AMENDED AGREEMENT AND PLAN OF REORGANIZATION
Agreement made as of the 7th day of November, 1997 by and among Touch Tone
America, Inc., a California corporation, ("Buyer"), ORIX Global Communications,
Inc., a Nevada corporation (the "Company" or "Seller") and the Shareholders of
the Company whose names and addresses are set forth on the signature page
hereof, (the "Shareholders"). Buyer, Seller, Company and Shareholders are
sometimes referred to as "party" or "parties."
The parties entered into an Agreement and Plan of Reorganization dated
August 11, 1997 (the "Agreement") pursuant to which the Shareholders agreed to
sell 1,200 shares of common stock, no par value per share, of the Company,
constituting all the issued and outstanding common stock of the Company (the
"Shares").
The parties have agreed to amend the Agreement in order to substitute the
consideration given by the Buyer for the Shares, as well as condition the
closing of the transaction upon certain terms. Buyer agrees to acquire all the
Shares in exchange for certain shares of the Common Stock of Buyer (the "Buyer's
Stock") and the Seller and Shareholders desire to exchange the Shares for
Buyer's Stock on the terms and conditions set forth herein. In consideration of
the mutual agreements contained herein, the parties agree as follows:
1. ACQUISITION AND EXCHANGE OF SHARES.
1.01 ACQUISITION. Buyer will acquire Seller pursuant to a
reorganization whereby Seller will become a wholly owned subsidiary of Buyer.
1.02. SHARES BEING EXCHANGED. Subject to the terms and conditions of
this Agreement, at the Closing, provided for in Section 2.01 hereof (the
"Closing"), Shareholders are assigning and delivering to Buyer the Shares and
Buyer is acquiring such Shares, free and clear of all liens, claims, options,
charges and encumbrances whatsoever in exchange for such number of Common Shares
of the Buyer's Common Stock to represent after issuance 65% of all issued and
outstanding shares of the Buyer's Common Stock after giving effect to all
options, warrants or other rights calling for issuances of Common Shares of the
Buyer's Common Stock. As of the date hereof, 4,561,245 shares of Buyer's Common
Stock are issued and outstanding, and options, warrants or other rights calling
for issuances of 3,393,400 Common Shares of the Buyer's Common Stock are
outstanding.
Accordingly, as of the date hereof, and before giving effect to any
adjustments contemplated under Paragraph 1.04 below, the number of Common Shares
of the Buyer's Common stock which represent, after issuance, 65% of all issued
and outstanding shares of the Buyer's Common Stock after giving effect to all
options, warrants or other rights calling for issuances of Common Shares of the
Company currently outstanding, is 14,772,912..
1.03. SHAREHOLDERS' REPRESENTATIVE. For this transaction, the
Shareholders hereby irrevocably designate and appoint Xxxxx Xxxxxx as their
representative and attorney in fact, ("Orix Shareholders' Representative"), with
full power and authority until the Closing to execute, deliver and receive on
their behalf all notices, requests, certificates and other communications
hereunder;
to, fix and alter on their behalf the date, time and place of the Closing; to
waive, amend or modify any provisions of this Agreement and to take such
other action on their behalf in connection with this Agreement, the Closing
and the transactions contemplated hereby as such agent or agents deem
appropriate; provided, however, that no such waiver, amendment or
modification may be made if it would decrease the number of shares to be
issued to the Sellers under Section 1.02 hereof or increase the extent of
their obligation to indemnify Buyer under Section 8.02 hereof.
1.04. ADJUSTMENTS TO NUMBER OF SHARES. In the event that, prior to
any issuance and delivery of shares of Buyer's Common Stock to the Shareholders
at Closing pursuant hereto, the outstanding shares of Buyer's Common Stock shall
have been, with or without new consideration, increased, decreased, changed into
or exchanged for a different number or kind of shares or securities through
reorganization, recapitalization, reclassification, stock dividend, stock split,
or other like changes in Buyer's capitalization, then an appropriate and
proportionate adjustment shall be made in the number of the Buyer's Common Stock
to be thereafter issued and delivered hereunder to the Shareholders at Closing
in order for the Shareholders to acquire the proportion of the Buyer's equity
contemplated under Paragraph 1.02 above, namely 65% of all issued and
outstanding shares of the Buyer's Common Stock after giving effect to all
options, warrants or other rights calling for issuances of Common Shares of the
Buyer's Common Stock then outstanding.
2. THE CLOSING.
2.01. TIME AND PLACE. The Closing hereunder shall occur at 10:00
a.m. at the offices of Seller, or at such other time and location as may be
mutually agreed upon by Buyer and Seller, but which date shall be no later than
January 31, 1998, or 24 hours after Shareholder approval.
2.02. DELIVERIES BY THE SELLER. At the Closing, the Seller shall
deliver to Buyer, (unless previously delivered or waived), the following:
a. Certificates representing the Company Shares, duly endorsed or
accompanied by stock powers, duly endorsed, duly executed in blank, (with
signatures guaranteed by a national bank or a member firm of the New York Stock
Exchange), and otherwise in form acceptable for transfer on the books of the
Company, with all requisite stock transfer stamps attached.
b. Certificates from appropriate authorities as to the good
standing of, and payment of taxes by, the Company in the State in which it is
incorporated and each jurisdiction in which it is qualified to do business as a
foreign corporation, dated as of the most recent practicable date.
c. The opinion of the Seller's counsel referred to in Section
7.c hereof.
2
d. A general release from Shareholders of all claims
Shareholders may have, as of the date of the Closing, against the Company,
Buyer, and their subsidiaries or affiliates, or directors, officers, employees
or agents of the Company, Buyer, or their subsidiaries or affiliates, except for
such rights or claims arising under this Agreement and those listed in Exhibit
2.02(d).
e. All other previously undelivered items required to be
delivered by the Seller to Buyer at or prior to the Closing.
2.03 DELIVERIES BY BUYER. At the Closing, Buyer shall deliver to the
Sellers certificates of the appropriate number of Buyers Stock.
a. Certificates representing the Company Shares, duly endorsed
or accompanied by stock powers, duly endorsed, duly executed in blank, (with
signatures guaranteed by a national bank or member firm of the New York Stock
Exchange), and otherwise in form acceptable for transfer on the books of the
Company, with all requisite stock transfer stamps attached.
b. Certificates from appropriate authorities as to the good
standing of, and payment of taxes by, the Buyer in the State in which it is
incorporated and each jurisdiction in which it is qualified to do business as a
foreign corporation, dated as of the most recent practicable date.
c. An opinion of the Buyer's counsel as referred to in Section
7.8 hereof.
d. All other previously undelivered items required to be
delivered by the Buyer to Seller at or prior to the Closing.
3. SECURITIES ACT.
3.01 INVESTMENT REPRESENTATION. Each Seller acknowledges that the
Buyer's Stock issuable pursuant to this Agreement will not have been registered
under the Securities Act of 1933 (the Securities Act") and that Seller's Buyer
Stock must be held indefinitely unless subsequently registered thereunder or an
exemption from registration is available. Seller represents and warrants to
Buyer that (i) Seller will acquire such Buyer Stock for investment, and not with
a view to the distribution thereof within the meaning of the Securities Act,
(ii) such Seller will acquire such Buyer Stock for his or her own account and
has not offered, and as of the Closing Date will not have offered and does not
intend, and as of the Closing Date will not intend, to transfer, any
participation or interest of any kind in such Buyer Stock to any other person,
and (iii) the exchange of Buyer Stock for the Shares constitutes an investment
decision of an amount and type consistent with such Seller's investment
practices and objectives. Seller and Buyer each acknowledges that each party
has been offered access to information, financial
3
and otherwise, regarding each party which is deemed relevant by each party in
this investment decision, and an opportunity to discuss such information with
officers and employees of each party, and to examine each parties' books and
records. In addition, until the Closing Date hereunder, Buyer shall deliver
to Seller all filings made under the Securities Exchange Act of 1934 by Buyer.
3.02 LEGENDING OF BUYER STOCK. The shares of Buyer stock issuable
hereunder shall not be transferable except upon the conditions specified in this
Section 3, which conditions are intended to insure compliance with the
provisions of the Securities Act in respect of the transfer of any such shares
of Stock.
Each certificate for Buyer Stock issued to Seller, and each certificate for
Buyer Stock issued to subsequent transferees of Seller, shall (unless otherwise
permitted by this Section 3) be stamped or otherwise imprinted in substantially
the following form:
"The transfer of the shares represented by this certificate is subject to
compliance with the conditions specified in an Agreement, a copy of which is on
file at the office of the Corporation, and no transfer of such shares shall be
valid or effective until such conditions have been fulfilled."
3.03 RESTRICTIONS ON TRANSFERABILITY. Each Shareholder, and any
subsequent holder of a certificate of Buyer Stock bearing the restrictive legend
set forth in Section 3.02, (hereinafter in this Section 3 called the "Holder")
by acceptance thereof agrees, prior to any transfer or attempted transfer of
such Buyer Stock, to give written notice to Buyer of such Holder's intention to
effect such transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer in reasonable detail, and shall contain
an undertaking by the person giving such notice to furnish an opinion of counsel
for the Holder with respect to the proposed sale, and such further information
as may reasonably be required by Buyer or counsel referred to below. Promptly
upon receiving any such notice, Buyer shall submit copies thereof to its
counsel, and the following provisions shall apply:
(i) If, in the opinion of such counsel, the proposed transfer of such
Buyer Stock may be effected without registration under the Securities Act,
Buyer shall as promptly as is practicable so notify the Holder of such
Stock, and such Holder shall thereupon be entitled to transfer such Stock
in accordance with the terms of the notice delivered by such Holder to
Buyer. Each certificate of Buyer Stock issued upon the transfer of any
such Stock shall bear the restrictive legend set forth above if in the
opinion of such counsel such legend is required in order to insure
compliance with the applicable provisions of the Securities Act;
(ii) If, in the opinion of such counsel, the proposed transfer of such
Buyer Stock may not be effected without registration under the Securities
Act of such Stock, Buyer shall
4
as promptly as is practicable so notify the Holder. The Holder thereof,
agrees, as to such Stock, by acceptance thereof, that if the proposed
transfer by him cannot, in the opinion of such counsel, be effected
without such Stock under the Securities Act, such Holder will not
transfer such securities unless they have been registered under the
Securities Act by Buyer, as hereinafter provided, or unless the staff of
the Securities and Exchange Commission has stated in writing that it
would raise no objection with respect to the proposed transfer. The
restrictions imposed by this Section 3 upon the transferability of any
particular share or shares of Buyer Stock shall cease and terminate
concurrently with the sale or other disposition thereof pursuant to and
in the manner contemplated by an effective registration statement under
the Securities Act, or pursuant to and in accordance with Rule 144
promulgated under the Securities Act, (or any similar rule or regulation
hereafter promulgated). Whenever the restrictions imposed by the
Section 3 shall terminate, as hereinabove provided, the Holder of any
Buyer Stock as to which such restrictions shall have terminated shall
be entitled to receive from Buyer one or more new certificates of Buyer
Stock not bearing the restrictive legend set forth above, and not
containing any other reference to the restrictions imposed by this
Section 3.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller hereby
represents and warrants to Buyer as follows (for the purposes of this Section 4,
the Company shall include any subsidiaries of the Company). The Company
represents and warrants:
4.01. TITLE TO THE SHARES. Each Shareholder owns, and is
transferring to Buyer at the Closing, good, valid and marketable title to the
number of Shares set forth opposite his name on the signature page hereof, free
and clear of all liens, claims, options, charges and encumbrances whatsoever.
Such shares in the aggregate represents, and will as of the Closing represent,
100% of the issued and outstanding capital stock of the Company. There are no
outstanding options, warrants, or rights to purchase or acquire any of the
Shares of the Seller.
4.02. VALID AND BINDING AGREEMENTS. As to each Shareholder, this
Agreement constitutes the valid and binding agreement of each Shareholder,
enforceable in accordance with its terms, and, as to Seller, neither the
execution and delivery of this Agreement nor the consummation by Seller of the
transaction contemplated hereby (a) violates or will violate any statute or law,
or any rule, regulation or order of any court or governmental authority; or (b)
violates or will violate, or conflicts with or will conflict with, or
constitutes a default under or will constitute a default under, any contract,
commitment, agreement, understanding, arrangement, or restriction of any kind to
which Seller is a party or by which Seller is bound.
4.03. ORGANIZATION. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada,
and has corporate power and authority to own, lease, license and operate its
business and assets. The Company is duly qualified to transact business as a
foreign corporation in the State of California, and is in good standing in each
jurisdiction where the nature of its business makes such qualification necessary
5
or the failure to so qualify would have a material adverse effect on its
business.
4.04. ARTICLES AND BY-LAWS. The copies of the Articles of
Incorporation and all amendments thereto of the Company, as certified by the
Secretary of the Company and of the By-Laws, as amended to the date hereof, of
the Company, as certified by its Secretary, which have heretofore been delivered
to Buyer are complete and correct copies of the Articles of Incorporation and
By-Laws of the Company as amended and in effect on the date of the Closing. All
minutes of the Company are contained in minute books of the Company heretofore
furnished to Buyer for examination and are being delivered to Buyer at the
Closing, and no minutes have been included in such minute books since such
examination by the Buyer that have not also been furnished to Buyer.
4.05. CAPITALIZATION. The total number of shares of stock which
the Company is authorized to issue is 2,500 shares of common stock of no par
value per share, of which 1,200 shares are validly issued, fully paid and
non-assessable. There is no option, warrant, agreement or understanding
pursuant to which any person or entity has or may have the right to acquire
any equity interest in the Company, or any other security convertible into
any equity interest in the Company.
4.06. FINANCIAL STATEMENTS. The Seller will deliver to Buyer balance
sheets of the Company as of May 31, 1997, and statements of operations for the
Company for the period then ending, and the report of Xxxx & Co., Xxxx
Xxxxxxxxx, C.P.A. pertaining thereto. These financial statements have been
prepared from the books and records of the Company, represent fairly the
financial position of the Company as of the dates appearing thereon, and the
results of operation of the Company for the period then ended, and have been
prepared in accordance with generally accepted accounting principles
consistently applied with those used in preparing financial statements of the
Company during prior fiscal periods. Except as provided for or reserved against
in the Balance Sheet dated May 31, 1997, (the "Balance Sheet") and except for
liabilities incurred in the ordinary course of the business of the Company after
the date of the balance sheet, and liabilities set forth on any of the exhibits
delivered in connection herewith, there are no liabilities of any kind, whether
accrued, absolute, contingent or otherwise, and whether or not determined or
determinable.
4.07. TAXES. The amount of the provision for liability for taxes on
the Balance Sheet is sufficient for the payment of all unpaid federal, state and
local income, franchise and property taxes of the Company accrued for or
applicable to the period ended on the date of said Balance Sheet, and all years
and periods prior thereto. The Company has collected or paid all applicable
local tax returns, intangible tax returns and other tax returns which are
required to be filed by it, and such returns and reports are true and correct.
The Company has prepared and filed all Federal, State and County and local
income, excise and other tax returns required to be filed by it, and all such
returns are true and correct. The Company has paid all taxes which have become
due pursuant to such returns, or pursuant to any assessment received by it. The
Federal income
6
tax returns of the Company have not been examined by the Internal Revenue
Service. The Company has not incurred any tax liabilities other than in the
ordinary course of business; there are no tax liens upon any of the
properties or assets, real, personal or mixed, tangible or intangible, of the
Company, (except for liens of taxes not yet due); and, except as reflected in
the Balance Sheet, there are no pending questions relating to, or claims
asserted for, taxes or assessments against the Company, and there is no basis
for any such question or claim.
4.08. PATENTS, TRADEMARKS, TRADE NAMES, PROGRAMS, ETC. Exhibit 4.08
hereto contains an accurate and complete description of all patents, trademarks,
trade names, assumed names, computer programs, licenses, franchises and
copyrights, and any applications therefore, presently owned, held by, or used by
the Company, or under which the Company owns or holds any license. No products
or services of the Company, nor any patents, formula, processes, know-how, trade
secrets, trademarks, trade names, assumed names, copyrights or designations used
in the business of the Company infringe on any patents, trademarks, copyrights
or any other rights of any person. The Company has the right to market its
products and services and conduct its business as currently being conducted.
Neither the Company nor any Seller knows or has any reason to believe that there
are any claims or rights of any third parties of infringement, or any conflict
with the rights of third parties, and the Company is not in receipt of any
notice or complaint of any infringement or conflict with the rights of others in
any patents, copyrights, trademarks or trade names, or computer programs, trade
secrets or any other proprietary rights. No claims have been made by the
Company of any infringement or conflicts by others with the rights of the
Company with respect to any patents, copyrights, trademarks, computer programs,
formulations, trade names, trade secrets or proprietary information used in the
Company's business. Neither the Company nor any Seller knows of any basis for
the making of any such claim. No Seller, officer, director, employee or
consultant of the Company owns, directly or indirectly, in whole or in part, any
patents, copyrights, trademarks, trade names, computer programs, or any trade
secrets or proprietary information which are presently being used in the
Company's business.
4.09. INSURANCE. The Company has in force and effect and is covered
under policies of insurance covering such risks, and in amounts adequate for the
size and scope of its business. A description of its insurance policies is set
forth in Exhibit 4.09.
4.10. ASSETS. The Company has good and marketable title to all of
its properties, free and clear of all liens and encumbrances except as noted in
the Balance Sheet, and set forth in detail in Exhibit 4.10 hereto. The
properties and assets of the Company are in good repair and condition, and are
adequate for the conduct of the business of the Company as now being conducted,
and for the anticipated growth of the Company's business. The assets of the
Company will include those operations and investments set forth in detail in
Exhibit 4.10. In the event the Company is required to pay additional
consideration to acquire such rights, operations or investments, such payments
shall reduce the Company shares due Sellers herein by the same amount.
7
4.11. BANKING ARRANGEMENTS. Set forth as Exhibit 4.11 hereto and
delivered to Buyer is a complete list of each bank in which the Company has an
account, line of credit, or other banking arrangement, and the account number,
balance and signatories of each such account, line of credit and loan.
4.12. EMPLOYEES. Set forth in Exhibit 4.12 hereto and delivered to
Buyer is a complete list setting forth the name, current annual salaries of all
officers, directors and employees of the Company, together with copies of any
employment agreements or other employment commitments of the Company.
4.13. PURCHASE COMMITMENTS. The Company has performed, in all
material respects, all of the obligations required to be performed by it to date
under all purchase agreements and purchase orders as conditions precedent to the
delivery of the items called for therein. No such purchase commitment is in
excess of the ordinary, common and usual requirements of the business of the
Company.
4.14. COMMITMENTS. The Company has performed, in all material
respects, all of the obligations required to be performed by it to date under
all of its sales, rental, service and franchise agreements and commitments. No
information has come to the attention of the Company or any Seller which would
tend to indicate that any of the customers of the Company are currently, or are
likely to become, unable to perform under the terms of any agreement or
commitment entered into with it. All leases entered into by the Company
involving remaining aggregate rentals in excess of $5,000 are set forth in
Exhibit 4.14 and have been delivered to Buyer.
4.15. AGENCY AGREEMENTS. Set forth in Exhibit 4.15 hereto and
delivered to Buyer are copies of all agreements and other commitments with
franchisees, distributors, dealers, sales representatives, consultants and other
agencies and entities engaged or utilized by the Company.
4.16. LABOR AGREEMENTS AND POLICIES. The Company is not a party to or
bound by any collective bargaining agreement, and the Company or any Seller is
not aware of any attempt to organize any of the employees of the Company. There
are no strikes or other labor disputes pending, or to the knowledge of the
Company or any of the Sellers, threatened against the Company. The Company has
complied in all material respects with the Fair Labor Standards Act,
Occupational Safety and Health Act, Equal Employment Opportunity and all other
applicable Federal and State laws regarding employment, and in respect to hours
worked by and payments made to the employees of the Company.
4.17. EMPLOYMENT BENEFIT PLANS. Set forth in Exhibit 4.17 hereto and
delivered to Buyer are copies of all pension, retirement, profit-sharing, bonus,
deferred compensation, stock option, stock purchase, severance pay, vacation
policy and pay, medical, dental, life insurance, death benefit and other plans
or agreements providing benefits to employees of the Company.
8
There are no unfunded liabilities attributed to any employee benefit plans
providing benefits to employees of the Company, and none will arise upon the
termination of any such plans. The Company is in full compliance with all
laws, rules and regulations governing employee benefits. The Company has an
established policy that its employees may not accrue vacation time beyond the
period of 12 months.
4.18. OTHER MATERIAL CONTRACTS AND COMMITMENTS. Set forth in Exhibit
4.18 and delivered to Buyer are copies of all material contracts, agreements,
instruments and other commitments to which the Company or the Seller is a party
and which are not included in other exhibits hereto. Except as included in said
Exhibit 4.18 and such other exhibits to this Agreement, the Company is not a
party to or bound by any written or oral (a) material contract, agreement or
other instrument or understanding creating a liability; (b) material lease,
mortgage, pledge, conditional sales contract, security agreement, factoring
agreement or other similar agreement with respect to any real or personal
property, whether as lessor or lessee or otherwise; (c) material agreement or
arrangement for the borrowing of money or for a line of credit; (d) agreement or
arrangement for the sale of the assets of the Company or for the grant of any
preferential rights to purchase any of the assets, property or rights of the
Company or for the transfer or the assignment thereof other than the ordinary
course of business of the Company; (e) guarantee, surety, subordination or other
agreement for related type of agreement or arrangement; (f) agreement of any
kind with any director or officer or with any associate of any such person; (g)
material agreement or commitment for capital expenditures or for the acquisition
of fixed assets. As used in this Section 4.18, the term "material" refers to
any contract, agreement, commitment, instrument or understanding involving a
liability, actual or potential, in excess of $5,000.
4.19. PERFORMANCE OF OBLIGATIONS. The Company has performed all of
the material obligations required to be performed by it and is not in material
default under any of the agreements, leases, contracts, or other documents to
which it is a party. No party with whom the Company has an agreement or
commitment is in material default thereof. As used in this Section 4.19, the
term "material" refers to a default involving more than $500 or which, when
aggregated with other defaults, would exceed $2,000, or which would give the
nondefaulting party a right to cancel or terminate such defaulted agreement or
obligation.
4.20. CONFLICT. Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will conflict with or
result in a breach of, or give rise to, or termination of, or accelerate the
maturity of or the performance required by any terms of the Articles of
Incorporation or By-laws, or any indenture, loan agreement, lease or other
agreement or arrangement of the Company or any Seller, or constitute a default
thereunder, or result in the creation of any lien, charge or encumbrance upon
any of the assets or properties of the Company.
4.21. LITIGATION, ETC. Except as set forth in Exhibit 4.21 hereto
and delivered to Buyer, there is no investigation by any governmental agency or
any legal proceedings pending,
9
or to the best knowledge of the Seller, threatened against the Company, or
the property, assets or good will thereof, and there is no outstanding order,
writ, injunction or decree of any court or governmental agency against or
affecting the Company, or against or affecting its business, property,
assets, good will or common stock.
4.22. COMPLIANCE WITH LAWS. The Company has complied in all material
respects with all laws, regulations and orders applicable to the conduct of its
business, and the Company possesses all permits, licenses and other approvals
and authorizations of all governmental agencies which are necessary to the
conduct of its business, and all said permits, licenses and other approvals and
authorizations are in full force and effect. The Company has not received any
notice of, and is not aware of any material violation of, any zoning regulation
or ordinance or of any law, order, regulation or requirement relating to the
operation of its business which remains uncured or which has not been dismissed.
4.23. RECENT TRANSACTIONS. Except as shown on the Exhibits delivered
in connection herewith, the business of the Company has been conducted
diligently and only in the ordinary course and the Company has not (a) incurred
or become subject to any obligation or liability, (absolute or contingent),
except current liabilities incurred in the ordinary course of business of the
Company, and under contracts entered into in the ordinary course of business of
the Company, none of which involves potential liability in excess of $5,000 or
is not cancelable in thirty (30) days or less notice without penalty or
liquidated damages; (b) discharged or satisfied any lien or encumbrance, or paid
any obligation, (tangible or intangible), other than liabilities shown on the
Balance Sheet and current liabilities incurred since the date of the said
Balance Sheet in the ordinary course of business of the Company; (c) mortgaged,
pledged or subjected to lien, charge or any other encumbrance, any of its
assets, real or personal, tangible or intangible; (d) sold or transferred any of
its assets, property or rights, or canceled any debts or claims except in each
case in the ordinary course of business of the Company, or entered into any
agreement or arrangement granting any preferential rights to purchase any of its
assets, property or rights or which requires consent of any third party to the
transfer and assignment of any of its assets, property or rights; (e) suffered
any extraordinary losses, (whether or not covered by insurance), or waived any
rights of substantial value; (f) made or permitted any amendment or termination
of any contract, agreement or license to which it is a party, otherwise than in
the ordinary course of business; (g) through negotiation or otherwise, made any
commitment or incurred any liability to any labor organization; (h) made capital
expenditures or entered into agreements therefor aggregating more than $5,000;
(i) issued any stock, bonds or any other corporate securities or granted any
options, warrants or other rights calling for the issuance thereof; (j) amended
its Articles of Incorporation or By-Laws.
4.24. WARRANTIES. There are no pending claims against the Company or
its insurers for breach of any warranty, or with respect to liability for
defective products or services.
4.25. BROKERS AND FINDER. Seller has not entered into an agreement
with any person,
10
firm or corporation, or become indirectly a party to any such agreement, nor
has he taken any action or is he aware of any facts which would result in the
assertion of any liability or claim for the payment of any commission,
brokerage or finder's fee in connection with his execution of this Agreement
or the consummation of transactions contemplated herein.
4.26. ACCOUNTS RECEIVABLE. Marked as Schedule 4.26 hereto and
delivered to Buyer is a complete list, appropriately aged, of the accounts
receivable of the Company as a date within ten (10) days of the date hereof.
Such accounts receivable of Company are valid and collectible in full and are
not subject to defense, set-off or counterclaim on the part of the account
debtor or any known assignee of any of such accounts except for the amount of
the allowance for uncollectible accounts shown on the Schedule.
4.27. DISCLOSURE. All material facts regarding the assets, business,
operations, financial condition and prospects of the Company are reflected in
the Balance Sheet, or have been disclosed herein, or have been disclosed to
Buyer in writing set forth as Exhibit 4.27 hereto. No representation or
warranty by the Seller contained in this agreement, and no statement contained
in any certificate, schedule, exhibit, list or other writing furnished to Buyer
pursuant to the provisions hereof or in connection with the negotiation hereof,
contains any untrue statement of any material fact or omits to state a material
fact necessary in order to make the statements herein not misleading.
4.28. UPDATE. The Seller will promptly advise the Buyer in writing
of any changes in any of the representations, warranties or Exhibits herein and
these representations and warranties shall be true and correct as of the date of
the Closing as well as the date hereof, and Seller will provide Buyer with
quarterly and annual balance sheets and income statements of the Company from
the date hereof through the Closing Date.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer warrants and
represents to the Seller and Shareholders as follows:
5.01. ORGANIZATION. With the exception of items in Exhibit 5.0l, the
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of California and has corporate power and authority
to own, lease, license and operate its business and assets. The Buyer is duly
qualified to transact business as a foreign corporation and is in good standing
in each jurisdiction where the nature of its business makes such qualification
necessary or the failure to so qualify would have a material adverse effect on
its business.
5.02. CAPITAL. The authorized capital stock of Buyer consists of
100,000,000 shares of Common Stock of which 4,568,245 shares of Common Stock are
currently issued and outstanding and 100,000,000 shares of Preferred Stock of
which no shares are issued and outstanding. All of the issued and out-standing
shares are duly and validly issued, fully paid and nonassessable. There are no
outstanding subscriptions, options, rights, warrants, convertible
11
securities, or other agreements or commitments obligating Buyer to issue or
to transfer from treasury any additional shares of its capital stock of any
class, except as set forth in Exhibit 5.02 hereto.
5.03. SUBSIDIARIES. Buyer does not have any subsidiaries or own any
interest in any other enterprise (whether or not such enterprise is a
corporation) except as set forth in Exhibit 5.03.
5.04. FINANCIAL STATEMENTS. The balance sheets of Buyer and the
financial statements set forth in Buyer's reports to the U.S. Securities and
Exchange Commission have been prepared in accordance with generally accepted
accounting principles and practices consistently followed by Buyer throughout
the periods indicated, and fairly present the financial position of Buyer as of
the dates of the balance sheets included in the financial statements, and the
results of operations for the period indicated. Except as provided for or
reserved against in the Balance Sheet dated May 31, 1997, (the "Balance
Sheet"), and except for liabilities incurred in the ordinary course of the
business of the Company after the date of the balance sheet and liabilities set
forth on any of the exhibits delivered in connection herewith, there are no
liabilities of any kind, whether accrued, absolute, contingent or otherwise and
whether or not determined or determinable.
5.05. ABSENCE OF CHANGES. Except as set forth in the Exhibits
herein, there has not been any change in the financial condition or operations
of Buyer, except for changes in the ordinary course of business, which changes
have not in the aggregate been materially adverse.
5.06. INVESTIGATION OF FINANCIAL CONDITION. Without in any manner
reducing or otherwise mitigating the representations contained herein, Sellers
shall have the opportunity to meet with Buyer's accountants and attorneys to
discuss the operation and financial condition of Buyer. Buyer shall make
available to Seller all books and records of Buyer.
5.07. LITIGATION. Except as set forth in Exhibit 5.07, Buyer is not
a party to any suit, action, arbitration, or legal, administrative, or other
proceeding, or governmental investigation pending or, to the best knowledge of
Buyer, threatened against or affecting Buyer or its business, assets, or
financial condition. Buyer is not in default with respect to any order, writ,
injunction, or decree of any federal, state, local, or foreign court, department
agency, or instrumentality.
5.08. AUTHORITY. The Board of Directors of Buyer has authorized the
execution of this Agreement and the transactions contemplated herein, and Buyer
has full power and authority to execute, deliver and perform this Agreement and
this Agreement is the legal, valid and binding obligation of Buyer, is
enforceable in accordance with its terms and conditions, except as may be
limited by bankruptcy and insolvency laws and by other laws affecting the rights
of creditors generally.
12
5.09. ABILITY TO CARRY OUT OBLIGATIONS. The execution and delivery
of this Agreement by Buyer and the performance by Buyer will not conflict with
or result in (a) any breach or violation of any of the provisions of or
constitute a default under any license, indenture, mortgage, charter,
instrument, certificate of incorporation, bylaw, or other agreement or
instrument to which Buyer is a party, or by which it may be bound, nor will any
consents or authorizations of any party other than those hereto be required, (b)
an event that would permit any party to any agreement or instrument to terminate
it or to accelerate the maturity of any indebtedness or other obligation of
Buyer, or 8 an event that would result in the creation or imposition of any
lien, charge, or encumbrance on any asset of Buyer.
5.10. VALIDITY OF BUYER'S SHARES. The shares of Buyer's Common Stock
to be delivered pursuant to this Agreement, when issued in accordance with the
provisions of this Agreement, will be duly authorized, validly issued, fully
paid and nonassessable.
5.11. ARTICLES AND BY-LAWS. The copies of the Articles of
Incorporation and all amendments thereto of the Buyer, as certified by the
Secretary of the Buyer and of the By-Laws, as amended to the date hereof, of
the Buyer, as certified by its Secretary, which have heretofore been
delivered to Seller are complete and correct copies of the Articles of
Incorporation and By-Laws of the Buyer as amended and in effect on the date
of the Closing. All minutes of the Buyer are contained in minute books of
the Buyer heretofore furnished to Seller for examination and are being
delivered to Seller at the Closing, and no minutes have been included in such
minute books since such examination by the Seller that have not also been
furnished to Seller.
5.12. TAXES. The amount of the provision for liability for taxes on
the Balance Sheet is sufficient for the payment of all unpaid federal, state and
local income, franchise and property taxes of the Buyer accrued for or
applicable to the period ended on the date of said Balance Sheet and all years
and periods prior thereto. The Buyer has collected or paid all applicable local
tax returns, intangible tax returns and other tax returns which are required to
be filed by it, and such returns and reports are true and correct. The Buyer
has prepared and filed all Federal, State and County and local income, excise
and other tax returns required to be filed by it and all such returns are true
and correct. The Buyer has paid all taxes which have become due pursuant to
such returns or pursuant to any assessment received by it. The Federal income
tax returns of the Buyer have not been examined by the Internal Revenue Service.
The Buyer has not incurred any tax liabilities other than in the ordinary course
of business; there are no tax liens upon any of the properties or assets, real,
personal or mixed, tangible or intangible, of the Buyer, (except for liens of
taxes not yet due); and, except as reflected in the Balance Sheet, there are no
pending questions relating to, or claims asserted for, taxes or assessments
against the Buyer, and there is no basis for any such question or claim. Seller
is aware there is a need to amend the payroll tax. As of this date it has not
been determined how much. Buyer will notify Seller of final result.
5.13. PATENTS, TRADEMARKS, TRADE NAMES, PROGRAMS, ETC. Exhibit 4.08
hereto contains an accurate and complete description of all patents, trademarks,
trade names, assumed names,
13
computer programs, licenses, franchises and copyrights, and any applications
therefore, presently owned, held by, or used by the Buyer, or under which the
Buyer owns or holds any license. No products or services of the Buyer, nor
any patents, formula, processes, know-how, trade secrets, trademarks, trade
names, assumed names, copyrights or designations used in the business of the
Buyer infringe on any patents, trademarks, copyrights or any other rights of
any person. The Buyer has the right to market its products and services and
conduct its business as currently being conducted. The Buyer does not know
or has any reason to believe that there are any claims or rights of any third
parties of infringement or any conflict with the rights of third parties and
the Buyer is not in receipt of any notice or complaint of any infringement or
conflict with the rights of others in any patents, copyrights, trademarks or
trade names, or computer programs, trade secrets or any other proprietary
rights. No claims have been made by the Buyer of any infringement or
conflicts by others with the rights of the Buyer with respect to any patents,
copyrights, trademarks, computer programs, formulations, trade names, trade
secrets or proprietary information used in the Buyer's business. The Buyer
does not know of any basis for the making of any such claim. No officer,
director, employee or consultant of the Buyer owns, directly or indirectly,
in whole or in part, any patents, copyrights, trademarks, trade names,
computer programs, or any trade secrets or proprietary information which are
presently being used in the Buyer's business.
5.14. INSURANCE. The Buyer has in force and effect and is covered
under policies of insurance covering such risks and in amounts adequate for the
size and scope of its business. Until such time as new management can review
such policies, Touch Tone America, Inc. is required to keep all insurance
policies, (liability and otherwise), in full force and effect. A description of
its insurance policies is set forth in Exhibit 5.14.
5.15. ASSETS. The Buyer has good and marketable title to all of its
properties, free and clear of all liens and encumbrances except as noted in the
Balance Sheet and set forth in detail in Exhibit 5.15. hereto. The properties
and assets of the Buyer are in good repair and condition and are adequate for
the conduct of the business of the Buyer as now being conducted and for the
anticipated growth of the Buyer's business. The assets of the Buyer will
include those operations and investments set forth in detail in Exhibit 5.15.
In the event Buyer is required to pay additional consideration to acquire such
rights, operations or investments, such payments shall reduce the Buyer shares
due Sellers herein by the same amount.
5.16. BANKING ARRANGEMENTS. Set forth as Exhibit 5.16 hereto and
delivered to Seller is a complete list of each bank in which the Buyer has an
account, line of credit, or other banking arrangement and the account number,
balance and signatories of each such account, line of credit and loan.
5.17. EMPLOYEES. Set forth in Exhibit 5.17 hereto and delivered to
Seller is a complete list setting forth the name, current annual salaries of all
officers, directors and employees of the Buyer, together with copies of any
employment agreements or other
14
employment commitments of the Buyer.
5.18. PURCHASE COMMITMENTS. The Buyer has performed, in all
material respects, all of the obligations required to be performed by it to
date under all purchase agreements and purchase orders as conditions
precedent to the delivery of the items called for therein. No such purchase
commitment is in excess of the ordinary, common and usual requirements of the
business of the Buyer.
5.19. COMMITMENTS. The Buyer has performed, in all material
respects, all of the obligations required to be performed by it to date under
all of its sales, rental, service and franchise agreements and commitments. No
information has come to the attention of the Buyer which would tend to indicate
that any of the customers of the Buyer are currently, or are likely to become,
unable to perform under the terms of any agreement or commitment entered into
with it. All leases entered into by the Buyer involving aggregate rentals in
excess of $5,000 are set forth in Exhibit 5.19 and have been delivered to
Seller.
5.20. AGENCY AGREEMENTS. Set forth in Exhibit 4.15 hereto and
delivered to Seller are copies of all agreements and other commitments with
franchisees, distributors, dealers, sales representatives, consultants and other
agencies and entities engaged or utilized by the Buyer.
5.21. LABOR AGREEMENTS AND POLICIES. The Buyer is not a party to or
bound by any collective bargaining agreement and the Buyer is not aware of any
attempt to organize any of the employees of the Buyer. There are no strikes or
other labor disputes pending, or to the knowledge of the Buyer, threatened
against the Buyer. The Buyer has complied in all material respects with the
Fair Labor Standards Act, Occupational Safety and Health Act, Equal Employment
Opportunity and all other applicable Federal and State laws regarding employment
and in respect to hours worked by and payments made to the employees of the
Buyer.
5.22. EMPLOYMENT BENEFIT PLANS. Set forth in Exhibit 5.22 hereto
and delivered to Seller are copies of all pension, retirement, profit-sharing,
bonus, deferred compensation, stock option, stock purchase, severance pay,
vacation policy and pay, medical, dental, life insurance, death benefit and
other plans or agreements providing benefits to employees of the Buyer. There
are no unfunded liabilities attributed to any employee benefit plans providing
benefits to employees of the Buyer, and none will arise upon the termination of
any such plans. The Buyer is in full compliance with all laws, rules and
regulations governing employee benefits. The Buyer has an established policy
that its employees may not accrue vacation time beyond the period of 12 months.
5.23. OTHER MATERIAL CONTRACTS AND COMMITMENTS. Set forth in
Exhibit 5.23 and delivered to Seller are copies of all material contracts,
agreements, instruments and other commitments to which the Buyer is a party and
which are not included in other exhibits hereto. Except as included in said
Exhibit 4.18 and such other exhibits to this Agreement, the Buyer is
15
not a party to or bound by any written or oral (a) material contract,
agreement or other instrument or understanding creating a liability; (b)
material lease, mortgage, pledge, conditional sales contract, security
agreement, factoring agreement or other similar agreement with respect to any
real or personal property, whether as lessor or lessee or otherwise; (c)
material agreement or arrangement for the borrowing of money or for a line of
credit; (d) agreement or arrangement any for the sale of the assets of the
Buyer or for the grant of any preferential rights to purchase any of the
assets, property or rights of the Buyer or for the transfer or the assignment
thereof other than the ordinary course of business of the Buyer; (e)
guarantee, surety, subordination or other agreement for related type of
agreement or arrangement; (f) agreement of any kind with any director or
officer or with any associate of any such person; (g) material agreement or
commitment for capital expenditures or for the acquisition of fixed assets.
As used in this Section 4.18, the term "material" refers to any contract,
agreement, commitment, instrument or understanding involving a liability,
actual or potential, in excess of $5,000.
5.24. PERFORMANCE OF OBLIGATIONS. The Buyer has performed all of
the material obligations required to be performed by it and is not in material
default under any of the agreements, leases, contracts, or other documents to
which it is a party. No party with whom the Buyer has an agreement or
commitment is in material default thereof. As used in this Section 4.19, the
term "material" refers to a default involving more than $500 or which, when
aggregated with other defaults, would exceed $2,000, or which would give the
nondefaulting party a right to cancel or terminate such defaulted agreement or
obligation.
5.25. CONFLICT. Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will conflict with or
result in a breach of, or give rise to, or termination of, or accelerate the
maturity of or the performance required by any terms of the Articles of
Incorporation or By-laws or any indenture, loan agreement, lease or other
agreement or arrangement of the Buyer, or constitute a default thereunder, or
result in the creation of any lien, charge or encumbrance upon any of the assets
or properties of the Buyer.
5.26. LITIGATION, ETC. Except as set forth in Exhibit 5.26 hereto
and delivered to Seller, there is no investigation by any governmental agency or
any legal proceedings pending, or to the best knowledge of the Buyer, threatened
against the Buyer, or the property, assets or good will thereof, and there is no
out-standing order, writ, injunction or decree of any court or governmental
agency against or affecting the Buyer, or against or affecting its business,
property, assets, good will or common stock.
5.27. COMPLIANCE WITH LAWS. The Buyer has complied in all material
respects with all laws, regulations and orders applicable to the conduct of its
business, and the Buyer possesses all permits, licenses and other approvals and
authorizations of all governmental agencies which are necessary to the conduct
of its business and all said permits, licenses and other approvals and
authorizations are in full force and effect. The Buyer has not received any
notice of, and is not aware of any material violation of, any zoning regulation
or ordinance or of any law, order,
16
regulation or requirement relating to the operation of its business which
remains uncured or which has not been dismissed.
5.28. RECENT TRANSACTIONS. Except as shown on the Exhibits
delivered in connection herewith, the business of the Buyer has been conducted
diligently and only in the ordinary course and the Buyer has not (a) incurred or
become subject to any obligation or liability (absolute or contingent) except
current liabilities incurred in the ordinary course of business of the Buyer and
under contracts entered into in the ordinary course of business of the Buyer,
none of which involves potential liability in excess of $5,000 or is not
cancelable in thirty days or less notice without penalty or liquidated damages;
(b) discharged or satisfied any lien or encumbrance or paid any obligation
(tangible or intangible) other than liabilities shown on the Balance Sheet and
current liabilities incurred since the date of the said Balance Sheet in the
ordinary course of business of the Buyer; (c) mortgaged, pledged or subjected to
lien, charge or any other encumbrance, any of its assets, real or personal
tangible or intangible; (d) sold or transferred any of its assets, property or
rights or canceled any debts or claims except in each case in the ordinary
course of business of the Buyer, or entered into any agreement or arrangement
granting any preferential rights to purchase any of its assets, property or
rights or which requires consent of any third party to the transfer and
assignment of any of its assets, property or rights; (e) suffered any
extraordinary losses (whether or not covered by insurance) or waived any rights
of substantial value; (f) made or permitted any amendment or termination of any
contract, agreement or license to which it is a party, otherwise than in the
ordinary course of business; (g) through negotiation or otherwise, made any
commitment or incurred any liability to any labor organization; (h) made capital
expenditures or entered into agreements therefor aggregating more than $5,000;
(i) issued any stock, bonds or any other corporate securities or granted any
options, warrants or other rights calling for the issuance thereof; (j) amended
its Articles of Incorporation or By-Laws.
5.29. WARRANTIES. There are no pending claims against the Buyer or
its insurers for breach of any warranty or with respect to liability for
defective products or services.
5.30. BROKERS AND FINDER. Buyer has not entered into an agreement
with any person, firm or corporation, or become indirectly a party to any such
agreement nor has he taken any action or is he aware of any facts which would
result in the assertion of any liability or claim for the payment of any
commission, brokerage or finder's fee in connection with his execution of this
Agreement or the consummation of transactions contemplated herein.
5.31. ACCOUNTS RECEIVABLE. Marked as Schedule 5.31 hereto and
delivered to Seller is a complete list, appropriately aged, of the accounts
receivable of the Buyer as a date within ten (10) days of the date hereof. Such
accounts receivable of Buyer are valid and collectible in full and are not
subject to defense, set-off or counterclaim on the part of the account debtor or
any known assignee of any of such accounts except for the amount of the
allowance for uncollectible accounts shown on the Schedule.
17
5.32. DISCLOSURE. All material facts regarding the assets,
business, operations, financial condition and prospects of the Buyer are
reflected in the Balance Sheet, or have been disclosed herein, or have been
disclosed to Buyer in writing set forth as Exhibit 5.32 hereto. No
representation or warranty by the Buyer contained in this agreement and no
statement contained in any certificate, schedule, exhibit, list or other writing
furnished to Seller pursuant to the provisions hereof or in connection with the
negotiation hereof, contains any untrue statement of any material fact or omits
to state a material fact necessary in order to make the statements herein not
misleading.
5.33. UPDATE. The Buyer will promptly advise the Seller in writing
of any changes in any of the representations, warranties or Exhibits herein and
these representations and warranties shall be true and correct as of the date of
the Closing as well as the date hereof, and Buyer will provide Seller with
quarterly and annual balance sheets and income statements of the Buyer from the
date hereof through the Closing Date.
6. OBLIGATIONS OF BOTH PARTIES PRIOR TO CLOSING DATE. During the period
from the date hereof to the Closing date, both parties shall cause the
following:
6.01. Refrain from doing any of the types of acts described in
paragraph 4.23 hereof, or entering into any of the types of contracts,
agreements, instruments or other commitments of the nature described or referred
to in paragraph 4.18 hereof, without the prior written consent of the other
party.
6.02. Give each party's representative full access, during normal
business hours and upon reasonable notice, to all of the assets, properties,
books, financial records, accounts and sales records of each party, working
papers of its accountants, agreements and commitments of each party, and furnish
each parties' representatives all such information concerning the business of
each party, as each party may request, including copies of all the documents
described in this Agreement and the exhibits hereto; provided, however, that any
furnishing of such information to each party for investigation by each party
shall not affect the right of each party to rely upon the representations and
warranties made by each party in this Agreement; and provided, further, that
each party will hold in strictest confidence all documents and information
concerning the other party, and, if the transactions contemplated in this
Agreement shall not be consummated, shall maintain such confidence and
immediately thereafter return all such documents to the other party.
6.03. Conduct its business and operations in the manner in which the
same had heretofore been conducted, except as other-wise consented to by each
party and in conformity with all applicable laws, maintain its properties in
good repair and operating condition, and maintain its books of accounts in a
manner which accurately reflects all items of its income, expenses and
liabilities, in accordance with generally accepted accounting principles
consistently
18
applied.
6.04. Use its best efforts to maintain and preserve its business
organization and to preserve its relationships with its customers, suppliers,
employees and others having business relations with it, to the extent that the
going business of each party shall be unimpaired at the Closing.
6.05. Not to merge or consolidate with, or agree to sell any of the
operations being conducted by it, or (otherwise than in the ordinary course of
business) any of its assets necessary to or utilized in connection with such
operations to any other organization, or enter into any agreement to do any of
the foregoing, in each case without the prior consent of the other party..
6.06. Deliver to each party promptly after they become available
balance sheet and income statement and its subsidiaries, certified by the
Company's accountants for the fiscal period ending September 30, 1997, and
copies of all communications to its Stockholders.
6.07. Not to take any action or omit to take any action if the effect
thereof is or may be to cause any of the representations or warranties of either
party to be inaccurate or incomplete in any respect as if such representations
or warranties were made at and as of the Closing.
6.08. Not to declare or pay any dividend or other distributions of
any shares of its capital stock or issue any capital stock or any security
convertible into its capital stock or options to purchase its capital stock
except in any transactions disclosed in Exhibit 6.08 hereto.
From and after the date of this Agreement and until the Closing Date (the
"Interim Period"):
6.09. Each Party's OPERATION OF BUSINESS. Each party shall operate
its business only in the usual, regular and ordinary manner and, to the extent
consistent with such operation, keep the business organization intact and
preserve the present business relationships with customers, suppliers and others
having business dealings with each party.
6.10. CERTAIN TRANSACTIONS. Neither party shall enter into any
transaction, take any action nor fail to take any action which would result in,
or could reasonably be expected to result in or cause, any of the
representations, warranties, disclosures, agreements or covenants of either
party contained in this Agreement, the exhibits hereto or any document delivered
pursuant to this Agreement or in connection with the consummation of the
transactions contemplated hereby, not being true and complete at and as of the
time immediately after the occurrence of such transaction or the action is taken
or failed to be taken and also on the Closing Date. Notwithstanding anything to
the contrary herein, each party shall be entitled to split its stock, increase
its authorized shares and issue shares of its common and preferred stock.
19
6.11. CORPORATE ACTION; APPROVALS AND CONSENTS. Each party shall
take or cause to be taken all action and will use its best efforts to obtain in
writing as promptly as possible all approvals and consents required to be
obtained in order to effectuate the consummation of the transactions
contemplated hereby.
6.12. ADVICE OF CHANGES. During the Interim Period, each party shall
promptly advise the other party in writing of any fact which, if existing or
known at the date of this Agreement, would have been required to be set forth in
or disclosed pursuant to this Agreement.
6.13. ACCESS TO PROPERTIES AND RECORDS. Each party and their
counsel, accountants and other representatives shall be given full access during
normal business hours to all of the properties, personnel, books, tax returns,
contracts, commitments and records of their other party and shall be furnished
with all such documents and information with respect to the affairs of the other
party or their counsel or accountants may from time to time reasonably request.
6.14. CARRY ON IN REGULAR COURSE. Each party shall carry on its
business diligently and substantially in the same manner as heretobefore with
such changes as agreed upon by its Board of Directors..
6.15. CONTRACTS AND COMMITMENTS. Except as otherwise provided
herein, neither party shall enter into any contract or commitment or engage in
any transaction not in the usual and ordinary course of business and consistent
with past practices without the written consent of the other party..
6.16. COMPLIANCE WITH LAWS. Each party will duly comply with all
applicable laws as may be required for the valid and effective consummation of
the transactions contemplated by this Agreement.
7. CONDITIONS TO OBLIGATIONS OF EACH PARTY.
Each party's obligations under this Agreement are subject to the
satisfaction at or prior to the Closing of each of the following conditions (all
or any of which may be waived in writing in full or in part by each party):
(a) The representations and the warranties of each party set forth in
this Agreement shall be true and complete in all material respects as of the
Closing date. All of the terms, provisions and conditions of this Agreement to
be performed or complied with by each party before the Closing shall have duly
been complied with and performed;
(b) Each party shall receive at the Closing legal title to all of the
certificates representing the Shares, free and clear of all liens, pledges,
encumbrances of any kind, nature or description, with exception of legends
referenced in Section 3.
20
(c) Each party shall have received an opinion of counsel dated the
Closing and addressed to the other party to the same effect of Sections 4.03 and
4.05 of this Agreement, and to the further effect that (i) this Agreement has
been duly executed by, and is a valid and binding obligation, except that such
counsel may assume, unless having reason to believe otherwise, the legal
capacity and genuineness of all signatures; (ii) based on statements and
representations to such counsel, which such counsel has no reason to believe are
inaccurate, and the share certificates relating to the Shares and books of the
Company which such counsel has examined, each party owns and is transferring at
the Closing, good, valid and marketable title to the number of shares set forth
in Section 1.01 hereof free and clear of all liens, options, charges and
encumbrances whatsoever; (iii) to the best knowledge of such counsel, each party
has good and marketable title to all of its properties and assets, subject to no
mortgage, pledge, lien, conditional sale agreement, encumbrance, or charge,
other than encumbrances reflected on the balance sheet dated May 31, 1997; (iv)
except as may be specified by such counsel such counsel does not know of any
action, proceeding, or investigation pending or threatened against, or relating
to it, its properties or business, the Shares, the capital stock, or the
transactions contemplated by this Agreement; (v) neither the execution or
delivery of this Agreement nor the consummation of the transactions contemplated
hereby: (a) violates or will violate or conflicts or will conflict with, or
constitutes a default under or will constitute a default under, any term or
provision of the Articles of Incorporation or the By-Laws, as amended, to the
best knowledge of such counsel, of any contract, commitment or other agreement,
understanding, arrangement, restriction of which either party is bound; (b) will
cause, or give any person grounds to cause (with or without notice the passage
of time or both) the maturity of any liability or obligation to be accelerated,
or will increase any such liability or obligation; or will give any person, firm
or corporation with which a party has any contractual relations the right to
cancel or amend such contractual relations, or (c) violates or will violate any
statute, law or any rule, regulation or order of any court or other governmental
authority.
(d) Each party shall have received the audited balance sheet as of May
31, 1997 and Statement of Income for the period then ending and completed its
due diligence investigation , which shall disclose no adverse trend in the
financial condition, business, operations, prospects, properties or assets of
the other party in the other party's sole opinion.
(e) Company has entered into an employment agreement with Xxxxx Xxxxxx
for his employment by the company after the Closing on such terms that are
acceptable to Buyer and Xxxxxx.
8. INDEMNIFICATION.
8.01. SURVIVAL. All agreements, representations, statements and
warranties contained herein or in any certificate, schedule, list, document, or
other writing, delivered pursuant hereto or in connection with the transactions
contemplated herein shall survive the execution and delivery of this Agreement,
the Closing of the transactions contemplated herein and any
21
investigation made at any time with respect to any of the foregoing or any
information the parties may have in respect thereto.
8.02. SELLER HOLD HARMLESS. Seller covenants and agrees with Buyer
that it will hold Buyer harmless from and hereby indemnify Buyer against any
and all damages, costs, expenses or other liabilities, including reasonable
attorney's fees (herein called "Damages") resulting to Buyer or the Company and
arising from the inaccuracy or the breach of any one or more of the
representations, warranties, covenants, statements or agreements made by Seller
in this Agreement or in connection with the transactions contemplated herein.
8.03. BUYER'S NOTICE. If at any time after the Closing Buyer has
reason to believe that it is entitled to indemnification under Section 8.02, or
any claim or dispute exists that could, unless successfully defended, entitle
Buyer to indemnification under Section 8.02, Buyer shall give notice to Seller
of the facts entitling Buyer to indemnification or the nature of the claim or
dispute. The Seller shall have the right to defend, settle or compromise any
third party claim or dispute that would entitle Buyer to indemnification at the
Seller's own expense using counsel of their choice which counsel shall be
reasonably acceptable to Buyer. If the Seller refuses or fails promptly to
defend or compromise any such claim or dispute, or in the event Seller's defense
of such claim or dispute is not successful, or if Buyer is otherwise entitled to
indemnification under Section 8.02, the Seller will promptly pay or reimburse
Buyer in the full amount of any Damages which Buyer becomes obligated to pay or
pays or suffers at any time as a result of any of the matters specified in
Section 8.02.
8.04. COMPANY AND BUYER'S HOLD HARMLESS. Buyer covenants and agrees
with Seller that it will hold Seller harmless from and hereby indemnifies Seller
against any and all damages, costs, expenses or other liabilities, including
reasonable attorney's fees (herein called "Damages") resulting to Seller and
arising from the inaccuracy or the breach of any one or more of the
representations, warranties, covenants, statements or agreements made by Buyer
in this Agreement or in connection with the transactions contemplated herein.
8.05. NOTICE. If at any time after the Closing Seller has reason to
believe that he is entitled to indemnification under Section 8.04, or any claim
or dispute exists that could, unless successfully defended, entitle Seller to
indemnification under Section 8.04, Seller shall give notice to Buyer of the
facts entitling Seller to indemnification or the nature of the claim or dispute.
Buyer shall have the right to defend, settle or compromise any third party claim
or dispute that would entitle Seller to indemnification at the Buyer's own
expense through counsel of its choice. If the Buyer refuses or fails promptly to
defend or compromise any such claim or dispute, or in the event Buyer's defense
of such claim or dispute is not successful, or if Seller is otherwise entitled
to indemnification under Section 8.04, the Buyer will promptly pay or reimburse
Seller in the full amount of any Damages which Seller becomes obligated to pay
or pays or suffers at any time as a result of any of the matters specified in
Section 8.04.
22
9. TERMINATION.
This agreement may be terminated prior to the Closing as follows:
9.01. TERMINATION WITHOUT LIABILITY. Buyer may terminate this
Agreement by giving written notice to the Seller without conferring liability,
in the event that the conditions specified in Section 7 of this Agreement are
not satisfied or waived at the Closing.
9.02. TERMINATION WITHOUT LIABILITY. Seller may terminate this
Agreement by giving written notice to Buyer without conferring liability, in the
event that the conditions specified in Section 8 of this Agreement are not
satisfied or waived at the Closing.
9.03. TERMINATION WITHOUT EFFECT ON LIABILITY. Buyer or Seller may
terminate this Agreement by giving written notice to the other party at or prior
to the Closing, without prejudice to any rights it or they may have if the other
party has failed in the observance or in the due and timely performance of any
of its material covenants or agreements contained herein, and such failure is
due to the fault of the other party, or if there shall have been a material
breach of the other party's warranties and representations herein contained.
9.04. EXHIBITS. At the time of execution hereof all Exhibits
required herein may not have been completed. The parties agree to use their
best efforts to complete the Exhibits as soon as practicable. If such Exhibits
are not completed on or prior to September 15, 1997, or the information
contained therein is deemed by a party to be unsatisfactory, and such party
gives notice to the other party within ten (10) days of receipt of such Exhibit,
this Agreement shall be null and void and have no further effect.
10. MISCELLANEOUS.
10.01. NOTICES. All notices, requests, demands, or other
communications hereunder shall be in writing and shall be deemed to have been
duly given when sent by certified mail, return receipt requested:
(I) If to Buyer, addressed to:
Touch Tone America, Inc.
0000 Xxxxx Xxxxxxxxxx Xxxx Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
With a copy to:
Xxxx Xxxxx
00000 Xxxxx Xxxx Xxxxx 000
Xxxxxxx, XX 00000
23
(ii) If to Sellers, addressed to:
Orix Global Communications, Inc.
0000 X. Xxxxxxxx Xxxx., Xxxxx #X-000
Xxx Xxxxx, Xxxxxx 00000
With a copy to:
Xxxxx Xxxx, Esquire
General Counsel
or such other address as Buyer or Sellers shall designate by notice given as
provided herein.
10.02. PUBLIC ANNOUNCEMENTS. No public announcement of the
transactions provided for herein shall be made by the Seller unless the same
shall be approved in advance in writing by Buyer.
10.03. EXPENSES. Except as otherwise expressly provided herein, each
of the parties hereto shall pay its or his own fees and expenses incident to the
negotiation, preparation, execution and consummation of this Agreement,
including all fees and expenses of their respective counsel and accountants
incurred in connection with this Agreement and all other agreements, documents,
certificates, applications and other instruments prepared in connection
herewith.
10.04. SUCCESSORS. This Agreement shall inure to the benefit of and
be binding upon the Seller and its heirs, legal representatives and successors
and permitted assigns, and Buyer and its respective successors and permitted
assigns.
10.05. LAW TO APPLY. This Agreement shall be construed and enforced
in accordance with the laws of the State of Nevada. The parties hereby agree
that dispute concerning this Agreement or the construction or enforcement
thereof shall be resolved by binding arbitration before the American Arbitration
Association.
10.06. ASSIGNMENT. This Agreement shall not be assignable by any
party hereto without the prior written consent of the other parties hereto.
10.07. ENTIRE AGREEMENT. This Agreement contains the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes any and all prior arrangements, proposals or understandings, written
or oral, by or among any of the parties hereto with respect to such purchase and
sale or other transactions, which arrangements, proposals and under-standings
shall be of no further force and effect. No amendment or modification of this
Agreement shall be effective for any purpose unless the same shall be in writing
signed by all
24
of the parties hereto or their successors in interest.
10.08. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10.09. SECTION HEADINGS. The section headings herein are for
convenience only and shall not affect the construction hereof.
10.10. SUBSEQUENT ACQUISITIONS AND MERGERS.
(a) The parties acknowledge that Buyer has embarked on a program
of acquisition and merger in order to grow its business. Notwithstanding any
contrary provision in this Agreement, any such transaction is expressly
permitted hereby and shall not constitute a breach of any representation,
warranty, term or condition in this Agreement.
(b) During the period from the date of this Agreement to the
Closing date, the Seller shall bring all acquisition candidates to the attention
of Buyer and the Seller shall cause the Company to, refrain from taking any
action to, directly or indirectly, encourage, initiate or engage in discussions
or negotiations with, or provide any information to, any other person, firm,
corporation or other entity or group, other than Buyer concerning any
acquisition candidates.
11.0 CONDITION TO PERFORMANCE.
11.1 CONDITIONS PRECEDENT TO PERFORMANCE. This Agreement, and any
performance hereunder, is specifically subject to, as the following express
conditions precedent,
a. The Buyer and Seller shall have received all permits, authorizations,
regulatory approvals and third party consents necessary for the consummation of
the acquisition, and all applicable legal requirements shall have been
satisfied.
a. All of Seller's shareholders shall have approved this Agreement. Buyer and
Seller shall have the corporate authority to enter into this Agreement.
c. Each party and its agents, attorneys and representatives shall have full
and free access to the properties, book and records of the other party (the
confidentiality of which the investigating party agrees to retain) for purposes
of conducting investigations of the other party.
d. Proper and legal approval of the shareholders of Touch Tone America, Inc.,
as required and necessary in conformity with all requirements of the By-Laws of
Touch Tone America, Inc., and the Corporation Law of the State of California of
the transaction contemplated under this
25
Agreement as well as all other matters necessary to give effect to this
transaction determined in the sole discretion of Orix Global Communications,
Inc. This approval must be by December 15,1997 unless mutually extended, or
this Agreement is null and void. All expenses relating to seeking and
obtaining Shareholder approval are to be borne by Touch Tone America, Inc.,
whether such approval is successful or not.
e. Seller will not have a net worth less than $500,000.
f. Buyer shall have filed all reports required under Section 13(a) or 15(d) of
the Securities Exchange Act of 1934.
g. The Buyer will be in good standing and in full compliance with the NASDAQ
rules and regulations, and the common stock of the Buyer will be listed with the
NASDAQ SmallCap Market, and will remain listed with such Market following any
decision and action taken by NASDAQ concerning Buyer's compliance with NASDAQ
rules and regulations whether or not such decision or action follows a review or
hearing. Buyer must also satisfy any and all conditions established by the
NASDAQ for the Buyer to maintain its listed status, and perform any and all
representations and undertakings made to the NASDAQ.
11.2 CONDITION SUBSEQUENT TO PERFORMANCE. This Agreement, and any
performance hereunder, is specifically subject to, as an express condition
subsequent, namely that the Buyer will be in good standing and in full
compliance with the NASDAQ rules and regulations, and the common stock of the
Buyer will be listed with the NASDAQ SmallCap Market, and will remain listed
with such Market following any decision and action taken by NASDAQ concerning
Buyer's compliance with NASDAQ rules and regulations whether or not such
decision or action follows a review or hearing, in no event for a period of no
less than 150 days from the date of Closing. Buyer must also satisfy any and
all conditions established during such period by the NASDAQ for the Buyer to
maintain its listed status, and perform any and all representations and
undertakings made to the NASDAQ.
11.3 FAILURE TO SATISFY CONDITIONS. Should Buyer fail to satisfy any of
the conditions precedent set out under paragraph 11.1 above or the conditions
subsequent set out under paragraph 11.2 above, the Seller and the Shareholders
may at their discretion and without liability, terminate this Agreement, in
which case the Agreement between the parties would be null, void, unenforceable
and without effect. In the event the Seller and the Shareholders terminate this
Agreement pursuant to a failure by Buyer to satisfy the conditions subsequent
set out under paragraph 11.2 above, the parties agree to do all things necessary
and useful to undo the transaction contemplated under this Agreement and the
make the parties whole and in the same position they were in prior to the
closing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
26
TOUCH TONE AMERICA, INC.
By: /s/ Xx. Xxxxxx X. Xxxxx
---------------------------------
Acting President
ORIX GLOBAL COMMUNICATIONS,
INC.
By: /s/ Xxxxx Xxxxxx
---------------------------------
President
27
Shares of
Company Stock Shares of
Delivered Buyer To
To Buyer Be Received
The Shareholders At Closing At Closing Signature
---------------- ---------- ---------- ----------
28
