FUNDING AGREEMENT
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THIS FUNDING AGREEMENT (the "Agreement"), is dated as of June
14, 2000 by and between Voice & Data Communications (Latin America), Inc., a
Delaware corporation (the "Sub"), and VDC COMMUNICATIONS, INC., a Delaware
corporation (the "Company").
W I T N E S S E T H:
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WHEREAS, pursuant to a Merger Agreement by and among the Company, the
Sub, Rare Telephony, Inc., a Nevada corporation (f/k/a Washoe Technology
Corporation) ("Rare Telephony"), and the holders of all of the outstanding
shares of common stock of Rare Telephony dated May 25, 2000, as amended, (the
"Merger Agreement"), Rare Telephony merged with and into the Sub (the "Merger")
for shares of common stock of the Company;
WHEREAS, the terms of the Merger Agreement provided for the execution
of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. Establishment of Accounts.
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(a) The Sub shall open up a bank account (or, in its sole
discretion, a money market fund account) the purpose of which shall be to hold
certain funds which shall be used exclusively to fund the business operations of
Sub and Cash Back Rebates XX.xxx, Inc., a Delaware corporation (the "Cash Back
Account"). The sole signatory on the Cash Back Account shall be Xxxxxxx X.
Xxxxx.
(b) The Sub shall open up a bank account to hold certain funds the
sole purpose of which is to fund the development of a robust web site for Free
dot Xxxxxxx.xxx, Inc. (the "Free Account"). The sole signatory on the Free
Account shall be Xxxxxxx X. Xxxxx.
2. Funding of Accounts.
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(a) The Company has agreed to provide up to ONE MILLION DOLLARS
AND NO/100 ($1,000,000.00) (the "Commitment") for the operations of Sub (and its
predecessor Rare Telephony) and Cash Back Rebates XX.xxx, Inc., a Delaware
corporation ("Cash Back"). As of the date of this Agreement, in partial
satisfaction of the Commitment, the Company has loaned to Rare Telephony and
Cash Back, SIX HUNDRED THOUSAND DOLLARS AND NO/100 ($600,000.00) (the "Prior
Loans"). Within five (5) business days of the "Effective Time" of the Merger (as
defined in the Merger Agreement), the Company shall deposit in the Cash Back
Account, FOUR HUNDRED THOUSAND DOLLARS AND NO/100 ($400,000.00) in full
satisfaction of the Commitment.
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(b) The Company has committed to providing ONE HUNDRED THOUSAND
DOLLARS AND NO/100 ($100,000.00) (the "Free Commitment") to the Sub for the
development of a robust web site for Free. Within five (5) business days of the
Effective Time of the Merger, the Company shall deposit ONE HUNDRED THOUSAND
DOLLARS AND NO/100 ($100,000.00) into the Free Account in full satisfaction of
the Free Commitment.
(c) The "Effective Time" of the Merger for purposes of this
Agreement shall be the Effective Time indicated on an Effective Time Certificate
executed by the Company at the closing of the Merger.
(d) Notwithstanding the foregoing, prior to the Company having
any obligation to deposit any funds in either the Cash Back Account or the Free
Account, Sub shall execute a promissory note in the form attached hereto as
Exhibit "A" for the full amount to be funded in both the Cash Back Account and
the Free Account. The note shall have a maturity date of four (4) years after
the Effective Time and shall provide for an interest rate of 8% per annum.
Additionally, Sub, Cash Back and Free shall execute any other documents
reasonably requested by the Company in connection with the funding of the Cash
Back Account and the Free Account. Without limiting the generality of the
foregoing, it is understood and agreed by the parties hereto, that the documents
referenced in the preceding sentence may include guarantees and that the
Company, at any time in the Company's sole discretion, may require that the Sub,
Cash Back, and/or Free (in the Company's sole discretion) execute a Security
Agreement and a UCC-1 covering all items that the Company views as necessary or
reasonable to protect the indebtedness of Sub to the Company.
3. Disbursement of the Funds in the Cash Back Account.
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(a) The funds in the Cash Back Account shall be used to pay for
the normal and customary business expenses of Cash Back including but not
limited to the expenses listed on Exhibit "B" hereto and incorporated herein by
reference.
(b) The funds in the Cash Back Account shall not be used to pay
for extraordinary and non-customary business or other expenses including, but
not limited to, payments to employees outside the terms of an employee's
employment agreement, loans or advances to employees, and other similar
expenditures. Without limiting the generality of the foregoing, it is agreed
that the funds in the Cash Back Account shall not be used for any of the
following purposes (unless otherwise approved in advance in writing by the Chief
Executive Officer of the Company):
(1) To make any loan or advance to, or purchase, acquire
or own any stock, bonds, notes or securities of, or any partnership interest
(whether general or limited) in, or any other investment or interest in, or make
any capital contribution to, any other person or entity;
(2) To make any dividend or other distribution of any
nature on account of or in respect of the shares of capital stock of Sub, Cash
Back or Fee (collectively referred to as the "Rare Companies") or on account of
the purchase, redemption, retirement or acquisition of said shares of capital
stock (or warrants, options or rights therefor);
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(3) To lease or purchase any new equipment in excess of
$1,000 for use in the operations of any of the Rare Companies;
(4) To make a payment in settlement of any litigation,
investigation, arbitration, or dispute to which any one of the Rare Companies is
a party or of which any one of the Rare Companies (or its officers, directors,
or employees) is aware as of the execution of this Agreement;
(5) To make any payment for any obligation, lien,
liability, or indebtedness that is represented as not existing (whether by
affirmative representation, omission of reference, or otherwise) in the Merger
Agreement; or
(6) To pay more than 1/2 of the legal fees charged by
Fuhro & Xxxxxx or Xxxxxx X. Xxxxxx, III, in connection with or arising out of
the Merger or the Merger Agreement or the Exhibits or Schedules thereto.
(c) Attached hereto as Exhibit "C" and incorporated herein by
reference is an anticipated schedule of disbursements from the Cash Back
Account.
(d) The funds in the Cash Back Account shall be disbursed in
accordance with the terms set forth in this Section 3. The funds in the Cash
Back Account shall not be remitted to the Company unless, upon written direction
from the Sub's Chief Executive Officer, said funds are remitted to the Company
in repayment of either the Commitment or the Fee Commitment.
4. Disbursements of the Funds in the Free Account.
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The funds in the Free Account shall be used exclusively for the purpose
of developing a robust web site for Free. The funds in the Free Account shall
not be remitted to the Company unless, upon written direction from the Sub's
Chief Executive Officer, said funds are remitted to the Company in repayment of
either the Commitment or the Fee Commitment.
5. Prior Loans.
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On the Effective Time, the Sub shall execute a promissory note in the
form attached hereto as Exhibit "A" for the full aggregate principal amount of
the Prior Loans (the "New Note"). The New Note shall provide for an interest
rate of 8% per annum and a maturity date of four years after the Effective Time.
Upon execution of the New Note, the original documents documenting the Prior
Loans shall be returned to Sub and all personal guarantees given in connection
with the Prior Loans shall be canceled.
6. Miscellaneous.
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(a) The failure of either party at any time or times to require
performance of any provision hereof shall in no manner affect the right at a
later time to enforce the same. To be effective, any waiver must be contained in
a written instrument signed by the party waiving compliance by the other party
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of the term or covenant as specified. The waiver by either party of the breach
of any term or covenant contained herein, whether by conduct or otherwise, in
any one or more instances, shall not be deemed to be, or construed as, a further
or continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement.
(b) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, successors and assigns.
(c) Sub shall not assign this Agreement to any other corporation,
firm or person without the express and written prior consent of the Company. The
Company may assign this Agreement without Sub's consent.
(d) This Agreement may not be amended except by an instrument
in writing, executed by both parties hereto.
(e) If any term or provision of this Agreement is determined to
be illegal, unenforceable, or invalid in whole or in part for any reason by an
arbitrator or court of competent jurisdiction, such illegal, unenforceable, or
invalid provisions or part(s) thereof shall be stricken from this Agreement and
such provision shall not affect the legality, enforceability, or validity of the
remainder of this section, then the stricken provision shall be replaced, to the
extent possible, with a legal, enforceable, and valid provision that is as
similar in tenor to the stricken provision as is legally possible.
(f) This Agreement may be executed in multiple counterparts each
of which shall be an original but all of which together shall constitute one and
the same instrument. This Agreement may also be executed and delivered by
exchange of facsimile copies showing the signatures of the parties, and those
signatures need not be affixed to the same copy. The facsimile copies showing
the signatures of the parties will constitute originally signed copies of the
Agreement requiring no further execution.
(g) The recitals to this Agreement constitute part of this
Agreement.
(h) All notices, requests, instructions, consents and other
communications to be given pursuant to this Agreement shall be in writing and
shall be deemed received (i) on the same day if delivered in person, by same-day
courier or by telegraph, telex or facsimile transmission (receipt confirmed)
(provided that telegraph, telex or facsimile notice shall be deemed received on
the next business day if received after 5:00 p.m. Eastern Standard Time), (ii)
on the next day if delivered by overnight mail or courier, or (iii) on the date
indicated on the return receipt, or if there is no such receipt, on the third
calendar day (excluding Sundays) if delivered by certified or registered mail,
postage prepaid, to the party for whom intended to the following addresses (or
to such other addresses and facsimile numbers as a party may designate by notice
to the other party):
(1) if to Sub at:
Xxxxxxxxx X. Xxxxx
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Voice & Data Communications (Latin America), Inc.
00 Xxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxx
000 Xxxx Xxxxxx, Xxxxx 000
X.X. Xxx 0000
Xxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
(2) if to the Company at:
Xxxxxxxxx X. Xxxxx
VDC Communications, Inc.
00 Xxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxx, Esq.
VDC Communications, Inc.
00 Xxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
(i) This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Connecticut applicable
to contracts executed and to be performed entirely within said State. All
controversies or claims arising out of or relating to this Agreement shall be
determined by binding arbitration applying the laws of the State of Connecticut.
The arbitration 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 decision of the arbitrator(s) shall be
final and binding upon the parties, and judgment may be obtained thereon in any
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 herein shall preclude a party from
seeking injunctive relief to restrain any breach or threatened breach of the
covenants and agreements set forth in this Agreement or otherwise to obtain
specific performance of any such covenant or agreement, without the necessity of
posting bond or security in connection therewith.
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(j) This Agreement shall 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 is the product of negotiations between the parties and that the
parties have contributed to the final preparation of this Agreement.
(k) Within ten (10) calendar days of receipt of a written request
from the Company, Sub shall provide the Company with a statement (sworn to by
the President or CEO of Sub before a Notary Public and signed by said Notary
Public and said President or CEO) that, as of the date of said statement, Sub
has complied with all material terms of this Agreement and has used the funds in
accordance with Section 3 or Section 4, as the case may be.
(l) Each party acknowledges that (i) it has carefully read this
Agreement, (ii) it has had the assistance of legal counsel of its choosing (and
such other professionals and advisors as it has deemed necessary) in the review
and execution hereof, (iii) the meaning and effect of the various terms and
provision hereof have been fully explained to it by such counsel, (iv) it has
conducted such investigation, review and analysis as it has deemed necessary to
understand the provisions of this Agreement and the transactions contemplated
hereby, and (v) it has executed this Agreement of its own free will.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ATTEST: COMPANY:
/s/ Xxxxx X. Xxxxx VDC COMMUNICATIONS, INC.
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Signature
Xxxxx X. Xxxxx By: /s/ Xxxxxxxxx X. Xxxxx
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Print Name Xxxxxxxxx X. Xxxxx
Chief Executive Officer
ATTEST: SUB:
Voice & Data Communications
/s/ Xxxxxxx X. Xxxxx (Latin America), Inc.
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Signature
Xxxxxxx X. Xxxxx By: /s/ Xxxxxxxxx X. Xxxxx
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Print Name Xxxxxxxxx X. Xxxxx
Chief Executive Officer
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