Execution Copy
AMNEX, INC.
$15,000,000 8 1/2% Convertible Subordinated Notes Due 2002(1)
PURCHASE AGREEMENT
New York, New York
September 11, 1997
HSBC Securities, Inc.
000 Xxxxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Amnex, Inc., a New York corporation (the "Company"), proposes to issue and
sell to HSBC Securities, Inc. (the "Initial Purchaser"), $15,000,000 principal
amount of its 8 1/2% Convertible Subordinated Notes Due 2002 (the "Firm
Securities"). The Securities are convertible into shares of Common Stock, par
value $0.001 per share (the "Common Stock"), of the Company at the conversion
price set forth herein. The Company also proposes to grant to the Initial
Purchaser an option to purchase up to $8,000,000 additional principal amount of
such Notes to cover over-allotments, if any (the "Option Securities" and,
together with the Firm Securities, the "Securities"). The Securities are to be
issued under an indenture (the "Indenture") to be dated as of September 25, 1997
between the Company and Marine Midland Bank as trustee (the "Trustee").
The sale of the Securities to the Initial Purchaser will be made without
registration of the Securities or the Common Stock issuable upon conversion
thereof under the Securities Act of 1933, as amended (the "Act") in reliance
upon exemptions from the registration requirements of the Act. You have advised
the Company that you will make an offering of the Securities purchased by you
hereunder in accordance with Section 4 hereof, as soon as you deem advisable
after this Agreement has been executed and delivered.
In connection with the sale of the Securities, the Company has prepared a
preliminary offering memorandum, dated August 8, 1997 (the "Preliminary
Memorandum"), and a final offering memorandum, dated September 11, 1997 (the
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1 Plus an option to purchase up to $8,000,000 additional principal amount
of such Notes to cover over-allotments.
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"Final Memorandum"). Each of the Preliminary Memorandum and the Final Memorandum
sets forth certain information concerning the Company, the Securities and the
Common Stock issuable upon conversion thereof. The Company hereby confirms that
it has authorized the use of the Preliminary Memorandum and the Final Memorandum
in connection with the offering and resale by the Initial Purchaser of the
Securities. Any references herein to the Preliminary Memorandum or the Final
Memorandum shall be deemed to include all exhibits thereto and all documents
incorporated by reference therein that were filed under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), on or before the date and time
that this Agreement is executed and delivered by the parties hereto (the
"Execution Time"); and any reference herein to the terms "amend", "amendment" or
"supplement" with respect to the Final Memorandum shall be deemed to refer to
and include the filing of any document under the Exchange Act after the
Execution Time that is incorporated by reference therein.
The holders of the Securities or the Common Stock issuable upon the
conversion thereof will be entitled to the benefits of a Registration Rights
Agreement, in substantially the form attached hereto as Exhibit A (the
"Registration Rights Agreement"), pursuant to which the Company will file a
shelf registration statement (the "Registration Statement") with the Securities
and Exchange Commission (the "Commission") registering the Securities and the
Common Stock issuable upon the conversion thereof under the Act.
This Agreement, the Indenture and the Registration Rights Agreement are
referred to collectively as the "Operative Documents." Capitalized terms used
but not defined herein have the respective meanings specified in the Final
Memorandum.
I. Representations and Warranties. The Company represents and warrants to, and
agrees with, the Initial Purchaser as set forth below in this Section 1.
A. Each of the Preliminary Memorandum and the Final Memorandum as of
its date did not, and the Final Memorandum (as the same may have been
amended or supplemented) as of the date hereof and as of the Closing Date
(as defined below) does not and will not, contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company makes no
representations or warranties as to the information contained in or omitted
from the Preliminary Memorandum or the Final Memorandum in reliance upon
and in conformity with information furnished in writing to the Company by
or on behalf of the Initial Purchaser specifically for inclusion in the
Preliminary Memorandum or the Final Memorandum (and any amendment or
supplement thereof or thereto). All documents incorporated by reference in
the Preliminary Memorandum or the Final
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Memorandum that were filed under the Exchange Act on or before the Execution
Time complied, and all such documents that are filed under the Exchange Act
after the Execution Time and on or before the Closing Date will comply, in all
material respects with the applicable requirements of the Exchange Act and the
rules thereunder in effect as of the date of filing.
B. All of the information set forth in the Final Memorandum under the
heading "Certain Relationships and Related Transactions -- Transactions
with Management and Others" is true and accurate in all material respects
and all of the agreements described in or contemplated by such section have
been duly authorized, executed and delivered by the Company and constitute
legal, valid and binding obligations of the Company.
C. All of the information set forth in the Final Memorandum under the
heading "Use of Proceeds" is true and accurate in all material respects and
the Company will not use the proceeds of the Offering except as set forth
in such section.
D. None the Company, its Subsidiaries (as defined below) or any
affiliate (an "Affiliate") (as defined in Rule 501(b) of Regulation D under
the Act ("Regulation D")) of the Company or its Subsidiaries, or any person
acting in its or their behalf (other than the Initial Purchaser) has
directly or indirectly, (i) sold, offered for sale, solicited offers to buy
or otherwise negotiated in respect of, any security (as defined in the Act)
that is currently or will be integrated with the sale of the Securities in
a manner that would require the registration of the Securities or the
Common Stock issuable upon conversion thereof under the Act or (ii) engaged
in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the offering of the Securities.
E. Assuming compliance by the Initial Purchaser with its agreements
and the accuracy of its representations contained herein, it is not
necessary in connection with the offer, sale and delivery of the Securities
or the Common Stock issuable upon conversion thereof in the manner
contemplated by this Agreement and the Final Memorandum to register the
Securities or such Common Stock under the Act or to qualify the Indenture
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act").
F. Neither the Company nor its affiliated purchasers, as defined in
Article 100 of Regulation M of the Exchange Act ("Regulation M"), either
alone or with one or more other persons: (i) has taken, either directly or
indirectly, any
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action which was designed to cause or result in, or which has constituted,
or which might reasonably be expected to cause or result in, stabilization
or manipulation of the price of any security of the Company in connection
with the offering of the Securities (the "Subject Securities") pursuant to
this Agreement or (ii) will bid for or purchase any Subject Securities of
the Company or any other covered securities (within the meaning of
Regulation M) relating to the Subject Securities (together with the Subject
Securities, the "Covered Securities"), or attempt to induce any person to
bid for or purchase any Covered Securities, in either case, for the purpose
of creating actual or apparent active trading in, or raising the price of
the Securities, unless an exemption from Rule 102 of Regulation M is
available.
G. None of the Company, its Affiliates or any person acting on behalf
of the Company or its Affiliates (other than the Initial Purchaser, as to
whom the Company makes no representation) has engaged in any directed
selling efforts (as that term is defined in Regulation S under the Act
("Regulation S")) with respect to the Securities, and the Company, its
Affiliates and any person acting on its or their behalf (other than the
Initial Purchaser, as to whom the Company makes no representations) have
complied with the offering restrictions requirement of Regulation S.
H. The Company is subject to and in compliance in all material
respects with the reporting requirements of Section 13 or Section 15(d) of
the Exchange Act and the Company has timely filed all reports required to
be filed thereunder within the last 12 months.
I. The Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Act.
J. The Company has agreed to permit the Securities to be designated
PORTAL eligible securities and has been advised by the National Association
of Securities Dealers, Inc. ("NASD") PORTAL Market that the Securities have
been designated PORTAL eligible securities in accordance with the rules and
regulations of the NASD; application has been made to list the Securities
on the Luxembourg Stock Exchange and the Company has been notified that the
Securities have been approved for such listing.
K. The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended (the "Investment Company
Act"), without taking account of any exemption arising out of the number of
holders of the Company's securities, and, if the Company conducts its
business
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as set forth in the Final Memorandum, will not become an "investment
company" and will not be required to be registered under the Investment
Company Act.
L. The Company has not paid or agreed to pay to any person any
compensation for soliciting another to purchase any of the Securities
(except as contemplated by this Agreement).
M. The information provided by the Company pursuant to Section 5(i)
hereof will not, at the date thereof, contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
N. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of New York, with
power and authority (corporate and other) to own, lease and operate its
property (real and personal) and to conduct its business as described in
the Final Memorandum; and the Company is duly qualified to do business as a
foreign corporation in good standing in each other jurisdiction in which
its ownership or lease of property or the conduct of its business requires
such qualification, except where the failure to be so qualified would not
have a material adverse effect on the condition (financial or otherwise),
business, properties or results of operations of the Company and its
consolidated subsidiaries taken as a whole (a "Material Adverse Effect").
O. The Company has no subsidiaries other than those listed on Exhibit
21 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (the "Form 10-K") incorporated by reference in the Final
Memorandum (individually a "Subsidiary" and collectively the
"Subsidiaries"). Each of the Subsidiaries has been duly incorporated and is
an existing corporation in good standing under the laws of the jurisdiction
of its incorporation, with power and authority (corporate and other) to own
its properties (real and personal) and conduct its business as described in
the Final Memorandum; and each Subsidiary is duly qualified to do business
as a foreign corporation in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its business
requires such qualification, except where the failure to be so qualified
would not have a Material Adverse Effect; all of the issued and outstanding
capital stock of each Subsidiary has been duly authorized and validly
issued and is fully paid and nonassessable; and except as described in the
Final Memorandum or as set forth on Schedule 1(o) attached hereto, each
Subsidiary's capital stock owned by the Company, directly or through
subsidiaries, is owned free from liens, encumbrances and defects.
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P. Except as described in the Final Memorandum, the Company is not in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which it is a party or by
which it may be bound or to which any of its properties may be subject,
except for such defaults that would not have a Material Adverse Effect. The
execution, delivery and performance of this Agreement and the Registration
Rights Agreement and the consummation of the transactions contemplated
herein and therein have been duly authorized by all necessary corporate
action of the Company and will not result in any breach of any of the
terms, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company pursuant to any indenture, loan
agreement, contract or other instrument to which the Company is a party or
by which the Company may be bound or to which any of the property or assets
of the Company is subject which breach, default, lien, charge or
encumbrance, individually or in the aggregate, would have a Material
Adverse Effect, nor will any such execution, delivery or performance result
in any violation of the provisions of the charter or by-laws of the Company
or any statute, any rule, regulation or order of any governmental agency or
body or any court having jurisdiction over the Company.
Q. No consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required for the valid
authorization, execution and delivery by the Company of the Operative
Documents and for the consummation of the transactions contemplated herein
and therein, except such as may be required (i) under the securities or
Blue Sky laws of the various states, (ii) under the Act, the Trust
Indenture Act or rules of the NASD in connection with the registration of
the Securities and the Common Stock issuable upon conversion thereof under
the Act pursuant to the Registration Rights Agreement; and (iii) under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 (the "HSR Act").
R. This Agreement has been duly authorized, executed and delivered by
the Company.
S. Assuming that each of the Indenture and the Registration Rights
Agreement has been duly authorized, executed and delivered by, and
constitutes the legal, valid and binding obligation of, the Trustee and the
Initial
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Purchaser, respectively, each of the Indenture and the Registration Rights
Agreement constitutes the legal, valid and binding obligation, of the
Company enforceable in accordance with its terms, except (i) as enforcement
thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws now or hereinafter in effect relating to
creditors' rights generally and (ii) as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
T. The consolidated financial statements included in the Final
Memorandum, together with the related notes thereto, present fairly in all
material respects the financial position of the Company and its
consolidated subsidiaries at the dates indicated and the consolidated
results of operations and cash flows of the Company and its consolidated
subsidiaries for the periods specified. Such financial statements have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved, except as
otherwise stated in the Final Memorandum.
U. The Securities and the Common Stock issuable upon the conversion
thereof have been duly authorized by the Company; when executed,
authenticated, issued and delivered in the manner provided for in the
Indenture and sold and paid for as provided in this Agreement, the
Securities will constitute valid and binding obligations of the Company
entitled to the benefits of the Indenture, enforceable against the Company
in accordance with their terms, except as enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law); the Securities and the Common Stock
issuable upon the conversion thereof conform and, in the case of the Common
Stock issuable upon conversion of the Securities, will conform in all
material respects to the descriptions thereof contained in the Final
Memorandum; and the shares of Common Stock issued upon conversion of the
Securities in the manner contemplated by the Indenture and the Securities,
will upon issue be validly issued, fully paid and non-assessable.
V. Except as disclosed in the Final Memorandum, the Company and the
Subsidiaries have good and marketable title to all real properties and all
other properties and assets owned by them, in each case free from liens,
encumbrances and defects except where the failure to have such title would
not have a
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Material Adverse Effect; and except as disclosed in the Final Memorandum,
the Company and the Subsidiaries hold any leased real or personal property
under valid and enforceable leases with no exceptions that would have a
Material Adverse Effect.
W. Except as disclosed in the Final Memorandum, there is no action,
suit or proceeding before or by any governmental agency or body or court,
domestic or foreign, now pending or, to the knowledge of the Company,
threatened against the Company or any of the Subsidiaries or any of their
respective properties that could reasonably be expected to result in a
Material Adverse Effect or that could reasonably be expected to materially
and adversely affect the consummation of the transactions contemplated by
this Agreement, the Indenture or the Registration Rights Agreement; all
pending legal or governmental proceedings to which the Company is a party
or which affect any of its properties that are not described in the Final
Memorandum, including ordinary routine litigation incidental to its
business, in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
X. Except as disclosed in the Final Memorandum, no labor dispute with
the employees of the Company or any Subsidiary exists, or to the knowledge
of the Company is threatened, that could reasonably be expected to have a
Material Adverse Effect.
Y. Each of the Company and the Subsidiaries has or, in the case of
those set forth on Schedule 1(y) hereto, has applied for all necessary
licenses, franchises, consents, authorizations, approvals, orders,
certificates and permits of and from, and has made all declarations and
filings with, all federal, state, local and other governmental authorities,
all self-regulatory organizations and all courts and other tribunals, to
own, lease, license and use its properties and assets and to conduct its
business in the manner to be described in the Final Memorandum, except to
the extent that the failure to so obtain or file would not have a Material
Adverse Effect.
Z. The Registration Rights Agreement and the Indenture conform in all
material respects to the descriptions thereof contained in the Final
Memorandum.
AA. Except as disclosed in the Final Memorandum, neither the Company
nor any of the Subsidiaries is in violation of any statute, rule,
regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic
8
substances (collectively, "environmental laws"), owns or operates any real
property contaminated with any substance that is subject to any
environmental laws, or is subject to any claim relating to any
environmental laws, which violation, contamination, liability or claim
individually or in the aggregate is reasonably expected to have a Material
Adverse Effect; and the Company is not aware of any pending investigation
which might lead to such a claim.
BB. The accountants that examined and issued an auditors report with
respect to the consolidated financial statements of the Company to be
included in the Offering Memorandum are independent public accountants
within the meaning of the Act and the regulations thereunder.
II. Purchase and Sale. (a) Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company, at a purchase price of 8 1/2% of the principal amount
thereof, plus accrued interest, if any, from September 25, 1997 to the Closing
Date, the Firm Securities. Each Security will be convertible at the option of
the holder, effective 90 days from the Closing Date, into shares of Common Stock
at a conversion price of $2.7844 per share (the "Conversion Price"), which
Conversion Price is subject to adjustment in certain events, as provided in the
Indenture.
1. Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby
grants an option (the "Option") to the Initial Purchaser to purchase
the Option Securities at a purchase price of 95% of the principal
amount thereof, plus accrued interest, if any, from September 25, 1997
to the settlement date for the Option Securities. Each Option Security
will be convertible at the option of the holder, effective 90 days
from the Closing Date, into shares of Common Stock at the Conversion
Price. The Option may be exercised only to cover over-allotments in
the sale of the Firm Securities by the Initial Purchaser. The Option
may be exercised in whole or in part at any time and from time to time
on or before the 30th day after the date of the Final Memorandum upon
written or telegraphic notice by the Initial Purchaser to the Company
setting forth the principal amount of Option Securities as to which
the Initial Purchaser is exercising the Option and the settlement date
therefor. Delivery of certificates for the Option Securities, and
payment therefor, shall be made as provided in Section 3 hereof.
III. Delivery and Payment. Delivery of and payment for the Firm Securities
and Option Securities (if the Option provided for in Section 2(b) hereof shall
have been exercised on or before the first business day prior to the Closing
Date (as defined
9
below)) shall be made at 10:00 AM, New York City time, on September 25, 1997 or
such later date as the Initial Purchaser designates, which date and time may be
postponed by agreement between the Initial Purchaser and the Company (such date
and time of delivery and payment for the Securities being herein called the
"Closing Date"). Delivery of certificates for the Securities in such names,
forms and denominations as the Initial Purchaser shall have requested shall be
made on the Closing Date to the Initial Purchaser or as it shall direct at such
location as the Initial Purchaser shall reasonably designate at least one
business day in advance of the Closing Date against payment by the Initial
Purchaser of the purchase price for the Securities to or upon the order of the
Company by wire transfer to an account designated by the Company or such other
manner of payment as may be agreed by the Company and the Initial Purchaser. The
certificates, opinions and letters provided for in Section 6 shall be delivered
at a closing to be held on the Closing Date at the office of Cleary, Xxxxxxxx,
Xxxxx & Xxxxxxxx ("Counsel for the Initial Purchaser"), One Liberty Plaza, New
York, New York. Certificates for the Securities shall be registered in such
names and in such denominations as the Initial Purchaser may request not less
than one full business day in advance of the Closing Date.
The Company agrees to have the Securities available for inspection,
checking and packaging by the Initial Purchaser in New York, New York, not later
than 1:00 PM on the business day prior to the Closing Date.
If the Option is exercised after the first business day prior to the
Closing Date, the Company will deliver (at the expense of the Company) to the
Initial Purchaser, at the office of Counsel for the Initial Purchaser, on the
date specified by the Initial Purchaser (which shall be within three business
days after exercise of the Option), certificates for the Option Securities in
such names and denominations as the Initial Purchaser shall have requested
against payment of the purchase price thereof to or upon order of the Company by
wire transfer to an account designated by the Company. If settlement for the
Option Securities occurs after the Closing Date, the Company will deliver to the
Initial Purchaser on the settlement date for the Option Securities, and the
obligation of the Initial Purchaser to purchase the Option Securities shall be
conditioned upon receipt of, supplemental opinions, certificates and letters
confirming as of such date the opinions, certificates and letters delivered on
the Closing Date pursuant to Section 6 hereof.
I. Offering of Securities; Restrictions on Transfer.
A. The Initial Purchaser represents and warrants to and agrees
with the Company that (i) it has not solicited and will not solicit
any offer to buy or offer to sell the Securities by means of any form
of general solicitation or general advertising (within the meaning of
Regulation D) in the United States or in any manner involving a public
offering within the meaning of Section 4(2) of the Act or,
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with respect to Securities sold in reliance on Regulation S under the
Act ("Regulation S"), by means of any directed selling efforts and
(ii) it has solicited and will solicit offers to buy the Securities
only from, and has offered and will offer, sell or deliver the
Securities only to, (A) persons whom it reasonably believes to be
qualified institutional buyers ("QIBs") (as defined in Rule 144A
under the Act) or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary
or agent, only when such person has represented to it that each such
account is a QIB to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A, and, in each case,
in transactions under Rule 144A, (B) a limited number of persons whom
it reasonably believes to be institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D), and who
provide to it a letter in the form of Exhibit B hereto or (C) persons
to whom, and under circumstances which, it reasonably believes offers
and sales of Securities may be made without registration of the
Securities or the Common Stock issuable upon conversion thereof under
the Act in reliance upon Regulation S. The Initial Purchaser also
represents and warrants and agrees that it has offered and will offer
to sell the Securities only to, and has solicited and will solicit
offers to buy the Securities only from, persons who in purchasing
such Securities will be deemed to have represented and agreed as
provided under "Investor Representations and Restrictions on Resale"
in Exhibit D hereto.
B. The Initial Purchaser represents and agrees that:
a. it has not offered or sold, and, prior to the expiration
of the period of six months from the Closing Date, will not offer
or sell any Securities to persons in the United Kingdom, except
to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or as
agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom, within the meaning of
the Public Offers of Securities Regulations 1995 (the
"Regulations");
b. it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 and the Regulations
with respect to anything done by it in relation to the Securities
in, from or otherwise involving the United Kingdom; and
c. it has only issued or passed on and will only issue or
pass on to any person in the United Kingdom any document received
by it in connection with the issue of the Securities if that
person is of a kind
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described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a
person to whom such document may otherwise lawfully be issued or
passed on.
II. Agreements. The Company agrees with the Initial Purchaser that:
A. Holders (including subsequent transferees) of the Securities and
the Common Stock issuable upon conversion thereof will have the
registration rights set forth in the Registration Rights Agreement, in
substantially the form of Exhibit A hereto, for so long as such Securities
constitute "restricted securities" (as defined in Rule 144(a)(3)). Pursuant
to the Registration Rights Agreement, the Company agrees to file with the
Securities and Exchange Commission (the "Commission"), a shelf registration
statement pursuant to Rule 415 under the Act (the "Shelf Registration
Statement") relating to the resale by holders of the Securities and the
Common Stock issuable upon conversion thereof, and to use its reasonable
best efforts to cause such Shelf Registration Statement to be declared
effective.
B. The Company will furnish to the Initial Purchaser and Counsel for
the Initial Purchaser, without charge, during the period mentioned in
paragraph (d) below, as many copies of the Final Memorandum and any
supplements and amendments thereof or thereto as they may reasonably
request.
C. The Company will not amend or supplement the Final Memorandum,
other than by the filing of documents under the Exchange Act that are
incorporated by reference therein, without the prior consent of the Initial
Purchaser. Prior to the completion of the distribution of the Securities by
the Initial Purchaser, the Company will not file any document under the
Exchange Act that is incorporated by reference in the Final Memorandum
unless prior to such proposed filing the Company has furnished the Initial
Purchaser with a copy of such document for its review and the Initial
Purchaser has not reasonably objected to the filing of such document.
D. The Company will promptly advise the Initial Purchaser when, prior
to the completion of the sale of the Securities by the Initial Purchaser,
any document filed under the Exchange Act which is incorporated by
reference in the Final Memorandum shall have been filed with the
Commission.
E. If at any time prior to the completion of the sale of the
Securities by the Initial Purchaser, any event occurs as a result of which
the Final Memorandum as then amended or supplemented would include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the circumstances
under which they were made not
12
misleading, or if it shall be necessary to amend or supplement the Final
Memorandum (including any document incorporated by reference therein which
was filed under the Exchange Act) to comply with the Exchange Act or the
rules thereunder or other applicable law, the Company promptly will notify
the Initial Purchaser of the same and, subject to paragraph (c) of this
Section 5, will prepare and provide to the Initial Purchaser pursuant to
paragraph (b) of this Section 5 an amendment or supplement which will
correct such statement or omission or effect such compliance and, in the
case of such an amendment or supplement which is to be filed under the
Exchange Act and which is incorporated by reference in the Final
Memorandum, will file such amendment or supplement with the Commission.
F. The Company will arrange for the qualification of the Securities
for sale under the laws of such jurisdictions as the Initial Purchaser may
designate, will maintain such qualifications in effect so long as required
for the sale of the Securities and will arrange for the determination of
the legality of the Securities for purchase by institutional investors
provided that the Company by reason of any such qualification for sale
shall not be required to (i) qualify as a foreign corporation or (ii) file
a general consent to service of process in any such jurisdiction where it
is not presently qualified or (iii) become subject to taxation as a foreign
corporation. The Company will promptly advise the Initial Purchaser of the
receipt by the Company of any notification with respect to the suspension
of the qualification of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.
G. Neither the Company nor any Affiliate of the Company will solicit
any offer to buy or offer or sell the Securities by means of any form of
general solicitation or general advertising (within the meaning of
Regulation D) in the United States.
H. None of the Company, its Affiliates nor any person acting on behalf
of the Company or its Affiliates will engage in any directed selling
efforts with respect to the Securities within the meaning of Regulation S,
and the Company, its Affiliates and each such person acting on its or their
behalf will comply with the offering restrictions requirement of Regulation
S.
I. So long as any of the Securities or the Common Stock issuable upon
the conversion thereof are "restricted securities" within the meaning of
Rule 144(a)(3), at any time when the Company is not subject to Section 13
or 15(d) of the Exchange Act), the Company will provide to any holder of
such restricted securities, or to any prospective purchaser of such
restricted securities designated by a holder,
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upon the request of such holder or prospective purchaser, any information
required to be delivered to holders and prospective purchasers of the
Securities pursuant to Rule 144A(d)(4) under the Securities Act. This
covenant is intended to be for the benefit of the holders, and prospective
purchasers designated by such holders, from time to time of such restricted
securities.
J. The Company will not, and will not permit any of its Affiliates to,
resell any Securities or Common Stock issuable upon conversion thereof
which constitute "restricted securities" under Rule 144 that have been
reacquired by any of them, except pursuant to an effective registration
statement.
K. Neither the Company nor any Affiliate will sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in the Act) the offering of which security will be integrated with
the sale of the Securities in a manner that would require the registration
of the Securities or Common Stock issuable upon conversion thereof under
the Act.
L. The Company shall use its reasonable best efforts in cooperation
with the Initial Purchaser to permit the Securities to be eligible for
clearance and settlement through The Depository Trust Company, New York,
New York.
M. The Company shall include information substantially in the form set
forth in Exhibit D in each Final Memorandum.
N. For a period of 180 days following the Closing Date the Company
will not, without prior written consent of the Initial Purchaser, which
consent will not be unreasonably withheld, offer, sell, contract to sell,
grant any other option to purchase or otherwise dispose of, directly or
indirectly, or announce the offering of, any debt securities issued or
guaranteed by the Company, any preferred stock or Common Stock of the
Company or any security (other than the Securities) convertible into or
exchangeable for preferred stock or Common Stock or enter into any
agreement to do any of the foregoing; provided, however, that the Company
may issue or sell preferred stock or Common Stock or securities (other than
the Securities) convertible into or exchangeable for preferred stock or
Common Stock, or options, warrants or similar rights to purchase preferred
stock or Common Stock or securities (other than the Securities) convertible
into or exchangeable for preferred stock or Common Stock pursuant to (i)
any employee and/or non-employee director stock option, grant or purchase
plan, stock ownership plan or dividend reinvestment plan of the Company in
effect at the Execution Time and (ii) outstanding options or warrants, or
other rights and written agreements for the purchase or delivery of Common
Stock in effect at the Execution Time.
14
O. During the period of five years after the date hereof, the Company
will promptly furnish to the Initial Purchaser upon request, a copy of its
Annual Report on Form 10-K and any definitive proxy statement of the
Company filed with the Commission under the Exchange Act or mailed to
stockholders.
P. The Company will pay all expenses incident to the performance of
its obligations under this Agreement, including (i) the preparation,
printing and distribution of the Preliminary Memorandum, Final Memorandum
and any amendments thereof or supplements thereto, (ii) the preparation,
printing and distribution of this Agreement, the Registration Rights
Agreement, the Indenture, the Securities and any Blue Sky Memorandum or
Legal Investment Survey by the Counsel for the Initial Purchaser, (iii) the
delivery of the Securities, (iv) the reasonable fees and disbursements of
the accountants for the Company, (v) the expenses of qualifying the
Securities under state securities laws in accordance with the provisions of
paragraph (f) of this Section, including filing fees and the reasonable
fees and disbursements of Counsel for the Initial Purchaser in connection
therewith, (vi) the fees and expenses of the Trustee and the reasonable
fees and disbursements of its counsel, (vii) any fees of the NASD with
respect to admitting the Securities for trading in the PORTAL Market and
any fees with respect to admitting the Securities for trading on the
Luxembourg Stock Exchange, (viii) all reasonable travel, lodging and other
out-of-pocket expenses of the Initial Purchaser and the Company's officers
and employees and any other out-of-pocket expenses in connection with
attending or hosting meetings with prospective purchasers of Securities and
(ix) all other out-of-pocket expenses incurred by the Initial Purchaser in
connection with the transactions contemplated by this Agreement, including,
without limitation, the reasonable fees and disbursements of Counsel for
the Initial Purchaser, provided, however, that the Company's obligation to
pay directly or reimburse the Initial Purchaser for its legal expenses
(including without limitation, those payable to Counsel for the Initial
Purchaser for legal services described in clauses (ii), (v) and (ix)
hereof) and other out-of-pocket costs and expenses under this Section 5
shall not exceed $375,000.
Q. In connection with the offering, neither the Company nor any of its
Affiliates has bid for or purchased, or until the Initial Purchaser shall
have notified the Company of the completion of the resale of the
Securities, will bid for or purchase, either alone or with one or more
other persons, for any account in which it or any of its Affiliates has a
beneficial interest, any Securities; and neither it nor any of its
Affiliates will make bids or purchases for the purpose of creating actual,
or apparent, active trading in, or of raising the price of, the Securities.
15
III. Conditions to the Obligations of the Initial Purchaser. The
obligations of the Initial Purchaser to purchase the Firm Securities and the
Option Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company contained herein as of
the Execution Time, the Closing Date and any settlement date pursuant to Section
3 hereof, to the accuracy of the statements of the Company made in any
certificates pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following additional conditions:
A. The Company shall have furnished to the Initial Purchaser:
(X) the opinion of Certilman Xxxxx Xxxxx & Xxxxx LLP, counsel for the
Company, dated the Closing Date, to the effect that:
a. each of the Company and Crescent Public Communications,
Inc., Sun Tel North America, Inc., National Billing
Exchange, Inc., American Network Exchange, Inc. and Capital
Network System, Inc. (collectively, the "Material
Subsidiaries") (A) is validly existing as a corporation in
good standing under the laws of the jurisdiction in which it
is chartered or organized, with full corporate power and
authority to own its properties and conduct its business as
described in the Final Memorandum, (B) is duly qualified to
do business as a foreign corporation and is in good standing
under the laws of each jurisdiction which requires such
qualification wherein the failure to be so qualified would
have a Material Adverse Effect and (C) holds or, in the case
of those set forth on Schedule 1(y) hereto, has applied for
all material approvals, authorizations, offers, licenses,
certificates and permits from federal and New York State
government authorities necessary for the conduct of its
business as prescribed in the Final Memorandum, excluding
approvals, authorizations, offers, licenses, certificates
and permits from the Federal Communications Commission
("FCC"), the Public Utility Commissions ("PUC") and other
similar regulatory authorities related to the
telecommunications industry collectively, the "FCC/PUC
Regulatory Approvals") as to which such counsel need not
express any opinion;
b. the Company's authorized equity capitalization is as set
forth in the Final Memorandum; the Common Stock conforms in
all material respects to the description thereof contained
under the heading "Description of Capital Stock" in the
Final Memorandum; the holders of
16
the outstanding shares of capital stock of the Company are
not entitled to any statutory preemptive or, to the
knowledge of such counsel after due inquiry, other rights to
subscribe for the Securities or the shares of Common Stock
issuable upon conversion thereof; and the shares of Common
Stock initially issuable upon conversion of the Securities
have been duly and validly authorized and, when issued upon
conversion, will be validly issued, fully paid and
nonassessable and the Board of Directors has duly and
validly adopted a resolution reserving such shares of Common
Stock for issuance upon conversion; as of the date hereof,
to the knowledge of such counsel after due inquiry, (A)
except for the preferred stock described under the heading
"Description of Capital Stock -- Preferred Stock" in the
Offering Memorandum, there are no other outstanding shares
of capital stock of the Company and, (B) except for (I) the
Warrants (as defined below), (II) the warrants issued to
Xxxxxxxxx Xxxxxx and the Xxxxxxxxx Xxxxxx Irrevocable
Grantor Trust dated October 18, 1991, on January 7, 1997 and
June 3, 1997, respectively which entitle him and it to
purchase 1,500,000 shares of Common Stock at an exercise
price of $3.03 per share (subject to reduction in certain
circumstances) and 500,000 shares of Common Stock at an
exercise price of $2.3125 per share (plus 100,000 additional
shares of Common Stock in case of certain defaults as
described in such warrant), respectively (the "Galesi
Warrants") (III) other warrants for the purchase of an
aggregate of approximately 2,260,000 shares of Common Stock,
(IV) options to purchase approximately 3,500,000 shares of
Common Stock issued under the Company's 1992 Stock Option
Plan (V) written agreements to issue an aggregate of
approximately 950,000 shares of Common Stock in effect on
the date hereof, (VI) promissory notes convertible into an
aggregate of approximately 3,100,000 shares of Common Stock
and (VII) the Securities, no outstanding options or warrants
to acquire, or any securities convertible into, any shares
of capital stock of the Company;
c. the Indenture has been duly authorized, executed and
delivered, and, assuming that the Indenture has been duly
authorized, executed and delivered by, and is a valid and
binding agreement of, the Trustee, constitutes a legal,
valid and binding instrument enforceable against the Company
in accordance with its terms (subject, as to enforcement of
remedies, to (A) applicable bankruptcy, reorganization,
insolvency (including without limitation, all laws relating
to fraudulent transfers), moratorium or other laws affecting
creditors' rights generally from time to time in effect and
(B) general principles of equity regardless of whether
enforcement is considered in a proceeding of equity or law);
and
17
the Securities have been duly authorized and, when executed
and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial
Purchaser pursuant to this Agreement, assuming that the
Indenture has been duly authorized, executed and delivered
by, and is a valid and binding agreement of, the Trustee,
will constitute legal, valid and binding obligations of the
Company entitled to the benefits of the Indenture (subject,
as to enforcement of remedies, to (A) applicable bankruptcy,
reorganization, insolvency (including without limitation,
all laws relating to fraudulent transfers), moratorium or
other laws affecting creditors' rights generally from time
to time in effect and assuming that the Indenture has been
duly authorized, executed and delivered by, and is a valid
and binding agreement of, the Trustee and (B) general
principles of equity regardless of whether enforcement is
considered in a proceeding of equity or law); and the
statement set forth under the heading "Description of Notes"
in the Final Memorandum, insofar as such statements purport
to summarize certain provisions of the Securities and the
Indenture, provide a fair summary of such provisions;
d. this Agreement has been duly authorized, executed and
delivered by the Company;
e. the Registration Rights Agreement has been duly authorized,
executed and delivered, and, assuming that the Registration
Rights Agreement has been duly authorized, executed and
delivered by and is a valid and binding agreement of, the
Initial Purchaser, constitutes a legal, valid and binding
instrument enforceable against the Company in accordance
with its terms (subject, as to enforcement of remedies, to
(A) applicable bankruptcy, reorganization, insolvency
(including, without limitation, all laws relating to
fraudulent transfers), moratorium or other laws affecting
creditors' rights generally from time to time in effect and
(B) general principles of equity regardless of whether
enforcement is considered in a proceeding of equity or law);
f. no consent, approval, authorization or order of any court or
governmental agency or body, is required for the
consummation of the transactions contemplated herein, except
(A) as may be required under any particular proceeding as to
which such counsel's opinion may be based on its knowledge,
(B) such as may be required under the securities laws of any
jurisdiction, domestic or foreign, in connection with the
purchase and distribution of the Securities by the Initial
Purchaser (as to which such counsel need not express any
opinion), (C) in connection with the registration under the
Act of the Securities and the Common Stock
18
issuable upon conversion thereof and qualification of the
Indenture under the Trust Indenture Act, (D) such as may be
required in connection with the listing of the Securities on
any stock exchange, including, without limitation, the
Luxembourg Stock Exchange or the designation of the
Securities as PORTAL- eligible securities (E) any FCC/PUC
Regulatory Approvals (as to which such counsel need not
express any opinion), (F) such as may be required under the
HSR Act in connection with the conversion of the Securities
and (G) such other approvals (specified in such opinion) as
have been obtained;
g. assuming the accuracy of the representations and warranties
of the Initial Purchaser and compliance by the Initial
Purchaser with the agreements contained in this Agreement,
none of the issue and sale of the Securities, the execution
and delivery of the Indenture or this Agreement, the
consummation of any other of the transactions herein or
therein contemplated and the fulfillment of the terms hereof
or thereof will conflict with, result in a breach or
violation of, or constitute a default under any law or the
Certificate of Incorporation or By-Laws of the Company or
the terms of any indenture or other agreement or instrument
known to such counsel and to which the Company or any of its
Subsidiaries is a party or bound or any judgment, order or
decree known to such counsel to be applicable to the Company
or any of the Subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator
having jurisdiction over the Company or any of the
Subsidiaries;
h. the Company has all necessary power and authority to
execute, deliver and perform its obligations under the
Warrant Agreement by and between the Company and the Initial
Purchaser to be dated as of or about even date herewith (the
"Warrant Agreement") and the Warrants to be issued under the
Warrant Agreement (the "Warrants") and to issue and deliver
the Warrants and Warrant Shares (as defined in the Warrant
Agreement), the execution, delivery and performance by the
Company of the Warrant Agreement and the Warrants have been
duly authorized by all necessary action; each of the Warrant
Agreement and the Warrants has been duly executed and
delivered by the Company and assuming that the Warrant
Agreement has been duly authorized, executed and delivered
by and is a valid and binding agreement of the Initial
Purchaser constitutes the legal, valid and binding
obligation of the Company enforceable in accordance with its
terms, subject, as to enforceability, to (A) applicable
bankruptcy, reorganization, insolvency (including, without
limitation, all laws relating to fraudulent transfers),
moratorium or other laws affecting creditors' rights
generally from time to time in effect and (B)
19
general principles of equity regardless of whether
enforcement is considered in a proceeding of equity or law);
i. the Board of Directors has duly and validly adopted
a resolution reserving the shares of Common Stock issuable
upon exercise of the Warrants for issuance upon the
exercise; the Warrants, when issued and delivered pursuant
hereto, and the Warrant Shares when issued and delivered
pursuant to the Warrants, will be validly issued, fully paid
and non-assessable, with no liability on the part of the
holders thereof and are not subject to any statutory
preemptive rights, rights of first refusal or rights of
first offer under any applicable law or any contract known
to such counsel;
j. none of the execution and delivery by the Company of
the Registration Rights Agreement, the Warrant Agreement or
the Warrants, the consummation of the transactions therein
contemplated, including the issuance and delivery of the
Warrants and, upon the exercise of the Warrants, the Warrant
Shares, or compliance with the terms and provisions thereof
will conflict with or result in a breach of, or require any
consent under, the Certificate of Incorporation or By-Laws
of the Company, or any applicable law or regulation, or any
order, writ, injunction or decree of any court or
governmental authority or agency, (except with respect to
any particular proceeding as to which such counsel's opinion
may be based on its knowledge) (excluding FCC/PUC Regulatory
Approvals, as to which such counsel need not express any
opinion) (provided, however, that the Company will need to
comply with the applicable provisions of the Securities Act,
the Exchange Act and state and foreign securities law in
connection with the exercise by the warrant holders of their
rights under Sections 5.01 and 5.02 of the Warrant
Agreement), or any agreement or instrument, known to such
counsel after due inquiry, to which the Company is a party
or by which it is bound or to which any of its properties or
assets is subject, or constitute a default under any such
agreement or instrument or result in the creation or
imposition of any lien upon any of the revenues or assets of
the Company pursuant to the terms of any such agreement or
instrument;
k. assuming the accuracy of the representations and
warranties of the Initial Purchaser and compliance by the
Initial Purchaser with its agreements contained herein, it
is not necessary in connection with the offer, sale and
delivery of the Securities in the manner contemplated by
this Agreement to register the issuance of the Securities
under the Act or to qualify the Indenture under the Trust
Indenture Act;
l. to the knowledge of such counsel after due
20
inquiry, there is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or
investigation pending or threatened with respect to the
Company, any Subsidiary, or any of their respective
operations, businesses, properties, or assets except as
properly described in the Final Memorandum or such as
individually or in the aggregate do not now have and in the
future could not reasonably be expected to have a Material
Adverse Effect;
m. insofar as statements in the Final Memorandum
purport to summarize the status of litigation or the
provisions of laws, rules, regulations, orders, judgments,
decrees, contracts, agreements, instruments, leases, or
licenses, such statements have been prepared or reviewed by
such counsel and accurately reflect in all material respects
the status of such litigation and provisions purported to be
summarized and are correct in all material respects (except
for the information contained in the Final Memorandum under
the heading "Business -- Government Regulation" or otherwise
relating to regulatory matters discussed therein, as to
which such counsel need not express any opinion); and
n. the Company is not an "investment company" as
defined in Section 3(a) of the Investment Company Act and,
if the Company conducts its business as set forth in the
Final Memorandum, will not become an "investment company"
and will not be required to be registered under the
Investment Company Act.
Such counsel shall also state that in the course of preparation by the
Company of the Final Memorandum, such counsel has participated in conferences
with officers and other representatives of the Company and representatives of
the independent accountants of the Company and representatives of the Initial
Purchaser and its counsel at which conferences the contents of the Final
Memorandum and related matters were discussed and, on the basis of the
foregoing, no fact has come to the attention of such counsel that causes such
counsel to believe that the Final Memorandum when issued or at the Execution
Time the Final Memorandum contained or on the date of such opinion contains an
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading provided such counsel
need express no comment or belief with respect to the financial statements or
other financial data or information with respect to the Initial Purchaser
contained in the Final Memorandum.
In addition, such counsel shall furnish to the Initial Purchaser an
opinion, dated the Closing Date to the effect that the statements made in the
Final Memorandum under the caption "Certain United States Federal Income Tax
Considerations" insofar as they purport
21
to describe the material United States Federal income tax consequences of the
purchase, ownership and disposition of the Securities and the Common Stock
issuable upon the conversion thereof fairly summarize the matters therein
described.
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
New York or the United States, to the extent they deem proper and specified in
such opinion, upon the opinion of other counsel of good standing whom they
believe to be reliable and who are satisfactory to Counsel for the Initial
Purchaser and (B) as to matters of fact, to the extent they deem proper, on
certificates of responsible officers of the Company and public officials.
References to the Final Memorandum in this paragraph (a) include any amendments
or supplements thereof or thereto at the Closing Date.
(Y) the opinion of Xxx Xxxxx, Vice President -- General Counsel of the
Company, dated the Closing Date, to the effect that:
1. a. each of the Company and the Material Subsidiaries
(A) is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is chartered
or organized, with full corporate power and authority to own
its properties and conduct its business as described in the
Final Memorandum, (B) is duly qualified to do business as a
foreign corporation and is in good standing under the laws
of each jurisdiction which requires such qualification
wherein the failure to be so qualified would have a Material
Adverse Effect and (C) holds, or in the case of those set
forth on Schedule 1(y) hereto, has applied for all material
approvals, authorizations, offers, licenses, certificates
and permits from government authorities necessary for the
conduct of its business as prescribed in the Final
Memorandum;
b. all the outstanding shares of capital stock of each
Subsidiary (A) have been duly and validly authorized and
issued and are fully paid and nonassessable and (B) except
as set forth on Exhibit 21 to the Form 10-K, are owned by
the Company either directly or through wholly owned
subsidiaries, free and clear of any perfected security
interest and any other security interests, claims, liens or
encumbrances (except as set forth in this Agreement or the
Schedules hereto);
c. no consent, approval, authorization or order of any
court or governmental agency or body is required for the
consummation of the transactions contemplated herein, except
(A) such as
22
may be required under the securities laws of any
jurisdiction domestic or foreign in connection with the
purchase and distribution of the Securities by the Initial
Purchaser (as to which such counsel need not express any
opinion), (B) in connection with the registration under the
Act of the Securities and the Common Stock issuable upon
conversion thereof and under the Trust Indenture Act, (C)
such as may be required in connection with the listing of
the Securities on any stock exchange, including, without
limitation, the Luxembourg Stock Exchange or the designation
of the Securities as PORTAL-eligible securities, (D) such as
may be required under the HSR Act in connection with the
conversion of the Securities and (E) such other approvals
(specified in such opinion) as have been obtained;
d. assuming the accuracy of the representations and
warranties of the Initial Purchaser and compliance by the
Initial Purchaser with the agreements contained in this
Agreement, none of the issue and sale of the Securities, the
execution and delivery of the Indenture or this Agreement,
the consummation of any other of the transactions herein
contemplated and the fulfillment of the terms hereof will
conflict with, result in a breach or violation of, or
constitute a default under any law or the Certificate of
Incorporation or By-Laws of the Company or the terms of any
indenture or other agreement or instrument to which the
Company or any of its subsidiaries is a party or bound or
any judgment, order or decree to be applicable to the
Company or any of the Subsidiaries of any court, regulatory
body, administrative agency, governmental body or arbitrator
having jurisdiction over the Company or any of the
Subsidiaries;
e. none of the execution and delivery by the Company of
this Agreement, the Indenture, the Securities, the
Registration Rights Agreement, the Warrant Agreement or the
Warrants, the consummation of the transactions herein or
therein contemplated, including the conversion of the
Securities, the issuance and delivery of the Warrants and,
upon the exercise of the Warrants, the Warrant Shares, or
compliance with the terms and provisions hereof or thereof
will conflict with or result in a breach of, or require any
consent under, the Certificate of Incorporation or By-Laws
of the Company, or any applicable law or regulation, or any
order, writ, injunction or decree of any court or
governmental authority or agency (although the Company will
need to comply with the applicable provisions of the
Securities Act, the Exchange Act and state securities law in
connection with the Registration Rights Agreement and the
exercise by the warrant holders of their rights under
Sections 5.01 and 5.02 of the Warrant Agreement), or any
agreement or instrument to which the Company is a party or
by which it is bound or to
23
which any of its properties or assets is subject, or
constitute a default under any such agreement or instrument
or result in the creation or imposition of any lien upon any
of the revenues or assets of the Company pursuant to the
terms of any such agreement or instrument;
f. there is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or
investigation pending or, to the best knowledge of such
counsel after due inquiry, threatened with respect to the
Company, any Subsidiary, or any of their respective
operations, businesses, properties, or assets except as
properly described in the Final Memorandum or such as
individually or in the aggregate do not now have and in the
future could not reasonably be expected to have a Material
Adverse Effect;
g. insofar as statements in the Final Memorandum
purport to summarize the status of litigation or the
provisions of laws, rules, regulations, orders, judgments,
decrees, contracts, agreements, instruments, leases, or
licenses, such statements have been prepared or reviewed by
such counsel and accurately reflect in all material respects
the status of such litigation and provisions purported to be
summarized and are correct in all material respects;
h. the information contained in the Form 10-K under the
heading "Government Regulation" in Item 1 - "Business" and
in Item 3 - "Legal Proceedings" and the information
contained in the Final Memorandum under the caption
"Business -- Government Regulation," fairly summarizes the
matters therein described.
Such counsel shall also state that in the course of preparation by the
Company of the Final Memorandum, such counsel has participated in conferences
with other officers and representatives of the Company and representatives of
the independent accountants of the Company and representatives of the Initial
Purchaser and its counsel at which conferences the contents of the Final
Memorandum and related matters were discussed and, on the basis of the
foregoing, no fact has come to the attention of such counsel that causes such
counsel to believe that the Final Memorandum when issued or at the Execution
Time the Final Memorandum contained or on the date of such opinion contains an
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading provided such counsel
need express no comment or belief with respect to the financial statements or
other financial data or information with respect to the Initial Purchaser
contained in the Final Memorandum.
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the District of
Columbia or the United States,
24
to the extent she deems proper and specified in such opinion, upon the opinion
of other counsel of good standing whom she believes to be reliable and who are
satisfactory to Counsel for the Initial Purchaser and (B) as to matters of fact,
to the extent she deems proper, on certificates of responsible officers of the
Company and public officials.
References to the Final Memorandum in this paragraph (a) include any
amendments or supplements thereof or thereto at the Closing Date.
A. The Initial Purchaser shall have received from Counsel for the
Initial Purchaser such opinion or opinions, dated the Closing Date, with
respect to the issuance and sale of the Securities, the Indenture, the
Registration Rights Agreement, the Warrant Agreement, the Final Memorandum
(together with any amendment or supplement thereof or thereto) and other
related matters as the Initial Purchaser may reasonably require, and the
Company shall have furnished to such counsel such documents as they request
for the purpose of enabling them to pass upon such matters. References to
the Final Memorandum in this paragraph (b) include any amendments or
supplements thereto at the Closing Date.
B. The Company shall have furnished to the Initial Purchaser a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the Company,
dated the Closing Date, to the effect that the signers of such certificate
have carefully examined the Final Memorandum, any amendment or supplement
to the Final Memorandum and this Agreement and that:
a. the representations and warranties of the Company in this
Agreement are true and correct on and as of the Closing Date with the
same effect as if made on the Closing Date and the Company has
complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the Closing Date;
and
b. since the date of the most recent financial statements
included in the Final Memorandum (exclusive of any amendment or
supplement thereof or thereto), there has been no material adverse
change in the condition (financial or other), earnings, business or
properties of the Company and its subsidiaries, whether or not arising
from transactions in the ordinary course of business, except as set
forth in or contemplated in the Final Memorandum (exclusive of any
amendment or supplement thereof or thereto).
C. At the Execution Time and at the Closing Date, Xxxxx & Young LLP
shall have furnished to the Initial Purchaser a letter or letters, dated
25
respectively as of the Execution Time and as of the Closing Date, in form
and substance satisfactory to and previously approved by the Initial
Purchaser and counsel to the Initial Purchaser, confirming that they are
independent certified public accountants with respect to the Company within
the meaning of the Act, the Exchange Act and the applicable rules and
regulations thereunder and Rule 101 of the American Institute of Certified
Public Accountants (the "AICPA") Code of Professional Conduct and its
interpretations and rulings, and containing such other information with
respect to the financial statements and certain other financial information
of the Company included in the Final Memorandum, as requested by the
Initial Purchaser and Counsel to the Initial Purchaser.
References to the Final Memorandum in this paragraph (d) include any
amendment or supplement thereof or thereto at the date of the letter.
A. Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Final Memorandum (exclusive of any
amendment or supplement thereof or thereto), there shall not have been (i)
any change or decrease specified in the letter or letters referred to in
paragraph (d) of this Section 6 or (ii) any change, or any development
involving a prospective change, in or affecting the business or properties
of the Company and the Subsidiaries the effect of which, in any case
referred to in clause (i) or (ii) above, is, in the judgment of the Initial
Purchaser, so material and adverse as to make it impractical or inadvisable
to market the Securities as contemplated by the Final Memorandum (exclusive
of any amendment or supplement thereof or thereto).
B. At the Closing Date, the Registration Rights Agreement shall have
been duly executed, delivered and be in full force and effect.
C. Prior to the Closing Date, the Company shall have furnished to the
Initial Purchaser such further information, certificates and documents as
the Initial Purchaser may reasonably request.
D. At the Execution Time, the Company shall have furnished to the
Initial Purchaser a letter substantially in the form of Exhibit C hereto
from each of the Company's executive officers and directors and each of the
individuals and entities listed on Schedule II hereto addressed to the
Initial Purchaser.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material
26
respects reasonably satisfactory in form and substance to the Initial Purchaser
and Counsel for the Initial Purchaser, this Agreement and all obligations of the
Initial Purchaser hereunder may be canceled at, or at any time prior to, the
Closing Date by the Initial Purchaser. Notice of such cancellation shall be
given to the Company in writing or by telephone or telefax confirmed in writing.
The documents required to be delivered by this Section 6 shall be
delivered at the office of Counsel for the Initial Purchaser, at Xxx Xxxxxxx
Xxxxx, Xxx Xxxx, Xxx Xxxx, on the Closing Date.
I. Payment of Fees and Reimbursement of Initial Purchaser's Expenses.
(a) On the Closing Date, the Company shall allow the Initial Purchaser a
management, sales and underwriting commission discount equal to 5% of the
principal amount of the Securities and as additional compensation the
Company shall issue to the Initial Purchaser Warrants exercisable (in
accordance with the Warrant Agreement which shall be in substantially the
form attached hereto as Exhibit E) for the purchase of an aggregate number
of shares of Common Stock (subject to adjustment) equal to 3% of the total
number of shares of Common Stock into which the Securities will be
convertible.
1. If the sale of the Securities provided for herein is not
consummated because any condition to the obligations of the Initial
Purchaser set forth in Section 6 hereof is not satisfied, because of
any termination pursuant to Section 9 hereof or because of any
refusal, inability or failure on the part of the Company to perform
any agreement herein or comply with any provision hereof, other than
as a result of the failure of the Initial Purchaser to perform its
obligations hereunder, the Company will reimburse the Initial
Purchaser upon demand an amount not to exceed $375,000 for its
out-of-pocket expenses (including fees and expenses of counsel) that
shall have been incurred by it in connection with the proposed
purchase and sale of the Securities; provided, however, that
notwithstanding the provisions of Section 5(p), in such case of
failure to perform by the Initial Purchaser, the fees and expenses of
the Counsel of the Initial Purchaser shall not be reimbursed by the
Company.
II. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless the Initial Purchaser, the directors, officers,
employees and agents of the Initial Purchaser and each person who controls
the Initial Purchaser within the meaning of either the Act or the Exchange
Act against any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or
27
alleged untrue statement of a material fact contained in the Preliminary
Memorandum, the Final Memorandum or any information provided by the
Company to any holder or prospective purchaser of Securities pursuant to
Section 5(i), or in any amendment thereof or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made in the
Preliminary Memorandum or the Final Memorandum, or in any amendment
thereof or supplement thereto, in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the
Initial Purchaser specifically for inclusion therein. This indemnity
agreement will be in addition to any liability which the Company may
otherwise have.
1. The Initial Purchaser agrees to indemnify and hold harmless
the Company, its directors, its officers, and each person who controls
the Company within the meaning of either the Act or the Exchange Act,
to the same extent as the foregoing indemnity from the Company to the
Initial Purchaser, but only with reference to written information
relating to the Initial Purchaser furnished to the Company by or on
behalf of the Initial Purchaser specifically for inclusion in the
Preliminary Memorandum or the Final Memorandum, or in any amendment
thereof or supplement thereto. This indemnity agreement will be in
addition to any liability which the Initial Purchaser may otherwise
have. The Company acknowledges that the statements set forth in the
last paragraph of the cover page, the sixth, eighth, ninth, eleventh
and fifteenth paragraphs under the heading "Plan of Distribution" and
the statements under the heading "Notice to Investors-Offers and Sales
by the Initial Purchaser" in the Preliminary Memorandum and the Final
Memorandum constitute the only information furnished in writing by or
on behalf of the Initial Purchaser for inclusion in the Preliminary
Memorandum or the Final Memorandum.
2. Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the commencement thereof; but the
failure so to notify the indemnifying party (i) will not relieve it
from liability under paragraph (a) or (b) above unless and to the
extent it did not otherwise learn of such action and such failure
results in
28
the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to
represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any
separate counsel retained by the indemnified party or parties except
as set forth below); provided, however, that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the
indemnified party in an action, the indemnified party shall have the
right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses
of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present
such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses
available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii)
the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of such
action or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying
party; provided further, that the indemnifying party shall not be
responsible for the fees and expenses of more than one separate
counsel (together with appropriate local counsel) representing all the
indemnified parties under paragraph (a) or (b) above. An indemnifying
party will not, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment
with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim,
action, suit or proceeding.
3. In the event that the indemnity provided in paragraph (a) or
(b) of this Section 8 is unavailable to or insufficient to hold
harmless an indemnified party for any reason, the Company and the
Initial Purchaser agree to contribute to the aggregate losses, claims,
damages and liabilities (including
29
legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which the
Company or the Initial Purchaser may be subject in such proportion as
is appropriate to reflect the relative benefits received by the
Company or by the Initial Purchaser from the offering of the
Securities; provided, however, that in no case shall the Initial
Purchaser be responsible for any amount in excess of the purchase
discount or commission applicable to the Securities purchased by the
Initial Purchaser hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the
Company or the Initial Purchaser, as the case may be, shall contribute
in such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company or of the Initial
Purchaser in connection with the statements or omissions that resulted
in such Losses as well as any other relevant equitable considerations.
Benefits received by the Company shall be deemed to be equal to the
total net proceeds from the offering (before deducting expenses), and
benefits received by the Initial Purchaser shall be deemed to be equal
to the total purchase discounts and commissions, in each case as set
forth on the cover page of the Final Memorandum. Relative fault shall
be determined by reference to whether any alleged untrue statement or
omission relates to information provided by the Company or the Initial
Purchaser. The Company and the Initial Purchaser agree that it would
not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation that does not take
account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this
Section 8, each person who controls the Initial Purchaser within the
meaning of either the Act or the Exchange Act and each director,
officer, employee and agent of the Initial Purchaser shall have the
same rights to contribution as the Initial Purchaser, and each person
who controls the Company within the meaning of either the Act or the
Exchange Act and each officer and director of the Company shall have
the same rights to contribution as the Company, subject in each case
to the applicable terms and conditions of this paragraph (d).
III. Termination. This Agreement shall be subject to termination in
the absolute discretion of the Initial Purchaser, by notice given to the
Company prior to delivery of and payment for the Securities, if prior to
such time (i) trading in or quotation of the Company's Common Stock shall
have been suspended by the Commission or Nasdaq's Small Cap Market or
trading in securities generally on the New York Stock Exchange or Nasdaq's
Small Cap Market shall have been suspended or
30
limited or minimum prices shall have been established on either of such
Exchange or Market System; (ii) subsequent to the date as of which
information is given in the Final Memorandum there shall have been a
material adverse change (or prospective material adverse change) in or
affecting the financial condition of the Company, otherwise than as set
forth in the Final Memorandum the effect of which, in any such case, is in
the Initial Purchaser's judgment so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Securities on the terms and in the manner contemplated by
the Preliminary Memorandum and Final Memorandum; (iii) if, on or after the
date hereof, a downgrading shall have occurred in the rating accorded the
Company's debt securities by Standard & Poor's Corporation or Xxxxx'x
Investors Service, Inc. or either of them shall have publicly announced
that it has under surveillance or review, with possible negative
implications, its rating of any of the Company's debt securities; (iv) a
banking moratorium shall have been declared either by Federal or New York
State authorities or (v) there shall have occurred any outbreak or
escalation of hostilities, declaration by the United States of a national
emergency or war or other calamity or crisis the effect of which on
financial markets is such as to make it, in the judgment of the Initial
Purchaser, impracticable or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Final Memorandum
(exclusive of any amendment or supplement thereof or thereto).
IV. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements
of the Company or its officers and of the Initial Purchaser set forth in or
made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of the Initial
Purchaser or the Company or any of the officers, directors or controlling
persons referred to in Section 8 hereof, and will survive delivery of and
payment for the Securities. The provisions of Sections 7 and 8 hereof shall
survive the termination or cancellation of this Agreement.
V. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Initial Purchaser, will be
mailed, delivered or telefaxed and confirmed to it in writing to HSBC
Securities, Inc., 000 Xxxxxxxx 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000,
Telephone (000) 000-0000, Telefax (000) 000-0000, with a copy to Cleary,
Gottlieb, Xxxxx & Xxxxxxxx, One Liberty Plaza, New York, New York 10006,
Telephone (000) 000-0000, Telefax (000) 000-0000, Attention: Xxxxx X.
Xxxxxxx, Esq.; or, if sent to the Company, will be mailed, delivered or
telefaxed and confirmed to it in writing at 0 Xxxxxx Xxxxx, Xxxx Xxxxxxx,
Xxx Xxxx 00000, Telephone (000) 000-0000, Telefax (000) 000-0000,
Attention: President, with copies to Xxx Xxxxx, Esq., 000 Xxxx Xxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxx, 00000, Telephone (407) 000- 0000, Telefax, (407)
481-2560 and Certilman Balin Xxxxx & Xxxxx, LLP, 00 Xxxxxxx Xxxxxx, Xxxx
Xxxxxx, Xxx Xxxx 00000, Telephone (000) 000-0000, Telefax, (516) 296- 7111,
Attention: Xxxx Xxxxxxx, Esq., or such other address as either party may
provide from time to time.
31
VI. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8
hereof, and, except as expressly set forth in Section 5(i) hereof, no other
person will have any right or obligation hereunder.
VII. APPLICABLE LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CHOICE OF LAW RULES THEREOF.
VIII. Business Day. For purposes of this Agreement, "business day"
means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a
day on which banking institutions in The City of New York, New York are
authorized or obligated by law, executive order or regulation to close.
IX. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument. * * *
32
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement between the
Company and the Initial Purchaser.
Very truly yours,
AMNEX, INC.
By
Name:
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
HSBC SECURITIES, INC.
By
Name:
Title:
33
