EXECUTION COPY
Exhibit 10.12
ECONOPHONE, INC.
$300,000,000
11% Senior Discount Notes Due 2008
PLACEMENT AGREEMENT
February 12, 1998
February 12, 1998
Xxxxxx Xxxxxxx & Co.
Incorporated
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Dear Sirs and Mesdames:
ECONOPHONE, INC., a Delaware corporation (the "Company"), proposes
to issue and sell to you (the "Placement Agent") $300,000,000 principal
amount at maturity of its 11% Senior Discount Notes due 2008 (collectively,
the "Notes") to be issued pursuant to the provisions of an Indenture dated as
of the Closing Date (as defined below) (the "Indenture") between the Company
and The Bank of New York, a New York banking corporation, as Trustee (in such
capacity, the "Trustee").
The Notes will be offered without being registered under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance on
exemptions therefrom.
The Placement Agent and its direct and indirect transferees will be
entitled to the benefits of a registration rights agreement (the
"Registration Rights Agreement"), to be dated the Closing Date and to be
substantially in the form attached hereto as Exhibit A.
In connection with the sale of the Notes, the Company has prepared
a preliminary offering memorandum (the "Preliminary Offering Memorandum") and
will prepare a final offering memorandum (the "Final Offering Memorandum"
and, with the Preliminary Offering Memorandum, each an "Offering Memorandum")
setting forth or including a description of the terms of the Notes, the terms
of the offering and a description of the Company and its business.
1. Representations and Warranties. The Company represents and
warrants to, and agrees with, the Placement Agent that as of the date hereof:
(a) The Preliminary Offering Memorandum does not contain and the
Final Offering Memorandum, in the form used by the Placement Agent to
confirm sales and on the Closing Date, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and
warranties set forth in this Section 1(a) do not apply to statements or
omissions in either Offering Memorandum based upon information relating to
the Placement Agent furnished to the Company in writing by the Placement
Agent expressly for use therein.
(b) The Company has been duly incorporated, is validly subsisting
under the laws of the State of Delaware, has the corporate power and
authority to own its property and to conduct its business as described in
each Offering Memorandum and is duly qualified to transact business and is
in good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification, except
to the extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(c) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to
own its property and to conduct its business as described in each Offering
Memorandum and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its subsidiaries, taken
as a whole.
(d) This Agreement has been duly authorized, executed and delivered
by the Company.
(e) Each of the Notes has been duly authorized and, when executed,
authenticated in accordance with the terms of the Indenture and delivered
to and paid for by the Placement Agent in accordance with the terms of this
Agreement, will (x) be a valid and binding obligation of the Company
enforceable in accordance with its terms, except (A) as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally,
(B) rights of acceleration, if applicable, and the availability of
equitable remedies may be limited by equitable principles of general
applicability and (C) that provisions of the Notes requiring any waiver of
stay or extension laws, diligent performance or other acts on the part of
the Trustee and payment of liquidated damages may be unenforceable under
principles of public policy and (y) be entitled to the benefits of the
Indenture and the Registration Rights Agreement.
(f) Each of the Indenture and the Registration Rights Agreement has
been duly authorized and, when executed and delivered by the Company and
each other party thereto, will be a valid and binding agreement of the
Company, enforceable in accordance with its terms except (w) as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, (x) rights of acceleration, if applicable, and the availability
of equitable remedies may be limited by equitable principles of general
applicability, (y) that provisions of the Indenture requiring any waiver of
stay or extension laws, diligent performance or other acts on the part of
the Trustee and payment of liquidated damages may be unenforceable under
principles of public policy and (z) rights to indemnification and
contribution under the Registration Rights Agreement may be limited by
public policy.
(g) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement, the Indenture, the
Registration Rights Agreement and the Notes (collectively, the "Transaction
Documents"), the issuance and sale and delivery in the manner contemplated
by the Offering Memorandum of the Notes will not contravene any provision
of applicable law or the certificate of incorporation or by-laws of the
Company or any agreement or other instrument binding upon the Company or
any of its subsidiaries or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or
any subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under the Transaction
Documents, except, (x) such as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and sale of the
Notes or (y) such as may be required under any federal or state securities
law in connection with the performance by the Company of its obligations
under the Registration Rights Agreement.
(h) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from that
set forth in the Preliminary Offering Memorandum. Furthermore, (1) the
Company and its subsidiaries have not incurred any material liability or
obligation, direct or contingent, nor entered into any material transaction
not in the ordinary course of business; (2) the Company has not purchased
any of its outstanding capital stock, nor declared, paid or otherwise made
any dividend or distribution of any kind on its capital stock other than
ordinary and customary dividends; and (3) there has not been any material
change in the capital stock, short-term debt or long-term debt of the
Company and its subsidiaries, except in each case as described in or
contemplated by the Final Offering Memorandum in respect of the business of
the Company described therein.
(i) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is
subject other than proceedings accurately described in all material
respects in each Offering Memorandum and proceedings that would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole, or on the power or ability of the Company to perform its obligations
under any of the Transaction Documents or to consummate the transactions
contemplated by the Final Offering Memorandum.
(j) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D under the Securities Act, an "Affiliate") of the Company
has directly, or through any agent (except, in the case of clause (ii)
below in connection with the offering of the Notes, the Placement Agent or
any person acting on its behalf), (i) sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any security (as
defined in the Securities Act) which is or will be integrated with the sale
of the Notes in a
manner that would require the registration under the Securities Act of the
Notes or (ii) engaged in any form of general solicitation or general
advertising in connection with the offering of the Notes (as those terms
are used in Regulation D under the Securities Act) in any manner involving
a public offering within the meaning of Section 4(2) of the Securities Act.
(k) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act").
(l) It is not necessary in connection with the offer, sale and
delivery of the Notes to the Placement Agent in the manner contemplated by
this Agreement to register the Notes under the Securities Act or to qualify
the Indenture under the Trust Indenture Act of 1939, as amended.
(m) The Notes satisfy the requirements set forth in Rule 144A(d)(3)
under the Securities Act.
(n) The Company and its subsidiaries (i) are in compliance with all
applicable foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or hazardous
or toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, singly or in
the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(o) None of the Company, its Affiliates or any person acting on its
or their behalf (other than the Placement Agent and any person acting on
its behalf) has engaged in any directed selling efforts (as that term is
defined in Regulation S under the Securities Act ("Regulation S")) with
respect to the Notes and the Company and its Affiliates and any person
acting on its or their behalf (other than the Placement Agent and any
person acting on its behalf) have complied with the offering restrictions
requirement of Regulation S with respect to the offering of the Notes.
(p) The Company and its subsidiaries have good title to all
properties and assets owned by them and have good leasehold interest in
each property and asset leased by them, in each case free and clear of all
pledges, liens, encumbrances, security interests, charges, mortgages and
defects, except (i) such as are described or referred to in each Offering
Memorandum and the financial statements and notes thereto contained
therein, (ii) such as do not materially affect the value of such property
or asset, (iii) such as do not interfere with the use made and proposed to
be made of such properties or assets by
the Company or its subsidiaries, as the case may be or (iv) such as do not
have a material adverse effect on the Company and its subsidiaries, taken
as a whole.
(q) The Company and its subsidiaries have filed all foreign and U.S.
federal and state income and franchise tax returns required to be filed and
have paid all taxes shown thereon as due, and there is no material tax
deficiency which has been asserted against the Company or any of its
subsidiaries; all material tax liabilities of the Company and its
subsidiaries are adequately provided for on the books of the Company or its
subsidiaries, as the case may be.
(r) The Company and its subsidiaries own or possess all material
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names currently employed by them in
connection with the business now operated by them, and neither the Company
nor any of its subsidiaries has received any notice of infringement of or
conflict with asserted rights of others with respect to any of the
foregoing which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would reasonably be expected to
result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business or operations of the Company and
its subsidiaries, taken as a whole.
(s) No material labor dispute with the employees of the Company or
any of its subsidiaries exists, except as described in or contemplated by
each Memorandum, or, to the knowledge of the Company, is imminent; and the
Company is not aware of any existing, threatened or imminent labor
disturbance by the employees of any of its principal suppliers,
manufacturers or contractors that would reasonably be expected to result in
any material adverse change in the condition, financial or otherwise, or in
the earnings, business or operations of the Company and its subsidiaries,
taken as a whole.
(t) Except as set forth in each Offering Memorandum (including,
without limitation, in the section thereof entitled "Business -
Regulation"), the Company and its subsidiaries have all necessary permits,
licenses, authorizations, consents and approvals and have made all
necessary filings required under any federal, state, local or foreign
supranational, national or regional law, regulation or rule, and have
obtained all necessary authorizations, consents and approvals from other
persons, material to the present conduct of their respective businesses, in
each case except to the extent that the failure to obtain such permits,
licenses, authorizations, consents or approvals or to make such filings
would not, singly or in the aggregate, have a material adverse effect on
the properties, assets, prospects, condition, financial or otherwise,
business or operations of the Company and its subsidiaries, taken as a
whole; except as set forth in each Offering Memorandum, the Company and its
subsidiaries have not received any notice of proceedings which remain
unresolved relating to revocation or modification of any such permits,
licenses, authorizations, consents or approvals, nor is the Company or any
of its subsidiaries in violation of, or in default under, any such license,
authorization, consent or approval or any federal, state, local or foreign
supranational, national or regional law,
regulation or rule or any decree, order or judgment applicable to the
Company or its subsidiaries the effect of which could have a material
adverse effect on the properties, assets, prospects, condition, financial
or otherwise, business or operations of the Company and its subsidiaries,
taken as a whole.
(u) The Company and its subsidiaries are insured against such losses
and risks and in such amounts as management of the Company reasonably
believes are prudent for the operation of their business; and neither the
Company nor any of its subsidiaries has any reason to believe that it will
not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not materially
and adversely affect the condition, financial or otherwise, or the
earnings, business or operations of the company and its subsidiaries, taken
as a whole, except as described in or contemplated by each Offering
Memorandum.
(v) The Company and its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (1)
transactions are executed in accordance with management's general or
specific authorizations; (2) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (3)
access to assets is permitted only in accordance with management's general
or specific authorization; and (4) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(w) The terms of the Notes, the Indenture and the Registration Rights
Agreement conform in all material respects to the description thereof
contained in the Final Offering Memorandum under the heading "Description
of the Notes."
(x) The financial statements included in each Offering Memorandum
present fairly the consolidated financial position of the Company as of the
dates indicated and the results of operations and cash flows of the Company
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. The selected financial
data included in each Offering Memorandum present fairly the information
shown therein and have been compiled from data contained in the audited
financial statements of the Company, except as indicated in each Offering
Memorandum.
(y) (A) The only telecommunications services provided by the Company
and its subsidiaries in France are prepaid card services and calling card
services utilizing international toll free access, telecommunications
services utilizing local dial up access and data services, and (B) the only
telecommunications services provided by the Company and its subsidiaries in
Belgium are international long distance services, utilizing local dial up
access and international toll free access, and data services, including
voicemail, e-mail and facsimile services.
2. Terms of Offering. You have advised the Company that the
Placement Agent will make an offering of the Notes purchased by the Placement
Agent hereunder on the terms set forth in the Final Offering Memorandum as soon
as practicable after this Agreement is entered into as in your judgment is
advisable.
3. Agreement to Sell and Purchase. The Company hereby agrees to
sell to the Placement Agent, and the Placement Agent, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees to purchase from the Company the Notes at a purchase
price of $565.44 per Note, for an aggregate purchase price of $169,632,525.
The Company hereby agrees that, without your prior written consent,
it will not, during the period beginning on the date hereof and continuing to
and including the Closing Date, offer, sell, contract to sell or otherwise
dispose of any debt of the Company or warrants to purchase debt of the
Company substantially similar to the Notes (other than the sale of the Notes
under this Agreement).
4. Payment and Delivery. Payment for the Notes shall be made
against delivery of the Notes at a closing (the "Closing") to be held at the
office of Shearman & Sterling, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, at
10:00 A.M., local time, on February 18, 1998, or at such other time on the
same or such other date, not later than March 3, 1998, as shall be designated
in writing by the Placement Agent. The time and date of such payment are
herein referred to as the Closing Date. Payment for the Notes shall be made
by wire transfer payable to the order of the Company in federal or other
funds immediately available in New York City.
Certificates for the Notes shall be in definitive form or global
form, as specified by you, and registered in such names and in such
denominations as you shall request in writing not later than one full
business day prior to the Closing Date. The certificates evidencing the
Notes shall be delivered to you on the Closing Date for the account of the
Placement Agent, with any transfer taxes payable in connection with the
transfer of the Notes to the Placement Agent duly paid, against payment of
the purchase price therefor.
5. Conditions to the Placement Agent's Obligations. The
obligation of the Placement Agent under this Agreement to purchase and pay
for the Notes on the Closing Date is subject to the following conditions:
(a) Subsequent to the date of this Agreement and prior to the
Closing Date,
(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of
any review for a possible change that does not indicate the direction
of the possible change, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2)
under the Securities Act; and
(ii) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations, of the Company
and its subsidiaries, taken as a whole, from that set forth in the
Final Offering Memorandum (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your judgment,
impracticable to market the Notes on the terms and in the manner
contemplated in the Final Offering Memorandum.
(b) You shall have received on the Closing Date a certificate, dated
the Closing Date and signed by an executive officer of the Company, to the
effect set forth in clause (a)(i) above and to the effect that the
representations and warranties of the Company contained in this Agreement
are true and correct as of the Closing Date and that the Company has
complied with all of the agreements and satisfied all of the conditions on
its part to be performed or satisfied on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his knowledge as to proceedings threatened.
(c) You shall have received on the Closing Date an opinion of Xxxxxxx
Xxxx & Xxxxx LLP, independent counsel for the Company, dated the Closing
Date, substantially to the effect set forth in Exhibit B.
(d) You shall have received on the Closing Date an opinion of
Shearman & Sterling, counsel for the Placement Agent, dated the Closing
Date, in form and substance satisfactory to you.
(e) You shall have received on the Closing Date opinions of (i) Xxxx
Xxxxxxx Xxxxx & Xxxxxxxxxx, special U.S. federal regulatory counsel to the
Company, (ii) Xxxxx X.X. Xxxxxxxxx, special U.S. state regulatory counsel
to the Company, (iii) Xxxxxxx & Xxxxxxx, special U.K. and European Union
regulatory counsel to the Company, (iv) Xxxxxx Xxxxxxx, special Belgian
regulatory counsel to the Company, (vi) Dser Amereller Xxxxx, special
German regulatory counsel to the Company, and (vii) Xxxxxxx & Xxxxxxx,
special French regulatory counsel to the Company, respectively, dated the
Closing Date, substantially in the form of Xxxxxxxx X-0, X-0, X-0, X-0, C-5
and C-6, respectively.
(f) You shall have received on each of the date hereof and the
Closing Date a letter, dated the date hereof or the Closing Date, as the
case may be, in form and substance satisfactory to you, from Xxxxxx
Xxxxxxxx LLP, the Company's independent public accountants, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements
and certain financial information contained in or incorporated by reference
into the Final
Offering Memorandum; provided that the letter delivered on the Closing Date
shall use a "cut-off date" not earlier than the date hereof.
(g) Each of the Transaction Documents shall have been (or shall,
simultaneously with the Closing, be) executed and delivered by all parties
thereto other than the Placement Agent.
(h) You shall have received such other documents as you and your
counsel shall reasonably request.
6. Covenants of the Company. In further consideration of the
agreements of the Placement Agent contained in this Agreement, the Company
covenants with the Placement Agent as follows:
(a) To furnish to you, without charge, prior to 10:00 a.m. New York
City time on the business day next succeeding the date of this Agreement
and during the period mentioned in paragraph (c) below, as many copies of
the Final Offering Memorandum, and any supplements and amendments thereto,
as you may reasonably request.
(b) Before amending or supplementing either Offering Memorandum, to
furnish to you a copy of each such proposed amendment or supplement and not
to use any such proposed amendment or supplement to which you reasonably
object without unreasonable delay.
(c) If, during such period after the date hereof and prior to the
date on which all of the Notes shall have been sold by the Placement Agent,
any event shall occur or condition exist as a result of which it is
necessary in your judgment to amend or supplement the Final Offering
Memorandum in order to make the statements therein, in the light of the
circumstances when such Offering Memorandum is delivered to a purchaser,
not misleading, or if, in the opinion of counsel to the Placement Agent it
is necessary to amend or supplement such Offering Memorandum to comply with
applicable law, forthwith to prepare and furnish, at its own expense, to
the Placement Agent, either amendments or supplements to such Offering
Memorandum so that the statements in such Offering Memorandum as so amended
or supplemented will not, in light of the circumstances when such Offering
Memorandum is delivered to a purchaser, be misleading or so that such
Offering Memorandum, as so amended or supplemented, will comply with
applicable law.
(d) To endeavor to qualify the Notes for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request; provided that in no event shall the Company be obligated to
qualify to do business in any jurisdiction where it is not now so qualified
or to take any action which would subject it to taxation in any
jurisdiction where it is not now so subject or to service or process in
suits, other than those arising out of the offering or sale of the Notes,
in any jurisdiction where it is not now so subject.
(e) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid
all expenses incident to the performance of its obligations under this
Agreement, including: (i) all the fees or expenses in connection with the
preparation of each Offering Memorandum and all amendments and supplements
thereto, (ii) all costs and expenses related to the preparation, issuance,
transfer and delivery of the Notes, including any transfer or other taxes
payable thereon, (iii) the fees, disbursements and expenses of the
Company's counsel and accountants and the Trustee, (iv) the cost of
printing or producing any Blue Sky or legal investment memorandum in
connection with the offer and sale of the Notes under state securities laws
and all expenses in connection with the qualification of the Notes for
offer and sale under state securities laws as provided in Section 6(d)
hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Placement Agent in connection with such qualification and
in connection with the Blue Sky or legal investment memorandum, (v) the
printing and delivery to the Placement Agent in quantities as hereinabove
stated of copies of the Offering Memorandum and any amendments or
supplements thereto, (vi) the fees and expenses, if any, incurred in
connection with the admission of the Notes for trading on the Private
Offerings, Resale and Trading through Automated Linkages ("PORTAL") and any
other appropriate market system agreed upon by the Company and the
Placement Agent, (vii) any fees charged by rating agencies for the rating
of the Notes, (viii) the costs and expenses of the Company relating to
investor presentations on any "road show" undertaken in connection with the
marketing of the Notes, including, without limitation, expenses associated
with the production of road show slides and graphics, fees and expenses of
any consultants engaged in connection with the road show presentations with
the prior approval of the Company, travel and lodging expense of the
representatives and officers of the Company and any such consultants, and
the cost of any aircraft chartered in connection with the road show, and
(ix) all other costs and expenses incident to the performance of the
obligations of the Company hereunder for which provision is not otherwise
made in this Section. It is understood, however, that except as provided
in this Section, Section 8, and the last paragraph of Section 10, the
Placement Agent will pay all of its costs and expenses, including fees and
disbursements of its counsel, transfer taxes payable on resale of any of
the Notes by it and any advertising expenses connected with any offers it
may make.
(f) 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 Securities Act) which could be integrated with the sale
of the Notes in a manner which would require the registration under the
Securities Act of the Notes.
(g) Not to solicit any offer to buy or offer or sell the Notes by
means of any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the
Securities Act.
(h) While any of the Notes remain outstanding, to make available,
upon request, to any seller of such Notes, the information specified in
Rule 144A(d)(4) under the Securities Act, unless the Company is then
subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(i) Except as contemplated by the Registration Rights Agreement, none
of the Company, its Affiliates or any person acting on its or their behalf
(other than the Placement Agent) will engage in any directed selling
efforts (as that term is defined in Regulation S) with respect to the Notes
and the Company and its Affiliates and each person acting on its or their
behalf (other than the Placement Agent) will comply with the offering
restrictions of Regulation S.
(j) To use its best efforts to permit the Notes to be designated
PORTAL securities in accordance with the rules and regulations adopted by
the National Association of Securities Dealers, Inc. relating to trading in
the PORTAL Market and to list the Notes on any other appropriate market
system agreed upon by the Company and the Placement Agent.
(k) The Company will, and will cause the Trustee to, refuse to
register any transfer of the Notes sold pursuant to Regulation S if such
transfer is not made in accordance with the provisions of Regulation S.
(l) During the period of two years after the Closing Date, the
Company will not, and will not permit any of its affiliates (as defined in
Rule 144A under the Securities Act) (other than the Placement Agent or any
of its affiliates (other than the Company) to the extent the Placement
Agent is deemed to be an affiliate of the Company) to resell any of the
Notes which constitute "restricted securities" under Rule 144A that have
been reacquired by any of them.
(m) To use the proceeds from the sale of the Notes in the manner set
forth in the Final Offering Memorandum.
(n) To use its best efforts to transfer all the authorizations
granted in relation to the conduct of its business to Econophone, Inc., a
New York corporation, that is the predecessor of the Company, by state
regulatory authorities or otherwise obtain all approvals necessary to
conduct its business from such state regulatory authorities as promptly as
possible.
7. Offering of Notes; Restrictions on Transfer. (a) The Placement
Agent represents and warrants that it is a qualified institutional buyer as
defined in Rule 144A under the Securities Act (a "QIB"). The Placement Agent
agrees with the Company that (i) it will not solicit offers for, or offer or
sell, the Notes by any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Securities
Act and (ii) it will solicit offers for the Notes only from, and will offer and
sell the Notes only to, persons that it
reasonably believes to be (A) in the case of offers inside the United States,
(x) QIBs or (y) other institutional accredited investors (as defined in
Rule 501(a) (1), (2), (3) or (7) under the Securities Act) ("institutional
accredited investors") that, prior to their purchase of the Notes, deliver to
the Placement Agent a letter containing the representations and agreements set
forth in Appendix A to the Offering Memorandum and (B) in the case of offers
outside the United States, to persons other than U.S. persons ("foreign
purchasers," which term shall include dealers or other professional fiduciaries
in the United States acting on a discretionary basis for foreign beneficial
owners (other than an estate or trust)) that, in each case, in purchasing the
Notes are deemed to have represented and agreed as provided in the Final
Offering Memorandum under the caption "Transfer Restrictions."
(b) The Placement Agent represents, warrants, and agrees with respect
to offers and sales outside the United States that:
(i) it understands that no action has been or will be taken in any
jurisdiction by the Company that would permit a public offering of the
Notes or possession or distribution of either Offering Memorandum or any
other offering or publicity material relating to the Notes in any country
or jurisdiction where action for that purpose is required;
(ii) it will comply with all applicable laws and regulations in each
jurisdiction in which it acquires, offers, solicits offers to buy, sells or
delivers the Notes or has in its possession or distributes either Offering
Memorandum or any such other material, in all cases at its own expense;
(iii) the Notes have not been and will not be registered under the
Securities Act and may not be offered or sold within the United States or
to, or for the account or benefit of, U.S. persons except in accordance
with Rule 144A or Regulation S or pursuant to another exemption from the
registration requirements of the Securities Act;
(iv) it has offered the Notes and will offer and sell the Notes (A)
as part of its distribution at any time and (B) otherwise until 40 days
after the Closing Date, only in accordance with Rule 903 of Regulation S
or as otherwise permitted in Section 7(a); accordingly, neither the
Placement Agent, its Affiliates nor any persons acting on its or their
behalf have engaged or will engage in any directed selling efforts
(within the meaning of Regulation S) with respect to the Notes and the
Placement Agent, its Affiliates and any such persons have complied and
will comply with the offering restrictions requirements of Regulation S;
(v) it has (A) not offered or sold and, during the period of six
months from the Closing Date, will not offer or sell any Notes 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 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) complied and will comply with all
applicable provisions of the Financial Services Xxx 0000 and the
Regulations with respect to anything done by it in relation to the Notes
in, from or otherwise involving the United Kingdom; and (C) only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Notes if that person is
of a kind described in Article 11(3) of the Financial Services Xxx 0000
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom
such document may otherwise lawfully be issued or passed on;
(vi) it understands that the Notes have not been and will not be
registered under the Securities and Exchange Law of Japan, and represents
that it has not offered or sold, and agrees that it will not offer or sell,
any Notes directly or indirectly in Japan or for the account of any
resident of Japan except (A) pursuant to any exemption from the
registration requirements of the Securities and Exchange Law of Japan and
(B) otherwise in compliance with applicable provisions of Japanese law; and
(vii) the Placement Agent agrees that, at or prior to confirmation
of sales of the Notes, it will have sent to each distributor, dealer or
person receiving a selling concession, fee or other remuneration that
purchases such Notes from it during the restricted period a confirmation or
notice to substantially the following effect:
"The Notes covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and may not
be offered and sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of their distribution at any
time or (ii) otherwise until 40 days after the closing date, except in
either case in accordance with Regulation S (or Rule 144A if
available) under the Securities Act. Terms used above have the
meanings given to them by Regulation S."
Terms used in this Section 7(b) and not otherwise defined in this Agreement have
the meanings given to them by Regulation S.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless the Placement Agent, and each person, if any, who
controls the Placement Agent within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in either Offering
Memorandum (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact necessary to make the statements
therein in the light of the circumstances under which they were made not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to
the Placement Agent furnished to the Company in writing by the Placement Agent
expressly for use therein.
(b) The Placement Agent agrees to indemnify and hold harmless the
Company, its directors, its officers and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company to the Placement Agent, but only with reference to information
relating to the Placement Agent furnished to the Company in writing by the
Placement Agent expressly for use in either Offering Memorandum or any
amendments or supplements thereto.
(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 Section 8(a) or 8(b), such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel 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 (i) the
indemnifying party and the indemnified party shall have mutually agreed to
the retention of such counsel or (ii) 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 respect of the legal expenses of any indemnified party in connection
with any proceeding or related proceedings in the same jurisdiction, be
liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Xxxxxx Xxxxxxx & Co. Incorporated in the case of
parties indemnified pursuant to Section 8(a) and by the Company in the case
of parties indemnified pursuant to Section 8(b). The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as
contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of
the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement, unless such fees and expenses of counsel are
disputed by the indemnifying party in good faith. 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 on claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in Section 8(a)
or 8(b) is unavailable to an indemnified party or insufficient in respect of
any losses, claims, damages or liabilities, then each indemnifying party
under such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company, on the one hand, and the Placement Agent, on the
other hand, from the offering of the Notes or (ii) if the allocation provided
by clause 8(d)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause 8(d)(i) above but also the relative fault of the
Company on the one hand and of the Placement Agent on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand and the Placement Agent on the other hand in connection with the
offering of the Notes shall be deemed to be in the same respective
proportions as the net proceeds from the offering of the Notes (before
deducting expenses) received by the Company and the total discounts and
commissions received by the Placement Agent in respect thereof bear to the
aggregate offering price of the Notes. The relative fault of the Company on
the one hand and of the Placement Agent on the other hand 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 the Company or by the
Placement Agent and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) The Company and the Placement Agent agree that it would not be
just or equitable if contribution pursuant to this Section 8 were determined
by pro rata allocation or by any other method of allocation that does not
take account of the equitable considerations referred to in Section 8(d).
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in Section 8(d) 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 8, the Placement Agent shall not be required to
contribute any amount in excess of the amount by which the total price at
which the Notes resold by it in the initial placement of such Notes were
offered to investors exceeds the amount of any damages that the Placement
Agent has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. 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. The remedies provided for in
this Section 8 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any indemnified party at law or in
equity.
(f) The indemnity and contribution provisions contained in this
Section 8 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full force
and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of the Placement Agent or any person
controlling the Placement Agent or by or on behalf of the Company, its
officers or directors or any person controlling the Company and (iii)
acceptance of and payment for any of the Notes.
9. Termination. This Agreement shall be subject to termination
by notice given by you to the Company, if (a) after the execution and
delivery of this Agreement and prior to the Closing Date (i) trading
generally shall have been suspended or materially limited on or by, as the
case may be, any of the New York Stock Exchange, the American Stock Exchange,
the National Association of Securities Dealers, Inc., the Chicago Board of
Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of
Trade, (ii) a general moratorium on commercial banking activities in New York
shall have been declared by either Federal or New York State authorities or
(iii) there shall have occurred any outbreak or escalation of hostilities or
any change in financial markets or any calamity or crisis that, in your
judgment, is material and adverse and (b) in the case of any of the events
specified in clauses 9(a)(i) through 9(a)(iii), such event singly or together
with any other such event makes it, in your judgment, impracticable to market
the Notes on the terms and in the manner contemplated in the Final Offering
Memorandum.
10. Effectiveness. This Agreement shall become effective upon the
execution and delivery hereof by the parties hereto.
If this Agreement shall be terminated by the Placement Agent,
because of any failure or refusal on the part of the Company to comply with
the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement (other than as a result of a breach of this Agreement by the
Placement Agent), the Company will reimburse the Placement Agent for all
out-of-pocket expenses (including the fees and disbursements of its counsel)
reasonably incurred by the Placement Agent in connection with this Agreement
or the offering contemplated hereunder.
11. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
13. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
Please confirm your agreement to the foregoing by signing in the space
provided below for that purpose and returning to us a copy hereof, whereupon
this Agreement shall constitute a binding agreement between us.
Very truly yours,
ECONOPHONE, INC.
By /s/ XXXX X. XXXX
--------------------------
Name: Xxxx X. Xxxx
Title: President and Chief
Operating Officer
Accepted as of the date hereof
XXXXXX XXXXXXX & CO.
INCORPORATED
By /s/ XXXXXXX XXXXXXX
---------------------------
Name: Xxxxxxx Xxxxxxx
Title: Principal
--------------------------------------------------------------
