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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.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
91821B 10 1
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(CUSIP Number)
Frederick A. Moran
VDC Communications, Inc.
75 Holly Hill Lane
Greenwich, CT 06830
(203) 869-5100
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
May 5, 1999
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(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 13 Pages
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1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Frederick A. Moran
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2. Check the Appropriate Box if a Member of a Group (See
Instructions)
(a)
(b) X
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3. SEC Use Only
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4. Source of Funds (See Instructions)
PF, OO
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5. Check if Disclosure of Legal Proceedings is Required Pursuant
to Items 2(d) or 2(e)
X
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6. Citizenship or Place of Organization
U.S.A.
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Number of 7. Sole Voting Power
Shares Bene-
ficially by 290,375 (1)
Owned by Each --------------------------------------------------------------
Reporting 8. Shared Voting Power
Person With
427,817 (1)
--------------------------------------------------------------
9. Sole Dispositive Power
290,375 (1)
--------------------------------------------------------------
10. Shared Dispositive Power
427,817(1)
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11. Aggregate Amount Beneficially Owned by Each Reporting Person
3,502,814 (2), (3)
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12. Check if the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions)
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13. Percent of Class Represented by Amount in Row (11)
16.3% (4)
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14. Type of Reporting Person (See Instructions)
IN
(1) As of the date of filing this statement (the "Statement"), Frederick
A. Moran ("Mr. Moran") had sole dispositive and voting power with respect to
290,375 shares of VDC Communications, Inc. (the "Issuer") common stock, par
value $.0001 per share (the "Common Stock") (including an option to purchase
40,000 shares of Issuer Common Stock held by Mr. Moran, individually, and vested
as of December 1999) and shared dispositive and voting power with respect to
427,817 shares of Issuer Common Stock. As of May 15, 1999, the date which is ten
days following the date of the event which requires filing this Statement, Mr.
Moran had sole voting and dispositive power with respect to 282,675 shares and
shared dispositive and voting power with respect to 427,817 shares of Issuer
Common Stock.
<PAGE>
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CUSIP No. 91821B 10 1 Page 3 of 13 Pages
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(2) Includes stock options to purchase 42,000 shares of Issuer Common
Stock which vested in December 1999. The 3,502,814 shares are owned by the
following individuals and entities in the following amounts: Frederick A. Moran
(125,000 shares plus option to purchase 40,000 shares); Joan Moran (option to
purchase 2,000 shares); Frederick A. Moran and Joan Moran (386,437 shares);
Frederick A. Moran and Anne Moran (41,380 shares); the Moran Equity Fund, Inc.
(938 shares); the Luke F. Moran Trust (1,328,660 shares); the Kent F. Moran
Trust (1,328,810 shares); Luke F. Moran (22,102 shares); Kent F. Moran (15,671
shares); the Frederick A. Moran, IRA (85,998 shares); the Frederick Moran Trust
(90 shares); the Anne Moran Trust (125 shares); the Luke Moran IRA (333 shares);
the Kent Moran IRA (333 shares); the Joan Moran IRA (248 shares); Anne Moran
(63,643 shares); and the Anne Moran IRA (61,046 shares).
This Statement assumes that all shares referenced in the preceding
paragraph are beneficially owned by Mr. Moran due to his family relationship and
family association with the individuals and entities in the preceding paragraph
and therefore the possibility that Mr. Moran is part of a "group" for the
purposes of Section 13(d)(3) of the Act and Rule 13d-5(b)(1) thereunder. Along
these lines, the beneficial ownership of shares owned by Anne Moran, Mr. Moran's
mother, and the Anne Moran IRA were included in Mr. Moran's beneficial ownership
as of December 1999, contemporaneously with Anne Moran's decision to reside with
Mr. Moran. However, it is important to note, as referenced in Items 7 through 10
of the cover page, that Mr. Moran has voting and dispositive power over a very
limited number of shares. The filing of this Statement shall not be construed as
an admission that Mr. Moran is, for purposes of Section 13(d), or 13(g) of the
Act, the beneficial owner of any securities covered by the Statement. The filing
of this Statement shall not be construed as an admission that Mr. Moran is part
of any "group" for the purposes of Section 13(d)(3) of the Act and Rule
13d-5(b)(1) thereunder. Moreover, Mr. Moran specifically disclaims that he is
part of any such group. This disclaimer is based, in part, on the fact that
there is neither an agreement, either orally or in writing, among the Moran
individuals or Moran entities that Mr. Moran is associated with, nor is there a
common plan or goal among such individuals and entities that would give rise to
a "group."
(3) As of May 15, 1999, the date that is ten days after the date of event
which requires the filing of this Statement, Mr. Moran was the beneficial owner
of 3,368,425 shares. As of May 15, 1999, the 3,368,425 shares were owned by the
following individuals and entities in the following amounts: Frederick A. Moran
(125,000 shares); Frederick A. Moran and Joan Moran (386,437 shares); Frederick
A. Moran and Anne Moran (41,380 shares); the Moran Equity Fund, Inc. (27,938
shares); the Luke F. Moran Trust (1,328,660 shares); the Kent F. Moran Trust
(1,328,810 shares); Luke F. Moran (22,102 shares); Kent F. Moran (20,971
shares); the Frederick A. Moran, IRA (85,998 shares); the Frederick Moran Trust
(90 shares); the Anne Moran Trust (125 shares); the Luke Moran IRA (333 shares);
the Kent Moran IRA (333 shares); and the Joan Moran IRA (248 shares).
The beneficial ownership of 3,368,425 shares assumes that all shares
referenced in the preceding paragraph were beneficially owned by Mr. Moran on
May 15, 1999 due to his family relationship and family association with the
individuals and entities in the preceding paragraph and therefore the
possibility that Mr. Moran was part of a "group" for the purposes of Section
13(d)(3) of the Act and Rule 13d-5(b)(1) thereunder. However, it is important to
note, as referenced in Footnote (1) to the cover page, that as of May 15, 1999,
Mr. Moran had voting and dispositive power over a very limited number of shares.
The filing of this Statement shall not be construed as an admission that Mr.
Moran was, for purposes of Section 13(d), or 13(g) of the Act, the beneficial
owner of 3,368,425 shares on May 15, 1999. The filing of this Statement shall
not be construed as an admission that Mr. Moran is or was part of any "group"
for the purposes of Section 13(d)(3) of the Act and Rule 13d-5(b)(1) thereunder.
Moreover, Mr. Moran specifically disclaims that he is or was part of any such
group. This disclaimer is based, in part, on the fact that there is and was
neither an agreement, either orally or in writing, among the Moran individuals
or Moran entities that Mr. Moran is associated with, nor is or was there a
common plan or goal among such individuals and entities that would give rise to
a "group."
<PAGE>
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CUSIP No. 91821B 10 1 Page 4 of 13 Pages
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(4) 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
plus 42,000 shares of Issuer Common Stock underlying stock options. The relevant
percentage for May 15, 1999 was 17.9% based upon 18,853,257 shares of Common
Stock as reported in Issuer's Quarterly Report on Form 10-Q for the quarter
ended March 30, 1999.
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 A. 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, Greenwich, CT 06830.
Item 2. Identity and Background
(a) The name of the person filing this Statement is Frederick A.
Moran.
(b-c) Mr. Moran's principal occupation is serving as Officer and
Director of the Issuer. Mr. Moran's business address and the address of the
Issuer is 75 Holly Hill Lane, Greenwich, Connecticut 06830. The Issuer's
principal business is telecommunications.
(d) During the last five years, Mr. Moran has not been convicted
in any criminal proceeding.
(e) In a civil action filed by the Securities and Exchange
Commission ("SEC") during June 1995, Mr. Moran and Moran Asset Management, Inc.,
an investment advisory firm ("Moran Asset") were found by the United States
District Court for the Southern District of New York to have violated Section
206(2) of the Investment Advisers Act of 1940 (the "Advisers Act") for
negligently allocating shares of stock to Mr. Moran's personal, family and firm
accounts at a slightly lower price than shares of stock purchased for Moran
Asset's advisory clients the following day. The Court also found that Mr. Moran,
Moran Asset and Moran & Associates, Inc. Securities Brokerage, an investment
banking and securities brokerage firm ("Moran Brokerage") had violated the
disclosure requirements of Section 204 of the Advisers Act and the corresponding
broker-dealer registration requirements of Section 15(b) of the Securities
Exchange Act of 1934 (the "Exchange Act") by willfully failing to disclose that
Mr. Moran's two eldest sons were members of Moran Asset's and Moran Brokerage's
board of directors. Mr. Moran was the President and principal portfolio manager
of Moran Asset, as well as the President and Director of Research for Moran
Brokerage. As a result of these findings, Mr. Moran, Moran Asset and Moran
Brokerage were permanently enjoined from violating Sections 204, 206(2), and 207
of the Advisers Act and Section 15(b) of the Exchange Act. The Court ordered
Moran Asset and Moran Brokerage to pay civil monetary penalties in the
respective amounts of $50,000 and $25,000. The Court also ordered Mr. Moran to
disgorge $9,551.17 plus prejudgment interest and pay a civil monetary penalty in
the amount of $25,000.
Although Mr. Moran and the other named parties accepted and
fully complied with the findings of the District Court, they believe that the
outcome of the matter and the sanctions imposed failed to take into account a
number of mitigating circumstances, the first of which is that the basis for the
violation of Section 206(2) of the Advisers Act was an isolated incident of
negligence resulting in the allocation of 15,000 shares of stock to Moran family
and firm accounts at a slightly lower price than those purchased for firm
clients the following day, resulting in $9,551.17 in higher purchase cost
incurred by these clients. In the opinion of Mr. Moran, the scope of this
infraction was not properly considered in view of the following circumstances,
among others: (i) the extraordinary volume of the daily business undertaken by
Moran Asset and Moran Brokerage which, on the date in question, purchased
approximately $34,000,000 of stocks for advisory clients and proprietary
<PAGE>
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CUSIP No. 91821B 10 1 Page 5 of 13 Pages
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accounts; (ii) that the appropriate personnel had inadvertently allocated shares
to certain personal and family accounts on the belief that all client purchases
had been completed; and (iii) shares of an additional stock had been purchased
that day for certain personal and family accounts at prices higher than those
paid by advisory clients the following day. Second, with respect to the
violation of the disclosure requirements of Section 204 of the Advisers Act and
Section 15(b) of the Exchange Act, the Court found Mr. Moran and others to be
liable for failure to disclose additional directors of Moran Asset and Moran
Brokerage. However, the additional directors in question were Mr. Moran's two
older sons who had been appointed as directors as a matter of clerical
convenience. In fact, they never participated in any Board of Directors
meetings, nor made any decisions concerning Moran Asset or Moran Brokerage, and
were never informed that they were directors. Furthermore, if their
directorships had been disclosed, as the Court had determined to be required,
Mr. Moran believes that any such disclosure would have, in fact, enhanced the
Form ADV of Moran Asset and the Form BD of Moran Brokerage, since both adult
sons were professional securities analysts with major investment banks and held
college degrees from prestigious universities. Third, during his twenty-four
years as a full time investment professional, Mr. Moran has not otherwise been
the subject of any SEC, NASD or other regulatory or judicial matters.
Other than as described above, 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 May 5, 1999, Mr. Moran and his wife, Joan Moran, jointly purchased
280,000 shares of Issuer Common Stock for $840,000. The source of this purchase
price was the personal funds of Mr. Moran and Joan Moran. Also on May 5, 1999,
the Kent F. Moran Trust purchased 24,160 shares of Issuer Common Stock for
$72,480. The source of this purchase price was the Trust's funds. Also on May 5,
1999, the Luke F. Moran Trust purchased 24,010 shares of Issuer Common Stock for
$72,030. The source of this purchase price was the Trust's funds. The
above-referenced acquisitions were part of an overall private placement
conducted by the Issuer in May 1999 (the "May 1999 Private Placement") in which
the Issuer sold 1,265,947 shares of Common Stock in a non-public offering exempt
from registration pursuant to Section 4(2), and Rule 506 of Regulation D of the
Securities Act of 1933 as follows:
<TABLE>
<CAPTION>
Shareholder Number of Shares Consideration ($) Warrants(1)
----------- ---------------- ----------------- -----------
<S> <C> <C> <C>
Adase Partners, L.P. 60,000 162,000.00 6,000
Alnilam Partners, LP 2,185 (2)
Dean Brizel and Jeanne Brizel 20,000 54,000.00 2,000
Stephen Buell 20,000 54,000.00 2,000
Capital Opportunity Partners One, LP 20,000 54,000.00 2,000
Arthur Cooper and Joanie Cooper 40,000 108,000.00 4,000
Mark Eshman & Jill Eshman trustees for the 20,000 54,000.00 2,000
Eshman Living Trust dated 9/24/90
Jeffrey Feingold and Barbara Feingold 20,000 54,000.00 2,000
Fred Fraenkel 20,000 54,000.00 2,000
Torunn Garin 60,000 162,000.00 6,000
Henry D. Jacobs Jr. 37,037 99,999.90 3,703
Frederick A. Moran and Joan B. Moran 280,000 840,000.00 -
<PAGE>
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CUSIP No. 91821B 10 1 Page 6 of 13 Pages
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Kent F. Moran Trust 24,160 72,480.00 -
Luke F. Moran Trust 24,010 72,030.00 -
Ernst Von Olnhausen 10,000 27,000.00 1,000
Paradigm Group, LLC 370,370 999,999.00 64,814 (3)
PGP I Investors, LLC 185,185 499,999.50 18,518
Santa Fe Capital Group (NM), Inc. 3,000 (2)
Scott Schenker and Randi Schenker 20,000 54,000.00 2,000
Michael Weissman 10,000 27,000.00 1,000
Robert Vicas 20,000 54,000.00 2,000
------------ ------ --------- -----
Total 1,265,947 121,035
</TABLE>
(1) The warrants have an exercise price of $6.00 per share and expire
three years from the date of grant (May, 2002).
(2) In consideration for investment banking services rendered in connection
with private placement.
(3) Includes warrant to purchase 27,777 shares granted in consideration for
consulting services rendered in connection with private placement.
The following paragraphs detail prior transactions that resulted in the
acquisition of Issuer securities, certain of which are reflected in this
Statement.
In December 1998, Anne Moran, the Anne Moran IRA, Mr. Moran and Anne
Moran, the Frederick A. Moran, IRA, the Joan Moran, IRA, Kent Moran, Luke Moran
and the Moran Equity Fund, Inc. purchased shares of Issuer Common Stock in a
non-public offering exempt from registration pursuant to Section 4(2) and Rule
506 of Regulation D of the Act as set forth below (the "December Private
Placement"). For the individuals and entity referenced in this paragraph,
certain other information required by this Item 3 is set forth in the table
below.
<TABLE>
<CAPTION>
Shareholder Number of Shares Purchase Price ($) Source of Funds
- ----------- ---------------- ------------------ ---------------
<S> <C> <C> <C>
Anne Moran 35,310 127,998.75 N/A
Anne Moran, IRA 49,379 178,998.87 N/A
Frederick A. Moran & 41,380 150,002.50 Personal funds of Mr. Moran and
Anne Moran Anne Moran
Frederick A. Moran, IRA 331 1,199.875 Personal funds of Mr. Moran
Frederick W. Moran 100,000 362,500 N/A
Joan Moran, IRA 248 899 Personal funds of Joan Moran
Kent Moran 8,221 29,801.13 Personal funds of Kent Moran
Luke Moran 9,352 33,901 Personal funds of Luke Moran
Moran Equity Fund, Inc. 938 3,400.25 Working capital
---
TOTAL 245,159
</TABLE>
In May 1998, Anne Moran, the Anne Moran Trust, the Anne Moran, IRA, the
Moran Equity Fund, Inc., the Frederick A. Moran, IRA, Frederick A. Moran and
Joan B. Moran, the Frederick A. Moran Trust, Kent Moran, the Kent Moran, IRA,
Luke Moran, and the Luke Moran IRA purchased shares of Issuer 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 set forth below (the "May Private Placement").
For the individuals and entities referenced in this paragraph, certain other
information required by this Item 3 is set forth in the table below.
<PAGE>
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CUSIP No. 91821B 10 1 Page 7 of 13 Pages
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<TABLE>
<CAPTION>
Shareholder Number of Shares Purchase Price ($) Source of Funds
- ----------- ---------------- ------------------ ---------------
<S> <C> <C> <C>
Lancer Offshore, Inc. 150,000 900,000 N/A
Lancer Voyager Fund 25,000 150,000 N/A
Anne Moran 39,333 235,998 N/A
Anne Moran Trust 250 1,500 Trust funds
Anne Moran, IRA 11,667 70,002 N/A
Moran Equity Fund, Inc. 27,000 162,000 Working capital
Frederick A. Moran, IRA 85,667 514,002 Personal funds of Mr. Moran
Frederick A. Moran 23,667 142,002 Personal funds of Mr. Moran and
& Joan B. Moran Joan Moran
Frederick A. Moran Trust 180 1,080 Trust funds
Frederick W. Moran 100,000 600,000 N/A
Kent Moran 10,000 60,000 Personal funds of Kent Moran
Kent Moran, IRA 333 1,998 Personal funds of Kent Moran
Luke Moran 10,000 60,000 Personal funds of Luke Moran
Luke Moran, IRA 333 1,998 Personal funds of Luke Moran
Alan B. Snyder 100,000 600,000 N/A
-------
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: (1) Mr. Moran and Joan Moran were jointly issued
82,670 shares of Preferred Stock; (2) Luke Moran was issued 1,304,650 shares of
Preferred Stock; and (3) Kent Moran was issued 1,304,650 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 and Joan Moran,
jointly, Kent Moran and Luke 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
Exhibits 4 and 5, respectively, and are incorporated in this Item 3 where such
references and descriptions appear.
Item 4. Purpose of the Transaction
The securities acquired by Frederick A. Moran and Joan Moran, Frederick
A. Moran and Anne Moran, the Moran Equity Fund, Inc., the Luke F. Moran Trust,
the Kent F. Moran Trust, Luke F. Moran, Kent F. Moran, the Frederick A. Moran,
IRA, the Frederick Moran Trust, the Anne Moran Trust, the Luke Moran IRA, the
Kent Moran IRA, the Joan Moran IRA., Anne Moran, and the Anne Moran, IRA, as
documented above in Item 3, were acquired for investment purposes. It should be
noted, however, that the shares acquired by Mr. Moran and Joan Moran, Luke Moran
and Kent Moran in the Merger were acquired in a transaction pursuant to which
Sky King management, including Mr. Moran, assumed management control of VDC.
That is, despite the fact that the shares acquired by such individuals were
acquired for investment purposes, the shares were acquired as part of a
transaction that specifically contemplated a change in management.
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
<PAGE>
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CUSIP No. 91821B 10 1 Page 8 of 13 Pages
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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 in his capacity as an Officer and Director of the Issuer is
constantly assessing enhancements to the Issuer's business. One possibility
being considered is the use of the Internet as a means of augmenting the
Issuer's carriage of telecommunications traffic or to otherwise complement the
Issuer's business with Internet services.
As an Officer and Director of the Issuer, Mr. Moran has influence over
the corporate activities of the Issuer, including as may relate to transactions
described in subparagraphs (a) through (j) of Item 4 of Schedule 13D. Mr. Moran
reserves the right to formulate purposes, plans, or proposals regarding the
Issuer or its securities to the extent he deems advisable in light of his
position as Chief Executive Officer, Chairman of the Board and Director of the
Issuer.
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) As of the date of the filing of this Statement, Mr. Moran is
the beneficial owner of 3,502,814 shares of Issuer Common Stock (see Footnote 1
below)(which includes stock options to purchase 42,000 shares of Issuer Common
Stock which vested in December 1999) which constitutes 16.3% of the issued and
outstanding shares of Issuer 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 plus 42,000 shares of Issuer Common Stock
underlying stock options). As of May 15, 1999, the date that is ten days after
the date of event which requires the filing of this Statement, Mr. Moran was the
beneficial owner of 3,368,425 shares (see Footnote 2 below), which shares
constituted 17.9% of the issued and outstanding shares of Issuer Common Stock
(based upon 18,853,257 shares of Common Stock as reported in Issuer's Quarterly
Report on Form 10-Q for the quarter ended March 30, 1999).
(b) As of the date of filing this Statement, Mr. Moran had sole
dispositive and voting power with respect to 290,375 shares of Issuer Common
Stock (including option to purchase 40,000 shares of Issuer Common Stock held by
Mr. Moran, individually, and vested as of December 1999) and shared dispositive
and voting power with respect to 427,817 shares of Issuer Common Stock. As of
May 15, 1999, the date which is ten days following the date of the event which
requires filing this Statement, Mr. Moran had sole voting and dispositive power
with respect to 282,675 shares and shared dispositive and voting power with
respect to 427,817 shares of Issuer Common Stock. The following sets forth
information with regards to each person with whom the power to vote or to direct
the vote or to dispose or to direct the disposition of shares is shared:
(i) Joan B. Moran.
(a) Joan B. Moran is one of the individuals
with whom Mr. Moran shares the power to vote or to direct the vote or to dispose
or direct the disposition of shares.
<PAGE>
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CUSIP No. 91821B 10 1 Page 9 of 13 Pages
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(b-c) Mrs. Moran's principal occupation is
administrative and human resources assistant at the Issuer. Mrs. Moran's
business address and the address of the Issuer is 75 Holly Hill Lane, Greenwich,
Connecticut 06830.
(d) During the last five years, Mrs. Moran has
not been convicted in any criminal proceedings.
(e) During the last five years, Mrs. Moran
has not been a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction, as a result of which she 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) Mrs. Moran is a citizen of the United States
of America.
(ii) Anne Moran.
(a) Anne Moran is one of the individuals with
whom Mr. Moran shares the power to vote or to direct the vote or to dispose or
direct the disposition of shares.
(b-c) Mrs. Moran is not currently employed. Mrs.
Moran's residence address is 25 Doubling Road, Greenwich, Connecticut 06830.
(d) During the last five years Mrs. Moran has
not been convicted in any criminal proceedings.
(e) During the last five years, Mrs. Moran
has not been a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction, as a result of which she 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) Mrs. Moran is a citizen of the United States
of America.
(c) Mr. Moran has not effected any transactions in the securities
of the Issuer during the past sixty (60) days.
(d) The 3,502,814 shares referenced in Item 5(a) are owned by the
following individuals and entities in the following amounts: Frederick A. Moran
(125,000 share plus option to purchase 40,000 shares); Joan Moran (option to
purchase 2,000 shares); Frederick A. Moran and Joan Moran (386,437 shares);
Frederick A. Moran and Anne Moran (41,380 shares); the Moran Equity Fund, Inc.
(938 shares); the Luke F. Moran Trust (1,328,660 shares); the Kent F. Moran
Trust (1,328,810 shares); Luke F. Moran (22,102 shares); Kent F. Moran (15,671
shares); the Frederick A. Moran, IRA (85,998 shares); the Frederick Moran Trust
(90 shares); the Anne Moran Trust (125 shares); the Luke Moran IRA (333 shares);
the Kent Moran IRA (333 shares); the Joan Moran IRA (248 shares); Anne Moran
(63,643 shares); and the Anne Moran IRA (61,046 shares). Each of these
individuals and entities has either the sole, or shares, the right to receive or
the power to direct the receipt of dividends from, or the proceeds from the sale
of, securities the beneficial ownership of which is attributed to them. The Kent
F. Moran Trust and the Luke F. Moran Trust each separately owns more than five
percent of the outstanding shares of Common Stock of the Issuer.
This Statement assumes that all shares referenced in the
preceding paragraph are beneficially owned by Mr. Moran due to his family
relationship and family association with the individuals and entities in the
preceding paragraph and therefore the possibility that Mr. Moran is part of a
"group" for the purposes of Section 13(d)(3) of the Act and Rule 13d-5(b)(1)
<PAGE>
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CUSIP No. 91821B 10 1 Page 10 of 13 Pages
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thereunder. Along these lines, the beneficial ownership of shares owned by Anne
Moran, Mr. Moran's mother, and the Anne Moran IRA were included in Mr. Moran's
beneficial ownership as of December 1999, contemporaneously with Anne Moran's
decision to reside with Mr. Moran. However, it is important to note, as
referenced in Item 5(b), that Mr. Moran has voting and dispositive power over a
very limited number of shares. The filing of this Statement shall not be
construed as an admission that Mr. Moran is, for purposes of Section 13(d), or
13(g) of the Act, the beneficial owner of any securities covered by the
Statement. The filing of this Statement shall not be construed as an admission
that Mr. Moran is part of any "group" for the purposes of Section 13(d)(3) of
the Act and Rule 13d-5(b)(1) thereunder. Moreover, Mr. Moran specifically
disclaims that he is part of any such group. This disclaimer is based, in part,
on the fact that there is neither an agreement, either orally or in writing,
among the Moran individuals or Moran entities that Mr. Moran is associated with,
nor is there a common plan or goal among such individuals and entities that
would give rise to a "group."
Pursuant to the terms of a Settlement, Release and Discharge
Agreement, dated November 19, 1998 by and among the Issuer, Dr. James C.
Roberts, and Mr. Moran, Dr. Roberts transferred 125,000 shares of Issuer Common
Stock to Mr. Moran, personally, and authorized Mr. Moran to sell said shares in
order to satisfy certain indebtedness Dr. Roberts had to Mr. Moran and his wife,
Mr. Moran, the Issuer, and a third-party landlord. According to the Agreement,
the proceeds from the sale of said shares will go to pay off Dr. Roberts'
indebtedness to the following individuals and entities in the following order:
(1) Mr. Moran and his wife; (2) Mr. Moran; (3) the Issuer; and (4) a third-party
landlord.
(e) Not applicable.
(1) The 3,502,814 shares are owned by the following individuals and
entities in the following amounts: Frederick A. Moran (125,000 share plus option
to purchase 40,000 shares); Joan Moran (option to purchase 2,000 shares);
Frederick A. Moran and Joan Moran (386,437 shares); Frederick A. Moran and Anne
Moran (41,380 shares); the Moran Equity Fund, Inc. (938 shares); the Luke F.
Moran Trust (1,328,660 shares); the Kent F. Moran Trust (1,328,810 shares); Luke
F. Moran (22,102 shares); Kent F. Moran (15,671 shares); the Frederick A. Moran,
IRA (85,998 shares); the Frederick Moran Trust (90 shares); the Anne Moran Trust
(125 shares); the Luke Moran IRA (333 shares); the Kent Moran IRA (333 shares);
the Joan Moran IRA (248 shares); Anne Moran (63,643 shares); and the Anne Moran
IRA (61,046 shares).
This Statement assumes that all shares referenced in the preceding
paragraph are beneficially owned by Mr. Moran due to his family relationship and
family association with the individuals and entities in the preceding paragraph
and therefore the possibility that Mr. Moran is part of a "group" for the
purposes of Section 13(d)(3) of the Act and Rule 13d-5(b)(1) thereunder. Along
these lines, the beneficial ownership of shares owned by Anne Moran, Mr. Moran's
mother, and the Anne Moran IRA were included in Mr. Moran's beneficial ownership
as of December 1999, contemporaneously with Anne Moran's decision to reside with
Mr. Moran. However, it is important to note, as referenced in Item 5(b), that
Mr. Moran has voting and dispositive power over a very limited number of shares.
The filing of this Statement shall not be construed as an admission that Mr.
Moran is, for purposes of Section 13(d), or 13(g) of the Act, the beneficial
owner of any securities covered by the Statement. The filing of this Statement
shall not be construed as an admission that Mr. Moran is part of any "group" for
the purposes of Section 13(d)(3) of the Act and Rule 13d-5(b)(1) thereunder.
Moreover, Mr. Moran specifically disclaims that he is part of any such group.
This disclaimer is based, in part, on the fact that there is neither an
agreement, either orally or in writing, among the Moran individuals or Moran
entities that Mr. Moran is associated with, nor is there a common plan or goal
among such individuals and entities that would give rise to a "group."
(2) As of May 15, 1999, the 3,368,425 shares were owned by the following
individuals and entities in the following amounts: Frederick A. Moran (125,000
shares); Frederick A. Moran and Joan Moran (386,437 shares); Frederick A. Moran
and Anne Moran (41,380 shares); the Moran Equity Fund, Inc. (27,938 shares); the
Luke F. Moran Trust (1,328,660 shares); the Kent F. Moran Trust (1,328,810
<PAGE>
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CUSIP No. 91821B 10 1 Page 11 of 13 Pages
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shares); Luke F. Moran (22,102 shares); Kent F. Moran (20,971 shares); the
Frederick A. Moran, IRA (85,998 shares); the Frederick Moran Trust (90 shares);
the Anne Moran Trust (125 shares); the Luke Moran IRA (333 shares); the Kent
Moran IRA (333 shares); and the Joan Moran IRA (248 shares).
The beneficial ownership of 3,368,425 shares assumes that all shares
referenced in the preceding paragraph were beneficially owned by Mr. Moran on
May 15, 1999 due to his family relationship and family association with the
individuals and entities in the preceding paragraph and therefore the
possibility that Mr. Moran was part of a "group" for the purposes of Section
13(d)(3) of the Act and Rule 13d-5(b)(1) thereunder. However, it is important to
note, as referenced in Item 5(b), that as of May 15, 1999, Mr. Moran had voting
and dispositive power over a very limited number of shares. The filing of this
Statement shall not be construed as an admission that Mr. Moran was, for
purposes of Section 13(d), or 13(g) of the Act, the beneficial owner of
3,368,425 shares on May 15, 1999. The filing of this Statement shall not be
construed as an admission that Mr. Moran is or was part of any "group" for the
purposes of Section 13(d)(3) of the Act and Rule 13d-5(b)(1) thereunder.
Moreover, Mr. Moran specifically disclaims that he is or was part of any such
group. This disclaimer is based, in part, on the fact that there is and was
neither an agreement, either orally or in writing, among the Moran individuals
or Moran entities that Mr. Moran is associated with, nor is there a common plan
or goal among such individuals and entities that would give rise to a "group."
Item 6. Contracts, Arrangement, Understandings or Relationships with Respect to
Securities Holder
The information set forth in Item 3 is hereby incorporated by
reference. A Form of Securities Purchase Agreement for the May 1999 Private
Placement, the December Private Placement, and the May Private Placement are
attached hereto as Exhibits 1, 2 and 3, respectively. All such Securities
Purchase Agreements contained registration rights providing that the Issuer
would use reasonable best efforts or best efforts to file a registration
statement within a certain number of days of closing in which the shares subject
to the Securities Purchase Agreement were included (subject to standard and
customary underwriter scale-back provisions and other restrictions) with all
registration expenses to be paid by the Issuer. Copies of the Merger Agreement
and the Amendment are attached hereto as Exhibit 4 and 5, respectively.
Mr. Moran has entered into an Incentive Stock Option Agreement with
Issuer, dated October 1, 1999, representing an option to purchase 200,000 shares
of Common Stock. The option exercise price is $1.25 per share. The option vests
20% per year over five years commencing on the first anniversary of the date of
grant. The option expires five years from the date of grant.
Mr. Moran has entered into an Incentive Stock Option Agreement with the
Issuer, dated November 30, 1999, representing an option to purchase 450,000
shares of Common Stock. The option exercise price is $1.03125 per share. The
option vests 20% per year over five years commencing on the first anniversary of
the date of grant. The option expires five years from the date of grant.
In connection with a personal loan made by Mr. Moran and his wife to
Edwin B. Read and Mary K. Read, Mr. Read, an Issuer employee, has agreed to
pledge his Issuer stock options as collateral to guarantee the repayment of the
loan. This agreement is documented in a Contractual Short Term Loan Agreement by
and between Edwin B. Read and Mary Karen Read and Frederick A. Moran and Joan
Moran, dated June 25, 1998. The employee at issue currently has options to
purchase 175,000 shares of Issuer Common Stock.
Pursuant to the terms of Settlement, Release and Discharge Agreement,
dated November 19, 1998 by and among the Issuer, Dr. James C. Roberts, and Mr.
Moran, Dr. Roberts transferred 125,000 shares of Issuer Common Stock to Mr.
Moran, personally, and authorized Mr. Moran to sell said shares in order to
satisfy certain indebtedness Dr. Roberts had to Mr. Moran and his wife, Mr.
<PAGE>
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CUSIP No. 91821B 10 1 Page 12 of 13 Pages
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Moran, the Issuer, and a third-party landlord. According to the Agreement, the
proceeds from the sale of said shares will go to pay off Dr. Roberts'
indebtedness to the following individuals and entities in the following order:
(1) Mr. Moran and his wife; (2) Mr. Moran; (3) the Issuer; and (4) a third-party
landlord. The Agreement further provides that to the extent more than 25,000
shares remain after satisfying the foregoing indebtedness, Mr. Moran will retain
shares in excess of 25,000 for his personal ownership with the remaining 25,000
being surrendered to the Company for cancellation. Finally, the Agreement
provides that to the extent 25,000 or fewer shares remain after satisfying the
foregoing indebtedness, Mr. Moran will surrender all such remaining shares to
the Company for cancellation.
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. Form of Securities Purchase Agreement for May 1999 Private Placement.
2. Form of Securities Purchase Agreement for December Private Placement
3. Form of Securities Purchase Agreement for May Private Placement
4. 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.
5. 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.
6. Incentive Stock Option Agreement by and between VDC Communications,
Inc. and Frederick A. Moran, dated November 30, 1999.
7. Incentive Stock Option Agreement by and between VDC Communications,
Inc. and Frederick A. Moran, dated October 1, 1999.
8. Contractual Short Term Loan Agreement by and between Edwin B. Read and
Mary Karen Read and Frederick A. Moran and Joan Moran, dated June 25,
1998.
9. Settlement, Release and Discharge Agreement by and among, VDC
Communications, Inc., Dr. James C. Roberts and Frederick A. Moran,
dated November 19, 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.
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Date
/s/Frederick A. Moran
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Signature
<PAGE>
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CUSIP No. 91821B 10 1 Page 13 of 13 Pages
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Frederick A. 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
The following form was used in connection with a private placement in May, 1999,
pursuant to which: (i) Frederick A. Moran and Joan Moran, joint tenants,
purchased 280,000 shares of Company common stock at $3.00 per share; (ii) the
Kent F. Moran Trust purchased 24,160 shares of Company common stock at $3.00 per
share; and (iii) the Luke F. Moran Trust purchased 24,010 shares of Company
common stock at $3.00 per share.
VDC COMMUNICATIONS, INC.
----------
SECURITIES PURCHASE AGREEMENT
----------
SHARES OF COMMON STOCK
AT $3.00 PER SHARE
----------
MAY 5, 1999
1
<PAGE>
CONFIDENTIAL
- ------------
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is entered into as
of the 5th day of May, 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 $3.00 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 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 10 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 b y which the Shares are purchased
occurs;
3
<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, 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) Broker Fees. Other than as provided for in Section 1,
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
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;
4
<PAGE>
(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, 1998; (ii) a copy of the
Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1998;
(iii) a copy of the Company's Registration Statement on Form S-4, pursuant to
which VDC Corporation Ltd., a Bermuda company, merged with and into the Company;
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 (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, BASED ON AN OPINION LETTER OF COUNSEL SATISFACTORY TO THE
COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION."
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.
5
<PAGE>
7. Understanding of Investment Risks. Any investment in the
Securities should not be made by a Purchaser who cannot afford the loss of his
entire Purchase Price. THE PURCHASER ACKNOWLEDGES THAT THE SECURITIES 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 SECURITIES, THE PURCHASER HAS FULLY CONSIDERED,
AMONG OTHER THINGS, THE FINANCIAL AND OTHER INFORMATION SET FORTH IN THE REPORTS
AS WELL AS THE RISK FACTORS ATTACHED HERETO AS EXHIBIT "A" AND ACKNOWLEDGES THAT
SUCH INFORMATION HAS BEEN CONSIDERED PRIOR TO MAKING THIS INVESTMENT DECISION.
8. Registration Rights. The Company agrees that within sixty (60)
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, 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.
6
<PAGE>
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.
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 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 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.
7
<PAGE>
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 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
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.
8
<PAGE>
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.
11. 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.
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 registered mail, return receipt requested (provided
that facsimile notice shall be deemed received on the next business day if
received after 5:00 p.m. local time), or (c) when received by the addressee, if
sent by a nationally recognized overnight delivery service (receipt requested),
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):
9
<PAGE>
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
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 Delaware without regard to
the principles of conflict of laws.
16. Arbitration. All controversies which may arise between the
parties including, but not limited to, those arising out of or related to this
Agreement shall be determined by binding arbitration applying the laws of the
State of Delaware. 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"). If the Parties are unable to agree on a single arbitrator with fifteen
(15) days of a demand for arbitration being filed with the AAA by one of the
parties, each party shall select an arbitrator and the two (2) arbitrators shall
mutually select a third arbitrator, the three of whom shall serve as an
arbitration panel. The decision of the arbitrator(s) shall be final and binding
upon the Parties and shall not be required to include written findings of law
and fact, 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 Delaware 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.
10
<PAGE>
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 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.
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.
11
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, the parties hereto
have caused this Agreement to be signed.
Purchaser:
Shares/$
Number and dollar amount ____________________________________
of Shares purchased - Name (Signature)
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 $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;
_____ (iv) The Purchaser is a "qualified institutional buyer" as
that term is defined in Rule 144A of the Securities Act;
12
<PAGE>
_____ (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: __________________________
Frederick A. Moran
Chairman & C.E.O.
Dated: _______________________
13
<PAGE>
EXHIBIT "A"
RISK FACTORS
An investment in Company Common Stock and Warrants to purchase Company Common
Stock involves a high degree of risk. Purchasers of such securities should
carefully review the following risk factors.
This following Risk Factors contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Although
forward-looking statements are based on assumptions made, and information
believed, by management to be reasonable, no assurance can be given that such
statements will prove to be correct. Such statements are subject to certain
risks, uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated, projected
or expected. Some, but not all, of such risks and uncertainties are described in
the risk factors set forth below.
1. WE ARE A DEVELOPMENT STAGE COMPANY. We have only recently commenced our
present operations, and therefore, have only a limited operating history
upon which you can evaluate our business. We have strategically placed
telecommunications equipment in cities that we believe will enable us to
efficiently transport telecommunications services. Now we are building our
customer base as rapidly as we can in order to achieve greater revenues and
market penetration. We will also add additional telecommunications
equipment in other areas of the world. We have not yet determined with
certainty where those areas will be.
2. WE ARE LOSING MONEY. We have not yet experienced a profitable quarter
and may not ever achieve profitability. By virtue of the early stage of our
development, we have yet to build sufficient volume of telecommunications
voice and facsimile traffic to reach profitability. Our current expenses
are greater than our revenues. This will probably continue until we reach a
greater level of maturity and it is possible that our revenues may never
exceed our expenses. If operating losses continue for longer than the
short-term, then our continued operation will be in jeopardy. However, we
believe that what we have developed over the past year is valuable and has
the potential to generate revenues greater than expenses.
3. NUMEROUS CONTINGENCIES COULD HAVE A MATERIAL ADVERSE EFFECT ON US.
Because we are a development stage company, and because of the nature of
the industry in which we operate, there are numerous contingencies over
which we have little or no control, any one of which could have a material
adverse effect on us. The contingencies include, but are not limited to,
the addition or loss of major customers, whether through competition,
merger, consolidation or otherwise; the loss of economically beneficial
routing options for the termination of our telecommunications traffic;
financial difficulties of major customers; pricing pressure resulting from
increased competition; and technical difficulties with or failures of
portions of our network that could impact our ability to provide service to
or bill our customers.
4. OUR ABILITY TO IMPLEMENT OUR PLAN SUCCESSFULLY IS DEPENDENT ON A FEW KEY
PEOPLE. We are particularly dependent upon Frederick A. Moran, Chairman,
Chief Executive Officer, Chief Financial Officer, Secretary and Director of
the Company. Mr. Moran is also a significant beneficial shareholder of the
Company. The Company has an employment agreement with Mr. Moran. We believe
the combination of his employment agreement and equity interest keeps Mr.
Moran highly motivated to remain with the Company.
14
<PAGE>
5. THE INTERNATIONAL TELECOMMUNICATIONS MARKET IS RISKY. The international
nature of the our operations involves certain risks, such as changes in
U.S. and foreign government regulations and telecommunications standards,
dependence on foreign partners, tariffs, taxes and other trade barriers,
the potential for nationalization and economic downturns and political
instability in foreign countries. At the current time, we are particularly
dependent on Central and North America. In addition, our business could be
adversely affected by a reversal in the current trend toward the
deregulation of the telecommunications industry. We will be increasingly
subject to these risks to the extent that we proceed with the planned
expansion of international operations.
6. OVERNMENT INVOLVEMENT IN INDUSTRY COULD HAVE AN ADVERSE EFFECT. We are
subject to various U.S. and foreign laws, regulations, agency actions and
court decisions. Our U.S. international telecommunications service
offerings are subject to regulation by the Federal Communications
Commission (the "FCC"). The FCC requires international carriers to obtain
certificates of public convenience and necessity prior to acquiring
international facilities by purchase or lease, or providing international
service to the public. Prior FCC approval is also generally required to
transfer control of a certificated carrier. We must file reports and
contracts with the FCC and must pay regulatory and other fees, which are
subject to change. We are also subject to the FCC policies and rules
discussed below. The FCC could determine, by its own actions or in response
to a third party's filing, that certain of our services, termination
arrangements, agreements with foreign carriers, transit or refile
arrangements or reports did not comply with FCC policies and rules. If this
occurred, the FCC could order us to terminate arrangements, fine us or
revoke our authorizations. Any of these actions could have a material
adverse effect on our business, operating results and financial condition.
7. POTENTIAL FOR TECHNICAL FAILURE. Our services are dependent on our own
and other companies' ability to successfully integrate technologies and
equipment. In connecting with other companies' equipment we take the risk
of not being able to provide service due to their error. In addition, there
is the risk that our equipment may malfunction or that we could make an
error which negatively affects our customers' service. We are also
dependent on the protection of our hardware and other equipment from damage
from natural disasters such as fires, floods, hurricanes and earthquakes,
other catastrophic events such as civil unrest, terrorism and war and other
sources of power loss and telecommunications failures. We have taken a
number of steps to prevent our service from being affected by natural
disasters, fire and the like. We have built redundant systems for power
supply to our equipment. Even though, there can be no assurance that any
such systems will prevent the switches from becoming disabled in the event
of an earthquake, power outage or otherwise. The failure of our network, or
a significant decrease in telephone traffic resulting from effects of a
natural or man-made disaster, could have a material adverse effect on our
relationship with our customers and our business, operating results and
financial condition.
15
<PAGE>
8. THE LONG DISTANCE AND INTERNATIONAL LONG DISTANCE TELEPHONE INDUSTRY IS
HIGHLY COMPETITIVE. We are a small company in an industry with many
companies that have more experience and greater resources than us.
International telecommunications providers compete mainly on the basis of
price, but also customer service, transmission quality, breadth of service
offerings and value-added services. Our operating history is probably not
long enough for you to make a judgment about our ability to compete in this
industry.
9. TECHNOLOGICAL ADVANCEMENT COULD RENDER OUR INFRASTRUCTURE OBSOLETE. The
international telecommunications industry is highly competitive and subject
to the introduction of new services facilitated by advances in technology.
We expect that the future will bring technological change. It is possible
that these changes could result in more advanced telecommunications
equipment that could render our current equipment obsolete. If this were to
happen, we would most likely have to invest significant capital into this
new technology.
10. WE HAVE LIMITED CAPITAL. Being a small company in a capital intensive
industry, our position of limited capital is a significant risk to our
future viability. We are currently seeking financing alternatives that
would put us in a better position financially. There is no guarantee that
we will be able to do this. We may sell additional shares of our stock in
order to provide the capital needed for our operations.
11. WE HAVE A SIGNIFICANT INVESTMENT IN A PRIVATE COMPANY THAT WE DO NOT
CONTROL. We have a non-controlling investment in a private company,
Metromedia China Corporation ("MCC"). Since this company is private and in
development, it is difficult to place a value on its worth. We currently
value our ownership interest based on extrapolating the value placed on MCC
by its majority shareholder, Metromedia International Group. As of March
31, 1999, that equaled $4.34 million. Our total assets were $13.7 million.
The value of our interest in MCC may change in the future. The value of MCC
may be unfavorably influenced by negative operating results, the Chinese
telecommunications market and/or other factors. Furthermore, changes in
governmental policy towards foreign investment in telecommunications in
China could also adversely effect the value of our investment. We have
decreased the value placed on this asset, in large part, due to the
uncertainty of the future of foreign participation in the Chinese
telecommunications market. Even so, there is still the possibility that
this asset will be worth less in the future than we believe is a fair value
currently.
12. OUR STOCK IS HIGHLY VOLATILE. Our stock price fluctuates significantly.
We believe that this will most likely continue. Historically, the market
prices for securities of emerging companies in the telecommunications
industry have been highly volatile. Future announcements concerning us or
our competitors, including results of operations, technological
innovations, government regulations, proprietary rights or significant
litigation, may have a significant impact on the market price of our stock.
13. ADDITIONAL SHARES WILL BE AVAILABLE FOR SALE IN THE PUBLIC MARKET. We
registered stock in connection with the domestication merger of VDC
Corporation Ltd. ("VDC Bermuda") with and into us (the "Domestication
Merger"). The effect of the Domestication Merger was that
members/shareholders of VDC Bermuda became shareholders of the Company
which then became the publicly traded company. In addition, we issued
shares in connection with the MCC investment and other additional business
related matters. These stock issuances and future registration statements
will have the effect of significantly increasing the number of shares
eligible for public trading. Sales of substantial amounts of the stock in
the public market could have an adverse effect on the price of the stock
and may make it more difficult for us to sell stock in the future. Although
it is impossible to predict market influences and prospective values for
securities, it is possible that the substantial increase in the number of
shares available for sale, in and of itself, could have a depressive effect
on the price of our stock.
16
<PAGE>
14. WE HAVE NOT PAID ANY DIVIDENDS TO OUR STOCKHOLDERS AND DO NOT EXPECT TO
ANY TIME IN THE NEAR FUTURE. Instead, we plan to retain earnings for
investment back into the company.
15. THE YEAR 2000 PROBLEM COULD HAVE A MATERIAL ADVERSE EFFECT ON US. The
Year 2000 issue is a matter of worldwide concern for carriers and affects
many aspects of telecommunications technology, including the computer
systems and software applications that are essential for operations. A
significant portion of the devices that we use to provide our basic
services use date-sensitive processes which affect functions such as
service activation, service assurance and billing processes.
We are currently evaluating the Year 2000 readiness of our computer
systems, software applications and telecommunications equipment. We are
sending Year 2000 compliance inquiries to certain third parties (i.e.
vendors, customers, outside contractors) with whom we have a relationship.
These inquiries include, among other things, requests to provide
documentation regarding the third party's Year 2000 programs, and questions
regarding how the third party specifically examined the Year 2000 effect on
their equipment and operations and what remedial actions will be taken with
regard to these problems.
Since we are a new company, our key systems have just recently been
implemented. Most of the vendors of such systems have represented to us
that the systems are compliant with the Year 2000 issues without any
modification. We will, however, continue to require confirmation of Year
2000 compliance in our future requests for proposals from equipment and
software vendors. The failure of the Company's computer systems and
software applications to accommodate the Year 2000, could have a material
adverse effect on our business, financial condition and results from
operations.
Further, if the software and equipment of those on whose services we depend
are not Year 2000 functional, it could have a material adverse effect on
our operations. While most major domestic telecommunications companies have
announced that they expect all of their network and support systems to be
Year 2000 functional by the middle of 1999, other domestic and
international carriers may not be Year 2000 functional. We intend to
continue to monitor the performance of our accounting, information and
other systems and software applications to identify and resolve any Year
2000 issues. Currently, through our discovery process, we have identified
an estimated $84,000 of expenditures associated with updating systems to be
Year 2000 compliant. However, we expect we will find additional expenses
pending the finalization of our Year 2000 investigation.
We believe that the most reasonably likely worst case scenario resulting
from the century change could be the inability to efficiently send voice
and facsimile calls at current rates to desired locations. We do not know
how long this might last. This would have a material adverse effect on our
results from operations.
17
<PAGE>
16. CERTAIN ANTI-TAKEOVER CONSIDERATIONS. Certain provisions of our
Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), and Bylaws, as amended (the "Bylaws"), and the General
Corporation Law of the State of Delaware (the "GCL") could deter a change
in our management or render more difficult an attempt to obtain control of
us. For example, we are subject to the provisions of the GCL that prohibit
a public Delaware corporation from engaging in a broad range of business
combinations with a person who, together with affiliates and associates,
owns 15% or more of the corporation's outstanding voting shares (an
"interested stockholder") for three years after the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. The Certificate of Incorporation includes undesignated
Preferred Stock, which may enable the Board to discourage an attempt to
obtain control of us by means of a tender offer, proxy contest, merger or
otherwise. In addition, the Certificate of Incorporation provides for a
classified Board of Directors such that approximately only one-third of the
members of the Board will be elected at each annual meeting of
stockholders. Classified boards may have the effect of delaying, deferring
or discouraging changes in control of us. Further, certain other provisions
of the Certificate of Incorporation and Bylaws and of the GCL could delay
or make more difficult a merger, tender offer or proxy contest involving
us. Additionally, certain federal regulations require prior approval of
certain transfers of control of telecommunications companies, which could
also have the effect of delaying, deferring or preventing a change in
control.
18
EXHIBIT 2
The following form was used in connection with a private placement in December,
1998, pursuant to which the following individuals and entities were involved on
the following terms:
<TABLE>
<CAPTION>
Name Price Per Share Number of Shares
- ---- --------------- ----------------
<S> <C> <C>
Moran Equity Fund, Inc. 3.625 938
Anne Moran, IRA 3.625 49,379
Luke Moran 3.625 9,352
Kent Moran 3.625 8,221
Anne Moran 3.625 35,310
Frederick A. Moran, IRA 3.625 331
Joan B. Moran, IRA 3.625 248
Anne Moran & Frederick A. Moran 3.625 41,380
Frederick W. Moran 3.625 100,000
===== =======
TOTAL 245,159
</TABLE>
VDC COMMUNICATIONS, INC.
----------
SECURITIES PURCHASE AGREEMENT
----------
SHARES OF COMMON STOCK
at $3.625 per Share
----------
December 23, 1998
1
<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, ______ 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.
(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.
2
<PAGE>
(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;
(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;
3
<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, 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
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;
4
<PAGE>
(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; (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; 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 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, AND ACKNOWLEDGES
THAT SUCH INFORMATION HAVE BEEN CONSIDERED PRIOR TO MAKING THIS INVESTMENT
DECISION.
5
<PAGE>
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, 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.
6
<PAGE>
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;
(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.
7
<PAGE>
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
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.
8
<PAGE>
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.
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 Communications, Inc.
75 Holly Hill Lane
Greenwich, CT 06830
Attention: Frederick A. Moran
Chairman & C.E.O.
9
<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.
19. United States Dollars. All dollar amounts stated herein refer
to and are payable solely in United States Dollars.
10
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, the parties hereto
have caused this Agreement to be signed by their duly authorized officers.
Purchaser:
Shares/$
- ---------------------
Number and dollar amount ____________________________________
of Shares purchased - Name (Signature)
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 $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;
_____ (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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<PAGE>
_____ (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: _______________________
Frederick A. Moran
Chairman & C.E.O.
Dated:______________________
12
EXHIBIT 3
The following form was used in connection with a private placement in May, 1998,
pursuant to which the following individuals and entities were involved on the
following terms:
<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>
VDC CORPORATION LTD.
-----------------------------------------------------------
Form of Securities Purchase Agreement
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Shares of Common Stock
at $6.00 per Share
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May 27, 1998
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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, 85,667 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
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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) 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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(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,
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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 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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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,
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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 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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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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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:
By:
---------------------------------
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Shares/ ------------------------------------
- ------ --------- Name (Signature)
Number and dollar amount
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
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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 CORPORATION LTD.
By:
---------------------------------
Frederick A. Moran, Chief Executive Officer
DATED:
------------------------
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EXHIBIT "A"
VDC CORPORATION LTD.
CURRENT REPORT
ON
FORM 8-K
<PAGE>
EXHIBIT "B"
VDC CORPORATION LTD.
FORM 10-Q
EXHIBIT 4
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
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<TABLE>
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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
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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
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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>
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<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>
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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
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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
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(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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<PAGE>
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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<PAGE>
(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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<PAGE>
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.
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(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.
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(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
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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
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(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;
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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
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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.
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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");
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(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>
<TABLE>
<CAPTION>
Schedule 4.2(d)(i)
------------------
VDC Corporation Ltd. Warrants
-----------------------------
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 5
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 6
1999-OP18
Frederick A. Moran
Optionee
VDC COMMUNICATIONS, INC.
------------------------
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE VDC COMMUNICATIONS, INC.
1998 STOCK INCENTIVE PLAN, AS AMENDED (the "Plan")
This Agreement is made as of November 30, 1999, (the "Grant
Date") by and between VDC Communications, Inc., a Delaware corporation (the
"Corporation") and Frederick A. Moran (the "Optionee").
WHEREAS, Optionee is an employee of the Corporation or one of
its subsidiaries and the Corporation considers it desirable and in its best
interest that Optionee be given an inducement to acquire a proprietary interest
in the Corporation and an incentive to advance the interests of the Corporation
by granting the Optionee an option to purchase shares of common stock of the
Corporation (the "Common Stock");
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree that as of the Grant Date, the Corporation hereby grants
Optionee an option to purchase from it, upon the terms and conditions set forth
in the Plan (a copy of which is attached hereto) and this Agreement, that number
of shares of the authorized and unissued Common Stock of the Corporation as is
set forth on Schedule A hereto.
1. Terms of Stock Option. The option to purchase Common
Stock granted herein is subject to the terms, conditions, and covenants set
forth in the Plan as well as the following:
(a) This option shall constitute an Incentive
Stock Option which is intended to qualify
under Section 422 of the Internal Revenue
Code of 1986, as amended;
(b) The per share exercise price for the shares
subject to this option shall be 110% of the
Fair Market Value (as defined in the Plan)
of the Common Stock on the Grant Date, which
exercise price is set forth on Schedule A
hereto;
1
<PAGE>
(c) This option shall vest in accordance with
the vesting schedule set forth on Schedule A
hereto; and
(d) No portion of this option may be exercised
more than five (5) years from the Grant
Date.
2. Payment of Exercise Price. The option may be
exercised, in part or in whole, only by written request to the Corporation
accompanied by payment of the exercise price in full either: (i) in cash for
the shares with respect to which it is exercised; (ii) by delivering to the
Corporation a notice of exercise with an irrevocable direction to a
broker-dealer registered under the Securities Exchange Act of 1934, as amended,
to sell a sufficient portion of the shares and deliver the sale proceeds
directly to the Corporation to pay the exercise price; (iii) in the discretion
of the Plan Administrator, through the delivery to the Corporation of
previously-owned shares of Common Stock having an aggregate Fair Market Value
equal to the option exercise price of the shares being purchased pursuant to
the exercise of the Option; provided, however, that shares of Common Stock
delivered in payment of the option price must have been held by the Optionee for
at least six (6) months in order to be utilized to pay the option price; (iv) in
the discretion of the Plan Administrator, through an election to have shares
of Common Stock otherwise issuable to the Optionee withheld to pay the
exercise price of such Option; or (v) in the discretion of the Plan
Administrator, through any combination of the payment procedures set forth in
Subsections (i) - (iv) of this paragraph.
3. Miscellaneous.
--------------
(a) This Agreement and the options represented
hereby may not be assigned or transferred in
any manner except by will or by the laws of
descent and distribution.
(b) This Agreement will be governed and
interpreted in accordance with the laws of
the State of Connecticut, and may be
executed in more than one counterpart, each
of which shall constitute an original
document.
(c) No alterations, amendments, changes or
additions to this agreement will be binding
upon either the Corporation or Optionee
unless reduced to writing and signed by both
parties.
(d) All controversies or claims arising out of
this Agreement shall be determined by
binding arbitration, conducted at the
Corporation's offices in Greenwich,
Connecticut, or at such other location
designated by the Corporation, before the
American Arbitration Association.
2
<PAGE>
(e) No rule of construction requiring
interpretation against the drafting party
shall apply to the interpretation of this
Agreement.
(f) If any provision of this Agreement is held
to be invalid, the remaining provisions
shall remain in full force and effect.
In witness whereof, the parties have executed this Agreement
as of the Grant Date.
VDC COMMUNICATIONS, INC.
By:/s/ Frederick A. Moran
----------------------
Frederick A. Moran
Chief Executive Officer
OPTIONEE
/s/ Frederick A. Moran
----------------------
Frederick A. Moran
3
<PAGE>
Frederick A. Moran
Optionee
Schedule A
1. Grant Date: November 30, 1999
2. Number of Shares of Common Stock covered by the Option: 450,000
3. Exercise Price (110% of Fair Market Value of Common Stock on the Grant
Date): $1.03125
4. The Option shall vest in accordance with the following schedule:
(i) 90,000 shares shall vest on the first anniversary of the Grant
Date, provided Optionee remains continuously employed by the
Corporation, or its subsidiaries, from November 30, 1999
through November 29, 2000;
(ii) 90,000 shares shall vest on the second anniversary of the
Grant Date, provided Optionee remains continuously employed
by the Corporation, or its subsidiaries, from November 30,
1999 through November 29, 2001;
(iii) 90,000 shares shall vest on the third anniversary of the Grant
Date, provided Optionee remains continuously employed by the
Corporation, or its subsidiaries, from November 30, 1999
through November 29, 2002;
(iv) 90,000 shares shall vest on the fourth anniversary of the
Grant Date, provided Optionee remains continuously employed by
the Corporation, or its subsidiaries, from November 30, 1999
through November 29, 2003; and
(v) 90,000 shares shall vest on the fifth anniversary of the Grant
Date, provided Optionee remains continuously employed by the
Corporation, or its subsidiaries, from November 30, 1999
through November 29, 2004.
4
EXHIBIT 7
1998-OP5/A
Frederick A. Moran
Optionee
THIS AGREEMENT SUPERSEDES AND RENDERS NULL AND VOID A PRIOR INCENTIVE STOCK
OPTION AGREEMENT BETWEEN THE PARTIES MADE AS OF DECEMBER 8, 1998.
VDC COMMUNICATIONS, INC.
------------------------
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE VDC COMMUNICATIONS, INC.
1998 STOCK INCENTIVE PLAN, AS AMENDED (the "Plan")
This Agreement is made as of October 1, 1999, (the "Grant
Date") by and between VDC Communications, Inc., a Delaware corporation (the
"Corporation") and Frederick A. Moran (the "Optionee").
WHEREAS, Optionee is an employee of the Corporation or one of
its subsidiaries and the Corporation, in December 1998, considered it desirable
and in its best interest that Optionee be given an inducement to acquire a
proprietary interest in the Corporation and an incentive to advance the
interests of the Corporation and granted the Optionee an option to purchase
shares of common stock of the Corporation (the "Common Stock"); and
WHEREAS, the parties entered into an Incentive Stock Option
Agreement dated December 8, 1998 (the "December Option Agreement") representing
an option to purchase 200,000 shares of Corporation Common Stock (the "December
Option");
WHEREAS, the Board of Directors of the Corporation has
repriced the per share exercise price for the shares subject to the December
Option; and
WHEREAS, the parties wish to enter into a new agreement that
reflects the new exercise price, and supersedes and renders null and void the
December Option Agreement and the December Option.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree that as of the Grant Date, the Corporation hereby grants
Optionee an option to purchase from it, upon the terms and conditions set forth
in the Plan (a copy of which is attached hereto) and this Agreement, that number
of shares of the authorized and unissued Common Stock of the Corporation as is
set forth on Schedule A hereto.
<PAGE>
1. Terms of Stock Option. The option to purchase Common
Stock granted herein is subject to the terms, conditions, and covenants set
forth in the Plan as well as the following:
(a) This option shall constitute an Incentive
Stock Option which is intended to qualify
under Section 422 of the Internal Revenue
Code of 1986, as amended;
(b) The per share exercise price for the shares
subject to this option shall be higher than
110% of the Fair Market Value (as defined in
the Plan) of the Common Stock on the Grant
Date, which exercise price is set forth on
Schedule A hereto;
(c) This option shall vest in accordance with
the vesting schedule set forth on Schedule A
hereto; and
(d) No portion of this option may be exercised
more than five (5) years from December 8,
1998.
2. Payment of Exercise Price. The option may be
exercised, in part or in whole, only by written request to the Corporation
accompanied by payment of the exercise price in full either: (i) in cash for
the shares with respect to which it is exercised; (ii) by delivering to the
Corporation a notice of exercise with an irrevocable direction to a
broker-dealer registered under the Securities Exchange Act of 1934, as amended,
to sell a sufficient portion of the shares and deliver the sale proceeds
directly to the Corporation to pay the exercise price; (iii) in the discretion
of the Plan Administrator, through the delivery to the Corporation of
previously-owned shares of Common Stock having an aggregate Fair Market Value
equal to the option exercise price of the shares being purchased pursuant to
the exercise of the Option; provided, however, that shares of Common Stock
delivered in payment of the option price must have been held by the Optionee for
at least six (6) months in order to be utilized to pay the option price; (iv) in
the discretion of the Plan Administrator, through an election to have shares
of Common Stock otherwise issuable to the Optionee withheld to pay the exercise
price of such Option; or (v) in the discretion of the Plan Administrator,
through any combination of the payment procedures set forth in Subsections (i) -
(iv) of this paragraph.
3. Miscellaneous.
(a) This Agreement and the option represented
hereby may not be assigned or transferred in
any manner except by will or by the laws of
descent and distribution.
(b) This Agreement will be governed and
interpreted in accordance with the laws of
the State of Connecticut, and may be
<PAGE>
executed in more than one counterpart, each
of which shall constitute an original
document.
(c) No alterations, amendments, changes or
additions to this agreement will be binding
upon either the Corporation or Optionee
unless reduced to writing and signed by both
parties.
(d) All controversies or claims arising out of
this Agreement shall be determined by
binding arbitration, conducted at the
Corporation's offices in Greenwich,
Connecticut, or at such other location
designated by the Corporation, before the
American Arbitration Association (the
"AAA").
(e) No rule of construction requiring
interpretation against the drafting party
shall apply to the interpretation of this
Agreement.
(f) This Agreement supersedes and renders null
and void the December Option Agreement and
the December Option.
(g) The recitals to this Agreement constitute a
part of this Agreement.
(h) If any provision of this Agreement is held
to be invalid, the remaining provisions
shall remain in full force and effect.
In witness whereof, the parties have executed this Agreement
as of the Grant Date.
CORPORATION:
VDC COMMUNICATIONS, INC.
By:/s/ Frederick A. Moran
---------------------------
Frederick A. Moran
Chief Executive Officer
OPTIONEE:
/s/ Frederick A. Moran
------------------------------
Frederick A. Moran
<PAGE>
Frederick A. Moran
Optionee
Schedule A
1. Grant Date: October 1, 1999
2. Number of Shares of Common Stock covered by the Option: 200,000
3. Exercise Price (higher than 110% of Fair Market Value of Common Stock
on the Grant Date): $1.38
4. The Option shall vest in accordance with the following schedule:
(i) 40,000 shares shall vest on December 8, 1999, provided
Optionee remains continuously employed by the Corporation from
December 8, 1998 through December 7, 1999;
(ii) 40,000 shares shall vest on December 8, 2000, provided
Optionee remains continuously employed by the Corporation
from December 8, 1998 through December 7, 2000;
(iii) 40,000 shares shall vest on December 8, 2001, provided
Optionee remains continuously employed by the Corporation from
December 8, 1998 through December 7, 2001;
(iv) 40,000 shares shall vest on December 8, 2002, provided
Optionee remains continuously employed by the Corporation from
December 8, 1998 through December 7, 2002; and
(v) 40,000 shares shall vest on December 8, 2003, provided
Optionee remains continuously employed by the Corporation from
December 8, 1998 through December 7, 2003.
EXHIBIT 8
Contractual Short Term Loan Agreement
-------------------------------------
This contractual agreement is made this 25th day of June, 1998 between Edwin B.
Read and Mary Karen Read (hereinafter referred to as "Read") of 805 Harvard St.
Rochester, NY 14610 and Frederick A. and Joan Moran (hereinafter referred to as
"Moran") of 25 Doubling Road, Greenwich, CT 06830. The purpose of this agreement
is to provide necessary funds to Read to allow Read to purchase a home in
Fairfield County, CT. Read will reimburse Moran the funds it has borrowed, plus
interest charged Moran account at DLJ (IMS division) for the funds Moran
borrowed from DLJ to provide funds to Read. Moran has set up a separate margin
brokerage account in Moran's name at DLJ, solely for the purpose of lending
these funds to Read. This account has been funded by Moran exclusively with
shares of stock. There will be no cash or borrowed funds in the account at
inception. Funds will only be withdrawn from the account for Read's benefit.
Therefore, the total borrowings of the account will constitute the funds
borrowed by Read and the interest charged by DLJ upon those borrowings.
Therefore, Read will repay Moran by placing into this account the funds
necessary to eliminate the margin debt in the account in full; that is both
principal withdrawn, plus interest charged by DLJ.
If the structure of the account should be altered by sales of stock or cash
infusion by Moran, the principal borrowed plus interest at the rate charged by
DLJ must still be repaid by Read.
It is anticipated that Read will borrow up to about $190,000 from the account.
VDC Corporation, Ltd. will guarantee Moran repayment of Moran's loan to Read
upon Read's failure to repay same.
As collateral, Read will deliver a second mortgage on it's new house plus Read's
option to purchase VDC Corporation common stock to VDC Corporation Ltd. These
mortgage and options will be held in escrow by VDC. Upon Read's repayment in
full of Moran, the mortgage and options shall be automatically returned to Read
by VDC. If Read fails to repay Moran within 36 months, VDC shall thereafter
immediately repay these funds to Moran and may foreclose upon the house and
cancel the options or reissue them to another person.
This contract constitutes the entire agreement between the parties and
supercedes any prior understandings or agreements. This agreement can only be
altered by a mutually agreed upon written agreement. The Parties hereby agree to
all of the terms herein.
June 25, 1998 /s/ Edwin B. Read
-----------------------------------
Edwin B. Read
June 25, 1998 /s/ Mary Karen Read
-----------------------------------
Mary Karen Read
June 25, 1998 /s/ Frederick A. Moran
-----------------------------------
Frederick A. Moran
June 25, 1998 /s/ Joan B. Moran
-----------------------------------
Joan B. Moran
EXHIBIT 9
SETTLEMENT, RELEASE AND DISCHARGE AGREEMENT
-------------------------------------------
THIS SETTLEMENT, RELEASE AND DISCHARGE AGREEMENT (the "Agreement"),
made this 19th day of November, 1998 (the "Date of this Agreement"), by and
among VDC COMMUNICATIONS, INC. (the "Company"), a corporation organized and
existing under the laws of the State of Delaware, DR. JAMES C. ROBERTS
("Roberts"), an individual presently residing within the State of Connecticut
and FREDERICK A. MORAN, an individual presently residing within the State of
Connecticut ("Moran").
WITNESSETH:
-----------
WHEREAS, VDC Corporation Ltd., a Bermuda corporation which merged with
and into the Company on or about November 6, 1998 ("VDC Bermuda"), and Roberts
are parties to an employment agreement dated as of March 3, 1998 (the
"Employment Agreement") pursuant to which Roberts served as an officer and
director of VDC Bermuda and the Company;
WHEREAS, as a result of the merger of VDC Bermuda with and into the
Company on or about November 6, 1998 (the "Domestication Merger"), the Company
is the successor-in-interest to all of the assets, liabilities and agreements of
VDC Bermuda, including, without limitation, the Employment Agreement;
WHEREAS, during his term of employment, Roberts, directly or
indirectly, was a principal stockholder of the Company;
WHEREAS, the Company and Roberts desire to adjust his stock ownership
in the Company and terminate the Employment Agreement, together with any and all
other arrangements, agreements or understandings between them, and except as
otherwise set forth herein, to terminate any and all claims that relate in any
manner to any matters arising out of or relating in any way to Roberts'
employment with or severance from the Company, or that otherwise relate to
Roberts' relationship with the Company, and to take the other actions as
provided below;
WHEREAS, in conjunction with the termination of all such agreements and
arrangements, Roberts does hereby tender his resignation as set forth in
Paragraph 1 hereafter;
WHEREAS, on or about June 24, 1998, Moran and Joan B. Moran, husband
and wife, entered into a loan agreement with Roberts which was secured by a
pledge of stock by the Trust and Moran, individually, has loaned Roberts certain
funds for moving expenses (collectively the "Moran Loans"); and
WHEREAS, Roberts and Moran would like to provide for the repayment of
the Moran Loans as set forth herein.
<PAGE>
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein, the parties hereto, intending to be legally bound hereunder,
agree as follows:
1. Resignation and Termination of Services.
----------------------------------------
1.1 Roberts hereby resigns as an officer, director and
employee of the Company, effective as of November 19, 1998, and the Company
hereby accepts such resignation. Roberts and the Company further agree to
terminate, effective November 19, 1998, the Employment Agreement, together with
any and all other arrangements, agreements and understandings between them
relating in any way or manner to Roberts' employment by the Company or services
on behalf of the Company; provided, however, that the provisions of Paragraph 7
of the Employment Agreement shall survive the termination thereof.
1.2 Roberts hereby resigns as an officer and director of
VDC Bermuda, effective as of November 19, 1998, and the VDC Bermuda hereby
accepts such resignation.
1.3 Roberts hereby resigns from all positions he held
with Voice & Data Communications (Hong Kong) Limited, including, but not limited
to director, as of the Date of this Agreement.
1.4 Roberts hereby resigns from all positions he held, if
any, with Masatepe Communications, U.S.A., L.L.C.
2. Release of Obligations.
-----------------------
2.1 By Roberts.
-----------
(a) Except for the Company's obligations set
forth herein and subject to the Company fulfilling its obligations as set
forth herein, Roberts, for and in consideration of the undertakings set forth
herein, and intending to be legally bound, does hereby REMISE, RELEASE AND
FOREVER DISCHARGE the Company and its subsidiaries, component and affiliated
entities, individually and collectively, its and their respective officers,
directors, employees and agents (including but not limited to Frederick A.
Moran, Clayton F. Moran, Joan Moran, Anthony DeJesus, Louis D. Frost, Charles
Mulloy, Dr. Hussein Elkholy, James Dittman, Leonard Hausman, William Zimmerling,
James Glenn, and Robert Warner), and its and their predecessors, successors
and assigns, heirs, executors and administrators, of and from any and all
manner of actions and causes of actions, suits, debts, claims and demands
whatsoever in law or in equity, which Roberts ever had, now has, or hereafter
may have, or which his heirs, executors or administrators hereafter may
have by reason of any matter, cause or thing whatsoever from the beginning
of the world to the Date of this Agreement and, particularly, but without
limitation of the foregoing terms, any claims concerning or relating in any
way to Roberts' status as an employee, officer or director of the Company or
VDC Bermuda, or any of its subsidiaries, or to Roberts' employment
relationship and/or the termination of his employment relationship with the
Company and/or its predecessors, component and/or affiliated corporate
entities including, but not limited to, any claims which have been or could
have been asserted, or could be asserted now or in the future against the
Company and/or its trustees, officers, directors, employees and agents
including any claims arising under any and all federal, state or local
2
<PAGE>
statutory or common laws including, but not limited to, any claims arising under
Title VII of the Civil Rights Act of 1964, 42 U.S.C. ss. 2000e, Age
Discrimination in Employment Act, 29 U.S.C. ss. 621 et seq., the Americans with
Disabilities Act, 42 U.S.C. ss. 12101, et seq., the Employee Retirement Income
Security Act, 29 U.S.C. ss. 1001, et seq., any contract with the Company or its
subsidiaries, and any and all other claims arising out of Roberts' employment at
the Company and termination thereof, including any claims for counsel fees and
costs. It is expressly understood and agreed that this Agreement shall operate
as a clear and unequivocal waiver by Roberts of any claim for accrued or future
wages, benefits or any other type of payment.
(b) Roberts further agrees and covenants that
neither he, nor any person, organization or other entity on his behalf, will
file, charge, claim, sue or cause or permit to be filed, charged or claimed
any action for legal or equitable relief (including damages, injunctive,
declaratory, monetary or other relief) involving any matter related in any
way whatsoever to Roberts' employment relationship with the Company or VDC
Bermuda or involving any continuing effects of any acts or practices which
may have arisen or occurred during Roberts' employment relationship or
thereafter in connection with the termination of his employment relationship
with the Company or VDC Bermuda.
(c) This Agreement does not prevent Roberts
from filing a charge of discrimination with the Equal Employment Opportunity
Commission, although by signing this Agreement Roberts waives his right to
recover any damages or other relief in any claim or suit brought by or through
the Equal Employment Opportunity Commission or any other state or local agency
on his behalf under any federal or state discrimination law, except where
prohibited by law. Roberts agrees to release and discharge the Company not
only from any and all claims which he could make on his own behalf but also
specifically waives any right to become, and promises not to become, a member of
any class in any proceeding or case in which a claim or claims against the
Company may arise, in whole or in part, from any event which occurred as of the
Date of this Agreement. Roberts agrees to pay for any legal fees or costs
incurred by the Company as a result of any breach of the promises in this
paragraph. The parties agree that if Roberts, by no action of his own, becomes
a mandatory member of any class from which he cannot, by operation of law
or order of court, opt out, he shall not be required to pay for any legal fees
or costs incurred by the Company as a result.
2.2 By the Company.
---------------
(a) Except for the Roberts's obligations set
forth herein and subject to the Roberts fulfilling his obligations as set forth
herein, the Company, for and in consideration of the undertakings set forth
herein, and intending to be legally bound, does hereby REMISE, RELEASE AND
FOREVER DISCHARGE Roberts and his heirs, executors and administrators, of and
from any and all manner of actions and causes of actions, suits, debts, claims
and demands whatsoever in law or in equity, which the Company ever had, now has,
or hereafter may have, or which its successors or assigns hereafter may have by
reason of any matter, cause or thing whatsoever from the beginning of the world
to the Date of this Agreement and, particularly, but without limitation of
the foregoing terms, any claims concerning or relating in any way to Roberts'
status as an employee, officer or director of the Company or VDC Bermuda, or
any of its subsidiaries, or to Roberts' employment relationship and/or the
termination of his employment relationship with the Company and/or its
3
<PAGE>
predecessors, component and/or affiliated corporate entities including, but
not limited to, any claims which have been or could have been asserted, or could
be asserted now or in the future against Roberts or his heirs, executors and
administrators including any claims arising under any and all federal, state or
local statutory or common laws.
(b) The Company also agrees that it will not
file any claim for legal or equitable relief against Roberts for any matter
related in any way whatsoever to Roberts' employment relationship with the
Company or involving any continuing effects of any acts or practices which may
have arisen or occurred during Roberts' employment relationship or thereafter
in connection with the termination of his employment relationship with the
Company or VDC Bermuda. This provision, however, is not intended to restrict
the Company's ability to cooperate in any manner it deems appropriate with any
enforcement agency with any analysis, investigation or prosecution related in
any way to Roberts' employment with the Company or VDC Bermuda.
3. Non-Competition and Confidentiality.
------------------------------------
(a) Roberts agrees, that for and in consideration of
compliance by the Company of the mutual covenants and premises contained herein,
for a period of two (2) years after the date hereof, he shall not directly or
indirectly: (i) engage in or carry on any business or in any way become
associated with any business which is similar to or is in competition with the
Business of the Company (as such term is used and defined below); (ii) solicit
the business of any person or entity, on behalf of himself or any other person
or entity, which is or has been at any time during the term of the Employment
Agreement a material customer or material supplier of the Company including, but
not limited to, former or present customers or suppliers with whom Roberts has
had personal contact during, or by reason of, his relationship with the Company;
(iii) be or become an employee, agent, consultant, representative, director or
officer of, or be otherwise in any manner associated with, any person, firm,
corporation, association or other entity which is engaged in or is carrying on
any business which is similar to or in competition with the Business of the
Company; (iv) solicit for employment or employ any person employed by the
Company or VDC Bermuda at any time during the 24-month period immediately
preceding such solicitation or employment; or (v) be or become a shareholder,
joint venturer, owner (in whole or in part), partner, or be or become associated
with or have any proprietary or financial interest in or of any firm,
corporation, association or other entity which is engaged in or is carrying on
any business which is similar to or in competition with the Business of the
Company. Notwithstanding the preceding sentence above, passive equity
investments by Roberts of $25,000 or less in any entity or affiliated group of
any entity which is engaged in or is carrying on any business which is similar
to or in competition with the Business of the Company, shall not be deemed to
violate this Paragraph 3. As used in this Agreement, the term "Business of the
Company" shall include all material business activities in which the Company is
engaged now which consists of (i) telecommunications gateways in the United
States, Nicaragua, Hong Kong, Egypt, Costa Rica, Honduras, El Salvador, South
Korea, Russia and Poland; (ii) international and domestic long distance
telecommunications services in the United States, Nicaragua, Hong Kong, Egypt,
Costa Rica, Honduras, El Salvador, South Korea, Russia and Poland; and (iii)
prepaid telephone calling cards.
4
<PAGE>
(b) Roberts acknowledges that the restrictions contained
herein in view of the nature of the business in which the Company is and has
been engaged, and in consideration of the financial value of the settlement
provisions of Paragraphs 4 and 5 hereof, are reasonable and necessary to protect
the legitimate interests of the Company, and that any violation of any of these
restrictions would result in irreparable injury to the Company. Roberts
acknowledges that, in the event of a violation of any of these restrictions, the
Company shall be entitled to preliminary and permanent injunctive relief as well
as an equitable accounting of all earnings, profits and other benefits arising
from such violation which rights or remedies shall be cumulative and in addition
to any other rights or remedies to which the Company may be entitled. In the
event that Roberts shall engage, directly or indirectly, in any business in
competition with the business of the Company, the period of non-competition
referred to above shall be extended by a period of time equal to that period
beginning when such violation commenced, and ending when the activities
constituting such a violation shall have finally been terminated in good faith.
(c) In addition, Roberts shall not disclose Confidential
Information of or about the Company, VDC Bermuda, VDC Telecommunications, Inc.,
Voice & Data Communications (Hong Kong) Limited, Masatepe Communications,
U.S.A., L.L.C., Masatepe Communiciones S.A., World Connect and their
subsidiaries and affiliates to any other person, entity, corporation, trust,
association or partnership. For the purposes of this Agreement, the term
"Confidential Information" shall include, without limitation, information
obtained while Roberts was employed by the Company or VDC Bermuda as an officer
or director or in any other capacity, relating to the Company's financial
condition, its systems, know-how, designs, formulas, processes, devices, patents
(pending or otherwise), inventions, research and development, projects,
technologies, communications with third parties such as governmental agencies,
customers or suppliers, methods of doing business, agreements with customers or
suppliers or other aspects of the Business of the Company which information is
generally not available outside of the Company to persons who are not authorized
to have such information or which information is otherwise treated as
confidential or which is sufficiently secret to derive economic value from not
being disclosed.
(d) Notwithstanding anything to the contrary contained
herein, in the event that any court of equity determines that the time period
and/or scope of this restrictive covenant is held to be unenforceably long
or broad, as the case may be, then, and in either such event, neither the
enforceability nor the validity of this paragraph as a whole shall be affected.
Rather, the time period and/or scope of the restriction as affected shall
be reduced to the maximum permitted by law.
4. Consideration.
--------------
4.1 Severance Pay and Medical Benefits. The Company
-----------------------------------
shall:
(a) pay Roberts the amount of $5,208.34, less any state,
local and federal withholding, employment or income taxes payable with
respect thereto, payable on each of the following dates: November 30, 1998,
December 15, 1998, and December 30, 1998. This total gross sum of $15,625.02
represents payment of Roberts' annual salary of $125,000 as set forth in the
5
<PAGE>
Employment Agreement for the period commencing as of November 16, 1998 and
ending December 30, 1998; and
(b) at its own expense, from the period commencing
November 19, 1998 through December 31, 1998, maintain Roberts as a participant
in his current major medical or group health insurance plan.
4.2 Transfer, Surrender and Conversion of Stock.
--------------------------------------------
(a) Upon the execution of this Agreement by Roberts and
the Company, Roberts, as settlor and co-trustee of The Roberts Family Trust
(the "Trust"), shall deliver to the Company: (x) VDC Corporation Ltd.
Stock Certificate Number VDC1635, representing 1,512,500 shares of common stock
of VDC Corporation Ltd. in the name of the Trust (the "VDC Corp. Shares")
(which by virtue of the Domestication Merger are exchangeable for 1,512,500
shares of common stock of the Company); and (y) a stock power duly executed
disposing of the VDC Corp. Shares upon the following terms:
(i) 637,500 of the VDC Corp. Shares shall be
exchanged for Company common stock and issued in the name of the Company (the
"First Series Shares");
(ii) 700,000 of the VDC Corp. Shares shall be
exchanged for Company common stock and issued in the name of the Trust (the
"Trust Shares");
(iii) 125,000 of the VDC Corp. Shares shall be
exchanged for Company common stock and issued in the name of Frederick A. Moran
(the "Payment Shares"), and
(iv) 50,000 of the VDC Corp. Shares shall be
exchanged for Company common stock and issued in the name of the Trust (the
"Additional Consulting Fee Shares").
The First Series Shares shall be delivered and surrendered to the Company within
twenty (20) business days of the Date of this Agreement. The Trust Shares shall
be delivered to Roberts within twenty (20) business days of the Date of this
Agreement. The Payment Shares and Additional Consulting Fee Shares shall be
delivered to Moran within twenty (20) business days of the Date of this
Agreement.
(b) Upon the execution of this Agreement by Roberts and
the Company, Roberts, as settlor and co-trustee of the Trust, shall deliver to
the Company a duly executed stock power transferring to the Company the
1,237,500 shares of the Company preferred stock owned by the Trust (which by
virtue of the Domestication Merger are convertible into 1,237,500 shares of
the Company's common stock) represented by stock certificate number PB7 of VDC
(Delaware), Inc. (n/k/a VDC Communications, Inc.). Said shares shall be
converted into Company common stock and delivered and surrendered to the Company
within twenty (20) business days of the Date of this Agreement.
(c) Of the 700,000 Trust Shares, the parties hereby agree
that 50,000 of the Trust Shares shall be payment for Advisory Services (as
defined below) in accordance with Paragraph 6.1(a)(i). In addition to any
6
<PAGE>
restrictions on the sale, offering or transfer of the Trust Shares pursuant to
federal or state securities laws, the Trust Shares shall be subject to certain
restrictions as set forth in Paragraphs 4.2(d) and 4.2(f). As such, all stock
certificates for the Trust Shares shall bear the following restrictive legend:
The Shares represented by this certificate are subject to a
Settlement, Release and Discharge Agreement dated November 19,
1998, by and among James C. Roberts, VDC Communications, Inc.,
and Frederick A. Moran, and may not be transferred or
encumbered except in accordance with the terms of that
Agreement.
(d) Subject to the condition set forth in Paragraph
4.2(e), Roberts covenants that none of the Trust Shares shall be sold by the
Trust, Roberts or any other person or entity until the one year anniversary of
the Date of this Agreement; provided, however, that a sale of the Trust Shares
by a brokerage or securities firm pledgee of such shares during the one year
period following the Date of this Agreement shall not be considered a breach
of this Paragraph if such sale is made as a result of a foreclosure or margin
call of such shares by said pledgee. Roberts further covenants that during the
one year period following the Date of this Agreement: (x) neither the Trust nor
Roberts, nor any person or entity on their behalf, shall margin more than
300,000 Trust Shares; (y) the Trust, Roberts, and any person or entity on their
behalf, shall margin the Trust Shares only with brokerage and securities firms
("Selected Firms") that are willing to lend funds at the rate of 40% or greater
of the aggregate value, calculated as set forth below on the day the Trust
Shares are margined with the respective Selected Firm, of the Trust Shares
margined with a Selected Firm; and (z) that during the one year period
following the Date of this Agreement, neither the Trust nor Roberts, nor any
person or entity on their behalf, shall margin the Trust Shares for more than
25% of the aggregate value, calculated as set forth below on the day the Trust
Shares are margined with the respective Selected Firm, of the Trust Shares
margined with the respective Selected Firm. For the purposes of this Paragraph,
the value of a Trust Share on a given day shall be determined as follows: (A) if
the Company's common stock is traded in the over-the-counter market and not
on any national securities exchange nor in the NASDAQ Reporting System, the
value shall be the last bid price per share, as reported by the National
Quotation Bureau, Inc. or an equivalent generally accepted reporting service,
for the most recent trading day, or if not so reported, the closing bid price
for a share of the Company's common stock for the most recent trading day as
furnished to the Company by any member of the National Association of Securities
Dealers, Inc., selected by the Company for that purpose; or (B) if the Company's
common stock is traded on a national securities exchange or in the NASDAQ
Reporting System, the value shall be the closing price at which a share of the
Company's common stock traded, as quoted on a national or other major stock
exchange or the NASDAQ Reporting System for the most recent trading day.
(e) The restrictions and covenants set forth in
Paragraph 4.2(d) hereof shall immediately terminate if the market price of
Company common stock is $7.00 or more on at least 30 trading days during any
120 consecutive trading day period following the Date of this Agreement.
For the purposes of this Paragraph, the market price of a share of Company
common stock on a given day shall be determined as follows: (A) if the Company's
common stock is traded in the over-the-counter market and not on any national
securities exchange nor in the NASDAQ Reporting System, the market price shall
be the last bid price per share, as reported by the National Quotation Bureau,
7
<PAGE>
Inc. or an equivalent generally accepted reporting service, for the most recent
trading day, or if not so reported, the closing bid price for a share of the
Company's common stock for the most recent trading day as furnished to the
Company by any member of the National Association of Securities Dealers, Inc.,
selected by the Company for that purpose; or (B) if the Company's common
stock is traded on a national securities exchange or in the NASDAQ Reporting
System, the market price shall be the closing price at which a share of the
Company's common stock traded, as quoted on a national or other major stock
exchange or the NASDAQ Reporting System for the most recent trading day.
(f) If the restrictions and covenants set forth in
Paragraph 4.2(d) are terminated in accordance with Paragraph 4.2(e), then, in
addition to any restrictions on the sale, offering or transfer of the Trust
Shares pursuant to federal or state securities laws, the resale of the Trust
Shares shall be subject to the following restrictions:
(i) 33% of the Trust Shares may be sold, offered
or transferred immediately;
(ii) 33% of the Trust Shares may not be sold,
offered or transferred until the six month anniversary of the Date of this
Agreement; and
(iii) 34% of the Trust Shares may not be sold,
offered or transferred until the twelve month anniversary of the Date of this
Agreement.
Notwithstanding the restrictions in this Paragraph
4.2(f), a sale of shares pledged in accordance with Paragraph 4.2(d) by a
brokerage or securities firm pledgee shall not be considered a breach of this
Paragraph if such sale is made as a result of a foreclosure or margin call of
such shares by said pledgee.
(g) For thirty (30) days from the Date of this Agreement,
the Company shall provide Roberts with whatever reasonable assistance is
necessary to permit Roberts to pledge his Company stock in accordance with the
terms of this Paragraph 4.2; said assistance may include reasonable
modifications on the restrictions contained in this Paragraph 4.2.
(h) Stock certificates representing the Payment Shares
and the Additional Consulting Fee Shares shall be delivered to Moran who shall
hold the Payment Shares and the Additional Consulting Fee Shares in escrow
to be disbursed pursuant to the terms hereof. The Payment Shares (consisting, in
part, of 100,000 shares of VDC Corporation Ltd. common stock that Roberts
had previously pledged to Moran and Joan Moran (the "Pledge") to secure the
Residential Loan (as defined below)) shall be disbursed in accordance with the
provisions of Paragraph 5.2 hereof to satisfy certain obligations of Roberts,
and the Additional Consulting Fee Shares shall be disbursed, in accordance with
the terms of Paragraph 6.1, to compensate Roberts for providing consulting
services to the Company as set forth in Paragraph 6.1.
(i) Roberts hereby agrees that Moran will hold
the Payment Shares and Additional Consulting Fee Shares in escrow, Moran hereby
agrees to hold and disburse such shares, and the remaining parties hereto agree
to such arrangement.
8
<PAGE>
(ii) Moran shall not be under any duty to give
the property held by him hereunder any greater care than it gives its own
similar property.
(iii) Moran may act in reliance upon advice of
counsel in reference to any matter connected herewith, and shall not be liable
for any mistake of fact or error of judgment.
(iv) Moran shall have the right to vote all
shares held in escrow.
(v) The Company, Roberts and the Roberts
Family Trust, and their respective employees, representatives, agents, heirs,
beneficiaries, successors and assigns, hereby waive any suit, claim, demand
or cause of action of any kind which any of them may have or may assert
against Moran arising out of or relating to the execution or performance
by Moran of this Agreement. The Company, Roberts and the Roberts Family Trust
hereby irrevocably covenant not to sue or commence or join in any proceedings,
whether legal, equitable or otherwise, against Moran on account of any act or
omission to act on the part of Moran. Further, to induce Moran to act hereunder,
Roberts and the Roberts Family Trust hereto agree to hold Moran harmless from
any liability incurred by any action taken or omission by Moran.
5. Cancellation of Loan - Return of Securities - Tower Lease
---------------------------------------------------------
5.1 The Company shall forgive the indebtedness owed to it
by Roberts under that certain Promissory Note, dated December 8, 1997, in the
original principal amount of $164,175, made in connection with the Subscription
Agreement, dated December 8, 1997, between Roberts and Sky King Communications,
Inc. (predecessor-in-interest to the Company).
5.2 Moran shall hold the Payment Shares and the proceeds
derived from the sale thereof in escrow pursuant to the terms hereof and shall
dispose of the Payment Shares as follows:
(a) Each of the parties hereto authorizes Moran to sell
as soon as is practicable and judicious, in the sole discretion of Moran, that
number of Payment Shares Moran determines, in his sole discretion, is necessary
in order to repay a loan of approximately $270,000 made by Frederick A. and Joan
B. Moran, husband and wife, to Roberts in connection with the lease and/or
purchase of a residence (the "Residence") in Greenwich, Connecticut by Roberts
(the "Residential Loan");
(b) Each of the parties hereto authorizes Moran to sell
that number of Payment Shares Moran determines, in his sole discretion, is
necessary to repay a loan in the original principal amount of $5,000 made by
Frederick A. Moran to Roberts on the date hereof for moving expenses (the
"Moving Loan").
(c) Each of the parties hereto authorizes Moran to sell,
as soon as is practicable and from time to time, that number of Payment Shares
Moran determines, in his sole discretion, is necessary to satisfy certain of
Roberts' rental or lease obligations associated with the Residence which
9
<PAGE>
obligations consist solely of monthly rental payments of approximately $18,000
for the six month period following the Date of this Agreement, which rental
obligations shall equal approximately $108,000 in the aggregate (the "Rental
Obligation").
(d) Each of the parties hereto authorizes Moran to sell
that number of Payment Shares Moran determines, in his sole discretion, is
necessary to reimburse any expenses incurred by the Company and/or VDC
Bermuda in connection with expediting the consummation of the Domestication
Merger between the Company and VDC Bermuda on behalf of Roberts, which expenses
include but are not limited to, expedited fees for filing the certificate of
merger with the Secretary of State of Delaware and courier and postal fees for
documents related to the Domestication Merger (the "Merger Expedition Fees");
(e) Moran shall apply the proceeds from the sale of the
Payment Shares first to the repayment of the Residential Loan; second, to the
repayment of the Moving Loan; third, to reimbursement of the Company for the
Merger Expedition Fees; and fourth, to the satisfaction of the Rental
Obligation.
(f) Upon the satisfaction in full of the Residential
Loan, the Lease Obligations, the Merger Expedition Fees and Moving Loan as
set forth herein, the parties hereby authorize Moran to distribute the remaining
Payment Shares (the "Remaining Payment Shares") as follows:
(i) If there are more than 25,000 Remaining
Payment Shares, Moran shall be entitled to any Remaining Payment Shares in
excess of 25,000 as satisfaction of the Moran Loans; provided, however, that
in no event shall such shares be distributed to Moran until January 1, 1999.
Moran shall surrender the 25,000 Remaining Payment Shares to the Company for
cancellation on the Company's books and records.
(ii) If there are 25,000 or fewer Remaining
Payment Shares, Moran shall surrender the said Remaining Payment Shares to the
Company for cancellation on the books and records of the Company.
5.3 The Company agrees to indemnify and hold Roberts harmless
against any liability of Roberts arising under the Agreement of Lease between
Tower Realty Operating Partnership, L.P. and VDC Bermuda, dated July, 1998 (the
"Tower Lease") and Roberts' Good Guy Guaranty of the Tower Lease. The Company
shall use diligent and good faith efforts to release Roberts from his Good Guy
Guaranty of the Tower Lease.
6. Affirmative Covenants.
----------------------
6.1 Advisory Services.
------------------
(a) For a period of twenty-four months from the date
hereof, Roberts agrees to provide advisory services (the "Advisory Services")
on a limited basis, to, or on behalf of, the Company as set forth below.
As compensation for providing these services, Roberts shall be entitled to the
following:
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(i) 50,000 shares of Company common stock
(which shall be issued as part of the 700,000 Trust Shares), for Advisory
Services to be rendered during the first 12 months; and
(ii) 50,000 of Additional Consulting Fee Shares
on the twelve month anniversary of the Date of this Agreement for Advisory
Services to be rendered during the second 12 months.
All of the Additional Consulting Fee Shares shall be subject to the same
restrictions as the Trust Shares as set forth in Paragraphs 4.2(d) and 4.2(f).
(b) Roberts shall be required to respond to telephonic
inquiries of employees or officers of the Company, particularly the C.E.O., and
to otherwise provide general assistance in connection with business matters as
they relate to the Company.
(c) Roberts shall cooperate with the Company in
connection with confirming matters or providing information relative to matters
for which he had principal responsibility while in the employ of the Company.
(d) Roberts will cooperate with the Company's auditors
in connection with the preparation of financial statements.
(e) On most occasions Roberts may provide such assistance
or confirmation telephonically; however, he may on an occasional basis be
required to meet personally with Company personnel at the offices of the
Company or in the general surrounding area, or be requested to provide
confirmations to third parties.
(f) The Company shall reimburse Roberts for any
out-of-pocket expenses, preapproved by the Company in writing, incurred by
Roberts in rendering Advisory Services.
6.2 Return of Company Materials.
----------------------------
Roberts has, or will upon the execution hereof,
deliver to the Company any and all Company property in his possession or under
his control. For the purpose of this paragraph, the term "property" means all
files, memoranda, minutes of Board meetings, employee files, documents, papers,
agreements, keys, credit cards, items, records, computer hardware, computer
software, computer apparatus, items of personal property, machinery and
equipment or other materials, that belong to the Company, were taken from the
premises of the Company or were purchased with funds or in the name of the
Company. The Company may, at the request of Roberts, make copies of certain
non-confidential files of a personal nature that he may retain for his records.
6.3 Full and Complete Accounting; Responsibility for
-----------------------------------------------------
Expenses.
---------
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(a) Roberts agrees to reimburse the Company for all
personal expenses incurred by the Company on his behalf since March 6, 1998,
and to henceforth refrain from charging any items of personal expense to the
account of the Company. Roberts shall immediately return the two (2) Sprint
cellular telephones the Company has permitted Roberts to use and all unused
DHL envelopes. Any other personal expenses incurred by the Company on behalf of
Roberts, since March 6, 1998, shall be offset on a pro-rata basis against the
remaining payments of consideration set forth at Paragraph 4.1 hereof. Prior to
offset, however, the Company shall provide Roberts with reasonable notice of any
such items in question so that Roberts may designate the character of such
terms. To the extent that any of the items to be offset exceed the total amount
of consideration due hereunder, Roberts shall immediately reimburse the Company
for such amounts. To the extent that Roberts and the Company cannot agree on the
nature or amount of an expense in question, they agree to submit the matter to
arbitration in the manner provided for at Paragraph 9 hereunder.
6.4 Roberts agrees that he shall not make or publish, or
assist anyone else to make or publish, any negative, critical, disparaging,
slanderous, or libelous statements about the Company or its subsidiaries or any
of their respective officers, directors, agents, employees, or representatives,
and unless (and then only to the extent) required by law, shall not disclose the
terms and provisions of the Agreement to any third party without the Company's
consent. Roberts agrees that he will provide no assistance, advisory services or
efforts to any third parties in connection with any disputes, claims or legal
proceedings between such third parties and the Company.
6.5 The Company agrees that neither it nor its officers,
directors, agents, employees, or representatives shall make or publish any
negative, critical, disparaging, slanderous, or libelous statements about
Roberts, and unless (and then only to the extent) required by law, shall not
disclose the terms and provisions of this Agreement to any third party, without
Roberts' consent. The Company agrees that it will provide no assistance or
advisory services (unless required by law) to any third parties in connection
with any disputes between such third parties and Roberts.
6.6 Roberts agrees to execute and deliver any documents
or make any representation reasonably required by the Company in order to
facilitate the termination of Roberts' employment with the Company.
6.7 Roberts agrees to serve as a witness for the Company,
and otherwise assist and cooperate with the Company, in any dispute between the
Company, or its subsidiaries, and BDO Seidman, or its subsidiaries, affiliates
or divisions. The Company shall reimburse Roberts for any out-of-pocket
expenses, preapproved by the Company in writing, incurred by Roberts in serving
as a witness for the Company or otherwise assisting or cooperating with the
Company, in any dispute between the Company, or its subsidiaries, and BDO
Seidman, or its subsidiaries, affiliates or divisions.
6.8 Roberts covenants and agrees to indemnify, defend and
hold harmless the Company and each of its shareholders, officers, directors,
employees, attorneys, and/or agents, individually and collectively (the
"Indemnified Parties"), against and in respect of any claim, liability, loss,
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cost, damage or expense (including attorneys' fees and costs of investigation
incurred in defending against or settling any such claim, liability, loss, cost,
damage or expense, and any amounts paid in settlement thereof) imposed on,
incurred or sustained by the Company and/or the Indemnified Parties as a result
of any inaccuracy or breach of Roberts' representations and warranties set forth
in Paragraph 7 or the subsections thereof or any breach of any obligations of
Roberts under this Agreement.
7. Representations and Warranties of Roberts.
------------------------------------------
Roberts does hereby provide the following representations and
warranties to the Company and the Company does hereby rely upon the accuracy and
truthfulness of such representations and warranties for the purpose of this
Agreement.
7.1 Roberts has delivered, or will upon the execution
hereof, deliver to the Company any and all files, memoranda, documents,
records, employee files, minutes of Board meetings, keys, credit cards, items of
personal property, computer hardware, software or other apparatus, machinery or
equipment, or any other materials which belong to the Company or were paid for
with Company funds, which Roberts has in his possession or control, which he
knows are in the possession or control of his spouse or which were removed from
the premises of the Company by him or his spouse.
7.2 He knows of no action or failure to act on the part
of the Company (including its directors, officers, employees and other agents
and representatives) condition, event, occurrence or the like, which could form
the basis for a claim or complaint against the Company, its subsidiaries or
other entities or individuals described above, by any third party and has not
committed or contracted the Company to any obligations.
7.3 Roberts has not during the term of his employment,
alone or with others, disclosed to third parties, without the knowledge or
permission of the Company, Confidential Information about the Company, its
technologies, formulations, customers, or suppliers, nor has he undertaken any
act or omission to act in a manner which breaches Paragraph 7 of his employment
agreement, which was effective during the term of his employment, nor has
he knowingly misrepresented the Company to any entity.
7.4 Roberts agrees that he shall not represent to any
individual or entity that he or any of his family members is an officer or
director of the Company. Furthermore, Roberts agrees that he shall not represent
to any third party that he has the authority or ability to execute contracts or
other documents or make decisions or take actions on behalf of the Company, any
of its subsidiaries or any of their respective officers, directors, employees or
agents.
7.5 The Rental Obligation, described more particularly in
Paragraph 5.2(c), does not exceed, in the aggregate, $108,000.
7.6 Roberts and Lynne Roberts, as Co-Trustees of the
Trust, have the sole requisite authority to execute this Agreement on behalf
of the Trust and bind the Trust thereto.
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The foregoing representations and warranties shall be deemed to be in the nature
of an obligation of Roberts in so far as the falsehood of same shall be deemed
to be a breach by Roberts of his obligations hereunder.
8. Standstill Provision.
---------------------
For and in consideration of the mutual covenants and premises
contained herein, during the term of this Agreement, and for a period of one (1)
year thereafter, (which period shall lapse in the event of the breach of this
Agreement by the Company), neither Roberts nor any family member (defined for
this purpose to include his spouse and children) or company, partnership or
trust in which Roberts (or such family member) owns five (5%) percent or more of
its equity or voting interests or for which Roberts serves as an employee,
agent, officer, director or partner will: (i) for the purposes of subparagraphs
(ii) or (iii) hereafter, acquire, offer to acquire, or agree to acquire,
directly or indirectly, by purchase or otherwise, any voting securities or
direct or indirect rights or options to acquire any voting securities of the
Company; (ii) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" to vote (as such terms are interpreted in the proxy
rules of the Securities and Exchange Commission), or seek to advise or influence
any person or entity with respect to the voting of any voting securities of the
Company, or (iii) form, join or in any way participate in a "group" within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended,
with respect to any voting securities of the Company for the purpose of seeking
to control the management, Board of Directors or policies of the Company.
Further, the parties acknowledge that the Company would not have an adequate
remedy at law for money damages in the event that this covenant were not
performed in accordance with its terms and therefore Roberts agrees that the
Company shall be entitled to specific enforcement of the terms hereof in
addition to any other remedy to which it may be entitled, at law or in equity.
9. Arbitration.
------------
Any dispute between the parties hereunder shall be determined
by binding arbitration applying the laws of the State of Connecticut. Any
arbitration pursuant to this Agreement shall be conducted in Stamford,
Connecticut before the American Arbitration Association in accordance with its
arbitration rules. The arbitration shall be final and binding upon all the
parties (so long as the award was not procured by corruption, fraud or undue
means) and the arbitrator's award shall not be required to include factual
findings or legal reasoning. Nothing in this Paragraph 9 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 injuries to one of the parties, and the parties hereto
agree that the federal and state courts located in Stamford, Connecticut shall
have exclusive subject matter and in personam jurisdiction over the parties and
any such claims or disputes arising from the subject matter contained herein.
10. Notice.
-------
Any notice, demand, or communication given in connection with
this Agreement shall be in writing and shall be deemed received (a) when
delivered if given in person or by courier or courier service, or (b) on the
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date and at the time of transmission if sent by facsimile (receipt confirmed) or
(c) five (5) business days after being deposited in the mail postage prepaid.
11. Applicable Law.
---------------
This Agreement shall be construed in accordance with the laws
of the State of Connecticut without regard to principles of conflict of laws.
12. Entire Agreement.
-----------------
This instrument contains the entire agreement of the parties.
It may not be changed orally but only by an agreement in writing signed by the
party against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
13. Rule of Construction.
---------------------
No rule of construction requiring interpretation against the
drafting party shall apply to the interpretation of this Agreement.
14. Agreement Read and Understood.
------------------------------
Both parties hereto acknowledge that they have had an
opportunity to consult with an attorney regarding this Agreement and that they,
or their designated agents, have read and understand this Agreement.
15. Review and Revocation Period. Roberts acknowledges that he has
been informed that he has the right to consider this Agreement for a period
of at least twenty-one (21) days prior to entering the Agreement. He also
understands that he has the right to revoke this Agreement for a period of seven
(7) days following his execution of the Agreement by giving written notice to
the Chief Executive Officer of the Company at its principal offices. Such notice
shall be effective upon receipt by the Company's Chief Executive Officer.
16. Signatures in Counterpart and Facsimile.
----------------------------------------
This Agreement may be executed in multiple counterparts and by
facsimile signature, each of which shall constitute an original, but all of
which counterparts taken together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement
the day and year first above written.
ATTEST: VDC COMMUNICATIONS, INC.
/s/ Louis D. Frost By: /s/ Frederick A. Moran
- ------------------ ------------------------
Frederick A. Moran, C.E.O.
WITNESS:
/s/ Lynne Roberts /s/ James C. Roberts
- ------------------ ---------------------
James C. Roberts
WITNESS:
/s/ Louis D. Frost /s/ Frederick A. Moran
- ------------------ -----------------------
Frederick A. Moran
Accepted and agreed this 19th
day of November, 1998
THE ROBERTS FAMILY TRUST
By: /s/ Dr. James C. Roberts
------------------------
Dr. James C. Roberts, Co-Trustee
By: /s/ Lynne Roberts
------------------------
Lynne Roberts, Co-Trustee
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