As filed with the Securities and Exchange Commission on September 9, 1998
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
VDC COMMUNICATIONS, INC.*
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
_________ Delaware____________ ____________4812_____________ __________061510832__________
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
Incorporation or Organization) Classification Code Number)
</TABLE>
--------------
75 Holly Hill Lane
Greenwich, Connecticut 06830
____________________(203) 869-5100_____________________
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Frederick A. Moran
Chief Executive Officer
75 Holly Hill Lane
Greenwich, Connecticut 06830
________________ (203) 869-5100___________________
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
--------------
Copies of all communications, including all communications sent to the agent
for service, should be sent to:
Stephen M. Cohen, Esquire
Joseph P. Galda, Esquire
Buchanan Ingersoll Professional Corporation
Eleven Penn Center, 14th Floor
1835 Market Street
Philadelphia, PA 19103
(215) 665-8700
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: Upon
consummation of the Domestication Merger described herein and after the
Effective Date of this Registration Statement.
*The securities to be issued pursuant to this registration statement
represent securities of VDC Communications, Inc., a subsidiary of VDC
Corporation Ltd., a Bermuda company.
<PAGE>
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------- ------------------ ---------------------- ------------------------- ----------------
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Per Aggregate Offering Registration
Securities Being Registered Registered Unit (1) Price (1) Fee (1)
- ------------------------------- ------------------ ---------------------- ------------------------- ----------------
- ------------------------------- ------------------ ---------------------- ------------------------- ----------------
<S> <C> <C> <C> <C>
Common Stock (par value 11,787,441 shares $5.375 $63,357,495.37 $18,690.40
$0.0001 per share) (2)
- ------------------------------- ------------------ ---------------------- ------------------------- ----------------
- ------------------------------- ------------------ ---------------------- ------------------------- ----------------
Common Stock (par value 3,987,500 shares $5.375 $22,432,812.50 $ 6,322.67
$0.0001 per share) (3)
- ------------------------------- ------------------ ---------------------- ------------------------- ----------------
- ------------------------------- ------------------ ---------------------- ------------------------- ----------------
Common Stock (par value 4,500,000 shares $5.375 $24,187,500.00 $ 7,135.31
$0.0001 per share) (4)
- ------------------------------- ------------------ ---------------------- ------------------------- ----------------
- ------------------------------- ------------------ ---------------------- ------------------------- ================
Total 20,274,941 $108,977,807.80 $32,148.44
- ------------------------------- ------------------ ---------------------- ------------------------- ================
</TABLE>
(1) Estimated for the sole purpose of calculating the registration fee.
Pursuant to Rule 457(f)(1) under the Securities Act of 1933, as amended
(the " Securities Act"), the maximum offering price per share and the
maximum aggregate offering price is based upon the average of the high and
low sale price of the Common Shares (the "VDC Shares") of VDC Corporation
Ltd. ("VDC") to be cancelled in connection with the amalgamation and merger
(the "Domestication Merger") of VDC with and into its subsidiary, VDC
Communications, Inc., pursuant to which VDC Communications, Inc. will be
the surviving corporation ("VDC Communications").
(2) Represents the maximum number of shares of Common Stock, par value $0.0001
per share, of VDC Communications (the "Common Stock") to be issued to the
members of VDC in connection with the Domestication Merger.
(3) Represents the maximum number of shares of Common Stock issuable upon
conversion of the Series A Convertible Preferred Stock of VDC
Communications in connection with the Domestication Merger.
(4) Represents the maximum number of shares of Common Stock issuable upon
conversion of the Series B Convertible Preferred Stock of VDC
Communications in connection with the Domestication Merger.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the Registration Statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
[Letterhead of VDC Corporation Ltd.]
[_________________, 1998]
To the Members of VDC Corporation Ltd.:
I am pleased to invite you to attend a Special Meeting of the Members of
VDC Corporation Ltd. ("VDC") to be held on ___________ ______, 1998 at 10:00
a.m. (Bermuda time) at 44 Church Street, Hamilton HM FX Bermuda. The agenda for
the Special Meeting includes a proposal to change the Company's jurisdiction of
incorporation from Bermuda to the State of Delaware in the United States by
amalgamating and merging (the "Domestication Merger") with and into VDC's
subsidiary, VDC Communications, Inc. ("VDC Communications") pursuant to the
terms of an Agreement and Plan of Merger in the form included as an exhibit to
the attached Proxy Statement/Prospectus (the "Merger Agreement"). I encourage
you to read the enclosed Proxy Statement carefully for more details on the
proposal to be considered at the meeting.
In the material accompanying this letter, you will find a Notice of Special
Meeting of the Members of VDC, a Proxy Statement/Prospectus relating to, among
other things, the actions to be taken by the Members at the Special Meeting, and
a proxy card. The Proxy Statement/Prospectus more fully describes the
Domestication Merger and the Merger Agreement and serves as a Prospectus for the
shares of common stock of VDC Communications to be issued in connection with the
Domestication Merger. The Domestication Merger is being submitted for the sole
purpose of changing VDC's domicile and effecting related changes in corporate
governance and, except for the automatic conversion of VDC Communications'
already-outstanding shares of Preferred Stock, is not intended to have any
effect on any individual's ownership interest in VDC. If approved, each Member
will receive one share of common stock of VDC Communications for each common
share of VDC (other than dissenters' shares and authorized but unissued shares
of VDC) owned by him or her.
I am delighted that you have chosen to invest in VDC and hope that, whether
or not you plan to attend the Special Meeting, you will vote as soon as possible
by completing, signing and returning the enclosed proxy card in the envelope
provided. Your vote is important. Voting by written proxy will ensure your
representation at the special meeting if you do not attend in person.
Very truly yours,
/s/ Frederick A. Moran
-----------------------
Frederick A. Moran,
Chairman and Chief Executive Officer
<PAGE>
[Letterhead of VDC Communications, Inc.]
[_________________, 1998]
To the Stockholders of VDC Communications, Inc.:
I am pleased to invite you to attend a Special Meeting of the Stockholders
of VDC Communications, Inc. ("VDC Communications") to be held on ___________
______, 1998 at 10:00 a.m. (local time) at VDC Communications' offices, 75 Holly
Hill Lane, Greenwich, Connecticut 06830. The agenda for the Special Meeting
includes a proposal to merge (the "Domestication Merger") with VDC
Communications' parent, VDC Corporation Ltd., a Bermuda company ("VDC"), in
order to change VDC's jurisdiction of incorporation from Bermuda to the State of
Delaware in the United States and to provide for the automatic conversion of VDC
Communications' outstanding Series A and Series B Convertible Preferred Stock,
pursuant to the terms of an Agreement and Plan of Merger between VDC
Communications and VDC in the form attached as Exhibit A to the accompanying
Proxy Statement/Prospectus (the "Merger Agreement"). VDC Communications will be
the surviving entity of the Domestication Merger. I encourage you to read the
enclosed Proxy Statement carefully for more details on the proposal to be
considered at the meeting.
In the material accompanying this letter, you will find a Notice of Special
Meeting of the Stockholders of VDC Communications, a Proxy Statement/Prospectus
relating to, among other things, the actions to be taken by the VDC stockholders
at the Special Meeting, and a proxy card. The Proxy Statement/Prospectus more
fully describes the Domestication Merger and the Merger Agreement and serves as
a Prospectus for the shares of common stock of VDC Communications to be issued
in connection with the Domestication Merger. In connection with the
Domestication Merger, each outstanding common share of VDC (other than
dissenters' shares and authorized but unissued shares of VDC) will automatically
convert into one share of common stock of VDC Communications. The Domestication
Merger has been approved by VDC as the holder of 100% of the outstanding common
stock of VDC Communications. The holders of preferred stock of VDC
Communications are being asked to approve the Domestication Merger because it
will result in (1) the conversion of each share of Series A Convertible
Preferred Stock of VDC Communications into one share of common stock of VDC
Communications and (2) the conversion of each share of Series B Convertible
Preferred Stock of VDC Communications into one share of common stock of VDC
Communications.
I hope that, whether or not you plan to attend the Special Meeting, you
will vote as soon as possible by completing, signing and returning the enclosed
proxy card in the envelope provided. Your vote is important. Voting by written
proxy will ensure your representation at the special meeting if you do not
attend in person.
Very truly yours,
/s/ Frederick A. Moran
-----------------------
Frederick A. Moran,
President
<PAGE>
VDC CORPORATION LTD.
75 Holly Hill Lane
Greenwich, Connecticut 06830
NOTICE OF SPECIAL GENERAL MEETING OF MEMBERS - _________, 1998
To the Members:
A Special General Meeting of Members (the "Special Meeting") of VDC
Corporation Ltd., a Bermuda company ("VDC"), will be held at 44 Church Street,
Hamilton HM FX Bermuda, on ________, 1998 at 10:00 a.m. (Bermuda time), to
consider and vote upon a proposal to change VDC's jurisdiction of incorporation
from Bermuda to the State of Delaware in the United States by merging (the
"Domestication Merger") with and into the Company's subsidiary, VDC
Communications, Inc. ("VDC Communications"), pursuant to an Agreement and Plan
of Merger in the form attached as Exhibit A to the accompanying Proxy
Statement/Prospectus (the "Merger Agreement"). Since VDC Communications will be
the surviving entity of the Domestication Merger, the impact of the
Domestication Merger is that the current members of VDC will become stockholders
of a corporation governed by the laws of the State of Delaware, with a Board of
Directors divided into three different classes, with each class being elected at
different annual stockholder meetings.
The Merger Agreement provides for the issuance of shares of Common Stock,
par value $0.0001 per share, of VDC Communications (the "VDC Communications
Common Stock"), in exchange for all outstanding Common Shares of VDC (other than
dissenters' shares and authorized but unissued shares of VDC), par value $2.00
per share (the "VDC Shares"), on a one-for-one basis. As of September 4, 1998,
11,787,441 shares of VDC Communications Common Stock would be issuable in
exchange for the 11,787,441 outstanding VDC Shares. The Merger Agreement also
provides for the issuance of 8,487,500 shares of VDC Communications Common Stock
upon the aggregate conversion of all outstanding shares of Series A Convertible
Preferred Stock of VDC Communications, par value $0.0001 per share (the "Series
A Stock") and Series B Convertible Preferred Stock of VDC Communications, par
value $0.0001 per share (the "Series B Stock"), on a one-for-one basis, which
conversion will occur automatically upon the consummation of the Domestication
Merger. The Series A Stock and Series B Stock had been issued by VDC
Communications in connection with VDC's acquisition of Sky King Communications,
Inc., a Connecticut corporation ("Sky King Connecticut"), on March 6, 1998.
Although the Domestication Merger has been structured with the intention
that it qualify as a tax-free reorganization within the meaning of Section 368
of the Internal Revenue Code of 1986, as amended, because of certain
non-statutory tests that must be satisfied in order for a transaction to qualify
as a tax-free reorganization, VDC has been unable to conclude that the
Domestication Merger will qualify as a tax-free reorganization. Accordingly, VDC
members should assume, for the purpose of evaluating the Domestication Merger,
that it will not qualify as a tax-free reorganization. See "CERTAIN UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES."
The affirmative majority vote of 75% of those holders of the VDC Shares
voting at the Special Meeting in person or by proxy is required to approve the
Domestication Merger and the Merger Agreement. The quorum necessary for the
purposes of voting on the Merger Agreement at the Special Meeting is at least
two persons holding or representing by proxy more than one-third of the issued
and outstanding VDC Shares. Any holder of VDC Shares present in person or by
proxy may demand a poll with respect to the approval of the Domestication Merger
and the Merger Agreement.
Pursuant to Section 106(6) of The Companies Act 1981 of Bermuda, as amended
(the "Bermuda Companies Act"), holders of VDC Shares who do not vote in favor of
the Domestication Merger and who are not satisfied that they have been offered
fair value for their VDC Shares are entitled to dissenters' rights with respect
to the Domestication Merger. Members may attend the Special Meeting to vote
their VDC Shares or to exercise their dissenters' rights. See "VOTING AND THE
SPECIAL MEETING - Dissenters' Rights" in the attached Proxy Statement/Prospectus
for a description of the procedures required to be followed to perfect
dissenters' rights.
<PAGE>
The VDC Board of Directors has unanimously approved the Merger Agreement,
the Domestication Merger and the transactions contemplated thereby, and has
determined that the Merger Agreement and the Domestication Merger are fair and
in the best interests of the members of VDC. The Board of Directors of VDC
initially established the consideration to be paid in the Domestication Merger
when VDC acquired Sky King Connecticut. This determination was made by the VDC
Board of Directors at arm's-length based upon the assessment of Sky King
Connecticut's assets and earnings prospects at the time of the acquisition. The
consideration to be paid in the Domestication Merger includes the rights of the
holders of Preferred Stock of VDC Communications to have their shares converted
into VDC Communications Common Stock on a share-for-share basis. The respective
Boards of Directors of VDC and VDC Communications have determined that no event
has occurred since the Sky King Connecticut acquisition which would necessitate
altering the merger consideration to be paid in the Domestication Merger, and
have concluded that the consideration is fair to the VDC members and the VDC
Communications stockholders. However, there was no formal valuation of VDC and
VDC Communications, either by VDC, VDC Communications or an independent third
party. Neither VDC nor VDC Communications has obtained a fairness opinion by an
investment banking firm or other qualified appraiser.
The VDC Board of Directors recommends that the Members of VDC vote in favor
of the Merger Agreement, the Domestication Merger Agreement and the transactions
contemplated thereby. However, you are urged to carefully consider all aspects
of the Merger Agreement and the Domestication Merger discussed in the attached
Proxy Statement/Prospectus.
Only Members of record at the close of business on _________ __, 1998, will
be entitled to vote at the Special Meeting and any adjournment(s) thereof. All
Members are cordially invited to attend the Special Meeting in person. However,
whether or not you plan to attend the Special Meeting, it is very important that
you sign, date and return the completed and signed proxy card as soon as
possible; in the enclosed envelope. A Member who has given a proxy may revoke it
at any time before it is exercised at the Special Meeting by filing with the
Secretary of VDC a written notice of revocation or a proxy bearing a later date
or by attending the Special Meeting and voting in person.
By Order of the Board of Directors,
Greenwich, Connecticut
/s/ Frederick A. Moran
----------------------------
Dated: _________, 1998 Chairman and Chief Executive Officer
YOUR PROXY IS IMPORTANT. PLEASE VOTE PROMPTLY.
VDC MEMBERS SHOULD NOT SURRENDER OR OTHERWISE ATTEMPT TO EXCHANGE THEIR
CERTIFICATES FOR VDC SHARES FOR COMMON STOCK CERTIFICATES OF VDC COMMUNICATIONS
UNLESS AND UNTIL THEY HAVE RECEIVED APPROPRIATE NOTICE AND INSTRUCTIONS FOR
EXCHANGE.
<PAGE>
VDC COMMUNICATIONS, INC.
75 Holly Hill Lane
Greenwich, Connecticut 06830
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS - _________, 1998
To the Stockholders:
A Special Meeting of Stockholders (the "Special Meeting") of VDC
Communications, Inc., a Delaware corporation ("VDC Communications"), will be
held at the offices of VDC Communications, 75 Holly Hill Lane, Greenwich,
Connecticut 06830, on ________, 1998 at 10:00 a.m. (local time), to consider and
vote upon a proposal to merge (the "Domestication Merger") with VDC
Communications' parent, VDC Corporation Ltd., a Bermuda company ("VDC"), in
order to change VDC's jurisdiction of incorporation from Bermuda to the State of
Delaware in the United States pursuant to the terms of an Agreement and Plan of
Merger between VDC Communications and VDC in the form attached as Exhibit A to
the accompanying Proxy Statement/Prospectus (the "Merger Agreement"). VDC
Communications will be the surviving entity of the Domestication Merger.
The Merger Agreement provides for the issuance of shares of Common Stock,
par value $0.0001 per share, of VDC Communications (the "VDC Communications
Common Stock"), in exchange for all outstanding Common Shares (other than
dissenters' shares and authorized but unissued shares of VDC), par value $2.00
per share, of VDC (the "VDC Shares") on a one-for-one basis. As of September 4,
1998, 11,787,441 shares of VDC Communications Common Stock would be issuable in
exchange for the 11,787,441 outstanding VDC Shares. The Merger Agreement also
provides for the issuance of 8,487,500 shares of VDC Communications Common Stock
upon the aggregate conversion of all outstanding shares of Series A Convertible
Preferred Stock of VDC Communications, par value $0.0001 per share (the "Series
A Stock") and Series B Convertible Preferred Stock of VDC Communications, par
value $0.0001 per share ("Series B Stock"), on a one-for-one basis, which
conversion will occur automatically upon the consummation of the Domestication
Merger. The Series A Stock and Series B Stock had been issued by VDC in
connection with its acquisition of Sky King Communications, Inc., a Connecticut
corporation ("Sky King Connecticut"), on March 6, 1998.
The Domestication Merger has been structured with the intention that it
qualify as a tax-free reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended, in which the holders of Preferred
Stock of VDC Communications will not recognize taxable gain upon conversion of
the Preferred Stock into VDC Communications Common Stock. See "CERTAIN UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES."
The stockholders of VDC Communications are not entitled to appraisal rights
with respect to the Domestication Merger.
The Board of Directors of VDC Communications has unanimously approved the
Merger Agreement and the transactions contemplated thereby, and has determined
that the Domestication Merger is fair and in the best interests of the
stockholders of VDC Communications. VDC Communications' Board of Directors
recommends that the stockholders vote in favor of the Merger Agreement and the
transactions contemplated thereby. However, you are urged to carefully consider
all aspects of the Merger Agreement discussed in the enclosed Proxy
Statement/Prospectus.
Only stockholders of record at the close of business on _________ __, 1998,
will be entitled to vote at the Special Meeting and any adjournment(s) thereof.
All stockholders are cordially invited to attend the Special Meeting in person.
However, whether or not you plan to attend the Special Meeting, it is very
important that you sign, date
<PAGE>
and return the completed and signed proxy card as soon as possible in the
enclosed envelope. A stockholder who has given a proxy may revoke it at any time
before it is exercised at the Special Meeting by filing with the Secretary of
VDC Communications a written notice of revocation or a proxy bearing a later
date or by attending the Special Meeting and voting in person.
By Order of the Board of Directors,
/s/ Frederick A. Moran
----------------------
Dated: _________, 1998 President
YOUR PROXY IS IMPORTANT. PLEASE VOTE PROMPTLY.
<PAGE>
VDC CORPORATION LTD.
AND
VDC COMMUNICATIONS, INC.
PROXY STATEMENT
--------------------------------------------------
PROSPECTUS OF
VDC COMMUNICATIONS, INC.
20,274,941 SHARES OF COMMON STOCK,
PAR VALUE $0.0001 PER SHARE
--------------------------------------------------
SOLICITATION OF PROXY, REVOCABILITY AND VOTING
This Proxy Statement/Prospectus relates to the proposed merger and
amalgamation (the "Domestication Merger") of VDC Corporation Ltd., a Bermuda
company ("VDC"), with and into its wholly-owned subsidiary, VDC Communications,
Inc., a Delaware corporation ("VDC Communications"), and the issuance of up to
20,274,941 shares of common stock of VDC Communications, $0.0001 par value (the
"VDC Communications Common Stock"), in connection therewith. The purpose of the
Domestication Merger is to change VDC's jurisdiction of incorporation from
Bermuda to the State of Delaware in the United States. As a result of the
Domestication Merger, VDC will cease to exist and VDC Communications will
continue to operate the business of VDC as the surviving entity of the
Domestication Merger.
In connection with the Domestication Merger, VDC Communications has filed a
Registration Statement on Form S-4 (the "Registration Statement"), of which this
Proxy Statement/Prospectus forms a part, with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), covering up to an aggregate of 20,274,941 shares of Common
Stock issuable in the Domestication Merger to the current holders of Common
Shares of VDC, par value $2.00 per share (the "VDC Shares"), and upon the
automatic conversion of the outstanding shares of Preferred Stock of VDC
Communications as described below. In connection with the Domestication Merger,
(i) each of the 11,787,441 outstanding VDC Shares (other than shares with
respect to which dissenters' rights are perfected in accordance with Bermuda
law, as more particularly described under "DISSENTERS' RIGHTS," and authorized
but unissued shares of VDC, which shall be canceled), will be converted into the
right to receive one share of VDC Communications Common Stock; (ii) each of the
3,987,500 outstanding shares of Series A Convertible Preferred Stock of VDC
Communications, par value $0.0001 per share ("Series A Stock"), of VDC
Communications will be automatically converted into one share of VDC
Communications Common Stock; and (iii) each of the 4,500,000 shares of Series B
Convertible Preferred Stock of VDC Communications, par value $0.0001 per share
("Series B Stock"), will be automatically converted into one share of VDC
Communications Common Stock.
SOLICITATION
Proxies are being solicited on behalf of the Board of Directors of VDC for
use at a Special General Meeting of Members of VDC (the "VDC Meeting") to be
held on ___________, 1998 at 44 Church Street, Hamilton HM FX Bermuda,
commencing at 10:00 a.m. (Bermuda time), and at any adjournment or postponement
thereof. Only members of record on __________, 1998 will be entitled to vote at
the VDC Meeting. Proxies are also being solicited on behalf of the Board of
Directors of VDC Communications for use at a Special Meeting of Stockholders of
VDC Communications (the "VDC Communications Meeting") to be held on ___________,
1998 at the principal
<PAGE>
executive offices of the VDC and VDC Communications, 75 Holly Hill Lane,
Greenwich, Connecticut 06830, commencing at 10:00 a.m. (local time), and at any
adjournment or postponement thereof. Only stockholders of record on __________,
1998 will be entitled to vote at the VDC Communications Meeting.
This Proxy Statement/Prospectus constitutes the prospectus of VDC
Communications, as the surviving entity of the Domestication Merger, filed as
part of the Registration Statement relating to the shares of VDC Communications
Common Stock to be issued by VDC Communications upon the consummation of the
Domestication Merger. This Proxy Statement/Prospectus is first being mailed to
members of VDC and stockholders of VDC Communications on or about _________,
1998.
VOTING
Each VDC Share outstanding on the record date is entitled to one vote. As
of September 4, 1998, there were 11,787,441 VDC Shares outstanding. At least two
holders of the VDC Shares entitled to vote at the VDC Meeting holding or
representing by proxy more than one-third of the issued and outstanding VDC
Shares must be present in person or represented by proxy at the VDC Meeting in
order to constitute a quorum for the transaction of business. Abstentions and
broker non-votes will not be counted for the purpose of determining a quorum and
will not be counted in the voting on the proposal to be considered at the VDC
Meeting, as described herein. The affirmative majority vote of 75% of those
holders of the VDC Shares voting at the VDC Meeting in person or by proxy is
required to approve the Domestication Merger. Any holder of VDC Shares present
in person or by proxy may demand a poll with respect to the approval of the
Domestication Merger. American Stock Transfer & Trust Company, VDC's transfer
agent, will tabulate the votes.
Each share of VDC Communications Common Stock and each share of Series A
and Series B Stock (the Series A Stock and Series B Stock shall be collectively
referred to as the "Preferred Stock") outstanding on the record date is entitled
to one vote. As of September 4, 1998, there were 100 shares of VDC
Communications Common Stock outstanding, 3,987,500 shares of Series A Stock
outstanding and 4,500,000 shares of Series B Stock outstanding. A majority of
the outstanding shares of each class of stock of VDC Communications entitled to
vote, represented in person or by proxy, constitutes a quorum for the
transaction of business and for a vote on the Domestication Merger. The
affirmative majority vote of those holders of the VDC Communications Common
Stock, the Series A Stock and the Series B Stock, voting as separate classes, at
the VDC Communications Meeting in person or by proxy is required to approve the
Domestication Merger. VDC, as the holder of all of the outstanding shares of VDC
Communications Common Stock, will vote in favor of the Domestication Merger at
the VDC Communications Meeting.
The Boards of Directors of VDC and VDC Communications know of no business
that will be presented at the VDC Meeting or the VDC Communications Meeting,
respectively, other than the matters described in this Proxy
Statement/Prospectus.
REVOCABILITY OF PROXIES
The execution of a proxy will not affect the rights of a VDC member or a
VDC Communications stockholder to attend the VDC Meeting or the VDC
Communications Meeting, respectively, and vote in person. Any person giving a
proxy in the form accompanying this Proxy Statement/Prospectus has the power to
revoke it at any time before its exercise at either the VDC Meeting or the VDC
Communications Meeting by filing with the Secretary of VDC or VDC
Communications, as the case may be, a written notice of revocation or a duly
executed proxy bearing a later date. It also may be revoked by attendance at the
VDC Meeting or the VDC Communications Meeting, as the case may be, and election
to vote in person.
DISSENTERS' RIGHTS
Under Bermuda law, those members of VDC who do not vote in favor of the
Domestication Merger and who are not satisfied that they have been offered "fair
value" for their VDC Shares may elect to have the "fair value"
ii
<PAGE>
of their shares appraised by the Supreme Court of Bermuda in accordance with
Section 106 of the Bermuda Companies Act, paid to them in cash if the
Domestication Merger is consummated and if they comply with the provisions of
said Section 106. An application to the Supreme Court of Bermuda must be made
within one month of the giving of the notice of the VDC Meeting. It is a
condition to the Domestication Merger that the number of VDC Shares held by
members of VDC who properly exercise their dissenters' rights shall not exceed
an amount which, in the opinion of VDC's Board of Directors, would represent an
unacceptable cash cost in light of the current and anticipated cash requirements
of VDC Communications as the surviving entity of the Domestication Merger.
Under Delaware law, neither the holders of the VDC Communications Common
Stock nor the holders of the Preferred Stock have rights to appraisal with
respect to the Domestication Merger.
GENERAL INFORMATION
The principal executive offices of VDC and VDC Communications are located
at 75 Holly Hill Lane, Greenwich, Connecticut 06830, and their telephone number
is (203) 869-5100.
VDC will bear the entire cost of preparing, assembling, printing and
mailing this Proxy Statement/Prospectus, the accompanying proxy and any
additional material which may be furnished to the members of VDC or the
stockholders of VDC Communications. Copies of solicitation material will be
furnished to brokerage houses, fiduciaries and custodians to forward to
beneficial owners of stock held in the names of such nominees.
VDC Shares are traded on the American Stock Exchange, Inc. ("AMEX") under
the trading symbol "VDC". On September 3, 1998, the closing bid price of VDC
Shares was $5.375. If the Domestication Merger is approved, the VDC
Communications Common Stock will continue to be traded on AMEX, without
interruption, under the trading symbol "VDC."
---------------
SEE "RISK FACTORS" ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY VDC MEMBERS AND VDC COMMUNICATIONS STOCKHOLDERS BEFORE
VOTING ON THE MATTERS MORE FULLY DESCRIBED HEREIN.
---------------
THE SECURITIES TO WHICH THIS PROXY STATEMENT/PROSPECTUS RELATES HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is __________, 1998.
iii
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TABLE OF CONTENTS
Page
AVAILABLE INFORMATION.........................................................3
PROXY STATEMENT/ PROSPECTUS SUMMARY...........................................5
RISK FACTORS.................................................................11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...............13
DESCRIPTION OF BUSINESS OF VDC AND VDC COMMUNICATIONS........................18
PROXY PROPOSAL - THE DOMESTICATION MERGER....................................19
LEGAL OPINIONS...............................................................41
<PAGE>
EXHIBITS TO PROXY STATEMENT/PROSPECTUS
<TABLE>
<S> <C>
Exhibit "A" Agreement and Plan of Merger dated as of ________, 1998 by and between VDC Corporation Ltd. and
VDC Communications, Inc.
Exhibit "B" Certificate of Incorporation of VDC Communications, Inc., as amended
Exhibit "C" Amended and Restated Bylaws of VDC Communications, Inc.
Exhibit "D" Opinion of Buchanan Ingersoll Professional Corporation [to be provided]
Exhibit "E" Section 106 of The Companies Act 1981 of Bermuda, as amended
</TABLE>
<PAGE>
AVAILABLE INFORMATION
VDC is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), and is required to file periodic
reports, proxy statements and other information with the Securities and Exchange
Commission (the "SEC") relating to its business, financial statements and other
matters. Such reports, proxy statements and other information may be inspected
and copied at the public reference facilities maintained by the SEC at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional
Offices of the SEC located at 7 World Trade Center, Suite 1300, New York, NY
10048, and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL
60661-2511. Copies of such material can also be obtained from the SEC at
prescribed rates from the Public Reference Section of the SEC at 450 Fifth
Street, N.W. Washington, D.C. 20549. In addition, copies of such material filed
with the SEC after March 6, 1998 may be obtained from the Web site maintained by
the Commission (http://www.sec.gov). Upon the consummation of the Domestication
Merger between VDC and VDC Communications, Inc., VDC Communications, Inc., as
the surviving corporation of the Domestication Merger ("VDC Communications"),
will become the successor filer of VDC, and accordingly will continue to be
subject to the informational requirements of the Exchange Act.
VDC Communications has filed a Registration Statement on Form S-4 with the
SEC covering the VDC Communications Common Stock to be issued in connection with
the Domestication Merger. The Registration Statement may be inspected and copied
at the principal office of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, and copies of the Registration Statement can be obtained from the SEC at
prescribed rates by writing to the SEC at such address. In addition, copies of
the Registration Statement may also be obtained from the Web site maintained by
the Commission (http://www.sec.gov). For further information, reference is made
to the Registration Statement and its exhibits. Statements in the Proxy
Statement/Prospectus concerning any document are not necessarily complete, and
in each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement. Each such statement is qualified in its
entirety by such reference.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THE
PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION
TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER, OR SOLICITATION
OF AN OFFER OR PROXY, IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES OFFERED PURSUANT TO
THIS PROXY STATEMENT/PROSPECTUS SHALL CREATE AN IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF VDC OR VDC COMMUNICATIONS SINCE THE DATE OF THIS
PROXY STATEMENT/PROSPECTUS.
---------------
CERTAIN STATEMENTS CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS THAT ARE
NOT RELATED TO HISTORICAL RESULTS, INCLUDING, WITHOUT LIMITATION, STATEMENTS
REGARDING VDC COMMUNICATIONS' BUSINESS STRATEGIES AND OBJECTIVES AFTER THE
DOMESTICATION MERGER, AND FUTURE FINANCIAL POSITION ARE FORWARD LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION
21E OF THE EXCHANGE ACT AND INVOLVE RISKS AND UNCERTAINTIES. ALTHOUGH EACH OF
VDC AND VDC COMMUNICATIONS BELIEVES THAT THE ASSUMPTIONS ON WHICH THESE
FORWARD-LOOKING STATEMENTS ARE BASED ARE REASONABLE, THERE CAN BE NO ASSURANCE
THAT SUCH ASSUMPTIONS WILL PROVE TO BE ACCURATE AND ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS
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<PAGE>
THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED
TO, THOSE DISCUSSED UNDER "RISK FACTORS," AS WELL AS THOSE DISCUSSED ELSEWHERE
IN THIS PROXY STATEMENT/PROSPECTUS. ALL FORWARD-LOOKING STATEMENTS CONTAINED IN
THIS PROXY STATEMENT/PROSPECTUS ARE QUALIFIED IN THEIR ENTIRETY BY THIS
CAUTIONARY STATEMENT. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
4
<PAGE>
PROXY STATEMENT/PROSPECTUS SUMMARY
The following is a summary of information which appears in more detail
elsewhere in this Proxy Statement/Prospectus. This summary is not complete and
is qualified by reference to the detailed information appearing elsewhere in the
Proxy Statement/Prospectus. Members of VDC and stockholders of VDC
Communications should review carefully the entire Proxy Statement/Prospectus,
including the exhibits and other documents referred to in this Proxy
Statement/Prospectus, and the matters set forth under "Risk Factors" before
voting upon or consenting to the matters to be considered by the VDC members and
the VDC Communications stockholders.
GENERAL
This Proxy Statement/Prospectus is being furnished to the members of VDC,
and to the stockholders of VDC Communications, in connection with the respective
solicitation of proxies by the VDC Board of Directors for use at the VDC Meeting
and by the VDC Communications Board of Directors for use at VDC Communications
Meeting both of which are scheduled to be held on ___________, 1998. At the VDC
Meeting and the VDC Communications Meeting, the VDC members and the VDC
Communications stockholders will be asked to consider and vote upon that certain
Agreement and Plan of Merger, dated as of _____, 1998 (the "Merger Agreement"),
between VDC and VDC Communications, pursuant to which VDC will amalgamate and
merge (the "Domestication Merger") with and into VDC Communications. Since the
surviving corporation of the Domestication Merger will be VDC Communications,
the Domestication Merger will result in a change of the jurisdiction of
incorporation of the public company from Bermuda to Delaware. In connection with
the Domestication Merger, VDC Communications has filed a Registration Statement
on Form S-4 (the "Registration Statement") with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), covering an aggregate of up to 20,274,941 shares of common
stock of VDC Communications, par value $0.0001 per share (the "VDC
Communications Common Stock"), issuable in the Domestication Merger to the
holders of the outstanding VDC common shares, $2.00 par value (other than shares
with respect to which dissenters' rights are perfected in accordance with
Bermuda law and authorized but unissued shares of VDC, which shall be canceled,
the "VDC Shares"), and to the holders of the outstanding preferred stock of VDC
Communications, par value $0.0001 (the "Preferred Stock"). In connection with
the Domestication Merger, each of the VDC Shares shall be exchanged for the
right to receive one share of VDC Communications Common Stock. See "PROXY
PROPOSAL -- TERMS OF THE MERGER AGREEMENT." This Proxy Statement/Prospectus
constitutes the prospectus of VDC Communications with respect to the VDC
Communications Common Stock issuable in the Domestication Merger.
THE COMPANIES
Since its incorporation, VDC has reoriented its principal focus of business
several times. From its inception until 1992, VDC was principally engaged in the
acquisition and exploration of North American mineral resource properties. From
1992 to 1994, VDC focused primarily on real estate ownership and development.
VDC then commenced the sale of its real estate holdings in 1996 in order to
redeploy its capital resources so as to facilitate investment in various private
and public companies. Following a review of available business opportunities
thereafter, during the fourth quarter of 1997, VDC engaged in a number of
transactions intended to shift the principal focus of its business to the
ownership, operation and management of telecommunications systems and services.
To further its goal of entering the telecommunications field, VDC sold its
investment assets and, on March 6, 1998, acquired Sky King Communications, Inc.,
a Connecticut corporation ("Sky King Connecticut"), a development stage
telecommunications systems and services company, through the merger of Sky King
Connecticut with and into VDC Communications (the "Sky King Connecticut
Merger").
Sky King Connecticut's historic business, which VDC continues to operate,
consisted of managing and acting as an agent for existing communications tower
and building sites. Since the date of the Sky King Connecticut
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<PAGE>
acquisition, however, VDC has significantly expanded the scope of its business
as management has started to implement a strategic plan to establish VDC as a
leading telecommunications company. Towards that end, VDC has established
telecommunications facilities in Denver, Colorado, New York City and Los
Angeles, which are expected to commence commercial operations during the fourth
quarter of 1998. In addition, VDC operates an earth station in Managua,
Nicaragua which receives international long distance telephony traffic from the
United States. VDC Communications is also developing and implementing plans to
expand its telecommunications business to the provision of wireless, cellular,
long-distance telephony and Internet provider services in the United States and
abroad.
The principal executive offices of VDC and VDC Communications are located
at 75 Holly Hill Lane, Greenwich, CT 06830, and their telephone number is (203)
869-5100.
SPECIAL MEETINGS OF VDC MEMBERS AND VDC COMMUNICATIONS STOCKHOLDERS
The VDC Meeting will be held on ________, 1998 at 10:00 a.m. (local time),
at 44 Church Street, Hamilton HM FX Bermuda. The VDC Communications Meeting will
be held on _________, 1998 at 10:00 a.m. at the offices of VDC Communications,
75 Holly Hill Lane, Greenwich, Connecticut 06830. The purpose of both the VDC
Meeting and the VDC Communications Meeting is to consider and vote upon the
Domestication Merger.
Only holders of record of VDC Shares at the close of business on _________,
1998 will be entitled to notice of, and to vote at, the VDC Meeting, or at any
adjournment or postponement thereof. At the close of business on such date,
there were approximately 11,787,441 VDC Shares issued and outstanding. Under
Bermuda law, the affirmative majority vote of 75% of the holders of the VDC
Shares voting at the VDC Meeting in person or by proxy is required to approve
the Domestication Merger and the Merger Agreement. For the purposes of the vote
on the Domestication Merger and the Merger Agreement, the VDC Meeting must have
a quorum of two persons holding or representing by proxy more than one-third of
the issued and outstanding VDC Shares as of the record date. The Board of
Directors of VDC has approved the Domestication Merger and the Merger Agreement.
See "VOTING AND THE VDC MEETING."
Under Bermuda law, appraisal rights are available to holders of VDC Shares
who dissent from approving the Domestication Merger and the Merger Agreement and
who are not satisfied that they have been offered "fair value" for their VDC
Shares. Particulars regarding the procedure to perfect such appraisal rights are
set forth in "VOTING AND THE VDC MEETING - Dissenters' Rights."
Only holders of record of VDC Communications Common and Preferred Stock at
the close of business on _________, 1998 will be entitled to notice of and to
vote at the VDC Communications Meeting, or at any adjournment or postponement
thereof. At the close of business on such date, there were 100 shares of VDC
Communications Common Stock, 3,987,500 shares of Series A Stock and 4,500,000
shares of Series B Stock outstanding. The Board of Directors of VDC
Communications has approved the Domestication Merger and the Merger Agreement.
VDC, as the sole shareholder of the VDC Communications Common Stock will vote at
the VDC Communications Meeting to approve the Domestication Merger. See "VOTING
AND THE VDC COMMUNICATIONS MEETING."
Under Delaware law, the holders of VDC Communications Common and Preferred
Stock have no appraisal rights with respect to the Domestication Merger and the
Merger Agreement.
6
<PAGE>
THE DOMESTICATION MERGER
EFFECT OF THE DOMESTICATION MERGER
The effect of the Domestication Merger will be that members of VDC will
become stockholders of VDC Communications, which shall become the publicly
traded company. The Domestication Merger will be accomplished by means of a
merger transaction (an "amalgamation" under Bermuda law) between VDC and VDC
Communications.
VDC has 11,787,441 VDC Shares issued and outstanding. Upon the consummation
of the Domestication Merger, the VDC Shares will automatically convert into
11,787,441 shares of VDC Communications Common Stock.
VDC Communications has 3,987,500 shares of Series A Stock and 4,500,000
shares of Series B Stock outstanding. Upon the consummation of the Domestication
Merger, all of the shares of Series A Stock and Series B Stock will
automatically convert into an aggregate 8,487,500 shares of VDC Communications
Common Stock.
EFFECTIVE DATE
Subject to Bermuda regulatory approval, the Domestication Merger will
become effective (the "Effective Date") upon (i) filing with the Secretary of
State of the State of Delaware and the Registrar of Companies in Bermuda a
Certificate of Merger with respect to the merger and amalgamation of VDC with
and into VDC Communications, and (ii) obtaining the consent of the Minister of
Finance of Bermuda to the Domestication Merger, all of which is anticipated to
occur as promptly as practicable after the requisite member and stockholder
approvals of the Domestication Merger have been obtained and all conditions to
the closing of the Domestication Merger as set forth in the Merger Agreement
have been satisfied.
CONVERSION OF VDC SHARES AND SERIES A STOCK INTO VDC COMMUNICATIONS COMMON STOCK
Upon the Effective Date, each outstanding VDC Share will be converted into
the right to receive one share of VDC Communications Common Stock. Subsequent to
the Effective Date, a holder of VDC Shares will not be able to receive dividends
or other distributions thereon or to vote those shares until the holder
exchanges his VDC Shares certificate(s) for VDC Communications Common Stock
certificate(s). After the Effective Date, American Stock Transfer and Trust
Company, New York, New York, VDC's transfer agent, will send transmittal forms
to VDC members for their use in exchanging their VDC Share certificates.
The Board of Directors of VDC initially established the consideration to be
paid in the Domestication Merger at arm's-length when VDC acquired Sky King
Connecticut in March, 1998. Based upon the assessment made by the VDC Board of
Directors of Sky King Connecticut's assets and earnings prospects, the former
shareholders of Sky King Connecticut received in the Sky King Connecticut Merger
10,000,000 shares of Preferred Stock convertible into a maximum aggregate of
either (i) 10,000,000 VDC Shares after March 6, 1999, or (ii) upon the
consummation of the Domestication Merger, 10,000,000 shares of VDC
Communications Common Stock. The consideration to be paid in the Domestication
Merger is therefore based on the rights of the holders of Preferred Stock of VDC
Communications to have their shares converted into VDC Communications Common
Stock on a share-for-share basis. The respective Boards of Directors of VDC and
VDC Communications have determined that no event has occurred since the Sky King
Connecticut acquisition which would necessitate altering the merger
consideration to be paid in the Domestication Merger, and have concluded that
the consideration is fair to the VDC members and the VDC Communications
stockholders. However, there was no formal valuation of VDC and VDC
Communications, either by VDC, VDC Communications or an independent third party.
Neither VDC nor VDC Communications has obtained a fairness opinion by an
investment banking firm or other qualified appraiser.
7
<PAGE>
BACKGROUND AND REASONS FOR THE DOMESTICATION MERGER
The primary reason for the Domestication Merger is to reorganize VDC as a
publicly traded U.S. corporation domesticated in the State of Delaware. The
Domestication Merger was contemplated as part of the acquisition of Sky King
Connecticut and was a condition of such transaction. If the Domestication Merger
is not consummated, the former Sky King Connecticut shareholders will have the
right after March 6, 1999 to convert their shares of Preferred Stock received in
the Sky King Connecticut Merger into VDC Shares on a share-for-share basis. The
VDC Board of Directors believes that the Domestication Merger will facilitate
access to Unites States markets to raise capital as well as increase VDC's
flexibility to meet future financing needs. As part of its expected growth
strategy, VDC expects to pursue joint venture and acquisition opportunities with
companies engaged in the telecommunications business. The price for any
potential acquisitions may be paid in VDC securities and VDC believes that such
securities will be more attractive as consideration for such acquisitions if the
issuer is domiciled in the United States. The Board of Directors of VDC believes
that the Domestication Merger will increase VDC's ability to meet its future
equity and debt financing needs, enhance the marketability of VDC's securities
by raising VDC's profile in the U.S. capital markets, allow investors to assess
VDC on a more comparable footing with its competitors domiciled in the United
States and, over time, have a positive effect on the trading of VDC's
securities. Furthermore, in order to encourage corporations to incorporate in
Delaware, Delaware has adopted modern, comprehensive and flexible corporate laws
to meet the changing needs of today's businesses. The Delaware courts have
developed a substantial body of corporate law and considerable expertise in
dealing with corporate issues. Furthermore, VDC conducts no business in Bermuda
and has no independent business justification for being incorporated in Bermuda.
Many of VDC's members reside in the United States, and VDC must comply with
certain federal securities laws of the United States. Consequently, VDC is
required to comply with both Bermuda and U.S. tax, corporate and securities
laws, which is both expensive and time consuming. Becoming a Delaware
corporation is expected to simplify VDC's tax and securities filings, accounting
and operations, and reduce both the cost and the burden of these reporting
obligations.
RECOMMENDATION OF THE BOARDS OF DIRECTORS OF VDC AND VDC COMMUNICATIONS
The respective Boards of Directors of VDC and VDC Communications believe
that the Domestication Merger is in the best interests of VDC and its members
and VDC Communications and its stockholders, and they recommend that the VDC
members and the VDC Communications stockholders vote for the approval of the
Merger Agreement and the transactions contemplated thereby.
CONDITIONS TO THE DOMESTICATION MERGER AND REGULATORY APPROVALS
The obligations of VDC and VDC Communications to effect the Domestication
Merger are subject to the satisfaction of the following conditions:
1. The Domestication Merger shall have been approved by the respective Boards
of Directors and equity holders of VDC and VDC Communications in accordance
with applicable Bermuda and Delaware law.
2. Rights of dissent and appraisal being exercised by the VDC members shall
not, in the opinion of VDC's Board of Directors, represent an unacceptable
cash cost in light of VDC Communications' current and anticipated cash
requirements as the surviving entity of the Domestication Merger;
3. VDC Communications shall have filed the Certificate of Merger with the
Delaware Secretary of State and with the Bermuda Registrar of Companies;
and
4. The consent of the Bermuda Minister of Finance to the Domestication Merger
pursuant to Section 104B of the Bermuda Companies Act shall have been
obtained.
VDC and VDC Communications are not aware of any other regulatory
filings or approvals that would be required in order to consummate the
Domestication Merger.
8
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MANAGEMENT AND OPERATIONS AFTER THE DOMESTICATION MERGER
It is anticipated that the directors and executive officers of VDC and
VDC Communication immediately prior to the Effective Date will continue to serve
as directors and executive officers of VDC Communications after the Effective
Date until their successors are elected and qualified or until their earlier
death, resignation or removal. On the Effective Date, the Board of Directors of
VDC Communications will continue to consist of Messrs. Moran, Roberts and
Elkholy and will be divided into three classes as follows: (i) Dr. Elkholy will
serve an initial term expiring in 1999; (ii) Dr. Roberts will serve an initial
term expiring in 2000; and (iii) Mr. Moran will serve an initial term expiring
in 2001; and in each case, until their successors have been duly elected and
qualified. At each annual stockholder meeting after 1998, directors will be
elected to succeed those whose terms then expire and each newly elected director
will serve for a three year term and until his successor is duly elected and
qualifies. In contrast, all of the members of the Board of Directors of VDC are
currently elected on an annual basis for one year terms.
The business of VDC immediately prior to the Effective Date shall
continue after the Effective Date as the business of VDC Communications as the
surviving entity of the Domestication Merger.
ACCOUNTING TREATMENT
The Domestication Merger will be accounted for as a capital reorganization
in which VDC Shares will be exchanged for, and shares of Preferred Stock will be
converted into, shares of VDC Communications Common Stock. The Domestication
Merger will have no material implications from an accounting perspective because
the financial statements of VDC Communications after the Effective Date will be
essentially the same as those of VDC prior to the Effective Date.
All costs associated with the Domestication Merger will be charged to the
results of operations of VDC upon the consummation of the Domestication Merger.
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
The Domestication Merger is intended to constitute a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). If the Domestication Merger qualifies as a reorganization,
VDC members will generally recognize no gain or loss upon the exchange of their
VDC Shares solely for shares of VDC Communications Common Stock. However, VDC is
not certain whether the Domestication Merger will qualify as a reorganization
due to certain non-statutory tests that must be satisfied in order for a
transaction to qualify as a reorganization. Accordingly, VDC members should
assume, for the purposes of evaluating the Domestication Merger, that it will
not qualify as a reorganization. If the Domestication Merger does not qualify as
a reorganization, VDC members who are U.S. citizens or residents will generally
recognize capital gain or loss equal to any difference between the member's
basis in his VDC Shares and the fair value of the shares of VDC Communications
Common Stock received in the Domestication Merger.
A VDC member who does not vote in favor of the Domestication Merger and who
elects under Bermuda law to have the "fair value" of his VDC Shares paid to him
in cash if the Domestication Merger is consummated, should be treated as if his
VDC Communications Common Stock was redeemed. Such cash should be treated as
having been received by the member as a distribution in redemption of VDC
Communications Common Stock subject to the provisions and limitations of Section
302 of the Code.
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The conversion of the shares of Preferred Stock of VDC Communications into
shares of VDC Communications Common Stock in the Domestication Merger will
likely qualify as a "reorganization," as such term is described in Section
368(a)(i)(E) of the Code. If so, the holders of Preferred Stock will recognize
no gain or loss upon the conversion of their shares in the transaction; the tax
basis of the VDC Communications Common Stock received by holders of Preferred
Stock in the Domestication Merger will be the same as the basis of the Preferred
Stock from which such shares converted; and the holding period of a current
holder of Preferred Stock in shares of VDC Communications Common Stock converted
from shares of Preferred Stock in the transaction will include the period for
which such holder held the Preferred Stock.
ALL VDC MEMBERS SHOULD CAREFULLY READ THE MORE DETAILED DISCUSSION UNDER
"DOMESTICATION MERGER - CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES"
AND ARE URGED TO CONSULT THEIR OWN TAX ADVISORS.
CERTAIN BERMUDA INCOME TAX CONSEQUENCES
There are no taxes on profits, income, dividends or capital gains in
Bermuda and neither VDC nor its members will suffer taxation in Bermuda as a
result of the Domestication Merger. See "DOMESTICATION MERGER - CERTAIN BERMUDA
INCOME TAX CONSEQUENCES."
COMPARISON OF RIGHTS UNDER APPLICABLE LAW
Currently, the rights of members of VDC are governed by applicable Bermuda
law and regulations, the Memorandum of Association of VDC (the "Bermuda
Charter") and the Bye-laws of VDC (the "Bermuda Bye-laws"). Holders of VDC
Shares immediately prior to the Effective Date (other than dissenters' shares)
will become stockholders of VDC Communications and from and after the Effective
Date, their rights as stockholders of VDC Communications will be governed by
applicable Delaware law, the Certificate of Incorporation of VDC Communications,
as amended (the "Delaware Charter") and the Amended and Restated Bylaws of VDC
Communications (the "Delaware Bylaws"). There are certain differences between
the rights of members of VDC and stockholders of VDC Communications under
Bermuda and Delaware law, the Bermuda Charter and the Delaware Charter, and the
Bermuda Bye-laws and the Delaware Bylaws. See "THE DOMESTICATION MERGER -
Comparative Rights of Members and Stockholders."
INTERESTS OF CERTAIN PERSONS IN THE DOMESTICATION MERGER
In considering the recommendation of the Board of Directors with respect to
the Domestication Merger, members of VDC and holders of VDC Communications
Common Stock and Preferred Stock should be aware that certain members of the
management and Boards of Directors of VDC and VDC Communications, among others,
have interests in the Domestication Merger that are in addition to the interests
of the members and stockholders. Upon the consummation of the Domestication
Merger, all of the outstanding VDC Shares, as well as shares of Series A Stock
and Series B Stock, will automatically convert, on a share-for-share basis, into
shares of VDC Communications Common Stock. Upon the consummation of the
Domestication Merger, Mr. Frederick A. Moran, Chairman and Chief Executive
Officer and a Director of VDC and President and a Director of VDC
Communications, together with his spouse and minor children, will receive
2,849,150 shares of VDC Communications Common Stock; a trust for the benefit of
Dr. James C. Roberts, Deputy Chairman and Chief Operating Officer and a Director
of VDC and Chief Operating Officer and a Director of VDC Communications, and his
family will receive 2,750,000 shares of VDC Communications Common Stock; and
Clayton F. Moran, Vice President of Finance of VDC, will receive 1,422,850
shares of VDC Communications Common Stock. Even absent the consummation of the
Domestication Merger, however, the terms of the Series A and Series B Stock
nevertheless permit conversion into VDC Shares on a share-for share basis
commencing March 6, 1999.
RISK FACTORS
For a discussion of certain matters that should be carefully considered in
connection with the Domestication Merger, see "RISK FACTORS" on page 11.
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RISK FACTORS
THE FOLLOWING FACTORS, IN ADDITION TO THE OTHER INFORMATION CONTAINED
IN THIS PROXY STATEMENT/PROSPECTUS, SHOULD BE CAREFULLY CONSIDERED BY MEMBERS OF
VDC AND STOCKHOLDERS OF VDC COMMUNICATIONS IN EVALUATING WHETHER TO APPROVE THE
MERGER AGREEMENT AND BECOME HOLDERS OF VDC COMMUNICATIONS COMMON STOCK.
EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of VDC Communications' Certificate of Incorporation, as
amended (the "Delaware Charter"), Amended and Restated Bylaws (the Delaware
"Bylaws") and the Delaware General Corporation Law could delay or frustrate the
removal of incumbent directors and could make difficult a change in control
transaction including a merger, tender offer or proxy contest involving VDC
Communications, even if such events could be viewed as beneficial by VDC
Communications' stockholders. For example, the Delaware Charter provides for a
classified Board of Directors and denies the right of stockholders to amend the
Delaware Bylaws without the consent of the Board and requires advance notice of
stockholder nominations of directors. VDC Communications is also subject to
provisions of the Delaware General Corporation law that prohibit a publicly-held
Delaware corporation from engaging in a broad range of business combinations
with a person who, together with affiliates and associates, owns 10% or more of
the corporation's outstanding voting shares (an "interested stockholder") for
three years after the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. See "The Domestication
Merger - Antitakeover Implications" and "The Charters and Bylaws of VDC and VDC
Communications - Special Meetings of Members/Stockholders; Advance Notice
Requirements for Member/Stockholder Proposals and Director Nominations."
CHANGE IN CONTROL
Upon the consummation of the Domestication Merger and the subsequent
conversion of all of the outstanding shares of Series A and Series B Stock into
VDC Communications Common Stock, the preferred stockholders of VDC
Communications immediately prior to the Domestication Merger will become the
beneficial owners of approximately 42% of the capital stock of VDC
Communications after the Domestication Merger, and will be able to exercise
substantial influence on all matters, including the election of directors and
thus the direction of future operations of VDC Communications. The change of
control associated with the conversion of the Preferred Stock is triggered by
the Domestication Merger. Regardless of the consummation of the Domestication
Merger, however, the terms of the Series A and Series B Stock permit the holders
thereof to convert each of their shares of Preferred Stock into one VDC Share in
the event that the Domestication Merger has not occurred by March 6, 1999.
Accordingly, in the absence of the Domestication Merger, the change in control
associated with the conversion of the Preferred Stock may occur after March 6,
1999.
INCREASE IN SHARES ELIGIBLE FOR PUBLIC SALE
As of September 2, 1998, VDC had outstanding 11,787,441 VDC Shares, of
which approximately 2,900,000 are eligible for public trading. Upon completion
of the distribution of shares covered by this Prospectus, 20,274,941 outstanding
shares of VDC Communications Common Stock will have been registered under the
Securities Act and eligible for public trading or will then be eligible for
resale under Rule 144 under the Securities Act or otherwise. Such shares
eligible for trading will constitute all of the outstanding shares of VDC
Communications Common Stock upon completion of the distribution of shares
covered by this Prospectus, although the resale of approximately 12,322,142
shares owned by affiliates of VDC Communications will still be subject to the
volume limitations set forth in Rule 145 under the Securities Act. Of those
12,322,142 shares, 5,300,000 owned by PortaCom Wireless, Inc. ("PortaCom") are
also subject to certain restrictions on resale as set forth in a Memorandum of
Understanding among VDC, PortaCom and the Official Committee of Unsecured
Creditors of PortaCom Wireless, Inc. Certain of the shares owned by PortaCom,
however, may be returned to VDC for surrender and cancellation based upon
settlements between PortaCom and its creditors in PortaCom's pending Chapter 11
bankruptcy proceeding. Sales of substantial amounts of VDC Communications Common
Stock in the public market
11
<PAGE>
could have an adverse effect on the market price of the stock and may make it
more difficult for VDC Communications to sell its equity securities in the
future at times and at prices it deems appropriate. Although it is impossible to
predict market influences and prospective values for securities, it is possible
that the substantial increase in the number of shares available for sale, in and
of itself, could have a depressive effect upon the market value of VDC
Communications Common Stock.
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
In considering the respective recommendations of the Boards of Directors of
VDC and VDC Communications regarding the Domestication Merger and the
transactions contemplated thereby, members of VDC and the stockholders of VDC
Communications should be aware that certain members of the management teams and
boards of directors of VDC and VDC Communications, among others, have interests
in the Domestication Merger that are in addition to the interests of the members
of VDC and stockholders of VDC Communications generally.
Upon the consummation of the Domestication Merger, all of the 8,487,500
outstanding shares of Series A Stock and Series B Stock will automatically
convert, on a share-for-share basis, into shares of VDC Communications Common
Stock. Through the conversions of Series A and Series B Stock, Clayton Moran,
Vice President, Finance of VDC, will receive 1,422,850 shares of Common Stock;
Mr. Frederick A. Moran, Chairman, Chief Executive Officer, Chief Financial
Officer and a Director of VDC and President, Chief Financial Officer and a
Director of VDC Communications, together with his spouse and minor children,
will receive 2,691,970 shares of VDC Communications Common Stock; and a trust
for the benefit of Dr. James C. Roberts, Deputy Chairman and Chief Operating
Officer and a Director of VDC and Vice-President, Chief Operating Officer and a
Director of VDC Communications, and his family will receive 1,237,500 shares of
VDC Communications Common Stock. Even absent the consummation of the
Domestication Merger, however, the terms of the Series A and Series B Stock
nevertheless permit conversion into VDC Shares on a share-for share basis
commencing March 6, 1999.
POSSIBLE ISSUANCE OF ADDITIONAL SHARES
The Domestication Merger may have the effect of permitting the issuance of
additional shares of Preferred Stock without requiring the vote of the
stockholders of VDC Communications. The Memorandum of Association (corporate
charter) of VDC had no provision for the issuance of Preferred Stock. However,
the Certificate of Incorporation of VDC Communications authorizes the issuance
of 10,000,000 shares of Preferred Stock with such designations, rights and
preferences as may be determined from time to time by the Board of Directors of
VDC Communications. The Board of Directors of VDC Communications is empowered,
without shareholder approval, to issue the Preferred Stock with dividend,
liquidation, conversion, voting or other rights, which could adversely affect
the voting power or other rights of the holders of the VDC Communications Common
Stock. In addition, the issuance of VDC Communications Common and Preferred
Stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of VDC Communications.
Although VDC Communications currently has no commitments to issue any shares of
stock other than as described in this Proxy Statement/Prospectus, there can be
no assurances that it will not do so in the future.
VDC does not currently have an incentive plan in place for its employees,
consultants and directors. As a result of the Domestication Merger, however, VDC
Communications' Stock Plan will apply to all current employees, consultants and
directors of VDC. Under the Plan, the Board of Directors of VDC Communications
has the discretion to grant stock options and other compensatory awards to
employees, consultants and directors. See "STOCK PLAN ".
TAX CONSEQUENCES
Although the Domestication Merger has been structured with the intention
that it qualify as a tax-free reorganization within the meaning of Section 368
of the Internal Revenue Code of 1986, as amended, because of certain
non-statutory tests that must be satisfied in order for a transaction to qualify
as a tax-free reorganization,
12
<PAGE>
VDC has been unable to conclude that the Domestication Merger will qualify as a
tax-free transaction. Accordingly, VDC members should assume, for the purpose of
evaluating the Domestication Merger, that it will not qualify as a tax-free
reorganization. See "CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the VDC Shares as of September 4, 1998 with respect to:
(i) each person known by VDC to beneficially own 5% or more of the outstanding
VDC Shares; (ii) each of VDC's directors; (iii) each of VDC's executive
officers; and (iv) all directors and executive officers of VDC as a group.
Except as otherwise indicated, each person set forth below has sole voting and
investment power on the shares reported.
<TABLE>
<CAPTION>
Number of Shares
Name Owned(1) Percentage of Shares
---- ----------------- ---------------------
<S> <C> <C>
Frederick A. Moran 2,849,150(2) 14.0%
75 Holly Hill Lane
Greenwich, CT 06830
Roberts Family Trust 2,750,000 13.6%
Dr. James C. Roberts, Trustee
75 Holly Hill Lane
Greenwich, CT 06830
Dr. Hussein Elkholy 0(3) -
781 Oneida Trail
Franklin Lakes, NJ 07417
Charles W. Mulloy 0(4) -
75 Holly Hill Lane
Greenwich, CT 06830
Clayton F. Moran 1,422,850(5) 7.0%
75 Holly Hill Lane
Greenwich, CT 06830
Frederick W. Moran 1,522,850(6) 7.5%
230 Park Avenue
13th Floor
New York, NY 10169
PortaCom Wireless, Inc. 5,300,000(7) 26.1%
10061 Talbert Avenue
Suite 200
Fountain Valley, CA 92708
All officers and directors of 7,022,000 34.6%
VDC as a group (5 persons)
</TABLE>
13
<PAGE>
- ---------------
(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 of September 4, 1998 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 20,274,941 shares of VDC Communications Common Stock outstanding
after the consummation of the Domestication Merger (assuming approximately
11,787,441 shares issuable upon conversion of the 11,787,441 outstanding
VDC shares, plus 3,987,500 shares issuable upon conversion of the Series A
Stock and 4,500,000 shares issuable upon conversion of the Series B Stock).
(2) Includes 219,184 shares owned directly by Mr. Moran as well as 2,629,966
shares owned, directly or indirectly, by Mr. Moran's minor children, whose
ownership is attributed to Mr. Moran. Does not include 51,250 shares
beneficially owned by Mr. Moran's mother. Also, does not include 1,522,850
shares beneficially owned by Frederick W. Moran and 1,422,850 shares
beneficially owned by Clayton F. Moran, both of whom are Mr. Moran's adult
children.
(3) Does not include options to purchase 25,000 VDC Shares which may vest on
and after July, 1999.
(4) Does not include options to purchase 60,000 VDC Shares which may vest on
and after January 31, 1999.
(5) An adult son of Frederick A. Moran and employed as Vice-President Finance
of VDC. Does not include options to purchase 10,000 VDC Shares which may
vest on and after June 1, 1999.
(6) An adult son of Frederick A. Moran.
(7) These shares were issued in connection with the acquisition of certain
securities from PortaCom Wireless, Inc. ("PortaCom") and in conjunction
with a Plan of Reorganization submitted by PortaCom in its pending Chapter
11 bankruptcy proceedings. Certain of these shares may be returned to VDC
for surrender and cancellation based upon settlements between PortaCom and
its creditors in its bankruptcy proceedings. These shares are subject to
certain limitations upon resale and redistribution requirements.
14
<PAGE>
VDC is the beneficial and record owner of 100% of the outstanding VDC
Communications Common Stock. The following table sets forth certain information
regarding the beneficial ownership of the Series A Stock and Series B Stock of
VDC Communications as of September 4, 1998.
<TABLE>
<CAPTION>
Number of Shares % Number of Shares %
Series A Stock Ownership of Series B Stock Ownership of
Name and Address of Stockholder Owned(1) Series A Stock Owned Series B Stock
- ------------------------------- ----------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C>
Frederick W. Moran 782,567.5 19.6% 640,282.5 14.2%
230 Park Avenue, 13th Floor
New York, NY 10169
Clayton F. Moran 782,567.5 19.6% 640,282.5 14.2%
75 Holly Hill Lane
Greenwich, CT 06830
Frederick A. Moran 1,480,583.5(2) 37.1% 1,211,386.5(3) 26.9%
75 Holly Hill Lane
Greenwich, CT 06830
George R. Finn 30,250 .76% 24,750 .55%
75 Holly Hill Lane
Greenwich, CT 06830
The Roberts Family Trust 0(4) 0% 1,237,500 27.5%
James Roberts, Trustee
75 Holly Hill Lane
Greenwich, CT 06830
Capital Growth Trust 330,000 8.3% 270,000 6%
Attn: Vicki Walters, Trustee
2028 Ryans Run Road
Lansdale, PA 19446
Godwin Finance Ltd. 198,000 5.0% 162,000 3.6%
Attn: Harold P. Chaffe, Financial
Controller
Whitehill House
Newby Road Industrial Estate
Newby Road
Hazel Grove
Stockport, Cheshire
England SK7 5DA
Gibralt Holdings Ltd. 165,000 4.1% 135,000 3%
1177 W. Hastings Street
Suite 2000
Vancouver, British Columbia V6E
15
<PAGE>
<CAPTION>
Number of Shares % Number of Shares %
Series A Stock Ownership of Series B Stock Ownership of
Name and Address of Stockholder Owned(1) Series A Stock Owned Series B Stock
- ------------------------------- ----------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C>
Charles Glazer 14,666.3 .37% 11,999.7 .26%
Glazer & Co.
1 East Putnam Avenue
Greenwich, CT 06830
Robert de Rose IRA 14,666.3 .37% 11,999.7 .26%
c/o Cowen & Co., Trustee
545 Madison Avenue
New York, NY 10022
Daniels Tech, LLC 5,866.3 .15% 4,799.7 .11%
Jack Daniels, Managing Partner
c/o Daniels Insurance, Inc.
500 Cooper N.W.
Suite 101
Albuquerque, NM 87102
Jose Carvalho Soares 44,000 1.1% 36,000 .8%
Rua Carlos Benedetti
78 Nilopolis
Brazil Cep 26535
Henry D. Jacobs, Jr. 39,600 1.0% 32,400 .72%
320 Dale Drive
Spartanburg, S.C. 29307
Watchung Road Associates, L.P. 59,400 1.5% 48,600 1.1%
Leon G. Cooperman, General Partner
c/o Omega Advisors, Inc.
Wall Street Plaza
88 Pine Street, 31st Floor
New York, NY 10005
Wayne Perry 36,666.3 .9% 29,999.7 .67%
Next Link Comm., Inc.
2300 Carillon Point
Kirkland, WA 98033
David Wheeler 3,666.3 .09% 2,999.7 .06%
Wheat First
131 N. Washington Street
Easton, MD 21601
</TABLE>
- ------------------
(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 of September 4, 1998 through
the exercise of options, or otherwise.
16
<PAGE>
Beneficial ownership may be disclaimed as to certain of the securities.
This table has been prepared based on 3,987,500 outstanding shares of
Series A Stock and 4,500,000 outstanding shares of Series B Stock.
(2) Includes 45,468.5 shares of Series A Stock owned in the name of Frederick
A. Moran and Joan B. Moran, husband and wife. Also includes 717,557.5
shares of Series A Stock owned in the name of Kent F. Moran and 717,557.5
Shares of Series A Stock owned by Luke F. Moran, both of whom are minor
children of Frederick A. Moran.
(3) Includes 37,201.5 shares of Series B Stock owned in the name of Frederick
A. Moran and Joan B. Moran, husband and wife. Also includes 587.092.5
shares of Series B Stock owned in the name of Kent F. Moran and 587,092.5
shares of Series B Stock owned in the name of Luke F. Moran, both of whom
are minor children of Frederick A. Moran.
(4) The Roberts Family Trust converted 1,512,500 shares of Series A Stock into
1,512,500 VDC Shares in June, 1998.
17
<PAGE>
DESCRIPTION OF BUSINESS OF VDC AND VDC COMMUNICATIONS
Since its incorporation, VDC has reoriented the principal focus of its
business several times. From its inception until 1992, VDC was involved in the
acquisition and exploration of North American mineral resource properties. From
1992 to 1994, VDC focused primarily on real estate ownership and development.
VDC then commenced the sale of its real estate holdings in 1996 in order to
redeploy its capital resources so as to facilitate investment in various private
and public companies. Following a review of available business opportunities
thereafter, during the fourth quarter of 1997, VDC engaged in a number of
transactions intended to shift the principal focus of its business to the
ownership and operation of telecommunications systems and services. Towards that
end, on March 6, 1998, through a wholly-owned subsidiary, VDC acquired by merger
Sky King Communications, Inc., a Connecticut corporation ("Sky King
Connecticut"). After the Sky King Connecticut acquisition, VDC continued to
operate Sky King Connecticut's historic business, which consisted of: (i)
managing and/or acting as agent for approximately 330 existing communications
tower and building top sites; and (ii) maintaining a data base of approximately
2,600 wireless telephony, paging and cable television service providers using
communications tower and building sites.
In conjunction with and following its acquisition of Sky King Connecticut,
VDC retained personnel with expertise in the telecommunications industry. These
individuals, together with management, have begun to implement a strategic plan
to establish VDC as a leading telecommunications company. VDC initially planned
to focus its business on building, owning and operating international
telecommunications gateways and cellular systems in certain areas of Eastern
Europe, Asia, Egypt and the United States. More recently, however, VDC has
expanded its business focus from these specific geographical areas to include
Latin America. VDC is currently operating primarily as a U.S. long distance
wholesale telecommunications carrier with facilities in the United States and
Central America. VDC continues to focus on developing its business in the
following areas:
1. Establishing a global network of international and domestic gateway
and long distance services, initially for the wholesale market, i.e.,
a carriers' carrier.
2. Providing local telecommunications, long distance telecommunications,
international long distance telecommunications and Internet access
services to businesses and residences, primarily in the U.S. retail
market.
3. Providing wireless telephony service in developing countries and
markets.
Towards that end, through two of its operating subsidiaries, VDC was
granted global facilities-based and global resale authority pursuant to Section
214 of the Communications Act of 1934, as amended (the "Section 214
Authorization"). VDC's Hong Kong-based subsidiary has applied for a similar
license. The facilities-based global Section 214 Authorization enables VDC to
provide international basic switched, private line, data, television and
business services using authorized facilities to virtually all countries in the
world, while the global resale Section 214 Authorization enables VDC to resell
the international services of authorized U.S. common carriers for the provision
of international basic switched, private line, data, television and business
services to virtually all countries. VDC recently installed communications
switching equipment at its Denver, Colorado, New York City and Los Angeles
facilities to provide international telecommunications gateways and domestic
long distance telecommunications services under its Section 214 Authorization.
All of the switches are gateway switches except for the Denver switch, which
handles in-country long distance telecommunications traffic. VDC's management
expects the Denver, New York City and Los Angeles switches to operate
commercially during the fourth quarter of 1998. Additional switches have also
been ordered for Miami, Florida and Hong Kong, and VDC anticipates that it may
order additional switches in the future to provide international gateway service
in one or more other countries. Based upon VDC's relationships within the
industry, management believes it will be able to sell time on its switches to
carriers who originate or terminate telecommunications traffic. However, to
date, VDC has not executed any contracts or received any firm commitments for
the employment of its planned telecommunications capacity for the switches. VDC
also operates an earth station in Managua, Nicaragua which receives
international long distance telephony traffic from the United States. The earth
station operates commercially and VDC has entered into a contract to carry, and
currently does carry, telecommunications services through the station.
18
<PAGE>
In June, 1998, VDC acquired from PortaCom Wireless, Inc. ("PortaCom") in an
arm's-length transaction 2,000,000 shares of common stock of Metromedia China
Corporation (f/k/a Metromedia Asia Corporation) ("MCC"), par value $0.01 per
share (the "MCC Shares"), and warrants to purchase 4,000,000 shares of common
stock of MCC at an exercise price of $4.00 per share (the "MCC Warrants")
pursuant to an asset purchase transaction between VDC and PortaCom. VDC's
management believes that the MCC Shares and MCC Warrants represent approximately
8.7% of MCC's fully diluted shares. VDC acquired the MCC Shares and MCC Warrants
to acquire a strategic stake in the telecommunications business in China and for
long-term investment purposes. According to information provided by its
management, MCC is a privately-held subsidiary of Metromedia International
Group, Inc., whose shares are listed for trading on the American Stock Exchange.
MCC is an early stage venture that provides telecommunications equipment and
services to operators in the field of wired and wireless local loop telephony
technology, cellular telephony and other telecommunications services in China.
MCC believes that its proposed wired and wireless local loop and cellular
telephony systems are a time and cost effective means of improving the
telecommunications infrastructure in China. In addition, the availability of
fixed telephony systems in China is limited and it is difficult for consumers in
these markets to obtain telephony service. In light of these difficulties and
the economic growth China is capable of experiencing, MCC has focused its
efforts on expanding the availability of telephony systems to China's vast
population. The technology to be provided by MCC offers the current telephony
service providers in China a rapid and cost effective method to expand their
service base.
PROXY PROPOSAL - THE
DOMESTICATION MERGER
For the reasons set forth below, the respective Boards of Directors of each
of VDC and VDC Communications believe that it is in the best interests of VDC
and VDC Communications and their respective members and stockholders to change
the jurisdiction of incorporation of VDC from Bermuda to the State of Delaware
in the United States through an amalgamation and merger of VDC with and into VDC
Communications, and to provide for the automatic conversion of the Series A
Stock (the "Domestication Merger"). MEMBERS OF VDC AND STOCKHOLDERS OF VDC
COMMUNICATIONS ARE URGED TO READ CAREFULLY THE PROXY STATEMENT, INCLUDING THE
RELATED EXHIBITS REFERENCED BELOW AND ATTACHED HERETO, BEFORE VOTING ON THE
PROXY PROPOSAL. Throughout this discussion of the Proxy Proposal, the term "VDC"
refers to VDC Corporation Ltd., the existing Bermuda company, and the term "VDC
Communications" refers to VDC Communications, Inc., a Delaware corporation, as
the surviving entity of its merger with VDC, unless the context denotes
otherwise.
As discussed below, the principal reasons for the Domestication Merger are
the reorganization of VDC as a United States company, the greater flexibility
and predictability of Delaware corporate law and the substantial amount of
judicial interpretation of that law. VDC believes that both the possibility of
greater market liquidity as a U.S. corporation as well as the more favorable
corporate environment and well-established principles of corporate governance
afforded by Delaware law will enable the company to compete more effectively
with other public companies, thus benefiting VDC's members. In addition, many of
VDC's members reside in the United States and VDC must comply with certain
federal securities laws of the United States. Consequently, VDC is required to
comply with both Bermuda and U.S. tax, corporate and securities laws, which is
cumbersome and expensive. Becoming a U.S. corporation is expected to simplify
VDC's tax and securities filings, accounting, and operations, and reduce both
the cost and burden of these reporting obligations.
The Domestication Merger will be effected by amalgamating and merging VDC
with and into VDC Communications. Upon completion of the Domestication Merger,
VDC will cease to exist as a corporate entity and VDC Communications, will
continue to operate the business of VDC and itself. Upon the completion of the
Domestication Merger, the existing Bermuda Charter and Bermuda Bye-laws shall be
changed to the existing Delaware Certificate and Delaware Bylaws of VDC
Communications which are attached hereto as Exhibits "B" and "C", respectively.
19
<PAGE>
Pursuant to the Agreement and Plan of Merger, in substantially the form
attached hereto as Exhibit "A" (the "Merger Agreement"), each outstanding VDC
Share will be automatically converted into one share of common stock of VDC
Communications (the "VDC Communications Common Stock") upon the completion of
the Domestication Merger. The VDC Shares are listed for trading on the American
Stock Exchange, Inc. ("AMEX") and, after the Domestication Merger, the VDC
Communications Common Stock will continue to be traded on AMEX, without
interruption, under the same symbol "VDC" as the VDC Shares are currently
traded.
Under Bermuda law, the affirmative majority vote of 75% of those holders of
the outstanding VDC Shares voting at the VDC Meeting in person or by proxy is
required for approval of the Merger Agreement and the Domestication Merger.
Bermuda law also requires a quorum of two members present in person or by proxy
holding in the aggregate more than one-third of the issued and outstanding VDC
Shares entitled to vote thereon in order for the members to vote on the Merger
Agreement and the Domestication Merger. See "Vote Required for the Proxy
Proposal." The Proxy Proposal has been unanimously approved by the Board of
Directors of VDC. If approved by the members, it is anticipated that the
Domestication Merger will become effective as soon as practicable (the
"Effective Date") following the VDC Meeting. However, pursuant to the terms of
the Merger Agreement, the Merger Agreement may be amended by the Board of
Directors (except that principal terms may not be amended without member
approval) either before or after member approval has been obtained and prior to
the Effective Date if, in the opinion of the Board of Directors of VDC,
circumstances arise which make it inadvisable to proceed under the original
terms of the Merger Agreement. Members of VDC have appraisal rights with respect
to the Domestication Merger. See "Dissenters' Rights."
The discussion set forth below is qualified in its entirety by reference to
the Merger Agreement and the Delaware Certificate and Delaware Bylaws of VDC
Communications, copies of which are attached hereto as Exhibits "A", "B" and
"C", respectively.
APPROVAL BY THE MEMBERS OF THE PROXY PROPOSAL WILL CONSTITUTE APPROVAL OF
THE MERGER AGREEMENT AND THE CERTIFICATE OF INCORPORATION, AS AMENDED, AND THE
AMENDED AND RESTATED BYLAWS OF VDC COMMUNICATIONS AND ALL PROVISIONS THEREOF.
VOTE REQUIRED FOR THE DOMESTICATION MERGER
Approval of the Domestication Merger, which will also constitute approval
of (i) the Merger Agreement, (ii) the Delaware Certificate and the Delaware
Bylaws of VDC Communications as the surviving entity of the Domestication
Merger; and (iii) the cancellation of the authorized but unissued shares of VDC,
including 200,000,000 Class A series of common stock of VDC, par value $0.01
(the "Class A Shares"), none of which are outstanding and the Dissenters'
Shares, will require the affirmative majority vote of 75% of those holders of
the outstanding VDC Shares voting at the VDC Meeting in person or by proxy is
required for approval of the Merger Agreement and other terms of the Proxy
Proposal. Bermuda law also requires a quorum of two members present in person or
by proxy holding in the aggregate more than one-third of the issued and
outstanding VDC Shares entitled to vote thereon in order for the members to vote
on the Domestication Merger.
THE VDC BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE DOMESTICATION
MERGER AND HAS DETERMINED THAT THE DOMESTICATION MERGER IS IN THE BEST INTERESTS
OF THE MEMBERS. THE BOARD OF DIRECTORS RECOMMENDS THAT THE MEMBERS VOTE IN FAVOR
OF APPROVAL OF THE PROXY PROPOSAL.
DISSENTERS' RIGHTS
If the Domestication Merger is consummated, Section 106 of the Bermuda
Companies Act confers upon Dissenting VDC Members (as such term is defined
below) the right to seek an appraisal of the fair value of their VDC Shares
("VDC Appraisal Right") by the Supreme Court of Bermuda (the "Bermuda Court").
The VDC Appraisal Right must, however, be exercised during the Appraisal Period
(as such term is defined below).
20
<PAGE>
THE PROCEDURES SET FORTH IN THE BERMUDA COMPANIES ACT MUST BE FOLLOWED EXACTLY
OR ANY DISSENTERS' RIGHTS MAY BE LOST.
"Dissenting VDC Members" are those members of VDC who: (i) do not vote in
favor of the Domestication Merger and (ii) are not satisfied that they have been
offered "fair value" for their VDC Shares. The "Appraisal Period" is a period
ending on the date that is one month from the date notice is given to VDC
members of the VDC Meeting to consider and vote upon the Domestication Merger.
A Dissenting VDC Member who wishes to exercise a VDC Appraisal Right must
not vote in favor of the Domestication Merger and must apply to the Bermuda
Court prior to the Appraisal Period.
In the event that the Bermuda Court appraises the fair value of the VDC
Shares of a Dissenting VDC Member, prior to the consummation of the
Domestication Merger, VDC will be entitled to either:
(a) pay to such Dissenting VDC Member an amount equal to the value of his
VDC Shares as appraised by the Bermuda Court; or
(b) terminate the consummation of the Domestication Merger if, in the
opinion of VDC's Board of Directors, payment or estimated payment of
the VDC Appraisal Rights in the aggregate constitutes an unacceptable
cash cost in light of VDC Communications' anticipated cash
requirements and VDC's current cash requirements.
In the event that the consummation of the Domestication Merger has occurred
prior to the completion of the appraisal by the Bermuda Court for a Dissenting
VDC Member, then VDC Communications shall pay the difference, if any, between
the amount paid to such Dissenting VDC Member and the amount appraised by the
Bermuda Court.
The information set forth below is a general summary of dissenters' rights
as they apply to VDC members and is qualified in its entirety by reference to
those excerpts from the Bermuda Companies Act which are set forth in Exhibit E
hereto.
In the opinion of the Board of Directors of VDC, the fair value of the
shares of VDC Communications Common Stock that the members are receiving in the
Domestication Merger is at least equal in fair value to the VDC Shares. As the
principal effect of the Domestication Merger is to change the domicile of VDC so
that it will be a publicly traded U.S. corporation, the Board of Directors of
VDC believes that the fair value of the shares of VDC Communications Common
Stock should be at least equal to, if not greater than, the current fair value
of the VDC Shares. The trading market for VDC Shares (AMEX) will continue to be
the trading market for VDC Communications Common Stock. VDC believes the
Domestication Merger will, among other things, enhance the marketability of VDC
Shares (as converted into VDC Communications Common Stock upon the consummation
of the Domestication Merger) by raising VDC's and VDC Communications' profiles
in U.S. capital markets and thus could have a positive effect on the trading of
the stock into which VDC Shares shall be converted.
PRINCIPAL REASONS FOR THE PROPOSED DOMESTICATION
The primary reason for the Domestication Merger is to reorganize VDC as a
publicly traded U.S. corporation domesticated in the State of Delaware. The
Board of Directors of VDC believes that the Domestication Merger is advantageous
to VDC members because it will facilitate access to U.S. markets to raise
capital as well as joint venture and acquisition opportunities with
telecommunications companies. After the Domestication Merger, the price for any
potential acquisitions may be paid in securities of the U.S. corporation
resulting from such merger, which management believes will be more attractive as
consideration for such acquisitions. The Board of Directors of VDC further
believes that the Domestication Merger will increase VDC's ability to meet its
future equity and debt financing needs, enhance the marketability of VDC's
securities by raising VDC's profile in U.S. capital markets,
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allow investors to assess VDC on a more comparable footing with its competitors
domiciled in the United States and, over time, have a positive effect on the
trading of VDC's securities. There cannot be, however, any assurances as to
these perceived effects of the Domestication Merger.
In addition, the Board of Directors and management believe that it is
essential to be able to draw and rely upon well-established principles of
corporate governance in making legal and business decisions. The prominence and
predictability of Delaware corporate law provide a reliable foundation on which
VDC's corporate governance decisions can be based, and the Board of Directors of
VDC believes that members will benefit from the responsiveness of Delaware
corporate law to their needs and to those of the corporation they own.
Finally, VDC conducts no business in Bermuda and has no independent
business justification for being incorporated in Bermuda. Since VDC must comply
with certain securities, corporate and tax laws of both the United States and
Bermuda, changing its jurisdiction of incorporation to the United States will
eliminate the need to comply with Bermuda law. This will result in a substantial
reduction in the cost and burden of complying with legal obligations.
NO CHANGE IN THE BOARD MEMBERS, BUSINESS, MANAGEMENT OR LOCATION OF THE
PRINCIPAL OFFICES OF VDC
The Proxy Proposal will effect only a change in the legal domicile and name
of VDC and other changes of a legal nature which are described in this Proxy
Statement, and will result in the assumption of VDC's business, assets and
liabilities by VDC Communications . The Proxy Proposal will NOT result in any
change in the business, management, fiscal year, assets or liabilities or
location of the principal facilities of VDC. The three members of VDC's Board of
Directors will remain members of the Board of Directors of VDC Communications
after the Domestication Merger, although the Board of Directors of VDC
Communications will be divided into three separate classes, as nearly equal in
number as possible, to serve a three year term and until their successors are
duly elected and qualified with each class being elected at different annual
stockholder meetings. Upon the consummation of the Domestication Merger, one
director will serve for an initial term of three years, another director will
serve an initial term of two years, and a third director will serve an initial
term of one year. The classified Board of VDC Communications contrasts with
VDC's current system of electing all of the directors annually for one year
terms. As noted above, after the Domestication Merger, shares of VDC
Communications Common Stock will be traded, without interruption, on the same
exchange (the American Stock Exchange, Inc.) and under the same symbol ("VDC")
as the VDC Shares are currently traded. VDC believes that the Proxy Proposal
will not affect any of its material contracts with any third parties and that
VDC's rights and obligations under such material contractual arrangements will
continue and be assumed by VDC Communications.
ANTITAKEOVER IMPLICATIONS
Delaware, like many other states, permits a corporation to adopt a number
of measures designed to reduce vulnerability to unsolicited takeover attempts
through amendment of the corporate charter or bylaws or otherwise. In the
discharge of its fiduciary obligations to the members, the respective Boards of
VDC and VDC Communications have evaluated the future vulnerability of VDC
Communications, as the surviving entity of the Domestication Merger, to
potential unsolicited bidders. The Board of VDC has considered certain defensive
strategies designed to enhance its ability to negotiate with an unsolicited
bidder. These strategies include, but are not limited to, the adoption of a
shareholder rights plan and the establishment of a staggered board of directors.
These measures will apply to VDC Communications as the surviving entity of the
Domestication Merger. For a detailed discussion of all of the anti-takeover
measures which will be included in VDC Communications charter and bylaws upon
the consummation of the Domestication Merger, see "THE CHARTERS AND BYLAWS OF
VDC AND VDC COMMUNICATIONS."
In addition to the anti-takeover measures included in VDC Communications'
charter and bylaws, other effects of the Proxy Proposal may be considered to
have anti-takeover implications. Section 203 of the General Corporation Law of
the State of Delaware, from which VDC Communications will not opt out, restricts
certain
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"business combinations" with "interested stockholders" for three years following
the date on which a person becomes an interested stockholder, unless the
business combination is approved in a prescribed manner. See "COMPARATIVE RIGHTS
OF MEMBERS/STOCKHOLDERS - BERMUDA AND DELAWARE CORPORATE LAW - ANTI-TAKEOVER
STATUTES."
The Boards of Directors of VDC and VDC Communications believe that any
future unsolicited takeover attempts could be unfair or disadvantageous to VDC
Communications because, among other reasons, (i) a non-negotiated takeover bid
may be timed to take advantage of temporarily depressed stock prices; (ii) a
non-negotiated takeover bid may be designed to foreclose or minimize the
possibility of more favorable competing bids or alternative transactions; and
(iii) a non-negotiated takeover bid may involve the acquisition of only a
controlling interest in the company's stock, without affording all shareholders
the opportunity to receive the same economic benefits.
By contrast, in a transaction in which a potential acquiror must negotiate
with an independent board of directors, the board can and should take account of
the underlying and long-term values of VDC Communications' business, technology
and other assets, the possibilities for alternative transactions on more
favorable terms, possible advantages from a tax-free reorganization, anticipated
favorable developments in VDC Communications' business not yet reflected in the
stock price and equality of treatment of all shareholders.
TERMS OF THE DOMESTICATION MERGER
Set forth below is a brief description of the material provisions of the
Merger Agreement and the Domestication Merger. This description does not purport
to be complete and is qualified in its entirety by reference to the Merger
Agreement. The full text of the Domestication Merger Agreement is attached as
Exhibit A to this Proxy Statement/Prospectus and is incorporated herein by
reference.
The Merger Agreement provides that VDC will be amalgamated and merged with
and into VDC Communications, a wholly-owned subsidiary of VDC. Pursuant to the
Domestication Merger, on the Effective Date, each outstanding VDC Share (other
than shares with respect to which dissenters' rights are perfected in accordance
with Bermuda law and authorized but unissued shares of VDC, which shall be
canceled) and each outstanding share of Series A Stock and Series B Stock of VDC
Communications Preferred Stock will be converted into one share of VDC
Communications Common Stock. VDC Communications will be the surviving
corporation after the Domestication Merger and VDC shall be discontinued as a
Bermuda corporation.
EFFECTIVE DATE
Once the Domestication Merger is approved by VDC's members, the
Domestication Merger will become effective as soon as (i) VDC Communications
files a Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with the Delaware General Corporation Law and (ii) the
consent of the Minister of Finance of Bermuda has been obtained and the
Certificate of Amalgamation has been filed with the Registrar of Companies in
Bermuda (the "Effective Date"). The Merger Agreement provides that VDC
Communications will file the Certificate of Merger and that VDC will apply for
the consent of the Minister of Finance not later than on the first business day
after all of the conditions to completion of the Domestication Merger are
satisfied or waived.
EXCHANGE OF CERTIFICATES
After the Effective Date, each outstanding certificate which represented
VDC Shares prior to the Domestication Merger will be deemed to evidence the
right to receive that number of shares of VDC Communications Common Stock. A
holder of VDC Shares will not be able to receive dividends or other
distributions on VDC Shares or to vote those shares until the holder exchanges
the holder's VDC Shares certificate for a Common Stock certificate of VDC
Communications. When that exchange occurs, VDC Communications will pay to the
holder all dividends and other distributions (without interest) which were
payable prior to the exchange with respect to the shares of VDC Shares delivered
to the holder as a result of the exchange.
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If any VDC Share certificate is to be issued in a name other than that of
the registered owner, the person requesting the issuance must pay all applicable
transfer and other taxes before VDC Communications will be obligated to issue
the certificate, unless that person establishes to the satisfaction of VDC or
its agent that the taxes have been paid. VDC Communications will not be liable
to any VDC member for any VDC Share certificate, cash or related property
delivered to any government official under any applicable abandoned property or
similar law.
After the Effective Date, VDC Communications' transfer agent will send
transmittal forms to the former VDC members for their use in forwarding VDC
Share certificates to the transfer agent. VDC Shares should not be surrendered
for exchange prior to receipt of the transmittal forms after completion of the
Domestication Merger.
EXPENSES
VDC has agreed to bear the expenses related to the Domestication Merger.
RESALE OF COMMON STOCK
All shares of VDC Communications Common Stock received by VDC members in
the Domestication Merger will be freely transferable, except those shares of VDC
Communications Common Stock received by VDC members who are deemed to be
"affiliates" of VDC prior to the Domestication Merger may be resold by them only
in transactions permitted by the resale provisions of SEC Rule 145 (or SEC Rule
144 in the case of such persons who become affiliates of VDC) or as otherwise
permitted under the Securities Act.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
This summary addresses certain material U.S. federal income tax
consequences that may be relevant to VDC members who are citizens or residents
of the United States, corporations, partnerships or other entities created or
organized under the laws of the United States and estates or trusts, the incomes
of which are subject to U.S. federal income taxation regardless of their sources
(collectively "U.S. Holders") and who hold VDC Shares as capital assets within
the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended
(the "Code"). This summary also addresses certain U.S. federal income tax
consequences to VDC members who are non-U.S. Holders ("Non-U.S. Holders"), as
well as the current holders of Preferred Stock of VDC Communications. This
summary is based on U.S. federal income tax laws, regulations, rulings and
decisions in effect as of the date of this Prospectus, all of which are subject
to change at any time (possibly with retroactive effect). Because the law is
technical and complex, the discussion below necessarily represents only a
general summary.
This summary, however, does not address all aspects of federal income
taxation that may be relevant to a particular VDC member in light of the
member's individual circumstances or to certain types of members (if any)
subject to special treatment under the U.S. federal income tax laws, such as
dealers in securities or foreign currency, financial institutions, insurance
companies, tax-exempt organizations, members who acquired VDC Shares through the
exercise of options or otherwise received VDC Shares as compensation and members
holding VDC Shares as part of a "straddle," "hedge," "conversion transaction,"
"synthetic security," or other integrated investment. Similarly, the effect of
any applicable state, local or foreign tax laws is not discussed.
TAXATION OF VDC MEMBERS
Taxation of U.S. Holders
The Domestication Merger has been structured with the intention that it
qualify as a "reorganization" within the meaning of Section 368(a) of the Code
and that VDC would be a party to that reorganization within the meaning of
Section 368(b) of the Code. VDC believes that it meets the general statutory
requirements for a reorganization under Section 368(a)(1)(D) of the Code.
However, in addition to the statutory requirements of the Code, certain
non-statutory tests must also be satisfied in order for a transaction to qualify
as a reorganization. Under one of the non-statutory requirements (the
"Continuity of Business Enterprise Requirement"), VDC Communications, as the
acquiring corporation, must either: (i) continue the historic business of VDC,
or (ii) use a significant portion of
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VDC's historic business assets in a business. VDC is not certain, and no
assurance can be provided, that the Continuity of Business Requirement is met.
As a result, VDC is not certain whether the Domestication Merger will qualify as
a reorganization. No advance income tax ruling has been sought or obtained from
the United States Internal Revenue Service (the "IRS") regarding the tax
consequences of any of the transactions described herein. In addition, VDC has
not obtained an opinion of counsel with respect to the income tax consequences
of the Domestication Merger.
If the Domestication Merger qualifies as a reorganization within the
meaning of Section 368(a) of the Code, the following will be the material United
States federal income tax consequences to a U.S. Holder, other than a Section
1248 member (as defined below):
(1) A U.S. Holder will recognize no gain or loss upon the exchange in the
Domestication Merger of VDC Shares solely for shares of VDC
Communications Common Stock.
(2) The tax basis of the shares of VDC Communications Common Stock
received by a U.S. Holder pursuant to the Domestication Merger will be
the same as the basis for such U.S. Holder's VDC Shares surrendered in
exchange therefor.
(3) The holding period of a U.S. Holder in the shares of VDC
Communications Common Stock received by such U.S. Holder as a result
of the Domestication Merger will include the period for which such
U.S. Holder held the VDC Shares which are converted into such shares
of VDC Communications Common Stock.
A VDC member who does not vote in favor of the Domestication Merger and
elects under Bermuda law to have the "fair value" of his VDC Shares, determined
in accordance with Section 106(b) of the Bermuda Companies Act, paid to him in
cash if the Domestication Merger is consummated, should be treated as if his VDC
Communications Common Stock was redeemed. Such cash should be treated as having
been received by the member as a distribution in redemption of VDC
Communications Common Stock subject to the provisions and limitations of Section
302 of the Code.
If VDC is a "controlled foreign corporation" as such term is defined in
Section 951 of the Code (a "CFC"), a U.S. Holder of VDC Shares who actually or
constructively owns (or has at any time in the preceding five-year period
actually owned or constructively owned) 10 percent or more of the voting stock
of VDC (a "Section 1248 Member"), generally must include, upon the receipt of
the VDC Communications Common Stock pursuant to the Domestication Merger, in
gross income either the "section 1248 amount" or the "all earnings and profits
amount," as such terms are defined in Section 1.367(b)-2 of the U.S. Treasury
regulations and which generally relate to the Section 1248 Member's
distributable share of the VDC's earnings and profits.
"Section 1248 amounts" and the "all earnings and profits amounts" should
accrue only while a foreign corporation is a CFC. VDC believes it is currently a
CFC. Under proposed U.S. Treasury regulations, the "section 1248 amount" and the
"all earnings and profits amount" would include all net positive earnings and
profits, if any, of VDC that would be attributable to such stock and includible
in income as a dividend under Section 1248 of the Code and the regulations
thereunder if the Section 1248 Member had sold the stock, regardless of whether
VDC was ever a CFC. Although VDC believes that it is currently a CFC, it is the
opinion of VDC management that VDC has no net positive earnings and profits.
Thus, the receipt by any Section 1248 Member of the VDC Communications Common
Stock pursuant to the Domestication Merger would not result in such members
being required to include any amounts in gross income (assuming the transaction
otherwise qualifies as a nontaxable reorganization). However, the amount, if
any, which a Section 1248 Member will include in gross income as a result of the
Domestication Merger cannot be predicted with certainty. Accordingly, Section
1248 Members are urged to consult their tax advisors regarding their U.S.
federal income tax consequences from the Domestication Merger.
Any U.S. Holder who receives shares of VDC Communications Common Stock in
exchange for VDC Shares and takes the position that such exchange is eligible
for nonrecognition treatment is required to file a notice
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with the IRS on or before the last day for filing a U.S. federal income tax
return (taking into account any extensions of time therefor) for the U.S.
Holder's taxable year in which the Domestication Merger occurs. The notice must
contain certain information specifically enumerated in Section 7.367(b)-1 of the
U.S. Treasury regulations, and U.S. Holders are advised to consult their tax
advisors for assistance in preparing such notice. If a U.S. Holder required to
give notice as described above fails to give such notice, and if the U.S. Holder
further fails to establish reasonable cause for the failure, then the IRS will
be required to determine, based on all the facts and circumstances, whether the
conversion of VDC Shares into VDC Communications Common Stock is eligible for
nonrecognition treatment. In making the determination, the IRS may conclude (i)
that the conversion is eligible for nonrecognition treatment, despite such
noncompliance, (ii) that the conversion is eligible for nonrecognition
treatment, provided that certain other conditions imposed by the U.S. Treasury
regulations are satisfied, or (iii) that the conversion is not eligible for
nonrecognition treatment and that any gain recognized will be taken into account
for purposes of increasing the tax basis of the VDC Communications Common Stock
received pursuant to the Domestication Merger. Nevertheless, the failure of any
one U.S. Holder to satisfy the foregoing notice requirements should not bar
other U.S. Holders that do satisfy such requirements from receiving
nonrecognition treatment with respect to the conversion of their VDC Shares into
VDC Communications Common Stock pursuant to the Domestication Merger.
PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS
For U.S. federal income tax purposes, VDC generally will be classified as a
passive foreign investment company (a "PFIC") for any taxable year during which
either (i) 75 percent or more of its gross income is passive income (as defined
for United States federal income tax purposes) or (ii) on average for such
taxable year, 50 percent or more of its assets (by value) produce or are held
for the production of passive income. For purposes of applying the foregoing
tests, all or some of the assets and gross income of VDC's subsidiaries, if any,
will be attributed to VDC.
Under recent modifications to the Code, a corporation will not be treated
as a PFIC with respect to a U.S. Shareholder (a U.S. Holder owning 10 percent or
more of the total combined voting power of all classes of stock) during any
period after December 31, 1997 in which the corporation is a CFC. In addition,
while there can be no assurance with respect to the classification of the VDC as
a PFIC, VDC believes that it has been a PFIC during taxable years prior and may
be a PFIC for the current taxable year.
If VDC is a PFIC and a U.S. Holder has not or does not make a qualified
electing fund election (a "QEF Election"), then (i) the U.S. Holder would be
required to allocate gain recognized upon the exchange of VDC Shares for VDC
Communications Common Stock ratably over the U.S. Holder's holding period for
such VDC Shares, (ii) the amount allocated to each year other than (x) the year
of the disposition of the VDC Shares or (y) any year prior to the beginning of
the first taxable year of VDC for which it was a PFIC, would be subject to tax
at the highest rate applicable to individuals or corporations, as the case may
be, for the taxable year to which such income is allocated, and an interest
charge would be imposed upon the resulting tax attributable to each such year
(which charge would accrue from the due date of the return for the taxable year
to which such tax was allocated), and (iii) gain recognized upon the disposition
of VDC Shares (including upon the exchange of VDC Shares for VDC Communications
Common Stock in the Domestication Merger) would be taxable as ordinary income.
If a U.S. Holder made a QEF Election, then the member generally is
currently taxable on such U.S. Holder's pro rata share of VDC's ordinary
earnings and net capital gains (at ordinary income and capital gains rates,
respectively) for each taxable year of VDC in which VDC is classified as a PFIC,
even if no dividend distributions are received by such U.S. Holder unless such
U.S. Holder made an election to defer such taxes.
The foregoing summary of the possible application of the PFIC rules to VDC
and the U.S. Holders of VDC Shares is only a summary of certain material aspects
of those rules. Because the U.S. federal income tax consequences to a U.S.
Holder under the PFIC provisions may be significant, U.S. Holders of VDC Shares
are urged to discuss those consequences with their tax advisors.
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FAILURE TO QUALIFY AS A REORGANIZATION
If the Domestication Merger does not qualify as a "reorganization" within
the meaning of Section 368(a) of the Code, a U.S. Holder's exchange of VDC
Shares for VDC Communications Common Stock will be treated as a taxable
transaction and a U.S. Holder will generally recognize capital gain or loss
equal to any difference between the U.S. Holder's tax basis in the VDC Shares
and the fair market value of VDC Communications Common Stock received. Such
capital gain or loss may be long-term capital gain or loss depending on the
holding period of the VDC Shares exchanged. Alternatively, the Domestication
Merger may result in some or all of the gain on the exchange of shares being
taxed as ordinary income rather than capital gain under one of two provisions of
the Code.
First, under Section 1246 of the Code, gain from the sale of stock of a
foreign corporation that qualified as a foreign investment company ("FIC") at
anytime when the selling shareholder held its stock is taxed as ordinary income
to the extent of post-1962 earnings and profits (except to the extent of
earnings and profits accumulated as a PFIC). Second, under Section 1248 of the
Code, as described above, if the corporation was a CFC at some time, sales of
its stock may be taxed as ordinary income to the extent of the earnings and
profits of the corporation.
Taxation of Non-U.S. Holders
A Non-U.S. Holder of VDC Shares will be exempt from U.S. federal income and
withholding tax on any gain realized with respect to the exchange of such shares
for shares of VDC Communications Common Stock pursuant to the Domestication
Merger unless the Domestication Merger does not qualify as a reorganization
pursuant to Section 368(a) of the Code and (i) such gain is effectively
connected with the conduct by such Non-U.S. Holder of a trade or business within
the United States, or (ii) such gain is realized by an individual Non-U.S.
Holder who holds such shares as capital assets and is present in the United
States for at least 183 days in the taxable year of the Domestication Merger and
certain other conditions are met.
TAXATION OF PREFERRED STOCKHOLDERS OF VDC COMMUNICATIONS
With respect to the current holders of Preferred Stock of VDC
Communications, the conversion of their shares of Preferred Stock into shares of
VDC Communications Common Stock upon the consummation of the Domestication
Merger will likely qualify as a "recapitalization," a type of reorganization
described in Section 368(a)(1)(E) of the Code. In general, the tax treatment to
such holders of Preferred Stock is the same as that described above for U.S.
Holders of VDC Shares in the Domestication Merger where the Domestication Merger
qualifies as a reorganization. Thus, (i) a holder of Preferred Stock will
recognize no gain or loss upon the exchange of Preferred Stock for VDC
Communications Common Stock, (ii) the tax basis of VDC Communications Common
Stock received by a holder of Preferred Stock will be the same as the basis for
such holder's Preferred Stock surrendered in exchange therefor, and (iii) the
holding period of a holder of Preferred Stock in the shares of VDC
Communications Common Stock received by such holder will include the period for
which he held the shares of Preferred Stock which were converted into VDC
Communications Common Stock.
This summary does not address tax consequences under any laws other than
those of the United States. See "CERTAIN BERMUDA TAX CONSEQUENCES" for a
discussion of tax consequences under Bermuda law which may be relevant to
particular members of VDC. HOLDERS OF VDC SHARES ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE DOMESTICATION MERGER,
INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO
THEM OF THE DOMESTICATION MERGER.
CERTAIN BERMUDA TAX CONSIDERATIONS
At the date hereof, there is no Bermuda income tax, corporation tax,
profits tax, withholding tax, capital gains tax, capital transfer tax or stamp
duty payable by VDC or VDC Communications as a result of or
in connection with the Domestication Merger.
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COMPARATIVE RIGHTS OF MEMBERS/STOCKHOLDERS
GENERAL
As a result of the Domestication Merger, holders of VDC Shares will become
stockholders of VDC Communications and the rights of all such former VDC members
will thereafter be governed by the certificate of incorporation, as amended (the
"Delaware Charter") and the Amended and Restated Bylaws (the "Delaware Bylaws")
of VDC Communications and the DGCL. The rights of the holders of VDC Shares are,
as stated, currently governed by the Memorandum of Association of VDC (the
"Bermuda Charter"), the bye-laws of VDC (the "Bermuda Bye-laws") and The
Companies Act 1981 of Bermuda (as amended to date, the "Bermuda Companies Act").
The following summary, which does not purport to be a complete statement of
the general differences among the rights of the stockholders of VDC
Communications and members of VDC, sets forth certain differences between the
DGCL and the Bermuda Companies Act, the Delaware Charter and Delaware Bylaws and
the Bermuda Charter and the Bermuda Bye-laws. This summary is qualified in its
entirety by reference to the full text of each of such charter and governance
documents, the DGCL and the Bermuda Companies Act. For information as to how
such documents may be obtained, see "Available Information."
BERMUDA AND DELAWARE CORPORATE LAW
The Bermuda Companies Act, under which VDC was incorporated, differs in
certain material respects from the provisions of the DGCL. Set forth below is a
summary of certain significant provisions of the Bermuda Companies Act which are
materially different from the DGCL. The following statements are summaries, and
do not purport to deal with all aspects of Bermuda or Delaware law that may be
relevant to VDC and its members.
VOTING RIGHTS AND QUORUM REQUIREMENTS
BERMUDA. Under Bermuda law, in the absence of any statutory provision or
other agreement to the contrary, the voting rights of members are regulated by
the Bermuda Bye-laws. The Bermuda Bye-laws specify that no business shall be
transacted at a meeting of the members unless a quorum is present when the
meeting proceeds to business. Under the Bermuda Bye-laws, two members present in
person or represented by proxy at the meeting shall form a quorum for all
purposes.
Any member of VDC who is present at a meeting may vote in person, as may
any corporation which is present by a duly authorized representative. The
Bermuda Bye-laws also permit votes by proxy, provided the instrument appointing
the proxy, together with such evidence of its due execution as is satisfactory
to VDC's Board of Directors, is delivered to VDC's registered office (or at any
other place specified in the notice convening the meeting or adjourned meetings)
at least 24 hours prior to the meeting. There is no statutory record date for
meetings under Bermuda law, but the Bermuda Bye-laws provide that the Board of
Directors may fix a record date of not more than 50 days or less than 21 days
immediately prior to the meeting. If the Board does not fix the record date, the
Bermuda Bye-laws provide that it shall be the day immediately preceding the day
on which notice is given.
Under the Bermuda By-laws (subject to any rights or restrictions otherwise
afforded to any VDC Shares), members of VDC are entitled to one vote per VDC
Share.
DELAWARE. Under the DGCL and the Delaware Bylaws, each holder of record of
VDC Communications Common Stock is entitled to one vote per share. The presence,
in person or by proxy, of the holders of record of shares of capital stock
entitling the holders thereof to cast a majority of votes entitled to be cast by
the holders of shares of capital stock shall constitute a quorum. When a
specified item of business requires a vote by a class or series voting as a
class, the holders of a majority of the shares of such class series shall
constitute a quorum (as to such class or series) for the transaction of such
item of business. The presiding officer, if directed by the Board of Directors
or the stockholders entitled to vote at the meeting may adjourn the meeting if
no quorum is present or represented thereat. The presiding officer, if directed
by the Board of Directors, may also adjourn the meeting in which a quorum is
present or represented, if the Board of Directors determines that an adjournment
is necessary or appropriate to enable the stockholders to either consider fully
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information which the Board of Directors determines has not been made
sufficiently or timely available to the stockholders, or otherwise exercise
effectively their voting rights. Under the DGCL, the stockholder entitled to
vote at a meeting of stockholders may authorize another person or persons to act
for him by proxy. Unless the proxy provides for a longer period, no proxy may be
voted or acted upon after three years from its date. Proxies may be transmitted
by telegram, cablegram or other means of electronic transmission to the person
who will be the holder of the proxy or to a proxy solicitation firm, proxy
support service or like agent duly authorized by the person who will be the
holder of the proxy to receive such transmission, provided that such proxy
either sets forth or is submitted with information from which it can be
determined that the telegram, cablegram or other electronic transmission was
authorized by the stockholder. The Delaware Bylaws provide that all matters
subject to a vote by the stockholders may (but need not) be by ballot, such
being at the discretion of the Board of Directors or the officer presiding at
the meeting.
VOTING RIGHTS WITH RESPECT TO EXTRAORDINARY CORPORATE TRANSACTIONS
BERMUDA. The Bermuda Companies Act requires shareholder approval for a
number of actions and the Bye-laws of a Bermuda company may provide for
additional approvals and, in certain cases, modify the requirements of the
Bermuda Companies Act. In the case of VDC, the principal shareholder approval
requirements are for alteration to the Bermuda Charter or the Bermuda Bye-laws,
increases in authorized share capital, creation of new classes of shares,
modification of rights attaching to existing classes of shares, compromises or
arrangements with creditors or shareholders, discontinuances to another
jurisdiction, winding up, whether or not for the purpose of a sale of the
undertaking, and mergers or amalgamations. In some cases there are special
quorum and/or majority voting provisions and/or rights to object to the court
and/or appraisal rights.
In the case of the Domestication Merger, the quorum requirement is at least
two persons holding or representing by proxy one third of the issued VDC Shares
and it must be approved by a majority vote of three fourths of those voting at
the VDC Meeting.
DELAWARE. Approval of mergers and consolidations and of sales, leases or
exchanges of all or substantially all of the property or assets of a company,
require the approval of the holders of a majority of the outstanding shares
entitled to vote, except that no vote of stockholders of the company surviving a
merger is necessary if (i) the merger does not amend the certificate of
incorporation of the company, (ii) each outstanding share immediately prior to
the effective date of the merger is to be an identical share after the merger,
and (iii) either no common shares of the company and no securities or
obligations convertible into common shares are to be issued in the merger, or
the common shares to be issued in the merger plus common shares initially
issuable on conversion of other securities issued in the merger does not exceed
20% of the common shares of the company immediately before the effective date of
the merger.
DISSENTERS' RIGHTS
BERMUDA. Under Bermuda law, a dissenting member of a company participating
in certain transactions may, under varying circumstances, receive cash in the
amount of the fair market value of his shares (as determined by a court), in
lieu of the consideration he or she would otherwise receive in any such
transactions. Bermuda law generally does not condition dissenters' rights to
circumstances in which a vote of the stockholders of the surviving company is
required. Bermuda law, in general, provides for dissenters' rights in an
amalgamation between non-affiliated companies, a scheme of arrangement, a
reconstruction and certain other transactions. For a more thorough discussion of
dissenters' rights under Bermuda law, see "Rights of Dissenting Stockholders."
DELAWARE. Stockholders are entitled to demand appraisal of their shares in
the case of mergers or consolidations, except where (i) they are stockholders of
the surviving company and the merger did not require their approval under the
DGCL, or (ii) the company shares are either listed on a national securities
exchange or on the NASDAQ National Market or held of record by more than 2,000
stockholders. Appraisal rights are available in either (i) or (ii) above,
however, if the stockholders are required by the terms of the merger or
consolidation to accept any consideration other than (a) shares of the company
surviving or resulting from the merger or consolidation, (b) shares of another
company which are either listed on a national securities exchange or held of
record by more than 2,000 stockholders, (c) cash in lieu of fractional shares,
or (d) any combination of the foregoing. Appraisal rights are not available in
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the case of a sale, lease, exchange or other disposition by a company of all or
substantially all of its property and assets.
DERIVATIVE SUITS
BERMUDA. In certain limited circumstances, such as a fraud, an action can
be brought by members, on behalf of the company, seeking to enforce a right of
action vested in or derived from the company. However, such a derivative action
will not be permitted where there is an alternative action available which would
provide an adequate remedy. Any property or damages recovered by derivative
action go to the company, not to the plaintiff members. The Bermuda Companies
Act enables a member who complains that the affairs of a company are being or
have been conducted in a manner oppressive or prejudicial to some part of the
members, including himself, to petition the court, which may, if it is of the
opinion that to wind up a company would unfairly prejudice those members, but
that otherwise the facts would justify a winding up order on just and equitable
grounds, make such order as it thinks fit. A statutory right of action is
conferred on subscribers to shares of a Bermuda company against persons
(including directors and officers) responsible for the issuance of a prospectus
in respect of damage suffered by reason of an untrue statement therein, but this
confers no right of action against the company itself. In addition, the company
itself (as opposed to its members) may take action against the officers
(including directors) of a Bermuda company for breach of their statutory and
fiduciary duty to act honestly and in good faith with a view to the best
interests of the company.
DELAWARE. Derivative actions may be brought in Delaware by a stockholder on
behalf of, and for the benefit of, the corporation. The DGCL provides that a
stockholder must state in the complaint that he or she was a stockholder of the
corporation at the time of the transaction of which he or she complains. A
stockholder may not sue derivatively unless he or she first makes demand on the
corporation that it bring suit and such demand has been refused, unless it is
shown that such demand would have been futile. No suit shall be brought against
any officer, director, or stockholder for any debt of a corporation of which he
or she is an officer, director, or stockholder, until judgment be obtained
therefor against the corporation and execution thereon returned.
SPECIAL MEETINGS OF MEMBERS/STOCKHOLDERS
BERMUDA. Under Bermuda law, a special meeting of members may be convened by
the Board of Directors at any time and must be convened upon the requisition of
members holding not less than one-tenth of the paid-in capital of the company
carrying the right to vote at general meetings.
DELAWARE. Stockholders generally do not have the right to call meetings of
stockholders unless such right is granted in the certificate of incorporation or
bylaws. However, if a company fails to hold its annual meeting within a period
of 30 days after the date designated therefor, or if no date has been designated
for a period of 13 months after its last annual meeting, the Delaware Court of
Chancery may order a meeting to be held upon the application of a stockholder or
director. The Delaware Charter and the Delaware Bylaws provide that special
meetings of stockholders may only be called by either the Chief Executive
Officer or the President, or pursuant to a written request of a majority of the
Board of Directors. Special meetings may not be called by the stockholders. See
"--The Charters and Bylaws of VDC and VDC Communications--Special Meeting of
Members/Stockholders; Advance Notice Requirements for Member/Stockholder
Proposals and Director Nominations" below.
AMENDMENTS TO CHARTER
BERMUDA. Amendments to the memorandum of association and bye-laws of a
Bermuda company must be submitted to a general meeting of the members and shall
be effective only to the extent approved by the members at such meeting.
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DELAWARE. Amendments to the certificate of incorporation require the
affirmative vote of the holders of two-thirds of the combined voting power of
the then outstanding shares entitled to vote thereon; except that if a
resolution to amend the certificate of incorporation is adopted by the
affirmative vote of at least eighty percent of the board of directors, approval
of the amendment shall only require the affirmative vote of the holders of a
majority combined voting power of the then outstanding shares of the stock
entitled to vote generally on such amendment.. See "-- Charter and Bylaw
Provisions -- Amendments to Charter."
ANTI-TAKEOVER MEASURES
BERMUDA. Bermuda does not currently have a tender offer statute. However,
the Bermuda Companies Act provides that where an offer is made for shares in a
company by another company and, within four months of the offer, the holders of
not less than 90% in value of the shares that are the subject of such offer
accept it, the offeror may by notice, given within two months after the
expiration of the four months, require that dissenting members to transfer their
shares under the terms of the offer. Dissenting members may apply to a court
within one month of the notice objecting to the transfer, and the court may give
such order as it thinks fit. The Bermuda Companies Act also provides that the
holders of not less than 95% of the shares of any class of shares in a company
may give notice to the remaining member or class of members of the intention to
acquire their shares on the terms set out in the notice. Recipients of the
notice have a right to apply to the Bermuda courts for an appraisal.
While the Bermuda Bye-laws do not contain anti-takeover measures, the
Bye-laws of a number of listed Bermuda companies contain provisions common in
the United States. These provisions have not been fully tested before the courts
in Bermuda. The ability of the Board of Directors to implement them at the
relevant time may be restricted by their duty to act in the interests of the
shareholders as a whole.
DELAWARE. Generally, Section 203 of the DGCL prohibits a publicly held
Delaware company from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless (i) prior to such
time, the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the outstanding voting stock, or (iii) on or
after such date the business combination is approved by the board of directors
and by the affirmative vote of at least 66 2/3% of the outstanding voting shares
that are not owned by the interested stockholder. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the stockholder. An "interested stockholder" is a person who,
together with affiliates or associates, owns (or within three years, did own)
15% or more of the company's voting stock.
LIMITATIONS ON DIRECTOR LIABILITY
BERMUDA. Under Bermuda law, a director must observe the statutory duty of
care requiring such director to act honestly and in good faith with a view to
the best interests of the company and exercise the care, diligence and skill
that a reasonably prudent person would exercise in comparable circumstances.
Bermuda law renders void any provision in the bye-laws or any contract between a
company and any such director exempting him from or indemnifying him against any
liability in respect of fraud or dishonesty of which he or she may be guilty in
relation to the company.
A director may be found jointly and severally liable only if it is proved
that he knowingly engaged in fraud or dishonesty. Otherwise, Bermuda courts will
determine the percentage of liability to be borne by each person responsible for
the loss bearing in mind the nature of the conduct of each such person and the
relationship between that conduct and the loss sustained.
DELAWARE. Under Delaware law, a company may include a provision in its
certificate of incorporation eliminating or limiting the liability of a director
to the company or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that a company may not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
certain acts concerning unlawful payments of dividends or stock purchases or
redemptions under Section 174 of the DGCL, or (iv) for any transactions from
which a director derived an improper personal benefit. The Delaware Charter
contains certain provisions limiting the liability of directors as permitted
under Delaware law. See "-- Charter and Bylaw Provisions -- Limitation of
Director Liability."
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INDEMNIFICATION OF DIRECTORS AND OFFICERS
BERMUDA. Under Bermuda law, a company is permitted to indemnify its
officers and directors, out of the funds of the company, against any liability
incurred by him in defending any proceedings, whether civil or criminal, in
which judgment is given in his favor, or in which he or she is acquitted, or in
connection with any application under relevant Bermuda legislation in which
relief from liability is granted to him by the court. The Bermuda Bye-laws
contain certain provisions regarding the indemnification of officers and
directors. See "--Charter and Bylaw Provisions--Indemnification of Directors and
Officers."
DELAWARE. Under Delaware law, a company is permitted to indemnify its
officers, directors and certain others against any liability incurred in any
civil, criminal, administrative or investigative proceeding if such individual
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the company and, with respect to any
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. In addition, under Delaware law, to the extent that a director,
officer, employee or agent of a company has been successful on the merits or
otherwise in defense of any proceeding referred to above or in defense of any
claim, issue or matter therein, he or she must be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith. The Delaware Bylaws contain provisions regarding the
indemnification of officers and directors. See "-- Charter and Bylaw
Provisions -- Indemnification of Directors and Officers."
INSPECTION OF BOOKS AND RECORDS; MEMBER/SHAREHOLDER LISTS
BERMUDA. Bermuda law provides the general public with a right of inspection
of a Bermuda company's public documents at the office of the Registrar of
Companies in Bermuda, and provides a Bermuda company's members with a right of
inspection of such company's bye-laws, minutes of general (member) meetings, and
audited financial statements. The register of members is also open to inspection
by members free of charge and, upon payment of a small fee, by any other person.
A Bermuda company is required to maintain its share register in Bermuda but may
establish a branch register outside of Bermuda. A Bermuda company is required to
keep at its registered office a register of its directors and officers which is
open for inspection by members of the public without charge. Bermuda law does
not, however, provide a general right for members to inspect or obtain copies of
any other corporate records.
DELAWARE. Any stockholder of record, in person or by attorney or other
agents, upon written demand under oath stating the purpose thereof, has the
right during the company's usual hours for business to inspect, for any proper
purpose, the company's stock ledger, a list of its stockholders, and its other
books and records, and to make copies or extracts therefrom.
PREEMPTIVE RIGHTS
BERMUDA. Under Bermuda law, no member has a preemptive right to subscribe
for additional issues of a company's shares unless, and to the extent that, such
right is expressly granted to such member under the Bye-laws of a company or
under any contract between such member and the company. The Bermuda Bye-laws do
not provide for preemptive rights and VDC is not a party to any contract with
any holder of VDC Shares providing such rights.
DELAWARE. Under Delaware law, no stockholder has a preemptive right to
subscribe to additional issues of a corporation's stock unless, and to the
extent that, such right is expressly granted to such stockholder in the
corporation's certificate of incorporation. The Delaware Charter does not
provide for preemptive rights. Shares of Preferred Stock of VDC Communications
have the same preemptive rights as shares of VDC Communications Common Stock.
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DIVIDENDS
BERMUDA. Bermuda law permits payment of dividends and distribution of
contributed surplus by a company unless the company, after the payment is made,
would be unable to pay its liabilities as they become due, or the realizable
value of the company's assets would be less, as a result of the payment, than
the aggregate of its liabilities and its issued share capital and share premium
accounts. The excess of the consideration paid on issue of shares over the
aggregate par value of such shares must (except in certain limited
circumstances) be credited to a share premium account. Share premium may be
distributed in certain limited circumstances, for example to pay up unissued
shares which may be distributed to stockholders in proportion to their holdings,
but is otherwise subject to limitation.
DELAWARE. Delaware law generally allows dividends to be paid out of surplus
of the corporation or out of the net profit of the corporation for the current
fiscal year and/or the prior fiscal year. No dividends may be paid if they would
result in the capital of the corporation being less than the capital represented
by the preferred shares of the corporation.
NUMBER AND QUALIFICATIONS OF DIRECTORS; SIZE OF BOARD
BERMUDA. Under Bermuda law, the minimum number of directors on the board of
directors of a company is two, although the minimum number of directors may be
set higher and the maximum number of directors may also be set in accordance
with the bye-laws of the company. The exact number of directors is usually fixed
by the members in the general meetings. Only the members may increase or
decrease the number of director seats last approved by the members.
The Bermuda Bye-laws provide that the number of directors which constitute
VDC's Board of Directors shall not be less than two (2), and that the specific
number of directors constituting the Board shall be determined from time to time
by the members in a general meeting. Only the members may change the size of
VDC's Board.
DELAWARE. Under Delaware law, the minimum number or directors is one. The
number of directors constituting the board of directors of a Delaware
corporation may be specified in the bylaws or the certificate of incorporation.
Accordingly, unless the certificate of incorporation provides otherwise, the
directors may change the number of directors constituting the board by amending
the bylaws. If the number of directors is specified in the certificate of
incorporation, then any change in the number of directors must be made pursuant
to a certificate of amendment approved by the stockholders.
The number of directors of VDC Communications is set in the Delaware
Bylaws, and the Delaware Charter does not provide otherwise. The Delaware Bylaws
provide that the number of directors is initially set at three, but shall be
determined from time to time by the Board of Directors.
ELECTIONS; CLASSIFIED BOARD OF DIRECTORS
BERMUDA. Under Bermuda law, directors are elected annually by the members
at the annual general meeting or in such other manner as the bye-laws may
provide. Bermuda law permits classification of a corporation's board of
directors. The Bermuda Charter does not require the division of directors into
classes, and the Bermuda Bye-laws provide that directors hold office until the
next annual general meeting of members and until their respective successors are
chosen and qualify.
DELAWARE. Delaware law requires that an annual meeting of the stockholders
be held for the election of directors. Delaware law permits, but does not
require, the adoption of a classified board of directors with staggered terms. A
maximum of three classes of directors is permitted by Delaware law, with members
of one class to be elected each year for a maximum term of three years. The
Delaware Charter and the Delaware Bylaws do provide for such a classified board
of directors with the three classes of directors serving in staggered terms.
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REMOVAL OF DIRECTORS
BERMUDA. Subject to the bye-laws, the members of a Bermuda company may, at
a special general meeting called for that purpose, remove any director or the
entire board of directors provided that notice of the meeting shall be served on
the director or directors concerned not less than fourteen days before such
meeting. Any director subject to such notice shall be entitled to be heard at
the meeting. The Bermuda Bye-laws provide that directors may be removed from
office by a simple majority of votes cast, which vote is otherwise in accordance
with the Bermuda Companies Act.
DELAWARE. Unless a corporation's certificate of incorporation provides
otherwise, Delaware law allows directors of a corporation to be removed with or
without cause by the vote of the holder of a majority of the shares entitled to
vote in any election of directors. The Delaware Charter provides that, except as
may be provided in a resolution or resolutions providing for any class or series
of preferred shares with respect to any directors elected by the holders of such
class or series, directors may be removed only for cause by the affirmative vote
of the holders of at least two-thirds of the combined voting power of all of the
shares of capital stock of VDC Communications then entitled to vote generally in
the election of directors, voting together as a single class. In addition to the
consent of the Board of Directors, the affirmative vote of the holders of
two-thirds of the combined voting power of all of the shares of capital stock of
VDC Communications then entitled to vote on any proposed amendment to the
Delaware Charter is required to amend or repeal, or adopt any provision
inconsistent with, this provision of the Delaware Charter.
THE CHARTERS AND BYLAWS OF VDC AND VDC COMMUNICATIONS
The Delaware Charter and Delaware Bylaws differ in certain material
respects from the provisions of the Bermuda Charter and Bermuda Bye-laws. Set
forth below is a summary of certain significant material differences between
such documents. The following statements are summaries and do not purport to
deal with all aspects of such documents that may be relevant to VDC and its
members.
AUTHORIZED CAPITAL STOCK
VDC. VDC has, as of April 7, 1998, 50,000,000 authorized VDC Shares, par
value of $2.00 per share, of which 11,787,441 are issued and outstanding, and
200,000,000 authorized Class A Shares, par value of $0.01, none of which are
issued and outstanding.
VDC COMMUNICATIONS. The Delaware Charter authorizes the issuance of
50,000,000 shares of Common Stock, par value $0.0001 per share, and 10,000,000
shares of Preferred Stock, par value $0.0001 per share. There are currently 100
shares of VDC Communications Common Stock issued and outstanding. All of these
shares are owned by VDC and will be cancelled upon the Effective Date of the
Domestiation Merger. Under the DGCL, shares of VDC Communications Common Stock
that will continue to be held by VDC Communications will not be entitled to vote
and will not be counted for purposes of determining whether a quorum of
stockholders entitled to vote at a meeting is present.
Under the Delaware Charter, the Board of Directors of VDC Communications is
authorized to issue preferred shares in series and to fix the powers,
designations, preferences, or other rights of the shares and the qualifications,
limitations, and restrictions of such shares. Preferred Stock issued after the
Domestication Merger may rank preferentially to VDC Communications Common Stock
as to dividend rights, liquidation preferences, or both, may have full or
limited voting rights (including multiple voting rights and voting rights as a
class), and may be convertible into VDC Communications Common Stock. VDC
Communications has no present plans or understandings for the issuance of any
preferred shares. However, any such issuance in the future could adversely
affect the rights of holders of VDC Communications Common Stock, particularly if
the preferred shares are given preferential dividend, liquidation, or voting
rights.
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LIMITATIONS ON DIRECTOR LIABILITY
VDC. The Bermuda Charter limits director liability to the extent permitted
by the Bermuda Companies Act as described under "-- Bermuda and Delaware
Corporate Law -- Limitations on Directory Liabiltiy."
VDC COMMUNICATIONS. The Delaware Charter limits director liability to the
extent permitted by the DGCL as described under "-- Bermuda and Delaware
Corporate Law -- Limitations on Director Liability."
INDEMNIFICATION OF DIRECTORS AND OFFICERS
VDC. The Bermuda Bye-laws generally provide that the officers and directors
of VDC Bermuda shall be indemnified and held harmless out of the funds of VDC
from and against all civil liabilities, losses, damages and expenses (including
reasonable legal and other costs) which they may incur by reason of any act done
or omitted in the execution of their duty in their respective offices; provided,
that VDC shall not be obligated to extend such indemnity to any matter in
respect of any fraud or dishonesty which may attach to any of such persons.
VDC COMMUNICATIONS. The Delaware Charter and Delaware Bylaws generally
provide that officers, directors and certain others will be indemnified by VDC
Communications against any liability incurred in any civil, criminal,
administrative or investigative proceeding if such individual acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of VDC Communications, and, with respect to any criminal
proceeding, had no reasonable cause to believe his conduct was unlawful. In
addition, to the extent that a director, officer, employee or agent of VDC
Communications has been successful on the merits or otherwise in defense of any
proceeding referred to above or in defense of any claim, issue or matter
therein, he or she will be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
AMENDMENTS TO CHARTER AND BYLAWS
VDC. The Bermuda Charter and Bermuda Bye-laws may be amended by a vote of
the holders of a majority of the outstanding VDC Shares, unless otherwise
provided in such documents. See "-- Bermuda and Delaware Corporate
Law -- Amendments to Charter."
VDC COMMUNICATIONS. The Delaware Charter and Delaware Bylaws may be amended
by a vote of the holders of two-thirds of the combined voting power of the then
outstanding shares of stock entitled to vote on any proposed amendment thereto,
unless otherwise provided in such documents; provided, however, that in the
event a resolution to amend the Delaware Charter is adopted by the affirmative
vote of at least 80% of the members of the Board of Directors, approval of an
amendment to the Delaware Charter shall only require the affirmative vote of the
holders of a majority combined voting power of the then outstanding shares of
the stock entitled to vote generally on such amendment. See "-- Bermuda and
Delaware Corporate Law -- Amendments to Charter."
SPECIAL MEETINGS OF MEMBERS/STOCKHOLDERS; ADVANCE NOTICE REQUIREMENTS
FOR MEMBER/STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
VDC. The Bermuda Bye-laws provide that the Board of Directors of VDC
Bermuda may, whenever they think fit, and shall, when required by the Bermuda
Companies Act, the Chairman of the Board of Directors, or the President of VDC
Bermuda, convene a special meeting. The Bermuda Bye-laws also provide that
special meetings may be convened by the holders of 10% of the outstanding shares
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of VDC Bermuda's voting shares in accordance with the Bermuda Companies Act. See
"-- Bermuda and Delaware Corporate Law -- Special Meetings of Stockholders."
VDC COMMUNICATIONS. The Delaware Charter and the Delaware Bylaws provide
that special meetings of stockholders may only be called by either the Chief
Executive Officer or the President, or pursuant to a written request of a
majority of the Board of Directors. Special meetings may not be called by the
stockholders.
These provisions could have the effect of delaying consideration of a
stockholder proposal until the next annual meeting. The provisions would also
prevent the holders of a majority of the voting power of the capital stock of
VDC Communications entitled to vote from unilaterally using the written consent
procedure to take stockholder action. Moreover, a stockholder could not force
the Board of Directors to call a special meeting of the stockholders prior to
the time such persons believe such consideration to be appropriate, except as
required by Delaware law.
The Delaware Charter and the Delaware Bylaws establish advance notice
procedures with regard to stockholder proposals and the nomination, other than
by or at the direction of the Board of Directors or a committee thereof, of
candidates for election as directors. These procedures provide that stockholder
nominations for the election of directors at an annual meeting must be in
writing and received by the Secretary of VDC Communications not less than 50
days nor more than 75 days prior to the meeting; provided, however, that in the
event that less than 60 days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder must be
received not later than the close of business on the tenth day following the day
on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. The notice of nominations for the
elections of directors must set forth certain information with respect to the
stockholder giving the notice and with respect to each nominee.
By requiring advance notice of nominations by stockholders, the foregoing
procedures will afford the Board of Directors an opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the Board of Directors, to inform stockholders about such
qualifications. By requiring advance notice of other proposed business, such
procedures will provide the Board of Directors with an opportunity to inform
stockholders prior to such meetings, of any business proposed to be conducted at
such meetings, together with any recommendations as to the Board of Directors'
position regarding action to be taken with respect to such business, so that
stockholders can better decide whether to attend such a meeting or to grant a
proxy regarding the disposition of any such business.
Although the Delaware Charter and the Delaware Bylaws do not give the Board
of Directors any power to approve or disapprove stockholder nominations for the
election of directors or proposals for action, they may have the effect of
precluding a contest for the election of directors or the consideration of
stockholder proposals if the proper procedures are not followed, and of
discouraging or deterring a third party from conducting a solicitation of
proxies to elect its own slate of directors or to approve its own proposal, with
regard to whether consideration of such nominee or proposals might be harmful or
beneficial to VDC Communications and its stockholders.
ANTI-TAKEOVER MEASURES
VDC. The Bermuda Charter does not contain any material provisions regarded
as anti-takeover measures.
VDC COMMUNICATIONS. Delaware law has been widely viewed to permit a
corporation greater flexibility in governing its internal affairs and its
relationships with stockholders and other parties than do the laws of many other
states. In particular, Delaware law permits a corporation to adopt a number of
measures designed to reduce a corporation's vulnerability to hostile takeover
attempts. Such measures are either not permitted or are more narrowly drawn
under Bermuda law. Moreover, many of these provisions have not been fully tested
before the courts of Bermuda. The ability of a Board of Directors of a Bermuda
company to implement anti-takover measures may be restriced by its duty to act
in the interests of the shareholders as a whole.
As discussed herein, certain provisions of the Delaware Charter and the
Delaware Bylaws could be considered to be anti-takeover measures. The
establishment by the Delaware Charter and the Delaware Bylaws of a classified
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board of directors, and the Delaware Bylaws' provisions that the stockholders
cannot call special stockholders' meetings, may be construed as anti-takeover
measures. In addition, certain types of "poison pill" defenses (such as
shareholder rights plans) have been upheld by Delaware courts, while their
effectiveness in Bermuda is less certain.
Delaware has adopted a statute regulating tender offers, which statute is
intended to limit coercive takeovers of companies incorporated in that state.
Bermuda has no comparable statute. The Delaware law provides that a corporation
may not engage in any business combination with any interested stockholder for a
period of three years following the date that such stockholder became an
interested stockholder, unless (i) prior to the date the stockholder became an
interested stockholder the board of directors approved the business combination
or the transaction which resulted in the stockholder becoming an interested
shareholder, or (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested shareholder, the interested shareholder owned
at least 85% of the voting stock, or (iii) the business combination is approved
by the board of directors and authorized by 66 2/3% of the outstanding voting
stock which is not owned by the interested stockholder. Consequently, the
Delaware law would not apply to the current holders of VDC Shares, VDC
Communications Common Stock or Preferred Stock because the VDC Communications
Board of Directors has approved the Domestication Merger. An interested
stockholder means any person who is the owner of 15% or more of the outstanding
voting stock, however, the statute provides for certain exceptions to parties
who otherwise would be designated interested stockholders. Any corporation may
decide to opt out of the statute in its original certificate of incorporation
or, at any time, by action of its shareholders. VDC Communications has no
present intention of opting out of the statute.
There can be no assurance that the VDC Communications Board of Directors
would not adopt any further anti-takeover measures available under Delaware law
(some of which may not require stockholder approval). Moreover, the availability
of such measures under Delaware law, whether or not implemented, may have the
effect of discouraging a future takeover attempt which a majority of VDC
Communications' stockholders may deem to be in their best interests or in which
stockholders may receive a premium for their shares over then current market
prices. As a result, stockholders who might desire to participate in such
transactions may not have the opportunity to do so. Stockholders should
recognize that, if adopted, the effect of such measures, along with the
possibility of discouraging takeover attempts, may be to limit in certain
respects the rights of stockholders of VDC Communications.
The Boards of Directors of VDC and VDC Communications recognize that
hostile takeover attempts do not always have the unfavorable consequences or
effects described above and may frequently be beneficial to the stockholders,
providing all of the stockholders with considerable value for their shares.
However, the Boards of Directors of VDC and VDC Communications believe that the
potential disadvantages of unapproved takeover attempts (such as disruption of
VDC Communications' business and the possibility of the terms which may be less
than favorable to all of the stockholders than would be available in a
board-approved transaction) are sufficiently great such that prudent steps to
reduce the likelihood of such takeover attempts and to enable the VDC Board of
Directors to consider fully the proposed takeover attempt and negotiate actively
its terms are in the best interest of VDC and its stockholders.
It should be noted that the voting rights to be accorded to any unissued
series of Preferred Stock remain to be fixed by the VDC Communications Board of
Directors. Accordingly, if the VDC Communications Board of Directors so
authorizes, the holders of Preferred Stock may be entitled to vote separately as
a class in connection with approval of certain extraordinary corporate
transactions and circumstances where Delaware law does not ordinarily require
such a class vote, or might be given a disproportionately large number of votes.
Such Preferred Stock could also be convertible into a large number of shares of
VDC Communications Common Stock under certain circumstances or have other terms
which might make acquisition of a controlling interest in VDC Communications
more difficult or more costly, including the right to elect additional directors
to the VDC Communications Board of Directors. Potentially, the Preferred Stock
could be used to create voting impediments or to frustrate persons seeking to
effect a merger or otherwise to gain control of VDC Communications. Also, the
Preferred Stock could be privately placed with purchasers who might side with
the management of VDC Communications in opposing a hostile tender offer or other
attempt to obtain control.
37
<PAGE>
The VDC Communications Board of Directors may also authorize the issuance
of Preferred Stock in connection with the various corporate transactions,
including corporate partnering arrangements and for the purpose of adopting a
shareholder rights plan. Future issuances of Preferred Stock may be utilized as
an anti-takeover device. This could have the effect of precluding stockholders
from taking advantage of a situation which might otherwise be favorable to their
interests.
IF THE DOMESTICATION MERGER IS APPROVED IT IS NOT THE PRESENT INTENTION OF
THE VDC COMMUNICATIONS BOARD OF DIRECTORS TO SEEK STOCKHOLDER APPROVAL PRIOR TO
ANY ISSUANCE OF THE VDC COMMUNICATIONS PREFERRED OR COMMON STOCK, EXCEPT AS
REQUIRED BY LAW OR REGULATION. Frequently, opportunities arise that require
prompt action, and it is the belief of the VDC Communications Board of Directors
that the delay necessary for stockholder approval of a specific issuance would
be a detriment to VDC and its stockholders. The VDC Board of Directors does not
intend to issue any VDC Preferred Stock except on terms which the VDC Board of
Directors deems to be in the best interest of VDC and its then existing
stockholders.
The establishment by the Delaware Charter and the Delaware Bylaws of a
classified board of directors, and the Delaware Bylaws' provision that only the
holders of a majority of shares of outstanding capital stock may call special
stockholders' meetings, may be construed as anti-takeover measures. In addition,
certain types of "poison pill" defenses (such as shareholder rights plans) have
been upheld by Delaware courts, while their effectiveness in Bermuda is less
certain.
The existence of a classified board of directors may deter so-called
"creeping acquisitions" in which a person or group seeks to acquire: (i) a
controlling position without paying a normal control premium to the selling
shareholders; (ii) a position sufficient to exert control over VDC through a
proxy contest or otherwise; or (iii) a block of stock with a view toward
attempting to promote a sale or liquidation or a repurchase by VDC of the block
at a premium, or an exchange of the block for assets of VDC. Faced with a
classified VDC Board of Directors (See "-- Elections; Classified Board of
Directors"), such a person or group would have to assess carefully its ability
to control or influence VDC. If free of the necessity to act in response to an
immediately threatened change in control, the VDC Board of Directors can act in
a more careful and deliberative manner to make and implement appropriate
business judgments in response to a creeping acquisition.
CAPITALIZATION; BLANK CHECK PREFERRED STOCK
VDC SHARES. The entire authorized capital stock of VDC consists of
50,000,000 Common Shares, $2.00 par value per share, of which 11,787,441 shares
were issued and outstanding as of September 4, 1998. All of the issued and
outstanding VDC Shares have been duly authorized and are validly issued, fully
paid and nonassessable. There are also outstanding options for the purchase of
186,500 VDC Shares.
In addition, there are outstanding warrants for the purchase of 938,546 VDC
Shares, all of which expire on the date that is thirty days following the
effective date of a registration statement registering the resale of the shares
issuable upon exercise of the warrants. Except for these options and warrants,
there are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights or other contracts or
commitments that could require VDC to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation or similar right with
respect to VDC.
VDC COMMUNICATIONS COMMON AND PREFERRED STOCK. VDC's capital stock consists
of 50,000,000 authorized shares of common stock, $0.0001 par value per share, of
which 100 shares are issued and outstanding as of September 4, 1998, and (b)
10,000,000 authorized shares of preferred stock, $0.0001 par value per share, of
which 8,487,5000 are issued and outstanding as of September 4, 1998. Of the
8,487,500 issued shares of preferred stock, 3,987,500 shares consist of Series A
Convertible Preferred Stock (the "Series A Stock") and 4,500,000 shares consist
of Series B Convertible Preferred Stock (the "Series B Stock").
38
<PAGE>
Upon the consummation of the Domestication Merger, VDC Communications will
have 20,274,941 outstanding shares of common stock, no outstanding shares of
Series A Stock and no outstanding shares of Series B Stock. Authorized but
unissued shares of Preferred Stock of VDC Communications will be available for
future issuance after the Domestication Merger.
Under the Delaware Charter, the VDC Communications Board of Directors has
the authority to determine or alter the rights, preferences, privileges and
restrictions to be granted to or imposed upon any wholly unissued series of
Preferred Stock and to fix the number of shares constituting any such series and
to determine the designation thereof. See "-- Anti-Takeover Measures."
The VDC Communications Board of Directors may authorize the issuance of
Preferred Stock in connection with various corporate transactions, including
corporate partnering arrangements. The VDC Communications Board of Directors may
also authorize the issuance of Preferred Stock for the purpose of adopting a
shareholder rights plan. IF THE DOMESTICATION MERGER IS APPROVED, IT IS NOT THE
PRESENT INTENTION OF THE VDC COMMUNICATIONS BOARD OF DIRECTORS TO SEEK
STOCKHOLDER APPROVAL PRIOR TO ANY ISSUANCE OF VDC COMMUNICATIONS PREFERRED
STOCK, EXCEPT AS REQUIRED BY LAW OR REGULATION.
VDC COMMUNICATIONS STOCK INCENTIVE PLAN
VDC Communications currently has a Stock Incentive Plan for the issuance of
up to 5,000,000 shares of VDC Communications Common Stock (the "Stock Plan"),
the terms and provisions of which are described more fully below. If the Proxy
Proposal is adopted by the members of VDC and the stockholders of VDC
Communications, upon the consummation of the Domestication Merger, the former
employees, consultants and directors of VDC shall be equally eligible to
participate in the Stock Plan with the employees, consultants and directors of
VDC Communications.
PURPOSE
The purpose of the Stock Plan is to encourage and enable the officers,
employees, directors and consultants of VDC Communications and its subsidiaries
upon whose judgment, initiative and efforts VDC Communications largely depends
for the successful conduct of its business to acquire a proprietary interest in
VDC Communications. It is anticipated that providing such persons with a direct
stake in VDC Communications' welfare will assure a closer identification of
their interests with those of VDC Communications, thereby stimulating their
efforts on VDC Communications' behalf and strengthening their desire to remain
with VDC Communications.
ADMINISTRATION
The Stock Plan is administered by the full Board of Directors of VDC
Communications or a committee of such Board of Directors comprised of two or
more "Non-Employee Directors" within the meaning of Rule 16b-3(a)(3) promulgated
under the Exchange Act (the "Plan Administrator"). The Plan Administrator will
have the authority to interpret the provisions of the Stock Plan, to determine
all questions thereunder and to amend such rules and regulations for the
administration of the Stock Plan as it deems desirable. All determinations of
the Plan Administrator on any such matters shall be conclusive.
GRANT OF AWARDS
Options granted pursuant to the Stock Plan may be either options to
purchase VDC Communications Common Stock designated and qualified as an
"incentive stock option" as defined in Section 422 of the Code ("Incentive Stock
Options") or options to purchase VDC Communications Common Stock which do not
qualify as Incentive Stock Options ("Non-Qualified Stock Options"). The Plan
Administrator may also grant stock appreciation rights, restricted stock awards,
stock awards and performance share awards to eligible participants, subject to
the terms of the Stock Plan.
39
<PAGE>
ELIGIBILITY
Directors, officers, employees and consultants of VDC Communications or its
subsidiaries who, in the opinion of the Plan Administrator, are mainly
responsible for the continued growth and development and future financial
success of the business will be eligible to participate in the Stock Plan. In
addition, the nonemployee directors who are not eligible to participate in any
other VDC Communications stock incentive plan (the "Ineligible Directors") will
be eligible to receive an automatic grant of options to purchase shares of VDC
Communications Common Stock.
SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Registrant
pursuant to the provisions of the Registrant's Articles of Incorporation,
Bylaws, or other documents, the Registrant has been informed that in the opinion
of the Commission such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
LEGAL OPINIONS
Buchanan Ingersoll Professional Corporation has passed upon the validity of
the shares of VDC Communications Common Stock to be issued in connection with
the Domestication Merger.
40
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
The Registrant has adopted the provisions of Section 102(b)(7) of the
Delaware General Corporation Law (the "Delaware Act") which eliminate or limit
the personal liability of a director to the Registrant or its stockholders for
monetary damages for breach of fiduciary duty under certain circumstances.
Furthermore, under Section 145 of the Delaware Act, the Registrant may indemnify
each of its directors and officers against his expenses (including reasonable
costs, disbursements and counsel fees) in connection with any proceeding
involving such person by reason of his having been an officer or director to the
extent he acted in good faith and in a manner reasonably believed to be in, or
not opposed to the best interest of the Registrant, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The determination of whether indemnification is proper under the
circumstances, unless made by a court, shall be determined by the Board of
Directors.
43
<PAGE>
Item 21. Exhibits
<TABLE>
<CAPTION>
The following Exhibits are filed as part of this Registration Statement.
Number Description Method of Filing
- ------ ----------- ----------------
<C> <S> <S>
2.1 Agreement and Plan of Merger between VDC Included as Exhibit A
Corporation Ltd. and Registrant to the Proxy
Statement/Prospectus
3.1 Certificate of Incorporation, as amended, of Registrant. Included as Exhibit B
to the Proxy
Statement/Prospectus
3.2 Amended and Restated Bylaws of Registrant Included as Exhibit C
to the Proxy
Statement/Prospectus
4.1 Instruments defining the rights of security holders: Included as Exhibit E
to the Proxy
Statement/Prospectus
5.1 Opinion of Buchanan Ingersoll Professional Corporation To be provided in an
amendment to the
Proxy
Statement/Prospectus
21.1 Subsidiaries of Registrant Filed herewith
23.1 Consent of Buchanan Ingersoll Professional Corporation To be provided in an
amendment to the
Proxy
Statement/Prospectus
</TABLE>
44
<PAGE>
Item 22. Undertakings
(1) Insofar as indemnification for liabilities arising under the
Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification is against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection
with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of
such issue.
45
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Greenwich, Connecticut on the 8th day of
September, 1998.
VDC COMMUNICATIONS, INC.
By: /s/ Frederick A. Moran
----------------------
Frederick A. Moran
President and Chief Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below under the heading "Signatures" constitutes and appoints FREDERICK A. MORAN
his true and lawful attorney-in-fact and agent with full power of substitution,
for him and in his name, place and stead, in any and all capacities to sign any
or all amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C> <C>
/s/ Frederick A. Moran President and Director September 8, 1998
-----------------------
Frederick A. Moran
/s/ Dr. James C. Roberts Chief Operating Officer and Director September 8, 1998
-------------------------
Dr. James C. Roberts
/s/ Dr. Hussein Elkholy Director September 5, 1998
------------------------
Dr. Hussein Elkholy
</TABLE>
46
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description Page Number in Sequential
- -------------- ----------- -------------------------
(Referenced to Sequential Numbering
- -------------- --------------------
Item 601 of Reg. System Where Exhibit
- ----------------- --------------------
S-K) Can Be Found
- ----- ------------
<C> <S>
2.1 Agreement and Plan of Merger between VDC
Corporation Ltd. and Registrant
3.1 Certificate of Incorporation, as amended, of Registrant
3.2 Amended and Restated Bylaws of Registrant
4.1 Instruments defining the rights of security holders
5.1 Opinion of Buchanan Ingersoll Professional Corporation*
21.1 Subsidiaries of Registrant
23.1 Consent of Buchanan Ingersoll Professional Corporation*
</TABLE>
- ---------
* To be filed with an amendment to the Registration Statement.
47
<PAGE>
Exhibit A
Agreement and Plan of Merger
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Merger Agreement") is made as of
_________________, 1998, by and between VDC Corporation Ltd., a Bermuda exempted
company ("VDC"), and VDC Communications, Inc. (f/k/a Sky King Communications,
Inc.), a Delaware corporation and wholly-owned subsidiary of VDC ("VDC
Communications"). VDC and VDC Communications are sometimes referred to herein as
the "Constituent Corporations."
RECITALS
A. VDC Communications is a corporation duly organized and existing under
the laws of the State of Delaware.
B. VDC is a company duly organized and existing under the laws of the
Commonwealth of Bermuda.
C. On the date of this Merger Agreement, VDC Communications has authority
to issue: (i) 50,000,000 shares of Common Stock, par value $0.0001 per share
("VDC Communications Common Stock"), of which 100 are issued and outstanding and
owned by VDC; (2) 5,500,000 shares of Series A Convertible Preferred Stock, par
value $0.0001 per share ("Series A Stock"), of which 3,987,500 are issued and
outstanding; and (3) 4,500,000 shares of Series B Convertible Preferred Stock,
par value $0.0001 per share (the "Series B Stock"), of which 4,500,000 are
issued and outstanding.
D. On the date of this Merger Agreement, VDC has authority to issue
50,000,000 shares of Common Stock, par value $2.00 per share, of which
11,787,441 shares are issued and outstanding ("VDC Shares"), and 200,000,000
shares of Common Stock, par value $0.01 per share ("Class A Shares"), of which
no shares are issued or outstanding.
E. The respective Boards of Directors of VDC Communications and VDC have
determined that, for the purpose of effecting the reincorporation of VDC in the
State of Delaware, it is advisable and to the advantage of such corporations and
their respective shareholders that VDC amalgamate and merge with and into VDC
Communications upon the terms and conditions herein provided.
F. The respective Boards of Directors of VDC Communications and VDC have
approved this Merger Agreement and have directed that this Merger Agreement be
submitted to the vote of their respective shareholders.
NOW, THEREFORE, in consideration of the mutual promises and on the terms
and conditions set forth below, the mutuality, adequacy and sufficiency of which
are hereby acknowledged, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that VDC shall
amalgamate and merge with and into VDC Communications:
<PAGE>
I. TERMS AND CONDITIONS
1.1 Merger. Upon the date this Merger Agreement is made effective in
accordance with applicable Delaware and Bermuda law by filing a Certificate of
Merger with the Delaware Secretary of State and the Bermuda Registrar of
Companies and the obtaining of the consent of the Minister of Finance of Bermuda
to the merger transaction contemplated thereby (the "Effective Date"), VDC shall
be amalgamated and merged with and into VDC Communications (the "Merger"), and
VDC Communications shall be the surviving corporation of the Merger.
1.2 Succession. Upon the Effective Date, the separate existence of VDC
shall cease and VDC Communications shall succeed to all of the rights,
privileges, powers and property of VDC and be subject to the liabilities of VDC
in the manner of and as more fully set forth in Section 259 of the General
Corporation Law of the State of Delaware.
1.3 VDC Common Stock. Upon the Effective Date, by virtue of the Merger and
without any action on the part of the holder thereof or the Constituent
Corporations, each share of VDC Common Stock issued and outstanding immediately
prior thereto (other than dissenters' shares for which appraisal rights are
perfected in accordance with section 106 of The Companies Act of 1981 of
Bermuda, as amended (the "Bermuda Companies Act")) shall be changed and
converted into one fully paid and nonassessable share of VDC Communications
Common Stock. All of the authorized but unissued shares of VDC shall be
cancelled on the Effective Date.
1.4 VDC Communications Common Stock. Upon the Effective Date, by virtue of
the Merger and without any action on the part of the holder thereof or the
Constituent Corporations, each share of VDC Communications Common Stock issued
and outstanding immediately prior thereto shall be canceled.
1.5 VDC Communications Preferred Stock.
a. Series A Stock.
Upon the Effective Date, by virtue of the Merger and without any
action on the part of the holder thereof or the Constituent Corporations, each
share of Series A Stock issued and outstanding immediately prior thereto shall
be changed and converted into one fully paid and nonassessable share of VDC
Communications Common Stock.
b. Series B Stock.
After the Effective Date, by virtue of the Merger and without any
action on the part of the holder thereof or the Constituent Corporations, each
share of Series B Stock issued and outstanding immediately prior thereto, shall
be changed and converted into one fully paid and nonassessable share of VDC
Communications Common Stock.
<PAGE>
1.6 Stock Certificates. Upon and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of VDC
Common Stock, Series A Stock or Series B Stock shall be deemed for all purposes
to evidence ownership of and to represent the shares of VDC Communications
Common Stock into which the shares of VDC Common Stock, Series A Stock or Series
B Stock represented by such certificates have been converted in the Merger. The
registered owner on the books and records of VDC Communications or its transfer
agent of any such outstanding stock certificate shall, until such certificate
shall have been surrendered for transfer or conversion or otherwise accounted
for to VDC Communications or its transfer agent, have and be entitled to
exercise any voting and other rights with respect to and to receive any
dividends and other distributions upon the shares of VDC Communications Common
Stock evidenced by such outstanding certificate as provided above.
1.7 Options. Upon the Effective Date, VDC Communications will assume and
continue all of VDC's stock options and the outstanding and unexercised portions
of all options and rights to purchase of VDC Common Stock shall be converted
into and become options or rights to purchase the same number of shares of VDC
Communications Common Stock at the same exercise price and upon the same terms
and subject to the same conditions as set forth in the agreements entered into
by VDC pertaining to such options and rights, as such agreements are in effect
at the Effective Date. Upon the Effective Date, VDC Communications will assume
the outstanding and unexercised portions of such options and rights and all
obligations of VDC with respect thereto.
1.8 Employee Benefit Plans. Upon the Effective Date, VDC Communications
will assume all obligations of VDC under any and all employee benefit plans in
effect as of the Effective Date or with respect to which employee rights or
accrued benefits are outstanding as of the Effective Date.
1.9 Warrants. Upon the Effective Date, each of the warrants to purchase
shares of VDC Common Stock which is outstanding immediately prior to the
Effective Date shall be converted into and become a warrant to purchase the same
number of shares of VDC Communications Common Stock at the same exercise price
and upon the same terms and subject to the same conditions as set forth in each
of such respective warrants as in effect at the Effective Date. Upon the
Effective Date, VDC Communications will assume the outstanding and unexercised
portions of such warrants and all obligations of VDC with respect thereto.
1.10 Reservation of Shares. Upon the Effective Date, an aggregate number of
shares of VDC Communications Common Stock shall be reserved for issuance upon
the exercise of options, stock purchase rights and warrants equal to the
aggregate number of shares of VDC Common Stock so reserved immediately prior to
the Effective Date.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation of VDC Communications as in effect immediately prior to the
Effective Date, a copy of which is attached hereto as Exhibit A, shall continue
in full force and effect thereafter as the Certificate of Incorporation of VDC
Communications without change or amendment,
<PAGE>
until such Certificate of Incorporation is duly amended in accordance with the
provisions thereof and applicable law. The Bylaws of VDC Communications in
effect immediately prior to the Effective Date shall continue in full force and
effect thereafter as the Bylaws of VDC Communications without change or
amendment, until such Bylaws are duly amended in accordance with the provisions
thereof and applicable law.
2.2 Directors. The directors of VDC Communications immediately prior to the
Effective Date, whose names and addresses are attached hereto as Exhibit B,
shall upon the Effective Date remain the directors of VDC Communications and
shall serve until the next annual meeting of shareholders of VDC Communications
and until their successors are duly elected and qualified or until their earlier
resignation, removal or death.
2.3 Officers. The officers of VDC shall become officers of VDC
Communications upon the Effective Date and shall serve until their successors
are duly elected and qualified or their earliest resignation, removal or death.
III. CONDITIONS TO CONSUMMATION OF THE MERGER
3.1 Conditions to Obligation of VDC. The obligation of VDC to consummate
the Merger is subject to the satisfaction prior to the Effective Date of each of
the following conditions:
(a) Payment or estimated payment of the fair value of the VDC Shares
held by shareholders of VDC who properly exercise or intend to exercise their
dissenters' rights under Section 106(6) of the Bermuda Companies Act, shall not
exceed an amount which, in the opinion of VDC's Board of Directors, constitutes
an unacceptable cash cost in light of the current cash requirements of VDC and
the anticipated cash requirements of VDC Communications as the surviving entity
of the Merger;
(b) The Merger shall have been approved by the shareholders of VDC in
accordance with the Bermuda Companies Act;
(c) All director, shareholder and other parties' consents and
approvals, as well as filings with, and all necessary consents or approvals of,
all federal, state and local governmental authorities and agencies, as are
required under this Merger Agreement or applicable law to complete the Merger
and the transactions related thereto shall have been secured; and
(d) No statute, rule, regulation, executive order, decree, injunction
or restraining order shall have been enacted, promulgated, entered or enforced
by any court of competent jurisdiction or governmental authority that prohibits
or restricts the consummation of the Merger or transactions related thereto.
3.2 Conditions to Obligation of VDC Communications. The obligation of VDC
Communications to consummate the Merger is subject to the satisfaction prior to
the Effective Date of each of the following conditions:
(a) The Merger shall have been approved by the shareholders of VDC
Communications in accordance with the Delaware General Corporation Law, as
amended ("DGCL");
(b) All director, shareholder and other parties' consents and
approvals, as well as filings with, and all necessary consents or approvals of,
all federal, state and local governmental authorities and agencies, as are
required under this Merger Agreement or applicable law to complete the Merger
and the transactions related thereto shall have been secured; and
(c) No statute, rule, regulation, executive order, decree, injunction
or restraining order shall have been enacted, promulgated, entered or enforced
by any court of competent jurisdiction or governmental authority that prohibits
or restricts the consummation of the Merger or transactions related thereto.
IV. MISCELLANEOUS
4.1 Further Assurances. From time to time, as and when required by VDC
Communications or by its successors and assigns, there shall be executed and
delivered on behalf of VDC such deeds and other instruments, and there shall be
taken or caused to be taken by it such further and other actions, as shall be
appropriate or necessary in order to vest, perfect or confirm, of record or
otherwise, in VDC Communications the title to and possession of all of the
property, interests, assets, rights, privileges, immunities, powers, franchises
and authority of VDC and otherwise to carry out the purposes of this Merger
Agreement, and the proper officers and directors of VDC Communications are fully
authorized in the name and on behalf of VDC or otherwise to take any and all
such action and to execute and deliver any and all such deeds and other
instruments.
4.2 Amendment. At any time before or after approval by the shareholders of
the Constituent Corporations and subject to applicable law, this Merger
Agreement may be amended in any manner as may be determined in the judgment of
the respective Boards of Directors of VDC and VDC Communications to be
necessary, desirable or expedient in order to clarify the intention of the
parties hereto or to effect or facilitate the purposes and intent of this Merger
Agreement; provided, however, that an amendment made subsequent to the adoption
of this Merger Agreement by the shareholders of either Constituent Corporation
shall not: (1) alter or change the amount or kind of shares, securities, cash,
property and/or rights to be received in exchange for or on conversion of all or
any of the shares of any class or series thereof such Constituent Corporation;
(2) alter or change any term of the Certificate of Incorporation of VDC
Communications to be effected by the Merger; or (3) alter or change any of the
terms and conditions of this Merger Agreement if such alteration or change would
adversely affect the holders of any class or series of capital stock of either
Constituent Corporation.
4.3 Abandonment. At any time before the Effective Date, this Merger
Agreement may be terminated and the Merger may be abandoned by the Board of
Directors of either VDC or VDC Communications or both, notwithstanding the
approval of this Merger Agreement by the shareholders of VDC and VDC
Communications.
4.4 Governing Law. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with and governed by the laws of the
State of Delaware and, so far as applicable, the merger provisions of the
Bermuda Companies Act.
4.5 Counterparts. In order to facilitate the filing and recording of this
Merger Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original.
IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved
by the respective Boards of Directors of VDC and VDC Communications, is hereby
executed on behalf of each said corporation and attested by their respective
officers thereunto duly authorized.
VDC CORPORATION LTD.,
a Bermuda company
By: ________________________________
Frederick A. Moran, Chief Executive
Officer
VDC COMMUNICATIONS, INC.,
a Delaware corporation
By: ________________________________
Frederick A. Moran, President
<PAGE>
EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
VDC (Delaware), Inc.
THE UNDERSIGNED, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, does hereby certify as follows:
1. The name of the corporation is:
VDC (Delaware), Inc.
2. That the name and address of its registered agent in said State of
Delaware upon whom service of process may be had is Barros, McNamara, Scanlon,
Malkiewicz & Taylor, P.A., 2 West Loockerman Street, Dover, Kent County, DE
19903.
3. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
4. The corporation is authorized to issue capital stock to the extent of:
Ten Million (10,000,000) Shares Common Stock
Par Value $.0001 Per Share
Five Million (5,000,000) Shares Preferred Stock
Par Value $.0001 Per Share
The board of directors shall have the authority to fix by resolution the
designations, powers, preferences, qualifications, limitations, or restrictions
in respect of any class or classes of stock or any series of any class which the
corporation shall have the authority to issue.
5. The Board of Directors is authorized and empowered to make, alter, amend
and rescind the By-Laws of the corporation, but By-Laws made by the Board may be
altered or repealed, and new By-Laws made, by the stockholders.
6. No contract or transaction between the corporation and one or more of
its directors or officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the board or
committee thereof which authorizes the contract or transaction, or solely
because his or their votes axe counted for such purpose, if:
The material facts as to his interest and as to the contract or transaction
are disclosed or are known to the Board of Directors or the committee, and the
Board or committee in good faith authorizes the contract or transaction by a
vote sufficient for such purpose without counting the vote of the interested
director or directors; or
<PAGE>
The material facts as to his interest and as to the contract or transaction
are disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or
The contract or transaction is fair as to the Corporation as of the time it
is authorized, approved or ratified, by the Board of Directors, a committee
thereof, or the stockholders.
Interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
7. INDEMNIFICATION AND INSURANCE:
(a) RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is
threatened to be made a party or is involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer, of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators; provided, however, that, except
as provided in paragraph (b) hereof, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law requires, the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the corporation
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so
<PAGE>
advanced if it shall ultimately be determined that such director or officer is
not entitled to be indemnified under this Section or otherwise. The Corporation
may, by action of its Board of Directors, provide indemnification to employees
and agents of the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
(b) RIGHT OF CLAIMANT TO BRING SUIT:
If a claim under paragraph (a) of this Section is not paid in full by the
Corporation within thirty days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard or conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard or
conduct.
(c) Notwithstanding any limitation to the contrary contained in
sub-paragraphs 8(a) and 8(b), the corporation shall, to the fullest extent
permitted by Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said section, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any By-law, agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be director, officer, employee or agent and shall inure
to the benefit of the heirs, executors and administrators of such a person.
(d) INSURANCE:
The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
<PAGE>
8. Under Section 102(b)(7) of the Delaware General Corporation Law, and
other provisions of the Delaware General Corporation Law, no director shall be
personally liable to the Corporation or its stockholders for monetary damages
for any breach of fiduciary duty by such director as a director. Notwithstanding
the foregoing sentence, a director shall be liable to the extent provided by
applicable law (i) for breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit. No
amendment to or repeal of this Article 9 shall apply to or have any effect on
the liability or alleged liability of any director of the Corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment.
9. Election of directors need not be by written ballot unless so provided
in the By-Laws of the corporation.
10. Except as otherwise required by statute, the books and records of the
corporation may be kept outside of the State of Delaware, at such place or
places as provided in the By-laws of the Corporation or from time to time
designated by the Board of Directors.
11. The name and address of the incorporator is as follows:
NAME ADDRESS
Robert Worthington 2021 Arch Street, Philadelphia, PA 19103
12. The powers of the incorporator shall terminate upon the execution by
said incorporator of a resolution designating and electing the Board of
Directors of this Corporation to hold office for the ensuing year and until
successors are chosen and qualified.
IN WITNESS WFEREOF, the incorporator has hereunder set his hand and seal
this 26th day of November, A.D. 1997.
/s/ Robert Worthington
----------------------
Robert Worthington
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
VDC (DELAWARE), INC.
The undersigned, desiring to amend the Certificate of Incorporation of VDC
(Delaware), Inc., a Delaware corporation (the "Corporation"), pursuant to
Section 242 of the Delaware General Corporation law, DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation, by unanimous written
consent of its members, has duly adopted the following resolution proposing and
declaring advisable the following amendment to its Certificate of Incorporation:
RESOLVED, that Section 4 be amended to read as follows:
"4. The corporation is authorized to issue capital stock to the extent of:
Fifty Million (50,000,000) Shares Common Stock
Par Value of $.0001 Per Share
Ten Million (10,000,000) Shares Preferred Stock
Par Value of $.0001 Per Share
The board of directors shall have the authority to fix by resolution the
designations, powers, preferences, qualifications, limitations, or restrictions
in respect of any class or classes of stock or any series of any class which the
corporation shall have the authority to issue."
SECOND: That written consent by the sole shareholder of the Corporation has
been given to the aforesaid amendment in accordance with Section 228 of the
Delaware General Corporation Law.
THIRD: That the aforesaid amendment has been duly adopted in accordance
with Section 242 of the Delaware General Corporation Law.
<PAGE>
FOURTH: That this amendment shall become effective when filed.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its President and Secretary this 5th day of March,
1998.
VDC (DELAWARE), INC.
By: /s/ Andrew Panzo
----------------------------
Andrew Panzo, President
By: /s/ Cecile Coady
----------------------------
Cecile Coady, Secretary
<PAGE>
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.
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
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
SKY KING COMMUNICATIONS, INC.
The undersigned, desiring to amend the Certificate of Incorporation of Sky
King Communications, Inc., a Delaware corporation (the "Corporation"), as
amended, pursuant to Section 242 of the General Corporation Law of the State of
Delaware, DO HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation, by unanimous written
consent of its members, has duly adopted the following resolutions
proposing and declaring advisable the following amendments to the
Certificate of Incorporation:
RESOLVED,that Article First of the Certificate of Incorporation
of the Corporation be amended to provide in its entirety
as follows:
"1. The name of the Corporation is "VDC Communications, Inc."
RESOLVED, that Article Fifth of the Certificate of Incorporation
of the Corporation be amended to provide in its entirety as
follows:
"5. BOARD OF DIRECTORS AND BYLAWS:
(a) Power and Authority, Bylaws. All corporate powers shall be
exercise by the Board of Directors, except as otherwise provided
by statute or by this Certificate of Incorporation, or any
amendment thereof. The Bylaws of the Corporation may be adopted,
altered, amended or repealed by the Board of Directors of the
Corporation, except as otherwise provided by law, but any Bylaw
made by the Board of Directors may be altered, amended or
repealed, and new Bylaws made, by the stockholders of the
Corporation entitled to vote with respect thereto; provided,
however, that Bylaws shall not be adopted, altered, amended or
repealed by the stockholders of the Corporation except by the
affirmative vote of the holders of two-thirds of the combined
voting power of the then outstanding shares of stock entitled to
vote on any proposed adoption, alteration, amendment or repeal of
or to the Bylaws.
(b) Numbers, Elections And Terms. Except as otherwise fixed by or
pursuant to provisions hereof relating to the rights of the
holders of any
<PAGE>
dividends or upon liquidation to elect additional Directors under
specified circumstances, the number of Directors of the
Corporation shall be fixed from time to time by affirmative vote
of a majority of the Directors then in office. The Directors,
other than those who may be elected by the holders of any classes
or series of stock having a preference over the common stock as
to dividends or upon liquidation, shall be classified, with
respect to the time for which they severally hold office, into
three classes, as nearly equal in number as possible, as shall be
provided in the manner specified in the Bylaws of the
Corporation, one class to be originally elected for a term
expiring at the annual meeting of stockholders to be held in
1999, another class to be originally elected for a term expiring
at the annual meeting of stockholders to be held in 2000, and
another class to be originally elected for a term expiring at the
annual meeting of the stockholders to be held in 2001, with each
class to hold office until its successors shall have been elected
and qualified. At each annual meeting of the stockholders of the
Corporation after fiscal year 1998, the successors of the class
of Directors whose term expires at that meeting shall be elected
to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their
election.
(c) Newly Created Directorships And Vacancies. Except as
otherwise fixed by or pursuant to provisions hereof relating to
the rights of the holders of any class or series of stock having
a preference over common stock as to dividends or upon
liquidation to elect additional Directors under specified
circumstances, newly created directorships resulting from any
increase in the number of Directors and any vacancies on the
Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled by the
affirmative vote of a majority of the remaining Directors then in
office, even though less than a quorum of the Board of Directors.
Any Director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the class
of Directors in which the new directorship was created or the
vacancy occurred and until such Director's successor shall have
been elected and qualified. No decrease in the number of
Directors constituting the Board of Directors shall shorten the
term of any incumbent director.
(d) Removal. Except as otherwise fixed by or pursuant to
provisions hereof relating to the rights of the holders of any
class or series of stock having a preference over common stock as
to dividends or upon liquidation to elect additional Directors
under specified circumstances, any Director may be removed from
office only for cause and only by the affirmative vote of the
holders of two-thirds of the combined voting power of the then
outstanding shares of stock entitled to vote generally in the
election of Directors, voting together as a single class.
<PAGE>
(e) Amendment, Repeal, Etc. Notwithstanding anything contained in
this Certificate of Incorporation to the contrary, the consent of
the Board of Directors shall be required to alter, amend, adopt
any provisions inconsistent with or repeal this Article Fifth."
RESOLVED,that Article Thirteenth of the Certificate of Incorporation
be included to provide in its entirety as follows:
"13. AMENDMENT TO CERTIFICATE OF INCORPORATION:
Amendments to the Certificate of Incorporation of the Corporation
shall require the affirmative vote of the holders of two-thirds
of the combined voting power of the then outstanding shares of
stock entitled to vote on any proposed amendment to the
Certificate of Incorporation. Notwithstanding the foregoing, in
the event that a resolution to amend the Certificate of
Incorporation of the Corporation is adopted by the affirmative
vote of at least eighty percent (80%) of the Board of Directors,
approval of the amendment shall only require the affirmative vote
of the holders of a majority combined voting power of the then
outstanding shares of the stock entitled to vote generally on
such amendment."
SECOND: That the written consent of the sole stockholder of the
Corporation entitled to vote on the aforesaid amendments has been
given to the aforesaid amendments in accordance with Section 228
of the Delaware General Corporation Law.
THIRD: That the aforesaid amendments have been duly adopted in
accordance with Section 242 of the Delaware General Corporation
Law.
FOURTH: That these amendments shall become effective when filed.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by, Frederick A. Moran, its President, and Dr. James C.
Roberts, its Secretary, this 4th day of September, 1998.
SKY KING COMMUNICATIONS, INC.
By: /s/ Frederick A. Moran
----------------------------
Frederick A. Moran,
President
By: /s/ Dr. James C. Roberts
----------------------------
Dr. James C. Roberts,
Secretary
<PAGE>
EXHIBIT C
BYLAWS
AMENDED AND RESTATED
BYLAWS OF
VDC COMMUNICATIONS, INC.
A Delaware Corporation
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year for the purpose of electing directors and
conducting such other proper business as may come before the meeting. The date,
time and place of the annual meeting may be determined by resolution of the
board of directors or as set by the Chief Executive Officer, if there be one, or
the President, of the Corporation.
Section 2. Special Meetings. Unless otherwise prescribed by Delaware
Corporation Law or by the Certificate of Incorporation, special meetings of
stockholders, for any purpose or purposes, may be called only by either the
Chief Executive Officer, if there be one, or the President, and shall be called
by the Secretary or any Assistant Secretary, if there be one, at the request in
writing of a majority of the board of directors. Such request shall state the
purpose or purposes of the proposed meeting. Upon receipt of such written
request, the Chief Executive Officer, if there be one, or the President of the
Corporation shall fix a date and time for such meeting which such date shall be
within ten business days of the proposed date specified in the written request.
Section 3. Place of Meetings. The board of directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
Corporation.
Section 4. Notice. Whenever stockholders are required or permitted to take
action at a meeting, written or printed notice stating the place, date, time,
and, in the case of special meetings, the purpose or purposes, of such meeting,
shall be given to each stockholder entitled to vote at such meeting not less
than 10 nor more than 60 days before the date of the meeting. All such notices
shall be delivered, either personally or by mail, by or at the direction of the
board of directors, the Chief Executive Officer or the Secretary, and if mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail, postage prepaid, addressed to the stockholder at his, her or its address
as the same appears on the records of the Corporation. Attendance of a person at
a meeting shall constitute a waiver of notice of such meeting, except when the
person attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened.
1
<PAGE>
Section 5. Quorum. The holders of the majority of the outstanding shares of
capital stock entitled to vote at a meeting, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders, except as
otherwise provided by Delaware Corporation Law or by the Certificate of
Incorporation. If a quorum is not present, the holders of fifty percent of the
shares present in person or represented by proxy at the meeting, and entitled to
vote at the meeting, may adjourn the meeting to another time and/or place. When
a specified item of business requires a vote by a class or series (if the
Corporation shall then have outstanding shares of more than one class or series)
voting as a class, the holders of a majority of the shares of such class or
series shall constitute a quorum (as to such class or series) for the
transaction of such item of business.
Section 6. Waiver of Notice. Any stockholder, either before or after any
stockholders' meeting, may waive in writing notice of the meeting, and his
waiver shall be deemed the equivalent of giving notice. Attendance at a meeting
by a stockholder shall constitute a waiver of notice, except when the
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
Section 7. Notice of Business. At any meeting of the stockholders of the
Corporation, only such proper business shall be conducted as shall have been
brought before the meeting (i) by or at the direction of the board of directors
or (ii) by any stockholder of the Corporation who is a stockholder of record at
the time of giving of the notice provided for in this Section 7, who shall be
entitled to vote at such meeting and who complies with the notice procedures set
forth in this Section 7. For business to be brought before a meeting of
stockholders by a stockholder, the stockholder shall have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive office of the Corporation not less than 50 days nor more
than 75 days prior to the meeting; provided, however, that in the event that
less than 60 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. Such stockholder's notice to the
Secretary of the Corporation shall set forth as to each matter the stockholder
proposes to bring before the meeting (i) a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and, in the event that such business includes a proposal
to amend any document, including these Bylaws, the language of the proposed
amendment, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, (iii) the class and number of shares
of capital stock of the Corporation which are beneficially owned by such
stockholder and (iv) any material interest of such stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at a meeting of the stockholders except in accordance with the
procedures set forth in this Section 7. The chairman of the meeting of
stockholders shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting and in accordance with
the provisions of these Bylaws, and if he should so determine, he shall so
2
<PAGE>
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted. Notwithstanding the foregoing provisions of
this Section 7, a stockholder shall also comply with all applicable requirements
of the Securities and Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder with respect to matters set forth in this
Section 7.
Section 8. Voting. Unless otherwise required by Delaware Corporation Law,
the Certificate of Incorporation or these Bylaws, any question brought before
any meeting of stockholders shall be decided by the vote of the holders of a
majority of the stock represented and entitled to vote thereat. Each stockholder
shall have one vote for each share of stock entitled to vote held of record by
such stockholder and a proportionate vote for each fractional share so held,
unless otherwise provided in the Certificate of Incorporation. The board of
directors, in its discretion, or the officer of the Corporation presiding at a
meeting of stockholders, in his discretion, may require that any votes cast at
such meeting shall be cast by written ballot.
Persons holding stock in a fiduciary capacity shall be entitled to vote the
shares so held. Persons whose stock is pledged shall be entitled to vote, unless
in the transfer by the pledgor on the books of the Corporation he has expressly
empowered the pledgee to vote thereon, in which case only the pledgee, or his
proxy, may represent such stock and vote thereon.
If shares having voting power stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, tenants by the entirety, or otherwise, or if two or more persons have
the same fiduciary relationship respecting the same shares, unless the Secretary
of the Corporation is given written notice to the contrary and is furnished with
a copy of the instrument or order appointing them or creating the relationship
wherein it is so provided, their acts with respect to voting shall have the
following effect: (i) if only one votes, his act binds all; (ii) if more than
one vote, the act of the majority so voting binds all; and (iii) if more than
one vote, but the vote is evenly split on any particular matter, each fraction
may vote the securities in question proportionately, or any person voting the
shares or a beneficiary, if any, may apply to the Court of Chancery or any court
of competent jurisdiction in the State of Delaware to appoint an additional
person to act with the persons so voting the shares. The shares shall then be
voted as determined by a majority of such persons and the person appointed by
the Court. If a tenancy is held in unequal interests, a majority or even-split
for the purpose of this subsection shall be a majority or even-split in
interest.
Section 9. Proxies. A stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy. No proxy shall be or acted upon after three (3) years from its date,
unless the proxy provides for a longer period.
Section 10. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of
3
<PAGE>
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The lists shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder of the Corporation who is present.
Section 11. Stock Ledger. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 11 of this Article I or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE II
DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the board of directors.
Section 2. Number Election and Term of Office. Except as otherwise fixed by
or pursuant to provisions of the Certificate of Incorporation relating to the
rights of the holders of any class or series of stock having a preference over
the Common Stock and as to dividends or upon liquidation to elect additional
directors under specified circumstances, the number of directors of the
Corporation which shall constitute the board as of the date these Bylaws are
first amended and restated shall be three. Thereafter, the number of directors
shall be established from time to time by resolution of the board of directors.
The directors, other than those who may be elected by the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation, shall be classified, with respect to the time for which they
severally hold office, into three classes, of that number of directors in each
class as nearly equal as possible, one class to be originally elected for a term
expiring at the annual meeting of stockholders to be held in fiscal year 1999,
another class to be originally elected for a term expiring at the annual meeting
of stockholders to be held in fiscal year 2000, and another class to be
originally elected for a term expiring at the annual meeting of stockholders to
be held in fiscal year 2001, with each class to hold office until its successor
is elected and qualified. At each annual meeting of the stockholders of the
Corporation after fiscal year 1998, the successors of the class of directors
whose term expires at that meeting shall be elected to hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election. The directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting and
entitled to vote in the election of directors. Directors need not be
stockholders.
Only persons who are nominated in accordance with the following procedures
shall be eligible for election by the stockholders as directors of the
Corporation. Nominations of persons for election as directors of the Corporation
may be made at a meeting of stockholders (a) by or at the direction of the board
of directors, (b) by any nominating committee or persons appointed by
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the board of directors or (c) by any stockholder of the Corporation entitled to
vote for the election of directors at the meeting who complies with the notice
procedures set forth in this Section 2. Such nominations, other than those made
by or at the direction of the board of directors, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive office of the Corporation not less than 50 days nor more
than 75 days prior to the meeting; provided, however, that in the event that
less than 60 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. Such stockholder's notice to the
Secretary of the Corporation shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a director, (i)
the name, age, business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class and number of
shares of capital stock of the Corporation which are beneficially owned by the
person and (iv) any other information relating to the person that is required to
be disclosed in solicitations for proxies for election of directors pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as now or hereafter
amended; and (b) as to the stockholder giving the notice, (i) the name and
record address of such stockholder and (ii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by such
stockholder. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as a director of the
Corporation. No person shall be eligible for election by the stockholders as a
director of the Corporation unless nominated in accordance with the procedures
set forth herein. The chairman of the meeting of the stockholders shall, if the
facts warrant, determine and declare to the meeting that nomination was not made
in accordance with the foregoing procedure, and if he should so determine, he
shall so declare to the meeting and the defective nomination shall be
disregarded.
Section 3. Removal and Resignation. Subject to the rights of any class or
series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect directors under specified circumstances, any director
may be removed from office only for cause and only by the affirmative vote of
the holders of a majority of the combined voting power of the then outstanding
shares of stock entitled to vote generally in the election of directors, voting
together as a single class. Any director may resign at any time upon written
notice to the Corporation.
Section 4. Vacancies. Any vacancies in the board of directors for any
reason, and directorships resulting from any increase in the number of
directors, may be filled by the board of directors, although less than a quorum,
and any directors so chosen shall hold office until the next election of the
class for which such directors shall have been chosen and until their successors
shall be elected and qualified.
Section 5. Annual Meetings. The annual meeting of each newly elected board
of directors shall be held without other notice than this Bylaw immediately
after, and at the same place as, the annual meeting of stockholders.
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Section 6. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board of directors may be called by or at the
request of the Chief Executive Officer, if there shall be one, or the President,
on at least 24 hours notice to each director, either personally, by telephone,
by mail, or by facsimile; in like manner and on like notice, the Chief Executive
Officer, if there shall be one, or the President, must call a special meeting on
the written request of at least a majority of the directors then in office.
Section 7. Quorum, Required Vote and Adjournment. A majority of the total
number of directors shall constitute a quorum for the transaction of business.
The vote of a majority of directors present at a meeting at which a quorum is
present shall be the act of the board of directors. If a quorum shall not be
present at any meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Committees. The board of directors may, by resolution passed by
a majority of the whole board, designate one or more committees, each committee
to consist of one or more of the directors of the Corporation, which to the
extent provided in such resolution or these Bylaws shall have and may exercise
the powers of the board of directors in the management and affairs of the
Corporation except as otherwise limited by law. The board of directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors when required.
Section 9. Committee Rules. Each committee of the board of directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. The vote of a majority of committee
members present at a meeting at which a quorum is present shall be the act of a
committee.
Section 10. Communications Equipment. Members of the board of directors or
any committee thereof may participate in and act at any meeting of such board or
committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of the
board of directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have
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assented to any action taken unless his or her dissent shall be entered in the
minutes of the meeting or unless his or her written dissent to such action shall
be filed with the person acting as the Secretary of the meeting before the
adjournment thereof or shall be forwarded by registered mail to the Secretary of
the Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by the
Certificate of Incorporation, any action required or permitted to be taken at
any meeting of the board of directors, or of any committee thereof, may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 13. Compensation. The directors may be paid their expenses, if any,
of attendance at each meeting of the board of directors and may be paid a fixed
sum which may be cash or other property or any combination thereof) for
attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE III
OFFICERS
Section 1. Number. The officers of the Corporation shall be elected by the
board of directors and shall consist of a Chairman of the Board, a Chief
Executive Officer, a President, one or more Vice Presidents, a Secretary, a
Treasurer, and such other officers and assistant officers as may be deemed
necessary or desirable by the board of directors. Any number of offices may be
held by the same person, except that no person may simultaneously hold the
office of President and Secretary. In its discretion, the board of directors may
choose not to fill any office for any period that it may deem advisable.
Section 2. Election and Term of Office. The officers of the Corporation
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as conveniently
may be. The Chief Executive Officer shall appoint other officers to serve for
such terms as he or she deems desirable. Vacancies may be filled or new offices
created and filled at any meeting of the board of directors. Each officer shall
hold office until a successor is duly elected and qualified or until his or her
earlier death, resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of directors
may be removed by the board of directors whenever in its judgment the best
interests of the Corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
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Section 4. Vacancies. Any vacancy occurring in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term by the board of directors
then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by the
board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the Corporation.
Section 6. The Chairman of the Board. The Chairman of the Board, if elected
or appointed, shall preside at all meetings of the stockholders and board of
directors at which he or she is present. He or she shall present to the annual
meeting of stockholders a report of business of the Corporation for the
preceding fiscal year and shall perform such other duties as, from time to time,
may be assigned to him by the Board of Directors.
Section 7. The Chief Executive Officer. The Chief Executive Officer shall
be the chief executive officer of the Corporation. In the absence of the
Chairman of the Board, the Chief Executive Officer shall preside at all meetings
of the stockholders and board of directors at which he or she is present.
Subject to the powers of the board of directors, the Chief Executive Officer
shall have general charge of the business, affairs and property of the
Corporation and control over its officers, agents and employees; and shall see
that all orders and resolutions of the board of directors are carried into
effect. The Chief Executive Officer shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the Corporation. The Chief
Executive Officer shall have such other powers and perform such other duties as
may be prescribed by the board of directors or as may be provided in these
Bylaws.
The Chief Executive Officer shall have the power and authority to execute,
without specific prior Board approval, all contracts, agreements and obligations
of the Corporation that arise in the ordinary course of business of the
Corporation which do not involve liabilities to the Corporation in an amount in
excess of ten million dollars $10,000,000.
Section 8. President. The President shall, in the absence or disability of
the Chief Executive Officer, act with all of the powers and be subject to all
the restrictions of the Chief Executive Officer. The President shall also
perform such other duties and have such other powers as the board of directors,
the Chief Executive Officer or these Bylaws may, from time to time, prescribe.
Section 9. Vice Presidents. The Vice President, if any, or if there shall
be more than one, the Vice Presidents in the order determined by the board of
directors shall in the absence or disability of the President, act with all of
the powers and be subject to all the restrictions of the President. The Vice
Presidents shall also perform such other duties and have such other powers as
the board of directors, the Chief Executive Officer or these Bylaws may, from
time to time, prescribe.
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Section 10. The Secretary and Assistant Secretaries. The Secretary shall
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose. Under the Chief
Executive Officer's supervision, the Secretary shall give, or cause to be given,
all notices required to be given by these Bylaws or by law; shall have such
powers and perform such duties as the board of directors, the Chief Executive
Officer or these Bylaws may, from time to time, prescribe; and shall have
custody of the corporate seal of the Corporation. The Secretary, or an Assistant
Secretary, shall have authority to affix the corporate seal to any instrument
requiring it and when so affixed, it may be attested by his or her signature or
by the signature of such Assistant Secretary. The board of directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by his or her signature. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined by the
board of directors, shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the board of directors, the
Chief Executive Officer, the President, or Secretary may, from time to time,
prescribe.
Section 11. The Treasurer and Assistant Treasurer. The Treasurer shall have
the custody of the corporate funds and securities; shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation;
shall deposit all monies and other valuable effects in the name and to the
credit of the Corporation as may be ordered by the board of directors; shall
cause the funds of the Corporation to be disbursed when such disbursements have
been duly authorized, taking proper vouchers for such disbursements; and shall
render to the Chief Executive Officer and the board of directors, at its regular
meeting or when the board of directors so requires, an account of the
Corporation; and shall have such powers and perform such duties as the board of
directors, the Chief Executive Officer, the President or these Bylaws may, from
time to time, prescribe. If required by the board of directors, the Treasurer
shall give the Corporation a bond (which shall be rendered every six years) in
such sums and with such surety or sureties as shall be satisfactory to the board
of directors for the faithful performance of the duties of the office of
Treasurer and for the restoration to the Corporation, in case of death,
resignation, retirement, or removal from office, of all books, papers, vouchers,
money, and other property of whatever kind in the possession or under the
control of the Treasurer belonging to the Corporation. The Assistant Treasurer,
or if there shall be more than one, the Assistant Treasurers in the order
determined by the board of directors, shall in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer. The
Assistant Treasurers shall perform such other duties and have such other powers
as the board of directors, the Chief Executive Officer, the President or
Treasurer may, from time to time, prescribe.
Section 12. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these Bylaws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
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Section 13. Absence or Disability of Officers. In the case of the absence
or disability of any officer of the Corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
ARTICLE IV
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the Corporation shall be entitled
to have a certificate, signed by, or in the name of the Corporation by the Chief
Executive Officer, the President or a Vice President and the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned by
such holder in the Corporation. If such a certificate is countersigned (1) by a
transfer agent or an assistant transfer agent other than the Corporation or its
employee or (2) by a registrar, other than the Corporation or its employee, the
signature of any such Chief Executive Officer, President, Vice President,
Secretary, or Assistant Secretary may be facsimiles. In case any officer or
officers who have signed, or whose facsimile signature or signatures have been
used on, any such certificate or certificates shall cease to be such officer or
officers of the Corporation whether because of death, resignation or otherwise
before such certificate or certificates have been delivered by the Corporation,
such certificate or certificates may nevertheless be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures have been used thereon had not ceased to
be such officer or officers of the Corporation. All certificates for shares
shall be consecutively numbered or otherwise identified. The name of the person
to whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the books of the Corporation. Shares of stock
of the Corporation shall only be transferred on the books of the Corporation by
the holder of record thereof or by such holder's attorney duly authorized in
writing, upon surrender to the Corporation of the certificate or certificates
for such shares endorsed by the appropriate person or persons, with such
evidence of the authenticity of such endorsement, transfer, authorization, and
other matters as the Corporation may reasonably require, and accompanied by all
necessary stock transfer stamps. In that event, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates, and record the transaction on its books.
The board of directors may appoint a bank or trust company organized under the
laws of the United States or Canada or any state or province thereof to act as
its transfer agent or registrar, or both in connection with the transfer of any
class or series of securities of the Corporation.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the Corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the
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Corporation a bond sufficient to indemnify the Corporation against any claim
that may be made against the Corporation on account of the loss, theft or
destruction of any such certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that the
Corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the board of directors, and
which record date shall not be more than sixty nor less than ten days before the
date of such meeting. If no record date is fixed by the board of directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be the close of business on the next day preceding
the day on which notice is given, or if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
Section 4. Fixing a Record Date for Other Purposes. In order that the
Corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 5. Registered Stockholders. Prior to the surrender to the
Corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the Corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
Section 6. Subscriptions for Stock. Unless otherwise provided for in the
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the Corporation may proceed to collect the
amount due in the same manner as any debt due the Corporation.
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ARTICLE V
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Certificate of Incorporation. Before
payment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the directors from time
to time, in their absolute discretion, think proper as a reserve or reserves to
meet contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the Corporation, or any other purpose and the directors may
modify or abolish any such reserve in the manner in which it was created.
Section 2. Checks Drafts or Orders. All checks, drafts, or other orders for
the payment of money by or to the Corporation and all notes and other evidences
of indebtedness issued in the name of the Corporation shall be signed by such
officer or officers, agent or agents of the Corporation, and in such manner, as
shall be determined by resolution of the board of directors or a duly authorized
committee thereof.
Section 3. Contracts. The board of directors may authorize any officer or
officers, or any agent or agents, of the Corporation to enter into any contract
or to execute and deliver any instrument in the name of and on behalf of the
Corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The Corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
Corporation or of its subsidiary, including any officer or employee who is a
director of the Corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the Corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the Corporation at
common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a corporate
seal which shall be in the form of a circle and shall have inscribed thereon the
name of the Corporation and the words "Corporate Seal, Delaware". The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
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Section 7. Voting Securities Owned By Corporation. Voting securities in any
other corporation held by the Corporation shall be voted by the Chief Executive
Officer, unless the board of directors specifically confers authority to vote
with respect thereto, which authority may be general or confined to specific
instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.
Section 8. Inspection of Books and Records. Any stockholder of record, in
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the Corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the Corporation at its registered
office in the State of Delaware or at its principal place of business.
Section 9. Section Headings. Section headings in these Bylaws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
these Bylaws is or becomes inconsistent with any provision of the Certificate of
Incorporation, the General Corporation Law of the State of Delaware or any other
applicable law, the provision of these Bylaws shall not be given any effect to
the extent of such inconsistency but shall otherwise be given full force and
effect.
ARTICLE VI
AMENDMENTS
These Bylaws may be amended, altered, or repealed and new bylaws adopted at any
meeting of the board of directors by a majority vote. The fact that the power to
adopt, amend, alter, or repeal the Bylaws has been conferred upon the board of
directors shall not divest the stockholders of the same powers.
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RESOLUTIONS OF
THE BOARD OF DIRECTORS
VDC COMMUNICATIONS, INC.
RESOLVED, that the Bylaws of the Corporation are hereby amended as set
forth on Exhibit A attached hereto and are hereby adopted as and for
the Bylaws of the Corporation, a copy of which Bylaws shall be kept
with the records of the Corporation.
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EX-E
SECTION 106 OF THE COMPANIES ACT 1981 OF BERMUDA, AS AMENDED.
Shareholder approval
106 (1) The directors of each amalgamating company shall submit the amalgamation
agreement for approval to a meeting of the holders of shares of the amalgamating
company of which they are directors and, subject to subsection (4), to the
holders of each class of such shares.
(2) A notice of a meeting of shareholders complying with section 75 shall
be sent in accordance with that section to each shareholder of each amalgamating
company, and shall
(a) include or be accompanied by a copy or summary of the amalgamating
agreement; and
(b) subject to subsection (2A), state
(i) the fair value of the shares as determined by each amalgamating
company; and
(ii) that a dissenting shareholder is entitled to be paid the fair
value of his shares.
(2A) Notwithstanding subsection (2)(b)(ii), failure to state the matter
referred to in that subsection does not invalidate an amalgamation.
(3) Each share of an amalgamating company carries the right to vote in
respect of an amalgamation whether or not it otherwise carries the right to
vote.
(4) The holders of shares of a class of share of an amalgamating company
are entitled to vote separately as a class in respect of an amalgamation if the
amalgamation agreement contains a provision which would constitute a variation
of the rights attaching to any such class of shares for the purposes of section
47.
(4A) The provisions of the bye-laws of the company relating to the holding
of general meetings shall apply to general meetings and class meetings required
by this section provided that, unless the bye-laws otherwise provide, the
resolution of the shareholders or class must be approved by a majority vote of
three-fourths of those voting at such meeting and the quorum necessary for such
meeting shall be two persons at least holding or representing by proxy more than
one-third of the issued shares of the company or the class, as the case may be,
and that any holder of shares present in person or by proxy may demand a poll.
(5) An amalgamation agreement shall be deemed to have been adopted when it
has been approved by the shareholders as provided in this section.
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(6) Any shareholder who did not vote in favor of the amalgamation and who
is not satisfied that he has been offered fair value for his shares may within
one month of the giving of the notice referred to in subsection (2) apply to the
Court to appraise the fair value of his shares.
(6A) Subject to subsection (6B), within one month of the Court appraising
the fair value of any shares under subsection (6) the company shall be entitled
either --
(a) to pay to the dissenting shareholder an amount equal to the value of
his shares as appraised by the Court; or
(b) to terminate the amalgamation in accordance with subsection (7).
(6B) Where the Court has appraised any shares under subsection (6) and the
amalgamation has proceeded prior to the appraisal then, within one month of the
Court appraising the value of the shares, if the amount paid to the dissenting
shareholder for his shares is less than that appraised by the Court the
amalgamated company shall pay to such shareholders the difference between the
amount paid to him and the value appraised by the Court.
(6C) No appeal shall lie from an appraisal by the Court under this section.
(6D) The costs of any application to the Court under this section shall be
in the discretion of the Court.
(7) An amalgamation agreement may provide that at any time before the issue
of a certificate of amalgamation the agreement may be terminated by the
directors of an amalgamating company, notwithstanding approval of the agreement
by the shareholders of all or any of the amalgamating companies.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
--------------------------
Upon the consummation of the Domestication Merger, the following
subsidiaries of VDC Corporation Ltd. will be the subsidiaries of the Registrant:
1. VDC Telecommunications, Inc., a Delaware corporation
2. Masatepe Communications U.S.A., L.L.C., a Delaware limited liability
company
3. Voice & Data Communications (Hong Kong) Limited, a Hong Kong corporation
