EXHIBIT 10.1
SECTOR COMMUNICATIONS, INC.
LONG-TERM DEBT RETIREMENT AND FUNDING AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of this 28th day of February,
1997, among Sector Communications, Inc., a Nevada corporation , formerly known
as Aurtex, Inc. (the "Company"), Peacetime Communications, Ltd., a British
Virgin Islands corporation ("Peacetime"), Emerald Capital, Inc., a British
Virgin Islands corporation ("Emerald") and Wallington Investment, Ltd. a British
Virgin Island corporation ("Wallington").
WHEREAS, Global Communications Group, Inc. aka Global Communications, Ltd.
a British Virgin Islands corporation ("Global BVI"), and Global Communications
Group, Inc., a Texas corporation ("Global Texas") on one side and Peacetime
entered into a Financing Agreement dated January 31, 1994 and a Line of Credit
Promissory Note Secured by a Pledge Agreement on February 1, 1994 and Amended on
August 15, 1994 collectively the "Global Financing Debt");
WHEREAS, the Company entered into a Stock Purchase and Exchange Agreement
with the Shareholders of Global Communications Group, Inc. on April 19, 1996
whereby the Company agreed to enter into an agreement to pay the outstanding
principal and accrued interest of the Global Financing Debt owed by Global Texas
to Peacetime;
WHEREAS, a Debt Repayment Agreement among the Company, Global Texas and
Peacetime was entered into on June 14, 1996 (the "Debt Repayment Agreement")
whereby the Company agreed to assume and pay in full the Global Financing Debt
within three years from the closing date of the Stock Purchase and Exchange
Agreement;
WHEREAS, the Company, through its wholly owned subsidiary, Sector
Communications AG, a Swiss Corporation, entered into a Definitive Agreement
dated August 12, 1996 among HIS Technologies AG ("Histech"), a Swiss
Corporation, and certain of HIS shareholders (the "Selling Shareholders")
whereby Sector acquired a 25.55% equity interest in Histech from Histech and an
additional 54.45% equity interest from Histech from the Selling Shareholders;
WHEREAS, the Company entered into a Definitive Investment and Option to
Merge Agreement with DBE Software, Inc., a Delaware corporation, ("DBE") in May
1996, which was amended by the subsequent Letter of January 16, 1997 whereby the
Company received 145,745 shares representing a 14.594% equity stake in DBE;
WHEREAS, on January 21, 1997 the Company signed a Promissory Note payable
to Emerald Capital, Inc. in the amount of $350,000;
WHEREAS, on January 21, 1997 the Company signed a Promissory Note payable
to Wallington Investment, Ltd. in the amount of $350,000;
WHEREAS, the Company desires to retire its debt obligations to Peacetime,
Emerald and Wallington and obtain additional financing in the amount of
$1,000,000 through the sale of 25% of the Company's equity holdings in HIS, all
of the Company's interests in DBE, and 1,000,000 shares of the Company's common
stock;
NOW THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto do hereby agree as follows:
I. PURCHASE OF SECURITIES
Subject to the terms and conditions hereinafter set forth, the Parties
hereby agree as follows:
1.1 Peacetime agrees:
(i) to purchase 24,170 shares of common stock of HIS Technologies
AG, a Swiss Corporation, ("Histech") which represents 18% of the
total outstanding shares of Histech;
(ii) to immediately make available one million dollars
($1,000,000)(the "Additional Funding") to the Company to draw
upon on an as needed basis for a period of six months in return
for the assignment to Peacetime of the Company's entire claim to
145,745 shares, representing 14.594% of the outstanding common
stock, of DBE Software, a Delaware corporation, ("DBE") pursuant
to the escrow agreement executed simultaneously herewith and
incorporated herein. The value of the Company's entire claim to
the DBE shares is $1,100,000.
1.2 Emerald agrees to purchase 500,000 shares of Sector Communications,
Inc. common stock and 1,193 shares of HIS common stock, which represents 1% of
the total number of outstanding shares of HIS.
1.3 Wallington agrees to purchase 500,000 shares of Sector
Communications, Inc. common stock and 1,193 shares of HIS common stock, which
represents 1% of the total number of outstanding shares of HIS.
II. CANCELLATION OF DEBT
2.1 In consideration for the purchase of the securities as stated in
Section 1.1 (i) herein, Peacetime agrees to cancel and discharge all of the
outstanding debt that was assumed by the Company pursuant to the Debt Repayment
Agreement. Said debt, including all outstanding principal and accrued interest,
totals $4,780,000.00.
2.2 In consideration for the purchase of the securities as stated in
Section 1.2 herein, Emerald agrees to cancel and discharge all of the
outstanding debt that was assumed by the Company pursuant to the Promissory Note
dated January 21, 1997 in the principal amount of $350,000.00.
2.3 In consideration for the purchase of the securities as stated in
Section 1.2 herein, Wallington agrees to cancel and discharge all of the
outstanding debt that was assumed by the Company pursuant to the Promissory Note
dated January 21, 1997 in the principal amount of $350,000.00.
2.4 Peacetime, Emerald and Wallington each agree to waive any and all
notice requirements that said debt instruments contain. Peacetime, Emerald and
Wallington discharge all obligations assumed by the Company under the Debt
Repayment Agreement and subsequent Promissory Notes and shall deliver to the
Company any and all canceled documents representing said debt to the Company
marked "paid in full" and "fully extinguished as a matter of law" within
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three (3) business days of the date of this Agreement.
III. REPRESENTATIONS BY THE PURCHASERS
3.1 The Purchasers recognize that the purchase of Securities involves a
high degree of risk and is suitable only for persons of adequate financial means
who have no need for liquidity in this investment in that (i) the Purchasers may
not be able to liquidate the Purchasers' investment in the event of an
emergency; (ii) transferability is extremely limited; and (iii) in the event of
a disposition, the Purchasers could sustain a complete loss of the Purchasers'
entire investment.
3.2 The Purchasers represent that (i) the Purchasers are competent to
understand and do understand the nature of the investment; and (ii) the
Purchasers are able to bear the economic risk of this investment.
3.3 The Purchasers hereby represent that the Purchasers have been
furnished by the Company during the course of this transaction with all
information regarding Sector, Histech and DBE which the Purchasers had requested
or desired to know; that all other documents which could be reasonably provided
have been made available for the Purchasers' inspection and review; and that the
Purchasers have been afforded the opportunity to ask questions of and receive
answers from duly authorized officers or other representatives of Sector,
Histech and DBE concerning the terms and conditions of the Agreement, and any
additional information that the Purchasers had requested.
3.4 The Purchasers hereby acknowledge that this sale of Securities has
not been reviewed by the Securities and Exchange Commission (the "SEC") because
of the Company's representations that this is intended to be a private sale
pursuant to Section 4(1) of the 1933 Act. The Purchasers represent that the
Securities are being purchased for the Purchasers' own account, for investment
purposes and not for distribution or resale to others. The Purchasers agree that
the Purchasers will not sell, transfer or otherwise dispose of any of the
Securities unless they are registered under the 1933 Act or unless an exemption
from such registration is available.
3.5 The Purchasers understand that the Securities have not been
registered under the 1933 Act by reason of a claimed exemption under the
provisions of the 1933 Act which depends, in part, upon the Purchasers'
investment intention. In this connection, the Purchasers understand that it is
the position of the SEC that the statutory basis for such exemption would not be
present if the Purchasers' representation merely meant that the Purchasers'
present intention was to hold the Securities for a short period, for a deferred
sale, for a market rise, assuming that a market develops and is maintained, or
for any other fixed period. The Purchasers realize that, in the view of the SEC,
a purchase now with an intent to resell would represent a purchase with an
intent inconsistent with the Purchasers' representation to the Company, and the
SEC might regard such a sale, transfer or other disposition as a deferred sale
for which no exemption from registration is available.
3.6 The Purchasers agree that Sector, Histech and DBE may, if they
desire, permit the transfer of the Securities by the Purchasers out of the
Purchasers' name only when the Purchasers' request for transfer is accompanied
by an opinion of counsel reasonably satisfactory to Sector, Histech and DBE that
the proposed sale, transfer or disposition does not result in a violation of the
1933 Act or any applicable state "Blue Sky" laws (collectively, "Securities
Laws"). The Purchasers agree to hold the Sector, Histech and DBE and their
respective directors, officers and controlling persons and their respective
heirs, representatives, successors and assigns harmless
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and to indemnify them against all liabilities, costs and expenses incurred by
them as a result of any sale, transfer or other disposition of the Securities by
the undersigned Purchasers in violation of any Securities Laws or any
misrepresentation herein.
3.7 The Purchasers consent to the placement of a legend on the
certificates evidencing the Securities stating that they have not been
registered under the 1933 Act and setting forth or referring to the restrictions
on the sale, transfer or other disposition thereof. The Purchasers are aware
that the Company will make a notation in its appropriate records with respect to
the restrictions on the sale, transfer or other disposition of the Securities.
3.8 The Purchasers acknowledge and agree that the Company is relying on
the Purchasers' representations contained in this Agreement and the related
subscription documents in determining whether to sell the Securities to
Purchasers. The Purchasers hereby give the Company authority to call the
Purchasers' bank or place of employment or otherwise review the financial
standing of the Purchasers.
3.9 The Purchasers represent and warrant that all representations made by
Purchasers hereunder are true and correct in all material respects as of the
date of execution hereof, and Purchasers further agree that until the closing on
the Securities subscribed for the Purchasers shall inform the Company
immediately of any changes in any of the representations provided by the
Purchasers hereunder.
3.10 The Purchasers represent and warrant that the Purchasers shall
undertake to complete all filings required by the Securities Exchange Act of
1934, as amended, and any other laws on a timely basis.
IV. REPRESENTATIONS BY THE COMPANY
4.1 The Company represents and warrants to the Purchasers as follows:
(a) The Company is a corporation duly organized, existing and in
good standing under the laws of the State of Nevada and has the corporate power
to conduct its business.
(b) The execution, delivery and performance of this Agreement by the
Company has been duly approved by the Board of Directors of the Company.
(c) The Company is the sole record and beneficial owner of the
number of Securities of DBE, and the Company's wholly owned subsidiary, Sector
AG is the sole record and beneficial owner of the number of Securities of
Histech as set forth above, free and clear of all voting trust and other
arrangements that require or permit any of the Securities owned by the Company
or Sector AG to be voted by or encumbered by or at the discretion of anyone
other than the Company.
(d) Upon consummation of the transactions contemplated hereby, the
Company will have transferred to Peacetime, such Securities, free and clear of
all encumbrances other than such restrictions on resale as have been created as
a result of this Agreement.
(e) Neither the execution nor delivery by the Company of this
Agreement or any of the other documents contemplated hereby, the performance by
the Company of the terms hereof, nor the consummation of the transactions
contemplated hereby (i) requires any consent,
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notice, or approval of any third party; (ii) or has resulted or will result in a
breach of the terms or conditions of, a default under, a conflict with, or the
acceleration of any right to cause the acceleration of any performance or any
increase in any payment required by, or the termination, suspension,
modification, impairment, or forfeiture of any rights or privileges of the
Company under any material agreement or obligation.
(f) The Securities have been duly authorized, and when delivered,
and paid for, will be validly issued, fully paid and non-assessable.
V. NOTICES TO PURCHASERS
5.1 THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE 1933 ACT, OR THE
SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND SUCH LAWS. THE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE
SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE
FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE
ACCURACY OR ADEQUACY OF THE OFFERING DOCUMENTS. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
5.2 THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE 1933
ACT, AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. PURCHASER SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
VI. MISCELLANEOUS
6.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, addressed to Sector Communications Xxxxx 000, 0000
Xxxxxxxxxxx Xx, XxXxxx, XX 00000 Attention: Xx. Xxxxxxxx X. Xxxxxxxxx, CEO, and
to the Purchasers at the Purchasers' address indicated on the last page of this
Agreement. Notices shall be deemed to have been given on the date of mailing,
except notices of change of address, which shall be deemed to have been given
when received.
6.2 This Agreement shall not be changed, modified, or amended except by a
writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
6.3 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and to their respective heirs, legal representatives, successors
and assigns. This Agreement sets forth the entire agreement and understanding
between the parties as to the subject matter thereof and merges and supersedes
all prior discussions, agreements and understandings of any and every nature
among them.
6.4 This Agreement and its validity, construction and performance shall
be governed in all respects by the laws of the Commonwealth of Virginia.
6.5 This Agreement may be executed by facsimile signature and in one or
more
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counterparts, each of which shall be deemed original and all of which, when
taken together, shall constitute one instrument. Upon the execution and delivery
of this Agreement by the Purchasers, this Agreement shall become a binding
obligation of the Purchasers with respect to the purchase of Securities as
herein provided.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
Sector Communications, Inc.
By: /s/ Xxxxxxxx X. Xxxxxxxxx
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Xxxxxxxx X. Xxxxxxxxx - CEO
Peacetime Communications Ltd.
/s/ Xxxxxxx Xxxxx
By: Xxxxxxx Xxxxx
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Title: President
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Emerald Capital, Inc.
/s/ Xxxxxxx Herik
By: Xxxxxxx Herik
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Title: President
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Wallington Investment, Ltd.
/s/ Xxxxxxx Xxxxx
By: Xxxxxxx Xxxxx
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Title: Authorized Agent
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