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Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "Agreement") dated as of June
11, 1998 is entered into by and among ORIX GLOBAL COMMUNICATIONS, INC., a Nevada
corporation (the "Company"), XXXXX XXXXXX, XXXX XXXXXXX and XXX XXXXXXXX (the
"Founders") and the Persons listed on the Schedule of Purchasers attached as
Exhibit A (individually, a "Purchaser" and, collectively, the "Purchasers").
This Agreement, together with the Related Agreements (as hereafter defined) are
being executed and delivered as the Additional Agreements, as such term is
defined in that certain letter agreement dated June 11, 1998 by and among
Infinity Investors Limited ("Infinity"), Touch Tone America, Inc. ("Touch
Tone"), the Company and the Founders (the "Letter Agreement"). This Agreement
and the Related Agreements supersede and replace the Letter Agreement.
In consideration of the mutual promises and covenants contained in this
Agreement, the parties agree as follows:
1. ASSUMPTION OF DEBT; ISSUANCE OF DEBENTURES AND OTHER SECURITIES.
(a) ASSUMPTION OF TOUCH TONE INDEBTEDNESS. Pursuant to the
terms of the Letter Agreement, the Company has assumed and agreed to
pay and discharge (the "Assumption") $2,610,477 aggregate principal
amount of debentures, together with accrued and unpaid interest of
$87,133 thereon through June 11, 1998 (the "Assumed Debentures"),
issued by Touch Tone to Infinity pursuant to that certain Securities
Purchase Agreement dated December 31, 1997 by and among Touch Tone, the
Company and Infinity. In connection with the Assumption, Infinity has
released and discharged Touch Tone from its obligation to repay the
Assumed Debentures.
(b) RESTATEMENT OF ASSUMED DEBENTURES; ISSUANCE OF ADDITIONAL
DEBENTURES.
The Company and the Purchasers have agreed pursuant to the terms of
this Agreement to (x) amend and restate in their entirety the Assumed
Debentures on the terms set forth herein as a direct obligation of the
Company to Infinity (the "Restated Debentures") and (y) provide for the
issuance of additional debentures of the Company (the "New Debentures")
to the Purchasers in an aggregate principal amount of $6,000,000 minus
the outstanding balance due and owing on the Assumed Debentures on June
11, 1998 (the difference between $6,000,000 and the outstanding balance
due and owing on the Assumed Debentures on June 11, 1998, i.e.,
$3,303,390 being herein referred to as the "New Advance"). The Restated
Debentures and the New Debentures (collectively, the "Debentures")
issued by the Company to the Purchasers pursuant to the terms of this
Agreement shall be (x) in the form attached hereto as Exhibit B, and
(y) secured by a pledge of all of the assets of the Company pursuant to
the terms of the Security Agreement (as hereafter defined).
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SECURITIES PURCHASE AGREEMENT - PAGE 1
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(c) FUTURE LETTERS OF CREDIT. At the sole and exclusive
discretion of the Purchasers, from time to time the Purchasers may
provide credit enhancement to the Company and its Subsidiaries (as
hereafter defined) by the issuance of letters of credit or similar
instruments (collectively, the "Letters of Credit"). In the event the
Purchasers provide any Letters of Credit, and amounts thereunder are
drawn upon by the issuing institution, the proceeds so drawn shall be
deemed to be an advance from the Purchasers to the Company in exchange
for a new Debenture in the original principal balance of the amount so
drawn, which Debenture shall be issued on terms identical to the
Debentures set forth on Exhibit B hereto and subject to all of the
terms and conditions of this Agreement and each Related Agreement.
(d) OTHER SECURITIES. As of the date hereof the Company shall
issue to the Purchasers, at a purchase price of $0.01 per share, 2,400
shares (the "Closing Shares") of common stock, no par value, of the
Company ("Common Stock"), representing a 66-2/3% ownership interest in
the issued and outstanding shares of Common Stock of the Company on a
Fully Diluted Basis (as hereafter defined). In addition to all other
remedies available to the Purchasers, in the event the Closing Shares
do not represent at least 66-2/3% of the issued and outstanding shares
of Common Stock of the Company as of the Closing on a Fully Diluted
Basis as specified herein (the "Fully Diluted Representation"), the
Purchasers shall be entitled to receive from the Company, without
additional consideration, such additional shares of Common Stock as
shall be necessary to cause the Fully Diluted Representation to be
accurate.
(e) USE OF PROCEEDS. The Company (x) used the proceeds from
the sale of the Assumed Debentures by Touch Tone and (y) will use the
proceeds from the sale of the New Debentures, in each case for working
capital and other general corporate purposes (and, with respect to the
New Advance, as more fully described in Section 9(h) below).
2. DEFINITIONS. For the purposes of this Agreement, the following terms
shall have the meanings set forth below:
"ACCREDITED INVESTOR" has the meaning as set forth in Regulation D
promulgated under the Securities Act.
"AFFILIATE" means with respect to any Person, a Person that directly,
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person, and, in the case of an individual,
includes any relative or spouse of such Person, or any relative or such spouse,
who has the same home as such Person. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
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"APPROVED PLAN" means any written stock option, stock purchase or
similar incentive plan approved by the Board of Directors constituted after the
Closing and the Majority Holders for senior executives of the Company who are
not stockholders of the Company as of the Closing.
"ASSUMED DEBENTURES" has the meaning set forth in Section 1(a).
"ASSUMPTION" has the meaning set forth in Section 1(a).
"AVANTEL" means Avantel, S.A.
"BALANCE SHEET" and "BALANCE SHEET DATE" have the meanings set forth in
Section 4(i).
"BOARD OF DIRECTORS" means the board of directors of the Company.
"BUDGET" has the meaning set forth in Section 9(b)(iv).
"BUSINESS DAY" means any day other than a Saturday, Sunday or any day
that national banks having offices in Texas or New York are required or
authorized to be closed for the transaction of business.
"BUSINESS PLAN" means the Company's business plan entitled "Status
Report Global Gate Network" dated May 14, 1998 and attached hereto as
Exhibit C.
"BYLAWS" means the bylaws of the Company or Subsidiary, as applicable,
as amended and in effect at the Closing.
"CERTIFICATE OF INCORPORATION" means the Company's or Subsidiary's, as
applicable, Certificate of Incorporation, as amended.
"CLOSING SHARES" has the meaning set forth in Section 1(d).
"CLOSING" has the meaning set forth in Section 3.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" has the meaning set forth in Section 1(c).
"COMPANY" has the meaning set forth in the preamble to this Agreement.
"COMPUTER SYSTEMS" has the meaning set forth in Section 4(y)(i).
"CURRENT STOCKHOLDERS" has the meaning set forth in Section 7(d)(ii).
"DATE DATA" has the meaning set forth in Section 4(y)(iii).
"DEBENTURES" has the meaning set forth in Section 1(b).
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"DEBT" means of any Person at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments
issued by such Person, (iii) all obligations of such Person as lessee which (y)
are capitalized in accordance with GAAP or (z) arise pursuant to sale-leaseback
transactions, (iv) all reimbursement obligations of such Person in respect of
letters of credit or other similar instruments, (v) all Debt of others secured
by a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person and (vi) all Debt of others Guaranteed by such Person.
"DEFAULT" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 4.
"EMPLOYMENT AGREEMENTS" has the meaning set forth in Section 7(d)(x).
"ENVIRONMENTAL LAWS" has the meaning set forth in Section 4(s)(iv).
"EQUITY SECURITIES" means any capital stock or similar security of the
Company, including without limitation, securities containing equity features and
securities containing profit participation features, or any security convertible
or exchangeable, with or without consideration, into or for any stock or similar
security of the Company, or any security carrying any warrant or right to
subscribe for or purchase any stock or similar security of the Company, or any
such warrant or right to acquire any security of the Company.
"ERISA" has the meaning set forth in Section 4(t).
"ESTIMATED EXPENSE REIMBURSEMENT FEE" has the meaning set forth in
Section 12(d)(i).
"EVENT OF DEFAULT" has the meaning set forth in the Debentures.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FACILITIES" has the meaning set forth in Section 4(p)(i).
"FAIR MARKET VALUE" has the meaning set forth in the Stockholders
Agreement.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4(i).
"FOUNDERS" has the meaning set forth in the preamble to this Agreement.
"FULLY DILUTED BASIS" means the sum of (i) the shares of Common Stock
outstanding, and (ii) the shares of Common Stock that would be outstanding at
the Closing assuming that (A) all shares of Common Stock issuable pursuant to
all outstanding Equity Securities and other rights to acquire Common Stock
(excluding, however, all options issued or issuable pursuant to any Approved
Plan) had been issued and (B) the Closing Shares had been issued.
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"FULLY DILUTED REPRESENTATION" has the meaning set forth in Section
1(d).
"GAAP" has the meaning set forth in Section 4(i).
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing (whether by virtue
of partnership arrangements, by agreement to keep well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain a minimum net
worth, financial ratio or similar requirements, or otherwise) any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or (ii) entered into for the purpose of assuring in any other manner the
holder of such Debt of the payment thereof or to protect such holder against
loss in respect thereof (in whole or in part); provided that the term Guarantee
shall not include endorsements for collection or deposit in the ordinary course
of business. The term Guarantee used as a verb has a corresponding meaning.
"HAZARDOUS MATERIALS" has the meaning set forth in Section 4(s)(v).
"INDEMNIFICATION AGREEMENT" means the Indemnification Agreement
executed by the Company as contemplated by the Stockholders Agreement.
"INFINITY" means Infinity Investors Limited, a Nevis West Indies
corporation.
"INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in Section
4(m).
"LETTER AGREEMENT" has the meaning set forth in the Preamble to this
Agreement.
"LETTERS OF CREDIT" has the meaning set forth in Section 1(c).
"LIEN" means any lien, security interest, pledge, mortgage, deed of
trust, charge or encumbrance in real, personal or mixed property (tangible or
intangible, and wherever located).
"LOSSES" has the meaning set forth in Section 12(o).
"MAJORITY HOLDERS" has the meaning set forth in Section 9(d).
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in
Section 4(i).
"NEW ADVANCE" has the meaning set forth in Section 1(b).
"NEW DEBENTURE" has the meaning set forth in Section 1(a).
"OTHER SYSTEMS" has the meaning set forth in Section 4(y)(i).
"PARI PASSU AGREEMENT" has the meaning set forth in Section 7(d)(xi).
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"PERMITS" has the meaning set forth in Section 4(p)(i).
"PERMITTED LIENS" means Liens for taxes and assessments not yet due and
payable or which are being challenged in good faith and with respect to which
adequate reserves have been established in the financial statements of the
Company, informational filings made by equipment lessors under the Uniform
Commercial Code, landlords' liens created by statute and not by affirmative
action of any landlord, and statutory liens created in the ordinary course of
business securing indebtedness or obligations whose payment is not yet due.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, a limited
liability company, an unincorporated organization or a governmental entity or
any department, agency or political subdivision thereof.
"PURCHASER DIRECTOR" means a Person serving as a director of the
Company as the designee or nominee of the Purchasers pursuant to the
Stockholders Agreement.
"PURCHASER(S)" has the meaning set forth in the preamble to this
Agreement.
"QUALIFIED PUBLIC OFFERING" has the meaning set forth in the
Stockholders Agreement.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in Section
7(d)(vi).
"RELATED AGREEMENTS" mean any and all agreements other than this
Agreement required to be executed by the parties to this Agreement at or prior
to the Closing pursuant to Section 7, including, without limitation, the
Debentures, the Employment Agreements, the Letter Agreement, the Pari Passu
Agreement, the Stockholders Agreement, the Indemnification Agreement, the
Registration Rights Agreement and the Security Agreement.
"RESTATED DEBENTURES" has the meaning set forth in Section 1(b).
"XXXXXX NOTE" has the meaning set forth in Section 7(d)(xi).
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"SECURITY AGREEMENT" has the meaning as set forth in Section 7(d)(v).
"STOCKHOLDERS AGREEMENT" has the meaning set forth in Section 7(d)(iv).
"SUBSIDIARY" means any corporation more than 50% of the outstanding
voting securities of which are owned by the Company or any Subsidiary, directly
or indirectly, or a partnership or limited liability company in which the
Company or any Subsidiary is a general partner or manager or holds interests
entitling it to receive more than 50% of the profits or losses of the
partnership or limited liability company.
"TOUCH TONE" has the meaning set forth in Section 1(a).
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"USE OF PROCEEDS STATEMENT" has the meaning set forth in Section 9(h).
"YEAR 2000 CAPABILITIES" has the meaning as set forth in
Section 4(y)(iii).
3. THE CLOSING.
(a) The closing of the issuance, sale and purchase of the
Debentures (the "Closing") shall take place on June 11, 1998, at the
offices of Xxxxx & Xxxxxx, LLP, 0000 Xxxx Xxxxxx, Xxx. 0000, Xxxxxx,
Xxxxx at 10:00 a.m., local time.
(b) At the Closing, (x) the Company shall deliver to the
Purchasers the Debentures in the aggregate principal amount of
$6,000,000, and (y) the Purchasers shall deliver to the Company, by
direct payment to Avantel at the direction of the Company, $250,000 of
the New Advance. In addition, at the Closing, the Purchasers shall
deliver a statement of the Estimated Expense Reimbursement Fee (which
is expected to be approximately $35,000), which sum shall be deemed
advanced by the Purchasers to the Company as part of the New Advance at
the Closing. From time to time after the Closing, the Purchasers shall
advance to the Company the remaining portion of the New Advance not
advanced (or deemed advanced) at the Closing, upon receipt of written
request thereof from the Company, provided no Default or Event of
Default then exists. The Company and the Purchasers hereby agree that
notwithstanding the $6,000,000 aggregate stated principal balance of
the Debentures issued at the Closing, interest shall only accrue on the
New Advance from the various dates the proceeds thereof are advanced
(or deemed advanced) to the Company in accordance with the terms of
this Agreement.
(c) In addition to the deliveries specified in subsection (b)
above, at the Closing the Company shall deliver to the Purchasers the
Closing Shares, and the Purchasers shall deliver to the Company $24 in
the aggregate, representing the purchase price of the Closing Shares.
(d) If at the Closing any of the conditions specified in
Section 7 to be fulfilled at or prior to the Closing shall not have
been fulfilled, each of the Purchasers shall, at its election, be
relieved of all of its obligations under this Agreement to be performed
at the Closing without thereby waiving any other rights such Purchaser
may have by reason of such failure or such nonfulfillment.
(e) Immediately preceding the Closing the Purchasers shall
deliver to the Company a Schedule setting forth the allocation among
the Purchasers of the Debentures and Closing Shares to be acquired
pursuant to the terms hereof.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Purchasers that the
statements contained in this Section 4 are true as of the date of this Agreement
and shall be true as of the Closing (as though made then), except as set forth
in the Schedule of Exceptions attached hereto
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as Exhibit D (the "Disclosure Schedule"). The Disclosure Schedule shall be
arranged in paragraphs corresponding to the numbered paragraphs contained in
this Section 4. Nothing contained in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made in this
Agreement unless the Disclosure Schedule identifies the exception with
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the representation
or warranty relates to the existence of the document or other item itself).
(a) ORGANIZATION AND STANDING.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada and has full
corporate power and authority to conduct its business as presently
conducted and as proposed to be conducted by it and to enter into and
perform this Agreement and to carry out the transactions contemplated
by this Agreement. The Company is duly qualified and in good standing
to do business in each jurisdiction where the failure to be so
qualified would have a material adverse effect on the Company. The
Company has furnished to each Purchaser true and complete copies of its
Certificate of Incorporation and Bylaws, and the Certificate of
Incorporation and Bylaws of each of its Subsidiaries, each as amended
to date and currently in effect.
(b) CAPITALIZATION.
The authorized capital stock of the Company, following the amendment
contemplated in Section 7(f)(iii) below, consists of 100,000 shares of
Common Stock, of which 1,200 shares are issued and outstanding. All of
the issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable.
Except (i) as provided in this Agreement or any Related Agreement, or
(ii) as set forth in the Disclosure Schedule: (a) no Equity Securities
or subscription or other right (contingent or otherwise) to purchase or
acquire any shares of capital stock of the Company are authorized or
outstanding; (b) neither the Company nor any Subsidiary has any
obligation (contingent or otherwise) to issue any Equity Securities or
subscription or other such right or to issue or distribute to holders
of any shares of its capital stock any evidences of indebtedness or
assets of the Company or any Subsidiary; and (c) neither the Company
nor any Subsidiary has any obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock
or any interest therein or to pay any dividend or make any other
distribution in respect thereof. All of the issued and outstanding
shares of capital stock of the Company have been offered, issued and
sold by the Company in compliance with applicable federal and state
securities laws or pursuant to valid exemptions therefrom.
(c) SUBSIDIARIES, ETC.
Except as set forth in the Disclosure Schedule, the Company has no
Subsidiaries and does
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not own or control, directly or indirectly, any shares of capital stock
of any other corporation or any interest in any partnership, joint
venture, limited liability company, professional association or other
business enterprise. Except as set forth in the Disclosure Schedule,
the Company owns 100% of the issued and outstanding capital stock of
each of the Subsidiaries (including, without limitation, Latin Gate,
S.A., whose shares are owned 99% by the Company and 1% by UCI Teleport,
Inc., a wholly-owned subsidiary of the Company) in each case, free and
clear of all Liens. Each of the Company's Subsidiaries is a corporation
organized, validly existing and in good standing under the laws of the
state of its incorporation or formation, as the case may be, and has
full power and authority and all licenses, permits and authorization
necessary to conduct its business and own its properties as presently
conducted and owned and as proposed to be conducted and owned, and to
carry out the transactions contemplated in this Agreement and the
Related Agreements, as applicable. Each of the Company's Subsidiaries
is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business or the properties
owned or leased by it requires qualification.
(d) STOCKHOLDER LIST AND AGREEMENTS.
The Disclosure Schedule sets forth a true and complete list of the
stockholders of the Company, showing the number of shares of Common
Stock or other securities of the Company held by each stockholder as of
the date of this Agreement and the consideration paid to the Company,
if any, therefor. Except (i) as provided in this Agreement or any
Related Agreement or (ii) as set forth in the Disclosure Schedule,
there are no agreements, written or oral, between the Company and any
holder of its capital stock or, to the best of the Company's knowledge,
among any holders of its capital stock relating to the acquisition
(including without limitation rights of first refusal or preemptive
rights), transfer, sale or other disposition, registration under the
Securities Act, or voting of the capital stock of the Company. The
Disclosure Schedule sets forth a true and complete list of stockholders
of the Company (x) as of the date hereof and (y) on a Fully Diluted
Basis. As set forth thereon, assuming conversion or exercise in full of
all Equity Securities and any other derivative securities of the
Company outstanding immediately after the Closing, the Purchasers would
own 2,400 shares of Common Stock, representing 66-2/3% of the issued
and outstanding shares of Common Stock of the Company on a Fully
Diluted Basis, without giving effect to any issuance of Common Stock
under any Approved Plan.
(e) ISSUANCE OF SECURITIES.
The issuance, sale and delivery of the Debentures in accordance with
this Agreement and the Related Agreements, and the issuance and
delivery of the Closing Shares have been, or will be prior to the
Closing, duly authorized by all necessary corporate action on the part
of the Company and its officers, directors and stockholders, and all
such Closing Shares have been duly reserved for issuance. The
Debentures and Closing Shares, when so issued, sold and delivered
against payment therefor in accordance with the provisions of this
Agreement and the Related Agreements will be duly and validly issued,
fully paid and non-assessable, free and clear of any taxes, Liens and
charges with respect to issuance and
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shall not be subject to preemptive rights or similar rights of any
other stockholders of the Company. Based in part on the representations
made by each of the Purchasers in Section 6 of this Agreement, the
offer and sale of the Debentures and Closing Shares to each of the
Purchasers will be in compliance with applicable federal and state
securities laws.
(f) AUTHORIZATION.
The execution, delivery and performance by the Company of this
Agreement and all Related Agreements and the consummation by the
Company of the transactions contemplated hereby and thereby, have been
duly authorized by all necessary corporate action. All corporate action
on the part of the Company and its officers, directors and stockholders
necessary for the authorization, execution and delivery of this
Agreement and all Related Agreements, and the performance of all
obligations of the Company hereunder and thereunder has been taken or
will be taken prior to the Closing. This Agreement and each of the
Related Agreements have been duly executed and delivered by the Company
and constitute valid and binding obligations of the Company enforceable
in accordance with their respective terms. The execution, delivery and
performance of the transactions contemplated by this Agreement and the
Related Agreements and compliance with their provisions by the Company
will not violate any provision of law and will not conflict with or
result in any breach of any of the terms, conditions or provisions of,
or constitute a default under, or require a consent or waiver under,
the Certificate of Incorporation or Bylaws (each as amended to date) or
any indenture, lease, agreement or other instrument to which the
Company or any Subsidiary is a party or by which any of them or any of
their properties is bound, or any decree, judgment, order, statute,
rule or regulation applicable to the Company or any such Subsidiary.
(g) GOVERNMENTAL CONSENTS.
No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any
governmental authority is required on the part of the Company in
connection with the execution and delivery of this Agreement or the
Related Agreements, the offer, issuance, sale and delivery of the
Closing Shares or Debentures, or the other transactions to be
consummated at the Closing, as contemplated by this Agreement, except
such filings as shall have been made prior to and shall be effective on
and as of the Closing.
(h) LITIGATION.
There is no action, suit or proceeding, or governmental inquiry or
investigation, pending, or, to the best of the Company's knowledge, any
basis therefor or threat thereof, against the Company or any
Subsidiary, which questions the validity of this Agreement or any
Related Agreement or the right of the Company to enter into or perform
this Agreement or any Related Agreement, or which could reasonably be
expected to have, either individually or in the aggregate, any material
adverse effect on the business, prospects, assets or condition,
financial or otherwise, of the Company or any Subsidiary, nor is there
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any litigation pending, or, to the best of the Company's knowledge, any
basis therefor or threat thereof, against the Company or any Subsidiary
by reason of the proposed activities of the Company or negotiations by
the Company with possible investors in the Company.
(i) FINANCIAL STATEMENTS.
The Company has furnished to each of the Purchasers a complete and
correct copy of the following financial statements (collectively, the
"Financial Statements"): (i) the Company's consolidated audited balance
sheet, statements of operations, changes in stockholders' equity and
cash flows for the fiscal year ended December 31, 1997, and (ii) the
Company's consolidated unaudited balance sheet (the "Balance Sheet") as
of April 30, 1998 (the "Balance Sheet Date") and statements of
operations and cash flow for the month ended as of the Balance Sheet
Date (the "Most Recent Financial Statements"). The Financial Statements
are complete and correct, are in accordance with the books and records
of the Company and present fairly the financial condition and results
of operations of the Company and each Subsidiary on a consolidated
basis, as at the dates and for the periods indicated, and have been
prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP"), except that the Most Recent Financial
Statements lack footnotes and other presentation items and are subject
to normal year-end audit adjustments, which will not be material,
individually or in the aggregate.
(j) ABSENCE OF LIABILITIES.
Except as disclosed in the Disclosure Schedule, at the Balance Sheet
Date, the Company and its Subsidiaries did not have any liabilities of
any type that in the aggregate exceeded $50,000, whether absolute or
contingent, which were not fully reflected on the Balance Sheet, and,
since the Balance Sheet Date, the Company and its Subsidiaries have not
incurred or otherwise become subject to any such liabilities or
obligations except in the ordinary course of business.
(k) TAXES.
The amount shown on the Balance Sheet as provision for taxes is
sufficient for the payment of all accrued and unpaid federal, state,
county, local and foreign taxes for the period then ended and all prior
periods. The Company and its Subsidiaries have filed all federal,
state, county, local and foreign tax returns which are required to be
filed by it on or prior to the date of the Closing, such returns are
true and correct and all taxes shown thereon to be due have been timely
paid with exceptions not material to the Company and its Subsidiaries.
Federal income tax returns of the Company and its Subsidiaries have not
been audited by the Internal Revenue Service, and no controversy with
respect to taxes of any type is pending or, to the best of the
Company's knowledge, threatened. Neither the Company nor any of its
stockholders has ever filed (i) an election pursuant to Section 1362 of
the Code, that the Company be taxed as an S Corporation or (ii) a
consent pursuant to Section 341(f) of the Code relating to collapsible
corporations. The Company and its Subsidiaries have withheld or
collected from each payment made to each of its
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employees, the amount of all taxes (including, without limitation,
federal income taxes, Federal Insurance Contribution Act taxes, Federal
Unemployment Tax Act taxes and Medicare taxes) required to be withheld
or collected therefrom, and has timely paid the same to the proper tax
receiving officers or authorized depositories.
(l) TITLE TO PROPERTY AND ASSETS.
The Company and its Subsidiaries have good and indefeasible title to or
a valid leasehold interest in all of its properties and assets, which
comprise all of the properties and assets reflected in the Balance
Sheet (except those disposed of since the Balance Sheet Date in the
ordinary course of business) and all of the properties and assets
necessary or useful for the conduct of its business as described in the
Business Plan and none of such properties or assets is subject to any
Lien of any nature whatsoever other than those the material terms of
which are described in the Balance Sheet or in the Disclosure Schedule.
(m) INTELLECTUAL PROPERTY.
The Company is the sole owner of or possesses all legal rights to all
trademarks, service marks, trademark and service xxxx applications,
trade names, copyrights, trade secrets, licenses, information and
proprietary rights and processes presently used by the Company or its
Subsidiaries or necessary for the conduct of the Company's or its
Subsidiaries' business as presently conducted and as proposed to be
conducted (the "Intellectual Property Rights") free and clear of any
Lien, license or other restriction. The Disclosure Schedule contains a
complete list of the Intellectual Property Rights. The Company has
taken all actions reasonable in light of its financial position to
protect the Intellectual Property Rights. The business conducted or
proposed to be conducted by the Company and its Subsidiaries does not
and will not cause the Company or any Subsidiary to infringe or violate
any of the trademarks, service marks, trade names, copyrights,
licenses, trade secrets, patents or other intellectual property rights
of any other Person, and, except as set forth in the Disclosure
Schedule, does not and will not require the Company or any Subsidiary
to obtain any license or other agreement to use any trademarks, service
marks, trade names, copyrights, licenses, patents, trade secrets or
other intellectual property rights of others. There are no outstanding
options, licenses or agreements of any kind relating to the
Intellectual Property Rights, nor is the Company or any Subsidiary
bound by or a party to any options, licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and proprietary rights
and processes of any other Person. The Company has not received any
communications alleging that the Company or any Subsidiary has violated
or, by conducting its business as proposed to be conducted, would
violate any of the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and proprietary rights
and processes of any other Person. The Company does not believe that it
is or will be necessary to use any inventions or works of authorship of
its employees (or Persons it currently intends to hire) made prior to
their employment by the Company. Except as set forth in the Disclosure
Schedule, neither the Company nor any Subsidiary have granted rights to
manufacture, produce, assemble, license, market or
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SECURITIES PURCHASE AGREEMENT - PAGE 12
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sell its products to any other Person and is not bound by any agreement
that affects the Company's or any Subsidiary's exclusive rights to
develop, manufacture, assemble, distribute, market or sell its
products.
(n) INSURANCE.
The Company and each Subsidiary maintains valid policies of insurance
with respect to its properties and business of the kinds and in the
amounts not less than is customarily obtained by corporations engaged
in the same or similar business and similarly situated, including,
without limitation, workers compensation insurance and insurance
against casualty loss, public liability, libel, slander, defamation,
advertising injury and other risks. The Disclosure Schedule sets forth
a schedule and brief description of the policies of insurance currently
maintained by the Company and each Subsidiary. With respect to each
such insurance policy: (a) the policy is in full force and effect; (b)
neither the Company nor any Subsidiary is in breach or default
(including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default or permit termination,
cancellation, modification or denial of coverage under the policy and
(c) no party to the policy has repudiated any of its provisions.
(o) MATERIAL CONTRACTS AND OBLIGATIONS.
The Disclosure Schedule sets forth a list and description of the
material terms of all material agreements or commitments of any nature
to which the Company or any Subsidiary is a party or by which it is
bound, including without limitation (i) each agreement which requires
future expenditures by the Company or any Subsidiary in excess of
$50,000 or which might result in payments to the Company or any
Subsidiary in excess of $50,000, (ii) all management and similar
agreements, (iii) all employment and consulting agreements, employee
benefit, bonus, pension, profit-sharing, stock option, stock purchase
and similar plans and arrangements, and distributor and sales
representative agreements, (iv) each agreement with any stockholder,
officer or director of the Company or any Subsidiary, or any Affiliate
of such Persons, including without limitation any agreement or other
arrangement providing for the furnishing of services by, rental of real
or personal property from, or otherwise requiring payments to, any such
Person or entity, and (v) any agreement relating to the Intellectual
Property Rights. The Company has delivered to the Purchasers copies of
such of the foregoing agreements as the Purchasers have requested. All
of such agreements and contracts are valid, binding and in full force
and effect.
(p) PERMITS.
(i) The Company and each Subsidiary is and has been in
possession of all (a) material franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents,
certificates, identification and registration numbers, approvals and
orders necessary to own, lease and operate its properties
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SECURITIES PURCHASE AGREEMENT - PAGE 13
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(collectively, the "Facilities") and to carry on its business as it is
now being conducted and as proposed to be conducted as set forth in the
Business Plan, and (b) agreements, licenses and certificates or
determinations from all federal, state and local governmental agencies
and accrediting and certifying organizations having jurisdiction over
the Facilities necessary to own, lease and operate the Facilities in
the manner in which they are now being operated and as proposed to be
operated as set forth in the Business Plan (collectively, the
"Permits"). The Disclosure Schedule sets forth a list of each of the
Permits held by Company and the jurisdiction issuing the same, all of
which are now, and as of the Closing shall be, in good standing and not
subject to meritorious challenge. The Disclosure Schedule also sets
forth all actions, proceedings, investigations or surveys pending or,
to the knowledge of the Company, threatened against the Company or any
Subsidiary that could reasonably be expected to result in (1) the loss
or revocation of a Permit necessary to operate one or more Facility or
(2) the suspension or cancellation of any other Permit. Except as set
forth in the Disclosure Schedule, neither the Company nor any
Subsidiary is in conflict with, in default under or in violation of and
has not received from any governmental entity any written notice with
respect to any conflict with, default under or violation of, (A) any
law, regulation or order applicable to the Company or any Subsidiary or
by or to which any of their respective properties is bound or subject,
(B) any judgment, order or decree applicable to the Company or any
Subsidiary or (C) any of the Permits.
(ii) The Company and each Subsidiary have complied in all
material respects with all laws, regulations and orders applicable to
its present and proposed business as conducted and as proposed to be
conducted and has all material Permits and licenses required thereby.
There is no term or provision of any mortgage, indenture, contract,
agreement or instrument to which the Company or any Subsidiary is a
party or by which it is bound or of any provision of any existing
judgment, decree, order, statute, rule or regulation applicable to or
binding upon the Company or any Subsidiary, which materially adversely
affects or, so far as the Company may now reasonably foresee, in the
future is reasonably likely to materially adversely affect, the
business, prospects, assets or condition, financial or otherwise, of
the Company or any Subsidiary.
(iii) To the Company's knowledge, no Founder or any other
employee of the Company or any Subsidiary is obligated under any
contract (including any license, covenant or commitment of any nature),
or subject to any judgment, decree or order of any court or
administrative agency, that would conflict or interfere with (i) the
performance of any employee's duties as an officer, employee or
director of the Company or any Subsidiary, (ii) the use of any
employee's best efforts to promote the interests of the Company or any
Subsidiary, or (iii) the Company's and its Subsidiaries' business as
conducted or proposed to be conducted. To the best of the Company's
knowledge, no employee of the Company is in violation of any term of
any contract or covenant (either with the Company or with another
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SECURITIES PURCHASE AGREEMENT - PAGE 14
15
entity) relating to employment, patents, proprietary information
disclosure, non-competition or non-solicitation.
(q) ABSENCE OF CHANGES.
Since the Balance Sheet Date, there has been no material adverse change
in the condition, financial or otherwise, net worth or results of
operations of the Company or any Subsidiary, other than changes
occurring in the ordinary course of business which changes have not,
individually or in the aggregate, had a materially adverse effect on
the business, prospects, properties or condition, financial or
otherwise, of the Company or any Subsidiary. Without limiting the
foregoing and except as set forth in the Disclosure Schedule, since the
Balance Sheet Date:
(i) neither the Company nor any Subsidiary has sold,
leased, transferred, or assigned any of its assets, tangible
or intangible, other than for a fair consideration in the
ordinary course of business;
(ii) neither the Company nor any Subsidiary has
entered into any agreement, contract, commitment, lease, or
license (or series of related agreements, contracts,
commitments, leases, and licenses) either involving more than
$50,000 or outside the ordinary course of business;
(iii) no party (including the Company) has
accelerated, terminated, modified, or canceled any agreement,
contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) involving more than $50,000
to which the Company or any Subsidiary is a party or by which
the Company or any Subsidiary or their assets are bound;
(iv) neither the Company nor any Subsidiary has
imposed or permitted any other Person to impose any Lien upon
any of its assets, tangible or intangible;
(v) neither the Company nor any Subsidiary has made
any capital expenditure (or series of related capital
expenditures) either involving more than $50,000 or outside
the ordinary course of business;
(vi) neither the Company nor any Subsidiary has made
any capital investment in, any loan to or any acquisition of
the securities or assets of any other Person (or series of
related capital investments, loans and acquisitions) either
involving more than $50,000 outside the ordinary course of
business;
(vii) neither the Company nor any Subsidiary has
issued any note, bond or other debt security or created,
incurred, assumed or guaranteed any indebtedness for borrowed
money or capitalized lease obligation either involving more
than $25,000 alone or $50,000 in the aggregate;
(viii) [RESERVED];
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SECURITIES PURCHASE AGREEMENT - PAGE 15
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(ix) neither the Company nor any Subsidiary has
canceled, compromised, waived, or released any right or claim
(or series of related rights and claims) either involving more
than $50,000 or outside the ordinary course of business;
(x) neither the Company nor any Subsidiary has
granted any license or sublicense of any rights under or with
respect to any Intellectual Property Rights except in the
ordinary course of business;
(xi) neither the Company nor any Subsidiary has
declared, set aside, or paid any dividend or made any
distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired
any of its capital stock;
(xii) neither the Company nor any Subsidiary has
experienced any damage, destruction, or loss (whether or not
covered by insurance) to its property;
(xiii) neither the Company nor any Subsidiary has
made any loan to, or entered into any other transaction with,
any of its directors, officers and employees outside the
ordinary course of business;
(xiv) neither the Company nor any Subsidiary has
entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any such
contract or agreement;
(xv) neither the Company nor any Subsidiary has
granted any increase in the base compensation of any of its
directors, officers, and employees outside the ordinary course
of business;
(xvi) neither the Company nor any Subsidiary has
adopted, amended, modified or terminated any bonus,
profit-sharing, incentive, severance or other plan, contract
or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect
to any other benefit plan);
(xvii) neither the Company nor any Subsidiary has
made any other change in employment terms for any of its
directors, officers, and employees outside the ordinary course
of business;
(xviii) neither the Company nor any Subsidiary has
made or pledged to make any charitable or other capital
contribution outside the ordinary course of business;
(xix) there has not been any other material
occurrence, event, incident, action, failure to act or
transaction outside the ordinary course of business involving
the Company or any Subsidiary or their assets or business; and
(xx) neither the Company nor any Subsidiary has
committed to do any of the foregoing.
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SECURITIES PURCHASE AGREEMENT - PAGE 16
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(r) EMPLOYEES. The Disclosure Schedule sets forth the annual salary and
any related payments or benefits of each (x) officer of the Company and (y)
Person who as an employee, consultant or manager receives annual compensation in
excess of $50,000. None of the employees of the Company or any Subsidiary is
represented by any labor union, and there is no labor strike or other labor
trouble pending with respect to the Company or any Subsidiary (including,
without limitation, any organizational drive) or, to the best of the Company's
knowledge, threatened.
(s) ENVIRONMENTAL MATTERS.
With respect to environmental matters:
(i) The Company and each Subsidiary is and has been
in compliance with all Environmental Laws (as defined below),
and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been made,
given, filed or commenced by any Person, nor has any such
making, giving, filing or commencement been threatened,
against any of them alleging any failure to comply with the
Environmental Laws, or seeking contribution towards, or
participation in, any remediation of any contamination of any
property or thing with Hazardous Materials (as defined in
paragraph 4(s)(v)). Without limiting the generality of the
preceding sentence, the Company and each Subsidiary has
obtained and been, and currently is, in compliance with all of
the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with
all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental Laws;
(ii) Neither the Company nor any Subsidiary has any
obligation to remediate or any other liabilities of any kind
arising in connection with or under any of the Environmental
Laws, nor is there any basis for such obligation or
liabilities;
(iii) Except as set forth in the Disclosure Schedule,
all properties and equipment used in the business of the
Company and each Subsidiary are and have been free of
Hazardous Materials;
(iv) "Environmental Laws" means all federal, state
and local laws, regulations, ordinances, codes, rules,
permits, decisions, orders or decrees relating or pertaining
to the public health and safety or the environment, or
otherwise governing the generation, use, handling, collection,
treatment, storage, transportation, recovery, recycling,
removal, discharge or disposal of Hazardous Materials,
including, without limitation, the Solid Waste Disposal Act,
42 U.S.C. 6901 et seq., as amended ("SWDA," also known as
"RCRA" for a subsequent amending act), (b) the Comprehensive
Environmental Response, Compensation and Liability Act, 42
U.S.C. ss.9601 et seq., as amended ("CERCLA", (c) the Clean
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SECURITIES PURCHASE AGREEMENT - PAGE 17
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Water Act, 33 U.S.C. ss.1251 et seq., as amended ("CWA"), (d)
the Clean Air Act, 42 U.S.C. ss.7401 et seq., as amended
("CAA"), (e) the Toxic Substances Control Act, 15 U.S.C.
ss.2601 et seq., as amended ("TSCA"), (f) the Emergency
Planning and Community Right To Know Act, 15 U.S.C. ss.2601 et
seq., as amended ("EPCRKA"), and (g) the Occupational Safety
and Health Act, 29 U.S.C. ss. 651 et seq., as amended
("OSHA"); and
(v) Hazardous Materials means, without limitation,
(a) any "hazardous wastes" as defined under RCRA, (b) any
"hazardous substances" as defined under CERCLA, (c) any toxic
pollutants as defined under the Clean Water Act, (d) any
hazardous air pollutants as defined under the Clean Air Act,
(e) any hazardous chemicals as defined under TSCA, (f) any
hazardous substances as defined under EPCRKA, (g) asbestos,
(h) polychlorinated biphenyls, (i) petroleum or petroleum
products, (j) underground storage tanks, whether empty, filled
or partially filled with any substance, (k) any substance the
presence of which on the property in question is prohibited
under any Environmental Law, and (1) any other substance which
under any Environmental Law requires special handling or
notification of or reporting to any federal, state or local
governmental entity in its generation, use, handling,
collection, treatment, storage, re-cycling, treatment,
transportation, recovery, removal, discharge or disposal.
(t) ERISA.
(i) Except as set forth in the Disclosure Schedule, neither
the Company nor any Subsidiary maintains or contributes to any (a)
nonqualified deferred compensation, bonus, retirement or retiree health
plans or arrangements, (b) qualified defined contribution or defined
benefit plans or arrangements which are employee pension benefit plans
(as defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974 ("ERISA")), or (c) employee welfare benefit plans (as
defined in Section 3(l) of ERISA), or material fringe benefit plans or
programs. Neither the Company nor any Subsidiary has within the past
five years, contributed to any multi-employer pension plan (as defined
in Section 3(37) of ERISA). Neither the Company nor any Subsidiary
maintains or contributes to any employee welfare benefit plan which
provides health, accident or life insurance benefits to former
employees, their spouses or dependents, other than in accordance with
Section 4980B of the Code.
(ii) With respect to each employee pension benefit plan, all
contributions which are due (including all employer contributions and
employee salary reduction contributions) have been paid to such
employee pension benefit plan, all contributions, if any, for prior
plan years have been paid and all contributions for the current plan
year will be paid prior to the filing of the federal income tax return
for the Company and each Subsidiary for the current plan year. With
respect to the employee welfare benefit plans, all premiums or other
payments which are due have been paid.
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SECURITIES PURCHASE AGREEMENT - PAGE 18
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(iii) The Company has furnished to the Purchasers true and
complete descriptions of each employee pension benefit plan and each
employee welfare benefit plan.
(u) TRANSACTIONS WITH RELATED PARTIES. Except as set forth in the
Disclosure Schedule, no employee, officer, director or stockholder of the
Company or any Subsidiary or member of his or her immediate family is indebted
to the Company or any Subsidiary , nor is the Company or any Subsidiary indebted
(or committed to make loans or extend or guarantee credit) to any of them, other
than (i) for payment of salary for services rendered, (ii) reimbursement for
reasonable expenses incurred on behalf of the Company or any Subsidiary, and
(iii) for other employee benefits made generally available to all employees. To
the Company's knowledge, none of such persons has any direct or indirect
ownership interest in any Person with which the Company or any Subsidiary is
affiliated or with which the Company or any Subsidiary has a business
relationship, or any Person that competes with the Company or any Subsidiary,
except that employees, stockholders, officers or directors of the Company and
each Subsidiary and members of their immediate families may own less than five
percent (5%) of the outstanding stock in publicly traded companies that may
compete with the Company and each Subsidiary. To the Company's knowledge, no
officer, director or stockholder or any member of their immediate families is,
directly or indirectly, interested in any material contract with the Company or
any Subsidiary (other than such contracts as relate to any such person's
ownership of capital stock or other securities of the Company).
(v) BUSINESS PLAN.
The Company has furnished to each Purchaser a complete and correct copy of the
Business Plan. While the Company does not warrant that it will achieve the
financial projections appearing in the Business Plan, the Business Plan
discloses all assumptions used in the preparation of these projections, all such
assumptions are reasonable, the Company has a reasonable basis for making these
projections and has no reason to believe that the Company will be unable to meet
these projections, and these projections fairly present the information which
they purport to show.
(w) NO SOLICITATION; NO INTEGRATION WITH OTHER OFFERINGS. No form of
general solicitation or general advertising was used by the Company or, to the
best of its actual knowledge, any other Person acting on behalf of the Company,
in connection with the offer and sale of the Closing Shares or Debentures.
Neither the Company, nor, to its knowledge, any Person acting on behalf of the
Company, has, either directly or indirectly, sold or offered for sale to any
Person (other than the Purchasers) any Debentures or, within the six months
prior to the date hereof, any shares of Common Stock or security similar to the
Debentures, except as contemplated by this Agreement, and the Company represents
that neither itself nor any Person authorized to act on its behalf (except that
the Company makes no representation as to the Purchasers and their Affiliates)
will sell or offer for sale any such security to, or solicit any offers to buy
any such security from, or otherwise approach or negotiate in respect thereof
with, any Person or Persons so as
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SECURITIES PURCHASE AGREEMENT - PAGE 19
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thereby to cause the issuance or sale of any of the securities referenced herein
to be in violation of any of the provisions of Section 5 of the Securities Act.
(x) INTERNAL ACCOUNTING CONTROLS. The minute books of the Company and
each Subsidiary contain complete and accurate records of all meetings and other
corporate actions of its shareholders and its Board of Directors and committees
thereof. The stock ledger of the Company and each Subsidiary is complete and
reflects all issuances, transfers, repurchases and cancellations of shares of
capital stock of the Company and such Subsidiary, as applicable. The Company and
each Subsidiary maintains a system of internal accounting controls sufficient,
in the judgment of the Company's Board of Directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(y) YEAR 2000 COMPLIANCE.
(i) COMPUTER AND OTHER SYSTEMS. (a) All software programs and
computer hardware that are owned, leased or licensed by the Company and
each Subsidiary, or used by third parties on behalf of the Company and
each Subsidiary ("Computer Systems"), are designated to be used prior
to, during and after the calendar year 2000 A.D., including leap years;
(b) all other operational systems that use software or equipment that
are owned, leased, or licensed by the Company and each Subsidiary, or
used by third parties on behalf of the Company and each Subsidiary
("Other Systems"), are designated to be used prior to, during and after
the calendar year 2000 A.D., including leap years; (c) the Computer
Systems and Other Systems will properly operate during each such period
without error or degradation of performance caused by a lack of Year
2000 Capabilities, and (d) the Computer Systems and Other Systems will
properly operate during each such period without requiring intervention
or modification to Date Data.
(ii) CAPABILITIES OF SUPPLIERS, VENDORS AND LANDLORDS. To the
best of the Company's knowledge after specific inquiry of all of its
material suppliers, vendors and landlords, the Company and each
Subsidiary will not suffer a loss from interruption or cessation of
business operations, in whole or in part, as a result of such
suppliers, vendors or landlords failing to provide materials, labor,
supplies or access to leased space for the operation of the Company and
each Subsidiary as a result of such suppliers or vendors not having
Year 2000 Capabilities.
(iii) For purposes of this Agreement, (x) "Year 2000
Capabilities" means the ability to: (i) manage and manipulate data
involving dates, including single century formulas and multi-century
formulas, in a manner that will not cause an
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SECURITIES PURCHASE AGREEMENT - PAGE 20
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abnormally ending scenario or generate incorrect values or invalid
results involving such dates, (ii) include the indication of proper
century dates in all date-related user interface functions and date
fields, and (iii) operate with proper century dates in date-related
software or hardware interface functions and (y) "Date Data" means any
existing data or input of date which includes an indication of or
reference to date.
(z) FOREIGN PRACTICES. Neither the Company nor any of its
Subsidiaries nor, to the Company's knowledge, any employee or agent of
the Company or any Subsidiary has made any payments of funds of the
Company or any Subsidiary, or received or retained any funds, in each
case in violation of any law, rule or regulation.
(aa) DISCLOSURES. Neither this Agreement, any Related
Agreement nor any exhibit hereto or thereto, nor any report,
certificate or instrument furnished to any of the Purchasers in
connection with the transactions contemplated in this Agreement or the
Related Agreements, when read together, contains any untrue statement
of a material fact or omits to state a material fact necessary in order
to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. The Company
knows of no information or fact that has or would have a material
adverse effect on the business, prospects, assets or condition,
financial or otherwise, of the Company and each Subsidiary which has
not been disclosed to the Purchasers in this Agreement, the Related
Agreements, the exhibits hereto or thereto, or other written materials
furnished to the Purchasers.
(bb) REPRESENTATIONS IN RELATED AGREEMENTS. Each of the
representations and warranties contained in this Section 4 is in
addition to, and not in lieu of, any representation or warranty made by
the Company in any Related Agreement.
5. REPRESENTATIONS AND WARRANTIES OF FOUNDERS.
The Founders jointly and severally represent and warrant to each of the
Purchasers as follows:
(a) CONFLICTING AGREEMENTS. The Founders are not, as a result
of the nature of the business conducted or proposed to be conducted by
the Company, or for any other reason, in violation of (i) any fiduciary
or confidential relationship, (ii) any term of any contract or covenant
(either with the Company or with another entity) relating to
employment, patents, proprietary information disclosure,
non-competition or non-solicitation or (iii) any other contract or
agreement, or any judgment, decree or order of any court or
administrative agency, in each case relating to or affecting the right
of any Founder to be employed by the Company. No such relationship,
term, judgment, decree or order conflicts with any Founder's
obligations to use his best efforts to promote the interests of the
Company nor does the execution, delivery and performance of this
Agreement or any Related Agreement by any Founder or the activities of
any Founder as an employee, officer or director of the Company,
conflict with any such relationship, term, judgment, decree or order.
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SECURITIES PURCHASE AGREEMENT - PAGE 21
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(b) LITIGATION.
There is no action, suit or proceeding, or governmental inquiry or
investigation, pending or, to the knowledge of any Founder, threatened
against a Founder, and, to the knowledge of any Founder, there is no
basis for any such action, suit, proceedings or governmental inquiry or
investigation which could reasonably be expected to have a material
adverse effect on the Company or to result in any change in ownership
of the Company's capital stock (provided Xxxxx Xxxxxx has disclosed
that he is under investigation by various federal and state agencies).
(c) STOCKHOLDER AGREEMENTS.
Except as contemplated by this Agreement, no Founder is a party to and
has no knowledge of any agreements, written or oral, relating to the
acquisition (including without limitation rights of first refusal or
preemptive rights), sale, transfer or other disposition, registration
under the Securities Act or voting of the capital stock of the Company.
(d) REPRESENTATIONS CORRECT.
To the knowledge of the Founders, each of the representations and
warranties of the Company contained in Section 4 is true and correct.
(e) DISCLOSURE.
Neither this Agreement, any Related Agreement nor any exhibit hereto or
thereto, nor any report, certificate or instrument furnished to any of
the Purchasers in connection with the transactions contemplated by this
Agreement or the Related Agreements when read together, contains any
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein,
in light of the circumstances under which they were made, not
misleading. The Founders know of no information or fact that has or
would have a material adverse effect on the business, prospects, assets
or condition, financial or otherwise, of the Company and each
Subsidiary which has not been disclosed to the Purchasers in this
Agreement, the Related Agreements, the exhibits hereto or thereto, or
other written materials furnished to the Purchasers.
(f) REPRESENTATIONS IN RELATED AGREEMENTS. Each of the
representations and warranties contained in this Section 5 is in
addition to, and not in lieu of, any representation or warranty made
each Founder in any Related Agreement.
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each of the Purchasers severally represents and warrants to the Company
as follows:
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SECURITIES PURCHASE AGREEMENT - PAGE 22
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(a) PURCHASE FOR INVESTMENT.
Such Purchaser is acquiring the Closing Shares for its own account for
investment and not with a view to, or for sale in connection with, any
distribution thereof, nor with any present intention of distributing or
selling the same, and, except as contemplated by this Agreement, the
Related Agreements, and the exhibits hereto and thereto, such Purchaser
has no present or contemplated agreement, undertaking, arrangement,
obligation, indebtedness or commitment providing for the disposition
thereof. Such Purchaser acknowledges the restrictions on transfer of
the Closing Shares as set forth in Section 9 of this Agreement. Nothing
contained in this Agreement shall limit or restrict the ability of a
Purchaser from pledging or granting a Lien in respect of any of the
Debentures or Closing Shares to secure bona fide obligations or
indebtedness of the Purchaser.
(b) AUTHORITY.
Such Purchaser has full power and authority to enter into and to
perform this Agreement in accordance with its terms. Any Purchaser
which is a corporation, partnership or trust represents that it has not
been organized, reorganized or recapitalized specifically for the
purpose of investing in the Company.
(c) ACCREDITED INVESTOR.
Such Purchaser is an "accredited investor," as such term is defined in
Regulation D promulgated under the Securities Act.
7. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS.
The obligation of each of the Purchasers to purchase Debentures at the
Closing is subject to the fulfillment or the waiver by each Purchaser of each of
the following conditions on or before the Closing.
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties contained in Sections 4 and 5 shall
have been true at and as of the date of this Agreement and shall be
true at and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of
the Closing.
(b) PERFORMANCE.
The Company, each Founder and each other Current Stockholder shall have
performed and complied with all agreements and conditions contained in
this Agreement and the Related Agreements required to be performed or
complied with by the Company or such Founder or other Current
Stockholder prior to or at the Closing.
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SECURITIES PURCHASE AGREEMENT - PAGE 23
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(c) OPINION OF COUNSEL.
Each Purchaser shall have received an opinion from counsel for the
Company, dated the date of the Closing, addressed to the Purchasers,
satisfactory in form and substance to the Purchasers and their special
counsel and substantially in the form attached as Exhibit E.
(d) RELATED AGREEMENTS.
(i) Debentures in the aggregate principal amount of
$6,000,000 in the form attached hereto as Exhibit B shall have
been executed and delivered by the Company at the Closing.
(ii) The Stockholders Agreement attached hereto as
Exhibit F (the "Stockholders Agreement") shall have been
executed and delivered by the Company, the Founders and each
of the other current stockholders of the Company
(collectively, with the Founders, the "Current Stockholders")
and each of the Purchasers at or prior to the Closing. All
actions to be taken by the Company and the Current
Stockholders as contemplated by the Stockholders Agreement
shall have occurred, including, without limitation, all
actions necessary to (x) elect a Board of Directors of the
Company of five (5) members, three (3) of which shall be the
Purchaser Directors, (y) appoint Xxxxx Xxxxxxxx as the
President and Treasurer of the Company, and (z) appoint Xxxxx
Xxxxxx as the Chief Technology Officer of the Company.
(iii) [RESERVED].
(iv) [RESERVED].
(v) The Security Agreement and the Pledge Agreement
attached hereto as Exhibits G and H (collectively, the
"Security Agreement") shall have been executed and delivered
by the Company, together with the delivery to the Purchasers
of UCC financing statements duly executed by the Company
necessary to perfect the collateral pledged thereunder (which
represents all of the stock of the Company's two subsidiaries
and all of the assets of the Company).
(vi) The Registration Rights Agreement attached
hereto as Exhibit I (the "Registration Rights Agreement")
shall have been executed and delivered by the Company and each
of the Purchasers at or prior to the Closing.
(vii) [RESERVED].
(viii) [RESERVED].
(ix) The Closing Shares shall have been duly issued
to the Purchasers by the Company at the Closing.
(x) Each of the Founders and the Company shall have
executed and delivered the form of Employment and
Noncompetition Agreement attached hereto as Exhibit J
(collectively, the "Employment Agreements").
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SECURITIES PURCHASE AGREEMENT - PAGE 24
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(xi) Xxxxx Xxxxxx shall execute and deliver to the
Company and the Purchasers the Pari Passu Agreement in the
form attached hereto as Exhibit K (the "Pari Passu Agreement")
which (x) confirms that the only sum owed by the Company or
its Subsidiaries to Xx. Xxxxxx or his Affiliates at the
Closing is $164,000 (the "Xxxxxx Note") and (y) provides the
terms of repayment of the interest and principal due on the
Xxxxxx Note.
(xii) [RESERVED]
(e) [RESERVED]
(f) CERTIFICATES AND DOCUMENTS.
The Company shall have delivered to the Purchasers or special counsel
to the Purchasers:
(i) a certificate dated the date of the Closing
certifying to the fulfillment of the conditions specified in
this Section 7;
(ii) certificates, as of the most recent practicable
dates, as to the existence and corporate good standing of the
Company and each Subsidiary;
(iii) Certificates of Incorporation and Bylaws of the
Company and each Subsidiary, certified by its Secretary as of
the date of the Closing (with the Certificate of Incorporation
of the Company amended in a form acceptable to the Purchasers
to increase the authorized shares of Common Stock to 100,000
shares, waive any preemptive rights of the stockholders, and
provide that a vote of only a majority of the outstanding
Common Stock is necessary to approve any merger, sale of all
or substantially all assets, share exchange or similar action
of the Company);
(iv) resolutions of the Board of Directors of the
Company, authorizing and approving all matters in connection
with this Agreement, the Related Agreements and the
transactions contemplated herein and therein, certified by the
Secretary of the Company as of the date of the Closing; and
(v) such other documents relating to the transactions
contemplated in this Agreement and the Related Agreements as
any Purchaser may reasonably request.
(g) EXCHANGE OF ASSUMED DEBENTURES.
At the Closing, Infinity shall have surrendered the Assumed Debentures
to the Company in exchange for the Restated Debentures and in complete
discharge and satisfaction of the indebtedness represented by the
Assumed Debentures.
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SECURITIES PURCHASE AGREEMENT - PAGE 25
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(h) SECURITY INTERESTS. The Purchasers shall have received
evidence satisfactory to them that Uniform Commercial Code financing
statements in proper form have been executed by all proper parties,
that such financing statements have been filed in all necessary filing
offices and that all security interests created under the Related
Agreements are of first priority.
(i) USE OF PROCEEDS. The Purchasers shall have received the
Use of Proceeds Statement in a form acceptable to the Purchasers.
(j) AVANTEL AMENDMENT. The contractual agreement between the
Company and Avantel shall have been amended on terms satisfactory to
the Purchasers, with evidence of the execution and delivery of such
amendment in a form acceptable to the Purchasers.
(k) OTHER MATTERS.
All corporate and other proceedings in connection with the transactions
contemplated in this Agreement and the Related Agreements and all
documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchasers and
their special counsel, and the Purchasers and their special counsel
shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
The Purchasers shall advance all of the New Advance to the Company at
the Closing or on such date thereafter as the Company shall request; provided,
the Company shall not pay any more funds to Avantel after the date hereof until
the condition in clause (j) above is satisfied.
8. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY.
The obligations of the Company to issue and sell Debentures and Closing
Shares to the Purchasers at the Closing are subject to fulfillment or the waiver
by the Company of each of the following conditions on or before the Closing:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Purchasers contained in
Section 6 shall be true at and as of the Closing with the same effect
as though such representations and warranties had been made on and as
of the date of the Closing.
(b) INVESTMENT.
At the Closing, (a) Infinity shall have surrendered the Assumed
Debentures to the Company as payment of the purchase price for
$2,697,610 of the Debentures to be purchased at the Closing and (b) the
Purchasers shall have tendered to the Company (I) $250,000 of the New
Advance as contemplated by the Letter Agreement (by direct remittance
to Avantel at the direction of the Company) for the purchase of the
remaining Debentures to be purchased at the Closing by such Purchasers
and (II) $24 for the purchase of the Closing Shares to be purchased at
the Closing by the Purchasers.
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SECURITIES PURCHASE AGREEMENT - PAGE 26
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(c) OTHER MATTERS.
All corporate and other proceedings in connection with the transactions
contemplated in this Agreement and the Related Agreements and all
documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Company and its
counsel, and the Company and its counsel shall have received all such
counterpart originals or certified or other copies of such documents as
they may reasonably request.
9. AFFIRMATIVE COVENANTS OF THE COMPANY.
(a) INSPECTION AND OBSERVATION.
The Company shall permit each Purchaser or any authorized
representative of a Purchaser, to visit and inspect the properties of
the Company and each Subsidiary, including its corporate and financial
records, and to discuss its business and finances with officers of the
Company, during normal business hours following reasonable notice,
without interference to the conduct of the Company's or any
Subsidiary's business and as often as may be reasonably requested.
(b) FINANCIAL STATEMENTS AND OTHER INFORMATION.
The Company shall deliver to each Purchaser:
(i) within 90 days after the end of each fiscal year
of the Company, a consolidated audited balance sheet of the
Company and each Subsidiary as at the end of such year and
consolidated audited statements of operations and of cash
flows of the Company and each Subsidiary for such year,
certified by public accountants of established national
reputation selected by the Company, and prepared in accordance
with GAAP;
(ii) within 45 days after the end of each of the
first three fiscal quarters of each fiscal year a consolidated
unaudited balance sheet of the Company and each Subsidiary as
at the end of such quarter and consolidated unaudited
statements of operations and of cash flows of the Company and
each Subsidiary for such quarter and for the current fiscal
year to the end of such quarter, prepared in accordance with
GAAP, and setting forth in comparative form the Company's
Budget for the corresponding periods for the current fiscal
year;
(iii) within 30 days after the end of each month, a
consolidated unaudited balance sheet of the Company and each
Subsidiary as at the end of such month and consolidated
unaudited statements of operations and of cash flows of the
Company and each Subsidiary for such month and for the current
fiscal year to the end of such month, setting forth in
comparative form the Company's Budget for the corresponding
periods for the current fiscal year, accompanied by an
executive
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SECURITIES PURCHASE AGREEMENT - PAGE 27
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summary of the activities of the Company and each Subsidiary
during such month, signed by the Company's chief executive
officer and chief financial officer;
(iv) as soon as available, but in any event not later
than 30 days prior to the beginning of each new fiscal year,
an operating and capital budget for the Company and each
Subsidiary for such fiscal year approved by the Board of
Directors (the "Budget"); and
(v) with reasonable promptness, such other notices,
information and data with respect to the Company and each
Subsidiary as the Company delivers to the holders of its
Common Stock and such other information and data as such
Purchaser may from time to time reasonably request.
The financial statements delivered pursuant to clauses (ii) and (iii)
shall be accompanied by a certificate of the chief financial officer of the
Company stating that (x) such statements have been prepared in accordance with
GAAP consistently applied and fairly present the financial condition and results
of operations of the Company and each Subsidiary at the date thereof and for the
periods covered thereby and (y) no Default or Event of Default has occurred or
then exists.
(c) MATERIAL CHANGES AND LITIGATION.
The Company shall promptly notify each Purchaser of any Default or
Event of Default or of any material adverse change in the business,
prospects, assets or condition, financial or otherwise, of the Company
or any Subsidiary and of any litigation or governmental proceeding or
investigation brought or, to the Company's knowledge, threatened
against the Company or any Subsidiary, or against any officer,
director, employee or stockholder of the Company or any Subsidiary
materially adversely affecting or which, if adversely determined, could
reasonably be expected to materially adversely affect its business,
prospects, assets or condition, financial or otherwise.
(d) OTHER AFFIRMATIVE COVENANTS.
Unless the prior approval of holders of at least 66-2/3% of the
Debentures (by aggregate outstanding principal balance thereof) (the
"Majority Holders") has been obtained, the Company shall (and shall
cause each Subsidiary to):
(i) maintain in full force and effect all leases,
Permits and other rights necessary to the operation of the
business of the Company and each Subsidiary;
(ii) maintain its corporate existence and its
business and maintain all properties which are reasonably
necessary for the conduct of its business, now or hereafter
owned by it, in good repair, working order and condition,
reasonable wear and tear excepted, and make any replacements
of properties necessary for the successful operation of its
business;
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SECURITIES PURCHASE AGREEMENT - PAGE 28
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(iii) maintain on all insurable properties now or
hereafter owned by it insurance against loss or damage by fire
or other casualty to the extent customary with respect to
similar properties of companies conducting business similar to
that conducted by it, and to maintain public liability and
workers' compensation insurance covering it to the extent
customary with respect to companies conducting business
similar to the business conducted by the Company and each
Subsidiary;
(iv) comply in all material respects with all
material contracts, Permits or other agreements or instruments
to which it is now or hereafter a party or by which it or any
of its properties and assets are now or hereafter bound,
unless and to the extent that the same are being contested in
good faith and by appropriate proceedings and adequate
reserves have been established on its books with respect
thereto in accordance with GAAP;
(v) pay and discharge when payable all taxes,
assessments and governmental charges imposed upon its
respective properties or upon the income or profits therefrom
(in each case before the same becomes delinquent and before
penalties accrue thereon) and all claims for labor, materials
or supplies which if unpaid might by law become a lien or
other encumbrance upon any of its respective properties,
unless and to the extent that the same are being contested in
good faith and by appropriate proceedings and adequate
reserves (as determined in accordance with GAAP) have been
established on its respective books with respect thereto;
(vi) comply with all applicable laws, rules and
regulations of all governmental authorities, the violation of
which could reasonably be expected to have a material adverse
effect on its financial condition, operating results or
business prospects of the Company or any Subsidiary; and
(vii) maintain proper books of record and account
which fairly represent its financial condition and results of
operations and make provisions on its financial statements for
all such proper reserves as in each case are required in
accordance with GAAP;
(e) KEY PERSONNEL LIFE INSURANCE.
The Company shall on or prior to the Closing obtain, and will use its
best efforts to maintain in force with a financially sound and
reputable insurer, one or more policies for term life insurance on the
life of Xxxxx Xxxxxx in the aggregate amount of at least $3,000,000.
Each such policy shall name the Purchasers as the sole beneficiary and
as loss payee (to the extent of the indebtedness due under the
Debentures, and thereafter the Company as the sole beneficiary and as
loss payee) of all amounts payable under such policy and shall not be
cancelable by the Company without the prior approval of the Majority
Holders.
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SECURITIES PURCHASE AGREEMENT - PAGE 29
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(f) [RESERVED]
(g) ELECTION OF PURCHASER DIRECTORS.
(i) The Company shall use its best efforts to enforce
the obligations of the Current Stockholders under the
Stockholders Agreement and shall not permit to occur any
amendment to the Stockholders Agreement without the prior
written consent of the Majority Holders.
(ii) The Company will promptly reimburse all
Directors for all reasonable costs incurred in connection with
attending any meeting of the Board of Directors of the Company
or otherwise incurred in connection with fulfilling their
duties as Directors of the Company.
(h) USE OF PROCEEDS. The proceeds of the New Advance will be
used by the Company for working capital and other general corporate
purposes. Specifically, at the Closing the Company shall provide a
detailed use of the proceeds of the New Advance and direct payment
instructions for various account payees, their addresses, the amounts
to be so paid, wire transfer instructions, the name of a contact person
of such payee and an explanation of the reason for the incurrence of
such payable (the "Use of Proceeds Statement"). All funds directly paid
to such third parties shall be deemed to have been advanced by the
Purchasers to the Company hereunder and under the Debentures.
(i) STOCK OPTION PLAN. Following the Closing, the Board of
Directors shall adopt a stock option plan of the Company providing for
the issuance of up to a maximum aggregate of 360 shares of Common Stock
(inclusive of all shares previously authorized and/or issued pursuant
to any stock option plan of the Company) to senior executives or other
employees of the Company; provided, however, the Founders acknowledge
that no current intention exists to include the Founders in such plan.
10. NEGATIVE COVENANTS. Unless the prior approval of the Majority
Holders has been obtained, the Company shall not, and shall not allow any
Subsidiary to:
(i) Effect any sale, lease, assignment, transfer,
exchange or other conveyance of all or substantially all of
the assets of the Company or any Subsidiary, or any
consolidation or merger involving the Company or any
reclassification or other change of any capital stock or any
recapitalization of the Company, or any dissolution,
liquidation or winding up of the Company or, make any
agreement or become obligated to do so;
(ii) Enter into or engage in any line of business
other than as described in the Business Plan and related
activities;
(iii) Declare or pay any dividends or declare or make
any other distribution,
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SECURITIES PURCHASE AGREEMENT - PAGE 30
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direct or indirect on account of the Common Stock (or any
other shares of capital stock of the Company) or set apart any
sum for any such purpose;
(iv) Purchase, redeem or otherwise acquire for value
(or pay into or set aside as a sinking fund for such purpose)
any of the Common Stock (or any other shares of capital stock
of the Company); provided, however, that this restriction
shall not apply to the repurchase of shares of Common Stock
from employees, officers, directors, consultants or other
persons performing services for the Company or any Subsidiary
pursuant to agreements under which the Company has the option
to repurchase such shares, such as the termination of
employment or service to the Company or any Subsidiary;
(v) Create or commit to create a Subsidiary unless
all of the outstanding securities of such Subsidiary are owned
by the Company or by a Subsidiary of the Company; provided
that the Company owns all of the outstanding securities of
such Subsidiary;
(vi) Incur any Debt not in existence on the date
hereof other than Debt owed to the Purchasers and additional
Debt after the Closing not to exceed $500,000 in the aggregate
(unless approved by the Purchaser Directors);
(vii) Incur any Lien, or permit to exist any Lien, of
any kind against any of the assets or properties of the
Company or any of its Subsidiaries, except the Liens granted
to the Purchasers and Permitted Liens;
(viii) Enter into any transaction with an Affiliate
or make any payment to an Affiliate (whether in cash or
property) or any type except on terms to the Company or such
Subsidiary no less favorable than terms that could be obtained
by the Company or such Subsidiary from a Person that is not an
Affiliate of the Company, as determined in good faith by the
Board of Directors of the Company;
(ix) Make any expenditure not specified in the Budget
in excess of $5,000 or become liable under any agreement which
requires annual payments not specified in the Budget in excess
of $5,000 unless approved in advance by either (i) the
President (currently Xxxxx Xxxxxxxx) and Xxxxx Xxxxxx (so long
as he owns shares of Common Stock) or (ii) the Board of
Directors of the Company; or
(x) Make payments of salary, bonus or otherwise
provide compensation (including benefits) to its officers or
employees in excess of the amounts listed on item 4.r. of the
Disclosure Schedule; provided in no event will any such
Persons or their Affiliates receive any stock options or other
securities as a result of serving as an officer, director,
employee or consultant to or of the Company or any of its
Subsidiaries except as set forth in any Approved Plan.
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SECURITIES PURCHASE AGREEMENT - PAGE 31
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11. TRANSFERS OF SECURITIES.
(a) RESTRICTIONS.
The restrictions on the sale or transfer of the Closing Shares set
forth in this Section 11 shall cease to apply to such Closing Shares
(i) upon any sale of such Closing Shares pursuant to the Registration
Rights Agreement, Section 4(l) of the Securities Act, or Rule 144 under
the Securities Act or (ii) at such time as such Closing Shares become
eligible for resale under Rule 144(k) under the Securities Act.
(b) REQUIREMENTS FOR TRANSFER.
(i) The Closing Shares shall not be sold or
transferred unless either (a) they first shall have been
registered under the Securities Act or (b) the Company first
shall have been furnished with an opinion of legal counsel,
reasonably satisfactory to the Company, to the effect that
such sale or transfer is exempt from the registration
requirements of the Securities Act.
(ii) Notwithstanding the foregoing, no registration
or opinion of counsel shall be required for (a) a transfer by
a Purchaser to an Affiliate which agrees in writing to be
subject to the terms of this Section 11 to the same extent as
if such Affiliate were an original Purchaser hereunder, or (b)
a transfer made in accordance with Rule 144 under the
Securities Act.
(c) LEGENDS.
Each certificate representing Closing Shares shall bear a legend
substantially in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE
SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM."
The foregoing legend shall be removed from the certificates
representing Closing Shares at the request of the holder thereof, at such time
as they become eligible for resale pursuant to Rule 144(k) under the Securities
Act.
(d) DEBENTURES. Each Debenture may be sold or transferred,
together with the Security Agreement, by the Purchasers without regard
to the restrictions contained in this Section 11, unless in the written
opinion of counsel to the Company the Debentures are a security (as
such term is defined in Section 2(1) of the Securities Act), whereupon
the Debentures may be sold or transferred on the same basis as the
Closing Shares pursuant to the foregoing provisions.
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SECURITIES PURCHASE AGREEMENT - PAGE 32
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(e) RIGHT OF PARTICIPATION. Notwithstanding the foregoing, the
Purchasers may assign or participate 50% or less of the Closing Shares
and any portion of the Debentures (together with all rights of the
Purchasers under this Agreement and the Related Agreements associated
therewith) to AXIS or any other Person without the consent or approval
of the Company or any Founder or any other Current Stockholders, which
assignee shall (x) make representations and warranties to the Company
substantially similar to those set forth in Section 6 hereof as made by
the Purchasers and (y) agree to be bound by the terms of this Agreement
and the Related Agreements (including the transfer restrictions set
forth in this Section 11).
12. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS.
The rights and obligations of each Purchaser under this Agreement and
each Related Agreement may be assigned by such Purchaser to any Person
or entity to which Debentures are transferred by such Purchaser, and
such transferee shall be deemed a "Purchaser" for purposes of this
Agreement.
(b) CONFIDENTIALITY.
Except as required by law, each Purchaser agrees that it will keep
confidential and will not disclose or divulge any confidential,
proprietary or secret information which such Purchaser may obtain from
the Company pursuant to financial statements, reports and other
materials submitted by the Company to such Purchaser pursuant to this
Agreement or otherwise, or pursuant to visitation or inspection rights
granted hereunder, unless such information is known, or until such
information becomes known, to the public; provided, however, that a
Purchaser may disclose such information (i) to its attorneys,
accountants, consultants and other professionals to the extent
necessary to obtain their services in connection with its investment in
the Company, (ii) to any prospective purchaser of any Debentures from
such Purchaser as long as such prospective purchaser agrees in writing
to be bound by the provisions of this Section 12 or (iii) to any
Affiliate of such Purchaser or to a partner or shareholder of such
Purchaser.
(c) SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All agreements, representations and warranties contained herein shall
survive the execution and delivery of this Agreement and the closing of
the transactions contemplated herein, regardless of any investigation
by the Purchasers or on behalf of the Purchasers.
(d) EXPENSES.
The Company agrees to pay and hold the Purchasers and holders of the
Debentures harmless from liability for the payment of:
(i) the fees and expenses of the Purchasers,
including the reasonable fees and
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SECURITIES PURCHASE AGREEMENT - PAGE 33
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expenses of Xxxxx & Xxxxxx, LLP, special counsel to the
Purchasers, arising in connection with the negotiation and
execution of this Agreement, the Related Agreements and
consummation of the transactions contemplated herein. At the
Closing, the Purchasers shall provide an estimate of such
reimbursable amounts (the "Estimated Expense Reimbursement
Fee"). To the extent the actual fees and expenses of the
Purchasers exceed the Estimated Expense Reimbursement Fee, the
Company shall promptly pay such excess to the Purchasers or,
at their election, their counsel;
(ii) the fees and expenses incurred with respect to
the interpretation of, or any amendments or waivers to this
Agreement or the Related Agreements (whether or not the same
become effective):
(iii) if a Purchaser or other holder of Debentures or
Conversion Shares desires to sell or otherwise transfer any or
all of the Debentures or Conversion Shares held by it and
counsel for the Company declines to render a legal opinion to
such Purchaser or holder, without cost or expense to such
Purchaser or holder, whether or not registration under the
Securities Act will be required for such sale or transfer, the
fees and expenses of counsel for such Purchaser or holder in
obtaining such an opinion;
(iv) the fees and expenses incurred in reviewing any
registration statement or prospectus or any amendments or
supplements thereto prepared pursuant to the Registration
Rights Agreement;
(v) the fees and expenses incurred in connection with
any requested waiver of the right of any holder of Debentures
or the consent of any holder of Debentures to contemplated
acts of the Company not otherwise permissible by the terms of
this Agreement or the Related Agreements;
(vi) stamp and other taxes, excluding income taxes,
which may be payable with respect to the execution and
delivery of this Agreement or the issuance, delivery or
acquisition of the Debentures or the Closing Shares;
(vii) the fees and expenses incurred in respect of
the enforcement of the rights granted under this Agreement and
the Related Agreements;
(viii) all costs, fees and expenses incurred by the
Company in its performance of and compliance with this
Agreement and the Related Agreements; and
(ix) fees and expenses incurred by each such Person
in any filing with any governmental with respect to its
investment in the Company or in any other filing with any
governmental agency with respect to the Company which mentions
such Person.
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SECURITIES PURCHASE AGREEMENT - PAGE 34
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(e) NOTICES.
All notices, requests, consents, and other communications under this
Agreement shall be in writing and shall be delivered personally or by
facsimile transmission or by overnight delivery service or 72 hours
after having been mailed by first class certified or registered mail,
return receipt requested, postage prepaid:
If to the Company, at its address set forth on the signature page
hereto, or at such other address or addresses as may have been furnished in
writing by the Company to the Purchasers.
If to a Purchaser, at its address set forth on the signature page
hereto, or at such other address or addresses as may have been furnished to the
Company in writing by such Purchaser.
(f) BROKERS.
The Company, the Founders and the Purchasers each represent and warrant
to the other parties hereto that it has not retained or engaged any
finder or broker in connection with the transactions contemplated in
this Agreement. The Company, the Founders and each Purchaser will
indemnify and save the other parties harmless from and against any and
all claims, liabilities or obligations with respect to brokerage or
finders fees or commissions, or consulting fees in connection with the
transactions contemplated in this Agreement asserted by any Person on
the basis of any statement or representation alleged to have been made
by such indemnifying party.
(g) ENTIRE AGREEMENT.
This Agreement, the exhibits hereto and the Related Agreements embody
the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersedes all prior
agreements and understandings relating to such subject matter.
(h) AMENDMENTS AND WAIVERS.
Except as otherwise expressly set forth in this Agreement, any term of
this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively), with the written consent of
the Company and the Majority Holders. Any amendment or waiver effected
in accordance with this Section 12 shall be binding upon each holder of
any Debentures, each future holder of all such Debentures and the
Company. No waivers of or exceptions to any term, condition or
provision of this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any
such term, condition or provision.
(i) COUNTERPARTS.
This Agreement may be executed by facsimile signature and in one or
more counterparts,
--------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT - PAGE 35
36
each of which shall be deemed to be an original, but all of which shall
be one and the same document.
(j) HEADINGS.
The headings of this Agreement are for convenience only and do not
constitute a part of this Agreement.
(k) SEVERABILITY.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
(l) RULES OF CONSTRUCTION.
Each covenant contained in this Agreement and each Related Agreement
shall be construed (absent an express contrary provision therein) as
being independent of each other covenant contained herein and therein
and compliance with one covenant shall not (absent such an express
contrary provision) be deemed to excuse compliance with any or all
other covenants. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any of the provisions of this
Agreement. The term "to the Company's knowledge" shall mean the
knowledge of the Company after reasonable inquiry and investigation
concerning the subject matter of the representation and warranty. Any
statements, representations or warranties that are based upon the
knowledge of the Company shall be deemed to have been made after
reasonable inquiry by the Company with respect to the matter in
question. Whenever the terms "satisfactory to Purchaser", "determined
by Purchaser", "acceptable to Purchaser", "consent of Purchaser",
"approved by Purchaser", "as Purchaser shall elect", "as Purchaser
shall request" or similar terms used in this Agreement or any Related
Agreement with respect to the Purchasers (or the Majority Holders, as
applicable), except as otherwise specifically provided herein or
therein, such terms shall mean satisfactory to, at the election of,
determined by, acceptable to or requested by, as applicable, such
Purchasers (or Majority Holders, as applicable) in their sole and
absolute discretion.
(m) GOVERNING LAW.
THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEVADA WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE
(WHETHER OF THE STATE OF NEVADA OR ANY OTHER JURISDICTION) THAT WOULD
CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEVADA.
--------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT - PAGE 36
37
(n) FURTHER ASSURANCES.
Each party to this Agreement hereby covenants and agrees, without the
necessity of any further consideration, to execute and deliver any and
all such further documents and take any and all such other actions as
may be necessary or appropriate to carry out the intent and purposes of
this Agreement and to consummate the transactions contemplated herein.
(o) INDEMNIFICATION.
The Company without limitation as to time, will indemnify each
Purchaser and its agents and representatives against, and hold each
Purchaser and its agents and representatives harmless from, all losses,
claims, damages, liabilities, costs (including the costs of preparation
and attorneys' fees and expenses) (collectively, the "Losses") incurred
pursuant to any investigation or proceeding against the Company, any
Purchaser or any of their agents and representatives arising out of or
in connection with this Agreement, any Related Agreement (or any other
document or instrument executed pursuant hereto or thereto), which
investigation or proceeding requires the participation of, or is
commenced or filed against, one or more of the Purchasers and any of
their agents because of this Agreement, the Related Agreements and the
transactions contemplated herein and therein, other than any Losses
resulting from action on the part of such Purchaser or its agents or
representatives which is finally determined in such proceeding to be
primarily and directly a result of (i) such Purchaser's gross
negligence or willful misconduct, (ii) a breach of a fiduciary duty, if
any, owed by such Purchaser to the Company, (iii) an act or omission
that involves intentional misconduct or a knowing violation of law by
such Purchaser, (iv) a transaction from which the Purchaser received an
improper personal benefit or (v) Losses incurred by or on behalf of an
agent of a Purchaser which are the subject of the Indemnification
Agreement entered into by the Company and such agent pursuant to the
Stockholders Agreement, as to which Losses such Indemnification
Agreement, rather than this Section 12, shall apply. The Company agrees
to reimburse each Purchaser and its agents and representatives promptly
for all such Losses as they are incurred by such Purchaser and its
agents. Each Purchaser agrees to reimburse the Company for any payments
made by the Company to such Purchaser pursuant to this Section 12 for
Losses which are finally determined in such proceeding to primarily and
directly result from the gross negligence or willful misconduct of such
Purchaser. The obligations of the Company to each Purchaser and its
agents and representatives under this Section 12 will be separate
obligations. The obligations of the Company under this Section 12 will
survive any transfer of securities by any Purchaser and the termination
of this Agreement or any Related Agreement.
(p) EXCULPATION AMONG PURCHASERS.
Each Purchaser acknowledges that it is not relying upon any other
Purchaser, or any officer, director, employee, agent, partner or
Affiliate of any such other Purchaser, in making its investment or
decision to invest in the Company or in monitoring such investment.
Each Purchaser agrees that no Purchaser nor any controlling Person,
officer,
--------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT - PAGE 37
38
director, shareholder, partner, agent or employee of any Purchaser
shall be liable for any action heretofore or hereafter taken or omitted
to be taken by any of them relating to or in connection with the
Company or the Debentures, or both. Without limiting the foregoing, no
Purchaser (nor any of its Affiliates, officers, directors,
shareholders, partners, agents or employees) or other holder of any
Debentures shall have any obligation, liability or responsibility
whatsoever for the accuracy, completeness or fairness of any or all
information about the Company or any subsidiary or their respective
properties, business or financial and other affairs, acquired by such
Purchaser or holder from the Company or any subsidiary or the
respective officers, directors, employees, agents, representatives,
counsel or auditors of either, and in turn provided to another
Purchaser or holder, nor shall any such Purchaser (or such other
Person) have any obligation or responsibility whatsoever to provide any
such information to any other Purchaser (or such other Person) or
holder or to continue to provide any such information if any
information is provided.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first written above.
ORIX GLOBAL COMMUNICATIONS, INC.
By:
Title:
Address: 0000 Xxxx Xxxxxxxx Xxxx, Xxx. X000
Xxx Xxxxx, XX 00000
Fax: 702/000-0000
FOUNDERS:
XXXXX XXXXXX
Address: 0000 Xxxx Xxxxxxxx Xxxx, Xxx. X000
Xxx Xxxxx, XX 00000
Fax: 702/000-0000
--------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT - PAGE 38
39
XXXX XXXXXXX
Address: 0000 Xxxx Xxxxxxxx Xxxx, Xxx. X000
Xxx Xxxxx, XX 00000
Fax: 702/000-0000
XXX XXXXXXXX
Address: 0000 Xxxx Xxxxxxxx Xxxx, Xxx. X000
Xxx Xxxxx, XX 00000
Fax: 702/000-0000
--------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT - PAGE 39
40
PURCHASERS:
INFINITY INVESTORS LIMITED
By:
Title:
Address: 00 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx X0X 0XX
Fax: 000-00-000-000-0000
--------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT - PAGE 40
41
SCHEDULE A
NUMBER OF
NAME AMOUNT OF INDEBTEDNESS CLOSING SHARES
---- ---------------------- --------------
Infinity Investors Limited $6,000,000 2,400
--------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT - PAGE 41
42
EXHIBITS:
Exhibit A Schedule of Purchasers
Exhibit B Form of Debentures
Exhibit C Business Plan
Exhibit D Schedule of Exceptions (Disclosure Schedule)
Exhibit E Opinion of Counsel (for the Company as provided to Purchaser)
Exhibit F Stockholders Agreement
Exhibit G Security Agreement
Exhibit H Pledge Agreement
Exhibit I Registration Rights Agreement
Exhibit J Employment and Noncompetition Agreement
Exhibit K Pari Passu Agreement
--------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT - PAGE 42
43
SCHEDULE A
NUMBER OF
NAME AMOUNT OF INDEBTEDNESS CLOSING SHARES
---- ---------------------- --------------
Infinity Investors Limited $6,000,000 2,400
--------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT - PAGE 40
(INFINITY/ORIX GLOBAL)
44
FORM EXHIBIT B
DEBENTURE
___________ June __, 1998
FOR VALUE RECEIVED, on or before ________, 2000 ("Maturity Date"), the
undersigned and if more than one, each of them, jointly and severally
(hereinafter referred to as "Borrower"), promises to pay to the order of
_________________("Lender") at its offices at _______________________ the
principal amount of ________________ DOLLARS ($_______) ("Total Principal
Amount"), or such amount less than the Total Principal Amount which is
outstanding from time to time if the total amount outstanding under this
Debenture ("Debenture") is less than the Total Principal Amount, together with
interest on such portion of the Total Principal Amount which has been advanced
to Borrower from the date advanced until paid at a fixed rate per annum equal to
the lesser of (a) the Maximum Rate (as hereinafter defined) or (b) eight percent
(8%), calculated on the basis of actual days elapsed but computed as if each
year consisted of 360 days. The term "Maximum Rate," as used herein, shall mean
at the particular time in question the maximum rate of interest, if any, which,
under applicable law, may then be charged on this Debenture. If such maximum
rate of interest changes after the date hereof and this Debenture provides for a
fluctuating rate of interest, the Maximum Rate shall be automatically increased
or decreased, as the case may be, without notice to Borrower from time to time
as of the effective date of each change in such maximum rate. If applicable law
ceases to provide for such a maximum rate of interest, the Maximum Rate shall be
equal to eighteen percent (18%) per annum.
The principal of and all accrued but unpaid interest on this Debenture
shall be due and payable as follows:
(a) interest shall be due and payable monthly as it accrues,
commencing on the ___ day of ____, 1998 and continuing on the last day
of each successive month thereafter during the term of this Debenture;
(b) principal of the Debenture shall be due and payable in
_________ equal monthly installments in the amount of ________ each,
commencing on ________, 1999 and continuing on the last day of each
successive month thereafter;
(c) in addition to the payments pursuant to subsection (b)
above, Borrower shall, on the last day of each calendar month, prepay
all or a portion of the principal balance of this Debenture from all
Available Cash Flow of Borrower. As used herein, Available Cash Flow
means the amount of cash on hand on such last day of such month and
received by Borrower from any source, less the cash expenses of
Borrower, any capital expenditures of Borrower, any principal and
interest payments on indebtedness of Borrower and a reserve maintained
in an amount determined by Borrower's Board of Directors, considering
current needs for operating capital and prudent reserves for future
operating capital; and
(d) the outstanding principal balance of this Debenture,
together with all accrued but unpaid interest, shall be due and payable
on the Maturity Date.
If a payment is ten (10) or more days late, Borrower will pay a
delinquency charge in an amount equal to the greater of (i) 5.0% of the amount
of the delinquent payment up to the maximum amount of $250.00, or (ii) $25.00.
Upon an Event of Default, including failure to pay upon final maturity, Lender,
at its option, may also, if permitted under applicable law, do one or both of
the following: (a) increase the interest rate provided for herein by three
(3.00) percentage points and (b) add any unpaid accrued interest to principal
and such sum will bear interest therefrom until paid at the rate provided in
this Debenture.
This Debenture evidences obligations and indebtedness from time to time
owing by Borrower to Lender pursuant to that certain Securities Purchase
Agreement of even date herewith by and between Borrower and Lender ("Securities
Purchase Agreement"), and is secured by a Security Agreement and Pledge
Agreement, each of even
DEBENTURE-Page 1
45
FORM
date herewith by Borrower, covering certain collateral as more particularly
described therein.
This Debenture, the Securities Purchase Agreement, such Security
Agreement and Pledge Agreement, and all other documents evidencing, securing,
governing, guaranteeing and/or pertaining to this Debenture, including but not
limited to those documents described above, are hereinafter collectively
referred to as the "Loan Documents." The holder of this Debenture is entitled to
the benefits and security provided in the Loan Documents.
Borrower may from time to time prepay all or any portion of the
principal of this Debenture without premium or penalty. Unless otherwise agreed
to in writing, or otherwise required by applicable law, payments will be applied
first to unpaid accrued interest, then to principal, and any remaining amount to
any unpaid collection costs, delinquency charges and other charges; provided,
however, upon delinquency or other Event of Default, Lender reserves the right
to apply payments among principal, interest, delinquency charges, collection
costs and other charges, at its discretion. All prepayments shall be applied to
the indebtedness owing hereunder in such order and manner as Lender may from
time to time determine in its sole discretion. All payments and prepayments of
principal of or interest on this Debenture shall be made in lawful money of the
United States of America in immediately available funds, at the address of
Lender indicated above, or such other place as the holder of this Debenture
shall designate in writing to Borrower. If any payment of principal of or
interest on this Debenture shall become due on a day which is not a Business Day
(as hereinafter defined), such payment shall be made on the next succeeding
Business Day and any such extension of time shall be included in computing
interest in connection with such payment. As used herein, the term "Business
Day" shall mean any day other than a Saturday, Sunday or any other day on which
national banking associations are authorized to be closed. The books and records
of Lender shall be prima facie evidence of all outstanding principal of and
accrued and unpaid interest on this Debenture.
Borrower agrees that no advances under this Debenture shall be used for
personal, family or household purposes, and that all advances hereunder shall be
used solely for business, commercial, investment or other similar purposes.
Borrower agrees that upon the occurrence of any one or more of the
following events of default ("Event of Default"):
(a) failure of Borrower to pay when due all or any part of the
principal on this Debenture or any other Debenture issued pursuant to
the terms of the Securities Purchase Agreement;
(b) failure of Borrower to pay (i) within twenty (20) Business
Days of the due date thereof any interest on this Debenture or any
other Debenture issued pursuant to the terms of the Securities Purchase
Agreement or (ii) within twenty (20) Business Days following the
delivery of notice to Borrower of any fees or any other amount payable
(not otherwise referred to in (a) above or this clause (b)) by Borrower
under this Debenture or any other Debenture issued pursuant to the
terms of the Securities Purchase Agreement;
(c) any representation, warranty, certification or statement
made by Borrower in the Securities Purchase Agreement or any Related
Agreement (as such term is defined in the Securities Purchase
Agreement) or which is contained in any certificate, document or
financial or other statement furnished at any time under or in
connection with the Securities Purchase Agreement or any Related
Agreement shall prove to have been untrue in any material respect when
made;
(d) failure on the part of Borrower to observe or perform any
of the covenants or agreement contained in Section 10 of the Securities
Purchase Agreement (Negative Covenants);
(e) failure on the part of Borrower to observe or perform any
covenant or agreement contained in the Securities Purchase Agreement or
any Related Document (other than those covered by
DEBENTURE-Page 2
46
FORM
clauses (a) through (d) above), which failure is not cured within
thirty (30) days of such failure;
(f) any of the Current Stockholders (as such term is defined
in the Securities Purchase Agreement) shall fail to perform, in any
material respect, any of their respective obligations under, or shall
have breached any material item of, the Securities Purchase Agreement
or any Related Agreement;
(g) Borrower or any Subsidiary (as such term is defined in the
Securities Purchase Agreement) has commenced a voluntary case or other
proceeding seeking liquidation, winding-up, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency, moratorium or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, or has consented to any such relief or to the appointment
of or taking possession by any such official in an involuntary case or
other proceeding commenced against it, or has made a general assignment
for the benefit of creditors, or has failed generally to pay its debts
as they become due, or has taken any corporate action to authorize any
of the foregoing;
(h) an involuntary case or other proceeding has been commenced
against Borrower or any Subsidiary, seeking liquidation, winding-up,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency, moratorium or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60
days, or an order for relief has been entered against Borrower or any
Subsidiary under the federal bankruptcy laws as now or hereafter in
effect; or
(i) judgments or orders for the payment of money which in the
aggregate at any one time exceed $250,000 and are not covered by
insurance have been rendered against Borrower or any Subsidiary by a
court of competent jurisdiction and such judgments or orders shall
continue unsatisfied and unstayed for a period of 60 days,
the holder of this Debenture may, at its option, without further notice or
demand, (i) declare the outstanding principal balance of and accrued but unpaid
interest on this Debenture at once due and payable, (ii) refuse to advance any
additional amounts under this Debenture, (iii) foreclose all liens securing
payment hereof, (iv) pursue any and all other rights, remedies and recourses
available to the holder hereof, including but not limited to any such rights,
remedies or recourses under the Related Agreements and Loan Documents, at law or
in equity, or (v) pursue any combination of the foregoing.
The failure to exercise the option to accelerate the maturity of this
Debenture or any other right, remedy or recourse available to the holder hereof
upon the occurrence of an Event of Default hereunder shall not constitute a
waiver of the right of the holder of this Debenture to exercise the same at that
time or at any subsequent time with respect to such Event of Default or any
other Event of Default. The rights, remedies and recourses of the holder hereof,
as provided in this Debenture and in any of the other Loan Documents, shall be
cumulative and concurrent and may be pursued separately, successively or
together as often as occasion therefore shall arise, at the sole discretion of
the holder hereof. The acceptance by the holder hereof of any payment under this
Debenture which is less than the payment in full of all amounts due and payable
at the time of such payment shall not (i) constitute a waiver of or impair,
reduce, release or extinguish any right, remedy or recourse of the holder
hereof, or nullify any prior exercise of any such right, remedy or recourse, or
(ii) impair, reduce, release or extinguish the obligations of any party liable
under any of the Loan Documents as originally provided herein or therein.
This Debenture and all of the other Loan Documents and Related
Agreements are intended to be performed in accordance with, and only to the
extent permitted by, all applicable usury laws. If any provision hereof or of
any of the other Loan Documents or Related Agreements or the application thereof
to any person or circumstance shall, for any reason and to any extent, be
invalid or unenforceable, neither the application of such provision to any other
person or circumstance nor the remainder of the instrument in which such
provision is
DEBENTURE-Page 3
47
FORM
contained shall be affected thereby and shall be enforced to the greatest extent
permitted by law. It is expressly stipulated and agreed to be the intent of the
holder hereof to at all times comply with the usury and other applicable laws
now or hereafter governing the interest payable on the indebtedness evidenced by
this Debenture. If the applicable law is ever revised, repealed or judicially
interpreted so as to render usurious any amount called for under this Debenture
or under any of the other Loan Documents, or contracted for, charged, taken,
reserved or received with respect to the indebtedness evidenced by this
Debenture, or if Lender's exercise of the option to accelerate the maturity of
this Debenture, or if any prepayment by Borrower results in Borrower having paid
any interest in excess of that permitted by law, then it is the express intent
of Borrower and Lender that all excess amounts theretofore collected by Lender
be credited on the principal balance of this Debenture (or, if this Debenture
and all other indebtedness arising under or pursuant to the other Loan Documents
have been paid in full, refunded to Borrower), and the provisions of this
Debenture and the other Loan Documents and Related Documents immediately be
deemed reformed and the amounts thereafter collectable hereunder and thereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the then applicable law, but so as to permit the recovery of the
fullest amount otherwise called for hereunder or thereunder. All sums paid, or
agreed to be paid, by Borrower for the use, forbearance, detention, taking,
charging, receiving or reserving of the indebtedness of Borrower to Lender under
this Debenture or arising under or pursuant to the other Loan Documents and
Related Agreements shall, to the maximum extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full so that the rate or amount of interest on
account of such indebtedness does not exceed the usury ceiling from time to time
in effect and applicable to such indebtedness for so long as such indebtedness
is outstanding. Notwithstanding anything to the contrary contained herein or in
any of the other Loan Documents and Related Agreements, it is not the intention
of Lender to accelerate the maturity of any interest that has not accrued at the
time of such acceleration or to collect unearned interest at the time of such
acceleration.
If this Debenture is placed in the hands of an attorney for collection,
or is collected in whole or in part by suit or through probate, bankruptcy or
other legal proceedings of any kind, Borrower agrees to pay, in addition to all
other sums payable hereunder, all costs and expenses of collection, including
but not limited to reasonable attorneys' fees.
Borrower and any and all endorsers and guarantors of this Debenture
severally waive presentment for payment, notice of nonpayment, protest, demand,
notice of protest, notice of intent to accelerate, notice of acceleration and
dishonor, diligence in enforcement and indulgences of every kind and without
further notice hereby agree to renewals, extensions, exchanges or releases of
collateral, taking of additional collateral, indulgences or partial payments,
either before or after maturity.
Any and all payments by Borrower hereunder to any holder of this
Debenture and each "qualified assignee" thereof shall be made free and clear of
and without deduction or withholding for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto (all such taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes") unless
such Taxes are required by law or the administration thereof to be deducted or
withheld. If Borrower shall be required by law or the administration thereof to
deduct or withhold any Taxes from or in respect of any sum payable with respect
to this Debenture (i) the sum payable shall be increased as may be necessary so
that after making all required deductions or withholdings (including deductions
or withholdings applicable to additional amounts paid under this paragraph) such
holder of this Debenture receives an amount equal to the sum it would have
received if no such deduction or withholding had been made; (ii) Borrower shall
make such deductions or withholdings; and (iii) Borrower shall forthwith pay the
full amount deducted or withheld to the relevant taxation or other authority in
accordance with applicable law. A "qualified assignee" of a holder of this
Debenture is a person that is organized under the laws of (I) the United States
or (II) any jurisdiction other than the United States or any political
subdivision thereof and that (y) represents and warrants to Borrower that
payments of Borrower to such assignee under applicable law would not be subject
to any Taxes and (z) from time to time, as and when requested by Borrower,
executes and delivers to Borrower and the Internal Revenue Service forms, and
provides Borrower with any information, necessary to establish such assignee's
continued exemption from Taxes under applicable law. Borrower shall forthwith
pay any present or future stamp or documentary taxes or any other excise
DEBENTURE-Page 4
48
FORM
or property taxes, charges or similar levies (all such taxes, charges and levies
hereinafter referred to as "Other Taxes") which arise from any payment made
under this Debenture or the transactions contemplated hereby. Borrower shall
indemnify each holder of this Debenture, or qualified assignee, for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this paragraph)
paid by each holder of this Debenture, or qualified assignee, and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. Payment under this indemnification shall be made within 30 days from
the date such holder of this Debenture or assignee makes written demand
therefor. A certificate as to the amount of such Taxes or Other Taxes submitted
to Borrower by such holder of this Debenture or assignee shall be conclusive
evidence of the amount due from Borrower to such party. Within 30 days after the
date of any payment of Taxes, Borrower will furnish to each holder of this
Debenture the original or a certified copy of a receipt evidencing payment
thereof.
[SIGNATURE PAGE FOLLOWS]
DEBENTURE-Page 5
49
FORM
THIS DEBENTURE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF
THE STATE OF NEVADA AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SAID STATE.
BORROWER:
--------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
DEBENTURE-Page 6
50
EXHIBIT C
SECURITIES PURCHASE AGREEMENT
DATED JUNE 11, 1998
[INTENTIONALLY OMITTED]
51
DISCLOSURE SCHEDULE
SCHEDULE 4(d)
SECURITIES PURCHASE AGREEMENT
DATED JUNE 11, 1998
LIST OF SHAREHOLDERS
Holder Number of Shares
------ ----------------
Xxxxx X. Xxxxxx 650
W. Xxxxx Xxxx 50
Xxxxxx X. Xxxxx 50
Xxxxxxx X. Xxxxx 30
Xxxx Xxxxxxx 305
Xxxxxx X. Xxxxxx 100
Nea1 Xxxxxxxx l5
52
SCHEDULE 4(m)
SECURITIES PURCHASE AGREEMENT
DATED JUNE 11, 1998
INTELLECTUAL PROPERTY
THE COMPANY DOES NOT HOLD ANY PATENTS OR REGISTERED TRADEMARKS. MATERIAL AND
MARKS DEVELOPED AND USED IN THE NORMAL COURSE OF BUSINESS ARE SUBJECT TO
PROTECTION UNDER COPYRIGHT AND TRADEMARK LAW.
53
SCHEDULE 4(n)
SECURITIES PURCHASE AGREEMENT
DATED JUNE 11, 1998
INSURANCE
1. PROPERTY, INLAND MARINE, GENERAL LIABILITY COVERAGE FOR LAS VEGAS
AND KANSAS:
RELIANCE INSURANCE CO.
2. GROUP HEALTH INSURANCE (COMPANY PAYS 80% OF PREMIUM FOR EMPLOYEES)
SIERRA HEALTH & LIFE INSURANCE CO.
3. PROGRESSIVE AUTO INSURANCE
4. TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
LIFE INSURANCE POLICY FOR XXXXX X. XXXXXX
54
SCHEDULE 4(o)
SECURITIES PURCHASE AGREEMENT
DATED JUNE 11, 1998
AGREEMENTS
55
INDEX
CONTRACTS:
1. AT&T MASTER CARRIER AGREEMENT
2. DIGITAL
3. DSC EQUIPMENT LEASE & FINANCING
4. FIBERNET
5. IXC
6. MCI/AVANTEL
7. QWEST
8. RSL COMMUNICATIONS
9. STAR TELECOM
10. TOTAL
11. VERIO
12. WORLDCOM
LEASES:
1. KANSAS OFFICE LEASE
2. LAS VEGAS OFFICE LEASE
3. MEXICO CITY OFFICE LEASE
4. MEXICO CITY APARTMENT LEASE
56
SCHEDULE 4(p)
SECURITIES PURCHASE AGREEMENT
DATED JUNE 11, 1998
PERMITS AND INVESTIGATION
57
STREAMLINE INTERNATIONAL SECTION 214 APPLICATION
ACCEPTED FOR FILING
(Formal Section 63.18)
The applications listed below have been found, upon initial review, to be
acceptable for filing and subject to the streamlined processing procedures set
forth in Section 63.12 of the Commission's Rules, 47 C.F.R. Section 63.12. These
applications are for authority: (1) to be a facilities-based carrier; and/or (2)
to resell the switched services of other common carriers to provide
international switched telecommunications services between the United States and
international points; and/or (3) to resell the private line services of other
common carriers to provide: (i) non-interconnected international private line
services between the United States and international points, and/or (ii)
switched services to a country which the Commission has determined provides
equivalent resale opportunities to U.S. carriers. See Regulation of
International Accounting Rates 7 FCC Rcd 7927, 7928 (1992).
ITC-97-199 ORIX LEASING, INC
Global Facilities-based/Global Resale Services
Application for authority to operate as a facilities-based carrier in accordance
with the provisions of Section 63.18(e)(1) of the rules and also to provide
service in accordance with the provisions of Section 63.18(e)(2) of the rules.
ITC-97-198 PACIFIC RIM DATA GROUP, INC
Global Facilities-based/Global Resale Services
Application for authority to operate as a facilities-based carrier in accordance
with the provisions of Section 63.18(e)(1) of the rules and also to provide
service in accordance with the provisions of Section 63.18(e)(2) of the rules.
ITC-97-197 TELSTAR INTERNATIONAL, INC
Global Resale Services
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
ITC-97-196 CRG INTERNATIONAL, INC D/B/A NETWORK ONE
Global Resale Services
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
ITC-97-195 NUMERA COMMUNICATIONS EXCHANGE, INC
Global Resale Services
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
ITC-97-194 STRATACOM INTERNATIONAL LTD
Global Resale Services
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
ITC-97-193 RURAL NETWORK SERVICES, INC
Global Resale Services
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
ITC-97-192 KEYART COMM, INC
58
[XXXXX XXXXX & XXXXX P.L.C. LETTERHEAD]
Our File No.
0000-000-00
July 25, 1997
Via Facsimile (000) 000-0000
Xx. Xxxxxx Xxxxxx
Executive President
Orix Leasing, Inc.
0000 X. Xxxxxxxx Xxxx
Xxxxxxxx X, Xxxxx 000
Xxx Xxxxx, XX 00000
Dear Xx. Xxxxxx:
Attached hereto is a Public Notice issued by the Federal Communications
on May 22, 1997. This Public Notice indicates that the application of Orix
Leasing, Inc. to operate as an international facilities-based and resale
carrier was granted, effective May 16, 1997.
This Public Notice will serve as authorization to offer the services
specified in the application of Orix Leasing, Inc. The FCC will not issue any
further authorization pursuant to this application.
If I can provide you with any further information concerning this
application, please contact me immediately.
Sincerely yours,
/s/ XXXX XXXXXXX
Xxxx Xxxxxxx
JC:dr
Enclosure
59
[SEAL] PUBLIC NOTICE [XXXXX XXXXX, & XXXXX STAMP]
FEDERAL COMMUNICATIONS COMMISSION
0000 X XXXXXX X.X.
XXXXXXXXXX X.X. 00000
----------------------------------------------------------------
News media information 000-000-0000. Recorded listing of releases and
texts 000-000-0000
Report No.: I-8243 Thursday, May 22, 0000
XX 00-0000
XXXXXXXX XXXXXX CARRIER SECTION 214 APPLICATIONS
ACTIONS TAKEN
The following applications for international section 214 certification have been
granted pursuant to the Commission's streamlined processing procedures set forth
in Section 63.12 of the Commission's Rules. 47 C.F.R. Section 63.12. Unless
otherwise noted, these authorizations grant the referenced applicants (1) global
or limited global facilities-based authority; and/or (2) global or limited
global resale authority. The general terms and conditions of such global
authority are set forth in Section 63.18(e)(1) & (2) of the Commission's rules,
47 C.F.R. Section 63.18(e)(1) & (2). These authorizations also are subject to
all other applicable Commission rules and policies. This Public Notice serves as
each referenced carrier's Section 214 authorization. It contains general and
specific conditions which are set forth below.
ITC-97-199 GLOBAL FACILITIES-BASED/GLOBAL RESALE SERVICES
ORIX LEASING, INC effective: 5/16/97
Application for authority to operate as a facilities-based carrier in accordance
with the provisions of Section 63.18(e)(1) of the rules and also to provide
service in accordance with the provisions of Section 63.18(e)(2) of the rules.
ITC-97-198 GLOBAL FACILITIES-BASED/GLOBAL RESALE SERVICES
PACIFIC RIM DATA GROUP, INC effective: 5/16/97
Application for authority to operate as a facilities-based carrier in accordance
with the provisions of Section 63.18(e)(1) of the rules and also to provide
service in accordance with the provisions of Section 63.18(e)(2) of the rules.
ITC-97-197 GLOBAL RESALE SERVICES
TELSTAR INTERNATIONAL, INC effective: 5/16/97
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
lTC-97-196 GLOBAL RESALE SERVICES
CRG INTERNATIONAL, INC D/B/A NETWORK ONE effective: 5/16/97
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
ITC-97-195 GLOBAL RESALE SERVICES
NUMERA COMMUNICATIONS EXCHANGE, INC effective: 5/16/97
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
ITC-97-194 GLOBAL RESALE SERVICES
STRATACOM INTERNATIONAL LTD effective: 5/16/97
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
ITC-97-193 GLOBAL RESALE SERVICES
RURAL NETWORK SERVICES, INC effective: 5/16/97
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
ITC-97-192* GLOBAL RESALE SERVICES
KEYART COMM, INC effective: 5/16/97
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
See Appendix A.
60
SCHEDULE 4(r)
SECURITIES PURCHASE AGREEMENT
DATED JUNE 11, 1998
EMPLOYEES
61
ORIX GLOBAL COMMUNICATIONS
re: Annual Salary
thru: 6/12/98
Employee Annual Salary
-------- -------------
Xxxxxx 70,000.00
Xxxxx 12,000.00
Deilaporta 18,000.00
Xxxxx 26,000.00
Xxxxxxx 39,000.00
Xxxxxxx 60,000.00
XxXxxxx 50,000.00
XxXxxxxx 30,000.00
XxXxxxx 25,000.00
Michel, J. 19,760.00
Michel, R. 120,000.00
Murrieta 36,000.00
Xxxxx, A. 29,000.00
Xxxxx, J. 26,000.00
Xxxxx 33,000.00
Xxxxxxxxx 45,000.00
Xxxxxx 150,000.00
Xxxxxx 22,737.00
Xxxxxxxx 36,000.00
Consultants Annual Salary
----------- -------------
Xxxxx 18,000.00
Xxxxxxx 65,000.00
62
SCHEDULE 4(u)
SECURITIES PURCHASE AGREEMENT
DATED JUNE 11, 1998
INDEBTEDNESS - RELATED PARTY TRANSACTION
XXXXX XXXXXX ADVANCED THE SUM OF $164,000 TO THE COMPANY.
63
[XXXXXXX & COMPANY LETTERHEAD]
June 11, 1998
Infinity Investments Limited
00 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx
X0X0XX
Dear Sirs:
We have acted as counsel to Orix Global Communications, Inc., a Nevada
Corporation (the "Corporation"), in connection with the issuance and amendment
of debentures of the Corporation, and the assumption of debentures of Touch Tone
America, Inc., pursuant to a certain Securities Purchase Agreement dated June
11, 1998, by and among Infinity Investments Limited and the Corporation (the
"Agreement"), the issuance of 2,400 shares of the capital stock of the
Corporation to Infinity Investments Limited (the "Shares"), and the execution
of Related Agreements, as such term is defined under the Agreement.
In connection with rendering this opinion, we have relied on the certificates of
officers of the Corporation, and upon representations and agreements of the
Corporation contained in the Agreement and the Related Agreements. We further
examined originals or copies identified to our satisfaction of the following:
1. Articles of Incorporation of the Corporation, as amended;
2. The Minute Book of the Corporation containing the written deliberations
and resolutions of the Board of Directors and Shareholders of the
Corporation; and
3. The Agreement and Related Agreements.
We have examined such other corporate documents and records, instruments and
certificates of public officials, officers and representatives of the
Corporation, and have made such investigations as we have deemed necessary or
appropriate under the circumstances.
Based on the foregoing, and on reliance thereon, we are of the opinion that:
1. The Corporation has full corporate power and authority to enter into
the Agreement and the Related Agreements.
2. The Corporation has taken all requisite corporate action to authorize
and approve the execution and delivery of the Agreement and the Related
Agreements, and the consummation of the transactions contemplated
therein.
3. The Agreement and the Related Agreements have been duly executed and
delivered by the
64
Infinity Investments Limited
June 11, 1998
Page 2
Corporation and is binding on the Corporation in accordance with its
terms, except (i) as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, or other similar laws of
general application now and hereafter in effect relating to creditors'
rights, and (ii) that the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court (in equity or in law)
before which any proceeding therefore may brought.
4. The issuance of the Shares has been duly authorized as fully paid and
non assessable.
This opinion is delivered solely to you and not be relied upon by any other
person or entity.
Very truly yours,
/s/ XXXXXXX & COMPANY
XXXXXXX & COMPANY
65
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT ("Agreement") is entered into as of June
11, 1998 among ORIX GLOBAL COMMUNICATIONS, INC. (the "Company"), the purchasers
of Common Stock of the Company listed on the signature pages below (individually
a "Purchaser" and collectively the "Purchasers"), the current holders of Common
Stock of the Company listed on the signature pages below and such other parties
as may from time to time and with the consent of the Company become parties
hereto (collectively, but excluding the Purchasers, the "Common Stockholders").
The Purchasers and Common Stockholders are collectively referred to as the
"Stockholders".
RECITALS:
The Company, certain of the Common Stockholders and the Purchasers
have entered into a Securities Purchase Agreement (the "Purchase Agreement") on
this date, providing, among other things, for the extension by the Purchasers of
credit to the Company pursuant to the purchase by the Purchasers of Debentures
of the Company (the "Debentures") on the terms and conditions set forth in such
Purchase Agreement. In connection with such extension of credit, the Company
shall issue to the Purchasers 2,400 shares of common stock ("Common Stock")
of the Company (the "Closing Shares") for a purchase price of $0.01 per share.
Terms defined in the Purchase Agreement and not otherwise defined herein are
used herein with the same meanings as defined in the Purchase Agreement.
This Agreement is the Stockholders Agreement referred to in the
Purchase Agreement. The parties deem it in the best interests of the Company to
provide for consistent and uniform management of the Company. The parties also
desire to restrict the sale, assignment, transfer, encumbrance or other
disposition of certain shares of Common Stock and to provide for certain rights
in respect of Purchaser's holdings of securities as hereinafter provided.
Furthermore, the execution and delivery of this Agreement is a condition to the
Closing under the Purchase Agreement.
Accordingly, the parties agree as follows:
1. WAIVER OF PREEMPTIVE RIGHTS. Each Common Stockholder, by his or her
execution and delivery of this Agreement, hereby approves and consents to the
issuance to the Purchasers of the Closing Shares and waives any preemptive right
of such Common Stockholder under applicable law or the Company's Articles of
Incorporation associated therewith.
2. VOTING PROVISIONS.
(a) NUMBER AND COMPOSITION OF BOARD OF DIRECTORS. The Board of
Directors of the Company shall at all times consist of not more than
five (5) and not less
--------------------------------------------------------------------------------
STOCKHOLDERS AGREEMENT - PAGE 1
(INFINITY/ORIX)
66
than three (3) members. The initial Board of Directors shall
consist of five (5) Directors. Such number of directors may be
increased only by a unanimous vote of the Board of Directors. The
Purchasers and the Common Stockholders agree that in any election
of directors of the Company they shall vote all shares of capital
stock of the Company owned or controlled by them to elect a Board
of Directors designated as follows:
(i) three (3) directors shall be designated by
the Purchasers (each a "Purchaser Director") for so long
as the Purchasers shall continue to hold at least
one-third of the Closing Shares. Such Purchaser Directors
shall be designated by the Purchasers of a majority in
interest of the Closing Shares then held by the Purchasers
at the time of such designation; and
(ii) two (2) directors shall be designated by the
Founders (each a "Common Stockholder Director"), by a
majority in interest of Common Stock then held by the
Founders, for so long as the Founders continue to hold at
least one-third of the shares of Common Stock held by
the Common Stockholders as of the date hereof (except as
otherwise specified in Section 4 below).
In the event the Purchasers assign a portion of their Closing
Shares to AXIS, the Stockholders agree to increase the Board of Directors
to seven (7) members, two (2) selected by the Purchasers, two (2) selected
by AXIS, two (2) selected by the Founders and the President of the Company,
which agreement shall apply during the same time periods as specified in
clauses (i) and (ii) above.
(b) INITIAL BOARD. The initial Board of Directors shall
consist of the individuals listed on Schedule A hereto.
(c) VACANCIES; REMOVAL. In the event of any vacancy in the
Board of Directors, each of the Purchasers and the Common
Stockholders agrees to vote all shares of Common Stock owned or
controlled by them and to otherwise use their best efforts to fill
such vacancy so that the Board of Directors of the Company will
include directors designated as provided in Paragraph 2(a). Each
of the Purchasers and the Common Stockholders agree to vote all
shares of Common Stock owned or controlled by them for the removal
of a director whenever (but only whenever) there shall be
presented to the Board of Directors the written direction that
such director be removed, signed by the holders of a majority in
interest of the Common Stock entitled to designate such director.
Following the removal of any director, each of the parties agrees
to use its best efforts to cause replacement designees to be
elected to the Board of Directors so that the Board will include
directors designated as provided in Paragraph 2(a).
(d) MEETINGS. The Company agrees to hold regular meetings
of the Board of Directors at least once during each fiscal
quarter. The Company will give each Purchaser written notice at
least three days (24 hours, in the case of a telephone meeting) in
advance of all meetings of the Board of Directors, and will permit
such Purchaser, if such
--------------------------------------------------------------------------------
STOCKHOLDERS AGREEMENT - PAGE 2
(INFINITY/ORIX)
67
Purchaser has not designated a Purchaser Director, to attend
meetings of the Board of Directors. If the Purchaser Director
designated by a Purchaser is not able to attend a Board of
Directors meeting or a meeting of a committee on which he
serves, such Purchaser may designate any one Person to attend
as an observer. The Company shall furnish each Purchaser with
a copy of the minutes and other records of all meetings and
other actions taken by the Board of Directors and its
committees and all written materials given to directors in
connection with such meeting at the same time such materials
and information are given to the directors. If the Company
proposes to take any action by written consent in lieu of a
meeting of its Board of Directors or any committee thereof,
the Company shall give written notice thereof to each such
Purchaser prior to the effective date of such consent
describing in reasonable detail the nature and the substance
of such action.
(e) EXPENSES. The Company shall reimburse all Persons
serving as directors for their actual and reasonable
out-of-pocket expenses incurred in attending meetings of the
Board of Directors and all committees thereof and otherwise
incurred in connection with the business of the Company or in
fulfilling their duties as directors. If a Purchaser has not
designated a Purchaser Director or if the Purchaser Director
designated by such Purchaser is unable to attend a meeting of
the Board of Directors or a committee on which he serves, the
Company shall reimburse one representative of such Purchaser
for actual and reasonable out-of-pocket expenses incurred in
attending meetings of the Board of Directors and such
committees.
(f) PRESIDENT. The Company, each Purchaser and each
Common Stockholder further hereby agrees to take all actions
(and to use their best efforts to cause the Board designees
specified in Paragraph (b) above to take all actions)
necessary to (x) cause Xxxxx Xxxxxxxx to be elected as the
President and Treasurer of the Company and each Subsidiary,
and (y) adopt a resolution of the Board of Directors of the
Company and each Subsidiary granting the President and
Treasurer the sole and exclusive authority over the banking
and cash management activities of the Company and each
Subsidiary, including the authority to make any disbursement
of cash or non-cash assets of the Company or any Subsidiary
consistent with, and on the terms specified in, Section
10(ix) of the Purchase Agreement.
(g) INDEMNIFICATION AGREEMENTS. At the Closing and on
each later date that a Purchaser Director or any other
director is first elected or appointed to the Board of
Directors, the Company shall enter into an indemnification
agreement in substantially the form attached as Exhibit A with
each Purchaser Director and each other director of the Company
who is elected or appointed to the Board of Directors on such
date.
(h) DIRECTORS AND OFFICERS LIABILITY INSURANCE. The
Company will use its best efforts to obtain and maintain in
force with a financially sound and reputable insurer, a
director, officers and corporate liability insurance policy
having a limit of liability of
--------------------------------------------------------------------------------
STOCKHOLDERS AGREEMENT - PAGE 3
(INFINITY/ORIX)
68
not less than $10,000,000 and providing coverage acceptable to
the Board of Directors (with a majority of the Purchaser
Directors concurring).
(i) CHARTER, BY-LAWS. The Company, each Purchaser and
each Common Stockholder shall vote all shares of Common Stock
owned by them and take all other action necessary (including,
without limitation, removing any director) to ensure that the
Company's Articles of Incorporation and By-Laws do not at any
time conflict with the provisions of this Agreement.
3. PROVISIONS RELATING TO RESTRICTED STOCK.
(a) RESTRICTIONS ON TRANSFER.
(i) For purposes of this Agreement,
"Restricted Stock" means all Common Stock and other
capital stock now owned or subsequently acquired by
any Stockholder (or a transferee of a Stockholder in
a Permitted Transfer). During the term of this
Agreement, none of the shares of Restricted Stock may
be sold, assigned, transferred, pledged, encumbered
or otherwise disposed of (a "transfer") except in a
"Permitted Transfer" (as defined below) or a transfer
that complies with the provisions of this Section 3.
(ii) Any attempted transfer of shares of
Restricted Stock other than in accordance with this
Agreement shall be null and void and the Company
shall refuse to recognize any such transfer and shall
not reflect on its records any change in record
ownership of shares of Restricted Stock pursuant to
any such transfer. The certificates representing all
shares of Restricted Stock shall bear the legend set
forth in Paragraph 7(a) of this Agreement.
(iii) The following transfers of Restricted
Stock (each a "Permitted Transfer") may be made free
of the restrictions and requirements of Paragraph
3(b) hereof: (A) an individual holder of Restricted
Stock may transfer any or all of the shares of
Restricted Stock owned by him to his spouse or
children, or to trusts established for the benefit of
his spouse or children, provided that the transferee
grants to the transferor an irrevocable proxy coupled
with an interest to vote all of the shares of
Restricted Stock so transferred; (B) a partnership,
corporation or trust holding Restricted Stock may
transfer any shares of Restricted Stock owned by such
holder (1) to its Affiliates, (2) to its general or
limited partners, stockholders or beneficiaries, or
(3) to an entity owned by or organized for the
benefit of the general or limited partners,
stockholders, officers, directors, employees,
Affiliates or beneficiaries of such holder, as
applicable; (c) a Person may sell Restricted Stock to
the Company or to the Stockholders pursuant to an
agreement under which the Company or such
Stockholders have the option to repurchase such
Restricted Stock upon the occurrence of certain
events, including the termination of employment by or
service to the Company or any
--------------------------------------------------------------------------------
STOCKHOLDERS AGREEMENT - PAGE 4
(INFINITY/ORIX)
69
subsidiary of the Company; (D) the Purchasers may
participate or assign 50% or less of the Closing
Shares to AXIS or any other Person; and (E) in
addition to the rights under clause (A) above, the
Founders may assign, within 30 days of the date
hereof, up to 10% of the aggregate shares of Common
Stock owned by the Founders to employees of the
Company or other Persons. Any transferee in a
Permitted Transfer is referred to herein as a
"Permitted Transferee". Any transferee of shares of
Common Stock in any Permitted Transfer shall,
however, take such shares subject to the terms of
this Agreement.
(b) RIGHT OF FIRST REFUSAL AND CO-SALE.
(i) Except as set forth herein no Stockholder
or Permitted Transferee of Stockholder may sell any
shares of Restricted Stock other than in a Permitted
Transfer.
(ii) Subject to this Section 3, whenever and
as often as any Stockholder or a Permitted Transferee
of any Stockholder desires to sell any shares of
Restricted Stock pursuant to a bona fide written
offer to purchase such shares other than in a
Permitted Transfer, such Person (the "Selling Holder"
for purposes of this Paragraph 3(b)) shall give
written notice (the "Notice") to the Company, and to
each other Stockholder (each an "Offeree") to such
effect, enclosing a copy of such offer and
specifying the number of shares of Restricted Stock
which the Selling Holder desires to sell, the name of
the person or persons to whom the Selling Holder
desires to make such sale and the consideration per
share of Common Stock which has been offered in
connection with such offer. In the event such
consideration includes non-cash consideration, the
dollar value of such non-cash consideration shall be
its fair market value, as determined by the Board of
Directors.
(iii) Upon receipt of the notice, the Company
shall have the first right and option to purchase the
shares proposed to be sold for cash at the purchase
price per share specified in the Notice, exercisable
for ten (10) Business Days after receipt of the
Notice. Failure of the Company to respond to such
Notice within such 10-day period shall be deemed to
constitute a notification to the Selling Holder and
the Offerees of the Company's decision not to
exercise the first right and option to purchase such
shares under this Paragraph 3(b)(iii). The Company
may exercise its right and option to purchase such
Restricted Stock by giving written notice of exercise
to the Selling Holder within such 10-day period,
specifying the date (not later than three Business
Days from the date of such notice) upon which payment
of the purchase price for the shares shall be made.
The Selling Holder shall deliver to the Company's
principal office, on or before the payment date
specified in such notice, the certificate or
certificates representing the shares being purchased
by the Company, properly endorsed for
--------------------------------------------------------------------------------
STOCKHOLDERS AGREEMENT - PAGE 5
(INFINITY/ORIX)
70
transfer, against payment of the purchase price
therefor by the Company in immediately available
funds.
(iv) In the event that all of the shares of
Restricted Stock proposed to be transferred are not
purchased by the Company, the Offerees shall have the
right and option to purchase the shares not purchased
by the Company for cash at the purchase price and on
the same terms as specified in the Notice to the
Company, pro rata according to their respective
holdings of Common Equivalents, exercisable for five
Business Days after the expiration of the 10-day
period during which the Company may exercise its
option pursuant to Paragraph 3(b)(iii). Failure of
any Offeree to respond to the Notice within such
five-day period shall be deemed to constitute a
notification to the Selling Holder of such Offeree's
decision not to exercise the first right and option
to purchase shares of Restricted Stock under this
Paragraph 3(b)(iv). If any Offeree fails to exercise
its first right and option to purchase its full pro
rata shares of the shares of Restricted Stock
proposed to be transferred, the Selling Holder shall
give written notice to each of the other Offerees who
has elected to purchase its full pro rata share of
the shares of Restricted Stock proposed to be
transferred, and each such Offeree shall have the
right, exercisable for a period of three Business
Days from the date of receipt of such notice, to
purchase the remaining shares of Restricted Stock,
pro rata according to the Common Equivalents held by
all such electing Offerees or in such other
proportions as they may agree upon.
(v) The Offerees may exercise the right and
option provided under Paragraph 3(b)(iv) by giving
written notice of exercise to the Selling Holder
within the period or periods set forth above,
specifying the date (not later than five Business
Days from the date of expiration of all applicable
first right and options to purchase shares under
Paragraphs 3(b)(ii) and 3(b)(iv)) upon which payment
of the purchase price for the shares purchased under
Paragraphs 3(b)(iv) shall be made. The Selling Holder
shall deliver to the Offeree(s) at the Company's
principal office, at least one day prior to the
payment date, wire transfer instructions, and on or
before the payment date specified in such notice, the
certificate or certificates representing such shares,
properly endorsed for transfer, against payment of
the purchase price therefor by the Offeree(s) in
immediately available funds.
(vi) If all the shares of Restricted Stock
proposed to be transferred are not purchased by the
Offerees and the Company in accordance with this
Paragraph 3(b), the Selling Holder shall not be
required to sell any of the shares of Restricted
Stock proposed to be transferred to the Offerees or
to the Company, and during the 90-day period
commencing on the expiration of the rights and
options provided for in this paragraph, may sell all
(but not less than all) of such shares to the
transferee named in the Notice for a consideration
equal to or greater
--------------------------------------------------------------------------------
STOCKHOLDERS AGREEMENT - PAGE 6
(INFINITY/ORIX)
71
than the consideration specified in the Notice
subject to the terms and conditions of Paragraph
3(b)(vii) below.
(vii) Each Stockholder, at such Stockholder's
option, may elect either to exercise the right and
option to purchase shares of Restricted Stock
proposed to be transferred under Paragraph 3(b)(iv)
or to participate in the sale to the prospective
purchaser pursuant to this Paragraph 3(b)(vii). The
Selling Holder will use best efforts to arrange for
the sale to the prospective purchaser by each such
Stockholder of the number of shares of Common Stock
which bears the same proportion to the total number
of shares of Common Stock owned by such Stockholder
as the number of shares of Restricted Stock being
sold by the Selling Holder bears to the total number
of shares of Restricted Stock owned by the Selling
Holder and such other Stockholder, at the purchase
price per share and on the terms and conditions
specified in the Notice. If the prospective purchaser
will not purchase all the shares of Restricted Stock
which the Selling Holder wishes to sell together with
the number of shares of Common Stock that
Stockholders wish to sell pursuant to this Paragraph
3(b)(vii), the number of shares which the Selling
Holder and such Stockholders shall be entitled to
sell to such prospective purchaser shall be a number
of shares equal to the number of shares which the
prospective purchaser desires to purchase times a
fraction, the numerator of which is the number of
shares of Common Stock owned by the Selling Holder or
each Stockholder, as applicable and the denominator
of which is the aggregate number of shares of Common
Stock held by the Selling Holder and all such
Stockholders. A Stockholder may exercise its right
under this paragraph by written notice given within
15 Business Days after receipt of the Notice.
(c) PURCHASERS OR TRANSFEREES OF RESTRICTED STOCK.
Except as otherwise specifically provided herein, any
Permitted Transferee or other Person who shall acquire (either
voluntarily or involuntarily, by operation of law or
otherwise) any shares of Restricted Stock shall be bound by
all the terms and conditions of this Agreement to the same
extent as the parties hereto and, prior to registration of the
transfer of any such securities on the books of the Company,
any purchaser or other transferee shall execute an agreement
with the parties hereto agreeing to be bound hereby.
4. PURCHASE OPTION UPON TERMINATION OF EMPLOYMENT.
(a) PURCHASER'S RIGHT TO PURCHASE. In the event the
employment of any Founder (as defined in the Purchase
Agreement) is terminated by the Company or any of its
Subsidiaries (for any reason or for no reason) or by such
Founder including, without limitation, by reason of voluntary
resignation, the death or disability of such Founder, such
Founder (the "Offering Stockholder") and/or the Company shall
immediately give written notice (the "Notice of Termination")
to the Stockholders of such termination. The occurrence of an
event requiring delivery of a Notice of Termination (whether
or not
--------------------------------------------------------------------------------
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72
delivered) shall constitute an offer by the Offering
Stockholder to sell all shares of Common Stock of the Company
then owned by such Offering Stockholder, together with all
shares of such Offering Shareholder previously transferred to
a Permitted Transferee (collectively, the "Termination
Shares") to the Other Stockholders (collectively, the "Offeree
Stockholders" and individually, an "Offeree Stockholder"). In
such event the Offeree Stockholders will have the right and
option, but shall not be required, to purchase for cash all,
but not less than all, of the Termination Shares of the
Offering Stockholder. The option to purchase may be exercised
by Offeree Stockholders at any time through and including the
30th day after the Purchase Price Determination Date (as
hereafter defined) or such option will expire. The Offeree
Stockholders shall, at their option, be authorized to acquire
the Termination Shares of the Offering Stockholder pro rata
according to their respective holdings of shares of Common
Stock.
(b) FOUNDERS AND COMPANY'S RIGHT TO PURCHASE.
Notwithstanding subsection (a) above to the contrary, the
remaining Founders who continue to own shares of Common Stock
at the time of a delivery of a Notice of Termination shall
have the right, prior to the right specified in subsection (a)
above, to purchase, on a pro rata basis, the Termination
Shares of the Offering Stockholder. Such option must be
exercised within ten (10) days of the date of the Notice or
Termination of such option shall expire. In the event that the
Founders and/or the Offeree Stockholders elect not to purchase
all of the Termination Shares from the Offering Stockholder,
the Company shall have the right, but not the obligation,
exercisable for a period of fifteen (15) days following the
expiration of the Offeree Stockholders' option as specified in
subsection (a) above, to purchase the Termination Shares.
(c) PURCHASE PRICE. The total purchase price to be
paid for the Offering Stockholder's Termination Shares
pursuant to this Section (the "Purchase Price") will be an
amount equal to the Fair Market Value Per Share multiplied by
the number of such Termination Shares to be sold. Fair Market
Value Per Share means the fair market value of the Common
Stock as determined by the Company based on a valuation of the
Company and its Subsidiaries as a going concern and not for
purposes of liquidation on the Valuation Date, and without
taking into account any discount for minority interest or lack
of liquidity of the shares of Common Stock being valued. The
Valuation Date shall be selected by the Offering Stockholder
by written notice delivered to the Company and Purchasers
within ten (10) days of the date of the Notice of Termination
and shall be either (x) the date of the Notice of Termination,
(y) one of the dates which is three (3) months, six (6) months
and nine (9) months following the Notice of Termination or (z)
the date which is one (1) year following the Notice of
Termination. Failure of the Offering Stockholder to timely
exercise this option shall result in the Valuation Date being
the date of the Notice of Termination. Upon such determin-
ation, the Company shall promptly give notice thereof to the
Offeree Stockholders and the Offering Stockholder, setting
forth in reasonable detail the calculation of such fair market
value and the method and basis of determination thereof (the
"Company Determination"). If
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STOCKHOLDERS AGREEMENT - PAGE 8
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73
the Offering Stockholder shall disagree with the Company
Determination and shall, by notice to the Company given within
ten (10) days after the delivery of the Company's notice of
the Company Determination, elect to dispute the Company
Determination, the Company shall, within five (5) days after
such notice, engage an investment bank or other qualified
appraisal firm selected by the Company and the Offering
Stockholder (the "Appraiser") to make an independent
determination of the Fair Market Value of the Common Stock
within fifteen (15) days after being engaged (the "Appraiser
Determination"). The Appraiser Determination shall be final
and binding on the Company and the Offering Stockholder. The
cost of the Appraiser Determination shall be borne by the
Company. In the event the Offering Stockholder and the Company
can not agree upon the selection of the Appraiser, each of
them shall within five (5) days of their failure to so agree
select an Appraiser, and the two (2) Appraisers as so selected
shall, within ten (10) days of their selection, select a third
Appraiser who shall be the sole Appraiser engaged to make the
Appraiser Determination. If the two (2) Appraisers fail, in
good faith, to so select a third Appraiser, each shall make an
Appraiser Determination, and the average of such Appraiser
Determinations shall be the Appraiser Determination hereunder.
The Purchase Price Determination Date means the day
immediately following the Company Determination or the final
Appraiser Determination, as applicable.
(d) RIGHT OF CERTAIN SHAREHOLDERS. In the event the
Offering Stockholder is Xxxxx Xxxxxx and either the Offeree
Stockholders, the Founders or the Company, as applicable,
acquire the Termination Shares of Xxxxx Xxxxxx, then at the
closing described in subsection (e) below, the purchaser
acquiring such Termination Shares must offer to acquire all of
the shares of Common Stock then owned by Xxxxx Xxxx, Xxxx
Xxxxxxxx, Xxxxxxx X. Xxxxx and Xxxxxx X. Xxxxx (collectively
the "Other Stockholders"), whom collectively, as of the date
hereof, own an aggregate of 145 shares of Common Stock. Such
purchase shall be on the same terms and at the same Purchase
Price (pro rata per share) as applicable to the Termination
Shares of Xxxxx Xxxxxx. Each Other Stockholder may, in its
discretion, decline to sell his shares of Common Stock at such
closing, in which case the purchaser of the Termination Shares
of Xxxxx Xxxxxx shall have no obligation to acquire such
shares (and from and after such date no Offeree Stockholder,
Founder or the Company shall have any obligation to acquire
such shares at any future date).
(e) CLOSING. The closing of the purchase and sale of
Termination Shares provided for in this Agreement will be held
at the offices of the Company or such other place as may be
mutually agreed to by all of the parties to such sale, on the
fortieth (40th) day following the Valuation Date. At the
Closing, the selling party will duly execute and deliver the
certificates evidencing such Termination Shares to the Offeree
Stockholder(s), Founders or the Company, as applicable, in
proper form for transfer, free and clear of all Liens, adverse
claims and encumbrances, and the purchasing party shall
deliver the Purchase Price to the applicable selling party.
Until such closing and payment of such
--------------------------------------------------------------------------------
STOCKHOLDERS AGREEMENT - PAGE 9
(INFINITY/ORIX)
74
Purchase Price, the Offering Stockholder shall be a
Stockholder of the Company for all purposes (including,
without limitation, receipt of dividends and election of
Directors).
5. PREEMPTIVE RIGHTS.
(a) PREEMPTIVE RIGHT GRANTED. If the Company proposes
to issue or sell any New Securities (as defined below) prior
to the consummation of a Qualified Public Offering (as
hereafter defined), each Stockholder shall have a preemptive
right to purchase a pro rata share of such New Securities
proposed to be issued or sold. For purposes of this Paragraph
3(a), a Stockholder's pro rata share is the ratio of the
number of shares of Common Stock held by such Stockholder
immediately prior to the issuance or sale of New Securities to
the total number of shares of Common Stock outstanding
immediately prior to the issuance or sale of New Securities.
If any Stockholder fails to exercise its preemptive right to
purchase its full pro rata share of New Securities under this
Paragraph 5(a), each other Stockholder who exercises its
preemptive right to purchase its full pro rata share of New
Securities shall also have a right of over-allotment to
purchase such remaining New Securities, ratably according to
the shares of Common Stock held by all such electing
Stockholders or in such other proportions as they may agree
within 10 days after the date such non-purchasing Stockholder
fails to exercise its preemptive right hereunder to purchase
its full pro rata share of New Securities.
(b) NEW SECURITIES. "New Securities" shall mean any
Equity Securities of the Company whether now authorized or
not, provided that the term "New Securities" does not include
(i) shares of Common Stock reserved for issuance to employees,
consultants, officers or directors of the Company who are not
Common Stockholders on the date of this Agreement pursuant to
any Approved Plan, (ii) securities issued in a Qualified
Public Offering, (iii) securities issued in connection with
any stock split, stock dividend or recapitalization of the
Company, and (iv) any right, option, warrant to acquire, or
any security convertible into, the securities excluded from
the definition of New Securities pursuant to subsections (i)
through (iv) above. Qualified Public Offering means any
underwritten offering by the Company of shares of Common Stock
to the public pursuant to an effective registration statement
under the Securities Act, then in effect, or any comparable
statement under any similar federal statute then in force, in
which (i) the aggregate cash proceeds to be received by the
Company and selling shareholders from such offering (without
deducting underwriting discounts, expenses and commissions)
are at least $17,500,000 and (ii) the price per share paid by
Persons subscribing for such shares in the offering is at
least $10.00.
(c) NOTICE; EXERCISE OF PREEMPTIVE RIGHTS. In the
event the Company proposes to issue or sell New Securities, it
shall give each Stockholder written notice of its intention,
describing the New Securities, their price and the terms upon
which the Company proposes to issue or sell the same. Each
Stockholder shall have 30 days after such notice is mailed or
delivered to agree to purchase such Stockholder's pro rata
share
--------------------------------------------------------------------------------
STOCKHOLDERS AGREEMENT - PAGE 10
(INFINITY/ORIX)
75
of such New Securities for the price and upon the terms
specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to
be purchased.
(d) SALE OF NEW SECURITIES. In the event the
Stockholders fail to exercise fully all preemptive rights
within said 30-day period and after the expiration of the
10-day period for the exercise of the over-allotment
provisions of Paragraph 5(a), the Company shall have 120 days
thereafter to sell the remaining New Securities that the
Stockholders do not elect to purchase upon exercise of the
preemptive rights pursuant to this part 5, at a price and upon
terms no more favorable to the purchasers thereof than
specified in the Company's notice to Stockholders pursuant to
Paragraph 5(c). In the event the Company has not sold all such
remaining New Securities within such 120-day period, the
Company shall not thereafter issue or sell any New Securities,
without first again offering such securities to the
Stockholders in the manner provided in Paragraph 5(c) above.
(e) ASSIGNMENT OF PREEMPTIVE RIGHTS. The preemptive
rights set forth in this part 5 may not be assigned or
transferred, except that such rights are assignable (i) by
each Stockholder to any Affiliate of such Stockholder, (ii) by
a Stockholder to any Person to which Debentures or Closing
Shares are transferred by such Stockholder and (iii) between
and among any of the Stockholders.
6. "MARKET STAND-OFF" AGREEMENT.
(a) CURRENT PURCHASERS. Each Stockholder hereby
agrees that, during the one hundred eighty (180) day period
(or such lesser period as shall be specified by the
underwriter of Common Stock or other securities of the
Company) following the effective date of the registration
statement of the Company filed under the Securities Act
covering the initial offering of Common Stock of the Company
for its own account to the public, it shall not, to the extent
requested by the Company and such underwriter, directly or
indirectly sell, offer to sell, contract to sell (including,
without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of (other than to
donees who agree to be similarly bound) any securities of the
company held by it at any time during such period except
Common Stock included in such registration.
(b) FUTURE PURCHASERS. Unless waived by unanimous
vote of the Board of Directors, the Company shall require each
employee or other purchaser, as a condition to purchasing
capital stock of the Company or rights to acquire capital
stock of the Company, to execute a market stand-off agreement
in the form set forth in subparagraph (a). This covenant shall
terminate and be of no further force and effect upon
termination of the effectiveness of subparagraph (a).
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STOCKHOLDERS AGREEMENT - PAGE 11
(INFINITY/ORIX)
76
7. GENERAL PROVISIONS.
(a) LEGENDS ON CERTIFICATES. During the term of this
Agreement, each certificate representing shares of capital
stock of the Company held by the Purchasers or the Common
Stockholders will bear a legend in substantially the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SALE,
ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION AND VOTING
THEREOF ARE SUBJECT TO CERTAIN RESTRICTIONS AND AGREEMENTS
CONTAINED IN A STOCKHOLDERS AGREEMENT DATED AS OF JUNE 11,
1998 AMONG THE COMPANY AND CERTAIN STOCKHOLDERS. A COPY OF THE
STOCKHOLDERS AGREEMENT AND ALL APPLICABLE AMENDMENTS THERETO
WILL BE FURNISHED BY THE COMPANY TO THE RECORD HOLDER OF THIS
CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED
OFFICE."
(b) TERMINATION; AMENDMENT.
(i) This Agreement shall terminate upon the
earliest to occur of (a) a Qualified Public Offering,
or (b) at such time as the written consent or
agreement of the holders of at least 80% of the
shares of Common Stock held by the Purchasers and the
holders of a majority of the shares of Restricted
Stock is procured.
(ii) This Agreement may be amended by the
written agreement of the Company, the holders of at
least 80% of the shares of Common Stock held by the
Purchasers and the holders of a majority of the
shares of Restricted Stock.
(c) NOTICES. All notices, requests, consents, and
other communications under this Agreement shall be in writing
and shall be deemed effectively given when delivered
personally or by facsimile transmission or by overnight
delivery service or 72 hours after being mailed by first class
certified or registered mail, return recent requested, postage
prepaid:
--------------------------------------------------------------------------------
STOCKHOLDERS AGREEMENT - PAGE 12
(INFINITY/ORIX)
77
If to the Company:
Orix Global Communications, Inc.
0000 Xxxx Xxxxxxxx Xxxx, Xxx. X000
Xxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxxxxx, President
Fax: 000.000.0000
If to a Purchaser to it at the address set
forth on Schedule A hereto.
with a copy to:
Xxxxx & Xxxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Fax: (000)000-0000
Or at such other address or addresses as may have been furnished in writing.
(d) GOVERNING LAW. THE CONSTRUCTION, VALIDITY AND
INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEVADA WITHOUT GIVING EFFECT TO
ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE
(WHETHER OF THE STATE OF NEVADA OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEVADA.
(e) COUNTERPARTS. This Agreement may be executed by
facsimile and in one or more counterparts, each of which
shall be deemed to be an original, but all of which shall be
one and the same document. The provisions of this Agreement
shall apply to any shares or other securities resulting from
any stock split or reverse split, stock dividend,
reclassification, subdivision, consolidation or
reorganization of any shares or other equity securities of
the Company and to any shares or other securities of the
Company or of any successor company which may be received by
any of the parties hereto by virtue of their respective
ownership of any shares of Common Stock of the Company.
(f) HEADINGS. The headings of this Agreement are
for convenience only and do not constitute a part of this
Agreement.
(g) SEVERABILITY. The invalidity or
unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other
provision of this Agreement.
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STOCKHOLDERS AGREEMENT - PAGE 13
(INFINITY/ORIX)
78
(h) BINDING EFFECT. Except as provided herein, the
rights and obligations of each Purchaser under this Agreement
may be assigned by such Purchaser to any Person to whom
Debentures or the Closing Shares are transferred by such
Purchaser, and such transferee shall be deemed a "Purchaser"
for purposes of this Agreement, provided that the transferee
provides written notice of such assignment to the Company.
(i) ENTIRE AGREEMENT. This Agreement embodies the
entire agreement of the parties with respect to the subject
matter hereof and supersedes all prior agreements relating to
such subject matter.
[SIGNATURE PAGES FOLLOWS]
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STOCKHOLDERS AGREEMENT - PAGE 14
(INFINITY/ORIX)
79
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the date first written above.
COMPANY:
ORIX GLOBAL COMMUNICATIONS, INC.
By: /s/ XXXXX XXXXXX
--------------------------------
Name: Xxxxx Xxxxxx
------------------------------
Title: President
-----------------------------
PURCHASERS:
INFINITY INVESTORS LIMITED
By: /s/ XXXXX X. XXXXXXXX
--------------------------------
Name: Xxxxx X. Xxxxxxxx
------------------------------
Title: Director
-----------------------------
80
COMMON STOCKHOLDERS:
/s/ XXXXX XXXXXX
----------------------------------------
Xxxxx Xxxxxx
/s/ BEKLEY M.[ILLEGIBLE]
----------------------------------------
Xxxxxxx M. [Illegible]
/s/ XXXXXX XXXXXX
----------------------------------------
Xxxxxx Xxxxxx
/s/ XXXX XXXXXXX
----------------------------------------
Xxxx Xxxxxxx
/s/ XXXXX XXXX
----------------------------------------
Xxxxx Xxxx
/s/ XXXX XXXXXXXX
----------------------------------------
Xxxx Xxxxxxxx
/s/ XXXXXXX X. XXXXX
----------------------------------------
Xxxxxxx X. Xxxxx
81
SECURITY AGREEMENT
SECURITY AGREEMENT dated June 11, 1998 between ORIX GLOBAL
COMMUNICATIONS, INC. ("Borrower"), a Nevada corporation, and HW PARTNERS, L.P.
as agent for and representative (in such capacity, "Pledgee") of INFINITY
INVESTORS LIMITED ("Lender").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Securities Purchase Agreement dated
as of the date hereof between Borrower and Lender (as the same may from time to
time be amended, modified or supplemented, the "Purchase Agreement"), Borrower
has issued to Lender its Debentures dated the date hereof (the "Notes") in the
aggregate stated principal amount of $6,000,000 payable by Borrower to the order
of Lender; and
WHEREAS, Lender is willing to purchase the Notes but only upon the
condition, among others, that Borrower shall have executed and delivered to
Pledgee this Security Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms defined in the
Purchase Agreement are used herein as therein defined, and the following terms
shall have the following meanings (such meanings being equally applicable to
both the singular and plural forms of the terms defined):
"ACCOUNT DEBTOR" shall mean any "account debtor," as such term is
defined in Section 9.105 of the UCC.
"ACCOUNTS" shall mean any "account," as such term is defined in Section
9.106 of the UCC, now owned or hereafter acquired by Borrower and, in any event,
shall include, without limitation, all accounts receivable, book debts and other
forms of obligations (other than forms of obligations evidenced by Chattel
Paper, Documents or Instruments) now owned or hereafter received or acquired by
or belonging or owing to Borrower (including, without limitation, under any
trade names, styles or divisions thereof) whether arising out of goods sold or
services rendered by Borrower or from any other transaction, whether or not the
same involves the sale of goods or services by Borrower (including, without
limitation, any such obligation which might be characterized as an account or
contract right under the UCC) and all of Borrower's rights in, to and under all
purchase orders or receipts now owned or hereafter acquired by it for goods or
services, and all of Borrower's rights to any goods represented by any of the
foregoing (including, without limitation, unpaid seller's rights of rescission,
replevin, reclamation and stoppage in transit and
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SECURITY AGREEMENT - PAGE 1
(HW PARTNERS/ORIX GLOBAL)
82
rights to returned, reclaimed or repossessed goods), and all moneys due or to
become due to Borrower under all contracts for the sale of goods or the
performance of services or both by Borrower (whether or not yet earned by
performance on the part of Borrower or in connection with any other
transaction), now in existence or hereafter occurring, including, without
limitation, the right to receive the proceeds of said purchase orders and
contracts, and all collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing.
"CHATTEL PAPER" shall mean any "chattel paper," as such term is defined
in Section 9.105 of the UCC, now owned or hereafter acquired by Borrower.
"COLLATERAL" shall have the meaning assigned to such term in Section 2
of this Security Agreement.
"CONTRACTS" shall mean all contracts, undertakings, or other agreements
(other than rights evidenced by Chattel Paper, Documents or Instruments) in or
under which Borrower may now or hereafter have any right, title or interest,
including, without limitation, with respect to an Account, any agreement
relating to the terms of payment or the terms of performance thereof.
"DOCUMENTS" shall mean any "documents" as such term is defined in
Section 9.105 of the UCC, now owned or hereafter acquired by Borrower.
"EQUIPMENT" shall mean any "equipment" as such term is defined in
Section 9.109 of the UCC, now owned or hereafter acquired by Borrower and, in
any event, shall include, without limitation, all machinery, equipment,
furnishings, fixtures, vehicles and computers and other electronic
data-processing and other office equipment now owned or hereafter acquired by
Borrower and any and all additions, substitutions and replacements of any of the
foregoing, wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto.
"GENERAL INTANGIBLES" shall mean any "general intangibles," as such
term is defined in Section 9.106 of the UCC, now owned or hereafter acquired by
Borrower and, in any event, shall include, without limitation, all right, title
and interest which Borrower may now or hereafter have in or under any Contract,
all customer lists, Trademarks, Patents, rights in intellectual property,
Licenses, permits, copyrights, trade secrets, proprietary or confidential
information, inventions (whether patented or patentable or not) and technical
information, procedures, designs, knowledge, know-how, software, data bases,
data, skill, expertise, experience, processes, models, drawings, materials and
records now owned or hereafter acquired by Borrower, goodwill and rights of
indemnification.
"HEREBY," "HEREIN," "HEREOF," "HEREUNDER" and words of similar import
refer to this Security Agreement as a whole (including, without limitation, any
schedules hereto) and not merely to the specific section, paragraph or clause in
which the respective word appears.
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SECURITY AGREEMENT - PAGE 2
(HW PARTNERS/ORIX GLOBAL)
83
"INSTRUMENTS" shall mean any "instrument," as such term is defined in
Section 9.105 of the UCC, now owned or hereafter acquired by Borrower, other
than instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"INVENTORY" shall mean any "inventory," as such term is defined in
Section 9.109 of the UCC, now owned or hereafter acquired by Borrower and, in
any event, shall include, without limitation, all inventory, merchandise, goods
and other personal property now owned or hereafter acquired by Borrower which
are held for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in Borrower's business, or
the processing, packaging, delivery or shipping of the same, and all finished
goods.
"LICENSE" shall mean any Patent License, Trademark License or other
license as to which Lender has been granted a security interest hereunder.
"PATENT LICENSE" shall mean all of the following now owned or hereafter
acquired by Borrower: any written agreement granting any right to practice any
invention on which a Patent is in existence.
"PATENTS" shall mean all of the following now or hereafter owned by
Borrower: (i) all letters patent of the United States or any other country, all
registrations and recordings thereof, and all applications for letters patent of
the United States or any other country, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country, and (ii) all reissues, continuations,
continuations-in-part or extensions thereof.
"PROCEEDS" shall mean "proceeds," as such term is defined in Section
9.306 of the UCC and, in any event, shall include, without limitation, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
Borrower from time to time with respect to any of the Collateral, (ii) any and
all payments (in any form whatsoever) made or due and payable to Borrower from
time to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any governmental
body, authority, bureau or agency (or any person acting under color of
governmental authority), (iii) any claim of Borrower against third parties (A)
for past, present or future infringement of any Patent or Patent License or (B)
for past, present or future infringement or dilution of any Trademark or
Trademark License or for injury to the goodwill associated with any Trademark,
Trademark registration or Trademark licensed under any Trademark License and
(iv) any and all other amounts from time to time paid or payable under or in
connection with any of the Collateral.
"SECURED OBLIGATIONS" shall mean (i) all indebtedness, obligations and
liabilities of Borrower to any Lender of any kind or character, now existing or
hereafter arising, whether direct, indirect, related, unrelated, fixed,
contingent, liquidated, unliquidated, joint, several or joint and several, and
regardless of whether such indebtedness, obligations and liabilities may, prior
to their acquisition by Lender, be or have been payable to or in favor of a
third party and subsequently
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SECURITY AGREEMENT - PAGE 3
(HW PARTNERS/ORIX GLOBAL)
84
acquired by Lender (it being contemplated that Lender may make such acquisitions
from third parties), including without limitation all indebtedness, obligations
and liabilities of Borrower to Lender now existing or hereafter arising by note,
draft, acceptance, guaranty, endorsement, letter of credit, assignment,
purchase, overdraft, discount, indemnity agreement or otherwise, (ii) all
accrued but unpaid interest on any of the indebtedness described in (i) above,
(iii) all obligations of Borrower to Lender under any documents evidencing,
securing, governing and/or pertaining to all or any part of the indebtedness
described in (i) and (ii) above, including, without limitation, the Purchase
Agreement and the Notes, (iv) all costs and expenses incurred by Lender in
connection with the collection and administration of all or any part of the
indebtedness and obligations described in (i), (ii) and (iii) above or the
protection or preservation of, or realization upon, the collateral securing all
or any part of such indebtedness and obligations, including without limitation
all reasonable attorneys' fees, and (v) all renewals, extensions, modifications
and rearrangements of the indebtedness and obligations described in (i), (ii),
(iii) and (iv) above.
"SECURITY AGREEMENT" shall mean this Security Agreement, as the same
may from time to time be amended, modified or supplemented and shall refer to
this Security Agreement as in effect of the date such reference becomes
operative.
"TRADEMARK LICENSE" shall mean all of the following now owned or
hereafter acquired by Borrower: any written agreement granting any right to use
any Trademark or Trademark registration.
"TRADEMARKS" shall mean all of the following now owned or hereafter
acquired by Borrower: (i) all trademarks, trade names, corporate names, business
names, fictitious business names, trade styles, service marks, logos, other
source or business identifier, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of like nature, now
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country or any political subdivision
thereof, and (ii) all reissues, extensions or renewals thereof.
"UCC" shall mean the Uniform Commercial Code as the same may, from time
to time, be in effect in the State of Nevada; provided, however, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Pledgee's and Lender's security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of Nevada, the term "UCC" shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such attachment, perfection or priority and
for purposes of definitions related to such provisions.
2. GRANT OF SECURITY INTEREST.
(a) As collateral security for the prompt and complete payment and
performance when due (whether at stated maturity, by acceleration or
otherwise) of all the
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SECURITY AGREEMENT - PAGE 4
(HW PARTNERS/ORIX GLOBAL)
85
Secured Obligations and to induce Lender to enter into the Purchase
Agreement and to purchase the Notes in accordance with the terms thereof,
Borrower hereby assigns, conveys, mortgages, pledges, hypothecates and
transfers to Pledgee, for the benefit of Lender, and to Lender, and hereby
grants to Pledgee and Lender a security interest in, all of Borrower's
right, title and interest in, to and under the following (all of which
being hereinafter collectively called the "Collateral"):
(i) all Accounts of Borrower;
(ii) all Chattel Paper of Borrower;
(iii) all Contracts of Borrower;
(iv) all Documents of Borrower;
(v) all Equipment of Borrower;
(vi) all General Intangibles of Borrower;
(vii) all Instruments of Borrower,
(viii) all Inventory of Borrower;
(ix) all right, title and interest of Borrower in and any
deposit accounts of Borrower and all amounts deposited therein;
(x) all other goods and personal property of Borrower whether
tangible or intangible or whether now owned or hereafter acquired by
Borrower and wherever located; and
(xi) to the extent not otherwise included, all Proceeds of each
of the foregoing and all accessions to, substitutions and replacements
for, and rents, profits and product of each of the foregoing.
(b) In addition, as collateral security for the prompt and complete
payment when due of the Secured Obligations and in order to induce Lender
as aforesaid, Pledgee, for the benefit of Lender, is hereby granted a lien
and security interest in all property of Borrower held by Pledgee or any
Lender, including, without limitation, all property of every description,
now or hereafter in the possession or custody of or in transit to Pledgee
or any Lender for any purpose, including safekeeping, collection or pledge,
for the account of Borrower, or as to which Borrower may have any right or
power.
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3. RIGHTS OF LENDER; LIMITATIONS ON LENDER'S OBLIGATIONS.
(a) It is expressly agreed by Borrower that, anything herein to the
contrary notwithstanding, Borrower shall remain liable under each of its
Contracts and each of its Licenses to observe and perform all the
conditions and obligations to be observed and performed by it thereunder
and Borrower shall perform all of its duties and obligations thereunder,
all in accordance with and pursuant to the terms and provisions of each
such Contract or License. Lender shall not have any obligation or liability
under any Contract or License by reason of or arising out of this Security
Agreement or the granting to Pledgee of a security interest therein or the
receipt by Pledgee or any Lender of any payment relating to any Contract or
License pursuant hereto, nor shall Pledgee or any Lender be required or
obligated in any manner to perform or fulfill any of the obligations of
Borrower under or pursuant to any Contract or License, or to make any
payment, or to make any inquiry as to the nature or the sufficiency of any
payment received by it or the sufficiency of any performance by any party
under any Contract or License, or to present or file any claim, or to take
any action to collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it may be entitled
at any time or times.
(b) Pledgee authorizes Borrower to collect its Accounts and
Instruments provided that such collection is performed in a prudent and
businesslike manner, and Pledgee may, upon the occurrence and during the
continuation of any Event of Default and without notice, limit or terminate
said authority at any time. Such Proceeds shall continue to be collateral
security for all of the Secured Obligations and shall not constitute
payment thereof until applied as hereinafter provided. At any time, Lender
shall be entitled to apply all or any part of the funds on deposit in said
account to the principal of or interest on or both in respect of any of the
Secured Obligations in accordance with the provisions of Section 8(d)
hereof and any part of such funds which Lender elect not so to apply and
deemed not required as collateral security for the Secured Obligations
shall be paid over from time to time by Lender to Borrower. If an Event of
Default has occurred and is continuing, at the request of Pledgee, Borrower
shall deliver to Pledgee all original and other documents evidencing, and
relating to, the sale and delivery of such Inventory or the performance of
labor or service which created such Accounts, including, without
limitation, all original orders, invoices and shipping receipts; and, prior
to the occurrence of an Event of Default, Borrower shall deliver
photocopies thereof to Pledgee at its request.
(c) Pledgee may at any time, upon the occurrence and during the
continuance of any Event of Default (whether or not waived), after first
notifying Borrower of its intention to do so, notify Account Debtors of
Borrower, parties to the Contracts of Borrower, obligors of Instruments of
Borrower and obligors in respect of Chattel Paper of Borrower that the
Accounts and the right, title and interest of Borrower in and under such
Contracts, such Instruments and such Chattel Paper have been assigned to
Pledgee and Lender and that payments shall be made directly to Pledgee.
Upon the request of Pledgee, Borrower will so notify such Account Debtors,
parties to such Contracts, obligors of such Instruments and
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obligors in respect of such Chattel Paper. Pledgee may at any time in its
own name or in the name of others communicate with such Account Debtors,
parties to such Contracts, obligors of such Instruments and obligors in
respect of such Chattel Paper to verify with such Persons to Pledgee's
satisfaction the existence, amount and terms of any such Accounts,
Contracts, Instruments or Chattel Paper.
(d) Upon reasonable prior notice to Borrower (unless an Event of
Default has occurred and is continuing, in which case no notice is
necessary), Pledgee shall have the right to make test verifications of the
Accounts, Instruments and Chattel Papers and physical verifications of the
Inventory in any manner and through any medium that it considers advisable,
and Borrower agrees to furnish all such assistance and information as
Pledgee may require in connection therewith. Borrower at its expense will
cause certified independent public accountants satisfactory to Pledgee to
prepare and deliver to Pledgee at any time and from time to time promptly
upon Pledgee's request, the following reports: (i) a reconciliation of all
its Accounts, Instruments and Chattel Paper, (ii) an aging of all its
Accounts, Instruments and Chattel Paper, (iii) trial balances, and (iv) a
test verification of such Accounts, Instruments and Chattel Paper as Lender
may request. Borrower at its expense will cause certified independent
public accountants satisfactory to Pledgee to prepare and deliver to
Pledgee the results of the annual physical verification of its Inventory
made or observed by such accountants.
4. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants the Pledgee and each Lender that:
(a) Except for the security interest granted to Pledgee pursuant to
this Security Agreement, Borrower is the sole owner of each item of the
Collateral in which it purports to grant a security interest hereunder,
having good and marketable title thereto, free and clear of any and all
liens, security interests or other encumbrances. No amount payable under or
in connection with any of its Accounts or Contracts are evidenced by
Instruments which have not been delivered to Pledgee.
(b) No effective security agreement, financing statement, equivalent
security or lien instrument or continuation agreement covering all or any
part of the Collateral is on file or of record in any public office, except
such as may have been filed by Borrower in favor of Pledgee pursuant to
this Security Agreement
(c) Appropriate financing statements having been filed in the
jurisdictions listed on Schedule I hereto, this Security Agreement is
effective to create a valid and continuing first priority lien on and first
priority perfected security interest in the Collateral (other than
fixtures) with respect to which a security interest may be perfected by
filing pursuant to the UCC in favor of Pledgee, prior to all other security
interests (other than the security interests granted to Pledgee under this
Security Agreement), and is enforceable as such as against creditors of and
purchasers from Borrower and as against any purchaser of real property
where any of the Equipment is located and any present or future creditor
obtaining
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a Lien on such real property. All action necessary or desirable to protect
and perfect such security interest in each item of the Collateral has been
duly taken.
(d) The address of Borrower's principal place of business and the
place where its records concerning the Collateral are kept is set forth on
Schedule II hereto, and Borrower will not change such principal place of
business or remove such records unless it has taken such action as is
necessary to cause the security interest of Pledgee and Lender in the
Collateral to continue to be perfected. Borrower will not change its
principal place of business or the place where its records concerning the
Collateral is kept without giving 40 days prior written notice thereof to
Pledgee.
(e) The amount represented by Borrower to Pledgee from time to time as
owing by each Account Debtor or by all Account Debtors in respect of the
Accounts, Instruments and Chattel Paper of Borrower or will at such time be
the correct amount actually and unconditionally owing by such Account
Debtors thereunder.
5. COVENANTS. Borrower covenants and agrees with Pledgee and Lender
that from and after the date of this Security Agreement and until the Secured
Obligations are fully satisfied:
(a) FURTHER DOCUMENTATION; PLEDGE OF INSTRUMENTS. At any time and from
time to time, upon the written request of Pledgee, and at the sole expense
of Borrower, Borrower will promptly and duly execute and deliver any and
all such further instruments and documents and take such further action as
Pledgee may reasonably deem necessary to obtain the full benefits of this
Security Agreement and of the rights and powers herein granted, including,
without limitation, using its best efforts to secure all consents and
approvals necessary or appropriate for the assignment to Pledgee and Lender
of any License or Contract held by Borrower or in which Borrower has any
rights not heretofore assigned, the filing of any financing or continuation
statements under the UCC with respect to the liens and security interests
granted hereby, transferring Collateral to Pledgee's possession (if a
security interest in such Collateral can be perfected by possession),
placing the interest of Pledgee and Lender as lienholder on the certificate
of title or any vehicle and using its best efforts to obtain waivers of
liens from landlords and mortgagees. Borrower also hereby authorizes
Pledgee to file any such financing or continuation statement without the
signature of Borrower to the extent permitted by applicable law. A
photocopy of this Security Agreement may be filed as a financing statement.
If any amount payable under or in connection with any of the Collateral
shall be or become evidenced by any Instrument, such Instrument shall be
immediately pledged to Pledgee hereunder, and shall be duly endorsed in a
manner satisfactory to Pledgee and delivered to Pledgee.
(b) MAINTENANCE OF RECORDS. Borrower will keep and maintain at its
own cost and expense satisfactory and complete records of the Collateral,
including, without limitation, a record of all payments received and all
credits granted with respect to the Collateral and all other dealings with
the Collateral. Borrower will xxxx its books and records pertaining to the
Collateral to evidence this Security Agreement and the security
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interests granted hereby. If requested by Pledgee, the security interest of
Pledgee and Lender shall be noted on the certificate of title of each
vehicle. For Pledgee's and Lender's further security, Borrower agrees that
Pledgee shall have a special property interest in all of Borrower's books
and records, and pertaining to the Collateral and, upon the occurrence and
during the continuation of any Event of Default, Borrower shall deliver and
turn over any such books and records to Pledgee or to its representatives
at any time on demand of Pledgee. Prior to the occurrence of an Event of
Default and upon reasonable notice from Pledgee, Borrower shall permit any
representative of Pledgee to inspect such books and records during normal
business hours, and will provide photocopies thereof to Pledgee.
(c) INDEMNIFICATION. In any suit, proceeding or action brought by
Pledgee or any Lender relating to any Account, Chattel Paper, Contract,
General Intangible or instrument for any sum owing thereunder, or to
enforce any provision of any Account, Chattel Paper, Contract, General
Intangible or Instrument, Borrower will save, indemnify and keep Pledgee
and each Lender harmless from and against all expense, loss or damage
suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction of liability whatsoever of the obligor thereunder, arising out of
a breach by Borrower of any obligation thereunder or arising out of any
other agreement, indebtedness or liability at any time owing to, or in
favor of, such obligor or its successors from Borrower, and all such
obligations of Borrower shall be and remain enforceable against and only
against Borrower and shall not be enforceable against Pledgee or any
Lender.
(d) COMPLIANCE WITH LAWS, ETC. Borrower will comply, in all material
respects, with all acts, rules, regulations, orders, decrees and directions
of any governmental authority, applicable to the Collateral or any part
thereof or to the operation of Borrower's business; provided, however, that
Borrower may contest any act, regulation, order, decree or direction in any
reasonable manner which shall not, in the sole opinion of Pledgee,
adversely affect Pledgee's or Lender's rights hereunder or adversely affect
the first priority of its security interest in the Collateral.
(e) PAYMENT OF OBLIGATIONS. Borrower will pay promptly when due all
taxes, assessments and governmental charges or levies imposed upon the
Collateral.
(f) COMPLIANCE WITH TERMS OF ACCOUNTS, ETC. Borrower will perform and
comply with all obligations in respect of Accounts, Chattel Paper,
Instruments, Contracts and Licenses and all other agreements to which it is
a party or by which it is bound.
(g) LIMITATION ON LIENS ON COLLATERAL. Borrower will not create,
permit or suffer to exist, and will defend the Collateral against and take
such other action as is necessary to remove, any lien, security interest or
other encumbrance on the Collateral, and will defend the right, title and
interest of Pledgee and Lender in and to any of Borrower's rights under the
Chattel Paper, Contracts, Documents, General Intangibles and Instruments
and to the Equipment and Inventory and in and to the Proceeds thereof
against the claims and demands of all Persons whomsoever.
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(h) LIMITATIONS ON MODIFICATIONS OF ACCOUNTS, ETC. Upon the occurrence
and during the continuation of any Event of Default, Borrower will not,
without Pledgee's prior written consent, grant any extension of the time of
payment of any of the Accounts, Chattel Paper or Instruments, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partly, any Person liable for the payment thereof, or allow any
credit or discount whatsoever thereon.
(i) [This subsection (i) has been intentionally omitted.]
(j) LIMITATIONS ON DISPOSITION. Borrower will not sell, lease,
transfer or otherwise dispose of any of the Collateral except in the
ordinary course of its business.
(k) FURTHER IDENTIFICATION OF COLLATERAL. Borrower will if so
requested by Lender furnish to Pledgee, as often as Pledgee reasonably
requests, statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as
Pledgee may reasonably request, all in reasonable detail.
(l) NOTICES. Borrower will advise Pledgee promptly, in reasonable
detail, (i) of any material lien, security interest, encumbrance or claim
made or asserted against any of the Collateral, (ii) of any material change
in the composition of the Collateral, and (iii) of the occurrence of any
other event which would have a material adverse effect on the aggregate
value of the Collateral or on the security interests created hereunder.
(m) RIGHT OF INSPECTION. Upon reasonable notice to Borrower (unless
an Event of Default has occurred and is continuing, in which case no notice
is necessary), Pledgee shall at all times have full and free access during
normal business hours to all the books and records and correspondence of
Borrower, and Lender or its representatives may examine the same, take
extracts therefrom and make photocopies thereof, and Borrower agrees to
render to Pledgee, at Borrower's cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto. Upon
reasonable notice to Borrower (unless an Event of Default has occurred and
is continuing, in which case no notice is necessary), Pledgee and its
representatives shall also have the right to enter into and upon any
premises where any of the Equipment or Inventory is located for the purpose
of inspecting the same, observing its use or otherwise protecting its
interests therein.
(n) MAINTENANCE OF EQUIPMENT. Borrower will keep and maintain the
Equipment in good operating condition sufficient for the continuation of
the business conducted by Borrower on a basis consistent with past
practices, and Borrower will provide all maintenance and service and all
repairs necessary for such purpose.
(o) CONTINUOUS PERFECTION. Borrower will not change its name, identity
or corporate structure in any manner which might make any financing or
continuation statement filed in connection herewith seriously misleading
within the meaning of Section 9.402(g) of the UCC (or any other then
applicable provision of the UCC) unless Borrower
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shall have given Pledgee at least 40 days prior written notice thereof and
shall have taken all action (or made arrangements to take such action
substantially simultaneously with such change if it is impossible to take
such action in advance) necessary or reasonably requested by Pledgee to
amend such financing statement or continuation statement so that it is not
seriously misleading.
(p) COVENANTS REGARDING TRADEMARK COLLATERAL.
(i) Borrower shall notify Pledgee immediately if it knows or
has reason to know that any application or registration relating to
any Trademark which is material to the conduct of Borrower's business
may become abandoned or dedicated, or of any adverse determination or
development (including, without limitation, the institution of, or any
such determination or development in, any proceeding in the United
States Patent and Trademark Office or any court) regarding Borrower's
ownership of any Trademark which is material to the conduct of
Borrower's business, its right to register the same, or to keep and
maintain the same.
(ii) In no event shall Borrower, either itself or through any
agent, employee, licensee or designee, file an application for the
registration of any Trademark with the United States Patent or
Trademark Office or any similar office or agency in any other country
or any political subdivision thereof, unless it promptly informs
Pledgee, and, upon request of Pledgee, executes and delivers any and
all agreements, instruments, documents, and papers as Lender may
request to evidence Pledgee's and Lender's security interest in such
Trademark and the General Intangibles, including, without limitation,
the goodwill of Borrower, relating thereto or represented thereby.
(iii) Borrower will take necessary actions, including, without
limitation, in any proceeding before the United States Patent and
Trademark Office, to maintain and pursue each application (and to
obtain the relevant registration) and to maintain each registration of
the Trademarks which are material to the conduct of Borrower's
business, including, without limitation, filing of applications for
renewal, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings.
(iv) In the event that any of the Trademark Collateral is
infringed, misappropriated or diluted by a third party, Borrower shall
notify promptly after it learns thereof and shall, unless Borrower
shall reasonably determine that such Trademark Collateral is not
material to the conduct of Borrower's business, promptly xxx for
infringement, misappropriation or dilution and to recover any and all
damages for such infringement, misappropriation or dilution, and take
such other actions as Borrower shall reasonably deem appropriate under
the circumstances to protect such Trademark Collateral.
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6. APPOINTMENT AS ATTORNEY-IN-FACT.
(a) Borrower hereby irrevocably constitutes and appoints Pledgee and
any officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of Borrower and in the name of Borrower or in its own
name, from time to time in Pledgee's reasonable discretion, for the purpose
of carrying out the terms of this Security Agreement, to take any and all
appropriate action and to execute and deliver any and all documents and
instruments which may be necessary or desirable to accomplish the purpose
of this Security Agreement and, without limiting the generality of the
foregoing, hereby gives Pledgee the power and right, on behalf of Borrower,
without notice to or assent by Borrower to do the following:
(i) to ask, demand, collect, receive and give acquittances and
receipts for any and all moneys due and to become due under any
Collateral and, in the name of Borrower or its own name or otherwise,
to take possession of and endorse and collect any checks, drafts,
notes, acceptances or other Instruments for the payment of monies due
under any Collateral, to access all post office boxes maintained by or
for Borrower for the collection of any of the Collateral, and to file
any claim or to take any other action or proceeding in any court of
law or equity or otherwise deemed appropriate by Pledgee for the
purpose of collecting any and all such moneys due under any Collateral
whenever payable and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed
appropriate by Pledgee for the purpose of collecting any and all such
moneys due under any Collateral whenever payable;
(ii) to pay or discharge taxes, liens, security interests or
other encumbrances levied or placed on or threatened against the
Collateral, to effect any repairs or any insurance called for by the
terms of this Security Agreement and to pay all or any part of the
premiums therefor and the costs thereof; and
(iii) (A) to direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due, and to
become due thereunder, directly to Lender or as Lender shall direct;
(B) to receive payment of and receipt for any and all moneys, claims
and other amounts due, and to become due at any time, in respect of or
arising out of any Collateral; (C) to sign and endorse any invoices,
freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications and
notices in connection with accounts and other Documents constituting
or relating to the Collateral; (D) to commence and prosecute any
suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any part thereof
and to enforce any other right in respect of any Collateral; (E) to
defend any suit, action or proceeding brought against Borrower with
respect to any Collateral; (F) to settle, compromise or adjust any
suit, action or proceeding described above and, in
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conjunction therewith, to give such discharges or releases as Pledgee
may deem appropriate; (G) to license or, to the extent permitted by an
applicable license, sublicense, whether general, special or otherwise,
and whether on an exclusive or non-exclusive basis, any Patent or
Trademark, throughout the world for such term or terms, on such
conditions, and in such manner, as Pledgee shall in its sole
discretion determine; and (H) generally to sell, transfer, pledge,
make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though Pledgee were the absolute
owner thereof for all purposes, and to do, at Pledgee's option and
Borrower's expense, at any time, or from time to time, all acts and
things which Pledgee reasonably deems necessary to protect, preserve
or realize upon the Collateral and Pledgee's and Lender's security
interest therein, in order to effect the intent of this Security
Agreement, all as fully and effectively as Borrower might do.
(b) Pledgee agrees that, except upon the occurrence and during the
continuation of an Event of Default, it will forebear from exercising the
power of attorney or any rights granted to Pledgee pursuant to this Section
6. Borrower hereby ratifies, to the extent permitted by law, all that said
attorneys shall lawfully do or cause to be done by virtue hereof. The power
of attorney granted pursuant to this Section 6 is a power coupled with an
interest and shall be irrevocable until the Secured Obligations are
indefeasibly paid in full.
(c) The powers conferred on Pledgee hereunder are solely to protect
Pledgee's interests in the Collateral and shall not impose any duty upon it
or Lender to exercise any such powers. Pledgee shall be accountable only
for amounts that it actually receives as a result of the exercise of such
powers and neither it nor any of its officers, directors, employees or
agents shall be responsible to Borrower for any act or failure to act,
except for its or their own gross negligence or willful misconduct.
(d) Borrower also authorizes Pledgee, at any time and from time to
time upon the occurrence and during the continuation any Event of Default,
(i) to communicate in its own name with any party to any Contract with
regard to the assignment of the right, title and interest of Borrower in
and under the Contracts hereunder and other matters relating thereto and
(ii) to execute, in connection with the sale provided for in Section 8
hereof, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral.
7. PERFORMANCE BY LENDER OF BORROWER'S OBLIGATIONS. If Borrower fails
to perform or comply with any of its agreements contained herein and Pledgee or
any Lender, as provided for by the terms of this Security Agreement, shall
itself perform or comply, or otherwise cause performance or compliance, with
such agreement, the reasonable expenses of Pledgee and such Lender incurred in
connection with such performance or compliance, together with interest thereon
at the rate then in effect under the Notes, shall be payable by Borrower to
Pledgee and Lender on demand and shall constitute Secured Obligations secured
hereby.
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8. REMEDIES, RIGHTS UPON DEFAULT.
(a) If any Event of Default shall occur and be continuing, Pledgee and
Lender may exercise in addition to all other rights and remedies granted to
it in this Security Agreement and in any other instrument or agreement
securing, evidencing or relating to the Secured Obligations, all rights and
remedies of a secured party under the UCC. Without limiting the generality
of the foregoing, Borrower expressly agrees that in any such event Pledgee,
without demand of performance or other demand, advertisement or notice of
any kind (except the notice specified below of time and place of public or
private sale) to or upon Borrower or any other Person (all and each of
which demands, advertisements and/or notices are hereby expressly waived to
the maximum extent permitted by the UCC and other applicable law), may
forthwith collect, receive, appropriate and realize upon the Collateral, or
any part thereof, and/or may forthwith sell, lease, assign, give an option
or options to purchase, or sell or otherwise dispose of and deliver said
Collateral (or contract to do so), or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange or broker's
board or at any of Pledgee's offices or elsewhere at such prices as it may
deem best, for cash or on credit or for future delivery without assumption
of any credit risk. Pledgee and Lender shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of said Collateral
so sold, free of any right or equity of redemption, which equity of
redemption Borrower hereby releases. Borrower further agrees, at Pledgee's
request, to assemble the Collateral and make it available to Pledgee at
places which Pledgee shall reasonably select, whether at Borrower's
premises or elsewhere. Pledgee shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, as
provided in Section 8(d) hereof, Borrower remaining liable for any
deficiency remaining unpaid after such application, and only after so
paying over such net proceeds and after the payment by Pledgee of any other
amount required by any provision of law, including Section 9.504(a)(3) of
the UCC, need Pledgee and Lender account for the surplus, if any, to
Borrower. To the maximum extent permitted by applicable law, Borrower
waives all claims, damages, and demands against Lender arising out of the
repossession, retention or sale of the Collateral except such as arise out
of the gross negligence or willful misconduct of Lender. Borrower agrees
that the Pledgee need not give more than ten days' notice (which
notification shall be deemed given when mailed or delivered on an overnight
basis, postage prepaid, addressed to Borrower at its address referred to in
Section 12 hereof) of the time and place of any public sale or of the time
after which a private sale may take place and that such notice is
reasonable notification of such matters. Borrower shall remain liable for
any deficiency if the proceeds of any sale or disposition of the Collateral
are insufficient to pay all amounts to which Pledgee and Lender are
entitled, Borrower also being liable for the reasonable fees of any
attorneys employed by Pledgee and Lender to collect such deficiency.
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(b) Borrower also agrees to pay all costs of Pledgee and Lender,
including, without limitation, reasonable attorneys' fees, incurred in
connection with the enforcement of any of its or their rights and remedies
hereunder.
(c) Borrower hereby waives presentment, demand, protest or any notice
(to the maximum extent permitted by applicable law) of any kind in
connection with this Security Agreement or any Collateral.
(d) The Proceeds of any sale, disposition or other realization upon
all or any part of the Collateral shall be distributed by Pledgee in the
following order of priorities:
first, to Pledgee and Lender in an amount sufficient to pay in
full the expenses of Pledgee and Lender in connection with such sale,
disposition or other realization, including all expenses, liabilities
and advances incurred or made by Pledgee and Lender in connection
therewith, including, without limitation, reasonable attorney's fees;
second, to Lender in an amount equal to the then unpaid principal
of and accrued interest and prepayment premiums, if any, on the
Secured Obligations;
third, to Lender in an amount equal to any other Secured
Obligations which are then unpaid; and
finally, upon payment in full of all of the Secured Obligations,
to pay to Borrower, or its representatives or as a court of competent
jurisdiction may direct, any surplus then remaining from such
Proceeds.
9. GRANT OF LICENSE TO USE PATENT AND TRADEMARK COLLATERAL. For the
purpose of enabling Pledgee and Lender to exercise rights and remedies under
Section 8 hereof at such time as Pledgee and Lender, without regard to this
Section 9, shall be lawfully entitled to exercise such rights and remedies,
Borrower hereby grants to Pledgee and Lender an irrevocable, non-exclusive
license (exercisable without payment of royalty or other compensation to
Borrower) to use, license or sublicense any Patent or Trademark, now owned or
hereafter acquired by Borrower, and wherever the same may be located, and
including, without limitation, in such license reasonable access to all media in
which any of the licensed items may be recorded or stored and to all computer
and automatic machinery software and programs used for the compilation or
printout thereof.
10. LIMITATION ON LENDER'S DUTY IN RESPECT OF COLLATERAL. Pledgee shall
use reasonable care with respect to the Collateral in its possession or under
its control. Neither Pledgee nor any Lender shall have any other duty as to any
Collateral in its possession or control or in the possession or control of any
agent or nominee of it or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto. Upon request of
Borrower,
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SECURITY AGREEMENT - PAGE 15
(HW PARTNERS/ORIX GLOBAL)
96
Pledgee shall account for any moneys received by it in respect of any
foreclosure on or disposition of the Collateral.
11. REINSTATEMENT. This Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against Borrower
for liquidation or reorganization, should Borrower become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of Borrower's assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Secured Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee of the Secured Obligations, whether as a
"voidable preference", "fraudulent conveyance", or otherwise, all as though such
payment or performance had not been made. In the event that any payment, or any
part thereof, is rescinded, reduced, restored or returned, the Secured
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
12. NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall be given as set forth in the Purchase Agreement.
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons designated above to
receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
13. SEVERABILITY. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceabiity in any jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction.
14. NO WAIVER; CUMULATIVE REMEDIES. Pledgee and Lender shall not by any
act, delay, omission or otherwise be deemed to have waived any of its or their
rights or remedies hereunder, and no waiver shall be valid unless in writing,
signed by Pledgee, and then only to the extent therein set forth. A waiver by
Pledgee or any Lender of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which Pledgee or any Lender
would otherwise have had on any future occasion. No failure to exercise nor any
delay in exercising on the part of Pledgee or any Lender, any right, power or
privilege hereunder, shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or future exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies hereunder provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights and
remedies provided by law. None of the terms or provisions of this Security
Agreement may be waived, altered, modified or amended except by an instrument in
writing, duly executed by Pledgee and, where applicable, by Borrower.
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SECURITY AGREEMENT - PAGE 16
(HW PARTNERS/ORIX GLOBAL)
97
15. SUCCESSORS AND ASSIGNS; GOVERNING LAW.
(a) This Security Agreement and all obligations of Borrower hereunder
shall be binding upon the successors and assigns of Borrower, and shall,
together with the rights and remedies of Pledgee and Lender hereunder,
inure to the benefit of Pledgee, Lender, all future holders of the Notes
and their respective successors and assigns. No sales of participations,
other sales, assignments, transfers or other dispositions of any agreement
governing or instrument evidencing the Secured Obligations or any portion
thereof or interest therein shall in any manner affect the security
interest granted to Pledgee and Lender hereunder.
(b) THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA.
16. USE AND PROTECTION OF PATENT AND TRADEMARK COLLATERAL. Notwithstanding
anything to the contrary contained herein, unless an Event of Default has
occurred and is continuing, Pledgee shall from time to time execute and deliver,
upon the written request of any grantor, any and all instruments, certificates
or other documents, in the form so requested, necessary or appropriate in the
judgment of Borrower to permit Borrower to continue to exploit, license, use,
enjoy and protect the Patents and Trademarks.
17. FURTHER INDEMNIFICATION. Borrower agrees to pay, and to save Pledgee
and each Lender harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all excise, sales or other similar
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Security Agreement.
18. WAIVER OF JURY TRIAL. BORROWER HEREBY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES
HEREUNDER.
19. TERMINATION. At such time as (i) the entire unpaid principal balance of
the Notes and all accrued interest thereon have been indefeasibly paid in full
("Payment in Full") and (ii) all other payment obligations under the Notes and
the Purchase Agreement due and owing as of the date of such Payment in Full have
been indefeasibly paid in full, this Agreement and the security interests
created hereby shall terminate. Upon termination of this Agreement and
Borrower's written request, Pledgee will, at Borrower's sole cost and expense,
return to Borrower such of the Collateral as shall not have been sold or
otherwise disposed of or applied pursuant to the terms hereof and execute and
deliver to Borrower such documents as Borrower shall reasonably request to
evidence such termination.
[SIGNATURE PAGE FOLLOWS]
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SECURITY AGREEMENT - PAGE 17
(HW PARTNERS/ORIX GLOBAL)
98
IN WITNESS WHEREOF, each of the parties hereto has caused this
Security Agreement to be executed and delivered by its duly authorized officer
on the date first set forth above.
ORIX GLOBAL COMMUNICATIONS, INC.
By: /s/ [ILLEGIBLE]
---------------------------------------
Title: President
-----------------------------------
HW PARTNERS, L.P., as Agent for Lender
By: HW Finance, L.L.C., its general partner
By: /s/ XXXXX X. XXXX
---------------------------------------
Title: Manager
-----------------------------------
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SECURITY AGREEMENT - PAGE 18
(HW PARTNER/ORIX GLOBAL)
99
SCHEDULE I
FILINGS
DEBTOR JURISDICTION FILING OFFICE
100
SCHEDULE II
LOCATION OF RECORDS AND CERTAIN COLLATERAL
Principal Place of Location of
Business and Inventory
Location of Records and Equipment
101
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT ("Agreement") is made as of the 11th day of June,
1998, by ORIX GLOBAL COMMUNICATIONS, INC., a Nevada corporation (hereinafter
called "Pledgor", whether one or more), in favor of HW Partners, L.P., as agent
for and representative of (in such capacity, "Pledgee") the Secured Party (as
hereinafter defined). Pledgor hereby agrees with Pledgees as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings indicated below:
(a) The term "Borrower" shall mean Pledgor.
(b) The term "Code" shall mean the Uniform Commercial Code as in
effect in the State of Nevada on the date of this Agreement or as it may
hereafter be amended from time to time.
(c) The term "Collateral" shall mean all of the following property:
(i) all of Pledgor's right, title and interest as a partner
(whether as a general partner or limited partner) in and to any
partnership (the "Pledged Partnerships"), whether now owned or
hereafter acquired, including, but not limited to, Pledgor's right to
vote and to manage and administer the business of each Pledged
Partnership pursuant to the partnership agreements of any such
partnership (the "Partnership Agreements"), together with all other
rights, interests, claims and other property of Pledgor in any manner
arising out of or relating to its general partnership interests or
limited partnership interests, as the case may be, whether such
rights, interests, claims or other property are now owned or hereafter
acquired by Pledgor, whatever their respective kind or character,
whether they are tangible or intangible property, and wheresoever they
may exist or be located, including without limitation any certificates
or instruments, however designated or titled, issued by any
partnership and evidencing Pledgor's interest as a general partner or
limited partner, as the case may be, now owned or hereafter acquired
by Pledgor and in any manner arising out of or relating to Pledgor's
general partnership interests or limited partnership interests, as the
case may be, and further including, without limitation, all of the
rights of Pledgor as a general partner or limited partner, as the case
may be (whether now owned or hereafter acquired) to: (A) receive money
due and to become due (including, without limitation, dividends,
distributions, interest, income from partnership properties and
returns of capital) under or pursuant to any of the Partnership
Agreements, to receive payments upon termination of any or all of the
Partnership Agreements and to receive any other payments or
distributions, whether cash or non-cash, in respect of Pledgor's
partnership interests; (B) fees, income, rents, proceeds of sale,
earnings, deposits, receipts, royalties, revenues, recoveries,
compensation, claims and causes of action arising out of or relating
to any partnership, and all other rights, powers, property and
remedies of Pledgor with respect to any of the foregoing; and (C)
access to any Pledged Partnership's books and records and to other
information concerning or affecting any Pledged Partnership;
(ii) all of Pledgor's right, title and interest as a member or
owner in and to any limited liability company (the "Pledged LLCs"),
whether now owned or hereafter acquired, including, but not limited
to, Pledgor's right to vote and to manage and administer the business
of each Pledged LLC pursuant to the agreements of any such LLC (the
"LLC Agreements"), together with all other rights, interests, claims
and other property of Pledgor in any manner arising out of or relating
to its interests in such LLCs, whether such rights, interests, claims
or other property are now owned or hereafter acquired by Pledgor,
whatever their respective kind or character, whether they are tangible
or intangible property, and wheresoever they may exist or be located,
including without limitation any certificates or instruments, however
designated or titled, issued by any LLC and evidencing Pledgor's
interest therein now owned or hereafter acquired by Pledgor and in any
manner arising out of or relating to Pledgor's interest including,
without limitation, all of the rights
PLEDGE AGREEMENT - PAGE 1
102
of Pledgor (whether now owned or hereafter acquired) to: (A) receive
money due and to become due (including, without limitation, dividends,
distributions, interest, income from properties and returns of
capital) under or pursuant to any of the LLC Agreements, to receive
payments upon termination of any or all of the LLC Agreements and to
receive any other payments or distributions, whether cash or non-cash,
in respect of Pledgor's membership or ownership interests, (B) fees,
income, rents, proceeds of sale, earnings, deposits, receipts,
royalties, revenues, recoveries, compensation, claims and causes of
action arising out of or relating to any LLC, and all other rights,
powers, property and remedies of Pledgor with respect to any of the
foregoing; and (C) access to any Pledged LLC's books and records and
to other information concerning or affecting any Pledged LLC;
(iii) all shares of capital stock or other equity interests now
owned or hereafter acquired by Pledgor in any person or entity,
together with certificates representing all of such shares or other
interests (the "Pledged Shares"), and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to the
Pledged Shares, and all dividends, cash, options, warrants, rights,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any and all of the Pledged Shares; and
(iv) all property specifically described on Schedule "A" attached
hereto and made a part hereof.
The term Collateral, as used herein, shall also include (A) all
certificates, instruments and/or other documents evidencing the
foregoing, (B) all renewals, replacements and substitutions of all of
the foregoing, (C) all Additional Property (as hereinafter defined),
and (D) all PRODUCTS and PROCEEDS of all of the foregoing. The
designation of proceeds does not authorize Pledgor to sell, transfer
or otherwise convey any of the foregoing property. The delivery at any
time by Pledgor to Secured Party of any property as a pledge to secure
payment or performance of any indebtedness or obligation whatsoever
shall also constitute a pledge of such property as Collateral
hereunder.
(d) The term "Indebtedness" shall mean all indebtedness, obligations
and liabilities of Borrower to Secured Party of any kind or character, now
existing or hereafter arising, whether direct, indirect, related,
unrelated, fixed, contingent, liquidated, unliquidated, joint, several or
joint and several, and regardless of whether such indebtedness, obligations
and liabilities may, prior to their acquisition by Secured Party, be or
have been payable to or in favor of a third party and subsequently acquired
by Secured Party (it being contemplated that Secured Party may make such
acquisitions from third parties), including without limitation all
indebtedness, obligations and liabilities of Borrower to Secured Party now
existing or hereafter arising by note, draft, acceptance, guaranty,
endorsement, letter of credit, assignment, purchase, overdraft, discount,
indemnity agreement or otherwise, (ii) all accrued but unpaid interest on
any of the indebtedness described in (i) above, (iii) all obligations of
Borrower to Secured Party under any documents evidencing, securing,
governing and/or pertaining to all or any part of the indebtedness
described in (i) and (ii) above, including, without limitation, the
Securities Purchase Agreement dated as of the date hereof (the "Purchase
Agreement") between Infinity Investors Limited and Borrower and the
Debentures issued pursuant thereto (the "Debentures"), (iv) all costs and
expenses incurred by Secured Party in connection with the collection and
administration of all or any part of the indebtedness and obligations
described in (i), (ii) and (iii) above or the protection or preservation
of, or realization upon, the collateral securing all or any part of such
indebtedness and obligations, including without limitation all reasonable
attorneys' fees, and (v) all renewals, extensions, modifications and
rearrangements of the indebtedness and obligations described in (i), (ii),
(iii) and (iv) above.
(e) The term "Loan Documents" shall mean all instruments and documents
evidencing, securing, governing, guaranteeing and/or pertaining to the
Indebtedness, including the Purchase Agreement and the Debentures.
PLEDGE AGREEMENT - PAGE 2
103
(f) The term "Obligated Party" shall mean any party other than
Borrower who secures, guarantees and/or is otherwise obligated to pay all
or any portion of the Indebtedness.
(g) The term "Secured Party" shall mean Infinity Investors Limited and
any other holder of Debentures, and the Pledgee as agent for such Secured
Party(s), their successors and assigns, including without limitation, any
party to whom any Secured Party or the Pledgee, or any of their successors
or assigns, may assign all or any part of the Indebtedness or any of its or
their rights and interests under this Agreement.
All words and phrases used herein which are expressly defined in Section 1.201,
Chapter 8 or Chapter 9 of the Code shall have the meaning provided for therein.
Other words and phrases defined elsewhere in the Code shall have the meaning
specified therein except to the extent such meaning is inconsistent with a
definition in Section 1-201, Chapter 8 or Chapter 9 of the Code.
2. Security Interest. As security for the Indebtedness, Pledgor, for value
received, hereby grants to Secured Party a continuing security interest in the
Collateral.
3. Additional Property. Collateral shall also include the following
property (collectively, the "Additional Property") which Pledgor becomes
entitled to receive or shall receive in connection with any other Collateral:
(a) any stock certificate, including without limitation, any certificate
representing a stock dividend or any certificate in connection with any
recapitalization, reclassification, merger, consolidation, conversion, sale of
assets, combination of shares, stock split or spin-off; (b) any option, warrant,
subscription or right, whether as an addition to or in substitution of any other
Collateral; (c) any dividends or distributions of any kind whatsoever, whether
distributable in cash, stock or other property; (d) any interest, premium or
principal payments; and (e) any conversion or redemption proceeds; provided,
however, that until the occurrence of an Event of Default (as hereinafter
defined), Pledgor shall be entitled to all cash dividends and all interest paid
on the Collateral (except interest paid on any certificate of deposit pledged
hereunder) free of the security interest created under this Agreement. All
Additional Property received by Pledgor shall be received in trust for the
benefit of Secured Party. All Additional Property and all certificates or other
written instruments or documents evidencing and/or representing the Additional
Property that is received by Pledgor, together with such instruments of transfer
as Secured Party may request, shall immediately be delivered to or deposited
with Secured Party and held by Secured Party as Collateral under the terms of
this Agreement. If the Additional Property received by Pledgor shall be shares
of stock or other securities, such shares of stock or other securities shall be
duly endorsed in blank or accompanied by proper instruments of transfer and
assignment duly executed in blank with, if requested by Secured Party,
signatures guaranteed by a member or member organization in good standing of an
authorized Securities Transfer Agents Medallion Program, all in form and
substance satisfactory to Secured Party. Secured Party shall be deemed to have
possession of any Collateral in transit to Secured Party or its agent
4. Voting Rights. As long as no Event of Default shall have occurred
hereunder, any voting rights incident to any stock or other securities pledged
as Collateral may be exercised by Pledgor; provided, however, that Pledgor will
not exercise, or cause to be exercised, any such voting rights, without the
prior written consent of Secured Party, if the direct or indirect effect of such
vote will result in an Event of Default hereunder.
5. Maintenance of Collateral. Other than the exercise of reasonable care to
assure the safe custody of any Collateral in Secured Party's possession from
time to time, Secured Party does not have any obligation, duty or responsibility
with respect to the Collateral. Without limiting the generality of the
foregoing, Secured Party shall not have any obligation, duty or responsibility
to do any of the following: (a) ascertain any maturities, calls, conversions,
exchanges, offers, tenders or similar matters relating to the Collateral or
informing Pledgor with respect to any such matters; (b) fix, preserve or
exercise any right, privilege or option (whether conversion, redemption or
otherwise) with respect to the Collateral unless (i) Pledgor makes written
demand to Secured Party to do so, (ii) such written demand is received by
Secured Party in sufficient time to permit Secured Party to take the action
demanded in the ordinary course of its business, and (iii) Pledgor provides
additional collateral, acceptable to Secured Party in its sole discretion; (c)
collect any amounts payable in respect of the Collateral (Secured Party being
PLEDGE AGREEMENT - PAGE 3
104
liable to account to Pledgor only for what Secured Party may actually receive or
collect thereon); (d) sell all or any portion of the Collateral to avoid market
loss; (e) sell all or any portion of the Collateral unless and until (i) Pledgor
makes written demand upon Secured Party to sell the Collateral, and (ii) Pledgor
provides additional collateral, acceptable to Secured Party in its sole
discretion; or (f) hold the Collateral for or on behalf of any party other than
Pledgor.
6. Representations and Warranties. Pledgor hereby represents and warrants
the following to Secured Party:
(a) Due Authorization. The execution, delivery and performance of this
Agreement and all of the other Loan Documents by Pledgor have been duly
authorized by all necessary corporate action of Pledgor, to the extent Pledgor
is a corporation, or by all necessary partnership action, to the extent Pledgor
is a partnership.
(b) Enforceability. This Agreement and the other Loan Documents
constitute legal, valid and binding obligations of Pledgor, enforceable in
accordance with their respective terms, except as limited by bankruptcy,
insolvency or similar laws of general application relating to the enforcement of
creditors' rights and except to the extent specific remedies may generally be
limited by equitable principles.
(c) Ownership and Liens. Pledgor has good and marketable title to the
Collateral free and clear of all liens, security interests, encumbrances or
adverse claims, except for the security interest created by this Agreement. No
dispute, right of setoff, counterclaim or defense exists with respect to all or
any part of the Collateral. Pledgor has not executed any other security
agreement currently affecting the Collateral and no financing statement or other
instrument similar in effect covering all or any part of the Collateral is on
file in any recording office except as may have been executed or filed in favor
of Secured Party. The capital stock described on Schedule "A" hereto constitutes
100% of the issued and outstanding capital stock of the issuer thereof.
(d) No Conflicts or Consents. Neither the ownership, the intended use
of the Collateral by Pledgor, the grant of the security interest by Pledgor to
Secured Party herein nor the exercise by Secured Party of its rights or remedies
hereunder, will (i) conflict with any provision of (A) any domestic or foreign
law, statute, rule or regulation, (B) the articles or certificate of
incorporation, charter, bylaws or partnership agreement, as the case may be, of
Pledgor, or (C) any agreement, judgment, license, order or permit applicable to
or binding upon Pledgor or otherwise affecting the Collateral, or (ii) result in
or require the creation of any lien, charge or encumbrance upon any assets or
properties of Pledgor or of any person except as may be expressly contemplated
in the Loan Documents. No consent, approval, authorization or order of, and no
notice to or filing with, any court, governmental authority or third party is
required in connection with the grant by Pledgor of the security interest herein
or the exercise by Secured Party of its rights and remedies hereunder.
(e) Security Interest. Pledgor has and will have at all times full
right, power and authority to grant a security interest in the Collateral to
Secured Party in the manner provided herein, free and clear of any lien,
security interest or other charge or encumbrance. This Agreement creates a
legal, valid and binding security interest in favor of Secured Party in the
Collateral.
(f) Location. Pledgor's residence or chief executive office, as the
case may be, and the office where the records concerning the Collateral are kept
is located at its address set forth on the signature page hereof.
(g) Solvency of Pledgor. As of the date hereof, and after giving
effect to this Agreement and the completion of all other transactions
contemplated by Pledgor at the time of the execution of this Agreement, (i)
Pledgor is and will be solvent, (ii) the fair saleable value of Pledgor's assets
exceeds and will continue to exceed Pledgor's liabilities (both fixed and
contingent), (iii) Pledgor is paying and will continue to be able to pay its
debts as they mature, and (iv) if Pledgor is not an individual, Pledgor has and
will have sufficient capital to carry on Pledgor's businesses and all businesses
in which Pledgor is about to engage.
PLEDGE AGREEMENT - PAGE 4
105
(h) Securities. Any certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are fully
paid and non-assessable, and were not issued in violation of the preemptive
rights of any party or of any agreement by which Pledgor or the issuer thereof
is bound. No restrictions or conditions exist with respect to the transfer or
voting of any securities pledged as Collateral, except as has been disclosed to
Secured Party in writing. To the best of Pledgor's knowledge, no issuer of such
securities (other than securities of a class which are publicly traded) has any
outstanding stock rights, rights to subscribe, options, warrants or convertible
securities outstanding or any other rights outstanding entitling any party to
have issued to such party capital stock of such issuer, except as has been
disclosed to Secured Party in writing.
7. Affirmative Covenants. Pledgor will comply with the covenants contained
in this Section at all times during the period of time this Agreement is
effective unless Secured Party shall otherwise consent in writing.
(a) Ownership and Liens. Pledgor will maintain good and marketable
title to all Collateral free and clear of all liens, security interests,
encumbrances or adverse claims, except for the security interest created by this
Agreement and the security interests and other encumbrances expressly permitted
by the other Loan Documents. Pledgor will not permit any dispute, right of
setoff, counterclaim or defense to exist with respect to all or any part of the
Collateral. Pledgor will cause any financing statement or other security
instrument with respect to the Collateral to be terminated, except as may exist
or as may have been filed in favor of Secured Party. Pledgor will defend at its
expense Secured Party's right, title and security interest in and to the
Collateral against the claims of any third party.
(b) Inspection of Books and Records. Pledgor will keep adequate
records concerning the Collateral and will permit Secured Party and all
representatives and agents appointed by Secured Party to inspect Pledgor's books
and records of or relating to the Collateral at any time during normal business
hours, to make and take away photocopies, photographs and printouts thereof and
to write down and record any such information.
(c) Adverse Claim. Pledgor covenants and agrees to promptly notify
Secured Party of any claim, action or proceeding affecting title to the
Collateral, or any part thereof, or the security interest created hereunder and,
at Pledgor's expense, defend Secured Party's security interest in the Collateral
against the claims of any third party. Pledgor also covenants and agrees to
promptly deliver to Secured Party a copy of all written notices received by
Pledgor with respect to the Collateral, including without limitation, notices
received from the issuer of any securities pledged hereunder as Collateral.
(d) Delivery of Instruments and/or Certificates. Contemporaneously
herewith, Pledgor covenants and agrees to deliver to Secured Party any
certificates, documents or instruments representing or evidencing the
Collateral, with Pledgor's endorsement thereon and/or accompanied by proper
instruments of transfer and assignment duly executed in blank with, if requested
by Secured Party, signatures guaranteed by a member or member organization in
good standing of an authorized Securities Transfer Agents Medallion Program, all
in form and substance satisfactory to Secured Party.
(e) Further Assurances. Pledgor will contemporaneously with the
execution hereof and from time to time thereafter at its expense promptly
execute and deliver all further instruments and documents and take all further
action necessary or appropriate or that Secured Party may request in order (i)
to perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable Secured
Party to exercise and enforce its rights and remedies hereunder in respect of
the Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining written
confirmation from the issuer of any securities pledged as Collateral of the
pledge of such securities, in form and substance satisfactory to Secured Party;
(C) cooperating with Secured Party in registering the pledge of any securities
pledged as Collateral with the issuer of such securities; (D) delivering notice
of Secured Party's security interest in any securities pledged as Collateral to
any securities or financial intermediary, clearing corporation or other party
required by Secured Party, in form and substance satisfactory to Secured Party;
and (E) obtaining written confirmation of the pledge of any securities
constituting Collateral from any securities or financial intermediary, clearing
corporation or other party
PLEDGE AGREEMENT - PAGE 5
106
required by Secured Party, in form and substance satisfactory to Secured Party.
If all or any part of the Collateral is securities issued by an agency or
department of the United States, Pledgor covenants and agrees, at Secured
Party's request, to cooperate in registering such securities in Secured Party's
name or with Secured Party's account maintained with a Federal Reserve Bank.
When applicable law provides more than one method of perfection of Secured
Party's security interest in the Collateral, Secured Party may choose the
method(s) to be used.
8. Negative Covenants. Pledgor will comply with the covenants contained in
this Section at all times during the period of time this Agreement is effective,
unless Secured Party shall otherwise consent in writing.
(a) Transfer or Encumbrance. Pledgor will not (i) sell, assign (by
operation of law or otherwise) or transfer Pledgor's rights in any of the
Collateral, (ii) xxxxx x xxxx or security interest in or execute, file or record
any financing statement or other security instrument with respect to the
Collateral to any party other than Secured Party, or (iii) deliver actual or
constructive possession of any certificate, instrument or document evidencing
and/or representing any of the Collateral to any party other than Secured Party.
(b) Impairment of Security Interest. Pledgor will not take or fail to
take any action which would in any manner impair the value or enforceability of
Secured Party's security interest in any Collateral.
(c) Dilution of Ownership. As to any securities pledged as Collateral
(other than securities of a class which are publicly traded), Pledgor will not
consent to or approve of the issuance of (i) any additional shares of any class
of securities of such issuer (unless immediately upon issuance additional
securities are pledged and delivered to Secured Party pursuant to the terms
hereof to the extent necessary to give Secured Party a security interest after
such issuance in at least the same percentage of such issuer's outstanding
securities as Secured Party had before such issuance), (ii) any instrument
convertible voluntarily by the holder thereof or automatically upon the
occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such securities, or (iii) any warrants, options, contracts or other
commitments entitling any third party to purchase or otherwise acquire any such
securities.
(d) Restrictions on Securities. Pledgor will not enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting or control of any securities pledged as Collateral,
except as consented to in writing by Secured Party.
9. Rights of Secured Party. Secured Party shall have the rights contained
in this Section at all times during the period of time this Agreement is
effective.
(a) Power of Attorney. Pledgor hereby irrevocably appoints Secured
Party as Pledgor's attorney-in-fact, such power of attorney being coupled with
an interest, with full authority in the place and stead of Pledgor and in the
name of Pledgor or otherwise, to take any action and to execute any instrument
which Secured Party may from time to time in Secured Party's discretion deem
necessary or appropriate to accomplish the purposes of this Agreement, including
without limitation, the following action: (i) transfer any securities,
instruments, documents or certificates pledged as Collateral in the name of
Secured Party or its nominee; (ii) use any interest, premium or principal
payments, conversion or redemption proceeds or other cash proceeds received in
connection with any Collateral to reduce any of the Indebtedness; (iii) exchange
any of the securities pledged as Collateral for any other property upon any
merger, consolidation, reorganization, recapitalization or other readjustment of
the issuer thereof, and, in connection therewith, to deposit and deliver any and
all of such securities with any committee, depository, transfer agent, registrar
or other designated agent upon such terms and conditions as Secured Party may
deem necessary or appropriate; (iv) exercise or comply with any conversion,
exchange, redemption, subscription or any other right, privilege or option
pertaining to any securities pledged as Collateral; provided, however, except as
provided herein, Secured Party shall not have a duty to exercise or comply with
any such right, privilege or option (whether conversion, redemption or
otherwise) and shall not be responsible for any delay or failure to do so; and
(v) file any claims or take any action or institute any proceedings which
Secured Party may deem necessary or appropriate for the collection and/or
preservation of the Collateral or otherwise to enforce the rights of Secured
Party with respect to the Collateral.
PLEDGE AGREEMENT - PAGE 6
107
(b) Performance by Secured Party. If Pledgor fails to perform any
agreement or obligation provided herein, Secured Party may itself perform, or
cause performance of, such agreement or obligation, and the expenses of Secured
Party incurred in connection therewith shall be a part of the Indebtedness,
secured by the Collateral and payable by Pledgor on demand.
Notwithstanding any other provision herein to the contrary, Secured Party does
not have any duty to exercise or continue to exercise any of the foregoing
rights and shall not be responsible for any failure to do so or for any delay in
doing so.
10. Events of Default. Each of the following constitutes an "Event of
Default" under this Agreement:
(a) Default Under Loan Documents. The occurrence of any Event of
Default under Article of the Purchase Agreement, any Event of Default under
any Debenture or any event of default under any other Loan Document; or
(b) Bankruptcy or Insolvency. If Borrower or any Obligated Party: (i)
becomes insolvent, or makes a transfer in fraud of creditors, or makes an
assignment for the benefit of creditors, or admits in writing its inability
to pay its debts as they become due; (ii) generally is not paying its debts
as such debts become due; (iii) has a receiver, trustee or custodian
appointed for, or take possession of, all or substantially all of the
assets of such party or any of the Collateral, either in a proceeding
brought by such party or in a proceeding brought against such party and
such appointment is not discharged or such possession is not terminated
within sixty (60) days after the effective date thereof or such party
consents to or acquiesces in such appointment or possession; (iv) files a
petition for relief under the United States Bankruptcy Code or any other
present or future federal or state insolvency, bankruptcy or similar laws
(all of the foregoing hereinafter collectively called "Applicable
Bankruptcy Law") or an involuntary petition for relief is filed against
such party under any Applicable Bankruptcy Law and such involuntary
petition is not dismissed within sixty (60) days after the filing thereof,
or an order for relief naming such party is entered under any Applicable
Bankruptcy Law, or any composition, rearrangement, extension,
reorganization or other relief of debtors now or hereafter existing is
requested or consented to by such party; (v) fails to have discharged
within a period of sixty (60) days any attachment, sequestration or similar
writ levied upon any property of such party; or (vi) fails to pay within
thirty (30) days any final money judgment against such party; or
(c) Execution on Collateral. The Collateral or any portion thereof is
taken on execution or other process of law in any action against Pledgor;
or
(d) Abandonment. Pledgor abandons the Collateral or any portion
thereof; or
(e) Action by Other Lienholder. The holder of any lien or security
interest on any of the assets of Pledgor, including without limitation, the
Collateral (without hereby implying the consent of Secured Party to the
existence or creation of any such lien or security interest on the
Collateral), declares a default thereunder or institutes foreclosure or
other proceedings for the enforcement of its remedies thereunder; or
(f) Dilution of Ownership. The issuer of any securities (other than
securities of a class which are publicly traded) constituting Collateral
hereafter issues any shares of any class of capital stock (unless
immediately upon issuance, additional securities are pledged and delivered
to Secured Party pursuant to the terms hereof to the extent necessary to
give Secured Party a security interest after such issuance in at least the
same percentage of such issuer's outstanding securities as Secured Party
had before such issuance) or any options, warrants or other rights to
purchase any such capital stock; or
(g) Bankruptcy of Issuer. (i) The issuer of any securities
constituting Collateral files a petition for relief under any Applicable
Bankruptcy Law, (ii) an involuntary petition for relief is filed against
any such issuer under any Applicable Bankruptcy Law and such involuntary
petition is not dismissed within thirty (30) days after the filing thereof,
or (iii) an order for relief naming any such issuer is entered under any
Applicable Bankruptcy Law.
PLEDGE AGREEMENT - PAGE 7
108
11. Remedies and Related Rights. If an Event of Default shall have
occurred, and without limiting any other rights and remedies provided herein,
under any of the other Loan Documents or otherwise available to Secured Party,
Secured Party may exercise one or more of the rights and remedies provided in
this Section.
(a) Remedies. Secured Party may from time to time at its discretion,
without limitation and without notice except as expressly provided in any of the
Loan Documents:
(i) exercise in respect of the Collateral all the rights and
remedies of a secured party under the Code (whether or not the Code applies to
the affected Collateral);
(ii) reduce its claim to judgment or foreclose or otherwise
enforce, in whole or in part, the security interest granted hereunder by any
available judicial procedure;
(iii) sell or otherwise dispose of, at its office, on the
premises of Pledgor or elsewhere, the Collateral, as a unit or in parcels, by
public or private proceedings, and by way of one or more contracts (it being
agreed that the sale or other disposition of any part of the Collateral shall
not exhaust Secured Party's power of sale, but sales or other dispositions may
be made from time to time until all of the Collateral has been sold or disposed
of or until the Indebtedness has been paid and performed in full), and at any
such sale or other disposition it shall not be necessary to exhibit any of the
Collateral;
(iv) buy the Collateral, or any portion thereof, at any public
sale;
(v) buy the Collateral, or any portion thereof, at any private
sale if the Collateral is of a type customarily sold in a recognized market or
is of a type which is the subject of widely distributed standard price
quotations;
(vi) apply for the appointment of a receiver for the Collateral,
and Pledgor hereby consents to any such appointment; and
(vii) at its option, retain the Collateral in satisfaction of the
Indebtedness whenever the circumstances are such that Secured Party is entitled
to do so under the Code or otherwise.
Pledgor agrees that in the event Pledgor is entitled to receive any
notice under the Uniform Commercial Code, as it exists in the state governing
any such notice, of the sale or other disposition of any Collateral, reasonable
notice shall be deemed given when such notice is deposited in a depository
receptacle under the care and custody of the United States Postal Service,
postage prepaid, at Pledgor's address set forth on the signature page hereof,
five (5) days prior to the date of any public sale, or after which a private
sale, of any of such Collateral is to be held. Secured Party shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. Secured Party may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Pledgor further acknowledges and agrees that the redemption by
Secured Party of any certificate of deposit pledged as Collateral shall be
deemed to be a commercially reasonable disposition under Section 9-504(3) of the
Code.
(b) Private Sale of Securities. Pledgor recognizes that Secured Party may
be unable to effect a public sale of all or any part of the securities pledged
as Collateral because of restrictions in applicable federal and state securities
laws and that Secured Party may, therefore, determine to make one or more
private sales of any such securities to a restricted group of purchasers who
will be obligated to agree, among other things, to acquire such securities for
their own account, for investment and not with a view to the distribution or
resale thereof. Pledgor acknowledges that any such private sale may be at
prices and other terms less favorable than what might have been obtained at a
public sale and, notwithstanding the foregoing, agrees that each such private
sale shall be deemed to have been made in a commercially reasonable manner and
that Secured Party shall have no obligation to delay the sale of any such
securities for the period of time necessary to permit the issuer to register
such securities for public sale under any federal or state securities laws.
Pledgor further acknowledges and agrees that any offer to sell
PLEDGE AGREEMENT - PAGE 8
109
such securities which has been made privately in the manner described above to
not less than five (5) bona fide offerees shall be deemed to involve a "public
sale" for the purposes of Section 9-504(3) of the Code, notwithstanding that
such sale may not constitute a "public offering" under any federal or state
securities laws and that Secured Party may, in such event, bid for the purchase
of such securities.
(c) Application of Proceeds. If any Event of Default shall have
occurred, Secured Party may at its discretion apply or use any cash held by
Secured Party as Collateral, and any cash proceeds received by Secured Party in
respect of any sale or other disposition of, collection from, or other
realization upon, all or any part of the Collateral as follows in such order and
manner as Secured Party may elect:
(i) to the repayment or reimbursement of the reasonable costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses) incurred by Secured Party in connection with (A) the administration of
the Loan Documents, (B) the custody, preservation, use or operation of, or the
sale of, collection from, or other realization upon, the Collateral, and (C) the
exercise or enforcement of any of the rights and remedies of Secured Party
hereunder;
(ii) to the payment or other satisfaction of any liens and other
encumbrances upon the Collateral;
(iii) to the satisfaction of the Indebtedness;
(iv) by holding such cash and proceeds as Collateral;
(v) to the payment of any other amounts required by applicable
law (including without limitation, Section 9-504(l)(c) of the Code or any other
applicable statutory provision); and
(vi) by delivery to Pledgor or any other party lawfully entitled
to receive such cash or proceeds whether by direction of a court of competent
jurisdiction or otherwise.
(d) Deficiency. In the event that the proceeds of any sale of,
collection from, or other realization upon, all or any part of the Collateral by
Secured Party are insufficient to pay all amounts to which Secured Party is
legally entitled, Borrower and any party who guaranteed or is otherwise
obligated to pay all or any portion of the Indebtedness shall be liable for the
deficiency, together with interest thereon as provided in the Loan Documents.
(e) Non-Judicial Remedies. In granting to Secured Party the power to
enforce its rights hereunder without prior judicial process or judicial hearing,
Pledgor expressly waives, renounces and knowingly relinquishes any legal right
which might otherwise require Secured Party to enforce its rights by judicial
process. Pledgor recognizes and concedes that non-judicial remedies are
consistent with the usage of trade, are responsive to commercial necessity and
are the result of a bargain at arm's length. Nothing herein is intended to
prevent Secured Party or Pledgor from resorting to judicial process at either
party's option.
(f) Other Recourse. Pledgor waives any right to require Secured Party
to proceed against any third party, exhaust any Collateral or other security for
the Indebtedness, or to have any third party joined with Pledgor in any suit
arising out of the Indebtedness or any of the Loan Documents, or pursue any
other remedy available to Secured Party. Pledgor further waives any and all
notice of acceptance of this Agreement and of the creation, modification,
rearrangement, renewal or extension of the Indebtedness. Pledgor further waives
any defense arising by reason of any disability or other defense of any third
party or by reason of the cessation from any cause whatsoever of the liability
of any third party. Until all of the Indebtedness shall have been paid in full,
Pledgor shall have no right of subrogation and Pledgor waives the right to
enforce any remedy which Secured Party has or may hereafter have against any
third party, and waives any benefit of and any right to participate in any other
security whatsoever now or hereafter held by Secured Party. Pledgor authorizes
Secured Party, and without notice or demand and without any reservation of
rights against Pledgor and without affecting Pledgor's liability hereunder or on
the Indebtedness, to (i) take or hold any other property of any type from any
third party as security for the
PLEDGE AGREEMENT - PAGE 9
110
Indebtedness, and exchange, enforce, waive and release any or all of such other
property, (ii) apply such other property and direct the order or manner of sale
thereof as Secured Party may in its discretion determine, (iii) renew, extend,
accelerate, modify, compromise, settle or release any of the Indebtedness or
other security for the Indebtedness, (iv) waive, enforce or modify any of the
provisions of any of the Loan Documents executed by any third party, and (v)
release or substitute any third party.
(g) Voting Rights. Upon the occurrence of an Event of Default, Pledgor
will not exercise any voting rights with respect to securities pledged as
Collateral. Pledgor hereby irrevocably appoints Secured Party as Pledgor's
attorney-in-fact (such power of attorney being coupled with an interest) and
proxy to exercise any voting rights with respect to Pledgor's securities pledged
as Collateral upon the occurrence of an Event of Default.
(h) Dividend Rights and Interest Payments. Upon the occurrence of an
Event of Default:
(i) all rights of Pledgor to receive and retain the dividends and
interest payments which it would otherwise be authorized to receive and retain
pursuant to Section 3 shall automatically cease, and all such rights shall
thereupon become vested with Secured Party which shall thereafter have the sole
right to receive, hold and apply as Collateral such dividends and interest
payments; and
(ii) all dividend and interest payments which are received by
Pledgor contrary to the provisions of clause (i) of this Subsection shall be
received in trust for the benefit of Secured Party, shall be segregated from
other funds of Pledgor, and shall be forthwith paid over to Secured Party in
the exact form received (properly endorsed or assigned if requested by Secured
Party), to be held by Secured Party as Collateral.
12. Indemnity. Pledgor hereby indemnifies and agrees to hold harmless
Secured Party, and its officers, directors, employees, agents and
representatives (each an "Indemnified Person") from and against any and all
liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
(collectively, the "Claims") which may be imposed on, incurred by, or asserted
against, any Indemnified Person arising in connection with the Loan Documents,
the Indebtedness or the Collateral (including without limitation, the
enforcement of the Loan Documents and the defense of any Indemnified Person's
actions and/or inactions in connection with the Loan Documents). WITHOUT
LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PERSON
WITH RESPECT TO ANY CLAIMS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT
OF THE NEGLIGENCE OF SUCH AND/OR ANY OTHER INDEMNIFIED PERSON, except to the
limited extent the Claims against an Indemnified Person are proximately caused
by such Indemnified Person's gross negligence or willful misconduct. If Pledgor
or any third party ever alleges such gross negligence or willful misconduct by
any Indemnified Person, the indemnification provided for in this Section shall
nonetheless be paid upon demand, subject to later adjustment or reimbursement,
until such time as a court of competent jurisdiction enters a final judgment as
to the extent and effect of the alleged gross negligence or willful misconduct.
The indemnification provided for in this Section shall survive the termination
of this Agreement and shall extend and continue to benefit each individual or
entity who is or has at any time been an Indemnified Person hereunder.
13. Miscellaneous.
(a) Entire Agreement. This Agreement contains the entire agreement of
Secured Party and Pledgor with respect to the Collateral. If the parties hereto
are parties to any prior agreement, either written or oral, relating to the
Collateral, the terms of this Agreement shall amend and supersede the terms of
such prior agreements as to transactions on or after the effective date of this
Agreement, but all security agreements, financing statements, guaranties, other
contracts and notices for the benefit of Secured Party shall continue in full
force and effect to secure the Indebtedness unless Secured Party specifically
releases its rights thereunder by separate release.
(b) Amendment. No modification, consent or amendment of any provision
of this Agreement or any of the other Loan Documents shall be valid or effective
unless the same is in writing and signed by the party against whom it is sought
to be enforced.
PLEDGE AGREEMENT - PAGE 10
111
(c) Actions by Secured Party. The lien, security interest and other
security rights of Secured Party hereunder shall not be impaired by (i) any
renewal, extension, increase or modification with respect to the Indebtedness,
(ii) any surrender, compromise, release, renewal, extension, exchange or
substitution which Secured Party may grant with respect to the Collateral, or
(iii) any release or indulgence granted to any endorser, guarantor or surety of
the Indebtedness. The taking of additional security by Secured Party shall not
release or impair the lien, security interest or other security rights of
Secured Party hereunder or affect the obligations of Pledgor hereunder.
(d) Waiver by Secured Party. Secured Party may waive any
Event of Default without waiving any other prior or subsequent Event of Default.
Secured Party may remedy any default without waiving the Event of Default
remedied. Neither the failure by Secured Party to exercise, nor the delay by
Secured Party in exercising, any right or remedy upon any Event of Default shall
be construed as a waiver of such Event of Default or as a waiver of the right to
exercise any such right or remedy at a later date. No single or partial exercise
by Secured Party of any right or remedy hereunder shall exhaust the same or
shall preclude any other or further exercise thereof, and every such right or
remedy hereunder may be exercised at any time. No waiver of any provision hereof
or consent to any departure by Xxxxxxx therefrom shall be effective unless the
same shall be in writing and signed by Secured Party and then such waiver or
consent shall be effective only in the specific instances, for the purpose for
which given and to the extent therein specified. No notice to or demand
on Pledgor in any case shall of itself entitle Pledgor to any other or further
notice or demand in similar or other circumstances.
(e) Costs and Expenses. Pledgor will upon demand pay to
Secured Party the amount of any and all costs and expenses (including without
limitation, attorneys' fees and expenses), which Secured Party may incur in
connection with (i) the transactions which give rise to the Loan Documents, (ii)
the preparation of this Agreement and the perfection and preservation of the
security interests granted under the Loan Documents, (iii) the administration of
the Loan Documents, (iv) the custody, preservation, use or operation of, or the
sale of, collection from, or other realization upon, the Collateral, (v) the
exercise or enforcement of any of the rights of Secured Party under the Loan
Documents, or (vi) the failure by Pledgor to perform or observe any of the
provisions hereof.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA AND APPLICABLE
FEDERAL LAWS, EXCEPT TO THE EXTENT PERFECTION AND THE EFFECT OF PERFECTION OR
NON-PERFECTION OF THE SECURITY INTEREST GRANTED HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEVADA.
(g) Appointment of Pledgee as Agent. Pledgee has been appointed to act
as Pledgee hereunder by and for the benefit of the Secured Parties.
(h) Severability. If any provision of this Agreement is held by a court
of competent jurisdiction to be illegal, invalid or unenforceable under present
or future laws, such provision shall be fully severable, shall not impair or
invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be illegal, invalid or unenforceable.
(i) No Obligation. Nothing contained herein shall be construed as an
obligation on the part of Secured Party to extend or continue to extend credit
to Borrower.
(j) Notices. All notices, requests, demands or other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and given by (i) personal delivery, (ii) expedited delivery service with proof
of delivery, or (iii) United States mail, postage prepaid, registered or
certified mail, return receipt requested, sent to the intended addressee at the
address set forth on the signature page hereof or to such different address as
the addressee shall have designated by written notice sent pursuant to the terms
hereof and shall be deemed to have been received either, in the case of personal
delivery, at the time of personal delivery, in the case of expedited delivery
service, as of the date of first attempted delivery at the address and in the
manner provided herein, or in the case of mail, upon deposit in a depository
receptacle under the care and custody of the United States Postal Service.
Either party shall have the right to change its address for notice hereunder to
any other
PLEDGE AGREEMENT - PAGE 11
112
location within the continental United States by notice to the other party of
such new address at least thirty (30) days prior to the effective date of such
new address.
(k) Binding Effect and Assignment. This Agreement (i) creates a
continuing security interest in the Collateral, (ii) shall be binding on Pledgor
and the heirs, executors, administrators, personal representatives, successors
and assigns of Pledgor, and (iii) shall inure to the benefit of Secured Party
and its successors and assigns. Without limiting the generality of the
foregoing, Secured Party may pledge, assign or otherwise transfer the
Indebtedness and its rights under this Agreement and any of the other Loan
Documents to any other party. Pledgor's rights and obligations hereunder may not
be assigned or otherwise transferred without the prior written consent of
Secured Party.
(l) Termination. It is contemplated by the parties hereto that from
time to time there may be no outstanding Indebtedness, but notwithstanding such
occurrences, this Agreement shall remain valid and shall be in full force and
effect as to subsequent outstanding Indebtedness. Upon (i) the satisfaction in
full of the Indebtedness, (ii) the termination or expiration of any commitment
of Secured Party to extend credit to Borrower, (iii) written request for the
termination hereof delivered by Pledgor to Secured Party, and (iv) written
release delivered by Secured Party to Pledgor, this Agreement and the security
interests created hereby shall terminate. Upon termination of this Agreement and
Pledgor's written request, Secured Party will, at Pledgor's sole cost and
expense, return to Pledgor such of the Collateral as shall not have been sold or
otherwise disposed of or applied pursuant to the terms hereof and execute and
deliver to Pledgor such documents as Pledgor shall reasonably request to
evidence such termination.
(m) Cumulative Rights. All rights and remedies of Secured Party
hereunder are cumulative of each other and of every other right or remedy which
Secured Party may otherwise have at law or in equity or under any of the other
Loan Documents, and the exercise of one or more of such rights or remedies shall
not prejudice or impair the concurrent or subsequent exercise of any other
rights or remedies.
(n) Gender and Number. Within this Agreement, words of any gender shall
be held and construed to include the other gender, and words in the singular
number shall be held and construed to include the plural and words in the plural
number shall be held and construed to include the singular, unless in each
instance the context requires otherwise.
(o) Descriptive Headings. The headings in this Agreement are for
convenience only and shall in no way enlarge, limit or define the scope or
meaning of the various and several provisions hereof.
[SIGNATURE PAGE FOLLOWS]
PLEDGE AGREEMENT - PAGE 12
113
EXECUTED as of the date first written above.
Pledgor's Address: PLEDGOR:
ORIX GLOBAL COMMUNICATIONS, INC.
By: [ILLEGIBLE]
-------------------------- ----------------------------
Name: [ILLEGIBLE]
-------------------------- --------------------------
Title: President
-------------------------
Secured Party's Address:
c/o HW Partners, L.P.
0000 Xxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Fax: 214/000-0000
Attn: Xxxxxxx Xxxxxxx
PLEDGE AGREEMENT - PAGE 13
114
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as
of June 11, 1998 among ORIX GLOBAL COMMUNICATIONS, INC. (the "Company"), and the
purchasers of Common Stock of the Company listed on the signature pages below
(individually a "Purchaser" and collectively the "Purchasers").
RECITALS:
The Company and the Purchasers have entered into a Securities Purchase
Agreement (the "Purchase Agreement") providing, among other things, for the
purchase by the Purchasers of Debentures of the Company and 2,400 shares of
Common Stock of the Company (the "Closing Shares"). Terms defined in the
Purchase Agreement and not otherwise defined herein are used herein with the
same meanings as defined in the Purchase Agreement.
This Agreement is the Registration Rights Agreement referred to in the
Purchase Agreement. The execution and delivery of this Agreement is a condition
to the Closing under the Purchase Agreement.
The parties agree as follows:
1. REGISTRABLE SECURITIES. For purposes of this Agreement, "Registrable
Stock" means (i) the Closing Shares and all other shares of Common Stock owned
now or in the future by the Purchasers or any assignee of the Purchasers
permitted pursuant to Paragraph 8(g) of this Agreement (a "Permitted Assignee"),
and (ii) any other capital stock of the Company now or hereafter owned and held
by any Purchaser or any Permitted Assignee, including any such capital stock
issued or issuable with respect to the Common Stock referred to in (i)) above by
way of a stock dividend, stock split or in connection with a combination of
shares, reclassification, recapitalization, merger or consolidation or
reorganization. Shares will cease to be "Registrable Stock" when sold pursuant
to an effective registration statement under the Securities Act or Rule 144
under the Securities Act.
2. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION.
(i) At any time and from time to time after the
earlier of (1) May 2000 or (2) the date which is six (6)
months after the effective date of the Company's first
registration statement for an offering of securities of the
Company under the Securities Act, holders owning or having the
right to acquire an aggregate of at least one-third (1/3) of
the Registrable Stock then issued or issuable shall have the
right to request that the Company file a registration
--------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT - PAGE 1
(INFINITY/ORIX)
115
statement under the Securities Act covering the registration
of all or any part of their Registrable Stock (each, a "Demand
Registration"), provided, however, that unless the reasonably
anticipated aggregate offering price (net of underwriting
discounts and commissions) for the Registrable Stock proposed
to be registered shall equal at least $15,000,000 then such
request shall cover the registration of at least twenty
percent (20%) of the Registrable Stock then issued or
issuable. Any request (a "Registration Request") for a Demand
Registration shall specify (x) the approximate number of
shares of Registrable Stock requested to be registered, and
(y) the intended method of distribution of such shares. Within
ten days after the date of sending of such request, the
Company will give written notice of such requested
registration to all other holders of Registrable Stock and
will include in such registration all shares of Registrable
Stock which holders of Registrable Stock request the Company
to include in such registration by written notice given to the
Company within thirty (30) days after the date of sending of
the Company's notice.
(ii) The company will be required to effect up to two
(2) Demand Registrations pursuant to this Paragraph 2(a).
(iii) A registration will not count as one of the
Demand Registrations effected by the Company unless (a) the
holders of Registrable Stock are able to register and sell the
Registrable Stock requested to be included in such
registration or (b) the registration statement relating to a
registration is withdrawn or abandoned at the request of the
holders of the Registrable Stock covered by such registration
statement (other than as a result of a material adverse change
to the Company or following a postponement by the Company
pursuant to Paragraph 2(d)).
(iv) The Company will not include in any Demand
Registration any securities other than shares of Registrable
Stock and securities to be registered for offering and sale on
behalf of the Company without the prior written consent of the
holders of a majority of the shares of Registrable Stock
included in such registration. If the managing underwriters
advise the Company in writing that in their opinion the number
of shares of Registrable Stock and, if permitted hereunder,
other securities in such offering, exceeds the number of
shares of Registrable Stock and other securities, if any,
which can be sold in an orderly manner in such offering within
a price range acceptable to the holders of a majority of the
shares of Registrable Stock initially requesting registration,
the Company will include in such registration, prior to the
inclusion of any securities which are not shares of
Registrable Stock, the number of shares of Registrable Stock
requested to be included which in the opinion of such
underwriters can be sold in an orderly manner within the price
range of such offering, pro rata among the respective holders
thereof on the basis of the number of shares of Registrable
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Stock which each such holder has requested the Company to
include in such registration.
(b) SELECTION OF UNDERWRITER. The holders of a majority of the
shares of Registrable Stock to be included in a registration will have
the right to select one or more underwriters to manage the offering,
subject to the Company's approval which will not be unreasonably
withheld or delayed.
(c) REGISTRATIONS ON FORM S-3. Following its initial public
offering of securities under the Securities Act, the Company shall use
its reasonable best efforts to qualify for registration on Form S-3 or
any comparable or successor form or forms. At any time and from time to
time, after the Company has qualified for the use of Form S-3, in
addition to the rights contained in Paragraph 2(a), the holders of at
least 25% of the Registrable Stock then issued or issuable shall have
the right to request registrations on Form S-3; provided, that the
Company shall not be required to effect a registration on Form S-3
pursuant to this Paragraph 2(c) unless the reasonably anticipated
aggregate offering price (net of underwriting discounts and
commissions) for the Registrable Stock proposed to be registered shall
equal at least $2,500,000. Such requests shall be in writing and shall
state the number of shares of Registrable Stock proposed to be disposed
of and the intended method of distribution of such shares by such
holder or holders. The Company shall be required to effect up to four
(4) registrations pursuant to this Paragraph 2(c), provided, however,
that a registration shall not count as one of the four unless it meets
the requirements set forth in subparagraph 2(a)(iii) above.
(d) RIGHT TO DEFER REGISTRATION. The Company shall not be
obligated to effect any registration within 90 days after the effective
date of a previous registration statement on Form S-I in which the
holders of Registrable Securities participated or were given an
opportunity to participate and declined to do so. The Company may
postpone for up to 90 days the filing or the effectiveness of a
registration statement for a demand registration set forth above if (i)
the Board of Directors determines, reasonably and in good faith, that
such registration might have an adverse effect on any proposal or plan
by the Company, including, without limitation, a plan or proposal to
engage in any acquisition, merger, consolidation, tender offer or
similar transaction or (ii) any other material, nonpublic development
or transaction is pending; provided, that the Company may not postpone
the filing or effectiveness of a registration statement pursuant to
this sentence more frequently than once during any period of 12
consecutive months.
3. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. If the Company proposes to register
any of its securities under the Securities Act (other than pursuant to
a Demand Registration or a registration solely in connection with an
employee benefit or stock ownership plan) and the registration form to
be used may be used for the registration of Registrable Stock (a
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"Piggyback Registration"), the Company will give prompt written notice
to all holders of Registrable Stock of its intention to effect such a
registration (each a "Piggyback Notice"). Subject to subparagraph 3(b)
below, the Company will include in such registration all shares of
Registrable Stock which holders of Registrable Stock request the
Company to include in such registration by written notice given to the
Company within twenty (20) days after the date of sending of the
Company's notice.
(b) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration relates to an underwritten public offering of equity
securities by the Company and the managing underwriters advise the
Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which
can be sold in an orderly manner in such offering within a price range
acceptable to the Company, the Company will include in such
registration (i) first, the securities proposed to be sold by the
Company, (ii) second, the Registrable Stock requested to be included
in such registration, pro rata among the holders of such Registrable
Stock on the basis of the number of shares owned by each such holder,
and (iii) third, other securities requested to be included in such
registration.
(c) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration relates to an underwritten public offering of equity
securities by holders of the Company's securities and the managing
underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration
exceeds the number which can be sold in an orderly manner in such
offering within a price range acceptable to the holders initially
requesting such registration, the Company will include in such
registration (i) first, the securities requested to be included
therein by the holders requesting such registration, (ii) second, the
Registrable Stock requested to be included in such registration, pro
rata among the holders of such Registrable Stock on the basis of the
number of shares owned by each such holder and (iii) third, other
securities requested to be included in such registration.
4. REGISTRATION PROCEDURES. Whenever the holders of Registrable Stock
have requested that any Registrable Stock be registered pursuant to this
Agreement, the Company will use its best efforts to effect the registration and
the sale of such Registrable Stock in accordance with the intended method of
distribution thereof and will as expeditiously as possible:
(i) prepare and file with the Securities and
Exchange Commission (the "Commission") a registration
statement with respect to such Registrable Stock and use its
best efforts to cause such registration statement to become
effective, provided that before filing a registration
statement or prospectus or any amendments or supplements
thereto, the Company will furnish to the counsel selected by
the holders of a majority of the Registrable Stock included
in such registration statement copies of all such documents
proposed to be filed, which documents will be subject to the
review of such counsel;
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(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a
period of up to two (2) years, and comply with the provisions
of the Securities Act with respect to the disposition of all
securities included in such registration statement during such
period in accordance with the intended methods of distribution
by the selling holders thereof set forth in such registration
statement (the Company hereby agrees that such registration
statement shall include a Plan of Distribution section
reasonably acceptable to the holders of Registrable Stock and
substantially in the form annexed hereto);
(iii) furnish to each selling holder of Registrable
Stock such number of copies of such registration statement,
each amendment and supplement thereto (in each case including
all exhibits), the prospectus included in such registration
statement (including each preliminary prospectus) and such
other documents as such selling holder may reasonably request
in order to facilitate the disposition of the Registrable
Stock owned by such selling holder;
(iv) use its best efforts to register or qualify such
Registrable Stock under such other securities or blue sky laws
of such jurisdictions as any selling holder reasonably
requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such selling
holder to consummate the disposition in such jurisdictions of
the Registrable Stock owned by such selling holder, provided
that the Company will not be required (i) to qualify generally
to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph,
(ii) to subject itself to taxation in any such jurisdiction,
or (iii) to consent to general service of process in any such
jurisdiction;
(v) notify each selling holder of such Registrable
Stock, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus
included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to
make the statements therein not misleading, and, at the
request of any such seller, the Company will prepare a
supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable
Stock, such prospectus will not contain an untrue statement of
a material fact or omit to state any fact necessary to make
the statements therein not misleading;
(vi) cause all such Registrable Stock to be listed on
each securities exchange on which similar securities issued by
the Company are then listed and to
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be qualified for trading on each system on which similar
securities issued by the Company are from time to time
qualified;
(vii) provide a transfer agent and registrar for all
such Registrable Stock not later than the effective date of
such registration statement and thereafter maintain such a
transfer agent and registrar;
(viii) enter into such customary agreements
(including underwriting agreements in customary form) and
take all such other actions as the holders of a majority of
the shares of Registrable Stock being sold or the
underwriters, if any, reasonably request in order to expedite
or facilitate the disposition of such Registrable Stock;
(ix) make available for inspection by any underwriter
participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained
by any such underwriter, all financial and other records,
pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors, employees and
independent accountants to supply all information reasonably
requested by any such underwriter, attorney, accountant or
agent in connection with such registration statement;
(x) otherwise use its best effort to comply with all
applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at
least twelve months beginning with the first day of the
Company's first full calendar quarter after the effective date
of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder;
(xi) permit any holder of Registrable Stock which
might be deemed, in the sole and exclusive judgment of such
holder, to be an underwriter or a controlling person of the
Company, to participate in the preparation of such
registration or comparable statement and to require the
insertion therein of material, furnished to the Company in
writing, which in the reasonable judgment of such holder and
its counsel should be included; and
(xii) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or
of any order suspending or preventing the use of any related
prospectus or suspending the qualification of any Registrable
Stock included in such registration statement for sale in any
jurisdiction, the Company will use its reasonable best efforts
promptly to obtain the withdrawal of such order.
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If any such registration or comparable statement refers to any holder by name or
otherwise as the holder of any securities of the Company and if, in the sole and
exclusive judgment of such holder, such holder is or might be deemed to be a
controlling person of the Company, such holder shall have the right to require
(a) the inclusion in such registration statement of language, in form and
substance reasonably satisfactory to such holder, to the effect that the holding
of such securities by such holder is not to be construed as a recommendation by
such holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such holder will assist in
meeting any future financial requirements of the Company, or (b) in the event
that such reference to such holder by name or otherwise is not required by the
Securities Act or any similar federal statute then in force, the deletion of the
reference to such holder; provided, that with respect to this clause (b) such
holder shall furnish to the Company an opinion of counsel to such effect, which
opinion and counsel shall be reasonably satisfactory to the Company.
5. REGISTRATION EXPENSES.
(a) DEFINITION. The term "Registration Expenses" means any
expenses incident to the Company's performance of or compliance with
this Agreement, including without limitation all registration and
filing fees, listing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery
expenses, internal expenses, the fees and expenses of counsel for the
Company (but not the fees and expenses of counsel to the holders the
Registrable Stock included in such registration) and all independent
certified public accountants, underwriting fees and expenses (excluding
discounts and commissions attributable to the Registrable Securities,
which shall be paid by the selling holders out of the proceeds of the
offering) and the fees and expenses of any other Persons retained by
the Company.
(b) PAYMENT. The Company shall pay the Registration Expenses
in connection with two (2) Demand Registrations, any and all
registrations on Form S-3 pursuant to paragraph 2(c), and any and all
Piggyback Registrations.
6. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify, to the extent permitted by law, each holder of Registrable
Stock, its general and limited partners, officers and directors and
each Person who controls such holder (within the meaning of the
Securities Act) against all losses, claims, damages, liabilities and
expenses caused by any untrue or alleged untrue statement of material
fact contained in any registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder
expressly for use therein. In connection with an
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underwritten offering, the Company will indemnify such
underwriters, their officers and directors and each Person
who controls such underwriters (within the meaning of the
Securities Act) to the same extent as provided above with
respect to the indemnification of the holders of Registrable
Stock.
(b) INDEMNIFICATION BY HOLDERS. In connection with
any registration statement in which a holder of Registrable
Stock is participating, each such holder will furnish to the
Company in writing such information and affidavits as the
Company reasonably requests for use in connection with any
such registration statement or prospectus and, to the extent
permitted by law, will indemnify the Company, its directors
and officers and each Person who controls the Company
(within the meaning of the Securities Act) against any
losses, claims, damages, liabilities and expenses resulting
from any untrue or alleged untrue statement of material fact
contained in the registration statement, prospectus or
preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to
make the statements therein not misleading, but only to the
extent that such untrue statement or omission is contained
in any written information or affidavit so furnished in
writing by such holder; provided, that the obligation to
indemnify will be individual to each holder and will be
limited to the net amount of proceeds received by such
holder from the sale of Registrable Stock pursuant to such
registration statement.
(c) NOTICE; DEFENSE OF CLAIMS. Any Person entitled
to indemnification hereunder will (i) give prompt written
notice to the indemnifying party of any claim with respect
to which it seeks indemnification and (ii) unless in such
indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties
may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party. If
such defense is assumed, the indemnifying party will not be
subject to any liability for any settlement made by the
indemnified party without its consent (but such consent will
not be unreasonably withheld). An indemnifying party who is
not entitled to, or elects not to, assume the defense of a
claim will not be obligated to pay the fees and expenses of
more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any
other of such indemnified parties with respect to such
claim.
(d) CONTRIBUTION. If the indemnification provided
for in this part 6 is held by a court of competent
jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense
referred to herein, then the indemnifying party, in lieu
of indemnifying such indemnified party hereunder, shall
contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability,
claim, damage, or expense in such proportion as is
appropriate to reflect the relative fault of the
indemnifying party, on the one hand, and of the indemnified
party, on the other, in
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connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party
and of the indemnified party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission. The obligation to contribute will be individual to each
holder of Registrable Stock and will be limited to the amount by which
the net amount of proceeds received by such holder from the sale of
Registrable Stock exceeds the amount of losses, liabilities, damages,
and expenses which such holder has otherwise been required to pay by
reason of such statements or omissions.
(e) SURVIVAL. The indemnification provided for under this Agreement
will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director
or controlling Person of such indemnified party and will survive the
transfer of securities.
(f) UNDERWRITING AGREEMENT. To the extent that the provisions on
indemnification and contribution contained in the underwriting
agreement entered into in connection with an underwritten public
offering are in conflict with the provisions of this part 6, the
provisions contained in the underwriting agreement shall control.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements, (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements, provided, that no
holder of Registrable Stock included in any underwritten registration shall be
required to make any representations or warranties to the Company or the
underwriters other than representations and warranties regarding such holder and
such holder's intended method of distribution, and (iii) if requested by the
managing underwriter or underwriters, agrees not to sell Registrable Stock or
other securities held by such Person in any transaction other than pursuant to
such underwriting for such period (not to exceed 180 days) following the
effective date of the registration statement relating to such underwriting as
determined by the Board of Directors; provided, that no holder of Registrable
Stock shall be required to enter into such an agreement unless each other holder
of Registrable Stock, each director and executive officer of the Company and
each other holder of at least one percent of the Common Stock then outstanding
enters into a substantially identical agreement relating to such underwriting.
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8. MISCELLANEOUS.
(a) INFORMATION AND REPORTING.
(i) The Company shall, at all times during which it is
neither subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, nor exempt from reporting pursuant
to Rule 12g3-2(b) under the Exchange Act, upon the written
request of any Purchaser, provide in writing to such Purchaser
and to any prospective transferee of the Registrable Stock of
such Purchaser the information concerning the Company
described in Rule 144A(d)(4) under the Securities Act ("Rule
144A Information"). Upon the written request of any Purchaser,
the Company shall cooperate with and assist such Purchaser or
any member of the National Association of Securities Dealers,
Inc. PORTAL system in applying to designate and thereafter
maintain the eligibility of the Registrable Stock for trading
through PORTAL. The Company's obligations under this Paragraph
8(a) shall at all times be contingent upon receipt from the
prospective transferee of Registrable Stock of a written
agreement to take all reasonable precautions to safeguard the
Rule 144A Information from disclosure to anyone other than
Persons who will assist such transferee in evaluating the
purchase of any Registrable Stock.
(ii) When it is first legally required to do so, the
Company shall register its Common Stock under Section 12 of
the Exchange Act and shall keep effective such registration
and shall timely file such information, documents and reports
as the Commission may require or prescribe under Section 13
of the Exchange Act. From and after the effective date of the
first registration statement filed by the Company under the
Securities Act, the Company shall (whether or not it shall
then be required to do so) timely file such information,
documents and reports which a corporation, partnership or
other entity subject to Section 13 or 15(d) (whichever is
applicable) of the Exchange Act is required to file.
Immediately upon becoming subject to the reporting
requirements of either Section 13 or 15(d) of the Exchange
Act, the Company shall promptly upon request furnish any
holder of Registrable Stock (a) a written statement by the
Company that it has complied with such reporting requirements,
(b) a copy of the most recent annual or quarterly report of
the Company, and (c) such other reports and documents filed by
the Company with the Commission as such holder may reasonably
request in availing itself of an exemption for the sale of
Registrable Stock without registration under the Securities
Act. The Company acknowledges and agrees that the purposes of
the requirements contained in this Paragraph 8(a)(ii) are to
enable any such holder to comply with the current public
information requirement contained in paragraph (c) of Rule 144
under the Securities Act, should such holder ever wish to
dispose of any of the securities of the Company acquired by it
without registration under the Securities Act in
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124
reliance upon Rule 144 (or any other similar exemptive
provision), and to qualify the Company for the use of
registration statements on Form S-3. In addition, the Company
shall take such other measures and file such other
information, documents and reports, as shall hereafter be
required by the Commission as a condition to the availability
of Rule 144 under the Securities Act (or any similar exemptive
provision hereafter in effect) and the use of Form S-3. The
Company also covenants to use its best efforts, to the extent
that it is reasonably within its power to do so, to qualify
for the use of Form S-3.
(b) NO INCONSISTENT AGREEMENTS. The Company will not hereafter
enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of
Registrable Stock in this Agreement. Without the consent of the holders
of at least fifty-one percent (51%) of the Registrable Stock, the
Company will not grant registration rights to any other Person.
(c) ADJUSTMENTS AFFECTING REGISTRABLE STOCK. The Company will
not take any action, or permit any change to occur, with respect to its
securities for the purpose of materially and adversely affecting the
ability of the holders of Registrable Stock to include such Registrable
Stock in a registration undertaken pursuant to this Agreement or
materially and adversely affecting the marketability of such
Registrable Stock in any such registration (including, without
limitation, effecting a stock split or a combination of shares),
provided that this subparagraph 8(c) shall not apply to actions or
changes with respect to the Company's business, balance sheet, earnings
or revenue where the effect of such actions or changes on the
Registrable Stock is merely incidental.
(d) NOTICES. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be
deemed effectively given when delivered personally or by facsimile
transmission or by overnight delivery service or 72 hours after being
mailed by first class certified or registered mail, return receipt
requested, postage prepaid:
If to the Company to it at its address as set forth in the Purchase
Agreement together with such copies as are set forth in the Purchase Agreement,
or at such other address or addresses as may have been furnished in writing by
the Company to the Purchasers.
If to a Purchaser to it at its address as set forth on Exhibit A
hereto, or at such other address or addresses as may have been furnished in
writing by such Purchaser with a copy to Xxxxx & Xxxxxx LLP, 0000 Xxxx Xxxxxx,
Xxxxx 0000, Xxxxxx, Xxxxx 00000, Attention: Xxxxxx X. Xxxxxxx, Esq. (Fax: (214)
000-0000).
(e) REMEDIES. Any Person having rights under any provision of
this Agreement will be entitled to enforce such rights specifically to
recover damages caused by reason of any breach of any provision of this
Agreement and to exercise all other
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125
rights granted by law. The parties hereto agree and acknowledge that
money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may in its sole
discretion apply to any court of law or equity of competent
jurisdiction (without posting any bond or other security) for specific
performance and for other injunctive relief in order to enforce or
prevent violation of the provisions of this Agreement.
(f) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, no amendment, modification, termination or cancellation of this
Agreement shall be effective unless made in writing signed by the
Company and the holders of a majority of the shares of Registrable
Stock.
(g) ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Stock pursuant to this Agreement may be
assigned (but only with all related obligations) by a Purchaser to any
transferee or set of related transferees in connection with the
transfer of Common Stock of the Company, in a single transaction or any
series of related transactions as a result of which the transferee(s)
will acquire an amount of Common Stock equivalent to at least
twenty-five percent (25%) of the shares of Common Stock acquired by
such Purchaser as of the Closing under the Purchase Agreement. Such
assignment shall not affect the rights of Purchasers hereunder which
shall remain in full force in accordance with the terms hereof.
Purchaser(s) shall provide the Company with written notice of such
transfer(s)/assignment(s), provided however, that the failure to
provide such notice shall not be deemed to preclude assignment
hereunder.
(h) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(i) ENTIRE AGREEMENT. This Agreement embodies the entire
agreement of the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements relating to such subject
matter.
(j) HEADINGS. The headings of this Agreement are for
convenience only and do not constitute a part of this Agreement.
(k) GOVERNING LAW. The construction, validity and
interpretation of this Agreement will be governed by the internal laws
of the State of Nevada without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Nevada or
any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of Nevada.
(l) FURTHER ASSURANCES. Each party to this Agreement hereby
covenants and agrees, without the necessity of any further
consideration, to execute and deliver any and
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126
all such further documents and take any and all such other actions as
may be necessary and appropriate to carry out the intent and purposes
of this Agreement and to consummate the transactions contemplated
hereby.
(m) COUNTERPARTS. This Agreement may be executed by facsimile
and in one or more counterparts, each of which shall be deemed to be an
original, but all of which shall be one and the same document.
[SIGNATURE PAGES FOLLOW.]
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IN WITNESS WHEREOF, this Agreement has been executed by the parites hereto
as of the date first written above.
COMPANY:
ORIX GLOBAL COMMUNICATIONS, INC.
By: /s/ XXXXX XXXXXX
-------------------------------
Name: Xxxxx Xxxxxx
-----------------------------
Title: President
----------------------------
PURCHASERS:
INFINITY INVESTORS LIMITED
By: /s/ XXXXX X. XXXXXXXX
-------------------------------
Name: Xxxxx X. Xxxxxxxx
-----------------------------
Title: Director
----------------------------
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128
EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS EMPLOYMENT AND NONCOMPETITION AGREEMENT is made and entered into
this 11th day of June, 1998, by and between ORIX GLOBAL COMMUNICATIONS, INC., a
Nevada corporation ("Employer") and XXXX XXXXXXX ("Employee").
RECITALS:
Employer desires to employ Employee, and Employee desires to accept
such employment, on the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants set forth in this Agreement, the parties hereto hereby agree as
follows:
1. EMPLOYMENT; DUTIES. Employer hereby employs Employee, and Employee
hereby accepts such employment, to perform such duties and services for and on
behalf of Employer as may from time to time be determined by the President
and/or Board of Directors of Employer. Employee shall devote his full and
undivided business time, attention and efforts to Employer's business and to the
performance of Employee's duties under this Agreement. Employee shall fully and
faithfully perform all duties assigned to him under this Agreement to the best
of Employee's abilities. In the performance of Employee's duties hereunder,
Employee agrees to report to the President of the Employer.
2. COMPENSATION. Employee shall be entitled to receive a per annum
salary of Ninety Thousand Dollars ($90,000) ("Base Salary") as full compensation
for all the services rendered by Employee during the Term (as hereafter defined)
of Employee's employment hereunder. Employee shall be entitled to receive the
Base Salary in twenty-six (26) equal payments; payments to be made every two
weeks (less all applicable deductions for all taxes, including federal, state
and FICA). In addition to Employee's Base Salary and Additional Compensation (as
hereafter defined), Employee shall receive an automobile allowance, automobile
insurance and standard health insurance together with any other benefits
approved by the President of Employer, in each case not to exceed in the
aggregate a cost of $1,200 per month to Employer during the Term (as hereinafter
defined) of employment. Employee shall be eligible for merit bonuses as
determined in the sole discretion of the Board of Directors of Employer.
3. ADDITIONAL COMPENSATION. As additional compensation for Employee's
agreements and covenants set forth in Section 5 hereof, Employer shall pay
Employee, in addition to the Base Salary, the per annum sum of Ten Thousand
Dollars ($10,000) which shall be paid in twenty six (26) equal payments;
payments to be made every two weeks (less all
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129
applicable deductions for all taxes, including federal state and FICA) (the
"Additional Compensation").
4. TERM OF EMPLOYMENT AND TERMINATION.
(a) EMPLOYMENT TERM. The term of Employee's employment
hereunder shall commence on June 11, 1998, and shall continue for two
(2) years, unless earlier terminated in accordance with the terms of
this Agreement. This Agreement, at the sole discretion of Employer, may
be renewed at the end of the Term for additional one (1) year periods
(the term of this Agreement, including any applicable renewal thereof,
being herein referred to as the "Term").
(b) EMPLOYER RIGHT OF TERMINATION. Notwithstanding anything
contained in this Agreement to the contrary, Employee's employment may
be terminated by Employer with or without cause, subject only to the
payment obligations of Employer as hereinafter set forth.
(c) TERMINATION FOR CAUSE. In the event Employer terminates
Employee's employment hereunder for Cause (as hereinafter defined)
during the Term of this Agreement, then Employee's employment hereunder
shall immediately terminate, and Employee shall only receive the Base
Salary and the Additional Compensation prorated in each case through
the effective date of termination of Employee's employment. For
purposes of this Agreement, "Cause" means: (i) "Total and Permanent
Incapacity" (as hereinafter defined) of Employee; (ii) the failure or
inability (not as a consequence of any illness, accident or other
disability, as confirmed by competent medical evidence) of Employee to
perform his duties hereunder for a period in excess of sixty (60) days
in any twelve (12) month period in a manner reasonably satisfactory to
Employer's Board of Directors; or (iii) "Serious Misconduct" (as
hereinafter defined) of Employee. "Total and Permanent Incapacity"
means such physical or mental condition of Employee, including, without
limitation, alcoholism, which renders Employee incapable of performing
his duties hereunder for a period in excess of sixty (60) days in any
twelve (12) month period. In the event Employee is a Qualified
Individual with a Disability, as defined in the Americans with
Disabilities Act, Employer shall not terminate Employee's employment
hereunder if Employee is able to perform the essential functions of the
Employee's job with reasonable accommodation from Employer. "Serious
Misconduct" means embezzlement or misappropriation of corporate funds;
acts of Dishonesty (as hereinafter defined); activities that cause
material adverse harm to the Employer (other than as a consequence of
good faith decisions made by Employee in the normal performance of
Employee's duties hereunder); the conviction of or the plea by Employee
to any misdemeanor involving dishonesty or moral turpitude or to any
criminal felony offense (other than those arising within the course of
Employee's employment hereunder with respect to environmental laws,
ERISA, products liability or civil rights, of which offenses Employee
was not personally aware and did not have operational control over
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130
the matter, or did not personally and knowingly order in violation of
the law; any violation of laws (other than a traffic or other offense
which in the sole discretion (exercised in good faith) of the Board of
Directors of Employer does not affect the performance of Employee's
duties hereunder); the refusal to perform the duties assigned to
Employee pursuant to this Agreement (unless such duties shall be
unlawful); or the material breach of any of the terms or conditions
contained in this Agreement. "Dishonesty" shall mean the furnishing of
any information, reports, documents or certificates by Employee to
Employer that Employee knew or reasonably should have known to be false
or misleading, or in which Employee omitted to state a material fact
necessary in order to make the statements made by Employee, in light of
the circumstances under which they were made, not misleading.
(d) VOLUNTARY RESIGNATION. Notwithstanding anything contained
in this Agreement to the contrary, Employee may resign and terminate
Employee's employment hereunder subject only to the requirement that
Employee shall provide Employer with a minimum of thirty (30) days
prior written notice. In such event, Employee shall only receive the
unpaid Base Salary and Additional Compensation prorated in each case
through the effective date of Employee's resignation.
(e) DEATH. In the event of the death of Employee during the
Term of this Agreement, this Agreement and Employee's employment
hereunder shall terminate as of the date of the death of Employee, and
his estate or personal representative shall be entitled to receive the
unpaid Base Salary and Additional Compensation prorated in each case
for the period of Employee's employment to the date of his death.
(f) PAYMENT UPON TERMINATION WITHOUT CAUSE. In the event
Employee's employment hereunder is terminated for reasons other than
(x) for Cause, (y) as a result of the voluntary resignation of Employee
or (z) as a result of Employee's death, then, in such event, Employee
shall be entitled to receive the unpaid Base Salary and Additional
Compensation prorated in each case for the period of Employee's
employment to the date of such termination, together with an additional
payment equal to the sum of (x) the unpaid Base Salary in effect on the
date of termination and (y) the Additional Compensation, in each case
for the remaining Term of the Agreement (or renewal term, if such
termination occurs during the renewal term), in each case payable at
the same time and amounts as if Employee had continued his employment
hereunder.
(g) SUSPENSION. Employer shall have the right to suspend
Employee with full pay and benefits for any period of time the Board of
Directors of Employer deems, in its sole discretion, necessary or
appropriate to investigate Employee's conduct.
5. COVENANT NOT TO COMPETE. During the Restricted Period (or such
lesser period to the maximum extent permitted by applicable law), Employee
agrees that Employee will not, directly or indirectly (including, without
limitation, as a partner, shareholder, director, officer or
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 3
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131
employee of, or lender or consultant to, any other person, firm or other
entity), in any capacity, within, into or from the Restricted Territory (as
defined below) engage or cause others to engage in the business that Employer
and/or its subsidiaries or affiliates is engaged in at the time of termination,
or any aspect thereof or consisting, as of the date hereof, principally of the
activities described in the Business Plan referenced in the Securities Purchase
Agreement dated the date hereof to which this Agreement is attached (the
"Business"), unless first authorized in writing by Employer, which authorization
may be withheld in the sole and absolute discretion of Employer. For purposes of
this Agreement, Restricted Period means the period of Employee's employment
hereunder and the following applicable period after the date of termination of
Employee's employment for any reason: (i) if Employee voluntarily resigns, a
period equal to two (2) years after the date of such resignation; (ii) for any
termination without Cause, the period through June 11, 2000; (iii) for any
termination with Cause, a period equal to one (1) year after the date of such
termination; and (iv) for any other termination, including non-renewal, a period
of one (1) year after the date of termination or non-renewal. For purposes of
this Agreement, the term "Restricted Territory" shall mean that the Business of
Employer has been initiated in any of North America, Central America or South
America and completed in any of North America, Central America or South America
(or such lesser territory to the maximum extent permitted by applicable law). If
Employee violates any obligations under this Section 5, then the time periods
hereunder shall be extended by the period of time equal to that period beginning
when the activities constituting such violation commenced and ending when the
activities constituting such violation terminate.
6. NONSOLICITATION. During the Employee's employment hereunder, and for
a period of thirty-six (36) months from and after the date of termination of
Employee's employment for any reason (or such lesser period to the maximum
extent permitted by applicable law), Employee agrees that Employee shall not,
directly or indirectly, for himself or on behalf of, or in connection with, any
person, firm or other entity other than Employer, solicit or cause others to
solicit (i) the business or patronage of any person, firm or other entity with
whom Employer has or had a business relationship (as a customer, supplier or
otherwise) or with whom Employer has proposed entering into a business
relationship (as a customer, supplier or otherwise), or (ii) any person who, on
the date hereof and on the date of termination of Employee's employment
hereunder, was an employee or consultant of Employer, or any of its subsidiaries
or their affiliates, for employment or as an independent contractor with any
person or entity, unless first authorized in writing by Employer, which
authorization may be withheld in Employer's sole and absolute discretion. If
Employee violates his obligations contained in this Section 6, then the time
periods hereunder shall be extended by the period of time equal to that period
beginning when the activities constituting such violation commenced and ending
when the activities constituting such violation terminate.
7. CONFIDENTIALITY. From and after the date hereof, Employee shall not
communicate or divulge to, or use for the benefit of, any person, firm or other
entity other than Employer, any of the trade secrets, business and/or marketing
plans, or any proprietary or confidential information with respect to Employer,
its subsidiaries or their affiliates, and their business,
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 4
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132
financial condition, business operations or methods or business prospects. The
preceding sentence shall not apply to information which (i) is, was or becomes
generally known or available to the public or the industry other than as a
result of a disclosure by Employee in violation of this Agreement, or (ii) is
required to he disclosed by law. Employee shall advise Employer, in writing, of
any request, including a subpoena or similar legal inquiry, to disclose any such
confidential information, so that Employer may, at its option, seek appropriate
legal relief.
8. RETURN OF EMPLOYER PROPERTY. Immediately upon the expiration or
earlier termination of this Agreement, Employee shall return to Employer any and
all property of Employer, including, but not limited to, all documents,
agreements, schedules, statements, customer lists, supplier lists, plans,
designs, parts and equipment, that is in the possession or control (direct or
indirect) of Employee.
9. SURVIVAL: REMEDIES; SEVERABILITY. Employee specifically acknowledges
that (a) Employer itself or through one or more of Employer's subsidiaries
currently operates, or will operate following the date hereof, in the Restricted
Territory; (b) Employer itself or through one or more of Employer's subsidiaries
or affiliates receives a significant amount of business from and throughout the
Restricted Territory; (c) Employer itself or through one or more of Employer's
subsidiaries or affiliates, plans to expand operations within and throughout
the Restricted Territory; and (d) the geographic restrictions contained in
Section 5 hereof, and the length of time restrictions in Sections 5, 6 and 7
hereof are each necessary and reasonable and were negotiated between Employer
and Employee. The restrictions and obligations set forth in Sections 5, 6, 7 and
8 hereof shall survive the expiration or termination of this Agreement. The
parties hereto hereby acknowledge and agree that the restrictions and
obligations set forth in Sections 5, 6, 7 and 8 hereof are reasonable and
necessary, and that any violation thereof would result in substantial and
irreparable injury to Employer, and that Employer may not have an adequate
remedy at law with respect to any such violation. Accordingly, Employee agrees
that, in the event of any actual or threatened violation thereof, Employer shall
have the right and privilege to obtain, without the necessity of posting bond
therefor, and in addition to any other remedies that may be available, equitable
relief, including temporary and permanent injunctive relief, to cease or prevent
any actual or threatened violation of any provision hereof. Further, in the
event of a breach by Employee of any of the provisions of this Agreement,
Employer shall be entitled to an accounting and repayment of all profits,
compensation, commissions, remunerations or other benefits that Employee,
directly or indirectly, has realized and/or may realize as a result of, arising
out of or in connection with any such breach. Each and every provision set forth
in Sections 5, 6, 7 and 8 hereof is independent and severable from the others,
and no restriction will be rendered unenforceable by virtue of the fact that,
for any reason, any other or others of them may be unenforceable in whole or in
part. If any provision in this Agreement, including, without limitation, those
in Sections 5, 6, 7 and 8 hereof is unenforceable for any reason whatsoever,
that provision will be appropriately limited and reformed to the maximum extent
provided by applicable law. If the scope of any restriction contained herein is
too broad to permit enforcement to its full extent, then such restriction shall
be enforced to the
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 5
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133
maximum extent permitted by law so as to be judged reasonable and enforceable,
and the parties agree that such scope may be modified by an arbitrator or judge
in any proceeding to enforce this Agreement. This includes, without limitation,
altering or enforcing only portions of the limits on activity restrictions, the
geographic scope, and/or the duration of the restrictions unless to do so would
be contrary to law or public policy.
10. MISCELLANEOUS.
(a) NOTICES. All notices required or permitted to be given
hereunder shall be in writing and shall be deemed given when delivered
in person, or three (3) business days after being placed in the hands
of a courier service (e.g., DHL or Federal Express) prepaid or faxed
provided that a confirming copy is delivered forthwith as herein
provided, addressed as follows:
IF TO EMPLOYER:
Orix Global Communications, Inc.
0000 Xxxx Xxxxxxxx Xxxx, Xxx. X000
Xxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxxxxx, President
Fax: 000.000.0000
IF TO EMPLOYEE:
Xxxx Xxxxxxx
0000 Xxxx Xxxxxxxx Xxxx, Xxx. X000
Xxx Xxxxx, XX 00000
Fax: 000.000.0000
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section.
(b) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter
hereof, and shall be binding upon and inure to the benefit of the
parties hereto and their respective legal representatives, successors
and permitted assigns. Except as set forth herein, the provisions of
this Agreement supersede any and all other agreements or
understandings, whether oral or written, with respect to Employee's
employment by Employer. Any amendments, or alternative or supplementary
provisions to this Agreement must be made in writing and duly executed
by the authorized representative or agent of each of the parties
hereto.
(c) NON-WAIVER. The failure in any one or more instances of a
party to insist upon performance of any of the terms, covenants or
conditions of this Agreement, to
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 6
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134
exercise any right or privilege conferred in this Agreement or the
waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement, shall not be construed as a subsequent
waiver of any such terms, covenants, conditions, rights or privileges,
but the same shall continue and remain in full force and effect as if
no such forbearance or waiver had occurred. No waiver shall be
effective unless it is in writing and signed by an authorized
representative of the waiving party.
(d) COUNTERPARTS. This Agreement may be executed by facsimile
signature and in multiple counterparts, each of which shall be deemed
to be an original, and all such counterparts shall constitute but one
instrument.
(e) APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONTROLLED AS TO VALIDITY, ENFORCEMENT, INTERPRETATION, CONSTRUCTION,
EFFECT AND IN ALL OTHER RESPECTS BY THE INTERNAL LAWS OF THE STATE OF
NEVADA APPLICABLE TO CONTRACTS MADE IN THAT STATE.
(f) CONSTRUCTION. The parties hereto acknowledge and agree
that each party has participated in the drafting of this Agreement and
that this document has been reviewed by the respective legal counsel
for the parties hereto and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be applied to the interpretation of this Agreement. No
inference in favor of, or against, any party shall be drawn from the
fact that one party has drafted any portion hereof.
BOTH PARTIES HERETO HAVE READ THIS ENTIRE AGREEMENT CAREFULLY AND FULLY
UNDERSTAND THE LIMITATIONS THAT THIS AGREEMENT IMPOSES UPON THEM AND ACKNOWLEDGE
AND AGREE THAT THOSE LIMITATIONS ARE REASONABLE.
[SIGNATURE PAGE FOLLOWS]
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 7
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135
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
EMPLOYER
ORIX GLOBAL COMMUNICATIONS, INC.,
a Nevada Corporation
By: /s/ XXXXX XXXXXXXX
-------------------------------
Xxxxx Xxxxxxxx, President
EMPLOYEE
/s/ XXXX XXXXXXX
-----------------------------------
Xxxx Xxxxxxx
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 8
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136
EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS EMPLOYMENT AND NONCOMPETITION AGREEMENT is made and entered into
this 11th day of June, 1998, by and between ORIX GLOBAL COMMUNICATIONS, INC., a
Nevada corporation ("Employer") and XXXXXX XXXXXX ("Employee").
R E C I T A L S:
Employer desires to employ Employee, and Employee desires to accept
such employment, on the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants set forth in this Agreement, the parties hereto hereby agree as
follows:
1. EMPLOYMENT; DUTIES. Employer hereby employs Employee, and Employee
hereby accepts such employment, to perform such duties and services for and on
behalf of Employer as may from time to time be determined by the President
and/or Board of Directors of Employer. Employee shall devote his full and
undivided business time, attention and efforts to Employer's business and to the
performance of Employee's duties under this Agreement. Employee shall fully and
faithfully perform all duties assigned to him under this Agreement to the best
of Employee's abilities. In the performance of Employee's duties hereunder,
Employee agrees to report to the President of the Employer.
2. COMPENSATION. Employee shall be entitled to receive a per annum
salary of One Hundred Fifteen Thousand Dollars ($115,000) ("Base Salary") as
full compensation for all the services rendered by Employee during the Term (as
hereafter defined) of Employee's employment hereunder. Employee shall be
entitled to receive the Base Salary in twenty-six (26) equal payments; payments
to be made every two weeks (less all applicable deductions for all taxes,
including federal, state and FICA). In addition to Employee's Base Salary and
Additional Compensation (as hereafter defined), Employee shall receive an
automobile allowance, automobile insurance and standard health insurance
together with any other benefits approved by the President of Employer, in each
case not to exceed in the aggregate a cost of $1,500 per month to Employer
during the Term (as hereinafter defined) of employment. Employee shall be
eligible for merit bonuses as determined in the sole discretion of the Board of
Directors of Employer.
3. ADDITIONAL COMPENSATION. As additional compensation for Employee's
agreements and covenants set forth in Section 5 hereof, Employer shall pay
Employee, in addition to the Base Salary, the per annum sum of Ten Thousand
Dollars (S10,000) which shall be paid in twenty-six (26) equal payments;
payments to be made every two weeks (less all
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 1
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137
applicable deductions for all taxes, including federal state and FICA) (the
"Additional Compensation").
4. TERM OF EMPLOYMENT AND TERMINATION.
(a) EMPLOYMENT TERM. The term of Employee's employment hereunder
shall commence on June 11, 1998, and shall continue for two (2) years,
unless earlier terminated in accordance with the terms of this
Agreement. This Agreement, at the sole discretion of Employer, may be
renewed at the end of the Term for additional one (1) year periods (the
term of this Agreement, including any applicable renewal thereof, being
herein referred to as the "Term").
(b) EMPLOYER RIGHT OF TERMINATION. Notwithstanding anything
contained in this Agreement to the contrary, Employee's employment may
be terminated by Employer with or without cause, subject only to the
payment obligations of Employer as hereinafter set forth.
(c) TERMINATION FOR CAUSE. In the event Employer terminates
Employee's employment hereunder for Cause (as hereinafter defined)
during the Term of this Agreement, then Employee's employment hereunder
shall immediately terminate, and Employee shall only receive the Base
Salary and the Additional Compensation prorated in each case through
the effective date of termination of Employee's employment. For
purposes of this Agreement, "Cause" means: (i) "Total and Permanent
Incapacity" (as hereinafter defined) of Employee; (ii) the failure or
inability (not as a consequence of any illness, accident or other
disability, as confirmed by competent medical evidence) of Employee to
perform his duties hereunder for a period in excess of sixty (60) days
in any twelve (12) month period in a manner reasonably satisfactory to
Employer's Board of Directors; or (iii) "Serious Misconduct" (as
hereinafter defined) of Employee. "Total and Permanent Incapacity"
means such physical or mental condition of Employee, including, without
limitation, alcoholism, which renders Employee incapable of performing
his duties hereunder for a period in excess of sixty (60) days in any
twelve (12) month period. In the event Employee is a Qualified
Individual with a Disability, as defined in the Americans with
Disabilities Act, Employer shall not terminate Employee's employment
hereunder if Employee is able to perform the essential functions of the
Employee's job with reasonable accommodation from Employer. "Serious
Misconduct" means embezzlement or misappropriation of corporate funds;
acts of Dishonesty (as hereinafter defined); activities that cause
material adverse harm to the Employer (other than as a consequence of
good faith decisions made by Employee in the normal performance of
Employee's duties hereunder); the conviction of or the plea by Employee
to any misdemeanor involving dishonesty or moral turpitude or to any
criminal felony offense (other than those arising within the course of
Employee's employment hereunder with respect to environmental laws,
ERISA, products liability or civil rights, of which offenses Employee
was not personally aware and did not have operational control over
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 2
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138
the matter, or did not personally and knowingly order in violation of
the law; any violation of laws (other than a traffic or other offense
which in the sole discretion (exercised in good faith) of the Board of
Directors of Employer does not affect the performance of Employee's
duties hereunder); the refusal to perform the duties assigned to
Employee pursuant to this Agreement (unless such duties shall be
unlawful); or the material breach of any of the terms or conditions
contained in this Agreement. "Dishonesty" shall mean the furnishing of
any information, reports, documents or certificates by Employee to
Employer that Employee knew or reasonably should have known to be false
or misleading, or in which Employee omitted to state a material fact
necessary in order to make the statements made by Employee, in light of
the circumstances under which they were made, not misleading.
(d) VOLUNTARY RESIGNATION. Notwithstanding anything contained in
this Agreement to the contrary, Employee may resign and terminate
Employee's employment hereunder subject only to the requirement that
Employee shall provide Employer with a minimum of thirty (30) days
prior written notice. In such event, Employee shall only receive the
unpaid Base Salary and Additional Compensation prorated in each case
through the effective date of Employee's resignation.
(e) DEATH. In the event of the death of Employee during the Term of
this Agreement, this Agreement and Employee's employment hereunder
shall terminate as of the date of the death of Employee, and his estate
or personal representative shall be entitled to receive the unpaid Base
Salary and Additional Compensation prorated in each case for the period
of Employee's employment to the date of his death.
(f) PAYMENT UPON TERMINATION WITHOUT CAUSE. In the event Employee's
employment hereunder is terminated for reasons other than (x) for
Cause, (y) as a result of the voluntary resignation of Employee or (z)
as a result of Employee's death, then, in such event, Employee shall be
entitled to receive the unpaid Base Salary and Additional Compensation
prorated in each case for the period of Employee's employment to the
date of such termination, together with an additional payment equal to
the sum of (x) the unpaid Base Salary in effect on the date of
termination and (y) the Additional Compensation, in each case for the
remaining Term of the Agreement (or renewal term, if such termination
occurs during the renewal term), in each case payable at the same time
and amounts as if Employee had continued his employment hereunder.
(g) SUSPENSION. Employer shall have the right to suspend Employee
with full pay and benefits for any period of time the Board of
Directors of Employer deems, in its sole discretion, necessary or
appropriate to investigate Employee's conduct.
5. COVENANT NOT TO COMPETE. During the Restricted Period (or such
lesser period to the maximum extent permitted by applicable law), Employee
agrees that Employee will not, directly or indirectly (including, without
limitation, as a partner, shareholder, director, officer or
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 3
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139
employee of, or lender or consultant to, any other person, firm or other
entity), in any capacity, within, into or from the Restricted Territory (as
defined below) engage or cause others to engage in the business that Employer
and/or its subsidiaries or affiliates is engaged in at the time of termination,
or any aspect thereof, (consisting, as of the date hereof, principally of the
activities described in the Business Plan referenced in the Securities Purchase
Agreement dated the date hereof to which this Agreement is attached (the
"Business"), unless first authorized in writing by Employer, which authorization
may be withheld in the sole and absolute discretion of Employer. For purposes of
this Agreement, Restricted Period means the period of Employee's employment
hereunder and the following applicable period after the date of termination of
Employee's employment for any reason: (i) if Employee voluntarily resigns, a
period equal to two (2) years after the date of such resignation; (ii) for any
termination without Cause, the period through June 11, 2000; (iii) for any
termination with Cause, a period equal to one (1) year after the date of such
termination; and (iv) for any other termination, including non-renewal, a period
of one (1) year after the date of termination or non-renewal. For purposes of
this Agreement, the term "Restricted Territory" shall mean that the Business of
Employer has been initiated in any of North America, Central America or South
America and completed in any of North America, Central America or South America
(or such lesser territory to the maximum extent permitted by applicable law). If
Employee violates any obligations under this Section 5, then the time periods
hereunder shall be extended by the period of time equal to that period beginning
when the activities constituting such violation commenced and ending when the
activities constituting such violation terminate.
6. NONSOLICITATION. During the Employee's employment hereunder, and for
a period of thirty-six (36) months from and after the date of termination of
Employee's employment for any reason (or such lesser period to the maximum
extent permitted by applicable law), Employee agrees that Employee shall not,
directly or indirectly, for himself or on behalf of, or in connection with, any
person, firm or other entity other than Employer, solicit or cause others to
solicit (i) the business or patronage of any person, firm or other entity with
whom Employer has or had a business relationship (as a customer, supplier or
otherwise) or with whom Employer has proposed entering into a business
relationship (as a customer, supplier or otherwise), or (ii) any person who, on
the date hereof and on the date of termination of Employee's employment
hereunder, was an employee or consultant of Employer, or any of its subsidiaries
or their affiliates, for employment or as an independent contractor with any
person or entity, unless first authorized in writing by Employer, which
authorization may be withheld in Employer's sole and absolute discretion. If
Employee violates his obligations contained in this Section 6, then the time
periods hereunder shall be extended by the period of time equal to that period
beginning when the activities constituting such violation commenced and ending
when the activities constituting such violation terminate.
7. CONFIDENTIALITY. From and after the date hereof, Employee shall not
communicate or divulge to, or use for the benefit of, any person, firm or other
entity other than Employer, any of the trade secrets, business and/or marketing
plans, or any proprietary or confidential information with respect to Employer,
its subsidiaries or their affiliates, and their business,
--------------------------------------------------------------------------------
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 4
(XXXXXX XXXXXX)
140
financial condition, business operations or methods or business prospects. The
preceding sentence shall not apply to information which (i) is, was or becomes
generally known or available to the public or the industry other than as a
result of a disclosure by Employee in violation of this Agreement, or (ii) is
required to be disclosed by law. Employee shall advise Employer, in writing, of
any request, including a subpoena or similar legal inquiry, to disclose any such
confidential information, so that Employer may, at its option, seek appropriate
legal relief.
8. RETURN OF EMPLOYER PROPERTY. Immediately upon the expiration or
earlier termination of this Agreement, Employee shall return to Employer any and
all property of Employer, including, but not limited to, all documents,
agreements, schedules, statements, customer lists, supplier lists, plans,
designs, parts and equipment, that is in the possession or control (direct or
indirect) of Employee.
9. SURVIVAL; REMEDIES; SEVERABILITY. Employee specifically acknowledges
that (a) Employer itself or through one or more of Employer's subsidiaries
currently operates, or will operate following the date hereof, in the Restricted
Territory; (b) Employer itself or through one or more of Employer's
subsidiaries or affiliates receives a significant amount of business from and
throughout the Restricted Territory; (c) Employer itself or through one or more
of Employer's subsidiaries or affiliates, plans to expand operations within and
throughout the Restricted Territory; and (d) the geographic restrictions
contained in Section 5 hereof, and the length of time restrictions in Sections
5, 6 and 7 hereof are each necessary and reasonable and were negotiated between
Employer and Employee. The restrictions and obligations set forth in Sections 5,
6, 7 and 8 hereof shall survive the expiration or termination of this Agreement.
The parties hereto hereby acknowledge and agree that the restrictions and
obligations set forth in Sections 5, 6, 7 and 8 hereof are reasonable and
necessary, and that any violation thereof would result in substantial and
irreparable injury to Employer, and that Employer may not have an adequate
remedy at law with respect to any such violation. Accordingly, Employee agrees
that, in the event of any actual or threatened violation thereof, Employer shall
have the right and privilege to obtain, without the necessity of posting bond
therefor, and in addition to any other remedies that may be available, equitable
relief, including temporary and permanent injunctive relief, to cease or prevent
any actual or threatened violation of any provision hereof. Further, in the
event of a breach by Employee of any of the provisions of this Agreement,
Employer shall be entitled to an accounting and repayment of all profits,
compensation, commissions, remunerations or other benefits that Employee,
directly or indirectly, has realized and/or may realize as a result of, arising
out of or in connection with any such breach. Each and every provision set
forth in Sections 5, 6, 7 and 8 hereof is independent and severable from the
others, and no restriction will be rendered unenforceable by virtue of the fact
that, for any reason, any other or others of them may be unenforceable in whole
or in part. If any provision in this Agreement, including, without limitation,
those in Sections 5, 6, 7 and 8 hereof is unenforceable for any reason
whatsoever, that provision will be appropriately limited and reformed to the
maximum extent provided by applicable law. If the scope of any restriction
contained herein is too broad to permit enforcement to its full extent, then
such restriction shall be enforced to the
--------------------------------------------------------------------------------
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 5
(XXXXXX XXXXXX)
141
maximum extent permitted by law so as to be judged reasonable and enforceable,
and the parties agree that such scope may be modified by an arbitrator or judge
in any proceeding to enforce this Agreement. This includes, without limitation,
altering or enforcing only portions of the limits on activity restrictions, the
geographic scope, and/or the duration of the restrictions unless to do so would
be contrary to law or public policy.
10. MISCELLANEOUS.
(a) NOTICES. All notices required or permitted to be given
hereunder shall be in writing and shall be deemed given when delivered
in person, or three (3) business days after being placed in the hands
of a courier service (e.g., DHL or Federal Express) prepaid or faxed
provided that a confirming copy is delivered forthwith as herein
provided, addressed as follows:
IF TO EMPLOYER:
Orix Global Communications, Inc.
0000 Xxxx Xxxxxxxx Xxxx, Xxx. X000
Xxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxxxxx, President
Fax: 000.000.0000
IF TO EMPLOYEE:
Xxxxxx Xxxxxx
0000 Xxxx Xxxxxxxx Xxxx, Xxx. X000
Xxx Xxxxx, XX 00000
Fax: 000.000.0000
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section.
(b) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter
hereof, and shall be binding upon and inure to the benefit of the
parties hereto and their respective legal representatives, successors
and permitted assigns. Except as set forth herein, the provisions of
this Agreement supersede any and all other agreements or
understandings, whether oral or written, with respect to Employee's
employment by Employer. Any amendments, or alternative or supplementary
provisions to this Agreement must be made in writing and duly executed
by the authorized representative or agent of each of the parties
hereto.
(c) NON-WAIVER. The failure in any one or more instances of a
party to insist upon performance of any of the terms, covenants or
conditions of this Agreement, to
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 6
(XXXXXX XXXXXX)
142
exercise any right or privilege conferred in this Agreement or the
waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement, shall not be construed as a subsequent
waiver of any such terms, covenants, conditions, rights or privileges,
but the same shall continue and remain in full force and effect as if
no such forbearance or waiver had occurred. No waiver shall be
effective unless it is in writing and signed by an authorized
representative of the waiving party.
(d) COUNTERPARTS. This Agreement may be executed by facsimile
signature and in multiple counterparts, each of which shall be deemed
to be an original, and all such counterparts shall constitute but one
instrument.
(e) APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONTROLLED AS TO VALIDITY, ENFORCEMENT, INTERPRETATION, CONSTRUCTION,
EFFECT AND IN ALL OTHER RESPECTS BY THE INTERNAL LAWS OF THE STATE OF
NEVADA APPLICABLE TO CONTRACTS MADE IN THAT STATE.
(f) CONSTRUCTION. The parties hereto acknowledge and agree
that each party has participated in the drafting of this Agreement and
that this document has been reviewed by the respective legal counsel
for the parties hereto and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be applied to the interpretation of this Agreement. No
inference in favor of, or against, any party shall be drawn from the
fact that one party has drafted any portion hereof.
BOTH PARTIES HERETO HAVE READ THIS ENTIRE AGREEMENT CAREFULLY AND FULLY
UNDERSTAND THE LIMITATIONS THAT THIS AGREEMENT IMPOSES UPON THEM AND ACKNOWLEDGE
AND AGREE THAT THOSE LIMITATIONS ARE REASONABLE.
[Signature page follows]
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - Page 7
(XXXXXX XXXXXXXX)
143
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
EMPLOYER
ORIX GLOBAL COMMUNICATIONS, INC.,
a Nevada Corporation
By: /s/ XXXXX XXXXXXXX
-------------------------------
Xxxxx Xxxxxxxx, President
EMPLOYEE
/s/ XXXXXX XXXXXX
-----------------------------------
Xxxxxx Xxxxxx
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 8
(XXXXXX XXXXXX)
144
EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS EMPLOYMENT AND NONCOMPETITION AGREEMENT is made and entered into
this 11th day of June, 1998, by and between ORIX GLOBAL COMMUNICATIONS, INC., a
Nevada corporation ("Employer") and XXXXX X. XXXXXX ("Employee").
RECITALS:
Employer desires to employ Employee, and Employee desires to accept
such employment, on the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants set forth in this Agreement, the parties hereto hereby agree as
follows:
1. EMPLOYMENT; DUTIES. Employer hereby employs Employee, and Employee
hereby accepts such employment, to perform such duties and services for and on
behalf of Employer as may from time to time be determined by the President
and/or Board of Directors of Employer. Employee shall devote his full and
undivided business time, attention and efforts to Employer's business and to the
performance of Employee's duties under this Agreement. Employee shall fully and
faithfully perform all duties assigned to him under this Agreement to the best
of Employee's abilities. In the performance of Employee's duties hereunder,
Employee agrees to report to the President of the Employer. Employee shall be
designated as the Chief Technology Officer of the Employer.
2. COMPENSATION. Employee shall be entitled to receive a per annum
salary of One Hundred Forty Thousand Dollars ($140,000) ("Base Salary") as full
compensation for all the services rendered by Employee during the Term (as
hereafter defined) of Employee's employment hereunder. Employee shall be
entitled to receive the Base Salary in twenty-six (26) equal payments; payments
to be made every two weeks (less all applicable deductions for all taxes,
including federal, state and FICA). Employee's Base Salary will increase to Two
Hundred Forty Thousand Dollars ($240,000) per annum if Employer achieves
$150,000 positive EBIDTA (as calculated in accordance with generally accepted
accounting principles) for three (3) consecutive months. In addition to
Employee's Base Salary and Additional Compensation (as hereafter defined),
Employee shall receive an automobile allowance, automobile insurance and
standard health insurance together with any other benefits approved by the
President of Employer, in each case not to exceed in the aggregate a cost of
$3,000 per month to Employer during the Term (as hereinafter defined) of
employment. Employee shall be eligible for merit bonuses as determined in the
sole discretion of the Board of Directors of Employer. Employee hereby releases
and discharges Employer from any obligation to pay "withheld or deferred sums"
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 1
(XXXXX X. XXXXXX)
145
under the terms of Employee's employment agreement with Employer in effect prior
to the date hereof. In lieu thereof, Employer agrees to pay to Employee the
Deferred Bonus upon satisfaction of the Bonus Event. The Bonus Event means
Employer has achieved net income from operations during the month of January,
1999 of $1,831,327 or more, as determined in accordance with generally accepted
accounting principles. The Deferred Bonus means the sum of (x) $50,000 and (y)
the product of $8,333 multiplied by the number of months between and including
July 1998 through December 1998 that Employee's Base Salary is $140,000 rather
than $240,000 per annum as specified herein. The Deferred Bonus shall be paid in
one lump sum (less any required withholding) promptly following the calculation
of whether Employer has satisfied the Bonus Event.
3. ADDITIONAL COMPENSATION. As additional compensation for Employee's
agreements and covenants set forth in Section 5 hereof, Employer shall pay
Employee, in addition to the Base Salary, the per annum sum of Ten Thousand
Dollars ($10,000) which shall be paid in twenty six (26) equal payments;
payments to be made every two weeks (less all applicable deductions for all
taxes, including federal state and FICA) (the "Additional Compensation").
4. TERM OF EMPLOYMENT AND TERMINATION.
(a) EMPLOYMENT TERM. The term of Employee's employment
hereunder shall commence on June 11, 1998, and shall continue for two
(2) years, unless earlier terminated in accordance with the terms of
this Agreement. This Agreement, at the sole discretion of Employer, may
be renewed at the end of the Term for additional one (1) year periods
(the term of this Agreement, including any applicable renewal thereof,
being herein referred to as the "Term").
(b) EMPLOYER RIGHT OF TERMINATION. Notwithstanding anything
contained in this Agreement to the contrary, Employee's employment may
be terminated by Employer with or without cause, subject only to the
payment obligations of Employer as hereinafter set forth.
(c) TERMINATION FOR CAUSE. In the event Employer terminates
Employee's employment hereunder for Cause (as hereinafter defined)
during the Term of this Agreement, then Employee's employment hereunder
shall immediately terminate, and Employee shall only receive the Base
Salary and the Additional Compensation prorated in each case through
the effective date of termination of Employee's employment. For
purposes of this Agreement, "Cause" means: (i) "Total and Permanent
Incapacity" (as hereinafter defined) of Employee; (ii) the failure or
inability (not as a consequence of any illness, accident or other
disability, as confirmed by competent medical evidence) of Employee to
perform his duties hereunder for a period in excess of sixty (60) days
in any twelve (12) month period in a manner reasonably satisfactory to
Employer's Board of Directors; or (iii) "Serious Misconduct" (as
hereinafter defined) of Employee. "Total and
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 2
(XXXXX X. XXXXXX)
146
Permanent Incapacity" means such physical or mental condition of
Employee, including, without limitation, alcoholism, which renders
Employee incapable of performing his duties hereunder for a period in
excess of sixty (60) days in any twelve (12) month period. In the event
Employee is a Qualified Individual with a Disability, as defined in the
Americans with Disabilities Act, Employer shall not terminate
Employee's employment hereunder if Employee is able to perform the
essential functions of the Employee's job with reasonable accommodation
from Employer. "Serious Misconduct" means embezzlement or
misappropriation of corporate funds; acts of Dishonesty (as hereinafter
defined); activities that cause material adverse harm to the Employer
(other than as a consequence of good faith decisions made by Employee
in the normal performance of Employee's duties hereunder); the
conviction of or the plea by Employee to any misdemeanor involving
dishonesty or moral turpitude or to any criminal felony offense (other
than those arising within the course of Employee's employment hereunder
with respect to environmental laws, ERISA, products liability or civil
rights, of which offenses Employee was not personally aware and did not
have operational control over the matter, or did not personally and
knowingly order in violation of the law; any violation of laws (other
than a traffic or other offense which in the sole discretion (exercised
in good faith) of the Board of Directors of Employer does not affect
the performance of Employee's duties hereunder); the refusal to perform
the duties assigned to Employee pursuant to this Agreement (unless such
duties shall be unlawful); or the material breach of any of the terms
or conditions contained in this Agreement. "Dishonesty" shall mean the
furnishing of any information, reports, documents or certificates by
Employee to Employer that Employee knew or reasonably should have known
to be false or misleading, or in which Employee omitted to state a
material fact necessary in order to make the statements made by
Employee, in light of the circumstances under which they were made, not
misleading.
(d) VOLUNTARY RESIGNATION. Notwithstanding anything contained
in this Agreement to the contrary, Employee may resign and terminate
Employee's employment hereunder subject only to the requirement that
Employee shall provide Employer with a minimum of thirty (30) days
prior written notice. In such event, Employee shall only receive the
unpaid Base Salary and Additional Compensation prorated in each case
through the effective date of Employee's resignation.
(e) DEATH. In the event of the death of Employee during the
Term of this Agreement, this Agreement and Employee's employment
hereunder shall terminate as of the date of the death of Employee, and
his estate or personal representative shall be entitled to receive the
unpaid Base Salary and Additional Compensation prorated in each case
for the period of Employee's employment to the date of his death.
(f) PAYMENT UPON TERMINATION WITHOUT CAUSE. In the event
Employee's employment hereunder is terminated for reasons other than
(x) for Cause, (y) as a result of the voluntary resignation of Employee
or (z) as a result of Employee's death, then, in
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 3
(XXXXX X. XXXXXX)
147
such event, Employee shall be entitled to receive the unpaid Base
Salary and Additional Compensation prorated in each case for the period
of Employee's employment to the date of such termination, together with
an additional payment equal to the sum of (x) the unpaid Base Salary in
effect on the date of termination and (y) the Additional Compensation,
in each case for the remaining Term of the Agreement (or renewal term,
if such termination occurs during the renewal term), in each case
payable at the same time and amounts as if Employee had continued his
employment hereunder. In addition, if the Bonus Event is satisfied by
Employer, the Employee shall be entitled to the Deferred Bonus even if
the Employee has previously been terminated without Cause.
(g) SUSPENSION. Employer shall have the right to suspend
Employee with full pay and benefits for any period of time the Board of
Directors of Employer deems, in its sole discretion, necessary or
appropriate to investigate Employee's conduct.
5. COVENANT NOT TO COMPETE. During the Restricted Period (or such
lesser period to the maximum extent permitted by applicable law), Employee
agrees that Employee will not, directly or indirectly (including, without
limitation, as a partner, shareholder, director, officer or employee of, or
lender or consultant to, any other person, firm or other entity), in any
capacity, within, into or from the Restricted Territory (as defined below)
engage or cause others to engage in the business that Employer and/or its
subsidiaries or affiliates is engaged in at the time of termination, or any
aspect thereof (consisting, as of the date hereof, principally of the activities
described in the Business Plan referenced in the Securities Purchase Agreement
dated the date hereof to which this Agreement is attached (the "Business"),
unless first authorized in writing by Employer, which authorization may be
withheld in the sole and absolute discretion of Employer. For purposes of this
Agreement, Restricted Period means the period of Employee's employment hereunder
and the following applicable period after the date of termination of Employee's
employment for any reason: (i) if Employee voluntarily resigns, a period equal
to two (2) years after the date of such resignation; (ii) for any termination
without Cause, the period through June 11, 2000; (iii) for any termination with
Cause, a period equal to one (1) year after the date of such termination; and
(iv) for any other termination, including non-renewal, a period of one (1) year
after the date of termination or non-renewal. For purposes of this Agreement,
the term "Restricted Territory" shall mean that the Business of Employer has
been initiated in any of North America, Central America or South America and
completed in any of North America, Central America or South America (or such
lesser territory to the maximum extent permitted by applicable law). If Employee
violates any obligations under this Section 5, then the time periods hereunder
shall be extended by the period of time equal to that period beginning when the
activities constituting such violation commenced and ending when the activities
constituting such violation terminate.
6. NONSOLICITATION. During the Employee's employment hereunder, and for
a period of thirty-six (36) months from and after the date of termination of
Employee's employment for any reason (or such lesser period to the maximum
extent permitted by applicable law), Employee agrees that Employee shall not,
directly or indirectly, for himself or on behalf of, or in
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 4
(XXXXX X. XXXXXX)
148
connection with, any person, firm or other entity other than Employer, solicit
or cause others to solicit (i) the business or patronage of any person, firm or
other entity with whom Employer has or had a business relationship (as a
customer, supplier or otherwise) or with whom Employer has proposed entering
into a business relationship (as a customer, supplier or otherwise), or (ii) any
person who, on the date hereof and on the date of termination of Employee's
employment hereunder, was an employee or consultant of Employer, or any of its
subsidiaries or their affiliates, for employment or as an independent contractor
with any person or entity, unless first authorized in writing by Employer, which
authorization may be withheld in Employer's sole and absolute discretion. If
Employee violates his obligations contained in this Section 6, then the time
periods hereunder shall be extended by the period of time equal to that period
beginning when the activities constituting such violation commenced and ending
when the activities constituting such violation terminate.
7. CONFIDENTIALITY. From and after the date hereof, Employee shall not
communicate or divulge to, or use for the benefit of, any person, firm or other
entity other than Employer, any of the trade secrets, business and/or marketing
plans, or any proprietary or confidential information with respect to Employer,
its subsidiaries or their affiliates, and their business, financial condition,
business operations or methods or business prospects. The preceding sentence
shall not apply to information which (i) is, was or becomes generally known or
available to the public or the industry other than as a result of a disclosure
by Employee in violation of this Agreement, or (ii) is required to be disclosed
by law. Employee shall advise Employer, in writing, of any request, including a
subpoena or similar legal inquiry, to disclose any such confidential
information, so that Employer may, at its option, seek appropriate legal relief.
8. RETURN OF EMPLOYER PROPERTY. Immediately upon the expiration or
earlier termination of this Agreement, Employee shall return to Employer any and
all property of Employer, including, but not limited to, all documents,
agreements, schedules, statements, customer lists, supplier lists, plans,
designs, parts and equipment, that is in the possession or control (direct or
indirect) of Employee.
9. SURVIVAL: REMEDIES; SEVERABILITY. Employee specifically acknowledges
that (a) Employer itself or through one or more of Employer's subsidiaries
currently operates, or will operate following the date hereof, in the Restricted
Territory; (b) Employer itself or through one or more of Employer's subsidiaries
or affiliates receives a significant amount of business from and throughout the
Restricted Territory; (c) Employer itself or through one or more of Employer's
subsidiaries or affiliates, plans to expand operations within and throughout the
Restricted Territory; and (d) the geographic restrictions contained in Section 5
hereof, and the length of time restrictions in Sections 5, 6 and 7 hereof are
each necessary and reasonable and were negotiated between Employer and Employee.
The restrictions and obligations set forth in Sections 5, 6, 7 and 8 hereof
shall survive the expiration or termination of this Agreement. The parties
hereto hereby acknowledge and agree that the restrictions and obligations set
forth in Sections 5, 6, 7 and 8 hereof are reasonable and necessary, and that
any violation thereof would
--------------------------------------------------------------------------------
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 5
(XXXXX X. XXXXXX)
149
result in substantial and irreparable injury to Employer, and that Employer may
not have an adequate remedy at law with respect to any such violation.
Accordingly, Employee agrees that, in the event of any actual or threatened
violation thereof, Employer shall have the right and privilege to obtain,
without the necessity of posting bond therefor, and in addition to any other
remedies that may be available, equitable relief, including temporary and
permanent injunctive relief, to cease or prevent any actual or threatened
violation of any provision hereof. Further, in the event of a breach by Employee
of any of the provisions of this Agreement, Employer shall be entitled to an
accounting and repayment of all profits, compensation, commissions,
remunerations or other benefits that Employee, directly or indirectly, has
realized and/or may realize as a result of, arising out of or in connection with
any such breach. Each and every provision set forth in Sections 5, 6, 7 and 8
hereof is independent and severable from the others, and no restriction will be
rendered unenforceable by virtue of the fact that, for any reason, any other or
others of them may be unenforceable in whole or in part. If any provision in
this Agreement, including, without limitation, those in Sections 5, 6, 7 and 8
hereof is unenforceable for any reason whatsoever, that provision will be
appropriately limited and reformed to the maximum extent provided by applicable
law. If the scope of any restriction contained herein is too broad to permit
enforcement to its full extent, then such restriction shall be enforced to the
maximum extent permitted by law so as to be judged reasonable and enforceable,
and the parties agree that such scope may be modified by an arbitrator or judge
in any proceeding to enforce this Agreement. This includes, without limitation,
altering or enforcing only portions of the limits on activity restrictions, the
geographic scope, and/or the duration of the restrictions unless to do so would
be contrary to law or public policy.
10. MISCELLANEOUS.
(a) NOTICES. All notices required or permitted to be given
hereunder shall be in writing and shall be deemed given when delivered
in person, or three (3) business days after being placed in the hands
of a courier service (e.g., DHL or Federal Express) prepaid or faxed
provided that a confirming copy is delivered forthwith as herein
provided, addressed as follows:
IF TO EMPLOYER:
Orix Global Communications, Inc.
0000 Xxxx Xxxxxxxx Xxxx, Xxx. X000
Xxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxxxxx, President
Fax: 000.000.0000
IF TO EMPLOYEE:
Xxxxx X. Xxxxxx
0000 Xxxx Xxxxxxxx Xxxx, Xxx. X000
--------------------------------------------------------------------------------
EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 6
(XXXXX X. XXXXXX)
150
Xxx Xxxxx, XX 00000
Fax: 000.000.0000
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section.
(b) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter
hereof, and shall be binding upon and inure to the benefit of the
parties hereto and their respective legal representatives, successors
and permitted assigns. Except as set forth herein, the provisions of
this Agreement supersede any and all other agreements or
understandings, whether oral or written, with respect to Employee's
employment by Employer. Any amendments, or alternative or supplementary
provisions to this Agreement must be made in writing and duly executed
by the authorized representative or agent of each of the parties
hereto.
(c) NON-WAIVER. The failure in any one or more instances of a
party to insist upon performance of any of the terms, covenants or
conditions of this Agreement, to exercise any right or privilege
conferred in this Agreement or the waiver by said party of any breach
of any of the terms, covenants or conditions of this Agreement, shall
not be construed as a subsequent waiver of any such terms, covenants,
conditions, rights or privileges, but the same shall continue and
remain in full force and effect as if no such forbearance or waiver had
occurred. No waiver shall be effective unless it is in writing and
signed by an authorized representative of the waiving party.
(d) COUNTERPARTS. This Agreement may be executed by facsimile
signature and in multiple counterparts, each of which shall be deemed
to be an original, and all such counterparts shall constitute but one
instrument.
(e) APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONTROLLED AS TO VALIDITY, ENFORCEMENT, INTERPRETATION, CONSTRUCTION,
EFFECT AND IN ALL OTHER RESPECTS BY THE INTERNAL LAWS OF THE STATE OF
NEVADA APPLICABLE TO CONTRACTS MADE IN THAT STATE.
(f) CONSTRUCTION. The parties hereto acknowledge and agree
that each party has participated in the drafting of this Agreement and
that this document has been reviewed by the respective legal counsel
for the parties hereto and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be applied to the interpretation of this Agreement. No
inference in favor of, or against, any party shall be drawn from the
fact that one party has drafted any portion hereof.
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 7
(XXXXX X. XXXXXX)
151
BOTH PARTIES HERETO HAVE READ THIS ENTIRE AGREEMENT CAREFULLY AND
FULLY UNDERSTAND THE LIMITATIONS THAT THIS AGREEMENT IMPOSES UPON THEM AND
ACKNOWLEDGE AND AGREE THAT THOSE LIMITATIONS ARE REASONABLE.
(SIGNATURE PAGE FOLLOWS]
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 8
(XXXXX X. XXXXXX)
152
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
EMPLOYER
ORIX GLOBAL COMMUNICATIONS, INC.,
a Nevada corporation
By:
-----------------------------------------
Xxxxx Xxxxxxxx, President
EMPLOYEE
--------------------------------------------
XXXXX X. XXXXXX
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EMPLOYMENT AND NONCOMPETITION AGREEMENT - PAGE 9
(XXXXX X. XXXXXX)
153
EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS EMPLOYMENT AND NONCOMPETITION AGREEMENT is made and entered into
this 11th day of June, 1998, by and between ORIX GLOBAL COMMUNICATIONS, INC., a
Nevada corporation ("Employer") and XXXXX X. XXXXXX ("Employee").
R E C I T A L S:
Employer desires to employ Employee, and Employee desires to accept
such employment, on the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants set forth in this Agreement, the parties hereto hereby agree as
follows:
1. EMPLOYMENT; DUTIES. Employer hereby employs Employee, and Employee
hereby accepts such employment, to perform such duties and services for and on
behalf of Employer as may from time to time be determined by the President
and/or Board of Directors of Employer. Employee shall devote his full and
undivided business time, attention and efforts to Employer's business and to the
performance of Employee's duties under this Agreement. Employee shall fully and
faithfully perform all duties assigned to him under this Agreement to the best
of Employee's abilities. In the performance of Employees duties hereunder,
Employee agrees to report to the President of the Employer. Employee shall be
designated as the Chief Technology Officer of the Employer.
2. COMPENSATION. Employee shall be entitled to receive a per annum
salary of One Hundred Forty Thousand Dollars ($140,000) ("Base Salary") as full
compensation for all the services rendered by Employee during the Term (as
hereafter defined) of Employee's employment hereunder. Employee shall be
entitled to receive the Base Salary in twenty-six (26) equal payments; payments
to be made every two weeks (less all applicable deductions for all taxes,
including federal, state and FICA). Employee's Base Salary will increase to Two
Hundred Forty Thousand Dollars ($240,000) per annum if Employer achieves
$150,000 positive EBIDTA (as calculated in accordance with generally accepted
accounting principles) for three (3) consecutive months. In addition to
Employee's Base Salary and Additional Compensation (as hereafter defined),
Employee shall receive standard employee benefits (such as health insurance)
available to all employees of Employer, but shall not otherwise receive any
benefits (such as an automobile allowance) or be eligible to participate in any
stock option, defined benefit or related pension plans of Employer. Employer
shall continue the terms of the existing automobile lease for the Employee, but
shall not be required to extend or renew such lease.
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3. ADDITIONAL COMPENSATION. As additional compensation for Employee's
agreements and covenants set forth in Section 5 hereof, Employer shall pay
Employee, in addition to the Base Salary, the per annum sum of Ten Thousand
Dollars ($10,000) which shall be paid in twenty six (26) equal payments;
payments to be made every two weeks (less all applicable deductions for all
taxes, including federal, state and FICA) (the "Additional Compensation").
4. TERM OF EMPLOYMENT AND TERMINATION.
(a) EMPLOYMENT TERM. The term of Employee's employment
hereunder shall commence on June 11, 1998, and shall continue for two
(2) years, unless earlier terminated in accordance with the terms of
this Agreement. This Agreement, at the sole discretion of Employer, may
be renewed at the end of the Term for additional one (1) year periods
(the term of this Agreement, including any applicable renewal thereof,
being herein referred to as the "Term").
(b) EMPLOYER RIGHT OF TERMINATION. Notwithstanding anything
contained in this Agreement to the contrary, Employee's employment may
be terminated by Employer with or without cause, subject only to the
payment obligations of Employer as hereinafter set forth.
(c) TERMINATION FOR CAUSE. In the event Employer terminates
Employee's employment hereunder for Cause (as hereinafter defined)
during the Term of this Agreement, then Employee's employment hereunder
shall immediately terminate, and Employee shall only receive the Base
Salary and the Additional Compensation prorated in each case through
the effective date of termination of Employee's employment. For
purposes of this Agreement, "Cause" means: (i) "Total and Permanent
Incapacity" (as hereinafter defined) of Employee; (ii) the failure or
inability (not as a consequence of any illness, accident or other
disability, as confirmed by competent medical evidence) of Employee to
perform his duties hereunder for a period in excess of sixty (60) days
in any twelve (12) month period in a manner reasonably satisfactory to
Employer's Board of Directors; or (iii) "Serious Misconduct" (as
hereinafter defined) of Employee. "Total and Permanent Incapacity"
means such physical or mental condition of Employee, including, without
limitation, alcoholism, which renders Employee incapable of performing
his duties hereunder for a period in excess of sixty (60) days in any
twelve (12) month period. In the event Employee is a Qualified
Individual with a Disability, as defined in the Americans with
Disabilities Act, Employer shall not terminate Employee's employment
hereunder if Employee is able to perform the essential functions of the
Employee's job with reasonable accommodation from Employer. "Serious
Misconduct" means embezzlement or misappropriation of corporate funds;
acts of Dishonesty (as hereinafter defined); activities that cause
material adverse harm to the Employer (other than as a consequence of
good faith decisions made by Employee in the normal performance of
Employee's duties hereunder); the conviction of or the plea by Employee
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155
to any misdemeanor involving dishonesty or moral turpitude or to any
criminal felony offense (other than those arising within the course of
Employee's employment hereunder with respect to environmental laws,
ERISA, products liability or civil rights, of which offenses Employee
was not personally aware and did not have operational control over the
matter, or did not personally and knowingly order in violation of the
law; any violation of laws (other than a traffic or other offense which
in the sole discretion (exercised in good faith) of the Board of
Directors of Employer does not affect the performance of Employee's
duties hereunder); the refusal to perform the duties assigned to
Employee pursuant to this Agreement (unless such duties shall be
unlawful); or the material breach of any of the terms or conditions
contained in this Agreement. "Dishonesty" shall mean the furnishing of
any information, reports, documents or certificates by Employee to
Employer that Employee knew or reasonably should have known to be false
or misleading, or in which Employee omitted to state a material fact
necessary in order to make the statements made by Employee, in light of
the circumstances under which they were made, not misleading.
(d) VOLUNTARY RESIGNATION. Notwithstanding anything contained
in this Agreement to the contrary, Employee may resign and terminate
Employee's employment hereunder subject only to the requirement that
Employee shall provide Employer with a minimum of thirty (30) days
prior written notice. In such event, Employee shall only receive the
unpaid Base Salary and Additional Compensation prorated in each case
through the effective date of Employee's resignation.
(e) DEATH. In the event of the death of Employee during the
Term of this Agreement, this Agreement and Employee's employment
hereunder shall terminate as of the date of the death of Employee, and
his estate or personal representative shall be entitled to receive the
unpaid Base Salary and Additional Compensation prorated in each case
for the period of Employee's employment to the date of his death.
(f) PAYMENT UPON TERMINATION WITHOUT CAUSE. In the event
Employee's employment hereunder is terminated for reasons other than
(x) for Cause, (y) as a result of the voluntary resignation of Employee
or (z) as a result of Employee's death, then, in such event, Employee
shall be entitled to receive the unpaid Base Salary and Additional
Compensation prorated in each case for the period of Employee's
employment to the date of such termination, together with an additional
payment equal to the sum of (x) the unpaid Base Salary in effect on the
date of termination and (y) the Additional Compensation, in each case
for the remaining Term of the Agreement (or renewal term, if such
termination occurs during the renewal term), in each case payable at
the same time and amounts as if Employee had continued his employment
hereunder.
(g) SUSPENSION. Employer shall have the right to suspend
Employee with full pay and benefits for any period of time the Board of
Directors of Employer deems, in its sole discretion, necessary or
appropriate to investigate Employee's conduct.
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156
5. COVENANT NOT TO COMPETE. During the Restricted Period (or such
lesser period to the maximum extent permitted by applicable law), Employee
agrees that Employee will not, directly or indirectly (including, without
limitation, as a partner, shareholder, director, officer or employee of, or
lender or consultant to, any other person, firm or other entity), in any
capacity, within, into or from the Restricted Territory (as defined below)
engage or cause others to engage in the business that Employer and/or its
subsidiaries or affiliates is engaged in at the time of termination, or any
aspect thereof of (consisting, as of the date hereof, principally of the
activities described in the Business Plan referenced in the Securities Purchase
Agreement dated the date hereof to which this Agreement is attached (the
"Business"), unless first authorized in writing by Employer, which authorization
may be withheld in the sole and absolute discretion of Employer. For purposes of
this Agreement, Restricted Period means the period of Employee's employment
hereunder and the following applicable period after the date of termination of
Employee's employment for any reason: (i) if Employee voluntarily resigns, a
period equal to two (2) years after the date of such resignation; (ii) for any
termination without Cause, the period through June 11, 2000; (iii) for any
termination with Cause, a period equal to two (2) years after the date of such
termination; and (iv) for any other termination, including non-renewal, a period
of one (1) year after the date of termination or non-renewal. For purposes of
this Agreement, the term "Restricted Territory" shall mean Xxxxx Xxxxxxx,
Xxxxxxx Xxxxxxx xxx Xxxxx Xxxxxxx (or such lesser territory to the maximum
extent permitted by applicable law). If Employee violates any obligations under
this Section 5, then the time periods hereunder shall be extended by the period
of time equal to that period beginning when the activities constituting such
violation commenced and ending when the activities constituting such violation
terminate.
6. NONSOLICITATION. During the Employee's employment hereunder, and for
a period of thirty-six (36) months from and after the date of termination of
Employee's employment for any reason (or such lesser period to the maximum
extent permitted by applicable law), Employee agrees that Employee shall not,
directly or indirectly, for himself or on behalf of, or in connection with, any
person, firm or other entity other than Employer, solicit or cause others to
solicit (i) the business or patronage of any person, firm or other entity with
whom Employer has or had a business relationship (as a customer, supplier or
otherwise) or with whom Employer has proposed entering into a business
relationship (as a customer, supplier or otherwise), or (ii) any person who, on
the date hereof and on the date of termination of Employee's employment
hereunder, was an employee or consultant of Employer, or any of its subsidiaries
or their affiliates, for employment or as an independent contractor with any
person or entity, unless first authorized in writing by Employer, which
authorization may be withheld in Employer's sole and absolute discretion. If
Employee violates his obligations contained in this Section 6, then the time
periods hereunder shall be extended by the period of time equal to that period
beginning when the activities constituting such violation commenced and ending
when the activities constituting such violation terminate.
7. CONFIDENTIALITY. From and after the date hereof, Employee shall not
communicate or divulge to, or use for the benefit of, any person, firm or other
entity other than Employer, any of the trade secrets, business and/or marketing
plans, or any proprietary or confidential
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157
information with respect to Employer, its subsidiaries or their affiliates, and
their business, financial condition, business operations or methods or business
prospects. The preceding sentence shall not apply to information which (i) is,
was or becomes generally known or available to the public or the industry other
than as a result of a disclosure by Employee in violation of this Agreement, or
(ii) is required to be disclosed by law. Employee shall advise Employer, in
writing, of any request, including a subpoena or similar legal inquiry, to
disclose any such confidential information, so that Employer may, at its option,
seek appropriate legal relief.
8. RETURN OF EMPLOYER PROPERTY. Immediately upon the expiration or
earlier termination of this Agreement, Employee shall return to Employer any and
all property of Employer, including, but not limited to, all documents,
agreements, schedules, statements, customer lists, supplier lists, plans,
designs, parts and equipment, that is in the possession or control (direct or
indirect) of Employee.
9. SURVIVAL: REMEDIES; SEVERABILITY. Employee specifically acknowledges
that (a) Employer itself or through one or more of Employer's subsidiaries
currently operates, or will operate following the date hereof, in the Restricted
Territory; (b) Employer itself or through one or more of Employer's subsidiaries
or affiliates receives a significant amount of business from and throughout the
Restricted Territory; (c) Employer itself or through one or more of Employer's
subsidiaries or affiliates, plans to expand operations within and throughout the
Restricted Territory; and (d) the geographic restrictions contained in Section 5
hereof, and the length of time restrictions in Sections 5, 6 and 7 hereof are
each necessary and reasonable and were negotiated between Employer and Employee.
The restrictions and obligations set forth in Sections 5, 6, 7 and 8 hereof
shall survive the expiration or termination of this Agreement. The parties
hereto hereby acknowledge and agree that the restrictions and obligations set
forth in Sections 5, 6, 7 and 8 hereof are reasonable and necessary, and that
any violation thereof would result in substantial and irreparable injury to
Employer, and that Employer may not have an adequate remedy at law with respect
to any such violation. Accordingly, Employee agrees that, in the event of any
actual or threatened violation thereof, Employer shall have the right and
privilege to obtain, without the necessity of posting bond therefor, and in
addition to any other remedies that may be available, equitable relief,
including temporary and permanent injunctive relief, to cease or prevent any
actual or threatened violation of any provision hereof. Further, in the event of
a breach by Employee of any of the provisions of this Agreement, Employer shall
be entitled to an accounting and repayment of all profits, compensation,
commissions, remunerations or other benefits that Employee, directly or
indirectly, has realized and/or may realize as a result of, arising out of or in
connection with any such breach. Each and every provision set forth in Sections
5, 6, 7 and 8 hereof is independent and severable from the others, and no
restriction will be rendered unenforceable by virtue of the fact that, for any
reason, any other or others of them may be unenforceable in whole or in part. If
any provision in this Agreement, including, without limitation, those in
Sections 5, 6, 7 and 8 hereof is unenforceable for any reason whatsoever, that
provision will be appropriately limited and reformed to the maximum extent
provided by applicable law. If the scope of any restriction contained herein is
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158
too broad to permit enforcement to its full extent, then such restriction shall
be enforced to the maximum extent permitted by law so as to be judged reasonable
and enforceable, and the parties agree that such scope may be modified by an
arbitrator or judge in any proceeding to enforce this Agreement. This includes,
without limitation, altering or enforcing only portions of the limits on
activity restrictions, the geographic scope, and/or the duration of the
restrictions unless to do so would be contrary to law or public policy.
10. MISCELLANEOUS.
(a) NOTICES. All notices required or permitted to be given
hereunder shall be in writing and shall be deemed given when delivered
in person, or three (3) business days after being placed in the hands
of a courier service (e.g., DHL or Federal Express) prepaid or faxed
provided that a confirming copy is delivered forthwith as herein
provided, addressed as follows:
IF TO EMPLOYER:
Orix Global Communications, Inc.
0000 Xxxx Xxxxxxxx Xxxx, Xxx. X000
Xxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxxxxx, President
Fax: 000.000.0000
IF TO EMPLOYEE:
Xxxxx X. Xxxxxx
0000 Xxxx Xxxxxxxx Xxxx, Xxx. X000
Xxx Xxxxx, XX 00000
Fax: 000.000.0000
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section.
(b) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter
hereof, and shall be binding upon and inure to the benefit of the
parties hereto and their respective legal representatives, successors
and permitted assigns. Except as set forth herein, the provisions of
this Agreement supersede any and all other agreements or
understandings, whether oral or written, with respect to Employee's
employment by Employer. Any amendments, or alternative or supplementary
provisions to this Agreement must be made in writing and duly executed
by the authorized representative or agent of each of the parties
hereto.
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159
(c) NON-WAIVER. The failure in any one or more instances of a
party to insist upon performance of any of the terms, covenants or
conditions of this Agreement, to exercise any right or privilege
conferred in this Agreement or the waiver by said party of any breach
of any of the terms, covenants or conditions of this Agreement, shall
not be construed as a subsequent waiver of any such terms, covenants,
conditions, rights or privileges, but the same shall continue and
remain in full force and effect as if no such forbearance or waiver had
occurred. No waiver shall be effective unless it is in writing and
signed by an authorized representative of the waiving party.
(d) COUNTERPARTS. This Agreement may be executed by facsimile
signature and in multiple counterparts, each of which shall be deemed
to be an original, and all such counterparts shall constitute but one
instrument.
(e) APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONTROLLED AS TO VALIDITY, ENFORCEMENT, INTERPRETATION, CONSTRUCTION,
EFFECT AND IN ALL OTHER RESPECTS BY THE INTERNAL LAWS OF THE STATE OF
NEVADA APPLICABLE TO CONTRACTS MADE IN THAT STATE.
(f) CONSTRUCTION. The parties hereto acknowledge and agree
that each party has participated in the drafting of this Agreement and
that this document has been reviewed by the respective legal counsel
for the parties hereto and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be applied to the interpretation of this Agreement. No
inference in favor of, or against, any party shall be drawn from the
fact that one party has drafted any portion hereof.
BOTH PARTIES HERETO HAVE READ THIS ENTIRE AGREEMENT CAREFULLY AND FULLY
UNDERSTAND THE LIMITATIONS THAT THIS AGREEMENT IMPOSES UPON THEM AND ACKNOWLEDGE
AND AGREE THAT THOSE LIMITATIONS ARE REASONABLE.
[SIGNATURE PAGE FOLLOWS]
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160
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
EMPLOYER
ORIX GLOBAL COMMUNICATIONS, INC.,
a Nevada corporation
By: /s/ XXXXX XXXXXXXX
---------------------------------
Xxxxx Xxxxxxxx, President
EMPLOYEE
By: /s/ XXXXX X. XXXXXX
---------------------------------
XXXXX X. XXXXXX
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161
ORIX GLOBAL COMMUNICATIONS, INC.
0000 XXXX XXXXXXXX XXXX, XXX. X000
XXX XXXXX, XX 00000
June 11, 1998
Xx. Xxxxx X. Xxxxxx
0000 Xxxx Xxxxxxxx Xxxx, Xxx. X000
Xxx Xxxxx, XX 00000
Re: Pari Passu Agreement
Dear Xx. Xxxxxx:
This letter sets forth our mutual agreement concerning a $164,000 debt
(the "Note") owed by us to you. The terms of repayment are as follows:
(a) The Note shall bear interest, commencing June 11, 1998, at 8% per
annum.
(b) $64,000 of principal, together with interest thereon, of the Note
shall be paid on or before July 11, 1998.
(c) The remaining balance of the Note shall be paid pari passu, on a
prorated basis, with the payment by us of the $5,000,000 8% Debentures issued as
of the date hereof by us to Infinity Investors Limited (the "Purchaser").
(d) We may prepay the Note, with the consent of the Purchaser, at any
time in whole or in part.
(e) Except for the Note, we do not owe you any other sums.
Yours very truly,
ORIX GLOBAL COMMUNICATIONS, INC.
By: /s/ XXXXX XXXXXXXX
----------------------------------------
Xxxxx Xxxxxxxx, President
ACKNOWLEDGED AND AGREED TO:
/s/ XXXXX X. XXXXXX
---------------------------------
Xxxxx X. Xxxxxx, Individually
INFINITY INVESTORS LIMITED
By: /s/ [ILLEGIBLE]
-----------------------------
Title: Director
--------------------------
