PURCHASE AGREEMENT
BY AND AMONG
SOFTALK INC.
AS "SELLER,"
INTERPRETEL (CANADA) INC.
AS "BUYER",
AND
WAVETECH INTERNATIONAL, INC.
OCTOBER 25, 1999
PURCHASE AGREEMENT
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Defined Terms.........................................................1
1.2 Other Defined Terms...................................................3
ARTICLE II
PURCHASE AND SALE OF PRODUCTS AND ACCOUNTS
2.1 Transfer of Products and Accounts.....................................3
2.2 Assumption of Liabilities.............................................3
2.3 Excluded Liabilities..................................................3
2.4 Purchase Price........................................................5
2.5 Closing Costs; Transfer Taxes and Fees................................5
ARTICLE III
CLOSING
3.1 Closing...............................................................6
3.2 Conveyances at Closing................................................6
3.3 Elections.............................................................6
ARTICLE IV
REPRESENTATION AND WARRANTIES OF SELLER
4.1 Organization of Seller................................................7
4.2 Authorization.........................................................7
4.3 No Changes to the Products or Accounts................................7
4.4 Products or Accounts..................................................8
4.5 Contracts and Commitments.............................................8
4.6 Absence of Breaches or Defaults.......................................8
4.7 Permits and Consents..................................................8
4.8 No Conflict or Violation..............................................9
4.9 Litigation............................................................9
4.10 Compliance with Law...................................................9
4.11 Tax Matters..........................................................10
4.12 Liabilities..........................................................10
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND WAVETECH
5.1 Organization of Buyer................................................10
5.2 Authorization........................................................10
5.3 Capitalization.......................................................10
5.4 Consents and Approvals...............................................11
5.5 Permits and Consents.................................................11
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5.6 No Conflict or Violation.............................................11
5.7 Litigation...........................................................12
5.8 Compliance with Law..................................................12
5.9 GST..................................................................12
ARTICLE VI
COVENANTS OF SELLER, BUYER AND WAVETECH
6.1 Further Assurances...................................................13
6.2 Notification of Certain Matters......................................13
6.3 Conduct of Business..................................................13
6.4 Joint Election.......................................................14
6.5 Right of First Refusal...............................................14
6.6 Registration Rights..................................................15
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS
7.1 Consents.............................................................16
7.2 Opinion of Counsel...................................................16
7.3 Certificates.........................................................18
7.4 Corporate Documents..................................................18
7.5 Buyer Preferred Stock................................................18
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS
8.1 Representations, Warranties and Covenants............................19
8.2 Consents.............................................................19
8.3 No Proceedings or Litigations........................................19
8.4 Opinion of Counsel...................................................19
8.5 Certificates.........................................................21
8.6 Conveyancing Documents; Release of Encumbrances......................21
8.7 Material Changes.....................................................21
8.8 Corporate Documents..................................................21
8.9 Due Diligence Review.................................................21
ARTICLE IX
RISK OF LOSS; CONSENTS TO ASSIGNMENT
9.1 Risk of Loss.........................................................22
9.2 Consents to Assignment...............................................22
ARTICLE X
ACTIONS BY SELLER, BUYER AND WAVETECH AFTER THE CLOSING
10.1 Books and Records; Payment of Liabilities............................23
10.2 Survival of Representations, Etc.....................................23
10.3 Indemnifications.....................................................23
10.4 Further Action.......................................................26
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ARTICLE XI
MISCELLANEOUS
11.1 Termination..........................................................26
11.2 Assignment...........................................................28
11.3 Notices..............................................................28
11.4 Choice of Law........................................................29
11.5 Entire Agreement; Amendments and Waivers.............................29
11.6 Multiple Counterparts................................................29
11.7 Expenses.............................................................29
11.8 Invalidity...........................................................29
11.9 Titles...............................................................30
11.10 Publicity; Confidentiality...........................................30
11.11 Cumulative Remedies..................................................30
11.12 Arbitration..........................................................30
ARTICLE XII
BULK SALES
12.1 Bulk Sales...........................................................31
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EXHIBITS
"A" Equipment
"B" Xxxx of Sale
"C" Assignment of Contract Rights
"D" Assumption of Certain Liabilities
SCHEDULES
Schedule 4.5.1 Assumed Contracts and Contracts
Schedule 5.3.1 - Wavetech Capital
Schedule 5.3.2 - Buyer Capital
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PURCHASE AGREEMENT
This Purchase Agreement, dated as of October 25, 1999, is by and among
Wavetech International, Inc., a Nevada corporation ("Wavetech"), Interpretel
(Canada) Inc. ("Buyer"), an Ontario, Canada corporation and a wholly owned
subsidiary of Wavetech, and Softalk Inc., an Ontario, Canada corporation
("Seller").
RECITALS
A. Seller owns certain Products and Accounts (as defined below) which it
sells or uses in its conduct of the Business (as defined below).
B. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, such Products and Accounts upon the terms and subject to the conditions
of this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the terms below shall have the
following meanings. Any of such terms, unless the context otherwise
requires, may be used in the singular or plural, depending upon the
reference.
"BOOKS AND RECORDS" shall mean all records and lists of Seller
pertaining to the Products or Accounts.
"BUSINESS" shall mean Seller's intellectual property for use in the
transmission of voice, data and fax services.
"BUYER PREFERRED STOCK" shall mean the Class A Preferred Stock, no
par value, of Buyer which shares are exchangeable for shares of
Wavetech Common Stock.
"CLOSING DATE" shall mean on or before October 29, 1999, or such
other date as Buyer and Seller shall mutually agree upon; provided
that either party may elect to defer the Closing Date to a date
which is reasonably satisfactory to both parties if necessary to
complete the Closing.
"CONTRACT" shall mean any agreement, contract, note, loan, evidence
of indebtedness, purchase order, letter of credit, franchise
agreement, undertaking, covenant not to compete, employment
agreement, license, instrument, obligation or commitment to which
Seller is a party or is bound and which relates to Products and
Accounts, whether oral or written.
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"ENCUMBRANCE" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales
agreement, encumbrance or other right of third parties, whether
voluntarily incurred or arising by operation of law, and includes,
without limitation, any agreement to give any of the foregoing in
the future, and any contingent sale or other little retention
agreement or lease in the nature thereof.
"EQUIPMENT" shall mean all of the computer equipment and related
spare parts, tools, supplies, equipment and other tangible personal
property owned by Seller related to the Products and Accounts.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" shall mean
with respect to the Business or the Products and Accounts any
significant and substantial adverse effect or change in the
condition (financial or other), business, results of operations,
prospects, assets, liabilities or operations of the Business and/or
the Products and Accounts or on the ability of Seller to consummate
the transactions contemplated hereby, or any event or condition
which would, with the passage of time, constitute a "Material
Adverse Effect" or "Material Adverse Change".
"PERMITS" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any
governmental authority, whether foreign, federal, provincial or
local, or any other person, necessary or desirable for the past,
present or anticipated conduct of, or relating to the operation of,
the business of such Person.
"PRODUCTS AND ACCOUNTS" shall mean all of the right, title and
interest of Seller in and to the following items:
1.1.1 all rights of Seller under the Assumed Contracts;
1.1.2 all Equipment related to the Products and Accounts listed on
Exhibit "A";
1.1.3 all rights under or pursuant to all warranties,
representations and guarantees made by suppliers in
connection with the Products and Accounts furnished to
Seller, to the extent such warranties, representations and
guarantees (ii) are not required by Seller to fulfill its
obligations under this Agreement and (ii) are assignable;
1.1.4 all claims, causes of action, rights of recovery and rights
of set-off of any kind, against any person or entity,
including without limitation any liens, security interests,
pledges or other rights to payment or to enforce payment in
connection with Products and Accounts delivered by Seller on
or prior to the Closing Date;
"REPRESENTATIVE" shall mean any officer, director, principal,
attorney, agent, employee or other representative.
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"Tax" shall mean any federal, provincial, local, foreign or other
tax, levy, impost, fee, assessment or other government or province
charge, including without limitation income, estimated income,
business, occupation, franchise, property, payroll, personal
property, sales, transfer, use, employment, commercial rent,
occupancy, franchise or withholding taxes, and any premium,
including without limitation interest, penalties and additions in
connection therewith.
"Wavetech Common Stock" shall mean the Common Stock, $0.01 par
value, of Wavetech.
1.2 Other Defined Terms. The following terms shall have the meanings
defined for such terms in the Sections set forth below:
TERM SECTION
---- -------
Action 4.9
Assumed Contracts 2.2
Assumed Liabilities 2.2
Assumption Document 3.2.1.4
Balance Sheet 4.12
Buyer Securities 5.3.2
Claim 10.3.4
Claim Notice 10.3.4
Closing 3.1
Damages 10.3.1
Excluded Liabilities 2.3
Purchase Price 2.4
Wavetech Securities 5.3.1
Share Exchange Agreement 7.5
ARTICLE II
PURCHASE AND SALE OF PRODUCTS AND ACCOUNTS
2.1 TRANSFER OF PRODUCTS AND ACCOUNTS. Upon the terms and subject to the
conditions contained herein, at the Closing, Seller will sell,
convey, transfer, assign and deliver to Buyer, and Buyer will
acquire from Seller, the Products and existing Accounts.
2.2 ASSUMPTION OF LIABILITIES. Upon the terms and subject to the
conditions contained herein, at the Closing, Buyer shall assume all
obligations and liabilities (the "Assumed Liabilities") accruing,
arising out of, or relating to events or occurrences happening after
the Closing Date under the vendor contracts listed in Schedule
4.5.1(the "Assumed Contracts").
2.3 EXCLUDED LIABILITIES. Notwithstanding any other provision of this
Agreement, except for the Assumed Liabilities expressly specified in
Section 2.2, Buyer shall not assume, or otherwise be responsible
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for, any of Seller's liabilities or obligations, whether actual or
contingent, matured or unmatured, liquidated or unliquidated, known
or unknown, or related or unrelated to the Business or the Products
and Accounts, whether arising out of occurrences prior to, at or
after the date hereof (collectively, "Excluded Liabilities"), which
Excluded Liabilities include, without limitation, the liabilities
and obligations specified in Sections 2.3.1-2.3.6 below, inclusive.
2.3.1 Any liability or obligation to or in respect of any
employees or former employees of Seller, including without
limitation, (i) any liability for accrued vacation or sick
pay due employees of Seller; (ii) any employment agreement,
whether or not written, between Seller and any person; (iii)
any liability under any employee plan at any time
maintained, contributed to or required to be contributed to
by or with respect to Seller or under which Seller may incur
liability, or any contributions, benefits or liabilities
therefor, or any liability with respect to Seller's
withdrawal or partial withdrawal from or termination of any
employee plan; and (iv) any claim of an unfair labor
practice, or any claim under any provincial unemployment
compensation or worker's compensation law or regulation or
under any federal or provincial employment discrimination
law or regulation, which shall have been asserted on or
prior to the Closing Date or is based on acts or omissions
which occurred on or prior to the Closing Date;
2.3.2 Any liability or obligation of Seller in respect of any Tax,
excluding any provincial sales tax ("PST") arising under the
RETAIL SALES ACT (Ontario), as amended (the "Retail Sales
Act") as result of the transactions contemplated by this
Agreement, or goods and services tax ("GST") arising under
the EXCISE TAX ACT (Canada), as amended (the "Excise Tax
Act"), as a result of the transactions contemplated by this
Agreement, which, subject to Section 3.2.5, shall be payable
by Buyer;
2.3.3 Any liability or obligation of Seller arising out of or
related to any Action against Seller or any Action which
adversely affects the Products and Accounts and which shall
have been asserted on or prior to the Closing Date or to the
extent the basis of which shall have arisen on or prior to
the Closing Date;
2.3.4 Any liability or obligation of Seller resulting from
entering into, performing its obligations pursuant to or
consummating the transactions contemplated by, this
Agreement (including, without limitation, any liability or
obligation of Seller pursuant to Article X hereof);
2.3.5 Any accounts payable of Seller; and
2.3.6 Any obligation or liability for breach of any Contract
occurring on or prior to the Closing Date.
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2.4 PURCHASE PRICE. At the Closing, upon the terms and subject to the
conditions set forth herein, Buyer shall pay to Seller the aggregate
sum of U.S. $10 million in consideration for Seller conveying and
assigning the Products and Accounts to Buyer (the "Purchase Price").
The Purchase Price shall be payable on the Closing Date in the
following manner.
2.4.1 BUYER PREFERRED STOCK. By delivery to Seller upon Closing of
an aggregate of 4,329,004 duly authorized, validly issued,
fully paid and nonassessable shares of Buyer Preferred
Stock, which shall be exchangeable on a one for one basis
into shares of Wavetech Common Stock. Each share of Buyer
Preferred Stock shall be exchangeable for one duly
authorized, validly issued, fully paid and nonassessable
share of Wavetech Common Stock as of the Closing. In the
event Seller elects to exchange such shares of Buyer
Preferred Stock for shares of Wavetech Common Stock as of
the Closing, such shares of Wavetech Common Stock would
represent approximately 58% of the issued and outstanding
capital stock of Wavetech as of the Closing.
2.4.2 RESTRICTIVE LEGEND. Such shares of Buyer Preferred Stock
(and Wavetech Common Stock if Seller elects to exchange
Buyer Preferred Stock for Wavetech Common Stock prior to the
effective date of its registration under Section 6.6) shall
bear the following restrictive legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR
UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
2.5 CLOSING COSTS; Transfer Taxes and Fees. Seller shall be responsible
for any taxes imposed by reason of the transfer of Products or
Accounts provided hereunder and any deficiency, interest or penalty
asserted with respect thereto, excluding any PST or GST arising as a
result of the transactions contemplated by this Agreement which
shall be payable by Buyer. Seller shall pay the fees and costs of
recording or filing all applicable conveyancing instruments
described in Section 3.2.1 and shall pay the fees and costs of
recording or filing in the Province of Ontario PPSA Financing Change
Statements and other releases of Encumbrances.
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ARTICLE III
CLOSING
3.1 CLOSING. The Closing of the transactions contemplated herein (the
"Closing") shall be held on the Closing Date at a time and place as
the parties shall mutually agree.
3.2 CONVEYANCES AT CLOSING BY SELLER.
3.2.1 INSTRUMENTS AND POSSESSION. To effect the sale and transfer
referred to in Section 2.1 hereof, Seller will, at the
Closing, execute and deliver to Buyer:
3.2.1.1 one or more bills of sale, each in the form of
Exhibit "B" attached hereto, conveying in the
aggregate all of Seller's owned personal property
included in the Products and Accounts, free and
clear of all Encumbrances, except as otherwise
provided in Section 2.5.5; 3.2.1.2 subject to
Section 9.2, Assignments of Contract Rights, each
in the form of Exhibit "C" attached hereto, with
respect to the Assumed Contracts;
3.2.1.3 such other instruments as shall be requested by
Buyer to vest in Buyer title in and to the
Products and Accounts in accordance with the
provisions hereof;
3.2.1.4 the Assumption Agreement in the form of Exhibit
"D."
3.2.2 FORM OF INSTRUMENTS. To the extent that a form of any
document to be delivered hereunder is not attached as an
Exhibit hereto, such documents shall be in form and
substance, and shall be executed and delivered in a manner,
reasonably satisfactory to Buyer.
3.2.3 CERTIFICATES; OPINIONS. Seller shall deliver to Buyer the
certificates, opinion of counsel and other documents
described in Article VIII.
3.2.4 Consents. Subject to Section 9.2, Seller shall deliver all
third party consents, if any, required for the valid
transfer of the Products and Accounts as contemplated by
this Agreement.
3.3 CONVEYANCES AT CLOSING BY BUYER.
3.3.1 INSTRUMENTS AND POSSESSION. To effect the sale and transfer
referred to in Section 2.1 hereof, Buyer will, at the
Closing, execute and deliver to Buyer:
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3.3.1.1 Certificates representing the 4,329,004 shares of
Buyer Preferred Stock to be delivered pursuant to
Section 2.4.1.
3.3.1.2 The Share Exchange Agreement.
3.3.2 FORM OF INSTRUMENTS. To the extent that a form of any
document to be delivered hereunder is not attached as an
exhibit hereto, such documents shall be in form and
substance, and shall be executed and delivered in manner
reasonably satisfactory to the Seller.
3.3.3 CERTIFICATES: OPINIONS. Buyer shall deliver to Seller the
certificates, opinion of counsel and other documents
described in Article VII.
3.4 ELECTIONS. Buyer and Seller shall complete and file in the form
prescribed such elections under Section 167 of the Excise Tax Act to
obtain a GST exemption with respect the sale of the Products and
Accounts contemplated by this Agreement. The Buyer shall file such
form with the return for the Buyer's reporting period in which the
sale is made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows, which representations
and warranties are, as of the date hereof, and will be, as of the Closing Date,
true and correct:
4.1 ORGANIZATION OF SELLER. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the Province
of Ontario, Canada.
4.2 AUTHORIZATION. Seller has all requisite corporate power and
authority, and has taken all corporate action necessary, to own the
Products and Accounts, to conduct the Business as it is presently
being conducted, to execute and deliver this Agreement, to
consummate the transactions contemplated hereby and to perform its
obligations hereunder. This Agreement has been duly executed and
delivered by Seller and is a legal, valid and binding obligation of
Seller enforceable against it in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting creditors' rights or by
principles of equity.
4.3 NO CHANGES TO THE PRODUCTS OR ACCOUNTS. Since April 30, 1998:
4.3.1 there has been no actual or, to the best of Seller's
knowledge, threatened adverse change in the Products or
Accounts or any event, condition or state of facts, in
either case that is, or would result in a Material Adverse
Change in the Products or Accounts, including without
limitation, the loss of any material customers; and
4.3.2 there has not been any sale or other disposition, except in
the ordinary course of Seller's business, of any of the
Products or Accounts, or any Encumbrance placed on the
Products or Accounts.
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4.4 PRODUCTS OR ACCOUNTS. Seller has and will transfer good and
marketable fee simple title to the Products or Accounts and upon the
consummation of the transactions contemplated hereby, Buyer will
acquire good title to all of the Products or Accounts, free and
clear of any Encumbrances. The Products and Accounts represent all,
or substantially all, of Seller's assets and, therefore, such sale
shall be exempt from GST.
4.5 CONTRACTS AND COMMITMENTS.
4.5.1 CONTRACTS. Schedule 4.5.1 sets forth a complete and accurate
list of all Assumed Contracts and all Contracts of the
following categories that relate to the Products or
Accounts:
4.5.1.1 Contracts not made in the ordinary course of
Seller's conduct of the Business;
4.5.1.2 Distribution, franchise, license, sales or
commission contracts related to the Products or
Accounts;
4.5.1.3 Contracts involving expenditures or liabilities,
actual or potential, in excess of $1,000 or
otherwise material to the Products or Accounts,
and not cancelable (without liability) within 30
calendar days;
4.5.1.4 Promissory notes, loans, agreements, evidences of
indebtedness, letters of credit, guarantees, or
other instruments relating to an obligation to pay
money, whether Seller shall be the borrower,
lender or guarantor thereunder or whereby any
Products or Accounts are pledged;
4.6 ABSENCE OF BREACHES OR DEFAULTS. All of the Contracts are valid and
in full force and effect. Seller has duly performed all of its
obligations under the Contracts in all material respects to the
extent those obligations to perform have accrued, and no violation
of, or default or breach under any Contracts by Seller, to the best
of Seller's knowledge, or any other party has occurred and neither
Seller nor, or to the best of Seller's knowledge, any other party
has repudiated any provisions thereof.
4.7 PERMITS AND CONSENTS. Seller has all Permits required to conduct the
Business, except where the failure to obtain such Permits would not
have a Material Adverse Effect on the Products or Accounts or the
Business. All Permits of Seller related to the Business are valid
and in full force and effect. All such Permits are assignable and no
notice to, declaration, filing or registration with, or
authorization, or consent or approval of, or Permit from, any
governmental or regulatory body or authority, or any other person or
entity, is required to be made or obtained by Seller in connection
with the execution, delivery or performance of this Agreement and
the consummation of the transactions contemplated hereby. All of the
Assumed Contracts will be enforceable by Buyer after the Closing to
the same extent as if the transactions contemplated by this
Agreement had not been consummated, except as the enforceability of
such Contracts may be limited by applicable bankruptcy or
reorganization laws.
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4.8 NO CONFLICT OR VIOLATION. After giving effect to consents and lien
releases that have been obtained from third parties or will be so
obtained prior to the Closing Date, if any, neither the execution
and delivery of this Agreement by Seller nor the consummation of the
transactions contemplated hereby, nor compliance by Seller with any
of the provisions hereof, will (a) violate or conflict with any
provision of the organizational documents of Seller, (b) violate,
conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result
in a right of termination or acceleration under, or result in the
creation of any Encumbrance upon any of the Products or Accounts
under, any of the terms, conditions or provisions of any Contract,
Permit, agreement, or other instrument or obligation (i) to which
Seller is a party or (ii) by which the Products or Accounts are
bound, (c) violate any statute, rule, regulation, ordinance, code,
order, judgment, ruling, writ, injunction, decree or award or (d)
impose any Encumbrance, restriction or charge on the Products or
Accounts or the Business.
4.9 LITIGATION. There is no action, order, writ, injunction, judgment or
decree outstanding or any claim, suit, litigation, proceeding, labor
dispute, arbitral action, governmental audit or investigation
(collectively, "Actions") pending, or to the best of Seller's
knowledge, threatened or anticipated (a) against, related to or
affecting Seller, the Business or the Products or Accounts or (b)
seeking to delay, limit or enjoin the transactions contemplated by
this Agreement. Seller is not in default with respect to or subject
to any judgment, order, writ, injunction or decree of any court or
governmental agency, and there are no unsatisfied judgments against
Seller, the Business or its Products or Accounts.
4.10 COMPLIANCE WITH LAW. The conduct of the Business has not violated
and is in compliance with all laws, statutes, ordinances,
regulations, rules and orders of any foreign, federal, provincial or
local government and any other governmental department or agency,
and any judgment, decision, decree or order of any court or
governmental agency, department or authority, including, without
limitation, environmental laws, relating to the Products or
Accounts, or Business or operations of Seller, except where the
violation or failure to comply, individually or in the aggregate,
would not have a Material Adverse Effect on the Products or Accounts
or the Business. Seller and the conduct of the Business is in
conformity with all energy, public utility, zoning, building and
health codes, regulations and ordinances, and environmental laws and
all other foreign, federal, provincial, and local governmental and
regulatory requirements, except where any nonconformity would not
have a Material Adverse Effect on the Products or Accounts or the
Business. Seller has not received any notice to the effect that, or
otherwise been advised that, it is not in compliance with any such
statutes, regulations, rules, judgments, decrees, orders, ordinances
or other laws, and Seller has no reason to anticipate that any
9
existing circumstances are likely to result in violations of any of
the foregoing, which non-compliance or violation could, in any one
case or in the aggregate, have a Material Adverse Effect on the
Products or Accounts or the Business.
4.11 TAX MATTERS. There are no liens for Taxes (other than as could be
asserted for current Taxes not yet due and payable) on the Products
or Accounts.
4.12 LIABILITIES. Seller has no liabilities or obligations (absolute,
accrued, contingent or otherwise) except (i) liabilities which are
reflected on its balance sheet dated as of April 30, 1999 (the
"Balance Sheet"), or which are not required under generally accepted
accounting principles to be reflected on the Balance Sheet, (ii)
liabilities incurred in the ordinary course of the Business and
consistent with past practice since the date of the Balance Sheet,
and (iii) liabilities arising under Contracts identified in Schedule
4.5 to which Seller is a party.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND WAVETECH
Buyer and Wavetech hereby represent and warrant to Seller as
follows, which representations and warranties are, as of the date hereof,
and will be, as of the Closing Date, true and correct:
5.1 ORGANIZATION OF BUYER. Each of Buyer and Wavetech is a corporation
duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation. Buyer is a wholly owned
subsidiary of Wavetech.
5.2 AUTHORIZATION. Each of Buyer and Wavetech has all requisite power
and authority, and has taken all action necessary under its
organizational documents, to execute and deliver this Agreement, to
consummate the transactions contemplated hereby and to perform its
obligations hereunder. This Agreement has been duly executed and
delivered by Buyer and Wavetech and is a legal, valid and binding
obligation of such corporations, enforceable against each
corporation in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, or similar laws
affecting creditor's rights or by principles of equity.
5.3 CAPITALIZATION.
5.3.1 WAVETECH. The authorized capital stock of Wavetech consists
of 50,000,000 shares of Common Stock, par value $.001 per
share, 3,059,662 of which are issued and outstanding as of
the Closing. All outstanding shares of capital stock of
Wavetech have been duly authorized, validly issued and are
fully paid and nonassessable. Except as set forth on
Schedule 5.3.1, there are outstanding (i) no shares of
capital stock or other voting securities of Wavetech or
capital appreciation rights, stock options, warrants, stock
appreciation rights or other phantom equity interests based
on the value of Wavetech's capital stock or other voting
securities, (ii) no securities of Wavetech convertible into
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or exchangeable for shares of capital stock or voting
securities of Wavetech, and (iii) no options or other rights
to acquire from Wavetech, and no obligation of Wavetech to
issue any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting
securities of Wavetech (collectively, "WAVETECH
SECURITIES"). There are no outstanding obligations of
Wavetech to repurchase, redeem or otherwise acquire Wavetech
Securities.
5.3.2 BUYER. The authorized capital stock of Buyer consists of an
unlimited number of no par value Class A Shares, none of
which are issued and outstanding, and an unlimited number of
no par value Common Shares, one of which is issued and
outstanding. All outstanding shares of capital stock of
Buyer have been duly authorized, validly issued and are
fully paid and nonassessable. Except as set forth on
Schedule 5.3.2, there are outstanding (i) no shares of
capital stock or other voting securities of Buyer or capital
appreciation rights, stock options, warrants, stock
appreciation rights or other phantom equity interests based
on the value of Buyer's capital stock or other voting
securities, (ii) no securities of Buyer convertible into or
exchangeable for shares of capital stock or voting
securities of Buyer, and (iii) no options or other rights to
acquire from Buyer, and no obligation of Buyer to issue any
capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities
of Buyer (collectively, "Buyer Securities"). There are no
outstanding obligations of Buyer to repurchase, redeem or
otherwise acquire Buyer Securities. Buyer is a wholly owned
subsidiary of Wavetech.
5.4 CONSENTS AND APPROVALS. No notice to, declaration, filing or
registration with, or authorization, consent or approval of, or
permit from, any governmental or regulatory body or authority, or
any other person or entity, is required to be made or obtained by
Buyer or Wavetech in connection with the execution, delivery and
performance of this Agreement, including the issuance of the shares
of Buyer Preferred Stock and Wavetech Common Stock exchangeable
therefor, and the consummation of the transactions contemplated
hereby, except (a) as has been obtained on or prior to the date
hereof.
5.5 PERMITS AND CONSENTS. Each of Buyer and Wavetech has all Permits
required to conduct their respective businesses, except where the
failure to obtain such Permits would not have a Material Adverse
Effect on such businesses. All Permits of Buyer and Wavetech related
to their respective businesses are valid and in full force and
effect. All such Permits are assignable and no notice to,
declaration, filing or registration with, or authorization, or
consent or approval of, or Permit from, any governmental or
regulatory body or authority, or any other person or entity, is
required to be made or obtained by either Buyer or Wavetech in
connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated
hereby.
5.6 NO CONFLICT OR VIOLATION. Neither the execution and delivery of this
Agreement by Buyer and Wavetech nor the consummation of the
transactions contemplated hereby, nor compliance by Buyer and
11
Wavetech with any of the provisions hereof, will (a) violate or
conflict with any provision of the organizational documents of such
corporations, (b) violate, conflict with, or result in a breach of
any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration
under, or result in the creation of any Encumbrance upon any of the
assets of any of the terms, conditions or provisions of any
contract, Permit, agreement, or other instrument or obligation (i)
to which either Buyer or Wavetech is a party or (c) violate any
statute, rule, regulation, ordinance, code, order, judgment, ruling,
writ, injunction, decree or award or (d) impose any Encumbrance,
restriction or charge on the respective businesses of Wavetech and
Buyer.
5.7 LITIGATION. There are no Actions pending, or to the best of Buyer's
and Wavetech's knowledge, threatened or anticipated (a) against,
related to or affecting Buyer or Wavetech or their respective
businesses or (b) seeking to delay, limit or enjoin the transactions
contemplated by this Agreement. Neither is not in default with
respect to or subject to any judgment, order, writ, injunction or
decree of any court or governmental agency, and there are no
unsatisfied judgments against Buyer, Wavetech or their respective
properties and assets.
5.8 COMPLIANCE WITH LAW. The conduct of the business of each of Buyer
and Wavetech has not violated and is in compliance with all laws,
statutes, ordinances, regulations, rules and orders of any foreign,
federal, provincial or local government and any other governmental
department or agency, and any judgment, decision, decree or order of
any court or governmental agency, department or authority,
including, without limitation, environmental laws, relating to the
business or operations of such corporation, except where the
violation or failure to comply, individually or in the aggregate,
would not have a Material Adverse Effect on the business of either
Buyer or Wavetech. The conduct of the business of Buyer and Wavetech
is in conformity with all energy, public utility, zoning, building
and health codes, regulations and ordinances, and environmental laws
and all other foreign, federal, provincial, and local governmental
and regulatory requirements, except where any nonconformity would
not have a Material Adverse Effect on their respective businesses.
Neither Buyer or Wavetech has received any notice to the effect
that, or otherwise been advised that, it is not in compliance with
any such statutes, regulations, rules, judgments, decrees, orders,
ordinances or other laws, and such corporations have no reason to
anticipate that any existing circumstances are likely to result in
violations of any of the foregoing, which non-compliance or
violation could, in any one case or in the aggregate, have a
Material Adverse Effect on their respective businesses.
5.9 GST. Buyer represents and warrants that it is a GST registrant for
the purpose of the Excise Tax Act. Buyer agrees to provide evidence
of the same on or before the Closing Date.
12
ARTICLE VI
COVENANTS OF SELLER , BUYER AND WAVETECH
Buyer, Seller and Wavetech each covenant with the others as follows:
6.1 FURTHER ASSURANCES. Upon the terms and subject to the conditions
contained herein, each of the parties hereto agrees, both before and
after the Closing, (i) to use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement, (ii) to
execute any documents, instruments or conveyances of any kind which
may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder, and (iii) to cooperate with
each other in connection with the foregoing, including using their
respective best efforts (A) to obtain all necessary waivers,
consents and approvals from other parties to the Contracts to be
assumed by Buyer; provided, however, that Buyer shall not be
required to make any payments, commence litigation or agree to
modifications of the terms thereof in order to obtain any such
waivers, consents or approvals, (B) to obtain all necessary Permits
as are required to be obtained under any federal, provincial, local
or foreign law or regulations, (C) to effect all necessary
registrations and filings, including without limitation submissions
of information requested by governmental authorities, and (D) to
fulfill all conditions to this Agreement.
6.2 NOTIFICATION OF CERTAIN MATTERS. From the date hereof until the
Closing, each party hereto shall give prompt notice to the other
parties of (a) the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause any
representation or warranty contained in this Agreement or in any
exhibit or schedule hereto to be untrue or inaccurate in any
material respect and (b) any failure of Seller, Wavetech or Buyer,
or any of their respective shareholders or Representatives, to
comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement or any exhibit
or schedule hereto; provided, however, that such disclosure shall
not be deemed to cure any breach of a representation, warranty,
covenant or agreement or to satisfy any condition.
6.3 CONDUCT OF BUSINESS. From the date hereof until the Closing, each
party hereto shall, except as contemplated by this Agreement or as
consented to by either Buyer, Wavetech or Seller, as the case may
be, in writing, operate their respective businesses in the ordinary
course of the business and substantially in accordance with past
practice and will not take any action inconsistent with this
Agreement or with the consummation of the Closing.
6.3.1 Without limiting the generality of the foregoing, Seller
shall not, except as specifically contemplated by this
Agreement:
6.3.1.1 enter into, extend, materially modify, terminate
or renew any Contract, except in the ordinary
course of the business; or
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6.3.1.2 sell, assign, transfer, convey, lease, mortgage,
pledge or otherwise dispose of or encumber any of
the Products or Accounts, or any interests
therein, except in the ordinary course of the
business.
6.3.2 Without limiting the generality of the foregoing, neither
Buyer nor Wavetech shall, except as specifically
contemplated by this Agreement:
6.3.2.1 issue any additional shares of capital stock;
6.3.2.2 sell, assign, transfer, convey, lease, mortgage,
pledge or otherwise dispose of or encumber any of
the assets of such company, or any interest
therein, except in the ordinary cause of business;
or
6.3.2.3 amend any of its organizational documents, except
in the case of Buyer's organizational documents
which shall be amended to provide for the issuance
of the Buyer Preferred Stock.
6.4 JOINT ELECTION. The Buyer and Seller agree that:
6.4.1 in respect of the transfer of the Products and Accounts
contemplated by this agreement, they shall jointly elect, in
prescribed form and within the prescribed time therefor,
under subsection 85(1) of the Income Tax Act (Canada) (the
"Act");
6.4.2 subject to the immediately succeeding clause, the amount
agreed on in such election (the "Elected Amount") shall be
determined by the Seller in its sole and absolute
discretion;
6.4.3 the Elected Amount shall not be less than the minimum
amount, nor greater than the maximum amount, permitted for
such purpose under the rules in section 85 of the Act;
6.4.4 subject to subsection 85(7.1) of the Act, the Seller and
Purchaser shall, if requested by the Seller, execute and
file an amended election, in the prescribed form and within
the prescribed time therefor, under subsection 85(1) of the
Act, and the Seller shall pay any penalty or fee associated
with the filing of such amended election.
6.5 RIGHT OF FIRST REFUSAL. Seller hereby grants Wavetech the right of
first refusal with respect to any sale by Seller of any intellectual
property of Seller, including, without limitation, any copyrights,
trademarks, service marks, trade names, patents, patent
applications, trade secret and mask work rights and source code.
This right of first refusal shall also include any sale of all or
substantially all of Seller's business or the merger or
consolidation of Seller (whether or not Seller is the surviving
entity). Further, Seller hereby agrees to immediately provide
Wavetech with access to the source code of any of the intellectual
property in the event of the liquidation, dissolution or winding up
of Seller's business. Upon Wavetech receiving written notice from
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Seller of a proposed sale to a third party buyer, including a
certified true copy of the proposed Sale Contract, Wavetech shall
have thirty (30) calendar days in which to elect to submit to Seller
a matching contract upon the same terms and conditions as that set
out in the certified true copy of the Sale Contract provided by
Seller to Wavetech. If Wavetech shall fail or refrain from
submitting such a matching contract within the prescribed time
period, Seller shall be free to complete the Sale Contract with the
third party buyer.
6.6 REGISTRATION UNDERTAKING. Wavetech hereby agrees to promptly file
after Closing a registration statement on Form S-3 (or any
appropriate successor form) for the purpose of registering the
shares of Wavetech Common Stock to be issued in exchange for the
Buyer Preferred Stock. Wavetech agrees to use such efforts as are
reasonably necessary to obtain the effectiveness of such
registration statement with the Securities and Exchange Commission.
15
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transactions provided for
hereby are subject, in the discretion of Seller, to the satisfaction, on or
prior to the Closing Date, of each of the following conditions, any of which may
be waived by Seller:
7.1 CONSENTS. All Permits and waivers necessary to the consummation of
the transactions contemplated hereby and for the operation of the
business by Buyer and Wavetech (including, without limitation, (a)
all required third party consents; (b) all required approvals of
Buyer's and Wavetech's lenders, if any; and (c) the approval of
Buyer's and Wavetech's Board of Directors) shall have been obtained.
7.2 OPINION OF COUNSEL. Buyer shall have delivered to Seller an opinion
of counsel to Buyer, dated as of the Closing Date, in form and
substance reasonably satisfactory to Seller, to the effect that:
7.2.1 INCORPORATION. Each of Buyer and Wavetech has been duly
incorporated and is validly existing and in good standing
under the laws of its jurisdiction of incorporation. The
capitalization of each of Buyer and Wavetech is as set forth
in Section 5.3.1 or 5.3.2 of this Agreement;
7.2.2 CORPORATE POWER AND AUTHORITY. Each of Buyer and Wavetech
have the necessary corporate power and authority to enter
into this Agreement and to consummate the transactions
contemplated hereby;
7.2.3 CORPORATE ACTION. The execution, delivery and performance of
this Agreement have been duly authorized by all necessary
corporate action of Buyer and Wavetech, and this Agreement
has been duly executed and delivered by Buyer and Wavetech.
Buyer shall have amended its organizational documents to
provide for the issuance of the Buyer Preferred Stock. The
shares of Wavetech Common Stock upon Closing shall be
immediately exchangeable for the Buyer Preferred Stock,
subject to the terms of this Agreement, the Share Exchange
Agreement and compliance with applicable securities laws;
7.2.4 OBLIGATION OF BUYER AND WAVETECH. This Agreement constitutes
a legally valid and binding obligation of Buyer and
Wavetech, enforceable against Buyer and Wavetech in
accordance with its terms, except as limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights generally or by
equitable principles (whether considered in an action at law
or in equity), (ii) limitations imposed by federal or
applicable provincial law or equitable principles upon the
availability of specific performance, injunctive relief or
other equitable remedies, or (iii) other customary
limitations reasonably satisfactory to Seller's counsel;
16
7.2.5 NO BREACH. Neither the execution and delivery of this
Agreement by Buyer and Wavetech, nor the consummation of the
transactions contemplated hereby will (i) violate or
conflict with any provision of the organizational documents
of Buyer or Wavetech, (ii) breach, or cause a default under,
any term or provision of any material contract listed on a
schedule to such opinion to which contract Buyer or Wavetech
is a party or by which their respective assets are bound, or
(iii) violate any judgment, decree, injunction, writ or
order applicable to Buyer or Wavetech;
7.2.6 NO PERMITS REQUIRED. No Permit of, or filing with, any
governmental authority or, to the best knowledge of such
counsel, any other person, is required for the execution and
delivery of this Agreement by Buyer or Wavetech, or the
consummation by Buyer or Wavetech of the transactions
contemplated hereby, except as set forth in this Agreement
or the schedules or exhibits hereto;
7.2.7 NO ACTIONS PENDING. Except as set forth in this Agreement or
the schedules hereto, to the best knowledge of such counsel,
no Action is pending or threatened (i) against Buyer or
Wavetech, (ii) against any of the officers or directors of
Buyer or Wavetech as such, (iii) in which Buyer or Wavetech
is a plaintiff, or (iv) which questions the validity or
legality of the transactions contemplated hereby;
7.2.8 NO VIOLATION OF LAW. Neither the execution and delivery of
this Agreement by Buyer or Wavetech, nor the consummation of
the transactions contemplated hereby will violate or result
in a failure to comply with any statute, law, ordinance,
regulation, rule or order of any federal, provincial or
local government or any other governmental department or
agency, or any judgment, decree or order of any court,
applicable to Buyer or Wavetech;
7.2.9 SHARE EXCHANGE AGREEMENT. The Share Exchange Agreement to be
delivered by Buyer and Wavetech has been duly authorized by
all necessary corporate action of Buyer and Wavetech and the
shares of Buyer Preferred Stock are immediately exchangeable
for shares of Wavetech Common Stock subject to the terms of
this Agreement and compliance with applicable securities
laws.
7.2.10 ELIGIBILITY TO FILE REGISTRATION STATEMENT. Wavetech Common
Stock is registered under the Securities Exchange Act of
1934 and all periodic reports required thereunder have been
filed; such Common Stock is currently qualified for trading
on the National Association of Securities Dealers (NASD) OTC
Bulletin Board; and such Common Stock is eligible for
registration on Form S-3 (on a resale basis and not as a
primary issuer) pursuant to the provisions of Section 6.6 of
the Agreement.
17
In rendering such opinions, such counsel may rely as to factual
matters upon certificates and assurances of public officials and officers
of Buyer and Wavetech. In addition, such opinions may be subject to such
additional qualifications and exceptions as are reasonably acceptable to
counsel to Seller.
7.3 CERTIFICATES. Buyer and Wavetech shall furnish Seller with such
certificates of its officers and others to evidence compliance with
the conditions set forth in this Article VII as may be reasonably
requested by Seller.
7.4 CORPORATE DOCUMENTS. Seller shall have received from each of Buyer
and Wavetech certified copies of resolutions adopted by its board of
directors approving this Agreement and the transactions contemplated
hereby.
7.5 BUYER PREFERRED STOCK. As of the Closing Date each share of the
Buyer Preferred Stock shall be exchangeable for one share of
Wavetech Common Stock. As of the Closing Date, Buyer, Wavetech and
Seller shall have entered into a Share Exchange Agreement with
respect to the Buyer Preferred Stock in the form of Exhibit "E".
Buyer shall have paid the Purchase Price to Seller in the manner
prescribed by Section 2.4.1 and the Share Exchange Agreement shall
have been executed and delivered by the parties thereto confirming
Seller's unqualified right to immediately exchange if, as and when
determined by Seller, in its sole discretion, the Buyer Preferred
Stock received by Seller in payment of the Purchase Price for an
equal number of duly authorized, validly issued and fully paid and
non-assessable Wavetech Common Shares.
18
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS
THE OBLIGATIONS OF BUYER TO CONSUMMATE THE TRANSACTIONS PROVIDED FOR HEREBY
ARE SUBJECT TO THE SELLER'S FULFILLMENT OF THE FOLLOWING CONDITIONS, TO THE
SATISFACTION OF BUYER, ON OR PRIOR TO THE CLOSING DATE, ANY OF WHICH MAY BE
WAIVED BY BUYER:
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of Seller contained in this Agreement shall be true and
correct in all material respects at and as of the date of this
Agreement and at and as of the Closing Date, except as and to the
extent that the facts and conditions upon which such representations
and warranties are based are expressly required or permitted to be
changed by the terms hereof, and Seller shall have performed and
satisfied all agreements and covenants required hereby to be
performed by it prior to or on the Closing Date.
8.2 CONSENTS. All Permits and waivers necessary to the consummation of
the transactions contemplated hereby and for the operation of the
Business by Buyer (including, without limitation, (a) all required
third party consents to the assignment of the Assumed Contracts to
be assumed by Buyer; (b) all required approvals of Buyer's lenders,
if any; and (c) the approval of Seller's Board of Directors) shall
have been obtained.
8.3 NO PROCEEDINGS OR LITIGATION. No Action by any governmental
authority or other person shall have been instituted or threatened
which questions the validity or legality of the transactions
contemplated hereby and which could reasonably be expected to damage
Buyer materially if the transactions contemplated hereby are
consummated, including without limitation any Material Adverse
Effect on the right or ability of Buyer to own, operate, possess or
transfer the Products or Accounts after the Closing. There shall not
be any statute, rule or regulation that makes the purchase and sale
of the Products or Accounts contemplated hereby illegal or otherwise
prohibited.
8.4 OPINION OF COUNSEL. Seller shall have delivered to Buyer an opinion
of counsel to Seller, dated as of the Closing Date, in form and
substance reasonably satisfactory to Buyer, to the effect that:
8.4.1 INCORPORATION. Seller has been duly incorporated and is
validly existing and in good standing under the laws of the
Province of Ontario, Canada;
8.4.2 CORPORATE POWER AND AUTHORITY. The Seller has the necessary
corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby and
to own, lease and operate the Products or Accounts and its
other properties and to conduct the Business as presently
conducted;
8.4.3 CORPORATE ACTION. The execution, delivery and performance of
this Agreement have been duly authorized by all necessary
corporate action of Seller, and this Agreement has been duly
19
executed and delivered by Seller; the approval of this
Agreement by the stockholders of Seller has been duly
obtained in accordance with the provisions of Seller's
organizational documents and applicable law;
8.4.4 OBLIGATION OF SELLER. This Agreement constitutes a legally
valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms, except as limited by
(i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to creditors' rights generally
or by equitable principles (whether considered in an action
at law or in equity), (ii) limitations imposed by federal or
applicable provincial law or equitable principles upon the
availability of specific performance, injunctive relief or
other equitable remedies, or (iii) other customary
limitations reasonably satisfactory to Buyer's counsel;
8.4.5 NO BREACH. Neither the execution and delivery of this
Agreement by Seller, nor the consummation of the
transactions contemplated hereby will (i) violate or
conflict with any provision of the organizational documents
of Seller, (ii) breach, or cause a default under, any term
or provision of any material contract listed on a schedule
to such opinion to which contract Seller is a party or by
which the Products or Accounts are bound, or (iii) violate
any judgment, decree, injunction, writ or order applicable
to Seller;
8.4.6 NO PERMITS REQUIRED. No Permit of, or filing with, any
governmental authority or, to the best knowledge of such
counsel, any other person, is required for the execution and
delivery of this Agreement by Seller, or the consummation by
Seller of the transactions contemplated hereby, except as
set forth in this Agreement or the schedules or exhibits
hereto;
8.4.7 NO ACTIONS PENDING. Except as set forth in this Agreement or
the schedules hereto, to the best knowledge of such counsel,
no Action is pending or threatened (i) against Seller or the
Products or Accounts or the Business, (ii) against any of
the officers or directors of Seller as such, (iii) in which
Seller is a plaintiff, or (iv) which questions the validity
or legality of the transactions contemplated hereby;
8.4.8 NO VIOLATION OF LAW. Neither the execution and delivery of
this Agreement by Seller, nor the consummation of the
transactions contemplated hereby will violate or result in a
failure to comply with any statute, law, ordinance,
regulation, rule or order of any federal, provincial or
local government or any other governmental department or
agency, or any judgment, decree or order of any court,
applicable to Seller or the Business; and, to the best
knowledge of such counsel, Seller has all licenses,
franchises and other authority required to conduct the
Business as it is now being conducted;
20
8.4.9 TRANSFER AND ASSIGNMENT. The documents to be delivered by
Seller at the Closing to effect the transfer and assignment
to Buyer of all right, title and interest in and to the
Products or Accounts are effective to do so, subject to (i)
the effects of bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors'
rights generally and equitable principles (whether
considered in an action at law or in equity), (ii)
limitations imposed by federal or provincial law or
equitable principles upon the availability of specific
performance, injunctive relief or other equitable remedies,
or (iii) other customary limitations reasonably satisfactory
to Buyer's counsel;
In rendering such opinions, such counsel may rely as to factual matters
upon certificates and assurances of public officials and officers of Seller. In
addition, such opinions may be subject to such additional qualifications and
exceptions as are reasonably acceptable to counsel to Buyer.
8.5 CERTIFICATES. Seller shall furnish Buyer with such certificates of
its officers and others to evidence compliance with the conditions
set forth in this Article VIII as may be reasonably requested by
Buyer.
8.6 CONVEYANCING DOCUMENTS; RELEASE OF ENCUMBRANCES. Seller shall have
executed and delivered each of documents described in Section 3.2
hereof so as to effect the transfer and assignment to Buyer of all
right, title and interest in and to the Products or Accounts and
Seller shall have filed (where necessary) and delivered to Buyer all
documents necessary to release the Products or Accounts from all
Encumbrances, which documents shall be in a form reasonably
satisfactory to Buyer's counsel.
8.7 MATERIAL CHANGES. Since the date of the Balance Sheet, there shall
not have been any Material Adverse Change with respect to the
Business or the Products or Accounts.
8.8 CORPORATE DOCUMENTS. Buyer shall have received from Seller
resolutions adopted by its board of directors and shareholders
approving this Agreement and the transactions contemplated hereby.
8.9 DUE DILIGENCE REVIEW. Buyer and its Representatives shall have the
right to conduct a due diligence review of Seller's Books and
Records, Financial Statements, and other records and accounts of the
Business, operations, equipment, properties and in the sole
discretion of Buyer, Buyer shall be satisfied on the basis of such
review that there has been no breach of the representations and
warranties or the pre-closing covenants of Seller made pursuant to
this Agreement. Such review shall have no effect whatsoever on the
liability of Seller to Buyer under this Agreement or otherwise for
breach of any representations, warranties, or covenants of Seller or
hereunder.
21
ARTICLE IX
RISK OF LOSS; CONSENTS TO ASSIGNMENT
9.1 RISK OF LOSS. From the date hereof through the Closing, all risk of
loss or damage to the property included in the Products or Accounts
shall be borne by Seller, and thereafter shall be borne by Buyer. If
any portion of the Products or Accounts is destroyed or damaged by
fire or any other cause on or prior to the Closing, other than use,
wear or loss in the ordinary course of the Business, Seller shall
give written notice to Buyer as soon as practicable after discovery
of such damage or destruction, the amount of insurance, if any,
covering such Products or Accounts and the amount, if any, which
Seller is otherwise entitled to receive as a consequence. Prior to
the Closing, Buyer shall have the option, which shall be exercised
by written notice to Seller within ten (10) calendar days after
receipt of Seller's notice or if there is not ten (10) calendar days
prior to the Closing, as soon as practicable prior to the Closing,
of (a) accepting such Products or Accounts in their destroyed or
damaged condition in which event Buyer shall be entitled to the
proceeds of any insurance or other proceeds payable with respect to
such loss and to such indemnification for any uninsured portion of
such loss pursuant to Section 10.3, and the full Purchase Price
shall be paid for such Products or Accounts, (b) excluding such
Products or Accounts from this Agreement, in which event the
Purchase Price shall be reduced by the amount allocated to such
Products or Accounts, as mutually agreed between the parties or (c)
terminating this Agreement in accordance with Section 11.1. If Buyer
accepts such Products or Accounts, then after the Closing, any
insurance or other proceeds shall belong, and shall be assigned to,
Buyer without any reduction in the Purchase Price; otherwise, such
insurance proceeds shall belong to Seller.
9.2 CONSENTS TO ASSIGNMENT. Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to
assign any Contract, lease, license, sales order, purchase order or
any claim or right or any benefit arising thereunder or resulting
therefrom if an attempted assignment thereof, without the consent of
a third party thereto, would constitute a breach thereof or in any
way adversely affect the rights of Buyer thereunder. If such consent
is not obtained, or if an attempted assignment thereof would be
ineffective or would affect the rights thereunder so that Buyer
would not receive all such rights, Seller will cooperate with Buyer,
in all reasonable respects, to provide to Buyer the benefits under
any such Contract, lease, license, sales order, purchase order,
claim or right including without limitation enforcement for the
benefit of Buyer of any and all rights of Seller against a third
party thereto arising out of the breach or cancellation by such
third party or otherwise.
22
ARTICLE IX
ACTIONS BY SELLER, BUYER AND WAVETECH
AFTER THE CLOSING
10.1 BOOKS AND RECORDS; PAYMENT OF LIABILITIES.
10.1.1 COOPERATION AND RECORDS RETENTION. Seller, Buyer and
Wavetech shall (i) each provide the other with such
assistance as may reasonably be requested by any of them in
connection with the preparation of any return, audit, or
other examination by any taxing authority or judicial or
administrative proceedings relating to liability for Taxes,
(ii) each retain and provide the other with any records or
other information that may be relevant to such return, audit
or examination, proceeding or determination, and (iii) each
provide the other with any final determination of any such
audit or examination, proceeding, or determination that
affects any amount required to be shown on any tax return of
the other for any period. Without limiting the generality of
the foregoing, Buyer, Seller and Wavetech shall each retain,
until the applicable statutes of limitations (including any
extensions) have expired, copies of all tax returns,
supporting work schedules, and other records or information
that may be relevant to such returns for all tax periods or
portions thereof ending on or before the Closing Date and
shall not destroy or otherwise dispose of any such records
without first providing the other party with a reasonable
opportunity to review and copy the same.
10.2 SURVIVAL OF REPRESENTATIONS, ETC. All statements contained in any
certificate, schedule, exhibit, instrument or conveyance delivered
by or on behalf of the parties pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be deemed
to be representations and warranties by the parties hereunder. The
representations, warranties, covenants and agreements of Seller,
Buyer and Wavetech contained herein shall survive the consummation
of the transactions contemplated hereby and the Closing Date,
without regard to any investigation made by any of the parties
hereto. Except as provided in this sentence, all such
representations and warranties and all claims and causes of action
with respect thereto (other than the provisions of Section 4.11 and
this Section 10.2, and all claims and causes of action with respect
thereto) shall terminate upon expiration of two years after the
Closing Date. The representations and warranties in Section 4.11
shall survive until the expiration of the applicable statute of
limitations (with extensions) with respect to the matters addressed
in such section. The termination of the representations and
warranties provided herein shall not affect the rights of a party in
respect of any Claim made by such party in a writing received by the
other party prior to the expiration of the applicable survival
period provided herein.
10.3 INDEMNIFICATIONS.
10.3.1 BY SELLER. Regardless of Seller's knowledge of the existence
of an indemnifiable event, Seller shall indemnify, defend,
save and hold harmless Buyer, its Affiliates and
subsidiaries, and its respective Representatives, from and
against any and all claims, damages, costs, losses
(including without limitation diminution in value), Taxes,
23
liabilities, judgments, penalties, fines, obligations,
lawsuits, deficiencies, demands and expenses (whether or not
arising out of third-party claims), including without
limitation interest, lost profits and other losses resulting
from any shutdown or curtailment of operations, damages to
the environment, attorneys' fees, experts' fees and all
amounts paid in investigation, defense or settlement of any
of the foregoing (herein, "Damages"), incurred in connection
with, arising out of, resulting from or incident to (i) any
breach of any representation or warranty in any material
respect, or the inaccuracy of any representation or
warranty, made by Seller in or pursuant to this Agreement;
(ii) any breach of any covenant or agreement made by Seller
in or pursuant to this Agreement; (iii) any Excluded
Liability; or (iv) any liability imposed upon Buyer by
reason of Buyer's status as transferee of the Products or
Accounts.
10.3.2 BUYER AND WAVETECH. Regardless of Buyer's or Wavetech's
knowledge of the existence of an indemnifiable event, each
of Buyer and Wavetech shall indemnify, defend, save and hold
harmless Seller, its subsidiaries, and its respective
Representatives, from and against any and all Damages,
incurred in connection with, arising out of, resulting from
or incident to (i) any breach of any representation or
warranty in any material respect, or the inaccuracy of any
representation or warranty, made by Buyer or Wavetech in or
pursuant to this Agreement; or (ii) any breach of any
covenant or agreement made by Buyer or Wavetech in or
pursuant to this Agreement; or (iii) the failure or
inability of Wavetech to effectively register the Wavetech
Common Shares to be issued to Buyer in exchange for the
Buyer Preferred Stock pursuant to this Agreement and the
Share Exchange Agreement.
10.3.3 COOPERATION. The indemnified party shall cooperate in all
reasonable respects with the indemnifying party and such
attorneys in the investigation, trial and defense of such
lawsuit or action and any appeal arising therefrom;
provided, however, that the indemnified party may, at its
own cost, participate in the investigation, trial and
defense of such lawsuit or action and any appeal arising
therefrom. The parties shall cooperate with each other in
any notifications to insurers.
10.3.4 DEFENSE OF CLAIMS. If a claim for Damages (a "Claim") is to
be made by a party entitled to indemnification hereunder
against the indemnifying party, the party claiming such
indemnification shall, subject to Section 10.2, give written
notice (a "Claim Notice") to the indemnifying party as soon
as practicable after the party entitled to indemnification
becomes aware of any fact, condition or event which may give
rise to Damages for which indemnification may be sought
24
under this Section 10.3. If any lawsuit or enforcement
action is filed against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given
to the indemnifying party as promptly as practicable (and in
any event within fifteen (15) calendar days after the
service of the citation or summons). The failure of any
indemnified party to give timely notice hereunder shall not
affect rights to indemnification hereunder, except to the
extent that the indemnifying party demonstrates actual
damage caused by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to the
indemnified party that the indemnifying party shall be
obligated under the terms of its indemnity hereunder in
connection with such lawsuit or action, then the
indemnifying party shall be entitled, if it so elects, (i)
to take control of the defense and investigation of such
lawsuit or action, (ii) to employ and engage attorneys of
its own choice (which shall be reasonably acceptable to the
indemnified party) to handle and defend the same, at the
indemnifying party's cost, risk and expense unless the named
parties to such action or proceeding include both the
indemnifying party and the indemnified party and the
indemnified party has been advised in writing by counsel
that there may be one or more legal defenses available to
such indemnified party that are different from or additional
to those available to the indemnifying party, and (iii) to
compromise or settle such claim, which compromise or
settlement shall be made only with the written consent of
the indemnified party, such consent not to be unreasonably
withheld; provided, however, if the remediation or
resolution of any such Claim will occur on or at any
Facility or is reasonably expected to have a Material
Adverse Effect on the indemnified party's business
operations, then, notwithstanding the foregoing, the
indemnified party shall be entitled to control such
remediation or resolution, including without limitation to
take control of the defense and investigation of such
lawsuit or action, to employ and engage attorneys of its own
choice to handle and defend the same, at the indemnifying
party's cost, risk and expense, and to compromise or settle
such Claim. If the indemnifying party fails to assume the
defense of such claim within fifteen (15) calendar days
after receipt of the Claim Notice, the indemnified party
against which such claim has been asserted will (upon
delivering notice to such effect to the indemnifying party)
have the right to undertake, at the indemnifying party's
cost and expense, the defense, compromise or settlement of
such claim on behalf of and for the account and risk of the
indemnifying party. In the event the indemnified party
assumes the defense of the claim, the indemnified party will
keep the indemnifying party reasonably informed of the
progress of any such defense, compromise or settlement. The
indemnifying party shall be liable for any settlement of any
action effected pursuant to and in accordance with this
25
Section 10.3 and for any final judgment (subject to any
right of appeal), and the indemnifying party agrees to
indemnify and hold harmless an indemnified party from and
against any Damages by reason of such settlement or
judgment.
10.3.5 LIABILITY AND REMEDIES, ETC. Except as set forth below, no
individual Representative of any party shall be personally
liable for any Damages under the provisions contained in
this Section 10.3. Nothing herein shall relieve either party
of any liability to make any payment expressly required to
be made by such party pursuant to this Agreement. The term
"Damages" as used in this Section 10.3 is not limited to
matters asserted by third parties against Seller or Buyer,
but includes Damages incurred or sustained by Seller or
Buyer in the absence of third party claims. Payments by
Buyer of amounts for which Buyer is indemnified hereunder,
and payments by Seller of amounts for which Seller is
indemnified, shall not be a condition precedent to recovery.
Seller's obligation to indemnify Buyer, and Buyer's
obligation to indemnify Seller, shall not limit any other
rights, including without limitation rights of contribution
which either party may have under statute or common law.
10.4 FURTHER ACTION. After the Closing, Seller shall take all actions
reasonably necessary to effect the conveyance of the Products or
Accounts to Buyer free and clear of all Encumbrances and otherwise
required by Buyer's lenders.
ARTICLE XI
MISCELLANEOUS
11.1 TERMINATION.
11.1.1 This Agreement may be terminated at any time prior to
Closing:
11.1.1.1 By mutual written consent of Buyer and Seller;
11.1.1.2 By Buyer or Seller if the Closing shall not have
occurred on or before October 29, 1999; PROVIDED,
HOWEVER, that this provision shall not be
available to Buyer if Seller has the right to
terminate this Agreement under Section 11.1.1.4,
and this provision shall not be available to
Seller if Buyer has the right to terminate this
Agreement under Section 11.1.1.3;
11.1.1.3 By Buyer if there is a material breach of any
representation or warranty set forth in Article IV
26
hereof or any covenant or agreement to be complied
with or performed by Seller pursuant to the terms
of this Agreement or the failure of a condition
set forth in Article VIII to be satisfied (and
such condition is not waived in writing by Buyer)
on or prior to the Closing Date, or the occurrence
of any event which results or would result in the
failure of a condition set forth in Article VIII
to be satisfied on or prior to the Closing Date,
provided that Buyer may not terminate this
Agreement prior to the Closing if Seller has not
had an adequate opportunity to cure such failure;
or
11.1.1.4 By Seller if there is a material breach of any
representation or warranty set forth in Article V
hereof or of any covenant or agreement to be
complied with or performed by Buyer pursuant to
the terms of this Agreement or the failure of a
condition set forth in Article VII to be satisfied
(and such condition is not waived in writing by
Seller) on or prior to the Closing Date, or the
occurrence of any event which results or would
result in the failure of a condition set forth in
Article VII to be satisfied on or prior to the
Closing Date; PROVIDED that Seller may not
terminate this Agreement prior to the Closing Date
if Buyer has not had an adequate opportunity to
cure such failure.
11.1.2 IN THE EVENT OF TERMINATION. In the event of termination of
this Agreement:
11.1.2.1 Each party will redeliver all documents, work
papers and other material of any other party
relating to the transactions contemplated hereby,
whether so obtained before or after the execution
hereof, to the party furnishing the same; and
11.1.2.2 No party hereto shall have any liability or
further obligation to any other party to this
Agreement, except as stated in Sections 11.7,
11.10, 11.1.2.1 or this Section 11.1.2.2, and
except for any willful breach of this Agreement
occurring prior to the proper termination of this
Agreement. The foregoing provisions shall not
limit or restrict the availability of specific
performance or other injunctive relief to the
extent that specific performance or such other
relief would otherwise be available to a party
hereunder.
27
11.2 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior
written consent of the other parties. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted
assigns, and no other person shall have any right, benefit or
obligation under this Agreement as a third party beneficiary or
otherwise.
11.3 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by telecopy,
electronic or digital transmission method; the day after it is sent,
if sent for next day delivery to a domestic address by recognized
overnight delivery service (e.g., Federal Express); and upon
receipt, if sent by certified or registered mail, return receipt
requested. In each case notice shall be sent to:
If to Seller or the Seller Stockholders, addressed to:
Ms. Rosnani Atani
Chief Executive Officer
Softalk, Inc.
000 Xxxxx Xx.
Xxxxxxx, Xxxxxxx X0X0X0
Fax: (000) 000-0000
With a copy to:
Xxxxxxx Righton
Barristers & Solicitors
000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx X0X 0X0
Attn: X. X. Xxxxx
Fax: (000) 000-0000
If to Buyer, addressed to:
Interpretel (Canada) Inc.
c/o Wavetech International, Inc.
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
Fax: (000) 000-0000
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With a copy to:
Squire, Xxxxxxx & Xxxxxxx L.L.P.
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Fax: (000) 000-0000
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
11.4 CHOICE LAW. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the
Province of Ontario (without reference to the choice of law
provisions thereof), except with respect to matters of law
concerning the internal corporate affairs of any corporate entity
which is a party to or the subject of this Agreement, and as to
those matters the law of the jurisdiction under which the respective
entity derives its powers shall govern.
11.5 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement, together
with all exhibits and schedules hereto, constitutes the entire
agreement among the parties pertaining to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties. This
Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. No amendment,
supplement, modification 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 such waiver constitute a continuing
waiver unless otherwise expressly provided.
11.6 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
11.7 EXPENSES. Except as otherwise specified in this Agreement, each
party hereto shall pay its own legal, accounting, out-of-pocket and
other expenses incident to this Agreement and to any action taken by
such party in preparation for carrying this Agreement into effect.
11.8 INVALIDITY. In the event that 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 to the maximum extent permitted
by law, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement or any other such
instrument.
29
11.9 TITLES. The titles, captions or headings of the Articles, Sections
and subsections herein are inserted for convenience of reference
only and are not intended to be a part of or to affect the meaning
or interpretation of this Agreement.
11.10 PUBLICITY; CONFIDENTIALITY. Neither Buyer nor Seller shall issue any
press release or make any public statement regarding, or disclose to
any third party (except as required by law or legal process, and
except to each party's lenders if such lenders so require) any of
the terms of, the transactions contemplated hereby, without prior
written approval of the other party, provided that Buyer and Seller
may, if they mutually agree, issue or make an appropriate press
release or public announcement after the Closing Date. In the event
that this Agreement is terminated prior to Closing, Buyer agrees to
return to Seller all correspondence and documents furnished by
Seller or its Representatives, and agrees not to disclose or use for
its own purposes any confidential or proprietary information of
Seller that has been furnished to it by Seller or its
Representatives.
11.11 CUMULATIVE REMEDIES. All rights and remedies of either party hereto
are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of
one or more rights or remedies shall not prejudice or impair the
concurrent or subsequent exercise of other rights or remedies.
11.12 ARBITRATION. Any controversy arising after the Closing out of or
relating to this Agreement (including, without limitation, pursuant
to Section 2.5 or 10.3), or relating to the breach hereof, shall be
settled by arbitration conducted in Toronto, Ontario in accordance
with the Arbitrations Act (Ontario), as amended. The award rendered
by the arbitrator(s) shall be final and judgment upon the award
rendered by the arbitrator(s) may be entered upon it in any court
having jurisdiction thereof. The arbitrator(s) shall possess the
powers to issue mandatory orders and restraining orders in
connection with such arbitration. The expenses of the arbitration
shall be borne by the losing party unless otherwise allocated by the
arbitrator(s). The agreement to arbitrate shall be specifically
enforceable under the prevailing arbitration law. During the
continuance of any arbitration proceedings, the parties shall
continue to perform their respective obligations under this
Agreement.
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ARTICLE XII
BULK SALES
12.1 BULK SALES
12.1.1 BULK SALES. The parties acknowledge that this transaction
may be subject to the BULK SALES ACT R.S.O. 1990, C.B. 14
(herein the "BULK SALES ACT"). It is agreed that:
12.1.1.1 Seller shall not be required to apply to a judge
pursuant to section 3(1) of the BULK SALES ACT for
an order exempting this transaction from the
application of the BULK SALES ACT;
12.1.1.2 Seller shall deliver to Buyer, at or prior to the
Closing, a statement verified by the affidavit of
a senior officer of Seller in Form 1 to the BULK
SALES ACT containing the information required by
section 4(2) of the BULK SALES ACT (the "BSA
STATEMENT");
12.1.1.3 Buyer waives compliance by Seller with the
requirements of the BULK SALES ACT notwithstanding
that the BSA Statement may disclose that the
claims of the unsecured trade creditors of Seller
exceed $2,500.00 but only if the claims of the
secured trade creditors of Seller do not exceed a
total of $2,500.00;
12.1.1.4 Seller shall defend, indemnify and save harmless
Buyer from all claims of the secured and unsecured
trade creditors of Seller and covenants to and
agrees with Buyer that Seller, in the ordinary
course of Seller's business, fully pay and satisfy
the claims of all such creditors owing at the
Closing Date. The foregoing notwithstanding, Buyer
hereby agrees to cooperate with Seller with
respect to defending any claims made by third
parties with respect to the Bulk Sales Act arising
as a result of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed on their respective behalf, by their respective
officers hereunto duly authorized, all as of the day and year first above
written.
INTERPRETEL (CANADA) INC.
By /s/ Xxxxxx X. Xxxxx
---------------------------
Name: Xxxxxx X. Xxxxx
Its: President
SOFTALK INC.
By /s/ A. Xxxxx Xxxx
---------------------------
Name: A. Xxxxx Xxxx
Its: President
WAVETECH INTERNATIONAL, INC.
By /s/ Xxxxxx X. Xxxxx
---------------------------
Name: Xxxxxx X. Xxxxx
Its: President
32
Exhibits are intentionally omitted
33
