AGREEMENT AND PLAN OF REORGANIZATION
Agreement, made as of the 11th day of August, 1997, by and among Touch
Tone America, Inc., a California corporation and its wholly owned
subsidiary GETNET INTERNATIONAL, Inc., an Arizona corporation,
(collectively both referred to as ("Buyer"), ORIX Global Communications,
Inc., a Nevada corporation (the "Company" or "Seller") and the Shareholders
of the Company whose names and addresses are set forth on the signature
page hereof, ("The Shareholders"). Buyer, Seller and Company are sometimes
referred to as "party" or "parties."
The Shareholders own an aggregate of 1,000 shares of common stock, no
par value per share, of the Company, constituting 100% of the issued and
outstanding common stock of the Company, (the "Shares"). Buyer desires to
acquire all of the Shares in exchange for certain shares of the common
stock of Buyer (the "Buyer's Stock") and the Seller and Shareholders desire
to exchange the Shares for Buyer's stock on the terms and conditions set
forth herein. In consideration of the mutual agreements contained herein,
the parties agree as follows:
1. EXCHANGE OF SHARES.
1.01. SHARES BEING EXCHANGED. Subject to the terms and
conditions of this Agreement, at the Closing provided for in Section 2.01
hereof (the "Closing"), Seller is assigning and delivering to Buyer the
number of Company Shares set forth below and Buyer is acquiring such
Shares, free and clear of all liens, claims, options, charges and
encumbrances whatsoever in exchange for 4,500,000 shares of Buyer's Common
Stock and 6,000,000 shares of Buyers Series C Preferred Stock. The Touch
Tone Series C Preferred Stock issued in the purchase will be non-voting and
will pay cumulative dividends of 8% per annum, payable annually. Each share
of Preferred Stock is redeemable for cash at the election of the holder of
the Series C Preferred Stock or convertible into shares of Touch Tone
Common Stock at the election of the holder of the Series C Preferred Stock
at any time for a period of three years from the date of issuance. On the
third anniversary of the date of the issuance Touch Tone must either
convert or redeem the Series C Preferred Stock. The Series C Preferred
Stock is redeemable at $1.50 per share (subject to adjustment in certain
circumstances) or convertible into 0.6667 of a share of Touch Tone Common
Stock. The Series C Preferred Stock has a liquidation preference of $1.50
per share.
1.02. SHAREHOLDERS' REPRESENTATIVE. For this transaction, Orix
Shareholders hereby irrevocably designate and appoint Xxxxx Xxxxxx as their
representative and attorney in fact, ("Orix Shareholders' Representative"),
with full power and authority until the Closing to execute, deliver and
receive on their behalf all notices, requests, certificates and other
communications hereunder; to, fix and alter on their behalf the date, time
and place of the Closing; to waive, amend or modify any provisions of this
Agreement and to take such other action on their behalf in connection with
this Agreement, the Closing and the transactions contemplated hereby as
such agent or agents deem appropriate; provided, however, that no such
waiver, amendment or modification may be made if it would decrease the
number of shares to be issued to the Sellers under Section 1.01 hereof or
increase the extent of their obligation to indemnify Buyer under Section
8.02 hereof.
1.03. ADJUSTMENTS TO NUMBER OF SHARES. In the event that, prior
to any issuance and delivery of shares of Buyer's Common Stock to the
Shareholders pursuant hereto, the outstanding
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shares of Buyer's Common Stock shall have been, without new consideration,
increased, decreased, changed into or exchanged for a different number or
kind of shares or securities through reorganization, recapitalization,
reclassification, stock dividend, stock split, or other like changes in
Buyer's capitalization, then an appropriate and proportionate adjustment
shall be made in the number and kind of shares of Buyer's Common Stock to
be thereafter delivered hereunder.
2. THE CLOSING.
2.01. TIME AND PLACE. The Closing hereunder shall occur at
10:00 a.m. at the offices of Seller, or at such other time and location as
may be mutually agreed upon by Buyer and Seller, but which date shall be no
later than September 30, 1997, or 24 hours after Shareholder approval,
(reference Section 10.ll).
2.02. DELIVERIES BY THE SELLER. At the Closing, the Seller shall
deliver to Buyer, (unless previously delivered or waived), the following:
a. Certificates representing the Company Shares, duly
endorsed or accompanied by stock powers, duly endorsed, duly executed in
blank, (with signatures guaranteed by a national bank or member firm of the
New York Stock Exchange), and otherwise in form acceptable for transfer on
the books of the Company, with all requisite stock transfer stamps
attached.
b. Certificates from appropriate authorities as to the good
standing of, and payment of taxes by, the Company in the State in which it
is incorporated and each jurisdiction in which it is qualified to do
business as a foreign corporation, dated as of the most recent practicable
date.
c. The opinion of the Seller's counsel referred to in
Section 7.c hereof.
d. A general release from Shareholders of all claims
Shareholders may have, as of the date of the Closing, against the Company,
Buyer, and their subsidiaries or affiliates, or directors, officers,
employees or agents of the Company, Buyer, or their subsidiaries or
affiliates, except for such rights or claims arising under this Agreement
and those listed in Exhibit 2.02(d).
e. All other previously undelivered items required to be
delivered by the Seller to Buyer at or prior to the Closing.
2.03. DELIVERIES BY BUYER. At the Closing, Buyer shall deliver to
the Sellers certificates of the appropriate number of Buyers
Stock.
a. Certificates representing the Company Shares, duly
endorsed or accompanied by stock powers, duly endorsed, duly executed in
blank, (with signatures guaranteed by a national bank or member firm of the
New York Stock Exchange), and otherwise in form acceptable for transfer on
the books of the Company, with all requisite stock transfer stamps
attached.
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b. Certificates from appropriate authorities as to the good
standing of, and payment of taxes by, the Buyer in the State in which it is
incorporated and each jurisdiction in which it is qualified to do business
as a foreign corporation, dated as of the most recent practicable date.
c. An opinion of the Buyer's counsel as referred to in
Section 78 hereof.
d. All other previously undelivered items required to be
delivered by the Buyer to Seller at or prior to the Closing.
3. SECURITIES ACT.
3.01 INVESTMENT REPRESENTATION. Each Seller acknowledges that
the Buyer's Stock issuable pursuant to this Agreement will not have been
registered under the Securities Act of 1933 (the Securities Act") and that
Seller's Buyer Stock must be held indefinitely unless subsequently
registered thereunder or an exemption from registration is available.
Seller represents and warrants to Buyer that (i) Seller will acquire such
Buyer Stock for investment, and not with a view to the distribution thereof
within the meaning of the Securities Act, (ii) such Seller will acquire
such Buyer Stock for his or her own account and has not offered, and as of
the Closing Date will not have offered and does not intend, and as of the
Closing Date will not intend, to transfer, any participation or interest of
any kind in such Buyer Stock to any other person, and (iii) the exchange of
Buyer Stock for the Shares constitutes an investment decision of an amount
and type consistent with such Seller's investment practices and objectives.
Seller and Buyer each acknowledges that each party has been offered access
to information, financial and otherwise, regarding each party which is
deemed relevant by each party in this investment decision, and an
opportunity to discuss such information with officers and employees of each
party, and to examine each parties' books and records. In addition, until
the Closing Date hereunder, Buyer shall deliver to Seller all filings made
under the Securities Exchange Act of 1934 by Buyer.
3.02 LEGENDING OF BUYER STOCK. The shares of Buyer stock
issuable hereunder shall not be transferable except upon the conditions
specified in this Section 3, which conditions are intended to insure
compliance with the provisions of the Securities Act in respect of the
transfer of any such shares of Stock.
Each certificate for Buyer Stock issued to Seller, and each certificate for
Buyer Stock issued to subsequent transferees of Seller, shall (unless
otherwise permitted by this Section 3) be stamped or otherwise imprinted in
substantially the following form:
"The transfer of the shares represented by this certificate is subject to
compliance with the conditions specified in an Agreement, a copy of which
is on file at the office of the Corporation, and no transfer of such shares
shall be valid or effective until such conditions have been fulfilled."
3.03 RESTRICTIONS ON TRANSFERABILITY. Each Seller, and any
subsequent holder of a certificate of Buyer Stock bearing the restrictive
legend set forth in Section 3.02, (hereinafter in this Section 3 called the
"Holder") by acceptance thereof agrees, prior to any transfer or attempted
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transfer of such Buyer Stock, to give written notice to Buyer of such
Holder's intention to effect such transfer. Each such notice shall
describe the manner and circumstances of the proposed transfer in
reasonable detail, and shall contain an undertaking by the person giving
such notice to furnish an opinion of counsel for the Holder with respect to
the proposed sale, and such further information as may reasonably be
required by Buyer or counsel referred to below. Promptly upon receiving
any such notice, Buyer shall submit copies thereof to its counsel, and the
following provisions shall apply:
(i) If, in the opinion of such counsel, the proposed transfer of
such Buyer Stock may be effected without registration under the
Securities Act, Buyer shall as promptly as is practicable so notify
the Holder of such Stock, and such Holder shall thereupon be entitled
to transfer such Stock in accordance with the terms of the notice
delivered by such Holder to Buyer. Each certificate of Buyer Stock
issued upon the transfer of any such Stock shall bear the restrictive
legend set forth above if in the opinion of such counsel such legend
is required in order to insure compliance with the applicable
provisions of the Securities Act;
(ii) If, in the opinion of such counsel, the proposed transfer of
such Buyer Stock may not be effected without registration under the
Securities Act of such Stock, Buyer shall as promptly as is
practicable so notify the Holder. The Holder thereof, agrees, as to
such Stock, by acceptance thereof, that if the proposed transfer by
him cannot, in the opinion of such counsel, be effected without such
Stock under the Securities Act, such Holder will not transfer such
securities unless they have been registered under the Securities Act
by Buyer, as hereinafter provided, or unless the staff of the
Securities and Exchange Commission has stated in writing that it would
raise no objection with respect to the proposed transfer. The
restrictions imposed by this Section 3 upon the transferability of any
particular share or shares of Buyer Stock shall cease and terminate
concurrently with the sale or other disposition thereof pursuant to
and in the manner contemplated by an effective registration statement
under the Securities Act, or pursuant to and in accordance with Rule
144 promulgated under the Securities Act, (or any similar rule or
regulation hereafter promulgated). Whenever the restrictions imposed
by the Section 3 shall terminate, as hereinabove provided, the Holder
of any Buyer Stock as to which such restrictions shall have
terminated shall be entitled to receive from Buyer one or more new
certificates of Buyer Stock not bearing the restrictive legend set
forth above, and not containing any other reference to the
restrictions imposed by this Section 3.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller hereby
represents and warrants to Buyer as follows (for the purposes of this
Section 4, the Company shall include any subsidiaries of the Company). The
Company represents and warrants:
4.01. TITLE TO THE SHARES. Each Shareholder owns, and is
transferring to Buyer at the Closing, good, valid and marketable title to
the number of Shares set forth opposite his name on the signature page
hereof, free and clear of all liens, claims, options, charges and
encumbrances whatsoever. Such shares in the aggregate represents, and will
as of the Closing represent, 100% of the issued and outstanding capital
stock of the Company. There are no outstanding options, warrants, or
rights to purchase or acquire any of the Shares of the Seller.
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4.02. VALID AND BINDING AGREEMENTS. As to each Shareholder,
this Agreement constitutes the valid and binding agreement of each Seller,
enforceable in accordance with its terms, and, as to Seller, neither the
execution and delivery of this Agreement nor the consummation by Seller of
the transaction contemplated hereby (a) violates or will violate any
statute or law, or any rule, regulation or order of any court or
governmental authority; or (b) violates or will violate, or conflicts with
or will conflict with, or constitutes a default under or will constitute a
default under, any contract, commitment, agreement, understanding,
arrangement, or restriction of any kind to which Seller is a party or by
which Seller is bound.
4.03. ORGANIZATION. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Nevada, and has corporate power and authority to own, lease,
license and operate its business and assets. The Company is duly qualified
to transact business as a foreign corporation in the State of California,
and is in good standing in each jurisdiction where the nature of its
business makes such qualification necessary or the failure to so qualify
would have a material adverse effect on its business.
4.04. ARTICLES AND BY-LAWS. The copies of the Articles of
Incorporation and all amendments thereto of the Company, as certified by
the Secretary of the Company and of the By-Laws, as amended to the date
hereof, of the Company, as certified by its Secretary, which have
heretofore been delivered to Buyer are complete and correct copies of the
Articles of Incorporation and By-Laws of the Company as amended and in
effect on the date of the Closing. All minutes of the Company are
contained in minute books of the Company heretofore furnished to Buyer for
examination and are being delivered to Buyer at the Closing, and no minutes
have been included in such minute books since such examination by the Buyer
that have not also been furnished to Buyer.
4.05. CAPITALIZATION. The total number of shares of stock which
the Company is authorized to issue is 2,500 shares of common stock of no
par value per share, of which 1,000 shares are validly issued, fully paid
and non-assessable. There is no option, warrant, agreement or understanding
pursuant to which any person or entity has or may have the right to acquire
any equity interest in the Company, or any other security convertible into
any equity interest in the Company.
4.06. FINANCIAL STATEMENTS. The Seller will deliver to Buyer
balance sheets of the Company as of May 31, 1997, and statements of
operations for the Company for the period then ending, and the report of
Xxxx & Co., Xxxx Xxxxxxxxx, C.P.A. pertaining thereto. These financial
statements have been prepared from the books and records of the Company,
represent fairly the financial position of the Company as of the dates
appearing thereon, and the results of operation of the Company for the
period then ended, and have been prepared in accordance with generally
accepted accounting principles consistently applied with those used in
preparing financial statements of the Company during prior fiscal periods.
Except as provided for or reserved against in the Balance Sheet dated May
31, 1997, (the "Balance Sheet") and except for liabilities incurred in the
ordinary course of the business of the Company after the date of the
balance sheet, and liabilities set forth on any of the exhibits delivered
in connection herewith, there are no liabilities of any kind, whether
accrued, absolute, contingent or otherwise, and whether or not determined
or
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determinable.
4.07. TAXES. The amount of the provision for liability for
taxes on the Balance Sheet is sufficient for the payment of all unpaid
federal, state and local income, franchise and property taxes of the
Company accrued for or applicable to the period ended on the date of said
Balance Sheet, and all years and periods prior thereto. The Company has
collected or paid all applicable local tax returns, intangible tax returns
and other tax returns which are required to be filed by it, and such
returns and reports are true and correct. The Company has prepared and
filed all Federal, State and County and local income, excise and other tax
returns required to be filed by it, and all such returns are true and
correct. The Company has paid all taxes which have become due pursuant to
such returns, or pursuant to any assessment received by it. The Federal
income tax returns of the Company have not been examined by the Internal
Revenue Service. The Company has not incurred any tax liabilities other
than in the ordinary course of business; there are no tax liens upon any of
the properties or assets, real, personal or mixed, tangible or intangible,
of the Company, (except for liens of taxes not yet due); and, except as
reflected in the Balance Sheet, there are no pending questions relating to,
or claims asserted for, taxes or assessments against the Company, and there
is no basis for any such question or claim.
4.08. PATENTS, TRADEMARKS, TRADE NAMES, PROGRAMS, ETC. Exhibit
4.08 hereto contains an accurate and complete description of all patents,
trademarks, trade names, assumed names, computer programs, licenses,
franchises and copyrights, and any applications therefore, presently owned,
held by, or used by the Company, or under which the Company owns or holds
any license. No products or services of the Company, nor any patents,
formula, processes, know-how, trade secrets, trademarks, trade names,
assumed names, copyrights or designations used in the business of the
Company infringe on any patents, trademarks, copyrights or any other rights
of any person. The Company has the right to market its products and
services and conduct its business as currently being conducted. Neither
the Company nor any Seller knows or has any reason to believe that there
are any claims or rights of any third parties of infringement, or any
conflict with the rights of third parties, and the Company is not in
receipt of any notice or complaint of any infringement or conflict with the
rights of others in any patents, copyrights, trademarks or trade names, or
computer programs, trade secrets or any other proprietary rights. No
claims have been made by the Company of any infringement or conflicts by
others with the rights of the Company with respect to any patents,
copyrights, trademarks, computer programs, formulations, trade names, trade
secrets or proprietary information used in the Company's business. Neither
the Company nor any Seller knows of any basis for the making of any such
claim. No Seller, officer, director, employee or consultant of the Company
owns, directly or indirectly, in whole or in part, any patents, copyrights,
trademarks, trade names, computer programs, or any trade secrets or
proprietary information which are presently being used in the Company's
business.
4.09. INSURANCE. The Company has in force and effect and is
covered under policies of insurance covering such risks, and in amounts
adequate for the size and scope of its business. A description of its
insurance policies is set forth in Exhibit 4.09.
4.10. ASSETS. The Company has good and marketable title to all
of its properties, free and clear of all liens and encumbrances except as
noted in the Balance Sheet, and set forth in detail
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in Exhibit 4.10 hereto. The properties and assets of the Company are in
good repair and condition, and are adequate for the conduct of the business
of the Company as now being conducted, and for the anticipated growth of
the Company's business. The assets of the Company will include those
operations and investments set forth in detail in Exhibit 4.10. In the
event the Company is required to pay additional consideration to acquire
such rights, operations or investments, such payments shall reduce the
Company shares due Sellers herein by the same amount.
4.11. BANKING ARRANGEMENTS. Set forth as Exhibit 4.11 hereto
and delivered to Buyer is a complete list of each bank in which the Company
has an account, line of credit, or other banking arrangement, and the
account number, balance and signatories of each such account, line of
credit and loan.
4.12. EMPLOYEES. Set forth in Exhibit 4.12 hereto and delivered
to Buyer is a complete list setting forth the name, current annual salaries
of all officers, directors and employees of the Company, together with
copies of any employment agreements or other employment commitments of the
Company.
4.13. PURCHASE COMMITMENTS. The Company has performed, in all
material respects, all of the obligations required to be performed by it to
date under all purchase agreements and purchase orders as conditions
precedent to the delivery of the items called for therein. No such
purchase commitment is in excess of the ordinary, common and usual
requirements of the business of the Company.
4.14. COMMITMENTS. The Company has performed, in all material
respects, all of the obligations required to be performed by it to date
under all of its sales, rental, service and franchise agreements and
commitments. No information has come to the attention of the Company or
any Seller which would tend to indicate that any of the customers of the
Company are currently, or are likely to become, unable to perform under the
terms of any agreement or commitment entered into with it. All leases
entered into by the Company involving remaining aggregate rentals in excess
of $5,000 are set forth in Exhibit 4.14 and have been delivered to Buyer.
4.15. AGENCY AGREEMENTS. Set forth in Exhibit 4.15 hereto and
delivered to Buyer are copies of all agreements and other commitments with
franchisees, distributors, dealers, sales representatives, consultants and
other agencies and entities engaged or utilized by the Company.
4.16. LABOR AGREEMENTS AND POLICIES. The Company is not a party
to or bound by any collective bargaining agreement, and the Company or any
Seller is not aware of any attempt to organize any of the employees of the
Company. There are no strikes or other labor disputes pending, or to the
knowledge of the Company or any of the Sellers, threatened against the
Company. The Company has complied in all material respects with the Fair
Labor Standards Act, Occupational Safety and Health Act, Equal Employment
Opportunity and all other applicable Federal and State laws regarding
employment, and in respect to hours worked by and payments made to the
employees of the Company.
4.17. EMPLOYMENT BENEFIT PLANS. Set forth in Exhibit 4.17
hereto and delivered to
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Buyer are copies of all pension, retirement, profit-sharing, bonus,
deferred compensation, stock option, stock purchase, severance pay,
vacation policy and pay, medical, dental, life insurance, death benefit and
other plans or agreements providing benefits to employees of the Company.
There are no unfunded liabilities attributed to any employee benefit plans
providing benefits to employees of the Company, and none will arise upon
the termination of any such plans. The Company is in full compliance with
all laws, rules and regulations governing employee benefits. The Company
has an established policy that its employees may not accrue vacation time
beyond the period of 12 months.
4.18. OTHER MATERIAL CONTRACTS AND COMMITMENTS. Set forth in
Exhibit 4.18 and delivered to Buyer are copies of all material contracts,
agreements, instruments and other commitments to which the Company or the
Seller is a party and which are not included in other exhibits hereto.
Except as included in said Exhibit 4.18 and such other exhibits to this
Agreement, the Company is not a party to or bound by any written or oral
(a) material contract, agreement or other instrument or understanding
creating a liability; (b) material lease, mortgage, pledge, conditional
sales contract, security agreement, factoring agreement or other similar
agreement with respect to any real or personal property, whether as lessor
or lessee or otherwise; (c) material agreement or arrangement for the
borrowing of money or for a line of credit; (d) agreement or arrangement
for the sale of the assets of the Company or for the grant of any
preferential rights to purchase any of the assets, property or rights of
the Company or for the transfer or the assignment thereof other than the
ordinary course of business of the Company; (e) guarantee, surety,
subordination or other agreement for related type of agreement or
arrangement; (f) agreement of any kind with any director or officer or with
any associate of any such person; (g) material agreement or commitment for
capital expenditures or for the acquisition of fixed assets. As used in
this Section 4.18, the term "material" refers to any contract, agreement,
commitment, instrument or understanding involving a liability, actual or
potential, in excess of $5,000.
4.19. PERFORMANCE OF OBLIGATIONS. The Company has performed all
of the material obligations required to be performed by it and is not in
material default under any of the agreements, leases, contracts, or other
documents to which it is a party. No party with whom the Company has an
agreement or commitment is in material default thereof. As used in this
Section 4.19, the term "material" refers to a default involving more than
$500 or which, when aggregated with other defaults, would exceed $2,000, or
which would give the nondefaulting party a right to cancel or terminate
such defaulted agreement or obligation.
4.20. CONFLICT. Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will conflict with or
result in a breach of, or give rise to, or termination of, or accelerate
the maturity of or the performance required by any terms of the Articles of
Incorporation or By-laws, or any indenture, loan agreement, lease or other
agreement or arrangement of the Company or any Seller, or constitute a
default thereunder, or result in the creation of any lien, charge or
encumbrance upon any of the assets or properties of the Company.
4.21. LITIGATION, ETC. Except as set forth in Exhibit 4.21
hereto and delivered to Buyer, there is no investigation by any
governmental agency or any legal proceedings pending, or to the best
knowledge of the Seller, threatened against the Company, or the property,
assets or good will
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thereof, and there is no outstanding order, writ, injunction or decree of
any court or governmental agency against or affecting the Company, or
against or affecting its business, property, assets, good will or common
stock.
4.22. COMPLIANCE WITH LAWS. The Company has complied in all
material respects with all laws, regulations and orders applicable to the
conduct of its business, and the Company possesses all permits, licenses
and other approvals and authorizations of all governmental agencies which
are necessary to the conduct of its business, and all said permits,
licenses and other approvals and authorizations are in full force and
effect. The Company has not received any notice of, and is not aware of
any material violation of, any zoning regulation or ordinance or of any
law, order, regulation or requirement relating to the operation of its
business which remains uncured or which has not been dismissed.
4.23. RECENT TRANSACTIONS. Except as shown on the Exhibits
delivered in connection herewith, the business of the Company has been
conducted diligently and only in the ordinary course and the Company has
not (a) incurred or become subject to any obligation or liability,
(absolute or contingent), except current liabilities incurred in the
ordinary course of business of the Company, and under contracts entered
into in the ordinary course of business of the Company, none of which
involves potential liability in excess of $5,000 or is not cancelable in
thirty (30) days or less notice without penalty or liquidated damages; (b)
discharged or satisfied any lien or encumbrance, or paid any obligation,
(tangible or intangible), other than liabilities shown on the Balance Sheet
and current liabilities incurred since the date of the said Balance Sheet
in the ordinary course of business of the Company; (c) mortgaged, pledged
or subjected to lien, charge or any other encumbrance, any of its assets,
real or personal, tangible or intangible; (d) sold or transferred any of
its assets, property or rights, or canceled any debts or claims except in
each case in the ordinary course of business of the Company, or entered
into any agreement or arrangement granting any preferential rights to
purchase any of its assets, property or rights or which requires consent of
any third party to the transfer and assignment of any of its assets,
property or rights; (e) suffered any extraordinary losses, (whether or not
covered by insurance), or waived any rights of substantial value; (f) made
or permitted any amendment or termination of any contract, agreement or
license to which it is a party, otherwise than in the ordinary course of
business; (g) through negotiation or otherwise, made any commitment or
incurred any liability to any labor organization; (h) made capital
expenditures or entered into agreements therefor aggregating more than
$5,000; (i) issued any stock, bonds or any other corporate securities or
granted any options, warrants or other rights calling for the issuance
thereof; (j) amended its Articles of Incorporation or By-Laws.
4.24. WARRANTIES. There are no pending claims against the
Company or its insurers for breach of any warranty, or with respect to
liability for defective products or services.
4.25. BROKERS AND FINDER. Seller has not entered into an
agreement with any person, firm or corporation, or become indirectly a
party to any such agreement, nor has he taken any action or is he aware of
any facts which would result in the assertion of any liability or claim for
the payment of any commission, brokerage or finder's fee in connection with
his execution of this Agreement or the consummation of transactions
contemplated herein.
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4.26. ACCOUNTS RECEIVABLE. Marked as Schedule 4.26 hereto and
delivered to Buyer is a complete list, appropriately aged, of the accounts
receivable of the Company as a date within ten (10) days of the date
hereof. Such accounts receivable of Company are valid and collectible in
full and are not subject to defense, set-off or counterclaim on the part of
the account debtor or any known assignee of any of such accounts except for
the amount of the allowance for uncollectible accounts shown on the
Schedule.
4.27. DISCLOSURE. All material facts regarding the assets,
business, operations, financial condition and prospects of the Company are
reflected in the Balance Sheet, or have been disclosed herein, or have been
disclosed to Buyer in writing set forth as Exhibit 4.27 hereto. No
representation or warranty by the Seller contained in this agreement, and
no statement contained in any certificate, schedule, exhibit, list or other
writing furnished to Buyer pursuant to the provisions hereof or in
connection with the negotiation hereof, contains any untrue statement of
any material fact or omits to state a material fact necessary in order to
make the statements herein not misleading.
4.28. UPDATE. The Seller will promptly advise the Buyer in
writing of any changes in any of the representations, warranties or
Exhibits herein and these representations and warranties shall be true and
correct as of the date of the Closing as well as the date hereof, and
Seller will provide Buyer with quarterly and annual balance sheets and
income statements of the Company from the date hereof through the Closing
Date.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer warrants and
represents to the Seller and Shareholders as follows:
5.01. ORGANIZATION. With the exception of items in Exhibit
5.0l, the Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of California and has corporate
power and authority to own, lease, license and operate its business and
assets. The Buyer is duly qualified to transact business as a foreign
corporation and is in good standing in each jurisdiction where the nature
of its business makes such qualification necessary or the failure to so
qualify would have a material adverse effect on its business.
5.02. CAPITAL. The authorized capital stock of Buyer consists
of 100,000,000 shares of Common Stock of which 4,568,245 shares of Common
Stock are currently issued and outstanding and 100,000,000 shares of
Preferred Stock of which no shares are issued and outstanding. All of the
issued and out-standing shares are duly and validly issued, fully paid and
nonassessable. There are no outstanding subscriptions, options, rights,
warrants, convertible securities, or other agreements or commitments
obligating Buyer to issue or to transfer from treasury any additional
shares of its capital stock of any class, except as set forth in Exhibit
5.02 hereto.
5.03. SUBSIDIARIES. Buyer does not have any subsidiaries or own
any interest in any other enterprise (whether or not such enterprise is a
corporation) except as set forth in Exhibit 5.03.
5.04. FINANCIAL STATEMENTS. The balance sheets of Buyer and the
financial statements set forth in Buyer's reports to the U.S. Securities
and Exchange Commission have been prepared in
10
accordance with generally accepted accounting principles and practices
consistently followed by Buyer throughout the periods indicated, and fairly
present the financial position of Buyer as of the dates of the balance
sheets included in the financial statements, and the results of operations
for the period indicated. Except as provided for or reserved against in
the Balance Sheet dated May 31, 1997, (the "Balance Sheet"), and except
for liabilities incurred in the ordinary course of the business of the
Company after the date of the balance sheet and liabilities set forth on
any of the exhibits delivered in connection herewith, there are no
liabilities of any kind, whether accrued, absolute, contingent or otherwise
and whether or not determined or determinable.
5.05. ABSENCE OF CHANGES. Except as set forth in the Exhibits
herein, there has not been any change in the financial condition or
operations of Buyer, except for changes in the ordinary course of business,
which changes have not in the aggregate been materially adverse.
5.06. INVESTIGATION OF FINANCIAL CONDITION. Without in any
manner reducing or otherwise mitigating the representations contained
herein, Sellers shall have the opportunity to meet with Buyer's accountants
and attorneys to discuss the operation and financial condition of Buyer.
Buyer shall make available to Seller all books and records of Buyer.
5.07. LITIGATION. Except as set forth in Exhibit 5.07, Buyer is
not a party to any suit, action, arbitration, or legal, administrative, or
other proceeding, or governmental investigation pending or, to the best
knowledge of Buyer, threatened against or affecting Buyer or its business,
assets, or financial condition. Buyer is not in default with respect to
any order, writ, injunction, or decree of any federal, state, local, or
foreign court, department agency, or instrumentality.
5.08. AUTHORITY. The Board of Directors of Buyer has authorized
the execution of this Agreement and the transactions contemplated herein,
and Buyer has full power and authority to execute, deliver and perform this
Agreement and this Agreement is the legal, valid and binding obligation of
Buyer, is enforceable in accordance with its terms and conditions, except
as may be limited by bankruptcy and insolvency laws and by other laws
affecting the rights of creditors generally.
5.09. ABILITY TO CARRY OUT OBLIGATIONS. The execution and
delivery of this Agreement by Buyer and the performance by Buyer will not
conflict with or result in (a) any breach or violation of any of the
provisions of or constitute a default under any license, indenture,
mortgage, charter, instrument, certificate of incorporation, bylaw, or
other agreement or instrument to which Buyer is a party, or by which it may
be bound, nor will any consents or authorizations of any party other than
those hereto be required, (b) an event that would permit any party to any
agreement or instrument to terminate it or to accelerate the maturity of
any indebtedness or other obligation of Buyer, or 8 an event that would
result in the creation or imposition of any lien, charge, or encumbrance on
any asset of Buyer.
5.10. VALIDITY OF BUYER'S SHARES. The shares of Buyer's Common
Stock to be delivered pursuant to this Agreement, when issued in accordance
with the provisions of this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable.
11
5.11. ARTICLES AND BY-LAWS. The copies of the Articles of
Incorporation and all amendments thereto of the Buyer, as certified by the
Secretary of the Buyer and of the By-Laws, as amended to the date hereof,
of the Buyer, as certified by its Secretary, which have heretofore been
delivered to Seller are complete and correct copies of the Articles of
Incorporation and By-Laws of the Buyer as amended and in effect on the date
of the Closing. All minutes of the Buyer are contained in minute books of
the Buyer heretofore furnished to Seller for examination and are being
delivered to Seller at the Closing, and no minutes have been included in
such minute books since such examination by the Seller that have not also
been furnished to Seller.
5.12. TAXES. The amount of the provision for liability for
taxes on the Balance Sheet is sufficient for the payment of all unpaid
federal, state and local income, franchise and property taxes of the Buyer
accrued for or applicable to the period ended on the date of said Balance
Sheet and all years and periods prior thereto. The Buyer has collected or
paid all applicable local tax returns, intangible tax returns and other tax
returns which are required to be filed by it, and such returns and reports
are true and correct. The Buyer has prepared and filed all Federal, State
and County and local income, excise and other tax returns required to be
filed by it and all such returns are true and correct. The Buyer has paid
all taxes which have become due pursuant to such returns or pursuant to any
assessment received by it. The Federal income tax returns of the Buyer
have not been examined by the Internal Revenue Service. The Buyer has not
incurred any tax liabilities other than in the ordinary course of business;
there are no tax liens upon any of the properties or assets, real, personal
or mixed, tangible or intangible, of the Buyer, (except for liens of taxes
not yet due); and, except as reflected in the Balance Sheet, there are no
pending questions relating to, or claims asserted for, taxes or assessments
against the Buyer, and there is no basis for any such question or claim.
Seller is aware there is a need to amend the payroll tax. As of this date
it has not been determined how much. Buyer will notify Seller of final
result.
5.13. PATENTS, TRADEMARKS, TRADE NAMES, PROGRAMS, ETC. Exhibit
4.08 hereto contains an accurate and complete description of all patents,
trademarks, trade names, assumed names, computer programs, licenses,
franchises and copyrights, and any applications therefore, presently owned,
held by, or used by the Buyer, or under which the Buyer owns or holds any
license. No products or services of the Buyer, nor any patents, formula,
processes, know-how, trade secrets, trademarks, trade names, assumed names,
copyrights or designations used in the business of the Buyer infringe on
any patents, trademarks, copyrights or any other rights of any person. The
Buyer has the right to market its products and services and conduct its
business as currently being conducted. The Buyer does not know or has any
reason to believe that there are any claims or rights of any third parties
of infringement or any conflict with the rights of third parties and the
Buyer is not in receipt of any notice or complaint of any infringement or
conflict with the rights of others in any patents, copyrights, trademarks
or trade names, or computer programs, trade secrets or any other
proprietary rights. No claims have been made by the Buyer of any
infringement or conflicts by others with the rights of the Buyer with
respect to any patents, copyrights, trademarks, computer programs,
formulations, trade names, trade secrets or proprietary information used in
the Buyer's business. The Buyer does not know of any basis for the making
of any such claim. No officer, director, employee or consultant of the
Buyer owns, directly or indirectly, in whole or in part, any patents,
copyrights, trademarks, trade names, computer programs, or any trade
secrets or proprietary information which are presently being used in the
Buyer's business.
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5.14. INSURANCE. The Buyer has in force and effect and is
covered under policies of insurance covering such risks and in amounts
adequate for the size and scope of its business. Until such time as new
management can review such policies, Touch Tone America, Inc. is required
to keep all insurance policies, (liability and otherwise), in full force
and effect. A description of its insurance policies is set forth in
Exhibit 5.14.
5.15. ASSETS. The Buyer has good and marketable title to all of
its properties, free and clear of all liens and encumbrances except as
noted in the Balance Sheet and set forth in detail in Exhibit 5.15. hereto.
The properties and assets of the Buyer are in good repair and condition and
are adequate for the conduct of the business of the Buyer as now being
conducted and for the anticipated growth of the Buyer's business. The
assets of the Buyer will include those operations and investments set forth
in detail in Exhibit 5.15. In the event Buyer is required to pay
additional consideration to acquire such rights, operations or investments,
such payments shall reduce the Buyer shares due Sellers herein by the same
amount.
5.16. BANKING ARRANGEMENTS. Set forth as Exhibit 5.16 hereto
and delivered to Seller is a complete list of each bank in which the Buyer
has an account, line of credit, or other banking arrangement and the
account number, balance and signatories of each such account, line of
credit and loan.
5.17. EMPLOYEES. Set forth in Exhibit 5.17 hereto and delivered
to Seller is a complete list setting forth the name, current annual
salaries of all officers, directors and employees of the Buyer, together
with copies of any employment agreements or other employment commitments of
the Buyer.
5.18. PURCHASE COMMITMENTS. The Buyer has performed, in all
material respects, all of the obligations required to be performed by it to
date under all purchase agreements and purchase orders as conditions
precedent to the delivery of the items called for therein. No such
purchase commitment is in excess of the ordinary, common and usual
requirements of the business of the Buyer.
5.19. COMMITMENTS. The Buyer has performed, in all material
respects, all of the obligations required to be performed by it to date
under all of its sales, rental, service and franchise agreements and
commitments. No information has come to the attention of the Buyer which
would tend to indicate that any of the customers of the Buyer are
currently, or are likely to become, unable to perform under the terms of
any agreement or commitment entered into with it. All leases entered into
by the Buyer involving aggregate rentals in excess of $5,000 are set forth
in Exhibit 5.19 and have been delivered to Seller.
5.20. AGENCY AGREEMENTS. Set forth in Exhibit 4.15 hereto and
delivered to Seller are copies of all agreements and other commitments with
franchisees, distributors, dealers, sales representatives, consultants and
other agencies and entities engaged or utilized by the Buyer.
5.21. LABOR AGREEMENTS AND POLICIES. The Buyer is not a party
to or bound by any
13
collective bargaining agreement and the Buyer is not aware of any attempt
to organize any of the employees of the Buyer. There are no strikes or
other labor disputes pending, or to the knowledge of the Buyer, threatened
against the Buyer. The Buyer has complied in all material respects with
the Fair Labor Standards Act, Occupational Safety and Health Act, Equal
Employment Opportunity and all other applicable Federal and State laws
regarding employment and in respect to hours worked by and payments made to
the employees of the Buyer.
5.22. EMPLOYMENT BENEFIT PLANS. Set forth in Exhibit 5.22
hereto and delivered to Seller are copies of all pension, retirement,
profit-sharing, bonus, deferred compensation, stock option, stock purchase,
severance pay, vacation policy and pay, medical, dental, life insurance,
death benefit and other plans or agreements providing benefits to employees
of the Buyer. There are no unfunded liabilities attributed to any employee
benefit plans providing benefits to employees of the Buyer, and none will
arise upon the termination of any such plans. The Buyer is in full
compliance with all laws, rules and regulations governing employee
benefits. The Buyer has an established policy that its employees may not
accrue vacation time beyond the period of 12 months.
5.23. OTHER MATERIAL CONTRACTS AND COMMITMENTS. Set forth in
Exhibit 5.23 and delivered to Seller are copies of all material contracts,
agreements, instruments and other commitments to which the Buyer is a party
and which are not included in other exhibits hereto. Except as included in
said Exhibit 4.18 and such other exhibits to this Agreement, the Buyer is
not a party to or bound by any written or oral (a) material contract,
agreement or other instrument or understanding creating a liability; (b)
material lease, mortgage, pledge, conditional sales contract, security
agreement, factoring agreement or other similar agreement with respect to
any real or personal property, whether as lessor or lessee or otherwise;
(c) material agreement or arrangement for the borrowing of money or for a
line of credit; (d) agreement or arrangement any for the sale of the
assets of the Buyer or for the grant of any preferential rights to purchase
any of the assets, property or rights of the Buyer or for the transfer or
the assignment thereof other than the ordinary course of business of the
Buyer; (e) guarantee, surety, subordination or other agreement for related
type of agreement or arrangement; (f) agreement of any kind with any
director or officer or with any associate of any such person; (g) material
agreement or commitment for capital expenditures or for the acquisition of
fixed assets. As used in this Section 4.18, the term "material" refers to
any contract, agreement, commitment, instrument or understanding involving
a liability, actual or potential, in excess of $5,000.
5.24. PERFORMANCE OF OBLIGATIONS. The Buyer has performed all
of the material obligations required to be performed by it and is not in
material default under any of the agreements, leases, contracts, or other
documents to which it is a party. No party with whom the Buyer has an
agreement or commitment is in material default thereof. As used in this
Section 4.19, the term "material" refers to a default involving more than
$500 or which, when aggregated with other defaults, would exceed $2,000, or
which would give the nondefaulting party a right to cancel or terminate
such defaulted agreement or obligation.
5.25. CONFLICT. Neither the execution of this Agreement nor
the consummation of the transactions contemplated hereby will conflict with
or result in a breach of, or give rise to, or termination of, or accelerate
the maturity of or the performance required by any terms of the
14
Articles of Incorporation or By-laws or any indenture, loan agreement,
lease or other agreement or arrangement of the Buyer, or constitute a
default thereunder, or result in the creation of any lien, charge or
encumbrance upon any of the assets or properties of the Buyer.
5.26. LITIGATION, ETC. Except as set forth in Exhibit 5.26
hereto and delivered to Seller, there is no investigation by any
governmental agency or any legal proceedings pending, or to the best
knowledge of the Buyer, threatened against the Buyer, or the property,
assets or good will thereof, and there is no out-standing order, writ,
injunction or decree of any court or governmental agency against or
affecting the Buyer, or against or affecting its business, property,
assets, good will or common stock.
5.27. COMPLIANCE WITH LAWS. The Buyer has complied in all
material respects with all laws, regulations and orders applicable to the
conduct of its business, and the Buyer possesses all permits, licenses and
other approvals and authorizations of all governmental agencies which are
necessary to the conduct of its business and all said permits, licenses and
other approvals and authorizations are in full force and effect. The Buyer
has not received any notice of, and is not aware of any material violation
of, any zoning regulation or ordinance or of any law, order, regulation or
requirement relating to the operation of its business which remains uncured
or which has not been dismissed.
5.28. RECENT TRANSACTIONS. Except as shown on the Exhibits
delivered in connection herewith, the business of the Buyer has been
conducted diligently and only in the ordinary course and the Buyer has not
(a) incurred or become subject to any obligation or liability (absolute or
contingent) except current liabilities incurred in the ordinary course of
business of the Buyer and under contracts entered into in the ordinary
course of business of the Buyer, none of which involves potential liability
in excess of $5,000 or is not cancelable in thirty days or less notice
without penalty or liquidated damages; (b) discharged or satisfied any lien
or encumbrance or paid any obligation (tangible or intangible) other than
liabilities shown on the Balance Sheet and current liabilities incurred
since the date of the said Balance Sheet in the ordinary course of business
of the Buyer; (c) mortgaged, pledged or subjected to lien, charge or any
other encumbrance, any of its assets, real or personal tangible or
intangible; (d) sold or transferred any of its assets, property or rights
or canceled any debts or claims except in each case in the ordinary course
of business of the Buyer, or entered into any agreement or arrangement
granting any preferential rights to purchase any of its assets, property or
rights or which requires consent of any third party to the transfer and
assignment of any of its assets, property or rights; (e) suffered any
extraordinary losses (whether or not covered by insurance) or waived any
rights of substantial value; (f) made or permitted any amendment or
termination of any contract, agreement or license to which it is a party,
otherwise than in the ordinary course of business; (g) through negotiation
or otherwise, made any commitment or incurred any liability to any labor
organization; (h) made capital expenditures or entered into agreements
therefor aggregating more than $5,000; (i) issued any stock, bonds or any
other corporate securities or granted any options, warrants or other rights
calling for the issuance thereof; (j) amended its Articles of Incorporation
or By-Laws.
5.29. WARRANTIES. There are no pending claims against the
Buyer or its insurers for breach of any warranty or with respect to
liability for defective products or services.
15
5.30. BROKERS AND FINDER. Buyer has not entered into an
agreement with any person, firm or corporation, or become indirectly a
party to any such agreement nor has he taken any action or is he aware of
any facts which would result in the assertion of any liability or claim for
the payment of any commission, brokerage or finder's fee in connection with
his execution of this Agreement or the consummation of transactions
contemplated herein.
5.31. ACCOUNTS RECEIVABLE. Marked as Schedule 5.31 hereto and
delivered to Seller is a complete list, appropriately aged, of the accounts
receivable of the Buyer as a date within ten (10) days of the date hereof.
Such accounts receivable of Buyer are valid and collectible in full and are
not subject to defense, set-off or counterclaim on the part of the account
debtor or any known assignee of any of such accounts except for the amount
of the allowance for uncollectible accounts shown on the Schedule.
5.32. DISCLOSURE. All material facts regarding the assets,
business, operations, financial condition and prospects of the Buyer are
reflected in the Balance Sheet, or have been disclosed herein, or have been
disclosed to Buyer in writing set forth as Exhibit 5.32 hereto. No
representation or warranty by the Buyer contained in this agreement and no
statement contained in any certificate, schedule, exhibit, list or other
writing furnished to Seller pursuant to the provisions hereof or in
connection with the negotiation hereof, contains any untrue statement of
any material fact or omits to state a material fact necessary in order to
make the statements herein not misleading.
5.33. UPDATE. The Buyer will promptly advise the Seller in
writing of any changes in any of the representations, warranties or
Exhibits herein and these representations and warranties shall be true and
correct as of the date of the Closing as well as the date hereof, and Buyer
will provide Seller with quarterly and annual balance sheets and income
statements of the Buyer from the date hereof through the Closing Date.
6. OBLIGATIONS OF BOTH PARTIES PRIOR TO CLOSING DATE. During the
period from the date hereof to the Closing date, both parties shall cause
the following:
6.01. Refrain from doing any of the types of acts described in
paragraph 4.23 hereof, or entering into any of the types of contracts,
agreements, instruments or other commitments of the nature described or
referred to in paragraph 4.18 hereof, without the prior written consent of
the other party.
6.02. Give each party's representative full access, during
normal business hours and upon reasonable notice, to all of the assets,
properties, books, financial records, accounts and sales records of each
party, working papers of its accountants, agreements and commitments of
each party, and furnish each parties' representatives all such information
concerning the business of each party, as each party may request, including
copies of all the documents described in this Agreement and the exhibits
hereto; provided, however, that any furnishing of such information to each
party for investigation by each party shall not affect the right of each
party to rely upon the
16
representations and warranties made by each party in this Agreement; and
provided, further, that each party will hold in strictest confidence all
documents and information concerning the other party, and, if the
transactions contemplated in this Agreement shall not be consummated, shall
maintain such confidence and immediately thereafter return all such
documents to the other party.
6.03. Conduct its business and operations in the manner in which
the same had heretofore been conducted, except as other-wise consented to
by each party and in conformity with all applicable laws, maintain its
properties in good repair and operating condition, and maintain its books
of accounts in a manner which accurately reflects all items of its income,
expenses and liabilities, in accordance with generally accepted accounting
principles consistently applied.
6.04. Use its best efforts to maintain and preserve its business
organization and to preserve its relationships with its customers,
suppliers, employees and others having business relations with it, to the
extent that the going business of each party shall be unimpaired at the
Closing.
6.05. Not to merge or consolidate with, or agree to sell any of
the operations being conducted by it, or (otherwise than in the ordinary
course of business) any of its assets necessary to or utilized in
connection with such operations to any other organization, or enter into
any agreement to do any of the foregoing, in each case without the prior
consent of the other party..
6.06. Deliver to each party promptly after they become available
balance sheet and income statement and its subsidiaries, certified by the
Company's accountants for the fiscal period ending May 31, 1997, and copies
of all communications to its Stockholders.
6.07. Not to take any action or omit to take any action if the
effect thereof is or may be to cause any of the representations or
warranties of either party to be inaccurate or incomplete in any respect as
if such representations or warranties were made at and as of the Closing.
6.08. Not to declare or pay any dividend or other distributions
of any shares of its capital stock or issue any capital stock or any
security convertible into its capital stock or options to purchase its
capital stock except in any transactions disclosed in Exhibit 6.08 hereto.
From and after the date of this Agreement and until the Closing Date
(the "Interim Period"):
6.09. Each Party's OPERATION OF BUSINESS. Each party shall
operate its business only in the usual, regular and ordinary manner and, to
the extent consistent with such operation, keep the business organization
intact and preserve the present business relationships with customers,
suppliers and others having business dealings with each party.
6.10. CERTAIN TRANSACTIONS. Neither party shall enter into
any transaction, take any action nor fail to take any action which would
result in, or could reasonably be expected to result in or cause, any of
the representations, warranties, disclosures, agreements or covenants of
either party contained in this Agreement, the exhibits hereto or any
document delivered pursuant to this Agreement or in connection with the
consummation of the transactions contemplated hereby, not
17
being true and complete at and as of the time immediately after the
occurrence of such transaction or the action is taken or failed to be taken
and also on the Closing Date. Notwithstanding anything to the contrary
herein, each party shall be entitled to split its stock, increase its
authorized shares and issue shares of its common and preferred stock.
6.11. CORPORATE ACTION; APPROVALS AND CONSENTS. Each party
shall take or cause to be taken all action and will use its best efforts to
obtain in writing as promptly as possible all approvals and consents
required to be obtained in order to effectuate the consummation of the
transactions contemplated hereby.
6.12. ADVICE OF CHANGES. During the Interim Period, each party
shall promptly advise the other party in writing of any fact which, if
existing or known at the date of this Agreement, would have been required
to be set forth in or disclosed pursuant to this Agreement.
6.13. ACCESS TO PROPERTIES AND RECORDS. Each party and their
counsel, accountants and other representatives shall be given full access
during normal business hours to all of the properties, personnel, books,
tax returns, contracts, commitments and records of their other party and
shall be furnished with all such documents and information with respect to
the affairs of the other party or their counsel or accountants may from
time to time reasonably request.
6.14. CARRY ON IN REGULAR COURSE. Each party shall carry on
its business diligently and substantially in the same manner as
heretobefore with such changes as agreed upon by its Board of Directors..
6.15. CONTRACTS AND COMMITMENTS. Except as otherwise provided
herein, neither party shall enter into any contract or commitment or engage
in any transaction not in the usual and ordinary course of business and
consistent with past practices without the written consent of the other
party..
6.16. COMPLIANCE WITH LAWS. Each party will duly comply with
all applicable laws as may be required for the valid and effective
consummation of the transactions contemplated by this Agreement.
7. CONDITIONS TO OBLIGATIONS OF EACH PARTY.
Each party's obligations under this Agreement are subject to the
satisfaction at or prior to the Closing of each of the following conditions
(all or any of which may be waived in writing in full or in part by each
party):
(a) The representations and the warranties of each party set
forth in this Agreement shall be true and complete in all material respects
as of the Closing date. All of the terms, provisions and conditions of
this Agreement to be performed or complied with by each party before the
Closing shall have duly been complied with and performed;
(b) Each party shall receive at the Closing legal title to all of
the certificates representing
18
the Shares, free and clear of all liens, pledges, encumbrances of any kind,
nature or description, with exception of legends referenced in Section 3.
(c) Each party shall have received an opinion of counsel dated
the Closing and addressed to the other party to the same effect of Sections
4.03 and 4.05 of this Agreement, and to the further effect that (i) this
Agreement has been duly executed by, and is a valid and binding obligation,
except that such counsel may assume, unless having reason to believe
otherwise, the legal capacity and genuineness of all signatures; (ii)
based on statements and representations to such counsel, which such counsel
has no reason to believe are inaccurate, and the share certificates
relating to the Shares and books of the Company which such counsel has
examined, each party owns and is transferring at the Closing, good, valid
and marketable title to the number of shares set forth in Section 1.01
hereof free and clear of all liens, options, charges and encumbrances
whatsoever; (iii) to the best knowledge of such counsel, each party has
good and marketable title to all of its properties and assets, subject to
no mortgage, pledge, lien, conditional sale agreement, encumbrance, or
charge, other than encumbrances reflected on the balance sheet dated May
31, 1997; (iv) except as may be specified by such counsel such counsel does
not know of any action, proceeding, or investigation pending or threatened
against, or relating to it, its properties or business, the Shares, the
capital stock, or the transactions contemplated by this Agreement; (v)
neither the execution or delivery of this Agreement nor the consummation of
the transactions contemplated hereby: (a) violates or will violate or
conflicts or will conflict with, or constitutes a default under or will
constitute a default under, any term or provision of the Articles of
Incorporation or the By-Laws, as amended, to the best knowledge of such
counsel, of any contract, commitment or other agreement, understanding,
arrangement, restriction of which either party is bound; (b) will cause, or
give any person grounds to cause (with or without notice the passage of
time or both) the maturity of any liability or obligation to be
accelerated, or will increase any such liability or obligation; or will
give any person, firm or corporation with which a party has any contractual
relations the right to cancel or amend such contractual relations, or (c)
violates or will violate any statute, law or any rule, regulation or order
of any court or other governmental authority.
(d) Each party shall have received the audited balance sheet as
of May 31, 1997 and Statement of Income for the period then ending and
completed its due diligence investigation, which shall disclose no adverse
trend in the financial condition, business, operations, prospects,
properties or assets of the other party in the other party's sole opinion.
(e) Company has entered into an employment agreement with Xxxxx
Xxxxxx for his employment by the company after the Closing on such terms
which are acceptable to Buyer and Xxxxxx.
8. INDEMNIFICATION.
8.01. SURVIVAL. All agreements, representations, statements and
warranties contained herein or in any certificate, schedule, list,
document, or other writing, delivered pursuant hereto or in connection with
the transactions contemplated herein shall survive the execution and
delivery of this Agreement, the Closing of the transactions contemplated
herein and any investigation made at
19
any time with respect to any of the foregoing or any information the
parties may have in respect thereto.
8.02. SELLER HOLD HARMLESS. Seller covenants and agrees with
Buyer that it will hold Buyer harmless from and hereby indemnify Buyer
against any and all damages, costs, expenses or other liabilities,
including reasonable attorney's fees (herein called "Damages") resulting to
Buyer or the Company and arising from the inaccuracy or the breach of any
one or more of the representations, warranties, covenants, statements or
agreements made by Seller in this Agreement or in connection with the
transactions contemplated herein.
8.03. BUYER'S NOTICE. If at any time after the Closing Buyer
has reason to believe that it is entitled to indemnification under Section
8.02, or any claim or dispute exists that could, unless successfully
defended, entitle Buyer to indemnification under Section 8.02, Buyer shall
give notice to Seller of the facts entitling Buyer to indemnification or
the nature of the claim or dispute. The Seller shall have the right to
defend, settle or compromise any third party claim or dispute that would
entitle Buyer to indemnification at the Seller's own expense using counsel
of their choice which counsel shall be reasonably acceptable to Buyer. If
the Seller refuses or fails promptly to defend or compromise any such claim
or dispute, or in the event Seller's defense of such claim or dispute is
not successful, or if Buyer is otherwise entitled to indemnification under
Section 8.02, the Seller will promptly pay or reimburse Buyer in the full
amount of any Damages which Buyer becomes obligated to pay or pays or
suffers at any time as a result of any of the matters specified in Section
8.02.
8.04. COMPANY AND BUYER'S HOLD HARMLESS. Buyer covenants and
agrees with Seller that it will hold Seller harmless from and hereby
indemnifies Seller against any and all damages, costs, expenses or other
liabilities, including reasonable attorney's fees (herein called "Damages")
resulting to Seller and arising from the inaccuracy or the breach of any
one or more of the representations, warranties, covenants, statements or
agreements made by Buyer in this Agreement or in connection with the
transactions contemplated herein.
8.05. NOTICE. If at any time after the Closing Seller has
reason to believe that he is entitled to indemnification under Section
8.04, or any claim or dispute exists that could, unless successfully
defended, entitle Seller to indemnification under Section 8.04, Seller
shall give notice to Buyer of the facts entitling Seller to indemnification
or the nature of the claim or dispute. Buyer shall have the right to
defend, settle or compromise any third party claim or dispute that would
entitle Seller to indemnification at the Buyer's own expense through
counsel of its choice. If the Buyer refuses or fails promptly to defend or
compromise any such claim or dispute, or in the event Buyer's defense of
such claim or dispute is not successful, or if Seller is otherwise entitled
to indemnification under Section 8.04, the Buyer will promptly pay or
reimburse Seller in the full amount of any Damages which Seller becomes
obligated to pay or pays or suffers at any time as a result of any of the
matters specified in Section 8.04.
9. TERMINATION.
This agreement may be terminated prior to the Closing as follows:
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9.01. TERMINATION WITHOUT LIABILITY. Buyer may terminate this
Agreement by giving written notice to the Seller without conferring
liability, in the event that the conditions specified in Section 7 of this
Agreement are not satisfied or waived at the Closing.
9.02. TERMINATION WITHOUT LIABILITY. Seller may terminate this
Agreement by giving written notice to Buyer without conferring liability,
in the event that the conditions specified in Section 8 of this Agreement
are not satisfied or waived at the Closing.
9.03. TERMINATION WITHOUT EFFECT ON LIABILITY. Buyer or Seller
may terminate this Agreement by giving written notice to the other party at
or prior to the Closing, without prejudice to any rights it or they may
have if the other party has failed in the observance or in the due and
timely performance of any of its material covenants or agreements contained
herein, and such failure is due to the fault of the other party, or if
there shall have been a material breach of the other party's warranties and
representations herein contained.
9.04. EXHIBITS. At the time of execution hereof all Exhibits
required herein may not have been completed. The parties agree to use
their best efforts to complete the Exhibits as soon as practicable. If
such Exhibits are not completed on or prior to September 15, 1997, or the
information contained therein is deemed by a party to be unsatisfactory,
and such party gives notice to the other party within ten (10) days of
receipt of such Exhibit, this Agreement shall be null and void and have no
further effect.
10. MISCELLANEOUS.
10.01. NOTICES. All notices, requests, demands, or other
communications hereunder shall be in writing and shall be deemed to have
been duly given when sent by certified mail, return receipt requested:
(I) If to Buyer, addressed to:
Touch Tone America, Inc.
0000 Xxxxx Xxxxxxxxxx Xxxx Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
With a copy to:
Xxxx Xxxxx
00000 Xxxxx Xxxx Xxxxx 000
Xxxxxxx, XX 00000
(ii) If to Sellers, addressed to:
Orix Global Communications, Inc.
0000 X. Xxxxxxxx Xxxx., Xxxxx #X-000
Xxx Xxxxx, Xxxxxx 00000
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With a copy to:
Xxxxx Xxxx, Esquire
General Counsel
Cummins & White, Attorneys at Law
0000 X.X. Xxxxxxx Xxxxxx, Xxxxx #000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
or such other address as Buyer or Sellers shall designate by notice given
as provided herein.
10.02. PUBLIC ANNOUNCEMENTS. No public announcement of the
transactions provided for herein shall be made by the Seller unless the
same shall be approved in advance in writing by Buyer.
10.03. EXPENSES. Except as otherwise expressly provided herein,
each of the parties hereto shall pay its or his own fees and expenses
incident to the negotiation, preparation, execution and consummation of
this Agreement, including all fees and expenses of their respective counsel
and accountants incurred in connection with this Agreement and all other
agreements, documents, certificates, applications and other instruments
prepared in connection herewith.
10.04. SUCCESSORS. This Agreement shall inure to the benefit of
and be binding upon the Seller and its heirs, legal representatives and
successors and permitted assigns, and Buyer and its respective successors
and permitted assigns.
10.05. LAW TO APPLY. This Agreement shall be construed and
enforced in accordance with the laws of the State of Nevada. The parties
hereby agree that dispute concerning this Agreement or the construction or
enforcement thereof shall be resolved by binding arbitration before the
American Arbitration Association.
10.06. ASSIGNMENT. This Agreement shall not be assignable by
any party hereto without the prior written consent of the other parties
hereto.
10.07. ENTIRE AGREEMENT. This Agreement contains the entire
agreement among the parties hereto with respect to the subject matter
hereof and supersedes any and all prior arrangements, proposals or
understandings, written or oral, by or among any of the parties hereto with
respect to such purchase and sale or other transactions, which
arrangements, proposals and under-standings shall be of no further force
and effect. No amendment or modification of this Agreement shall be
effective for any purpose unless the same shall be in writing signed by all
of the parties hereto or their successors in interest.
10.08. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
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10.09. SECTION HEADINGS. The section headings herein are for
convenience only and shall not affect the construction hereof.
10.10. SUBSEQUENT ACQUISITIONS AND MERGERS.
(a) The parties acknowledge that Buyer has embarked on a
program of acquisition and merger in order to grow its business.
Notwithstanding any contrary provision in this Agreement, any such
transaction is expressly permitted hereby and shall not constitute a breach
of any representation, warranty, term or condition in this Agreement.
(b) During the period from the date of this Agreement to the
Closing date, the Seller shall bring all acquisition candidates to the
attention of Buyer and the Seller shall cause the Company to, refrain from
taking any action to, directly or indirectly, encourage, initiate or engage
in discussions or negotiations with, or provide any information to, any
other person, firm, corporation or other entity or group, other than Buyer
concerning any acquisition candidates.
10.11 CONDITION PRECEDENT TO PERFORMANCE.
This Agreement, and any performance hereunder, is specifically subject
to, as an express condition precedent, proper and legal approval of the
Shareholders of Touch Tone America, Inc., as required and necessary, to be
determined in the sole discretion of Orix Global Communications, Inc.,
plus, additionally, all requirements of the By-Laws of Touch Tone America,
Inc., and the corporation law of the State of California, must be met.
This approval must be by September 30, 1997, or this Agreement is null and
void. All expenses relating to seeking and obtaining Shareholder approval
are to be borne by Touch Tone America, Inc., whether such approval is
successful or not.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
TOUCH TONE AMERICA, INC.
By: /s/ XXXXX XXXXXXXX
----------------------------------
Acting President
ORIX GLOBAL COMMUNICATIONS, INC.
By: /s/ XXXXX XXXXXX
----------------------------------
President
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Shares of
Company Stock Shares of
Delivered Buyer To
To Buyer Be Received
The Shareholders At Closing At Closing Signature
---------------- ---------- ---------- ---------
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