Stock Purchase Agreement
dated as of September 30, 1999
by and among
MailTV Pty Ltd,
World CallNet, Inc.,
and
Xxxx Xxxxxxx-Xxxxxxx
XXXXX & MC.KENZIE
Solicitors
Level 26, AMP Centre Xxxxx 00, Xxxxxx
00 Xxxxxx Xxxxxx 525 Xxxxxxx Street
SYDNEY NSW 2000 XXXXXXXXX XXX 0000
Tel: (00) 0000-0000 Tel: (00) 0000-0000
Fax: (00) 0000-0000 Fax: (00) 0000-0000
Contents
Section Heading Page
1. Definitions and Interpretation.............................................2
1.1 Definitions................................................................2
1.2 Interpretation.............................................................4
2. Purchase and Sale..........................................................5
2.1 Purchase and Sale of Company Shares........................................5
2.2 Issuance of Company Shares; Purchase Price.................................5
2.3 First Closing..............................................................5
2.4 Second Closing.............................................................5
2.5 Deliveries at the First Closing by the Purchaser...........................6
2.6 Deliveries at the First Closing by the Company.............................6
2.7 Deliveries at the Second Closing by the Purchaser..........................7
2.8 Deliveries at the Second Closing by the Company............................7
3. Changes to Capital.........................................................7
3.1 Alteration of the capital of the Company...................................7
3.2 Merger involving the Company...............................................8
3.3 Anti-dilution..............................................................8
4. Conditions.................................................................8
4.1 Conditions Precedent to Purchaser's Obligation to Close....................8
4.2 Conditions Precedent to Company's Obligation to Close......................9
5. Representations and Warranties............................................10
5.1 Representations and Warranties of the Company.............................10
5.2 Representations and Warranties of the Purchaser...........................10
5.3 Survival of representations and warranties................................10
5.4 Representation and warranties separate....................................10
5.5 Waiver....................................................................10
5.6 Indemnity.................................................................11
5.7 Guaranty..................................................................11
5.8 Aggregate liability.......................................................11
5.9 Disclosure Letters........................................................12
5.10 Time limitation...........................................................12
5.11 Prompt disclosure of breach...............................................12
6. Covenants.................................................................13
6.1 Affirmative covenants of the Company......................................13
6.2 Negative Covenants of the Company.........................................13
6.3 Covenants of the Purchaser................................................14
6.4 No Solicitation...........................................................15
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7. Termination...............................................................15
7.1 General...................................................................15
7.2 Payments in event of termination..........................................15
8. General...................................................................16
8.1 Costs.....................................................................16
8.2 Notices...................................................................16
8.3 Successors Bound..........................................................17
8.4 Assignment................................................................18
8.5 Continuing Agreement......................................................18
8.6 Further Assurance.........................................................18
8.7 Publicity.................................................................18
8.8 Amendments................................................................18
8.9 Governing Law; Jurisdiction...............................................18
8.10 No Partnership............................................................19
8.11 Severability..............................................................19
8.12 Waiver....................................................................19
8.13 Effect of Termination.....................................................19
8.14 Rights Cumulative.........................................................19
8.15 Entire Agreement..........................................................19
8.16 Counterparts..............................................................20
Schedule 1 Representations and Warranties of the Company.............................22
Company Disclosure Schedule.................................................................39
Schedule 2 Representations and Warranties of the Purchaser...........................42
Annex A Previous Payments by the Purchaser........................................44
Annex B Form of Registration Rights Agreement......................................1
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This Stock Purchase Agreement, dated as of September 30, 1999, is made by an
among the following parties:
MailTV Pty Limited (the "Purchaser"), a company incorporated in New South Wales,
Australia, whose registered office is Xxxxx 00-00, Xxxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxx 0000,
World CallNet, Inc. (the "Company"), a Delaware corporation, whose principal
place of business is Brecon House, Meridian Gate, 000 Xxxxx Xxxx, Xxxxxx X00
0XX, and
Xxxx Xxxxxxx-Xxxxxxx of Brecon House, Meridian Gate, 000 Xxxxx Xxxx, Xxxxxx X00
0XX ("Xxxxxxx").
Recitals
A. The Company, through its wholly owned subsidiary Overleaf, is the legal and
beneficial owner of all intellectual property rights and interests in
Mailtv.
B. The Company owns and operates an internet service provider in the United
Kingdom operating as CallNet PLC.
C. The Company wishes to expand the Business internationally and, in
connection therewith, has agreed to grant to the Purchaser the exclusive
right to commercialize Mailtv in Australia and has entered into a joint
venture arrangement relating to the production of Mailtv in the Asia
Pacific region with the Purchaser.
D. To further cement their commercial relationship, the Purchaser has agreed
to purchase, and the Company has agreed to issue and sell, the number of
Company Shares specified in this Agreement, subject to and in accordance
with the provisions of this Agreement. The Company Shares to be issued to
the Purchaser, when issued pursuant to the terms of this Agreement, will
represent approximately 50% of the outstanding Company Shares, after giving
effect to all outstanding warrants, options and similar rights to purchase
Company Shares.
X. Xxxxxxx is the Chief Executive Officer of the Company and the owner of
approximately 4.3% of the issued and outstanding Company Shares as of the
date of this Agreement, exclusive of Company Shares underlining Stock
options owned by Xxxxxxx.
F. The Warrantors (as hereinafter defined) are willing to give the
representations and warranties regarding the Company to the Purchaser with
the intention that the Purchaser shall rely on them in entering into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants contained herein, the Parties agree as follows:
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1. Definitions and Interpretation
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1.1 Definitions
As used herein, the following capitalized terms shall have the following
meanings:
"Agreement" means this Stock Purchase Agreement;
"Business" means the business of creation, production and promotion of internet
technologies, products (including Mailtv) and communications as carried on by
the Group;
"Business Day" means a day on which banks are open for business in Sydney and
New York, excluding a Saturday, Sunday and public holiday;
"Company Acquisition Proposal" means an inquiry or proposal which relates to or
contemplates a Company Acquisition Transaction;
"Company Acquisition Transaction" means (a) any Merger involving the Company or
any subsidiary of the Company, (b) any sale, exchange, transfer or other
disposition to any person or entity of properties or assets of the Company or
any subsidiary which constitute all or substantially all of the properties and
assets of the Company or such subsidiary or which are material to the Business,
or (c) any tender offer or exchange offer by any person or entity for any of the
outstanding Company Shares or the outstanding shares of any subsidiary of the
Company;
"Company Disclosure Letter" is defined in Section 5.1
"Company Shares" means the shares of common stock, par value $.001 per share, of
the Company;
"Delaware Code" is defined in Section 2.6;
"Disclosure Schedule" means the Company Disclosure Schedule and/or the Purchaser
Disclosure Schedule, as the context may require;
"Dollars" or "$" or "US$" means the currency of the United States of America;
"First Closing" is defined in Section 2.3;
"First Tranche Shares" is defined in Section 2.2;
"Government Agency" means:
(a) a government, whether foreign, federal, state, territorial or local;
(b) a department, office or minister of a government acting in that capacity;
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(c) Securities and Exchange Commission;
(d) The National Association of Securities Dealers or The Nasdaq Stock Market,
Inc.; or
(e) a commission, delegate, instrumentality, agency, board or other
governmental, semi-governmental, judicial, administrative, monetary or
fiscal authority, whether statutory or not;
"Group" means the Company and its subsidiaries (wholly owned or otherwise);
"Joint Venture" means, collectively, (a) the joint venture arrangement between
the Company and the Purchaser pursuant to which the Purchaser will have the
exclusive right to market and sell Mailtv in the Asia Pacific region and (b) the
license granted by the Company to the Purchaser pursuant to which the Purchaser
will have the exclusive right to market and sell Mailtv in Australia;
"KeyClub" means XxxXxxx.xxx, Inc a company incorporated in the State of Florida;
"KeyClub Shares" means the shares of common stock, par value $.001 per share, of
KeyClub;
"Mailtv" means the interactive television and internet system legally and
beneficially owned by the Company (with patents pending in Europe), as
identified in Application Number 99201002.5, together with all future expansions
and applications of these systems, methods and technologies;
"Merger" is defined in Section 3.2;
"Overleaf" means Overleaf Systems Ltd., a wholly owned subsidiary of the
Company;
"Parties" means the parties to this Agreement;
"Purchaser Disclosure Letter" is defined in Section 5.2;
"Registration Rights Agreement" means the Registration Rights Agreement, in the
form attached hereto as Annex B, between the Company and the Purchaser;
"Second Closing" is defined in Section 2.4;
"Second Tranche Shares" is defined in Section 2.2;
"Security Interest" means any mortgage, charge, xxxx of sale, pledge, deposit,
lien, encumbrance, hypothecation, arrangement for the retention of title and any
other right, interest, power or arrangement of any nature having the purpose or
effect of providing security for, or protecting against default in respect of
the obligations of any person;
"Service Agreement" means the service agreement between the Company and the
Purchaser pursuant to which the Company will provide all technical and
management services as may be required by the Company to deliver Mailtv to all
commercial markets in the Asia Pacific region;
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"Terminating Company Breach" is defined in Section 7.1;
"Terminating Purchaser Breach" is defined in Section 7.1;
"Third Party Interest" means any Security Interest, lease, license, option,
voting arrangement, easement, covenant, notation, restriction, interest under
any agreement, interest under any trust, or other right, equity, entitlement or
other interest of any nature held by a third party; and
"Warrantors" means the Company and Xxxxxxx.
1.2 Interpretation
In this Agreement unless the context otherwise requires:
(a) words importing the singular include the plural and vice versa;
(b) words importing a gender include every gender;
(c) references to any document (including this Agreement) include references to
that document as amended, modified, supplemented or replaced;
(d) references to this Agreement are references to this Agreement and any
annexes, schedules, recitals and exhibits to this Agreement;
(e) references to paragraphs, Sections, recitals, schedules, annexes and
exhibits are references to paragraphs and Sections of, and recitals,
annexes and exhibits to, this Agreement;
(f) headings are for convenience only and must be ignored in construing this
Agreement;
(g) references to any person or any party include references to their or its
respective successors, permitted assigns, substitutes, executors and
administrators;
(h) references to law includes references to any constitutional provision,
treaty, decree, convention, statute, act, regulation, rule, ordinance,
proclamation, subordinate legislation, by-law, judgment, rule of common law
or equity and rule of any applicable stock exchange;
(i) references to any law are references to that law as amended, consolidated,
supplemented or replaced;
(j) references to any person include references to any individual, company,
body corporate, association, partnership, firm, joint venture, trust, fund
and Governmental Agency; and
(k) where any covenant, obligation, liability or warranty is given or entered
into by more than one person, it shall bind such persons jointly and
severally.
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2. Purchase and Sale
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2.1 Purchase and Sale of Company Shares
Upon the terms and subject to the terms and conditions of this Agreement, the
Purchaser agrees to purchase from the Company, and the Company agrees to sell,
transfer, convey and deliver to the Purchaser, the Company Shares.
2.2 Issuance of Company Shares; Purchase Price
The Company Shares shall be issued in two installments, in accordance with the
following schedule: At the First Closing, the Company shall issue 2,900,000
Company Shares (the "First Tranche Shares") and at the Second Closing the
Company shall issue 11,600,000 Company Shares (the "Second Tranche Shares"). The
purchase price for the First Tranche Shares shall be the payment by the
Purchaser to the Company, by wire transfer of immediately available funds, of
the amount of $2,718,750 (including amounts referred to in the following
sentence) and the transfer by the Purchaser of 453,125 KeyClub Shares owned by
it. The Company acknowledges that it has previously received from, or on behalf
of, the Purchaser the amounts set forth on Annex A attached hereto as an advance
payment for the First Tranche Shares and that such amounts are deemed part of
the purchase price of the First Tranche Shares. The purchase price for the
Second Tranche Shares shall be the payment by the Purchaser to the Company, by
wire transfer of immediately available funds, of the amount of $10,875,000 and
the transfer by the Purchaser of 1,812,500 KeyClub Shares owned by it.
All Company Shares issued pursuant to the terms of this Agreement, and all of
the KeyClub Shares transferred pursuant to the terms of this Agreement, shall be
issued and transferred free of any Third Party Interests.
2.3 First Closing
The closing of the purchase of the First Tranche Shares (the "First Closing")
shall take place on September 30, 1999, or such earlier date as the Parties may
agree.
2.4 Second Closing
The closing of the purchase of the Second Tranche Shares (the "Second Closing")
shall take place on December 31, 1999, except that, with the consent of all
Parties, (a) the Second Closing shall take place on an earlier date or (b) a
portion of the Second Tranche Shares shall be issued, in one or more closings,
prior to December 31, 1999 (in which event the Purchaser shall make a pro rata
payment for the portion of the Second Tranche Shares so issued, and all
references in this Agreement to the Second Closing shall refer to each closing
at which a portion of the Second Tranche Shares are issued).
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2.5 Deliveries at the First Closing by the Purchaser
At the First Closing, the Purchaser shall deliver to the Company;
(a) cash, in immediately available funds, in the amount of $2,718,750;
(b) a stock certificate(s), containing a "restrictive shares" legend,
representing 453,125 KeyClub Shares, endorsed for transfer or accompanied
by stock powers;
(c) resolutions adopted by the Board of Directors of the Purchaser authorizing
the execution, delivery and performance by the Purchaser of this Agreement
and the transactions contemplated hereby (including the execution of the
Registration Rights Agreement);
(d) the Registration Rights Agreement, executed by the Purchaser;
(e) the documents referred to in Section 4.2; and
(f) such other documents, certificates and instruments as the Company shall
reasonably request.
2.6 Deliveries at the First Closing by the Company
At the First Closing, the Company shall deliver to the Purchaser:
(a) a stock certificate(s), containing a "restrictive shares" legend,
representing the First Tranche Shares;
(b) resolutions adopted by the Board of Directors of the Company authorizing
the execution, delivery and performance of this Agreement and the
transactions contemplated hereby (including the execution, delivery and
performance of the Registration Rights Agreement);
(c) resolutions adopted by the Board of Directors of the Company approving the
acquisition by the Purchaser of the Company Shares pursuant to this
Agreement so that the Purchaser will not be subject to the limitations on
"business combinations" set forth in Section 203 of General Corporation Law
of the State of Delaware (the "Delaware Code") by virtue of the execution,
delivery or performance of this Agreement by the Company and the Purchaser;
(d) resolutions of the Board of Directors of the Company appointing two
nominees of the Purchaser as directors of the Company;
(e) the Registration Rights Agreement, executed by the Company;
(f) the documents referred to in Section 4.1; and
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(g) such other documents, certificates and instruments as the Purchaser shall
reasonably request.
2.7 Deliveries at the Second Closing by the Purchaser
At the Second Closing, the Purchaser shall deliver to the Company:
(a) cash, in immediately available funds, in the amount of $10,875,000;
(b) a stock certificate(s), containing a "restrictive shares" legend,
representing 1,812,500 KeyClub Shares, endorsed for transfer or accompanied
by stock powers;
(c) the documents referred to in Section 4.2; and
(d) such other documents, certificates and instruments as the Company shall
reasonably request.
2.8 Deliveries at the Second Closing by the Company
At the Second Closing, the Company shall deliver to the Purchaser;
(a) a stock certificate(s), containing a "restrictive shares" legend,
representing the Second Tranche Shares;
(b) the documents referred to in Section 4.1; and
(c) such other documents, certificates and instruments as the Purchaser shall
reasonably request.
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3. Changes to Capital
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3.1 Alteration of the capital of the Company
If, after the date of this Agreement but prior to the issuance to the Purchaser
of all of the Company Shares to be issued pursuant to this Agreement, there is:
(a) a stock dividend payable in Company Shares, the number of Company Shares
which have not been issued to the Purchaser shall be increased by the
number of Company Shares which the Purchaser would have received if it had
been the registered holder of all of the Company Shares to be issued
pursuant to this Agreement before the record date for the stock dividend;
or
(b) a reverse stock split of the Company Shares, the number of Company Shares
which have not been issued to the Purchaser shall be decreased in the same
ratio; or
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(c) a stock split of the Company Shares, the number of Company Shares which
have not been issued to the Purchaser shall be increased in the same ratio;
or
(d) Nothing in this Section 3.1 shall be deemed to permit the Company to take
any action prohibited by Section 6.2.
3.2 Merger involving the Company
If, after the date of this Agreement but prior to the issuance to the Purchaser
of all of the Company Shares to be issued pursuant to this Agreement, there is a
merger, takeover, consolidation or similar restructuring or acquisition
involving the Company with the result that the Company Shares are compulsorily
acquired, cancelled or vested in a third party under any law relating to a
merger, consolidation or other business combination (a "Merger"), the Purchaser
shall, upon the tender by it of payment for the Company Shares which have not
theretofore been issued to it, be entitled to any new securities or cash
proceeds received in respect of such Merger to the same value and to the same
extent as it would have been entitled to had the Purchaser been the record
holder of all of the Company Shares issuable pursuant to this Agreement
immediately prior to the Merger. Nothing in this Section 3.2 shall be deemed to
permit the Company to take any action prohibited by Section 6.2.
3.3 Anti-dilution
If after the date of this Agreement, the Company issues Company Shares (for
whatever reason) to a third party, the Company must offer to sell to the
Purchaser, on terms no less favorable than those offered to the third party, a
number of Company Shares such that upon payment and allotment and issue, the
Purchaser's shareholding or interest in the enlarged issued share capital of the
Company shall at all times not be less than fifty percent (50%). Nothing in this
Section 3.3 shall be deemed to permit the Company to take any action prohibited
by Section 6.2.
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4. Conditions
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4.1 Conditions Precedent to Purchaser's Obligation to Close
The obligation of the Purchaser to consummate the transactions contemplated by
this Agreement at the First Closing or at the Second Closing is subject to the
satisfaction of the following conditions, unless waived by the Purchaser:
(a) the results of a due diligence examination, by or on behalf of the
Purchaser, of business, tax and legal matters pertaining to the Group and
the Business, being satisfactory to the Purchaser in its sole discretion;
(b) the Company and the Purchaser entering into the Joint Venture and the
Service Agreement, the terms of which are satisfactory to the Purchaser;
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(c) the Company obtaining all necessary shareholder approval and any consents
(government, regulatory or otherwise) to the issue of the Company Shares to
the Purchaser;
(d) the representations and warranties set forth in Schedule 1 shall be true
and correct in all material respects at and as of such Closing (except that
at any Second Closing the number of outstanding Company Shares shall have
increased from the number set forth in such Schedule by the number of
Company Shares issued pursuant to this Agreement);
(e) the Company shall have performed and complied, in all material respects,
with all of its covenants hereunder;
(f) no governmental entity or court of competent jurisdiction shall have
enacted issued any statute, rule, regulation, decree, injunction or other
order which prohibits the transactions contemplated hereby by the Company;
(g) the Company shall have delivered to the Purchaser a certificate to the
effect that each of the conditions specified above in Section 4.1(c)-(f) is
satisfied; and
(h) at the First Closing, the Company shall have delivered to the Purchaser the
resolutions of the Board of Directors of the Company referred to in Section
2.6 and, at the Second Closing, the Company shall have delivered to the
Purchaser a certificate of its Secretary that such resolutions are still in
full force and effect and have not been modified, amended or altered in any
way.
4.2 Conditions Precedent to Company's Obligation to Close
The obligation of the Company to consummate the transactions contemplated by
this Agreement at the First Closing or at the Second Closing is subject to the
satisfaction of the following conditions, unless waived by the Company:
(a) the Company obtaining all necessary shareholder approval and any consents
(government, regulatory or otherwise) to the issue of the Company Shares to
the Purchaser;
(b) the representations and warranties set forth in Schedule 2 shall be true
and correct in all material respects at and as of such Closing;
(c) the Purchaser shall have performed and complied, in all material respects,
with all of its covenants hereunder;
(d) no governmental entity or court of competent jurisdiction shall have
enacted issued any statute, rule, regulation, decree, injunction or other
order which prohibits the transactions contemplated hereby by the
Purchaser;
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(e) the Purchaser shall have delivered to the Company a certificate to the
effect that each of the conditions specified above in Section 4.2(b)-(d) is
satisfied; and
(f) at the First Closing, the Purchaser shall have delivered to the Company the
resolutions of the Board of Directors of the Purchaser referred to in
Section 2.5 and, at the Second Closing, the Purchaser shall have delivered
to the Company a certificate of its Secretary that such resolutions are
still in full force and effect and have not been modified, amended or
altered in any way.
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5. Representations and Warranties
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5.1 Representations and Warranties of the Company
The Company represents and warrants to the Purchaser that the statements
contained in Schedule 1 are correct and complete as of the date of this
Agreement, except as set forth in the Disclosure Schedule delivered by the
Company to the Purchaser prior to the execution of this Agreement (the "Company
Disclosure Schedule"). The Warrantors acknowledge and agree that the Purchaser
has entered into this Agreement in reliance on the representations and
warranties regarding the Company contained in this Agreement.
5.2 Representations and Warranties of the Purchaser
The Purchaser represents and warrants to the Company that the statements
contained in Schedule 2 are correct and complete as of the date of this
Agreement, except as contained in the Disclosure Schedule delivered by the
Purchaser to the Company prior to the execution of this Agreement (the
"Purchaser Disclosure Schedule").
5.3 Survival of representations and warranties
The representations and warranties of the Company contained in this Agreement
and the remedies of the Purchaser for any breach of any of such representations
and warranties shall survive the First Closing and each Second Closing.
5.4 Representation and warranties separate
Each of the representations and warranties of each of the Company and the
Purchaser shall be construed separately and independently from the others and
from the rest of this Agreement so that the Purchaser and the Company,
respectively, shall have a separate claim and right of action in respect of
every breach of each such representation and warranty.
5.5 Waiver
Each of the Warrantors waive any right which they may have against the Group or
any director or employee of the Group for any error, omission or
misrepresentation in the information or opinions given by any of the Warrantors
in connection with the negotiation and preparation of this Agreement and the
giving by the Warrantors of the representations and warranties of the Company
contained in this Agreement. Each of the Warrantors also acknowledge and agree
that any such right to claim any damages or contribution from the Group or any
director or employee of the Group shall not constitute a defense in respect of
any claim against any of the Warrantors by the Purchaser relating to this
Agreement.
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5.6 Indemnity
Without restricting the ability of the Purchaser to claim damages on any basis,
the Company hereby agrees to indemnify and hold harmless the Purchaser from and
against all proceedings, actions, claims, demands, losses, liabilities, damages,
costs and expenses which may be brought against or suffered or incurred by the
Purchaser arising out of or in connection with any of the representations and
warranties of the Company contained in this Agreement being untrue, inaccurate,
or misleading or arising out of or in connection with any breach of this
Agreement by any of the Warrantors.
5.7 Guaranty
Xxxxxxx hereby irrevocably and unconditionally guarantees to the Purchaser the
prompt and full discharge by the Company of all of the Company's covenants,
agreements, obligations and liabilities under this Agreement (collectively, the
"Obligations"), including, but not limited to the Obligations under Sections 5.6
and 7.2 hereof, in accordance with the terms thereof. Xxxxxxx acknowledges and
agrees that, with respect to all Obligations to pay money, such guaranty shall
be a guaranty of payment and not of collection and shall not be conditioned or
contingent upon the pursuit of any remedies against the Company. If the Company
shall default in the due and punctual performance of any Obligation, including
the full and timely payment of any amount due and payable pursuant to any
Obligation that Xxxxxxx shall forthwith on demand perform or cause to be
performed such Obligation and will forthwith on demand make full payment of any
amount due with respect thereto.
The liabilities and obligations of Xxxxxxx pursuant to this Section 5.7 are
unconditional and absolute, and without limiting the generality of the
foregoing, shall not be released, discharged or otherwise affected by the
invalidity or unenforceability in whole or in part of this Agreement or the
insolvency, bankruptcy or other similar provision affecting the Company. Xxxxxxx
hereby waives any right to require the Purchaser to proceed against or take any
action against or pursue any remedy with respect to the Company before the
Purchaser may enforce its rights hereunder against him.
5.8 Aggregate liability
The maximum aggregate liability of Xxxxxxx under this Agreement shall not exceed
twice the cash actually paid by the Purchaser for the Company Shares.
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5.9 Disclosure Letters
(a) The representations and warranties of the Company and the Purchaser are
given subject only to the matters fairly and specifically disclosed in the
Company Disclosure Letter and the Purchaser Disclosure Letter,
respectively, but not by any matters which could be inferred from them or
which are contained in any other documents referred to in the Company
Disclosure Letter or the Purchaser Disclosure Letter but which are not
themselves attached to such Disclosure Letter.
(b) If any document is annexed to a Disclosure Letter, then the representations
and warranties will only be limited by matters fairly and specifically
disclosed in that document but not by any matters which could be inferred
from that document or contained in any other documents which are referred
to in that document but which are not themselves attached to such
Disclosure Letter.
(c) No other information relating to the Company which the Purchaser has
knowledge of (actual or constructive) and no investigation by or on behalf
of the Purchaser will prejudice any claim made by the Purchaser as a result
of the breach by the Company of any of the representations and warranties
made by it in this Agreement or operate to reduce any amount recoverable by
the Purchaser. No other information relating to KeyClub or the Purchaser
which the Company has knowledge of (actual or constructive) and no
investigation by or on behalf of the Company will prejudice any claim made
by the Company as a result of the breach by the Purchaser of any of the
representations and warranties made by it in this Agreement or operate to
reduce any amount recoverable by the Purchaser.
5.10 Time limitation
The Purchaser shall only be able to make a claim under this Section 5 in respect
of any representation or warranty of the Company contained in this Agreement
being untrue, inaccurate or misleading if that claim is notified to the Company
in writing by the date which is twelve months after the date of this Agreement.
5.11 Prompt disclosure of breach
The Warrantors must immediately disclose to Purchaser any matter, event or
circumstance (including any omission to act) which may arise or become known to
them which:
(a) constitutes a breach of or is inconsistent with any representation or
warranty of the Company contained in this Agreement; or
(b) has or is likely to have, an adverse effect on the financial position or
prospects of the Group.
The obligations of the Warrantors under this Section 5.11 shall cease on the
expiration of the period referred to in Section 5.10.
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6. Covenants
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6.1 Affirmative covenants of the Company
During the period from the date of this Agreement until all of the Company
Shares issuable pursuant to this Agreement have been issued by the Company to
the Purchaser, the Company will:
(a) conduct the Business in the ordinary and normal course and in the same
manner as it was conducted prior to the date of this Agreement;
(b) permit the Purchaser and its representatives, upon one business days
notice, to have reasonable access from time to time during normal business
hours to all premises, properties, personnel, books, records, contracts and
documents of or pertaining to the Company; and
(c) give prompt written notice to the Purchaser of any event that (i) has or
may reasonably be expected to have a material adverse effect on the
Company, the Group or the Business or (ii) causes or may reasonably be
expected to cause a breach of any of the representations or warranties of
the Company contained forth in this Agreement.
6.2 Negative Covenants of the Company
Without the prior written consent of the Purchaser, which will not be
unreasonably withheld, during the period from the date of this Agreement until
all of the Company Shares issuable pursuant to this Agreement have been issued
by the Company to the Purchaser, the Company will not:
(a) enter into any contract or commitment which is in any way outside the
ordinary course of the business of the Group or which will have a material
adverse effect on the Group;
(b) institute changes in any management policy of the Group;
(c) issue, award, grant or sale any shares, stock, stock units, convertible
notes, bonds or other securities of the Group or any rights or options to
subscribe for, or otherwise agree to issue any of the foregoing or any
other interest convertible into shares of capital stock;
(d) do or omit to do or allow there to be done any act or thing which would
lead to any of the representations and warranties of the Company contained
in this Agreement being untrue, inaccurate or misleading or in any of the
conditions to a First Closing or Second Closing not being satisfied;
(e) (i) increase the compensation payable to, or to become payable to, any
director or executive officer of the Company, or (ii) grant any severance
or termination pay (other than pursuant to the normal severance policy of
the Company as in effect on this date of this Agreement) to, or enter into
any employment or severance agreement with, any director or executive
officer;
13
(f) declare or pay any dividend on, or make any other distribution in respect
of, the outstanding shares of capital stock of the Company, except for
dividends by a subsidiary of the Company to the Company or another
subsidiary of the Company;
(g) (i) redeem, purchase or otherwise acquire any Company Shares or any
securities convertible into or exchangeable or exercisable for Company
Shares, (ii) effect any recapitalization, or (iii) split, combine or
reclassify any of its outstanding shares of capital stock;
(h) acquire or agree to acquire, in one transaction or a series of related
transactions, an equity interest with a purchase price in excess of $50,000
or assets with a value in excess of $50,000 unless it has received approval
to do so by its Board of Directors;
(i) sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of
any assets with a value in excess of $50,000 unless it has received
approval to do so by its Board of Directors;
(j) propose or adopt any amendments to the Certificate of Incorporation or
By-Laws of the Company; or
(k) commit to do any of the foregoing.
6.3 Covenants of the Purchaser
(a) During the period from the date of this Agreement until all of the Company
Shares issuable pursuant to this Agreement have been issued by the Company
to the Purchaser, the Purchaser will:
(i) give prompt written notice to the Company of any event that causes or
may reasonably be expected to cause a breach of any of the
representations or warranties of the Purchaser contained in this
Agreement; and
(ii) not do or omit to do or allow there to be done any act or thing which
would lead to any of the representations and warranties of the
Purchaser contained in this Agreement being untrue, inaccurate or
misleading or in any of the conditions to a First Closing or Second
Closing not being satisfied.
(b) Within 30 days from the date of this Agreement, Purchaser shall use its
best efforts to cause KeyClub to execute and deliver a registration rights
agreement to the Company granting the Company the right to register the
KeyClub Shares received by it pursuant to this Agreement. The rights of the
Company to register the KeyClub Shares shall be identical to Purchaser's
rights to register the Company Shares as provided in the Registration
Rights Agreement, except that the Company shall only be permitted to
exercise its registration rights with respect to the KeyClub Shares to the
extent that it has satisfied its obligations to register the Purchaser's
Company Shares under the Registration Rights Agreement.
14
6.4 No Solicitation
During the period from the date of this Agreement until December 31, 1999, the
Company will not, directly or indirectly, initiate, solicit or encourage
(including by way of furnishing information or assistance), or take any action
to facilitate, a Company Acquisition Proposal, or enter into discussions or
negotiate with any person or entity in furtherance of a Company Acquisition
Proposal, or enter into an agreement with respect to a Company Acquisition
Transaction, or agree to or endorse any Company Acquisition Proposal, or
authorize or permit any of the officers, directors or employees of the Company
or any representative of the Company to take any such action; provided, however,
that the foregoing shall not prohibit the Company from complying with applicable
law.
--------------------------------------------------------------------------------
7. Termination
--------------------------------------------------------------------------------
7.1 General
This Agreement may be terminated only in the following ways:
(a) prior to the First Closing, by the mutual consent of the Parties; or
(b) at any time by the Purchaser upon any intentional breach of any covenant or
agreement on the part of the Company contained in this Agreement, or if any
material representation or warranty of the Company contained in this
Agreement shall be or become untrue (a "Terminating Company Breach"),
provided that if such Terminating Company Breach is curable by the Company
through the exercise of its reasonable best efforts and for so long as the
Company continues to exercise such reasonable best efforts, the Purchaser
may not terminate this Agreement under this Section 7.1(b); or
(c) at any time by the Company upon any intentional breach of any covenant or
agreement on the part of the Purchaser contained in this Agreement, or if
any material representation or warranty of the Purchaser contained in this
Agreement shall be or become untrue (a "Terminating Purchaser Breach"),
provided that if such Terminating Purchaser Breach is curable by the
Purchaser through the exercise of its reasonable best efforts and for so
long as the Purchaser continues to exercise such reasonable best efforts,
the Company may not terminate this Agreement under this Section 7.1(c).
7.2 Payments in event of termination
(a) If this Agreement is terminated for any reason pursuant to Section 7.1(b),
then the Company shall (i) pay the Purchaser an amount equal to two times
the amount of cash paid by the Purchaser for the Company Shares theretofore
purchased by the Purchaser (including any payments made by the Purchaser to
the Company prior to the execution of this Agreement, as set forth on Annex
A) and (ii) transfer back to the Purchaser all KeyClub Shares which have
theretofore been transferred from the Purchaser to the Company.
15
(b) The Parties agree that the amounts provided in Section 7.2(a) payable upon
the occurrence of the events specified therein have been determined by
negotiation and reflect their best estimate and judgment of the monetary
value of the losses and damages to be incurred in connection with, and
time, effort, expense and cost of opportunity associated with, the
transactions contemplated in this Agreement, and the Parties agree to
accept payment of such amount as liquidated damages in full and complete
satisfaction of all claims and expenses arising from the occurrence of such
events. Any payment required to be made pursuant to Section 7.2(a) shall be
made not later than two Business Days after delivery to the Company by the
Purchaser of notice of demand for payment and shall be made by wire
transfer of immediately available funds.
--------------------------------------------------------------------------------
8. General
--------------------------------------------------------------------------------
8.1 Costs
Except as contemplated by Section 7.2, each of the Parties shall bear its own
costs and expenses incurred in the preparation and performance of this Agreement
and the transactions contemplated hereby.
8.2 Notices
Any notice required to be given under this Agreement shall be in writing and
signed by or on behalf of the Party giving it and shall be sent by certified
mail and by facsimile transmission to the following addresses and facsimile
numbers:
Purchaser:
Address: Xxxxx 00-00, Xxxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxxx Xxxxx
Fax: (000) 0000 0000
Attn: Xxxxx Xxxxxx/Xxxxxx Xxxxxx
with a copy to Xxxxx & XxXxxxxx
Address: Xxxxx 00, XXX Xxxxxx
00 Xxxxxx Xxxxxx
Xxxxxx, XXX 00000
Fax: (000) 0000-0000
Attn: Xxxxxxxx XxXxxxxxxx
The Company:
Address: Brecon House
Xxxxxxxx Xxxx
000 Xxxxx Xxxx
Xxxxxx X00 0XX
Fax: (00-000) 000-0000
Attn: Xxxx Xxxxxxx-Xxxxxxx
with a copy to Sichenzia, Ross & Xxxxxxxx LLP
Address: 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxxx Xxxxxxxx
Xxxxxxx:
Address: Brecon House
Xxxxxxxx Xxxx
000 Xxxxx Xxxx
Xxxxxx X00 0XX
Fax: (00-000) 000-0000
Any such notice shall be deemed to be delivered on the Business Day following
receipt of the facsimile transmission report confirming the recipient's answer
back.
16
8.3 Successors Bound
This Agreement shall be binding on and shall inure to the benefit of the
successors and assigns of each of the Parties.
8.4 Assignment
Except as may be contemplated hereby, none of the Parties may assign its rights
and obligations in whole or in part under this Agreement without the prior
written consent of the other Parties. provided, that, upon the request of the
Purchaser, all or a portion of the Company Shares shall be issued in the name of
a person or entity other than the Purchaser and, upon the request of the
Company, all or a portion of the KeyClub Shares to be transferred to the Company
shall be transferred to a person or entity other than the Company.
8.5 Continuing Agreement
All provisions of this Agreement shall so far as they are capable of being
performed and observed continue in full force and effect notwithstanding a First
Closing or a Second Closing except in respect of those matters then already
performed.
8.6 Further Assurance
Each of the Parties shall use its respective reasonable best efforts to take all
action and to do all things necessary, proper or advisable in order to
consummate the transactions contemplated by this Agreement (including obtaining
any necessary third party consents) and shall, do, execute and perform all such
further deeds, documents, assurances, acts and things as any of the Parties may
reasonably require by notice in writing to the others to carry the provisions of
this Agreement into full force and effect.
8.7 Publicity
Other than as required by law, the rules of any relevant stock exchange or any
other like regulatory authority or Governmental Agency no announcement or
publicity concerning this Agreement or any matter ancillary to this Agreement
shall be made by any Party without the prior written consent of the other
Parties (such consent not to be unreasonably withheld or delayed).
8.8 Amendments
No amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by each of the Parties which would be affected by
such amendment.
8.9 Governing Law; Jurisdiction
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY APPLICABLE PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HEREBY (A) SUBMITS TO THE JURISDICTION OF
ANY COURT SITTING IN XXX XXXX XX XXX XXXX, XXXXX XX XXX XXXX IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE AGREEMENTS
OR TRANSACTIONS CONTEMPLATED HEREBY, (B) AGREES THAT ALL CLAIMS IN RESPECT OF
SUCH ACTION OR PROCEEDING MAY BE HEARD OR DETERMINED IN SUCH NEW YORK STATE OR
FEDERAL COURT, AND (C) WAIVES ANY OBJECTION TO SUCH VENUE BASED UPON FORUM NON
CONVENIENS. THE FOREGOING SHALL NOT LIMIT OR AFFECT THE RIGHT OF A PARTY HERETO
TO BRING ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR
ANY OF THE AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY IN ANY OTHER
JURISDICTION.
17
8.10 No Partnership
Nothing in this Agreement shall constitute or be deemed to constitute a
partnership or joint venture or fiduciary relationship between any of the
Parties and none of them shall have any authority to bind the others in any way.
8.11 Severability
Notwithstanding that any provision of this Agreement may prove to be illegal or
unenforceable, the remaining provisions of this Agreement shall continue in full
force and effect.
8.12 Waiver
No failure or delay by any Party in exercising any right, power or privilege
hereunder shall impair the same or operate as a waiver thereof nor shall any
single or partial exercise of any right, power or privilege preclude any further
exercise thereof or the exercise of any other right, power or privilege.
8.13 Effect of Termination
If this Agreement is terminated then, in addition and without prejudice to any
other rights, powers or remedies available to it:
(a) each Party is released from its obligations to further perform the
Agreement; and
(b) each Party retains the rights it has against the other Party in respect of
any past breach.
8.14 Rights Cumulative
The rights, remedies and powers of the Parties contained in this Agreement are
cumulative and do not exclude any rights, remedies or powers otherwise provided
to the Parties.
8.15 Entire Agreement
This Agreement together with any documents referred to in this Agreement or
executed contemporaneously in connection with this Agreement comprises the
entire agreement between the Parties with respect to the subject matter of this
Agreement and supersedes all prior understandings, agreements, representations
and correspondence.
18
8.16 Counterparts
This Agreement may be executed in any number of counterparts and all such
counterparts taken together will be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of
the date first written above.
MailTV Pty Ltd
By: /s/ Xxxxx Xxxxxx
---------------------------------
Name: Xxxxx Xxxxxx
Title:
World CallNet, Inc.
By: /s/ Xxxx Xxxxxxx-Xxxxxxx
---------------------------------
Name: Xxxx Xxxxxxx-Xxxxxxx
Title: President and Chief Executive
Officer
/s/ Xxxx Xxxxxxx-Xxxxxxx
---------------------------------
Xxxx Xxxxxxx-Xxxxxxx
19
Schedule 1
Representations and Warranties of the Company
--------------------------------------------------------------------------------
1. Interpretation
--------------------------------------------------------------------------------
1.1 In this Schedule 1, unless the context otherwise requires, the
representations and warranties of the Company are deemed to be repeated
mutatis mutandis in relation to any subsidiary of the Company as if all
references to "the Company" were references to any such subsidiary.
1.2 Where any statement is qualified by the expression "to the best of the
Warrantors' knowledge" or any similar expression, that statement shall be
deemed to include an additional statement that it has been made after due
and careful inquiry.
1.3 Capitalized terms used in this Schedule 1 without definition shall have the
meanings assigned them in the Agreement to which this Schedule is attached.
--------------------------------------------------------------------------------
2. Corporate
--------------------------------------------------------------------------------
2.1 Incorporation; Good standing
The Company:
(a) is duly incorporated and in good standing under the laws of the State of
Delaware;
(b) has the power to own, lease and operate its properties and assets and carry
on the Business as it is now being conducted; and
(c) is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualification.
2.2 Authority
(a) The Company has obtained all licenses, permits and authorizations of
whatever nature required to own its properties and assets and carry on the
Business as it is now being conducted.
(b) The Company has the requisite corporate power and authority to execute,
deliver an perform the Agreement and the transactions contemplated hereby.
The Company has taken all necessary action by it to authorize the
execution, delivery and performance of the Agreement and the transactions
contemplated hereby. The Agreement constitutes the valid and legally
binding obligation of the Company, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to creditors' rights and to general principles
of equity. The Board of Directors of the Company has taken all appropriate
action so that the Purchaser will not be subject to the limitations on
"business combinations" set forth in Section 203 of the Delaware Code by
virtue of the execution, delivery or performance of the Agreement by the
Company and the Purchaser.
20
(c) The stockholders of the Company are not required to approve the execution,
delivery or performance of the Agreement by the Company.
(d) No Government Agency is required to give its consent or authorization to
the execution, delivery or performance of the Agreement by the Company.
2.3 No conflict with other obligations
The execution, delivery and performance of the Agreement by the Company does not
breach or conflict with or result in the violation of any provision of, or
require the consent of any third party under or pursuant to:
(a) any material contract or obligation of the Company or any arrangement to
which the Company is a party or otherwise bound;
(b) any law, regulation, license, permit, authorization, ruling, judgment,
order or decree of any Governmental Agency; and
(c) the Certificate of Incorporation or By-Laws of the Company.
2.4 Company not shareholder
The Company is not the holder or beneficial owner of any share, security or
other interest of or in any other corporation other than Overleaf, Telemail Ltd,
CallNet PLC, World CallNet Ltd.
2.5 Company not member of any partnership
The Company is not a party to any partnership, joint venture, agency or
consortium agreement or other unincorporated association other than the
agreement, dated December 2, 1998, between the Company and Zilog, Inc.
2.6 Share capital
(a) The authorized capital stock of the Company consists of 30,000,000 Company
Shares, and 10,000,000 preferred shares, par value $.001 per share (the
"Preferred Shares"), of which, as of the date of the Agreement, (i)
14,556,325 Company Shares were issued and outstanding on a fully diluted
basis and 500,000 are held in treasury which the Company intends to retire
and (ii) no Preferred Shares were issued and outstanding and none were held
in treasury. As of the date of the Agreement, there were no outstanding
subscriptions, convertible or exchangeable securities, options, warrants or
21
other rights, arrangements or commitments obligating the Company to issue,
deliver or sell any shares of its capital stock or any debt securities
(collectively, the "Convertible Securities"), other than as set forth on
the Schedule of Capital Shares Outstanding which is annexed hereto as
Schedule 2.6. After giving effect to shares of capital stock issuable upon
the exercise or conversion of outstanding Convertible Securities, upon the
issuance to the Purchaser (or a person or entity designated by it) of all
of the Company Shares to be issued pursuant to the Agreement, the Purchaser
(together with designees, if any) will be the record and beneficial owner
of not less than 50% of the issued and outstanding share capital of the
Company on a fully-diluted basis. After giving effect to all Company Shares
that must be issued upon the exercise or conversion of Convertible
Securities, the Company has sufficient authorized but unissued Company
Shares to issue the Company Shares to the Purchaser pursuant to this
Agreement.
(b) The Company has never reduced, repaid, or repurchased any of its share
capital.
(c) All of the issued share capital of the Company is fully paid and
non-assessable.
(d) No holder of shares of capital stock of the Company is entitled to exercise
pre-emptive rights, whether statutory or contractual.
(e) The Company Shares to be issued pursuant to the terms of the Agreement,
when issued and delivered in accordance with the terms of the Agreement,
will be duly authorized, validly issued, fully paid and non-assessable and
free and clear of any Third Party Interests.
2.7 Certificate of Incorporation and By-Laws
(a) Prior to the execution of the Agreement the Company has delivered to the
Purchaser a true and correct copy of its Certificate of Incorporation and
By-Laws, each as amended to date.
(b) The business affairs of the Company have at all material times and in all
material respects been conducted in accordance with the Certificate of
Incorporation and By-Laws of the Company.
--------------------------------------------------------------------------------
3. Contracts
--------------------------------------------------------------------------------
3.1 Disclosure of contracts
Except as disclosed in the Company Disclosure Schedule, the Company is not a
party to any distribution agreement, agency/representative agreement, factoring
agreement, major customer supply/purchase agreement, order obligation,
sub-contract agreement, letter of intent or agreement to sell any shares or
assets of the Company or government contract, in any such case of more than
US$50,000.
22
3.2 Contracts, etc.
(a) For the purposes of this Section 3.2 and Section 3.4 and 3.5 a "material
contract" is one with a value of more than US$50,000 that cannot be
cancelled at the option of the Company within 60 days.
(b) The Company is not a party to any material contract:
(i) which is outside its ordinary course of business;
(ii) which materially and adversely affects its business or assets or which
restricts the Company's freedom of action in relation to its normal
business activities;
(iii) which is a joint venture, shareholders' agreement or partnership;
(iv) pursuant to which any officer, employee, agent, distributor or
independent contractor of the Company is entitled to a commission,
remuneration, royalty or payment of any nature from the Company
calculated by reference to the whole or part of the turnover, profits
or sales of the Company.
3.3 Powers of attorney
The Company has given no power of attorney to any person which is still
effective to enter into any contract or commitment to do anything on its behalf
other than the authority of employees to enter into contracts in the normal
course of their duties
3.4 Defaults under contract/liable to termination
The Company is in compliance in all material respects with its obligations under
each material contract to which the Company is a party and no other party to any
such material contract is in breach of it.
3.5 No notices
The Company has not received any notice which might materially affect any rights
of the Company or the exercise of any rights by the Company in respect of any
material contract.
--------------------------------------------------------------------------------
4. Assets
--------------------------------------------------------------------------------
4.1 Fixed assets
The Company has good and marketable title to all fixed and unattached furniture,
fixtures and fittings, equipment and vehicles, computer software and all other
tangible assets owned by the Company and/or used in connection with the
business, free from Security Interests, and all such assets are:
23
(a) in the possession or control of the Company;
(b) fully paid for; and
(c) not the subject of any lease or hire purchase arrangement or agreements for
purchase on deferred terms.
4.2 All assets disclosed
The assets listed in the Company Disclosure Schedule constitute all the material
assets owned or used by the Company in the ordinary course of the Business.
4.3 All assets necessary
The Company has:
(a) good and marketable title to all assets; and
(b) all contractual arrangements in respect of Mailtv;
necessary to enable it to conduct the Business in the manner in which it has
been conducted for the period of 12 months immediately prior to the date of the
Agreement.
4.4 Equipment
All major items of equipment and vehicles of the Company used in connection with
the business are in appropriate working repair and condition having regard to
their age and the use to which they are currently put.
--------------------------------------------------------------------------------
5. Guarantees and Security Interests
--------------------------------------------------------------------------------
5.1 No third party guarantees by Company
The Company has not entered into any guarantee of or granted any Security
Interest over its own assets in respect of, any other person's obligations or
liabilities or indemnified any person against the acts or omissions of any third
party other than a Security Interest arising by operation of law.
--------------------------------------------------------------------------------
6. Governmental matters
--------------------------------------------------------------------------------
6.1 Investigations
The Company is not the subject of any investigation or inquiry by any
Governmental Agency.
24
6.2 Authorizations
(a) All material authorizations required to conduct the Business are held by
the relevant person and the Company is not in breach, or default in any
material respect with respect to, any such authorization and has paid all
fees due in relation to each such authorization.
(b) There are no factors or circumstances known to the Company which might
prejudice the continuance or renewal of any authorization referred to in
Section 6.2(a).
6.3 Compliance with laws
The Company has complied in all material respects with all applicable American
and English laws in the conduct of the Business.
--------------------------------------------------------------------------------
7. Taxation
--------------------------------------------------------------------------------
For the purposes of this Section 7:
"Duty" means any stamp, transaction or registration duty or similar charge
imposed by any Governmental Agency and includes, but is not limited to, any
interest, fine, penalty, charge or other similar amount imposed in respect of
the above but excludes any Tax;
"Tax" means and includes all taxes and duties of any kind or place and includes
any interest, fine, penalty, change or other similar impost in respect of any
such taxes or duties; and
"Tax Law" means any law relating to either Tax or Duty as the context requires.
7.1 No Tax proceedings
The Company:
(a) is not a party to any action or proceeding for the assessment or collection
of Tax nor has it received any notice of any pending or threatened Tax
audit, action or proceeding; and
(b) is not the subject of any dispute or disagreement with any Governmental
Agency in relation to Tax.
7.2 Assessed Taxes paid
The Company has paid all Taxes and Duties which have been assessed upon it and
which are due and payable.
25
7.3 Tax returns
The Company has filed with the appropriate Governmental Agency all Tax returns,
information and notices required to be filed by it and all returns filed by the
Company in relation to Tax were accurate in all material respects upon filing,
not misleading and submitted on time.
7.4 Withholding tax
Any obligation under any Tax Law to withhold amounts at source has been complied
with.
7.5 Records
The Company has maintained proper and adequate records to enable it to comply
with its obligations to:
(a) prepare and submit any information, notices, computations, returns and
payments required in respect of any Tax Law;
(b) prepare any accounts necessary for the compliance of any Tax Law; and
(c) retain necessary records as required by any Tax Law.
7.6 Residence
The Company:
(a) does not have and will not at the date of the First Closing have a branch
or permanent establishment (as that term is defined in any relevant double
taxation agreement) outside the United States of America and the United
Kingdom; and
(b) is not and will not at the date of the First Closing be deemed for taxation
purposes to be resident in any country other than the United Kingdom and
the United States of America whether under the laws of those countries or
any other relevant country (including Australia).
--------------------------------------------------------------------------------
8. Insolvency events
--------------------------------------------------------------------------------
8.1 Liquidation; Winding up
(a) The Company has not had a liquidator appointed.
(b) The Company has not passed any resolution that it be wound up.
(c) No application for the winding up of the Company has been made and served
on the Company which is still outstanding.
26
(d) No petition or other process for winding-up has been presented or,
threatened against the Company and there are no circumstances justifying a
bona fide petition or other process on the grounds of insolvency.
8.2 Solvency
The Company is able to pay its debts as and when they fall due.
--------------------------------------------------------------------------------
9. Litigation
--------------------------------------------------------------------------------
For the purposes of this Section 9 "material" shall mean having a potential
liability of at least US$50,000.
9.1 Ongoing proceedings, etc.
The Company is not engaged, and has not in the last 2 years been engaged in any
material proceedings.
9.2 Proceedings pending or threatened
No material proceedings against the Company have been threatened at any time or
are pending.
9.3 Unsatisfied judgments
There is no material unfulfilled or unsatisfied judgment outstanding against the
or any of its assets.
9.4 No circumstances
To the best of the Warrantors' knowledge, there are no circumstances arising
from the conduct of the Company or the Warrantors which might give rise to any
material proceedings or any other material dispute involving the Company.
--------------------------------------------------------------------------------
10. SEC Reports and financial statements
--------------------------------------------------------------------------------
10.1 SEC Reports
The Company has previously furnished to the Purchaser true and complete copies
of (a) the Company's Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1998, (b) the Company's Quarterly Reports on Form 10-QSB for the
quarters ended December 31, 1998, March 31, 1999 and June 30, 1999, and (c)
every Current Report on Form 8-K, registration statement and prospectus filed by
the Company with the Securities and Exchange Commission since September 30, 1998
(collectively, the "SEC Reports"). As of their respective dates, the SEC Reports
(i) complied as to form in all material respect with the applicable requirements
of such Reports and (ii) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
27
make the statements therein, in light of the circumstances under which they were
made, not misleading. Except to the extent that information contained in an SEC
Report has been revised or superseded by a later filed SEC Report, none of the
SEC Reports contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Since January 1, 1999, the Company has timely filed all
documents required to be filed by it with the Securities and Exchange
Commission.
10.2 Financial statements
Each of the financial statements (including any notes thereto) contained in the
SEC Reports was prepared in accordance with United States generally accepted
accounting principles (except as may be indicated in the notes thereto) and each
fairly presented in all material respects the financial position, results of
operations and changes in stockholders' equity and cash flows of the Company as
at the respective dates thereof and for the respective periods indicated therein
(subject, in the case of unaudited statements, to normal year-end adjustments).
10.3 No off balance sheet financing
The Company has not factored any of its debts or engaged in financing of a type
which is not required to be shown or reflected in its financial statements.
10.4 No material adverse effect
Since September 30, 1998, other than as described in the SEC Reports, no event
has occurred, or condition exists, which would constitute or cause a material
adverse effect with respect to the Company.
--------------------------------------------------------------------------------
11. Matters since the Accounts Date
--------------------------------------------------------------------------------
11.1 Accounts Date
In this Schedule 2, "Accounts Date" means July 1, 1999.
Since the Accounts Date:
(a) the Business has been carried on in the ordinary course consistent with the
practice for the 2 years immediately preceding the Accounts Date;
(b) the Company has not repaid any borrowed moneys in whole or in part except
in the normal course of carrying on the Business;
28
(c) there has been no material and adverse change in the financial condition,
position, prospects, assets or liabilities of the Business or the Company
as compared with the position disclosed by the Accounts; (d) the Company
has not sold any assets except in each case in the ordinary course of
business;
(e) the Company has not purchased any assets, except in the ordinary course of
business;
(f) the Company has not disposed of any fixed asset having a book value
exceeding US$50,000;
(g) the Company has not incurred any capital expenditure or made any single
capital commitment of an amount exceeding US$50,000;
(h) no dividends, bonuses or other distributions have been paid or made;
(i) the Company has not altered its capital in any way or undergone any capital
reorganization or resolved to repurchase any of its shares;
(j) the Company has not entered into, incurred or become subject to any
contract, liability, obligation, commitment or transaction except in the
ordinary course of business; and
(k) the Company has not passed or purported to pass any resolution in general
meeting for any purpose other than a resolution required under the Law to
be passed at the Company's Annual General Meeting.
--------------------------------------------------------------------------------
12. Officers
--------------------------------------------------------------------------------
12.1 Restrictions
None of the directors or officers of the Company is subject to any obligation or
liability or duty to any person or company or other incorporated or
unincorporated body which could in any way:
(a) prevent or restrict him from being involved in any capacity whatsoever with
the Company or in any part of the business of the Company; or
(b) prevent or restrict the Company from doing business with any person firm or
company which is or might otherwise become its customer or supplier or the
provider of services to it.
12.2 Previous conduct
None of the directors or officers of the Company:
(a) has within the period of three years prior to the date of the Agreement
been convicted of any criminal offence;
(b) has been a director, senior executive or senior employee of any company
other than KORE Data Ltd. in respect of which a receiver, administrative
receiver, receiver and manager or administrator has been appointed or which
has gone into insolvent liquidation either within his period of employment
with such company or within the period of twelve months following his
ceasing to be a director, senior executive or senior employee of such
company;
29
(c) has any interest or involvement in any business which compete in any way
with the Business;
(d) has any financial or managerial interest or involvement in any customer or
supplier of the Company.
--------------------------------------------------------------------------------
13. Insurance
--------------------------------------------------------------------------------
13.1 Policies
All insurance policies referred to in Section 13.3 are currently in full force
under effect, all premiums due under them have been paid and nothing has been
done or omitted to be done which would, or would be likely to, make any of them
void, voidable or unenforceable.
13.2 Claims
The Company is not aware of any claims in excess of US$50,000 which are
outstanding, pending, threatened or capable of arising against the Company in
respect of any accident or injury which are not fully covered by insurance.
13.3 Adequacy of coverage
The Company has, and at all times since incorporation has had, valid insurance
polices in effect in respect of the Business, its employees and its assets:
(a) against all risks insured against in accordance with prudent business
practice by companies carrying on the same type of business as the Company
or having similar assets;
(b) for the full amount required by any applicable law; and
(c) for the full replacement value of its assets.
--------------------------------------------------------------------------------
14. Properties
--------------------------------------------------------------------------------
For the purposes of this Section 14:
"Leasehold Properties" means those properties listed on the Company Disclosure
Schedule.
14.1 Title
The Company is the lessee, sub-lessee or licensee of the Leasehold Properties
and the Company's title or interest to each of them is held free from any
Security Interest or any option, easement, covenant or third party interest,
other than the interest of the landlord in the Leasehold Properties.
14.2 All real estate
The Leasehold Properties comprise all real estate, owned, used, held or occupied
by the Company.
30
14.3 Use of properties
The use of the Properties for the purpose of the Business does not contravene in
any material respect any applicable law.
14.4 Outstanding orders or notices
There are no outstanding orders or notices affecting the Leasehold Properties
requiring the carrying out of any material alterations, improvements or
maintenance.
14.5 Property leases
All material particulars in relation to the title or interest of the Company to
the Leasehold Properties has been disclosed to the Purchaser.
14.6 No grants to third parties
The Company has not granted or agreed to grant to any third party any lease,
sub-lease or license in respect of the whole or any part of any of the Leasehold
Properties.
14.7 Occupation
The Company has exclusive occupation and quiet enjoyment of the Leasehold
Properties and holds all easements, rights, interests and privileges necessary
or appropriate for the conduct of the Business.
14.8 No breach
The Company is not in breach of, or in default under any material respect, any
Agreement or covenant effecting the Leasehold Properties.
--------------------------------------------------------------------------------
15. Intellectual Property rights
--------------------------------------------------------------------------------
15.1 Definition of Intellectual Property
"Intellectual Property" means all intellectual property, know-how and
proprietary rights (whether registered or unregistered) owned or used by the
Company in the conduct of the Business including:
(a) Mailtv;
(b) all computer software;
(c) all trade or service marks and trade or service xxxx applications;
(d) all patents, patent applications, inventions, know-how, registered and
unregistered designs and copyright; and
(e) all trade secrets, ideas, concepts, technical and operational information
and other confidential information
provided, however, that "Intellectual Property" does not include the Patent
Applications (as defined below).
31
15.2 General
(a) The Company holds or has all necessary licenses in respect of all
Intellectual Property Rights material to carrying on the Business as
presently conducted in its name as sole legal and beneficial owner or
licensee and, where registered as the legal and beneficial owner, as sole
registered proprietor, free and clear of all Security Interests.
(b) All appropriate registrations for the Intellectual Property Rights have
been obtained.
(c) The Company has not entered into any agreement for the licensing of the
Intellectual Property Rights of which it is the legal and beneficial owner.
(d) The Company does not pay or have any requirement to pay any royalty or
other payment to any third party for the use of the Intellectual Property
Rights in the conduct of the Business.
(e) All registration and renewal fees regarding the Intellectual Property
Rights due on or before the First Closing have been paid in full.
(f) To the best of the Warrantors' knowledge, the use by the Company of the
Intellectual Property Rights does not breach or infringe any Intellectual
Property Rights of any other person.
32
15.3 Patents and Patent Applications
(a) The Company Disclosure Schedule sets forth a true and complete list of
every patent application in which the Company has any right, title ("Patent
Application"), together with (i) the country in which such Patent
Application was filed, (ii) the application number, (iii) the serial
number, (iv) the filing date, (v) the applicant's name(s), (vi) the
inventor's name(s), (vii) the patent number, if applicable, and (viii) the
date of grant, if applicable.
(b) The Patent Applications listed in the Company Disclosure Schedule comprise
all of the intellectual property rights necessary to the conduct of the
Business. The Company has full right and title to each Patent Application.
(c) The Company does not have any right, title or interest in any patents which
have been granted, nor are any such patents used in the conduct of the
Business.
(d) The Company Disclosure Schedule sets forth the Convention countries in
which the Company intends to file Patent Applications so as to obtain
priority for the inventions claimed in the Patent Applications.
(e) All governmental fees, including, but not limited to, filing fees,
annuities and issue fees, which have fallen due in respect of the Patent
Applications have been paid.
(f) Each Patent Application has been filed in the correct name of the
inventor(s) of the inventions claimed in such Patent Application and such
inventor(s) is the sole inventor(s) responsible for the inventions claimed
in such Patent Application.
(g) The inventor(s) of the inventions claimed in each Patent Application has
duly assigned in writing to the Company the inventions claimed in such
Patent Application. The Company Disclosure Schedule sets forth the parties
to, and the date of execution of, each such assignment document.
(h) The Company is not the licensee of any of the Patent Applications. There
are no royalties, license fees, charges or other amounts payable by, or on
behalf of, the Company in respect of the Patent Applications or the patents
sought thereby.
(i) The Company has not assigned, licensed or otherwise transferred any of its
right, title or interest in the Patent Applications, nor has the Company
agreed to do any of the foregoing.
(j) To the best of the Warrantors' knowledge, there is no prior art which would
have the effect of invalidating any of the inventions claimed in the Patent
Applications.
(k) To the best of the Warrantors' knowledge, no other person or entity
infringes on any of the claims in any Patent Application (assuming for
purposes of this representation that each such Patent Application was
issued as a patent).
33
15.4 Business names
No business names or trade names are used by the Company in connection with the
carrying on of the Business.
--------------------------------------------------------------------------------
16. Personnel
--------------------------------------------------------------------------------
16.1 Disclosure of officers/employers
Details as at the date of the Agreement of:
(a) the names of all directors, secretaries, principal executive officers and
employees of the Company ("Employees") who are earning a salary of more
than US$100,000 per year; and
(b) all salary, wages and other remuneration payable to the Employees who are
earning a salary of more than US$100,000 per year are included in the
Company Disclosure Schedule.
16.2 Material employment terms
There are no:
(a) existing service or other agreements with any Employees which in their
terms provide for a notice period of more than six months' notice for the
termination of the employment of that Employee;
(b) schemes or arrangements for the payment of bonuses or commissions to any
Employees; or
(c) share option or share incentive or similar schemes for any Employees, other
than 300,000 Company Shares underlying 100,000 Stock options reserved for
issuance to each of Xxxx Xxxxx, Xxxxxxx Xxxxxxx and Xxxx Xxxxxx and other
than the Company's existing Stock Option Plan pursuant to which options to
purchase up to 1,000,000 shares may be issued.
--------------------------------------------------------------------------------
17. Regarding the KeyClub Shares
--------------------------------------------------------------------------------
17.1 Investment purposes
The Company is taking the KeyClub Shares for investment purposes only and not
with a view towards their resale or distribution.
--------------------------------------------------------------------------------
18. All information true and accurate
--------------------------------------------------------------------------------
To the best of the Warrantors' knowledge, all information set out in the
Agreement (including this Schedule) or which has been disclosed by the Company
and its officers, consultants, auditors or advisers to the Purchaser, its
officers, consultants or advisers on or prior to the First Closing and the
Second Closing is true and accurate in all respects and not misleading (whether
by inclusion or omission).
34
Company Disclosure Schedule
Schedule 2.6
WORLD CALLNET, INC.
SCHEDULE OF CAPITAL SHARES OUTSTANDING
ON A FULLY DILUTED BASIS
AS OF SEPTEMBER 30, 1999
Common stock, $0.001 par value,
outstanding as of September 30,
1999 10,541,325
Less treasury shares (held by CallNet Plc) (500,000)
Shares issuable pursuant to options
granted under the WCN Stock
Option Plan to the following
individuals:
Xxxx Xxxxxxx-Xxxxxxx 500,000
Xxxxx Xxxxxxx-Xxxxxxx 500,000
Xxxxx Xxxxxxx 500,000
Xxxxxx Xxxxxxx 50,000
CallNet Plc options assumed by WCN 440,000
Additional 350,000 options reserved for issuance 350,000
----------------
2,340,000
----------------
Shares issuable pursuant to warrants
to purchase WCN common stock
granted to the following parties:
November 30, 1998 bridge lenders 150,000
December 31, 1998 bridge lenders 425,000
April 1999 bridge lenders 1,100,000
Xxxxxxxxxx & Associates 250,000
Xxx Xxxxx, Jr. 100,000
Xxxxx X. Xxxxx 150,000
Other warrant holders
----------------
2,175,000
----------------
Total outstanding shares of WCN capital
stock as of September 30, 1999 on a
fully diluted basis 14,556,325
================
35
3.1 Disclosure of contracts
The Company is not a party to any distribution agreement, agency or
representative agreement, factoring agreement, major customer supply/purchase
agreement, order obligation, sub-contract agreement, letter of intent or
agreement to sell any shares or assets of the Company or government contract, in
any such case of more than US$50,000.
4.2 All assets disclosed
Other than the Patent Applications, the Company does not own or use any assets
in the ordinary course of the Business that are deemed "material."
14. Leasehold Properties(1)
0 Xxxx Xxxxxxx
Xxxxxxx Xxx
Xxxxxx X00 0XX Xxxxxxx
Rent: (pound)325 per week
Term: One year lease ending April 29, 0000
Xxxxxx Xxxxx
Xxxxxxxx Xxxx
000 Xxxxx Xxxx
Xxxxxx X00 0XX
Rent: (pound)29.400 per year
Term: Five year lease ending August 12, 2003
0 Xxxxxxx Xxxxx
Xxxxx Xxxxxx
Xxxxxxx Xxxxxxx
Rent: (pound)13,000 per year
Term: Nine year lease ending August 14, 2007
0 Xxxxxxx Xxxxx
Xxxxx Xxxxxx
Xxxxxxx Xxxxxxx
Rent (pound)8,500 per year
Term: Lease ends June 28, 2007
15.3 Patents and Patent Applications
Country Where Application Serial Applicant's Inventor's Patent
Filed Number Number Filing Date Name Name Number Grant Date
---------------- -------------- ----------- ---------------- ---------------- -------------- ----------- ------------
General
American N/A -
United Kingdom 9828850.9 N/A Dec. 30, 1998 Royalty, Inc. N/A N/A Pending
European World CallNet, N/A -
Patent Office 99201002.5 N/A March 3, 1999 Inc. N/A N/A Pending
------------------------
(1) Does not include leased equipment.
36
16.1 Disclosure of officers/employers
Executive Compensation
The following table sets forth the name and title of all directors, secretaries,
principal executive officers and employees of the Company who are earning a
salary of more than US$100,000 per year:
Annual Car
Employee Title Annual Salary Allowance
------------------------------ --------------------------------- --------------- -------------
Xxxx Xxxxxxx-Xxxxxxx President & Chief Executive (pound)135,000 (pound)12,500
Officer and Director
Xxxxx Xxxxxxx- Xxxxxxx Chief Operations Officer and (pound)135,000 (pound)12,500
Director
Xxxxx Xxxxxxx Chief Technological Officer and (pound)135,000 -0-
Director
Xxxx Xxxxx Engineering Manager (pound)65,000 (pound)7,500
Xxxxxxx Xxxxxxx Marketing & Communications Manager (pound)65,000 (pound)7,500
Xxxx Xxxxxx Operations Manager (pound)60,000 (pound)7,500
37
Schedule 2
Representations and Warranties of the Purchaser
--------------------------------------------------------------------------------
1. Interpretation
--------------------------------------------------------------------------------
1.1 Capitalized terms used in this Schedule 2 without definition shall have
the meanings assigned them in the Agreement to which this Schedule is
attached.
--------------------------------------------------------------------------------
2. Corporate
--------------------------------------------------------------------------------
2.1 Incorporation; Good standing
The Purchaser:
(a) is duly incorporated and in good standing under the laws of its
jurisdiction of incorporation;
(b) has the power to own, lease and operate its properties and assets and carry
on the Business as it is now being conducted; and
(c) is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualification.
2.2 Authority
(a) The Purchaser has obtained all licenses, permits and authorizations of
whatever nature required to own its properties and assets and carry on its
business as it is now being conducted.
(b) The Purchaser has the requisite corporate power and authority to execute,
deliver and perform the Agreement and the transactions contemplated hereby.
The Purchaser has taken all necessary action by it to authorize the
execution, delivery and performance of the Agreement and the transactions
contemplated hereby. The Agreement constitutes the valid and legally
binding obligation of the Purchaser, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to creditors' rights and to general principles
of equity.
(c) The stockholders of the Purchaser are not required to approve the
execution, delivery or performance of the Agreement by the Purchaser.
(d) No Government Agency is required to give its consent or authorization to
the execution, delivery or performance of the Agreement by the Purchaser.
38
2.3 No conflict with other obligations
The execution, delivery and performance of the Agreement by the Purchaser does
not breach or conflict with or result in the violation of any provision of, or
require the consent of any third party under or pursuant to:
(a) any material contract or obligation of the Purchaser or any arrangement to
which the Purchaser is a party or otherwise bound;
(b) any law, regulation, license, permit, authorization, ruling, judgment,
order or decree of any Governmental Agency; and
(c) the Certificate of Incorporation or By-Laws of the Purchaser.
2.4 Share capital
(a) The KeyClub Shares to be transferred pursuant to the terms of the Agreement
have been duly authorized and validly issued and are fully paid,
non-assessable and free of any Third Party Interests.
--------------------------------------------------------------------------------
3. Regarding the Company Shares
--------------------------------------------------------------------------------
3.1 Investment purposes
The Purchaser is taking the Company Shares for investment purposes and not with
a view towards their resale or distribution.
39
Annex A
Previous Payments by the Purchaser
------------------------------- --------------------------------------
Date Payment Amount
------------------------------- --------------------------------------
July 20, 0000 Xxxxxxxxxx $215,000
------------------------------- --------------------------------------
July 23, 0000 Xxxxxxxxxx $120,000
------------------------------- --------------------------------------
August 4, 1999 (pound)35,000
------------------------------- --------------------------------------
August 6, 1999 (pound)35,000
------------------------------- --------------------------------------
August 26, 1999 (pound)35,000
------------------------------- --------------------------------------
August 31, 1999 (pound)35,000
------------------------------- --------------------------------------
September 9, 1999 (pound)35,000
------------------------------- --------------------------------------
September 16, 1999 US$ 450,000
------------------------------- --------------------------------------
40
Annex B
Form of Registration Rights Agreement
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is entered into
as of October __, 1999 by and between World CallNet, Inc., a Delaware
corporation (the "Company"), and MailTV Pty Ltd, an Australian corporation
("MailTV").
WHEREAS, the Company, MailTV and Xxxx Xxxxxxx-Xxxxxxx have entered into
the Stock Purchase Agreement (capitalized terms used herein without definition
shall have the meanings ascribed to them in Section 1.11 of this Agreement);
WHEREAS, as contemplated by the Stock Purchase Agreement, the Company
will issue to MailTV up to an aggregate of 14,500,000 shares of Common Stock in
two or more closings (such number being subject to adjustment in the event of a
stock split, merger or other business combination, as provided in the Stock
Purchase Agreement); and
WHEREAS, it is a condition precedent to the Company's obligation to
close the transactions contemplated by the Stock Purchase Agreement that this
Agreement be executed by the parties hereto;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the Company and MailTV hereby agree as follows:
1.1 Demand Registration Rights.
(a) Holder shall have the right, exercisable prior to the
Termination Date, unless extended pursuant to this Section 1.1, on one (1)
occasion by written notice to the Company (the "Registration Notice"), to
require the Company to effect a registration under the Securities Act of the
Registrable Securities, and the Company will cause, as expeditiously as
practicable, the registration under the Securities Act of any or all of the
Registrable Securities. In connection therewith, the Company shall be obligated
to prepare and file a registration statement promptly upon receipt of any such
Registration Notice and shall be further obligated to cause such registration
statement to be declared effective under the Securities Act and the rules and
regulations promulgated thereunder as soon as practicable after the filing date
thereof; provided, that the Company may defer for period not longer than 60 days
the registration requested pursuant to this Section 1.1 if a majority of the
Company's board of directors shall resolve that because the Company has under
consideration a significant (as used in Regulation S-X of the Commission)
acquisition, disposition or other material transaction that has not been
publicly disclosed, the expeditious registration, as otherwise required by this
Section 1.1, would be materially disadvantageous to the Company. The period
during which the rights granted under this Section 1.1 may be exercised by
B-1
Holder shall be extended by one day beyond the Termination Date for each day
that pursuant to this Section 1.1 the Company postpones effecting a registration
or requires Holder to refrain from disposing of Registrable Securities pursuant
to the registration statement. Holder may demand, and the Company shall be
required to effect, only one (1) such registration of Registrable Securities
owned by Holder, and such obligation shall be deemed satisfied (i) when one
underwritten registration and offering shall have been completed with respect to
Registrable Securities which Holder requests be registered pursuant to this
Section 1.1 or (ii) when one registration not involving an underwriter shall
become effective pursuant to a request of Holder made pursuant to this Section
1.1, provided that a registration not involving an underwriter shall not be
deemed to have been effected for purposes of this Section 1.1 if the
registration statement relating to such registration does not remain effective
for a period of at least 365 days (or such shorter period ending on the date
Holder completes its distribution of Registrable Securities as contemplated by
such registration statement) or if within 365 days after such registration
becomes effective (or such shorter period referred to above) such registration
is interfered with by any stop order, injunction or other order or requirement
of the Commission or other governmental agency or court for any reason and all
the Registrable Securities registered in connection therewith were not sold.
(b) If Registrable Securities which the Company has been
requested to register pursuant to this Section 1.1 are to be disposed of in an
underwritten public offering, Holder shall select the managing underwriter for
such offering, provided that such underwriter is acceptable to the Company. The
Company may not unreasonably withhold its approval of the underwriter. If the
managing underwriter shall advise the Company in writing (with a copy to Holder)
stating that, in its opinion, the number of shares proposed to be included in
such registration exceeds the number which can be sold in such offering within
the price range acceptable to Holder (such opinion to state the approximate
number of shares which, in the judgment of the managing underwriter, may be
included in such offering without such effect), then the Company will include in
such registration, to the extent of the number of securities which the Company
is so advised can be sold in such offering (i) first, Registrable Securities
owned by Holder requested to be registered pursuant to this Section 1.1, and
(ii) second, all other securities of the Company proposed to be included in such
registration.
1.2 Piggyback Registration Rights. If the Company at any time through
the Termination Date proposes (or if the Company proposes on more than one
occasion) to register any of its securities under the Securities Act for sale,
in a manner which would permit registration of Registrable Securities owned by
Holder for sale to the public under the Securities Act, it will give written
notice to Holder of its intention to register any of its securities and, upon
the written request of Holder given within 30 days after the actual receipt of
any such notice, the Company will cause all or any part of any Registrable
Securities then owned by Holder to be included in such registration statement;
provided, however, that the Company may at any time withdraw or cease proceeding
with any such registration if it shall at the same time withdraw or cease
proceeding with the registration of such other securities originally proposed to
be registered. Notwithstanding anything in the foregoing to the contrary,
(a) if a registration pursuant to this Section 1.2 involves an
underwritten offering, the Company shall select the managing underwriter for the
offering and any additional investment bankers or manager to be used in
B-2
connection with the offering, and, if the managing underwriter shall advise the
Company in writing (with a copy to Holder) that, in its opinion, the number of
shares proposed to be included in such registration is so great as would
adversely affect the offering, including the price at which the shares can be
sold, then the Company will include in such registration the maximum number of
securities which the Company is so advised can be sold in such offering without
the adverse effect allocated as follows: (i) first, securities of the Company
that the Company proposes to issue and sell for its own account and securities
for which it has granted demand registration rights to Persons other than
Holder, (ii) second, Registrable Securities owned by Holder and requested to be
registered pursuant to this Section 1.2 and securities of the Company held by
other holders granted similar piggyback or incidental registration rights by the
Company, pro rata among Holder and such other holders on the basis of the total
number of shares of such securities requested to be registered by Holder and all
such other holders, and (iii) third, all other securities of the Company
proposed to be included in such registration;
(b) the Company shall not be required to include any
Registrable Securities owned by Holder in a registration statement on Form S-4
or S-8 (or any successor form) or a registration statement filed in connection
with an exchange offer or other offering of securities solely to the then
existing shareholders of the Company; and
(c) the procedures set forth in Section 1.3 (other than those
set forth in Section 1.3(a) and (b)) shall apply to any registration involving a
Holder pursuant to the terms of this Section 1.2.
1.3 Registration Procedures. Registration under this Agreement shall be
on such appropriate registration form of the Commission as shall be selected by
the Company and as shall permit the disposition of such Registrable Securities.
If and whenever the Company proposes to effect the registration of any
Registrable Securities under the Securities Act as provided in Section 1.1, the
Company will as expeditiously as possible:
(a) promptly and in any event within 90 days of the
Registration Notice (subject to the proviso set forth in Section 1.1), prepare
and file with the Commission the requisite registration statement to effect such
registration and use its best efforts to cause such registration statement to
become effective;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement until the
earlier of (i) such time as all of the Registrable Securities have been disposed
of by Holder and (ii) 365 days after the effective date of such registration
statement, and shall immediately notify Holder when such registration statement
is no longer effective under the Securities Act;
(c) furnish as soon as available to Holder and the managing
underwriter, if any, (i) such number of copies of such drafts and final versions
of such registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), (ii) such number of copies of such drafts
B-3
and final versions of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus), (iii) such
number of copies of any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act, and
(iv) such number of copies of such other documents, as Holder may reasonably
request;
(d) register or qualify the Registrable Securities and other
securities covered by such registration statement under such other securities or
blue sky laws of such U.S. jurisdictions as Holder shall reasonably request,
keep such registration or qualification in effect for so long as such
registration statement remains in effect, and take any other action which may be
reasonably necessary or advisable to enable Holder to consummate the disposition
in such jurisdictions of the Registrable Securities owned by Holder, except that
the Company shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it would not
but for the requirements of this subdivision (d) be obligated to be so qualified
or to consent to general service of process in any such jurisdiction;
(e) in the case of an underwritten offering, furnish to Holder
and the underwriters of Registrable Securities:
(i) an opinion of counsel for the Company, dated the
effective date of such registration statement and dated the
date of the closing under the underwriting agreement,
reasonably satisfactory in form and substance to the managing
underwriter, and
(ii) a "comfort" letter, dated the effective date of
such registration statement and dated the date of the closing
under the underwriting agreement, signed by the independent
public accountants who have certified the Company's financial
statements included or incorporated by reference in such
registration statement and the prospectus included therein
and, in the case of the accountants' letter, with respect to
events subsequent to the date of such financial statements, as
are customarily covered in accountants' letters delivered to
the underwriters in underwritten public offerings of
securities;
(f) notify Holder, at any time when a prospectus relating to
Registrable Securities is required to be delivered under the Securities Act,
upon discovery that, or upon the happening of any event as a result of which,
the prospectus included in the registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made, and
at the request of Holder promptly prepare and furnish to Holder a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to purchasers or prospective
purchasers of such securities, such prospectus shall not include an untrue
B-4
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(g) otherwise comply with all applicable rules and regulations
of the Commission, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at least
twelve months, but not more than eighteen months, beginning with the first full
calendar month after the effective date of such registration statement, which
earnings statement shall satisfy (in accordance with Rule 158) the provisions of
Section 11(a) of the Securities Act, and furnish to Holder at least five
Business Days prior to the filing thereof a copy of any amendment or supplement
to such registration statement or prospectus, and shall not file any thereof to
which Holder shall have reasonably objected on the grounds that such amendment
or supplement does not comply in all material respects with the requirements of
the Securities Act or the rules or regulations thereunder;
(h) provide and cause to be maintained a transfer agent and
registrar for the Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such registration
statement; and
(i) cause all Registrable Securities covered by such
registration statement to be listed on the exchange on which similar securities
issued by the Company are then listed.
In any registration of Registrable Securities pursuant to this Agreement, Holder
shall provide to the Company all necessary information regarding Holder's
intended method of distribution. The Company may require Holder to furnish the
Company such additional information in respect of Holder or its Registrable
Securities which will be included in such registration statement as the Company
may reasonably request in writing and as it required by applicable laws or
regulations. The Company agrees to include in any such registration statement
all information which Holder shall reasonably request.
1.4 Underwritten Offerings.
If requested by the underwriters for any underwritten offering
by Holder made pursuant to a registration requested under Section 1.1, the
Company will use its reasonable efforts to enter into a firm commitment
underwriting agreement with such underwriters and Holder for such offering, such
agreement to be satisfactory in substance and form to Holder and the
underwriters and to contain such representations and warranties by the Company
and such other terms as are customarily contained in such agreements, including,
without limitation, indemnities to the effect and the extent provided in Section
1.7. Except as set forth in this Agreement, Holder shall not be required to make
any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding
Holder, Holder's Registrable Securities and Holder's intended method of
distribution and any other representation required by law.
1.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
in which Registrable Securities are included pursuant to this Agreement, the
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Company will give Holder, its counsel and the managing underwriter or
underwriters (if any) the opportunity (a) to review such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and (b) to discuss the business of the
Company with its officers and the independent public accountants who have
certified its financial statements.
1.6 Registration Expenses. The Company will, whether or not any
registration pursuant to this Agreement becomes effective, from time to time
promptly upon receipt of bills or invoices relating thereto, pay all expenses
incident to its performance of or compliance with this Agreement, including,
without limitation, all (a) registration, filing and listing fees, (b) fees and
expenses of compliance with securities or Blue Sky laws, (c) printing expenses
and messenger and delivery expenses, (d) fees and disbursements of counsel for
the Company and the Company's independent public accountants (including the
expenses of any audit and/or "comfort" letter) and other Persons retained by the
Company and (e) any fees and disbursements of underwriters customarily borne by
issuers or sellers of securities (excluding underwriting commission and
discounts, which shall be borne by Holder).
1.7 Indemnification.
(a) The Company will, and hereby does, indemnify and hold
harmless, to the extent permitted by applicable law, Holder, its officers and
directors, if any, and each Person, if any, who controls Holder within the
meaning of Section 15 of the Securities Act, and their respective successors,
against all losses, claims, damages, liabilities (or proceedings in respect
thereof) and expenses, including legal fees incurred in investigating or
defending any such loss, claim, damage or liability (under the Securities Act or
common law or otherwise) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement or prospectus (and as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), covering the Registrable
Securities or any preliminary prospectus or other document incident thereto or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities (or proceedings in respect thereof) or expenses arise out of or are
based upon any untrue statement or alleged untrue statement contained in or by
any omission or alleged omission from information furnished in writing to the
Company by Holder expressly for use therein. If the offering pursuant to any
registration statement provided for under this Agreement is made through
underwriters, no action or failure to act on the part of such underwriters
(whether or not any such underwriter is an Affiliate of Holder) shall affect the
obligations of the Company to indemnify Holder or any Person pursuant to the
preceding sentence. If the offering pursuant to any registration statement
provided for under this Agreement is made through underwriters, the Company
agrees to enter into an underwriting agreement in customary form, with customary
indemnification provision, with such underwriters. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
Holder, its officers, directors or any Person, if any, who controls Holder as
aforesaid, and shall survive the transfer of such securities by Holder.
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(b) Holder will and hereby does indemnify, to the extent
permitted by applicable law, the Company, its officers and directors and each
Person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act, and their respective successors, against any losses, claims,
damages, liabilities (or proceedings in respect thereof) and expenses (including
legal fees incurred in investigating or defending any such loss, claim, damage
or liability) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact or any omission or alleged omission of a
material fact required to be stated in such registration statement or prospectus
or preliminary prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement is contained in, or such omission is in, information
furnished in a writing by Holder expressly for use therein, provided that
Holder's obligations hereunder shall be limited to an amount equal to the
proceeds to Holder of the Registrable Securities sold pursuant to such
registration statement.
(c) Any Person entitled to indemnification under the
provisions of this Section 1.7 shall (i) give prompt notice to the indemnifying
Person of any claim with respect to which it seeks indemnification and (ii)
unless in such indemnified Person's reasonably judgment a conflict of interest
between such indemnified and indemnifying Persons may exist in respect to such
claim, permit such indemnifying Person to assume the defense of such claim, with
counsel reasonably satisfactory to the indemnified Person; and, if such defense
is so assumed, such indemnifying Person shall not enter into any settlement
without the consent of the indemnified Person if such settlement attributes
liability to the indemnified Person and such indemnified Person shall not be
subject to any liability for any settlement made without such consent (which
shall not be unreasonably withheld); and any underwriting agreement entered into
with respect to any registration statement provided for under this Agreement
shall so provide. In the event that an indemnifying Person shall not be
entitled, or elects not, to assume the defense of a claim, such indemnifying
Person shall not be obligated to pay the fees and expenses of more than one
counsel or firm of counsel for all parties indemnified by such indemnifying
Person in respect of such claim, unless, in the reasonable judgment of any such
indemnified Person, a conflict of interest may exist between such indemnified
Person and any other of such indemnified Persons in respect of such claim.
(d) If for any reason the foregoing indemnity is unavailable,
then, subject to the proviso in Section 1.7(b) in the case of Holder, the
indemnifying Person shall contribute to the amount paid or payable by the
indemnified Person as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying Person and the indemnified Person as well as any other relevant
equitable considerations. The relative fault of the indemnifying Person on the
one hand and of the indemnified Person on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying Person or by the indemnified
Person and by the Persons' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a Person as a result of the losses, claims, damages, liabilities and
expenses shall be deemed to include any legal or other fees or expenses
reasonably incurred by the Person in connection with investigating or defending
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any action or claim. 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.
(e) An indemnifying Person shall make payments of all amounts
required to be made pursuant to the foregoing provisions of this Section 1.7 to
or for the account of the indemnified Person from time to time promptly upon
receipt of bills or invoices relating thereto or when otherwise due or payable.
1.8 Transfer of Registration Rights. The registration rights set forth
in this Agreement are transferable only in connection with the sale or other
transfer to a single purchaser of at least 50.1% of the shares of Common Stock
of MailTV acquired pursuant to the Stock Purchase Agreement, provided such
purchaser agrees (in a writing that names the Company as an explicit third party
beneficiary) to be bound by all of the terms and conditions of this Agreement.
1.9 Merger or Consolidation of the Company. The Company will not merge
or consolidate with or into any other corporation unless the corporation
resulting from such merger or consolidation (if not the Company) shall expressly
assume, by supplemental agreement, the due and punctual performance and
observance of each and every covenant and condition of this Agreement to be
performed and observed by the Company.
1.10 Availability of Information. The Company will comply with the
reporting requirements of Sections 13 and 15(d) of the Exchange Act and will
comply with all other public information reporting requirements of the
Commission (including Rule 144 promulgated by the Commission under the
Securities Act from time to time in effect and relating to the availability of
an exemption from the Securities Act for the sale of any Registrable Securities.
The Company will also cooperate with the Holder of any Registrable Securities in
supplying such information as may be necessary for such Holder to complete and
file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of an exemption from the
Securities Act for the sale of such Registrable Securities.
1.11 Certain Definitions. As used herein, the following defined
terms shall have the following meanings:
"Affiliate": any Person that is an "affiliate" within the meaning of
the regulations promulgated under the Securities Act.
"Business Day": any day, other than a Saturday, Sunday or a day on
which commercial banking institutions in the City of New York, State of New
York, are required or authorized by law to close.
"Commission": the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock": the Common Stock, par value $.001 per share, of the
Company.
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"Holder": MailTV, or the purchaser (in a transfer made in compliance
with Section 1.8) of at least 50.1% of the shares of Common Stock acquired by
MailTV pursuant to the Stock Purchase Agreement.
"NASD": The National Association of Securities Dealers, Inc. or any
successor organization.
"Person": a corporation, a limited liability company, an association,
a partnership, an organization, a business, an individual, a government or
political subdivision thereof or a governmental agency.
"Registrable Securities": fifty percent (50%) of the shares of Common
Stock (or such lesser number as Holder shall determine) acquired by MailTV
pursuant to the Stock Purchase Agreement, provided, that the shares of Common
Stock acquired by MailTV pursuant to the Stock Purchase Agreement shall cease to
be Registrable Securities when (i) a registration statement with respect to the
sale of such shares shall have become effective under the Securities Act and
such shares shall have been disposed of in accordance with such registration
statement, (ii) they shall have been distributed to the public pursuant to Rule
144 under the Securities Act, (iii) they shall have otherwise been transferred,
new instruments or certificates of them not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent disposition of
them shall not require registration or qualification of them under the
Securities Act or any similar state law then in force, or (iv) they shall have
ceased to be outstanding.
"Securities Act": the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Stock Purchase Agreement": the Stock Purchase Agreement, dated as
of September 30, 1999, among the Company, MailTV and Xxxx Xxxxxxx-Xxxxxxx.
"Termination Date": December 31, 2004.
1.12 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
1.13 Successors and Assigns. The terms of this Agreement shall be
binding upon and inure to the benefit of (a) the Company and its successors and
assigns and (b) Holder and its successors and assigns.
1.14 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto, and supersedes all prior understandings and
agreements, with respect to the subject matter hereof.
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1.15 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed an original, but
all of which together shall constitute one and the same instrument.
1.16 Notices. All notices and other communications hereunder shall be
in writing and may be sent by (a) personal delivery (including courier service),
(b) telecopier during normal business hours to the number indicated below, or
(c) first class or registered or certified mail, postage prepaid, and addressed
as follows:
If to the Company at:
World CallNet, Inc.
Xxxxxx Xxxxx
Xxxxxxxx Xxxx
000 Xxxxx Xxxx
Xxxxxx X00 0XX
Attention: Xxxx Xxxxxxx-Xxxxxxx
Telecopier: (00)-000-000-0000
If to MailTV at:
MailTV Pty Ltd
Xxxxx 00-00, Xxxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxxx Xxxxx
Attention: Xxxxx Xxxxxx/Xxxxxx Xxxxxx
Telecopier No.: (000) 0000-0000
The Company or any Holder may change or add its address or telecopier
number to which notices and other communications hereunder are to be delivered
by giving the Company or such Holder, as the case may be, notice in the manner
herein set forth. Each notice and other communication shall be effective (i) if
given by telecopier, when the telecopy is transmitted to the proper address and
the receipt of the transmission is confirmed, (ii) if given by mail, 72 hours
after the notice or other communication is deposited in the mail properly
addressed with first class postage prepaid or (iii) if given by any other means,
when delivered to the proper address and a written acknowledgment of delivery is
received.
1.17 Headings. The descriptive headings of the several Sections of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
1.18 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of the prohibition or unenforceability without
invalidating the remaining provisions of the Agreement or affecting the validity
or enforceability of such provision in any other jurisdiction.
1.19 Construction. Personal pronouns, when used in this Agreement,
whether in the masculine, feminine or neuter gender, shall include all other
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genders, and the singular shall include the plural, and vice versa. All
references in this Agreement to Sections or subsections shall refer to the
corresponding Section or subsection of this Agreement, unless specific reference
is made to a Section or subsection of another document or instrument. Any
reference in this Agreement to any federal, state, local or foreign statute or
law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.
The word "including" shall mean including without limitation.
1.20 Amendments and Waivers. No amendment, modification, termination or
waiver of any provision of the Agreement shall be valid unless it shall be in
writing and signed by the Company and Holder. No waiver by the Company or any
Holder of any default, misrepresentation, breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentations, breach of warranty or covenant hereunder
or to affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be executed as of the date first above written.
WORLD CALLNET, INC.
By:_____________________________________
Name:
Title:
MAILTV PTY LTD
By:_____________________________________
Name:
Title:
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