-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Duq51BUH+Ke8vQJZGBhh2bVHoPlOj2pKSkliPACKIO+/y3uNKEPQZ71Wu4TKrDeq 8thcjeqUMIf9s4dAHpfhRw== /in/edgar/work/20000623/0000784961-00-000016/0000784961-00-000016.txt : 20000920 0000784961-00-000016.hdr.sgml : 20000920 ACCESSION NUMBER: 0000784961-00-000016 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20000614 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000623 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VDC COMMUNICATIONS INC CENTRAL INDEX KEY: 0000784961 STANDARD INDUSTRIAL CLASSIFICATION: [4813 ] IRS NUMBER: 061524454 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-14281 FILM NUMBER: 660153 BUSINESS ADDRESS: STREET 1: 75 HOLLY HILL LANE CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2038695100 MAIL ADDRESS: STREET 1: 75 HOLLY HILL LANE CITY: GREENWICH STATE: CT ZIP: 06831 FORMER COMPANY: FORMER CONFORMED NAME: VDC CORP LTD DATE OF NAME CHANGE: 19960117 8-K 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): June 14, 2000 VDC COMMUNICATIONS, INC. ------------------------ (Exact name of registrant as specified in its charter) Delaware 001-14281 061524454 -------- --------- --------- (State or other (Commission File No.) (IRS Employer jurisdiction of Identification No.) incorporation) 75 Holly Hill Lane Greenwich, Connecticut 06830 (Address of principal executive office) (203) 869-5100 -------------- (Registrant's telephone number, including area code) Not Applicable -------------- (Former name or former address, if changed since last report.) Item 2. Acquisition or Disposition of Assets (a) On June 14, 2000 (the "Effective Date"), Rare Telephony, Inc., a Nevada corporation ("Rare Telephony"), merged (the "Merger") with and into Voice & Data Communications (Latin America), Inc., a Delaware corporation (the "Sub") and wholly-owned subsidiary of VDC Communications, Inc. (the "Company"). The Merger was effected pursuant to the terms of an Agreement and Plan of Merger originally dated May 25, 2000 and amended on June 14, 2000 (the "Merger Agreement"). In connection with the Merger, the Sub changed its name to "Rare Telephony, Inc." The consideration paid to the former shareholders of Rare Telephony (the "Rare Telephony Shareholders") in the Merger consisted of 1,551,020 newly-issued shares of Company common stock (the "Merger Consideration"). Of the consideration paid to the Rare Telephony Shareholders, 155,102 shares of Company common stock were placed in escrow pending receipt of all state and federal regulatory approvals required in connection with the Merger and 775,508 shares of Company common stock were placed in a separate escrow and are subject to various forfeiture provisions: a portion is subject to forfeiture, upon terms set forth in an escrow agreement, within one year of the Effective Date in connection with indemnification claims made by the Company or Sub pursuant to the Merger Agreement; and a portion is subject to forfeiture within three years of the Effective Date upon terms and conditions set forth in an escrow agreement, certain employment agreements, an independent contractor agreement, and another agreement executed by certain Rare Telephony Shareholders. The principle followed in determining the amount of the Merger Consideration was one based upon negotiation between unaffiliated parties and a valuation of Rare Telephony undertaken by certain members of the Company's management prior to the Merger. Prior to the Merger, there were no material relationships between the Rare Telephony Shareholders and the Company or any of its affiliates, any director or officer of the Company, or any associate of any such director or officer other than as follows: (1) in anticipation of the Merger, the Company provided Rare Telephony and one of its subsidiaries with an aggregate of $600,000 in financing, evidenced by promissory notes, and obtained in connection therewith guaranty agreements from two Rare Telephony Shareholders and a security interest in certain property and securities of said Rare Telephony Shareholders; (2) in anticipation of the Merger, the Sub entered into employment agreements and an independent contractor agreement to take effect on the Effective Date, with certain of the Rare Telephony Shareholders; (3) in anticipation of the Merger, the Company entered into an agreement, to take effect on the Effective Date, with a Rare Telephony Shareholder which provides for said Rare Telephony Shareholder to make payments on certain capital leases for equipment used by Rare Telephony, now Sub, and its subsidiaries, in their business; (4) in anticipation of the Merger, the Company executed two guaranty agreements to guarantee performance by a subsidiary of Rare Telephony, now Sub, under two contracts; and (5) in anticipation of the Merger, and for ease of clerical administration, an officer of the Company was appointed as Treasurer of Rare Telephony and one of its subsidiaries. The source of the Merger Consideration was authorized but unissued shares of Company common stock. (b) The assets acquired by virtue of the Merger were used in a telecommunications business prior to the Merger and will continued to be so used. Item 7. Financial Statements and Exhibits (a) Financial statements of business acquired. It is impracticable at the time of the filing of this Current Report to provide the historical financial information for Rare Telephony required by Regulation S-X. Accordingly, the Company will file the required historical financial statements under cover of an Amendment to this Current Report on Form 8-K as soon as practicable, but in any event, not later than 60 days after the date on which this Current Report must be filed with the Commission. (b) Pro forma financial information. It is impracticable at the time of the filing of this Current Report to provide the pro forma financial information for Rare Telephony required by Regulation S-X. Accordingly, the Company will file the required pro forma financial statements under cover of an Amendment to this Current Report on Form 8-K as soon as practicable, but in any event, not later than 60 days after the date on which this Current Report must be filed with the Commission. (c) Exhibits (referenced to Item 601 of Regulation S-K).
Exhibit Number Title - ------ ----- 2.1 Agreement and Plan of Merger dated May 25, 2000 by and among VDC Communications, Inc., Voice & Data Communications (Latin America), Inc., Rare Telephony, Inc., and the holders of all of the outstanding common stock of Rare Telephony, Inc. 2.2 Amendment to Agreement and Plan of Merger dated June 14, 2000 2.3 Certificate of Merger of Rare Telephony, Inc. into Voice & Data Communications (Latin America), Inc. 2.4 Articles of Merger of Rare Telephony, Inc. into Voice & Data Communications (Latin America), Inc. 10.37 Escrow Agreement, dated May 25, 2000, by and among VDC Communications, Inc., Voice & Data Communications (Latin America), Inc., the shareholders of Rare Telephony, Inc., and Buchanan Ingersoll Professional Corporation 10.38 Form of Registration Rights Agreement 10.39 Form of Executive Employment Agreement 10.40 Form of Employment Agreement 10.41 Independent Contractor Agreement, dated May 25, 2000, by and among Peter J. Salzano and Voice & Data Communications (Latin America), Inc. 2 10.42 License Agreement, dated June 14, 2000, by and between Peter J. Salzano and Free dot Calling.com, Inc. 10.43 Network Agreement, dated May 25, 2000, by and among Network Consulting Group, Inc. and VDC Communications, Inc. 10.44 Funding Agreement, dated June 14, 2000, by and between Voice & Data Communications (Latin America), Inc. and VDC Communications, Inc. 10.45 Promissory Note, dated June 23, 2000, made by Rare Telephony, Inc. in favor of Peter J. Salzano
3 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: June 23, 2000 VDC COMMUNICATIONS, INC. By: /s/ Frederick A. Moran ------------------------------------- Frederick A. Moran Chairman and Chief Executive Officer 4
EXHIBIT INDEX Exhibit Page Number in Rule Number 0-3(b) Sequential (Referenced to Item Numbering System Where 601 of Reg. S-K) Exhibit Can Be Found 2.1 Agreement and Plan of Merger dated May 25, 2000 by and among VDC Communications, Inc., Voice & Data Communications (Latin America), Inc., Rare Telephony, Inc., and the holders of all of the outstanding common stock of Rare Telephony, Inc. 2.2 Amendment to Agreement and Plan of Merger dated June 14, 2000 2.3 Certificate of Merger of Rare Telephony, Inc. into Voice & Data Communications (Latin America), Inc. 2.4 Articles of Merger of Rare Telephony, Inc. into Voice & Data Communications (Latin America), Inc. 10.37 Escrow Agreement, dated May 25, 2000, by and among VDC Communications, Inc., Voice & Data Communications (Latin America), Inc., the shareholders of Rare Telephony, Inc., and Buchanan Ingersoll Professional Corporation 10.38 Form of Registration Rights Agreement 10.39 Form of Executive Employment Agreement 10.40 Form of Employment Agreement 10.41 Independent Contractor Agreement, dated May 25, 2000, by and among Peter J. Salzano and Voice & Data Communications (Latin America), Inc. 10.42 License Agreement, dated June 14, 2000, by and between Peter J. Salzano and Free dot Calling.com, Inc. 10.43 Network Agreement, dated May 25, 2000, by and among Network Consulting Group, Inc. and VDC Communications, Inc. 10.44 Funding Agreement, dated June 14, 2000, by and between Voice & Data Communications (Latin America), Inc. and VDC Communications, Inc. 10.45 Promissory Note, dated June 23, 2000, made by Rare Telephony, Inc. in favor of Peter J. Salzano
EX-2.1 2 0002.txt EX-2.1 AGREEMENT AND PLAN OF MERGER BY AND AMONG VDC COMMUNICATIONS, INC. Voice & Data Communications (Latin America), Inc. RARE TELEPHONY, INC. AND THE SHAREHOLDERS OF RARE TELEPHONY, INC. Effective Date: May ___, 2000 TABLE OF CONTENTS
ARTICLE I: MERGER OF RARE TELEPHONY WITH AND INTO SUB AND RELATED MATTERS 1 1.1 The Merger. 1 1.2 Conversion of Stock. 2 1.3 Merger Consideration. 3 1.4 Additional Rights; Taking of Necessary Action; Further Action. 4 1.5 Dissenters' Rights. 4 1.6 No Further Rights or Transfers. 4 ARTICLE II: THE CLOSING 5 2.1 Closing Date. 5 2.2 Closing Transactions. 5 ARTICLE III: CERTAIN CORPORATE ACTION 10 3.1 Rare Telephony Corporate Action. 10 3.2 Acquiror Corporate Action. 10 ARTICLE IV: REPRESENTATIONS AND WARRANTIES 10 4.1 Representations and Warranties of Rare Telephony and the Rare Telephony Shareholders. 10 4.2 Representations and Warranties of Acquiror and the Sub. 21 ARTICLE V: AGREEMENTS OF THE PARTIES 23 5.1 Access to Information. 23 5.2 Confidentiality; No Solicitation. 23 5.3 Interim Operations. 25 5.4 Consents. 26 5.5 Filings. 27 5.6 All Reasonable Efforts. 27 5.7 Public Announcements. 27 i 5.8 Notification of Certain Matters. 27 5.9 Expenses. 28 5.10 Registration Rights; Resale Restrictions 28 5.11 Documents at Closing. 29 5.12 Prohibition on Trading in Acquiror and Sub Stock. 29 5.13 Production of Schedules and Exhibits. 30 5.14 Loan Documents. 30 5.15 Acknowledgment of Approvals. 30 5.16 Audit. 30 5.17 Appointment to Board of Directors. 30 5.18 Consents from Rare Telephony Shareholders. 31 5.19 Vrabel Indemnification. 31 ARTICLE VI: CONDITIONS TO CONSUMMATION OF THE MERGER 31 6.1 Conditions to Obligations of Rare Telephony and the Rare Telephony Shareholders. 32 6.2 Conditions to Acquiror's and the Sub's Obligations. 32 ARTICLE VII: INDEMNIFICATION 34 7.1 Indemnification. 35 ARTICLE VIII: TERMINATION 36 8.1 Termination. 36 8.2 Notice and Effect of Termination. 37 8.3 Extension; Waiver. 38 8.4 Amendment and Modification. 38 ARTICLE IX: MISCELLANEOUS 39 9.1 Survival of Representations and Warranties. 39 ii 9.2 Notices. 39 9.3 Entire Agreement; Assignment. 40 9.4 Binding Effect; Benefit. 40 9.5 Headings. 40 9.6 Counterparts. 40 9.7 Governing Law; Arbitration. 40 9.8 Severability. 41 9.9 Release and Discharge. 41 9.10 Construction. 41 9.11 Read and Understood. 42 9.12 Remedies Cumulative. 42 9.13 Certain Definitions. 42
iii EXHIBITS AND SCHEDULES
EXHIBITS - -------- Exhibit 1.3(b)(ii) Escrow Agreement Exhibit 2.2(a)(ii) Investment Letter Exhibit 5.10 Registration Rights Agreement Exhibit 5.14 Funding Agreement Exhibit 6.2(m)(1) Form of Employment Agreement Exhibit 6.2(m)(2) Form of Employment Agreement Exhibit 6.2(m)(3) Form of Executive Employment Agreement Exhibit 6.2(m)(4) Form of Consulting Agreement for Thomas N. Salzano Exhibit 6.2(m)(5) Form of Consulting Agreement for Peter J. Salzano SCHEDULES - --------- Schedule 4.1(a) Articles of Incorporation and Bylaws of Rare Telephony Communications, Inc. Schedule 4.1(a)(i) Certificate of Incorporation and Bylaws of Cash Back Rebates LD.com, Inc. Schedule 4.1(a)(ii) Articles of Incorporation of Free dot Calling.com, Inc. Schedule 4.1(d) Options, etc. - Rare Companies Schedule 4.1(d)(iii) Names changes, etc. - Rare Companies Schedule 4.1(e) Financial Statements - Rare Companies Schedule 4.1(g) Litigation - Rare Companies Schedule 4.1(h) Tax Returns - Rare Companies Schedule 4.1(k) Encumbrances on Personal Property - Rare Companies Schedule 4.1(l) Names and Marks - Rare Companies iv Schedule 4.1(m) Leases and Agreements - Rare Companies Schedule 4.1(n) Conflicting Interests - Rare Companies Schedule 4.1(p) Certain Changes and Events - Rare Companies Schedule 4.2(g) Litigation - VDC Communications, Inc. Schedule 6.2(m) Employees to Sign New Agreements - Rare Companies
v AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and entered into as of May 25, 2000, by and among VDC COMMUNICATIONS, INC., a Delaware corporation ("Acquiror"), Voice & Data Communications (Latin America), Inc., a Delaware corporation and wholly-owned subsidiary of Acquiror ("Sub"), RARE TELEPHONY, INC., a Nevada corporation (f/k/a Washoe Technology Corporation) ("Rare Telephony"), and those individuals and entities whose names appear on the signature page hereof in their capacity as holders of all of the outstanding common stock of Rare Telephony (the "Rare Telephony Shareholders"). Recitals WHEREAS, Acquiror, Sub, and Rare Telephony have determined that it is in the best interests of their respective shareholders for Rare Telephony 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, Sub, and Rare Telephony 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 Agreement and Plan of Merger shall be as follows: ARTICLE I MERGER OF RARE TELEPHONY 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), Rare Telephony shall be merged with and into the Sub (the "Merger") in accordance with the provisions of Chapters 78 and 92A of the Nevada Revised Statutes ("NRS") and the Delaware General Corporation Law (the "DGCL") and the separate corporate existence of Rare Telephony shall cease, and the Sub shall continue as the surviving corporation under the laws of the state of Delaware with the corporate name "RARE TELEPHONY, 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 (or a Certificate of Merger) with the Secretary of State of Nevada, in accordance with the provisions of Section 252 of the DGCL and Section 92A.200 of the NRS, 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 Rare Telephony shall cease; (iii) all rights, title and interests to all assets, whether tangible or intangible and any property or property rights owned by Rare Telephony 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 Rare Telephony 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 "Rare Telephony, 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 Rare Telephony 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 Secretary of State of the State of Nevada, the Articles of Merger (or Certificate of Merger), with such amendments thereto as the parties hereto shall deem mutually acceptable; and (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. 1.2 Conversion of Stock. At the Effective Time, and without any action on the part of the parties hereto, the Rare Telephony Shareholders or any other party: 2 (a) the shares representing 100% of the issued and outstanding common stock of Rare Telephony ("Rare Telephony 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 Rare Telephony 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 (100 shares of common stock of Sub owned by Acquiror prior to the Effective Time) shall continue to represent one share of common stock of the Surviving Corporation after the Merger, which shares shall thereafter constitute all of the issued and outstanding shares of capital stock of the Surviving Corporation; (d) from and after the Effective Time, there shall be no transfers on the stock transfer books of the Surviving Corporation of shares of Rare Telephony 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 Rare Telephony 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 (e) no fractional shares of stock shall be issued in the Merger, and each holder of Rare Telephony 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; provided, however, that the Merger Consideration shall in no event exceed 1,551,020 shares of Acquiror common stock. 1.3 Merger Consideration. The Merger Consideration consisting of the total purchase price payable to the holders of 100% of the Rare Telephony Common Stock in connection with the acquisition by merger of Rare Telephony shall consist exclusively of 1,551,020 shares of Acquiror common stock (the "Merger Consideration"), par value $.0001 per share ("Acquiror Common Stock"). (a) The Merger Consideration shall be allocated among the holders of 100% of the Rare Telephony Common Stock in the proportion of their share ownership of the outstanding common stock of Rare Telephony as of the date of the Closing. (b) The Merger Consideration shall be paid and delivered in the following manner: 3 (i) At the Closing, 775,512 shares of Acquiror Common Stock shall be delivered to the Rare Telephony Shareholders; and (ii) At the Closing, Acquiror shall issue in the name of the Rare Telephony Shareholders an additional 775,508 shares of Acquiror Common 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(b)(ii) and made a part hereto (the "Escrow Agreement"). THE Rare Telephony Shareholders ACKNOWLEDGE THAT THE ESCROW AGREEMENT PROVIDES FOR THE FORFEITURE OF a portion OF THE MERGER CONSIDERATION UNDER CERTAIN CONDITIONS. (c) The shares of Acquiror Common Stock to be delivered at the Closing and the shares of Acquiror Common Stock released from escrow by the Escrow Agent shall be fully paid and non-assessable and shall be free and clear of all liens, levies and encumbrances except that all of such shares of Acquiror Common Stock shall be "restricted securities" as such term is defined in Rule 144, promulgated under the Securities Act of 1933, as amended (the "Act") and shall be subject to contractual restrictions on resale as provided for in Section 5.10. 1.4 Additional Rights; Taking of Necessary Action; Further Action. Each of Acquiror, Sub, Rare Telephony and Rare Telephony Shareholders, respectively, shall use their best efforts to take all such action as may be necessary and appropriate to effectuate the Merger under the NRS and DGCL as promptly as possible, including, without limitation, the filing of the Certificate of Merger and the Articles of Merger (or Certificate 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 Rare Telephony, 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 Rare Telephony and the Rare Telephony Shareholders acknowledge that dissenters' rights are available to each of the Rare Telephony Shareholders pursuant to the NRS and that (i) Rare Telephony has complied with the provisions of the NRS in notifying each Rare Telephony Shareholder of the availability of such rights; and (ii) pursuant to the provisions of the NRS, 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 NRS. 1.6 No Further Rights or Transfers. At and after the Effective Time, the shares of capital stock of Rare Telephony outstanding immediately prior to the Effective Time shall cease to provide any rights to the shareholders of Rare Telephony or the 4 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 the Acquiror, 75 Holly Hill Lane, Greenwich, CT 06830, 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 Rare Telephony 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 (iii) at such other time, date and place as the parties may agree, but in no event shall such date be later than June 30, 2000, unless such date is extended by the mutual written agreement of the parties. 2.2 Closing Transactions. At the Closing, the following transactions shall occur, all of such transactions being deemed to occur simultaneously: (a) Rare Telephony and all holders of the Rare Telephony Common Stock shall take, or shall cause to be taken, the following actions: (i) Each of the holders of Rare Telephony 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 Rare Telephony Common Stock; (ii) Each of the holders of Rare Telephony 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 Rare Telephony Common Stock shall have been terminated and evidence of such termination satisfactory to Acquiror shall have been delivered to Acquiror; 5 (iv) Rare Telephony and the holders of Rare Telephony Common Stock shall execute and deliver, and file or cause to be filed with the Secretary of State of the State of Nevada, the Articles of Merger (or Certificate of Merger) with such amendments thereto as the parties hereto shall deem mutually acceptable; (v) A certificate shall be executed by Rare Telephony and the holders of Rare Telephony Common Stock to the effect that all representations and warranties made by Rare Telephony and the Rare Telephony Shareholders under this Agreement are true and correct as of the Closing, as though originally given to Acquiror and Sub on said date; (vi) Certificates of good standing shall be delivered by Rare Telephony from the Secretary of State of the State of Nevada or the Secretary of State of the State of Delaware, as the case may be, dated at or about the Closing, to the effect that Rare Telephony, Cash Back Rebates LD.com, Inc., a Delaware corporation ("Cash Back") and Free dot Calling.com, Inc., a Nevada corporation ("Free"), are in good standing under the laws of the State of Nevada or Delaware, as the case may be; (vii) An incumbency certificate shall be delivered by Rare Telephony, Cash Back and Free signed by all of the officers thereof dated at or about the Closing; (viii) Certified Articles of Incorporation of Rare Telephony and Cash Back shall be delivered by Rare Telephony dated at or about the Closing and a copy of the Bylaws of Rare Telephony and Cash Back certified by the Secretary of Rare Telephony and Cash Back, respectively, dated at or about the Closing; (ix) Certified Board and shareholder resolutions shall be delivered by the Secretary of Rare Telephony dated at or about the Closing authorizing the transactions contemplated under this Agreement; (x) Rare Telephony and the holders of Rare Telephony Common Stock shall execute and deliver the Escrow Agreement to Acquiror and the Escrow Agent; (xi) A legal opinion from corporate counsel to Rare Telephony satisfactory to Acquiror's counsel shall be delivered by Rare Telephony opining, among other things, that the representations made in Sections 4.1(a), (b), (c)(i), (d) and (g) are true and correct; (xii) A legal opinion from telecommunications counsel to Rare Telephony satisfactory to Acquiror's counsel shall be delivered by Rare Telephony opining, among other things, that: (1) no consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or 6 instrumentality, domestic or foreign, is required by or with respect to Rare Telephony in connection with the execution and delivery of this Agreement by Rare Telephony and the Rare Telephony Shareholders or the consummation by Rare Telephony and the Rare Telephony Shareholders of the transactions contemplated hereby, except certain filings with the Federal Communications Commission ("FCC") and state telecommunications agencies in connection with a change of control of Cash Back; (2) Cash Back has all telecommunications licenses, tariffs, permits, certificates and authorizations (collectively, "Telecommunications Licenses") needed or required for the conduct of Cash Back'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; (3) the Telecommunications Licenses are duly and validly issued, are in full force and effect, and are not now subject to any condition outside the ordinary course; (4) to the best of counsel's knowledge there is no outstanding adverse judgment, injunction, decree or order that has been issued by the FCC or any state telecommunications office or regulatory agency against Cash Back (or any predecessors in interest), or any action, proceeding, complaint, or investigation initiated by the FCC or any state telecommunications office or regulatory agency against Cash Back (or any predecessors in interest); and (5) neither the consummation of this Merger nor the execution of this Agreement shall result in any violation of the Communications Act of 1934, as amended, the FCC's rules, regulations, decisions or published policies, and will not cause any forfeiture or impairment of Cash Back's 214 license or any other Telecommunications License; (xiii) An exclusive license or assignment, satisfactory in the sole discretion of Acquiror, (or other license acceptable to Acquiror and its counsel) (the "Email License") for Cash Back, Free, or any other Acquiror subsidiary, in Acquiror's sole discretion, to use, for as long as is legally permissible, patent pending email business method which is the subject of a provisional patent application filed by John R. Flanagan for Peter J. Salzano, Inventor, dated April 7, 2000 shall be delivered by Rare Telephony; (xiv) An agreement, satisfactory in the sole discretion of Acquiror, shall be delivered by Rare Telephony executed by Network Consulting Group, Inc. ("Network") and Acquiror, Rare Telephony or Cash Back, or any combination of said companies in Acquiror's sole discretion (the "Network Agreement"), which documents the fact that Network shall continue to pay and otherwise perform on all equipment leases outstanding as of the date of this Agreement for equipment used by Rare Telephony and Cash Back in their respective businesses (the "Network Equipment") throughout the term of said leases and, at the end of said leases, assuming any one of Acquiror, Sub, Free (as defined below) or Cash Back (as defined below), has paid either the $1 or FMV end of lease payment, shall ensure that title to the Network Equipment passes to Rare Telephony or Cash Back, or both in Acquiror's sole discretion; further the Network Agreement shall provide that Network shall take whatever action is requested by Acquiror or Sub to assign the Qwest Contract to Acquiror, Sub, or one of the Rare Companies, in the sole discretion of Acquiror, if and when Acquiror or Sub so requests; 7 (xv) Documentation shall be delivered by Rare Telephony that documents to the sole satisfaction of Acquiror and its counsel, the transfer of the domain name "CASHBACKREBATESLD.COM" from The Internet Trust to Cash Back; (xvi) Rare Telephony shall execute and deliver the Funding Agreement, satisfactory in the sole discretion of Acquiror, to Acquiror; (xvii) Rare Telephony shall deliver executed general releases, satisfactory in the sole discretion of Acquiror, from each of its directors, officers, consultants, employees and shareholders and from any Cash Back directors, officers, consultants, employees and shareholders requested by Acquiror agreeing to: (i) release Rare Telephony and Cash Back from any and all claims, liabilities, obligations and demands; (ii) terminate any employment agreements; and (iii) terminate any shareholder agreements; (xviii) 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; (xix) The Board of Directors of Cash Back and Free shall be reconstituted. Each of the existing members of Board of Directors of Cash Back and Free shall tender his resignation and nominate to their Board of Directors Frederick A. Moran to serve as the sole director. The newly constituted Boards of Directors shall hold office in accordance with the DGCL or NRS, as the case may be, and shall appoint executive officers in accordance with the DGCL or NRS, as the case may be. Mr. Moran shall also serve as the sole director of Sub; and (xx) A certificate of good standing shall be delivered by Rare Telephony from the Secretary of State of the state of incorporation of Network, dated at or about the Closing, to the effect that Network is in good standing under the laws of the state of Network's incorporation. (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 Rare Telephony Common Stock (other than Dissenting Shareholders) a certificate or certificates representing the number of shares of that portion of an aggregate number of 775,512 shares of Acquiror Common Stock as such holder is entitled to receive at the Closing (or as soon thereafter as is practical) in connection with the Merger; 8 (ii) Acquiror shall, on behalf of itself and the Rare Telephony Shareholders, deliver or shall cause to be delivered to the Escrow Agent certificates representing 775,508 shares of Acquiror Common Stock at Closing (or as soon thereafter as is practical); (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) A certificate for each of the Acquiror and the Sub shall be executed by their respective Presidents or Chief Executive Officers 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 Rare Telephony on said date; (vi) 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; (vii) A certificate of good standing shall be delivered by Acquiror from the State of Delaware, dated at or about the Closing, stating that Acquiror is in good standing under the laws of such State; (viii) 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; (ix) Sub will deliver Employment Agreements or Consulting Agreements, satisfactory in the sole discretion of Acquiror, as the case may be, to the individuals listed on Schedule 6.2(m) to this Agreement; (x) Acquiror and Sub shall execute and deliver the Escrow Agreement, satisfactory in the sole discretion of Acquiror, to Rare Telephony and the Escrow Agent; (xi) Acquiror shall execute and deliver the Funding Agreement, satisfactory in the sole discretion of Acquiror, to Rare Telephony; (c) 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. 9 ARTICLE III CERTAIN CORPORATE ACTION 3.1 Rare Telephony Corporate Action. Rare Telephony 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 Rare Telephony and the Rare Telephony Shareholders. As a material inducement to Acquiror and Sub to execute this Agreement and consummate the Merger and other transactions contemplated hereby, Rare Telephony and the Rare Telephony 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. There are currently two wholly-owned subsidiaries of Rare Telephony: (1) Cash Back; and (2) Free. Rare Telephony, Cash Back and Free are collectively referred to as the "Rare Companies." Rare Telephony is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Nevada, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. Rare Telephony 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. True, correct and complete copies of the Articles of Incorporation and Bylaws of Rare Telephony as amended to date are attached hereto as Schedule 4.1(a) and are made a part hereof. (i) Cash Back is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now 10 conducted. Cash Back 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. True, correct and complete copies of the Articles of Incorporation and Bylaws of Cash Back as amended to date are attached hereto as Schedule 4.1(a)(i) and are made a part hereof. (ii) Free is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Nevada, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. Free 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. True, correct and complete copies of the Articles of Incorporation of Free as amended to date are attached hereto as Schedule 4.1(a)(ii) and are made a part hereof. (iii) Network is a corporation duly incorporated, validly existing and in good standing under the laws of the state of its incorporation, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. Network 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. (b) Due Authorization. This Agreement has been duly authorized, executed and delivered by Rare Telephony and the Rare Telephony Shareholders and constitutes a valid and binding agreement of Rare Telephony and the Rare Telephony Shareholders, enforceable in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, moratorium, and other similar laws relating to, limiting or affecting the enforcement of creditors' rights generally or by the application of equitable principles. As of the Closing all corporate action on the part of Rare Telephony 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 (including the execution of any documents referenced herein, including, without limitation, employment agreements) will: (i) conflict with or result in any violation of any provision of the Articles of Incorporation or Bylaws of Rare Telephony; 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 any of the Rare Companies or the Rare Telephony 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 any of the Rare Companies. 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 Rare Telephony in connection with the 11 execution and delivery of this Agreement by Rare Telephony and the Rare Telephony Shareholders or the consummation by Rare Telephony and the Rare Telephony Shareholders of the transactions contemplated hereby, except the filing of the Articles of Merger (or Certificate of Merger) with the States of Delaware and Nevada, and certain filings with the FCC and state telecommunications agencies in connection with a change of control of Cash Back. (d) Capitalization and Share Ownership. The currently authorized capital stock of Rare Telephony is 25,000 shares of common stock ("Rare Telephony Common Stock"). There are currently outstanding 25,000 shares of Rare Telephony Common Stock. The outstanding shares of capital stock of Rare Telephony 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 Rare Telephony, (B) no securities of Rare Telephony convertible into or exchangeable for shares of capital stock or voting securities of Rare Telephony and (C) no options, warrants or other rights to acquire from Rare Telephony, and no obligation of Rare Telephony to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of Rare Telephony, 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 Rare Telephony. The Rare Telephony Common Stock to be surrendered in the Merger will be owned of record and beneficially by the Rare Telephony Shareholders, free and clear of all Encumbrances, and have not been sold, pledged, assigned or otherwise transferred. The Rare Telephony Common Stock to be surrendered in the Merger have been issued in compliance with all applicable securities laws. There are no agreements (other than this Agreement) to sell, pledge, assign or otherwise transfer such securities. (i) The currently authorized capital stock of Cash Back is 1,000 shares of common stock. There are currently outstanding 1,000 shares of Cash Back common stock. Rare Telephony owns all of the outstanding shares of Cash Back common stock. The outstanding shares of capital stock of Cash Back have been duly authorized and validly issued and are fully paid and nonassessable and free of preemptive rights. (ii) The currently authorized capital stock of Free is 10,000,000 shares of common stock. There are currently outstanding 100 shares of Free common stock. Rare Telephony owns all of the outstanding shares of Free common stock. The outstanding shares of capital stock of Free have been duly authorized and validly issued and are fully paid and nonassessable and free of preemptive rights. (iii) Except as set forth in Schedule 4.1(d)(iii), neither Rare Telephony nor any of its Subsidiaries has, during the six-year period immediately preceding the date hereof, changed its name, been the surviving entity of a merger, consolidation or other reorganization, or acquired all or substantially all of the assets of any Person. 12 (e) Financial Statements. Attached hereto as Schedule 4.1 (e) and incorporated herein by reference are unaudited interim financial statements for Rare Telephony on a consolidated basis (the "Financial Statements"). Such Financial Statements fairly present in all material respects the financial position of Rare Telephony on a consolidated basis with Cash Back and Free as of the date thereof and the results of operations for the periods then ended (subject to normal year-end adjustments). Upon Acquiror's request Rare Telephony shall update the Financial Statements. (f) No Liabilities. Except for the Remaining Indebtedness (as defined below), at the Closing, Rare Telephony 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 Rare Telephony and the Rare Telephony Shareholders 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 in this Agreement or any Schedule or Exhibit hereto. (g) Legal Proceedings; Orders. Except as described on Schedule 4.1(g) hereto, there is no action, suit, investigation or proceeding (or, to the knowledge of Rare Telephony or any one of the Rare Telephony Shareholders, any basis therefor) pending against, or to the knowledge of Rare Telephony or any one of the Rare Telephony Shareholders threatened, against or affecting any of the Rare Companies or any of their properties before any court or arbitrator or any governmental body, agency or official. Except as described on Schedule 4.1(g) hereto: (i) There is no Order to which any of the Rare Companies or any of their properties is subject. (ii) Neither any of the Rare Companies nor any Rare Telephony Shareholder is subject to any Order that relates to the business of, or any of the assets owned or used by any of the Rare Companies. (iii) No officer, director, agent, consultant, or employee of any one of the Rare Companies is subject to any Order that prohibits such officer, director, agent, consultant, or employee from engaging in or continuing any conduct, activity, or practice relating to the business of any one of the Rare Companies. (iv) Both Rare Telephony and Cash Back is, and at all times since its organization, has been, in full compliance with all of the terms and requirements of each Order to which it, or any of the assets owned or used by it, is or has been subject. (v) No event has occurred or circumstance exists that may constitute or result in (with or without notice or lapse of time) a violation of or failure to comply with any term or requirement of any Order to which any of the Rare Companies or any of their properties is subject. 13 (vi) None of the Rare Companies has received, at any time since its organization, any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding any actual, alleged, possible, or potential violation of, or failure to comply with, any term or requirement of any Order to which any of the Rare Companies or any of their properties is subject. Rare Telephony currently has a dispute (the "Dispute") with the landlord of its offices in Passaic, New Jersey (the "Landlord"). Rare Telephony has not breached its lease with the Landlord and none of the Rare Companies will be liable to the Landlord for breach of its lease with the Landlord, or for damages in connection therewith. Due, in part, to the Dispute, the Rare Companies plan to move their operations to a new office at 55 Broad Street in Newark, NJ (the "Move"). The Move will not cost the Rare Companies, or any one of them, more than $55,000 in out of pocket expenses. Any shut down of the operations of the Rare Companies, or any one of them, in connection with the Move shall not exceed two full calendar days (one of which days shall be a Saturday). The various judgments obtained against the former officer, directors, and/or principals, and/or the spouses of the foregoing, of National TeleCommunications, Inc. (a/k/a National Telecommunications, Inc.) ("NTC") arising out of the operation, management, or business of NTC (the "NTC Judgments") do not, and will not, have a Material Adverse Effect on any one of the Rare Companies or any of their assets. The NTC Judgments do not, and will not, have a Material Adverse Effect on the operations of any one of the Rare Companies. (h) Taxes. Except as set forth on Schedule 4.1(h), Rare Telephony and Cash Back 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. Rare Telephony and Cash Back 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 Rare Telephony and Cash Back reflect, or will reflect, adequate reserves for all taxes payable by Rare Telephony which have been, or will be, accrued but are not yet due. None of the Rare Companies is delinquent in the payment of any material tax, assessment or governmental charge. No deficiencies for any taxes have been proposed, asserted or assessed against any one of the Rare Companies, Rare Telephony and the Rare Telephony 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 any one of the Rare Companies. All taxes which any one of the Rare Companies 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. Except as set forth on Schedule 4.1(h), neither Rare Telephony, nor any member of any affiliated or combined group of which Rare Telephony 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 any one of the Rare Companies, except Encumbrances for current taxes not yet due. There are no tax sharing or tax allocation agreements to which any one of the Rare Companies is now or ever has been a party. None of the Rare Companies will not be required under Section 481(c) of the Code, of 1986, to 14 include any material adjustment in taxable income for any period subsequent to the Merger. None of the Rare Companies (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 Rare Telephony) and (b) has no liability for the taxes of any Person (other than Rare Telephony) 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. None of the Rare Companies is in violation of, or has 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. None of the Rare Telephony Shareholders has violated, any applicable provisions of any laws, statues, ordinances or regulations other than as would not be reasonably likely to constitute a felony or misdemeanor. No such laws, statutes, ordinances or regulations require or are expected to require capital expenditures by any of the Rare Companies that are reasonably likely to have a Material Adverse Effect. Without limiting the generality of the foregoing, Rare Telephony has all licenses, permits, certificates and authorizations needed or required for the conduct of Rare Telephony'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. Without limiting the generality of the foregoing, Cash Back has all licenses, permits, certificates and authorizations needed or required for the conduct of Cash Back'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. Other than RC&A Group (which will receive an investment banking fee of 81,633 shares of Acquiror Common Stock to be paid directly to RC&A Group by Acquiror (the "Investment Banking Shares")), there is no investment banker, broker, finder or other similar intermediary which has been retained by, or is authorized by, Rare Telephony or the Rare Telephony Shareholders to act on its or their behalf who might be entitled to any fee or commission from Rare Telephony, the Rare Telephony Shareholders, Acquiror or the Sub or any of their respective Affiliates upon consummation of the transactions contemplated by this Agreement. (k) Personal Property. Other than as set forth on Schedule 4.1(k), each of the Rare Companies 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. All equipment, furniture and fixtures and other tangible personal property used by Rare Telephony and Cash Back 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. None of the Rare Companies owns a motor vehicle. (l) Intellectual Property; Intangible Property. The corporate names of Rare Telephony, Cash Back, and Free and the trade names, trademarks, and service marks listed on Schedule 4.1(l) are the only names and 15 marks which are used by any one of the Rare Companies in the operation of its business (the "Names and Marks"). Other than Washoe Technology Corporation, Rare Telephony has not done business and has not been known by any other name other than by its Names and Marks. Other than Common Concerns, Inc., Cash Back has not done business and has not been known by any other name other than by its Names and Marks. Each of the Rare Companies 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 any one of the Rare Companies or the patent pending email business method which is the subject of a provisional patent application filed by John R. Flanagan for Peter J. Salzano, Inventor, dated April 7, 2000 (the "Email Technology"); other than as set forth in the Email License, no royalties or fees are payable by any one of the Rare Companies, Peter J. Salzano or any other Person to any third party by reason of the use of the Email Technology. No royalties or fees are payable by any one of the Rare Companies to any third party by reason of the use of any of its intellectual property. None of the Rare Companies has received notice of any adversely held patent, invention, trademark, copyright, service mark or trade name of any Person, or any claims of any other Person relating to any of the intellectual property subject hereto, and to the knowledge of Rare Telephony and the Rare Telephony Shareholders, there is no reasonable basis for any such charge or claim. Neither Peter J. Salzano nor John R. Flanagan (or any associate or partner of Mr. Flanagan) has received notice of any adversely held patent, invention, or any claims of any other Person relating to any of the Email Technology, and to the knowledge of Peter J. Salzano and John R. Flanagan, 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. None of the Rare Companies is 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 Schedule 4.1(m); and (ii) Agreements involving a maximum possible liability or obligation on the part of Rare Telephony of less than Five Hundred Dollars ($500) in the aggregate. True, correct and complete copies of each Corporation Agreement described and listed under Subsection 4.1(m) have been made available to Acquiror prior to the execution of this Agreement. 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 Rare Telephony under such of the Corporation Agreements to which Rare Telephony is a party as if the Surviving Corporation were the original party to such Corporation Agreements. Additionally, the Corporation Agreements which are executed by Cash Back or Free, as the case may be, shall continue to be valid, binding and enforceable against the respective parties thereto in accordance with their 16 respective terms following the Merger. 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 any of the Rare Companies 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 any one of the Rare Companies. (n) Conflicting Interests. Except as set forth on Schedule 4.1(n), no director, officer, consultant, employee of any one of the Rare Companies, no Rare Telephony Shareholder, and no relative or Affiliate of any of the foregoing (i) sells or purchases goods or services from any one of the Rare Companies or has any pecuniary interest in any supplier or client of any of the foregoing or in any other business enterprise with which any one of the Rare Companies conducts business or with which any of the foregoing is in competition, or (ii) is indebted to any one of the Rare Companies except for money borrowed and as set forth on the Financial Statements. (o) Environmental Protection. None of the Rare Companies and the Rare Telephony Shareholders have been notified by any governmental authority, agency or third party, and none of the Rare Companies and the Rare Telephony Shareholders have any knowledge, of any violation by any one of the Rare Companies of any Environmental Statute (as defined below). All registrations by each of the Rare Companies with, licenses from or permits issued by governmental agencies pursuant to environmental, health and safety laws are in full force and effect. The term "Environmental Statutes" means all statutes, ordinances, regulations, orders and requirements of common law concerning discharges to the air, soil, surface water or groundwater and concerning the storage, treatment or disposal of any waste or hazardous substance. There is no hazardous substance at any premises currently or previously occupied by any one of the Rare Companies. None of the Rare Companies has 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 Schedule 4.1(p), since February 1, 2000 there has not been (i) any material adverse change in the business, assets, properties, results of operations, financial condition or prospects of any one of the Rare Companies; (ii) any entry by any one of the Rare Companies into any material commitment or transaction which is not in the ordinary course of business; (iii) 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 Rare Telephony or any Subsidiary, or any direct or indirect redemption, purchase or any other type of acquisition by any one of the Rare Companies of any shares of its capital stock or any other securities; (iv) any agreement by any one of the Rare Companies, whether in writing or otherwise, to take any 17 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; (v) any acquisition of the assets of any one of the Rare Companies, other than in the ordinary course of business and consistent with past practice; or (vi) any execution of any agreement with any executive officer of any one of the Rare Companies providing for his or her employment, or any increase in the compensation or in severance or termination benefits payable or to become payable by any one of the Rare Companies 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 any one of the Rare Companies. Since the date of the Financial Statements (dated April 30, 2000), 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) The shares of Acquiror Common Stock are not being registered under the Act on the basis of the statutory exemption provided by Section 4(2) thereof and/or Regulation D thereunder, relating to transactions not involving a public offering, and the Acquiror's reliance on the statutory exemption thereof is based in part on the representations contained in this Agreement; (ii) The Rare Telephony 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 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 Rare Telephony 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 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 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; (e) that the certificate or certificates representing the shares of Acquiror Common Stock comprising the Merger Consideration to be issued will be imprinted with a legend in form and substance substantially as follows: 18 "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION FROM REGISTRATION, UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, BASED ON AN OPINION LETTER OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION." (f) Acquiror is hereby authorized to notify its transfer agent of the status of the shares of Acquiror Common Stock comprising the Merger Consideration, 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; (g) Acquiror is hereby authorized to place any other legends on the shares of Acquior Common Stock to be issued and take any other actions it believes necessary or reasonable to ensure compliance with federal and state securities laws; and (h) the shares of Acquiror Common Stock comprising the Merger Consideration to be issued will be imprinted with a legend in form and substance substantially as follows (it being understood that the actual legends may contain specific date references): "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN AGREEMENT AND PLAN OF MERGER BY AND AMONG VDC COMMUNICATIONS, INC., VOICE & DATA COMMUNICATIONS (LATIN AMERICA), INC., RARE TELEPHONY, INC., AND THE SHAREHOLDERS OF RARE TELEPHONY, INC. AND MAY NOT BE TRANSFERRED OR ENCUMBERED EXCEPT IN ACCORDANCE WITH THE TERMS OF THAT AGREEMENT." (iii) Rare Telephony and the Rare Telephony Shareholders have been afforded the opportunity to review and are familiar with the Reports and have based their decision to invest solely on the information contained therein, and the information contained within this Agreement and the associated exhibits and schedules, and have not been furnished with any other literature, prospectus or other information except as included in the Reports or this Agreement; (iv) The Rare Telephony Shareholders are able to bear the economic risks of an investment in the shares of Acquiror Common Stock comprising the Merger Consideration and that their overall commitment to their investments which are not readily marketable is not disproportionate to their net worth; 19 (v) The Rare Telephony Shareholders have relied solely upon the advice of their own tax and legal advisors with respect to the tax and other legal aspects of this investment; (vi) The Rare Telephony Shareholders acknowledge that they have had the opportunity to ask questions of and receive answers from, and to obtain additional information from, representatives of Acquiror concerning the terms and conditions of the acquisition of the shares of Acquiror Common Stock comprising the Merger Consideration and the present and proposed business and financial condition of the Acquiror, and have had all such questions answered to its satisfaction and has been supplied all information requested; and (vii) The Rare Telephony Shareholders understand that no federal or state agency has approved or disapproved the shares of Acquiror Common Stock comprising the Merger Consideration, 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) Books and Records. The books of account, minute books, and other records of the Rare Companies, all of which have been made available to Acquiror, are complete and correct and have been maintained in accordance with sound business practices, including the maintenance of an adequate system of internal controls. The minute books of Rare Telephony, Cash Back, and Free contain accurate and complete records of all meetings held of, and corporate action taken by, the members, the Board of Directors, and committees of the Board of Directors of Rare Telephony, Cash Back, and Free, as the case may be, and no meeting of any such members, Board of Directors, or committee has been held for which minutes have not been prepared and are not contained in such minute books. At the Closing, all of those books and records will be in the possession of Rare Telephony, Cash Back, and Free as the case may be. (s) Employee Benefits. None of the Rare Companies has any pension, retirement, profit sharing and bonus plans, dental plan, deferred compensation, health (other than standard medical insurance (excluding dental coverage) whereby the Rare Company pays no more than 70% of the employee's medical insurance premium, which insurance excludes the employee's family members (other than executives of the Rare Companies, as that term is defined by the Board of Directors for the Rare Companies, who may have standard medical insurance for their immediate family members whereby the Rare Company pays no more than 70% of the employee's immediate family members' medical insurance premium)), welfare, severance management, severance package or termination payment, or other similar plans for the benefit of any employees of any one of the Rare Companies, including employee plans ("Employee Benefit Plan"). Subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), none of the Rare Companies at present is, or since its organization, has been a sponsor of, party to or obligated to contribute to any employee benefit plan (as defined in Section 3(3) of ERISA), and is not, and has not been, a party to any collective bargaining agreement. None of the Rare Companies has ever been a member of a "controlled group of corporations" within the meaning of Internal Revenue Code Section 414(b) or has ever maintained a defined benefit pension plan or contributed to a multiemployer plan as defined in Section 3(37) of 20 ERISA. None of the Rare Companies is obligated to or (directly or indirectly) provides death benefits to any former employees or retirees. Both Rare Telephony and Cash Back have complied with all applicable provisions of the Immigration Reform and Control Act of 1986. (t) Certain Payments. Since their organization, none of the Rare Companies, nor any of their directors, officers, agents, or employees, nor any other Person associated with or acting for or on behalf of any one of the Rare Companies, has directly or indirectly (a) made any contribution, gift, bribe, payoff, influence payment, kickback, or other payment to any Person, private or public, regardless of form, whether in money, property, or services, (i) to obtain favorable treatment in securing business, (ii) to pay for favorable treatment for business secured, (iii) to obtain special concessions, or for special concessions already obtained, for or in respect of any one of the Rare Companies or any Affiliate of any one of the Rare Companies, or (iv) in violation of any Legal Requirement; or (b) established or maintained any fund or asset that has not been recorded in the books and records of the Rare Companies. (u) Stock Purchase Agreement. Pursuant to a Stock Purchase Agreement by and among Danny McGinnis, Ian Eisenberg, and Linda Kadowaki (collectively, the "Common Sellers") and Rare Telephony (then known as Washoe Technology Corporation), dated July 20, 1999 (the "Common Purchase Agreement"), Rare Telephony purchased all of the outstanding securities of Common Concerns, Inc. (now know as Cash Back); Rare Telephony does not have any liabilities or obligations to the Common Sellers or any other Person arising out of Common Purchase Agreement. (v) Dissenters' Rights. Rare Telephony has complied with the provisions of the NRS in notifying each Rare Telephony Shareholder of the availability of dissenters' rights and all Rare Telephony Shareholders have consented to the transactions contemplated by this Agreement and have, thereby, waived their entitlement to dissenters' rights. (w) 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 Rare Telephony or the Rare Telephony 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 Rare Telephony or the Rare Telephony Shareholders which may have a Material Adverse Effect on the business, prospects, financial condition or results of operations of any one of the Rare Companies 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 Rare Telephony and the Rare Telephony Shareholders to execute this Agreement and to consummate the Merger 21 and the other transactions contemplated hereby, Acquiror and Sub hereby make the following representations and warranties to Rare Telephony and the Rare Telephony Shareholders. (a) Corporate Existence and Power. Acquiror is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and the Sub is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Each of Acquiror and the Sub has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except where the failure to have any of the foregoing would not have a Material Adverse Effect on their respective businesses. Each of Acquiror and the Sub is duly qualified to do business and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except for those jurisdictions where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. Acquiror owns all of the issued and outstanding shares of capital stock of the Sub, and there are no other rights or obligations of Acquiror or the Sub to issue any other shares of capital stock of the Sub. (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 (other than the delivery of the shares of Merger Consideration) will have occurred. (c) No Contravention. Neither the execution and delivery of the Agreement nor the consummation of the transactions contemplated thereby will conflict with or result in any violation of any provision of the Certificate of Incorporation or Bylaws of Acquiror or the Certificate 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 Certificate of Incorporation or Bylaws of Acquiror or the Certificate of Incorporation or Bylaws of Sub 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. (d) Merger Consideration Authorized. Except as limited by Section 1.3(c), the shares of Acquiror Common Stock to be issued in the Merger will be duly authorized, validly issued, fully paid and nonassessable. (e) SEC Filings. Upon request Acquiror will make available to Rare Telephony 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 1998 and all of its other reports, statements, schedules 22 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." (f) Litigation. Except as set forth in any of the SEC Documents or Schedule 4.2(g), to the best of Acquiror's knowledge there is no formally filed lawsuit against or affecting Acquiror or Sub 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 Sub, 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. ARTICLE V AGREEMENTS OF THE PARTIES 5.1 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 5.2 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. 5.2 Confidentiality; No Solicitation. (a) Confidentiality of Rare Telephony-Related Information. With respect to information concerning Rare Telephony 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 and except as required by or implicated by federal or state securities laws or the rules or regulations of the United States Securities and Exchange Commission or any national securities exchange, it shall hold such information in confidence, and shall not use such information except for the sole purpose of evaluating the Merger and related transactions. 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 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 23 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 Rare Telephony or the Rare Telephony Shareholders. Notwithstanding anything contained herein to the contrary, in the event a party is required by court order or subpoena to disclose information which is otherwise deemed to be confidential or subject to the confidentiality obligations hereunder, prior to such disclosure, the disclosing party shall: (i) promptly notify the non-disclosing party and, if having received a court order or subpoena, deliver a copy of the same to the non-disclosing party; (ii) cooperate with the non-disclosing party, at the expense of the non-disclosing party, in obtaining a protective or similar order with respect to such information; and (iii) provide only such of the confidential information as the disclosing party is advised by its counsel is necessary to strictly comply with such court order or subpoena. (b) Confidentiality of Acquiror-Related Information. With respect to information concerning Acquiror that is made available to Rare Telephony and the Rare Telephony Shareholders pursuant to the provisions of this Agreement, Rare Telephony and the Rare Telephony Shareholders agree that they shall hold such information in confidence, and shall not use such information except for the sole purpose of evaluating the Merger and the related transactions. If this Agreement is terminated pursuant to the provisions of Article VIII, Rare Telephony and the Rare Telephony 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 Rare Telephony's 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 Rare Telephony or the Rare Telephony Shareholders from a third party entitled to disclose it; (ii) becomes known publicly other than through Rare Telephony, the Rare Telephony Shareholders or any party who received the same through Rare Telephony or the Rare Telephony Shareholders, provided that Rare Telephony or the Rare Telephony 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 Rare Telephony; or (iv) is disclosed with the express prior written consent thereto of Acquiror. 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) 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 Rare Telephony Shareholders, Rare Telephony nor any Affiliate thereof will, prior to the earlier of the Closing or ninety (90) calendar days after the termination of this Agreement, directly or indirectly, through any officer, director, agent, consultant or otherwise: (i) solicit, initiate or encourage the submission of inquiries, proposals or offers from any Person or entity relating to any 24 acquisition or purchase of assets of or any equity interest in Rare Telephony 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 Rare Telephony 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 Rare Telephony 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. Rare Telephony or the Rare Telephony Shareholders shall within six (6) hours notify Acquiror if any such proposal or offer, or any inquiry or contact with any Person or entity with respect thereto is made. 5.3 Interim Operations. During the period from the date of this Agreement and continuing until the Closing, Rare Telephony 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 the Rare Companies: (a) Ordinary Course. Each of the Rare Companies 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; (b) Dividends; Changes in Stock. Each of the Rare ------------------------------- Companies 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. (c) Issuance of Securities. Except for the Merger, none ----------------------- of the Rare Companies 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. (d) Governing Documents. None of the Rare Companies shall -------------------- amend its Certificate of Incorporation, or Articles of Incorporation, as the case may be, or its Bylaws. 25 (e) No Dispositions. None of the Rare Companies shall ----------------- 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. (f) Indebtedness. None of the Rare Companies shall incur ------------- any indebtedness for borrowed money or guarantee any such indebtedness or issue or sell any debt securities of any one of the Rare Companies or guarantee any debt securities of others other than in the ordinary course of business consistent with prior practice. (g) Benefit Plans; Etc. None of the Rare Companies shall ------------------- adopt or amend in any material respect any collective bargaining agreement or Employee Benefit Plan. (h) Compensation. None of the Rare Companies shall grant ------------- to any management level employee or officer any increase in compensation or in severance or termination pay, or enter into any employment agreement with any management level employee or officer. (i) Acquisitions. None of the Rare Companies shall ------------- 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. (j) Tax Elections. None of the Rare Companies shall make -------------- any material tax election or settle or compromise any material federal, state, local or foreign tax liability. (k) Waivers and Releases. None of the Rare Companies --------------------- shall 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. (l) Other Actions. None of the Rare Companies shall enter -------------- into any agreement or arrangement to do any of the foregoing. None of the Rare Companies shall take any action, or fail to take any action, that is reasonably likely to result in any of the representations and warranties of Rare Telephony set forth in this Agreement becoming untrue in any material respect. 5.4 Consents. Acquiror, Sub, Rare Telephony and the Rare Telephony 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 26 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. 5.5 Filings. Acquiror, the Sub, Rare Telephony and the Rare Telephony 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. 5.6 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. 5.7 Public Announcements. Acquiror and Rare Telephony 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 any national securities exchange or as otherwise deemed reasonable or necessary in the sole discretion of Acquiror's counsel. The Rare Telephony Shareholders shall not issue any other press release or make any other public statement with respect to the Merger, this Agreement or the other transactions contemplated by this Agreement. 5.8 Notification of Certain Matters. Rare Telephony and the Rare Telephony Shareholders shall give prompt notice to Acquiror, and Acquiror and the Sub shall give prompt notice to Rare Telephony and the Rare Telephony 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 Rare Telephony and the Rare Telephony Shareholders, at or prior to the Closing, and, as to Acquiror and Sub, as of the Closing and (b) any material failure of Rare Telephony and the Rare 27 Telephony 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. 5.9 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. Without limiting the generality of the foregoing, neither Rare Telephony nor Sub (including the Surviving Corporation) will be responsible for the legal fees (or fees of other advisors or experts) of the Rare Telephony Shareholders. 5.10 Registration Rights; Resale Restrictions (a) In accordance with the terms and conditions of Registration Rights Agreements to be provided by the Acquiror (in substantially the form attached hereto as Exhibit 5.10), Acquiror shall offer piggy back registration rights for the following shares of Acquiror Common Stock: (i) the Investment Banking Shares; (ii) 50,000 shares of Acquiror Common Stock issued in the name of Peter J. Salzano in connection with the Merger (the "Salzano Registerable Shares"); and (iii) 45,000 shares of Acquiror Common Stock issued in the name of Robert Paterno in connection with the Merger (the "Paterno Registerable Shares") Other than as set forth above, there are no registration rights associated with the Merger Consideration. The Acquiror's registration rights obligations in accordance with this paragraph shall extend only to the inclusion of the Investment Banking Shares, the Salzano Registerable Shares, and the Paterno Registerable Shares (collectively, the "Registerable Shares") in a Registration Statement filed under the Act. The Acquiror shall have no obligation to assure the terms and conditions of distribution, to obtain a commitment from an underwriter relative to the sale of the Registerable Shares or to otherwise assume any responsibility for the manner, price or terms of the distribution of the Registerable Shares. Furthermore, the Acquiror shall not be restricted in any manner from including within the Registration Statement the distribution, issuance or resale of any of its or any other securities. (b) In addition to any restrictions on the sale, offering, or transfer pursuant to federal or state securities laws (and the rules and regulations thereunder), the shares of Acquiror Common Stock constituting the Merger Consideration shall be subject to the following restrictions upon resale (the "Restrictions"): 34% of the holder's Acquiror Common Stock no earlier than one (1) year following the Closing; an additional 33% of the holder's Acquiror Common Stock no earlier than two (2) years following the Closing; and the remaining 33% of the holder's Acquiror Common Stock no earlier than three (3) years following the Closing. Notwithstanding the foregoing, the Registerable Shares shall not be subject to the Restrictions; provided however: (i) the Registerable Shares will remain subject to any restrictions on the sale, offering, or transfer pursuant to federal or state 28 securities laws (and the rules and regulations thereunder); and (ii) the shares of Acquiror Common Stock issued to both Peter J. Salzano and Robert Paterno pursuant to this Merger Agreement (other than the Salzano Registerable Shares and the Paterno Registerable Shares, as the case may be), shall remain subject to the Restrictions. THE RARE TELEPHONY SHAREHOLDERS ACKNOWLEDGE THAT THE SHARES CONSTITUTING THE MERGER CONSIDERATION ARE SUBJECT TO FORFEITURE. (c) Notwithstanding the foregoing, the Restrictions shall immediately expire (and counsel for Acquiror shall send a letter to Acquiror's transfer agent instructing the transfer agent to remove the Restriction legends from all certificates representing outstanding shares of Acquiror Common Stock constituting the Merger Consideration) if and only if the Acquiror upon direction from its Board of Directors: (1) completely shuts down the operations of all of the Rare Companies; and (2) fires, other than five (5) or fewer individuals, all employees, consultants, and agents of all of the Rare Companies. Moreover, if a Rare Telephony Shareholder dies prior to the expiration of the Restrictions, the Restrictions on the shares of Acquiror Common Stock issued in the name of the deceased Rare Telephony Shareholder only shall immediately expire (and counsel for Acquiror shall send a letter to Acquiror's transfer agent instructing the transfer agent to remove the Restriction legends from all certificates representing outstanding shares of Acquiror Common Stock issued in the name of the deceased Rare Telephony Shareholder) upon the estate of the deceased Rare Telephony Shareholder providing the Acquiror's counsel with an original death certificate for the deceased Rare Telephony Shareholder. It is understood that the Restrictions to be removed, if removed, in accordance with this Section 5.10(c) are contractual restrictions on resale. The removal of the Restrictions shall not in any way impact or relieve any Rare Telephony Shareholder from compliance with any and all federal or state securities laws (and the rules and regulations thereunder). 5.11 Documents at Closing. Each party to this Agreement agrees to execute and deliver at the Closing those documents identified in Section 2.2 which are required to be executed and delivered by such party. 5.12 Prohibition on Trading in Acquiror and Sub Stock. Rare Telephony and the Rare Telephony 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 Rare Telephony 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. 29 5.13 Production of Schedules and Exhibits. Within fifteen (15) calendar 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. 5.14 Loan Documents On the terms and conditions set forth in the Funding Agreement attached hereto as Exhibit 5.14 and made a part hereto, the Acquiror shall provide limited financing to Rare Telephony. 5.15 Acknowledgment of Approvals. By virtue of their respective signatures to this Agreement, Acquiror, Sub, Rare Telephony and the Rare Telephony Shareholders acknowledge their approval of this Agreement and their consent to the consummation of the transactions identified herein. 5.16 Audit. After the Closing, Rare Telephony and the Rare Telephony Shareholders shall cooperate with Acquiror, its accountants and representatives in furnishing information on the Rare Companies and their businesses for the purposes of conducting an audit of the Rare Companies, and, without limiting the generality of the foregoing, shall provide, execute and deliver standard and customary management representation letters. 5.17 Appointment to Board of Directors. For the six (6) months following the Effective Time, the Rare Telephony Shareholders shall have the right, upon the delivery to Acquiror of a written consent of a majority of the Rare Telephony Shareholders (as opposed to the written consent of a majority of the shares held by the Rare Telephony Shareholders in either Rare Telephony or the Acquiror), to designate one person to attend, either telephonically or in person, all meetings of the Board of Directors of the Acquiror (the "Attendance Right"). The Attendance Right (i.e. the right to have a designate attend, either telephonically or in person, all meetings of the Board of Directors of the Acquiror) shall expire on the calendar day after the six month anniversary of the Effective Time. The Attendance Right shall not extend to meetings of the committees of the Acquiror's Board of Directors. Additionally, on or before September 15, 2000, the Rare Telephony Shareholders shall have the right, upon the delivery to Acquiror of a written consent of a majority of the Rare Telephony Shareholders (as opposed to the 30 written consent of a majority of the shares held by the Rare Telephony Shareholders in either Rare Telephony or the Acquiror), to designate one person to be elected to the Acquiror's Board of Directors (the "Rare Telephony Candidate"). If, and only if, the Rare Telephony Candidate is an acceptable candidate for serving on the Acquiror's Board of Directors (in the sole discretion of the members of the Acquiror's Board of Directors), then the members of the Acquiror's Board of Directors shall elect the Rare Telephony Candidate to serve as a Class II member of the Acquiror's Board of Directors with a term to expire at the annual meeting of the Acquiror's stockholders held in 2000. The right of the Rare Telephony Shareholders to designate a Rare Telephony Candidate shall expire at 5:01 p.m. Eastern Standard Time on September 15, 2000. If the Rare Telephony Shareholders designate a Rare Telephony Candidate and the members of Acquiror's Board of Directors elect the Rare Telephony Candidate to the Acquiror's Board of Directors then the Attendance Right shall immediately expire. 5.18 Consents from Rare Telephony Shareholders. To the extent the Rare Telephony Shareholders receive options to purchase shares of Acquiror common stock pursuant to the Acquiror's 1998 Stock Incentive Plan, as Amended (the "Plan") in connection with their serving as employees of or consultants to Acquiror or its subsidiaries (as defined in the Plan), all such Rare Telephony Shareholders agree to approve any amendment(s) to the Plan approved by the Acquiror's Board of Directors in the six months following the Effective Date. 5.19 Vrabel Indemnification. Rare Telephony (then known as Washoe Technology Corporation) and Cash Back executed on March 7, 2000 a promissory note in the principal amount of $200,000.00 bearing interest at the rate of 15% per annum in favor of Platt & Platt, a partnership (the "Platt Note"). The Sub shall indemnify and hold harmless Thomas J. Vrabel against any damage or cost (including reasonable attorney's fees) incurred by Mr. Vrabel arising out of his personal guarantee of the Platt Note if, and only if, the said damage or cost is incurred due to the fact that: (1) Rare Telephony and/or Cash Back are (is) in default under the Platt Note pursuant to Section 8(a) through 8(f) of the Platt Note; and (2) said default has occurred due to the fact that the treasurer of Sub has not timely approved payment of the Platt Note. In no event shall Acquiror indemnify Mr. Vrabel hereunder if the source of the default is Section 8(g) of the Platt Note or any provision of an Agreement by and among Rare Telephony (then known as Washoe Technology Corporation), Cash Back and Platt and Platt, dated March 6, 2000. ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER 31 6.1 Conditions to Obligations of Rare Telephony and the Rare Telephony Shareholders. The obligations of Rare Telephony and the Rare Telephony 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 Rare Telephony and the Rare Telephony 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) 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. (b) The approval of the Merger by the Board of Directors of Rare Telephony and the Rare Telephony Shareholders in accordance with the provisions of the NRS shall not have been revoked or altered in any way. (c) 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, Rare Telephony shall have secured general releases from each of its directors, officers, consultants, employees and shareholders agreeing to (and to the extent requested by the Acquiror the directors, officers, and employees of Cash Back): (i) release Rare Telephony, Cash Back, and Free from any and all claims, liabilities, obligations and demands; (ii) terminate any employment agreements with Rare Telephony, Cash Back, or Free; and (iii) terminate any shareholder agreements. (b) On or before the Closing, each of the Rare Companies shall have secured the resignation of each of its directors and officers to the extent requested by Acquiror. (c) No Rare Telephony Shareholder shall have filed with Rare Telephony, prior to the Rare Telephony 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 32 effectuated, as required by the NRS in order for such shareholder to perfect the right to dissent from such proposed action. (d) The representations and warranties of Rare Telephony and the Rare Telephony 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. (e) Rare Telephony and the Rare Telephony Shareholders shall have complied in a timely manner and in all material respects with its covenants and agreements set out in this Agreement. (f) There shall be delivered to Acquiror and Sub an officer's certificate of Rare Telephony to the effect that all of the representations and warranties of Rare Telephony set forth herein are true and complete in all respects as of the Closing, and that Rare Telephony 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 Rare Telephony Shareholders to the effect that the representations and warranties of the Rare Telephony Shareholders set forth herein are true and correct in all material respects and that the Rare Telephony Shareholders have complied in all material respects with their covenants and agreements set forth herein required to be complied with by Closing. (g) Rare Telephony and the Rare Telephony Shareholders shall have executed and delivered the Escrow Agreement to Acquiror and the Escrow Agent. (h) 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 Rare Telephony. (i) 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. (j) 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. (k) Acquiror's and Sub's Board of Directors, and shareholders to the extent necessary, shall have approved the Merger in accordance with the DGCL. 33 (l) The approval of the Merger by the Board of Directors of Rare Telephony and the Rare Telephony Shareholders in accordance with the provisions of the NRS shall not have been revoked or altered in any way. (m) The Rare Telephony and Cash Back employees and consultants listed on Schedule 6.2(m) have terminated their existing employment agreements or consultant agreements, as the case may be, and (1) Armando Medina, Timothy Grace, Godwin Cruz, Christopher LeFebvre, Alberto Roman, Debra Santa Lucia, Ivel Turner, and Williams Jean Charles shall have entered into new employment agreements with Sub in the form attached hereto as Exhibit 6.2(m)(1); (2) Rosaria Ventola and Toni Ann Afflitto shall have entered into new employment agreements with Sub in the form attached hereto as Exhibit 6.2(m)(2) (3) Arthur Scuttaro, Thomas Vrabel, and Robert Paterno shall have entered into new employment agreements with Sub in the form attached hereto as Exhibit 6.2(m)(3); (4) Thomas Salzano shall have entered into a new consulting agreement with Sub in the form attached hereto as Exhibit 6.2(m)(4); and (5) Peter J. Salzano shall have entered into a new consulting agreement with Sub in the form attached hereto as Exhibit 6.2(m)(5). (n) Rare Telephony, Cash Back, and Free shall not have more than $300,000 of indebtedness, on a consolidated basis (as determined to the sole satisfaction of Acquiror) (the "Remaining Indebtedness"); $200,000 of the Remaining Indebtedness shall bear interest at 15% per annum (provided, however, that if the creditor for the $200,000 indebtedness shall be an officer, director, consultant, agent or Affiliate of any Rare Company, then said indebtedness shall bear interest at the rate of 8% per annum); $100,000 of the Remaining Indebtedness shall bear interest at 8% per annum; the Remaining Indebtedness shall have a maturity date of three years from Closing (or later) and shall be able to be prepaid without penalty. A $50,000 loan by Thomas J. Vrabel to any one or more of the Rare Companies shall be extinguished as of Closing. The Remaining Indebtedness shall exclude trade debt, accounts payable, and accrued expenses. At Closing, the Rare Companies on a consolidated basis shall not have more than, in the aggregate, $450,000 of trade debt, accounts payable, and accrued expenses (excluding salaries). (o) Rare Telephony shall have executed and delivered the Funding Agreement to Acquiror. ARTICLE VII 34 INDEMNIFICATION 7.1 Indemnification. (a) Rare Telephony and Rare Telephony Shareholders. The ------------------------------------------------ Rare Telephony Shareholders shall jointly and severally, indemnify, defend and hold harmless Acquiror, Sub, and their respective Representatives, stockholders, controlling persons, and affiliates 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, Sub, or their respective Representatives, stockholders, controlling persons, or affiliates which arise out of or result from a misrepresentation, breach of warranty, or breach of any covenant of Rare Telephony or the Rare Telephony 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 Rare Telephony or the Rare Telephony 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 Rare Telephony and the Rare Telephony Shareholders from and against any and all Claims, as defined at Subsection 7.1(a) above, incurred by Rare Telephony and/or the Rare Telephony 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) Escrow Claim. Upon notice to the Rare Telephony ------------- Shareholders (or any one of them as specified in the Escrow Agreement) specifying in reasonable detail the basis for such setoff, either Acquiror or Sub may give notice of a Claim under the Escrow Agreement in such amount to which it may be entitled under this Article VII. Neither the exercise of nor the failure to give a notice of a Claim under the Escrow Agreement will constitute an election of remedies or limit Buyer in any manner in the enforcement of any other remedies that may be available to it. (d) Right to Indemnification Not Affected by Knowledge. ----------------------------------------------------- The right to indemnification or other remedy based on such representations, warranties, covenants, and obligations will not be affected by any investigation conducted with respect to, or any Knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant, or obligation. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not affect the right to indemnification, or other remedy based on such representations, warranties, covenants, and obligations. 35 (e) Methods of Asserting Claims for Indemnification. ----------------------------------------------------- All claims for indemnification under this Agreement shall be asserted as follows: (i) Third Party Claims. In the event that any --------------------- Claim for which a party (the "Indemnitee") would be entitled to indemnification under this Agreement is asserted against or sought to be collected from the Indemnitee by a third party the Indemnitee shall promptly notify the other party (the "Indemnitor") of such Claim, specifying the nature thereof, the applicable provision in this Agreement or other instrument under which the Claim arises, and the amount or the estimated amount thereof (the "Claim Notice"); provided, however, that the failure to notify the Indemnitor will not relieve the Indemnitor of any liability that it may have to any Indemnitee, except to the extent that the Indemnitor demonstrates that the defense of such action is materially prejudiced by the Indemnitee's failure to give such notice. The Indemnitor shall have thirty (30) calendar days (or, if shorter, a period to a date not less than ten (10) calendar days prior to when a responsive pleading or other document is required to be filed but in no event less than ten (10) calendar 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 (provided that the Indemnitee is entitled to such reimbursement under this Agreement). (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, then the Indemnitee and the Indemnitor shall attempt to resolve the dispute in good faith and if such attempts shall fail shall be free to commence arbitration pursuant to Section 9.7. ARTICLE VIII TERMINATION 8.1 Termination. 36 This Agreement may be terminated and the Merger may be abandoned at any time prior to the Closing: (a) by written consent of all of the following: the Rare Telephony Shareholders and the boards of directors of Acquiror, the Sub, and Rare Telephony; (b) by either of Acquiror or Sub: (i) if the Closing shall not have occurred on or before June 30, 2000 (or such later date upon the mutual written agreement of the parties); provided, however, that the right to terminate this Agreement under this Section 8.1(b)(i) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before that date; or (ii) if any court of competent jurisdiction, or any governmental body, regulatory or administrative agency or commission having appropriate jurisdiction shall have issued an order, decree or filing or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and non-appealable. (c) by Rare Telephony and the Rare Telephony Shareholders if any of the conditions specified in Section 6.1 have not been materially met and the sole remedy of Rare Telephony and the Rare Telephony 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 Rare Telephony and the Rare Telephony Shareholders nor Acquiror shall have any claim or action against the other (other than as provided for in Section 8.2); 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 Rare Telephony and the Rare Telephony Shareholders shall have any claim or action against the other (other than as provided for in Section 8.2). 8.2 Notice and Effect of Termination. (a) 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 5.2, 5.7, 5.9, 8.1, and 9.7 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 Rare Telephony and the Rare Telephony Shareholders for any breach of this Agreement by Acquiror or Sub shall be as set forth in Section 7.1 37 hereof and provided, further, that, to the maximum extent permitted by law, in no event shall Acquiror, Sub, or their officers, directors, employees or agents be liable to either Rare Telephony or any Rare Telephony Shareholder(s) or any other person or entity for any indirect, special, incidental, punitive or consequential losses or damages, including without limitation loss of revenue, loss of customers or clients, loss of goodwill or loss of profits arising in any manner from this Agreement or the performance or non-performance of obligations hereunder, even if such party has been advised of the possibility of such damages. (b) If: (1) Acquiror or Sub shall terminate this Agreement pursuant to Section 8.1(d) (provided that the basis for said termination is that the condition(s) set forth in Sections 6.2(a), 6.2(b), 6.2(c), 6.2(d), 6.2(e), 6.2(g), 6.2(l), 6.2(m), 6.2(n), or 6.2(o) have not been satisfied), (2) Rare Telephony or the Rare Telephony Shareholders terminate this Agreement pursuant to Section 8.1(c) (provided that the basis for said termination is that the conditions set forth in Sections 6.1(b) have not been satisfied, or (3) Section 5.2(c) is violated or any of the officers, directors, employees or consultants of any one of the Rare Companies receives any information regarding a Transaction Proposal at any time between the date of this Agreement and 90 calendar days following the termination of this Agreement, this Agreement is terminated by any party hereto, and within twelve months of any such termination of this Agreement, a definitive agreement with respect to a Transaction Proposal is entered into or a transaction with respect to a Transaction Proposal is consummated, (each of the foregoing being a "Fee Event") then Rare Telephony shall immediately pay to the Acquiror, by wire transfer or immediately available funds, TWO MILLION DOLLARS AND NO/100 ($2,000,000.00). (c) The parties acknowledge that the payments described in Section 8.2(b) are a payment of liquidated damages which are paid in lieu of damages and as a genuine pre-estimate of the damages which the Acquiror will suffer or incur as a result of the event giving rise to such damages and resultant termination of this Agreement, are not penalties and are the sole monetary remedy of the Acquiror (other than the repayment of loans made by Acquiror to Rare Telephony and Cash Back which shall remain on the terms set forth in the relevant loan documents). Nothing herein shall preclude a party from seeking injunctive relief to restrain any breach or threatened breach of the covenants and agreements set forth in this Agreement or otherwise to obtain specific performance of any such covenant or agreement, without the necessity of posting bond or security in connection therewith. 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. 38 This Agreement may be amended by written agreement of all of the parties hereto. This Agreement may not be amended except by an instrument in writing signed on behalf of Acquiror, the Sub, Rare Telephony and the Rare Telephony Shareholders. ARTICLE IX MISCELLANEOUS 9.1 Survival of Representations and Warranties. The respective representations and warranties of Acquiror, the Sub, Rare Telephony and the Rare Telephony 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, instructions, consents and other communications to be given pursuant to this Agreement shall be in writing and shall be deemed received (i) on the same day if delivered in person, by same-day courier or by telegraph, telex or facsimile transmission (receipt confirmed) (provided that telegraph, telex or facsimile notice shall be deemed received on the next business day if received after 5:00 p.m. Eastern Standard Time), (ii) on the next day if delivered by overnight mail or courier, or (iii) on the date indicated on the return receipt, or if there is no such receipt, on the third calendar day (excluding Sundays) if delivered by certified or registered mail, postage prepaid, to the party for whom intended to the following addresses: (a) if to Rare Telephony or the Rare Telephony Shareholders, or any one of them, at: Thomas J. Vrabel Rare Telephony, Inc. 657 Main Street, Suite 301 P.O. Box 9101 Passaic, NJ 07055-9101 Facsimile: (973) 779-7991 (b) if to Acquiror or the Sub at: Frederick A. Moran VDC Communications, Inc. 75 Holly Hill Lane Greenwich, CT 06830 Facsimile: (203) 552-0908 with a copy to: 39 Louis D. Frost, Esq. VDC Communications, Inc. 75 Holly Hill Lane Greenwich, CT 06830 Facsimile: (203) 552-0908 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. Except as otherwise provided in this Agreement, 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 multiple counterparts each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may also be executed and delivered by exchange of facsimile copies showing the signatures of the parties, and those signatures need not be affixed to the same copy. The facsimile copies showing the signatures of the parties will constitute originally signed copies of the Agreement requiring no further execution. 9.7 Governing Law; Arbitration. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Connecticut applicable to contracts executed and to be performed entirely within said State. All 40 controversies or claims arising out of or relating to this Agreement shall be determined by binding arbitration applying the laws of the State of Connecticut. The arbitration shall be conducted at Acquiror's offices in Greenwich, Connecticut, or at such other location designated by Acquiror, before the American Arbitration Association. The decision of the arbitrator(s) shall be final and binding upon the parties, and judgment may be obtained thereon in any 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 thereto unless the award otherwise provides. Nothing herein shall preclude a party from seeking injunctive relief to restrain any breach or threatened breach of the covenants and agreements set forth in this Agreement or otherwise to obtain specific performance of any such covenant or agreement, without the necessity of posting bond or security in connection therewith. 9.8 Severability. The invalidity or unenforceability of any term of this Agreement shall not affect the validity or enforceability of this Agreement or any of its other terms; in the event that any court or arbitrator determines that any provision of this Agreement is invalid or unenforceable, as the case may be, then, and in either such event, neither the enforceability nor the validity of said paragraph or section as a whole shall be affected. Rather, the scope of said paragraph or section shall be revised by the court or arbitrator as little as possible to make the paragraph or section enforceable. If the court or arbitrator will not revise said paragraph or section, then this Agreement shall be construed as though the invalid or unenforceable term(s) were not included herein. 9.9 Release and Discharge. By virtue of their execution of this Agreement, as of the Closing and thereafter, any and all Rare Telephony directors, officers and shareholders hereby agree to release, remise and forever discharge Rare Telephony, Cash Back, and Free from and against any and all debts, obligations, liabilities and amounts owing from Rare Telephony, Cash Back or Free prior to the Closing, and none of Rare Telephony, Cash Back and Free is obligated to take any action or make any payments to third parties on behalf of the Rare Telephony Shareholders. 9.10 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 and documents are the product of negotiations between the parties and that the parties have contributed to the final preparation of this Agreement and all related instruments and documents. 41 9.11 Read and Understood. Each party acknowledges that (i) it has carefully read this Agreement, (ii) it has had the assistance of legal counsel of its choosing (and such other professionals and advisors as it has deemed necessary) in the review and execution hereof, (iii) the meaning and effect of the various terms and provision hereof have been fully explained to it by such counsel, (iv) it has conducted such investigation, review and analysis as it has deemed necessary to understand the provisions of this Agreement and the transactions contemplated hereby, and (v) it has executed this Agreement of its own free will. 9.12 Remedies Cumulative. Except as otherwise expressly provided herein, each of the rights and remedies of the parties set forth in this Agreement shall be cumulative with all other such rights and remedies, as well as with all rights and remedies of the parties otherwise available at law or in equity. 9.13 Certain Definitions. As used herein: (a) "Act" means the Securities Act of 1933, as amended; (b) "Affiliate" shall have the meanings ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended to date (the "Exchange Act"); (c) "Business Day" shall mean any day other than a Saturday, Sunday or a day on which federally chartered financial institutions are not open for business in Greenwich, Connecticut; (d) "Dissenting Shares" shall mean the shares of Rare Telephony 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 Section 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 42 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) "Governmental Body" means any: (i) nation, state, county, city, town, village, district, or other jurisdiction of any nature; (ii) federal, state, local, municipal, foreign, or other government; (iii) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (iv) multinational organization or body; or (v) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature. (h) "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; (i) "Legal Requirement" means any federal, state, local, municipal, foreign, international, multinational, or other administrative order, constitution, law, ordinance, principle of common law, regulation, statute, or treaty. (i) "Funding Agreement" shall have the meaning set forth in Section 5.14. (j) "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. (k) "Order" shall mean any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator. 43 (l) "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 (m) "Representative" shall mean with respect to a particular Person, any director, officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors. (n) "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, Rare Telephony and the Rare Telephony Shareholders have caused this Agreement to be signed by their respective officers hereunto duly authorized, effective as of the date first written above.
Attest: VDC COMMUNICATIONS, INC. By: /s/ Clay Moran By: /s/ Frederick A. Moran ---------------------------------- -------------------------------- Frederick A. Moran Chief Executive Officer Attest: VOICE & DATA COMMUNICATIONS (LATIN AMERICA), INC. By: /s/ Clay Moran By: /s/ Frederick A. Moran ---------------------------------- -------------------------------- Frederick A. Moran Chief Executive Officer Attest: RARE TELEPHONY, INC. By: /s/ Debra Santa Lucia By: /s/ Thomas J. Vrabel ---------------------------------- -------------------------------- Thomas J. Vrabel Chief Executive Officer and President Witness RARE TELEPHONY SHAREHOLDERS /s/ Debra Santa Lucia /s/ Thomas J. Vrabel - ------------------------------------- ----------------------------------- Name: Debra Santa Lucia Signature -------------------------------- Name: Thomas J. Vrabel Address: ----------------------------- 44 - ------------------------------------- Address: --------------------------- ----------------------------------- Ownership Percentage: [signatures continue onto next page] Witness /s/ Debra Santa Lucia /s/ Peter J. Salzano - ------------------------------------- ----------------------------------- Name: Debra Santa Lucia Signature -------------------------------- Name: Peter J. Salzano Address: Address: ----------------------------- --------------------------- - ------------------------------------- ----------------------------------- Ownership Percentage: Witness /s/ Debra Santa Lucia /s/ Armando Medina - ------------------------------------- ----------------------------------- Name: Debra Santa Lucia Signature -------------------------------- Name: Armando Medina Address: Address: ----------------------------- --------------------------- - ------------------------------------- ----------------------------------- Ownership Percentage: Witness /s/ Debra Santa Lucia /s/ Christopher LeFebvre - ------------------------------------- ----------------------------------- Name: Debra Santa Lucia Signature -------------------------------- Name: Christopher LeFebvre Address: Address: ----------------------------- --------------------------- - ------------------------------------- ----------------------------------- Ownership Percentage: Witness /s/ Debra Santa Lucia /s/ Arthur Scuttaro - ------------------------------------- ----------------------------------- Name: Debra Santa Lucia Signature -------------------------------- Name: Arthur Scuttaro Address: Address: ----------------------------- --------------------------- - ------------------------------------- ----------------------------------- Ownership Percentage: Witness /s/ Chris Peterson /s/ Debra Santa Lucia - ------------------------------------- ----------------------------------- 45 Name: Chris Peterson Signature -------------------------------- Name: Debra Santa Lucia Address: Address: ----------------------------- --------------------------- - ------------------------------------- ----------------------------------- Ownership Percentage: Witness /s/ Peter J. Salzano, President /s/ Debra Santa Lucia ----------------------------------- - ------------------------------------- Signature Name: Debra Santa Lucia Name: Network Consulting Group, Inc. -------------------------------- -------------------------------- Address: Address: ----------------------------- --------------------------- ----------------------------------- Ownership Percentage: [signatures continue onto next page] Witness /s/ Debra Santa Lucia /s/ Robert Paterno - ------------------------------------- ----------------------------------- Name: Debra Santa Lucia Signature -------------------------------- Name: Robert Paterno Address: Address: ----------------------------- --------------------------- - ------------------------------------- ----------------------------------- Ownership Percentage: Witness /s/ Debra Santa Lucia /s/ Paul Kaufman - ------------------------------------- ----------------------------------- Name: Debra Santa Lucia Signature -------------------------------- Name: Paul Kaufman Address: Address: ----------------------------- --------------------------- - ------------------------------------- ----------------------------------- Ownership Percentage: Witness /s/ Debra Santa Lucia /s/ Richard Roccia - ------------------------------------- ----------------------------------- Name: Debra Santa Lucia Signature -------------------------------- Name: Richard Roccia Address: Address: ----------------------------- --------------------------- - ------------------------------------- ----------------------------------- Ownership Percentage: 46 Witness /s/ Debra Santa Lucia /s/ Timothy Grace - ------------------------------------- ----------------------------------- Name: Debra Santa Lucia Signature -------------------------------- Name: Timothy Grace Address: Address: ----------------------------- --------------------------- - ------------------------------------- ----------------------------------- Ownership Percentage: Witness /s/ Debra Santa Lucia /s/ Godwin Cruz - ------------------------------------- ----------------------------------- Name: Debra Santa Lucia Signature -------------------------------- Name: Godwin Cruz Address: Address: ----------------------------- --------------------------- - ------------------------------------- ----------------------------------- Ownership Percentage: Witness /s/ Debra Santa Lucia /s/ Alberto Roman - ------------------------------------- ----------------------------------- Name: Debra Santa Lucia Signature -------------------------------- Name: Alberto Roman Address: Address: ----------------------------- --------------------------- - ------------------------------------- ----------------------------------- Ownership Percentage: Witness /s/ Debra Santa Lucia /s/ Ivel Turner - ------------------------------------- ----------------------------------- Name: Debra Santa Lucia Signature -------------------------------- Name: Ivel Turner Address: Address: ----------------------------- --------------------------- - ------------------------------------- ----------------------------------- Ownership Percentage: Witness /s/ Debra Santa Lucia /s/ Williams Jean Charles - ------------------------------------- ----------------------------------- Name: Debra Santa Lucia Signature -------------------------------- Name: Williams Jean Charles Address: Address: ----------------------------- --------------------------- - ------------------------------------- ----------------------------------- Ownership Percentage:
47 EX-2.2 3 0003.txt EX-2.2 AMENDMENT TO AGREEMENT AND PLAN OF MERGER THIS AMENDMENT TO AGREEMENT AND PLAN OF MERGER (the "Amendment"), is made and entered into as of June 14, 2000, by and among VDC COMMUNICATIONS, INC., a Delaware corporation ("Acquiror"), Voice & Data Communications (Latin America), Inc., a Delaware corporation and wholly-owned subsidiary of Acquiror ("Sub"), RARE TELEPHONY, INC., a Nevada corporation (f/k/a Washoe Technology Corporation) ("Rare Telephony"), and those individuals and entities whose names appear on the signature page hereof in their capacity as holders of all of the outstanding common stock of Rare Telephony (the "Rare Telephony Shareholders"). Recitals: WHEREAS, the parties hereto have entered into an Agreement and Plan of Merger dated as of May 25, 2000 (the "Merger Agreement") pursuant to which Rare Telephony shall merge with and into Sub (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 other 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 1.3(b)(i) is hereby amended in its entirety to read: "(i) At the Closing, 775,512 shares of Acquiror Common Stock shall be delivered to the Rare Telephony Shareholders; provided, however, that Thomas J. Vrabel shall contemporaneously deliver a certificate representing 155,102 shares of Acquiror Common Stock (representing 10% of the Merger Consideration) issued in his name to Clayton F. Moran, in his capacity as Chief Financial Officer of the Acquiror, to hold in escrow pending receipt of all state and federal regulatory approvals required in connection with the Merger; and" 2. Section 7.1(c) is hereby amended in its entirety to read: "(c) Escrow Claim. Upon notice to the Rare Telephony Shareholders (or any one of them as specified in the Escrow Agreement) specifying in reasonable detail the basis for such setoff, either Acquiror or Sub may give notice of a 1 Claim under the Escrow Agreement in such amount to which it may be entitled under this Article VII. Neither the exercise of nor the failure to give a notice of a Claim under the Escrow Agreement will constitute an election of remedies or limit Acquiror or Sub in any manner in the enforcement of any other remedies that may be available to either of them." 3. Section 7.1(e)(i) is hereby amended in its entirety to read: "(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 indemnifying party or parties (the "Indemnitor") of such Claim, specifying the nature thereof, the applicable provision in this Agreement or other instrument under which the Claim arises, and the amount or the estimated amount thereof (the "Claim Notice"); provided, however, that the failure to notify the Indemnitor will not relieve the Indemnitor of any liability that it may have to any Indemnitee, except to the extent that the Indemnitor demonstrates that the defense of such action is materially prejudiced by the Indemnitee's failure to give such notice. The Indemnitor shall have thirty (30) calendar days (or, if shorter, a period to a date not less than ten (10) calendar days prior to when a responsive pleading or other document is required to be filed but in no event less than ten (10) calendar 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 (provided that the Indemnitee is entitled to such reimbursement under this Agreement)." 4. Except as otherwise set forth herein, the terms of the Merger Agreement shall remain in full force and effect. 5. 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. 2 6. This Amendment shall be governed by and construed in accordance with the laws of Connecticut, without regard to the laws that might otherwise govern under principles of conflicts of laws applicable thereto. IN WITNESS WHEREOF, Acquiror, Sub, Rare Telephony and the Rare Telephony Shareholders have caused this Agreement to be signed, effective as of the date first written above.
Attest: VDC COMMUNICATIONS, INC. By: /s/ Clay Moran By: /s/ Frederick A. Moran -------------------------------------- ---------------------------------------------- Frederick A. Moran Chief Executive Officer Attest: VOICE & DATA COMMUNICATIONS (LATIN AMERICA), INC. By: /s/ Clay Moran By: /s/ Frederick A. Moran -------------------------------------- ---------------------------------------------- Frederick A. Moran Chief Executive Officer Attest: RARE TELEPHONY, INC. By: /s/ Debra Santa Lucia By: /s/ Thomas J. Vrabel -------------------------------------- ---------------------------------------------- Thomas J. Vrabel Chief Executive Officer and President Witness RARE TELEPHONY SHAREHOLDERS /s/ Debra Santa Lucia /s/ Thomas J. Vrabel - ----------------------------------------- ------------------------------------------------- Name: Debra Santa Lucia Signature Address: Name: Thomas J. Vrabel Address: Ownership Percentage: Witness 3 /s/ Debra Santa Lucia /s/ Peter J. Salzano - ----------------------------------------- ------------------------------------------------- Name: Debra Santa Lucia Signature Address: Name: Peter J. Salzano Address: Ownership Percentage: Witness /s/ Debra Santa Lucia /s/ Armando Medina - ----------------------------------------- ------------------------------------------------- Name: Debra Santa Lucia Signature Address: Name: Armando Medina Address: Ownership Percentage: Witness /s/ Debra Santa Lucia /s/ Christopher LeFebvre - ----------------------------------------- ------------------------------------------------- Name: Debra Santa Lucia Signature Address: Name: Christopher LeFebvre Address: Ownership Percentage: Witness /s/ Debra Santa Lucia /s/ Arthur Scuttaro - ----------------------------------------- ------------------------------------------------- Name: Debra Santa Lucia Signature Address: Name: Arthur Scuttaro Address: Ownership Percentage: Witness /s/ Debra Santa Lucia /s/ Thomas Salzano ------------------------------------------------- - ----------------------------------------- Signature 4 Name: Thomas Salzano Name: Debra Santa Lucia Address: Address: Ownership Percentage: Witness /s/ Peter J. Salzano, President /s/ Debra Santa Lucia ------------------------------------------------- - ----------------------------------------- Signature Name: Debra Santa Lucia Name: Network Consulting Group, Inc. Address: Address: Ownership Percentage: [signatures continue onto next page] Witness /s/ Robert Paterno ------------------------------------------------- /s/ Thomas Salzano Signature - ----------------------------------------- Name: Robert Paterno Name: Thomas Salzano Address: Address: Ownership Percentage: Witness /s/ Paul Kaufman ------------------------------------------------- /s/ Anthony Zinni, Jr. Signature - ----------------------------------------- Name: Paul Kaufman Name: Antohny Zinni, Jr. Address: Address: Ownership Percentage: Witness /s/ Richard Roccia /s/ Debra Santa Lucia ------------------------------------------------- - ----------------------------------------- Signature Name: Debra Santa Lucia Name: Richard Roccia Address: Address: Ownership Percentage: 5 Witness /s/ Timothy Grace /s/ Debra Santa Lucia ------------------------------------------------- - ----------------------------------------- Signature Name: Debra Santa Lucia Name: Timothy Grace Address: Address: Ownership Percentage: Witness /s/ Godwin Cruz /s/ Debra Santa Lucia ------------------------------------------------- - ----------------------------------------- Signature Name: Debra Santa Lucia Name: Godwin Cruz Address: Address: Ownership Percentage: Witness /s/ Alberto Roman /s/ Debra Santa Lucia ------------------------------------------------- - ----------------------------------------- Signature Name: Debra Santa Lucia Name: Alberto Roman Address: Address: Ownership Percentage: Witness /s/ Ivel Turner /s/ Thomas Salzano ------------------------------------------------- - ----------------------------------------- Signature Name: Thomas Salzano Name: Ivel Turner Address: Address: Ownership Percentage: Witness /s/ Williams Jean Charles /s/ Debra Santa Lucia ------------------------------------------------- - ----------------------------------------- Signature 6 Name: Debra Santa Lucia Name: Williams Jean Charles Address: Address: Ownership Percentage:
7 EX-2.3 4 0004.txt EX-2.3 CERTIFICATE OF MERGER OF RARE TELEPHONY, INC. INTO Voice & DATA COMMUNICATIONS (LATIN AMERICA), INC. The undersigned corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the name and state of incorporation of each of the constituent corporations of the merger is as follows:
Name State of Incorporation Voice & Data Communications (Latin America), Inc. Delaware Rare Telephony, Inc. Nevada
SECOND: That an Agreement and Plan of Merger between the parties to the merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of Section 252 of the General Corporation Law of the State of Delaware. THIRD: That the surviving corporation of the merger is Voice & Data Communications (Latin America), Inc. FOURTH: Article First of the Certificate of Incorporation of the surviving corporation shall be amended to read as follows: "FIRST: The name of the corporation is Rare Telephony, Inc." FIFTH: That the executed Agreement and Plan of Merger is on file at the principal place of business of the surviving corporation. The address of the principal place of business of the surviving corporation is 657 Main Avenue, Suite 301, Passaic, New Jersey 07055 and its executive offices are located at 75 Holly Hill Lane, Greenwich, CT 06830. SIXTH: That a copy of the Agreement and Plan of Merger will be furnished by the surviving corporation, on request and without cost to any stockholder of any constituent corporation. SEVENTH: The authorized aggregate capital stock for Rare Telephony, Inc., is 25,000 shares of Common Stock, having no par value, of which 25,000 shares are issued and outstanding. EIGHTH: The merger shall become effective upon the filing of this Certificate of Merger with the State of Delaware. IN WITNESS WHEREOF, Voice & Data Communications (Latin America), Inc., has caused the Certificate to be signed by Frederick A. Moran, its Chief Executive Officer, this 14th day of June, 2000. VOICE & DATA COMMUNICATIONS (LATIN AMERICA), INC. By: /s/ Frederick A. Moran ------------------------ Frederick A. Moran, Chief Executive Officer 2 EX-2.4 5 0005.txt EX-2.4 ARTICLES OF MERGER OF RARE TELEPHONY, INC. INTO VOICE & DATA COMMUNICATIONS (LATIN AMERICA), INC. FIRST. The name of the surviving entity is Voice & Data Communications (Latin America), Inc. and the place of its organization is the jurisdiction of Delaware, the laws of which permits this merger. The name and place of organization of the entity being merged into the surviving entity is Rare Telephony, Inc., organized in the jurisdiction of Nevada. SECOND. An Agreement and Plan of Merger ("Plan of Merger") was adopted by each entity that is a party to this merger. THIRD. The Plan of Merger was submitted to the owners of Rare Telephony, Inc. by the directors thereof pursuant to Chapter 78 of the Nevada Revised Statutes. FOURTH. The designation, number of votes entitled to be cast and the total number of undisputed votes cast for the Plan of Merger, by each class of capital stock of Rare Telephony, Inc. entitled to vote on the Plan of Merger is as follows:
Class Common Total Number of Votes Entitled to be Cast: 25,000 Total Number of Votes Cast for: 25,000
FIFTH. The number of votes cast for the Plan of Merger by the owners of the shares of Common Stock of Rare Telephony, Inc. was sufficient for approval by the owners of such class of stock. SIXTH. The Plan of Merger was submitted to the owners of Voice & Data Communications (Latin America), Inc. by the directors thereof pursuant to Section 251 of the Delaware General Corporation Law. SEVENTH. The designation, total number of votes entitled to be cast and the total number of undisputed votes cast for the Plan of Merger, by each class of capital stock of Voice & Data Communications (Latin America), Inc. entitled to vote on the Plan of Merger is as follows:
Class Common Total Number of Votes Entitled to be Cast: 100 Total Numbers of Votes Cast for: 100
EIGHTH. The number of votes cast for the Plan of Merger by the owners of the shares of Common Stock of Voice & Data Communications (Latin America), Inc. was sufficient for approval by the owners of such class of stock. NINTH. The Certificate of Incorporation of Voice & Data Communications (Latin America), Inc. was amended as provided by the Plan of Merger as follows: Article 1 of the Certificate of Incorporation of the surviving corporation shall be amended to read as follows: "1. The name of the corporation is Rare Telephony, Inc." TENTH. That the executed Plan of Merger is on file at the principal place of business of Voice & Data Communications (Latin America), Inc. The address of the principal place of business is 657 Main Avenue, Suite 301, Passaic, NJ 07055, and a copy of the Plan of Merger will be furnished by Voice & Data Communications (Latin America), Inc. on request and without cost to any owner of any entity which is a party to this merger by submitting such request to the executive offices located at 75 Holly Hill Lane, Greenwich, CT 06830. ELEVENTH. All parties to this merger have complied with the laws of their respective jurisdiction of organization concerning this merger. TWELFTH. Voice & Data Communications (Latin America), Inc., the surviving corporation hereby: (a) agrees that it may be served with process in the State of Nevada in any proceedings for the enforcement of any obligation of any domestic corporation party to the merger and in any proceedings for the enforcement of the rights of a dissenting shareholder of any such domestic corporation against the surviving corporation; (b) irrevocably appoints the Secretary of State of Nevada as its agent to accept service of process in any such proceeding and that the post office address to which the Secretary of State may mail a copy of any process that may be served upon him is 75 Holly Hill Lane, Greenwich, CT 06830; and (c) agrees that it will promptly pay to the dissenting shareholders of any such domestic corporation the amount, if any, to which they shall be entitled under the provisions of the Nevada General Corporation Law with respect to the right of dissenting shareholders. THIRTEENTH. The merger shall become effective when filed. IN WITNESS WHEREOF, Rare Telephony, Inc. has caused the Certificate to be signed by Thomas J. Vrabel, its President, Chief Executive Officer and Secretary, this 14th day of June, 2000. RARE TELEPHONY, INC. By: /s/ Thomas J. Vrabel ----------------------------------- Thomas J. Vrabel, President Chief Executive Officer & Secretary 2 EX-10.37 6 0006.txt EX-10.37 ESCROW AGREEMENT THIS ESCROW AGREEMENT ("Agreement") dated as of May 25, 2000 by and among VDC COMMUNICATIONS, INC., a Delaware corporation ("Acquiror"), Voice & Data Communications (Latin America), Inc., a Delaware corporation ("Sub"), those individuals and entities whose names appear on the signature page hereof under the heading "RARE TELEPHONY SHAREHOLDERS" (collectively, the "Rare Telephony Shareholders") and Buchanan Ingersoll Professional Corporation, as escrow agent (the "Escrow Agent"). BACKGROUND WHEREAS, Acquiror, Sub, Rare Telephony, Inc., a Nevada corporation ("Rare Telephony"), and the Rare Telephony Shareholders have entered into an Agreement and Plan of Merger dated May 25, 2000 (the "Merger Agreement") pursuant to which Rare Telephony shall be merged with and into the Sub (the "Merger"); WHEREAS, pursuant to the terms of the Merger Agreement, at the Closing, and effective as of the Effective Time (as defined in Section 19 below), Acquiror shall deliver the Escrow Shares, which are part of the Merger Consideration, to the Escrow Agent; and WHEREAS, the Escrow Agent has agreed to hold the Escrow Shares in escrow in accordance with the terms and conditions contained herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto hereby covenant and agree as follows: 1. Definitions, Other Agreements. (a) All capitalized terms used herein and not otherwise defined herein shall have the respective meanings assigned to such terms in the Merger Agreement. (b) It is expressly understood and agreed by the parties hereto that all references in this Agreement to the Merger Agreement and to any exhibits to such Merger Agreement are for the convenience of the parties hereto other than the Escrow Agent, and the Escrow Agent shall have no obligations or duties with respect thereto other than the obligation to refer to the Merger Agreement for the purpose of determining the definitions of certain capitalized terms used herein and not otherwise defined herein or to interpret any provisions of such other agreements referred to in this Agreement for purposes of implementation hereof. 2. Appointment of Escrow Agent. Buchanan Ingersoll Professional Corporation hereby accepts its appointment as Escrow Agent to serve in accordance with the terms, conditions and provisions of this Agreement. The acceptance by the Escrow Agent of its duties under this Agreement is subject to the terms and conditions set forth at Section 7 hereafter, which the parties to this Agreement hereby agree shall govern and control with respect to the rights, duties, liabilities and immunities of the Escrow Agent. 3. Establishment of Escrow Fund; Power of Attorney. (a) Pursuant to Section 2.2 of the Merger Agreement, the Acquiror shall at the Closing deposit with the Escrow Agent the Escrow Shares constituting the escrow fund (the "Escrow Fund"). The Escrow Shares shall be registered on the share transfer books of Acquiror in the name of the Rare Telephony Shareholders, as provided for in the Merger Agreement, and such shares shall be held by the Escrow Agent on behalf of Rare Telephony Shareholders as owner of the Escrow Shares comprising the Escrow Fund. If dividends are paid, or a distribution is made, by Acquiror with respect to the Escrow Shares, in cash or in property, such dividends or distributions shall also be held as a part of the Escrow Fund. In the event of any stock splits, recapitalizations or other adjustments to the capital stock of Acquiror, the resulting number of shares or other securities which the Escrow Shares convert shall be held as part of the Escrow Fund. (b) By virtue of the Rare Telephony Shareholders' execution of this Escrow Agreement, the Rare Telephony Shareholders have, without any further act, consented to: (i) the establishment of this escrow pursuant to the Merger Agreement in the manner set forth herein and (ii) all of the other terms, conditions and limitations in this Agreement. (c) By virtue of the Rare Telephony Shareholders' execution of this Escrow Agreement, the Rare Telephony Shareholders hereby irrevocably constitute and appoint the Escrow Agent the true and lawful agent and attorney-in-fact of the Rare Telephony Shareholders with respect to all matters arising in connection with this Escrow Agreement, including the administration of the Escrow Fund and the subsequent surrender and cancellation of the Escrow Shares pursuant to pursuant to Sections 4 and 5 below. To the extent applicable, the Rare Telephony Shareholders hereby waive the application of 20 Pa. Stat. Ann. Section 5601 to the application of this power of attorney. (d) In the event the Escrow Fund includes any cash (such as the result of a dividend paid on the Escrow Shares), the Escrow Agent shall invest such cash in an interest bearing money market account (or similar account) with a financial institution selected by the Escrow Agent located in the United States of America and with assets of no less that one billion dollars. The Escrow Agent may retain such cash in a single account notwithstanding that the amount of such cash is greater than $100,000. The Escrow Agent is not required to select the financial institution with the highest interest rate. Any interest earned shall be part of the Escrow Fund and shall be treated the same as the Other Property (as defined in Section 4(e) below) being held by the Escrow Agent. The tax on the interest earned shall be the responsibility of the owner of the Escrow Shares which resulted in such cash being held by the Escrow Agent (and such owner shall execute any appropriate forms with respect to such tax). 2 4. Operation and Administration of the Escrow Fund. (a) Indemnification Claims (i) To the extent provided herein and in the Merger Agreement, the Escrow Fund shall be established and thereafter applied to the payment of indemnification claims asserted by Acquiror or Sub on or before the one year anniversary of the Effective Time ("Claims") for the benefit of Acquiror or Sub as provided in Section 7.1(a) of the Merger Agreement. The use of the Escrow Shares in connection with 7.1(a) of the Merger Agreement shall serve as non-exclusive sources for payment of any liability of the Rare Telephony Shareholders to Acquiror and Sub under the Merger Agreement. (ii) For purposes of calculating the "value" of the Escrow Shares to be applied against any Claim, such value shall be determined based on the average closing price of Acquiror's common stock for the ten (10) trading days immediately preceding the date of the Application (as defined below). (iii) Either Acquiror or Sub may make application to the Escrow Agent, with a copy to the Rare Telephony Shareholders (the "Application"), if it has incurred or suffered damages or losses pursuant to Section 7.1 of the Merger Agreement. The Application shall identify the amount of the damages or losses (the "Claim Amount") and shall instruct the Escrow Agent to apply, subject to subparagraph (iv) below, the Claim Amount against the "value" of the Escrow Shares in the manner set forth in Section 4(a)(ii) above by surrendering to Acquiror for cancellation that number of Escrow Shares equal in "value" to the Claim Amount. Notwithstanding the foregoing, neither the Acquiror nor the Sub shall make an Application under this Section 4(a) until the aggregate amount of the damages or losses incurred or suffered by either or both combined exceeds $20,000.00 (the "Minimum Aggregate Liability Amount"). Subject to the terms of this Section 4(a), the Acquiror or Sub shall be entitled to apply the Claim Amount against the "value" of the Escrow Shares in the manner set forth in Section 4(a)(ii) above only to the extent that the Claim Amount exceeds the Minimum Aggregate Liability Amount. For clarification purposes, the Minimum Aggregate Liability Amount is not a "per incident" amount, but rather an aggregate threshold. Once the Minimum Aggregate Liability Amount has been reached and is the subject of an Application, any subsequent Claim Amount, regardless of how small, may be the subject of an Application and shall not be subject to any kind of deduction or threshold. The maximum number of Escrow Shares that may be surrendered to Acquiror or Sub for cancellation pursuant to this Section 4(a)(iii) is 244,898 Escrow Shares. In connection with Escrow Shares surrendered pursuant to this Section 4(a), said Escrow Shares shall be surrendered to Acquiror for cancellation on a pro rata basis among all of the Rare Telephony Shareholders (i.e. taking the same percentage of Escrow Shares from each such shareholder); provided, however, to the extent a Rare Telephony Shareholder has had all of his Escrow Shares surrendered to Acquiror for cancellation pursuant to Sections 4(b) or 4(c) below, then the Escrow Shares to be surrendered shall be surrendered to Acquiror for cancellation on a pro rata basis among all of the Rare Telephony Shareholders who have shares held in escrow, provided further, however, to the extent a Rare Telephony Shareholder has had some, but not all, of his Escrow Shares surrendered to Acquiror for 3 cancellation pursuant to Sections 4(b) or 4(c) below, then the number of Escrow Shares to be surrendered by such shareholder to Acquiror for cancellation shall be calculated as though such shareholder had not previously had any of his Escrow Shares cancelled, unless the remaining Escrow Shares of such shareholder are less than his pro rata share to be cancelled using this method of calculation, in which event all of his Escrow Shares shall be cancelled and the remaining balance to be cancelled shall be on a pro rata basis among the remaining Rare Telephony Shareholders (in no event under either of these provisos is there to be a reduction in the total number of shares to be surrendered for cancellation pursuant to this Section 4 (a)). (iv) Unless the Escrow Agent is otherwise informed in writing by the representative of the Rare Telephony Shareholders referred to in Section 10(a) below within 20 calendar days from the date of the Escrow Agent's receipt of the Application, that all of the Rare Telephony Shareholders, in a sworn affidavit, are disputing the basis for the Claim (and said sworn affidavit is provided to the Escrow Agent), the Claim Amount or the application thereof against the Escrow Fund, then the Escrow Agent shall apply the Escrow Fund in the manner set forth in the Application and this Agreement. (v) If the Escrow Agent is notified by the representative of the Rare Telephony Shareholders referred to in Section 10(a) below that all of the Rare Telephony Shareholders contest the basis for the Claim, the Claim Amount or the application of the Claim Amount against the Escrow Fund (in the manner set forth in Section 4(a)(iv) above), then, and in that event, the parties thereto shall submit the issues in dispute to arbitration in accordance with the provisions of Section 15. The Rare Telephony Shareholders hereby waive any objection (on the basis of an actual or perceived conflict or interest) to Buchanan Ingersoll Professional Corporation providing legal representation to Acquiror or Sub in any such arbitration. (vi) If the arbitration results in a finding (or settlement between the parties) in support of the Application (which for this purpose shall include any finding, conclusion or settlement which awards Acquiror at least 70% of the Claim Amount (hereafter, the "Adjusted Claim Amount")); then, and in that event, there shall be added to the Adjusted Claim Amount all expenses and costs of Acquiror in connection with the arbitration, including reasonable counsel fees. (vii) For purposes of Section 4(a) of this Agreement only, the term "all of the Rare Telephony Shareholders" means all Rare Telephony Shareholders who have Escrow Shares being held in escrow subject to the terms of this Section 4(a). For example, if a Rare Telephony Shareholder dies prior to the one year anniversary of the deposit of the Escrow Shares and the deceased Rare Telephony Shareholder's shares are released pursuant to Section 5(b) or if a Rare Telephony Shareholder has had all of his Escrow Shares surrendered to the Acquiror for cancellation pursuant to Section 4(b) or 4(c), then for purposes of Section 4(a) of the Agreement only, the term "all of the Rare Telephony Shareholders" would exclude such Rare Telephony Shareholder. 4 (b) Termination of Employment or Services; Breach of Contract (i) The Rare Telephony Shareholders listed on Schedule 4(b)(i) hereto and incorporated herein by reference ("Hirees") have entered into, or will be entering into, employment or consulting agreements with Sub. If a Hiree is terminated for cause (as defined in his employment or consulting agreement), resigns from such employment or service, or breaches a material term of his employment or consulting contract (any such event constituting a "Default Event"), then said Hiree shall forfeit (and said shares shall be surrendered to Acquiror for cancellation) a percentage of the shares of Acquiror Common Stock comprising the Merger Consideration issued in the name of Hiree as follows: (A) 50% if the Default Event occurs within the first one year period following the Effective Time; (B) 33% if the Default Event occurs within the second one year period following the Effective Time; and (C) 20% if the Default Event occurs within the third one year period following the Effective Time. Attached hereto as Schedule 4(b)(i)II and incorporated herein by reference is a list of the Rare Telephony Shareholders and the number of shares of Acquiror Common Stock comprising the Merger Consideration issued in the name of each Rare Telephony Shareholder. The Escrow Agent shall be entitled to rely upon this schedule for purposes of the administration of this Agreement. If a Default Event occurs and the defaulting Hiree (the "Defaulting Hiree") does not have enough Escrow Shares to cover the number of shares the Defaulting Hiree forfeited, then the Escrow Agent shall surrender to Acquiror for cancellation all of the Escrow Shares held in escrow in the name of the Defaulting Hiree and the Defaulting Hiree shall deliver to the Acquiror an amount of shares of Acquiror Common Stock equal to such shortfall. For purposes of the percentage calculations above, all fractions shall be rounded up. The forfeiture and surrendering of shares Acquiror Common Stock as provided for in this paragraph shall serve as a non-exclusive remedy for Sub and Acquiror. (ii) Either Acquiror or Sub may file a notice (a "Default Notice") with the Escrow Agent, with a copy to the Defaulting Hiree, if officers of Acquiror or Sub believe that a Default Event has occurred. The Default Notice shall identify the Default Event(s) and shall instruct the Escrow Agent to surrender to Acquiror for cancellation that number of Escrow Shares to be forfeited based upon the formula set forth in Section 4(b)(i). (iii) Unless the Escrow Agent receives a sworn affidavit from the Defaulting Hiree within 20 calendar days from the date of the Escrow Agent's receipt of the Default Notice, disputing the existence of the Default Event(s), the Escrow Agent shall surrender to Acquiror for cancellation that number of Escrow Shares to be forfeited based upon the formula set forth in Section 4(b)(i). (iv) If the Escrow Agent is notified that the Defaulting Hiree contests the existence of the Default Event(s) (in the manner set forth in Section 4(b)(iii) above), then, and in that event, the parties thereto shall submit the issues in dispute to arbitration in accordance with the provisions of Section 15. The Defaulting Hiree hereby waives any objection (on 5 the basis of an actual or perceived conflict or interest) to Buchanan Ingersoll Professional Corporation providing legal representation to Acquiror or Sub in any such arbitration. (v) If the arbitration results in a finding (or settlement between the parties) in support of the Default Notice (which for this purpose shall include any finding, conclusion or settlement which provides that at least one Default Event has occurred); then, and in that event, within ten (10) calendar days after being provided with an invoice from counsel for Acquiror or Sub, as the case may be, or Acquiror or Sub, the Defaulting Hiree shall pay all expenses and costs of Acquiror or Sub, as the case may be, in connection with the arbitration, including reasonable counsel fees. (c) Network Consulting Group, Inc. Defaults (i) Pursuant to an Agreement by and between Network Consulting Group, Inc. ("Network") and Rare Telephony, dated May 25, 2000 (the "Network Agreement"), Network has agreed to make all payments due from Network under the terms of, and otherwise perform all of its obligations under, the leases summarized on Exhibit "A" to the Network Agreement (the "Leases"). If Network breaches any material term of the Network Agreement or of any one of the Leases (and any such breach remains uncured fifteen (15) calendar days after notice of such breach is given by Acquiror or the lessor, or its agent, for any Lease) (each such breach and failure to cure constituting a "Network Default Event"), then Network shall forfeit (and said shares shall be surrendered to Acquiror for cancellation) a percentage of the shares of Acquiror Common Stock comprising the Merger Consideration issued in the name of Network as follows: (A) 30% if the Network Default Event occurs within the first one year period following the Effective Time; (B) 18% if the Network Default Event occurs within the second one year period following the Effective Time; and (C) 10% if the Network Default Event occurs within the third one year period following the Effective Time. Set forth on Schedule 4.2(b)(i)II is the number of shares of the Acquiror Common Stock comprising the Merger Consideration issued in the name of Network. The Escrow Agent shall be entitled to rely upon Schedule 4.2(b)(i)II for purposes of the administration of this Section 4(c). If a Network Default Event occurs and Network does not have enough Escrow Shares to cover the number of shares Network forfeited, then the Escrow Agent shall surrender to Acquiror for cancellation all of the Escrow Shares held in escrow in the name of Network and Network shall surrender to Acquiror for cancellation an amount of shares of Acquiror Common Stock equal to such shortfall. For purposes of the percentage calculations above, all fractions shall be rounded up. The forfeiture and surrendering of shares of Acquiror Common Stock as provided for in this paragraph shall serve as a non-exclusive remedy for Sub and Acquiror. (ii) Either Acquiror or Sub may file a notice (the "Network Notice") with the Escrow Agent, with a copy to Network, if officers of Acquiror or Sub believe that a Network Default Event has occurred. The Network Notice shall identify the Network Default Event(s) and shall instruct the Escrow Agent to surrender to Acquiror for cancellation that number of Escrow Shares to be forfeited based upon the formula set forth in Section 4(c)(i). 6 (iii) Unless the Escrow Agent receives a sworn affidavit from Network within 20 calendar days from the date of the Escrow Agent's receipt of the Network Notice, disputing the existence of the Network Default Event(s), the Escrow Agent shall surrender to Acquiror for cancellation that number of Escrow Shares to be forfeited based upon the formula set forth in Section 4(c)(i). (iv) If the Escrow Agent is notified that Network contests the existence of the Network Default Event(s) (in the manner set forth in Section 4(c)(iii) above), then, and in that event, the parties thereto shall submit the issues in dispute to arbitration in accordance with the provisions of Section 15. Network hereby waives any objection (on the basis of an actual or perceived conflict or interest) to Buchanan Ingersoll Professional Corporation providing legal representation to Acquiror or Sub in any such arbitration. (v) If the arbitration results in a finding (or settlement between the parties) in support of the Network Notice (which for this purpose shall include any finding, conclusion or settlement which provides that at least one Network Default Event has occurred); then, and in that event, within ten (10) calendar days after being provided with an invoice from counsel for Acquiror or Sub, as the case may be, or Acquiror or Sub, Network shall pay all expenses and costs of Acquiror or Sub, as the case may be, in connection with the arbitration, including reasonable counsel fees. (d) The shares of Acquiror Common Stock constituting the Merger Consideration is subject to the following restrictions upon resale (the "Restrictions"): 34% of the holder's Acquiror Common Stock no earlier than one (1) year following the Effective Time; an additional 33% of the holder's Acquiror Common Stock no earlier than two (2) years following the Effective Time; and the remaining 33% of the holder's Acquiror Common Stock no earlier than three (3) years following the Effective Time. When shares are forfeited and/or surrendered to Acquiror for cancellation pursuant to Section 4, the Escrow Agent shall surrender first shares which have the Restriction expire three (3) years following the Effective Time and second shares which have the Restriction expire two (2) years following the Effective Time. For purposes of the percentage calculations above for years one and two, all fractions shall be rounded up. (e) Notwithstanding the other provisions of this Section 4 in the event that the Escrow Fund includes cash or property received with respect to the Escrow Shares (collectively, the "Other Property"), such Other Property shall be applied by the Escrow Agent as follows: (i) In the event the Escrow Agent is making a distribution from the Escrow Fund as a result of a Claim pursuant to Section 4(a) above, the Escrow Agent shall first deliver to the Acquiror the Other Property in an amount up to the Claim Amount and then the balance of the Claim Amount, if any, would be paid by the delivery of the Escrow Shares. (ii) In the event any of the Other Property to be delivered to the Acquiror hereunder is not cash, the value of such Other Property shall be determined as follows: 7 (A) if it is shares of publicly traded stock, the value shall be based on the average closing price of such stock for the ten (10) trading days immediately preceding the date of Application or (B) if the Other Property is anything else, by the mutual decision of the Acquiror and the Rare Telephony Shareholders (if they are unable to reach such determination, then any dispute shall be determined by arbitration pursuant to Section 15 below). (iii) If a percentage of the Escrow Shares are being forfeited pursuant to Section 4(b) or 4(c) above, the Escrow Agent shall deliver to the Acquiror the same percentage of the Other Property being held in escrow with respect to such Rare Telephony Shareholder or Network. (f) In the event that pursuant to the provisions of Sections 4(a)(vi), 4(b)(v) or 4(c)(v) the Acquiror or Sub is owed amounts hereunder, and such amounts are not paid within ten (10) calendar days of its notifying the responsible party (the "Responsible Party") of the amount owed, it may request the Escrow Agent pay such amounts by delivery to the Acquiror or the Sub the appropriate amount of the Escrow Fund being held with respect to the Responsible Party by written notice (a "Payment Notice") to the Escrow Agent with a copy to the Responsible Party. In the event the Responsible Party fails to provide the Escrow Agent with written notification of its objection, in a sworn affidavit, within twenty (20) calendar days from the date of the Escrow Agent's receipt of a Payment Notice, the Escrow Agent shall apply the Escrow Fund in the manner set forth in the Payment Notice and this Agreement. In the event the Escrow Agent receives written notice of a dispute, then the parties thereto shall submit the dispute to arbitration in accordance with the provisions of Section 15. The Responsible Party hereby waives any objection (on the basis of an actual or perceived conflict or interest) to Buchanan Ingersoll Professional Corporation providing legal representation to Acquiror or Sub in any such arbitration. 5. Release of Escrow Shares; Termination. (a) Rare Telephony Shareholders Who Are Not Hirees (Other Than Network Consulting Group, Inc.). A list of Rare Telephony Shareholders, other than Network, who are not Hirees is set forth on Schedule 5(a) hereto and incorporated herein by reference (the "Non-hiree Shareholders"). The Escrow Shares issued in the name of the Non-hiree Shareholders (the "Non-hiree Shares") shall remain in escrow subject to application pursuant to Section 4 hereof until the one year anniversary of the Effective Time, and on such date any such Non-hiree Shares remaining in the Escrow Fund shall be delivered and released to the Non-hiree Shareholders. (b) Rare Telephony Shareholders Who Are Hirees. All of the Escrow Shares issued in the name of the Hirees (the "Hiree Shares") shall remain in escrow subject to application pursuant to Section 4 hereof until the one year anniversary of the Effective Time. On such date the Escrow Agent may release Hiree Shares not needed to cover potential forfeitures as provided for in Section 4(b) in the second and third years following the Effective Time. On 8 the two year anniversary of the Effective Time, the Escrow Agent may release Hiree Shares not needed to cover potential forfeitures as provided for in Section 4(b) in the third year following the Effective Time. On the three year anniversary of the Effective Time, the Escrow Agent may release to the Hirees all Hiree Shares remaining in the Escrow Fund. To the extent the employment or consultancy of a Hiree is terminated without cause by the Sub (i.e. not under any for "cause" provision of the applicable agreement) prior to the three year anniversary of the Effective Time, said Hiree's Shares shall continue to remain in escrow, in accordance with the terms of this paragraph, subject to forfeiture in accordance with Section 4(b). In the event that a Hiree dies prior to the three year anniversary of the Effective Time, then said Hiree's Escrow Shares (but only said Hiree's Escrow Shares) shall be released to the estate of the deceased Hiree if, and only if, the Escrow Agent is notified in writing by Acquiror that the following three conditions precedent were satisfied: (1) the estate of the Hiree provides the Acquiror's counsel with an original death certificate for the deceased Hiree; (2) the President or CEO of the Sub (in Acquiror's sole discretion) provides a sworn affidavit confirming that to the best of his knowledge the Hiree, prior to his death, had not violated any material term of his employment or consulting agreement with the Sub; and (3) in the sixty (60) calendar days following the Hiree's death, counsel for Acquiror is satisfied that Hiree, prior to his death, had not violated any material term of his employment or consulting agreement with the Sub. (c) Network Consulting Group, Inc. All of the Escrow Shares issued in the name of Network (the "Network Shares") shall remain in escrow subject to application pursuant to Section 4 hereof until the one year anniversary of the Effective Time. On such date the Escrow Agent may release Network Shares not needed to cover potential forfeitures as provided for in Section 4(c) in the second and third years following the Effective Time. On the two year anniversary of the Effective Time, the Escrow Agent may release Network Shares not needed to cover potential forfeitures as provided for in Section 4(c) in the third year following the Effective Time. On the three year anniversary of the Effective Time, the Escrow Agent may release to the Network all Network Shares remaining in the Escrow Fund. (d) Notwithstanding the above, the Escrow Agent may continue to retain in escrow, subject to the terms of this Agreement, any Escrow Shares that upon Acquiror's or Sub's reasonable estimate are subject to dispute or arbitration in accordance with the terms of this Agreement. (e) In the event the Escrow Fund contains any Other Property, such Other Property shall be released pursuant to the provisions of this Section 5 at the same time that the Escrow Shares to which such Other Property relates to is released. (f) Once all of the Escrow Shares and any Other Property have been either released to Acquiror for cancellation or returned to Rare Telephony Shareholders, the provisions of this Escrow Agreement shall no longer be of any force and effect and this Escrow Agreement shall be deemed to have terminated, other than the provisions of Section 6 and 7(g) below. 9 6. Fees and Expenses of Escrow Agent. The Escrow Agent shall be entitled to reimbursement of all fees and reasonable out-of-pocket expenses incurred by the Escrow Agent in connection with the performance of his functions hereunder, including reasonable fees and disbursements of the attorneys and paralegals of Escrow Agent at their respective regularly hourly rates then in effect and the fees incurred by outside counsel pursuant to Section 7(d) below. The responsibility for payment of reimbursements to the Escrow Agent shall be assumed by Acquiror. 7. Duties and Liabilities of the Escrow Agent. (a) The Escrow Agent shall act hereunder as depository only, and it shall not be responsible or liable in any manner whatsoever for any determinations regarding the cancellation and forfeiture of the Escrow Shares pursuant to Section 4 hereof. It is agreed that the duties and obligations of the Escrow Agent are those herein specifically provided and no other. Except as otherwise specifically provided in this Agreement, the Escrow Agent shall not have any liability under, nor duty to inquire into, the terms and provisions of any agreement or instrument, other than this Agreement. The duties of the Escrow Agent are ministerial in nature, and the Escrow Agent shall not incur any liability whatsoever other than for its own willful misconduct or gross negligence. Without limiting the generality of the foregoing, the Escrow Agent shall not have any duty or responsibility (i) to enforce or cause to be enforced any of the terms and conditions contained in the Merger Agreement or (ii) to verify the accuracy or sufficiency of any notice or other document received by it in connection with this Agreement. (b) The Escrow Agent shall not incur any liability for following the instructions herein contained or expressly provided for, or written instructions given by the parties hereto. The Escrow Agent shall not have any responsibility for the genuineness or validity of any document or other material presented to or deposited with it nor shall it have any liability for any action taken, suffered or omitted in accordance with any written instructions or certificates given to it hereunder and believed by it in good faith to be what it purports to be and to be signed by the proper party or parties. (c) The Escrow Agent shall not be liable for any error of judgment, or for any act done or step taken or omitted by it in good faith, or for any mistake of fact or law, or for anything which it may do or refrain from doing in connection with this Agreement, except its own gross negligence or willful misconduct. (d) The Escrow Agent may consult with, and obtain the advice of, legal counsel selected by it in the event of any question as to any of the provisions hereof or its duties hereunder, and the Escrow Agent shall incur no liability and shall be fully protected for any action taken, suffered or omitted by it in good faith in accordance with the advice of such counsel and shall be reimbursed for such fees and expenses pursuant to Section 6 above. 10 (e) In the event that the Escrow Agent shall be uncertain as to its duties or rights hereunder or shall have received instructions, claims or demands from any party hereto which, in its reasonable opinion, conflict with any of the provisions of this Agreement or with instructions, claims or demands of any other party hereto, the Escrow Agent shall refrain from taking any action and its sole obligation shall be to keep safely all property held in escrow hereunder until it shall be directed otherwise in writing by all of the surviving parties hereto or, with respect to a dispute under Section 4 hereof by all of the parties to such dispute, or by a final order by a court of competent jurisdiction or by a judgment or order of an arbitrator pursuant to Section 15, or exercises its rights under Section 7 hereof. (f) The Escrow Agent shall not be required to institute legal proceedings of any kind and shall not be required to initiate or defend any legal proceedings which may be instituted against it in respect of the subject matter of this Agreement, provided that the Escrow Agent shall at all times take such action as is reasonably necessary to keep safely all property held in escrow hereunder. If the Escrow Agent does elect to so act or is required to so act in order to keep safely all property held in escrow hereunder, the Escrow Agent will do so only to the extent that it is indemnified to its reasonable satisfaction against the cost and expense of such defense or initiation. (g) The parties hereto (other than the Escrow Agent) shall jointly and severally indemnify and hold the Escrow Agent harmless from and against any and all losses, claims. damages. liabilities and expenses (including, without limitation, reasonable attorneys' fees and disbursements) arising out of or in connection with any act or failure to act (other than by reason of any willful misconduct or gross negligence) on the part of the Escrow Agent in connection with any of the duties required to be performed by the Escrow Agent hereunder. The terms of this Section 7(g) shall survive the termination of this Agreement and, with respect to claims arising in connection with the Escrow Agent's duties while acting as such, the resignation or removal of the Escrow Agent. (h) At any time that the Escrow Agent so chooses, the Escrow Agent may resign from its duties hereunder by giving not less than thirty (30) calendar days' prior written notice to Acquiror, Sub, and the Rare Telephony Shareholders. Prior to the expiration of such thirty (30) day period, Acquiror, Sub, and the Rare Telephony Shareholders shall designate, by mutual consent, a successor escrow agent; provided, that notwithstanding any resignation date set forth in the Escrow Agent' notice, such resignation shall not take effect until receipt by the Escrow Agent of an instrument duly executed by a successor escrow agent evidencing its appointment as Escrow Agent hereunder and acceptance of this Agreement. If no successor escrow agent is appointed within such thirty (30) day period, the Escrow Agent may deposit the Escrow Fund with a court of competent jurisdiction as provided in Section 7(j) hereof, whereupon the Escrow Agent shall be discharged of all duties and obligations hereunder. (i) The Escrow Agent may be removed at any time by agreement of Acquiror, Sub, and the Rare Telephony Shareholders by giving not less than thirty (30) calendar days' prior written notice to the Escrow Agent. Prior to the expiration of such thirty (30) day period, Acquiror, Sub, and the 11 Rare Telephony Shareholders shall designate, by mutual consent, a successor escrow agent. If no successor escrow agent is appointed within such thirty (30) day period and accepts the Escrow Fund and agrees to be bound by this Agreement, the Escrow Agent may deposit the Escrow Fund with a court of competent jurisdiction as provided in Section 7(j) hereof, whereupon the Escrow Agent shall be discharged of all duties and obligations hereunder. (j) Notwithstanding anything herein to the contrary, in the event of any disagreement between any of the parties to this Agreement, or between them and any other person, resulting in adverse claims or demands being made against the Escrow Fund, or in the event the Escrow Agent in good faith is in doubt as to what action it should take hereunder, the Escrow Agent may be discharged of its duties and obligations hereunder upon its deposit, at any time after ten (10) calendar days' written notice to Acquiror, Sub, and the Rare Telephony Shareholders, of the Escrow Fund with a court of competent jurisdiction located in the Commonwealth of Pennsylvania. The parties hereto hereby submit to the personal jurisdiction of any such court, waive any and all right to contest the jurisdiction of such court, and consent to service of process by the method and addresses set forth in Section 10 hereof. (k) The parties hereto acknowledge that Escrow Agent has served, and may serve in the future, as counsel to the Acquiror, the Sub and their affiliates. In any matter or dispute arising among the parties hereto, including out of the Merger Agreement, this Agreement, or any document in connection therewith, any party hereto may confer with, and be represented by, such counsel and such counsel shall not be disqualified from any such representation as a result of being the Escrow Agent hereunder. Without limiting the generality of the foregoing, Buchanan Ingersoll Professional Corporation acting as Escrow Agent hereunder shall not present a conflict of interest in connection with any representation by it of any or all of the Acquiror, the Sub or any affiliate thereof including, without limitation, in any matter adverse to any party hereto, any such conflict of interest being hereby expressly waived. 8. Amendment. This Agreement may be amended, modified or rescinded by and upon written notice to the Escrow Agent given by Acquiror, Sub, and the Rare Telephony Shareholders; provided that the rights, duties, liabilities, indemnities and immunities of the Escrow Agent hereunder may not be adversely affected at any time without the written consent of the Escrow Agent. 12 9. Voting of Escrow Shares; Rights During Escrow Period; Restriction on Transfer. All rights to vote the Escrow Shares while they are part of the Escrow Fund shall be retained by the Escrow Agent, who shall vote the Escrow Shares in accordance with the written instructions of the applicable Rare Telephony Shareholder. While retained in escrow pursuant to the terms of this Agreement, except as otherwise provided, the Rare Telephony Shareholders shall have no right, title or interest in and to the Escrow Fund until otherwise released from escrow pursuant to the terms hereof. The Rare Telephony Shareholders shall not have any right to transfer or assign their interests in the Escrow Shares in the Escrow Fund during such period of time as such Shares remain a part of the Escrow Fund unless Acquiror shall first have consented thereto in writing and provided that any such transferee shall deliver to the Escrow Agent a duly signed stock power covering such Escrow Shares and written confirmation, satisfactory to the Escrow Agent and the Acquiror, that such transferee agrees to become a party to and be bound by the provisions of this Agreement, and the Escrow Agent shall hold such transferee's shares and stock powers in escrow subject to this Agreement. 10. Notices. All notices, requests, instructions, consents and other communications to be given pursuant to this Agreement shall be in writing and shall be deemed received (i) on the same day if delivered in person, by same-day courier or by telegraph, telex or facsimile transmission (receipt confirmed) (provided that telegraph, telex or facsimile notice shall be deemed received on the next business day if received after 5:00 p.m. Eastern Standard Time), (ii) on the next day if delivered by overnight mail or courier, or (iii) on the date indicated on the return receipt, or if there is no such receipt, on the third calendar day (excluding Sundays) if delivered by certified or registered mail, postage prepaid, to the party for whom intended to the following addresses (or to such other addresses and facsimile numbers as a party may designate by notice to the other parties): (a) if to the Rare Telephony Shareholders, or any one of them, at: Thomas J. Vrabel Rare Telephony, Inc. 657 Main Street, Suite 301 P.O. Box 9101 Passaic, NJ 07055-9101 Facsimile No: (973) 779-7991 If a Default Notice, a copy to the defaulting Hiree at the address set forth on the signature page hereto (or such subsequent address provided by such Hiree to the Acquiror or Sub). (b) if to Acquiror or the Sub at: 13 Frederick A. Moran VDC Communications, Inc. 75 Holly Hill Lane Greenwich, CT 06830 Facsimile: (203) 552-0908 with a copy to: Louis D. Frost, Esq. VDC Communications, Inc. 75 Holly Hill Lane Greenwich, CT 06830 Facsimile: (203) 552-0908 (c) If to the Escrow Agent to: Joseph P. Galda, Esq. Buchanan Ingersoll Professional Corporation Eleven Penn Center 1835 Market Street, 14th Floor Philadelphia, Pennsylvania 19103 Facsimile No. (215) 665-8760 11. Parties in Interest. This Agreement shall be binding upon and shall inure to the benefit of the successors, heirs, personal representatives and permitted assigns of each of the parties hereto. 12. Counterparts. This Agreement may be executed in multiple counterparts each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may also be executed and delivered by exchange of facsimile copies showing the signatures of the parties, and those signatures need not be affixed to the same copy. The facsimile copies showing the signatures of the parties will constitute originally signed copies of the Agreement requiring no further execution. 13. Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New Jersey applicable to contracts executed and to be performed entirely within said State; provided, however, that the provisions of Section 7(j) shall be governed by the laws of the Commonwealth of Pennsylvania. 14 14. Severability. In case any provision in this Agreement shall be held invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof will not in any way be affected or impaired thereby, unless the provisions held invalid shall substantially impair the benefits of the remaining portions of this Agreement. 15. Arbitration. All controversies or claims arising out of or relating to this Agreement shall be determined by binding arbitration applying the laws of the State of New Jersey and the rules of the American Arbitration Association applicable to the Commercial Panel, except that there shall only be one (1) arbitrator. The arbitration shall be conducted at Acquiror's offices in Greenwich, Connecticut, or at such other location designated by Acquiror. The decision of the arbitrator shall be final and binding upon the parties, shall include written findings of law and fact, and judgment may be obtained thereon in any court of competent jurisdiction. Each party shall bear the cost of preparing and presenting its own case (except as provided for in Section 4 above). The cost of the arbitration, including the fees and expenses of the arbitrator, shall be shared equally by the parties thereto unless the award otherwise provides (except as provided in Section 4 above). Nothing herein shall preclude a party from seeking injunctive relief to restrain any breach or threatened breach of the covenants and agreements set forth in this Agreement or otherwise to obtain specific performance of any such covenant or agreement, without the necessity of posting bond or security in connection therewith. 16. 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. 17. Construction. This Agreement 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 is the product of negotiations among the parties and that the parties have contributed to the final preparation of this Agreement. 18. Read and Understood. Each party acknowledges that (i) it has carefully read this Agreement, (ii) it has had the assistance of legal counsel of its choosing (and such other professionals and advisors as it has deemed necessary) in the review and execution hereof, (iii) the meaning and effect of the various terms and provision hereof have been fully explained to it by such counsel, (iv) it has conducted such investigation, review and analysis as it has deemed necessary to 15 understand the provisions of this Agreement and the transactions contemplated hereby, and (v) it has executed this Agreement of its own free will. 19. Effective Time. This Agreement shall become effective as of the "Effective Time" of the Merger (as defined in the Merger Agreement). The "Effective Time" of the Merger for purposes of this Agreement shall be the "Effective Time" indicated on an "Effective Time Certificate" executed by VDC Communications, Inc. at the closing of the Merger. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 16 IN WITNESS WHEREOF, the parties hereto have duly caused this Escrow Agreement to be executed as of the date first written above.
Attest: VDC COMMUNICATIONS, INC. By: /s/ Louis D. Frost By: /s/ Frederick A. Moran ------------------------------------- -------------------------------------- Frederick A. Moran Chief Executive Officer Attest: VOICE & DATA COMMUNICATIONS (LATIN AMERICA), INC. By: /s/ Louis D. Frost By: /s/ Frederick A. Moran ------------------------------------- -------------------------------------- Frederick A. Moran Chief Executive Officer Witness RARE TELEPHONY SHAREHOLDERS: /s/ Debra Santa Lucia /s/ Thomas J. Vrabel - ---------------------------------------- ----------------------------------------- Name: Debra Santa Lucia Signature Address:____________________________ Name: Thomas J. Vrabel ____________________________________ Address: Fax No: Witness /s/ Debra Santa Lucia /s/ Peter Salzano - ---------------------------------------- ----------------------------------------- Name: Debra Santa Lucia_____________ Signature Address:____________________________ Name: Peter J. Salzano ____________________________________ Address: Fax No: Witness /s/ Debra Santa Lucia /s/ Armando Medina - ---------------------------------------- ----------------------------------------- Name: Debra Santa Lucia_____________ Signature Address:____________________________ Name: Armando Medina ____________________________________ Address: Fax No: 17 Witness /s/ Debra Santa Lucia /s/ Christopher LeFebvre - ---------------------------------------- ----------------------------------------- Name: Debra Santa Lucia_____________ Signature Address:____________________________ Name: Christopher LeFebvre ____________________________________ Address: Fax No: _____________________ Witness /s/ Debra Santa Lucia /s/ Arthur Scuttaro - ---------------------------------------- ----------------------------------------- Name: Debra Santa Lucia_____________ Signature Address:____________________________ Name: Arthur Scuttaro ____________________________________ Address: Fax No: _____________________ Witness /s/ Christian J. Peterson /s/ Debra Santa Lucia - ---------------------------------------- ----------------------------------------- Name: Christian J. Peterson Signature Address: Name: Debra Santa Lucia Address: Fax No: _____________________ Witness /s/ Debra Santa Lucia /s/ Peter J. Salzano ,President - ---------------------------------------- ----------------------------------------- Name: Debra Santa Lucia_____________ Signature Address:____________________________ Name: Network Consulting Group, Inc. ____________________________________ Address: Fax No: Witness /s/ Debra Santa Lucia /s/ Robert Paterno - ---------------------------------------- ----------------------------------------- Name: Debra Santa Lucia_____________ Signature Address:____________________________ Name: Robert Paterno ____________________________________ Address: Fax No: _____________________ 18 Witness /s/ Debra Santa Lucia /s/ Paul Kaufman - ---------------------------------------- ----------------------------------------- Name: Debra Santa Lucia_____________ Signature Address:____________________________ Name: Paul Kaufman ____________________________________ Address: Fax No: Witness /s/ Debra Santa Lucia /s/ Richard Roccia - ---------------------------------------- ----------------------------------------- Name: Debra Santa Lucia_____________ Signature Address:____________________________ Name: Richard Roccia ____________________________________ Address: Fax No: Witness /s/ Debra Santa Lucia /s/ Timothy Grace - ---------------------------------------- ----------------------------------------- Name: Debra Santa Lucia_____________ Signature Address:____________________________ Name: Timothy Grace ____________________________________ Address: Fax No: Witness /s/ Debra Santa Lucia /s/ Godwin Cruz - ---------------------------------------- ----------------------------------------- Name: Debra Santa Lucia_____________ Signature Address:____________________________ Name: Godwin Cruz ____________________________________ Address: Fax No: Witness /s/ Debra Santa Lucia /s/ Alberto Roman - ---------------------------------------- ----------------------------------------- Name: Debra Santa Lucia_____________ Signature Address:____________________________ Name: Alberto Roman ____________________________________ Address: Fax No: _____________________ 19 Witness /s/ Debra Santa Lucia /s/ Ivel Turner - ---------------------------------------- ----------------------------------------- Name: Debra Santa Lucia_____________ Signature Address:____________________________ Name: Ivel Turner ____________________________________ Address: Fax No: Witness /s/ Debra Santa Lucia /s/ Williams Jean Charles - ---------------------------------------- ----------------------------------------- Name: Debra Santa Lucia_____________ Signature Address:____________________________ Name: Williams Jean Charles ____________________________________ Address: Fax No:
ESCROW AGENT: Buchanan Ingersoll Professional Corporation By: /s/ Joseph P. Galda ---------------------------------------------- Joseph P. Galda, Shareholder 20 Schedule 4(b)(i) Arthur Scuttaro Armando Medina Thomas J. Vrabel Peter J. Salzano Robert Paterno Timothy Grace Godwin Cruz Christopher LeFebvre Alberto Roman Debra Santa Lucia Ivel Turner Williams Jean Charles 21 Schedule 4(b)(i) II -------------------
Rare Telephony Shareholder Number of Shares - -------------------------- ---------------- Arthur Scuttaro 62,661 Armando Medina 62,661 Thomas Vrabel 503,306 Peter Salzano 125,167 Robert Paterno 239,943 Timothy Grace 6,204 Godwin Cruz 6,204 Christopher LeFebvre 31,331 Alberto Roman 6,204 Debra Santa Lucia 12,563 Ivel Turner 3,102 Williams Jean Charles 3,102 Network Consulting Group, Inc. 438,628 Paul Kaufman 24,972 Richard Roccia 24,972
22 Schedule 5(a) ------------- Paul Kaufman 24,972 shares Richard Roccia 24,972 shares 23 EX-10.38 7 0007.txt EX-10.38 The following Form of Registration Rights Agreement was entered into with the following individuals and entities: Peter J. Salzano, Robert Paterno, and RC&A Group, Inc. FORM OF REGISTRATION RIGHTS AGREEMENT ------------------------------------- This Registration Rights Agreement (this "Agreement") is dated as of June 14, 2000 by and between VDC COMMUNICATIONS, INC., a Delaware corporation (the "Company"), and the undersigned (the "Holder"). W I T N E S S E T H: -------------------- WHEREAS, this Agreement is being delivered in connection with a certain Agreement and Plan of Merger by and among the Company, Voice & Data Communications (Latin America), Inc. ("Acquiror"), Rare Telephony, Inc. ("Acquiree"), and the holders of all of the outstanding shares of Acquiree common stock, dated May 25, 2000, as amended, (the "Merger Agreement") pursuant to which Acquiree merged into and with Acquiror, a wholly-owned subsidiary of the Company; WHEREAS, the Company is granting registration rights to Holder for certain of the shares of Company common stock being issued to the Holder in connection with the Merger Agreement (the exact number of registerable shares being identified in the Merger Agreement); and WHEREAS, all capitalized terms not hereinafter defined shall have that meaning assigned to them in the Merger Agreement. NOW, THEREFORE, the parties hereto agree as follows: 1. Definitions. ------------ (a) "Closing" shall mean the closing provided for in the Merger Agreement. (b) "Common Stock" shall mean the common stock of the Company, par value $.0001 per share. (c) "Company" shall mean VDC Communications, Inc. (d) "Person" means an individual, a partnership (general or limited), corporation, limited liability company, joint venture, business trust, cooperative, association or other form of business organization, whether or not regarded as a legal entity under applicable law, a trust (inter vivos or testamentary), an estate of a deceased, insane or incompetent person, a quasi-governmental entity, a government or any agency, authority, political subdivision or other instrumentality thereof, or any other entity. (f) "Principal Market" means the OTC Electronic Bulletin Board, the Nasdaq National Market, the Nasdaq Small Cap Stock Market, the American Stock Exchange or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock. (h) "Registration Statement" shall mean the Registration Statement of the Company filed with the SEC pursuant to the provisions of Section 2 of this Agreement which covers the resale of the Restricted Stock on Form S-1, S-3 or any other appropriate form then permitted by the SEC to be used for such registration and the sales contemplated to be made thereby under the Securities Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such Registration Statement, including any pre-and post-effective amendments thereto, in each case including the prospectus contained therein, all exhibits thereto and all materials incorporated by reference therein. (i) "Restricted Stock" shall mean the shares of Company Common Stock issued to Holder in connection with the Merger Agreement for which Holder has been granted registration rights, and any additional shares of Common Stock or other equity securities of the Company issued or issuable after the date hereof in respect of any such securities (or other equity securities issued in respect thereof) by way of a stock dividend or stock split, in connection with a combination, exchange, reorganization, recapitalization or reclassification of Company securities, or pursuant to a merger, division, consolidation or other similar business transaction or combination involving the Company; provided that: as to any particular shares of Restricted Stock, such securities shall cease to constitute Restricted Stock (i) when a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of thereunder, or (ii) when and to the extent such securities are permitted to be distributed pursuant to subparagraph (k) of Rule 144 (or any successor provision to such Rule) promulgated under the Securities Act or are otherwise freely transferable to the public without further registration under the Securities Act. (j) "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar or successor federal statute, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at any relevant time. (k) "SEC" shall mean the United States Securities and Exchange Commission. (l) "Trading Day" means a day on which the Principal Market on which the Common Stock is listed or admitted to trading is open for the transaction of business or, if the Common Stock is not listed or admitted to trading on any national securities exchange, any day other than a Saturday, Sunday, or a day on which banking institutions in the State of Connecticut are authorized or obligated by law or executive order to close. 2. Registration Rights. -------------------- (a) Piggyback Registration Rights. The Company shall advise the Holder by written notice at least ten (10) calendar days prior to the filing of a Registration Statement under the Securities Act (excluding registration on Forms S-8, S-4, or any successor forms thereto), covering securities of the Company to be offered and sold (whether by the Company or any stockholder thereof) and shall, upon the request of the 2 Holder given at least five calendar (5) days prior to the filing of such Registration Statement, include in any such Registration Statement such information as may be required to permit the public distribution of the Restricted Stock. The Holder shall furnish such information as may be reasonably requested by the Company in order to include such Restricted Stock in the Registration Statement. In the event that any registration pursuant to this Section 2 shall be, in whole or in part, an underwritten public offering of Common Stock on behalf of the Company, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in an orderly manner in such offering within a price range acceptable to the Company, the Company shall include in such registration (i) first, the securities the Company proposes to sell, and (ii) second, the Restricted Stock and any other securities eligible and requested to be included in such registration to the extent that the number of shares to be registered will not, in the opinion of the managing underwriters, adversely affect the offering of the securities pursuant to clause (i), pro rata among the holders of such securities, including the Holder of the Restricted Stock, on the basis of the number of shares eligible for registration which are owned by all such holders. Notwithstanding the foregoing, the Company may withdraw any registration statement referred to in this Section 2 without thereby incurring liability to the holders of the Restricted Stock. (b) Notwithstanding anything to the contrary contained herein, the Company's obligation in Section 2(a) and 2(b) above shall extend only to the inclusion of the Restricted Stock in a Registration Statement filed under the Securities Act. The Company shall have no obligation to assure the terms and conditions of distribution, to obtain a commitment from an underwriter relative to the sale of the Restricted Stock or to otherwise assume any responsibility for the manner, price or terms of the distribution of the Restricted Stock. Furthermore, the Company shall not be restricted in any manner from including within the Registration Statement the distribution, issuance or resale of any of its or any other securities. (c) The registration rights above are conditioned upon the Holder timely furnishing such information as may be reasonably requested by the Company in order to include such Restricted Stock in the Registration Statement. 3. Registration Procedures. Whenever it is obligated to register ------------------------ any Restricted Stock pursuant to this Agreement, the Company shall: (a) prepare and file with the SEC a Registration Statement with respect to the Restricted Stock in the manner set forth at Sections 2(a) or 2(b) hereof and use reasonable efforts to cause such Registration Statement to remain effective for that period identified in Section 3(g) hereafter; (b) prepare and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for the period specified in Section 3(g) below and to comply with the provisions of the Securities Act with respect to the disposition of all Restricted Stock covered by such Registration Statement in accordance with the Holders intended method of disposition set forth in such Registration Statement for such period; 3 (c) furnish to the Holder and to each underwriter, if any, such number of copies of the Registration Statement and the prospectus included therein (including each preliminary prospectus), as such person may reasonably request in order to facilitate the public sale or other disposition of the Restricted Stock covered by such Registration Statement; (d) use reasonable efforts to register or qualify the Restricted Stock covered by such Registration Statement under the securities or blue sky laws of such jurisdictions as the Holder, or, in the case of an underwritten public offering, the managing underwriter shall reasonably request; provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction; (e) promptly notify the Holder under such Registration Statement and each underwriter, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus contained in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required or necessary to be stated therein in order to make the statements contained therein not misleading in light of the circumstances under which they were made; (f) make available for inspection by any underwriter participating in an underwritten disposition on behalf of any Holder, and any attorney, accountant or other agent retained by such underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by the underwriter, attorney, accountant or agent in connection with such Registration Statement; (g) for purposes of Sections 3(a) and 3(b) above, the period of distribution of Restricted Stock shall be deemed to extend until the earlier of: (A) in an underwritten public offering of all of the Restricted Stock, the period in which each underwriter has completed the distribution of all securities purchased by it; (B) in any other registration, the earlier of the period in which all shares of Restricted Stock covered thereby shall have been sold or eighteen (18) months from the date of Closing; (h) if the Common Stock of the Company is listed on any securities exchange or automated quotation system, the Company shall use reasonable efforts to list (with the listing application being made at the time of the filing of such Registration Statement or as soon thereafter as is reasonably practicable) the Restricted Stock covered by such Registration Statement on such exchange or automated quotation system; (i) enter into normal and customary underwriting arrangements or an underwriting agreement and take all other reasonable and customary actions if the Holder sells its shares of Restricted Stock pursuant to an underwriting (however, in no event shall the Company, in connection with such underwriting, be required to undertake any special audit of a fiscal period in which an audit is normally not required); 4 (j) notify the Holder if there are any amendments to the Registration Statement, any requests by the SEC to supplement or amend the Registration Statement, or of any threat by the SEC or state securities commission to undertake a stop order with respect to sales under the Registration Statement; and (k) cooperate in the timely removal of any restrictive legends from the shares of Restricted Stock in connection with the resale of such shares covered by an effective Registration Statement. 4. Expenses. --------- (a) For the purposes of this Section 4, the term "Registration Expenses" shall mean: all expenses incurred by the Company in complying with Sections 2 and 3 of this Agreement, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, "blue sky" fees, fees of the National Association of Securities Dealers, Inc. ("NASD"), fees and expenses of listing shares of Restricted Stock on any securities exchange or automated quotation system on which the Company's shares are listed and fees of transfer agents and registrars. The term "Selling Expenses" shall mean: all underwriting discounts and selling commissions applicable to the sale of Restricted Stock and all accountable or non-accountable expenses paid to any underwriter in respect of the sale of Restricted Stock. (b) Except as otherwise provided herein, the Company will pay all Registration Expenses in connection with the Registration Statements filed pursuant to Section 2 of this Agreement. All Selling Expenses in connection with any Registration Statements filed pursuant to Section 2 of this Agreement shall, in the case of an underwritten offering, be borne by the participating Holders in proportion to the number of shares sold by each, or, in all other instances, shall be borne by the Holder incurring such expenses. 5. Obligations of Holder. ---------------------- (a) In connection with each registration hereunder, each selling Holder will furnish to the Company in writing such information with respect to such seller and the securities held by such seller, and the proposed distribution by him or them as shall be reasonably requested by the Company in order to assure compliance with federal and applicable state securities laws, as a condition precedent to including such seller's Restricted Stock in the Registration Statement. Each selling Holder also shall agree to promptly notify the Company of any changes in such information included in the Registration Statement or prospectus as a result of which there is an untrue statement of material fact or an omission to state any material fact required or necessary to be stated therein in order to make the statements contained therein not misleading in light of the circumstances then existing. (b) In connection with each registration pursuant to this Agreement, the Holder whose shares are included therein will not effect sales thereof until notified by the Company of the effectiveness of the Registration Statement, and thereafter will suspend such sales after receipt of telegraphic, facsimile or written notice from the Company to suspend sales to permit the Company to correct or update a Registration Statement or prospectus. 5 At the end of any period during which the Company is obligated to keep a Registration Statement current, the Holder included in said Registration Statement shall discontinue sales of shares pursuant to such Registration Statement upon receipt of notice from the Company of its intention to remove from registration the shares covered by such Registration Statement which remain unsold, and such Holder shall notify the Company of the number of shares registered which remain unsold immediately upon receipt of such notice from the Company. 6. Information Blackout. --------------------- At any time when a Registration Statement effected pursuant to Section 2 relating to Restricted Stock is effective, upon written notice from the Company to the Holder that the Company has determined in good faith that sale of Restricted Stock pursuant to the Registration Statement would require disclosure of non-public material information, the Holder shall suspend sales of Restricted Stock pursuant to such Registration Statement until such time as the Company notifies the Holder that such material information has been disclosed to the public or has ceased to be material or that sales pursuant to such Registration Statement may otherwise be resumed. 7. Indemnification. ---------------- (a) The Company agrees to indemnify, to the extent permitted by law, each Holder of Restricted Stock, its officers and directors and each Person who controls such Holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses caused by any untrue statement of material fact contained in any Registration Statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished to the Company by such Holder for use therein or by such Holder's failure to deliver a copy of the Registration Statement or prospectus or any amendments or supplements thereto after the Company has furnished such Holder with a sufficient number of copies of the same. (b) In connection with any Registration Statement in which a Holder of Restricted Stock is participating, each such Holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such Registration Statement or prospectus and, to the extent permitted by law, shall indemnify the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from: (i) any untrue or alleged untrue statement of material fact contained in the Registration Statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, (but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished by such Holder); or (ii) any disposition of the Restricted Stock in a manner that fails to comply with the permitted methods of distribution identified within the Registration Statement; provided that the obligation to indemnify (if there shall be more than one Holder) shall be individual, not joint and several, for each Holder and shall be limited to the net amount of proceeds received by such Holder from the sale of Restricted Stock pursuant to such Registration Statement. 6 (c) Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any Person's right to indemnification hereunder to the extent such failure has not prejudiced the indemnifying party) and (ii) unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. (d) The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and shall survive the transfer of securities. The Company also agrees to make such provisions, as are reasonably requested by any indemnified party, for contribution to such party in the event the Company's indemnification is unavailable for any reason. 8. Miscellaneous Provisions. ------------------------- (a) Governing Law. This Agreement shall be governed by --------------- and construed in accordance with the laws of the State of Connecticut with regard to principles of conflicts of laws. (b) Counterparts. This Agreement may be signed in any ------------- number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. (c) Amendments and Waivers. Except as otherwise provided ----------------------- herein, the provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the written consent of the Company and the Holder. (d) Notices. All notices, consents, waivers, and other -------- communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by certified mail or 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. Eastern Standard 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). 7 (i) if to the Company to: VDC Communications, Inc. 75 Holly Hill Lane Greenwich, CT 06830 Attn: Frederick A. Moran, Chief Executive Officer Telephone: (203) 869-5100 Facsimile: (203) 552-0908 (ii) if to the Holder, to the address identified on the books and records of the Company (e) Successors and Assigns; Holders as Beneficiaries. ----------------------------------------------------- This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors and assigns, and the agreements of the Company herein shall inure to the benefit of the Holders and their respective successors and assigns. (f) Headings. The headings in this Agreement are for --------- convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) Entire Agreement; Survival; Termination. Other than ---------------------------------------- to the extent referenced to the Merger Agreement is necessary or appropriate, this Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter (other than the Merger Agreement). (h) Construction. This Agreement and any related ------------- instruments will not be construed more strictly against one party then against the other by virtue of the fact that drafts may have been prepared by counsel for one of the parties, it being recognized that this Agreement and any related instruments are the product of negotiations between the parties and that both parties have contributed to the final preparation of this Agreement and all related instruments. (i) Arbitration. This Agreement shall be governed by ------------ and construed and interpreted in accordance with the laws of the State of Connecticut applicable to contracts executed and to be performed entirely within said State. All controversies or claims arising out of or relating to this Agreement shall be determined by binding arbitration applying the laws of the State of Connecticut. The arbitration shall be conducted at Company's offices in Greenwich, Connecticut, or at such other location designated by Company, before the American Arbitration Association. The decision of the arbitrator(s) shall be final and binding upon the parties, and judgment may be obtained thereon in any 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 thereto unless the award otherwise provides. Nothing herein shall preclude a party from seeking injunctive relief to restrain any breach or threatened breach of the 8 covenants and agreements set forth in this Agreement or otherwise to obtain specific performance of any such covenant or agreement, without the necessity of posting bond or security in connection therewith. (j) Agreement Read and Understood. Both parties hereto ------------------------------ acknowledge that they have had an opportunity to consult with an attorney, and such other experts or consultants as they deem necessary or prudent, regarding this Agreement and that they, or their designated agents, have read and understand this Agreement. IN WITNESS WHEREOF, intending to be legally bound, the parties hereto have caused this Agreement to be signed. ATTEST: VDC COMMUNICATIONS, INC. By: - ------------------------------ --------------------------------- Frederick A. Moran Chief Executive Officer WITNESS: - ------------------------------ ------------------------------------ 9 EX-10.39 8 0008.txt EX-10.39 The following Form of Employment Agreement was entered into with the following individuals: Arthur Scuttaro, Thomas Vrabel, and Robert Paterno. FORM OF EXECUTIVE EMPLOYMENT AGREEMENT -------------------------------------- THIS AGREEMENT is dated as of the 25th day of May, 2000 (the "Date of this Agreement"), by and among ______, an adult individual (hereinafter referred to as "Employee") and Voice & Data Communications (Latin America), Inc., a Delaware corporation (the "Company"). WITNESSETH: ----------- WHEREAS, pursuant to a Merger Agreement by and among VDC Communications, Inc. ("VDC"), the Company, Rare Telephony, Inc., a Nevada corporation (f/k/a Washoe Technology Corporation) ("Rare Telephony"), and the holders of all of the outstanding shares of common stock of Rare Telephony (the "Rare Telephony Shareholders"), dated May 25, 2000 (the "Merger Agreement"), Rare Telephony will be merging with and into the Company (the "Merger") for shares of common stock of VDC (the "Shares"); WHEREAS, in connection with the Merger, VDC, the Company, the Rare Telephony Shareholders, and Buchanan Ingersoll Professional Corporation entered into an Escrow Agreement, dated May 25, 2000 (the "Escrow Agreement"); WHEREAS, prior to the execution of this Agreement, the Employee was an employee of Rare Telephony or one of it subsidiaries; and WHEREAS, the terms of the Merger Agreement provide for the execution of this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Employment Term, Duties and Acceptance. --------------------------------------- (a) The Company hereby retains the Employee as ______ to render his services to the Company and, at the direction of the Company's Board of Directors (the "Board" or "Board of Directors"), its subsidiaries, upon the terms and conditions herein contained subject to the direction of the Company through its principal executive officers (including, without limitation, its Chief Executive and President) or its Board of Directors. (b) The Employee hereby accepts the foregoing employment and agrees to devote his full time, best efforts, energy and skill to such employment. (c) The Employee shall not engage in any other business endeavor or activity during the Employment Period. (d) The Employee hereby agrees that any and all business opportunities which are similar to or in competition with the Business of the Company (as such term is used and defined in Section 6(b) below) and are available as of the Effective Time (as defined below) or become available to the Employee during the Employment Period (as defined below) shall automatically become the sole property of the Company without any obligation of the Company to compensate or otherwise pay the Employee for such opportunities. The Employee further agrees that any and all inventions, discoveries, developments and innovations conceived by the Employee during the Employment Period relative to the duties under this Agreement shall be the exclusive property of the Company; and the Employee hereby assigns all right, title, and interest in the same to the Company. (e) The term of the Employee's employment hereunder (the "Employment Period") shall commence and the effective date of this Agreement shall be the "Effective Time" of the Merger (as defined in the Merger Agreement) and shall end on the third anniversary of the Date of this Agreement, unless sooner terminated as provided herein, provided, however, that the Employment Period shall be extended and this Agreement shall be automatically renewed for successive one-year periods unless: (i) this Agreement is terminated as otherwise provided herein; or (ii) Employee provides written notice to the Company of his desire not to extend the Employment Period at least sixty (60) calendar days prior to the expiration of the then lapsing term. If the Merger Agreement is terminated, this Agreement shall immediately become null and void. The "Effective Time" of the Merger for purposes of this Agreement shall be the "Effective Time" indicated on an "Effective Time Certificate" executed by VDC Communications, Inc. at the closing of the Merger. (f) The Employee shall comply with all policies of the Company whether now existing or hereafter adopted including, without limitation, policies on insider trading and harassment. (g) Notwithstanding any term to the contrary in the Company's Bylaws, without the prior permission of the Board of Directors, the Employee shall not enter into agreements, execute instruments, contractually bind, or incur expenses on behalf of the Company or its subsidiaries in excess of $500. Without the prior written permission of the Board of Directors, Employee shall not represent to any individual or entity that he is an officer or authorized representative of VDC Communications, Inc. or any subsidiary thereof other than the Company and the Company's subsidiaries. 2. Compensation and Expense Reimbursement. --------------------------------------- (a) As base compensation for the Employee duly rendering his services to the Company and its subsidiaries pursuant to the terms of this Agreement, the Company agrees to pay and Employee agrees to accept a base salary ("Base Salary") of ______ Dollars ($______,000) per annum to be paid in accordance with the general payroll practices of the Company as from time to time in effect. Certain additional compensation terms, if any, are set forth on Exhibit "A" hereto and incorporated herein by reference. The Base Salary shall be subject to deductions and withholdings permitted or required by law. 2 (b) The Company will pay or reimburse Employee for all reasonable and necessary out-of-pocket expenses incurred by him in the performance of his duties under this Agreement and pre-approved by the Company in writing. Employee shall keep detailed and accurate records of expenses incurred in connection with the performance of his duties hereunder and reimbursement therefor shall be in accordance with policies and procedures to be established from time to time by the Board of Directors. 3. Fringe Benefits. Employee shall be entitled, subject to the terms and ---------------- conditions of particular plans and programs, to all fringe benefits generally afforded to other employees of the Company at Employee's level, including, but not by way of limitation, the right to participate in any stock option, major medical, and other employee benefit programs made generally available, from time to time, by the Company. 4. Vacations. Employee shall be entitled to compensated vacation in each ---------- fiscal year, to be taken at times which do not unreasonably interfere with the performance of Employee 's duties hereunder and otherwise in accordance with the Company's vacation policies in effect from time to time as applied to other Employees of the Company. 5. Termination. ------------ (a) Termination by Company for "Cause". In addition to any other ----------------------------------- remedies which the Company may have at law, in equity, or otherwise, if Employee engages in (i) fraud, (ii) embezzlement, (iii) any other crime involving moral turpitude, (iv) gross or willful neglect of duty, (v) material breach of any of the provisions of this Agreement, on his part to be performed (including material breach of the representations and warranties of Section 16), (vi) such conduct as results or as is reasonably likely to result in damage to the reputation of the Company, or any of the subsidiaries or affiliates of the Company, (vii) the theft, misuse, or wrongful disclosure of confidential customer information (including, without limitation, bank account or credit card numbers); or (viii) if Employee declines to follow any significant instruction adopted by the Board of Directors of the Company or given by the Company's Chief Executive Officer or President in writing, and communicated to Employee in writing, the Company may at any time thereafter terminate Employee's employment hereunder by written notice to him, effective immediately and the date of the notice shall be the termination date. Any such termination shall be deemed to be termination for "cause", for purposes of this Agreement, the Escrow Agreement, and all other documents referencing a for "cause" termination in this Agreement. Notwithstanding the foregoing, in the event that the basis for the for "cause" termination is the reason set forth in subsection (iv), (v), or (viii) above, then prior to the termination, Employee shall first be given written notice of the facts or circumstances constituting the determination of "cause" and up to fifteen (15) calendar days to cure, rectify or reverse such facts or circumstances. If, in the sole discretion of the Board of Directors, the presence of the Employee in the Company's offices during this cure period would be disruptive to the Company's operations or the operations of its subsidiaries or would potentially result in the misappropriation or misuse of Confidential Information (as defined below), then the opportunity to cure shall take place outside of the Company's offices. If the Employee is permitted in the Company's offices during the cure period and the Employee disrupts the Company's operations or the operations of its subsidiaries or misappropriates or misuses of Confidential Information then the cure period shall immediately end and the 3 Company may at any time thereafter terminate Employee's employment hereunder by written notice to him, effective immediately and the date of the notice shall be the termination date. Upon the early termination of Employee's employment under this Agreement by the Company for "cause," the Company shall pay to Employee: (i) an amount equal to Employee 's Base Salary accrued through the effective date of termination at the rate in effect at the time of termination, payable at the time such payment is due; and (ii) any expense reimbursement amounts accrued to the effective date of termination, payable on the effective date of termination. Upon payment of such amounts, the Company shall have no further obligation to Employee under this Agreement, and Employee shall have no further rights under this Agreement. Upon the early termination of Employee 's employment under this Agreement by the Company for "cause," a percentage of the Shares issued in the name of the Employee in connection with the Merger (the "Employee Shares") shall be forfeited and surrendered to VDC for cancellation as set forth in Section 5(e). (b) Termination by Company without "Cause". At any time, the ------------------------------------------- Company may terminate this Agreement for any reason or no reason other than for "cause" upon five (5) calendar days written notice to the Employee. Upon the early termination of the Employee 's employment under this Agreement by the Company "without cause," the Company shall pay to the Employee : (i) an amount equal to the Employee 's Base Salary accrued through the effective date of termination at the rate in effect at the time of termination, payable at the time such payment is due; and (ii) any expense reimbursement amounts accrued to the effective date of termination, payable on the effective date of termination. Upon payment of such amounts, the Company shall have no further obligation to Employee under this Agreement, and Employee shall have no further rights under this Agreement. (c) Death of Employee. This Agreement shall automatically ------------------ terminate upon the death of Employee. Upon the early termination of this Agreement as a result of death, the Company shall pay the Employee's estate: (i) an amount equal to the Employee 's Base Salary accrued through the effective date of termination at the rate in effect at the effective date of termination, payable at the time such payment is due; and (ii) any expense reimbursement amounts accrued to the effective date of termination, payable on the effective date of termination. Upon payment of such amounts, the Company shall have no further obligation to Employee under this Agreement, and Employee shall have no further rights under this Agreement. (d) Termination by Employee. At any time after the six month ------------------------ anniversary of the date of this Agreement, the Employee may terminate this Agreement by giving at least thirty (30) calendar days' prior written notice to the Company. Upon the early termination of Employee 's employment under this Agreement by the Employee pursuant to this Section, a percentage of the Employee Shares shall be forfeited and surrendered to VDC for cancellation as set forth in Section 5(e). (e) Forfeiture of Shares. IF THE EMPLOYEE IS TERMINATED FOR --------------------- "CAUSE" (PURSUANT TO SECTION 5(A).), RESIGNS FROM EMPLOYMENT (PURSUANT TO SECTION 5(D)), OR BREACHES A MATERIAL TERM OF THIS AGREEMENT (ANY SUCH EVENT CONSTITUTING A "DEFAULT EVENT"), THEN THE EMPLOYEE SHALL FORFEIT (AND SAID 4 SHARES SHALL BE SURRENDERED TO VDC FOR CANCELLATION) A PERCENTAGE OF THE EMPLOYEE SHARES AS FOLLOWS: (A) 50% IF THE DEFAULT EVENT OCCURS WITHIN THE FIRST ONE YEAR PERIOD FOLLOWING THE EFFECTIVE TIME; (B) 33% IF THE DEFAULT EVENT OCCURS WITHIN THE SECOND ONE YEAR PERIOD FOLLOWING THE EFFECTIVE TIME; AND (C) 20% IF THE DEFAULT EVENT OCCURS WITHIN THE THIRD ONE YEAR PERIOD FOLLOWING THE EFFECTIVE TIME. TO THE EXTENT THERE ARE NOT ENOUGH EMPLOYEE SHARES BEING HELD IN ESCROW PURSUANT TO THE ESCROW AGREEMENT TO COVER THE FORFEITURES ABOVE, THEN, WITHIN FIVE (5) CALENDAR DAYS OF RECEIVING NOTICE OF THIS FACT FROM THE COMPANY, THE EMPLOYEE SHALL DELIVER ADDITIONAL VDC SHARES TO VDC FOR CANCELLATION TO COVER ANY SUCH DEFICIENCY. FOR PURPOSES OF THE PERCENTAGE CALCULATIONS ABOVE, ALL FRACTIONS SHALL BE ROUNDED UP. THE EMPLOYEE ACKNOWLEDGES AND AGREES THAT THE FORFEITURE OF SHARES IN ACCORDANCE WITH THIS SECTION IS IN ADDITION TO ANY OTHER REMEDIES WHICH THE COMPANY MAY HAVE AT LAW, IN EQUITY, OR OTHERWISE. 6. Covenant Not to Compete. ------------------------ (a) The Employee recognizes and acknowledges: (i) that the execution of this Agreement containing the following Covenant Not to Compete was a condition precedent to the closing of the Merger and the Company would not have consummated said Merger without the same; and (ii) that the Company is placing its confidence and trust in the Employee. The Employee , therefore, covenants and agrees that during the Applicable Non-Compete Period (as defined below), the Employee shall not, either directly or indirectly, without the prior written consent of the Board of Directors: (i) engage in or carry on 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) be or become an employee, agent, consultant, representative, director or officer of 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; (iii) solicit for employment or employ any person employed by the Company (or its subsidiaries) at any time during the 12-month period immediately preceding such solicitation or employment; or (iv) 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, the following shall not be deemed to violate this Section 6: (i) passive equity investments by Employee of $10,000 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; (ii) passive equity investments by Employee in excess of $25,000 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, so long as and only to the extent that Employee has obtained the prior written consent of the Company to make such investments; or 5 (iii) an equity investment by Employee of up to 1% in any publicly traded company which is engaged in or is carrying on any business which is similar to or in competition with the Business of the Company. (b) As used in this Agreement, the term "Business of the Company" shall include all material business activities in which the Company and its subsidiaries are engaged now which includes, but is not limited to, international and domestic (i.e. in the United States) long distance telecommunications services. (c) Employee hereby recognizes and acknowledges that the existing Business of the Company extends throughout the United States and therefore agrees that the covenants not to compete contained in this Section 6 shall be applicable in and throughout the United States, as well as throughout such additional areas, states or countries in which the Company may be (or has prepared written plans to be) doing business as of the date of termination of the Employee 's employment hereunder. Employee further warrants and represents that, because of his varied skill and abilities, he does not need to compete with the Business of the Company and that this Agreement will not prevent him from earning a livelihood and acknowledges that the restrictions contained in this Section 6 constitute reasonable protections for the Company. (d) As used in this Section 6, "Applicable Non-Compete Period" shall mean all periods of employment hereunder and that period of two (2) years following the termination of Employee 's employment hereunder. 7. Trade Secrets and Confidential Information. Employee recognizes ------------------------------------------------ and acknowledges that certain information including, without limitation, information pertaining to the financial condition of the Company, its systems, methods of doing business, agreements with customers or suppliers or other aspects of the Business of the Company or which is sufficiently secret to derive economic value from not being disclosed or customer confidential personal information (including, without limitation, credit card and banking account data) ("Confidential Information") may be made available or otherwise come into the possession of the Employee by reason of his employment with the Company. Accordingly, the Employee agrees that he will not at any time disclose any Confidential Information to any person, firm, corporation, association or other entity for any reason or purpose whatsoever or make use to his personal advantage or to the advantage of any third party, of any Confidential Information, without the prior written consent of the Board of Directors. The Employee shall, upon termination of employment, return to the Company all documents which reflect Confidential Information (including copies thereof). Notwithstanding anything heretofore stated in this Section 7, the Employee 's obligations under this Section 7 shall not, after termination of the Employee 's employment with the Company, apply to information which has become generally available to the public without any action or omission of the Employee (except that any Confidential Information which is disclosed to any third party by an employee or representative of the Company who is not authorized to make such disclosure shall be deemed to remain confidential and protectable by the Employee under this Section 7). 8. Severability. The invalidity or unenforceability of any term of this ------------- Agreement shall not affect the validity or enforceability of this Agreement or any of its other terms; in the event that any court or arbitrator determines that the time period and/or scope of any paragraph or section of this Agreement 6 is unenforceably long or broad, as the case may be, then, and in either such event, neither the enforceability nor the validity of said paragraph or section as a whole or the Agreement as a whole shall be affected. Rather, the scope of the section shall be revised by the court or arbitrator as little as possible to make the section enforceable. If the court or arbitrator will not revise said paragraph or section, then this Agreement shall be construed as though the invalid or unenforceable term(s) were not included herein. 9. Breach. The Employee hereby recognizes and acknowledges that ------- irreparable injury or damage shall result to the Company in the event of a breach or threatened breach by the Employee of any of the terms of provisions Section 6 or 7 hereunder, and the Employee therefore agrees that the Company shall be entitled to an injunction (without posting bond) restraining Employee from engaging in any activity constituting such breach or threatened breach. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to the Company at law, in equity, or otherwise for breach or threatened breach of this Agreement, including but not limited to, the recovery of damages from the Employee and, if the Employee is an employee of the Company, the termination of his employment with the Company in accordance with the terms and provisions of this Agreement. 10. Arbitration ----------- (a) Arbitration Disclosures. (i) arbitration is usually final ------------------------- and binding on the parties and subject to only very limited review by a court; (ii) the parties are waiving their right to litigate in court, including their right to a jury trial; (iii) pre-arbitration discovery is generally more limited and different from court proceedings; (iv) any party's right to appeal or to seek modification of rulings by arbitrators is strictly limited; and (v) a panel of arbitrators might include an arbitrator who is or was affiliated with the telecommunications industry. (b) Arbitration. All controversies or claims arising out of or ------------ relating to this Agreement, or arising out of or relating to the employment contemplated herein, or the termination thereof, shall be determined by binding arbitration applying the laws of the State of New Jersey and the rules of the American Arbitration Association applicable to the Commercial Panel, except that there shall only be one (1) arbitrator. The arbitration shall be conducted at Acquiror's offices in Greenwich, Connecticut, or at such other location designated by Acquiror. The decision of the arbitrator shall be final and binding upon the parties, shall include written findings of law and fact, and judgment may be obtained thereon in any court of competent jurisdiction. Each party shall bear the cost of preparing and presenting its own case (except as provided for in Section 4 of the Escrow Agreement). The cost of the arbitration, including the fees and expenses of the arbitrator, shall be shared equally by the parties thereto unless the award otherwise provides (except as provided for in Section 4 of the Escrow Agreement). Nothing herein shall preclude a party from seeking injunctive relief to restrain any breach or threatened breach of the covenants and agreements set forth in this Agreement or otherwise to obtain specific performance of any such covenant or agreement, without the necessity of posting bond or security in connection therewith. 11. Remedies Cumulative. Except as otherwise expressly provided herein, -------------------- each of the rights and remedies of the parties set forth in this Agreement shall 7 be cumulative with all other such rights and remedies, as well as with all rights and remedies of the parties otherwise available at law or in equity. 12. Counterparts. This Agreement may be executed in multiple counterparts ------------- each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may also be executed and delivered by exchange of facsimile copies showing the signatures of the parties, and those signatures need not be affixed to the same copy. The facsimile copies showing the signatures of the parties will constitute originally signed copies of the Agreement requiring no further execution. 13. Waiver. The failure of either party at any time or times to require ------- performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. To be effective, any waiver must be contained in a written instrument signed by the party waiving compliance by the other party of the term or covenant as specified. The waiver by either party of the breach of any term or covenant contained herein, whether by conduct or otherwise, in any one or more instances, shall not be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement. 14. Governing Law. This Agreement shall be governed by the laws of the -------------- State of New Jersey without regard to principles of conflict of laws. 15. Complete Agreement. This Agreement constitutes the complete and -------------------- exclusive agreement between the parties hereto which supersedes all proposals, oral and written, and all other communications between the parties relating to the subject matter contained herein. Without limiting the foregoing, the Agreement supersedes and renders null and void any employment or consulting agreement the Employee had with Rare Telephony or its subsidiaries (or all of their predecessors) prior to the Merger. Notwithstanding the foregoing, this Agreement shall not supersede the Merger Agreement or the Schedules or Exhibits thereto or the Escrow Agreement. No change or modification of this Agreement shall be valid or binding unless the same is in writing and signed by the parties hereto. 16. Warranties. The Employee represents, warrants, covenants and agrees ----------- that: (a) The Employee has a right to enter into this Agreement, that he is not a party to any agreement or understanding whether or not written which would prohibit or restrict his performance of his obligations under this Agreement and that he will not use in the performance of his obligations hereunder any proprietary information of any other party which he is legally prohibited from using; and (b) The Employee has had an opportunity to consult with an attorney, and such other experts or consultants as he deemed necessary or prudent, regarding this Agreement and the Employee has read and understands this Agreement. Each representation and warranty of Employee shall survive the execution of this Agreement and shall continue throughout the Employment Period. The right to any remedy based on such representations and warranties will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable 8 of being acquired) at any time, whether before or after the execution and delivery of this Agreement, with respect to the accuracy or inaccuracy of or compliance with, any such representation or warranty. 17. Notice. All notices, requests, instructions, consents and other ------- communications to be given pursuant to this Agreement shall be in writing and shall be deemed received (i) on the same day if delivered in person, by same-day courier or by telegraph, telex or facsimile transmission (receipt confirmed) (provided that telegraph, telex or facsimile notice shall be deemed received on the next business day if received after 5:00 p.m. Eastern Standard Time), (ii) on the next day if delivered by overnight mail or courier, or (iii) on the date indicated on the return receipt, or if there is no such receipt, on the third calendar day (excluding Sundays) if delivered by certified or registered mail, postage prepaid. If notice is being given under both this Agreement and the Escrow Agreement to the Employee, then notice may be given to the Employee for purposes of both such agreements at the address given for the Employee in the Escrow Agreement. 18. Assignment. This Agreement shall inure to the benefit of and be binding ----------- upon the Company, its successors and assigns. This Agreement may not be assigned by the Employee without the prior written consent of the Company. This Agreement may be assigned by the Company and the execution of this Agreement by the Employee shall be deemed a consent to such assignment. 19. Material Provisions; Survival of Certain Terms. The following sections ----------------------------------------------- (including all subsections thereto) of the Agreement, without limitation, shall be deemed material: Section 1, Section 5, Section 6, Section 7, Section 10, Section 14, and Section 21. The terms and provisions contained in this Agreement that by their sense and context are intended to survive the termination of this Agreement shall so survive the termination of this Agreement; including, without limitation, Section 5, Section 6, Section 7, Section 10, Section 14, and Section 21. 20. Payment Offsets. The Company shall be entitled to deduct from any ---------------- payment due to Employee under this Agreement any payments or amounts owed to the Company or any of its affiliates from the Employee. 21. Statement. Within ten (10) calendar days of receipt of a written ---------- request from the Board of Directors, the Employee shall provide the Board of Directors with a statement (sworn before a Notary Public and signed by said Notary Public) that, as of the date of said statement, the Employee has complied with all material terms of this Agreement. This provision shall expire two (2) years following the termination of this Agreement. 22. Rule of Construction; Pronouns. No rule of construction requiring ------------------------------- interpretation against the drafting party shall apply to the interpretation of this Agreement. To the extent the terms of this Agreement and the Escrow Agreement conflict, the terms of this Agreement shall govern. 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. 23. Recitals. The recitals to this Agreement constitute part of this --------- Agreement. 9 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written ATTEST: Voice & Data Communications (Latin America), Inc. - --------------------------- Signature By: ------------------------------------------- Frederick A. Moran, Chief Executive Officer - --------------------------- Print Name WITNESS: EMPLOYEE: - --------------------------- ------------------------------------------- Signature - --------------------------- Print Name 10 EXHIBIT "A" 11 EX-10.40 9 0009.txt EX-10.40 The following Form of Employment Agreement was entered into with the following individuals: Armando Medina, Timothy Grace, Godwin Cruz, Christopher LeFebvre, Alberto Roman, Debra Santa Lucia, Ivel Turner, and Williams Jean Charles. FORM OF EMPLOYMENT AGREEMENT ---------------------------- THIS AGREEMENT is dated as of the 25th day of May, 2000 (the "Date of this Agreement"), by and among , an adult individual (hereinafter referred to as "Employee") and Voice & Data Communications (Latin America), Inc., a Delaware corporation (the "Company"). WITNESSETH: ----------- WHEREAS, pursuant to a Merger Agreement by and among VDC Communications, Inc. ("VDC"), the Company, Rare Telephony, Inc., a Nevada corporation (f/k/a Washoe Technology Corporation) ("Rare Telephony"), and the holders of all of the outstanding shares of common stock of Rare Telephony (the "Rare Telephony Shareholders"), dated May 25, 2000 (the "Merger Agreement"), Rare Telephony will be merging with and into the Company (the "Merger") for shares of common stock of VDC (the "Shares"); WHEREAS, in connection with the Merger, VDC, the Company, the Rare Telephony Shareholders, and Buchanan Ingersoll Professional Corporation entered into an Escrow Agreement, dated May 25, 2000 (the "Escrow Agreement"); WHEREAS, prior to the execution of this Agreement, the Employee was an employee of Rare Telephony or one of it subsidiaries; and WHEREAS, the terms of the Merger Agreement provide for the execution of this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Employment Term, Duties and Acceptance. --------------------------------------- (a) The Company hereby retains the Employee as to render his services to the Company and, at the direction of the Company's President, its subsidiaries, upon the terms and conditions herein contained subject to the direction of the Company through its principal executive officers (including, without limitation, its Chief Executive and President) or its Board of Directors (the "Board" or "Board of Directors"). (b) The Employee hereby accepts the foregoing employment and agrees to devote his full time, best efforts, energy and skill to such employment. (c) The Employee shall not engage in any other business endeavor or activity during the Employment Period. (d) The Employee hereby agrees that any and all business opportunities which are similar to or in competition with the Business of the Company (as such term is used and defined in Section 6(b) below) and are available as of the date hereof or become available to the Employee during the Employment Period (as defined below) shall automatically become the sole property of the Company without any obligation of the Company to compensate or otherwise pay the Employee for such opportunities. The Employee further agrees that any and all inventions, discoveries, developments and innovations conceived by the Employee during the Employment Period relative to the duties under this Agreement shall be the exclusive property of the Company; and the Employee hereby assigns all right, title, and interest in the same to the Company. (e) The term of the Employee 's employment hereunder (the "Employment Period") shall commence and the effective date of this Agreement shall be the "Effective Time" of the Merger (as defined in the Merger Agreement) and shall end on the third anniversary of the Date of this Agreement, unless sooner terminated as provided herein, provided, however, that the Employment Period shall be extended and this Agreement shall be automatically renewed for successive one-year periods unless: (i) this Agreement is terminated as otherwise provided herein; or (ii) Employee provides written notice to the Company of his desire not to extend the Employment Period at least sixty (60) calendar days prior to the expiration of the then lapsing term. If the Merger Agreement is terminated, this Agreement shall immediately become null and void. The "Effective Time" of the Merger for purposes of this Agreement shall be the "Effective Time" indicated on an "Effective Time Certificate" executed by VDC Communications, Inc. at the closing of the Merger. (f) The Employee shall comply with all policies of the Company whether now existing or hereafter adopted including, without limitation, policies on insider trading and harassment. (g) Without the prior written permission of the Board of Directors, the Employee shall not enter into agreements, execute instruments, contractually bind, or incur expenses on behalf of the Company or its subsidiaries in excess of $100. Without the prior written permission of the Board of Directors, Employee shall not represent to any individual or entity that he is an officer or authorized representative of VDC Communications, Inc. or any subsidiary thereof other than the Company and the Company's subsidiaries. 2. Compensation and Expense Reimbursement. --------------------------------------- (a) As base compensation for the Employee duly rendering his services to the Company and its subsidiaries pursuant to the terms of this Agreement, the Company agrees to pay and Employee agrees to accept a base salary ("Base Salary") of Dollars ($ ,000) per annum to be paid in accordance with the general payroll practices of the Company as from time to time in effect. Certain additional compensation terms, if any, are set forth on Exhibit "A" hereto and incorporated herein by reference. The Base Salary shall be subject to deductions and withholdings permitted or required by law. 2 (b) The Company will pay or reimburse Employee for all reasonable and necessary out-of-pocket expenses incurred by him in the performance of his duties under this Agreement and pre-approved by the Company in writing. Employee shall keep detailed and accurate records of expenses incurred in connection with the performance of his duties hereunder and reimbursement therefor shall be in accordance with policies and procedures to be established from time to time by the Board of Directors. 3. Fringe Benefits. Employee shall be entitled, subject to the terms ---------------- and conditions of particular plans and programs, to all fringe benefits generally afforded to other employees of the Company at Employee's level, including, but not by way of limitation, the right to participate in any stock option, major medical, and other employee benefit programs made generally available, from time to time, by the Company. 4. Vacations. Employee shall be entitled to compensated vacation in each ---------- fiscal year, to be taken at times which do not unreasonably interfere with the performance of Employee 's duties hereunder and otherwise in accordance with the Company's vacation policies in effect from time to time as applied to other Employees of the Company. 5. Termination. ------------ (a) Termination by Company for "Cause". In addition to any other ------------------------------------ remedies which the Company may have at law, in equity, or otherwise, if Employee engages in (i) fraud, (ii) embezzlement, (iii) any other crime involving moral turpitude, (iv) gross or willful neglect of duty, (v) material breach of any of the provisions of this Agreement, on his part to be performed (including material breach of the representations and warranties of Section 16), (vi) such conduct as results or as is likely to result in damage to the reputation of the Company, or any of the subsidiaries or affiliates of the Company, (vii) the theft, misuse, or wrongful disclosure of confidential customer information (including, without limitation, bank account or credit card numbers); or (viii) if Employee declines to follow any significant instruction adopted by the Board of Directors of the Company or given by the Company's Chief Executive Officer or President, and communicated to Employee, the Company may at any time thereafter terminate Employee's employment hereunder by written notice to him, effective immediately and the date of the notice shall be the termination date. Any such termination shall be deemed to be termination for "cause", for purposes of this Agreement, the Escrow Agreement, and all other documents referencing a for "cause" termination in this Agreement. Upon the early termination of Employee's employment under this Agreement by the Company for "cause," the Company shall pay to Employee : (i) an amount equal to Employee 's Base Salary accrued through the effective date of termination at the rate in effect at the time of termination, payable at the time such payment is due; and (ii) any expense reimbursement amounts accrued to the effective date of termination, payable on the effective date of termination. Upon payment of such amounts, the Company shall have no further obligation to Employee under this Agreement, and Employee shall have no further rights under this Agreement. Upon the early termination of Employee 's employment under this Agreement by the Company for "cause," a percentage of the Shares issued in the name of the Employee in connection with the Merger (the "Employee Shares") shall be forfeited and surrendered to VDC for cancellation as set forth in Section 5(e). 3 (b) Termination by Company without "Cause". At any time, the ------------------------------------------- Company may terminate this Agreement for any reason or no reason other than for "cause" upon five (5) calendar days written notice to the Employee. Upon the early termination of the Employee 's employment under this Agreement by the Company "without cause," the Company shall pay to the Employee : (i) an amount equal to the Employee 's Base Salary accrued through the effective date of termination at the rate in effect at the time of termination, payable at the time such payment is due; and (ii) any expense reimbursement amounts accrued to the effective date of termination, payable on the effective date of termination. Upon payment of such amounts, the Company shall have no further obligation to Employee under this Agreement, and Employee shall have no further rights under this Agreement. (c) Death of Employee. This Agreement shall automatically ------------------ terminate upon the death of Employee. Upon the early termination of this Agreement as a result of death, the Company shall pay the Employee's estate: (i) an amount equal to the Employee 's Base Salary accrued through the effective date of termination at the rate in effect at the effective date of termination, payable at the time such payment is due; and (ii) any expense reimbursement amounts accrued to the effective date of termination, payable on the effective date of termination. Upon payment of such amounts, the Company shall have no further obligation to Employee under this Agreement, and Employee shall have no further rights under this Agreement. (d) Termination by Employee. At any time after the six month -------------------------- anniversary of the date of this Agreement, the Employee may terminate this Agreement by giving at least thirty (30) calendar days' prior written notice to the Company. Upon the early termination of Employee 's employment under this Agreement by the Employee pursuant to this Section, a percentage of the Employee Shares shall be forfeited and surrendered to VDC for cancellation as set forth in Section 5(e). (e) Forfeiture of Shares. IF THE EMPLOYEE IS TERMINATED FOR --------------------- "CAUSE" (PURSUANT TO SECTION 5(A).), RESIGNS FROM EMPLOYMENT (PURSUANT TO SECTION 5(D)), OR BREACHES A MATERIAL TERM OF THIS AGREEMENT (ANY SUCH EVENT CONSTITUTING A "DEFAULT EVENT"), THEN THE EMPLOYEE SHALL FORFEIT (AND SAID SHARES SHALL BE SURRENDERED TO VDC FOR CANCELLATION) A PERCENTAGE OF THE EMPLOYEE SHARES AS FOLLOWS: (A) 50% IF THE DEFAULT EVENT OCCURS WITHIN THE FIRST ONE YEAR PERIOD FOLLOWING THE EFFECTIVE TIME; (B) 33% IF THE DEFAULT EVENT OCCURS WITHIN THE SECOND ONE YEAR PERIOD FOLLOWING THE EFFECTIVE TIME; AND (C) 20% IF THE DEFAULT EVENT OCCURS WITHIN THE THIRD ONE YEAR PERIOD FOLLOWING THE EFFECTIVE TIME. TO THE EXTENT THERE ARE NOT ENOUGH EMPLOYEE SHARES BEING HELD IN ESCROW PURSUANT TO THE ESCROW AGREEMENT TO COVER THE FORFEITURES ABOVE, THEN, WITHIN FIVE (5) CALENDAR DAYS OF RECEIVING NOTICE OF THIS FACT FROM THE COMPANY, THE EMPLOYEE SHALL DELIVER ADDITIONAL VDC SHARES TO VDC FOR CANCELLATION TO COVER ANY SUCH DEFICIENCY. FOR PURPOSES OF THE PERCENTAGE CALCULATIONS ABOVE, ALL FRACTIONS SHALL BE ROUNDED UP. THE EMPLOYEE ACKNOWLEDGES AND AGREES THAT THE FORFEITURE OF SHARES IN ACCORDANCE WITH THIS SECTION IS IN ADDITION TO ANY OTHER REMEDIES WHICH THE COMPANY MAY HAVE AT LAW, IN EQUITY, OR OTHERWISE. 6. Covenant Not to Compete. ------------------------ 4 (a) The Employee recognizes and acknowledges: (i) that the execution of this Agreement containing the following Covenant Not to Compete was a condition precedent to the closing of the Merger and the Company would not have consummated said Merger without the same; and (ii) that the Company is placing its confidence and trust in the Employee. The Employee , therefore, covenants and agrees that during the Applicable Non-Compete Period (as defined below), the Employee shall not, either directly or indirectly, without the prior written consent of the Board of Directors: (i) engage in or carry on 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) be or become an employee, agent, consultant, representative, director or officer of 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; or (iii) solicit for employment or employ any person employed by the Company (or its subsidiaries) at any time during the 12-month period immediately preceding such solicitation or employment. (b) As used in this Agreement, the term "Business of the Company" shall include all material business activities in which the Company and its subsidiaries are engaged now which includes, but is not limited to, international and domestic (i.e. in the United States) long distance telecommunications services. (c) Employee hereby recognizes and acknowledges that the existing Business of the Company extends throughout the United States and therefore agrees that the covenants not to compete contained in this Section 6 shall be applicable in and throughout the United States, as well as throughout such additional areas, states or countries in which the Company may be (or has prepared written plans to be) doing business as of the date of termination of the Employee 's employment hereunder. Employee further warrants and represents that, because of his varied skill and abilities, he does not need to compete with the Business of the Company and that this Agreement will not prevent him from earning a livelihood and acknowledges that the restrictions contained in this Section 6 constitute reasonable protections for the Company. (d) As used in this Section 6, "Applicable Non-Compete Period" shall mean all periods of employment hereunder and that period of two (2) years following the termination of Employee 's employment hereunder. 7. Trade Secrets and Confidential Information. Employee recognizes ------------------------------------------------ and acknowledges that certain information including, without limitation, information pertaining to the financial condition of the Company, its systems, methods of doing business, agreements with customers or suppliers or other aspects of the Business of the Company or which is sufficiently secret to derive economic value from not being disclosed or customer confidential personal information (including, without limitation, credit card and banking account data) ("Confidential Information") may be made available or otherwise come into the possession of the Employee by reason of his employment with the Company. Accordingly, the Employee agrees that he will not at any time disclose any Confidential Information to any person, firm, corporation, association or other entity for any reason or purpose whatsoever or make use to his personal advantage or to the advantage of any third party, of any Confidential Information, without the prior written consent of the Board of Directors. The Employee shall, upon termination of employment, return to the Company all documents which reflect Confidential Information (including copies thereof). Notwithstanding anything heretofore stated in this Section 7, the Employee 's 5 obligations under this Section 7 shall not, after termination of the Employee 's employment with the Company, apply to information which has become generally available to the public without any action or omission of the Employee (except that any Confidential Information which is disclosed to any third party by an employee or representative of the Company who is not authorized to make such disclosure shall be deemed to remain confidential and protectable by the Employee under this Section 7). 8. Severability. The invalidity or unenforceability of any term of ------------- this Agreement shall not affect the validity or enforceability of this Agreement or any of its other terms; in the event that any court or arbitrator determines that the time period and/or scope of any paragraph or section of this Agreement is unenforceably long or broad, as the case may be, then, and in either such event, neither the enforceability nor the validity of said paragraph or section as a whole or the Agreement as a whole shall be affected. Rather, the scope of the section shall be revised by the court or arbitrator as little as possible to make the section enforceable. If the court or arbitrator will not revise said paragraph or section, then this Agreement shall be construed as though the invalid or unenforceable term(s) were not included herein 9. Breach. The Employee hereby recognizes and acknowledges that ------- irreparable injury or damage shall result to the Company in the event of a breach or threatened breach by the Employee of any of the terms of provisions Section 6 or 7 hereunder, and the Employee therefore agrees that the Company shall be entitled to an injunction (without posting bond) restraining Employee from engaging in any activity constituting such breach or threatened breach. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to the Company at law, in equity, or otherwise for breach or threatened breach of this Agreement, including but not limited to, the recovery of damages from the Employee and, if the Employee is an employee of the Company, the termination of his employment with the Company in accordance with the terms and provisions of this Agreement. 10. Arbitration ----------- (a) Arbitration Disclosures. (i) arbitration is usually final ------------------------- and binding on the parties and subject to only very limited review by a court; (ii) the parties are waiving their right to litigate in court, including their right to a jury trial; (iii) Pre-arbitration discovery is generally more limited and different from court proceedings; (iv) any party's right to appeal or to seek modification of rulings by arbitrators is strictly limited; and (v) a panel of arbitrators might include an arbitrator who is or was affiliated with the telecommunications industry. (b) Arbitration. All controversies or claims arising out of or ------------ relating to this Agreement, or arising out of or relating to the employment contemplated herein, or the termination thereof, shall be determined by binding arbitration applying the laws of the State of New Jersey and the rules of the American Arbitration Association applicable to the Commercial Panel, except that there shall only be one (1) arbitrator. The arbitration shall be conducted at Acquiror's offices in Greenwich, Connecticut, or at such other location designated by Acquiror. The decision of the arbitrator shall be final and binding upon the parties, shall include written findings of law and fact, and judgment may be obtained thereon in any court of competent jurisdiction. Each party shall bear the cost of preparing and presenting its own case (except as provided for in Section 4 of the Escrow Agreement). The cost of the arbitration, 6 including the fees and expenses of the arbitrator, shall be shared equally by the parties thereto unless the award otherwise provides (except as provided for in Section 4 of the Escrow Agreement). Nothing herein shall preclude a party from seeking injunctive relief to restrain any breach or threatened breach of the covenants and agreements set forth in this Agreement or otherwise to obtain specific performance of any such covenant or agreement, without the necessity of posting bond or security in connection therewith. 11. Remedies Cumulative. Except as otherwise expressly provided herein, -------------------- each of the rights and remedies of the parties set forth in this Agreement shall be cumulative with all other such rights and remedies, as well as with all rights and remedies of the parties otherwise available at law or in equity. 12. Counterparts. This Agreement may be executed in multiple counterparts ------------- each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may also be executed and delivered by exchange of facsimile copies showing the signatures of the parties, and those signatures need not be affixed to the same copy. The facsimile copies showing the signatures of the parties will constitute originally signed copies of the Agreement requiring no further execution. 13. Waiver. The failure of either party at any time or times to require ------- performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. To be effective, any waiver must be contained in a written instrument signed by the party waiving compliance by the other party of the term or covenant as specified. The waiver by either party of the breach of any term or covenant contained herein, whether by conduct or otherwise, in any one or more instances, shall not be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement. 14. Governing Law. This Agreement shall be governed by the laws of the -------------- State of New Jersey without regard to principles of conflict of laws. 15. Complete Agreement. This Agreement constitutes the complete and -------------------- exclusive agreement between the parties hereto which supersedes all proposals, oral and written, and all other communications between the parties relating to the subject matter contained herein. Without limiting the foregoing, the Agreement supersedes and renders null and void any employment or consulting agreement the Employee had with Rare Telephony or its subsidiaries (or all of their predecessors) prior to the Merger. Notwithstanding the foregoing, this Agreement shall not supersede the Merger Agreement or the Schedules or Exhibits thereto or the Escrow Agreement. No change or modification of this Agreement shall be valid or binding unless the same is in writing and signed by the parties hereto. 16. Warranties. The Employee represents, warrants, covenants and agrees ----------- that: (a) The Employee has a right to enter into this Agreement, that he is not a party to any agreement or understanding whether or not written which would prohibit or restrict his performance of his obligations under this 7 Agreement and that he will not use in the performance of his obligations hereunder any proprietary information of any other party which he is legally prohibited from using; and (b) The Employee has had an opportunity to consult with an attorney, and such other experts or consultants as he deemed necessary or prudent, regarding this Agreement and the Employee has read and understands this Agreement. Each representation and warranty of Employee shall survive the execution of this Agreement and shall continue throughout the Employment Period. The right to any remedy based on such representations and warranties will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement, with respect to the accuracy or inaccuracy of or compliance with, any such representation or warranty. 17. Notice. All notices, requests, instructions, consents and other ------- communications to be given pursuant to this Agreement shall be in writing and shall be deemed received (i) on the same day if delivered in person, by same-day courier or by telegraph, telex or facsimile transmission (receipt confirmed) (provided that telegraph, telex or facsimile notice shall be deemed received on the next business day if received after 5:00 p.m. Eastern Standard Time), (ii) on the next day if delivered by overnight mail or courier, or (iii) on the date indicated on the return receipt, or if there is no such receipt, on the third calendar day (excluding Sundays) if delivered by certified or registered mail, postage prepaid. If notice is being given under both this Agreement and the Escrow Agreement to the Employee, then notice may be given to the Employee for purposes of both such agreements at the address given for the Employee in the Escrow Agreement. 18. Assignment. This Agreement shall inure to the benefit of and be binding ----------- upon the Company, its successors and assigns. This Agreement may not be assigned by the Employee without the prior written consent of the Company. This Agreement may be assigned by the Company and the execution of this Agreement by the Employee shall be deemed a consent to such assignment. 19. Material Provisions; Survival of Certain Terms. The following sections ------------------------------------------------ (including all subsections thereto) of the Agreement, without limitation, shall be deemed material: Section 1, Section 5, Section 6, Section 7, Section 10, Section 14, and Section 21. The terms and provisions contained in this Agreement that by their sense and context are intended to survive the termination of this Agreement shall so survive the termination of this Agreement; including, without limitation, Section 5, Section 6, Section 7, Section 10, Section 14, and Section 21. 20. Payment Offsets. The Company shall be entitled to deduct from any ----------------- payment due to Employee under this Agreement any payments or amounts owed to the Company or any of its affiliates from the Employee. 21. Statement. Within ten (10) calendar days of receipt of a written ---------- request from the Board of Directors, the Employee shall provide the President of the Company with a statement (sworn before a Notary Public and signed by said Notary Public) that, as of the date of said statement, the Employee has complied 8 with all material terms of this Agreement. This provision shall expire two (2) years following the termination of this Agreement. 22. Rule of Construction; Pronouns. No rule of construction requiring ------------------------------- interpretation against the drafting party shall apply to the interpretation of this Agreement. To the extent the terms of this Agreement and the Escrow Agreement conflict, the terms of this Agreement shall govern. 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. 23. Recitals. The recitals to this Agreement constitute part of this --------- Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. ATTEST: Voice & Data Communications (Latin America), Inc. - --------------------------- Signature By: ------------------------------------------- Frederick A. Moran, Chief Executive Officer - --------------------------- Print Name WITNESS: EMPLOYEE : - --------------------------- ---------------------------------------------- Signature - --------------------------- Print Name 9 EXHIBIT "A" 10 EX-10.41 10 0010.txt EX-10.41 INDEPENDENT CONTRACTOR AGREEMENT -------------------------------- THIS AGREEMENT is dated as of the 25th day of May, 2000, by and among Peter J. Salzano, an adult individual (hereinafter referred to as "Contractor") and Voice & Data Communications (Latin America), Inc., a Delaware corporation (the "Company"). WITNESSETH: ----------- WHEREAS, pursuant to a Merger Agreement by and among VDC Communications, Inc. ("VDC"), the Company, Rare Telephony, Inc., a Nevada corporation (f/k/a Washoe Technology Corporation) ("Rare Telephony"), and the holders of all of the outstanding shares of common stock of Rare Telephony (the "Rare Telephony Shareholders"), dated May 25, 2000, as the same may be amended, (the "Merger Agreement"), Rare Telephony will be merging with and into the Company (the "Merger") for shares of common stock of VDC (the "Shares"); WHEREAS, in connection with the Merger, VDC, the Company, the Rare Telephony Shareholders, and Buchanan Ingersoll Professional Corporation entered into an Escrow Agreement, dated May 25, 2000 (the "Escrow Agreement"); WHEREAS, prior to the execution o f this Agreement, the Contractor was a contractor of Rare Telephony or one of it subsidiaries; and WHEREAS, the terms of the Merger Agreement provide for the execution of this Agreement. NOW, THEREFORE, in consideration of the recitals and mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as follows: 1. Term, Duties and Acceptance. ---------------------------- (a) Subject to the terms and conditions of this Agreement, the Company hereby engages the Contractor as an independent contractor to perform the services set forth herein, and the Contractor hereby accepts such engagement. The Company hereby engages the Contractor to provide the following services, among others, on a monthly basis to the Company and, at the request of the Company's Board of Directors (the "Board" or "Board of Directors"), its subsidiaries, upon the terms and conditions herein: (1) Assist in debugging the web site (the "Free Site") for Free dot Calling.com, Inc. ("Free"); (2) Provide editing, marketing consulting, design and implementation recommendations for the Free Site; (3) Ensure that the Free Site is functioning properly from a customer acquisition and satisfaction standpoint; (4) Review the work performed by outside programmers from a non-technical users standpoint to check all links; (5) Work with Company staff and web site development engineers to order corrections when approved by management; (6) Ensure that the Free Site has a method of ascertaining and recording how a customer at the Free Site was referred to or became aware of the Free Site in a neutral and unbiased manner so as not to suggest or direct the customer to a particular answer; and (7) Once the Free Site is operating successfully, Contractor will continue to work to improve the web site's content and create and maintain an attractive and "sticky" web site for customers. (b) The Contractor hereby agrees that any and all business opportunities which are similar to or in competition with the Business of the Company (as such term is used and defined in Section 5(b) below) and are available as of the Effective Time (as defined below) or become available to the Contractor during the Engagement Period (as defined below) shall automatically become the sole property of the Company without any obligation of the Company to compensate or otherwise pay the Contractor for such opportunities. The Contractor further agrees that any and all inventions, discoveries, developments and innovations conceived by the Contractor during the Engagement Period relative to the duties under this Agreement shall be the exclusive property of the Company; and the Contractor hereby assigns all right, title, and interest in the same to the Company. (c) This engagement shall commence, and this Agreement shall become effective, upon the Effective Time (as defined in the Merger Agreement) and shall end on the third anniversary of the Effective Time, unless sooner terminated as provided herein. The "Effective Time" of the Merger for purposes of this Agreement shall be the Effective Time indicated on an Effective Time Certificate executed by VDC at the closing of the Merger. (d) Contractor shall devote his best efforts, energy and skill to such engagement. (e) Without the prior written permission of the Board of Directors, the Contractor shall not enter into agreements, execute instruments, contractually bind, or incur expenses on behalf of the Company or its subsidiaries. Without the prior written permission of the Board of Directors, Contractor shall not represent to any individual or entity that he is an officer or authorized representative of VDC or any subsidiary or affiliate thereof. 2. Commission and Expense Reimbursement. ------------------------------------- (a) For the Contractor duly rendering his services to the Company and its subsidiaries pursuant to the terms of this Agreement, the Company shall pay to the Contractor a commission on the terms and conditions set forth on Exhibit "A" hereto and incorporated herein by reference (the "Commission"). No taxes will be deducted from the Contractor's Commission. At year end, the Company will file a 1099 Form with the IRS indicating the amount paid to Contractor during the year. The Company shall not be responsible for withholding taxes with respect to the Contractor's Commission hereunder. Because the 2 Contractor will be serving as an independent contractor, the Contractor shall be solely responsible for and shall indemnify the Company and all of its subsidiaries and affiliates against all employment taxes, if any, including, but not limited to social security taxes, unemployment taxes, and withholding taxes, arising out of his service to the Company or its subsidiaries. (b) The Company will pay or reimburse Contractor for all reasonable and necessary out-of-pocket expenses incurred by him in the performance of his duties under this Agreement and pre-approved by the Company in writing. Contractor shall keep detailed and accurate records of expenses incurred in connection with the performance of his services hereunder and reimbursement therefor. 3. Certain Benefits. The Contractor shall have no claim against the ------------------ Company or its subsidiaries or affiliates hereunder or otherwise for vacation pay, sick leave, retirement benefits, social security, worker's compensation, health or disability benefits, unemployment insurance benefits, or employee benefits of any kind. 4. Termination. ------------ (a) Termination by Company for "Cause". In addition to any --------------------------------------- other remedies which the Company may have at law, in equity, or otherwise, if Contractor engages in (i) fraud, (ii) embezzlement, (iii) any other crime involving moral turpitude, (iv) gross or willful neglect of duty, (v) material breach of any of the provisions of this Agreement, on his part to be performed (including material breach of the representations and warranties of Section 15), (vi) such conduct as results or as is reasonably likely to result in damage to the reputation of the Company, or any of the subsidiaries or affiliates of the Company, (vii) the theft, misuse, or wrongful disclosure of confidential customer information (including, without limitation, bank account or credit card numbers); or (viii) if Contractor declines to follow any significant instruction adopted by the Board of Directors of the Company or given by the Company's Chief Executive Officer or President in writing, and communicated to Contractor in writing, the Company may at any time thereafter terminate Contractor's engagement hereunder by written notice to him, effective immediately and the date of the notice shall be the termination date. Any such termination shall be deemed to be termination for "cause", for purposes of this Agreement, the Escrow Agreement, and all other documents referencing a for "cause" termination in this Agreement. Notwithstanding the foregoing, in the event that the basis for the for "cause" termination is the reason set forth in subsection (iv), (v), or (viii) above, then prior to the termination, Contractor shall first be given written notice of the facts or circumstances constituting the determination of "cause" and up to fifteen (15) calendar days to cure, rectify or reverse such facts or circumstances. If, in the sole discretion of the Board of Directors, the presence of the Contractor in the Company's offices during this cure period would be disruptive to the Company's operations or the operations of its subsidiaries or would potentially result in the misappropriation or misuse of Confidential Information (as defined below), then the opportunity to cure shall take place outside of the Company's offices. If the Contractor is permitted in the Company's offices during the cure period and the Contractor disrupts the Company's operations or the operations of its subsidiaries or misappropriates or misuses Confidential Information then the cure period shall immediately end and the Company may at any time thereafter terminate Contractor's engagement 3 hereunder by written notice to him, effective immediately and the date of the notice shall be the termination date. Upon the early termination of Contractor's engagement under this Agreement by the Company for "cause," the Company shall pay to Contractor: (i) an amount equal to Contractor's Commission accrued through the effective date of termination at the rate in effect at the time of termination, payable at the time such payment is due; and (ii) any expense reimbursement amounts accrued to the effective date of termination, payable on the effective date of termination. Upon payment of such amounts, the Company shall have no further obligation to Contractor under this Agreement, and Contractor shall have no further rights under this Agreement. To the extent the final payments referenced in the preceding two sentences are offset as provided for in Section 19, said payments shall be deemed to have been made for purposes of the preceding two sentences. Upon the early termination of Contractor's engagement under this Agreement by the Company for "cause," a percentage of the Shares issued in the name of the Contractor in connection with the Merger (the "Contractor Shares") shall be forfeited and surrendered to VDC for cancellation as set forth in Section 4(e). (b) Termination by Company without "Cause". At any time, the ---------------------------------------- Company may terminate Contractor's engagement hereunder for any reason or no reason other than for "cause" upon five (5) calendar days written notice to the Contractor. Upon the early termination of the Contractor's engagement under this Agreement by the Company "without cause," the Company shall pay to the Contractor: (i) an amount equal to the Contractor's Commission accrued through the effective date of termination at the rate in effect at the time of termination, payable at the time such payment is due; and (ii) any expense reimbursement amounts accrued to the effective date of termination, payable on the effective date of termination. To the extent the final payments referenced in the preceding sentence are offset as provided for in Section 19, said payments shall be deemed to have been made for purposes of the preceding sentence. Additionally, as long as the Contractor does not violate either the terms and conditions of this Agreement that survive the termination of the engagement (the "Surviving Terms"), including, without limitation, Section 4(e), Section 5, Section 6, Section 9, and Section 20, or the terms and conditions of a Covenant Not to Compete in a License Agreement by and between Contractor and Free (the "Email License"), Contractor shall continue to receive the Commission. If Contractor does violate any Surviving Term or the Covenant Not to Compete in the Email License, then the Company's payment of and liability for the Commission, except to the extent earned prior to such violation, shall immediately terminate forever and Contractor shall have no further rights under this Agreement. Notwithstanding the foregoing, if Contractor violates a Surviving Term in Section 5 or the Covenant Not to Compete in the Email License, then the Commission shall only be forfeited if upon notice from the Company, the Contractor does not cease such violation and cause such violation to be ceased within sixty (60) calendar days of the notice from the Company. If Contractor is able to cease such violation and cause such violation to be ceased within sixty (60) calendar days of the notice from the Company, then Contractor shall continue to receive the Commission; provided, however, that Contractor shall have forever forfeited all Commissions to which he would have been entitled during the term of the violation. If Contractor is unable to cease such violation and cause such violation to be ceased within sixty (60) calendar days of the notice from the Company, then the Commission shall immediately terminate forever and Contractor shall have no further rights under this Agreement. Notwithstanding the forgoing, the Company's obligation to pay Contractor the Commission shall immediately terminate forever if: (1) VDC, the Company, or Free 4 has terminated or shut down the Free Site for more than thirty (30) calendar days; or (2) the Email License is terminated. (c) Death of Contractor. This Agreement shall automatically -------------------- terminate upon the death of Contractor. Upon the early termination of this Agreement as a result of death, the Company shall pay the Contractor's estate: (i) an amount equal to the Contractor's Commission accrued through the effective date of termination at the rate in effect at the effective date of termination, payable at the time such payment is due; and (ii) any expense reimbursement amounts accrued to the effective date of termination, payable on the effective date of termination. Except as set forth below, upon payment of such amounts, the Company shall have no further obligation to Contractor or his estate under this Agreement, and Contractor and his estate shall have no further rights under this Agreement. To the extent the final payments referenced in the preceding two sentences are offset as provided for in Section 19, said payments shall be deemed to have been made for purposes of the preceding two sentences. In the event that the Contractor dies during the term of the engagement hereunder, then the Company shall pay the Commission to the Contractor's estate for a period of seven (7) years (or such shorter period of time that the Commission would have otherwise been payable to Contractor under the terms of this Agreement) from the date of his death if, and only if, the following three conditions precedent are satisfied: (1) the estate of the Contractor provides the Company's counsel with an original death certificate for the Contractor; (2) the President or CEO of the Company provides a sworn affidavit confirming that to the best of his knowledge the Contractor, prior to his death, had not violated any material term of this Agreement; and (3) in the sixty (60) calendar days following the Contractor's death, counsel for the Company is satisfied that Contractor, prior to his death, had not violated any material term of this Agreement. (d) Termination by Contractor. At any time after the six month -------------------------- anniversary of the date of this Agreement, the Contractor may terminate his engagement under this Agreement by giving at least thirty (30) calendar days' prior written notice to the Company. Upon the early termination of Contractor's engagement under this Agreement by the Company for "cause," the Company shall pay to Contractor: (i) an amount equal to Contractor's Commission accrued through the effective date of termination at the rate in effect at the time of termination, payable at the time such payment is due; and (ii) any expense reimbursement amounts accrued to the effective date of termination, payable on the effective date of termination. Upon payment of such amounts, the Company shall have no further obligation to Contractor under this Agreement, and Contractor shall have no further rights under this Agreement. To the extent the final payments referenced in the preceding two sentences are offset as provided for in Section 19, said payments shall be deemed to have been made for purposes of the preceding two sentences. Upon the early termination of Contractor's engagement under this Agreement by the Contractor pursuant to this Section, a percentage of the Contractor Shares shall be forfeited and surrendered to VDC for cancellation as set forth in Section 4(e). (e) Forfeiture of Shares. IF THE CONTRACTOR IS TERMINATED FOR --------------------- "CAUSE" (PURSUANT TO SECTION 4(A).), RESIGNS FROM THIS ENGAGEMENT (PURSUANT TO SECTION 4(D)), OR BREACHES A MATERIAL TERM OF THIS AGREEMENT (ANY SUCH EVENT CONSTITUTING A "DEFAULT EVENT"), THEN THE CONTRACTOR SHALL FORFEIT (AND SAID SHARES SHALL BE SURRENDERED TO VDC FOR CANCELLATION) A PERCENTAGE OF THE CONTRACTOR SHARES AS FOLLOWS: (A) 50% IF THE DEFAULT EVENT OCCURS WITHIN THE 5 FIRST ONE YEAR PERIOD FOLLOWING THE EFFECTIVE TIME; (B) 33% IF THE DEFAULT EVENT OCCURS WITHIN THE SECOND ONE YEAR PERIOD FOLLOWING THE EFFECTIVE TIME; AND (C) 20% IF THE DEFAULT EVENT OCCURS WITHIN THE THIRD ONE YEAR PERIOD FOLLOWING THE EFFECTIVE TIME. TO THE EXTENT THERE ARE NOT ENOUGH CONTRACTOR SHARES BEING HELD IN ESCROW PURSUANT TO THE ESCROW AGREEMENT TO COVER THE FORFEITURES ABOVE, THEN, WITHIN FIVE (5) CALENDAR DAYS OF RECEIVING NOTICE OF THIS FACT FROM THE COMPANY, THE CONTRACTOR SHALL DELIVER ADDITIONAL VDC SHARES TO VDC FOR CANCELLATION TO COVER ANY SUCH DEFICIENCY. FOR PURPOSES OF THE PERCENTAGE CALCULATIONS ABOVE, ALL FRACTIONS SHALL BE ROUNDED UP. THE CONTRACTOR ACKNOWLEDGES AND AGREES THAT THE FORFEITURE OF SHARES IN ACCORDANCE WITH THIS SECTION IS IN ADDITION TO ANY OTHER REMEDIES WHICH THE COMPANY MAY HAVE AT LAW, IN EQUITY, OR OTHERWISE. 5. Covenant Not to Compete. ------------------------ (a) The Contractor recognizes and acknowledges: (i) that the execution of this Agreement containing the following Covenant Not to Compete was a condition precedent to the closing of the Merger and the Company would not have consummated said Merger without the same; and (ii) that the Company is placing its confidence and trust in the Contractor. The Contractor, therefore, covenants and agrees that during the Applicable Non-Compete Period (as defined below), the Contractor shall not, either directly or indirectly, without the prior written consent of the Board of Directors: (i) engage in or carry on 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) be or become an employee, agent, consultant, representative, director or officer of 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; (iii) solicit for employment or employ any person employed by the Company (or its subsidiaries) at any time during the 12-month period immediately preceding such solicitation or employment; or (iv) 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, the following shall not be deemed to violate this Section 5: (i) passive equity investments by Contractor of $10,000 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; (ii) passive equity investments by Contractor in excess of $25,000 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, so long as and only to the extent that Contractor has obtained the prior written consent of the Board to make such investments; or 6 (iii) an equity investment by Contractor of up to 0.1% in any publicly traded company which is engaged in or is carrying on any business which is similar to or in competition with the Business of the Company. (b) As used in this Agreement, the term "Business of the Company" shall include all material business activities in which the Company and its subsidiaries are engaged now which includes, but is not limited to, international and domestic (i.e. in the United States) long distance telecommunications services. (c) Contractor hereby recognizes and acknowledges that the existing Business of the Company extends throughout the United States and therefore agrees that the covenants not to compete contained in this Section 5 shall be applicable in and throughout the United States, as well as throughout such additional areas, states or countries in which the Company may be (or has prepared written plans to be) doing business as of the date of termination of the Contractor's engagement hereunder. Contractor further warrants and represents that, because of his varied skill and abilities, he does not need to compete with the Business of the Company and that this Agreement will not prevent him from earning a livelihood and acknowledges that the restrictions contained in this Section 5 constitute reasonable protections for the Company. (d) As used in this Section 5, "Applicable Non-Compete Period" shall mean all periods of engagement hereunder and that period of two (2) years following the termination of Contractor's engagement hereunder. 6. Trade Secrets and Confidential Information. Contractor recognizes ----------------------------------------------- and acknowledges that certain information including, without limitation, information pertaining to the financial condition of the Company (and/or its affiliates and/or its subsidiaries), its systems, methods of doing business, agreements with customers or suppliers or other aspects of the Business of the Company or which is sufficiently secret to derive economic value from not being disclosed or customer confidential personal information (including, without limitation, credit card and banking account data) ("Confidential Information") may be made available or otherwise come into the possession of the Contractor by reason of his engagement with the Company. Accordingly, the Contractor agrees that he will not at any time disclose any Confidential Information to any person, firm, corporation, association or other entity for any reason or purpose whatsoever or make use to his personal advantage or to the advantage of any third party, of any Confidential Information, without the prior written consent of the Board of Directors. The Contractor shall, upon termination of his engagement hereunder, return to the Company all documents which reflect Confidential Information (including copies thereof). Notwithstanding anything heretofore stated in this Section 6, the Contractor's obligations under this Section 6 shall not, after termination of the Contractor's engagement with the Company, apply to information which has become generally available to the public without any action or omission of the Contractor (except that any Confidential Information which is disclosed to any third party by an employee or representative of the Company who is not authorized to make such disclosure shall be deemed to remain confidential and protectable by the Contractor under this Section 6). 7. Severability. The invalidity or unenforceability of any term of ------------- this Agreement shall not affect the validity or enforceability of this Agreement or any of its other terms; in the event that any court or arbitrator of competent jurisdiction determines that the time period and/or scope of any 7 paragraph or section of this Agreement is unenforceably long or broad, as the case may be, then, and in either such event, neither the enforceability nor the validity of said paragraph or section as a whole shall be affected. Rather, the scope of the section shall be revised by the court or arbitrator as little as possible to make the section enforceable. If the court or arbitrator will not revise said paragraph or section, then this Agreement shall be construed as though the invalid or unenforceable term(s) were not included herein. 8. Breach. The Contractor hereby recognizes and acknowledges that ------- irreparable injury or damage shall result to the Company in the event of a breach or threatened breach by the Contractor of any of the terms of provisions Section 5 or 6 hereunder, and the Contractor therefore agrees that the Company shall be entitled to an injunction (without posting bond) restraining Contractor from engaging in any activity constituting such breach or threatened breach. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to the Company at law, in equity, or otherwise for breach or threatened breach of this Agreement, including but not limited to, the recovery of damages from the Contractor and the termination of his engagement with the Company in accordance with the terms and provisions of this Agreement. 9. Arbitration ----------- (a) Arbitration Disclosures. (i) Arbitration is usually final ------------------------- and binding on the parties and subject to only very limited review by a court; (ii) the parties are waiving their right to litigate in court, including their right to a jury trial; (iii) pre-arbitration discovery is generally more limited and different from court proceedings; (iv) any party's right to appeal or to seek modification of rulings by arbitrators is strictly limited; and (v) a panel of arbitrators might include an arbitrator who is or was affiliated with the telecommunications industry. (b) Arbitration. All controversies or claims arising out of or ------------ relating to this Agreement, or arising out of or relating to the engagement contemplated herein, or the termination thereof, shall be determined by binding arbitration applying the laws of the State of New Jersey and the rules of the American Arbitration Association applicable to the Commercial Panel, except that there shall only be one (1) arbitrator. The arbitration shall be conducted at the Company's offices in Greenwich, Connecticut, or at such other location designated by the Company. The decision of the arbitrator shall be final and binding upon the parties, shall include written findings of law and fact, and judgment may be obtained thereon in any court of competent jurisdiction. Each party shall bear the cost of preparing and presenting its own case (except as provided for in Section 4 of the Escrow Agreement). The cost of the arbitration, including the fees and expenses of the arbitrator, shall be shared equally by the parties thereto unless the award otherwise provides (except as provided for in Section 4 of the Escrow Agreement). Nothing herein shall preclude a party from seeking injunctive relief to restrain any breach or threatened breach of the covenants and agreements set forth in this Agreement or otherwise to obtain specific performance of any such covenant or agreement, without the necessity of posting bond or security in connection therewith. 10. Remedies Cumulative. Except as otherwise expressly provided herein, -------------------- each of the rights and remedies of the parties set forth in this Agreement shall 8 be cumulative with all other such rights and remedies, as well as with all rights and remedies of the parties otherwise available at law or in equity. 11. Counterparts. This Agreement may be executed in multiple counterparts ------------- each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may also be executed and delivered by exchange of facsimile copies showing the signatures of the parties, and those signatures need not be affixed to the same copy. The facsimile copies showing the signatures of the parties will constitute originally signed copies of the Agreement requiring no further execution. 12. Waiver. The failure of either party at any time or times to require ------- performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. To be effective, any waiver must be contained in a written instrument signed by the party waiving compliance by the other party of the term or covenant as specified. The waiver by either party of the breach of any term or covenant contained herein, whether by conduct or otherwise, in any one or more instances, shall not be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement. 13. Governing Law. This Agreement shall be governed by the laws of the -------------- State of New Jersey without regard to principles of conflict of laws. 14. Complete Agreement. This Agreement constitutes the complete and -------------------- exclusive agreement between the parties hereto which supersedes all proposals, oral and written, and all other communications between the parties relating to the subject matter contained herein. Without limiting the foregoing, the Agreement supersedes and renders null and void any contractor or consulting agreement the Contractor had with Rare Telephony or its subsidiaries (or all of their predecessors) prior to the Merger and a letter agreement among VDC, Contractor, and Network Consulting Group, Inc., dated May 17, 2000. Notwithstanding the foregoing, this Agreement shall not supersede or render null or void the Merger Agreement or the Schedules or Exhibits thereto, the Escrow Agreement, or the Email License. 15. Warranties. The Contractor represents, warrants, covenants and agrees ----------- that: (a) The Contractor has a right to enter into this Agreement, that he is not a party to any agreement or understanding whether or not written which would prohibit or restrict his performance of his obligations under this Agreement and that he will not use in the performance of his obligations hereunder any proprietary information of any other party which he is legally prohibited from using; and (b) The Contractor has had an opportunity to consult with an attorney, and such other experts or consultants as he deemed necessary or prudent, regarding this Agreement and the Contractor has read and understands this Agreement. Each representation and warranty of Contractor shall survive the execution of this Agreement and shall continue throughout the term of this Agreement. The right to any remedy based on such representations and warranties will not be affected by any investigation conducted with respect to, or any knowledge 9 acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement, with respect to the accuracy or inaccuracy of or compliance with, any such representation or warranty. 16. Notice. All notices, requests, instructions, consents and other ------- communications to be given pursuant to this Agreement shall be in writing and shall be deemed received (i) on the same day if delivered in person, by same-day courier or by telegraph, telex or facsimile transmission (receipt confirmed) (provided that telegraph, telex or facsimile notice shall be deemed received on the next business day if received after 5:00 p.m. Eastern Standard Time), (ii) on the next day if delivered by overnight mail or courier, or (iii) on the date indicated on the return receipt, or if there is no such receipt, on the third calendar day (excluding Sundays) if delivered by certified or registered mail, postage prepaid. 17. Assignment. This Agreement shall inure to the benefit of and be binding ----------- upon the Company, its successors and assigns. This Agreement may not be assigned by Contractor without the written consent of the Company. This Agreement may be assigned by the Company and the execution of this Agreement by the Contractor shall be deemed a consent to such assignment. 18. Material Provisions; Survival of Certain Terms. The following sections ----------------------------------------------- (including all subsections thereto) of the Agreement, without limitation, shall be deemed material: Section 1, Section 2, Section 4(e), Section 5, Section 6, Section 9, Section 13, and Section 20. The terms and provisions contained in this Agreement that by their sense and context are intended to survive the termination of this Agreement shall so survive the termination of this Agreement, including, without limitation, the following sections (including all subsections thereto): Section 4(e), Section 5, Section 6, Section 9, Section 13, Section 20, and Section 21. 19. Payment Offsets. The Company shall be entitled to deduct from any ---------------- payment due to Contractor under this Agreement any payments or amounts owed to the Company or any of its subsidiaries or affiliates (including, without limitation, VDC) from the Contractor or Network Consulting Group, Inc. 20. Statement. Within ten (10) calendar days of receipt of a written ---------- request from the Board of Directors, the Contractor shall provide the Board of Directors with a statement (sworn to by the Contractor before a Notary Public and signed by said Notary Public and the Contractor) that, as of the date of said statement, the Contractor has complied with all material terms of this Agreement. This provision shall expire two (2) years following the termination of this Agreement. 21. Limitation of Damages. TO THE FULLEST EXTENT PERMITTED BY LAW, THE ---------------------- COMPANY SHALL NOT BE LIABLE TO THE CONTRACTOR OR ANY OTHER PERSON OR ENTITY FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL LOSSES OR DAMAGES, INCLUDING WITHOUT LIMITATION LOSS OF REVENUE, LOSS OF CUSTOMERS OR CLIENTS, LOSS OF GOODWILL OR LOSS OF PROFITS ARISING IN ANY MANNER FROM THIS AGREEMENT OR THE PERFORMANCE OR NON-PERFORMANCE OF OBLIGATIONS HEREUNDER, EVEN IF THE COMPANY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 10 22. Rule of Construction; Pronouns. No rule of construction requiring ------------------------------- interpretation against the drafting party shall apply to the interpretation of this Agreement. 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. 23. Recitals. The recitals to this Agreement constitute part of this --------- Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written ATTEST: Voice & Data Communications (Latin America), Inc. /s/ Clay Moran - --------------------------- Signature By: /s/ Frederick A. Moran ------------------------------------------- Frederick A. Moran, Chief Executive Officer Clay Moran - --------------------------- Print Name WITNESS: CONTRACTOR: /s/ Louis D. Frost /s/ Peter J. Salzano - --------------------------- ---------------------------------------------- Signature Peter J. Salzano Louis D. Frost - --------------------------- Print Name 11 EXHIBIT "A" 12 EX-10.42 11 0011.txt EX-10.42 LICENSE AGREEMENT ----------------- This License Agreement (the "Agreement") is dated the 14th day of June, 2000 (the "Date of this Agreement"), between Peter J. Salzano, an adult individual with an address at 74 Jesse Court, Montville, NJ 07045 ("Licensor"), and Free dot Calling.com, Inc. a Nevada corporation, having an office at 75 Holly Hill Lane, Greenwich, CT 06830 (the "Licensee"). WITNESSETH: ----------- WHEREAS, pursuant to a Merger Agreement by and among VDC Communications, Inc. ("VDC"), Voice & Data Communications (Latin America), Inc. (the "Company"), Rare Telephony, Inc., a Nevada corporation (f/k/a Washoe Technology Corporation) ("Rare Telephony"), and the holders of all of the outstanding shares of common stock of Rare Telephony (the "Rare Telephony Shareholders"), dated May 25, 2000, as amended, (the "Merger Agreement"), Rare Telephony merged with and into the Company (the "Merger"); WHEREAS, in connection with the Merger, VDC, the Company, the Rare Telephony Shareholders, and Buchanan Ingersoll Professional Corporation entered into an Escrow Agreement, dated May 25, 2000 (the "Escrow Agreement"); WHEREAS, the Licensor has filed a provisional patent application through John R. Flanagan for Peter J. Salzano, Inventor, dated April 7, 2000 (the "Application"), for an email business method described in the Application (the "Email Technology"); WHEREAS, the parties desire to enter into a License Agreement for the purpose of granting to Licensee an exclusive, transferable license under certain terms and conditions; WHEREAS, the Company and the Licensor have entered into an Independent Contractor Agreement (the "Contractor Agreement"); and WHEREAS, the terms of the Merger Agreement provide for the execution of this Agreement. NOW, THEREFORE, in consideration of the recitals and mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as follows: 1. Licensor hereby grants to Licensee an exclusive, transferable license to use the Email Technology in the U.S. and internationally (the "License") and Licensee shall have the right to sublicense, in whole or in part, the rights granted herein, to Licensee's subsidiaries, the Company, the Company's subsidiaries, VDC, and VDC's subsidiaries; provided, however, that any sublicense granted or issued without the prior written permission of the Chief Executive Officer of VDC shall be void ab initio. The License shall cover all improvements, additions, and changes to the Email Technology. This License shall continue in full effect whether or not Licensor receives a patent for the Email Technology. The term of the License shall extend for the greatest time period permitted by law (and in no event less than ten (10) years), unless sooner terminated as provided in Section 4. 1 2. Licensor warrants that he is the exclusive owner of the Email Technology and that he has the right to grant the License to Licensee. Licensor further warrants that other than as provided for in this Agreement, the Licensor has not granted a license to use the Email Technology, or otherwise assigned or transferred any of his rights in the Email Technology, to any person or entity. Licensor shall indemnify, protect, defend and hold harmless the Licensee, and its officers, directors, employees, agents, representatives, subsidiaries, affiliates, and controlling entities (collectively, "Indemnified Persons") for, and will pay to the Indemnified Persons the amount of, any loss, liability, claim, damage, expense (including, without limitation, attorneys' fees) or the diminution of value, whether or not involving a third-party claim, directly or indirectly from or in connection with any inaccuracy of, or associated with, any representation or warranty made by Licensor in this Agreement. The rights to indemnification hereunder shall not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement, with respect to the accuracy or inaccuracy of or compliance with any such representation, warranty, or obligation. 3. The Licensee shall pay a one time royalty to Licensor of $100,000 (said payment shall be in cash or cash equivalent only) upon Licensee or any permitted sublicensee hereunder (collectively, the "Entities") first obtaining 250,000 active monthly billing customers (with minimum gross usage and regulatory fee billing of $4,500,000 per month) exclusively through the Licensee web site (the "Free Site") through the employment of the Email Technology and the Licensee web site affiliate system (the "System"). For purposes of this Agreement the term "exclusively through the Licensee web site (the "Free Site") through the employment of the Email Technology and the Licensee web site affiliate system (the "System")" means customers obtained through the Free Site using the Email Technology and the System where no telemarketing, or advertising has been utilized to attract them other than (a) "click and talk" web site telemarketing creating inbound calls to and outbound calls from the Licensee sales/customer service center, (b) referral/viral e-mail marketing from the Email Technology, (c) bulk e-mail marketing from Cash Back Rebates LD.com, Inc. ("Cash Back") self-generated e-mail lists, (d) affiliate web site and web partnership marketing/sales, and (e) inbound calls to Licensee's call center. Without limiting the generality of the foregoing, customers obtained in the following ways shall not be counted towards the 250,000 customers referenced above: (i) customers referred to, directed to, or made aware of Licensee or the Free Site by telemarketers, employees, agents, consultants, officers or directors of or from Cash Back (other than bulk e-mail marketing from Cash Back self-generated e-mail lists), the Company, VDC or any of their affiliates or subsidiaries; (ii) customers referred to, directed to, or made aware of Licensee or the Free Site by or through the marketing, advertising, or publicly available materials of Cash Back, the Company, VDC or any of their affiliates or subsidiaries (other than Licensee). The failure to generate 250,000 customers upon the terms and conditions set forth in this Section 3(a) shall result in no one time royalty being paid. The Licensor shall bear the burden of proving to the Licensee's Board of Directors (which shall make the ultimate determination in its discretion) that the 250,000 active monthly billing customers (with minimum gross usage and regulatory fee billing of $4,500,000 per month) were obtained exclusively through the Free Site through the employment of the Email Technology and the System. In connection with the proof required from the Licensor in the preceding sentence, the Licensor shall have reasonable access to 2 the records of the Licensee and its controlling entities after Licensor has executed a confidentiality agreement acceptable to Licensee's counsel. The determination of whether said customers have achieved the minimum gross usage and regulatory fee billing of $4,500,000 per month shall be made in the sole discretion of the Licensee's Board of Directors with guidance from VDC's controller. 4. This License may be terminated on the following terms and conditions: (a) Immediately by written consent of all of the parties hereto; (b) By the Licensee on five (5) calendar days' written notice if the Free Site is not operational within one year after $100,000 has been placed in a bank account or other account for the development of the Free Site; (c) By the Licensor on five (5) calendar days' written notice if $100,000 has not been placed in a bank account or other account for the development of the Free Site within sixty (60) calendar days of the Date of this Agreement; (d) By either the Licensor or the Licensee on fifteen (15) calendar days' written notice if, after the Free Site becomes operational, VDC, the Company, or the Licensee has terminated or shut down the Free Site for more than thirty (30) calendar days; (e) By Licensor upon fifteen (15) calendar days' written notice if, after the Free Site becomes operational, the Licensor has not timely received the royalty payment provided for in Section 3; provided, however, that Licensor shall have first provided the Licensee with written notice of such failure and such failure shall not have been cured within fifteen (15) calendar days' of receipt of such notice from Licensor; or (f) By either the Licensor or the Licensee on five (5) calendar days' written notice if Licensee is dissolved under the corporate code then applicable to Licensee. Notwithstanding the provisions of this Section 4, Licensor shall not be entitled to terminate this License pursuant to either Section 4(c) or 4(d) if he has violated either the Covenant Not to Compete contained in the Contractor Agreement or the Covenant Not to Compete set forth in Section 5. Upon the termination of the License as set forth in this Section 4, and upon the payment of the royalty, if any, owed to Licensor as provided for in Section 3 accrued through the effective date of termination, the Licensee shall have no further obligation to Licensor under this Agreement, and Licensor shall have no further rights under this Agreement. To the extent the payment referenced in the preceding two sentences are offset as provided for in Section 7(m), said payment shall be deemed to have been made for purposes of the preceding two sentences. 5. Covenant Not to Compete. (a) The Licensor recognizes and acknowledges: (i) that the execution of this Agreement containing the following Covenant Not to Compete was a condition precedent to the closing of the Merger; and (ii) that the Licensee is placing its confidence and trust in the Licensor. The Licensor, therefore, 3 covenants and agrees that during the Applicable Non-Compete Period (as defined below), the Licensor shall not, either directly or indirectly, without the prior written consent of the Board of Directors of the Licensee: (i) engage in or carry on any business which is similar to or is in competition with the Business of the Licensee (as such term is used and defined below); (ii) be or become an employee, agent, consultant, representative, director or officer of 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 Licensee; (iii) solicit for employment or employ any person employed by the Licensee (or its subsidiaries or controlling entities) at any time during the 12-month period immediately preceding such solicitation or employment; (iv) develop or provide to persons or entities other than VDC, the Company or their affiliates or subsidiaries, products, technologies or business methods that compete with or are similar to the Email Technology; 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 Licensee. Notwithstanding the preceding sentence above, the following shall not be deemed to violate this Section 5: (i) passive equity investments by Licensor of $10,000 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 Licensee; (ii) passive equity investments by Licensor in excess of $25,000 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 Licensee, so long as and only to the extent that Licensor has obtained the prior written consent of the Board to make such investments; or (iii) an equity investment by Licensor of up to 0.1% in any publicly traded company which is engaged in or is carrying on any business which is similar to or in competition with the Business of the Licensee. (b) As used in this Agreement, the term "Business of the Licensee" shall include all material business activities in which the Licensee, the Company and the Company's subsidiaries are engaged now which includes, but is not limited to, international and domestic (i.e. in the United States) long distance telecommunications services. (c) Licensor hereby recognizes and acknowledges that the existing Business of the Licensee extends throughout the United States and therefore agrees that the covenants not to compete contained in this Section 5 shall be applicable in and throughout the United States, as well as throughout such additional areas, states or countries in which the Licensee may be (or has prepared written plans to be) doing business as of the date of termination of the Licensor's engagement hereunder. Licensor further warrants and represents that, because of his varied skill and abilities, he does not need to compete with the Business of the Licensee and that this Agreement will not prevent him from earning a livelihood and acknowledges that the restrictions contained in this Section 5 constitute reasonable protections for the Licensee. 4 (d) As used in this Section 5, "Applicable Non-Compete Period" shall mean all periods after the License has been granted and before it has been terminated in accordance with Section 4 and that period of six (6) months following the termination of the License. (e) The parties hereto expressly understand, acknowledge and agree that the Covenant Not to Compete contained in Section 5 of this Agreement (the "License Covenant") is in addition to and supplementary to the Covenant Not to Compete in the Contractor Agreement (the "Contractor Covenant"). The termination or unenforceability of the License Covenant shall not affect the Contractor Covenant and the termination or unenforceability of the Contractor Covenant shall not affect the License Covenant. (f) In addition to any other remedy available to the Licensee at law, equity, or otherwise, the Licensee may suspend payment of the royalty described in Section 3 during all periods during which the Licensor has violated any term of Section 5. 6. Upon request from the Licensee, the Licensor shall use its best efforts to promptly file a definitive and final patent application for the Email Technology. In respect of any such application, Licensor agrees to execute or to employ its best efforts to have executed any documents, including affidavits and working declarations necessary or reasonable to facilitate the lawful filing, prosecution and maintenance thereof. Licensor shall provide Licensee with a copy of documentation referenced in this Section 6. The full costs (including government fees, taxes, charges and the like and associate attorney charges for services) for such application and the issuance and maintenance of any resulting patent shall be borne by the Licensor. Notwithstanding the foregoing, the Licensee may, in its sole discretion, but shall have no obligation to, opt to direct the drafting, preparation and prosecution of the definitive and final patent application for the Email Technology, including all exhibits, schedules, and affidavits thereto. In order to exercise the option referenced in the preceding sentence (the "Option"), the Licensee shall provide Licensor with written notice of its desire to exercise this option by specific reference to this Section 6. If and only if the Licensee exercises the Option, then the full costs (including government fees, taxes, charges and the like and attorney charges for services) for such application and the issuance and maintenance of any resulting patent shall be borne by the Licensee. If the Licensee exercises the Option, then the Licensor shall fully and in good faith cooperate with Licensee in connection therewith. Provided that Licensor has not violated his obligations or covenants under this Section 6, the exercise of the Option by Licensee shall in no way affect the rights or obligations of the parties hereto as otherwise provided for apart from this Section. 7. Miscellaneous. (a) Except as otherwise provided in this Agreement or the Contractor Agreement (or otherwise authorized by the Licensee in writing in advance), the Licensor is not authorized to act as an agent for, or legal representative of, the Licensee or its subsidiaries or affiliates and the Licensor shall not have the authority to assume or create any obligation on behalf of, in the name of, or binding upon the Licensee or its subsidiaries or affiliates. This Agreement does not create a joint venture or partnership of any kind between the parties. 5 (b) The failure of either party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. To be effective, any waiver must be contained in a written instrument signed by the party waiving compliance by the other party of the term or covenant as specified. The waiver by either party of the breach of any term or covenant contained herein, whether by conduct or otherwise, in any one or more instances, shall not be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement. (c) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns. (d) The Licensor shall not assign this Agreement to any other corporation, firm or person without the express and written prior consent of the Licensee. The Licensee may assign this Agreement and the License without the Licensor's consent and the Licensor's execution of this Agreement shall be deemed a consent to any such assignment; provided, however, that any assignment of the License or the Agreement by Licensee without the prior written permission of the Chief Executive Officer of VDC shall be void ab initio. (e) This Agreement may not be amended except by an instrument in writing, executed by the parties. (f) If any term or provision of this Agreement is determined to be illegal, unenforceable, or invalid in whole or in part for any reason by an arbitrator or court of competent jurisdiction, such illegal, unenforceable, or invalid provisions or part(s) thereof shall be stricken from this Agreement and such provision shall not affect the legality, enforceability, or validity of the remainder of the affected section or the Agreement, then the stricken provision shall be replaced, to the extent possible, with a legal, enforceable, and valid provision that is as similar in tenor to the stricken provision as is legally possible. (g) This Agreement may be executed in multiple counterparts each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may also be executed and delivered by exchange of facsimile copies showing the signatures of the parties, and those signatures need not be affixed to the same copy. The facsimile copies showing the signatures of the parties will constitute originally signed copies of the Agreement requiring no further execution. (h) Each right and remedy granted to the Licensee under this Agreement shall be cumulative and in addition to any other right or remedy existing in equity, at law, by virtue of statute or otherwise, and may be exercised by the Licensee from time to time concurrently or independently and as often and in such order as the Licensee may elect. Any failure or delay on the part of the Licensee in exercising any such right or remedy shall not operate as a waiver thereof. (i) The parties acknowledge that the execution and delivery of this Agreement was a material inducement to VDC's and the Company's decision to consummate the Merger. 6 (j) The recitals to this Agreement constitute part of this Agreement. (k) All notices, requests, instructions, consents and other communications to be given pursuant to this Agreement shall be in writing and shall be deemed received (i) on the same day if delivered in person, by same-day courier or by telegraph, telex or facsimile transmission (receipt confirmed) (provided that telegraph, telex or facsimile notice shall be deemed received on the next business day if received after 5:00 p.m. Eastern Standard Time), (ii) on the next day if delivered by overnight mail or courier, or (iii) on the date indicated on the return receipt, or if there is no such receipt, on the third calendar day (excluding Sundays) if delivered by certified or registered mail, postage prepaid, to the party for whom intended to the following addresses (or to such other addresses and facsimile numbers as a party may designate by notice to the other party): (a) if to the Licensor at: Peter J. Salzano Network Consulting Group, Inc. 101 Route 46E Pine Brook, NJ 07058 Facsimile No: (973) 882-8520 (b) if to the Licensee at: Thomas J. Vrabel Free dot Calling.com, Inc. 657 Main Street, Suite 301 P.O. Box 9101 Passaic, NJ 07055-9101 Facsimile: (973) 779-7991 with a copy to: Louis D. Frost, Esq. Voice & Data Communications (Latin America), Inc. 75 Holly Hill Lane Greenwich, CT 06830 Facsimile: (203) 552-0908 (l) This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New Jersey applicable to contracts executed and to be performed entirely within said State. All controversies or claims arising out of or relating to this Agreement, or arising out of or relating to the License or any sublicense contemplated herein, or the termination thereof, shall be determined by binding arbitration applying the laws of the State of New Jersey and the rules of the American Arbitration Association applicable to the Commercial Panel, except that there shall only be one (1) arbitrator. The arbitration shall be conducted at the Licensee's offices 7 in Greenwich, Connecticut, or at such other location designated by the Licensee. The decision of the arbitrator shall be final and binding upon the parties, shall include written findings of law and fact, and judgment may be obtained thereon in any court of competent jurisdiction. Each party shall bear the cost of preparing and presenting its own case (except as provided for in Section 4 of the Escrow Agreement). The cost of the arbitration, including the fees and expenses of the arbitrator, shall be shared equally by the parties thereto unless the award otherwise provides (except as provided for in Section 4 of the Escrow Agreement). Nothing herein shall preclude a party from seeking injunctive relief to restrain any breach or threatened breach of the covenants and agreements set forth in this Agreement or otherwise to obtain specific performance of any such covenant or agreement, without the necessity of posting bond or security in connection therewith. (m) The Licensee shall be entitled to deduct from any payment due to Licensor under this Agreement any payments or amounts owed to the Licensee or any of its controlling entities or affiliates (including, without limitation, VDC) by the Licensor or Network Consulting Group, Inc. (n) This Agreement 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 is the product of negotiations between the parties and that the parties have contributed to the final preparation of this Agreement. (o) Licensor acknowledges that this Agreement is supported by good and adequate consideration. Licensor hereby waives any defense, claim or other arguments (in relation to the enforceability of this Agreement including rescission or cancellation hereof) or any similar theory based upon lack of consideration. (p) Each party represents and warrants that (i) it has carefully read this Agreement, (ii) it has had the assistance of legal counsel of its choosing (and such other professionals and advisors as it has deemed necessary) in the review and execution hereof, (iii) the meaning and effect of the various terms and provision hereof have been fully explained to it by such counsel, (iv) it has conducted such investigation, review and analysis as it has deemed necessary to understand the provisions of this Agreement and the transactions contemplated hereby, and (v) it has executed this Agreement of its own free will. (q) Nothing contained in this Agreement shall imply any agreement by the Licensee to develop or fund the Free Site. The parties acknowledge that there is or shall be a separate Funding Agreement which shall provide for limited funding of the Free Site. (r) The Licensor shall execute such additional documents and to perform all such other and further acts as may be reasonably necessary or desirable to carry out the purposes and intents of this Agreement, at the cost of the Licensee. Without limiting the generality of the foregoing, the Licensor shall upon request from Licensee, execute a new document satisfactory to Licensee upon Licensor receiving a patent for the Email Technology. 8 (s) This Agreement constitutes the complete and exclusive agreement between the parties hereto which supersedes all proposals, oral and written, and all other communications between the parties relating to the subject matter contained herein. Without limiting the foregoing, the Agreement supersedes and renders null and void a letter agreement among VDC, Licensor, and Network Consulting Group, Inc., dated May 17, 2000. Notwithstanding the foregoing, this Agreement shall not supersede or render null or void the Merger Agreement or the Schedules or Exhibits thereto, the Escrow Agreement, or the Contractor Agreement. (t) TO THE FULLEST EXTENT PERMITTED BY LAW, THE LICENSEE SHALL NOT BE LIABLE TO LICENSOR OR ANY OTHER PERSON OR ENTITY FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL LOSSES OR DAMAGES, INCLUDING WITHOUT LIMITATION LOSS OF REVENUE, LOSS OF CUSTOMERS OR CLIENTS, LOSS OF GOODWILL OR LOSS OF PROFITS ARISING IN ANY MANNER FROM THIS AGREEMENT OR THE PERFORMANCE OR NON-PERFORMANCE OF OBLIGATIONS HEREUNDER, EVEN IF THE LICENSEE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. (u) Licensor agrees, within seven (7) calendar days after request from Licensee, to deliver to Licensee a statement certifying that this Agreement is in full force and effect (or stating any facts to the contrary). Within ten (10) calendar days of receipt of a written request from Licensee, the Licensor shall provide the Licensee with a statement (sworn to by the Licensor before a Notary Public and signed by said Notary Public and the Licensor) that, as of the date of said statement, the Licensor has complied with all material terms of this Agreement. This provision shall expire six (6) months following the termination of this Agreement. (v) This Agreement and the License are effective as of the Date of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written. ATTEST: LICENSEE: /s/ Thomas Salzano Free dot Calling.com, Inc. - --------------------------- Signature By: /s/ Thomas J. Vrabel --------------------------------- Thomas Salzano Thomas J. Vrabel - --------------------------- President Print Name WITNESS: LICENSOR: /s/ Louis D. Frost - --------------------------- Signature /s/ Peter J. Salzano ------------------------------------ Louis D. Frost Peter J. Salzano - --------------------------- Print Name 9 EX-10.43 12 0012.txt EX-10.43 NETWORK AGREEMENT ----------------- THIS AGREEMENT is dated as of the 25th day of May, 2000, by and among Network Consulting Group, Inc., ("Network") and VDC Communications, Inc. ("VDC"). WITNESSETH: ----------- WHEREAS, pursuant to a Merger Agreement by and among VDC, Voice & Data Communications (Latin America), Inc. (the "Sub"), Rare Telephony, Inc., a Nevada corporation (f/k/a Washoe Technology Corporation) ("Rare Telephony"), and the holders of all of the outstanding shares of common stock of Rare Telephony dated May 25, 2000 (the "Merger Agreement"), Rare Telephony will be merging with and into the Sub (the "Merger") for shares of common stock of VDC (the "Shares"); WHEREAS, in connection with the Merger, VDC, the Sub, the Rare Telephony Shareholders, and Buchanan Ingersoll Professional Corporation entered into an Escrow Agreement, dated May 25, 2000 (the "Escrow Agreement"); WHEREAS, the terms of the Merger Agreement provide for the execution of this Agreement. WHEREAS, attached hereto as Exhibit "A" and incorporated herein by reference is a list of certain leases to which Network is a party ("Leases"). NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Additional Payments. VDC shall pay to Network TEN DOLLARS AND NO/100 -------------------- ($10.00). 2. Performance Under Leases. ------------------------- (a) Network shall make each and every payment (other than end of Lease fair market value or ONE DOLLAR AND NO/100 ($1.00) payments) due from Network under the Leases. (b) Network shall otherwise fully perform all of its agreements, duties, responsibilities, obligations, and covenants under each of the Leases (other than end of Lease fair market value or ONE DOLLAR AND NO/100 ($1.00) payments). 3. End of Lease Payments. Within thirty (30) calendar days of the end of ----------------------- each Lease, Network shall notify VDC in writing of the fact that the Lease is about to end. Upon the payment of the end of Lease payment (i.e. the FMV payment or the ONE DOLLAR AND NO/100 ($1.00) payment) by VDC or one of its subsidiaries or affiliates to either Network or the lessor under the Lease, in VDC's sole discretion, Network shall immediately take any and all action necessary or appropriate (including, without limitation the execution of document(s) requested by VDC's counsel) to transfer all of Network's right, title, and interest in and to the equipment or property that is the subject of the Lease to VDC or one of its subsidiaries or affiliates, as directed by VDC. Additionally, at any time thereafter, Network shall execute and deliver or cause to be executed and delivered such further instruments of conveyance, assignment and transfer and take such further action as VDC may request in order more effectively to sell, assign, convey, transfer, reduce to possession and record title to the equipment or property that is the subject of the Lease. Network agrees to cooperate with VDC in all respects to assure the continued title to and possession of such equipment and property in VDC or the VDC subsidiary or affiliate of VDC's choosing. 4. Certain Remedies for VDC in the Event of Default. IF NETWORK BREACHES ------------------------------------------------- ANY MATERIAL TERM OF THIS AGREEMENT OR OF ANY ONE OF THE LEASES (AND ANY SUCH BREACH REMAINS UNCURED FIFTEEN (15) CALENDAR DAYS AFTER NOTICE OF SUCH BREACH IS GIVEN BY VDC OR THE LESSOR, OR ITS AGENT, FOR ANY LEASE) (EACH SUCH BREACH AND FAILURE TO CURE CONSTITUTING A "NETWORK DEFAULT EVENT"), NETWORK SHALL FORFEIT SHARES ISSUED IN ITS NAME PURSUANT TO THE MERGER AND MERGER AGREEMENT (THE "NETWORK SHARES") UPON THE TERMS AND CONDITIONS SET FORTH IN THE ESCROW AGREEMENT. TO THE EXTENT THERE ARE NOT ENOUGH NETWORK SHARES BEING HELD IN ESCROW PURSUANT TO THE ESCROW AGREEMENT TO COVER THE FORFEITURES ABOVE, THEN, WITHIN FIVE (5) CALENDAR DAYS OF RECEIVING NOTICE OF THIS FACT FROM VDC, NETWORK SHALL DELIVER ADDITIONAL VDC SHARES TO VDC FOR CANCELLATION TO COVER ANY SUCH DEFICIENCY. NETWORK ACKNOWLEDGES AND AGREES THAT THE FORFEITURE OF THE NETWORK SHARES IS IN ADDITION TO ANY OTHER REMEDIES WHICH VDC MAY HAVE AT LAW, IN EQUITY, OR OTHERWISE. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE PARTIES HEREBY AGREE THAT EVEN IN THE EVENT OF A NETWORK DEFAULT EVENT PURSUANT TO WHICH THE NETWORK SHARES ARE FORFEITED IN ACCORDANCE WITH THE TERMS OF THE ESCROW AGREEMENT, NETWORK SHALL STILL BE OBLIGATED TO PAY AND PERFORM UNDER THE LEASES AND VDC SHALL BE ENTITLED TO RECOVER MONETARY DAMAGES AND ALL OTHER REMEDIES AVAILABLE AT LAW, EQUITY, OR OTHERWISE. 5. Certain Representations and Warranties of Network. -------------------------------------------------- (a) Network represents and warrants to VDC as follows: (1) If Network is a corporation or a company, it is duly organized or duly formed, validly existing, and in good standing under the laws of the jurisdiction of its incorporation or formation and has the corporate or company power and authority to own its property and carry on its business as owned and carried on at the date hereof and as contemplated hereby. Network is duly licensed or qualified to do business and in good standing in each of the jurisdictions in which the failure to be so licensed or qualified would have a material adverse effect on its financial condition or its ability to perform its obligations hereunder. Network has the individual, corporate, or company power and authority to execute and deliver this Agreement and to perform its obligations hereunder and the financial resources to perform its obligations hereunder, if Network is a corporation or partnership, the execution, delivery, and performance of this Agreement has been duly authorized by all necessary corporate or partnership action. This Agreement constitutes the legal, valid, and binding obligation of Network. 2 (2) Neither the execution, delivery, and performance of this Agreement nor the consummation by Network of the transactions contemplated hereby (i) will conflict with, violate, or result in a breach of any of the terms, conditions, or provisions of any law, regulation, order, writ, injunction, decree, determination, or award of any court, any governmental department, board, agency, or instrumentality, domestic or foreign, or any arbitrator, applicable to Network or any of its wholly owned affiliates, (ii) will conflict with, violate, result in a breach of, or constitute a default under any of the terms, conditions, or provisions of the articles of incorporation, bylaws, or company agreement of Network or any of its wholly owned affiliates if Network is a corporation or company, or of any material agreement or instrument to which Network or any of its wholly owned affiliates is a party or by which Network or any of its wholly owned affiliates is or may be bound or to which any of its material properties or assets is subject, (iii) will conflict with, violate, result in a breach of, constitute a default under (whether with notice or lapse of time or both), accelerate or permit the acceleration of the performance required by, give to others any material interests or rights, or require any consent, authorization, or approval under any indenture, mortgage, lease agreement, or instrument to which Network or any of its wholly owned affiliates is a party or by which Network or any of its wholly owned affiliates is or may be bound, or (iv) will result in the creation or imposition of any lien upon any of the material properties or assets of Network or any of its wholly owned affiliates. (3) There are no actions, suits, proceedings, or investigations pending or, to the knowledge of Network or any of its wholly owned affiliates, threatened against or affecting Network or any of its wholly owned affiliates or any of their properties, assets, or businesses in any court or before or by any governmental department, board, agency, or instrumentality, domestic or foreign, or any arbitrator which could, if adversely determined (or, in the case of an investigation could lead to any action, suit, or proceeding, which if adversely determined could) reasonably be expected to materially impair Network's ability to perform its obligations under this Agreement or to have a material adverse effect on the consolidated financial condition of Network; and Network or any of its wholly owned affiliates has not received any currently effective notice of any default, and Network or any of its wholly owned affiliates is not in default, under any applicable order, writ, injunction, decree, permit, determination, or award of any court, any governmental department, board, agency, or instrumentality, domestic or foreign, or any arbitrator which could reasonably be expected to materially impair Network's ability to perform its obligations under this Agreement or to have a material adverse effect on the consolidated financial condition of Network. (4) All parties to all of the Leases have performed all obligations required to be performed to date under such Leases, 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. (5) Under the terms of each Lease, at the end of each Lease, Network has the right to obtain free and clear title to the equipment and property that is the subject of each Lease upon payment of either an end of Lease fair market value payment or ONE DOLLAR AND NO/100 ($1.00) payment. 3 (6) Exhibit "A" hereto is a true and accurate summary of the leases referenced therein. There are no leases to which Network is a party for equipment used by Rare Telephony and/or its subsidiaries other than those listed in Exhibit "A." (b) Network shall indemnify, protect, defend (with counsel chosen by VDC) and hold harmless VDC, and its officers, directors, employees, agents, representatives, subsidiaries, affiliates, and controlling entities (collectively, "Indemnified Persons") for, and will pay to the Indemnified Persons the amount of, any loss, liability, claim, damage, expense (including, without limitation, attorneys' fees and an allocable portion of in-house counsel fees) or the diminution of value, whether or not involving a third-party claim, directly or indirectly from or in connection with any inaccuracy of, or associated with, any representation or warranty made by Network in this Agreement. The rights to indemnification hereunder shall not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement, with respect to the accuracy or inaccuracy of or compliance with any such representation, warranty, or obligation. 6. Guaranty. The performance and payments of Network pursuant to this --------- Agreement and the Leases are guaranteed by a Guaranty Agreement of even date executed by Peter J. Salzano. 7. Miscellaneous. -------------- (a) Except as otherwise provided in this Agreement (or otherwise authorized by VDC in writing in advance), Network is not authorized to act as an agent for, or legal representative of, VDC or its subsidiaries or affiliates and Network shall not have the authority to assume or create any obligation on behalf of, in the name of, or binding upon VDC or its subsidiaries or affiliates. This Agreement does not create a joint venture or partnership of any kind between the parties. (b) The failure of either party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. To be effective, any waiver must be contained in a written instrument signed by the party waiving compliance by the other party of the term or covenant as specified. The waiver by either party of the breach of any term or covenant contained herein, whether by conduct or otherwise, in any one or more instances, shall not be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement. (c) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns. (d) Network shall not assign this Agreement to any other corporation, firm or person without the express and written prior consent of VDC. VDC may assign this Agreement without Network's consent. (e) This Agreement may not be amended except by an instrument in writing, executed by the parties. 4 (f) If any term or provision of this Agreement is determined to be illegal, unenforceable, or invalid in whole or in part for any reason by an arbitrator or court of competent jurisdiction, such illegal, unenforceable, or invalid provisions or part(s) thereof shall be stricken from this Agreement and such provision shall not affect the legality, enforceability, or validity of the remainder of this section, then the stricken provision shall be replaced, to the extent possible, with a legal, enforceable, and valid provision that is as similar in tenor to the stricken provision as is legally possible. (g) This Agreement may be executed in multiple counterparts each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may also be executed and delivered by exchange of facsimile copies showing the signatures of the parties, and those signatures need not be affixed to the same copy. The facsimile copies showing the signatures of the parties will constitute originally signed copies of the Agreement requiring no further execution. (h) Each right and remedy granted to VDC under this Agreement shall be cumulative and in addition to any other right or remedy existing in equity, at law, by virtue of statute or otherwise, and may be exercised by VDC from time to time concurrently or independently and as often and in such order as VDC may elect. Any failure or delay on the part of VDC in exercising any such right or remedy shall not operate as a waiver thereof. (i) The parties acknowledge that the execution and delivery of this Agreement was a material inducement to VDC's decision to consummate the Merger. (j) The recitals to this Agreement constitute part of this Agreement. (k) All notices, requests, instructions, consents and other communications to be given pursuant to this Agreement shall be in writing and shall be deemed received (i) on the same day if delivered in person, by same-day courier or by telegraph, telex or facsimile transmission (receipt confirmed) (provided that telegraph, telex or facsimile notice shall be deemed received on the next business day if received after 5:00 p.m. Eastern Standard Time), (ii) on the next day if delivered by overnight mail or courier, or (iii) on the date indicated on the return receipt, or if there is no such receipt, on the third calendar day (excluding Sundays) if delivered by certified or registered mail, postage prepaid, to the party for whom intended to the following addresses (or to such other addresses and facsimile numbers as a party may designate by notice to the other party): (a) if to Network at: Peter J. Salzano Network Consulting Group, Inc. 101 Route 46E Pine Brook, NJ 07058 Facsimile No: (973) 882-8520 5 (b) if to VDC at: Frederick A. Moran VDC Communications, Inc. 75 Holly Hill Lane Greenwich, CT 06830 Facsimile: (203) 552-0908 with a copy to: Louis D. Frost, Esq. VDC Communications, Inc. 75 Holly Hill Lane Greenwich, CT 06830 Facsimile: (203) 552-0908 (l) This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Connecticut applicable to contracts executed and to be performed entirely within said State. All controversies or claims arising out of or relating to this Agreement shall be determined by binding arbitration applying the laws of the State of Connecticut. The arbitration shall be conducted at VDC's offices in Greenwich, Connecticut, or at such other location designated by VDC, before the American Arbitration Association. The decision of the arbitrator(s) shall be final and binding upon the parties, and judgment may be obtained thereon in any court of competent jurisdiction. Except as provided in Section 7(m), each party shall bear the cost of preparing and presenting its own case. Except as provided in Section 7(m), 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 herein shall preclude a party from seeking injunctive relief to restrain any breach or threatened breach of the covenants and agreements set forth in this Agreement or otherwise to obtain specific performance of any such covenant or agreement, without the necessity of posting bond or security in connection therewith. (m) Network agrees unconditionally upon demand to pay or reimburse VDC and to hold VDC harmless against liability for the payment of all reasonable out-of-pocket costs, expenses and disbursements, including but not limited to fees and expenses of counsel, incurred by VDC in connection with the enforcement of this Agreement or collection of amounts due hereunder or the proof and allowability of any claim arising under this Agreement. (n) This Agreement 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 is the product of negotiations between the parties and that the parties have contributed to the final preparation of this Agreement. (o) The following sections (including all subsections thereto) of the Agreement, without limitation, shall be deemed material: Section 2, Section 3, Section 4, Section 5, Section 7(l), Section 7(m), and Section 7(p). 6 (p) Within ten (10) calendar days of receipt of a written request from VDC, Network shall provide VDC with a statement (sworn to by the President or CEO of Network before a Notary Public and signed by said Notary Public and said President or CEO) that, as of the date of said statement, Network has complied with all material terms of this Agreement. Network shall provide VDC with a copy of any notice of default, breach, or late or missed payment received by Network for any Lease within two (2) calendar days of receipt by Network. Within ten (10) calendar days of receipt of a written request from VDC, Network shall provide VDC with such unaudited financial or other statements regarding the condition and operations of Network as VDC may from time to time reasonably request. (q) Upon Network's failure to pay any amount or perform any obligation under any Lease when due, VDC (or any subsidiary or affiliate of its choosing) shall have the right, but shall not be obligated, to pay such sum or perform such obligation, whereupon such sum or cost of such performance shall be due from Network and payable to VDC (or the subsidiary or affiliate thereof performing), with interest thereon at fifteen percent (15%) per annum from the date such payment or performance was made. (r) Each party represents and warrants that (i) it has carefully read this Agreement, (ii) it has had the assistance of legal counsel of its choosing (and such other professionals and advisors as it has deemed necessary) in the review and execution hereof, (iii) the meaning and effect of the various terms and provision hereof have been fully explained to it by such counsel, (iv) it has conducted such investigation, review and analysis as it has deemed necessary to understand the provisions of this Agreement and the transactions contemplated hereby, and (v) it has executed this Agreement of its own free will. (s) This Agreement shall become effective as of the "Effective Time" of the Merger (as defined in the Merger Agreement). The "Effective Time" of the Merger for purposes of this Agreement shall be the "Effective Time" indicated on an "Effective Time Certificate" executed by VDC at the closing of the Merger. IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written. ATTEST: VDC: 7 /s/ Louis D. Frost VDC COMMUNICATIONS, INC. - ------------------------------------ Signature By: /s/ Frederick A. Moran --------------------------------- Louis D. Frost Frederick A. Moran - ------------------------------------ Chief Executive Officer Print Name ATTEST: NETWORK: /s/ Debra Santa Lucia NETWORK CONSULTING GROUP, INC. - ------------------------------------ Signature By: /s/ Peter J. Salzano, Pres --------------------------------- Debra Santa Lucia Peter J. Salzano - ------------------------------------ President Print Name 8 EX-10.44 13 0013.txt EX-10.44 FUNDING AGREEMENT ----------------- THIS FUNDING AGREEMENT (the "Agreement"), is dated as of June 14, 2000 by and between Voice & Data Communications (Latin America), Inc., a Delaware corporation (the "Sub"), and VDC COMMUNICATIONS, INC., a Delaware corporation (the "Company"). W I T N E S S E T H: -------------------- WHEREAS, pursuant to a Merger Agreement by and among the Company, the Sub, Rare Telephony, Inc., a Nevada corporation (f/k/a Washoe Technology Corporation) ("Rare Telephony"), and the holders of all of the outstanding shares of common stock of Rare Telephony dated May 25, 2000, as amended, (the "Merger Agreement"), Rare Telephony merged with and into the Sub (the "Merger") for shares of common stock of the Company; WHEREAS, the terms of the Merger Agreement provided for the execution of this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Establishment of Accounts. -------------------------- (a) The Sub shall open up a bank account (or, in its sole discretion, a money market fund account) the purpose of which shall be to hold certain funds which shall be used exclusively to fund the business operations of Sub and Cash Back Rebates LD.com, Inc., a Delaware corporation (the "Cash Back Account"). The sole signatory on the Cash Back Account shall be Clayton F. Moran. (b) The Sub shall open up a bank account to hold certain funds the sole purpose of which is to fund the development of a robust web site for Free dot Calling.com, Inc. (the "Free Account"). The sole signatory on the Free Account shall be Clayton F. Moran. 2. Funding of Accounts. -------------------- (a) The Company has agreed to provide up to ONE MILLION DOLLARS AND NO/100 ($1,000,000.00) (the "Commitment") for the operations of Sub (and its predecessor Rare Telephony) and Cash Back Rebates LD.com, Inc., a Delaware corporation ("Cash Back"). As of the date of this Agreement, in partial satisfaction of the Commitment, the Company has loaned to Rare Telephony and Cash Back, SIX HUNDRED THOUSAND DOLLARS AND NO/100 ($600,000.00) (the "Prior Loans"). Within five (5) business days of the "Effective Time" of the Merger (as defined in the Merger Agreement), the Company shall deposit in the Cash Back Account, FOUR HUNDRED THOUSAND DOLLARS AND NO/100 ($400,000.00) in full satisfaction of the Commitment. 1 (b) The Company has committed to providing ONE HUNDRED THOUSAND DOLLARS AND NO/100 ($100,000.00) (the "Free Commitment") to the Sub for the development of a robust web site for Free. Within five (5) business days of the Effective Time of the Merger, the Company shall deposit ONE HUNDRED THOUSAND DOLLARS AND NO/100 ($100,000.00) into the Free Account in full satisfaction of the Free Commitment. (c) The "Effective Time" of the Merger for purposes of this Agreement shall be the Effective Time indicated on an Effective Time Certificate executed by the Company at the closing of the Merger. (d) Notwithstanding the foregoing, prior to the Company having any obligation to deposit any funds in either the Cash Back Account or the Free Account, Sub shall execute a promissory note in the form attached hereto as Exhibit "A" for the full amount to be funded in both the Cash Back Account and the Free Account. The note shall have a maturity date of four (4) years after the Effective Time and shall provide for an interest rate of 8% per annum. Additionally, Sub, Cash Back and Free shall execute any other documents reasonably requested by the Company in connection with the funding of the Cash Back Account and the Free Account. Without limiting the generality of the foregoing, it is understood and agreed by the parties hereto, that the documents referenced in the preceding sentence may include guarantees and that the Company, at any time in the Company's sole discretion, may require that the Sub, Cash Back, and/or Free (in the Company's sole discretion) execute a Security Agreement and a UCC-1 covering all items that the Company views as necessary or reasonable to protect the indebtedness of Sub to the Company. 3. Disbursement of the Funds in the Cash Back Account. --------------------------------------------------- (a) The funds in the Cash Back Account shall be used to pay for the normal and customary business expenses of Cash Back including but not limited to the expenses listed on Exhibit "B" hereto and incorporated herein by reference. (b) The funds in the Cash Back Account shall not be used to pay for extraordinary and non-customary business or other expenses including, but not limited to, payments to employees outside the terms of an employee's employment agreement, loans or advances to employees, and other similar expenditures. Without limiting the generality of the foregoing, it is agreed that the funds in the Cash Back Account shall not be used for any of the following purposes (unless otherwise approved in advance in writing by the Chief Executive Officer of the Company): (1) To make any loan or advance to, or purchase, acquire or own any stock, bonds, notes or securities of, or any partnership interest (whether general or limited) in, or any other investment or interest in, or make any capital contribution to, any other person or entity; (2) To make any dividend or other distribution of any nature on account of or in respect of the shares of capital stock of Sub, Cash Back or Fee (collectively referred to as the "Rare Companies") or on account of the purchase, redemption, retirement or acquisition of said shares of capital stock (or warrants, options or rights therefor); 2 (3) To lease or purchase any new equipment in excess of $1,000 for use in the operations of any of the Rare Companies; (4) To make a payment in settlement of any litigation, investigation, arbitration, or dispute to which any one of the Rare Companies is a party or of which any one of the Rare Companies (or its officers, directors, or employees) is aware as of the execution of this Agreement; (5) To make any payment for any obligation, lien, liability, or indebtedness that is represented as not existing (whether by affirmative representation, omission of reference, or otherwise) in the Merger Agreement; or (6) To pay more than 1/2 of the legal fees charged by Fuhro & Hanley or Walter E. Hanley, III, in connection with or arising out of the Merger or the Merger Agreement or the Exhibits or Schedules thereto. (c) Attached hereto as Exhibit "C" and incorporated herein by reference is an anticipated schedule of disbursements from the Cash Back Account. (d) The funds in the Cash Back Account shall be disbursed in accordance with the terms set forth in this Section 3. The funds in the Cash Back Account shall not be remitted to the Company unless, upon written direction from the Sub's Chief Executive Officer, said funds are remitted to the Company in repayment of either the Commitment or the Fee Commitment. 4. Disbursements of the Funds in the Free Account. ----------------------------------------------- The funds in the Free Account shall be used exclusively for the purpose of developing a robust web site for Free. The funds in the Free Account shall not be remitted to the Company unless, upon written direction from the Sub's Chief Executive Officer, said funds are remitted to the Company in repayment of either the Commitment or the Fee Commitment. 5. Prior Loans. ------------ On the Effective Time, the Sub shall execute a promissory note in the form attached hereto as Exhibit "A" for the full aggregate principal amount of the Prior Loans (the "New Note"). The New Note shall provide for an interest rate of 8% per annum and a maturity date of four years after the Effective Time. Upon execution of the New Note, the original documents documenting the Prior Loans shall be returned to Sub and all personal guarantees given in connection with the Prior Loans shall be canceled. 6. Miscellaneous. -------------- (a) The failure of either party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. To be effective, any waiver must be contained in a written instrument signed by the party waiving compliance by the other party 3 of the term or covenant as specified. The waiver by either party of the breach of any term or covenant contained herein, whether by conduct or otherwise, in any one or more instances, shall not be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement. (b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns. (c) Sub shall not assign this Agreement to any other corporation, firm or person without the express and written prior consent of the Company. The Company may assign this Agreement without Sub's consent. (d) This Agreement may not be amended except by an instrument in writing, executed by both parties hereto. (e) If any term or provision of this Agreement is determined to be illegal, unenforceable, or invalid in whole or in part for any reason by an arbitrator or court of competent jurisdiction, such illegal, unenforceable, or invalid provisions or part(s) thereof shall be stricken from this Agreement and such provision shall not affect the legality, enforceability, or validity of the remainder of this section, then the stricken provision shall be replaced, to the extent possible, with a legal, enforceable, and valid provision that is as similar in tenor to the stricken provision as is legally possible. (f) This Agreement may be executed in multiple counterparts each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may also be executed and delivered by exchange of facsimile copies showing the signatures of the parties, and those signatures need not be affixed to the same copy. The facsimile copies showing the signatures of the parties will constitute originally signed copies of the Agreement requiring no further execution. (g) The recitals to this Agreement constitute part of this Agreement. (h) All notices, requests, instructions, consents and other communications to be given pursuant to this Agreement shall be in writing and shall be deemed received (i) on the same day if delivered in person, by same-day courier or by telegraph, telex or facsimile transmission (receipt confirmed) (provided that telegraph, telex or facsimile notice shall be deemed received on the next business day if received after 5:00 p.m. Eastern Standard Time), (ii) on the next day if delivered by overnight mail or courier, or (iii) on the date indicated on the return receipt, or if there is no such receipt, on the third calendar day (excluding Sundays) if delivered by certified or registered mail, postage prepaid, to the party for whom intended to the following addresses (or to such other addresses and facsimile numbers as a party may designate by notice to the other party): (1) if to Sub at: Frederick A. Moran 4 Voice & Data Communications (Latin America), Inc. 75 Holly Hill Lane Greenwich, CT 06830 Facsimile: (203) 552-0908 with a copy to: Thomas J. Vrabel 657 Main Street, Suite 301 P.O. Box 9101 Passaic, NJ 07055-9101 Facsimile: (973) 779-7991 (2) if to the Company at: Frederick A. Moran VDC Communications, Inc. 75 Holly Hill Lane Greenwich, CT 06830 Facsimile: (203) 552-0908 with a copy to: Louis D. Frost, Esq. VDC Communications, Inc. 75 Holly Hill Lane Greenwich, CT 06830 Facsimile: (203) 552-0908 (i) This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Connecticut applicable to contracts executed and to be performed entirely within said State. All controversies or claims arising out of or relating to this Agreement shall be determined by binding arbitration applying the laws of the State of Connecticut. The arbitration 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 decision of the arbitrator(s) shall be final and binding upon the parties, and judgment may be obtained thereon in any 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 herein shall preclude a party from seeking injunctive relief to restrain any breach or threatened breach of the covenants and agreements set forth in this Agreement or otherwise to obtain specific performance of any such covenant or agreement, without the necessity of posting bond or security in connection therewith. 5 (j) This Agreement shall 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 is the product of negotiations between the parties and that the parties have contributed to the final preparation of this Agreement. (k) Within ten (10) calendar days of receipt of a written request from the Company, Sub shall provide the Company with a statement (sworn to by the President or CEO of Sub before a Notary Public and signed by said Notary Public and said President or CEO) that, as of the date of said statement, Sub has complied with all material terms of this Agreement and has used the funds in accordance with Section 3 or Section 4, as the case may be. (l) Each party acknowledges that (i) it has carefully read this Agreement, (ii) it has had the assistance of legal counsel of its choosing (and such other professionals and advisors as it has deemed necessary) in the review and execution hereof, (iii) the meaning and effect of the various terms and provision hereof have been fully explained to it by such counsel, (iv) it has conducted such investigation, review and analysis as it has deemed necessary to understand the provisions of this Agreement and the transactions contemplated hereby, and (v) it has executed this Agreement of its own free will. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. ATTEST: COMPANY: /s/ Louis D. Frost VDC COMMUNICATIONS, INC. - --------------------------- Signature Louis D. Frost By: /s/ Frederick A. Moran - --------------------------- --------------------------------- Print Name Frederick A. Moran Chief Executive Officer ATTEST: SUB: Voice & Data Communications /s/ Clayton F. Moran (Latin America), Inc. - --------------------------- Signature Clayton F. Moran By: /s/ Frederick A. Moran - --------------------------- --------------------------------- Print Name Frederick A. Moran Chief Executive Officer 6 EX-10.45 14 0014.txt EX-10.45 THIS PROMISSORY NOTE SUPERCEDES AND RENDERS NULL AND VOID: (1) A PROMISSORY NOTE, DATED MAY 12, 1999, IN THE PRINCIPAL AMOUNT OF $300,000 MADE BY WASHOE TECHNOLOGY CORPORATION WITH NETWORK CONSULTING GROUP, INC. AS HOLDER; AND (2) A PROMISSORY NOTE, DATED JUNE 14, 2000, IN THE PRINCIPAL AMOUNT OF $100,000 MADE BY RARE TELEPHONY, INC., A NEVADA CORPORATION WITH NETWORK CONSULTING GROUP, INC. AS HOLDER. PROMISSORY NOTE --------------- $100,000 June 23, 2000 Greenwich, Connecticut FOR VALUE RECEIVED, RARE TELEPHONY, INC. A DELAWARE CORPORATION ("Maker"), promises to pay to the order of NETWORK CONSULTING GROUP, INC. a New Jersey Corporation ("Holder"), which term shall include any subsequent holder of this Note, at 101 Route 46 East, Pine Brook, NJ 07058 (or at such other place as Holder shall designate in writing) in lawful money of the United States of America, the aggregate principal sum of One Hundred Thousand Dollars ($100,000), with interest thereon at the rate (the "Interest Rate") described below. 1. Interest Rate. The Interest Rate shall be eight percent (8%) per --------------- annum. Interest shall be computed at the Interest Rate on the basis of the actual number of days which the Outstanding Principal Balance (as defined herein) is outstanding divided by three hundred sixty (360), which shall, for the purposes of this Note, be considered one (1) year. 2. Outstanding Principal Balance. All references to the "Outstanding ------------------------------- Principal Balance" shall mean the amount of One Hundred Thousand Dollars ($100,000), less any principal repaid. 3. Installment Payments. This Note shall be payable in thirty six ---------------------- (36) equal installments ("Installments") of principal and interest in the amount of $3,133.64, which installments shall commence on December 1, 2000 and continue thereafter on the 1st day of each successive calendar month until November 1, 2003 (the "Maturity Date") when the entire Outstanding Principal Balance, and any accrued but unpaid interest, shall be due and payable. 4. Application of Payments. All payments on this Note shall be -------------------------- applied first to the payment of accrued and unpaid interest, and then to the reduction of the Outstanding Principal Balance. 5. Prepayment Right. Maker shall have the right to prepay at any ------------------ time, in whole or in part, the Outstanding Principal Balance of this Note, without premium or penalty. 6. Accelerated Maturity. Notwithstanding anything in this Note to ---------------------- the contrary and irrespective of the Maturity Date, the entire Outstanding Principal Balance and accrued interest shall become immediately due and payable upon the earliest to occur of the following (the "Accelerated Maturity Date") after June 23, 2000: 1 (a) the sale of all or substantially all of the assets of the Maker or the common stock of the Maker to a third party (provided, however, that this provision shall not take effect or be applicable if the sale of all or substantially all of the assets of the Maker or the common stock of the Maker is to a subsidiary, controlling corporation or affiliate of the Maker); or (b) the issuance of the securities of Maker on the Public Market. 7. Modifications. From time to time, without affecting the obligation -------------- of Maker to pay the Outstanding Principal Balance or to observe the covenants of Maker contained herein, and without giving notice to or obtaining the consent of Maker, Holder may, at the option of Holder, extend the time for payment of the Outstanding Principal Balance or any part thereof, reduce the payments hereunder, release any person liable hereunder, accept a renewal or extension of this Note, join in any extension or subordination agreement, release any security given herefor, take or release security, or agree in writing with Maker to modify the Interest Rate or any other provision of this Note. 8. Events of Default. Time is of the essence hereof. Upon the -------------------- occurrence of any of the following events (the "Events of Default"), payment of the entire Outstanding Principal Balance and accrued interest of this Note shall, at the option of the Holder, be accelerated and shall be immediately due and payable without notice or demand: (a) Failure of Maker to pay any Installment within ten (10) days after the due date thereof; or (b) Failure of Maker to pay the Outstanding Principal Balance and accrued interest in full on the Maturity Date or the Accelerated Maturity Date; or (c) All or the majority of the value of the assets of Maker is seized or levied upon by writ of attachment, garnishment, execution or otherwise, and such seizure or levy is not released within thirty (30) days thereafter; or (d) Maker executes a general assignment for the benefit of its creditors, convenes any meeting of its creditors, becomes insolvent, admits in writings its insolvency or inability to pay its debts, or is unable to pay or is generally not paying its debts as they become due; or (e) A receiver, trustee, custodian or agent is appointed to take possession of all or any substantial portion of Maker's assets; or (f) Any case or proceeding is voluntarily commenced by Maker under any provision of the federal Bankruptcy Code or any other federal or state law relating to debtor rehabilitation, insolvency, bankruptcy, liquidation or reorganization, or any such case or proceeding is involuntarily commenced against Maker and not dismissed within thirty (30) days thereafter; or (g) Any representation made by Maker in this Note or in any of the other documents delivered in connection therewith, shall have been untrue or incorrect in any material respect when made. 9. Default Rate. In the event that Maker (a) fails to pay any -------------- Installment within ten (10) days after the due date thereof, or (b) fails to pay the Outstanding Principal Balance and all accrued interest in full on the Maturity Date or the Accelerated Maturity Date, the amount past due (including any acceleration of the Outstanding Principal Balance), and unpaid shall bear interest at an annual rate equal to the lesser of (I) the then 2 applicable Interest Rate plus five percent (5%), or (ii) the maximum amount permitted by law (the "Default Rate"), computed from the date on which said amount was due and payable until paid. The charging or collecting of interest at the Default Rate shall not limit any of Holder's other rights or remedies under this Note. 10. Governing Law. Maker, and each endorser and cosigner of this Note, -------------- acknowledges and agrees that this Note is made and is intended to be paid and performed in the State of New Jersey and the provisions hereof will be construed in accordance with the laws of the State of New Jersey and, to the extent that federal law may preempt the applicability of state laws, federal law. Maker, and each endorser and cosigner of this Note further agree that upon the occurrence of an Event of Default, this Note may be enforced in any court of competent jurisdiction in the State of New Jersey, and they do hereby submit to the jurisdiction of such courts regardless of their residence. 11. Remedies Cumulative: Waiver. The remedies of Holder as provided ------------------------------ herein shall be cumulative and concurrent, and may be pursued singularly, successively or together, in the sole discretion of Holder, and may be exercised as often as occasion therefor shall arise. No act of omission or commission of Holder, including specifically any failure to exercise any right, remedy or recourse, shall be deemed to be a waiver or release of the same; such waiver or release to be affected only through a written document executed by Holder and then only to the extent specifically recited therein. Without limiting the generality of the preceding sentence, acceptance by Holder of any payment with knowledge of the occurrence of an Event of Default by Maker shall not be deemed a waiver of such Event of Default, and acceptance by Holder of any payment in an amount less than the amount then due hereunder shall be an acceptance on account only and shall not in any way affect the existence of an Event of Default hereunder. A waiver or release with reference to any one event shall not be construed as continuing, as a bar to, or as a waiver or release of, any subsequent right, remedy or recourse as to a subsequent event. 12. No Usury Intended. This Note is expressly limited so that in no ------------------- contingency or event whatsoever, whether by reason of: error of fact or law; payment, prepayment or advancement of the proceeds hereof; acceleration of maturity of the Outstanding Principal Balance, or otherwise, shall the amount paid or agreed to be paid to Holder hereof for the use, forbearance or retention of the money to be advanced hereunder, including any charges collected or made in connection with the indebtedness evidenced by this Note which may be treated as interest under applicable law, if any, exceed the maximum legal limit (if any such limit is applicable) under United States federal law or state law (to the extent not preempted by federal law, if any), now or hereafter governing the interest payable in connection with this Note. If, from any circumstances whatsoever, fulfillment of any provision hereof at the time performance of such provision shall be due shall involve transcending the limit of validity (if any) prescribed by law which a court of competent jurisdiction may deem applicable hereto, then ipso facto, the obligation to be fulfilled shall be ---------- reduced to the limit of such validity, and if from any circumstances, Holder shall ever receive as interest an amount which would exceed the maximum legal limit (if any such limit is applicable), such amount which would be excessive interest shall be applied to the reduction of 3 the Outstanding Principal Balance due hereunder and not to the payment of interest or, if necessary, rebated to Maker. 13. Guaranty. (intentionally deleted) --------- 14. Purpose of Loan. Maker certifies that the loan evidenced by this ---------------- Note is obtained for business or commercial purposes and that the proceeds thereof shall not be used for personal, family, household, or agricultural purposes. 15. Miscellaneous Provisions. ------------------------- (a) Maker, and each endorser and cosigner of this Note expressly grants to Holder the right to release or to agree not to sue any other person, or to suspend the right to enforce this Note against such other person or to otherwise discharge such person; and Maker, and each endorser and cosigner agrees that the exercise of such rights by Holder will have no effect on this liability of any other person, primarily or secondarily liable hereunder. Maker, and each endorser and cosigner of this Note waives, to the fullest extent permitted by law, demand for payment, presentment for payment, protest, notice of protest, notice of dishonor, notice of nonpayment, notice of acceleration of maturity, diligence in taking any action to collect sums owing hereunder, any duty or obligation of Holder to effect, protect, perfect, retain or enforce any security for the payment of this Note or to proceed against any collateral before otherwise enforcing this Note, and the right to plead as a defense to the payment hereof any statute of limitations. (b) This Note and each payment of principal and interest hereunder shall be paid when due without deduction or setoff of any kind or nature whatsoever. (c) Maker agrees to reimburse Holder for all costs, including, without limitation, reasonable attorneys' fees, incurred to collect this Note if this Note is not paid when due, including, but not limited to, attorneys' fees incurred in connection with any bankruptcy proceedings instituted by or against Maker (including relief from stay litigation). (d) If any provision hereof is for any reason and to any extent, invalid or unenforceable, then neither the remainder of the document in which such provision is contained, nor the application of the provision to other persons, entities or circumstances shall be affected thereby, but instead shall be enforceable to the maximum extent permitted by law. (e) This Note shall be a joint and several obligation of Maker, and of all endorsers and cosigners hereof and shall be binding upon them and their respective heirs, personal representatives, successors and assigns. (f) This Note may not be modified or amended orally, but only by a modification or amendment in writing signed by Holder and Maker. (g) When the context and construction so require, all words used in the singular herein shall be deemed to have been used in the plural and the masculine shall include the feminine and neuter and vice versa. The word "person" as used herein shall 4 include any individual, company, firm, association, partnership, corporation, trust or other legal entity of any kind whatsoever. (h) The headings of the paragraphs and sections of this Note are for convenience or reference only, are not to be considered a part hereof and shall not limit to otherwise affect any of the terms hereof. (i) In the event that at any time any payment received by Holder hereunder shall be deemed by final order of a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under the bankruptcy or insolvency laws of the United States, or shall otherwise be deemed to be due to any party other than Holder, then, in any such event, the obligation to make such payment shall survive any cancellation of this Note and/or return thereof to Maker and shall not be discharged or satisfied by any prior payment thereof and/or cancellation of this Note, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof, and the amount of such payment shall bear interest at the Default Rate from the date of such final order until repaid hereunder. (j) THIS NOTE SUPERSEDES AND RENDERS NULL AND VOID: (1) A PROMISSORY NOTE, DATED MAY 12, 1999, IN THE PRINCIPAL AMOUNT OF $300,000 MADE BY WASHOE TECHNOLOGY CORPORATION WITH NETWORK CONSULTING GROUP, INC. AS HOLDER (THE "FIRST NOTE"); AND (2) A PROMISSORY NOTE, DATED JUNE 14, 2000, IN THE PRINCIPAL AMOUNT OF $100,000 MADE BY RARE TELEPHONY, INC., A NEVADA CORPORATION WITH NETWORK CONSULTING GROUP, INC. AS HOLDER (THE "SECOND NOTE"). For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Holder hereby forever releases, discharges, and agrees to hold harmless, Maker and its predecessors, successors, and affiliates from any and all claims, demands, or actions arising out of or related to the First Note or the Second Note. (k) This Note may be signed by the undersigned in counterparts. This Note may also be executed and delivered by Holder by facsimile signature. This Note may not be executed and delivered by Maker by facsimile signature. IN WITNESS WHEREOF Maker has executed this Promissory Note as of the day and year first above written. Accepted by "Holder" "Maker" Network Consulting Group, Inc. Rare Telephony, Inc. By /s/ Peter J. Salzano By /s/ Frederick A. Moran ----------------------- ------------------------- Peter J. Salzano, President Frederick A. Moran, CEO 5 -----END PRIVACY-ENHANCED MESSAGE-----