OPTION AGREEMENT
DATED AS OF
DECEMBER 31, 1997
BY AND AMONG
TOUCH TONE AMERICA, INC.,
AS THE ISSUER,
AND
INFINITY INVESTORS LIMITED,
AS THE PURCHASER
OPTION AGREEMENT
AGREEMENT, dated as of December 31, 1997, among Touch Tone America, Inc.
(the "Company") and INFINITY INVESTORS LIMITED ("Purchaser").
R E C I T A L S:
WHEREAS, the Company has entered into that certain Amended Agreement and
Plan of Reorganization in the form attached hereto as EXHIBIT A (the
"Reorganization Agreement") between the Company and Orix Global Communications,
Inc. ("Orix"), pursuant to which the Company shall acquire all of the issued
and outstanding capital stock of Orix in exchange for the issuance to the
shareholders of Orix (the "Orix Shareholders") of 33,732,980 shares of the
Company's common stock, no par value (the "Common Stock") (the
"Reorganization"); and
WHEREAS, the Company and the Purchaser desire to set forth herein their
agreement pursuant to which the Purchaser shall, at its option, at any time,
and from time to time on or before the second anniversary date hereof, assign
and transfer to the Company the Transferred UPC Securities (as hereafter
defined) in exchange (the "Exchange") for Convertible Instruments (as hereafter
defined) of the Company in an aggregate amount equal to the Exchange Amount (as
hereafter defined); and
WHEREAS, contemporaneous herewith the Company, Purchaser and certain other
parties have executed and delivered that certain Securities Purchase Agreement
in the form attached hereto as EXHIBIT B (the "Securities Purchase Agreement");
and
WHEREAS, the Convertible Instruments shall be issued by the Company in a
private placement pursuant to Regulation S ("Regulation S") promulgated under
the Securities Act of 1933, as amended (the "Securities Act"); and
WHEREAS, the Convertible Instruments will be convertible into shares of
Common Stock on the terms described therein.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
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OPTION AGREEMENT - Page 1
I. DEFINITIONS
SECTION 1.1 Definitions. The following terms, as used herein, have the
following meanings:
"AFFILIATE" means, with respect to any Person (the "Subject Person"), (i)
any other Person (a "Controlling Person") that directly or indirectly through
one or more intermediaries, Controls the Subject Person or (ii) any other
Person (other than the Subject Person or a Consolidated Subsidiary of the
Subject Person) which is Controlled by or is under common Control with a
Controlling Person.
"AGREEMENT" means this Option Agreement, as amended, supplemented or
otherwise modified from time to time in accordance with its terms.
"ASSET SALE" has the meaning set forth in Section 8.1.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York and Miami, Florida are authorized
or required by law to close.
"CHANGE OF CONTROL" means (i) after the date of this Agreement any person
or group of persons (within the meaning of Sections 13 and 14 of the Exchange
Act and the rules and regulations of the Commission relating to such Sections)
other than the Purchaser shall have acquired beneficial ownership (within the
meaning of Rules 13d-3 and 13d-5 promulgated by the Commission pursuant to the
Exchange Act) of 33-1/3% or more of the outstanding shares of Common Stock of
the Company, (ii) any sale or other disposition (other than by reason of death
or disability) to any Person of any Common Stock of the Company owned by ▇▇▇▇▇
▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇ resulting in such Persons owning, in the aggregate, less
than 95% of the outstanding voting shares of Common Stock of the Company
received by them in Reorganization; or (iii) individuals constituting the Board
of Directors of the Company on the date hereof (together with any new Directors
whose election by such Board of Directors or whose nomination for election by
the stockholders of the Company was approved by a vote of at least 50.1% of the
Directors then still in office who were either Directors immediately following
the Reorganization or whose election or nomination for election was previously
so approved), cease for any reason to constitute at least two-thirds of the
Board of Directors of the Company then in office.
"CLOSING BID PRICE" shall mean for any security as of any date, the lowest
closing bid price as reported by Bloomberg, L.P. ("Bloomberg") on the principal
securities exchange or trading market where such security is listed or traded
or, if the foregoing does not apply, the lowest closing bid price of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no lowest trading price is
reported for
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such security by Bloomberg, then the average of the bid prices of any
market-makers for such securities as reported in the "pink sheets" by the
National Quotation Bureau, Inc. If the lowest closing bid price cannot be
calculated for such security on such date on any of the foregoing bases, the
lowest closing bid price of such security on such date shall be the fair market
value as mutually determined by the Purchaser and the Company for which the
calculation of the closing bid price requires, and in the absence of such
mutual determination, as determined by the Board of Directors of the Company in
good faith.
"CLOSING DATE" means each of the applicable dates of the issuance of the
Convertible Instruments to the Purchaser and the corresponding closing of each
Exchange.
"COMMISSION" means the Securities and Exchange Commission or any entity
succeeding to all of its material functions.
"COMMON STOCK" has the meaning set forth in the Recitals.
"COMPANY" means Touch Tone America, Inc., a California corporation, and
its successors.
"COMPANY CORPORATE DOCUMENTS" means the certificate of incorporation and
by-laws of the Company.
"CONSOLIDATED SUBSIDIARY" means at any date with respect to any Person any
Subsidiary or other entity, the accounts of which would be consolidated with
those of such Person in its consolidated financial statements if such
statements were prepared as of such date.
"CONTROL" (including, with correlative meanings, the terms "Controlling,"
"Controlled by" and under "common Control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that Person, whether
through the ownership of voting securities, by contract or otherwise .
"CONVERSION DATE" shall mean the date of delivery (including delivery via
telecopy) of a Notice of Conversion for all or a portion of the Convertible
Instruments by the holder thereof to the Company.
"CONVERSION PRICE" has the meaning set forth in the Debentures or Series C
Certificate of Designation, as applicable.
"CONVERSION SHARES" has the meaning set forth in Section 4.5.
"CONVERTIBLE INSTRUMENTS" means the Debentures or Series C Shares, as
applicable.
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"DEBENTURES" means Convertible Exchange Debentures due December 31, 1999
in the form attached hereto as EXHIBIT C, to be issued to the Purchaser (if the
Shareholder Ratification Event has not occurred) on each applicable Closing
Date upon consummation of each Exchange.
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments
issued by such Person, (iii) all obligations of such Person as lessee which (y)
are capitalized in accordance with GAAP or (z) arise pursuant to sale-leaseback
transactions, (iv) all reimbursement obligations of such Person in respect of
letters of credit or other similar instruments, (v) all Debt of others secured
by a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person and (vi) all Debt of others Guaranteed by such
Person.
"DEFAULT" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DERIVATIVE SECURITIES" has the meaning set forth in Section 8.4.
"DISCOUNTED EQUITY OFFERINGS" has the meaning set forth in Section 8.4.
"DIRECTORS" means the individuals then serving on the Board of Directors
or similar such management council of the Company.
"ESCROW AGENT" means the Person serving as the Escrow Agent pursuant to
the terms of the Escrow Agreement.
"ESCROW AGREEMENT" means that certain Escrow Agreement between the
Company, the Purchaser and the Escrow Agent, dated the date of this Agreement,
in the form attached hereto as EXHIBIT D.
"EVENT OF DEFAULT" has the meaning set forth in the Debentures and in
Section 3.1.
"EXCHANGE" has the meaning set forth in the Recitals.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE AMOUNT" means (i) with respect to the UPC Debentures, the
outstanding principal balance thereof, together with accrued and unpaid
interest thereon through the Business Day preceding the Closing Date, (ii) with
respect to the UPC Preferred Shares, the aggregate stated value thereof,
together with accrued and unpaid dividends thereon through the Business
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Day preceding the Closing Date, and (iii) with respect to the UPC Common
Shares, the product of (x) the average Closing Bid Price of the UPC Common
Shares for the five (5) consecutive Trading Days through and including the
Business Day immediately preceding the Closing Date multiplied by (y) the
number of shares of UPC Common Shares so conveyed as part of the Exchange.
"EXPENSE REIMBURSEMENT FEE" has the meaning set forth in Section 11.5.
"GAAP" has the meaning set forth in Section 1.2.
"GUARANTEE" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing (whether by virtue of
partnership arrangements, by agreement to keep well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain a minimum net worth,
financial ratio or similar requirements, or otherwise) any Debt of any other
Person and, without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) such Debt or
(ii) entered into for the purpose of assuring in any other manner the holder of
such Debt of the payment thereof or to protect such holder against loss in
respect thereof (in whole or in part); provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term Guarantee used as a verb has a corresponding meaning.
"KEY MAN POLICY" has the meaning set forth in Section 7.14.
"LIEN" means, any lien, mechanic's lien, materialmen's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, agreement to sell or convey, option, claim, title
imperfection, encroachment or other survey defect, pledge, restriction,
security interest or other adverse claim, whether arising by contract or under
law or otherwise (including, without limitation, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction in respect of any of the foregoing).
"MARKET PRICE" shall mean the Closing Bid Price of the Common Stock
preceding the date of determination.
"MATERIAL ADVERSE EFFECT" has the meaning set forth in Section 4.1.
"MAXIMUM EXCHANGE AMOUNT" has the meaning set forth in Section 2.1.
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"NOTICE OF CONVERSION" means the form to be delivered by a holder of the
Convertible Instruments upon conversion of all or a portion thereof to the
Company substantially in the form attached to the Debentures.
"OBSERVER" has the meaning set forth in Section 7.11.
"OFFICER'S CERTIFICATE" shall mean a certificate executed by the
President, chief executive officer or chief financial officer of the Company
substantially in the form of EXHIBIT E attached hereto.
"OPTION" shall have the meaning set forth in Section 2.1.
"OPTION EXPIRATION DATE" has the meaning set forth in Section 2.1.
"OPTION NOTICE" has the meaning set forth in Section 2.1.
"ORIX" means Orix Global Communications, Inc., a Nevada corporation.
"OTC MARKET" means the electronic quotation medium known as the OTC
Bulletin Board-Registered Trademark- by which members of the National
Association of Securities Dealers, Inc. enter, update and display quotations
and other information regarding eligible securities.
"PERSON" means an individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock
company, government (or any agency or political subdivision thereof) or other
entity of any kind.
"PURCHASER" means, collectively, Infinity Investors Limited, and its
successors and assigns, including the assignors of the Transferred UPC
Securities from time to time by Infinity Investors Limited prior to
consummation of any Exchange, and the holders from time to time of the
Convertible Instruments issued in each Exchange.
"PUT AND CALL AGREEMENT" has the meaning set forth in Section 2.3.
"RECAPITALIZATION EVENT" has the meaning set forth in Section 3.1.
"REGISTRATION RIGHTS AGREEMENT" means the agreement between the Company
and the Purchaser dated the Closing Date substantially in the form set forth
in EXHIBIT F attached hereto.
"RESTRICTED PERIOD" means the period from the applicable Closing Date
through and including the fortieth (40th) day thereafter.
"REINCORPORATION" has the meaning set forth in Section 3.3.
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"REORGANIZATION" has the meaning set forth in the Recitals.
"REORGANIZATION AGREEMENT" has the meaning set forth in the Recitals.
"SECURITIES" means the Debentures, the Series C Shares and the
Conversion Shares.
"SECURITIES PURCHASE AGREEMENT" has the meaning set forth in the
Recitals.
"SERIES C CERTIFICATE OF DESIGNATION" means that certain Series C
Certificate of Designations, Preferences and Rights setting forth the rights
and preferences of the Series C Shares in the form attached hereto as EXHIBIT
G.
"SERIES C PREFERRED STOCK" means shares of Series C Convertible
Preferred Stock of the Company, the rights and preferences of which are more
fully described in the Series C Certificate of Designation.
"SERIES C SHARES" means that certain number of shares of Series C
Preferred Stock issuable to the Purchaser (if the Shareholder Ratification
Event has occurred) from time to time on each applicable Closing Date upon
consummation of each Exchange.
"SECURITIES ACT" has the meaning set forth in the Recitals.
"SHAREHOLDER RATIFICATION" has the meaning set forth in Section 3.2.
"SHAREHOLDER RATIFICATION EVENT" shall mean the later to occur of (x)
the Shareholder Ratification and (y) the date of final determination that the
Company is not obligated to pay more than $250,000 to existing shareholders
of the Company who properly exercise dissenters rights under applicable
California law arising as a result of the Shareholder Ratification.
"SUBSIDIARY" means, with respect to any Person, any corporation or other
entity of which a majority of the capital stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person. Unless specified to the contrary,
"Subsidiary" means a Subsidiary of the Company. Unless specified to the
contrary, all references to a Subsidiary of the Company shall be deemed to
include Orix after giving effect to the Reorganization.
"SUBSIDIARY CORPORATE DOCUMENTS" means the certificates of incorporation
and by-laws of each Subsidiary.
Page 7
"TRADING DAY" shall mean any Business Day in which at least 1,000 shares
of Common Stock are traded on the OTC Market, or any Business Day in which
any other automated quotation system or exchange on which the Common Stock is
then traded is open for trading for at least four (4) hours, as applicable
"TRANSACTION AGREEMENTS" means this Agreement, the Debentures, the
Registration Rights Agreement, the Put and Call Agreement, the Escrow
Agreement, the Reorganization Agreement, and the Series C Certificate of
Designation.
"TRANSFERRED UPC SECURITIES" means the UPC Debentures, UPC Preferred
Shares and/or UPC Common Shares, as applicable, as assigned and conveyed by
the Purchaser to the Company in the form so assigned and conveyed by the
Purchaser on each Closing Date upon consummation of each Exchange.
"UPC" shall mean United Petroleum Corporation, a Delaware corporation
and its successors and assigns.
"UPC CERTIFICATE OF DESIGNATION" means that certain Certificate of
Designations, Preferences and Rights setting forth the rights and preferences
of the UPC Preferred Shares in the form attached hereto as EXHIBIT H.
"UPC COMMON SHARES" means shares of common stock of UPC.
"UPC DEBENTURES" means Convertible Debentures of UPC in the form annexed
hereto as EXHIBIT I.
"UPC PREFERRED SHARES" means shares of UPC Preferred Stock.
"UPC PREFERRED STOCK" means shares of Convertible Preferred Stock of UPC
issued pursuant to the terms of the UPC Certificate of Designation.
SECTION 1.2 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared, in
accordance with generally accepted accounting principles as in effect from
time to time, applied on a consistent basis (except for changes concurred in
by the Company's independent public accountants) ("GAAP"). All references to
"dollars," "Dollars" or "$" are to United States dollars unless otherwise
indicated. All references to the "Company and its Subsidiaries" shall include
references to Orix as a Subsidiary of the Company after giving effect to the
consummation of the Reorganization, unless otherwise indicated.
Page 8
ARTICLE II
PURCHASE, EXCHANGE AND SALE OF DEBENTURES
SECTION 2.1. (A) OPTION. The Company hereby irrevocably grants to the
Purchaser an option (the "Option") exercisable at any time, and from time to
time, prior to the second anniversary date of this Agreement (the "Option
Expiration Date") to assign and convey to the Company Transferred UPC
Securities with an Exchange Amount not to exceed in the aggregate for all
such assignments $11,000,000 (the "Maximum Exchange Amount").
(B) EXERCISE OF OPTION. The Purchaser shall have the right,
but not the obligation, to exercise the Option from time to time by
delivering to the Company and the Escrow Agent prior to the Option Expiration
Date one or more written notices (each an "Option Notice") specifying (i) the
Transferred UPC Securities to be assigned and conveyed to the Company, (ii)
the Exchange Amount thereof and (iii) the date, not earlier than one (1)
Business Day and not later than three (3) Business Days after the delivery of
such Option Notice, on which the closing of the Exchange shall occur. On the
applicable Closing Date, (x) the Purchaser shall deliver to the Escrow Agent
the applicable Transferred UPC Securities and (y) the Escrow Agent shall
deliver (I) to the Company the Transferred UPC Securities received from the
Purchaser and (II) to the Purchaser at its address specified on the signature
page hereto (unless a contrary address located outside of the United States
is provided in the Option Notice) either the Debentures (if the Shareholder
Ratification Event has not occurred) or the Series C Shares (if the
Shareholder Ratification Event has occurred), dated the date of the first
Closing Date by the Escrow Agent, all as more fully described in the Escrow
Agreement.
SECTION 2.2 ESCROW PROCEDURES.
(A) Promptly following the date hereof, the Company shall file
with the Secretary of State of California the Series C Certificate of
Designation and shall deposit with the Escrow Agent for administration
pursuant to the terms of the Escrow Agreement a Debenture in the
aggregate principal balance of the Maximum Exchange Amount. Immediately
following the Shareholder Ratification Event, the Company shall
undertake the actions specified in Section 3.1 below.
(B) From and after the first Closing Date hereunder, the Purchaser
shall hold either the Debentures or Series C Shares. At each subsequent
Closing Date, the Purchaser shall directly assign to the Company the
Transferred UPC Securities and the Company and the Purchaser shall
record the then applicable (x) aggregate principal balance of the
Debentures outstanding or (y) aggregate number of Series C Shares and
the stated value thereof then outstanding. Each of the Company and the
Purchaser acknowledge and agree that the Debentures or Series C Shares
held by the Purchaser following the first Closing Date shall reflect the
Maximum Exchange Amount; provided, however, for all purposes
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(including calculation of interest or dividend payments) the amount of
the Debentures or the number of Series C Shares deemed issued and
outstanding and held by the Purchaser shall be the Exchange Amount
applicable to each Exchange consummated on each Closing Date.
SECTION 2.3 PUT AND CALL AGREEMENT. Contemporaneous with the
execution and delivery of this Agreement, the Company and the Purchaser shall
enter into a Put and Call Agreement in the form annexed hereto as EXHIBIT J
(the "Put and Call Agreement").
SECTION 2.4 ADDITIONAL PAYMENTS TO PURCHASER. The Company further
agrees that following each Exchange consummated on each Closing Date, if UPC
makes any payments of interest on the UPC Debentures and/or dividends with
respect to the UPC Preferred Shares (in each case, whether in cash, property
or securities) attributable to any period prior to the applicable Closing
Date, then the Company shall pay to Purchaser within one (1) Business Day
from receipt thereof all such payments of interest and/or dividends (whether
in cash, property or securities).
SECTION 2.5 RIGHTS AND PREFERENCES OF SERIES B SHARES AND SERIES C
SHARES. Notwithstanding any provision in this Agreement, the Series C
Certificate of Designation, the Securities Purchase Agreement or the Series B
Certificate of Designation (as defined in the Securities Purchase Agreement)
to the contrary, upon any Mandatory Redemption Event (as defined in the
Series C Certificate of Designation), the Company shall redeem all of the
Series C Shares prior to any redemption of the Series B Shares (as defined in
the Securities Purchase Agreement).
ARTICLE III
EXCHANGE OF DEBENTURES FOR SERIES B SHARES
SECTION 3.1. EXCHANGE OF DEBENTURES FOR SERIES C SHARES. Effective on
the first Business Day following the consummation of the Shareholder
Ratification Event, the aggregate outstanding principal balance, together
with accrued and unpaid interest thereon, of the Debentures shall be
automatically exchanged for an equal stated amount of Series C Shares (based
on the liquidation preference per share as provided in the Series C
Certificate of Designation) (the "Recapitalization Event"); provided,
however, the Recapitalization Event shall not occur if, as of the date of
consummation of the Shareholder Ratification Event, an Event of Default then
exists. In connection therewith, the Company shall issue effective as of the
first Business Day following the Shareholder Ratification Event the
appropriate number of Series C Shares representing the Maximum Exchange
Amount in the name of Purchaser and deliver the same to the Escrow Agent for
administration pursuant to the Escrow Agreement, and the Escrow Agent shall
submit to the Company the original Debentures for cancellation. Following the
Recapitalization Event, all references in this Agreement to Default and Event
of Default
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(including, without limitation, the references set forth in Articles Seven
and Eight hereof), shall be construed to mean the occurrence of a Mandatory
Redemption Event as specified in the Series C Certificate of Designation.
SECTION 3.2 SHAREHOLDER RATIFICATION. The Company has disclosed that
the Reorganization will require the ratification and/or approval by the
shareholders of the Company holding at least 50.1% of the Common Stock
outstanding immediately preceding the Reorganization (the "Shareholder
Ratification"). The Company hereby agrees to use its best lawful efforts to
obtain such Shareholder Ratification as soon as practicable following the
date hereof. The items which the Shareholder Ratification shall cover shall
include, among other items requested by the Company and approved by the
Purchaser, the following:
(A) Approval of the Reorganization; and
(B) The reincorporation of the Company from the State of
California to the State of Delaware (the "Reincorporation").
SECTION 3.3 REINCORPORATION. In the event the Company obtains the
Shareholder Ratification on the terms set forth above on or before June 30,
1998, then (x) the Recapitalization Event shall occur following the
Shareholder Ratification Event (assuming there then exists no Event of
Default under the Debentures) and (y) the Series C Shares shall remain as
issued and outstanding securities of the Company following the
Reincorporation, and the Series C Certificate of Designation shall thereafter
be governed by the laws of the State of Delaware.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and Orix, jointly and severally, represent and warrant to
the Purchaser, and each of them, as of the date hereof the following:
SECTION 4.1. ORGANIZATION AND QUALIFICATION. The Company and each
Subsidiary is a corporation (or other legal entity) duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation (or organization), with full power and authority to own, lease,
use and operate its properties and to carry on its business as and where now
owned, leased, used, operated and conducted. SCHEDULE 4.1 sets forth a list
of all Subsidiaries and the jurisdiction in which each is incorporated (or
organized). The Company and each of its Subsidiaries is duly qualified to
conduct business as a foreign corporation and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary, except where such failure would not have a Material
Adverse Effect. A "Material Adverse Effect" means any material adverse
effect on the operations, results of operations, properties, assets,
condition (financial or otherwise) or prospects of the Company
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or the Company and its Subsidiaries, taken as a whole, or on the transactions
contemplated hereby or by the agreements or instruments to be entered into in
connection herewith.
SECTION 4.2. AUTHORIZATION AND EXECUTION.
(A) Each of the Company and Orix have all requisite corporate
power and authority to enter into and perform each of the Transaction
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby and (with respect to the Company) to
issue the Convertible Instruments in accordance with the terms hereof
and thereof.
(B) The execution, delivery and performance by the Company and Orix
of each Transaction Agreement to which it is a party and the issuance by
the Company of the Convertible Instruments have been duly and validly
authorized and no further consent or authorization of the Company or Orix,
or their respective Boards of Directors or shareholders is required.
(C) This Agreement has been duly executed and delivered by the
Company and Orix.
(D) This Agreement constitutes, and upon execution and delivery
thereof by the Company and Orix, each of the Transaction Agreements will
constitute, a valid and binding agreement of the Company and Orix, in each
case enforceable against the Company and Orix in accordance with its
respective terms.
(E) All representations and warranties of each party to the
Reorganization Agreement are true and correct.
(F) All representations and warranties of the Company and Orix in
the Securities Purchase Agreement are true and correct.
SECTION 4.3. SERIES C SHARES. Upon issuance, the Series C Shares will
be, duly authorized, validly issued, fully paid and non-assessable. None of the
Series C Shares are subject to preemptive rights of the stockholders of the
Company or any Liens or encumbrances imposed through the actions or failure to
act of the Company. Other than as set forth on SCHEDULE 4.3 hereto, (i) there
are no outstanding options, warrants, scrip, rights to subscribe for, puts,
calls, rights of first refusal, agreements, understandings, claims or other
commitments or rights of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for any shares of capital stock of the
Company or any of its Subsidiaries, or arrangements by which the Company or any
of its Subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its Subsidiaries, and (ii) there are no
agreements or arrangements under which the Company or any of its Subsidiaries
are obligated to register the sale of any of its
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or their securities under the Securities Act (except pursuant to the
Registration Rights Agreement) and (iii) there are no anti-dilution or price
adjustment provisions contained in any security issued by the Company (or in
any agreement providing rights to security holders) that will be triggered by
the issuance of the Convertible Instruments or the Conversion Shares. The
Company has furnished to the Purchaser' true and correct copies of the
Company's Corporate Documents and Subsidiary Corporate Documents, and the
terms of all securities convertible into or exercisable for Common Stock and
the material rights of the holders thereof in respect thereto.
SECTION 4.4. GOVERNMENTAL AUTHORIZATION. The execution and delivery
by the Company and Orix of the Transaction Agreements does not and will not,
the issuance and sale by the Company of the Convertible Instruments does not
and will not, and the consummation of the transactions contemplated hereby
and by the other Transaction Agreements will not, require any action by or in
respect of, or filing with, any governmental body, agency or governmental
official except (a) such actions or filings that have been undertaken or made
prior to the date hereof and that will be in full force and effect (or as to
which all applicable waiting periods have expired) on and as of the date
hereof or which are not required to be filed on or prior to the Closing Date,
and (b) such actions or filings that, if not obtained, would not result in a
Material Adverse Effect.
SECTION 4.5. ISSUANCE OF SHARES. Upon conversion in accordance with
the terms of the Debentures or the Series C Certificate of Designation, the
shares of Common Stock issued upon conversion thereof (the "Conversion
Shares") shall be duly and validly issued and outstanding, fully paid and
nonassessable, free and clear of any taxes, Liens and charges with respect to
issuance and shall not be subject to preemptive rights or similar rights of
any other stockholders of the Company. Assuming the representations and
warranties of the Purchaser herein are true and correct in all material
respects, each of the Securities will have been issued in material compliance
with all applicable United States federal securities laws. The Company
understands and acknowledges that, in certain circumstances, the issuance of
the Conversion Shares could dilute the ownership interests of other
stockholders of the Company. The Company further acknowledges that its
obligation to issue the Conversion Shares upon conversion of the Shares in
accordance with this Agreement, the Debentures and the Series C Certificate
of Designation is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
stockholders of the Company.
SECTION 4.6. NO CONFLICTS. The execution and delivery by the Company
and Orix of the Transaction Agreements to which each is a party did not and
will not, the issuance and sale by the Company of the Securities did not and
will not and the consummation of the transactions contemplated hereby and by
the other Transaction Agreements will not, as of the date hereof, contravene
or constitute a default under or violation of (i) any provision of applicable
law or regulation, (ii) the Company Corporate Documents or Subsidiary
Corporate Documents, (iii) any material agreement, judgment, injunction,
order, decree or other material instrument binding upon the Company or any
Subsidiary or any of their respective assets, or result in the creation or
imposition of any Lien on any asset of the Company or any Subsidiary.
Page 13
The Company and each Subsidiary is in compliance with and conforms to all
statutes, laws, ordinances, rules, regulations, orders, restrictions and all
other legal requirements of any domestic or foreign government or any
instrumentality thereof having jurisdiction over the conduct of its
businesses or the ownership of its properties, except in each case where such
failure would not have a Material Adverse Effect.
SECTION 4.7. FULL DISCLOSURE. The information heretofore furnished by
the Company and Orix to the Purchaser for purposes of or in connection with
this Agreement or any transaction contemplated hereby does not, and all such
information hereafter furnished by the Company or any Subsidiary to the
Purchaser will not (in each case taken together and on the date as of which
such information is furnished), contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
contained therein, in the light of the circumstances under which they are made,
not misleading.
SECTION 4.8. CURRENT PUBLIC INFORMATION. The Company is a "reporting
issuer" as defined in Rule 902(l) of Regulation S and it has a class of
securities (Common Stock) registered under Section 12(b) or 12(g) of the
Exchange Act.
SECTION 4.9. NO DIRECTED SELLING EFFORTS IN REGARD TO THIS TRANSACTION;
COMPLIANCE WITH REGULATION S. The Company has not' and no Purchaser nor any
distributor, if any, participating in the offering of the Securities nor any of
their respective affiliates nor any Person acting for the Company or any such
distributor has conducted any "directed selling efforts" in connection with the
offering described in this Agreement as that term is defined in Rule 902 of
Regulation S. The Company has not offered the Securities to the Purchaser in
the United States or to any Person in the United States or any U.S. person (as
defined in Regulation S). The Company represents and warrants that the offering
by the Company of the Securities to the Purchaser as contemplated in this
Agreement is not part of a plan or scheme to evade the registration provisions
of the Securities Act.
SECTION 4.10. NO ACTION. The Company has not taken and will not take any
action that will affect in any way the running of the Restricted Period or the
ability of any Purchaser to resell freely, without restrictive legend following
the running of the Restricted Period, the Convertible Instruments and/or
Conversion Shares in accordance with applicable securities laws and this
Agreement.
SECTION 4.11. EXCHANGE AMOUNT. The Board of Directors of the Company has
concluded that the Exchange Amount of the Transferred UPC Securities
corresponds to the fair market value of such securities and that to the extent
the Exchange Amount includes any discount to the Market Price, such discount is
not excessive.
Page 14
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 5.1. PURCHASER. Each Purchaser severally (but not jointly)
hereby represents and warrants to the Company solely as to such Purchaser that:
(A) the Purchaser is not a "U.S. person" as that term is defined in
Rule 902(o) of Regulation S (a copy of which definition is attached hereto
as SCHEDULE 5.1(a), and such Purchaser is not an entity organized or
incorporated under the laws of any foreign jurisdiction by any U.S. person
principally for the purpose of investing in securities not registered
under the Securities Act, unless the Purchaser is or was organized or
incorporated by "U.S. persons" who are accredited investors (as defined in
Rule 501(a) under the Securities Act) and who are not natural persons,
estates or trusts;
(B) the Convertible Instruments were not offered to the Purchaser in
the United States and at the time of execution of this Agreement and at
the time the buy order was originated, and of any offer to such Purchaser
to purchase the Convertible Instruments hereunder, such Purchaser was
outside the United States;
(C) the Purchaser is purchasing the Convertible Instruments for its
own account and not on behalf of or for the benefit of any U.S. person and
the resale of the Convertible Instruments and Conversion Shares has not
been prearranged with any buyer in the United States, and that any sale of
the Convertible Instruments or Conversion Shares following the expiration
of the Restricted Period may be made only pursuant to the registration of
such Securities or an applicable exemption therefrom;
(D) the Purchaser agrees that all offers and sales of the
Convertible Instruments prior to the expiration of the Restricted Period
shall not be made to U.S. persons or for the account or benefit of U.S.
persons or within the United States and shall otherwise be made in
compliance with the provisions of Regulation S;
(E) the Purchaser has not been engaged or acted as or on behalf of a
distributor or dealer (and is not an affiliate of a distributor or dealer)
with respect to the offering of the Convertible Instruments.
(F) the Purchaser shall take all reasonable steps to ensure its
compliance with Regulation S and shall promptly send to each Person who
acts as a distributor, dealer or a Person receiving a selling
concession, fee or other remuneration in respect of any of the
Convertible Instruments, who purchases prior to the expiration of the
Restricted Period a confirmation or other notice to the Person stating
that the Person is subject to the same
Page 15
restrictions on offers and sales as the Person pursuant to
Section 901(c)(2)(iv) of Regulation S;
(G) the Purchaser has not engaged in any "direct selling efforts"
(as such term is defined in Regulation S) and has no present plan or
intention of selling the Securities in the United States, has made no
predetermined arrangements to sell the Securities (other than the
registration provisions contained in the Registration Rights Agreement,
which pertain only to a potential method of disposing of the shares of
Common Stock) and that the offering of the Securities, together with any
subsequent resale by any Purchaser of the Securities, is not part of a
plan or scheme on the part of Purchaser to evade the registration
provisions of the Securities Act;
(H) the Purchaser currently does not have a short position in the
Company's Common Stock, including any short call position or any long put
position or any contract or arrangement that has the effect of eliminating
or substantially diminishing the risk of ownership of the Convertible
Instruments, nor has any Purchaser engaged in any hedging transaction with
respect to the Convertible Instruments (or the Common Stock of the
Company);
(I) The Purchaser is not an officer, director or "affiliate" (as
that term is defined in Rule 405 under the Securities Act) of the company
or an "underwriter" or "dealer" (as such terms are defined in the federal
securities law of the United States). If the Purchaser becomes an
affiliate of the Company at any time after purchasing the Debentures, the
Purchaser understands and agrees that every sale made by it thereafter
must be made in compliance with the provisions of Rule 144 of the Act
(except for the four (4) year holding period requirement), including the
filing of Form 144 with the Commission at the time of the sale, as
required under Rule 144. The Purchaser understands and agrees that the
provisions of Rule 144, if at any time applicable to it, are separate and
apart from and independent of any restrictions imposed by Regulation S and
will apply even after the expiration oft he applicable restricted period
under Regulation S.
(J) If at any time after the expiration of the restricted period the
Purchaser wishes to transfer or attempts to transfer the Debentures to a
U.S. Person, Purchaser agrees to notify the Company if at such time it is
an "affiliate" of the Company or is then acting as an "underwriter",
"dealer" or "distributor" as to such Debentures (as such terms are defined
in the federal securities laws of the United States or the regulations
promulgated thereunder, including, but not limited to, Regulation S), or
if such transfer is being made as apart of a plan or scheme to evade the
registration provisions of the Securities Act.
(K) this Agreement and the remaining Transaction Agreements to which
it is a party have been duly executed and delivered in London, England by
the Purchaser.
Page 16
(L) the Purchaser is an "accredited investor" within the meaning of
Rule 501(a) under the Securities Act and the Securities to be acquired by
it pursuant to this Agreement are being acquired for its own account and,
as of the date hereof, not with a view toward, or for sale in connection
with, any distribution thereof except in compliance with applicable United
States federal and state securities law; provided that the disposition of
the Purchaser's property (including the Conversion Shares) shall at all
times be and remain within its control;
(M) the execution, delivery and performance of this Agreement and
the purchase of the Securities pursuant hereto are within Purchaser's
corporate or partnership powers, as applicable, and have been duly and
validly authorized by all requisite corporate or partnership action;
(N) this Agreement has been duly executed and delivered by the
Purchaser;
(O) such Purchaser understands that the Securities have not been
registered under the Securities Act and may not be transferred or sold
except as specified in this Agreement;
(P) this Agreement constitutes a valid and binding agreement of the
Purchaser enforceable in accordance with its terms when executed and
delivered by the Company (subject to (i) applicable bankruptcy, insolvency
or similar laws affecting creditors rights generally and (ii) equitable
principles of general applicability);
(Q) the Purchaser has such knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of
its investment in the Securities and the Purchaser is capable of bearing
the economic risks of such investment;
(R) the Purchaser is knowledgeable, sophisticated and experienced in
business and financial matters; the Purchaser has previously invested in
securities similar to the Securities and fully understands the limitations
on transfer described herein; the Purchaser has been afforded access to
information about the Company and the financial condition, results of
operations, property, management and prospects of the Company sufficient
to enable it to evaluate its investment in the Securities; the Purchaser
has been afforded the opportunity to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Securities and
the merits and the risks of investing in the Securities; and the Purchaser
has been afforded the opportunity to obtain such additional information
which the Company possesses or can acquire that is necessary to verify the
accuracy and completeness of the information given to the Purchaser
concerning the
Page 17
Company. The foregoing does not in any way relieve the Company of its
representations and other undertakings hereunder, and shall not limit
any Purchaser's ability to rely thereon;
(S) no part of the source of funds used by the Purchaser to acquire
the Securities constitutes assets allocated to any separate account
maintained by the Purchaser in which any employee benefit plan (or its
related trust) has any interest; and
(T) as of the date of execution of this Agreement, Purchaser is the
holder and beneficial owner of the UPC Debentures and the UPC Preferred
Stock listed on SCHEDULE 5.1(R), free and clear of all Liens; the rights
and obligations of Purchaser and UPC with regard to the UPC Debentures and
the UPC Preferred Shares are as set forth in (i) the Securities Purchase
Agreement between Purchaser and UPC, as amended, (ii) the UPC Debentures,
and (iii) the UPC Certificate of Designation, each as amended, copies of
which are attached hereto as EXHIBITS B, I and H, respectively.
ARTICLE VI
CONTEMPORANEOUS ACTS
SECTION 6.1. COMPANY DELIVERIES. Contemporaneous with the execution and
delivery of this Agreement:
(A) The Company shall execute the Registration Rights Agreement,
Escrow Agreement and Put and Call Agreement and deliver signed copies
thereof to Purchaser;
(b) The Company shall deliver to the Escrow Agent a duly executed
undated Debenture representing the Maximum Exchange Amount in accordance
with Section 2.1 hereof;
(c) The Company shall cause its legal counsel to deliver to the
Purchaser an opinion, dated the date hereof, substantially in the form
attached hereto as EXHIBIT K ; and
(d) The Company shall deliver to the Purchaser all other opinions,
resolutions, certificates, instruments, agreements or other documents as
it shall reasonably request.
SECTION 6.2. PURCHASER DELIVERIES. Contemporaneous with the execution
and delivery of this Agreement:
(A) The Purchaser shall execute the Registration Rights Agreement,
the Escrow Agreement and the Put and Call Agreement and deliver signed
copies thereof to the Company.
Page 18
ARTICLE VII
AFFIRMATIVE COVENANTS
The Company (and Orix, until the Shareholder Ratification has been
consummated) hereby agrees that, from and after the date hereof until the later
to occur of (x) the Option Expiration Date or (y) for so long as any of the
Convertible Instruments remain outstanding and for the benefit of the
Purchaser:
SECTION 7.1. INFORMATION. The Company will deliver to each holder of
the Convertible Instruments:
(A) AUDITED ANNUAL FINANCIAL STATEMENTS. As soon as available and
in any event within ninety (90) days after the end of each fiscal year of
the Company, a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such fiscal year and the related
consolidated statements of income and cash flows and stockholders' equity
(deficit) for such fiscal year, setting forth in each case in comparative
form the figures for the previous fiscal year, and certified by
independent public accountants of the Company of nationally recognized
standing in each case together with a report of such accounting firm
stating that in the course of its regular audit of the financial
statements of the Company, which audit was conducted in accordance with
GAAP, such accounting firm obtained no knowledge of any Default or Event
of Default which has occurred or is continuing or, if in the opinion of
such accounting firm such a Default or Event of Default has occurred and
is continuing, a statement as to the nature thereof;
(B) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in any
event within forty five (45) days after the end of each of the first three
fiscal quarters of each fiscal year of the Company, a consolidated balance
sheet of the Company and its Subsidiaries as of the end of such quarter
and the related consolidated statements of income and cash flows and
stockholders' equity (deficit) for such quarter and for the portion of the
Company's fiscal year ended at the end of such quarter, setting forth in
each case in comparative form the figures for the corresponding quarter
and the corresponding portion of the Company's previous fiscal year, all
certified (subject to footnote presentation and normal year-end
adjustments), as to fairness of presentation, GAAP and consistency, by the
chief financial officer or the chief accounting officer of the Company;
(C) FILINGS UNDER SECURITIES ACT AND EXCHANGE ACT. Promptly upon
the filing thereof, copies of (i) all registration statements (other than
the exhibits thereto and any registration statements on Form S-8 or its
equivalent), (ii) all reports on Forms 10-K,
Page 19
10-Q and 8-K (or their equivalents) which the Company or any Subsidiary has
filed with the Commission and (iii) any material press releases issued by
the Company or any Subsidiary;
(D) OFFICER'S CERTIFICATES. Simultaneously with the delivery of
each item referred to in clauses (a) and (b) above, a certificate from the
Company stating that no Default or Event of Default has occurred and is
continuing, or within five Business Days after any officer of the Company
obtains knowledge of a Default or Event of Default , a certificate of the
chief financial officer of the Company setting forth the details thereof
and the action which the Company is taking or proposes to take with
respect thereto;
(E) OTHER REPORTS AND FILINGS. Promptly upon the mailing thereof to
the shareholders of the Company generally, copies of all financial
statements, reports and proxy statements so mailed and any other document
generally distributed to shareholders;
(F) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any event
within three Business Days after an officer of the Company obtains
knowledge thereof, notice of (i) the occurrence of any event which
constitutes a Default or Event of Default, (ii) any litigation or
governmental proceeding pending (x) against the Company or any of its
Subsidiaries which would materially and adversely affect the business,
operations, property, assets, condition (financial or otherwise) or
prospects of the Company or any of its Subsidiaries or (y) with respect to
this Agreement or any of the other Transaction Agreements, and (iii) any
other event which is likely to materially and adversely affect the
business, operations, property, assets, condition (financial or otherwise)
or prospects of the Company or any of its Subsidiaries; and
(G) OTHER INFORMATION. From time to time such additional
information regarding the financial position or business of the Company
and its Subsidiaries as the Purchaser may reasonably request.
SECTION 7.2. PERFORMANCE OF OBLIGATIONS. The Company will, and will
cause each of its Subsidiaries to, perform all its obligations under the
terms of each mortgage, indenture, security agreement and other debt
instrument by which it is bound, except such non-performances as could not in
the aggregate have a material adverse effect on the business, operations,
property, assets, condition (financial or otherwise) or prospects of the
Company or of the Company and its Subsidiaries taken as a whole.
SECTION 7.3. MAINTENANCE OF PROPERTY; INSURANCE. The Company will,
and will cause each Subsidiary to, keep all property useful and necessary in
its business in good working order and condition, (ii) maintain with
financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks as
Page 20
is common in the industry, (iii) furnish to the Purchaser' Representative,
upon written request, full information as to the insurance carried.
SECTION 7.4. MAINTENANCE OF EXISTENCE. The Company will continue, and
each Subsidiary will continue, to engage in business of the same general type
as now conducted by the Company and such Subsidiaries, and will preserve,
renew and keep in full force and effect its respective corporate existence
and their respective material rights, privileges and franchises necessary or
desirable in the normal conduct of business.
SECTION 7.5. COMPLIANCE WITH LAWS. The Company will and will cause
each Subsidiary to comply, in all material respects, with all federal, state,
municipal, local or foreign laws, ordinances, rules, regulations, municipal
by-laws, codes and requirements of governmental authorities in respect of the
conduct of its business and the ownership of its property except where
non-compliance therewith could not reasonably be expected, in the aggregate,
to have a material adverse effect on the business, condition (financial or
otherwise), operations, performance, properties or prospects of the Company
or such Subsidiary.
SECTION 7.6. INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Company
will and will cause each Subsidiary to keep proper books of record and
account in which full, true and correct entries in conformity with GAAP and
all requirements of law shall be made of all dealings and transactions in
relation to their respective businesses and activities. The Company will,
and will cause each Subsidiary to, permit, during normal business hours upon
reasonable notice, officers and designated representatives of the Purchaser'
Representative to visit and inspect properties of the Company, upon
reasonable prior notice, to examine and make abstracts from any of the books
and records of the Company and to discuss the affairs, finances and accounts
of the Company with its executive officers and independent public
accountants, all at such reasonable times at the Company's expense.
SECTION 7.7. INVESTMENT COMPANY ACT. The Company will not be or
become an open-end investment trust, unit investment trust or face-amount
certificate company that is or is required to be registered under Section 8
of the Investment Company Act of 1940, as amended.
SECTION 7.8. SUPPLEMENTAL INFORMATION. If at any time the Company is
not subject to the requirements of Section 13 or 15(d) of the Exchange Act,
the Company will promptly furnish at its expense, upon request, for the
benefit of the holders from time to time of Securities, and prospective
purchasers of Securities, information satisfying the information requirements
of Rule 144 under the Securities Act.
SECTION 7.9. COMPLIANCE WITH TERMS AND CONDITIONS OF MATERIAL
CONTRACTS. The Company will comply and will cause each Subsidiary to comply,
in all material respects, with all terms and conditions of all material
contracts to which it is subject.
Page 21
SECTION 7.10 BLUE SKY LAWS. The Company shall promptly take such
action as the Company shall reasonable determine is necessary to qualify the
Convertible Instruments for sale to the Purchaser at the Closing pursuant to
this Agreement under applicable securities or "blue sky" laws of the states
of the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to each Purchaser and the
Purchaser' Representative on or prior to the Closing Date.
SECTION 7.11 OBSERVER RIGHTS. As long as the Purchaser own, in the
aggregate, not less than twenty five percent (25%) of the Convertible
Instruments issued hereunder (or an equivalent amount of Common Stock issued
upon conversion thereof), a representative of the Purchaser (the "Observer")
will have all the rights of a director (exclusive of payment of director
fees) pursuant to the Company's Corporate Documents but will not attend
meetings of the Company's Board of Directors and will not be entitled to vote
on matters submitted for the Board's approval. The Company shall provide to
the Observer copies of all notices, minutes, consents, and other materials
that it provides to its Directors (including but not limited to the minutes
of shareholders' meetings); provided, however, that the Observer shall agree
to hold in confidence and trust and to act in a fiduciary manner with respect
to all information so provided; and, provided further, that the Company
reserves the right to withhold any information or portion thereof if access
to such information or attendance at such meeting could adversely affect the
attorney-client privilege between the Company and its counsel or would result
in disclosure of material inside information or trade secrets to the
Observer. At the request of the Purchaser, key members of the Company's
management and executive officers will meet with the Observer no less than
four (4) times per calendar year, at the Company's facilities and at the
Company's expense.
SECTION 7.12. MAINTENANCE OF REPORTING STATUS; SUPPLEMENTAL
INFORMATION. So long as any of the Securities are outstanding, the Company
shall timely file all reports required to be filed with the Commission
pursuant to the Exchange Act. The Company shall not terminate its status as
an issuer required to file reports under the Exchange Act, even if the
Exchange Act or the rules and regulations thereunder would permit such
termination. If at anytime the Company is not subject to the requirements of
Section 13 or 15(d) of the Exchange Act, the Company will promptly furnish at
its expense, upon request, for the benefit of the holders from time to time
of Securities, and prospective Purchaser of Securities, information
satisfying the information requirements of Rule 144 under the Securities Act.
SECTION 7.13. OTC ELIGIBILITY. Unless the Common Stock becomes listed
on the Nasdaq Stock Market's National Market, Nasdaq Stock market's SmallCap
Market, American Stock Exchange or New York Stock Exchange, the Company shall
take all actions necessary such that the Company's Common Stock will be (i)
eligible for quotation on the OTC Market and (ii) "active" securities (as
such term is defined by NASD regulations) satisfying the frequency-of-
quotation requirement and traded on the OTC Market. Additionally, the Company
shall take all
Page 22
actions necessary such that at least ten (10) members of the NASD continue to
be registered as market makers with respect to the Company's shares of Common
Stock.
SECTION 7.14. KEY-MAN INSURANCE POLICY. Within 30 days of Closing, the
Company shall purchase a $3 million key-man life insurance policy (the "Key
Man Policy") on the life of ▇▇▇▇▇ ▇▇▇▇▇▇. The Company shall appoint the
Purchasers as the primary beneficiary of the Key Man Policy to the extent of
the remaining balance (i.e., the principal amount and accrued interest or
Stated Value and accrued dividends) of the Convertible Instruments and any
remaining proceeds shall be payable to the Company. The Company shall
maintain the Key Man Policy for so long as the Purchasers hold at least
$500,000 of the Convertible Instruments.
ARTICLE VIII
NEGATIVE COVENANTS
The Company (and Orix, until the Shareholder Ratification has been
consummated) hereby agrees that, from and after the date hereof until the
later to occur of (x) the Option Expiration Date or (y) for so long as any
Convertible Instruments remain outstanding and for the benefit of the
Purchaser:
SECTION 8.1. CONSOLIDATION, MERGER, SALE OF ASSETS, ETC. Except for
consummation of the Reorganization and mergers contemplated by the
Reincorporation, the Company will not, and will not permit any of its
Subsidiaries to, wind up, liquidate or dissolve its affairs or enter into any
transaction of merger or consolidation, or convey, sell, lease or otherwise
dispose of (or agree to do any of the foregoing at any future time) all or
any part of its property or assets, or purchase or otherwise acquire (in one
or a series of related transactions) any part of the property or assets
("Asset Sale") (other than purchases or other acquisitions of inventory,
materials and equipment in the ordinary course of business) of any Person, or
permit any of its Subsidiaries so to do any of the foregoing, except that the
Company and its Subsidiaries may (i) make sales of inventory in the ordinary
course of business, and (ii) in the ordinary course of business, sell
equipment which is uneconomical or obsolete.
SECTION 8.2. TRANSACTIONS WITH AFFILIATES. The Company will not, and
will not permit any of its Subsidiaries to, enter into any transaction or
series of related transactions, whether or not in the ordinary course of
business, with any Affiliate of the Company, other than on terms and
conditions substantially as favorable to the Company or such Subsidiary as
would be obtainable by the Company or such Subsidiary at the time in a
comparable arm's-length transaction with a Person other than an Affiliate.
SECTION 8.3. RESTRICTIONS ON CERTAIN AMENDMENTS. Except for the
Reincorporation, neither the Company nor any Subsidiary will waive any
provision of, amend, or suffer to be amended, any provision of such entity's
existing Debt, any material contract or
Page 23
agreement previously or hereafter filed by the Company with the Commission as
part of its SEC Reports, any Company Corporate Document or Subsidiary
Corporate Document if such amendment, in the Company's reasonable judgment,
would materially adversely affect the Purchaser or the holders of the
Securities without the prior written consent of the Purchaser.
SECTION 8.4 PROHIBITION ON DISCOUNTED EQUITY OFFERINGS.
(A) Until such time as all of the Convertible Instruments have been
either redeemed or converted into Conversion Shares in full, the Company
agrees that it will not issue any of its equity securities (or securities
convertible into or exchangeable or exercisable for equity securities
(collectively, the "Derivative Securities"), on terms that allow a holder
thereof to acquire such equity securities (or Derivative Securities) at a
discount to the Market Price of the Common Stock at the time of issuance
or, in the case of Derivative Securities (other than the Shares) at a
conversion price based on any formula (other than standard anti-dilution
provisions) based on the Market Price on a date later than the date of
issuance so long as such conversion is not below the Market Price on the
date of issuance (each such event, a "Discounted Equity Offering"). As
used herein, "discount" shall include, but not be limited to, (i) any
warrant, right or other security granted or offered in connection with
such issuance which, on the applicable date of grant, is offered with an
exercise or conversion price, as the case may be, at less than the then
current Market Price of the Common Stock or, if such security has an
exercise or conversion price based on any formula (other than standard
anti-dilution provisions) based on the Market Price on a date later than
the date of issuance, then at a price below the Market Price on such date
of exercise or conversion, as the case may be, or (ii) any commissions,
fees or other allowances paid in connection with such issuances (other
than customary underwriter or placement agent commissions, fees or
allowances). For the purposes of determining the Market Price at which
Common Stock is acquired under this Section, normal underwriting
commissions and placement fees (including underwriters' warrants) shall be
excluded.
(B) Until such time as all of the Convertible Instruments have been
either redeemed or converted into Conversion Shares in full, the Company
agrees it will not issue any of its equity securities (or Derivative
Securities), unless any shares of Common Stock issued or issuable in
connection therewith are "restricted securities". As used herein
"restricted securities" shall mean securities which may not be sold by
virtue of contractual restrictions imposed by the Company either pursuant
to an exemption from registration under the Securities Act or pursuant to
a registration statement filed by the Company with the Commission, in each
case prior to eighteen (18) months following the date of issuance of such
securities.
(C) The restrictions contained in this Section 10.5 shall not apply
to the issuance by the Company of (or the agreement to issue) Common Stock
or Derivative Securities in connection with (i) the acquisition (including
by merger) of a business or of assets
Page 24
otherwise permitted under this Agreement, (ii) stock option or other
compensatory plans, or (iii) issuance of Common Stock pursuant to the terms
of the Equity Line.
SECTION 8.5 EXECUTIVE COMPENSATION. The Company shall not pay any of
its employees more than $100,000 per annum without approval of the Company's
compensation committee, except for ▇▇▇▇▇ ▇▇▇▇▇▇ whose base salary shall be
$250,000 for calendar year 1998, with not more than $150,000 thereof paid
during calendar year 1998 (with any deferred portion being payable in January
1999), plus perquisites which shall not exceed $3,000 per month. In
addition, the Company shall be permitted to establish compensation plans
(including stock option plans) that are comparable to other companies of
similar size in similar industries, and which are approved by the Company's
compensation committee.
SECTION 8.6 REGISTRATION RIGHTS. The Company shall not grant any
registration rights to any parties receiving warrants to acquire Common Stock
in connection with the Reorganization or this Agreement.
ARTICLE IX
RESTRICTIVE LEGENDS
SECTION 9.1 RESTRICTIVE LEGENDS. The Convertible Instruments shall
bear a legend substantially as set forth below and any other legend, if such
legend or legends are reasonably required to comply with state, federal or
foreign law. Assuming that there are no changes in the material facts
represented by the Purchaser in Section 5.1 of this Agreement or applicable
law from the date hereof until the date of conversion, all certificates
representing the Conversion Shares into which the Convertible Instruments are
converted after the Restricted Period shall be issued without any restrictive
legend.
"The securities of Touch Tone America, Inc. represented hereby have
been issued pursuant to Regulation S, promulgated under the United
States Securities Act of 1933, as amended (the "Act"), and have not
been registered under the Act or any applicable state securities
laws. These securities may not be offered or sold within the United
States or to or for the account of a "U.S. Person" (as that term is
defined in Regulation S) during the period commencing on the date of
sale of these securities and ending forty days thereafter (the
"Restricted Period"). These securities may first be converted into
common stock on the 41st day following the date of issuance hereof.
SECTION 9.2. ISSUANCE OF COMMON SHARES; TRANSFERS. Upon conversion of
the Convertible Instruments, the Company will, and will use its best lawful
efforts to cause its transfer agent to, issue within three (3) Business Days
of the delivery of a Notice of Conversion one or more certificates
representing shares of Common Stock in such name or names and in
Page 25
such denominations specified by a Purchaser in a Notice of Conversion. The
shares of Common Stock to be issued upon conversion of the Convertible
Instruments shall not bear any restrictive legends and shall be freely
transferable upon expiration of the Restricted Period, subject to compliance
with the terms of the Convertible Instruments. The Company agrees that no
instructions other than these instructions, and instructions for a "stop
transfer" until the end of the Restricted Period have been or will be given
to its transfer agent and also agrees that the Convertible Instruments or
Conversion Shares, as applicable, shall otherwise be freely transferable by
Purchaser on the books and records of the Company subject to compliance with
Federal and state securities laws and the terms of the Convertible
Instruments. The Company will notify its transfer agent of the Closing Date
and of the date of expiration of the Restricted Period. Nothing in this
section shall affect in any way a Purchaser's obligations and agreement to
comply with all applicable securities laws upon resale of the Securities.
ARTICLE X
ADDITIONAL AGREEMENTS AMONG THE PARTIES
SECTION 10.1. REGISTRATION RIGHTS. The Company shall grant the
Purchaser registration rights covering the Conversion Shares on the terms set
forth in the Registration Rights Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. NOTICES. All notices, demands and other communications
to any party hereunder shall be in writing (including telecopier or similar
writing) and shall be given to such party at its address set forth on the
signature pages hereof, or such other address as such party may hereafter
specify for the purpose to the other parties. Each such notice, demand or
other communication shall be effective (i) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified on the signature
page hereof, (ii) if given by mail, four (4) days after such communication is
deposited in the mail with first class postage prepaid, addressed as
aforesaid or (iii) if given by any other means, when delivered at the address
specified in or pursuant to this Section.
SECTION 11.2. NO WAIVERS; AMENDMENTS.
(A) No failure or delay on the part of any party in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.
Page 26
(b) Any provision of this Agreement may be amended, supplemented or
waived if, but only if, such amendment, supplement or waiver is in writing
and is signed by the Company; provided, that without the consent of each
Purchaser affected thereby, an amendment or waiver may not restrict or
limit such Purchaser's rights under the Certificates of Designation. In
determining whether the requisite number of holders of the Shares have
concurred in any direction, consent, or waiver as provided in any
Transaction Agreement, Shares which are owned by the Company or any other
obligor on or guarantor of the Shares, or by any Person Controlling,
Controlled by, or under Common Control with any of the foregoing, shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; and provided further that no such amendment, supplement or
waiver which affects the rights of the Purchaser and their Affiliates
otherwise than solely in their capacities as holders of Shares shall be
effective with respect to them without their prior written consent.
SECTION 11.3. INDEMNIFICATION BY THE COMPANY.
(a) The Company agrees to indemnify and hold harmless each
Purchaser, its Affiliates, and each Person, if any, who controls such
Purchaser, or any of its Affiliates, within the meaning of the Securities
Act or the Exchange Act (each for purposes of this Section 11.3 a
"Controlling Person"), and the respective partners, agents, employees,
officers and directors of each Purchaser, their Affiliates and any such
Controlling Person (each for purposes of this Section 11.3 an "Indemnified
Party" and collectively, the "Indemnified Parties"), from and against any
and all losses, claims, damages, liabilities and expenses (including,
without limitation, and as incurred, reasonable costs of investigating,
preparing or defending any such claim or action, whether or not such
Indemnified Party is a party thereto, provided that the Company shall not
be obligated to advance such costs to any Indemnified Party other than the
Purchaser unless it has received from such Indemnified Party an
undertaking to repay to the Company the costs so advanced if it should be
determined by final judgment of a court of competent jurisdiction that
such Indemnified Party was not entitled to indemnification hereunder with
respect to such costs) which may be incurred by such Indemnified Party in
connection with any investigative, administrative or judicial proceeding
brought or threatened that relates to or arises out of, or is in
connection with any activities contemplated by any Transaction Agreement
or any other services rendered in connection herewith; provided that the
Company will not be responsible for any claims, liabilities losses,
damages or expenses that are determined by final judgment of a court of
competent jurisdiction to result from such Indemnified Party's gross
negligence, willful misconduct or bad faith.
(b) If any action shall be brought against an Indemnified Party with
respect to which indemnity may be sought against the Company under this
Agreement, such Indemnified Party shall promptly notify the Company in
writing and the Company, at its
Page 27
option, may, assume the defense thereof, including the employment
of counsel reasonably satisfactory to such Indemnified Party and
payment of all reasonable fees and expenses. The failure to so
notify the Company shall not affect any obligations the Company may
have to such Indemnified Party under this Agreement or otherwise
unless the Company is materially adversely affected by such
failure. Such Indemnified Party shall have the right to employ separate
counsel in such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of
such Indemnified Party, unless: (i) the Company has failed to
assume the defense and employ counsel or (ii) the named parties to
any such action (including any impleaded parties) include such
Indemnified Party and the Company, and such Indemnified Party shall
have been advised by counsel that there may be one or more legal
defenses available to it which are different from or additional to
those available to the Company, in which case, if such Indemnified
Party notifies the Company in writing that it elects to employ
separate counsel at the expense of the Company, the Company shall
not have the right to assume the defense of such action or
proceeding on behalf of such Indemnified Party, provided, however, that
the Company shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be responsible hereunder for the
reasonable fees and expenses of more than one such firm of separate
counsel, in addition to any local counsel, which counsel shall be
designated by the Purchaser. The Company shall not be liable for
any settlement of any such action effected without the written
consent of the Company (which shall not be unreasonably withheld)
and the Company agrees to indemnify and hold harmless each
Indemnified Party from and against any loss or liability by reason
of settlement of any action effected with the consent of the
Company. In addition, the Company will not, without the prior written
consent of the Purchaser, settle or compromise or consent to the entry
of any judgment in or otherwise seek to terminate any pending or
threatened action, claim, suit or proceeding in respect to which
indemnification or contribution may be sought hereunder (whether or
not any Indemnified Party is a party thereto) unless such
settlement, compromise, consent or termination includes an express
unconditional release of the Purchaser and the other Indemnified
Parties, satisfactory in form and substance to the Purchaser, from
all liability arising out of such action, claim, suit or proceeding.
(c) If for any reason the foregoing indemnity is unavailable
(otherwise than pursuant to the express terms of such indemnity) to an
Indemnified Party or insufficient to hold an Indemnified Party harmless,
then in lieu of indemnifying such Indemnified Party, the Company shall
contribute to the amount paid or payable by such Indemnified Party as a
result of such claims, liabilities, losses, damages, or expenses (i) in
such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and by the Purchaser on the other
from the transactions contemplated by this Agreement or (ii) if the
allocation provided by clause (i) is not permitted under applicable law,
in such proportion as is appropriate to reflect not only the relative
benefits received
Page 28
by the Company on the one hand and the Purchaser on the other, but
also the relative fault of the Company and the Purchaser as well as
any other relevant equitable considerations. Notwithstanding the
provisions of this Section 11.3, the aggregate contribution of all
Indemnified Parties shall not exceed the amount of interest and fees
actually received by the Purchaser pursuant to this Agreement. It is
hereby further agreed that the relative benefits to the Company on
the one hand and the Purchaser on the other with respect to the
transactions contemplated hereby shall be determined by reference
to, among other things, whether any untrue or alleged untrue statement
of material fact or the omission or alleged omission to state a material
fact related to information supplied by the Company or by the Purchaser
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. No Person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent misrepresentation.
(d) The indemnification, contribution and expense reimbursement
obligations set forth in this Section 11.3 (i) shall be in addition to any
liability the Company may have to any Indemnified Party at common law or
otherwise, (ii) shall survive the termination of this Agreement and the
other Transaction Agreements and the payment in full of the Convertible
Instruments and (iii) shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Purchaser or
any other Indemnified Party.
SECTION 11.4 INDEMNIFICATION BY THE PURCHASER.
(a) The Purchaser severally agrees to indemnify and hold harmless
the Company, its Affiliates, and each Person, if any, who controls the
Company, or any of its Affiliates, within the meaning of the Securities
Act or the Exchange Act (each for purposes of this Section 11.4 a
"Controlling Person"), and the respective partners, agents, employees,
officers and directors of the Company, their Affiliates and any such
Controlling Person (each for purposes of this Section 11.4 an "Indemnified
Party" and collectively, the "Indemnified Parties"), from and against any
and all losses, claims, damages, liabilities and expenses (including,
without limitation, and as incurred, reasonable costs of investigating,
preparing or defending any such claim or action, whether or not such
Indemnified Party is a party thereto, provided that the Purchaser shall
not be obligated to advance such costs to any Indemnified Party other than
the Company unless it has received from such Indemnified Party an
undertaking to repay to the Purchaser the costs so advanced if it should
be determined by final judgment of a court of competent jurisdiction that
such Indemnified Party was not entitled to indemnification hereunder with
respect to such costs) which may be incurred by such Indemnified Party in
connection with any breach of the representations and warranties of the
Purchaser contained in this Agreement; provided that the Purchaser will
not be responsible for any
Page 29
claims, liabilities losses, damages or expenses that are determined by
final judgment of a court of competent jurisdiction to result from such
Indemnified Party's gross negligence, willful misconduct or bad faith.
(b) If any action shall be brought against an Indemnified Party with
respect to which indemnity may be sought against the Purchaser under this
Agreement, such Indemnified Party shall promptly notify the Purchaser in
writing and the Purchaser, at its option, may, assume the defense thereof,
including the employment of counsel reasonably satisfactory to such
Indemnified Party and payment of all reasonable fees and expenses. The
failure to so notify the Purchaser shall not affect any obligations the
Purchaser may have to such Indemnified Party under this Agreement or
otherwise unless the Purchaser is materially adversely affected by such
failure. Such Indemnified Party shall have the right to employ separate
counsel in such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such
Indemnified Party, unless: (i) the Purchaser has failed to assume the
defense and employ counsel or (ii) the named parties to any such action
(including any impleaded parties) include such Indemnified Party and the
Purchaser, and such Indemnified Party shall have been advised by counsel
that there may be one or more legal defenses available to it which are
different from or additional to those available to the Purchaser, in which
case, if such Indemnified Party notifies the Purchaser in writing that it
elects to employ separate counsel at the expense of the Purchaser, the
Purchaser shall not have the right to assume the defense of such action or
proceeding on behalf of such Indemnified Party, provided, however, that
the Purchaser shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be responsible hereunder for the reasonable
fees and expenses of more than one such firm of separate counsel, in
addition to any local counsel, which counsel shall be designated by the
Company. The Purchaser shall not be liable for any settlement of any such
action effected without the written consent of the Purchaser (which shall
not be unreasonably withheld) and the Purchaser agrees to indemnify and
hold harmless each Indemnified Party from and against any loss or
liability by reason of settlement of any action effected with the consent
of the Purchaser. In addition, the Purchaser will not, without the prior
written consent of the Company, settle or compromise or consent to the
entry of any judgment in or otherwise seek to terminate any pending or
threatened action, claim, suit or proceeding in respect to which
indemnification or contribution may be sought hereunder (whether or not
any Indemnified Party is a party thereto) unless such settlement,
compromise, consent or termination includes an express unconditional
release of the Company and the other Indemnified Parties, satisfactory in
form and substance to the Company, from all liability arising out of such
action, claim, suit or proceeding.
(c) If for any reason the foregoing indemnity is unavailable
(otherwise than pursuant to the express terms of such indemnity) to an
Indemnified Party or insufficient
Page 30
to hold an Indemnified Party harmless, then in lieu of indemnifying
such Indemnified Party, the Purchaser shall contribute to the
amount paid or payable by such Indemnified Party as a result of
such claims, liabilities, losses, damages, or expenses (i) in such
proportion as is appropriate to reflect the relative benefits
received by the Purchaser on the one hand and by the Company on the
other from the transactions contemplated by this Agreement or
(ii) if the allocation provided by clause (i) is not permitted under
applicable law, in such proportion as is appropriate to reflect not
only the relative benefits received by the Purchaser on the one
hand and the Company on the other, but also the relative fault of
the Purchaser and the Company as well as any other relevant equitable
considerations. Notwithstanding the provisions of this Section 11.4, the
aggregate contribution of all Indemnified Parties shall not exceed the
amount of interest and fees actually received by the Company pursuant to
this Agreement. It is hereby further agreed that the relative benefits
to the Purchaser on the one hand and the Company on the other with
respect to the transactions contemplated hereby shall be determined by
reference to, among other things, whether any untrue or alleged untrue
statement of material fact or the omission or alleged omission to state a
material fact related to information supplied by the Purchaser or by the
Company and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(d) The indemnification, contribution and expense reimbursement
obligations set forth in this Section 11.4 (i) shall be in addition to any
liability the Purchaser may have to any Indemnified Party at common law or
otherwise, (ii) shall survive the termination of this Agreement and the
other Transaction Agreements and the payment in full of the Convertible
Instruments and (iii) shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Company or any
other Indemnified Party.
SECTION 11.5 EXPENSES: DOCUMENTARY TAXES. The Company agrees to pay (i)
the greater of $25,000 or all actual reasonable out-of-pocket expenses of the
Purchaser, including fees and disbursements of counsel, in connection with (x)
the negotiation and preparation of this Agreement (the "Expense Reimbursement
Fee") and (y) any waiver or consent hereunder or under any other Transaction
Agreement or any amendment hereof or thereof and (ii) all reasonable
out-of-pocket expenses of the Purchaser and each holder of Securities,
including fees and disbursements of counsel, in connection with any collection,
bankruptcy, insolvency and other enforcement proceedings resulting therefrom.
In addition, the Company agrees to pay any and all stamp, transfer and other
similar taxes, assessments or charges payable in connection with the execution
and delivery of any Transaction Agreement or the issuance of the Securities to
the Purchaser, excluding their assigns.
Page 31
SECTION 11.6. PAYMENT. The Company agrees that, so long as a Purchaser
shall own any Shares issued by the Company hereunder, the Company will make
any payments required to such Purchaser of all amounts due thereon by wire
transfer by 1:00 P.M. (New York City time) on the date of payment.
SECTION 11.7. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the Company and upon the Purchaser and their respective successors and
assigns; provided that the Company shall not assign or otherwise transfer its
rights or obligations under this Agreement to any other Person without the
prior written consent of the Purchaser. All provisions hereunder purporting
to give rights to Purchaser and their Affiliates or to holders of Securities
are for the express benefit of such Persons and their successors and assigns.
SECTION 11.8. BROKERS. Except as set forth on SCHEDULE 11.8, the
Company represents and warrants that it has not employed any broker, finder,
financial advisor or investment banker who would be entitled to any
brokerage, finder's or other fee or commission payable by the Company or the
Purchaser in connection with the sale of the Securities. Each Purchaser
hereby warrants that it has not employed any broker, finder, financial
advisor or investment banker who would be entitled to any brokerage, finder's
or other fee or commission payable by the Company in connection with the sale
of the Securities.
SECTION 11.9. CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEVADA. EACH PARTY
HERETO HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR ▇▇▇▇▇ COUNTY AND OF ANY NEVADA STATE COURT SITTING IN
NEVADA FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 11.10. FURTHER ASSURANCE. The Company, the Purchaser'
Representative and the Purchaser shall each take such further actions as
requested by any party hereto which are necessary, desirable or proper to
carry out the purposes of this Agreement and each Transaction Agreement.
SECTION 11.11. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in
Page 32
full force and effect and shall in no way be affected, impaired or
invalidated unless a failure of consideration would result thereby.
SECTION 11.12 SURVIVAL. All provisions contained in this Agreement
(unless specifically noted to the contrary) shall survive the redemption or
conversion into Conversion Shares in full of the Shares and shall remain
operative and in full force and effect.
SECTION 11.12. COUNTERPARTS. This Agreement may be executed by telecopy
signature and in any number of counterparts each of which shall be an
original with the same effect as if the signatures there to and hereto were
upon the same instrument.
[SIGNATURE PAGE FOLLOWS]
Page 33
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers, as of the date first
above written.
TOUCH TONE AMERICA, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President and Chief Executive Officer
Address: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Day, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO PURCHASER:
INFINITY INVESTORS LIMITED
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
Address: ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Fax: ▇▇▇-▇▇-▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇. ▇. ▇▇▇▇▇▇▇▇
ACKNOWLEDGED AND AGREED TO
FOR ALL PURPOSES SPECIFIED:
ORIX GLOBAL COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
Address: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇)▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
Page 34
LIST OF SCHEDULES
Schedule 4.1 - Subsidiaries
Schedule 4.3 - Outstanding Convertible Securities
Schedule 5.1(a)- Definition of U.S. Person
Schedule 5.1(r)- UPC Debentures and UPC Preferred Stock held by Purchaser
Schedule 11.8 - Brokers
Page 35
SCHEDULE 4.1
SUBSIDIARIES
GetNet International, Inc., an Arizona Corporation.
Orix Global communications, Inc., a Nevada corporation, will be a Subsidiary
following the Reorganization.
Page 36
SCHEDULE 4.3
OUTSTANDING CONVERTIBLE SECURITIES
None
Page 37
SCHEDULE 5.1(a)
DEFINITION OF U.S. PERSON
Attached hereto as ANNEX A is a copy of the definition of "U.S. person" as
defined in Rule 902(o) of Regulation S.
Page 38
SCHEDULE 5.1(r)
UPC DEBENTURES AND UPC PREFERRED STOCK HELD BY PURCHASER
Page 39
SCHEDULE 11.8
BROKERS
None
Page 40
LIST OF EXHIBITS
Exhibit A - Reorganization Agreement
Exhibit B - Securities Purchase Agreement
Exhibit C - Convertible Exchange Debentures
Exhibit D - Escrow Agreement
Exhibit E - Officer's Certificate
Exhibit F - Registration Rights Agreement
Exhibit G - Series C Certificate of Designation
Exhibit H - UPC Certificate of Designation
Exhibit I - UPC Debentures
Exhibit J - Put and Call Agreement
Exhibit K - Company Counsel Opinion
Page 41