SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): March 6, 1998
VDC CORPORATION LTD.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Bermuda 0-14045 061510832
- --------------- -------------------- -------------------
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification No.)
incorporation)
27 Doubling Road
Greenwich, CT 06830
--------------------------------------
(Address of principal executive office)
(203) 661-9600
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(Registrant's telephone number, including area code)
<PAGE>
ITEM 1: CHANGES IN CONTROL OF REGISTRANT
Description of Change in Control Transaction
On March 6, 1998 (the "Effective Date"), through a wholly-owned
subsidiary, VDC Corporation Ltd. (the "Company") acquired by merger (the
"Merger") Sky King Communications, Inc., a Connecticut corporation ("Sky King").
By virtue of the securities issued to the former shareholders of Sky King (the
"Sky King Shareholders") and the election of new directors and officers, the
Merger resulted in a change in control of the Company as described herein.
The Merger was effected pursuant to the terms of an Amended and
Restated Agreement and Plan of Merger originally dated December 10, 1997 and
amended on March 6, 1998 (the "Merger Agreement"). On the Effective Date, Sky
King merged with and into VDC (Delaware), Inc., a Delaware corporation and a
wholly-owned subsidiary of the Company (the "Sub"), following which the Sub
changed its name to "Sky King Communications, Inc." The consideration paid to
the former Sky King Shareholders in the Merger consisted of the issuance of
10,000,000 newly-issued shares of preferred stock of the Sub (the "Sub Preferred
Stock") which is convertible, in the aggregate, into 10,000,000 shares of common
stock of the Sub (the "Sub Common Stock"). Of the consideration paid to the Sky
King Shareholders, Sub Preferred Stock convertible in the aggregate into
4,500,000 shares of Sub Common Stock (the "Escrow Shares") was placed in escrow
to be held and released from time to time as the Sub achieves certain
performance criteria described below. To the extent that any of the Escrow
Shares have not been released at the expiration of an escrow period of five (5)
years (the "Escrow Period"), the remaining Escrow Shares shall be surrendered to
the Company for cancellation.
The Merger Agreement requires the Company to use diligent efforts to
domesticate as a United States corporation within one year following the
Effective Date. The domestication is anticipated to occur through the merger of
the Company into the Sub (the "Domestication Merger"). Upon the occurrence of
the Domestication Merger, the shares of Sub Preferred Stock issued to the former
Sky King Shareholders in the Merger would automatically convert into shares of
Sub Common Stock. In the event that the Domestication Merger does not occur
within one year following the Effective Date, the Sub Preferred Stock would be
exchangeable for common shares of the Company (the "Company Common Shares"), on
a share for share basis, resulting in the issuance of up to 10,000,000 Company
Common Shares. Based upon the number of Company Common Shares outstanding as of
the Effective Date and assuming that all of the Escrow Shares are released from
escrow, the former Sky King Shareholders would become the beneficial owners of
approximately 73% of the Company Common Shares through either the Domestication
Merger or through the issuance of Company Common Shares in lieu of the
Domestication Merger.
Performance Criteria
Escrow Shares are scheduled to be released to the Sky King Shareholders
from time to time if the following Performance Criteria are achieved:
- --------------------------------------------------------------------------------
Number of Shares to be Released Performance Criteria
------------------------------- --------------------
- --------------------------------------------------------------------------------
500,000 Upon each procurement of one or
more frequency, operating and/or
business licenses ("Licenses") to
provide the following types of
services (the "Services") to an
aggregate minimum population of
500,000 people: wireless or wired
telephony, local loop telephony,
and in country long distance
telephony services, international
long distance telephony gateways
or internet service provision;
plus
100,000 for each 100,000 people in excess
of the aggregate minimum
population of 500,000 covered by
the Licenses.
- --------------------------------------------------------------------------------
500,000 The provision of billing services
at an average rate of 100,000
bills per month for a consecutive
three month period.
- --------------------------------------------------------------------------------
100,000(1) Upon each procurement of
$1,000,000 of appropriate
financing for the provision of
Services or for capital
expenditures or other expenses
associated with the Services; or
procurement of $200,000 of
appropriate financing for the
provision of paging services or
for capital expenditures or other
expenses associated with the
provision of paging services.
- --------------------------------------------------------------------------------
100,000 Upon each procurement of one or
more Licenses to provide paging
services for an aggregate minimum
population of 500,000 people; plus
100,000 for each 100,000 people in excess
of the aggregate minimum
population of 500,000 covered by
the Licenses.
- --------------------------------------------------------------------------------
For a further description of the Sub Preferred Stock issued to the Sky
King Stockholders, see "Description of the Securities Issued in the Merger."
The Company agreed to pay an investment banking fee of 5% of the total
Merger consideration, or 500,000 Company Common Shares (the "Investment Banking
Shares"), for arranging the Merger transaction and for advisory services
rendered in connection with the Merger transaction. The issuance of these
shares, however, is subject to the satisfaction of certain post-closing
contingencies which have not been satisfied as of the date of this filing.
Under an asset purchase agreement between the Company and PortaCom
Wireless, Inc. ("PortaCom"), the Company may have an obligation to fund up to
$700,000 of loan advances to PortaCom. The Company had funded $240,000 of these
advances prior to the Effective Date.
- ----------------
(1) By virtue of private placement financing transactions completed during
the quarter ended March 31, 1998, 300,000 Escrow Shares are scheduled to
be released.
2
<PAGE>
The remaining advances of $460,000 were anticipated, under the Merger Agreement,
to be derived from the proceeds of an outstanding subscription receivable of
$632,500 due from a third party shareholder who subscribed to the shares during
the first quarter of 1998. To ensure that Company funds existing as of Effective
Date were not utilized to satisfy the remaining advances due PortaCom, the
Merger Agreement provides that the Investment Banking Shares serve as an escrow
fund for the payment of the remaining advances. To the extent that the
subscription receivable has not been paid in time to satisfy the $460,000 in
remaining PortaCom advances, the Company may retain and sell all or part of the
Investment Banking Shares to satisfy the remaining PortaCom advances.
Description of the Company's Business
During fiscal year 1997, the Company elected to shift the focus of its
business from investment holdings in private and publicly-traded companies to
that of securing and operating international telecommunications systems. This
followed a period of several years in which the Company's principal activities
involved the ownership and development of certain real estate and investment
properties.
To satisfy one of the conditions precedent contained within the Merger
Agreement, prior to the Effective Date, the Company disposed in bulk of
principally all of its investment and other holdings so that as of the Effective
Date, the Company's principal assets consisted of: a promissory note from Rozel
International Holdings Limited in the principal amount of $3.5 million, of which
$300,000 is due and payable on June 1, 1998, $1.2 million on February 1, 1999,
$1.0 million on May 1, 1999 and the balance of $1 million on August 1, 1999 (the
"Rozel Note"); a promissory note from Tasmin Limited in the principal amount of
$800,000, of which $150,000 is due and payable on June 30, 1998, $150,000 on
February 28, 1999 and $500,000 on September 30, 1999 (the "Tasmin Note"); and a
subscription receivable in the form of a promissory note from HPC Corporate
Services Limited in the principal amount of $632,500 due and payable on March 2,
1999 (the "HPC Note"). The Rozel, Tasmin and HPC Notes, and documents related
thereto, are attached as exhibits to this Report.
The business of the Company after the Merger shall consist of the
historic business of Sky King. Incorporated on January 3, 1996, Sky King engages
in the business of managing and/or acting as agent for approximately 330
existing communications tower and building top sites. It also maintains a data
base of approximately 2,600 service providers using communications tower and
building sites. Sky King markets the sites to communications companies, such as
wireless telephony, paging and cable television service providers, who require
the use of communications sites for communications transmitters and receivers
necessary to provide the infrastructure needed by them to provide their services
to customers. For the year ended December 31, 1997, Sky King remained in the
development stage, having incurred a net loss of $47,667 on revenues of $67,473.
Through the collective experiences and relationships of its executive
management team, the Company intends to pursue opportunities to establish
wireless, wired and cellular telephony systems, operate international telephony
gateways and become internet service providers in certain areas of Eastern
3
<PAGE>
Europe and Asia, as well as Egypt and the United States. Management intends to
initially focus its efforts on opportunities it perceives to exist in China,
Russia, Ukraine, Kazakhstan, Egypt and the United States.
Several wireless and wired telephony opportunities have been or may be
made available to the Company and its management personnel to secure certain
licenses for international gateways, long-distance and cellular telephony
service and to establish proprietary billing services to telephony, paging and
cable television carriers, electric utilities and others. There can be no
assurances, however, that any or all of these opportunities will continue to be
made available or prove successful.
To enhance its opportunities to pursue these businesses, the Company is
in the process of developing a proprietary billing system which it believes may
be used as the basis for providing billing services to other telephony, paging
and cable television carriers, as well as electric utilities and other possible
users who have the need to issue bills periodically. This billing system is
likely to have the following capabilities that may distinguish it from other
commercially available systems, such as:
o electronically signaling customers when their bank account balance is
inadequate to cover the cost of continued service by their service provider;
o threatening cessation of service unless additional funds are
deposited, thereby providing the opportunity to substantially reduce customers'
bad debts and their need to require their own customers to prepay for services,
a business tactic used often in developing countries; and
o producing bills electronically in any of 25 different languages,
including English, French, Arabic, Mandarin, Russian and Ukrainian, on a per
customer basis upon request.
The Company is subject to risks associated with any new business
venture. There can be no assurances that the targeted business opportunities
will be made available, or that if made available, the Company will be able to
secure sufficient capital and personnel resources to pursue any such
opportunities. In addition, there can be no assurances that any or all of these
opportunities will prove successful. The Company may also experience, from time
to time, cash flow shortages as cash is needed for the expansion of the
business, as well as unfavorable bank and supplier credit terms. The inability
to control these risks may have a material adverse effect on the Company.
Furthermore, the future success of the Company's business is largely dependent
upon the efforts of its key management personnel, Mr. Frederick A. Moran and Dr.
James C. Roberts. Although the Company currently has employment arrangements
with these executives, the loss of their services would likely have a materially
adverse effect on the business of the Company.
4
<PAGE>
Management of the Company
Upon the Effective Date, the existing officers of the Company tendered
their resignation from office, and were replaced by Frederick A. Moran, the
former Chairman of Sky King, and James C. Roberts, the former Chief Operating
Officer of Sky King.
The Board of Directors and executive officers of the Company as of the
Effective Date consisted of the following individuals:
Name Age Position
---- --- --------
Frederick A. Moran 56 Chairman, Chief Executive Officer and
Director
Dr. James C. Roberts 45 Deputy Chairman, President, Chief
Operating Officer and Director
The following is a brief summary of the business experience of the
foregoing directors and executive officers.
Frederick A. Moran
Mr. Moran was formerly Chairman and Chief Executive Officer of NovoComm
Inc., a privately owned company engaged in the telephony and communications
businesses in Russia and Ukraine. Prior to his affiliation with NovoComm, Inc.,
Mr. Moran was the co-founder, Chairman and Chief Executive Officer of
International Telcell, Inc. (now part of Metromedia International Group, Inc.)
and the founder and President of Moran & Associates, Inc. Securities Brokerage,
an investment banking and securities brokerage firm ("Moran Brokerage"), and
Moran Asset Management, Inc., an investment advisory firm ("Moran Asset"). Mr.
Moran has been listed in the "Who's Who of American Business Leaders" for the
last seven years.
In a civil action filed by the Securities & Exchange Commission ("SEC")
during June 1995, Mr. Moran and Moran Asset were found by the United States
District Court for the Southern District of New York to have violated Section
206(2) of the Investment Advisers Act of 1940 (the "Advisers Act") for
negligently allocating shares of stock to Mr. Moran's personal, family and firm
accounts at a slightly lower price than shares of stock purchased for Moran
Asset's advisory clients the following day. The Court also found that Mr. Moran,
Moran Asset and Moran Brokerage had violated the disclosure requirements of
Section 204 of the Advisers Act and the corresponding broker-dealer registration
requirements of Section 15(b) of the Securities Exchange Act of 1934 (the
"Exchange Act") by willfully failing to disclose that Mr. Moran's two eldest
sons were members of Moran Asset's and Moran Brokerage's board of directors. Mr.
Moran was the President and principal portfolio manager of Moran Asset as well
as the President and Director of Research for Moran Brokerage. As a result of
these findings, Mr. Moran, Moran Asset and Moran Brokerage were permanently
enjoined from violating Sections 204, 206(2), and 207 of the Advisers Act and
Section 15(b) of the Exchange Act. The Court ordered Moran Asset and Moran
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<PAGE>
Brokerage to pay civil monetary penalties in the respective amounts of $50,000
and $25,000. The Court also ordered Mr. Moran to disgorge $9,551.17 plus
prejudgment interest and pay a civil monetary penalty in the amount of $25,000.
Although Mr. Moran and the other named parties accepted and fully
complied with the findings of the District Court, they believe that the outcome
of the matter and the sanctions imposed failed to take into account a number of
mitigating circumstances, the first of which is that the basis for the violation
of Section 206(2) of the Advisers Act was an isolated incident of negligence
resulting in the allocation of 15,000 shares of stock to Moran family and firm
accounts at a slightly lower price than those purchased for firm clients the
following day, resulting in $9,551.17 in higher purchase cost incurred by these
clients. The scope of this infraction was not properly considered in view of the
following circumstances, among others: (i) the extraordinary volume of the daily
business undertaken by Moran Asset and Moran Brokerage which, on the date in
question, purchased approximately $34,000,000 of stocks for advisory clients and
proprietary accounts; (ii) that the appropriate personnel had inadvertently
allocated shares to certain personal and family accounts on the belief that all
client purchases had been completed; and (iii) shares of an additional stock had
been purchased that day for certain personal and family accounts at prices
higher than those paid by advisory clients the following day. Second, with
respect to the violation of the disclosure requirements of Section 204 of the
Advisers Act and Section 15(b) of the Exchange Act, the Court found Mr. Moran
and others to be liable for failure to disclose additional directors of Moran
Asset and Moran Brokerage. However, the additional directors in question were
Mr. Moran's two older sons who had been appointed as directors as a matter of
clerical convenience. In fact, they never participated in any Board of Directors
meetings, nor made any decisions concerning Moran Asset or Moran Brokerage, and
were never informed that they were directors. Furthermore, if their
directorships had been disclosed, as the Court had determined to be required,
Mr. Moran believes that any such disclosure would have, in fact, enhanced the
Form ADV of Moran Asset and the Form BD of Moran Brokerage since both adult sons
were professional securities analysts with major investment banks and held
college degrees from prestigious universities. Third, during his twenty-four
years as a full time investment professional, Mr. Moran has not otherwise been
the subject of any SEC, NASD or other regulatory or judicial matters.
Dr. James C. Roberts
Dr. Roberts served as President and Chief Executive Officer of CGI
Worldwide, Inc. ("CGI") since its inception in 1986 until 1997. CGI is a
multifaceted telecommunications company which has designed, engineered,
constructed and developed over 80 cellular, paging and cable television systems
around the world. Prior to joining CGI, Dr. Roberts spent over 10 years in the
telecommunications business, holding senior management positions with McCaw
Cellular Communications, Inc., MCI Communications Corp. and Motorola, Inc.
During this period, Dr. Roberts was responsible for building and operating over
50 cellular, paging and cable TV systems. Dr. Roberts is a charter member of the
Cellular Telephone Industry Association and has been listed in the "Who's Who in
Industry and Finance" since 1990 and "Who's Who of American Business Leaders"
for the last five issues.
6
<PAGE>
Employment Arrangements
The Company has entered into employment agreements with Messrs. Moran
and Roberts which provide for annual salaries of $125,000 each. Messrs. Moran
and Roberts are both employed for a term of five years, with successive
year-to-year renewals in the event that neither they, nor the Company, elect to
terminate the agreement after the initial term.
Description of the Securities Issued in the Merger
Series A Convertible Preferred Stock
In connection with the Merger, the Sky King Shareholders received
5,500,000 shares of Series A Convertible Preferred Stock of Sub (the "Series A
Shares"). The Series A Shares automatically convert into an aggregate of
5,500,000 shares of Sub Common Stock upon the occurrence of the Domestication
Merger. If the domestication of the Company does not occur within one (1) year
after the Effective Date, all, but not less than all of the Series A Shares may
be convertible at any time thereafter by the holders thereof into, or
exchangeable for, 5,500,000 Company Common Shares. The Series A Shares shall
also automatically convert into shares of Sub Common Stock upon the occurrence
of: (i) a liquidation event, dissolution or winding up of Sub, (ii) the sale of
all or substantially all of the assets or business of Sub or (iii) a merger,
plan of reorganization or consolidation in which Sub is not the surviving
corporation.
Prior to the conversion of the Series A Shares, the holders thereof
shall have no voting rights.
The terms of the Series A Shares are contained within a definitive
Certificate of Designation which has been filed with the Secretary of State of
Delaware and is attached as an exhibit to this Report.
Series B Convertible Preferred Stock
In connection with the Merger, the Sky King Shareholders received
4,500,000 shares of Series B Convertible Preferred Stock of Sub (the "Series B
Shares"). The terms of the Series B Shares are identical to those of the Series
A Shares, except that the Series B Shares have been issued in escrow and may
only be released upon satisfaction of certain performance criteria. See
"Performance Criteria."
The terms of the Series B Shares are contained within a definitive
Certificate of Designation which has been filed with the Secretary of State of
Delaware and is attached as an exhibit to this Report.
7
<PAGE>
Registration Rights
The Company has agreed, as soon as practicable after the closing of the
Domestication Merger, to prepare and file with the Securities and Exchange
Commission, and use its best efforts to have declared effective, a Registration
Statement (the "Registration Statement") pursuant to which the Company shall
register the potential resale of the shares of Sub Common Stock then to be held
by the former Sky King Shareholders (the "Registrable Securities"), and
thereafter, shall use its best efforts to keep such Registration Statement
effective for a period of three (3) years. Other than brokerage or underwriting
discounts or commissions, if any, the expenses of such registration will be
borne by the Company. If the Domestication Merger is not completed within one
year of the Effective Date, the registration rights described in this paragraph
would apply to the Company Common Shares issuable to the former Sky King
Shareholders.
The Company may delay filing the Registration Statement, and may
withhold efforts to cause the Registration Statement to become effective, if in
the opinion of a lead or managing underwriter retained to conduct an
underwriting on a firm basis, the resale of such Registrable Securities covered
by the Registration Statement would have an adverse effect upon the completion
of an underwritten sale of Registrable Securities.
Restrictions upon Resale
The Registrable Securities are subject to restrictions upon resale such
that 25% of the shares held by the non-affiliate former Sky King Shareholders
are eligible for resale after November 5, 1998, an additional 25% are eligible
for resale after May 5, 1999 and the remaining 50% of the shares are eligible
for resale after November 5, 1999.
With respect to affiliates at the time of the Merger (i.e., over 10%
shareholders, officers and directors), no resales shall commence until eighteen
(18) months after the Effective Date, or November 6, 1999.
Principal Stockholders
The following table sets forth certain information regarding the
beneficial ownership of the Company Common Shares as of the Effective Date with
respect to: (i) each person known by the Company to beneficially own 5% or more
of the outstanding Company Common Shares; (ii) each of the Company's directors;
(iii) each of the Company's executive officers; and (iv) all directors and
executive officers of the Company as a group. Except as otherwise indicated,
each person set forth below has sole voting and investment power on the shares
reported.
8
<PAGE>
Number of Shares Percentage
Name Owned(1)(2) of Shares
---- ---------------- ----------
Frederick A. Moran 2,691,970(3) 19.6%
27 Doubling Road
Greenwich, CT 06830
Roberts Family Trust 2,750,000 20.0%
James C. Roberts, Trustee
c/o 27 Doubling Road
Greenwich, CT 06830
Frederick W. Moran 1,422,850 10.4%
230 Park Avenue, 13th Floor
New York, NY 10169
Clayton F. Moran 1,422,850 10.4%
435 Old Stratfield Road
Fairfield, CT 06432
All officers and directors of the 5,441,970 39.6%
Company as a group (2 persons)
- ---------------
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in
the regulations promulgated under the Securities Exchange Act of 1934,
and, accordingly, may include securities owned by or for, among others,
the spouse and/or minor children of an individual and any other
relative who has the same home as such individual, as well as other
securities as to which the individual has or shares voting or
investment power or which each person has the right to acquire within
60 days after the date of this Report through the exercise of options,
or otherwise. Beneficial ownership may be disclaimed as to certain of
the securities. This table has been prepared based on 13,700,000
Company Common Shares outstanding (assuming approximately 3,700,000
outstanding shares, plus 10,000,000 Company Common Shares issuable upon
conversion of the Series A Shares and the Series B Shares).
(2) Assumes the issuance of 10,000,000 shares of common stock upon
conversion of the Series A Shares and the Series B Shares. The Series B
Shares are being held by the Company in escrow and are subject to
release upon the satisfaction of certain performance criteria by the
Sub.
(3) Includes 1,304,650 shares of common stock owned by Kent F. Moran and
1,304,650 shares of common stock owned by Luke F. Moran, both of
whom are minor children of Frederick A. Moran. Includes 82,670 shares
of common stock owned in the name of Frederick A. Moran and Joan B.
Moran, husband and wife. Does not include 1,422,850 shares of common
stock owned by Frederick W. Moran and 1,422,850 shares of common stock
owned by Clayton F. Moran, both of whom are adult children of
Frederick A. Moran.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
As a result of the Merger, the Company has assumed the historical
business of Sky King. See ITEM 1 and the financial statements of Sky King
attached as an exhibit to this Report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
(i) Financial Statements (audited) of Sky King Communications, Inc.
for the period ended June 30, 1996 and year ended June 30, 1997.
(ii) Financial Statements (unaudited) of Sky King
Communications, Inc. for the nine months ended March 31, 1997 and March 31,
1998.
(b) Proforma Financial Information
(i) Pro forma condensed consolidated statement of operations
(unaudited) for the nine months ended March 31, 1998.
(ii) Pro forma condensed consolidated statement of operations
(unaudited) for the year ended June 30, 1997.
(c) Exhibits (referenced to Item 601 of Regulation S-K).
Exhibit
Number Title
- ------- -----
2.8 Amended and Restated Agreement and Plan of Merger effective December
10, 1997 by and among VDC Corporation Ltd., VDC (Delaware), Inc. and
Sky King Communications, Inc.
2.9 Amendment to Amended and Restated Agreement and Plan of Merger
dated March 6, 1998
2.10 Certificate of Merger of Sky King Communications, Inc. into VDC
(Delaware), Inc.
4.1 Certificate of Designation, Preferences and Rights of Series A
Convertible Preferred Stock
4.2 Certificate of Designation, Preferences and Rights of Series B
Convertible Preferred Stock
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4.3 Specimen of Series A Convertible Preferred Stock
4.4 Specimen of Series B Convertible Preferred Stock
10.1 Employment Agreement of Frederick A. Moran, as amended
10.2 Employment Agreement of Dr. James C. Roberts
10.3 Asset Purchase Agreement by and between VDC Corporation Ltd. and
Rozel International Holdings Limited, dated December 18 , 1997,
including Exhibits thereto.
10.4 Asset Purchase Agreement by and between VDC Corporation Ltd. and
Tasmin Limited, dated February 10, 1998, including Exhibits thereto.
10.5 Promissory Note from HPC Corporate Services Limited, dated March 2,
1998.
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VDC Corporation Ltd.
and Subsidiary
Index to Financial Statements
- -------------------------------------------------------------------------------
VDC Corporation Ltd.
(Formerly Sky King Communications, Inc.) Financial Statements:
Report of Independent Certified Public Accountants F-2
Balance sheets F-3
Statements of operations F-4
Statements of stockholders' equity F-5
Statements of cash flows F-6
Notes to financial statements F-7 - F-16
VDC Corporation Ltd. Pro Forma Condensed
Consolidated Financial Statements - Unaudited:
Introduction F-17
Statement of operations for the nine months
ended March 31, 1998 F-18
Statement of operations for the year ended
June 30, 1997 F-19
F-1
<PAGE>
Independent Auditors' Report
Board of Directors and Stockholders
VDC Corporation Ltd.
Greenwich, Connecticut
We have audited the accompanying balance sheets of VDC Corporation Ltd.
(formerly Sky King Communications, Inc.) as of June 30, 1997 and 1996, and the
related statements of operations, stockholders' equity, and cash flows for the
year ended June 30, 1997 and the period January 3, 1996 (inception) to June 30,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of VDC Corporation Ltd.
(formerly Sky King Communications, Inc.) at June 30, 1997 and 1996, and the
results of its operations and its cash flows for the year ended June 30, 1997
and the period January 3, 1996 (inception) to June 30, 1996 in conformity with
generally accepted accounting principles.
BDO Seidman, LLP
May 12, 1998
F-2
<PAGE>
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VDC Corporation Ltd.
(Formerly Sky King Communications, Inc.)
Balance Sheets
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<TABLE>
<CAPTION>
March 31,
June 30, June 30, 1998
1996 1997 (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current:
Cash and cash equivalents (Note 5) $ 2,173 $ 1,430 $ 3,784,036
Marketable securities (Note 3) -- -- 361,750
Notes receivable - current (Note 4) -- -- 1,800,000
Other current assets 466 -- 93,130
- --------------------------------------------------------------------------------------------------------------------------
Total current assets 2,639 1,430 6,038,916
Property, plant and equipment, less accumulated depreciation
(Note 7) 13,860 13,570 21,144
Notes receivable, less current portion (Note 4) -- -- 2,500,000
Loan receivable (Note 5) -- -- 366,725
Other assets -- -- 12,100
- --------------------------------------------------------------------------------------------------------------------------
Total assets $ 16,499 $ 15,000 $ 8,938,885
- --------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current:
Accounts payable and accrued expenses $ 250 $ 250 $ 151,730
- --------------------------------------------------------------------------------------------------------------------------
Total current liabilities 250 250 151,730
- --------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Notes 5, 11 and 12)
Stockholders' equity:
Convertible Preferred Stock Series A (Note 8) -- -- 550
Convertible Preferred Stock Series B (Note 8) -- -- 30
Common stock (Note 8) 1,000 1,000 8,799,676
Additional paid-in capital 41,951 72,881 2,964,680
Accumulated deficit (26,702) (59,131) (2,391,831)
Stock subscriptions receivable (Note 6) -- -- (610,975)
Unrealized gain on marketable securities (Note 3) -- -- 25,025
- --------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 16,249 14,750 8,787,155
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 16,499 $ 15,000 $ 8,938,885
- --------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
F-3
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VDC Corporation Ltd.
(Formerly Sky King Communications, Inc)
Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
January 3, Nine Months
1996 Nine Months Ended
(inception) to Ended March 31,
June 30, Year Ended March 31, 1997 1998
1996 June 30, 1997 (Unaudited) (Unaudited)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 4,850 $ 43,248 $ 30,491 $ 62,741
- ----------------------------------------------------------------------------------------------------------
Site leasing expense 1,091 22,020 11,172 26,546
Selling, general and administrative 30,461 53,657 43,675 468,697
Noncash compensation expense (Note 9) -- -- -- 801,000
- ----------------------------------------------------------------------------------------------------------
Loss from operations (26,702) (32,429) (24,356) (1,233,502)
- ----------------------------------------------------------------------------------------------------------
Interest income -- -- -- 6,325
- ----------------------------------------------------------------------------------------------------------
Net loss $ (26,702) $ (32,429) $ (24,356) $(1,227,177)
==========================================================================================================
Net loss per common share - basic $ (.01) $ (.01) $ (.01) $ (.33)
==========================================================================================================
Weighted average number of shares
outstanding 3,699,838 3,699,838 3,699,838 3,713,342
==========================================================================================================
See accompanying notes to financial statements.
</TABLE>
F-4
<PAGE>
VDC Corporation Ltd.
(Formerly Sky King Communications, Inc.)
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Convertible Convertible
Preferred Stock Preferred Stock
Series A Series B Common Stock
------------------ ------------------ --------------------
Shares Amount Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 3, 1996 -- $ -- -- $-- -- $ --
Issuance of common stock -- -- -- -- 1,000 1,000
Capital contribution -- -- -- -- -- --
Net loss -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------
Balance - June 30, 1996 -- -- -- -- 1,000 1,000
Capital contribution -- -- -- -- -- --
Net loss -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------
Balance - June 30, 1997 -- -- -- -- 1,000 1,000
Recapitalization resulting
from merger (Note 9) 5,500,000 550 -- -- 3,698,373 7,398,211
Release of escrow shares
(Note 9) -- -- 300,000 30 -- --
Issuance of common stock -- -- -- -- 700,000 1,400,000
Issuance of stock for note -- -- -- -- 465 465
Unrealized gain on marketable
securities -- -- -- -- -- --
Net loss -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------
Balance - March 31, 1998 5,500,000 $550 300,000 $30 4,399,838 $8,799,676
- --------------------------------------------------------------------------------------------------
<CAPTION>
Stock Unrealized
Additional Subscrip- gain on
Paid-in Accumulated tions Marketable
Capital Deficit Receivable Securities Total
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 3, 1996 $ -- $ -- $ -- $ -- $ --
Issuance of common stock -- -- -- -- 1,000
Capital contribution 41,951 -- -- -- 41,951
Net loss -- (26,702) -- -- (26,702)
- ----------------------------------------------------------------------------------------------
Balance - June 30, 1996 41,951 (26,702) -- -- 16,249
Capital contribution 30,930 -- -- -- 30,930
Net loss -- (32,429) -- -- (32,429)
- ----------------------------------------------------------------------------------------------
Balance - June 30, 1997 72,881 (59,131) -- -- 14,750
Recapitalization resulting
from merger (Note 9) (72,881) (1,105,523) -- -- 6,220,357
Release of escrow shares
(Note 9) 800,970 -- -- -- 801,000
Issuance of common stock 2,000,000 -- -- -- 3,400,000
Issuance of stock for note 163,710 -- (610,975) -- (446,800)
Unrealized gain on marketable
securities -- -- -- 25,025 25,025
Net loss -- (1,227,177) -- -- (1,227,177)
- ----------------------------------------------------------------------------------------------
Balance - March 31, 1998 $2,964,680 $(2,391,831) $(610,975) $25,025 $8,787,155
- ----------------------------------------------------------------------------------------------
</TABLE>
F-5
<PAGE>
VDC Corporation Ltd.
(Formerly Sky King Communications, Inc.)
Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months
Nine Months Ended
Period Ended Ended March 31, March 31,
June 30, 1996 Year Ended 1997 1998
(since inception) June 30, 1997 (Unaudited) (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (26,702) $ (32,429) $ (24,356) $(1,227,177)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 1,540 3,390 2,542 4,953
Noncash compensation expense -- -- -- 801,000
Changes in operating assets and
liabilities:
Prepaid expenses and other assets (466) 466 466 (35,230)
Accounts payable and accrued
expenses 250 -- -- 27,201
- --------------------------------------------------------------------------------------------------------------------------
Net cash used by operating
activities (25,378) (28,573) (21,348) (429,253)
- --------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of investment securities -- -- -- (288,600)
Proceeds from repayment of notes receivable -- -- -- 885,700
Advances under loan receivable -- -- -- (122,000)
Fixed asset acquisition -- -- -- (12,527)
- --------------------------------------------------------------------------------------------------------------------------
Net cash flows from investing
activities -- -- -- 462,573
- --------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock 1,000 -- -- 3,749,286
Capital contribution 26,551 27,830 26,170 --
- --------------------------------------------------------------------------------------------------------------------------
Net cash flows from financing
activities 27,551 27,830 26,170 3,749,286
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 2,173 (743) 4,822 3,782,606
Cash and cash equivalents, beginning of period -- 2,173 2,173 1,430
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 2,173 $ 1,430 $ 6,995 $ 3,784,036
- --------------------------------------------------------------------------------------------------------------------------
Supplemental schedule of noncash investing
and financing activities:
Net assets acquired in exchange for capital $ -- $ -- $ -- $ 5,871,071
Fixed assets contributed by stockholders 15,400 3,100 3,100 --
Stock subscription for common stock -- -- -- 164,175
- --------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
F-6
<PAGE>
VDC Corporation Ltd.
(Formerly Sky King Communications, Inc.)
Notes to Financial Statements
(Amounts and disclosures relating to March 31, 1998 and for the nine month
periods ended March 31, 1997 and March 31, 1998 are unaudited)
1. Organization and VDC Corporation Ltd. (formerly Sky King
Business Operations Communications, Inc.) (the "Company") was
incorporated in Connecticut on January 3, 1996
to engage in the international telephony and
wireless communications businesses.
2. Significant Accounting (a) Basis of Presentation
Policies
On March 6, 1998, Sky King
Communications, Inc. ("Sky King")
entered into a merger agreement with VDC
Corporation Ltd. ("VDC") and VDC
(Delaware), Inc. ("Sub", a wholly-owned
subsidiary of VDC). Under the agreement,
all of the outstanding shares of Sky
King's common stock were exchanged for
Sub preferred stock convertible into up
to 10 million newly issued shares of Sub
common stock. Sub Preferred Stock Series
A that is convertible into 5.5 million
shares of Sub common stock was issued at
the closing, and Sub Preferred Stock
Series B convertible into the remaining
4.5 million shares of Sub common stock
was placed and held in escrow pending
the achievement of certain performance
criteria. Simultaneous with the merger
Sub changed its name to Sky King
Communications, Inc. ("Sky King
Communications, Inc."). This transaction
is being accounted for as a reverse
acquisition whereby Sky King is the
acquirer for accounting purposes.
Accordingly the historical financial
statements presented are those of Sky
King prior to the merger on March 6,
1998 and reflect the consolidated
results of Sky King and VDC subsequent
to the merger.
(b) Property, Plant and Equipment
and Depreciation
Property, plant and equipment are stated
at cost. Depreciation is computed over
the estimated lives of the assets using
the straight-line method.
(c) Cash and Cash Equivalents
For purposes of the statement of cash
flows, the Company considers all highly
liquid investments with an original
maturity of three months or less to be
cash equivalents.
(d) Credit Risk
Financial instruments which potentially
subject the Company to concentrations of
credit risk consist principally of
temporary cash investments. The
Company's cash investments are placed
with high credit quality financial
institutions and may exceed the amount
of federal deposit insurance.
F-7
<PAGE>
VDC Corporation Ltd.
(Formerly Sky King Communications, Inc.)
Notes to Financial Statements
(Amounts and disclosures relating to March 31, 1998 and for the nine month
periods ended March 31, 1997 and March 31, 1998 are unaudited)
(e) Income Taxes
Deferred income taxes are provided, when
applicable, on differences between the
financial reporting and income tax bases of
assets and liabilities based upon statutory
tax rates enacted for future periods.
(f) Use of Estimates
In preparing the financial statements in
conformity with generally accepted
accounting principles, management is
required to make estimates and assumptions
that affect the reported amounts of assets
and liabilities and the disclosure of
contingent assets and liabilities at the
date of the financial statements, and
revenues and expenses during the reporting
period. Actual results could differ from
those estimates.
(g) Financial Instruments
The carrying amounts of financial
instruments including cash and cash
equivalents, loan receivable and accounts
payable approximated fair value as of March
31, 1998, because of the relatively short
maturity of these financial instruments. The
carrying value of long-term notes
receivable, including the current portion,
approximated fair value as of March 31,
1998, based upon quoted market prices for
similar debt issues. The carrying value of
amounts due from and due to related parties
cannot be determined because of the nature
of the terms.
(h) Loss Per Share of Common Stock
Loss per common share is computed on the
weighted average number of shares
outstanding. If dilutive, common equivalent
shares (common shares assuming exercise of
options and warrants) utilizing the treasury
stock method, as well as the conversion of
convertible preferred stock are considered
in presenting diluted earnings per share.
Diluted loss per share is not presented
because the effect of the convertible
securities is antidilutive. Warrants to
purchase 938,546 shares of common stock at
prices ranging from $4.00 to $5.00 are not
included in the computation of diluted loss
per share because they are antidilutive due
to the net loss. If the preferred shares
were considered to be common shares, loss
per share would have been $0.00, $0.00,
$0.00 and $(0.09) for the periods ended June
30, 1996, June 30, 1997, March 31, 1997 and
March 31, 1998.
F-8
<PAGE>
VDC Corporation Ltd.
(Formerly Sky King Communications, Inc.)
Notes to Financial Statements
(Amounts and disclosures relating to March 31, 1998 and for the nine month
periods ended March 31, 1997 and March 31, 1998 are unaudited)
(i) Long-Lived Assets
The Company reviews certain long-lived
assets and identifiable intangibles for
impairment whenever events or changes in
circumstances indicate that the carrying
amount may not be recoverable. In that
regard, the Company assesses the
recoverability of such assets based upon
estimated non-discounted cash flow
forecasts.
(j) Recent Accounting Standards
Statement of Financial Accounting Standards
No. 130 "Reporting Comprehensive Income,"
established standards for reporting and
display of comprehensive income, its
components and accumulated balances.
Comprehensive income is defined to include
all changes in equity except those resulting
from investments by owners and distributions
to owners. Among other disclosures, SFAS No.
130 requires that all items that are
required to be recognized under current
accounting standards as components of
comprehensive income be recognized under
current accounting standards as components
of comprehensive income and reported in a
financial statement that is displayed with
the same prominence as other financial
statements.
Statement of Financial Accounting Standards
No. 131 "Disclosures about Segments of an
Enterprise and Related Information", which
supersedes SFAS No. 14, "Financial Reporting
for Segments of a Business Enterprise"
establishes standards for the way that
public enterprises report information about
operating segments in annual financial
statements and requires reporting of
selected information about operating
segments in interim financial statements
issued to the public. It also establishes
standards for disclosures regarding products
and services, geographical areas and major
customers. SFAS No. 131 defined operating
segments as components of an enterprise
about which separate financial information
is available that is evaluated regularly by
management in deciding how to allocate
resources and in assessing performance.
Both SFAS Nos. 130 and 131 are effective for
financial statements for fiscal years
beginning after December 15, 1997 and
require comparative information for earlier
years to be restated. The adoption of SFAS
No. 130 is not expected to have a material
effect on the Company's financial statement
disclosures. The Company is currently
reviewing the effect of SFAS No. 131 but has
yet been unable to fully evaluate the
impact, if any, it may have on future
financial statement disclosures.
F-9
<PAGE>
VDC Corporation Ltd.
(Formerly Sky King Communications, Inc.)
Notes to Financial Statements
(Amounts and disclosures relating to March 31, 1998 and for the nine month
periods ended March 31, 1997 and March 31, 1998 are unaudited)
- -------------------------------------------------------------------------------
3. Marketable Securities Marketable equity securities, which are
available for sale are measured at fair
value, with net unrealized gains and losses
included as a component of stockholders'
equity. Gross unrealized holding gains of
$25,025 were included as changes in the
component of stockholders' equity during the
period ended March 31, 1998. The Company
uses the specific identification method to
determine the cost of securities sold. Gross
unrealized gains on marketable securities
amounted to $25,025 at March 31, 1998.
4. Notes Receivable Notes receivable, which resulted from the
sale of certain VDC Corporation, Ltd.
investments to unrelated parties prior to
the March 6, 1998 merger (Note 9), have
repayment terms through September, 1999 and
bear interest at 8%. The notes are with
recourse against the general assets of the
debtors and are collateralized by the
related investments sold which consisted of
its investments in private and
publicly-traded companies. As of March 31,
1998, the notes receivable and related
collateral consisted of the following:
$3,500,000 due from Rozel International
Holdings Limited, collateralized by
3,972,877 shares of netValue, Inc., notes in
the aggregate principal amount of $200,000
due from netValue, 100,000 shares of
Informatix, Inc., and $700,000 principal
amount note due from Informatix.
$800,000 due from Tasmin Limited,
collateralized by 15,836,364 shares of
Tamaris PLC, a note in the principal amount
of $167,842 due from Silk Securities, notes
in the aggregate principal amount of
$161,990 due from MJZ Securities Ltd.,
advances amounting to $119,264 due from
EPSOM Investment Services and an investment
in FIP Holdings, Ltd. in the aggregate
amount of $330,000.
F-10
<PAGE>
- --------------------------------------------------------------------------------
VDC Corporation Ltd.
(Formerly Sky King Communications, Inc.)
Notes to Financial Statements
(Amounts and disclosures relating to March 31, 1998 and for the nine month
periods ended March 31, 1997 and March 31, 1998 are unaudited)
5. Loan Receivable On November 25, 1997, the Company entered
into an agreement with PortaCom Wireless,
Inc. ("PortaCom") wherein the Company will
acquire from PortaCom warrants to purchase
four million shares of common stock of
Metromedia China Corporation (formerly
Metromedia Asia Corporation) ("MCC"), and
two million shares of common stock of MCC.
Under the original purchase agreement, the
Company will fund up to $700,000 of loan
advances and transfer up to 5,300,000 common
shares of VDC Corporation, Ltd. to PortaCom.
As of March 31, 1998, the Company has
advanced $366,725 under this agreement.
Interest on the advances is at 10%. Amounts
advanced under the loan agreement are
secured by a first- priority interest in all
of PortaCom's rights, title and interest in
warrants to purchase four million shares of
common stock of MCC and two million shares
of the common stock of MCC. To the extent
that advances are outstanding at the closing
of the purchase transaction, they would
offset the $700,000 maximum cash component
of the purchase price.
PortaCom subsequently filed a voluntary
petition for bankruptcy relief under Chapter
11 of the United States Bankruptcy Code in
the United States Bankruptcy Court. During
the course of the bankruptcy proceeding, the
original purchase agreement was amended to
provide that the Company will fund an escrow
account in the amount of $2,682,000 for the
benefit of holders of priority unsecured
claims and general unsecured claims against
PortaCom's bankruptcy estate. To the extent
that the cash escrow is drawn upon by
PortaCom, it will receive fewer VDC shares.
The number of VDC shares to be issued shall
be the difference between 5,300,000 and the
difference between the principal amount of
the cash escrow and the loan advances
($366,725 at March 31, 1998) divided by the
value of the Company's stock. The escrow
fund and VDC shares will be held in escrow
pending the confirmation of the plan of
reorganization of PortaCom and the
resolution of the disputed claims against
PortaCom's bankruptcy estate. Under the
amended purchase agreement, part of the
purchase price may be used to satisfy claims
against PortaCom's bankruptcy estate.
6. Stock Subscription In December 1997, a shareholder acquired
Receivable 465.3 shares of Sky King Receivable
Communications, Inc. for a note amounting to
$164,175. The note, which bears interest at
8%, matures in December, 1999. This note has
been presented as a reduction of
stockholders' equity.
In March 1998, 253,000 shares of VDC were
issued in exchange for a $632,500 note which
bears interest at 8% and is due in March,
1999. The unpaid balance at March 31, 1998
of $446,800 has been presented as a
reduction of stockholders' equity.
F-11
<PAGE>
- --------------------------------------------------------------------------------
VDC Corporation Ltd.
(Formerly Sky King Communications, Inc.)
Notes to Financial Statements
(Amounts and disclosures relating to March 31, 1998 and for the nine month
periods ended March 31, 1997 and March 31, 1998 are unaudited)
<TABLE>
<S> <C>
7. Property, Plant and Major classes of property, plant and equipment consist of the following:
Equipment
March 31,
June 30, June 30, 1998
1996 1997 (Unaudited)
----------------------------------------------------------------------------------------
Office equipment $11,900 $11,900 $24,428
Furniture and fixtures 3,500 6,600 6,600
----------------------------------------------------------------------------------------
15,400 18,500 31,028
Less accumulated depreciation 1,540 4,930 9,884
----------------------------------------------------------------------------------------
$13,860 $13,570 $21,144
----------------------------------------------------------------------------------------
8. Capital Stock and Capital stock is comprised of the following:
Capital Transactions
March 31,
June 30, June 30, 1998
1996 1997 (Unaudited)
-----------------------------------------------------------------------------------------
Common stock of Sky King
Communications, Inc., $1 par
value, shares authorized
2,000, issued and outstanding
1,000 and 1,000 at June 30,
1996 and 1997 $1,000 $1,000 $ --
Convertible Preferred Stock
Series A of VDC (Delaware),
Inc., non-voting, $.0001 par
value, shares authorized,
5,500,000 issued and
outstanding 5,500,000 at
March 31, 1998(a) $ -- $ -- $ 550
Convertible preferred stock series
B of VDC (Delaware), Inc.
non-voting $.0001 par value
shares authorized 4,500,000
issued and outstanding
300,000 at March 31, 1998(a) -- -- 30
Common stock of VDC
Corporation, Ltd. $2 par
value, shares authorized
50,000,000, issued and
outstanding 4,399,838 at
March 31, 1998 $ -- $ -- $8,799,676
-----------------------------------------------------------------------------------------
</TABLE>
F-12
<PAGE>
VDC Corporation Ltd.
(Formerly Sky King Communications, Inc.)
Notes to Financial Statements
(Amounts and disclosures relating to March 31, 1998 and for the nine month
periods ended March 31, 1997 and March 31, 1998 are unaudited)
(a) The convertible preferred stock, which
is non voting, is to convert into up to
10 million newly issued shares of VDC
(Delaware), Inc. common stock upon the
domestication of VDC Corporation Ltd.
into VDC (Delaware), Inc. If the
domestication does not occur within one
year of the merger (Note 9), the
convertible preferred stock will be
exchangeable into common stock of VDC
Corporation Ltd. on a share for share
basis. There are 4.2 million shares held
in escrow at March 31, 1998 under the
merger agreement.
On March 6, 1998, Sky King Communications,
Inc. entered into a merger agreement with
VDC Corporation Ltd. and VDC (Delaware),
Inc. wherein all of the outstanding shares
of Sky King Communications, Inc. were
exchanged for preferred shares of VDC
(Delaware), Inc. (See Note 9).
On March 31, 1998, the Company issued
100,000 shares of common stock at $5.50 and
on March 24, 1998, 600,000 shares of common
stock at $4.75, each to unrelated investors
for total cash consideration of $3,400,000.
In April, 1998, the Company issued options
to purchase an aggregate of 201,500 common
stock shares of VDC Corporation, Ltd. for
$5.00 per share. 30,000 of these options
which vest immediately were issued in
conjunction with the acquisition of Blue Sky
International, L.L.C. (Note 13). The
remaining options vest over five years and
expire after ten years.
At March 31, 1998, the Company had
outstanding warrants to acquire an aggregate
of 938,546 shares of company common stock at
prices ranging from $4.00 to $5.00.
The Company is obligated to pay
investment banking fees in connection
with the merger in an aggregate amount
equal to 5% of the total merger
consideration or 500,000 common shares
of VDC Corporation, Ltd. (Note 9). The
issuance of the shares is subject to the
satisfaction of certain contingencies
which have not yet been satisfied. Upon
issuance, the shares will be accounted
for as an adjustment to the
recapitalization resulting from the
merger.
9. Merger On March 6, 1998, Sky King
Communications, Inc. entered into a
merger agreement with VDC Corporation
Ltd. and VDC (Delaware), Inc. (See Note
2). This transaction is being accounted
for as a reverse acquisition whereby Sky
King is the acquirer for accounting
purposes. Since the assets and
liabilities acquired were monetary in
nature, the merger has been recorded at
the value of the net monetary assets.
F-13
<PAGE>
VDC Corporation Ltd.
(Formerly Sky King Communications, Inc.)
Notes to Financial Statements
(Amounts and disclosures relating to March 31, 1998 and for the nine month
periods ended March 31, 1997 and March 31, 1998 are unaudited)
The consideration paid to the former Sky
King Shareholders in the Merger
consisted of the issuance of 10 million
newly-issued shares of preferred stock
of the Sub (the "Sub Preferred Stock")
which is convertible, in the aggregate,
into 10,000,000 shares of common stock
of Sub (the "Sub Common Stock"). Of the
consideration paid to the Sky King
Shareholders, Sub Preferred Stock
convertible in the aggregate into
4,500,000 shares of Sub Common Stock
(the "Escrow Shares") was placed in
escrow to be held and released from time
to time as the Sub achieves certain
performance criteria described below. To
the extent that any of the Escrow Shares
have not been released at the expiration
of an escrow period of five (5) years
(the "Escrow Period"), the remaining
Escrow Shares shall be surrendered to
the Company for cancellation.
Escrow shares will be released to the
Sky King Shareholders from time to time
in accordance with the following
schedule:
<TABLE>
<CAPTION>
Number of Shares to be Released(1) Performance Criteria
------------------------------------------------------------------------------------------
<S> <C> <C>
500,000 Upon each procurement of one or more frequency,
operating and/or business licenses ("Licenses") to
provide the following types of services (the
"Services") to an aggregate minimum population of
500,000 people: wireless or wired telephony, local
loop telephony, and in country long distance
telephony services, international long distance
telephony gateways or internet service provision; plus
100,000 for each 100,000 people in excess of the aggregate
minimum population of 500,000 covered by the
Licenses.
-------------------------------------------------------------------------------------------
500,000 The provision of billing services at an average rate of
100,000 bills per month for a consecutive
three month period.
-------------------------------------------------------------------------------------------
100,000 Upon each procurement of $1,000,000 of appropriate
financing for the provision of Services or for capital
expenditures or other expenses associated with the
Services; or procurement of $200,000 of appropriate
financing for the provision of paging services or for
capital expenditures or other expenses associated with
the provision of paging services.
-------------------------------------------------------------------------------------------
100,000 Upon each procurement of one or more Licenses to
provide paging services for an aggregate minimum
population of 500,000 people; plus
100,000 for each 100,000 people in excess of the aggregate
minimum population of 500,000 covered by the
Licenses.
------------------------------------------------------------------------------------------
(1) The aggregate number of shares of Sub Common Stock (or if the Domestication
Merger does not occur within one year after the Effective Date, the VDC Common
Shares) to be released resulting from the conversion of Escrow Shares.
</TABLE>
F-14
<PAGE>
VDC Corporation Ltd.
(Formerly Sky King Communications, Inc.)
Notes to Financial Statements
(Amounts and disclosures relating to March 31, 1998 and for the nine month
periods ended March 31, 1997 and March 31, 1998 are unaudited)
================================================================================
In March 1998, 300,000 shares were
released from escrow. Of the 300,000
shares released, 164,880 shares were
considered to be compensatory resulting
in noncash compensation of $801,000.
Compensatory shares related to members
of the Company's management, their
family trusts and minor children and an
employee. Noncompensatory shares
released related to non-management
shareholders and non-minor children of
management shareholders where beneficial
ownership does not exist.
The unaudited pro forma results of
operations which follow assume the
acquisition occurred at July 1, 1996.
<TABLE>
<CAPTION>
Nine Months
Ended March Year Ended
31, 1998 June 30, 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $ 62,741 $ 43,248
Loss from continuing operations $(2,529,956) $(1,205,416)
Loss on disposal of discontinued operations $ -- $ (432,275)
Net loss $(2,584,326) $(1,637,691)
Loss per share of common stock $ (0.70) $ (0.44)
=========================================================================================
</TABLE>
10. Income Taxes As of March 31, 1998, the
Company had deferred tax assets of
approximately $184,000, for which a
valuation allowance has been
established. Deferred income taxes
result primarily from net operating loss
carryforwards.
11. Leases The Company leases radio tower
and antenna space under various
operating leases. The future remaining
minimum lease payments under these
leases are as follows:
Years ending June 30,
- --------------------------------------------------------------------------------
1998 $34,260
1999 28,407
2000 18,573
2001 2,135
- --------------------------------------------------------------------------------
$83,375
================================================================================
The Company sub-leases the radio tower
and antenna space to its customers under
operating leases with future remaining
minimum lease payments due to the
Company as follows:
Years ending June 30,
- --------------------------------------------------------------------------------
1998 $ 73,710
1999 34,687
2000 26,085
2001 27,390
- --------------------------------------------------------------------------------
$161,872
================================================================================
F-15
<PAGE>
VDC Corporation Ltd.
(Formerly Sky King Communications, Inc.)
Notes to Financial Statements
(Amounts and disclosures relating to March 31, 1998 and for the nine month
periods ended March 31, 1997 and March 31, 1998 are unaudited)
================================================================================
12. Commitments Employment Agreements
The Company has entered into seven
multi-year employment agreements
expiring through 2003 with officers of
the Company, which provide for aggregate
annual base salaries as follows:
Years ended June 30,
- --------------------------------------------------------------------------------
1998 $ 158,000
1999 633,000
2000 608,000
2001 456,000
2002 225,000
Thereafter 169,000
- --------------------------------------------------------------------------------
$2,249,000
================================================================================
13. Subsequent Events Asset Purchase
On April 1, 1998 the Company acquired
certain assets of Blue Sky International
L.L.C. ("Blue Sky") in exchange for
options to the owners of Blue Sky
to acquire an aggregate of 30,000 shares
of common stock of VDC Corporation Ltd.
F-16
<PAGE>
VDC Corporation LTD. Unaudited Pro Forma Consolidated
Condensed Financial Statements
Introduction
The following unaudited pro forma condensed consolidated statement of operations
for the nine months ended March 31, 1998 and year ended June 30, 1997 reflect
the pro forma condensed consolidated statements of operations of VDC
Corporation, Ltd. giving effect to the pro forma adjustments described herein as
though the merger with Sky King Communications Inc. ("Sky King") dated March 6,
1998 had been consummated at July 1, 1996.
The unaudited pro forma condensed consolidated statements of operations should
be read in conjunction with the historical financial statements of VDC
Corporation, Ltd. as filed in its annual report on Form 20-F and Sky King
Communications, Inc. included elsewhere herein. See "Index to Financial
Statements". The unaudited pro forma condensed consolidated statement of
operations is not necessarily indicative of operating results that would have
been achieved had the merger actually been consummated at July 1, 1996 and
should not be construed as indicative of future operations.
Under the terms of the merger agreement, VDC (Delaware), Inc. (Sub), a newly
formed Delaware Corporation and wholly owned subsidiary of the Company, issued
to the former Sky King shareholders preferred stock convertible into up to 10
million newly issued shares of Sub common stock. Sub preferred stock that is
convertible into 5.5 million shares of Sub common stock were issued at the
closing and Sub preferred convertible into the remaining 4.5 million shares of
Sub common stock were placed in escrow and will be released from time to time as
certain performance criteria are achieved.
This transaction is being accounted for as a reverse acquisition whereby Sky
King is the acquirer for accounting purposes. Since the assets and liabilities
acquired were monetary in nature, the merger has been recorded at the value of
the net monetary assets.
F-17
<PAGE>
VDC Corporation Ltd.
(Formerly Sky King Communications, Inc.)
Pro Forma Condensed Consolidated
Statement of Operations (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VDC Sky King
Corporation, Communications,
Nine months ended March 31, 1998 Ltd. Inc Adjustment Pro Forma
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ -- $ 62,741 $-- $ 62,741
- ------------------------------------------------------------------------------------------------------------------------------
Expenses
Site leasing expense -- 26,546 -- 26,546
Selling, general and administrative 1,552,018 213,133 -- 1,765,151
Noncash compensation expense -- 801,000 -- 801,000
- ------------------------------------------------------------------------------------------------------------------------------
Loss from operations (1,552,018) (977,938) -- (2,529,956)
Interest expense 24,077 -- -- 24,077
Interest income (198,833) (3,800) -- (202,633)
Realized loss on sale of marketable securities 232,926 -- -- 232,926
- ------------------------------------------------------------------------------------------------------------------------------
Net loss $(1,610,188) $ (974,138) $-- $(2,584,326)
- ------------------------------------------------------------------------------------------------------------------------------
Net loss per share - Basic $ (.43) $ (.27) $-- $(.70)
- ------------------------------------------------------------------------------------------------------------------------------
Weighted average number of common shares
outstanding 3,713,342 3,713,342 3,713,342
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-18
<PAGE>
VDC Corporation Ltd.
(Formerly Sky King Communications, Inc.)
Pro Forma Condensed Consolidated
Statement of Operations (Unaudited)
================================================================================
<TABLE>
<CAPTION>
VDC Sky King
Year ended June 30, 1997 Corporation, Ltd. Communications, Inc Adjustment Pro Forma
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ -- $ 43,248 $-- $ 43,248
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses
Site leasing expense -- 22,020 -- 22,020
Selling, general and administrative 1,013,353 53,657 -- 1,067,010
- ----------------------------------------------------------------------------------------------------------------------------------
Loss from operations (1,013,353) (32,429) -- (1,045,782)
Interest expense 83,669 -- -- 83,669
Interest and other income (121,465) -- -- (121,465)
Realized loss on sale of marketable securities 142,168 -- -- 142,168
Realized gain on sale of real estate (52,049) -- -- (52,049)
Unrealized holdings loss on marketable securities 64,636 -- -- 64,636
Foreign currency loss 42,675 -- -- 42,675
- ----------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations $(1,172,987) $ (32,429) $-- $(1,205,416)
- ----------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations per share - Basic $ (0.55) $ (0.01) $-- $ (0.32)
====================================================================================================================================
Weighted average number of common shares
outstanding 2,140,395 3,699,838 3,699,838(a)
====================================================================================================================================
</TABLE>
(a) Represents the weighted average number of shares of VDC as of the date of
the merger.
F-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 26, 1998 VDC CORPORATION LTD.
By: /s/ Frederick A. Moran
---------------------------------
Frederick A. Moran
Chairman and Chief Executive Officer
12
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Page Number in Rule
(Referenced to 0-3(b) Sequential
Item 601 of Numbering System Where
Reg. S-K) Exhibit Can Be Found
<S> <C> <C>
2.8 Amended and Restated Agreement and Plan of Merger effective
December 10, 1997 by and among VDC Corporation Ltd., VDC
(Delaware), Inc. and Sky King Communications, Inc.
2.9 Amendment to Amended and Restated Agreement and Plan of Merger
dated March 6, 1998
2.10 Certificate of Merger of Sky King Communications, Inc.
into VDC (Delaware), Inc.
4.1 Certificate of Designation, Preferences and Rights of Series A
Convertible Preferred Stock
4.2 Certificate of Designation, Preferences and Rights of Series B
Convertible Preferred Stock
4.3 Specimen of Series A Convertible Preferred Stock
4.4 Specimen of Series B Convertible Preferred Stock
10.1 Employment Agreement of Frederick A. Moran, as amended
10.2 Employment Agreement of Dr. James C. Roberts
10.3 Asset Purchase Agreement by and between VDC Corporation Ltd. and
Rozel International Holdings Limited, dated December 18 , 1997,
including Exhibits thereto.
10.4 Asset Purchase Agreement by and between VDC Corporation Ltd. and
Tasmin Limited, dated February 10, 1998, including Exhibits
thereto.
10.5 Promissory Note from HPC Corporate Services Limited, dated March
2, 1998.
</TABLE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
VDC CORPORATION LTD.
VDC (Delaware), INC.
AND
SKY KING COMMUNICATIONS, INC.
Effective Date: December 10, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I: MERGER OF SKY KING WITH AND INTO SUB AND RELATED
MATTERS 2
1.1 The Merger. 2
1.2 Conversion of Stock. 3
1.3 Merger Consideration. 4
1.4 Additional Rights; Taking of Necessary Action; Further Action. 6
1.5 Dissenters' Rights. 6
1.6 No Further Rights or Transfers. 6
ARTICLE II: THE CLOSING 6
2.1 Closing Date. 6
2.2 Closing Transactions. 7
ARTICLE III: CERTAIN CORPORATE ACTION 10
3.1 Sky King Corporate Action. 10
3.2 Acquiror Corporate Action. 10
ARTICLE IV: REPRESENTATIONS AND WARRANTIES 10
4.1 Representations and Warranties of Sky King and the Sky King Shareholders. 10
4.2 Representations and Warranties of Acquiror and the Sub. 18
ARTICLE V: AGREEMENTS OF THE PARTIES 22
5.1 Issuance of Securities of Acquiror prior to the Closing. 22
5.2 Anticipated Domestication of Acquiror; Possible Follow-on Merger. 22
5.3 Access to Information. 23
5.4 Confidentiality; No Solicitation. 24
5.5 Interim Operations. 26
5.6 Consents. 29
</TABLE>
i
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
5.7 Filings. 29
5.8 All Reasonable Efforts. 29
5.9 Public Announcements. 29
5.10 Notification of Certain Matters. 30
5.11 Expenses. 30
5.12 Registration Rights. 30
5.13 Documents at Closing. 34
5.14 Prohibition on Trading in Acquiror and Sub Stock. 34
5.15 Anticipated Acquisition of the Principal Assets of PortaCom Wireless, Inc. 34
5.16 Production of Schedules and Exhibits. 35
5.17 Acknowledgment of Approvals. 36
ARTICLE VI: CONDITIONS TO CONSUMMATION OF THE MERGER 36
6.1 Conditions to Obligations of Sky King and the Sky King Shareholders. 36
6.2 Conditions to Acquiror's and the Sub's Obligations. 38
ARTICLE VII: INDEMNIFICATION 39
7.1 Indemnification. 39
ARTICLE VIII: TERMINATION 41
8.1 Termination. 41
8.2 Notice and Effect of Termination. 42
8.3 Extension; Waiver. 42
8.4 Amendment and Modification. 42
ARTICLE IX: MISCELLANEOUS 42
9.1 Survival of Representations and Warranties. 42
9.2 Notices. 43
</TABLE>
ii
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
9.3 Entire Agreement; Assignment. 44
9.4 Binding Effect; Benefit. 44
9.5 Headings. 44
9.6 Counterparts. 44
9.7 Governing Law. 44
9.8 Arbitration. 44
9.9 Severability. 45
9.10 Release and Discharge. 45
9.11 Certain Definitions. 45
</TABLE>
iii
<PAGE>
EXHIBITS AND SCHEDULES
EXHIBITS
- --------
Exhibit 1.3(a)(i) Series A Certificate of Designation
Exhibit 1.3(a)(ii) Series B Certificate of Designation
Exhibit 1.3(c)(ii) Escrow Agreement
Exhibit 2.2(a)(ii) Investment Letter
Exhibit 2.2(b)(xii) Employment Agreement
SCHEDULES
- ---------
<TABLE>
<S> <C>
Schedule 4.1(a) Articles of Incorporation and Bylaws of Sky King
Communications, Inc.
Schedule 4.1(d) Options, etc. - Sky King Communications, Inc.
Schedule 4.1(g) Litigation - Sky King Communications, Inc.
Schedule 4.1(l) Names and Service Marks - Sky King Communications, Inc.
Schedule 4.1(m) Leases and Agreements - Sky King Communications, Inc.
Schedule 4.1(n) Conflicting Interests - Sky King Communications, Inc.
Schedule 4.1(p) Certain Changes and Events - Sky King Communications,
Inc.
Schedule 4.2(a) Memorandum of Association and Byelaws of VDC
Corporation Ltd. and Articles of Incorporation and
Bylaws of VDC (Delaware), Inc.
Schedule 4.2(d)(i) VDC Corporation Ltd. Warrants
Schedule 4.2(g) Legal Violations of VDC Corporation Ltd. and its
Subsidiaries
Schedule 4.2(i) Litigation - VDC Corporation Ltd.
Schedule 5.5(a)(ix) Acquisitions by Sky King Communications, Inc.
</TABLE>
iv
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the "Agreement"),
is made and entered into effective as of December 10, 1997, by and among VDC
CORPORATION LTD, a Bermuda Corporation ("Acquiror"), VDC (Delaware), Inc., a
Delaware corporation and wholly-owned subsidiary of Acquiror ("Sub"), SKY KING
COMMUNICATIONS, INC., a Connecticut corporation ("Sky King"), and those
individuals and entities whose names appear on the signature page hereof in
their capacity as holders of the outstanding common stock of Sky King (the "Sky
King Shareholders").
Recitals
WHEREAS, the parties hereto entered into an Agreement and Plan of Merger
effective as of the date thereof (the "Original Agreement") pursuant to which
Sub shall merger with and into Sky King (the "Merger");
WHEREAS, the parties hereto desire to amend the Original Agreement to (i)
amend the voting, conversion and other rights of holders of Sub's Series A
Convertible Preferred Stock to be issued as Merger Consideration in the Merger;
(ii) provide for the issuance of Sub's Series B Convertible Preferred Stock as
part of the Merger Consideration; (iii) change the manner in which the Merger
Consideration shall be paid and delivered to the Sky King shareholders; and (iv)
amend and restate entirely the Original Agreement;
WHEREAS, Acquiror and Sky King have determined that it is in the best
interests of their respective shareholders for Sky King to merge with and into
Sub upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the respective Boards of Directors of Acquiror and Sky King have
each approved this Agreement and the consummation of the transactions
contemplated hereby and approved the execution and delivery of this Agreement;
and
WHEREAS, for federal income tax purposes, it is intended that this merger
shall qualify as a tax-free reorganization under the provisions of Section 368
of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and
representations, warranties and agreements contained herein, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree that the Amended and Restated
Agreement and Plan of Merger shall be as follows:
<PAGE>
ARTICLE I
MERGER OF SKY KING WITH AND INTO SUB
AND RELATED MATTERS
1.1 The Merger.
(a) Upon the terms and conditions of this Agreement, at the
"Effective Time" (as defined herein), Sky King shall be merged with and into the
Sub (the "Merger") in accordance with the provisions of the Connecticut Business
Corporation Act ("CBCA") and the Delaware General Corporation Law (the "DGCL")
and the separate corporate existence of Sky King shall cease, and the Sub shall
continue as the surviving corporation under the laws of the state of Delaware
with the corporate name "SKY KING COMMUNICATIONS, INC." (the "Surviving
Corporation").
(b) The Merger shall become effective as of the filing of a
certificate of merger (the "Certificate of Merger") with the Secretary of State
of Delaware and Articles of Merger with State Department of Assessments and
Taxation, in accordance with the provisions of Section 252 of the DGCL and
Section 33-821 of the CBCA, and the confirmation by the Certificate of Merger
that the Merger is effective as of such filing date. The date and time when the
Merger shall become effective is referred to herein as the "Effective Time."
(c) At the Effective Time:
(i) the Sub shall continue its existence under the laws of the
State of Delaware as the Surviving Corporation;
(ii) the separate corporate existence of Sky King shall cease;
(iii) all rights, title and interests to all assets, whether
tangible or intangible and any property or property rights owned by Sky King
shall be allocated to and vested in the Sub as the Surviving Corporation without
reversion or impairment, without further act or deed, and without any transfer
or assignment having occurred, but subject to any existing liens or other
encumbrances thereon, and all liabilities and obligations of Sky King shall be
allocated to the Sub as the Surviving Corporation which shall be the primary
obligor therefor and, except as otherwise provided by law or contract, no other
party to the Merger, other than the Sub as the Surviving Corporation, shall be
liable therefor;
(iv) the Certificate of Incorporation of the Sub as in effect
immediately prior to the consummation of the Merger, other than the name of the
Sub which shall be changed to "Sky King Communications, Inc." in connection with
the Merger, shall be the Certificate of Incorporation of the Surviving
Corporation, until thereafter amended as provided by law and such Certificate of
Incorporation;
2
<PAGE>
(v) Each of Acquiror, Sub and Sky King shall execute and
deliver, and file or cause to be filed with the Secretary of State of the State
of Delaware, the Certificate of Merger and with the State Department of
Assessments and Taxation, the Articles of Merger, with such amendments thereto
as the parties hereto shall deem mutually acceptable;
(vi) the Bylaws of Sub, as in effect immediately prior to the
consummation of the Merger, shall be the Bylaws of the Surviving Corporation
until thereafter amended as provided by law and such Bylaws; and
(vii) the officers and directors of the Acquiror shall be
nominated and elected in accordance with the provisions of Sections 6.1(g)
hereof.
1.2 Conversion of Stock.
At the Effective Time, and without any action on the part of the parties
hereto, the Sky King Shareholders or any other party: (a) the shares
representing 100% of the issued and outstanding common stock of Sky King ("Sky
King Common Stock") as of the Closing (the "Closing") (as such term is defined
in Section 2.1 below) (other than "Dissenting Shares", as defined herein) shall,
by virtue of the Merger and without any action on the part of any holder
thereof, be converted into and represent the right to receive, and shall be
exchangeable for the merger consideration identified at Section 1.3 hereafter
(the "Merger Consideration);
(b) each share of capital stock of Sky King held in treasury as of
the Effective Time shall, by virtue of the Merger, be canceled without payment
of any consideration therefor and without any conversion thereof;
(c) each share of common stock of the Sub that is issued and
outstanding as of the Effective Time shall continue to represent one share of
common stock of the Surviving Corporation after the Merger, which shares,
together with the 100 shares of common stock of Sub owned by Acquiror prior to
the Effective Time, shall thereafter constitute all of the issued and
outstanding shares of capital stock of the Surviving Corporation;
(d) Acquiror shall pay all charges and expenses, including those of
any exchange agent and the National Association of Securities Dealers, Inc., if
any, in connection with the issuance or exchange of the shares in connection
with the Merger;
(e) from and after the Effective Time, there shall be no transfers
on the stock transfer books of the Surviving Corporation of shares of Sky King
Common Stock (or any warrants or other rights to acquire any of the same) that
were outstanding immediately prior to the Effective Time. After the Effective
Time, certificates for shares of Sky King Common Stock (or any warrants or other
rights to acquire any of the same) that were outstanding immediately
3
<PAGE>
prior to the Effective Time shall be canceled and exchanged for the
consideration to be received therefor in connection with the Merger as provided
in this Agreement; and
(f) no fractional shares of stock shall be issued in the Merger, and
each holder of Sky King Common Stock entitled to receive as part of the Merger
Consideration fractional shares shall receive that number of shares of stock
rounded to the nearest whole number.
1.3 Merger Consideration.
(a) The Merger Consideration consisting of the total purchase price
payable to the holders of 100% of the Sky King Common Stock in connection with
the acquisition by merger of Sky King shall consist exclusively of the
following:
(i) newly issued shares of Sub's Series A Convertible Preferred
Stock (the "Series A Stock") which are subject to the following salient
features:
o Conversion Rights. The Series A Stock shall automatically
convert into an aggregate of 5,500,000 shares of Sub Common Stock upon the
occurrence of the domestication of Acquiror pursuant to Section 5.2 of this
Agreement. If the domestication of Acquiror does not occur within one (1) year
after the Effective Time, all, but not less than all of the Series A Stock may
be convertible at any time thereafter by the holders thereof into, or
exchangeable for, 5,500,000 shares of Acquiror Common Stock. The Series A Stock
shall also automatically convert into shares of Sub Common Stock upon the
occurrence of: (i) a liquidation event, dissolution or winding up of Sub, (ii)
the sale of all or substantially all of the assets or business of Sub or (iii) a
merger, plan of reorganization or consolidation in which Sub is not the
surviving corporation.
o Voting Rights. Prior to the conversion thereof, the Series
A Stock shall have no voting rights.
o Dividends. The Series A Stock will share pari-passu with
all dividends on Sub Common Stock and will otherwise have no dividend rights.
The definitive terms of the Series A Stock are set forth within
the Certificate of Designation for the Series A Convertible Preferred Stock
attached hereto as Exhibit 1.3(a)(i) (the "Series A Certificate of
Designation"). The Series A Certificate of Designation shall indicate Acquiror's
consent to the terms of the Series A Stock as set forth in this Subsection
1.3(a)(i); and
(ii) newly issued shares of Sub's Series B Convertible Preferred
Stock (the "Series B Stock"; the Series A Stock and the Series B Stock shall be
collectively referred to herein as the "Sub Preferred Stock") which are subject
to the following salient features:
4
<PAGE>
o Conversion Rights. The Series B Stock shall automatically
convert into an aggregate of 4,500,000 shares of Sub Common Stock upon the
occurrence of the domestication of Acquiror pursuant to Section 5.2 of this
Agreement. If the domestication of Acquiror does not occur within one (1) year
after the Effective Time, all, but not less than all of the Series B Stock may
be convertible at any time thereafter by the holders thereof into, or
exchangeable for, 4,500,000 shares of Acquiror Common Stock. The Series B Stock
shall also automatically convert into shares of Sub Common Stock upon the
occurrence of: (i) a liquidation event, dissolution or winding up of Sub, (ii)
the sale of all or substantially all of the assets or business of Sub or (iii) a
merger, plan of reorganization or consolidation in which Sub is not the
surviving corporation.
o Voting Rights. Prior to the conversion thereof, the Series
B Stock shall have no voting rights.
o Dividends. The Series B Stock will share pari-passu with
all dividends on Sub Common Stock and will otherwise have no dividend rights.
The definitive terms of the Series B Stock are set forth within the Certificate
of Designation for the Series B Convertible Preferred Stock attached hereto as
Exhibit 1.3(a)(ii) (the "Series B Certificate of Designation"). The Series B
Certificate of Designation shall indicate Acquiror's consent to the terms of the
Series B Stock as set forth in this Subsection 1.3(a)(ii).
(b) The Merger Consideration shall be allocated among the holders of
100% of the Sky King Common Stock in the proportion of their share ownership of
the outstanding common stock of Sky King as of the date of the Closing.
(c) The Merger Consideration shall be paid and delivered in the
following manner:
(i) At the Closing, shares of Series A Stock convertible into an
aggregate of 5,500,000 shares of Sub Common Stock shall be delivered to the Sky
King Shareholders; and
(ii) At the Closing, Acquiror shall issue in the name of the Sky
King Shareholders shares of Series B Stock (the "Escrow Shares") and shall
deliver such shares to the Escrow Agent to be held in accordance with the terms
and conditions of the Escrow Agreement attached hereto as Exhibit 1.3(c)(ii) and
made a part hereto (the "Escrow Agreement").
(d) The shares of Series A Stock to be delivered at the Closing and
the shares of Series B Stock released from escrow by the Escrow Agent (as well
as shares of Acquiror Common Stock that may be issued pursuant to Section 5.2(b)
hereof) shall be fully paid and non-assessable and shall be free and clear of
all liens, levies and encumbrances except that all of such
5
<PAGE>
Series A Stock, Series B Stock, shares of common stock issuable upon conversion
of the Series A Stock, Series B Stock and any shares of Acquiror Common Stock
shall be "restricted securities" pursuant to Rule 144, promulgated under the
Securities Act of 1933, as amended (the "Act").
1.4 Additional Rights; Taking of Necessary Action; Further Action.
Each of Acquiror, Sub, Sky King and Sky King Shareholders, respectively,
shall use their best efforts to take all such action as may be necessary and
appropriate to effectuate the Merger under the CBCA and DGCL as promptly as
possible, including, without limitation, the filing of the Certificate of Merger
and the Articles of Merger consistent with the terms of this Agreement. If at
any time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest in Sub as the Surviving
Corporation full right, title and possession to all assets, property, rights,
privileges, powers and franchises of Sky King, the officers of such corporations
are fully authorized in the name of their corporations or otherwise, and
notwithstanding the Merger, to take, and shall take, all lawful and necessary
action.
1.5 Dissenters' Rights.
Each of Sky King and the Sky King Shareholders acknowledge that
dissenters' rights are available to each of the Sky King Shareholders pursuant
to the CBCA and that (i) Sky King has complied with the provisions of the CBCA
in notifying each Sky King Shareholder of the availability of such rights; and
(ii) pursuant to the provisions of the CBCA, if the appropriate procedures and
guidelines are followed, any dissenting shareholders ("Dissenting
Shareholders"), in lieu of the Merger Consideration, shall be entitled to
receive the fair value of their shares in accordance with the provisions of the
CBCA.
1.6 No Further Rights or Transfers.
At and after the Effective Time, the shares of capital stock of Sky King
outstanding immediately prior to the Effective Time shall cease to provide any
rights to the shareholders of Sky King or the Surviving Corporation, except for
the right to surrender the certificate or certificates representing such shares
and to receive the Merger Consideration as provided in this Agreement.
ARTICLE II
THE CLOSING
2.1 Closing Date.
Subject to satisfaction or waiver of all conditions precedent set forth
in Article VI of this Agreement, the closing of the Merger (the "Closing") shall
take place at the offices of Buchanan Ingersoll Professional Corporation.,
Eleven Penn Center, 1835 Market Street, 14th
6
<PAGE>
Floor, Philadelphia, PA 19103, at 10:00 a.m., local time on the later of: (i)
the first Business Day following the day upon which all appropriate Acquiror
corporate action and Sky King corporate action has been taken in accordance with
Article III of this Agreement; or (ii) the day on which the last of the
conditions precedent set forth in Article VI of this Agreement is fulfilled or
waived, or (b) at such other time, date and place as the parties may agree, but
in no event shall such date be later than March 10, 1998, unless such date is
extended by the mutual written agreement of the parties.
2.2 Closing Transactions.
At the Closing, the following transactions shall occur, all of such transactions
being deemed to occur simultaneously:
(a) Sky King and all holders of the Sky King Common Stock shall
take, or shall cause to be taken, the following actions:
(i) Each of the holders of Sky King Common Stock (other than
Dissenting Shareholders) shall surrender and deliver to the Sub as the Surviving
Corporation the certificate or certificates representing all of their shares of
Sky King Common Stock;
(ii) Each of the holders of Sky King Common Stock (other than
Dissenting Shareholders) shall, to the extent necessary to comply with
applicable federal and state securities laws (including, if applicable, Rule 145
promulgated under the Act), execute and deliver at the Closing a copy of an
investment letter in a form mutually agreed upon by the parties and attached to
this Agreement as Exhibit 2.2(a)(ii) ("Investment Letter");
(iii) Any outstanding shareholder agreements relating to Sky
King Common Stock shall have been terminated and evidence of such termination
satisfactory to Acquiror shall have been delivered to Acquiror;
(iv) Sky King and the holders of Sky King Common Stock shall
execute and deliver, and file or cause to be filed with the Secretary of State
of the State of Connecticut, the Certificate of Merger with such amendments
thereto as the parties hereto shall deem mutually acceptable;
(v) A certificate shall be executed by Sky King and the holders
of Sky King Common Stock to the effect that all representations and warranties
made by Sky King and the Sky King Shareholders under this Agreement are true and
correct as of the Closing, as though originally given to Acquiror and Sub on
said date;
7
<PAGE>
(vi) A certificate of good standing shall be delivered by Sky
King from the Secretary of State of the State of Connecticut, dated at or about
the Closing, to the effect that such corporation is in good standing under the
laws of such state;
(vii) An incumbency certificate shall be delivered by Sky King
signed by all of the officers thereof dated at or about the Closing;
(viii) Certified Articles of Incorporation shall be delivered by
Sky King dated at or about the Closing and a copy of the Bylaws of Sky King
certified by the Secretary of Sky King dated at or about the Closing;
(ix) Certified Board and shareholder resolutions shall be
delivered by the Secretary of Sky King dated at or about the Closing authorizing
the transactions contemplated under this Agreement;
(x) Sky King and the holders of Sky King Common Stock shall
execute and deliver the Escrow Agreement to Acquiror and the Escrow Agent; and
(xi) Each of the parties to this Agreement shall have otherwise
executed whatever documents and agreements, provided whatever consents or
approvals and taken all such actions as are required under this Agreement.
(b) Acquiror and/or Sub shall take, or shall cause to be taken, the
following actions:
(i) Acquiror shall deliver or shall cause to be delivered to all
of the holders of the Sky King Common Stock (other than Dissenting Shareholders)
a certificate or certificates representing the number of shares of that portion
of an aggregate number of 5,500,000 shares of Series A Stock as such holder is
entitled to receive at the Closing in connection with the Merger;
(ii) Acquiror shall, on behalf of itself and the Sky King
Shareholders, deliver or shall cause to be delivered to the Escrow Agent
certificates representing 4,500,000 shares of Series B Stock;
(iii) Acquiror and the Sub shall execute and deliver, and file
or cause to be filed with the Secretary of the State of Delaware, the
Certificate of Merger with such amendments thereto as the parties hereto shall
deem mutually acceptable;
8
<PAGE>
(iv) Sub shall receive from the Secretary of State of Delaware a
final Certificate of Merger; (v) The Acquiror's Board of Directors will be
reconstituted to consist of a maximum of five (5) members. Each of the existing
members of Acquiror's Board of Directors will tender his resignation and
nominate to the Board two (2) individuals consisting of designees of the holders
of the Sub Preferred Stock and one (1) designee of the former Acquiror Board
members ("VDC Designee"). The newly constituted Board of Directors will hold
office in accordance with the DGCL and will appoint executive officers in
accordance with the DGCL;
(vi) A certificate for each of the Acquiror and the Sub shall be
executed by their respective Presidents to the effect that all of the respective
representations and warranties of the Acquiror and Sub under this Agreement are
true and correct as of the Closing, as though originally given to Sky King on
said date;
(vii) A certificate of good standing shall be delivered by Sub
from the Secretary of State of the State of Delaware, dated at or about the
Closing, stating that Sub is in good standing under the laws of such state;
(viii) A certificate of good standing shall be delivered by
Acquiror from the Commonwealth of Bermuda, dated at or about the Closing,
stating that Acquiror is in good standing under the laws of such commonwealth;
(ix) An incumbency certificate shall be delivered by each of
Acquiror and Sub signed by all of their respective officers dated at or about
the Closing;
(x) Certified Certificates of Incorporation shall be delivered
by Acquiror and Sub dated at or about the Closing, and a copy of the Bylaws of
Acquiror and Sub certified by the respective Secretary of Acquiror and Sub dated
at or about the Closing;
(xi) Certified Board resolutions shall be delivered by the
respective Secretary of the Acquiror and Sub dated at or about the Closing
authorizing the transactions contemplated under this Agreement;
(xii) Acquiror will deliver an Employment Agreement to each of
Frederick A. Moran and James C. Roberts upon the terms and conditions identified
upon Exhibit 2.2(b)(xii) to this Agreement;
(xiii) A Certificate of Designation shall be filed with the
Secretary of State of Delaware in accordance with the DGCL, designating the
terms of the Sub Preferred Stock;
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(xiv) Acquiror shall execute and deliver the Escrow Agreement to
Sky King and the Escrow Agent; and
(xv) Each of the parties to this Agreement shall have otherwise
executed whatever documents and agreements, provided whatever consents or
approvals and taken all such actions as are required under this Agreement.
ARTICLE III
CERTAIN CORPORATE ACTION
3.1 Sky King Corporate Action.
Sky King shall cause to occur all corporate action necessary to
effect the Merger and to consummate the other transactions contemplated hereby.
3.2 Acquiror Corporate Action.
Acquiror and the Sub shall cause to occur all corporate action necessary
on behalf of either of them to effect the Merger and to consummate the other
transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Sky King and the Sky King
Shareholders.
As a material inducement to Acquiror and Sub to execute this Agreement
and consummate the Merger and other transactions contemplated hereby, Sky King
and the Sky King Shareholders, jointly and severally, hereby make the following
representations and warranties to Acquiror and Sub. The representations and
warranties are true and correct in all material respects at this date, and will
be true and correct in all material respects on the Closing as though made on
and as of such date.
(a) Corporate Existence and Power. Sky King is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Connecticut, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, except where the failure to have any of the foregoing would not have
a Material Adverse Effect. Sky King is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character
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of the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. True, correct and complete copies of the Articles of
Incorporation and Bylaws of Sky King as amended to date are attached hereto as
Schedule 4.1(a) and are made a part hereof. There are currently no subsidiaries
of Sky King.
(b) Due Authorization. This Agreement has been duly authorized,
executed and delivered by Sky King and the Sky King Shareholders and constitutes
a valid and binding agreement of Sky King and the Sky King Shareholders,
enforceable in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, moratorium, and other similar laws
relating to, limiting or affecting the enforcement of creditors' rights
generally or by the application of equitable principles. As of the Closing all
corporate action on the part of Sky King required under applicable law in order
to consummate the Merger will have occurred.
(c) No Contravention. Neither the execution and delivery of the
Agreement nor the consummation of the transactions contemplated thereby will:
(i) conflict with or result in any violation of any provision of the Articles of
Incorporation or Bylaws of Sky King; or (ii) conflict with or result in any
violation or default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of a right
or obligation or loss under, any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Sky King and the Sky King Shareholders or their properties or
assets, or result in the creation or imposition of any mortgage, lien, pledge,
charge or security interest of any kind ("Encumbrance") on any assets of Sky
King, except such as is not reasonably likely to have a Material Adverse Effect
or prevent Sky King or the Sky King Shareholders from consummating the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, is required by or with respect to Sky King
in connection with the execution and delivery of this Agreement by Sky King and
the Sky King Shareholders or the consummation by Sky King and the Sky King
Shareholders of the transactions contemplated hereby, except the filing of the
Articles of Merger with the States of Delaware and Connecticut.
(d) Capitalization and Share Ownership. The authorized capital stock
of Sky King will upon the Closing consist of no more than 2,000 shares of common
stock ("Sky King Common Stock"). There are currently outstanding approximately
1,692 shares of Sky King Common Stock. The outstanding shares of capital stock
of Sky King have been duly authorized and validly issued and are fully paid and
nonassessable and free of preemptive rights. Except as described on Schedule
4.1(d) hereto, there are outstanding (A) no shares of preferred stock or other
voting securities of Sky King, (B) no securities of Sky King convertible into or
exchangeable for shares of capital stock or voting securities of Sky King and
(C) no options, warrants or other rights to acquire from Sky King, and no
obligation of Sky King to issue, any
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capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of Sky King, and there are no agreements
or commitments to do any of the foregoing. There are no voting trusts or voting
agreements applicable to any capital stock of Sky King. The Sky King Common
Stock to be surrendered in the Merger will be owned of record and beneficially
by the Sky King Shareholders, free and clear of all liens and encumbrances of
any kind and nature, and have not been sold, pledged, assigned or otherwise
transferred. There are no agreements (other than this Agreement) to sell,
pledge, assign or otherwise transfer such securities.
(e) Financial Statements. Within fifteen (15) days after the
execution hereof, Sky King will provide Acquiror with unaudited annual and
interim financial statements (the "Financial Statements") such that would comply
with Regulation S-X of the Securities Exchange Act of 1934 if such Financial
Statements were provided on an audited basis. Such Financial Statements will
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods reported upon and fairly present in
all material respects the financial position of Sky King as of the date thereof
and the results of operations for the periods then ended (subject to normal
year-end adjustments). On or before the Closing, Sky King shall deliver audited
Financial Statements to the Acquiror (the "Audited Financial Statements")
covering the same periods as the Financial Statements, that reflect no material
negative adjustments or differences from the Financial Statements.
(f) No Contingent Liabilities. Except as set forth in the Financial
Statements, at the Closing, Sky King shall have no liabilities, whether related
to tax or non-tax matters, known or unknown, due or not yet due, liquidated or
unliquidated, fixed or contingent, determined or determinable in amount or
otherwise and, to the knowledge of Sky King after due inquiry, there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, except as and to the extent reflected
on: (i) the Financial Statements; (ii) this Agreement or any Schedule or Exhibit
hereto; or (iii) liabilities incurred since the date of the Financial Statements
solely in the ordinary course of business and as accurately reflected on the
books and records of Sky King; provided, however, that no liability shall be
incurred from and after the date hereof which is in contravention of any
negative covenant contained herein and applicable to Sky King.
(g) Litigation. Except as described on Schedule 4.1(g) hereto, there
is no action, suit, investigation or proceeding (or, to the knowledge of Sky
King, any basis therefor) pending against, or to the knowledge of Sky King
threatened, against or affecting Sky King or any of its properties before any
court or arbitrator or any governmental body, agency or official that (i) if
adversely determined against Sky King, would have a Material Adverse Effect or
(ii) in any manner challenges or seeks to prevent, enjoin, alter or materially
delay the Merger or any of the other transactions contemplated by the Agreement.
(h) Taxes. Sky King has timely filed all tax returns required to be
filed by it, and will timely file when due all tax returns required to be filed
by it between the date hereof and the Closing. Sky King has paid in a timely
fashion or will pay when due in a timely fashion, all
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taxes required to be paid in respect of the periods covered by such returns, and
the books and the financial statements of Sky King reflect, or will reflect,
adequate reserves for all taxes payable by Sky King which have been, or will be,
accrued but are not yet due. Sky King is not delinquent in the payment of any
material tax, assessment or governmental charge. No deficiencies for any taxes
have been proposed, asserted or assessed against Sky King, Sky King and the Sky
King Shareholders are not aware of any facts which would constitute the basis
for the proposal or assertion of any such deficiency and there is no action,
suit, proceeding, audit or claim now pending or threatened against Sky King. All
taxes which Sky King is required by law to withhold and collect have been duly
withheld and collected, and have been timely paid over to the proper authorities
to the extent due and payable. For the purposes of this Agreement, the term
"tax" shall include all federal state, local and foreign income, property,
sales, excise and other taxes of any nature whatsoever. Neither Sky King nor any
member of any affiliated or combined group of which Sky King is or has been a
member has granted any extension or waiver of the limitation period applicable
to any tax returns. There are no Encumbrances for taxes upon the assets of Sky
King, except Encumbrances for current taxes not yet due. There are no tax
sharing or tax allocation agreements to which Sky King is now or ever has been a
party. Sky King will not be required under Section 481(c) of the Code, of 1986,
to include any material adjustment in taxable income for any period subsequent
to the Merger. Sky King (a) has not been a member of an affiliated group filing
a consolidated federal income tax return (other than a group the common parent
of which was Sky King) and (b) has no liability for the taxes of any person
(other than Sky King) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise.
(i) Compliance with Laws. Sky King is not in violation of, and has
not violated, any applicable provisions of any laws, statues, ordinances or
regulations, other than as would not be reasonably likely to have a Material
Adverse Effect or constitute a felony. No such laws, statutes, ordinances or
regulations require or are reasonably expected to require capital expenditures
by Sky King that are reasonably likely to have a Material Adverse Effect.
Without limiting the generality of the foregoing, Sky King has all licenses,
permits, certificates and authorizations needed or required for the conduct of
Sky King's business as presently conducted and for the use of its properties and
premises occupied by it, except where the failure to obtain a licenses, permit,
certificate or authorization would not have a Material Adverse Effect.
(j) Investment Banking Fees. There is no investment banker, broker,
finder or other similar intermediary which has been retained by, or is
authorized by, Sky King or the Sky King Shareholders to act on its or their
behalf who might be entitled to any fee or commission from Sky King, the Sky
King Shareholders, Acquiror or the Sub or any of their respective affiliates
upon consummation of the transactions contemplated by this Agreement.
(k) Personal Property. Sky King has good and valid title to all of
its personal property, tangible and intangible, reflected on the Financial
Statements and to all other personal property owned by it, free and clear of any
Encumbrance. Sky King is the owner of all of its personal property now located
in or upon its leased premises and of all personal property which is used in the
operation of its business. All such equipment, furniture and fixtures and
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other tangible personal property is in good operating condition and repair and
none require any repairs other than normal routine maintenance to maintain such
property in good operating condition and repair. All inventory as reflected on
the Financial Statements is useable in the ordinary course of business free from
material defects. Sky King owns no motor vehicles.
(l) Intellectual Property; Intangible Property. The corporate names
of Sky King and the trade names and service marks listed on Schedule 4.1(l) are
the only names and service marks which are used by Sky King in the operation of
its business (the "Names and Service Marks"). Sky King has not done business and
has not been known by any other name other than by its Names and Service Marks.
Sky King owns and has the exclusive right to use all intellectual property
presently in use by it and necessary for the operation of its business as now
being conducted, which intellectual property includes, but is not limited to,
patents, trademarks, trade names, service marks, copyrights, trade secrets,
customer lists, inventions, formulas, methods, processes and other proprietary
information. There are no outstanding licenses or consents granting third
parties the right to use any intellectual property owned by Sky King. No
royalties or fees are payable by Sky King to any third party by reason of the
use of any of its intellectual property. Sky King has received no notice of any
adversely held patent, invention, trademark, copyright, service mark or trade
name of any person, or any claims of any other person relating to any of the
intellectual property subject hereto, and to the knowledge of Sky King, there is
no reasonable basis for any such charge or claim. There is no presently known
threatened use or encroachment of any such intellectual property.
(m) Contracts, Leases, Agreements and Other Commitments. Sky King is
not a party to or bound by any oral, written or implied contracts, agreements,
licenses, leases, employment agreements, powers of attorney, guaranties, surety
arrangements or other commitments, except for the following (which are
hereinafter collectively called the "Corporation Agreements"):
(i) The leases and agreements described on Schedules 4.1(m); and
(ii) Agreements involving a maximum possible liability or
obligation on the part of Sky King of less than Twenty-Five Thousand Dollars
($25,000) in the aggregate.
The Corporation Agreements constitute all of the agreements and
instruments which are necessary and desirable to operate the business as
currently conducted by Sky King. True, correct and complete copies of each
Corporation Agreement described and listed under Subsection 4.1(m) will be made
available to Acquiror within fifteen (15) days after the date hereof. The term
"Corporation Agreement" excludes purchase orders entered into in the ordinary
course for personalty or inventory which may be returned to the vendor without
penalty. All of the Corporation Agreements are valid, binding and enforceable
against the respective parties thereto in accordance with their respective
terms. Following the Merger, the Surviving Corporation shall become entitled to
all rights of Sky King under such of the Corporation Agreements as if the
Surviving Corporation were the original party to such Corporation Agreements.
All parties to all of the Corporation Agreements have performed all obligations
required to be performed to date under such Corporation Agreements, and no party
is in default
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or in arrears under the terms thereof, and no condition exists or event has
occurred which, with the giving of notice or lapse of time or both, would
constitute a default thereunder. The consummation of this Agreement and the
Merger will not result in an impairment or termination of any of the rights of
Sky King under any Corporation Agreement. None of the terms or provisions of any
Corporation Agreement materially adversely affects the business, prospects,
financial condition or results of operations of Sky King.
(n) Conflicting Interests. Except as set forth on Schedule 4.1(n),
no director, officer, employee or Sky King Shareholder, and no relative or
affiliate of any of the foregoing (i) sells or purchases goods or services from
Sky King or has any pecuniary interest in any supplier or client of any of the
foregoing or in any other business enterprise with which Sky King conducts
business or with which any of the foregoing is in competition, or (ii) is
indebted to Sky King except for money borrowed and as set forth on the Financial
Statements.
(o) Environmental Protection. Neither Sky King nor the Sky King
Shareholders have been notified by any governmental authority, agency or third
party, and Sky King and the Sky King Shareholders have no knowledge, of any
violation by Sky King of any Environmental Statute (as defined below). All
registrations by Sky King with, licenses from or permits issued by governmental
agencies pursuant to environmental, health and safety laws are in full force and
effect. The term "Environmental Statutes" means all statutes, ordinances,
regulations, orders and requirements of common law concerning discharges to the
air, soil, surface water or groundwater and concerning the storage, treatment or
disposal of any waste or hazardous substance. There is no hazardous substance at
any premises currently or previously occupied by Sky King. Sky King has not
received any notice or any request for information, notice of claim, demand or
other notification that it may be potentially responsible with respect to any
investigation or clean-up of any threatened or actual release of hazardous
substances. All hazardous wastes and substances have been stored, treated,
disposed of and transported in conformance with all requirements applicable to
such hazardous substances and wastes.
(p) Absence of Certain Changes or Events. Except as and to the
extent set forth on the Financial Statements, to the extent contained in this
Agreement, or as set forth on Schedule 4.1(p), there has not been (i) any
material adverse change in the business, assets, properties, results of
operations, financial condition or prospects of Sky King; (ii) any entry by Sky
King into any material commitment or transaction which is not in the ordinary
course of business; (iii) any change by Sky King in accounting principles or
methods except insofar as may be required by a change in generally accepted
accounting principles; (iv) any declaration, payment or setting aside for
payment of any dividends or other distributions (whether in cash, stock or
property) in respect of capital stock of Sky King or any Subsidiary, or any
direct or indirect redemption, purchase or any other type of acquisition by Sky
King of any shares of its capital stock or any other securities for an aggregate
sum in excess of $5,000; (v) any agreement by Sky King, whether in writing or
otherwise, to take any action which, if taken prior to the date of this
Agreement, would have made any representation or warranty in this Section 4.1
untrue or incorrect; (vi) any acquisition of the assets of Sky King, other than
in the ordinary course of
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business and consistent with past practice and in excess of $5,000 in the
aggregate; or (vii) any execution of any agreement with any executive officer of
Sky King providing for his or her employment, or any increase in the
compensation or in severance or termination benefits payable or to become
payable by Sky King to its officers or key employees, or any material increase
in benefits under any collective bargaining agreement or in benefits under any
bonus, pension, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization, insurance or
other plan or arrangement or understanding (whether or not legally binding)
providing benefits to any present or former employee of Sky King. Since the date
of the Financial Statements, there has not been and there is not threatened, any
material adverse change in financial condition, business, results of operations
or prospects of the business or any material physical damage or loss to any of
the properties or assets of the business or to the premises occupied in
connection with the business, whether or not such loss is covered by insurance.
(q) Investment Intent.
(i) Except with respect to the registration rights granted to
the Sky King Shareholders pursuant to the terms of this Agreement, the shares of
Sub Preferred Stock are not being registered under the Act on the basis of the
statutory exemption provided by Section (4)2 thereof, relating to transactions
not involving a public offering, and the Acquiror's reliance on the statutory
exemption thereof is based in part on the representations contained in this
Agreement;
(ii) The Sky King Shareholders represent (a) that they have
reviewed such quarterly, annual and periodic reports of the Acquiror (the
"Reports") as have been filed with the Securities and Exchange Commission (the
"SEC") and that they have such knowledge and experience in financial and
business matters that they are capable of utilizing the information set forth
therein concerning Acquiror to evaluate the risk of investing in the Acquiror;
(b) that they have been advised that the shares of Sub Preferred Stock or
Acquiror Common Stock to be issued to each of them by the Acquiror constitute
"restricted securities" as defined in Rule 144 promulgated under the Act and
accordingly, have not been and will not be registered under the Act, except as
otherwise provided in this Agreement, and therefore, the Sky King Shareholders
may not be able to sell or otherwise dispose of such shares except if such
shares are subject to an effective registration statement filed with the SEC, in
compliance with Rule 144 or otherwise pursuant to an exemption from registration
under the Act; (c) that the shares of Sub Preferred Stock or Acquiror Common
Stock are being acquired by them for their own benefit and on their own behalf
for investment purposes and not with a view to, or for sale or resale in
connection with, a public offering or distribution thereof; (d) that the shares
of Sub Preferred Stock or Acquiror Common Stock so issued will not be sold (I)
without registration thereof under the Act (unless such shares are subject to
registration or in the opinion of counsel acceptable to the Acquiror, an
exemption from such registration is available), or (II) in violation of any law;
and (e) that the certificate or certificates representing the shares of Sub
Preferred Stock or Acquiror Common Stock to be issued will be imprinted with a
legend in form and substance substantially as follows:
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"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THESE SECURITIES MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF REGISTRATION, OR THE
AVAILABILITY OF AN EXEMPTION FROM REGISTRATION,
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
BASED ON AN OPINION LETTER OF COUNSEL FOR THE
COMPANY OR A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION."
and Acquiror is hereby authorized to notify its transfer agent of the
status of the shares of Sub Preferred Stock or Acquiror Common Stock, 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 ensure
compliance with the foregoing.
(iii) Sky King and the Sky King Shareholders have been afforded
the opportunity to review and are familiar with the Reports and have based their
decision to invest solely on the information contained therein, and the
information contained within this Agreement and the associated exhibits and
schedules, and have not been furnished with any other literature, prospectus or
other information except as included in the Reports or this Agreement;
(iv) The Sky King Shareholders are able to bear the economic
risks of an investment in the shares of Sub Preferred Stock or Acquiror Common
Stock and that their overall commitment to their investments which are not
readily marketable is not disproportionate to their net worth; and
(v) The Sky King Shareholders understand that no federal or
state agency has approved or disapproved the shares of Sub Preferred Stock or
Acquiror Common Stock, passed upon or endorsed the merits of the transfer of
such shares set forth within this Agreement or made any finding or determination
as to the fairness of such shares for investment.
(r) Statements And Other Documents Not Misleading. Neither this
Agreement, including all exhibits and schedules and other closing documents, nor
any other financial statement, document or other instrument heretofore or
hereafter furnished by Sky King or the Sky King Shareholders to Acquiror or Sub
in connection with the Merger or the other transactions contemplated hereby,
contains or will contain any untrue statement of any material fact or omit or
will omit to state any material fact required to be stated in order to make such
statement, information, document or other instruments, in light of the
circumstances in which they are made, not misleading. There is no fact known to
Sky King or the Sky King Shareholders which may have a Material Adverse Effect
on the business, prospects, financial condition or results of operations of Sky
King or of any of its properties or assets which has not been set forth in this
Agreement as an exhibit or schedule hereto.
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4.2 Representations and Warranties of Acquiror and the Sub.
As a material inducement to Sky King and the Sky King Shareholders to
execute this Agreement and to consummate the Merger and the other transactions
contemplated hereby, Acquiror and Sub hereby make the following representations
and warranties to Sky King and the Sky King Shareholders.
(a) Corporate Existence and Power. Acquiror is a corporation duly
incorporated, validly existing and in good standing under the laws of Bermuda,
and the Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. Each of Acquiror and the Sub
has all corporate powers and all governmental licenses, authorizations, consents
and approvals required to carry on its business as now conducted, except where
the failure to have any of the foregoing would not have a Material Adverse
Effect on their respective businesses. Each of Acquiror and the Sub is duly
qualified to do business and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect. Acquiror owns all of the issued and outstanding shares
of capital stock of the Sub, and there are no other rights or obligations of
Acquiror or the Sub to issue any other shares of capital stock of the Sub. The
Sub has conducted no business activity other than in connection with the
transactions contemplated by this Agreement. True, complete and correct copies
of the Memorandum of Association and Byelaws of Acquiror and the Articles of
Incorporation and Bylaws of Sub, each as amended to date, are attached hereto as
Schedule 4.2(a) and are made a part hereof.
(b) Due Authorization. This Agreement has been duly authorized,
executed and delivered by Acquiror and the Sub and constitutes a valid and
binding agreement of Acquiror and the Sub, enforceable in accordance with its
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium, and other similar laws relating to, limiting or
affecting the enforcement of creditors' rights generally or by the application
of equitable principles. As of the Closing all corporate action on the part of
Acquiror and the Sub required under applicable law in order to consummate the
Merger will have occurred.
(c) No Contravention. Neither the execution and delivery of the
Agreement nor the consummation of the transactions contemplated thereby will:
(i) conflict with or result in any violation of any provision of the Memorandum
of Association or Byelaws of Acquiror or the Articles of Incorporation or Bylaws
of Sub or (ii) conflict with or result in any violation or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of an right or obligation or to loss
or a benefit under, any provision of the Memorandum of Association or Byelaws of
Acquiror or the Articles of Incorporation or Bylaws of Sub or any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Acquiror or its
properties or assets, or result in the creation or imposition of any Encumbrance
on any asset of Acquiror,
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except, only as to clause (ii) above, such as is not reasonably likely to have a
Material Adverse Effect or prevent Acquiror or Sub from consummating the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, is required by or with respect to Acquiror
or the Sub in connection with the execution and delivery of this Agreement by
either of them or the consummation by either of them of the transactions
contemplated hereby, except the filing of the Certificate of Merger with the
Secretary of the State of Delaware.
(d) Capitalization. As of the Closing, Acquiror shall have
outstanding no more than that number of shares of common stock equal to
3,700,000 less the number of Surrendered Shares (as such term is defined in
Section 5.15(b)(i)(A) below), if any, in addition to those shares discussed at
Section 5.1, as well as no more than 750,000 Warrants identified upon Schedule
4.2(d)(i). All outstanding shares of capital stock of Acquiror have been duly
authorized and validly issued and are fully paid and nonassessable and free of
preemptive rights. The shares of Sub Preferred Stock to be issued in the Merger
will be duly authorized, validly issued, fully paid and nonassessable. Except as
otherwise set forth herein, there will be outstanding (A) no shares of capital
stock or other voting securities of Acquiror, (B) no securities of Acquiror
convertible into or exchangeable for shares of capital stock or voting
securities of Acquiror and (C) no options, warrants or other rights to acquire
from Acquiror, and no obligation of Acquiror to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of Acquiror and there are no agreements or commitments, to do
any of the foregoing.
(e) SEC Filings.
(i) Upon request Acquiror will make available to Sky King copies
of its periodic reports filed pursuant to the Securities Exchange Act of 1934,
as well as its proxy or information statements relating to meetings of, or
actions taken without a meeting by the stockholders of Acquiror held since 1994
and all of its other reports, statements, schedules and registration statements
filed with the SEC since inception, other than pre-effective amendments to such
registration statements. The documents referred to in the preceding sentence are
sometimes referred to herein as the "SEC Documents."
(ii) As of its filing date, to the knowledge of Acquiror, each
such SEC Documents did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
(f) Financial Statements. The financial statements contained within
the SEC Documents fairly present in all material respects the results of
operations, retained earnings and changes in financial position, as the case may
be, of the Acquiror at and for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments which will
not be material to the Acquiror, taken as a whole, in amount or effect), in each
case in accordance with generally accepted accounting principles consistently
applied during the periods
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involved, except as may be noted therein. The books and records, financial and
other, of the Acquiror are, to the knowledge of the Acquiror, in all material
respects complete and correct and have been maintained in accordance with good
business and accounting practices.
(g) No Violations. Except as described on Schedule 4.2(g) hereto,
neither Acquiror or any of its Subsidiaries has received any written notice from
any governmental entity having jurisdiction over it or over any of the real
property leased by it of any violation by Acquiror or any of its Subsidiaries of
any law, regulation or ordinance relating to zoning, environmental matters,
local building or fire codes or similar matters relating to any of the real
property leased by Acquiror or any of its Subsidiaries.
(h) No Contingent Liabilities. Except as set forth in the financial
statements referred to in Section 4.2(f) above, as of the Closing, Acquiror and
each of its Subsidiaries shall have no liabilities, whether related to tax or
non-tax matters, known or unknown, due or not yet due, liquidated or
unliquidated, fixed or contingent, determined or determinable in amount or
otherwise and, to the knowledge of Acquiror after due inquiry, there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability except as and to the extent reflected on:
(i) the SEC Documents; (ii) this Agreement or any Schedule or Exhibit thereto;
or (iii) liabilities incurred since the date of the most recent SEC Document
solely in the ordinary course of business (or in connection with the
transactions contemplated hereby) and as accurately reflected on the books and
records of Acquiror; provided however, that no liability shall be incurred from
and after the date hereof which is in contravention of any negative covenant
contained herein and applicable to Acquiror.
(i) Litigation. Except as set forth in any of the SEC Documents or
Schedule 4.2(i), there is no action, suit, investigation or proceeding (or, to
the knowledge of Acquiror, any basis therefor) pending against, or to the
knowledge of Acquiror threatened, against or affecting Acquiror, any of its
Subsidiaries or any of their properties before any court or arbitrator or any
governmental body, agency or official that (i) if adversely determined against
Acquiror, would have a Material Adverse Effect on Acquiror and its Subsidiaries,
taken as a whole, or (ii) in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the Merger or any of the other transactions
contemplated by the Agreement.
(j) Taxes.
(i) Acquiror and each of its Subsidiaries have timely filed all
tax returns required to be filed by them, and will timely file when due all tax
returns required to be filed by them between the date hereof and the Closing.
Acquiror and each of its Subsidiaries have paid in a timely fashion or will pay
when due in a timely fashion, all taxes required to be paid in respect of the
periods covered by such returns, and the books and the financial statements of
Acquiror and each of its Subsidiaries reflect, or will reflect, adequate
reserves for all taxes payable by Acquiror and each of its Subsidiaries which
have been, or will be, accrued but are not yet due. Acquiror and each of its
Subsidiaries are not delinquent in the payment of any material
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tax, assessment or governmental charge. No deficiencies for any taxes have been
proposed, asserted or assessed against Acquiror and each of its Subsidiaries,
Acquiror and each of its Subsidiaries are not aware of any facts which would
constitute the basis for the proposal or assertion of any such deficiency and
there is no action, suit, proceeding, audit or claim now pending, or to
Acquiror's knowledge, threatened against Acquiror and each of its Subsidiaries.
All taxes which Acquiror and each of its Subsidiaries are required by law to
withhold and collect have been duly withheld and collected, and have been timely
paid over to the proper authorities to the extent due and payable. For the
purposes of this Agreement, the term "tax" shall include all federal state,
local and foreign income, property, sales, excise and other taxes of any nature
whatsoever. Neither Acquiror or any of its Subsidiaries nor any member of any
affiliated or combined group of which Acquiror is or has been a member has
granted any extension or waiver of the limitation period applicable to any tax
returns. There are no Encumbrances for taxes upon the assets of Acquiror or any
of its Subsidiaries, except Encumbrances for current taxes not yet due. There
are no tax sharing or tax allocation agreements to which Acquiror or any of its
Subsidiaries is now or ever has been a party. Acquiror will not be required
under Section 481(c) of the Code, to include any material adjustment in taxable
income for any period subsequent to the Merger. Neither Acquiror nor any of its
Subsidiaries (A) has been a member of an affiliated group filing a consolidated
federal income tax return (other than a group the common parent of which was
Acquiror or a Subsidiary of Acquiror) and (b) has no liability for the taxes of
any person (other than Acquiror or any of its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract or otherwise.
(ii) For federal income tax purposes, the Merger shall
constitute a tax-free reorganization under the provisions of Section 368 of the
Code, provided, however, that the Sky King Shareholders recognize and
acknowledge that receipt of shares of Acquiror Common Stock (rather than Sub
Preferred or Common Stock) will not qualify as a tax-free reorganization at the
time of the receipt of such shares of Acquiror Common Stock.
(k) Compliance with Laws. To the best knowledge of Acquiror and Sub,
neither Acquiror nor any of its Subsidiaries is in violation of, or has
violated, any applicable provisions of any laws, statutes, ordinances or
regulations, which taken as a whole would be reasonably likely to have a
Material Adverse Effect on Acquiror and its Subsidiaries, or which would
constitute a felony. No such laws, statutes, ordinances or regulations require
or are reasonably expected to require capital expenditures that are reasonably
likely to have a Material Adverse Effect on Acquiror and its Subsidiaries, taken
as a whole. Without limiting the generality of the foregoing, Acquiror and Sub
have all licenses, permits, certificates and authorizations needed or required
for the conduct of Acquiror's or Sub's business as presently conducted and for
the use of its properties and premises occupied by it, except where the failure
to obtain a license, permit, certificate or authorization would not have a
Material Adverse Effect.
(l) Investment Banking Fees. Acquiror has retained and agreed upon
the Closing hereof to pay an investment banking firm a stock fee in the amount
equal to 5.00% of the
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Merger Consideration, or 500,000 shares of Acquiror Common Stock, for arranging
this transaction.
(m) Statements and Other Documents Not Misleading. Neither this
Agreement, including all exhibits and schedules and other closing documents, nor
any other financial statement, document or other instrument heretofore or
hereafter furnished by Acquiror or Sub to Sky King and the Sky King Shareholders
in connection with the Merger or the other transactions contemplated hereby, or
any information furnished by Acquiror and Sub taken as a whole contains or will
contain any untrue statement of any material fact or omit or will omit to state
any material fact required to be stated in order to make such statement,
information, document or other instruments, in light of the circumstances in
which they are made, not misleading. There is no fact known to Acquiror and Sub
taken as a whole which may have a Material Adverse Effect on the business,
prospects, financial condition or results of operations of Acquiror and Sub
taken as a whole or of any of their properties or assets which has not been set
forth in this Agreement as an exhibit or schedule hereto.
ARTICLE V
AGREEMENTS OF THE PARTIES
5.1 Issuance of Securities of Acquiror prior to the Closing.
Between the date hereof and the Closing, Acquiror contemplates that it
may be caused to issue up to 5,300,000 additional shares of Acquiror Common
Stock in connection with certain acquisition transaction (the "Acquisition
Transaction") that is presently being evaluated or are under contract as set
forth in Section 5.15. No investment banker, broker, finder or other similar
intermediary has been retained by, or is authorized by, Acquiror to act on its
behalf who might be entitled to any fee or commission from Acquiror or any of
its affiliates in connection with the Acquisition Transaction or the
transactions contemplated thereby.
5.2 Anticipated Domestication of Acquiror; Possible Follow-on Merger.
(a) Acquiror shall use diligent efforts to domesticate by merger or
other permissible means into Sub within one (1) year after the Closing. Upon
Acquiror's domestication into Sub, the Series A Stock will automatically convert
into shares of Sub Common Stock such that the holders thereof will at that time
own the same percentage of outstanding Sub Common Stock as they would have owned
in Acquiror had they originally received an aggregate of 5,500,000 shares of
Acquiror Common Stock upon the Closing, and the Series B Stock will
automatically convert into shares of Sub Common Stock such that the holders
thereof will at that time own the same percentage of outstanding Sub Common
Stock as they would have owned in Acquiror had they originally received an
aggregate of 4,500,000 shares of Acquiror Common Stock upon the Closing. Upon
the domestication of Acquiror into
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Sub, the number of shares of common stock resulting from the conversion of the
Escrow Shares by the Escrow Agent as of such conversion date shall be held in
escrow as Escrow Shares pursuant to the terms of the Escrow Agreement.
(b) If the domestication of Acquiror described in Section 5.2(a)
above does not occur within one (1) year from the Effective Date, the Series A
Stock may, at the discretion of the holders thereof, be converted into, or
exchangeable for, an aggregate of 5,500,000 shares of Acquiror Common Stock, and
the Series B Stock may, at the discretion of the holders thereof, be converted
into, or exchangeable for, an aggregate of 4,500,000 shares of Acquiror Common
Stock. Upon such discretionary conversion, the number of shares of common stock
resulting from the conversion of the Escrow Shares as of such conversion date
shall be held in escrow by the Escrow Agent as Escrow Shares pursuant to the
terms of the Escrow Agreement.
(c) Acquiror and Sub covenant and agree that as to Sub, prior to the
domestication of Acquiror described in Section 5.2 hereof:
(i) Dividends; Changes in Stock. Sub shall not and shall not
propose to (a) split, combine or reclassify any of its capital stock or issue,
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock; or (b) redeem, repurchase
or otherwise acquire any shares of its capital stock or (c) otherwise change its
capitalization.
(ii) Issuance of Securities. Except as contemplated by this
Agreement, Sub shall not sell, issue, pledge, authorize or propose the sale or
issuance of, pledge or purchase or propose the purchase of, any shares of its
capital stock of any class or securities convertible into, or rights, warrants
or options to acquire, any such shares or other convertible securities.
(iii) Sale of Stock by Acquiror. Acquiror shall not sell, pledge
or authorize or propose the sale, pledge or purchase of, the shares of common
stock of Sub owned by Acquiror prior to the Effective Time.
(d) Sky King and the Sky King Shareholders acknowledge that they
have been advised that this domestication may not occur until a Registration
Statement on Form S-4 is filed with, and declared effective by, the SEC.
5.3 Access to Information.
At all times prior to the Closing or the earlier termination of this
Agreement in accordance with the provisions of Article VIII, and in each case
subject to Section 5.4 below, each of the parties hereto shall provide to the
other parties (and the other parties' authorized representatives) full access
during normal business hours and upon reasonable prior notice to the premises,
properties, books, records, assets, liabilities, operations, contracts,
personnel, financial information and other data and information of or relating
to such party (including without limitation all written proprietary and trade
secret information and documents, and other written
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information and documents relating to intellectual property rights and matters),
and will cooperate with the other party in conducting its due diligence
investigation of such party.
5.4 Confidentiality; No Solicitation.
(a) Confidentiality of Acquiror-Related Information. With respect to
information concerning Sky King that is made available to Acquiror pursuant to
the terms of this Agreement, Acquiror agrees that, except in connection with the
private placement and other securities purchase agreements associated therewith,
it shall hold such information in strict confidence, shall not use such
information except for the sole purpose of evaluating the Merger and related
transactions and shall not disseminate or disclose any of such information other
than to its directors, officers, employees, shareholders, affiliates, agents and
representatives who need to know such information for the sole purpose of
evaluating the Merger and the related transactions (each of whom shall be
informed in writing by Acquiror of the confidential nature of such information
and directed by Acquiror in writing to treat such information confidentially).
If this Agreement is terminated pursuant to the provisions of Article VIII,
Acquiror shall immediately return all such information, all copies thereof and
all information prepared by Acquiror based upon the same; provided, however,
that one copy of all such material may be retained by Acquiror's outside legal
counsel for purposes only of resolving any disputes under this Agreement. The
above limitations on use, dissemination and disclosure shall not apply to
information that (i) is learned by Acquiror from a third party entitled to
disclose it; (ii) become known publicly other than through Acquiror or any party
who received the same through Acquiror, provided that Acquiror has no knowledge
that the disclosing party was subject to an obligation of confidentiality; (iii)
is required by law or court order to be disclosed by Acquiror; or (iv) is
disclosed with the express prior written consent thereto of Sky King or the Sky
King Shareholders. Acquiror shall undertake all necessary steps to ensure that
the secrecy and confidentiality of such information will be maintained in
accordance with the provisions of this paragraph (a). Notwithstanding anything
contained herein to the contrary, in the event a party is required by court
order or subpoena to disclose information which is otherwise deemed to be
confidential or subject to the confidentiality obligations hereunder, prior to
such disclosure, the disclosing party shall: (i) promptly notify the
non-disclosing party and, if having received a court order or subpoena, deliver
a copy of the same to the non-disclosing party; (ii) cooperate with the
non-disclosing party, at the expense of the non-disclosing party in obtaining a
protective or similar order with respect to such information; and (iii) provide
only such of the confidential information as the disclosing party is advised by
its counsel is necessary to strictly comply with such court order or subpoena.
(b) Confidentiality of Sky King-Related Information. With respect to
information concerning Acquiror that is made available to Sky King and the Sky
King Shareholders pursuant to the provisions of this Agreement, Sky King and the
Sky King Shareholders agree that they shall hold such information in strict
confidence, shall not use such information except for the sole purpose of
evaluating the Merger and the related transactions and shall not disseminate or
disclose any of such information other than to their directors, officers,
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employees, shareholders, affiliates, agents and representatives who need to know
such information for the sole purpose of evaluating the Merger and the related
transactions (each of whom shall be informed in writing by Sky King or the Sky
King Shareholders of the confidential nature of such information and directed by
such party in writing to treat such information confidentially). If this
Agreement is terminated pursuant to the provisions of Article VIII, Sky King and
the Sky King Shareholders agree to return immediately all such information, all
copies thereof and all information prepared by either of them based upon the
same; provided, however, that one copy of all such material may be retained by
Sky King's outside legal counsel for purposes only of resolving any disputes
under this Agreement. The above limitations on use, dissemination and disclosure
shall not apply to information that (i) is learned by Sky King or the Sky King
Shareholders from a third party entitled to disclose it; (ii) becomes known
publicly other than through Sky King, the Sky King Shareholders or any party who
received the same through Sky King or the Sky King Shareholders, provided that
Sky King or the Sky King Shareholders have no knowledge that the disclosing
party was subject to an obligation of confidentiality; (iii) is required by law
or court order to be disclosed by Sky King; or (iv) is disclosed with the
express prior written consent thereto of Acquiror. Sky King or the Sky King
Shareholders agree to undertake all necessary steps to ensure that the secrecy
and confidentiality of such information will be maintained in accordance with
the provisions of this paragraph (b). Notwithstanding any thing contained herein
to the contrary, in the event a party is required by court order or subpoena to
disclose information which is otherwise deemed to be confidential or subject to
the confidentiality obligations hereunder, prior to such disclosure, the
disclosing party shall: (i) promptly notify the non-disclosing party and, if
having received a court order or subpoena, deliver a copy of the same to the
non-disclosing party; (ii) cooperate with the non-disclosing party at the
expense of the non-disclosing party in obtaining a protective or similar order
with respect to such information; and (iii) provide only such of the
confidential information as the disclosing party is advised by its counsel is
necessary to strictly comply with such court order or subpoena.
(c) Nondisclosure. Neither Sky King, the Sky King Shareholders, the
Sub nor Acquiror shall disclose to the public or to any third party the
existence of this Agreement or the transactions contemplated hereby or any other
material non-public information concerning or relating to the other party
hereto, other than with the express prior written consent of the other parties
hereto, except as may be required by law or court order or to enforce the rights
of such disclosing party under this Agreement, in which event the contents of
any proposed disclosure shall be discussed with the other party before release;
provided, however, that notwithstanding anything to the contrary contained in
this Agreement, any party hereto may disclose this Agreement to any of its
directors, officers, employees, shareholders, affiliates, agents and
representatives who need to know such information for the sole purpose of
evaluating the Merger, and to any party whose consent is required in connection
with the Merger or this Agreement. The parties anticipate issuing a mutually
acceptable, joint press release announcing the execution of this Agreement and
the consummation of the Merger.
(d) No Solicitation. In consideration of the substantial expenditure
of time, effort and money to be undertaken by Acquiror in connection with the
transactions contemplated
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by this Agreement, neither the Sky King Shareholders, Sky King nor any affiliate
thereof will, prior to the earlier of the Closing or ninety (90) days after the
termination of this Agreement, directly or indirectly, through any officer,
director, agent or otherwise: (i) solicit, initiate or encourage the submission
of inquiries, proposals or offers from any person or entity relating to any
acquisition or purchase of assets of or any equity interest in Sky King or any
affiliate thereof or any tender offer (including a self-tender offer), exchange
offer, merger, consolidation, business combination, sale of a substantial amount
of assets or sale of securities, liquidation, dissolution or similar transaction
involving Sky King or its affiliates (a "Transaction Proposal"); (b) enter into
or participate in any discussions or negotiations regarding a Transaction
Proposal, or furnish to any other person or entity any information with respect
to the business, properties or assets of Sky King or its affiliates in
connection with a Transaction Proposal; or (c) otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage any effort or attempt
by any other person to do or seek a Transaction Proposal. Sky King or the Sky
King Shareholders shall promptly notify Acquiror if any such proposal or offer,
or any inquiry or contact with any person or entity with respect thereto is
made.
5.5 Interim Operations.
During the period from the date of this Agreement and continuing until
the Closing:
(a) Interim Operations of Sky King. Sky King agrees (except as
expressly contemplated by this Agreement, including any Exhibits and Schedules
hereto, or to the extent that Acquiror shall otherwise consent in writing) that
as to Sky King:
(i) Ordinary Course. Sky King shall carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business, use all
reasonable efforts to preserve intact its present business organization, keep
available the services of its present officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it;
(ii) Dividends; Changes in Stock. Sky King shall not and shall
not propose to (a) declare, set aside or pay any dividend, on, or make other
distributions in respect of, any of its capital stock, (b) split, combine or
reclassify any of its capital stock or issue, authorize or propose the issuance
of any other securities in respect of, in lieu of or in substitution for shares
of its capital stock (c) redeem, repurchase or otherwise acquire any shares of
its capital stock or (d) otherwise change its capitalization.
(iii) Issuance of Securities. Except as contemplated by this
Agreement, Sky King shall not sell, issue, pledge, authorize or propose the sale
or issuance of, pledge or purchase or propose the purchase of, any shares of its
capital stock of any class or securities convertible into, or rights, warrants
or options to acquire, any such shares or other convertible securities.
(iv) Governing Documents. Sky King shall not amend its
certificate of incorporation or its Bylaws.
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(v) No Dispositions. Sky King shall not sell, lease, pledge,
encumber or otherwise dispose of or agree to sell, lease, pledge, encumber or
otherwise dispose of, any of its assets that are material to its business or any
other assets except in the ordinary course of business consistent with prior
practice.
(vi) Indebtedness. Sky King shall not incur any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any debt
securities of Sky King or guarantee any debt securities of others other than in
the ordinary course of business consistent with prior practice.
(vii) Benefit Plans; Etc. Sky King shall not adopt or amend in
any material respect any collective bargaining agreement or Employee Benefit
Plan (as defined herein).
(viii) Executive Compensation. Sky King shall not grant to any
executive officer any increase in compensation or in severance or termination
pay, or enter into any employment agreement with any executive officer.
(ix) Acquisitions. Except as set forth on Schedule 5.5(a)(ix),
Sky King shall not acquire (by merger, consolidation or acquisition of stock or
assets or otherwise) any corporation, partnership or other business organization
or subdivision thereof, or make any investment by either purchase of stock or
securities, contributions to capital, property transfer or, except in the
ordinary course of business, purchase of any property or assets, of any other
individual or entity.
(x) Tax Elections. Sky King shall not make any material tax
election or settle or compromise any material federal, state, local or foreign
tax liability.
(xi) Waivers and Releases. Sky King shall not waive, release,
grant or transfer any rights of material value or modify or change in any
material respect any Corporation Agreement other than in the ordinary course of
business and consistent with past practice.
(xii) Other Actions. Sky King shall not enter into any agreement
or arrangement to do any of the foregoing. Sky King shall not take any action,
or fail to take any action, that is reasonably likely to result in any of the
representations and warranties of Sky King set forth in this Agreement becoming
untrue in any material respect.
(b) Interim Operations of Acquiror and Sub. Acquiror and Sub jointly
and severally agree (except as expressly contemplated by this Agreement,
including any Exhibits and Schedules hereto, or to the extent that Sky King and
the Sky King Shareholders shall otherwise consent in writing or to the extent
required to permit Acquiror to meet its obligations under Section 5) that:
(i) Ordinary Course. Acquiror shall carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business, use all
reasonable efforts to preserve intact its present business organization
(provided that such obligation shall not relate to the officers and employees of
Acquiror or any of its Subsidiaries including the Sub) and preserve its
relationships
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with customers, suppliers and others having business dealings with it. The Sub
shall conduct no business activity other than in connection with the
transactions contemplated by this Agreement in connection with the Merger.
(ii) Dividends; Changes in Stock. Neither Acquiror nor the Sub
shall (and shall not propose to) (a) declare or pay any dividend, on, or make
other distributions in respect of, any of its capital stock, (b) split, combine
or reclassify any of its capital stock or issue, authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, (c) repurchase or otherwise acquire any shares
of its capital stock or (d) otherwise change its capitalization.
(iii) Issuance of Securities. Except as provided for in Article
V, neither Acquiror nor the Sub shall sell, issue, pledge, authorize or propose
the sale or issuance of, pledge or purchase or propose the purchase of, any
shares of its capital stock of any class or securities convertible into, or
rights, warrants or options to acquire, any such shares or other convertible
securities.
(iv) No Dispositions. Acquiror shall not sell, lease, pledge,
encumber or otherwise dispose of, or agree to sell, lease, pledge, encumber or
otherwise dispose of, any of its assets that are material to its business, or
any other assets except in the ordinary course of business consistent with prior
practice.
(v) Indebtedness. Neither Acquiror nor the Sub shall incur any
indebtedness for borrowed money or guarantee any such indebtedness or issue or
sell any debt securities or guarantee any debt securities of others other than
in the ordinary course of business consistent with prior practice.
(vi) Benefit Plans, Etc. Neither Acquiror nor the Sub shall
adopt or amend in any material respect any collective bargaining agreement or
Employee Benefit Plan (as defined herein).
(vii) Executive Compensation. Neither Acquiror nor the Sub shall
grant to any executive officer any increase in compensation, or enter into any
employment agreement with any executive officer, other than any of the same the
material terms of which have been disclosed to Sky King on or before the date
hereof. Other Actions. Neither Acquiror nor the Sub shall enter into any
agreement or arrangement to do any of the foregoing. Neither Acquiror nor the
Sub shall take any action, or fail to take any action, that is reasonably likely
to result in any of their representations and warranties set forth in this
Agreement becoming untrue in any material respect.
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5.6 Consents.
Acquiror, Sub, Sky King and the Sky King Shareholders shall cooperate
and use their best efforts to obtain, prior to the Closing, all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts as are necessary for the
consummation of the transactions contemplated by this Agreement; provided,
however, that no loan agreement or contract for borrowed monies shall be repaid
and no contract shall be amended materially to increase the amount payable
thereunder or otherwise to be materially more burdensome in order to obtain any
such consent, approval or authorization without first obtaining the written
approval of the other parties hereto.
5.7 Filings.
Acquiror, the Sub, Sky King and the Sky King Shareholders shall, as
promptly as practicable, make any required filing, and any other required
submissions, under any law, statute, order rule or regulation with respect to
the Merger and the related transactions and shall cooperate with each other with
respect to the foregoing and any shareholder of the Acquiror who has an
obligation to file a Schedule 13D shall do so prior to the Closing.
5.8 All Reasonable Efforts.
Subject to the terms and conditions of this Agreement and to the
fiduciary duties and obligations of the boards of directors of the parties
hereto to their respective shareholders, as advised by their counsel, each of
the parties to this Agreement shall use all reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations, or to remove any
injunctions or other impediments or delays, legal or otherwise, as soon as
reasonable practicable, to consummate the Merger and the other transactions
contemplated by this Agreement.
5.9 Public Announcements.
Acquiror, the Sub, Sky King and the Sky King Shareholders shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Merger, this Agreement or the other transactions
contemplated by this Agreement and shall not issue any other press release or
make any other public statement without prior consultation with the other
parties, except as may be required by law or, with respect to Acquiror, by
obligations pursuant to any listing agreement with an national securities
exchange.
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5.10 Notification of Certain Matters.
Sky King and the Sky King Shareholders shall give prompt notice to
Acquiror, and Acquiror and the Sub shall give prompt notice to Sky King and the
Sky King Shareholders, of (a) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which would cause any of their representations
or warranties in this Agreement to be untrue or inaccurate in any material
respect, as to Sky King and the Sky King Shareholders, at or prior to the
Closing, and, as to Acquiror and Sub, as of the Closing and (b) any material
failure of Sky King and the Sky King Shareholders, on the one hand, or Acquiror
or the Sub, on the other hand, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by them under
this Agreement; provided, however, that the delivery of any notice pursuant to
this Section shall not limit or otherwise affect the remedies available to the
party receiving such notice under this Agreement as expressly provided in this
Agreement.
5.11 Expenses.
Except as otherwise expressly provided herein, all costs and expenses
incurred in connection with the Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses whether or not the
Merger is consummated.
5.12 Registration Rights.
(a) Registrable Securities
(i) Promptly after the domestication of Acquiror into a Delaware
corporation by virtue of merging with and into Sub and the corresponding
conversion of Sub Preferred Stock into shares of Sub Common Stock, Sub shall use
its best efforts to prepare and file with the SEC, and use its best efforts to
have declared effective, a registration statement (the "Registration Statement")
registering under the Act and the securities statutes and regulations of certain
states as provided herein, for resale at market, the shares of Sub Common Stock
then to be held by the Sky King Shareholders (the "Registrable Securities") and
thereafter, subject to the terms and conditions of this Agreement, Sub shall use
its best efforts to keep such Registration Statement effective for a period of
three (3) years. The Registration Statement may also include other securities of
Sub, whether on behalf of Sub or certain other selling stockholders.
Restrictions on the resale of the Registrable Securities are identified at
Section 5.12(j). From time to time, Sub shall amend or supplement such
Registration Statement and the prospectus contained therein as and to the extent
necessary to comply with the Act and any applicable state securities statute or
regulation.
(ii) In the event that the Acquiror is not domesticated by
merger into the Sub within one year from the Effective Date, and if thereafter
the holders of Sub Preferred Stock elect to exchange such shares of Sub
Preferred Stock for shares of Acquiror Common Stock, in the manner and to the
extent provided for in the Series A and Series B Certificates of
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Designation, then the Acquiror shall register the resale of the shares of
Acquiror Common Stock received by the holders of the Sub Preferred Stock in the
manner discussed in this Section 5.12 as if the obligations of Sub were those of
Acquiror. In that event, the terms "Registrable Securities" and "Sub Common
Stock" as used in this Section 5.12 shall refer to those shares of Acquiror
Common Stock received by the holders of Sub Preferred Stock.
(b) Sub shall pay all expenses of the Sub relating to such
registration, other than brokerage or underwriting discounts or commissions, if
any.
(c) It shall be a condition precedent to the obligations of Sub to
take any action pursuant to this Section 5.12 that each of the holders of
Registrable Securities whose shares are so to be registered shall furnish to Sub
in a timely fashion such information regarding such holder, such holder's
Registrable Securities and such other factual information as shall be reasonably
required to effect the registration of such shares.
(d) To the maximum extent permitted by law, Sub shall indemnify and
hold harmless each such holder of Registrable Securities from and against any
and all claims, damages or liabilities, joint or several, to which such holder
becomes subject under the Act or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will reimburse each such holder
for any legal or other expenses reasonably incurred by such holder in connection
with investigating or defending any actions, whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement, in any
preliminary or amended preliminary prospectus or in the prospectus (or the
registration statement or prospectus as from time to time amended or supplement
by Sub) or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statement therein not misleading in the circumstances in which
they were made, unless such untrue preliminary or amended preliminary prospectus
or prospectus in reliance upon and in conformity with information furnished in
writing to Sub in connection therewith by such holder expressly for use therein.
Promptly after receipt by any such holder of notice of the commencement of any
action in respect of which indemnity may be sought against Sub, such holder
shall notify Sub in writing of the commencement thereof, and, subject to the
provisions of this Section 5.12, Sub shall assume the defense of such action
(including the employment of counsel, who shall be counsel reasonably
satisfactory to such holder), and the payment of expenses insofar as such action
shall relate to any alleged liability in respect of which indemnity may be
sought against Sub. Sub shall not be liable to indemnify any such holder for any
settlement of any such action effected with Sub's prior written consent. Sub
shall not, except with the approval of each party being indemnified under this
Section 5.12, consent to entry of any judgment or enter into any settlement of
any claim or litigation in connection with which provisions of this Section 5.12
have been applied which does not include an unconditional term thereof the
giving by such claimant or plaintiff to the parties being so indemnified of a
release from all liability in respect to such claim or litigation.
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(e) Each holder whose shares of Registrable Securities are
registered pursuant to the provisions of this Section 5.12 shall indemnify and
hold harmless Sub, each of its directors and each of its officers from and
against any and all claims, damages or liabilities, joint or several, to which
they or any of them may become subject under the Act or under any other statute
or at common law or otherwise, and, except as hereinafter provided, will
reimburse Sub and each director and officer for any legal or other expenses
reasonably incurred by them or any of them in connection with investigating or
defending any actions, whether or not resulting in any liability, insofar as
such losses, claims, damages, expenses, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the registration statement, in any preliminary or amended
preliminary prospectus or in the prospectus (or the registration statement or
prospectus as from time to time amended or supplemented) or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading in the circumstances in which they were made, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with information furnished in writing to Sub in connection therewith
by such holder expressly for use therein. Promptly after receipt of notice of
the commencement of any action in respect of which indemnity may be sought
against such holder, Sub shall notify such holder in writing of the commencement
thereof, and such holder shall, subject to the provisions of this Section 5.12,
assume the defense of such action (including the employment of counsel, who
shall be counsel reasonably satisfactory to Sub) and the payment of expenses
insofar as such action shall relate to any alleged liability in respect of which
indemnity may be sought against such holder. Such holder shall not be liable to
indemnify Sub, any director, officer or other person for any settlement of any
such action effected without such holder's consent. Such holder shall not,
except with the approval of the parties being indemnified under this Section
5.12, consent to entry of any judgment or enter into any settlement of any claim
or litigation in connection with which provision of this Section 5.12 have been
applied which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to the parties being so indemnified of a release from
all liability in respect to such claim or litigation. The liability of any such
holder under this Section 5.12 shall be limited to the aggregate price at which
such holder's shares of Sub Common Stock is sold.
(f) In connection with its obligations to register the Registrable
Securities as provided in this Section 5.12, Sub shall have no obligation: (i)
to assist or cooperate in the offering or disposition of such shares; (ii)
except as expressly provided in this Section 5.12, to indemnify or hold harmless
the holders of such securities being registered or any underwriter designated by
such holders; (iii) to obtain a commitment from an underwriter relative to the
sale of such shares; or (iv) to include such Registrable Securities within an
underwritten offering of Sub conducted on a firm basis.
(g) If in the opinion of a lead or managing underwriter retained by
Sub to conduct an underwriting on a firm basis, the resale of such Registrable
Securities covered by the registration statement would have an adverse effect
upon the completion of an underwritten sale of securities, on behalf of Sub,
then, in that event, the holders of the Registrable Securities to be
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included in such registration statement do hereby agree to the restrictions upon
resale requested by a managing underwriter.
(h) In connection with its obligations to register the Registrable
Securities as provided in this Section 5.12, Sub shall also:
(i) furnish to each holder of shares of Registrable Securities
that are registered or to be registered pursuant to the provisions of this
Section 5.12, such copies of each preliminary and final prospectus and any and
all supplements and such other documents as such holder may reasonably request
to facilitate the public offering of the shares of Registrable Securities;
(ii) use its best efforts to register or qualify such
Registrable Securities covered by such registration statement under the
applicable securities or "Blue Sky" laws of such jurisdiction in the United
States as such holder may reasonably request (not to exceed an aggregate of 10
such jurisdictions); provided, however, that Acquiror shall not be obligated to
qualify to do business in any jurisdiction where it is not then so qualified or
to take any action that would subject it to the service of process in suits
other than those arising out of the offer or sale of the securities covered by
the registration statement in any jurisdiction where it is not then so subject;
and
(iii) furnish to each such holder upon request a copy of all
documents filed and all correspondence from and to the SEC in connection with
any such offering.
(i) The registration and other rights granted to the holders of
Registrable Securities in this Section 5.12 may not be assigned or transferred
by such holder without the prior written consent of Sub thereto.
(j) The Registrable Securities shall be subject to the following
restrictions upon resale:
(i) With respect to Sky King Shareholders other than principal
shareholders of Sky King (over 10% shareholders) or individuals who become
directors or officers of Acquiror or Sub, resale shall be limited to: 25% of the
holder's Sub Common Stock no earlier than six (6) months following the Closing;
an additional 25% of the holder's Sub Common Stock no earlier than twelve (12)
months following the Closing; and the remaining 50% of the holder's Sub Common
Stock no earlier than eighteen (18) months following the Closing.
(ii) With respect to all principal (over 10%) shareholders of
Sky King and individuals who become directors or officers of Acquiror or Sub, no
resales shall commence until eighteen (18) months after the Closing.
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5.13 Documents at Closing.
Each party to this Agreement agrees to execute and deliver at the
Closing those documents identified in Section 2.2 which are required to be
executed and delivered by such party.
5.14 Prohibition on Trading in Acquiror and Sub Stock.
Sky King and the Sky King Shareholders acknowledge that the United
States securities laws prohibit any person who has received material non-public
information concerning the matters which are the subject matter of this
Agreement from purchasing or selling the securities of the Acquiror or Sub, or
from communicating such information to any person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell
securities of the Acquiror or Sub. Accordingly, the Sky King Shareholders agree
that they will not purchase or sell any securities of the Acquiror or Sub, or
communicate such information to any other person under circumstances in which it
is reasonably foreseeable that such person is likely to purchase or sell
securities of the Acquiror or Sub, until no earlier than 72 hours following the
dissemination of a Current Report on Form 8-K to the SEC announcing the Closing
pursuant to this Agreement.
5.15 Anticipated Acquisition of the Principal Assets of PortaCom
Wireless, Inc.
(a) Acquiror has entered into an Asset Purchase Agreement with
PortaCom Wireless, Inc. ("PortaCom") to purchase from PortaCom all of its
interest in and to 2,000,000 shares of the common stock and 4,000,000 warrants
of Metromedia Asia Corporation (the "PortaCom Transaction") in consideration for
5,300,000 shares of Acquiror Common Stock and up to $700,000 in immediately
available funds. A copy of the Asset Purchase Agreement shall be attached as an
Exhibit to this Agreement. Acquiror will continue to take whatever reasonable
measures are necessary to complete the PortaCom Transaction. Sky King has been
advised that there can be no assurances that the PortaCom Transaction will be
completed timely, if at all, since a closing thereunder is dependent upon
PortaCom shareholder and regulatory approvals, as well as securing certain
waivers from Metromedia Asia Corporation ("MAC") permitting transfer of the MAC
shares and warrants.
(b) In connection with the PortaCom Transaction, Acquiror has agreed
to advance amounts up to $700,000 to PortaCom (the "PortaCom Advances") to be
applied by PortaCom against certain of its outstanding indebtedness. Towards
that end, as of the date of the Closing hereof, Acquiror must have funded at
least $300,000 of the PortaCom Advances. In recognition of the possibility that
Acquiror may need to fund up to $400,000 of the PortaCom Advances after the
Closing hereof, the parties hereto agree as follows:
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(i) In the event that on the date of the Closing, Acquiror has not
advanced all of the PortaCom Advances to PortaCom, then:
(A) On or before the Closing, one or more shareholders of
Acquiror shall voluntarily surrender to Acquiror, without payment therefor, that
number of shares of Acquiror Common Stock (the "Surrendered Shares") valued at
the amount of the remainder of the PortaCom Advances (the "Remaining PortaCom
Advances"). For the purposes of this paragraph, the shares of Acquiror Common
Stock shall be valued at $3.00 per share; and
(B) From the date of the Closing and until the date of the
closing of the PortaCom Transaction, Acquiror shall use diligent efforts to sell
the Surrendered Shares in one or more private placement transactions (the
"Private Placement Transactions") in order to, and only to the extent required
to, secure cash proceeds sufficient to satisfy the obligation to advance the
Remaining PortaCom Advances to PortaCom.
(1) If and to the extent that Acquiror fails to receive the
entire amount of the Remaining PortaCom Advances through the Private Placement
Transactions by the date of the closing of the PortaCom Transaction, then
Acquiror shall make any such remaining payment out of its then-existing cash
assets. Thereafter, Acquiror shall be entitled to sell any remaining Surrendered
Shares to reimburse itself for funds expended in connection with the payment of
the Remaining PortaCom Advances or retain any remaining Surrendered Shares in
its treasury.
(2) In the event that Acquiror receives through the Private
Placement Transactions more than the amount of the Remaining PortaCom Advances,
then Acquiror shall deliver to the former holder(s) of the Surrendered Shares
(in the proportion of their shares so surrendered), any such excess amount.
(3) In the event that Acquiror raises sufficient funds from
the Private Placement Transactions to pay or advance the entire amount of the
Remaining PortaCom Advances before all of the Surrendered Shares are sold
through the Private Placement Transactions, then Acquiror shall, for no
consideration therefor, re-issue to the former holder(s) of the Surrendered
Shares (in the proportion of their shares so surrendered), any such remaining
Surrendered Shares.
5.16 Production of Schedules and Exhibits.
Within fifteen (15) days of the execution of this Agreement each of the
parties hereto shall produce to the other parties, to the extent not previously
done, all of the Schedules and Exhibits required to be produced pursuant to this
Agreement. The Schedules and Exhibits produced subsequent to the execution of
this Agreement, shall be given such force and effect as though such Schedules
and Exhibits were produced upon execution of this Agreement.
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5.17 Acknowledgment of Approvals.
By virtue of their respective signatures to this Agreement,
Acquiror, Sub, Sky King and the Sky King Shareholders acknowledge their approval
of this Agreement and their consent to the consummation of the transactions
identified herein.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
6.1 Conditions to Obligations of Sky King and the Sky King Shareholders.
The obligations of Sky King and the Sky King Shareholders to consummate
the Merger and the other transactions contemplated to be consummated by it at
the Closing are subject to the satisfaction (or waiver by Sky King and the Sky
King Shareholders) at or prior to the Closing (or at such other time prior
thereto as may be expressly provided in this Agreement) of each of the following
conditions:
(a) Acquiror shall have sold, transferred or otherwise disposed of
all of its present assets and shall as of the Closing have assets consisting of
at least: (i) $1 million in cash or other liquid assets; and (ii) notes
receivable of not less than $4 million with maturities on or before 1 August,
1999.
(b) Acquiror shall have settled and/or satisfied all outstanding
obligations or liabilities so that as of the Closing Acquiror shall have no
obligations or liabilities except trade payables incurred in connection with
this transaction, those in connection with the PortaCom Transaction and those in
the ordinary course, which in the aggregate shall not exceed $250,000.
Notwithstanding anything to the contrary contained in the foregoing sentence, if
Acquiror has not advanced the entire amount of the PortaCom Advances to PortaCom
on or before the date of the Closing, then on or before the date of the Closing,
Acquiror shall have (i) advanced a minimum of $300,000 of the PortaCom Advances
to PortaCom and (ii) satisfied the provisions of Section 5.15(b)(i)(A).
(c) On or before the Closing, Acquiror shall have secured general
releases from each of its directors and officers agreeing to release Acquiror
from any and all claims, liabilities, obligations and demands in connection with
the transactions contemplated by this Agreement.
(d) The representations and warranties of Acquiror and the Sub set
out in this Agreement shall be true and correct in all material respects at and
as of the time of the Closing as though such representations and warranties were
made at and as of such time.
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(e) Each of Acquiror and the Sub shall have complied in a timely
manner and in all material respects with the respective covenants and agreements
set out in this Agreement.
(f) The Merger shall have been approved by Sky King and the Sky King
Shareholders in accordance with the provisions of the CBCA.
(g) On or before the Closing, the officers and directors of Acquiror
shall have tendered their immediate resignations from office and shall have in
conjunction therewith reconstituted the Board of Directors to consist of a
maximum of five (5) members and shall have nominated to Acquiror's Board of
Directors two (2) individuals designated by the holders of the Sub Preferred
Stock and the VDC Designee shall have been designated by the Acquiror's Board of
Directors (as such Board was constituted immediately prior to the Closing).
(h) Sky King and the Sky King Shareholders shall be reasonably
satisfied that the Merger results in a tax-free reorganization under Section 368
of the Code.
(i) Acquiror shall enter into Employment Agreements with each of
Frederick A. Moran and James Roberts substantially in accordance with the terms
contained within Exhibit 2.2(b)(xii).
(j) Acquiror shall have executed and delivered the Escrow Agreement
to Sky King and the Escrow Agent.
(k) There shall be delivered to Sky King and the Sky King
Shareholders an officer's certificate of Acquiror and Sub to the effect that all
of the respective representations and warranties of Acquiror and Sub set forth
herein are true and complete in all material respects as of the Closing, and the
Acquiror and Sub have complied in all material respects with their covenants and
agreements set forth herein that are required to be complied with by the
Closing.
(l) Sky King shall have completed prior to the Closing, to its
satisfaction, a due diligence review of the financial condition, results of
operations, properties, assets, liabilities, business and prospects of Acquiror.
(m) All director, shareholder, lender, lessor and other parties'
consents and approvals, as well as all filings with, and all necessary consents
or approvals of, all federal, state and local governmental authorities and
agencies, as are required under this Agreement, applicable law or any applicable
contract or agreement (other than as contemplated by this Agreement) to complete
the Merger shall have been secured.
(n) No statute, rule, regulation, executive order, decree,
injunction or restraining order shall have been enacted, entered, promulgated or
enforced by any court of
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competent jurisdiction or governmental authority that prohibits or restricts
the consummation of the Merger or the related transactions.
6.2 Conditions to Acquiror's and the Sub's Obligations.
The obligations of Acquiror and the Sub to consummate the Merger and the
other transactions contemplated to be consummated by it at the Closing are
subject to the satisfaction (or waiver by Acquiror) at or prior to the Closing
(or at such other time prior thereto as may be expressly provided in this
Agreement) of each of the following conditions:
(a) On or before the Closing, Sky King shall have secured general
releases from each of its directors, officers, consultants, employees and
shareholders agreeing to: (i) release Sky King, Acquiror and Sub from any and
all claims, liabilities, obligations and demands; (ii) terminate any employment
agreements; and (iii) terminate any shareholder agreements.
(b) On or before the Closing, Sky King shall have secured the
resignation of each of its directors and officers except George Finn who will
remain the President of Sky King.
(c) Acquiror shall have executed employment agreements with
Frederick A. Moran and James Roberts substantially in accordance with the terms
contained within Exhibit 2.2(b)(xii).
(d) No Sky King Shareholder shall have filed with Sky King, prior to
the Sky King shareholder meeting at which a vote is to be taken with respect to
a proposal to approve this Agreement, a written notice of intent to demand
payment for his shares if the proposed action is effectuated, as required by
Section 33-861 of the CBCA in order for such shareholder to perfect the right to
dissent from such proposed action.
(e) The representations and warranties of Sky King and the Sky King
Shareholders set out in this Agreement shall be true and correct in all material
respects at and as of the time of the Closing as though such representations and
warranties were made at and as of such time.
(f) Sky King and the Sky King Shareholders shall have complied in a
timely manner and in all material respects with its covenants and agreements set
out in this Agreement.
(g) There shall be delivered to Acquiror and Sub an officer's
certificate of Sky King to the effect that all of the representations and
warranties of Sky King set forth herein are true and complete in all respects as
of the Closing, and that Sky King has complied in all material respects with
covenants and agreements set forth herein required to be complied with by the
Closing, and there shall be delivered to Acquiror and Sub a certificate signed
by the Sky King
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Shareholders to the effect that the representations and warranties of the Sky
King Shareholders set forth herein are true and correct in all material respects
and that the Sky King Shareholders have complied in all material respects with
their covenants and agreements set forth herein required to be complied with by
Closing.
(h) Sky King and the Sky King Shareholders shall have executed and
delivered the Escrow Agreement to Acquiror and the Escrow Agent.
(i) Acquiror and Sub shall have completed prior to the Closing, to
their satisfaction, a due diligence review of the financial condition, results
of operations, properties, assets, liabilities, businesses and prospects of Sky
King.
(j) All director, shareholder, lender, lessor and other parties'
consents and approvals, as well as all filings with, and all necessary consents
or approvals of, all federal, state and local governmental authorities and
agencies, as are required under this Agreement, applicable law or any applicable
contract or agreement (other than as contemplated by this Agreement) to complete
the Merger shall have been secured.
(k) No statute, rule, regulation, executive order, decree,
injunction or restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental authority that
prohibits or restricts the consummation of the Merger or the related
transactions.
(l) Acquiror's and Sub's Board of Directors, and shareholders to the
extent necessary, shall have approved the Merger in accordance with the DGCL.
(m) The Board of Directors and Sky King Shareholders shall have
approved the Merger in accordance with the CBCA.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification.
(a) Sky King Shareholders. The Sky King Shareholders shall
indemnify, defend and hold harmless Acquiror and Sub from and against any and
all demands, claims, actions or causes of action, judgments, assessments,
losses, liabilities, damages or penalties and reasonable attorneys' fees and
related disbursements (collectively, "Claims") incurred by Acquiror or Sub which
arise out of or result from a misrepresentation, breach of warranty, or breach
of any covenant of Sky King or the Sky King Shareholders contained herein or in
the Schedules annexed hereto or in any deed, exhibit, closing certificate,
schedule or any ancillary
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certificates or other documents or instruments furnished by Sky King or the Sky
King Shareholders pursuant hereto or in connection with the transactions
contemplated hereby or thereby.
(b) Acquiror and Sub. Acquiror and Sub shall indemnify, defend and
hold harmless Sky King and the Sky King Shareholders from and against any and
all Claims, as defined at Subsection 7.1(a) above, incurred by Sky King and/or
the Sky King Shareholders which arise out of or result from a misrepresentation,
breach of warranty or breach of any covenant of Acquiror and Sub contained
herein or in the Schedules annexed hereto or in any deed, exhibit, closing
certificate, schedule or any ancillary certificates or other documents or
instruments furnished by Acquiror or the Sub pursuant hereto or in connection
with the transactions contemplated hereby or thereby.
(c) Methods of Asserting Claims for Indemnification. All claims for
indemnification under this Agreement shall be asserted as follows:
(i) Third Party Claims. In the event that any Claim for which a
party (the "Indemnitee") would be entitled to indemnification under this
Agreement is asserted against or sought to be collected from the Indemnitee by a
third party the Indemnitee shall promptly notify the other party (the
"Indemnitor") of such Claim, specifying the nature thereof, the applicable
provision in this Agreement or other instrument under which the Claim arises,
and the amount or the estimated amount thereof (the "Claim Notice"). The
Indemnitor shall have thirty (30) days (or, if shorter, a period to a date not
less than ten (10) days prior to when a responsive pleading or other document is
required to be filed but in no event less than ten (10) days from delivery or
mailing of the Claim Notice) (the "Notice Period") to notify the Indemnitee (a)
whether or not it disputes the Claim and (b) if liability hereunder is not
disputed, whether or not it desires to defend the Indemnitee. If the Indemnitor
elects to defend by appropriate proceedings, such proceedings shall be promptly
settled or prosecuted to a final conclusion in such a manner as to avoid any
risk of damage to the Indemnitee; and all costs and expenses of such proceedings
and the amount of any judgment shall be paid by the Indemnitor.
If the Indemnitee desires to participate in, but not control,
any such defense or settlement, it may do so at its sole cost and expense. If
the Indemnitor has disputed the Claim, as provided above, and shall not defend
such Claim, the Indemnitee shall have the right to control the defense or
settlement of such Claim, in its sole discretion, and shall be reimbursed by the
Indemnitor for its reasonable costs and expenses of such defense.
(ii) Non-Third Party Claims. In the event that the Indemnitee
should have a Claim for indemnification hereunder which does not involve a Claim
being asserted against it or sought to be collected by a third party, the
Indemnitee shall promptly send a Claim Notice with respect to such Claim to the
Indemnitor. If the Indemnitor does not notify the Indemnitee within the Notice
Period that it disputes such Claim, the Indemnitor shall pay the
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amount thereof to the Indemnitee. If the Indemnitor disputes the amount of such
Claim, the controversy in question shall be submitted to arbitration pursuant to
Section 9.8 hereafter.
ARTICLE VIII
TERMINATION
8.1 Termination.
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Closing:
(a) by mutual written consent of the board of directors of Acquiror,
the Sub, Sky King and the Sky King Shareholders:
(b) by any of Acquiror, the Sub, Sky King or the Sky King
Shareholders:
(i) if the Closing shall not have occurred on or before March
31, 1998; provided, however, that the right to terminate this Agreement under
this Section 8.1(b)(i) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before that date; or
(ii) if any court of competent jurisdiction, or any governmental
body, regulatory or administrative agency or commission having appropriate
jurisdiction shall have issued an order, decree or filing or taken any other
action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable.
(c) by Sky King and the Sky King Shareholders if any of the
conditions specified in Section 6.1 have not been met and the sole remedy of Sky
King and the Sky King Shareholders in that event, shall be either to waive such
failure and proceed to close hereunder, or to terminate this Agreement in which
event neither Sky King and the Sky King Shareholders nor Acquiror shall have any
claim or action against the other; or
(d) by Acquiror and Sub if any of the conditions specified in
Section 6.2 have not been met and the sole remedy of Acquiror and Sub in that
event, shall be either to waive such failure and proceed to close hereunder, or
to terminate this Agreement in which event neither Acquiror and the Sub nor Sky
King and the Sky King Shareholders shall have any claim or action against the
other.
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8.2 Notice and Effect of Termination.
In the event of the termination and abandonment of this Agreement
pursuant to Section 8.1, written notice thereof shall forthwith be given to the
other party or parties specifying the provision pursuant to which such
termination is made, and this Agreement shall forthwith become void and have no
effect without any liability on the part of any party or its directors, officers
or shareholders, except for the provisions of this Section 8.2 and Sections 5.4,
5.9 and 5.11, which shall survive any termination of this Agreement. Nothing
contained in this Section 8.2 shall relieve any party from any liability for any
breach of this Agreement provided that the sole remedy available to Sky King and
the Sky King Shareholders for any breach of this Agreement by Acquiror or Sub
shall be as set forth in Section 7.1 hereof.
8.3 Extension; Waiver.
Any time prior to the Closing, the parties may (a) extend the time for
the performance of any of the obligations or other acts of any other party under
or relating to this Agreement; (b) waive any inaccuracies in the representations
or warranties by any other party or (c) waive compliance with any of the
agreements of any other party or with any conditions to its own obligations. Any
agreement on the part of any other party to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of such
party.
8.4 Amendment and Modification.
This Agreement may be amended, whether before or after the vote of the
Sky King Shareholders or shareholders of Acquiror, by written agreement of
Acquiror, the Sub, Sky King and the Sky King Shareholders; provided, however,
that after the approval, if any, of this Agreement by the Sky King Shareholders,
no such amendment shall reduce or change the consideration to be received by any
Sky King Shareholder in connection with the Merger as set out in Section 1.3
hereof or shall otherwise adversely affect the rights under this Agreement of
the Sky King Shareholders without the approval of such adversely affected
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of Acquiror, the Sub, Sky King and the Sky King
Shareholders.
ARTICLE IX
MISCELLANEOUS
9.1 Survival of Representations and Warranties.
The respective representations and warranties of Acquiror, the Sub, Sky
King and the Sky King Shareholders shall not be deemed waived or otherwise
affected by any investigation made by any
42
<PAGE>
party. Each representation and warranty shall survive the Closing through all
applicable statutes of limitations.
9.2 Notices.
All notices requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given on the date if delivered personally, or
upon the second business day after it shall have been deposited by certified or
registered mail with postage prepaid, or sent by telex, telegram or telecopier,
as follows (or at such other address or facsimile number for a party as shall be
specified by like notice):
(a) if to Sky King at:
Fred Moran, Chairman
Sky King Communications, Inc.
25 Doubling Road
Greenwich, CT 06830
Facsimile: (203) 869-1430
with a copy to:
George Finn, President
Sky King Communications, Inc.
25 Doubling Road
Greenwich, CT 06830
Facsimile: (203) 869-1430
if to Acquiror or the Sub at:
Graham Ferguson Lacey
VDC Corporation Ltd.
Bishopscourt, Kirk Michael
Isles of Man
British Isles
with a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll Professional Corporation
Eleven Penn Center
1835 Market Street, 14th Floor
Philadelphia, PA 19103
Facsimile: (215) 665-8760
43
<PAGE>
9.3 Entire Agreement; Assignment.
This Agreement, including all Exhibits and Schedules hereto, constitutes
the entire Agreement among the parties with respect to its subject matter and
supersedes all prior agreements and understandings, both written and oral, among
the parties or any of them with respect to such subject matter and shall not be
assigned by operation of law or otherwise.
9.4 Binding Effect; Benefit.
This Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors and assigns. Nothing in this Agreement
is intended to confer on any person other than the parties to this Agreement or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.5 Headings.
The descriptive headings of the sections of this Agreement are inserted
for convenience only, do not constitute a part of this Agreement and shall not
affect in any way the meaning or interpretation of this Agreement.
9.6 Counterparts.
This Agreement may be executed in two or more counterparts and delivered
via facsimile, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
9.7 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to the laws that might otherwise
govern under principles of conflicts of laws applicable thereto.
9.8 Arbitration.
If a dispute arises as to the interpretation of this Agreement, it shall
be decided finally in an arbitration proceeding conforming to the Rules of the
American Arbitration Association applicable to commercial arbitration then in
effect at the time of the dispute. The arbitration shall take place in
Philadelphia, Pennsylvania. The decision of the Arbitrators shall be
conclusively binding upon the parties and final, and such decision shall be
enforceable as a
44
<PAGE>
judgment in any court of competent jurisdiction. The parties shall share equally
the costs of the arbitration.
9.9 Severability.
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other authority to be invalid,
void, unenforceable or against its regulatory policy, the remainder of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
9.10 Release and Discharge.
By virtue of their execution of this Agreement, as of the Closing and
thereafter, any and all Sky King directors, officers and shareholders hereby
agree to release, remise and forever discharge Sky King from and against any and
all debts, obligations, liabilities and amounts owing from Sky King prior to the
Closing, and Sky King is not obligated to take any action or make any payments
to third parties on behalf of the Sky King Shareholders.
9.11 Certain Definitions.
As used herein:
(a) "Act" means the Securities Act of 1933, as amended;
(b) "Affiliate" shall have the meanings ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended to date (the "Exchange Act");
(c) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which federally chartered financial institutions are not open for
business in the City of Philadelphia;
(d) "Dissenting Shares" shall mean the shares of Sky King Common
Stock held by the Dissenting Shareholders, as such term is defined in Section
1.5;
(e) "Employee Benefit Plan" means any employee benefit plan (as
defined in ss. 3(3) of the Employee Retirement Income Security Act of 1974, as
amended, or any employment contract, employee loan, incentive compensation,
profit sharing, retirement, pension, deferred compensation, severance,
termination pay, stock option or purchase plan, guaranteed annual income plan,
fund or arrangement, payroll incentive, policy, fund, agreement
45
<PAGE>
or arrangement, non-competition or consulting agreement, hospitalization,
disability, life or other insurance plan, or other employee fringe benefit
program or plan, or any other plan, payroll practice, policy fund agreement or
arrangement similar to or in the nature of the foregoing, oral or written;
(f) "Escrow Agent" means that person or entity mutually agreed upon
by the parties hereto to act as escrow agent to hold, safeguard and disburse the
Escrow Shares (as such term is defined in Section 1.3) pursuant to the terms and
conditions of this Agreement;
(g) "Knowledge" shall mean the actual current knowledge of the
executive management of the party to this Agreement to whom knowledge is
ascribed together with the knowledge such executive management should reasonably
be expected to have in the performance of its duties and responsibilities;
(h) "Material Adverse Effect" shall mean any adverse effect on the
business, condition (financial or otherwise) or results of operation of the
relevant party and its subsidiaries, if any, which is material to such party and
its subsidiaries, if any, taken as a whole;
(i) "Person" means any individual, corporation, partnership,
association, trust or other entity or organization, including a governmental or
political subdivision or any agency or institution thereof; and
(j) "Subsidiary" shall mean, when used with reference to an entity,
any corporation, a majority of the outstanding voting securities of which is
owned directly or indirectly, or a majority of the board of directors of which
may be elected, by such entity.
IN WITNESS WHEREOF, Acquiror, Sub, Sky King and the Sky King
Shareholders have caused this Agreement to be signed by their respective
officers hereunto duly authorized, effective as of the date first written above.
Attest: VDC CORPORATION LTD.
By: By: /s/ Graham Ferguson Lacey
----------------------------- ----------------------------------
Graham Ferguson Lacey, President
Attest: VDC (DELAWARE), INC.
By: By: /s/ Andrew Panzo
----------------------------- ---------------------------------
Andrew Panzo, President
[signatures continue onto next page]
46
<PAGE>
Attest: SKY KING COMMUNICATIONS, INC.
By: By: /s/ Frederick A. Moran
----------------------------- -----------------------------------
Frederick A. Moran, Chairman
Attest:
By: /s/ James Roberts
-----------------------------------
James Roberts, Chief Operating
Officer
By:
-----------------------------
Witness SKY KING SHAREHOLDERS
/s/ Frederick W. Moran
- -------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Frederick W. Moran
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: 14.2%
Witness
/s/ Clayton E. Moran
- -------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Clayton E. Moran
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: 14.2%
Witness
/s/ Kent F. Moran
- -------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Kent F. Moran
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: 13.0%
[signatures continue onto next page]
47
<PAGE>
Witness
/s/ Luke F. Moran
- -------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Luke F. Moran
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: 13.0%
Witness
/s/ Frederick A. Moran
- -------------------------------- --------------------------------------
Name:___________________________ Signature (Frederick A. Moran)
Address:________________________
/s/ Joan B. Moran
- -------------------------------- ---------------------
Name: __________________________ Signature (Joan B. Moran)
Address:_______________________ Name: Frederick A. and Joan B. Moran
________________________________ Address: 25 Doubling Road
Greenwich, CT 06830
Ownership Percentage: .83%
Witness
/s/ George Finn
- -------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: George Finn
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: .55%
Witness
/s/ James C. Roberts, Trustee
- -------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Roberts Family Trust
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: 27.5%
[signatures continued onto next page]
48
<PAGE>
Witness
/s/ Henry Jacobs
- -------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Henry Jacobs
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: .72%
Witness
/s/ Leon G. Cooperman
--------------------------------------
- -------------------------------- Signature
Name:___________________________ Name: Watchung Road Associates, L.P.
Address:________________________ By: Leon G. Cooperman, General Partner
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: 1.1%
Witness
/s/ Wayne Perry
- -------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Wayne Perry
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: .66%
Witness
/s/ David Wheeler
- -------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: David Wheeler
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: .07%
[signatures continue onto next page]
49
<PAGE>
Witness
/s/ Charles Glazer
- -------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Charles Glazer
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: .27%
Witness
/s/ Robert de Rose
- -------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Robert de Rose IRA
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: .27%
Witness
/s/ Jack Daniels
--------------------------------------
- -------------------------------- Signature
Name:___________________________ Name: Daniels Tech, LLC
Address:________________________ By: Jack Daniels, Managing Partner
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: .11%
Witness
/s/ Jose Carvalho Soares
--------------------------------------
- -------------------------------- Signature
Name:___________________________ Name: Jose Carvalho Soares
Address:________________________ Address: Rua Carlos Benedetti 78
________________________________ Nilopolis - Rio de Janeiro
Brazil Cep 26535
______________________________________
Ownership Percentage: .8%
[signatures continue onto next page]
50
<PAGE>
Witness
/s/ Vicki Walters, Trustee
--------------------------------------
- -------------------------------- Signature
Name:___________________________ Name: Capital Growth Trust
Address:________________________ Vicki Walters, Trustee
________________________________ Address: 2028 Ryans Run Road
Lansdale, PA 19446
Ownership Percentage: 6.0%
Witness
/s/ Harold Chaffe
--------------------------------------
- -------------------------------- Signature
Name:___________________________ Name: Godwin Finance Ltd.
Address:________________________ Harold Chaffe
________________________________ Title: Financial Controller
Address: Whitehill House
Newby Road Industrial Estate
Newby Road
Hazel Grove
Stockport, Cheshire England SK7 5DA
______________________________________
Ownership Percentage: 3.6%
Witness
/s/ Bruno DiSpirito
--------------------------------------
- -------------------------------- Signature
Name:___________________________ Name: Gibralt Holdings Ltd.
Address:________________________ By: Bruno DiSpirito
________________________________ Title: Vice President
Address: 1177 Hastings Street
Suite 2000
Newby Road
Vancouver, British Columbia V6E 2K3
______________________________________
Ownership Percentage: 3.0%
51
<PAGE>
Schedule 4.1(m)
Lease between Sky King Communications, Inc. as lessee and D. Loschiava, trustee,
as lessor for a residence located at 71 Long Meadow, Riverside, CT for James C.
Roberts. The term of the lease is from February 1998 through June 1998, and the
monthly rental payment is $4,150.
52
<PAGE>
Schedule 4.1(p)
1. Lease between Sky King Communications, Inc. as lessee and D. Loschiava,
trustee, as lessor for a residence located at 71 Long Meadow, Riverside, CT for
James C. Roberts. The term of the lease is from February 1998 through June 1998,
and the monthly rental payment is $4,150.
2. Sky King Communications, Inc. paid James C. Roberts a $25,000 sign-on bonus
in January 1998 after he became Sky King's Chief Operating Officer in December
1997.
53
<PAGE>
Schedule 4.2(d)(i)
VDC Corporation Ltd. Warrants
Number of Warrants Expiration Date Exercise Price
- ------------------ --------------- --------------
455,000 June 30, 1998 $4 per share
250,000 September 30, 1998 $4 per share
45,000 June 30, 1998 $5 per share
54
<PAGE>
Schedule 4.2(g)
None
55
<PAGE>
Schedule 5.5(a)(ix)
Sky King Communications, Inc. plans to acquire Blue Sky International LLC and
the Sakalin Telecom Group of companies.
56
AMENDMENT TO
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT TO AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
(the "Amendment"), is made and entered into as of March 6, 1998, by and among
VDC CORPORATION LTD., a Bermuda corporation ("Acquiror"), VDC (DELAWARE), INC.,
a Delaware corporation and wholly-owned subsidiary of Acquiror ("Sub"), SKY KING
COMMUNICATIONS, INC., a Connecticut corporation ("Sky King"), and those
individuals and entities whose names appear on the signature page hereof in
their capacity as holders of the outstanding common stock of Sky King (the "Sky
King Shareholders").
Recitals
WHEREAS, the parties hereto have entered into an Amended and Restated
Agreement and Plan of Merger effective as of December 10, 1997 (the "Merger
Agreement") pursuant to which Sub shall merge with and into Sky King (the
"Merger");
WHEREAS, the parties hereto desire to amend the Merger Agreement in the
manner set forth herein effective as of the date hereof; and
WHEREAS, any capitalized term used but not defined herein shall have
the meaning ascribed to such term in the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
agreements contained herein, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree that the Merger Agreement is hereby amended as follows:
1. Section 6.1(a)(i) of the Merger Agreement is amended to require that
Acquiror shall have assets at the Closing consisting of at least
$600,000.00 in cash or other liquid assets and the right to receive
$370,000.00 in immediately available funds from Tasmin Limited by March
13, 1998. In the event the remaining funds are not timely received from
Tasmin Limited, the Acquiror may draw upon such number of Investment
Banking Shares as are necessary to satisfy any such deficiency in
funding to the extent of Investment Banking Shares at the rate of $2.00
per share. Assets available at Closing will also include approximately
50,000 shares of the Common Stock of PortaCom that were acquired for
approximately $30,000.
2. Wayne Perry, a Sky King Shareholder, shall be deemed to have not given
any of the representations and warranties of Sky King and the Sky King
Shareholders set forth in Article IV of the Merger Agreement.
<PAGE>
3. Schedule 4.2(d)(i) to the Merger Agreement is hereby amended and
restated in its entirety by the following Schedule:
Schedule 4.2(d)(i)
VDC Corporation Ltd. Warrants
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Number of Warrants Exercise Price Expiration Date
------------------ -------------- ---------------
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
45,000 $5.00 Aug. 30, 1998
- ---------------------------------------------------------------------------------------------------------------------
85,000 $4.00 Aug. 30, 1998
- ---------------------------------------------------------------------------------------------------------------------
41,110 $4.00 Aug. 30, 1998
- ---------------------------------------------------------------------------------------------------------------------
90,909 $4.00 Aug. 30, 1998
- ---------------------------------------------------------------------------------------------------------------------
90,909 $4.00 Aug. 30, 1998
- ---------------------------------------------------------------------------------------------------------------------
9,890 $4.00 Aug. 30, 1998
- ---------------------------------------------------------------------------------------------------------------------
250,000 $4.00 Aug. 30, 1998
- ---------------------------------------------------------------------------------------------------------------------
30,000 $4.00 Aug. 30, 1998
- ---------------------------------------------------------------------------------------------------------------------
100,000 $4.00 Aug. 30, 1998
- ---------------------------------------------------------------------------------------------------------------------
145,728 $4.00 Aug. 30, 1998
- ---------------------------------------------------------------------------------------------------------------------
50,000 $4.00 Aug. 30, 1998
-------
- ---------------------------------------------------------------------------------------------------------------------
938,546
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
4. Paragraph 5.15 of the Merger Agreement shall be amended to provide that
Acquiror has funded at least $240,000 of the PortaCom Advances.
Subparagraph (i)(A) of Paragraph 5.15 shall be amended to provide that
the Investment Banking Shares shall serve as an escrow fund for the
payment of the Remaining PortaCom Advances or that the Remaining
PortaCom Advances may be satisfied upon the early collection of
outstanding subscriptions receivable. See Paragraph 5 below. The
remainder of Paragraph 5.15 shall remain in full force and effect.
5. Paragraph 4.2(L) of the Merger Agreement provides that the Acquiror has
agreed to pay an investment banking fee in stock equal to 5% of the
Merger Consideration or 500,000 shares of Acquiror Common Stock for
arranging this transaction (the "Investment Banking Shares"). This
Amendment will confirm that the Investment Banking Shares will be paid
through the issuance by Acquiror following the transaction of 500,000
shares of Common Stock to the following persons: FAC Enterprises, Inc.
- 185,000 shares; KAB Investments, Inc. - 185,000 shares; SPH
Investments, Inc. - 70,000 shares; and SPH Equities, Inc. - 60,000
shares.
Notwithstanding the above, the Investment Banking Shares will not be
distributed at the Closing, and instead, will be subject to offset in
the following manner: (i) to the extent the Remaining PortaCom Advances
are not satisfied by the early collection of outstanding subscriptions
receivable, the Investment Banking Shares will serve as an escrow fund
upon which the Acquiror will be able to draw from these shares in order
to sell shares in one or more private placement transactions in order
to, and to the extent necessary, to secure cash proceeds sufficient to
satisfy the obligation to advance the Remaining PortaCom Advances
identified within Subparagraph 5.15(b)(i)(A) of the Merger Agreement.
2
<PAGE>
To the extent the Remaining PortaCom Advances are satisfied, then, with
the exception of Investment Banking Shares that are otherwise serving
as an escrow fund under Paragraph 1 hereof, the remaining Investment
Banking Shares may be issued in the manner identified above.
6. Notwithstanding anything to the contrary in the Merger Agreement, the
Merger shall become effective as of the filing of a Certificate of
Merger with the Secretary of State of the State of Connecticut in
accordance with Section 38-821 of the CBCA and a Certificate of Merger
with the Secretary of State of the State of Delaware in accordance with
Section 252 of the DGCL; and confirmation that both Certificates of
Merger have become effective as of such filing date; and at such time
the Merger shall be deemed completed and such time shall be referred to
herein as the "Effective Time."
7. Except as otherwise set forth herein, the terms of the Merger Agreement
shall remain in full force and effect.
8. This Amendment may be executed in two or more counterparts and
delivered via facsimile, each of which shall be deemed to be an
original, and all of which together shall be deemed to be one and the
same instrument.
9. This Amendment shall be governed by and construed in accordance with
the laws of Bermuda, without regard to the laws that might otherwise
govern under principles of conflicts of laws applicable thereto.
IN WITNESS WHEREOF, Acquiror, Sub, Sky King and the Sky King
Shareholders have caused this Amendment to be signed by their respective
officers hereunto duly authorized, effective as of the date first written above.
VDC CORPORATION LTD.
By: /s/ Graham Ferguson Lacey
-------------------------------------
Graham Ferguson Lacey, President
VDC (DELAWARE), INC.
By: /s/ Andrew Panzo
-------------------------------------
Andrew Panzo, President
[Signatures continue on next page]
3
<PAGE>
SKY KING COMMUNICATIONS, INC.
By: /s/ Frederick A. Moran
-------------------------------------
Frederick A. Moran,
Chief Executive Officer
By: /s/ James Roberts
-------------------------------------
James Roberts,
Chief Operating Officer
SKY KING SHAREHOLDERS
(*) /s/ Frederick A. Moran
-------------------------------------
Signature
Name: Frederick W. Moran
(*) /s/ Frederick A. Moran
-------------------------------------
Signature
Name: Clayton E. Moran
(*) /s/ Frederick A. Moran
-------------------------------------
Signature
Name: Kent F. Moran
(*) /s/ Frederick A. Moran
-------------------------------------
Signature
Name: Luke F. Moran
(*) /s/ Frederick A. Moran
-------------------------------------
Signature (Frederick A. Moran)
(*) /s/ Frederick A. Moran
-------------------------------------
Signature (Joan B. Moran)
Name: Frederick A. and Joan B. Moran
[Signatures continue on next page]
4
<PAGE>
(*) /s/ Frederick A. Moran
-------------------------------------
Signature
Name: George Finn
(*) /s/ Frederick A. Moran
-------------------------------------
Signature
Name: Roberts Family Trust
(*) /s/ Frederick A. Moran
-------------------------------------
Signature
Name: Henry Jacobs
(*) /s/ Frederick A. Moran
-------------------------------------
Signature
Name: Watchung Road Associates, L.P.
By: Leon G. Cooperman,
General Partner
(*) /s/ Frederick A. Moran
-------------------------------------
Signature
Name: Wayne Perry
(*) /s/ Frederick A. Moran
-------------------------------------
Signature
Name: David Wheeler
(*) /s/ Frederick A. Moran
-------------------------------------
Signature
Name: Charles Glazer
(*) /s/ Frederick A. Moran
-------------------------------------
Signature
Name: Robert de Rose IRA
By: Cowen & Co., Trustee
[Signatures continue on next page]
5
<PAGE>
(*) /s/ Frederick A. Moran
-------------------------------------
Signature
Name: Daniels Tech, LLC
By: Jack Daniels,
Managing Partner
(*) /s/ Frederick A. Moran
-------------------------------------
Signature
Name: Jose Carvalho Soares
(*) /s/ Frederick A. Moran
-------------------------------------
Signature
Name: Capital Growth Trust
By: Vicki Walters, Trustee
(*) /s/ Frederick A. Moran
-------------------------------------
Signature
Name: Godwin Finance Ltd.
By: Harold Chaffe,
Financial Controller
(*) /s/ Frederick A. Moran
-------------------------------------
Signature
Name: Gibralt Holdings Ltd.
By: Bruno DiSpirito
Title: Vice President
(*) By Power of Attorney granted to Frederick A. Moran.
6
CERTIFICATE OF MERGER OF
SKY KING COMMUNICATIONS, INC.
INTO
VDC (DELAWARE), INC.
The undersigned corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the
constituent corporations of the merger is as follows:
Name State of Incorporation
VDC (Delaware), Inc. Delaware
Sky King Communications, Inc. Connecticut
SECOND: That an Amended and Restated Agreement and Plan of Merger
between the parties to the merger has been approved, adopted, certified,
executed and acknowledged by each of the constituent corporations in accordance
with the requirements of Section 252 of the General Corporation Law of the State
of Delaware.
THIRD: That the surviving corporation of the merger is VDC (Delaware),
Inc.
FOURTH: Article 1 of the Certificate of Incorporation of the surviving
corporation shall be amended to read as follows:
"1. The name of the corporation is Sky King Communications, Inc."
FIFTH: That the executed Amended and Restated Agreement and Plan of
Merger is on file at the principal place of business of the surviving
corporation. The address of the principal place of business of the surviving
corporation is 25 Doubling Road, Greenwich, CT 06830.
SIXTH: That a copy of the Amended and Restated Agreement and Plan of
Merger will be furnished by the surviving corporation, on request and without
cost to any stockholder of any constituent corporation.
SEVENTH: The authorized capital stock for Sky Communications, Inc. is
2,000 shares of common stock, $1.00 par value per share.
EIGHTH: The merger shall become effective upon the filing of this
Certificate of Merger with the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, VDC (Delaware), Inc. has caused the Certificate to
be signed by Andrew Panzo, its authorized officer, this 5th day of March, 1998.
VDC (DELAWARE), INC.
By: /s/ Andrew Panzo
-------------------------------
Andrew Panzo, President
- 2 -
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS
of
SERIES A Convertible Preferred Stock
of
VDC (DELAWARE), INC.
Pursuant to Section 151(g) of the General Corporation Law
of the State of Delaware
VDC (Delaware), Inc., a Delaware corporation (the "Company"), certifies
that pursuant to the authority contained in its Certificate of Incorporation, as
amended, and in accordance with the provisions of Section 151(g) of the General
Corporation Law of the State of Delaware, its Board of Directors (the "Board of
Directors") in an action taken as of January 16, 1998, has duly adopted the
following resolution creating a series of Preferred Stock, $.0001 par value,
designating a segment thereof as Series A Convertible Preferred Stock:
WHEREAS, the Certificate of Incorporation of the Company presently
authorizes the issuance of 10,000,000 shares of Preferred Stock, $.0001 par
value, in one or more series upon terms and conditions that are to be designated
by the Board of Directors;
WHEREAS, in order to consummate the acquisition of Sky King Communications,
Inc. ("Sky King") by merger (the "Merger"), the Board of Directors does hereby
seek to provide for the designation of a segment of the Company's Preferred
Stock as "Series A Convertible Preferred Stock" to be issued to the Sky King
shareholders upon the closing of the Merger;
WHEREAS, the terms, conditions, voting rights, preferences, limitations and
special rights of the Series A Convertible Preferred Stock in their entirety are
as provided herein.
NOW, THEREFORE, be it:
RESOLVED, that a series of the class of authorized Preferred Stock, $.0001
par value, of the Company hereinafter designated "Series A Convertible Preferred
Stock," be hereby created, and that the designation and amount thereof and the
voting powers, preferences and relative, participating and other specials rights
of the shares of such series, and the qualifications, limitations or
restrictions thereof are as follows:
Section 1. Designation and Amount.
The shares of such series shall be designated as the "Series A Convertible
Preferred Stock" (the "Series A Convertible Preferred Stock") and the number of
shares initially constituting such series shall be 5,500,000 which may be issued
in whole or fractional shares.
<PAGE>
Section 2. Dividends and Distributions.
Each share of Series A Convertible Preferred Stock shall share pari-passu
with all dividends on each share of Series B Convertible Preferred Stock
("Series B Convertible Preferred Stock") and each share of Common Stock of the
Company (the "Common Stock") and shall otherwise have no dividend rights.
Section 3. Voting Rights.
Prior to conversion, the holders of shares of Series A Convertible
Preferred Stock shall have no voting rights.
Section 4. Liquidation, Dissolution, Winding Up or Certain Mergers or
Consolidations.
(a) If the Company shall adopt a plan of liquidation or of dissolution,
or commence a voluntary case under the federal bankruptcy laws or any other
applicable state or federal bankruptcy, insolvency or similar law, or consent to
the entry of an order for relief in any involuntary case under such law or to
the appointment of a receiver, liquidator, assignee, custodian, trustee or
sequestrator (or similar official) of the Company or of any substantial part of
its property, or make an assignment for the benefit of its creditors, or admit
in writing its inability to pay its debts generally as they become due and on
account of such event the Company shall liquidate, dissolve or wind up, or upon
any other liquidation, dissolution or winding up of the Company, or engage in a
merger, plan of reorganization or consolidation in which the Company is not the
surviving corporation, then and in that event, each share of Series A
Convertible Preferred Stock shall automatically convert into shares of the
Company's Common Stock and shall accordingly share in any liquidation proceeds
proportionately with all other holders of Common Stock.
(b) Except as provided in subparagraph (a) above, neither the
consolidation, merger or other business combination of the Company with or into
any other person or persons in which the Company is the surviving corporation
nor the sale, lease, exchange or conveyance of all or any part of the property,
assets or business of the Company to a person or persons other than the holders
of the Company's Common Stock, shall be deemed to be a liquidation, dissolution
or winding up of the Company.
Section 5. Conversion.
(a) Subject to the provisions for adjustment hereinafter set forth,
each share of Series A Convertible Preferred Stock shall be convertible in the
manner hereinafter set forth into fully paid and nonassessable shares of Common
Stock. Each share of Series A Convertible Preferred Stock shall be converted at
a rate (the "Conversion Rate") equal to one share of Common Stock for each share
of Series A Convertible Preferred Stock upon the domestication of VDC
Corporation Ltd. into a Delaware corporation through a merger with or into the
Company (the "Conversion Event").
2
<PAGE>
(b) Subject to the provisions for adjustment hereafter set forth, each
share of Series A Convertible Preferred Stock shall be convertible in the manner
hereinafter set forth into fully paid and nonassessable shares of common stock
of VDC Corporation Ltd. (the "Parent Common Stock"). If the shares of Series A
Convertible Preferred Stock shall not have been converted into shares of the
Company's Common Stock within one year of the effective date of the Merger
pursuant to subparagraph (a) above, each share of Series A Convertible Preferred
Stock may, at the option of the holder thereof, be convertible at the Conversion
Rate into one share of Parent Common Stock at any time commencing one year from
the effective date of Merger and ending immediately prior to a conversion of the
shares of Series A Convertible Preferred Stock pursuant to subparagraph (a)
above.
(c) The number of shares of Common Stock or Parent Common Stock, as
applicable, into which each share of Series A Convertible Preferred Stock is
convertible shall be subject to adjustment from time to time as follows:
(i) In case the Company or the Parent, as applicable, shall at any
time or from time to time declare a dividend, or make a distribution, on the
outstanding shares of common stock in shares of common stock or subdivide or
reclassify the outstanding shares of common stock into a greater number of
shares or combine or reclassify the outstanding shares of common stock into a
smaller number of shares of common stock, and in each case,
(A) the number of shares of common stock into which each share
of Series A Convertible Preferred Stock is convertible shall be adjusted so that
the holder of each share thereof shall be entitled to receive, upon the
conversion thereof, the number of shares of common stock which the holder of a
share of Series A Convertible Preferred Stock would have been entitled to
receive after the happening of any of the events described above had such share
been converted immediately prior to the happening of such event or the record
date therefor, whichever is earlier; and
(B) an adjustment made pursuant to this clause (i) shall become
effective (I) in the case of any such dividend or distribution, immediately
after the close of business on the record date for the determination of holders
of shares of common stock entitled to receive such dividend or distribution, or
(II) in the case of any such subdivision, reclassification or combination, at
the close of business on the day upon which such corporate action becomes
effective.
(ii) In case the Company or the Parent, as applicable, shall be a
party to any transaction (including, without limitation, a merger,
consolidation, sale of all or substantially all of the assets or
recapitalization of the common stock and excluding (X) any transaction to which
clause (i) of this paragraph (c) applied, and (Y) a merger or consolidation in
which the Company or the Parent, as applicable, is the surviving corporation in
which the previously outstanding common stock shall be changed into or, pursuant
to the operation of law or the terms of the transaction to which the Company or
the Parent, as applicable, is a party, exchanged for different securities of the
Company or the Parent, as applicable, or common stock or other securities of
another corporation or interests in a noncorporate entity or other property
3
<PAGE>
(including cash) or any combination of any of the foregoing), then, as a
condition of the consummation of such transaction, in addition to the
requirements of paragraph 4(a), lawful and adequate provision shall be made so
that each holder of shares of Series A Convertible Preferred Stock shall be
entitled, upon conversion, to an amount per share equal to (A) the aggregate
amount of stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which or which each share of common stock is changed or
exchanged times (B) the number of shares of common stock into which a share of
Series A Convertible Preferred Stock is convertible immediately prior to the
consummation of such transaction.
(d) In case the Company or the Parent, as applicable, shall be a party
to a transaction described in subparagraph (c)(ii) above resulting in the change
or exchange of the Company's Common Stock or the Parent Common Stock, as
applicable, then, from and after the date of announcement of the pendency of
such subparagraph (c)(ii) transaction until the effective date thereof, each
share of Series A Convertible Preferred Stock may be converted, at the option of
the holder thereof, into shares of stock on the terms and conditions set forth
in this Section 5, and if so converted during such period, such holder shall be
entitled to receive such consideration in exchange for such holder's shares of
common stock as if such holder had been the holder of such shares of common
stock as of the record date for such change or exchange of the common stock.
(e) The holder of any shares of Series A Convertible Preferred Stock
may exercise his right to convert such shares into shares of Parent Common Stock
by surrendering for such purpose to the Company, at the offices of VDC
Corporation, Ltd., (the "Parent"), at 44 Church Street, Hamilton, Bermuda, or
any successor location, a certificate or certificates representing the shares of
Series A Convertible Preferred Stock to be converted with the form of election
to convert (the "Election to Convert") on the reverse side of the stock
certificate completed and executed as indicated, thereby stating that such
holder elects to convert all or a specified whole number of such shares in
accordance with the provisions of this Section 5 and specifying the name or
names in which such holder wishes the certificate or certificates for shares of
Parent Common Stock to be issued. In case the Election to Convert shall specify
a name or names other than that of such holder, it shall be accompanied by
payment of all transfer or other taxes payable upon the issuance of shares of
Parent Common Stock in such name or names that may be payable in respect of any
issue or delivery of shares of Parent Common Stock on conversion of Series A
Convertible Preferred Stock pursuant hereto. Neither the Company nor the Parent
will have any responsibility to pay any taxes with respect to the Series A
Convertible Preferred Stock. As promptly as practicable, and in any event within
three Business Days after the surrender of such certificate or certificates and
the receipt of the Election to Convert in the case of an election to convert and
within three business days after the Conversion Event, if applicable, and, if
applicable, payment of all transfer or other taxes (or the demonstration to the
satisfaction of the Parent or the Company, as applicable, that such taxes have
been paid), the Company or the Parent, as applicable, shall deliver or cause to
be delivered (i) certificates representing the number of validly issued, fully
paid and nonassessable full shares of stock to which the holder of shares of
Series A Convertible Preferred Stock so converted shall be entitled and (ii) if
less than the full number of shares of Series A Convertible Preferred Stock
evidenced by the surrendered certificate or certificates are being converted, a
new certificate or
4
<PAGE>
certificates, of like tenor, for the number of shares evidenced by such
surrendered certificate or certificates less the number of shares converted.
Such conversion shall be deemed to have been made at the close of business on
the date of (A) giving of the Election to Convert and of such surrender of the
certificate or certificates representing the shares of Series A Convertible
Preferred Stock to be converted, or (B) of the Conversion Event, as applicable,
so that the rights of the holder thereof as to the shares being converted shall
cease except for the right to receive shares of Common Stock or Parent Common
Stock, as applicable, in accordance herewith, and the person entitled to receive
the shares of Common Stock or Parent Common Stock, as applicable, shall be
treated for all purposes as having become the record holder of such shares of
Common Stock or Parent Common Stock, as applicable, at such time. Neither the
Company nor the Parent shall be required to convert, and no surrender of shares
of Series A Convertible Preferred Stock shall be effective for that purpose,
while the transfer books of the Company or the Parent Company, as applicable,
for the Common Stock or Parent Common Stock, as applicable, are closed for any
purpose (but not for any period in excess of 15 calendar days); but the
surrender of shares of Series A Convertible Preferred Stock for conversion
during any period while such books are so closed shall become effective for
conversion immediately upon the reopening of such books, as if the conversion
had been made on the date such shares of Series A Convertible Preferred Stock
were surrendered, and at the conversion rate in effect at the date of such
surrender.
(f) In connection with the conversion of any shares of Series A
Convertible Preferred Stock, no fractions of shares of Common Stock or Parent
Common Stock, as applicable, shall be issued, but in lieu thereof the Company or
the Parent, as applicable, shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied by
the Conversion Rate.
Section 6. Reports as to Adjustments.
Whenever the number of shares of stock into which each share of Series A
Convertible Preferred Stock is convertible is adjusted as provided in Section 5
hereof, the Company shall promptly mail to the holders of record of the
outstanding shares of Series A Convertible Preferred Stock at their respective
addresses as the same shall appear in the Company's stock records a notice
stating that the number of shares of stock into which the shares of Series A
Convertible Preferred Stock are convertible has been adjusted and setting forth
the new number of shares of stock (or describing the new stock, securities, cash
or other property) into which each share of Series A Convertible Preferred Stock
is convertible, as a result of such adjustment, a brief statement of the facts
requiring such adjustment and the computation thereof, and when such adjustment
became effective.
Section 7. Redemption.
The shares of Series A Convertible Preferred Stock shall not be redeemable
by the Company.
5
<PAGE>
Section 8. Reacquired Shares.
Any shares of Series A Convertible Preferred Stock converted, purchased or
otherwise acquired by the Company in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof, and, if necessary to provide
for the lawful purchase of such shares, the capital represented by such shares
shall be reduced in accordance with the General Corporation Law of the State of
Delaware. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock, $.0001 par value, of the Company and may be
reissued as part of another series of Preferred Stock, $.0001 par value, of the
Company.
Section 9. Certain Definitions.
For the purposes of the Certificate of Designation of Series A Convertible
Preferred Stock which embodies this resolution:
"Business Day" means 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.
"Trading Day" means a day on which the principal national securities
exchange 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.
IN WITNESS WHEREOF, the Company has caused this Certificate of Designation
of Series A Convertible Preferred Stock to be duly executed by its President
this 5th day of March, 1998.
ATTEST: VDC (DELAWARE), INC.
By: By: /s/ Andrew Panzo
------------------------- -------------------------------
Name: Andrew Panzo, President
Title:
Agreeing to be bound by the terms contained herein this 5th day of March, 1998.
ATTEST: VDC CORPORATION LTD.
By: By: /s/ Graham Ferguson Lacey
------------------------- -------------------------------
Name: Graham Ferguson Lacey, President
Title:
6
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS
of
SERIES B Convertible Preferred Stock
of
VDC (DELAWARE), INC.
Pursuant to Section 151(g) of the General Corporation Law
of the State of Delaware
VDC (Delaware), Inc., a Delaware corporation (the "Company"), certifies
that pursuant to the authority contained in its Certificate of Incorporation, as
amended, and in accordance with the provisions of Section 151(g) of the General
Corporation Law of the State of Delaware, its Board of Directors (the "Board of
Directors") in an action taken as of January 16, 1998, has duly adopted the
following resolution creating a series of Preferred Stock, $.0001 par value,
designating a segment thereof as Series B Convertible Preferred Stock:
WHEREAS, the Certificate of Incorporation of the Company presently
authorizes the issuance of 10,000,000 shares of Preferred Stock, $.0001 par
value, in one or more series upon terms and conditions that are to be designated
by the Board of Directors;
WHEREAS, in order to consummate the acquisition of Sky King
Communications, Inc. ("Sky King") by merger (the "Merger"), the Board of
Directors does hereby seek to provide for the designation of a segment of the
Company's Preferred Stock as "Series B Convertible Preferred Stock" to be issued
to the Sky King shareholders upon the closing of the Merger;
WHEREAS, the terms, conditions, voting rights, preferences, limitations
and special rights of the Series B Convertible Preferred Stock in their entirety
are as provided herein.
NOW, THEREFORE, be it:
RESOLVED, that a series of the class of authorized Preferred Stock,
$.0001 par value, of the Company hereinafter designated "Series B Convertible
Preferred Stock," be hereby created, and that the designation and amount thereof
and the voting powers, preferences and relative, participating and other
specials rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. Designation and Amount.
The shares of such series shall be designated as the "Series B
Convertible Preferred Stock" (the "Series B Convertible Preferred Stock") and
the number of shares initially constituting such series shall be 4,500,000 which
may be issued in whole or fractional shares.
<PAGE>
Section 2. Dividends and Distributions.
Each share of Series B Convertible Preferred Stock shall share
pari-passu with all dividends on each share of Series A Convertible Preferred
Stock ("Series A Convertible Preferred Stock") and each share of Common Stock of
the Company (the "Common Stock") and shall otherwise have no dividend rights.
Section 3. Voting Rights.
Prior to conversion, the holders of shares of Series B Convertible
Preferred Stock shall have no voting rights.
Section 4. Liquidation, Dissolution, Winding Up or Certain Mergers or
Consolidations.
(a) If the Company shall adopt a plan of liquidation or of
dissolution, or commence a voluntary case under the federal bankruptcy laws or
any other applicable state or federal bankruptcy, insolvency or similar law, or
consent to the entry of an order for relief in any involuntary case under such
law or to the appointment of a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or similar official) of the Company or of any
substantial part of its property, or make an assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts generally as they
become due and on account of such event the Company shall liquidate, dissolve or
wind up, or upon any other liquidation, dissolution or winding up of the
Company, or engage in a merger, plan of reorganization or consolidation in which
the Company is not the surviving corporation, then and in that event, each share
of Series B Convertible Preferred Stock shall automatically convert into shares
of the Company's Common Stock and shall accordingly share in any liquidation
proceeds proportionately with all other holders of Common Stock.
(b) Except as provided in subparagraph (a) above, neither the
consolidation, merger or other business combination of the Company with or into
any other person or persons in which the Company is the surviving corporation
nor the sale, lease, exchange or conveyance of all or any part of the property,
assets or business of the Company to a person or persons other than the holders
of the Company's Common Stock, shall be deemed to be a liquidation, dissolution
or winding up of the Company.
Section 5. Conversion.
(a) Subject to the provisions for adjustment hereinafter set
forth, each share of Series B Convertible Preferred Stock shall be convertible
in the manner hereinafter set forth into fully paid and nonassessable shares of
Common Stock. Each share of Series B Convertible Preferred Stock shall be
converted at a rate (the "Conversion Rate") equal to one share of Common Stock
for each share of Series B Convertible Preferred Stock upon the domestication of
VDC Corporation Ltd. into a Delaware corporation through a merger with or into
the Company (the "Conversion Event").
2
<PAGE>
(b) Subject to the provisions for adjustment hereafter set
forth, each share of Series B Convertible Preferred Stock shall be convertible
in the manner hereinafter set forth into fully paid and nonassessable shares of
common stock of VDC Corporation Ltd. (the "Parent Common Stock"). If the shares
of Series B Convertible Preferred Stock shall not have been converted into
shares of the Company's Common Stock within one year of the effective date of
the Merger pursuant to subparagraph (a) above, each share of Series B
Convertible Preferred Stock may, at the option of the holder thereof, be
convertible at the Conversion Rate into one share of Parent Common Stock at any
time commencing one year from the effective date of Merger and ending
immediately prior to a conversion of the shares of Series B Convertible
Preferred Stock pursuant to subparagraph (a) above.
(c) The number of shares of Common Stock or Parent Common
Stock, as applicable, into which each share of Series B Convertible Preferred
Stock is convertible shall be subject to adjustment from time to time as
follows:
(i) In case the Company or the Parent, as
applicable, shall at any time or from time to time declare a dividend, or make a
distribution, on the outstanding shares of common stock in shares of common
stock or subdivide or reclassify the outstanding shares of common stock into a
greater number of shares or combine or reclassify the outstanding shares of
common stock into a smaller number of shares of common stock, and in each case,
(A) the number of shares of common stock
into which each share of Series B Convertible Preferred Stock is convertible
shall be adjusted so that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of shares of common stock which
the holder of a share of Series B Convertible Preferred Stock would have been
entitled to receive after the happening of any of the events described above had
such share been converted immediately prior to the happening of such event or
the record date therefor, whichever is earlier; and
(B) an adjustment made pursuant to this
clause (i) shall become effective (I) in the case of any such dividend or
distribution, immediately after the close of business on the record date for the
determination of holders of shares of common stock entitled to receive such
dividend or distribution, or (II) in the case of any such subdivision,
reclassification or combination, at the close of business on the day upon which
such corporate action becomes effective.
(ii) In case the Company or the Parent, as
applicable, shall be a party to any transaction (including, without limitation,
a merger, consolidation, sale of all or substantially all of the assets or
recapitalization of the common stock and excluding (X) any transaction to which
clause (i) of this paragraph (c) applied, and (Y) a merger or consolidation in
which the Company or the Parent, as applicable, is the surviving corporation in
which the previously outstanding common stock shall be changed into or, pursuant
to the operation of law or the terms of the transaction to which the Company or
the Parent, as applicable, is a party, exchanged for different securities of the
Company or the Parent, as applicable, or common stock or other securities of
another corporation or interests in a noncorporate entity or other property
(including cash) or any combination of any of the foregoing), then, as a
3
<PAGE>
condition of the consummation of such transaction, in addition to the
requirements of paragraph 4(a), lawful and adequate provision shall be made so
that each holder of shares of Series B Convertible Preferred Stock shall be
entitled, upon conversion, to an amount per share equal to (A) the aggregate
amount of stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which or which each share of common stock is changed or
exchanged times (B) the number of shares of common stock into which a share of
Series B Convertible Preferred Stock is convertible immediately prior to the
consummation of such transaction.
(d) In case the Company or the Parent, as applicable, shall be
a party to a transaction described in subparagraph (c)(ii) above resulting in
the change or exchange of the Company's Common Stock or the Parent Common Stock,
as applicable, then, from and after the date of announcement of the pendency of
such subparagraph (c)(ii) transaction until the effective date thereof, each
share of Series B Convertible Preferred Stock may be converted, at the option of
the holder thereof, into shares of stock on the terms and conditions set forth
in this Section 5, and if so converted during such period, such holder shall be
entitled to receive such consideration in exchange for such holder's shares of
common stock as if such holder had been the holder of such shares of common
stock as of the record date for such change or exchange of the common stock.
(e) The holder of any shares of Series B Convertible Preferred
Stock may exercise his right to convert such shares into shares of Parent Common
Stock by surrendering for such purpose to the Company, at the offices of VDC
Corporation, Ltd., (the "Parent"), at 44 Church Street, Hamilton, Bermuda, or
any successor location, a certificate or certificates representing the shares of
Series B Convertible Preferred Stock to be converted with the form of election
to convert (the "Election to Convert") on the reverse side of the stock
certificate completed and executed as indicated, thereby stating that such
holder elects to convert all or a specified whole number of such shares in
accordance with the provisions of this Section 5 and specifying the name or
names in which such holder wishes the certificate or certificates for shares of
Parent Common Stock to be issued. In case the Election to Convert shall specify
a name or names other than that of such holder, it shall be accompanied by
payment of all transfer or other taxes payable upon the issuance of shares of
Parent Common Stock in such name or names that may be payable in respect of any
issue or delivery of shares of Parent Common Stock on conversion of Series B
Convertible Preferred Stock pursuant hereto. Neither the Company nor the Parent
will have any responsibility to pay any taxes with respect to the Series B
Convertible Preferred Stock. As promptly as practicable, and in any event within
three Business Days after the surrender of such certificate or certificates and
the receipt of the Election to Convert in the case of an election to convert and
within three business days after the Conversion Event, if applicable, and, if
applicable, payment of all transfer or other taxes (or the demonstration to the
satisfaction of the Parent or the Company, as applicable, that such taxes have
been paid), the Company or the Parent, as applicable, shall deliver or cause to
be delivered (i) certificates representing the number of validly issued, fully
paid and nonassessable full shares of stock to which the holder of shares of
Series B Convertible Preferred Stock so converted shall be entitled and (ii) if
less than the full number of shares of Series B Convertible Preferred Stock
evidenced by the surrendered certificate or certificates are being converted,
4
<PAGE>
a new certificate or certificates, of like tenor, for the number of shares
evidenced by such surrendered certificate or certificates less the number of
shares converted. Such conversion shall be deemed to have been made at the close
of business on the date of (A) giving of the Election to Convert and of such
surrender of the certificate or certificates representing the shares of Series B
Convertible Preferred Stock to be converted, or (B) of the Conversion Event, as
applicable, so that the rights of the holder thereof as to the shares being
converted shall cease except for the right to receive shares of Common Stock or
Parent Common Stock, as applicable, in accordance herewith, and the person
entitled to receive the shares of Common Stock or Parent Common Stock, as
applicable, shall be treated for all purposes as having become the record holder
of such shares of Common Stock or Parent Common Stock, as applicable, at such
time. Neither the Company nor the Parent shall be required to convert, and no
surrender of shares of Series B Convertible Preferred Stock shall be effective
for that purpose, while the transfer books of the Company or the Parent Company,
as applicable, for the Common Stock or Parent Common Stock, as applicable, are
closed for any purpose (but not for any period in excess of 15 calendar days);
but the surrender of shares of Series B Convertible Preferred Stock for
conversion during any period while such books are so closed shall become
effective for conversion immediately upon the reopening of such books, as if the
conversion had been made on the date such shares of Series B Convertible
Preferred Stock were surrendered, and at the conversion rate in effect at the
date of such surrender.
(f) In connection with the conversion of any shares of Series
B Convertible Preferred Stock, no fractions of shares of Common Stock or Parent
Common Stock, as applicable, shall be issued, but in lieu thereof the Company or
the Parent, as applicable, shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied by
the Conversion Rate.
Section 6. Reports as to Adjustments.
Whenever the number of shares of stock into which each share of Series
B Convertible Preferred Stock is convertible is adjusted as provided in Section
5 hereof, the Company shall promptly mail to the holders of record of the
outstanding shares of Series B Convertible Preferred Stock at their respective
addresses as the same shall appear in the Company's stock records a notice
stating that the number of shares of stock into which the shares of Series B
Convertible Preferred Stock are convertible has been adjusted and setting forth
the new number of shares of stock (or describing the new stock, securities, cash
or other property) into which each share of Series B Convertible Preferred Stock
is convertible, as a result of such adjustment, a brief statement of the facts
requiring such adjustment and the computation thereof, and when such adjustment
became effective.
Section 7. Redemption.
The shares of Series B Convertible Preferred Stock shall not be
redeemable by the Company.
5
<PAGE>
Section 8. Reacquired Shares.
Any shares of Series B Convertible Preferred Stock converted, purchased
or otherwise acquired by the Company in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof, and, if necessary to
provide for the lawful purchase of such shares, the capital represented by such
shares shall be reduced in accordance with the General Corporation Law of the
State of Delaware. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock, $.0001 par value, of the
Company and may be reissued as part of another series of Preferred Stock, $.0001
par value, of the Company.
Section 9. Certain Definitions.
For the purposes of the Certificate of Designation of Series B
Convertible Preferred Stock which embodies this resolution:
"Business Day" means 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.
"Trading Day" means a day on which the principal national securities
exchange 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.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation of Series B Convertible Preferred Stock to be duly executed by its
President this 5th day of March, 1998.
ATTEST: VDC (DELAWARE), INC.
By: By: /s/ Andrew Panzo
----------------------------- ----------------------------------
Name: Andrew Panzo, President
Title:
Agreeing to be bound by the terms contained herein this 5th day of March, 1998.
ATTEST: VDC CORPORATION LTD.
By: By: /s/ Graham Ferguson Lacey
----------------------------- ----------------------------------
Name: Graham Ferguson Lacey, President
Title:
6
NUMBER SHARES
VDC (Delaware), Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SERIES A CONVERTIBLE PREFERRED STOCK
Par Value $.0001 Per Share
THIS CERTIFIES THAT ___________________________________________________ is the
owner of ________________________________________________shares of the SERIES A
CONVERTIBLE PREFERRED STOCK of VDC (Delaware), Inc., fully paid and
non-assessable, transferable only on the books of the Corporation in person or
by Attorney upon surrender of this Certificate properly endorsed.
The corporation will furnish without charge to each stockholder who so
requests, a statement of the powers, designations, preferences and relative,
participating, optional, or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this ___________________________________________________________________
day of _________________________________ A.D. 19______.
____________________________________ _____________________________________
SECRETARY PRESIDENT
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- .........Custodian........under
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of survivorship Uniform Gifts to Minors Act........
and not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
For Value Received, ____ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGEE
- ---------------------------------------
| |
| |
- --------------------------------------- ----------------------------------------
- --------------------------------------------------------------------------------
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint ________________________________________________________
Attorney to transfer the said Shares on the books of the within named
Corporation with full power of substitution in the premises.
Dated __________________ 19____
In presence of
______________________________________________________
___________________________
NOTICE. THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
NUMBER SHARES
VDC (Delaware), Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SERIES B CONVERTIBLE PREFERRED STOCK
Par Value $.0001 Per Share
THIS CERTIFIES THAT ___________________________________________________ is the
owner of ________________________________________________shares of the SERIES B
CONVERTIBLE PREFERRED STOCK of VDC (Delaware), Inc., fully paid and
non-assessable, transferable only on the books of the Corporation in person or
by Attorney upon surrender of this Certificate properly endorsed.
The corporation will furnish without charge to each stockholder who so
requests, a statement of the powers, designations, preferences and relative,
participating, optional, or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this ___________________________________________________________________
day of _________________________________ A.D. 19______.
____________________________________ _____________________________________
SECRETARY PRESIDENT
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- .........Custodian........under
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of survivorship Uniform Gifts to Minors Act........
and not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
For Value Received, ____ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGEE
- ---------------------------------------
| |
| |
- --------------------------------------- ----------------------------------------
- --------------------------------------------------------------------------------
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint ________________________________________________________
Attorney to transfer the said Shares on the books of the within named
Corporation with full power of substitution in the premises.
Dated __________________ 19____
In presence of
______________________________________________________
___________________________
NOTICE. THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 3rd day of March, 1998, by and between Frederick
A. Moran, an adult individual residing at 25 Doubling Road, Greenwich,
Connecticut 06830 (hereinafter referred to as "Executive") and VDC Corporation
Ltd., a Bermuda corporation having a registered office at 44 Church Street,
Hamilton HM FX Bermuda (hereinafter referred to as the "Company").
WITNESSETH
WHEREAS, the Company considers it essential and in the best interests of
its stockholders to foster the continuous employment of key management personnel
and desires to retain the services of the Executive on the terms and conditions
hereinafter set forth; and
WHEREAS, Executive desires to render services to the Company on the terms
and conditions provided in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Employment Term, Duties and Acceptance
a. The Company hereby retains the Executive as Company's Chairman and
Chief Executive Officer, to render his services to the Company upon
the terms and conditions herein contained, in such executive capacity,
subject to the direction of the Company through its Board of
Directors.
b. The Executive hereby accepts the foregoing employment and agrees to
devote his full time, best efforts, energy and skill to such
employment.
c. The Executive shall not engage in any other business endeavor or
activity during the Employment Period.
d. The Executive hereby agrees that any and all business opportunities
which are similar to or in competition with the Business of the
Company (as such term is used and defined in Section 6(a) below) and
are available as of the date hereof or become available to the
Executive during the Employment Period shall automatically become the
sole property of the Company without any obligation of the Company to
compensate or otherwise pay the Executive for such opportunities.
e. The term of the Executive's employment hereunder (the "Employment
Period") shall commence on the date hereof and shall end on the fifth
anniversary hereof, unless sooner terminated as provided herein,
provided, however, that the Employment Period shall be extended and
this Agreement shall be automatically renewed for successive one-year
periods unless: (i) this Agreement is terminated
<PAGE>
as otherwise provided herein; or (ii) Executive provides written
notice to the Company of his desire not to extend the Employment
Period at least sixty (60) days prior to the expiration of the then
lapsing term.
2. Compensation and Expense Reimbursement
a. As base compensation for the Executive duly rendering his services
pursuant to the terms of this Agreement, Company agrees to pay and
Executive agrees to accept a base salary ("Base Salary") of One
Hundred Thousand Dollars ($100,000) per annum to be paid in accordance
with the general payroll practices of the Company as from time to time
in effect. The Base Salary will be subject to merit increases annually
as determined by the Board of Directors.
b. Any bonus or other compensation provided for herein shall at all times
be exclusive of Executive's interest in and to any stock option
plan(s) that may in the future be adopted by the Company for its
management personnel.
c. The Company will pay or reimburse Executive for all reasonable and
necessary out-of-pocket expenses incurred by him in the performance of
his duties under this Agreement, including all of the Executive's
travel, hotel, meal and other incidental expenses during the
Executive's travel on behalf of the Company. Executive shall keep
detailed and accurate records of expenses incurred in connection with
the performance of his duties hereunder and reimbursement therefor
shall be in accordance with policies and procedures to be established
from time to time by the Board.
3. Fringe Benefits
a. Executive shall be entitled, subject to the terms and conditions of
particular plans and programs, to all fringe benefits afforded to
other senior executives of the Company, including, but not by way of
limitation, the right to participate in any pension, stock option,
retirement, major medical, group health, disability, accident and life
insurance, and other employee benefit programs made generally
available, from time to time, by the Company.
b. During the term of this Agreement, the Company shall include Executive
and his family in family health insurance coverage provided for
executive level employees of the Company.
4. Vacations
Executive shall be entitled to compensated vacation in each fiscal
year, to be taken at times which do not unreasonably interfere with the
performance of Executive's duties hereunder and otherwise in accordance with the
Company's vacation policies in effect from time to time as applied to other
executives of the Company.
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<PAGE>
5. Termination by the Company
a. Termination for "Cause". In addition to any other remedies which the
Company may have at law or in equity, the Board of Directors may upon
the affirmative vote of no less than a majority of its members,
terminate Executive's employment under this Agreement by giving
Executive written notice of such termination upon or at any time
following the occurrence of any of the following events, and each such
termination shall constitute a termination for "cause," provided,
however, that Executive has first been given written notice of the
facts or circumstances constituting the determination of "cause" and a
reasonable opportunity (in no event less than fifteen (15) days) to
cure, rectify or reverse such facts or circumstances and Executive
shall have failed to do so: (a) any act or failure to act (or series
or combination thereof) by Executive done with the intent to harm in
any material respect the interests of the Company or any affiliate
thereof; (b) the commission by Executive of a felony for which he is
convicted by a court of competent jurisdiction; (c) the finding by a
court of competent jurisdiction that Executive perpetrated a dishonest
act or common law fraud against the Company or any affiliate thereof;
or (d) a grossly negligent act or failure to act (or series or
combination thereof) by Executive detrimental to a material extent to
the interests of the Company or any affiliate thereof; or (e) the
continued refusal to follow the directives of the Board or the
Company's Chief Executive Officer which are consistent with
Executive's duties, responsibilities and covenants hereunder unless
the failure to follow such directives were either: (i) based upon the
advice of counsel; or (ii) based upon the Executive's judgment in good
faith that such directives would not be in the best interests of the
Company or its members.
Upon the early termination of Executive's employment under this Agreement
by the Company for "cause," the Company shall pay to Executive: (i) an amount
equal to Executive's Base Salary accrued through the effective date of
termination at the rate in effect at the time of termination, payable at the
time such payment is due; and (ii) any expense reimbursement amounts accrued to
the effective date of termination, payable on the effective date of termination.
Upon payment of such amounts, the Company shall have no further obligation to
Executive under this Agreement.
b. Termination without "Cause". The Company may terminate this Agreement
for any reason or no reason other than for cause upon thirty (30) days
written notice to the Executive. Upon the early termination of the
Executive's employment under this Agreement by the Company "without
cause," the Company shall pay to the Executive: (i) an amount equal to
the Executive's Base Salary accrued through the effective date of
termination at the rate in effect at the time of termination, payable
at the time such payment is due; (ii) a lump sum payment at the time
of termination equal to one year's Base Salary, payable on the
effective date of termination; and (iii) any expense reimbursement
amounts accrued to the effective date of termination, payable on the
effective date of termination. Upon
3
<PAGE>
payment of such amounts, the Company shall have no further obligation
to Executive under this Agreement.
c. Incapacity of Executive. Subject to applicable law, if Executive shall
become ill or be injured or otherwise become incapacitated such that,
in the opinion of the Board of Directors, he cannot fully carry out
and perform his duties hereunder, and such incapacity shall continue
for a period of 120 consecutive days, the Board of Directors may, at
any time thereafter, by giving Executive twenty (20) days' prior
written notice, fully and finally terminate his employment under this
Agreement. Termination under this Section 5(c) shall be effective as
of the date provided in such notice, which date shall not be fewer
than thirty (30) days after such notice is delivered to Executive or
his representative, and on the effective date of termination, the
Company shall pay the Executive (i) his Base Salary accrued to the
effective date of termination at the rate in effect at the time of
such notice, payable at the time such payment is due; (ii) a lump sum
equal to one year of his Base Salary at the rate in effect at the time
of such notice, payable on the effective date of termination; and
(iii) any expense reimbursement amounts accrued to the effective date
of termination, payable on the effective date of termination. Upon
payment of such amounts, the Company shall have no further obligation
to Executive under this Agreement.
d. Death of Executive. This Agreement shall automatically terminate upon
the death of Executive. Upon the early termination of this Agreement
as a result of death, the Company shall pay the Executive's estate:
(i) an amount equal to the Executive's Base Salary accrued through the
effective date of termination at the rate in effect at the effective
date of termination, payable at the time such payment is due; (ii) a
lump sum equal to one year of the Executive's Base Salary at the rate
in effect at the effective date of termination, payable on the
effective date of termination and (iii) any expense reimbursement
amounts accrued to the effective date of termination, payable on the
effective date of termination. Upon payment of such amounts, the
Company shall have no further obligation to Executive under this
Agreement.
e. Mitigation. The Executive shall not be required to mitigate the amount
of any payment or other benefits provided for under this Agreement by
seeking other employment and none of these payments or other benefits
may be reduced by any salary or other benefits that Executive may
earn.
6. Covenant Not to Compete
a. The Executive recognizes and acknowledges that the Company is placing
its confidence and trust in the Executive. The Executive, therefore,
and in consideration of the severance payments set forth in Section 5
hereof, covenants and agrees that during the Applicable Non-Compete
Period (as defined below), the Executive shall not, either directly or
indirectly, without the prior written
4
<PAGE>
consent of the Board of Directors: (i) engage in or carry on any
business or in any way become associated with any business which is
similar to or is in competition with the Business of the Company (as
such term is used and defined below); (ii) solicit the business of any
person or entity, on behalf of himself or any other person or entity,
which is or has been at any time during the term of this Agreement a
material customer or material supplier of the Company including, but
not limited to, former or present customers or suppliers with whom the
Executive has had personal contact during, or by reason of, his
relationship with the Company; (iii) be or become an employee, agent,
consultant, representative, director or officer of, or be otherwise in
any manner associated with, any person, firm, corporation, association
or other entity which is engaged in or is carrying on any business
which is similar to or in competition with the Business of the
Company; (iv) solicit for employment or employ any person employed by
the Company at any time during the 12-month period immediately
preceding such solicitation or employment; or (v) be or become a
shareholder, joint venturer, owner (in whole or in part), partner, or
be or become associated with or have any proprietary or financial
interest in or of any firm, corporation, association or other entity
which is engaged in or is carrying on any business which is similar to
or in competition with the Business of the Company. Notwithstanding
the preceding sentence above, passive equity investments by Executive
of $25,000 or less in any entity or affiliated group of any entity
which is engaged in or is carrying on any business which is similar to
or in competition with the Business of the Company, and an equity
investment of up to 5% in any publicly traded company which is engaged
in or is carrying on any business which is similar to or in
competition with the Business of the Company, shall not be deemed to
violate this Section 6. As used in this Agreement, the term "Business
of the Company" shall include all material business activities in
which the Company is engaged now or during the Applicable Non-Compete
Period, which are: (i) telephony gateways in the United States,
Ukraine, Kazakhstan, Russia, China and Egypt; (ii) the acquisition of
Alaska Telecom; (iii) cellular, PCS or other wireless telephony
licenses and businesses for the United States, Egypt, Kazakhstan,
Ukraine, China and various republics and regions of Russia; (iv) local
loop opportunities in the United States, Egypt, Kazakhstan, Ukraine,
China and Russia; (v) funding and/or vendor financing from NTS,
Qualcomm, Ericcson and Motorola; (vi) paging and cable TV licenses for
the entire country of Ukraine; (vii) a billing system for Egypt and
Ukraine; (viii) a long distance in country project for the national
railway system of Ukraine; (ix) communications tower site management
business in the United States, Ukraine, Kazakhstan, Egypt, China and
Russia; and (x) Internet service provision in the United States,
Egypt, Kazakhstan, Ukraine, China and Russia.
b. Executive hereby recognizes and acknowledges that the existing
Business of the Company extends throughout a number of countries,
including Ukraine, Russia, China, Egypt and Kazakhstan and most states
of the United States, and therefore agrees that the covenants not to
compete contained in this Section 6 shall be applicable in and
throughout such countries and states, as well as throughout such
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<PAGE>
additional areas, states or countries in which the Company may be (or
has prepared written plans to be) doing business as of the date of
termination of the Executive's employment. The Executive further
warrants and represents that, because of his varied skill and
abilities, he does not need to compete with the Business of the
Company and that this Agreement will not prevent him from earning a
livelihood and acknowledges that the restrictions contained in this
Section 6 constitute reasonable protections for the Company.
c. As used in this Section 6, "Applicable Non-Compete Period" shall mean
that period of one year following the termination of Executive's
employment hereunder.
7. Trade Secrets and Confidential Information
Executive recognizes and acknowledges that certain information
including, without limitation, information pertaining to the financial condition
of the Company, its systems, methods of doing business, agreements with
customers or suppliers or other aspects of the Business of the Company or which
is sufficiently secret to derive economic value from not being disclosed
("Confidential Information") may be made available or otherwise come into the
possession of the Executive by reason of his employment with the Company.
Accordingly, the Executive agrees that he will not at any time disclose any
Confidential Information to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever or make use to his personal
advantage or to the advantage of any third party, of any Confidential
Information, without the prior written consent of the Board of Directors. The
Executive shall, upon termination of employment, return to the Company all
documents which reflect Confidential Information (including copies thereof).
Notwithstanding anything heretofore stated in this Section 7, the Executive's
obligations under this Section 7 shall not, after termination of the Executive's
employment with the Company, apply to information which has become generally
available to the public without any action or omission of the Executive (except
that any Confidential Information which is disclosed to any third party by an
employee or representative of the Company who is not authorized to make such
disclosure shall be deemed to remain confidential and protectable by the
Executive under this Section 7).
8. Severability
The invalidity or unenforceability of any term of this Agreement shall
not affect the validity or enforceability of this Agreement or any of its other
terms; and this Agreement and such other terms shall be construed as though the
invalid or unenforceable term(s) were not included herein, unless the effect
would be to vitiate the parties' fundamental purposes in entering into this
Agreement.
9. Breach
The Executive hereby recognizes and acknowledges that irreparable
injury or damage shall result to the Company in the event of a breach or
threatened breach by the Executive of any of the terms of provisions Section 6
or 7 hereunder, and the Executive therefore
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<PAGE>
agrees that the Company shall be entitled to an injunction restraining Executive
from engaging in any activity constituting such breach or threatened breach.
Nothing contained herein shall be construed as prohibiting the Company from
pursuing any other remedies available to the Company at law or in equity for
breach or threatened breach of this Agreement, including but not limited to, the
recovery of damages from the Executive and, if the Executive is an employee of
the Company, the termination of his employment with the Company in accordance
with the terms and provisions of this Agreement.
10. Arbitration
All controversies which may arise between the parties hereto 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 as
set forth in Section 14 hereof. Any arbitration pursuant to this Agreement shall
be conducted in Philadelphia, Pennsylvania before the American Arbitration
Association in accordance with its arbitration rules. The arbitration shall be
final and binding upon all the parties (so long as the award was not procured by
corruption, fraud or undue means) and the arbitrator's award shall not be
required to include factual findings or legal reasoning. Nothing in this Section
10 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 federal and state courts located in
Philadelphia, Pennsylvania shall have exclusive subject matter and in personam
jurisdiction over the parties and any such claims or disputes arising from the
subject matter contained herein.
11. Remedies Cumulative
Except as otherwise expressly provided herein, each of the rights and
remedies of the parties set forth in this Agreement shall be cumulative with all
other such rights and remedies, as well as with all rights and remedies of the
parties otherwise available at law or in equity.
12. Counterparts
This Agreement may be executed via facsimile transmission signature and
in counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
13. Waiver
The failure of either party at any time or times to require performance
of any provision hereof shall in no manner affect the right at a later time to
enforce the same. To be effective, any waiver must be contained in a written
instrument signed by the party waiving compliance by the other party of the term
or covenant as specified. The waiver by either party of the breach of any term
or covenant contained herein, whether by conduct or otherwise, in any one or
more instances, shall not be deemed to be, or construed as, a further or
continuing waiver
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<PAGE>
of any such breach, or a waiver of the breach of any other term or covenant
contained in this Agreement.
14. Governing Law
This Agreement shall be governed by the laws of the State of Delaware
without regard to principles of conflict of laws.
15. Complete Agreement
This Agreement constitutes the complete and exclusive agreement between
the parties hereto which supersedes all proposals, oral and written, and all
other communications between the parties relating to the subject matter
contained herein.
16. Warranties
The Executive represents, warrants, covenants and agrees that he has a
right to enter into this Agreement, that he is not a party to any agreement or
understanding whether or not written which would prohibit or restrict his
performance of his obligations under this Agreement and that he will not use in
the performance of his obligations hereunder any proprietary information of any
other party which he is legally prohibited from using.
17. Notice
Any notice required to be given pursuant to the provisions of this
Agreement shall be in writing and sent by registered mail or nationally
recognized overnight carrier, to the parties at the following addresses:
To the Company at:
VDC Corporation Ltd.
44 Church Street
Hamilton HM FX Bermuda
with a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll Professional Corporation
Eleven Penn Center, 14th Floor
1835 Market Street
Philadelphia, PA 19103
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<PAGE>
To the Executive at:
Frederick A. Moran
25 Doubling Road
Greenwich, CT 06830
18. Key Man Insurance
The Company shall have the right to obtain what is commonly known as
"Key Man Insurance" on the life of the Executive in such amount as the Company
deems appropriate. The Executive agrees to cooperate in all manner in the
obtaining of such a policy. All expenses involved in connection with the
obtaining and maintaining of such a policy shall be that of the Company.
19. Due Authorization
The Company represents to the Executive that this Agreement has been
duly authorized and approved by the Board of Directors of the Company.
20. Assignment
This Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns. This Agreement may not be assigned to any
third party without the written consent of all parties to the assignment.
IN WITNESS WHEREOF, the parties have executed this Agreement as of this
___ day of ____________, 1998.
ATTEST: VDC CORPORATION LTD.
By: /s/ Graham Ferguson Lacey
- ----------------------------- --------------------------------
Graham Ferguson Lacey, President
WITNESS: EXECUTIVE:
/s/ Frederick A. Moran
- ----------------------------- --------------------------------
Frederick A. Moran
9
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement ("Amendment") is made as of the 18th
day of May, 1998, by and between VDC CORPORATION LTD., a Bermuda corporation
("Company"), and FREDERICK A. MORAN, an adult individual residing at 25 Doubling
Road, Greenwich, Connecticut 06830 (hereinafter referred to as "Executive").
Capitalized terms used but not otherwise defined herein shall have the meaning
ascribed to them in the Employment Agreement (as such term is defined below).
W I T N E S S E T H :
WHEREAS, Company and Executive have entered into that certain Employment
Agreement, dated as of March 3, 1998 (the "Employment Agreement"); and
WHEREAS, Company and Executive wish to amend the Employment Agreement as
set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. Section 2(a) of the Employment Agreement is amended to provide for a Base
Salary of One Hundred Twenty Five Thousand Dollars ($125,000).
2. Except as otherwise set forth herein, the terms of the Employment Agreement
shall remain in full force and effect.
3. This Amendment shall be construed in accordance with the laws of the State
of Delaware without giving effect to conflicts of law principles.
4. This Amendment is made and entered into effective as of the date first
above written.
IN WITNESS WHEREOF, Company and Executive have caused this Amendment to be
duly executed as of the day and year first above written.
VDC CORPORATION LTD.
By: /s/ Frederick A. Moran
-------------------------------------------
Frederick A. Moran, Chief Executive Officer
EXECUTIVE:
/s/ Frederick A. Moran
-------------------------------------------
Frederick A. Moran
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 3rd day of March, 1998, by and between James
C. Roberts, an adult individual residing at 71 Long Meadow Road, Riverside,
Connecticut 06878 (hereinafter referred to as "Executive") and VDC Corporation
Ltd., a Bermuda corporation having a registered office at 44 Church Street,
Hamilton HM FX Bermuda (hereinafter referred to as the" Company").
WITNESSETH
WHEREAS, the Company considers it essential and in the best interests of
its stockholders to foster the continuous employment of key management personnel
and desires to retain the services of the Executive on the terms and conditions
hereinafter set forth; and
WHEREAS, Executive desires to render services to the Company on the terms
and conditions provided in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Employment Term, Duties and Acceptance
a. The Company hereby retains the Executive as Company's President and
Chief Operating Officer, to render his services to the Company upon
the terms and conditions herein contained, in such executive capacity,
subject to the direction of the Company through its Board of
Directors.
b. The Executive hereby accepts the foregoing employment and agrees to
devote his full time, best efforts, energy and skill to such
employment.
c. The Executive shall not engage in any other business endeavor or
activity during the Employment Period.
d. The Executive hereby agrees that any and all business opportunities
which are similar to or in competition with the Business of the
Company (as such term is used and defined in Section 6(a) below) and
are available as of the date hereof or become available to the
Executive during the Employment Period shall automatically become the
sole property of the Company without any obligation of the Company to
compensate or otherwise pay the Executive for such opportunities.
e. The term of the Executive's employment hereunder (the "Employment
Period") shall commence on the date hereof and shall end on the fifth
anniversary hereof, unless sooner terminated as provided herein,
provided, however, that the Employment Period shall be extended and
this Agreement shall be automatically renewed for successive one-year
periods unless: (i) this Agreement is terminated
<PAGE>
as otherwise provided herein; or (ii) Executive provides written
notice to the Company of his desire not to extend the Employment
Period at least sixty (60) days prior to the expiration of the then
lapsing term.
2. Compensation and Expense Reimbursement
a. As base compensation for the Executive duly rendering his services
pursuant to the terms of this Agreement, Company agrees to pay and
Executive agrees to accept a base salary ("Base Salary") of One
Hundred Twenty-Five Thousand Dollars ($125,000) per annum to be paid
in accordance with the general payroll practices of the Company as
from time to time in effect. The Base Salary will be subject to merit
increases annually as determined by the Board of Directors.
b. Any bonus or other compensation provided for herein shall at all times
be exclusive of Executive's interest in and to any stock option
plan(s) that may in the future be adopted by the Company for its
management personnel.
c. The Company will pay or reimburse Executive for all reasonable and
necessary out-of-pocket expenses incurred by him in the performance of
his duties under this Agreement, including all of the Executive's
travel, hotel, meal and other incidental expenses during the
Executive's travel on behalf of the Company. Executive shall keep
detailed and accurate records of expenses incurred in connection with
the performance of his duties hereunder and reimbursement therefor
shall be in accordance with policies and procedures to be established
from time to time by the Board.
3. Fringe Benefits
a. Executive shall be entitled, subject to the terms and conditions of
particular plans and programs, to all fringe benefits afforded to
other senior executives of the Company, including, but not by way of
limitation, the right to participate in any pension, stock option,
retirement, major medical, group health, disability, accident and life
insurance, and other employee benefit programs made generally
available, from time to time, by the Company.
b. During the term of this Agreement, the Company shall include Executive
and his family in family health insurance coverage provided for
executive level employees of the Company.
4. Vacations
Executive shall be entitled to compensated vacation in each fiscal
year, to be taken at times which do not unreasonably interfere with the
performance of Executive's duties hereunder and otherwise in accordance with the
Company's vacation policies in effect from time to time as applied to other
executives of the Company.
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5. Termination by the Company
a. Termination for "Cause". In addition to any other remedies which the
Company may have at law or in equity, the Board of Directors may upon
the affirmative vote of no less than a majority of its members,
terminate Executive's employment under this Agreement by giving
Executive written notice of such termination upon or at any time
following the occurrence of any of the following events, and each such
termination shall constitute a termination for "cause," provided,
however, that Executive has first been given written notice of the
facts or circumstances constituting the determination of "cause" and a
reasonable opportunity (in no event less than fifteen (15) days) to
cure, rectify or reverse such facts or circumstances and Executive
shall have failed to do so: (a) any act or failure to act (or series
or combination thereof) by Executive done with the intent to harm in
any material respect the interests of the Company or any affiliate
thereof; (b) the commission by Executive of a felony for which he is
convicted by a court of competent jurisdiction; (c) the finding by a
court of competent jurisdiction that Executive perpetrated a dishonest
act or common law fraud against the Company or any affiliate thereof;
or (d) a grossly negligent act or failure to act (or series or
combination thereof) by Executive detrimental to a material extent to
the interests of the Company or any affiliate thereof; or (e) the
continued refusal to follow the directives of the Board or the
Company's Chief Executive Officer which are consistent with
Executive's duties, responsibilities and covenants hereunder unless
the failure to follow such directives were either: (i) based upon the
advice of counsel; or (ii) based upon the Executive's judgment in good
faith that such directives would not be in the best interests of the
Company or its members.
Upon the early termination of Executive's employment under this Agreement
by the Company for "cause," the Company shall pay to Executive: (i) an amount
equal to Executive's Base Salary accrued through the effective date of
termination at the rate in effect at the time of termination, payable at the
time such payment is due; and (ii) any expense reimbursement amounts accrued to
the effective date of termination, payable on the effective date of termination.
Upon payment of such amounts, the Company shall have no further obligation to
Executive under this Agreement.
b. Termination without "Cause". The Company may terminate this Agreement
for any reason or no reason other than for cause upon thirty (30) days
written notice to the Executive. Upon the early termination of the
Executive's employment under this Agreement by the Company "without
cause," the Company shall pay to the Executive: (i) an amount equal to
the Executive's Base Salary accrued through the effective date of
termination at the rate in effect at the time of termination, payable
at the time such payment is due; (ii) a lump sum payment at the time
of termination equal to one year's Base Salary, payable on the
effective date of termination; and (iii) any expense reimbursement
amounts accrued to the effective date of termination, payable on the
effective date of termination. Upon
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payment of such amounts, the Company shall have no further obligation
to Executive under this Agreement.
c. Incapacity of Executive. Subject to applicable law, if Executive shall
become ill or be injured or otherwise become incapacitated such that,
in the opinion of the Board of Directors, he cannot fully carry out
and perform his duties hereunder, and such incapacity shall continue
for a period of 120 consecutive days, the Board of Directors may, at
any time thereafter, by giving Executive twenty (20) days' prior
written notice, fully and finally terminate his employment under this
Agreement. Termination under this Section 5(c) shall be effective as
of the date provided in such notice, which date shall not be fewer
than thirty (30) days after such notice is delivered to Executive or
his representative, and on the effective date of termination, the
Company shall pay the Executive (i) his Base Salary accrued to the
effective date of termination at the rate in effect at the time of
such notice, payable at the time such payment is due; (ii) a lump sum
equal to one year of his Base Salary at the rate in effect at the time
of such notice, payable on the effective date of termination; and
(iii) any expense reimbursement amounts accrued to the effective date
of termination, payable on the effective date of termination. Upon
payment of such amounts, the Company shall have no further obligation
to Executive under this Agreement.
d. Death of Executive. This Agreement shall automatically terminate upon
the death of Executive. Upon the early termination of this Agreement
as a result of death, the Company shall pay the Executive's estate:
(i) an amount equal to the Executive's Base Salary accrued through the
effective date of termination at the rate in effect at the effective
date of termination, payable at the time such payment is due; (ii) a
lump sum equal to one year of the Executive's Base Salary at the rate
in effect at the effective date of termination, payable on the
effective date of termination and (iii) any expense reimbursement
amounts accrued to the effective date of termination, payable on the
effective date of termination. Upon payment of such amounts, the
Company shall have no further obligation to Executive under this
Agreement.
e. Mitigation. The Executive shall not be required to mitigate the amount
of any payment or other benefits provided for under this Agreement by
seeking other employment and none of these payments or other benefits
may be reduced by any salary or other benefits that Executive may
earn.
6. Covenant Not to Compete
a. The Executive recognizes and acknowledges that the Company is placing
its confidence and trust in the Executive. The Executive, therefore,
and in consideration of the severance payments set forth in Section 5
hereof, covenants and agrees that during the Applicable Non-Compete
Period (as defined below), the Executive shall not, either directly or
indirectly, without the prior written
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consent of the Board of Directors: (i) engage in or carry on any
business or in any way become associated with any business which is
similar to or is in competition with the Business of the Company (as
such term is used and defined below); (ii) solicit the business of any
person or entity, on behalf of himself or any other person or entity,
which is or has been at any time during the term of this Agreement a
material customer or material supplier of the Company including, but
not limited to, former or present customers or suppliers with whom the
Executive has had personal contact during, or by reason of, his
relationship with the Company; (iii) be or become an employee, agent,
consultant, representative, director or officer of, or be otherwise in
any manner associated with, any person, firm, corporation, association
or other entity which is engaged in or is carrying on any business
which is similar to or in competition with the Business of the
Company; (iv) solicit for employment or employ any person employed by
the Company at any time during the 12-month period immediately
preceding such solicitation or employment; or (v) be or become a
shareholder, joint venturer, owner (in whole or in part), partner, or
be or become associated with or have any proprietary or financial
interest in or of any firm, corporation, association or other entity
which is engaged in or is carrying on any business which is similar to
or in competition with the Business of the Company. Notwithstanding
the preceding sentence above, passive equity investments by Executive
of $25,000 or less in any entity or affiliated group of any entity
which is engaged in or is carrying on any business which is similar to
or in competition with the Business of the Company, and an equity
investment of up to 5% in any publicly traded company which is engaged
in or is carrying on any business which is similar to or in
competition with the Business of the Company, shall not be deemed to
violate this Section 6. As used in this Agreement, the term "Business
of the Company" shall include all material business activities in
which the Company is engaged now or during the Applicable Non-Compete
Period, which are: (i) telephony gateways in the United States,
Ukraine, Kazakhstan, Russia, China and Egypt; (ii) the acquisition of
Alaska Telecom; (iii) cellular, PCS or other wireless telephony
licenses and businesses for the United States, Egypt, Kazakhstan,
Ukraine, China and various republics and regions of Russia; (iv) local
loop opportunities in the United States, Egypt, Kazakhstan, Ukraine,
China and Russia; (v) funding and/or vendor financing from NTS,
Qualcomm, Ericcson and Motorola; (vi) paging and cable TV licenses for
the entire country of Ukraine; (vii) a billing system for Egypt and
Ukraine; (viii) a long distance in country project for the national
railway system of Ukraine; (ix) communications tower site management
business in the United States, Ukraine, Kazakhstan, Egypt, China and
Russia; and (x) Internet service provision in the United States,
Egypt, Kazakhstan, Ukraine, China and Russia.
b. Executive hereby recognizes and acknowledges that the existing
Business of the Company extends throughout a number of countries,
including Ukraine, Russia, China, Egypt and Kazakhstan and most states
of the United States, and therefore agrees that the covenants not to
compete contained in this Section 6 shall be applicable in and
throughout such countries and states, as well as throughout such
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additional areas, states or countries in which the Company may be (or
has prepared written plans to be) doing business as of the date of
termination of the Executive's employment. The Executive further
warrants and represents that, because of his varied skill and
abilities, he does not need to compete with the Business of the
Company and that this Agreement will not prevent him from earning a
livelihood and acknowledges that the restrictions contained in this
Section 6 constitute reasonable protections for the Company.
c. As used in this Section 6, "Applicable Non-Compete Period" shall mean
that period of one year following the termination of Executive's
employment hereunder.
7. Trade Secrets and Confidential Information
Executive recognizes and acknowledges that certain information
including, without limitation, information pertaining to the financial condition
of the Company, its systems, methods of doing business, agreements with
customers or suppliers or other aspects of the Business of the Company or which
is sufficiently secret to derive economic value from not being disclosed
("Confidential Information") may be made available or otherwise come into the
possession of the Executive by reason of his employment with the Company.
Accordingly, the Executive agrees that he will not at any time disclose any
Confidential Information to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever or make use to his personal
advantage or to the advantage of any third party, of any Confidential
Information, without the prior written consent of the Board of Directors. The
Executive shall, upon termination of employment, return to the Company all
documents which reflect Confidential Information (including copies thereof).
Notwithstanding anything heretofore stated in this Section 7, the Executive's
obligations under this Section 7 shall not, after termination of the Executive's
employment with the Company, apply to information which has become generally
available to the public without any action or omission of the Executive (except
that any Confidential Information which is disclosed to any third party by an
employee or representative of the Company who is not authorized to make such
disclosure shall be deemed to remain confidential and protectable by the
Executive under this Section 7).
8. Severability
The invalidity or unenforceability of any term of this Agreement shall
not affect the validity or enforceability of this Agreement or any of its other
terms; and this Agreement and such other terms shall be construed as though the
invalid or unenforceable term(s) were not included herein, unless the effect
would be to vitiate the parties' fundamental purposes in entering into this
Agreement.
9. Breach
The Executive hereby recognizes and acknowledges that irreparable
injury or damage shall result to the Company in the event of a breach or
threatened breach by the Executive of any of the terms of provisions Section 6
or 7 hereunder, and the Executive therefore
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agrees that the Company shall be entitled to an injunction restraining Executive
from engaging in any activity constituting such breach or threatened breach.
Nothing contained herein shall be construed as prohibiting the Company from
pursuing any other remedies available to the Company at law or in equity for
breach or threatened breach of this Agreement, including but not limited to, the
recovery of damages from the Executive and, if the Executive is an employee of
the Company, the termination of his employment with the Company in accordance
with the terms and provisions of this Agreement.
10. Arbitration
All controversies which may arise between the parties hereto 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 as
set forth in Section 14 hereof. Any arbitration pursuant to this Agreement shall
be conducted in Philadelphia, Pennsylvania before the American Arbitration
Association in accordance with its arbitration rules. The arbitration shall be
final and binding upon all the parties (so long as the award was not procured by
corruption, fraud or undue means) and the arbitrator's award shall not be
required to include factual findings or legal reasoning. Nothing in this Section
10 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 federal and state courts located in
Philadelphia, Pennsylvania shall have exclusive subject matter and in personam
jurisdiction over the parties and any such claims or disputes arising from the
subject matter contained herein.
11. Remedies Cumulative
Except as otherwise expressly provided herein, each of the rights and
remedies of the parties set forth in this Agreement shall be cumulative with all
other such rights and remedies, as well as with all rights and remedies of the
parties otherwise available at law or in equity.
12. Counterparts
This Agreement may be executed via facsimile transmission signature and
in counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
13. Waiver
The failure of either party at any time or times to require performance
of any provision hereof shall in no manner affect the right at a later time to
enforce the same. To be effective, any waiver must be contained in a written
instrument signed by the party waiving compliance by the other party of the term
or covenant as specified. The waiver by either party of the breach of any term
or covenant contained herein, whether by conduct or otherwise, in any one or
more instances, shall not be deemed to be, or construed as, a further or
continuing waiver
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of any such breach, or a waiver of the breach of any other term or covenant
contained in this Agreement.
14. Governing Law
This Agreement shall be governed by the laws of the State of Delaware
without regard to principles of conflict of laws.
15. Complete Agreement
This Agreement constitutes the complete and exclusive agreement between
the parties hereto which supersedes all proposals, oral and written, and all
other communications between the parties relating to the subject matter
contained herein.
16. Warranties
The Executive represents, warrants, covenants and agrees that he has a
right to enter into this Agreement, that he is not a party to any agreement or
understanding whether or not written which would prohibit or restrict his
performance of his obligations under this Agreement and that he will not use in
the performance of his obligations hereunder any proprietary information of any
other party which he is legally prohibited from using.
17. Notice
Any notice required to be given pursuant to the provisions of this
Agreement shall be in writing and sent by registered mail or nationally
recognized overnight carrier, to the parties at the following addresses:
To the Company at:
VDC Corporation Ltd.
44 Church Street
Hamilton HM FX Bermuda
with a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll Professional Corporation
Eleven Penn Center, 14th Floor
1835 Market Street
Philadelphia, PA 19103
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To the Executive at:
James C. Roberts
71 Long Meadow Road
Riverside, CT 06878
18. Key Man Insurance
The Company shall have the right to obtain what is commonly known as
"Key Man Insurance" on the life of the Executive in such amount as the Company
deems appropriate. The Executive agrees to cooperate in all manner in the
obtaining of such a policy. All expenses involved in connection with the
obtaining and maintaining of such a policy shall be that of the Company.
19. Due Authorization
The Company represents to the Executive that this Agreement has been
duly authorized and approved by the Board of Directors of the Company.
20. Assignment
This Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns. This Agreement may not be assigned to any
third party without the written consent of all parties to the assignment.
IN WITNESS WHEREOF, the parties have executed this Agreement as of this
___ day of ____________, 1998.
ATTEST: VDC CORPORATION LTD.
By: /s/ Graham Ferguson Lacey
- ----------------------------- --------------------------------
Graham Ferguson Lacey, President
WITNESS: EXECUTIVE:
/s/ James C. Roberts
- ----------------------------- --------------------------------
James C. Roberts
9
ASSET PURCHASE AGREEMENT
by and between
VDC CORPORATION LTD.,
as Seller,
and
ROZEL INTERNATIONAL HOLDINGS LIMITED
as Buyer
December 18, 1997
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made as of
the 18th day of December, 1997, by and between VDC CORPORATION LTD., a Bermuda
corporation ("Seller") and ROZEL INTERNATIONAL HOLDINGS LIMITED, a British
Virgin Island corporation ("Buyer").
WITNESSETH
WHEREAS, Seller desires to sell, and Buyer desires to purchase, on the
terms and conditions hereafter set forth, certain of the assets of Seller as
described herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
agreements and representations and warranties herein contained, and for other
good and legal consideration, the receipt and sufficiency of which is hereby
acknowledged, Seller and Buyer, intending to be legally bound hereby, agree as
follows:
ARTICLE 1
DEFINITIONS
1.1. When used in this Agreement, the following terms, in their singular
and plural forms, shall have the meanings assigned to them below:
"Act" means the Securities Act of 1933, as amended.
"Agreement" is defined in the initial paragraph hereof.
"Assets" means all of the right, title and interest that Seller
possesses and has the right to transfer in and to all of the following described
holdings:
(i) 3,972,877 shares of common stock, par value $.01 per share
("NV Common Stock"), of netValue ("NetValue");
(ii) 100,000 shares of common stock, par value $.01 per share
("Informatix Common Stock"), of Informatix, Inc. ("Informatix");
(iii) $700,000 Note, dated October 18, 1997 (the "Note") owed by
Informatix to Seller; and
(iv) Promissory Notes in the aggregate principal amount of
$200,000 ("NetValue Notes") owed by NetValue to Seller.
"Buyer" is defined in the initial paragraph hereof.
"Claim" means a claim or demand for any and all Liabilities, damages,
losses, obligations, deficiencies, encumbrances, penalties, costs and expenses,
including reasonable attorneys' fees, resulting from, related to or arising out
of (i) any misrepresentation, breach of
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warranty or non-fulfillment of any obligation of Seller set forth in this
Agreement or in any Related Document; (ii) Seller's ownership of the Assets;
(iii) Seller's failure to comply with the provisions of applicable bulk sales
laws; and (iv) any and all actions, suits, investigations, proceedings, demands,
assessments, audits, judgments and claims arising out of any of the foregoing.
"Closing" and "Closing Date" are defined in Section 6.1.
"GAAP" means generally accepted accounting principles.
"Governmental Authority" means any foreign, federal, state, regional
or local authority, agency, body, court or instrumentality, regulatory or
otherwise, which, in whole or in part, was formed by or operates under the
auspices of any foreign, federal, state, regional or local government.
"Law" means any common law and any federal, state, regional, local or
foreign law, rule, statute, ordinance, rule, order or regulation.
"Liabilities" means liabilities, obligations, claims or debts of
Seller of any type or nature, whether matured, unmatured, contingent or unknown,
including, without limitation, tort, contract or other claims asserted against
Seller which are based on acts or omissions occurring on, before or after the
Closing Date.
"Lien" means any lien, charge, covenant, condition, easement, adverse
claim, demand, encumbrance, security interest, option, pledge, or any other
title defect, easement or restriction of any kind.
"Material Adverse Effect" is defined in Section 4.9(c).
"Permitted Liens" means those Liens to which the Assets are subject
under (i) the federal securities laws of the United States.
"Purchase Price" is defined in Section 3.1.
"Related Documents" means this Agreement and each document or
instrument executed in connection with the consummation of the transactions
contemplated herein.
"Seller" is defined in the initial paragraph of this Agreement.
ARTICLE 2
SALE AND PURCHASE OF ASSETS
2.1. Agreement to Sell and Purchase Assets. Subject to the terms and
conditions hereof and on the basis of and in reliance upon the agreements and
representations and warranties set forth herein, on the Closing Date Seller
shall sell the Assets to Buyer, and Buyer shall purchase the Assets from Seller.
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2.2. Responsibility for Liabilities. Buyer shall not assume any Liabilities
of Seller by virtue of this Agreement or otherwise.
ARTICLE 3
PAYMENT OF THE PURCHASE PRICE
3.1. Purchase Price.
The purchase price ("Purchase Price") for the Assets shall be
$4,000,000 in cash, or other immediately available funds, which shall paid or
delivered by Buyer in the following manner:
(a) At the Closing, Buyer shall deliver to Seller an amount equal to
Five Hundred Thousand Dollars ($500,000) ("Cash Funds") in
immediately available funds in the form of cash, cashier's check
or wire transfer; and
(b) At the Closing, Buyer shall deliver a Promissory Note payable to
Seller in the aggregate amount of $3,500,000, the form of which
is attached hereto as Exhibit A, ("Promissory Note"); whereby
$300,000 shall be due and payable on June 1, 1998; $1,200,000
shall be due and payable on February 1, 1999; $1,000,000 shall be
due and payable on May 1, 1999 and the remaining $1,000,000 shall
be due and payable on August 1, 1999.
3.2. Adjustment to Purchase Price Sums previously advanced to Seller by
Buyer in the aggregate amount of $500,000, shall constitute initial payments
against the Purchase Price, and shall be applied to the Cash Funds due at the
Closing.
3.3. Pledge of Assets to secure Promissory Note At Closing, the Assets
shall be pledged to Seller, pursuant to the terms of a Pledge Agreement,
attached hereto as Exhibit B, and a Security Agreement, attached hereto as
Exhibit C, to secure the payment of the Promissory Note and the obligations
thereunder.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
4.1. Organization and Standing of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of Bermuda.
Seller has all requisite corporate power and authority to sell the Assets, free
and clear of any and all Liens other than Permitted Liens.
4.2. Encumbrances Created by this Agreement. The execution and delivery of
this Agreement and each of the Related Documents does not, and the consummation
of the transactions contemplated hereby or thereby will not, create any Liens on
any assets (including the Assets) of Seller in favor of third parties.
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4.3. Authorization and Enforceability. The Seller has the full and
unrestricted legal right, power and authority to enter into this Agreement and
the Related Documents to which it is a party, to carry out the transactions
contemplated hereby and thereby, and to perform the obligations hereunder and
thereunder. All necessary and appropriate action has been taken by Seller with
respect to the execution and delivery of this Agreement and each of the Related
Documents and the performance of its obligations hereunder and thereunder. No
authorization, consent or approval of, or filing with, any third party or
Governmental Authority is necessary for the consummation by Seller of the
transactions contemplated by this Agreement or any Related Document. The
execution and delivery of this Agreement and the Related Documents and the
consummation of the contemplated transactions by Seller will not (a) result in
the breach of any of the terms or conditions of or constitute a default under
the Memorandum of Association or the Bye-Laws of the Seller, (b) violate any Law
or any order, writ, injunction or decree of any Governmental Authority, (c)
conflict with or constitute a default under any agreement or commitment that is
binding upon Seller or (d) result in the acceleration of any indebtedness of
Seller. This Agreement constitutes a valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms.
4.4. Title to Assets. Seller owns and holds of record the entire right,
title and interest in and to all of the Assets, free and clear of any and all
Liens, other than Permitted Liens.
4.5. Litigation. There is no claim, suit, arbitration, investigation,
action, inquiry, review or proceeding pending or threatened against Seller which
(a) affects the validity of this Agreement or any of the Related Documents or
which could prevent or delay the transactions contemplated hereunder or (b)
could reasonably be expected to have a Material Adverse Effect. Seller is not
subject to any judicial injunction or mandate or any administrative order.
4.6. Approval. The Board of Directors of Seller has approved the execution
of this Agreement and the transactions contemplated thereby.
4.7. Brokers' Fees. No broker, finder or other person or entity acting in a
similar capacity has participated on behalf of Seller in connection with the
transactions contemplated by this Agreement. Seller has not incurred any
Liability for brokers' fees, finders' fees, agents' commissions or other similar
forms of compensation in connection with this Agreement or the transactions
contemplated hereby.
4.8. Full Disclosure. No representation or warranty by Seller in this
Agreement and no statement contained in any Disclosure Schedule to this
Agreement contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statements contained therein, in light of
the circumstances in which they are made, not misleading.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1. Organization and Standing of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the British
Virgin Islands.
5.2. Authorization and Enforceability. Buyer has all requisite corporate
power and authority to enter into this Agreement and the Related Documents to
which it is a party and to carry out the transactions contemplated hereby and
thereby and to perform its obligations hereunder and thereunder. All necessary
and appropriate action has been taken by Buyer with respect to the execution and
delivery of this Agreement and each of the Related Documents and the performance
of its obligations hereunder and thereunder. The execution and delivery of this
Agreement and the Related Documents and the consummation of the contemplated
transactions by Buyer will not (a) result in the breach of any of the terms or
conditions of, or constitute a default under, the Buyer or (b) violate any Law
or any order, writ, injunction or decree of any Governmental Authority. This
Agreement and any Related Documents to which Buyer is a party constitute valid
and binding obligations of Buyer enforceable against Buyer in accordance with
their respective terms.
5.3. Approval. The Board of Directors of the Buyer has approved the
execution of this Agreement and the transactions contemplated thereby.
5.4. Brokers' Fees. Buyer has not incurred any liability for brokers' fees,
finders' fees, agents' commissions or other similar forms of compensation in
connection with this Agreement or the transactions contemplated hereby.
5.5. Full Disclosure. No representation or warranty by Buyer in this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained therein, in light of
the circumstances in which they are made, not misleading.
ARTICLE 6
CLOSING
6.1. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place upon the execution of this Agreement
by all parties thereto and upon satisfaction of the obligations of Seller and
Buyer below (the "Closing Date").
6.2. Obligations of Seller. At or prior to the Closing, Seller shall
deliver to Buyer, in each case, in form and substance satisfactory to Buyer:
(a) Certificates representing the NV Common Stock duly endorsed with
executed stock powers;
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(b) Certificates representing the Informatix Common Stock duly
endorsed with executed stock powers;
(c) An executed Assignment of the Note and NetValue Notes, attached
hereto as Exhibits D and E, respectively;
(d) An executed Pledge Agreement, attached hereto as Exhibit B;
(e) An executed Security Agreement, attached hereto as Exhibit C;
(f) Such other instruments of transfer as shall be necessary or
appropriate to vest in the Buyer good and marketable title to the
Assets.
6.3. Obligations of Buyer. At the Closing, Buyer shall deliver:
(a) The Cash Funds in accordance with Article 3 of this Agreement;
(b) The Promissory Note in accordance with Article 3 of this
Agreement;
(c) An executed Pledge Agreement, attached hereto as Exhibit B; and
(d) An executed Security Agreement, attached hereto as Exhibit C.
6.4. Further Documents or Necessary Action. Buyer and Seller each agree to
take all such further actions on or after the Closing Date as may be necessary,
desirable or appropriate in order to confirm or effectuate the transactions
contemplated by this Agreement.
ARTICLE 7
INDEMNIFICATION AND RELATED MATTERS
7.1. Survival of Representations and Warranties. The representations and
warranties contained in this Agreement, the schedules and exhibits hereto, and
any agreement, document, instrument or certificate delivered hereunder,
including the Related Documents, shall survive the Closing Date. This Article 7
constitutes the sole and exclusive remedy of Buyer and Seller with respect to
any subject matter addressed herein, and Buyer and Seller hereby waive and
release the other from any and all claims and other causes of action, including
without limitation claims for contribution, relating to any such subject matter.
7.2. Indemnification by Seller.
(a) Seller agrees to indemnify Buyer against and hold it harmless
from:
(i) all liability, loss, damage or deficiency resulting from
or arising out of any inaccuracy in or breach of any
representation or warranty by Seller in this Agreement, in any
Related Document to which Seller was a signatory or in any other
agreement or document delivered by or on behalf of Seller in
connection with the transactions contemplated by this Agreement;
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(ii) all liability of Seller not expressly assumed by Buyer;
(iii) all liability, loss, damage or deficiency resulting
from or arising out of any breach or nonperformance of any
obligation made or incurred by Seller in this Agreement, in any
Related Document to which Seller was a signatory or in any other
agreement or document delivered by or on behalf of Seller in
connection with the transactions contemplated by this Agreement;
and
(iv) any and all reasonable costs and expenses (including
reasonable legal and accounting fees) related to any of the
foregoing. In the event that Buyer makes a Claim which is
determined by a court of competent jurisdiction to be without
reasonable basis in law or fact, Buyer shall bear all reasonable
costs and expenses (including court costs and reasonable legal
and accounting fees), incurred by Seller in investigating and
defending against such Claim.
7.3. Indemnification by Buyer. Buyer shall indemnify Seller against and
hold it harmless from:
(a) all liability, loss, damage or deficiency resulting from or
arising out of any inaccuracy in or breach of any representation or
warranty by Buyer in this Agreement in any Related Document or in any other
agreement or document delivered by or on behalf of Buyer in connection with
the transactions contemplated by this Agreement;
(b) all liability, loss, damage or deficiency resulting from or
arising out of any breach or nonperformance of any obligation made or
incurred by Buyer in this Agreement, in any Related Document, or in any
other agreement or document delivered by or on behalf of Buyer in
connection with the transactions contemplated by this Agreement; and
7.4. any and all reasonable costs and expenses (including reasonable legal
and accounting fees) related to any of the foregoing. In the event that Seller
makes a Claim which is determined by a court of competent jurisdiction to be
without reasonable basis in law or fact, Seller shall bear all reasonable costs
and expenses (including court costs and reasonable legal and accounting fees),
incurred by Buyer in investigating and defending against such Claim.
ARTICLE 8
GENERAL
8.1. Entire Agreement. This Agreement, and the exhibits and schedules
hereto (including the Disclosure Schedule), and the agreements specifically
referred to herein set forth the entire agreement and understanding of Seller
and Buyer in respect of the transactions contemplated hereby and supersede all
prior agreements, arrangements and understandings relating to the subject matter
hereof. No representation, promise, inducement or statement of intention has
been made by Seller or Buyer that is not embodied in this Agreement or in the
documents specifically referred to herein and neither Seller nor Buyer shall not
be bound by or
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liable for any alleged representation, promise, inducement or statement of
intention not so set forth.
8.2. Binding Effect; Benefits; Assignment. All of the terms of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
and against Seller and its successors and authorized assigns, and Buyer and its
successors and authorized assigns. Nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies
under or by reason of this Agreement except as expressly indicated herein.
Neither Seller nor Buyer shall assign any of their respective rights or
obligations under this Agreement to any other person, firm or corporation
without the prior written consent of the other party, except that Buyer may
assign its rights and obligations under this Agreement to a direct or indirect
wholly-owned subsidiary of Buyer, although Buyer shall remain fully responsible
for all of its obligations under this Agreement.
8.3. Construction. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and shall in no
way restrict or otherwise modify any of the terms or provisions hereof. The
language used in this Agreement shall be deemed to be the language chosen by the
parties to this Agreement to express their mutual intent, and no rule of strict
construction shall be applied against any party.
8.4. Amendment and Waiver. This Agreement may be amended, modified,
superseded or canceled and any of the terms, representations, warranties or
conditions hereof may be waived only by a written instrument executed by Seller
and Buyer or, in the case of a waiver, by or on behalf of the party waiving
compliance.
8.5. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania as applicable to
contracts made and to be performed in Pennsylvania, without regard to conflict
of laws principles.
8.6. Public Disclosure. Except as required by Law, or in connection with
the solicitation of new investment advisory agreements with Seller's clients,
neither Buyer nor Seller shall make any public disclosure of the existence or
terms of this Agreement or the transactions contemplated hereby without the
prior written consent of the other party, which consent shall not be
unreasonably withheld. In the event that Seller or Buyer determines that the
disclosure of the existence or terms of this Agreement is required by Law, such
party shall so notify the other parties and shall provide to the other party a
copy of any such public disclosure prior to releasing the same.
8.7. Notices. All notices, requests, demands and other communications to be
given pursuant to the terms of this Agreement shall be in writing and shall be
deemed to have been duly given if hand delivered, sent by overnight mail by a
nationally recognized overnight delivery service or mailed first class, postage
prepaid:
(a) If to Seller:
Graham Lacey, President
VDC Corporation Ltd.
P.O. Box HM 1255
44 Church Street
Hamilton, Bermuda
Telephone: 01624 878762
Telecopier: 01624 878765
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(b) If to Buyer:
Harold Chaffe, President
Rozel International Holdings Limited
c/o Whitehill House
Newby Road - Industrial Estate
Stratford Cheshire, United Kingdom
Telephone: 01614 837000
Telecopier: 01614 871508
Either party may change its address by prior written notice to the other party.
8.8. Counterparts. This Agreement may be executed in counterparts, each of
which when so executed shall be deemed to be an original and such counterparts
shall together constitute one and the same instrument.
8.9. Expenses. Each party shall pay their own respective expenses, costs
and fees incurred in connection with the negotiation, preparation, execution and
delivery of this Agreement and each of the Related Documents and the
consummation of the transactions contemplated hereby, including, without
limitation, the fees and expenses of their respective legal counsel, accountants
and financial advisors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
VDC CORPORATION LTD.
By: /s/ Graham Lacey
--------------------------------
Graham Lacey
President
ROZEL INTERNATIONAL HOLDINGS LIMITED
By: /s/ Harold Chaffe
--------------------------------
Harold Chaffe
President
10
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PROMISSORY NOTE
$ 3,500,000.00 December 18, 1997
FOR VALUE RECEIVED, ROZEL INTERNATIONAL HOLDINGS LIMITED., a British
Virgin Island Corporation (the "Maker"), promises to pay to the order of VDC
CORPORATION LTD., a Bermuda corporation (the "Payee") the amount of Three
Million Five Hundred Thousand Dollars ($3,500,000.00) in accordance with the
terms hereof.
The Maker shall pay interest on any unpaid principal balance hereof from
time to time as may be outstanding from the date hereof which shall accrue at
the rate of eight percent (8%) per annum (the "Interest Rate"). Any amounts
outstanding under this Note, together with all interest accrued thereon and any
penalties due hereunder, shall be payable in lawful money of the United States
at Payee's principal offices at 44 Church Street, Hamilton, Bermuda or at such
other place or places as Payee shall designate, as follows:
(i) Three Hundred Thousand Dollars ($300,000) shall be payable on June
1, 1998;
(ii) One Million Two Hundred Thousand Dollars ($1,200,000) shall be
payable on February 1, 1999;
(iii) One Million Dollars ($1,000,000) shall be payable on May 1, 1999;
and
(iv) One Million Dollars ($1,000,000) shall be payable on August 1,
1999.
Maker is obligated to make the payments on the above specified due dates
in accordance with the terms of this Note without defalcation or setoff and
without notice or demand, and the failure to receive any notice or demand from
Payee shall not be a defense to, or excuse for, the failure to make such payment
on the due date. Payment under this Note and performance of the terms hereunder
shall be secured, pursuant to a Security Agreement between Maker and Payee,
dated of even date herewith, by those assets subject to the Asset Purchase
Agreement between Maker and Payee, which assets shall be pledged to Payee
pursuant to a Pledge Agreement, dated of even date herewith, to secure the
Maker's obligations under this Note.
Maker shall be in default hereunder upon the occurrence of any of the
following events (an "Event of Default"): (i) the failure to make payment when
due; (ii) the failure of Maker to observe or perform or cause to be observed or
performed any agreement, condition or obligation on Maker's part to be performed
hereunder; (iii) the institution by or against Maker of any bankruptcy,
insolvency, arrangement, debt adjustment or receivership, proceeding which, if
an involuntary bankruptcy petition, remains undismissed for thirty (30) days
after the filing thereof; (iv) the adjudication of Maker as a bankrupt or the
appointment of a trustee or receiver for all or any part of Maker's property;
(v) the making by Maker of an assignment for the benefit of
<PAGE>
creditors; (vi) the admission, in writing, by Maker of an inability to pay its
debts as they become due.
Upon the occurrence of any Event of Default, the entire amount
outstanding under this Note shall, at the option of Payee, become immediately
due and payable without presentment, demand or further action of any kind, and
one or more executions may forthwith issue on any judgment or judgments obtained
by virtue of any provision of this Note or otherwise obtained.
The rights and remedies provided herein shall be cumulative and
concurrent and shall not be exclusive of any right or remedy provided by law, in
equity or otherwise. Said rights and remedies may, at the sole discretion of
Payee, be pursued singly, successively or together as often as occasion therefor
shall arise, against Maker. No failure on the part of Payee to exercise any of
such rights or remedies shall be deemed a waiver of any such rights or remedies
or of any Event of Default hereunder.
Upon the occurrence of a default or an Event of Default, Payee shall
have the right, but not the duty, to cure such default or Event of Default, in
part or in its entirety, and all amounts expended or debts incurred by Payee,
including reasonable attorneys' fees, shall be deemed to be advances to Maker,
shall be added to the amount due under this Note, shall be secured by the
security for this Note, if any, and shall be payable by Maker to Payee upon
demand.
THE FOLLOWING SECTION SETS FORTH WARRANTS OF ATTORNEY FOR ANY ATTORNEY
TO CONFESS JUDGMENTS AGAINST MAKER. IN GRANTING THESE WARRANTS OF ATTORNEY TO
CONFESS JUDGMENTS AGAINST MAKER, MAKER HEREBY KNOWINGLY, INTENTIONALLY,
VOLUNTARILY, AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS MAKER MAY HAVE TO
PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS
AND LAWS OF THE COMMONWEALTH OF PENNSYLVANIA AND THE UNITED STATES OF AMERICA.
WITHOUT LIMITATION OF THE FOREGOING, MAKER HEREBY SPECIFICALLY WAIVES ALL RIGHTS
MAKER HAS OR MAY HAVE TO NOTICE AND AN OPPORTUNITY FOR A HEARING PRIOR TO
EXECUTION UPON ANY JUDGMENT ENTERED AGAINST MAKER PURSUANT TO THE TERMS HEREOF.
UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, MAKER DOES HEREBY
IRREVOCABLY AUTHORIZE AND EMPOWER ANY ATTORNEY OR THE PROTHONOTARY OF ANY COURT
OF RECORD OF BERMUDA OR ELSEWHERE TO APPEAR FOR MAKER IN ANY SUCH COURT, AND
WITH OR WITHOUT A COMPLAINT OR DECLARATION FILED, IN AN APPROPRIATE ACTION
BROUGHT AGAINST MAKER ON THIS NOTE, TO ENTER AND CONFESS JUDGMENT AGAINST MAKER
IN FAVOR OF PAYEE OR ITS SUCCESSORS AND ASSIGNS, FOR THE ENTIRE AMOUNT DUE TO
PAYEE UPON SUCH EVENT OF DEFAULT AS PROVIDED HEREIN, TOGETHER WITH COSTS OF SUIT
AND
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<PAGE>
REASONABLE ATTORNEYS' FEES NOT TO EXCEED ONE THOUSAND DOLLARS ($1,000.00);
AND FOR SO DOING THIS NOTE OR A COPY HEREOF VERIFIED BY AFFIDAVIT SHALL BE A
SUFFICIENT WARRANT. THE AUTHORITY HEREIN GRANTED TO APPEAR, ENTER AND CONFESS
JUDGMENT SHALL NOT BE EXHAUSTED BY ANY ONE OR MORE EXERCISE THEREOF OR BY ANY
DEFECTIVE EXERCISE THEREOF, BUT SHALL CONTINUE AND BE EXERCISABLE FROM TIME TO
TIME UNTIL THE FULL PAYMENT OF ALL AMOUNTS DUE FROM MAKER TO PAYEE HEREUNDER IS
MADE.
MAKER ACKNOWLEDGES THAT IT HAS HAD THE ASSISTANCE OF LEGAL COUNSEL IN
THE REVIEW AND EXECUTION OF THIS NOTE AND FURTHER ACKNOWLEDGES THAT THE MEANING
AND EFFECT OF THE FOREGOING PROVISIONS CONCERNING CONFESSION OF JUDGMENT HAVE
BEEN FULLY EXPLAINED TO MAKER BY SUCH COUNSEL, OR, IN THE ALTERNATIVE, MAKER
HEREBY WAIVES THE ASSISTANCE OF LEGAL COUNSEL IN THE REVIEW AND EXECUTION OF
THIS NOTE, AND AS EVIDENCE OF SUCH FACT, AS THE CASE MAY BE, SIGNS HIS/HER
INITIALS.
- ------------------- -------------------
(initials of Maker) (initials of Maker)
Maker hereby waives the benefit of any laws now or hereafter enacted
providing for any stay of execution, marshalling of assets, exemption from civil
process, redemption, extension of time for payment, or valuation or appraisement
of all or any part of any security for this Note, exempting all or any part of
any other security for this Note or any other property of Maker from attachment,
levy or sale upon any such execution or conflicting with any provision of this
Note. Maker waives and releases Payee and said attorney or attorneys from all
errors, defects and imperfections whatsoever in confessing any such judgment or
in any proceedings relating thereto or instituted by Payee hereunder. Maker
hereby agrees that any property that may be levied upon pursuant to a judgment
obtained under this Note may be sold upon any execution thereon in whole or in
part, and in any manner and order that Payee, in its sole discretion may elect.
The Maker and all other endorsers, sureties and guarantors hereby
jointly and severally waive presentment and demand for payment, notice of
demand, notice of default, notice of dishonor, protest and notice of protest of
this Note, and all other notices in connection with the delivery, acceptance,
performance, default or enforcement of the payment of this Note, and also waive
notice of the exercise of any options on the part of Payee hereunder.
The granting, with or without notice, of any extension or extensions of
time for payment of any sum or sums due hereunder, or for the performance of any
covenant, provision, condition or agreement contained herein or therein, or the
granting of any other indulgence, or the taking or releasing or subordinating of
any security for the indebtedness evidenced hereby, or any other
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<PAGE>
modification or amendment of this Note will in no way release or discharge the
liability of Maker whether or not granted or done with the knowledge or consent
of Maker.
Payee shall not be deemed, by any act of omission or commission, to have
waived any of its rights or remedies hereunder, at law or in equity, unless such
waiver is in writing and signed by Payee, and then only to the extent
specifically set forth in the writing. A waiver as to one event shall not be
construed as continuing or as a bar to or waiver of any right or remedy as to a
subsequent event.
In the event any portion of this Note shall be declared by any court of
competent jurisdiction to be invalid or unenforceable, such portion shall be
deemed severable from this Note, and the remaining parts hereof shall remain in
full force and effect, as fully as though such invalid or unenforceable portion
was never part of this Note.
The obligations of Maker hereunder shall be binding on the heirs,
representatives, successors and assigns of Maker and the benefits of this Note
shall inure to Payee, and its heirs, representatives, successors and assigns and
to any holder of this Note.
The outstanding balance due under this Note may be prepaid, in the
aggregate during the term of this Note, in whole or in part, without penalty or
premium. No partial prepayment shall postpone or interrupt payments of the
remaining balance, all of which shall continue to be due and payable at the time
and in the manner set forth above.
All notices and other communications required or given under this Note
shall be in writing and shall be sent by U.S. certified mail, return receipt
requested, or by a nationally recognized overnight courier service, addressed to
Payee or to Maker at their respective addresses as set forth in the Asset
Purchase Agreement between Maker and Payee.
This Note, and all issues arising hereunder, shall be governed by and
construed according to the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has
caused this Promissory Note to be duly executed as of the 18th day of December,
1997.
ROZEL INTERNATIONAL HOLDINGS LIMITED
By: /s/ Harold Chaffe
----------------------------
Harold Chaffe, President
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PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the "Agreement"), dated December 18, 1997, is
made and entered into by and between ROZEL INTERNATIONAL HOLDINGS LIMITED, a
British Virgin Island corporation (the "Debtor") and VDC CORPORATION LTD., (the
"Secured Party") under that certain Asset Purchase Agreement dated December 18,
1997 (as it may hereafter from time to time be restated, amended, modified or
supplemented, the "Purchase Agreement") by and between the Debtor and the
Secured Party.
WHEREAS, pursuant to the Purchase Agreement, the Secured Party
agreed to sell certain of its assets to Debtor which purchase price included a
Promissory Note in the aggregate amount of $3,500,000; and
WHEREAS, as security for payment under the Promissory Note, and as
required by the Purchase Agreement, the Assets (as such term is defined in the
Purchase Agreement) shall be pledged to the Secured Party in accordance
herewith.
NOW, THEREFORE, intending to be legally bound hereby, the parties
hereto agree as follows:
1. Defined Terms.
(a) Except as otherwise expressly provided herein, capitalized
terms used in this Agreement shall have the respective meanings assigned to them
in the Purchase Agreement. Where applicable and except as otherwise expressly
provided herein, terms used herein (whether or not capitalized) shall have the
respective meanings assigned to them in the Uniform Commercial Code as enacted
in each applicable jurisdiction and as may be amended from time to time (the
"Code").
(b) "Pledged Collateral" shall mean and include the following: (i)
the property listed on Schedule A attached hereto and made a part hereof, and
all rights and privileges pertaining thereto, including, without limitation, all
securities and additional securities receivable in respect of or in exchange for
such securities, all rights to subscribe for securities incident to or arising
from ownership of such securities, all cash, interest, stock and other dividends
or distributions paid or payable on such securities, and all books and records
pertaining to the foregoing, including, without limitation, all stock record and
transfer books, (ii) any and all other securities hereafter pledged to the
Secured Party to secure the Secured Obligations (as hereinafter defined) of
Debtor, and all rights and privileges pertaining thereto, including, without
limitation, all securities and additional securities receivable in respect of or
in exchange for such securities, all rights to subscribe for securities incident
to or arising from ownership of such securities, all cash, interest, stock and
other dividends or distributions paid or payable on such securities, and all
books and records pertaining to the foregoing, including, without limitation,
all stock record and stock transfer books and (iii) whatever is received when
any of the foregoing is sold, exchanged or otherwise disposed of, including any
proceeds as such term is
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<PAGE>
defined in the Code.
2. Grant of Security Interests.
(a) Debtor, to secure on a first priority basis, the payment and
performance of all of its indebtedness and other obligations of every nature it
owes under the Purchase Agreement, the Promissory Note and all of the Other
Documents (the "Secured Obligations"), hereby grants to the Secured Party a
security interest in all of Debtor's now existing and hereafter acquired and/or
arising right, title and interest in, to and under the Pledged Collateral,
whether now or hereafter existing and wherever located.
(b) Upon the execution and delivery of this Agreement, Debtor has
delivered to and deposited with the Secured Party in pledge, stock certificates
and any other instruments evidencing the Pledged Collateral, together with
undated stock powers signed in blank by Debtor.
3. Further Assurances.
Prior to or concurrently with the execution of this Agreement, and
thereafter at any time and from time to time upon reasonable request of the
Secured Party, Debtor shall execute and deliver to the Secured Party all
financing statements, continuation financing statements, termination statements,
assignments, certificates and documents of title, affidavits, reports, notices,
schedules of account, letters of authority, further pledges, powers of attorney
and all other documents (collectively, the "Security Documents") which the
Secured Party may reasonably request, in form reasonably satisfactory to the
Secured Party, and take such other action which the Secured Party may request,
to perfect and continue perfected and to create and maintain the first priority
status of the Secured Party's security interest in (subject only to Permitted
Liens) the Pledged Collateral and to fully consummate the transactions
contemplated under the Purchase Agreement, the Promissory Note and this
Agreement. Debtor hereby irrevocably makes, constitutes and appoints the Secured
Party (and any of the Secured Party's officers or employees or agents designated
by the Secured Party) as Debtor's true and lawful attorney with power to sign
the name of Debtor on all or any of the Security Documents which the Secured
Party reasonably determines must be executed, filed, recorded or sent in order
to perfect or continue perfected the Secured Party's security interest in the
Pledged Collateral in the event Debtor fails to so execute such documents upon
Secured Party's request. Such power, being coupled with an interest, is
irrevocable until all of the Secured Obligations have been indefeasibly paid in
full and have terminated.
4. Representations and Warranties.
In addition to the representations and warranties of Debtor set forth
in the Purchase Agreement which are incorporated herein by reference, Debtor
hereby represents and warrants to the Secured Party as follows:
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(a) Debtor has, and will continue to have (or, in the case of
after-acquired Pledged Collateral, at the time Debtor acquires rights in such
Pledged Collateral, will have), title to the Pledged Collateral, free and clear
of all Liens.
(b) The shares of common stock of NetValue and Informatix,
constituting, in part, the Pledged Collateral have been duly authorized and
validly issued to Debtor, and constitute all of the shares of common stock of
NetValue and Informatix owned by Debtor.
(c) The security interests in the Pledged Collateral granted
hereunder are valid, perfected and of first priority.
(d) There are no restrictions upon the transfer of the Pledged
Collateral and Debtor has the power and authority and right to transfer the
Pledged Collateral free of any encumbrances and without obtaining the consent of
any other person. It is acknowledged that a transfer of the Pledged Collateral
by Secured Party following a foreclosure may require compliance with federal and
state securities laws.
(e) Debtor has all necessary power to execute, deliver and perform
this Agreement and all necessary action to authorize the execution, delivery and
performance of this Agreement has been properly taken.
(f) There are no actions, suits, or proceedings pending or, to
Debtor's best knowledge after due inquiry, threatened against or affecting
Debtor with respect to the Pledged Collateral, at law or in equity or before or
by any commission, board, bureau, agency, department or instrumentality, and
Debtor is not in default with respect to any judgment, writ, injunction, decree,
rule or regulation which would adversely affect Debtor's performance hereunder.
(g) This Agreement has been duly executed and delivered and
constitutes the valid and legally binding obligation of Debtor, enforceable in
accordance with its terms, except to the extent that enforceability of this
Agreement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforceability of creditors'
rights generally or limiting the right of specific performance or by general
equitable principles.
(h) Neither the execution and delivery by Debtor of this Agreement,
nor the compliance with the terms and provisions hereof, will violate any
provision of the articles or certificates of incorporation or similar
organizational documents, bylaws or partnership agreement of Debtor or any law
or conflict with or result in a breach of any of the terms, conditions or
provisions of any judgment, order, injunction, decree or ruling of any court or
arbitration tribunal or any governmental authority to which Debtor is subject or
any provision of any material agreement, understanding or arrangement to which
Debtor is a party or by which Debtor is bound.
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(i) Debtor's principal place of business and chief executive office
is as set forth on the signature page hereto.
5. General Covenants.
In addition to any covenants and agreements of Debtor set forth in
the Purchase Agreement, the Promissory Note and Other Documents, which are
incorporated herein by this reference, Debtor hereby covenants and agrees as
follows:
(a) Debtor shall do all reasonable acts that may be necessary and
appropriate to maintain, preserve and protect the Pledged Collateral; Debtor
shall be responsible for the risk of loss of, damage to, or destruction of the
Pledged Collateral owned by Debtor, unless such loss is the result of the gross
negligence or willful misconduct of the Secured Party. Debtor shall notify the
Secured Party in writing ten (10) days prior to any change in either the address
and location of Debtor's chief executive office or the address and location of
Debtor's principal place of business.
(b) Debtor shall pay promptly when due all taxes, assessments,
charges and obligations secured by encumbrances and liens now or hereafter
imposed upon or affecting any of the Pledged Collateral, except as otherwise
expressly permitted under the Purchase Agreement.
(c) Debtor shall appear in and defend any action or proceeding of
which Debtor is aware which could reasonably be expected to affect Debtor's
title to, or the Secured Party's interest in, the Pledged Collateral owned by
Debtor and the proceeds thereof; provided, however, that Debtor may settle such
actions or proceedings with respect to the Pledged Collateral Debtor owns with
the consent of the Secured Party, which consent shall not be unreasonably
withheld or delayed.
(d) Debtor shall keep separate, accurate and complete records of
the Pledged Collateral owned by Debtor, disclosing the Secured Party's security
interest hereunder.
(e) Debtor shall permit the Secured Party, its officers, employees
and agents at reasonable times and on reasonable prior notice to inspect all
books and records related to the Pledged Collateral.
(f) During the term of this Agreement, Debtor shall not sell,
assign, transfer, pledge, grant a security interest, place a lien on or
otherwise dispose of the Pledged Collateral except as permitted under the
Purchase Agreement.
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6. Other Rights With Respect to Pledged Collateral.
In addition to the other rights with respect to the Pledged Collateral
granted to the Secured Party hereunder, at any time and from time to time, after
and during the continuation of an Event of Default, the Secured Party at its
option and at the expense of Debtor, may (a) transfer into its own name, or into
the name of its nominee, all or any part of the Pledged Collateral, thereafter
receiving all dividends, income or other distributions upon the Pledged
Collateral; (b) take control of and manage all or any of the Pledged Collateral;
(c) apply to the payment of any of the Secured Obligations, whether any be due
and payable or not, any moneys, including cash dividends and income from any
Pledged Collateral, now or hereafter in the hands of the Secured Party or any
Affiliate of the Secured Party, on deposit or otherwise, belonging to Debtor, as
the Secured Party, in its sole discretion, shall determine; and (d) do anything
which Debtor is required but fails to do hereunder. The proceeds of any
collection, sale or other disposition of the Pledged Collateral of Debtor, or
any part thereof, shall, after the Secured Party has made all deductions of
expenses, including but not limited to reasonable attorneys' fees and other
expenses incurred in connection with repossession, collection, sale or
disposition of such Pledged Collateral or in connection with the enforcement of
the Secured Party's rights with respect to the Pledged Collateral in any
insolvency, bankruptcy or reorganization proceedings, be applied against the
Secured Obligations, whether or not all the same be then due and payable, in
such manner and order as set forth in the Purchase Agreement and Promissory
Note.
7. Additional Remedies Upon Event of Default.
Upon the occurrence of any Event of Default and while such Event of
Default shall be continuing, the Secured Party shall have, in addition to all
rights and remedies of a secured party under the Code or other applicable Law,
and in addition to its rights under Section 6 above and under the Purchase
Agreement, the Promissory Note and the Other Documents, the following rights and
remedies:
(a) The Secured Party may, after ten (10) days' advance notice to
Debtor, sell, assign, give an option or options to purchase or otherwise dispose
of the Pledged Collateral or any part thereof at public or private sale, at any
of the Secured Party's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Secured Party may deem commercially
reasonable. Debtor agrees that ten (10) days' advance notice of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Secured Party shall not be
obligated to make any sale of Pledged Collateral regardless of notice of sale
having been given. The Secured Party may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Debtor recognizes that the Secured Party may be compelled to resort
to one or more private sales of the Pledged Collateral to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire such
securities for its own account for investment and not with a view to the
distribution or resale thereof. Debtor acknowledges and agrees that any such
private sale may result in prices and other terms less favorable than if such
sale were a public sale and, notwithstanding such circumstances, agrees that any
such private sale
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shall be deemed to have been made in a commercially reasonable manner. The
Secured Party shall be under no obligation to delay sale of any of the Pledged
Collateral for the period of time necessary to permit Debtor to register such
securities for public sale under the Securities Act of 1933, as amended, or
under applicable state securities laws, even if Debtor would agree to do so.
(b) The proceeds of any collection, sale or other disposition of
the Pledged Collateral of Debtor, or any part thereof, shall, after the Secured
Party has made all deductions of expenses, including but not limited to
reasonable attorneys' fees and other expenses incurred in connection with
repossession, collection, sale or disposition of such Pledged Collateral or in
connection with the enforcement of the Secured Party's rights with respect to
the Pledged Collateral in any insolvency, bankruptcy or reorganization
proceedings, be applied against the Secured Obligations, whether or not all the
same be then due and payable, in such manner and order as set forth in the
Purchase Agreement.
8. Secured Party's Duties.
The powers conferred on the Secured Party hereunder are solely to
protect its interest in the Pledged Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the safe custody of any Pledged
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Secured Party shall have no duty as to any Pledged Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Pledged Collateral.
9. No Waiver; Cumulative Remedies.
No failure to exercise, and no delay in exercising, on the part of the
Secured Party, any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any further exercise thereof or the exercise of any
other right, power or privilege. The remedies herein provided are cumulative and
not exclusive of any remedies provided under the Purchase Agreement, the
Promissory Note, and the Other Documents or by Law. Debtor waives any right to
require the Secured Party to proceed against any other person or to exhaust any
of the Pledged Collateral or other security for the Secured Obligations or to
pursue any remedy in the Secured Party's power.
10. Assignment.
All rights of the Secured Party under this Agreement shall inure to the
benefit of its successors and assigns. All obligations of Debtor shall bind its
successors and assigns; provided, however, Debtor may not assign or transfer any
of its rights and obligations hereunder or any interest herein.
11. Severability.
Any provision of this Agreement which shall be held invalid or
unenforceable shall be ineffective without invalidating the remaining provisions
hereof.
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12. Governing Law and Jurisdiction.
This Agreement shall be construed in accordance with and governed by
the internal laws of the Commonwealth of Pennsylvania without regard to its
conflicts of law principles, except to the extent the validity or perfection of
the security interests or the remedies hereunder in respect of any Pledged
Collateral are governed by the law of a jurisdiction other than the Commonwealth
of Pennsylvania. The Debtor hereby irrevocably consents to the exclusive
jurisdiction of the courts of the Commonwealth of Pennsylvania located within
Philadelphia County or the United States District Court for the Eastern District
of Pennsylvania for the resolution of all claims, disputes and controversies
arising hereunder.
13. Notices.
Debtor agrees that all notices, statements, requests, demands and other
communications under this Agreement shall be given to each of the parties at the
address set forth below their names and the manner provided in Section 12 of the
Purchase Agreement.
14. Specific Performance.
Debtor acknowledges and agrees that, in addition to the other rights of
the Secured Party hereunder and under the Purchase Agreement and Promissory Note
because the Secured Party's remedies at law for failure of Debtor to comply with
the provisions hereof relating to the Secured Party's rights (i) to inspect the
books and records related to the Pledged Collateral, (ii) to receive the various
notifications Debtor is required to deliver hereunder, (iii) to obtain copies of
agreements and documents as provided herein with respect to the Pledged
Collateral, (iv) to enforce the provisions hereof pursuant to which Debtor has
appointed the Secured Party its attorney-in-fact, and (v) to enforce the Secured
Party's remedies hereunder, would be inadequate and that any such failure would
not be adequately compensable in damages, Debtor agrees that each such provision
hereof may be specifically enforced.
15. Dividends; Voting Rights in Respect of the Pledged Collateral.
So long as no Event of Default shall occur and be continuing under the
Purchase Agreement, Debtor may exercise any and all voting and other consensual
rights pertaining to the Pledged Collateral or any part thereof for any purpose
not inconsistent with the terms of this Agreement, the Purchase Agreement, the
Promissory Note or Other Documents; provided, however, that Debtor will not
exercise or will refrain from exercising any such right, as the case may be, if
such action would be inconsistent with the covenants and obligations of Debtor
under the Purchase Agreement and the Other Documents or would have a material
adverse effect on the value of any Pledged Collateral. So long as no Event of
Default has occurred and is continuing, any lawful dividends paid in cash to
Debtor in respect of the Pledged Collateral may be used or applied by Debtor for
any purpose permitted by the Purchase Agreement.
16. Entire Agreement; Amendments.
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements
relating to a grant of a
7
<PAGE>
security interest in the Pledged Collateral by Debtor. This Agreement may not be
amended or supplemented except by a writing signed by the Secured Party and
Debtor.
17. Counterparts.
This Agreement may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
18. Descriptive Headings.
The descriptive headings which are used in this Agreement are for the
convenience of the parties only and shall not affect the meaning of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SECURED PARTY:
VDC CORPORATION LTD.
By: /s/ Graham Lacey
---------------------------
Graham Lacey, President
DEBTOR:
ROZEL INTERNATIONAL HOLDINGS LIMITED
By: /s/ Harold Chaffe
----------------------------
Harold Chaffe, President
[SEAL]
Principal Place of Business:
----------------------------
Tropic Isle Building
Wickhams Cay
Road Town
Tortola
British Virgin Islands
Chief Executive Office:
-----------------------
Tropic Isle Building
Wickhams Cay
Road Town
Tortola
British Virgin Islands
8
<PAGE>
SCHEDULE A
TO
PLEDGE AGREEMENT
Description of Pledged Collateral
Type and Amount of Ownership
(i) 3,972,877 shares of common stock, par value $.01 per share, of
netValue, Inc.;
(ii) 100,000 shares of common stock, par value $.01 per share of
Informatix, Inc.;
(iii) $700,000 Note, dated October 18, 1997 owed by Informatix, Inc. to
VDC Corporation Ltd.; and
(iv) Promissory Notes in the aggregate principal amount of $200,000
owed by netValue, Inc. to VDC Corporation Ltd.
9
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is dated December 18, 1997 and is made between
Rozel International Holdings Limited, a British Virgin Island corporation
("Grantor") and VDC Corporation Ltd. ("Secured Party") pursuant to the Purchase
Agreement referred to below.
WITNESSETH THAT:
WHEREAS, pursuant to that certain Asset Purchase Agreement dated
December 18, 1997 (as it may hereafter be amended or otherwise modified from
time to time, the "Purchase Agreement") between Grantor and the Secured Party,
the Grantor has agreed to purchase certain assets of Grantor, which purchase
price for such assets includes a Promissory Note in the aggregate amount of
$3,500,000 ("Promissory Note");
WHEREAS, the obligations of the Secured Party to pay the Promissory Note
pursuant to the Purchase Agreement are subject to the condition, among others,
that Grantor secure its obligations to the Secured Party under the Purchase
Agreement and Promissory Note by the grant of security interests in the
Collateral, as defined and more fully set forth herein; and
WHEREAS, Grantor is (or will be with respect to after-acquired property)
the legal and beneficial owner and holder of the Collateral (as defined in
Section 1 hereof), and has agreed to grant security interests in such Collateral
to the Secured Party on the terms and conditions set forth herein.
NOW, THEREFORE, intending to be legally bound hereby and for value
received, the parties hereto covenant and agree as follows:
1. Definitions. Terms which are defined in the Purchase Agreement and
not otherwise defined herein are used herein as defined therein. In addition to
the words and terms defined elsewhere in this Security Agreement, the following
words and terms shall have the following meanings, respectively, unless the
context otherwise clearly requires:
(a) "Code" shall mean the Uniform Commercial Code of each state as
enacted and in effect on the date hereof in each applicable jurisdiction, and as
the same may subsequently be amended from time to time.
(b) "Collateral" shall mean, all of Grantor's right, title and
interest in, to and under the following described property, whether now owned or
hereafter acquired (words and terms defined in the Code shall have the same
meanings when used herein):
(i) 3,972,877 shares of common stock, par value $.01 per share
("NV Common Stock"), of netValue ("NetValue");
(ii) 100,000 shares of common stock, par value $.01 per share
("Informatix Common Stock"), of Informatix, Inc. ("Informatix");
<PAGE>
(iii) $700,000 Note, dated October 18, 1997 (the "Note") owed by
Informatix to VDC Corporation Ltd.; and
(iv) Promissory Notes in the aggregate principal amount of
$200,000 ("NetValue Notes") owed by NetValue to VDC Corporation Ltd.
The NV Common Stock, Informatix Common Stock, the Note and the NetValue
Notes, collectively, shall be referred to as the "Securities". The term
"Collateral" as it applies to the NV Common Stock and Informatix Common Stock
shall also include all rights and privileges pertaining thereto, including,
without limitation, all securities and additional securities receivable in
respect of or in exchange for such securities, all rights to subscribe for
securities incident to or arising from ownership of such securities, all cash,
interest, stock and other dividends or distributions paid or payable on such
securities, and all books and records pertaining to the foregoing, including,
without limitation, all stock record and transfer books, and whatever is
received when any of the foregoing is sold, exchanged or otherwise disposed of,
including any proceeds as such term is defined in the Code.
(c) "Secured Indebtedness" shall mean (i) all obligations, whether
of principal, interest, fees, expenses or otherwise, of Grantor to Secured
Party, whether now existing or hereafter incurred, under the Purchase Agreement,
Promissory Note or any of the Other Documents as any of the same may from time
to time be amended, modified or supplemented, together with any and all
extensions, renewals, refinancings or refundings thereof in whole or in part by
the Secured Party, (ii) all out-of-pocket costs, expenses and disbursements,
including reasonable attorneys' fees and legal expenses, incurred by the Secured
Party in the collection of any of the obligations referred to in subclause
1(c)(i) above; and (iii) any advances made, subsequent to an Event of Default,
by the Secured Party, for the reasonable maintenance, preservation, protection
or enforcement of, or realization upon, the Collateral, including advances for
taxes and the like and reasonable expenses incurred to sell or otherwise realize
on, or prepare for sale or other realization on, any of the Collateral.
2. Assignment and Grant of Security Interests. As security for the due
and punctual payment and performance of the Secured Indebtedness in full,
Grantor hereby agrees that the Secured Party shall have, and Grantor hereby
grants to and creates in favor of the Secured Party, for the benefit of the
Secured Party, to secure all of the Secured Indebtedness, a continuing first
priority security interest in and to Grantor's Collateral. Without limiting the
generality of Section 4 below, Grantor further agrees that with respect to each
item of Collateral as to which (i) the creation of valid and enforceable
security interests is not governed exclusively by the Code or (ii) the
perfection of valid and enforceable security interests therein under the Code
cannot be accomplished by the Secured Party taking possession thereof or by the
filing in appropriate locations of appropriate Code financing statements
executed by the Grantor, Grantor will at its expense execute and deliver to the
Secured Party such documents, agreements, notices, assignments and instruments
and take such further actions as may be reasonably requested by the Secured
Party from time to time for the purpose of creating a valid and perfected first
priority
2
<PAGE>
lien on such item, enforceable against the Grantor and all third parties to
secure the Secured Indebtedness.
3. Representations and Warranties. Except as otherwise set forth in the
Purchase Agreement, Grantor represents, warrants and covenants to the Secured
Party that:
(a) Grantor is the legal and beneficial owner and holder of the
Collateral and Grantor has and will continue to have good and marketable title
to the Collateral which Grantor purports to own or which is reflected as owned
in its books and records.
(b) The Grantor has received value from the Secured Party for
Grantor's grant of security interests hereunder and, except for the security
interests granted to and created in favor of the Secured Party hereunder, all of
the Collateral is and will continue to be free and clear of all liens, except
the Permitted Lien.
(c) Grantor has full power to enter into, execute, deliver and carry
out this Security Agreement and to perform its obligations hereunder and all
such actions have been duly authorized by all necessary proceedings on its part.
This Security Agreement has been duly and validly executed and delivered by
Grantor. This Security Agreement constitutes the legal, valid and binding
obligations of Grantor, enforceable against it in accordance with its terms,
except to the extent that enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforceability of creditors' rights generally or limiting the right of specific
performance.
(d) Neither the execution and delivery of this Security Agreement
nor compliance with the terms and provisions hereof (i) will conflict with or
result in any breach of the terms and conditions of the articles of
incorporation, bylaws or equivalent documents of Grantor or of any law or of the
Termination Agreement or any material agreement or instrument to which Grantor
is a party or by which it is bound or to which it is subject, (ii) will
constitute a default under any of the documents referred to in clause 3(d)(i)
above or (iii) will result in the creation or enforcement of any lien (other
than the Permitted Lien) whatsoever upon any Collateral (now or hereafter
acquired) of Grantor.
4. Further Assurances. Grantor will, from time to time, at its expense,
faithfully preserve and protect the Secured Party's security interests in the
Collateral as continuing first priority perfected security interests, and will
do all such other acts and things and will, upon request therefor by the Secured
Party, execute, deliver, file and record all such other documents and
instruments, including financing statements, security agreements, pledges,
assignments, documents and powers of attorney with respect to the Collateral,
and pay all filing fees and taxes related thereto as the Secured Party in its
reasonable discretion may deem necessary or advisable from time to time in order
to preserve, perfect or protect any security interest granted or purported to be
granted hereby or to enable the Secured Party to exercise and enforce its rights
and remedies hereunder with respect to any of the Collateral. Without limiting
the generality of the foregoing, to the extent Article 9 of the Code does not
govern the creation and/or perfection of the security interests intended to be
created hereunder, Grantor agrees to execute and deliver
3
<PAGE>
such further documents and instruments and do such further acts as the Secured
Party may from time to time require.
5. Covenants. Grantor covenants and agrees that, (a) it will not sell,
assign or otherwise dispose of any portion of the Collateral; (b) it will obtain
and maintain sole and exclusive possession of its Collateral; (c) it will keep
materially accurate and complete books and records concerning the Collateral and
such other books and records as may be required under the Purchase Agreement;
(d) it will promptly furnish to the Secured Party such information and documents
relating to the Collateral as the Secured Party may reasonably request in order
to confirm the status of the Secured Party's security interests in such
Collateral; (e) it will not take or omit to take any actions, the taking or the
omission of which might result in a material adverse alteration or impairment of
the Collateral or in a violation of this Security Agreement; and (f) it will
execute and deliver to the Secured Party and record such supplements to this
Security Agreement and additional assignments as the Secured Party reasonably
may request to evidence and confirm the security interests herein contained.
6. Preservation of Security Interests. Grantor assumes full
responsibility for taking and hereby agrees to take any and all necessary steps
to preserve and defend the Secured Party's right, title and security interests
in and to the Collateral against the claims and demands of all persons. The
Secured Party shall be deemed to have exercised reasonable care in the custody
and preservation of the Collateral in the Secured Party's possession if, prior
to the existence of an Event of Default, the Secured Party takes such action for
that purpose as such Grantor shall reasonably request in writing, provided that
such requested action will not, in the judgment of the Secured Party, impair the
security interests in the Collateral created hereby or the Secured Party's
rights in, or the value of, such Collateral, and provided further that such
written request is received by the Secured Party in sufficient time to permit
the Secured Party to take the requested action.
7. Secured Party's Rights with Respect to the Collateral. At any time
and from time to time, whether or not an Event of Default shall have occurred,
and without notice to or consent of the Grantor, the Secured Party may, at its
option, do any or all of the following: (a) do anything which the Grantor is
required but fails to do hereunder, and in particular the Secured Party may, if
the Grantor fails to do so, (i) insure or take any reasonable steps to protect
the Collateral, (ii) pay any or all taxes, levies, expenses and costs arising
with respect to the Collateral, or (iii) pay any or all premiums payable on any
policy of insurance required to be obtained or maintained hereunder, and add any
amounts paid under this Section 7 to the principal amount of the Promissory
Note, and other liabilities of Grantor secured by this Security Agreement; (b)
inspect the Collateral at any reasonable time; and (c) pay any amounts the
Secured Party reasonably elects to pay or advance hereunder on account of
insurance, taxes or other costs, fees or charges arising in connection with the
Collateral, either directly to the payee(s) of such cost, fee or charge,
directly to the Grantor, or to such payee(s) and Grantor, jointly.
8. Remedies on Default. If there shall have occurred and be continuing
an Event of Default under the terms of the Purchase Agreement, then the Secured
Party shall have such rights
4
<PAGE>
and remedies with respect to the Collateral or any part thereof and the proceeds
thereof as are provided by the Code and such other rights and remedies with
respect thereto which it may have at law or in equity or under this Security
Agreement, including to the extent not inconsistent with the provisions of the
Code or any other applicable Law, the right to take over and collect the
Collateral which consists of amounts owing to Grantor to the extent not
prohibited by applicable law. To this end, the Secured Party shall have the
right to (a) transfer all or any part of any of the Collateral into the Secured
Party's name or into the name of its nominee or nominees and thereafter receive
all cash, stock and other dividends or distributions paid or payable in respect
thereof, and otherwise act with respect thereto as the absolute owner thereof;
(b) notify the obligors on any of the Collateral, whether accounts or otherwise,
to make payment thereon directly to the Secured Party, whether or not the
Grantor was theretofore making collections thereon; (c) take control of and
manage the Collateral; (d) apply to the payment of the Secured Indebtedness,
whether it be due and payable or not, any moneys, including cash dividends and
income from the Collateral, now or hereafter in the hands of the Secured Party,
on deposit or otherwise, belonging to Grantor, in accordance with Section 9
hereof; (e) endorse the name of the Grantor upon any checks or other evidences
of payment or any document or instrument that may come into the possession of
the Secured Party as proceeds of or relating to such Grantor's Collateral; (f)
demand, sue for, collect, compromise and give acquittances for the Collateral;
(g) prosecute, defend or compromise any action, claim or proceeding with respect
to the Collateral; and (h) take such other action as the Secured Party may deem
appropriate, including extending or modifying the terms of payment of the
debtors of Grantor. In addition, upon the occurrence of an Event of Default but
subject to any restrictions set forth in the Termination Agreement, Grantor, at
the request of the Secured Party, shall assemble all or any portion of the
Grantor's Collateral at such locations as the Secured Party shall designate
which are reasonably convenient to Grantor, and the Secured Party may sell,
assign, give an option or options to purchase or otherwise dispose of all or any
part of the Collateral at any public or private sale at such place or places and
at such time or times and upon such terms, whether for cash or on credit, and in
such manner, as the Secured Party may determine, and apply the proceeds so
received in accordance with Section 9 hereof. Written notice of sale mailed by
certified mail, return receipt requested, to the Grantor, at least ten (10) days
prior to such sale shall be deemed reasonable notice.
In the event of a breach by Grantor in the performance of any of the
terms of this Security Agreement, the Secured Party may demand specific
performance of this Security Agreement and seek injunctive relief and may
exercise any other remedy, available at law or in equity, it being recognized
that the remedies of the Secured Party at law may not fully compensate the
Secured Party for the damages it may suffer in the event of a breach hereof.
9. Application of Proceeds. The proceeds of the Collateral shall be
applied in accordance with the terms of the Purchase Agreement. Grantor shall be
liable for any deficiency if the proceeds of any sale, assignment, giving of an
option or options to purchase or other disposition of the Collateral is
insufficient to pay all amounts to which the Secured Party is entitled.
5
<PAGE>
10. Attorneys-in-Fact. After an Event of Default the Grantor hereby
irrevocably appoints the Secured Party, its officers, employees and agents, or
any of them, as attorneys-in-fact, with full power of substitution, for Grantor
for the purpose of carrying out the provisions of this Security Agreement and
taking any action and executing, delivering, filing and recording any
instruments which the Secured Party may deem necessary or advisable to
accomplish the purposes hereof, which power of attorney being given for security
is coupled with an interest and irrevocable. The Grantor hereby ratifies and
confirms and agrees to ratify and confirm all action taken by the Secured Party,
its officers, employees or agents pursuant to the foregoing power of attorney.
11. Indemnity and Expenses.
(a) The Grantor unconditionally agrees to indemnify the Secured
Party from and against any and all claims, losses and liabilities arising out of
or resulting from this Security Agreement (including enforcement of this
Security Agreement), except claims, losses or liabilities resulting from the
gross negligence or willful misconduct of the Secured Party.
(b) The Grantor unconditionally agrees upon demand to pay to the
Secured Party the amount of any and all reasonable and necessary out-of-pocket
costs, expenses and disbursements, including fees and expenses of its counsel,
which the Secured Party may incur in connection with (i) the administration of
this Security Agreement, (ii) the custody, preservation, use or operation of, or
the sale of, collection from, or other realization upon, the Collateral, (iii)
the exercise or enforcement of any of the rights of the Secured Party hereunder
or (iv) the failure by the Grantor to perform or observe any of the provisions
hereof.
12. Security Interest Absolute; Waiver of Notices. All rights of the
Secured Party hereunder, all security interests hereunder, and all obligations
of the Grantor hereunder shall be absolute and unconditional, irrespective of:
(a) any lack of validity or enforceability of the Purchase Agreement, Promissory
Note or any of the Other Documents; (b) any change in the time, manner or place
or payment of, or in any other term of, all or any of the Secured Indebtedness
or any other amendment or waiver of or any consent to any departure from the
Purchase Agreement, Promissory Note or any of the Other Documents; (c) any
exchange, release or non-perfection of any other Collateral; or (d) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, any Grantor or any third party mortgagors, pledgors or grantors of
security interests. Grantor waives any and all notice with respect to acceptance
by the Secured Party of this Security Agreement, the provisions of the Purchase
Agreement, Promissory Note or any of the Other Documents or any other note,
instrument or agreement relating to the Secured Indebtedness, and any default in
connection with the Secured Indebtedness. Grantor waives any presentment,
demand, notice of dishonor or nonpayment, protest, notice of protest and any
other notice of any kind in connection with the Secured Indebtedness.
13. Termination. Upon payment in full of the Secured Indebtedness and
termination of the Purchase Agreement and Promissory Note, this Security
Agreement shall terminate and be of no further force and effect, and the Secured
Party, at the Grantor's expense, shall thereupon
6
<PAGE>
promptly return to Grantor the Collateral and such other documents delivered by
Grantor hereunder as may then be in the Secured Party's possession. Upon any
such termination, the Secured Party will, at the Grantor's expense, execute and
deliver to the Grantor such documents as that Grantor shall reasonably request
to evidence such termination.
14. Modifications, Amendments and Waivers. Any and all agreements
amending or changing any provision of this Security Agreement or the rights of
any of the Secured Party or the Grantor, and any and all waivers or consents to
Events of Default or other departures from the due performance of the Grantor
hereunder shall be made only pursuant to the provisions of the Purchase
Agreement.
15. No Implied Waivers; Cumulative Remedies. No course of dealing and no
failure or delay on the part of the Secured Party in exercising any right,
remedy, power or privilege hereunder shall operate as a waiver thereof or of any
other right, remedy, power or privilege of the Secured Party hereunder; and no
single or partial exercise of any such right, remedy, power or privilege shall
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights and remedies of the Secured Party
under this Security Agreement are cumulative and not exclusive of any rights or
remedies which it may otherwise have.
16. Notices. All notices, statements, requests, demands and other
communications given to or made upon the Grantor, the Secured Party in
accordance with the provisions of this Security Agreement shall be given or made
as provided in Section 12 of the Purchase Agreement.
17. Severability.
(a) Grantor agrees that the provisions of this Security Agreement
are severable, and in an action or proceeding involving any state or federal
bankruptcy, insolvency or other law affecting the rights of creditors generally:
(i) if any clause or provision shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof, in
such jurisdiction and shall not in any manner affect such clause or provision in
any other jurisdiction, or any other clause or provision in this Agreement in
any jurisdiction;
(ii) if this Security Agreement would be held or determined to
be void, invalid or unenforceable on account of the amount of the aggregate
liability of Grantor under this Security Agreement, then, notwithstanding any
other provision of this Security Agreement to the contrary, the aggregate amount
of such liability shall, without any further action by the Secured Party,
Grantor or any other person, be automatically limited and reduced to the highest
amount which is valid and enforceable as determined in such action or
proceeding.
(iii) If the grant of any security interest hereunder by Grantor
is held or determined to be void, invalid or unenforceable, in whole or in part,
such holding or
7
<PAGE>
determination shall not impair or affect the validity and enforceability of any
clause or provision not so held to be void, invalid or unenforceable.
18. Governing Law. This Security Agreement shall be deemed to be a
contract under the laws of the Commonwealth of Pennsylvania and for all purposes
shall be governed by and construed in accordance with the internal laws of said
State, without reference to its conflicts of law principles, except as required
by mandatory provisions of law and except to the extent that the validity or
perfection of security interests hereunder, or remedies hereunder with respect
to the Collateral, is governed by the laws of a jurisdiction other than the law
of the Commonwealth of Pennsylvania.
19. Successors and Assigns. This Security Agreement shall be freely
assignable and transferable by the Secured Party in connection with the
assignment or transfer of the Secured Indebtedness; provided, however, the
duties and obligations of the Grantor may not be delegated or transferred by the
Grantor, without the written consent of the Secured Party. The rights and
privileges of the Secured Party shall inure to their benefit and the benefit of
its respective successors and assigns (as permitted under the Purchase
Agreement) and the duties and obligations of the Grantor shall bind the Grantor
and its respective successors and assigns.
20. Counterparts. This Security Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed and delivered, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
21. Consent to Jurisdiction; Waiver of Jury Trial. The Grantor hereby
irrevocably consents to the exclusive jurisdiction of the courts of Bermuda and
waives personal service of any and all process upon it and consents that all
such service of process be made by certified or registered mail directed to the
Grantor at the addresses set forth or referred to in Section 16 hereof and
service so made shall be deemed to be completed upon actual receipt thereof. The
Grantor waives any objection to jurisdiction and venue of any action instituted
against it as provided herein and agrees not to assert any defense based on lack
of jurisdiction or venue, AND THE SECURED PARTY WAIVES TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING OR COUNTERCLAIM WITH RESPECT TO THIS SECURITY AGREEMENT
TO THE FULL EXTENT PERMITTED BY LAW.
<PAGE>
WITNESS the due execution hereof as of the day and year first above
written.
ROZEL INTERNATIONAL HOLDINGS
LIMITED
By: /s/ Harold Chaffe
----------------------------
Harold Chaffe, President
VDC CORPORATION LTD.
By: /s/ Graham Lacey
----------------------------
Graham Lacey, President
9
<PAGE>
ASSIGNMENT
The undersigned (the "Assignor") hereby assigns all of its right, title
and interest in and to a certain promissory note in the principal amount of
$700,000 dated October 18, 1997 by and between the Assignor as "Payee" and
Informatix, Inc., as "Maker" to Rozel International Holdings Limited (the
"Assignee").
This Assignment and any other documents delivered in connection
herewith and the rights and obligations of the parties hereto and thereto shall
be for all purposes governed by and construed and enforced in accordance with
the internal laws of the Commonwealth of Pennsylvania without giving effect to
its conflicts of law principles.
IN WITNESS WHEREOF, the parties, intending to be legally bound hereby,
have executed this Assignment as of the 18th day of December, 1997.
ATTEST: ASSIGNOR:
VDC CORPORATION LTD.
By: /s/ Graham Lacey
- ----------------------------- -------------------------------
Title: Graham Lacey, President
ATTEST: ASSIGNEE:
ROZEL INTERNATIONAL HOLDINGS LIMITED
By: /s/ Harold Chaffe
- ----------------------------- -------------------------------
Title: Harold Chaffe, President
<PAGE>
ASSIGNMENT
The undersigned (the "Assignor") hereby assigns all of its right, title
and interest in and to certain promissory notes in the aggregate principal
amount of $200,000 by and between the Assignor as "Payee" and netValue, Inc., as
"Maker" to Rozel International Holdings Limited (the "Assignee").
This Assignment and any other documents delivered in connection
herewith and the rights and obligations of the parties hereto and thereto shall
be for all purposes governed by and construed and enforced in accordance with
the internal laws of the Commonwealth of Pennsylvania without giving effect to
its conflicts of law principles.
IN WITNESS WHEREOF, the parties, intending to be legally bound hereby,
have executed this Assignment as of the 18th day of December, 1997.
ATTEST: ASSIGNOR:
VDC CORPORATION LTD.
By: /s/ Graham Lacey
- ----------------------------- -------------------------------
Title: Graham Lacey, President
ATTEST: ASSIGNEE:
ROZEL INTERNATIONAL HOLDINGS LIMITED
By: /s/ Harold Chaffe
- ----------------------------- -------------------------------
Title: Harold Chaffe, President
ASSET PURCHASE AGREEMENT
by and between
VDC CORPORATION LTD.,
as Seller,
and
TASMIN LIMITED
as Buyer
February 10, 1998
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made as of the 10th
day of February, 1998, by and between VDC CORPORATION LTD., a Bermuda
corporation ("Seller") and TASMIN LIMITED, a Nevis corporation ("Buyer").
WITNESSETH
WHEREAS, Seller desires to sell, and Buyer desires to purchase, on the
terms and conditions hereafter set forth, certain of the assets of Seller as
described herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and representations and warranties herein contained, and
for other good and legal consideration, the receipt and sufficiency of which is
hereby acknowledged, Seller and Buyer, intending to be legally bound hereby,
agree as follows:
ARTICLE 1
DEFINITIONS
1.1. When used in this Agreement, the following terms, in their singular
and plural forms, shall have the meanings assigned to them below:
"Act" means the Securities Act of 1933, as amended.
"Agreement" is defined in the initial paragraph hereof.
"Assets" means all of the right, title and interest that Seller
possesses and has the right to transfer in and to all of the following described
holdings:
(i) 15,836,364 shares of common stock, par value $.01 per share
("Tamaris Common Stock"), of Tamaris PLC ("Tamaris");
(ii) $167,842 Note due June 30, 1998 (the "Silk Note") owed by Silk
Securities to Seller;
(iii) Promissory Notes in the aggregate principal amount of $161,990
due June 30, 1998 (the "MJZ Note") owed by MJZ Securities Limited to Seller;
(iv) Contractual advances to EPSOM Investment Services in the
aggregate amount of $119,264 (the "EPSOM Investment") which may be recovered by
the Seller for its participation in arbitration rights; and
(v) Investment in FIP Holdings, Ltd. in the aggregate amount of
$330,000 (the "FIP Investment").
"Buyer" is defined in the initial paragraph hereof.
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"Claim" means a claim or demand for any and all Liabilities, damages,
losses, obligations, deficiencies, encumbrances, penalties, costs and expenses,
including reasonable attorneys' fees, resulting from, related to or arising out
of (i) any misrepresentation, breach of warranty or non-fulfillment of any
obligation of Seller set forth in this Agreement or in any Related Document;
(ii) Seller's ownership of the Assets; (iii) Seller's failure to comply with the
provisions of applicable bulk sales laws; and (iv) any and all actions, suits,
investigations, proceedings, demands, assessments, audits, judgments and claims
arising out of any of the foregoing.
"Closing" and "Closing Date" are defined in Section 6.1.
"GAAP" means generally accepted accounting principles.
"Governmental Authority" means any foreign, federal, state,
regional or local authority, agency, body, court or instrumentality, regulatory
or otherwise, which, in whole or in part, was formed by or operates under the
auspices of any foreign, federal, state, regional or local government.
"Law" means any common law and any federal, state, regional,
local or foreign law, rule, statute, ordinance, rule, order or regulation.
"Liabilities" means liabilities, obligations, claims or debts of Seller
of any type or nature, whether matured, unmatured, contingent or unknown,
including, without limitation, tort, contract or other claims asserted against
Seller which are based on acts or omissions occurring on, before or after the
Closing Date.
"Lien" means any lien, charge, covenant, condition, easement, adverse
claim, demand, encumbrance, security interest, option, pledge, or any other
title defect, easement or restriction of any kind.
"Material Adverse Effect" is defined in Section 4.9(c).
"Permitted Liens" means those Liens to which the Assets are subject
under (i) the federal securities laws of the United States.
"Purchase Price" is defined in Section 3.1.
"Related Documents" means this Agreement and each document or instrument
executed in connection with the consummation of the transactions contemplated
herein.
"Seller" is defined in the initial paragraph of this Agreement.
ARTICLE 2
SALE AND PURCHASE OF ASSETS
2.1. Agreement to Sell and Purchase Assets. Subject to the terms and
conditions hereof and on the basis of and in reliance upon the agreements and
representations and warranties
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set forth herein, on the Closing Date Seller shall sell the Assets to Buyer, and
Buyer shall purchase the Assets from Seller.
2.2. Responsibility for Liabilities. Buyer shall not assume any
Liabilities of Seller by virtue of this Agreement or otherwise.
ARTICLE 3
PAYMENT OF THE PURCHASE PRICE
3.1. Purchase Price.
The purchase price ("Purchase Price") for the Assets shall be $1,500,000
in cash, or other immediately available funds, which shall paid or delivered by
Buyer in the following manner:
(a) At the Closing, Buyer shall deliver to Seller an amount equal to
Three Hundred Thousand Dollars ($300,000) in immediately
available funds in the form of cash, cashier's check or wire
transfer;
(b) At the Closing, Buyer shall deliver a Promissory Note payable to
Seller in the aggregate amount of $800,000, the form of which is
attached hereto as Exhibit A, ("Promissory Note"); whereby
$150,000 shall be due and payable on June 30, 1998; $150,000
shall be due and payable on February 28, 1999; and the remaining
$500,000 shall be due and payable on September 30, 1999; and
(c) By a date not later than March 9, 1998, Buyer shall deliver to
Seller an amount equal to Four Hundred Thousand Dollars
($400,000) in immediately available funds in the form of cash,
cashier's check or wire transfer (collectively, the amounts
referred to in this subparagraph (c) and in subparagraph (a)
above shall be referred to as the "Cash Funds").
3.2. Pledge of Assets to secure Promissory Note At Closing, the Assets
shall be pledged to Seller, pursuant to the terms of a Pledge Agreement,
attached hereto as Exhibit B, and a Security Agreement, attached hereto as
Exhibit C, to secure the payment of the Promissory Note and the obligations
thereunder.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
4.1. Organization and Standing of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of Bermuda.
Seller has all requisite corporate power and authority to sell the Assets, free
and clear of any and all Liens other than Permitted Liens.
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4.2. Encumbrances Created by this Agreement. The execution and delivery
of this Agreement and each of the Related Documents does not, and the
consummation of the transactions contemplated hereby or thereby will not, create
any Liens on any assets (including the Assets) of Seller in favor of third
parties.
4.3. Authorization and Enforceability. The Seller has the full and
unrestricted legal right, power and authority to enter into this Agreement and
the Related Documents to which it is a party, to carry out the transactions
contemplated hereby and thereby, and to perform the obligations hereunder and
thereunder. All necessary and appropriate action has been taken by Seller with
respect to the execution and delivery of this Agreement and each of the Related
Documents and the performance of its obligations hereunder and thereunder. No
authorization, consent or approval of, or filing with, any third party or
Governmental Authority is necessary for the consummation by Seller of the
transactions contemplated by this Agreement or any Related Document. The
execution and delivery of this Agreement and the Related Documents and the
consummation of the contemplated transactions by Seller will not (a) result in
the breach of any of the terms or conditions of or constitute a default under
the Memorandum of Association or the Bye-Laws of the Seller, (b) violate any Law
or any order, writ, injunction or decree of any Governmental Authority, (c)
conflict with or constitute a default under any agreement or commitment that is
binding upon Seller or (d) result in the acceleration of any indebtedness of
Seller. This Agreement constitutes a valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms.
4.4. Title to Assets. Seller owns and holds of record the entire right,
title and interest in and to all of the Assets, free and clear of any and all
Liens, other than Permitted Liens.
4.5. Litigation. There is no claim, suit, arbitration, investigation,
action, inquiry, review or proceeding pending or threatened against Seller which
(a) affects the validity of this Agreement or any of the Related Documents or
which could prevent or delay the transactions contemplated hereunder or (b)
could reasonably be expected to have a Material Adverse Effect. Seller is not
subject to any judicial injunction or mandate or any administrative order.
4.6. Approval. The Board of Directors of Seller has approved the
execution of this Agreement and the transactions contemplated thereby.
4.7. Brokers' Fees. No broker, finder or other person or entity acting
in a similar capacity has participated on behalf of Seller in connection with
the transactions contemplated by this Agreement. Seller has not incurred any
Liability for brokers' fees, finders' fees, agents' commissions or other similar
forms of compensation in connection with this Agreement or the transactions
contemplated hereby.
4.8. Full Disclosure. No representation or warranty by Seller in this
Agreement and no statement contained in any Disclosure Schedule to this
Agreement contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statements contained therein, in light of
the circumstances in which they are made, not misleading.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1. Organization and Standing of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Nevis.
5.2. Authorization and Enforceability. Buyer has all requisite corporate
power and authority to enter into this Agreement and the Related Documents to
which it is a party and to carry out the transactions contemplated hereby and
thereby and to perform its obligations hereunder and thereunder. All necessary
and appropriate action has been taken by Buyer with respect to the execution and
delivery of this Agreement and each of the Related Documents and the performance
of its obligations hereunder and thereunder. The execution and delivery of this
Agreement and the Related Documents and the consummation of the contemplated
transactions by Buyer will not (a) result in the breach of any of the terms or
conditions of, or constitute a default under, the Buyer or (b) violate any Law
or any order, writ, injunction or decree of any Governmental Authority. This
Agreement and any Related Documents to which Buyer is a party constitute valid
and binding obligations of Buyer enforceable against Buyer in accordance with
their respective terms.
5.3. Approval. The Board of Directors of the Buyer has approved the
execution of this Agreement and the transactions contemplated thereby.
5.4. Brokers' Fees. Buyer has not incurred any liability for brokers'
fees, finders' fees, agents' commissions or other similar forms of compensation
in connection with this Agreement or the transactions contemplated hereby.
5.5. Full Disclosure. No representation or warranty by Buyer in this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained therein, in light of
the circumstances in which they are made, not misleading.
ARTICLE 6
CLOSING
6.1. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place upon satisfaction of the obligations
of Seller and Buyer below (the "Closing Date"), but in no event later than March
6, 1998.
6.2. Obligations of Seller. At or prior to the Closing, Seller shall
deliver to Buyer, in each case, in form and substance satisfactory to Buyer:
(a) Certificates representing the Tamaris Common Stock duly endorsed
with executed stock powers;
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(b) An executed Assignment of the Silk Note, MJZ Note, EPSOM
Investment and FIP Investment, attached hereto as Exhibit D;
(c) An executed Pledge Agreement, attached hereto as Exhibit B;
(d) An executed Security Agreement, attached hereto as Exhibit C;
and
(e) Such other instruments of transfer as shall be necessary or
appropriate to vest in the Buyer good and marketable title to the Assets.
6.3. Obligations of Buyer. At the Closing, Buyer shall deliver:
(a) $300,000 of the Cash Funds in accordance with Article 3 of this
Agreement;
(b) The Promissory Note in accordance with Article 3 of this
Agreement;
(c) An executed Pledge Agreement, attached hereto as Exhibit B; and
(d) An executed Security Agreement, attached hereto as Exhibit C.
6.4. Conditions Subsequent to Closing. Subsequent to Closing, however,
in no event later than March 9, 1998, Buyer shall deliver to the Seller the
remaining $400,000 of the Cash Funds.
6.5. Further Documents or Necessary Action. Buyer and Seller each agree
to take all such further actions on or after the Closing Date as may be
necessary, desirable or appropriate in order to confirm or effectuate the
transactions contemplated by this Agreement.
ARTICLE 7
INDEMNIFICATION AND RELATED MATTERS
7.1. Survival of Representations and Warranties. The representations and
warranties contained in this Agreement, the schedules and exhibits hereto, and
any agreement, document, instrument or certificate delivered hereunder,
including the Related Documents, shall survive the Closing Date. This Article 7
constitutes the sole and exclusive remedy of Buyer and Seller with respect to
any subject matter addressed herein, and Buyer and Seller hereby waive and
release the other from any and all claims and other causes of action, including
without limitation claims for contribution, relating to any such subject matter.
7.2. Indemnification by Seller.
(a) Seller agrees to indemnify Buyer against and hold it harmless
from:
(i) all liability, loss, damage or deficiency resulting from or
arising out of any inaccuracy in or breach of any representation or
warranty by Seller in this Agreement, in any Related Document to which
Seller was a signatory or in
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any other agreement or document delivered by or on behalf of Seller in
connection with the transactions contemplated by this Agreement;
(ii) all liability of Seller not expressly assumed by Buyer;
(iii) all liability, loss, damage or deficiency resulting from or
arising out of any breach or nonperformance of any obligation made or
incurred by Seller in this Agreement, in any Related Document to which
Seller was a signatory or in any other agreement or document delivered
by or on behalf of Seller in connection with the transactions
contemplated by this Agreement; and
(iv) any and all reasonable costs and expenses (including reasonable
legal and accounting fees) related to any of the foregoing. In the event
that Buyer makes a Claim which is determined by a court of competent
jurisdiction to be without reasonable basis in law or fact, Buyer shall
bear all reasonable costs and expenses (including court costs and
reasonable legal and accounting fees), incurred by Seller in
investigating and defending against such Claim.
7.3. Indemnification by Buyer. Buyer shall indemnify Seller against and
hold it harmless from:
(a) all liability, loss, damage or deficiency resulting from or
arising out of any inaccuracy in or breach of any representation or
warranty by Buyer in this Agreement in any Related Document or in any
other agreement or document delivered by or on behalf of Buyer in
connection with the transactions contemplated by this Agreement;
(b) all liability, loss, damage or deficiency resulting from or
arising out of any breach or nonperformance of any obligation made or
incurred by Buyer in this Agreement, in any Related Document, or in any
other agreement or document delivered by or on behalf of Buyer in
connection with the transactions contemplated by this Agreement; and
(c) any and all reasonable costs and expenses (including reasonable
legal and accounting fees) related to any of the foregoing. In the event
that Seller makes a Claim which is determined by a court of competent
jurisdiction to be without reasonable basis in law or fact, Seller shall
bear all reasonable costs and expenses (including court costs and
reasonable legal and accounting fees), incurred by Buyer in
investigating and defending against such Claim.
ARTICLE 8
GENERAL
8.1. Entire Agreement. This Agreement, and the exhibits and schedules
hereto (including the Disclosure Schedule), and the agreements specifically
referred to herein set forth the entire agreement and understanding of Seller
and Buyer in respect of the transactions contemplated hereby and supersede all
prior agreements, arrangements and understandings relating to the subject matter
hereof. No representation, promise, inducement or statement of intention has
been made by Seller or Buyer that is not embodied in this Agreement or in the
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documents specifically referred to herein and neither Seller nor Buyer shall not
be bound by or liable for any alleged representation, promise, inducement or
statement of intention not so set forth.
8.2. Binding Effect; Benefits; Assignment. All of the terms of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
and against Seller and its successors and authorized assigns, and Buyer and its
successors and authorized assigns. Nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies
under or by reason of this Agreement except as expressly indicated herein.
Neither Seller nor Buyer shall assign any of their respective rights or
obligations under this Agreement to any other person, firm or corporation
without the prior written consent of the other party, except that Buyer may
assign its rights and obligations under this Agreement to a direct or indirect
wholly-owned subsidiary of Buyer, although Buyer shall remain fully responsible
for all of its obligations under this Agreement.
8.3. Construction. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and shall in no
way restrict or otherwise modify any of the terms or provisions hereof. The
language used in this Agreement shall be deemed to be the language chosen by the
parties to this Agreement to express their mutual intent, and no rule of strict
construction shall be applied against any party.
8.4. Amendment and Waiver. This Agreement may be amended, modified,
superseded or canceled and any of the terms, representations, warranties or
conditions hereof may be waived only by a written instrument executed by Seller
and Buyer or, in the case of a waiver, by or on behalf of the party waiving
compliance.
8.5. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Bermuda as applicable to contracts made and to be
performed in Bermuda, without regard to conflict of laws principles.
8.6. Public Disclosure. Except as required by Law, or in connection with
the solicitation of new investment advisory agreements with Seller's clients,
neither Buyer nor Seller shall make any public disclosure of the existence or
terms of this Agreement or the transactions contemplated hereby without the
prior written consent of the other party, which consent shall not be
unreasonably withheld. In the event that Seller or Buyer determines that the
disclosure of the existence or terms of this Agreement is required by Law, such
party shall so notify the other parties and shall provide to the other party a
copy of any such public disclosure prior to releasing the same.
8.7. Notices. All notices, requests, demands and other communications to
be given pursuant to the terms of this Agreement shall be in writing and shall
be deemed to have been duly given if hand delivered, sent by overnight mail by a
nationally recognized overnight delivery service or mailed first class, postage
prepaid:
(a) If to Seller:
Graham Lacey, President
VDC Corporation Ltd.
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c/o Stephen M. Cohen, Esq.
Buchanan Ingersoll, P.C.
11 Penn Center, 14th Floor
Telephone: (215) 665-3873
Telecopier: (215) 665-8760
(b) If to Buyer:
R.A. Leopard, President
Tasmin Limited
---------------------------
---------------------------
---------------------------
Telephone: ________________
Telecopier: _______________
Either party may change its address by prior written notice to the other party.
8.8. Counterparts. This Agreement may be executed in counterparts, each
of which when so executed shall be deemed to be an original and such
counterparts shall together constitute one and the same instrument.
8.9. Expenses. Each party shall pay their own respective expenses, costs
and fees incurred in connection with the negotiation, preparation, execution and
delivery of this Agreement and each of the Related Documents and the
consummation of the transactions contemplated hereby, including, without
limitation, the fees and expenses of their respective legal counsel, accountants
and financial advisors.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
VDC CORPORATION LTD.
By: /s/ Graham Lacey
------------------
Graham Lacey
President
TASMIN LIMITED
By: /s/ R. A. Leopard
------------------
R. A. Leopard
President
11
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PROMISSORY NOTE
$ 800,000.00 February 10, 1998
FOR VALUE RECEIVED, TASMIN LIMITED., a Nevis Corporation (the "Maker"),
promises to pay to the order of VDC CORPORATION LTD., a Bermuda corporation (the
"Payee") the amount of Eight Hundred Thousand Dollars ($800,000.00) in
accordance with the terms hereof.
The Maker shall pay interest on any unpaid principal balance hereof from
time to time as may be outstanding from the date hereof which shall accrue at
the rate of eight percent (8%) per annum (the "Interest Rate"). Any amounts
outstanding under this Note, together with all interest accrued thereon and any
penalties due hereunder, shall be payable in lawful money of the United States
at Payee's principal offices at 44 Church Street, Hamilton, Bermuda or at such
other place or places as Payee shall designate, as follows:
(i) One Hundred Fifty Thousand Dollars ($150,000) shall be payable on
June 30, 1998;
(ii) One Hundred Fifty Thousand Dollars ($150,000) shall be payable on
February 28, 1999; and
(iii) Five Hundred Thousand Dollars ($500,000) shall be payable on
September 30, 1999.
Maker is obligated to make the payments on the above specified due dates
in accordance with the terms of this Note without defalcation or setoff and
without notice or demand, and the failure to receive any notice or demand from
Payee shall not be a defense to, or excuse for, the failure to make such payment
on the due date. Payment under this Note and performance of the terms hereunder
shall be secured, pursuant to a Security Agreement between Maker and Payee,
dated of even date herewith, by those assets subject to the Asset Purchase
Agreement between Maker and Payee, which assets shall be pledged to Payee
pursuant to a Pledge Agreement, dated of even date herewith, to secure the
Maker's obligations under this Note.
Maker shall be in default hereunder upon the occurrence of any of the
following events (an "Event of Default"): (i) the failure to make payment when
due; (ii) the failure of Maker to observe or perform or cause to be observed or
performed any agreement, condition or obligation on Maker's part to be performed
hereunder; (iii) the institution by or against Maker of any bankruptcy,
insolvency, arrangement, debt adjustment or receivership, proceeding which, if
an involuntary bankruptcy petition, remains undismissed for thirty (30) days
after the filing thereof; (iv) the adjudication of Maker as a bankrupt or the
appointment of a trustee or receiver for all or any part of Maker's property;
(v) the making by Maker of an assignment for the benefit of creditors; (vi) the
admission, in writing, by Maker of an inability to pay its debts as they become
due.
<PAGE>
Upon the occurrence of any Event of Default, the entire amount
outstanding under this Note shall, at the option of Payee, become immediately
due and payable without presentment, demand or further action of any kind, and
one or more executions may forthwith issue on any judgment or judgments obtained
by virtue of any provision of this Note or otherwise obtained.
The rights and remedies provided herein shall be cumulative and
concurrent and shall not be exclusive of any right or remedy provided by law, in
equity or otherwise. Said rights and remedies may, at the sole discretion of
Payee, be pursued singly, successively or together as often as occasion therefor
shall arise, against Maker. No failure on the part of Payee to exercise any of
such rights or remedies shall be deemed a waiver of any such rights or remedies
or of any Event of Default hereunder.
Upon the occurrence of a default or an Event of Default, Payee shall
have the right, but not the duty, to cure such default or Event of Default, in
part or in its entirety, and all amounts expended or debts incurred by Payee,
including reasonable attorneys' fees, shall be deemed to be advances to Maker,
shall be added to the amount due under this Note, shall be secured by the
security for this Note, if any, and shall be payable by Maker to Payee upon
demand.
THE FOLLOWING SECTION SETS FORTH WARRANTS OF ATTORNEY FOR ANY ATTORNEY
TO CONFESS JUDGMENTS AGAINST MAKER. IN GRANTING THESE WARRANTS OF ATTORNEY TO
CONFESS JUDGMENTS AGAINST MAKER, MAKER HEREBY KNOWINGLY, INTENTIONALLY,
VOLUNTARILY, AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS MAKER MAY HAVE TO
PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS
AND LAWS OF BERMUDA. WITHOUT LIMITATION OF THE FOREGOING, MAKER HEREBY
SPECIFICALLY WAIVES ALL RIGHTS MAKER HAS OR MAY HAVE TO NOTICE AND AN
OPPORTUNITY FOR A HEARING PRIOR TO EXECUTION UPON ANY JUDGMENT ENTERED AGAINST
MAKER PURSUANT TO THE TERMS HEREOF.
UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, MAKER DOES HEREBY
IRREVOCABLY AUTHORIZE AND EMPOWER ANY ATTORNEY OR THE PROTHONOTARY OF ANY COURT
OF RECORD OF BERMUDA OR ELSEWHERE TO APPEAR FOR MAKER IN ANY SUCH COURT, AND
WITH OR WITHOUT A COMPLAINT OR DECLARATION FILED, IN AN APPROPRIATE ACTION
BROUGHT AGAINST MAKER ON THIS NOTE, TO ENTER AND CONFESS JUDGMENT AGAINST MAKER
IN FAVOR OF PAYEE OR ITS SUCCESSORS AND ASSIGNS, FOR THE ENTIRE AMOUNT DUE TO
PAYEE UPON SUCH EVENT OF DEFAULT AS PROVIDED HEREIN, TOGETHER WITH COSTS OF SUIT
AND REASONABLE ATTORNEYS' FEES NOT TO EXCEED ONE THOUSAND DOLLARS ($1,000.00);
AND FOR SO DOING THIS NOTE OR A COPY HEREOF VERIFIED BY AFFIDAVIT SHALL BE A
SUFFICIENT WARRANT. THE AUTHORITY HEREIN
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GRANTED TO APPEAR, ENTER AND CONFESS JUDGMENT SHALL NOT BE EXHAUSTED BY ANY ONE
OR MORE EXERCISE THEREOF OR BY ANY DEFECTIVE EXERCISE THEREOF, BUT SHALL
CONTINUE AND BE EXERCISABLE FROM TIME TO TIME UNTIL THE FULL PAYMENT OF ALL
AMOUNTS DUE FROM MAKER TO PAYEE HEREUNDER IS MADE.
MAKER ACKNOWLEDGES THAT IT HAS HAD THE ASSISTANCE OF LEGAL COUNSEL IN
THE REVIEW AND EXECUTION OF THIS NOTE AND FURTHER ACKNOWLEDGES THAT THE MEANING
AND EFFECT OF THE FOREGOING PROVISIONS CONCERNING CONFESSION OF JUDGMENT HAVE
BEEN FULLY EXPLAINED TO MAKER BY SUCH COUNSEL, OR, IN THE ALTERNATIVE, MAKER
HEREBY WAIVES THE ASSISTANCE OF LEGAL COUNSEL IN THE REVIEW AND EXECUTION OF
THIS NOTE, AND AS EVIDENCE OF SUCH FACT, AS THE CASE MAY BE, SIGNS HIS/HER
INITIALS.
- ------------------- -------------------
(initials of Maker) (initials of Maker)
Maker hereby waives the benefit of any laws now or hereafter enacted
providing for any stay of execution, marshalling of assets, exemption from civil
process, redemption, extension of time for payment, or valuation or appraisement
of all or any part of any security for this Note, exempting all or any part of
any other security for this Note or any other property of Maker from attachment,
levy or sale upon any such execution or conflicting with any provision of this
Note. Maker waives and releases Payee and said attorney or attorneys from all
errors, defects and imperfections whatsoever in confessing any such judgment or
in any proceedings relating thereto or instituted by Payee hereunder. Maker
hereby agrees that any property that may be levied upon pursuant to a judgment
obtained under this Note may be sold upon any execution thereon in whole or in
part, and in any manner and order that Payee, in its sole discretion may elect.
The Maker and all other endorsers, sureties and guarantors hereby
jointly and severally waive presentment and demand for payment, notice of
demand, notice of default, notice of dishonor, protest and notice of protest of
this Note, and all other notices in connection with the delivery, acceptance,
performance, default or enforcement of the payment of this Note, and also waive
notice of the exercise of any options on the part of Payee hereunder.
The granting, with or without notice, of any extension or extensions of
time for payment of any sum or sums due hereunder, or for the performance of any
covenant, provision, condition or agreement contained herein or therein, or the
granting of any other indulgence, or the taking or releasing or subordinating of
any security for the indebtedness evidenced hereby, or any other modification or
amendment of this Note will in no way release or discharge the liability of
Maker whether or not granted or done with the knowledge or consent of Maker.
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Payee shall not be deemed, by any act of omission or commission, to have
waived any of its rights or remedies hereunder, at law or in equity, unless such
waiver is in writing and signed by Payee, and then only to the extent
specifically set forth in the writing. A waiver as to one event shall not be
construed as continuing or as a bar to or waiver of any right or remedy as to a
subsequent event.
In the event any portion of this Note shall be declared by any court of
competent jurisdiction to be invalid or unenforceable, such portion shall be
deemed severable from this Note, and the remaining parts hereof shall remain in
full force and effect, as fully as though such invalid or unenforceable portion
was never part of this Note.
The obligations of Maker hereunder shall be binding on the heirs,
representatives, successors and assigns of Maker and the benefits of this Note
shall inure to Payee, and its heirs, representatives, successors and assigns and
to any holder of this Note.
The outstanding balance due under this Note may be prepaid, in the
aggregate during the term of this Note, in whole or in part, without penalty or
premium. No partial prepayment shall postpone or interrupt payments of the
remaining balance, all of which shall continue to be due and payable at the time
and in the manner set forth above.
All notices and other communications required or given under this Note
shall be in writing and shall be sent by U.S. certified mail, return receipt
requested, or by a nationally recognized overnight courier service, addressed to
Payee or to Maker at their respective addresses as set forth in the Asset
Purchase Agreement between Maker and Payee.
This Note, and all issues arising hereunder, shall be governed by and
construed according to the laws of Bermuda.
IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has
caused this Promissory Note to be duly executed as of the 10th day of February,
1998.
TASMIN LIMITED
By: /s/ R. A. Leopard
----------------------------
R. A. Leopard, President
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PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the "Agreement"), dated February 10, 1998, is
made and entered into by and between TASMIN LIMITED, a Nevis corporation (the
"Debtor") and VDC CORPORATION LTD., (the "Secured Party") under that certain
Asset Purchase Agreement dated February 10, 1998 (as it may hereafter from time
to time be restated, amended, modified or supplemented, the "Purchase
Agreement") by and between the Debtor and the Secured Party.
WHEREAS, pursuant to the Purchase Agreement, the Secured Party agreed to
sell certain of its assets to Debtor which purchase price included a Promissory
Note in the aggregate amount of $800,000; and
WHEREAS, as security for payment under the Promissory Note, and as
required by the Purchase Agreement, the Assets (as such term is defined in the
Purchase Agreement) shall be pledged to the Secured Party in accordance
herewith.
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. Defined Terms.
(a) Except as otherwise expressly provided herein, capitalized terms
used in this Agreement shall have the respective meanings assigned to them in
the Purchase Agreement. Where applicable and except as otherwise expressly
provided herein, terms used herein (whether or not capitalized) shall have the
respective meanings assigned to them in the Uniform Commercial Code as enacted
in each applicable jurisdiction and as may be amended from time to time (the
"Code").
(b) "Pledged Collateral" shall mean and include the following: (i)
the property listed on Schedule A attached hereto and made a part hereof, and
all rights and privileges pertaining thereto, including, without limitation, all
securities and additional securities receivable in respect of or in exchange for
such securities, all rights to subscribe for securities incident to or arising
from ownership of such securities, all cash, interest, stock and other dividends
or distributions paid or payable on such securities, and all books and records
pertaining to the foregoing, including, without limitation, all stock record and
transfer books, (ii) any and all other securities hereafter pledged to the
Secured Party to secure the Secured Obligations (as hereinafter defined) of
Debtor, and all rights and privileges pertaining thereto, including, without
limitation, all securities and additional securities receivable in respect of or
in exchange for such securities, all rights to subscribe for securities incident
to or arising from ownership of such securities, all cash, interest, stock and
other dividends or distributions paid or payable on such securities, and all
books and records pertaining to the foregoing, including, without limitation,
all stock record and stock transfer books and (iii) whatever is received when
any of the foregoing is
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sold, exchanged or otherwise disposed of, including any proceeds as such term is
defined in the Code.
2. Grant of Security Interests.
(a) Debtor, to secure on a first priority basis, the payment and
performance of all of its indebtedness and other obligations of every nature it
owes under the Purchase Agreement, the Promissory Note and all of the Other
Documents (the "Secured Obligations"), hereby grants to the Secured Party a
security interest in all of Debtor's now existing and hereafter acquired and/or
arising right, title and interest in, to and under the Pledged Collateral,
whether now or hereafter existing and wherever located.
(b) Upon the execution and delivery of this Agreement, Debtor has
delivered to and deposited with the Secured Party in pledge, stock certificates
and any other instruments evidencing the Pledged Collateral, together with
undated stock powers signed in blank by Debtor.
3. Further Assurances.
Prior to or concurrently with the execution of this Agreement, and
thereafter at any time and from time to time upon reasonable request of the
Secured Party, Debtor shall execute and deliver to the Secured Party all
financing statements, continuation financing statements, termination statements,
assignments, certificates and documents of title, affidavits, reports, notices,
schedules of account, letters of authority, further pledges, powers of attorney
and all other documents (collectively, the "Security Documents") which the
Secured Party may reasonably request, in form reasonably satisfactory to the
Secured Party, and take such other action which the Secured Party may request,
to perfect and continue perfected and to create and maintain the first priority
status of the Secured Party's security interest in (subject only to Permitted
Liens) the Pledged Collateral and to fully consummate the transactions
contemplated under the Purchase Agreement, the Promissory Note and this
Agreement. Debtor hereby irrevocably makes, constitutes and appoints the Secured
Party (and any of the Secured Party's officers or employees or agents designated
by the Secured Party) as Debtor's true and lawful attorney with power to sign
the name of Debtor on all or any of the Security Documents which the Secured
Party reasonably determines must be executed, filed, recorded or sent in order
to perfect or continue perfected the Secured Party's security interest in the
Pledged Collateral in the event Debtor fails to so execute such documents upon
Secured Party's request. Such power, being coupled with an interest, is
irrevocable until all of the Secured Obligations have been indefeasibly paid in
full and have terminated.
4. Representations and Warranties.
In addition to the representations and warranties of Debtor set forth in
the Purchase Agreement which are incorporated herein by reference, Debtor hereby
represents and warrants to the Secured Party as follows:
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(a) Debtor has, and will continue to have (or, in the case of
after-acquired Pledged Collateral, at the time Debtor acquires rights in such
Pledged Collateral, will have), title to the Pledged Collateral, free and clear
of all Liens.
(b) The shares of common stock of Tamaris PLC, constituting, in
part, the Pledged Collateral have been duly authorized and validly issued to the
Debtor, and constitute all of the shares of common stock of Tamaris PLC owned by
the Debtor.
(c) The security interests in the Pledged Collateral granted
hereunder are valid, perfected and of first priority.
(d) There are no restrictions upon the transfer of the Pledged
Collateral and Debtor has the power and authority and right to transfer the
Pledged Collateral free of any encumbrances and without obtaining the consent of
any other person. It is acknowledged that a transfer of the Pledged Collateral
by Secured Party following a foreclosure may require compliance with federal and
state securities laws.
(e) Debtor has all necessary power to execute, deliver and perform
this Agreement and all necessary action to authorize the execution, delivery and
performance of this Agreement has been properly taken.
(f) There are no actions, suits, or proceedings pending or, to
Debtor's best knowledge after due inquiry, threatened against or affecting
Debtor with respect to the Pledged Collateral, at law or in equity or before or
by any commission, board, bureau, agency, department or instrumentality, and
Debtor is not in default with respect to any judgment, writ, injunction, decree,
rule or regulation which would adversely affect Debtor's performance hereunder.
(g) This Agreement has been duly executed and delivered and
constitutes the valid and legally binding obligation of Debtor, enforceable in
accordance with its terms, except to the extent that enforceability of this
Agreement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforceability of creditors'
rights generally or limiting the right of specific performance or by general
equitable principles.
(h) Neither the execution and delivery by Debtor of this Agreement,
nor the compliance with the terms and provisions hereof, will violate any
provision of the articles or certificates of incorporation or similar
organizational documents, bylaws or partnership agreement of Debtor or any law
or conflict with or result in a breach of any of the terms, conditions or
provisions of any judgment, order, injunction, decree or ruling of any court or
arbitration tribunal or any governmental authority to which Debtor is subject or
any provision of any material agreement, understanding or arrangement to which
Debtor is a party or by which Debtor is bound.
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(i) Debtor's principal place of business and chief executive office
is as set forth on the signature page hereto.
5. General Covenants.
In addition to any covenants and agreements of Debtor set forth in the
Purchase Agreement, the Promissory Note and Other Documents, which are
incorporated herein by this reference, Debtor hereby covenants and agrees as
follows:
(a) Debtor shall do all reasonable acts that may be necessary and
appropriate to maintain, preserve and protect the Pledged Collateral; Debtor
shall be responsible for the risk of loss of, damage to, or destruction of the
Pledged Collateral owned by Debtor, unless such loss is the result of the gross
negligence or willful misconduct of the Secured Party. Debtor shall notify the
Secured Party in writing ten (10) days prior to any change in either the address
and location of Debtor's chief executive office or the address and location of
Debtor's principal place of business.
(b) Debtor shall pay promptly when due all taxes, assessments,
charges and obligations secured by encumbrances and liens now or hereafter
imposed upon or affecting any of the Pledged Collateral, except as otherwise
expressly permitted under the Purchase Agreement.
(c) Debtor shall appear in and defend any action or proceeding of
which Debtor is aware which could reasonably be expected to affect Debtor's
title to, or the Secured Party's interest in, the Pledged Collateral owned by
Debtor and the proceeds thereof; provided, however, that Debtor may settle such
actions or proceedings with respect to the Pledged Collateral Debtor owns with
the consent of the Secured Party, which consent shall not be unreasonably
withheld or delayed.
(d) Debtor shall keep separate, accurate and complete records of the
Pledged Collateral owned by Debtor, disclosing the Secured Party's security
interest hereunder.
(e) Debtor shall permit the Secured Party, its officers, employees
and agents at reasonable times and on reasonable prior notice to inspect all
books and records related to the Pledged Collateral.
(f) During the term of this Agreement, Debtor shall not sell,
assign, transfer, pledge, grant a security interest, place a lien on or
otherwise dispose of the Pledged Collateral except as permitted under the
Purchase Agreement.
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6. Other Rights With Respect to Pledged Collateral.
In addition to the other rights with respect to the Pledged Collateral
granted to the Secured Party hereunder, at any time and from time to time, after
and during the continuation of an Event of Default, the Secured Party at its
option and at the expense of Debtor, may (a) transfer into its own name, or into
the name of its nominee, all or any part of the Pledged Collateral, thereafter
receiving all dividends, income or other distributions upon the Pledged
Collateral; (b) take control of and manage all or any of the Pledged Collateral;
(c) apply to the payment of any of the Secured Obligations, whether any be due
and payable or not, any moneys, including cash dividends and income from any
Pledged Collateral, now or hereafter in the hands of the Secured Party or any
Affiliate of the Secured Party, on deposit or otherwise, belonging to Debtor, as
the Secured Party, in its sole discretion, shall determine; and (d) do anything
which Debtor is required but fails to do hereunder. The proceeds of any
collection, sale or other disposition of the Pledged Collateral of Debtor, or
any part thereof, shall, after the Secured Party has made all deductions of
expenses, including but not limited to reasonable attorneys' fees and other
expenses incurred in connection with repossession, collection, sale or
disposition of such Pledged Collateral or in connection with the enforcement of
the Secured Party's rights with respect to the Pledged Collateral in any
insolvency, bankruptcy or reorganization proceedings, be applied against the
Secured Obligations, whether or not all the same be then due and payable, in
such manner and order as set forth in the Purchase Agreement and Promissory
Note.
7. Additional Remedies Upon Event of Default.
Upon the occurrence of any Event of Default and while such Event of
Default shall be continuing, the Secured Party shall have, in addition to all
rights and remedies of a secured party under the Code or other applicable Law,
and in addition to its rights under Section 6 above and under the Purchase
Agreement, the Promissory Note and the Other Documents, the following rights and
remedies:
(a) The Secured Party may, after ten (10) days' advance notice to
Debtor, sell, assign, give an option or options to purchase or otherwise dispose
of the Pledged Collateral or any part thereof at public or private sale, at any
of the Secured Party's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Secured Party may deem commercially
reasonable. Debtor agrees that ten (10) days' advance notice of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Secured Party shall not be
obligated to make any sale of Pledged Collateral regardless of notice of sale
having been given. The Secured Party may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Debtor recognizes that the Secured Party may be compelled to resort
to one or more private sales of the Pledged Collateral to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire such
securities for its own account for investment and not with a view to the
distribution or resale thereof. Debtor acknowledges and agrees that any such
private sale may result in prices and other terms less favorable than if such
sale were a public sale and, notwithstanding such circumstances, agrees that any
such private sale
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shall be deemed to have been made in a commercially reasonable manner. The
Secured Party shall be under no obligation to delay sale of any of the Pledged
Collateral for the period of time necessary to permit Debtor to register such
securities for public sale under the Securities Act of 1933, as amended, or
under applicable state securities laws, even if Debtor would agree to do so.
(b) The proceeds of any collection, sale or other disposition of the
Pledged Collateral of Debtor, or any part thereof, shall, after the Secured
Party has made all deductions of expenses, including but not limited to
reasonable attorneys' fees and other expenses incurred in connection with
repossession, collection, sale or disposition of such Pledged Collateral or in
connection with the enforcement of the Secured Party's rights with respect to
the Pledged Collateral in any insolvency, bankruptcy or reorganization
proceedings, be applied against the Secured Obligations, whether or not all the
same be then due and payable, in such manner and order as set forth in the
Purchase Agreement.
8. Secured Party's Duties.
The powers conferred on the Secured Party hereunder are solely to
protect its interest in the Pledged Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the safe custody of any Pledged
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Secured Party shall have no duty as to any Pledged Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Pledged Collateral.
9. No Waiver; Cumulative Remedies.
No failure to exercise, and no delay in exercising, on the part of the
Secured Party, any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any further exercise thereof or the exercise of any
other right, power or privilege. The remedies herein provided are cumulative and
not exclusive of any remedies provided under the Purchase Agreement, the
Promissory Note, and the Other Documents or by Law. Debtor waives any right to
require the Secured Party to proceed against any other person or to exhaust any
of the Pledged Collateral or other security for the Secured Obligations or to
pursue any remedy in the Secured Party's power.
10. Assignment.
All rights of the Secured Party under this Agreement shall inure to the
benefit of its successors and assigns. All obligations of Debtor shall bind its
successors and assigns; provided, however, Debtor may not assign or transfer any
of its rights and obligations hereunder or any interest herein.
11. Severability.
Any provision of this Agreement which shall be held invalid or
unenforceable shall be ineffective without invalidating the remaining provisions
hereof.
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12. Governing Law and Jurisdiction.
This Agreement shall be construed in accordance with and governed by the
internal laws of Bermuda without regard to its conflicts of law principles,
except to the extent the validity or perfection of the security interests or the
remedies hereunder in respect of any Pledged Collateral are governed by the law
of a jurisdiction other than Bermuda. The Debtor hereby irrevocably consents to
the exclusive jurisdiction of the courts of Bermuda for the resolution of all
claims, disputes and controversies arising hereunder.
13. Notices.
Debtor agrees that all notices, statements, requests, demands and other
communications under this Agreement shall be given to each of the parties at the
address set forth below their names and the manner provided in Section 12 of the
Purchase Agreement.
14. Specific Performance.
Debtor acknowledges and agrees that, in addition to the other rights of
the Secured Party hereunder and under the Purchase Agreement and Promissory Note
because the Secured Party's remedies at law for failure of Debtor to comply with
the provisions hereof relating to the Secured Party's rights (i) to inspect the
books and records related to the Pledged Collateral, (ii) to receive the various
notifications Debtor is required to deliver hereunder, (iii) to obtain copies of
agreements and documents as provided herein with respect to the Pledged
Collateral, (iv) to enforce the provisions hereof pursuant to which Debtor has
appointed the Secured Party its attorney-in-fact, and (v) to enforce the Secured
Party's remedies hereunder, would be inadequate and that any such failure would
not be adequately compensable in damages, Debtor agrees that each such provision
hereof may be specifically enforced.
15. Dividends; Voting Rights in Respect of the Pledged Collateral.
So long as no Event of Default shall occur and be continuing under the
Purchase Agreement, Debtor may exercise any and all voting and other consensual
rights pertaining to the Pledged Collateral or any part thereof for any purpose
not inconsistent with the terms of this Agreement, the Purchase Agreement, the
Promissory Note or Other Documents; provided, however, that Debtor will not
exercise or will refrain from exercising any such right, as the case may be, if
such action would be inconsistent with the covenants and obligations of Debtor
under the Purchase Agreement and the Other Documents or would have a material
adverse effect on the value of any Pledged Collateral. So long as no Event of
Default has occurred and is continuing, any lawful dividends paid in cash to
Debtor in respect of the Pledged Collateral may be used or applied by Debtor for
any purpose permitted by the Purchase Agreement.
16. Entire Agreement; Amendments.
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreements
relating to a grant of a security interest in the Pledged Collateral by Debtor.
This Agreement may not be amended or supplemented except by a writing signed by
the Secured Party and Debtor.
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17. Counterparts.
This Agreement may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
18. Descriptive Headings.
The descriptive headings which are used in this Agreement are for the
convenience of the parties only and shall not affect the meaning of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SECURED PARTY:
VDC CORPORATION LTD.
By: /s/ Graham Lacey
---------------------------
Graham Lacey, President
DEBTOR:
TASMIN LIMITED
By: /s/ R.A. Leopard
---------------------------
R.A. Leopard, President
[SEAL]
Principal Place of Business:
Isle of Man
Chief Executive Office:
Isle of Man
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SCHEDULE A
TO
PLEDGE AGREEMENT
Description of Pledged Collateral
Type and Amount of Ownership
(i) 15,836,364 shares of common stock, par value $.01 per
share ("Tamaris Common Stock"), of Tamaris PLC ("Tamaris");
(ii) $167,842 Note due June 30, 1998 (the "Silk Note") owed by Silk
Securities to Secured Party;
(iii) Promissory Notes in the aggregate principal amount of $161,990
due June 30, 1998 (the "MJZ Note") owed by MJZ Securities Limited to Secured
Party;
(iv) Contractual advances to EPSOM Investment Services in the
aggregate amount of $119,264 (the "EPSOM Investment") which may be recovered by
the Secured Party for its participation in arbitration rights; and
(v) Investment in FIP Holdings, Ltd. in the aggregate amount of
$330,000 (the "FIP Investment").
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT is dated February 10, 1998 and is made between
Tasmin Limited, a Nevis corporation ("Grantor") and VDC Corporation Ltd.
("Secured Party") pursuant to the Purchase Agreement referred to below.
WITNESSETH THAT:
WHEREAS, pursuant to that certain Asset Purchase Agreement dated March
4, 1998 (as it may hereafter be amended or otherwise modified from time to time,
the "Purchase Agreement") between Grantor and the Secured Party, the Grantor has
agreed to purchase certain assets of Grantor, which purchase price for such
assets includes a Promissory Note in the aggregate amount of $800,000
("Promissory Note");
WHEREAS, the obligations of the Secured Party to pay the Promissory Note
pursuant to the Purchase Agreement are subject to the condition, among others,
that Grantor secure its obligations to the Secured Party under the Purchase
Agreement and Promissory Note by the grant of security interests in the
Collateral, as defined and more fully set forth herein; and
WHEREAS, Grantor is (or will be with respect to after-acquired property)
the legal and beneficial owner and holder of the Collateral (as defined in
Section 1 hereof), and has agreed to grant security interests in such Collateral
to the Secured Party on the terms and conditions set forth herein.
NOW, THEREFORE, intending to be legally bound hereby and for value
received, the parties hereto covenant and agree as follows:
1. Definitions. Terms which are defined in the Purchase Agreement and
not otherwise defined herein are used herein as defined therein. In addition to
the words and terms defined elsewhere in this Security Agreement, the following
words and terms shall have the following meanings, respectively, unless the
context otherwise clearly requires:
(a) "Code" shall mean the Uniform Commercial Code of each state as
enacted and in effect on the date hereof in each applicable jurisdiction, and as
the same may subsequently be amended from time to time.
(b) "Collateral" shall mean, all of Grantor's right, title and
interest in, to and under the following described property, whether now owned or
hereafter acquired (words and terms defined in the Code shall have the same
meanings when used herein):
(i) 15,836,364 shares of common stock, par value $.01 per share
("Tamaris Common Stock"), of Tamaris PLC ("Tamaris");
(ii) $167,842 Note due June 30, 1998 (the "Silk Note") owed by
Silk Securities to Secured Party;
<PAGE>
(iii) Promissory Notes in the aggregate principal amount of
$161,990 due June 30, 1998 (the "MJZ Note") owed by MJZ Securities Limited to
Secured Party;
(iv) Contractual advances to EPSOM Investment Services in the
aggregate amount of $119,264 (the "EPSOM Investment") which may be recovered by
the Secured Party for its participation in arbitration rights; and
(v) Investment in FIP Holdings, Ltd. in the aggregate amount of
$330,000 (the "FIP Investment").
The Tamaris Common Stock, the Silk Note, the MJZ Note, the EPSOM
Investment and the FIP Investment, collectively, shall be referred to as the
"Securities". The term "Collateral" as it applies to the Tamaris Common Stock
shall also include all rights and privileges pertaining thereto, including,
without limitation, all securities and additional securities receivable in
respect of or in exchange for such securities, all rights to subscribe for
securities incident to or arising from ownership of such securities, all cash,
interest, stock and other dividends or distributions paid or payable on such
securities, and all books and records pertaining to the foregoing, including,
without limitation, all stock record and transfer books, and whatever is
received when any of the foregoing is sold, exchanged or otherwise disposed of,
including any proceeds as such term is defined in the Code.
(c) "Secured Indebtedness" shall mean (i) all obligations, whether
of principal, interest, fees, expenses or otherwise, of Grantor to Secured
Party, whether now existing or hereafter incurred, under the Purchase Agreement,
Promissory Note or any of the Other Documents as any of the same may from time
to time be amended, modified or supplemented, together with any and all
extensions, renewals, refinancings or refundings thereof in whole or in part by
the Secured Party, (ii) all out-of-pocket costs, expenses and disbursements,
including reasonable attorneys' fees and legal expenses, incurred by the Secured
Party in the collection of any of the obligations referred to in subclause
1(c)(i) above; and (iii) any advances made, subsequent to an Event of Default,
by the Secured Party, for the reasonable maintenance, preservation, protection
or enforcement of, or realization upon, the Collateral, including advances for
taxes and the like and reasonable expenses incurred to sell or otherwise realize
on, or prepare for sale or other realization on, any of the Collateral.
2. Assignment and Grant of Security Interests. As security for the due
and punctual payment and performance of the Secured Indebtedness in full,
Grantor hereby agrees that the Secured Party shall have, and Grantor hereby
grants to and creates in favor of the Secured Party, for the benefit of the
Secured Party, to secure all of the Secured Indebtedness, a continuing first
priority security interest in and to Grantor's Collateral. Without limiting the
generality of Section 4 below, Grantor further agrees that with respect to each
item of Collateral as to which (i) the creation of valid and enforceable
security interests is not governed exclusively by the Code or (ii) the
perfection of valid and enforceable security interests therein under the Code
cannot be accomplished by the Secured Party taking possession thereof or by the
filing in appropriate locations of appropriate Code financing statements
executed by the Grantor, Grantor will at its expense execute and deliver to the
Secured Party such documents, agreements, notices,
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assignments and instruments and take such further actions as may be reasonably
requested by the Secured Party from time to time for the purpose of creating a
valid and perfected first priority lien on such item, enforceable against the
Grantor and all third parties to secure the Secured Indebtedness.
3. Representations and Warranties. Except as otherwise set forth in the
Purchase Agreement, Grantor represents, warrants and covenants to the Secured
Party that:
(a) Grantor is the legal and beneficial owner and holder of the
Collateral and Grantor has and will continue to have good and marketable title
to the Collateral which Grantor purports to own or which is reflected as owned
in its books and records.
(b) The Grantor has received value from the Secured Party for
Grantor's grant of security interests hereunder and, except for the security
interests granted to and created in favor of the Secured Party hereunder, all of
the Collateral is and will continue to be free and clear of all liens, except
the Permitted Lien.
(c) Grantor has full power to enter into, execute, deliver and carry
out this Security Agreement and to perform its obligations hereunder and all
such actions have been duly authorized by all necessary proceedings on its part.
This Security Agreement has been duly and validly executed and delivered by
Grantor. This Security Agreement constitutes the legal, valid and binding
obligations of Grantor, enforceable against it in accordance with its terms,
except to the extent that enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforceability of creditors' rights generally or limiting the right of specific
performance.
(d) Neither the execution and delivery of this Security Agreement
nor compliance with the terms and provisions hereof (i) will conflict with or
result in any breach of the terms and conditions of the articles of
incorporation, bylaws or equivalent documents of Grantor or of any law or of the
Termination Agreement or any material agreement or instrument to which Grantor
is a party or by which it is bound or to which it is subject, (ii) will
constitute a default under any of the documents referred to in clause 3(d)(i)
above or (iii) will result in the creation or enforcement of any lien (other
than the Permitted Lien) whatsoever upon any Collateral (now or hereafter
acquired) of Grantor.
4. Further Assurances. Grantor will, from time to time, at its expense,
faithfully preserve and protect the Secured Party's security interests in the
Collateral as continuing first priority perfected security interests, and will
do all such other acts and things and will, upon request therefor by the Secured
Party, execute, deliver, file and record all such other documents and
instruments, including financing statements, security agreements, pledges,
assignments, documents and powers of attorney with respect to the Collateral,
and pay all filing fees and taxes related thereto as the Secured Party in its
reasonable discretion may deem necessary or advisable from time to time in order
to preserve, perfect or protect any security interest granted or purported to be
granted hereby or to enable the Secured Party to exercise and enforce its rights
and remedies hereunder with respect to any of the Collateral. Without limiting
the generality of the foregoing, to the extent Article 9 of the Code does not
govern the creation and/or perfection
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of the security interests intended to be created hereunder, Grantor agrees to
execute and deliver such further documents and instruments and do such further
acts as the Secured Party may from time to time require.
5. Covenants. Grantor covenants and agrees that, (a) it will not sell,
assign or otherwise dispose of any portion of the Collateral; (b) it will obtain
and maintain sole and exclusive possession of its Collateral; (c) it will keep
materially accurate and complete books and records concerning the Collateral and
such other books and records as may be required under the Purchase Agreement;
(d) it will promptly furnish to the Secured Party such information and documents
relating to the Collateral as the Secured Party may reasonably request in order
to confirm the status of the Secured Party's security interests in such
Collateral; (e) it will not take or omit to take any actions, the taking or the
omission of which might result in a material adverse alteration or impairment of
the Collateral or in a violation of this Security Agreement; and (f) it will
execute and deliver to the Secured Party and record such supplements to this
Security Agreement and additional assignments as the Secured Party reasonably
may request to evidence and confirm the security interests herein contained.
6. Preservation of Security Interests. Grantor assumes full
responsibility for taking and hereby agrees to take any and all necessary steps
to preserve and defend the Secured Party's right, title and security interests
in and to the Collateral against the claims and demands of all persons. The
Secured Party shall be deemed to have exercised reasonable care in the custody
and preservation of the Collateral in the Secured Party's possession if, prior
to the existence of an Event of Default, the Secured Party takes such action for
that purpose as such Grantor shall reasonably request in writing, provided that
such requested action will not, in the judgment of the Secured Party, impair the
security interests in the Collateral created hereby or the Secured Party's
rights in, or the value of, such Collateral, and provided further that such
written request is received by the Secured Party in sufficient time to permit
the Secured Party to take the requested action.
7. Secured Party's Rights with Respect to the Collateral. At any time
and from time to time, whether or not an Event of Default shall have occurred,
and without notice to or consent of the Grantor, the Secured Party may, at its
option, do any or all of the following: (a) do anything which the Grantor is
required but fails to do hereunder, and in particular the Secured Party may, if
the Grantor fails to do so, (i) insure or take any reasonable steps to protect
the Collateral, (ii) pay any or all taxes, levies, expenses and costs arising
with respect to the Collateral, or (iii) pay any or all premiums payable on any
policy of insurance required to be obtained or maintained hereunder, and add any
amounts paid under this Section 7 to the principal amount of the Promissory
Note, and other liabilities of Grantor secured by this Security Agreement; (b)
inspect the Collateral at any reasonable time; and (c) pay any amounts the
Secured Party reasonably elects to pay or advance hereunder on account of
insurance, taxes or other costs, fees or charges arising in connection with the
Collateral, either directly to the payee(s) of such cost, fee or charge,
directly to the Grantor, or to such payee(s) and Grantor, jointly.
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8. Remedies on Default. If there shall have occurred and be continuing
an Event of Default under the terms of the Purchase Agreement, then the Secured
Party shall have such rights and remedies with respect to the Collateral or any
part thereof and the proceeds thereof as are provided by the Code and such other
rights and remedies with respect thereto which it may have at law or in equity
or under this Security Agreement, including to the extent not inconsistent with
the provisions of the Code or any other applicable Law, the right to take over
and collect the Collateral which consists of amounts owing to Grantor to the
extent not prohibited by applicable law. To this end, the Secured Party shall
have the right to (a) transfer all or any part of any of the Collateral into the
Secured Party's name or into the name of its nominee or nominees and thereafter
receive all cash, stock and other dividends or distributions paid or payable in
respect thereof, and otherwise act with respect thereto as the absolute owner
thereof; (b) notify the obligors on any of the Collateral, whether accounts or
otherwise, to make payment thereon directly to the Secured Party, whether or not
the Grantor was theretofore making collections thereon; (c) take control of and
manage the Collateral; (d) apply to the payment of the Secured Indebtedness,
whether it be due and payable or not, any moneys, including cash dividends and
income from the Collateral, now or hereafter in the hands of the Secured Party,
on deposit or otherwise, belonging to Grantor, in accordance with Section 9
hereof; (e) endorse the name of the Grantor upon any checks or other evidences
of payment or any document or instrument that may come into the possession of
the Secured Party as proceeds of or relating to such Grantor's Collateral; (f)
demand, sue for, collect, compromise and give acquittances for the Collateral;
(g) prosecute, defend or compromise any action, claim or proceeding with respect
to the Collateral; and (h) take such other action as the Secured Party may deem
appropriate, including extending or modifying the terms of payment of the
debtors of Grantor. In addition, upon the occurrence of an Event of Default but
subject to any restrictions set forth in the Termination Agreement, Grantor, at
the request of the Secured Party, shall assemble all or any portion of the
Grantor's Collateral at such locations as the Secured Party shall designate
which are reasonably convenient to Grantor, and the Secured Party may sell,
assign, give an option or options to purchase or otherwise dispose of all or any
part of the Collateral at any public or private sale at such place or places and
at such time or times and upon such terms, whether for cash or on credit, and in
such manner, as the Secured Party may determine, and apply the proceeds so
received in accordance with Section 9 hereof. Written notice of sale mailed by
certified mail, return receipt requested, to the Grantor, at least ten (10) days
prior to such sale shall be deemed reasonable notice.
In the event of a breach by Grantor in the performance of any of the
terms of this Security Agreement, the Secured Party may demand specific
performance of this Security Agreement and seek injunctive relief and may
exercise any other remedy, available at law or in equity, it being recognized
that the remedies of the Secured Party at law may not fully compensate the
Secured Party for the damages it may suffer in the event of a breach hereof.
9. Application of Proceeds. The proceeds of the Collateral shall be
applied in accordance with the terms of the Purchase Agreement. Grantor shall be
liable for any deficiency if the proceeds of any sale, assignment, giving of an
option or options to purchase or other disposition of the Collateral is
insufficient to pay all amounts to which the Secured Party is entitled.
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10. Attorneys-in-Fact. After an Event of Default the Grantor hereby
irrevocably appoints the Secured Party, its officers, employees and agents, or
any of them, as attorneys-in-fact, with full power of substitution, for Grantor
for the purpose of carrying out the provisions of this Security Agreement and
taking any action and executing, delivering, filing and recording any
instruments which the Secured Party may deem necessary or advisable to
accomplish the purposes hereof, which power of attorney being given for security
is coupled with an interest and irrevocable. The Grantor hereby ratifies and
confirms and agrees to ratify and confirm all action taken by the Secured Party,
its officers, employees or agents pursuant to the foregoing power of attorney.
11. Indemnity and Expenses.
(a) The Grantor unconditionally agrees to indemnify the Secured
Party from and against any and all claims, losses and liabilities arising out of
or resulting from this Security Agreement (including enforcement of this
Security Agreement), except claims, losses or liabilities resulting from the
gross negligence or willful misconduct of the Secured Party.
(b) The Grantor unconditionally agrees upon demand to pay to the
Secured Party the amount of any and all reasonable and necessary out-of-pocket
costs, expenses and disbursements, including fees and expenses of its counsel,
which the Secured Party may incur in connection with (i) the administration of
this Security Agreement, (ii) the custody, preservation, use or operation of, or
the sale of, collection from, or other realization upon, the Collateral, (iii)
the exercise or enforcement of any of the rights of the Secured Party hereunder
or (iv) the failure by the Grantor to perform or observe any of the provisions
hereof.
12. Security Interest Absolute; Waiver of Notices. All rights of the
Secured Party hereunder, all security interests hereunder, and all obligations
of the Grantor hereunder shall be absolute and unconditional, irrespective of:
(a) any lack of validity or enforceability of the Purchase Agreement, Promissory
Note or any of the Other Documents; (b) any change in the time, manner or place
or payment of, or in any other term of, all or any of the Secured Indebtedness
or any other amendment or waiver of or any consent to any departure from the
Purchase Agreement, Promissory Note or any of the Other Documents; (c) any
exchange, release or non-perfection of any other Collateral; or (d) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, any Grantor or any third party mortgagors, pledgors or grantors of
security interests. Grantor waives any and all notice with respect to acceptance
by the Secured Party of this Security Agreement, the provisions of the Purchase
Agreement, Promissory Note or any of the Other Documents or any other note,
instrument or agreement relating to the Secured Indebtedness, and any default in
connection with the Secured Indebtedness. Grantor waives any presentment,
demand, notice of dishonor or nonpayment, protest, notice of protest and any
other notice of any kind in connection with the Secured Indebtedness.
13. Termination. Upon payment in full of the Secured Indebtedness and
termination of the Purchase Agreement and Promissory Note, this Security
Agreement shall terminate and be of no further force and effect, and the Secured
Party, at the Grantor's expense, shall thereupon
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promptly return to Grantor the Collateral and such other documents delivered by
Grantor hereunder as may then be in the Secured Party's possession. Upon any
such termination, the Secured Party will, at the Grantor's expense, execute and
deliver to the Grantor such documents as that Grantor shall reasonably request
to evidence such termination.
14. Modifications, Amendments and Waivers. Any and all agreements
amending or changing any provision of this Security Agreement or the rights of
any of the Secured Party or the Grantor, and any and all waivers or consents to
Events of Default or other departures from the due performance of the Grantor
hereunder shall be made only pursuant to the provisions of the Purchase
Agreement.
15. No Implied Waivers; Cumulative Remedies. No course of dealing and no
failure or delay on the part of the Secured Party in exercising any right,
remedy, power or privilege hereunder shall operate as a waiver thereof or of any
other right, remedy, power or privilege of the Secured Party hereunder; and no
single or partial exercise of any such right, remedy, power or privilege shall
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights and remedies of the Secured Party
under this Security Agreement are cumulative and not exclusive of any rights or
remedies which it may otherwise have.
16. Notices. All notices, statements, requests, demands and other
communications given to or made upon the Grantor, the Secured Party in
accordance with the provisions of this Security Agreement shall be given or made
as provided in Section 12 of the Purchase Agreement.
17. Severability.
(a) Grantor agrees that the provisions of this Security Agreement
are severable, and in an action or proceeding involving any state or federal
bankruptcy, insolvency or other law affecting the rights of creditors generally:
(i) if any clause or provision shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof, in
such jurisdiction and shall not in any manner affect such clause or provision in
any other jurisdiction, or any other clause or provision in this Agreement in
any jurisdiction;
(ii) if this Security Agreement would be held or determined to
be void, invalid or unenforceable on account of the amount of the aggregate
liability of Grantor under this Security Agreement, then, notwithstanding any
other provision of this Security Agreement to the contrary, the aggregate amount
of such liability shall, without any further action by the Secured Party,
Grantor or any other person, be automatically limited and reduced to the highest
amount which is valid and enforceable as determined in such action or
proceeding.
(iii) If the grant of any security interest hereunder by Grantor
is held or determined to be void, invalid or unenforceable, in whole or in part,
such holding or
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determination shall not impair or affect the validity and enforceability of any
clause or provision not so held to be void, invalid or unenforceable.
18. Governing Law. This Security Agreement shall be deemed to be a
contract under the laws of Bermuda and for all purposes shall be governed by and
construed in accordance with such internal laws, without reference to its
conflicts of law principles, except as required by mandatory provisions of law
and except to the extent that the validity or perfection of security interests
hereunder, or remedies hereunder with respect to the Collateral, is governed by
the laws of a jurisdiction other than the law of Bermuda.
19. Successors and Assigns. This Security Agreement shall be freely
assignable and transferable by the Secured Party in connection with the
assignment or transfer of the Secured Indebtedness; provided, however, the
duties and obligations of the Grantor may not be delegated or transferred by the
Grantor, without the written consent of the Secured Party. The rights and
privileges of the Secured Party shall inure to their benefit and the benefit of
its respective successors and assigns (as permitted under the Purchase
Agreement) and the duties and obligations of the Grantor shall bind the Grantor
and its respective successors and assigns.
20. Counterparts. This Security Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed and delivered, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
21. Consent to Jurisdiction; Waiver of Jury Trial. The Grantor hereby
irrevocably consents to the exclusive jurisdiction of the courts of Bermuda and
waives personal service of any and all process upon it and consents that all
such service of process be made by certified or registered mail directed to the
Grantor at the addresses set forth or referred to in Section 16 hereof and
service so made shall be deemed to be completed upon actual receipt thereof. The
Grantor waives any objection to jurisdiction and venue of any action instituted
against it as provided herein and agrees not to assert any defense based on lack
of jurisdiction or venue, AND THE SECURED PARTY WAIVES TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING OR COUNTERCLAIM WITH RESPECT TO THIS SECURITY AGREEMENT
TO THE FULL EXTENT PERMITTED BY LAW.
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WITNESS the due execution hereof as of the day and year first above
written.
TASMIN LIMITED
By: /s/ R. A. Leopard
------------------------------
R. A. Leopard, President
VDC CORPORATION LTD.
By: /s/ Graham Lacey
------------------------------
Graham Lacey, President
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ASSIGNMENT
The undersigned (the "Assignor") hereby assigns all of its right, title
and interest in and to:
(i) 15,836,634 shares of common stock, par value $.01 per
share ("Tamaris Common Stock"), of Tamaris PLC ("Tamaris");
(ii) a $167,842 Note due June 30, 1998 (the "Silk Note")
owed by Silk Securities to Assignor;
(iii) the Promissory Notes in the aggregate principal amount
of $161,990 due June 30, 1998 (the "MJZ Note") owed by MJZ Securities Limited to
Assignor;
(iv) the Contractual advances to EPSOM Investment Services in
the aggregate amount of $119,264 (the "EPSOM Investment") which may be recovered
by the Assignor for its participation in arbitration rights; and
(v) the Investment in FIP Holdings, Ltd. in the aggregate
amount of $330,000 (the "FIP Investment")
to Tasmin Limited (the "Assignee").
This Assignment and any other documents delivered in connection herewith
and the rights and obligations of the parties hereto and thereto shall be for
all purposes governed by and construed and enforced in accordance with the
internal laws of Bermuda without giving effect to its conflicts of law
principles.
IN WITNESS WHEREOF, the parties, intending to be legally bound hereby,
have executed this Assignment as of the 10th day of February, 1998.
ATTEST: ASSIGNOR:
VDC CORPORATION LTD.
By: /s/ Graham Lacey
- ------------------------------ ---------------------------------
Title: Graham Lacey, President
ATTEST: ASSIGNEE:
TASMIN LIMITED
By: /s/ R. A. Leopard
- ------------------------------ ---------------------------------
Title: R. A. Leopard, President
PROMISSORY NOTE
$632,500.00 March 2, 1998
FOR VALUE RECEIVED, HPC CORPORATE SERVICES LIMITED (the "Maker"), promises
to pay to the order of VDC CORPORATION LTD., a Bermuda corporation (the
"Payee"), the amount of Six Hundred Thirty-Two Thousand Five Hundred Dollars
($632,500.00) in accordance with the terms hereof.
The Maker shall pay interest on any unpaid principal balance hereof from
time to time as may be outstanding from the date hereof which shall accrue at
the rate of eight percent (8%) per annum (the "Interest Rate"). The entire
principal amount of this Note, together with all interest accrued thereon and
any penalties due hereunder, shall be payable in lawful money of the United
States at Payee's principal offices at 44 Church Street, Hamilton, Bermuda or at
such other place or places as Payee shall designate, on the one year anniversary
of the date hereof.
Maker is obligated to make the payments as specified above in accordance
with the terms of this Note without defalcation or setoff and without notice or
demand, and the failure to receive any notice or demand from Payee shall not be
a defense to, or excuse for, the failure to make such payment on the due date.
Maker shall be in default hereunder upon the occurrence of any of the
following events (an "Event of Default"): (i) the failure to make payment when
due; (ii) the failure of Maker to observe or perform or cause to be observed or
performed any agreement, condition or obligation on Maker's part to be performed
hereunder; (iii) the institution by or against Maker of any bankruptcy,
insolvency, arrangement, debt adjustment or receivership, proceeding which, if
an involuntary bankruptcy petition, remains undismissed for thirty (30) days
after the filing thereof; (iv) the adjudication of Maker as a bankrupt or the
appointment of a trustee or receiver for all or any part of Maker's property;
(v) the making by Maker of an assignment for the benefit of creditors; (vi) the
admission, in writing, by Maker of an inability to pay its debts as they become
due.
Upon the occurrence of any Event of Default, the entire amount outstanding
under this Note shall, at the option of Payee, become immediately due and
payable without presentment, demand or further action of any kind, and one or
more executions may forthwith issue on any judgment or judgments obtained by
virtue of any provision of this Note or otherwise obtained.
The rights and remedies provided herein shall be cumulative and concurrent
and shall not be exclusive of any right or remedy provided by law, in equity or
otherwise. Said rights and remedies may, at the sole discretion of Payee, be
pursued singly, successively or together as often as occasion therefor shall
arise, against Maker. No failure on the part of Payee to exercise any of such
rights or remedies shall be deemed a waiver of any such rights or remedies or of
any Event of Default hereunder.
<PAGE>
Upon the occurrence of a default or an Event of Default, Payee shall have
the right, but not the duty, to cure such default or Event of Default, in part
or in its entirety, and all amounts expended or debts incurred by Payee,
including reasonable attorneys' fees, shall be deemed to be advances to Maker,
shall be added to the amount due under this Note, shall be secured by the
security for this Note, if any, and shall be payable by Maker to Payee upon
demand.
Maker hereby waives the benefit of any laws now or hereafter enacted
providing for any stay of execution, marshalling of assets, exemption from civil
process, redemption, extension of time for payment, or valuation or appraisement
of all or any part of any security for this Note, exempting all or any part of
any other security for this Note or any other property of Maker from attachment,
levy or sale upon any such execution or conflicting with any provision of this
Note. Maker waives and releases Payee and said attorney or attorneys from all
errors, defects and imperfections whatsoever in confessing any such judgment or
in any proceedings relating thereto or instituted by Payee hereunder. Maker
hereby agrees that any property that may be levied upon pursuant to a judgment
obtained under this Note may be sold upon any execution thereon in whole or in
part, and in any manner and order that Payee, in its sole discretion may elect.
The Maker and all other endorsers, sureties and guarantors hereby jointly
and severally waive presentment and demand for payment, notice of demand, notice
of default, notice of dishonor, protest and notice of protest of this Note, and
all other notices in connection with the delivery, acceptance, performance,
default or enforcement of the payment of this Note, and also waive notice of the
exercise of any options on the part of Payee hereunder.
The granting, with or without notice, of any extension or extensions of
time for payment of any sum or sums due hereunder, or for the performance of any
covenant, provision, condition or agreement contained herein or therein, or the
granting of any other indulgence, or the taking or releasing or subordinating of
any security for the indebtedness evidenced hereby, or any other modification or
amendment of this Note will in no way release or discharge the liability of
Maker whether or not granted or done with the knowledge or consent of Maker.
Payee shall not be deemed, by any act of omission or commission, to have
waived any of its rights or remedies hereunder, at law or in equity, unless such
waiver is in writing and signed by Payee, and then only to the extent
specifically set forth in the writing. A waiver as to one event shall not be
construed as continuing or as a bar to or waiver of any right or remedy as to a
subsequent event.
In the event any portion of this Note shall be declared by any court of
competent jurisdiction to be invalid or unenforceable, such portion shall be
deemed severable from this Note, and the remaining parts hereof shall remain in
full force and effect, as fully as though such invalid or unenforceable portion
was never part of this Note.
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The obligations of Maker hereunder shall be binding on the heirs,
representatives, successors and assigns of Maker and the benefits of this Note
shall inure to Payee, and its heirs, representatives, successors and assigns and
to any holder of this Note.
The outstanding balance due under this Note may be prepaid, in the
aggregate during the term of this Note, in whole or in part, without penalty or
premium. No partial prepayment shall postpone or interrupt payments of the
remaining balance, all of which shall continue to be due and payable at the time
and in the manner set forth above.
All notices and other communications required or given under this Note
shall be in writing and shall be sent by U.S. certified mail, return receipt
requested, or by a nationally recognized overnight courier service, addressed to
Payee or to Maker at their respective addresses as set forth in the Asset
Purchase Agreement between Maker and Payee.
This Note, and all issues arising hereunder, shall be governed by and
construed according to the laws of the Commonwealth of Bermuda without regard to
conflict of laws principles.
IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has caused
this Promissory Note to be duly executed as of the 2nd day of March, 1998.
HPC CORPORATE SERVICES LIMITED
/s/ Harold Chaffe
------------------------------
Name: Harold Chaffe
Title: Director
3
