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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERTLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ________ To ________
VDC COMMUNICATIONS, INC.
------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-14045 061524454
-------- ------- ---------
(Jurisdiction of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
75 Holly Hill Lane
Greenwich, Connecticut 06830
(Address of principal executive office)
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code: (203) 869-5100
(Former name, if changed since last report)
Check whether the Registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
(1) Yes ____X____ No __________
(2) Yes ____X____ No __________
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.0001 par value 18,503,837 as of January 27, 1999
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VDC COMMUNICATIONS, INC.
INDEX
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PART I FINANCIAL INFORMATION PAGE
--------------------- ----
Item 1. Consolidated balance sheets as of June 30, 1998
And December 31, 1998 3
Consolidated statements of operations and
comprehensive loss for the three and six month
periods ended December 31, 1997 and 1998 4
Consolidated statements of cash flows for the
six months ended December 31, 1997 and 1998 5
Notes to consolidated financial statements 6-10
Item 2. Management's discussion and analysis of financial
condition and results of operations 11-17
Item 3. Quantitative and qualitative disclosures about
market risk 17
PART II OTHER INFORMATION
-----------------
Item 1. Legal Proceedings 18-19
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20-21
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PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
VDC COMMUNICATIONS, INC. AND SUBSIDARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
December 31, 1998 June 30, 1998
----------------- -------------
(Unaudited)
<S> <C> <C>
Assets
Current:
cash and cash equivalents $ 627,302 $ 2,212,111
restricted cash 406,720 -
marketable securities 93,388 451,875
accounts receivable 152,709 -
notes receivable - current 2,174,988 2,800,000
------------ -----------
Total current assets 3,455,107 5,463,986
------------ -----------
property, plant and equipment, less accumulated depreciation 4,817,307 331,316
notes receivable, less current portion - 1,500,000
investment in MCC 23,728,647 37,790,877
deposits 419,642 567,775
intangible assets less accumulated amortization 988,185 -
investment - at equity 61,530
Other assets 247,322 169,730
------------ -----------
Total assets $ 33,717,740 $45,823,684
------------ -----------
Liabilities and Stockholders' Equity
Current:
accounts payable and accrued expenses $ 3,322,445 $ 156,185
note payable 127,379 -
------------ -----------
Total current liabilities 3,449,824 156,185
------------ -----------
Stockholders' equity:
convertible preferred stock series A - -
convertible preferred stock series B - 60
common stock 1,868 1545
additional paid-in capital 63,880,679 51,234,105
accumulated deficit (32,785,356) (4,218,035)
treasury stock - at cost (164,175) -
stock subscriptions receivable (344,700) (1,425,951)
accumulated comprehensive income (deficit) (320,400) 75,775
------------ -----------
Total stockholders' equity 30,267,916 45,667,499
------------ -----------
Total liabilities and stockholders' equity $ 33,717,740 $45,823,684
------------ -----------
</TABLE>
See accompanying notes to consolidated financial statements.
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VDC COMMUNICATIONS, INC. AND SUBSIDARIES CONSOLIDATED STATEMENTS
OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
------------------------------------------------
<TABLE>
<CAPTION>
three-months ended six-months ended
December 31, December 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
revenue $ 527,567 $ 20,295 $ 728,961 $ 40,230
direct costs of revenues (exclusive of depreciation) 857,129 56,468 1,198,550 76,717
------------ ------------ ------------ ------------
gross margin (329,562) (36,173) (469,589) (36,487)
selling, general and administrative 797,306 108 1,719,716 183
depreciation and amortization 240,877 1,651 343,713 3302
non-cash compensation - - 16,146,000 -
------------ ------------ ------------ ------------
total operating expenses 1,038,183 1,759 18,209,429 3485
operating loss (1,367,745) (37,932) (18,679,018) (39,972)
other income (expense)
loss on note restructuring (1,198,425) - (1,598,425) -
other income (expense) (161,752) - (72,610) -
------------ ------------ ------------ ------------
total other income (expense) (1,360,177) - (1,671,035) -
equity in loss of affiliate (363,268) - (363,268) -
------------ ------------ ------------ ------------
net loss $ (3,091,190) $ (37,932) $(20,713,321) $ (39,972)
------------ ------------ ------------ ------------
Other Comprehensive income (loss), net of tax:
Unrealized loss on marketable securities (57,237) - (396,175) -
------------ ------------ ------------ ------------
comprehensive loss (3,148,427) (37,932) (21,109,496) (39,972)
------------ ------------ ------------ ------------
net loss per common share - basic $ (.17) $ (0.00) $ (1.15) $ (0.00)
------------ ------------ ------------ ------------
weighted average number of shares outstanding 18,420,158 9,199,838 17,984,119 9,199,838
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
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VDC COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
net loss (20,713,321) (39,972)
Adjustments to reconcile net loss to net cash
provided by operating activities
depreciation and amortization 343,713 3,302
non-cash compensation expense 16,146,000 -
equity in losses of affiliate 363,268 -
loss on note restructuring 1,598,425 -
Changes in operating assets and liabilities
cash restricted in use (406,720) -
accounts receivable (152,709) -
prepaid expenses and other assets 198,077 -
accounts payable and accrued expenses 664,303 -
----------- -----------
Net cash used by operating activities (1,958,964) (36,670)
----------- -----------
Cash flows from investing activities:
proceeds from return of escrow in connection 1,019,762
with the investment in MCC -
payment for purchase of subsidiary (589,169) -
investment in affiliate (424,800)
proceeds from payment of notes receivable 526,587 -
capital expenditures (1,899,002) -
----------- -----------
Net cash flows used in investing activities (1,366,622) -
----------- -----------
Cash flows from financing activities:
proceeds from issuance of common stock 888,701 -
collections on stock subscription receivables 917,076 -
repayment of note payable (65,000) -
capital contribution - 132,200
----------- -----------
Net cash flows provided by financing activities 1,740,777 132,200
----------- -----------
Net increase (decrease) in cash and cash equivalents (1,584,809) 95,530
Cash and cash equivalents, beginning of period 2,212,111 1,430
----------- -----------
Cash and cash equivalents, end of period 627,302 96,960
----------- -----------
Supplemental schedule of non cash investing and financing activities:
fixed assets exchanged for note 192,379
common stock placed in escrow in connection
with investment in MCC 13,962,500
treasury stock acquired in exchange
for subscription receivable 164,175
Acquisition of subsidiary:
fair value of assets acquired 1,290,044
common stock issued 700,875
-----------
cash paid 589,169
-----------
</TABLE>
See accompanying notes to consolidated financial statements.
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VDC Communications, Inc. and Subsidiaries
Notes to consolidated financial statements
1. Basis of Presentation
The financial statements presented are those of VDC Communications, Inc. (the
Company") which is the successor to VDC Corporation Ltd. ("VDC") by way of the
Domestication Merger (the "Domestication Merger") that occurred on November
6,1998. The Domestication Merger was accounted for as a capital reorganization
in which 11,810,862 issued and outstanding shares of common stock of VDC, $2.00
par value per share, were exchanged, and 8,487,500 issued and outstanding shares
of preferred stock of the Company $.0001 par value per share, were converted, on
a one for one basis, into a total of 20,298,362 shares of common stock, of the
Company $.0001 par value common stock per share.
The Domestication Merger reflects the completion of a series of transactions
entered into on March 6, 1998 pursuant to which Sky King Communications, Inc.
("Sky King") entered into a merger agreement with VDC and VDC (Delaware), Inc.
(n/k/a VDC Communications, Inc). This merger transaction was accounted for as a
reverse acquisition whereby Sky King was the acquirer for accounting purposes.
Accordingly the historical financial statements presented are those of Sky King
before the merger on March 6, 1998 and reflect the consolidated results of Sky
King and VDC, and VDC's wholly-owned subsidiaries after the merger. On November
6, 1998, the Domestication Merger, whereby VDC merged with and into the Company,
was consummated.
The accompanying unaudited consolidated financial statements of the Company have
been prepared in accordance with generally accepted accounting principles for
interim financial information and in accordance with the instruction to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the
disclosures required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The results for the three- and six-month periods ended December
31, 1998 are not necessarily indicative of the results that may be expected for
the year ended June 30, 1999. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended June 30, 1998, as filed with the
Securities and Exchange Commission.
The Company is a facilities-based international telecommunications carrier
focused on international telecommunications gateways and long distance carrier
services, which includes international private lines ("IPL's"), direct routes
and the resale of other carriers' routes.
2. Summary of Significant Accounting Policies
(a) Cash and Cash Equivalents
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For purposes of the statement of cash flows, the Company considers all
highly liquid investments with an original maturity of three months or less to
be cash equivalents.
(b) Principles of Consolidation
The consolidated financial statements represent all companies of which the
Company directly or indirectly has majority ownership. Significant intercompany
accounts and transactions have been eliminated. The Company's consolidated
financial statements include the accounts of wholly owned subsidiaries VDC
Telecommunications, Inc. ("VDC Telecommunications"), Masatepe Communications
U.S.A., L.L.C ("Masatepe"), and Voice & Data Communications (Hong Kong) Limited
("VDC Hong Kong").
(c) Loss Per Share of Common Stock
Loss per common share is computed on the weighted average number of shares
outstanding. If dilutive, common equivalent shares (common shares assuming
exercise of options and warrants) utilizing the treasury stock method, as well
as the conversion of convertible preferred stock are considered in presenting
diluted earnings per share. Warrants to purchase 938,546 shares of common stock
at prices ranging from $4.00 to $5.00 are not included in the computation of
diluted loss per share because they are antidilutive due to the net loss.
(d) Goodwill and Amortization
Goodwill is amortized using the straight-line method over its estimated
useful life.
(e) Recent Accounting Pronouncements
In June 1998, the AICPA issued statement of Financial Accounting Standards
No. 33 "Accounting for Derivative Instruments and Hedging Activities". The
Company has not yet analyzed the impact of this new standard. The Company will
adopt this standard in July of 1999.
3. Domestication Merger
On November 6, 1998, the Company completed the Domestication Merger with
VDC. The effect of the Domestication Merger was that members of VDC became
stockholders of the Company. The primary reason for the Domestication Merger was
to reorganize VDC, which had been a Bermuda company, as a publicly traded U.S.
corporation domesticated in the State of Delaware. In connection with the
Domestication Merger, 11,810,862 issued and outstanding shares of common stock
of VDC, $2.00 par value per share, were exchanged, and 8,487,500 issued and
outstanding shares of preferred stock of the Company, $.0001 par value per
share, were converted, on a one-for-one basis, into an aggregate 20,298,362
shares of common stock of the Company, $.0001 par value per share. The
Domestication merger has been accounted for as a
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reorganization which has been given retroactive effect in the financial
statements for all periods presented.
4. Metromedia China Corporation Investment
On June 22, 1998 the Company acquired from PortaCom Wireless, Inc.
("PortaCom") 2 million shares of the common stock of Metromedia China
Corporation ("MCC") and warrants to purchase 4 million shares of common stock of
MCC at an exercise price of $4.00 per share. The MCC shares and warrants
represent an approximate 8.7% interest in the outstanding common stock of MCC.
MCC operates joint ventures in China under the direction of its majority owner,
Metromedia International Group. The joint ventures invest in network
construction and development of telephony networks in China and participate in
project cooperation contracts with local partners that enable the joint ventures
to receive certain percentages of the projects' distributable cash flows. The
Company evaluated the MCC investment based on: (i) the population of the Chinese
markets where MCC's local partner has licenses to provide wireless and wireline
telecommunications service, which the Company estimates at 116,000,000; (ii) the
understanding that MCC's local partner would receive additional licenses in the
future; and (iii) the possible synergy should the Company ever do business in
China.
In March 1998, PortaCom filed a voluntary petition for bankruptcy relief
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court District of Delaware. During the course of the bankruptcy
proceedings, the acquisition was amended to provide that the Company will fund
an escrow account in the amount of up to $2,682,000 for the benefit of holders
of priority unsecured claims and general unsecured claims against PortaCom's
bankruptcy estate. The escrow fund and 5,300,000 VDC shares were placed in
escrow pending the resolution of the disputed claims against PortaCom's
bankruptcy estate. To the extent that the cash escrow is used, PortaCom will
receive proportionally fewer VDC shares. PortaCom had used $1,627,339 of the
escrow funds as of December 31, 1998.
In November 1998, the Company and PortaCom settled a dispute in which the
Company alleged that fraud may have been committed against it in connection with
the investment in MCC. PortaCom agreed to allow two million VDC shares be held
in escrow for up to eighteen months. These shares will be released from escrow
contingent upon certain performance criteria. To the extent that the performance
criteria are not met, those shares will be returned to VDC. The two million
escrow shares have been recorded as a reduction in common shares outstanding at
their original issue price of $6.98125 (fair market value as determined at the
date of acquisition) and a corresponding reduction in the investment in MCC.
The investment in MCC has been recorded based on the consideration given
which consisted of 3,061,900 common shares at $6.98125 (excludes 2 million
shares in escrow), $1,662,236 in cash, the elimination of a loan
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receivable of $390,522 and 50,000 investment advisory shares valued at $6.00 per
share.
5. Non-cash Compensation
Sky King entered into a merger agreement with VDC and the Company effective
March 6, 1998. This transaction was accounted for as a reverse acquisition
whereby Sky King was the acquirer for accounting purposes. Since the assets and
liabilities of VDC Corporation Ltd. acquired were monetary in nature, the merger
was recorded at the value of the net monetary assets.
The consideration paid to the former Sky King shareholders in the merger
consisted of the issuance of 10 million newly-issued shares of preferred stock
of the Company which were convertible, and have been converted, in the
aggregate, into 10 million shares of common stock of the Company. Of the
consideration paid to the Sky King shareholders, preferred stock of the Company
convertible in the aggregate into 4.5 million shares of common stock of the
Company (the "Escrow Shares") was placed in escrow to be held and released from
time to time as the Company achieved certain performance criteria. As of
December 31, 1998, all of the performance criteria had been met. Accordingly,
4.5 million shares have been released from escrow.
During the six-months ended December 31, 1998, 3.9 million shares were
released from escrow. Of the shares released, approximately 2.7 million shares
were considered compensatory to the extent of the trading value of the shares on
the date of the release. This resulted in non-cash compensation of $16,146,000
for the six-months ended December 31, 1998. Compensatory shares are related to
former Sky King shareholders who are members of the Company's management, their
family trusts and minor children and an employee. Non-compensatory shares
released related to non-employee shareholders and non-minor children of employee
shareholders where beneficial ownership does not exist. The non-compensatory
shares have been accounted for as a stock dividend in which the issued stock is
recorded at fair value on the date of release through a charge to accumulated
deficit.
6. Shares Surrendered
In November 1998, an executive officer and member of the Company's Board of
Directors ("officer") resigned. In connection with the resignation, the officer
surrendered 1,875,000 common shares in exchange for the elimination of a
subscription receivable for $164,175. The transaction has been accounted for as
the purchase of 1,875,000 shares of treasury stock using the cost method. The
subscription receivable represented the officer's basis in his 27.5% ownership
in Sky King.
7. Investment in Masatepe Communications, S.A.
Masatepe owns a 49% interest in Masatepe Comunicaciones, S.A. ("Masacom"),
a Nicaraguan company. Masacom supports the development of Masatepe's operations
in Central America. Masatepe carries the investment at cost, adjusted for 100%
of Masacom's losses, since the recovery of 51% of the
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losses is not reasonably assured. Following is Masacom's summary of financial
position at December 31, 1998 and results of operations from inception through
December 31, 1998:
Assets $72,032
Liabilities $10,500
Results of operations $(363,268)
8. Private Placement
In December 1998, the Company sold 245,159 shares at $3.625, the public
market price at that time. The Chairman and CEO and certain family members and
entities associated with the Chairman and CEO participated as investors in the
private placement. These shares have not been issued, but for financial
statement purposes such shares have been treated as if they had been issued and
outstanding.
9. Restructured Note Receivable
During the six months ended December 31, 1998, the Company restructured
notes receivable from debtors by reducing the principal due by $1,598,425 which
has been charged to operations. The Company believes this step will maximize the
recovery of its investment and expedite payment on the notes. The debt will be
repaid in installments through April 1999.
10. Line of Credit
In August 1998, the Company entered into a $1,000,000 revolving conditional
line of credit to be used for the purposes of issuing certain letters of credit
("LC") to secure payment of certain activities of the Company. Principal
payments are due on demand and the interest rate is two percent above the prime
rate. The aggregate face amount of all LC's must be collateralized in the form
of cash equivalents held by the issuing bank. Collateral at December 31, 1998
consisted of approximately $406,000 in the form of three-month U.S. Government
bonds. Each LC expires no later than one year from the date of issuance. As of
December 31, 1998, there were no advances issued under the revolving line of
credit.
11. Issuance of Investment Banking Shares
In December 1998, the Company issued 240,000 common shares previously held
in escrow for investment bankers in connection with the March 6, 1998 merger of
Sky King with VDC and VDC (Delaware), Inc (n/k/a VDC Communications, Inc.). The
shares were issued at the fair market value as of the date of the merger ($2.50
per share) and a corresponding charge to accumulated deficit.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
CAUTIONARY STATEMENT FOR PURPOSES OF
THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
When used in this Report on Form 10-Q, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "intend," and similar expressions are
intended to identify forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934 regarding events, conditions and financial trends which may affect the
Company's future plans of operations, business strategy, operating results and
financial position. Such statements are not guarantees of future performance and
are subject to risks and uncertainties and actual results may differ materially
from those included within the forward-looking statements as a result of various
factors. Such risks may relate to, among others: (i) the Company's ability to
secure the various international licenses, approvals and other authorizations
needed to commence operations in Asia, Latin America, China or other foreign
countries; (ii) the Company's ability to otherwise develop and implement certain
segments of its intended business that are subject to normal start-up risks and
uncertainties; (iii) the Company's ability to secure sufficient financing in
order to fund its proposed operations; (iv) inherent regulatory, licensing and
political risks associated with operations in foreign countries; (v) the
Company's dependence on certain key personnel; and (vi) competitive and other
market conditions that may adversely affect the scope of the Company's
operations. Additional factors are described in the Company's other public
reports and filings with the Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date made. The Company undertakes no obligation to publicly
release the result of any revision of these forward-looking statements to
reflect events or circumstances after the date they are made or to reflect the
occurrence of unanticipated events.
General
The Company is a facilities-based international telecommunications company,
focused on international telecommunications gateways and long distance carrier
services, which includes IPL's, direct routes and the reselling of other
carriers' routes. Its global telecommunications network provides customers both
voice and data capabilities. The Company currently carries international
telecommunications traffic and has points of presence in major US cities and
Central America and is currently developing opportunities in other parts of the
world including Asia, Africa and further development in the Americas.
Through VDC Telecommunications, a Delaware corporation, the Company operates an
international network of telecommunications services with gateway and/or switch
facilities located in New York, Los Angeles and Denver. During the quarter ended
December 31, 1998, VDC Telecommunications began carrying wholesale domestic and
international telecommunications traffic
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through its network. VDC Telecommunications provides international carrier
services through a United States Federal Communications Commission Overseas
Common Carrier Section 214 License ("FCC 214 License"). An FCC 214 License
authorizes an entity to provide international telecommunication services. At
mid-January 1999, VDC Telecommunications had six contracted carrier customers
for carriage of telecommunications traffic or provision of related
telecommunication services.
Through Masatepe, a Delaware limited liability company, the Company provides
wholesale telecommunications services between Central America and the United
States through an operating agreement with the Nicaraguan Post Telephone and
Telegraph ("PTT") and an FCC 214 License. Masatepe also holds an Internet
license from TELCOR in Nicaragua, and a teleport license in Nicaragua. At
mid-January 1999, Masatepe had two carrier customers for carriage of
telecommunications traffic. As of February 1999, Masatepe was in the process of
increasing the capacity of its Central American network in response to customer
demand.
The Company also derives modest revenues from site tower management.
Through VDC Hong Kong, the Company is developing telecommunications capability
in Hong Kong and Asia. The Company has been licensed by the Office of
Telecommunications Authority in Hong Kong to provide international calling
services, value-added services and Internet services. In addition, VDC Hong Kong
has an FCC 214 License. VDC Hong Kong is currently in the developmental stage
and does not yet provide customers with telecommunications services.
The Company is currently seeking a telecommunications license and operating
agreement in Egypt because it believes this market offers significant
opportunity. The Company's efforts in Egypt have not resulted in any licenses or
agreements to date. There can be no assurances regarding the Company's ability
to secure the appropriate regulatory approval to provide wholesale carrier or
other telecommunications services in Egypt.
The Company's costs include long distance charges for transmission services,
terminating overseas-originated traffic in the United States and terminating
domestic originated international traffic outside the United States. In
addition, the Company incurs costs associated with business development
including selling, general, and administrative costs.
On November 6, 1998, VDC Corporation Ltd., a Bermuda company ("VDC"), merged
with and into the Company (the "Domestication Merger"). The effect of the
Domestication Merger was that members/stockholders of VDC became stockholders of
the Company. The primary reason for the Domestication Merger was to reorganize
VDC as a publicly traded U.S. corporation domesticated in the State of Delaware.
The Company believes that the Domestication Merger may increase the Company's
ability to meet any future equity and debt financing needs, may enhance the
marketability of the Company's securities by raising the Company's profile in
the U.S. capital markets, may allow investors to assess the Company on a more
comparable footing with its competitors domiciled in the
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United States and, over time, may have a positive effect on the trading of the
Company's securities. Additionally, becoming a Delaware corporation is expected
to simplify the Company's tax and securities filings, accounting and operations,
and reduce both the cost and burden of these reporting obligations. In
connection with the Domestication Merger, 11,810,862 issued and outstanding
shares of common stock of VDC, $2.00 par value per share, were exchanged, and
8,487,500 issued and outstanding shares of preferred stock of the Company,
$.0001 par value per share, were converted, on a one-for-one basis, into an
aggregate 20,298,362 shares of common stock of the Company, $.0001 par value per
share.
During the quarter ended December 31, 1998, the Company renegotiated the
agreement to acquire 2.0 million shares and warrants to purchase 4.0 million
shares of MCC. Under the terms of the amended agreement, 2.0 million of the 5.1
million VDC shares issued to purchase the MCC interest will be held in escrow.
These shares will be released from escrow contingent upon certain performance
criteria. The shares not released will be returned to VDC.
During the quarter ended December 31, 1998, the Company added additional
personnel to its sales, technical and corporate development teams. In addition,
the former chief operating officer ("COO") resigned from his position to pursue
other opportunities. Upon his resignation, the COO returned one million
eight-hundred seventy-five thousand (1,875,000) common shares to the Company's
treasury. The combination of this with the potential reduction in shares slated
for the MCC investment could reduce the Company's base shares by 3,875,000.
Results of Operations
The Company's operations are currently in a transitional phase. The Company
began the development of its telecommunications business on March 6, 1998 and
has since experienced a ramp-up in business. The Company does not believe,
however, that current results are indicative of future performance, given the
expected increase in business activity.
For the three months ended December 31, 1998, compared to the three months ended
December 31, 1997
Revenues: Total revenues in the three months ended December 31, 1998 increased
to $527,567 from $20,295 in the three months ended December 31, 1997. This is
the initial result of the implementation of the Company's telecommunications
carrier services. Revenues were generated during the period by Masatepe, site
tower management, and VDC Telecommunications for an abbreviated portion of the
period. Revenue for the corresponding period of the prior year was solely
attributable to site tower rentals.
Gross Margin: Negative gross margins were the result of a combination of
termination and circuit fees associated with the traffic carried in the quarter
and salaries and other operating expenses incurred in advance of the realization
of significant telecommunications traffic revenues.
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Selling, general & administrative: Selling, general and administrative expenses
increased to $797,306 from $108 in the corresponding period of the previous
year. This increase was primarily attributable to salaries and corporate
development costs necessary for the Company's development and operation of new
telecommunications services, including its domestic and global
telecommunications network.
Depreciation and Amortization: Depreciation and amortization increased to
$240,877 from $1,651 in the corresponding period of the previous year. The
increase was primarily attributable to the amortization of goodwill associated
with the Masatepe acquisition and depreciation of the Company's
telecommunications equipment.
Other income (expense): Other income (expense) was approximately $(1,360,000)
for the three months ended December 31, 1998. The Company restructured certain
notes receivable to maximize their recovery and wrote off all previously accrued
interest. There were no other income (expense) items for the three months ended
December 31, 1997.
For the six months ended December 31, 1998, compared to the six months ended
December 31, 1997
Revenues: Total revenues in the six months ended December 31, 1998 increased to
$728,961 from $40,230 in the six months ended December 31, 1997. This is the
initial result of the implementation of the Company's telecommunications carrier
services. Revenues were generated during the period by Masatepe, site tower
management, and VDC Telecommunications for an abbreviated portion of the period.
Revenue for the corresponding period of the prior year was attributable to site
tower rentals.
Gross Margin: Negative gross margins were the result of a combination of
termination and circuit fees associated with the traffic carried in the period
and salaries and other operating expenses incurred in advance of the realization
of significant telecommunications traffic revenues.
Selling, general & administrative: Selling, general and administrative expenses
increased to $1,719,716 from $183 in the corresponding period of the previous
year. This increase was primarily attributable to salaries and corporate
development costs necessary for the Company's development and operation of new
telecommunications services, including its domestic and global
telecommunications network; and professional fees, including consulting, legal
and accounting expenses associated with the redeployment of the Company's
assets.
Non-cash Compensation Expense: Non-cash compensation expense was $16,146,000 for
the six-months ended December 31, 1998 compared to $0 for the corresponding
period of the previous year. During the six months ended December 31, 1998, 3.9
million shares of the Company's Series B convertible preferred stock ("Series B
Stock"), were released from escrow based upon the achievement of performance
criteria which includes the deployment of telecommunications equipment in
service areas with an aggregate population of
14
<PAGE>
greater than 3.9 million. Of the 3.9 million shares of Series B Stock released,
2.7 million shares were considered compensatory for accounting purposes. These
compensatory shares were owned by management, their family trusts, minor
children, and an employee. The non-cash expense reflected on the Company's
financial statements was developed based on the deemed value of the shares
released from escrow, which in turn, was based on the trading price of the
Company's common stock on the date of release.
Depreciation and Amortization: Depreciation and amortization increased to
$343,713 from $3,302 in the corresponding period of the previous year. The
increase was primarily attributable to the amortization of goodwill associated
with the Masatepe acquisition.
Other income (expense): Other income (expense) was approximately $(1,671,000)
for the six months ended December 31, 1998. The Company restructured certain
notes receivable to maximize their recovery and wrote off all previously accrued
interest. There were no other income (expense) items for the six months ended
December 31, 1997.
Liquidity and Capital Resources
In the near term, the Company expects to satisfy its working capital
requirements and capital commitments with available cash on hand, notes
receivable and other short term liquid assets and/or alternative financing
arrangements. Management believes that its long-term liquidity needs will be
satisfied by achieving positive operating results and cash flow through revenue
generated by carrying long distance traffic.
Net cash used in operating activities was approximately $1,959,000 for the six
months ended December 31, 1998. The Company collected approximately $550,000
from customers while paying approximately $2,509,000 to its vendors and
employees. Net cash used by operating activities of approximately $37,000 for
the corresponding period of the previous year was due to the net loss from
operations offset by depreciation.
Net cash used by investing activities was approximately $1,367,000 for the six
months ended December 31, 1998. Cash was used for capital expenditures on
network facilities and switching equipment, the purchase of Masatepe as well as
investing in Masatepe's Nicaraguan subsidiary, Masacom. Cash provided by
investing activities was attributable to the collection of notes receivable and
the return of escrow funds in connection with the investment in MCC. There were
no cash flows from investing activities for the six months ended December 31,
1997.
Cash provided by financing activities was approximately $1,741,000 for the six
months ended December 31, 1998. This reflects the collection of stock
subscriptions receivable and the issuance of common stock less repayments of
notes for the purchase of telecommunication equipment. The funds were used to
fund operations and capital expenditures. Proceeds provided by financing
15
<PAGE>
activities of approximately $132,000 for the corresponding period of the
previous year were used to fund operations.
At December 31, 1998 the Company had outstanding capital commitments of
approximately $2.5 million for the purchase of network facilities and switching
equipment. These commitments are reflected in the Company's consolidated balance
sheet at December 31, 1998.
Acquisitions
The Company entered into a Purchase Agreement on July 31, 1998 to acquire
Masatepe for $589,169 in cash and shares of the Company's Common Stock valued at
$700,875, less any adjustments made to the purchase price by virtue of
indemnification claims made by the Company against an escrow fund established
under the Purchase Agreement. The entire purchase price for the Masatepe
acquisition was placed in escrow pending the satisfaction of certain regulatory
filings to be made by Masatepe with the United States Federal Communications
Commission (the "FCC"). On or about October 27, 1998, the entire purchase price
for the Masatepe acquisition was released from escrow, less 14,160 shares of the
Company's common stock, which shall be retained in escrow pending the resolution
of a claim made by the Company against the escrow fund for outstanding expenses
incurred by Masatepe prior to its acquisition by the Company.
In addition, the Company delivered a promissory note to an executive officer of
Masatepe in connection with the Masatepe acquisition. The amount due under the
note is payable in shares of the Company's common stock on or before September
30, 2001, and will be based on Masatepe's cash flow for the twelve calendar
months immediately preceding July 31, 2001.
The Company may also be obligated under the Purchase Agreement to pay a deferred
purchase price component (the "Deferred Purchase Price") to the sellers,
Activated Communications, Limited Partnership and Marc Graubart on or about
April 7, 1999 in the event that the market price of the Company's common stock
is less than $7.00 per share, as determined by a formula set forth in the
Purchase Agreement. The Deferred Purchase Price is payable in shares of common
stock of the Company.
The Company expects to continue to explore acquisition opportunities. Such
acquisitions may have a significant impact on the Company's need for capital.
The Company would explore a range of financing options, which could include
public or private debt, or equity financing. There can be no assurances that
such financing will be available, or if available, will be available on terms
attractive to the Company. The Company may also consider acquisitions using the
Company's common stock.
The Year 2000 Readiness Disclosure
The Year 2000 issue is a matter of worldwide concern for carriers and affects
many aspects of telecommunications technology, including the computer
16
<PAGE>
systems and software applications that are essential for network administration
and operations. A significant portion of the voice and data networking and
network management devices have date-sensitive processing in them which affect
network administration and operations functions such as service activation,
service assurance and billing processes.
The Company is currently evaluating the year 2000 readiness of its computer
systems, software applications and telecommunications equipment. It is sending
Year 2000 compliance inquiries to certain third parties (i.e. vendors,
customers, outside contractors) with whom it has a relationship. These inquiries
include, among other things, requests to provide documentation regarding the
third party's year 2000 programs, and questions regarding how the third party
specifically examined the Year 2000 effect on their computers and what remedial
actions will be taken with regard to these problems.
The Company's key processing systems have recently been implemented. Most of the
vendors of such systems have represented to the Company that the systems are
compliant with the year 2000 issues without any modification. The Company will,
however, continue to require confirmation of year 2000 compliance in its future
requests for proposals from equipment and software vendors. The failure of the
Company's computer systems and software applications to accommodate the year
2000, could have a material adverse effect on the Company's business, financial
condition and result of operations.
Further, if the networks and systems of those on whose services the Company
depends and with whom the Company's networks and systems must interface are not
year 2000 functional, it could have a material adverse effect on the operation
of the Company's networks and, as a result, have a material adverse effect on
the Company. Most major domestic carriers have announced that they expect all of
their network and support systems to be year 2000 functional by mid 1999.
However, other domestic and international carriers may not be year 2000
functional. The Company intends to continue to monitor the performance of its
accounting, information and processing systems and software applications and
those of its third-party constituents to identify and resolve any year 2000
issues. Currently, through its discovery process, the Company has identified an
estimated $84,000 of expenditures associated with updating its systems to be
compliant with the year 2000. However, the Company expects to find additional
expenses pending the finalization of its year 2000 investigation.
The Company believes that the most reasonably likely worst case scenario
resulting from the century change could be the inability to route
telecommunications traffic at current rates to desired locations for an
indeterminable period of time, which could have a material adverse effect on the
Company's results of operations and liquidity.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item not applicable.
17
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Metromedia China Corporation Investment
On June 22, 1998, the Company acquired from PortaCom Wireless, Inc. ("PortaCom")
2 million shares of the common stock of Metromedia China Corporation ("MCC") and
warrants to purchase 4 million shares of common stock of MCC at an exercise
price of $4.00 per share, for an aggregate purchase price of 5,300,000 shares of
common stock of VDC Corporation Ltd., a Bermuda company ("VDC Bermuda") and up
to $700,000 in cash.
In March 1998, PortaCom filed a voluntary petition for bankruptcy relief under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court District of Delaware. During the course of the bankruptcy proceedings, the
acquisition was amended to provide that VDC Bermuda would fund an escrow account
in the amount of up to $2,682,000 (the "Escrow Cash") for the benefit of holders
of priority unsecured claims and general unsecured claims against PortaCom's
bankruptcy estate. To the extent that the cash escrow is used by PortaCom,
PortaCom will receive fewer VDC Bermuda shares. The Escrow Cash and 5,300,000
VDC shares (the "Escrow Shares") were placed in escrow pending the resolution of
the disputed claims against PortaCom's bankruptcy estate.
In October 1998, the Company, successor to VDC Bermuda pursuant to the
Domestication Merger, filed a motion in the United States Bankruptcy Court to
block the distribution of escrowed assets in connection with the bankruptcy of
PortaCom. The Company filed the motion to permit it to undertake discovery
relative to certain aspects of its investment in MCC prior to the distribution
of escrowed assets. Following the submission of that motion, the Company,
PortaCom, and certain other interested parties, agreed on a stipulation
releasing the majority of the Escrow Cash and Escrow Shares, as reduced based
upon the use of Escrow Cash, from escrow to be distributed in accordance with
PortaCom's Amended Plan of Reorganization as Modified (the "Plan") and
postponing the distribution of certain Escrow Shares to PortaCom and PortaCom
shareholders.
In November 1998, PortaCom, the Company and Michael Richard, a PortaCom officer
charged with certain responsibilities in distributing certain assets in
connection with the Plan, entered into a Settlement Agreement pursuant to which
2 million of the Escrow Shares will be retained in escrow for up to eighteen
(18) months (the "Retained Shares"). A portion or all of the Retained Shares
shall be released to PortaCom contingent upon certain performance criteria.
Those shares not so released will be returned to the Company.
As of February 1999, PortaCom had used approximately $1,669,839 of the Escrow
Cash, resulting in PortaCom's return, or obligation to return, approximately
186,105 Escrow Shares to the Company. The unused Escrow Cash has been returned
to the Company.
Worldstar Suit
On or about June 10, 1998, Worldstar Communications Corporation ("Worldstar")
commenced an action in the United States District Court for the Southern
District of New York entitled Worldstar Communications Corporation v. Lindemann
Capital L.P., Activated Communications, L.P. and Marc Graubart (Civil Action No.
98 4093) (the "Action"). Worldstar asserts in the Action that, under the terms
of a purported joint venture arrangement with Lindemann Capital L.P.
("Lindemann") and Activated Communications, L.P. ("Activated"), Worldstar
acquired certain rights to share in the
18
<PAGE>
profits and ownership of a telecommunications project in Nicaragua owned by
Masatepe Comunicaciones S.A., a Nicaraguan company ("Masatepe S.A."). Masatepe
Communications U.S.A., L.L.C. ("Masatepe U.S.A."), which owns a 49% equity
interest in Masatepe S.A., was acquired by the Company and is now a wholly-owned
subsidiary of the Company.
In the event that the plaintiff prevails in the Action, the value of the
Company's interest in Masatepe U.S.A., Masatepe S.A and/or the Nicaraguan
Project could be diluted. However, pursuant to the Purchase Agreement through
which the Company acquired Masatepe U.S.A. (the "Purchase Agreement"), Activated
agreed to indemnify and hold the Company and Masatepe U.S.A. harmless from any
loss, liability, claim, damage and expense arising out or resulting from the
Action. Under certain circumstances, Activated has an obligation under the
Purchase Agreement to repurchase from the Company all or part of the Company's
equity interest in Masatepe U.S.A. Furthermore, defendants in the action have
filed a motion to dismiss the Action, and are otherwise vigorously defending the
Action. In view of the foregoing, the Company does not believe that the
claims asserted in the Action will have a material adverse effect on the
Company's assets or operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Domestication Merger
On November 6, 1998, VDC Corporation Ltd., a Bermuda company ("VDC Bermuda"),
merged with and into the Company (the "Domestication Merger") pursuant to the
terms of an Agreement and Plan of Merger, made as of October 5, 1998, by and
between VDC Bermuda and the Company (the "Merger Agreement"). Pursuant to the
terms of the Merger Agreement, each outstanding share of VDC Bermuda common
stock, par value $2.00 per share, was converted into the right to receive one
share of Company common stock, par value $.0001 per share ("Common Stock").
Additionally, each outstanding share of Company preferred stock was changed and
converted into one share of Company Common Stock. Additional information
required by this Item is provided in the registrant's Registration Statement on
Form S-4, filed with the SEC on September 9, 1998 and is incorporated by
reference herein.
Recent Sales of Unregistered Securities
On December 22, 1998, the Company issued 129,852 shares of Company Common Stock
in the name of FAC Enterprises, Inc. ("FAC"), 70,000 shares of Company Common
Stock in the name of SPH Investments Inc. ("SPH Investments"), and 40,148 shares
of Company Common Stock in the name of SPH Equities Inc. ("SPH Equities") in a
non-public offering exempt from registration pursuant to Section 4(2) and Rule
506 of Regulation D of the Act (the "Investment Banking Shares"). The Investment
Banking Shares were issued in the name of FAC, SPH Investments, and SPH Equities
as an investment banking fee for their work in arranging for, and providing
services in connection with, the merger of Sky King Communications, Inc., a
Connecticut corporation, with and into VDC (Delaware), Inc., a Delaware
corporation. The aggregate value of the services rendered as consideration for
the Investment Banking Shares was $600,000.
On December 23, 1998, the Company sold 245,159 shares of Company Common Stock to
accredited investors consisting of Frederick A. Moran and certain entities
associated with and family members of Frederick A. Moran for an aggregate
purchase price of $888,701.38 in a non-public offering exempt from registration
pursuant to Section 4(2) and Rule 506 of Regulation D of the Act.
19
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Item not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Domestication Merger
On October 30, 1998, VDC Bermuda held a Special General Meeting of its
shareholders (the "VDC Bermuda Meeting"). At the VDC Bermuda Meeting the
shareholders voted on the merger of VDC Bermuda with and into the Company.
Holders of 8,519,975 shares voted in favor of the Domestication Merger. Holders
of 42,016 shares voted against the Domestication Merger. Holders of 5,830 shares
abstained from voting on the Domestication Merger.
The sole holder of shares of Company Common Stock, par value $.0001 per share,
prior to the Domestication Merger voted for the Domestication Merger pursuant to
a Unanimous Written Consent dated November 5, 1998.
The holders of Company Series A convertible preferred stock, par value $.0001
per share ("Series A Stock") and Series B convertible preferred stock, par value
$.0001 per share ("Series B Stock") approved the Domestication Merger pursuant
to a Written Consent dated November 4, 1998. Holders of 3,832,767.4 shares of
Series A Stock voted for the Domestication Merger. Holders of 4,373,400.6 shares
of Series B Stock voted for the Domestication Merger. No abstentions or votes
against the Domestication Merger were noted by holders of Series A or Series B
Stock on the Written Consent.
ITEM 5. OTHER INFORMATION
The Company has decided to postpone the Company's 1999 Annual Meeting of
Shareholders (the "Annual Meeting") until on or about December 3, 1999. To be
considered for inclusion in the Company's proxy statement relating to the Annual
Meeting, Company shareholder ("Shareholder") proposals must be received no later
than August 2, 1999. To be considered for presentation at the Annual Meeting,
although not included in the proxy statement, proposals must be received no
later than October 14, 1999, nor earlier than September 17, 1999. All
Shareholder proposals should be marked for the attention of Secretary, VDC
Communications, Inc., 75 Holly Hill Lane, Greenwich, Connecticut 06830.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description Method of Filing
----------- ----------- ----------------
<S> <C> <C>
2.1 Agreement and Plan of Merger, made as of October 5, 1998, by (1)
and between VDC Corporation Ltd. and VDC Communications, Inc.
3.1 Certificate of Incorporation, as amended (1)
20
<PAGE>
3.2 Amended and Restated Bylaws (1)
4.1 1998 Stock Incentive Plan (2)
10.1 Settlement, Release and Discharge Agreement, by and among VDC (3)
Communications, Inc., Dr. James C. Roberts, and Frederick A.
Moran, dated November 19, 1998
10.2 Settlement Agreement between VDC Communications, Inc., PortaCom (3)
Wireless, Inc., and Michael Richards, dated November 24, 1998
10.3 Director Agreement with Dr. Leonard Hausman, dated November 4, (4)
1998
10.4 Option to Purchase 25,000 shares granted to Dr. Leonard (4)
Hausman, dated November 4, 1998
10.5 Registration Rights Agreement between VDC Corporation Ltd. and (4)
Dr. Leonard Hausman, dated November 4, 1998
10.6 Director Agreement with James Dittman, dated November 4, 1998 (4)
10.7 Option to Purchase 25,000 shares granted to James Dittman, (4)
dated November 4, 1998
10.8 Registration Rights Agreement between VDC Corporation Ltd. and (4)
James Dittman, dated November 4, 1998
27.1 Financial Data Schedule (4)
</TABLE>
(1) Filed as an Exhibit to registrant's registration statement on Form S-4,
filed with the SEC on September 9, 1998, and incorporated by reference
herein.
(2) Filed as an Exhibit to registrant's registration statement on Form
8-A/A, filed with the SEC on January 19, 1999, and incorporated by
reference herein.
(3) Filed as an Exhibit to Current Report on Form 8-K dated November 19,
1998, and incorporated by reference herein.
(4) Filed herewith.
(b) Reports on Form 8-K
Report on Form 8-K, dated November 19, 1998, reporting resignation of
Dr. James C. Roberts, and improvement of terms of acquisition of
Metromedia China Corporation securities.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 10-Q to be signed on its behalf by the
undersigned, thereunto duly authorized.
VDC COMMUNICATIONS, INC.
By: /s/ Frederick A. Moran Dated: February 11, 1999
------------------------------------------
Frederick A. Moran
Chairman, Chief Executive Officer,
Chief Financial Officer and Director
22
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page Number in
Number Rule 0-3(b)
(Referenced to Sequential
Item 601 of Numbering System
Reg. S-K) Where Exhibit Can
Be Found
<S> <C> <C>
10.3 Director Agreement with Dr. Leonard Hausman, dated November 4,
1998
10.4 Option to Purchase 25,000 shares granted to Dr. Leonard
Hausman, dated November 4, 1998
10.5 Registration Rights Agreement between VDC Corporation Ltd. and
Dr. Leonard Hausman, dated November 4, 1998
10.6 Director Agreement with James Dittman, dated November 4, 1998
10.7 Option to Purchase 25,000 shares granted to James Dittman,
dated November 4, 1998
10.8 Registration Rights Agreement between VDC Corporation Ltd. and
James Dittman, dated November 4, 1998
27.1 Financial Data Schedule
</TABLE>
23
<PAGE>
Exhibit 10.3
DIRECTOR AGREEMENT
DIRECTOR AGREEMENT effective as of the 4th day of November, 1998 by and
among Leonard Hausman (hereinafter referred to as "Dr. Hausman") and VDC
Corporation Ltd., a Bermuda company (hereinafter referred to as the "Company").
WITNESSETH
WHEREAS, Dr. Hausman has been elected to serve as a member of the
Company's Board of Directors (a "Director") and Dr. Hausman has agreed to serve
as a Director, each upon the terms and conditions contained within this Director
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Term, Duties and Acceptance
a. The Company hereby retains Dr. Hausman as a Director to render
his services to the Company in such capacity.
b. Dr. Hausman hereby agrees to serve as a Director and agrees to
devote his best efforts, energy and skill to such position.
c. Dr. Hausman agrees to serve as a Director for the term for
which he was elected unless he retires or is removed from
office.
2. Compensation and Expense Reimbursement
a. As compensation (the "Compensation") for his service as a
Director, Dr. Hausman shall receive options to purchase the
Company's stock upon the terms and conditions set forth in
that certain Option to Purchase Common Shares of VDC
Corporation Ltd. by and between Dr. Hausman and the Company
dated November 4, 1998.
b. Other than the Compensation, Dr. Hausman shall not receive a
salary, payments or reimbursement of any kind for his service
as a Director.
c. The Company shall not pay or reimburse Dr. Hausman for
out-of-pocket expenses incurred by him in the performance of
his duties as a Director, nor for attending telephonic or
physical meetings of the Company's Board of Directors (the
"Board").
<PAGE>
3. Resignation and Removal from Office
a. Dr. Hausman may resign from his position as a Director upon
thirty (30) days written notice to the Board.
b. Dr. Hausman may be removed from office as Director on the
terms and conditions set forth in the corporate law of the
current jurisdiction of incorporation of the Company and on
the terms and conditions set forth in the Company's governing
documents.
4. Trade Secrets and Confidential Information
Dr. Hausman recognizes and acknowledges that certain information
including, without limitation, information pertaining to the financial condition
of the Company, its systems, methods of doing business, agreements with
customers or suppliers or other aspects of the business of the Company or which
is sufficiently secret to derive economic value from not being disclosed
("Confidential Information") may be made available or otherwise come into the
possession of Dr. Hausman by reason of his service to the Company. Accordingly,
Dr. Hausman agrees that he will not at any time disclose any Confidential
Information to any person, firm, corporation, association or other entity for
any reason or purpose whatsoever or make use to his personal advantage or to the
advantage of any third party, of any Confidential Information, without the prior
written consent of the Board. Dr. Hausman shall, upon termination of his service
to the Company, return to the Company all documents which reflect Confidential
Information (including copies thereof). Notwithstanding anything heretofore
stated in this Section 4, Dr. Hausman's obligations under this Section 4 shall
not, after termination of Dr. Hausman's service to the Company, apply to
information which has become generally available to the public without any
action or omission of Dr. Hausman (except that any Confidential Information
which is disclosed to any third party by an employee or representative of the
Company who is not authorized to make such disclosure shall be deemed to remain
confidential and protectable by Dr. Hausman under this Section 4).
5. Severability
The invalidity or unenforceability of any term of this Agreement shall
not affect the validity or enforceability of this Agreement or any of its other
terms; and this Agreement and such other terms shall be construed as though the
invalid or unenforceable term(s) were not included herein, unless the effect
would be to vitiate the parties' fundamental purposes in entering into this
Agreement.
6. Breach
Dr. Hausman hereby recognizes and acknowledges that irreparable injury
or damage shall result to the Company in the event of a breach or threatened
breach by Dr. Hausman of any of the terms of Section 4 hereunder, and Dr.
Hausman therefore agrees that the Company shall be entitled to an injunction
restraining Dr. Hausman from engaging in any activity constituting such breach
or threatened breach. Nothing contained herein shall be construed as prohibiting
the
2
<PAGE>
Company from pursuing any other remedies available to the Company at law or in
equity for breach or threatened breach of this Agreement, including but not
limited to, the recovery of damages from Dr. Hausman and removal from office as
a Director.
7. Arbitration
All controversies which may arise between the parties hereto including,
but not limited to, those arising out of or related to this Agreement shall be
determined by binding arbitration applying the laws of the State of Delaware as
set forth in Section 11 hereof. Any arbitration pursuant to this Agreement shall
be conducted in Stamford, Connecticut before the American Arbitration
Association in accordance with its arbitration rules. The arbitration shall be
final and binding upon all the parties (so long as the award was not procured by
corruption, fraud or undue means) and the arbitrator's award shall not be
required to include factual findings or legal reasoning. Nothing in this Section
7 will prevent either party from resorting to judicial proceedings if interim
injunctive relief under the laws of the State of Delaware from a court is
necessary to prevent serious and irreparable injury to one of the parties, and
the parties hereto agree that the federal and state courts located in Stamford,
Connecticut shall have exclusive subject matter and in personam jurisdiction
over the parties and any such claims or disputes arising from the subject matter
contained herein.
8. Remedies Cumulative
Except as otherwise expressly provided herein, each of the rights and
remedies of the parties set forth in this Agreement shall be cumulative with all
other such rights and remedies, as well as with all rights and remedies of the
parties otherwise available at law or in equity.
9. Counterparts
This Agreement may be executed via facsimile transmission signature and
in counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
10. Waiver
The failure of either party at any time or times to require performance
of any provision hereof shall in no manner affect the right at a later time to
enforce the same. To be effective, any waiver must be contained in a written
instrument signed by the party waiving compliance by the other party of the term
or covenant as specified. The waiver by either party of the breach of any term
or covenant contained herein, whether by conduct or otherwise, in any one or
more instances, shall not be deemed to be, or construed as, a further or
continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement.
11. Governing Law
This Agreement shall be governed by the laws of the State of Delaware
without regard to principles of conflict of laws.
3
<PAGE>
12. Complete Agreement
This Agreement constitutes the complete and exclusive agreement between
the parties hereto which supersedes all proposals, oral and written, and all
other communications between the parties relating to the subject matter
contained herein.
13. Warranties
Dr. Hausman represents, warrants, covenants and agrees that he has a
right to enter into this Agreement, that he is not a party to any agreement or
understanding whether or not written which would prohibit or restrict his
performance of his obligations under this Agreement and that he will not use in
the performance of his obligations hereunder any proprietary information of any
other party which he is legally prohibited from using.
14. Notice
Any notice, demand, or communication given in connection with this
Agreement shall be in writing and shall be deemed received (a) when delivered if
given in person or by courier or courier service, or (b) on the date and at the
time of transmission if sent by facsimile (receipt confirmed) or (c) five (5)
business days after being deposited in the mail postage prepaid.
15. Key Man Insurance
The Company shall have the right to obtain what is commonly known as
"Key Man Insurance" on the life of Dr. Hausman in such amount as the Company
deems appropriate. Dr. Hausman agrees to cooperate in all manner in the
obtaining of such a policy. All expenses involved in connection with the
obtaining and maintaining of such a policy shall be that of the Company.
16. Assignment
This Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns. By way of illustration, and not
limitation, if the Company merges with and into VDC Communications, Inc., (the
"Subsidiary") and Mr. Dittman serves as a Director of the Subsidiary following
the merger, then the terms of this Agreement shall inure to the benefit of and
be binding upon the Subsidiary.
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
4th day of November 1998.
<TABLE>
<S> <C>
WITNESS: VDC CORPORATION LTD.
/s/ Louis D. Frost By:/s/ Frederick A. Moran
- ------------------ -----------------------------------------------
Frederick A. Moran, Chief Executive Officer
WITNESS:
/s/ Tamar Miller /s/ Leonard Hausman
- ---------------- ----------------------------------------
Leonard Hausman
</TABLE>
Agreed to and accepted this 4th
day of November, 1998
VDC COMMUNICATIONS, INC.
By:/s/ Frederick A. Moran
---------------------------------------------
Frederick A. Moran, President
5
<PAGE>
Exhibit 10.4
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION
FROM REGISTRATION, UNDER THE 1933 ACT, BASED ON AN OPINION LETTER OF COUNSEL
SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION.
OPTION TO PURCHASE COMMON SHARES
OF
VDC CORPORATION LTD.
Void after November 4, 2008
This certifies that, for value received, Dr. Leonard Hausman
("Holder"), is entitled, subject to the terms set forth below and prior to the
Expiration Date (as hereinafter defined), to purchase from VDC Corporation Ltd.
(the "Company"), a Bermuda company, Common Shares of the Company (as defined
below), commencing on the date hereof (the "Option Issue Date"), with the Notice
of Exercise attached hereto duly executed, and simultaneous payment therefor in
lawful money of the United States, at the Exercise Price as set forth in Section
2 below. The number, character and Exercise Price of the shares are subject to
adjustment as provided below. The options granted hereunder are intended to be
treated as non-qualified stock options and will not be treated as incentive
stock options under Section 422 of the Internal Revenue Code of 1986, as
amended.
1. Term of Option. Subject to compliance with the vesting provisions
identified at Paragraph 2.3 hereafter, this Option shall be exercisable, in
whole or in part, during the term commencing on the Option Issue Date and ending
at 5:00 p.m. on November 4, 2008 (the "Expiration Date"), and shall be void
thereafter.
2. Exercise Price, Number of Shares and Vesting Provisions.
2.1. Number of Shares. The number of shares of the Company's Common
Shares, $2.00 par value per share ("Common Shares"), which may be purchased
pursuant to this Option shall be 25,000 shares, as adjusted pursuant to Section
11 hereof.
2.2. Exercise Price. The Exercise Price at which this Option may be
exercised shall be $4.00 per common share, as adjusted pursuant to Section 11
hereof.
2.3. Vesting. The Options granted hereunder shall vest in accordance
with the following schedule on an aggregate basis:
(i) 8,333 provided Holder serves as a member of the Company's
Board of Directors (a "Director") continuously from November 4, 1998 through
November 3, 1999;
(ii) 16,666 provided Holder serves as a Director continuously
from November 4, 1998 through November 3, 2000; and
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(iii) 25,000 provided Holder serves as a Director continuously
from November 4, 1998 through November 3, 2001.
Except as otherwise specifically provided herein, Holder's right in and
to any Options that do not vest at the date of termination of Holder's service
as Director of the Company shall lapse and terminate.
2.4. Death of Holder and Termination.
(a) If the Holder shall die, he or his estate, personal
representatives, or beneficiary, as applicable, shall have the right, subject to
the provisions of this Paragraph 2 hereof, to continue to vest and exercise the
Options as if no termination in service to the Company had occurred.
(b) In the event Holder resigns or is removed from office
pursuant to Section 3 of the Director Agreement by and between the Holder and
the Company effective as of November 4, 1998, Holder shall have 30 days in which
to exercise the Options (only to the extent that the Holder would have been
entitled to do so as of the date of his termination) and thereafter, Holder's
right in and to the Options shall lapse and terminate.
3. Exercise of Option.
(a) The Exercise Price shall either be payable in cash or by
bank or certified check; or by cashless exercise through the delivery by the
Holder to the Company of Common Shares for which Holder is the record and
beneficial owner which have been held for at least six (6) months, or by
delivering to the Company a notice of exercise with an irrevocable direction to
a broker/dealer registered under the Securities Exchange Act of 1934 to sell a
sufficient portion of the shares and deliver the sale proceeds directly to the
Company to pay the Exercise Price, or by any combination thereof. If Common
Shares of the Company are tendered as payment of the Exercise Price, the value
of such shares shall be their "market value" as of the trading date immediately
preceding the date of exercise. The "market value" shall be:
(i) If the Company's Common Shares are traded in the
over-the-counter market and not on any national securities exchange nor in the
NASDAQ Reporting System, the market value shall be the average of the mean
between the last bid and ask prices per share, as reported by the National
Quotation Bureau, Inc., or an equivalent generally accepted reporting service,
for the consecutive 20 trading days immediately preceding the date of exercise,
or if not so reported, the average of the closing bid and asked prices for a
share for the consecutive 20 trading days immediately preceding the date of
exercise, as furnished to the Company by any member of the National Association
of Securities Dealers, Inc., selected by the Company for that purpose.
(ii) If the Company's Common Shares are traded on a
national securities exchange or in the NASDAQ Reporting System, the market value
shall be either (1) the simple average of the high and low prices at which a
share of the Company's Common Shares traded, as quoted on the NASDAQ-NMS or its
other principal exchange, for the consecutive 20
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trading days immediately preceding the date of exercise or (2) the average price
of the last sale of a Common Share as similarly quoted for the consecutive 20
trading days immediately preceding the date of exercise, whichever is higher,
and rounding out such figure to the next higher multiple of 12.5 cents (unless
the figure is already a multiple of 12.5 cents).
If such tender would result in an issuance of a whole number of shares and a
fractional Common Share, the value of such fractional share shall be paid to the
Company in cash or by check by the Holder.
(b) The purchase rights represented by this Option are
exercisable by the Holder in whole or in part, at any time, or from time to
time, by the surrender of this Option and the Notice of Exercise annexed hereto
duly completed and executed on behalf of the Holder, at the office of the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the Holder at the address of the Holder appearing on the
books of the Company).
(c) This Option shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above, and the person entitled to receive the Common Shares
issuable upon such exercise shall be treated for all purposes as the holder of
record of such shares as of the close of business on such date. As promptly as
practicable on or after such date and in any event within ten (10) days
thereafter, the Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or certificates for the
number of shares issuable upon such exercise. In the event that this Option is
exercised in part, the Company at its expense will execute and deliver a new
Option of like tenor exercisable for the number of shares for which this Option
may then be exercised.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this Option.
In lieu of any fractional share to which the Holder would otherwise be entitled,
the Company shall make a cash payment equal to the Exercise Price multiplied by
such fraction.
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5. Replacement of Option. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Option and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Option, the
Company at its expense shall execute and deliver, in lieu of this Option, a new
Option of like tenor and amount.
6. Rights of Stockholder. The Holder shall not be entitled to vote or
receive dividends or be deemed the holder of Common Shares or any other
securities of the Company that may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed to
confer upon the Holder, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, or change of stock to no par
value, consolidation, merger, conveyance or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until the
Option shall have been exercised as provided herein.
7. Transfer of Option.
7.1. Non-Transferability. Prior to vesting in accordance with
paragraph 2 herein, the Option shall not be assigned, transferred, pledged or
hypothecated in any way, nor subject to execution, attachment or similar
process, otherwise than by will or by the laws of descent and distribution. To
the extent the Options have vested, transfers thereof which comply with the
remaining provisions of this paragraph 7 may be undertaken upon the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of the Option contrary to the provisions hereof, and the levy of an
execution, attachment, or similar process upon the Option, shall be null and
void and without effect.
7.2. Exchange of Option Upon a Transfer. On surrender of this Option
for exchange, properly endorsed, the Company at its expense shall issue to or on
the order of the Holder a new Option or Options of like tenor, in the name of
the Holder or as the Holder (on payment by the Holder of any applicable transfer
taxes) may direct, of the number of shares issuable upon exercise hereof.
7.3. Compliance with Securities Laws; Restrictions on Transfers.
(a) The Holder of this Option, by acceptance hereof,
acknowledges that this Option and the Shares to be issued upon exercise hereof
are being acquired solely for the Holder's own account and not as a nominee for
any other party, and for investment (unless such shares are subject to resale
pursuant to an effective prospectus), and that the Holder will not offer, sell
or otherwise dispose of this Option or any Shares to be issued upon exercise
hereof except under circumstances that will not result in a violation of
applicable federal and state securities laws. Upon exercise of this Option, the
Holder shall, if requested by the Company,
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confirm in writing, in a form satisfactory to the Company, that the Common
Shares so purchased are being acquired solely for the Holder's own account and
not as a nominee for any other party, for investment (unless such shares are
subject to resale pursuant to an effective prospectus), and not with a view
toward distribution or resale.
(b) Neither this Option nor any Common Shares issued upon
exercise of this Option may be offered for sale or sold, or otherwise
transferred or sold in any transaction which would constitute a sale thereof
within the meaning of the Securities Act of 1933, as amended (the "1933 Act"),
unless (i) such security has been registered for sale under the 1933 Act and
registered or qualified under applicable state securities laws relating to the
offer an sale of securities, or (ii) exemptions from the registration
requirements of the 1933 Act and the registration or qualification requirements
of all such state securities laws are available and the Company shall have
received an opinion of counsel satisfactory to the Company that the proposed
sale or other disposition of such securities may be effected without
registration under the 1933 Act and would not result in any violation of any
applicable state securities laws relating to the registration or qualification
of securities for sale, such counsel and such opinion to be satisfactory to the
Company.
(c) All Common Shares issued upon exercise hereof shall be
stamped or imprinted with a legend in substantially the following form (in
addition to any legend required by state securities laws).
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION
FROM REGISTRATION, UNDER THE 1933 ACT, BASED ON AN OPINION LETTER OF COUNSEL
SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION."
8. Reservation and Issuance of Stock; Taxes.
(a) The Company covenants that during the term that this Option is
exercisable, the Company will reserve from its authorized and unissued Common
Shares a sufficient number of shares to provide for the issuance of the shares
upon the exercise of this Option, and from time to time will take all steps
necessary to amend its Memorandum of Association to provide sufficient reserves
of Common Shares issuable upon the exercise of the Option.
(b) The Company further covenants that all Common Shares issuable upon
the due exercise of this Option will be free and clear from all taxes or liens,
charges and security interests created by the Company with respect to the
issuance thereof, however, the Company shall not be obligated or liable for the
payment of any taxes, liens or charges of Holder, or any other party
contemplated by Paragraph 7, incurred in connection with the issuance of this
Option or the Common Shares upon the due exercise of this Option. The Company
agrees that its issuance of this Option shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Common Shares upon the
exercise of
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this Option. The Common Shares issuable upon the due exercise of this Option,
will, upon issuance in accordance with the terms hereof, be duly authorized,
validly issued, fully paid and non-assessable.
(c) Upon exercise of the Option, the Company shall have the right to
require the Holder to remit to the Company an amount sufficient to satisfy
federal, state and local tax withholding requirements prior to the delivery of
any certificate for Common Shares purchased pursuant to the Option.
(d) A Holder who is obligated to pay the Company an amount required to
be withheld under applicable tax withholding requirements may pay such amount
(i) in cash; (ii) in the discretion of the Company's Chief Executive Officer,
through the delivery to the Company of previously-owned Common Shares having an
aggregate market value equal to the tax obligation provided that the previously
owned shares delivered in satisfaction of the withholding obligations must have
been held by the Holder for at least six (6) months; (iii) in the discretion of
the Company's Chief Executive Officer, through the withholding of Common Shares
otherwise issuable to the Holder in connection with the Option exercise; or (iv)
in the discretion of the Company's Chief Executive Officer, through a
combination of the procedures set forth in subsections (i), (ii) and (iii) of
this Paragraph 8(d).
9. Notices.
(a) Whenever the Exercise Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall
issue a certificate signed by its Chief Executive Officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Exercise
Price and number of shares purchasable hereunder after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to the Holder of this Option.
(b) All notices, advices and communications under this Option shall
be deemed to have been given, (i) in the case of personal delivery, on the date
of such delivery and (ii) in the case of mailing, on the third business day
following the date of such mailing, addressed as follows:
If to the Company:
VDC Corporation Ltd.
75 Holly Hill Lane, 3rd Floor
Greenwich, CT 06830
Attn: Frederick A. Moran, Chief Executive Officer
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With a Copy to:
Louis D. Frost, VDC Corporate Counsel
VDC Corporation Ltd.
75 Holly Hill Lane, 3rd Floor
Greenwich, CT 06830
and to the Holder:
at the address of the Holder appearing on the books of the
Company or the Company's transfer agent, if any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Paragraph 9.
10. Amendments.
(a) Any term of this Option may be amended with the written consent
of the Company and the Holder. Any amendment effected in accordance with this
Section 10 shall be binding upon the Holder, each future holder and the Company.
(b) No waivers of, or exceptions to, any term, condition or
provision of this Option, in any one or more instances, shall be deemed to be,
or construed as, a further or continuing waiver of any such term, condition or
provision.
11. Adjustments. The number of Shares purchasable hereunder and the
Exercise Price are subject to adjustment from time to time upon the occurrence
of certain events, as follows:
11.1. Reorganization, Merger or Sale of Assets. If at any time
while this Option, or any portion thereof, is outstanding and unexpired there
shall be (i) a reorganization (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), (ii) a merger
or consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a merger in which the Company is the
surviving entity but the shares of the Company's capital stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, or (iii) a sale
or transfer of substantially all of the Company's properties and assets as, or
substantially as, an entirety to any other person, then, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the holder of this Option shall upon such reorganization,
merger, consolidation or sale or transfer, have the right by exercising such
Option, to purchase the kind and number of Common Shares or other securities or
property (including cash) otherwise receivable upon such reorganization, merger,
consolidation or sale or transfer by a holder of the number of Common Shares
that might
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have been purchased upon exercise of such Option immediately prior to such
reorganization, merger, consolidation or sale or transfer. The foregoing
provisions of this Section 11.1 shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this Option. If the per-share consideration payable to the Holder
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Option
with respect to the rights and interests of the Holder after the transaction, to
the end that the provisions of this Option shall be applicable after that event,
as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Option.
11.2. Reclassification. If the Company, at any time while this
Option, or any portion thereof, remains outstanding and unexpired, by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Option exist into the same or a different
number of securities of any other class or classes, this Option shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Option immediately prior to such
reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 11.
11.3. Split, Subdivision or Combination of Shares. If the Company
at any time while this Option, or any portion thereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Option exist, into a different number of securities of the
same class, the Exercise Price and the number of shares issuable upon exercise
of this Option shall be proportionately adjusted.
11.4. Adjustments for Dividends in Stock or Other Securities or
Property. If while this Option, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Option exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible Stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Option shall represent the right to acquire, in addition
to the number of shares of the security receivable upon exercise of this Option,
and without payment of any additional consideration therefor, the amount of such
other or additional stock or other securities or property (other than cash) of
the Company that such holder would hold on the date of such exercise had it been
the holder of record of the security receivable upon exercise of this Option on
the date hereof and had thereafter, during the period from the date hereof to
and including the date of such exercise, retained such shares and/or all other
additional stock, other securities or property available by this Option as
aforesaid during such period.
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11.5. Necessary or Appropriate Action. The Company will not, by any
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 11 and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holders of this Option against
impairment.
12. Registration Rights. The Holder shall be entitled to the
registration rights set forth in that certain Registration Rights Agreement of
even date herewith by and between the Company and such Holder.
13. Severability. Whenever possible, each provision of this Option
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Option is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this Option
in such jurisdiction or affect the validity, legality or enforceability of any
provision in any other jurisdiction, but this Option shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
14. Governing Law. The corporate law of the current jurisdiction of
incorporation of the Company shall govern all issues and questions concerning
the relative rights of the Company and its stockholders. All other questions
concerning the construction, validity, interpretation and enforceability of this
Option and the exhibits and schedules hereto shall be governed by, and construed
in accordance with, the laws of the current jurisdiction of incorporation of the
Company, without giving effect to any choice of law or conflict of law rules or
provisions that would cause the application of the laws of any jurisdiction
other than those of the current jurisdiction of incorporation of the Company.
For the purposes of this Section 14, the term "current" shall mean the time at
which any dispute, issue or question shall arise hereunder.
15. Jurisdiction. The Holder and the Company agree to submit to
personal jurisdiction and to waive any objection as to venue in the federal or
state courts located in Stamford, Connecticut. Service of process on the Company
or the Holder in any action arising out of or relating to this Option shall be
effective if mailed to such party at the address listed in Section 9 hereof.
16. Arbitration. If a dispute arises as to interpretation of this
Option, it shall be decided finally by three arbitrators in an arbitration
proceeding conforming to the Rules of the American Arbitration Association
applicable to commercial arbitration. The arbitrators shall be appointed as
follows: one by the Company, one by the Holder and the third by the said two
arbitrators, or, if they cannot agree, then the third arbitrator shall be
appointed by the American Arbitration Association. The third arbitrator shall be
chairman of the panel and shall be impartial. The arbitration shall take place
in Stamford, Connecticut. The decision of a majority of the Arbitrators shall be
conclusively binding upon the parties and final, and such decision shall be
enforceable as a judgment in any court of competent jurisdiction. Each party
shall pay the
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fees and expenses of the arbitrator appointed by it, its counsel and its
witnesses. The parties shall share equally the fees and expenses of the
impartial arbitrator.
17. Corporate Power; Authorization; Enforceable Obligations. The
execution, delivery and performance by the Company of this Agreement: (i) are
within the Company's corporate power; (ii) have been duly authorized by all
necessary or proper corporate action; (iii) are not in contravention of the
Company's memorandum of association or bye-laws; (iv) will not violate in any
material respect, any law or regulation, including any and all Federal and state
securities laws, or any order or decree of any court or governmental
instrumentality; and (v) will not, in any material respect, conflict with or
result in the breach or termination of, or constitute a default under any
agreement or other material instrument to which the Company is a party or by
which the Company is bound.
18. Successors and Assigns. This Option shall inure to the benefit of
and be binding on the respective successors, assigns and legal representatives
of the Holder and the Company.
IN WITNESS WHEREOF, the Company has caused this Option to be executed
by its officers thereunto duly authorized.
Dated: November 4, 1998
<TABLE>
<S> <C>
VDC CORPORATION LTD.
/s/ Frederick A. Moran
-----------------------------------------------------
By: Frederick A. Moran, Chief Executive Officer
HOLDER:
/s/ Leonard Hausman
-----------------------------------------------------
Dr. Leonard Hausman
</TABLE>
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NOTICE OF EXERCISE
TO: [_____________________________]
(1) The undersigned hereby elects to purchase _______ Common Shares of
VDC Corporation Ltd. pursuant to the terms of the attached Option, and tenders
herewith payment of the purchase price for such shares in full.
(2) In exercising this Option, the undersigned hereby confirms and
acknowledges that the Common Shares to be issued upon conversion thereof are
being acquired solely for the account of the undersigned and not as a nominee
for any other party, and for investment (unless such shares are subject to
resale pursuant to an effective prospectus), and that the undersigned will not
offer, sell or otherwise dispose of any such Common Shares except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said Common
Shares in the name of the undersigned or in such other name as is specified
below:
-----------------------------------
(Name)
-----------------------------------
(Name)
- -------------------------- -----------------------------------
(Date) (Signature)
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Exhibit 10.5
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT made and entered into as of this
4th day of November, 1998, by and between VDC Corporation Ltd., a Bermuda
company (the "Company"), and Dr. Leonard Hausman ("Holder").
BACKGROUND
WHEREAS, pursuant to an Option to Purchase Common Shares of
VDC Corporation Ltd. dated November 4, 1998, by and between the Company and the
Holder (the "Option Agreement"), the Company has agreed to issue to Holder
options to purchase Common Shares of the Company, par value $2.00 per share
("Common Stock") in accordance with the terms of the Option Agreement.
WHEREAS, in order to induce Holder and the Company to enter
into the foregoing transactions, the Company has agreed to provide Holder with
the registration rights set forth in this Agreement.
Article 1 CERTAIN DEFINITIONS.
In addition to the other terms defined in this Agreement, the
following terms shall be defined as follows:
"Brokers' Transactions" has the meaning ascribed to such term
pursuant to Rule 144 under the Securities Act.
"Business Day" means any day on which the New York Stock
Exchange ("NYSE") is open for trading.
"Common Stock" means any outstanding Common Shares of the
Company.
"Company" means VDC Corporation Ltd., a Bermuda company, or
any successor thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder, all as the same
shall be in effect at the relevant time.
"Holder" means Holder for so long as (and to the extent that)
he owns any Registrable Securities, and each of his heirs and personal
representatives who become registered owners of Registrable Securities or
securities exercisable, exchangeable or convertible into Registrable Securities.
"Outstanding" means with respect to any securities as of any
date, all such securities therefore issued, except any such securities therefore
canceled or held by the Company
<PAGE>
or any successor thereto (whether in its treasury or not) or any affiliate of
the Company or any successor thereto shall not be deemed "Outstanding" for the
purpose of this Agreement.
"Person" means an individual, a partnership (general or
limited), corporation, limited liability company, joint venture, business trust,
cooperative, association or other form of business organization, whether or not
regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate of a deceased, insane or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political
subdivision or other instrumentality thereof, or any other entity.
"Registrable Security(ies)" means the Common Stock issued to
the Holder pursuant to the Option Agreement, and any additional shares of Common
Stock or other equity securities of the Company issued or issuable after the
date hereof in respect of any such securities (or other equity securities issued
in respect thereof) by way of a stock dividend or stock split, in connection
with a combination, exchange, reorganization, recapitalization or
reclassification of Company securities, or pursuant to a merger, division,
consolidation or other similar business transaction or combination involving the
Company; provided that: as to any particular Registrable Securities, such
securities shall cease to constitute Registrable Securities (i) when a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of thereunder, or (ii) when and to the extent such securities are
permitted to be publicly sold pursuant to Rule 144 (or any successor provision
to such Rule) under the Securities Act or are otherwise freely transferable to
the public without further registration under the Securities Act, or (iii) when
such securities shall have ceased to be Outstanding and, in the case of clause
(ii), the Company shall, if requested by the Holder or Holders thereof, have
delivered to such Holder or Holders the written opinion of independent counsel
to the Company to such effect.
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with the registration requirements set
forth in this Agreement including, without limitation, the following: (i) the
fees, disbursements and expenses of the Company's counsel(s), accountants, and
experts in connection with the registration under the Securities Act of
Registrable Securities; (ii) all expenses in connection with the preparation,
printing and filing of the registration statement, any preliminary prospectus or
final prospectus, any other offering documents and amendments and supplements
thereto, and the mailing and delivery of copies thereof to the underwriters and
dealers, if any; (iii) the cost of printing or producing any agreement(s) among
underwriters, underwriting agreement(s) and blue sky or legal investment
memoranda, any selling agreements, and any other documents in connection with
the offering, sale or delivery of Registrable Securities to be disposed of; (iv)
any other expenses in connection with the qualification of Registrable
Securities for offer and sale under state securities laws, including the fees
and disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(v) the filing fees incident to securing any required review by the NASDAQ Stock
Market of the terms of the sale of Registrable Securities to be disposed of and
any blue sky registration or filing fees, and (vi) the fees and expenses
incurred in connection with the listing of Registrable Securities on each
securities exchange (or the NASDAQ Stock Market) on which Company securities of
the same class are then listed; provided, however, that Registration Expenses
with respect to any registration pursuant to
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<PAGE>
this Agreement shall not include (x) expenses of any Holder's counsel, or (y)
any underwriting discounts or commissions attributable to Registrable
Securities, each of which shall be borne by the Holder.
"SEC" means the United States Securities and Exchange
Commission, or such other federal agency at the time having the principal
responsibility for administering the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder, all as the same shall be in
effect at the relevant time.
Article 2 PIGGYBACK REGISTRATIONS.
(a) Right to Piggyback. If at any time after the date hereof,
the Company proposes to file a registration statement under the Securities Act
(except with respect to registration statements on Forms S-4, S-8, or any other
form not available for registering the Registrable Securities for sale to the
public), with respect to an offering of newly issued Common Stock for its own
account, then the Company shall in each case give written notice of such
proposed filing to the Holders of Registrable Securities at least 45 days before
the anticipated filing date of the registration statement with respect thereto
(the "Piggyback Registration"), and shall, subject to Sections 2(b) and 2(c)
below, include in such Piggyback Registration such amount of Registrable
Securities as the Holder may request within 20 days of the receipt of such
notice.
(b) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriter advises the Company in writing that in its opinion
the number of securities requested to be included in such registration exceeds
the number which can be sold in an orderly manner in such offering within a
price range acceptable to the Company, the Company shall include in such
registration (i) first, the securities the Company proposes to sell, (ii)
second, the Registrable Securities requested to be included in such registration
to the extent that the number of shares to be registered will not, in the
opinion of the managing underwriter, adversely affect the offering of the
securities pursuant to clause (i), pro rata among the Holders of such
Registrable Securities on the basis of the number of shares owned by such Holder
and (iii) third, provided that all Registrable Securities requested to be
included in the registration statement have been so included, any other
securities requested to be included in such registration.
(c) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities other than the Holders of Registrable Securities, and
the managing underwriter advises the Company in writing that in their opinion
the number of securities requested to be included in such registration exceeds
the number which can be sold in an orderly manner in such offering within a
price range acceptable to the holders initially requesting such registration,
the Company shall include in such registration (i) first, the securities
requested to be included therein by the holders requesting such registration,
(ii) second, the Registrable Securities requested to be included in such
registration, to the extent that the number of shares to be registered will not,
in the opinion of the managing underwriter, adversely affect the offering of the
securities pursuant to clause (i), pro rata among the
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<PAGE>
Holders of such securities on the basis of the number of shares so requested to
be included therein owned by each such Holder, and (iii) third, other securities
requested to be included in such registration.
Article 3 HOLDBACK AGREEMENTS.
The Holder of Registrable Securities shall not effect any
public sale or distribution (including sales pursuant to Rule 144) of equity
securities of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the 60 days prior to and the 120-day
period beginning on the effective date of any underwritten primary registration
undertaken by the Company (except as part of such underwritten registration),
unless the underwriter managing the registered public offering otherwise agrees.
Article 4 REGISTRATION PROCEDURES.
Whenever the Holder of Registrable Securities has requested
that any Registrable Securities be registered pursuant to this Agreement, the
Company shall use its best efforts to effect the registration of the resale of
such Registrable Securities and pursuant thereto the Company shall as soon as
practicable:
(a) prepare and file with the SEC a registration statement
with respect to the resale of such Registrable Securities and use its best
efforts to cause such registration statement to become effective thereafter
(provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall furnish to the counsel
selected by the Holder of the Registrable Securities covered by such
registration statement copies of all such documents proposed to be filed, which
documents shall be subject to the review and consent of such counsel);
(b) notify the Holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the SEC such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than 180 days and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as Holder reasonably requests and do any and all other acts and
things which may be reasonably necessary or advisable to enable such seller to
consummate the disposition of the Registrable Securities owned by the sellers in
such
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<PAGE>
jurisdictions (provided that the Company shall not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this subparagraph, (ii) subject itself to taxation
in any such jurisdiction or (iii) consent to general service of process in any
such jurisdiction);
(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange or trading system on which similar securities issued by the
Company are then listed;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary underwriting agreements
(containing terms acceptable to the Company) as the Holder of Registrable
Securities being sold or the underwriters, if any, reasonably requests (although
the Company has no obligation to secure any underwriting arrangements on behalf
of the Holder); and
(i) make available for inspection during normal business hours
by any seller of Registrable Securities, any underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant
or other agent retained by any such seller or underwriter, all financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors, employees and independent accountants
to supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement.
-5-
<PAGE>
Article 5 REGISTRATION EXPENSES.
All Registration Expenses in connection with any of the
registration events identified within this Agreement shall be borne by the
Company. All other expenses shall be borne by the Holder.
Article 6 INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted
by law, the Holder of Registrable Securities, its officers and directors and
each Person who controls such Holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are caused by or contained in any information furnished to the Company by
such Holder for use therein or by such Holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such holder with a sufficient number of copies
of the same. In connection with an underwritten offering, the Company shall
provide reasonable and customary indemnification to such underwriters, their
officers and directors and each Person who controls such underwriters (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the Holder of Registrable Securities.
(b) In connection with any registration statement in which the
Holder of Registrable Securities is participating, such Holder shall furnish to
the Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished by such Holder.
(c) Any Person entitled to indemnification hereunder shall (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give prompt
notice shall not impair any Person's right to indemnification hereunder to the
extent such failure has not prejudiced the indemnifying party) and (ii) unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to,
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<PAGE>
assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and shall survive the transfer of securities.
The Company also agrees to make such provisions, as are reasonably requested by
any indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
Article 7 OBLIGATION OF HOLDERS.
(a) In connection with each registration hereunder, Holder
will furnish to the Company in writing such information with respect to such
Holder and the securities held by such Holder, and the proposed distribution by
them as shall be reasonably requested by the Company in order to assure
compliance with federal and applicable state securities laws, as a condition
precedent to including such Holder's Registrable Securities in the registration
statement. Each Holder also shall agree to promptly notify the Company of any
changes in such information included in the registration statement or prospectus
as a result of which there is an untrue statement of material fact or an
omission to state any material fact required or necessary to be stated therein
in order to make the statements contained therein not misleading in light of the
circumstances then existing.
(b) In connection with each registration pursuant to this
Agreement, the Holder included therein will not effect sales thereof until
notified by the Company of the effectiveness of the registration statement, and
thereafter will suspend such sales after receipt of telegraphic or written
notice from the Company to suspend sales to permit the Company to correct or
update a registration statement or prospectus. At the end of any period during
which the Company is obligated to keep a registration statement current, the
Holder included in said registration statement shall discontinue sales of shares
pursuant to such registration statement upon receipt of notice from the Company
of its intention to remove from registration the shares covered by such
registration statement which remain unsold, and such Holder shall notify the
Company of the number of shares registered which remain unsold immediately upon
receipt of such notice from the Company.
Article 8 INFORMATION BLACKOUT.
(a) At any time when a registration statement effected
pursuant to this Agreement relating to Registrable Securities is effective, upon
written notice from the Company to the Holders that the Company has determined
in good faith that sale of Registrable Securities pursuant to the registration
statement would require disclosure of non-public material information not
otherwise required to be disclosed under applicable law (an "Information
Blackout"), all Holders shall suspend sales of Registrable Securities pursuant
to such registration statement until the earlier of:
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<PAGE>
(i) thirty (30) days after the Company makes such
good faith determination; and
(ii) such time as the Company notifies the Holders
that such material information has been disclosed to the public or has ceased to
be material or that sales pursuant to such registration statement may otherwise
be resumed (the number of days from such suspension of sales by the Holders
until the day when such sale may be resumed hereunder is hereinafter called a
"Sales Blackout Period").
(b) Notwithstanding the foregoing, there shall be no more than
two (2) Information Blackouts during the term of this Agreement and no Sales
Blackout Period shall continue for more than thirty (30) consecutive days.
Article 9 MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the current jurisdiction of
incorporation of the Company without regard to that jurisdiction's conflict of
laws provisions. For the purposes of this paragraph, the term "current" shall
mean the time at which any dispute, issue or question shall arise hereunder.
(b) Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
(c) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given without the written consent of the Company and the Holders.
(d) Notices. All communications under this Agreement shall be
sufficiently given if delivered by hand or by overnight courier or mailed by
registered or certified mail, postage prepaid, addressed,
(i) if to the Company, to:
VDC Corporation Ltd.
75 Holly Hill Lane, 3rd Floor
Greenwich, CT 06830
Attention: Frederick A. Moran, Chief Executive Officer
-8-
<PAGE>
with a copy to:
Louis D. Frost, VDC Corporate Counsel
VDC Corporation Ltd.
75 Holly Hill Lane, 3rd Floor
Greenwich, CT 06830
or, in the case of the Holders, at such address as each such Holder shall have
furnished in writing to the Company; or at such other address as any of the
parties shall have furnished in writing to the other parties hereto.
(e) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(f) Entire Agreement; Survival; Termination. This Agreement is
intended by the parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
have executed this Agreement as of the date first written above.
VDC CORPORATION LTD.
By:/s Frederick A. Moran
-----------------------------
Frederick A. Moran
Chief Executive Officer
HOLDER:
/s/ Leonard Hausman
---------------------------------
Dr. Leonard Hausman
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<PAGE>
Exhibit 10.6
DIRECTOR AGREEMENT
DIRECTOR AGREEMENT effective as of the 4th day of November, 1998 by and
among James Dittman (hereinafter referred to as "Mr. Dittman") and VDC
Corporation Ltd., a Bermuda company having an address at 75 Holly Hill Lane,
Greenwich, CT 06830 (hereinafter referred to as the "Company").
WITNESSETH
WHEREAS, Mr. Dittman has been elected to serve as a member of the
Company's Board of Directors (a "Director") and Mr. Dittman has agreed to serve
as a Director, each upon the terms and conditions contained within this Director
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Term, Duties and Acceptance
a. The Company hereby retains Mr. Dittman as a Director to render
his services to the Company in such capacity.
b. Mr. Dittman hereby agrees to serve as a Director and agrees to
devote his best efforts, energy and skill to such position.
c. Mr. Dittman agrees to serve as a Director for the term for
which he was elected unless he retires or is removed from
office.
2. Compensation and Expense Reimbursement
a. As compensation (the "Compensation") for his service as a
Director, Mr. Dittman shall receive options to purchase the
Company's stock upon the terms and conditions set forth in
that certain Option to Purchase Common Shares of VDC
Corporation Ltd. by and between Mr. Dittman and the Company
dated November 4, 1998.
b. Other than the Compensation, Mr. Dittman shall not receive a
salary, payments or reimbursement of any kind for his service
as a Director.
c. The Company shall not pay or reimburse Mr. Dittman for
out-of-pocket expenses incurred by him in the performance of
his duties as a Director, nor for attending telephonic or
physical meetings of the Company's Board of Directors (the
"Board").
<PAGE>
3. Resignation and Removal from Office
a. Mr. Dittman may resign from his position as a Director upon
thirty (30) days written notice to the Board.
b. Mr. Dittman may be removed from office as Director on the
terms and conditions set forth in the corporate law of the
current jurisdiction of incorporation of the Company and on
the terms and conditions set forth in the Company's governing
documents.
4. Trade Secrets and Confidential Information
Mr. Dittman recognizes and acknowledges that certain information
including, without limitation, information pertaining to the financial condition
of the Company, its systems, methods of doing business, agreements with
customers or suppliers or other aspects of the business of the Company or which
is sufficiently secret to derive economic value from not being disclosed
("Confidential Information") may be made available or otherwise come into the
possession of Mr. Dittman by reason of his service to the Company. Accordingly,
Mr. Dittman agrees that he will not at any time disclose any Confidential
Information to any person, firm, corporation, association or other entity for
any reason or purpose whatsoever or make use to his personal advantage or to the
advantage of any third party, of any Confidential Information, without the prior
written consent of the Board. Mr. Dittman shall, upon termination of his service
to the Company, return to the Company all documents which reflect Confidential
Information (including copies thereof). Notwithstanding anything heretofore
stated in this Section 4, Mr. Dittman's obligations under this Section 4 shall
not, after termination of Mr. Dittman's service to the Company, apply to
information which has become generally available to the public without any
action or omission of Mr. Dittman (except that any Confidential Information
which is disclosed to any third party by an employee or representative of the
Company who is not authorized to make such disclosure shall be deemed to remain
confidential and protectable by Mr. Dittman under this Section 4).
5. Severability
The invalidity or unenforceability of any term of this Agreement shall
not affect the validity or enforceability of this Agreement or any of its other
terms; and this Agreement and such other terms shall be construed as though the
invalid or unenforceable term(s) were not included herein, unless the effect
would be to vitiate the parties' fundamental purposes in entering into this
Agreement.
6. Breach
Mr. Dittman hereby recognizes and acknowledges that irreparable injury
or damage shall result to the Company in the event of a breach or threatened
breach by Mr. Dittman of any of the terms of Section 4 hereunder, and Mr.
Dittman therefore agrees that the Company shall be entitled to an injunction
restraining Mr. Dittman from engaging in any activity constituting such breach
or threatened breach. Nothing contained herein shall be construed as prohibiting
the
2
<PAGE>
Company from pursuing any other remedies available to the Company at law or in
equity for breach or threatened breach of this Agreement, including but not
limited to, the recovery of damages from Mr. Dittman and removal from office as
a Director.
7. Arbitration
All controversies which may arise between the parties hereto including,
but not limited to, those arising out of or related to this Agreement shall be
determined by binding arbitration applying the laws of the State of Delaware as
set forth in Section 11 hereof. Any arbitration pursuant to this Agreement shall
be conducted in Stamford, Connecticut before the American Arbitration
Association in accordance with its arbitration rules. The arbitration shall be
final and binding upon all the parties (so long as the award was not procured by
corruption, fraud or undue means) and the arbitrator's award shall not be
required to include factual findings or legal reasoning. Nothing in this Section
7 will prevent either party from resorting to judicial proceedings if interim
injunctive relief under the laws of the State of Delaware from a court is
necessary to prevent serious and irreparable injury to one of the parties, and
the parties hereto agree that the federal and state courts located in Stamford,
Connecticut shall have exclusive subject matter and in personam jurisdiction
over the parties and any such claims or disputes arising from the subject matter
contained herein.
8. Remedies Cumulative
Except as otherwise expressly provided herein, each of the rights and
remedies of the parties set forth in this Agreement shall be cumulative with all
other such rights and remedies, as well as with all rights and remedies of the
parties otherwise available at law or in equity.
9. Counterparts
This Agreement may be executed via facsimile transmission signature and
in counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
10. Waiver
The failure of either party at any time or times to require performance
of any provision hereof shall in no manner affect the right at a later time to
enforce the same. To be effective, any waiver must be contained in a written
instrument signed by the party waiving compliance by the other party of the term
or covenant as specified. The waiver by either party of the breach of any term
or covenant contained herein, whether by conduct or otherwise, in any one or
more instances, shall not be deemed to be, or construed as, a further or
continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement.
11. Governing Law
This Agreement shall be governed by the laws of the State of Delaware
without regard to principles of conflict of laws.
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<PAGE>
12. Complete Agreement
This Agreement constitutes the complete and exclusive agreement between
the parties hereto which supersedes all proposals, oral and written, and all
other communications between the parties relating to the subject matter
contained herein.
13. Warranties
Mr. Dittman represents, warrants, covenants and agrees that he has a
right to enter into this Agreement, that he is not a party to any agreement or
understanding whether or not written which would prohibit or restrict his
performance of his obligations under this Agreement and that he will not use in
the performance of his obligations hereunder any proprietary information of any
other party which he is legally prohibited from using.
14. Notice
Any notice, demand, or communication given in connection with this
Agreement shall be in writing and shall be deemed received (a) when delivered if
given in person or by courier or courier service, or (b) on the date and at the
time of transmission if sent by facsimile (receipt confirmed) or (c) five (5)
business days after being deposited in the mail postage prepaid.
15. Key Man Insurance
The Company shall have the right to obtain what is commonly known as
"Key Man Insurance" on the life of Mr. Dittman in such amount as the Company
deems appropriate. Mr. Dittman agrees to cooperate in all manner in the
obtaining of such a policy. All expenses involved in connection with the
obtaining and maintaining of such a policy shall be that of the Company.
16. Assignment
This Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns. By way of illustration, and not limitation,
if the Company merges with and into VDC Communications, Inc., (the "Subsidiary")
and Mr. Dittman serves as a Director of the Subsidiary following the merger,
then the terms of this Agreement shall inure to the benefit of and be binding
upon the Subsidiary.
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
4th day of November 1998.
<TABLE>
<S> <C>
WITNESS: VDC CORPORATION LTD.
/s/ Louis D. Frost By:/s/ Frederick A. Moran
- ------------------ ---------------------------------------------
Frederick A. Moran, Chief Executive Officer
WITNESS:
/s/ Earl Standard /s/ James Dittman
- ----------------- ----------------------------------
James Dittman
</TABLE>
Agreed to and accepted this 4th
day of November, 1998
VDC COMMUNICATIONS, INC.
By:/s/ Frederick A. Moran
--------------------------------------
Frederick A. Moran, President
5
<PAGE>
Exhibit 10.7
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION
FROM REGISTRATION, UNDER THE 1933 ACT, BASED ON AN OPINION LETTER OF COUNSEL
SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION.
OPTION TO PURCHASE COMMON SHARES
OF
VDC CORPORATION LTD.
Void after November 4, 2008
This certifies that, for value received, James Dittman ("Holder"), is
entitled, subject to the terms set forth below and prior to the Expiration Date
(as hereinafter defined), to purchase from VDC Corporation Ltd. (the "Company"),
a Bermuda company, Common Shares of the Company (as defined below), commencing
on the date hereof (the "Option Issue Date"), with the Notice of Exercise
attached hereto duly executed, and simultaneous payment therefor in lawful money
of the United States, at the Exercise Price as set forth in Section 2 below. The
number, character and Exercise Price of the shares are subject to adjustment as
provided below. The options granted hereunder are intended to be treated as
non-qualified stock options and will not be treated as incentive stock options
under Section 422 of the Internal Revenue Code of 1986, as amended.
1. Term of Option. Subject to compliance with the vesting provisions
identified at Paragraph 2.3 hereafter, this Option shall be exercisable, in
whole or in part, during the term commencing on the Option Issue Date and ending
at 5:00 p.m. on November 4, 2008 (the "Expiration Date"), and shall be void
thereafter.
2. Exercise Price, Number of Shares and Vesting Provisions.
2.1. Number of Shares. The number of shares of the Company's Common
Shares, $2.00 par value per share ("Common Shares"), which may be purchased
pursuant to this Option shall be 25,000 shares, as adjusted pursuant to Section
11 hereof.
2.2. Exercise Price. The Exercise Price at which this Option may be
exercised shall be $4.00 per common share, as adjusted pursuant to Section 11
hereof.
2.3. Vesting. The Options granted hereunder shall vest in accordance
with the following schedule on an aggregate basis:
(i) 8,333 provided Holder serves as a member of the Company's
Board of Directors (a "Director") continuously from November 4, 1998 through
November 3, 1999;
(ii) 16,666 provided Holder serves as a Director continuously
from November 4, 1998 through November 3, 2000; and
<PAGE>
(iii) 25,000 provided Holder serves as a Director continuously
from November 4, 1998 through November 3, 2001.
Except as otherwise specifically provided herein, Holder's right in and
to any Options that do not vest at the date of termination of Holder's service
as Director of the Company shall lapse and terminate.
2.4. Death of Holder and Termination.
(a) If the Holder shall die, he or his estate, personal
representatives, or beneficiary, as applicable, shall have the right, subject to
the provisions of this Paragraph 2 hereof, to continue to vest and exercise the
Options as if no termination in service to the Company had occurred.
(b) In the event Holder resigns or is removed from office
pursuant to Section 3 of the Director Agreement by and between the Holder and
the Company effective as of November 4, 1998, Holder shall have 30 days in which
to exercise the Options (only to the extent that the Holder would have been
entitled to do so as of the date of his termination) and thereafter, Holder's
right in and to the Options shall lapse and terminate.
3. Exercise of Option.
(a) The Exercise Price shall either be payable in cash or by bank or
certified check; or by cashless exercise through the delivery by the Holder to
the Company of Common Shares for which Holder is the record and beneficial owner
which have been held for at least six (6) months, or by delivering to the
Company a notice of exercise with an irrevocable direction to a broker/dealer
registered under the Securities Exchange Act of 1934 to sell a sufficient
portion of the shares and deliver the sale proceeds directly to the Company to
pay the Exercise Price, or by any combination thereof. If Common Shares of the
Company are tendered as payment of the Exercise Price, the value of such shares
shall be their "market value" as of the trading date immediately preceding the
date of exercise. The "market value" shall be:
(i) If the Company's Common Shares are traded in the
over-the-counter market and not on any national securities exchange nor in the
NASDAQ Reporting System, the market value shall be the average of the mean
between the last bid and ask prices per share, as reported by the National
Quotation Bureau, Inc., or an equivalent generally accepted reporting service,
for the consecutive 20 trading days immediately preceding the date of exercise,
or if not so reported, the average of the closing bid and asked prices for a
share for the consecutive 20 trading days immediately preceding the date of
exercise, as furnished to the Company by any member of the National Association
of Securities Dealers, Inc., selected by the Company for that purpose.
(ii) If the Company's Common Shares are traded on a national
securities exchange or in the NASDAQ Reporting System, the market value shall be
either (1) the simple average of the high and low prices at which a share of the
Company's Common Shares traded, as quoted on the NASDAQ-NMS or its other
principal exchange, for the consecutive 20
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<PAGE>
trading days immediately preceding the date of exercise or (2) the average price
of the last sale of a Common Share as similarly quoted for the consecutive 20
trading days immediately preceding the date of exercise, whichever is higher,
and rounding out such figure to the next higher multiple of 12.5 cents (unless
the figure is already a multiple of 12.5 cents).
If such tender would result in an issuance of a whole number of shares and a
fractional Common Share, the value of such fractional share shall be paid to the
Company in cash or by check by the Holder.
(b) The purchase rights represented by this Option are exercisable
by the Holder in whole or in part, at any time, or from time to time, by the
surrender of this Option and the Notice of Exercise annexed hereto duly
completed and executed on behalf of the Holder, at the office of the Company (or
such other office or agency of the Company as it may designate by notice in
writing to the Holder at the address of the Holder appearing on the books of the
Company).
(c) This Option shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise as
provided above, and the person entitled to receive the Common Shares issuable
upon such exercise shall be treated for all purposes as the holder of record of
such shares as of the close of business on such date. As promptly as practicable
on or after such date and in any event within ten (10) days thereafter, the
Company at its expense shall issue and deliver to the person or persons entitled
to receive the same a certificate or certificates for the number of shares
issuable upon such exercise. In the event that this Option is exercised in part,
the Company at its expense will execute and deliver a new Option of like tenor
exercisable for the number of shares for which this Option may then be
exercised.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this Option.
In lieu of any fractional share to which the Holder would otherwise be entitled,
the Company shall make a cash payment equal to the Exercise Price multiplied by
such fraction.
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<PAGE>
5. Replacement of Option. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Option and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Option, the
Company at its expense shall execute and deliver, in lieu of this Option, a new
Option of like tenor and amount.
6. Rights of Stockholder. The Holder shall not be entitled to vote or
receive dividends or be deemed the holder of Common Shares or any other
securities of the Company that may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed to
confer upon the Holder, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, or change of stock to no par
value, consolidation, merger, conveyance or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until the
Option shall have been exercised as provided herein.
7. Transfer of Option.
7.1. Non-Transferability. Prior to vesting in accordance with
paragraph 2 herein, the Option shall not be assigned, transferred, pledged or
hypothecated in any way, nor subject to execution, attachment or similar
process, otherwise than by will or by the laws of descent and distribution. To
the extent the Options have vested, transfers thereof which comply with the
remaining provisions of this paragraph 7 may be undertaken upon the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of the Option contrary to the provisions hereof, and the levy of an
execution, attachment, or similar process upon the Option, shall be null and
void and without effect.
7.2. Exchange of Option Upon a Transfer. On surrender of this Option
for exchange, properly endorsed, the Company at its expense shall issue to or on
the order of the Holder a new Option or Options of like tenor, in the name of
the Holder or as the Holder (on payment by the Holder of any applicable transfer
taxes) may direct, of the number of shares issuable upon exercise hereof.
7.3. Compliance with Securities Laws; Restrictions on Transfers.
(a) The Holder of this Option, by acceptance hereof,
acknowledges that this Option and the Shares to be issued upon exercise hereof
are being acquired solely for the Holder's own account and not as a nominee for
any other party, and for investment (unless such shares are subject to resale
pursuant to an effective prospectus), and that the Holder will not offer, sell
or otherwise dispose of this Option or any Shares to be issued upon exercise
hereof except under circumstances that will not result in a violation of
applicable federal and state securities laws. Upon exercise of this Option, the
Holder shall, if requested by the Company,
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<PAGE>
confirm in writing, in a form satisfactory to the Company, that the Common
Shares so purchased are being acquired solely for the Holder's own account and
not as a nominee for any other party, for investment (unless such shares are
subject to resale pursuant to an effective prospectus), and not with a view
toward distribution or resale.
(b) Neither this Option nor any Common Shares issued upon
exercise of this Option may be offered for sale or sold, or otherwise
transferred or sold in any transaction which would constitute a sale thereof
within the meaning of the Securities Act of 1933, as amended (the "1933 Act"),
unless (i) such security has been registered for sale under the 1933 Act and
registered or qualified under applicable state securities laws relating to the
offer an sale of securities, or (ii) exemptions from the registration
requirements of the 1933 Act and the registration or qualification requirements
of all such state securities laws are available and the Company shall have
received an opinion of counsel satisfactory to the Company that the proposed
sale or other disposition of such securities may be effected without
registration under the 1933 Act and would not result in any violation of any
applicable state securities laws relating to the registration or qualification
of securities for sale, such counsel and such opinion to be satisfactory to the
Company.
(c) All Common Shares issued upon exercise hereof shall be
stamped or imprinted with a legend in substantially the following form (in
addition to any legend required by state securities laws).
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION
FROM REGISTRATION, UNDER THE 1933 ACT, BASED ON AN OPINION LETTER OF COUNSEL
SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION."
8. Reservation and Issuance of Stock; Taxes.
(a) The Company covenants that during the term that this Option is
exercisable, the Company will reserve from its authorized and unissued Common
Shares a sufficient number of shares to provide for the issuance of the shares
upon the exercise of this Option, and from time to time will take all steps
necessary to amend its Memorandum of Association to provide sufficient reserves
of Common Shares issuable upon the exercise of the Option.
(b) The Company further covenants that all Common Shares issuable upon
the due exercise of this Option will be free and clear from all taxes or liens,
charges and security interests created by the Company with respect to the
issuance thereof, however, the Company shall not be obligated or liable for the
payment of any taxes, liens or charges of Holder, or any other party
contemplated by Paragraph 7, incurred in connection with the issuance of this
Option or the Common Shares upon the due exercise of this Option. The Company
agrees that its issuance of this Option shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Common Shares upon the
exercise of this Option. The Common Shares issuable upon the due exercise of
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<PAGE>
this Option, will, upon issuance in accordance with the terms hereof, be duly
authorized, validly issued, fully paid and non-assessable.
(c) Upon exercise of the Option, the Company shall have the right to
require the Holder to remit to the Company an amount sufficient to satisfy
federal, state and local tax withholding requirements prior to the delivery of
any certificate for Common Shares purchased pursuant to the Option.
(d) A Holder who is obligated to pay the Company an amount required to
be withheld under applicable tax withholding requirements may pay such amount
(i) in cash; (ii) in the discretion of the Company's Chief Executive Officer,
through the delivery to the Company of previously-owned Common Shares having an
aggregate market value equal to the tax obligation provided that the previously
owned shares delivered in satisfaction of the withholding obligations must have
been held by the Holder for at least six (6) months; (iii) in the discretion of
the Company's Chief Executive Officer, through the withholding of Common Shares
otherwise issuable to the Holder in connection with the Option exercise; or (iv)
in the discretion of the Company's Chief Executive Officer, through a
combination of the procedures set forth in subsections (i), (ii) and (iii) of
this Paragraph 8(d).
9. Notices.
(a) Whenever the Exercise Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall
issue a certificate signed by its Chief Executive Officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Exercise
Price and number of shares purchasable hereunder after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to the Holder of this Option.
(b) All notices, advices and communications under this Option shall
be deemed to have been given, (i) in the case of personal delivery, on the date
of such delivery and (ii) in the case of mailing, on the third business day
following the date of such mailing, addressed as follows:
If to the Company:
VDC Corporation Ltd.
75 Holly Hill Lane, 3rd Floor
Greenwich, CT 06830
Attn: Frederick A. Moran, Chief Executive Officer
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<PAGE>
With a Copy to:
Louis D. Frost, VDC Corporate Counsel
VDC Corporation Ltd.
75 Holly Hill Lane, 3rd Floor
Greenwich, CT 06830
and to the Holder:
at the address of the Holder appearing on the books of the
Company or the Company's transfer agent, if any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Paragraph 9.
10. Amendments.
(a) Any term of this Option may be amended with the written consent
of the Company and the Holder. Any amendment effected in accordance with this
Section 10 shall be binding upon the Holder, each future holder and the Company.
(b) No waivers of, or exceptions to, any term, condition or
provision of this Option, in any one or more instances, shall be deemed to be,
or construed as, a further or continuing waiver of any such term, condition or
provision.
11. Adjustments. The number of Shares purchasable hereunder and the
Exercise Price are subject to adjustment from time to time upon the occurrence
of certain events, as follows:
11.1. Reorganization, Merger or Sale of Assets. If at any time
while this Option, or any portion thereof, is outstanding and unexpired there
shall be (i) a reorganization (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), (ii) a merger
or consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a merger in which the Company is the
surviving entity but the shares of the Company's capital stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, or (iii) a sale
or transfer of substantially all of the Company's properties and assets as, or
substantially as, an entirety to any other person, then, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the holder of this Option shall upon such reorganization,
merger, consolidation or sale or transfer, have the right by exercising such
Option, to purchase the kind and number of Common Shares or other securities or
property (including cash) otherwise receivable upon such reorganization, merger,
consolidation or sale or transfer by a holder of the number of Common Shares
that might
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<PAGE>
have been purchased upon exercise of such Option immediately prior to such
reorganization, merger, consolidation or sale or transfer. The foregoing
provisions of this Section 11.1 shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this Option. If the per-share consideration payable to the Holder
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Option
with respect to the rights and interests of the Holder after the transaction, to
the end that the provisions of this Option shall be applicable after that event,
as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Option.
11.2. Reclassification. If the Company, at any time while this
Option, or any portion thereof, remains outstanding and unexpired, by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Option exist into the same or a different
number of securities of any other class or classes, this Option shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Option immediately prior to such
reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 11.
11.3. Split, Subdivision or Combination of Shares. If the Company
at any time while this Option, or any portion thereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Option exist, into a different number of securities of the
same class, the Exercise Price and the number of shares issuable upon exercise
of this Option shall be proportionately adjusted.
11.4. Adjustments for Dividends in Stock or Other Securities or
Property. If while this Option, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Option exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible Stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Option shall represent the right to acquire, in addition
to the number of shares of the security receivable upon exercise of this Option,
and without payment of any additional consideration therefor, the amount of such
other or additional stock or other securities or property (other than cash) of
the Company that such holder would hold on the date of such exercise had it been
the holder of record of the security receivable upon exercise of this Option on
the date hereof and had thereafter, during the period from the date hereof to
and including the date of such exercise, retained such shares and/or all other
additional stock, other securities or property available by this Option as
aforesaid during such period.
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11.5 Necessary or Appropriate Action. The Company will not, by any
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 11 and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holders of this Option against
impairment.
12. Registration Rights. The Holder shall be entitled to the
registration rights set forth in that certain Registration Rights Agreement of
even date herewith by and between the Company and such Holder.
13. Severability. Whenever possible, each provision of this Option
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Option is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this Option
in such jurisdiction or affect the validity, legality or enforceability of any
provision in any other jurisdiction, but this Option shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
14. Governing Law. The corporate law of the current jurisdiction of
incorporation of the Company shall govern all issues and questions concerning
the relative rights of the Company and its stockholders. All other questions
concerning the construction, validity, interpretation and enforceability of this
Option and the exhibits and schedules hereto shall be governed by, and construed
in accordance with, the laws of the current jurisdiction of incorporation of the
Company, without giving effect to any choice of law or conflict of law rules or
provisions that would cause the application of the laws of any jurisdiction
other than those of the current jurisdiction of incorporation of the Company.
For the purposes of this Section 14, the term "current" shall mean the time at
which any dispute, issue or question shall arise hereunder.
15. Jurisdiction. The Holder and the Company agree to submit to
personal jurisdiction and to waive any objection as to venue in the federal or
state courts located in Stamford, Connecticut. Service of process on the Company
or the Holder in any action arising out of or relating to this Option shall be
effective if mailed to such party at the address listed in Section 9 hereof.
16. Arbitration. If a dispute arises as to interpretation of this
Option, it shall be decided finally by three arbitrators in an arbitration
proceeding conforming to the Rules of the American Arbitration Association
applicable to commercial arbitration. The arbitrators shall be appointed as
follows: one by the Company, one by the Holder and the third by the said two
arbitrators, or, if they cannot agree, then the third arbitrator shall be
appointed by the American Arbitration Association. The third arbitrator shall be
chairman of the panel and shall be impartial. The arbitration shall take place
in Stamford, Connecticut. The decision of a majority of the Arbitrators shall be
conclusively binding upon the parties and final, and such decision shall be
enforceable as a judgment in any court of competent jurisdiction. Each party
shall pay the
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<PAGE>
fees and expenses of the arbitrator appointed by it, its counsel and its
witnesses. The parties shall share equally the fees and expenses of the
impartial arbitrator.
17. Corporate Power; Authorization; Enforceable Obligations. The
execution, delivery and performance by the Company of this Agreement: (i) are
within the Company's corporate power; (ii) have been duly authorized by all
necessary or proper corporate action; (iii) are not in contravention of the
Company's memorandum of association or bye-laws; (iv) will not violate in any
material respect, any law or regulation, including any and all Federal and state
securities laws, or any order or decree of any court or governmental
instrumentality; and (v) will not, in any material respect, conflict with or
result in the breach or termination of, or constitute a default under any
agreement or other material instrument to which the Company is a party or by
which the Company is bound.
18. Successors and Assigns. This Option shall inure to the benefit of
and be binding on the respective successors, assigns and legal representatives
of the Holder and the Company.
IN WITNESS WHEREOF, the Company has caused this Option to be executed
by its officers thereunto duly authorized.
Dated: November 4, 1998
<TABLE>
<S> <C>
VDC CORPORATION LTD.
/s/ Frederick A. Moran
--------------------------------------------------
By: Frederick A. Moran, Chief Executive Officer
HOLDER:
/s/ James Dittman
--------------------
James Dittman
</TABLE>
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NOTICE OF EXERCISE
TO: [_____________________________]
(1) The undersigned hereby elects to purchase _______ Common Shares of
VDC Corporation Ltd. pursuant to the terms of the attached Option, and tenders
herewith payment of the purchase price for such shares in full.
(2) In exercising this Option, the undersigned hereby confirms and
acknowledges that the Common Shares to be issued upon conversion thereof are
being acquired solely for the account of the undersigned and not as a nominee
for any other party, and for investment (unless such shares are subject to
resale pursuant to an effective prospectus), and that the undersigned will not
offer, sell or otherwise dispose of any such Common Shares except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said Common
Shares in the name of the undersigned or in such other name as is specified
below:
-----------------------------------
(Name)
-----------------------------------
(Name)
- -------------------------- -----------------------------------
(Date) (Signature)
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Exhibit 10.8
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT made and entered into as of this
4th day of November, 1998, by and between VDC Corporation Ltd., a Bermuda
company (the "Company"), and James Dittman ("Holder").
BACKGROUND
WHEREAS, pursuant to an Option to Purchase Common Shares of
VDC Corporation Ltd. dated November 4, 1998, by and between the Company and the
Holder (the "Option Agreement"), the Company has agreed to issue to Holder
options to purchase Common Shares of the Company, par value $2.00 per share
("Common Stock") in accordance with the terms of the Option Agreement.
WHEREAS, in order to induce Holder and the Company to enter
into the foregoing transactions, the Company has agreed to provide Holder with
the registration rights set forth in this Agreement.
Article 1 CERTAIN DEFINITIONS.
In addition to the other terms defined in this Agreement, the
following terms shall be defined as follows:
"Brokers' Transactions" has the meaning ascribed to such term
pursuant to Rule 144 under the Securities Act.
"Business Day" means any day on which the New York Stock
Exchange ("NYSE") is open for trading.
"Common Stock" means any outstanding Common Shares of the
Company.
"Company" means VDC Corporation Ltd., a Bermuda company, or
any successor thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder, all as the same
shall be in effect at the relevant time.
"Holder" means Holder for so long as (and to the extent that)
he owns any Registrable Securities, and each of his heirs and personal
representatives who become registered owners of Registrable Securities or
securities exercisable, exchangeable or convertible into Registrable Securities.
"Outstanding" means with respect to any securities as of any
date, all such securities therefore issued, except any such securities therefore
canceled or held by the Company
<PAGE>
or any successor thereto (whether in its treasury or not) or any affiliate of
the Company or any successor thereto shall not be deemed "Outstanding" for the
purpose of this Agreement.
"Person" means an individual, a partnership (general or
limited), corporation, limited liability company, joint venture, business trust,
cooperative, association or other form of business organization, whether or not
regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate of a deceased, insane or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political
subdivision or other instrumentality thereof, or any other entity.
"Registrable Security(ies)" means the Common Stock issued to
the Holder pursuant to the Option Agreement, and any additional shares of Common
Stock or other equity securities of the Company issued or issuable after the
date hereof in respect of any such securities (or other equity securities issued
in respect thereof) by way of a stock dividend or stock split, in connection
with a combination, exchange, reorganization, recapitalization or
reclassification of Company securities, or pursuant to a merger, division,
consolidation or other similar business transaction or combination involving the
Company; provided that: as to any particular Registrable Securities, such
securities shall cease to constitute Registrable Securities (i) when a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of thereunder, or (ii) when and to the extent such securities are
permitted to be publicly sold pursuant to Rule 144 (or any successor provision
to such Rule) under the Securities Act or are otherwise freely transferable to
the public without further registration under the Securities Act, or (iii) when
such securities shall have ceased to be Outstanding and, in the case of clause
(ii), the Company shall, if requested by the Holder or Holders thereof, have
delivered to such Holder or Holders the written opinion of independent counsel
to the Company to such effect.
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with the registration requirements set
forth in this Agreement including, without limitation, the following: (i) the
fees, disbursements and expenses of the Company's counsel(s), accountants, and
experts in connection with the registration under the Securities Act of
Registrable Securities; (ii) all expenses in connection with the preparation,
printing and filing of the registration statement, any preliminary prospectus or
final prospectus, any other offering documents and amendments and supplements
thereto, and the mailing and delivery of copies thereof to the underwriters and
dealers, if any; (iii) the cost of printing or producing any agreement(s) among
underwriters, underwriting agreement(s) and blue sky or legal investment
memoranda, any selling agreements, and any other documents in connection with
the offering, sale or delivery of Registrable Securities to be disposed of; (iv)
any other expenses in connection with the qualification of Registrable
Securities for offer and sale under state securities laws, including the fees
and disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(v) the filing fees incident to securing any required review by the NASDAQ Stock
Market of the terms of the sale of Registrable Securities to be disposed of and
any blue sky registration or filing fees, and (vi) the fees and expenses
incurred in connection with the listing of Registrable Securities on each
securities exchange (or the NASDAQ Stock Market) on which Company securities of
the same class are then listed; provided, however, that Registration Expenses
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with respect to any registration pursuant to this Agreement shall not include
(x) expenses of any Holder's counsel, or (y) any underwriting discounts or
commissions attributable to Registrable Securities, each of which shall be borne
by the Holder.
"SEC" means the United States Securities and Exchange
Commission, or such other federal agency at the time having the principal
responsibility for administering the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder, all as the same shall be in
effect at the relevant time.
Article 2 PIGGYBACK REGISTRATIONS.
(a) Right to Piggyback. If at any time after the date hereof,
the Company proposes to file a registration statement under the Securities Act
(except with respect to registration statements on Forms S-4, S-8, or any other
form not available for registering the Registrable Securities for sale to the
public), with respect to an offering of newly issued Common Stock for its own
account, then the Company shall in each case give written notice of such
proposed filing to the Holders of Registrable Securities at least 45 days before
the anticipated filing date of the registration statement with respect thereto
(the "Piggyback Registration"), and shall, subject to Sections 2(b) and 2(c)
below, include in such Piggyback Registration such amount of Registrable
Securities as the Holder may request within 20 days of the receipt of such
notice.
(b) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriter advises the Company in writing that in its opinion
the number of securities requested to be included in such registration exceeds
the number which can be sold in an orderly manner in such offering within a
price range acceptable to the Company, the Company shall include in such
registration (i) first, the securities the Company proposes to sell, (ii)
second, the Registrable Securities requested to be included in such registration
to the extent that the number of shares to be registered will not, in the
opinion of the managing underwriter, adversely affect the offering of the
securities pursuant to clause (i), pro rata among the Holders of such
Registrable Securities on the basis of the number of shares owned by such Holder
and (iii) third, provided that all Registrable Securities requested to be
included in the registration statement have been so included, any other
securities requested to be included in such registration.
(c) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities other than the Holders of Registrable Securities, and
the managing underwriter advises the Company in writing that in their opinion
the number of securities requested to be included in such registration exceeds
the number which can be sold in an orderly manner in such offering within a
price range acceptable to the holders initially requesting such registration,
the Company shall include in such registration (i) first, the securities
requested to be included therein by the holders requesting such registration,
(ii) second, the Registrable Securities requested to be included in such
registration, to the extent that the number of shares to be registered will not,
in the opinion of the managing underwriter, adversely affect the offering of the
securities pursuant to clause (i), pro rata among the
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<PAGE>
Holders of such securities on the basis of the number of shares so requested to
be included therein owned by each such Holder, and (iii) third, other securities
requested to be included in such registration.
Article 3 HOLDBACK AGREEMENTS.
The Holder of Registrable Securities shall not effect any
public sale or distribution (including sales pursuant to Rule 144) of equity
securities of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the 60 days prior to and the 120-day
period beginning on the effective date of any underwritten primary registration
undertaken by the Company (except as part of such underwritten registration),
unless the underwriter managing the registered public offering otherwise agrees.
Article 4 REGISTRATION PROCEDURES.
Whenever the Holder of Registrable Securities has requested
that any Registrable Securities be registered pursuant to this Agreement, the
Company shall use its best efforts to effect the registration of the resale of
such Registrable Securities and pursuant thereto the Company shall as soon as
practicable:
(a) prepare and file with the SEC a registration statement
with respect to the resale of such Registrable Securities and use its best
efforts to cause such registration statement to become effective thereafter
(provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall furnish to the counsel
selected by the Holder of the Registrable Securities covered by such
registration statement copies of all such documents proposed to be filed, which
documents shall be subject to the review and consent of such counsel);
(b) notify the Holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the SEC such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than 180 days and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as Holder reasonably requests and do any and all other acts and
things which may be reasonably necessary or advisable to enable such seller to
consummate the disposition of the Registrable Securities owned by the sellers in
such
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<PAGE>
jurisdictions (provided that the Company shall not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange or trading system on which similar securities issued by the
Company are then listed;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary underwriting agreements
(containing terms acceptable to the Company) as the Holder of Registrable
Securities being sold or the underwriters, if any, reasonably requests (although
the Company has no obligation to secure any underwriting arrangements on behalf
of the Holder); and
(i) make available for inspection during normal business hours
by any seller of Registrable Securities, any underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant
or other agent retained by any such seller or underwriter, all financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors, employees and independent accountants
to supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement.
-5-
<PAGE>
Article 5 REGISTRATION EXPENSES.
All Registration Expenses in connection with any of the
registration events identified within this Agreement shall be borne by the
Company. All other expenses shall be borne by the Holder.
Article 6 INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted
by law, the Holder of Registrable Securities, its officers and directors and
each Person who controls such Holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are caused by or contained in any information furnished to the Company by
such Holder for use therein or by such Holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such holder with a sufficient number of copies
of the same. In connection with an underwritten offering, the Company shall
provide reasonable and customary indemnification to such underwriters, their
officers and directors and each Person who controls such underwriters (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the Holder of Registrable Securities.
(b) In connection with any registration statement in which the
Holder of Registrable Securities is participating, such Holder shall furnish to
the Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished by such Holder.
(c) Any Person entitled to indemnification hereunder shall (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give prompt
notice shall not impair any Person's right to indemnification hereunder to the
extent such failure has not prejudiced the indemnifying party) and (ii) unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to,
-6-
<PAGE>
assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and shall survive the transfer of securities.
The Company also agrees to make such provisions, as are reasonably requested by
any indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
Article 7 OBLIGATION OF HOLDERS.
(a) In connection with each registration hereunder, Holder
will furnish to the Company in writing such information with respect to such
Holder and the securities held by such Holder, and the proposed distribution by
them as shall be reasonably requested by the Company in order to assure
compliance with federal and applicable state securities laws, as a condition
precedent to including such Holder's Registrable Securities in the registration
statement. Each Holder also shall agree to promptly notify the Company of any
changes in such information included in the registration statement or prospectus
as a result of which there is an untrue statement of material fact or an
omission to state any material fact required or necessary to be stated therein
in order to make the statements contained therein not misleading in light of the
circumstances then existing.
(b) In connection with each registration pursuant to this
Agreement, the Holder included therein will not effect sales thereof until
notified by the Company of the effectiveness of the registration statement, and
thereafter will suspend such sales after receipt of telegraphic or written
notice from the Company to suspend sales to permit the Company to correct or
update a registration statement or prospectus. At the end of any period during
which the Company is obligated to keep a registration statement current, the
Holder included in said registration statement shall discontinue sales of shares
pursuant to such registration statement upon receipt of notice from the Company
of its intention to remove from registration the shares covered by such
registration statement which remain unsold, and such Holder shall notify the
Company of the number of shares registered which remain unsold immediately upon
receipt of such notice from the Company.
Article 8 INFORMATION BLACKOUT.
(a) At any time when a registration statement effected
pursuant to this Agreement relating to Registrable Securities is effective, upon
written notice from the Company to the Holders that the Company has determined
in good faith that sale of Registrable Securities pursuant to the registration
statement would require disclosure of non-public material information not
otherwise required to be disclosed under applicable law (an "Information
Blackout"), all Holders shall suspend sales of Registrable Securities pursuant
to such registration statement until the earlier of:
-7-
<PAGE>
(i) thirty (30) days after the Company makes such
good faith determination; and
(ii) such time as the Company notifies the Holders
that such material information has been disclosed to the public or has ceased to
be material or that sales pursuant to such registration statement may otherwise
be resumed (the number of days from such suspension of sales by the Holders
until the day when such sale may be resumed hereunder is hereinafter called a
"Sales Blackout Period").
(b) Notwithstanding the foregoing, there shall be no more than
two (2) Information Blackouts during the term of this Agreement and no Sales
Blackout Period shall continue for more than thirty (30) consecutive days.
Article 9 MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the current jurisdiction of
incorporation of the Company without regard to that jurisdiction's conflict of
laws provisions. For the purposes of this paragraph, the term "current" shall
mean the time at which any dispute, issue or question shall arise hereunder.
(b) Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
(c) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given without the written consent of the Company and the Holders.
(d) Notices. All communications under this Agreement shall be
sufficiently given if delivered by hand or by overnight courier or mailed by
registered or certified mail, postage prepaid, addressed,
(i) if to the Company, to:
VDC Corporation Ltd.
75 Holly Hill Lane, 3rd Floor
Greenwich, CT 06830
Attention: Frederick A. Moran,
Chief Executive Officer
-8-
<PAGE>
with a copy to:
Louis D. Frost, VDC Corporate Counsel
VDC Corporation Ltd.
75 Holly Hill Lane, 3rd Floor
Greenwich, CT 06830
or, in the case of the Holders, at such address as each such Holder shall have
furnished in writing to the Company; or at such other address as any of the
parties shall have furnished in writing to the other parties hereto.
(e) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(f) Entire Agreement; Survival; Termination. This Agreement is
intended by the parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
have executed this Agreement as of the date first written above.
VDC CORPORATION LTD.
By: /s/ Frederick A. Moran
----------------------------
Frederick A. Moran
Chief Executive Officer
HOLDER:
/s/ James Dittman
----------------------------
James Dittman
-9-
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<LEGEND>
This schedule contains Summary Financial information extracted from the
Financial Statements for the Six-months ended December 31, 1998 and is
qualified in its entirety by reference to such statements.
</LEGEND>
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<PERIOD-START> JUN-30-1998
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0
0
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