VDC COMMUNICATIONS, INC.
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SECURITIES PURCHASE AGREEMENT
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SHARES OF COMMON STOCK
AT $2.70 PER SHARE
AND COMMON STOCK
PURCHASE WARRANTS
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MAY 12, 1999
121
CONFIDENTIAL
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is entered into as
of the 12th 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:
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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 and Warrants.
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 $2.70 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 ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇. For
every full block of ten (10) Shares purchased pursuant to this Agreement, the
Purchaser shall be entitled to receive from the Company, and the Company shall
grant to the Purchaser, one (1) Common Stock Purchase Warrant (the "Warrants")
upon substantially the terms set forth in the document attached hereto as
Exhibit "A." The sale of Shares and Warrants evidenced by this Agreement is part
of an overall private placement transaction being undertaken by the Company of a
maximum principal amount of $1,499,998.50. See Section 3 hereafter.
No broker, investment banker or any other person, other than
Paradigm Group LLC ("Paradigm") and Santa Fe Capital Group (NM), Inc. ("Santa
Fe"), 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
and Warrants hereunder. As a consulting fee, for every full block of twenty (20)
Shares purchased by "accredited investors," as that term is defined in Rule 501
of Regulation D of the Securities Act of 1933, as amended (the "Act") introduced
to the Company exclusively by Paradigm ("Paradigm Purchasers"), Paradigm shall
be entitled to receive from the Company, and the Company shall grant to the
Paradigm, one (1) Warrant. The Company shall pay Santa Fe an investment banking
fee (the "Santa Fe Fee") based upon gross proceeds paid to the Company by
Paradigm Purchasers (the "Proceeds"). Specifically, Santa Fe is entitled to:
five percent (5%) of the first $1,000,000 in Proceeds; four percent (4%) of the
second $1,000,000 in Proceeds; three percent (3%) of the third $1,000,000 in
Proceeds; two percent (2%) of the fourth $1,000,000 in proceeds; and one percent
(1%) for all Proceeds in excess of $4,000,000. Twenty percent (20%) of the Santa
Fe Fee shall be paid to Santa Fe in shares of Company Common valued at $2.70 per
share.
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2. Description of the Securities.
(a) Restricted Securities. The Shares, Warrants and shares
of Common Stock issuable upon exercise of the Warrants (the "Warrant Shares")
being offered hereby (collectively, the "Securities") shall be "restricted
securities" as that term is defined under Rule 144 promulgated under 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,
prepared at Purchaser's expense, 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.
(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) Description of Warrants. Each Warrant entitles the
holder to purchase one (1) share of Common Stock at an exercise price of $6.00
per share, exercisable for a three year period from the date of Closing. Prior
to the exercise of the Warrants, holders of the Warrants shall not be entitled
to any right whatsoever, either in law or equity, of a stockholder of the
Company, including without limitation, the right to receive dividends or to vote
or to consent or to receive notice as a stockholder in respect of the meetings
of stockholders or the election of directors of the Company or any other matter.
(e) Restriction Upon Resale. The Subscriber hereby agrees
that the Securities shall be subject to restrictions upon the transfer, sale,
encumbrance or other disposition of the Securities. See "UNDERSTANDING OF
INVESTMENT RISKS" AND "REGISTRATION RIGHTS".
3. Securities Offered in a Private Placement Transaction.
The Securities offered by this Securities Purchase Agreement are
being offered as a non-public offering (the "Offering") pursuant to Section 4(2)
and Regulation D of the Act ("Regulation D") by the Company on a "best efforts"
basis of a maximum principal amount of $1,499,998.50 (the "Maximum Offering") to
be offered to the Paradigm Purchasers. Accordingly, there can be no assurances
as to the number of securities that will be sold in the Offering. The Company
may, in its sole discretion, reject, in whole or part, subscriptions from
Paradigm Purchasers to the extent such subscriptions, when aggregated with other
subscriptions from Paradigm Purchasers exceed the Maximum Offering.
Additionally, the Company may, in its sole discretion, reject any subscription
from any Paradigm Purchaser to the extent funds for such subscription are not
received by the Company on or before 5 p.m. Eastern Standard Time on Wednesday,
May 26, 1999, (the "Outside Payment Date").
123
The Company is concurrently offering up to 700,000 shares of
Common Stock and up to 70,000 three-year warrants to purchase one (1) share of
Common Stock at an exercise price of $6.00 per share in a private placement at a
purchase price of between $2.70 and approximately $4.00 per share of Common
Stock with the right to receive one (1) warrant for every full block of ten (10)
shares of Common Stock (the "Concurrent Offering"). The proceeds of this
Offering and the Concurrent Offering are intended to raise working capital for
the Company.
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 Agreement in its sole discretion if the
Purchaser does not meet the suitability standards established herein.
Additionally, the Company may reject this Agreement, in its sole discretion, if
the Purchase Price is not received by the Company on or before 5 p.m. Eastern
Standard Time on Thursday, May 13, 1999. In the event the Company rejects this
Agreement, the Purchaser's funds will be returned without deduction of any costs
and without interest.
A closing (the "Closing") will occur contemporaneously with the
acceptance of this Agreement by the Company and the Company's receipt of the
Purchase Price. The Company shall deliver to the Purchaser within fifteen
business (15) days after the Outside Payment Date:
(a) A stock certificate representing the number of Shares
purchased, bearing applicable restrictive legends, duly executed by the
appropriate officer(s) and registered on the books of the Company in Purchaser's
name; and
(b) The Warrants in substantially the form set forth at
Exhibit "A" duly executed by the appropriate officer(s) and registered on the
books of the Company in the Purchaser's name.
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 Securities. 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;
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(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 by which the Securities are purchased occurs;
(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
Securities 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 will not attempt to sell,
transfer, assign, pledge or otherwise dispose of all or any portion of the
Securities 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
Securities 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 Securities;
(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 Securities 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. 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 Securities other than as declared herein;
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(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 Securities. 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 Securities 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;
(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 Securities 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 Securities are "restricted securities" as that
term is defined in Rule 144 promulgated under the Act;
(iii) The Securities 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 Securities 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."
126
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.
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 "B" AND ACKNOWLEDGES THAT
SUCH INFORMATION HAS BEEN CONSIDERED PRIOR TO MAKING THIS INVESTMENT DECISION.
8. Registration Rights. The Company has agreed to advise the
Purchaser by written notice at least ten (10) calendar days prior to the filing
of a registration statement under the Act (excluding registration on Forms ▇-▇,
▇-▇ or any successor forms thereto), covering securities of the Company to be
offered and sold to the public generally (whether on behalf of the Company or
selling security holders) and shall, upon the request of the Purchaser given at
least five (5) calendar days prior to the filing of such registration statement,
include in any such registration statement such information as may be required
to permit the public resale of the Shares and Warrant Shares; provided, however,
that in the event the resale of the Shares and Warrant Shares has not been
previously included within a registration statement, the Company shall in any
event file a registration statement under the Act within one year of the
Closing, the purpose of which is to register the resale of the Shares and
Warrant Shares. The registration rights associated with the Shares and Warrants
Shares are described more particularly and are subject in full to the terms of a
Registration Rights Agreement substantially in the form attached hereto as
Exhibit "C."
The Company shall use its best efforts to file, within thirty (30) days
of the Outside Payment Date, a registration statement on Form S-1 on behalf of
certain Company security holders which, if filed, will include the Shares and
Warrant Shares referenced in this Agreement.
The Company's obligation to register the Shares and the Warrant Shares
extends only to the inclusion of the Shares and the Warrant Shares in a
registration statement which covers the public resale thereof. In all events,
the Company shall have no obligation: (i) to assist or cooperate in the offering
or disposition of such Shares or Warrant Shares; (ii) to obtain a commitment
from an underwriter relative to the sale of such Shares or Warrant Shares; or
(iii) to include such Shares or Warrant Shares within an underwritten offering
of the Company. The Company shall assume no responsibility for the manner of
sale, timing of sale, or sales price relating to the resale of the Shares and
Warrant Shares.
9. Representations and Warranties of the Company. The Company
hereby represents and warrants to Purchaser as follows:
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(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.
10. IMPORTANT CONSIDERATIONS: SUITABILITY STANDARDS - WHO SHOULD INVEST.
INVESTMENT IN THE SECURITIES 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 Securities 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.
128
The Company has adopted as a general investor suitability
standard the requirement that each Subscriber for Securities represents in
writing that the Subscriber: (a) is acquiring the Securities 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 Securities 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
Securities; (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 Securities 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.
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 Securities.
129
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
Securities 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 THE SECURITIES BY THE
COMPANY DOES NOT CONSTITUTE A DETERMINATION BY THE COMPANY THAT AN INVESTMENT IN
THE SECURITIES IS SUITABLE FOR A PROSPECTIVE INVESTOR. THE FINAL DETERMINATION
OF THE SUITABILITY OF INVESTMENT IN THE SECURITIES 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 SECURITIES 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):
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If to the Company:
VDC Communications, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman & C.E.O.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
VDC Communications, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
VDC Corporate Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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.
131
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. Signatures in Counterpart and Facsimile. This Agreement may be
executed in multiple counterparts and by facsimile signature, each of which
shall constitute an original, but all of which counterparts taken together shall
constitute one and the same instrument.
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.
132
IN WITNESS WHEREOF, intending to be legally bound, the parties hereto
have caused this Agreement to be signed.
Purchaser: PGP I Investors, LLC
185,185 Shares/$499,999.50
-------------------------- -------------------------------------------
Number and dollar amount By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
of Shares purchased -
Purchase Price Its:Manager
Address/Residence of Purchaser:
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
-------------------------------------------
18,518
------
Warrants ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-------------------------------------------
Employer Identification 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 Securities 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;
133
_____ (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 Securities 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 Securities;
_____ (vi) I am a director or executive officer of the Company; or
__X__ (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: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman & C.E.O.
Dated: May 13, 1999
--------------
134
EXHIBIT "A"
Warrant No.1999-W___
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
REASONABLY SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION.
FORM OF
WARRANT TO PURCHASE COMMON STOCK
OF
VDC COMMUNICATIONS, INC.
Void after 5:00 p.m. Eastern Standard Time on May ___, 2002
This is to verify that, FOR VALUE RECEIVED, the undersigned, or its
registered assigns (hereinafter referred to as the "Holder"), is entitled to
purchase, subject to the terms and conditions hereof, from VDC COMMUNICATIONS,
INC., a Delaware corporation (the "Company"), that number of shares of Common
Stock, par value $.0001 per share of the Company (the "Common Stock") set forth
on the signature page hereto at any time during the period commencing at 9:00
a.m., Eastern Standard Time on May ___, 1999 (the "Commencement Date") and
ending at 5:00 p.m. Eastern Standard Time on May ___, 2002 (the "Termination
Date") at an exercise price of $6.00 per share of Common Stock. The number of
shares of Common Stock purchasable upon exercise of this Warrant (the
"Warrant(s)") and the exercise price per share shall be subject to adjustment
from time to time upon the occurrence of certain events as set forth below.
The shares of Common Stock or any other shares or other units of stock or
other securities or property, or any combination thereof then receivable upon
exercise of this Warrant, as adjusted from time to time, are sometimes referred
to hereinafter as "Exercise Shares". The exercise price per share as from time
to time in effect is referred to hereinafter as the "Exercise Price".
1. Exercise of Warrant: Issuance of Exercise Shares.
(a) Exercise of Warrant. This Warrant may be exercised in whole or
in part at any time or from time to time on or after the Commencement Date and
until and including the Termination Date, upon surrender on any business day to
the Company at its principal office, presently located at the address of the
Company set forth in Section 8 hereof (or such other office of the Company, if
any, as shall theretofore have been designated by the Company by written notice
to the Holder), together with: (i) a completed and executed Notice of Warrant
Exercise in the form set forth in Appendix A hereto and made a part hereof and
(ii) payment of the full Exercise Price for the amount of Exercise Shares set
forth in the Notice of Warrant Exercise, in lawful money of the United States of
America by certified check or cashier's check, made payable to the order of the
Company.
135
In the event that this Warrant shall be duly exercised in part prior to the
Termination Date, the Company shall issue a new Warrant or Warrants of like
tenor evidencing the rights of the Holder thereof to purchase the balance of the
Exercise Shares purchasable under the Warrant so surrendered that shall not have
been purchased.
No adjustments shall be made for any cash dividends on Exercise Shares
issuable upon exercise of the Warrant. The Company shall cancel Warrant
Certificates surrendered upon exercise of Warrants.
(b) Issuance of Exercise Shares: Delivery of Warrant Certificate.
The Company shall, within fifteen (15) business days or as soon thereafter as is
practicable of the exercise of this Warrant, issue in the name of and cause to
be delivered to the Holder (or such other person or persons, if any, as the
Holder shall have designated in the Notice of Warrant Exercise) one or more
certificates representing the Exercise Shares to which the Holder (or such other
person or persons) shall be entitled upon such exercise under the terms hereof.
Such certificate or certificates shall be deemed to have been issued and the
Holder (or such other person or persons so designated) shall be deemed to have
become the record holder of the Exercise Shares as of the date of the due
exercise of this Warrant.
(c) Exercise Shares Fully Paid and Non-assessable. The Company
agrees and covenants that all Exercise Shares issuable upon the due exercise of
the Warrant represented by this Warrant Certificate will, upon issuance in
accordance with the terms hereof, be duly authorized, validly issued, fully paid
and non-assessable and free and clear of all taxes (other than taxes which,
pursuant to Section 2 hereof, the Company shall not be obligated to pay) or
liens, charges, and security interests created by the Company with respect to
the issuance thereof.
(d) Reservation of Exercise Shares. At the time of or before taking
any action which would cause an adjustment pursuant to Section 5 hereof
increasing the number of shares of capital stock constituting the Exercise
Shares, the Company will take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company have remaining, after such
adjustment, a number of shares of such capital stock unissued and unreserved for
other purposes sufficient to permit the exercise of all the then outstanding
Warrants of like tenor immediately after such adjustment; the Company will also
from time to time take action to increase the authorized amount of its capital
stock constituting the Exercise Shares if at any time the number of shares of
capital stock authorized but remaining unissued and unreserved for other
purposes shall be insufficient to permit the exercise of the Warrants then
outstanding. The Company may but shall not be limited to reserve and keep
available, out of the aggregate of its authorized but unissued shares of capital
stock, for the purpose of enabling it to satisfy any obligation to issue
Exercise Shares upon exercise of Warrants, through the Termination Date, the
number of Exercise Shares deliverable upon the full exercise of this Warrant and
all other Warrants of like tenor then outstanding.
(e) Fractional Shares. The Company shall not be required to issue
fractional shares of capital stock upon the exercise of this Warrant or to
deliver Warrant Certificates which evidence fractional shares of capital stock.
In the event that any fraction of an Exercise Share would, except for the
provisions of this subparagraph (e), be issuable upon the exercise of this
Warrant, the Company shall pay to the Holder exercising the Warrant an amount in
cash equal to such fraction multiplied by the current market value of the
Exercise Share. For purposes of this subparagraph (e), the current market value
shall be determined as follows:
136
(i) if the Exercise Shares are traded in the
over-the-counter market and not on any national securities exchange and not in
the NASDAQ Reporting System, the average of the mean between the last bid and
asked prices per share, as reported by the National Quotation Bureau, Inc., or
an equivalent generally accepted reporting service, for the last business day
prior to the date on which this Warrant is exercised, or if not so reported, the
average of the closing bid and asked prices for an Exercise Share as furnished
to the Company by any member of the National Association of Securities Dealers,
Inc., selected by the Company for that purpose; or
(ii) if the Exercise Shares are listed or traded on a national
securities exchange or in the NASDAQ National Market System, the closing price
on the principal national securities exchange on which they are so listed or
traded or in the NASDAQ National Market System, as the case may be, on the last
business day prior to the date of the exercise of this Warrant. The closing
price referred to in this clause (ii) shall be the last reported sales price or,
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices, in either case on the national securities
exchange on which the Exercise Shares are then listed or in the NASDAQ Reporting
System; or
(iii) if no such closing price or closing bid and asked prices
are available, as determined in any reasonable manner as may be prescribed by
the Board of Directors of the Company.
2. Payment of Taxes.
(a) The Company will pay all documentary stamp taxes, if any,
attributable to the initial issuance of Exercise Shares upon the exercise of
this Warrant; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue of any Warrant Certificates or any certificates for Exercise Shares in a
name other than that of the Holder of a Warrant Certificate surrendered upon the
exercise of a Warrant, and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(b) Upon exercise of a Warrant, the Company shall have the right to
require the Holder to remit to the Company an amount sufficient to satisfy
federal, state and local tax withholding requirements prior to the delivery of
any certificate for Exercise Shares issuable pursuant to the exercise of such
Warrant.
(c) A Holder who is obligated to pay the Company an amount required
to be withheld under applicable tax withholding requirements may pay such amount
(i) in cash; (ii) in the discretion of the Company's Chief Executive Officer,
through the delivery to the Company of previously-owned shares of common stock
of the Company having an aggregate current market value equal to the tax
obligation, provided that the previously owned shares delivered in satisfaction
of the withholding obligations must have been held by the Holder for at least
six (6) months; (iii) in the discretion of the Company's Chief Executive
Officer, through the withholding of shares of common stock of the Company
otherwise issuable to the Holder in connection with the exercise of a Warrant;
or (iv) in the discretion of the Company's Chief Executive Officer, through a
combination of the procedures set forth in clauses (i), (ii) and (iii) of this
Section 2(c).
137
3. Mutilated or Missing Warrant Certificates. In case any Warrant
Certificate shall be mutilated, lost, stolen or destroyed, the Company may in
its discretion issue, in exchange and substitution for and upon cancellation of
the mutilated Warrant Certificate, or in lieu of and in substitution for the
Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate or
Warrant Certificates of like tenor and in the same aggregate denomination, but
only (i) in the case of loss, theft or destruction, upon receipt of evidence
satisfactory to the Company of such loss, theft or destruction of such Warrant
Certificate and indemnity or bond, if requested, also satisfactory to them and
(ii) in the case of mutilation, upon surrender of the mutilated Warrant.
Applicants for such substitute Warrant Certificates shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company or its counsel may prescribe.
4. Rights of Holder. The Holder shall not, by virtue of anything
contained in this Warrant Certificate or otherwise, be entitled to any right
whatsoever, either in law or equity, of a stockholder of the Company, including
without limitation, the right to receive dividends or to vote or to consent or
to receive notice as a shareholder in respect of the meetings of shareholders or
the election of directors of the Company or any other matter.
5. Adjustment of Exercise Shares and Exercise Price. The Exercise Price
and the number and kind of Exercise Shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the happening of
certain events as hereinafter provided. The Exercise Price in effect at any time
and the number and kind of securities purchasable upon exercise of each Warrant
shall be subject to adjustment as follows:
(a) In case the Company shall (i) pay a dividend on its shares of
Common Stock in shares of Common Stock, (ii) subdivide its outstanding Common
Stock into a greater number of shares, or (iii) combine its outstanding Common
Stock into a smaller number of shares, the Exercise Price and number of
securities purchasable under this Warrant in effect at the time of the record
date for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification, shall be proportionally adjusted
so that the Holder of this Warrant exercised after such date shall be entitled
to receive the aggregate number and kind of shares which, if this Warrant had
been exercised by such Holder immediately prior to such date, he would have
owned upon such exercise and been entitled to receive upon such dividend,
subdivision, combination or reclassification. For example, if the Company
declares a 2 for 1 stock dividend or stock split and the Exercise Price
immediately prior to such event was $5.00 per share, the adjusted Exercise Price
immediately after such event would be $2.50 per share. Additionally, the number
of securities purchasable under this Warrant would be adjusted accordingly. Such
adjustment shall be made successively whenever any event listed above shall
occur.
138
(b) If at any time while this Warrant, or any portion thereof, is
outstanding and unexpired there shall be (i) a capital reorganization pursuant
to which the shares of the Company's capital stock outstanding immediately prior
to such reorganization are converted by virtue of such reorganization into other
property, whether in the form of new securities, cash or otherwise (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), (ii) a merger or consolidation of the Company with or into
another corporation in which the Company is not the surviving entity, or a
reverse triangular merger in which the Company is the surviving entity but the
shares of the Company's capital stock outstanding immediately prior to the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise, or (iii) a sale or transfer of all or
substantially all of the Company's properties and assets as, or substantially
as, an entirety to any other person, then, as a part of such capital
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the holder of this Warrant shall thereafter be entitled to
receive upon payment of the Exercise Price then in effect, the number of shares
of stock or other securities or property of the successor corporation resulting
from such capital reorganization, merger, consolidation, sale or transfer that a
holder of the shares deliverable upon exercise of this Warrant would have been
entitled to receive in such capital reorganization, consolidation, merger, sale
or transfer if this Warrant had been exercised immediately before such capital
reorganization, merger, consolidation, sale or transfer, all subject to further
adjustment as provided in Section 5. The foregoing provisions of this Subsection
5(b) shall similarly apply to successive capital reorganizations,
consolidations, mergers, sales and transfers and to the stock or securities of
any other corporation that are at the time receivable upon the exercise of this
Warrant. If the per-share consideration payable to the Holder hereof for shares
in connection with any such transaction is in a form other than cash or
marketable securities, then the value of such consideration shall be determined
in good faith by the Company's Board of Directors. In all events, appropriate
adjustment (as determined in good faith by the Company's Board of Directors)
shall be made in the application of the provisions of this Warrant with respect
to the rights and interests of the Holder after the transaction, to the end that
the provisions of this Warrant shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable after
that event upon exercise of this Warrant.
139
(c) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to subsections (a) and (b) above, the number of
Exercise Shares purchasable upon exercise of this Warrant shall simultaneously
be adjusted by multiplying the number of Exercise Shares initially issuable upon
exercise of this Warrant by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as adjusted.
(d) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least twenty-five
cents ($0.25) in such price; provided, however, that any adjustments which by
reason of this subsection (d) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment required to be made
hereunder. All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
(e) Whenever the Exercise Price is adjusted, as herein provided,
the Company shall promptly cause a notice setting forth the adjusted Exercise
Price and adjusted number of Exercise Shares issuable upon exercise of each
Warrant to be mailed to the Holders, at their last addresses appearing on the
books of the Company. The Company may retain a firm of independent certified
public accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Section 5, and a certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
(f) Irrespective of any adjustments in the Exercise Price or the
number or kind of Exercise Shares purchasable upon exercise of this Warrant,
Warrants theretofore or thereafter issued may continue to express the same price
and number and kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Warrant.
(g) Whenever the Exercise Price shall be adjusted as required by
the provisions of the foregoing Section 5, the Company shall forthwith file in
the custody of its Secretary or an Assistant Secretary at its principal office
an officer's certificate showing the adjusted Exercise Price determined as
herein provided, setting forth in reasonable detail the facts requiring such
adjustment, including a statement of the number of additional shares of Common
Stock, if any, and such other facts as shall be necessary to show the reason for
and the manner of computing such adjustment. Each such officer's certificate
shall be made available at all reasonable times for inspection by the Holder and
the Company shall, forthwith after each such adjustment, mail a copy by
certified mail of such certificate to the Holder.
140
6. Transfers, Exchanges, and Certain Restrictions.
(a) The Warrant shall be transferable, subject to the provisions of
Section 6 hereof, only upon the books of the Company, if any, to be maintained
by it for that purpose, upon surrender of the Warrant to the Company at its
principal office accompanied (if so required by it) by a written instrument or
instruments of transfer in form satisfactory to the Company and duly executed by
the Holder thereof or by the duly appointed legal representative thereof or by a
duly authorized attorney and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. In all cases of transfer by an
attorney, the original letter of attorney, duly approved, or an official copy
thereof, duly certified, shall be deposited and remain with the Company. In case
of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Company in its
discretion. Upon any such registration of transfer, a new Warrant Certificate
shall be issued to the transferee named in such instrument of transfer, and the
surrendered Warrant Certificate shall be canceled by the Company.
(b) The Warrant may be exchanged, at the option of the Holder
thereof and without change, when surrendered to the Company at its principal
office, or at the office of its transfer agent, if any, for another Warrant or
other Warrants of like tenor and representing in the aggregate the right to
purchase from the Company a like number and kind of Shares as the Warrant
surrendered for exchange or transfer, and the Warrant so surrendered shall be
canceled by the Company or transfer agent, as the case may be.
(c) The Holder of this Warrant, by acceptance hereof, acknowledges
that this Warrant and the Shares to be issued upon exercise hereof are being
acquired solely for the Holder's own account and not as a nominee for any other
party, and for investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any Shares to be issued upon exercise hereof except
under circumstances that will not result in a violation of applicable federal
and state securities laws. Upon exercise of this Warrant, the Holder shall, if
requested by the Company, execute the Company's standard Investor Representation
Letter which shall, among other things, confirm in writing that the Exercise
Shares so purchased are being acquired solely for the Holder's own account and
not as a nominee for any other party, for investment, and not with a view toward
distribution or resale.
(d) Neither this Warrant nor any Exercise Share may be offered for
sale or sold, or otherwise transferred or sold, unless (i) such security has
been registered for sale under the Securities Act of 1933, as amended (the "1933
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 1933 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, prepared at Holder's expense,
reasonably satisfactory to the Company that the proposed sale or other
disposition of such securities may be effected without registration under the
1933 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.
141
(e) All Shares issued upon exercise hereof shall be stamped or
imprinted with a legend in substantially the following form (in addition to any
legend required by law or otherwise deemed necessary or appropriate by Company's
counsel, including, but not limited to, an affiliate legend).
"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."
The Company is hereby authorized to notify its transfer agent of the status of
the Exercise Shares and to take such other action including, but not limited to,
the placing of a "stop-transfer" order on the transfer agent's books and records
to assure compliance with the Act.
(f) Holder recognizes that investing in the Warrant and the Exercise
Shares involves a high degree of risk, and Holder is in a financial position to
hold the Warrant and the Exercise Shares indefinitely and is able to bear the
economic risk and withstand a complete loss of its investment in the Warrant and
the Exercise Shares. The Holder is a sophisticated investor and is capable of
evaluating the merits and risks of investing in the Company. The Holder has had
an opportunity to discuss the Company's business, management and financial
affairs with the Company's management, has been given full and complete access
to information concerning the Company, and has utilized such access to its
satisfaction for the purpose of obtaining information or verifying information
and have had the opportunity to inspect the Company's operation. Holder has had
the opportunity to ask questions of, and receive answers from, the management of
the Company (and any person acting on its behalf) concerning the Warrant and the
Shares and the agreements and transactions contemplated hereby, and to obtain
any additional information as Holder may have requested in making its investment
decision. The initial Holder of this Warrant is an "accredited investor", as
defined by Regulation D promulgated under the ▇▇▇▇ ▇▇▇.
(g) The Holder agrees to indemnify and hold harmless the Company
against any loss, damage, claim or liability arising from any inaccuracy in the
provisions of Section 6 hereof or the disposition of this Warrant or any
Exercise Share held by such holder or any interest therein in violation of the
provisions of Section 6 hereof.
7. Registration Rights. The shares of Common Stock or other equity
securities of the Company that may be issued to the Holder upon the exercise of
the Warrants are entitled to the registration rights set forth in the
Registration Rights Agreement of even date herewith between the Company and the
Holder.
8. Notices. All notices or other communications under this Warrant
Certificate shall be in writing and shall be deemed to have been given on the
day of delivery if delivered by hand, on the fifth day after deposit in the mail
if mailed by certified mail, postage prepaid, return receipt requested, or on
the next business day after mailing if sent by a nationally recognized overnight
courier such as federal express, addressed as follows:
142
If to the Company:
VDC Communications, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Executive Officer
and to the Holder at the address of the Holder appearing on the
books of the Company or the Company's transfer agent, if any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Section 8.
9. Supplements and Amendments. The Company may from time to time
supplement or amend this Warrant Certificate without the approval of any holders
of Warrants in order to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provision, or to make any other provisions in regard to matters or questions
herein arising hereunder which the Company may deem necessary or desirable and
which shall not materially adversely affect the interests of the Holder.
10. Successors and Assigns. This Warrant shall inure to the benefit of and
be binding on the respective successors, assigns and legal representatives of
the Holder and the Company.
11. Severability. If for any reason any provision, paragraph or terms of
this Warrant Certificate is held to be invalid or unenforceable, all other valid
provisions herein shall remain in full force and effect and all terms,
provisions and paragraphs of this Warrant shall be deemed to be severable.
12. Governing Law. This Warrant shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be governed
by and construed in accordance with the laws of said jurisdiction without regard
to such jurisdiction's conflicts of laws provisions.
13. Headings. Paragraph and subparagraph headings used herein are included
herein for convenience of reference only and shall not affect the construction
of this Warrant Certificate nor constitute a part of this Warrant Certificate
for any other purpose.
14. Counterparts. This Warrant may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
143
IN WITNESS WHEREOF, the Company has caused these presents to be duly
executed as of the ___th day of May, 1999 defined herein as the "Commencement
Date."
Number of Warrants:
VDC COMMUNICATIONS, INC.
By:
-------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Executive Officer
Acknowledged and Agreed
to by the undersigned
this ____ day of May 1999.
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APPENDIX A
NOTICE OF WARRANT EXERCISE
Pursuant to a Warrant by and between the undersigned and VDC
COMMUNICATIONS, INC., a Delaware corporation (the "Company"), dated as of May
___, 1999, the undersigned hereby irrevocably elects to exercise its warrant to
the extent of purchasing _______________ shares of Common Stock, $.0001 par
value (the "Warrant Shares"), of the Company as provided for therein.
The undersigned hereby represents and agrees that the Warrant Shares
purchased pursuant hereto are being purchased for investment and not with a view
to the distribution or resale thereof, and that the undersigned understands that
said Warrant Shares have not been registered under the Securities Act of 1933,
as amended.
Payment of the full Purchase Price of the Warrant Shares is enclosed
herewith, in the form of a check made payable to the Company.
The undersigned requests that a certificate for the Warrant Shares be
issued in the name of:
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
(Please print name, address and social security number)
Dated:_______________________________________
Address:___________________________________________________
Signature:__________________________________________________
145
EXHIBIT "B"
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 ▇▇▇▇ our customers.
4. OUR ABILITY TO IMPLEMENT OUR PLAN SUCCESSFULLY IS DEPENDENT ON A FEW KEY
PEOPLE. We are particularly dependent upon ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman,
Chief Executive Officer, Chief Financial Officer, Secretary and Director of
the Company. ▇▇. ▇▇▇▇▇ is also a significant beneficial shareholder of the
Company. The Company has an employment agreement with ▇▇. ▇▇▇▇▇. We believe
the combination of his employment agreement and equity interest keeps ▇▇.
▇▇▇▇▇ highly motivated to remain with the Company.
146
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. GOVERNMENT 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.
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.
147
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.
148
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.
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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.
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EXHIBIT "C"
FORM OF
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "AGREEMENT") is dated as of May
___, 1999 by and between VDC COMMUNICATIONS, INC., a Delaware corporation (the
"COMPANY"), and the undersigned (the "HOLDER" or the "INVESTOR").
W I T N E S S E T H:
--------------------
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Investor is purchasing from the Company, pursuant to a Securities
Purchase Agreement dated the date hereof (the "PURCHASE AGREEMENT"), certain
shares of the Company's common stock (the "SHARES") and Warrants to purchase
certain shares of the Company's common stock (the "WARRANTS") (the Shares and
Warrants are collectively referred to as the "SECURITIES" of the Company);
WHEREAS, all capitalized terms not hereinafter defined shall have
that meaning assigned to them in the Purchase Agreement; and
WHEREAS, the Company desires to grant to the Holder the
registration rights set forth herein with respect to the Securities.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions.
(a) "CLOSING" shall mean the closing provided for in the
Purchase Agreement.
(b) "COMMON STOCK" shall mean the common stock of the
Company, par value $.0001 per share.
(c) "COMPANY" shall mean VDC Communications, Inc.
(d) "OFFERING" shall mean that private placement transaction
pursuant to which the Company shall offer shares of Common Stock and Warrants to
purchase shares of Common Stock upon terms and conditions set forth in the
Purchase Agreements.
(e) "PERSON" means an individual, a partnership (general or
limited), corporation, limited liability company, joint venture, business trust,
cooperative, association or other form of business organization, whether or not
regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate of a deceased, insane or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political
subdivision or other instrumentality thereof, or any other entity.
(f) "PRINCIPAL MARKET" means the OTC Electronic Bulletin
Board, the Nasdaq National Market, the Nasdaq Small Cap Stock Market, the
American Stock Exchange or the New York Stock Exchange, whichever is at the time
the principal trading exchange or market for the Common Stock.
151
(h) "REGISTRATION STATEMENT" shall mean the Registration
Statement of the Company filed with the SEC pursuant to the provisions of
Section 2 of this Agreement which covers the resale of the Shares and the shares
of Common Stock underlying the Warrants (the "Warrant Shares") on Form ▇-▇, ▇▇-▇
or any other appropriate form then permitted by the SEC to be used for such
registration and the sales contemplated to be made thereby under the Securities
Act, or any similar rule that may be adopted by the SEC, and all amendments and
supplements to such Registration Statement, including any pre-and post-
effective amendments thereto, in each case including the prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein.
(i) "RESTRICTED STOCK" shall mean the Shares, the Warrant
Shares, and any additional shares of Common Stock or other equity securities of
the Company issued or issuable after the date hereof in respect of any such
securities (or other equity securities issued in respect thereof) by way of a
stock dividend or stock split, in connection with a combination, exchange,
reorganization, recapitalization or reclassification of Company securities, or
pursuant to a merger, division, consolidation or other similar business
transaction or combination involving the Company; provided that: as to any
particular shares of Restricted Stock, such securities shall cease to constitute
Restricted Stock (i) when a registration statement with respect to the sale of
such securities shall have become effective under the Securities Act and such
securities shall have been disposed of thereunder, or (ii) when and to the
extent such securities are permitted to be distributed pursuant to subparagraph
(k) of Rule 144 (or any successor provision to such Rule) promulgated under the
Securities Act or are otherwise freely transferable to the public without
further registration under the Securities Act.
(j) "SECURITIES ACT" shall mean the Securities Act of 1933,
as amended, or any similar or successor federal statute, and the rules and
regulations of the SEC thereunder, all as the same shall be in effect at any
relevant time.
(k) "SEC" shall mean the United States Securities and
Exchange Commission.
(l) "TRADING DAY" means a day on which the Principal Market
on which the Common Stock is listed or admitted to trading is open for the
transaction of business or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of Delaware are
authorized or obligated by law or executive order to close.
2. Registration Rights.
(a) Piggyback Registration Rights.
152
The Company shall advise the Holder by written notice at least
ten (10) calendar days prior to the filing of a Registration Statement under the
Securities Act (excluding registration on Forms ▇-▇, ▇-▇, or any successor forms
thereto), covering securities of the Company to be offered and sold (whether by
the Company or any stockholder thereof) and shall, upon the request of the
Holder given at least five calendar (5) days prior to the filing of such
Registration Statement, include in any such Registration Statement such
information as may be required to permit the public distribution of the
Restricted Stock. The Holder shall furnish such information as may be reasonably
requested by the Company in order to include such Restricted Stock in the
Registration Statement. In the event that any registration pursuant to this
Section 2 shall be, in whole or in part, an underwritten public offering of
Common Stock on behalf of the Company, and the managing underwriters advise the
Company in writing that in their opinion the number of securities requested to
be included in such registration exceeds the number which can be sold in an
orderly manner in such offering within a price range acceptable to the Company,
the Company shall include in such registration (i) first, the securities the
Company proposes to sell, and (ii) second, the Restricted Stock and any other
securities eligible and requested to be included in such registration to the
extent that the number of shares to be registered will not, in the opinion of
the managing underwriters, adversely affect the offering of the securities
pursuant to clause (i), pro rata among the holders of such securities, including
the Holder of the Restricted Stock, on the basis of the number of shares
eligible for registration which are owned by all such holders. Notwithstanding
the foregoing, the Company may withdraw any registration statement referred to
in this Section 2 without thereby incurring liability to the holders of the
Restricted Stock.
(b) Shelf Registration.
In the event that the Restricted Stock is not otherwise included
within a Registration Statement filed pursuant to Section 2(a) above, the
Company shall use its best efforts to prepare and file, not later than twelve
(12) months following the Closing of the Offering, a Registration Statement with
the SEC and use its best efforts to, as promptly as possible, have such
Registration Statement declared effective for the purpose of facilitating the
public resale of the Restricted Stock.
(c) Notwithstanding anything to the contrary contained
herein, the Company's obligation in Section 2(a) and 2(b) above shall extend
only to the inclusion of the Restricted Stock in a Registration Statement filed
under the Securities Act. The Company shall have no obligation to assure the
terms and conditions of distribution, to obtain a commitment from an underwriter
relative to the sale of the Restricted Stock or to otherwise assume any
responsibility for the manner, price or terms of the distribution of the
Restricted Stock. Furthermore, the Company shall not be restricted in any manner
from including within the Registration Statement the distribution, issuance or
resale of any of its or any other securities.
3. Registration Procedures. Whenever it is obligated to register any
Restricted Stock pursuant to this Agreement, the Company shall:
(a) prepare and file with the SEC a Registration Statement
with respect to the Restricted Stock in the manner set forth at Sections 2(a) or
2(b) hereof and use its best efforts to cause such Registration Statement to
become effective as promptly as possible and to remain effective for that period
identified in Section 3(g) hereafter;
(b) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective for
the period specified in Section 3(g) below and to comply with the provisions of
the Securities Act with respect to the disposition of all Restricted Stock
covered by such Registration Statement in accordance with the Holders intended
method of disposition set forth in such Registration Statement for such period;
153
(c) furnish to the Holder and to each underwriter, if any,
such number of copies of the Registration Statement and the prospectus included
therein (including each preliminary prospectus), as such person may reasonably
request in order to facilitate the public sale or other disposition of the
Restricted Stock covered by such Registration Statement;
(d) use its best efforts to register or qualify the
Restricted Stock covered by such Registration Statement under the securities or
blue sky laws of such jurisdictions as the Holder, or, in the case of an
underwritten public offering, the managing underwriter shall reasonably request;
provided, however, that the Company shall not for any such purpose be required
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(e) promptly notify the Holder under such Registration
Statement and each underwriter, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus contained in such Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required or necessary to be stated therein in
order to make the statements contained therein not misleading in light of the
circumstances under which they were made;
(f) make available for inspection by any underwriter
participating in an underwritten disposition on behalf of any Holder, and any
attorney, accountant or other agent retained by such underwriter, all financial
and other records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors and employees to supply all
information reasonably requested by the underwriter, attorney, accountant or
agent in connection with such Registration Statement;
(g) for purposes of Sections 3(a) and 3(b) above, the period
of distribution of Restricted Stock shall be deemed to extend until the earlier
of: (A) in an underwritten public offering of all of the Restricted Stock, the
period in which each underwriter has completed the distribution of all
securities purchased by it; (B) in any other registration, the earlier of the
period in which all shares of Restricted Stock covered thereby shall have been
sold or three (3) years from the date of Closing.
(h) if the Common Stock of the Company is listed on any
securities exchange or automated quotation system, the Company shall use its
best efforts to list (with the listing application being made at the time of the
filing of such Registration Statement or as soon thereafter as is reasonably
practicable) the Restricted Stock covered by such Registration Statement on such
exchange or automated quotation system;
(i) enter into normal and customary underwriting
arrangements or an underwriting agreement and take all other reasonable and
customary actions if the Holder sells its shares of Restricted Stock pursuant to
an underwriting (however, in no event shall the Company, in connection with such
underwriting, be required to undertake any special audit of a fiscal period in
which an audit is normally not required);
(j) notify the Holder if there are any amendments to the
Registration Statement, any requests by the SEC to supplement or amend the
Registration Statement, or of any threat by the SEC or state securities
commission to undertake a stop order with respect to sales under the
Registration Statement; and
154
(k) cooperate in the timely removal of any restrictive
legends from the shares of Restricted Stock in connection with the resale of
such shares covered by an effective Registration Statement.
4. Expenses.
(a) For the purposes of this Section 4, the term
"REGISTRATION EXPENSES" shall mean: all expenses incurred by the Company in
complying with Sections 2 and 3 of this Agreement, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel and independent public accountants for the Company,
"blue sky" fees, fees of the National Association of Securities Dealers, Inc.
("NASD"), fees and expenses of listing shares of Restricted Stock on any
securities exchange or automated quotation system on which the Company's shares
are listed and fees of transfer agents and registrars. The term "SELLING
EXPENSES" shall mean: all underwriting discounts and selling commissions
applicable to the sale of Restricted Stock and all accountable or
non-accountable expenses paid to any underwriter in respect of the sale of
Restricted Stock.
(b) Except as otherwise provided herein, the Company will
pay all Registration Expenses in connection with the Registration Statements
filed pursuant to Section 2 of this Agreement. All Selling Expenses in
connection with any Registration Statements filed pursuant to Section 2 of this
Agreement shall, in the case of an underwritten offering, be borne by the
participating Holders in proportion to the number of shares sold by each, or, in
all other instances, shall be borne by the Holder incurring such expenses.
5. Obligations of Holder.
(a) In connection with each registration hereunder, each
selling Holder will furnish to the Company in writing such information with
respect to such seller and the securities held by such seller, and the proposed
distribution by him or them as shall be reasonably requested by the Company in
order to assure compliance with federal and applicable state securities laws, as
a condition precedent to including such seller's Restricted Stock in the
Registration Statement. Each selling Holder also shall agree to promptly notify
the Company of any changes in such information included in the Registration
Statement or prospectus as a result of which there is an untrue statement of
material fact or an omission to state any material fact required or necessary to
be stated therein in order to make the statements contained therein not
misleading in light of the circumstances then existing.
(b) In connection with each registration pursuant to this
Agreement, the Holder whose shares are included therein will not effect sales
thereof until notified by the Company of the effectiveness of the Registration
Statement, and thereafter will suspend such sales after receipt of telegraphic
or written notice from the Company to suspend sales to permit the Company to
correct or update a Registration Statement or prospectus. At the end of any
period during which the Company is obligated to keep a Registration Statement
current, the Holder included in said Registration Statement shall discontinue
sales of shares pursuant to such Registration Statement upon receipt of notice
from the Company of its intention to remove from registration the shares covered
by such Registration Statement which remain unsold, and such Holder shall notify
the Company of the number of shares registered which remain unsold immediately
upon receipt of such notice from the Company.
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6. Information Blackout.
At any time when a Registration Statement effected pursuant to
Section 2 relating to Restricted Stock is effective, upon written notice from
the Company to the Holder that the Company has determined in good faith that
sale of Restricted Stock pursuant to the Registration Statement would require
disclosure of non-public material information, the Holder shall suspend sales of
Restricted Stock pursuant to such Registration Statement until such time as the
Company notifies the Holder that such material information has been disclosed to
the public or has ceased to be material or that sales pursuant to such
Registration Statement may otherwise be resumed.
7. Indemnification.
(a) The Company agrees to indemnify, to the extent permitted
by law, each Holder of Restricted Stock, its officers and directors and each
Person who controls such Holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue statement of material fact contained in any Registration Statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are caused by or contained in any information furnished to the Company by
such Holder for use therein or by such Holder's failure to deliver a copy of the
Registration Statement or prospectus or any amendments or supplements thereto
after the Company has furnished such Holder with a sufficient number of copies
of the same.
(b) In connection with any Registration Statement in which a
Holder of Restricted Stock is participating, each such Holder shall furnish to
the Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such Registration Statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from: (i) any untrue or alleged untrue statement of
material fact contained in the Registration Statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, (but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished by such Holder); or (ii) any disposition of the Restricted Stock in a
manner that fails to comply with the permitted methods of distribution
identified within the Registration Statement; provided that the obligation to
indemnify (if there shall be more than one Holder) shall be individual, not
joint and several, for each Holder and shall be limited to the net amount of
proceeds received by such Holder from the sale of Restricted Stock pursuant to
such Registration Statement.
(c) Any Person entitled to indemnification hereunder shall
(i) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification (provided that the failure to give
prompt notice shall not impair any Person's right to indemnification hereunder
to the extent such failure has not prejudiced the indemnifying party) and (ii)
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist with respect to such
claim, permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party shall not be subject to any liability for any
settlement made by the indemnified party without its consent (but such consent
shall not be unreasonably withheld). An indemnifying party who is not entitled
to, or elects not to, assume the defense of a claim shall not be obligated to
pay the fees and expenses of more than one counsel for all parties indemnified
by such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
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(d) The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and shall survive the transfer of securities.
The Company also agrees to make such provisions, as are reasonably requested by
any indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
8. Miscellaneous Provisions.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware with regard to
principles of conflicts of laws.
(b) Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
(c) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given without the written consent of the Company and the Holder.
(d) 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)
(ii) if to the Company to:
VDC Communications, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Executive Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) if to the Holder, to the address identified on the
books and records of the Company
157
(e) Successors and Assigns; Holders as Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the parties and
their respective successors and assigns, and the agreements of the Company
herein shall inure to the benefit of the Holders and their respective successors
and assigns.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Entire Agreement; Survival; Termination. This Agreement
is intended by the parties as a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(h) 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.
(i) 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.
(j) 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.
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IN WITNESS WHEREOF, intending to be legally bound, the parties hereto
have caused this Agreement to be signed.
ATTEST: VDC COMMUNICATIONS, INC.
______________________________ By:________________________________
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Executive Officer
WITNESS:
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