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EXHIBIT 10.10
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made this 18th
day of August, 1995, by and between DCR COMMUNICATIONS, INC. (the
"Corporation" or "DCR"), a corporation organized under the laws of the State of
Maryland, and MULTINATIONAL TECHNOLOGY AND BUSINESS LIMITED (the "Purchaser"),
a corporation organized under the laws of the Republic of Hong Kong, and
entered into in the Republic of Hong Kong.
W I T N E S S E T H:
WHEREAS, the Purchaser desires to invest Eight Hundred
Thirty-Three Thousand and 00/100 Dollars (U.S.) ($833,000.00) in DCR through
the purchase of a convertible debenture pursuant to the terms and subject to
the conditions set forth herein; and
WHEREAS, the parties hereto desire to set forth herein their
understandings and agreements.
NOW, THEREFORE, in consideration of the foregoing, of the
mutual covenants and agreements set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by DCR and the Purchaser, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Definitions:
1.1. For purposes of this Agreement, the following
terms shall have the following definitions:
"AUCTION" shall mean the Federal Communications
Commission ("FCC") C-Block Auction for Broadband Personal Communications
Services ("PCS").
"CLASS A STOCK" shall mean shares of the Class A
Voting Common Stock of the Corporation, par value One Cent ($0.01) per share,
as the same may be modified or exchanged in any reclassification or
recapitalization of the Corporation.
"CLASS B STOCK" shall mean shares of the Class B
Non-Voting Common Stock of the Corporation, par value One Cent ($0.01) per
share, as the same may be modified or exchanged in any reclassification or
recapitalization of the Corporation.
"CLOSING DATE" shall mean the date that the parties
hereto execute this Agreement, which shall take place at _______________, Hong
Kong, on August 18, 1995, or at such other date, time or location as the
parties hereto shall otherwise agree.
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"COMMUNICATIONS ACT" shall mean the Communications
Act of 1934, as amended, codified at 47 U.S.C.A. Section 151, et seq.
"FOREIGN INVESTOR" shall mean any alien or
representative thereof, any foreign government or representative thereof or any
corporation organized under the laws of a foreign country whose ownership of
capital stock of the Corporation is or would be subject to foreign ownership
restrictions of the Communications Act including, without limitation, 47
U.S.C.A. Section 310(b), or FCC regulations.
"FOREIGN-OWNED EQUITY" shall mean any and all shares
of capital stock of DCR owned of record or voted for the account of a Foreign
Investor.
"PREFERRED STOCK" shall mean shares of Convertible
Preferred Stock of the Corporation, par value One Cent ($0.01) per share, as
the same may be modified or exchanged in any reclassification or
recapitalization of the Corporation.
"SERIES A DEBENTURES" shall mean the convertible
debentures issued to Masa Telecom Asia Investment Pte. Ltd. ("MTAI") pursuant
to that certain Loan and Purchase Agreement entered into by and between the
Corporation and MTAI dated June 24, 1995 ("MTAI Agreement"), and the
convertible debentures issued or to be issued to Pacific Eagle Investments Ltd.
("Pacific") pursuant to that certain Loan and Purchase Agreement entered into
by and between the Corporation and Pacific ("Pacific Agreement").
"SERIES B DEBENTURE" shall mean the convertible
debenture(s) issued to the Purchaser hereunder.
"TERMINATION EVENT" shall mean the earlier to occur
of (a) a closing of the first sale of stock of the Corporation to the public
through an underwriter which produces gross proceeds of at least Five Million
and 00/100 Dollars ($5,000,000.00) pursuant to a registration statement filed
with, and declared effective by, the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933 as amended (the "Securities
Act"), or (b) a merger or similar corporate transaction in which a majority of
the Corporation's voting securities are acquired by a third party that is not
directly or indirectly related to or affiliated with the Corporation or any
stockholder of the Corporation.
ARTICLE 1
PURCHASE AND SALE OF SERIES B CONVERTIBLE DEBENTURE
1.1. Sale of Convertible Debentures; Payment of Purchase
Price. The Corporation agrees to sell to the Purchaser, and the Purchaser
agrees to purchase from the Corporation, a convertible debenture of DCR in the
amount of Eight Hundred Thirty-Three
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Thousand and 00/100 Dollars ($833,000.00) (hereinafter, "Purchase Price"). The
Purchase Price shall be deposited into the Corporation's bank account in
immediately available U.S. funds no later than September 5, 1995.
1.2. Conversion. The Series B Debenture purchased
hereunder shall be issued to the Purchaser upon full payment of the Purchase
Price in a form substantially similar to the form Debenture attached hereto as
Exhibit 1.2, which debenture shall be convertible into shares of Class A Stock,
as provided below.
1.2.1. Elective Conversion Rights. To the extent that such
conversion does not cause the Corporation's Foreign-owned Equity to exceed the
maximum allowable amount of Foreign-owned Equity on the effective date(s) of
any such conversion ("Conversion Dates"), the holder of the Series B Debenture
shall have the right, at the Debenture holder's option, to convert the entire
amount or a portion of the Series B Debenture into such number of fully paid
and non-assessable shares of Class A Stock upon such terms and conditions as
set forth in this Agreement; provided, however, that if, as of the Conversion
Date, (i) any holder of Series A Debentures has made an election to convert
any Series A Debentures pursuant to the terms of such Series A Debentures
which conversion has not been completed or (ii) any mandatory conversion of
Series A Debentures is in process or is applicable, the conversion of the
Series A Debentures shall be processed prior to any conversion of the Series B
Debenture so that the Series B Debenture conversion takes place subsequent to
such Series A Debenture conversions, Foreign-owned Equity limitations
permitting. Any election made by a Series B Debenture holder shall be deemed
irrevocable and continuing until completion of the conversion giving elections
by holders of Series A Debentures priority over holders of Series B Debentures.
Any irrevocable election to convert (i) shall be processed at the earliest
time that the Foreign-owned Equity restrictions permit such conversion, in
whole or in part, (ii) shall be processed in the order received by the
Corporation giving elections by holders of Series A Debentures priority over
holders of Series B Debentures, and (iii) shall be prorated in accordance with
the percentage of the total number of outstanding Series B Debentures held by
each holder thereof in the event two or more elections to convert are received
on the same day. In the event that there is more than one holder of the
Corporation's Series B Debenture on any Conversion Date, the aggregate amount
of the debenture then convertible hereunder shall convert on a pro rata basis
among all of the Series B Debenture holders. The Corporation shall give
written notice to the Series B Debenture holder at such address as provided in
the debenture ("Debenture Holder Notice") of the principal amount of the
debenture that are to be converted as provided herein and the number of shares
of Class A Stock to be issued therefor. Promptly after receipt of the
Debenture Holder Notice, the debenture holder shall provide the Corporation
with the
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debenture being converted and the name and address to which the stock
certificate is to be issued and delivered.
1.2.2. Mandatory Conversion. At any time
following the completed conversion of all of the Series A Debentures pursuant
to the terms and conditions of the Series A Debentures, to the extent that such
conversion does not cause the Corporation's Foreign-owned Equity to exceed the
maximum allowable amount of Foreign-owned Equity on the Conversion Date, all or
a portion of the Series B Debenture shall convert into such number of fully
paid and non-assessable shares of Class A Stock as set forth herein.
1.2.3. Mandatory Conversion Upon Public
Offering. Notwithstanding anything herein contained to the contrary, to the
extent that such conversion does not cause the Corporation's Foreign-owned
Equity to exceed the maximum allowable amount, the Series B Debenture shall
convert into such number of fully paid and nonassessable shares of Class A
Stock as set forth herein, at the time of the closing of the first sale of
stock of the Corporation to the public through an underwriting which produces
gross proceeds of at least Five Million and 11/100 Dollars ($5,000,000.00)
pursuant to a registration statement filed with and declared effective by the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, and continue to convert thereafter, Foreign-owned Equity limitations
permitting. Notwithstanding, in the event that any of the Series A Debentures
are immediately convertible on the Conversion Date pursuant to their terms, the
conversion of any and all Series A Debentures shall be processed first pursuant
to their terms of conversion, followed by the conversion of the Series B
Debentures, Foreign-owned Equity limitations permitting. In the event that
there is more than one holder of the Corporation's Series B Debenture on any
Conversion Date, the aggregate amount of the debenture then convertible
hereunder shall convert on a pro rata basis among all of the Series B Debenture
holders.
1.3. Conversion Rate. For any conversion of the Series B
Debenture, the number of shares of Class A Stock that shall be issuable upon
conversion of such debenture shall equal the amount of the debenture being
converted divided by Eighty-Three Cents ($0.833000). In the event that there
are any stock dividends, split-ups, combinations, recapitalizations, or the
like, which affect the Class A Stock, proportionate adjustments shall be made
to the conversion rate, or the number of shares of Class A Stock issuable
pursuant to this conversion right.
1.4. Minimum Conversion Increments. Notwithstanding
anything in this Article 1 to the contrary, in no event shall any conversion of
the Series B Debenture into Class A Stock (other than the final conversion of
the remaining portion of the Series B Debenture) take
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place unless and until the amount convertible is at least Two Hundred Thousand
and 00/100 Dollars ($200,000.00).
1.5. Notice; Election of Rights. The Series B Debenture
holder may exercise its Elective Conversion Rights provided in Section 1.2.1 by
giving written notice to the Corporation of its exercise of such right and
stating the name in which the stock certificate is to be issued and the address
to which such certificate shall be delivered. Such notice, to be effective,
must be accompanied by the Debenture(s) being converted. The Corporation shall
issue and deliver to an address designated by the Debenture holder, a stock
certificate of the Corporation representing the number of shares of Class A
Stock to which the Series B Debenture holder is entitled.
ARTICLE 2
CONDITIONS TO CLOSING; CONDITIONS TO CONVERSION
2.1. Purchaser's Conditions to Closing. The Purchaser's
obligation to purchase the Series B Debenture shall be subject to the
fulfillment of the following conditions on or prior to the Closing Date, or the
waiver thereof by the Purchaser:
2.1.1. The Corporation shall have delivered to
the Purchaser (a) the Articles of Incorporation of the Corporation, with any
and all amendments thereto (the "Articles of Incorporation"), (b) the Bylaws of
the Corporation, with any and all amendments thereto (the "Bylaws"), (c) all
authorizations by the Board of Directors and, if necessary, the stockholders of
the Corporation, relating to the execution and performance of this Agreement
(including the issuance of the Series B Debentures) and (d) a certificate of
Secretary of the Corporation attesting to the completeness and accuracy of each
such document.
2.1.2. All covenants, agreements and conditions
contained herein to be performed by the Corporation on or prior to the Closing
Date shall have been performed or complied with, and the Corporation shall have
delivered to Purchaser a certificate to that effect.
2.2. The Corporation's Conditions to Closing. The
Corporation's obligation to issue and sell the Series B Debenture shall be
subject to the fulfillment of the following conditions on or prior to the
Closing Date (unless another date is specified herein), or the waiver thereof
by the Corporation:
2.2.1. Masa Telecom, Inc. shall have executed
and delivered to the Corporation an amendment of certain rights relating to the
Class A Stock, which amendment shall be in substantially the same form as
attached hereto as Exhibit 2.2.1.
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2.2.2. All covenants, agreements and conditions
contained herein to be performed by the Purchaser on or prior to the Closing
Date shall have been performed or complied with, and the Purchaser shall have
delivered to the Corporation a certificate to that effect.
2.3. Condition to Conversion. The obligation to issue the
shares of Class A Stock upon conversion of the Series B Debenture shall be
subject to the Purchaser and/or its permitted assigns having executed and
delivered to the Corporation on or prior to any Conversion Date, an amendment
to that certain Stockholders' Agreement entered into by and among the
Corporation by each of its holders of Class A Stock, dated January 30, 1995,
which amendment shall be in substantially the same form as attached hereto as
Exhibit 2.3.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE CORPORATION
As a material inducement to the Purchaser to purchase the
Series B Debenture, the Corporation represents and warrants to the Purchaser
that the following statements are true and correct in all material respects as
of the date hereof:
3.1. Organization and Standing; Articles and Bylaws. The
Corporation is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland. The Corporation has
requisite corporate power and authority to own and operate its properties and
assets and to carry on its business as presently conducted and as proposed to
be conducted. The Corporation is duly licensed or qualified to transact
business as a foreign corporation in each jurisdiction in which failure to
qualify would have a material adverse effect on the Corporation. The Articles
of Incorporation and the Bylaws of the Corporation delivered to the Purchaser
pursuant to Section 2.1.1 hereof are true, correct and complete.
3.2. Corporate Power. The Corporation has all requisite
legal and corporate power and authority to execute and deliver this Agreement,
to sell and issue the Series B Debenture pursuant thereto, and to carry out and
perform all of its other obligations under the terms of this Agreement and the
Series B Debenture.
3.3. Subsidiaries. Except as set forth on Schedule 3.3
attached hereto, the Corporation has no subsidiaries or affiliated companies
and does not otherwise own or control, directly or indirectly, any equity
interest in any corporation, association or business entity other than the
fifty (50) shares of FedSMR, Inc. contributed by American Business
Communications, Inc.
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3.4. Capitalization. The authorized capital stock of the
Corporation consists solely of (i) one hundred million (100,000,000) shares of
Class A Voting Common Stock, par value One Cent ($0.01) per share, of which
twenty-five million four hundred thirty-four thousand (25,434,000) shares are
issued and outstanding, (ii) one hundred million (100,000,000) shares of Class
B Nonvoting Common Stock, par value One Cent ($0.01) per share, of which no
shares are issued and outstanding, and (iii) one hundred million (100,000,000)
shares of Convertible Preferred Stock, par value One Cent ($0.01) per share, of
which no shares are issued and outstanding. All issued and outstanding shares
of Class A Voting Common Stock have been duly authorized and validly issued and
are fully paid and nonassessable. The Corporation has duly and validly
reserved (a) an aggregate of three million (3,000,000) shares of Class B Stock
for issuance pursuant to stock options to be granted to employees of the
Corporation (the "Employee Reserve"), and (b) an aggregate of one million five
hundred sixty-six thousand (1,566,000) shares are reserved for issuance to
other investors. Except as set forth on Schedule 3.4, there are no preemptive
rights or anti-dilution rights existing with respect to any issuance or
proposed issuance of any Class A Stock, including issuances pursuant to this
Agreement.
3.5. Authorization. All corporate actions on the part of
the Corporation, its directors and stockholders necessary for (a) the
authorization, execution, delivery and performance of this Agreement by the
Corporation, (b) the sale, issuance and delivery of the Series B Debenture, and
(c) the performance of all of the Corporation's obligations under this
Agreement and the other agreements and actions contemplated herein, have been
or will be taken prior to or as of the Closing Date.
3.6. Binding Effect. This Agreement, when executed and
delivered by the parties hereto, shall constitute a valid and binding
obligation of the Corporation, and shall be enforceable in accordance with its
terms. The Series B Debenture issued to Purchaser pursuant to this Agreement,
when paid for and issued in compliance with the provisions of this Agreement,
shall be validly issued, and any shares of Class A Stock issued upon conversion
thereof shall be validly issued, fully-paid and nonassessable, and free of any
liens or encumbrances; provided, however, that such Debenture and shares may be
subject to restrictions on transfer under state, United States federal and/or
foreign securities laws and any other restrictions set forth in this Agreement,
agreements with other investors, the Series A Debentures, and the Series B
Debenture, to the extent applicable.
3.7. Liabilities. To the actual knowledge of the officers
of the Corporation, the Corporation has no material liabilities or obligations,
absolute or contingent (individually or in the aggregate), except liabilities
and obligations relating to (a) the
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ordinary course of its business (in each case in normal amounts and incurred
only in the ordinary course of business), (b) items set forth in the Financial
Statements and notes thereto; (c) the Loan and Purchase Agreements entered into
with MTAI and Pacific; and (d) PCS 1900 Project and Supply Agreement between
the Corporation and Northern Telecom, Inc. dated July 28, 1995.
3.8. Title to Properties and Assets; Liens. The
Corporation has good and marketable title to its properties and assets,
including, without limitation, all technology, patents, copyrights, trademarks,
trade names, service marks (and any applications for any of the foregoing) and
trade secrets (the Corporation's proprietary rights are hereinafter referred to
as the "Business Property Rights"). All of the Business Property Rights are
accurately listed on Schedule 3.8 attached hereto, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge. The Business Property
Rights constitute all such proprietary rights owned or held by the Corporation.
No person or entity has made or, to the knowledge of the officers of the
Corporation, has threatened to make any claims that the operation of the
business of the Corporation is in violation of or infringes any Business
Property Rights or any other proprietary or trade rights of any third party.
3.9. Consents. No consent, approval or authorization of
any third party or governmental authority, or designation, declaration or
filing with any governmental authority on the part of the Corporation, is
required in connection with the valid execution, delivery and performance of
this Agreement, or the offer, sale or issuance of the Series B Debenture, or
the consummation of any other transaction contemplated by this Agreement,
except as required under the Communications Act and applicable FCC policies,
rules and regulations or to comply with exemptions from registration under the
Securities Act, the rules and regulations promulgated thereunder, applicable
state securities laws and regulations, and applicable foreign securities laws
and regulations.
3.10. Compliance with Other Instruments. To the knowledge
of the officers of the Corporation, the Corporation is not in violation of any
term of its Articles of Incorporation or Bylaws, of any term or provision of
any mortgage, indebtedness, indenture, contract, agreement, instrument,
judgment or decree, or of any order, statute, rule or regulation applicable to
the Corporation. The execution, delivery and performance of this Agreement by
the Corporation, and the issuance of the Series B Debenture, have not resulted
and shall not result in any violation of, or conflict with, or constitute a
default under, the Corporation's Articles of Incorporation or Bylaws. To the
knowledge of the officers of the Corporation, there is no event or circumstance
which, with the passage of time, would constitute any such violation or default
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which would adversely affect the business of the Corporation or any of its
properties or assets.
3.11. Litigation. There are no actions, suits, proceedings
or investigations pending or (to the knowledge of the officers of the
Corporation) threatened against the Corporation or its properties before any
court or governmental agency, nor (to the knowledge of the officers of the
Corporation) is there any reasonable basis therefor.
3.12. Registration Rights. Except as set forth in Schedule
3.12 attached hereto, the Corporation is not under any contractual obligation
to register any of its presently outstanding securities or any of its
securities which may hereafter be issued.
3.13. Financial Statements. The Profit and Loss Statements
for the period ending December 31, 1994 and the six (6) month period ending
June 30, 1995, and the Balance Sheets of the Corporation dated as of December
31, 1994 and June 30, 1995, previously furnished to the Purchaser and attached
hereto as Exhibit 3.13 ("Financial Statements") are true and correct in all
material respects. The Corporation previously delivered to the Purchaser
financial information, including prospective financial information which was
based upon assumptions that the Corporation believed to be reasonable in light
of all facts known to the Corporation at the time such financial information
was provided.
3.14. Other Agreements. A list of all material agreements
with vendors or suppliers of equipment or network services (other than
employment agreements to which the Corporation is a party) is attached hereto
as Schedule 3.14.
3.15. Violation of Other Agreements. The execution and
performance of this Agreement and the other agreements, documents and actions
contemplated herein shall not violate or result in any breach of any agreement
to which the Corporation is a party or by which it is bound.
3.16. Taxes. The Corporation (a) has duly and timely filed
or caused to be filed all federal, state, local and foreign tax returns
(including, without limitation, consolidated and/or combined tax returns)
required to be filed by it prior to the date of this Agreement which relate to
the Corporation or with respect to which the Corporation is liable or otherwise
in any way subject, (b) has paid or fully accrued for all taxes shown to be due
and payable on such returns (which taxes are all the taxes due and payable
under the laws and regulations pursuant to which returns were filed) and (c)
has properly accrued for all such taxes accrued in respect of the Corporation
for periods subsequent to the periods covered by such returns. No deficiency
in payment of taxes for any
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period has been asserted by any taxing body and remains unsettled at the date
of this Agreement.
3.17. ERISA. Except as set forth in Schedule 3.17, the
Corporation does not participate in any ERISA or employee pension or benefit
plan of any kind whatsoever.
3.18. Transactions With Affiliates. Except as set forth on
Schedule 3.18 attached hereto, no director, officer or stockholder of the
Corporation, or member of the family of any such person, or any corporation,
partnership, trust or other entity in which any such person is an officer,
director, trustee, partner or holder of any of the outstanding capital stock,
is a party to any transaction with the Corporation, including any contract,
agreement or other arrangement providing for the employment of, furnishing of
services by, rental of real or personal property from or otherwise requiring
payments to, any such person or firm.
3.19. Offering. Subject to the truth and completeness of
representations and warranties received by the Corporation from holders of its
outstanding shares of Class A Voting Common Stock (none of which the
Corporation or its officers has reason to believe is false or inaccurate in any
material respect), all shares of Class A Stock outstanding immediately prior to
the date hereof shall have been issued and sold in compliance with exemptions
from registration requirements of the Securities Act and applicable state
securities laws. The offer, sale and issuance of the Series B Debenture in
conformity with the terms of this Agreement shall constitute a transaction
exempt from the registration requirements of the Securities Act, subject to the
truth and completeness of the representations and warranties of the Purchaser
in Article 4 hereof and any purchaser questionnaires provided by the Purchaser
and each of its equity owners to the Corporation in connection herewith.
3.20. Brokers. Except as set forth in Exhibit 3.20
attached hereto, the Corporation has not incurred, nor shall incur, directly or
indirectly, as a result of any action taken by it, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this Agreement.
3.21. FCC Matters. This Agreement is entered into in
connection with the Corporation's intention to bid in the Auction and to
qualify (a) to bid for entrepreneurs' blocks ("Blocks") to be set aside in the
Auction for firms that meet certain criteria set forth in FCC regulations,
including, without limitation, 47 CFR Section 24.709, and (b) for special
financing, credits and other benefits which may be made available by the FCC
with respect to the Auction to firms that meet applicable criteria for any
eligible licensee that is a "small business" and a "business owned by members
of minority groups and women" to the extent such benefits are made
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available ("Special Incentives"). Subject to its filing of the Application to
Participate in the Auction, the Corporation is eligible to bid for and receive
PCS licenses in the Auction, qualifies to bid for Blocks and qualifies as a
small business and as a business owned by members of minority groups and women
for purposes of the Special Incentives.
3.22. Disclosure. This Agreement and the Exhibits and
Schedules hereto, and all of the documents and materials delivered to Purchaser
in connection herewith, do not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As a material inducement to the Corporation to agree to issue
and sell the Series B Debenture as provided herein, the Purchaser represents
and warrants to the Corporation that the following statements are true and
correct in all material respects as of the date hereof and shall be true and
correct in all material respects as of the date hereof:
4.1. Organization and Standing; Authority. The Purchaser
is a corporation duly organized, validly existing and in good standing under
the laws of the Republic of Hong Kong and is duly licensed or qualified to
transact business in each jurisdiction in which the failure to qualify would
have a material adverse effect on the Purchaser. The Purchaser has requisite
legal and corporate power and authority to execute and deliver this Agreement
to purchase the Series B Debenture pursuant to the terms of this Agreement, and
to carry out and perform all of its other obligations under the terms of this
Agreement.
4.2. Authorization. All corporate actions on the part of
the Purchaser, its directors and stockholders necessary for (a) the
authorization, execution, delivery and performance of this Agreement by the
Purchaser, (b) the purchase of the Series B Debenture, and (c) the performance
of all of Purchaser's obligations under this Agreement and the other agreements
and actions contemplated herein, have been taken prior to or as of the Closing
Date.
4.3. Binding Effect. This Agreement, when executed and
delivered by the parties hereto, shall constitute a valid and binding
obligation of the Purchaser, enforceable in accordance with its terms.
4.4. No Violation; Compliance with Laws. The execution,
delivery and performance of this Agreement and compliance with the
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provisions hereof (a) will be in conformance with all laws, statutes and
regulations applicable to the Purchaser and (b) will not conflict with, or
result in any breach of, any agreement to which the Purchaser is a party or by
which Purchaser is bound.
4.5. Purchaser Representations.
4.5.1. The Purchaser is acquiring the Series B
Debenture with the intention of selling it to another foreign entity, and in a
manner to enable the Series B Debenture to come to rest outside of the United
States of America, its territories and possessions. The Purchaser is not
engaged in the business of dealing in securities in Hong Kong. The Purchaser
has not engaged in any activity that would reasonably be expected, or is
intended, to condition the market in the United States with respect to the
securities being purchased hereunder, i.e., has not engaged in any "directed
selling efforts" within the meaning given by Regulation S adopted pursuant to
the Securities Act. The Purchaser is not a "U.S. Person" within the meaning
given by Regulation S, and is not acquiring the Series B Debenture on behalf of
any U.S. Person.
4.5.2. Each of the answers in the Purchaser
Questionnaires completed by the Purchaser and each of the equity owners of the
Purchaser and submitted to the Corporation, in a form substantially similar to
that attached hereto as Exhibit 4.5, is true, complete and correct.
4.5.3. The Purchaser is acquiring securities of
the Corporation after having received and reviewed such financial and other
information as was necessary in order to make an informed investment decision
and after having completed an independent investigation and analysis of facts
and circumstances that it deems appropriate for this investment. The Purchaser
understands that the Corporation is a recent start-up company with very limited
operating history, that much of the financial information provided is
prospective in nature and is based upon assumptions that the Corporation
believes to be reasonable in light of all facts currently known to the
Corporation, and that the validity of such assumptions is subject to numerous
risks and unknown factors, involving the uncertainties associated with PCS.
The Purchaser also acknowledges that the technological know-how required for
the development and implementation of PCS is not owned by the Corporation, but
is either generally available in the marketplace or is owned by other parties.
4.5.4. The Corporation has made available to
the Purchaser all documents that have been requested by the Purchaser relating
to an investment in the Corporation, and has provided the Purchaser the
opportunity to ask, and has provided answers to, its questions concerning the
offering and an investment in the Corporation; and, in evaluating the
suitability of the investment
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in the Corporation, the Purchaser has relied only on the information contained
in any documents or written answers so furnished to it by the Corporation.
4.5.5. The Purchaser was outside of the United
States at the time Purchaser offered to purchase securities of the Corporation,
and the securities purchased hereunder were offered and sold to the Purchaser
outside of the United States.
4.5.6. The Purchaser recognizes that an
investment in the Corporation involves substantial risks and that it has taken
full cognizance of and understands all the risks related to the purchase of the
Series B Debenture.
4.6. Brokers. The Corporation has not incurred, and shall
not incur, directly or indirectly, as a result of any action taken by the
Purchaser, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement.
4.7. Disclosure. This Agreement and the Exhibits and
Schedules hereto, and all of the documents and materials delivered to the
Corporation in connection herewith, do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statement contained herein or therein not misleading.
ARTICLE 5
COVENANTS
5.1. Financial Statements. From the date hereof until a
Termination Event, the Corporation shall furnish to the Purchaser:
5.1.1. Within ninety (90) days after the end of
each fiscal year of the Corporation, a consolidated balance sheet of the
Corporation and its subsidiaries, if any, as of the end of such fiscal year and
the related consolidated statements of income, stockholders' equity and cash
flows for the fiscal year then ended, prepared in accordance with generally
accepted accounting principles applied on a consistent basis, as audited by the
Corporation's independent certified public accountant.
5.1.2. Within thirty (30) days after the end of
each fiscal quarter in each fiscal year (other than the last fiscal quarter in
each fiscal year), a consolidated balance sheet of the Corporation and its
subsidiaries, if any, and the related consolidated statements of income,
stockholders' equity and cash flows, unaudited but prepared in accordance with
generally accepted accounting principles and certified by the Chief Financial
Officer of the Corporation, such consolidated balance sheet to be as of the end
of such fiscal quarter, and such consolidated statements of
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income, stockholders' equity and cash flows to be for such fiscal quarter and
for the period from the beginning of the fiscal year to the end of such fiscal
quarter, in each case with comparative statements for the corresponding period
or periods in the prior fiscal year.
5.2. Reservation of Class A Stock. The Corporation shall
at all times until issuance thereof in accordance with the terms of this
Agreement and the Corporation's Articles of Incorporation, reserve and keep
available out of its authorized but unissued shares of its Class A Stock, such
shares as are necessary for the purpose of issuing the Class A Stock in
accordance with the terms of the Series B Debenture. The Corporation shall
issue such Class A Stock in accordance with the applicable terms of this
Agreement, the Series B Debenture and the Corporation's Articles of
Incorporation. The Corporation shall obtain any authorization, consent,
approval or other action by, or make any filing with, any governmental agency
or administrative body that may be required under applicable United States of
America and state securities laws, any foreign securities laws and the
Communications Act in connection with the issuance of the Series B Debenture
and the Class A Stock, or any portion thereof, as contemplated by the terms of
this Agreement and subject to the truth and completeness, at the time of
issuance of such shares, of the representations of the Purchaser in Article 4
hereof.
5.3. Corporate Existence. The Corporation shall maintain
its corporate existence in full force and effect.
5.4. Stockholders' Rights. In the event that, at the time
of any conversion of the Series B Debenture pursuant to the terms of this
Agreement, any rights with respect to inspection of the Corporation's books and
records, registration rights, preemptive rights, tag-along rights, and/or
redemption rights have been granted to holders of the Corporation's Preferred
Stock or Class B Stock at any time prior to September 1, 1996, then the holders
of Series B Debentures that have been converted into Class A Stock shall have
the following rights with respect to the Converted Shares:
To the extent such rights are or have been granted to
Third Party Investors (hereinafter defined), then the Corporation shall enter
into such agreement(s) as are necessary to provide to holders of shares of
Class A Stock received upon conversion of the Series B Debenture ("Converted
Shares") rights with respect to the Converted Shares that are equal to the most
favorable rights granted to other purchasers of Preferred Stock or Class B
Stock ("Third Party Investors") at any time prior to September 1, 1996, with
respect to: (a) inspection of the properties of the Corporation and its
subsidiaries and examination of its books and records, subject to standard
corporate confidentiality agreements;
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(b) registration rights; (c) preemptive rights to acquire its proportionate
share of a future offering or sale of Preferred Stock or Class B Stock; (d)
tag-along rights in the event of a sale of over fifty percent (50%) of the
outstanding Class A Stock; (e) periodic financial information; and (f)
redemption rights.
5.5. Securities Law Compliance. The Purchaser covenants
and agrees (i) not to offer, sell, hypothecate or otherwise dispose of the
securities purchased hereunder except in a manner consistent with the
restrictions set forth in Regulation S adopted pursuant to the Securities Act
("Regulation S") and the restrictions imposed by any applicable foreign
securities law, (ii) with respect to any activities in the United States, not
to act in any way that would cause it to be deemed an "underwriter" of such
securities within the meaning given that term by the Securities Act, and (iii)
not to engage in any activity that could reasonably be expected, or is
intended, to condition the market in the United States with respect to the
securities being purchased hereunder, i.e., not to engage in any "directed
selling efforts" within the meaning given that term by Regulation S with
respect to the Series B Debenture or Class A Stock.
5.6. Transfer Restrictions. The Purchaser hereby
covenants and agrees for itself and on behalf of its representatives, agents,
transferees and assigns, with respect to the Series B Debenture to be bound by
all of the provisions of Article 1 of the Stockholders' Agreement (a copy of
which is attached hereto as Exhibit 5.6) including the transfer restrictions,
as if the Series B Debentures were Class A Stock. Notwithstanding any transfer
restrictions included in Article 1 of the Stockholders' Agreement, the
Corporation agrees to allow the Purchaser to transfer its right, title and
interest in the Agreement and the Series B Debenture to Lee Chung Chan ("Chan")
or an entity designated by Chan, subject to the terms and conditions set forth
in this Agreement.
ARTICLE 6
INDEMNIFICATION
6.1. Indemnification of Purchaser. The Corporation hereby
agrees to indemnify, defend and hold harmless the Purchaser against and in
respect of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies, including interest,
penalties, costs of investigation and reasonable attorneys' fees, that the
Purchaser may incur, directly or indirectly, which result from any breach of,
or failure by the Corporation to perform, any of its representations,
warranties, covenants or agreements contained in this Agreement.
6.2. Indemnification of the Corporation. The Purchaser
hereby agrees to indemnify, defend and hold harmless the Corporation against
and in respect of any and all claims, demands, losses,
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costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties, costs of investigation and
reasonable attorneys' fees, that the Corporation may incur, directly or
indirectly, which result from any breach of, or failure by the Purchaser to
perform, any of its representations, warranties, covenants or agreements
contained in this Agreement.
ARTICLE 7
MISCELLANEOUS
7.1. Expenses. Each of the parties hereto shall be
responsible for its respective expenses incurred in connection with the
preparation and execution of this Agreement (and any and all investigations
undertaken in connection herewith or therewith), including the fees and
expenses of all accountants, attorneys and advisors of any such party. The
Corporation covenants and agrees that it shall not bear, pay or reimburse any
fees, costs or expenses of any holder of any Series B Debenture in connection
with the negotiation and execution of this Agreement, or any other agreement
executed in connection herewith or therewith.
7.2. Notices. Any and all notices, requests or other
communications hereunder provided for herein shall be given in writing and sent
by hand delivery, by any express courier service that produces and maintains
proof of delivery or by registered or certified mail, return receipt requested,
with first-class postage prepaid; and such notices shall be addressed (a) if to
the Corporation, to the principal office of the Corporation, with a copy to
Ronald S. Schimel, Esquire, Levan, Schimel, Belman & Abramson, P.A., 9881
Broken Land Parkway, Suite 400, Columbia, Maryland 21046, U.S.A., and (b) if
to the Purchaser, to its address as reflected in the stock records of the
Corporation, with a copy to Masa Telecom, Inc., 1140 19th Street, N.W., Suite
602, Washington, DC 20036, and a copy to Arthur Cirulnick, Esquire, Tucker,
Flyer & Lewis, 1615 L Street, N.W., Suite 400, Washington, DC 20036-5061,
unless notice of a change of address is furnished to all parties in the manner
provided in this Section 7.2. Any notice which is required to be made within a
stated period of time shall be considered timely if delivered or mailed before
midnight of the last day of such period.
7.3. Invalid or Unenforceable Provisions. The invalidity
or unenforceability of any particular provision of this Agreement shall not
affect the other provisions hereof, and this Agreement shall be construed in
all respects as if such invalid or unenforceable provision were omitted.
7.4. Survival. The representations, warranties, covenants
and agreements made in this Agreement shall survive any investigation made by
the Purchaser and the closing of the transactions contemplated by this
Agreement.
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7.5. Benefit and Burden, Permitted Assignment. This
Agreement shall inure to the benefit of, and shall be binding upon, the parties
hereto and their successors and assigns, and other legal representatives,
provided that Purchaser may not assign its rights and obligations under the
Agreement without the prior written consent of the Corporation. The
Corporation hereby consents to the assignment by Purchaser to Lee Chung Chan
("Chan") or an entity designated by Chan (Chan or his designated entity shall
be collectively referred to hereinafter as "Permitted Assignee") and
acknowledges that in addition to being bound by the obligations of the
Purchaser set forth herein, including all transfer restrictions, the Permitted
Assignee has the right to enforce the terms hereof against the Corporation as
if it were the Purchaser.
7.6. Gender. The use of any gender herein shall be deemed
to be or include the other genders and the use of the singular herein shall be
deemed to be or include the plural (and vice versa), wherever appropriate.
7.7. Changes; Waiver. No change or modification of this
Agreement shall be valid unless the same is in writing and signed by all of the
parties hereto. No waiver of any provision of this Agreement shall be valid
unless in writing and signed by the person against whom sought to be enforced.
The failure of any party at any time to insist upon strict performance of any
condition, promise, agreement or understanding set forth herein shall not be
construed as a waiver or relinquishment of the right to insist upon strict
performance of the same or any other condition, promise, agreement or
understanding at a future time.
7.8. Entire Agreement. This Agreement and the Exhibits
and Schedules attached hereto set forth all of the promises, agreements,
conditions, understandings, warranties and representations among the parties
hereto with respect to the matters set forth herein, and there are no promises,
agreements, conditions, understandings, warranties or representations, oral or
written, express or implied, among them with respect to such matters except as
set forth herein or therein. Except for the Exhibits and Schedules attached
hereto, any and all prior agreements among the parties hereto with respect to
the matters set forth herein are hereby revoked. This Agreement and the
Exhibits and Schedules attached hereto are intended by the parties to be an
integration of any and all prior agreements or understandings, oral or written,
with respect to the matters set forth herein. Each writing or document
referred to as being attached hereto as an exhibit or otherwise designated
herein as an exhibit hereto is hereby made a part hereof.
7.9. Governing Law. Notwithstanding that the offer and
sale of securities sold to the Purchaser hereunder shall have taken place
outside of the United States, this Agreement shall be
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construed and enforced in accordance with the substantive laws of the State of
Maryland without regard to its rules regarding conflicts of law.
7.10. Headings. The headings, subheadings and other
captions in this Agreement are for convenience and reference only and shall not
be used in interpreting, construing or enforcing any of the provisions of this
Agreement.
7.11. Counterparts. This Agreement may be executed in any
number of counterparts, all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
CORPORATION:
WITNESS: DCR COMMUNICATIONS, INC.,
a Maryland corporation
By:
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Daniel C. Riker,
Chairman of the Board
PURCHASER:
ATTEST: MULTINATIONAL TECHNOLOGY AND BUSINESS LIMITED
By:
- -------------------------- -------------------------------
-------------------------------
President
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