DATED February 8, 1995
BLUE XXXXX ENTERPRISES LIMITED
AND
STARTEC, INC.
AND
11
RAM XXXXXXX, solely for the purposes
of Clause 3
_________________
SUBSCRIPTION AGREEMENT
_________________
DEACONS
in association with
XXXXXX & XXXXX
AND
SLY & WEIGALL
Solicitors & Notaries
Xxxxxxxxx Xxxxx
0xx-0xx Xxxxxx
Xxxx Xxxx
INDEX
Page
Parties 1
Recitals 1
Clauses
1. Interpretation 1
2. Subscription 4
3. The Company's and Mukunda's obligations 4
4. Expenses 6
5. Warranties and undertakings 6
6. General 6
7. Notices 8
8. Governing Law and Jurisdiction 8
Schedule 1 11
Schedule 2 14
12
THIS SUBSCRIPTION AGREEMENT is made on February 8, 1995.
PARTIES:
(1) BLUE XXXXX ENTERPRISES LIMITED, a company incorporated in
the British Virgin Islands whose address for service and
facsimile number are 000 Xxxxx Xxxxxx, Xxxxxxx Xxxx,
Xxxxxxx, Xxxx Xxxx and (000) 000-0000 respectively
("Subscriber");
(2) STARTEC, INC., a company incorporated in the State of
Maryland whose address for service and facsimile number are
00000 Xxxxx Xxxx Xxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx 00000
(U.S.A.) c/o Ram Xxxxxxx, President and 000-000-0000
respectively ("Company"); and
(3) RAM XXXXXXX, solely for the purposes of Clause 3, whose
address for service and facsimile number are c/o Startec,
Inc., 00000 Xxxxx Xxxx Xxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx
00000 (U.S.A.) and 000-000-0000 respectively ("Xxxxxxx").
RECITALS :
(A) The Company has an authorized share capital of $125,000
divided into ten million Shares of voting common stock
having a par value of $.01 per share (each a "Voting Share")
and twenty-five thousand Shares of non-voting common stock
having a par value of $1.00 per share (each a "Non-voting
Share" and together with Voting Shares, "Shares"). As at the
date hereof the Company has in issue 4,573,700 Shares, and
Xxxxxxx is the majority shareholder owning 3,562,500 shares
of the Company.
(B) The Subscriber wishes to subscribe for, and Xxxxxxx and the
Company wishes to issue to it, 807,124 new Voting Shares
("Subscription Shares") comprising 15% of the enlarged share
capital of the Company on the terms and conditions herein.
(C) The Board of Directors of the Company have, by resolution
passed on the date hereof, approved the issue of the
Subscription Shares on the terms of this Subscription
Agreement.
AGREEMENT
1. INTERPRETATION
1.1 In this Agreement including the Recitals the following
expressions have the following meaning except where the context
otherwise requires:
"Adverse Consequences"
13
all actions, suits, proceedings, hearings, investigations,
charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, amounts paid in settlement,
Liabilities, obligations, Taxes, liens, losses, expenses,
and fees, including court costs and reasonable attorneys'
fees and expenses;
"Business Day"
a day, excluding Saturdays, on which banks in Hong Kong and
Annapolis, Maryland are open for business;
"Directors"
the Board of Directors of the Company;
"Knowledge"
actual knowledge after reasonable investigation;
"Liability"
any liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued
or unaccrued, or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Net Asset Value"
the net asset value of Startec as shown in its most recent
unaudited quarterly consolidated account for the period
immediately preceding any of the events or transactions,
that may arise throughout the terms of this Agreement, as
contemplated in Section 3 hereof;
"Non-voting Shares"
the non-voting Shares in the Company winch are more
particularly described in Recital (A);
"Shares"
Voting Shares and Non-voting Shares, and such other Shares
in the Company as are authorized, from time to time;
"Shareholders"
the shareholders in the Company, from time to time;
"Subscription"
the subscription by the Subscriber of the Subscription
Shares as provided in this
"Subscription Shares"
the 807,124 new Voting Shares the subject of the
Subscription;
"Subscription Price"
$750,000, being the purchase price of the Subscription
Shares;
14
"$" and "cents"
United States dollars and cents.
"Tax"
any federal, state, local, or foreign income (except for
such taxes due from Subscriber to any taxing authority),
gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, franchise,
profits, withholding, social security (or similar),
unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative
or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not; and
"Voting Shares"
the voting Shares in the Company which are more particularly
described in Recital (A).
1.2 In this Agreement:
(a) reference to Recitals, Clauses, and the Schedules are to the
clauses and subclauses of, and the recitals, and the
schedules to this Agreement;
(b) references to any statutory provision or any rule or
regulation (whether or not having the force of law) shall be
construed as references to the same as amended, varied,
modified, consolidated or re-enacted from time to time and
to any subordinate legislation made under such statutory
provision;
(c) words importing the singular include the plural and vice
versa, words importing one gender include every gender, and
references to persons include bodies corporate and
unincorporated; and
(d) headings are for ease of reference only and shall not affect
the interpretation of this Agreement.
1.3 The Recitals and the Schedules form part of this Agreement
and shall have the same force and effect as if expressly set out
in the body of this Agreement and any reference to this Agreement
shall include the Recitals and the Schedules.
2. SUBSCRIPTION
2.1 The Subscriber agrees to subscribe, and the Company agrees
to issue, each of the Subscription Shares at the
Subscription Price subject to and in accordance with the
terms and conditions set out herein and to rank pari passu
15
with all other Shares then in issue other than in respect of
any dividend declared prior to the date of such issue of the
Subscription Shares.
2.2 This Agreement constitutes the Subscriber's application for
the Subscription Shares subject to the Articles and By-Laws
of the Company.
2.3 Completion of the Subscription shall take place at the
office of Subscriber's counsel, Xxxxxx & Xxxxx, 0000 X
Xxxxxx, X.X., Xxxxx 000, Xxxxxxxxxx, X.X. 00000 on February
8, 1995.
2.4 At Completion:
(a) the Company shall deliver to the Subscriber (or as it may
direct) evidence of the due allotment and issue to the
Subscriber of fully paid, non-assessable Subscription Shares
and of the due registration of the Subscriber as holder of
the Subscription Shares, and a share certificate, for the
Subscription Shares; and
(b) contemporaneously with the allotment, issue and delivery
provided for in (a) above the Subscriber shall deliver to
the Company, by electronic transfer of funds to the
Company's designated account, the Subscription Price of all
Subscription Shares.
3. THE COMPANY'S AND MUKUNDA'S OBLIGATIONS
3.1 The Company undertakes and agrees that for so long as the
Subscriber holds such number of Shares as shall comprise less
than 40% or more than 10% of the then issued share capital of the
Company it will not issue any additional Shares unless either of
the following conditions is satisfied:
(a) if at any time the Company proposes to issue additional
Shares pursuant to an option granted or shares set aside for
issuance to employees prior to the Closing Date, the Company
must also issue to the Subscriber, at 0.01 (one cent) per
share, such additional Shares as will ensure that the
Subscriber's percentage interest in the Company's
outstanding Shares prior to such issuance shall equal to the
Subscriber's percentage interest in the Company's
outstanding Shares after such issuance (taking into account
all Shares issued to the option holder);
(b) if at any time the Company proposes to issue additional
Shares for any other reason, it shall first offer such
Shares to the Subscriber by notice in writing of such
proposed issuance (the "Notice"). The Notice shall set forth
the number of Shares proposed to be offered, and the
16
proposed price per share. The Subscriber shall have the
right to purchase some or all of the Shares at the offer
price, provided that written notice of such acceptance is
provided to the Company specifying the number of Shares to
be acquired within 15 days of receipt of the Notice. The
Company shall have the right to issue any Shares not
purchased by the Subscriber, at the price per share set
forth in the Notice (or higher), for six months following
the end of the 15 day period. Thereafter, any such unsold
Shares shall again be subject to this Section 3.1. Any
Shares that the Subscriber agrees to purchase hereunder
shall be issued to Subscriber within ten (10) days of
Subscriber's acceptance, upon receipt of payment in full in
U.S. Dollars.
3.2 Subject to Clause 3.3, and except for transfers by descent
and distribution, which transfer shall be permitted only if the
transferee agrees in writing to be bound by this Agreement,
Xxxxxxx shall not sell, transfer or assign any Shares now or
hereafter owned by him unless:
(a) Xxxxxxx first offers to sell such Shares to the
Subscriber, in the manner prescribed in relation to the
Company's issue of additional Shares in Section 3.1,
except that the Subscriber must agree to purchase all,
and not less than all, of the offered Shares; and
(b) if the number of Shares described in the Notice amounts
to greater than 45 percent of the Shares then
outstanding, and the Subscriber has declined to
purchase the offered Shares, then Xxxxxxx may not sell
such Shares to any third party unless such third party
also offers to purchase all of the Subscriber's Shares
at the same price per Share as it has offered Xxxxxxx
for the Shares described in the Notice; the Subscriber
shall accept or reject any such offer within 15 days of
receipt of the offer by delivering notice in writing to
the offeror and to Xxxxxxx for all, and not less than
all, of the Subscriber's Shares. If the Subscriber does
not send notice accepting the offer within such 15 day
period, Xxxxxxx shall be permitted to sell to the
offeror all of the Shares described in the Notice;
3.3 Section 3.2 shall not apply if the Subscriber owns 40
percent or more or less than 10 percent of the then-issued Shares
of the Company.
3.4 In the event that the Subscriber or Xxxxxxx considers, in
good faith, that there is a disagreement between the Subscriber
and the Company on which no satisfactory resolution of material
points can be found, Xxxxxxx will offer to sell the Subscriber
all of his Shares, for a price per Share to be specified by
17
Xxxxxxx; the Subscriber must accept any such offer to purchase
Shares within 15 days of the offer being received by it; if the
Subscriber declines to take up Mukunda's offer, the Subscriber
will be deemed to offer for sale and Xxxxxxx will purchase all of
the Shares then held by the Subscriber for the same price per
Share as that at which Xxxxxxx originally offered to sell his
Shares to the Subscriber.
3.5 Except as is provided in this Clause 3, nothing in this
Agreement will oblige the Subscriber to take up any Shares
offered to it by the Company or any of the Shareholders, or
hinder it from taking up an offer of Shares in part only,
depending on the price and terms of such offer. Any decision by
the Subscriber to take up the whole or any part of an offer of
Shares will not relieve Xxxxxxx of his undertakings under this
Clause 3.
3.6 The provisions of this Clause 3 shall expire upon the
earlier of (i) a bona fide public offering of the Company's
Shares pursuant to an effective registration under the Securities
Act of 1933, as amended, or (ii) the sale or other transfer of 50
percent or more of the stock ownership of Subscriber (whether
directly or through a change of control of Subscriber).
3.7 Xxxxxxx will exercise his voting rights as a shareholder
and, subject to Maryland law, as a director and such influence as
he has over the Directors to procure the Company's performance of
its obligations under this Agreement.
3.8 Xxxxxxx will be jointly and severally liable with the
Company for any loss Blue Xxxxx xxx sustain as a result of the
Company's failure to perform its obligations under this Section 3
of this Agreement.
4. EXPENSES
4.1 Save as expressly provided in this Agreement, all costs,
charges and expenses of or incidental to this Agreement shall be
paid by the party incurring those expenses.
5. WARRANTIES AND UNDERTAKINGS
5.1 The Company represents, warrants and undertakes to the
Subscriber, subject to the provisions of this Clause 5, in the
terms of Schedule 1 and the Subscriber represents, warrants and
undertakes to the Company, subject to the provisions of this
Clause 5, in the terms of Schedule 2.
6. GENERAL
6.1 This Agreement contains the entire agreement between the
Parties relating to the Subscription and supersedes any previous
18
agreements between the Parties in relation to the issue and
allotment of the Subscription Shares.
6.2 Any variation to this Agreement shall be binding only if
recorded in a document signed by the Parties.
6.3 Time shall be of the essence of this Agreement both as
regard the time and periods specifically referred to and any time
or period which may (by agreement in writing) be substituted
therefor, but, except as provided herein, no failure by any Party
to exercise, and no delay on its part in exercising, any right
hereunder will operate as a waiver thereof, nor shall any single
or partial exercise of any right under this Agreement preclude
any other or further exercise of it or the exercise of any right
or prejudice or affect any right against any person under the
same liability whether joint, several or otherwise.
6.4 The rights and remedies provided in this Agreement are
cumulative and not exclusive of any rights or remedies provided
by law and shall not be affected by completion of the
Subscription.
6.5 None of the Parties may assign or transfer any of their
rights or obligations under this Agreement save that the
Subscriber may assign the warranties given in Clause 5.1.
6.6 If this Agreement is rescinded or terminated in accordance
with its terms, all rights and obligations of the Parties shall
cease to have effect immediately upon such rescission or
termination except that rescission or termination shall not
affect the then accrued rights, obligations and liabilities of
the Parties and the continued application of Clause 6.
6.7 All of the representations and warranties of the Parties
contained in this Agreement shall survive completion of
Subscription and continue in full force and effect forever
thereafter (subject to any applicable statutes of limitations).
6.8 This Agreement shall not confer any rights or remedies upon
any person other than the Parties and their respective successors
and/or assigns.
6.9 Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any
other jurisdiction.
6.10 In the event the Company or Xxxxxxx breaches (or in the
event any third party alleges facts that, if true, would mean the
Company and/or Xxxxxxx have breached) any of their
19
representations, warranties, and covenants contained herein, then
the Company agrees to indemnify the Subscriber, from and against
the entirety of any Adverse Consequences the Subscriber may
suffer through and after the date of the claim for
indemnification resulting from, arising out of, relating to, in
the nature of, or caused by the breach (or the alleged breach);
provided that, the Subscriber provides reasonable notice of such
breach to the Company, and further provides the Company 30 days
in which to cure such breach. Subscriber may not settle any
matter arising from a third party claim without the consent of
the Company, which cannot be unreasonably withheld or delayed.
7. NOTICES
7.1 All notices delivered hereunder shall be in writing in
English and shall be communicated to the address and/or the
facsimile number of the Party specified at the beginning of this
Agreement, or to such other address and/or facsimile number as
the relevant Party shall have notified to the other Parties in
accordance with the terms hereof.
7.2 Any such notice shall be served either personally or by
sending it by overnight mail, courier or facsimile. In the case
of notice served personally during normal business hours, it
shall be deemed to have been given when delivered, if sent by
overnight mail or courier, 7 days after posting or, if sent by
facsimile, upon receipt in full.
8. GOVERNING LAW AND JURISDICTION
8.1 This Agreement shall be governed and construed in accordance
with the laws of the State of Maryland.
8.2 Any dispute, controversy or claim arising out of or relating
to this Agreement, or the breach, termination or invalidity
thereof, shall be settled in accordance with the Rules of
Arbitration of the International Chamber of Commerce as at
present in force. The arbitration shall be held at London in
England and heard by a single arbitrator appointed in accordance
with the said Rules.
IN WITNESS WHEREOF the parties hereto have caused this
Agreement to be duly executed.
SIGNED by
for and on behalf of )
BLUE XXXXX ENTERPRISES LIMITED )
in the presence of: )
)
)
20
Witness' signature:
Witness' name:
Witness' occupation:
Witness' address:
SIGNED by Ram Xxxxxxx, President
for and on behalf of )
STARTEC, INC )
in the presence of: )
)
Witness' signature: Ram Xxxxxxx
Witness' name: Xxxxxxx Xxx
Witness' occupation: Timana
Witness' address: 00000 Xxxxx Xxxx Xx.
Xxxxxxxx, XX 00000
SIGNED BY RAM MAKUNDA
RAM MAKUNDA solely for the purposes of
Clause 3
the present of:
Witness' signature:
Witness' name Xxxxxxx Xxx
Witness' occupation: Timana
Witness' address: 00000 Xxxxx Xxxx Xx.
Xxxxxxxx, XX 00000
SCHEDULE 1
Warranties by the Company
References in this Schedule to:
the "Accounts" are to the audited consolidated accounts for the
Group for the period ended December 31, 1993 (including without
limitation, the balance sheets, profit and loss accounts and
notes contained therein);
21
the "Interim Accounts" are to the consolidated unaudited accounts
of the Group for the six months ended December 31, 1994; and
"the Group" are to the Company and its subsidiaries.]
1. Recitals (A) and (C) are true and correct.
2. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Maryland.
3. The Company has the full right, power, and authority to
enter into and perform its obligations under this Agreement
and to allot and issue the Subscription Shares without any
further sanction or consent of its Shareholders and all
necessary authorizations, approvals, consents and licenses
relating to the same have been unconditionally obtained and
are in full force and effect, and this Agreement is a legal,
valid and binding agreement of the Company, enforceable in
accordance with its terms, except as may be limited by the
affect of bankruptcy, insolvency, reorganization or similar
laws affecting the rights of creditors generally from time
to time in effect.
4. The allotment and issue of the Subscription Shares pursuant
to, and compliance by the Company with, this Agreement will
not result in the breach of and will comply with all
relevant provisions of all applicable laws, rules and
regulations, and all agreements and obligations to which any
member of the Group is a party or by which any of them or
any of their respective property is bound.
5. The Company has no liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which
Subscriber could become liable or obligated.
6. The Subscription Shares shall be allotted and issued free
from all liens, charges, encumbrances, and all third party
rights, interests or claims of any nature whatsoever and
together with all rights now and hereafter attaching
thereto, including the right to any dividend or distribution
declared, made or paid on or after the date of this
Agreement (but excluding, for the avoidance of doubt, any
dividend declared prior to the date hereof).
7. Once allotted, the Subscription Shares shall comprise 15% of
the entire issued share capital of the Company.
8. Except for this Agreement and the options specified on
Exhibit A to this Schedule 1, there are no agreements or
arrangements in force which provide for the present or
22
future issue, allotment or transfer of, or grant to any
person the right (whether conditional or otherwise) to call
for the issue, allotment or transfer of any share or loan
capital of the Company, or any subsidiary of the Company
(including any option or right of preemption or conversion).
9. The Accounts and Interim Accounts:
(a) have been prepared in accordance with all applicable
laws and regulations and on bases consistent with
previous audited accounts and interim accounts of the
Group in respect of the immediately preceding financial
year and in accordance with generally accepted
accountancy principles, standards and practices in the
United States as at the date of such accounts;
(b) give a true and fair view of the state of affairs of
the Group as at, and its results for the financial
period ended, on December 31, 1993 and December 31,
1994 respectively and correctly set out the issued
share capital, assets, liabilities and reserves of the
Group as at such dates; and
(c) make full provision for all material actual liabilities
and contain proper provision for or notes of all
material contingent and prospective liabilities,
including in each case liabilities for any form of
taxation and capital commitments.
10. There has been no material adverse change in the financial
position or prospects of the Group since January 31, 1994 and
each member of the Group has since such date carried on business
in the ordinary and usual course and has not entered into any
contracts or commitments of an unusual or onerous nature.
11. No member of the Group is or has within the previous 12
months been, nor is or has been any person for whom it may be
vicariously liable, engaged in any litigation, arbitration or
similar proceedings (whether of a criminal or civil nature) which
may have a significant effect on the financial position of the
Group, and there are no such proceedings pending or to the
knowledge of the Company threatened and no matters or
circumstances which are likely to give rise to such proceedings
which may have a significant effect on the financial position of
the Group.
12. No event or circumstance has occurred which constitutes or
could constitute a material infringement or default, or could
result in the acceleration of any material obligation, under any
agreement, undertaking, instrument or arrangement to which any
member of the Group is a party or by which any such person or any
of its properties, revenues and assets are bound, and no member
23
of the Group has received notice to repay under any agreement
relating to any material borrowing or indebtedness in the nature
of borrowing on the part of any member of the Group which is
repayable on demand, or to perform any guarantee or indemnity
given by any of them in relation to the material indebtedness or
obligations of any person, and to the knowledge of the Company
there are no circumstances which might lead to any of the
aforesaid events, or circumstances arising or occurring.
13. No member of the Group has taken any action, nor to the
knowledge of the Company have any other steps been taken, or any
legal proceedings been started or threatened, against any member
of the Group by any person, for its winding up or dissolution, or
for it to enter into any arrangement or composition for the
benefit of creditors, or for the appointment of a receiver,
trustee, administrator or similar officer of any of them, or any
of their respective properties, revenues or assets, and each
member of the Group can pay its debts as and when they fall due
for payment.
14. The Company and its subsidiaries have duly complied with
their obligations to account to all relevant taxation authorities
for all amounts for which they are or may become accountable in
respect of any form of taxation (including overseas taxation,
stamp duty, levies, import duties, charges, fees, deductions and
withholdings whatsoever charged or imposed by any statutory or
governmental authority), or reserves have been set aside
therefor.
Initials
RM
SCHEDULE 2
Warranties by the Subscriber
1. The Subscriber is a corporation, duly organized, validly
existing, and in good standing under the laws of the British
Virgin Islands and has no present intention of domesticating
in any other jurisdiction.
2. The Subscriber has the full right, power and authority to
enter into and perform its obligations under this Agreement
without any sanction or consent of its members and all
necessary authorizations, approvals, consent and licenses
relating to the same have been unconditionally obtained and
are in full force and effect, and this Agreement is a legal,
valid and binding agreement of the Subscriber, enforceable
in accordance with its terms.
24
3. The applications for, allotment and issue of the
Subscription Shares pursuant to, and compliance by the
Subscriber with, this Agreement will not result in the
breach of and will comply with the laws of the British
Virgin Islands and all other applicable laws, rules and
regulations, and all agreements and obligations to which the
Subscriber is a party or by which it or its property is
bound.
4. Subscriber confirms that it understands, among other things,
that: (i) the Shares are speculative investments which
involve a risk of loss of the entire investment therein;
(ii) there are substantial restrictions on transferability
of the Shares; and (iii) presently there is no public market
for the Shares and Startec makes no assurance that such a
public market will exist.
6. Subscriber can bear the economic risk of loss of its entire
investment in the Shares.
7. Subscriber understands that the Shares have not been
registered or qualified under any federal, state or other
securities laws and are being offered and sold under
exemption(s) from registration provided under provisions of
federal securities laws and regulations thereunder; and
Subscriber further understands and agrees that the Shares
may not be sold or transferred by it without compliance with
the registration or qualification provisions of applicable
federal and state securities laws or applicable exemptions
therefrom.
8. The Shares hereby subscribed for are being acquired by
Subscriber solely for its own account and not for the
account of another person, for investment purposes only, and
are not being purchased with a view to, or in connection
with, any resale, distribution, subdivision, or
fractionalization, either in whole or in part.
9. Subscriber understands that neither the Securities and
Exchange Commission nor any state or other securities
commission has passed on, or has made any recommendation or
endorsement of, the Shares or the offering thereof.
Initials
__________
EXHIBIT A
SHARES SET ASIDE BY STARTEC
The company has set aside 270,000 shares as options for issuance
25
to employees, consultants, advisors, etc. The terms, conditions
and price of issuance will be determined by the Board of
Directors.
The company has issued an option to Xx. Xxxxx Xxxxxx to convert a
loan to the company. The option gives him a right to purchase
75,000 shares at $1.50 per share. The option expires on October
18, 1995.
