UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission File Number: 0-17158
AMNEX, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
New York 11-2790221
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of ) (I.R.S Employer Identification No.)
Incorporation or Organization
6 Nevada Drive, Lake Success, New York 11042
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(516) 326-2540
- --------------------------------------------------------------------------------
Registrant's Telephone Number, Including Area Code
101 Park Avenue, Suite 2507, New York, New York 10178
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. (X) Yes ( ) No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. ( )Yes ( ) No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: Common Stock, $.001 par
value: 34,044,729 shares at September 30, 1997.
<PAGE>
<TABLE>
AMNEX, INC.
Consolidated Balance Sheets
(In thousands)
<CAPTION>
September 30,
1997 December 31,
(unaudited) 1996
Assets
Current assets:
<S> <C> <C>
Cash $ 1,236 $ 4,947
Trade receivables, less allowance for doubtful accounts of $4,579
as of September 30, 1997 and $2,757 as of December 31, 1996 21,945 19,311
Parts inventory 1,032 739
Deferred income taxes 1,791 1,791
Customer advances 1,028 2,414
Deposits and other current assets 1,182 861
-----------------------------------
Total current assets 28,214 30,063
Investment in unconsolidated subsidiary 5,091 ---
Property and equipment, net 24,410 23,851
Deposits and other 3,399 1,543
Intangible assets, net 9,680 5,947
Goodwill, net 29,130 29,955
Total assets $ 99,924 $ 91,359
===================================
</TABLE>
F-1
<PAGE>
<TABLE>
AMNEX, INC.
Consolidated Balance Sheets (continued)
(In thousands, except share data)
<CAPTION>
September 30,
1997 December 31,
(unaudited) 1996
----------------- -----------------
Liabilities and shareholders' equity Current liabilities:
<S> <C> <C>
Short-term debt $ 15,307 $ 11,498
Accounts payable 8,700 3,651
Accrued expenses 6,628 7,733
Accrued network expenses 2,247 1,975
Accrued commissions 2,155 3,169
Accrued taxes payable 1,523 1,406
Due to related party 2,498 1,198
Current portion of capital lease obligations 1,829 2,179
Current portion of long-term debt 2,418 2,248
----------------- -----------------
Total current liabilities 43,305 35,057
Capital lease obligations 1,530 2,668
Long-term debt 26,617 13,530
Minority interest 428 10
Compensation payable 805 894
Obligations under non-compete agreement 1,314 2,630
Common stock subject to redemption 3,250 3,250
Commitments and contingencies
Shareholders' equity:
Voting Preferred Stock, $.001 par; authorized 5,000,000 shares: Series B
Preferred Stock, authorized 356,000 shares, issued and
outstanding zero shares at September 30, 1997 and 72,450
shares at December 31, 1996 (liquidation preference $362) -0- 362
Series D Preferred Stock, authorized 1,413,337 shares, issued and
outstanding zero shares at September 30, 1997 and 1,413,337
shares at December 31, 1996 (liquidation preference $3,533) -0- 3,533
Series E Preferred Stock, authorized 1,085,000 shares, issued and
outstanding zero shares at September 30, 1997 and 1,035,000
shares at December 31, 1996 (liquidation preference $2,911) -0- 2,911
Series F Preferred Stock, authorized 415,250 shares, issued and
outstanding zero shares at September 30, 1997 and 415,250
shares at December 31, 1996 (liquidation preference $2,076) -0- 2,076
Series G Preferred Stock, authorized 145,000 shares, issued and
outstanding zero shares at September 30, 1997 and 78,750 shares at
December 31, 1996 (liquidation preference $1,575 at
December 31, 1996) -0- 1,179
Common stock, $.001 par; authorized 70,000,000, issued 34,062,979
at September 30, 1997 and 26,897,892 shares at December 31, 34 27
1996
Capital in excess of par value 65,477 56,093
Accumulated deficit (42,360) (32,385)
----------------- -----------------
23,151 33,796
Less 18,250 common shares held in treasury, at cost (476) (476)
----------------- -----------------
Total shareholders' equity 22,675 33,320
Total liabilities and shareholders' equity $ 99,924 $ 91,359
================= =================
See accompanying notes.
</TABLE>
F-2
<PAGE>
<TABLE>
AMNEX INC.
Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 1997 and 1996
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $31,358 $37,430 $93,707 $88,188
Costs and expenses:
Cost of sales and service 28,207 30,494 78,753 70,942
Selling, general and administrative 5,992 3,172 11,980 9,018
Depreciation and amortization 2,513 1,758 6,704 4,124
Restructuring charge -0- -0- 1,400 -0-
---------------------------------------------------------------------------
36,712 35,424 98,837 84,084
Operating income (loss) (5,354) 2,006 (5,130) 4,104
Interest expense 1,131 869 2,823 1,973
---------------------------------------------------------------------------
Income (loss) before income taxes
and minority interest (6,485) 1,137 (7,953) 2,131
Minority interest in income (loss)
of subsidiaries 3 -0- (5) -0-
---------------------------------------------------------------------------
Income (loss) before income taxes (6,482) 1,137 (7,958) 2,131
Provision for income taxes 75 240 175 436
---------------------------------------------------------------------------
Net income (loss) $(6,557) $ 897 $ (8,133) $ 1,695
===========================================================================
Preferred share dividend $ 154 $ 154 $ 462 $ 462
---------------------------------------------------------------------------
Net income (loss) available
for common shares $(6,711) $ 743 $ (8,595) $ 1,233
===========================================================================
Net income (loss) per common share $ (.21) $ .03 $ (.29) $ .06
===========================================================================
Weighted average number of shares
outstanding used in computing net
income (loss) per common share: 31,597 24,666 30,081 22,014
===========================================================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
AMNEX, INC.
Consolidated Statement of Shareholders' Equity
December 31, 1996 through September 30,1997
(In thousands, except share data)
(Unaudited)
<CAPTION>
Common Stock Preferred Preferred Preferred Preferred Preferred
$.001 par value Stock Stock Stock Stock Stock
Shares Amount Series B Series D Series E Series F Series G
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 26,897,892 $27 $ 362 $ 3,533 $ 2,911 $ 2,076 $ 1,179
Issuance of common shares 3,933,982 4
Exercise of stock options 16,308
Issuance of preferred shares and
warrant for investment
Vesting of stock grants 24,500
Issuance of warrants
Exercise of warrants 155,000
Payment of preferred dividends
Conversion of preferred shares 3,035,297 3 (362) (1,179)
Repurchase of preferred shares (3,533) (2,911) (2,076)
Net loss
Balance, September 30, 1997 34,062,979 $34 $ -0- $ -0- $ -0- $ -0- $ -0-
================================================================================================
<CAPTION>
Preferred Capital in Total
Stock Excess of Accumulated Treasury Shareholders'
Series L Par Value Deficit Stock Equity
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $56,093 ($32,385) ($476) $33,320
Issuance of common shares 2,154 2,158
Exercise of stock options 45 45
Issuance of preferred shares and
warrant for investment $ 3,636 1,455 5,091
Vesting of stock grants 56 56
Issuance of warrants 400 400
Exercise of warrants 100 100
Payment of preferred dividends (1,842) (1,842)
Conversion of preferred shares (3,636) 5,174
Repurchase of preferred shares (8,520)
Net loss (8,133) (8,133)
Balance, September 30, 1997 $ -0- $65,477 $(42,360) ($476) $22,675
===============================================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
AMNEX, INC.
Consolidated Statements of Cash Flows
Nine months ended September 30, 1997 and 1996
(In thousands)
(Unaudited)
<CAPTION>
1997 1996
----------------------------
Cash flows from operating activities
<S> <C> <C>
Net income (loss) $(8,133) $ 1,695
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 6,704 4,124
Minority interest (17)
Provision for losses on receivables 1,822 (494)
Changes in operating assets and liabilities:
Trade receivables (4,592) 546
Parts inventory (107) (80)
Note receivable 1,279
Customer advances, deposits and other current assets 350 564
Deposits and other assets (1,169) 169
Accounts payable and accrued expenses 1,007 (3,888)
----------------------------
Net cash provided by (used in) operating activities (4,135) 3,915
Cash flows from investing activities
Purchase of businesses, net of cash acquired (1,032)
Purchase of phones (1,106) (150)
Expenditures for property and equipment (1,607) (1,840)
Acquisition of Teleplus Dealer Agreement (1,500)
Cash received from acquisition 910
Phone contracts purchased (579)
Proceeds from sale of assets 867
----------------------------
Net cash used in investing activities (3,745) (2,292)
Cash flows from financing activities
Proceeds from the exercise of common stock options 45 136
Proceeds from related party 1,300
Borrowings under revolving credit, net 4,309 (621)
Proceeds from long term debt 15,750
Payment of debt issuance costs (1,622)
Long term debt payments (3,763) (703)
Principal payments under capital lease obligations (1,488) (927)
Preferred dividends paid (1,842)
Purchase of preferred stock (8,520)
Proceeds from sale of preferred shares 2,000
Proceeds from the sale of common stock 225
Payment of stock registration rights (20)
----------------------------
Net cash provided by financing activities 4,169 90
----------------------------
Net increase (decrease) in cash (3,711) 1,713
Cash at beginning of period 4,947 94
----------------------------
Cash at end of period $ 1,236 $ 1,807
============================
</TABLE>
See accompanying notes.
F-5
<PAGE>
Supplemental disclosure of cash flow information:
(In thousands, except share data)
Nine months ended September 30, 1997:
1. The Company issued 100,000 Series L Preferred Shares convertible into
1,500,000 Common Shares.
2. The Company issued 810,797 Common Shares pursuant to the conversion of
78,750 Series G Preferred Shares.
3. The Company issued 1,500,000 Common Shares pursuant to the conversion of
100,000 Series L Preferred Shares.
4. The Company issued 94,369 Common Shares for the acquisition of pay
telephones.
5. The Company issued 526,168 Common Shares pursuant to agreement with
Teleplus, Inc.
6. The Company issued 3,341,326 Common Shares pursuant to the conversion of
$500 of debt plus accrued interest thereon.
7. The Company issued 155,000 Common Shares pursuant to the exercise of
155,000 warrants.
8. The Company issued 24,500 Common Shares pursuant to the 1996 Restricted
Stock Grant Plan.
9. The Company issued 724,500 Common Shares pursuant to the conversion of
Series B Preferred Shares.
10. Interest of approximately $2,857 was paid.
11. Income taxes of approximately $674 were paid.
Nine months ended September 30, 1996:
1. In January 1996, the holder of an aggregate of 50,000 shares of the
Company's Series E Preferred Stock elected to convert such shares into
50,000 shares of the Company's Common Stock.
2. Interest of approximately $1,601 was paid.
3. Income taxes of approximately $244 were paid.
4. Capital lease obligations incurred to acquire property and equipment were
approximately $1,548.
5. The Company issued 4,099,086 Common Shares upon acquisition of Capital
Network System, Inc.
6. The Company issued 550,725 Common Shares upon acquisition of National
Business Exchange, Inc.
7. The Company holds 1,052,336 issuable Common Shares for the acquisition of
the Teleplus, Inc. Dealer Agreement.
8. The Company issued 44,643 Common Shares pursuant to the conversion of $150
of debt plus accrued interest thereon.
9. The Company issued 54,340 Common Shares for the acquisition of pay
telephones.
F-6
<PAGE>
AMNEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information in response to the requirements of Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, the
accompanying unaudited consolidated financial statements contain all
adjustments (consisting of normal recurring accruals) necessary to present
fairly the financial position as of September 30, 1997; results of
operations for the three and nine months ended September 30, 1997 and 1996;
cash flows for the nine months ended September 30, 1997 and 1996; and
changes in shareholders' equity for the nine months ended September 30,
1997. For further information, refer to AMNEX's financial statements and
notes thereto included in the Company's Form 10-K for the year ended
December 31, 1996. The December 31, 1996 balance sheet has been derived
from AMNEX's audited financial statements as of that date. Certain prior
year amounts were reclassified to conform with the current period
presentation.
2. Recently Issued Accounting Standards
In February 1997, the FASB issued SFAS No. 128 "Earnings Per Share," which
is effective for financial statements issued for periods ending after
December 15, 1997. This pronouncement establishes standards for computing
and presenting earnings per share ("EPS") for entities with publicly-held
common stock or potential common stock. SFAS 128 simplifies the standards
for computing EPS and makes them comparable to international EPS standards.
Early application of this statement is not permitted.
In February 1997, the FASB issued SFAS No. 129, Disclosure of Information
about Capital Structure, which is applicable to all companies. Capital
structure disclosures required by SFAS 129 include liquidation preferences
of preferred stock, information about the pertinent rights and privileges
of the outstanding equity securities, and the redemption amounts for all
issues of capital stock that are redeemable at fixed or determinable prices
on fixed or determinable dates. SFAS 129 is effective for financial
statements for periods ending after December 15, 1997.
In June, 1997, the FASB issued SFAS No. 131, Disclosures About Segments of
an Enterprise and Related Information, which significantly changes the way
public companies report segment information in annual financial statements
and also requires those companies to report selected segment information in
interim financial reports to shareholders. SFAS No. 131 is effective for
periods beginning after December 15, 1997.
The Company intends to adopt the provisions of these standards in 1998 and
does not expect their application to have a material impact on the
financial statements of the Company.
3. Related Party Transactions
Pursuant to a Stock Exchange Agreement, dated as of January 7, 1997,
between the Company and Francesco Galesi, a Director of the Company, the
Company acquired from Mr. Galesi 10% of the outstanding capital stock of
Elektra Communication, Inc. ("ECI"), a telecommunications company
controlled by him. Pursuant to the terms of the Stock Exchange Agreement,
(i) Mr. Galesi was issued 100,000 Series L Preferred Shares
F-7
<PAGE>
AMNEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
of the Company which automatically converted in May 1997 into an aggregate
of 1,500,000 Common Shares (the "Conversion Shares") upon the filing of a
Certificate of Amendment to the Certificate of Incorporation of the Company
pursuant to which the number of Common Shares authorized for issuance was
increased from 40,000,000 to 70,000,000; (ii) Mr. Galesi was issued a
warrant which entitles him to purchase 1,500,000 Common Shares (the
"Warrant Shares") at an exercise price of $3.03 per share (subject to
reduction to zero in the event, during any continuous six month period
commencing with January 1, 1997 and ending on December 31, 1999, the
consolidated revenues from operations of ECI are at least $12,500,000);
(iii) Mr. Galesi was granted certain registration rights under the
Securities Act with regard to the Conversion Shares and Warrant Shares;
(iv) Peter M. Izzo, Jr., then Chief Executive Officer of the Company, was
elected a Director of ECI; (v) Mr. Galesi was elected a Director of the
Company; (vi) Mr. Galesi agreed that he would utilize ECI as his sole
vehicle with regard to the conduct of international telecommunications
business; (vii) Mr. Galesi agreed to a two year lock-up with regard to any
securities acquired from the Company pursuant to the transaction; and
(viii) Mr. Galesi granted the Company certain "tag along" rights with
regard to the sale of the ECI capital stock acquired.
The Company's 10% investment in ECI is accounted for on the cost method and
the value of the investment has been based on a preliminary estimate of the
fair value of the Series L Preferred Shares and warrant issued, based upon
the market prices of AMNEX's stock at the date of issuance, less a
discount, and using the Black- Scholes model to value the warrant.
In connection with the Friedli Client Repurchases, (see Convertible
Subordinated Notes footnote), pursuant to a Note Purchase Agreement dated
as of June 10, 1997, Mr. Galesi acquired from certain clients of Friedli
Corporate Finance AG certain convertible promissory notes of the Company in
the aggregate principal amount of $404,000 for an aggregate purchase price
of $3,863,000, and, pursuant to the terms of the acquired notes, converted
the principal amounts thereof, together with accrued interest thereon of
approximately $139,000, into 2,717,326 Common Shares. The Common Shares
acquired by Mr. Galesi are subject to a one year lock-up agreement with the
initial purchaser of the Convertible Subordinated Notes.
On June 3, 1997, the Company borrowed $2,000,000 for working capital
purposes from an irrevocable trust established by Mr. Galesi. The
promissory note evidencing the loan provided for interest at the rate of
10% per annum and the payment of the principal amount thereof within 15
days following receipt of demand for payment. The Company's repayment
obligation was secured by a security interest in certain accounts
receivable of certain of its subsidiaries. This note was repaid in
September 1997 with the proceeds of a $5,000,000 revolving line of credit
obtained on September 10, 1997 from the CIT Group/Credit Finance, Inc.
On September 18, 1997, the Company borrowed $500,000 for working capital
purposes from Rotterdam Ventures, Inc. ("Rotterdam"), a company wholly
owned by Mr. Galesi. The note evidencing the loan (the "$500,000 Note")
provides for interest at the rate of 10% per annum and the payment of the
principal amount thereof on September 18, 1998. Payment of the $500,000
Note is secured by a security interest in certain payphones owned by one of
the Company's subsidiaries.
On September 30, 1997, the Company borrowed an additional $800,000 from
Rotterdam for use in satisfying a portion of certain claims against the
Company by National Telecom USA, Inc. ("National"). The note evidencing the
loan is unsecured and provides for interest at the rate of 6% per annum and
the payment of the principal amount thereof on September 30, 1998.
F-8
<PAGE>
AMNEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
In October 1997 the Company borrowed $900,000 for working capital purposes
from Rotterdam under an unsecured demand promissory note which bears
interest at the rate of 10% per annum.
4. Convertible Subordinated Notes
On September 30, 1997, the Company issued 8 1/2% Convertible Subordinated
Notes due 2002 (the "Notes") in the aggregate principal amount of
$15,000,000. The issuance was made to certain institutional investors in
the United States and certain investors outside the United States. The
Notes will be convertible, at the option of the holder, into common shares,
after December 29, 1997 at a conversion price of $2.7844 per share. The
securities offered were not registered under the Securities Act of 1933, as
amended, and may not be offered or sold in the United States absent
registration or an applicable exemption from the registration requirements.
The Company has agreed to grant certain registration rights with respect to
the resale of the Notes and the underlying Common Shares. A substantial
portion of the net proceeds of the offering was used to repurchase certain
outstanding convertible promissory notes and preferred shares of the
Company and to repay certain other debt of the Company, in each case held
by clients of Friedli Corporate Finance AG (the "Friedli Client
Repurchases").
F-9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three and Nine Months Ended September 30, 1997 Compared With
Three and Nine Months Ended September 30, 1996
Results of Operations
For the three months ended September 30, 1997, the Company's operating loss
totaled $5,354,000 with revenues of $31,358,000, compared to $2,006,000 in
operating income with revenues of $37,430,000 in the prior year September
quarter. The reduction in revenue in the third quarter of 1997 was primarily due
to lower operator service revenue, partially offset by increased payphone
revenues. The current quarter loss is primarily attributable to reduced revenue,
increased network costs associated with international operator services revenue,
a $2,158,000 write-off related to a joint venture investment and $1,310,000 in
charges related to local exchange carriers and customer receivables, and a
$1,315,000 provision established for dial around compensation (see Regulatory
Developments section following).
For the nine month period ended September 30, 1997, the Company had an
operating loss of $5,130,000 with revenues of $93,707,000 versus operating
income of $4,104,000 with revenues of $88,188,000 for the comparable period in
1996. In addition to the effect of the third quarter costs and charges noted
above, the 1997 nine month period includes a $1,400,000 restructuring charge
recorded in the first quarter of 1997. This charge related to the Company's
plan, which is substantially complete, to close certain of its facilities and
eliminate redundant functions. The benefits expected by the Company from this
restructuring are reduced costs in subsequent quarters. The nine month 1996
results include a $1,500,000 gain from the sale of certain assets related to the
validation and fraud management of the Company's operator services revenue base.
<TABLE>
The table below sets forth the Company's revenues by product line.
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
-----------------------------------------------------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Domestic operator services $17,022 $25,286 $49,662 $66,993
International operator services 4,569 6,524 18,124 6,524
Long distance services 1,928 2,659 5,861 6,503
1+ Coin services 2,132 1,582 5,583 2,917
Payphone ownership and operation 5,901 1,520 15,071 4,084
PBX program services 509 620 1,341 1,307
Billing services 1,020 -0- 2,324 -0-
--------- ----------- --------- ---------
33,081 38,191 97,966 88,328
Other revenue 1,500
Intercompany (1,723) (761) (4,259) (1,640)
---------- ----------- ---------- ---------
$31,358 $37,430 $93,707 $88,188
========== =========== ========== =========
</TABLE>
The decrease in domestic and international operator services revenue is
principally attributable to increased dial around usage and a reduction in the
number of phones under contract. The Company recognized that such services will
not contribute to the growth of the Company and, therefore, has made strategic
acquisitions in 1996 and 1997 related to the payphone and billing businesses.
F-10
<PAGE>
Cost of sales and services increased to 90% of revenue for the three months
ended September 30, 1997 versus 81% for the same period last year, and increased
to 84% of revenue for the nine months ended September 30, 1997 versus 80% for
the 1996 period. The increase is primarily attributable to increased network and
billing-related costs associated with traffic in Mexico related to international
telecommunications services. This was partially offset by a reduction in
commissions expense, which is considerably less in the international business
than the domestic business.
Selling, general and administrative expenses, exclusive of the joint
venture investment write-off of $2,158,000 and provision for dial around
compensation of $1,315,000 represented 8% of revenues for both the September
1997 and 1996 quarters, and, for the nine month period, represented 9% in 1997
versus 10% in 1996.
Interest expense increased from $869,000 in the third quarter of 1996 to
$1,131,000 for the current quarter and from $1,973,000 to $2,823,000 for the
year to date due to increased borrowings primarily related to CNSI and payphone
acquisitions during the later part of 1996.
Liquidity and Capital Resources
The Company had a working capital deficiency of $15,091,000 at September
30, 1997 versus a $4,994,000 deficiency at December 31, 1996. The increase is
primarily due to increased borrowings and operating losses. The Company is
currently pursuing alternate and additional financing from several different
sources and believes additional financing will be obtained to meet its current
and future obligations.
The Company has in place a lending agreement with one of its billing and
collection agents under which advances of up to $21,000,000 are provided based
on eligible receivables. Such receivables are purchased by the billing and
collection agent, with recourse, at the approximate rate of 76% of the gross
amount thereof. The Company pays interest under this agreement at prime plus
1.5% per annum. At September 30, 1997, the amount due under this agreement was
$11,965,000. The lending agreement extends through February 2000.
On September 10, 1997, the Company obtained a $5,000,000 revolving line of
credit from The CIT Group/Credit Finance, Inc. (the "Line of Credit"). The Line
of Credit provides for borrowings based on a percentage of eligible receivables
(between 50% and 85%) and interest at a rate equal to the prime rate plus 1% per
annum. Repayment of the Line of Credit is secured by certain trade receivables
and other assets. Any future drawdowns against the Line of Credit are dependent
upon an increase in eligible receivables. The amount outstanding under this line
of credit was $2,501,000 at September 30, 1997.
Regulatory Developments
Provision for Dial-Around Compensation: On September 20, 1996, the Federal
Communications Commission (the "FCC") adopted rules in a docket entitled In the
Matter of Implementation of the Pay Telephone Reclassification and Compensation
Provisions of the Telecommunications Act of 1996, FCC 96-388 (the "1996 Payphone
Order"), implementing the payphone provisions of Section 276 of the
Telecommunications Act of 1996 ("Telecom Act"). The 1996 Payphone Order, which
became effective November 7, 1996, initially mandated dial-around compensation
for both access code calls and 800 subscriber calls at a flat rate of $45.85 per
payphone per month (131 calls multiplied by $0.35 per call). Commencing October
7, 1997 and ending October 6, 1998 the $45.85 per payphone per month rate was to
transition to a per-call system at the rate of $0.35 per call. Several parties
filed petitions for judicial review of certain of the FCC regulations including
the dial-around compensation rate. On July 1, 1997, the U.S. Court of Appeals
for the District of Columbia Circuit (the "Court") responded to appeals related
to the 1996 Payphone Order by remanding certain issues to the FCC for
reconsideration. These issues included, among other things, the manner in which
the FCC established the dial-around compensation for 800 subscriber and access
code calls, the manner in which the FCC
F-11
<PAGE>
established the interim dial-around compensation plan and the basis upon which
interexchange carriers ("IXCs") would be required to compensate payphone service
providers ("PSPs"). The Court remanded the issue to the FCC for further
consideration, and clarified on September 16, 1997 that it had vacated certain
portions of the FCC's 1996 Payphone Order, including the dial-around
compensation rate. Specifically, the Court determined that the FCC did not
adequately justify (i) the per-call compensation rate for subscriber 800 and
access code calls at the deregulated local coin rate of $0.35, because it did
not sufficiently justify its conclusion that the costs of local coin calls are
similar to those of subscriber 800 and access code calls; and (ii) the
allocation of the payment obligation among the IXCs for the period from November
7, 1996 through October 6, 1997.
In accordance with the Court's mandate, on October 9, 1997, the FCC adopted
and released its Second Report and Order in the same docket, FCC 97-371 (the
"1997 Payphone Order"). This order addressed the per-call compensation rate for
subscriber 800 and access code calls that originate from payphones in light of
the decision of the Court which vacated and remanded certain portions of the
FCC's 1996 Payphone Order. The FCC concluded that the rate for per-call
compensation for subscriber 800 and access code calls from payphones is the
deregulated local coin rate adjusted for certain cost differences. Accordingly,
the FCC established a rate of $0.284 ($0.35 - $0.066) per call for the first two
years of per-call compensation (October 7, 1997 through October 6, 1999). The
IXCs are required to pay this per-call amount to PSPs, including the Company,
beginning October 7, 1997. After the first two years of per-call compensation,
the market-based local coin rate, adjusted for certain costs defined by the FCC
as $0.066 per call, is the surrogate for the per-call rate for subscriber 800
and access code calls. These new rule provisions were made effective as of
October 7, 1997.
In addition, the 1997 Payphone Order tentatively concluded that the same
$0.284 per call rate adopted on a going-forward basis should also govern
compensation obligations during the period from November 7, 1996 through October
6, 1997, and that PSPs are entitled to compensation for all access code and
subscriber 800 calls during this period. The FCC stated that the manner in which
the payment obligation of the IXCs for the period from November 7, 1996 through
October 6, 1997 will be allocated among the IXCs will be addressed in a
subsequent order.
Based on the FCC's tentative conclusion in the 1997 Payphone Order, the
Company has adjusted the amounts of dial-around compensation previously recorded
related to the period from November 7, 1996 through September 30, 1997 from the
initial $45.85 rate to $37.20 ($0.284 per call multiplied by 131 calls). As a
result of this adjustment, the provision recorded in the third quarter for
reduced dial-around compensation is approximately $1,315,000.
The Company's Counsel, Morrison & Foerster, LLP, is of the opinion that the
Company is legally entitled to fair compensation under the Telecom Act for
dial-around calls the Company delivered to any carrier during the period from
November 7, 1996 through October 6, 1997. Based on the information available,
the Company believes that the minimum amount it is entitled to as fair
compensation under the Telecom Act for the period from November 7, 1996 through
October 7, 1997 is $37.20 per payphone per month and the Company, based on the
information available to it, does not believe that it is reasonably possible
that the amount will be materially less than $37.20 per payphone per month.
While the amount of $0.284 per call constitutes the Company's position of the
appropriate level of fair compensation, certain IXCs have asserted in the past,
are asserting and are expected to assert in the future that the appropriate
level of fair compensation should be lower than $0.284 per call. In a letter to
the FCC dated August 15, 1997, AT&T stated its intention to make dial-around
payments to PSPs based on its imputed rate of $0.12 per call until the FCC
issues a new order setting the level of fair compensation.
F-12
<PAGE>
Claims and Contingencies
On July 2, 1997, D. Faye Manghir, the holder of a 50% equity interest in
the joint venture company formed by Community Network Services, Inc., MicroTel
Communications Corp. and the Company (which holds the remaining 50% equity
interest), filed suit against the Company in the Supreme Court of the State of
New York (the "Suit"). The Suit alleges, among other things, that the Company
made certain misrepresentations and committed certain breaches under the joint
venture agreement among the parties, and seeks rescission of such agreement,
compensatory damages in the sum of $10,000,000, punitive damages in the sum of
$25,000,000, and attorneys' fees. The Company filed a motion to dismiss or in
the alternative to stay. The Company believes that the claims of D. Faye Manghir
are without merit and that it will ultimately prevail, resulting in dismissal of
the suit or referral to arbitration.
Pursuant to the terms of the February 28, 1997 Renewal Agreement, as of
June 30, 1997, approximately $1,500,000 was due and owing to National. In
addition, as of such date, approximately an additional $370,000 was owed but not
yet payable to National. On September 25, 1997, National and its affiliates,
Keystone Corporation, Coastal Telecom Payphone Company, Inc., BEK Tel., Inc.,
Garden State Telephone Installation & Service Co., Inc., National Telecom
Hospitality USA and Brian E. King filed suit against the Company and its
subsidiaries, American Network Exchange, Inc., Crescent Public Communications
Inc. and American Hotel Exchange, Inc. alleging breaches of various contracts,
negligence, misappropriation of trade secrets, conversion of various assets,
fraud, negligent misrepresentations and promissory estoppel, and seeking
rescission of certain claims, specific performance of other claims, damages in
the amount of $6,300,000, punitive damages and attorney's fees.
On September 30, 1997, the Company and National reached an agreement as to
a settlement of certain of the above claims as they relate to the National
Renewal Agreement. Pursuant to this agreement, on September 30, 1997, the
Company paid National $1,000,000 in cash and delivered a note in the principal
amount of $840,000 (the "National Note"), representing the remaining balance of
the amounts referred to above and certain other amounts due to National. The
National Note provides for interest at the rate of 12% per annum and will mature
in four months.
The other items raised in the lawsuit remain unresolved and the Company has
filed a motion to dismiss and compel arbitration or, in the alternative, to stay
pending arbitration. The Company believes the unsettled claims are without merit
and intends to vigorously defend the lawsuit. However, there can be no assurance
that the Company will prevail in the litigation.
In connection with the Company's June 1996 CNSI acquisition, CNSI issued a
promissory note in favor of Robert A. Rowland (the "Rowland Note"), a principal
shareholder of the Company, in the principal amount of $1,197,700 payable on
July 31, 1997, with interest due on the unpaid principal balance at a rate of
10.5% per annum. On July 11, 1997, Mr. Rowland filed suit against the Company
and CNSI in the District Court of Travis County, Texas. Mr. Rowland asserts
several causes of action against the Company including enforcement of an alleged
settlement agreement regarding indemnification claims, and seeks damages in the
amount of the principal and interest due under the Rowland Note, attorneys' fees
and exemplary damages in an unstated amount. The causes of action asserted by
Mr. Rowland against CNSI relate to monies allegedly due under a consulting
agreement, and damages claimed include attorneys' fees. On August 11, 1997, the
Company received a letter from counsel to Mr. Rowland which demanded that the
Board of Directors conduct an investigation into certain matters, specifically
(i) the propriety of certain transactions with Mr. Galesi and (ii) possible
mismanagement of the Company, particularly in regard to CNSI's business in
Mexico. Counsel to Mr. Rowland demanded that suit be brought against any officer
or Director of the Company for wrongdoing, fraud, breach of fiduciary duty, self
dealing, gross mismanagement or under any other theory of liability and further
stated that if his demand is refused, Mr. Rowland will take appropriate action,
including possibly a shareholder's derivative action. On August 29, 1997, the
Company advised counsel to Mr. Rowland that the outside Directors of the Company
have been requested to investigate the assertions made.
F-13
<PAGE>
Risks and Uncertainties
Except for historical information contained herein, this Management's
Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements that are subject to risks and uncertainties,
including seasonal variations in revenues, shifts in Company's business focus
from core domestic operator services, regulatory and legislative uncertainty,
technological change and new service, competition, risks associated with
international operations, service interruptions and equipment failures, change
in economic conditions of the various markets the Company serves, as well as the
other risks detailed in the Company's Form 10-K for the year ended December 31,
1996 filed with the Securities and Exchange Commission on April 15, 1997.
F-14
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
On July 2, 1997, D. Faye Manghir, the holder of a 50% equity interest in
the joint venture company formed by Community Network Services, Inc., MicroTel
Communications Corp. and the Company (which holds the remaining 50% equity
interest), filed suit against the Company in the Supreme Court of the State of
New York (the "Suit"). The Suit alleges, among other things, that the Company
made certain misrepresentations and committed certain breaches under the joint
venture agreement among the parties, and seeks rescission of such agreement,
compensatory damages in the sum of $10,000,000, punitive damages in the sum of
$25,000,000, and attorneys' fees. The Company filed a motion to dismiss or in
the alternative to stay. The Company believes that the claims of D. Faye Manghir
are without merit and that it will ultimately prevail, resulting in dismissal of
the suit or referral to arbitration.
Pursuant to the terms of the National Renewal Agreement, as of June 30,
1997, approximately $1,500,000 was due and owing to National. In addition, as of
such date, approximately an additional $370,000 was owed but not yet payable to
National. On September 25, 1997, National and its affiliates Keystone
Corporation, Coastal Telecom Payphone Company, Inc., BEK Tel., Inc., Garden
State Telephone Installation & Service Co., Inc., National Telecom Hospitality
USA and Brian E. King filed suit against the Company and its subsidiaries,
American Network Exchange, Inc., Crescent Public Communications Inc. and
American Hotel Exchange, Inc. alleging breaches of various contracts,
negligence, misappropriation of trade secrets, conversion of various assets,
fraud, negligent misrepresentations and promissory estoppel, and seeking
rescission of certain claims, specific performance of other claims, damages in
the amount of $6,300,000, punitive damages and attorney's fees.
The Company and National have reached an agreement as to a settlement of
certain of the above claims as they relate to the National Renewal Agreement.
Pursuant to this agreement, on September 30, 1997, the Company paid to National
$1,000,000 in cash and delivered a note in the principal amount of $840,000 (the
"National Note"), representing the remaining balance of the amounts referred to
above and certain other amounts due to National. The National Note provides for
interest at the rate of 12% per annum and will mature in four months.
The other items raised in the lawsuit remain unresolved and the Company has
filed a motion to dismiss and compel arbitration or, in the alternative, to stay
pending arbitration. The Company believes the unsettled claims are without merit
and intends to vigorously defend the lawsuit. However, there can be no assurance
that the Company will prevail in the litigation.
In connection with the Company's June 1996 CNSI acquisition, CNSI issued a
promissory note in favor of Robert A. Rowland (the "Rowland Note"), a principal
shareholder of the Company, in the principal amount of $1,197,700 payable on
July 31, 1997, with interest due on the unpaid principal balance at a rate of
10.5% per annum. On July 11, 1997, Mr. Rowland filed suit against the Company
and CNSI in the District Court of Travis County, Texas. Mr. Rowland asserts
several causes of action against the Company including enforcement of an alleged
settlement agreement regarding indemnification claims, and seeks damages in the
amount of the principal and interest due under the Rowland Note, attorneys' fees
and exemplary damages in an unstated amount. The causes of action asserted by
Mr. Rowland against CNSI relate to monies allegedly due under a consulting
agreement, and damages claimed include attorneys' fees. On August 11, 1997, the
Company received a letter from counsel to Mr. Rowland which demanded that the
Board of Directors conduct an investigation into certain matters, specifically
(i) the propriety of certain transactions with Mr. Galesi and (ii) possible
mismanagement of the Company, particularly in regard to CNSI's business in
Mexico. Counsel to Mr. Rowland demanded that suit be brought against any officer
or Director of the Company for wrongdoing, fraud, breach of fiduciary duty, self
dealing, gross mismanagement or under any other theory of liability and further
stated that if his demand is refused, Mr. Rowland will take appropriate action,
including possibly a shareholder's derivative action. On August 29, 1997, the
Company advised counsel to Mr. Rowland that the outside Directors of the Company
have been directed to investigate the assertions made.
<PAGE>
Item 2. Changes in Securities.
(a) None.
(b) None.
(c) During the quarter ended September 30, 1997, the Company issued or
sold the following equity securities other than in transactions
registered under the Securities Act:
(i) On September 30, 1997, the Company issued 8.5% convertible
subordinated notes in the aggregate principal amount of
$15,000,000. The Notes will be convertible, at the option of the
holder, into Common Shares after December 29, 1997 at a
conversion price of $2.7844 per share. The notes were issued
pursuant to the exemption from registration provided by Section
4(2) of the Securities Act of 1933, as amended (the "Securities
Act"), as a transaction by an issuer not involving any public
offering. In connection with the issuance of the notes, the
Company also issued warrants to the initial purchaser thereof and
the international sales agent for the purchase of up to 96,250
and 65,365 Common Shares, respectively, at an exercise price of
$2.7844 per share. Such warrants were issued pursuant to the
exemption provided by Section 4(2) of the Securities Act as a
transaction by an issuer not involving a public offering.
(ii) Effective September 30, 1997, the Company issued 892,151 Common
Shares to Francesco Galesi upon the conversion of certain notes
of the Company other than in transactions registered under the
Securities Act. The Common Shares were issued pursuant to the
exemption from registration provided by Section 3(a)(9) of the
Securities Act as such Common Shares were exchanged by the
company with its existing security holder and no commission or
other remuneration was paid or given, directly or indirectly, for
soliciting such exchange.
Item 3. Defaults Upon Senior Securities.
(a) None.
(b) None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3.1 Restated Certificate of Incorporation, as amended(1).
3.2 By-Laws, as amended(2).
4 Indenture, dated September 29, 1997, between the Company and
Marine Midland Bank, as trustee.
<PAGE>
10.1 Purchase Agreement, dated September 11, 1997, between the Company
and HSBC Securities, Inc.
10.2 Registration Rights Agreement, dated September 29, 1997, between
the Company and HSBC Securities, Inc.
10.3 Warrant Agreement, dated September 29, 1997, between the Company
and HSBC Securities, Inc.
10.4 Loan and Security Agreement, dated September 10, 1997, between
the Company and The CIT Group/Credit Finance, Inc.
10.5 Secured Promissory Note, dated September 18, 1997, in the
principal amount of $500,000, issued by the Company to Rotterdam
Ventures, Inc.
10.6 Unsecured Promissory Note, dated September 30, 1997, in the
principal amount of $800,000, issued by the Company to Rotterdam
Ventures, Inc.
11 Statements Regarding Computation of Per Share Earnings.
27 Financial Data Schedule.
-------------
Note 1 Filed as Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q
for the period ended March 31, 1997 (File No. 0-17158) and incorporated
herein by reference.
Note 2 Filed as Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for
the period ended June 30, 1997 (File No. 0-17158) and incorporated
herein by reference.
(b) Reports on Form 8-K.
During the quarter ended September 30, 1997, two Current Reports on
Form 8-K filed by the Company are as follows:
(i) Date of Report: June 18, 1997
Item Reported: 5
(ii) Date of Report: July 30, 1997
Item Reported: 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMNEX, INC.
November 19, 1997 By:/s/ Alan J. Rossi
--------------------
Alan J. Rossi
Chairman of the Board
and Chief Executive Officer
November 19, 1997 By:/s/ Cynthia I. Terrell
-------------------------
Cynthia I. Terrell
Chief Financial Officer
<PAGE>
Execution Copy
AMNEX, INC.
to
MARINE MIDLAND BANK
Trustee
___________
Indenture
Dated as of September 29, 1997
8-1/2% Convertible Subordinated Notes due 2002
i
Execution Copy
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions 1
SECTION 1.02. Other Definitions 7
SECTION 1.03. Incorporation by Reference of Trust Indenture Act 8
SECTION 1.04. Rules of Construction 8
ARTICLE II
The Securities
SECTION 2.01. Form and Dating 8
SECTION 2.02. Execution and Authentication 11
SECTION 2.03. Registrar, Transfer Agent, Paying Agent and Conversion Agent 12
SECTION 2.04. Paying Agent to Hold Money in Trust 12
SECTION 2.05. Securityholder Lists 13
SECTION 2.06. Transfer and Exchange 13
SECTION 2.07. Replacement Securities 17
SECTION 2.08. Outstanding Securities 18
SECTION 2.09. Treasury Securities 18
i
SECTION 2.10. Temporary Securities 18
SECTION 2.11. Cancellation 18
SECTION 2.12. Defaulted Interest or Liquidated Damages 19
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee 19
SECTION 3.02. Selection of Securities to be Redeemed 19
SECTION 3.03. Notice of Redemption 20
SECTION 3.04. Effect of Notice of Redemption 20
SECTION 3.05. Deposit of Redemption Price 20
SECTION 3.06. Securities Redeemed in Part 21
SECTION 3.07. Optional Redemption 21
SECTION 3.08. Designated Event Offer 21
ARTICLE IV
Covenants
SECTION 4.01. Payment of Securities 23
SECTION 4.02. SEC Reports 23
SECTION 4.03. Compliance Certificate 24
SECTION 4.04. Stay, Extension and Usury Law 24
SECTION 4.05. Corporate Existence 24
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Execution Copy
SECTION 4.06. Taxes 25
SECTION 4.07. Designated Event 25
SECTION 4.08. Listing on the Luxembourg Stock Exchange 25
ARTICLE V
Conversion
SECTION 5.01. Conversion Privilege 25
SECTION 5.02. Conversion Procedure 26
SECTION 5.03. Fractional Shares 27
SECTION 5.04. Taxes on Conversion. 27
SECTION 5.05. Company to Provide Stock 27
SECTION 5.06. Adjustment of Conversion Price 28
SECTION 5.07. No Adjustment 31
SECTION 5.08. Other Adjustments 31
SECTION 5.09. Adjustments for Tax Purposes 31
SECTION 5.10. Adjustments by the Company 31
SECTION 5.11. Notice of Adjustment 32
SECTION 5.12. Notice of Certain Transactions 32
SECTION 5.13. Effect of Reclassifications, Consolidations,
Mergers or Sales on Conversion Privilege 32
iii
SECTION 5.14. Trustee's Disclaimer 33
ARTICLE VI
Subordination
SECTION 6.01. Agreement to Subordinate 33
SECTION 6.02. No Payment on Securities if Senior Debt in Default 34
SECTION 6.03. Distribution on Acceleration of Securities;
Dissolution and Reorganization; Subrogation of Securities 35
SECTION 6.04. Reliance by Senior Debt on Subordination Provisions 38
SECTION 6.05. No Waiver of Subordination Provisions 38
SECTION 6.06. Trustee's Relation to Senior Debt 38
SECTION 6.07. Other Provisions Subject Hereto 39
ARTICLE VII
Successors
SECTION 7.01. Merger, Consolidation or Sale of Assets 39
SECTION 7.02. Successor Corporation Substituted 40
ARTICLE VIII
Defaults and Remedies
SECTION 8.01. Events of Default 40
SECTION 8.02. Acceleration 42
SECTION 8.03. Other Remedies 42
SECTION 8.04. Waiver of Past Defaults 42
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Execution Copy
SECTION 8.05. Control by Majority 42
SECTION 8.06. Limitation on Suits 43
SECTION 8.07. Rights of Securityholders to Receive Payment 43
SECTION 8.08. Collection Suit by Trustee 43
SECTION 8.09. Trustee May File Proofs of Claim 43
SECTION 8.10. Priorities 44
SECTION 8.11. Undertaking for Costs 44
ARTICLE IX
Trustee
SECTION 9.01. Duties of Trustee 44
SECTION 9.02. Rights of Trustee 45
SECTION 9.03. Individual Rights of Trustee 46
SECTION 9.04. Trustee's Disclaimer 46
SECTION 9.05. Notice of Defaults 46
SECTION 9.06. Reports by Trustee to Securityholders 46
SECTION 9.07. Compensation and Indemnity 46
v
SECTION 9.08. Replacement of Trustee 47
SECTION 9.09. Successor Trustee by Merger, Etc. 48
SECTION 9.10. Eligibility; Disqualification 48
SECTION 9.11. Preferential Collection of Claims Against Company 48
ARTICLE X
Discharge of Indenture
SECTION 10.01. Termination of Companys Obligations 48
SECTION 10.02. Repayment to Company 49
ARTICLE XI
Amendments, Supplements and Waivers
SECTION 11.01. Without Consent of Securityholders 49
SECTION 11.02. With Consent of Securityholders 50
SECTION 11.03. Compliance with Trust Indenture Act 50
SECTION 11.04. Revocation and Effect of Consents. 51
SECTION 11.05. Notation on or Exchange of Securities 51
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Execution Copy
SECTION 11.06. Trustee Protected 51
ARTICLE XII
Miscellaneous
SECTION 12.01. Trust Indenture Act Controls 52
SECTION 12.02. Notices 52
SECTION 12.03. Communication by Securityholders with Other Securityholders 52
SECTION 12.04. Certificate and Opinion as to Conditions Precedent 53
SECTION 12.05. Statements Required in Certificate or Opinion 53
SECTION 12.06. Rules by Trustee and Agents 53
SECTION 12.07. Legal Holidays 53
SECTION 12.08. No Recourse Against Others 54
SECTION 12.09. Counterparts 54
SECTION 12.10. Variable Provisions 54
vii
SECTION 12.11. Governing Law 55
SECTION 12.12. No Adverse Interpretation of Other Agreements 55
SECTION 12.13. Successors 55
SECTION 12.14. Severability 55
SECTION 12.15. Table of Contents, Headings, Etc 55
EXHIBIT A
FORM OF CONVERTIBLE SUBORDINATED NOTE........................................A-1
EXHIBIT B
FORM OF TRANSFER CERTIFICATE FOR EXCHANGE OR TRANSFER FROM RESTRICTED
GLOBAL SECURITY OR RESTRICTED CERTIFICATED SECURITY TO REGULATION S
GLOBAL SECURITY..............................................................B-1
EXHIBIT C
FORM OF TRANSFER CERTIFICATE FOR EXCHANGE OR TRANSFER FROM RESTRICTED
GLOBAL SECURITY OR RESTRICTED CERTIFICATED SECURITY TO UNRESTRICTED
GLOBAL SECURITY..............................................................C-1
EXHIBIT D
FORM OF TRANSFER CERTIFICATE FOR EXCHANGE OR TRANSFER FROM REGULATION S
GLOBAL SECURITY AND RESTRICTED OR UNRESTRICTED CERTIFICATED SECURITY TO
RESTRICTED GLOBAL SECURITY...................................................D-1
EXHIBIT E
FORM OF ACCREDITED INVESTOR TRANSFEREE CERTIFICATE...........................E-1
viii
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EXHIBIT F
FORM OF REGISTRATION RIGHTS AGREEMENT........................................F-1
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Execution Copy
INDENTURE dated as of September 29, 1997 between AMNEX, Inc., a New York
corporation (the "Company"), and Marine Midland Bank, a New York banking
corporation, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Securityholders of the Company's 8-1/2%
Convertible Subordinated Notes due 2002 (the "Securities"):
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions. "Affiliate" of any specified person means any
other person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling", "controlled by" and "under common control with"), as used with
respect to any person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
person, whether through the ownership of voting securities or by agreement or
otherwise; provided, however, that beneficial ownership of 10% or more of the
voting securities of a person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent, Conversion Agent or Transfer
Agent.
"Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board.
"Board Resolution" means a copy of a resolution of the Board of Directors
certified by the Secretary or an Assistant Secretary of the Company to be in
full force and effect on the date of such certification and delivery to the
Trustee.
"Business Day" means any day that is not a Legal Holiday.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of equity interests in any entity,
including, without limitation, corporate stock and partnership interests.
"Change of Control" means any event where: (i) any "person" or "group" (as
such terms are used in Section 13(d) and 14(d) of the Exchange Act) is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act) of shares representing more than 50% of the combined voting power
of the then-outstanding securities entitled to vote generally in elections of
1
Directors of the Company ("Voting Stock"), (ii) the Company consolidates with or
merges into any other corporation, or any other person merges into the Company,
and, in the case of any such transaction, the outstanding Common Stock of the
Company is reclassified into or exchanged for any other property or security,
unless the stockholders of the Company immediately before such transaction own,
directly or indirectly immediately following such transaction, at least a
majority of the combined voting power of the outstanding voting securities of
the corporation resulting from such transaction in substantially the same
proportion as their ownership of the Voting Stock immediately before such
transaction, (iii) the Company conveys, transfers or leases all or substantially
all of its assets to any person (other than to one or more wholly-owned
Subsidiaries of the Company) or (iv) any time the Continuing Directors do not
constitute a majority of the Board of Directors of the Company (or, if
applicable, a successor corporation to the Company); provided that a Change of
Control shall not be deemed to have occurred if at least 90% of the
consideration (excluding cash payments for fractional shares) in the transaction
or transactions constituting the Change of Control consists of shares of common
stock that are, or upon issuance will be, traded on a United States national
securities exchange or approved for trading on an established automated
over-the-counter trading market in the United States and as a result of such
transaction or transactions the Securities become convertible solely into such
common stock.
"Common Stock" means the common stock, par value $0.001 per share, of the
Company as the same exists at the date of the execution of this Indenture or as
such stock may be constituted from time to time.
"Company" means the party named as such above until a successor replaces it
in accordance with Article VI and thereafter means the successor.
"Continuing Directors" means as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of this Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such board at the time of such
nomination or election.
"Conversion Agent" means any person authorized by the Company to convert
any Security in accordance with Article 5.01. The Company has initially
appointed the Trustee as its Conversion Agent in the Borough of Manhattan, The
City of New York, and Kredietbank S.A. Luxembourgeoise, 43 Boulevard Royal, L -
2955 Luxembourg, as its Conversion Agent in Luxembourg.
"Daily Market Price" means the price of a share of Common Stock on the
relevant date, determined (a) on the basis of the last reported sale price
2
Execution Copy
regular way of the Common Stock as reported on the Nasdaq Stock Market's Small
Cap Market (the "Nasdaq Small Cap"), or if the Common Stock is not then listed
on the Nasdaq Small Cap, as reported on such national securities exchange upon
which the Common Stock is listed, or (b) if there is no such reported sale on
the day in question, on the basis of the average of the closing bid and asked
quotations regular way as so reported, or (c) if the Common Stock is not listed
on the Nasdaq Small Cap or on any national securities exchange, on the basis of
the average of the high bid and low asked quotations regular way on the day in
question in the over-the-counter market as reported by the National Association
of Securities Dealers Automated Quotation System, or if not so quoted, as
reported by National Quotation Bureau, Incorporated, or a similar organization.
"Default" means any event that is, or with the passage of time or the
giving of notice or both, would be an Event of Default.
"Depositary" means The Depository Trust Company, its nominees and their
respective successors.
"Designated Event" means the occurrence of a Change of Control or a
Termination of Trading.
"Designated Senior Debt" means (i) any Senior Debt which, as of the date of
this Indenture, has an aggregate principal amount outstanding of at least
U.S.$25,000,000, and (ii) any Senior Debt which, at the date of determination,
has an aggregate principal amount outstanding of, or commitments to lend up to,
at least U.S.$25,000,000 and is specifically designated by the Company in the
instrument evidencing or governing such Senior Debt as "Designated Senior Debt"
for purposes of this Indenture (provided that such instrument may place
limitations and conditions on the right of such Senior Debt to exercise the
rights of Designated Senior Debt).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession in the United States, which are in effect from time to time.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
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"Indebtedness" means, with respect to any person, all obligations, whether
or not contingent, of such person (i)(a) for borrowed money (including, but not
limited to, any indebtedness secured by a security interest, mortgage or other
lien on the assets of such person which is (1) given to secure all or part of
the purchase price of property subject thereto, whether given to the vendor of
such property or to another, or (2) existing on property at the time of
acquisition thereof), (b) evidenced by a note, debenture, bond or written
instrument, (c) under a lease required to be capitalized on the balance sheet of
the lessee under GAAP or under any lease or related document (including a
purchase agreement) which provides that such person is contractually obligated
to purchase or to cause a third party to purchase such leased property, (d) in
respect of letters of credit, bank guarantees or bankers' acceptances (including
reimbursement obligations with respect to any of the foregoing), (e) with
respect to Indebtedness secured by a mortgage, pledge, lien, encumbrance, charge
or adverse claim affecting title or resulting in an encumbrance to which the
property or assets of such person are subject, whether or not the obligation
secured thereby shall have been assumed or Guaranteed by or shall otherwise be
such person's legal liability, (f) in respect of the balance of the deferred and
unpaid purchase price of any property or assets, and (g) under interest rate or
currency swap agreements, cap, floor and collar agreements, spot and forward
contracts and similar agreements and arrangements; (ii) with respect to any
obligation of others of the type described in the preceding clause (i) or under
clause (iii) below assumed by or guaranteed in any manner by such person or in
effect guaranteed by such person through an agreement to purchase (including,
without limitation, "take or pay" and similar arrangements), contingent or
otherwise (and the obligations of such person under any such assumptions,
guarantees or other such arrangements); and (iii) any and all deferrals,
renewals, extensions, refinancings and refundings of, or amendments,
modifications or supplements to, any of the foregoing.
"Indenture" means this Indenture as amended from time to time.
"Initial Purchaser" means HSBC Securities, Inc.
"Issuance Date" means the date on which the Securities are first
authenticated and issued.
"Liquidated Damages" means any liquidated damages payable pursuant to the
Registration Rights Agreement.
"Material Subsidiary" means any Subsidiary of the Company which at the date
of determination is a "significant subsidiary" as defined in Rule 1-02(w) of
Regulation S-X under the Securities Act and the Exchange Act (as such Regulation
is in effect on the date hereof).
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"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering Memorandum" means the offering memorandum relating to the
Securities dated September 11, 1997, as amended by the Supplement dated
September 25, 1997.
"Officers' Certificate" means a certificate signed by two Officers, one of
whom must be the Chairman of the Board, the President, the Chief Financial
Officer, the Treasurer or a Vice- President of the Company. See Sections 12.04
and 12.05 hereof.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee. See Sections 12.04 and 12.05 hereof.
"Paying Agent" means any person authorized by the Company to pay the
principal of or interest on and any other amounts due in respect of any
Securities on behalf of the Company and, except as otherwise specifically set
forth herein, such term shall include the Company if it shall act as its own
Paying Agent. The Company has initially appointed the Trustee as its Paying
Agent in the Borough of Manhattan, The City of New York, and Kredietbank S.A.
Luxembourgeoise, 43 Boulevard Royal, L - 2955 Luxembourg, as its Paying Agent in
Luxembourg.
"person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"principal" of a debt security means the principal of the security plus the
premium, if any, on the security.
"Registrar" means any person authorized by the Company (i) to maintain the
register, subject to such reasonable regulations as the Company may prescribe,
in which the Company shall provide for the registration, exchange and
registration of transfer of any Security, and (ii) to effectuate the exchange or
registration of transfer of any Security on behalf of the Company. The Company
has initially appointed the Trustee as Registrar.
"Registration Rights Agreement" means the Registration Rights Agreement
relating to the Securities dated September 25, 1997, between the Company and the
Initial Purchaser, a form of which is attached as Exhibit F hereto.
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"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Debt.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Securities described in the preamble above that are
issued, authenticated and delivered under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securityholder" or Holder" means a person in whose name a Security is
registered.
"Senior Debt" means the principal of and interest and other amounts due on
Indebtedness of the Company, whether outstanding on the date of the Indenture or
thereafter created, incurred, assumed or Guaranteed by the Company; unless, in
the instrument creating or evidencing or pursuant to which Indebtedness is
outstanding, it is expressly provided that such Indebtedness is not senior in
right of payment to the Securities. Senior Debt includes, with respect to the
obligations described above, interest accruing, pursuant to the terms of such
Senior Debt, on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company, whether or not post- filing interest is
allowed in such proceeding, at the rate specified in the instrument governing
the relevant obligation. Notwithstanding anything to the contrary in the
foregoing, Senior Debt shall not include: (a) Indebtedness in respect of or
amounts owned by the Company for compensation to employees, or for goods,
services or materials purchased in the ordinary course of business; (b)
Indebtedness of the Company to a Subsidiary of the Company; or (c) any liability
for Federal, state, local or other taxes owed or owing by the Company.
"Shelf Registration Statement" shall have the meaning set forth in the
Registration Rights Agreement.
"Subsidiary" means in relation to any person other than an individual, any
corporation, partnership, limited liability company, joint venture, association,
joint stock company, or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such person and any one or more of the other Subsidiaries of that person.
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"Termination of Trading" means an event where the Common Stock (or other
securities into which the Securities are then convertible) is neither listed for
trading on a United States national securities exchange nor approved for trading
on an established automated over-the- counter trading market in the United
States.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code SS.
77aaa-77bbbb), as amended.
"Trading Day" shall mean (a) if the applicable security is listed or
admitted for trading on the New York Stock Exchange or another national
securities exchange, a day on which the New York Stock Exchange or such other
national securities exchange is open for business, (b) if the applicable
security is quoted on the Nasdaq National Market or Nasdaq Stock Market's Small
Cap Market, as the case may be, a day on which trades may be made thereon or (c)
if the applicable security is not so listed, admitted for trading or quoted, any
day other than a Saturday or Sunday or a day on which banking institutions in
the State of New York are authorized or obligated by law or executive order to
close.
"Transfer Agent" means any person authorized by the Company to effectuate
the exchange or facilitate the registration of transfer of any Security on
behalf the Company. The Company has initially appointed Kredietbank S.A.
Luxembourgeoise, 43 Boulevard Royal, L - 2955 Luxembourg, as its Transfer Agent
in Luxembourg.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer this Indenture.
"United States" or "U.S." means the United States of America (including the
states and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction.
SECTION 1.02. Other Definitions.
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Defined in
Term Section
"Agent Members" 2.01
"Applicable Procedures" 2.06
"Bankruptcy Law" 8.01
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"Cedel" 2.01
"Certificated Securities" 2.01
"Commencement Date" 3.08
"Conversion Date" 5.02
"Conversion Price" 5.01
"Conversion Shares" 5.06
"Current Market Price" 5.06
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"Custodian" 8.01
"Designated Event Offer" 4.07
"Designated Event Payment" 4.07
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"Designated Event Payment Date" 3.08
"Distribution Date" 5.06
"Distribution Record Date" 5.06
"Excess Payment" 5.06
"Euroclear" 2.01
"Event of Default" 8.01
"Global Securities" 2.01
"Global Securities Legend" 2.01
2.01
"Kredietbank" 12.10
"Legal Holiday" 12.07
"Offer Amount" 3.08
"Officer" 12.10
"Payment Blockage Notice" 6.02
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"Payment Blockage Period" 6.02
"Payment Default" 8.01
"Purchase Agreement" 2.01
"Purchase Date" 5.06
"QIBs" 2.01
"Regulation S" 2.01
"Restricted Certificated Securities" 2.01
"Restricted Global Security" 2.01
"Regulation S Global Security" 2.01
"Restricted Period" 2.01
"Restricted Securities Legend" 2.01
"Rights" 5.06
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"Rule 144A" 2.01
"Tender Period" 3.08
"Unrestricted Certificated Securities" 2.01
"Unrestricted Global Security" 2.01
SECTION 1.03. Incorporation by Reference of Trust Indenture Act. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Securities means the Company or any other obligor on the
Securities.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
SECTION 1.04. Rules of Construction. Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP consistently applied;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and words in the plural
include the singular; and
(e) provisions apply to successive events and transactions.
ARTICLE II
The Securities
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SECTION 2.01. Form and Dating. The Securities and the Trustee's certificate
of authentication shall be substantially in the form of Exhibit A, which is
hereby incorporated in and expressly made a part of this Indenture.
The Securities may have notations, legends or endorsements required by law,
stock exchange rule, agreements to which the Company is subject, if any, or
usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company). The Company shall furnish any such legend not
contained in Exhibit A to the Trustee in writing. Each Security shall be dated
the date of its authentication. The terms and provisions of the Securities set
forth in Exhibit A are part of the terms of this Indenture and to the extent
applicable, the Company and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
(a) Global Securities. The Securities are being offered and sold by the
Company pursuant to a Purchase Agreement relating to the Securities, dated
September 11, 1997, among the Company and the Initial Purchaser (the "Purchase
Agreement").
(i) Securities offered and sold outside the United States in
reliance on Regulation S under the Securities Act ("Regulation S") as
provided by the Purchase Agreement will be represented by beneficial
interests in a permanent global Security in definitive, fully
registered form without interest coupons, duly executed by the Company
and authenticated by the Trustee as hereinafter provided and bearing
the global Securities legend set forth in Exhibit A hereto (the
"Global Securities Legend"), which shall be deposited on behalf of the
purchasers of the Securities represented thereby with the Trustee as
custodian for the Depositary and registered in the name of the
Depositary or a nominee of the Depositary, for credit to the
respective accounts of beneficial owners of interests in such global
Securities (or to such accounts as they may direct) only at Morgan
Guaranty Trust Company of New York, Brussels office, as operator of
the Euroclear System ("Euroclear") or Cedel Bank, societe anonyme
("Cedel") (or to such other accounts as Euroclear or Cedel may direct)
unless delivery is made through the Restricted Global Security in
accordance with the certification requirements set forth in Section
2.06. Until the expiration of 40 days after the later of the
commencement of the offering or the original issue date of the
Securities (the "Restricted Period"), such global Security shall be
referred to herein as the "Regulation S Global Security." After such
time as the Restricted Period shall have expired, such global Security
shall be referred to herein as the "Unrestricted Global Security." The
aggregate principal amount of the Regulation S Global Security and the
Unrestricted Global Security may from time to time be increased or
decreased by adjustments made on the records of the Trustee and the
Depositary or its nominee as hereinafter provided, provided that the
aggregate principal amount of the Securities may not exceed
U.S.$23,000,000.
The Company shall notify the Trustee in writing immediately upon
the expiration of the Restricted Period and the Trustee shall not be
deemed to have knowledge of the expiration of the Restricted Period
until such notice from the Company is received.
(ii) Securities offered and sold to Qualified Institutional
Buyers ("QIBs") in the United States in reliance on Rule 144A under
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the Securities Act ("Rule 144A") will be represented by beneficial
interests in a permanent global Security in fully registered form
without interest coupons, duly executed by the Company and
authenticated by the Trustee as hereinafter provided and bearing the
restricted Securities legend set forth in Exhibit A hereto (the
"Restricted Securities Legend") and the Global Securities Legend (the
"Restricted Global Security", and together with the Regulation S
Global Security and the Unrestricted Global Security, the "Global
Securities") and will be deposited with the Trustee as custodian for
the Depositary and registered in the name of the Depositary or a
nominee of the Depositary. The aggregate principal amount of the
Restricted Global Security may from time to time be increased or
decreased by adjustments made on the records of the Trustee and the
Depositary as hereinafter provided, provided that the aggregate
principal amount of the Securities may not exceed U.S.$23,000,000.
(b) Book-Entry Provisions. This Section 2.01(b) shall apply only to the
Global Securities deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with this
Section 2.01(b) and the written order of the Company, authenticate and deliver
initially one or more Global Securities that (i) shall be registered in the name
of Cede & Co. or other nominee of such Depositary and (ii) shall be delivered by
the Trustee to such Depositary or pursuant to such Depositary's instructions or
held by the Trustee as custodian for the Depositary pursuant to a FAST Balance
Certificate Agreement between the Depositary and the Trustee.
Members of, or participants in, the Depositary ("Agent Members") shall have
no rights under this Indenture with respect to any Global Security held on their
behalf by the Depositary or by the Trustee as the custodian of the Depositary or
under such Global Security, and the Depositary may be treated by the Company,
the Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices of such
Depositary governing the exercise of the rights of a holder of a beneficial
interest in any Global Security.
(c) Certificated Securities.
(i) Except as provided in this Section 2.01(c), owners of beneficial
interests in Global Securities will not be entitled to receive physical
delivery of certificates evidencing the Securities beneficially owned by
such owners ("Certificated Securities"). Purchasers of Securities that are
institutional "accredited investors" (as defined in Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Securities Act) which are not QIBs
will receive Certificated Securities bearing the Restricted Securities
Legend ("Restricted Certificated Securities") in denominations of $250,000
or in integral multiples of $10,000 in excess thereof. Certificated
Securities will bear the Restricted Securities Legend unless removed in
accordance with Section 2.06(b) and may be exchanged for beneficial
interests in a Global Security in accordance with Section 2.06(a).
Beneficial interests in Global Securities may not be exchanged for
Certificated Securities except as provided in Section 2.01(c)(ii).
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(ii) Any Global Security deposited with the Depositary or with the
Trustee as custodian for the Depositary pursuant to Section 2.01(a) shall
be transferred to the beneficial owners thereof in the form of Certificated
Securities only if such transfer complies with Section 2.06 and (x) the
Depositary notifies the Company that it is unwilling or unable to continue
as Depositary for such Global Security or if at any time such Depositary
ceases to be a "clearing agency" registered under the Exchange Act and a
successor Depositary is not appointed by the Company within 90 days of such
notice, or (y) an Event of Default has occurred and is continuing.
(iii) Any Global Security evidencing Securities that are to be
transferred to the beneficial owners thereof in the form of Certificated
Securities pursuant to this Section 2.01(c) shall be surrendered by the
Depositary to the Trustee to be so transferred, in whole or, from time to
time, in part, and the Trustee shall authenticate and deliver, without
charge, upon the registration of transfer of each portion of such Global
Security, an equal aggregate principal amount at maturity of Securities of
authorized denominations in the form of Certificated Securities. Any
portion of a Global Security transferred pursuant to this Section shall be
executed, authenticated and delivered only in denominations of U.S.$1,000
and any integral multiple thereof and registered in such names as the
Depositary shall direct. Any Securities in the form of Certificated
Securities delivered in exchange for an interest in any Global Security
shall, except as otherwise provided by Section 2.06(b), bear the Restricted
Securities Legend and shall be executed, authenticated and delivered in
authorized denominations as set forth in the Securities.
(iv) Prior to any registration of transfer pursuant to this
Section 2.01(c), the registered Holder of a Global Security may grant
proxies and otherwise authorize any person, including Agent Members and
persons that may hold interests through Agent Members, to take any action
which a holder is entitled to take under this Indenture or the Securities.
(v) In the event of the occurrence of either of the events specified
in Section 2.01(c)(ii), the Company will promptly make available to the
Trustee a reasonable supply of Certificated Securities in definitive form
without interest coupons.
SECTION 2.02. Execution and Authentication. Two Officers shall sign the
Securities for the Company by manual or facsimile signature. The Company's seal
or a facsimile thereof shall be reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that office
at the time the Security is authenticated, the Security shall nevertheless be
valid.
A Security shall not be valid until authenticated by the manual signature
of an authorized officer of the Trustee. The signature shall be conclusive
evidence that the Security has been authenticated under this Indenture.
Upon a written order of the Company signed by two Officers, the Trustee
shall authenticate the Securities for original issue up to an aggregate
principal amount of U.S.$15,000,000 (plus up to U.S.$8,000,000 aggregate
principal amount of Securities that may be sold by the Company pursuant to the
over-allotment option granted pursuant to the Purchase Agreement). The aggregate
principal amount of Securities outstanding at any time shall not exceed such
amount except as provided in Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Securities. An authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate.
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SECTION 2.03. Registrar, Transfer Agent, Paying Agent and Conversion Agent.
The Company shall maintain, or caused to be maintained, in the Borough of
Manhattan, The City of New York and, so long as the Securities are listed on the
Luxembourg Stock Exchange and the rules of such Exchange so require, in
Luxembourg, (i) an office or agency where Securities may be presented for
registration of transfer or for exchange, (ii) an office or agency where
Securities may be presented for payment and (iii) an office or agency where
Securities may be presented for conversion. The Registrar shall keep a register
of the Securities and of their transfer and exchange. The Company may appoint
the Registrar, the Transfer Agent, the Paying Agents and the Conversion Agents
and may appoint one or more co-registrars, one or more additional transfer
agents, one or more additional paying agents and one or more additional
conversion agents in such other locations as it shall determine. The term
"Paying Agent" includes any additional paying agent, the term "Transfer Agent"
includes any additional transfer agent, and the term "Conversion Agent" includes
any additional conversion agent. The Company may change any Paying Agent,
Registrar, Transfer Agent or Conversion Agent without prior notice to any
Securityholder. The Company shall notify the Trustee of the name and address of
any such agent which is not a party to this Indenture. If the Company fails to
appoint or maintain another entity as Registrar, Transfer Agent, Paying Agent or
Conversion Agent, the Trustee shall act as such. The Company or any of its
Affiliates may act as Paying Agent, Registrar, Transfer Agent or Conversion
Agent.
SECTION 2.04. Paying Agent to Hold Money in Trust. The Company shall
require each Paying Agent other than the Trustee to agree in writing that the
Paying Agent will hold in trust for the benefit of Securityholders or the
Trustee all money held by the Paying Agent for the payment of principal,
interest or Liquidated Damages on the Securities, and will notify the Trustee of
any default by the Company in making any such payment. While any such default
continues, the Trustee may require a Paying Agent to pay all money held by it to
the Trustee. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee and to account for any money disbursed by it. Upon
payment over to the Trustee, the Paying Agent (if other than the Company or an
Affiliate of the Company) shall have no further liability for the money. If the
Company or an Affiliate of the Company acts as Paying Agent, it shall segregate
and hold in a separate trust fund for the benefit of the Securityholders all
money held by it as Paying Agent.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee on or before each interest
payment date and at such other times as the Trustee may request in writing a
list in such form and as of such date as the Trustee may reasonably require of
the names and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange. Where Securities are presented to the
Registrar or a Transfer Agent with a request to register a transfer or to
exchange them for an equal principal amount of Securities of other
denominations, the Registrar shall register the transfer or exchange if the
Registrar's or Transfer Agent's requirements for such transactions are met, and
such Registrar or Transfer Agent, as the case may be, shall effectuate such
registration of transfer or exchange. To permit registrations of transfers and
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exchanges, the Company shall issue and the Trustee shall authenticate Securities
at the Registrar's or Transfer Agent's request. No service charge shall be made
for any registration of transfer or exchange (except as otherwise expressly
permitted herein), but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer tax or similar governmental charge
payable upon exchanges pursuant to Sections 2.10, 3.06, 3.08, 5.02 or 11.05
hereof).
The Company shall not be required (i) to issue, register the transfer of,
or exchange Securities during a period beginning at the opening of business 15
days before the day of any selection of Securities for redemption under Section
3.02 hereof and ending at the close of business on the day of selection, or (ii)
to exchange or register the transfer of any Security so selected for redemption
in whole or in part, except the unredeemed portion of any Security being
redeemed in part.
(a) Notwithstanding any other provision herein or in the Securities,
transfers of a Global Security, in whole or in part, or of any beneficial
interest therein of the kind described in clauses (ii), (iii) or (iv) below,
shall only be made in accordance with this Section 2.06(a), and all transfers of
an interest in the Regulation S Global Security shall comply with
Section 2.06(a)(vi).
(i) General. A Global Security may not be transferred, in whole or in
part, to any person other than the Depositary or any successor to the
Depositary or a nominee thereof, and no such transfer to any such other
person may be registered; provided that this clause (i) shall not prohibit
any transfer of a Security that is issued in exchange for a Global Security
but is not itself a Global Security. No transfer of a Security to any
person shall be effective under this Indenture or the Securities unless and
until such Security has been registered in the name of such person. Nothing
in this Section 2.06(a)(i) shall prohibit or render ineffective any
transfer of a beneficial interest in a Global Security effected in
accordance with the other provisions of this Section 2.06(a).
(ii) Restricted Security to Regulation S Global Security. If the
holder of a beneficial interest in the Restricted Global Security or the
Holder of a Restricted Certificated Security wishes at any time prior to
the expiration of the Restricted Period to transfer the whole or any part
of such beneficial interest or the whole or any part of the principal
amount of such Restricted Certificated Security to a person who wishes to
take delivery thereof in the form of a beneficial interest in the
Regulation S Global Security, such transfer may be effected, subject to the
rules and procedures of the Depositary, Euroclear and Cedel Bank, in each
case to the extent applicable (the "Applicable Procedures"), only in
accordance with the provisions of this Section 2.06(a)(ii). Upon receipt by
the Registrar of (1) written instructions given in accordance with the
Applicable Procedures from an Agent Member directing the Registrar to
credit or cause to be credited to a specified Agent Member's account a
beneficial interest in the Regulation S Global Security in a principal
amount equal to that of the beneficial interest in the Restricted Global
Security (or the principal amount of the Restricted Certificated Security)
to be so transferred, and, in the case of the Restricted Certificated
Security, the surrender thereof with the assignment of transfer on the
reverse thereof duly completed, (2) a written order given in accordance
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with the Applicable Procedures containing information regarding the account
of the Agent Member (and the Euroclear or Cedel Bank account, as the case
may be) to be credited with, and the account of the Agent Member to be
debited for, such beneficial interest or, in the case of a Restricted
Certificated Security, written instructions regarding the account of the
Agent Member (and the Euroclear or Cedel Bank account, as the case may be)
to be credited with the principal amount of the Restricted Certificated
Security to be transferred, and (3) a certificate in substantially in the
form specified in Exhibit B hereto given by the holder of such beneficial
interest or the Holder of such Restricted Certificated Security, the
Registrar shall instruct the Depositary (A)(I) in the case of a transfer of
a beneficial interest in the Restricted Global Security, to reduce the
principal amount thereof and to increase the principal amount of the
Regulation S Global Security, by the principal amount of the beneficial
interest in the Restricted Global Security to be so transferred, or (II) in
the case of the Restricted Certificated Security, to increase the principal
amount of the Regulation S Global Security by the principal amount of the
Restricted Certificated Security so transferred, and (B) to credit or cause
to be credited to the account of the person specified in such instructions
(which shall be the Agent Member for Euroclear or Cedel Bank or both, as
the case may be) a beneficial interest in the Regulation S Global Security
having a principal amount equal to the amount by which the principal amount
of the Restricted Global Security was reduced upon such transfer (or, in
the case of a transfer of a Restricted Certificated Security, the principal
amount thereof so transferred). In the case of a transfer of a Restricted
Certificated Security, the Registrar shall cancel such Restricted
Certificated Security and issue one or more new Restricted Certificated
Securities in authorized denominations in the aggregate amount of any
untransferred portion thereof.
(iii) Restricted Global Security to Unrestricted Global Security. If
the holder of a beneficial interest in the Restricted Global Security
wishes at any time to transfer the whole or any part of such beneficial
interest or the Holder of a Restricted Certificated Security wishes at any
time to transfer the whole or any part of the principal amount of such
Restricted Certificated Security to a person who wishes to take delivery
thereof in the form of a beneficial interest in the Unrestricted Global
Security following the expiration of the Restricted Period, such transfer
may be effected, subject to the Applicable Procedures, only in accordance
with this Section 2.06(a)(iii). Upon receipt by the Registrar of (1)
written instructions given in accordance with the Applicable Procedures
from an Agent Member directing the Registrar to credit or cause to be
credited to a specified Agent Member's account a beneficial interest in the
Unrestricted Global Security in a principal amount equal to that of the
beneficial interest in the Restricted Global Security (or the principal
amount of Restricted Certificated Security) to be so transferred, and, in
the case of a Restricted Certificated Security, the surrender thereof with
the assignment of transfer on the reverse thereof duly completed, (2) a
written order given in accordance with the Applicable Procedures containing
information regarding the account of the Agent Member (and, in the case of
any such transfer pursuant to Regulation S, the Euroclear or Cedel Bank
account for which such Agent Member's account is held) to be credited with,
and the account of the Agent Member to be debited for, such beneficial
interest or, in the case of a Restricted Certificated Security, written
instructions regarding the account of the Agent Member (and,
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in the case of any such transfer pursuant to Regulation S, the Euroclear or
Cedel Bank account for which such Agent Member's account is held) to be
credited with the principal amount of the Restricted Certificated Security
to be transferred, and (3) a certificate in substantially the form of
Exhibit C hereto given by the holder of such beneficial interest or the
Holder of such Restricted Certificated Security, as the case may be, the
Registrar shall instruct the Depositary (A)(I) in the case of a transfer of
a beneficial interest in the Restricted Global Security, to reduce the
principal amount thereof, and to increase the principal amount of the
Unrestricted Global Security, by the principal amount of the beneficial
interest in the Restricted Global Security to be so transferred or (II) in
the case of a transfer of a Restricted Certificated Security, to increase
the principal amount of the Unrestricted Global Security by the principal
amount of the Restricted Certificated Security to be so transferred, and
(B) to credit or cause to be credited to the account of the person
specified in such instructions a beneficial interest in the Unrestricted
Global Security having a principal amount equal to the amount by which the
principal amount of the Restricted Global Security was reduced upon such
transfer (or, in the case of a transfer of a Restricted Certificated
Security, the principal amount thereof so transferred). In the case of a
transfer of a Restricted Certificated Security, the Registrar shall cancel
such Restricted Certificated Security and issue one or more new Restricted
Certificated Securities in authorized denominations in the aggregate amount
of any untransferred portion thereof.
(iv) Regulation S Global Security or Unrestricted Global Security to
Restricted Global Security. If the holder of a beneficial interest in the
Regulation S Global Security or the Unrestricted Global Security or the
Holder of an Unrestricted Certificated Security wishes at any time to
transfer the whole or any part of such beneficial interest to a person who
wishes to take delivery thereof in the form of a beneficial interest in the
Restricted Global Security, such transfer may be effected, subject to the
Applicable Procedures, only in accordance with this Section 2.06(a)(iv).
Upon receipt by the Registrar of (1) written instructions given in
accordance with the Applicable Procedures from an Agent Member directing
the Registrar to credit or cause to be credited to a specified Agent
Member's account a beneficial interest in the Restricted Global Security
equal to that of the beneficial interest in the Regulation S Global
Security or Unrestricted Global Security to be so transferred (or in the
case of a Certificated Security, the principal amount thereof to be
transferred), and, in the case of a Certificated Security, the surrender
thereof with the assignment of transfer on the reverse thereof duly
completed, (2) a written order given in accordance with the Applicable
Procedures containing information regarding the accounting of the Agent
Member to be credited with, and the account of the Agent Member (or, if
such account is held for Euroclear of Cedel Bank, the Euroclear or Cedel
Bank Account, as the case may be) to be debited for, such beneficial
interest or, in the case of a Certificated Security, written instructions
regarding the account of the Agent Member (and, in the case of any such
transfer pursuant to Regulation S, the Euroclear or Cedel Bank account for
which such Agent Member's account is held) to be credited with the
principal amount of the Certificated Security to be transferred, and (3)
with respect to a transfer of a beneficial
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interest in the Regulation S Global Security (but not the Unrestricted
Global Security) or a transfer of a Restricted Certificated Security, a
certificate substantially in the form of Exhibit D hereto given by the
holder of such beneficial interest or the Holder of such Restricted
Certificated Security, as the case may be, the Registrar shall instruct the
Depositary (A)(I) in the case of a transfer of a beneficial interest in the
Regulation S Global Security or Unrestricted Global Security, to reduce the
principal amount of the Regulation S Global Security or Unrestricted Global
Security, as the case may be, and to increase the principal amount of the
Restricted Global Security, by the principal amount of the beneficial
interest in the Regulation S Global Security or Unrestricted Global
Security to be so transferred, or (II) in the case of a Certificated
Security, to increase the principal amount of the Restricted Global Note by
the principal amount of the Certificated Security to be so transferred, and
(B) to credit or cause to be credited to the account of the person
specified in such instructions a beneficial interest in the Restricted
Global Security having a principal amount equal to the amount by which the
principal amount of the Regulation S Global Security or Unrestricted Global
Security, as the case may be, was reduced upon such transfer (or, in the
case of a Certificated Security, the principal amount thereof so
transferred). In the case of a transfer of a Certificated Security, the
Registrar shall cancel such Certificated Security and issue one or more new
Certificated Securities in authorized denominations in the aggregate amount
of any untransferred portion thereof.
(v) Other Exchanges. In the event that a Global Security or any
portion thereof is exchanged for Securities other than Global Securities,
such other Securities and any Certificated Securities then outstanding may
in turn be exchanged (on transfer or otherwise) for Securities that are not
Global Securities or Certificated Securities or for beneficial interests in
a Global Security (if any is then outstanding) only in accordance with such
procedures, which shall be substantially consistent with the provisions of
Section 2.06(a)(i) and (iv) above (including the certification requirements
intended to insure that transfers of beneficial interests in a Global
Security comply with Rule 144A, Rule 144 or Regulation S under the
Securities Act, as the case may be) and any Applicable Procedures, as may
be from time to time adopted by the Company and the Trustee.
(vi) Holding of Interests in Regulation S Global Security. Until the
termination of the Restricted Period, interests in the Regulation S Global
Security may be held only through Agent Members acting for and on behalf of
Euroclear and Cedel Bank, provided that this Section 2.06(a)(vi) shall not
prohibit any transfer in accordance with Section 2.06(a)(iv).
(b) Except in connection with a Shelf Registration Statement contemplated
by and in accordance with the terms of the Registration Rights Agreement, if
Securities are issued upon the registration of transfer, exchange or replacement
of Securities bearing the Restricted Securities Legend, or if a request is made
to remove such Restricted Securities Legend on certificates evidencing
Securities or shares of Common Stock issued upon conversion of such Securities
and bearing a comparable legend as provided in Section 5.05 hereof, the
certificates evidencing Securities or such shares so issued shall bear the
Restricted Securities Legend, or the Restricted Securities Legend shall not be
removed, as the case may be, unless there is delivered to the Company such
satisfactory evidence, which may include an opinion of counsel licensed to
practice law in the State of New York, as may be reasonably required by the
Company, that neither the legend nor the restrictions on transfer set forth
therein are required to ensure that transfers thereof comply with the provisions
of Rule 144A, Rule 144 or Regulation S under the Securities Act or, with respect
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to Certificated Securities or such shares, that such Securities or shares are
not "restricted" within the meaning of Rule 144 under the Securities Act. Upon
provision to the Company of such satisfactory evidence, the Trustee, at the
written direction of the Company, shall authenticate and deliver Securities or
shares of Common Stock that do not bear the Restricted Securities Legend.
(c) The Trustee shall have no responsibility for any actions taken or not
taken by the Depositary.
SECTION 2.07. Replacement Securities. If the Holder of a Security claims
that the Security has been lost, destroyed or wrongfully taken or if such
Security is mutilated and is surrendered to the Trustee, the Company shall issue
and the Trustee shall authenticate a replacement Security if the Trustee's and
the Company's requirements are met. If required by the Trustee or the Company,
an indemnity bond must be sufficient in the judgment of both to protect the
Company, the Trustee, any Agent or any authenticating agent from any loss which
any of them may suffer if a Security is replaced. The Company may charge for its
expenses in replacing a Security.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, or is about to be redeemed or purchased
by the Company pursuant to Article III hereof or converted into shares of Common
Stock pursuant to Article V hereof, the Company in its discretion may, instead
of issuing a new Security, pay, redeem or convert such Security, as the case may
be.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities. The Securities outstanding at any
time are all the Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation, and those described in
this Section as not outstanding.
If a Security is replaced, paid, redeemed or converted pursuant to Section
2.07 hereof, it ceases to be outstanding unless, in the case of a replaced
Security, the Trustee receives proof satisfactory to it that the replaced
Security is held by a bona fide purchaser.
If Securities are considered paid under Section 4.01 hereof, they cease to
be outstanding and interest on them ceases to accrue.
A Security does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Security.
SECTION 2.09. Treasury Securities. In determining whether the
Securityholders of the required principal amount of Securities have concurred in
any direction, waiver or consent, Securities owned by the Company or an
Affiliate of the Company shall be considered as though they are not outstanding,
except that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only Securities
which a Trust Officer knows are so owned shall be so disregarded.
SECTION 2.10. Temporary Securities. Until definitive Securities are ready
for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
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definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities in
exchange for temporary Securities.
SECTION 2.11. Cancellation. The Company at any time may deliver Securities
to the Trustee for cancellation. The Registrar, Transfer Agent, Paying Agents
and Conversion Agents shall forward to the Trustee any Securities surrendered to
them for registration of transfer, redemption, conversion, exchange or payment.
The Trustee shall promptly cancel all Securities surrendered for registration of
transfer, redemption, conversion, exchange, payment, replacement or cancellation
and shall destroy all canceled Securities unless the Company otherwise directs.
The Company may not issue new Securities to replace Securities that it has paid
or that have been delivered to the Trustee for cancellation or that any Holder
has converted.
SECTION 2.12. Defaulted Interest or Liquidated Damages. If the Company
fails to make a payment of interest or Liquidated Damages on the Securities, it
shall pay such defaulted interest or Liquidated Damages plus any interest
payable on the defaulted interest or Liquidated Damages, in any lawful manner.
It may pay such defaulted interest or Liquidated Damages, plus any such interest
payable on them, to the persons who are Securityholders on a subsequent special
record date. The Company shall fix any such record date and payment date. At
least 15 days before any such record date, the Company shall mail to
Securityholders a notice that states the record date, payment date, and amount
of such interest or Liquidated Damages to be paid.
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
Securities pursuant to Section 3.07 hereof, it shall notify the Trustee of the
redemption date and the principal amount of Securities to be redeemed. The
Company shall give each notice provided for in this Section 3.01 at least 40
days before the redemption date (unless a shorter notice period shall be
satisfactory to the Trustee).
SECTION 3.02. Selection of Securities to be Redeemed. If less than all the
Securities are to be redeemed, the Trustee shall select the Securities to be
redeemed by a method that complies with the requirements of the principal
national securities exchange, if any, on which the Securities are listed, or, if
the Securities are not so listed, on a pro rata basis, by lot or by such other
method as the Trustee considers fair and appropriate. The Trustee shall make the
selection not more than 60 days and not less than 30 days before the redemption
date from Securities outstanding not previously called for redemption. The
Trustee may select for redemption portions of the principal of Securities that
have denominations larger than U.S.$1,000. Securities and portions of them it
selects shall be in amounts of U.S.$1,000 or integral multiples of U.S.$1,000;
provided, however that Restricted Certificated Securities may be redeemed only
in whole to the extent a redemption in part would reduce the principal amount
thereof to an amount less than U.S.$250,000. Provisions of this Indenture that
apply to Securities called for redemption also apply to portions of Securities
called for redemption. The Trustee shall notify the Company promptly of the
Securities or portions of Securities to be called for redemption.
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If any Security selected for partial redemption is converted in part after
such selection, the converted portion of such Security shall be deemed (so far
as may be) to be the portion to be selected for redemption. The Securities (or
portions thereof) so selected shall be deemed duly selected for redemption for
all purposes hereof, notwithstanding that any such Security is converted in
whole or in part before the mailing of the notice of redemption. Upon any
redemption of less than all the Securities, the Company and the Trustee may
treat as outstanding any Securities surrendered for conversion during the period
15 days next preceding the mailing of a notice of redemption and need not treat
as outstanding any Security authenticated and delivered during such period in
exchange for the unconverted portion of any Security converted in part during
such period.
SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60
days before a redemption date, the Company shall (i) mail a notice of redemption
to each Holder whose Securities are to be redeemed at such Holder's registered
address, and (ii) publish such notice in a daily newspaper with general
circulation in Luxembourg.
The notice shall identify the Securities to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date, upon cancellation of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion will be
issued in the name of the Holder thereof;
(d) the name and address of the Paying Agents;
(e) that Securities called for redemption must be surrendered to any
Paying Agent to collect the redemption price plus accrued interest and
Liquidated Damages, if any;
(f) that, unless the Company defaults in making such redemption
payment or any Paying Agent is prohibited from making such payment pursuant
to the terms of this Indenture, by law or otherwise, interest and
Liquidated Damages on Securities called for redemption ceases to accrue on
and after the redemption date; and
(g) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed.
Such notice shall also state the current Conversion Price and the date on
which the right to convert such Securities or portions thereof into Common Stock
of the Company will expire.
At the Company's request, the Trustee shall give notice of redemption in
the Company's name and at its expense.
SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is
mailed,
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Securities called for redemption become due and payable on the redemption date
at the price set forth in the Security.
SECTION 3.05. Deposit of Redemption Price. On or before the redemption
date, the Company shall deposit with the Trustee or with the Paying Agents money
sufficient to pay the redemption price of and accrued interest and Liquidated
Damages, if any, up to but not including the redemption date on all Securities
to be redeemed on that date (subject to the right of holders of record on the
relevant record date to receive interest and Liquidated Damages due on an
interest payment date) unless theretofore converted into Common Stock pursuant
to the provisions hereof. The Trustee or the Paying Agents shall return to the
Company any money not required for that purpose.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security
that is redeemed in part, the Company shall issue and the Trustee shall
authenticate for the Holder at the expense of the Company one or more new
Securities of authorized denominations equal in aggregate principal amount to
the unredeemed portion of the Security surrendered.
SECTION 3.07. Optional Redemption. The Company may redeem all or any
portion of the Securities, upon the terms and at the redemption prices set forth
in each of the Securities. Any redemption pursuant to this Section 3.07 shall be
made pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. Designated Event Offer. (a) In the event that, pursuant to
Section 4.07 hereof, the Company shall commence a Designated Event Offer, the
Company shall follow the procedures in this Section 3.08.
(b) The Designated Event Offer shall remain open for a period specified by
the Company which shall be no less than 30 calendar days and no more than 40
calendar days following its commencement on the date of the mailing of notice in
accordance with Section 4.07(b) hereof (the "Commencement Date"), except to the
extent that a longer period is required by applicable law (the "Tender Period").
Upon the expiration of the Tender Period (the "Designated Event Payment Date"),
the Company shall purchase the principal amount of Securities required to be
purchased pursuant to Section 4.07 hereof (the "Offer Amount").
(c) If the Designated Event Payment Date is on or after an interest payment
record date and on or before the related interest payment date, any accrued
interest and Liquidated Damages to the related interest payment date will be
paid to the person in whose name a Security is registered at the close of
business on such record date, and no additional interest or Liquidated Damages
will be payable to Securityholders who tender Securities pursuant to the
Designated Event Offer.
(d) The Company shall provide the Trustee with written notice of the
Designated Event Offer at least ten Business Days before the Commencement Date
(unless a shorter period shall be satisfactory to the Trustee).
(e) Subject to Section 4.07(b), on or before the Commencement Date, the
Company or the Trustee (at the request and expense of the Company) shall send,
by first class mail, a notice to each of the Securityholders, which shall govern
the terms of the Designated Event Offer and shall state:
(i) that the Designated Event Offer is being made pursuant to this
Section 3.08 and Section 4.07 hereof and that all Securities tendered will
be accepted for payment;
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(ii) the Offer Amount, the purchase price (as determined in accordance
with Section 4.07 hereof), the length of time the Designated Event Offer
will remain open and the Designated Event Payment Date;
(iii) that any Security or portion thereof not tendered or accepted
for payment will continue to accrue interest and, if applicable, Liquidated
Damages;
(iv) that, unless the Company defaults in the payment of the
Designated Event Payment, any Security or portion thereof accepted for
payment pursuant to the Designated Event Offer shall cease to accrue
interest or Liquidated Damages after the Designated Event Payment Date;
(v) that Securityholders electing to have a Security or portion
thereof purchased pursuant to any Designated Event Offer will be required
to surrender the Security, with the form entitled "Option of Securityholder
To Elect Purchase" on the reverse of the Security completed, to the Paying
Agent at the address specified in the notice prior to the close of business
on the third Business Day preceding the Designated Event Payment Date;
(vi) that Securityholders will be entitled to withdraw their election
if any Paying Agent receives, not later than the close of business on the
second Business Day preceding the Designated Event Payment Date, or such
longer period as may be required by law, a letter or a telegram, telex,
facsimile transmission (receipt of which is confirmed and promptly followed
by a letter) setting forth the name of the Securityholder, the principal
amount of the Security or portion thereof the Securityholder delivered for
purchase and a statement that such Securityholder is withdrawing his
election to have the Security or portion thereof purchased; and
(vii) that Securityholders whose Securities are being purchased only
in part will be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered, which unpurchased
portion must be equal to U.S.$1,000 in principal amount or an integral
multiple thereof.
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In addition, the notice shall contain all instructions and materials that
the Company shall reasonably deem necessary to enable such Securityholders to
tender Securities pursuant to the Designated Event Offer.
(f) At least one Business Day prior to the Designated Event Payment Date,
the Company shall irrevocably deposit with the Trustee or the Paying Agents in
immediately available funds an amount equal to the Offer Amount to be held for
payment in accordance with the terms of this Section 3.08. On the Designated
Event Payment Date, the Company shall, to the extent lawful, (i) accept for
payment the Securities or portions thereof tendered pursuant to the Designated
Event Offer, (ii) deliver or cause to be delivered to the Trustee Securities so
accepted and (iii) deliver to the Trustee an Officers' Certificate stating such
Securities or portions thereof have been accepted for payment by the Company in
accordance with the terms of this Section 3.08. The Paying Agents shall promptly
(but in any case not later than five calendar days after the Designated Event
Payment Date) mail or deliver to each tendering Securityholder an amount equal
to the purchase price of the Securities tendered by such Securityholder, and the
Trustee shall promptly authenticate and mail or deliver to such Securityholders
a new Security equal in principal amount to any unpurchased portion of the
Security surrendered, if any; provided, that each new Security shall be in a
principal amount of U.S.$1,000 or an integral multiple thereof; and provided,
further that a Holder of a Restricted Certificated Security may tender such
Security only in whole to the extent a tender in part would reduce the principal
amount thereof to an amount less than U.S.$250,000. Any Securities not so
accepted shall be promptly mailed or delivered by or on behalf of the Company to
the Holder thereof. The Company will publicly announce the results of the
Designated Event Offer on, or as soon as practicable after, the Designated Event
Payment Date.
(g) The Designated Event Offer shall be made by the Company in compliance
with all applicable provisions of the Exchange Act, and all applicable tender
offer rules promulgated thereunder, and shall include all instructions and
materials that the Company shall reasonably deem necessary to enable such
Securityholders to tender their Securities.
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ARTICLE IV
Covenants
SECTION 4.01. Payment of Securities. The Company shall pay the principal of
and interest and Liquidated Damages on the Securities on the dates and in the
manner provided in the Securities. Principal, interest and Liquidated Damages
shall be considered paid on the date due if the Paying Agents (other than the
Company or an Affiliate of the Company) hold on that date money designated for
and sufficient to pay all principal, interest and Liquidated Damages then due
and such Paying Agents are not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture. To the
extent lawful, the Company shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue installments of interest
and Liquidated Damages (without regard to any applicable grace period) at the
rate borne by the Securities, compounded semiannually. The Company shall also
pay all Liquidated Damages, if any, in the manner, on the dates and in the
amounts set forth in the Registration Rights Agreement.
SECTION 4.02. SEC Reports. Whether or not required by the rules and
regulations of the SEC, so long as any Securities are outstanding, the Company
will file with the SEC and furnish to the Trustee and to the Holders of
Securities all quarterly and annual financial information required to be
contained in a filing with the SEC on Forms 10-Q and 10-K, including a
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations" and, with respect to annual information only, a report thereon by
the Company's certified independent accountants.
SECTION 4.03. Compliance Certificate. The Company shall deliver to the
Trustee, within 120 days after the end of each fiscal year of the Company, an
Officers' Certificate stating that a review of the activities of the Company and
its subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under, and
complied with the covenants and conditions contained in, this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of such Officer's knowledge the Company has kept, observed, performed and
fulfilled each and every covenant, and complied with the covenants and
conditions contained in this Indenture and is not in default in the performance
or observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which such Officer may have knowledge) and that to the best
of such Officer's knowledge no event has occurred and remains in existence by
reason of which payments on account of the principal or of interest or
Liquidated Damages, if any, on the Securities are prohibited.
One of the Officers signing such Officers' Certificate shall be either the
Company's principal executive officer, principal financial officer or principal
accounting officer.
The Company will, so long as any of the Securities are outstanding, deliver
to the Trustee, forthwith upon becoming aware of:
(a) any Default, Event of Default or default in the performance of any
covenant, agreement or condition contained in this Indenture; or
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(b) any event of default under any other mortgage, indenture or
instrument as that term is used in Section 8.01(e),
an Officers' Certificate specifying such Default, Event of Default or
default.
SECTION 4.04. Stay, Extension and Usury Law. The Company covenants (to the
extent that it may lawfully do so) that it will not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, which may affect the covenants or the performance of this Indenture;
and the Company (to the extent it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not, by
resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law has been enacted.
SECTION 4.05. Corporate Existence. Except as provided in Article VII
hereof, the Company will do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence and the corporate,
partnership or other existence of each Subsidiary of the Company in accordance
with the respective organizational documents of each Subsidiary and the rights
(charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any Subsidiary, if the Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries taken as a whole and that the loss
thereof is not adverse in any material respect to the Securityholders.
SECTION 4.06. Taxes. The Company shall, and shall cause each of its
Subsidiaries to, pay prior to delinquency all taxes, assessments and
governmental levies, except as contested in good faith and by appropriate
proceedings.
SECTION 4.07. Designated Event. (a) Upon the occurrence of a Designated
Event, each holder of Securities shall have the right, in accordance with this
Section 4.07 and Section 3.08 hereof, to require the Company to repurchase all
or any part (equal to U.S.$1,000 or an integral multiple thereof, subject to the
limitation set forth in the second proviso to the third sentence of Section
3.08(f) hereof) of such holder's Securities pursuant to the terms of Section
3.08 (the "Designated Event Offer") at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon to the Designated Event Payment Date (the "Designated Event
Payment").
(b) Within 30 days following any Designated Event, the Company shall mail
to each Holder the notice provided by Section 3.08(e) and publish such notice in
a daily newspaper with general circulation in Luxembourg.
SECTION 4.08. Listing on the Luxembourg Stock Exchange. The Company shall
use its reasonable best efforts to cause and maintain the listing of all of the
Securities on the Luxembourg Stock Exchange.
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ARTICLE V
Conversion
SECTION 5.01. Conversion Privilege. A holder of a Security may convert the
principal amount thereof (or any portion thereof that is an integral multiple of
U.S.$1,000; provided, however that a Holder of a Restricted Certificated
Security may convert such Security only in whole to the extent a conversion in
part would reduce the principal amount thereof to an amount less than
U.S.$250,000) into fully paid and nonassessable shares of Common Stock of the
Company at any time after 90 days following the Issuance Date and prior to the
close of business (New York time) on the Business Day immediately preceding the
maturity date of the Security at the Conversion Price then in effect, except
that, with respect to any Security called for redemption, such conversion right
shall terminate at the close of business (New York time) on the Business Day
immediately preceding the redemption date (unless the Company shall default in
making the redemption payment when it becomes due, in which case the conversion
right shall terminate on the date such default is cured). The number of shares
of Common Stock issuable upon conversion of a Security is determined by dividing
the principal amount of the Security converted by the conversion price in effect
on the Conversion Date (the "Conversion Price").
The initial Conversion Price is stated in paragraph 10 of the Securities
and is subject to adjustment as provided in this Article V.
Provisions of this Indenture that apply to conversion of all of a Security
also apply to conversion of a portion of it. A holder of Securities is not
entitled to any rights of a holder of Common Stock until such holder of
Securities has converted such Securities into Common Stock, and only to the
extent that such Securities are deemed to have been converted into Common Stock
under this Article V.
SECTION 5.02. Conversion Procedure. To convert a Security, a Holder must
satisfy the requirements in paragraph 10 of the Securities. The date on which
the Holder satisfies all of those requirements is the conversion date (the
"Conversion Date"). As soon as practicable after the Conversion Date (subject to
the expiration of any required waiting period following any required filing
pursuant to the provisions of the Hart-Scott-Rodino Improvements Act of 1976),
the Company shall deliver to the Holder through a Conversion Agent a certificate
for the number of whole shares of Common Stock issuable upon the conversion and
a check for any fractional share determined pursuant to Section 5.03. The person
in whose name the certificate is registered shall become the stockholder of
record on the Conversion Date and, as of such date, such person's rights as a
Holder with respect to the converted Security shall cease; provided, however,
that no surrender of a Security on any date when the stock transfer books of the
Company shall be closed shall be effective to constitute the person entitled to
receive the shares of Common Stock upon such conversion as the stockholder of
record of such shares of Common Stock on such date, but such surrender shall be
effective to constitute the person entitled to receive such shares of Common
Stock as the stockholder of record thereof for all purposes at the close of
business on the next succeeding day on which such stock transfer books are open;
provided further, that such conversion shall be at the Conversion Price in
effect on the date that such Security shall have been surrendered for
conversion, as if the stock transfer books of the Company had not been closed.
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No payment or adjustment will be made for accrued and unpaid interest and
Liquidated Damages on a converted Security or for dividends or distributions on
shares of Common Stock issued upon conversion of a Security, but if any Holder
surrenders a Security for conversion after the close of business on the record
date for the payment of an installment of interest and Liquidated Damages and
prior to the opening of business on the next interest and Liquidated Damages
payment date, then, notwithstanding such conversion, the interest and Liquidated
Damages payable on such interest and Liquidated Damages payment date shall be
paid to the Holder of such Security on such record date. In such event, unless
such Security has been called for redemption on or prior to such interest
payment date, such Security, when surrendered for conversion, must be
accompanied by payment in funds acceptable to the Company of an amount equal to
the interest and Liquidated Damages payable on such interest and Liquidated
Damages payment date on the portion so converted.
If a Holder converts more than one Security at the same time, the number of
whole shares of Common Stock issuable upon the conversion shall be based on the
total principal amount of Securities converted.
Upon surrender of a Security that is converted in part, the Trustee shall
authenticate for the Holder one or more new Securities of authorized
denominations equal in aggregate principal amount to the unconverted portion of
the Security surrendered.
SECTION 5.03. Fractional Shares. The Company will not issue fractional
shares of Common Stock upon conversion of a Security. In lieu thereof, the
Company will pay an amount in cash based upon the Daily Market Price of the
Common Stock on the trading day prior to the date of conversion.
SECTION 5.04. Taxes on Conversion. The issuance of certificates for shares
of Common Stock upon the conversion of any Security shall be made without charge
to the converting Securityholder for such certificates or for any tax in respect
of the issuance of such certificates, and such certificates shall be issued in
the respective names of, or in such names as may be directed by, the Holder or
Holders of the converted Security; provided, however, that in the event that
certificates for shares of Common Stock are to be issued in a name other than
the name of the Holder of the Security converted, such Security, when
surrendered for conversion, shall be accompanied by an instrument of transfer,
in form satisfactory to the Company, duly executed by the Holder or his duly
authorized attorney; and provided further, however, that the Company shall not
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificates in a name other
than that of the Holder of the converted Security, and the Company shall not be
required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid or is not applicable.
SECTION 5.05. Company to Provide Stock. The Company shall at all times
reserve and keep available, free from preemptive rights, out of its authorized
but unissued Common Stock, solely for the purpose of issuance upon conversion of
Securities as herein provided, a sufficient number of shares of Common Stock to
permit the conversion of all outstanding Securities for shares of Common Stock.
All shares of Common Stock which may be issued upon conversion of the
Securities shall be duly authorized, validly issued, fully paid and
nonassessable when so issued.
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Shares of Common Stock issued upon conversion of any Restricted
Certificated Security or the Restricted Global Security shall bear a legend
comparable to the Restricted Securities Legend until the requirements for the
removal thereof set forth in Section 2.06(b) hereof are met.
SECTION 5.06. Adjustment of Conversion Price. The Conversion Price shall be
subject to adjustment from time to time as follows:
(a) In case the Company shall (1) pay a dividend in shares of Common Stock
to holders of Common Stock, (2) make a distribution in shares of Common Stock to
holders of Common Stock, (3) subdivide its outstanding shares of Common Stock
into a greater number of shares of Common Stock or (4) combine its outstanding
shares of Common Stock into a smaller number of shares of Common Stock, the
Conversion Price in effect immediately prior to such action shall be adjusted so
that the holder of any Security thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock which he would have
owned immediately following such action had such Securities been converted
immediately prior thereto. Any adjustment made pursuant to this subsection (a)
shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination.
(b) In case the Company shall issue rights or warrants to substantially all
holders of Common Stock entitling them (for a period commencing no earlier than
the record date for the determination of holders of Common Stock entitled to
receive such rights or warrants and expiring not more than 45 days after such
record date) to subscribe for or purchase shares of Common Stock (or securities
convertible into Common Stock) at a price per share less than the Current Market
Price (as determined pursuant to subsection (f) below) of the Common Stock on
such record date, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to such record date by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding on such record date, plus
the number of shares of Common Stock which the aggregate offering price of the
offered shares of Common Stock (or the aggregate conversion price of the
convertible securities so offered) would purchase at such Current Market Price,
and of which the denominator shall be the number of shares of Common Stock
outstanding on such record date plus the number of additional shares of Common
Stock offered (or into which the convertible securities so offered are
convertible). Such adjustments shall become effective immediately after such
record date.
(c) In case the Company shall distribute to all holders of Common Stock
shares of any class of Capital Stock of the Company other than Common Stock,
evidences of indebtedness or other assets (other than cash dividends out of
current or retained earnings), or shall distribute to substantially all holders
of Common Stock rights or warrants to subscribe for securities (other than those
securities referred to in subsection (b) above), then in each such case the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the date of such distribution by a fraction of which the numerator shall be the
Current Market Price (determined as provided in subsection (f) below) of the
Common Stock on the record date mentioned below less the then fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive evidence of such fair market value and described in a Board
Resolution) of the portion of the assets so distributed or of such subscription
rights or warrants applicable to one share of Common Stock, and of which the
denominator shall be such Current Market Price of the Common Stock. Such
adjustment shall become effective immediately after the record date for the
determination of the holders of Common Stock entitled to receive such
distribution. Notwithstanding the foregoing, in case the Company shall issue
rights or warrants to subscribe for additional shares of the Company's capital
stock (other than those referred to in subsection (b) above) ("Rights") to
substantially all holders of Common Stock, the Company may, in lieu of making
any adjustment pursuant to this Section 5.06, make proper provision so that each
holder of a Security who converts such Security (or any portion thereof) after
the record date for such distribution and prior to the expiration or redemption
of the Rights shall be entitled to receive upon such conversion, in addition to
the shares of Common Stock issuable upon such conversion (the "Conversion
Shares"), a number of Rights to be determined as follows: (i) if such conversion
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occurs on or prior to the date for the distribution to the holders of Rights of
separate certificates evidencing such Rights (the "Distribution Date"), the same
number of Rights to which a holder of a number of shares of Common Stock equal
to the number of Conversion Shares is entitled at the time of such conversion in
accordance with the terms and provisions of and applicable to the Rights; and
(ii) if such conversion occurs after the Distribution Date, the same number of
Rights to which a holder of the number of shares of Common Stock into which the
principal amount of the Security so converted was convertible immediately prior
to the Distribution Date would have been entitled on the Distribution Date in
accordance with the terms and provisions of and applicable to the Rights.
(d) In case the Company shall, by dividend or otherwise, at any time
distribute to all holders of its Common Stock cash (including any distributions
of cash out of current or retained earnings of the Company but excluding any
cash that is distributed as part of a distribution requiring a Conversion Price
adjustment pursuant to paragraph (c) of this Section) in an aggregate amount
that, together with the sum of (x) the aggregate amount of any other
distributions to all holders of its Common Stock made in cash plus (y) all
Excess Payments, in each case made within the 12 months preceding the date fixed
for determining the stockholders entitled to such distribution (the
"Distribution Record Date") and in respect of which no Conversion Price
adjustment pursuant to paragraphs (c) or (e) of this Section or this paragraph
(d) has been made, exceeds 15% of the product of the Current Market Price per
share (determined as provided in paragraph (f) of this Section) of the Common
Stock on the Distribution Record Date multiplied by the number of shares of
Common Stock outstanding on the Distribution Record Date (excluding shares held
in the treasury of the Company), the Conversion Price shall be reduced so that
the same shall equal the price determined by multiplying such Conversion Price
in effect immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this paragraph (d) by a fraction of which the
numerator shall be the Current Market Price per share (determined as provided in
paragraph (f) of this Section) of the Common Stock on the Distribution Record
Date less the amount of such cash and other consideration (including any Excess
Payments) so distributed applicable to one share of Common Stock (equal to the
aggregate amount of such cash and other consideration (including any Excess
Payments) divided by the number of shares of Common Stock outstanding on the
Distribution Record Date) and the denominator shall be such Current Market Price
per share (determined as provided in paragraph (f) of this Section) of the
Common Stock on the Distribution Record Date, such reduction to become effective
immediately prior to the opening of business on the day following the
Distribution Record Date.
(e) In case a tender offer or other negotiated transaction made by the
Company or any Subsidiary of the Company for all or any portion of the Common
Stock shall be consummated, if an Excess Payment is made in respect of such
tender offer or other negotiated transaction and the amount of such Excess
Payment, together with the sum of (x) the aggregate amount of all Excess
Payments plus (y) the aggregate amount of all distributions to all holders of
the Common Stock made in cash (including any distributions of cash out of
current or retained earnings of the Company), in each case made within the 12
months preceding the date of payment of such current negotiated transaction
consideration or expiration of such current tender offer, as the case may be
(the "Purchase Date"), and as to which no adjustment pursuant to paragraph (c)
or paragraph (d) of this Section or this paragraph (e) has been made, exceeds
15% of the product of the Current Market Price per share (determined as provided
in paragraph (f) of this Section) of the Common Stock on the Purchase Date
multiplied by the number of shares of Common Stock outstanding (including any
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tendered shares but excluding any shares held in the treasury of the Company or
any Subsidiary of the Company) on the Purchase Date, the Conversion Price shall
be reduced so that the same shall equal the price determined by multiplying such
Conversion Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this paragraph (e) by a fraction of
which the numerator shall be the Current Market Price per share (determined as
provided in paragraph (f) of this Section) of the Common Stock on the Purchase
Date less the amount of such Excess Payments and such cash distributions, if
any, applicable to one share of Common Stock (equal to the aggregate amount of
such Excess Payments and such cash distributions divided by the number of shares
of Common Stock outstanding on the Purchase Date) and the denominator shall be
such Current Market Price per share (determined as provided in paragraph (f) of
this Section) of the Common Stock on the Purchase Date, such reduction to become
effective immediately prior to the opening of business on the day following the
Purchase Date.
(f) The "Current Market Price" per share of Common Stock on any date shall
be deemed to be the average of the Daily Market Prices for the shorter of (i) 30
consecutive Business Days ending on the last full Trading Day on the exchange or
market referred to in determining such Daily Market Prices prior to the time of
determination or (ii) the period commencing on the date next succeeding the
first public announcement of the issuance of such rights or such warrants or
such other distribution or such negotiated transaction through such last full
trading day on the exchange or market referred to in determining such Daily
Market Prices prior to the time of determination.
(g) "Excess Payment" means the excess of (A) the aggregate of the cash and
fair market value of other consideration paid by the Company or any of its
Subsidiaries with respect to the shares acquired in a tender offer or other
negotiated transaction over (B) the Daily Market Price on the Trading Day
immediately following the completion of such tender offer or other negotiated
transaction multiplied by the number of acquired shares.
(h) In any case in which this Section 5.06 shall require that an adjustment
be made immediately following a record date for an event, the Company may elect
to defer, until such event, issuing to the Holder of any Security converted
after such record date the shares of Common Stock and other Capital Stock of the
Company issuable upon such conversion over and above the shares of Common Stock
and other Capital Stock of the Company issuable upon such conversion only on the
basis of the Conversion Price prior to adjustment; and, in lieu of the shares
the issuance of which is so deferred, the Company shall issue or cause its
transfer agents to issue due bills or other appropriate evidence of the right to
receive such shares.
SECTION 5.07. No Adjustment. No adjustment in the Conversion Price shall be
required until cumulative adjustments amount to 1% or more of the Conversion
Price as last adjusted; provided, however, that any adjustments which by reason
of this Section 5.07 are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Article V shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be. No adjustment need be made for rights to purchase
Common Stock pursuant to a Company plan for reinvestment of dividends or
interest. No adjustment need be made for a change in the par value or no par
value of the Common Stock.
SECTION 5.08. Other Adjustments. (a) In the event that, as a result of an
adjustment made pursuant to Section 5.06 above, the holder of any Security
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thereafter surrendered for conversion shall become entitled to receive any
shares of Capital Stock of the Company other than shares of its Common Stock,
thereafter the Conversion Price of such other shares so receivable upon
conversion of any Securities shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to Common Stock contained in this Article V.
(b) In the event that shares of Common Stock are not delivered after the
expiration of any of the rights or warrants referred to in Section 5.06(b) and
Section 5.06(c) hereof, the Conversion Price shall be readjusted to the
Conversion Price which would otherwise be in effect had the adjustment made upon
the issuance of such rights or warrants been made on the basis of delivery of
only the number of shares of Common Stock actually delivered.
SECTION 5.09. Adjustments for Tax Purposes. The Company may, at its option,
make such reductions in the Conversion Price, in addition to those required by
Section 5.06 above, as it determines to be advisable in order that any stock
dividend, subdivision of shares, distribution of rights to purchase stock or
securities or distribution of securities convertible into or exchangeable for
stock made by the Company to its stockholders will not be taxable to the
recipients thereof.
SECTION 5.10. Adjustments by the Company. The Company from time to time
may, to the extent permitted by law, reduce the Conversion Price by any amount
for any period of at least 20 days, in which case the Company shall give at
least 15 days' notice of such reduction in accordance with Section 5.11, if the
Board of Directors has made a determination that such reduction would be in the
best interests of the Company, which determination shall be conclusive.
SECTION 5.11. Notice of Adjustment. Whenever the Conversion Price is
adjusted, the Company shall promptly mail to Securityholders at the addresses
appearing on the Registrar's books a notice of the adjustment and file with the
Trustee an Officers' Certificate briefly stating the facts requiring the
adjustment and the manner of computing it. The certificate shall be conclusive
evidence of the correctness of such adjustment.
SECTION 5.12. Notice of Certain Transactions. In the event that:
(1) the Company takes any action which would require an adjustment in the
Conversion Price;
(2) the Company takes any action that would require a supplemental
indenture pursuant to Section 5.13; or
(3) there is a dissolution or liquidation of the Company;
a holder of a Security may wish to convert such Security into shares of
Common Stock prior to the record date for or the effective date of the
transaction so that he may receive the rights, warrants, securities or assets
which a holder of shares of Common Stock on that date may receive. Therefore,
the Company shall mail to Securityholders at the addresses appearing on the
Registrar's books and the Trustee a notice stating the proposed record or
effective date, as the case may be. The Company shall mail the notice at least
15 days before such date; however, failure to mail such notice or any defect
therein shall not affect the validity of any transaction referred to in clause
(1), (2) or (3) of this Section 5.12.
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SECTION 5.13. Effect of Reclassifications, Consolidations, Mergers or Sales
on Conversion Privilege. If any of the following shall occur, namely: (i) any
reclassification or change of outstanding shares of Common Stock issuable upon
conversion of Securities (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), (ii) any consolidation or merger to which the Company is a
party other than a merger in which the Company is the continuing corporation and
which does not result in any reclassification of, or change (other than a change
in name, or par value, or from par value to no par value, or from no par value
to par value or as a result of a subdivision or combination) in, outstanding
shares of Common Stock or (iii) any sale or conveyance of all or substantially
all of the property or business of the Company as an entirety, then the Company,
or such successor or purchasing corporation, as the case may be, shall, as a
condition precedent to such reclassification, change, consolidation, merger,
sale or conveyance, execute and deliver to the Trustee a supplemental indenture
in form satisfactory to the Trustee providing that the holder of each Security
then outstanding shall have the right to convert such Security into the kind and
amount of shares of stock and other securities and property (including cash)
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock deliverable upon
conversion of such Security immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. Such supplemental indenture shall
provide for adjustments of the Conversion Price which shall be as nearly
equivalent as may be practicable to the adjustments of the Conversion Price
provided for in this Article V. The foregoing, however, shall not in any way
affect the right a holder of a Security may otherwise have, pursuant to clause
(ii) of the last sentence of subsection (c) of Section 5.06, to receive Rights
upon conversion of a Security. If, in the case of any such consolidation,
merger, sale or conveyance, the stock or other securities and property
(including cash) receivable thereupon by a holder of Common Stock includes
shares of stock or other securities and property of a corporation other than the
successor or purchasing corporation, as the case may be, in such consolidation,
merger, sale or conveyance, then such supplemental indenture shall also be
executed by such other corporation and shall contain such additional provisions
to protect the interests of the holders of the Securities as the Board of
Directors of the Company shall reasonably consider necessary by reason of the
foregoing. The provision of this Section 5.13 shall similarly apply to
successive consolidations, mergers, sales or conveyances.
In the event the Company shall execute a supplemental indenture pursuant to
this Section 5.13, the Company shall promptly file with the Trustee an Officers'
Certificate briefly stating the reasons therefor, the kind or amount of shares
of stock or securities or property (including cash) receivable by holders of the
Securities upon the conversion of their Securities after any such
reclassification, change, consolidation, merger, sale or conveyance and any
adjustment to be made with respect thereto.
SECTION 5.14. Trustee's Disclaimer. The Trustee has no duty to determine
when an adjustment under this Article V should be made, how it should be made or
what such adjustment should be, but may accept as conclusive evidence of the
correctness of any such adjustment, and shall be protected in relying upon the
Officers' Certificate with respect thereto which the Company is obligated to
file with the Trustee pursuant to Section 5.11. The Trustee makes no
representation as to the validity or value of any securities or assets issued
upon conversion of Securities, and the Trustee shall not be responsible for the
Company's failure to comply with any provisions of this Article V.
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The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 5.13, but may accept as conclusive evidence of the
correctness thereof, and shall be protected in relying upon, the Officers'
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 5.13.
ARTICLE VI
Subordination
SECTION 6.01. Agreement to Subordinate. The Company, for itself and its
successors, and each Securityholder, by his acceptance of Securities, agree that
the payment of the principal of or interest or Liquidated Damages on or any
other amounts due on the Securities is subordinated in right of payment, to the
extent and in the manner stated in this Article VI, to the prior payment in full
of all existing and future Senior Debt.
SECTION 6.02. No Payment on Securities if Senior Debt in Default. Anything
in this Indenture to the contrary notwithstanding, no payment on account of
principal of or redemption of, interest or Liquidated Damages on or other
amounts due on the Securities, and no redemption, purchase, or other acquisition
of the Securities, shall be made by or on behalf of the Company (i) unless full
payment of amounts then due for principal and interest and of all other amounts
then due on all Senior Debt has been made or duly provided for pursuant to the
terms of the instrument governing such Senior Debt, (ii) if, at the time of such
payment, redemption, purchase or other acquisition, or immediately after giving
effect thereto, there shall exist under any Senior Debt, or any agreement
pursuant to which any Senior Debt is issued, any default, which default shall
not have been cured or waived and which default shall have resulted in the full
amount of such Senior Debt being declared due and payable or (iii) if, at the
time of such payment, redemption, purchase or other acquisition, the Trustee
shall have received written notice from the Representative of the holders of
Designated Senior Debt (a "Payment Blockage Notice") that there exists under
such Designated Senior Debt, or any agreement pursuant to which such Designated
Senior Debt is issued, any default, which default shall not have been cured or
waived, permitting the holders thereof to declare any amounts of such Designated
Senior Debt due and payable, but only for the period (the "Payment Blockage
Period") commencing on the date of receipt of the Payment Blockage Notice and
ending (unless earlier terminated by notice given to the Trustee by the
Representative of the holders of such Designated Senior Debt) on the earlier of
(a) the date on which such event of default shall have been cured or waived or
(b) 180 days from the receipt of the Payment Blockage Notice. Notwithstanding
the provisions described in the immediately preceding sentence (other than in
clauses (i) and (ii)), unless the holders of such Designated Senior Debt or the
Representative of such holders shall have accelerated the maturity of such
Designated Senior Debt, the Company may resume payments on the Securities after
the end of such Payment Blockage Period. Not more than one Payment Blockage
Notice may be given in any consecutive 365-day period, irrespective of the
number of defaults with respect to Senior Debt during such period.
In the event that, notwithstanding the provisions of this Section 6.02,
payments are made by or on behalf of the Company in contravention of the
provisions of this Section 6.02, such payments shall be held by the Trustee, any
Paying Agent or the holders, as applicable, in trust for the benefit of, and
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shall be paid over to and delivered to, the Representative of the holders of
Senior Debt or the trustee under the indenture or other agreement (if any),
pursuant to which any instruments evidencing any Senior Debt may have been
issued for application to the payment of all Senior Debt ratably according to
the aggregate amounts remaining unpaid to the extent necessary to pay all Senior
Debt in full in accordance with the terms of such Senior Debt, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Debt.
The Company shall give prompt written notice to the Trustee and any Paying
Agent of any default or event of default under any Senior Debt or under any
agreement pursuant to which any Senior Debt may have been issued.
SECTION 6.03. Distribution on Acceleration of Securities; Dissolution and
Reorganization; Subrogation of Securities. (a) If the Securities are declared
due and payable because of the occurrence of an Event of Default, the Company
shall give prompt written notice to the holders of all Senior Debt or to the
trustee(s) for such Senior Debt of such acceleration. The Company may not pay
the principal of or interest or Liquidated Damages on or any other amounts due
on the Securities until five Business Days after such holders or trustee(s) of
Senior Debt receive such notice and, thereafter, the Company may pay the
principal of or interest or Liquidated Damages on or any other amounts due on
the Securities only if the provisions of this Article VI permit such payment.
(b) Upon (i) any acceleration of the principal amount due on the Securities
because of an Event of Default or (ii) any direct or indirect distribution of
assets of the Company upon any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors or any other
dissolution, winding up, liquidation or reorganization of the Company):
(1) the holders of all Senior Debt shall first be entitled to receive
payment in full of the principal thereof, the interest thereon and any other
amounts due thereon before the Holders are entitled to receive payment on
account of the principal of or interest and Liquidated Damages on or any other
amounts due on the Securities;
(2) any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (other than securities of the
Company as reorganized or readjusted or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment the payment
of which is subordinate, at least to the extent provided in this Article with
respect to the Securities, to the payment in full without diminution or
modification by such plan of all Senior Debt), to which the holders or the
Trustee would be entitled except for the provisions of this Article, shall be
paid by the liquidating trustee or agent or other person making such a payment
or distribution, directly to the holders of Senior Debt (or their
representative(s) or trustee(s) acting on their behalf), ratably according to
the aggregate amounts remaining unpaid on account of the principal of or
interest on and other amounts due on the Senior Debt held or represented by
each, to the extent necessary to make payment in full of all Senior Debt
remaining unpaid, after giving effect to any concurrent payment or distribution
to the holders of such Senior Debt; and
(3) in the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (other than securities of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment the payment of which is subordinate,
at least to the extent provided in this Article with respect to the Securities,
to the payment in full without diminution or modification by such plan of Senior
Debt), shall be received by the Trustee or the holders before all Senior Debt is
paid in full, such payment or distribution shall be held in trust for the
benefit of, and be paid over to upon request by a holder of the Senior Debt, the
holders of the Senior Debt remaining unpaid (or their representatives) or
trustee(s) acting on their behalf, ratably as aforesaid, for application to the
payment of such Senior Debt until all such Senior Debt shall have been paid in
full, after giving effect to any concurrent payment or distribution to the
holders of such Senior Debt.
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Subject to the payment in full of all Senior Debt, the Holders shall be
subrogated to the rights of the holders of Senior Debt to receive payments or
distributions of cash, property or securities of the Company applicable to the
Senior Debt until the principal of and interest and Liquidated Damages on the
Securities shall be paid in full and, for purposes of such subrogation, no such
payments or distributions to the holders of Senior Debt of cash, property or
securities which otherwise would have been payable or distributable to Holders
shall, as between the Company, its creditors other than the holders of Senior
Debt, and the Holders, be deemed to be a payment by the Company to or on account
of the Senior Debt, it being understood that the provisions of this Article are
and are intended solely for the purpose of defining the relative rights of the
Holders, on the one hand, and the holders of Senior Debt, on the other hand.
Nothing contained in this Article or elsewhere in this Indenture or in the
Securities is intended to or shall (i) impair, as between the Company and its
creditors other than the holders of Senior Debt, the obligation of the Company,
which is absolute and unconditional, to pay to the Holders the principal of, and
interest and Liquidated Damages on, the Securities as and when the same shall
become due and payable in accordance with the terms of the Securities, (ii)
affect the relative rights of the Holders and creditors of the Company other
than holders of Senior Debt or, as between the Company and the Trustee, the
obligations of the Company to the Trustee, or (iii) prevent the Trustee or the
Holders from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
of the holders of Senior Debt in respect of cash, property and securities of the
Company received upon the exercise of any such remedy.
Upon distribution of assets of the Company referred to in this Article, the
Trustee, subject to the provisions of Section 9.01 hereof, and the Holders shall
be entitled to rely upon a certificate of the liquidating trustee or agent or
other person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Debt and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
The Trustee, however, shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt. Nothing contained in this Article or elsewhere in this
Indenture, or in any of the Securities, shall prevent the good faith application
by the Trustee of any moneys which were deposited with it hereunder, prior to
its receipt of written notice of facts which would prohibit such application,
for the purpose of the payment of or on account of the principal of, or interest
and Liquidated Damages on, the Securities unless, prior to the date on which
such application is made by the Trustee, the Trustee shall be charged with
actual notice under Section 6.03(d) hereof of the facts which would prohibit the
making of such application.
(c) The provisions of this Article shall not be applicable to any cash,
properties or securities received by the Trustee or by any Holder when received
as a holder of Senior Debt and nothing in Section 9.11 hereof or elsewhere in
this Indenture shall deprive the Trustee or such Holder of any of its rights as
such Holder.
(d) The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment of money to
or by the Trustee in respect of the Securities pursuant to the provisions of
this Article. The Trustee, subject to the provisions of Section 9.01 hereof,
shall be entitled to assume that no such fact exists unless the Company or any
holder of Senior Debt or any trustee therefor has given notice thereof to the
Trustee. Notwithstanding the provisions of this Article or any other provisions
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any fact which would prohibit the making of any payment of moneys
to or by the Trustee in respect of the Securities pursuant to the provisions in
this Article, unless, and until three Business Days after, the Trustee shall
have received written notice thereof from the Company or any holder or holders
of Senior Debt or from any trustee therefor; and, prior to the receipt of any
such written notice, the Trustee, subject to the provisions of Section 9.01
hereof, shall be entitled in all respects conclusively to assume that no such
facts exist; provided that if on a date not less than three Business Days
immediately preceding the date upon which, by the terms hereof, any such moneys
may become payable for any purpose (including, without limitation, the principal
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of or interest and Liquidated Damages on any Security), the Trustee shall not
have received with respect to such moneys the notice provided for in this
Section 6.03(d), then anything herein contained to the contrary notwithstanding,
the Trustee shall have full power and authority to receive such moneys and to
apply the same to the purpose for which they were received, and shall not be
affected by any notice to the contrary which may be received by it on or after
such prior date.
The Trustee shall be entitled to conclusively rely on the delivery to it of
a written notice by a person representing himself to be a holder of Senior Debt
(or a trustee on behalf of such holder) to establish that such notice has been
given by a holder of Senior Debt (or a trustee on behalf of any such holder or
holders). In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
person under this Article, and, if such evidence is not furnished, the Trustee
may defer any payment to such person pending judicial determination as to the
right of such person to receive such payment; nor shall the Trustee be charged
with knowledge or the curing or waiving of any default of the character
specified in Section 6.02 hereof or that any event or any condition preventing
any payment in respect of the Securities shall have ceased to exist, unless and
until the Trustee shall have received written notice to such effect.
(e) The provisions of this Section 6.03 applicable to the Trustee shall
(unless the context requires otherwise) also apply to any Paying Agent for the
Company.
SECTION 6.04. Reliance by Senior Debt on Subordination Provisions. Each
Holder of any Security by his acceptance thereof acknowledges and agrees that
the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration for each holder of any Senior Debt, whether such
Senior Debt was created or acquired before or after the issuance of the
Securities, to acquire and continue to hold, or to continue to hold, such Senior
Debt, and such holder of Senior Debt shall be deemed conclusively to have relied
on such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Debt. Notice of any default in the payment of
any Senior Debt, except as expressly stated in this Article, and notice of
acceptance of the provisions hereof are hereby expressly waived. Except as
otherwise expressly provided herein, no waiver, forbearance or release by any
holder of Senior Debt under such Senior Debt or under this Article shall
constitute a release of any of the obligations or liabilities of the Trustee or
Holders of the Securities provided in this Article.
SECTION 6.05. No Waiver of Subordination Provisions. Except as otherwise
expressly provided herein, no right of any present or future holder of any
Senior Debt to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any such holder, or
by any noncompliance by the Company with the terms, provisions and covenants of
this Indenture, regardless of any knowledge thereof any such holder may have or
be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Debt may, at any time and from time to time, without the
consent of, or notice to, the Trustee or the Holders of the Securities, without
incurring responsibility to the Holders of the Securities and without impairing
or releasing the subordination provided in this Article VI or the obligations
hereunder of the Holders of the Securities to the holders of Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
of, or renew or alter, Senior Debt, or otherwise amend or supplement in any
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manner Senior Debt or any instrument evidencing the same or any agreement under
which Senior Debt is outstanding; (ii) sell, exchange, release or otherwise
dispose of any property pledged, mortgaged or otherwise securing Senior Debt;
(iii) release any person liable in any manner for the collection of Senior Debt;
and (iv) exercise or refrain from exercising any rights against the Company or
any other person.
SECTION 6.06. Trustee's Relation to Senior Debt. The Trustee in its
individual capacity shall be entitled to all the rights set forth in this
Article in respect of any Senior Debt at any time held by it, to the same extent
as any holder of Senior Debt, and nothing in Section 9.11 hereof or elsewhere in
this Indenture shall deprive the Trustee of any of its rights as such holder.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations, as are
specifically set forth in this Article, and no implied covenants or obligations
with respect to the holders of Senior Debt shall be read into this Indenture
against the Trustee. The Trustee shall not owe any fiduciary duty to the holders
of Senior Debt but shall have only such obligations to such holders as are
expressly set forth in this Article.
Each Holder of a Security by his acceptance thereof authorizes and directs
the Trustee on his behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article and appoints the
Trustee his attorney-in-fact for any and all such purposes, including, in the
event of any dissolution, winding up or liquidation or reorganization under any
applicable bankruptcy law of the Company (whether in bankruptcy, insolvency or
receivership proceedings or otherwise), the timely filing of a claim for the
unpaid balance of such Holder's Securities in the form required in such
proceedings and the causing of such claim to be approved. If the Trustee does
not file a claim or proof of debt in the form required in such proceedings prior
to 30 days before the expiration of the time to file such claims or proofs, then
any holder or holders of Senior Debt or their representative or representatives
shall have the right to demand, sue for, collect, receive and receipt for the
payments and distributions in respect of the Securities which are required to be
paid or delivered to the holders of Senior Debt as provided in this Article and
to file and prove all claims therefor and to take all such other action in the
name of the holders or otherwise, as such holders of Senior Debt or
representative thereof may determine to be necessary or appropriate for the
enforcement of the provisions of this Article.
SECTION 6.07. Other Provisions Subject Hereto. Except as expressly stated
in this Article, notwithstanding anything contained in this Indenture to the
contrary, all the provisions of this Indenture and the Securities are subject to
the provisions of this Article. However, nothing in this Article shall apply to
or adversely affect the claims of, or payment to, the Trustee pursuant to
Section 9.07. Notwithstanding the foregoing, the failure to make a payment on
account of principal of or interest or Liquidated Damages on the Securities by
reason of any provision of this Article VI shall not be construed as preventing
the occurrence of an Event of Default under Section 8.01.
ARTICLE VII
Successors
SECTION 7.01. Merger, Consolidation or Sale of Assets. The Company may not
consolidate or merge with or into any person (whether or not the Company is the
surviving corporation), or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets unless:
(a) the Company is the surviving corporation or the person formed by
or surviving any such consolidation or merger (if other than the Company)
or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia;
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(b) the corporation formed by or surviving any such consolidation or
merger (if other than the Company) or the corporation to which such sale,
assignment, transfer, lease, conveyance or other disposition will have been
made assumes all the Obligations of the Company, pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee, under the
Securities and the Indenture;
(c) any such sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the Company's properties or
assets shall be as an entirety or virtually as an entirety to one
corporation;
(d) immediately after such transaction no Default or Event of Default
exists; and
(e) the Company or such corporation shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such transaction and the supplemental indenture comply with the
Indenture and that all conditions precedent in the Indenture relating to
such transaction have been satisfied.
SECTION 7.02. Successor Corporation Substituted. Upon any consolidation or
merger, or any sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the assets of the Company in
accordance with Section 7.01 hereof, the successor corporation formed by such
consolidation or into or with which the Company is merged or the corporation to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor person has been named as the Company herein; provided, however, that
the predecessor Company in the case of a sale, assignment, transfer, lease,
conveyance or other disposition shall not be released from the obligation to pay
the principal of and interest and Liquidated Damages on the Securities.
ARTICLE VIII
Defaults and Remedies
SECTION 8.01. Events of Default. An "Event of Default" occurs if:
(a) the Company defaults in the payment of interest or Liquidated
Damages on any Security when the same becomes due and payable, and the
Default continues for a period of 30 days after the date due and payable;
(b) the Company defaults in the payment of the principal of any
Security when the same becomes due and payable at maturity, upon redemption
or otherwise;
(c) the Company fails to observe or perform any covenant or agreement
contained in Section 4.07 hereof;
(d) the Company fails to observe or perform any other covenant or
agreement contained in this Indenture or the Securities, required by it to
be performed and the Default continues for a period of 60 days after the
receipt of written notice from the Trustee to the Company or from the
Holders of 25% in aggregate principal amount of the then outstanding
Securities to the Company and the Trustee stating that such notice is a
"Notice of Default";
(e) there is a default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any
Material Subsidiary of the Company (or the payment of which is guaranteed
by the Company or any Material Subsidiary of the Company), whether such
Indebtedness or guarantee now exists or is created after the Issuance
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Date, which default (i) is caused by a failure to pay when due principal of
or interest or Liquidated Damages on such Indebtedness within the grace
period provided for in such Indebtedness (which failure continues beyond
any applicable grace period) (a "Payment Default") or (ii) results in the
acceleration of such Indebtedness prior to its express maturity (without
such acceleration being rescinded or annulled) and, in each case, the
principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there is a Payment
Default or the maturity of which has been so accelerated, aggregates
U.S.$3,000,000 or more;
(f) a final, non-appealable judgment or final non-appealable judgments
(other than any judgment as to which a reputable insurance company has
accepted full liability) for the payment of money are entered by a court or
courts of competent jurisdiction against the Company or any Material
Subsidiary of the Company and remain undischarged for a period (during
which execution shall not be effectively stayed) of 60 days, provided that
the aggregate of all such judgments exceeds U.S.$3,000,000;
(g) the Company or any Material Subsidiary pursuant to or within the
meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii)
consents to the entry of an order for relief against it in an involuntary
case in which it is the debtor, (iii) consents to the appointment of a
Custodian of it or for all or substantially all of its property, (iv) makes
a general assignment for the benefit of its creditors, or (v) makes the
admission in writing that it generally is unable to pay its debts as the
same become due; or
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (i) is for relief against the Company or any
Material Subsidiary of the Company in an involuntary case, (ii) appoints a
Custodian of the Company or any Material Subsidiary of the Company or for
all or substantially all of its property, and the order or decree remains
unstayed and in effect for 60 days or (iii) orders the liquidation of the
Company or any Material Subsidiary of the Company, and the order or decree
remains unstayed and in effect for 60 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal
or state law for the relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or similar official under any Bankruptcy Law.
SECTION 8.02. Acceleration. If an Event of Default (other than an Event of
Default specified in clauses (g) and (h) of Section 8.01 hereof) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of at least 25%
in principal amount of the then-outstanding Securities by notice to the Company
and the Trustee, may declare all the Securities to be due and payable. Upon such
declaration, the principal of, premium, if any, and accrued and unpaid interest
and Liquidated Damages on the Securities shall be due and payable immediately.
If an Event of Default specified in clause (g) or (h) of Section 8.01 hereof
occurs, such an amount shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Securityholder. The Holders of a majority in aggregate principal amount of the
then- outstanding Securities by notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree, if all amounts payable to the Trustee pursuant to Section
9.07 hereof have been paid and if all existing Events of Default have been cured
or waived except nonpayment of principal or interest and Liquidated Damages that
has become due solely because of the acceleration.
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SECTION 8.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal or interest and Liquidated Damages on the Securities or to enforce
the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 8.04. Waiver of Past Defaults. The Holders of a majority in
aggregate principal amount of the then-outstanding Securities by notice to the
Trustee may waive an existing Default or Event of Default and its consequences
except a continuing Default or Event of Default in the payment of the Designated
Event Payment or the principal of, or interest or Liquidated Damages on, any
Security. When a Default or Event of Default is waived, it is cured and ceases;
but no such waiver shall extend to any subsequent or other Default or impair any
right consequent thereon.
SECTION 8.05. Control by Majority. The Holders of a majority in principal
amount of the then-outstanding Securities may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture, is unduly
prejudicial to the rights of other Securityholders, or would involve the Trustee
in personal liability.
SECTION 8.06. Limitation on Suits. A Securityholder may pursue a remedy
with respect to this Indenture or the Securities only if:
(a) the Securityholder gives to the Trustee notice of a continuing
Event of Default;
(b) the Securityholders of at least 25% in principal amount of the
then-outstanding Securities make a request to the Trustee to pursue the
remedy;
(c) such Securityholder or Securityholders offer to the Trustee
indemnity satisfactory to the Trustee against any loss, liability or
expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then-outstanding Securities do not give the Trustee a
direction inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 8.07. Rights of Securityholders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder of a Security to
receive payment of principal and interest and Liquidated Damages on such
Security, on or after the respective due dates expressed in such Security, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
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SECTION 8.08. Collection Suit by Trustee. If an Event of Default specified
in Section 8.01(a) or (b) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
for the whole amount of principal and interest and Liquidated Damages remaining
unpaid on the Securities and interest on overdue principal and interest and
Liquidated Damages and such further amount as shall be sufficient to cover the
costs and, to the extent lawful, expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts payable under Section 9.07 hereof.
SECTION 8.09. Trustee May File Proofs of Claim. The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and the Securityholders allowed in
any judicial proceedings relative to the Company, its creditors or its property.
Nothing contained herein shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Securityholder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Securityholder thereof, or to authorize the Trustee to vote
in respect of the claim of any Securityholder in any such proceeding.
SECTION 8.10. Priorities. If the Trustee collects any money pursuant to
this Article, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 9.07 hereof;
Second: to the holders of Senior Debt to the extent required by
Article VI;
Third: to the Securityholders, for amounts due and unpaid on the
Securities for principal and interest and Liquidated Damages, ratably,
according to the amounts due and payable on the Securities for principal
and interest and Liquidated Damages, respectively; and
Fourth: to the Company.
Except as otherwise provided in Section 2.12 hereof, the Trustee may fix a
record date and payment date for any payment to Securityholders made pursuant to
this Section.
SECTION 8.11. Undertaking for Costs. In any suit for the enforcement of any
right or remedy under this Indenture or in any suit against the Trustee for any
action taken or omitted by it as a Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a holder pursuant to Section 8.07 hereof, or a suit by
Holders of more than 10% in principal amount of the then-outstanding Securities.
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ARTICLE IX
Trustee
SECTION 9.01. Duties of Trustee. (a) If an Event of Default has occurred
and is continuing, the Trustee shall exercise such of the rights and powers
vested in it by this Indenture, and use the same degree of care and skill in
their exercise, as a prudent man would exercise or use under the circumstances
in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default: (i) the Trustee
need perform only those duties that are specifically set forth in this Indenture
and no others and (ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and, if required by the terms hereof, conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and opinions
to determine whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that: (i) this paragraph does not limit the effect of paragraph (b) of this
Section 9.01; (ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts and (iii) the Trustee shall not be
liable with respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section 8.05 hereof.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 9.01.
(e) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 9.02. Rights of Trustee. (a) The Trustee may rely on any document
believed by it to be genuine and to have been signed or presented by the proper
person. The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible for the
misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee shall not be charged with knowledge of any Event of Default
under Section 8.01 (other than an Event of Default under Section 8.01(a) or (b)
if the Trustee is also a Paying Agent with respect to the Securities) unless
either (1) a Trust Officer assigned to its Corporate Trust Department shall have
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actual knowledge thereof, or (2) the Trustee shall have received notice thereof
in accordance with Section 12.02 hereof from the Company or any Holder.
SECTION 9.03. Individual Rights of Trustee. The Trustee in its individual
or any other capacity may become the owner or pledgee of Securities and may
otherwise deal with the Company or an Affiliate with the same rights it would
have if it were not Trustee. Any Agent may do the same with like rights.
However, the Trustee is subject to Sections 9.10 and 9.11 hereof.
SECTION 9.04. Trustee's Disclaimer. The Trustee makes no representation as
to the validity or adequacy of this Indenture or the Securities, it shall not be
accountable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company in the Indenture or
any statement in the Securities (other than its authentication) or for
compliance by the Company with the Registration Rights Agreement.
SECTION 9.05. Notice of Defaults. If a Default or Event of Default occurs
and is continuing and if it is known to the Trustee, the Trustee shall mail to
Securityholders a notice of the Default or Event of Default within 90 days after
it occurs. Except in the case of a Default or Event of Default in payment on any
Security, the Trustee may withhold the notice if and so long as a committee of
its Trust Officers in good faith determines that withholding the notice is in
the interests of Securityholders.
SECTION 9.06. Reports by Trustee to Securityholders. Within 60 days after
the reporting date stated in Section 12.10, the Trustee shall mail to
Securityholders a brief report dated as of such reporting date that complies
with TIA S-313(a) if and to the extent required by such S-313(a). The Trustee
also shall comply with TIA S-313(b)(2). The Trustee shall also transmit by mail
all reports as required by TIA S-313(c).
A copy of each report at the time of its mailing to Securityholders shall
be filed with the SEC and each stock exchange on which the Securities are
listed. The Company shall notify the Trustee when the Securities are listed on
any stock exchange.
SECTION 9.07. Compensation and Indemnity. The Company shall pay to the
Trustee from time to time reasonable compensation for its services hereunder.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable disbursements, expenses and advances incurred or made
by it. Such disbursements and expenses may include the reasonable disbursements,
compensation and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any loss or liability
incurred by it except as set forth in the next paragraph. The Trustee shall
notify the Company promptly of any claim for which it may seek indemnity. The
Company shall defend the claim and the Trustee shall cooperate in the defense.
The Company will not, without the prior written consent of the Trustee, settle
or compromise or consent to the entry of any judgment with respect to any such
claim unless such settlement, compromise or consent includes an unconditional
release of the Trustee from all liabilities arising out of such claim. The
Trustee may have separate counsel and the Company shall pay the reasonable fees,
disbursements and expenses of one such separate counsel. The Company need not
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pay for any settlement made without its consent, which consent shall not be
unreasonably withheld.
The Company need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section, the Trustee
shall have a lien prior to the Securities on all money or property held or
collected by the Trustee, except money or property held in trust to pay
principal and interest and Liquidated Damages on particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 8.01(g) or (h) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The provisions of this Section 9.07 shall survive the appointment of a
successor trustee, the termination of this Indenture and the resignation or
removal of the Trustee.
SECTION 9.08. Replacement of Trustee. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section.
The Trustee may resign by so notifying the Company. The Securityholders of
a majority in principal amount of the then-outstanding Securities may remove the
Trustee by so notifying the Trustee and the Company. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 9.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA S-310(b);
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the
Securityholders of a majority in principal amount of the then-outstanding
Securities may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then-outstanding Securities
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 9.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA S-310(b), any
Securityholder who has been a bona fide holder of a Security for at least six
months may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Securityholders. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee, subject to the lien provided for in Section 9.07 hereof.
Notwithstanding the resignation
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or replacement of the Trustee pursuant to this Section 9.08, the Company's
obligations under Section 9.07 hereof shall continue for the benefit of the
retiring trustee with respect to expenses and liabilities incurred by it prior
to such resignation or replacement.
SECTION 9.09. Successor Trustee by Merger, Etc. If the Trustee
consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation, the successor corporation
without any further act shall be the successor Trustee.
SECTION 9.10. Eligibility; Disqualification. This Indenture shall always
have a Trustee who satisfies the requirements of TIA S-310(a)(1) and (5). The
Trustee shall always have a combined capital and surplus as stated in Section
12.10 hereof. The Trustee is subject to TIA S-310(b).
SECTION 9.11. Preferential Collection of Claims Against Company. The
Trustee is subject to TIA S-311(a), excluding any creditor relationship listed
in TIA S-311(b). A Trustee who has resigned or been removed shall be subject to
TIA S-311(a) to the extent indicated therein.
ARTICLE X
Discharge of Indenture
SECTION 10.01. Termination of Company's Obligations. This Indenture shall
cease to be of further effect (except that the Company's obligations under
Sections 9.07 and 10.02 hereof shall survive) when all outstanding Securities
theretofore authenticated and issued have been delivered to the Trustee for
cancellation and the Company has paid all sums payable hereunder. Thereupon, the
Trustee upon request of the Company, shall acknowledge in writing the discharge
of the Company's obligations under this Indenture, except for those surviving
obligations specified above.
SECTION 10.02. Repayment to Company. The Trustee and the Paying Agents
shall promptly pay to the Company upon request any excess money or securities
held by them at any time.
The Trustee and the Paying Agents shall pay to the Company upon request any
money held by them for the payment of principal or interest or Liquidated
Damages that remains unclaimed for two years after the date upon which such
payment shall have become due; provided, however, that the Company shall have
first caused notice of such payment to the Company to be mailed to each
Securityholder entitled thereto no less than 30 days prior to such payment.
After payment to the Company, the Trustee and the Paying Agents shall have no
further liability with respect to such money, and Securityholders entitled to
the money must look to the Company for payment as general creditors unless any
applicable abandoned property law designates another person.
ARTICLE XI
Amendments, Supplements and Waivers
SECTION 11.01. Without Consent of Securityholders. The Company and the
Trustee may amend or supplement this Indenture or the Securities without the
consent of any Securityholder:
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(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Sections 5.13 and 7.01 hereof;
(c) to provide for uncertificated Securities in addition to
certificated Securities;
(d) to make any change that does not adversely affect the legal rights
hereunder of any Securityholder;
(e) to qualify this Indenture under the TIA or to comply with the
requirements of the SEC in order to maintain the qualification of the
Indenture under the TIA; or
(f) to make any change that provides any additional rights or benefits
to the holders of Securities.
An amendment under this Section may not make any change that adversely
affects the rights under Article VI of any holder of Senior Debt then
outstanding unless the holders of such Senior Debt (or any group or
representative thereof authorized to give a consent) consent to such change.
SECTION 11.02. With Consent of Securityholders. Subject to Section 8.07
hereof, the Company and the Trustee may amend or supplement this Indenture or
the Securities with the written consent (including consents obtained in
connection with any tender or exchange offer for Securities) of the
Securityholders of at least a majority in principal amount of the
then-outstanding Securities. Subject to Sections 8.04 and 8.07 hereof, the
Holders of a majority in principal amount of the Securities then outstanding may
also by their written consent (including consents obtained in connection with
any tender offer or exchange offer for Securities) waive any existing Default as
provided in Section 8.04 or waive compliance in a particular instance by the
Company with any provision of this Indenture or the Securities. However, without
the consent of each Securityholder affected, an amendment, supplement or waiver
under this Section may not (with respect to any Securities held by a
nonconsenting Securityholder):
(a) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the rate of or change the time for payment of interest on
any Security;
(c) reduce the principal of or change the fixed maturity of any
Security or alter the redemption provisions with respect thereto;
(d) make any Security payable in money other than that stated in the
Security;
(e) make any change in Section 8.04, 8.07 or 11.02 hereof (this
sentence);
(f) waive a default in the payment of the Designated Event Payment or
principal of, or interest or Liquidated Damages on, any Security (other
than as provided in Section 8.04);
(g) waive a redemption payment payable on any Security; or
(h) make any change that adversely affects the right of
Securityholders to convert Securities into Common Stock of the Company.
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To secure a consent of the Securityholders under this Section 11.02, it
shall not be necessary for the Securityholders to approve the particular form of
any proposed amendment, supplement or waiver, but it shall be sufficient if such
consent approves the substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to Securityholders a notice briefly describing
the amendment or waiver.
SECTION 11.03. Compliance with Trust Indenture Act. Every amendment to this
Indenture or the Securities shall be set forth in a supplemental indenture that
complies with the TIA as then in effect.
SECTION 11.04. Revocation and Effect of Consents. Until an amendment,
supplement or waiver becomes effective, a consent to it by a Securityholder of a
Security is a continuing consent by the Securityholder and every subsequent
Securityholder of a Security or portion of a Security that evidences the same
debt as the consenting Securityholder's Security, even if notation of the
consent is not made on any Security. However, any such Securityholder or
subsequent Securityholder may revoke the consent as to such Holder's Security or
portion of a Security if the Trustee receives the notice of revocation before
the date on which the Trustee receives an Officers' Certificate certifying that
the Securityholders of the requisite principal amount of Securities have
consented to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Securityholders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those persons who were
Securityholders at such record date (or their duly designated proxies), and only
those persons, shall be entitled to consent to such amendment, supplement or
waiver or to revoke any consent previously given, whether or not such persons
continue to be Securityholders after such record date. No consent shall be valid
or effective for more than 90 days after such record date unless consents from
Securityholders of the principal amount of Securities required hereunder for
such amendment or waiver to be effective shall have also been given and not
revoked within such 90-day period.
After an amendment, supplement or waiver becomes effective it shall bind
every Securityholder, unless it is of the type described in any of clauses (a)
through (h) of Section 11.02 hereof. In such case, the amendment or waiver shall
bind each Securityholder who has consented to it and every subsequent
Securityholder that evidences the same debt as the consenting Securityholder's
Security.
SECTION 11.05. Notation on or Exchange of Securities. The Trustee may place
an appropriate notation about an amendment or waiver on any Security thereafter
authenticated. The Company in exchange for all Securities may issue and the
Trustee shall authenticate new Securities that reflect the amendment or waiver.
SECTION 11.06. Trustee Protected. The Trustee shall sign all supplemental
indentures, except that the Trustee may, but need not, sign any supplemental
indenture that adversely affects its rights or duties hereunder. As a condition
to executing, or accepting the additional trusts created by, any supplemental
indenture permitted by this Article or the modifications thereby of the trust
created by this Indenture, the Trustee shall be entitled to receive (in addition
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to those documents required by Section 12.04), and (subject to Section 315 of
the TIA) shall be fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized or permitted by
this Indenture.
ARTICLE XII
Miscellaneous
SECTION 12.01. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies, or conflicts with another provision which is
automatically deemed to be incorporated in this Indenture by the TIA, the
incorporated provision shall control.
SECTION 12.02. Notices. Any notice or communication by the Company or the
Trustee to the other is duly given if in writing and delivered in person or
mailed by first-class mail to the other's address stated in Section 12.10
hereof. The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication to a Securityholder shall be (i) mailed by
first-class mail to his address shown on the register kept by the Registrar, not
later than the latest date (if any), and not earlier than the earliest date (if
any), prescribed for the giving of such notice, and (ii) published in a leading
newspaper of general circulation in Luxembourg, which is expected to be the
Luxemburger Wort so long as the Securities are listed on the Luxembourg Stock
Exchange and the rules of the Luxembourg Stock Exchange so require, or if such
newspaper shall cease to be published or timely publication in it shall not be
practicable, in such other newspaper as the Trustee shall deem necessary to give
fair and reasonable notice to the Securityholders. Failure to mail a notice or
communication to a Securityholder or any defect in it shall not affect its
sufficiency with respect to other Securityholders.
Any notice given by publication shall be deemed to have been validly given
on the date of such publication or, if published more than once, on the date of
the first publication. If a notice or communication is mailed in the manner
provided above within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Company mails a notice or communication to Securityholders, it shall
mail a copy to the Trustee and each Agent at the same time.
All other notices or communications shall be in writing.
In case by reason of the suspension of regular mail service, or by reason
of any other cause, it shall be impossible to mail any notice as required by the
Indenture, then such method of notification as shall be made with the approval
of the Trustee shall constitute a sufficient mailing of such notice.
SECTION 12.03. Communication by Securityholders with Other Securityholders.
Securityholders may communicate pursuant to TIA S-312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA S-312(c).
SECTION 12.04. Certificate and Opinion as to Conditions Precedent. Upon any
request or application by the Company to the Trustee to take any action under
this Indenture, the Company shall furnish to the Trustee:
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(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 12.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture (other than pursuant to Section 4.03) shall
include:
(a) a statement that the person signing such certificate or rendering
such opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such person, such person has
made such examination or investigation as is necessary to enable such
person to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
SECTION 12.06. Rules by Trustee and Agents. The Trustee may make reasonable
rules for action by, or a meeting of, Securityholders. The Registrar, Transfer
Agent, Paying Agents or Conversion Agents may each make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.07. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or
a day on which banking institutions in the State of New York and Luxembourg are
not required to be open. If a payment date is a Legal Holiday at a place of
payment, payment may be made at that place on the next succeeding day that is
not a Legal Holiday, and no interest or Liquidated Damages shall accrue with
respect to such payment for the intervening period. If any other operative date
for purposes of this Indenture shall occur on a Legal Holiday then for all
purposes the next succeeding day that is not a Legal Holiday shall be such
operative date.
SECTION 12.08. No Recourse Against Others. A director, Officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Securityholder by accepting a Security waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Securities.
SECTION 12.09. Counterparts. This Indenture may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
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SECTION 12.10. Variable Provisions. "Officer" means the Chairman of the
Board, the President, any Vice-President, the Chief Financial Officer, the
Treasurer, the Secretary, any Assistant Treasurer or any Assistant Secretary of
the Company.
The Company initially appoints the Trustee as Paying Agent, Registrar and
Conversion Agent in the Borough of Manhattan, The City of New York, and the
Trustee hereby accepts such appointments.
The Company initially appoints Kredietbank S.A., Luxembourgeoise, 43
Boulevard Royal, L - 2955 ("Kredietbank"), as its Paying Agent, Transfer Agent
and Conversion Agent in Luxembourg, and Kredietbank accepts such appointments.
The first certificate pursuant to Section 4.03 hereof shall be for the
fiscal year ending on December 31, 1997.
The reporting date for Section 9.06 hereof is May 15 of each year. The
first reporting date is May 15, 1998.
The Trustee shall always have a combined capital and surplus of at least
U.S.$50,000,000 as set forth in its most recent published annual report of
condition.
The Company's address for purposes of the Indenture is:
AMNEX, Inc.
6 Nevada Drive
Lake Success, New York 11042
The Trustee's address is:
Marine Midland Bank
Attn: Corporate Trust Department
140 Broadway
New York, New York 10005
The Company or the Trustee may change its address for purposes of this
Indenture by written notice to the other.
SECTION 12.11. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THIS INDENTURE AND THE SECURITIES, WITHOUT REGARD TO THE CONFLICT
OF LAWS PROVISIONS THEREOF.
SECTION 12.12. No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or an Affiliate. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.
SECTION 12.13. Successors. All agreements of the Company in this Indenture
and the Securities shall bind its successor. All agreements of the Trustee in
this Indenture shall bind its successor.
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SECTION 12.14. Severability. In case any provision in this Indenture or in
the Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 12.15. Table of Contents, Headings, Etc. The Table of Contents and
headings of the Articles and Sections of this Indenture have been inserted for
convenience of reference only, are not to be considered a part hereof, and shall
in no way modify or restrict any of the terms or provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
AMNEX, Inc., as the Company,
by_________________________
Name:
Title:
Marine Midland Bank, as Trustee,
by_________________________
Name:
Title:
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Personally appeared before me, the undersigned authority in and for the
said county and state, on this 29th day of September, 1997, within my
jurisdiction, the within named ____________________, who acknowledged that he is
a __________________ of AMNEX, Inc., a New York corporation, and that for and on
behalf of the said corporation, and as its act and deed he executed the above
and foregoing instrument, after first having been duly authorized by said
corporation so to do.
__________________ ______
NOTARY PUBLIC
[Notarial Seal]
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Personally appeared before me, the undersigned authority in and for the
said county and state, on this 29th day of September, 1997, within my
jurisdiction, the within named ____________________, who acknowledged that he is
a __________________ of Marine Midland Bank, and that for and on behalf of the
said corporation, and as its act and deed he executed the above and foregoing
instrument, after first having been duly authorized by said corporation so to
do.
______________________
NOTARY PUBLIC
[Notarial Seal]
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EXHIBIT A
FORM OF CONVERTIBLE SUBORDINATED NOTE
[FORM OF FACE OF NOTE]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO
THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE
ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT
WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING
THE DATE OF SUCH TRANSFER, IN EITHER CASE, OTHER THAN (1) TO THE COMPANY, (2) SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A") TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A, PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3)
IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES
ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THE REVERSE OF THIS SECURITY), (4) TO AN INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE IN
THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE TRANSFEREE TO THE COMPANY
AND THE TRUSTEE, (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR
(6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES
THAT IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER
INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF
THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY
THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
OR (2) AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S.
PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING
THE REQUIREMENTS OF PARAGRAPH (o)(2) OF RULE 902 UNDER) REGULATION S UNDER THE
SECURITIES ACT.
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No. _________
[CUSIP No. ______________]
[CINS No. _______________]
[ISIN No. ________________]
AMNEX, INC.
8-1/2% CONVERTIBLE SUBORDINATED NOTE
DUE 2002
AMNEX, Inc., a New York corporation (the "Company") promises to pay to
_________________________________________________________________ or registered
assigns, the principal sum [indicated on Schedule A hereof]* [of _________
Dollars]** on September 25, 2002.
Interest Payment Dates:
Record Dates:
Reference is hereby made to the further provisions of this Convertible
Subordinated Note set forth on the reverse hereof which further provisions shall
for all purposes have the same effect as if set forth at this place.
- --------
* Applicable to Global Securities only.
**Applicable to Certificated Securities only.
IN WITNESS WHEREOF, AMNEX, INC. has caused this Convertible Note to be
signed manually or by facsimile by its duly authorized Officers and a facsimile
of its corporate seal to be affixed hereto or imprinted hereon.
Dated:__________________ AMNEX, INC.
by
Name:
Title:
by
Name:
Title:
[Seal]
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the
8-1/2 Convertible Subordinated Notes due 2002
described in the within-
mentioned Indenture.
Marine Midland Bank, as Trustee,
by
Authorized Signatory
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AMNEX, INC.
8-1/2% Convertible Subordinated Note due 2002
1. Interest. AMNEX, INC., a New York corporation (the "Company"), is the
issuer of the 8-1/2% Convertible Subordinated Notes due 2002 (the Convertible
Notes"), of which this Convertible Note is a part. The Company promises to pay
interest on the Convertible Notes in cash semiannually on each March 25 and
September 25, commencing on March 25, 1998, to holders of record on the
immediately preceding March 10 and September 10.
Interest on the Convertible Notes will accrue from the most recent date to
which interest has been paid, or if no interest has been paid, from September
25, 1997. Interest will be computed on the basis of a 360-day year of twelve
30-day months. To the extent lawful, the Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest or Liquidated Damages (without regard to any applicable
grace period) at the rate borne by the Convertible Notes, compounded annually.
All payments made by the Company on the Convertible Notes will be made
without withholding or deduction for, or on account of, any present or future
taxes, duties, assessments or governmental charges of whatever nature imposed or
levied by or on behalf of the jurisdiction of incorporation of the Company or
any political subdivision thereof or any authority therein or thereof having
power to tax unless the withholding or deduction of such taxes, duties,
assessments or governmental charges is required by law. If any such withholding
or deduction is required, the Company will not be obliged to pay any additional
amounts in respect of such withholding or deduction.
2. Method of Payment. The Company will pay interest and Liquidated Damages
on the Convertible Notes (except defaulted interest) to the persons who are
registered Holders of the Convertible Notes at the close of business on the
record date for the next interest payment date even though Convertible Notes are
canceled after the record date and on or before the interest payment date. The
Securityholder hereof must surrender Convertible Notes to a Paying Agent to
collect principal payments. The Company will pay principal and interest and
Liquidated Damages in money of the United States that at the time of payment is
legal tender for payment of public and private debts. However, the Company may
pay principal and interest and Liquidated Damages by check payable in such money
drawn on a bank in The City of New York. It may mail a check for interest or
Liquidated Damages to a Holders' registered address.
3. Paying Agent and Registrar. The Trustee will act as Paying Agent,
Registrar and Conversion Agent in the Borough of Manhattan, The City of New
York. Kredietbank S.A. Luxembourgeoise will act as Paying Agent, Transfer Agent
and Conversion Agent in Luxembourg. The Company may change any Paying Agent,
Registrar, Transfer Agent or Conversion Agent without prior notice. The Company
or any of its Affiliates may act in any such capacity.
4. Indenture. The Company issued the Convertible Notes under an indenture,
dated as of September 25, 1997 (the "Indenture"), between the Company and Marine
Midland Bank, as Trustee. The terms of the Convertible Notes include those
stated in the Indenture and those made part of the Indenture by the Trust
Indenture Act of 1939 (15 U.S. Code S-77aaa- 77bbbb), as amended. The
Convertible Notes are subject to, and qualified by, all such terms, certain of
which are summarized hereon, and Securityholders are referred to the Indenture
and such Act for a statement of such terms. The Convertible Notes are general
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unsecured obligations of the Company limited to an aggregate principal amount of
U.S.$15,000,000 (or, if the Initial Purchaser's over-allotment option is
exercised in full, U.S.$23,000,000). The Indenture does not limit the ability of
the Company or any of its Subsidiaries to incur indebtedness or to grant
security interests or liens in respect of their assets.
5. Optional Redemption. The Convertible Notes are not redeemable at the
Company's option prior to September 25, 2000. On or after September 25, 2000,
the Convertible Notes will be subject to redemption at the option of the
Company, in whole or in part (in any integral multiple of U.S.$1,000; provided,
however, that a Restricted Certificated Security may be redeemed only in whole
to the extent a redemption in part would reduce the principal amount thereof to
an amount less than U.S.$250,000), at a redemption price equal to 100% of the
principal amount thereof together with accrued interest and Liquidated Damages
to the redemption date (subject to the right of holders of record on the
relevant record date to receive interest and Liquidated Damages due on an
interest payment date). On or after the redemption date, interest and Liquidated
Damages will cease to accrue on the Convertible Notes, or portion thereof,
called for redemption.
6. Notice of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder of the
Convertible Notes to be redeemed at his address of record. Convertible Notes in
denominations larger than U.S.$1,000 may be redeemed in part but only in
integral multiples of U.S.$1,000; provided, however, that a Restricted
Certificated Security may be redeemed only in whole to the extent a redemption
in part would reduce the principal amount thereof to an amount less than
U.S.$250,000. In the event of a redemption of less than all of the Convertible
Notes, the Convertible Notes will be chosen for redemption by the Trustee in
accordance with the
Indenture. Unless the Company defaults in making such redemption payment,
or any Paying Agent is prohibited from making such payment pursuant to the
Indenture, by law or otherwise, interest and Liquidated Damages cease to accrue
from and after the redemption date on the Convertible Notes or portions thereof
called for redemption.
If this Convertible Note is redeemed subsequent to a record date with
respect to any interest payment date specified above and on or prior to such
interest payment date, then any accrued interest or Liquidated Damages will be
paid to the person in whose name this Convertible Note is registered at the
close of business on such record date.
7. Mandatory Redemption. The Company will not be required to make mandatory
redemption payments with respect to the Convertible Notes. There are no sinking
fund payments with respect to the Convertible Notes.
8. Repurchase at Option of Holder. If there is a Designated Event, the
Company shall be required to offer to purchase on the Designated Event Payment
Date all outstanding Convertible Notes at a purchase price equal to 101% of the
principal amount thereof on the date of purchase, plus accrued and unpaid
interest and Liquidated Damages to the Designated Event Payment Date. Holders of
Convertible Notes that are subject to an offer to purchase will receive a
Designated Event Offer from the Company prior to any related Designated Event
Payment Date and may elect to have such Convertible Notes or portions thereof in
authorized denominations purchased by completing the form entitled "Option of
Securityholder To Elect Purchase" appearing below. Securityholders have the
right to withdraw their election by delivering a written notice of withdrawal to
the Company or any Paying Agent in accordance with the terms of the Indenture.
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9. Subordination. The payment of the principal of, interest and Liquidated
Damages on or any other amounts due on the Convertible Notes is subordinated in
right of payment to all existing and future Senior Debt of the Company, as
described in the Indenture. Each Securityholder, by accepting a Convertible
Note, agrees to such subordination and authorizes and directs the Trustee on its
behalf to take such action as may be necessary or appropriate to effectuate the
subordination so provided and appoints the Trustee as its attorney- in-fact for
such purpose.
10. Conversion. The holder of any Convertible Note has the right,
exercisable at any time after 90 days following the Issuance Date and prior to
the close of business (New York time) on the Business Day immediately preceding
the date of the Convertible Note's maturity, to convert the principal amount
thereof (or any portion thereof that is an integral multiple of U.S.$1,000;
provided, however that a holder of a Restricted Certificated Security may
convert such Security only in whole to the extent a conversion in part would
reduce the principal amount thereof to an amount less than U.S.$250,000) into
shares of Common Stock at the initial Conversion Price of U.S.$2.7844 per share,
subject to adjustment under certain circumstances, except that if a Convertible
Note is called for redemption, the conversion right will terminate at the close
of business (New York time) on the Business Day immediately preceding the date
fixed for redemption.
To convert a Convertible Note, a Holder must (1) complete and sign a notice
of election to convert (a "Conversion Notice") substantially in the form set
forth below (copies of which are available from the Conversion Agent in
Luxembourg or New York, (2) deliver the Conversion Notice and the Convertible
Note to be converted in whole or in part to a Conversion Agent in New York or
Luxembourg, (3) furnish appropriate endorsements or
transfer documents if required by the Registrar or such Conversion Agent and (4)
pay any transfer or similar tax, if required. Upon conversion, no adjustment or
payment will be made for interest, Liquidated Damages or dividends, but if any
Securityholder surrenders a Convertible Note for conversion after the close of
business on the record date for the payment of an installment of interest and
Liquidated Damages and prior to the opening of business on the next interest
payment date, then, notwithstanding such conversion, the interest and Liquidated
Damages payable on such interest payment date will be paid to the registered
Holder of such Convertible Note on such record date. In such event, such
Convertible Note, when surrendered for conversion, must be accompanied by
payment in funds acceptable to the Company of an amount equal to the interest
and Liquidated Damages payable on such interest payment date on the portion so
converted. The number of shares of Common Stock issuable upon conversion of a
Convertible Note is determined by dividing the principal amount of the
Convertible Note converted by the Conversion Price in effect on the Conversion
Date. No fractional shares will be issued upon conversion but a cash adjustment
will be made for any fractional interest.
A Convertible Note in respect of which a holder has delivered an "Option of
Securityholder to Elect Purchase" form appearing below exercising the option of
such holder to require the Company to purchase such Convertible Note may be
converted only if the notice of exercise is withdrawn as provided above and in
accordance with the terms of the Indenture. The above description of conversion
of the Convertible Notes is qualified by reference to, and is subject in its
entirety by, the more complete description thereof contained in the Indenture.
11. Registration Rights Agreement. The holder of the Convertible Notes is
entitled to the benefits of the Registration Rights Agreement, dated September
25, 1997, among
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the Company and the Initial Purchaser (the "Registration Rights Agreement"),
which agreement is attached to the Indenture as an Exhibit thereto. Such
benefits include the right of the holder to receive Liquidated Damages in the
event of a failure on the part of the Company to comply with certain covenants
pertaining to registration and availability of a prospectus for resale, as
provided in the Registration Rights Agreement.
12. Denominations, Transfer, Exchange. The Convertible Notes are in
registered form, without coupons, in denominations of U.S.$1,000 and integral
multiples of U.S.$1,000; provided that Convertible Notes offered and sold to
institutional "accredited investors" (as defined in rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Securities Act) which are not QIBs will be
issuable solely in minimum denominations of U.S.$250,000 and integral multiples
of U.S.$10,000 in excess thereof. The transfer of Convertible Notes may be
registered, and Convertible Notes may be exchanged, as provided in the
Indenture. The Transfer Agent or Registrar may require a Securityholder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay any taxes and fees required by law or permitted by the Indenture. The
Transfer Agent or Registrar need not exchange or register the transfer of,
respectively, any Convertible Note or portion of a Convertible Note selected for
redemption (except the unredeemed portion of any Convertible Note being redeemed
in part). Also, the Transfer Agent or Registrar need not exchange or register
the transfer of, respectively, any Convertible Note for a period of 15 days
before a selection of Convertible Notes to be redeemed.
13. Persons Deemed Owners. The registered Holder of a Convertible Note may
be treated as its owner for all purposes.
14. Unclaimed Money. If money for the payment of principal or interest and
Liquidated Damages remains unclaimed for two years, the Trustee and the Paying
Agents shall pay the money back to the Company at its request. After that,
Securityholders of Convertible Notes entitled to the money must look to the
Company for payment, unless an abandoned property law designates another person,
and all liability of the Trustee and such Paying Agents with respect to such
money shall cease.
15. Defaults and Remedies. The Convertible Notes shall have the Events of
Default as set forth in Section 8.01 of the Indenture. Subject to certain
limitations in the Indenture, if an Event of Default occurs and is continuing,
the Trustee by notice to the Company or the Securityholders of at least 25% in
aggregate principal amount of the then-outstanding Convertible Notes by notice
to the Company and the Trustee may declare all the Convertible Notes to be due
and payable immediately, except that in the case of an Event of Default arising
from certain events of bankruptcy or insolvency, all unpaid principal and
interest and Liquidated Damages accrued on the Convertible Notes shall become
due and payable immediately without further action or notice. Upon acceleration
as described in either of the preceding sentences, the subordination provisions
of the Indenture preclude any payment being made to Securityholders for at least
five Business Days except as otherwise provided in the Indenture.
The Securityholders of a majority in principal amount of the Convertible
Notes then outstanding by written notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest or Liquidated Damages that has
become due solely because of the acceleration. Securityholders may not enforce
the Indenture or the Convertible Notes except as provided in the Indenture.
Subject to certain limitations, Securityholders of a majority in principal
amount of the then-outstanding Convertible Notes issued under the Indenture may
direct the
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Trustee in its exercise of any trust or power. The Company must furnish
compliance certificates to the Trustee annually. The above description of Events
of Default and remedies is qualified by reference to, and subject in its
entirety by, the more complete description thereof contained in the Indenture.
16. Amendments, Supplements and Waivers. Subject to certain exceptions, the
Indenture or the Convertible Notes may be amended or supplemented with the
consent of the Securityholders of at least a majority in principal amount of the
then-outstanding Convertible Notes (including consents obtained in connection
with a tender offer or exchange offer for Convertible Notes), and any existing
default may be waived with the consent of the Securityholders of a majority in
principal amount of the then-outstanding Convertible Notes, including consents
obtained in connection with a tender offer or exchange offer for Convertible
Notes. Without the consent of any Securityholder, the Indenture or the
Convertible Notes may be amended, among other things, to cure any ambiguity,
defect or inconsistency, to provide for assumption of the Company's obligations
to Securityholders, to make any change that does not adversely affect the rights
of any Securityholder, to qualify the Indenture under the TIA, or to comply with
the requirements of the SEC in order to maintain the qualification of the
Indenture under the TIA.
17. Trustee Dealings with the Company. The Trustee, in its individual or
any other capacity, may become the owner or pledgee of the Convertible Notes and
may otherwise deal with the Company or an Affiliate with the same rights it
would have, as if it were not Trustee, subject to certain limitations provided
for in the Indenture and in the TIA. Any Agent may do the same with like rights.
18. No Recourse Against others. A director, Officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Convertible Notes or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Securityholder, by accepting a Convertible Note, waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Convertible Notes.
19. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN
THE INDENTURE AND THE CONVERTIBLE NOTES WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS THEREOF.
20. Authentication. The Convertible Notes shall not be valid until
authenticated by the manual signature of an authorized officer of the Trustee or
an authenticating agent.
21. Abbreviations. Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as: TEN COM (for tenants in common), TEN ENT
(for tenants by the entireties), JT TEN (for joint tenants with right of
survivorship and not as tenants in common), CUST (for Custodian), and U/G/M/A
(for Uniform Gifts to Minors Act).
22. Definitions. Capitalized terms not defined in this Convertible Note
have the meaning given to them in the Indenture.
The Company will furnish to any Securityholder of the Convertible Notes
upon written request and without charge a copy of the Indenture and the
Registration Rights Agreement. Request may be made to:
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Amy S. Gross
AMNEX, Inc.
c/o American Network Exchange, Inc.
100 West Lucerne Circle
Orlando, Florida 32801
(407) 246-1234
ASSIGNMENT FORM
To assign this Convertible Note, fill in the form below:
(I) or (we) assign and transfer this Convertible Note to
_____________________________________________________________________________
(Insert assignee's social security or tax I.D. no.)
_____________________________________________________________________________
_____________________________________________________________________________
____________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ____________________ agent to transfer this Convertible
Note on the books of the Company. The agent may substitute another to act for
him.
Your Signature: ___________________________________________________
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(Sign exactly as your name appears on the other side of this Convertible Note)
Date: ___________________
Signature Guarantee:*** _____________________________
In connection with any transfer of any of the Convertible Notes evidenced
by this certificate occurring prior to the date that is two years after the
later of the date of original issuance of such Convertible Notes and the last
date, if any, on which such
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*** Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
Convertible Notes were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Convertible Notes are being
transferred: CHECK ONE BOX BELOW
(1) [ ] to the Company; or
(2) [ ] pursuant to and in compliance with Rule 144A under the Securities
Act of 1933; or
(3) [ ] pursuant to and in compliance with Regulation S under the
Securities Act of 1933; or
(4) [ ] to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that has furnished
to the Trustee a signed certificate containing certain representations and
agreements (the form of which certificate can be obtained from the Trustee and
is set forth in Exhibit E to the Indenture); or
(5) [ ] pursuant to an exemption from registration under the Securities Act
of 1933 provided by Rule 144 thereunder.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Convertible Notes evidenced by this certificate in the name of any person
other than the registered Holder thereof; provided, however, that if box (3),
(4) or (5) is checked, the Trustee may require, prior to registering any such
transfer of the Convertible Notes such legal opinions, certifications and other
information as the Company has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from,
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or in a transaction not subject to, the registration requirements of the
Securities Act of 1933.
__________________________
Signature
Signature Guarantee:*
___________________________
Signature
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Convertible Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
19
Dated:_______________________________________________
NOTICE: To be executed by
an executive officer
_____________________________
*Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
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[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE A
The initial principal amount at maturity of this Global Security shall be
U.S.$_________. The following increases or decreases in the principal amount of
this Global Security have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Amount of increase in
Principal Amount of Principal Amount of Signature of
this Global Security Amount of decrease this Global Security authorized officer
including upon exercise in Principal Amount following such of Trustee or
Date Made of over-allotment option of this Global Security decrease or increase Securities Custodian
- --------- ------------------------ ----------------------- -------------------- --------------------
</TABLE>
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OPTION OF SECURITYHOLDER TO ELECT PURCHASE
If you want to elect to have this Convertible Note or a portion thereof
repurchased by the Company pursuant to Section 3.08 or 4.07 of the Indenture,
check the box: [ ]
If the purchase is in part, indicate the portion (U.S.$1,000 or any
integral multiple thereof) to be purchased: ____________
Your Signature: ________________________________________________
(Sign exactly as your name appears on the other side of this Convertible
Note)
Date: ____________
Signature Guarantee: * _______________________
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* Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
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ELECTION TO CONVERT
To AMNEX, Inc.:
The undersigned owner of this Convertible Note hereby irrevocably exercises
the option to convert this Convertible Note, or the portion below designated,
into Common Stock of AMNEX, INC. in accordance with the terms of the Indenture
referred to in this Convertible Note, and directs that the shares issuable and
deliverable upon conversion, together with any check in payment for fractional
shares, be issued in the name of and delivered to the undersigned, unless a
different name has been indicated in the assignment below. If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto.
The undersigned hereby represents and warrants that the undersigned did
not, directly or indirectly, within the period of 90 days after the original
issuance of the Convertible Note, sell, dispose of, hedge or otherwise transfer
or part with the economics of ownership of all or any part of the Common Stock
issuable upon conversion of the Convertible Note.
The undersigned agrees to be bound by the terms of the Registration Rights
Agreement relating to the Common Stock issuable upon conversion of the
Convertible Notes.
Date:
In whole ____ orPortion of Convertible Note to be
converted
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(U.S.$1,000 or any integral multiple thereof):
U.S.$_____________
Your Signature: _______________________________________
(Sign exactly as your name appears on the other side of this Convertible
Note.)
25
Please Print or Typewrite Name and
Address, Including Zip Code, and
Social Security or other Identifying
Number
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Signature Guarantee:*
___________________
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* Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
Execution Copy
AMNEX, INC.
$15,000,000 8 1/2% Convertible Subordinated Notes Due 2002(1)
PURCHASE AGREEMENT
New York, New York
September 11, 1997
HSBC Securities, Inc.
140 Broadway, 5th Floor
New York, New York 10005
Ladies and Gentlemen:
Amnex, Inc., a New York corporation (the "Company"), proposes to issue and
sell to HSBC Securities, Inc. (the "Initial Purchaser"), $15,000,000 principal
amount of its 8 1/2% Convertible Subordinated Notes Due 2002 (the "Firm
Securities"). The Securities are convertible into shares of Common Stock, par
value $0.001 per share (the "Common Stock"), of the Company at the conversion
price set forth herein. The Company also proposes to grant to the Initial
Purchaser an option to purchase up to $8,000,000 additional principal amount of
such Notes to cover over-allotments, if any (the "Option Securities" and,
together with the Firm Securities, the "Securities"). The Securities are to be
issued under an indenture (the "Indenture") to be dated as of September 25, 1997
between the Company and Marine Midland Bank as trustee (the "Trustee").
The sale of the Securities to the Initial Purchaser will be made without
registration of the Securities or the Common Stock issuable upon conversion
thereof under the Securities Act of 1933, as amended (the "Act") in reliance
upon exemptions from the registration requirements of the Act. You have advised
the Company that you will make an offering of the Securities purchased by you
hereunder in accordance with Section 4 hereof, as soon as you deem advisable
after this Agreement has been executed and delivered.
In connection with the sale of the Securities, the Company has prepared a
preliminary offering memorandum, dated August 8, 1997 (the "Preliminary
Memorandum"), and a final offering memorandum, dated September 11, 1997 (the
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1 Plus an option to purchase up to $8,000,000 additional principal amount
of such Notes to cover over-allotments.
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"Final Memorandum"). Each of the Preliminary Memorandum and the Final Memorandum
sets forth certain information concerning the Company, the Securities and the
Common Stock issuable upon conversion thereof. The Company hereby confirms that
it has authorized the use of the Preliminary Memorandum and the Final Memorandum
in connection with the offering and resale by the Initial Purchaser of the
Securities. Any references herein to the Preliminary Memorandum or the Final
Memorandum shall be deemed to include all exhibits thereto and all documents
incorporated by reference therein that were filed under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), on or before the date and time
that this Agreement is executed and delivered by the parties hereto (the
"Execution Time"); and any reference herein to the terms "amend", "amendment" or
"supplement" with respect to the Final Memorandum shall be deemed to refer to
and include the filing of any document under the Exchange Act after the
Execution Time that is incorporated by reference therein.
The holders of the Securities or the Common Stock issuable upon the
conversion thereof will be entitled to the benefits of a Registration Rights
Agreement, in substantially the form attached hereto as Exhibit A (the
"Registration Rights Agreement"), pursuant to which the Company will file a
shelf registration statement (the "Registration Statement") with the Securities
and Exchange Commission (the "Commission") registering the Securities and the
Common Stock issuable upon the conversion thereof under the Act.
This Agreement, the Indenture and the Registration Rights Agreement are
referred to collectively as the "Operative Documents." Capitalized terms used
but not defined herein have the respective meanings specified in the Final
Memorandum.
I. Representations and Warranties. The Company represents and warrants to, and
agrees with, the Initial Purchaser as set forth below in this Section 1.
A. Each of the Preliminary Memorandum and the Final Memorandum as of
its date did not, and the Final Memorandum (as the same may have been
amended or supplemented) as of the date hereof and as of the Closing Date
(as defined below) does not and will not, contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company makes no
representations or warranties as to the information contained in or omitted
from the Preliminary Memorandum or the Final Memorandum in reliance upon
and in conformity with information furnished in writing to the Company by
or on behalf of the Initial Purchaser specifically for inclusion in the
Preliminary Memorandum or the Final Memorandum (and any amendment or
supplement thereof or thereto). All documents incorporated by reference in
the Preliminary Memorandum or the Final
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Memorandum that were filed under the Exchange Act on or before the Execution
Time complied, and all such documents that are filed under the Exchange Act
after the Execution Time and on or before the Closing Date will comply, in all
material respects with the applicable requirements of the Exchange Act and the
rules thereunder in effect as of the date of filing.
B. All of the information set forth in the Final Memorandum under the
heading "Certain Relationships and Related Transactions -- Transactions
with Management and Others" is true and accurate in all material respects
and all of the agreements described in or contemplated by such section have
been duly authorized, executed and delivered by the Company and constitute
legal, valid and binding obligations of the Company.
C. All of the information set forth in the Final Memorandum under the
heading "Use of Proceeds" is true and accurate in all material respects and
the Company will not use the proceeds of the Offering except as set forth
in such section.
D. None the Company, its Subsidiaries (as defined below) or any
affiliate (an "Affiliate") (as defined in Rule 501(b) of Regulation D under
the Act ("Regulation D")) of the Company or its Subsidiaries, or any person
acting in its or their behalf (other than the Initial Purchaser) has
directly or indirectly, (i) sold, offered for sale, solicited offers to buy
or otherwise negotiated in respect of, any security (as defined in the Act)
that is currently or will be integrated with the sale of the Securities in
a manner that would require the registration of the Securities or the
Common Stock issuable upon conversion thereof under the Act or (ii) engaged
in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the offering of the Securities.
E. Assuming compliance by the Initial Purchaser with its agreements
and the accuracy of its representations contained herein, it is not
necessary in connection with the offer, sale and delivery of the Securities
or the Common Stock issuable upon conversion thereof in the manner
contemplated by this Agreement and the Final Memorandum to register the
Securities or such Common Stock under the Act or to qualify the Indenture
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act").
F. Neither the Company nor its affiliated purchasers, as defined in
Article 100 of Regulation M of the Exchange Act ("Regulation M"), either
alone or with one or more other persons: (i) has taken, either directly or
indirectly, any
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action which was designed to cause or result in, or which has constituted,
or which might reasonably be expected to cause or result in, stabilization
or manipulation of the price of any security of the Company in connection
with the offering of the Securities (the "Subject Securities") pursuant to
this Agreement or (ii) will bid for or purchase any Subject Securities of
the Company or any other covered securities (within the meaning of
Regulation M) relating to the Subject Securities (together with the Subject
Securities, the "Covered Securities"), or attempt to induce any person to
bid for or purchase any Covered Securities, in either case, for the purpose
of creating actual or apparent active trading in, or raising the price of
the Securities, unless an exemption from Rule 102 of Regulation M is
available.
G. None of the Company, its Affiliates or any person acting on behalf
of the Company or its Affiliates (other than the Initial Purchaser, as to
whom the Company makes no representation) has engaged in any directed
selling efforts (as that term is defined in Regulation S under the Act
("Regulation S")) with respect to the Securities, and the Company, its
Affiliates and any person acting on its or their behalf (other than the
Initial Purchaser, as to whom the Company makes no representations) have
complied with the offering restrictions requirement of Regulation S.
H. The Company is subject to and in compliance in all material
respects with the reporting requirements of Section 13 or Section 15(d) of
the Exchange Act and the Company has timely filed all reports required to
be filed thereunder within the last 12 months.
I. The Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Act.
J. The Company has agreed to permit the Securities to be designated
PORTAL eligible securities and has been advised by the National Association
of Securities Dealers, Inc. ("NASD") PORTAL Market that the Securities have
been designated PORTAL eligible securities in accordance with the rules and
regulations of the NASD; application has been made to list the Securities
on the Luxembourg Stock Exchange and the Company has been notified that the
Securities have been approved for such listing.
K. The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended (the "Investment Company
Act"), without taking account of any exemption arising out of the number of
holders of the Company's securities, and, if the Company conducts its
business
4
<PAGE>
as set forth in the Final Memorandum, will not become an "investment
company" and will not be required to be registered under the Investment
Company Act.
L. The Company has not paid or agreed to pay to any person any
compensation for soliciting another to purchase any of the Securities
(except as contemplated by this Agreement).
M. The information provided by the Company pursuant to Section 5(i)
hereof will not, at the date thereof, contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
N. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of New York, with
power and authority (corporate and other) to own, lease and operate its
property (real and personal) and to conduct its business as described in
the Final Memorandum; and the Company is duly qualified to do business as a
foreign corporation in good standing in each other jurisdiction in which
its ownership or lease of property or the conduct of its business requires
such qualification, except where the failure to be so qualified would not
have a material adverse effect on the condition (financial or otherwise),
business, properties or results of operations of the Company and its
consolidated subsidiaries taken as a whole (a "Material Adverse Effect").
O. The Company has no subsidiaries other than those listed on Exhibit
21 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (the "Form 10-K") incorporated by reference in the Final
Memorandum (individually a "Subsidiary" and collectively the
"Subsidiaries"). Each of the Subsidiaries has been duly incorporated and is
an existing corporation in good standing under the laws of the jurisdiction
of its incorporation, with power and authority (corporate and other) to own
its properties (real and personal) and conduct its business as described in
the Final Memorandum; and each Subsidiary is duly qualified to do business
as a foreign corporation in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its business
requires such qualification, except where the failure to be so qualified
would not have a Material Adverse Effect; all of the issued and outstanding
capital stock of each Subsidiary has been duly authorized and validly
issued and is fully paid and nonassessable; and except as described in the
Final Memorandum or as set forth on Schedule 1(o) attached hereto, each
Subsidiary's capital stock owned by the Company, directly or through
subsidiaries, is owned free from liens, encumbrances and defects.
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P. Except as described in the Final Memorandum, the Company is not in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which it is a party or by
which it may be bound or to which any of its properties may be subject,
except for such defaults that would not have a Material Adverse Effect. The
execution, delivery and performance of this Agreement and the Registration
Rights Agreement and the consummation of the transactions contemplated
herein and therein have been duly authorized by all necessary corporate
action of the Company and will not result in any breach of any of the
terms, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company pursuant to any indenture, loan
agreement, contract or other instrument to which the Company is a party or
by which the Company may be bound or to which any of the property or assets
of the Company is subject which breach, default, lien, charge or
encumbrance, individually or in the aggregate, would have a Material
Adverse Effect, nor will any such execution, delivery or performance result
in any violation of the provisions of the charter or by-laws of the Company
or any statute, any rule, regulation or order of any governmental agency or
body or any court having jurisdiction over the Company.
Q. No consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required for the valid
authorization, execution and delivery by the Company of the Operative
Documents and for the consummation of the transactions contemplated herein
and therein, except such as may be required (i) under the securities or
Blue Sky laws of the various states, (ii) under the Act, the Trust
Indenture Act or rules of the NASD in connection with the registration of
the Securities and the Common Stock issuable upon conversion thereof under
the Act pursuant to the Registration Rights Agreement; and (iii) under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act").
R. This Agreement has been duly authorized, executed and delivered by
the Company.
S. Assuming that each of the Indenture and the Registration Rights
Agreement has been duly authorized, executed and delivered by, and
constitutes the legal, valid and binding obligation of, the Trustee and the
Initial
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Purchaser, respectively, each of the Indenture and the Registration Rights
Agreement constitutes the legal, valid and binding obligation, of the
Company enforceable in accordance with its terms, except (i) as enforcement
thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws now or hereinafter in effect relating to
creditors' rights generally and (ii) as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
T. The consolidated financial statements included in the Final
Memorandum, together with the related notes thereto, present fairly in all
material respects the financial position of the Company and its
consolidated subsidiaries at the dates indicated and the consolidated
results of operations and cash flows of the Company and its consolidated
subsidiaries for the periods specified. Such financial statements have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved, except as
otherwise stated in the Final Memorandum.
U. The Securities and the Common Stock issuable upon the conversion
thereof have been duly authorized by the Company; when executed,
authenticated, issued and delivered in the manner provided for in the
Indenture and sold and paid for as provided in this Agreement, the
Securities will constitute valid and binding obligations of the Company
entitled to the benefits of the Indenture, enforceable against the Company
in accordance with their terms, except as enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law); the Securities and the Common Stock
issuable upon the conversion thereof conform and, in the case of the Common
Stock issuable upon conversion of the Securities, will conform in all
material respects to the descriptions thereof contained in the Final
Memorandum; and the shares of Common Stock issued upon conversion of the
Securities in the manner contemplated by the Indenture and the Securities,
will upon issue be validly issued, fully paid and non-assessable.
V. Except as disclosed in the Final Memorandum, the Company and the
Subsidiaries have good and marketable title to all real properties and all
other properties and assets owned by them, in each case free from liens,
encumbrances and defects except where the failure to have such title would
not have a
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Material Adverse Effect; and except as disclosed in the Final Memorandum,
the Company and the Subsidiaries hold any leased real or personal property
under valid and enforceable leases with no exceptions that would have a
Material Adverse Effect.
W. Except as disclosed in the Final Memorandum, there is no action,
suit or proceeding before or by any governmental agency or body or court,
domestic or foreign, now pending or, to the knowledge of the Company,
threatened against the Company or any of the Subsidiaries or any of their
respective properties that could reasonably be expected to result in a
Material Adverse Effect or that could reasonably be expected to materially
and adversely affect the consummation of the transactions contemplated by
this Agreement, the Indenture or the Registration Rights Agreement; all
pending legal or governmental proceedings to which the Company is a party
or which affect any of its properties that are not described in the Final
Memorandum, including ordinary routine litigation incidental to its
business, in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
X. Except as disclosed in the Final Memorandum, no labor dispute with
the employees of the Company or any Subsidiary exists, or to the knowledge
of the Company is threatened, that could reasonably be expected to have a
Material Adverse Effect.
Y. Each of the Company and the Subsidiaries has or, in the case of
those set forth on Schedule 1(y) hereto, has applied for all necessary
licenses, franchises, consents, authorizations, approvals, orders,
certificates and permits of and from, and has made all declarations and
filings with, all federal, state, local and other governmental authorities,
all self-regulatory organizations and all courts and other tribunals, to
own, lease, license and use its properties and assets and to conduct its
business in the manner to be described in the Final Memorandum, except to
the extent that the failure to so obtain or file would not have a Material
Adverse Effect.
Z. The Registration Rights Agreement and the Indenture conform in all
material respects to the descriptions thereof contained in the Final
Memorandum.
AA. Except as disclosed in the Final Memorandum, neither the Company
nor any of the Subsidiaries is in violation of any statute, rule,
regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic
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substances (collectively, "environmental laws"), owns or operates any real
property contaminated with any substance that is subject to any
environmental laws, or is subject to any claim relating to any
environmental laws, which violation, contamination, liability or claim
individually or in the aggregate is reasonably expected to have a Material
Adverse Effect; and the Company is not aware of any pending investigation
which might lead to such a claim.
BB. The accountants that examined and issued an auditors report with
respect to the consolidated financial statements of the Company to be
included in the Offering Memorandum are independent public accountants
within the meaning of the Act and the regulations thereunder.
II. Purchase and Sale. (a) Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company, at a purchase price of 8 1/2% of the principal amount
thereof, plus accrued interest, if any, from September 25, 1997 to the Closing
Date, the Firm Securities. Each Security will be convertible at the option of
the holder, effective 90 days from the Closing Date, into shares of Common Stock
at a conversion price of $2.7844 per share (the "Conversion Price"), which
Conversion Price is subject to adjustment in certain events, as provided in the
Indenture.
1. Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby
grants an option (the "Option") to the Initial Purchaser to purchase
the Option Securities at a purchase price of 95% of the principal
amount thereof, plus accrued interest, if any, from September 25, 1997
to the settlement date for the Option Securities. Each Option Security
will be convertible at the option of the holder, effective 90 days
from the Closing Date, into shares of Common Stock at the Conversion
Price. The Option may be exercised only to cover over-allotments in
the sale of the Firm Securities by the Initial Purchaser. The Option
may be exercised in whole or in part at any time and from time to time
on or before the 30th day after the date of the Final Memorandum upon
written or telegraphic notice by the Initial Purchaser to the Company
setting forth the principal amount of Option Securities as to which
the Initial Purchaser is exercising the Option and the settlement date
therefor. Delivery of certificates for the Option Securities, and
payment therefor, shall be made as provided in Section 3 hereof.
III. Delivery and Payment. Delivery of and payment for the Firm Securities
and Option Securities (if the Option provided for in Section 2(b) hereof shall
have been exercised on or before the first business day prior to the Closing
Date (as defined
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<PAGE>
below)) shall be made at 10:00 AM, New York City time, on September 25, 1997 or
such later date as the Initial Purchaser designates, which date and time may be
postponed by agreement between the Initial Purchaser and the Company (such date
and time of delivery and payment for the Securities being herein called the
"Closing Date"). Delivery of certificates for the Securities in such names,
forms and denominations as the Initial Purchaser shall have requested shall be
made on the Closing Date to the Initial Purchaser or as it shall direct at such
location as the Initial Purchaser shall reasonably designate at least one
business day in advance of the Closing Date against payment by the Initial
Purchaser of the purchase price for the Securities to or upon the order of the
Company by wire transfer to an account designated by the Company or such other
manner of payment as may be agreed by the Company and the Initial Purchaser. The
certificates, opinions and letters provided for in Section 6 shall be delivered
at a closing to be held on the Closing Date at the office of Cleary, Gottlieb,
Steen & Hamilton ("Counsel for the Initial Purchaser"), One Liberty Plaza, New
York, New York. Certificates for the Securities shall be registered in such
names and in such denominations as the Initial Purchaser may request not less
than one full business day in advance of the Closing Date.
The Company agrees to have the Securities available for inspection,
checking and packaging by the Initial Purchaser in New York, New York, not later
than 1:00 PM on the business day prior to the Closing Date.
If the Option is exercised after the first business day prior to the
Closing Date, the Company will deliver (at the expense of the Company) to the
Initial Purchaser, at the office of Counsel for the Initial Purchaser, on the
date specified by the Initial Purchaser (which shall be within three business
days after exercise of the Option), certificates for the Option Securities in
such names and denominations as the Initial Purchaser shall have requested
against payment of the purchase price thereof to or upon order of the Company by
wire transfer to an account designated by the Company. If settlement for the
Option Securities occurs after the Closing Date, the Company will deliver to the
Initial Purchaser on the settlement date for the Option Securities, and the
obligation of the Initial Purchaser to purchase the Option Securities shall be
conditioned upon receipt of, supplemental opinions, certificates and letters
confirming as of such date the opinions, certificates and letters delivered on
the Closing Date pursuant to Section 6 hereof.
I. Offering of Securities; Restrictions on Transfer.
A. The Initial Purchaser represents and warrants to and agrees
with the Company that (i) it has not solicited and will not solicit
any offer to buy or offer to sell the Securities by means of any form
of general solicitation or general advertising (within the meaning of
Regulation D) in the United States or in any manner involving a public
offering within the meaning of Section 4(2) of the Act or,
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<PAGE>
with respect to Securities sold in reliance on Regulation S under the
Act ("Regulation S"), by means of any directed selling efforts and
(ii) it has solicited and will solicit offers to buy the Securities
only from, and has offered and will offer, sell or deliver the
Securities only to, (A) persons whom it reasonably believes to be
qualified institutional buyers ("QIBs") (as defined in Rule 144A
under the Act) or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary
or agent, only when such person has represented to it that each such
account is a QIB to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A, and, in each case,
in transactions under Rule 144A, (B) a limited number of persons whom
it reasonably believes to be institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D), and who
provide to it a letter in the form of Exhibit B hereto or (C) persons
to whom, and under circumstances which, it reasonably believes offers
and sales of Securities may be made without registration of the
Securities or the Common Stock issuable upon conversion thereof under
the Act in reliance upon Regulation S. The Initial Purchaser also
represents and warrants and agrees that it has offered and will offer
to sell the Securities only to, and has solicited and will solicit
offers to buy the Securities only from, persons who in purchasing
such Securities will be deemed to have represented and agreed as
provided under "Investor Representations and Restrictions on Resale"
in Exhibit D hereto.
B. The Initial Purchaser represents and agrees that:
a. it has not offered or sold, and, prior to the expiration
of the period of six months from the Closing Date, will not offer
or sell any Securities to persons in the United Kingdom, except
to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or as
agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom, within the meaning of
the Public Offers of Securities Regulations 1995 (the
"Regulations");
b. it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 and the Regulations
with respect to anything done by it in relation to the Securities
in, from or otherwise involving the United Kingdom; and
c. it has only issued or passed on and will only issue or
pass on to any person in the United Kingdom any document received
by it in connection with the issue of the Securities if that
person is of a kind
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described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a
person to whom such document may otherwise lawfully be issued or
passed on.
II. Agreements. The Company agrees with the Initial Purchaser that:
A. Holders (including subsequent transferees) of the Securities and
the Common Stock issuable upon conversion thereof will have the
registration rights set forth in the Registration Rights Agreement, in
substantially the form of Exhibit A hereto, for so long as such Securities
constitute "restricted securities" (as defined in Rule 144(a)(3)). Pursuant
to the Registration Rights Agreement, the Company agrees to file with the
Securities and Exchange Commission (the "Commission"), a shelf registration
statement pursuant to Rule 415 under the Act (the "Shelf Registration
Statement") relating to the resale by holders of the Securities and the
Common Stock issuable upon conversion thereof, and to use its reasonable
best efforts to cause such Shelf Registration Statement to be declared
effective.
B. The Company will furnish to the Initial Purchaser and Counsel for
the Initial Purchaser, without charge, during the period mentioned in
paragraph (d) below, as many copies of the Final Memorandum and any
supplements and amendments thereof or thereto as they may reasonably
request.
C. The Company will not amend or supplement the Final Memorandum,
other than by the filing of documents under the Exchange Act that are
incorporated by reference therein, without the prior consent of the Initial
Purchaser. Prior to the completion of the distribution of the Securities by
the Initial Purchaser, the Company will not file any document under the
Exchange Act that is incorporated by reference in the Final Memorandum
unless prior to such proposed filing the Company has furnished the Initial
Purchaser with a copy of such document for its review and the Initial
Purchaser has not reasonably objected to the filing of such document.
D. The Company will promptly advise the Initial Purchaser when, prior
to the completion of the sale of the Securities by the Initial Purchaser,
any document filed under the Exchange Act which is incorporated by
reference in the Final Memorandum shall have been filed with the
Commission.
E. If at any time prior to the completion of the sale of the
Securities by the Initial Purchaser, any event occurs as a result of which
the Final Memorandum as then amended or supplemented would include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the circumstances
under which they were made not
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<PAGE>
misleading, or if it shall be necessary to amend or supplement the Final
Memorandum (including any document incorporated by reference therein which
was filed under the Exchange Act) to comply with the Exchange Act or the
rules thereunder or other applicable law, the Company promptly will notify
the Initial Purchaser of the same and, subject to paragraph (c) of this
Section 5, will prepare and provide to the Initial Purchaser pursuant to
paragraph (b) of this Section 5 an amendment or supplement which will
correct such statement or omission or effect such compliance and, in the
case of such an amendment or supplement which is to be filed under the
Exchange Act and which is incorporated by reference in the Final
Memorandum, will file such amendment or supplement with the Commission.
F. The Company will arrange for the qualification of the Securities
for sale under the laws of such jurisdictions as the Initial Purchaser may
designate, will maintain such qualifications in effect so long as required
for the sale of the Securities and will arrange for the determination of
the legality of the Securities for purchase by institutional investors
provided that the Company by reason of any such qualification for sale
shall not be required to (i) qualify as a foreign corporation or (ii) file
a general consent to service of process in any such jurisdiction where it
is not presently qualified or (iii) become subject to taxation as a foreign
corporation. The Company will promptly advise the Initial Purchaser of the
receipt by the Company of any notification with respect to the suspension
of the qualification of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.
G. Neither the Company nor any Affiliate of the Company will solicit
any offer to buy or offer or sell the Securities by means of any form of
general solicitation or general advertising (within the meaning of
Regulation D) in the United States.
H. None of the Company, its Affiliates nor any person acting on behalf
of the Company or its Affiliates will engage in any directed selling
efforts with respect to the Securities within the meaning of Regulation S,
and the Company, its Affiliates and each such person acting on its or their
behalf will comply with the offering restrictions requirement of Regulation
S.
I. So long as any of the Securities or the Common Stock issuable upon
the conversion thereof are "restricted securities" within the meaning of
Rule 144(a)(3), at any time when the Company is not subject to Section 13
or 15(d) of the Exchange Act), the Company will provide to any holder of
such restricted securities, or to any prospective purchaser of such
restricted securities designated by a holder,
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<PAGE>
upon the request of such holder or prospective purchaser, any information
required to be delivered to holders and prospective purchasers of the
Securities pursuant to Rule 144A(d)(4) under the Securities Act. This
covenant is intended to be for the benefit of the holders, and prospective
purchasers designated by such holders, from time to time of such restricted
securities.
J. The Company will not, and will not permit any of its Affiliates to,
resell any Securities or Common Stock issuable upon conversion thereof
which constitute "restricted securities" under Rule 144 that have been
reacquired by any of them, except pursuant to an effective registration
statement.
K. Neither the Company nor any Affiliate will sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in the Act) the offering of which security will be integrated with
the sale of the Securities in a manner that would require the registration
of the Securities or Common Stock issuable upon conversion thereof under
the Act.
L. The Company shall use its reasonable best efforts in cooperation
with the Initial Purchaser to permit the Securities to be eligible for
clearance and settlement through The Depository Trust Company, New York,
New York.
M. The Company shall include information substantially in the form set
forth in Exhibit D in each Final Memorandum.
N. For a period of 180 days following the Closing Date the Company
will not, without prior written consent of the Initial Purchaser, which
consent will not be unreasonably withheld, offer, sell, contract to sell,
grant any other option to purchase or otherwise dispose of, directly or
indirectly, or announce the offering of, any debt securities issued or
guaranteed by the Company, any preferred stock or Common Stock of the
Company or any security (other than the Securities) convertible into or
exchangeable for preferred stock or Common Stock or enter into any
agreement to do any of the foregoing; provided, however, that the Company
may issue or sell preferred stock or Common Stock or securities (other than
the Securities) convertible into or exchangeable for preferred stock or
Common Stock, or options, warrants or similar rights to purchase preferred
stock or Common Stock or securities (other than the Securities) convertible
into or exchangeable for preferred stock or Common Stock pursuant to (i)
any employee and/or non-employee director stock option, grant or purchase
plan, stock ownership plan or dividend reinvestment plan of the Company in
effect at the Execution Time and (ii) outstanding options or warrants, or
other rights and written agreements for the purchase or delivery of Common
Stock in effect at the Execution Time.
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O. During the period of five years after the date hereof, the Company
will promptly furnish to the Initial Purchaser upon request, a copy of its
Annual Report on Form 10-K and any definitive proxy statement of the
Company filed with the Commission under the Exchange Act or mailed to
stockholders.
P. The Company will pay all expenses incident to the performance of
its obligations under this Agreement, including (i) the preparation,
printing and distribution of the Preliminary Memorandum, Final Memorandum
and any amendments thereof or supplements thereto, (ii) the preparation,
printing and distribution of this Agreement, the Registration Rights
Agreement, the Indenture, the Securities and any Blue Sky Memorandum or
Legal Investment Survey by the Counsel for the Initial Purchaser, (iii) the
delivery of the Securities, (iv) the reasonable fees and disbursements of
the accountants for the Company, (v) the expenses of qualifying the
Securities under state securities laws in accordance with the provisions of
paragraph (f) of this Section, including filing fees and the reasonable
fees and disbursements of Counsel for the Initial Purchaser in connection
therewith, (vi) the fees and expenses of the Trustee and the reasonable
fees and disbursements of its counsel, (vii) any fees of the NASD with
respect to admitting the Securities for trading in the PORTAL Market and
any fees with respect to admitting the Securities for trading on the
Luxembourg Stock Exchange, (viii) all reasonable travel, lodging and other
out-of-pocket expenses of the Initial Purchaser and the Company's officers
and employees and any other out-of-pocket expenses in connection with
attending or hosting meetings with prospective purchasers of Securities and
(ix) all other out-of-pocket expenses incurred by the Initial Purchaser in
connection with the transactions contemplated by this Agreement, including,
without limitation, the reasonable fees and disbursements of Counsel for
the Initial Purchaser, provided, however, that the Company's obligation to
pay directly or reimburse the Initial Purchaser for its legal expenses
(including without limitation, those payable to Counsel for the Initial
Purchaser for legal services described in clauses (ii), (v) and (ix)
hereof) and other out-of-pocket costs and expenses under this Section 5
shall not exceed $375,000.
Q. In connection with the offering, neither the Company nor any of its
Affiliates has bid for or purchased, or until the Initial Purchaser shall
have notified the Company of the completion of the resale of the
Securities, will bid for or purchase, either alone or with one or more
other persons, for any account in which it or any of its Affiliates has a
beneficial interest, any Securities; and neither it nor any of its
Affiliates will make bids or purchases for the purpose of creating actual,
or apparent, active trading in, or of raising the price of, the Securities.
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III. Conditions to the Obligations of the Initial Purchaser. The
obligations of the Initial Purchaser to purchase the Firm Securities and the
Option Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company contained herein as of
the Execution Time, the Closing Date and any settlement date pursuant to Section
3 hereof, to the accuracy of the statements of the Company made in any
certificates pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following additional conditions:
A. The Company shall have furnished to the Initial Purchaser:
(X) the opinion of Certilman Balin Adler & Hyman LLP, counsel for the
Company, dated the Closing Date, to the effect that:
a. each of the Company and Crescent Public Communications,
Inc., Sun Tel North America, Inc., National Billing
Exchange, Inc., American Network Exchange, Inc. and Capital
Network System, Inc. (collectively, the "Material
Subsidiaries") (A) is validly existing as a corporation in
good standing under the laws of the jurisdiction in which it
is chartered or organized, with full corporate power and
authority to own its properties and conduct its business as
described in the Final Memorandum, (B) is duly qualified to
do business as a foreign corporation and is in good standing
under the laws of each jurisdiction which requires such
qualification wherein the failure to be so qualified would
have a Material Adverse Effect and (C) holds or, in the case
of those set forth on Schedule 1(y) hereto, has applied for
all material approvals, authorizations, offers, licenses,
certificates and permits from federal and New York State
government authorities necessary for the conduct of its
business as prescribed in the Final Memorandum, excluding
approvals, authorizations, offers, licenses, certificates
and permits from the Federal Communications Commission
("FCC"), the Public Utility Commissions ("PUC") and other
similar regulatory authorities related to the
telecommunications industry collectively, the "FCC/PUC
Regulatory Approvals") as to which such counsel need not
express any opinion;
b. the Company's authorized equity capitalization is as set
forth in the Final Memorandum; the Common Stock conforms in
all material respects to the description thereof contained
under the heading "Description of Capital Stock" in the
Final Memorandum; the holders of
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the outstanding shares of capital stock of the Company are
not entitled to any statutory preemptive or, to the
knowledge of such counsel after due inquiry, other rights to
subscribe for the Securities or the shares of Common Stock
issuable upon conversion thereof; and the shares of Common
Stock initially issuable upon conversion of the Securities
have been duly and validly authorized and, when issued upon
conversion, will be validly issued, fully paid and
nonassessable and the Board of Directors has duly and
validly adopted a resolution reserving such shares of Common
Stock for issuance upon conversion; as of the date hereof,
to the knowledge of such counsel after due inquiry, (A)
except for the preferred stock described under the heading
"Description of Capital Stock -- Preferred Stock" in the
Offering Memorandum, there are no other outstanding shares
of capital stock of the Company and, (B) except for (I) the
Warrants (as defined below), (II) the warrants issued to
Francesco Galesi and the Francesco Galesi Irrevocable
Grantor Trust dated October 18, 1991, on January 7, 1997 and
June 3, 1997, respectively which entitle him and it to
purchase 1,500,000 shares of Common Stock at an exercise
price of $3.03 per share (subject to reduction in certain
circumstances) and 500,000 shares of Common Stock at an
exercise price of $2.3125 per share (plus 100,000 additional
shares of Common Stock in case of certain defaults as
described in such warrant), respectively (the "Galesi
Warrants") (III) other warrants for the purchase of an
aggregate of approximately 2,260,000 shares of Common Stock,
(IV) options to purchase approximately 3,500,000 shares of
Common Stock issued under the Company's 1992 Stock Option
Plan (V) written agreements to issue an aggregate of
approximately 950,000 shares of Common Stock in effect on
the date hereof, (VI) promissory notes convertible into an
aggregate of approximately 3,100,000 shares of Common Stock
and (VII) the Securities, no outstanding options or warrants
to acquire, or any securities convertible into, any shares
of capital stock of the Company;
c. the Indenture has been duly authorized, executed and
delivered, and, assuming that the Indenture has been duly
authorized, executed and delivered by, and is a valid and
binding agreement of, the Trustee, constitutes a legal,
valid and binding instrument enforceable against the Company
in accordance with its terms (subject, as to enforcement of
remedies, to (A) applicable bankruptcy, reorganization,
insolvency (including without limitation, all laws relating
to fraudulent transfers), moratorium or other laws affecting
creditors' rights generally from time to time in effect and
(B) general principles of equity regardless of whether
enforcement is considered in a proceeding of equity or law);
and
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the Securities have been duly authorized and, when executed
and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial
Purchaser pursuant to this Agreement, assuming that the
Indenture has been duly authorized, executed and delivered
by, and is a valid and binding agreement of, the Trustee,
will constitute legal, valid and binding obligations of the
Company entitled to the benefits of the Indenture (subject,
as to enforcement of remedies, to (A) applicable bankruptcy,
reorganization, insolvency (including without limitation,
all laws relating to fraudulent transfers), moratorium or
other laws affecting creditors' rights generally from time
to time in effect and assuming that the Indenture has been
duly authorized, executed and delivered by, and is a valid
and binding agreement of, the Trustee and (B) general
principles of equity regardless of whether enforcement is
considered in a proceeding of equity or law); and the
statement set forth under the heading "Description of Notes"
in the Final Memorandum, insofar as such statements purport
to summarize certain provisions of the Securities and the
Indenture, provide a fair summary of such provisions;
d. this Agreement has been duly authorized, executed and
delivered by the Company;
e. the Registration Rights Agreement has been duly authorized,
executed and delivered, and, assuming that the Registration
Rights Agreement has been duly authorized, executed and
delivered by and is a valid and binding agreement of, the
Initial Purchaser, constitutes a legal, valid and binding
instrument enforceable against the Company in accordance
with its terms (subject, as to enforcement of remedies, to
(A) applicable bankruptcy, reorganization, insolvency
(including, without limitation, all laws relating to
fraudulent transfers), moratorium or other laws affecting
creditors' rights generally from time to time in effect and
(B) general principles of equity regardless of whether
enforcement is considered in a proceeding of equity or law);
f. no consent, approval, authorization or order of any court or
governmental agency or body, is required for the
consummation of the transactions contemplated herein, except
(A) as may be required under any particular proceeding as to
which such counsel's opinion may be based on its knowledge,
(B) such as may be required under the securities laws of any
jurisdiction, domestic or foreign, in connection with the
purchase and distribution of the Securities by the Initial
Purchaser (as to which such counsel need not express any
opinion), (C) in connection with the registration under the
Act of the Securities and the Common Stock
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issuable upon conversion thereof and qualification of the
Indenture under the Trust Indenture Act, (D) such as may be
required in connection with the listing of the Securities on
any stock exchange, including, without limitation, the
Luxembourg Stock Exchange or the designation of the
Securities as PORTAL- eligible securities (E) any FCC/PUC
Regulatory Approvals (as to which such counsel need not
express any opinion), (F) such as may be required under the
HSR Act in connection with the conversion of the Securities
and (G) such other approvals (specified in such opinion) as
have been obtained;
g. assuming the accuracy of the representations and warranties
of the Initial Purchaser and compliance by the Initial
Purchaser with the agreements contained in this Agreement,
none of the issue and sale of the Securities, the execution
and delivery of the Indenture or this Agreement, the
consummation of any other of the transactions herein or
therein contemplated and the fulfillment of the terms hereof
or thereof will conflict with, result in a breach or
violation of, or constitute a default under any law or the
Certificate of Incorporation or By-Laws of the Company or
the terms of any indenture or other agreement or instrument
known to such counsel and to which the Company or any of its
Subsidiaries is a party or bound or any judgment, order or
decree known to such counsel to be applicable to the Company
or any of the Subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator
having jurisdiction over the Company or any of the
Subsidiaries;
h. the Company has all necessary power and authority to
execute, deliver and perform its obligations under the
Warrant Agreement by and between the Company and the Initial
Purchaser to be dated as of or about even date herewith (the
"Warrant Agreement") and the Warrants to be issued under the
Warrant Agreement (the "Warrants") and to issue and deliver
the Warrants and Warrant Shares (as defined in the Warrant
Agreement), the execution, delivery and performance by the
Company of the Warrant Agreement and the Warrants have been
duly authorized by all necessary action; each of the Warrant
Agreement and the Warrants has been duly executed and
delivered by the Company and assuming that the Warrant
Agreement has been duly authorized, executed and delivered
by and is a valid and binding agreement of the Initial
Purchaser constitutes the legal, valid and binding
obligation of the Company enforceable in accordance with its
terms, subject, as to enforceability, to (A) applicable
bankruptcy, reorganization, insolvency (including, without
limitation, all laws relating to fraudulent transfers),
moratorium or other laws affecting creditors' rights
generally from time to time in effect and (B)
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general principles of equity regardless of whether
enforcement is considered in a proceeding of equity or law);
i. the Board of Directors has duly and validly adopted
a resolution reserving the shares of Common Stock issuable
upon exercise of the Warrants for issuance upon the
exercise; the Warrants, when issued and delivered pursuant
hereto, and the Warrant Shares when issued and delivered
pursuant to the Warrants, will be validly issued, fully paid
and non-assessable, with no liability on the part of the
holders thereof and are not subject to any statutory
preemptive rights, rights of first refusal or rights of
first offer under any applicable law or any contract known
to such counsel;
j. none of the execution and delivery by the Company of
the Registration Rights Agreement, the Warrant Agreement or
the Warrants, the consummation of the transactions therein
contemplated, including the issuance and delivery of the
Warrants and, upon the exercise of the Warrants, the Warrant
Shares, or compliance with the terms and provisions thereof
will conflict with or result in a breach of, or require any
consent under, the Certificate of Incorporation or By-Laws
of the Company, or any applicable law or regulation, or any
order, writ, injunction or decree of any court or
governmental authority or agency, (except with respect to
any particular proceeding as to which such counsel's opinion
may be based on its knowledge) (excluding FCC/PUC Regulatory
Approvals, as to which such counsel need not express any
opinion) (provided, however, that the Company will need to
comply with the applicable provisions of the Securities Act,
the Exchange Act and state and foreign securities law in
connection with the exercise by the warrant holders of their
rights under Sections 5.01 and 5.02 of the Warrant
Agreement), or any agreement or instrument, known to such
counsel after due inquiry, to which the Company is a party
or by which it is bound or to which any of its properties or
assets is subject, or constitute a default under any such
agreement or instrument or result in the creation or
imposition of any lien upon any of the revenues or assets of
the Company pursuant to the terms of any such agreement or
instrument;
k. assuming the accuracy of the representations and
warranties of the Initial Purchaser and compliance by the
Initial Purchaser with its agreements contained herein, it
is not necessary in connection with the offer, sale and
delivery of the Securities in the manner contemplated by
this Agreement to register the issuance of the Securities
under the Act or to qualify the Indenture under the Trust
Indenture Act;
l. to the knowledge of such counsel after due
20
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inquiry, there is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or
investigation pending or threatened with respect to the
Company, any Subsidiary, or any of their respective
operations, businesses, properties, or assets except as
properly described in the Final Memorandum or such as
individually or in the aggregate do not now have and in the
future could not reasonably be expected to have a Material
Adverse Effect;
m. insofar as statements in the Final Memorandum
purport to summarize the status of litigation or the
provisions of laws, rules, regulations, orders, judgments,
decrees, contracts, agreements, instruments, leases, or
licenses, such statements have been prepared or reviewed by
such counsel and accurately reflect in all material respects
the status of such litigation and provisions purported to be
summarized and are correct in all material respects (except
for the information contained in the Final Memorandum under
the heading "Business -- Government Regulation" or otherwise
relating to regulatory matters discussed therein, as to
which such counsel need not express any opinion); and
n. the Company is not an "investment company" as
defined in Section 3(a) of the Investment Company Act and,
if the Company conducts its business as set forth in the
Final Memorandum, will not become an "investment company"
and will not be required to be registered under the
Investment Company Act.
Such counsel shall also state that in the course of preparation by the
Company of the Final Memorandum, such counsel has participated in conferences
with officers and other representatives of the Company and representatives of
the independent accountants of the Company and representatives of the Initial
Purchaser and its counsel at which conferences the contents of the Final
Memorandum and related matters were discussed and, on the basis of the
foregoing, no fact has come to the attention of such counsel that causes such
counsel to believe that the Final Memorandum when issued or at the Execution
Time the Final Memorandum contained or on the date of such opinion contains an
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading provided such counsel
need express no comment or belief with respect to the financial statements or
other financial data or information with respect to the Initial Purchaser
contained in the Final Memorandum.
In addition, such counsel shall furnish to the Initial Purchaser an
opinion, dated the Closing Date to the effect that the statements made in the
Final Memorandum under the caption "Certain United States Federal Income Tax
Considerations" insofar as they purport
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to describe the material United States Federal income tax consequences of the
purchase, ownership and disposition of the Securities and the Common Stock
issuable upon the conversion thereof fairly summarize the matters therein
described.
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
New York or the United States, to the extent they deem proper and specified in
such opinion, upon the opinion of other counsel of good standing whom they
believe to be reliable and who are satisfactory to Counsel for the Initial
Purchaser and (B) as to matters of fact, to the extent they deem proper, on
certificates of responsible officers of the Company and public officials.
References to the Final Memorandum in this paragraph (a) include any amendments
or supplements thereof or thereto at the Closing Date.
(Y) the opinion of Amy Gross, Vice President -- General Counsel of the
Company, dated the Closing Date, to the effect that:
1. a. each of the Company and the Material Subsidiaries
(A) is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is chartered
or organized, with full corporate power and authority to own
its properties and conduct its business as described in the
Final Memorandum, (B) is duly qualified to do business as a
foreign corporation and is in good standing under the laws
of each jurisdiction which requires such qualification
wherein the failure to be so qualified would have a Material
Adverse Effect and (C) holds, or in the case of those set
forth on Schedule 1(y) hereto, has applied for all material
approvals, authorizations, offers, licenses, certificates
and permits from government authorities necessary for the
conduct of its business as prescribed in the Final
Memorandum;
b. all the outstanding shares of capital stock of each
Subsidiary (A) have been duly and validly authorized and
issued and are fully paid and nonassessable and (B) except
as set forth on Exhibit 21 to the Form 10-K, are owned by
the Company either directly or through wholly owned
subsidiaries, free and clear of any perfected security
interest and any other security interests, claims, liens or
encumbrances (except as set forth in this Agreement or the
Schedules hereto);
c. no consent, approval, authorization or order of any
court or governmental agency or body is required for the
consummation of the transactions contemplated herein, except
(A) such as
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<PAGE>
may be required under the securities laws of any
jurisdiction domestic or foreign in connection with the
purchase and distribution of the Securities by the Initial
Purchaser (as to which such counsel need not express any
opinion), (B) in connection with the registration under the
Act of the Securities and the Common Stock issuable upon
conversion thereof and under the Trust Indenture Act, (C)
such as may be required in connection with the listing of
the Securities on any stock exchange, including, without
limitation, the Luxembourg Stock Exchange or the designation
of the Securities as PORTAL-eligible securities, (D) such as
may be required under the HSR Act in connection with the
conversion of the Securities and (E) such other approvals
(specified in such opinion) as have been obtained;
d. assuming the accuracy of the representations and
warranties of the Initial Purchaser and compliance by the
Initial Purchaser with the agreements contained in this
Agreement, none of the issue and sale of the Securities, the
execution and delivery of the Indenture or this Agreement,
the consummation of any other of the transactions herein
contemplated and the fulfillment of the terms hereof will
conflict with, result in a breach or violation of, or
constitute a default under any law or the Certificate of
Incorporation or By-Laws of the Company or the terms of any
indenture or other agreement or instrument to which the
Company or any of its subsidiaries is a party or bound or
any judgment, order or decree to be applicable to the
Company or any of the Subsidiaries of any court, regulatory
body, administrative agency, governmental body or arbitrator
having jurisdiction over the Company or any of the
Subsidiaries;
e. none of the execution and delivery by the Company of
this Agreement, the Indenture, the Securities, the
Registration Rights Agreement, the Warrant Agreement or the
Warrants, the consummation of the transactions herein or
therein contemplated, including the conversion of the
Securities, the issuance and delivery of the Warrants and,
upon the exercise of the Warrants, the Warrant Shares, or
compliance with the terms and provisions hereof or thereof
will conflict with or result in a breach of, or require any
consent under, the Certificate of Incorporation or By-Laws
of the Company, or any applicable law or regulation, or any
order, writ, injunction or decree of any court or
governmental authority or agency (although the Company will
need to comply with the applicable provisions of the
Securities Act, the Exchange Act and state securities law in
connection with the Registration Rights Agreement and the
exercise by the warrant holders of their rights under
Sections 5.01 and 5.02 of the Warrant Agreement), or any
agreement or instrument to which the Company is a party or
by which it is bound or to
23
<PAGE>
which any of its properties or assets is subject, or
constitute a default under any such agreement or instrument
or result in the creation or imposition of any lien upon any
of the revenues or assets of the Company pursuant to the
terms of any such agreement or instrument;
f. there is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or
investigation pending or, to the best knowledge of such
counsel after due inquiry, threatened with respect to the
Company, any Subsidiary, or any of their respective
operations, businesses, properties, or assets except as
properly described in the Final Memorandum or such as
individually or in the aggregate do not now have and in the
future could not reasonably be expected to have a Material
Adverse Effect;
g. insofar as statements in the Final Memorandum
purport to summarize the status of litigation or the
provisions of laws, rules, regulations, orders, judgments,
decrees, contracts, agreements, instruments, leases, or
licenses, such statements have been prepared or reviewed by
such counsel and accurately reflect in all material respects
the status of such litigation and provisions purported to be
summarized and are correct in all material respects;
h. the information contained in the Form 10-K under the
heading "Government Regulation" in Item 1 - "Business" and
in Item 3 - "Legal Proceedings" and the information
contained in the Final Memorandum under the caption
"Business -- Government Regulation," fairly summarizes the
matters therein described.
Such counsel shall also state that in the course of preparation by the
Company of the Final Memorandum, such counsel has participated in conferences
with other officers and representatives of the Company and representatives of
the independent accountants of the Company and representatives of the Initial
Purchaser and its counsel at which conferences the contents of the Final
Memorandum and related matters were discussed and, on the basis of the
foregoing, no fact has come to the attention of such counsel that causes such
counsel to believe that the Final Memorandum when issued or at the Execution
Time the Final Memorandum contained or on the date of such opinion contains an
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading provided such counsel
need express no comment or belief with respect to the financial statements or
other financial data or information with respect to the Initial Purchaser
contained in the Final Memorandum.
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the District of
Columbia or the United States,
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<PAGE>
to the extent she deems proper and specified in such opinion, upon the opinion
of other counsel of good standing whom she believes to be reliable and who are
satisfactory to Counsel for the Initial Purchaser and (B) as to matters of fact,
to the extent she deems proper, on certificates of responsible officers of the
Company and public officials.
References to the Final Memorandum in this paragraph (a) include any
amendments or supplements thereof or thereto at the Closing Date.
A. The Initial Purchaser shall have received from Counsel for the
Initial Purchaser such opinion or opinions, dated the Closing Date, with
respect to the issuance and sale of the Securities, the Indenture, the
Registration Rights Agreement, the Warrant Agreement, the Final Memorandum
(together with any amendment or supplement thereof or thereto) and other
related matters as the Initial Purchaser may reasonably require, and the
Company shall have furnished to such counsel such documents as they request
for the purpose of enabling them to pass upon such matters. References to
the Final Memorandum in this paragraph (b) include any amendments or
supplements thereto at the Closing Date.
B. The Company shall have furnished to the Initial Purchaser a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the Company,
dated the Closing Date, to the effect that the signers of such certificate
have carefully examined the Final Memorandum, any amendment or supplement
to the Final Memorandum and this Agreement and that:
a. the representations and warranties of the Company in this
Agreement are true and correct on and as of the Closing Date with the
same effect as if made on the Closing Date and the Company has
complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the Closing Date;
and
b. since the date of the most recent financial statements
included in the Final Memorandum (exclusive of any amendment or
supplement thereof or thereto), there has been no material adverse
change in the condition (financial or other), earnings, business or
properties of the Company and its subsidiaries, whether or not arising
from transactions in the ordinary course of business, except as set
forth in or contemplated in the Final Memorandum (exclusive of any
amendment or supplement thereof or thereto).
C. At the Execution Time and at the Closing Date, Ernst & Young LLP
shall have furnished to the Initial Purchaser a letter or letters, dated
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<PAGE>
respectively as of the Execution Time and as of the Closing Date, in form
and substance satisfactory to and previously approved by the Initial
Purchaser and counsel to the Initial Purchaser, confirming that they are
independent certified public accountants with respect to the Company within
the meaning of the Act, the Exchange Act and the applicable rules and
regulations thereunder and Rule 101 of the American Institute of Certified
Public Accountants (the "AICPA") Code of Professional Conduct and its
interpretations and rulings, and containing such other information with
respect to the financial statements and certain other financial information
of the Company included in the Final Memorandum, as requested by the
Initial Purchaser and Counsel to the Initial Purchaser.
References to the Final Memorandum in this paragraph (d) include any
amendment or supplement thereof or thereto at the date of the letter.
A. Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Final Memorandum (exclusive of any
amendment or supplement thereof or thereto), there shall not have been (i)
any change or decrease specified in the letter or letters referred to in
paragraph (d) of this Section 6 or (ii) any change, or any development
involving a prospective change, in or affecting the business or properties
of the Company and the Subsidiaries the effect of which, in any case
referred to in clause (i) or (ii) above, is, in the judgment of the Initial
Purchaser, so material and adverse as to make it impractical or inadvisable
to market the Securities as contemplated by the Final Memorandum (exclusive
of any amendment or supplement thereof or thereto).
B. At the Closing Date, the Registration Rights Agreement shall have
been duly executed, delivered and be in full force and effect.
C. Prior to the Closing Date, the Company shall have furnished to the
Initial Purchaser such further information, certificates and documents as
the Initial Purchaser may reasonably request.
D. At the Execution Time, the Company shall have furnished to the
Initial Purchaser a letter substantially in the form of Exhibit C hereto
from each of the Company's executive officers and directors and each of the
individuals and entities listed on Schedule II hereto addressed to the
Initial Purchaser.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material
26
<PAGE>
respects reasonably satisfactory in form and substance to the Initial Purchaser
and Counsel for the Initial Purchaser, this Agreement and all obligations of the
Initial Purchaser hereunder may be canceled at, or at any time prior to, the
Closing Date by the Initial Purchaser. Notice of such cancellation shall be
given to the Company in writing or by telephone or telefax confirmed in writing.
The documents required to be delivered by this Section 6 shall be
delivered at the office of Counsel for the Initial Purchaser, at One Liberty
Plaza, New York, New York, on the Closing Date.
I. Payment of Fees and Reimbursement of Initial Purchaser's Expenses.
(a) On the Closing Date, the Company shall allow the Initial Purchaser a
management, sales and underwriting commission discount equal to 5% of the
principal amount of the Securities and as additional compensation the
Company shall issue to the Initial Purchaser Warrants exercisable (in
accordance with the Warrant Agreement which shall be in substantially the
form attached hereto as Exhibit E) for the purchase of an aggregate number
of shares of Common Stock (subject to adjustment) equal to 3% of the total
number of shares of Common Stock into which the Securities will be
convertible.
1. If the sale of the Securities provided for herein is not
consummated because any condition to the obligations of the Initial
Purchaser set forth in Section 6 hereof is not satisfied, because of
any termination pursuant to Section 9 hereof or because of any
refusal, inability or failure on the part of the Company to perform
any agreement herein or comply with any provision hereof, other than
as a result of the failure of the Initial Purchaser to perform its
obligations hereunder, the Company will reimburse the Initial
Purchaser upon demand an amount not to exceed $375,000 for its
out-of-pocket expenses (including fees and expenses of counsel) that
shall have been incurred by it in connection with the proposed
purchase and sale of the Securities; provided, however, that
notwithstanding the provisions of Section 5(p), in such case of
failure to perform by the Initial Purchaser, the fees and expenses of
the Counsel of the Initial Purchaser shall not be reimbursed by the
Company.
II. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless the Initial Purchaser, the directors, officers,
employees and agents of the Initial Purchaser and each person who controls
the Initial Purchaser within the meaning of either the Act or the Exchange
Act against any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or
27
<PAGE>
alleged untrue statement of a material fact contained in the Preliminary
Memorandum, the Final Memorandum or any information provided by the
Company to any holder or prospective purchaser of Securities pursuant to
Section 5(i), or in any amendment thereof or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made in the
Preliminary Memorandum or the Final Memorandum, or in any amendment
thereof or supplement thereto, in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the
Initial Purchaser specifically for inclusion therein. This indemnity
agreement will be in addition to any liability which the Company may
otherwise have.
1. The Initial Purchaser agrees to indemnify and hold harmless
the Company, its directors, its officers, and each person who controls
the Company within the meaning of either the Act or the Exchange Act,
to the same extent as the foregoing indemnity from the Company to the
Initial Purchaser, but only with reference to written information
relating to the Initial Purchaser furnished to the Company by or on
behalf of the Initial Purchaser specifically for inclusion in the
Preliminary Memorandum or the Final Memorandum, or in any amendment
thereof or supplement thereto. This indemnity agreement will be in
addition to any liability which the Initial Purchaser may otherwise
have. The Company acknowledges that the statements set forth in the
last paragraph of the cover page, the sixth, eighth, ninth, eleventh
and fifteenth paragraphs under the heading "Plan of Distribution" and
the statements under the heading "Notice to Investors-Offers and Sales
by the Initial Purchaser" in the Preliminary Memorandum and the Final
Memorandum constitute the only information furnished in writing by or
on behalf of the Initial Purchaser for inclusion in the Preliminary
Memorandum or the Final Memorandum.
2. Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the commencement thereof; but the
failure so to notify the indemnifying party (i) will not relieve it
from liability under paragraph (a) or (b) above unless and to the
extent it did not otherwise learn of such action and such failure
results in
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<PAGE>
the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to
represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any
separate counsel retained by the indemnified party or parties except
as set forth below); provided, however, that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the
indemnified party in an action, the indemnified party shall have the
right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses
of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present
such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses
available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii)
the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of such
action or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying
party; provided further, that the indemnifying party shall not be
responsible for the fees and expenses of more than one separate
counsel (together with appropriate local counsel) representing all the
indemnified parties under paragraph (a) or (b) above. An indemnifying
party will not, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment
with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim,
action, suit or proceeding.
3. In the event that the indemnity provided in paragraph (a) or
(b) of this Section 8 is unavailable to or insufficient to hold
harmless an indemnified party for any reason, the Company and the
Initial Purchaser agree to contribute to the aggregate losses, claims,
damages and liabilities (including
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<PAGE>
legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which the
Company or the Initial Purchaser may be subject in such proportion as
is appropriate to reflect the relative benefits received by the
Company or by the Initial Purchaser from the offering of the
Securities; provided, however, that in no case shall the Initial
Purchaser be responsible for any amount in excess of the purchase
discount or commission applicable to the Securities purchased by the
Initial Purchaser hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the
Company or the Initial Purchaser, as the case may be, shall contribute
in such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company or of the Initial
Purchaser in connection with the statements or omissions that resulted
in such Losses as well as any other relevant equitable considerations.
Benefits received by the Company shall be deemed to be equal to the
total net proceeds from the offering (before deducting expenses), and
benefits received by the Initial Purchaser shall be deemed to be equal
to the total purchase discounts and commissions, in each case as set
forth on the cover page of the Final Memorandum. Relative fault shall
be determined by reference to whether any alleged untrue statement or
omission relates to information provided by the Company or the Initial
Purchaser. The Company and the Initial Purchaser agree that it would
not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation that does not take
account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this
Section 8, each person who controls the Initial Purchaser within the
meaning of either the Act or the Exchange Act and each director,
officer, employee and agent of the Initial Purchaser shall have the
same rights to contribution as the Initial Purchaser, and each person
who controls the Company within the meaning of either the Act or the
Exchange Act and each officer and director of the Company shall have
the same rights to contribution as the Company, subject in each case
to the applicable terms and conditions of this paragraph (d).
III. Termination. This Agreement shall be subject to termination in
the absolute discretion of the Initial Purchaser, by notice given to the
Company prior to delivery of and payment for the Securities, if prior to
such time (i) trading in or quotation of the Company's Common Stock shall
have been suspended by the Commission or Nasdaq's Small Cap Market or
trading in securities generally on the New York Stock Exchange or Nasdaq's
Small Cap Market shall have been suspended or
30
<PAGE>
limited or minimum prices shall have been established on either of such
Exchange or Market System; (ii) subsequent to the date as of which
information is given in the Final Memorandum there shall have been a
material adverse change (or prospective material adverse change) in or
affecting the financial condition of the Company, otherwise than as set
forth in the Final Memorandum the effect of which, in any such case, is in
the Initial Purchaser's judgment so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Securities on the terms and in the manner contemplated by
the Preliminary Memorandum and Final Memorandum; (iii) if, on or after the
date hereof, a downgrading shall have occurred in the rating accorded the
Company's debt securities by Standard & Poor's Corporation or Moody's
Investors Service, Inc. or either of them shall have publicly announced
that it has under surveillance or review, with possible negative
implications, its rating of any of the Company's debt securities; (iv) a
banking moratorium shall have been declared either by Federal or New York
State authorities or (v) there shall have occurred any outbreak or
escalation of hostilities, declaration by the United States of a national
emergency or war or other calamity or crisis the effect of which on
financial markets is such as to make it, in the judgment of the Initial
Purchaser, impracticable or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Final Memorandum
(exclusive of any amendment or supplement thereof or thereto).
IV. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements
of the Company or its officers and of the Initial Purchaser set forth in or
made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of the Initial
Purchaser or the Company or any of the officers, directors or controlling
persons referred to in Section 8 hereof, and will survive delivery of and
payment for the Securities. The provisions of Sections 7 and 8 hereof shall
survive the termination or cancellation of this Agreement.
V. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Initial Purchaser, will be
mailed, delivered or telefaxed and confirmed to it in writing to HSBC
Securities, Inc., 140 Broadway 5th Floor, New York, New York, 10005,
Telephone (212) 658-5100, Telefax (212) 658-4859, with a copy to Cleary,
Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, New York 10006,
Telephone (212) 225-2000, Telefax (212) 225-3999, Attention: James F.
Munsell, Esq.; or, if sent to the Company, will be mailed, delivered or
telefaxed and confirmed to it in writing at 6 Nevada Drive, Lake Success,
New York 11042, Telephone (516) 326-2540, Telefax (516) 437-0807,
Attention: President, with copies to Amy Gross, Esq., 100 West Lucerne
Circle, Orlando, Florida, 32801, Telephone (407) 246- 1234, Telefax, (407)
481-2560 and Certilman Balin Adler & Hyman, LLP, 90 Merrick Avenue, East
Meadow, New York 11554, Telephone (516) 296-7000, Telefax, (516) 296- 7111,
Attention: Fred Skolnik, Esq., or such other address as either party may
provide from time to time.
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VI. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8
hereof, and, except as expressly set forth in Section 5(i) hereof, no other
person will have any right or obligation hereunder.
VII. APPLICABLE LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CHOICE OF LAW RULES THEREOF.
VIII. Business Day. For purposes of this Agreement, "business day"
means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a
day on which banking institutions in The City of New York, New York are
authorized or obligated by law, executive order or regulation to close.
IX. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument. * * *
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<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement between the
Company and the Initial Purchaser.
Very truly yours,
AMNEX, INC.
By
Name:
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
HSBC SECURITIES, INC.
By
Name:
Title:
33
AMNEX, INC.
8 1/2% Convertible Subordinated Notes Due 2002
REGISTRATION RIGHTS AGREEMENT
New York, New York
September 29, 1997
HSBC Securities, Inc.
140 Broadway, 5th Floor
New York, New York 10005
Ladies and Gentlemen:
Amnex, Inc., a New York corporation (the "Company"), proposes to issue and
sell (such issuance and sale, the "Initial Placement") to HSBC Securities, Inc.
(the "Initial Purchaser") in accordance with the Purchase Agreement dated
September 11, 1997 (the "Purchase Agreement") between the Company and the
Initial Purchaser, $15,000,000 aggregate principal amount of its 8 1/2%
Convertible Subordinated Notes Due 2002 (the "Securities") (plus up to an
additional $8,000,000 aggregate principal amount to cover over-allotments of the
Securities, if any). The Securities will be convertible into shares of Common
Stock, par value $0.001 per share (the "Common Stock"), of the Company at the
conversion price set forth in the Final Memorandum (as defined in the Purchase
Agreement). In satisfaction of a condition to your obligations under the
Purchase Agreement, the Company agrees with you, (i) for your benefit and (ii)
for the benefit of the holders from time to time of the Securities or the Common
Stock issuable upon conversion of the Securities (including you) (each of the
foregoing, a "Holder" and together, the "Holders"), as follows:
1. Definitions.
(a) As used in this Agreement, the following capitalized terms shall have
the following meanings:
"Act" means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"Affiliate" of any specified person means any other person that, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such specified person. For purposes of this definition, control of a
person means the power, direct or indirect, to direct or cause the direction of
the management and policies of such person whether by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
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"Business Day" means any day that is neither a Saturday or a Sunday nor a
day on which banking institutions in The City of New York are authorized or
obligated by law or executive order to close.
"Closing Date" has the meaning set forth in the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Damages Accrual Period" has the meaning set forth in Section 2(d) hereof.
"Damages Payment Date" has the meaning set forth in Section 2(d) hereof.
"Deferral Period" shall have the meaning set forth in Section 2(c) hereof.
"Event" has the meaning set forth in Section 2(d) hereof.
"Event Date" has the meaning set forth in Section 2(d) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Holder" has the meaning set forth in the preamble hereto.
"Indenture" means the Indenture relating to the Securities, dated as of
September 29, 1997, between the Company and Marine Midland Bank, as trustee, as
the same may be amended from time to time in accordance with the terms thereof.
"Initial Placement" has the meaning set forth in the preamble hereto.
"Interest Payment Date" shall mean March 25 and September 25 in each year,
commencing March 25, 1998, during which any of the Securities are outstanding in
accordance with the Indenture.
"Liquidated Damages" has the meaning set forth in Section 2(d) hereof.
"Majority Holders" means the Holders of a majority of the aggregate
principal amount of Securities registered under a Shelf Registration Statement
then outstanding; provided that Holders of Common Stock issued upon conversion
of Securities shall be deemed to be
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<PAGE>
Holders of the aggregate principal amount of Securities from which such Common
Stock was converted.
"Managing Underwriters" means the Underwriter or Underwriters that shall
administer an Underwritten Offering.
"Notice Holder" has the meaning set forth in Section 2(b) hereof.
"Prospectus" means the prospectus included in any Shelf Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Securities or Common Stock issuable upon
conversion thereof, covered by such Shelf Registration Statement, and all
amendments and supplements to such prospectus, including post-effective
amendments.
"Record Date" has the meaning set forth in Section 2(d).
"Record Holder" has the meaning set forth in Section 2(d).
"Registrable Securities" shall mean the Securities and shares of Common
Stock issued upon conversion thereof, excluding any such securities that, and
any such securities the predecessors of which, were previously sold pursuant to
an effective registration statement of the Company filed under the Act or
pursuant to Rule 144 promulgated under the Act.
"Securities" has the meaning set forth in the preamble hereto.
"Selling Confirmation" has the meaning set forth in Section 2(b)(i).
"Selling Notice" has the meaning set forth in Section 2(b).
"Selling Period" means, with respect to a Notice Holder and a Selling
Notice given by such Notice Holder, a period of 45 calendar days commencing on
the date such Notice Holder receives a Selling Confirmation in respect of the
transactions described in such Selling Notice; provided that the Company may
defer existing Selling Periods in accordance with Section 3(c)(2).
"Shelf Registration" means a registration effected pursuant to Section 2
hereof.
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<PAGE>
"Shelf Registration Period" has the meaning set forth in Section 2(a)
hereof.
"Shelf Registration Statement" means a registration statement of the
Company pursuant to the provisions of Section 2 hereof (including additional
registration statements filed pursuant to Section 3(d)) that covers some or all
of the Securities and the Common Stock issuable upon conversion thereof, as
applicable, on an appropriate form under Rule 415 promulgated under the Act, or
any similar or successor rule that may be adopted by the Commission, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Trustee" means the trustee with respect to the Securities under the
Indenture.
"Underwriter" means any underwriter of Securities or Common Stock issuable
upon conversion thereof in connection with an offering thereof under a Shelf
Registration Statement.
"Underwritten Offering" means an offering in which the Securities or Common
Stock are sold to an Underwriter or with the assistance of an Underwriter for
reoffering to the public.
(b) Capitalized terms used but not defined herein shall have the respective
meanings set forth in the Purchase Agreement.
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<PAGE>
2. Shelf Registration; Suspension of Use of Prospectus; Liquidated Damages.
a) The Company shall prepare and file with the Commission, as soon as
practicable but in any event on or prior to the date 90 days following the
Closing Date, a Shelf Registration Statement under the Act on any appropriate
form under Rule 415 promulgated under the Securities Act or any similar or
successor rule or regulation registering the resale from time to time by Holders
thereof of all of the Registrable Securities. The Shelf Registration Statement
shall permit resales of Registrable Securities by Holders in the manner or
manners designated by them (including, without limitation, one or more
Underwritten Offerings by an underwriter reasonably acceptable to the Company)
from time to time, which shall be set forth in such Shelf Registration
Statement. The Company shall use its reasonable best efforts to cause the Shelf
Registration Statement to be declared effective under the Act as soon as
reasonably practicable but in any event on or prior to the date 180 days
following the Closing Date and to keep the Shelf Registration Statement
continuously effective under the Act until the earlier of (i) the second
anniversary of the Closing Date, (ii) the date on which, in the written opinion
of counsel to the Company, the Securities or Common Stock issuable upon
conversion thereof may be sold by non-affiliates of the Company pursuant to
paragraph (k) of Rule 144 (or any similar or successor provision) promulgated by
the Commission and (iii) such date as of which all the Securities or the Common
Stock issuable upon conversion thereof have been sold pursuant to the Shelf
Registration Statement (the period ending at such earlier date, the "Shelf
Registration Period").
b) Each Holder of Registrable Securities agrees that if such Holder wishes
to sell its Registrable Securities pursuant to the Shelf Registration Statement
and the Prospectus, it will do so only in accordance with this Section 2(b).
Each Holder of Registrable Securities agrees to give written notice to the
Company at least three Business Days prior to any intended resale of Registrable
Securities under the Shelf Registration Statement, which notice shall specify
the date on which such Holder intends to begin such distribution and such
information with respect to such Holder and the intended distribution as may be
reasonably required to amend the Shelf Registration Statement or supplement the
Prospectus with respect to such intended distribution (each Holder providing the
notice described in this sentence and with respect to which the related Selling
Period is continuing or has been deferred, a "Notice Holder"; each such notice,
a "Selling Notice"). As soon as practicable after the date a Selling Notice is
received by the Company, and in any event within two Business Days after such
date, the Company shall either:
(i) (A) provide a written notice to the Notice Holder who gave such
Selling Notice instructing and notifying such Notice Holder that the Shelf
Registration Statement and Prospectus may be used during the applicable
Selling Period to effect the
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<PAGE>
transactions described in such Selling Notice, that the Company is
then-currently in compliance with Section 3(b) and that the Company
reaffirms the consent granted pursuant to Section 3(f) (each such notice a
"Selling Confirmation") or (B) file a supplement to the Prospectus or a
post-effective amendment to the Shelf Registration Statement as required by
Section 3(b), use its reasonable best efforts to cause any such amendment
to become effective and immediately provide a Selling Confirmation to such
Notice Holder; or
(ii) in the event of the happening of any event of the kind described
in Section 3(c)(2)(i), 3(c)(2)(ii), 3(c)(2)(iii) (y) or 3(c)(2)(iv) hereof,
the Company shall deliver to such Notice Holder the notice required by
Section 3(c)(2) and notify the holders that the consent granted pursuant to
Section 3(f) is suspended until further notice.
(c) Each such Notice Holder may sell all or any Registrable Securities
pursuant to the Shelf Registration Statement and the Prospectus only during the
Selling Period commencing with the earlier of (x) the date on which such Notice
Holder receives a Selling Confirmation and (y) the third Business Day after the
related Selling Notice has been received by the Company; provided that in the
event the Company elects to take the actions permitted by Section 2(b)(ii), the
commencement of the Selling Period shall be deferred until such later date as
the Company delivers a Selling Confirmation. A Notice Holder shall not sell any
Registrable Securities pursuant to the Shelf Registration Statement or the
Prospectus after the expiration of the applicable Selling Period without giving
a new Selling Notice pursuant to Section 2(b) hereof and receiving a new Selling
Confirmation. The period during which the commencement of a Selling Period is
deferred by the Company or during which an existing Selling Period is deferred
by the Company is hereinafter referred to as a "Deferral Period." In the event
that (i) the number of Deferral Periods exceeds one in any three-month period or
three in any twelve-month period or (ii) the number of days in any Deferral
Period exceeds 30 days, the Company shall be liable to pay Liquidated Damages in
accordance with Section 2(d).
In the event the Company elects to take the actions described in Section
2(b)(ii), the Company will, at such time as it is in compliance with Section
3(b) and as use of the Prospectus may be resumed, immediately provide Selling
Confirmations to all Notice Holders.
a) The parties hereto agree that the Holders of the Registrable Securities
will suffer damages, and that it would not be feasible to ascertain the extent
of such damages with precision, if (i) the Shelf Registration Statement has not
been filed on or prior to the date 90 days following the Closing Date, (ii) the
Shelf Registration Statement has not been declared effective under the
Securities Act on or before the date 180 days following the Closing Date, (iii)
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<PAGE>
prior to the end of the Shelf Registration Period, the Commission shall have
issued a stop order suspending the effectiveness of the Shelf Registration
Statement or proceedings have been initiated with respect to the Shelf
Registration Statement under Section 8(d) or 8(e) of the Act, (iv) the aggregate
number of days in any one Deferral Period exceeds 30 days or (v) the number of
Deferral Periods exceeds more than one in any three-month period or three in any
twelve-month period (each of the events of a type described in any of the
foregoing clauses (i) through (v) are individually referred to herein as an
"Event"; and the date 90 days following the Closing Date in the case of clause
(i), the date 180 days following the Closing Date in the case of clause (ii),
the date on which the effectiveness of the Shelf Registration Statement has been
suspended or proceedings with respect to the Shelf Registration Statement under
Section 8(d) or 8(e) of the Act have been commenced in the case of clause (iii),
the date on which the duration of a Deferral Period exceeds the periods
permitted by Section 2(c) hereof in the case of clause (iv), and the date of the
commencement of a Deferral Period that causes the limit on the number of
Deferral Periods under Section 2(c) hereof to be exceeded in the case of clause
(v), are referred to herein as an "Event Date"). Events shall be deemed to
continue until the date of the termination of such Event, which shall be the
following date with respect to the respective types of Events: the date the
Registration Statement is filed in the case of an Event of the type described in
clause (i), the date the Registration Statement is declared effective under the
Act in the case of an Event described in clause (ii), the date that all stop
orders suspending effectiveness of the Shelf Registration Statement have been
removed and the proceedings initiated with respect to the Shelf Registration
Statement under Section 8(d) or 8(e) of the Act have terminated, as the case may
be, in the case of Events of the types described in clause (iii), termination of
the Deferral Period which caused the aggregate number of days in any one
Deferral Period to exceed the number permitted by Section 2(c) to be exceeded in
the case of Events of the type described in clause (iv), and termination of the
Deferral Period the commencement of which caused the number of Deferral Periods
permitted by Section 2(c)(ii) to be exceeded in the case of Events of the type
described in clause (v).
Accordingly, upon the occurrence of any Event and until such time as there
are no Events which have occurred and are continuing (a "Damages Accrual
Period"), commencing on the Event Date on which such Damages Accrual Period
began, the Company agrees to pay, as liquidated damages, and not as a penalty,
an additional amount (the "Liquidated Damages"): (A) to each Holder of
Registrable Securities that is a Notice Holder, accruing at a rate equal to one
quarter of one percent per annum (25 basis points) on (s) where such Registrable
Securities are Securities, the aggregate principal amount of such Securities
held by such Notice Holder and (t) where such Registrable Securities are shares
of Common Stock issued upon conversion of Securities, the aggregate principal
amount of Securities that were converted into such shares and (B) if the Damages
Accrual Period continues for a period in excess of 30 days from the Event Date,
from and after the end of such 30-day period until such time as there are
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<PAGE>
no Events which have occurred and are continuing, to each Holder of Registrable
Securities (whether or not a Notice Holder), accruing at a rate equal to
one-quarter of one percent per annum (25 basis points) on (u) where such
Registrable Securities are Securities, the aggregate principal amount of such
Securities held by such Holder and (v) where such Registrable Securities are
shares of Common Stock issued upon conversion of Securities, the aggregate
principal amount of Securities that were converted into such shares.
Notwithstanding the foregoing, no Liquidated Damages shall accrue under clause
(A) of the preceding sentence during any period for which Liquidated Damages
accrue under clause (B) of the preceding sentence or as to any Securities or
shares of Common Stock from and after the earlier of (x) the date such
securities are no longer Registrable Securities, and (y) the expiration of the
Shelf Registration Period. The rate of accrual of the Liquidated Damages with
respect to any period shall not exceed the rate provided for in this paragraph
notwithstanding the occurrence of multiple concurrent Events.
Liquidated Damages due on any Securities or Common Stock shall be payable
on each Interest Payment Date on the Securities accruing (or if there are no
Securities outstanding, which would have accrued) during the Damages Accrual
Period and on the Interest Payment Date immediately following (or which would
have followed) the termination of such Period (a "Damages Payment Date"). The
Company shall pay the Liquidated Damages due on any Securities by depositing
with the Trustee under the Indenture, in trust, for the benefit of the Holders
of Securities or Common Stock or Notice Holders, as the case may be, entitled
thereto, at least one Business Day prior to the applicable Damages Payment Date,
sums sufficient to pay the Liquidated Damages accrued or accruing since the last
preceding Damages Payment Date to such Damages Payment Date. The Liquidated
Damages shall be paid on each Damages Payment Date to the Holders of record of
the Registrable Securities (the "Record Holders") on the 10th day of March or
10th day of September (each a "Record Date") immediately preceding such Damages
Payment Date by wire transfer of immediately available funds to the accounts
specified by them or by mailing checks to their registered addresses as they
appear in the Securities register or stock transfer books of the Company, if no
such accounts have been specified on or before the applicable Regular Record
Date. The Trustee shall be entitled, on behalf of the Holders of Securities,
Common Stock and Notice Holders, to seek any available remedy for the
enforcement of this Agreement, including for the payment of such Liquidated
Damages. Notwithstanding the foregoing, the parties agree that the sole remedy
payable for a violation of the terms of this Agreement with respect to which
Liquidated Damages are expressly provided shall be such Liquidated Damages.
Nothing shall preclude a Notice Holder or Holder of Registrable Securities from
pursuing or obtaining specific performance or other equitable relief with
respect to any violation of this Agreement for which liquidated damages are not
expressly provided by this Agreement.
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All of the Company's obligations set forth in this Section 2(d) which are
outstanding with respect to any Registrable Securities at the time such security
ceases to be a Registrable Security shall survive until such time as all such
obligations with respect to such security have been satisfied in full
(notwithstanding termination of the Agreement).
The parties hereto agree that the Liquidated Damages provided for in this
Section 2(d) constitute a reasonable estimate of the damages that may be
incurred by Holders of Registrable Securities (other than the Initial Purchaser)
by reason of the failure of the Shelf Registration Statement to be filed or
declared effective or unavailable (absolutely or as a practical matter) for
effecting resales of Registrable Securities, as the case may be, in accordance
with the provisions hereof.
3. Registration Procedures. In connection with any Shelf Registration
Statement, the following provisions shall apply:
a) The Company shall furnish to you, prior to the filing thereof with the
Commission, a copy of any Shelf Registration Statement, and each amendment
thereof and each amendment or supplement, if any, to the Prospectus included
therein and shall use its reasonable best efforts to reflect in each such
document, when so filed with the Commission, such comments as you reasonably may
propose in a timely manner to allow the Company to comply with the filing date
provisions of Section 2(a).
b) The Company shall ensure that (i) any Shelf Registration Statement and
any amendment thereto and any Prospectus forming part thereof and any amendment
or supplement thereto comply in all material respects with the Act and the
Exchange Act and the respective rules and regulations thereunder, (ii) any Shelf
Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any Prospectus forming part of any Shelf
Registration Statement, and any amendment or supplement to such Prospectus, does
not include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided that no
representation or agreement is made hereby with respect to information with
respect to you or any Holder required to be included in any Shelf Registration
or Prospectus pursuant to the Act or the rules and regulations thereunder or
provided by you, any Holder, or any Managing Underwriter specifically for
inclusion in any Shelf Registration Statement or Prospectus.
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c) (1) The Company shall advise you and the Holders and, if requested by
you or any such Holder, confirm such advice in writing:
d) when a Shelf Registration Statement and any amendment thereto has
been filed with the Commission and when the Shelf Registration Statement or
any post-effective amendment thereto has become effective; and
e) of any request by the Commission for amendments or supplements to
the Shelf Registration Statement or the Prospectus included therein or for
additional information.
(2) During any Selling Period, during the deferral of any Selling
Period and within two Business Days of receipt by the Company of any
Selling Notice, the Company shall notify you and the Notice Holders and, if
requested by you or any such Notice Holder, confirm such notification in
writing:
a) of the issuance by the Commission of any stop order suspending the
effectiveness of the Shelf Registration Statement or the initiation of any
proceedings for that purpose;
b) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Securities included in any Shelf
Registration Statement for sale in any jurisdiction or the initiation or
threat of any proceeding for such purpose;
c) of (x) the suspension of the use of the Prospectus pursuant to
Section 2(b) or (y) of the happening of any event that requires the making
of any changes in the Shelf Registration Statement or the Prospectus so
that, as of such date, the statements therein are not misleading and do not
omit to state a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in the light of
the circumstances under which they were made) not misleading; and
d) of the determination by the Company, in its reasonable judgment,
that it is advisable to suspend use of the Prospectus for valid business
reasons (not including avoidance of the Company's obligations hereunder)
including, among other things, the acquisition or divestiture of assets,
public filings with the Commission, pending corporate developments and
similar events;
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which notice shall be accompanied by an instruction to defer the use of the
Prospectus until the Company delivers a Selling Confirmation whereupon any
existing Selling Period shall be deferred and shall recommence upon
delivery of the aforementioned Selling Confirmation; provided that such
Selling Period shall be extended by the number of days elapsed in such
period prior to such deferral.
I. The Company shall use its reasonable best efforts to prevent the
issuance, and if issued to obtain the withdrawal of, any order suspending the
effectiveness of any Shelf Registration Statement at the earliest possible time,
and in any event shall within 30 days of any such order amend the Shelf
Registration Statement in a manner reasonably expected to obtain the withdrawal
of such order, or file an additional Shelf Registration Statement covering all
of the Registrable Securities (whereupon references herein to the Shelf
Registration Statement shall be deemed to include reference to such additional
filing).
II. The Company shall furnish to each Holder of Securities or the Common
Stock issued upon conversion thereof included within the coverage of any Shelf
Registration Statement, without charge, at least one copy of such Shelf
Registration Statement and any post-effective amendment or supplement thereto,
including financial statements and schedules, and, if the Holder so requests in
writing, all exhibits (including those incorporated by reference).
III. The Company shall, during the Shelf Registration Period, deliver to
each Holder of Securities or the Common Stock issued upon conversion thereof
included within the coverage of any Shelf Registration Statement, without
charge, as many copies of the Prospectus (including each preliminary Prospectus)
included in such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request; and, except during such periods
as the Company shall have suspended the use of the Prospectus pursuant to
Section 2(b) or 3(c)(2), the Company consents to the use of the Prospectus or
any amendment or supplement thereto by each of the selling Holders in connection
with the offering and sale of the Securities or the Common Stock issued upon
conversion thereof covered by the Prospectus or any amendment or supplement
thereto.
IV. Prior to any offering of Securities or the Common Stock issued upon
conversion thereof pursuant to any Shelf Registration Statement, the Company
shall register or qualify or cooperate with the Holders of Securities or the
Common Stock issued upon conversion thereof included therein and their
respective counsel in connection with the registration or qualification of such
Securities or Common Stock for offer and sale under the securities or blue sky
laws of such jurisdictions as any such Holders reasonably request in writing and
do any and all other acts or things necessary or advisable to enable the offer
and sale in such jurisdictions of the Securities and the Common Stock issued
upon conversion thereof covered by such Shelf Registration Statement; provided,
however, that the Company will not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take any
action which would subject it to general service of process or to taxation in
any such jurisdiction where it is not then so subject.
V. The Company shall cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Securities or the Common
Stock issued upon conversion thereof to be sold pursuant to any Shelf
Registration Statement free of any restrictive legends and in such denominations
and
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registered in such names as Holders may request in connection with sales of
Securities or the Common Stock issued upon conversion thereof pursuant to such
Shelf Registration Statement.
VI. Upon the occurrence of any event contemplated by clause (iii) of
Section (c)(2) above, the Company shall promptly prepare a post-effective
amendment to any Shelf Registration Statement or an amendment or supplement to
the related Prospectus or file any other required document so that, as
thereafter delivered (when and as permitted pursuant to Section 2(c)) to
purchasers of the Securities or the Common Stock issued upon conversion thereof
included therein, the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
VII. The Company shall use its best efforts to comply with all applicable
rules and regulations of the Commission and shall make generally available to
its security holders as soon as practicable after the effective date of the
applicable Shelf Registration Statement an earning statement satisfying the
provisions of Section 11(a) of the Act and Rule 158 promulgated by the
Commission thereunder.
VIII. The Company shall cause the Indenture to be qualified under the Trust
Indenture Act in a timely manner.
IX. The Company may require each Holder of Securities or the Common Stock
issued upon conversion thereof to be sold pursuant to any Shelf Registration
Statement to furnish to the Company such information regarding the Holder and
the distribution of such Securities or Common Stock as may, from time to time,
be required by the Act and the rules and regulations promulgated thereunder, and
the obligations of the Company to any Holder hereunder shall be expressly
conditioned on the compliance of such Holder with such request.
X. The Company shall, if requested, use its reasonable best efforts to
promptly incorporate in a supplement to the Prospectus included in the Shelf
Registration or post-effective amendment to a Shelf Registration Statement (i)
such information as the Majority Holders or, if the Securities or Common Stock
are being sold in an Underwritten Offering, as the Managing Underwriters and the
Majority Holders reasonably agree should be included therein and provide to the
Company in writing for inclusion in the Shelf Registration Statement or
Prospectus, and (ii) such information as a Holder may provide from time to time
to the Company in writing for inclusion in a Prospectus or any Shelf
Registration Statement concerning such Holder and the distribution of such
Holder's Securities and Common Stock and, in either case, shall make all
required filings of such supplement or post-effective amendment as soon as
notified of the matters to be incorporated in such supplement or post-effective
amendment.
XI. The Company shall enter into such reasonable agreements (including
underwriting agreements) and take all other appropriate actions in order to
expedite or facilitate the registration or the disposition of the Securities or
the Common Stock issuable upon conversion thereof, and in connection therewith,
if an underwriting agreement is entered into, cause the same to contain
indemnification provisions and procedures no less favorable to the Holders than
those set forth in Section 5 (or such other provisions and procedures acceptable
to the Majority Holders and the Managing Underwriters, if any, with respect to
all parties to be indemnified pursuant to Section 5 from Holders of Securities
or the Common Stock issuable upon conversion thereof to the Company).
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XII. The Company shall (i) make reasonably available for inspection by the
Holders of Securities or the Common Stock issued upon conversion thereof to be
registered under a Shelf Registration Statement, any Underwriter participating
in any disposition pursuant to such Shelf Registration Statement, and any
attorney, accountant or other agent retained by the Holders or any such
Underwriter all relevant financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries; (ii) cause the
Company's officers, directors and employees to supply all relevant information
reasonably requested by the Holders or any such Underwriter, attorney,
accountant or agent in connection with any such Shelf Registration Statement as
is customary for similar due diligence examinations; provided, however, that any
information that is designated in writing by the Company, in its sole
discretion, as confidential at the time of delivery of such information (the
"Confidential Information") shall be kept confidential by the Holders or any
such Underwriter, attorney, accountant or agent, unless such information has
become available to the public generally or through a third party without an
accompanying obligation of confidentiality (provided, however, that in the event
that any of such persons is requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena, or similar
process) to disclose any of the Confidential Information, it is agreed that such
person will provide the Company with prompt notice of such request(s) so that
the Company may seek an appropriate protective order or other appropriate remedy
and/or waive such persons compliance with this provision and in the event that
such protective order or other remedy is not obtained, or that the Company
grants a waiver hereunder, such person may furnish that portion of the
confidential information which it is legally compelled to disclose); (iii) make
such representations and warranties to the Holders of Securities or the Common
Stock issued upon conversion thereof registered thereunder and the Underwriters,
if any, in form, substance and scope as are customarily made by issuers to
Underwriters and covering matters including, but not limited to, those set forth
in the Purchase Agreement; (iv) obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions, in form, scope and substance, shall
be reasonably satisfactory to the Managing Underwriters, if any) addressed to
each selling Holder and the Underwriters, if any, covering such matters as are
customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by such Holders and Underwriters;
(v) obtain "cold comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Shelf Registration
Statement), addressed to each selling Holder of Securities or the Common Stock
issued upon conversion thereof registered thereunder (provided such Holder
furnishes the accountants with such representations as the accountants
customarily require in similar situations) and the Underwriters, if any, in
customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with primary underwritten offerings; and (vi)
deliver such documents and certificates as may be reasonably requested by the
Majority Holders and the Managing
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Underwriters, if any, including those to evidence compliance with Section 3(i)
and with any customary conditions contained in the underwriting agreement or
other agreement entered into by the Company. The foregoing actions set forth in
clauses (iii), (iv), (v) and (vi) of this Section 3 (o) shall be performed at
(A) the effectiveness of such Shelf Registration Statement and each
post-effective amendment thereto and (B) each closing under any underwriting or
similar agreement as and to the extent required thereunder.
XIII. The Company shall use its reasonable best efforts to take all other
steps necessary to effect the registration, offering and sale of the Registrable
Securities covered by the Shelf Registration Statement contemplated hereby.
4. Registration Expenses. The Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 2
and 3 hereof and shall bear or reimburse the Holders for the reasonable fees and
disbursements of one firm or counsel designated by the Majority Holders to act
as counsel for the Holders in connection therewith. However, the Company shall
not be liable for underwriting discounts or commissions or transfer taxes
payable in connection with any sale of Securities or Common Stock issued on
conversion thereof included in a Shelf Registration Statement.
5. Indemnification and Contribution.
a) (i) In connection with any Shelf Registration Statement, the Company
agrees to indemnify and hold harmless each Holder of Securities or Common Stock
issued upon conversion thereof covered thereby (including the Initial
Purchasers), the directors, officers, employees and agents of each such Holder
and each person who controls any such Holder within the meaning of either the
Act or the Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
the Shelf Registration Statement as originally filed or in any amendment
thereof, or in any preliminary Prospectus or Prospectus, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any case to the extent that any such
loss, claim, damage or liability arises out of or is based
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upon (A) any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any such Holder or any
Initial Purchaser specifically for inclusion therein, (B) use of a Shelf
Registration Statement or the related Prospectus during a period when a stop
order has been issued in respect of such Shelf Registration or any proceedings
for that purpose have been initiated or use of a Prospectus when use of such
Prospectus has been deferred pursuant to Section 2(c); provided, further, in
each case, that the Company has delivered prior notice, and the Holders have
received such prior notice, in accordance with Section 7(c) hereof of such stop
order, initiation of proceedings or deferral or (C) if the Holder fails to
deliver a Prospectus or the then current Prospectus. This indemnity agreement
will be in addition to any liability which the Company may otherwise have.
(ii) The Company also agrees to indemnify or contribute to Losses, as
provided in Section 5(d), of any Underwriters of Securities or the Common Stock
issued upon conversion thereof registered under a Shelf Registration Statement,
their officers and directors and each person who controls such Underwriters on
substantially the same basis as that of the indemnification of the Initial
Purchaser and the selling Holders provided in this Section 5(a) and shall, if
requested by any Holder, enter into an underwriting agreement reflecting such
agreement, as provided in Section 3(n) hereof.
a. Each Holder of Securities or Common Stock issued upon conversion thereof
covered by a Shelf Registration Statement (including the Initial Purchaser)
severally agrees to indemnify and hold harmless (i) the Company, (ii) each of
its directors, (iii) each of its officers who signs such Shelf Registration
Statement and (iv) each person who controls the Company within the meaning of
either the Act or the Exchange Act to the same extent as the foregoing indemnity
from the Company to each such Holder, but only with reference to written
information relating to such Holder furnished to the Company by or on behalf of
such Holder specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability which any such Holder may otherwise have.
a) Promptly after receipt by an indemnified party under this Section 5 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 5, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The
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<PAGE>
indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the indemnified
party in any action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the fees and expenses
of any separate counsel retained by the indemnified party or parties except as
set forth below); provided, however, that such counsel shall be reasonably
satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel (and local counsel) if (i) the use of
counsel chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of the institution
of such action or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying party;
provided further, that the indemnifying party shall not be responsible for the
fees and expenses of more than one separate counsel (together with appropriate
local counsel) representing all the indemnified parties under paragraph (a)(i),
paragraph (a)(ii) or paragraph (b) above. An indemnifying party will not,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
b) In the event that the indemnity provided in Section 5(a) or (b) is
unavailable to or insufficient to hold harmless an indemnified party for any
reason, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall have a joint and several obligation to contribute to
the aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which such indemnified party may be subject in such
proportion as is appropriate to reflect the relative benefits received by such
indemnifying party, on the one hand, and such indemnified party, on the other
hand, from the Initial Placement and the Shelf Registration Statement which
resulted in such Losses;
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<PAGE>
provided, however, that in no case shall the Initial Purchaser be responsible,
in the aggregate, for any amount in excess of the purchase discount or
commission applicable to such Security, as set forth on the cover page of the
Final Memorandum (unless the Initial Purchaser shall also be an Underwriter, in
which case, such Initial Purchaser shall also be responsible for amounts
pursuant to the remaining of this sentence), nor shall any Underwriter be
responsible for any amount in excess of the underwriting discount or commission
applicable to the Securities and Common Stock issued upon conversion thereof
purchased by such Underwriter under the Shelf Registration Statement which
resulted in such Losses. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the indemnifying party and the
indemnified party shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of such
indemnifying party, on the one hand, and such indemnified party, on the other
hand, in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations. Benefits received
by the Company shall be deemed to be equal to the sum of (x) the total net
proceeds from the Initial Placement (before deducting expenses) as set forth on
the cover page of the Final Memorandum and (y) the total amount of additional
interest which the Company was not required to pay as a result of registering
the Securities and Common Stock issued upon conversion thereof covered by the
Shelf Registration Statement which resulted in such Losses. Benefits received by
the Initial Purchaser shall be deemed to be equal to the total purchase
discounts and commissions as set forth on the cover page of the Final
Memorandum, and benefits received by any other Holders shall be deemed to be
equal to the value of receiving Securities or the Common Stock issuable upon
conversion thereof registered under the Act. Benefits received by any
Underwriter shall be deemed to be equal to the total underwriting discounts and
commissions, as set forth on the cover page of the Prospectus forming a part of
the Shelf Registration Statement which resulted in such Losses. Relative fault
shall be determined by reference to whether any alleged untrue statement or
omission relates to information provided by the indemnifying party, on the one
hand, or by the indemnified party, on the other hand. The parties agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 5(d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 5, each person who controls a Holder within the meaning of either
the Act or the Exchange Act and each director, officer, employee and agent of
such Holder shall have the same rights to contribution as such Holder, and each
person who controls the Company within the meaning of either the Act or the
Exchange Act, each officer of the Company who shall have signed the Shelf
Registration Statement and each director of the Company shall have the same
17
<PAGE>
rights to contribution as the Company, subject in each case to the applicable
terms and conditions of this Section 5(d).
(e) The provisions of this Section 5 will remain in full force and effect,
regardless of any investigation made by or on behalf of any Holder or the
Company or any of the officers, directors or controlling persons referred to in
Section 5 hereof, and will survive the sale by a Holder of Securities covered by
a Shelf Registration Statement.
6. Underwritten Offering. The Holders of Registrable Securities covered by
the Shelf Registration Statement who desire to do so may sell such Registrable
Securities in an Underwritten Offering in accordance with the provisions of this
Section 6. In any such Underwritten Offering, the Managing Underwriters that
administer the Underwritten Offering will be selected by, and the underwriting
arrangements with respect thereto will be approved by, the Holders of a majority
of the Registrable Securities to be included in such offering (if both
Securities and Common Stock are to be included in such Underwritten Offering
determined in a manner analogous to that used to calculate Majority Holders with
Holders of Common Stock deemed to represent the aggregate principal amount of
Securities from which such Common Stock was converted); provided, however, that
(i) such Managing Underwriters and underwriting arrangements must be reasonably
satisfactory to the Company and (ii) the Company shall not be obligated to
arrange for more than one Underwritten Offering during the Shelf Registration
Period. No Holder may participate in any such Underwritten Offering contemplated
unless such Holder (a) agrees to sell such Holder's Registrable Securities in
accordance with any approved underwriting arrangements, (b) completes and
executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such approved underwriting arrangements and (c) at least 70% of the
outstanding Registrable Securities are included in such Underwritten Offering.
The Holders participating in any Underwritten Offering shall be responsible for
any expenses customarily borne by selling securityholders, including
underwriting discounts and commissions and fees and expenses of counsel to the
selling securityholders and shall reimburse the Company for the fees and
disbursements of their counsel, their independent public accountants and any
printing expenses incurred in connection with such Underwritten Offering.
Notwithstanding the foregoing or the provisions of Section 3(m) hereof, upon
receipt of a request from the Managing Underwriter or a representative of the
Majority Holders to prepare and file an amendment or supplement to the Shelf
Registration Statement and Prospectus in connection with an Underwritten
Offering, the Company may delay the filing of any such amendment or supplement
for up to 90 days if the Company in good faith has a valid business reason for
such delay.
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7. Miscellaneous.
a) No Inconsistent Agreements. The Company has not, as of the date hereof,
entered into nor shall it, on or after the date hereof, enter into, any
agreement with respect to the Securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
b) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, qualified, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Majority Holders; provided that, with respect to any matter that directly or
indirectly affects the rights of the Initial Purchaser hereunder, the Company
shall obtain the written consent of the Initial Purchaser against which such
amendment, qualification, supplement, waiver or consent is to be effective.
Notwithstanding the foregoing (except the foregoing proviso), a waiver or
consent to departure from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose Securities are being sold
pursuant to a Shelf Registration Statement and that does not directly or
indirectly affect the rights of other Holders may be given by the Majority
Holders, determined on the basis of Securities being sold rather than registered
under such Shelf Registration Statement.
c) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail, telex,
telecopier, or air courier guaranteeing overnight delivery:
1. if to you, initially at the address set forth in the Purchase
Agreement;
2. if to any other Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section
7(c), which address initially is, with respect to each Holder, the address
of such Holder maintained by the Trustee under the Indenture, with a copy
in like manner to you; and
3. if to the Company, initially at its address set forth in the
Purchase Agreement.
All such notices and communications shall be deemed to have been duly given
when received, if delivered by hand or air courier, and when sent, if sent by
first-class mail, telex or telecopier.
The Initial Purchaser or the Company by notice to the other may designate
additional or different addresses for subsequent notices or communications.
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a. Successors and Assigns. This Agreement shall inure to the benefit of and
be binding upon the successors and assigns of each of the parties, including,
without the need for an express assignment or any consent by the Company
thereto, subsequent Holders. The Company hereby agrees to extend the benefits of
this Agreement to any Holder and any such Holder may specifically enforce the
provisions of this Agreement as if an original party hereto.
a) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
b) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
c) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW RULES
THEREOF.
d) Severability. In the event that any one of more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.
e) Securities Held by the Company, etc. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities or the
Common Stock issuable upon conversion thereof is required hereunder, Securities
or the Common Stock issued upon conversion thereof held by the Company or its
Affiliates (other than subsequent Holders of Securities or the Common Stock
issued upon conversion thereof if such subsequent Holders are deemed to be
Affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
* * *
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Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
AMNEX, INC.
By_____________________________
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.
HSBC SECURITIES, INC.
By___________________________
Name:
Title:
22
WARRANT AGREEMENT
WARRANT AGREEMENT (this "Agreement"), dated as of September 29, 1997, by
and between Amnex, Inc., a corporation incorporated under the laws of the State
of New York (the "Company"), and HSBC Securities, Inc. (the "Initial Holder" or
"HSBC").
W I T N E S S E T H :
WHEREAS, the Company and HSBC are parties to a Purchase Agreement dated
September 11, 1997 (the "Purchase Agreement");
WHEREAS, as an inducement to HSBC to enter into the Purchase Agreement, the
Company has agreed to issue to HSBC Warrants (as hereinafter defined)
exercisable, in accordance with the terms and conditions thereof, for shares of
Common Stock (as hereinafter defined) of the Company;
WHEREAS, the Company has authorized the issuance of the Warrants; and
WHEREAS, HSBC now desires to subscribe for, and the Company now desires to
issue the Warrants to HSBC upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth herein and other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions.
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<PAGE>
1.01 Definitions. As used herein:
"Affiliate" shall mean, with respect to any Person, any other Person that
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (including,
with their correlative meanings, the terms "controlled by" and "under common
control with"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of power to direct or cause the direction of the
management and policies of such Person (whether through ownership of securities
or partnership or other ownership interests, contract or otherwise), provided
that, in any event, any Person which owns, directly or indirectly, more than 10%
of the securities having ordinary voting power for the election of directors or
other
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governing body of a corporation or more than 10% of the partnership or other
ownership interests of any Person (other than as a limited partner of such other
Person) will be deemed to control such corporation or other Person.
Notwithstanding the foregoing, neither the Initial Holder nor any of its
Affiliates shall be deemed to be an Affiliate of the Company.
"Business Day" shall mean any day other than a Saturday, Sunday or any
other day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
"Common Stock" shall mean the Company's authorized Common Stock, par value
$0.001 per share, as constituted on the date hereof.
"Commission" shall mean the Securities and Exchange Commission or any
successor entity.
"Deferral Period" shall have the meaning set forth in the Registration
Rights Agreement.
"Demand Registration" shall have the meaning provided in Section 5.01(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exercise Price" shall have the meaning set forth in the Warrant.
"Final Offering Memorandum" shall mean the Company's Offering Memorandum
dated September 11, 1997, as amended by the Supplement dated September 25, 1997,
relating to the Notes.
"GAAP" shall mean accounting principles generally accepted in the United
States from time to time.
"Galesi Warrants" shall have the meaning provided in Section 3.05.
"Holder" shall mean the Initial Holder and each other holder of any Warrant
or Warrant Share that is a direct or indirect transferee of the Initial Holder
or any other Holder as
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permitted hereunder unless, with respect to any such Warrant Share, such Warrant
Share is acquired in a public distribution pursuant to an effective registration
statement under the Securities Act or pursuant to a transaction exempt from
registration under the Securities Act, if securities sold in such transaction
may be resold without registration under the Securities Act.
"Holder Expenses" shall have the meaning specified in Section 5.05.
"Notes" shall mean $15,000,000 principal amount of 8 1/2% Convertible
Subordinated Notes of the Company Due 2002 (plus an option to purchase up to
$8,000,000 additional principal amount of such Notes to cover over-allotments)
to be issued and sold by the Company to the Initial Holder for resale as set out
in the Final Offering Memorandum.
"Optional Notes" shall mean the Notes issued upon the exercise of the
Over-allotment Option, if any.
"Over-allotment Option" shall mean HSBC's option to purchase up to
$8,000,000 additional principal amount of the Notes to cover over-allotments.
"Person" shall mean an individual, a corporation, a limited liability
company, a company, a voluntary association, a general partnership, a limited
partnership, a trust, an unincorporated organization or a government or any
agency, instrumentality or political subdivision thereof.
"Piggy-Back Registration" shall have the meaning provided in Section 5.02.
"Purchase Agreement" shall mean the purchase agreement dated September 11,
1997 between the Company and the Initial Holder relating to the offering and
sale of the Notes.
"Registrable Securities" shall mean any Warrant Shares until (i) one or
more registration statements covering any such Warrant Shares has become
effective under the Securities Act and all such Warrant Shares have been
disposed of pursuant to such effective registration statement, (ii) such Warrant
Shares are sold under circumstances in which all of the applicable conditions of
Rule 144 (or any similar provisions then in force) under the Securities Act are
met, (iii) such Warrant Shares may be sold pursuant to Rule 144(k), (iv) the
Company has delivered a new certificate or other evidence of ownership for such
Warrant Shares not bearing any legend relating
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to restrictions on transfer and such Warrant Shares may be resold without
registration under the Securities Act or (v) such Warrant Shares are no longer
outstanding.
"Registration Expenses" shall have the meaning provided in Section 5.05.
"Registration Period" shall have the meaning provided in Section 5.04(a).
"Registration Rights Agreement" shall have the meaning provided in Section
5.02.
"Required Holders" shall mean the holders of more than 50% of all Warrant
Shares (assuming the full exercise of all outstanding Warrants).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"shares of Common Stock" shall have the meaning provided in Section 4.1(b)
of the Warrants.
"Shelf Registration" shall mean (i) a registration statement filed on any
appropriate form under Rule 415 promulgated under the Securities Act or any
successor rule or regulation or (ii) an amendment or supplement to any
then-effective shelf registration.
"Suspension Period" shall have the meaning provided in Section
5.01(b)(iii).
"Warrant" shall mean an outstanding Warrant substantially in the form of
Exhibit A hereto issued in accordance with this Agreement and any Warrant or
Warrants issued upon transfer thereof or in substitution therefor.
"Warrant Share" shall mean a share of Common Stock issued or issuable upon
exercise of a Warrant. For purposes of this Agreement, a Warrant Share shall be
deemed to be "outstanding" from and after the date hereof until the redemption
or cancellation of such Warrant Share (or, if the related Warrant has not been
exercised, the expiration, repurchase or cancellation of such Warrant) by the
Company; provided, however, that for purposes of the definition of "Required
Holders", Warrant Shares shall not be deemed to be outstanding if they have been
sold pursuant to an effective registration statement.
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1.02 Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be delivered hereunder shall be prepared, in accordance with GAAP.
Section 2. Terms and Conditions of Issuance of Warrants.
2.01 Issuance of the Warrants. In consideration of the premises and other
good and valuable consideration, the Company hereby agrees to issue to the
Initial Holder (i) on the date hereof one or more Warrants to purchase an
aggregate of 161,615 shares of Common Stock and (ii) on the date of the closing
of the exercise of the Over-allotment Option, if any, one or more warrants to
purchase an additional number of shares of Common Stock that shall be equal to
3% of the total number of shares of Common Stock into which the Optional Notes
are convertible (in each case as may be adjusted as provided in the Warrants).
Section 3. Representations and Warranties of the Company. The Company
represents and warrants to each Holder as follows:
3.01 Authorization. The Company has all necessary power and authority to
execute, deliver and perform its obligations under this Agreement and the
Warrants and to issue and deliver the Warrants and Warrant Shares; the
execution, delivery and performance by the Company of this Agreement and the
Warrants have been duly authorized by all necessary action; each of this
Agreement and the Warrants has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company
enforceable in accordance with its terms, subject, as to enforceability, to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws relating to creditors' rights generally and to
general equitable principles.
3.02 Reservation; Valid Issuances. The Warrant Shares have been duly and
validly reserved for issuance upon the exercise of the Warrants. The Warrants,
when issued and delivered pursuant hereto, and the Warrant Shares when issued
and delivered upon exercise of the Warrants in accordance with their terms and
the payment of the applicable Exercise Price, will be validly issued, fully paid
and non-assessable, with no liability on the part of the holders thereof, and
are not subject to any preemptive rights, rights of first refusal or rights of
first offer.
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3.03 No Breach. None of the execution and delivery by the Company of this
Agreement or the Warrants, the consummation of the transactions herein or
therein contemplated, including the issuance and delivery of the Warrants and,
upon the exercise of the Warrants, the Warrant Shares, or compliance with the
terms and provisions hereof or thereof will conflict with or result in a breach
of, or require any consent under, the Certificate of Incorporation or By-Laws of
the Company, or any applicable law or regulation, or any order, writ, injunction
or decree of any court or governmental authority or agency (although the Company
will need to comply with the applicable provisions of the Securities Act, the
Exchange Act and state securities laws in connection with the exercise by the
Holders of their rights under Sections 5.01 and 5.02 hereof), or any agreement
or instrument to which the Company is a party or by which it is bound or to
which any of its properties or assets is subject, or constitute a default under
any such agreement or instrument or result in the creation or imposition of any
lien upon any of the revenues or assets of the Company pursuant to the terms of
any such agreement or instrument.
3.04 Approvals. No authorizations, approvals or consents of, and no filings
or registrations with, any governmental or regulatory authority or agency, which
have not already been made or obtained, are necessary for the execution,
delivery or performance by the Company of this Agreement or the Warrants, the
consummation of the transactions contemplated herein and therein or the validity
or enforceability hereof or thereof, except for compliance by the Company with
the applicable provisions of the Securities Act, the Exchange Act and state
securities laws in connection with the exercise by the Holders of their rights
under Sections 5.01 and 5.02 hereof.
3.05 Capitalization. The Company's authorized equity capitalization is as
set forth in the Final Offering Memorandum; the Common Stock conforms in all
material respects to the description thereof contained under the heading
"Description of Capital Stock" in the Final Offering Memorandum. As of the date
hereof, except as set forth in the Final Offering Memorandum under the heading
"Description of Capital Stock," there are no other outstanding shares of capital
stock of the Company and, except as set forth therein and for (i) the Warrants,
(ii) the warrants issued to Francesco Galesi and the Francesco Galesi
Irrevocable Grantor-Trust dated October 18, 1991 on January 7, 1997 and June 3,
1997, respectively, which entitle him and it to purchase 1,500,000 shares of
Common Stock at an exercise price of $3.03 per share (subject to reduction in
certain circumstances) and 500,000 shares of Common Stock at an exercise price
of $2.3125 per share (plus 100,000 additional shares of Common Stock in case of
certain defaults, as described in such warrant), respectively (the "Galesi
Warrants"), (iii) other warrants for the purchase of an aggregate of
approximately 2,260,000 shares of Common Stock, (iv) options to purchase
approximately
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3,500,000 shares of Common Stock issued under the Company's 1992 Stock Option
Plan (v) written agreements to issue an aggregate of approximately 950,000
shares of Common Stock in effect on the date hereof, (vi) promissory notes
convertible into an aggregate of approximately 3,100,000 shares of Common Stock
and (vii) the Notes, there are no outstanding options or warrants to acquire, or
any securities convertible into, any shares of capital stock of the Company.
3.06 Offer of Warrants. Except to the extent, if any, caused by the
issuance of the Galesi Warrants, neither the Company nor any Person acting on
its behalf has directly or indirectly offered the Warrants or any part thereof
or any similar securities for sale to, or solicited any offer to buy any of the
same from, or otherwise approached or negotiated in respect thereof with, any
Person other than the Initial Holder so as to cause the registration provisions
of the Securities Act to apply to the offer and sale of the Warrants. Neither
the Company nor any Person acting on its behalf has taken or will take any
action which would subject the offer and sale of the Warrants to the provisions
of Section 5 of the Securities Act, or to the provisions of any state securities
law requiring registration of securities, notification of the issuance or sale
thereof or confirmation of the availability of any exemption from such
registration except pursuant to this Agreement.
Section 4. Covenants.
4.01 Notice of Merger. Prior to the exercise of all of the Warrants, the
Company shall give each Holder at least 20 Business Days' prior written notice
before it agrees to any merger, acquisition, consolidation or similar
transaction in which the Company shall not be the surviving corporation.
4.02 Inspection. The Company covenants and agrees that it will permit each
Holder and its representatives to examine and make extracts and copies from the
books and records of the Company during normal business hours to the same extent
that any shareholder of the Company has the right to do so under the laws of the
State of New York.
4.03 Information. The Company covenants and agrees that it will deliver to
each Holder such financial statements and other information regarding the
Company or any of its subsidiaries that the Company is obligated to prepare and
deliver to its shareholders generally, in each case at the same time such
financial statements and other information are delivered to such shareholders.
The Company hereby acknowledges and agrees that each Holder may share with any
of its Affiliates any information related to the Company and any of its
subsidiaries (including,
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without limitation, any non-public customer information regarding the
creditworthiness of the Company and its subsidiaries). Each Holder agrees to
treat, and to cause its respective Affiliates to treat, any non-public
information received from the Company pursuant to this Section 4.03 as
confidential.
4.04 Rules 144 and 144A. The Company covenants that it will file any
reports required to be filed by it under the Exchange Act and that it will take
such further action as the Initial Holder or the Required Holders may reasonably
request, all to the extent required from time to time to enable the Holders to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rules 144 and 144A under the
Securities Act, as such Rules may be amended from time to time, or (b) any
similar or successor rules or regulations hereafter adopted by the Commission.
In particular, while any Registrable Securities remain outstanding, the Company
will make available, upon request, to any Holder the information required
pursuant to Rule 144(d)(4) under the Securities Act during any period in which
the Company is not subject to Section 13 or 15(d) of the Exchange Act. Upon the
request of any Holder, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
Section 5. Registration Rights.
5.01 Demand Registrations. (a) Demand Registrations. If (i) the Company
fails to timely file the Shelf Registration required under the Registration
Rights Agreement, (ii) the Company fails to cause such Shelf Registration to
become effective within the 180-day time period set forth in the Registration
Rights Agreement, (iii) the number of Deferral Periods exceeds one in any
three-month period or three in any twelve-month period, or (iv) the number of
days in a Deferral Period exceeds 30 days, then on the date of such event the
Holders of the Warrants shall have demand registration rights as set forth in
this Section 5.01. From and after such event, for so long as the Warrants or any
Registrable Securities are outstanding, the Holder may make a written request to
the Company for registration under the Securities Act on Form S-1 or Form S-3
(or other similar short-form if the Company then qualifies for such short form
registration) of Registrable Securities for public offering (a "Demand
Registration"); provided, however, that the Holders shall have the right to only
one Demand Registration of all or any part of their Registrable Securities.
Whenever the Company shall receive a request for a Demand Registration, the
Company will promptly give written notice of such registration request to all
Holders. All requests made pursuant to this Section
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5.01(a) will specify the number of shares of Registrable Securities to be
registered and will also specify the intended methods of disposition thereof.
(b) Effective Registration. (i) A registration initiated as a Demand
Registration shall not be deemed a Demand Registration until such registration
has become effective and (except in the case of a Shelf Registration) until the
Registrable Securities included in such registration have actually been sold;
provided, however, that a registration that does not become effective after the
Company has filed a registration statement with respect thereto solely by reason
of the refusal to proceed by the Holders shall be deemed to have been effected
by the Company unless the Holders shall have elected (without any obligation) to
pay, and in fact pay all reasonable Registration Expenses in connection with
such registration.
(ii) The Company may delay the filing of a registration statement for
up to 90 days if at the time of a request for registration under Section
5.01(a) above, (i) the Company is a party to a transaction involving the
purchase, sale, conversion or issuance of securities of the Company, (ii)
there is material undisclosed information concerning the Company or any
subsidiary of the Company which cannot be disclosed for bona fide and
significant business reasons, which reason shall be provided to the
Holders, in writing (iii) financial statements required to be included or
incorporated in the registration statement have not been prepared or are
otherwise not available or (iv) the Company reasonably expects to promptly
commence an offering of securities of the Company and the investment banker
for the Company shall advise the Company in writing (with a copy to the
Holders) that, in its opinion, the offering contemplated by the Company
would be materially and adversely affected by the sale of Registrable
Securities by the Holders. The Company shall promptly notify the Holders of
any delay in such filing, the reasons for such delay and proposed length of
such delay.
(iii) The Company may suspend the effectiveness of any registration
statement filed pursuant to a Demand Registration or, without suspending
such effectiveness, instruct the Holders that no sales of Registrable
Securities included in such registration statement may be made (a
"Suspension Period") (and the Holders shall forthwith discontinue
disposition of any such Registrable Securities) if, in the Company's
reasonable good faith judgment, the Company would be required to disclose
any actions taken or proposed to be taken by the Company, which disclosure
would have a material adverse effect on the Company or on such actions by
providing the Holders with written notice of such Suspension Period and the
reasons therefor. The Company shall use its best efforts to provide such
notice as soon as reasonably practicable prior to the commencement of
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<PAGE>
a Suspension Period; provided that in any event the Company shall provide
such notice no later than two Business Days prior to the commencement of
such Suspension Period. No more than one Suspension Period may be commenced
in any three-month period, no more than three Suspension Periods may be
commenced in any 12-month period and no Suspension Period shall exceed 30
days. The Company shall give prompt written notice to the Holders of the
termination of any Suspension Period.
(c) No Right of Company or Other Person to Piggyback on Demand
Registrations. Neither the Company nor any Person owning any of its securities
(other than the Holders) shall have the right to include any of the Company's
securities in a registration statement initiated as a Demand Registration under
this Section 5.01, unless (i) such securities are of the same class and type as
the Registrable Securities being registered and (ii) if such Demand Registration
is to be in the form of an underwritten offering, the Company or such Person, as
applicable, agrees in writing to sell their securities on the same terms and
conditions as apply to the Registrable Securities being sold. If any Person
owning any securities of the Company (other than any Holder) registers
securities of the Company in a Demand Registration (in accordance with the
provisions of this Section 5.01(c)), such Person shall pay the fees and expenses
of counsel to such Person and its pro rata share of the Registration Expenses if
the Registration Expenses for such registration are not paid by the Company, for
any reason. The foregoing provisions of this Section 5.01(c) are subject to the
rights of certain Persons as set forth under the caption "Description of Capital
Stock -- Registration Rights" in the Final Offering Memorandum. The Company
covenants that it shall not grant any registration rights to any Person which
rights would, in the reasonable judgment of the Initial Holder, conflict or be
inconsistent with the provisions of this Section 5.01(c), and in the event of
such a conflict or inconsistency, the terms of this Section 5.01(c) shall
prevail.
(d) Selection of Underwriters and Counsel, Etc. If the Initial Holder or
any Affiliate of the Initial Holder so elects, as the case may be, the offering
of such Registrable Securities pursuant to such Demand Registration shall be in
the form of an underwritten offering. If a Demand Registration involves an
underwritten offering, the Initial Holder or such Affiliate thereof, as the case
may be, shall have the right to select (i) the investment banker or bankers and
manager or managers to administer the offering (who may include the Initial
Holder and one or more of its Affiliates); provided, however, that any
investment bankers and managers other than the Initial Holder or one of its
Affiliates, must be reasonably satisfactory to the Company, and (ii) one law
firm as counsel to represent the Holders. Any Holder participating in an
underwritten offering pursuant to this Section 5.01 or Section 5.02 shall, if
required by the managing underwriter or underwriters
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of such offering, enter into an underwriting agreement in a form customary for
underwritten offerings of the same general type as such offering.
5.02 Piggy-Back Registration. If, at any time or from time to time while
any Warrants or Registrable Securities are outstanding, the Company proposes to
file a registration statement with respect to any of its securities (whether for
its own or another's account) under the Securities Act (including the Shelf
Registration to be filed by the Company in accordance with its obligations under
the Registration Rights Agreement dated September 29, 1997 between the Company
and the Initial Holder (the "Registration Rights Agreement"), but excluding
registration statements on Form S-4, S-8 or other forms that do not include
substantially the same information as would be required in a form for the
general registration of securities or that would not be available for
registration of Registrable Securities), the Company shall, as expeditiously as
possible, give written notice to the Holders of the Company's intention to file
such registration statement. If, within 20 days after receipt of such notice,
any Holder submits a written request to the Company specifying the Registrable
Securities such Holder proposes to sell or otherwise dispose of (a "PiggyBack
Registration"), the Company shall include the number of shares of Registrable
Securities specified in such Holder's request in such registration statement and
the Company shall use its best efforts to keep each such registration statement
in effect and to maintain compliance with each Federal and state law and
regulation for the period necessary for such Holder to effect the proposed sale
or other disposition.
5.03 Reduction of Offering. Notwithstanding anything contained herein, if
the managing underwriter or underwriters of an offering described in Section
5.01 or 5.02 hereof delivers a written opinion to the Holders that the size of
the offering that the Holders, the Company or any other Person intends to make
or the kind or combination of securities that the Holders, the Company and any
other Persons intend to include in such offering are such that the success of
the offering would be materially and adversely affected by inclusion of the
Registrable Securities requested to be included, then the amount of any
securities proposed to be offered shall be reduced or excluded from the offering
as follows:
(i) in the case of a Demand Registration, (x) all securities proposed
to be included in such offering by Persons other than the Holders shall be
reduced or excluded from such offering on a pro rata basis (or on another
basis agreed to by such other Persons) before any Registrable Securities of
the Holders are reduced or excluded from such offering, and (y) in the
event that any Registrable Securities of the Holders are required to be
reduced or excluded from such offering (which
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will only be required after all securities of Persons other than the
Holders have been reduced or excluded as provided in immediately preceding
clause (x)), then the number of Registrable Securities of the Holders shall
be reduced or excluded from such offering on a pro rata basis;
(ii) in the case of a Piggy-Back Registration initiated by a Person
other than the Company, all securities (including Registrable Securities)
to be included in such offering by the Company, the Holders and the holders
of similar "piggyback" registration rights shall be reduced or excluded
from such offering on a pro rata basis before any securities of the Persons
initiating the Piggy-Back Registration are reduced or excluded; and
(iii) in the case of a Piggy-Back Registration initiated by the
Company, all securities (including Registrable Securities) to be included
in such offering by the Holders and any other holders of similar
"piggy-back" registration rights shall be reduced or excluded from such
offering on a pro rata basis before any securities of the Company are
reduced or excluded.
The foregoing provisions of this Section 5.03 are subject to the rights of
certain Persons as set forth under the caption "Description of Capital Stock --
Registration Rights" in the Final Offering Memorandum.
5.04 Registration Procedures. Whenever any Holder or Holders request that
any Registrable Securities be registered pursuant to this Section 5, the Company
will use its reasonable best efforts to effect the registration of the sale of
such Registrable Securities in accordance with the intended method of
disposition thereof as quickly as practicable, and in connection with any such
request:
(a) The Company will as expeditiously as possible prepare and file with the
Commission a registration statement on any form for which the Company then
qualifies or which counsel for the Company shall deem appropriate and which form
shall be available for the sale of the Registrable Securities to be registered
thereunder in accordance with the intended method of distribution thereof, and
use its reasonable best efforts to cause such filed registration statement to
become and remain effective for a period of not less than 180 days or until all
of such Registrable Securities have been disposed of (if earlier) (such period,
the "Registration Period"); provided, however, that, if the Holders specify that
such registration shall be a Shelf Registration, the Company shall use its
reasonable best efforts to effect such
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Shelf Registration; provided further, that, in the case of a Piggy-Back
Registration, if the Company shall furnish to the Holders a certificate signed
by its chief executive officer stating that in such officer's good faith
judgment it would be significantly disadvantageous to the Company or its
shareholders for such a registration statement to be filed as expeditiously as
possible, the Company shall have a period of not more than 60 days within which
to file such registration statement measured from the date of receipt of the
request in accordance with Section 5.02 hereof.
(b) The Company will, if requested, prior to filing a registration
statement or prospectus or any amendment or supplement thereto, furnish to the
Holders requesting registration of Registrable Securities and each underwriter,
if any, of the Registrable Securities covered by such registration statement
copies of such registration statement as proposed to be filed, and thereafter
furnish to the Holders requesting registration of Registrable Securities and
underwriter, if any, such number of copies of such registration statement, each
amendment and supplement thereto (in each case including all exhibits thereto
and documents incorporated by reference therein), the prospectus included in
such registration statement (including each preliminary prospectus) and such
other documents as the Holders requesting registration of Registrable Securities
or underwriter may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such Holders.
(c) After the filing of the registration statement, the Company will
promptly notify the Holders of any stop order issued or threatened by the
Commission and take all reasonable actions required to prevent the entry of such
stop order or to remove it if entered.
(d) The Company will use its reasonable best efforts to (i) register or
qualify the Registrable Securities under such other securities or blue sky laws
of such jurisdictions in the United States as the Holders requesting
registration of Registrable Securities reasonably (in light of such Holders'
intended plan of distribution) request and (ii) cause such Registrable
Securities to be registered with or approved by such other governmental agencies
or authorities as may be necessary by virtue of the business and operations of
the Company and do any and all other acts and things that may be reasonably
necessary or advisable to enable the Holders to consummate the disposition of
the Registrable Securities owned by the Holders; provided, however, that the
Company will not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for
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this paragraph (d), (B) subject itself to taxation in any such jurisdiction or
(C) consent to general service of process in any such jurisdiction.
(e) The Company will immediately notify the Holders, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the occurrence of an event requiring the preparation of a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
promptly make available to the Holders any such supplement or amendment.
(f) The Company will enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of such
Registrable Securities.
(g) The Company will make available for inspection by the Holders
requesting registration of Registrable Securities, any underwriter participating
in any disposition pursuant to such registration statement and any attorney,
accountant or other professional retained by such Holders or underwriter
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Company (collectively, the "Records")
as shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any Inspectors in connection with
such registration statement. Records which the Company determines, in good
faith, to be confidential and which it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in such
registration statement or (ii) the release of such Records is ordered pursuant
to a subpoena or other order from a court of competent jurisdiction. In the
event that an Inspector or any of its representatives is requested or required
(by oral questions, interrogatories, requests for information or documents,
subpoena, or similar process) to disclose any of the confidential information
contained in the Records, it is agreed that such Inspector or its
representative, as the case may be, will provide the Company with prompt notice
of such request(s) so that the Company may seek an appropriate protective order
or other appropriate remedy and/or waive such Inspector's or its
representative's compliance with this provision. In the event that such
protective order or other remedy is not obtained,
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or that the Company grants a waiver hereunder, such Inspector or its
representative may furnish that portion of the Records which it is legally
compelled to disclose. Each Holder agrees that information obtained by it as a
result of such inspections shall be deemed confidential and shall not be used by
it as the basis for any market transactions in the securities of the Company or
its Affiliates unless and until such is made generally available to the public.
(h) The Company will furnish to each underwriter, if any, a signed
counterpart, addressed to such underwriter, of (i) an opinion or opinions of
counsel to the Company and (ii) a comfort letter or comfort letters from the
Company's independent public accountants, each in customary form and covering
such matters of the type customarily covered by opinions or comfort letters, as
the case may be, as the managing underwriter therefor reasonably requests.
(i) The Company will otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to the
Holders, as soon as reasonably practicable, an earnings statement covering a
period of 12 months, beginning within three months after the effective date of
the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act.
(j) The Company will (at its own expense) use its best efforts to cause all
such Registrable Securities to be listed on each securities exchange on which
similar securities issued by the Company are then listed.
The Company may require the Holders requesting registration of Registrable
Securities to promptly furnish in writing to the Company such information
regarding the distribution of the Registrable Securities as the Company may from
time to time reasonably request and such other information as may be legally
required in connection with such registration.
The Holders agree that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5.04(e) hereof, the
Holders will forthwith discontinue disposition of any Registrable Securities
registered pursuant to this Section 5 pursuant to the registration statement
covering such Registrable Securities until the Holders' receipt of the copies of
the supplemented or amended prospectus contemplated by Section 5.04(e) hereof,
and, if so directed by the Company, the Holders will deliver to the Company all
copies, other than
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permanent file copies then in such Holders' possession, of the most recent
prospectus covering such Registrable Securities at the time of receipt of such
notice. In the event the Company shall give such notice, the Company shall
extend the period during which such registration statement shall be maintained
effective (including the Registration Period) by the number of days during the
period from and including the date of the giving of notice pursuant to Section
5.04(e) hereof to the date when the Company shall make available to the Holder a
prospectus supplemented or amended to conform with the requirements of Section
5.04(e) hereof.
5.05 Registration Expenses. In connection with any registration statement
required to be filed hereunder, the Company shall pay the following registration
expenses incurred in connection with the registration hereunder (the
"Registration Expenses"): (i) all registration and filing fees, (ii) fees and
expenses of compliance with securities or blue sky laws (including reasonable
fees and disbursements of counsel in connection with blue sky qualifications of
the Registrable Securities), (iii) printing expenses, (iv) internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), (v) the fees and expenses
incurred in connection with the listing of the Registrable Securities, (vi) fees
and disbursements of counsel for the Company and customary fees and expenses for
independent certified public accountants retained by the Company (including the
expenses of any comfort letters or costs associated with the delivery by
independent certified public accountants of a comfort letter or comfort letters
requested pursuant to Section 5.04(h) hereof), (vii) the fees and expenses of
any special experts retained by the Company in connection with such
registration, and (viii) reasonable fees and expenses of one law firm acting as
counsel for the Holders. The Company shall have no obligation to pay any
underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities, or any out-of-pocket expenses of Holders (other than as
provided in clause (viii) above) selling Registrable Securities under this
Section 5 (or the agents who manage its account) (collectively, the "Holder
Expenses").
5.06 Indemnification and Contribution. (a) In connection with each
registration statement relating to the disposition of Registrable Securities,
the Company shall indemnify and hold harmless each of the Holders, each
underwriter of Registrable Securities, each partner, officer, director or
employee of each of the Holders or any such underwriter and each Person, if any,
who controls (within the meaning of either the Securities Act or the Exchange
Act) any of the Holders or any such underwriter against all losses, claims,
damages or liabilities, joint or several, to which any of the Holders, such
underwriter or any such Person may be subject arising out of or based upon (A)
any untrue statement or alleged untrue statement of a material fact contained in
such registration
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statement or the prospectus included therein (or any supplement or amendment
thereto) or a preliminary prospectus, or (B) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company shall reimburse each of
the Holders and each of such other Persons for any reasonable legal or other
expenses incurred in connection with the investigation or defense thereof (any
such reimbursement to be made as such expenses are incurred); provided, however,
that the Company shall not be liable in any such instance to the extent that any
such loss, claim, damage or liability arises out of or is based upon (A) any
untrue statement or omission or alleged untrue statement or omission made in any
such registration statement, preliminary prospectus, or prospectus (or amendment
or supplement) in reliance upon and in conformity with information relating to
any Person referred to above who would be indemnified by the Company pursuant to
this Section 5.06(a) furnished in writing to the Company by such Person
expressly for use therein, (B) use of a Shelf Registration Statement or the
related Prospectus during a period when a stop order has been issued in respect
of such Shelf Registration or any proceedings for that purpose have been
initiated or use of a Prospectus when use of such Prospectus has been deferred
by the Company; provided further, in each case, that the Company delivered prior
notice, and the Holders have received such prior notice, in accordance with
Section 7.02 hereof of such stop order, initiation of proceedings or deferral or
(C) if the Holder fails to deliver a Prospectus or the then current Prospectus.
This indemnity agreement will be in addition to any liability which the Company
may otherwise have.
(b) In connection with each registration relating to the disposition of
Registrable Securities, each Holder shall severally indemnify the Company, each
director of the Company, each officer of the Company who signs the registration
statement and any Person who controls the Company (within the meaning of either
the Securities Act or the Exchange Act) to the same extent as the indemnity from
the Company provided in Section 5.06(a) hereof, but only with respect to
information relating to such Holder furnished in writing to the Company by such
Holder expressly for use in any such registration statement, preliminary
prospectus or prospectus (or amendment or supplement). The maximum liability of
any Holder under this Section 5.06(b) shall be limited to the aggregate amount
of all sales proceeds actually received by such Holder upon the sale of such
Holder's Registrable Securities in connection with such registration.
(c) In case any proceeding (including any governmental investigation) shall
be instituted involving any Person in respect of which indemnity may be sought
pursuant to subsections (a) or (b) of this Section 5.06, such Person (the
"indemnified party") shall promptly notify the Person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
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indemnifying party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the indemnified party, and shall assume the
payment of all fees and disbursements related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (x) the indemnifying party and indemnified party
shall have mutually agreed to the retention of such counsel at the expense of
the indemnifying party or (y) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate law firm (in addition to
any reasonably necessary local counsel) at any time for all such indemnified
parties, and that all such fees and expenses shall be reimbursed as they are
incurred. In the case of any such separate law firm for the indemnified parties,
such law firm shall be designated in writing by the indemnified parties. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability arising out
of such proceeding.
(d) If the indemnification provided for in this Section 5.06 is unavailable
to the indemnified parties in respect of any losses, claims, damages or
liabilities referred to herein, then each such indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities as between the Company on the one hand and the respective Holder on
the other, in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and such Holder on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and of the respective Holder on
the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such
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party, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and each Holder agree that it would not be just and equitable
if contribution pursuant to this Section 5.06(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5.06(d), no Holder shall be
required to contribute any amount in excess of the amount of all sales proceeds
actually received by such Holder upon the sale of such Holder's Registrable
Securities in connection with such registration. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
5.07 Participation in Underwritten Registrations. No Person may participate
in any underwritten registration hereunder unless such Person (a) agrees to sell
such Person's securities on the basis provided in any underwriting arrangements
approved by the Company and the Holders and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements and these registration rights.
5.08 Holdback Agreement. (a) The Company and its Affiliates agree not to
effect any public sale or distribution of any Registrable Securities or any
securities similar to the Registrable Securities, or any securities convertible
into or exchangeable or exercisable for Registrable Securities during the 14
days prior to, and during the Registration Period of any registration statement
(other than the Shelf Registration Statement) filed pursuant to Section 5.01 or
5.02 of this Agreement with respect to an underwritten public offering of any
such securities (except as part of such registration statement where the Holders
consents) or the commencement of a public distribution of Registrable
Securities; provided, however, that the provisions of this Section 5.08(a) shall
not prevent (x) the conversion or exchange of any securities pursuant to their
terms into or for other securities or (y) the issuance of securities pursuant to
the Company's employee benefit plans.
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(b) To the extent not inconsistent with applicable law, each Holder agrees
not to effect any public sale or distribution of the issue being registered or
any similar security of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the 14 days prior to and
during the Registration Period of any such registration statement with respect
to an underwritten public offering of any such securities (except in any case as
part of such registration), if and to the extent requested by the Company in the
case of a non-underwritten public offering or if and to the extent requested by
the managing underwriter or underwriters in the case of an underwritten public
offering.
5.09 Specific Enforcement. The Company and each of the Holders acknowledge
that remedies at law for the enforcement of this Section 5 may be inadequate and
intend that this Section 5 shall be specifically enforceable in accordance with
Section 7.04 hereof.
Section 6. Compliance with the Securities Act.
6.01 Representations and Warranties. Each Holder by its acceptance of the
Warrants represents and warrants as of the date hereof and as of the date of any
exercise of the Warrants held by such Holder as follows:
(a) Such Holder is acquiring the Warrants and the related Warrant
Shares for its own account and not as nominee or agent for any other Person
and not for offer or sale in any manner that would be in violation of the
securities laws of the United States of America or any state thereof,
without prejudice, however, to its right at all times to sell or otherwise
dispose of all or any part of said Warrants or Warrant Shares under a
registration under the Securities Act or any applicable state securities
laws or under an exemption from such registration available under such Act
or any applicable state securities laws.
(b) Such Holder is an "accredited investor" within the meaning of
Regulation D promulgated under the Securities Act.
6.02 Transfer Restriction. No Holder will sell, transfer or otherwise
dispose of any Warrant or Warrant Share other than to an Affiliate of such
Holder, an employee of such Holder or one of its Affiliates or in a transaction
that complies with the registration requirements of Section 5 of the Securities
Act or pursuant to an exemption (including, without limitation, sales under
Rules
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144 and 144A promulgated under the Securities Act) therefrom. Notwithstanding
the foregoing sentence, in accordance with an agreement between the Initial
Purchaser and Rauscher Pierce & Clark ("RPC") whereby RPC has agreed to act as
the international sales agent in connection with the sale of the Notes, the
Initial Holder may transfer to RPC, in one or more transactions, up to 66.67% of
the Warrants to be issued to the Initial Holder in connection with the Notes
sold by RPC. Upon any such transfer to RPC, RPC shall be deemed to be a Holder
for all purposes hereunder.
6.03 Legend. Each Warrant or certificate or instrument (if any)
representing the Warrant Shares issued upon exercise of the Warrants (and each
Warrant or certificate or instrument (if any) representing the Warrant Shares
issued to transferees of such Warrant or certificate or instrument (if any)),
unless at such time as the same is no longer required under the applicable
requirements of the Securities Act, shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR
INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). SUCH SECURITIES MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION OR
AN EXEMPTION FROM REGISTRATION UNDER THE ACT."
Section 7. Miscellaneous.
7.01 Expenses. The Company agrees to pay all fees and disbursements of the
Initial Holder (including the reasonable fees and expenses of its counsel) in
connection with the purchase and sale of the Warrants as contemplated by this
Agreement or any amendments hereto and the fees and disbursements of the Initial
Holder (including the reasonable fees and expenses of its counsel) in connection
with the negotiation, execution, delivery and enforcement of this Agreement and
the Warrants or any waiver or consent hereunder or thereunder or any amendment
hereof or thereof; provided, however, that the sum of the Company's obligations
to pay such fees hereunder and the out-of-pocket expenses of the Initial
Purchaser as provided in Section 5(p) of the Purchase Agreement shall not exceed
$375,000. In addition, the Company agrees to pay any and all stamp, transfer and
other similar taxes payable or determined to be payable by the Initial Holder in
connection with the execution and delivery of this Agreement, any Warrants or
the issuance or transfer of the Warrants (other than any such taxes in
connection with a transfer of the Warrants to another Holder).
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7.02 Notices. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers or consents
under, this Agreement) shall be given or made by telex, telegraph, facsimile,
cable or other writing and telexed, faxed, telegraphed, cabled, mailed or
delivered to the intended recipient at the "Address for Notices" specified below
its name on the signature pages hereof; or, as to any party, at such other
address as shall be designated by such party in a notice to the Company given in
accordance with this Section 7.02. All such communications shall be deemed to
have been duly given when transmitted by telex or facsimile, delivered to the
telegraph or cable office or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
7.03 Exclusion. This Agreement and the Warrants shall be binding upon, and
inure solely to the benefit of the Company and the Holders, and no other Person
shall acquire or have any right under or by virtue of this Agreement or the
Warrants (other than any such Person to whom such Holders have transferred an
interest in the Warrants pursuant to the terms thereof and hereof).
7.04 Specific Performance. The Company acknowledges and agrees that in the
event of any breach of this Agreement or the Warrants by the Company, the
Holders would be irreparably harmed and could not be made whole by monetary
damages. The Company accordingly agrees (i) to waive the defense in any action
for specific performance that a remedy at law would be adequate, and (ii) that
the Holders, in addition to any other remedy to which they may be entitled at
law or in equity, shall be entitled to compel specific performance of this
Agreement or the Warrants in any action instituted in the United States District
Court for the Southern District of New York, or, in the event such Court would
not have jurisdiction for such action, in any court of the United States or any
state thereof having subject matter jurisdiction for such action.
7.05 Holder Not a Shareholder. Prior to the exercise of any of its
Warrants, no Holder shall, except as specifically provided herein, be entitled
to any of the rights of, or be deemed to be, a shareholder in the Company.
7.06 No Waivers. No failure or delay by any party in exercising any rights,
power or privilege hereunder or under the Warrants shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies provided herein shall be cumulative and not exclusive of
any rights or remedies provided by law.
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7.07 Amendments and Waivers. Any provision of this Agreement or the
Warrants may be amended or waived if, but only if, such amendment or waiver is
in writing and signed by the Company, the Required Holders and, until such time
as the Initial Holder (or any Affiliate thereof) no longer holds any Warrants or
Warrant Shares, the Initial Holder (or such Affiliates).
7.08 GOVERNING LAW. THIS AGREEMENT AND THE WARRANTS SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO THE CHOICE OF LAW OR CONFLICT OF LAW PRINCIPLES OF ANY
JURISDICTION WHICH WOULD CAUSE THE APPLICATION OF THE DOMESTIC SUBSTANTIVE LAWS
OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
7.09 Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatories thereto and hereto were upon the same instrument.
***
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
AMNEX, INC.
By
Name:
Title:
Address for Notices:
100 West Lucerne Circle
Orlando, Florida 32801
Telephone: (407) 246-1234
Telecopier: (407) 481-2560
Attention: Amy Gross, Esq.
With a copy to:
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
Telephone: (516) 296-7000
Telecopier: (516) 296-7111
Attention: Fred Skolnik, Esq.
HSBC SECURITIES, INC.
By
Name:
Title:
Address for Notices:
140 Broadway, 5th Floor
New York, New York 10005
Telephone No. : (212) 658-5100
Telecopier No. : (212) 658-4859
Attention: Guy Longobardo
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With a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza, 42nd Floor
New York, New York 10006
Telephone: (212) 225-2000
Telecopier: (212) 225-3999
Attention: James Munsell, Esq.
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EXHIBIT A
FORM OF WARRANT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH
SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION FROM REGISTRATION UNDER THE ACT.
AMNEX, INC.
Common Stock Purchase Warrant
Representing Right To Purchase _________ shares of Common Stock of Amnex, Inc.
(as such number may be adjusted as provided herein).
No. R-_
FOR VALUE RECEIVED, AMNEX, INC, a New York corporation (the "Company"),
hereby certifies that _________________, or its registered assigns (the
"Holder"), is entitled, subject to the provisions of this Warrant, to purchase
from the Company, at any time or from time to time during the Exercise Period
(as hereinafter defined), up to a total of _________ shares (as such number of
shares may be adjusted pursuant to Section 2 and/or 4 below, the "Warrant
Shares") of Common Stock (as hereinafter defined), at $2.7844 per share (as such
price may be adjusted pursuant to Section 2 or 4 below, the "Exercise Price").
This Warrant is issued to the Holder (together with such other Warrants as may
be issued in exchange, transfer or replacement of this Warrant, the "Warrants")
and entitles the Holder to purchase the Warrant Shares (as hereinafter defined).
Section 1.1. Certain Definitions. Terms defined in the Warrant Agreement
(as hereinafter defined) and not otherwise defined herein have, as used herein,
the respective meanings
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provided for therein. The following additional terms, as used herein, have the
following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
successor entity.
"Common Stock" shall mean the Company's authorized Common Stock, $0.001 par
value, per share, as constituted on the date hereof.
"Conversion Price" shall have the meaning set forth in the Indenture.
"Current Market Price" shall have the meaning set forth in Section 4.1(h).
"Daily Market Price" shall have the meaning set forth in Section 4.1(j).
"Date of Issuance" shall have the meaning set forth in Section 8.
"Excess Payment" shall have the meaning set forth in Section 4.1(i).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exercise Period" shall mean the period of time from September 29, 1997
until 5:00 P.M., local time in The City of New York, on September 25, 2002.
"Exercise Price" shall have the meaning set forth in the preamble.
"Indenture" shall mean the Indenture, dated as of September 29, 1997, by
and between Amnex, Inc. and Marine Midland Bank, as trustee, pursuant to which
the Notes are issued.
"Notes" shall mean $15,000,000 aggregate principal amount of the Company's
8 1/2% Convertible Subordinated Notes Due 2002 (plus an option to purchase up to
an additional $8,000,000 aggregate principal amount of such Notes to cover
over-allotments).
"Trading Day" shall mean (A) if the applicable security is listed or
admitted for trading on the New York Stock Exchange or another national
securities exchange, a day on which the
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New York Stock Exchange or such other national securities exchange is open for
business, (B) if the applicable security is quoted on The Nasdaq National Market
or Nasdaq Stock Market's Small Cap Market, as the case may be, a day on which
trades may be made thereon or (C) if the applicable security is not so listed,
admitted for trading or quoted, any day other than a Saturday, Sunday or any
other day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
"Warrant Agreement" shall mean the Warrant Agreement, dated as of September
25, 1997, between the Company and the Initial Holder, as such agreement may be
modified, amended and supplemented and in effect from time to time.
Section 1.2. Other Definitions. Capitalized terms used but not defined
herein shall have the meaning set forth in the Indenture.
Section 2. Exercise of Warrant; Cancellations of Warrant. This Warrant may
be exercised in whole or in part, at any time or from time to time, during the
Exercise Period, by presentation and surrender of this Warrant to the Company at
its principal office at the address set forth on the signature page hereof (or
at such other address as the Company may after the date hereof notify the Holder
in writing), or at the office of its transfer agent or warrant agent, if any,
with the Purchase Form annexed hereto duly executed and accompanied by proper
payment either (at the option of the Holder) in cash or check equal to the
Exercise Price for the Warrant Shares for which this Warrant is being exercised.
Upon receipt by the Company of this Warrant and such Purchase Form,
together with the Exercise Price for the Warrant Shares for which this Warrant
is being exercised, the Holder shall be deemed to be the holder of record of the
number of Warrant Shares specified in such Purchase Form, notwithstanding that
the transfer books of the Company shall then be closed or that certificates (if
any) representing the Warrant Shares shall not then be actually delivered to the
Holder. The Company shall pay any and all documentary stamp or similar issue
taxes payable in respect of the issue of the Warrant Shares. If this Warrant
should be exercised in part only, the Company shall, upon surrender of this
Warrant, execute and deliver a new Warrant evidencing the rights of the Holder
thereof to purchase the balance of the Warrant Shares issuable hereunder.
Section 3. Exchange, Transfer, Assignment or Loss of Warrant. This Warrant
is exchangeable at the option of, and without cost to, the Holder, upon
presentation and surrender of this
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Warrant to the Company for other Warrants of different denominations, entitling
the Holder to purchase in the aggregate the same number of Warrant Shares. The
Holder of this Warrant shall be entitled, without obtaining the consent of the
Company, to transfer or assign its interest in (and rights under) this Warrant
in whole or in part to any Person or Persons, subject to the provisions of
Section 6 of the Warrant Agreement. Upon surrender of this Warrant to the
Company, with the Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall, without charge, execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
named in such instrument of assignment and, if the Holder's entire interest is
not being assigned, in the name of the Holder, and this Warrant shall promptly
be canceled. This Warrant may be divided or combined with other Warrants that
carry the same rights upon presentation hereof at the office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued and signed by the Holder hereof. Upon receipt by
the Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Warrant, if mutilated, the Company shall execute and deliver a new Warrant
of like tenor and date.
Section 4.1. Adjustment of Number of Warrant Shares and Exercise Price. The
number of Warrant Shares purchasable pursuant hereto shall be subject to
adjustment from time to time on and after the Date of Issuance as hereinafter
provided in this Section 4.1.
(a) In case the Company shall at any time after the Date of Issuance (i)
declare or pay a dividend in shares of Common Stock, (ii) make a distribution in
shares of Common Stock, (iii) subdivide its outstanding shares of Common Stock,
(iv) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock or (v) issue any shares of its capital stock or other
assets in a reclassification or reorganization of the Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing entity), the securities purchasable pursuant
hereto shall be adjusted to the number of Warrant Shares and amount of any other
securities, cash or other property of the Company which the Holder would have
owned or have been entitled to receive after the happening of any of the events
described above, had this Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto. An adjustment
made pursuant to this paragraph (a) shall become effective immediately after the
effective date of such event, retroactive to the record date, if any, for such
event. Any Warrant Shares purchasable as a result of such adjustment shall not
be issued prior to the effective date of such event.
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(b) For the purpose of this Section 4.1 and Section 4.2 hereof, the term
"shares of Common Stock" shall mean (i) the classes of stock designated as the
Common Stock of the Company as of the date hereof, (ii) any other class of stock
resulting from successive changes or reclassifications of such shares consisting
solely of changes in par value, or from par value to no par value, or from no
par value to par value, or (iii) any other capital stock of the Company which is
not by its terms restricted in amount or timing to the entitlement to dividends
or in the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company. In theevent that at any time, as a
result of an adjustment made pursuant to this Section 4.1, the Holder shall
become entitled to receive any securities of the Company other than shares of
Common Stock, thereafter the number of such other securities so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Warrant Shares contained in this Section 4.
(c) In case the Company shall issue rights or warrants to substantially all
holders of Common Stock entitling them (for a period commencing no earlier than
the record date for the determination of holders of Common Stock entitled to
receive such rights or warrants and expiring not more than 45 days after such
record date) to subscribe for or purchase shares of Common Stock (or securities
convertible into Common Stock) at a price per share less than the Current Market
Price per share of Common Stock on such record date (determined as provided in
paragraph (h) below), the number of Warrant Shares purchasable pursuant hereto
shall be adjusted so that the same shall equal the number of Warrant Shares
determined by multiplying the number of Warrant Shares purchasable immediately
prior to such record date by a fraction the numerator of which shall be the
number of shares of Common Stock outstanding on such record date plus the number
of additional shares of Common Stock offered (or into which the convertible
securities so offered are convertible) and the denominator of which shall be the
number of shares of Common Stock outstanding on such record date plus the number
of shares of Common Stock which the aggregate offering price of the offered
shares of Common Stock (or the aggregate conversion price of the convertible
securities so offered) would purchase at such Current Market Price. Such
adjustment shall become effective immediately after such record date.
(d) In case the Company shall distribute to all holders of Common Stock
shares of any class of Capital Stock of the Company other than Common Stock,
evidences of indebtedness or other assets (other than cash dividends out of
current or retained earnings), or shall distribute to substantially all holders
of Common Stock rights or warrants to subscribe for securities (other than
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those securities referred to in paragraph (c) above), then in each such case the
number of Warrant Shares purchasable pursuant hereto shall be adjusted so that
the same shall equal the number of Warrant Shares determined by multiplying the
number of Warrant Shares purchasable immediately prior to the date of such
distribution by a fraction the numerator of which shall be the Current Market
Price per share of Common Stock on the record date mentioned below (determined
as provided in paragraph (h) below) and the denominator of which shall be such
Current Market Price less the then fair market value (as determined by the Board
of Directors, whose determination shall be conclusive evidence of such fair
market value and described in a Board Resolution (as defined in the Indenture))
of the portion of the assets so distributed or of such subscription rights or
warrants applicable to one share of Common Stock. Such adjustment shall become
effective immediately after the record date for the determination of the holders
of Common Stock entitled to receive such distribution.
(e) In case the Company shall, by dividend or otherwise, at any time
distribute to all holders of its Common Stock cash (including any distributions
of cash out of current or retained earnings of the Company, but excluding any
cash that is distributed as part of a distribution requiring an adjustment
pursuant to paragraph (d) above) in an aggregate amount that, together with the
sum of (x) the aggregate amount of any other distributions to all holders of its
Common Stock made in cash plus (y) all Excess Payments (as defined below in
paragraph (i)), in each case made within the 12 months preceding the date fixed
for determining the shareholders entitled to such distribution (the
"Distribution Record Date") and in respect of which no adjustment to the
Exercise Price of Warrants pursuant to paragraphs (d) or (f) of this Section 4.1
or this paragraph (e) has been made, exceeds 15% of the product of the Current
Market Price per share (determined as provided in paragraph (i) below) of Common
Stock on the Distribution Record Date multiplied by the number of shares of
Common Stock outstanding on the Distribution Record Date (excluding shares of
Common Stock held in the treasury of the Company), the number of Warrant Shares
purchasable pursuant hereto shall be adjusted so that the same shall equal the
number of Warrant Shares determined by multiplying the number of Warrant Shares
purchasable pursuant hereto immediately prior to the effectiveness of the
adjustment contemplated by this paragraph (e) by a fraction the numerator of
which shall be the Current Market Price per share of Common Stock on the
Distribution Record Date (determined as provided in paragraph (h) below) and the
denominator of which shall be such Current Market Price less the amount of such
cash and other consideration (including any Excess Payments) so distributed
applicable to one share of Common Stock (equal to the aggregate amount of such
cash and other consideration (including any Excess Payments) divided by the
number of shares of Common Stock outstanding on the Distribution Record Date).
Such adjustment shall become effective immediately prior to the opening of
business on the day following the Distribution Record Date.
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(f) In case a tender offer or other negotiated transaction made by the Company
or any subsidiary of the Company for all or any portion of the Common Stock
shall be consummated, if an Excess Payment is made in respect of such tender
offer or other negotiated transaction and the amount of such Excess Payment,
together with the sum of (x) the aggregate amount of all Excess Payments plus
(y) the aggregate amount of all distributions to all holders of the Common Stock
made in cash (including any distributions of cash out of current or retained
earnings of the Company), in each case made within the 12 months preceding the
date of payment of such current negotiated transaction consideration or
expiration of such current tender offer, as the case may be (the "Purchase
Date"), and as to which no adjustment pursuant to paragraph (d) or paragraph (e)
of this Section 4.1 or this paragraph (f) has been made, exceeds 15% of the
product of the Current Market Price per share of Common Stock on the Purchase
Date (determined as provided in paragraph (i) below) multiplied by the number of
shares of Common Stock outstanding (including any tendered shares but excluding
any shares of Common Stock held in the treasury of the Company) on the Purchase
Date, the number of Warrant Shares purchasable pursuant hereto shall be adjusted
so that the same shall equal the number of Warrant Shares purchasable pursuant
hereto determined by multiplying the number of Warrant Shares purchasable
pursuant hereto in effect immediately prior to the effectiveness of the
adjustment contemplated by this paragraph (f) by a fraction the numerator of
which shall be the Current Market Price per share of Common Stock on the
Purchase Date (determined as provided in paragraph (h) below) and the
denominator shall be such Current Market Price less the amount of such Excess
Payments and such cash distributions, if any, applicable to one share of Common
Stock (equal to the aggregate amount of such Excess Payments and such cash
distributions divided by the number of shares of Common Stock outstanding on the
Purchase Date). Such adjustment shall become effective immediately prior to the
opening of business on the day following the Purchase Date.
(g) Whenever the number of Warrant Shares purchasable pursuant hereto is
adjusted as herein provided, the Exercise Price shall be adjusted by multiplying
the Exercise Price immediately prior to such adjustment by a fraction, the
numerator of which shall be the number of Warrant Shares purchasable pursuant
hereto immediately prior to such adjustment, and the denominator of which shall
be the number of Warrant Shares purchasable pursuant hereto immediately
thereafter.
(h) The "Current Market Price" per share of Common Stock on any date of
determination shall be deemed to be the average of the Daily Market Prices for
the shorter of (i) 15 consecutive Business Days ending on the last full Trading
Day on the exchange or market referred to in determining such Daily Market
Prices prior to the time of determination or (ii) the period
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commencing on the date next succeeding the first public announcement of the
issuance of such rights or such warrants or such other distribution or such
negotiated transaction through such last full Trading Day on the exchange or
market referred to in determining such Daily Market Prices prior to the time of
determination.
(i) "Excess Payment" means the excess of (A) the aggregate of the cash and
fair market value of other consideration paid by the Company or any of its
subsidiaries with respect to the shares acquired in a tender offer or other
negotiated transaction over (B) the Daily Market Price on the Trading Day
immediately following the completion of such tender offer or other negotiated
transaction multiplied by the number of acquired shares.
(j) "Daily Market Price" means the price of a share of Common Stock on the
relevant date, determined (a) on the basis of the last reported sale price
regular way of the Common Stock as reported on the Nasdaq Stock Market's Small
Cap Market (the "Nasdaq Small Cap"), or if the Common Stock is not then listed
on the Nasdaq Small Cap, as reported on such national securities exchange upon
which the Common Stock is listed, or (b) if there is no such reported sale on
the day in question, on the basis of the average of the closing bid and asked
quotations regular way as so reported, or (c) if the Common Stock is not listed
on the Nasdaq Small Cap or on any national securities exchange, on the basis of
the average of the high bid and low asked quotations regular way on the day in
question in the over-the-counter market as reported by the National Association
of Securities Dealers Automated Quotation System, or if not so quoted, as
reported by National Quotation Bureau, Incorporated, or a similar organization.
4.2. No Adjustment. No adjustment in the number of Warrant Shares
purchasable pursuant hereto shall be required until cumulative adjustments
amount to 1% or more of the number of Warrant Shares purchasable pursuant hereto
as last adjusted; provided, however, that any adjustments which by reason of
this Section 4.2 are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section 4
shall be made to the nearest cent or to the nearest one-hundredth of a share, as
the case may be. No adjustment need be made for rights to purchase Common Stock
pursuant to a Company plan for reinvestment of dividends or interest. No
adjustment need be made for a change in the par value or no par value of the
Common Stock.
4.3. Other Adjustments. In the event that shares of Common Stock are not
delivered after the expiration of any of the rights or warrants referred to in
Section 4.1(c) and Section 4.1(d)
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hereof, the number of Warrant Shares purchasable pursuant hereto shall be
readjusted to the number of Warrant Shares purchasable pursuant hereto which
would otherwise be in effect had the adjustment made upon the issuance of such
rights or warrants been made on the basis of delivery of only the number of
shares of Common Stock actually delivered.
4.4. Adjustments for Tax Purposes. The Company may, at its option, make
such reductions in the number of Warrant Shares purchasable pursuant hereto, in
addition to those required by Section 4.1 above, as it determines to be
advisable in order that any stock dividend, subdivision of shares, distribution
of rights to purchase stock or securities or distribution of securities
convertible into or exchangeable for stock made by the Company to its
shareholders will not be taxable to the recipients thereof.
4.5. Adjustments by the Company. The Company from time to time may, to the
extent permitted by law, increase the number of Warrant Shares purchasable
pursuant hereto by any amount for any period of at least 20 days, in which case
the Company shall give at least 15 days' prior notice of such increase in
accordance with Section 4.6, if the Board of Directors has made a determination
that such increase would be in the best interests of the Company, which
determination shall be conclusive.
4.6. Reorganization, Merger, etc. If any capital reorganization,
reclassification or similar transaction involving the capital stock of the
Company (other than a stock dividend), any consolidation, merger or business
combination of the Company with another corporation, or the sale or conveyance
of all or any substantial part of its assets to another corporation (such
transactions collectively, a "Reorganization"), shall be effected in such a way
that holders of the shares of Common Stock shall be entitled to receive stock,
securities or assets (including, without limitation, cash)with respect to or in
exchange for shares of the Common Stock, then, prior to and as a condition of
such Reorganization, lawful and adequate provision shall be made whereby the
Holder shall thereafter have the right to purchase and receive upon the basis
and upon the terms and conditions specified in this Warrant and in lieu of the
Warrant Shares of the Company immediately theretofore purchasable and receivable
upon the exercise of this Warrant, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for a number of
outstanding Warrant Shares equal to the number of Warrant Shares immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby had such Reorganization not taken place. The Company shall
not effect any such Reorganization unless prior to or simultaneously with the
consummation thereof the survivor or successor corporation (if other than the
Company) resulting
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from a consolidation or merger, or the corporation purchasing the Company's
assets, as the case may be, shall assume by written instrument executed and sent
to each registered Holder, the obligation to deliver to such Holder such shares
of stock, securities or assets as, in accordance with the foregoing provisions,
such Holder may be entitled to receive.
4.7. Other Events. If any event occurs as to which the provisions of
Section 4.6 are not strictly applicable or, if strictly applicable, would not,
in the good faith judgment of the Board of Directors of the Company, fairly and
adequately protect the purchase rights represented by the Warrants in accordance
with the essential intent and principles of such provisions, then such Board of
Directors shall make such adjustments in the application of such provisions, in
accordance with such essential intent and principles, as shall be reasonably
necessary, in the good faith opinion of such Board of Directors, to protect such
purchase rights as aforesaid.
4.8. Statement on Warrant Certificates. Irrespective of any adjustments in
the Exercise Price or the number or kind of Warrant Shares, this Warrant may
continue to express the same price and number and kind of shares as are stated
on the front page hereof.
4.9. Exceptions to Adjustment. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of the
number of Warrant Shares issuable hereunder in the case of the issuance of the
Warrants or the issuance of shares of the Common Stock upon exercise of the
Warrants.
4.10. Common Stock Outstanding. The number of shares of the Common Stock
outstanding at any time shall not include shares owned or held by or for the
account of the Company, but the disposition of any such shares shall be
considered an issue or sale of the Common Stock for the purposes of this Section
4.
4.11. Adjustment Notices to Holder. Upon any increase or decrease in the
number of Warrant Shares purchasable upon the exercise of this Warrant the
Company shall, within 15 days thereafter, deliver written notice thereof to the
Holder, which notice shall state the increased or decreased number of Warrant
Shares purchasable upon the exercise of this Warrant and the changed Exercise
Price, if any, setting forth in reasonable detail the method of calculation and
the facts upon which such calculations are based. If the Company shall fail so
to timely deliver any notice required pursuant to this Section 4.11, the
Exercise Period shall be extended until the Holder shall have received the
proper notification under this Section 4.11.
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Section 5.1. Special Covenants of the Company. The Company covenants and
agrees that until all Warrants have been exercised in full:
(a) The Company will not, by amendment of its certificate of
incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, directly or indirectly avoid or seek to avoid the
observance or performance of any of the terms of this Warrant or the
Warrant Agreement, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Holder
against dilution or other impairment in accordance with the terms of this
Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable
upon the exercise of the Warrants above the Exercise Price payable therefor
upon such exercise, and (ii) will take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of stock upon the exercise of all
Warrants from time to time outstanding (including as a result of a
reduction in the purchase price pursuant to the terms hereof).
(b) If any Warrant Shares required to be reserved for the purposes of
exercise of this Warrant require registration with or approval of any
governmental authority under any federal law (other than the Securities
Act) or under any state law before such Warrant Shares may be issued upon
exercise of this Warrant, the Company will, at its expense, as
expeditiously as possible use its best efforts to cause such Warrant Shares
to be duly registered or approved, as the case may be.
(c) If at any time as the Common Stock is listed on any national
securities exchange (as defined in the Exchange Act), the Company will, at
its expense, obtain and maintain the approval for listing on each such
exchange upon official notice of issuance of all Warrant Shares receivable
upon the exercise of the Warrants at the time outstanding and maintain the
listing of such Warrant Shares after their issuance; and the Company will
so list on such national securities exchange, will register under the
Exchange Act (and any similar state statute then in effect), and will
maintain such listing of, any other securities that at any time are
issuable upon exercise of the Warrants, if and at the time that any
securities of the same class shall be listed on such national securities
exchange by the Company.
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(d) The Company will give notice to the Holder within five days after
the Company shall have filed with the Commission or with any national
securities exchange an application to register any securities of the
Company pursuant to the Exchange Act.
Section 5.2. Pro Rata Purchase. If at any time the Company or any of its
Affiliates shall offer to purchase any shares of Common Stock, other than shares
purchased from any employees of the Company or any of its subsidiaries as
permitted by the terms of any employee benefit plan or shareholders or similar
agreement that has been approved by the Board of Directors of the Company, the
Company shall, as part of such offer, also make an offer to purchase the
Warrants and Warrant Shares from the holders of all outstanding Warrant Shares
and Warrants, and with any purchase pursuant to each offer to be allocated pro
rata among the holders of Warrant Shares and Warrants and the other holders of
Common Stock accepting each offer to purchase.
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Section 6. Notification by the Company. In case at any time:
(i)the Company shall declare any dividend or make any distribution
upon its Common Stock or any other class of its capital stock; or
(ii)the Company shall offer for subscription pro rata to the holders
of its Common Stock or any other class of its capital stock any additional
shares of stock of any class or any other securities convertible into or
exchangeable for shares of stock or any rights or options to subscribe
thereto; or
(iii)the Board of Directors of the Company shall authorize any capital
reorganization, reclassification or similar transaction involving the
capital stock of the Company, or a sale or conveyance of all or a
substantial part of the assets of the Company, or a consolidation, merger
or business combination of the Company with another Person; or
(iv)actions or proceedings shall be authorized or commenced for a
voluntary or involuntary dissolution, liquidation or winding-up of the
Company;
then, in any one or more of such cases, the Company shall give written notice to
the Holder, at the earliest time legally practicable (and not less than 15 days
before any record date or other date set for definitive action) of the date on
which (A) the books of the Company shall close or a record shall be taken for
such dividend, distribution or subscription rights or options or (B) such
reorganization, reclassification, sale, conveyance, consolidation, merger,
dissolution, liquidation or winding up shall take place or be voted on by
shareholders of the Company, as the case may be. Such notice shall also specify
the date as of which the holders of the Common Stock of record shall participate
in said dividend, distribution, subscription rights or options or shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, sale, conveyance,
consolidation, merger, dissolution, liquidation or winding-up, as the case may
be. If the action in question or the record date is subject to the effectiveness
of a registration statement under the Securities Act or to a favorable vote of
shareholders, the notice required by this Section 6 shall so state.
Section 7. No Voting Rights; Limitations of Liability. Prior to exercise,
this Warrant will not entitle the Holder to any voting rights or other rights as
a shareholder of the Company. No provision hereof, in the absence of affirmative
action by the Holder to purchase Common Stock, and no enumeration herein of the
rights or privileges of the Holder shall give rise to any liability of the
Holder for the purchase price of Common Stock acquirable by exercise hereof or
as a shareholder of the Company.
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Section 8. Date of Issuance. The date the Company initially issues this
Warrant will be deemed to be the "Date of Issuance" hereof and of each new
Warrant issued in exchange, transfer or replacement hereof, regardless of the
number of times new certificates representing the unexpired and unexercised
rights formerly represented by this Warrant shall be issued.
Section 9. Amendment and Waiver. (a) No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of such right or power, or any abandonment
or discontinuance of steps to enforce such a right or power, preclude any other
or further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Holder are cumulative and not exclusive of any rights
or remedies which it would otherwise have. The provisions of this Warrant may be
amended, modified or waived with (and only with) the written consent of the
Company and the Required Holders.
(b) Any such amendment, modification or waiver effected pursuant to this
Section 9 shall be binding upon the Holders of all Warrants and Warrant Shares,
upon each future holder thereof, upon the Company and its shareholders. In the
event of any such amendment, modification or waiver, the Company shall give
prompt written notice thereof to all Holders and, if appropriate, notation
thereof shall be made on all Warrants thereafter surrendered for registration of
transfer or exchange.
(c) No notice or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances.
Section 10. No Fractional Warrant Shares. The Company shall not be required
to issue stock certificates representing fractions of Warrant Shares, but may at
its option in respect of any final fraction of a Warrant Share make a payment in
cash based on the then current market price of the Common Stock (as determined
in good faith by the Board of Directors of the Company) after giving effect to
the full exercise or conversion of the Warrants.
Section 11. Reservation of Warrant Shares. The Company will authorize,
reserve and keep available at all times, free from preemptive rights, a
sufficient number of Warrant Shares to satisfy the requirements of this Warrant
and any other outstanding Warrants.
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Section 12. Notices. All notices, requests, consents and other
communications hereunder shall be in writing (including, telegraphic, telex,
facsimile or cable communication) and delivered, mailed telegraphed, telexed,
telecopied or cabled:
(i)if to a Holder, to its address as set forth in records of the Company;
and
(ii)if to the Company, to Amnex, Inc., 6 Nevada Drive, Lake Success, New
York 11042, Attention: President, or at such other address as may have been
furnished to the Holder in writing by the Company, with a copy to Amy Gross,
Esq., Amnex, Inc. 100 West Lucerne Circle, Orlando, Florida 32801.
All such notices and communications shall, when mailed, telegraphed,
telexed, facsimiled, or cabled or sent by overnight courier, be effective three
Business Days after deposited in the mails, certified, return receipt requested,
when delivered to the telegraph company, cable company or one day following
delivery to an overnight courier, as the case may be, or sent by telex or
facsimile device.
Section 13. Headings. The headings of the sections and subsections of this
Warrant are inserted for convenience only and shall not be deemed to constitute
a part of this Warrant.
Section 14. Governing Law; Consent to Jurisdiction. THIS WARRANT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK. If any action or proceeding shall be brought by the Holder in order to
enforce any right or obligation in respect of this Warrant, the Company hereby
consents and submits, to the fullest extent permitted by law, to the
non-exclusive jurisdiction of any state or federal court of competent
jurisdiction sitting within the area comprising the Southern District of New
York on the date of this Warrant, and agrees that venue will be proper in any
such court.
Section 15. Binding Effect. The terms and provisions of this Warrant shall
inure to the benefit of the original Holder and its successors and assigns and
shall be binding upon the Company and its successors and assigns, including,
without limitation, any Person succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets.
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Section 16. Registration Rights; etc. Each Holder shall be entitled to the
benefits of registration and other rights pursuant to the Warrant Agreement and
shall be subject to the restrictions on sale or transfer of this Warrant or the
Warrant Shares subject hereto, as the case may be, pursuant to the Warrant
Agreement.
***
IN WITNESS WHEREOF, the seal of the Company and the signature of its duly
authorized officer have been affixed hereto as of September 29, 1997.
AMNEX, INC.
By______________________________
Name:
Title:
Attest: _________________
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PURCHASE FORM
Dated ________________,
The undersigned hereby irrevocably elects to exercise the attached Warrant
to the extent of purchasing ___ shares of the Common Stock issuable hereunder
and hereby makes payment of $________ in payment of the exercise price thereof.
-----------------
INSTRUCTIONS FOR REGISTRATION OF
COMMON STOCK
Name
(please typewrite or print in block letters)
Address
Signature
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ASSIGNMENT FORM
FOR VALUE RECEIVED, ____________________________ hereby sells, assigns and
transfers unto
Name
(please typewrite or print in block letters)
Address
its right to purchase ___ shares of the Common Stock represented by this Warrant
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.
Date: ________________________
Signature ________________________
Signature Guaranteed:
1
LOAN AND SECURITY AGREEMENT
This Agreement is between the undersigned Borrower and the undersigned
Lender concerning loans and other credit accommodations to be made by Lender to
Borrower.
SECTION 1. PARTIES
1.1 The "Borrower" is the person, firm, corporation or other entity,
identified as the Borrower in Section 10.6(c) and its successors and assigns. If
more than one Borrower is specified in Section 10.6(c), all references to
Borrower shall mean each of them, jointly and severally, individually and
collectively, and the successors and assigns of each.
1.2 The "Lender" is The CIT Group/Credit Finance, Inc. and its successors
and assigns.
SECTION 2. LOANS AND OTHER CREDIT ACCOMMODATIONS
2.1 Revolving Loans. Lender shall, subject to the terms and conditions
contained herein, make revolving loans to Borrower ("Revolving Loans") in
amounts requested by Borrower from time to time, but not in excess of the Net
Availability existing immediately prior to the making of the requested loan and
provided the requested loan would not cause the outstanding Obligations to
exceed the Maximum Credit.
(a) The "Maximum Credit" is set forth in Section 10.1(a) hereof.
(b) The "Gross Availability" shall be calculated at any time as the product
obtained by multiplying the outstanding amount of Eligible Accounts, net of all
taxes, discounts, allowances and credits given or claimed, by the Eligible
Accounts Percentage set forth in Section 10.1(b) minus Reserves.
(c) The "Net Availability" shall be calculated at any time as an amount
equal to the Gross Availability minus the aggregate amount of all
then-outstanding Obligations to Lender other than the then outstanding principal
balance of the Term Loan, if any.
(d) "Eligible Accounts" are accounts created by Borrower in the ordinary
course of its business which are and remain acceptable to Lender for lending
purposes. General criteria for Eligible Accounts are set forth below but may be
revised from time to time by Lender, in its sole judgment, on fifteen (15) days'
prior written notice to Borrower. Lender shall, in general, deem the accounts
set forth below to be Eligible Accounts, in each case a receivable due from an
account debtor arising in connection with:
(x) 1+ Direct Dial Long Distance Service Accounts;
<PAGE>
(y) 1+ Coin Sent Paid Long Distance Accounts; and
(z) Dial Around Pay Phone Compensation Plan Accounts.
All of which accounts Lender, in its sole judgment, deems to be an Eligible
Account, provided, however, that no such account shall be an Eligible Account
if: (i) the Dial Around Pay Phone Compensation Plan Accounts are more than one
hundred eighty (180) days past invoice date; (ii) the 1+ Coin Sent Paid Long
Distance Accounts and the 1+ Direct Dial Long Distance Service Accounts are more
than ninety (90) days past invoice date; (iii) the account is billed more than
sixty (60) days past the origination call; (iv) such account arises out of the
rendering of services to an Affiliate of Borrower or to a Person controlled by
an Affiliate of Borrower; or (v) such account is unpaid more than the number of
days set forth above; or (vi) any covenant, representation or warranty contained
in this Agreement with respect to such account has been breached; or (vii) the
account debtor has disputed liability with respect to a receivable or has made
any claim with respect to any other account due to Borrower, to the extent of
any dispute or claim, or (viii) such account is due from or processed by an
account debtor that has commenced a voluntary case under the federal bankruptcy
laws, as now constituted or hereafter amended, or made assignment for the
benefit of creditors, or a decree or order for relief has been entered by a
court having jurisdiction over such account debtor in an involuntary case under
the federal bankruptcy laws, as now constituted or hereafter amended, or any
other petition or other application for relief under the federal bankruptcy laws
has been filed against the account debtor, or if the account debtor has failed,
suspended business, ceased to be solvent, or consented to or suffered a
receiver, trustee, liquidator, or custodian to be appointed for it or for all or
a significant portion of its assets or affairs; or (ix) Lender believes, in its
reasonable judgment, that collection of such Account is insecure or that payment
thereof is doubtful or will be delayed by reason of another account debtor's
financial condition; or (x) the account is subject to a lien other than
Lender's; or (xi) the account is evidenced by chattel paper or an instrument (as
defined in the Uniform Commercial Code) or has been reduced to judgment; or
(xii) Borrower has made any agreement with another account debtor(s) for any
deduction therefrom, except for post-billing adjustments which are made in the
ordinary course of business and except as provided in the applicable agreement
for billing services, but only to the extent of such deduction; or (xiii)
Borrower has made an agreement with the account debtor to extend the time of
payment thereof, unless, notwithstanding such agreement, payment is made within
ninety (90) days of the applicable invoice date; or (xiv) such account is
subject to setoff, carve-out or other adjustment; or (xv) such account is a
duplicate billing; (xvi) such accounts have dilution rates (as set forth in
sections 10.1(b)(i) and (ii) hereof) which are unacceptable to Lender; (xvii)
such accounts are not accounts with respect to which the account debtor is the
United States or any State or political subdivision thereof or any department,
agency or instrumentality of the United States, any State or political
subdivision, unless there has been compliance with the Assignment of Claims Act
or any similar State or local law, if applicable; (xviii) Borrower has delivered
to Lender or Lender's representative such documents as Lender may have requested
in connection with such accounts and Lender shall have received a verification
of such account, satisfactory to it, if sent to the account debtor or any other
obligor or any bailee; (xix) there are no facts existing or threatened which
might result in any adverse change in the account debtor's financial condition;
<PAGE>
(xx) such accounts owed by a single account debtor or its affiliates do not
represent more than thirty five percent (35%) (or in the event the account
debtor is AT&T, does not exceed fifty percent (50%)) of all otherwise Eligible
Accounts provided however, that accounts excluded from Eligible Accounts solely
by reason of this subsection (xx) shall nevertheless be considered Eligible
Accounts to the extent of the amount of such accounts which does not exceed
thirty five percent (35%) (or in the event the account debtor is AT&T, does not
exceed fifty percent (50%)) of all otherwise Eligible Accounts; (xxi) such
accounts are not owed by an account debtor who is or whose Affiliates are past
due upon other accounts owed to Borrower comprising more than fifty percent
(50%) of the accounts of such account debtor or its affiliates owed to Borrower;
(xxii) such accounts are owed by account debtors whose total indebtedness to
Borrower does not exceed the amount of any customer credit limits as
established, and changed, from time to time by Lender on notice to Borrower
(accounts excluded from Eligible Accounts solely by reason of this subsection
(xxii) shall nevertheless be considered Eligible Accounts to the extent the
amount of such accounts does not exceed such customer credit limit); or (xxiii)
such accounts are owed by account debtors deemed creditworthy at all times by
Lender.
(e) "Eligible Inventory" is inventory owned by Borrower which is and
remains acceptable to Lender for lending purposes and is located at one of the
addresses set forth in Section 10.6(e).
(f) Lender shall have a continuing right to deduct reserves in determining
the Gross Availability ("Reserves"), and to increase and decrease such Reserves
from time to time, if and to the extent that, in Lender's sole judgment, such
Reserves are necessary to protect Lender against any state of facts which does,
or would, with notice or passage of time or both, constitute an Event of Default
or have an adverse effect on any Collateral. Lender may, at its option,
implement Reserves by designating as ineligible a sufficient amount of accounts
or inventory which would otherwise be Eligible Accounts or Eligible Inventory so
as to reduce Gross Availability by the amount of the intended Reserve.
(g) Subject to the terms and conditions hereof, including but not limited
to the existence of sufficient Gross Availability and Net Availability, Borrower
agrees to borrow sufficient amounts from time to time so that the outstanding
Revolving Loan or the Term Loan, shall at all times equal or exceed the
principal amount set forth in Section 10.1(d) as the Minimum Borrowing;
provided, that if Borrower fails to do so, interest shall nevertheless accrue on
the Obligations as if Borrower had at all times borrowed such amounts as would
have been sufficient to maintain the outstanding Revolving Loans and Term Loan
at an amount equal to the Minimum Borrowing (and Lender shall have the right to
charge Borrower's loan account for such additional interest), and provided
<PAGE>
further that such accrual shall not impose upon Lender any obligation to make
loans to Borrower to increase the outstanding Revolving Loans or Term Loan to
such Minimum Borrowing.
2.2 Term Loan. Any term loan and the terms of such loan, made by Lender to
Borrower are set forth in Section 10.2 ("Term Loan").
2.3 Accommodations.
(a) Lender may, in its sole discretion, issue or cause to be issued, from
time to time at Borrower's request and on terms and conditions and for purposes
satisfactory to Lender, credit accommodations consisting of letters of credit,
bankers' acceptances, merchandise purchase guaranties or other guaranties or
indemnities for Borrower's account ("Accommodations"). Borrower shall execute
and perform additional agreements relating to the Accommodations in form and
substance acceptable to Lender and the issuer of any Accommodations, all of
which shall supplement the rights and remedies granted herein. Any payments made
by Lender or any affiliate of Lender in connection with the Accommodations shall
constitute additional Revolving Loans to Borrower.
(b) In addition to the fees and costs of any issuer in connection with
issuing or administering Accommodations, Borrower shall pay monthly to Lender,
on the first day of each month, a charge on open Accommodations at the rate per
annum set forth in Section 10.3 (the "Accommodation Charges").
(c) No Accommodation will be issued unless the full amount of the
Accommodation requested, plus fees and costs for issuance, is less than the Net
Availability existing immediately prior to the issuance of the requested
Accommodation, or if the requested Accommodation would cause the outstanding
Obligations to exceed the Maximum Credit, or cause the open amount of
Accommodations to exceed, at any time, the Accommodation sublimit set forth in
Section 10.3.
(d) All indebtedness, liabilities and obligations of any sort whatsoever,
however arising, whether present or future, fixed or contingent, secured or
unsecured, due or to become due, paid or incurred, arising or incurred in
connection with any Accommodation shall be included in the term "Obligations",
as defined herein, and shall include, without limitation, (i) all amounts due or
which may become due under any Accommodation; (ii) all amounts charged or
chargeable to Borrower or to Lender by any bank, other financial institution or
correspondent bank which opens, issues or is involved with such Accommodations;
(iii) Lender's Accommodation Charges and all fees, costs and other charges of
any issuer of any Accommodation; and (iv) all duties, freight, taxes, costs,
insurance and all such other charges and expenses which may pertain directly or
indirectly to any Obligations or Accommodations or to the goods or documents
relating thereto.
(e) Borrower unconditionally agrees to indemnify and hold Lender harmless
from any and all loss, claim or liability (including reasonable attorneys' fees)
arising from any transactions or occurrences relating to any Accommodation
established or opened for Borrower's account, the Collateral relating thereto
and any drafts or acceptances thereunder, including any such loss or claim due
to any action taken by an issuer of any Accommodation. Borrower further agrees
to indemnify and hold Lender harmless for any errors or omissions in connection
with the Accommodations, whether caused by Lender, by the issuer of any
Accommodation or otherwise. Borrower's unconditional obligation to indemnify and
hold Lender harmless under this provision shall not be modified or diminished
for any reason or in any manner whatsoever, except for Lender's willful
misconduct. Borrower agrees that any charges made to Lender by any issuer of any
Accommodation shall be conclusive on Borrower and may be charged to Borrower's
account.
<PAGE>
(f) Lender shall not be responsible for: the conformity of any services to
the documents presented; the validity or genuineness of any documents; delay,
default, or fraud by the Borrower or anyone else in connection with the
Accommodations or any underlying transaction.
(g) Borrower agrees that any action taken by Lender, if taken in good
faith, or any action taken by an issuer of any Accommodation, under or in
connection with any Accommodation, shall be binding on Borrower and shall not
create any resulting liability to Lender. In furtherance thereof, Lender shall
have the full right and authority to clear and resolve any questions of
non-compliance of documents; to give any instructions as to acceptance or
rejection of any documents or goods; to execute fo Borrower's account any and
all applications for steamship or airway guarantees, indemnities or delivery
orders; to grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents; and to agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications or Accommodations. All of
the foregoing actions may be taken in Lender's sole name, and the issuer thereof
shall be entitled to comply with and honor any and all such documents or
instruments executed by or received solely from Lender, all without any notice
to or any consent from Borrower. None of the foregoing actions described in this
subsection (g) may be taken by Borrower without Lender's express written
consent.
SECTION 3. INTEREST AND FEES
3.1 Interest. (a) Interest on the Revolving Loans and Term Loans shall be
payable by Borrower on the first day of each month, calculated upon the closing
daily balances in the loan account of Borrower for each day during the
immediately preceding month, at the per annum rate set forth as the Interest
Rate in Section 10.4(a). The interest rate shall increase or decrease by an
amount equal to each increase or decrease, respectively, in the Prime Rate (as
defined below), effective as of the date of each such change. On and after any
Event of Default or termination or non-renewal hereof, interest on all unpaid
Obligations shall accrue at a rate equal to two percent (2%) per annum in excess
of the Prime Rate otherwise payable until such time as all Obligations are
indefeasibly paid in full (notwithstanding entry of any judgment against
Borrower or the exercise of any other right or remedy by Lender), and all such
interest shall be payable on demand. Interest shall in no month be less than the
interest rate multiplied by the Minimum Borrowing. In no event shall charges
constituting interest exceed the rate permitted under any applicable law or
regulation, and if any provision of this Agreement is in contravention of any
such law or regulation, such provision shall be deemed amended to conform
thereto.
(b) The "Prime Rate" is the rate of interest publicly announced by The
Chase Manhattan Bank in New York, New York, or its successors, and assigns from
time to time as its prime rate (the prime rate is not intended to be the lowest
rate of interest charged by The Chase Manhattan Bank to its borrowers).
3.2 Closing Facility Fee. Borrower shall have paid Lender the Closing
Facility Fee set forth in Section 10.4(b) hereof which fee is fully earned and
payable as of the date hereof.
3.3 Annual Facility Fee. Borrower shall pay Lender on each anniversary of
the date hereof, an Annual Facility Fee in the amount set forth in Section
10.4(c), which fee is fully earned as of the date hereof, for each year in the
initial Term, and shall be fully earned for each year in any renewal Term,
effective upon the first day of such renewal Term.
<PAGE>
3.4 Minimum Borrowing Fee. Borrower shall pay Lender the Minimum Borrowing
Fee set forth in Section 10.4(d) hereof.
3.5 Unused Line Fee. Borrower shall pay Lender monthly, on the first day of
each month, in arrears, an Unused Line Fee for each month during the initial and
each renewal Term at the rate per annum set forth in Section 10.4(e), calculated
upon the amount, if any, by which the Maximum Credit exceeds the greater of (i)
the average outstanding daily principal balance during the preceding month of
all Revolving Loans or (ii) $2,500,000.
3.6 Account Servicing Collateral Handling Fee. Borrower shall pay Lender
monthly, on the first day of each month during the initial and each renewal Term
an Account Servicing Fee for the immediately preceding month (or part thereof)
in the amount set forth in Section 10.4(f).
3.7 Charges to Loan Account. At Lender's option, all payments of principal,
interest, fees, costs, expenses and other charges provided for in this
Agreement, or in any other agreement now or hereafter existing between Lender
and Borrower, may be charged on the date when due, as principal to any loan
account of Borrower maintained by Lender. Interest, fees for Accommodations, the
Unused Line Fee and any other amounts payable by Borrower to Lender based on a
per annum rate shall be calculated on the basis of actual days elapsed over a
360-day year.
SECTION 4. GRANT OF SECURITY INTEREST
4.1 Grant of Security Interest. To secure the payment and performance in
full of all Obligations, Borrower hereby grants to Lender a continuing security
interest in and lien upon, and a right of setoff against, and Borrower hereby
assigns and pledges to Lender, all of the Collateral (as defined below),
including any Collateral not deemed eligible for lending purposes.
4.2 "Obligations" shall mean any and all Revolving Loans, Term Loans,
Accommodations and all other indebtedness, liabilities and obligations of every
kind, nature and description owing by Borrower to Lender and/or its affiliates,
including principal, interest, charges, fees and expenses, however evidenced,
whether as principal, surety, endorser, guarantor or otherwise, whether arising
under this Agreement or otherwise, whether now existing or hereafter arising,
whether arising before, during or after the initial or any renewal Term or after
the commencement of any case with respect to Borrower under the United States
Bankruptcy Code or any similar statute, whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured, original, renewed or extended and whether
arising directly or howsoever acquired by Lender including from any other entity
outright, conditionally or as collateral security, by assignment merger with any
other entity, participations or interests of Lender in the obligations of
Borrower to others, assumption, operation of law, subrogation or otherwise and
shall also include all amounts chargeable to Borrower under this Agreement or in
connection with any of the foregoing.
<PAGE>
4.3 "Collateral" shall mean all of the following property of Borrower:
All now owned and hereafter acquired right, title and interest of Borrower
in, to and in respect of all accounts receivable including but not limited to:
(i) 1+ Coin Sent Paid Long Distance Services Accounts; (ii) Dial Around Pay
Phone Compensation Plan Accounts; and (iii) 1+ Direct Dial Long Distance
Services Accounts, but expressly excluding (a) those accounts receivable derived
from 0+/0- Operator Services Accounts which are sold to and /or financed by OAN
Services, Inc., Zero Plus Dialing, Inc., or any other third party billing agent
(by whatever name, and inclusive of any successor or assignee thereto or
thereof); (b) all commissions receivable on non-coin revenues and any coin
revenues derived from pay telephones and related equipment which are pledged as
collateral to Lyon Credit Corporation, Southbridge Financial Corp., or any other
third party equipment financing source (by whatever name, and inclusive of any
participant, successor or assignee thereto or thereof); and (c) all accounts
receivable derived from the sale or lease of any pay telephones and related
equipment or any other equipment pledged as collateral to any third party, or
derived from the sale or lease of any chattel paper evidencing such collateral
(items (a), (b) and (c) being hereinafter collectively referred to as the
"Excluded Accounts" or "Excluded Accounts Receivable"), and, expressly
including, interests in goods (excluding equipment) represented by accounts
other than the Excluded Accounts, returned, reclaimed or repossessed goods
(excluding equipment) with respect to accounts other than the Excluded Accounts
and rights as an unpaid vendor; contract rights other than those relating to or
arising out of 0+/0- Operator Services Accounts or pay telephone location lease,
license, placement or similar agreements (collectively, the "Excluded
Contracts"); chattel paper; investment property; general intangibles other than
the Excluded Contracts including, but not limited to, tax and duty refunds,
registered and unregistered patents, trademarks, service marks, copyrights,
trade names, applications for the foregoing, trade secrets, goodwill, processes,
drawings, blueprints, customer lists, licenses, whether as licensor or licensee,
choses in action and other claims, and existing and future leasehold interests
in real property; documents other than the Excluded Contracts; instruments;
letters of credit, bankers' acceptances or guaranties; cash monies, deposits,
securities, bank accounts, deposit accounts, credits and other property now or
hereafter held in any capacity by Lender, its affiliates or any entity which, at
any time, participates in Lender's financing of Borrower or at any other
depository or other institution; agreements or property securing or creating
entitlements to any of the items referred to above other than the Excluded
Contracts or the Excluded Accounts Receivable.
<PAGE>
All now owned and hereafter acquired right, title and interest of Borrower
in, to and in respect of:
All inventory, wherever located, whether now owned or hereafter acquired,
of whatever kind, nature or description, including all raw materials,
work-in-process, finished goods (excluding equipment), and materials to be used
or consumed in Borrower's business; and all names or marks affixed to or to be
affixed thereto for purposes of selling same by the seller, manufacturer, lessor
or licensor thereof;
All motor vehicles, furniture wherever located, and any and all additions,
substitutions, replacements, and accessions thereof and thereto;
Any personal property in or upon which Lender has or may hereafter have a
security interest, lien or right of setoff;
All present and future books and records relating to any of the above other
than the Excluded Contracts or the Excluded Accounts Receivable, including,
without limitation, all computer programs (other than those installed in or
maintained in connection with any pay telephones and related equipment),
computer discs, Billing Tapes, printed output and computer readable data in the
possession or control of the Borrower or Borrower's agents, licensees, or any
computer service bureau or other third party; and
All products and proceeds of the foregoing other than the Excluded
Contracts or the Excluded Accounts Receivable, in whatever form and wherever
located, including, without limitation, all insurance proceeds, if any, and all
claims against third parties, if any, for loss, impairment, or destruction of or
damage to any of the foregoing.
SECTION 5. COLLECTION AND ADMINISTRATION
5.1 Collections. Borrower shall, at Borrower's expense and in the manner
requested by Lender from time to time, direct that remittances and all other
proceeds of accounts and other Collateral shall be sent to a lock box designated
by and/or maintained in the name of Lender, and deposited into a bank account
now or hereafter selected by Lender and maintained in the name of Lender under
arrangements with the depository bank under which all funds deposited to such
bank account are required to be transferred solely to Lender. Borrower shall
bear all risk of loss of any funds deposited into such account. In connection
therewith, Borrower shall execute such lock box and bank account agreements as
Lender shall specify. Any collections or other proceeds received by Borrower
shall be held in trust for Lender and immediately remitted to Lender in kind.
5.2 Payments. All Obligations shall be payable at Lender's office set forth
below or at Lender's bank designated in Section 10.6(b) or at such other bank or
place as Lender may expressly designate from time to time for purposes of this
Section. Lender shall apply all proceeds of accounts or other Collateral
received by Lender and all other payments in respect of the Obligations to the
Revolving Loans whether or not then due or to any other Obligations then due, in
whatever order or manner Lender shall determine. For purposes of determining
Gross and Net Availability and for the calculation of Minimum Borrowings,
remittances and other payments with respect to the Collateral and Obligations
will be treated as credited to the loan account of Borrower maintained by Lender
and Collateral balances to which they relate, upon the date of Lender's receipt
of advice from Lender's bank that such remittances or other payments have been
credited to Lender's account or in the case of remittances or othe payments
received directly in kind by Lender, upon the date of Lender's deposit thereof
at Lender's bank, subject to final payment and collection. In computing interest
charges, the loan account of Borrower maintained by Lender will be credited with
remittances and other payments three (3) Business Days after the day Lender has
received advice of receipt of remittances in Lender's account at Lender's Bank.
For purposes of this Agreement, "Business Day" shall mean any day other than a
Saturday, Sunday or any other day on which banks located in states where Lender
has its offices, are authorized to close.
<PAGE>
5.3 Loan Account Statements. Lender shall render to Borrower monthly a loan
account statement. Each statement shall be considered correct and binding upon
Borrower as an account stated, except to the extent that Lender receives, within
sixty (60) days after the mailing of such statement, written notice from
Borrower of any specific exceptions by Borrower to that statement.
5.4 Direct Collections. Lender may, at any time, whether or not an Event of
Default has occurred, without notice to or assent of Borrower, (a) notify any
account debtor that the accounts and other Collateral which includes a monetary
obligation have been assigned to Lender by Borrower and that payment thereof is
to be made to the order of and directly to Lender, (b) send, or cause to be sent
by its designee, requests (which may identify the sender by a pseudonym) for
verification of accounts and other Collateral directly to any account debtor or
any other obligor or any bailee with respect thereto, and (c) demand, collect or
enforce payment of any accounts or such other Collateral, but without any duty
to do so, and Lender shall not be liable for any failure to collect or enforce
payment thereof. At Lender's request, all invoices and statements sent to any
account debtor, other obligor or bailee, shall state that the accounts and such
other Collateral have been assigned to Lender and are payable directly and only
to Lender.
5.5 Attorney-in-Fact. Borrower hereby appoints Lender and any designee of
Lender as Borrower's attorney-in-fact and authorizes Lender or such designee, at
Borrower's sole expense, to exercise at any times in Lender's or such designee's
discretion all or any of the following powers, which powers of attorney, being
coupled with an interest, shall be irrevocable until all Obligations have been
paid in full: (a) receive, take, endorse, assign, deliver, accept and deposit,
in the name of Lender o Borrower, any and all cash, checks, commercial paper,
drafts, remittances and other instruments and documents relating to the
Collateral or the proceeds thereof, (b) transmit to account debtors, other
obligors or any bailees notice of the interest of Lender in the Collateral or
request from account debtors or such other obligors or bailees at any time, in
the name of Borrower or Lender or any designee of Lender, information concerning
the Collateral and any amounts owing with respect thereto, (c) notify account
debtors or other obligors to make payment directly to Lender, or notify bailees
as to the disposition of Collateral, (d) take or bring, in the name of Lender or
Borrower, all steps, actions, suits or proceedings deemed by Lender necessary or
desirable to effect collection of or other realization upon the accounts and
other Collateral, (e) after an Event of Default, change the address for delivery
of mail to Borrower and to receive and open mail addressed to Borrower, (f)
after an Event of Default, extend the time of payment of, compromise or settle
for cash, credit, return of merchandise, and upon any terms or conditions, any
and all accounts or other Collateral which includes a monetary obligation and
discharge or release the account debtor or other obligor, without affecting any
of the Obligations, and (g) execute in the name of Borrower and file against
Borrower in favor of Lender financing statements or amendments with respect to
the Collateral.
5.6 Liability. Borrower hereby releases and exculpates Lender, its
officers, employees and designees, from any liability arising from any acts
under this Agreement or in furtherance thereof, whether as attorney-in-fact or
otherwise, whether of omission or commission, and whether based upon any error
of judgment or mistake of law or fact, except for gross negligence or willful
misconduct. In no event will Lender have any liability to Borrower for lost
profits or other special or consequential damages.
5.7 Administration of Accounts. After written notice by Lender to Borrower
and automatically, without notice, after an Event of Default, Borrower shall
not, without the prior written consent of Lender in each instance, (a) grant any
extension of time of payment of any of the accounts or any other Collateral
which includes a monetary obligation, (b) compromise or settle any of the
accounts or any such other Collateral for less than the full amount thereof, (c)
release in whole or in part any account debtor or other person liable for the
payment of any of the accounts or any such other Collateral, or (d) grant any
credits, discounts, allowances, deductions, return authorizations or the like
with respect to any of the accounts or any such other Collateral; provided,
however, that this restriction shall not limit Borrower=s ability to comply
fully with all applicable laws, rules and regulations of any governmental
authority relating to Borrower's business, including all rules and regulations
promulgated by the Federal Communication Commission.
<PAGE>
5.8 Documents. At such times as Lender may request and in the manner
specified by Lender, Borrower shall deliver to Lender or Lender's
representative, as Lender shall designate, copies or original invoices,
agreements, proofs of rendition of services and delivery of goods and other
documents evidencing or relating to the transactions which gave rise to accounts
or other Collateral, together with customer statements, schedules describing the
accounts or other Collateral and/or statements of account and confirmatory
assignments to Lender of the accounts or other Collateral, in form and substance
satisfactory to Lender and duly executed by Borrower. Without limiting the
provisions of Section 5.7, Borrower's granting of credits, discounts,
allowances, deductions, return authorizations or the like will be promptly
reported to Lender in writing. In no event shall any such schedule or
confirmatory assignment (or the absence thereof or omission of any of the
accounts or other Collateral therefrom) limit or in any way be construed as a
waiver, limitation or modification of the security interests or rights of Lender
or the warranties, representations and covenants of Borrower under this
Agreement. Any documents, schedules, invoices or other paper delivered to Lender
by Borrower may be destroyed or otherwise disposed of by Lender six (6) months
after receipt by Lender, unless Borrower requests their return in writing in
advance and makes prior arrangements for their return at Borrower's expense. All
documents delivered by Borrower to Lender pursuant to this provision or any
other provision in this Agreement are subject to the Non-Disclosure and
Confidentiality Agreements between Borrower and Lender, which agreements are
being executed simultaneously with this Agreement.
5.9 Access. From time to time as requested by Lender, at the sole expense
of Borrower, Lender or its designee shall have access, prior to an Event of
Default during reasonable business hours and on or after an Event of Default at
any time, to all of the premises where Collateral is located for the purposes of
inspecting the Collateral, and all Borrower's books and records, and Borrower
shall permit Lender or its designee to make such copies of such books and
records or extracts therefrom as Lender may request. Without expense to Lender,
Lender may use such of Borrower's personnel, equipment, including computer
equipment, programs, printed output and computer readable media, supplies and
premises for the collection of accounts and realization on other Collateral as
Lender, in its sole discretion, deems appropriate. Borrower hereby irrevocably
authorizes all accountants and third parties to disclose and deliver to Lender
at Borrower's expense all financial information, books and records, work papers,
management reports and other information in their possession regarding Borrower.
5.10 Environmental Audits. From time to time, as requested by Lender, at
the sole expense of Borrower, Borrower shall provide Lender, or its designee,
complete access to all of Borrower's facilities for the purpose of conducting an
environmental audit of such facilities as Lender or its designees may deem
necessary. Borrower agrees to cooperate with Lender with respect to any
environmental audit conducted by Lender or its designee pursuant to this Section
5.10.
5.11 Compliance with Laws. In exercising its rights and remedies pursuant
to this Section 5, Lender shall comply with the requirements of all laws, rules,
regulations and orders of any governmental authority relating to Borrower=s
business, including all rules and regulations promulgated by the Federal
Communications Commission as same apply.
SECTION 6. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Borrower hereby represents, warrants and covenants to Lender the following,
the truth and accuracy of which, and compliance with which, shall be continuing
conditions of the making of loans or other credit accommodations by Lender to
Borrower:
<PAGE>
6.1 Financial and Other Reports. Borrower shall keep and maintain its books
and records in accordance with generally accepted accounting principles,
consistently applied. Borrower shall, at its expense, deliver to Lender: (a)
true and complete monthly agings of accounts receivable, accounts payable and
notes payable on or before the fifteenth (15th) day of the month following the
month they reflect; (b) true and complete financial statements certified by an
officer of Borrower on or before the thirtieth (30th) day of each month
following the month they reflect; (c) quarterly financials reviewed by
independent certified public accountants acceptable to Lender and certified by
an officer of Borrower on or before the fifteenth (15th) day following the
filing of such financials with the Securities and Exchange Commission ("SEC");
and (d) annually audited financial statements of Borrower accompanied by the
report and opinion thereon of independent certified public accountants
acceptable to Lender, as soon as available, but in no event later than fifteen
(15) days following the filing of such audited annual financial statements with
the SEC. Borrowers and Guarantor shall also forward copies of all filings made
with the SEC. All of the foregoing shall be in such form and together with such
information with respect to the business of Borrower or any Guarantor, as Lender
may in each case request.
6.2 Trade Names. Borrower may from time to time render invoices to account
debtors under its trade names set forth in Section 10.6(g) after Lender has
received prior written notice from Borrower of the use of such trade names and
as to which, Borrower agrees that: (a) the trade name "Coastal Payphones, Inc."
has been obtained from the Secretary of State of the State of New Jersey and
Borrower shall maintain same, (b) Borrower and its related corporate entities
have the right to use the registered federal service mark "AMNEX", (c) all
accounts and proceeds thereof invoiced by Borrower under either of the foregoing
trade names are owned exclusively by Borrower and are subject to the security
interest of Lender and the other terms of this Agreement, (d) all schedules of
accounts and confirmatory assignments by Borrower, including any sales made or
services rendered by Borrower using either of the foregoing trade names shall,
to the extent feasible and permitted by applicable law, show Borrower's name as
assignor, and (e) Lender is authorized to receive, endorse and deposit to any
loan account of Borrower maintained by lender all checks or other remittances
made payable to any such trade name of Borrower representing payment with
respect to such sales or service.
6.3 Losses. Borrower shall promptly notify Lender in writing of any loss,
damage, investigation, action, suit, proceeding or claim relating to a material
portion of the Collateral or which may result in any material adverse change in
Borrower's business, assets, liabilities or condition, financial or otherwise.
6.4 Books and Records. Borrower's books and records concerning accounts are
and shall be maintained only at the addresses set forth in Section 10.6(d).
Borrower's only other places of business and the only other locations of
Collateral, if any, are and shall be the addresses set forth in Section 10.6(f)
hereof, except Borrower may change such locations or open a new place of
business after thirty (30) days prior written notice to Lender. Prior to any
change in location or opening of any new place of business, Borrower shall
execute and deliver or cause to be executed and delivered to Lender such
financing statements, financing documents and security and other agreements as
Lender may reasonably require, including, without limitation, those described in
Section 6.14.
6.5 Title. Borrower has and at all times will continue to have good and
marketable title to all of the Collateral, free and clear of all liens, security
interests, claims or encumbrances of any kind except in favor of Lender and
except, if any, those set forth on Schedule A hereto.
6.6 Disposition of Assets. Borrower shall not directly or indirectly: (a)
sell, lease, transfer, assign, abandon or otherwise dispose of any part of the
Collateral or any material portion of its other assets or; (b) consolidate with
or merge with or into any other entity, or permit any other entity to
consolidate with or merge with or into Borrower without Lender's prior written
consent, which consent will not be unreasonably withheld provided such
consolidation or merger will not impair Borrower's ability o comply with the
terms of this Agreement or; (c) form or acquire any interest in any firm,
corporation or other entity or permit any other entity to consolidate with or
merge with or into Borrower without Lender's prior written consent, which
consent will not be unreasonably withheld provided such formation or acquisition
will not impair Borrower's ability to comply with the terms of this Agreement.
<PAGE>
6.7 Insurance. Borrower shall at all times maintain, with financially sound
and reputable insurers, insurance (including, without limitation, at the option
of Lender, earthquake insurance) with respect to the Collateral and other
assets. All such insurance policies shall be in such form, substance, amounts
and coverage as may be satisfactory to Lender and shall provide for thirty (30)
days' prior written notice to Lender of cancellation or reduction of coverage.
Borrower hereby irrevocably appoints Lender and any designee of Lender as
attorney-in-fact for Borrower to obtain at Borrower's expense, any such
insurance should Borrower fail to do so and, after an Event of Default, to
adjust or settle any claim or other matter under or arising pursuant to such
insurance or to amend or cancel such insurance. Borrower shall deliver to Lender
evidence of such insurance and a lender's loss payable endorsement satisfactory
to Lender as to all existing and future insurance policies with respect to the
Collateral. Borrower shall deliver to Lender, in kind, all instruments
representing proceeds of insurance received by Borrower. Lender may apply any
insurance proceeds received at any time to the cost of repairs to or replacement
of any portion of the Collateral and/or, at Lender's option, to payment of or as
security for any of the Obligations, whether or not due, in any order or manner
as Lender determines.
6.8 Compliance With Laws. Borrower is and at all times will continue to be
in compliance with the requirements of all material laws, rules, regulations and
orders of any governmental authority relating to its business (including those
promulgated by the Federal Communications Commission and those laws, rules,
regulations and orders relating to taxes, payment and withholding of payroll
taxes, employer and employee contributions and similar items, securities,
employee retirement and welfare benefits, employee health and safety, or
environmental matters) and all material agreements or other instruments binding
on Borrower or its property. All of Borrower's inventory shall be produced in
accordance with the requirements of the Federal Fair Labor Standards Act of
1938, as amended and all rules, regulations and orders related thereto. Borrower
shall pay and discharge all taxes, assessments and governmental charges against
Borrower or any Collateral prior to the date on which penalties are impose or
liens attach with respect thereto, unless the same are being contested in good
faith and, at Lender's option, Reserves are established for the amount contested
and penalties which may accrue thereon.
6.9 Accounts. With respect to each account deemed an Eligible Account,
except as reported in writing to Lender, Borrower has no knowledge that any of
the criteria for eligibility are not or are no longer satisfied. As to each
account, except as disclosed in writing to Lender at the time such account
arises (a) each is valid and legally enforceable and represents an undisputed
bona fide indebtedness incurred by the account debtor for the sum reported to
Lender, (b) each arises from a completed rendition of services, (c) each is not,
at the time such account arises, subject to any defense, offset, dispute, contra
relationship, counterclaim, or any given or claimed credit, allowance or
discount, and (d) all statements made and all unpaid balances and other
information appearing in the invoices, agreements, proofs of rendition of
services and delivery of goods and other documentation relating to the accounts,
and all confirmatory assignments, schedules, statements of account and books and
records with respect thereto, are true and correct and in all respects what they
purport to be.
6.10 Equipment. With respect to Borrower's equipment, Borrower shall keep
the equipment in good order and repair, and in running and marketable condition,
ordinary wear and tear excepted.
<PAGE>
6.11 Financial Covenants. Borrower shall at all times: (i) maintain working
capital and net worth (each as determined in accordance with generally accepted
accounting principles, in effect on the date hereof, consistently applied
("GAAP")) in the amounts set forth in Section 10.5 and Borrower shall not,
directly or indirectly, expend or commit to expend, for fixed or capital assets
(including capital lease obligations) an amount in excess of the capital
expenditure limit set forth in Section 10.5 in any fiscal year of Borrower; and
(ii) not suffer net losses as reflected in Borrower's audited fiscal year end
financial statements submitted pursuant to Section 6.1(d).
6.12 Affiliated Transactions. Borrower will not, directly or indirectly:
(a) without Lender's prior written consent, which consent will not be
unreasonably withheld provided same will not impair Borrower=s ability to meet
its Obligations hereunder, lend or advance money or property to, guarantee or
assume indebtedness of, or invest (by capital contribution or otherwise) in any
person, firm, corporation or other entity in excess of $6,000,000.00 in the
aggregate per annum; or (b) declare, pay or make any dividend, redemption or
other distribution on account of any shares of any class of stock of Borrower
now or hereafter outstanding; or (c) without Lender's prior written consent,
which consent will not be unreasonably withheld provided same will not impair
Borrower's ability to meet its Obligations hereunder make any payment of the
principal amount of or interest on any indebtedness owing to any officer,
director, shareholder, or affiliate of Borrower in excess of $3,800,000.00 in
the aggregate per annum; or (d) without Lender's prior written consent, which
consent will not be unreasonably withheld provided same will not impair
Borrower's ability to meet its Obligations hereunder make any loans or advances
to any officer, director, employee, shareholder or affiliate of Borrower, in
excess of $200,000.00 in the aggregate per annum; or (e) enter into any sale,
lease or other transaction with any officer, director, employee, shareholder or
affiliate of Borrower on terms that are less favorable to Borrower than those
which might be obtained at the time from persons who are not an officer,
director, employee, shareholder or affiliate of Borrower.
6.13 Fees and Expenses. Borrower shall pay, on Lender's demand, all costs,
expenses, filing fees and taxes payable in connection with the preparation,
execution, delivery, recording, administration, collection, liquidation,
enforcement and defense of the Obligations, Lender's rights in the Collateral,
this Agreement and all other existing and future agreements or documents
contemplated herein or related hereto, including any amendments, waivers,
supplements or consents which may hereafter be mad or entered into in respect
hereof, or in any way involving claims or defense asserted by Lender or claims
or defense against Lender asserted by Borrower, any guarantor or any third party
directly or indirectly arising out of or related to the relationship between
Borrower and Lender or any guarantor and Lender, including, but not limited to
the following, whether incurred before, during or after the initial or any
renewal Term or after the commencement of any case with respect to Borrower or
any guarantor under the United States Bankruptcy Code or any similar statute:
(a) all costs and expenses of filing or recording (including Uniform Commercial
Code financing statement filing taxes and fees, documentary taxes, intangibles
taxes and mortgage recording taxes and fees, if applicable); (b) all title
insurance and other insurance premiums, appraisal fees, fees incurred in
connection with any environmental report, audit or survey and search fees; (c)
all fees as then in effect relating to the wire transfer of loan proceeds and
other funds and fees then in effect for returned checks and credit reports; (d)
all expenses and costs heretofore and from time to time hereafter incurred by
Lender during the course of periodic field examinations of the Collateral and
Borrower's operations, plus a per diem charge at the rate set forth in Section
10.4(g) for Lender's examiners in the field and office; and (e) the costs, fees
and disbursements of in-house and outside counsel to Lender, including but not
limited to such fees and disbursements incurred as a result of litigation
between the parties hereto, any third party and in any appeals arising
therefrom.
<PAGE>
6.14 Further Assurances. At the request of Lender, at any time and from
time to time, at Borrower's sole expense, Borrower shall execute and deliver or
cause to be executed and delivered to Lender, such agreements, documents and
instruments, including waivers, consents and subordination agreements from
mortgagees or other holders of security interests or liens, landlords or
bailees, and do or cause to be done such further acts as Lender, in its
discretion, deems necessary or desirable to create, preserve, perfect or
validate any security interest of Lender or the priority thereof in the
Collateral and otherwise to effectuate the provisions and purposes of this
Agreement. Borrower hereby authorizes Lender to file financing statements or
amendments against Borrower in favor of Lender with respect to the Collateral,
without Borrower's signature and to file as financing statements any carbon,
photographic or other reproductions of this Agreement or any financing
statements signed by Borrower.
6.15 Revolving Loan. The Revolving Loan will not at any time exceed the
Gross Availability unless Lender has consented.
6.16 Environmental Condition. None of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute. No
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower. Borrower has not
received a summons, citation, notice, or directive from the Environmental
Protection Agency or any other federal or state governmental agency any action
or omission by Borrower resulting in the releasing, or otherwise exposing of
hazardous waste or hazardous substances into the environment. Borrower is in
compliance (in all material respects) with all statutes, regulations, ordinances
and other legal requirements pertaining to the production, storage, handling,
treatment, release, transportation or disposal of any hazardous waste or
hazardous substance.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES
7.1 Events of Default. All Obligations shall be immediately due and
payable, without notice or demand, and any provisions of this Agreement as to
future loans and credit accommodations by Lender shall terminate automatically,
upon the termination or non-renewal of this Agreement or, at Lender's option,
upon or at any time after the occurrence or existence of any one or more of the
following "Events of Default":
(a) Borrower fails to pay when due any of the Obligations (or any portion
thereof) or fails to perform any of the terms of this Agreement or any other
existing or future financing, security or other agreement between Borrower and
Lender or any affiliate of Lender;
(b) Any representation, warranty or statement of fact made by Borrower to
Lender in this Agreement or any other agreement, schedule, confirmatory
assignment or otherwise, or to any affiliate of Lender, shall prove inaccurate
or misleading;
<PAGE>
(c) Any guarantor revokes, terminates, attempts to revoke or terminate, or
fails to perform any of the terms of any guaranty, endorsement or other
agreement of such party in favor of Lender or any affiliate of Lender;
(d) Any judgment or judgments aggregating in excess of $250,000 or any
injunction or attachment is obtained against Borrower or any guarantor which
remains unstayed for a period of ten (10) days or is enforced;
(e) Borrower or any guarantor or a general partner of a guarantor or
Borrower (which is a partnership), being a natural person, dies, or Borrower or
any guarantor which is a partnership or corporation, is dissolved, or Borrower
or any guarantor which is a corporation fails to maintain its corporate
existence in good standing, or the usual business of Borrower or any guarantor
ceases or is suspended;
(f) Any change in the controlling ownership of Borrower;
(g) Borrower or any guarantor becomes insolvent, makes an assignment for
the benefit of creditors, makes or sends notice of a bulk transfer or calls a
general meeting of its creditors or principal creditors;
(h) Any petition or application for any relief under the bankruptcy laws of
the United States now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed by or against Borrower or any guarantor and, in the case of
an involuntary filing, is not discharged within sixty (60) days, during which
time Lender shall have no obligation to fund;
(i) The indictment or threatened indictment of Borrower or any guarantor
under any criminal statute, or commencement or threatened commencement of
criminal or civil proceedings against Borrower or any guarantor, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of any of the property of Borrower or such guarantor;
<PAGE>
(j) Any default or event of default occurs on the part of Borrower under
any agreement, document or instrument to which Borrower is a party or by which
Borrower or any of its property is bound, creating or relating to any
indebtedness of Borrower to any person or entity other than Lender in an amount
exceeding $250,000, if the effect of such default is to accelerate, or to permit
the acceleration of, the maturity of all or any part of such indebtedness, or
all or any part of any such indebtedness shall be declared to be due and payable
or required to be prepaid or any other reason, in either event prior to the
stated maturity thereof;
(k) Lender in good faith believes that either (i) the prospect of payment
or performance of the Obligations is impaired or (ii) the Collateral is not
sufficient to secure fully the Obligations; and
(l) Any material change occurs in the nature or conduct of Borrower's
business.
7.2 Remedies. Upon the occurrence of an Event of Default and at any time
thereafter, Lender shall have all rights and remedies provided in this
Agreement, any other agreements between Borrower and Lender, the Uniform
Commercial Code or other applicable law, all of which rights and remedies may be
exercised without notice to Borrower, all such notices being hereby waived,
except such notice as is expressly provided for hereunder or is not waivable
under applicable law. All rights and remedies of Lender are cumulative and not
exclusive and are enforceable, in Lender's discretion, alternatively,
successively, or concurrently on any one or more occasions and in any order
Lender may determine. Without limiting the foregoing, Lender may (a) accelerate
the payment of all Obligations and demand immediate payment thereof to Lender,
(b) with or without judicial process or the aid or assistance of others, enter
upon any premises on or in which any of the Collateral may be located and take
possession of the Collateral or complete processing, manufacturing and repair of
all or any portion of the Collateral, (c) require Borrower, at Borrower's
expense, to assemble and make available to Lender any part or all of the
Collateral at any place and time designated by Lender, (d) collect, foreclose,
receive, appropriate, setoff and realize upon any and all Collateral, (e) extend
the time of payment of, compromise or settle for cash, credit, return of
merchandise, and upon any terms or conditions, any and all accounts or other
Collateral which includes a monetary obligation and discharge or release the
account debtor or other obligor, without affecting any of the Obligations, (f)
sell, lease, transfer, assign, deliver or otherwise dispose of any and all
Collateral (including, without limitation, entering into contracts with respect
thereto, by public or private sales at any exchange, broker's board, any office
of Lender or elsewhere) at such prices or terms as Lender may deem reasonable,
for cash, upon credit or for future delivery, with the Lender having the right
to purchase the whole or any part of the Collateral at any such public sale, all
of the foregoing being free from any right or equity of redemption of Borrower,
which right or equity of redemption is hereby expressly waived and released by
Borrower. If any of the Collateral is sold or leased by Lender upon credit terms
or for future delivery, the Obligations shall not be reduced as a result thereof
until payment therefor is finally collected by Lender. If notice of disposition
of Collateral is required by law, seven (7) days prior notice by Lender to
Borrower designating the time and place of any public sale or the time after
which any private sale or other intended disposition of Collateral is to be
made, shall be deemed to be reasonable notice thereof and Borrower waives any
other notice. In the event Lender institutes an action to recover any Collateral
or seeks recovery of any Collateral by way of prejudgment remedy, Borrower
waives the posting of any bond which might otherwise be required.
<PAGE>
7.3 Application of Proceeds. Lender may apply the cash proceeds of
Collateral actually received by Lender from any sale, lease, foreclosure or
other disposition of the Collateral to payment of any of the Obligations, in
whole or in part (including reasonable attorneys' fees and legal expenses
incurred by Lender with respect thereto or otherwise chargeable to Borrower) and
in such order as Lender may elect, whether or not then due. Borrower shall
remain liable to Lender for the payment of any deficiency together with interest
at the highest rate provided for herein and all costs and expenses of collection
or enforcement, including reasonable attorneys' fees and legal expenses.
7.4 Lender's Cure of Third Party Agreement Default. Lender may, at its
option, cure any default by Borrower under any agreement with a third party or
pay or bond on appeal any judgment entered against Borrower, discharge taxes,
liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral and pay any amount, incur any expense or
perform any act which, in Lender's sole judgment, is necessary or appropriate to
preserve, protect, insure, maintain, or realize upon the Collateral. Lender may
charge Borrower's loan account for any amounts so expended, such amounts to be
repayable by Borrower on demand. Lender shall be under no obligation to effect
such cure, payment, bonding or discharge, and shall not, by doing so, be deemed
to have assumed any obligation or liability of Borrower.
SECTION 8. JURY TRIAL WAIVER; CERTAIN OTHER WAIVERS AND CONSENTS
8.1 JURY TRIAL WAIVER. BORROWER AND LENDER EACH WAIVE ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING INSTITUTED BY EITHER OF THEM AGAINST THE
OTHER WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE OBLIGATIONS,
THE COLLATERAL, ANY ALLEGED TORTUOUS CONDUCT BY BORROWER OR LENDER, OR, IN ANY
WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP
BETWEEN BORROWER AND LENDER. IN NO EVENT WILL LENDER BE LIABLE FOR LOST PROFITS
OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
8.2 Counterclaims. Borrower waives all rights to interpose any claims,
deductions, setoffs or counterclaims of any kind, nature or description in any
action or proceeding instituted by Lender with respect to this Agreement, the
Obligations, the Collateral or any matter arising therefrom or relating thereto,
except compulsory counterclaims.
8.3 Jurisdiction. Borrower hereby irrevocably submits and consents to the
nonexclusive jurisdiction of the State and Federal Courts located in the State
in which the office of Lender designated in Section 10.6(a) is located and any
other State where any Collateral is located with respect to any action or
proceeding arising out of this Agreement, the Obligations, the Collateral or any
matter arising therefrom or relating thereto. In any such action or proceeding,
Borrower waives personal service of the summons and complaint or other process
and papers therein and agrees that the service thereof may be made by mail
directed to Borrower at its chief executive office set forth herein or other
address thereof of which Lender has received notice as provided herein, service
to be deemed complete five (5) days after mailing, or as permitted under the
rules of either of said Courts. Any such action or proceeding commenced by
Borrower against Lender will be litigated only in a Federal Court located in the
district, or a State Court in the State and County, in which the office of
Lender designated in Section 10.6(a) is located and Borrower waives any
objection based on forum non conveniens and any objection to venue in connection
therewith.
8.4 No Waiver by Lender. Lender shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its rights or
remedies unless such waiver shall be in writing and signed by an authorized
officer of Lender. A waiver by Lender of any right or remedy on any one occasion
shall not be construed as a bar to or waiver of any such right or remedy which
Lender would otherwise have on any future occasion, whether similar in kind or
otherwise.
<PAGE>
SECTION 9. TERM OF AGREEMENT; MISCELLANEOUS
9.1 Term. This Agreement shall only become effective upon execution and
delivery by Borrower and Lender and shall continue in full force and effect for
a term of three (3) years from the date hereof and shall be deemed automatically
renewed for successive terms of two (2) years thereafter unless terminated as of
the end of the initial or any renewal term (each a "Term") by either party
giving the other written notice at least sixty (60) days' prior to the end of
the then-current Term.
9.2 Early Termination. Borrower may also terminate this Agreement by giving
Lender at least thirty (30) days prior written notice at any time upon payment
in full of all of the Obligations as provided herein, including the early
termination fee provided below. Lender shall also have the right to terminate
this Agreement at any time upon or after the occurrence of an Event of Default.
If Lender terminates this Agreement upon or after the occurrence of an Event of
Default, or if Borrower shall terminate this Agreement as permitted herein
effective prior to the end of the then-current Term, in addition to all other
Obligations, Borrower shall pay to Lender, upon the effective date of
termination, in view of the impracticality and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of Lender's lost profits, an early termination fee equal
to:
(a) five percent (5%) of the Maximum Credit during the first (1st) year of
the initial Term hereof;
(b) three percent (3%) of the Maximum Credit during the second (2nd) year
of the initial Term hereof; and
(c) one percent (1%) of the Maximum Credit during the third (3rd) year of
the initial Term hereof and during any year of any renewal Term thereafter.
9.3 Termination Indemnity Deposit. Upon termination of this Agreement by
Borrower, as permitted herein, in addition to payment of all Obligations which
are not contingent, Borrower shall deposit such amount of cash collateral as
Lender determines is necessary to secure Lender from loss, cost, damage or
expense, including reasonable attorneys' fees, in connection with any open
Accommodations or remittance items or other payments provisionally credited to
the Obligations and/or to which Lender has not yet received final and
indefeasible payment.
9.4 Notices. Except as otherwise provided, all notices, requests and
demands hereunder shall be (a) made to Lender at its address set forth in
Section 10.6(a) and to Borrower at its chief executive office set forth in
Section 10.6(c), or to such other address as either party may designate by
written notice to the other in accordance with this provision, and (b) deemed to
have been given or made: if by hand, immediately upon delivery; if by telex,
telegram or telecopy (fax), immediately upon receipt; if by overnight delivery
service, one day after dispatch; and if by first class or certified mail, three
(3) days after mailing.
9.5 Severability. If any provision of this Agreement is held to be invalid
or unenforceable, such provision shall not affect this Agreement as a whole, but
this Agreement shall be construed as though it did not contain the particular
provision held to be invalid or unenforceable.
9.6 Entire Agreement; Amendments; Assignments. This Agreement and the
agreements referred to herein contain the entire agreement of the parties as to
the subject matter hereof, all prior commitments, proposals and negotiations
concerning the subject matter hereof being merged herein. Neither this Agreement
nor any provision hereof shall be amended, modified or discharged orally or by
course of conduct, but only by a written agreement signed by an authorized
officer of each of Borrower and Lender. This Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns, except that any obligation of Lender under this
Agreement shall not be assignable nor inure to the successors and assigns of
Borrower.
<PAGE>
9.7 Discharge of Borrower. No termination of this Agreement shall relieve
or discharge Borrower of its Obligations, grants of Collateral, duties and
covenants hereunder or otherwise until such time as all Obligations to Lender
have been indefeasibly paid and satisfied in full, including, without
limitation, the continuation and survival in full force and effect of all
security interests and liens of Lender in and upon all then existing and
thereafter-arising or acquired Collateral and all warranties and waivers of
Borrower.
9.8 Usage. All terms used herein which are defined in the Uniform
Commercial Code shall have the meanings given therein unless otherwise defined
in this Agreement and all references to the singular or plural herein shall also
mean the plural or singular, respectively.
9.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State in which the office of Lender set forth in
Section 10.6(a) below is located.
SECTION 10. ADDITIONAL DEFINITIONS AND TERMS
10.1 (a) Maximum Credit: Five Million Dollars ($5,000,000.00)
(b) Gross Availability Formulas:
Eligible Accounts Percentage:
(i) Fifty five percent (50%) of Dial Around Pay Phone
Compensation Plan Accounts;
(ii) Eighty five percent (85%) of the 1+ Coin Sent Paid Long
Distance Services Accounts so long as the Dilution Percentage of such
accounts (ADilution Percentage@ is defined as the sum of all credits,
discounts, allowances, write-offs, contra-accounts, and other offsets
which reduce the value of accounts receivable, as determined by Lender
in its sole discretion, divided by the gross sales), as calculated on
a rolling 90 day basis, remains less than or equal to five percent
(5%). If the Dilution Percentage is greater than five percent (5%)
then the advance formula will be decreased by one percentage point for
each percentage point or fraction thereof that such dilution
percentage exceeds five percent (5%);
(iii) Eighty percent (80%) of 1+ Direct Dial Long Distance
Services Accounts so long as the Dilution Percentage of such accounts,
as calculated on a rolling 90 day basis, remains less than or equal to
ten percent (10%). If the Dilution Percentage is greater than ten
percent (10%) then the advance formula will be decreased by one
percentage point for each percentage point or fraction thereof that
such dilution percentage exceeds ten percent (10%); and
(iv) The above sections 10.1(b)(i), (ii) and (iii)
notwithstanding, without in any way limiting Lender's right to
institute other Reserves from time to time during the Term of the
Revolving Loans, Lender may establish such Reserves in amounts as it
shall deem appropriate from Gross Availability, including but not
limited to, a reserve for federal excise taxes, state taxes, public
utility charges, commissions due agents or sales persons, billing and
collection charges, a reserve for commissions due to NYNEX of at least
fifty-five percent (55%) of amounts due with respect to prepaid
calling cards, and a reserve of at least five percent (5%) for all 1+
Coin Sent Paid Long Distance Services Accounts and Dial Around Pay
Phone Compensation Plan Accounts.
<PAGE>
Eligible Inventory Percentages:
Finished Goods: Not Applicable
Raw Materials: Not Applicable
(c) Sublimits: Not Applicable
(d) Minimum Borrowing: Two Million Five Hundred Thousand Dollars
($2,500,000)
10.2 Term Loan: Not Applicable.
10.3 Accommodations: None.
10.4 Interest, Fees and Charges :
(a) Interest Rate: Prime Rate plus one percent (1.0%) per annum;
(b) Closing Facility Fee: Eighteen Thousand Seven Hundred Fifty
Dollars ($18,750) earned and payable in full at Closing;
(c) Annual Facility Fee: Three quarters of one percent (.75%) per
annum of the Maximum Credit.
(d) Minimum Borrowing Fee: If the average monthly loan balance is
below Two Million Five Hundred Thousand Dollars ($2,500,000) ("Minimum
Borrowing") Lender shall receive a fee equal to the interest on the
difference between the actual average monthly loan balance and the
Minimum Borrowing, payable monthly;
(e) Unused Line Fee: (.25%) per annum.;
(f) Account Servicing Collateral Handling Fee: None; and
(g) Field Examinations: $650.00 per examiner per day.
10.5 Financial Covenants: None, except as set forth in Section
6.11(ii).
10.6 (a) Lender's Office: The CIT Group/Credit Finance, Inc.
1211 Avenue of the Americas
New York, NY 10036
Telecopier: (212) 790-9123 Attn.:
Marcia L. Karetsky, Vice President
(b) Lender's Bank: The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
With a copy to: Blank Rome Comisky & McCauley
Woodland Falls Corporate Park
210 Lake Drive East
Cherry Hill, NJ 08002
Attn.: Peter W. Leibundgut, Esquire
(c) Borrowers: American Network Exchange, Inc.
100 West Lucerne Circle, Suite 100
Orlando, FL 32801
Telecopier: (407) 481-2560
Attn.: Amy Gross, Esquire
Crescent Public Communications Inc.
6 Nevada Drive, Building C
Lake Success, NY 11042
Telecopier: (516) 437-0807
Attn.: Renee Brandner, Esquire
<PAGE>
(d) Borrower's Locations of Books and Records of Account:
100 W. Lucerne Circle, Suite 100
Orlando, FL 32801-4400
6 Nevada Drive
Lake Success, NY 11042
1675 Highway 34 South
Farmingdale, NJ 07727
(e) Locations of Eligible Inventory Collateral:
Not Applicable.
(f) Borrower's Other Offices and Locations of Collateral:
1516 E. Colonial Drive
Orlando, FL 32803
350 Camino Gardens Boulevard, Suite 201
Boca Raton, FL 33432
(g) Borrower's Trade Names for Invoicing:
1. AMNEX
2. Coastal Payphones, Inc.
(h) Subsidiary of Borowers
1. Suntel, Inc.
10.7 Term: Three (3) years.
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have duly executed this Agreement
this _____ day of September, 1997.
LENDER: BORROWERS:
THE CIT GROUP/CREDIT FINANCE, INC. AMERICAN NETWORK EXCHANGE, INC.
By: ________________________________ By: _____________________________
Andrew S. Hausspiegel, Vice President
CRESCENT PUBLIC COMMUNICATIONS INC.
By: ______________________________
<PAGE>
SCHEDULE A
First lien and security interest of OAN Services, Inc. in, to and in
respect of accounts receivable derived from 0+/0- Operator Services Accounts of
American Network Exchange, Inc. other than those of such accounts receivable
which are sold to and/or financed by OAN Services, Inc., Zero Plus Dialing, Inc.
or any other third party billing agent (by whatever name, and inclusive of any
successor or assignee thereto to thereof).
PROMISSORY NOTE
$500,000 September 18, 1997
FOR VALUE RECEIVED, AMNEX, INC., a New York corporation ("AMNEX"), AMERICAN
NETWORK EXCHANGE, INC., a Delaware corporation and wholly-owned subsidiary of
AMNEX ("ANEI"), and CRESCENT PUBLIC COMMUNICATIONS INC., a New York corporation
and wholly-owned subsidiary of AMNEX ("CRESCENT", and collectively with AMNEX
and ANEI, the "Borrower"), hereby jointly and severally promise to pay to the
order of ROTTERDAM VENTURES, INC., a New York corporation ("Lender"), on the
first anniversary (the "Maturity Date") of the date of this Promissory Note
("Note"), at its principal office at Rotterdam Industrial Park, Building 6,
Schenectady, New York 12306, the principal sum of Five Hundred Thousand Dollars
($500,000), together with all accrued unpaid interest thereon and all other sums
remaining due and owing hereunder and under the Security Agreement (as
hereinafter defined). Interest shall accrue and be payable in arrears, on any
and all principal amounts outstanding and remaining unpaid hereunder from time
to time from the date hereof until payment in full hereof at the rates
hereinafter provided, such interest to be payable as hereinafter provided.
Interest shall be calculated on the basis of the actual number of days elapsed
over a year of three hundred sixty (360) days and shall be at a rate (whether
before or after maturity, except as hereinafter provided) of ten percent (10%)
per annum. Prior to the Maturity Date, interest shall be payable monthly in
arrears on the first day of each calendar month commencing November 1, 1997 and
continuing on the same day of each successive month, and on the Maturity Date.
Methods of Payment. Payments of both principal and interest as required
hereunder shall be made in lawful money of the United States of America in
immediately available funds (or, with respect to interest only, by company
check) at the office of Lender set forth above. If any payment of principal or
interest shall become due on a Saturday, Sunday, or on any other day on which
banking institutions
1
<PAGE>
are authorized or obligated by law to close, such payment shall be made on the
next succeeding business day and such extension of time shall in such case be
included in computing interest in connection with such payment.
Prepayment. This Note may be prepaid in whole or in part, at any time, without
premium or penalty. Any payments received on this Note shall be applied first to
any unpaid fees or other sums due and owing hereunder and/or under the Security
Agreement, next to accrued but unpaid interest, and then to the principal amount
outstanding.
Security. Payment of the principal amount of, and accrued interest on, this Note
is secured by, a security interest in certain assets of Crescent granted
pursuant to a certain Security Agreement of even date herewith by and between
Crescent and the Lender (the "Security Agreement"). This Note is being executed
in conjunction with, and is entitled to the benefits of, the Security Agreement.
Remedies After Default. Upon the occurrence of an Event of Default (as such term
is defined in the Security Agreement), the entire unpaid principal balance
hereof, together with accrued unpaid interest thereon and all other sums
remaining due and owing hereunder and under the Security Agreement shall at the
option of Lender and without further notice or demand to the Borrower, become
immediately due and payable and Lender may forthwith exercise any and all
remedies available to Lender at law and in equity as well as those remedies set
forth in the Security Agreement and this Note, and one or more executions may
forthwith issue on any judgment or judgments obtained by virtue thereof, and no
failure on the part of Lender to exercise any of Lender's rights hereunder shall
be deemed a waiver of any such rights. Irrespective of the exercise or
nonexercise of any of the aforesaid rights, if the entire amount of any required
principal and/or interest payment is not paid in full within ten (10) days after
the same is due, Borrower shall pay to Lender a late fee equal to five percent
(5%) of the required payment. This charge shall be in addition to, and not in
lieu of, any other remedy Lender may have, and is in addition to any reasonable
attorney fees and other sums payable hereunder or under the Security Agreement
or permitted by law. Irrespective of the exercise or nonexercise of any of the
aforesaid rights, after the occurrence of an Event of Default and acceleration
of the principal balance hereof, at the option of the Lender, Borrower will pay,
on demand, interest on the principal balance of this Note then outstanding at
the rate (the "Default Rate") of fifteen percent (15%) per annum, in lieu of ten
percent (10%) per annum.
2
<PAGE>
Notices. Any and all notices or other communications or deliveries required or
permitted to be given or made pursuant to any of the provisions of this Note
shall be in writing and shall be deemed to have been duly given or made for all
purposes when hand delivered or sent by certified or registered mail, return
receipt requested and postage pre-paid, overnight mail or courier or telecopier
(receipt confirmed) as follows:
If to Lender at:
Rotterdam Ventures, Inc.
Building 6, East Road
Schenectady, New York 12306
Attention: David M. Buicko, Chief Operating Officer
Telecopier Number: (518) 356-5334
and
Steven K. Porter, Esq.
Rotterdam Industrial Park, Building 6
Schenectady, New York 12306
Telecopier Number (518) 357-2534
if to the Borrower at:
6 Nevada Drive, Building C
Lake Success, New York 11042
Attention: Chief Executive Officer or President
Telecopier Number: (516) 326-7987
3
<PAGE>
With copies to:
Richard Stoun and
Amy S. Gross, Esq.
American Network Exchange, Inc.
100 West Lucerne Circle
Suites 500 and 401
Orlando, FL 32801
Telecopier Numbers: (407) 425-3265
(407) 481-2560
Waivers. Borrower hereby waives presentment for payment, protest and demand, and
notice of protest, demand and/or dishonor and nonpayment of this Note, and all
other notices or demands otherwise required by law that Borrower may lawfully
waive. The Borrower expressly agrees that this Note, or any payment hereunder,
may be extended from time to time, without in any way affecting the liability of
Borrower. No unilateral consent or waiver by Lender with respect to any action
or failure to act which, without consent, would constitute a breach of any
provision of this Note shall be valid and binding unless in writing and signed
by Lender.
Governing Law. The rights and obligations of Borrower and all provisions hereof
shall be governed by and construed in accordance with the laws of the State of
New York applicable to contracts made and performed in said State.
Consent to Jurisdiction: Jury Trial Waiver. Borrower hereby submits to the
jurisdiction of the courts of the State of New York located in the City of
Schenectady and the United States District Court for the Northern District of
New York, as well as to the jurisdiction of all courts to which an appeal may be
taken or other review sought from the aforesaid courts, for the purpose of any
suit, action or other proceeding arising out of Borrower's obligations under or
with respect to this Note, and expressly waives any and all obligations it may
have as to venue in any of such courts. BORROWER AND LENDER EACH HEREBY WAIVES
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF
THEM AGAINST THE OTHER ON ANY MATTERS WHATSOEVER (INCLUDING, WITHOUT LIMITATION,
ANY
4
<PAGE>
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY CONNECTED WITH
THIS NOTE, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN). No party to this
Note, including but not limited to any assignee of or successor to Borrower or
Lender, shall seek a jury trial in any lawsuit, proceeding, counterclaim, or any
other litigation procedure based upon, or arising out of, this Note or the
relationship between the parties. No party will seek to consolidate any such
action, in which a jury trial has been waived, with any other action in which a
jury trial cannot be or has not been waived. THE PROVISIONS OF THIS PARAGRAPH
HAVE BEEN FULLY DISCUSSED BY BORROWER AND LENDER, AND THESE PROVISIONS SHALL BE
SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO
ANY OTHER PARTY THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED
IN ALL INSTANCES.
Savings Clause. All agreements between Borrower and Lender are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to Lender for the use, forbearance or
detention of the indebtedness evidenced hereby exceed the maximum permissible
under applicable law. Any interest received by Lender which would exceed the
maximum permissible under applicable law shall be applied to the reduction of
the principal balance evidenced hereby and not to the payment of interest. This
provision shall control every other provision of all agreements between Borrower
and Lender.
Attorneys' Fees. If this Note shall not be paid when due and shall be placed by
the holder hereof in the hands of any attorney for collection, through legal
proceedings or otherwise, Borrower will pay (on demand) all reasonable costs and
expenses of collection incurred, including reasonable attorneys' fees.
5
<PAGE>
Continued Liability. Borrower shall remain primarily liable on this Note until
full payment, unaffected by any agreement or transaction between Lender and any
subsequent Borrower as to payment of principal, interest or other moneys, by any
forbearance or extension of time, guaranty or assumption by others, or by any
other matter, as to all of which notice is hereby waived by Borrower.
Section Headings. Any section headings in this Note are included herein for
convenience of reference only and shall not constitute apart of this Note for
any other purpose.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officer as of the day and year first above written.
Borrower:
AMNEX, INC.
By: ____________________________
Name: Peter Izzo
Title: President
AMERICAN NETWORK EXCHANGE, INC.
By: ________________________________
Name: Peter Izzo
Title: Chief Executive Officer
CRESCENT PUBLIC COMMUNICATIONS INC.
By: __________________________________
Name: Peter Izzo
Title: President and Chief Executive Officer
6
PROMISSORY NOTE
$800,000 September 30, 1997
FOR VALUE RECEIVED, AMNEX, INC., a New York corporation ("AMNEX"), AMERICAN
NETWORK EXCHANGE, INC., a Delaware corporation and wholly-owned subsidiary of
AMNEX ("ANEI"), and CRESCENT PUBLIC COMMUNICATIONS INC., a New York corporation
and wholly-owned subsidiary of AMNEX ("CRESCENT", and collectively with AMNEX
and ANEI, the "Borrower"), hereby jointly and severally promise to pay to the
order of ROTTERDAM VENTURES, INC., a New York corporation ("Lender"), on the
first anniversary (the "Maturity Date") of the date of this Promissory Note
("Note"), at its principal office at Rotterdam Industrial Park, Building 6,
Schenectady, New York 12306, the principal sum of Eight Hundred Thousand Dollars
($800,000), together with all accrued unpaid interest thereon and all other sums
remaining due and owing hereunder. Interest shall accrue and be payable in
arrears, on any and all principal amounts outstanding and remaining unpaid
hereunder from time to time from the date hereof until payment in full hereof at
the rates hereinafter provided, such interest to be payable as hereinafter
provided. Interest shall be calculated on the basis of the actual number of days
elapsed over a year of three hundred sixty (360) days and shall be at a rate
(whether before or after maturity, except as hereinafter provided) of six
percent (6%) per annum. Prior to the Maturity Date, interest shall be payable
monthly in arrears on the first day of each calendar month commencing November
1, 1997 and continuing on the same day of each successive month, and on the
Maturity Date.
Methods of Payment. Payments of both principal and interest as required
hereunder shall be made in lawful money of the United States of America in
immediately available funds (or, with respect to interest only, by company
check) at the office of Lender set forth above. If any payment of principal or
interest shall become due on a Saturday, Sunday, or on any other day on which
banking institutions are authorized or obligated by law to close, such payment
shall be made on the next succeeding business day and such extension of time
shall in such case be included in computing interest in connection with such
payment.
1
<PAGE>
Prepayment. This Note may be prepaid in whole or in part, at any time, without
premium or penalty. Any payments received on this Note shall be applied first to
any unpaid fees or other sums due and owing hereunder, next to accrued but
unpaid interest, and then to the principal amount outstanding.
Remedies After Default. Upon the failure of the Borrower to make an interest
payment when due hereunder, which failure continues for a period of ten (10)
days after the same shall be due, the entire unpaid principal balance hereof,
together with accrued unpaid interest thereon and all other sums remaining due
and owing hereunder, shall, at the option of Lender and without further notice
or demand to the Borrower, become immediately due and payable and Lender may
forthwith exercise any and all remedies available to Lender at law and in equity
and one or more executions may forthwith issue on any judgment or judgments
obtained by virtue thereof. No failure on the part of Lender to exercise any of
Lender's rights hereunder shall be deemed a waiver of any such rights.
Irrespective of the exercise or nonexercise of any of the aforesaid rights, if
the entire amount of any required principal and/or interest payment is not paid
in full within ten (10) days after the same is due, Borrower shall pay to Lender
a late fee equal to five percent (5%) of the required payment. This charge shall
be in addition to, and not in lieu of, any other remedy Lender may have, and is
in addition to any reasonable attorney fees and other sums payable hereunder or
permitted by law. Irrespective of the exercise or nonexercise of any of the
aforesaid rights, after the acceleration of the principal balance hereof, at the
option of the Lender, Borrower will pay, on demand, interest on the principal
balance of this Note then outstanding at the rate (the "Default Rate") of
fifteen percent (15%) per annum in lieu of six percent (6%) per annum.
Notices. Any and all notices or other communications or deliveries required or
permitted to be given or made pursuant to any of the provisions of this Note
shall be in writing and shall be deemed to have been duly given or made for all
purposes when hand delivered or sent by certified or registered mail, return
receipt requested and postage pre-paid, overnight mail or courier or telecopier
(receipt confirmed) as follows:
If to Lender at:
Rotterdam Ventures, Inc.
Building 6, East Road
Schenectady, New York 12306
Attention: David M. Buicko, Chief Operating Officer
Telecopier Number: (518) 356-5334
2
<PAGE>
and
Steven K. Porter, Esq.
Rotterdam Industrial Park, Building 6
Schenectady, New York 12306
Telecopier Number (518) 357-2534
if to the BORROWER at:
6 Nevada Drive, Building C
Lake Success, New York 11042
Attention: Chief Executive Officer or President
Telecopier Number: (516) 326-7987
With copies to:
Richard Stoun and
Amy S. Gross, Esq.
American Network Exchange, Inc.
100 West Lucerne Circle
Suites 500 and 401
Orlando, FL 32801
Telecopier Numbers: (407) 425-3265
(407) 481-2560
Waivers. Borrower hereby waives presentment for payment, protest and demand, and
notice of protest, demand and/or dishonor and nonpayment of this Note, and all
other notices or demands otherwise required by law that Borrower may lawfully
waive. The Borrower expressly agrees that this Note, or any payment hereunder,
may be extended from time to time, without in any way affecting the liability of
Borrower. No unilateral consent or waiver by Lender with respect to any action
or failure to act which, without consent, would constitute a breach of any
provision of this Note shall be valid and binding unless in writing and signed
by Lender.
Governing Law. The rights and obligations of Borrower and all provisions hereof
shall be governed by and construed in accordance with the laws of the State of
New York applicable to contracts made and performed in said State.
Consent to Jurisdiction: Jury Trial Waiver. Borrower hereby submits to the
jurisdiction of the courts of the State of New York located in the City of
Schenectady and the United States District Court for the Northern District of
New York, as well as to the jurisdiction of all courts to which an
3
<PAGE>
appeal may be taken or other review sought from the aforesaid courts, for the
purpose of any suit, action or other proceeding arising out of Borrower's
obligations under or with respect to this Note, and expressly waives any and all
obligations it may have as to venue in any of such courts. BORROWER AND LENDER
EACH HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY EITHER OF THEM AGAINST THE OTHER ON ANY MATTERS WHATSOEVER
(INCLUDING, WITHOUT LIMITATION, ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR IN ANY WAY CONNECTED WITH THIS NOTE, OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN). No party to this Note, including but not limited to any
assignee of or successor to Borrower or Lender, shall seek a jury trial in any
lawsuit, proceeding, counterclaim, or any other litigation procedure based upon,
or arising out of, this Note or the relationship between the parties. No party
will seek to consolidate any such action, in which a jury trial has been waived,
with any other action in which a jury trial cannot be or has not been waived.
THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY BORROWER AND
LENDER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN
ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF
THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
Savings Clause. All agreements between Borrower and Lender are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to Lender for the use, forbearance or
detention of the indebtedness evidenced hereby exceed the maximum permissible
under applicable law. Any interest received by Lender which would exceed the
maximum permissible under applicable law shall be applied to the reduction of
the principal balance evidenced hereby and not to the payment of interest. This
provision shall control every other provision of all agreements between Borrower
and Lender.
Attorneys' Fees. If this Note shall not be paid when due and shall be placed by
the holder hereof in the hands of any attorney for collection, through legal
proceedings or otherwise, Borrower will pay (on demand) all reasonable costs and
expenses of collection incurred, including reasonable attorneys' fees.
Continued Liability. Borrower shall remain primarily liable on this Note until
full payment, unaffected by any agreement or transaction between Lender and any
subsequent Borrower as to payment of principal, interest or other moneys, by any
forbearance or extension of time, guaranty or assumption by others, or by any
other matter, as to all of which notice is hereby waived by Borrower.
Section Headings. Any section headings in this Note are included herein for
convenience of reference only and shall not constitute apart of this Note for
any other purpose.
4
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officer as of the day and year first above written.
Borrower:
AMNEX, INC.
By: ____________________________
Name: Peter Izzo
Title: President
AMERICAN NETWORK EXCHANGE, INC.
By: ________________________________
Name: Peter Izzo
Title: Chief Executive Officer
CRESCENT PUBLIC COMMUNICATIONS INC.
By: __________________________________
Name: Peter Izzo
Title: President and Chief Executive Officer
5
Exhibit 11
<TABLE>
Statements Regarding Computation of Per Share Earnings
(In thousands, except share data)
<CAPTION>
Three months Nine months
ended September 30 ended September 30
1997 1996 1997 1996
-----------------------------------------------------------------
Primary Earnings Per Share:
Weighted average number of shares of
<S> <C> <C> <C> <C>
Common Stock outstanding 31,501,875 23,889,034 29,365,576 21,280,865
Net effect of dilutive stock options
and warrants based on the Treasury
stock method using the average fair
market value in effect for the period 94,862 777,235 715,801 733,266
--------- --------- ---------- ----------
Weighted Average Share Outstanding 31,596,737 24,666,269 30,081,377 22,014,131
========== ========== ========== ==========
Net Income (Loss) $ (6,557) $ 897 $ (8,133) $ 1,695
Less preferred stock dividends and deemed dividends 154 154 462 462
---------- ---------- ---------- ----------
Net Income (Loss) available for common shares $ (6,711) $ 743 $ (8,595) $ 1,233
========== ========== ========== ==========
Net Income (Loss) per share $ (0.21) $ 0.03 $ (0.29) $ 0.06
========== ========== ========== ==========
Fully Diluted Earnings Per Share:
Weighted average number of shares of
Common Stock outstanding 31,501,875 23,889,034 29,365,576 21,280,865
Net effect of dilutive stock options and
warrants based on the Treasury stock
method using the average fair market
value in effect for the period 94,862 777,235 715,801 733,266
Net effect of convertible securities 6,442,558 7,656,406 7,690,399 7,656,406
--------- --------- --------- ---------
Weighted Average Share Outstanding 38,039,295 32,322,675 37,771,776 29,670,537
========== ========== ========== ==========
Net Income (Loss) $ (6,557) $ 897 $ (8,133) $ 1,695
Add interest expense on convertible debt, net of tax 28 10 87 31
---------- ---------- ---------- ----------
Net Income (Loss) available for common share$ (6,529) $ 907 $ (8,046) $ 1,726
========== ========== ========== ==========
Net Income (Loss) per share $ (0.17) $ 0.03 $ (0.21) $ 0.06
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> I
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> dec-31-1997
<PERIOD-END> sep-30-1997
<EXCHANGE-RATE> 1
<CASH> 1,236
<SECURITIES> 0
<RECEIVABLES> 21,945
<ALLOWANCES> 4,579
<INVENTORY> 1,032
<CURRENT-ASSETS> 28,214
<PP&E> 40,659
<DEPRECIATION> 16,249
<TOTAL-ASSETS> 99,924
<CURRENT-LIABILITIES> 43,305
<BONDS> 33,592
0
0
<COMMON> 65,511
<OTHER-SE> (42,360)
<TOTAL-LIABILITY-AND-EQUITY> 99,924
<SALES> 0
<TOTAL-REVENUES> 93,707
<CGS> 0
<TOTAL-COSTS> 78,753
<OTHER-EXPENSES> 20,084
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,823
<INCOME-PRETAX> (7,958)
<INCOME-TAX> 175
<INCOME-CONTINUING> (8,133)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,133)
<EPS-PRIMARY> (0.29)
<EPS-DILUTED> (0.21)
</TABLE>
