IDIAL NETWORKS, INC.
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is made and entered by
and between IDIAL NETWORKS, INC., a Nevada corporation ("Company"), on one hand,
and Growth Enterprise Fund, S.A., a Panamanian corporation ("Purchaser"), and
GlobalNet Systems, Inc., a Florida Corporation (the "Subsidiary") as of the date
set forth on the signature page.
RECITALS
WHEREAS, Company provides enhanced telecommunication services using
voice-over-internet technology. The business of Company is further described in
Company's filings with the Securities and Exchange, which Purchaser has been
provided access to and has reviewed;
WHEREAS, Purchaser and the Subsidiary, the wholly-owned subsidiary of
Purchaser and a Florida corporation, have entered into that certain Stock
Purchase Agreement (the "Stock Purchase Agreement"), dated May 20, 2003 with The
Titan Corporation ("Titan"), a Delaware Corporation, and its wholly owned
subsidiary, GlobalNet, Inc. ("GNI"), a Nevada corporation, whereby the
Subsidiary has the right to acquire 100% of the issued and outstanding common
stock of GNI from Titan and Purchaser has the right to acquire certain
promissory notes, together with accrued interest payable by GNI, from Titan in
the approximate amount of $15,600,000 (the "Notes"), in consideration for the
release of certain guarantees provided by Titan for the benefit of GNI, as
specifically described in Exhibit B to the Stock Purchase Agreement, the payment
of approximately $2,000,000 to Titan and the issuance to Titan of a promissory
note in the amount of $1,500,000;
WHEREAS, as permitted by Section 12.6 of the Stock Purchase Agreement,
Subsidiary and Purchaser agrees to assign (the "Assignment") all of their rights
under the Stock Purchase Agreement, including the right to receive all of the
issued and outstanding common stock of GNI, to Company, which such assignment is
attached hereto and incorporated into this Agreement as Exhibit A, and has been
consented to by Titan as set forth in Exhibit A, and provide an assignment of
the Notes to Company, which such assignment is attached hereto and incorporated
into this Agreement as Exhibit B, in consideration for (i) Company's issuance of
2,086,885,971 shares of Company's common stock, par value $.005 per share (the
"Common Stock"); provided, however, in the event that Company does not payoff
all of its outstanding secured convertible debentures purchased by an aggregate
of five accredited investors purchased pursuant to the Securities Purchase
Agreement dated February 2003, May 2003 and August 2003 prior to the expiration
of 60 days from the date of this Agreement, then the Company will be required to
issue 2,392,221,188 additional shares (the "Shares"), which such issuances of
the Shares is subject to Company filing its Certificate of Amendment to its
Certificate of Incorporation (the "Amended Charter") as set forth in Section 4.1
of this Agreement, and (ii) Company's issuance of 100,000 shares of Series A
Preferred Stock and 100,000 shares of Series B Preferred Stock (the "Preferred
Stock"), of which the rights, preferences, privileges and restrictions of the
shares are as stated in the Certificate of Designation, which is attached hereto
as Exhibit C;
WHEREAS, Company has authorized the sale of the Shares, the Preferred Stock
and the shares of Common Stock issuable upon conversion of the Preferred Stock
(the "Conversion Shares") (collectively referred to as the "Securities");
WHEREAS, Company desires to issue and sell the Securities to Purchaser on
the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
TERMS AND CLOSING
1.1. Terms. Subject to the terms and conditions hereof, and in reliance
upon the mutual representations, covenants, agreements and warranties herein
contained, and for, and in mutual consideration by Company and Purchaser, the
parties hereby agree that, at the closing:
(i) Company shall sell, assign, transfer and convey to Purchaser (A)
the Shares within three days of filing the Amended Charter as required
under Section 4.1 and (B) the Preferred Stock; and
(ii) In consideration for the sale of the Securities, the Subsidiary
and Purchaser agree to assign all of their rights under the Stock Purchase
Agreement, including the right to receive all of the issued and outstanding
common stock of GNI, to Company and provide an assignment of the Note to
Company.
1.2. Closing. The date of the issuance and sale of the Securities pursuant
to this Agreement shall be August 22, 2003 or such other mutually agreed upon
time (the "Closing Date"). The closing of the transactions contemplated by this
Agreement shall occur on the Closing Date at such location as may be agreed to
by the parties.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants, upon which representations and
warranties Purchaser relies, as follows:
2.1. Corporate Organization. Company is a corporation duly organized,
validly existing, and in good standing under the laws of its state of
incorporation, and has all requisite power and authority (corporate and other)
to own, lease and operate its properties and carry on its business as it is now
being conducted and to enter into this Agreement and to consummate the
transactions contemplated hereunder. Company is qualified, licensed or
registered to do business in any states where the nature of its business and
activities and the character of the properties owned by it, require it to be so
qualified, licensed or registered, except where the failure to be so qualified,
licensed or registered would not have a materially adverse effect on the
business or operations of Company.
2.2. Power and Authority. Company has the full, absolute and unrestricted
right, power, legal capacity and authority to enter into this Agreement, and to
carry out the transaction contemplated hereby; nor will it violate any statute,
law, regulation, rule, court or administrative judgment, order, writ, injunction
or decree which is applicable to Company or any of its properties, or to which
Company is subject or by which it is bound. All actions of Company necessary to
authorize it to execute, deliver and consummate this Agreement have been duly
and validly authorized and taken, and no further actions or authorizations are
required. This Agreement constitutes the valid, legally binding obligation of
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Company, and is enforceable in accordance with its terms. The Securities, when
issued, will be duly authorized, validly issued, fully paid and non-assessable.
The Securities, when issued, will be free and clear of all liens, charges,
encumbrances, liabilities and restrictions of every kind, nature or description.
2.3. No Violations. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement will not result
in any breach of, or constitute a default under, the Certificate or Articles of
Incorporation or Bylaws of Company, or any agreement, instrument or obligation
to which Company is a party or by which it is bound.
2.4. SEC and Other Reports; Financial Statements. Company has filed with
the SEC true and complete copies of all forms, reports, schedules, statements
and other documents required to be filed by it since January 1, 2000, under the
Exchange Act or the Securities Act (as such documents have been amended since
the time of their filing, collectively, the "SEC Documents"). To the best of its
knowledge, Company has complied with the reporting, disclosure or approval
requirements of all other laws, rules and regulations of each other United
States federal, state, local, municipal government or governmental agency or
body or non-United States equivalent government or governmental agency or body,
including any court, arbitral tribunal, administrative agency or commission or
other governmental or other regulatory authority or agency or entity regulating
the issuance or exchange of securities applicable to or required to be complied
with in respect of the issuance, sale, distribution or exchange of capital stock
of Company. As of their respective dates, or if amended, as of the date of the
last such amendment, the SEC Documents, including any financial statements or
schedules included therein (a) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and (b) complied in all material
respects with the applicable requirements of the Exchange Act or the Securities
Act, as the case may be, and the applicable rules and regulations of the SEC
thereunder. None of Acquirer's Subsidiaries is required to file any forms,
reports or other documents with the SEC. Each of the consolidated financial
statements included in the SEC Documents (the "Financial Statements") (i) has
been prepared from, and is in accordance with, the books and records of Company
and its consolidated subsidiaries, if any, (ii) complies in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, (iii) has been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be permitted by the rules of the SEC or indicated therein or in
the notes thereto and subject, in the case of unaudited statements, to normal
year-end audit adjustments) and (iv) fairly presents the consolidated financial
position and the consolidated results of operations and cash flows (and changes
in financial position, if any) of Company as of the times and for the periods
referred to therein.
2.5. No Undisclosed Liabilities. Except (a) as disclosed in the Financial
Statements and (b) for liabilities and obligations incurred in the ordinary
course of business and consistent with past practice since the most recent
audited balance sheet contained in the Financial Statements pursuant to the
terms of this Agreement, Company has no liability or obligation of any nature,
whether or not accrued, contingent or otherwise, that has, or would be
reasonably likely to have, a material adverse effect on the (i) business,
assets, liabilities, financial condition or results of operations of Company,
(ii) ability of Company to conduct business in the manner in which Company
currently conducts business, and (iii) the ability of Company to consummate the
transactions contemplated by this Agreement.
2.6. Capitalization. The authorized capital stock of Company immediately
prior to giving effect to the transactions contemplated hereby consists of (i)
500,000,000 shares of Common Stock, of which 499,991,064 shares are issued and
outstanding as of the date hereof, and (ii) 30,000,000 shares of preferred
stock, no class or series of which has been designated and no shares of which
are issued or outstanding as of the date hereof. All of the outstanding shares
of Common Stock are, and the Securities when issued in accordance with the terms
hereof, will be, duly authorized, validly issued, fully paid and nonassessable,
and have not been or, with respect to the Securities, will not be issued in
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violation of any preemptive right of stockholders. The Securities are not
subject to any preemptive or subscription right. Except as set forth on Schedule
2.6, there is no outstanding voting trust agreement or other contract,
agreement, arrangement, option, warrant, call, commitment or other right of any
character obligating or entitling Company to issue, sell, redeem or repurchase
any of its securities, and there is no outstanding security of any kind
convertible into or exchangeable for Common Stock or preferred stock of Company.
2.7. Accuracy of Representations and Warranties. None of the
representations and warranties made by Company contained in this Agreement,
including all Exhibits, nor in any statement, document, certificate, schedule,
list, memorandum or other writing (collectively, "Statements") furnished or to
be furnished by Company pursuant hereto, or in connection with the transactions
contemplated hereby, is or will be incorrect or incomplete, or contains or will
contain any untrue statement of fact, and none of such representations,
warranties and Statements omits or will omit to state a fact necessary in order
to make the statements contained herein or therein not misleading. There is no
fact known to Company which Company has not disclosed in this Agreement, or in
an Exhibit hereto, or in a Statement, which adversely affects or may reasonably
be expected to affect adversely the business or assets of Company.
2.8 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Company directly with
Purchaser without the intervention of any person on behalf of Company in such a
manner as to give rise to any valid claim by any person against Company or
Purchaser for a finder's fee, brokerage commission or similar payment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Company, upon which representations
and warranties Company relies, as follows:
3.1. Power and Authority. Purchaser has, and will at Closing have, the
full, absolute and unrestricted right, power, legal capacity and authority to
enter into this Agreement and to carry out the transaction contemplated hereby;
nor will it violate any statute, law, regulation, rule, court or administrative
judgment, order or decree which is applicable to Purchaser, or to which it is
subject or by which it is bound. This Agreement constitutes the valid, legally
binding obligation of Purchaser and is enforceable in accordance with its terms.
3.2. Acquisition for Investment. Purchaser has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the investment in the Securities, and is able to bear
the economic risks of such investment. Purchaser acknowledges that:
(i) it has been given the opportunity to ask questions of Company's
management;
(ii) the sale of the Securities has not been registered under the
Securities Act of 1933, as amended (the "Securities Act"); there is no
commitment to register the Securities under the Securities Act; and
Purchaser is relying on the exemption from such registration provided by
Section 4(2) of the Securities Act as a transaction by an issuer not
involving a public offering; and
(iii) the stock certificates representing the shares of Preferred
Stock, Shares and Conversion Shares will be endorsed with the following
legend:
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"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE 1933 ACT, OR UNLESS COMPANY
HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY
TO COMPANY AND ITS COUNSEL, THAT SUCH SALE, TRANSFER, ASSIGNMENT
OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF THE 1933 ACT."
3.3 Accredited Investor. Purchaser represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.
3.4. Accuracy of Representations and Warranties. None of the
representations and warranties made by Purchaser contained in this Agreement,
including all Exhibits, nor in any Statement furnished or to be furnished by
Purchaser pursuant hereto, or in connection with the transactions contemplated
hereby, is or will be incorrect or incomplete, or contains or will contain any
untrue statement of fact, and none of such representations, warranties and
Statements omits or will omit to state a fact necessary in order to make the
statements contained herein or therein not misleading.
ARTICLE IV
POST-CLOSING COVENANTS
4.1 Amendment to Charter. Company shall use its best efforts to file the
Amended Charter increasing Company's authorized shares of Common Stock so that
the Company can issue all of the Shares issuable pursuant to this Agreement in
accordance with Nevada law.
4.2 Further Assurances. If, at any time after the Closing, the parties
shall consider or be advised that any further deeds, assignments or assurances
in law or that any other things are necessary, desirable or proper to complete
the transactions contemplated by this agreement or to vest, perfect or confirm,
of record or otherwise, the title to any property or rights of the parties
hereto, the parties agree that their proper officers and directors shall execute
and deliver all such proper deeds, assignments and assurances in law and do all
things necessary, desirable or proper to vest, perfect or confirm title to such
property or rights and otherwise to carry out the purpose of this Agreement, and
that the proper officers and directors the parties are fully authorized to take
any and all such action.
ARTICLE V
CONDITIONS TO CLOSING
5.1 Conditions to Company's Obligation to Sell. The obligation of Company
hereunder to issue and sell the Securities to Purchaser at the Closing is
subject to the satisfaction, at or before the Closing Date of each of the
following conditions thereto, provided that these conditions are for Company's
sole benefit and may be waived by Company at any time in its sole discretion:
(i) Purchaser shall have executed this Agreement, and delivered the
same to Company;
(ii) Purchaser shall deliver to Company the Assignment of its rights
under the Stock Purchase Agreement;
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(iii) Purchaser shall deliver to Company the Consent executed by
Titan;
(iv) Purchaser shall deliver to Company the assignment of the Notes;
and
(v) the representations and warranties of Purchaser shall be true and
correct in all material respects
as of the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date),
and Purchaser shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by Purchaser at or prior
to the Closing Date.
5.2 Conditions to Purchaser's Obligation to Purchase. The obligation of
Purchaser to purchase the Securities at the Closing is subject to the
satisfaction, at or before the Closing Date of each of the following conditions,
provided that these conditions are for Purchaser's sole benefit and may be
waived by Purchaser at any time in its sole discretion:
(i) Company shall have executed this Agreement, and delivered the same
to the Buyer;
(ii) Company shall have filed the Certificate of Designations of
Series A Preferred Stock and delivered to Purchaser duly executed stock
certificates representing the Preferred Stock and the Shares in accordance
with Article I above; and
(iii) the representations and warranties of Company shall be true and
correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date) and Company shall have
performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by Company at or prior to the Closing
Date;
(iv) the size of the Board shall have been increased from one to
three, of which Purchaser shall be entitled to appoint the four vacancies
to serve until their successors are elected and qualified; provided,
however, such appointments of the directors are subject to the requirements
of the filing of Schedule 14f-1 with the Securities and Exchange Commission
and the delivery of Schedule 14f-1 to Company's shareholders at least ten
(10) days prior to any appointment; and
(v) Company shall have delivered to Purchaser agreements terminating
as of the Closing Date all employment and severance agreements and other
compensation agreements with executive officers of Company, except the
existing employment agreements with Xxxx X. Xxxx and Xxxxxx X. Xxxxxxx,
which are attached hereto as Exhibit D.
ARTICLE V
RESCISSION RIGHTS
5.1. Rescission Rights of Purchaser. If any representation or warranty of
Company contained in this Agreement or any covenant of Company contained in this
Agreement shall be materially breached, or if Company fails to amend its charter
to authorize the increase in the authorized Common Stock as provided under
Section 4.1, then, at any time from the Closing Date through the date six (6)
months after the Closing Date, Purchaser may rescind the transactions
contemplated by this Agreement by delivering written notice to Company of
Purchaser's election to rescind this Agreement. Rescission shall be effective
upon delivery of such written notice to Company without any further act by
Purchaser.
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5.2 Termination Fee. In the event of rescission under Section 5.1, in
addition to rescinding the transactions contemplated by this Agreement, Company
shall pay Purchaser a fee of Six Hundred Thousand Dollars ($600,000), which the
parties agree is a reasonable estimate of Purchaser's damages.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1. Entire Agreement. This Agreement, together with the Exhibits hereto,
constitutes and sets forth the entire agreement and understanding of the parties
pertaining to the subject matter hereof, and there are no other prior or
contemporaneous written or oral agreements, understandings, undertakings,
negotiations, promises, discussions, warranties or covenants not specifically
referred to or contained herein or attached hereto. No supplement, modification,
termination in whole or in part, or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any of
the provisions of this Agreement shall be deemed, or shall constitute, a waiver
of any other provision hereof (whether or not similar), nor shall any such
waiver constitute a continuing waiver unless otherwise expressly provided.
6.2. Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by either party without the prior written
consent of the other party.
6.3. Headings. The headings or titles of the various paragraphs of this
Agreement are inserted merely for the purpose of convenience and do not
expressly or by implication or intention, limit, define, extend or affect the
meaning or interpretation of this Agreement or the specific terms or text of the
section so designated.
6.4. Law Governing. This Agreement shall be governed in all respects,
whether as to validity, construction, interpretation, capacity performance or
otherwise, by the laws of the State of New York. If any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein shall, for any reason, be held to be invalid, illegal or unenforceable in
any respect, then and in that event, to the maximum extent permitted by law,
such invalidity, illegality or unenforceability shall not affect any other
provisions of this Agreement or any other such instrument.
6.5. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
6.6. Notices. All notices requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given on the date if delivered
personally, or upon the second business day after it shall have been deposited
by certified or registered mail with postage prepaid, or upon the next business
day after it shall have been deposited with a nationally recognized overnight
courier such as federal express, or sent by telex, telegram or telecopier, as
follows (or at such other address or facsimile number for a party as shall be
specified by like notice):
(a) if to Company, to it at: with a copy to:
iDial Networks, Inc. Xxxxxxx Xxxxxxxxx, Esquire
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000 Xxxxxxxxx Xxxx Xxxxxxxx Xxxxxxx LLP
The Xxxxxxxxx, Xxxxx 00000 1065 Avenue of the Americas
Attn: Xxxx X. Xxxx Xxx Xxxx, XX 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
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(b) if to Purchaser, to it at: with a copy to:
Growth Enterprise Fund, S.A. Oscar de la Guardia, Esquire
Sea Orchard Suntrust International Center
Elms-Avenue Poole One Xxxxxxxxx 0xx Xxxxxx, Xxxxx 0000
Xxxxxxx XX00 0XX Xxxxx, XX 00000
Xxxxxx Xxxxxxx Fax: (000) 000-0000
Attn: Xxxxx Xxxxxx, Managing
Director and
Fax:
Xxxxx X. Xxxxx, Esq.
Xxxxxx Xxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
IN WITNESS WHEREOF, the corporate parties hereto have caused this Agreement
to be executed by their respective duly authorized officers and the individual
parties have executed this Agreement as of the day and year first above written.
IDIAL NETWORKS, INC. GROWTH ENTERPRISE FUND, S.A.
By:_________________________ By:_________________________
Name: Xxxx X. Xxxx Name:
Title: Chief Executive Officer Title:
GlobalNet Systems, Inc.
By:________________________
Name:
Title:
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Schedule 2.6
Capitalization
There presently are warrants outstanding to purchase 166,667 shares of common
stock of the Company. Xxxx Xxxx, an officer and director of the Company, holds a
convertible promissory note in the principal amount of $905,918 that is
convertible into shares of common stock of the Company at the conversion rate of
$.0016 per share. The Company has no shares of common stock currently reserved
in connection with outstanding debentures and warrants issued pursuant to
Securities Purchase Agreement entered into on February 6, 2003, May 9, 2003 and
August 22, 2003 (the "Debenture Agreements"); provided, however, the Company
will be required to reserve shares of common stock pursuant to the Debenture
Agreements upon filing its Certificate of Amendment to its Certificate of
Incorporation. Under the Debenture Agreements, four investors hold convertible
debentures and stock purchase warrants.
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