INVESTMENT RIGHTS AGREEMENT
This Investment Rights Agreement (this "Agreement") dated as of December 4,
1998 is entered into by and between SmarTalk TeleServices, Inc., a California
corporation (together with its successors, "SmarTalk"), and Xxxxxxxx
International Limited, a company organized under the laws of the Cayman Islands
(together with its successors, "Xxxxxxxx").
The parties hereto agree as follows:
1. Purchase and Sale. In consideration of and upon the basis of the
representations, warranties and agreements and subject to the terms and
conditions set forth in this Agreement:
a. [RESERVED].
b. Investment Right.
(i) SmarTalk hereby grants Xxxxxxxx the right to purchase ( the
"Investment Rights"), and agrees to sell to Xxxxxxxx, at Xxxxxxxx'x
sole option, newly issued shares of SmarTalk common stock (the "Common
Stock"), no par value, in an aggregate amount equal to the greater of
(x) 6,060,606 and (y) such number which would equal at the time of any
Investment Closing (as defined below) fifteen percent (15%) of the
Common Stock of SmarTalk as determined on a Fully-Diluted basis after
giving effect to Xxxxxxxx'x exercise of its Investment Rights
hereunder (collectively, such number of shares of Common Stock as
determined pursuant hereto, subject to any adjustments made pursuant
to this Agreement, the "Shares") at a purchase price per Share of
$4.125 (such sum, subject to any adjustments made pursuant to this
Agreement, the "Investment Right Price"). "Fully-Diluted" shall mean,
at any time, the then outstanding Common Stock plus (without
duplication) all shares of Common Stock issuable, whether at such time
or upon the passage of time or the occurrence of future events, upon
the exercise, conversion or exchange of all then-outstanding rights,
warrants, options, convertible securities or exchangeable securities
or indebtedness, or other rights exercisable for or convertible or
exchangeable into, directly or indirectly, Common Stock, and
securities convertible or exchangeable into Common Stock, whether at
the time of issuance or upon the passage of time or the occurrence of
some future event.
(ii) Xxxxxxxx shall be entitled to exercise its Investment Rights
hereunder in whole or in part from time to time for a period
commencing on the date of this Agreement and ending on the first
trading day which is five (5) years from the date of this Agreement
(the "Expiration Date"); provided, however, that any exercise
hereunder is subject to Xxxxxxxx making available to SmarTalk
$5,000,000 as a Loan (as defined in the Credit Agreement (as defined
below)) pursuant to the Credit Agreement on December 7, 1998.
c. To exercise the Investment Rights, Xxxxxxxx shall deliver one or
more written notices in the form attached hereto as Annex A (an "Investment
Notice") to SmarTalk from time to time prior to the Expiration Date. The
date upon which Xxxxxxxx causes an Investment Notice to be delivered to
SmarTalk, by hand, facsimile, electronic transmission or otherwise, shall
be the "Notice Date" with respect to such exercise of the Investment
Rights. If the Investment Rights are exercised, such sale shall take place
on an Investment Closing Date (as defined below) upon satisfaction of the
terms and conditions described herein. Upon satisfaction or, if applicable,
waiver of the relevant conditions set forth in Sections 9 and 10 hereof,
the closing of the sale or delivery of Shares (the "Investment Closing")
shall take place three (3) business days following the Notice Date (such
date and time being referred to herein as the "Investment Closing Date").
To the extent such Investment Closing Date occurs after the 3 day period
referred to in the preceding sentence (each day a "Default Day") due to a
failure of the relevant conditions set forth in Sections 9 and 10 hereof on
the part of SmarTalk, Xxxxxxxx shall be entitled to receive an amount of
additional shares of Common Stock equal to 10% of the number of Shares
determined pursuant to Section 1.b(i) for each such Default Day at no
additional cost to Xxxxxxxx.
d. Notwithstanding anything else contained in this Agreement, solely
in limitation of Xxxxxxxx'x rights, the aggregate number of Shares issuable
immediately upon exercise of the Investment Rights, together with all
Shares previously issued, shall be less than or equal to the lower of (i)
the Exercisable Number (as defined below) or (ii) the number of shares of
Common Stock otherwise issuable upon the exercise of Investment Rights. Any
Shares not issued as a result of the previous sentence shall be issuable
when and to the extent the Exercisable Number is thereafter increased. The
"Exercisable Number" is initially zero (0) and thereafter may be increased
upon expiration of a sixty-five day period (the "65 Day Notice Period")
after Xxxxxxxx delivers a notice (a "65 Day Notice") to SmarTalk
designating an aggregate number of shares of Common Stock in excess of the
then existing Exercisable Number. A 65 Day Notice may be given at any time.
One or more 65 Day Notice(s) may be given from time to time at any time
after the date of this Agreement, provided that any increase in the
Exercisable Number designated by any 65 Day Notice shall be effective only
upon expiration of the 65 Day Notice Period with respect to such 65 Day
Notice.
2. Closing.
a. [RESERVED].
b. At any Investment Closing, the following deliveries shall be made:
(i). Shares. SmarTalk shall deliver the stock certificate(s)
representing the Shares, duly registered on the books of SmarTalk in
the name of Xxxxxxxx or its nominee, against payment by Xxxxxxxx of
the Investment Right Price (if any) by wire transfer in immediately
available funds, to the account identified in the Investment Notice;
provided, however, that notwithstanding anything to the contrary
herein, Xxxxxxxx may set-off against such Investment Right Price any
and all amounts owing to Xxxxxxxx under that certain Credit Agreement
dated as of the date hereof between Xxxxxxxx and SmarTalk (the "Credit
Agreement") (including without limitation any principal, interest and
accrued fees thereunder).
(ii). Closing Documents. The closing documents required by
Sections 9 and 10 shall be delivered to Xxxxxxxx and SmarTalk,
respectively.
(iii). Delivery Notice. An executed copy of the delivery notice
in the form attached hereto as Annex C shall be delivered in
accordance therewith, with a copy delivered to Xxxxxxxx.
The foregoing deliveries shall be deemed to occur simultaneously as part of
a single transaction, and no delivery shall be deemed to have been made until
all such deliveries have been made. The original certificates representing the
Shares shall be delivered via Federal Express to Xxxxxxxx at the address set
forth in Section 15 hereof, unless Xxxxxxxx shall have delivered to SmarTalk a
written notice specifying a different address.
3. Representations and Warranties of SmarTalk. SmarTalk hereby represents
and warrants to Xxxxxxxx on the date hereof and on each Investment Closing Date,
if any, as follows:
a. SmarTalk has been duly incorporated and is validly existing in good
standing under the laws of California, or after the date hereof, if another
entity has succeeded SmarTalk in accordance with the terms hereof, under
the laws of one of the United States.
b. The execution, delivery and performance of this Agreement
(including the issuance of the Shares (when and if issued)) by SmarTalk
have been duly authorized by all requisite corporate action and no further
consent or authorization of SmarTalk, its Board of Directors or its
shareholders is required. This Agreement has been duly executed and
delivered by SmarTalk and, when this Agreement is duly authorized, executed
and delivered by Xxxxxxxx, will be a valid and binding agreement
enforceable against SmarTalk in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally
and to general principles of equity.
c. SmarTalk has full corporate power and authority necessary to
execute and deliver this Agreement and to perform its obligations hereunder
(including the issuance of the Shares). The transaction evidenced and
contemplated by this Agreement and the issuance of the Shares is a separate
and distinct transaction and shall not be integrated with any other
transaction between Xxxxxxxx and SmarTalk.
d. Except as may be required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), no consent, approval,
authorization or order of any court, governmental agency or other body is
required for execution and delivery by SmarTalk of this Agreement or the
performance by SmarTalk of any of its obligations hereunder other than such
as may already have been received.
e. Except as may be required under the HSR Act, neither the execution
and delivery by SmarTalk of this Agreement nor the performance by SmarTalk
of any of its obligations hereunder:
(1) violates, conflicts with, results in a breach of, or
constitutes a default (or an event which with the giving of notice or
the lapse of time or both would be reasonably likely to constitute a
default) under (A) the Articles of Incorporation or by-laws of
SmarTalk or any of its subsidiaries, (B) any decree, judgment, order,
law, treaty, rule, regulation or determination of which SmarTalk is
aware (after due inquiry) of any court, governmental agency or body,
or arbitrator having jurisdiction over SmarTalk or any of its
subsidiaries or any of their respective properties or assets, (C) the
terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan,
indenture, lease, mortgage, deed of trust or other instrument to which
SmarTalk or any of its subsidiaries is a party, by which SmarTalk or
any of its subsidiaries is bound, or to which any of the properties or
assets of SmarTalk or any of its subsidiaries is subject, (D) the
terms of any "lock-up" or similar provision of any underwriting or
similar agreement to which SmarTalk or any of its subsidiaries is a
party or (E) any rules of the National Association of Securities
Dealers, Inc. or the NASDAQ National Market applicable to SmarTalk or
the transactions contemplated hereby; or
(2) results in the creation or imposition of any lien, charge or
encumbrance upon (A) any Share or (B) any of the properties or assets
of SmarTalk or any of its subsidiaries.
f. SmarTalk has validly reserved for issuance to Xxxxxxxx (i) the
shares of Common Stock for issuance from time to time as Shares and (ii)
any additional shares of Common Stock as required under this Agreement.
When issued to Xxxxxxxx against payment therefor in accordance with the
terms of this Agreement, each Share:
(1) will have been duly and validly authorized, duly and validly
issued, fully paid and non-assessable;
(2) will be free and clear of any security interests, liens,
claims or other encumbrances (other than encumbrances that may be
imposed under federal securities laws); and
(3) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of
SmarTalk.
g. SmarTalk satisfies all quantitative maintenance criteria of the
NASDAQ National Market or, after the date hereof, has a valid exemption
from such criteria. Following any Investment Closing, the Shares (when and
if issued) will be, duly listed and admitted for trading on the principal
exchange or market for the Common Stock.
h. On the date hereof, except as disclosed in the schedules to the
Credit Agreement, there is no pending or, to the best knowledge of
SmarTalk, threatened action, suit, proceeding or investigation before any
court, governmental agency or body, or arbitrator having jurisdiction over
SmarTalk or any of its affiliates that would materially affect the
execution by SmarTalk of, or the performance by SmarTalk of its obligations
under, this Agreement, provided, however, that the representations and
warranties contained in this Section 3.1(h) shall not apply to any action,
threatened action, suit, proceeding or investigation initiated by Xxxxxxxx.
i. None of SmarTalk's filings with the United States Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as
amended (the "Securities Act"), or under Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (each an
"SEC Filing") contained any untrue statement of a material fact or omitted
to state any material fact necessary in order to make the statements, in
the light of the circumstances under which they were made, not misleading.
j. Since the date of SmarTalk's most recent SEC Filing, there has not
been, and SmarTalk is not aware of, any development that would require an
amendment to SmarTalk's most recent effective Registration Statement in
order to permit public offers and sales of shares of Common Stock
thereunder.
k. The offer and sale of the Shares to Xxxxxxxx pursuant to this
Agreement will, subject to compliance by Xxxxxxxx with the applicable
representations and warranties contained in Section 4 hereof and with the
applicable covenants and agreements contained in Section 8 hereof, be made
in accordance with the provisions and requirements of Regulation D
promulgated under the Securities Act of 1933, as amended (the "Securities
Act") and any applicable state law.
l. As of the date hereof, the authorized capital stock of SmarTalk
consists of 100,000,000 shares of Common Stock, and 10,000,000 shares of
preferred stock, no par value, of SmarTalk ("Preferred Stock"). As of
November 30, 1998, (i) 27,607,379 shares of Common Stock (including the
treasury shares described in clause (iii) below) and no shares of Preferred
Stock were issued and outstanding, (ii) less than 10,000,000 shares of
Common Stock were reserved for issuance upon exercise of outstanding stock
options, warrants or other convertible rights and (iii) no shares of Common
Stock were held in the treasury of SmarTalk. All of the outstanding shares
of Common Stock are, and all shares which may be issued pursuant to stock
options, warrants or other convertible rights will be, when issued and paid
for in accordance with the respective terms thereof, duly authorized,
validly issued, fully paid and non-assessable and free of any preemptive
rights in respect thereof. As of the date hereof, except as set forth
above, and except for shares of Common Stock or other securities issued
upon conversion, exchange, exercise or purchase associated with the
securities, options, warrants, rights and other instruments referenced
above, (i) no shares of capital stock or other voting securities of
SmarTalk were outstanding, (ii) no equity equivalents, interests in the
ownership or earnings of SmarTalk or other similar rights were outstanding
and (iii) there were no existing options, warrants, calls, subscriptions or
other rights or agreements or commitments relating to the capital stock of
SmarTalk or any of its subsidiaries or obligating SmarTalk or any of its
subsidiaries to issue, transfer, sell or redeem any shares of capital
stock, or other equity interest in, SmarTalk or any of its subsidiaries or
obligating SmarTalk or any of its subsidiaries to grant, extend or enter
into any such option, warrant, call, subscription or other right, agreement
or commitment. No provision of this Section 3(l) is intended to relate to
any transaction, including but not limited to options traded by third
parties on the Chicago Board of Exchange, in which SmarTalk is not a party
and by which neither SmarTalk nor any of its properties are bound.
3.A Registration Provisions.
a. SmarTalk shall as soon as practicable and in any event in no later
than 30 days from the date of this Agreement and at its own expense, file a
registration statement (the "Registration Statement") under the Securities
Act covering the sale or resale of the sum of all Shares (which for such
purposes shall be deemed to be not less than the number of Shares subject
to the Investment Rights) (each, a "Covered Security"), shall use its best
efforts to cause such Registration Statement to be declared effective not
later than 90 calendar days (the "Required Registration Date") after the
date of this Agreement and shall promptly amend such Registration Statement
from time to time if the maximum number of Shares is greater than the
number of shares of Common Stock registered pursuant to such Registration
Statement, provided that Xxxxxxxx shall have provided such information and
cooperation in connection therewith as SmarTalk may reasonably request. If
the Registration Statement has not been declared effective by the Required
Registration Date, the Investment Right Price as determined pursuant to
Section 1.b. for shares of Common Stock issuable upon exercise of the
Investment Rights exercised following the Required Registration Date shall
be reduced by 2.5% for each month (or portion thereof) following the
Required Registration Date that such Registration Statement shall not have
been declared effective.
b. SmarTalk will use its best efforts to: (i) keep such registration
effective until the earlier of (A) the second anniversary of the issuance
of each Covered Security (provided that, Xxxxxxxx may freely resell such
Covered Securities), (B) the later of the date all of the Covered
Securities shall have been sold by Xxxxxxxx and the Expiration Date or (C)
such time as all of the Covered Securities held by Xxxxxxxx can be sold by
Xxxxxxxx or any of its affiliates within a three-month period without
compliance with the registration requirements of the Securities Act
pursuant to Rule 144 under the Securities Act ("Rule 144"); (ii) prepare
and file with the SEC such amendments and supplements to the Registration
Statement and the prospectus used in connection with the Registration
Statement (as so amended and supplemented from time to time, the
"Prospectus") as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all Covered Securities by
Xxxxxxxx or any of its affiliates; (iii) furnish such number of
Prospectuses and other documents incident thereto, including any amendment
of or supplement to the Prospectus, as Xxxxxxxx from time to time may
reasonably request; (iv) cause all Covered Securities to be listed on each
securities exchange and quoted on each quotation service on which similar
securities issued by SmarTalk are then listed or quoted; (v) provide a
transfer agent and registrar for all Covered Securities and a CUSIP number
for all Covered Securities; (vi) otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC; and (vii) file the
documents required of SmarTalk and otherwise use its best efforts to obtain
and maintain requisite blue sky clearance in (A) New York, California and
all other jurisdictions in which any of the shares of Common Stock were
originally sold and (B) all other states specified in writing by Xxxxxxxx,
provided, however, that as to this clause (B), SmarTalk shall not be
required to qualify to do business or consent to service of process in any
state in which it is not now so qualified or has not so consented.
c. SmarTalk shall furnish to Xxxxxxxx upon request a reasonable number
of copies of a supplement to or an amendment of such Prospectus as may be
necessary in order to facilitate the public sale or other disposition of
all or any of the Covered Securities by Xxxxxxxx or any of its affiliates
pursuant to the Registration Statement.
d. With a view to making available to Xxxxxxxx and its affiliates the
benefits of Rule 144 and Form S-3 under the Securities Act, SmarTalk
covenants and agrees to: (i) make and keep available adequate current
public information (within the meaning of Rule 144(c)) concerning SmarTalk,
until the earlier of (A) the second anniversary of the issuance of each
Covered Security (provided that, Xxxxxxxx may freely resell such Covered
Securities) or (B) such date as all of the Covered Securities shall have
been resold by Xxxxxxxx or any of its affiliates; and (ii) furnish to
Xxxxxxxx upon request, as long as Xxxxxxxx owns any Covered Securities, (A)
a written statement by SmarTalk that it has complied with the reporting
requirements of the Securities Act and the Exchange Act, (B) a copy of the
most recent annual or quarterly report of SmarTalk, and (C) such other
information as may be reasonably requested in order to avail Xxxxxxxx and
its affiliates of Rule 144 or Form S-3 with respect to such Covered
Securities.
e. Notwithstanding anything else in this Section 3.A, if, at any time
during which a Prospectus is required to be delivered in connection with
the sale of any Covered Securities, SmarTalk determines in good faith that
a development has occurred or a condition exists as a result of which the
Registration Statement or the Prospectus contains a material misstatement
or omission, SmarTalk will immediately notify Xxxxxxxx thereof by telephone
and in writing. Upon receipt of such notification, Xxxxxxxx and its
affiliates will immediately suspend all offers and sales of any Covered
Securities pursuant to the Registration Statement. In such event, SmarTalk
will amend or supplement the Registration Statement as promptly as
practicable and will take such other steps as may be required to permit
sales of the Covered Securities thereunder by Xxxxxxxx and its affiliates
in accordance with applicable federal and state securities laws. SmarTalk
will promptly notify Xxxxxxxx after it has determined in good faith that
such sales have become permissible in such manner and will promptly deliver
copies of the Registration Statement and the Prospectus (as so amended or
supplemented) to Xxxxxxxx in accordance with paragraph (b) of this Section
3.A. Notwithstanding the foregoing, (A) under no circumstances shall
SmarTalk be entitled to exercise its right to suspend sales of any Covered
Securities pursuant to the Registration Statement more than two times in
any twelve-month period, (B) the period during which such sales may be
suspended (each a "Blackout Period") shall not exceed thirty days and (C)
no Blackout Period may commence less than 30 days after the end of the
preceding Blackout Period.
Upon the commencement of a Blackout Period pursuant to this Section
3.A, Xxxxxxxx will notify SmarTalk of any contracts to sell any Covered
Securities (each a "Sales Contract") that Xxxxxxxx or any of its affiliates
has entered into prior to the commencement of such Blackout Period and that
would require delivery of such Covered Securities during such Blackout
Period, which notice will contain the aggregate sale price and volume of
Covered Securities pursuant to such Sales Contract. Upon receipt of such
notice, SmarTalk will immediately notify Xxxxxxxx of its election either
(i) to terminate the Blackout Period and, as promptly as practicable, amend
or supplement the Registration Statement or the Prospectus in order to
correct the material misstatement or omission and deliver to Xxxxxxxx
copies of such amended or supplemented Registration Statement and
Prospectus in accordance with paragraph (b) of this Section 3.A or (ii) to
continue the Blackout Period in accordance with this paragraph. If SmarTalk
elects to continue the Blackout Period, and Xxxxxxxx or any of its
affiliates is therefore unable to consummate the sale of Covered Securities
pursuant to the Sales Contract (such unsold Covered Securities being
hereinafter referred to herein as the "Unsold Securities"), SmarTalk will
promptly indemnify each Xxxxxxxx Indemnified Party (as such term is defined
in Section 13 below) against any Proceeding (as such term is defined in
Section 13 below) that each Xxxxxxxx Indemnified Party may incur arising
out of or in connection with Xxxxxxxx'x breach or alleged breach of any
such Sales Contract, and SmarTalk shall reimburse each Xxxxxxxx Indemnified
Party for any reasonable costs or expenses (including reasonable legal
fees) incurred by such party in investigating or defending any such
Proceeding (collectively, the "Indemnification Amount"); provided, however,
that each Xxxxxxxx Indemnified Party shall take all actions reasonably
necessary or appropriate to mitigate such Indemnification Amount; and
provided further, however, that the Indemnification Amount shall be reduced
by an amount equal to the number of Unsold Securities multiplied by the
difference between (x) the actual per share price received by Xxxxxxxx or
any of its affiliates upon the sale of the Unsold Securities (if such sale
occurs within three Trading Days of the end of the Blackout Period) or the
closing sale price of the Common Stock on the NASDAQ National Market or
other national securities exchange on which the Common Stock is then listed
on the third Trading Day after the end of the Blackout Period (if the
Unsold Securities are not sold by Xxxxxxxx or any of its affiliates within
three Trading Days of the end of the Blackout Period), and (y) the per
share sale price for the Unsold Securities provided in the Sales Contract.
As used herein, the term "Trading Day" means any day on which SmarTalk's
Common Stock is quoted on the NASDAQ National Market or, if applicable,
other national securities exchange.
4. Representations and Warranties of Xxxxxxxx. Xxxxxxxx hereby represents
and warrants to SmarTalk on the date hereof and on each Investment Closing Date,
if any, as follows:
x. Xxxxxxxx has been duly incorporated and is validly existing in good
standing under the laws of the Cayman Islands, or after the date hereof,
under the laws of the jurisdiction of its organization.
b. The execution, delivery and performance of this Agreement by
Xxxxxxxx have been duly authorized by all requisite corporate action and no
further consent or authorization of Xxxxxxxx, its Board of Directors or its
stockholders is required. This Agreement has been duly executed and
delivered by Xxxxxxxx and, when duly authorized, executed and delivered by
SmarTalk, will be a valid and binding agreement enforceable against
Xxxxxxxx in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general
principles of equity.
x. Xxxxxxxx understands that no United States federal or state agency
has passed on, reviewed or made any recommendation or endorsement of the
Shares.
d. Subject to Section 3.A hereof, Xxxxxxxx understands that the Shares
have not been registered under the Securities Act and may not be re-offered
or resold other than pursuant to registration thereunder or an available
exemption therefrom.
x. Xxxxxxxx is an "accredited investor" as such term is defined in
Regulation D promulgated under the Securities Act.
x. Xxxxxxxx shall be purchasing the Shares for its own account for
investment only and not with a view to, or for resale in connection with,
the public sale or distribution thereof, except pursuant to sales
registered under the Securities Act.
x. Xxxxxxxx understands that the Shares are being or will be offered
and sold to it in reliance on specific exemptions from the registration
requirements of United States federal securities laws and that SmarTalk is
relying on the truth and accuracy of, and Xxxxxxxx'x compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of Xxxxxxxx set forth herein in order to determine the availability of such
exemptions and the eligibility of Xxxxxxxx to acquire the Shares.
h. The transactions contemplated by this Agreement are not part of a
plan or scheme on the part of Xxxxxxxx, any of its affiliates or any person
acting on its or their behalf to evade the registration requirements of the
Securities Act.
i. As of the date hereof, Xxxxxxxx intends to purchase any Additional
Shares within the Investment Purposes Only exemption of the XXX Xxx, 00
C.F.R Section 802-9 and will take any action required by the HSR Act in
connection with any such purchase.
5. [RESERVED.]
6. Consolidation, Merger, Etc. In case SmarTalk shall be a party to any
transaction providing for (i) any acquisition of SmarTalk by means of merger or
other form of corporate reorganization in which outstanding shares of SmarTalk
are exchanged for securities or other consideration issued, or caused to be
issued, by the acquiring corporation (the "Acquirer") or its subsidiary or (ii)
a sale of all or substantially all of the assets of SmarTalk (on a consolidated
basis) or (iii) any other transaction or series of related transactions by
SmarTalk in which in excess of 50% of SmarTalk's voting power is transferred to
a single entity or group acting in concert (each of the foregoing being referred
to as a "Combination"), Xxxxxxxx, at its sole option, may choose to (1) exercise
the Investment Rights (in whole or in part) before the Combination is closed
(the "Combination Closing") or (2) exercise the Investment Rights (in whole or
in part) simultaneously with the Combination Closing, in which event, it shall
receive a number of shares of Acquirer Common Stock (as defined below) on terms
identical to those set forth in Section 1 (and Section 5 and 3.A, if applicable)
and any other consideration that it would have received had it exercised the
Investment Rights immediately prior to the Combination Closing; and (3) with
respect to any portion of the Investment Rights that are not exercised by
Xxxxxxxx, Xxxxxxxx shall be entitled to purchase from the Acquirer (i) a right
to purchase a number of shares of common stock of the Acquirer equal to the
remaining amount of Shares subject to the Investment Rights (the "Number of
Shares") at a price per share determined by multiplying (a) the Number of Shares
times (b)(x) 4.125 divided by the consideration received in the Combination from
or on behalf of the Acquirer times (y) the market price of Acquirer Common Stock
on the day of the Combination Closing and/or (ii) receive cash in an amount
equal to the Black-Scholes value of the Investment Rights based on the 260-day
volatility as reported by Bloomberg, L.P. and based on the time remaining until
the Expiration Date. The "Acquirer Common Stock" shall mean the class of
publicly traded common stock of the Acquirer having the largest market
capitalization as of the date of the Combination Closing. SmarTalk shall provide
Xxxxxxxx with written notice of any proposed Combination as soon as the
existence of a proposed Combination is made public by any person (the
"Combination Notice"). SmarTalk will cause the surviving party in a Combination
to assume all of the obligations of SmarTalk pursuant to this Agreement. It
shall be a condition that all Acquirer common stock issued to Xxxxxxxx in any
Combination shall have been registered under the Securities Act.
7. Covenants of SmarTalk. SmarTalk covenants and agrees with Xxxxxxxx as
follows:
a. For so long as Xxxxxxxx owns any Shares or any Investment Rights
exist, and in any case for a period of 90 days thereafter, SmarTalk will
use its best efforts to (i) maintain the eligibility of the Common Stock
for quotation on the NASDAQ National Market or listing on a national
securities exchange (as defined in the Exchange Act) and (ii) regain the
eligibility of the Common Stock for quotation on the NASDAQ National Market
in the event that the Common Stock is delisted by the NASDAQ National
Market.
b. SmarTalk will provide Xxxxxxxx with an opportunity to review and
comment on any public disclosure by SmarTalk of information regarding this
Agreement and the transactions contemplated hereby. Beginning on the date
hereof and for so long as any Investment Rights exist, and in any case for
a period of 90 days thereafter, SmarTalk will (i) promptly notify Xxxxxxxx
if there is any public disclosure by SmarTalk of material information
regarding SmarTalk or its financial condition, prospects or results of
operation and (ii) provide Xxxxxxxx with copies of all SEC Filings.
c. As soon as such information is available (but in no event later
than December 10, 1998), SmarTalk shall deliver to Xxxxxxxx a written
notice stating the number of outstanding shares of Common Stock as of the
date hereof.
d. SmarTalk will make all filings required by law with respect to the
transactions contemplated hereby.
e. SmarTalk will cause the Common Stock issuable as Shares to be duly
listed and admitted for trading on the NASDAQ National Market or, if the
NASDAQ National Market is not then the principal trading market for the
Common Stock, on a national securities exchange (as defined in the Exchange
Act) or the principal exchange or market for the Common Stock.
f. [RESERVED]
g. For a period beginning on the date hereof and ending on the day
which is one year after the date hereof (the "One Year Period"), SmarTalk
will not offer or sell any of its or its subsidiaries' Preferred Stock,
Common Stock or other equity securities (or any securities convertible into
or exchangeable for such Preferred Stock, Common Stock or other equity
securities) in reliance upon Section 4(2) of the Securities Act or
Regulation D promulgated thereunder or under Regulation S promulgated under
the Securities Act (an "Equity Placement"), unless SmarTalk shall have
given Xxxxxxxx prior written notice (a "Notice Obligation") of its
intention to engage in any such Equity Placement or other capital raising
transaction in advance of soliciting or negotiating with any prospective
investor and Xxxxxxxx has given its written approval thereof (which such
approval shall be in Xxxxxxxx'x sole discretion); and for one additional
year after the One Year Period SmarTalk shall still have a Notice
Obligation, and the parties hereto shall be obligated to negotiate in good
faith with respect to the terms of any such proposed Equity Placement
before the same shall occur. Except during the five trading days
immediately prior to and following the date hereof and during the three
trading days immediately prior to, and the five trading days immediately
following, any Investment Closing Date, the above restrictions shall not
apply to (i) the sale of 50% or more of the outstanding common stock of a
subsidiary of SmarTalk (other than a sale which would constitute all or
substantially all of the assets of SmarTalk and its subsidiaries), (ii) any
strategic partnership or arrangement or joint venture entered into by
SmarTalk or any of its subsidiaries, (iii) the merger or consolidation of
SmarTalk with or into any other corporation or entity (other than a merger
or consolidation that in substance results in the issuance of SmarTalk's
securities for cash), (iv) any registered, underwritten public offering of
SmarTalk's equity securities, (v) any issuances of Common Stock (including
warrants and options exercisable for or convertible into Common Stock) in
connection with any employee, consultant or director compensation plan or
arrangement, (vi) any acquisition of any other corporation or entity by
SmarTalk or any of its subsidiaries or merger or consolidation of any other
corporation or entity with or into SmarTalk or any of its subsidiaries,
provided such corporation or entity engages in a substantial trade or
business; (vii) any issuance of warrants or other similar instrument with a
fixed exercise price at or above the then current market price in
connection with the offer and sale of non-convertible debt securities by
SmarTalk and (viii) any issuance in connection with bona fide bank or
equipment financing by or on behalf of SmarTalk or any of its subsidiaries.
h. If on any Notice Date, the aggregate number of Shares issuable
pursuant to Investment Rights (without regard to any notice periods), when
added to the aggregate number of Shares previously issued and any other
shares of Common Stock required to be included by NASDAQ, would exceed the
number of shares equal to 20% of the total number of shares of Common Stock
outstanding (adjusted to reflect any split, subdivision, combination or
consolidation of the Common Stock, whether by reclassification,
distribution of a dividend with respect to the outstanding Common Stock
payable in shares of Common Stock, or otherwise, or any recapitalization of
the Common Stock) on the date of this Agreement (the "Original Number") and
such circumstance would require the approval (the "Required Consent") of
the holders of the Common Stock pursuant to the listing requirements or
rules of the NASDAQ National Market (or such other national securities
exchange on which the Common Stock is then listed), SmarTalk (A) shall not
issue shares of Common Stock (the "Issuance Blockage") to the extent that
the total number of shares of Common Stock issued hereunder would exceed
19.9% of the Original Number, and (B) shall use its best efforts to obtain,
within 90 days from the Notice Date, the Required Consent approval for the
issuance of 20% or more of SmarTalk's Common Stock under this Agreement. In
the event the Required Consent is not obtained in accordance with the
preceding sentence, Xxxxxxxx shall have the right to convert up to that
amount of the Investment Rights, the exercise of which would result in the
total number of shares issued hereunder to exceed 19.9% of the Original
Number into a note (an "Excess Note") by delivery of an Excess Notice (as
defined below) in an amount equal the product of (x) the positive excess of
the closing price (the "Excess Closing Price") as reported by Bloomberg,
L.P. of the Common Stock on the NASDAQ National Market (or such other
national securities exchange on which the Common Stock is then listed) on
the Excess Notice Date (as defined below) over the applicable Investment
Right Price and (y) the number of shares of Common Stock that would be
issuable in respect of the complete exercise of the Initial Investment
Right but for the Issuance Blockage. All computations in the preceding
sentence with respect to the Investment Right Price and the number of
shares of Common Stock issuable shall be determined as if the Excess Notice
Date were the Notice Date. In addition, in the event the Required Consent
is not obtained and any Excess Note is outstanding, SmarTalk shall not
issue any securities or incur any indebtedness for borrowed money (other
than indebtedness incurred pursuant to a revolving bank credit agreement
("Bank Debt") or in the ordinary course of SmarTalk's business), except in
connection with the repurchase of Excess Notes. The Excess Note(s) shall be
subordinated in right of payment to the Bank Debt, provided that such
subordination shall not affect SmarTalk's obligation to pay such Excess
Note(s) when due. To convert Investment Rights into an Excess Note,
Xxxxxxxx shall deliver one or more written notices in the form attached
hereto as Annex D (an "Excess Notice") to SmarTalk from time to time. The
date upon which Xxxxxxxx causes an Excess Notice to be delivered to
SmarTalk, by hand, facsimile, electronic transmission or otherwise, shall
be the "Excess Notice Date" with respect to such exercise of the Investment
Rights, which date shall be deemed to be an Investment Closing Date for
purposes of Section 3 hereof. Each Excess Note shall be due and payable 90
days after the date of issuance and bear interest at an interest rate of
15% per annum. Notwithstanding anything else in this section 7(h), if at
any time Xxxxxxxx delivers an Investment Notice and SmarTalk is unable to
issue all or any portion of the shares identified therein as a result of
the Issuance Blockage, SmarTalk shall issue to Xxxxxxxx an Excess Note in
amount equal to the product of (x) the positive excess of the closing price
as reported by Bloomberg of the Common Stock on the NASDAQ National Market
(or such other national securities exchange on which the Common Stock is
then listed) on the Excess Notice Date over the applicable Investment Right
Price and (y) the number of shares of Common Stock that would be issuable
in respect of such exercise of the Initial Investment Right but for the
Issuance Blockage.
8. Covenants of Xxxxxxxx. Xxxxxxxx hereby covenants and agrees with
SmarTalk as follows:
a. Neither Xxxxxxxx nor any of its affiliates nor any person acting on
its or their behalf will at any time offer or sell any Shares other than
pursuant to registration under the Securities Act or pursuant to an
available exemption therefrom.
x. Xxxxxxxx will provide SmarTalk with an opportunity to review and
comment on its filings pursuant to Regulation 13D-G under the Exchange Act
regarding this Agreement and the transactions contemplated hereby.
c. [RESERVED].
8.A. Legend. Subject to Section 3.A., Xxxxxxxx understands that the
certificates or other instruments representing the Shares shall bear a
restrictive legend in the following form (and a stop transfer order may be
placed against transfer of such certificates or other instruments):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR UNLESS
SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and SmarTalk shall issue a
certificate without such legend to any holder of Shares if, unless otherwise
required by state securities laws, (a) such shares are sold pursuant to an
effective registration statement under the Securities Act, or (b) such holder
provides SmarTalk with assurances reasonably satisfactory to SmarTalk that such
shares may be publicly sold pursuant to Rule 144 (or similar regulation
hereinafter adopted) without restriction.
8.B. Adjustments. In the event that SmarTalk shall declare a dividend or
make a distribution on or with respect to the outstanding shares of its Common
Stock in shares of its Common Stock, subdivide its outstanding shares of Common
Stock into a greater number of shares, or combine its outstanding shares of
Common Stock into a smaller number of shares, then, in each such event, the
number of shares issuable and the per share price stated in this Agreement in
effect at the time of the record date for such dividend or distribution or the
effective date of such subdivision or combination shall be proportionately
adjusted, if necessary, as determined in good faith by the Board of Directors of
SmarTalk, so that Xxxxxxxx shall be entitled to receive the aggregate number of
shares of Common Stock that Xxxxxxxx would have received immediately following
such action if Xxxxxxxx had exercised its rights immediately prior to such
action. Such adjustment shall be made successively whenever any event specified
above shall occur.
9. Conditions Precedent to Xxxxxxxx'x Obligations. The obligations of
Xxxxxxxx hereunder are subject to the performance by SmarTalk of its obligations
hereunder and to the satisfaction of the following additional conditions
precedent, unless expressly waived in writing by Xxxxxxxx:
a. On the date hereof and each Investment Closing Date, if any, (i) to
the extent provided in Section 3 hereof, the representations and warranties
made by SmarTalk in this Agreement shall be true and correct, and (ii)
SmarTalk shall have complied fully with all the covenants and agreements in
this Agreement; and Xxxxxxxx shall have received on each such date a
certificate of the Chief Executive Officer or the Chief Financial Officer
of SmarTalk dated such date and to such effect.
b. On the date hereof and each Investment Closing Date, if any,
SmarTalk shall have delivered to Xxxxxxxx an opinion of the general counsel
reasonably satisfactory to Xxxxxxxx, dated the date of delivery, confirming
in substance the matters covered in paragraphs (a), (b), (c), (d), (e),
(f), and (h) of Section 3 hereof.
c. [RESERVED].
d. On each Investment Closing Date, if any, SmarTalk shall have
delivered to Xxxxxxxx an opinion of the general counsel reasonably
satisfactory to Xxxxxxxx, dated the date of delivery, to the effect that
the offer and sale of the Shares to Xxxxxxxx do not require registration
under the Securities Act.
e. In addition, as of each Investment Closing, SmarTalk shall have
delivered an opinion of outside counsel reasonably satisfactory to
Xxxxxxxx, dated the date of delivery, confirming in substance the matter
covered in paragraph (d) of this Section 9.
10. Conditions Precedent to SmarTalk's Obligations. The obligations of
SmarTalk hereunder are subject to the performance by Xxxxxxxx of its obligations
hereunder and to the satisfaction of the following additional conditions
precedent, unless expressly waived in writing by SmarTalk:
a. On the date hereof and each Investment Closing, if any, (i) the
representations and warranties made by Xxxxxxxx in this Agreement shall be
true and correct, and (ii) Xxxxxxxx shall have complied fully with all the
covenants and agreements in this Agreement; and SmarTalk shall have
received on each such date a certificate of an appropriate officer of
Xxxxxxxx dated such date and to such effect.
11. Fees and Expenses. SmarTalk agrees to pay all expenses incident to the
performance of its obligations hereunder, including, but not limited to the
fees, expenses and disbursements of Xxxxxxxx'x counsel.
12. Non-Performance.
If, on the date hereof or on any Investment Closing, SmarTalk shall fail to
deliver the Shares to Xxxxxxxx required to be delivered pursuant to this
Agreement for any reason other than the failure of any condition precedent to
SmarTalk's obligations hereunder or the failure by Xxxxxxxx to comply with its
obligations hereunder, then SmarTalk shall:
a. hold Xxxxxxxx harmless against any loss, claim or damage (including
without limitation, incidental and consequential damages) arising from or
as a result of such failure by SmarTalk; and
b. reimburse Xxxxxxxx for all of its reasonable out-of-pocket
expenses, including fees and disbursements of its counsel, incurred by
Xxxxxxxx in connection with this Agreement and the transactions
contemplated herein and therein;
provided, however, that SmarTalk shall then be under no further liability to
Xxxxxxxx except as provided in this Section 12 and Section 13 hereof.
13. Indemnification.
a. Indemnification of Xxxxxxxx. SmarTalk hereby agrees to indemnify
Xxxxxxxx and each of its officers, directors, employees, agents and
affiliates and each person that controls (within the meaning of Section 20
of the Exchange Act) any of the foregoing persons (each a "Xxxxxxxx
Indemnified Party") against any claim, demand, action, liability, damages,
loss, cost or expense (including, without limitation, reasonable legal
fees) (a "Proceeding"), that it may incur in connection with any of the
transactions contemplated hereby arising out of or based upon:
(1) any untrue or alleged untrue statement of a material fact in
an SEC filing or this Agreement by SmarTalk or any of its affiliates
or any person acting on its or their behalf or omission or alleged
omission to state therein or herein any material fact necessary in
order to make the statements, in the light of the circumstances under
which they were made, not misleading by SmarTalk or any of its
affiliates or any person acting on its or their behalf;
(2) any of the representations or warranties made by SmarTalk
herein being untrue or incorrect at the time such representation or
warranty was made; and
(3) any breach or non-performance by SmarTalk of any of its
covenants, agreements or obligations under this Agreement;
and SmarTalk hereby agrees to reimburse each Xxxxxxxx Indemnified Party
for any reasonable legal or other expenses incurred by such Xxxxxxxx
Indemnified Party in investigating or defending any such Proceeding;
provided, however, that the foregoing indemnity shall not apply to any
Proceeding to the extent that it arises out of or is based upon the
gross negligence or wilful misconduct of Xxxxxxxx in connection
therewith. Furthermore, the foregoing indemnity rights will not take
effect unless or until the total amount of the indemnification is
$10,000.
b. Indemnification of SmarTalk. Xxxxxxxx hereby agrees to indemnify
SmarTalk and each of its officers, directors, employees, agents and
affiliates and each person that controls (within the meaning of Section 20
of the Exchange Act) any of the foregoing persons (each a "SmarTalk
Indemnified Party") against any Proceeding, that it may incur in connection
with any of the transactions contemplated hereby arising out of or based
upon:
(1) any untrue or alleged untrue statement of a material fact by
Xxxxxxxx or any of its affiliates or any person acting on its or their
behalf or omission or alleged omission to state any material fact
necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading by Xxxxxxxx
or any of its affiliates or any person acting on its or their behalf;
(2) any of the representations or warranties made by Xxxxxxxx
herein being untrue or incorrect; and
(3) any breach or non-performance by Xxxxxxxx of any of its
covenants, agreements or obligations under this Agreement;
and Xxxxxxxx hereby agrees to reimburse each SmarTalk Indemnified Party
for any reasonable legal or other expenses incurred by such SmarTalk
Indemnified Party in investigating or defending any such Proceeding;
provided, however, that the foregoing indemnity shall not apply to any
Proceeding to the extent that it arises out of or is based upon the
gross negligence or wilful misconduct of SmarTalk in connection
therewith. Furthermore, the foregoing indemnity rights will not take
effect unless or until the total amount of the indemnification is
$10,000.
c. Conduct of Claims.
(1) Whenever a claim for indemnification shall arise under this
Section, the party seeking indemnification (the "Indemnified Party"),
shall notify the party from whom such indemnification is sought (the
"Indemnifying Party") in writing of the Proceeding and the facts
constituting the basis for such claim in reasonable detail;
(2) Upon delivery of such notice, such Indemnified Party shall
have a duty to take all reasonable steps to mitigate any losses,
liabilities, costs, charges and expenses relating to any such
Proceeding;
(3) Such Indemnifying Party shall have the right to retain the
counsel of its choice in connection with such Proceeding and to
participate at its own expense in the defense of any such Proceeding;
provided, however, that counsel to the Indemnifying Party shall not
(except with the consent of the relevant Indemnified Party) also be
counsel to such Indemnified Party. In no event shall the Indemnifying
Party be liable for fees and expenses of more than one counsel (in
addition to any local counsel) separate from its own counsel for all
Indemnified Parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances; and
(4) No Indemnifying Party shall, without the prior written
consent of the Indemnified Parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry
of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which
indemnification could be sought under this Section unless such
settlement, compromise or consent (A) includes an unconditional
release of each Indemnified Party from all liability arising out of
such litigation, investigation, proceeding or claim and (B) does not
include a statement as to or an admission of fault, culpability or a
failure to act by or on behalf of any Indemnified Party.
14. Survival of the Representations, Warranties, etc. The respective
representations, warranties, and agreements made herein by or on behalf of the
parties hereto shall remain in full force and effect, regardless of any
investigation made by or on behalf of the other party to this Agreement or any
officer, director or employee of, or person controlling or under common control
with, such party and will survive delivery of and payment for any Shares
issuable hereunder.
15. Notices. All communications hereunder shall be in writing, and
a. if sent to Xxxxxxxx, shall be delivered by hand, sent by registered
mail or transmitted and confirmed by facsimile to Xxxxxxxx, unless
otherwise notified in writing of a substitute address, at:
Original Copy:
Xxxxxxxx International Limited
c/o Midland Bank Trust Corporation (Cayman) Limited
X.X. Xxx 0000
Xxxx Xxxxxx
Xxxxx Xxxxxx, Xxxxxx Xxxxxxx, B.W.I.
Attn: Xxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx Asset Management
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
b. if sent to SmarTalk, shall be delivered by hand, sent by registered
mail or transmitted and confirmed by facsimile to SmarTalk, unless
otherwise notified in writing of a substitute address, at:
SmarTalk TeleServices, Inc.
0000 Xxxxxx Xxxxxxxx Xxxx.
Xxxxxx, Xxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Cadwalader, Xxxxxxxxxx & Xxxx
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To the extent that any funds shall be delivered to SmarTalk by wire
transfer, unless otherwise instructed by SmarTalk, such funds should
be delivered in accordance with the following wire instructions
provided by SmarTalk.
16. Miscellaneous
a. This Agreement may be executed in one or more counterparts and it
is not necessary that signatures of all parties appear on the same
counterpart, but such counterparts together shall constitute but one and
the same agreement.
b. This Agreement shall inure to the benefit of and be binding upon
the parties hereto, their respective successors and assigns and, with
respect to Section 13 hereof, their respective officers, directors,
employees, agents, affiliates and controlling persons, and no other person
shall have any right or obligation hereunder. SmarTalk may not assign this
Agreement. Xxxxxxxx may assign any of its rights, in whole or in part, at
its sole discretion (including, without limitation, the Investment Rights).
c. This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of Delaware, and each of the parties
hereto hereby submits to the non-exclusive jurisdiction of any State or
Federal court in the State of Delaware and any court hearing any appeal
therefrom, over any suit, action or proceeding against it arising out of or
based upon this Agreement (a "Related Proceeding"). Each of the parties
hereto hereby waives any objection to any Related Proceeding in such courts
whether on the grounds of venue, residence or domicile or on the ground
that the Related Proceeding has been brought in an inconvenient forum.
d. This Agreement shall not limit SmarTalk's ability to issue options
under or to enter into, adopt or amend any stock option, bonus, incentive,
deferred compensation, hospitalization, medical insurance, severance or
other plan, fund, program or policy providing director, officer, employee
or similar person benefits maintained or contributed to by SmarTalk in the
ordinary course of business consistent with past practice.
e. This Agreement shall not limit SmarTalk's ability to adopt a
shareholders rights plan or similar agreement or arrangement (any of which,
a "Rights Plan") provided that SmarTalk shall not adopt a Rights Plan
unless in connection therewith SmarTalk delivers to Xxxxxxxx a legal
opinion from outside counsel reasonable satisfactory to Xxxxxxxx confirming
that no Xxxxxxxx Party (as defined below) shall be adversely affected by
such Rights Plan either at such time or with the passage of time, as a
result of its being the beneficial owner of any securities issued or
issuable pursuant to this Agreement (any such securities, "Xxxxxxxx
Securities," including any Common Stock which have been or may be issued
upon exercise of the Investment Rights), where a "Xxxxxxxx Party" shall
include (i) Xxxxxxxx, Xxxxxxxx Asset Management, Inc., Polaris Fund, L.P.,
and The Xxxxxxxx Fund, L.P., (ii) any affiliate of Xxxxxxxx, (iii) any
creditor of Xxxxxxxx who acquires Xxxxxxxx Securities upon the exercise of
creditor rights in connection with a bona fide credit arrangement, and (iv)
any other person who acquires Xxxxxxxx Securities provided that such person
stated or intends to state in a timely fashion in a filing pursuant to
Regulation 13D-G under the Securities Exchange Act of 1934, as amended, or
any successor provision thereto, that such person has acquired such
securities in the ordinary course of business and not with the purpose or
effect of changing or influencing control of SmarTalk, nor in connection
with or as a participant in any transaction having such purpose or effect,
including any transaction subject to Rule 13d-3(b).
SmarTalk shall not take any actions inconsistent with the rights of
Xxxxxxxx Parties as of the date hereof.
f. The headings of the sections of this document have been inserted
for convenience of reference only and shall not be deemed to be a part of
this Agreement. This Agreement constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter of this
Agreement. This Agreement is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder or under the terms
of the term sheets between such parties.
17. Time of Essence. Time shall be of the essence in this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement, all as of the day and year first above written.
SMARTALK TELESERVICES, INC.
By:___________________________
Name:
Title:
XXXXXXXX INTERNATIONAL LIMITED
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
ANNEX A
[FORM OF INVESTMENT NOTICE]
-------------, --
SmarTalk TeleServices, Inc.
[ADDRESS]
Ladies and Gentlemen:
Xxxxxxxx International Limited ("Xxxxxxxx") hereby elects to exercise the
_________ Right (as defined in the Investment Rights Agreement (the "Agreement")
dated as of December __, 1998 by and between SmarTalk TeleServices, Inc.
("SmarTalk") and Xxxxxxxx) and, if applicable, herewith tenders $_________ by
check or wire transfer to the account of SmarTalk as payment for __________
Shares in accordance with the terms of the Agreement. Capitalized terms not
otherwise defined herein shall have the meanings ascribed thereto in the
Agreement.
In accordance with the terms of the Agreement, the Investment Closing shall
be ___________, and the total number of Shares issuable in respect of this
exercise is ________________. Xxxxxxxx requests that stock certificates
representing the Shares purchased hereby be registered in the name of Xxxxxxxx
and delivered to the following address in accordance with the terms of the
Agreement:
[To Come]
XXXXXXXX INTERNATIONAL LIMITED
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
AGREED AND ACKNOWLEDGED:
SMARTALK TELESERVICES, INC.
By:________________________
Name:
Title:
[ANNEX B RESERVED]
ANNEX C
[FORM OF SHARE DELIVERY NOTICE]
Xxxxxxxx International Limited
c/o Fletcher Asset Management
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
RE: Investment Rights Agreement (the "Agreement") dated December __ ,
1998 by and between Xxxxxxxx International Limited ("Xxxxxxxx")
and SmarTalk TeleServices, Inc. ("SmarTalk").
Ladies and Gentlemen:
Attached are copies of the original stock certificates representing the
__________ Shares (as defined in the Agreement) purchased by Xxxxxxxx, together
with a copy of the overnight courier air xxxx which will be used to ship the
certificates. We have the executed originals of the stock certificates and other
documents required to be delivered in connection with the Investment Closing.
Upon our confirmation of the payment of the $_____________ aggregate Investment
Right Price by Xxxxxxxx to SmarTalk, if applicable, for the Shares on the Notice
Date, we will send the stock certificates by overnight courier to the following
address:
[INSERT ADDRESS]
and we will send the other original documents by overnight courier to the
following address:
Xxxxxxxx International Limited
c/o Midland Bank Trust Corporation (Cayman) Limited
X.X. Xxx 0000
Xxxx Xxxxxx
Xxxxx Xxxxxx, Xxxxxx Xxxxxxx, B.W.I.
Attn: Xxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx International Limited
c/o Fletcher Asset Management
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Capitalized terms not otherwise defined in this letter have the meanings
set forth in the Agreement.
Very truly yours,
SMARTALK TELESERVICES, INC.
ANNEX D
[FORM OF EXCESS NOTES NOTICE]
-------------, --
SmarTalk TeleServices, Inc.
[ADDRESS]
Ladies and Gentlemen:
Xxxxxxxx International Limited ("Xxxxxxxx") hereby elects to exercise its
right to convert some or all of its Investment Rights (as defined in the
Investment Rights Agreement (the "Agreement") dated as of December __, 1998 by
and between SmarTalk TeleServices, Inc. ("SmarTalk") and Xxxxxxxx) and, if
applicable, herewith tenders $_________ by check or wire transfer to the account
of SmarTalk as payment for $ __________ of Excess Notes in accordance with the
terms of the Agreement. Capitalized terms not otherwise defined herein shall
have the meanings ascribed thereto in the Agreement.
In accordance with the terms of the Agreement, the Investment Closing Date
shall be ___________, and the amount of issuable Excess Notes in respect of this
exercise is ________________. Xxxxxxxx requests that the Excess Notes be
registered in the name of Xxxxxxxx and delivered to the following address in
accordance with the terms of the Agreement:
[To Come]
XXXXXXXX INTERNATIONAL LIMITED
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
AGREED AND ACKNOWLEDGED:
SMARTALK TELESERVICES, INC.
By:________________________
Name:
Title:
