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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ... )*
VDC Communications, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock
- --------------------------------------------------------------------------------
(Title of Class of Securities)
91821B 10 1
- --------------------------------------------------------------------------------
(CUSIP Number)
Frederick W. Moran
VDC Communications, Inc.
75 Holly Hill Lane
Greenwich, CT 06830
(203) 869-5100
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
October 27, 1999
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box. [ ]
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss.204.13d-7 for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Potential persons who are to respond to the collection of information contained
in this form are not required to respond unless the form displays a currently
valid OMB control number.
<PAGE>
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CUSIP No. 91821B 10 1 Page 2 of 7 Pages
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1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Frederick W. Moran
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group (See
Instructions)
(a)
(b)
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3. SEC Use Only
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4. Source of Funds (See Instructions)
PF
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5. Check if Disclosure of Legal Proceedings is Required Pursuant
to Items 2(d) or 2(e)
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6. Citizenship or Place of Organization
U.S.A.
- --------------------------------------------------------------------------------
Number of 7. Sole Voting Power
Shares Bene-
ficially by 2,069,480
Owned by Each ----------------------------------------------------------
Reporting 8. Shared Voting Power
Person With
0
----------------------------------------------------------
9. Sole Dispositive Power
2,069,480
----------------------------------------------------------
10. Shared Dispositive Power
0
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
2,069,480
- --------------------------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions)
- --------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
9.6%
- --------------------------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
IN
This statement (the "Statement") relates to the common stock, par value
$.0001 per share (the "Common Stock") of VDC Communications, Inc., a Delaware
corporation (the "Issuer"). This Statement constitutes an initial filing of
Schedule 13D for Frederick W. Moran ("Mr. Moran").
Item 1. Security and Issuer
This Statement relates to the Issuer's Common Stock. The address of the
Issuer's principal executive office is 75 Holly Hill Lane, 3rd Floor, Greenwich,
CT 06830.
<PAGE>
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CUSIP No. 91821B 10 1 Page 3 of 7 Pages
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Item 2. Identity and Background
(a) The name of the person filing this Statement is Frederick W.
Moran.
(b-c) Mr. Moran's principal occupation is Managing Director of
Equity Research for Jefferies & Company, Inc. Mr. Moran's business address and
the address of Jefferies & Company, Inc. is 520 Madison Avenue, 12th Floor, New
York, NY 10022. Jefferies & Company, Inc.'s principal business is investment
banking/securities brokerage.
(d) During the last five years, Mr. Moran has not been convicted
in any criminal proceeding.
(e) During the last five years, Mr. Moran has not been a party to
a civil proceeding of a judicial or administrative body of competent
jurisdiction, as a result of which he was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
(f) Mr. Moran is a citizen of the United States of America.
Item 3. Source and Amount of Funds or Other Consideration
On October 27, 1999, Mr. Moran purchased from Issuer 666,667 shares of
Common Stock for $500,000.25. The source of this purchase price was Mr. Moran's
personal funds. Mr. Moran's acquisition of the above-referenced shares was part
of an overall private placement conducted by the Issuer in October 1999 (the
"October Private Placement") in which the Issuer sold 1,333,334 shares of Common
Stock in a non-public offering exempt from registration pursuant to Section
4(2), and Rule 506 of Regulation D of the Securities Act of 1933 as follows:
<TABLE>
<CAPTION>
Shareholder Number of Shares Consideration ($)
----------- ---------------- -----------------
<S> <C> <C>
Adase Partners, L.P. 140,000 105,000.00
The Lucien I. Levy Revocable Living Trust 10,000 7,500.00
Frederick W. Moran 666,667 500,000.25
Merl Trust 28,000 21,000.00
O.T. Finance, SA 22,000 16,500.00
Alan B. Snyder 266,667 200,000.25
Eric M. Zachs 200,000 150,000.00
------- ----------
Total 1,333,334 1,000,000.50
</TABLE>
The following paragraphs detail certain prior transactions that
resulted in the acquisition of certain securities reflected in this Statement.
On December 23, 1998, Mr. Moran purchased from Issuer 100,000 shares of
Common Stock for $362,500. The source of this purchase price was Mr. Moran's
personal funds. Mr. Moran's acquisition of the above-referenced shares was part
of an overall private placement conducted by the Issuer in December 1998 (the
"December Private Placement") in which the Issuer sold 245,159 shares of Common
Stock in a non-public offering exempt from registration pursuant to Section 4(2)
and Rule 506 of Regulation D of the Act as follows:
<PAGE>
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CUSIP No. 91821B 10 1 Page 4 of 7 Pages
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<TABLE>
<CAPTION>
Shareholder Number of Shares Price per Share
- ----------- ---------------- ---------------
<S> <C> <C>
Anne Moran 35,310 $3.625
Anne Moran, IRA 49,379 $3.625
Frederick A. Moran & 41,380 $3.625
Anne Moran
Frederick A. Moran, IRA 331 $3.625
Frederick W. Moran 100,000 $3.625
Joan Moran, IRA 248 $3.625
Kent Moran 8,221 $3.625
Luke Moran 9,352 $3.625
Moran Equity Fund, Inc. 938 $3.625
---
TOTAL 245,159
</TABLE>
In May 1998, Mr. Moran purchased from Issuer 100,000 shares of Common
Stock for $600,000. The source of this purchase price was Mr. Moran's personal
funds. Mr. Moran's acquisition of the above-referenced shares was part of an
overall private placement conducted by the Issuer in May 1998 (the "May Private
Placement"), in which the Issuer sold 583,430 shares of Common Stock in a
non-public offering exempt from registration pursuant to Section 4(2) and Rule
506 of Regulation D of the Act as follows:
<TABLE>
<CAPTION>
Shareholder Number of Shares Price Per Share
- ----------- ---------------- ---------------
<S> <C> <C>
Lancer Offshore, Inc. 150,000 $6.00
Lancer Voyager Fund 25,000 $6.00
Anne Moran 39,333 $6.00
Anne Moran Trust 250 $6.00
Anne Moran, IRA 11,667 $6.00
Moran Equity Fund, Inc. 27,000 $6.00
Frederick A. Moran 85,667 $6.00
Frederick A. Moran 23,667 $6.00
& Joan B. Moran
Frederick A. Moran Trust 180 $6.00
Frederick W. Moran 100,000 $6.00
Kent Moran 10,000 $6.00
Kent Moran, IRA 333 $6.00
Luke Moran 10,000 $6.00
Luke Moran, IRA 333 $6.00
Alan B. Snyder 100,000 $6.00
-------
TOTAL 583,430
</TABLE>
Pursuant to the terms of an Amended and Restated Agreement and Plan of
Merger, by and among VDC Corporation Ltd. ("VDC"), a Bermuda company, the Issuer
(then known as VDC (Delaware), Inc.), Sky King Communications, Inc., a
Connecticut corporation ("Sky King") and the Sky King shareholders (the "Merger
Agreement"), as further amended by an Amendment to the Merger Agreement, dated
March 6, 1998 (the "Amendment"), Sky King merged with and into the Issuer (the
"Merger"). In exchange for their shares of Sky King common stock, Sky King
shareholders were issued shares of preferred stock of the Issuer ("Preferred
Stock"). As part of the Merger, Mr. Moran was issued 1,422,850 shares of
Preferred Stock. In accordance with the terms of the Merger Agreement, all
shares of Preferred Stock, including those shares held by Mr. Moran, were
converted into shares of Issuer Common Stock upon the merger of VDC with and
into the Issuer on November 6, 1998.
References to, and descriptions of, the Merger Agreement and the
Amendment as set forth in this Item 3 are qualified in their entirety by
reference to the copies of the Merger Agreement and the Amendment, included as
<PAGE>
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CUSIP No. 91821B 10 1 Page 5 of 7 Pages
- --------------------------------------------------------------------------------
Exhibits 1 and 2, respectively, and are incorporated in this Item 3 where such
references and descriptions appear.
Item 4. Purpose of the Transaction
Mr. Moran acquired the shares of Common Stock in the transactions
set forth in Item 3 for personal investment.
Except as set forth below, Mr. Moran does not have any present plans or
proposals which relate to, or would result in: (a) an acquisition by any person
of additional securities of the Issuer, or the disposition of securities of the
Issuer; (b) an extraordinary transaction, such as a merger, reorganization or
liquidation, involving the Issuer or any of its subsidiaries; (c) a sale or
transfer of a material amount of the assets of the Issuer or any of its
subsidiaries; (d) any change in the present Board of Directors (the "Board") or
management of the Issuer; (e) any material change in the present capitalization
or dividend policy of the Issuer; (f) any other material change in the Issuer's
business or corporate structure; (g) any changes in the Issuer's charter,
bylaws, or instruments corresponding thereto or other actions which may impede
the acquisition of control of the Issuer by any person; (h) causing a class of
securities of the Issuer to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association; (i) a class of equity securities of
the Issuer becoming eligible for termination of registration pursuant to the
Act; or (j) any action similar to those enumerated above.
Mr. Moran reserves the right to acquire or sell securities of the
Issuer to the extent he deems advisable in light of market conditions and other
factors.
Item 5. Interest in Securities of the Issuer
(a-b) Mr. Moran is the beneficial owner of, and has sole dispositive
voting power with respect to, 2,069,480 shares of Common Stock, which shares
constitute 9.6% of the issued and outstanding shares of Common Stock (based upon
21,506,917 shares of Common Stock as reported in the Issuer's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1999). Mr. Moran does not share
voting or dispositive power with respect to said shares.
(c) Except for the transactions described in Item 3 above, Mr.
Moran has not effected any transactions in the securities of the Issuer during
the past sixty (60) days.
(d) No persons, other than Mr. Moran, have the right to receive
or the power to direct the receipt of dividends from, or the proceeds from the
sale of, the shares owned by Mr. Moran.
(e) Not applicable.
Item 6. Contracts, Arrangement, Understandings or Relationships with Respect to
Securities Holder
The information set forth in Item 3 is hereby incorporated by
reference. Copies of the Merger Agreement and the Amendment are attached hereto
as Exhibit 1 and 2, respectively.
On October 27, 1999, Mr. Moran entered into a Securities Purchase
Agreement with the Issuer pursuant to which Mr. Moran purchased 666,667 shares
of Issuer Common Stock at a price of $.75 per share. Also on October 27, 1999,
in connection with the same transaction, Mr. Moran entered into a Registration
Rights Agreement with the Issuer. The Registration Rights Agreement provided for
piggyback registration rights upon offerings by the Issuer (subject to standard
and customary underwriter scale-back provisions and other restrictions) with all
registration expenses, subject to certain limitations, to be paid by the Issuer.
<PAGE>
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CUSIP No. 91821B 10 1 Page 6 of 7 Pages
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On December 23, 1998, Mr. Moran entered into a Securities Purchase
Agreement with the Issuer pursuant to which Mr. Moran purchased 100,000 shares
of Issuer Common Stock at a price of $3.625 per share. The Securities Purchase
Agreement contained registration rights providing that the Issuer shall use
reasonable best efforts to file a registration statement within 120 days of
closing in which the shares subject to the Securities Purchase Agreement are
included (subject to standard and customary underwriter scale-back provisions
and other restrictions) with all registration expenses to be paid by the Issuer.
On May 27, 1998, Mr. Moran entered into a Securities Purchase Agreement
with VDC Corporation Ltd. (predecessor to Issuer)("VDC") pursuant to which Mr.
Moran purchased 100,000 shares of VDC common stock at a price of $6.00 per
share. The Securities Purchase Agreement contained registration rights providing
that the Issuer shall use best efforts to file a registration statement within
90 days of closing in which the shares subject to the Securities Purchase
Agreement are included (subject to standard and customary underwriter scale-back
provisions and other restrictions) with all registration expenses to be paid by
VDC.
The descriptions of the above contracts and agreements do not purport
to be complete and are qualified in their entirety by reference to the
appropriate complete contract or agreement attached as an Exhibit to this
Statement. Such Exhibits are incorporated in this Item 6 in their entirety to
supplement the appropriate reference or description above.
Item 7. Material to Be Filed as Exhibits
1. Amended and Restated Agreement and Plan of Merger, by and among VDC
Corporation Ltd., VDC (Delaware), Inc., Sky King Communications, Inc.
and the shareholders of Sky King Communications, Inc., dated December
10, 1997.
2. Amendment to Amended and Restated Agreement and Plan of Merger, by and
among VDC Corporation Ltd., VDC (Delaware), Inc., Sky King
Communications, Inc. and the shareholders of Sky King Communications,
Inc., dated March 6, 1998.
3. Securities Purchase Agreement by and between VDC Communications, Inc.
and Frederick W. Moran, dated October 27, 1999.
4. Registration Rights Agreement by and between VDC Communications, Inc.
and Frederick W. Moran, dated October 27, 1999.
5. Securities Purchase Agreement by and between VDC Communications, Inc.
and Frederick W. Moran, dated December 23, 1998.
6. Securities Purchase Agreement by and between VDC Corporation Ltd. and
Frederick W. Moran, dated May 27, 1998.
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
December 17, 1999.
- --------------------------------------------------------------------------------
Date
/s/Frederick W. Moran
- --------------------------------------------------------------------------------
Signature
<PAGE>
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CUSIP No. 91821B 10 1 Page 7 of 7 Pages
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Frederick W. Moran
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Name/Title
Attention: Intentional misstatements or omissions of fact constitute Federal
criminal violations (See 18 U.S.C. 1001)
EXHIBIT 1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
VDC CORPORATION LTD.
VDC (Delaware), INC.
AND
SKY KING COMMUNICATIONS, INC.
Effective Date: December 10, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I: MERGER OF SKY KING WITH AND INTO SUB AND RELATED MATTERS 1
1.1 The Merger. 2
1.2 Conversion of Stock. 3
1.3 Merger Consideration. 4
1.4 Additional Rights; Taking of Necessary Action; Further Action. 6
1.5 Dissenters' Rights. 6
1.6 No Further Rights or Transfers. 6
ARTICLE II: THE CLOSING 6
2.1 Closing Date. 6
2.2 Closing Transactions. 7
ARTICLE III: CERTAIN CORPORATE ACTION 9
3.1 Sky King Corporate Action. 10
3.2 Acquiror Corporate Action. 10
ARTICLE IV: REPRESENTATIONS AND WARRANTIES 10
4.1 Representations and Warranties of Sky King and the Sky King Shareholders. 10
4.2 Representations and Warranties of Acquiror and the Sub. 17
ARTICLE V: AGREEMENTS OF THE PARTIES 21
5.1 Issuance of Securities of Acquiror prior to the Closing. 21
5.2 Anticipated Domestication of Acquiror; Possible Follow-on Merger. 22
5.3 Access to Information. 23
5.4 Confidentiality; No Solicitation. 23
5.5 Interim Operations. 25
5.6 Consents. 28
5.7 Filings. 28
i
<PAGE>
5.8 All Reasonable Efforts. 28
5.9 Public Announcements. 28
5.10 Notification of Certain Matters. 29
5.11 Expenses. 29
5.12 Registration Rights. 29
5.13 Documents at Closing. 32
5.14 Prohibition on Trading in Acquiror and Sub Stock. 33
5.15 Anticipated Acquisition of the Principal Assets of PortaCom Wireless, Inc. 33
5.16 Production of Schedules and Exhibits. 34
5.17 Acknowledgment of Approvals. 34
ARTICLE VI: CONDITIONS TO CONSUMMATION OF THE MERGER 34
6.1 Conditions to Obligations of Sky King and the Sky King Shareholders. 35
6.2 Conditions to Acquiror's and the Sub's Obligations. 36
ARTICLE VII: INDEMNIFICATION 38
7.1 Indemnification. 38
ARTICLE VIII: TERMINATION 39
8.1 Termination. 39
8.2 Notice and Effect of Termination. 40
8.3 Extension; Waiver. 40
8.4 Amendment and Modification. 40
ARTICLE IX: MISCELLANEOUS 41
9.1 Survival of Representations and Warranties. 41
9.2 Notices. 41
9.3 Entire Agreement; Assignment. 42
9.4 Binding Effect; Benefit. 42
ii
<PAGE>
9.5 Headings. 42
9.6 Counterparts. 42
9.7 Governing Law. 43
9.8 Arbitration. 43
9.9 Severability. 43
9.10 Release and Discharge. 43
9.11 Certain Definitions. 43
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS AND SCHEDULES
EXHIBITS
- --------
<S> <C>
Exhibit 1.3(a)(i) Series A Certificate of Designation
Exhibit 1.3(a)(ii) Series B Certificate of Designation
Exhibit 1.3(c)(ii) Escrow Agreement
Exhibit 2.2(a)(ii) Investment Letter
Exhibit 2.2(b)(xii) Employment Agreement
SCHEDULES
- ---------
Schedule 4.1(a) Articles of Incorporation and Bylaws of Sky King
Communications, Inc.
Schedule 4.1(d) Options, etc. - Sky King Communications, Inc.
Schedule 4.1(g) Litigation - Sky King Communications, Inc.
Schedule 4.1(l) Names and Service Marks - Sky King Communications, Inc.
Schedule 4.1(m) Leases and Agreements - Sky King Communications, Inc.
Schedule 4.1(n) Conflicting Interests - Sky King Communications, Inc.
Schedule 4.1(p) Certain Changes and Events - Sky King Communications, Inc.
Schedule 4.2(a) Memorandum of Association and Byelaws of VDC Corporation
Ltd. and Articles of Incorporation and Bylaws of VDC (Delaware),
Inc.
Schedule 4.2(d)(i) VDC Corporation Ltd. Warrants
Schedule 4.2(g) Legal Violations of VDC Corporation Ltd. and its Subsidiaries
Schedule 4.2(i) Litigation - VDC Corporation Ltd.
Schedule 5.5(a)(ix) Acquisitions by Sky King Communications, Inc.
</TABLE>
iv
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the
"Agreement"), is made and entered into effective as of December 10, 1997, by and
among VDC CORPORATION LTD, a Bermuda Corporation ("Acquiror"), VDC (Delaware),
Inc., a Delaware corporation and wholly-owned subsidiary of Acquiror ("Sub"),
SKY KING COMMUNICATIONS, INC., a Connecticut corporation ("Sky King"), and those
individuals and entities whose names appear on the signature page hereof in
their capacity as holders of the outstanding common stock of Sky King (the "Sky
King Shareholders").
Recitals
WHEREAS, the parties hereto entered into an Agreement and Plan of
Merger effective as of the date thereof (the "Original Agreement") pursuant to
which Sub shall merger with and into Sky King (the "Merger");
WHEREAS, the parties hereto desire to amend the Original Agreement to
(i) amend the voting, conversion and other rights of holders of Sub's Series A
Convertible Preferred Stock to be issued as Merger Consideration in the Merger;
(ii) provide for the issuance of Sub's Series B Convertible Preferred Stock as
part of the Merger Consideration; (iii) change the manner in which the Merger
Consideration shall be paid and delivered to the Sky King shareholders; and (iv)
amend and restate entirely the Original Agreement;
WHEREAS, Acquiror and Sky King have determined that it is in the best
interests of their respective shareholders for Sky King to merge with and into
Sub upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the respective Boards of Directors of Acquiror and Sky King
have each approved this Agreement and the consummation of the transactions
contemplated hereby and approved the execution and delivery of this Agreement;
and
WHEREAS, for federal income tax purposes, it is intended that this
merger shall qualify as a tax-free reorganization under the provisions of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and
representations, warranties and agreements contained herein, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree that the Amended and Restated
Agreement and Plan of Merger shall be as follows:
ARTICLE I
<PAGE>
MERGER OF SKY KING WITH AND INTO SUB
AND RELATED MATTERS
1.1 The Merger.
(a) Upon the terms and conditions of this Agreement, at
the "Effective Time" (as defined herein), Sky King shall be merged with and into
the Sub (the "Merger") in accordance with the provisions of the Connecticut
Business Corporation Act ("CBCA") and the Delaware General Corporation Law (the
"DGCL") and the separate corporate existence of Sky King shall cease, and the
Sub shall continue as the surviving corporation under the laws of the state of
Delaware with the corporate name "SKY KING COMMUNICATIONS, INC." (the
"Surviving Corporation").
(b) The Merger shall become effective as of the filing of
a certificate of merger (the "Certificate of Merger") with the Secretary of
State of Delaware and Articles of Merger with State Department of Assessments
and Taxation, in accordance with the provisions of Section 252 of the DGCL
and Section 33-821 of the CBCA, and the confirmation by the Certificate of
Merger that the Merger is effective as of such filing date. The date and time
when the Merger shall become effective is referred to herein as the "Effective
Time."
(c) At the Effective Time:
(i) the Sub shall continue its existence under
the laws of the State of Delaware as the Surviving Corporation;
(ii) the separate corporate existence of Sky King
shall cease;
(iii) all rights, title and interests to all
assets, whether tangible or intangible and any property or property rights owned
by Sky King shall be allocated to and vested in the Sub as the Surviving
Corporation without reversion or impairment, without further act or deed, and
without any transfer or assignment having occurred, but subject to any existing
liens or other encumbrances thereon, and all liabilities and obligations of Sky
King shall be allocated to the Sub as the Surviving Corporation which shall be
the primary obligor therefor and, except as otherwise provided by law or
contract, no other party to the Merger, other than the Sub as the Surviving
Corporation, shall be liable therefor;
(iv) the Certificate of Incorporation of the Sub
as in effect immediately prior to the consummation of the Merger, other than
the name of the Sub which shall be changed to "Sky King Communications, Inc."
in connection with the Merger, shall be the Certificate of Incorporation of
the Surviving Corporation, until thereafter amended as provided by law and such
Certificate of Incorporation;
(v) Each of Acquiror, Sub and Sky King shall
execute and deliver, and file or cause to be filed with the Secretary of State
of the State of Delaware, the Certificate of Merger and with the State
2
<PAGE>
Department of Assessments and Taxation, the Articles of Merger, with such
amendments thereto as the parties hereto shall deem mutually acceptable;
(vi) the Bylaws of Sub, as in effect immediately
prior to the consummation of the Merger, shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by law and such Bylaws; and
(vii) the officers and directors of the Acquiror
shall be nominated and elected in accordance with the provisions of Sections 6.1
(g) hereof.
1.2 Conversion of Stock.
At the Effective Time, and without any action on the part of
the parties hereto, the Sky King Shareholders or any other party:
(a) the shares representing 100% of the issued and
outstanding common stock of Sky King ("Sky King Common Stock") as of the
Closing (the "Closing") (as such term is defined in Section 2.1 below)
(other than "Dissenting Shares", as defined herein) shall, by virtue of the
Merger and without any action on the part of any holder thereof, be converted
into and represent the right to receive, and shall be exchangeable for the
merger consideration identified at Section 1.3 hereafter (the "Merger
Consideration);
(b) each share of capital stock of Sky King held in
treasury as of the Effective Time shall, by virtue of the Merger, be canceled
without payment of any consideration therefor and without any conversion
thereof;
(c) each share of common stock of the Sub that is issued
and outstanding as of the Effective Time shall continue to represent one share
of common stock of the Surviving Corporation after the Merger, which shares,
together with the 100 shares of common stock of Sub owned by Acquiror prior to
the Effective Time, shall thereafter constitute all of the issued and
outstanding shares of capital stock of the Surviving Corporation;
(d) Acquiror shall pay all charges and expenses,
including those of any exchange agent and the National Association of Securities
Dealers, Inc., if any, in connection with the issuance or exchange of the
shares in connection with the Merger;
(e) from and after the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of shares of
Sky King Common Stock (or any warrants or other rights to acquire any of the
same) that were outstanding immediately prior to the Effective Time. After the
Effective Time, certificates for shares of Sky King Common Stock (or any
warrants or other rights to acquire any of the same) that were outstanding
immediately prior to the Effective Time shall be canceled and exchanged for the
consideration to be received therefor in connection with the Merger as provided
in this Agreement; and
3
<PAGE>
(f) no fractional shares of stock shall be issued in the
Merger, and each holder of Sky King Common Stock entitled to receive as part of
the Merger Consideration fractional shares shall receive that number of shares
of stock rounded to the nearest whole number.
1.3 Merger Consideration.
(a) The Merger Consideration consisting of the total
purchase price payable to the holders of 100% of the Sky King Common Stock in
connection with the acquisition by merger of Sky King shall consist exclusively
of the following:
(i) newly issued shares of Sub's Series A
Convertible Preferred Stock (the "Series A Stock") which are subject to the
following salient features:
(1) Conversion Rights. The Series A
Stock shall automatically convert into an aggregate of 5,500,000 shares of Sub
Common Stock upon the occurrence of the domestication of Acquiror pursuant to
Section 5.2 of this Agreement. If the domestication of Acquiror does not occur
within one (1) year after the Effective Time, all, but not less than all of the
Series A Stock may be convertible at any time thereafter by the holders thereof
into, or exchangeable for, 5,500,000 shares of Acquiror Common Stock. The
Series A Stock shall also automatically convert into shares of Sub Common
Stock upon the occurrence of: (i) a liquidation event, dissolution or winding
up of Sub, (ii) the sale of all or substantially all of the assets or business
of Sub or (iii) a merger, plan of reorganization or consolidation in which Sub
is not the surviving corporation.
(2) Voting Rights. Prior to the
conversion thereof, the Series A Stock shall have no voting rights.
(3) Dividends. The Series A Stock will
share pari-passu with all dividends on Sub Common Stock and will otherwise have
no dividend rights.
The definitive terms of the Series A Stock are set
forth within the Certificate of Designation for the Series A Convertible
Preferred Stock attached hereto as Exhibit 1.3(a)(i) (the "Series A
Certificate of Designation"). The Series A Certificate of Designation shall
indicate Acquiror's consent to the terms of the Series A Stock as set forth in
this Subsection 1.3(a)(i); and
(ii) newly issued shares of Sub's Series B
Convertible Preferred Stock (the "Series B Stock"; the Series A Stock and the
Series B Stock shall be collectively referred to herein as the "Sub Preferred
Stock") which are subject to the following salient features:
(1) Conversion Rights. The Series B
Stock shall automatically convert into an aggregate of 4,500,000 shares of Sub
Common Stock upon the occurrence of the domestication of Acquiror pursuant to
Section 5.2 of this Agreement. If the domestication of Acquiror does not occur
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within one (1) year after the Effective Time, all, but not less than all of the
Series B Stock may be convertible at any time thereafter by the holders thereof
into, or exchangeable for, 4,500,000 shares of Acquiror Common Stock. The
Series B Stock shall also automatically convert into shares of Sub Common
Stock upon the occurrence of: (i) a liquidation event, dissolution or
winding up of Sub, (ii) the sale of all or substantially all of the assets or
business of Sub or (iii) a merger, plan of reorganization or consolidation in
which Sub is not the surviving corporation.
(2) Voting Rights. Prior to the
conversion thereof, the Series B Stock shall have no voting rights.
(3) Dividends. The Series B Stock will
share pari-passu with all dividends on Sub Common Stock and will otherwise have
no dividend rights.
The definitive terms of the Series B Stock are set forth within the Certificate
of Designation for the Series B Convertible Preferred Stock attached hereto as
Exhibit 1.3(a)(ii) (the "Series B Certificate of Designation"). The Series B
Certificate of Designation shall indicate Acquiror's consent to the terms of the
Series B Stock as set forth in this Subsection 1.3(a)(ii).
(b) The Merger Consideration shall be allocated among the
holders of 100% of the Sky King Common Stock in the proportion of their share
ownership of the outstanding common stock of Sky King as of the date of the
Closing.
(c) The Merger Consideration shall be paid and delivered
in the following manner:
(i) At the Closing, shares of Series A Stock
convertible into an aggregate of 5,500,000 shares of Sub Common Stock shall
be delivered to the Sky King Shareholders; and
(ii) At the Closing, Acquiror shall issue in the
name of the Sky King Shareholders shares of Series B Stock (the "Escrow
Shares") and shall deliver such shares to the Escrow Agent to be held in
accordance with the terms and conditions of the Escrow Agreement attached hereto
as Exhibit 1.3(c)(ii) and made a part hereto (the "Escrow Agreement").
(d) The shares of Series A Stock to be delivered at the
Closing and the shares of Series B Stock released from escrow by the Escrow
Agent (as well as shares of Acquiror Common Stock that may be issued pursuant to
Section 5.2(b) hereof) shall be fully paid and non-assessable and shall be free
and clear of all liens, levies and encumbrances except that all of such Series A
Stock, Series B Stock, shares of common stock issuable upon conversion of the
Series A Stock, Series B Stock and any shares of Acquiror Common Stock shall be
"restricted securities" pursuant to Rule 144, promulgated under the Securities
Act of 1933, as amended (the "Act").
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1.4 Additional Rights; Taking of Necessary Action; Further Action.
Each of Acquiror, Sub, Sky King and Sky King Shareholders,
respectively, shall use their best efforts to take all such action as may be
necessary and appropriate to effectuate the Merger under the CBCA and DGCL as
promptly as possible, including, without limitation, the filing of the
Certificate of Merger and the Articles of Merger consistent with the terms of
this Agreement. If at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
in Sub as the Surviving Corporation full right, title and possession to all
assets, property, rights, privileges, powers and franchises of Sky King, the
officers of such corporations are fully authorized in the name of their
corporations or otherwise, and notwithstanding the Merger, to take, and shall
take, all lawful and necessary action.
1.5 Dissenters' Rights.
Each of Sky King and the Sky King Shareholders acknowledge
that dissenters' rights are available to each of the Sky King Shareholders
pursuant to the CBCA and that (i) Sky King has complied with the provisions of
the CBCA in notifying each Sky King Shareholder of the availability of such
rights; and (ii) pursuant to the provisions of the CBCA, if the appropriate
procedures and guidelines are followed, any dissenting shareholders ("Dissenting
Shareholders"), in lieu of the Merger Consideration, shall be entitled to
receive the fair value of their shares in accordance with the provisions of the
CBCA.
1.6 No Further Rights or Transfers.
At and after the Effective Time, the shares of capital stock
of Sky King outstanding immediately prior to the Effective Time shall cease to
provide any rights to the shareholders of Sky King or the Surviving Corporation,
except for the right to surrender the certificate or certificates representing
such shares and to receive the Merger Consideration as provided in this
Agreement.
ARTICLE II
THE CLOSING
2.1 Closing Date.
Subject to satisfaction or waiver of all conditions precedent
set forth in Article VI of this Agreement, the closing of the Merger (the
"Closing") shall take place at the offices of Buchanan Ingersoll Professional
Corporation., Eleven Penn Center, 1835 Market Street, 14th Floor, Philadelphia,
PA 19103, at 10:00 a.m., local time on the later of: (i) the first Business Day
following the day upon which all appropriate Acquiror corporate action and Sky
King corporate action has been taken in accordance with Article III of this
Agreement; or (ii) the day on which the last of the conditions precedent set
forth in Article VI of this Agreement is fulfilled or waived, or (b) at such
other time, date and place as the parties may agree, but in no event shall such
date be later than March 10, 1998, unless such date is extended by the mutual
written agreement of the parties.
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2.2 Closing Transactions.
At the Closing, the following transactions shall occur, all of
such transactions being deemed to occur simultaneously:
(a) Sky King and all holders of the Sky King Common
Stock shall take, or shall cause to be taken, the following actions:
(i) Each of the holders of Sky King Common
Stock (other than Dissenting Shareholders) shall surrender and deliver to the
Sub as the Surviving Corporation the certificate or certificates representing
all of their shares of Sky King Common Stock;
(ii) Each of the holders of Sky King Common
Stock (other than Dissenting Shareholders) shall, to the extent necessary to
comply with applicable federal and state securities laws (including, if
applicable, Rule 145 promulgated under the Act), execute and deliver at the
Closing a copy of an investment letter in a form mutually agreed upon by the
parties and attached to this Agreement as Exhibit 2.2(a)(ii) ("Investment
Letter");
(iii) Any outstanding shareholder agreements
relating to Sky King Common Stock shall have been terminated and evidence of
such termination satisfactory to Acquiror shall have been delivered to Acquiror;
(iv) Sky King and the holders of Sky King Common
Stock shall execute and deliver, and file or cause to be filed with the
Secretary of State of the State of Connecticut, the Certificate of Merger
with such amendments thereto as the parties hereto shall deem mutually
acceptable;
(v) A certificate shall be executed by Sky King
and the holders of Sky King Common Stock to the effect that all representations
and warranties made by Sky King and the Sky King Shareholders under this
Agreement are true and correct as of the Closing, as though originally given to
Acquiror and Sub on said date;
(vi) A certificate of good standing shall be
delivered by Sky King from the Secretary of State of the State of Connecticut,
dated at or about the Closing, to the effect that such corporation is in good
standing under the laws of such state;
(vii) An incumbency certificate shall be delivered
by Sky King signed by all of the officers thereof dated at or about the Closing;
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(viii) Certified Articles of Incorporation shall be
delivered by Sky King dated at or about the Closing and a copy of the Bylaws of
Sky King certified by the Secretary of Sky King dated at or about the Closing;
(ix) Certified Board and shareholder resolutions
shall be delivered by the Secretary of Sky King dated at or about the Closing
authorizing the transactions contemplated under this Agreement;
(x) Sky King and the holders of Sky King Common
Stock shall execute and deliver the Escrow Agreement to Acquiror and the Escrow
Agent; and
(xi) Each of the parties to this Agreement shall
have otherwise executed whatever documents and agreements, provided whatever
consents or approvals and taken all such actions as are required under this
Agreement.
(b) Acquiror and/or Sub shall take, or shall cause to be
taken, the following actions:
(i) Acquiror shall deliver or shall cause to be
delivered to all of the holders of the Sky King Common Stock (other than
Dissenting Shareholders) a certificate or certificates representing the number
of shares of that portion of an aggregate number of 5,500,000 shares of Series A
Stock as such holder is entitled to receive at the Closing in connection with
the Merger;
(ii) Acquiror shall, on behalf of itself and the
Sky King Shareholders, deliver or shall cause to be delivered to the Escrow
Agent certificates representing 4,500,000 shares of Series B Stock;
(iii) Acquiror and the Sub shall execute and
deliver, and file or cause to be filed with the Secretary of the State of
Delaware, the Certificate of Merger with such amendments thereto as the parties
hereto shall deem mutually acceptable;
(iv) Sub shall receive from the Secretary of
State of Delaware a final Certificate of Merger;
(v) The Acquiror's Board of Directors will be
reconstituted to consist of a maximum of five (5) members. Each of the existing
members of Acquiror's Board of Directors will tender his resignation and
nominate to the Board two (2) individuals consisting of designees of the
holders of the Sub Preferred Stock and one (1) designee of the former Acquiror
Board members ("VDC Designee"). The newly constituted Board of Directors will
hold office in accordance with the DGCL and will appoint executive officers in
accordance with the DGCL;
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(vi) A certificate for each of the Acquiror and
the Sub shall be executed by their respective Presidents to the effect that all
of the respective representations and warranties of the Acquiror and Sub under
this Agreement are true and correct as of the Closing, as though originally
given to Sky King on said date;
(vii) A certificate of good standing shall be
delivered by Sub from the Secretary of State of the State of Delaware, dated at
or about the Closing, stating that Sub is in good standing under the laws of
such state;
(viii) A certificate of good standing shall be
delivered by Acquiror from the Commonwealth of Bermuda, dated at or about the
Closing, stating that Acquiror is in good standing under the laws of such
commonwealth;
(ix) An incumbency certificate shall be delivered
by each of Acquiror and Sub signed by all of their respective officers dated at
or about the Closing;
(x) Certified Certificates of Incorporation
shall be delivered by Acquiror and Sub dated at or about the Closing, and a
copy of the Bylaws of Acquiror and Sub certified by the respective Secretary
of Acquiror and Sub dated at or about the Closing;
(xi) Certified Board resolutions shall be
delivered by the respective Secretary of the Acquiror and Sub dated at or about
the Closing authorizing the transactions contemplated under this Agreement;
(xii) Acquiror will deliver an Employment
Agreement to each of Frederick A. Moran and James C. Roberts upon the terms and
conditions identified upon Exhibit 2.2(b)(xii) to this Agreement;
(xiii) A Certificate of Designation shall be filed
with the Secretary of State of Delaware in accordance with the DGCL, designating
the terms of the Sub Preferred Stock;
(xiv) Acquiror shall execute and deliver the
Escrow Agreement to Sky King and the Escrow Agent; and
(xv) Each of the parties to this Agreement shall
have otherwise executed whatever documents and agreements, provided whatever
consents or approvals and taken all such actions as are required under this
Agreement.
ARTICLE III
CERTAIN CORPORATE ACTION
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3.1 Sky King Corporate Action.
Sky King shall cause to occur all corporate action necessary
to effect the Merger and to consummate the other transactions contemplated
hereby.
3.2 Acquiror Corporate Action.
Acquiror and the Sub shall cause to occur all corporate action
necessary on behalf of either of them to effect the Merger and to consummate the
other transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Sky King and the Sky King
Shareholders.
As a material inducement to Acquiror and Sub to execute this
Agreement and consummate the Merger and other transactions contemplated hereby,
Sky King and the Sky King Shareholders, jointly and severally, hereby make the
following representations and warranties to Acquiror and Sub. The
representations and warranties are true and correct in all material respects at
this date, and will be true and correct in all material respects on the Closing
as though made on and as of such date.
(a) Corporate Existence and Power. Sky King is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Connecticut, and has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to
carry on its business as now conducted, except where the failure to have any of
the foregoing would not have a Material Adverse Effect. Sky King is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. True, correct
and complete copies of the Articles of Incorporation and Bylaws of Sky King
as amended to date are attached hereto as Schedule 4.1(a) and are made a part
hereof. There are currently no subsidiaries of Sky King.
(b) Due Authorization. This Agreement has been duly
authorized, executed and delivered by Sky King and the Sky King Shareholders and
constitutes a valid and binding agreement of Sky King and the Sky King
Shareholders, enforceable in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium, and
other similar laws relating to, limiting or affecting the enforcement of
creditors' rights generally or by the application of equitable principles. As of
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the Closing all corporate action on the part of Sky King required under
applicable law in order to consummate the Merger will have occurred.
(c) No Contravention. Neither the execution and delivery
of the Agreement nor the consummation of the transactions contemplated
thereby will: (i) conflict with or result in any violation of any provision
of the Articles of Incorporation or Bylaws of Sky King; or (ii) conflict with or
result in any violation or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of a right or obligation or loss under, any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Sky King and the
Sky King Shareholders or their properties or assets, or result in the
creation or imposition of any mortgage, lien, pledge, charge or security
interest of any kind ("Encumbrance") on any assets of Sky King, except such as
is not reasonably likely to have a Material Adverse Effect or prevent Sky
King or the Sky King Shareholders from consummating the transactions
contemplated by this Agreement. No consent, approval, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, is required by or with respect to Sky King in connection
with the execution and delivery of this Agreement by Sky King and the Sky
King Shareholders or the consummation by Sky King and the Sky King
Shareholders of the transactions contemplated hereby, except the filing of
the Articles of Merger with the States of Delaware and Connecticut.
(d) Capitalization and Share Ownership. The authorized
capital stock of Sky King will upon the Closing consist of no more than 2,000
shares of common stock ("Sky King Common Stock"). There are currently
outstanding approximately 1,692 shares of Sky King Common Stock. The outstanding
shares of capital stock of Sky King have been duly authorized and validly issued
and are fully paid and nonassessable and free of preemptive rights. Except as
described on Schedule 4.1(d) hereto, there are outstanding (A) no shares of
preferred stock or other voting securities of Sky King, (B) no securities of
Sky King convertible into or exchangeable for shares of capital stock or
voting securities of Sky King and (C) no options, warrants or other rights to
acquire from Sky King, and no obligation of Sky King to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of Sky King, and there are no agreements or
commitments to do any of the foregoing. There are no voting trusts or voting
agreements applicable to any capital stock of Sky King. The Sky King Common
Stock to be surrendered in the Merger will be owned of record and beneficially
by the Sky King Shareholders, free and clear of all liens and encumbrances
of any kind and nature, and have not been sold, pledged, assigned or otherwise
transferred. There are no agreements (other than this Agreement) to sell,
pledge, assign or otherwise transfer such securities.
(e) Financial Statements. Within fifteen (15) days after
the execution hereof, Sky King will provide Acquiror with unaudited annual
and interim financial statements (the "Financial Statements") such that would
comply with Regulation S-X of the Securities Exchange Act of 1934 if such
Financial Statements were provided on an audited basis. Such Financial
Statements will have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods reported upon
and fairly present in all material respects the financial position of Sky King
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as of the date thereof and the results of operations for the periods then ended
(subject to normal year-end adjustments). On or before the Closing, Sky King
shall deliver audited Financial Statements to the Acquiror (the "Audited
Financial Statements") covering the same periods as the Financial Statements,
that reflect no material negative adjustments or differences from the Financial
Statements.
(f) No Contingent Liabilities. Except as set forth in the
Financial Statements, at the Closing, Sky King shall have no liabilities,
whether related to tax or non-tax matters, known or unknown, due or not yet due,
liquidated or unliquidated, fixed or contingent, determined or determinable in
amount or otherwise and, to the knowledge of Sky King after due inquiry, there
is no existing condition, situation or set of circumstances which could
reasonably be expected to result in such a liability, except as and to the
extent reflected on: (i) the Financial Statements; (ii) this Agreement or any
Schedule or Exhibit hereto; or (iii) liabilities incurred since the date of the
Financial Statements solely in the ordinary course of business and as accurately
reflected on the books and records of Sky King; provided, however, that no
liability shall be incurred from and after the date hereof which is in
contravention of any negative covenant contained herein and applicable to Sky
King.
(g) Litigation. Except as described on Schedule 4.1(g)
hereto, there is no action, suit, investigation or proceeding (or, to the
knowledge of Sky King, any basis therefor) pending against, or to the knowledge
of Sky King threatened, against or affecting Sky King or any of its properties
before any court or arbitrator or any governmental body, agency or official
that (i) if adversely determined against Sky King, would have a Material Adverse
Effect or (ii) in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the Merger or any of the other transactions contemplated by the
Agreement.
(h) Taxes. Sky King has timely filed all tax returns
required to be filed by it, and will timely file when due all tax returns
required to be filed by it between the date hereof and the Closing. Sky King
has paid in a timely fashion or will pay when due in a timely fashion, all taxes
required to be paid in respect of the periods covered by such returns, and the
books and the financial statements of Sky King reflect, or will reflect,
adequate reserves for all taxes payable by Sky King which have been, or will be,
accrued but are not yet due. Sky King is not delinquent in the payment of
any material tax, assessment or governmental charge. No deficiencies for
any taxes have been proposed, asserted or assessed against Sky King, Sky
King and the Sky King Shareholders are not aware of any facts which would
constitute the basis for the proposal or assertion of any such deficiency and
there is no action, suit, proceeding, audit or claim now pending or threatened
against Sky King. All taxes which Sky King is required by law to withhold and
collect have been duly withheld and collected, and have been timely paid over
to the proper authorities to the extent due and payable. For the purposes of
this Agreement, the term "tax" shall include all federal state, local and
foreign income, property, sales, excise and other taxes of any nature
whatsoever. Neither Sky King nor any member of any affiliated or combined group
of which Sky King is or has been a member has granted any extension or waiver of
the limitation period applicable to any tax returns. There are no Encumbrances
for taxes upon the assets of Sky King, except Encumbrances for current taxes
not yet due. There are no tax sharing or tax allocation agreements to which Sky
King is now or ever has been a party. Sky King will not be required under
Section 481(c) of the Code, of 1986, to include any material adjustment in
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taxable income for any period subsequent to the Merger. Sky King (a) has not
been a member of an affiliated group filing a consolidated federal income tax
return (other than a group the common parent of which was Sky King) and (b) has
no liability for the taxes of any person (other than Sky King) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract or otherwise.
(i) Compliance with Laws. Sky King is not in violation
of, and has not violated, any applicable provisions of any laws, statues,
ordinances or regulations, other than as would not be reasonably likely to
have a Material Adverse Effect or constitute a felony. No such laws, statutes,
ordinances or regulations require or are reasonably expected to require capital
expenditures by Sky King that are reasonably likely to have a Material Adverse
Effect. Without limiting the generality of the foregoing, Sky King has all
licenses, permits, certificates and authorizations needed or required for the
conduct of Sky King's business as presently conducted and for the use of its
properties and premises occupied by it, except where the failure to obtain a
licenses, permit, certificate or authorization would not have a Material Adverse
Effect.
(j) Investment Banking Fees. There is no investment
banker, broker, finder or other similar intermediary which has been retained by,
or is authorized by, Sky King or the Sky King Shareholders to act on its or
their behalf who might be entitled to any fee or commission from Sky King, the
Sky King Shareholders, Acquiror or the Sub or any of their respective affiliates
upon consummation of the transactions contemplated by this Agreement.
(k) Personal Property. Sky King has good and valid title
to all of its personal property, tangible and intangible, reflected on the
Financial Statements and to all other personal property owned by it, free and
clear of any Encumbrance. Sky King is the owner of all of its personal property
now located in or upon its leased premises and of all personal property which is
used in the operation of its business. All such equipment, furniture and
fixtures and other tangible personal property is in good operating condition and
repair and none require any repairs other than normal routine maintenance to
maintain such property in good operating condition and repair. All inventory as
reflected on the Financial Statements is useable in the ordinary course of
business free from material defects. Sky King owns no motor vehicles.
(l) Intellectual Property; Intangible Property. The
corporate names of Sky King and the trade names and service marks listed on
Schedule 4.1(l) are the only names and service marks which are used by Sky King
in the operation of its business (the "Names and Service Marks"). Sky King has
not done business and has not been known by any other name other than by its
Names and Service Marks. Sky King owns and has the exclusive right to use all
intellectual property presently in use by it and necessary for the operation of
its business as now being conducted, which intellectual property includes, but
is not limited to, patents, trademarks, trade names, service marks, copyrights,
trade secrets, customer lists, inventions, formulas, methods, processes and
other proprietary information. There are no outstanding licenses or consents
granting third parties the right to use any intellectual property owned by
Sky King. No royalties or fees are payable by Sky King to any third party by
reason of the use of any of its intellectual property. Sky King has received no
notice of any adversely held patent, invention, trademark, copyright, service
mark or trade name of any person, or any claims of any other person relating
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to any of the intellectual property subject hereto, and to the knowledge of Sky
King, there is no reasonable basis for any such charge or claim. There is no
presently known threatened use or encroachment of any such intellectual
property.
(m) Contracts, Leases, Agreements and Other Commitments.
Sky King is not a party to or bound by any oral, written or implied contracts,
agreements, licenses, leases, employment agreements, powers of attorney,
guaranties, surety arrangements or other commitments, except for the following
(which are hereinafter collectively called the "Corporation Agreements"):
(i) The leases and agreements described on
Schedules 4.1(m); and
(ii) Agreements involving a maximum possible
liability or obligation on the part of Sky King of less than Twenty-Five
Thousand Dollars ($25,000) in the aggregate.
The Corporation Agreements constitute all of the agreements
and instruments which are necessary and desirable to operate the business as
currently conducted by Sky King. True, correct and complete copies of each
Corporation Agreement described and listed under Subsection 4.1(m) will be made
available to Acquiror within fifteen (15) days after the date hereof. The term
"Corporation Agreement" excludes purchase orders entered into in the ordinary
course for personalty or inventory which may be returned to the vendor without
penalty. All of the Corporation Agreements are valid, binding and enforceable
against the respective parties thereto in accordance with their respective
terms. Following the Merger, the Surviving Corporation shall become entitled to
all rights of Sky King under such of the Corporation Agreements as if the
Surviving Corporation were the original party to such Corporation Agreements.
All parties to all of the Corporation Agreements have performed all obligations
required to be performed to date under such Corporation Agreements, and no party
is in default or in arrears under the terms thereof, and no condition exists or
event has occurred which, with the giving of notice or lapse of time or both,
would constitute a default thereunder. The consummation of this Agreement and
the Merger will not result in an impairment or termination of any of the rights
of Sky King under any Corporation Agreement. None of the terms or provisions of
any Corporation Agreement materially adversely affects the business, prospects,
financial condition or results of operations of Sky King.
(n) Conflicting Interests. Except as set forth on
Schedule 4.1(n), no director, officer, employee or Sky King Shareholder, and no
relative or affiliate of any of the foregoing (i) sells or purchases goods or
services from Sky King or has any pecuniary interest in any supplier or client
of any of the foregoing or in any other business enterprise with which Sky King
conducts business or with which any of the foregoing is in competition, or
(ii) is indebted to Sky King except for money borrowed and as set forth on the
Financial Statements.
(o) Environmental Protection. Neither Sky King nor the
Sky King Shareholders have been notified by any governmental authority, agency
or third party, and Sky King and the Sky King Shareholders have no knowledge, of
any violation by Sky King of any Environmental Statute (as defined below). All
registrations by Sky King with, licenses from or permits issued by governmental
agencies pursuant to environmental, health and safety laws are in full force and
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effect. The term "Environmental Statutes" means all statutes, ordinances,
regulations, orders and requirements of common law concerning discharges to the
air, soil, surface water or groundwater and concerning the storage, treatment or
disposal of any waste or hazardous substance. There is no hazardous substance at
any premises currently or previously occupied by Sky King. Sky King has not
received any notice or any request for information, notice of claim, demand or
other notification that it may be potentially responsible with respect to any
investigation or clean-up of any threatened or actual release of hazardous
substances. All hazardous wastes and substances have been stored, treated,
disposed of and transported in conformance with all requirements applicable to
such hazardous substances and wastes.
(p) Absence of Certain Changes or Events. Except as and
to the extent set forth on the Financial Statements, to the extent contained
in this Agreement, or as set forth on Schedule 4.1(p), there has not been
(i) any material adverse change in the business, assets, properties, results of
operations, financial condition or prospects of Sky King; (ii) any entry by Sky
King into any material commitment or transaction which is not in the ordinary
course of business; (iii) any change by Sky King in accounting principles or
methods except insofar as may be required by a change in generally accepted
accounting principles; (iv) any declaration, payment or setting aside for
payment of any dividends or other distributions (whether in cash, stock or
property) in respect of capital stock of Sky King or any Subsidiary, or any
direct or indirect redemption, purchase or any other type of acquisition by Sky
King of any shares of its capital stock or any other securities for an aggregate
sum in excess of $5,000; (v) any agreement by Sky King, whether in writing or
otherwise, to take any action which, if taken prior to the date of this
Agreement, would have made any representation or warranty in this Section 4.1
untrue or incorrect; (vi) any acquisition of the assets of Sky King, other than
in the ordinary course of business and consistent with past practice and in
excess of $5,000 in the aggregate; or (vii) any execution of any agreement with
any executive officer of Sky King providing for his or her employment, or any
increase in the compensation or in severance or termination benefits payable or
to become payable by Sky King to its officers or key employees, or any material
increase in benefits under any collective bargaining agreement or in benefits
under any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
insurance or other plan or arrangement or understanding (whether or not legally
binding) providing benefits to any present or former employee of Sky King. Since
the date of the Financial Statements, there has not been and there is not
threatened, any material adverse change in financial condition, business,
results of operations or prospects of the business or any material physical
damage or loss to any of the properties or assets of the business or to the
premises occupied in connection with the business, whether or not such loss is
covered by insurance.
(q) Investment Intent.
(i) Except with respect to the registration
rights granted to the Sky King Shareholders pursuant to the terms of this
Agreement, the shares of Sub Preferred Stock are not being registered under
the Act on the basis of the statutory exemption provided by Section (4)2
thereof, relating to transactions not involving a public offering, and the
Acquiror's reliance on the statutory exemption thereof is based in part on the
representations contained in this Agreement;
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(ii) The Sky King Shareholders represent (a) that
they have reviewed such quarterly, annual and periodic reports of the Acquiror
(the "Reports") as have been filed with the Securities and Exchange Commission
(the "SEC") and that they have such knowledge and experience in financial and
business matters that they are capable of utilizing the information set forth
therein concerning Acquiror to evaluate the risk of investing in the Acquiror;
(b) that they have been advised that the shares of Sub Preferred Stock or
Acquiror Common Stock to be issued to each of them by the Acquiror constitute
"restricted securities" as defined in Rule 144 promulgated under the Act and
accordingly, have not been and will not be registered under the Act, except as
otherwise provided in this Agreement, and therefore, the Sky King Shareholders
may not be able to sell or otherwise dispose of such shares except if such
shares are subject to an effective registration statement filed with the SEC,
in compliance with Rule 144 or otherwise pursuant to an exemption from
registration under the Act; (c) that the shares of Sub Preferred Stock or
Acquiror Common Stock are being acquired by them for their own benefit and on
their own behalf for investment purposes and not with a view to, or for sale
or resale in connection with, a public offering or distribution thereof; (d)
that the shares of Sub Preferred Stock or Acquiror Common Stock so issued will
not be sold (I) without registration thereof under the Act (unless such shares
are subject to registration or in the opinion of counsel acceptable to the
Acquiror, an exemption from such registration is available), or (II) in
violation of any law; and (e) that the certificate or certificates representing
the shares of Sub Preferred Stock or Acquiror Common Stock to be issued will be
imprinted with a legend in form and substance substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THESE SECURITIES MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF REGISTRATION, OR THE
AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION, UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, BASED ON AN OPINION LETTER OF
COUNSEL FOR THE COMPANY OR A NO-ACTION LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION."
and Acquiror is hereby authorized to notify its transfer agent of the
status of the shares of Sub Preferred Stock or Acquiror Common Stock, and to
take such other action including, but not limited to, the placing of a
"stop-transfer" order on the transfer agent's books and records to ensure
compliance with the foregoing.
(iii) Sky King and the Sky King Shareholders have
been afforded the opportunity to review and are familiar with the Reports and
have based their decision to invest solely on the information contained therein,
and the information contained within this Agreement and the associated exhibits
and schedules, and have not been furnished with any other literature, prospectus
or other information except as included in the Reports or this Agreement;
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(iv) The Sky King Shareholders are able to bear
the economic risks of an investment in the shares of Sub Preferred Stock or
Acquiror Common Stock and that their overall commitment to their investments
which are not readily marketable is not disproportionate to their net worth; and
(v) The Sky King Shareholders understand that no
federal or state agency has approved or disapproved the shares of Sub Preferred
Stock or Acquiror Common Stock, passed upon or endorsed the merits of the
transfer of such shares set forth within this Agreement or made any finding
or determination as to the fairness of such shares for investment.
(r) Statements And Other Documents Not Misleading.
Neither this Agreement, including all exhibits and schedules and other
closing documents, nor any other financial statement, document or other
instrument heretofore or hereafter furnished by Sky King or the Sky King
Shareholders to Acquiror or Sub in connection with the Merger or the other
transactions contemplated hereby, contains or will contain any untrue statement
of any material fact or omit or will omit to state any material fact required
to be stated in order to make such statement, information, document or other
instruments, in light of the circumstances in which they are made, not
misleading. There is no fact known to Sky King or the Sky King Shareholders
which may have a Material Adverse Effect on the business, prospects, financial
condition or results of operations of Sky King or of any of its properties or
assets which has not been set forth in this Agreement as an exhibit or schedule
hereto.
4.2 Representations and Warranties of Acquiror and the Sub.
As a material inducement to Sky King and the Sky King
Shareholders to execute this Agreement and to consummate the Merger and the
other transactions contemplated hereby, Acquiror and Sub hereby make the
following representations and warranties to Sky King and the Sky King
Shareholders.
(a) Corporate Existence and Power. Acquiror is a
corporation duly incorporated, validly existing and in good standing under
the laws of Bermuda, and the Sub is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. Each of
Acquiror and the Sub has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as
now conducted, except where the failure to have any of the foregoing would not
have a Material Adverse Effect on their respective businesses. Each of Acquiror
and the Sub is duly qualified to do business and is in good standing in each
jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. Acquiror
owns all of the issued and outstanding shares of capital stock of the Sub, and
there are no other rights orobligations of Acquiror or the Sub to issue any
other shares of capital stock of the Sub. The Sub has conducted no business
activity other than in connection with the transactions contemplated by this
Agreement. True, complete and correct copies of the Memorandum of Association
and Byelaws of Acquiror and the Articles of Incorporation and Bylaws of Sub,
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each as amended to date, are attached hereto as Schedule 4.2(a) and are made a
part hereof.
(b) Due Authorization. This Agreement has been duly
authorized, executed and delivered by Acquiror and the Sub and constitutes a
valid and binding agreement of Acquiror and the Sub, enforceable in accordance
with its terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, moratorium, and other similar laws relating to, limiting
or affecting the enforcement of creditors' rights generally or by the
application of equitable principles. As of the Closing all corporate action on
the part of Acquiror and the Sub required under applicable law in order to
consummate the Merger will have occurred.
(c) No Contravention. Neither the execution and delivery
of the Agreement nor the consummation of the transactions contemplated thereby
will: (i) conflict with or result in any violation of any provision of the
Memorandum of Association or Byelaws of Acquiror or the Articles of
Incorporation or Bylaws of Sub or (ii) conflict with or result in any violation
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of an right or
obligation or to loss or a benefit under, any provision of the Memorandum of
Association or Byelaws of Acquiror or the Articles of Incorporation or Bylaws of
Sub or any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Acquiror or its properties or assets, or result in the creation or imposition of
any Encumbrance on any asset of Acquiror, except, only as to clause (ii) above,
such as is not reasonably likely to have a Material Adverse Effect or prevent
Acquiror or Sub from consummating the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, is
required by or with respect to Acquiror or the Sub in connection with the
execution and delivery of this Agreement by either of them or the consummation
by either of them of the transactions contemplated hereby, except the filing of
the Certificate of Merger with the Secretary of the State of Delaware.
(d) Capitalization. As of the Closing, Acquiror shall
have outstanding no more than that number of shares of common stock equal to
3,700,000 less the number of Surrendered Shares (as such term is defined in
Section 5.15(b)(i)(A) below), if any, in addition to those shares discussed at
Section 5.1, as well as no more than 750,000 Warrants identified upon Schedule
4.2(d)(i). All outstanding shares of capital stock of Acquiror have been duly
authorized and validly issued and are fully paid and nonassessable and free of
preemptive rights. The shares of Sub Preferred Stock to be issued in the Merger
will be duly authorized, validly issued, fully paid and nonassessable. Except as
otherwise set forth herein, there will be outstanding (A) no shares of capital
stock or other voting securities of Acquiror, (B) no securities of Acquiror
convertible into or exchangeable for shares of capital stock or voting
securities of Acquiror and (C) no options, warrants or other rights to acquire
from Acquiror, and no obligation of Acquiror to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of Acquiror and there are no agreements or commitments, to do
any of the foregoing.
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(e) SEC Filings.
(i) Upon request Acquiror will make available
to Sky King copies of its periodic reports filed pursuant to the Securities
Exchange Act of 1934, as well as its proxy or information statements relating
to meetings of, or actions taken without a meeting by the stockholders of
Acquiror held since 1994 and all of its other reports, statements, schedules and
registration statements filed with the SEC since inception, other than
pre-effective amendments to such registration statements. The documents
referred to in the preceding sentence are sometimes referred to herein as the
"SEC Documents."
(ii) As of its filing date, to the knowledge of
Acquiror, each such SEC Documents did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(f) Financial Statements. The financial statements
contained within the SEC Documents fairly present in all material respects the
results of operations, retained earnings and changes in financial position, as
the case may be, of the Acquiror at and for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which will not be material to the Acquiror, taken as a whole, in
amount or effect), in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may be
noted therein. The books and records, financial and other, of the Acquiror are,
to the knowledge of the Acquiror, in all material respects complete and correct
and have been maintained in accordance with good business and accounting
practices.
(g) No Violations. Except as described on Schedule 4.2(g)
hereto, neither Acquiror or any of its Subsidiaries has received any written
notice from any governmental entity having jurisdiction over it or over any of
the real property leased by it of any violation by Acquiror or any of its
Subsidiaries of any law, regulation or ordinance relating to zoning,
environmental matters, local building or fire codes or similar matters relating
to any of the real property leased by Acquiror or any of its Subsidiaries.
(h) No Contingent Liabilities. Except as set forth in the
financial statements referred to in Section 4.2(f) above, as of the Closing,
Acquiror and each of its Subsidiaries shall have no liabilities, whether related
to tax or non-tax matters, known or unknown, due or not yet due, liquidated or
unliquidated, fixed or contingent, determined or determinable in amount or
otherwise and, to the knowledge of Acquiror after due inquiry, there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability except as and to the extent reflected on:
(i) the SEC Documents; (ii) this Agreement or any Schedule or Exhibit thereto;
or (iii) liabilities incurred since the date of the most recent SEC Document
solely in the ordinary course of business (or in connection with the
transactions contemplated hereby) and as accurately reflected on the books and
records of Acquiror; provided however, that no liability shall be incurred from
and after the date hereof which is in contravention of any negative covenant
contained herein and applicable to Acquiror.
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(i) Litigation. Except as set forth in any of the SEC
Documents or Schedule 4.2(i), there is no action, suit, investigation or
proceeding (or, to the knowledge of Acquiror, any basis therefor) pending
against, or to the knowledge of Acquiror threatened, against or affecting
Acquiror, any of its Subsidiaries or any of their properties before any court or
arbitrator or any governmental body, agency or official that (i) if adversely
determined against Acquiror, would have a Material Adverse Effect on Acquiror
and its Subsidiaries, taken as a whole, or (ii) in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the Merger or any of the
other transactions contemplated by the Agreement.
(j) Taxes.
(i) Acquiror and each of its Subsidiaries have
timely filed all tax returns required to be filed by them, and will timely
file when due all tax returns required to be filed by them between the date
hereof and the Closing. Acquiror and each of its Subsidiaries have paid in a
timely fashion or will pay when due in a timely fashion, all taxes required to
be paid in respect of the periods covered by such returns, and the books and the
financial statements of Acquiror and each of its Subsidiaries reflect, or will
reflect, adequate reserves for all taxes payable by Acquiror and each of its
Subsidiaries which have been, or will be, accrued but are not yet due. Acquiror
and each of its Subsidiaries are not delinquent in the payment of any material
tax, assessment or governmental charge. No deficiencies for any taxes have been
proposed, asserted or assessed against Acquiror and each of its Subsidiaries,
Acquiror and each of its Subsidiaries are not aware of any facts which would
constitute the basis for the proposal or assertion of any such deficiency and
there is no action, suit, proceeding, audit or claim now pending, or to
Acquiror's knowledge, threatened against Acquiror and each of its Subsidiaries.
All taxes which Acquiror and each of its Subsidiaries are required by law to
withhold and collect have been duly withheld and collected, and have been timely
paid over to the proper authorities to the extent due and payable. For the
purposes of this Agreement, the term "tax" shall include all federal state,
local and foreign income, property, sales, excise and other taxes of any nature
whatsoever. Neither Acquiror or any of its Subsidiaries nor any member of any
affiliated or combined group of which Acquiror is or has been a member has
granted any extension or waiver of the limitation period applicable to any tax
returns. There are no Encumbrances for taxes upon the assets of Acquiror or any
of its Subsidiaries, except Encumbrances for current taxes not yet due. There
are no tax sharing or tax allocation agreements to which Acquiror or any of its
Subsidiaries is now or ever has been a party. Acquiror will not be required
under Section 481(c) of the Code, to include any material adjustment in
taxable income for any period subsequent to the Merger. Neither Acquiror nor
any of its Subsidiaries (A) has been a member of an affiliated group filing a
consolidated federal income tax return (other than a group the common parent
of which was Acquiror or a Subsidiary of Acquiror) and (b) has no liability
for the taxes of any person (other than Acquiror or any of its Subsidiaries)
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract or otherwise.
(ii) For federal income tax purposes, the Merger
shall constitute a tax-free reorganization under the provisions of Section 368
of the Code, provided, however, that the Sky King Shareholders recognize and
acknowledge that receipt of shares of Acquiror Common Stock (rather than Sub
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Preferred or Common Stock) will not qualify as a tax-free reorganization at the
time of the receipt of such shares of Acquiror Common Stock.
(k) Compliance with Laws. To the best knowledge of
Acquiror and Sub, neither Acquiror nor any of its Subsidiaries is in violation
of, or has violated, any applicable provisions of any laws, statutes,
ordinances or regulations, which taken as a whole would be reasonably likely
to have a Material Adverse Effect on Acquiror and its Subsidiaries, or which
would constitute a felony. No such laws, statutes, ordinances or regulations
require or are reasonably expected to require capital expenditures that are
reasonably likely to have a Material Adverse Effect on Acquiror and its
Subsidiaries, taken as a whole. Without limiting the generality of the
foregoing, Acquiror and Sub have all licenses, permits, certificates and
authorizations needed or required for the conduct of Acquiror's or Sub's
business as presently conducted and for the use of its properties and premises
occupied by it, except where the failure to obtain a license, permit,
certificate or authorization would not have a Material Adverse Effect.
(l) Investment Banking Fees. Acquiror has retained and
agreed upon the Closing hereof to pay an investment banking firm a stock fee
in the amount equal to 5.00% of the Merger Consideration, or 500,000 shares of
Acquiror Common Stock, for arranging this transaction.
(m) Statements and Other Documents Not Misleading.
Neither this Agreement, including all exhibits and schedules and other
closing documents, nor any other financial statement, document or other
instrument heretofore or hereafter furnished by Acquiror or Sub to Sky King
and the Sky King Shareholders in connection with the Merger or the other
transactions contemplated hereby, or any information furnished by Acquiror and
Sub taken as a whole contains or will contain any untrue statement of any
material fact or omit or will omit to state any material fact required to be
stated in order to make such statement, information, document or other
instruments, in light of the circumstances in which they are made, not
misleading. There is no fact known to Acquiror and Sub taken as a whole which
may have a Material Adverse Effect on the business, prospects, financial
condition or results of operations of Acquiror and Sub taken as a whole or of
any of their properties or assets which has not been set forth in this Agreement
as an exhibit or schedule hereto.
ARTICLE V
AGREEMENTS OF THE PARTIES
5.1 Issuance of Securities of Acquiror prior to the Closing.
Between the date hereof and the Closing, Acquiror contemplates
that it may be caused to issue up to 5,300,000 additional shares of Acquiror
Common Stock in connection with certain acquisition transaction (the
"Acquisition Transaction") that is presently being evaluated or are under
contract as set forth in Section 5.15. No investment banker, broker, finder or
other similar intermediary has been retained by, or is authorized by, Acquiror
to act on its behalf who might be entitled to any fee or commission from
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Acquiror or any of its affiliates in connection with the Acquisition Transaction
or the transactions contemplated thereby.
5.2 Anticipated Domestication of Acquiror; Possible Follow-on
Merger.
(a) Acquiror shall use diligent efforts to domesticate by
merger or other permissible means into Sub within one (1) year after the
Closing. Upon Acquiror's domestication into Sub, the Series A Stock will
automatically convert into shares of Sub Common Stock such that the holders
thereof will at that time own the same percentage of outstanding Sub Common
Stock as they would have owned in Acquiror had they originally received an
aggregate of 5,500,000 shares of Acquiror Common Stock upon the Closing, and the
Series B Stock will automatically convert into shares of Sub Common Stock such
that the holders thereof will at that time own the same percentage of
outstanding Sub Common Stock as they would have owned in Acquiror had they
originally received an aggregate of 4,500,000 shares of Acquiror Common Stock
upon the Closing. Upon the domestication of Acquiror into Sub, the number of
shares of common stock resulting from the conversion of the Escrow Shares by the
Escrow Agent as of such conversion date shall be held in escrow as Escrow Shares
pursuant to the terms of the Escrow Agreement.
(b) If the domestication of Acquiror described in Section
5.2(a) above does not occur within one (1) year from the Effective Date, the
Series A Stock may, at the discretion of the holders thereof, be converted into,
or exchangeable for, an aggregate of 5,500,000 shares of Acquiror Common Stock,
and the Series B Stock may, at the discretion of the holders thereof, be
converted into, or exchangeable for, an aggregate of 4,500,000 shares of
Acquiror Common Stock. Upon such discretionary conversion, the number of shares
of common stock resulting from the conversion of the Escrow Shares as of such
conversion date shall be held in escrow by the Escrow Agent as Escrow Shares
pursuant to the terms of the Escrow Agreement.
(c) Acquiror and Sub covenant and agree that as to Sub,
prior to the domestication of Acquiror described in Section 5.2 hereof:
(i) Dividends; Changes in Stock. Sub shall not
and shall not propose to (a) split, combine or reclassify any of its capital
stock or issue, authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock; or
(b) redeem, repurchase or otherwise acquire any shares of its capital stock or
(c) otherwise change its capitalization.
(ii) Issuance of Securities. Except as
contemplated by this Agreement, Sub shall not sell, issue, pledge, authorize or
propose the sale or issuance of, pledge or purchase or propose the purchase
of, any shares of its capital stock of any class or securities convertible into,
or rights, warrants or options to acquire, any such shares or other convertible
securities.
(iii) Sale of Stock by Acquiror. Acquiror shall
not sell, pledge or authorize or propose the sale, pledge or purchase of, the
shares of common stock of Sub owned by Acquiror prior to the Effective Time.
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(d) Sky King and the Sky King Shareholders acknowledge
that they have been advised that this domestication may not occur until a
Registration Statement on Form S-4 is filed with, and declared effective by, the
SEC.
5.3 Access to Information.
At all times prior to the Closing or the earlier termination
of this Agreement in accordance with the provisions of Article VIII, and in each
case subject to Section 5.4 below, each of the parties hereto shall provide to
the other parties (and the other parties' authorized representatives) full
access during normal business hours and upon reasonable prior notice to the
premises, properties, books, records, assets, liabilities, operations,
contracts, personnel, financial information and other data and information of or
relating to such party (including without limitation all written proprietary and
trade secret information and documents, and other written information and
documents relating to intellectual property rights and matters), and will
cooperate with the other party in conducting its due diligence investigation of
such party.
5.4 Confidentiality; No Solicitation.
(a) Confidentiality of Acquiror-Related Information. With
respect to information concerning Sky King that is made available to Acquiror
pursuant to the terms of this Agreement, Acquiror agrees that, except in
connection with the private placement and other securities purchase agreements
associated therewith, it shall hold such information in strict confidence, shall
not use such information except for the sole purpose of evaluating the Merger
and related transactions and shall not disseminate or disclose any of such
information other than to its directors, officers, employees, shareholders,
affiliates, agents and representatives who need to know such information for the
sole purpose of evaluating the Merger and the related transactions (each of whom
shall be informed in writing by Acquiror of the confidential nature of such
information and directed by Acquiror in writing to treat such information
confidentially). If this Agreement is terminated pursuant to the provisions of
Article VIII, Acquiror shall immediately return all such information, all copies
thereof and all information prepared by Acquiror based upon the same; provided,
however, that one copy of all such material may be retained by Acquiror's
outside legal counsel for purposes only of resolving any disputes under this
Agreement. The above limitations on use, dissemination and disclosure shall not
apply to information that (i) is learned by Acquiror from a third party entitled
to disclose it; (ii) become known publicly other than through Acquiror or any
party who received the same through Acquiror, provided that Acquiror has no
knowledge that the disclosing party was subject to an obligation of
confidentiality; (iii) is required by law or court order to be disclosed by
Acquiror; or (iv) is disclosed with the express prior written consent thereto of
Sky King or the Sky King Shareholders. Acquiror shall undertake all necessary
steps to ensure that the secrecy and confidentiality of such information will be
maintained in accordance with the provisions of this paragraph (a).
Notwithstanding anything contained herein to the contrary, in the event a party
is required by court order or subpoena to disclose information which is
otherwise deemed to be confidential or subject to the confidentiality
obligations hereunder, prior to such disclosure, the disclosing party shall: (i)
promptly notify the non-disclosing party and, if having received a court order
or subpoena, deliver a copy of the same to the non-disclosing party; (ii)
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cooperate with the non-disclosing party, at the expense of the non-disclosing
party in obtaining a protective or similar order with respect to such
information; and (iii) provide only such of the confidential information as the
disclosing party is advised by its counsel is necessary to strictly comply with
such court order or subpoena.
(b) Confidentiality of Sky King-Related Information. With
respect to information concerning Acquiror that is made available to Sky King
and the Sky King Shareholders pursuant to the provisions of this Agreement, Sky
King and the Sky King Shareholders agree that they shall hold such information
in strict confidence, shall not use such information except for the sole purpose
of evaluating the Merger and the related transactions and shall not disseminate
or disclose any of such information other than to their directors, officers,
employees, shareholders, affiliates, agents and representatives who need to know
such information for the sole purpose of evaluating the Merger and the related
transactions (each of whom shall be informed in writing by Sky King or the Sky
King Shareholders of the confidential nature of such information and directed by
such party in writing to treat such information confidentially). If this
Agreement is terminated pursuant to the provisions of Article VIII, Sky King and
the Sky King Shareholders agree to return immediately all such information, all
copies thereof and all information prepared by either of them based upon the
same; provided, however, that one copy of all such material may be retained by
Sky King's outside legal counsel for purposes only of resolving any disputes
under this Agreement. The above limitations on use, dissemination and disclosure
shall not apply to information that (i) is learned by Sky King or the Sky King
Shareholders from a third party entitled to disclose it; (ii) becomes known
publicly other than through Sky King, the Sky King Shareholders or any party who
received the same through Sky King or the Sky King Shareholders, provided that
Sky King or the Sky King Shareholders have no knowledge that the disclosing
party was subject to an obligation of confidentiality; (iii) is required by law
or court order to be disclosed by Sky King; or (iv) is disclosed with the
express prior written consent thereto of Acquiror. Sky King or the Sky King
Shareholders agree to undertake all necessary steps to ensure that the secrecy
and confidentiality of such information will be maintained in accordance with
the provisions of this paragraph (b). Notwithstanding any thing contained herein
to the contrary, in the event a party is required by court order or subpoena to
disclose information which is otherwise deemed to be confidential or subject to
the confidentiality obligations hereunder, prior to such disclosure, the
disclosing party shall: (i) promptly notify the non-disclosing party and, if
having received a court order or subpoena, deliver a copy of the same to the
non-disclosing party; (ii) cooperate with the non-disclosing party at the
expense of the non-disclosing party in obtaining a protective or similar order
with respect to such information; and (iii) provide only such of the
confidential information as the disclosing party is advised by its counsel is
necessary to strictly comply with such court order or subpoena.
(c) Nondisclosure. Neither Sky King, the Sky King
Shareholders, the Sub nor Acquiror shall disclose to the public or to any third
party the existence of this Agreement or the transactions contemplated hereby or
any other material non-public information concerning or relating to the other
party hereto, other than with the express prior written consent of the other
parties hereto, except as may be required by law or court order or to enforce
the rights of such disclosing party under this Agreement, in which event the
contents of any proposed disclosure shall be discussed with the other party
before release; provided, however, that notwithstanding anything to the contrary
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contained in this Agreement, any party hereto may disclose this Agreement to any
of its directors, officers, employees, shareholders, affiliates, agents and
representatives who need to know such information for the sole purpose of
evaluating the Merger, and to any party whose consent is required in connection
with the Merger or this Agreement. The parties anticipate issuing a mutually
acceptable, joint press release announcing the execution of this Agreement and
the consummation of the Merger.
(d) No Solicitation. In consideration of the substantial
expenditure of time, effort and money to be undertaken by Acquiror in connection
with the transactions contemplated by this Agreement, neither the Sky King
Shareholders, Sky King nor any affiliate thereof will, prior to the earlier of
the Closing or ninety (90) days after the termination of this Agreement,
directly or indirectly, through any officer, director, agent or otherwise: (i)
solicit, initiate or encourage the submission of inquiries, proposals or offers
from any person or entity relating to any acquisition or purchase of assets of
or any equity interest in Sky King or any affiliate thereof or any tender offer
(including a self-tender offer), exchange offer, merger, consolidation, business
combination, sale of a substantial amount of assets or sale of securities,
liquidation, dissolution or similar transaction involving Sky King or its
affiliates (a "Transaction Proposal"); (b) enter into or participate in any
discussions or negotiations regarding a Transaction Proposal, or furnish to any
other person or entity any information with respect to the business, properties
or assets of Sky King or its affiliates in connection with a Transaction
Proposal; or (c) otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage any effort or attempt by any other person to do or
seek a Transaction Proposal. Sky King or the Sky King Shareholders shall
promptly notify Acquiror if any such proposal or offer, or any inquiry or
contact with any person or entity with respect thereto is made.
5.5 Interim Operations.
During the period from the date of this Agreement and
continuing until the Closing:
(a) Interim Operations of Sky King. Sky King agrees
(except as expressly contemplated by this Agreement, including any Exhibits and
Schedules hereto, or to the extent that Acquiror shall otherwise consent in
writing) that as to Sky King:
(i) Ordinary Course. Sky King shall carry on
its business in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted and, to the extent consistent with such
business, use all reasonable efforts to preserve intact its present business
organization, keep available the services of its present officers and employees
and preserve its relationships with customers, suppliers and others having
business dealings with it;
(ii) Dividends; Changes in Stock. Sky King shall
not and shall not propose to (a) declare, set aside or pay any dividend, on,
or make other distributions in respect of, any of its capital stock, (b) split,
combine or reclassify any of its capital stock or issue, authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock (c) redeem, repurchase or otherwise
acquire any shares of its capital stock or (d) otherwise change its
capitalization.
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(iii) Issuance of Securities. Except as
contemplated by this Agreement, Sky King shall not sell, issue, pledge,
authorize or propose the sale or issuance of, pledge or purchase or propose the
purchase of, any shares of its capital stock of any class or securities
convertible into, or rights, warrants or options to acquire, any such shares or
other convertible securities.
(iv) Governing Documents. Sky King shall not
amend its certificate of incorporation or its Bylaws.
(v) No Dispositions. Sky King shall not sell,
lease, pledge, encumber or otherwise dispose of or agree to sell, lease, pledge,
encumber or otherwise dispose of, any of its assets that are material to its
business or any other assets except in the ordinary course of business
consistent with prior practice.
(vi) Indebtedness. Sky King shall not incur any
indebtedness for borrowed money or guarantee any such indebtedness or issue or
sell any debt securities of Sky King or guarantee any debt securities of others
other than in the ordinary course of business consistent with prior practice.
(vii) Benefit Plans; Etc. Sky King shall not
adopt or amend in any material respect any collective bargaining agreement or
Employee Benefit Plan (as defined herein).
(viii) Executive Compensation. Sky King shall not
grant to any executive officer any increase in compensation or in severance or
termination pay, or enter into any employment agreement with any executive
officer.
(ix) Acquisitions. Except as set forth on
Schedule 5.5(a)(ix), Sky King shall not acquire (by merger, consolidation or
acquisition of stock or assets or otherwise) any corporation, partnership
or other business organization or subdivision thereof, or make any investment
by either purchase of stock or securities, contributions to capital, property
transfer or, except in the ordinary course of business, purchase of any property
or assets, of any other individual or entity.
(x) Tax Elections. Sky King shall not make any
material tax election or settle or compromise any material federal, state, local
or foreign tax liability.
(xi) Waivers and Releases. Sky King shall not
waive, release, grant or transfer any rights of material value or modify or
change in any material respect any Corporation Agreement other than in the
ordinary course of business and consistent with past practice.
(xii) Other Actions. Sky King shall not enter
into any agreement or arrangement to do any of the foregoing. Sky King shall
not take any action, or fail to take any action, that is reasonably likely to
result in any of the representations and warranties of Sky King set forth
in this Agreement becoming untrue in any material respect.
(b) Interim Operations of Acquiror and Sub. Acquiror and
Sub jointly and severally agree (except as expressly contemplated by this
Agreement, including any Exhibits and Schedules hereto, or to the extent that
Sky King and the Sky King Shareholders shall otherwise consent in writing or
to the extent required to permit Acquiror to meet its obligations under Section
5) that:
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(i) Ordinary Course. Acquiror shall carry on
its business in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted and, to the extent consistent with such
business, use all reasonable efforts to preserve intact its present business
organization (provided that such obligation shall not relate to the officers
and employees of Acquiror or any of its Subsidiaries including the Sub) and
preserve its relationships with customers, suppliers and others having business
dealings with it. The Sub shall conduct no business activity other than in
connection with the transactions contemplated by this Agreement in connection
with the Merger.
(ii) Dividends; Changes in Stock. Neither
Acquiror nor the Sub shall (and shall not propose to) (a) declare or pay any
dividend, on, or make other distributions in respect of, any of its capital
stock, (b) split, combine or reclassify any of its capital stock or issue,
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, (c) repurchase
or otherwise acquire any shares of its capital stock or (d) otherwise change its
capitalization.
(iii) Issuance of Securities. Except as provided
for in Article V, neither Acquiror nor the Sub shall sell, issue, pledge,
authorize or propose the sale or issuance of, pledge or purchase or propose the
purchase of, any shares of its capital stock of any class or securities
convertible into, or rights, warrants or options to acquire, any such shares
or other convertible securities.
(iv) No Dispositions. Acquiror shall not sell,
lease, pledge, encumber or otherwise dispose of, or agree to sell, lease,
pledge, encumber or otherwise dispose of, any of its assets that are material to
its business, or any other assets except in the ordinary course of business
consistent with prior practice.
(v) Indebtedness. Neither Acquiror nor the Sub
shall incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others other than in the ordinary course of business consistent
with prior practice.
(vi) Benefit Plans, Etc. Neither Acquiror nor
the Sub shall adopt or amend in any material respect any collective bargaining
agreement or Employee Benefit Plan (as defined herein).
(vii) Executive Compensation. Neither Acquiror
nor the Sub shall grant to any executive officer any increase in compensation,
or enter into any employment agreement with any executive officer, other than
any of the same the material terms of which have been disclosed to Sky King on
or before the date hereof. Other Actions. Neither Acquiror nor the Sub shall
enter into any agreement or arrangement to do any of the foregoing. Neither
Acquiror nor the Sub shall take any action, or fail to take any action, that is
reasonably likely to result in any of their representations and warranties set
forth in this Agreement becoming untrue in any material respect.
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5.6 Consents.
Acquiror, Sub, Sky King and the Sky King Shareholders shall
cooperate and use their best efforts to obtain, prior to the Closing, all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts as are necessary for
the consummation of the transactions contemplated by this Agreement; provided,
however, that no loan agreement or contract for borrowed monies shall be repaid
and no contract shall be amended materially to increase the amount payable
thereunder or otherwise to be materially more burdensome in order to obtain any
such consent, approval or authorization without first obtaining the written
approval of the other parties hereto.
5.7 Filings.
Acquiror, the Sub, Sky King and the Sky King Shareholders
shall, as promptly as practicable, make any required filing, and any other
required submissions, under any law, statute, order rule or regulation with
respect to the Merger and the related transactions and shall cooperate with each
other with respect to the foregoing and any shareholder of the Acquiror who has
an obligation to file a Schedule 13D shall do so prior to the Closing.
5.8 All Reasonable Efforts.
Subject to the terms and conditions of this Agreement and to
the fiduciary duties and obligations of the boards of directors of the parties
hereto to their respective shareholders, as advised by their counsel, each of
the parties to this Agreement shall use all reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations, or to remove any
injunctions or other impediments or delays, legal or otherwise, as soon as
reasonable practicable, to consummate the Merger and the other transactions
contemplated by this Agreement.
5.9 Public Announcements.
Acquiror, the Sub, Sky King and the Sky King Shareholders
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to the Merger, this Agreement or the
other transactions contemplated by this Agreement and shall not issue any other
press release or make any other public statement without prior consultation with
the other parties, except as may be required by law or, with respect to
Acquiror, by obligations pursuant to any listing agreement with an national
securities exchange.
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5.10 Notification of Certain Matters.
Sky King and the Sky King Shareholders shall give prompt
notice to Acquiror, and Acquiror and the Sub shall give prompt notice to Sky
King and the Sky King Shareholders, of (a) the occurrence or non-occurrence of
any event, the occurrence or non-occurrence of which would cause any of their
representations or warranties in this Agreement to be untrue or inaccurate in
any material respect, as to Sky King and the Sky King Shareholders, at or prior
to the Closing, and, as to Acquiror and Sub, as of the Closing and (b) any
material failure of Sky King and the Sky King Shareholders, on the one hand, or
Acquiror or the Sub, on the other hand, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
them under this Agreement; provided, however, that the delivery of any notice
pursuant to this Section shall not limit or otherwise affect the remedies
available to the party receiving such notice under this Agreement as expressly
provided in this Agreement.
5.11 Expenses.
Except as otherwise expressly provided herein, all costs and
expenses incurred in connection with the Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated.
5.12 Registration Rights.
(a) Registrable Securities
(i) Promptly after the domestication of
Acquiror into a Delaware corporation by virtue of merging with and into Sub
and the corresponding conversion of Sub Preferred Stock into shares of Sub
Common Stock, Sub shall use its best efforts to prepare and file with the SEC,
and use its best efforts to have declared effective, a registration statement
(the "Registration Statement") registering under the Act and the securities
statutes and regulations of certain states as provided herein, for resale at
market, the shares of Sub Common Stock then to be held by the Sky King
Shareholders (the "Registrable Securities") and thereafter, subject to the terms
and conditions of this Agreement, Sub shall use its best efforts to keep such
Registration Statement effective for a period of three (3) years. The
Registration Statement may also include other securities of Sub, whether on
behalf of Sub or certain other selling stockholders. Restrictions on the resale
of the Registrable Securities are identified at Section 5.12(j). From time to
time, Sub shall amend or supplement such Registration Statement and the
prospectus contained therein as and to the extent necessary to comply with the
Act and any applicable state securities statute or regulation.
(ii) In the event that the Acquiror is not
domesticated by merger into the Sub within one year from the Effective Date,
and if thereafter the holders of Sub Preferred Stock elect to exchange such
shares of Sub Preferred Stock for shares of Acquiror Common Stock, in the manner
and to the extent provided for in the Series A and Series B Certificates of
Designation, then the Acquiror shall register the resale of the shares of
Acquiror Common Stock received by the holders of the Sub Preferred Stock in
the manner discussed in this Section 5.12 as if the obligations of Sub were
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those of Acquiror. In that event, the terms "Registrable Securities" and
"Sub Common Stock" as used in this Section 5.12 shall refer to those shares of
Acquiror Common Stock received by the holders of Sub Preferred Stock.
(b) Sub shall pay all expenses of the Sub relating to
such registration, other than brokerage or underwriting discounts or
commissions, if any.
(c) It shall be a condition precedent to the obligations
of Sub to take any action pursuant to this Section 5.12 that each of the holders
of Registrable Securities whose shares are so to be registered shall furnish to
Sub in a timely fashion such information regarding such holder, such holder's
Registrable Securities and such other factual information as shall be reasonably
required to effect the registration of such shares.
(d) To the maximum extent permitted by law, Sub shall
indemnify and hold harmless each such holder of Registrable Securities from and
against any and all claims, damages or liabilities, joint or several, to which
such holder becomes subject under the Act or under any other statute or at
common law or otherwise, and, except as hereinafter provided, will reimburse
each such holder for any legal or other expenses reasonably incurred by such
holder in connection with investigating or defending any actions, whether or not
resulting in any liability, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement, in any preliminary or amended preliminary prospectus or in the
prospectus (or the registration statement or prospectus as from time to time
amended or supplement by Sub) or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statement therein not misleading in the
circumstances in which they were made, unless such untrue preliminary or amended
preliminary prospectus or prospectus in reliance upon and in conformity with
information furnished in writing to Sub in connection therewith by such holder
expressly for use therein. Promptly after receipt by any such holder of notice
of the commencement of any action in respect of which indemnity may be sought
against Sub, such holder shall notify Sub in writing of the commencement
thereof, and, subject to the provisions of this Section 5.12, Sub shall assume
the defense of such action (including the employment of counsel, who shall be
counsel reasonably satisfactory to such holder), and the payment of expenses
insofar as such action shall relate to any alleged liability in respect of which
indemnity may be sought against Sub. Sub shall not be liable to indemnify any
such holder for any settlement of any such action effected with Sub's prior
written consent. Sub shall not, except with the approval of each party being
indemnified under this Section 5.12, consent to entry of any judgment or enter
into any settlement of any claim or litigation in connection with which
provisions of this Section 5.12 have been applied which does not include an
unconditional term thereof the giving by such claimant or plaintiff to the
parties being so indemnified of a release from all liability in respect to such
claim or litigation.
(e) Each holder whose shares of Registrable Securities
are registered pursuant to the provisions of this Section 5.12 shall indemnify
and hold harmless Sub, each of its directors and each of its officers from and
against any and all claims, damages or liabilities, joint or several, to which
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they or any of them may become subject under the Act or under any other statute
or at common law or otherwise, and, except as hereinafter provided, will
reimburse Sub and each director and officer for any legal or other expenses
reasonably incurred by them or any of them in connection with investigating or
defending any actions, whether or not resulting in any liability, insofar as
such losses, claims, damages, expenses, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the registration statement, in any preliminary or amended
preliminary prospectus or in the prospectus (or the registration statement or
prospectus as from time to time amended or supplemented) or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading in the circumstances in which they were made, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with information furnished in writing to Sub in connection therewith
by such holder expressly for use therein. Promptly after receipt of notice of
the commencement of any action in respect of which indemnity may be sought
against such holder, Sub shall notify such holder in writing of the commencement
thereof, and such holder shall, subject to the provisions of this Section 5.12,
assume the defense of such action (including the employment of counsel, who
shall be counsel reasonably satisfactory to Sub) and the payment of expenses
insofar as such action shall relate to any alleged liability in respect of which
indemnity may be sought against such holder. Such holder shall not be liable to
indemnify Sub, any director, officer or other person for any settlement of any
such action effected without such holder's consent. Such holder shall not,
except with the approval of the parties being indemnified under this Section
5.12, consent to entry of any judgment or enter into any settlement of any claim
or litigation in connection with which provision of this Section 5.12 have been
applied which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to the parties being so indemnified of a release from
all liability in respect to such claim or litigation. The liability of any such
holder under this Section 5.12 shall be limited to the aggregate price at which
such holder's shares of Sub Common Stock is sold.
(f) In connection with its obligations to register the
Registrable Securities as provided in this Section 5.12, Sub shall have no
obligation: (i) to assist or cooperate in the offering or disposition of such
shares; (ii) except as expressly provided in this Section 5.12, to indemnify or
hold harmless the holders of such securities being registered or any underwriter
designated by such holders; (iii) to obtain a commitment from an underwriter
relative to the sale of such shares; or (iv) to include such Registrable
Securities within an underwritten offering of Sub conducted on a firm basis.
(g) If in the opinion of a lead or managing underwriter
retained by Sub to conduct an underwriting on a firm basis, the resale of such
Registrable Securities covered by the registration statement would have an
adverse effect upon the completion of an underwritten sale of securities, on
behalf of Sub, then, in that event, the holders of the Registrable Securities to
be included in such registration statement do hereby agree to the restrictions
upon resale requested by a managing underwriter.
(h) In connection with its obligations to register the
Registrable Securities as provided in this Section 5.12, Sub shall also:
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(i) furnish to each holder of shares of
Registrable Securities that are registered or to be registered pursuant to the
provisions of this Section 5.12, such copies of each preliminary and final
prospectus and any and all supplements and such other documents as such holder
may reasonably request to facilitate the public offering of the shares of
Registrable Securities;
(ii) use its best efforts to register or qualify
such Registrable Securities covered by such registration statement under the
applicable securities or "Blue Sky" laws of such jurisdiction in the United
States as such holder may reasonably request (not to exceed an aggregate
of 10 such jurisdictions); provided, however, that Acquiror shall not be
obligated to qualify to do business in any jurisdiction where it is not then
so qualified or to take any action that would subject it to the service of
process in suits other than those arising out of the offer or sale of the
securities covered by the registration statement in any jurisdiction where it
is not then so subject; and
(iii) furnish to each such holder upon request a
copy of all documents filed and all correspondence from and to the SEC in
connection with any such offering.
(i) The registration and other rights granted to the
holders of Registrable Securities in this Section 5.12 may not be assigned or
transferred by such holder without the prior written consent of Sub thereto.
(j) The Registrable Securities shall be subject to the
following restrictions upon resale:
(i) With respect to Sky King Shareholders other
than principal shareholders of Sky King (over 10% shareholders) or individuals
who become directors or officers of Acquiror or Sub, resale shall be limited to:
25% of the holder's Sub Common Stock no earlier than six (6) months following
the Closing; an additional 25% of the holder's Sub Common Stock no earlier than
twelve (12) months following the Closing; and the remaining 50% of the holder's
Sub Common Stock no earlier than eighteen (18) months following the Closing.
(ii) With respect to all principal (over 10%)
shareholders of Sky King and individuals who become directors or officers of
Acquiror or Sub, no resales shall commence until eighteen (18) months after the
Closing.
5.13 Documents at Closing.
Each party to this Agreement agrees to execute and deliver at
the Closing those documents identified in Section 2.2 which are required to be
executed and delivered by such party.
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5.14 Prohibition on Trading in Acquiror and Sub Stock.
Sky King and the Sky King Shareholders acknowledge that the
United States securities laws prohibit any person who has received material
non-public information concerning the matters which are the subject matter of
this Agreement from purchasing or selling the securities of the Acquiror or Sub,
or from communicating such information to any person under circumstances in
which it is reasonably foreseeable that such person is likely to purchase or
sell securities of the Acquiror or Sub. Accordingly, the Sky King Shareholders
agree that they will not purchase or sell any securities of the Acquiror or Sub,
or communicate such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell
securities of the Acquiror or Sub, until no earlier than 72 hours following the
dissemination of a Current Report on Form 8-K to the SEC announcing the Closing
pursuant to this Agreement.
5.15 Anticipated Acquisition of the Principal Assets of PortaCom
Wireless, Inc.
(a) Acquiror has entered into an Asset Purchase Agreement
with PortaCom Wireless, Inc. ("PortaCom") to purchase from PortaCom all of its
interest in and to 2,000,000 shares of the common stock and 4,000,000 warrants
of Metromedia Asia Corporation (the "PortaCom Transaction") in consideration for
5,300,000 shares of Acquiror Common Stock and up to $700,000 in immediately
available funds. A copy of the Asset Purchase Agreement shall be attached as an
Exhibit to this Agreement. Acquiror will continue to take whatever reasonable
measures are necessary to complete the PortaCom Transaction. Sky King has been
advised that there can be no assurances that the PortaCom Transaction will be
completed timely, if at all, since a closing thereunder is dependent upon
PortaCom shareholder and regulatory approvals, as well as securing certain
waivers from Metromedia Asia Corporation ("MAC") permitting transfer of the MAC
shares and warrants.
(b) In connection with the PortaCom Transaction, Acquiror
has agreed to advance amounts up to $700,000 to PortaCom (the "PortaCom
Advances") to be applied by PortaCom against certain of its outstanding
indebtedness. Towards that end, as of the date of the Closing hereof,
Acquiror must have funded at least $300,000 of the PortaCom Advances. In
recognition of the possibility that Acquiror may need to fund up to $400,000 of
the PortaCom Advances after the Closing hereof, the parties hereto agree as
follows:
(i) In the event that on the date of the
Closing, Acquiror has not advanced all of the PortaCom Advances to PortaCom,
then:
(A) On or before the Closing, one or
more shareholders of Acquiror shall voluntarily surrender to Acquiror, without
payment therefor, that number of shares of Acquiror Common Stock (the
"Surrendered Shares") valued at the amount of the remainder of the PortaCom
Advances (the "Remaining PortaCom Advances"). For the purposes of this
paragraph, the shares of Acquiror Common Stock shall be valued at $3.00 per
share; and
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(B) From the date of the Closing and
until the date of the closing of the PortaCom Transaction, Acquiror shall use
diligent efforts to sell the Surrendered Shares in one or more private
placement transactions (the "Private Placement Transactions") in order to, and
only to the extent required to, secure cash proceeds sufficient to satisfy the
obligation to advance the Remaining PortaCom Advances to PortaCom.
(1) If and to the extent that
Acquiror fails to receive the entire amount of the Remaining PortaCom Advances
through the Private Placement Transactions by the date of the closing of the
PortaCom Transaction, then Acquiror shall make any such remaining payment out
of its then-existing cash assets. Thereafter, Acquiror shall be entitled to sell
any remaining Surrendered Shares to reimburse itself for funds expended in
connection with the payment of the Remaining PortaCom Advances or retain any
remaining Surrendered Shares in its treasury.
(2) In the event that Acquiror
receives through the Private Placement Transactions more than the amount of
the Remaining PortaCom Advances, then Acquiror shall deliver to the former
holder(s) of the Surrendered Shares (in the proportion of their shares so
surrendered), any such excess amount.
(3) In the event that Acquiror
raises sufficient funds from the Private Placement Transactions to pay or
advance the entire amount of the Remaining PortaCom Advances before all of
the Surrendered Shares are sold through the Private Placement Transactions,
then Acquiror shall, for no consideration therefor, re-issue to the former
holder(s) of the Surrendered Shares (in the proportion of their shares so
surrendered), any such remaining Surrendered Shares.
5.16 Production of Schedules and Exhibits.
Within fifteen (15) days of the execution of this Agreement
each of the parties hereto shall produce to the other parties, to the extent not
previously done, all of the Schedules and Exhibits required to be produced
pursuant to this Agreement. The Schedules and Exhibits produced subsequent to
the execution of this Agreement, shall be given such force and effect as though
such Schedules and Exhibits were produced upon execution of this Agreement.
5.17 Acknowledgment of Approvals.
By virtue of their respective signatures to this Agreement,
Acquiror, Sub, Sky King and the Sky King Shareholders acknowledge their approval
of this Agreement and their consent to the consummation of the transactions
identified herein.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
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6.1 Conditions to Obligations of Sky King and the Sky King
Shareholders.
The obligations of Sky King and the Sky King Shareholders to
consummate the Merger and the other transactions contemplated to be consummated
by it at the Closing are subject to the satisfaction (or waiver by Sky King and
the Sky King Shareholders) at or prior to the Closing (or at such other time
prior thereto as may be expressly provided in this Agreement) of each of the
following conditions:
(a) Acquiror shall have sold, transferred or otherwise
disposed of all of its present assets and shall as of the Closing have assets
consisting of at least: (i) $1 million in cash or other liquid assets; and (ii)
notes receivable of not less than $4 million with maturities on or before 1
August, 1999.
(b) Acquiror shall have settled and/or satisfied all
outstanding obligations or liabilities so that as of the Closing Acquiror shall
have no obligations or liabilities except trade payables incurred in connection
with this transaction, those in connection with the PortaCom Transaction and
those in the ordinary course, which in the aggregate shall not exceed $250,000.
Notwithstanding anything to the contrary contained in the foregoing sentence, if
Acquiror has not advanced the entire amount of the PortaCom Advances to PortaCom
on or before the date of the Closing, then on or before the date of the Closing,
Acquiror shall have (i) advanced a minimum of $300,000 of the PortaCom Advances
to PortaCom and (ii) satisfied the provisions of Section 5.15(b)(i)(A).
(c) On or before the Closing, Acquiror shall have secured
general releases from each of its directors and officers agreeing to release
Acquiror from any and all claims, liabilities, obligations and demands in
connection with the transactions contemplated by this Agreement.
(d) The representations and warranties of Acquiror and
the Sub set out in this Agreement shall be true and correct in all material
respects at and as of the time of the Closing as though such representations
and warranties were made at and as of such time.
(e) Each of Acquiror and the Sub shall have complied in a
timely manner and in all material respects with the respective covenants and
agreements set out in this Agreement.
(f) The Merger shall have been approved by Sky King and
the Sky King Shareholders in accordance with the provisions of the CBCA.
(g) On or before the Closing, the officers and directors
of Acquiror shall have tendered their immediate resignations from office and
shall have in conjunction therewith reconstituted the Board of Directors to
consist of a maximum of five (5) members and shall have nominated to Acquiror's
Board of Directors two (2) individuals designated by the holders of the Sub
Preferred Stock and the VDC Designee shall have been designated by the
Acquiror's Board of Directors (as such Board was constituted immediately prior
to the Closing).
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(h) Sky King and the Sky King Shareholders shall be
reasonably satisfied that the Merger results in a tax-free reorganization under
Section 368 of the Code.
(i) Acquiror shall enter into Employment Agreements with
each of Frederick A. Moran and James Roberts substantially in accordance with
the terms contained within Exhibit 2.2(b)(xii).
(j) Acquiror shall have executed and delivered the Escrow
Agreement to Sky King and the Escrow Agent.
(k) There shall be delivered to Sky King and the Sky King
Shareholders an officer's certificate of Acquiror and Sub to the effect that all
of the respective representations and warranties of Acquiror and Sub set forth
herein are true and complete in all material respects as of the Closing, and the
Acquiror and Sub have complied in all material respects with their covenants and
agreements set forth herein that are required to be complied with by the
Closing.
(l) Sky King shall have completed prior to the Closing,
to its satisfaction, a due diligence review of the financial condition,
results of operations, properties, assets, liabilities, business and prospects
of Acquiror.
(m) All director, shareholder, lender, lessor and other
parties' consents and approvals, as well as all filings with, and all necessary
consents or approvals of, all federal, state and local governmental authorities
and agencies, as are required under this Agreement, applicable law or any
applicable contract or agreement (other than as contemplated by this Agreement)
to complete the Merger shall have been secured.
(n) No statute, rule, regulation, executive order,
decree, injunction or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or governmental
authority that prohibits or restricts the consummation of the Merger or
the related transactions.
6.2 Conditions to Acquiror's and the Sub's Obligations.
The obligations of Acquiror and the Sub to consummate the
Merger and the other transactions contemplated to be consummated by it at the
Closing are subject to the satisfaction (or waiver by Acquiror) at or prior to
the Closing (or at such other time prior thereto as may be expressly provided in
this Agreement) of each of the following conditions:
(a) On or before the Closing, Sky King shall have secured
general releases from each of its directors, officers, consultants, employees
and shareholders agreeing to: (i) release Sky King, Acquiror and Sub from any
and all claims, liabilities, obligations and demands; (ii) terminate any
employment agreements; and (iii) terminate any shareholder agreements.
36
<PAGE>
(b) On or before the Closing, Sky King shall have secured
the resignation of each of its directors and officers except George Finn who
will remain the President of Sky King.
(c) Acquiror shall have executed employment agreements
with Frederick A. Moran and James Roberts substantially in accordance with the
terms contained within Exhibit 2.2(b)(xii).
(d) No Sky King Shareholder shall have filed with Sky
King, prior to the Sky King shareholder meeting at which a vote is to be taken
with respect to a proposal to approve this Agreement, a written notice of intent
to demand payment for his shares if the proposed action is effectuated, as
required by Section 33-861 of the CBCA in order for such shareholder to perfect
the right to dissent from such proposed action.
(e) The representations and warranties of Sky King and
the Sky King Shareholders set out in this Agreement shall be true and correct
in all material respects at and as of the time of the Closing as though
such representations and warranties were made at and as of such time.
(f) Sky King and the Sky King Shareholders shall have
complied in a timely manner and in all material respects with its covenants
and agreements set out in this Agreement.
(g) There shall be delivered to Acquiror and Sub an
officer's certificate of Sky King to the effect that all of the
representations and warranties of Sky King set forth herein are true and
complete in all respects as of the Closing, and that Sky King has complied in
all material respects with covenants and agreements set forth herein required
to be complied with by the Closing, and there shall be delivered to Acquiror and
Sub a certificate signed by the Sky King Shareholders to the effect that the
representations and warranties of the Sky King Shareholders set forth herein are
true and correct in all material respects and that the Sky King Shareholders
have complied in all material respects with their covenants and agreements set
forth herein required to be complied with by Closing.
(h) Sky King and the Sky King Shareholders shall have
executed and delivered the Escrow Agreement to Acquiror and the Escrow Agent.
(i) Acquiror and Sub shall have completed prior to the
Closing, to their satisfaction, a due diligence review of the financial
condition, results of operations, properties, assets, liabilities, businesses
and prospects of Sky King.
(j) All director, shareholder, lender, lessor and other
parties' consents and approvals, as well as all filings with, and all necessary
consents or approvals of, all federal, state and local governmental authorities
and agencies, as are required under this Agreement, applicable law or any
applicable contract or agreement (other than as contemplated by this Agreement)
to complete the Merger shall have been secured.
37
<PAGE>
(k) No statute, rule, regulation, executive order,
decree, injunction or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or governmental
authority that prohibits or restricts the consummation of the Merger or the
related transactions.
(l) Acquiror's and Sub's Board of Directors, and
shareholders to the extent necessary, shall have approved the Merger in
accordance with the DGCL.
(m) The Board of Directors and Sky King Shareholders
shall have approved the Merger in accordance with the CBCA.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification.
(a) Sky King Shareholders. The Sky King Shareholders
shall indemnify, defend and hold harmless Acquiror and Sub from and against any
and all demands, claims, actions or causes of action, judgments, assessments,
losses, liabilities, damages or penalties and reasonable attorneys' fees and
related disbursements (collectively, "Claims") incurred by Acquiror or Sub which
arise out of or result from a misrepresentation, breach of warranty, or breach
of any covenant of Sky King or the Sky King Shareholders contained herein or in
the Schedules annexed hereto or in any deed, exhibit, closing certificate,
schedule or any ancillary certificates or other documents or instruments
furnished by Sky King or the Sky King Shareholders pursuant hereto or in
connection with the transactions contemplated hereby or thereby.
(b) Acquiror and Sub. Acquiror and Sub shall indemnify,
defend and hold harmless Sky King and the Sky King Shareholders from and
against any and all Claims, as defined at Subsection 7.1(a) above, incurred
by Sky King and/or the Sky King Shareholders which arise out of or result from a
misrepresentation, breach of warranty or breach of any covenant of Acquiror and
Sub contained herein or in the Schedules annexed hereto or in any deed, exhibit,
closing certificate, schedule or any ancillary certificates or other documents
or instruments furnished by Acquiror or the Sub pursuant hereto or in connection
with the transactions contemplated hereby or thereby.
(c) Methods of Asserting Claims for Indemnification. All
claims for indemnification under this Agreement shall be asserted as follows:
(i) Third Party Claims. In the event that any
Claim for which a party (the "Indemnitee") would be entitled to indemnification
under this Agreement is asserted against or sought to be collected from the
Indemnitee by a third party the Indemnitee shall promptly notify the other party
(the "Indemnitor") of such Claim, specifying the nature thereof, the applicable
38
<PAGE>
provision in this Agreement or other instrument under which the Claim arises,
and the amount or the estimated amount thereof (the "Claim Notice"). The
Indemnitor shall have thirty (30) days (or, if shorter, a period to a date not
less than ten (10) days prior to when a responsive pleading or other document
is required to be filed but in no event less than ten (10) days from delivery or
mailing of the Claim Notice) (the "Notice Period") to notify the Indemnitee (a)
whether or not it disputes the Claim and (b) if liability hereunder is not
disputed, whether or not it desires to defend the Indemnitee. If the
Indemnitor elects to defend by appropriate proceedings, such proceedings
shall be promptly settled or prosecuted to a final conclusion in such a manner
as to avoid any risk of damage to the Indemnitee; and all costs and expenses of
such proceedings and the amount of any judgment shall be paid by the Indemnitor.
If the Indemnitee desires to participate in, but
not control, any such defense or settlement, it may do so at its sole cost and
expense. If the Indemnitor has disputed the Claim, as provided above, and
shall not defend such Claim, the Indemnitee shall have the right to control the
defense or settlement of such Claim, in its sole discretion, and shall be
reimbursed by the Indemnitor for its reasonable costs and expenses of such
defense.
(ii) Non-Third Party Claims. In the event that
the Indemnitee should have a Claim for indemnification hereunder which does
not involve a Claim being asserted against it or sought to be collected by a
third party, the Indemnitee shall promptly send a Claim Notice with respect
to such Claim to the Indemnitor. If the Indemnitor does not notify the
Indemnitee within the Notice Period that it disputes such Claim, the
Indemnitor shall pay the amount thereof to the Indemnitee. If the Indemnitor
disputes the amount of such Claim, the controversy in question shall be
submitted to arbitration pursuant to Section 9.8 hereafter.
ARTICLE VIII
TERMINATION
8.1 Termination.
This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Closing:
(a) by mutual written consent of the board of directors
of Acquiror, the Sub, Sky King and the Sky King Shareholders:
(b) by any of Acquiror, the Sub, Sky King or the Sky
King Shareholders:
(i) if the Closing shall not have occurred on or
before March 31, 1998; provided, however, that the right to terminate this
Agreement under this Section 8.1(b)(i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of,
or resulted in, the failure of the Closing to occur on or before that date; or
39
<PAGE>
(ii) if any court of competent jurisdiction, or
any governmental body, regulatory or administrative agency or commission having
appropriate jurisdiction shall have issued an order, decree or filing or taken
any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable.
(c) by Sky King and the Sky King Shareholders if any of
the conditions specified in Section 6.1 have not been met and the sole remedy of
Sky King and the Sky King Shareholders in that event, shall be either to waive
such failure and proceed to close hereunder, or to terminate this Agreement in
which event neither Sky King and the Sky King Shareholders nor Acquiror shall
have any claim or action against the other; or
(d) by Acquiror and Sub if any of the conditions
specified in Section 6.2 have not been met and the sole remedy of Acquiror and
Sub in that event, shall be either to waive such failure and proceed to close
hereunder, or to terminate this Agreement in which event neither Acquiror and
the Sub nor Sky King and the Sky King Shareholders shall have any claim or
action against the other.
8.2 Notice and Effect of Termination.
In the event of the termination and abandonment of this
Agreement pursuant to Section 8.1, written notice thereof shall forthwith be
given to the other party or parties specifying the provision pursuant to which
such termination is made, and this Agreement shall forthwith become void and
have no effect without any liability on the part of any party or its directors,
officers or shareholders, except for the provisions of this Section 8.2 and
Sections 5.4, 5.9 and 5.11, which shall survive any termination of this
Agreement. Nothing contained in this Section 8.2 shall relieve any party from
any liability for any breach of this Agreement provided that the sole remedy
available to Sky King and the Sky King Shareholders for any breach of this
Agreement by Acquiror or Sub shall be as set forth in Section 7.1 hereof.
8.3 Extension; Waiver.
Any time prior to the Closing, the parties may (a) extend the
time for the performance of any of the obligations or other acts of any other
party under or relating to this Agreement; (b) waive any inaccuracies in the
representations or warranties by any other party or (c) waive compliance with
any of the agreements of any other party or with any conditions to its own
obligations. Any agreement on the part of any other party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
8.4 Amendment and Modification.
This Agreement may be amended, whether before or after the
vote of the Sky King Shareholders or shareholders of Acquiror, by written
agreement of Acquiror, the Sub, Sky King and the Sky King Shareholders;
40
<PAGE>
provided, however, that after the approval, if any, of this Agreement by the Sky
King Shareholders, no such amendment shall reduce or change the consideration to
be received by any Sky King Shareholder in connection with the Merger as set out
in Section 1.3 hereof or shall otherwise adversely affect the rights under this
Agreement of the Sky King Shareholders without the approval of such adversely
affected shareholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of Acquiror, the Sub, Sky King and the Sky King
Shareholders.
ARTICLE IX
MISCELLANEOUS
9.1 Survival of Representations and Warranties.
The respective representations and warranties of Acquiror, the
Sub, Sky King and the Sky King Shareholders shall not be deemed waived or
otherwise affected by any investigation made by any party. Each representation
and warranty shall survive the Closing through all applicable statutes of
limitations.
9.2 Notices.
All notices requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given on the date if delivered
personally, or upon the second business day after it shall have been deposited
by certified or registered mail with postage prepaid, or sent by telex, telegram
or telecopier, as follows (or at such other address or facsimile number for a
party as shall be specified by like notice):
(a) if to Sky King at:
Fred Moran, Chairman
Sky King Communications, Inc.
25 Doubling Road
Greenwich, CT 06830
Facsimile: (203) 869-1430
with a copy to:
George Finn, President
Sky King Communications, Inc.
25 Doubling Road
Greenwich, CT 06830
Facsimile: (203) 869-1430
41
<PAGE>
if to Acquiror or the Sub at:
Graham Ferguson Lacey
VDC Corporation Ltd.
Bishopscourt, Kirk Michael
Isles of Man
British Isles
with a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll Professional Corporation
Eleven Penn Center
1835 Market Street, 14th Floor
Philadelphia, PA 19103
Facsimile: (215) 665-8760
9.3 Entire Agreement; Assignment.
This Agreement, including all Exhibits and Schedules hereto,
constitutes the entire Agreement among the parties with respect to its subject
matter and supersedes all prior agreements and understandings, both written and
oral, among the parties or any of them with respect to such subject matter and
shall not be assigned by operation of law or otherwise.
9.4 Binding Effect; Benefit.
This Agreement shall inure to the benefit of and be binding
upon the parties and their respective successors and assigns. Nothing in this
Agreement is intended to confer on any person other than the parties to this
Agreement or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
9.5 Headings.
The descriptive headings of the sections of this Agreement are
inserted for convenience only, do not constitute a part of this Agreement and
shall not affect in any way the meaning or interpretation of this Agreement.
9.6 Counterparts.
This Agreement may be executed in two or more counterparts and
delivered via facsimile, each of which shall be deemed to be an original, and
all of which together shall be deemed to be one and the same instrument.
42
<PAGE>
9.7 Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the laws
that might otherwise govern under principles of conflicts of laws applicable
thereto.
9.8 Arbitration.
If a dispute arises as to the interpretation of this
Agreement, it shall be decided finally in an arbitration proceeding conforming
to the Rules of the American Arbitration Association applicable to commercial
arbitration then in effect at the time of the dispute. The arbitration shall
take place in Philadelphia, Pennsylvania. The decision of the Arbitrators shall
be conclusively binding upon the parties and final, and such decision shall be
enforceable as a judgment in any court of competent jurisdiction. The parties
shall share equally the costs of the arbitration.
9.9 Severability.
If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the remainder of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
9.10 Release and Discharge.
By virtue of their execution of this Agreement, as of the
Closing and thereafter, any and all Sky King directors, officers and
shareholders hereby agree to release, remise and forever discharge Sky King from
and against any and all debts, obligations, liabilities and amounts owing from
Sky King prior to the Closing, and Sky King is not obligated to take any action
or make any payments to third parties on behalf of the Sky King Shareholders.
9.11 Certain Definitions.
As used herein:
(a) "Act" means the Securities Act of 1933, as amended;
(b) "Affiliate" shall have the meanings ascribed to such
term in Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended to date (the "Exchange Act");
43
<PAGE>
(c) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which federally chartered financial institutions
are not open for business in the City of Philadelphia;
(d) "Dissenting Shares" shall mean the shares of Sky
King Common Stock held by the Dissenting Shareholders, as such term is defined
in Section 1.5;
(e) "Employee Benefit Plan" means any employee benefit
plan (as defined in ss. 3(3) of the Employee Retirement Income Security Act of
1974, as amended, or any employment contract, employee loan, incentive
compensation, profit sharing, retirement, pension, deferred compensation,
severance, termination pay, stock option or purchase plan, guaranteed annual
income plan, fund or arrangement, payroll incentive, policy, fund, agreement or
arrangement, non-competition or consulting agreement, hospitalization,
disability, life or other insurance plan, or other employee fringe benefit
program or plan, or any other plan, payroll practice, policy fund agreement or
arrangement similar to or in the nature of the foregoing, oral or written;
(f) "Escrow Agent" means that person or entity mutually
agreed upon by the parties hereto to act as escrow agent to hold, safeguard
and disburse the Escrow Shares (as such term is defined in Section 1.3) pursuant
to the terms and conditions of this Agreement;
(g) "Knowledge" shall mean the actual current knowledge
of the executive management of the party to this Agreement to whom knowledge is
ascribed together with the knowledge such executive management should reasonably
be expected to have in the performance of its duties and responsibilities;
(h) "Material Adverse Effect" shall mean any adverse
effect on the business, condition (financial or otherwise) or results of
operation of the relevant party and its subsidiaries, if any, which is material
to such party and its subsidiaries, if any, taken as a whole;
(i) "Person" means any individual, corporation,
partnership, association, trust or other entity or organization, including a
governmental or political subdivision or any agency or institution thereof; and
(j) "Subsidiary" shall mean, when used with reference to
an entity, any corporation, a majority of the outstanding voting securities
of which is owned directly or indirectly, or a majority of the board of
directors of which may be elected, by such entity.
IN WITNESS WHEREOF, Acquiror, Sub, Sky King and the Sky King
Shareholders have caused this Agreement to be signed by their respective
officers hereunto duly authorized, effective as of the date first written above.
<TABLE>
<CAPTION>
Attest: VDC CORPORATION LTD.
44
<PAGE>
<S> <C>
By:____________________________ By: /s/ Graham Ferguson Lacey
--------------------------------
Graham Ferguson Lacey, President
Attest: VDC (DELAWARE), INC.
By:____________________________ By: /s/ Andrew Panzo
--------------------------------
Andrew Panzo, President
[signatures continue onto next page]
Attest: SKY KING COMMUNICATIONS, INC.
By:____________________________ By: /s/ Frederick A. Moran
--------------------------------
Frederick A. Moran, Chairman
Attest:
By: /s/ James Roberts
--------------------------------
By:____________________________ James Roberts, Chief Operating Officer
Witness
SKY KING SHAREHOLDERS
_____________________________________ /s/ Frederick W. Moran
--------------------------------
Name:________________________________ Signature
Address:______________________________ Name: Frederick W. Moran
_____________________________________ Address: :_____________________________
---------------------------------------
Ownership Percentage: 14.2%
Witness
_____________________________________ /s/ Clayton E. Moran
--------------------------------
Name:________________________________ Signature
Address:______________________________ Name: Clayton E. Moran
_____________________________________ Address:_____________________________
-------------------------------------
Ownership Percentage: 14.2%
Witness
_____________________________________ /s/ Kent F. Moran
--------------------------------
Name:________________________________ Signature
Address:______________________________ Name: Kent F. Moran
_____________________________________ Address:_____________________________
-------------------------------------
45
<PAGE>
Ownership Percentage: 13.0%
[signatures continue onto next page]
46
<PAGE>
Witness
_____________________________________ /s/ Luke F. Moran
--------------------------------
Name:________________________________ Signature
Address:______________________________ Name: Luke F. Moran
_____________________________________ Address:_____________________________
Ownership Percentage: 13.0%
Witness
_____________________________________ /s/ Frederick A. Moran
--------------------------------
Name:________________________________ Signature (Frederick A. Moran)
Address:______________________________
_____________________________________ /s/ Joan B. Moran
--------------------------------
Name:________________________________ Signature (Joan B. Moran)
Address:______________________________ Name: Frederick A. and Joan B. Moran
_____________________________________ Address: 25 Doubling Road
Greenwich, CT 06830
Ownership Percentage: .83%
Witness
/s/ George Finn
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: George Finn
Address:______________________________ Address:_____________________________
- ------------------------------------- -------------------------------------
Ownership Percentage: .55%
Witness
/s/ James C. Roberts, Trustee
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Roberts Family Trust
Address:______________________________ Address:_____________________________
- ------------------------------------- -------------------------------------
Ownership Percentage: 27.5%
[signatures continue onto next page]
47
<PAGE>
Witness
/s/ Henry Jacobs
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Henry Jacobs
Address:______________________________ Address:_____________________________
- ------------------------------------- -------------------------------------
Ownership Percentage: .72%
Witness
/s/ Leon G. Cooperman
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Watchung Road Associates, L.P.
Address:______________________________ By: Leon G. Cooperman, General Partner
_____________________________________ Address:_____________________________
-------------------------------------
Ownership Percentage: 1.1%
Witness
/s/ Wayne Perry
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Wayne Perry
Address:______________________________ Address:_____________________________
- ------------------------------------- -------------------------------------
Ownership Percentage: .66%
Witness
/s/ David Wheeler
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: David Wheeler
Address:______________________________ Address:_____________________________
- ------------------------------------- -------------------------------------
Ownership Percentage: .07%
[signatures continue onto next page]
48
<PAGE>
Witness
/s/ Charles Glazer
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Charles Glazer
Address:______________________________ Address:_____________________________
- ------------------------------------- -------------------------------------
Ownership Percentage: .27%
Witness
/s/ Robert de Rose
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Robert de Rose IRA
Address:______________________________ Address:_____________________________
- ------------------------------------- -------------------------------------
Ownership Percentage: .27%
Witness
/s/ Jack Daniels
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Daniels Tech, LLC
Address:______________________________ By: Jack Daniels, Managing Partner
_____________________________________ Address:_____________________________
Ownership Percentage: .11%
[signatures continue onto next page]
Witness
/s/ Jose Carvalho Soares
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Jose Carvalho Soares
Address:______________________________ Address: Rua Carlos Benedetti 78
_____________________________________ Nilopolis - Rio de Janeiro
Brazil Cep 26535
Ownership Percentage: .8%
[signatures continue onto next page]
49
<PAGE>
Witness
/s/ Vicki Walters, Trustee
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Capital Growth Trust
Address:______________________________ Vicki Walters, Trustee
_____________________________________ Address: 2028 Ryans Run Road
Lansdale, PA 19446
Ownership Percentage: 6.0 %
Witness
/s/ Harold Chaffe
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Godwin Finance Ltd.
Address:______________________________ Name: Harold Chaffe
_____________________________________ Title: Financial Controller
Address: Whitehill House
Newby Road Industrial Estate
Newby Road
Hazel Grove
Stockport, Cheshire England SK7 5DA
Ownership Percentage: 3.6%
Witness
/s/ Bruno DiSpirito
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Gibralt Holdings Ltd.
Address:______________________________ By: Bruno DiSpirito
_____________________________________ Title: Vice President
Address: 1177 Hastings Street
Suite 2000
Vancouver, British Columbia V6E 2K3
Ownership Percentage: 3.0%
</TABLE>
50
<PAGE>
Schedule 4.1(m)
---------------
Lease between Sky King Communications, Inc. as lessee and D. Loschiava, trustee,
as lessor for a residence located at 71 Long Meadow, Riverside, CT for James C.
Roberts. The term of the lease is from February 1998 through June 1998, and the
monthly rental payment is $4,150.
51
<PAGE>
Schedule 4.1(p)
---------------
1. Lease between Sky King Communications, Inc. as lessee and D. Loschiava,
trustee, as lessor for a residence located at 71 Long Meadow, Riverside, CT for
James C. Roberts. The term of the lease is from February 1998 through June 1998,
and the monthly rental payment is $4,150.
2. Sky King Communications, Inc. paid James C. Roberts a $25,000 sign-on
bonus in January 1998 after he became Sky King's Chief Operating Officer in
December 1997.
52
<PAGE>
Schedule 4.2(d)(i)
------------------
VDC Corporation Ltd. Warrants
-----------------------------
<TABLE>
<CAPTION>
Number of Warrants Expiration Date Exercise Price
- ------------------ --------------- --------------
<S> <C> <C>
455,000 June 30, 1998 $4 per share
250,000 September 30, 1998 $4 per share
45,000 June 30, 1998 $5 per share
</TABLE>
53
<PAGE>
Schedule 4.2(g)
---------------
None
54
<PAGE>
Schedule 5.5(a)(ix)
-------------------
Sky King Communications, Inc. plans to acquire Blue Sky International LLC and
the Sakalin Telecom Group of companies.
55
EXHIBIT 2
AMENDMENT TO
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT TO AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
(the "Amendment"), is made and entered into as of March 6, 1998, by and among
VDC CORPORATION LTD., a Bermuda corporation ("Acquiror"), VDC (DELAWARE), INC.,
a Delaware corporation and wholly-owned subsidiary of Acquiror ("Sub"), SKY KING
COMMUNICATIONS, INC., a Connecticut corporation ("Sky King"), and those
individuals and entities whose names appear on the signature page hereof in
their capacity as holders of the outstanding common stock of Sky King (the "Sky
King Shareholders").
R E C I T A L S:
----------------
WHEREAS, the parties hereto have entered into an Amended and Restated
Agreement and Plan of Merger effective as of December 10, 1997 (the "Merger
Agreement") pursuant to which Sub shall merge with and into Sky King (the
"Merger");
WHEREAS, the parties hereto desire to amend the Merger Agreement in the
manner set forth herein effective as of the date hereof; and
WHEREAS, any capitalized term used but not defined herein shall have
the meaning ascribed to such term in the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
agreements contained herein, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree that the Merger Agreement is hereby amended as follows:
1. Section 6.1(a)(i) of the Merger Agreement is amended to require that
Acquiror shall have assets at the Closing consisting of at least
$600,000.00 in cash or other liquid assets and the right to receive
$370,000.00 in immediately available funds from Tasmin Limited by March
13, 1998. In the event the remaining funds are not timely received from
Tasmin Limited, the Acquiror may draw upon such number of Investment
Banking Shares as are necessary to satisfy any such deficiency in
funding to the extent of Investment Banking Shares at the rate of $2.00
per share. Assets available at Closing will also include approximately
50,000 shares of the Common Stock of PortaCom that were acquired for
approximately $30,000.
2. Wayne Perry, a Sky King Shareholder, shall be deemed to have not given
any of the representations and warranties of Sky King and the Sky King
Shareholders set forth in Article IV of the Merger Agreement.
3. Schedule 4.2(d)(i) to the Merger Agreement is hereby amended and
restated in its entirety by the following Schedule:
<PAGE>
Schedule 4.2(d)(i)
------------------
VDC Corporation Ltd. Warrants
-----------------------------
<TABLE>
<CAPTION>
Number of Warrants Exercise Price Expiration Date
------------------ -------------- ---------------
<S> <C> <C>
45,000 $5.00 Aug. 30, 1998
85,000 $4.00 Aug. 30, 1998
41,110 $4.00 Aug. 30, 1998
90,909 $4.00 Aug. 30, 1998
90,909 $4.00 Aug. 30, 1998
9,890 $4.00 Aug. 30, 1998
250,000 $4.00 Aug. 30, 1998
30,000 $4.00 Aug. 30, 1998
100,000 $4.00 Aug. 30, 1998
145,728 $4.00 Aug. 30, 1998
50,000 $4.00 Aug. 30, 1998
------
938,546
</TABLE>
4. Paragraph 5.15 of the Merger Agreement shall be amended to provide that
Acquiror has funded at least $240,000 of the PortaCom Advances.
Subparagraph (i)(A) of Paragraph 5.15 shall be amended to provide that
the Investment Banking Shares shall serve as an escrow fund for the
payment of the Remaining PortaCom Advances or that the Remaining
PortaCom Advances may be satisfied upon the early collection of
outstanding subscriptions receivable. See Paragraph 5 below. The
remainder of Paragraph 5.15 shall remain in full force and effect.
5. Paragraph 4.2(L) of the Merger Agreement provides that the Acquiror has
agreed to pay an investment banking fee in stock equal to 5% of the
Merger Consideration or 500,000 shares of Acquiror Common Stock for
arranging this transaction (the "Investment Banking Shares"). This
Amendment will confirm that the Investment Banking Shares will be paid
through the issuance by Acquiror following the transaction of 500,000
shares of Common Stock to the following persons: FAC Enterprises, Inc.
- 185,000 shares; KAB Investments, Inc. - 185,000 shares; SPH
Investments, Inc. - 70,000 shares; and SPH Equities, Inc. - 60,000
shares.
Notwithstanding the above, the Investment Banking Shares will not be
distributed at the Closing, and instead, will be subject to offset in
the following manner: (i) to the extent the Remaining PortaCom Advances
are not satisfied by the early collection of outstanding subscriptions
receivable, the Investment Banking Shares will serve as an escrow fund
upon which the Acquiror will be able to draw from these shares in order
to sell shares in one or more private placement transactions in order
to, and to the extent necessary, to secure cash proceeds sufficient to
satisfy the obligation to advance the Remaining PortaCom Advances
identified within Subparagraph 5.15(b)(i)(A) of the Merger Agreement.
To the extent the Remaining PortaCom Advances are satisfied, then, with
the exception of Investment Banking Shares that are otherwise serving
as an escrow fund under Paragraph 1 hereof, the remaining Investment
Banking Shares may be issued in the manner identified above.
2
<PAGE>
6. Notwithstanding anything to the contrary in the Merger Agreement, the
Merger shall become effective as of the filing of a Certificate of
Merger with the Secretary of State of the State of Connecticut in
accordance with Section 38-821 of the CBCA and a Certificate of Merger
with the Secretary of State of the State of Delaware in accordance with
Section 252 of the DGCL; and confirmation that both Certificates of
Merger have become effective as of such filing date; and at such time
the Merger shall be deemed completed and such time shall be referred to
herein as the "Effective Time."
7. Except as otherwise set forth herein, the terms of the Merger Agreement
shall remain in full force and effect.
8. This Amendment may be executed in two or more counterparts and
delivered via facsimile, each of which shall be deemed to be an
original, and all of which together shall be deemed to be one and the
same instrument.
9. This Amendment shall be governed by and construed in accordance with
the laws of Bermuda, without regard to the laws that might otherwise
govern under principles of conflicts of laws applicable thereto.
IN WITNESS WHEREOF, Acquiror, Sub, Sky King and the Sky King
Shareholders have caused this Amendment to be signed by their respective
officers hereunto duly authorized, effective as of the date first written above.
VDC CORPORATION LTD.
By: /s/ Graham Ferguson Lacey
-----------------------------
Graham Ferguson Lacey, President
VDC (DELAWARE), INC.
By: /s/ Andrew Panzo
---------------------
Andrew Panzo, President
[Signatures continue on next page]
3
<PAGE>
SKY KING COMMUNICATIONS, INC.
By: /s/ Frederick A. Moran
---------------------------
Frederick A. Moran,
Chief Executive Officer
By: /s/ James Roberts
----------------------
James Roberts, Chief Operating Officer
SKY KING SHAREHOLDERS
(*) /s/ Frederick A. Moran
----------------------------
Signature
Name: Frederick W. Moran
(*) /s/ Frederick A. Moran
----------------------------
Signature
Name: Clayton F. Moran
(*) /s/ Frederick A. Moran
----------------------------
Signature
Name: Kent F. Moran
(*) /s/ Frederick A. Moran
----------------------------
Signature
Name: Luke F. Moran
(*) /s/ Frederick A. Moran
----------------------------
Signature (Frederick A. Moran)
(*) /s/ Frederick A. Moran
----------------------------
Signature (Joan B. Moran)
Name: Frederick A. and Joan B. Moran
[Signatures continue on next page]
4
<PAGE>
(*) /s/ Frederick A. Moran
----------------------------
Signature
Name: George Finn
(*) /s/ Frederick A. Moran
----------------------------
Signature
Name: Roberts Family Trust
(*) /s/ Frederick A. Moran
----------------------------
Signature
Name: Henry Jacobs
(*) /s/ Frederick A. Moran
----------------------------
Signature
Name: Watchung Road Associates, L.P.
By: Leon G. Cooperman, General Partner
(*) /s/ Frederick A. Moran
----------------------------
Signature
Name: Wayne Perry
(*) /s/ Frederick A. Moran
----------------------------
Signature
Name: David Wheeler
(*) /s/ Frederick A. Moran
----------------------------
Signature
Name: Charles Glazer
(*) /s/ Frederick A. Moran
----------------------------
Signature
Name: Robert de Rose IRA
By: Cowen & Co., Trustee
[Signatures continue on next page]
5
<PAGE>
(*) /s/ Frederick A. Moran
----------------------------
Signature
Name: Daniels Tech, LLC
By: Jack Daniels, Managing Partner
(*) /s/ Frederick A. Moran
----------------------------
Signature
Name: Jose Carvalho Soares
(*) /s/ Frederick A. Moran
----------------------------
Signature
Name: Capital Growth Trust
By: Vicki Walters, Trustee
(*) /s/ Frederick A. Moran
----------------------------
Signature
Name: Godwin Finance Ltd.
By: Harold Chaffe,
Financial Controller
(*) /s/ Frederick A. Moran
----------------------------
Signature
Name: Gibralt Holdings Ltd.
By: Bruno DiSpirito
Title: Vice President
(*) By Power of Attorney granted to Frederick A. Moran.
6
EXHIBIT 3
VDC COMMUNICATIONS, INC.
----------
Securities Purchase Agreement
----------
Shares of Common Stock
at $0.75 per Share
----------
October 27, 1999
<PAGE>
CONFIDENTIAL
- ------------
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement" or the "Securities
Purchase Agreement") is entered into as of the 27th day of October, 1999, by and
between VDC Communications, Inc., a Delaware corporation ("VDC" or the
"Company"), and the investor whose name appears at the end of this Agreement
("Purchaser" or "Subscriber").
R E C I T A L S:
----------------
The Company wishes to obtain additional working capital and the
Purchaser desires to provide such working capital to the Company through the
purchase of certain shares of the Company's common stock, $.0001 par value per
share (the "Common Stock"), being privately offered by the Company.
NOW, THEREFORE, in consideration of the premises hereof and the
agreements set forth herein below, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Sale and Purchase of Shares.
Subject to the terms and conditions hereof, the Company agrees
to issue and sell, and the Purchaser agrees to purchase that number of shares of
Common Stock (the "Shares") identified on the signature page hereof at a
purchase price of $0.75 per share. The total purchase price is set forth on the
signature page hereof (the "Purchase Price"). The Purchase Price is payable upon
subscription in cash, check or wire transfer. If paying by check, the check
should be made payable to "VDC Communications, Inc." and delivered to VDC
Communications, Inc. at 75 Holly Hill Lane, Greenwich, Connecticut, 06830.
No broker, investment banker or any other person will receive
from the Company any compensation as a broker, finder, adviser or in any other
capacity in connection with the purchase of the Shares hereunder.
2. Description of the Shares.
(a) Restricted Securities. The Shares shall be "restricted
securities" as that term is defined under Rule 144 of the Securities Act of
1933, as amended (the "Act"), and may not be offered for sale or sold or
otherwise transferred in a transaction which would constitute a sale thereof
within the meaning of the Act unless (i) such security has been registered for
sale under the Act and registered or qualified under applicable state securities
laws relating to the offer and sale of securities; or (ii) exemptions from the
registration requirements of the Act and the registration or qualification
requirements of all such state securities laws are available and the Company
shall have received an opinion of counsel that the proposed sale or other
disposition of such securities may be effected without registration under the
Act and would not result in any violation of any applicable state securities
2
<PAGE>
laws relating to the registration or qualification of securities for sale, such
counsel and such opinion to be satisfactory to the Company.
(b) Voting Rights; Dividends. Holders of Common Stock of the
Company have equal rights to receive dividends when, as, and if declared by the
Board of Directors out of funds legally available therefor. Holders of Common
Stock of the Company have one vote for each share held of record and do not have
cumulative voting rights.
(c) Liquidation; Redemption. Holders of Common Stock of the
Company are entitled upon liquidation of the Company to share ratably in the net
assets available for distribution, subject to the rights, if any of holders of
any preferred stock of the Company then outstanding. Shares of Common Stock of
the Company are not redeemable and have no preemptive or similar rights. All
outstanding shares of Common Stock of the Company are fully paid and
nonassessable.
(d) Restriction Upon Resale. The Subscriber hereby agrees
that the Shares shall be subject to restrictions upon the transfer, sale,
encumbrance or other disposition of the Shares. See "Understanding of Investment
Risks" and "Registration Rights".
3. Shares Offered in a Private Placement Transaction.
The Shares offered by this Securities Purchase Agreement are
being offered as a non-public offering pursuant to Section 4(2) and Regulation D
of the Act ("Regulation D").
4. Binding Effect of Securities Purchase Agreement; The Closing.
This Securities Purchase Agreement shall not be binding on the
Company unless and until an authorized executive officer of the Company has
evidenced acceptance thereof by executing the signature page at the end hereof.
The Company may accept or reject this Securities Purchase Agreement in its sole
discretion if the Purchaser does not meet the suitability standards established
herein, or for any other reason. A closing (the "Closing") will occur
contemporaneously with the execution of this Agreement by all parties hereto.
5. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company as follows:
(a) Accredited Investor. The Purchaser has such knowledge and
experience in business and financial matters such that the Purchaser is capable
of evaluating the merits and risks of purchasing the Shares. The Purchaser is
either an "accredited investor" as that term is defined in Rule 501 of
Regulation D of the Act or a "qualified institutional buyer" as that term is
defined in Rule 144A of the Act, and represents that he satisfies the
suitability standards identified in Section 10 hereof;
3
<PAGE>
(b) Loss of Investment. The Purchaser('s) (i) overall
commitment to investments which are not readily marketable is not
disproportionate to his net worth; (ii) investment in the Company will not cause
such overall commitment to become excessive; (iii) can afford to bear the loss
of his entire investment in the Company; and (iv) has adequate means of
providing for his current needs and personal contingencies and has no need for
liquidity in his investment in the Company;
(c) Special Suitability. The Purchaser satisfies any special
suitability or other applicable requirements of his state of residence and/or
the state in which the transaction by which the Shares are purchased occurs;
(d) Investment Intent. The Purchaser hereby acknowledges that
the Purchaser has been advised that this offering has not been registered with,
or reviewed by, the Securities and Exchange Commission ("SEC") because this
offering is intended to be a non-public offering pursuant to Section 4(2) and
Regulation D of the Act. The Purchaser represents that the Purchaser's Shares
are being purchased for the Purchaser's own account and not on behalf of any
other person, for investment purposes only and not with a view towards
distribution or resale to others. The Purchaser agrees that the Purchaser will
not attempt to sell, transfer, assign, pledge or otherwise dispose of all or any
portion of the Shares unless they are registered under the Act or unless in the
opinion of counsel an exemption from such registration is available, such
counsel and such opinion to be satisfactory to the Company. The Purchaser
understands that the Shares have not been registered under the Act by reason of
a claimed exemption under the provisions of the Act which depends, in part, upon
the Purchaser's investment intention;
(e) State Securities Laws. The Purchaser understands that no
securities administrator of any state has made any finding or determination
relating to the fairness of this investment and that no securities administrator
of any state has recommended or endorsed, or will recommend or endorse, the
offering of the Shares;
(f) Authority; Power; No Conflict. The execution, delivery
and performance by the Purchaser of the Agreement are within the powers of the
Purchaser, have been duly authorized and will not constitute or result in a
breach or default under, or conflict with, any order, ruling or regulation of
any court or other tribunal or of any governmental commission or agency, or any
agreement or other undertaking, to which the Purchaser is a party or by which
the Purchaser is bound, and, if the Purchaser is not an individual, will not
violate any provision of the charter documents, Bylaws, indenture of trust,
operating agreement, or partnership agreement, as applicable, of the Purchaser.
The signatures of the Purchaser on the Agreement are genuine, and the signatory,
if the Purchaser is an individual, has legal competence and capacity to execute
the same, or, if the Purchaser is not an individual, the signatory has been duly
authorized to execute the same; and the Agreement constitutes the legal, valid
and binding obligations of the Purchaser, enforceable in accordance with its
terms;
(g) No General Solicitation. The Purchaser acknowledges that
no general solicitation or general advertising (including communications
published in any newspaper, magazine or other broadcast) has been received by
4
<PAGE>
him and that no public solicitation or advertisement with respect to the
offering of the Shares has been made to him;
(h) Advice of Tax and Legal Advisors. The Purchaser has
relied solely upon the advice of his own tax and legal advisors with respect to
the tax and other legal aspects of this investment;
(i) Broker Fees. The Purchaser is not aware that any person,
and has been advised that no person, will receive from the Company any
compensation as a broker, finder, adviser or in any other capacity in connection
with the purchase of the Shares;
(j) Access to Information. Purchaser has had access to all
material and relevant information concerning the Company, its management,
financial condition, capitalization, market information, properties and
prospects necessary to enable Purchaser to make an informed investment decision
with respect to its investment in the Shares. Purchaser has carefully read and
reviewed, and is familiar with and understands the contents thereof and hereof,
including, without limitation, the risk factors referenced in this Agreement.
See "Understanding of Investment Risks." Purchaser acknowledges that it has had
the opportunity to ask questions of and receive answers from, and to obtain
additional information from, representatives of the Company concerning the terms
and conditions of the acquisition of the Shares and the present and proposed
business and financial condition of the Company, and has had all such questions
answered to its satisfaction and has been supplied all information requested;
(k) Review of Reports. The Purchaser acknowledges that it
has been provided with an opportunity to review: (i) a copy of the Company's
Annual Report on Form 10-K for the year ended June 30, 1999; (ii) a copy
of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1999, as amended; (iii) a copy of the Company's Registration Statement on Form
S-1 (SEC File Number 333-80107); and (iv) all other recent reports filed by the
Company with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 (collectively, the "Reports").
(l) Understanding the Nature of Securities. The Purchaser
understands and acknowledges that:
(i) The Shares have not been registered under the
Act or any state securities laws and are being issued and sold in reliance upon
certain exemptions contained in the Act;
(ii) The Shares are "restricted securities" as
that term is defined in Rule 144 promulgated under the Act;
(iii) The Shares cannot be sold or transferred
without registration under the Act and applicable state securities laws, or
unless the Company receives an opinion of counsel reasonably acceptable to it
5
<PAGE>
(as to both counsel and the opinion) that such registration is not necessary;
and
(iv) The Shares and any certificates issued in
replacement therefor shall bear the following legend, in addition to any other
legend required by law or otherwise:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION, OR THE AVAILABILITY OF EXEMPTION FROM REGISTRATION,
UNDER THE ACT and any applicable state securities laws, BASED ON AN
OPINION LETTER OF COUNSEL SATISFACTORY TO THE COMPANY."
(m) Information Provided. The Purchaser has, on or before the
date of the Closing, been afforded the opportunity to review and is familiar
with the Reports and has based his decision to invest solely on the information
contained therein, and the information contained within this Agreement and the
associated exhibits and schedules, and has not been furnished with and is not
relying upon any other literature, prospectus or other information except as
included in the Reports or this Agreement.
6. Indemnification. The Purchaser shall indemnify and hold
harmless the Company and the Company's officers, directors and employees from
and against any and all loss, damage or liability (including attorneys' fees),
due to, or arising out of, a breach or inaccuracy of any representation or
warranty contained in Section 5.
7. Understanding of Investment Risks. Any investment in the
Shares should not be made by a Purchaser who cannot afford the loss of his
entire Purchase Price. The Purchaser acknowledges that the Shares offered hereby
have not been approved or disapproved by the Securities and Exchange Commission,
or any state securities commissions, nor has the Securities and Exchange
Commission or any state securities commission passed upon the adequacy or
accuracy of this Securities Purchase Agreement or any exhibit hereto. Prior
to making an investment in the Shares, the Purchaser has fully considered,
among other things, the financial and other information set forth in the Reports
as well as the risk factors enumerated in the Company's Form 10-K for the year
ended June 30, 1999, and acknowledges that such information has been considered
prior to making this investment decision.
8. Registration Rights. The Company has agreed to advise the
Purchaser by written notice prior to the filing of a registration statement
under the Act (excluding registration on Forms S-8, S-4 or any successor forms
thereto), covering securities of the Company to be offered and sold to the
public generally (whether on behalf of the Company or selling security holders)
6
<PAGE>
and shall, upon the request of the Purchaser given at least five (5) calendar
days prior to the filing of such registration statement, include in any
such registration statement such information as may be required to permit the
public resale of the Shares; provided, however, that in the event the resale
of the Shares has not been previously included within a registration statement,
the Company shall in any event file a registration statement under the Act
within one year of the Closing, the purpose of which is to register the resale
of the Shares. The registration rights associated with the Shares are
described more particularly and are subject in full to the terms of a
Registration Rights Agreement between the parties and dated the date hereof
(the "Registration Rights Agreement").
The Company is currently working on a registration statement on Form
S-1 (the "Current S-1"); Further, the Company shall use reasonable efforts to
include the Shares in the Current S-1; provided, however, that an explicit
condition precedent to the inclusion of the Shares in the Current S-1 is that
the Purchaser shall immediately return or provide to the Company, or return or
provide upon such other schedule as the Company shall provide in writing, any
document or information requested by the Company in connection with or
associated with the inclusion of the Shares in the Current S-1. This paragraph
shall serve as written notice prior to the filing of a registration statement in
accordance with the terms of the Registration Rights Agreement.
The Company's obligation to register the Shares extends only to the
inclusion of the Shares in a registration statement which covers the public
resale thereof. In all events, the Company shall have no obligation: (i) to
assist or cooperate in the offering or disposition of such Shares; (ii) to
obtain a commitment from an underwriter relative to the sale of such Shares; or
(iii) to include such Shares within an underwritten offering of the Company. The
Company shall assume no responsibility for the manner of sale, timing of sale,
or sales price relating to the resale of the Shares.
9. Representations and Warranties of the Company. The Company
hereby represents and warrants to Purchaser as follows:
(a) Organization and Standing of the Company. The Company is
a duly organized and validly existing corporation in good standing under the
laws of the State of Delaware with adequate power and authority to conduct
the business in which it is now engaged and has the corporate power and
authority to enter into this Agreement, and is duly qualified and licensed to
do business as a foreign corporation in such other jurisdictions as is
necessary to enable it to carry on its business, except where failure to do
so would not have a material adverse effect on its business;
(b) Corporate Power and Authority. The execution and delivery
of this Agreement and the transactions contemplated hereby have been duly
authorized by the Board of Directors of the Company. No other corporate act or
proceeding on the part of the Company is necessary to authorize this Agreement.
When duly executed and delivered by the parties hereto, this Agreement will
constitute a valid and legally binding obligation of the Company enforceable
against it in accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, moratorium, reorganization or other
7
<PAGE>
similar laws and legal and equitable principles limiting or affecting the rights
of creditors generally; and/or (ii) general principles of equity, regardless of
whether considered in a proceeding in equity or at law.
10. IMPORTANT CONSIDERATIONS: SUITABILITY STANDARDS - WHO SHOULD
INVEST.
INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK AND IS
SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL FINANCIAL RESOURCES WHO HAVE NO NEED
FOR LIQUIDITY IN THEIR INVESTMENT.
A substantial number of state securities commissions have
established investor suitability standards for the marketing within their
respective jurisdictions of restricted securities. Some have also established
minimum dollar levels for purchases in their states. The reasons for these
standards appear to be, among others, the relative lack of liquidity of
securities of such programs as compared with other securities investments.
Investment in the Shares involves a high degree of risk and is suitable only for
persons of substantial financial means who have no need for liquidity in their
investments.
The Company has adopted as a general investor suitability
standard the requirement that each Subscriber for Shares represents in writing
that the Subscriber: (a) is acquiring the Shares for investment and not with a
view to resale or distribution; (b) can bear the economic risk of losing his
entire investment; (c) his overall commitment to investments which are not
readily marketable is not disproportionate to his net worth, and an investment
in the Shares will not cause such overall commitment to become excessive; (d)
has adequate means of providing for his current needs and personal contingencies
and has no need for liquidity in this investment in the Shares; (e) has
evaluated all the risks of investment in the Company; and (f) has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of investing in the Company or is relying on his own
purchaser representative in making an investment decision.
In addition, all of the Subscribers for Shares must be: (1)
extremely sophisticated investors with substantial net worth and experience in
making investments of this nature; and (2) "accredited investors," as defined in
Rule 501 of Regulation D under the Act, by meeting any of the following
conditions:
(i) he or she has an individual income in excess of
$200,000 in each of the two most recent years or joint income with his or her
spouse in excess of $300,000 in each of those years, and he or she reasonably
expects an income in excess of the aforesaid levels in the current year, or
8
<PAGE>
(ii) he or she has an individual net worth, or a joint
net worth with his or her spouse, at the time of his or her purchase, in excess
of $1,000,000 (net worth for these purposes includes homes, home furnishings and
automobiles), or
(iii) he or she otherwise satisfies the Company that he or
she is an accredited investor, as defined in Rule 501 under the Act.
Other categories of investors included within the definition
of accredited investor include the following: certain institutional investors,
including certain banks, whether acting in their individual or fiduciary
capacities; certain insurance companies; federally registered investment
companies; business development companies (as defined under the Investment
Company Act of 1940); Small Business Investment Companies licensed by the Small
Business Administration; certain employee benefit plans; private business
development companies (as defined in the Investment Advisers Act of 1940); tax
exempt organizations (as defined in Section 501(c)(3) of the Internal Revenue
Code) with total assets in excess of $5,000,000; entities in which all the
equity owners are accredited investors; and certain affiliates of the Company.
A partnership Subscriber, which satisfies the requirements set
forth in clauses (a) through (f) above shall satisfy the suitability standards
if it is an accredited investor by reason of clause (iii) above, or if all of
its partners are accredited investors. A corporate subscriber, which satisfies
the requirements set forth in clauses (a) through (f) above shall satisfy the
investor suitability standards if it is an accredited investor by reason of
clause (iii) above, or if all of its shareholders are accredited investors.
Corporate subscribers must have net worth of at least three (3) times the amount
of their investment in the Shares.
The suitability standards referred to above represent minimum
suitability requirements for prospective purchasers and the satisfaction of such
standards by a prospective purchaser does not necessarily mean that the Shares
are a suitable investment for such purchaser. The Company may, in circumstances
it deems appropriate, modify such requirements. The Company may also reject
subscriptions for whatever reasons, in its sole discretion, it deems
appropriate.
Securities Purchase Agreements may not necessarily be accepted
in the order in which received. Purchasers who are residents of certain states
may be required to meet certain additional suitability standards.
THE ACCEPTANCE OF A SUBSCRIPTION FOR SHARES BY THE COMPANY
DOES NOT CONSTITUTE A DETERMINATION BY THE COMPANY THAT AN INVESTMENT IN THE
SHARES IS SUITABLE FOR A PROSPECTIVE INVESTOR. THE FINAL DETERMINATION OF THE
SUITABILITY OF INVESTMENT IN THE SHARES MUST BE MADE BY THE PROSPECTIVE INVESTOR
AND HIS OR HER ADVISERS.
9
<PAGE>
11. State Law Considerations.
(a) For Residents of All States.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR
OWN EXAMINATION OF THE ISSUER'S SECURITIES AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT, AND THE APPLICABLE STATES SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
THE INVESTOR MUST RELY ON THE INVESTOR'S OWN EXAMINATION OF THE PERSON
OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED, IN MAKING AN INVESTMENT DECISION ON THESE SECURITIES.
(b) Florida Residents. Pursuant to Section 517.061(11) (a)
(5) of the Florida statute, when sales are made to five or more persons in
Florida, Florida investors have a three day right of rescission. If a Florida
resident has executed a Securities Purchase Agreement, he may elect, within
three business days after signing the subscription agreement, to withdraw from
the Agreement and to receive a full refund and return (without interest) of any
money paid by him. A Florida resident's withdrawal will be without any further
liability to any person. To accomplish such withdrawal, a Florida resident need
only send a letter or telegram to the Company at the address set forth in this
Agreement indicating their intention to withdraw. Such letter or telegram must
be sent and postmarked prior to the end of the aforementioned third business
day. If a Florida resident sends a letter, it is prudent to send it by certified
mail, return receipt requested, to insure that it is received and also to
evidence the time and date when it is mailed. Should a Florida resident make
this request orally, he should ask for written confirmation that his request has
been received.
(c) New Jersey Residents. Neither the Attorney General of the
State nor the Bureau of Securities has passed on or endorsed the merits of this
Securities Purchase Agreement. The filing of the Securities Purchase Agreement
with the Bureau of Securities does not constitute approval of the issue or the
10
<PAGE>
sale thereof by the Bureau of Securities or the Department of Law and public
safety of the State of New Jersey. Any representation to the contrary is
unlawful.
(d) New York Residents. This Securities Purchase Agreement
has not been filed with or reviewed by the Attorney General of the State of New
York prior to its issuance and use. The Attorney General of the State of New
York has not passed on or endorsed the merits of this Agreement. Any
representation to the contrary is unlawful. This Agreement does not contain an
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made. In light of the circumstances under
with they were made, not misleading, it contains a fair summary of the material
terms of documents purported to be summarized herein.
12. Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by facsimile (with written confirmation of receipt), provided
that a copy is mailed by certified mail, return receipt requested (provided that
facsimile notice shall be deemed received on the next business day if received
after 5:00 p.m. Eastern Standard Time), or (c) on the next business day, if
sent by a nationally recognized overnight delivery service, in each case to the
appropriate addresses and facsimile numbers set forth below (or to such other
addresses and facsimile numbers as a party may designate by notice to the other
parties):
If to the Company:
VDC Communications, Inc.
75 Holly Hill Lane
Greenwich, CT 06830
Attention: Frederick A. Moran
Chairman & C.E.O.
Facsimile: (203) 552-0908
with a copy to:
VDC Communications, Inc.
75 Holly Hill Lane
Greenwich, CT 06830
Attention: Louis D. Frost, Esq.
VDC Corporate Counsel
Facsimile: (203) 552-0908
11
<PAGE>
If to Purchaser:
to the address set forth at the end of this Agreement or to
such other addresses as may be specified in accordance herewith from time to
time.
13. Survival of Representations and Warranties. Representations
and warranties contained herein shall survive the execution and delivery of
this Agreement.
14. Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and permitted assigns of the parties hereto,
provided that this Agreement and the interests herein may not be assigned by
either party without the express written consent of the other party.
15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut without
regard to the principles of conflict of laws.
16. Arbitration. All controversies arising out of or related to
this Agreement shall be determined by binding arbitration applying the laws of
the State of Connecticut. Any arbitration between the parties shall be conducted
at the Company's offices in Greenwich, Connecticut, or at such other location
designated by the Company, before the American Arbitration Association (the
"AAA"). The decision of the arbitrator(s) shall be final and binding upon the
parties and judgment may be obtained thereon by either party in a court of
competent jurisdiction. Each party shall bear the cost of preparing and
presenting its own case. The cost of the arbitration, including the fees and
expenses of the arbitrator(s), shall be shared equally by the parties hereto
unless the award otherwise provides. Nothing in this section will prevent either
party from resorting to judicial proceedings if interim injunctive relief under
the laws of the State of Connecticut from a court is necessary to prevent
serious and irreparable injury to one of the parties, and the parties hereto
agree that the state courts in Stamford, Connecticut and the United States
District Court in the District of Connecticut in Bridgeport, Connecticut shall
have exclusive subject matter and in personam jurisdiction over the parties for
purposes of obtaining interim injunctive relief.
17. Sections and Other Headings. The section and other headings
contained in this Agreement are for the convenience of reference only, and do
not constitute part of this Agreement or otherwise affect any of the provisions
hereof.
18. Pronouns. Whenever the context of this Agreement may require,
any pronoun will include the corresponding masculine, feminine and neuter form,
and the singular form of nouns and pronouns will include the plural.
19. Counterpart Signatures. This Agreement may be executed in
multiple counterparts each of which shall be an original but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed and delivered by exchange of facsimile copies showing the signatures
12
<PAGE>
of the parties, and those signatures need not be affixed to the same copy. The
facsimile copies showing the signatures of the parties will constitute
originally signed copies of the Agreement requiring no further execution.
20. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
21. Entire Agreement; Amendments. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the
Purchaser make any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the party to be
charged with enforcement.
22. Construction. This Agreement and any related instruments will
not be construed more strictly against one party then against the other by
virtue of the fact that drafts may have been prepared by counsel for one of the
parties, it being recognized that this Agreement and any related instruments
are the product of negotiations between the parties and that both parties have
contributed to the final preparation of this Agreement and all related
instruments.
23. Agreement Read and Understood. Both parties hereto acknowledge
that they have had an opportunity to consult with an attorney, and such other
experts or consultants as they deem necessary or prudent, regarding this
Agreement and that they, or their designated agents, have read and understand
this Agreement.
24. United States Dollars. All dollar amounts stated herein refer
to and are payable solely in United States Dollars.
IN WITNESS WHEREOF, intending to be legally bound, the parties hereto
have caused this Agreement to be signed.
Purchaser:
666,667 Shares/$500,000.25 /s/ Frederick W. Moran
- -------------------------- ----------------------
Number and dollar amount Frederick W. Moran
of Shares purchased -
Purchase Price
13
<PAGE>
Address/Residence of Purchaser:
-------------------------------
-------------------------------
-------------------------------
Social Security Number:
-------------
Accredited Investor Certification
(Place initials on the appropriate
line(s))
(i) I am a natural person who had individual income
- ----- of more than $200,000 in each of the most recent two years or
joint income with my spouse in excess of $300,000 in each of
the most recent two years and reasonably expect to reach that
same income level for the current year ("income", for purposes
hereof, should be computed as follows: individual adjusted
gross income, as reported (or to be reported) on a federal
income tax return, increased by (1) any deduction of long-term
capital gains under Section 1202 of the Internal Revenue Code
of 1986 (the "Code"), (2) any deduction for depletion under
Section 611 et seq. of the Code, (3) any exclusion for
interest under Section 103 of the Code and (4) any losses of a
partnership as reported on Schedule E of Form 1040); or
(ii) I am a natural person whose individual net worth
- ----- (i.e., total assets in excess of total liabilities), or joint
net worth with my spouse, will at the time of purchase of the
Shares be in excess of $1,000,000; or
(iii) The Purchaser is an investor satisfying the
- ----- requirements of Section 501(a)(1), (2) or (3) of Regulation D
promulgated under the Securities Act, which includes but is
not limited to, a self-directed employee benefit plan where
investment decisions are made solely by persons who are
"accredited investors" as otherwise defined in Regulation D;
or
(iv) The Purchaser is a "qualified institutional buyer"
- ----- as that term is defined in Rule 144A of the Securities Act; or
(v) The Purchaser is a trust, which trust has total
- ----- assets in excess of $5,000,000, which is not formed for the
specific purpose of acquiring the Shares offered hereby
and whose purchase is directed by a sophisticated person as
described in Rule 506(b)(ii) of Regulation D and who has such
knowledge and experience in financial and business matters
that he is capable of evaluating the risks and merits of an
investment in the Shares; or
(vi) I am a director or executive officer of the
- ----- Company; or
14
<PAGE>
(vii) The Purchaser is an entity (other than a trust)
- ----- in which all of the equity owners meet the requirements of at
least one of the above subparagraphs.
Agreed and Accepted by
VDC COMMUNICATIONS, INC.
By: /s/ Frederick A. Moran
------------------------
Frederick A. Moran
Chairman & C.E.O.
Dated: 10/29/99
----------
15
EXHIBIT 4
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is dated as of
October 27, 1999 by and between VDC COMMUNICATIONS, INC., a Delaware corporation
(the "Company"), and the undersigned (the "Holder" or the "Investor").
W I T N E S S E T H:
--------------------
WHEREAS, simultaneously with the execution and delivery of
this Agreement, the Investor is purchasing from the Company, pursuant to the
Securities Purchase Agreement dated the date hereof (the "Purchase Agreement"),
certain shares of the Company's Common Stock (the "Securities");
WHEREAS, all capitalized terms not hereinafter defined shall
have that meaning assigned to them in the Purchase Agreement; and
WHEREAS, the Company desires to grant to the Holder the
registration rights set forth herein with respect to the Securities.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions.
(a) "Closing" shall mean the closing provided for in the
Purchase Agreement.
(b) "Common Stock" shall mean the common stock of the
Company, par value $.0001 per share.
(c) "Company" shall mean VDC Communications, Inc.
(d) "Offering" shall mean that private placement
transaction pursuant to which the Company shall offer shares of Common Stock
upon terms and conditions set forth in the Purchase Agreements.
(e) "Person" means an individual, a partnership (general
or limited), corporation, limited liability company, joint venture, business
trust, cooperative, association or other form of business organization, whether
or not regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate of a deceased, insane or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political
subdivision or other instrumentality thereof, or any other entity.
(f) "Principal Market" means the OTC Electronic Bulletin
Board, the Nasdaq National Market, the Nasdaq Small Cap Stock Market, the
American Stock Exchange or the New York Stock Exchange, whichever is at the time
the principal trading exchange or market for the Common Stock.
(h) "Registration Statement" shall mean the Registration
Statement of the Company filed with the SEC pursuant to the provisions of
Section 3 of this Agreement which covers the resale of the Securities on Form
S-1, SB-2 or any other appropriate form then permitted by the SEC to be used for
<PAGE>
such registration and the sales contemplated to be made thereby under the
Securities Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such Registration Statement, including any pre-and
post- effective amendments thereto, in each case including the prospectus
contained therein, all exhibits thereto and all materials incorporated by
reference therein.
(i) "Restricted Stock" shall mean the Securities that may
be issued to the Holder pursuant to the Purchase 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 shares of
Restricted Stock, such securities shall cease to constitute Restricted Stock (i)
when a registration statement with respect to the sale of such securities shall
have become effective under the Securities Act and such securities shall have
been disposed of thereunder, or (ii) when and to the extent such securities are
permitted to be distributed pursuant to subparagraph (k) of Rule 144 (or any
successor provision to such Rule) promulgated under the Securities Act or are
otherwise freely transferable to the public without further registration under
the Securities Act.
(j) "Securities Act" shall mean the Securities Act of
1933, as amended, or any similar or successor federal statute, and the rules and
regulations of the SEC thereunder, all as the same shall be in effect at any
relevant time.
(k) "SEC" shall mean the United States Securities and
Exchange Commission.
(l) "Trading Day" means a day on which the Principal
Market on which the Common Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of Connecticut are
authorized or obligated by law or executive order to close.
2. Restrictions on Transfer. The Holder acknowledges and
understands that prior to the registration of the Restricted Stock as provided
herein, the Restricted Stock and the Securities are "restricted securities"
as defined in Rule 144 promulgated under the Securities Act. The Holder
understands that no disposition or transfer of the Restricted Stock or the
Securities may be made by the Holder in the absence of (i) an opinion of counsel
to the Holder, reasonably satisfactory to the Company and prepared at Holder's
expense, that such transfer may be made without registration under the
Securities Act or any applicable state securities laws; or (ii) such security
has been registered for sale under the Securities Act and registered or
qualified under applicable state securities laws relating to the offer and sale
of securities.
2
<PAGE>
3. Registration Rights.
(a) Piggyback Registration Rights.
The Company shall advise the Holder by written notice prior to
the filing of a Registration Statement under the Securities Act (excluding
registration on Forms S-8, S-4, or any successor forms thereto), covering
securities of the Company to be offered and sold (whether by the Company or any
stockholder thereof) and shall, upon the request of the Holder given at least
five (5) calendar days prior to the filing of such Registration Statement,
include in any such Registration Statement such information as may be required
to permit an offering of the Restricted Stock. The Holder shall promptly furnish
such information as may be reasonably requested by the Company in order to
include such Restricted Stock in the Registration Statement. In the event that
any registration pursuant to this Section 3 shall be, in whole or in part, an
underwritten public offering of Common Stock on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in an orderly manner in such offering within a price
range acceptable to the Company, the Company shall include in such registration
(i) first, the securities the Company proposes to sell, and (ii) second, the
Restricted Stock and any other registrable securities eligible and requested to
be included in such registration to the extent that the number of shares to be
registered will not, in the opinion of the managing underwriters, adversely
affect the offering of the securities pursuant to clause (i), pro rata among the
holders of such registrable securities, including the Holder of the Restricted
Stock, on the basis of the number of shares eligible for registration which are
owned by all such holders. Notwithstanding the foregoing, the Company may
withdraw any registration statement referred to in this Section 3 without
thereby incurring liability to the holders of the Restricted Stock.
(b) Shelf Registration.
In the event that the Restricted Stock is not otherwise
included within a Registration Statement filed pursuant to Section 3(a) above,
the Company shall use reasonable efforts to prepare and file, not later than
twelve (12) months following the Closing of the Offering, a Registration
Statement with the SEC and use reasonable efforts to have such Registration
Statement declared effective promptly for the purpose of facilitating the public
resale of the Restricted Stock.
(c) Notwithstanding anything to the contrary contained
herein, the Company's obligation in Section 3(a) and 3(b) above shall extend
only to the inclusion of the Restricted Stock in a Registration Statement filed
under the Securities Act. The Company shall have no obligation to assure the
terms and conditions of distribution, to obtain a commitment from an underwriter
relative to the sale of the Restricted Stock or to otherwise assume any
responsibility for the manner, price or terms of the distribution of the
Restricted Stock. Furthermore, the Company shall not be restricted in any
manner from including within the Registration Statement or the distribution,
issuance or resale of any of its or any other securities.
3
<PAGE>
4. Registration Procedures. Whenever it is obligated to register
any Restricted Stock pursuant to this Agreement, the Company shall:
(a) prepare and file with the SEC a Registration
Statement with respect to the Restricted Stock in the manner set forth at
Sections 3(a) or 3(b) hereof and use reasonable efforts to cause such
Registration Statement to remain effective for that period identified in Section
4(g) hereafter;
(b) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective for
the period specified in Section 4(g) below and to comply with the provisions of
the Securities Act with respect to the disposition of all Restricted Stock
covered by such Registration Statement in accordance with the Holder's intended
method of disposition set forth in such Registration Statement for such period;
(c) furnish to the Holder and to each underwriter, if
any, such number of copies of the Registration Statement and the prospectus
included therein (including each preliminary prospectus), as such person may
reasonably request in order to facilitate the public sale or other disposition
of the Restricted Stock covered by such Registration Statement;
(d) use reasonable efforts to register or qualify the
Restricted Stock covered by such Registration Statement under the securities or
blue sky laws of such jurisdictions as the Holder, or, in the case of an
underwritten public offering, the managing underwriter shall reasonably request;
provided, however, that the Company shall not for any such purpose be required
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(e) promptly notify the Holder under such Registration
Statement and each underwriter, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus contained in such Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required or necessary to be stated therein in
order to make the statements contained therein not misleading in light of the
circumstances under which they were made;
(f) make available for inspection by the Holder, any
underwriter participating in any disposition pursuant to such Registration
Statement, and any attorney, accountant or other agent retained by any such
Holder or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by the
Holder, underwriter, attorney, accountant or agent in connection with such
Registration Statement;
(g) for purposes of Sections 4(a) and 4(b) above, the
period of distribution of Restricted Stock shall be deemed to extend until the
earlier of: (A) in an underwritten public offering of all of the Restricted
Stock, the period in which each underwriter has completed the distribution
4
<PAGE>
of all securities purchased by it; (B) in any other registration, the earlier
of the period in which all shares of Restricted Stock covered thereby shall have
been sold or two (2) years from the effective date of the first Registration
Statement filed by the Company with the SEC pursuant to this Agreement.
(h) if the Common Stock of the Company is listed on any
securities exchange or automated quotation system, the Company shall use
reasonable efforts to list (with the listing application being made at the time
of the filing of such Registration Statement or as soon thereafter as is
reasonably practicable) the Restricted Stock covered by such Registration
Statement on such exchange or automated quotation system;
(i) enter into normal and customary underwriting
arrangements or an underwriting agreement and take all other reasonable and
customary actions if the Holder sells its shares of Restricted Stock pursuant
to an underwriting (however, in no event shall the Company, in connection with
such underwriting, be required to undertake any special audit of a fiscal period
in which an audit is normally not required);
(j) notify the Holder if there are any amendments to the
Registration Statement, any requests by the SEC to supplement or amend the
Registration Statement, or of any threat by the SEC or state securities
commission to undertake a stop order with respect to sales under the
Registration Statement; and
(k) cooperate in the removal of any restrictive legends
from the shares of Restricted Stock in connection with the resale of such shares
covered by an effective Registration Statement.
5. Expenses.
(a) For the purposes of this Section 5, the term
"Registration Expenses" shall mean: all expenses incurred by the Company in
complying with Sections 3 and 4 of this Agreement, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel and independent public accountants for the Company,
"blue sky" fees, fees of the National Association of Securities Dealers, Inc.
("NASD"), fees and expenses of listing shares of Restricted Stock on any
securities exchange or automated quotation system on which the Company's shares
are listed and fees of transfer agents and registrars. The term "Selling
Expenses" shall mean: all underwriting discounts and selling commissions
applicable to the sale of Restricted Stock and all accountable or
non-accountable expenses paid to any underwriter in respect of the sale of
Restricted Stock.
(b) Except as otherwise provided herein, the Company will
pay all Registration Expenses in connection with the Registration Statements
filed pursuant to Section 3 of this Agreement. All Selling Expenses in
connection with any Registration Statements filed pursuant to Section 3 of this
Agreement shall be borne by the participating Holder in proportion to the number
of shares sold by each.
5
<PAGE>
6. Obligations of Holder.
(a) In connection with each registration hereunder, each
selling Holder will promptly furnish to the Company in writing such information
with respect to such seller and the securities held by such seller, and the
proposed distribution by him or them as shall be reasonably requested by the
Company in order to assure compliance with federal and applicable state
securities laws, as a condition precedent to including such seller's Restricted
Stock in the Registration Statement. Each selling Holder also shall agree to
promptly notify the Company of any changes in such information included in the
Registration Statement or prospectus as a result of which there is an untrue
statement of material fact or an omission to state any material fact required or
necessary to be stated therein in order to make the statements contained therein
not misleading in light of the circumstances then existing.
(b) In connection with each registration pursuant to this
Agreement, the Holder whose shares are included therein will not effect sales
thereof until notified by the Company of the effectiveness of the Registration
Statement, and thereafter will suspend such sales after receipt of telegraphic
or written notice from the Company to suspend sales to permit the Company to
correct or update a Registration Statement or prospectus. At the end of any
period during which the Company is obligated to keep a Registration Statement
current, the Holder included in said Registration Statement shall discontinue
sales of shares pursuant to such Registration Statement upon receipt of notice
from the Company of its intention to remove from registration the shares covered
by such Registration Statement which remain unsold, and such Holder shall notify
the Company of the number of shares registered which remain unsold immediately
upon receipt of such notice from the Company.
7. Information Blackout and Holdbacks.
(a) At any time when a Registration Statement effected
pursuant to Section 3 relating to Restricted Stock is effective, upon written
notice from the Company to the Holder that the Company has determined in good
faith that sale of Restricted Stock pursuant to the Registration Statement would
require disclosure of non-public material information, the Holder shall suspend
sales of Restricted Stock pursuant to such Registration Statement until such
time as the Company notifies the Holder that such material information has been
disclosed to the public or has ceased to be material or that sales pursuant to
such Registration Statement may otherwise be resumed.
(b) Notwithstanding any other provision of this
Agreement, each Holder of Restricted Stock 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 thirty (30) days prior to the commencement of
any primary offering to be undertaken by the Company of shares of its own
common stock (the "Primary Offering"), which may also include other securities,
and ending one hundred and twenty (120) days after completion of any such
Primary Offering, unless the Company, in the case of a non-underwritten
offering, or the managing underwriter, in the case of an underwritten Primary
Offering, otherwise agrees.
6
<PAGE>
8. Indemnification
(a) The Company agrees to indemnify, to the extent
permitted by law, each Holder of Restricted Stock, its officers and directors
and each Person who controls such Holder (within the meaning of the Securities
Act) against all losses, claims, damages, liabilities and expenses caused by any
untrue statement of material fact contained in any Registration Statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are caused by or contained in any information furnished to the Company by
such Holder for use therein or by such Holder's failure to deliver a copy of the
Registration Statement or prospectus or any amendments or supplements thereto
after the Company has furnished such Holder with a sufficient number of copies
of the same.
(b) In connection with any Registration Statement in
which a Holder of Restricted Stock is participating, each such Holder shall
furnish to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such Registration Statement
or prospectus and, to the extent permitted by law, shall indemnify the Company,
its directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from: (i) any untrue or alleged untrue statement of
material fact contained in the Registration Statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, (but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished by such Holder); or (ii) any disposition of the Restricted Stock in a
manner that fails to comply with the permitted methods of distribution
identified within the Registration Statement; provided that the obligation to
indemnify (if there shall be more than one Holder) shall be individual, not
joint and several, for each Holder and shall be limited to the net amount of
proceeds received by such Holder from the sale of Restricted Stock pursuant to
such Registration Statement.
(c) Any Person entitled to indemnification hereunder
shall (i) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification (provided that the failure to give
prompt notice shall not impair any Person's right to indemnification hereunder
to the extent such failure has not prejudiced the indemnifying party) and (ii)
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist with respect to such
claim, permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party shall not be subject to any liability for any
settlement made by the indemnified party without its consent (but such consent
shall not be unreasonably withheld). An indemnifying party who is not entitled
to, or elects not to, assume the defense of a claim shall not be obligated to
pay the fees and expenses of more than one counsel for all parties indemnified
by such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such
7
<PAGE>
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.
9. Miscellaneous Provisions.
(a) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Connecticut without
regard to principles of conflicts of laws.
(b) Counterparts. This Agreement may be executed in
multiple counterparts each of which shall be an original but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed and delivered by exchange of facsimile copies showing the signatures
of the parties, and those signatures need not be affixed to the same copy. The
facsimile copies showing the signatures of the parties will constitute
originally signed copies of the Agreement requiring no further execution.
(c) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given without the written consent of the Company and the Holder.
(d) Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by facsimile (with written confirmation of receipt), provided
that a copy is mailed by certified mail, return receipt requested (provided that
facsimile notice shall be deemed received on the next business day if received
after 5:00 p.m. Eastern Standard Time), or (c) on the next business day, if sent
by a nationally recognized overnight delivery service, in each case to the
appropriate addresses and facsimile numbers set forth below (or to such other
addresses and facsimile numbers as a party may designate by notice to the other
parties)
(i) if to the Company to:
VDC Communications, Inc.
75 Holly Hill Lane
Greenwich, CT 06830
Attn: Frederick A. Moran
Chief Executive Officer
Telephone: (203) 869-5100
8
<PAGE>
Facsimile: (203) 552-0908
(ii) if to the Holder, to the address identified
on the books and records of the Company
(e) Successors and Assigns; Holders as Beneficiaries.
This Agreement shall inure to the benefit of and be binding upon the parties
and their respective successors and assigns, and the agreements of the Company
herein shall inure to the benefit of the Holders and their respective successors
and assigns.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Entire Agreement; Survival; Termination. This
Agreement is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, representations, warranties or
undertakings, other than those set forth or referred to herein. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
(h) Construction. This Agreement and any related
instruments will not be construed more strictly against one party then against
the other by virtue of the fact that drafts may have been prepared by counsel
for one of the parties, it being recognized that this Agreement and any related
instruments are the product of negotiations between the parties and that both
parties have contributed to the final preparation of this Agreement and
all related instruments.
(i) Arbitration. All controversies arising out of or
related to this Agreement shall be determined by binding arbitration applying
the laws of the State of Connecticut. Any arbitration between the parties
shall be conducted at the Company's offices in Greenwich, Connecticut, or at
such other location designated by the Company, before the American Arbitration
Association (the "AAA"). The decision of the arbitrator(s) shall be final and
binding upon the parties and judgment may be obtained thereon by either party
in a court of competent jurisdiction. Each party shall bear the cost of
preparing and presenting its own case. The cost of the arbitration, including
the fees and expenses of the arbitrator(s), shall be shared equally by the
parties hereto unless the award otherwise provides. Nothing in this section will
prevent either party from resorting to judicial proceedings if interim
injunctive relief under the laws of the State of Connecticut from a court is
necessary to prevent serious and irreparable injury to one of the parties, and
the parties hereto agree that the state courts in Stamford, Connecticut and
the United States District Court in the District of Connecticut in Bridgeport,
Connecticut shall have exclusive subject matter and in personam jurisdiction
over the parties for purposes of obtaining interim injunctive relief.
(j) Agreement Read and Understood. Both parties hereto
acknowledge that they have had an opportunity to consult with an attorney, and
such other experts or consultants as they deem necessary or prudent, regarding
9
<PAGE>
this Agreement and that they, or their designated agents, have read and
understand this Agreement.
(k) Binding Effect. This Agreement shall not be binding
on the Company unless and until an authorized executive officer of the Company
has evidenced acceptance thereof by executing the signature page at the end
hereof.
IN WITNESS WHEREOF, intending to be legally bound, the parties hereto
have caused this Agreement to be signed.
ATTEST: VDC COMMUNICATIONS, INC.
/s/ Clayton F. Moran By:/s/ Frederick A. Moran
- -------------------- ----------------------
Frederick A. Moran
Chief Executive Officer
WITNESS:
/s/ unreadable /s/ Frederick W. Moran
- -------------- ----------------------
Frederick W. Moran
10
EXHIBIT 5
VDC COMMUNICATIONS, INC.
----------
Securities Purchase Agreement
----------
100,000 Shares of Common Stock
at $3.625 per Share
----------
December 23, 1998
<PAGE>
CONFIDENTIAL
- ------------
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is entered into as
of the 23rd day of December, 1998, by and between VDC Communications, Inc., a
Delaware corporation ("VDC" or the "Company"), and the investor whose name
appears at the end of this Agreement ("Purchaser" or "Subscriber").
R E C I T A L S:
----------------
The Company wishes to obtain additional working capital and the
Purchaser desires to provide such working capital to the Company through the
purchase of certain shares of the Company's common stock, $.0001 par value per
share (the "Common Stock"), being privately offered by the Company.
NOW, THEREFORE, in consideration of the premises hereof and the
agreements set forth herein below, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Sale and Purchase of Shares.
Subject to the terms and conditions hereof, the Company agrees
to issue and sell, and the Purchaser agrees to purchase, 100,000 shares of
Common Stock at a purchase price of $3.625 per share. The purchase price is
payable upon subscription in cash, check or wire transfer. If paying by check,
the check should be made payable to "VDC Communications, Inc." and delivered to
VDC Communications, Inc. at 75 Holly Hill Lane, Greenwich, Connecticut, 06830.
No broker, investment banker or any other person will receive
from the Company any compensation as a broker, finder, adviser or in any other
capacity in connection with the purchase of the Shares.
2. Description of the Shares.
(a) Restricted Securities. The shares of Common Stock of
the Company being offered hereby (the "Shares") shall be "restricted securities"
as that term is defined under Rule 144 of the Securities Act of 1933, as amended
(the "Act") and may not be offered for sale or sold or otherwise transferred in
a transaction which would constitute a sale thereof within the meaning of the
Act unless (i) such security has been registered for sale under the Act and
registered or qualified under applicable state securities laws relating to the
offer and sale of securities; or (ii) exemptions from the registration
requirements of the Act and the registration or qualification requirements of
all such state securities laws are available and the Company shall have received
an opinion of counsel that the proposed sale or other disposition of such
securities may be effected without registration under the Act and would not
result in any violation of any applicable state securities laws relating to the
registration or qualification of securities for sale, such counsel and such
opinion to be satisfactory to the Company.
2
<PAGE>
(b) Voting Rights; Dividends. Holders of Common Stock of
the Company have equal rights to receive dividends when, as, and if declared by
the Board of Directors out of funds legally available therefor. Holders of
Common Stock of the Company have one vote for each share held of record and do
not have cumulative voting rights.
(c) Liquidation; Redemption. Holders of Common Stock of
the Company are entitled upon liquidation of the Company to share ratably in the
net assets available for distribution, subject to the rights, if any of holders
of any preferred stock of the Company then outstanding. Shares of Common Stock
of the Company are not redeemable and have no preemptive or similar rights. All
outstanding shares of Common Stock of the Company are fully paid and
nonassessable.
(d) Restriction Upon Resale. The Subscriber hereby agrees
that the Shares shall be subject to restrictions upon the transfer, sale,
encumbrance or other disposition of the Shares. See "Understanding of Investment
Risks" and "Registration Rights".
3. Shares Offered in a Private Placement Transaction.
The Shares offered by this Securities Purchase Agreement are
being offered as a non-public offering pursuant to Section 4(2) and Regulation D
of the Act ("Regulation D").
4. Binding Effect of Securities Purchase Agreement; The Closing.
This Securities Purchase Agreement shall not be binding on the
Company unless and until an authorized executive officer of the Company has
evidenced acceptance thereof by executing the signature page at the end hereof.
The Company may accept or reject this Securities Purchase Agreement in its sole
discretion if the Purchaser does not meet the suitability standards established
herein, or for any other reason. A closing (the "Closing") will occur
contemporaneously with the execution of this Agreement by all parties hereto.
5. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company as follows:
(a) Accredited Investor. The Purchaser has such knowledge
and experience in business and financial matters such that the Purchaser is
capable of evaluating the merits and risks of purchasing the Shares. The
Purchaser is either an "accredited investor" as that term is defined in
Rule 501 of Regulation D of the Act or a "qualified institutional buyer" as
that term is defined in Rule 144A of the Act, and represents that he
satisfies the suitability standards identified in Section 9 hereof;
(b) Loss of Investment. The Purchaser(`s) (i) overall
commitment to investments which are not readily marketable is not
disproportionate to his net worth; (ii) investment in the Company will not cause
such overall commitment to become excessive; (iii) can afford to bear the loss
of his entire investment in the Company; and (iv) has adequate means of
providing for his current needs and personal contingencies and has no need for
liquidity in his investment in the Company;
3
<PAGE>
(c) Special Suitability. The Purchaser satisfies any
special suitability or other applicable requirements of his state of residence
and/or the state in which the transaction by which the Shares are purchased
occurs;
(d) Investment Intent. The Purchaser hereby acknowledges
that the Purchaser has been advised that this offering has not been registered
with, or reviewed by, the Securities and Exchange Commission ("SEC") because
this offering is intended to be a non-public offering pursuant to Section 4(2)
and Regulation D of the Act. The Purchaser represents that the Purchaser's
Shares are being purchased for the Purchaser's own account and not on behalf
of any other person, for investment purposes only and not with a view towards
distribution or resale to others. The Purchaser agrees that the Purchaser will
not attempt to sell, transfer, assign, pledge or otherwise dispose of all or any
portion of the Shares unless they are registered under the Act or unless in the
opinion of counsel an exemption from such registration is available, such
counsel and such opinion to be satisfactory to the Company. The Purchaser
understands that the Shares have not been registered under the Act by reason of
a claimed exemption under the provisions of the Act which depends, in part, upon
the Purchaser's investment intention;
(e) State Securities Laws. The Purchaser understands that
no securities administrator of any state has made any finding or determination
relating to the fairness of this investment and that no securities administrator
of any state has recommended or endorsed, or will recommend or endorse, the
offering of the Shares;
(f) Authority; Power; No Conflict. The execution,
delivery and performance by the Purchaser of the Agreement are within the
powers of the Purchaser, have been duly authorized and will not constitute or
result in a breach or default under, or conflict with, any order, ruling or
regulation of any court or other tribunal or of any governmental commission or
agency, or any agreement or other undertaking, to which the Purchaser is a party
or by which the Purchaser is bound, and, if the Purchaser is not an individual,
will not violate any provision of the charter documents, Bylaws, indenture of
trust or partnership agreement, as applicable, of the Purchaser. The signatures
on the Agreement are genuine, and the signatory, if the Purchaser is an
individual, has legal competence and capacity to execute the same, or, if the
Purchaser is not an individual, the signatory has been duly authorized to
execute the same; and the Agreement constitutes the legal, valid and binding
obligations of the Purchaser, enforceable in accordance with its terms;
(g) No General Solicitation. The Purchaser acknowledges
that no general solicitation or general advertising (including communications
published in any newspaper, magazine or other broadcast) has been received by
him and that no public solicitation or advertisement with respect to the
offering of the Shares has been made to him;
(h) Advice of Tax and Legal Advisors. The Purchaser has
relied solely upon the advice of his own tax and legal advisors with respect to
the tax and other legal aspects of this investment;
(i) No Broker Fees. The Purchaser is not aware that any
person, and has been advised that no person, will receive from the Company any
4
<PAGE>
compensation as a broker, finder, adviser or in any other capacity in connection
with the purchase of the Shares other than as declared herein;
(j) Access to Information. Purchaser has had access to
all material and relevant information concerning the Company, its management,
financial condition, capitalization, market information, properties and
prospects necessary to enable Purchaser to make an informed investment decision
with respect to its investment in the Shares. Purchaser has carefully read and
reviewed, and is familiar with and understands the contents thereof and hereof,
including, without limitation, the risk factors described in this Agreement. See
"Understanding of Investment Risks." Purchaser acknowledges that it has had the
opportunity to ask questions of and receive answers from, and to obtain
additional information from, representatives of the Company concerning the terms
and conditions of the acquisition of the Shares and the present and proposed
business and financial condition of the Company, and has had all such questions
answered to its satisfaction and has been supplied all information requested;
(k) Review of Exchange Act Reports. The Purchaser
acknowledges that it has been provided with an opportunity to review: (i) a
copy of the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998, which is attached hereto as Exhibit "A"; (ii) a copy of
the Company's Registration Statement on Form S-4, in accordance with which VDC
Bermuda LTD., a Bermuda company merged with and into the Company, which is
attached hereto as Exhibit "B"; and (iii) all other relevant reports filed by
the Company with the Securities and Exchange Commission under the Securities
Exchange Act of 1934.
(l) Understanding the Nature of Securities. The Purchaser
understands and acknowledges that:
(i) The Shares have not been registered under
the Act or any state securities laws and are being issued and sold in reliance
upon certain exemptions contained in the Act;
(ii) The Shares are "restricted securities" as
that term is defined in Rule 144 promulgated under the Act;
(iii) The Shares cannot be sold or transferred
without registration under the Act and applicable state securities laws, or
unless the Company receives an opinion of counsel reasonably acceptable to it
(as to both counsel and the opinion) that such registration is not necessary;
and
(iv) The Shares and any certificates issued in
replacement therefor shall bear the following legend, in addition to any other
legend required by law or otherwise:
5
<PAGE>
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN TAKEN BY
THE REGISTERED OWNER FOR INVESTMENT, AND WITHOUT A VIEW TO
RESALE OR DISTRIBUTION THEREOF, AND MAY NOT BE TRANSFERRED OR
DISPOSED OF WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER THAT SUCH TRANSFER OR DISPOSITION DOES NOT VIOLATE THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE RULES AND
REGULATIONS THEREUNDER."
6. Understanding of Investment Risks. Any investment in the
Shares should not be made by a Purchaser who cannot afford the loss of his
entire Purchase Price. The Purchaser acknowledges that the Shares offered hereby
have not been approved or disapproved by the Securities and Exchange Commission,
or any state securities commissions, nor has the Securities and Exchange
Commission or any state securities commission passed upon the adequacy or
accuracy of this Securities Purchase Agreement or any exhibit hereto. Prior
to making an investment in the Shares, the Purchaser has fully considered,
among other things, the financial and other information set forth in the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998
(a copy of which is attached hereto as Exhibit "A"), and acknowledges that such
information have been considered prior to making this investment decision.
7. Registration Rights. The Company agrees that within one
hundred twenty (120) days of the Closing, it will use its reasonable best
efforts to prepare and file with the Securities and Exchange Commission, and
use its reasonable best efforts to have declared effective thereafter, a
Registration Statement on Form S-1 or other equivalent form pursuant to which
the Company shall register the public resale of the Shares. The Company shall
have the right to include within such Registration Statement any other
securities on behalf of the Company or security holders. The expenses of such
registration shall be borne by the Company.
Notwithstanding the foregoing, the Company may: (A) delay
filing the Registration Statement and may withhold efforts to cause the
Registration Statement to become effective, if the Company determines in good
faith that such registration rights might (i) interfere with or affect the
negotiation or completion of any transaction that is being contemplated by the
Company (whether or not a final decision has been made to undertake such
transaction) at the time the right to delay is exercised, or (ii) involve
initial or continuing disclosure obligations that might not be in the best
interest of the Company's stockholders, and (B) not include the Shares in a
Registration Statement covering an underwritten offering to the extent that the
inclusion of the Shares would, in the opinion of the managing underwriter of
such an offering, adversely affect such an offering or the market for the
Company's securities. In the event that the Shares are not included in the
Registration Statement in accordance with the provisions of clause (B) above,
the Company agrees to register the Shares promptly after the completion of the
underwritten offering described in clause (B) as may be permitted by the
managing underwriter of such an offering. If, after the Registration Statement
becomes effective, the Company advises the holders of registered Shares that the
Company considers it appropriate for the Registration Statement to be amended,
6
<PAGE>
the holders of such Shares shall suspend any further sales of their registered
Shares until the Company advises them that the Registration Statement has been
amended.
Each holder of Shares whose shares are registered pursuant to the
Registration Statement set forth herein shall indemnify and hold harmless the
Company, each of its directors and each of its officers from and against any and
all claims, damages or liabilities, joint or several, to which they or any of
them may become subject, including all legal and other expenses, arising out of
or in connection with any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, in any preliminary or
amended preliminary prospectus or in the prospectus (or the Registration
Statement or prospectus as from time to time amended or supplemented) or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading in the circumstances in which they were made,
but only insofar as any such statement or omission was made in reliance upon and
in conformity with information furnished in writing to the Company in connection
therewith by such holder expressly for use therein. The liability of any such
holder shall be limited to the aggregate price at which such holder's Shares of
the Company is sold.
In connection with the registration rights, the Company shall have no
obligation: (i) to assist or cooperate in the offering or disposition of such
Shares; (ii) to indemnify or hold harmless the holders of the securities being
registered; (iii) to obtain a commitment from an underwriter relative to the
sale of such Shares; or (iv) to include such Shares within an underwritten
offering of the Company.
8. Representations and Warranties of the Company. The Company
hereby represents and warrants to Purchaser as follows:
(a) Organization and Standing of the Company. The Company
is a duly organized and validly existing corporation in good standing under the
laws of the State of Delaware with adequate power and authority to conduct the
business in which it is now engaged and has the corporate power and authority to
enter into this Agreement, and is duly qualified and licensed to do business as
a foreign corporation in such other jurisdictions as is necessary to enable it
to carry on its business, except where failure to do so would not have a
material adverse effect on its business;
(b) Corporate Power and Authority. The execution and
delivery of this Agreement and the transactions contemplated hereby have been
duly authorized by the Board of Directors of the Company. No other corporate act
or proceeding on the part of the Company is necessary to authorize this
Agreement or the consummation of the transactions contemplated hereby. When duly
executed and delivered by the parties hereto, this Agreement will constitute a
valid and legally binding obligation of the Company enforceable against it in
accordance with its terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium, reorganization or other similar laws and
legal and equitable principles limiting or affecting the rights of creditors
generally; and/or (ii) general principles of equity, regardless of whether
considered in a proceeding in equity or at law;
7
<PAGE>
(c) Noncontravention. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not,
to the best of the Company's knowledge and belief, (i) permit the termination or
acceleration of the maturity of any material indebtedness or material obligation
of the Company; (ii) permit the termination of any material note, mortgage,
indenture, license, agreement, contract, or other instrument to which the
Company is a party or by which it is bound or the Certificate of Incorporation
or Bylaws of the Company; (iii) except as expressly provided in this Agreement
and except for state "blue sky" approvals that may be required and those
consents and waivers which already have been obtained by the Company, require
the consent, approval, waiver or authorization from or registration or filing
with any party, including but not limited to any party to a material agreement
to which the Company is a party or by which it is bound, or any regulatory or
governmental agency, body or entity except where failure to obtain such consent,
approval, waiver or authorization would not have a material adverse effect on
the Company's business; (iv) result in the creation or imposition of any lien,
claim or encumbrance of any kind or nature on any material properties or assets
of the Company; or (v) violate in any material aspect any statue, law, rule,
regulation or ordinance, or any judgment, decree, order, regulation or rule of
any court, tribunal, administrative or governmental agency, body or entity to
which the Company or its properties is subject except where such violation would
not have a material adverse effect on the Company's business.
9. IMPORTANT CONSIDERATIONS: SUITABILITY STANDARDS - WHO SHOULD
INVEST.
INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK AND IS
SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL FINANCIAL RESOURCES WHO HAVE NO NEED
FOR LIQUIDITY IN THEIR INVESTMENT.
A substantial number of state securities commissions have
established investor suitability standards for the marketing within their
respective jurisdictions of restricted securities. Some have also established
minimum dollar levels for purchases in their states. The reasons for these
standards appear to be, among others, the relative lack of liquidity of
securities of such programs as compared with other securities investments.
Investment in the Shares involves a high degree of risk and is suitable only for
persons of substantial financial means who have no need for liquidity in their
investments.
The Company has adopted as a general investor suitability
standard the requirement that each Subscriber for Shares represents in writing
that the Subscriber: (a) is acquiring the Shares for investment and not with a
view to resale or distribution; (b) can bear the economic risk of losing its
entire investment; (c) its overall commitment to investments which are not
readily marketable is not disproportionate to its net worth, and an investment
in the Shares will not cause such overall commitment to become excessive; (d)
has adequate means of providing for its current needs and personal contingencies
and has no need for liquidity in this investment in the Shares; (e) has
evaluated all the risks of investment in the Company; and (f) has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of investing in the Company or is relying on its own
purchaser representative in making an investment decision.
8
<PAGE>
In addition, all of the Subscribers for Shares must be: (1)
extremely sophisticated investors with substantial net worth and experience in
making investments of this nature; and (2) "accredited investors," as defined in
Rule 501 of Regulation D under the Act, by meeting any of the following
conditions:
(i) he or she has an individual income in excess of
$200,000 in each of the two most recent years or joint income with his or her
spouse in excess of $300,000 in each of those years, and he or she reasonably
expects an income in excess of the aforesaid levels in the current year, or
(ii) he or she has an individual net worth, or a joint net
worth with his or her spouse, at the time of his or her purchase, in excess of
$1,000,000 (net worth for these purposes includes homes, home furnishings and
automobiles), or
(iii) he or she otherwise satisfies the Company that he or
she is an accredited investor, as defined in Rule 501 under the Act.
Other categories of investors included within the definition
of accredited investor include the following: certain institutional investors,
including certain banks, whether acting in their individual or fiduciary
capacities; certain insurance companies; federally registered investment
companies; business development companies (as defined under the Investment
Company Act of 1940); Small Business Investment Companies licensed by the Small
Business Administration; certain employee benefit plans; private business
development companies (as defined in the Investment Advisers Act of 1940); tax
exempt organizations (as defined in Section 501(c)(3) of the Internal Revenue
Code) with total assets in excess of $5,000,000; entities in which all the
equity owners are accredited investors; and certain affiliates of the Company.
A partnership Subscriber, which satisfies the requirements set
forth in clauses (a) through (f) above shall satisfy the suitability standards
if it is an accredited investor by reason of clause (iii) above, or if all of
its partners are accredited investors. A corporate subscriber, which satisfies
the requirements set forth in clauses (a) through (f) above shall satisfy the
investor suitability standards if it is an accredited investor by reason of
clause (iii) above, or if all of its shareholders are accredited investors.
Corporate subscribers must have net worth of at least three (3) times the amount
of their investment in the Shares.
The suitability standards referred to above represent minimum
suitability requirements for prospective purchasers and the satisfaction of such
standards by a prospective purchaser does not necessarily mean that the Shares
are a suitable investment for such purchaser. The Company may, in circumstances
it deems appropriate, modify such requirements. The Company may also reject
subscriptions for whatever reasons, in its sole discretion, it deems
appropriate.
Securities Purchase Agreements may not necessarily be accepted
in the order in which received. Purchasers who are residents of certain states
may be required to meet certain additional suitability standards.
9
<PAGE>
THE ACCEPTANCE OF A SUBSCRIPTION FOR SHARES BY THE COMPANY
DOES NOT CONSTITUTE A DETERMINATION BY THE COMPANY THAT AN INVESTMENT IN THE
SHARES IS SUITABLE FOR A PROSPECTIVE INVESTOR. THE FINAL DETERMINATION OF THE
SUITABILITY OF INVESTMENT IN THE SHARES MUST BE MADE BY THE PROSPECTIVE INVESTOR
AND HIS OR HER ADVISERS.
10. State Law Considerations for Residents of All States.
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY
ON THEIR OWN EXAMINATION OFTHE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING
THE MERITS AND RISKS INVOLVED. THESE SHARES HAVE NOT BEEN RECOMMENDED BY ANY
FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
OF THE DESCRIPTION OF BUSINESS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
11. Notices. All notices, requests, consents or other
communications required or permitted hereunder shall be in writing and shall be
hand delivered or mailed first class postage prepaid, registered or certified
mail, to the following addresses:
If to the Company:
VDC Communications, Inc.
75 Holly Hill Lane
Greenwich, CT 06830
Attention: Frederick A. Moran
Chairman & C.E.O.
10
<PAGE>
In the case of Purchaser:
To the address set forth at the end of this Agreement or to
such other addresses as may be specified in accordance herewith from time to
time.
Unless specified otherwise, such notices and other
communications shall for all purposes of this Agreement be treated as being
effective upon being delivered personally or, if sent by mail, five days after
the same has been deposited in a regularly maintained receptacle for the deposit
of United States mail, addressed as set forth above, and postage prepaid.
12. Survival of Representations and Warranties. Representations
and warranties contained herein shall survive the execution and delivery of this
Agreement.
13. Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and permitted assigns of the parties hereto,
provided that this Agreement and the interests herein may not be assigned by
either party without the express written consent of the other party.
14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the jurisdiction of incorporation of
the Company without regard to the principles of conflict of laws. The parties
hereto hereby submit to the exclusive jurisdiction of the courts located in the
jurisdiction of incorporation of the Company with respect to any dispute arising
under this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby.
15. Sections and Other Headings. The section and other headings
contained in this Agreement are for the convenience of reference only, and do
not constitute part of this Agreement or otherwise affect any of the provisions
hereof.
16. Counterpart Signatures. This agreement may be signed in
counterparts and all counterparts together shall become effective only when the
counterpart(s) have been executed and delivered by and on behalf of the Company
and the Purchaser.
17. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
18. Entire Agreement; Amendments. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Purchaser
make any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
11
<PAGE>
19. United States Dollars. All dollar amounts stated herein refer
to and are payable solely in United States Dollars.
IN WITNESS WHEREOF, intending to be legally bound, the parties hereto
have caused this Agreement to be signed by their duly authorized officers.
Purchaser: Frederick W. Moran
100,000 Shares/$362,500.00
- --------------------------
Number and dollar amount /s Frederick W. Moran
of Shares purchased - ---------------------
Purchase Price Name (Signature)
Address/Residence of Purchaser:
------------------------------------
------------------------------------
Social Security No.:
----------------
Accredited Investor Certification
(Place initials on the appropriate
line(s))
(i) I am a natural person who had individual
- ---- income of more than $200,000 in each of the most recent two
years or joint income with my spouse in excess of $300,000
in each of the most recent two years and reasonably expect
to reach that same income level for the current year
("income", for purposes hereof, should be computed as
follows: individual adjusted gross income, as reported (or
to be reported) on a federal income tax return, increased by
(1) any deduction of long-term capital gains under Section
1202 of the Internal Revenue Code of 1986 (the "Code"), (2)
any deduction for depletion under Section 611 et seq. of the
Code, (3) any exclusion for interest under Section 103 of
the Code and (4) any losses of a partnership as reported on
Schedule E of Form 1040);
(ii) I am a natural person whose individual net
- ---- worth (i.e., total assets in excess of total liabilities), or
joint net worth with my spouse, will at the time of purchase
of the Shares be in excess of $1,000,000;
(iii) The Purchaser is an investor satisfying the
- ---- requirements of Section 501(a)(1), (2) or (3) of Regulation D
promulgated under the Securities Act, which includes but is
not limited to, a self-directed employee benefit plan where
investment decisions are made solely by persons who are
"accredited investors" as otherwise defined in Regulation D;
12
<PAGE>
(iv) The Purchaser is a "qualified institutional
- ---- buyer" as that term is defined in Rule 144A of the Securities
Act;
(v) The Purchaser is a trust, which trust has
- ---- total assets in excess of $5,000,000, which is not formed for
the specific purpose of acquiring the Shares offered hereby
and whose purchase is directed by a sophisticated person as
described in Rule 506(b)(ii) of Regulation D and who has such
knowledge and experience in financial and business matters
that he is capable of evaluating the risks and merits of an
investment in the Shares;
(vi) I am a director or executive officer of the
- ---- Company; or
(vii) The Purchaser is an entity (other than
- ---- a trust) in which all of the equity owners meet the
requirements of at least one of the above subparagraphs.
Agreed and Accepted by
VDC COMMUNICATIONS, INC.
By: /s Frederick A. Moran
---------------------
Frederick A. Moran
Chairman & C.E.O.
Dated: 12-23-98
--------
13
EXHIBIT 6
VDC CORPORATION LTD.
-----------------------------------------------------------
Form of Securities Purchase Agreement
-----------------------------------------------------------
100,000 Shares of Common Stock
at $6.00 per Share
-------------------------------------------------------------
May 27, 1998
<PAGE>
CONFIDENTIAL
- ------------
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is entered into as
of the 27th day of May, 1998, by and between VDC Corporation Ltd., a Bermuda
corporation ("VDC" or the "Company"), and the investor whose name appears at the
end of this Agreement ("Purchaser" or "Subscriber").
R E C I T A L S:
----------------
The Company wishes to obtain additional working capital and the
Purchaser desires to provide such working capital to the Company through the
purchase of certain shares of the Company's common stock, $2.00 par value per
share (the "Common Stock"), being privately offered by the Company.
NOW, THEREFORE, in consideration of the premises hereof and the
agreements set forth herein below, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Sale and Purchase of Shares.
Subject to the terms and conditions hereof, the Company agrees
to issue and sell, and the Purchaser agrees to purchase, 100,000 shares of
Common Stock at a purchase price of $6.00 per share. The purchase price is
payable upon subscription in cash, check or wire transfer. If paying by check,
the check should be made payable to "VDC Corporation Ltd." and delivered to VDC
Corporation Ltd. at 27 Doubling Road, Greenwich, CT 06830.
No broker, investment banker or any other person will receive
from the Company any compensation as a broker, finder, adviser or in any other
capacity in connection with the purchase of the Shares.
2. Description of the Shares.
(a) Restricted Securities. The shares of Common Stock of
the Company being offered hereby (the "Shares") shall be "restricted securities"
as that term is defined under Rule 144 of the Securities Act of 1933, as amended
(the "Act") and may not be offered for sale or sold or otherwise transferred in
a transaction which would constitute a sale thereof within the meaning of the
Act unless (i) such security has been registered for sale under the Act and
registered or qualified under applicable state securities laws relating to the
offer and sale of securities; or (ii) exemptions from the registration
requirements of the Act and the registration or qualification requirements of
all such state securities laws are available and the Company shall have received
an opinion of counsel that the proposed sale or other disposition of such
securities may be effected without registration under the Act and would not
result in any violation of any applicable state securities laws relating to the
registration or qualification of securities for sale, such counsel and such
opinion to be satisfactory to the Company.
(b) Voting Rights; Dividends. Holders of Common Stock of
the Company have equal rights to receive dividends when, as, and if declared by
the Board of Directors out of funds legally available therefor. Holders of
<PAGE>
Common Stock of the Company have one vote for each share held of record and do
not have cumulative voting rights.
(c) Liquidation; Redemption. Holders of Common Stock of
the Company are entitled upon liquidation of the Company to share ratably in the
net assets available for distribution, subject to the rights, if any of holders
of any preferred stock of the Company then outstanding. Shares of Common Stock
of the Company are not redeemable and have no preemptive or similar rights. All
outstanding shares of common stock of the Company are fully paid and
nonassessable.
(d) Restrictions Upon Resale. The Subscriber hereby agrees
that the Shares shall be subject to restrictions upon the transfer, sale,
encumbrance or other disposition of the Shares. See "Understanding of Investment
Risks" and "Registration Rights".
3. Shares Offered in a Private Placement Transaction.
The Shares offered by this Securities Purchase Agreement are
being offered as a non-public offering pursuant to Section 4(2) and Regulation D
of the Act ("Regulation D").
4. Binding Effect of Securities Purchase Agreement; the Closing.
This Securities Purchase Agreement shall not be binding on the
Company unless and until an authorized executive officer of the Company has
evidenced acceptance thereof by executing the signature page at the end hereof.
The Company may accept or reject this Securities Purchase Agreement in its sole
discretion if the Purchaser does not meet the suitability standards established
herein, or for any other reason. A closing (the "Closing") will occur
contemporaneously with the execution of this Agreement by all parties hereto.
5. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company as follows:
(a) Accredited Investor. The Purchaser has such knowledge
and experience in business and financial matters such that the Purchaser is
capable of evaluating the merits and risks of purchasing the Shares. The
Purchaser is either an "accredited investor" as that term is defined in Rule 501
of Regulation D of the Act or a "qualified institutional buyer" as that term is
defined in Rule 144A of the Act, and represents that he satisfies the
suitability standards identified in Section 9 hereof;
(b) Loss of Investment. The Purchaser('s) (i) overall
commitment to investments which are not readily marketable is not
disproportionate to his net worth; (ii) investment in the Company will not cause
such overall commitment to become excessive; (iii) can afford to bear the loss
of his entire investment in the Company; and (iv) has adequate means of
providing for his current needs and personal contingencies and has no need for
liquidity in his investment in the Company;
(c) Special Suitability. The Purchaser satisfies any
special suitability or other applicable requirements of his state of residence
and/or the state in which the transaction by which the Shares are purchased
occurs;
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<PAGE>
(d) Investment Intent. The Purchaser hereby acknowledges
that the Purchaser has been advised that this offering has not been registered
with, or reviewed by, the Securities and Exchange Commission ("SEC") because
this offering is intended to be a non-public offering pursuant to Section 4(2)
and Regulation D of the Act. The Purchaser represents that the Purchaser's
Shares are being purchased for the Purchaser's own account and not on behalf of
any other person, for investment purposes only and not with a view towards
distribution or resale to others. The Purchaser agrees that the Purchaser will
not attempt to sell, transfer, assign, pledge or otherwise dispose of all or any
portion of the Shares unless they are registered under the Act or unless in the
opinion of counsel an exemption from such registration is available, such
counsel and such opinion to be satisfactory to the Company. The Purchaser
understands that the Shares have not been registered under the Act by reason of
a claimed exemption under the provisions of the Act which depends, in part, upon
the Purchaser's investment intention;
(e) State Securities Laws. The Purchaser understands that
no securities administrator of any state has made any finding or determination
relating to the fairness of this investment and that no securities administrator
of any state has recommended or endorsed, or will recommend or endorse, the
offering of the Shares;
(f) Authority; Power; No Conflict. The execution, delivery
and performance by the Purchaser of the Agreement are within the powers of the
Purchaser, have been duly authorized and will not constitute or result in a
breach or default under, or conflict with, any order, ruling or regulation of
any court or other tribunal or of any governmental commission or agency, or any
agreement or other undertaking, to which the Purchaser is a party or by which
the Purchaser is bound, and, if the Purchaser is not an individual, will not
violate any provision of the charter documents, By-Laws, indenture of trust or
partnership agreement, as applicable, of the Purchaser. The signatures on the
Agreement are genuine, and the signatory, if the Purchaser is an individual, has
legal competence and capacity to execute the same, or, if the Purchaser is not
an individual, the signatory has been duly authorized to execute the same; and
the Agreement constitutes the legal, valid and binding obligations of the
Purchaser, enforceable in accordance with its terms;
(g) No General Solicitation. The Purchaser acknowledges
that no general solicitation or general advertising (including communications
published in any newspaper, magazine or other broadcast) has been received by
him and that no public solicitation or advertisement with respect to the
offering of the Shares has been made to him;
(h) Advice of Tax and Legal Advisors. The Purchaser has
relied solely upon the advice of his own tax and legal advisors with respect to
the tax and other legal aspects of this investment;
(i) No Brokers Fees. The Purchaser is not aware that
any person, and has been advised that no person, will receive from the Company
any compensation as a broker, finder, adviser or in any other capacity in
connection with the purchase of the Shares other than as declared herein;
(j) Access to Information. Purchaser has had access to
all material and relevant information concerning the Company, its management,
financial condition, capitalization, market information, properties and
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<PAGE>
prospects necessary to enable Purchaser to make an informed investment decision
with respect to its investment in the Shares. Purchaser has carefully read and
reviewed, and is familiar with and understands the contents thereof and hereof,
including, without limitation, the risk factors described in this Agreement. See
"Understanding of Investment Risks." Purchaser acknowledges that it has had the
opportunity to ask questions of and receive answers from, and to obtain
additional information from, representatives of the Company concerning the terms
and conditions of the acquisition of the Shares and the present and proposed
business and financial condition of the Company, and has had all such questions
answered to its satisfaction and has been supplied all information requested;
(k) Review of Exchange Act Reports. The Purchaser
acknowledges that it has been provided with an opportunity to review: (i) a copy
of the Company's Current Report on Form 8-K, which provides details as to the
Company's recent merger with Sky King Communications, which copy is attached
hereto as Exhibit "A"; (ii) a copy of the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1998, which is attached hereto as Exhibit
"B"; and (iii) all other relevant reports filed by the Company with the
Securities and Exchange Commission under the Securities Exchange Act of 1934.
(l) Understanding the Nature of Securities. The Purchaser
understands and acknowledges that:
(i) The Shares have not been registered under
the Act or any state securities laws and are being issued and sold in reliance
upon certain exemptions contained in the Act;
(ii) The Shares are "restricted securities" as
that term is defined in Rule 144 promulgated under the Act;
(iii) The Shares cannot be sold or transferred
without registration under the Act and applicable state securities laws, or
unless the Company receives an opinion of counsel reasonably acceptable to it
(as to both counsel and the opinion) that such registration is not necessary;
and
(iv) the Shares and any certificates issued in
replacement therefor shall bear the following legend, in addition to any other
legend required by law or otherwise:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN TAKEN BY
THE REGISTERED OWNER FOR INVESTMENT, AND WITHOUT A VIEW TO
RESALE OR DISTRIBUTION THEREOF, AND MAY NOT BE TRANSFERRED OR
DISPOSED OF WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER THAT SUCH TRANSFER OR DISPOSITION DOES NOT VIOLATE THE
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<PAGE>
SECURITIES ACT OF 1933, AS AMENDED, OR THE RULES AND
REGULATIONS THEREUNDER."
6. Understanding of Investment Risks. An investment in the
Shares should not be made by a Purchaser who cannot afford the loss of his
entire Purchase Price. The Purchaser acknowledges that the Shares offered hereby
have not been approved or disapproved by the Securities and Exchange Commission,
or any state securities commissions, nor has the Securities and Exchange
Commission or any state securities commission passed upon the adequacy or
accuracy of this Securities Purchase Agreement or any exhibit hereto. Prior to
making an investment in the Shares, the Purchaser has fully considered, among
other things, the financial and other information set forth in the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 (a copy of
which is attached hereto as Exhibit "B"), and acknowledges that such information
have been considered prior to making this investment decision.
7. Registration Rights.
The Company agrees that within ninety (90) days of the
Closing, it will prepare and file with the Securities and Exchange Commission,
and use its best efforts to have declared effective thereafter, a Registration
Statement on Form SB-2 or other equivalent form pursuant to which the Company
shall register the public resale of the Shares. The Company shall have the right
to include within such Registration Statement any other securities on behalf of
the Company or other security holders. The expenses of such registration shall
be borne by the Company.
Notwithstanding the foregoing, the Company may: (A) delay
filing the Registration Statement and may withhold efforts to cause the
Registration Statement to become effective, if the Company determines in good
faith that such registration rights might (i) interfere with or affect the
negotiation or completion of any transaction that is being contemplated by the
Company (whether or not a final decision has been made to undertake such
transaction) at the time the right to delay is exercised, or (ii) involve
initial or continuing disclosure obligations that might not be in the best
interest of the Company's stockholders, and (B) not include the Shares in a
Registration Statement covering an underwritten offering to the extent that the
inclusion of the Shares would, in the opinion of the managing underwriter of
such an offering, adversely affect such an offering or the market for the
Company's securities. In the event that the Shares are not included in the
Registration Statement in accordance with the provisions of clause (B) above,
the Company agrees to register the Shares promptly after the completion of the
underwritten offering described in clause (B) as may be permitted by the
managing underwriter of such an offering. If, after the Registration Statement
becomes effective, the Company advises the holders of registered Shares that the
Company considers it appropriate for the Registration Statement to be amended,
the holders of such Shares shall suspend any further sales of their registered
Shares until the Company advises them that the Registration Statement has been
amended.
Each holder of Shares whose shares are registered pursuant to
the Registration Statement set forth herein shall indemnify and hold harmless
the Company, each of its directors and each of its officers from and against any
and all claims, damages or liabilities, joint or several, to which they or any
of them may become subject, including all legal and other expenses, arising out
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<PAGE>
of or in connection with any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, in any preliminary or
amended preliminary prospectus or in the prospectus (or the Registration
Statement or prospectus as from time to time amended or supplemented) or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading in the circumstances in which they were made,
but only insofar as any such statement or omission was made in reliance upon and
in conformity with information furnished in writing to the Company in connection
therewith by such holder expressly for use therein. The liability of any such
holder shall be limited to the aggregate price at which such holder's Shares of
the Company is sold.
In connection with the registration rights, the Company shall
have no obligation: (i) to assist or cooperate in the offering or disposition of
such Shares; (ii) to indemnify or hold harmless the holders of the securities
being registered; (iii) to obtain a commitment from an underwriter relative to
the sale of such Shares; or (iv) to include such Shares within an underwritten
offering of the Company.
8. Representations and Warranties of the Company. The Company
hereby represents and warrants to Purchaser as follows:
(a) Organization and Standing of the Company. The Company
is a duly organized and validly existing corporation in good standing under the
laws of the Commonwealth of Bermuda with adequate power and authority to conduct
the business in which it is now engaged and has the corporate power and
authority to enter into this Agreement, and is duly qualified and licensed to do
business as a foreign corporation in such other jurisdictions as is necessary to
enable it to carry on its business, except where failure to do so would not have
a material adverse effect on its business;
(b) Corporate Power and Authority. The execution and
delivery of this Agreement and the transactions contemplated hereby have been
duly authorized by the Board of Directors of the Company. No other corporate act
or proceeding on the part of the Company is necessary to authorize this
Agreement or the consummation of the transactions contemplated hereby. When duly
executed and delivered by the parties hereto, this Agreement will constitute a
valid and legally binding obligation of the Company enforceable against it in
accordance with its terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium, reorganization or other similar laws and
legal and equitable principles limiting or affecting the rights of creditors
generally; and/or (ii) general principles of equity, regardless of whether
considered in a proceeding in equity or at law;
(c) Noncontravention. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not,
to the best of the Company's knowledge and belief, (i) permit the termination or
acceleration of the maturity of any material indebtedness or material obligation
of the Company; (ii) permit the termination of any material note, mortgage,
indenture, license, agreement, contract, or other instrument to which the
Company is a party or by which it is bound or the Memorandum of Association or
Bye-Laws of the Company; (iii) except as expressly provided in this Agreement
and except for state "blue sky" approvals that may be required and those
consents and waivers which already have been obtained by the Company, require
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<PAGE>
the consent, approval, waiver or authorization from or registration or filing
with any party, including but not limited to any party to a material agreement
to which the Company is a party or by which it is bound, or any regulatory or
governmental agency, body or entity except where failure to obtain such consent,
approval, waiver or authorization would not have a material adverse effect on
the Company's business; (iv) result in the creation or imposition of any lien,
claim or encumbrance of any kind or nature on any material properties or assets
of the Company; or (v) violate in any material aspect any statute, law, rule,
regulation or ordinance, or any judgment, decree, order, regulation or rule of
any court, tribunal, administrative or governmental agency, body or entity to
which the Company or its properties is subject except where such violation would
not have a material adverse effect on the Company's business; and
(d) Reservation of Securities. The requisite number of
shares of Common Stock of the Company have been duly authorized and reserved for
issuance upon the Company's receipt and acceptance of payment therefor, and no
further corporate action is required for the valid issuance of such Shares.
9. IMPORTANT CONSIDERATIONS: SUITABILITY STANDARDS - WHO SHOULD
INVEST.
INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK AND IS
SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL FINANCIAL RESOURCES WHO HAVE NO NEED
FOR LIQUIDITY IN THEIR INVESTMENT.
A substantial number of state securities commissions have
established investor suitability standards for the marketing within their
respective jurisdictions of restricted securities. Some have also established
minimum dollar levels for purchases in their states. The reasons for these
standards appear to be, among others, the relative lack of liquidity of
securities of such programs as compared with other securities investments.
Investment in the Shares involves a high degree of risk and is suitable only for
persons of substantial financial means who have no need for liquidity in their
investments.
The Company has adopted as a general investor suitability
standard the requirement that each Subscriber for Shares represents in writing
that the Subscriber: (a) is acquiring the Shares for investment and not with a
view to resale or distribution; (b) can bear the economic risk of losing its
entire investment; (c) its overall commitment to investments which are not
readily marketable is not disproportionate to its net worth, and an investment
in the Shares will not cause such overall commitment to become excessive; (d)
has adequate means of providing for its current needs and personal contingencies
and has no need for liquidity in this investment in the Shares; (e) has
evaluated all the risks of investment in the Company; and (f) has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of investing in the Company or is relying on its own
purchaser representative in making an investment decision.
In addition, all of the Subscribers for Shares must be: (1)
extremely sophisticated investors with substantial net worth and experience in
making investments of this nature; and (2) "accredited investors," as defined in
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<PAGE>
Rule 501 of Regulation D under the Act, by meeting any of the following
conditions:
(i) he or she has an individual income in excess of
$200,000 in each of the two most recent years or joint income with his or her
spouse in excess of $300,000 in each of those years, and he or she reasonably
expects an income in excess of the aforesaid levels in the current year, or
(ii) he or she has an individual net worth, or a joint
net worth with his or her spouse, at the time of his or her purchase, in excess
of $250,000 (net worth for these purposes includes homes, home furnishings and
automobiles), or
(iii) he or she otherwise satisfies the Company that he or
she is an accredited investor, as defined in Rule 501 under the Act.
Other categories of investors included within the definition
of accredited investor include the following: certain institutional investors,
including certain banks, whether acting in their individual or fiduciary
capacities; certain insurance companies; federally registered investment
companies; business development companies (as defined under the Investment
Company Act of 1940); Small Business Investment Companies licensed by the Small
Business Administration; certain employee benefit plans; private business
development companies (as defined in the Investment Advisers Act of 1940); tax
exempt organizations (as defined in Section 501(c)(3) of the Internal Revenue
Code) with total assets in excess of $5,000,000; entities in which all the
equity owners are accredited investors; and certain affiliates of the Company.
A partnership Subscriber, which satisfies the requirements set
forth in clauses (a) through (f) above shall satisfy the suitability standards
if it is an accredited investor by reason of clause (iii) above, or if all of
its partners are accredited investors. A corporate subscriber, which satisfies
the requirements set forth in clauses (a) through (f) above shall satisfy the
investor suitability standards if it is an accredited investor by reason of
clause (iii) above, or if all of its shareholders are accredited investors.
Corporate subscribers must have net worth of at least three (3) times the amount
of their investment in the Shares.
The suitability standards referred to above represent minimum
suitability requirements for prospective purchasers and the satisfaction of such
standards by a prospective purchaser does not necessarily mean that the Shares
are a suitable investment for such purchaser. The Company may, in circumstances
it deems appropriate, modify such requirements. The Company may also reject
subscriptions for whatever reasons, in its sole discretion, it deems
appropriate.
Securities Purchase Agreements may not necessarily be accepted
in the order in which received. Purchasers who are residents of certain states
may be required to meet certain additional suitability standards.
THE ACCEPTANCE OF A SUBSCRIPTION FOR SHARES BY THE COMPANY
DOES NOT CONSTITUTE A DETERMINATION BY THE COMPANY THAT AN INVESTMENT IN THE
SHARES IS SUITABLE FOR A PROSPECTIVE INVESTOR. THE FINAL DETERMINATION OF THE
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SUITABILITY OF INVESTMENT IN THE SHARES MUST BE MADE BY THE PROSPECTIVE INVESTOR
AND HIS OR HER ADVISERS.
10. State Law Considerations for Residents of All States.
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY
ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING
THE MERITS AND RISKS INVOLVED. THESE SHARES HAVE NOT BEEN RECOMMENDED BY ANY
FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
OF THE DESCRIPTION OF BUSINESS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
11. Notices. All notices, requests, consents or other
communications required or permitted hereunder shall be in writing and shall be
hand delivered or mailed first class postage prepaid, registered or certified
mail, to the following addresses:
If to the Company:
VDC Corporation Ltd.
27 Doubling Road
Greenwich, CT 06830
Attention: Frederick A. Moran, Chief Executive Officer
With a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll Professional Corporation
Eleven Penn Center
1835 Market Street, 14th Floor
Philadelphia, PA 19103
In the case of Purchaser:
To the address set forth at the end of this Agreement or to
such other addresses as may be specified in accordance herewith from time to
time.
Unless specified otherwise, such notices and other
communications shall for all purposes of this Agreement be treated as being
effective upon being delivered personally or, if sent by mail, five days after
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the same has been deposited in a regularly maintained receptacle for the deposit
of United States mail, addressed as set forth above, and postage prepaid.
12. Survival of Representations and Warranties. Representations
and warranties contained herein shall survive the execution and delivery of this
Agreement.
13. Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and permitted assigns of the parties hereto,
provided that this Agreement and the interests herein may not be assigned by
either party without the express written consent of the other party.
14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the jurisdiction of incorporation of
the Company without regard to the principles of conflict of laws. The parties
hereto hereby submit to the exclusive jurisdiction of the courts located in the
jurisdiction of incorporation of the Company with respect to any dispute arising
under this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby.
15. Sections and Other Headings. The section and other headings
contained in this Agreement are for the convenience of reference only, and do
not constitute part of this Agreement or otherwise affect any of the provisions
hereof.
16. Counterpart Signatures. This Agreement may be signed in
counterparts and all counterparts together shall become effective only when the
counterpart(s) have been executed and delivered by and on behalf of the Company
and the Purchaser.
17. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
18. Entire Agreement; Amendments. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Purchaser
make any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
19. United States Dollars. All dollar amounts stated herein refer
to and are payable solely in United States Dollars.
IN WITNESS WHEREOF, intending to be legally bound, the parties hereto
have caused this Agreement to be signed by their duly authorized officers.
Purchaser: Frederick W. Moran
By:_/s/ Frederick W. Moran
-----------------------
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100,000 Shares/$600,000 Frederick W. Moran
- ----------------------- ------------------
Number and dollar amount Name (Signature)
of Shares purchased -
Purchase Price Address/Residence of Purchaser:
------------------------------------
------------------------------------
Social Security No.
-----------------
Accredited Investor Certification
---------------------------------
(Place initials on the appropriate line(s))
(i) I am a natural person who had individual income of more
- --- than $200,000 in each of the most recent two years or joint
income with my spouse in excess of $300,000 in each of the
most recent two years and reasonably expect to reach that
same income level for the current year ("income", for
purposes hereof, should be computed as follows: individual
adjusted gross income, as reported (or to be reported) on a
federal income tax return, increased by (1) any deduction of
long-term capital gains under section 1202 of the Internal
Revenue Code of 1986 (the "Code"), (2) any deduction for
depletion under Section 611 et seq. of the Code, (3) any
exclusion for interest under Section 103 of the Code and (4)
any losses of a partnership as reported on Schedule E of
Form 1040);
(ii) I am a natural person whose individual net worth (i.e.,
- --- total assets in excess of total liabilities), or joint net
worth with my spouse, will at the time of purchase of the
Shares be in excess of $250,000;
(iii) The Purchaser is an investor satisfying the requirements of
- --- Section 501(a)(1), (2) or (3) of Regulation D promulgated
under the Securities Act, which includes but is not limited
to, a self-directed employee benefit plan where investment
decisions are made solely by persons who are "accredited
investors" as otherwise defined in Regulation D;
(iv) The Purchaser is a "qualified institutional buyer" as that
- --- term is defined in Rule 144A of the Securities Act;
(v) The Purchaser is a trust, which trust has total assets
- --- in excess of $5,000,000, which is not formed for the
specific purpose of acquiring the Shares offered hereby and
whose purchase is directed by a sophisticated person as
described in Rule 506(b)(ii) of Regulation D and who has
such knowledge and experience in financial and business
matters that he is capable of evaluating the risks and
merits of an investment in the Shares;
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(vi) I am a director or executive officer of the Company; or
- ---
(vii) The Purchaser is an entity (other than a trust) in which
- --- all of the equity owners meet the requirements of at least
one of the above subparagraphs.
Agreed and Accepted by
VDC CORPORATION LTD.
By:/s/ Frederick A. Moran
------------------------------------------
Frederick A. Moran, Chief Executive Officer
DATED:5-27-98
--------------------------
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EXHIBIT "A"
VDC CORPORATION LTD.
CURRENT REPORT
ON
FORM 8-K
<PAGE>
EXHIBIT "B"
VDC CORPORATION LTD.
FORM 10-Q
