILITIES") in connection
with existing litigation or disputes between CNSI and (s) Gail Stradley,
(t) Kyle Pentecost, (u) Dwain Daniels, (v) Don Kaplan, (w) Mary
Petachenko, (x) Clay Jones, (y) Mickey Bentley, and (z) Landmark
Communications Co. and Mark Sawyer (the foregoing are referred to,
collectively, as the "CONTINGENT DISPUTES"). Sellers and Purchaser agree
that after the Closing Date the Contingent Reserve shall be applied to any
Contingent Liability for the Contingent Disputes; PROVIDED, HOWEVER, that
if the aggregate amount of the Contingent Liability exceeds the Contingent
Reserve, then indemnification pursuant to the provisions of SECTION 11.1
and 11.2 may be sought; PROVIDED, FURTHER HOWEVER, that with respect to any
Contingent Liability that exceeds the Contingent Reserve (the "EXCESS
LIABILITY"), the Excess Liability shall be a permissible claim by Purchaser
entitled to indemnification pursuant to SECTION 11.1 and 11.2 without
regard to the Deductible Amount. In the event that any amount remains in
the Contingent Reserve after all Contingent Liabilities are satisfied, such
amounts shall be released to the general reserve and utilized to offset
other post closing adjustments as may be required.
3.H AMENDMENTS TO ARTICLE 15. Article 15 of the Stock Purchase Agreement
is hereby as follows:
3.H.1 The following defined terms and their respective meanings are hereby
added to Section 15.1:
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 15
<PAGE>
"AAC is defined in SECTION 2.1.
AAC STOCK is defined in SECTION 2.1.
AMNEX SHARE CERTIFICATES is defined in SECTION 2.1.
ARTICLES OF MERGER. The Articles of Merger filed in the Office of the
Secretary of State for the State of Texas pursuant to the Plan of
Merger.
CNSI COMMON STOCK is defined in SECTION 2.1.
CONTINGENT DISPUTES is defined in SECTION 11.9.
CONTINGENT LIABILITIES is defined in SECTION 11. 9.
CONTINGENT RESERVE is defined in SECTION 11.9.
EFFECTIVE TIME. The "Effective Time" as defined in the Plan of
Merger.
EXCESS LIABILITY is defined in SECTION 11.9.
FIRST AMENDMENT. This First Amendment, including all Exhibits and
Schedules attached thereto.
INSTRUCTION LETTER is defined in SECTION 2.1.
PLAN OF MERGER is defined in SECTION 2.1.
ROWLAND GRANDCHILDREN'S TRUST is defined in SECTION 2.1.
SIRROM CNSI SHARES is defined in RECITAL H.
SIRROM TRANSACTION is defined in RECITAL H.
SPECTRUM CNSI SHARES is defined in RECITAL I.
SPECTRUM TRANSACTION is defined in RECITAL J."
3.H.2 The following defined terms included in SECTION 15.1 are amended to
read as follows:
"ADJUSTMENT NOTE" is defined in RECITAL I.
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 16
<PAGE>
AGREEMENT. This Stock Purchase Agreement, including all Schedules and
Exhibits hereto, as amended by the First Amendment, and as it may be renewed,
extended, restated, amended, modified or supplemented from time to time.
SPECTRUM. Spectrum Global Telecommunications Pty Limited, a limited
liability company organized under the laws of Australia."
3.H.3 The following defined terms included in SECTION 15.1 are hereby
deleted in their entirety:
"ADJUSTMENT TRANSACTION"
"DEED OF RELEASE"
"KNOW HOW LICENSE AGREEMENT"
3.I AMENDMENTS TO SECTION 16.15. Section 16.15 of the Stock Purchase
Agreement is hereby deleted in its entirety.
4. AMENDMENTS TO AND ADDITION OF EXHIBITS. EXHIBIT E attached to the
Stock Purchase Agreement is amended to read in its entirety as set forth in
EXHIBIT E attached to this First Amendment. The following Exhibits, attached to
this First Amendment, are deemed to be attached to and made a part of the Stock
Purchase Agreement for all purposes:
EXHIBIT F Plan of Merger and Articles of Merger
EXHIBIT G Debt Cancellation Agreement
EXHIBIT H Rowland Renewal Note
EXHIBIT I Security Agreement
EXHIBIT J Termination Agreement
5. AMENDMENTS TO SCHEDULES. ANNEX I to this Amendment contains updated
Schedules to the Agreement, as amended by this First Amendment. As to any such
updated Schedule indicating a modification, addition or deletion to the
corresponding Schedule to the Agreement, such updated Schedule is restated in
its entirety. If said Schedule would contain no such modification, addition or
deletion, then such updated Schedule merely makes reference to the corresponding
Schedule to the Agreement.
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 17
<PAGE>
6. PARTIES BOUND. The Stock Purchase Agreement, as herein amended, shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
set forth above.
PURCHASER: SELLERS:
/s/ ROBERT A. ROWLAND
AMNEX, Inc. ----------------------------
ROBERT A. ROWLAND
By: /s/ JOHN KANE JOINDER BY SPOUSE
------------------------------------
Name Printed: John Kane /s/ LINDA ROWLAND
-------------------------- ----------------------------
LINDA ROWLAND
Title: Executive Vice President
--------------------------------- /s/ DELAJANE ROWLAND
----------------------------
DELAJANE ROWLAND
JOINDER BY SPOUSE:
-NONE-
/s/ DONALD D. SIMMONS
----------------------------
DONALD D. SIMMONS
JOINDER BY SPOUSE:
/s/ CONNIE SIMMONS
----------------------------
CONNIE SIMMONS
/s/ C. MICHAEL MOEHLE
----------------------------
C. MICHAEL MOEHLE
JOINDER BY SPOUSE:
/s/ MARY H. MOEHLE
-----------------------------
MARY H. MOEHLE
/s/ BARBARA ANN CROMWELL
-----------------------------
BARBARA ANN CROMWELL
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 18
<PAGE>
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 19
<PAGE>
JOINDER BY SPOUSE:
/s/ RICHARD CROMWELL
----------------------------
RICHARD CROMWELL
/s/ ELLEN E. WOOD
----------------------------
ELLEN E. WOOD
JOINDER BY SPOUSE:
/s/ BRIAN WOOD
-----------------------------
BRIAN WOOD
/s/ DANIEL N. MATHESON
----------------------------
DANIEL N. MATHESON
JOINDER BY SPOUSE
/s/ JANE MATHESON
----------------------------
JANE MATHESON
SIRROM CAPITAL CORPORATION
By: /s/ KATHY HARRIS
-------------------------
Name: Kathy Harris
-----------------------
Title: Vice President
-----------------------
SPECTRUM GLOBAL
TELECOMMUNICATIONS PTY
LIMITED
By: /s/ WAYNE HOLLINGSWORTH
-------------------------
Name: Wayne Hollingsworth
-----------------------
Title: Authorized Agent
----------------------
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 20
<PAGE>
CNSI COMPANIES:
CAPITAL NETWORK SYSTEM, INC.
By: /s/ ROBERT A. ROWLAND
-------------------------
Name Printed: Robert A. Rowland
Title: Chairman of the Board
CAPITAL NETWORK INTERNATIONAL,
INC.
By: /s/ ROBERT A. ROWLAND
-------------------------
Name Printed: Robert A. Rowland
Title: Chairman of the Board
CAPITAL NETWORK MEXICO, S.A. de C.V.
By: /s/ ROBERT A. ROWLAND
-------------------------
Name Printed: Robert A. Rowland
Title: Chairman of the Board
POINT TO POINT COMMUNICATIONS
COMPANY
By: /s/ ROBERT A. ROWLAND
-------------------------
Name Printed: Robert A. Rowland
Title: Chairman of the Board
H:\USERS\ACCTG\JOE\EXELDATA\9KCNSI\FIRSTAME.WPD
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT 21
<PAGE>
VOID AFTER 5:00 P.M., NEW YORK CITY TIME, ON JUNE 28, 1998.
NEITHER THIS WARRANT NOR THE WARRANT STOCK (AS HEREINAFTER
DEFINED) HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). THIS WARRANT AND THE WARRANT STOCK MAY
BE TRANSFERRED ONLY IN COMPLIANCE WITH THE ACT. THIS LEGEND
SHALL BE ENDORSED UPON ANY WARRANT ISSUED IN EXCHANGE FOR THIS
WARRANT.
AMNEX, INC.
(Incorporated under the laws of the State of New York)
WARRANT
June 28, 1996
FOR VALUE RECEIVED, AMNEX, INC., a New York
corporation (the "Company"), hereby certifies that,
_____________________________ (the "Holder") is entitled,
subject to the provisions of this Warrant, to purchase from the
Company up to _________________________________(_________)
shares of Common Stock, par value .001 per share (the "Common
Stock") of the Company at a price of $4.51 per share (the
"Exercise Price") during the period commencing on June 28, 1996
(the "Commencement Date") and expiring at 5:00 P.M., New York
City time, on June 28, 1998 (the "Expiration Date").
The number of Common Shares to be received upon the
exercise of this Warrant may be adjusted from time to time as
hereinafter set forth. The Common Shares deliverable upon such
exercise, and as adjusted from time to time, are hereinafter
sometimes referred to as a "Warrant Stock."
The Holder agrees with the Company that this Warrant
is issued, and all the rights hereunder shall be held subject
to, all of the conditions, limitations and provisions set forth
herein.
1. EXERCISE OF WARRANT. This Warrant may be
exercised by its presentation and surrender to the Company at
its principal office, between the Commencement Date and 5:00
P.M., New York City time, on the Expiration Date, with the
Warrant Exercise Form attached hereto duly executed and
accompanied by payment (either in cash or by certified or
official bank check, payable to the order of the Company) of the
Exercise Price for the number of shares specified in such Form.
If this warrant should be exercised in part only, the Company
<PAGE>
shall, upon surrender of this Warrant for cancellation, execute
and deliver a new Warrant evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable
hereunder.
2. RESERVATION OF SHARES. The Company will at all
times reserve for issuance and delivery upon exercise of this
Warrant all Common Shares or other shares of capital stock of
the Company (and other securities and property) from time to
time receivable upon exercise of this Warrant.
3. FRACTIONAL SHARES. The Company shall not be
required to issue certificates representing fractions of Common
Shares, nor shall it be required to issue scrip or pay cash in
lieu of fractional interests, it being the intent of the Company
and the Holder that all fractional interests shall be
eliminated.
4. EXCHANGE OR ASSIGNMENT OF WARRANT. This Warrant
is exchangeable, without expense, at the option of the Holder,
upon presentation and surrender hereof to the Company for other
Warrants of different denominations, entitling the Holder to
purchase in the aggregate the same number of Common Shares
purchasable hereunder. Subject to the provisions of this Warrant
and the receipt by the Company of any required representations
and agreements, upon surrender of this Warrant to the Company
with the Warrant Assignment Form annexed hereto duly executed
and funds sufficient to pay any transfer tax, the Company shall,
without additional charge, execute and deliver a new Warrant in
the name of the assignee named in such instrument of assignment
and this Warrant shall promptly be canceled.
5. RIGHTS OF THE HOLDER. The Holder shall not, by
virtue hereof, be entitled to any rights of a shareholder of the
Company, either at law or in equity, and the rights of the
Holder are limited to those expressed in this Warrant.
6. ANTI-DILUTION PROVISIONS.
6.1 ADJUSTMENTS FOR STOCK DIVIDENDS,
COMBINATIONS, ETC. (a) In case the Company shall do any of the
following (an "Event"):
i) declare a dividend or other
distribution on its Common Shares payable in Common Shares of
the Company;
ii) subdivide the outstanding Common Shares
pursuant to a stock split or otherwise;
2
<PAGE>
iii) combine the outstanding Common Shares
into a smaller number of shares pursuant to a reverse split or
otherwise; or
iv) reclassify or otherwise change its
Common Shares;
then the Exercise Price in effect at the time of the record date
for such dividend or other distribution or of the effective date
of such subdivision, combination, reclassification or other
change shall be changed to a price determined by dividing (a)
the product of the number of Common Shares outstanding
immediately prior to such Event, multiplied by the Exercise
Price in effect immediately prior to such Event by (b) the
number of Common Shares outstanding immediately after such
Event. Each such adjustment of the Exercise Price shall be
calculated to the nearest cent. No such adjustment shall be
made in an amount less than one cent ($.O1), but any such amount
shall be carried forward and shall be given effect in connection
with the next subsequent adjustment. Such adjustment shall be
made successively whenever any Event listed above shall occur.
(b) Whenever the Exercise Price is adjusted as
set forth in Section 6.1 (whether or not the Company then or
thereafter elects to issue additional Warrants in substitution
for an adjustment in the number of shares of Warrant Stock), the
number of shares of Warrant Stock specified in each Warrant
which the Holder may purchase shall be adjusted, to the nearest
full share, by multiplying such number of shares of Warrant
Stock immediately prior to such adjustment by a fraction, of
which the numerator shall be the Exercise Price immediately
prior to such adjustment and the denominator shall be the
Exercise Price immediately thereafter.
6.2 ADJUSTMENT FOR REORGANIZATION,
CONSOLIDATION OR MERGER. In case of any reorganization of the
Company (or any other corporation, the securities of which are
at the time receivable on the exercise of this Warrant) after
the date hereof or in case after such date the Company (or any
such other corporation) shall consolidate with or merge with or
into another corporation, then, and in each such case, the
Holder of this Warrant upon the exercise thereof as provided in
Section 1 at any time after the consummation of such
reorganization, consolidation, or merger, shall be entitled to
receive, in lieu of the securities and property receivable upon
the exercise of this Warrant prior to such consummation, the
securities or property to which such Holder would have been
entitled upon such consummation if such Holder had exercised
this Warrant immediately prior thereto all subject to further
adjustment as provided in Section 6.1; in each such case, the
terms of this Warrant shall be applicable to the securities or
3
<PAGE>
property receivable upon the exercise of this Warrant after such
consummation.
7. RESTRICTIONS ON EXERCISE.
7.1 INVESTMENT INTENT. Unless, prior to the
exercise of the Warrant, the issuance of the Warrant Stock has
been registered with the Securities and Exchange Commission
pursuant to the Act, the notice of exercise shall be accompanied
by a representation of the Holder to the Company to the effect
that such shares are being acquired for investment and not with
a view to the distribution thereof, and such other documentation
as may be required by the Company, unless in the opinion of
counsel to the Company such representation or other
documentation is not necessary to comply with such Act.
7.2 LISTING: QUALIFICATION. The Company shall
not be obligated to deliver any shares of Warrant Stock until
they have been listed on each securities exchange or other
self-regulatory body on which the Company's Common Shares may
then be listed or until there has been qualification under or
compliance with such federal or state laws, rules or regulations
as the Company may deem applicable, including, without
limitation, compliance with Rule 10b-17 promulgated under the
Securities Exchange Act of 1934, as amended. The Company shall
use reasonable efforts to obtain such listing, qualification and
compliance.
8. RESTRICTIONS ON TRANSFER.
8.1 RESTRICTIONS GENERALLY: TRANSFER TO COMPLY
WITH THE SECURITIES ACT OF 1933. Neither this Warrant nor any
Warrant Stock may be sold, assigned, transferred, or otherwise
disposed of except as follows: (1) to a person who, in the
opinion of counsel satisfactory to the Company, is a person to
whom this Warrant or the Warrant Stock may legally be
transferred without registration and without the delivery of a
current prospectus under the Act with respect thereto and then
only against receipt of an agreement of such person to comply
with the provisions of this Section 8 with respect to any
resale, assignment, transfer or other disposition of such
securities; or (2) to any person upon delivery of a prospectus
then meeting the requirements of the Act relating to such
securities and the offering thereof for such sale, assignment,
transfer or disposition.
8.2 LEGEND. Subject to the terms hereof, upon
exercise of this Warrant and the issuance of the Warrant Stock,
all certificates representing such Warrant Stock shall bear on
the face or reverse thereof substantially the following legend:
4
<PAGE>
"The Common Shares represented by this certificate
have not been registered under the Securities Act of
1933, as amended, and may not be sold, offered for
sale, assigned, transferred or otherwise disposed of
unless registered pursuant to the provisions of that
Act or such disposition is otherwise in compliance
with an available exemption from such registration."
9. LOST, STOLEN OR DESTROYED WARRANTS. In the event
that the Holder notifies the Company that this Warrant has been
lost, stolen or destroyed and either (a) provides a letter, in
form satisfactory to the Company, to effect that it will
indemnify the Company from any loss incurred by it in connection
therewith, and/or (b) provides an indemnity bond in such amount
as is reasonably required by the Company, the Company having the
option of electing either (a) or (b) or both, the Company may,
in its sole discretion, accept such letter and/or indemnity bond
in lieu of the surrender of this Warrant as required by Section
1 hereof.
10. APPLICABLE LAW. This Warrant is issued under, and
shall for all purposes be governed by and construed in
accordance with, the laws of the State of New York, excluding
choice of law principles thereof.
IN WITNESS WHEREOF, the Company has caused this
Warrant to be signed on its behalf, in its corporate name, by
its duly authorized officer, all as of the day and year first
above written.
AMNEX, INC.
By:_____________________
AGREED TO:
____________________________
By: _______________________
Name Printed:
Title:
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<PAGE>
AMNEX, INC.
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise
the within Warrant dated June 28, 1996 to the extent of
purchasing __________ Common Shares of AMNEX, Inc. The
undersigned hereby makes a payment of $___________ in payment
thereof.
___________________________
Name of Holder
___________________________
Signature of Holder or
Authorized Representative
___________________________
Signature, if jointly held
___________________________
Name and Title of Authorized
Representative
___________________________
Address of Holder
___________________________
Date
<PAGE>
AMNEX, INC.
WARRANT EXERCISE FORM
FOR VALVE RECEIVED, _______________________ hereby
sells, assigns and transfers unto
Name ___________________________________________________________
(Please typewrite or print name of assignee in block letters)
Address ________________________________________________________
the right to purchase Common Shares of AMNEX, Inc. represented
by this Warrant dated June 28, 1996 to the extent of
_____________ shares and does hereby irrevocably constitute and
appoint _________________ attorney to transfer the same on the
books of the Company with full power of substitution in the
premises.
____________________________
Name of Holder
___________________________
Signature of Holder or
Authorized Representative
___________________________
Signature, if jointly held
___________________________
Name and Title of Authorized
Representative
___________________________
Address of Holder
___________________________
Date
_________________________
Signature(s) guaranteed:
