Exhibit 4.6
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into July 1, 1997, between ECONOPHONE, INC., a New York corporation (the
"Company"), and XXXXXX XXXXXXX & CO. INCORPORATED (the "Placement Agent").
This Agreement is made pursuant to the Placement Agreement, dated June
26, 1997, between the Company and the Placement Agent (the "Placement
Agreement"), which provides for the sale by the Company to the Placement Agent
of 155,000 Units (the "Units"), each consisting of one 131/2% Senior Note due
2007 with a principal amount of $1,000 (collectively, the "Notes") and one
Warrant (collectively, the "Warrants") entitling the holder thereof to purchase
8.167 shares of Voting Common Stock, par value $.0001 per share, of the Company
(collectively, the "Common Stock"). In order to induce the Placement Agent to
enter into the Placement Agreement, the Company has agreed to provide to the
Placement Agent and its direct and indirect transferees the registration rights
set forth in this Agreement. The execution of this Agreement is a condition to
the closing under the Placement Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. DEFINITIONS.
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"BUSINESS DAY" shall have the meaning specified in the Indenture.
"CLOSING DATE" shall mean the Closing Date as defined in the Placement
Agreement.
"COMPANY" shall have the meaning set forth in the preamble and shall
also include the Company's successors.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"EXCHANGE OFFER" shall mean the exchange offer by the Company of
Exchange Securities for Registrable Securities pursuant to Section 2(a)
hereof.
"EXCHANGE OFFER REGISTRATION" shall mean a registration under the 1933
Act effected pursuant to Section 2(a) hereof.
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"EXCHANGE OFFER REGISTRATION STATEMENT" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another
appropriate form) and all amendments and supplements to such registration
statement, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"EXCHANGE SECURITIES" shall mean securities issued by the Company
under the Indenture containing terms identical to the Notes (except that
(i) interest thereon shall accrue from the last date on which interest was
paid on the Notes or, if no such interest has been paid, from July 1, 1997
and (ii) the interest rate per annum on the Exchange Securities shall be
131/2%; PROVIDED that if by January 15, 1998 the Company has not
consummated the Exchange Offer or caused the Shelf Registration Statement
to be declared effective, interest (in addition to interest otherwise due
on the Exchange Securities after such date) will accrue at a rate of .5%
per annum on the Exchange Securities) and to be offered to Holders of Notes
in exchange for Notes pursuant to the Exchange Offer.
"HOLDER" shall mean the Placement Agent, for so long as it owns any
Registrable Securities, and each of its successors, assigns and direct and
indirect transferees who become registered owners of Registrable Securities
under the Indenture; PROVIDED that for purposes of Sections 4 and 5 of this
Agreement, the term "Holder" shall include Participating Broker-Dealers (as
defined in Section 4(a)).
"INDENTURE" shall mean the Indenture relating to the Notes dated as of
July 1, 1997 between the Company and The Bank of New York, as trustee, and
as the same may be amended from time to time in accordance with the terms
thereof.
"MAJORITY HOLDERS" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Securities; PROVIDED
that whenever the consent or approval of Holders of a specified percentage
of Registrable Securities is required hereunder, Registrable Securities
held by the Company or any of its affiliates (as such term is defined in
Rule 405 under the Securities Act) (other than the Placement Agent or
subsequent holders of Registrable Securities if such subsequent holders are
deemed to be such affiliates solely by reason of their holding of such
Registrable Securities) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage or
amount.
"PERSON" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
"PLACEMENT AGENT" shall have the meaning set forth in the preamble.
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"PLACEMENT AGREEMENT" shall have the meaning set forth in the
preamble.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Shelf Registration
Statement, and by all other amendments and supplements to such prospectus,
and in each case including all material incorporated by reference therein.
"REGISTRABLE SECURITIES" shall mean the Notes; PROVIDED, HOWEVER, that
the Notes shall cease to be Registrable Securities (i) when a Registration
Statement with respect to such Notes shall have been declared effective
under the Securities Act and such Notes shall have been disposed of or
exchanged pursuant to such Registration Statement, (ii) when such Notes
have been sold to the public pursuant to Rule 144(k) (or any similar
provision then in force, but not Rule 144A) under the Securities Act or
(iii) when such Notes shall have ceased to be outstanding.
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees, (ii) all fees and
expenses incurred in connection with compliance with state securities or
blue sky laws (including reasonable fees and disbursements of one counsel
for any underwriters or Holders in connection with blue sky qualification
of any of the Exchange Securities or Registrable Securities), (iii) all
expenses of any Persons in preparing or assisting in preparing, word
processing, printing and distributing any Registration Statement, any
Prospectus, any amendments or supplements thereto, any underwriting
agreements, securities sales agreements and other documents relating to the
performance of and compliance with this Agreement, in each case to the
extent not paid or payable by any other person, (iv) all rating agency
fees, (v) all fees and disbursements relating to the qualification of the
Indenture under applicable securities laws, (vi) the fees and disbursements
of the Trustee and its counsel, (vii) the fees and disbursements of counsel
for the Company and, in the case of a Shelf Registration Statement, the
reasonable fees and disbursements of one counsel for the Holders (which
counsel shall be selected by the Majority Holders and which counsel may
also be counsel for the Placement Agent) and (viii) the fees and
disbursements of the independent public accountants of the Company,
including the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance, but excluding
fees and expenses of counsel to the underwriters (other than fees and
expenses set forth in clause (ii) above) or the Holders (other than fees
and expenses set forth in clause (vii) above) or accountants to the Holders
and underwriting
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discounts and commissions and transfer taxes, if any, relating to the sale,
disposition or exchange of Registrable Securities by a Holder.
"REGISTRATION STATEMENT" shall mean any registration statement of the
Company that covers any of the Exchange Securities or Registrable
Securities pursuant to the provisions of this Agreement and all amendments
and supplements to any 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.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended
from time to time.
"SHELF REGISTRATION" shall mean a registration effected pursuant to
Section 2(b) hereof.
"SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2(b) of this
Agreement which covers all of the Registrable Securities (but no other
securities unless approved by the Majority Holders whose Registrable
Securities are covered by such Shelf Registration Statement) on an
appropriate form under Rule 415 under the Securities Act, or any similar
rule that may be adopted by the SEC, 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" shall mean the trustee with respect to the Notes under the
Indenture.
"UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" shall mean a
registration in which Registrable Securities are sold to an Underwriter (as
hereinafter defined) for reoffering to the public.
2. REGISTRATION UNDER THE SECURITIES ACT.
(a) To the extent not prohibited by any applicable law or applicable
interpretation of the Staff of the SEC, the Company shall use its best efforts
to cause to be filed an Exchange Offer Registration Statement covering the offer
by the Company to the Holders to exchange all of the Registrable Securities for
Exchange Securities and to have such Registration Statement remain effective
until the closing of the Exchange Offer. The Company shall commence the
Exchange Offer promptly after the Exchange Offer
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Registration Statement has been declared effective by the SEC and use its best
efforts to have the Exchange Offer consummated not later than 60 days after such
effective date. The Company shall commence the Exchange Offer by mailing the
related exchange offer Prospectus and accompanying documents to each Holder
stating, in addition to such other disclosures as are required by applicable
law:
(i) that the Exchange Offer is being made pursuant to this
Registration Rights Agreement and that all Registrable Securities validly
tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be a period of
at least 20 Business Days from the date such notice is mailed) (the
"Exchange Dates");
(iii) that any Registrable Security not tendered will remain
outstanding and continue to accrue interest, but will not retain any rights
under this Registration Rights Agreement;
(iv) that Holders electing to have a Registrable Security exchanged
pursuant to the Exchange Offer will be required to surrender such
Registrable Security, together with the enclosed letters of transmittal, to
the institution and at the address (located in the Borough of Manhattan,
The City of New York) specified in the notice prior to the close of
business on the last Exchange Date; and
(v) that Holders will be entitled to withdraw their election, not
later than the close of business on the last Exchange Date, by sending to
the institution and at the address (located in the Borough of Manhattan,
The City of New York) specified in the notice a telegram, telex, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Registrable Securities delivered for exchange and a statement
that such Holder is withdrawing his election to have such Notes exchanged.
As soon as practicable after the last Exchange Date, the Company
shall:
(i) accept for exchange Registrable Securities or portions thereof
tendered and not validly withdrawn pursuant to the Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities or portions thereof so accepted for
exchange by the Company and issue, and cause the Trustee to promptly
authenticate and mail to each Holder, an Exchange Security equal in
principal amount to the principal amount of the Registrable Securities
surrendered by such Holder.
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The Company shall use its best efforts to complete the Exchange Offer as
provided above and shall comply with the applicable requirements of the
Securities Act, the Exchange Act and other applicable laws and regulations in
connection with the Exchange Offer. The Exchange Offer shall not be subject to
any conditions, other than that the Exchange Offer does not violate applicable
law or any applicable interpretation of the Staff of the SEC. The Company shall
inform the Placement Agent of the names and addresses of the Holders to whom the
Exchange Offer is made, and the Placement Agent shall have the right, subject to
applicable law, to contact such Holders and otherwise facilitate the tender of
Registrable Securities in the Exchange Offer.
(b) In the event that (i) the Company determines that the Exchange
Offer Registration provided for in Section 2(a) above is not available or may
not be consummated as soon as practicable after the last Exchange Date because
it would violate applicable law or the applicable interpretations of the Staff
of the SEC, (ii) the Exchange Offer is not for any other reason consummated by
January 15, 1998 or (iii) the Exchange Offer has been completed and in the
written opinion of counsel for the Placement Agent a Registration Statement must
be filed and a Prospectus must be delivered by the Placement Agent in connection
with any offering or sale of Registrable Securities (other than in situations
covered by Section 2(f) below), the Company shall use its best efforts to cause
to be filed as soon as practicable after such determination, date or notice of
such opinion of counsel is given to the Company, as the case may be, a Shelf
Registration Statement providing for the sale by the Holders of all of the
Registrable Securities, in the case of clause (i) or (ii) above, or by the
Placement Agent, in the case of clause (iii) above, and to have such Shelf
Registration Statement declared effective by the SEC. Subject to the
penultimate paragraph of Section 3 hereof, the Company agrees to use its best
efforts to keep the Shelf Registration Statement continuously effective until
the second anniversary of the Closing Date or such shorter period that will
terminate when all of the Registrable Securities covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement or all of the Notes cease to be Registrable Securities. The Company
further agrees to supplement or amend the Shelf Registration Statement if
required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration Statement or
by the Securities Act or by any other rules and regulations thereunder for shelf
registration or if reasonably requested by a Holder with respect to information
relating to such Holder, and, subject to the penultimate paragraph of Section 3
hereof, to use its best efforts to cause any such amendment to become effective
and such Shelf Registration Statement to become usable as soon as thereafter
practicable. The Company agrees to furnish to the Holders of Registrable
Securities copies of any such supplement or amendment promptly after its being
used or filed with the SEC.
(c) The Company shall pay all Registration Expenses in connection
with the registration pursuant to Section 2(a) or Section 2(b). Each Holder
shall pay all underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or
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disposition of such Holder's Registrable Securities pursuant to the Shelf
Registration Statement.
(d) An Exchange Offer Registration Statement pursuant to Section 2(a)
hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will
not be deemed to have become effective unless it has been declared effective by
the SEC; PROVIDED, HOWEVER, that, if, after it has been declared effective, the
offering of Registrable Securities pursuant to a Shelf Registration Statement is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Registration Statement
will be deemed not to have become effective during the period of such
interference until the offering of Registrable Securities pursuant to such
Registration Statement may legally resume. As provided for in the Indenture,
the interest rate on the Notes will be 131/2% per annum; PROVIDED that if by
January 15, 1998 the Company has not consummated the Exchange Offer or caused
the Shelf Registration Statement to be declared effective, interest (in addition
to interest otherwise due on the Exchange Securities after such date) will
accrue at a rate of .5% per annum on the Notes or the Exchange Securities, as
the case may be.
(e) Without limiting the remedies available to the Placement Agent
and the Holders, the Company acknowledges that any failure by the Company to
comply with its obligations under Section 2(a) and Section 2(b) hereof may
result in material irreparable injury to the Placement Agent or the Holders for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Placement Agent or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Section 2(a)
and Section 2(b) hereof.
(f) In the event that, at any time after consummation of the Exchange
Offer or the effectiveness of the Shelf Registration Statement, the Placement
Agent, or any successor thereto, in its opinion, becomes an Affiliate (as such
term is defined in Rule 144 under the Securities Act) of the Company, or any
successor thereto, the Company (or its successor) shall use its best efforts to
cause to be filed as soon as practicable after receiving notice thereof from the
Placement Agent (or its successor) a shelf registration statement (the "Resales
Registration Statement") under the Securities Act providing for the sale by the
Placement Agent (or its successor) of all Notes or Exchange Securities it
acquires from time to time in connection with market-making activities and to
have such shelf registration statement declared effective by the SEC. The
provisions of this Agreement concerning the Shelf Registration Statement shall
apply to any Resales Registration Statement as if such Resales Registration
Statement were the Shelf Registration Statement filed pursuant to Section 2(b)
hereof (except that the Company (or its successor) will use its best efforts to
keep the Resales Registration Statement effective until the earlier of (i) the
date on which no Notes or Exchange Securities remain outstanding and (ii) such
time as the Placement Agent shall, in
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its opinion, have ceased to be an Affiliate of the Company, as evidenced by
written notice, which shall be sent promptly upon such event). Notwithstanding
the foregoing, the Company shall not be required to maintain the effectiveness
of any Resales Registration Statement if the Placement Agent shall have ceased
to make a market in the Notes or the Exchange Securities.
3. REGISTRATION PROCEDURES.
In connection with the obligations of the Company with respect to the
Registration Statements pursuant to Section 2(a) and Section 2(b) hereof, the
Company shall as expeditiously as is practicable:
(a) prepare and file with the SEC a Registration Statement on the
appropriate form under the Securities Act, which form (x) shall be selected
by the Company and (y) shall, in the case of a Shelf Registration, be
available for the sale of the Registrable Securities by the selling Holders
thereof and (z) shall comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the SEC to be filed therewith, and use its best efforts to
cause such Registration Statement to become effective and remain effective
in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable period and cause each
Prospectus to be supplemented by any required prospectus supplement and, as
so supplemented, to be filed pursuant to Rule 424 under the Securities Act;
to keep each Prospectus current during the period described under Section
4(3) and Rule 174 under the Securities Act that is applicable to
transactions by brokers or dealers with respect to the Registrable Notes or
Exchange Notes;
(c) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities, to counsel for the Placement Agent, to counsel for
the Holders and to each Underwriter of an Underwritten Offering of
Registrable Securities, if any, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any amendment or
supplement thereto and such other documents as such Holder or Underwriter
may reasonably request, in order to facilitate the public sale or other
disposition of the Registrable Securities; and the Company consents to the
use of such Prospectus and any amendment or supplement thereto in
accordance with applicable law by each of the selling holders of
Registrable Securities and any such Underwriters in connection with the
offering and sale of the Registrable Securities covered by and in the
manner described in such Prospectus or any amendment or supplement thereto
in accordance with applicable law;
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(d) use its best efforts to register or qualify the Registrable
Securities under all applicable state securities or "blue sky" laws of such
jurisdictions as any Holder of Registrable Securities covered by a
Registration Statement shall reasonably request in writing by the time the
applicable Registration Statement is declared effective by the SEC, to
cooperate with such Holders in connection with any filings required to be
made with the National Association of Securities Dealers, Inc. and do any
and all other acts and things which may be reasonably necessary or
advisable to enable such Holder to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder; PROVIDED,
HOWEVER, that the Company shall not be required to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it would
not otherwise be required to qualify but for this Section 3(d), (ii) file
any general consent to service of process or (iii) subject itself to
taxation in any such jurisdiction if it is not so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Securities, counsel for the Holders and counsel for the
Placement Agent promptly and, if requested by any such Holder or counsel,
confirm such advice in writing (i) when a Shelf Registration Statement has
become effective and when any post-effective amendment thereto has been
filed and becomes effective, (ii) of any request by the SEC or any state
securities authority for amendments and supplements to a Shelf
Registration Statement and Prospectus or for additional information after
the Shelf Registration Statement has become effective, (iii) of the
issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of a Shelf Registration Statement or the
initiation of any proceedings for that purpose, (iv) if, between the
effective date of a Shelf Registration Statement and the closing of any
sale of Registrable Securities covered thereby, the representations and
warranties of the Company contained in any underwriting agreement,
securities sales agreement or other similar agreement, if any, relating to
the offering cease to be true and correct in all material respects or if
the Company receives any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or
the initiation of any proceeding for such purpose, (v) of the happening of
any event during the period a Shelf Registration Statement is effective
which makes any statement made in such Registration Statement or the
related Prospectus untrue in any material respect or which requires the
making of any changes in such Registration Statement or Prospectus in order
to make the statements therein not misleading and (vi) of any determination
by the Company that a post-effective amendment to a Registration Statement
would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the
earliest possible moment and provide notice as promptly as practicable to
each Holder of the withdrawal of any such order;
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(g) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities, without charge, at least one conformed copy of each
Registration Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
requested);
(h) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Securities to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends and enable such Registrable Securities
to be in such denominations (consistent with the provisions of the
Indenture) and registered in such names as the selling Holders may
reasonably request at least two business days prior to the closing of any
sale of Registrable Securities;
(i) in the case of a Shelf Registration, upon the occurrence of any
event contemplated by Section 3(e)(v) hereof, use its best efforts to
prepare and file with the SEC a supplement or post-effective amendment to a
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The Company agrees to notify the Holders to suspend
use of the Prospectus as promptly as practicable after the occurrence of
such an event, and the Holders hereby agree to suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus
after initial filing of a Registration Statement, provide copies of such
document to the Placement Agent and its counsel (and, in the case of a
Shelf Registration Statement, the Holders and their joint counsel) and make
such of the representatives of the Company as shall be reasonably requested
by the Placement Agent or its counsel (and, in the case of a Shelf
Registration Statement, the Holders or their joint counsel) available for
discussion of such document, and shall not at any time file or make any
amendment to the Registration Statement, any Prospectus or any amendment of
or supplement to a Registration Statement or a Prospectus or file any
document which is to be incorporated by reference into a Registration
Statement or a Prospectus, of which the Placement Agent and its counsel
(and, in the case of a Shelf Registration Statement, the Holders and their
counsel) shall not have previously been advised and furnished a copy or to
which the
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Placement Agent or its counsel (and, in the case of a Shelf Registration
Statement, the Holders or their counsel) shall reasonably object without
unreasonable delay;
(k) obtain a CUSIP number for all Exchange Securities or Registrable
Securities, as the case may be, not later than the effective date of a
Registration Statement;
(l) cause the Indenture to be qualified under the Trust Indenture Act
of 1939, as amended (the "TIA"), in connection with the registration of the
Exchange Securities or Registrable Securities, as the case may be,
cooperate with the Trustee and the Holders to effect such changes to the
Indenture as may be required for the Indenture to be so qualified in
accordance with the terms of the TIA and execute, and use its best efforts
to cause the Trustee to execute, all documents as may be required to effect
such changes and all other forms and documents required to be filed with
the SEC to enable the Indenture to be so qualified in a timely manner;
(m) in the case of a Shelf Registration, make available for
inspection by a representative of the Holders of the Registrable
Securities, any Underwriter participating in any disposition pursuant to
such Shelf Registration Statement, and one firm of attorneys and
accountants designated by the Holders, at reasonable times and in a
reasonable manner, all financial and other records, pertinent documents and
properties of the Company as shall reasonably be requested, and cause the
respective officers, directors and employees of the Company to supply all
information reasonably requested by any such representative, Underwriter,
attorney or accountant in connection with a Shelf Registration Statement;
PROVIDED, HOWEVER, that any such representative, Underwriter, attorney or
accountant agrees to keep confidential any records, documents or other
information (collectively, "Information") received from the Company and
designated by the Company as confidential and to use such Information
obtained pursuant to this provision only in connection with the transaction
for which such Information was obtained, and not for any other purpose;
PROVIDED FURTHER, HOWEVER, that the foregoing confidentiality obligation
shall not apply to the extent that (i) such Information (x) is available to
the public, (y) subject to clause (z) below, is already in such
representative's, Underwriters', attorney's or accountant's possession
prior to receipt from the Company and such person does not otherwise have
any obligation to keep such Information confidential or (z) is obtained by
such representative, Underwriter, attorney or accountant from a third
person who, insofar as is known to such representative, Underwriter,
attorney or accountant after due inquiry, is not required to keep such
Information confidential or (ii) disclosure of such Information is required
by court or administrative order after the exhaustion of all appeals
therefrom;
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(n) in the case of a Shelf Registration, use its best efforts to
cause all Registrable Securities to be listed on any securities exchange or
any automated quotation system on which similar securities issued by the
Company are then listed if requested by the Majority Holders, to the extent
such Registrable Securities satisfy applicable listing requirements;
(o) if reasonably requested by any Holder of Registrable Securities
covered by a Registration Statement, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment such information with
respect to such Holder as such Holder reasonably requests to be included
therein and (ii) make all required filings of such Prospectus supplement or
such post-effective amendment as soon as practicable after the Company has
received notification of the matters to be incorporated in such filing; and
(p) in the case of a Shelf Registration, enter into such customary
agreements and take all such other customary actions in connection
therewith (including those requested by the Holders of a majority of the
Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities including, but not limited to,
an Underwritten Offering and in such connection, (i) to the extent
possible, make such representations and warranties to the Holders and any
Underwriters of such Registrable Securities with respect to the business of
the Company and its subsidiaries, the Registration Statement, Prospectus
and documents incorporated by reference or deemed incorporated by
reference, if any, in each case, in form, substance and scope as are
customarily made by issuers to underwriters in underwritten offerings and
confirm the same if and when requested, (ii) obtain opinions of counsel to
the Company (which counsel and opinions, in form, scope and substance,
shall be reasonably satisfactory to the Holders of a majority in principal
amount of the Registrable Securities to be sold in such Underwritten
Offering and any Underwriters and their respective counsel) addressed to
each selling Holder and Underwriter of Registrable Securities, covering the
matters customarily covered in opinions requested in underwritten
offerings, (iii) obtain "cold comfort" letters from the independent
certified public accountants of the Company (and, if necessary, any other
certified public accountant 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 Registration
Statement) addressed to each selling Holder and Underwriter of Registrable
Securities, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings, and (iv) deliver such documents and certificates as
may be reasonably requested by the Holders of a majority in principal
amount of the Registrable Securities being sold or the Underwriters, and
which are customarily delivered in underwritten offerings, to evidence the
continued validity of the representations and warranties of the Company
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made pursuant to clause (i) above and to evidence compliance with any
customary conditions contained in an underwriting agreement; PROVIDED that
the Company shall be required to use its best efforts to make an
Underwritten Offering only upon the request of Holders of at least (1) 25%
of the aggregate principal amount of the Registrable Securities outstanding
at the time such request is delivered to the Company and (2) 10% of the
aggregate principal amount of the Notes outstanding on the date hereof. In
the case of any Underwritten Offering, the Company shall provide written
notice to the Holders of all Registrable Securities of such Underwritten
Offering at least 30 days prior to the filing of a prospectus supplement
for such Underwritten Offering, (y) specifying a date, which shall be no
earlier than 10 days following the date of such notice, by which each such
Holder must inform the Company of its intent to participate in such
Underwritten Offering and (z) including the instructions such Holder must
follow in order to participate in such Underwritten Offering.
In the case of a Shelf Registration Statement, the Company may require
each Holder of Registrable Securities to furnish to the Company such information
regarding the Holder and the proposed distribution by such Holder of such
Registrable Securities as the Company may from time to time reasonably request
in writing.
In the case of a Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 3(e)(v) hereof, such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to a Shelf
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if
so directed by the Company, such Holder will deliver to the Company (at its
expense) all copies in its possession, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice. If the Company shall give any
such notice to suspend the disposition of Registrable Securities pursuant to a
Shelf Registration Statement, the Company shall extend the period during which
the Shelf Registration Statement shall be maintained effective pursuant to this
Agreement by the number of days during the period from and including the date of
the giving of such notice to and including the date when the Holders shall have
received copies of the supplemented or amended Prospectus necessary to resume
such dispositions. In addition, the Company may, for a good-faith business
purpose, provide the Holders with notice of the suspension of the disposition of
Registrable Securities pursuant to a Shelf Registration Statement. The Company
may give any such notice pursuant to the preceding sentence only twice during
any 365 day period and any such suspensions may not exceed 30 days for each
suspension and there may not be more than two suspensions in effect during any
365 day period (which may be cumulative).
14
The Holders of Registrable Securities covered by a Shelf Registration
Statement who desire to do so may sell such Registrable Securities in an
Underwritten Offering, subject to such terms and conditions as shall be
established by the Underwriters thereof. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers (the
"Underwriters") that will administer the offering will be selected by the
Majority Holders of the Registrable Securities included in such offering,
subject to the approval of the Company, which approval shall not be unreasonably
withheld.
4. PARTICIPATION OF BROKER-DEALERS IN EXCHANGE OFFER.
(a) The Staff of the SEC has taken the position that any
broker-dealer that receives Exchange Securities for its own account in the
Exchange Offer in exchange for Notes that were acquired by such broker-dealer as
a result of market-making or other trading activities (a "Participating
Broker-Dealer"), may be deemed to be an "underwriter" within the meaning of the
Securities Act and must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Securities.
The Company understands that it is the position of the Staff of the
SEC that if the Prospectus contained in the Exchange Offer Registration
Statement includes a plan of distribution containing a statement to the above
effect and the means by which Participating Broker-Dealers may resell the
Exchange Securities, without naming the Participating Broker-Dealers or
specifying the amount of Exchange Securities owned by them, such Prospectus may
be delivered by Participating Broker-Dealers to satisfy their prospectus
delivery obligation under the Securities Act in connection with resales of
Exchange Securities for their own accounts, so long as the Prospectus otherwise
meets the requirements of the Securities Act.
(b) In light of the above, notwithstanding the other provisions of
this Agreement, the Company agrees that the provisions of this Agreement as they
relate to a Shelf Registration shall also apply to an Exchange Offer
Registration to the extent, and with such reasonable modifications thereto as
may be, reasonably requested by the Placement Agent or by one or more
Participating Broker-Dealers, in each case as provided in clause (ii) below, in
order to expedite or facilitate the disposition of any Exchange Securities by
Participating Broker-Dealers consistent with the positions of the Staff recited
in Section 4(a) above; PROVIDED that:
(i) the Company shall not be required to amend or supplement the
Prospectus contained in the Exchange Offer Registration Statement, as would
otherwise be contemplated by Section 3(i), for a period exceeding 180 days
after the last Exchange Date (as such period may be extended pursuant to
the penultimate paragraph of Section 3 of this Agreement) and Participating
Broker-Dealers shall not
15
be authorized by the Company to deliver and shall not deliver such
Prospectus after such period in connection with the resales contemplated by
this Section 4; and
(ii) the application of the Shelf Registration procedures set forth in
Section 3 of this Agreement to an Exchange Offer Registration, to the
extent not required by the positions of the Staff of the SEC or the
Securities Act and the rules and regulations thereunder, will be in
conformity with the reasonable request to the Company by the Placement
Agent or with the reasonable request in writing to the Company by one or
more broker-dealers who certify to the Placement Agent and the Company in
writing that they anticipate that they will be Participating
Broker-Dealers; and PROVIDED FURTHER that, in connection with such
application of the Shelf Registration procedures set forth in Section 3 to
an Exchange Offer Registration, the Company shall be obligated (x) to deal
only with one entity representing the Participating Broker-Dealers as a
whole, which shall be the Placement Agent unless it elects not to act as
such representative, (y) to pay the fees and expenses of only one counsel
representing the Participating Broker-Dealers, which shall be counsel to
the Placement Agent unless such counsel elects not to so act and (z) to
cause to be delivered only one, if any, "cold comfort" letter with respect
to the Prospectus in the form existing on the last Exchange Date and with
respect to each subsequent amendment or supplement, if any, effected during
the period specified in clause (i) above.
(c) The Placement Agent shall have no liability to the Company or any
Holder with respect to any request that it may make pursuant to Section 4(b)
above.
5. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless the Placement
Agent, each Holder and each person, if any, who controls the Placement Agent or
any Holder within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, or is under common control with, or is
controlled by, the Placement Agent or any Holder, from and against all losses,
claims, damages and liabilities (including, without limitation, any legal or
other expenses reasonably incurred by the Placement Agent, any Holder or any
such controlling or affiliated person 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 any Registration
Statement (or any amendment thereto) pursuant to which Exchange Securities or
Registrable Securities were registered under the Securities Act, including all
documents incorporated therein by reference, or caused by 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, or caused by any
untrue statement or alleged untrue statement of a material fact contained in any
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or
16
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in 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 or any Holder furnished to the Company in
writing by the Placement Agent or any selling Holder expressly for use therein.
In connection with any Underwritten Offering permitted by Section 3, the Company
will also indemnify the Underwriters, if any, selling brokers, dealers and
similar securities industry professionals participating in the distribution,
their officers and directors and each Person who controls such Persons (within
the meaning of the Securities Act and the Exchange Act) to the same extent as
provided above with respect to the indemnification of the Holders, if requested
in connection with any Registration Statement.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company, the Placement Agent and the other selling Holders,
and each of their respective directors, officers who sign the Registration
Statement and each Person, if any, who controls the Company, the Placement Agent
and any other selling Holder 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 and the Holders, but
only with reference to information relating to such Holder furnished to the
Company in writing by such Holder expressly for use in any Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement 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 either paragraph (a) or paragraph (b) above, 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 connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (a) the reasonable fees and expenses of more than
one separate firm (in addition to any one firm of local counsel in each
applicable jurisdiction) for the Placement Agent and all persons, if any, who
control the Placement Agent within the meaning of either Section 15 of the
Securities
17
Act or Section 20 of the Exchange Act, (b) the reasonable fees and expenses of
more than one separate firm (in addition to one firm of local counsel in each
applicable jurisdiction) for the Company, its directors, its officers who sign
the Registration Statement and each person, if any, who controls the Company
within the meaning of either such Section and (c) the reasonable fees and
expenses of more than one separate firm (in addition to one firm of local
counsel in each applicable jurisdiction) for all Holders and all persons, if
any, who control any Holders within the meaning of either such Section, and that
all such fees and expenses shall be reimbursed as they are incurred, to the
extent not being contested by the indemnifying party in good faith. In such
case involving the Placement Agent and persons who control the Placement Agent,
such firm shall be designated in writing by the Placement Agent. In such case
involving the Holders and such persons who control Holders, such firm shall be
designated in writing by the Majority Holders. In all other cases, such firm
shall be designated by the Company. 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 reasonable 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 45 days after receipt
by such indemnifying party of the aforesaid request and (ii) such indemnifying
party shall not have reimbursed the indemnified party for such fees and expenses
of counsel 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 such 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) If the indemnification provided for in paragraph (a) or paragraph
(b) of this Section 5 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 in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party or parties on the one hand and of the indemnified party or parties 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 fault of the Company and the Holders 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
18
to state a material fact relates to information supplied by the Company or by
the Holders and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Holders'
respective obligations to contribute pursuant to this Section 5(d) are several
in proportion to the respective principal amount of Registrable Securities of
such Holder that were registered pursuant to a Registration Statement.
(e) The Company and each Holder agree that it would not be just or
equitable if contribution pursuant to this Section 5 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 paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in paragraph (d) above 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, no Holder shall be required to indemnify or contribute any amount in
excess of the amount by which the total price at which Registrable Securities
were sold by such Holder exceeds the amount of any damages that such Holder 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 5 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.
The indemnity and contribution provisions contained in this Section 5
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, any Holder or any person controlling the Placement Agent or
any Holder, or by or on behalf of the Company, its officers or directors or any
person controlling the Company, (iii) acceptance of any of the Exchange
Securities and (iv) any sale of Registrable Securities pursuant to a Shelf
Registration Statement.
6. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company has not entered into,
and on or after the date of this Agreement will not enter into, any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
other issued and outstanding securities under any such agreements.
19
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, 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 Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or consent; PROVIDED, HOWEVER, that no amendment, modification,
supplement, waiver or consents to any departure from the provisions of Section 5
hereof shall be effective as against any Holder of Registrable Securities unless
consented to in writing by such Holder.
(c) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 6(c), which address initially is, with respect to the Placement Agent,
the address set forth in the Placement Agreement; and (ii) if to the Company,
initially at the Company's address set forth in the Placement Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 6(c).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the person giving the same to the Trustee, at the
address specified in the Indenture.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; PROVIDED that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Placement Agreement. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement and such person shall be entitled to receive the benefits hereof. The
Placement Agent (in its capacity as Placement Agent) shall have no liability or
obligation to the Company with respect to any failure by any other Holder to
comply with,
20
or any breach by any other Holder of, any of the obligations of such Holder
under this Agreement.
(e) PURCHASES AND SALES OF NOTES. The Company shall not, and shall
use its best efforts to cause its affiliates (as defined in Rule 405 under the
Securities Act) not to, purchase and then resell or otherwise transfer any
Notes.
(f) THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Placement Agent, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(g) 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.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
21
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ECONOPHONE, INC.
By
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Confirmed and accepted as of
the date first above written:
XXXXXX XXXXXXX & CO. INCORPORATED
By
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Name:
------------------------
Title:
-------------------------
