February 3, 1999
SHARE EXCHANGE AGREEMENT
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THIS AGREEMENT is made as of the 3rd day of February, 1999, by and among
Clariti Telecommunications International, Ltd., a Delaware (U.S.) corporation
formerly known as Sigma Alpha Group, Ltd. ("Clariti"); Xxxxxxxx Xxxx Holdings,
Limited, a corporation formed under the laws of the British Virgin Islands
("CHH"); and MediaTel Global Communications Limited, a corporation formed under
the laws of the United Kingdom ("MediaTel").
BACKGROUND
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A. Clariti wishes to acquire one hundred percent (100%) of the issued and
outstanding stock of MediaTel.
B. CHH owns and is authorized to transfer to Clariti one hundred percent
(100%) of the issued and outstanding stock of MediaTel (the "MediaTel
Shares").
NOW THEREFORE, in consideration of the premises and of the respective
covenants, representations and warranties contained herein, intending to be
legally bound, the parties hereby agree as follows:
1. EXCHANGE.
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1.1 Transfer of MediaTel Shares.
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1.1.1 MediaTel Shares.
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At the Closing, CHH shall sell, transfer, assign, convey and deliver to Clariti
all right, title and interest in or to the MediaTel Shares, which shall be free
and clear of any and all liens, claims, charges, pledges, security interests,
warrants, puts, calls, trusts (voting or otherwise) or rights of any kind
granting any interest in or right to purchase any of such shares or other
encumbrances of any nature whatsoever ("Liens"). At the Closing, CHH shall
deliver to Clariti stock certificates representing the MediaTel Shares, each
certificate to be duly endorsed in blank or with stock powers annexed thereto
duly endorsed in blank, in proper form for transfer of the MediaTel Shares to
Clariti upon delivery.
1.1.2 Shares of MediaTel Subsidiaries.
-------------------------------
MediaTel owns one hundred percent (100%) of the ownership interests of the
corporations listed on Schedule 1.1.2 hereto (the "MediaTel Wholly Owned
Subsidiaries"). At the Closing, CHH shall deliver to Clariti stock
certificates evidencing the ownership by MediaTel of one hundred percent (100%)
of the issued and outstanding shares of each of the MediaTel Wholly Owned
Subsidiaries (the "MediaTel Wholly Owned Subsidiaries Shares"), which shall be
free and clear of any and all Liens.
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1.1.3 MediaTel Dispositions.
---------------------
Prior to the Closing, MediaTel shall dispose (the "Disposition") of one hundred
percent (100%) of its ownership of the subsidiary listed on Schedule 1.1.3
hereto (the "MediaTel Disposition Subsidiary"). The MediaTel Disposition
Subsidiary shall be distributed to CHH without consideration.
1.2 Consideration for MediaTel Shares.
---------------------------------
At the Closing and simultaneously with the transfer and assignment to Clariti
of the MediaTel Shares, Clariti shall deliver to CHH the following
consideration representing full and complete payment by Clariti to CHH for the
MediaTel Shares (the "MediaTel Consideration").
1.2.1 Clariti shall cancel and deliver to CHH that certain
promissory note dated February 3, 1999 made payable by CHH to Clariti in the
principal amount of Twenty-One Million U.S. Dollars (USD$21,000,000) [the
"$21,000,000 Note"].
1.2.2 Clariti shall cause to be issued to CHH Three Million Five
Hundred and Fifty Five Thousand Five Hundred and Fifty Five (3,555,555) shares
of Clariti's common stock $.001 par value (the "Clariti Common Stock Issued to
CHH"), which shall be free and clear of any and all Liens. At the Closing,
Clariti shall deliver to CHH stock certificates representing the Clariti Common
Stock Issued to CHH.
1.2.3 Clariti shall execute and deliver to CHH its unsecured
convertible debenture in the principal amount of Five Million U.S. Dollars
(USD$5,000,000), in the form attached as Exhibit "B" to this Agreement and
incorporated herein (the "Convertible Debenture").
1.3 Allocation of MediaTel Consideration.
------------------------------------
The parties acknowledge and agree that the aggregate consideration being paid
by Clariti to CHH for the MediaTel Shares is Thirty-Four Million U.S. Dollars
(USD$34,000,000) payable as provided for in Section 1.2 and allocable as
follows:
1.3.1 Twenty-One Million U.S. Dollars (USD$21,000,000) in the
form of the canceled $21,000,000 Note.
1.3.2 Eight Million U.S. Dollars (USD$8,000,000) in the form of
the Clariti Common Stock Issued to CHH as provided for in Section 1.2.3. The
parties acknowledge and agree that any fluctuation in the market value of the
common stock of Clariti as reported on the OTC-Bulletin Board, or any successor
exchange thereto, between the date hereof and the Closing Date shall not affect
the number of shares of Clariti stock being issued to CHH hereunder (i.e.,
3,555,555 shares).
1.3.3 Five Million U.S. Dollars (USD$5,000,000) in the form
of the Convertible Debenture as provided for in Section 1.2.3.
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1.4 Closing.
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The consummation of the transactions contemplated by this Agreement shall take
place on March 15, 1999 or such other date as shall be mutually agreed upon by
the parties in writing and shall take place at the offices of Clariti
Telecommunications International, Ltd., located at 0000 Xxxxx Xxxxxxxx Xxxxxx,
Xxxxx 000, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, at 10:00 A.M. or at such other
place, date or time mutually agreed to by the parties (the "Closing" or the
"Closing Date").
2. COVENANTS OF CHH AND MEDIATEL.
-----------------------------
CHH and MediaTel, severally, with respect to itself only, except for and as
required by the Disposition, hereby agree to perform and comply with the
following covenants:
2.1 Conduct of Business Pending Closing.
-----------------------------------
From and after the date hereof until the Closing Date, CHH and MediaTel shall
cause each of MediaTel, each of the MediaTel Wholly Owned Subsidiaries and each
of the MediaTel Disposition Subsidiary (hereinafter, MediaTel, the MediaTel
Wholly Owned Subsidiaries and the MediaTel Disposition Subsidiary shall be
collectively referred to as the "Companies") shall:
2.1.1 Maintain its existence in good standing;
2.1.2 Maintain the general character of its business and conduct
its business in the ordinary and usual manner;
2.1.3 Maintain business and accounting records consistent with
such Company's past practices;
2.1.4 Maintain its properties in accordance with past practice;
2.1.5 Use commercially reasonable efforts to preserve its
business intact and to preserve the goodwill of their customers and others
having business relations with any of the Companies; and
2.1.6 Immediately notify Clariti of any change or condition
adversely impacting such covenants.
2.2 Prohibited Actions Pending Closing.
----------------------------------
Unless otherwise provided for herein or approved by Clariti in writing, from
the date hereof until the Closing Date, CHH and MediaTel shall cause each of
the Companies not to take any of the following actions, except (i) in order to
comply with the terms of any contract, agreement or instrument to which any of
the Companies is a party or by which any of the Companies is bound, (ii) as
required in order to comply with any law, rule, regulation, court order or
judgment or (iii) as set forth and described in Schedule 2.2, which schedule
shall be delivered to Clariti by no later than February 20, 1999 and which
schedule shall, to the knowledge of MediaTel and CHH, disclose whether any of
the Companies on or before Closing, shall:
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2.2.1 Amend or otherwise change its respective certificates or
articles of incorporation, bylaws or other governing documents;
2.2.2 Issue or sell or authorize for issuance or sale, or grant
any options or make other agreements with respect to, any shares of its capital
stock, any bonds or any other of its securities;
2.2.3 Declare, set aside, make or pay any dividend or other
distribution to their shareholders, or redeem, purchase or otherwise acquire,
directly or indirectly, any of their capital stock, or authorize or effect any
split-up or any recapitalization or make any changes in its authorized or
issued capital stock;
2.2.4 Sell, transfer or otherwise dispose of or agree to sell,
transfer or dispose of any of its assets, except assets sold, used or consumed
in the ordinary course of business;
2.2.5 Take any action prior to the Closing Date that would
breach any of the representations and warranties contained in this Agreement;
or
2.2.6 Operate the business of any of the Companies in any way
other than in the ordinary course of business.
On or before February 20, 1999, CHH and MediaTel shall provide to Clariti
copies, true, correct and complete in all material respects, of each item
referenced to in clause (i) or (ii) of this Section 2.2.
2.3 Access.
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From and after the date hereof until the Closing, CHH and MediaTel, jointly and
severally, shall cause the respective shareholders, directors, officers,
employees, consultants, independent certified public accountants, counsel and
other agents and representatives of each of the Companies (the "MediaTel
Representatives") to afford to three (3) representatives of Clariti, subject to
each of such representatives of Clariti executing and delivering to MediaTel
confidentiality agreements in the form attached as Exhibit "C" to this
Agreement ("Confidentiality Agreements"): (i) free and full access at all
reasonable times during ordinary business hours to all of each Companies'
properties, customer lists, contracts, books, records and other property,
including all computerized information and data bases and any tax returns,
financial statements, budgets, projections, operating reports and related
information, whether completed or otherwise and (ii) the right to: (a) consult
with the MediaTel Representatives at all reasonable times during ordinary
business hours, (b) to take a physical inventory of any of the Companies or to
audit all or any part of the Companies' books and records, through an
independent certified public accountant of Clariti or otherwise, (c) review and
copy the work papers and other records of any independent certified public
accountants of any of the Companies and such additional financial and operating
data and other information as to the business and properties of any of the
Companies as Clariti shall from time to time reasonably require for the purpose
of evaluating the Companies and the transactions contemplated in this
Agreement; provided, however, that any such investigations shall not affect or
otherwise diminish or obviate in any way any of the representations and
warranties of CHH and MediaTel.
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3. REPRESENTATIONS AND WARRANTIES BY CHH AND MEDIATEL.
--------------------------------------------------
CHH and MediaTel, hereby severally, with respect to itself only, represent and
warrant to Clariti that the statements contained in this Section 3 are true,
correct and complete in all material respects as of the date of this Agreement
and shall be true, correct and complete in all material respects as of the
Closing, except as set forth in the Disclosure Schedules, which Disclosure
Schedules shall be arranged to correspond to the lettered and numbered sections
contained in this Section 3. All schedules referenced in this Section 3 shall
be delivered by CHH and/or MediaTel to Clariti by no later than February 20,
1999.
3.1 Organization and Authorization.
------------------------------
CHH is a corporation, duly organized, validly existing and in good standing
under the laws of the British Virgin Islands. MediaTel is a corporation, duly
organized, validly existing and in good standing under the laws of the United
Kingdom. Each of CHH and MediaTel is duly qualified and in good standing in
every other jurisdiction where the failure to be so qualified would have a
material adverse effect on its business. Each of CHH and MediaTel has all
requisite corporate power and authority and, except as set forth in Schedule
3.1 hereto, all necessary licenses and permits to carry on its business as it
has been and is now being conducted and to own, lease and operate the
properties used in connection therewith, except for such licenses and permits
the failure to have which would not have a material adverse effect on the
business and operations of CHH, MediaTel and their affiliates, taken as a
whole. The execution and delivery of this Agreement, and the actions
contemplated hereby have been duly authorized by all necessary corporate action
by the Board of Directors of CHH and MediaTel and their respective
shareholders, which are the only corporate approvals required by CHH and
MediaTel, such Board of Directors' approval having been lawfully and validly
obtained. CHH and MediaTel have and will have at the Closing the full right,
power and capacity (a) to execute, deliver and perform this Agreement and (b)
to perform all other transactions contemplated to be performed by each of them
hereunder. This Agreement is a valid and binding obligation of CHH and
MediaTel.
3.2 Capitalization.
--------------
The total authorized capital stock of MediaTel consists of one thousand (1,000)
shares of common stock one pound par value of which, the MediaTel Shares have
been validly issued and are outstanding and are fully paid and nonassessable.
All of the MediaTel Shares were issued in compliance with all applicable
federal, state and foreign securities laws and regulations, have been duly and
validly authorized and issued and are fully paid and nonassessable, free of
preemptive rights, and to CHH's and MediaTel's knowledge, with no liability
attaching to the ownership thereof. None of the MediaTel Shares have been
issued in violation of any stockholder's preemptive rights.
3.3 Options.
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Except as set forth on Schedule 3.3 hereto, there are no existing agreements,
subscriptions, options, warrants, puts, calls, commitments, pledges,
assignments, trusts (voting or otherwise), or rights of any kind whatsoever
granting to any person or entity any interest in or the right to purchase or
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otherwise acquire from MediaTel or from CHH, at any time, or upon the happening
of any stated event, any securities of CHH or MediaTel, whether or not
presently issued or outstanding, nor are there any outstanding securities of
CHH or MediaTel of any type which are convertible into or exchangeable for
shares or other securities of CHH or MediaTel, nor are there any agreements,
subscriptions, options, warrants, calls, commitments or rights of any kind
whatsoever granting to any person or entity any interest in or the right to
purchase or otherwise acquire from MediaTel, or from CHH, any securities so
convertible or exchangeable, nor are there any proxies, agreements or
understandings with respect to the voting or transferability of any shares or
securities of MediaTel or of CHH.
3.4 Freedom to Contract.
-------------------
The execution and delivery of this Agreement by CHH and MediaTel does not and
the performance by them of their obligations hereunder will not: (a) violate or
conflict with any provision of the Certificates or Articles of Incorporation or
Bylaws of CHH or MediaTel, or any amendments thereto or restatements thereof,
(b) to the knowledge of CHH and MediaTel, violate any of the terms, conditions
or provisions of any law or order of any court or governmental authority or (c)
to the knowledge of CHH and MediaTel, result in a material violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any
agreement, instrument or obligation, oral or written, to which CHH or MediaTel
is a party (whether as an original party or as an assignee or successor) or by
which any of them or any of their respective properties is bound.
3.5 Charter and Organizational Documents.
------------------------------------
In connection with that certain Share Exchange Agreement dated November 5,
1998, the parties to which include CHH and Clariti (the "GlobalFirst
Agreement"), CHH has previously delivered to Clariti a copy of the certificate
or articles of incorporation, by-laws and any other governing documents of CHH,
of which Clariti hereby acknowledges receipt and which, CHH represents and
warrants to Clariti, are true, correct and complete in all material respects.
On or before February 20, 1999, CHH and MediaTel shall deliver to Clariti a
copy that is true, correct and complete in all material respects of the
certificate or articles of incorporation, by-laws and any other governing
documents of MediaTel and each of the MediaTel Wholly Owned Subsidiaries, and
any amendments thereto or restatements thereof. The corporate or other minute
books of MediaTel and each MediaTel Wholly Owned Subsidiary, which shall be
made available to Clariti at any time prior to Closing, accurately reflect in
all material respects all corporate action required to be passed upon by the
stockholders and boards of directors of MediaTel and each MediaTel Wholly Owned
Subsidiary, respectively. The stock certificate books and stock transfer
ledgers of MediaTel and each MediaTel Wholly Owned Subsidiary, which shall be
made available to Clariti for inspection prior to the Closing, are true,
correct and complete in all material respects. To the knowledge of MediaTel,
all stock transfer taxes levied or payable with respect to all transfers of
shares of MediaTel and each MediaTel Wholly Owned Subsidiary prior to the date
hereof have been paid and appropriate transfer tax stamps affixed.
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3.6 MediaTel Wholly Owned Subsidiaries.
----------------------------------
MediaTel owns one hundred percent (100%) of the ownership interests of the
MediaTel Wholly Owned Subsidiaries. Schedule 3.6 also includes a general
description of each MediaTel Wholly Owned Subsidiaries' current operations, its
assets and liabilities and annual revenue and profit (loss) figures. Each
MediaTel Wholly Owned Subsidiary is a corporation, duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. Each MediaTel Wholly Owned Subsidiary is qualified to do
business in each jurisdiction where the failure to be so qualified would have a
material adverse effect on the business of such MediaTel Wholly Owned
Subsidiary. Each MediaTel Wholly Owned Subsidiary has all requisite corporate
power and authority and all necessary licenses and permits to carry on its
business as it has been and is now being conducted and to own, lease and
operate the properties used in connection therewith where the failure to have
such licenses or permits would have a material adverse effect on the businesses
of such MediaTel Wholly Owned Subsidiary. Except for its ownership interests
in each MediaTel Wholly Owned Subsidiary and except for such additional
contract interests in other entities as are set forth in Schedule 3.6, MediaTel
does not, directly or indirectly, have any ownership or other interest in, or
control of, any corporation, partnership, joint venture, business association
or other entity (whether as an original party or as an assignee or successor).
3.7 Directors and Officers.
----------------------
Schedule 3.7 contains a true, correct and complete list of the directors and
officers of CHH, MediaTel and each MediaTel Wholly Owned Subsidiary.
3.8 Financial Statements.
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CHH and MediaTel shall furnish to Clariti, on or before February 20, 1999,
copies of the financial statements described in this Section below (the
"Financial Statements"):
A. To the extent available, audited consolidating balance sheets and
statements of income, stockholders' equity and cash flows for MediaTel and each
of the MediaTel Wholly Owned Subsidiaries, for the calendar years ended
December 31, 1997 and 1996 prepared in accordance with generally accepted
accounting principals applied on a consistent basis.
B. Unaudited consolidated [and consolidating] balance sheets and
statements of income, for the year-to-date periods ending on December 31, 1998
(the "Most Recent Financial Statements") and January 31, 1999, prepared from
the Companies' respective books and records, but subject to normal year end
adjustments and consolidating adjustments, and without footnotes.
The above-described financial statements fairly present the financial position
of the Companies as of the date thereof and the results of operations of the
Companies for the periods presented, subject to normal consolidating and year-
end adjustments with respect to the results of operations. Except as set forth
in any of the Most Recent Financial Statements or in Schedule 3.8.1 or for and
as required by the Disposition, since December 31, 1998, there has been no: (a)
material adverse change in the financial condition, results of operations,
assets, liabilities, business or prospects of MediaTel, or to the knowledge of
MediaTel, any of the Companies, (b) material liability or obligation of any
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nature whatsoever (or the MediaTel's knowledge, any contingent liability or
obligation) incurred by MediaTel, or to MediaTel's knowledge, any of the
Companies, other than current liabilities or obligations incurred in the
ordinary course of business, (c) material change in the accounting methods or
practices followed by any of the Companies or (d) other event or condition of
any character which has materially adversely affected MediaTel's, or to
MediaTel's knowledge, any of the Companies' assets, business or prospects.
3.9 Absence of Undisclosed Liabilities.
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Except as set forth in Schedule 3.9 hereto, or except for amounts stated or
properly reserved for in the Most Recent Financial Statements or liabilities
incurred after the date thereof in the ordinary course of business, to the
knowledge of CHH and MediaTel, none of the Companies have any material
liabilities, obligations or contingencies. From and after the Closing, none of
CHH, MediaTel or any of the Companies shall have any liabilities, obligations,
contingencies or other sums payable to or any accounts receivable, claims,
demands or other sums due from any of CHH, MediaTel or any of the Companies.
On or before February 20, 1999, CHH and MediaTel shall provide to Clariti
copies, true, correct and complete in all material respects, of all debt
instruments, including, without limitation, any loan agreement or promissory
note, security agreement, or other evidence of any indebtedness or lien in an
original principal amount in excess of One Hundred Thousand Dollars ($100,000),
to which MediaTel is a party, and shall cause each of the Companies to present
to Clariti copies of such documents with respect to any indebtedness or lien in
an original principal amount in excess of One Hundred Thousand Dollars
($100,000), to which such Company is a party.
3.10 Title to Properties.
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To the knowledge of CHH and MediaTel, each of the Companies has good and
marketable title to all properties and assets (a) reflected on the Financial
Statements or acquired after the date thereof (except for properties and assets
sold or otherwise disposed of in the ordinary course of business since the date
of the Most Recent Financial Statements or for and as required by the
Disposition,), subject only to: (a) statutory liens arising or incurred in the
ordinary course of business with respect to which the underlying obligations
are not delinquent, (b) with respect to personal property, the rights of
customers of the Companies with respect to inventory or work in progress under
orders or contracts entered into by the Companies in the ordinary course of
business, (c) liens reflected in the Financial Statements or notes thereto, or
(d) liens for taxes not yet delinquent.
3.11 Other Contracts and Documents.
-----------------------------
Except as disclosed in some other Schedule hereto, Schedule 3.11 lists all
material written executory contracts in effect as of the date hereof, which
exceeds One Hundred Thousand Dollars ($100,000) in value, to which MediaTel or
any of the Companies is a party (whether as an original party or an assignee or
successor). On or before February 20, 1999, MediaTel shall provide Clariti
with copies of material written executory contracts to which any of the
Companies is a party (whether as an original party or an assignee or successor)
which: (a) was not made in the ordinary course of business; (b) as of the, date
hereof exceeds or at any time prior to the date hereof exceeded Five Hundred
Thousand Dollars ($500,000) in value; and/or (c) either (i) restricts any of
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the Companies or any of their respective employees from engaging in business or
from competing in any line of business with any other parties or (ii) provides
for a line of credit or guarantee, pledge of undertaking of the indebtedness of
any other person or entity. MediaTel shall make available to representatives
of Clariti, upon written request, for their review, subject to the provisions
of Section 2.3, true and correct copies of all material agreements, documents
and information of or relating to such Acquisitions. Except as set forth in
Schedule 3.11, there are no existing agreements, options, commitments or rights
with, to or in any third party to acquire any assets or properties, real,
personal or mixed, or any interest therein, of any of the Companies, except for
those contracts entered into by any of the Companies in the ordinary course of
business.
3.12 Absence of Default.
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Except as set forth in Schedule 3.12 and except in such instances of non-
compliance as would not have a material adverse effect on the business and
operations of MediaTel and all of the Companies taken as a whole to the
knowledge of CHH and MediaTel, the Companies have complied in all material
respects with and performed all of their respective material obligations
required to have been performed prior to the date hereof under all material
contracts, agreements and leases to which any of them is a party (whether as an
original party or as an assignee or successor) as of the date hereof, and are
not in default in any material respect under any contract, agreement, lease,
undertaking, commitment or other obligation; and to the knowledge of CHH and
MediaTel, no event has occurred which, with or without the giving of notice,
lapse of time or both, would constitute a default thereunder in any material
respect. CHH and MediaTel have no knowledge that any party has failed to comply
with or perform any of its material obligations required to have been performed
prior to the date hereof under any material contract, agreement or lease to
which any of the Companies is a party (whether as an original party or as an
assignee or successor) as of the date hereof, or that any event has occurred
which, with or without the giving of notice, lapse of time or both, would
constitute a material default by such party thereunder.
3.13 Distributions, Satisfactions, Obligations.
-----------------------------------------
Except as set forth in Schedule 3.13 hereto, since the date of the Most Recent
Financial Statements or for and as required by the Disposition, to the
knowledge of CHH and MediaTel, none of the Companies has:
(a) Issued any other shares of its capital stock, bonds or any
other of its securities;
(b) Incurred any obligations or liabilities for money borrowed
or any additional debt in an original principal amount greater than U.S.
$100,000 other than trade debt, or assumed, guaranteed or otherwise become
responsible for any obligation of any other party in a principal amount greater
than U.S. $100,000, or agreed to so do;
(c) Incurred any material obligations or liabilities in an
amount in excess of U.S. $100,000, other than in the ordinary course of
business;
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(d) Mortgaged or pledged or subjected to lien, charge or other
encumbrance, any of its assets, tangible or intangible, except for capital
leases, equipment leases, and liens securing debt in an amount less than U.S.
$100,000, or in the ordinary course of business;
(e) Declared, set aside or made or paid any dividend or other
distribution to any its stockholders, partners or members; or redeemed,
purchased or otherwise acquired, directly or indirectly, any of its capital
stock or ownership interest, or authorized or effected any split-up or any
recapitalization or made any changes in its authorized or issued capital stock;
(f) Sold, transferred or disposed of any of its assets for
consideration in excess of U.S. $ 100,000 or having a book value in excess of
U.S. $50,000, except assets used or consumed in the ordinary course of business
and obsolete equipment and equipment which has been replaced in the ordinary
course of business;
(g) Suffered any material adverse change in its business,
material damage to its assets, disruption of business or losses, whether
covered by insurance or not, or waived any rights of substantial value; or
(h) Operated its business in any way other than in the ordinary
course.
3.14 Litigation.
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Except as disclosed on Schedule 3.14, as the same may be updated, from time to
time, by MediaTel or CHH prior to Closing, there are no material actions,
suits, material labor disputes or arbitrations, legal or administrative
proceedings pending against the Companies, and to the knowledge of CHH and
MediaTel, no actions, suits, material labor disputes or arbitrations, legal or
administrative proceedings or investigations have been threatened against the
Companies or any of their respective assets, properties or businesses. Except
as set forth on Schedule 3.14, neither the Companies, nor the assets,
properties or business of any of them, is subject to any material judgment,
order, writ, injunction or decree of any court, governmental agency or
arbitration tribunal which has or will have a material adverse effect on the
Companies taken as a whole, on a consolidated basis.
3.15 Compliance with Laws.
--------------------
To the knowledge of CHH and MediaTel, each of the Companies has complied with,
and is not in violation of, any law, ordinance or governmental rule or
regulation to which it or its business or its assets and properties (real,
personal and intangibles) is subject, which in the event of any noncompliance,
would have a material adverse effect on the business, operations, prospects,
properties, assets or condition (financial or otherwise) of such Company. To
the knowledge of CHH and MediaTel, none of the Companies has received any claim
or notice of any violation of any building, zoning, fire, health or employment
laws, ordinances, rules or regulations relating to the properties, assets,
premises, business or employees of the Companies which has not been fully
remedied, which violation would have a material adverse effect on the business,
operations, prospects, properties, assets or condition (financial or otherwise)
of the Companies.
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3.16 Tax Matters.
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To the knowledge of CHH and MediaTel, each of the Companies has filed all
required federal, state, county, local, foreign and other tax returns and
reports, paid all taxes shown to have been due on such returns and reports,
including interest and penalties with respect thereto, and withheld all amounts
required to have been withheld by the Companies from employees or workers for
income taxes, social security and other payroll taxes. To the knowledge of CHH
and MediaTel, except as set forth in Schedule 3.16, none of the Companies is a
party to any pending action by any governmental authority for assessment or
collection of taxes, or party to any dispute or, to CHH's and MediaTel's
knowledge, threatened dispute in which an adverse determination would have a
material adverse effect on the business, operations, properties, or financial
condition of the Companies.
4. REPRESENTATIONS AND WARRANTIES BY CHH.
-------------------------------------
CHH represents and warrants to Clariti as follows:
4.1 Title to Shares.
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CHH presently owns, controls and is authorized to transfer one hundred percent
(100%) of the outstanding shares of MediaTel. CHH is the lawful record and the
beneficial owner of, and has good and marketable title to one hundred percent
(100%) of the MediaTel Shares. CHH owns the MediaTel Shares free and clear of
any and all Liens.
4.2 Power and Capacity.
------------------
CHH has the full right, power and capacity to sell, transfer and deliver the
MediaTel Shares owned by CHH to Clariti under and pursuant to the terms of this
Agreement. Simultaneously upon delivery of and payment for the MediaTel Shares
pursuant to this Agreement, CHH shall transfer to Clariti good and marketable
record and beneficial title to the MediaTel Shares held by CHH, free and clear
of any and all Liens.
4.3 Restricted Shares.
-----------------
4.3.1 The Clariti Common Stock Issued to CHH received or to be
received from Clariti pursuant to this Agreement are (a) being acquired for
CHH's own account and not with the present view towards the distribution
thereof without compliance with securities laws and (b) is subject to certain
restrictions on transferability as provided under the Securities Act of 1933,
as amended (the "Securities Act"). CHH agrees that it will not dispose of the
Clariti Common Stock Issued to CHH except (1) pursuant to an effective
registration statement under the Securities Act, or (ii) in any other
transaction which, in the opinion of Clariti's securities counsel, is exempt
from registration under the Securities Act, or the rules and regulations of the
Securities and Exchange Commission ("SEC") thereunder.
4.3.2 The Clariti Common Stock Issued to CHH is being offered
and sold under exemptions from the registration provisions of the Securities
Act including, but not limited to Sections 3(b), 4(2) and 4(6) of the
Securities Act and Regulation D promulgated thereunder; that CHH is purchasing
the Clariti Common Stock Issued to CHH without being furnished any offering
11
literature, a prospectus or offering memorandum; that this transaction has not
been scrutinized by the SEC or by any administrative agency charged with the
administration of securities laws of any state; that all information,
documents, records and books pertaining to this investment and Clariti have
been made available upon request to CHH and its respective representatives,
including CHH's attorney, accountant and/or purchaser representatives.
4.3.3 CHH has read and considered the SEC Reports (as
hereinafter defined) and understands that investments in the Clariti Common
Stock Issued to CHH are accompanied by a degree of risk, and there are
substantial restrictions on the transferability of the Clariti Common Stock
Issued to CHH.
4.3.4 CHH is able to (a) bear the economic risk of this
investment, (b) hold the Clariti Common Stock Issued to CHH indefinitely and
(c) presently afford a complete loss of this investment.
4.3.5 CHH has adequate means of providing for current business
needs and business contingencies and has no need for liquidity in this
investment.
4.3.6 CHH has such knowledge and expertise in financial and
business matters and are capable of evaluating the merits and risk of
investment in the Clariti Common Stock Issued to CHH and of making an informed
investment decision. CHH confirms that in making the decision to purchase the
Clariti Common Stock Issued to CHH, it has relied solely upon CHH's independent
investigations by CHH and/or its respective representatives, including its
respective own professional tax, legal and other advisors and that CHH and such
representatives and advisors have been given the opportunity to ask questions
of and to receive answers from, persons acting on behalf of Clariti concerning
the terms and conditions of this offering, Clariti's business and associated
risks and to obtain any additional information, to the extent such persons
possess such information or can acquire it without unreasonable effort or
expense.
4.3.7 CHH confirms that: (i) the Clariti Common Stock Issued to
CHH is being acquired by CHH in good faith solely for CHH's own account and
investment purposes only and is not being purchased for resale, resyndication,
distribution, subdivision or fractionalization thereof and (ii) CHH has no
contract or arrangement, or present plans to enter into any contract or
arrangement, with any person to sell, transfer or pledge to any person the
Clariti Common Stock Issued to CHH or any part thereof, any interest therein or
any rights thereto.
4.3.8 CHH understands that neither the SEC nor any other federal
or state agency has passed upon or made any recommendation or endorsement of
the Clariti Common Stock Issued to CHH. CHH further acknowledges that the
Clariti Common Stock Issued to CHH has not been registered under the Securities
Act or under any state securities laws. CHH therefore acknowledges that the
Clariti Common Stock Issued to CHH cannot be sold unless such stock is
subsequently registered under the Securities Act and applicable state laws or
unless an exemption from such registration is available. CHH further
understands that Clariti is relying upon the truth and accuracy of CHH's
representations, warranties and acknowledgments made herein by offering the
Clariti Common Stock Issued to CHH for sale to CHH and CHH without having first
registered same under the Securities Act.
12
4.3.9 CHH realizes that, in the absence of the availability of
Rule 144, any disposition of the Clariti Common Stock Issued to CHH may require
compliance with the registration provisions of the Securities Act and state
securities laws or exemption provisions thereunder.
4.3.10 CHH consents to stop transfer instructions being placed
with the transfer agent for the Clariti Common Stock Issued to CHH and the
placement of a legend on all certificates evidencing the purchase of the
Clariti Common Stock Issued to CHH, which legend shall be in form substantially
as follows:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS. THE SALE OR OTHER DISPOSITION OF
THESE SHARES IS RESTRICTED AND IN ANY EVENT IS PROHIBITED UNLESS THE HOLDER OF
THIS CERTIFICATE RECEIVES AN OPINION OF COUNSEL, WHICH OPINION IS SATISFACTORY
TO CLARITI TELECOMMUNICATIONS INTERNATIONAL, LTD., AND ITS COUNSEL, THAT SUCH
SALE OR OTHER DISPOSITION CAN BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES
ACT OF 1933 AND ANY STATE SECURITIES LAWS.
4.3.11 CHH is an "accredited investor" as such term is defined
in Rule 502 of Regulation D promulgated under the Securities Act of 1933, as
amended.
4.3.12 CHH acknowledges that CHH understands the meaning of the
legal consequences of the representations, warranties, undertakings and
acknowledgments contained in this Section 4.4 and hereby agrees to indemnify
and hold harmless Clariti and its officers, directors, attorneys and
representatives, against any and all loss, damage and/or liability, including
costs and reasonable attorneys fees, due to or arising out of a breach of any
representation, warranty undertaking or acknowledgment of CHH contained in this
Section 4.4 or arising out of the sale of the Clariti Common Stock Issued to
CHH by CHH in violation of the Securities Act or any other applicable state or
federal securities laws.
4.3.13 CHH acknowledges that no general solicitation or general
advertising regarding the offering (including communications published in any
newspaper, magazine or similar broadcast) has been received by or communicated
to CHH and no public solicitation or advertisement with respect to the offering
of the Clariti Common Stock Issued to CHH has been made to the CHH.
4.3.14 CHH represents that it is not affiliated with or
associated with any member of the National Association of Securities Dealers,
Inc. (the "NASD") and that MediaTel is not in control of, controlled by, or
under common control with any person or entity that is affiliated or associated
with any member of the NASD.
5. COVENANTS OF CLARITI.
--------------------
Clariti hereby covenants and agrees with CHH and MediaTel as follows:
5.1 Conduct of Business Pending Closing.
-----------------------------------
From the date hereof until the Closing Date, Clariti shall:
5.1.1 Maintain its existence in good standing;
13
5.1.2 Maintain the general character of its business and conduct
its business in the ordinary and usual manner;
5.1.3 Maintain business and accounting records consistent with
its past practices;
5.1.4 Maintain its properties in accordance with past practice;
5.1.5 Use commercially reasonable efforts to preserve its
business intact, to preserve the goodwill of its customers and others having
business relations with Clariti or any of its subsidiaries and to keep
available to Clariti the services of its present officers and employees; and
5.1.6 Immediately notify CHH of any change or condition
adversely impacting such covenants.
5.2 Prohibited Actions Pending Closing.
----------------------------------
Unless: (i) otherwise provided for herein, (ii) approved in writing by CHH, or
(iii) required of Clariti in order for Clariti to comply with any: (a)
contract, agreement or instrument to which Clariti is a party or by which
Clariti is bound or (ii) law, rule, regulation, court order or judgment, from
the date hereof until the Closing Date, Clariti shall not take any of the
following actions:
5.2.1 Amend or otherwise change its certificate of
incorporation, bylaws or other governing documents;
5.2.2 Operate the business of Clariti in any way other than in
the ordinary course;
5.2.3 Authorize or issue shares of any class or series of equity
securities or securities convertible into or exercisable for any equity
securities;
5.2.4 Restructure, reclassify or otherwise modify or amend the
terms of its common stock or any other class or series of equity securities or
securities convertible into or exercisable for any equity securities of
Clariti;
5.2.5 Voluntarily liquidate, dissolve or wind-up Clariti, make
any filing under any state or federal bankruptcy, insolvency or reorganization
law or other law for relief from creditors or the protection of debtors, make
any assignment for the benefit of creditors or consent to the appointment of a
receiver for itself or any part of its property, or conduct any form of
recapitalization or reorganization of Clariti (other than pursuant to the terms
hereof); or
5.2.6 Merge or consolidate with or into any other entity, or
permit any other entity to consolidate or merge with or into Clariti, or
participate (other than pursuant to the terms hereof) in a share exchange with
or sell, license, lease, transfer, mortgage, pledge, encumber, contribute, or
otherwise dispose of all or any substantial part of its assets (tangible or
intangible), or all or any substantial part of it intellectual property, to any
other person or entity, or enter into any transaction series of related
14
transactions which results in a change in the person or persons exercising
control of Clariti immediately prior to such transactions, other than (i) sales
of assets in the ordinary course of business, or (ii) licenses granted in the
ordinary course of business.
5.3 Access.
------
From and after the date hereof until the Closing, Clariti shall cause its
directors, officers, employees, consultants, independent certified public
accountants, counsel, officers, agents and representatives (the "Clariti
Representatives") to afford to three (3) representatives of CHH, subject to
each of such representatives of CHH executing and delivering to Clariti
Confidentiality Agreements in the form attached as Exhibit "C" to this
Agreement: (i) free and full access at all reasonable times during ordinary
business hours to Clariti's properties, customer lists, contracts, books,
records and other property, including all computerized information and data
bases and any tax returns, financial statements, budgets, projections,
operating reports and related information, whether completed or otherwise; and
(ii) the right to (a) consult with the Clariti Representatives at reasonable
times during ordinary business hours, (b) to take a physical inventory of
Clariti or to audit all or any part of Clariti's books and records, through an
independent certified public accountants designated by MediaTel or CHH, or
otherwise, (c) review and copy the work papers and other records of any
independent certified public accountants of Clariti and such additional
financial and operating data and other information as to the business and
properties of Clariti as CHH shall from time to time reasonably require;
provided, however, that any such investigations shall not affect or otherwise
diminish or obviate in any way any of the representations and warranties of
Clariti.
6. REPRESENTATIONS AND WARRANTIES OF CLARITI.
-----------------------------------------
Clariti represents and warrants to CHH and MediaTel that the statements
contained in this Section 6 are true, correct and complete in all material
respects as of the date of this Agreement and shall be true, correct and
complete in all material respects as of the Closing.
6.1 Organization and Authorization.
------------------------------
Clariti is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Clariti is duly qualified and in good
standing in every other jurisdiction in which it presently engages in business,
in which such qualification is required, and where the failure to be so
qualified would have a material adverse effect on the business of Clariti.
Clariti has all requisite corporate power and authority and all necessary
licenses and permits to carry on its business as it has been and is now being
conducted and to own, lease and operate the properties used in connection
therewith, except for such licenses and permits the failure to have would not
have a material adverse effect on its business and operations. The execution
and delivery by Clariti of this Agreement and the performance of its
obligations hereunder have been authorized by all necessary corporate action.
Clariti has and will have at the Closing the full right, power and capacity (a)
to execute, deliver and perform this Agreement and (b) to perform all other
transactions contemplated to be performed by it hereunder. This Agreement is a
valid and binding obligation of Clariti.
15
6.2 Capitalization.
--------------
6.2.1 The total authorized shares of Clariti's common stock
consists of Three Hundred Million (300,000,000) shares of common stock ($.001
par value), of which 111,743,883 are issued and outstanding as of the date
hereof (the "Clariti's Outstanding Shares"). In addition, Clariti has
outstanding warrants and options for 5,980,000 shares, all of which have been
reserved for issuance by Clariti. All of Clariti's Outstanding Shares were
issued in compliance with all applicable federal, state and foreign securities
laws and regulations, have been duly and validly authorized and issued and are
fully paid and nonassessable, free of preemptive rights, and to Clariti's
knowledge, with no liability attaching to the ownership thereof. None of the
Clariti's Outstanding Shares have been issued in violation of any stockholder's
preemptive rights.
6.2.2 The Clariti Common Stock Issued to CHH shall be issued in
compliance with all applicable federal, state and foreign securities laws and
regulations, will be duly and validly authorized, fully paid and nonassessable,
and issued free of preemptive rights with no liability attaching to the
ownership thereof. None of the Clariti Common Stock Issued to CHH shall be
issued in violation of any stockholder's preemptive rights. As of the Closing,
CHH will own the Clariti Common Stock Issued to CHH free and clear of any Liens
except as otherwise provided in Section 1.2.
6.2.3 Except as disclosed in the SEC Reports (defined in Section
6.4) there are no existing agreements, subscriptions, options, warrants, calls,
commitments, trusts (voting or otherwise), or rights of any kind whatsoever
granting to any person or entity any interest in or the right to purchase or
otherwise acquire from Clariti, at any time, or upon the happening of any
stated event, any securities of or ownership interest in Clariti, whether or
not presently issued or outstanding, nor are there any outstanding securities
of Clariti or any other entity which are convertible into or exchangeable for
shares or other securities of Clariti, nor are there any agreements,
subscriptions, options, warrants, calls, commitments, trusts (voting or
otherwise), or rights of any kind whatsoever granting to any person or entity
any interest in or the right to purchase or otherwise acquire from Clariti or
any other entity any securities so convertible or exchangeable, nor are there
any proxies, agreements or understandings with respect to the voting or
transferability of any shares or securities of Clariti.
6.3 Freedom to Contract.
-------------------
The execution and delivery of this Agreement by Clariti does not and the
performance by it of its obligation hereunder will not (a) violate or conflict
with any provision of the Certificate of Incorporation or Bylaws of Clariti, or
any amendments thereto or restatements thereof, (b) to the knowledge of
Clariti, violate any of the terms, conditions or provisions of any law or order
of any court or governmental authority or (c) to the knowledge of Clariti,
result in a material violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any agreement, instrument or obligation, oral or written, to
which Clariti is a party (whether as an original party or as an assignee or
successor) or by which any of them or any of their respective properties is
bound.
16
6.4 SEC Reports.
-----------
6.4.1 CHH acknowledges that, in connection with the GlobalFirst
Agreement, Clariti has previously delivered to CHH Clariti's: (i) Amendment No.
2 to Annual Report on Form 10-KSB for the fiscal year ending July 31, 1997 and
the Annual Report on Form 10-KSB for the fiscal year ended June 30, 1998 (the
"Most Recent Forms 10-KSB"); (ii) Amendment No. 1 to Quarterly Report on Form
10-QSB for the quarter ended April 30, 1998 and Quarterly Reports on Form 10-
QSB for the quarters ended January 31, 1998 and October 31, 1997 (collectively,
the "Forms 10-QSB"): and (iii) Forms 8-K filed March 4, 1998, April 24, 1998
and August 7, 1998 (collectively, items (i), (ii) and (iii) shall hereinafter
be referred to as the "SEC Reports"). As of their respective dates, the SEC
Reports complied with the applicable requirements of the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations thereunder, and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
6.4.2 Since the respective date as of which information is given
in the SEC Reports: (i) there has been no material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of Clariti or any of its subsidiaries whether or not arising
in the ordinary course of business, (ii) there have been no transactions
entered into by Clariti or any of its subsidiaries, other than those in the
ordinary course of business, and (iii) there has been no dividend or
distribution of any kind declared, paid or made by Clariti on any class or its
capital stock.
6.5 Clariti Financial Statements.
----------------------------
The unaudited consolidated balance sheet, the consolidated statements of
operations and the consolidated statements of cash flow of Clariti and its
subsidiaries, together with all notes and schedules thereto, in each case as
included in the Forms 10-QSB, are hereinafter referred to collectively as the
"Clariti Interim Financial Statements." The audited consolidated balance
sheets, statements of operations, statements of stockholders' equity and
statements of cash flow of Clariti and its subsidiaries, together with all
notes and schedules thereto, in each case as included in the Most Recent Forms
10-KSB, are hereinafter referred to collectively as the "Clariti Audited
Financial Statements." The Clariti Audited Financial Statements and the
Clariti Interim Financial Statements are collectively referred to hereinafter
as the "Clariti Financial Statements."
6.5.1 The Clariti Interim Financial Statements and Clariti
Financial Statements: (i) were prepared in accordance with GAAP, subject only
in the case of the Clariti Interim Financial Statements to normal year end
adjustments and without footnotes.; (ii) are correct and complete in all
material respects; (iii) fairly presented the financial position of Clariti on
the date of filing of said financial statements with the SEC; and (iv) fully
disclose all material liabilities, obligations or contingencies required to be
disclosed under GAAP, including, without limitation, whether any such
liabilities, obligations or contingencies affect any properties of any of
Clariti (except for this Agreement) limit or restrain Clariti from declaring,
setting aside, authorizing or making payment of any dividend or any
17
distribution, whether in cash or property. Except as set forth in the Form 8-K
filed August 7, 1998, since June 30, 1998, there has been no: (a) material
adverse change in the financial condition, results of operations, assets,
liabilities, business or prospects of Clariti, (b) material liability or
obligation of any nature whatsoever (contingent or otherwise) incurred by
Clariti, other than current liabilities or obligations incurred in the ordinary
course of business, (c) change in the accounting methods or practices followed
by Clariti or (d) other event or condition of any character which has
materially adversely affected Clariti's assets, business or prospects.
6.6 Title to Properties.
-------------------
To the knowledge of Clariti, Clariti has good and marketable title to all
properties and assets (a) reflected on the Clariti Financial Statements or
acquired after the date thereof (except for properties and assets sold or
otherwise disposed of in the ordinary course of business since the date of the
Clariti Interim Financial Statements), subject only to: (a) statutory liens
arising or incurred in the ordinary course of business with respect to which
the underlying obligations are not delinquent, (b) with respect to personal
property, the rights of customers of Clariti with respect to inventory or work
in progress under orders or contracts entered into by Clariti in the ordinary
course of business, (c) liens reflected in the Clariti Financial Statements or
notes thereto, or (d) liens for taxes not yet delinquent.
6.7 Compliance with Laws.
To the knowledge of Clariti, Clariti and its subsidiaries have complied with,
and none of them is in violation of any, law, ordinance or governmental rule or
regulation to which they or their business or assets and properties (real,
personal and intangibles) is subject, which in the event of any noncompliance,
would have a material adverse effect on the business, operations, prospects,
properties, assets or condition (financial or otherwise) of Clariti and its
subsidiaries taken as a whole. To the knowledge of Clariti, neither Clariti
nor any of its subsidiaries has received any claim or notice of any violation
of any building, zoning, fire, health or employment laws, ordinances, rules or
regulations relating to the properties, assets, premises, business or employees
of Clariti or any of its subsidiaries which has not been fully remedied, which
violation would have a material adverse effect on the business, operations,
prospects, properties, assets or condition (financial or otherwise) of Clariti
and its subsidiaries take as a whole.
6.8 Other Contracts and Documents.
-----------------------------
CHH acknowledges that Clariti has delivered to CHH Disclosure Schedule 6.8 to
the GlobalFirst Agreement, which lists each material written executory
contracts in effect of the date hereof to which Clariti is a party (whether as
an original party or an assignee or successor) which exceeds One Hundred
Thousand Dollars ($100,000) in value and which : (a) was not made in the
ordinary course of business; (b) as of the date of the GlobalFirst Agreement
exceeded or at any time prior to the date hereof exceeded Five Hundred Thousand
Dollars ($500,000) in value; or (c) either (i) restricts Clariti or any of its
employees from engaging in business or from competing in any line of business
with any other parties or (ii) provides for a line of credit or guarantee,
pledge of undertaking of the indebtedness of any other person or entity. CHH
further acknowledges that Clariti has delivered to CHH copies of all such
18
contracts listed on Disclosure Schedule 6.8 to the GlobalFirst Agreement. There
are no existing agreements, options, commitments or rights with, to or in any
third party to acquire any assets or properties, real, personal or mixed, or
any interest therein, of Clariti, except for those contracts entered into by
Clariti in the ordinary course of business.
6.9 Absence of Default.
Except in such instances of non-compliance as would not have a material and
adverse effect on the business and operations of Clariti and its subsidiaries
taken as a whole, to the knowledge of Clariti, Clariti and its subsidiaries
have complied in all material respects with and performed all of their
respective material obligations required to have been performed prior to the
date hereof under all material contracts, agreements and leases to which any of
them is a party (whether as an original party or as an assignee or successor)
as of the date hereof, and are not in default in any material respect under any
contract, agreement, lease, undertaking, commitment or other obligation; and to
the knowledge of Clariti and its subsidiaries, no event has occurred which,
with or without the giving of notice, lapse of time or both, would constitute a
default thereunder in any material respect. Clariti has no knowledge that any
party has failed to comply with or perform all of its material obligations
required to have been performed prior to the date hereof under any material
contract, agreement or lease to which Clariti or any of its subsidiaries is a
party (whether as an original party or as an assignee or successor) as of the
date hereof, or that any event has occurred which, with or without the giving
of notice, lapse of time or both, would constitute a material default by such
party thereunder.
6.10 Distributions, Satisfactions, Obligations.
-----------------------------------------
Since the date of the Clariti Interim Financial Statements, to the knowledge of
Clariti, Clariti has not:
(a) Issued any other shares of its capital stock, bonds or any
other of its securities;
(b) Incurred any obligations or liabilities for money borrowed,
or any additional debt in an original principal amount greater than U.S.
$100,000 other than trade debt, or assumed, guaranteed or otherwise become
responsible for the obligations of any other party in a principal amount
greater than U.S. $100,000, or agreed to so do;
(c) Incurred any material obligations or liabilities, in an
amount in excess of U.S. $100,000, other than in the ordinary course of
business;
(d) Mortgaged or pledged or subjected to lien, charge or other
encumbrance, any of its assets, tangible or intangible, except for capital
leases, equipment leases, or in the ordinary course of business;
(e) Declared, set aside or made or paid any dividend or other
distribution to any its stockholders, partners or members; or redeemed,
purchased or otherwise acquired, directly or indirectly, any of its capital
stock or ownership interest, or authorized or effected any split-up or any
recapitalization or made any changes in its authorized or issued capital stock;
19
(f) Sold, transferred or disposed of any of its assets except
assets used or consumed in the ordinary course of business and obsolete
equipment and equipment which has been replaced in the ordinary course of
business;
(g) Suffered any material adverse change in its business,
material damage to its assets, disruption of business or losses, whether
covered by insurance or not, or waived any rights of substantial value; or
(h) Operated its business in any way other than in the ordinary
course.
6.11 Litigation.
----------
CHH acknowledges that Clariti has delivered to CHH Disclosure Schedule 6.11 to
the GlobalFirst Agreement. Except as disclosed on GlobalFirst Disclosure
Schedule 6.11, there are no material actions, suits, material labor disputes or
arbitrations, legal or administrative proceedings pending against Clariti, and
to the knowledge of Clariti, no actions, suits, material labor disputes or
arbitrations, legal or administrative proceedings or investigations are
contemplated or threatened against Clariti or any of its subsidiaries or any of
their respective assets, properties or businesses. Except as set forth on
Disclosure Schedule 6.11 to the GlobalFirst Agreement, neither Clariti, its
subsidiaries, nor the assets, properties or business of any of them, is subject
to any judgment, order, writ, injunction or decree of any court, governmental
agency or arbitration tribunal which has, or will have, a material adverse
effect on Clariti and its subsidiaries taken as a whole, on a consolidated
basis.
6.12 Tax Matters.
-----------
To the knowledge of Clariti, except as may be disclosed in the SEC Reports or
on Disclosure Schedule 6.11 to the GlobalFirst Agreement, Clariti and its
subsidiaries have filed all required federal, state, county, local, foreign and
other tax returns and reports, paid all taxes shown to have been due on such
returns and reports, including interest and penalties with respect thereto, and
withheld all amounts required to have been withheld from employees or workers
for income taxes, social security and other payroll taxes. To the knowledge of
Clariti, except as disclosed in the SEC Reports or on Disclosure Schedule 6.11
to the GlobalFirst Agreement, neither Clariti nor any of its subsidiaries is a
party to any pending action by any governmental authority for assessment or
collection of taxes, or party to any dispute or, to the knowledge of Clariti,
threatened dispute in which an adverse determination would have a material
adverse effect on the business, operations, properties, or financial condition
of the Clariti.
7. CONDITIONS PRECEDENT TO CLARITI'S OBLIGATIONS.
---------------------------------------------
All obligations of Clariti under this Agreement are subject to the fulfillment
or satisfaction, at the Closing, of each of the following conditions precedent
(any one or more of which may be waived in writing in whole or in part by
Clariti):
20
7.1 Delivery of MediaTel Shares and Other Consideration.
---------------------------------------------------
CHH shall have delivered to Clariti the MediaTel Shares and the MediaTel Wholly
Owned Subsidiaries Shares.
7.2 Representations and Warranties True as of Closing Date.
------------------------------------------------------
The representations and warranties of MediaTel and/or CHH contained in this
Agreement shall be true, correct and complete on and as of the date hereof and
shall be true, correct and complete on and as of the Closing with the same
effect as though such representations and warranties were made on and as of the
Closing, except for changes in the ordinary course of business which,
individually or in the aggregate, do not constitute an adverse change to the
Companies.
7.3 Compliance with this Agreement.
------------------------------
CHH and MediaTel shall have performed and complied with in all material
respects all agreements and conditions contained in this Agreement that are
required to be performed or complied with by them prior to or at the Closing
including, without limitation, furnishing Clariti with all information
reasonably requested by Clariti pursuant hereto.
7.4 Notifications and Consents.
--------------------------
CHH and MediaTel shall have timely given notice required to be given by them to
any third party in connection with the consummation of the transactions
contemplated hereby, including, without limitation, required notices to the
holders of any indebtedness of the Companies, and any governmental bodies or
regulatory agencies, where the failure to give such notice would have an
adverse effect on the businesses of the Companies. CHH and MediaTel shall have
received each consent or approval required to be given by any such third party
in connection with the consummation of the transactions contemplated hereby,
where, in the reasonable judgment of Clariti, the failure to receive such
consent or approval would have an adverse effect on the businesses of the
Companies.
7.5 CHH's and MediaTel's Certificates.
---------------------------------
Clariti shall have been furnished with a certificate dated the Closing Date and
signed by the Secretary or an Assistant Secretary of CHH, MediaTel and each of
the MediaTel Wholly Owned Subsidiaries, setting forth (i) the names, signatures
and positions of the officers of each of CHH, MediaTel and/or the MediaTel
Wholly Owned Subsidiaries who have executed this Agreement or any other
document executed by any of CHH, MediaTel and/or the MediaTel Wholly Owned
Subsidiaries and delivered to Clariti at the Closing as a document pursuant to
or subject to this Agreement, and (ii) a copy of the resolutions adopted by the
board of directors of each of CHH, MediaTel and the MediaTel Wholly Owned
Subsidiaries authorizing the execution, delivery and performance of this
Agreement.
7.6 Satisfaction of Due Diligence.
-----------------------------
Clariti, in its sole, absolute and non-reviewable discretion, shall be
satisfied with its findings resulting from its due diligence inquiries
21
including, without limitation, the financial position of MediaTel and the
MediaTel Wholly Owned Subsidiaries, the business operations of MediaTel and the
MediaTel Wholly Owned Subsidiaries and any and all matters of or relating to
the ownership and operations of MediaTel and the MediaTel Wholly Owned
Subsidiaries. This condition shall be deemed satisfied unless Clariti shall
deliver written notice to CHH by no later than the Closing Date of its
dissatisfaction of any such findings. In the event Clariti is not satisfied
with its findings resulting from its due diligence inquiries, this Agreement
shall be null and void and none of the parties shall have any claims of any
kind against any of the other parties.
7.7 Exclusive Telecommunications Agreements.
---------------------------------------
CHH, MediaTel Joint Ventures Limited, a corporation formed under the laws of
the United Kingdom ("MediaTel Joint Ventures") and Clariti or Clariti's
designee shall have entered into an Exclusive Telecommunications Agreement in
the form attached as Exhibit "D" to this Agreement and incorporated herein.
8. CONDITIONS PRECEDENT TO MEDIATEL AND CHH OBLIGATIONS.
----------------------------------------------------
All obligations of MediaTel and CHH under this Agreement are subject to the
fulfillment or satisfaction prior to or at the Closing, of each of the
following conditions precedent (any one or more of which may be waived in
writing in whole or in part by MediaTel and CHH):
8.1 Delivery of Clariti Shares and Other Consideration.
--------------------------------------------------
Clariti shall have delivered to CHH: (i) the original, cancelled $21,000,000
Note; (ii) the Clariti Common Stock Issued to CHH and (iii) the Convertible
Debenture.
8.2 Representations and Warranties True as of Closing Date.
------------------------------------------------------
The representations and warranties of Clariti contained in this Agreement shall
be true, correct and complete at and as of the date hereof and shall be true,
correct and complete on and as of the Closing Date with the same effect as
though such representations and warranties were made on and as of the Closing
Date, except for changes in the ordinary course of business which, individually
or in the aggregate, do not constitute an adverse change to Clariti.
8.3 Compliance with this Agreement.
------------------------------
Clariti shall have performed and complied in all material respects with all
agreements and conditions contained in this Agreement that are required to be
performed or complied with by it prior to or at the Closing including, without
limitation, furnishing CHH and MediaTel with all information reasonably
requested by CHH and MediaTel pursuant hereto.
8.4 Notifications and Consents.
--------------------------
Clariti shall have timely given all notices required to be given by it to any
third party in connection with the consummation of the transactions
contemplated hereby, including, without limitation, required notices to the
holders of any indebtedness of Clariti and any governmental bodies or
regulatory agencies, where the failure to give such notice would have an
22
adverse effect on the businesses of Clariti and its subsidiaries. Clariti
shall have received each consent or approval required to be given by any such
third party in connection with the consummation of the transactions
contemplated hereby, where, in the reasonable judgment of CHH and MediaTel, the
failure to receive such consent or approval would have an adverse effect on the
business of Clariti.
8.5 Clariti's Certificate.
---------------------
CHH and MediaTel shall have been furnished with a certificate dated the Closing
Date and signed by an officer of Clariti, setting forth (i) the names,
signatures and positions of the officers of Clariti who have executed this
Agreement or any other document executed by Clariti and delivered to CHH and
MediaTel at the Closing as a document pursuant to or subject to this Agreement,
and (ii) a copy of the resolutions adopted by the board of directors of Clariti
authorizing the execution, delivery and performance of this Agreement.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
------------------------------------------
All representations, warranties, covenants and agreements made by each party in
this Agreement, in any Schedule hereto or in any list, certificate, documents
or written statement furnished or delivered by any such party pursuant hereto
shall survive the Closing hereunder and continue in full force and effect (i)
with respect to the representations and warranties contained in Section 3.16
(Tax Matters) and 6.12 (Tax Matters), for a period of five (5) years following
the Closing Date, and (ii) with respect to all other representations,
warranties and covenants, for a period of one (1) year following the Closing
Date, notwithstanding any investigation conducted before or after the Closing
or the decision of any party to complete the Closing.
10. MISCELLANEOUS.
-------------
10.1 Brokers' And Finders' Fees.
--------------------------
The parties hereby represent and warrant to each other that all negotiations
relative to this Agreement have been carried on by it directly without the
intervention of any person or entity who or which may be entitled to a
brokerage fee or other commission in respect of the execution of this Agreement
or the consummation of the transactions contemplated hereby. The parties
hereby agree to indemnify and hold each other harmless against any and all
claims, losses, liabilities or expenses which may be asserted against it as a
result of such party or any of its affiliates' dealings, arrangements or
agreements with or any such other person or entity.
10.2 Press Releases.
--------------
Except as required by law or under the rules and regulations of the SEC, no
party shall issue any press release nor otherwise make public any information
with respect to this Agreement nor the transactions contemplated thereby, prior
to the Closing Date, without the consent of the other.
10.3 Assignment and Binding Effect.
-----------------------------
This Agreement may not be assigned by any party hereto without the prior
written consent of all the other parties hereto. All of the terms and
23
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective heirs, legal representatives, successors
and permitted assigns of the parties hereto.
10.4 Notices.
-------
Except as otherwise specifically provided herein, all notices, requests,
demands, and other communications hereunder must be in writing and shall be
given by prepaid certified or registered mail, return receipt requested, or by
a nationally recognized overnight delivery service, addressed to the principal
offices of each part or to such other address as shall have been designated in
writing by any party. All notices, requests, demands and other communications
hereunder shall be effective on the earlier of (i) when received or (ii) two
(2) business days after being deposited in the mails, certified or registered
mail, postage prepaid or the next business day if sent by such nationally
recognized overnight delivery service, and addressed as aforesaid, except that
notice of change of address shall be effective only from the date of its
receipt. For purposes hereof, the following are the principal offices:
If to MediaTel or CHH:
c/o Corporate & Legal Administration Services, Ltd.
Riverbank House, One Xxxxxx Xxxxxx Xxxxxxxx
Xxxxxx, XX00XX
Attention: Xxxxxx Xxxxx
With a copy to:
Joblings Solicitors
00 Xxxxxx Xxxxxx
Xxxxx
Xxxxxxxxxxxx, Xxxxxxx
TCV212PE
Attn.: Xxxxx Xxxxxxx, Solicitor
If to Clariti:
0000 X. Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attn.: Xxxxx X. Xxxxxxx, Chief Executive Officer
With a copy to:
Xxxxx Xxxxxxxx & XxXxxxxx, LLP
Two Commerce Square Suite 3410
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn.: Xxxx X. XxXxxxxx, Esquire
10.5 Entire Agreement; Amendments; Waivers; Expenses.
-----------------------------------------------
This Agreement (including the Schedules and Exhibits hereto) and the other
documents delivered pursuant hereto constitute the full and entire
understanding and agreement among the parties with regard to the subject matter
hereof. Changes in or additions to this Agreement may be made only by written
24
instrument executed by the parties. Any and all previous agreements and
understandings between or among the parties regarding the subject matter
hereof, whether written or oral, are superseded by this Agreement. The parties
shall bear their own expenses in connection with this Agreement.
10.6 Severability.
------------
In case any provisions of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
10.7 Knowledge.
---------
The term "knowledge" means actual knowledge after reasonable investigation.
10.8 General.
-------
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original and all of which together shall constitute one and
the same instrument. This Agreement shall be construed and enforced as a
contract under seal in accordance with, and the rights of the parties shall be
governed by, the laws of the Commonwealth of Pennsylvania. Any and all legal
proceedings concerning the infringement, breach, or contemplated breach of this
Agreement be filed in the Commonwealth of Pennsylvania, Philadelphia County,
only and the parties hereto consent to such jurisdiction.
IN WITNESS WHEREOF, the parties have caused this Share Exchange Agreement
to be duly executed and delivered as of the day and year first above written.
CLARITI:
Clariti Telecommunications International, Ltd.,
a Delaware corporation
s/Xxxxx X. Xxxxxxx
------------------
Xxxxx X. Xxxxxxx
Chief Executive Officer
CHH:
Xxxxxxxx Xxxx Holdings, Limited,
a British Virgin Islands corporation
s/ Xxxxxxx Xxxxxx
-----------------
Xxxxxxx Xxxxxx, Director
[a duly authorized representative]
25
MEDIATEL:
MediaTel Global Communications Limited,
a United Kingdom corporation
s/Xxxxxxx X. Xxxxxx
-------------------
Xxxxxxx X. Xxxxxx, Director
[a duly authorized representative]
26
EXHIBIT "A"
to
Share Exchange Agreement
made by and among
Clariti Telecommunications International, Ltd. ("Clariti");
Xxxxxxxx Hall Holdings, Limited, ("CHH"); and
MediaTel Global Communications Limited ("MediaTel")
LIST OF DISCLOSURE SCHEDULES
Reference Title
-------------- ----------------------------------
Schedule 1.1.2 MediaTel Wholly Owned Subsidiaries
Schedule 1.1.3 MediaTel Disposition Subsidiary
Schedule 2.2 Permitted Actions
Schedule 3.1 Licenses and Permits
Schedule 3.3 Options
Schedule 3.6 MediaTel Wholly Owned Subsidiaries general description
of operations, assets and liabilities and annual
revenue and profit (loss) figures.
Schedule 3.7 Directors and Officers
Schedule 3.8.1 Material Changes
Schedule 3.9 Absence of Undisclosed Liabilities
Schedule 3.11 Other Contracts, Documents
Acquisitions, Mergers, Consolidations, etc.
Schedule 3.12 Absence of Default
Schedule 3.13 Distributions, Satisfactions, Obligations
Schedule 3.14 Litigation - CHH and MediaTel
Schedule 3.16 Tax Matters-CHH and MediaTel
Schedule 6.8 Other Contracts and Documents
Schedule 6.11 Litigation-Clariti
Schedule 6.12 Tax Matters-Clariti
27
EXHIBIT "B"
to
Share Exchange Agreement
made by and among
Clariti Telecommunications International, Ltd. ("Clariti");
Xxxxxxxx Xxxx Holdings, Limited, ("CHH"); and
MediaTel Global Communications Limited ("MediaTel")
CONVERTIBLE DEBENTURE
Five Million U.S. Dollars Philadelphia, Pennsylvania (U.S.)
(USD$5,000,000) March __, 1999
FOR VALUE RECEIVED, Clariti Telecommunications International, Ltd., a Delaware
(U.S.) corporation ("Maker"), promises to pay to the order of Xxxxxxxx Hall
Holdings Limited, a corporation formed under the laws of the British Virgin
Islands ("Payee"), ninety (90) days from the date hereof ("Due Date"), the
principal sum of Five Million U.S. Dollars (USD $5,000,000), together with
interest thereon, at a rate equal to four and sixty two one hundredths percent
(4.62%) per annum, which interest shall be calculated on the basis of the
actual number of days elapsed during any period during which the unpaid
principal balance of this Convertible Debenture (this "Debenture") shall be
outstanding, upon the terms and conditions set forth in Time is of the essence
of this Debenture.
1. Place of Payment; Prepayment.
----------------------------
The principal balance hereof and interest due thereon (the "Balance") shall be
payable by check or wire transfer on the Due Date and at such place as Payee
may from time to time designate in writing. At any time and from time to time
hereafter, Maker may prepay all or any part of the Balance without penalty or
premium, provided that any such prepayment of principal shall be accompanied by
the payment of all accrued and unpaid interest thereon to the date of such
prepayment, in currency or Shares (as defined in Paragraph 2 hereof).
2. Conversion of Debenture at Election of Maker.
--------------------------------------------
2.1 Conversion.
----------
At any time after the date hereof and prior to the payment in full of this
Debenture, notwithstanding any fluctuation in the market value of Shares as
reported on the OTC-Bulletin Board or any other successor exchange on which the
Shares may be listed, Maker shall have the absolute right to convert any
portion or all of the Balance into fully paid and non-assessable shares of
Maker's common stock $.001 par value (each, a "Share" and collectively,
"Shares"), at the conversion price determined as follows. The conversion price
at which Shares shall be delivered upon conversion shall be Two Dollars and
Twenty-Five Cents (USD$2.25) of the Balance per one (1) Share. Maker shall pay
in U.S. currency any portion of the unpaid Balance that would otherwise result
in the issuance of a fractional Share.
28
2.2 Exercise of Conversion.
----------------------
In order to exercise the conversion privilege, Maker shall provide written
notice to Payee stating Maker's intention to convert all or a stated portion of
the Balance into the Shares. As soon as practicable after the receipt of such
notice, Payee shall deliver the original Debenture to Maker. Maker shall then
deliver or cause to be delivered to Payee a certificate or certificates for the
number of fully paid and non-assessable Shares issuable upon conversion of all
or the specified portion of the Balance. In the event that less than the full
amount of this Debenture is converted, concurrently with the delivery of the
Shares, Maker shall execute and deliver to Payee a new Debenture in principal
amount equal to the unconverted portion of this Debenture.
2.3 Share Restrictions.
------------------
Payee represents and warrants to Maker as follows:
2.3.1 The Shares received or to be received from Maker pursuant
to this Agreement (a) are being acquired for Payee's own account and not with
the present view towards the distribution thereof without compliance with
securities laws and (b) is subject to certain restrictions on transferability
as provided under the Securities Act of 1933, as amended ("Securities Act").
Payee agrees that it will not dispose of the Shares except (1) pursuant to an
effective registration statement under the Securities Act, or (ii) in any other
transaction which, in the opinion of Maker's securities counsel, is exempt from
registration under the Securities Act, or the rules and regulations of the
Securities and Exchange Commission ("SEC") thereunder.
2.3.2 The Shares is being offered and sold under exemptions from
the registration provisions of the Securities Act including, but not limited to
Sections 3(b), 4(2) and 4(6) of the Securities Act and Regulation D promulgated
thereunder; that Payee is purchasing the Shares without being furnished any
offering literature, a prospectus or offering memorandum; that this transaction
has not been scrutinized by the SEC or by any administrative agency charged
with the administration of securities laws of any state; that all information,
documents, records and books pertaining to this investment and Maker have been
made available upon request to Payee and its respective representatives,
including Payee's attorney, accountant and/or purchaser representatives.
2.3.3 Payee understands that investments in the Shares are
accompanied by a degree of risk and there are substantial restrictions on the
transferability of the Shares.
2.3.4 Payee is able to (a) bear the economic risk of this
investment, (b) hold the Shares indefinitely and (c) presently afford a
complete loss of this investment.
2.3.5 Payee has adequate means of providing for current business
needs and business contingencies and has no need for liquidity in this
investment.
2.3.6 Payee has such knowledge and expertise in financial and
business matters and is capable of evaluating the merits and risk of investment
in the Shares and of making an informed investment decision. Payee confirms
that in making the decision to purchase the Shares, it has relied solely upon
29
payee's independent investigations by Payee and/or its respective
representatives, including its respective own professional tax, legal and other
advisors and that Payee and such representatives and advisors have been given
the opportunity to ask questions of and to receive answers from, persons acting
on behalf of Maker concerning the terms and conditions of this offering,
Maker's business and associated risks and to obtain any additional information,
to the extent such persons possess such information or can acquire it without
unreasonable effort or expense.
2.3.7 Payee confirms that: (i) the Shares are being acquired by
Payee in good faith solely for Payee's own account and investment purposes only
and is not being purchased for resale, resyndication, distribution, subdivision
or fractionalization thereof and (ii) Payee has no contract or arrangement with
any person to sell, transfer or pledge to any person the Shares or any part
thereof, any interest therein or any rights thereto or any present plans to
enter into any such contract or arrangement.
2.3.8 Payee understands that neither the SEC nor any other
federal or state agency has passed upon or made any recommendation or
endorsement of the Shares. Payee further acknowledges that the Shares has not
been registered under the Securities Act or under any state securities laws.
Payee therefore acknowledges that the Shares cannot be sold unless such stock
is subsequently registered under the Securities Act and applicable state laws
or unless an exemption from such registration is available. Payee further
understands that Maker is relying upon the truth and accuracy of Payee's
representations, warranties and acknowledgments made herein by offering the
Shares for sale to Payee and Payee without having first registered same under
the Securities Act.
2.3.9 Payee realizes that, in the absence of the availability of
Rule 144, any disposition of the Shares may require compliance with the
registration provisions of the Securities Act and state securities laws or
exemption provisions thereunder.
2.3.10 Payee consents to stop transfer instructions being placed
with the transfer agent for the Shares and the placement of a legend on all
certificates evidencing the acquisition of the Shares, which legend shall be in
form substantially as follows:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933,AS
AMENDED, OR ANY STATE SECURITIES LAWS. THE SALE OR OTHER DISPOSITION OF THESE
SHARES IS RESTRICTED AND IN ANY EVENT IS PROHIBITED UNLESS THE HOLDER OF THIS
CERTIFICATE RECEIVES AN OPINION OF COUNSEL, WHICH OPINION IS SATISFACTORY TO
MAKER TELECOMMUNICATIONS INTERNATIONAL, LTD.,AND ITS COUNSEL, THAT SUCH SALE OR
OTHER DISPOSITION CAN BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF
1933 AND ANY STATE SECURITIES LAWS.
2.3.11 Payee is an "accredited investor" as such term is defined
in Rule 502 of Regulation D promulgated under the Securities Act.
2.3.12 Payee acknowledges that Payee understands the meaning of
the legal consequences of the representations, warranties, undertakings and
acknowledgments contained in this Section 2.2 and hereby agrees to indemnify
and hold harmless Maker and its officers, directors, attorneys and
30
representatives, against any and all loss, damage and/or liability, including
costs and reasonable attorneys fees, due to or arising out of a breach of any
representation, warranty undertaking or acknowledgment of Payee contained in
this Section 2.2 or arising out of the sale of the Shares by Payee in violation
of the Securities Act or any other applicable state or federal securities laws.
2.3.13 Payee acknowledges that no general solicitation or
general advertising regarding the Shares (including communications published in
any newspaper, magazine or similar broadcast) has been received by or
communicated to Payee and no public solicitation or advertisement with respect
to the offering of the Shares has been made to Payee.
2.3.14 Payee represents that it is not affiliated with or
associated with any member of the National Association of Securities Dealers,
Inc.
3. Event of Default.
----------------
The failure of Maker to pay any sum due and payable hereunder on the date which
is ten (10) days after the date on which Payee shall have given notice thereof
to Maker shall constitute the Event of Default hereunder (the "Event of
Default"); provided, however, that if Maker shall at any time be precluded,
under the law of the jurisdiction of its incorporation, from paying any sum
then due and payable hereunder because its surplus is insufficient for such
purpose, Maker shall pay on account of such payment all available surplus and
any remaining portion of such payment shall be paid in full by Maker upon the
earlier to occur of: (i) the date that Maker may lawfully make such payment or
(ii) the date ninety (90) days from the date such payment was first due and
payable.
4. Post-Judgment Interest; Usury.
-----------------------------
Any judgment obtained for sums due under this Debenture shall accrue interest
until paid. Notwithstanding any provision contained herein, Maker's liability
for the payment of interest under this Debenture shall not exceed the limits
now imposed by the applicable usury law. If any provision of this Debenture
requires interest payments in excess of the highest rate permitted by law, the
provision in question shall be deemed to require only the highest such payment
permitted by law. Any amounts theretofore received by Payee hereunder in
excess of the maximum amount of interest so permitted to be collected by Payee
shall be applied by Payee in reduction of the outstanding principal balance
hereof (in which event any applicable prepayment prohibition or premium shall
be waived with respect to the amount so prepaid) or, if this Debenture shall
have theretofore been paid in full, the amount of such excess shall be promptly
returned by Payee to the Maker.
5. Remedies; Noncumulative.
-----------------------
Upon the occurrence of the Event of Default, Payee, at its option and without
further notice to Maker, may enforce and seek to recover any all sums due and
payable hereunder by any remedy available to Payee hereunder, at law or in
equity. All remedies shall be cumulative and concurrent and may be pursued
singly, successively or concurrently at Payee's discretion and may be exercised
as often as occasion therefor shall occur. The failure to exercise any right or
remedy shall in no event be construed as a waiver or release of the same.
31
6. Waiver of Defenses.
------------------
Maker waives presentment for payment, demand, notice of demand, notice of
nonpayment or dishonor, protest and notice of protest of this Debenture, and
all other notices in connection with the delivery, acceptance, performance,
default, or enforcement of the payment of this Debenture.
7. Representations and Warranties.
------------------------------
Maker represents and warrants to Payee that: (a) Maker's execution and delivery
of this Debenture and the enforceability against Maker of the transactions
hereby contemplated have been duly authorized by all requisite corporate
action; (b) this Debenture has been duly and validly executed and delivered by
Maker and constitutes a legal, valid and binding obligation of Maker; (c) the
execution and delivery of this Debenture by Maker does not, and the performance
by it of the transactions hereby contemplated will not result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation or
acceleration) under, any terms, conditions or provisions of any note,
debenture, security agreement, lien, mortgage or other agreement, instrument or
obligation, oral or written, to which Maker is a party (whether as an original
party or as an assignee or successor) or by which it or any of its properties
is bound; (d) no approval or consent by any third party is required in
connection with Maker's execution and delivery of this Debenture and the
transactions hereby contemplated.
8. Binding Effect.
--------------
This Debenture and all rights, obligations and powers granted hereby will bind
and inure to the benefit of the parties hereto and their respective successors
and assigns.
9. Notices.
-------
All notices, requests, demands, and other communications hereunder must be in
writing and shall be given by a nationally recognized overnight delivery
service, addressed to the principal offices of each part or to such other
address as shall have been designated in writing by any party. All notices,
requests, demands and other communications hereunder shall be effective on the
earlier of (i) when received or (ii) the next business day if sent by such
nationally recognized overnight delivery service, and addressed as aforesaid,
except that notice of change of address shall be effective only from the date
of its receipt. For purposes hereof, the following are the principal offices:
If to MediaTel or Payee:
c/o Corporate & Legal Administration Services, Ltd.
Riverbank House
One Xxxxxx Xxxxxx Xxxxxxxx
Xxxxxx, XX00XX
Attention: Xxxxxx Xxxxx
32
With a copy to:
Joblings Solicitors
00 Xxxxxx Xxxxxx
Xxxxx
Xxxxxxxxxxxx, Xxxxxxx
TCV212PE
Attn.: Xxxxx Xxxxxxx, Solicitor
If to Maker:
0000 X. Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attn.: Xxxxx X. Xxxxxxx, Chief Executive Officer
With a copy to:
Xxxxx Xxxxxxxx & XxXxxxxx, LLP
Two Commerce Square Suite 3410
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn.: Xxxx X. XxXxxxxx, Esquire
10. Captions; Headings; Number; Gender.
----------------------------------
The captions and headings in this Debenture are inserted for convenience only,
and in no way describe or limit the scope or intent of this Debenture or any of
its provisions. Whenever used, the singular number shall include the plural,
the plural the singular and the use of any gender shall be applicable to all
genders
11. Severability; Modification.
--------------------------
The provisions of this Debenture are deemed severable. The invalidity or
unenforceability of any provision shall not affect or impair the remaining
provisions which shall continue in full force and effect. No modification of
this Debenture shall be binding or enforceable unless in writing and signed by
or on behalf of the party against whom enforcement is sought.
12. Assignment.
----------
Payee shall not assign, transfer, encumber, pledge or otherwise convey any
portion or all of this Debenture (including any rights or obligations
hereunder), without the prior written approval of Maker.
13. Governing Law.
-------------
Notwithstanding the jurisdiction in which this Debenture shall be executed,
this Debenture shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania and the parties submit to the jurisdiction
of the courts of such jurisdiction.
33
IN WITNESS WHEREOF, intending to be legally bound hereby, Maker has caused this
Debenture to be duly executed the day and year first above mentioned.
MAKER:
Clariti Telecommunications International, Ltd.,
a Delaware corporation
s/Xxxxx X. Xxxxxxx
------------------
Xxxxx X. Xxxxxxx
Chief Executive Officer
PAYEE:
Xxxxxxxx Xxxx Holdings, Limited,
a British Virgin Islands corporation
s/Xxxxxxx Xxxxxx
----------------
Xxxxxxx Xxxxxx, Director
[a duly authorized representative]
34
EXHIBIT "C"
to
Share Exchange Agreement
made by and among
Clariti Telecommunications International, Ltd. ("Clariti");
Xxxxxxxx Hall Holdings, Limited, ("CHH"); and
MediaTel Global Communications Limited ("MediaTel")
CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is made as of the 3rd day of February, 1999, by and among
Clariti Telecommunications International, Ltd., a Delaware (U.S.) corporation
formerly known as Sigma Alpha Group, Ltd. ("Clariti"); Xxxxxxxx Xxxx Holdings,
Limited, a corporation formed under the laws of the British Virgin Islands
("CHH"); and MediaTel Global Communications Limited, a corporation formed under
the laws of the United Kingdom ("MediaTel").
B A C K G R O U N D
A. Clariti and CHH are among the parties to that certain Share Exchange
Agreement (the "Share Exchange Agreement") pursuant to which Clariti may
acquire from CHH one hundred percent (100%) of the issued and outstanding stock
of MediaTel (the "MediaTel Shares").
B. Clariti wishes to conduct due diligence inquiries of the Companies (as
defined in the Share Exchange Agreement), including, without limitation, with
respect to the financial position and business operations of the Companies and
any and all matters of or relating to the ownership and operations of the
Companies.
C. CHH wishes to conduct due diligence inquiries of Clariti and certain of
its subsidiaries, to wit: Telnet Products & Services Limited, a corporation
formed under the laws of the United Kingdom ("Telnet") and Oystohl Limited, a
corporation formed under the laws of the United Kingdom ("Oystohl")
[hereinafter Telnet and Oystohl are collectively referred to as the "Clariti
Subsidiaries"], including, without limitation, with respect to the financial
position and business operations of Clariti and the Clariti Subsidiaries and
any and all matters of or relating to the ownership and operations of Clariti
and the Clariti Subsidiaries.
NOW THEREFORE, in consideration of the premises and the respective agreements
and covenants contained herein, intending to be legally bound, the parties
hereby agree as follows:
1. Due Diligence.
-------------
1.1 Due Diligence by Clariti.
------------------------
From and after the date hereof until the Closing (as defined in the Share
Exchange Agreement), CHH and MediaTel shall cause the respective shareholders,
directors, officers, employees, consultants, independent certified public
accountants, counsel and other agents and representatives of each of the
Companies (the "MediaTel Representatives") to afford to three (3)
representatives of Clariti: (i) free and full access at all reasonable times
35
during ordinary business hours to all of the properties, customer lists,
contracts, books, records and other property, including all computerized
information and data bases and any tax returns, financial statements, budgets,
projections, operating reports and related information, whether completed or
otherwise, of each of the Companies and (ii) the right to: (a) consult with the
MediaTel Representatives at all reasonable times during ordinary business
hours, (b) take a physical inventory of any of the Companies or to audit all or
any part of any of the Companies' books and records, through an independent
certified public accountant of Clariti or otherwise, and (c) review and copy
the work papers and other records of any independent certified public
accountants of any of the Companies and such additional financial and operating
data and other information as to the business and properties of any of the
Companies as Clariti shall from time to time reasonably require for the purpose
of evaluating the Companies and the transactions contemplated in the Share
Exchange Agreement.
1.2 Due Diligence by CHH.
--------------------
From and after the date hereof until the Closing, Clariti shall cause its
directors, officers, employees, consultants, independent certified public
accountants, counsel, officers, agents and representatives (the "Clariti
Representatives") to afford to three (3) representatives of CHH: (i) free and
full access at all reasonable times during ordinary business hours to the
customer lists, contracts, books, records and other property, including all
computerized information and data bases and any tax returns, financial
statements, budgets, projections, operating reports and related information,
whether completed or otherwise of Clariti and the Clariti Subsidiaries; and
(ii) the right to (a) consult with the Clariti Representatives at reasonable
times during ordinary business hours, (b) to audit all or any part of the books
and records, through independent certified public accountants designated by
CHH, or otherwise of Clariti and the Clariti Subsidiaries, (c) review and copy
the work papers and other records of any independent certified public
accountants of Clariti and the Clariti Subsidiaries and such additional
financial and operating data and other information as to the business and
properties of Clariti and the Clariti Subsidiaries as CHH shall from time to
time reasonably require for the purpose of evaluating Clariti and the Clariti
Subsidiaries and the transactions contemplated in the Share Exchange Agreement.
2. Definitions.
-----------
Hereinafter, each party shall be "Disclosing Party" with respect to its
information and "Receiving Party" with respect to the information received from
the other party.
"Confidential Information" shall mean any information disclosed to
Receiving Party by Disclosing Party orally, in writing or in model or other
tangible form that is generally not known to the public, whether of a
technical, business or other nature, and which is clearly identified at the
time of disclosure as confidential or proprietary (or other similar
designation). Confidential Information shall include all: tangible material,
including, without limitation, written or printed documents and computer disks
or tapes, whether machine or user readable, financial statements and
projections (except those already voluntarily disclosed to the public domain
by Disclosing Party ), methods of operation, specifications, drawings, samples,
designs, construction and process information, formulae, trade secrets, know-
36
how, models, reports, forecasts, current or historical data, computer programs
or files and all other technical financial or business data, regarding the
business affairs, products (whether patented or unpatented), and services of a
party, both written and unwritten, which are clearly identified at the time of
disclosure as confidential or proprietary (or other similar designation).
Confidential Information shall include all oral discussions, and their content,
regarding information which has been previously identified as "Confidential
Information." Confidential Information shall include all specific information
transmitted orally and clearly identified at the time of disclosure as
confidential or proprietary (or other similar designation).
3. Exclusions.
----------
Notwithstanding any other provision of this Agreement, the parties acknowledge
that Confidential Information shall not include any information which is: (a)
publicly known or becomes publicly known through no act or omission by
Receiving Party; (b) already known to Receiving Party at the time of disclosure
as evidenced by written documents; (c) rightfully received by Receiving Party
from a third party without breach of this Agreement; (d) approved for release
by express written authorization of Disclosing Party; (f) independently
developed by Receiving Party without use of Confidential Information.
4. Exception.
---------
Receiving Party may disclose Confidential Information in accordance with
judicial and other governmental order, provided Receiving Party first gives
Disclosing Party reasonable notice prior to any such disclosure in order to
permit Disclosing Party an opportunity to protect the confidentiality of such
Confidential Information.
5. Security; Notice of Restrictions; Persons Bound.
-----------------------------------------------
Disclosing Party shall take reasonable care and reasonable security precautions
(in no event less than the security precautions it takes to protect its own
Confidential Information) to keep confidential any and all Confidential
Information received from Disclosing Party. In furtherance of the foregoing,
and not in limitation thereof, Receiving Party may disclose Confidential
Information only to those MediaTel Representatives or Clariti Representatives,
as the case may be, who have a need to know such Confidential Information.
Receiving Party shall inform its MediaTel Representatives and Clariti
Representatives, as the case may be, who handle such information that it is
Confidential Information hereunder and shall not to be disclosed to others.
Receiving Party shall advise each person to whom Receiving Party discloses any
Confidential Information of the requirement for confidentiality under this
Agreement and cause each such person to be bound by this Agreement.
6. Prohibitions.
------------
6.1 Receiving Party shall not reverse engineer, decompile or
disassemble any software or hardware products disclosed to Receiving Party.
Receiving Party further agrees to use Disclosing Party's Confidential
Information only for the purpose contemplated by the Share Exchange Agreement.
6.2 Prior to the earlier to occur of the Closing or the date
occurring five (5) years after the termination of the Share Exchange Agreement,
37
Receiving Party, directly or indirectly, shall not: (i) solicit or service in
any way, on behalf of such party or on behalf of or in conjunction with others,
any client or customer, or prospective client or customer, which has been
solicited or serviced by Disclosing Party; or (ii) solicit for employment,
employ or engage as an independent contractor, any person who is employed by
Disclosing Party, or induce any such person to leave the employ of Disclosing
Party.
7. Notice of Violation.
-------------------
Receiving Party shall notify Disclosing Party immediately upon discovery of any
unauthorized use or disclosure of Confidential Information, or any other breach
of this Agreement by Receiving Party, and shall cooperate with Disclosing Party
in every reasonable way to help Disclosing Party regain possession or control
of such Confidential Information to prevent its further unauthorized use.
8. Return of Confidential Information.
----------------------------------
Receiving Party shall return all originals, copies, reproductions, and
summaries of Confidential Information at Disclosing Party's request, or at
Disclosing Party's option, certify destruction of the same.
9. Access for Compliance.
---------------------
Disclosing Party may visit Receiving Party's premises, with reasonable prior
notice and during normal business hours, to review Receiving Party's compliance
with the terms of this Agreement.
10. Property Right.
--------------
Receiving Party agrees that Disclosing Party's Confidential Information is and
shall at all times remain the exclusive property of Disclosing Party,
constitute valuable trade secrets of Disclosing Party, and that the
unauthorized disclosure or use of such Confidential Information by Receiving
Party shall cause irreparable harm to Disclosing Party. In the event of any
actual or threatened violation of the restrictions set forth herein by
Receiving Party, Disclosing Party shall be entitled, in addition to any other
remedy, to preliminary and permanent injunctive relief.
11. Miscellaneous.
-------------
11.1 Attorney's Fees.
---------------
If at any time any party hereto retains one or more attorneys to enforce any
covenant or agreement of any other party hereto, or to defend itself against
any claim by any other party, whether or not suit is filed, and such party is
substantially successful in recovering its claim, then such party's reasonable
attorney's fees, expenses and litigation costs, if any, shall be due and
payable by the other party, this covenant to survive the termination of this
Agreement.
11.2 Assignment and Binding Effect.
-----------------------------
This Agreement may not be assigned by any party hereto without the prior
written consent of all the other parties hereto. All of the terms and
38
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective heirs, legal representatives, successors
and permitted assigns of the parties hereto.
11.3 Notices.
-------
The terms of Section 10.4 (titled "Notices") of the Share Exchange Agreement
are hereby incorporated by reference herein.
11.4 Entire Agreement; Amendments; Waivers; Expenses.
-----------------------------------------------
This Agreement constitutes the full and entire understanding and agreement
among the parties with regard to the subject matter hereof. Headings appearing
herein are merely for convenience and shall not in any way alter the
construction or meaning of any provision hereof. Changes in or additions to
this Agreement may be made only by written instrument executed by the parties.
Any and all previous agreements and understandings between or among the parties
regarding the subject matter hereof, whether written or oral, are superseded by
this Agreement. The waiver by either party of any breach or violation of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach or violation hereof. The failure of any party to insist,
in any one or more instances, upon performance of any term, condition or
restriction of this Agreement shall not be construed as a waiver or
relinquishment of any rights or remedies granted hereunder for the future
performance of any such term, condition or restriction. The parties shall bear
their own expenses in connection with this Agreement.
11.5 Severability.
------------
In case any provisions of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
11.6 Benefit.
-------
Neither party may assign any of its rights or obligations hereunder without the
express written consent of the other party. Except as prohibited hereunder,
this Agreement shall inure to and shall be binding upon the parties hereto and
their respective successors and assigns.
11.7 General.
-------
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original and all of which together shall constitute one and
the same instrument. This Agreement shall be construed and enforced as a
contract under seal in accordance with, and the rights of the parties shall be
governed by, the laws of the Commonwealth of Pennsylvania. Any and all legal
proceedings concerning the infringement, breach, or contemplated breach of this
Agreement shall be filed in the Commonwealth of Pennsylvania, Philadelphia
County, only and the parties hereto consent to such jurisdiction.
39
IN WITNESS WHEREOF, the parties have caused this Share Exchange Agreement to be
duly executed and delivered as of the day and year first above written.
CLARITI:
Clariti Telecommunications International, Ltd.,
a Delaware corporation
s/Xxxxx X.Xxxxxxx
-----------------
Xxxxx X. Xxxxxxx
Chief Executive Officer
CHH:
Xxxxxxxx Hall Holdings, Limited,
a British Virgin Islands corporation
s/Xxxxxxx Xxxxxx
----------------
Xxxxxxx Xxxxxx, Director
[a duly authorized representative]
MEDIATEL:
MediaTel Global Communications Limited,
a United Kingdom corporation
s/Xxxxxxx X. Xxxxxx
-------------------
Xxxxxxx X. Xxxxxx, Director
[a duly authorized representative]
40
EXHIBIT "D"
to
Share Exchange Agreement
made by and among
Clariti Telecommunications International, Ltd. ("Clariti");
Xxxxxxxx Xxxx Holdings, Limited, ("CHH"); and
MediaTel Global Communications Limited ("MediaTel")
EXCLUSIVE TELECOMMUNICATIONS AGREEMENT
--------------------------------------
[EXCLUDED FROM EXHIBIT FOR REASONS OF CONFIDENTIALITY]
41
SCHEDULE 1.1.2
to
Share Exchange Agreement
made by and among
Clariti Telecommunications International, Ltd. ("Clariti");
Xxxxxxxx Hall Holdings, Limited, ("CHH"); and
MediaTel Global Communications Limited ("MediaTel")
MEDIATEL WHOLLY OWNED SUBSIDIARIES
----------------------------------
A. Unicom UK Limited
B. Xero One Limited
C. Belltec International Telecoms Limited
D. Fastlink Residential Services Limited
E. Fastlink Telecommunications (UK) Limited
F. Fastlink Global Communications Limited
42
SCHEDULE 1.1.3
to
Share Exchange Agreement
made by and among
Clariti Telecommunications International, Ltd. ("Clariti");
Xxxxxxxx Xxxx Holdings, Limited, ("CHH"); and
MediaTel Global Communications Limited ("MediaTel")
MEDIATEL DISPOSITION SUBSIDIARY
-------------------------------
A. MediaTel Joint Ventures Limited
43
