The following form was used in connection with a private placement in May, 1999,
pursuant to which: (i) Xxxxxxxxx X. Xxxxx and Xxxx Xxxxx, joint tenants,
purchased 280,000 shares of Company common stock at $3.00 per share; (ii) the
Xxxx X. Xxxxx Trust purchased 24,160 shares of Company common stock at $3.00 per
share; and (iii) the Xxxx X. Xxxxx Trust purchased 24,010 shares of Company
common stock at $3.00 per share.
VDC COMMUNICATIONS, INC.
----------
SECURITIES PURCHASE AGREEMENT
----------
SHARES OF COMMON STOCK
AT $3.00 PER SHARE
----------
MAY 5, 1999
65
CONFIDENTIAL
------------
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is entered into as
of the 5th day of May, 1999, by and between VDC Communications, Inc., a Delaware
corporation ("VDC" or the "Company"), and the investor whose name appears at the
end of this Agreement ("Purchaser" or "Subscriber").
R E C I T A L S:
----------------
The Company wishes to obtain additional working capital and the
Purchaser desires to provide such working capital to the Company through the
purchase of certain shares of the Company's common stock, $.0001 par value per
share (the "Common Stock"), being privately offered by the Company.
NOW, THEREFORE, in consideration of the premises hereof and the
agreements set forth herein below, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Sale and Purchase of Shares.
Subject to the terms and conditions hereof, the Company agrees to
issue and sell, and the Purchaser agrees to purchase that number of shares of
Common Stock (the "Shares") identified on the signature page hereof at a
purchase price of $3.00 per share. The total purchase price is set forth on the
signature page hereof (the "Purchase Price"). The Purchase Price is payable upon
subscription in cash, check or wire transfer. If paying by check, the check
should be made payable to "VDC Communications, Inc." and delivered to VDC
Communications, Inc. at 00 Xxxxx Xxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxxx, 00000.
No broker, investment banker or any other person will receive
from the Company any compensation as a broker, finder, adviser or in any other
capacity in connection with the purchase of the Shares hereunder.
2. Description of the Shares.
(a) Restricted Securities. The shares of Common Stock of the
Company being offered hereby (the "Shares") shall be "restricted securities" as
that term is defined under Rule 144 of the Securities Act of 1933, as amended
(the "Act") and may not be offered for sale or sold or otherwise transferred in
a transaction which would constitute a sale thereof within the meaning of the
Act unless (i) such security has been registered for sale under the Act and
registered or qualified under applicable state securities laws relating to the
offer and sale of securities; or (ii) exemptions from the registration
requirements of the Act and the registration or qualification requirements of
all such state securities laws are available and the Company shall have received
an opinion of counsel that the proposed sale or other disposition of such
securities may be effected without registration under the Act and would not
result in any violation of any applicable state securities laws relating to the
registration or qualification of securities for sale, such counsel and such
opinion to be satisfactory to the Company.
66
(b) Voting Rights; Dividends. Holders of Common Stock of the
Company have equal rights to receive dividends when, as, and if declared by the
Board of Directors out of funds legally available therefor. Holders of Common
Stock of the Company have one vote for each share held of record and do not have
cumulative voting rights.
(c) Liquidation; Redemption. Holders of Common Stock of the
Company are entitled upon liquidation of the Company to share ratably in the net
assets available for distribution, subject to the rights, if any of holders of
any preferred stock of the Company then outstanding. Shares of Common Stock of
the Company are not redeemable and have no preemptive or similar rights. All
outstanding shares of Common Stock of the Company are fully paid and
nonassessable.
(d) Restriction Upon Resale. The Subscriber hereby agrees
that the Shares shall be subject to restrictions upon the transfer, sale,
encumbrance or other disposition of the Shares. See "UNDERSTANDING OF INVESTMENT
RISKS" AND "REGISTRATION RIGHTS".
3. Shares Offered in a Private Placement Transaction.
The Shares offered by this Securities Purchase Agreement are
being offered as a non-public offering pursuant to Section 4(2) and Regulation D
of the Act ("Regulation D").
4. Binding Effect of Securities Purchase Agreement; The Closing.
This Securities Purchase Agreement shall not be binding on the
Company unless and until an authorized executive officer of the Company has
evidenced acceptance thereof by executing the signature page at the end hereof.
The Company may accept or reject this Securities Purchase Agreement in its sole
discretion if the Purchaser does not meet the suitability standards established
herein, or for any other reason. A closing (the "Closing") will occur
contemporaneously with the execution of this Agreement by all parties hereto.
5. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company as follows:
(a) Accredited Investor. The Purchaser has such knowledge
and experience in business and financial matters such that the Purchaser is
capable of evaluating the merits and risks of purchasing the Shares. The
Purchaser is either an "accredited investor" as that term is defined in Rule 501
of Regulation D of the Act or a "qualified institutional buyer" as that term is
defined in Rule 144A of the Act, and represents that he satisfies the
suitability standards identified in Section 10 hereof;
(b) Loss of Investment. The Purchaser's (i) overall
commitment to investments which are not readily marketable is not
disproportionate to his net worth; (ii) investment in the Company will not cause
such overall commitment to become excessive; (iii) can afford to bear the loss
of his entire investment in the Company; and (iv) has adequate means of
providing for his current needs and personal contingencies and has no need for
liquidity in his investment in the Company;
(c) Special Suitability. The Purchaser satisfies any
special suitability or other applicable requirements of his state of residence
and/or the state in which the transaction b y which the Shares are purchased
occurs;
67
(d) Investment Intent. The Purchaser hereby acknowledges
that the Purchaser has been advised that this offering has not been registered
with, or reviewed by, the Securities and Exchange Commission ("SEC") because
this offering is intended to be a non-public offering pursuant to Section 4(2)
and Regulation D of the Act. The Purchaser represents that the Purchaser's
Shares are being purchased for the Purchaser's own account and not on behalf of
any other person, for investment purposes only and not with a view towards
distribution or resale to others. The Purchaser agrees that the Purchaser will
not attempt to sell, transfer, assign, pledge or otherwise dispose of all or any
portion of the Shares unless they are registered under the Act or unless in the
opinion of counsel an exemption from such registration is available, such
counsel and such opinion to be satisfactory to the Company. The Purchaser
understands that the Shares have not been registered under the Act by reason of
a claimed exemption under the provisions of the Act which depends, in part, upon
the Purchaser's investment intention;
(e) State Securities Laws. The Purchaser understands that no
securities administrator of any state has made any finding or determination
relating to the fairness of this investment and that no securities administrator
of any state has recommended or endorsed, or will recommend or endorse, the
offering of the Shares;
(f) Authority; Power; No Conflict. The execution, delivery
and performance by the Purchaser of the Agreement are within the powers of the
Purchaser, have been duly authorized and will not constitute or result in a
breach or default under, or conflict with, any order, ruling or regulation of
any court or other tribunal or of any governmental commission or agency, or any
agreement or other undertaking, to which the Purchaser is a party or by which
the Purchaser is bound, and, if the Purchaser is not an individual, will not
violate any provision of the charter documents, Bylaws, indenture of trust or
partnership agreement, as applicable, of the Purchaser. The signatures on the
Agreement are genuine, and the signatory, if the Purchaser is an individual, has
legal competence and capacity to execute the same, or, if the Purchaser is not
an individual, the signatory has been duly authorized to execute the same; and
the Agreement constitutes the legal, valid and binding obligations of the
Purchaser, enforceable in accordance with its terms;
(g) No General Solicitation. The Purchaser acknowledges that
no general solicitation or general advertising (including communications
published in any newspaper, magazine or other broadcast) has been received by
him and that no public solicitation or advertisement with respect to the
offering of the Shares has been made to him;
(h) Advice of Tax and Legal Advisors. The Purchaser has
relied solely upon the advice of his own tax and legal advisors with respect to
the tax and other legal aspects of this investment;
(i) Broker Fees. Other than as provided for in Section 1,
the Purchaser is not aware that any person, and has been advised that no person,
will receive from the Company any compensation as a broker, finder, adviser or
in any other capacity in connection with the purchase of the Shares other than
as declared herein;
(j) Access to Information. Purchaser has had access to all
material and relevant information concerning the Company, its management,
financial condition, capitalization, market information, properties and
prospects necessary to enable Purchaser to make an informed investment decision
with respect to its investment in the Shares. Purchaser has carefully read and
reviewed, and is familiar with and understands the contents thereof and hereof,
including, without limitation, the risk factors described in this Agreement. See
"UNDERSTANDING OF INVESTMENT RISKS." Purchaser acknowledges that it has had the
opportunity to ask questions of and receive answers from, and to obtain
additional information from, representatives of the Company concerning the terms
and conditions of the acquisition of the Shares and the present and proposed
business and financial condition of the Company, and has had all such questions
answered to its satisfaction and has been supplied all information requested;
68
(k) Review of Reports. The Purchaser acknowledges that it
has been provided with an opportunity to review: (i) a copy of the Company's
Annual Report on Form 10-K for the year ended June 30, 1998; (ii) a copy of the
Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1998;
(iii) a copy of the Company's Registration Statement on Form S-4, pursuant to
which VDC Corporation Ltd., a Bermuda company, merged with and into the Company;
and (iv) all other recent reports filed by the Company with the Securities and
Exchange Commission under the Securities Exchange Act of 1934 (collectively, the
"Reports").
(l) Understanding the Nature of Securities. The Purchaser
understands and acknowledges that:
(i) The Shares have not been registered under the Act
or any state securities laws and are being issued and sold in reliance upon
certain exemptions contained in the Act;
(ii) The Shares are "restricted securities" as that
term is defined in Rule 144 promulgated under the Act;
(iii) The Shares cannot be sold or transferred without
registration under the Act and applicable state securities laws, or unless
the Company receives an opinion of counsel reasonably acceptable to it (as to
both counsel and the opinion) that such registration is not necessary; and
(iv) The Shares and any certificates issued in
replacement therefor shall bear the following legend, in addition to any
other legend required by law or otherwise:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION, OR THE AVAILABILITY OF EXEMPTION FROM REGISTRATION, UNDER
THE ACT, BASED ON AN OPINION LETTER OF COUNSEL SATISFACTORY TO THE
COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION."
6. _____ Indemnification. The Purchaser shall indemnify and hold
harmless the Company and the Company's officers, directors and employees from
and against any and all loss, damage or liability (including attorneys' fees),
due to, or arising out of, a breach or inaccuracy of any representation or
warranty contained in Section 5.
69
7. Understanding of Investment Risks. Any investment in the
Securities should not be made by a Purchaser who cannot afford the loss of his
entire Purchase Price. THE PURCHASER ACKNOWLEDGES THAT THE SECURITIES OFFERED
HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION, OR ANY STATE SECURITIES COMMISSIONS, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ADEQUACY
OR ACCURACY OF THIS SECURITIES PURCHASE AGREEMENT OR ANY EXHIBIT HERETO. PRIOR
TO MAKING AN INVESTMENT IN THE SECURITIES, THE PURCHASER HAS FULLY CONSIDERED,
AMONG OTHER THINGS, THE FINANCIAL AND OTHER INFORMATION SET FORTH IN THE REPORTS
AS WELL AS THE RISK FACTORS ATTACHED HERETO AS EXHIBIT "A" AND ACKNOWLEDGES THAT
SUCH INFORMATION HAS BEEN CONSIDERED PRIOR TO MAKING THIS INVESTMENT DECISION.
8. Registration Rights. The Company agrees that within sixty (60)
days of the Closing, it will use its reasonable best efforts to prepare and file
with the Securities and Exchange Commission, and use its reasonable best efforts
to have declared effective thereafter, a Registration Statement on Form S-1 or
other equivalent form pursuant to which the Company shall register the public
resale of the Shares. The Company shall have the right to include within such
Registration Statement any other securities on behalf of the Company or security
holders. The expenses of such registration shall be borne by the Company.
Notwithstanding the foregoing, the Company may: (A) delay filing
the Registration Statement and may withhold efforts to cause the Registration
Statement to become effective, if the Company determines in good faith that such
registration rights might (i) interfere with or affect the negotiation or
completion of any transaction that is being contemplated by the Company (whether
or not a final decision has been made to undertake such transaction) at the time
the right to delay is exercised, or (ii) involve initial or continuing
disclosure obligations that might not be in the best interest of the Company's
stockholders, and (B) not include the Shares in a Registration Statement
covering an underwritten offering to the extent that the inclusion of the Shares
would, in the opinion of the managing underwriter of such an offering, adversely
affect such an offering or the market for the Company's securities. In the event
that the Shares are not included in the Registration Statement in accordance
with the provisions of clause (B) above, the Company agrees to register the
Shares promptly after the completion of the underwritten offering described in
clause (B) as may be permitted by the managing underwriter of such an offering.
If, after the Registration Statement becomes effective, the Company advises the
holders of registered Shares that the Company considers it appropriate for the
Registration Statement to be amended, the holders of such Shares shall suspend
any further sales of their registered Shares until the Company advises them that
the Registration Statement has been amended.
Each holder of Shares whose shares are registered pursuant to the
Registration Statement set forth herein shall indemnify and hold harmless the
Company, each of its directors and each of its officers from and against any and
all claims, damages or liabilities, joint or several, to which they or any of
them may become subject, including all legal and other expenses, arising out of
or in connection with any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, in any preliminary or
amended preliminary prospectus or in the prospectus (or the Registration
Statement or prospectus as from time to time amended or supplemented) or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading in the circumstances in which they were made,
but only insofar as any such statement or omission was made in reliance upon and
in conformity with information furnished in writing to the Company in connection
therewith by such holder expressly for use therein.
70
In connection with the registration rights, the Company shall have no
obligation: (i) to assist or cooperate in the offering or disposition of such
Shares; (ii) to indemnify or hold harmless the holders of the securities being
registered; (iii) to obtain a commitment from an underwriter relative to the
sale of such Shares; or (iv) to include such Shares within an underwritten
offering of the Company.
9. Representations and Warranties of the Company. The Company
hereby represents and warrants to Purchaser as follows:
(a) Organization and Standing of the Company. The Company is
a duly organized and validly existing corporation in good standing under the
laws of the State of Delaware with adequate power and authority to conduct the
business in which it is now engaged and has the corporate power and authority to
enter into this Agreement, and is duly qualified and licensed to do business as
a foreign corporation in such other jurisdictions as is necessary to enable it
to carry on its business, except where failure to do so would not have a
material adverse effect on its business;
(b) Corporate Power and Authority. The execution and
delivery of this Agreement and the transactions contemplated hereby have been
duly authorized by the Board of Directors of the Company. No other corporate act
or proceeding on the part of the Company is necessary to authorize this
Agreement or the consummation of the transactions contemplated hereby. When duly
executed and delivered by the parties hereto, this Agreement will constitute a
valid and legally binding obligation of the Company enforceable against it in
accordance with its terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium, reorganization or other similar laws and
legal and equitable principles limiting or affecting the rights of creditors
generally; and/or (ii) general principles of equity, regardless of whether
considered in a proceeding in equity or at law;
(c) Noncontravention. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not,
to the best of the Company's knowledge and belief, (i) permit the termination or
acceleration of the maturity of any material indebtedness or material obligation
of the Company; (ii) permit the termination of any material note, mortgage,
indenture, license, agreement, contract, or other instrument to which the
Company is a party or by which it is bound or the Certificate of Incorporation
or Bylaws of the Company; (iii) except as expressly provided in this Agreement
and except for state "blue sky" approvals that may be required and those
consents and waivers which already have been obtained by the Company, require
the consent, approval, waiver or authorization from or registration or filing
with any party, including but not limited to any party to a material agreement
to which the Company is a party or by which it is bound, or any regulatory or
governmental agency, body or entity except where failure to obtain such consent,
approval, waiver or authorization would not have a material adverse effect on
the Company's business; (iv) result in the creation or imposition of any lien,
claim or encumbrance of any kind or nature on any material properties or assets
of the Company; or (v) violate in any material aspect any statue, law, rule,
regulation or ordinance, or any judgment, decree, order, regulation or rule of
any court, tribunal, administrative or governmental agency, body or entity to
which the Company or its properties is subject except where such violation would
not have a material adverse effect on the Company's business.
71
10. IMPORTANT CONSIDERATIONS: SUITABILITY STANDARDS - WHO SHOULD INVEST.
INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK AND IS
SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL FINANCIAL RESOURCES WHO HAVE NO NEED
FOR LIQUIDITY IN THEIR INVESTMENT.
A substantial number of state securities commissions have
established investor suitability standards for the marketing within their
respective jurisdictions of restricted securities. Some have also established
minimum dollar levels for purchases in their states. The reasons for these
standards appear to be, among others, the relative lack of liquidity of
securities of such programs as compared with other securities investments.
Investment in the Shares involves a high degree of risk and is suitable only for
persons of substantial financial means who have no need for liquidity in their
investments.
The Company has adopted as a general investor suitability
standard the requirement that each Subscriber for Shares represents in writing
that the Subscriber: (a) is acquiring the Shares for investment and not with a
view to resale or distribution; (b) can bear the economic risk of losing its
entire investment; (c) its overall commitment to investments which are not
readily marketable is not disproportionate to its net worth, and an investment
in the Shares will not cause such overall commitment to become excessive; (d)
has adequate means of providing for its current needs and personal contingencies
and has no need for liquidity in this investment in the Shares; (e) has
evaluated all the risks of investment in the Company; and (f) has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of investing in the Company or is relying on its own
purchaser representative in making an investment decision.
In addition, all of the Subscribers for Shares must be: (1)
extremely sophisticated investors with substantial net worth and experience in
making investments of this nature; and (2) "accredited investors," as defined in
Rule 501 of Regulation D under the Act, by meeting any of the following
conditions:
(i) he or she has an individual income in excess of $200,000
in each of the two most recent years or joint income with his or her spouse in
excess of $300,000 in each of those years, and he or she reasonably expects an
income in excess of the aforesaid levels in the current year, or
(ii) he or she has an individual net worth, or a joint net worth
with his or her spouse, at the time of his or her purchase, in excess of
$1,000,000 (net worth for these purposes includes homes, home furnishings and
automobiles), or
(iii) he or she otherwise satisfies the Company that he or she is
an accredited investor, as defined in Rule 501 under the Act.
Other categories of investors included within the definition of
accredited investor include the following: certain institutional investors,
including certain banks, whether acting in their individual or fiduciary
capacities; certain insurance companies; federally registered investment
companies; business development companies (as defined under the Investment
Company Act of 1940); Small Business Investment Companies licensed by the Small
Business Administration; certain employee benefit plans; private business
development companies (as defined in the Investment Advisers Act of 1940); tax
exempt organizations (as defined in Section 501(c)(3) of the Internal Revenue
Code) with total assets in excess of $5,000,000; entities in which all the
equity owners are accredited investors; and certain affiliates of the Company.
72
A partnership Subscriber, which satisfies the requirements set
forth in clauses (a) through (f) above shall satisfy the suitability standards
if it is an accredited investor by reason of clause (iii) above, or if all of
its partners are accredited investors. A corporate subscriber, which satisfies
the requirements set forth in clauses (a) through (f) above shall satisfy the
investor suitability standards if it is an accredited investor by reason of
clause (iii) above, or if all of its shareholders are accredited investors.
Corporate subscribers must have net worth of at least three (3) times the amount
of their investment in the Shares.
The suitability standards referred to above represent minimum
suitability requirements for prospective purchasers and the satisfaction of such
standards by a prospective purchaser does not necessarily mean that the Shares
are a suitable investment for such purchaser. The Company may, in circumstances
it deems appropriate, modify such requirements. The Company may also reject
subscriptions for whatever reasons, in its sole discretion, it deems
appropriate.
Securities Purchase Agreements may not necessarily be accepted in
the order in which received. Purchasers who are residents of certain states may
be required to meet certain additional suitability standards.
THE ACCEPTANCE OF A SUBSCRIPTION FOR SHARES BY THE COMPANY DOES
NOT CONSTITUTE A DETERMINATION BY THE COMPANY THAT AN INVESTMENT IN THE SHARES
IS SUITABLE FOR A PROSPECTIVE INVESTOR. THE FINAL DETERMINATION OF THE
SUITABILITY OF INVESTMENT IN THE SHARES MUST BE MADE BY THE PROSPECTIVE INVESTOR
AND HIS OR HER ADVISERS.
11. State Law Considerations for Residents of All States.
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON
THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED. THESE SHARES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL
OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
OF THE DESCRIPTION OF BUSINESS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
12. Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by facsimile (with written confirmation of receipt), provided
that a copy is mailed by registered mail, return receipt requested (provided
that facsimile notice shall be deemed received on the next business day if
received after 5:00 p.m. local time), or (c) when received by the addressee, if
sent by a nationally recognized overnight delivery service (receipt requested),
in each case to the appropriate addresses and facsimile numbers set forth below
(or to such other addresses and facsimile numbers as a party may designate by
notice to the other parties):
73
If to the Company:
VDC Communications, Inc.
00 Xxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxxxx X. Xxxxx
Chairman & C.E.O.
Facsimile: (000) 000-0000
with a copy to:
VDC Communications, Inc.
00 Xxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esq.
VDC Corporate Counsel
Facsimile: (000) 000-0000
If to Purchaser:
to the address set forth at the end of this Agreement or to such
other addresses as may be specified in accordance herewith from time to time.
13. Survival of Representations and Warranties. Representations and
warranties contained herein shall survive the execution and delivery of this
Agreement.
14. Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and permitted assigns of the parties hereto,
provided that this Agreement and the interests herein may not be assigned by
either party without the express written consent of the other party.
15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the state of Delaware without regard to
the principles of conflict of laws.
16. Arbitration. All controversies which may arise between the
parties including, but not limited to, those arising out of or related to this
Agreement shall be determined by binding arbitration applying the laws of the
State of Delaware. Any arbitration between the parties shall be conducted at the
Company's offices in Greenwich, Connecticut, or at such other location
designated by the Company, before the American Arbitration Association (the
"AAA"). If the Parties are unable to agree on a single arbitrator with fifteen
(15) days of a demand for arbitration being filed with the AAA by one of the
parties, each party shall select an arbitrator and the two (2) arbitrators shall
mutually select a third arbitrator, the three of whom shall serve as an
arbitration panel. The decision of the arbitrator(s) shall be final and binding
upon the Parties and shall not be required to include written findings of law
and fact, and judgment may be obtained thereon by either party in a court of
competent jurisdiction. Each party shall bear the cost of preparing and
presenting its own case. The cost of the arbitration, including the fees and
expenses of the arbitrator(s), shall be shared equally by the parties hereto
unless the award otherwise provides. Nothing in this section will prevent either
party from resorting to judicial proceedings if interim injunctive relief under
the laws of the State of Delaware from a court is necessary to prevent serious
and irreparable injury to one of the parties, and the parties hereto agree that
the state courts in Stamford, Connecticut and the United States District Court
in the District of Connecticut in Bridgeport, Connecticut shall have exclusive
subject matter and in personam jurisdiction over the parties for purposes of
obtaining interim injunctive relief.
74
17. Sections and Other Headings. The section and other headings
contained in this Agreement are for the convenience of reference only, and do
not constitute part of this Agreement or otherwise affect any of the provisions
hereof.
18. Pronouns. Whenever the context of this Agreement may require,
any pronoun will include the corresponding masculine, feminine and neuter form,
and the singular form of nouns and pronouns will include the plural.
19. Counterpart Signatures. This Agreement may be signed in
counterparts and all counterparts together shall become effective only when the
counterpart(s) have been executed and delivered by and on behalf of the Company
and the Purchaser.
20. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
21. Entire Agreement; Amendments. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Purchaser
make any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
22. Construction. This Agreement and any related instruments will
not be construed more strictly against one party then against the other by
virtue of the fact that drafts may have been prepared by counsel for one of the
parties, it being recognized that this Agreement and any related instruments are
the product of negotiations between the parties and that both parties have
contributed to the final preparation of this Agreement and all related
instruments.
23. Agreement Read and Understood. Both parties hereto acknowledge
that they have had an opportunity to consult with an attorney, and such other
experts or consultants as they deem necessary or prudent, regarding this
Agreement and that they, or their designated agents, have read and understand
this Agreement.
24. United States Dollars. All dollar amounts stated herein refer
to and are payable solely in United States Dollars.
75
IN WITNESS WHEREOF, intending to be legally bound, the parties hereto
have caused this Agreement to be signed.
Purchaser:
Shares/$
Number and dollar amount ____________________________________
of Shares purchased - Name (Signature)
Purchase Price
Address/Residence of Purchaser:
------------------------------------
------------------------------------
------------------------------------
Social Security No.:
-----------------------
Accredited Investor Certification
(Place initials on the appropriate line(s))
____ (i) I am a natural person who had individual income of more
than $200,000 in each of the most recent two years or joint
income with my spouse in excess of $300,000 in each of the most
recent two years and reasonably expect to reach that same income
level for the current year ("income", for purposes hereof, should
be computed as follows: individual adjusted gross income, as
reported (or to be reported) on a federal income tax return,
increased by (1) any deduction of long-term capital gains under
Section 1202 of the Internal Revenue Code of 1986 (the "Code"),
(2) any deduction for depletion under Section 611 et seq. of the
Code, (3) any exclusion for interest under Section 103 of the
Code and (4) any losses of a partnership as reported on Schedule
E of Form 1040);
_____ (ii) I am a natural person whose individual net worth
(i.e., total assets in excess of total liabilities), or joint net
worth with my spouse, will at the time of purchase of the Shares
be in excess of $1,000,000;
_____ (iii) The Purchaser is an investor satisfying the
requirements of Section 501(a)(1), (2) or (3) of Regulation D
promulgated under the Securities Act, which includes but is not
limited to, a self-directed employee benefit plan where
investment decisions are made solely by persons who are
"accredited investors" as otherwise defined in Regulation D;
_____ (iv) The Purchaser is a "qualified institutional buyer" as
that term is defined in Rule 144A of the Securities Act;
76
_____ (v) The Purchaser is a trust, which trust has total assets
in excess of $5,000,000, which is not formed for the specific
purpose of acquiring the Shares offered hereby and whose purchase
is directed by a sophisticated person as described in Rule
506(b)(ii) of Regulation D and who has such knowledge and
experience in financial and business matters that he is capable
of evaluating the risks and merits of an investment in the
Shares;
_____ (vi) I am a director or executive officer of the Company;
or
_____ (vii) The Purchaser is an entity (other than a trust) in
which all of the equity owners meet the requirements of at least
one of the above subparagraphs.
Agreed and Accepted by
VDC COMMUNICATIONS, INC.
By: __________________________
Xxxxxxxxx X. Xxxxx
Chairman & C.E.O.
Dated: _______________________
77
EXHIBIT "A"
RISK FACTORS
An investment in Company Common Stock and Warrants to purchase Company Common
Stock involves a high degree of risk. Purchasers of such securities should
carefully review the following risk factors.
This following Risk Factors contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Although
forward-looking statements are based on assumptions made, and information
believed, by management to be reasonable, no assurance can be given that such
statements will prove to be correct. Such statements are subject to certain
risks, uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated, projected
or expected. Some, but not all, of such risks and uncertainties are described in
the risk factors set forth below.
1. WE ARE A DEVELOPMENT STAGE COMPANY. We have only recently commenced our
present operations, and therefore, have only a limited operating history
upon which you can evaluate our business. We have strategically placed
telecommunications equipment in cities that we believe will enable us to
efficiently transport telecommunications services. Now we are building our
customer base as rapidly as we can in order to achieve greater revenues and
market penetration. We will also add additional telecommunications
equipment in other areas of the world. We have not yet determined with
certainty where those areas will be.
2. WE ARE LOSING MONEY. We have not yet experienced a profitable quarter
and may not ever achieve profitability. By virtue of the early stage of our
development, we have yet to build sufficient volume of telecommunications
voice and facsimile traffic to reach profitability. Our current expenses
are greater than our revenues. This will probably continue until we reach a
greater level of maturity and it is possible that our revenues may never
exceed our expenses. If operating losses continue for longer than the
short-term, then our continued operation will be in jeopardy. However, we
believe that what we have developed over the past year is valuable and has
the potential to generate revenues greater than expenses.
3. NUMEROUS CONTINGENCIES COULD HAVE A MATERIAL ADVERSE EFFECT ON US.
Because we are a development stage company, and because of the nature of
the industry in which we operate, there are numerous contingencies over
which we have little or no control, any one of which could have a material
adverse effect on us. The contingencies include, but are not limited to,
the addition or loss of major customers, whether through competition,
merger, consolidation or otherwise; the loss of economically beneficial
routing options for the termination of our telecommunications traffic;
financial difficulties of major customers; pricing pressure resulting from
increased competition; and technical difficulties with or failures of
portions of our network that could impact our ability to provide service to
or bill our customers.
4. OUR ABILITY TO IMPLEMENT OUR PLAN SUCCESSFULLY IS DEPENDENT ON A FEW KEY
PEOPLE. We are particularly dependent upon Xxxxxxxxx X. Xxxxx, Chairman,
Chief Executive Officer, Chief Financial Officer, Secretary and Director of
the Company. Xx. Xxxxx is also a significant beneficial shareholder of the
Company. The Company has an employment agreement with Xx. Xxxxx. We believe
the combination of his employment agreement and equity interest keeps Xx.
Xxxxx highly motivated to remain with the Company.
78
5. THE INTERNATIONAL TELECOMMUNICATIONS MARKET IS RISKY. The international
nature of the our operations involves certain risks, such as changes in
U.S. and foreign government regulations and telecommunications standards,
dependence on foreign partners, tariffs, taxes and other trade barriers,
the potential for nationalization and economic downturns and political
instability in foreign countries. At the current time, we are particularly
dependent on Central and North America. In addition, our business could be
adversely affected by a reversal in the current trend toward the
deregulation of the telecommunications industry. We will be increasingly
subject to these risks to the extent that we proceed with the planned
expansion of international operations.
6. OVERNMENT INVOLVEMENT IN INDUSTRY COULD HAVE AN ADVERSE EFFECT. We are
subject to various U.S. and foreign laws, regulations, agency actions and
court decisions. Our U.S. international telecommunications service
offerings are subject to regulation by the Federal Communications
Commission (the "FCC"). The FCC requires international carriers to obtain
certificates of public convenience and necessity prior to acquiring
international facilities by purchase or lease, or providing international
service to the public. Prior FCC approval is also generally required to
transfer control of a certificated carrier. We must file reports and
contracts with the FCC and must pay regulatory and other fees, which are
subject to change. We are also subject to the FCC policies and rules
discussed below. The FCC could determine, by its own actions or in response
to a third party's filing, that certain of our services, termination
arrangements, agreements with foreign carriers, transit or refile
arrangements or reports did not comply with FCC policies and rules. If this
occurred, the FCC could order us to terminate arrangements, fine us or
revoke our authorizations. Any of these actions could have a material
adverse effect on our business, operating results and financial condition.
7. POTENTIAL FOR TECHNICAL FAILURE. Our services are dependent on our own
and other companies' ability to successfully integrate technologies and
equipment. In connecting with other companies' equipment we take the risk
of not being able to provide service due to their error. In addition, there
is the risk that our equipment may malfunction or that we could make an
error which negatively affects our customers' service. We are also
dependent on the protection of our hardware and other equipment from damage
from natural disasters such as fires, floods, hurricanes and earthquakes,
other catastrophic events such as civil unrest, terrorism and war and other
sources of power loss and telecommunications failures. We have taken a
number of steps to prevent our service from being affected by natural
disasters, fire and the like. We have built redundant systems for power
supply to our equipment. Even though, there can be no assurance that any
such systems will prevent the switches from becoming disabled in the event
of an earthquake, power outage or otherwise. The failure of our network, or
a significant decrease in telephone traffic resulting from effects of a
natural or man-made disaster, could have a material adverse effect on our
relationship with our customers and our business, operating results and
financial condition.
79
8. THE LONG DISTANCE AND INTERNATIONAL LONG DISTANCE TELEPHONE INDUSTRY IS
HIGHLY COMPETITIVE. We are a small company in an industry with many
companies that have more experience and greater resources than us.
International telecommunications providers compete mainly on the basis of
price, but also customer service, transmission quality, breadth of service
offerings and value-added services. Our operating history is probably not
long enough for you to make a judgment about our ability to compete in this
industry.
9. TECHNOLOGICAL ADVANCEMENT COULD RENDER OUR INFRASTRUCTURE OBSOLETE. The
international telecommunications industry is highly competitive and subject
to the introduction of new services facilitated by advances in technology.
We expect that the future will bring technological change. It is possible
that these changes could result in more advanced telecommunications
equipment that could render our current equipment obsolete. If this were to
happen, we would most likely have to invest significant capital into this
new technology.
10. WE HAVE LIMITED CAPITAL. Being a small company in a capital intensive
industry, our position of limited capital is a significant risk to our
future viability. We are currently seeking financing alternatives that
would put us in a better position financially. There is no guarantee that
we will be able to do this. We may sell additional shares of our stock in
order to provide the capital needed for our operations.
11. WE HAVE A SIGNIFICANT INVESTMENT IN A PRIVATE COMPANY THAT WE DO NOT
CONTROL. We have a non-controlling investment in a private company,
Metromedia China Corporation ("MCC"). Since this company is private and in
development, it is difficult to place a value on its worth. We currently
value our ownership interest based on extrapolating the value placed on MCC
by its majority shareholder, Metromedia International Group. As of March
31, 1999, that equaled $4.34 million. Our total assets were $13.7 million.
The value of our interest in MCC may change in the future. The value of MCC
may be unfavorably influenced by negative operating results, the Chinese
telecommunications market and/or other factors. Furthermore, changes in
governmental policy towards foreign investment in telecommunications in
China could also adversely effect the value of our investment. We have
decreased the value placed on this asset, in large part, due to the
uncertainty of the future of foreign participation in the Chinese
telecommunications market. Even so, there is still the possibility that
this asset will be worth less in the future than we believe is a fair value
currently.
12. OUR STOCK IS HIGHLY VOLATILE. Our stock price fluctuates significantly.
We believe that this will most likely continue. Historically, the market
prices for securities of emerging companies in the telecommunications
industry have been highly volatile. Future announcements concerning us or
our competitors, including results of operations, technological
innovations, government regulations, proprietary rights or significant
litigation, may have a significant impact on the market price of our stock.
13. ADDITIONAL SHARES WILL BE AVAILABLE FOR SALE IN THE PUBLIC MARKET. We
registered stock in connection with the domestication merger of VDC
Corporation Ltd. ("VDC Bermuda") with and into us (the "Domestication
Merger"). The effect of the Domestication Merger was that
members/shareholders of VDC Bermuda became shareholders of the Company
which then became the publicly traded company. In addition, we issued
shares in connection with the MCC investment and other additional business
related matters. These stock issuances and future registration statements
will have the effect of significantly increasing the number of shares
eligible for public trading. Sales of substantial amounts of the stock in
the public market could have an adverse effect on the price of the stock
and may make it more difficult for us to sell stock in the future. Although
it is impossible to predict market influences and prospective values for
securities, it is possible that the substantial increase in the number of
shares available for sale, in and of itself, could have a depressive effect
on the price of our stock.
80
14. WE HAVE NOT PAID ANY DIVIDENDS TO OUR STOCKHOLDERS AND DO NOT EXPECT TO
ANY TIME IN THE NEAR FUTURE. Instead, we plan to retain earnings for
investment back into the company.
15. THE YEAR 2000 PROBLEM COULD HAVE A MATERIAL ADVERSE EFFECT ON US. The
Year 2000 issue is a matter of worldwide concern for carriers and affects
many aspects of telecommunications technology, including the computer
systems and software applications that are essential for operations. A
significant portion of the devices that we use to provide our basic
services use date-sensitive processes which affect functions such as
service activation, service assurance and billing processes.
We are currently evaluating the Year 2000 readiness of our computer
systems, software applications and telecommunications equipment. We are
sending Year 2000 compliance inquiries to certain third parties (i.e.
vendors, customers, outside contractors) with whom we have a relationship.
These inquiries include, among other things, requests to provide
documentation regarding the third party's Year 2000 programs, and questions
regarding how the third party specifically examined the Year 2000 effect on
their equipment and operations and what remedial actions will be taken with
regard to these problems.
Since we are a new company, our key systems have just recently been
implemented. Most of the vendors of such systems have represented to us
that the systems are compliant with the Year 2000 issues without any
modification. We will, however, continue to require confirmation of Year
2000 compliance in our future requests for proposals from equipment and
software vendors. The failure of the Company's computer systems and
software applications to accommodate the Year 2000, could have a material
adverse effect on our business, financial condition and results from
operations.
Further, if the software and equipment of those on whose services we depend
are not Year 2000 functional, it could have a material adverse effect on
our operations. While most major domestic telecommunications companies have
announced that they expect all of their network and support systems to be
Year 2000 functional by the middle of 1999, other domestic and
international carriers may not be Year 2000 functional. We intend to
continue to monitor the performance of our accounting, information and
other systems and software applications to identify and resolve any Year
2000 issues. Currently, through our discovery process, we have identified
an estimated $84,000 of expenditures associated with updating systems to be
Year 2000 compliant. However, we expect we will find additional expenses
pending the finalization of our Year 2000 investigation.
We believe that the most reasonably likely worst case scenario resulting
from the century change could be the inability to efficiently send voice
and facsimile calls at current rates to desired locations. We do not know
how long this might last. This would have a material adverse effect on our
results from operations.
81
16. CERTAIN ANTI-TAKEOVER CONSIDERATIONS. Certain provisions of our
Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), and Bylaws, as amended (the "Bylaws"), and the General
Corporation Law of the State of Delaware (the "GCL") could deter a change
in our management or render more difficult an attempt to obtain control of
us. For example, we are subject to the provisions of the GCL that prohibit
a public Delaware corporation from engaging in a broad range of business
combinations with a person who, together with affiliates and associates,
owns 15% or more of the corporation's outstanding voting shares (an
"interested stockholder") for three years after the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. The Certificate of Incorporation includes undesignated
Preferred Stock, which may enable the Board to discourage an attempt to
obtain control of us by means of a tender offer, proxy contest, merger or
otherwise. In addition, the Certificate of Incorporation provides for a
classified Board of Directors such that approximately only one-third of the
members of the Board will be elected at each annual meeting of
stockholders. Classified boards may have the effect of delaying, deferring
or discouraging changes in control of us. Further, certain other provisions
of the Certificate of Incorporation and Bylaws and of the GCL could delay
or make more difficult a merger, tender offer or proxy contest involving
us. Additionally, certain federal regulations require prior approval of
certain transfers of control of telecommunications companies, which could
also have the effect of delaying, deferring or preventing a change in
control.
82
